Wednesday, April 2, 2014

Bill Black — Ten Lessons We Must Learn from Charles Keating

The Savings and Loan debacle was the test bed for the epidemics of accounting control fraud that drove our subsequent financial crises. The debacle was the only one that was “successfully” contained before it could cause a financial crisis. The debacle was widely described at the time as the “worst financial scandal is U.S. history,” so the phrase “successfully contained” is obviously one that could spark disbelief. The critical modifier is “before it could cause a financial crisis.” The S&L debacle did not lead to even a mild national recession. It did hyper-inflate regional real estate bubbles that pushed parts of the Southwest region into a serious economic decline. The Enron-era frauds substantially contributed (in conjunction with the related collapse of the dot com bubble) to a $7 trillion fall in market capitalization and the fraud epidemics hyper-inflated the largest bubble in history and drove a Great Recession that is projected to cost over $20 trillion in lost production. The S&L debacle, therefore, allows us to understand not only went wrong, but also how to prevent things from going wrong.
This one is a classic.

New Economic Perspectives
Ten Lessons We Must Learn from Charles Keating
William K. Black | Associate Professor of Economics and Law, UMKC

11 comments:

paul meli said...

Bill Black is a National Treasure™

Ryan Harris said...
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Six said...

That's fascinating, Ryan. Who are some the regulators Bill Black has "shilled" for? I want to learn more.

Ryan Harris said...
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Six said...

All that typing and you can't identify one regulator that Bill Black has "shilled" for?

I think the game is played thusly:

1. Push for deregulation.
2. Once deregulation occurs, the system eventually fails.
3. Blame the system's failure on the regulators (that's your role, Ryan).
4. Just for fun, be sure to blame "baby boomers and hippies"
5. Repeat.

Ryan Harris said...
This comment has been removed by the author.
Ryan Harris said...
This comment has been removed by the author.
Six said...

Regulators pushed for deregulation? I'm not even sure how to respond to that. Wouldn't that make them deregulators?

Let's try fill in the blank.

When FHFA (insert crime here), Bill Black shilled for them when he said (insert shillish quote here).

Ryan Harris said...
This comment has been removed by the author.
Unknown said...

Ryan,
1. The word you're trying for is "shill" (not "schill")
2. The Bank Board did not become the FHFA.
3. You have not read my book (updated 1/15/14). I spend much of the book exposing the anti-regulators who created the criminogenic environments.
4. I blew the whistle on the Keating Five, Speaker Wright, and two presidential appointees running my agency.
5. Read my pieces attacking reinventing government and my dozens of pieces attacking Bush & Clinton non-regulators and non-prosecutors
6. Stop making things up about people whose careers and views you have not taken the trouble to learn.
Best,
Bill Black

Ryan Harris said...

Ok. I deleted my posts as they refer to you personally but Regulators and politicians can blame everyone in the world for the system failing but at the end of the day when there is a systemic failure, it doesn't matter. They were responsible for the system. We aren't talking about one bank failure or a handful of bank officers that went rogue and made bad loans. The entire housing finance system was broken! For decades. What happened was way beyond a greedy banker trying to make a bonus. Until Washington starts talking about prosecuting Senators, Congressmen, The Ivy Leaguers at the top of the regulatory agencies, and the CEOs of Banks..I guess I'll find out the rest in your book. The rest is window dressing or something more nefarious.