Fraud caused the Great Depression and it has caused the current financial crisis. But fraud is not not being prosecuted, and so it will occur again and again, and prevent a sustainable economic recovery.Numerous economists have been saying this for years.
Not enough attention is being paid to this. Of course, the situation is highly complex and there were man causal and contributory factors. But the proximate cause of the Great Depression and the Global Financial Crisis (GFC) was Ponzi finance, typical at the culmination of a financial cycle according to Hyman Minsky's financial instability hypotheses. So far, much too little attention has been paid to this and and as a result the crisis is lingering and far from resolved.
MMT is well aware of this. MMT economist and developer L. Randall Wary was a PhD student of Hyman Minsky, for example. William K. Black was one of the earliest and loudest voices warning about massive control fraud."
Owing to capture, those responsible for oversight were suborned, Black charges. Owing to the same influence, politicians conveniently lost the plot and erected strawmen to attack. The result is a problem that continues to fester.
UPDATE: Randy Wray explains the gory details:
But that is easy to overlook in Washington/Wall Street since the biggest financial institutions escaped with barely a scratch, and have returned to the same practices and rewards that caused the GFC. By hook and by crook, Wall Street also escaped re-regulation as the flaccid Dodd-Frank Act avoided any fundamental reform. In any case, the Republicans have made clear that they will not provide new funding to regulatory agencies, so even the weak rules in the Act will never get enforced. And, so far (fingers crossed!) none of the big Wall Street crooks has been prosecuted for high crimes. Yes there have been some fines and civil cases, and a few lesser criminals like Bernie Madoff were sacrificed, but all the big banksters are not only free—they are still running their criminal organizations (called “chartered banks” in polite conversation), advising the White House, and gearing up to fund the next presidential campaign.All of that is to say that financial reform is deader than Elvis. Nothing can be done until the next Wall Street-induced crash. But I am an eternal optimist—the crash will come soon—and so it is time to enumerate the lessons we should have learned from the GFC so as to prepare the reforms that should have been adopted.