Tag Archives: financial crisis

by William K. Black

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. The banking expert James Pierce found that fraud by senior insiders was, historically, the leading cause of major bank failures in the United States. The national commission that investigated the cause of the S&L debacle found:

“The typical large failure [grew] at an extremely rapid rate, achieving high concentrations of assets in risky ventures…. [E]very accounting trick available was used…. Evidence of fraud was invariably present as was the ability of the operators to “milk” the organization” (NCFIRRE 1993)

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. Continue reading →