New Economic Perspectives has the article Oral Testimony of William K. Black.

The article points to a transcript of the testimony Joint Committee of Inquiry into the Banking Crisis. Rather than read the article’s summary of the testimony, I went right to the transcript. The transcript is long, so even the lengthy excerpts below are only a small part of the transcript. (I wish I had found the link to the promised video.)

Marc MacSharry

Okay. In terms of the likelihood of a repeat, does Professor Black think that the set of parameters that currently exist make it quite likely that it will all happen again?

Professor William Black

Yes, and it will be worse. This is not just Ireland and Europe – this is the United States. There has been no accountability for the bankers and no accountability for the regulators. So, it will take the next boom before this happens again. In the savings and loan crisis, as the committee heard we got over these 1,000 felony convictions. None of those people, to my knowledge, participated in the current crisis precisely because they had criminal records. That is what we call specific deterrence. There will be no specific deterrence out of this crisis. The worst actors who know exactly how to use these four ingredients of the recipe that I told the committee are out there, and what they have learned from this crisis is that it is a sure thing and not much of anything happens to one. That is a really perverse incentive structure. It is critical that one reverses that.

Notice the mention of Stephanie Kelton and her current position. This is a name that I have been trying to get readers of my blog to burn into their memories. It is going to be extremely important for people to know who she is, and to remember who hired her – Bernie Sanders.

Marc MacSharry

Would Professor Black feel that the euro, therefore, is arguably unfit for purpose because of the smaller economies on the periphery like Ireland, which are less than 1% of the eurozone?

Professor William Black

The euro is a disaster. It never made sense in terms of the economic literature on an optimal currency area. My colleague, Professor Stephanie Kelton, who is now the chief economist on the Senate budget committee, is one of a number of scholars who wrote this in advance and their predictions have proven absolutely correct.
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Professor William Black

We have not set this up but I thank Deputy Doherty. My answer is not in response to Ireland. I am not talking about Ireland. I am responding to the generic question. Here is an example of that dated 15 July 1987 from Charles Keating, our most notorious fraud in the savings and loan crisis to his chief political fixer. “Highest priority – get Black. Good grief – if you can’t get Wright [the Speaker of the House] and Congress to get Black – kill him dead – you ought to retire.” That is the kind of thing I am talking about. Our joke in the savings and loan crisis was the highest return on assets was always a political contribution for any banker. In our context, the Speaker of the House held hostage our Bill to get funding to close the institutions, to extort special favours for several fraudulent Texas savings and loan branches. Five US Senators who became known as the Keating Five sought to keep us from taking enforcement action against the worst fraud. The President of the United States attempted to appoint two members, chosen by Charles Keating, to run the agency. I told the committee it was a three presidential appointee agency that ran it. A Mr. Phelan, doubtless a distant cousin, was hired by the House ethics committee to investigate the ethics complaints against the Speaker of the House, James Wright. He did resign at the end of this process, but three of the recommended charges by Mr. Phelan after his investigation were that an ethics case should be brought against the Speaker of the House for his effort to fire William Black, his effort to fire Joe Selby, who was one of those two top regulators I told the committee about, and because he held hostage our funding to extort favours on behalf of folks.

In the United States context, these people do not go quietly. If you bring cases against powerful bankers, they will enlist their political allies and they will give very large political contributions to do that. In our context, Alan Greenspan was used to recruit the Keating Five, the five US Senators. He was hired as a lobbyist initially by Charles Keating to recruit those Senators. The United States is not unusual in those terms. If you take on really powerful bankers you will find that you get political push-back. If you do not pick regulators who will stand up to that – this is what I referred to as the Mike Patriarca level – Mike Patriarca was asked by a US Senator, one of the five who was meeting with us, whether he was saying that Arthur Young & Company, then one of the top tier audit firms, would prostitute itself for a client. Committee members, as legislators, know that if they ask that of a bureaucrat what the only possible answer is. When there are five Senators the only possible answer is, “Oh no sir, I would never say that.” The actual answer from Mike Patriarca was “Absolutely, it happens all the time.”
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Professor William Black

When I was an enforcement and litigation director I negotiated these things all the time and here is the key that you need to understand. Bankers make the decision and their priorities are not to go to jail, not to lose their job and not to have their bonuses clawed back. To accomplish those three things they also have a fourth priority to not throw anybody junior to the wolves. In the United States we have much broader plea bargaining powers than exists in most of Europe. If you throw the junior person to the wolves we will flip him which means we will get him to plead and to testify about the more senior people. The committee will note that in all of these major deals in the United States nobody got named, loses their bonus, loses their job or goes to jail and they are happy to trade off fines.

