Bank Leaders Condemn Themselves

By William K. Black
Bloomington, MN: Valentine’s Day 2015

If you inhabit the reality-based universe you know that finance has become a parasite that is a leading threat to our economies and democracies. A series of financial regulators – each of them infamous for their slavish apologias for bankers and banking – now admit that our most elite banks and bankers have created corrupt cultures that have turned the world’s largest banks into the world’s largest criminal enterprises.

How have top bank leaders reacted to this corruption? There is a new report out that asked bank leaders that question.

“Of note, the Industrial Products industry is the only one that views the risk related to the organization’s culture to be a ‘Significant Impact’ risk. It is interesting that other industries, particularly Financial Services, do not view this risk to be more significant given the recent spree of cultural lapses that have been reported.”

Bank leaders aren’t worried about their corrupt cultures or endemic frauds – they view their most “significant” risk to be regulatory interventions that might stop their frauds and send them to prison.

“The Financial Services and Energy and Utilities industries rated only one risk – regulatory changes and regulatory scrutiny – as a ‘Significant Impact” risk.’”

Yes, that is precisely our job as financial regulators – providing effective “scrutiny” to break the Gresham’s dynamic caused by elite bank frauds. Fraudulent bankers recognize that we are their only “significant” risk because we are the only ones they cannot hire and fire. Only our criminal referrals, training, documentation, vigor, and expertise can lead the Department of Justice to prosecute elite bankers for the frauds they lead. Listen to the bankers – and insist on recreating effective, vigorous regulation. The elite bankers won’t fix the culture of corruption. They created the culture by setting the corrupt “tone at the top.” They are desperate to prevent real regulators from successfully undertaking the Herculean labor of cleansing the modern Augean stables of the City of London and Wall Street.

3 responses to “Bank Leaders Condemn Themselves

  1. Thanks!

    I poached this from the WSJ’s comments: “How long can those who sit around collecting rent, subsidy and interest pass themselves off as “wealth creators”? Asking for a friend.”

  2. «the reality-based universe you know that finance has become a parasite that is a leading threat to our economies and democracies.»

    That’s very agreeable, but financial parasitism is also very *popular with voters*. Lots of voters hope to be financial parasites and that their small investments in housing and stocks will produce massive effort-free capital gains that will enable them to retire in luxury without actually saving enough.

    «financial regulators [ … ]. Fraudulent bankers recognize that we are their only “significant” risk because we are the only ones they cannot hire and fire.»

    That’s also very agreeable, but fraudsters can largely hire and fire the politicians that control the hiring and firing of regulators, and also can persuade many voters that fraud will make them richer. As Norquist said:

    http://web01.prospect.org/article/world-according-grover
    «And that is, in 2002, on the investor class stuff … you could have said, just drop $7 trillion in stock market value with the collapse of the bubble … $7 trillion, trillions with a T … Americans had $7 trillion less than they used to have, you can expect them to be very irritated and in trouble. You did see the Republicans run out and agree to Sarbanes-Oxley in reaction to the Enron scandal. But going into November, what actually saved it for the Republicans was the investor vote, which went heavily R. Why?
    One, they didn’t blame Bush for the collapse of the bubble. They were mad at having lower stock prices and 401(k)s, but they didn’t say Bush did this and that caused this.
    Secondly, the Democratic solution was to sic the trial lawyers on Enron and finish it off. No no no no no. We want our market caps to go back up, not low.

    The 1930s rhetoric was bash business — only a handful of bankers thought that meant them. Now if you say we’re going to smash the big corporations, 60-plus percent of voters say “That’s my retirement you’re messing with. I don’t appreciate that”.»

    As usual the great task that regulator have is to get voters (and thus politicians) to value and support and fight for anti-fraud activities.

    Regulators have a lot of explaining to do to average voters (who often aim to be financial parasites themselves) why anti-fraud policy is in their interest.

  3. @Blissex – “financial parasitism is also very *popular with voters*. Lots of voters hope to be financial parasites and that their small investments in housing and stocks will produce massive effort-free capital gains that will enable them to retire in luxury without actually saving enough.”
    __
    Yeah. Interesting that so many people naively buy the right-wing/plutocrat line and vote against their rational self-interest. Because they all have this fevered illusion that THEY are simply Billionaires in Waiting.