Category Archives: William K. Black

Bipartisan Budget Deal

Posted on December 14, 2013 by | 5 comments

NEP’s Bill Black appears on TheRealNews.com. The discussion is about the new budget deal and the fact that it secures austerity policies and fails to extend unemployment benefits. (Bill appears at the 8:00 minute mark).

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The NYT Implies that Not Prosecuting JPMorgan Proves DOJ’s Vigor

Posted on November 26, 2013 by | 3 comments

By William K. Black
(Crossposted at Benzinga.com)

 

No one expects Andrew Ross Sorkin’s slavish “Deal Book” lackeys to demand that the elite Wall Street bankers whose frauds drove the financial crisis be imprisoned, but the slavishness to the banks revealed when major news stories emerge continues to irritate if not surprise.  A recent embarrassment can be found here.

The “Deal Book” Spinmeisters

The context of the NYT article was the expected settlement between DOJ, various states, and JPMorgan.  The spin comes fast and hard, which would be great in cricket (or quarks) but, sadly, exemplifies the national paper of record’s “Deal Book” devotional pages.  The “Deal Book” shows that cricket masters can impart very different spins.  The first substantive paragraph’s spin is to minimize JPMorgan’s fraud.

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We have Passed the Economic Tipping Point in Achieving Marriage Equality

Posted on November 21, 2013 by | Comments Off on We have Passed the Economic Tipping Point in Achieving Marriage Equality

By William K. Black

A number of experts in law and state politics have written to emphasize the enormous slog that lies ahead for proponents of marriage equality.  As a lawyer who knows a bit about politics I share their concerns.  But employing my economics “hat” I wish to offer this encouragement – we have passed the tipping point in economics that ensures eventual success in securing marriage equality throughout the United States.

Sixteen states and the District of Columbia have reached the decision to allow full marriage equality for same-sex couples.  As the chart I prepared shows, those jurisdictions represent nearly 38% of the total U.S. population and over 43% of total GDP.  Marriage equality is now a normal aspect of life for an enormous share of our total U.S. population.

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Jackie Calmes’ “Dirty Secret” about the Opponents of Austerity is that they are Correct

Posted on November 19, 2013 by | 13 comments

By William K. Black

Ms. Calmes is the New York Times’ White House correspondent.  Readers who follow finance and fraud may recall her as the object of an epic dismantling in Naked Capitalism.  The subject there was Calmes’ dismissive review of Neill Barofsky’s (SIGTARP) book’s criticism of Timothy Geithner.

Calmes is back and writing about economics in an article entitled:  “A Dirty Secret Lurks in the Struggle Over a Fiscal ‘Grand Bargain.’”

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Why Does the Media Ignore Timothy Geithner’s Disastrous Leadership of the NY Fed?

Posted on November 18, 2013 by | 8 comments

By William K. Black
(Cross posted at Benzinga.com)

Remember nine months ago when Timothy Geithner assured us that it was “extremely unlikely” he would take a position on Wall Street?

The media meme when Geithner announced that he was stepping down as Treasury Secretary and taking a position as a “senior fellow” with the Council on Foreign Relations (CFR) was what a superior human he was for not taking a job with Wall Street.  The “extremely unlikely” (to no one’s surprise) was announced nine months later.  The private equity firm Warburg Pincus has hired Geithner as its President.

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Will the Chilean People Save the U.S. by Electing Michelle Bachelet?

Posted on November 15, 2013 by | 8 comments

By William K. Black

For every one that doeth evil hateth the light, neither cometh to the light, lest his deeds should be reproved.  John: 3:20

The effort by corporate CEOs to dominate the global economy and global government is reaching the end-game stage.  Corporate CEOs view government and democracy as their gravest threats and are constantly seeking to discredit and hamstring government and democratic decision-making.  CEOs are particularly eager to discredit, destroy, or capture regulation and they have enlisted enormous support in both major U.S. parties and many of the world’s dominant parties for these efforts.  President Obama has continued and made worse the effort of President Bush to betray our nation, our democracy, and our people through the secret, draft Trans-Pacific Partnership (TPP) agreement.  In this first column on TPP I explain that while there is no realistic chance of convincing Obama to repudiate the TPP, there is a chance that the people of Chile will save our democracy and our national sovereignty.

