Search Results for : William Black

Bill Black at TED Explains How Insiders Rob Banks and Cause Crises

Naked Capitalism has the article Bill Black at TED Explains How Insiders Rob Banks and Cause Crises.

This is a great piece to share with friends and who still aren’t sure why we had a crisis or are predisposed to blame it on greedy borrowers, as opposed to greedy and reckless financial services industry players.

If you don’t know who Bill Black is and if you haven’t read his book and if you have been ignoring my blog for the past 7 or 8 years, here is the bio that was posted along with the YouTube video below.

William Black is an associate professor of economics and law at UMKC. He has held many prestigious positions, including executive director for Fraud Prevention. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae’s former senior management. He is a criminologist and former financial regulator.

Warning: If you would prefer to cling to your own idea of what caused the crisis because you are so sure you know what you know, then do not watch the video below. If, on the other hand, you entertain the possibility that the Tea Party funded by the Koch Brothers might have an ulterior motive in getting you to believe the government’s promotion of home ownership is the cause, then this video is for you.


Why aren’t we outraged enough to demand action from Obama and Holder?

Black Report: Majority of Wall St. Money Now Goes to Romney

The Real News Network weekly report from William Black Black Report: Majority of Wall St. Money Now Goes to Romney covers a few different subjects.

One topic of the conversation is that the credit rating agencies are agin becoming the enablers of Wall Street fraud.

What the credit rating agencies discovered, though, was that they were the key to making Wall Street possible to make their fortunes. And so they learned to negotiate, and they became not just credit rating agencies; they became advisers on the same deal that they were rating, despite the obvious conflict of interest. And so they would structure the deal to ensure that it would get a AAA rating and it would get a AAA rating even though the great bulk of the loans backing it were fraudulent liars’ loans. And so a chart of income for the rating agencies looks like, you know, an incredibly steep ascending hill, and they made an absolute fortune.

They got embarrassed, but you’ll note that they didn’t get sued successfully, and, of course, they didn’t even get threatened with prosecution. So that embarrassment period where they supposedly tried to toughen up their act only lasted around a year. And what they found was whoever was toughest lost business to whoever was weak—again, this race to the bottom or Gresham’s dynamic, in which bad ethics drives good ethics out of the professions. And the result is that they’ve pitched, you know, thrown to the curb the only guy at Standard & Poor’s—which is the biggest of the rating agencies—who was their symbol of trying to be tougher.

What really irks me about this is that one of the fundamentals of my investing strategy depends on a selection of S & P A-rated companies. I have to be extra vigilant about believing anything from S & P. Since they did this before, I guess this is not anything new with them.

JPMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black

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.

Private-equity crowd wants your 401(k) money — ‘yikes!’

Yahoo! Market Watch has the opinion piece Private-equity crowd wants your 401(k) money — ‘yikes!’,

From the Department of Dangerous Ideas comes the news that your employer may soon offer you the “opportunity” to invest some of your hard-earned money in private equity as well as in the public stock and bond markets.

I read most of this. “yikes!” is the appropriate response. One thing the article didn’t mention in the part that I read is that much of the superior performance is attributable to insider trading which has caused a few hedge fund managers to go to jail. As William Black titled his book, “The Best Way To Rob A Bank Is to Own One“. Just imagine how rich we could all be if we just resorted to robbery.

Jill Stein responds to the first Presidential debate in real time

For those of you 88 million people who wasted their time and gave a ratings to boost to the “official” debate, here is what over 1.2 million of us have done instead. We watched a debate with three of the four viable Presidential candidates – Jill Stein, Hillary Clinton, and Donald Trump. Over 32 thousand of us have shared it on our Facebook pages.

Click on to see for yourself. This should answer almost all the questions you might have about Jill Stein.

The video may take a bit of time to load, so please have patience.

Jill Stein At The Debate

For those regular readers of my blog, you will probably realize that I was ecstatic when she mentioned William K. Black, the author of The Best Way To Rob A Bank Is To Own One. That link isn’t the best one on this web site – here is a list of all the references to William Black on this blog.

When she was asked about Stephanie Kelton, I almost feinted. See my posts The Economy: Does More Government Help or Hurt – Stephanie Kelton and Watch Out, MMT’s About, As Bernie Sanders Hires Stephanie Kelton to find out who Stephanie Kelton is.

