Tag Archives: accounting control fraud

Key House Republicans Almost Get Accounting Control Fraud

Posted on February 28, 2014 by Devin Smith | 10 comments

To prepare myself for a guest lecture to a class at the University of Kansas I did some research about the House Financial Services Committee, now chaired by Jeb Hensarling (R. TX). I was pleased to learn that the Committee’s home page emphasizes the key role that accounting control fraud played at Fannie and Freddie. The home page has a “spotlight” section designed to draw the reader’s eye to a short series of documents designed to support passage of the Protecting American Taxpayers and Homeowners (PATH) Act, which focuses on eliminating Fannie and Freddie. The documents largely stress that Fannie and Freddie were accounting control frauds.

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Posted in William K. Black

Tagged accounting control fraud, fannie mae, freddie mac, Hensarling, the great financial crisis

Finance Refuses to Take Akerlof and Romer Seriously about Looting

Posted on February 3, 2014 by Devin Smith | 4 comments

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

I have often written and spoken of my frustration that economists refuse to read George Akerlof and Paul Romer’s classic 1993 article (“Looting: The Economic Underworld of Bankruptcy for Profit”) and apply it to an analysis of the current financial crisis. Note that their title expresses the paradox they were reporting – the best way to loot the bank is for its controlling officer to cause it to make extraordinary amounts of terrible loans that will typically cause the bank to fail.

In my fantasy world I am even frustrated that they refuse to read the white-collar criminology literature that my colleagues and I have spent decades developing about “accounting control fraud” (what Akerlof and Romer called “looting”). Economists do not study fraud and in my flights of fantasy I imagine a world in which they would read the work of those who specialize in that field. Silly, I know, though that is exactly what Akerlof and Romer did, see their beginning note*, because they wanted to get the facts correct. If you think that is the obvious approach that any scientist examining an issue would take – congratulations – you just might be a scientist, but you’re almost certainly not an economist.

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Posted in William K. Black

Tagged accounting control fraud, ackerlof and romer, Control Fraud, looting

Let’s End Politico and Deal Book’s “Competition in Sycophancy”

Posted on January 22, 2014 by Devin Smith | 2 comments

By William K. Black

Politico has joined Deal Book in a “competition in sycophancy.” The contestants are competing to see which can author the most extreme version of a fantasy meme in which heroic Wall Street “banks” are oppressed by “Washington.” I had not believed that any “serious” journalist could compete with Andrew Ross Sorkin’s Deal Book in pounding this meme. Ben White, Politico’s economics reporter, has become my dark horse favorite in the race to the bottom of the “serious” business press with his whitewash entitled “How Washington beat Wall Street.”

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Posted in William K. Black

Tagged accounting control fraud, banksters, gresham's dynamic

James M. Cirona: In Memoriam

Posted on January 20, 2014 by Devin Smith | 2 comments

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

The death of a successful banker and regulator

James M. Cirona died January 4, 2014. I doubt that many readers know of Jim’s work even if they follow finance. That is a shame for Jim was one of the most important reasons the savings and loan debacle did not cause a financial crisis and a Great Recession. The reason Jim was so effective was that he understood that the factor driving the debacle was a surging epidemic of accounting control fraud and he had the leadership abilities and the courage to expand and focus the resources of the Federal Home Loan Bank of San Francisco (FHLBSF) to stop that epidemic.

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Posted in William K. Black

Tagged accounting control fraud, bank fraud, bank regulation, bankster

What Would It Take To Get Andrew Ross Sorkin To Call For Jamie Dimon To Resign?

Posted on January 17, 2014 by Devin Smith | 10 comments

By William K. Black

I have concluded that the journalists who write for the New York Times’ “Deal Book” are incapable of embarrassment or introspection. I have waited in vain for Andrew Ross Sorkin to make a New Year’s resolution to make 2014 a fresh start. There are scores of Deal Book article that drive a white-collar criminologist and a (real) financial regulator to despair. I focus here on one article by Sorkin on October 14, 2013 entitled “The Bloodlust of Pundits Swirls Around Jamie Dimon” that exemplifies how much harm Deal Book does because of its pandering to the elite financial CEOs who became wealthy from the frauds that drove the crisis, its ethics-free approach to financial fraud, and its analytical ennui. Deal Book could be a national asset, but it is a net liability. This first installment discussing their “Bloodlust” article analyzes Sorkin’s use of the world “bloodlust.”

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Posted in William K. Black

Tagged accounting control fraud, andrew ross sorking, banksters, jamie dimon

The Icelandic Chutzpah Prize is Retired: Portes and Baldursson Win by Losing

Posted on January 14, 2014 by Devin Smith | 5 comments

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

Portes as the poster child for the failure of econometrics and neoclassical dogma

Richard Portes is the economist that the U.K.’s neoclassical economists chose to be their representative. They consider him to represent the greatest strengths of neoclassical economists in general and econometricians in particular. “Econometricians” is a fancy term for economists whose specialty is statistics. Economics is unique in that one can receive exceptional honors from fellow-neoclassical economists for proving catastrophically wrong – repeatedly and causing immense human suffering. Wesley Marshall and I are doing a book that illustrates this point by focusing on Nobel Laureates in economics, and explains the underlying pathology that has so twisted the field. Portes has not been made a Laureate, but he is a global leader among neoclassical economists. Portes’ pronouncements on Iceland have proven so wrong, so often, that they serve a similar purpose in illustrating these crippling pathologies.

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Posted in William K. Black

Tagged accounting control fraud, Iceland, Portes

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

Posted on November 26, 2013 by Devin Smith | 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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Posted in William K. Black

Tagged accounting control fraud, Andrew Ross Sorkin, banksters, DOJ, Great Financial Crisis, jp morgan

Irish Fish, and Banks, Rot from the Head

Posted on November 13, 2013 by Devin Smith | 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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Posted in William K. Black

Tagged accounting control fraud, Kilkenomics, Nyberg

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

Posted on November 4, 2013 by Devin Smith | 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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Posted in William K. Black

Tagged accounting control fraud, Benjamin Wagner, jp morgan, too big to fail

Economics could be a Science if More Economists were Scientists

Posted on October 28, 2013 by Devin Smith | 34 comments

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

Raj Chetty has written an op ed in the New York Times designed to counter the abuse the Sveriges Riksbank (Sweden’s central bank) rightly received for its latest embarrassment. Economics does not have a true Nobel Prize, so a central bank decided to create a near-beer variant. The central bankers have frequently made a hash of it, often awarding economists who got it disastrously wrong and inflicted policies that caused immense suffering. This year, not for the first time, the central bankers decided to hedge their bets – awarding their prize to economists who contradict each other (Eugene Fama and Robert Shiller). The hedge strategy might be thought to ensure that the central bank’s prize winners were right at least half the time (which would be an improvement over the central bankers’ batting average in their awards), but that is a logical error. It is perfectly possible for both of the prize winners to be wrong. I’ll explain why I think that is the case in a future article.

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