The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk

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.

The Greek Revolt: Good News For Europe

by Guest Author Charles Wyplosz, Voxeu, November 4, 2011 Greek Prime Minister Papandreou made a stand this week. Even though he was backed down, this column argues that he did the EZ a favor by providing an opportunity to change course. One way or another, a disorderly Greek default is in the cards with its …

Why was the S&L Crisis not a Systemic Economic Crisis?

We promote our failures and give them presidential medals. The high priests of theoclassical economics and their law and economics acolytes will always fail as regulators. They are trained to create and worship intensely criminogenic environments.