William K. Black is one of the US' leading experts on financial fraud in general, and on banking fraud in particular.
This is why you will rarely see him interviewed or even quoted in the mainstream media. And why he gains so little traction with the Congress and this Administration. He is an informed and honest voice, at a time when the status quo just does not want to hear it. They are caught in a credibility trap in which they can admit nothing, investigate nothing, without risking themselves and their 'good thing.'
He has done an impressive but somewhat lengthy interview with Russ Roberts of EconTalk. It is very informative, but would have benefited tremendously from some judicious editing.
I have to caution you in advance that it is somewhat lengthy, so it is best listened to when you have an extended quiet moment. Russ Roberts is a bright fellow, but in the first half he tends to interject himself quite a bit into the narrative, sometimes it seems not really listening well to what Wm. Black is saying. Perhaps he was having an ideaphoric day as do we all. I found it to be a little annoying at times. But he seems to calm down after a while.
But the interview is really a gem, because it explodes so many economic myths and urban legends about the financial crisis. Efficient markets hypothesis and the virtues of self-regulation are a joke. I think most of us who are not wedded to some ideological belief already know that, but Mr. Black puts a stake in that theory's vampiric heart.
Professional economists tend to make lousy public policy, because they have learned to think in theoretical models that only touch reality at statistical intervals. And those models often suppress and crush the significance out of crucial variables of problems that resist adequate measurement for the sake of mathematical expediency, whether it is the propensity of market participants to cheat and do foolish things, or in gravely underestimating fully priced risk and its dynamic consequences.
So we too often see economists in the media saying foolish things with a straight face, sometimes alas for pay in the manner of what they unfortunately are, but sometimes because, although they may be highly regarded and even esteemed, when it comes to the rough world of hard ball business and greed, they really are, as the kids are often wont to say, 'pwned noobs.'
Economics is a profession currently gasping in autoerotic asphyxiation, choking on intricately useless models and obfuscating jargon. I do not wish to dwell on their problems and challenges facing the hard-working and honest economists in reforming their profession because it plays a more supportive than primary role in the problems facing the world today. The economists, politicians, spokesmodels, and strategic analysts are merely the hired help, the servants, collaborators; the root of the problem is with the money masters themselves. If you wish to know who they are, then follow the money, if you can.
I think it is important to hear the clear voice of experience and reason in this matter, whether you like it or not, whether it suits your self-interest or political biases or not.
Why is this important? Because there is another financial crisis coming, and the monied interests and their banks will be serving up the same set of propaganda and demands, writ larger. So it now be a good time to unplug yourself from whatever media bubble machine you follow, so you may have at a least a slim chance of coming out of this intact.
You may listen or download the interview here.
"So, it's, I think, really naive to believe that any lender made loans because they thought it made politicians happy. Lenders made loans because it made individual lenders--I don't mean companies, I mean people--much, much wealthier. And they created those incentive structures not because they could care less about people...
...we think this actually is a story, driven overwhelmingly by what we call accounting control fraud; and we think no one much doubts that about the Enron era. And we think there is pretty good consensus on the Savings and Loan crisis as well, because of all the factual record. We had to go up against the best criminal defense lawyers in the world, and we got a 90% conviction rate.
Plus, we satisfied the economists that looked. I quoted from the National Commission, which was run by economists, that concluded that at the typical large failure, fraud was invariably present.
But if you go and read the economic literature on this crisis, you will find that Akerlof and Romer are cited for example in maybe, generously, 1 out of 100 articles that purport to discuss the causes of the crisis.
And you will see that fraud is virtually never discussed as even a potential major contributor. And that is poor; and that is really the tribal taboo that still exists in economics against any serious consideration of the word fraud."
Wm. K. Black
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| Daniel 5:25 מנא ,מנא, תקל, ופרסין Mene, Mene, Tekel u'Pharsin |
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall.
How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!
For in that universal call,
Few bankers will to heaven be mounters;
They'll cry, 'Ye shops, upon us fall!
Conceal and cover us, ye counters!'
When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
'Weigh'd in the balance and found light!'"
Jonathan Swift, The Run Upon the Bankers
