Author Archives: William Black

Geithner’s Single Most Revealing Sentence

Posted on May 12, 2014 | 18 comments

Timothy Geithner has a great deal of competition for the title of worst Treasury Secretary of the United States, but he has swept the field as worst President of Federal Reserve Bank of New York (NY Fed). Geithner is a target rich environment for critics and he has a gift for saying things that are obviously depraved, but which he thinks are worthy of a public servant.

He did vastly more harm to the Nation as the President of the New York Fed than he did as Treasury Secretary. He was supposed to regulate most of the largest (and most criminal) bank holding companies – and failed so completely that he testified to Congress that he had never been a regulator and that the problem in banking leading up to the crisis was excessive regulation. His statement that he was never a regulator was truthful – but you’re not supposed to admit it, and you’re certainly not supposed to be proud of it. Geithner, Greenspan, and Bernanke are the three Fed leaders who could have prevented the entire crisis by being even modestly effective regulators.

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Posted in William K. Black

Tagged accounting control fraud, banksters, MMT, Modern Monetary Theory

Those who the gods wish to destroy: Bernanke’s Triumphal Pride

Posted on May 6, 2014 | 3 comments

By William K. Black

Greetings form Guayaquil, Ecuador where I’m teaching a mini-course at ESPOL. The course introduces students to the great economic debates of theory that shaped our dominant fiscal, monetary, and anti-regulatory policies in the decades before the financial crisis. Memory can be a tricky and misleading guide, so I went back to what the key decision makers and theorists were saying in the years before the crisis. My focus is on Ben Bernanke and Alan Greenspan, but I also discuss extensively John Williamson, who coined the phrase “the Washington Consensus.” (My readers know that I attribute many of the most damaging anti-regulatory policies to the Clinton-Gore administration and its evisceration of effective regulation through its “Reinventing Government” program.) I wanted readers to see what was being said by the Fed’s leadership (which would soon transition from Greenspan to Bernanke) as the financial world was exploding into an orgy of “accounting control fraud” (the most destructive in history) that was hyper-inflating the largest financial bubble in history, and about to cause a global financial crisis that produced the Great Recession and (if Bernanke is to be believed) would have produced another Great Depression but for the largest financial bailout in history.

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Posted in William K. Black

Tagged bernanke, crony capitalism, washington consensus

Deal Book Embraces Unintentional Self-Parody

Posted on May 2, 2014 | 3 comments

By William K. Black

I have been attempting the vain act of trying to embarrass the New York Times’ Deal Book feature into dropping its ethics-free reportage of elite financial crimes. I have had so little success that today’s James Stewart column reached the pinnacle of unintentional self-parody of Deal Book’s zealous efforts to remove any concept of ethics from its reportage of elite white-collar crime. The substance of piece is reporting that Steve Jobs “was a walking antitrust violation.” Stewart focuses on the cartel Jobs formed with other giant firms to fix (and suppress) employees’ salaries.

But the title of the piece takes the fact that Jobs was a serial felon who caused great harm to employees and preforms a remarkable transformation in which he is praised as “Steve Jobs, a Genius at Pushing Boundaries.” “Pushing boundaries” is Deal Book’s euphemism for Jobs’ crimes that he committed in order to make the already spectacularly wealthy CEO even wealthier – at the direct expense of his employees. And, this being Deal Book, and James Stewart being what Stewart has descended to, we have the inevitable claim that Jobs was a “genius” at crime. But it turns out that if you consider the facts reported; he wasn’t a genius. His violations of anti-trust law were obvious crimes. Instead, his key characteristic was the one we always emphasize is critical about the most fraudulent CEOs – audacity. Jobs had gotten away with committing so many crimes that he came to believe he was immune from prosecution.

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Posted in William K. Black

Tagged Deal Book, Ethics, self-parody

Why Does Refusing to Put Fraudulent Banks into Receivership Help the Economy?

Posted on April 30, 2014 | 8 comments

By William K. Black

Conservative economists love “creative destruction.” They can’t wait to “get their Schumpeter on” when a business fails and thousands of workers lose their jobs. There is no more “creative destruction” conceivable than when we put a bank that has become a fraudulent enterprise into receivership, remove the controlling officers leading the fraud, and sell the bank through an FDIC-assisted acquisition. Indeed, the pinnacle of creative destruction would be doing this with a systemically dangerous institution (SDI) through a process that split the supposedly “too big to fail” bank into smaller components that (1) were no longer large enough to pose a systemic risk, (2) were more efficient than the bloated SDI, (3) no longer extorted a large (implicit) government subsidy that made real competition impossible, and (4) no longer had dominant political power via crony capitalism. Unlike the situation in which an SDI collapses suddenly in the midst of causing a global crisis when its frauds cause a liquidity crisis, it is vastly easier to put fraudulent SDIs in receivership in today’s circumstances. Unlike Arthur Anderson, the receivership power allows us to keep the enterprise alive and create more competitors rather than fewer.

