Words of wisdom from a forensic economist:
A Suggested Theme for the Occupation of Wall StreetBy William K. Black
The systemically dangerous institutions (SDIs) are inaccurately called "too big to fail" banks. The administration calls them "systemically important," and acts as if they deserve a gold star. The ugly truth, however, is what Wall Street and each administration screams when the SDIs get in trouble. They warn us that if a single SDI fails it will cause a global financial crisis. There are roughly 20 U.S. SDIs and about the same number abroad. That means that we roll the dice 40 times a day to see which SDI will blow up next and drag the world economy into crisis. Economists agree that the SDIs are so large that they are grotesquely inefficient. In "good times," therefore, they harm our economy. It is insane not to shrink the SDIs to the point that they no longer hold the global economy hostage. The ability -- and willingness -- of the CEOs that control SDIs to hold our economy hostage makes the SDIs too big to regulate and prosecute. It also allows them to extort, dominate, and degrade our democracies. The SDIs pose a clear and present danger to the U.S. and the world.
It takes a global effort against the SDIs because they constantly put nations in competition with each other in order to generate a "race to the bottom." We are always being warned that if the U.S. adopts even minimal regulation of its SDIs they will flee to the City of London or be unable to compete with Germany's "universal" banks. The result of the race to the bottom, however, as Ireland, Iceland, the UK, and U.S. all experienced is that we create intensely criminogenic environment that creates epidemics of "control fraud." Control fraud -- frauds led by CEOs who use seemingly legitimate entities as "weapons" to defraud -- cause greater financial losses than all other forms of property crime -- combined. Because of the political power of the SDIs and the destruction of effective regulation these fraudulent SDIs now commit endemic fraud with impunity.
Effective financial regulation is essential if markets are to work. Regulators have to serve as the "cops on the beat" to keep the fraudsters from gaining a competitive advantage over honest firms. George Akerlof, the economist who identified and labeled this perverse ("Gresham's") dynamic was awarded the Nobel Prize in 2001 for his insight about how control fraud makes market forces perverse.
SNIP...
It is the fraudulent SDIs that are the massive job killers and wealth destroyers. It is the Great Recession that the fraudulent SDIs produced that caused most of the growth in the federal deficits and made the fiscal crises in our states and localities acute. The senior officers that led the control frauds are the opposite of the "productive class." No one, without the aid of an army, has ever destroyed more wealth and dreams than the control frauds. It is essential to hold them accountable, to help their victims recover, and to end their ongoing frauds and corruption that have crippled our economy, our democracy, and our nation.
SOURCE:
http://neweconomicperspectives.blogspot.com/2011/10/suggested-theme-for-occupation-of-wall.html Thanks, Donnachaidh, for being interested in forensic economics. Everybody in the world needs to be interested.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
