William K Black PhD's Contributions

The FDIC has sued 16 of the largest banks in the world plus the British Bankers Association (BBA) alleging that they engaged in fraud and collusion to manipulate the London Inter-bank Offered Rate (LIBOR). BBA called LIBOR “The most important number in the world.”

The Department of Justice’s (DOJ) latest civil suit against Bank of America (B of A) is an embarrassment of tragic proportions on multiple dimensions. In this version I explore “only” seven of its epic fails.

The ultimate culpability for the shameful “too big to prosecute” indulgence granted to the criminal enterprise known as HSBC rests with President Obama and Prime Minister Cameron. It is also worth noting that the Republican Party and Governor Romney never protested this failure to prosecute and that Obama is largely continuing President Bush’s failure to even investigate seriously the banksters. Welcome to crony capitalism.

The ongoing U.S. crisis was driven largely by financial derivatives. Nine of America’s systemically dangerous institutions (SDIs) failed or had to be bailed out – Bear Stearns, Lehman, Merrill Lynch, Fannie, Freddie, AIG, Countrywide, Wachovia, and Washington Mutual (WaMu).

JPMorgan’s flacks and apologists have, unintentionally, exposed the fact that their cover story – hedging gone bad – is false. JPMorgan runs the world’s largest gambling operation in financial derivatives.

On April 25, 2012, Treasury Secretary Geithner made remarkable statements about the role of elite financial fraud and greed in producing our recurrent, intensifying financial crises.

Presidential nominees of either U.S. party can secure economic advice from any economist in the world. This makes it all the more amazing and sad that they choose economists with track records of disastrous policy advice. Bill Clinton chose Robert Rubin, George W. Bush chose Gregory Mankiw, Obama chose Lawrence Summers, and Mitt Romney chose Mankiw.

“Pink slime” just had its fifteen minutes of fame. BPI, the producer of pink slime, calls it “Lean Finely Textured Beef.” BPI’s slogan is “expect a higher standard.” Pink slime starts with fatty tissues that are inherently more likely to be repositories of salmonella and e coli infections.

April 9, 2012 is the twenty-fifth anniversary of the most infamous savings and loan fraud, Charles Keating’s, successful use of five U.S. Senators to escape sanction for a massive violation of the law.

As white-collar criminologists (and a former financial regulator and enforcement head) and experts in ferreting out sophisticated financial frauds, our careers and research focus on financial fraud by the world’s most elite private sector criminals and their political cronies.

Criminologists know that accounting control fraud causes greater financial losses than all other forms of property crime – combined. Some of the world’s best economists, George Akerlof and Paul Romer, praised the S&L regulators’ early recognition of these frauds and set out a formal economic theory of accounting control fraud (“Looting: the Economic Underworld of Bankruptcy for Profit”). They ended their 1993 article with this paragraph, in order to emphasize its importance.

Neither administration has prosecuted any elite CEO for the epidemic of mortgage fraud that drove the ongoing crisis. This contrasts with over 1,000 elite felony convictions arising from the S&L debacle. The ongoing crisis caused losses more than 70 times greater than the S&L debacle and the amount of elite fraud driving this crisis is also vastly greater than during the S&L debacle. Bank CEOs leading “accounting control frauds” now do so with impunity from the criminal laws. They become wealthy through fraud and even if they are sued civilly they almost invariably walk away wealthy with the proceeds of their frauds.

The New York Times published a column by its leading financial experts, Gretchen Morgenson and Louise Story, on November 22, 2011 which contains a spectacular charge against the Obama administration’s financial regulatory leaders. I have waited for the rebuttal, but it is now clear that the administration does not contest the charge.

Professor William Black, instrumental during the S&L crisis, makes his case that the current problems we're experiencing are not the result of just a few bad apples, but an "entire orchard" of fradulent banks.