September 18, 2013 § Leave a comment
I don’t even think Holder takes Holder seriously anymore; this is about the fifth time he’s said something like this. They’ve been busy propagating the myth that this is the first virgin crisis, conceived without sin…
We’ve got a million people that work in the criminal-justice system and 2300 of them do elite white-collar crime… they only come when there’s a criminal referral and banks don’t make criminal referrals against their own CEOs, which is why, in the Savings and Loan débacle we, the Office of Thrift Supervision, made over 30,000 criminals referrals… Flash forward to this crisis over 70 times larger in terms of losses and fraud and the same agency, the Office of Thrift Supervision, made zero criminal referrals; the Office of the Comptroller of the Currency made zero criminal referrals; the Fed appears to have made zero criminal referrals; the FDIC was smart enough to refuse to answer to the question…
Risk has virtually nothing to do with vast aspects of this crisis, at least risk as we conventionally talk about it in finance. If you follow the accounting control fraud recipe you are mathematically guaranteed in the near term to report record profits… watch
ART: Tilman Hornig
The ticking can be heard like the sea if the enquirer presses an ear to the forged steel padlock that damply secures all access at the base of the tower
March 4, 2013 § 1 Comment
Criminologists know that accounting control fraud causes greater financial losses than all other forms of property crime – combined.
Some of the world’s best economists, George Akerlof and Paul Romer, praised the S&L regulators’ early recognition of these frauds and set out a formal economic theory of accounting control fraud (“Looting: the Economic Underworld of Bankruptcy for Profit”). They ended their 1993 article with this paragraph, in order to emphasize its importance.
“Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself.”
The primary reasons that accounting control fraud can produce catastrophic losses are the seeming legitimacy of the firm, the supreme status and respectability of the CEO leading the fraud, the fact that accounting control fraud is a “sure thing” (Akerlof & Romer 1993), the ability of control fraud to hyper-inflate bubbles, allowing the fraud to persist for years and magnify losses, and the paradox that the optimal means for a fraudulent CEO to loot “his” bank is to cause the bank to make exceptionally bad loans.
The last element is so counter-intuitive that despite the accounting control frauds’ dominant role in driving the S&L debacle and the Enron-era accounting control frauds many people cannot really believe that elite CEOs would loot “their” banks despite the many felony convictions of the elite CEOs that drove the two predecessor crises.
“Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. ‘It doesn’t make any sense to me that they would be deliberately defrauding themselves,’ Wagner said.”
Wagner is so befuddled that he cannot keep his pronouns straight in the same sentence. “They” is the fraudulent CEO. The fraudulent CEO loots “his” bank. The bank is “themselves” in Wagner’s bewildered sentence. The CEO is not looting himself when he loots the bank. read more
PHOTOGRAPH: Irina Ionesco