By William K. Black
(Cross posted at Benzinga.com)
Glass-Steagall prevented a classic conflict of interest that we know frequently arises in the real world. Commercial banks are subsidized through federal deposit insurance. Most economists support providing deposit insurance to commercial banks for relatively smaller depositors. I am not aware of any economists who support federal “deposit” insurance for the customers of investment banks or the creditors of non-financial businesses.
I have written a series of articles recently that focus on appraisal fraud.
I did so because appraisal fraud allows such “clean” tests of what (and who) drove the financial crisis and how many different private and public sector actors could have easily prevented the crisis had they acted against the fraud epidemics.
Posted in William K. Black
Tagged accounting control fraud, appraisal, appraisers, Control Fraud, Great Financial Crisis
David Wessel has just published a fantasy piece in the Wall Street Journal that asks the question “what if Bernanke could be blunt” in his Congressional testimony later this week. Here are the first two things that Wessel envisions a blunt Bernanke as telling Congress:
The Banks Have Blood on Their Hands and the regulators are too fearful to act. Bill returned to Peak Prosperity to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.
The Appraisers’ Warning of the Lenders’ Fraud Epidemic
Two of my recent columns have explained the effort by a very large number of appraisers to combat the “Gresham’s” dynamic that home lenders and their agents were deliberately generating by extorting appraisers to inflate appraisals. A “Gresham’s” dynamics perverts market forces. When cheaters prosper the markets drive honest firms and professionals out of business. Honest appraisers tried to block this dynamic.
Posted in William K. Black
Tagged accounting control fraud, Control Fraud, Great Financial Crisis, gresham's dynamic, MARI
Bill Griffeth (filling in for Larry Kudlow) discusses high frequency trading and whether it creates unfair markets. Bill Black weighs in on the lack of merits for High Frequency Trading and impact of collocating servers to get milli-second trading advantages.
CCTV America’s Phillip Yin speaks with Bill Black about new US bank regulations. Bill warns against ‘too big to fail institutions’ and the attempts to create a ‘tame tiger’ through policy, which he believes is a reckless path to the next financial crisis
Comments Off on NEP’s Bill Black Appears On CCTV’s Biz Asia America
Posted in William K. Black
Tagged Biz Asia America, CCTV, too big to fail
On July 9, 2013 I participated in a radio interview with a lobbyist for the 100 largest financial firms. The San Francisco radio program host asked me what question I would ask the lobbyist and I said that any discussion should begin with allowing him to state his view of what caused the crisis. In the course of his explanation, he bemoaned the fact that there was no warning about the crisis.
Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC).
“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).
Those two sentences tell us more about the crisis’ cause, and how easy it was to prevent, than all the books published about the crisis – combined. Here are ten key implications.
By William K. Black
(Cross posted at Benzinga.com)
Laura D’Andrea Tyson (President Clinton’s principal economist) has written an ode to a “carbon tax” that does not acknowledge a single disadvantage or substantive (as opposed to political) concern with such a tax. A carbon tax can have advantages, but her article oversells the idea and ignores the severe concerns about such a tax. Her article demonstrates why the Clinton administration’s anti-regulatory and fiscal policies helped sow the seeds of ongoing financial disaster. (The Bush administration watered and fertilized those seeds and we all reaped the whirlwind.)
Posted in William K. Black
Tagged accounting control fraud, Coase, Control Fraud, regulation, Stigler, Tyson
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