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Posted in William K. Black

Tagged accounting control fraud, Control Fraud, creative destruction, Deal Book, fraudulent banks

The New Book on Regulation I Just Decided to Write: Blame it on Monaco

Posted on April 28, 2014 | 7 comments

By William K. Black

This is the third article in a series of columns devoted to financial regulation prompted by the comments of a Swiss academic at the XII^th Annual CIFA Forum in Monaco. (See first here and second here.)

Having spent 20 years as a non-academic professional, I still find it odd the directions in which a single speaker or writer can start an academic on a convoluted path of research that spans multiple disciplines and eras and produces a series of “light bulb” analytical moments. And that prompts a digression into a symptom of the problem illuminated by that series of moments that has led me to decide to write a book on regulation.

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Posted in William K. Black

Tagged accounting control fraud, Control Fraud, david brooks, financial regulation, Hans Geiger

Why Did George Kaufman, the Father of “Prompt Corrective Action” (PCA), Hate Ed Gray so Much that He Opposed Gray’s Embrace of PCA?

Posted on April 28, 2014 | Comments Off

By William K. Black

This is the second installment of a series arising from my recent participation in CIFA’s XII^th Annual International Forum in Monaco. The series was prompted by Dr. Hans Geiger’s rage at financial regulation in Europe – not at its pathetic weakness that produced the criminogenic environments through much of the Eurozone, but at the proposal that Swiss banks be required to make criminal referrals when they found evidence of likely criminality by their customers. This inspired me to wonder why a requirement that has existed in the U.S. for over 30 years would lead to such raw animus against “bureaucrats” serving “big brother” (i.e., the democratically elected Swiss government).

Geiger is a member of the European Shadow Financial Regulation Commission, which I will call the “EU Shadow” for the sake of brevity. I am familiar with the US Shadow. There are interesting (if you are a fellow wonk) articles by members of the EU Shadow about its creation and its conception of what it intends to achieve and how it will do so. I will refer to the 2004 article by the EU Shadow’s chairman, Harald A. Benink.

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Posted in William K. Black

Tagged accounting control fraud, charles keating, Control Fraud, ed gray, george kaufman, Hans Geiger, PCA. prompt corrective action

Corporate CEOs Demand that they be Tipped Off When a Whistleblower Reports their Crimes

Posted on April 26, 2014 | 3 comments

By William K. Black

I’m writing on the flight returning from the XII^th International CIFA Forum in Monaco. CIFA is an NGO. It is a confederation of independent financial advisor organizations that works with the UN in promoting the protection of investors. This means that their clients are often very wealthy and that many of the participants are speakers are very conservative or libertarians (or an admixture). One of the speakers, Dr. Hans Geiger, gave an impassioned denunciation of “bureaucrats” (which turned out to mean anyone who worked for the government) and the imposition of a duty on bankers to file criminal referrals when they had a “reasonable suspicion” that their clients had committed certain crimes. The official U.S. jargon for a criminal referral is “Suspicious Activity Reports” (SARS). Geiger was particularly distressed that the banker would not be allowed to inform his client that he was making the criminal referral (which FATF terms “Suspicious Transaction Reports” (STRs)) under the standard 21 proposed by the Financial Action Task Force in 2012.

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Posted in William K. Black

Tagged accounting control fraud, Control Fraud, dodd-frank, Financial Action Task Force, whistleblowers

CEO Pay is Perverse and Must be Fixed to Avoid Recurrent Crises

Posted on April 21, 2014 | 11 comments

By William K. Black

Slate has published a piece by Zachary Karabell entitled “Stop Obsessing Over exorbitant CEO Pay” in which the author appears unaware that he has reported, and then ignored, evidence that scholars he cites favorably are “resoundingly convinced” proves the opposite. Karabell’s author’s page shows that he has recently joined Slate and promotes theoclassical dogmas about economics. He is a Wall Streeter of the kind that thinks it is an honor to be a “regular” on CNBC. He also touts being a favorite of the Davos plutocrats. In roughly a month with Slate he has managed to be an apologist for high unemployment, inequality, and high frequency trading (HFT) scams.

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Posted in William K. Black

Tagged accounting control fraud, Control Fraud, criminogenic environment, executive compensation, Karabell, white collar crime

Zachary Karabell and our Flawed “Society of Apologists for Plutocrats (SAPs)”

Posted on April 21, 2014 | 5 comments

By William K. Black

Slate has replaced one minor member of the Society of Apologists for Plutocrats (SAPs), Matt Yglesias, with another, Zachary Karabell. The transition has been seamless. As I noted in my prior column, Karabell’s initial columns served up apologias for extraordinary executive compensation and extreme inequality, high youth unemployment, and high frequency trading (HFT) scams. Karabell is the type of Wall Streeter who thinks it reflects well on him that he has been a “regular” on CNBC, rather than an admission of grave defects of character and intellect. Similarly, he thinks it is an honor that he was dubbed a bright young thing (a decade ago) by the denizens of Davos, the club for selfless plutocrats eager to “take up the white man’s burden.”

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