The fines sound large. They are large in absolute terms but relative to JP Morgan Chase, to pick a non-random example, they are literally a few weeks’ revenue so they do not care. Also, bankers do not pay the fines; it is the shareholders. This is the third in a triple whammy hit if you follow the recipe to the extent that the banks have followed this recipe. First, they have caused huge losses to the shareholders directly by making bad loans intentionally. Second, they have taken a whole lot of money that should have gone to the shareholders in the form of bonuses for destroying the institution or at least causing huge losses. Third, they come along and are happy to sign an agreement in which the shareholders pay the fines to make sure that they have no accountability. Therefore, this is an utterly useless exercise in terms of deterrence.

I think I understood a lot of the testimony because I am a regular reader of the New Economic Perspectives blog and of the book, “The Best Way to Rob a Bank Is To Own One”. I wonder how much is understood by ordinary people and perhaps even the members of the committee that took the testimony.

I take particular interest in the talk of Gresham’s Dynamic, which I am not sure Black did justice to in explaining it to the uninitiated.

Back in the late 1980’s and early 1990’s I was remarking on the Gresham’s Law as it applied to Mutual Fund Managers. The only ones who could keep their jobs were the ones who were taking insane risks and achieving insane (if temporary) returns for their funds. It was hard to find a mutual fund that was still being managed by prudent investors. I even had to keep reminding myself that it was not how much money that I was making on paper, but it was about how much of it that I would eventually get to keep.

The American public still does not get what a crucial failure of the Obama administration it was and still is in the failure to prosecute the bankers (fraudsters.) This is why I keep harping on this issue to the same extent that Bill Black does.

New Economic Perspectives has the fabulous article Hillary’s Threat to Wage Continuous War on the Working Class via Austerity Proved Fatal by William K Black. The article was republished on Naked Capitalism as Bill Black: Hillary’s Threat to Wage Continuous War on the Working Class via Austerity Proved Fatal.

This is a great explanation of what my Politics Blog is largely about. It explains why I am so adamantly opposed to Hillary Clinton and so disappointed by Barack Obama. It explains why I have come to realize just how bad Bill Clinton’s time in office was for this country.

It is hard to select a few excerpts from the article to give you the gist, but the following is my feeble attempt.

Here is the excerpt I should have chosen first.

Timothy Geithner, a proponent of austerity, is famous for remarking that he only took only one economics class – and did not understand it. In the same review of Geithner’s book by Krugman that I have been quoting, Krugman gives a concise summary of Geithner’s repeated lies about his supposed support for a larger stimulus. Jacob Lew, the Rubinite who Obama chose as Geithner’s successor as Treasury Secretary, was also trained as a lawyer and is equally fanatic in favoring austerity. In 2009, no one with any credibility in economics within the Obama administration could serve as an effective spokesperson for [against?] austerity as the ideal response to the Great Recession.

But Romer, Summers, and Bernstein experienced the same frustration as 2009 proceeded. The problem was not simply the Rubinites’ fervor for the self-inflicted wound of austerity – the fundamental problem was President Obama. Obama’s administration was littered with Rubinites because Obama was a New Democrat who believed that Rubin’s love of austerity and trade deals was an excellent policy. Of course, he had campaigned on the opposite policy positions, but that was simply political and Obama promptly abandoned those campaign promises. Fiscal stimulus ceased to be an administration priority as soon as the stimulus bill was enacted. Romer and Summers recognized the obvious and soon made clear that they were leaving. Bernstein retained Biden’s support, but he was frozen out of influence on administration fiscal policies by the Rubinites.
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Final Cautions

Each of the economists speaking on these subjects in Kilkenny opposed Trumps election and believe it will harm the public. Fiscal stimulus is critical, but it is only one element of macroeconomics and no one was comfortable with Trump’s long-term control of the economy. I opined, for example, that Trump will create an exceptionally criminogenic environment that will produce epidemics of control fraud. The challenge for progressive Democrats and independents is to break with the New Democrats’ dogmas. Neither America nor the Democratic Party can continue to bear the terrible cost of this unforced error of economics, politics, and basic humanity. I fear that the professional Democrats assigned the task of re-winning the support of the white working class do not even have ending the New Democrats’ addiction to austerity on their radar. They are probably still forbidden to read Tom Frank.

This information in this article is exactly why I feature a picture on my Facebook page of L. Randall Wray’s book Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems.

