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

Bill Black — How to Prosecute the Elite Bank CEO that Led the Frauds that Drove the Crisis

Step one: Understand the three “control fraud” epidemics that drove the crisis....

There is no fraud exorcist, so fraudulently originated loans stay fraudulent and can only be sold to the secondary market through fraud....

Step 2: Restore the destroyed criminal referral process, restore the partnership with the banking regulatory agencies, and end the partnership with the “perps”....

To produce over 1,000 felony convictions in cases the Department of Justice (DOJ) designated as “major” during the S&L debacle, the Office of Thrift Supervision (OTS) made over 30,000 criminal referrals. In this crisis, which is over 70 times larger than the debacle in terms of losses and fraud, OTS made zero criminal referrals, as did the Office of the Comptroller of the Currency and the Federal Reserve. (The FDIC is smart enough to refuse to answer how many referrals it made.)

New Economic Perspectives
How to Prosecute the Elite Bank CEO that Led the Frauds that Drove the Crisis
William K. Black | Associate Professor of Economics and Law at the University of Missouri-Kansas City in the Department of Economics and the School of Law

Like Sen. Durbin said, "The banks own the place."

Bill Black at #occupywallstreet on arresting bankers

Good stuff!