Tag Archives: Control Fraud

The Broader Costs of Lethal Lemons: “We Have so Many Ranas”

Posted on May 1, 2013 by | 3 comments

By William K. Black

This is the third article in a series on some of the additional lessons we should learn from the mass murder of Bangladeshi garment workers by anti-employee control frauds.  I discuss new allegations about the senior executives involved in producing the terrible loss of life and maiming of so many workers because they are relevant to the broader harms that control fraud can cause that I discussed in the first and second articles in this series. Continue reading →

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What if George Akerlof had written about Lethal “Lemons?”

Posted on April 29, 2013 by | 7 comments

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

If you have studied economics at the university level in the last 35 years it is likely you were introduced to the concept of “asymmetrical information” and George Akerlof’s famous 1970 article on markets for “lemons” (American slang for an automobile of terrible quality).  The Nobel committee that awards the prize in economics singled out that article for special praise in deciding to make him a Nobel Laureate in 2001.  The article discusses the implications of asymmetrical information in a number of contexts, but at least two of the contexts involved what criminologists call “control fraud” and a third involves the risk of fraud by borrowers.  Most of the examples Akerlof discussed involved fraud.  The frauds he analyzes concern deceit about the quality of goods being sold or the borrowers’ ability or willingness to repay a loan.    Continue reading →

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The SEC embraces irony – its enforcement “inflection” “point”

Posted on March 18, 2013 by | 5 comments

By William K. Black

Many readers doubtless shared my doubt that the SEC was capable of exercising the critical self-examination and sense of humor about itself as a flawed institution that would make it capable of deliberate irony.  When I accessed the Wall Street Journal’s home page I found the most delicious example of SEC (and WSJ) irony.  The WSJ synopsis of its article on the SEC reads: “The SEC is filing significantly fewer civil fraud cases this year, as its efforts to punish misconduct related to the financial crisis start to ebb.”

“Start to ebb?”  Is it only me, or have other readers missed the tidal bore of SEC enforcement cases “punishing” the “misconduct” of the most culpable, elite perpetrators of what, even conservative, finance scholars describe as “pervasive” accounting control fraud by our “most reputable banks”?  Continue reading →

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Which Aspect of the FDIC’s Litigation Failures is the Most Embarrassing and Damaging?

Posted on March 12, 2013 by | 9 comments

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

On March 11, 2013 the Los Angeles Times published a revealing article by E. Scott Reckard entitled:  “In major policy shift, scores of FDIC settlements go unannounced.”

The article’s summary statement captures the theme nicely.  “Since the mortgage meltdown, the FDIC has opted to settle cases while helping banks avoid bad press, rather than trumpeting punitive actions as a deterrent to others.” Continue reading →

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“Pervasive” Fraud by our “Most Reputable” Banks

Posted on February 28, 2013 by | 8 comments

By William K. Black

A recent study confirmed that control fraud was endemic among our most elite financial institutions.  Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market.  Tomasz Piskorski, Amit Seru & James Witkin (February 2013) (“PSW 2013”).

The key conclusion of the study is that control fraud was “pervasive” (PSW 2013: 31).

“[A]lthough there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions” (PSW 2013: 29).

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NEP’s William Black in Davos

Posted on January 28, 2013 by | 5 comments

William Black’s Speech at the 2013 Public Eye Awards in Davos Switzerland.

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The Central Fact that Folks Don’t Get about Fannie and Freddie’s Role in the Crisis

Posted on October 24, 2012 by | 5 comments

By William K. Black

Here’s the central thesis of the far right about Fannie Mae and Freddie Mac.  It is taken from the web site: The Neville Awards (as in Neville Chamberlain), which gives “awards” to Democrats for their cowardice and other mortal and venal sins.  This particular article claims that the damnably clever Democrats, while the Republicans controlled the Presidency, House, Senate, Supreme Court, and all the regulatory agencies, pulled off a deliberate plan to destroy the economy in order to elect Obama. “Obama, Fannie Mae & Freddie Mac – How the Democrats Brought Down the Economy in Time to Elect Obama.”

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The City of London continues to drive the criminogenic regulatory race to the bottom

Posted on October 22, 2012 by | 25 comments

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

Two years ago, I wrote an article entitled “The Bank of England Sows the Seeds of the Next UK Crisis.”

I was not vain enough to believe that the British establishment would listen to my critique.  The books authored recently by Jeff Connaughton, Neil Barofsky, and Sheila Bair have made clear that the dominant strategy of the Bush and Obama administrations has been providing aid and comfort to the banksters who drove the crisis rather than holding them accountable for their crimes.  The Brits are following the same dominant strategy.

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The Best Way to Rob a Bank is still to Own One: a Postscript

Posted on October 8, 2012 by | 4 comments

By William K. Black

The central questions for a theorist are whether his theory showed strong explanatory power and to what extent it proved useful in diverse settings.  A distinguished economist, Dr. Jayati Ghosh, has addressed those questions in an article in which she was explaining to Indian readers that a large fraud, Satyam, was not the product of unique defects in Indian regulation.

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American weirdness seeks to intervene in Honduras

Posted on October 8, 2012 by | 16 comments

By William K. Black

Michael Strong is an American businessman who is a devotee of  the Austrian school of economics.  Austrians view democratic governance as so inherently illegitimate that they claim that virtually any governmental program irretrievably consigns us to the “Road to Serfdom.”   Strong has decided to save Hondurans from their government.  He wants his corporation to buy a Honduran city named Puerto Castilla and turn it into his first global “model city.”  The Honduran government holds power through a coup that removed that forced out Manuel Zelaya, the democratically-elected President.  The coup occurred during the Obama administration and returned the oligarchs to power.  The administration criticized the coup but recognized the (eventual) newly elected President Profirio Lobo.  The constitutional chamber of Honduras’ Supreme Court (which provided a fig leaf of respectability for the coup) rule 4-to-1 that it was unconstitutional to create privately run cities.  (The decision is expected to be appealed to the full Supreme Court.)

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