Image from my Facebook page

New Economic Perspectives has the article Je Suis Oncle Bernard by William Black.

it is my sad responsibility to note the murder of Bernard Maris, a prominent French economist and opponent of financial terrorism via austerity, in the terror attack on Charlie Hebdo.

I doubt the attackers even cared that they killed an economist who probably was one of the few  who spoke up for the needs of the middle and lower classes in France and Europe.  Of course, I don’t know what kind of satire Maris wrote, so I cannot vouch for that part of his public life.  As if someone needed vouching for as a precondition for not being murdered.

New Economic Perspectives has the article Jeffrey Sachs Channeled His Inner Bill Black – and Obama and Holder Ignored Him Too by William K. Black.   The article quotes from the appearance by Professor Jeffrey Sachs, Columbia University at The  31st Annual Monetary & Trade Conference
in Partnership with Drexel University’s LeBow College of Business: Fixing the Banking System for Good, Wednesday, April 17, 2013, Pennsylvania Room at the Federal Reserve Bank of Philadelphia, 100 N. Sixth Street Philadelphia, PA 19106.

Jeffrey Sachs: ‘Well, thank you very much for saying it and practicing it. I do believe – by the way, I’m just going to end here because I’ve been told I have to run to the U.N. in fact right now – I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I’m going to put it very bluntly. I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably. These people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes. They have no responsibility to their clients. They have no responsibility to people, counterparties in transactions. They are tough, greedy, aggressive, and feel absolutely out of control, you know, in a quite literal sense. And they have gamed the system to a remarkable extent, and they have a docile president, a docile White House, and a docile regulatory system that absolutely can’t find its voice. It’s terrified of these companies.

For those who don’t know Jeffrey Sachs, William Black quotes the following from the article Jeffrey Sachs Calls Out Wall Street Criminality and Pathological Greed.

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.

Now, perhaps you get the point of why I am so disappointed in our “docile president”.  It may even be worse than what we have been hearing from Elizabeth Warren and William Black.  You should also read what Sachs had to say about the Clintons.

The Daily Ticker on Yahoo his another segment with William Black.  This one is headlined JPMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black.

More importantly, Black notes JPMorgan is betting on “derivatives of derivatives” and is by far the largest player in the market for the CDX Investment Grade 9 and CDX High Yield 11, the derivatives underlying the trade that earned Bruno Michel Iksil the nickname ‘the London Whale.’

“They didn’t just gamble, this was a wild, crazy insane gamble,” says Black, who calls JPMorgan “the world’s largest gambling operation in financial derivatives” in his latest blog at New Economic Perspectives.

To be sure, a $2 billion loss is just 0.1% of JPMorgan’s assets, as of March 31. JPMorgan has suspended its share buyback program and would appear to have ample resources to cover the losses, even if they were to double or triple or even quadruple.

But that’s not the point, according to Black.

“We don’t want any federal insured entity…to be speculating in financial derivatives. That’s just nuts,” he says. “It’s really disastrous when you’re talking about an institution like JPMorgan. It will sooner or later have a really bad year…when it has the really bad year, we will all end up having to bail them out or having another global crisis.”

Given its size and outsized bets on credit derivatives, “JPMorgan poses a clear and present danger to the global economy,” according to Black.

I don’t suppose William Black could have put it in any more stark terms than that last sentence above, emphasis added by me.

William Black: Why Nobody Went to Jail During the Credit Crisis is an interview with the man who wrote the book The Best Way To Rob A Bank Is To Own One.  I also mention Black and his book in the post The Best Way To Rob A Bank Is To Own A Politician.

The link to the article that is the focus of this blog has both an audio of the interview and a transcript.  To try to give you a sense of the magnitude of the fraud being discussed and to whet your appetite to read the article, I have selected some parts of the transcript to quote.

Remember I told you there were over a million cases of mortgage fraud a year and that overwhelmingly it’s lenders who foot the fraud, the lie in the liars loan.
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To give you a comparison, at the peak of the Savings and Loan Crisis, there were 1,000 FBI agents working the cases.
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Eight times more FBI agents than were working the cases in fiscal year 2007. And this crisis is forty times bigger and worse than the Savings and Loan Crisis. So you would have required massively more people. To give you another idea of scope, to investigate Enron, and Enron was complex, but it was nowhere near as big and as complex as Washington Mutual. It took 100 FBI agents. So you can see that with 120 nationwide, at most you could have done one major case.
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Every year, with a million plus cases of fraud a year, if you prosecute a thousand of them or two thousand of them or three thousand of them, you are a million cases further behind every year, right. It is just insane. So the FBI says we got to start going after the big guys at which point Bush’s Attorney General Mukasey says no, he refuses to even create a National Task Force against mortgage fraud, saying famously, this is simply the equivalent of, and I am quoting again, “White Collar Street Crime,” little tiny stuff. Well of course he has assigned the FBI to only look at little cases and they report back, hey we’re finding little cases. And the Mukasey interprets from that, hey only little cases exist.

