Tag Archives: accounting control fraud

Bank Leaders Condemn Themselves

Posted on February 14, 2015 by | 3 comments

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.

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Geithner: “The End of Capitalism as We Know It”

Posted on February 10, 2015 by | 7 comments

By William K. Black
Bloomington, MN: February 10, 2015

Timothy Geithner’s penchant for speaking about things he does not care enough about to get right has led to him uttering many of the most cringe-worthy phrases about the economic crisis. The latest example is in David Axelrod’s new book about the Obama administration’s response to the financial crisis. This column was prompted by Sam Stein’s piece in the Huffington Post about Axelrod’s key points.

“Axelrod was ‘livid’ when he found out that Geithner and [Larry] Summers ‘had quietly lobbied’ against an amendment to the stimulus that would have restricted the payment of bonuses at firms that received bailout funds. Those bonuses had become a huge political sore point for the administration, but the finance guys argued that retroactive steps to claw back the money would have violated existing contracts.

‘This would be the end of capitalism as we know it’ Geithner told Axelrod, to which Axelrod says he responded: ‘I hate to break the news, Mr. Secretary, but capitalism isn’t trading very high right now.’”

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Hensarling Loves Clinton’s Worst Deregulatory Blunders

Posted on February 10, 2015 by | Comments Off on Hensarling Loves Clinton’s Worst Deregulatory Blunders

By William K. Black
Bloomington, MN: February 9, 2015

This the second in a series of columns about Jeb Hensarling and Peter Wallison – the Nation’s chief myth makers about the causes of our financial crisis. Hensarling is the Chairman of the House Financial Services Committee and a leader in the effort to gut the Dodd-Frank Act’s few effective provisions. Wallison is one of the primary architects of the three “de’s” (deregulation, desupervision, and de facto decriminalization) that made the banking environment so criminogenic that it caused the fraud epidemics that hyper-inflated the bubble and drove the financial crisis.

In this second column I focus on Hensarling’s embrace of Bill Clinton and Al Gore’s worst anti-regulatory blunders. Their overall blunder was “Reinventing Government,” a broad assault on regulation and government effectiveness. In the financial sphere, Clinton and Gore embraced a fatal concept (the regulatory “race to the bottom”), two specific legislative acts of deregulation, and the growth of systemically dangerous institutions (SDIs) that were “too big to fail.” Each of these blunders contributed to the most recent crisis and unless corrected will contribute to future crises. Hensarling celebrates each of these anti-regulatory blunders as superb policies.

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Hensarling: Regulations (and Condoms) Don’t Work if You Don’t Use Them

Posted on February 10, 2015 by | Comments Off on Hensarling: Regulations (and Condoms) Don’t Work if You Don’t Use Them

By William K. Black
Bloomington, MN: February 8, 2015

I am writing a series of columns about the Republican fantasy team of apologists for the elite banksters. Jeb Hensarling (R, TX), chair of the House banking committee that is taking the lead in trying to further deregulate banking and Peter Wallison, one of the chief architects of the most recent banking crisis, are teaming up to flog Wallison’s book. The book attempts to convince its readers that Wallison’s leadership of the effort to push the three “de’s” – deregulation, desupervision, and de facto decriminalization – played no role in creating the criminogenic environment that produced the three most destructive epidemics of financial fraud in history. Hensarling is hosting Wallison’s book unveiling.

They are the perfect fantasy team because they inhabit a fantasy world of their own construction that rests on a foundation of non-facts with appalling logical leaps. This first column begins with a brief introduction to how crazy Hensarling is – and recall that he is the Republican Party’s leader on financial issues. George Akerlof and Paul Romer, in their classic 1993 article “Looting: The Economic Underworld of Bankruptcy for Profit,” explained that the 1982 federal deregulation law was “bound to produce looting.”

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It Would be Well if Economics Were Modest for it has Much to be Modest About

Posted on January 15, 2015 by | 4 comments

By William K. Black
Bloomington, MN: January 13, 2015

One of the many quips ascribed to Winston Churchill is that it was well that Clement Atlee were modest for he had much to be modest about. This article comments on a remarkable article dated September 19, 2009 by the French economist Gilles Saint-Paul that embodies why economics is the only field that purports to be a science that has gotten worse for decades, which actively makes the world worse in its supposed area of expertise, and that is proud of it. I learned of the article through the worthy blog site Unlearning Economics. That site has a special category for theoclasscial sermons, including Saint-Paul’s, that exemplify our family rule that it is impossible to compete with unintentional self-parody.

Saint-Paul’s title is “A ‘modest’ intellectual discipline.” Saint-Paul is one of the economists who was an architect of the ongoing disaster, so one could hope that writing in 2009 would have led him to conduct a thorough re-examination of his field’s catastrophic failures. He should have begun with a personal and professional mea culpa and a series of frank admissions as to what caused him and his discipline to fail yet again and cause such great harm to the world. That’s what a representative of a “modest” field that has so very much to be modest about would do.

