Crony Capitalism

Bill Black did a series of good interviews for The Real News here.

Paraphrasing what the S&L crisis regulation, professor of economics, and author of the “The Best Way to Rob a Bank is to Own One,” had to say:

His recipe for disaster:

  1. Grow quickly
  2. Make bad loans
  3. Leverage to the hilt
  4. Do not set aside loss reserves

This formula applied to S&L crisis, Enron, WorldCom, and this crisis.

Bill Black says our crisis was the inevitable result of “systemic Ponzi scheme.”  Overwhelmingly, most mortgage fraud was lender fraud. 

Congress has extorted the accounting standards board, FASB, so that banks no longer have to recognize (trillion dollar) losses, solely to allow the banks to pretend they’ve had a recovery, and allow the banks to pay these outsize bonuses.  These are accounting scams, gimmicking the numbers.  This only makes the problem worse.  Japan was allowed to do this, and it caused the “ten lost years” in Japan.

Black says we are worse off than we were before the crisis.  We have negative accountability.   It’s as if you took your teenagers when they did something criminal that hurt others, and tripled their allowance.  We now have criminals and psychopaths rewarded by giving them unprecedented power and promotions to top government posts. 


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