November 12th, 2011
in Op Ed
by Guest Author The Daily Bell, originally published at iHub
Systematically Ignoring Fraud as a Systemic Risk ... One of the most revealing things about this crisis is the unwillingness to investigate whether "accounting control fraud" was a major contributor to the crisis. The refusal to even consider a major role for fraud is facially bizarre ... Two of the nation's top economists' study of the S&L debacle led them to conclude that the S&L regulators were correct – financial deregulation could be dangerously criminogenic. That understanding would allow us to avoid similar future crises. Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. – William K. Black (pictured), OWSnews.org
Follow up:Dominant Social Theme: Fraud is endemic and I, William Black, with the help of Occupy Wall Street will root it out in order to perfect the greater American state. Once lawyers, prosecutors and the police are fully in charge, we will finally have prosperity and peace.
Free-Market Analysis: Attorney William Black (above), about whom we have written previously, is back with an article posted at OWSnews.org, the new website for the Occupy Wall Street movement, which has not-so-mysteriously sprung up as a billboard for various OWS news and views (see above excerpt).
In the article, Black basically repeats his call for massive investigations into Wall Street fraud. In doing so, he AGAIN cites America's very own STASI, (the FBI) approvingly. He is also, apparently, a big fan of the US penitentiary-industrial complex, with its expanding gulag of virtual slave laborers.
Ironically Black's dislike of "deregulation" does not extend to the regulatory state's "privatization" of its ever-expanding gulag of slave-laborers; here, he remains silent.
What is it about the FBI that William Black so enjoys? Its determination to attack free-market thinking? Its illegal wiretaps? Its intimidation of Congress? Its escalating war on the few freedoms that Americans have left? Its illegal expansion to nearly 100 countries around the world? And what is it that Black so enjoys about the American criminal-industrial complex itself and its increasingly propensity (literally) for turning criminals into virtual slave laborers?
Black is a lawyer who built his career on further destroying the S&L industry in the late 1980s, which had been already mostly destroyed by Federal Reserve low-interest rate manipulations.
It is ironic that Black, who looks a bit like Santa Claus in some poses, is now posing as a great avenging litigator for the Occupy Wall Street movement. He obviously wants to repeat his previous "success" with the S&L movement. He wants to be known as the Man Who Cleaned Up Wall Street; now, with this new OWSNews.org site, he has the right platform to make his case.
A week ago, we predicted this sort of thing. We wrote, "We're sure that this OWS news site will receive PLENTY of publicity ... This is how the power elite manipulate history. Set up a movement – an anomalous one – and invite anyone and everyone to participate. Provide non-leader/leaders at the top of YOUR choosing and then use your controlled media outlets to give them the publicity that no one else has access to. Finally, create a megaphone – a mouthpiece – controlled by your 'controllers.'"
William Black seems to be the designated mouthpiece for the new storm of criminal prosecutions that is about to descend on Wall Street. He is making his availability very clear. It is likely part of a plan. Soon, no doubt, Washington shall announce additional criminal investigations into Wall Street "crime."
And somehow or other William Black shall emerge as a leading candidate to lead the probes. It seems predictable in our view. That's the reason he's writing these articles. First set up a platform; then get someone to occupy it. That's how promotions work. They're supposed to look logical.
In this case, the whole idea is to ensure that the Anglosphere power elite and its money mechanism – central banking – doesn't get any unwanted attention. This is the same trick that was played in the 1930s the last time people were genuinely mad at the system.
Rapidly, FDR convened hearings in Washington and began upping regulations and sending people to jail. He replaced libertarian criticisms with a populist response. Don't like the way the system works? Punish some people and send them to jail. It's always the same thing – a kind of blood sacrifice to palliate the masses.
How can people object to being raped if the rapist is going to jail? And once the rapist is behind bars RAPES SHALL STOP FOREVER. That's the logic of populism. Prosecute the b—stards, make them pay and everybody else shall live happily ever after.