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The WSJ Is Outraged That Someone Would “Loot a Company”

Posted on January 4, 2015 by | 6 comments

By William K. Black
Washington, DC: January 4, 2015

George Akerlof and Paul Romer’s famous 1993 article “Looting: The Economic Underworld of Bankruptcy for Profit” introduced what criminologists call “accounting control fraud” to the economics literature. The people who control the firm (typically the CEOs) use its seeming legitimacy as a “weapon” to loot shareholders, creditors, and, if the resultant losses are large enough, the U.S. Treasury. Their article discussed several examples of such fraud epidemics, including the savings and loan debacle. Criminologists, the S&L regulators, and over 1,000 successful felony prosecutions of the S&L looters confirmed Akerlof & Romer’s insights.

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Holder and Obama Never Miss an Opportunity to Miss an Opportunity v the Banksters

Posted on December 19, 2014 by | 7 comments

By William K. Black
Bloomington, MN: December 18, 2014

Holiday greetings! Today’s semi-sermon considers verses from tracts many consider sacred.

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

Talmud: Here I will simply summarize the Miracle of the Lights. When the temple was restored to Jewish control its sanctified olive oil for the lamps had been profaned. Only one portion, enough to last one night was still pure. That portion, however, miraculously continued to light the temple for over a week until new sanctified oil could arrive.

The common theme, of course, is the blessings that light brings in making it much easier for good to prevail over evil. In the financial world we use a related concept – transparency. In finance, we implicitly assume that transparency also involves providing light. (Anyone who has walked into a glass door on a very dark night knows that transparency without light is no great protection.) John 3:20 is also about accountability – the desire of the evil to use darkness to avoid having their evil “deeds” “reproved.” A related verse, from our semi-sacred secular texts, was doubtless influenced by these religious themes – Supreme Court Justice Louis Brandeis’ famous phrase was that “Sunlight is the best disinfectant.”

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UK Determined to Win the Race to the Bottom and Remain the Global Financial Cesspool

Posted on December 17, 2014 by | 3 comments

By William K. Black
Bloomington, MN: December 16, 2014

On June 20, 2012 the UK Commercial Secretary to the Treasury, Lord Sassoon of Ashley Park gave a speech to the British Bankers Association – the group the U.S. government (i.e., the FDIC) found to have helped organize the world’s largest price rigging cartel and fraud in the form of rigging Libor. The financial crisis occurred under the “new” neo-liberal Labour when its championing of the three “de’s” – financial deregulation, desupervision, and de facto decriminalization – combined with modern executive and professional compensation and the effective elimination of “joint and several liability” to make the City of London the most criminogenic environment in the world for financial “control frauds.” Naturally, the Tories have decided that the answer to this disaster is to double-down on Labour’s embrace of the three “de’s.” Indeed, the first words in Lord Sassoon’s prepared speech were “Thank you Philip [Hampton].”

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New York City: Aggressive “Broken Windows” Policing but Carte Blanche for Banksters

Posted on December 6, 2014 by | 5 comments

By William K. Black
Kansas City, MO: December 6, 2014

New York City exemplifies two perverse criminal justice policies that drive many criminologists to distraction. It is the home of the most destructive epidemics of elite financial frauds in history. Those fraud epidemics hyper-inflated the housing bubble and drove the financial crisis and the Great Recession. The best estimate is that the U.S. GDP loss will be $21 trillion and that 10 million Americans lost their jobs. Both numbers are far larger in Europe. The elite “C Suite” leaders of these fraud epidemics were made wealthy by those frauds through bonuses that measured in the billions of dollars annually.

The most extraordinary facts about the catastrophic fraud epidemics, however, is New York City’s reaction to the fraud epidemics. Not a single Wall Street bankster who led the fraud epidemics has been prosecuted or had their fraud proceeds “clawed back.” Not a single Wall Street bankster who led the fraud epidemics is treated as a pariah by his peers or New York City elites. New York City’s elected leaders have made occasional criticisms of the banksters, but Mayor Bloomberg was famous for his sycophancy for the Wall Street banksters that made him wealthy. In 2011, Mayor Bloomberg attacked the “Occupy Wall Street” movement for daring to protest the banksters.

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Jeffrey Sachs Channeled His Inner Bill Black – and Obama and Holder Ignored Him Too

Posted on December 4, 2014 by | 5 comments

By William K. Black
Kansas City, MO: December 4, 2014

“Yves Smith,” the nom de guerre (and plume) of the finance expert who created and runs the invaluable blog Naked Capitalism, wrote an introduction to a piece roughly 18 months ago that mentions me. The points she made in that introduction, including the reason she invoked my name, are important but the lapse of time since she wrote it teaches us another important lesson. Here is the introduction.

“One of the things that Matt Stoller has stressed that the possibility of reform is remote until breaks within the elites take place.

Jeffrey Sachs, Columbia professor and director of the Earth Institute at Columbia, is a controversial figure for his neoliberal stance on macroeconomics and his role in promoting the use of ‘shock therapy’ in emerging economies. But it is also important to recognize that criticism from a connected, respected insider has more significance than that of someone like Bill Black, who has made a career of taking on bank fraud but has never reached a top policy-making level.”

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