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How to Prosecute the Elite Bank CEO that Led the Frauds that Drove the Crisis

Posted on November 15, 2013 by | 6 comments

By William K. Black

Step one: Understand the three “control fraud” epidemics that drove the crisis.

Control fraud occurs when the person that controls a seemingly legitimate entity uses it as a “weapon to defraud.”  In finance, accounting is the “weapon of choice.”  Lenders engaged in accounting control fraud display the four “ingredients” of the fraud “recipe.”

  1. Grow massively by
  2. Making loans at a premium yield that are so bad that they will produce losses
  3. Employing extreme leverage and
  4. Providing only trivial allowances for loan and lease losses (ALLL)

The recipe produces three “sure things.”  The lender will report record profits in the near term, the controlling officers will promptly be made wealthy through modern executive compensation, and the firm will suffer catastrophic losses.  The recipe is also an ideal means to hyper-inflate a financial bubble in real estate, which can delay loss recognition for many years.  Minor variants on this recipe drove the savings and loan debacle and the Enron-era frauds.

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The Department of Justice’s Willful Blindness to the Willful Blindness of CEOs

Posted on November 14, 2013 by | 1 comment

By William K. Black

The best thing that the Department of Justice (DOJ) could do immediately to restore faith in the criminal justice system is to prosecute Steven Cohen, the head of SAC.  The indictment of SAC charges that many SAC officers committed crimes due to:  “institutional practices that encouraged the widespread solicitation and use of illegal inside information.”  That indictment supports that claim with detailed allegations.  For example, paragraph 6 states that “employees were financially incentivized to recommend to [Cohen] ‘high conviction’ trading ideas” that would inherently come from insider information.  Providing “high conviction” tips to Cohen was a job requirement and a code phrase that signaled to Cohen that he could invest his funds with confidence due to the insider information.  Paragraph 7 observes that “the predictable and foreseeable result … was systematic insider trading.”  Paragraph 11 explains that SAC investment managers had a duty to provide Cohen with “high conviction” deals and that Cohen made fulfilling this duty a top priority.  Paragraph 13 explains that the managers’ bonuses largely depended on the “high conviction” tips they made to Cohen.

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Irish Fish, and Banks, Rot from the Head

Posted on November 13, 2013 by | 1 comment

By William K. Black
(Cross posted at Benzinga.com)

I’m back from my annual purifying rite – participating in Kilkenomics IV in Kilkenny, Ireland.  It was a big success again this year, with dozens of sold out events in which economists (and the odd criminologist) are paired with superb professional comedians who serve to keep things lively, understandable, and blunt.  Regular folks stop you on the street and talk to you for hours in the bars about economics.  This year, the organizers (Richard Cook and David McWilliams) added “young economist” awards for the equivalent of high school and junior high school awards.  The brilliant Dan Ariely and I had the privilege to help judge the final round of the competition.  Should you ever find yourself near Ireland in early November during the festival I encourage you to join us in Kilkenny.

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The U.S. Attorney Who Prosecutes JPMorgan Will Be Its First Witness

Posted on November 4, 2013 by | 3 comments

By William K. Black
(Cross Posted at Benzinga.com)

The U.S. Attorney for the Eastern District of California is Benjamin Wagner.

“Once the U.S. government built a case against J.P. Morgan and settlement talks began, the Justice Department made several threats that it would file its civil lawsuit, and each time J.P. Morgan responded by offering to talk more or increase the amount of money it might pay, the people familiar with the discussions said.

One critical moment came as the department set an internal deadline, Sept. 24, to file a suit against the bank.

The day before the deadline, the bank offered to pay $3 billion to settle a case tied to mortgage-backed securities—an offer the attorney general rejected. That same day, Ben Wagner, the U.S. attorney from Sacramento, Calif., flew to Washington with two large charts he meant to display at a news conference describing the bank’s alleged misconduct. A criminal and civil investigation into J.P. Morgan’s past sale of mortgages bonds had been handled by Mr. Wagner’s office.”

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