Financial control frauds’ primary weapon is accounting. Fraudulent lenders produce exceptional short-term “profits” through a four-part strategy: extreme growth (Ponzi), lending to uncreditworthy borrowers, extreme leverage, and minimal loss reserves. These exceptional profits defeat regulatory restrictions and turn private market discipline perverse.
The finance sector is most criminogenic because of the absence of effective regulation and the ability to invest in assets that lack readily verifiable values. Unless regulators deal effectively with the initial frauds their record profits will produce imitators.
Mega bubbles produce financial crises."
William K. Black, Recurrent, Intensifying Bubbles and Crises
"Do not be deceived, God is not mocked; for whatever a man sows, that he will reap. For whoever sows to the flesh will from the flesh reap corruption, but whoever sows to the Spirit will from the Spirit reap everlasting life. And let us not grow weary while doing good, for in due time we shall reap if we do not lose heart."
Galatians 6:7-9
When we look back on this period in time with the perspective of history, we will see markets dominated by control frauds and mispricing of risk that will seem painfully obvious. Why do we not see this now? Why did so few see it coming 2007, and in 2000?
Perhaps because the money is too good, and our societal judgement is too corrupted, often willfully so.
Still, bubbles have a surprising resiliency, as does evil in a hardened heart.
And for the same reasons.
Related: Trader's Lawsuit Offers Window Into Crime Culture at Bank