White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed

New Economic Perspectives has this great post White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed.

My colleagues who are macroeconomists can then make orthodox macroeconomics far tougher by injecting a realistic understanding of money, accounting identities, budget, and real resource constraints in nations such as the United States that maintain sovereign currencies. Once more, my colleagues’ work demonstrates that “modern macro” (DSGE) is not “tough” – it is impossible. It incorporates fictions (in the guise of “discipline”) and excludes reality in a manner that makes it impossible to model economic crises and superior means of recovery. Incorporating these two sources of revolutionary analytical changes from real world micro and macro would create a real revolution in economic theory and allow a truly modern macroeconomics with predictive ability to arise, but neither source of change will make macroeconomics “easy.” It will, however, be a considerable advance to cease making macro impossible.

It is just amazing how Nobel Prize winning economists like Paul Krugman are so resistant to putting some realism in economics theory. They are already being swept away into the dust bin of history. The realists like William Black and his colleagues could burst through the barrier if we dump Hillary Clinton who depends on economists like Paul Krugman, and vote in Bernie Sanders who depends on economists like Bill Black’s colleague Stephanie Kelton.

Greece Proves Again Why Democracy is the Criminal Classes’ Great Fear

New Economic Perspectives has the article Greece Proves Again Why Democracy is the Criminal Classes’ Great Fear by William Black.

So, the new Greek government was right on both of its key policies – as even the troika’s historic “deficit hawk” (the IMF) now admits it has known for years. That means that the troika has knowingly insisted on economically illiterate and self-destructive policies and caused immense human misery for no (desirable) reason. What is going on? The answer is the troika’s oxymoronic definition of “reforms.” When the troika uses the word the “reforms” it means three anti-reforms – reduced wages and rights for workers, destroying the safety net, and selling public assets to private buyers. The troika is deliberately, with the aid of the major media, generating a “race to the bottom” throughout the EU. The New York Times provided a reprehensible example of how the media aids and abets this assault on workers and those who need the safety net in a June 29, 2015 article entitled “Greece’s Troubles Attract Little Sympathy From Poorer Neighbors.”

“We are much poorer than the Greeks, but we have performed reforms,” Rosen Plevneliev, the president of Bulgaria, a northern neighbor of Greece, said in an interview.

While the media cannot refer to Greece’s government without the label “left-wing,” an ultra-right wing politician and vitriolic opponent of the Greek government is simply referred to as “the president of Bulgaria.” (The NYT article above promptly referred to “The left-leaning Syriza Party.”) Given Plevneliev’s anti-worker ideology, he was delighted to inflict “reforms” harming labor. His fear is that Greece will not be destroyed by the troika and that Bulgarian labor will rise up in political opposition to his party. He is, of course, a virulent opponent of the Greek government.

More signs the revolution is coming.

Clinton to name former financial regulator as CFO -Bloomberg

Reuters “reporting” on a Bloomberg story has the article Clinton to name former financial regulator as CFO -Bloomberg.

Bloomberg cited in its report an unnamed Democrat familiar with the decision. Gensler, whose five-year term as the chairman of the Commodity Futures Trading Commission ended in January 2014, came to embody President Barack Obama’s push for Wall Street reforms in the trillion-dollar derivatives market.

A one-time Goldman Sachs swaps trader, he transformed the watchdog from a relatively sleepy agriculture-focused regulator to a powerful overseer of Wall Street.

He proved a polarizing figure with his aggressive interpretation of swaps reforms after the financial crisis, irritating both Wall Street and international counterparts.

Despite, or maybe because of, his Wall Street background, he does seem to have been an effective regulator.

The WikiPedia article on Gary Gensler, has pretty high praise for him.   I checked one of the sources referred to in the article which did not expose any holes in the WikiPedia write-up.  You can tell that I am skeptical of Clinton’s appointees, so I will wait to hear what William Black has to say.  Except for just fining Barclay’s bank over the Libor scandal instead of jailing the offenders according to The New York Times article Libor Case Energizes a Wall Street Watchdog, I can’t find anything else that Elizabeth Warren would complain about.  That is a pretty big exception, and one of my major knocks against Eric Holder and Loretta Lynch. I just don’t know what Elizabeth Warren or William K. Black will say about his record.  At least there is a possibility that he is really as good a guy as some people make him out to be.