Is it any wonder that one of the signs I am going to hold up in the Occupy Boston march is Justice For Wall Street?  Sharon The Two Fisted Protester is holding this sign plus another.

For some reason, people cannot understand what the Occupy … movement really wants.  They must have very short memories.

I found the link to the William Black article on the Occupy Boston Facebook page, but I’ll be darned if I can figure out how to create a direct link to that specific post.  If someone else makes a comment after I did, I may receive an email with the link.

YouTube has the video Coffeezilla: SBF, FTX, Fraud, Scams, Fake Gurus, Money, Fame, and Power | Lex Fridman Podcast #345.

Coffeezilla is a journalist and investigator on YouTube who exposes financial frauds, scams, and fake gurus.

I have only had the time to listen to 1 hour of this 3 hour and 46 minute interview. One of the places where I think they are missing the boat is to not realize how fraudulent and worthless the whole idea of crypto-currency is. Read Michael Hudson’s many books on the history of money and how government money gets its value. If you haven’t read Michael Hudson or other experts in modern money theory, you have no idea how money works. Lex Fridman has not done the required reading. As good as the interview seems to be, it could have been so much better if Lex knew whom to talk to.

They talk about the importance of decentralization of power. I always think that decentralization is very important in making systems anti-fragile. Too much power in the hands of a small number of people whether they be in private enterprise or in government is very dangerous. One thing that gets missed in the argument of capitalism versus socialism is the value of competition among small centers of power. Diversification is a central tenet of safe investment. You never can be sure whose ideas will be best for the future. That’s why there is some wisdom in the rule of thumb that it is not safe to put all your eggs in one basket. It is valuable to have many people trying different ideas, to see which ones actually pan out over time.

The other issue is the inevitability of some fraud. If you build any system that depends on the absence of fraud, that system will be doomed to failure. Asking honest people and especially ones who have no experience detecting fraud how a con artist is going to invent a fraudulent scheme, then you have committed yourself to unilateral disarmament. That is what I learned from reading William K. Black’s book, “The Best Way to Rob a Bank Is To Own One.”

New Economic Perspectives has the article How White Collar Criminals Get Away with Murder. I don’t watch The Real News Network anymore since they pushed Paul Jay out, so I only post this because it is an interview with WIlliam K. Black and I was pointed to this from New Economic Perspectives.

White-collar crime prosecutions are at a 33-year low. Corporate leaders can cause environmental disasters, economic crashes, and the deaths of thousands and still walk free. But there’s a way out.

New Economic Perspectives has the article A Conspiracy Against MMT? Chicago Booth’s Polling and Trolling.

I am glad to see L. Randall Wray step into this fight, and not leave it all up to William K. Black.

The task ahead of us is bigger. The stakes are bigger. The future of humanity lies in the balance. Half measures will not do. It will take all of our available resources—and then some—to win this battle. The experts (and I’m not one of them) say we’ve got most of the technology we need. We’ve got unused resources to put to use. We can shift others from destructive uses to be engaged in constructive endeavors. We can mobilize the population for greater effort with the promise of greater equality and a shared but sustainable prosperity.

I just have to include the following excerpt:

In reality, OPEC caused both of our high inflation periods (early and late 1970s), and the adoption of austerity to fight oil price hikes slowed growth and led to unemployment.

I have been arguing for years for a Modern Money Theory (MMT) authority to say this. I have been shunned by Steve Grumbine of Real Progressives for even mentioning this. Somehow, I feel vindicated.

Now that I think about it, I have been saying this about the inflation of the 1970s and the ending of the inflation in the 1980s by Ronald Reagan’s putting us into a near depression since about the time that Ronald Reagan did this almost 40 years ago. This is long before I even heard about MMT. Possibly before MMT was even invented.

YouTube has the video Middle Class Loses, Plutocrats Win With Trump’s Tax Cuts.

I am used to hearing comedians like Jimmy Dore and Lee Camp talk about economics. Here we have an economist, William K. Black essentially doing a comedy routine.

The article they discuss in the video is Why Did Trump Choose to be Such an Unpopular President?