Of course in the meantime, the REAL problem, which is central banking, shall be ignored. FDR didn't just ignore, he actively covered up REAL crimes that had been committed. In fact, the good, gray men of the New York Fed had printed currency well beyond what Congress had authorized. They'd printed so many bills that it was impossible for them to be redeemed by gold.
And so they panicked. Roosevelt was compelled to declare a series of bank holidays and eventually to criminalize gold holdings. Roosevelt, despite the image that the power elite wants to portray of him, was part of this criminal mafia of good, gray men. They'd inflated the money supply so much (illegally) that they caused the Crash of '29 and the subsequent Depression.
And what was the result? Wall Street was split up by Glass Steagall! Commercial banks and private banking were now to be separated to prevent "abuses." Never mind that abuses came from the New York Fed. Never mind that illegal monetary inflation (and additional regulation) was responsible for the horror of the Depression.
Even today, the lies come in bunches, stinking like a bad bouquet. It was "protectionism" that caused the Crash and subsequent Depression. it was "deflation." it was "speculation." Nope. Cornel West got it wrong in his debate with Peter Schiff. Not that it seems to have stopped him. (See video, this issue.)
It was an illegitimate manipulation of the money supply aggravated by the wholesale criminalization of the innocent act of holding gold and then further aggravated by a deluge of regulations, laws and restructurings that ruined America in the first-third of the 20th century. And now the US and its leadership are aching to do it all over again. Gradually the focus shall shift from the destructive power of central banking to the bad men who committed fraud. Here's the "Black-ian" analysis:
The epidemic of accounting control fraud that drove the second phase of the S&L debacle (the first phase was caused by interest rate risk) was followed by an epidemic of accounting control fraud that produced the Enron era frauds. The FBI warned in September 2004 that there was an "epidemic" of mortgage fraud and predicted that it would cause a financial "crisis" if it were not contained.
The mortgage banking industry's own anti-fraud experts reported in writing to nearly every mortgage lender in 2006 that: "Stated income and reduced documentation loans speed up the approval process, but they are open invitations to fraudsters." "When the stated incomes were compared to the IRS figures: [90%] of the stated incomes were exaggerated by 5% or more.
[A]lmost 60% were exaggerated by more than 50%. [T]he stated income loan deserves the nickname used by many in the industry, the 'liar's loan'" (MARI 2006). We know that accounting control fraud is itself criminogenic – fraud begets fraud. The fraudulent CEOs deliberately create the perverse incentives that that suborn inside and outside employees and professionals. We have known for four decades how these perverse incentives produce endemic fraud by generating a "Gresham's" dynamic in which bad ethics drives good ethics out of the marketplace.
All the most clever sophistry is on display here. He alludes to "interest rate" risk when what he is really saying (in passing) is that the Fed kept rates too low for too long, as it always does. But he is not really interested in prosecuting central bankers or their direct associates or enablers. Certainly not that impossibly wealthy handful that CONTROL central banks around the world! He would argue, anyway, that the law doesn't allow it. So he will focus on other targets.
He comes up with sexy names as well. "Liar's loan." Sounds good. This is part of the larger, pervasive effort by the legal industry to ensure that everyone who loses money on any transaction is deemed a victim. The criminal is the one offering the money.
Finally, we are supposed to be impressed that he has invoked "Gresham" and dressed up a perfectly adequate observation in entirely new clothes. Now "good" ethics are supposedly driven out by "bad" ones. The perverse and vicious system of money creation is never at fault, you see. Blame the sinners, not the sin.
Black is setting up for something. Just wait. And if it is not Black, it will be someone else. But sooner or later, the credibility of the illegitimate system of American jurisprudence shall be reinforced, the US prison-industrial complex shall continually expand and the real systemic problems shall continue to go unaddressed.
Conclusion: The elites run an old playbook. They never come up with anything new. We shall see if, in this era of the Internet Reformation, it shall be enough.
Previous article on this topic at iHub: http://www.thedailybell.com/3206/Occupy-Wall-Streets-William-Black-A-Bigger-Regulatory-State-Secret-Police-and-Expanding-Gulag