The Wall Street Journal Still Refuses to Grasp Accounting Control Fraud via Appraisal Fraud

New Economic Perspectives has the article The Wall Street Journal Still Refuses to Grasp Accounting Control Fraud via Appraisal Fraud by William Black.

I’ll give you the beginning of the article.

The Financial Crisis Inquiry Commission (FCIC) report described one of three epidemics of accounting control fraud that drove the financial crisis in these terms.

“Some real estate appraisers had also been expressing concerns for years. From 2000 to 2007, a coalition of appraisal organizations circulated and ultimately delivered to Washington officials a public petition; signed by 11,000 appraisers and including the name and address of each, it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” [FCIC 2011: 18].

The FCIC Report then documents scale of this epidemic of loan origination fraud.

“One 2003 survey found that 55% of the appraisers had felt pressed to inflate the value of homes; by 2006, this had climbed to 90%. The pressure came most frequently from the mortgage brokers, but appraisers reported it from real estate agents, lenders, and in many cases borrowers themselves. Most often, refusal to raise the appraisal meant losing the client” [FCIC 2011: 91].

And here is the conclusion of the Black’s analysis of the Wall Street Journal article.

No bank officer was sanctioned administratively by the regulators, sued by them, or prosecuted. No enforcement action is described as being taken by the OCC against any bank. The OCC is not described as adopting any rule. The OCC is not described as having made a single criminal referral. If this is what the WSJ thinks describes a “wary” regulator’s response to a fraud epidemic then they are delusional. I have explained in prior articles that the head of the OCC is an anti-regulator who has expressly refused to make ending control frauds led by bank CEOs a regulatory priority. Note that the OCC not only failed to use the word “fraud” to describe appraisal fraud, it also attributed the endemic appraisal fraud to preposterous explanations such as insufficient staff “training” and “oversight.”

To what can we attribute the absolute refusal of regulators to see any fraud when the evidence of the fraud has been presented to them for over 14 years?  What can we expect for investigations of this question from the Republican leadership of the House and the Senate in the next two years – Benghazi?

Is it any wonder that voters are disgusted with both Democrats and Republicans who cannot agree on anything except for “more money for fraudulent bankers is good for the economy”?

A “Perfectly Legal” Scam is Perfectly Unacceptable to Real Bank Supervisors

New Economic Perspectives has the article A “Perfectly Legal” Scam is Perfectly Unacceptable to Real Bank Supervisors by William K. Black.  Now that you have heard the words of the culprits from my previous posts, let us bring in an expert to tell you exactly what is so wrong with what they did.

Let me give you some excerpts from William Black’s biography from  University of Missouri Kansas City.

Professor Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

So when you get an explanation of what the Fed bank supervisors did wrong, you know it is the voice of experience from a bank regulator who has done it right.    He explains several episodes of the financial crisis that are peripheral to (but essential background information about) the current brouhaha over Goldman Sachs before he gets into their latest fraud.

In case you don’t get to read the article, I will just show you the excerpt that shows exactly how derelict the bank supervisors were.

So, it’s “apparent” that the deal was a scam. Silva knew it was a scam. His team knew it was a scam. As a former senior banking lawyer/regulator who worked with real supervisors let me assure the reader that there can be real supervisors and that no change in law was required for Silva to block a “perfectly legal” scam designed to “artificially enhance” a bank’s reported “capital.” Such a deal is “unsafe and unsound” and it abets an “unsafe and unsound” act. We would have ordered Goldman to terminate the scam and if its senior managers refused to comply we would have brought a “cease and desist” order against Goldman and a “removal and prohibition” order against the senior managers. We would have won both actions. The federal banking regulators have explicit statutory power to act against “unsafe and unsound” banking practices.

I think the point is that the system including the FED is corrupt.  However, the likes of Rand Paul haven’t a clue as to exactly what is wrong.  If you want a Senator to go after the Fed and try to fix it, Elizabeth Warren is one of the people you want.