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TechnoratiObama’s Financial Regulation Plan Doomed to Fail
According to Law and Economics, Professor William K. Black, You Need a Criminal Mind to Take Down a Criminal Entrerprise
President Obama’s financial regulation proposal is doomed to fail.
Why?
Because it was developed by people who don’t believe in regulation.
That’s the take of William K. Black, a profess of law and economics at the University of Missouri-Kansas City.
Black believes that the only way to prevent future financial meltdowns is to have in place a regulatory system and prosecutorial system developed by people with a proven track record.
People like Michael Patriarca. And William Black
First thing Black would do?
Implant at every financial regulator an office of the chief criminologist.
“If you look at the largest single area of losses in banks – it has been control fraud,” Black told Corporate Crime Reporter last week. “But of course, institutionally, none of these financial regulatory agencies are set up well to even spot or stop these kinds of fraud. They don’t have the training, they don’t have the background, they don’t have institutional structures that focus on the criminality.”
“So, you would institutionalize. You put in place someone who knows about fraud, the literature about crime and criminology. They need to think, before they deregulate, whether they are producing what we refer to as a criminogenic environment – an environment that is going to produce widespread crime.”
There are currently nineteen banks that the government says are too big to fail. Black would reduce that number to zero – by shrinking their size.
He would also beef up financial enforcement units across the country – and rehire the 500 FBI white collar agents who were shifted over to work national security cases post-911.
And he would send them undercover into troubled banks.
“Once you get in, you are going to discover literally on day one that the underwriting has been removed,” Black said. “You are going to discover no later than day two that the internal controls are gone and that indeed people get in trouble for saying no to bad loans. By week one, you will have identified several people who used to work at six other big places. That’s how this industry worked. And they will tell you the names – oh yeah, Fred is the disastrous CFO over there.”
Black would also turn the executive compensation system on hits head.
“You say – you can’t get paid except on the basis of long term performance,” Black said. “You can get your $200,000 a year. And then you show us you produce the long term performance. And you show us that the long term performance gains were due to your efforts, as opposed to everyone in the same industry producing the same results.”
[For a complete transcript of the Interview with William K. Black, see 23 Corporate Crime Reporter 26(13), June 29, 2009, print edition only.]
15 Comments so far
Show AllIf I "owned the place" like the banksters do, the last person I'd "hire" to "reform" "the place" I own would be Mr. Black.
I might, however, send a coupla boys to talk to him about his crazy, extreme leftist/socialist/marxist/fascist anti-American ideas, see if we can't agree that he's not thinking clearly...
Seriously, we know what needs to be done already - the problem is: how? We have been told, flat-out, by a US Senator, that the banksters own our government. Yet, we keep pretending to be surprised and appalled when the guy they hired to run the place they own, BO, is doing what he was hired to do.
Nothing matters, nothing will change, until we figure out how to wrest ownership of the place out of the greedy paws of the banksters (and Team Big Whatever). And, right now, they're spending billions to insure that never happens.
What are we doing?
If we gave them all that money before any regulation
then it means they don't really care about regulation.
"Where's my change?" - Nader
Obama, Kapital's Kerensky.
There are no regulations.
Look they're opening a new market, the Chicago Climate Exchange (CCX), for trading the cap and trade permits. Guess who the major players are? Hank Paulson owns 10% of CCX stock and Goldman Sachs is ready to inflate another bubble.
http://www.globalresearch.ca/index.php?context=va&aid=14209
I am not a financial whiz and not even very smart, I guess that is why every thing seems simple to me. I hear nothing coming out of the regulation mumbo jumbo that makes any sense. How hard would it be to make commercial banks nothing but commercial banks, which would be easy to regulate by the FDIC? We can shit can freddy and fanny and create hiney. Hiney a fed institution that buys and holds loans from commercial banks and no one else can buy commercial paper. Insurance companies can not be anything but insurance companies and should be easily regulated. Investment banks are free to do what ever they want no regulation what so ever. Let the free market regulate them and buyer beware. We only need one rule 401 or public money can not be invested in investment banks. Wouldn’t that scare the wealth creators, how can money make money, which produces nothing, if there is no one to steal from.
"You are going to discover no later than day two that the internal controls are gone and that indeed people get in trouble for saying no to bad loans."
This is indeed the problem, not wholesale criminal malfeasance of the customers, but the deregulation of the banks permitting loan officers, who are only salesmen after all, to encourage clients to sign up for loans beyond their ability to pay with the rationale that the increase in equity of the property itself would sustain the loan. It is noticeably similar to the conservative rhetoric about continually cutting taxes as a means to increase revenues as a result of "growing the pie."
As the time honored maxim states, "The devil is in the details." This is certainly so with any financial regulation plan, and so far, the details are not what they should be.
Obama’s Financial Regulation Plan Designed to Fail
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[headline typo corrected]
· Yr Obd't Servant
Exactly.
This is the plan they'll never implement because it would work:
1) Not only tax futures, but ALL securities transactions. This guarantees a paper trail on all the hanky panky thereby discouraging CDSs and other negative collateral magic crap. If they run shadow Banking scams, they won't be able to go to the government crying for a taxpayer bailout because the transaction was technically illegal because it wasn't reported and taxed. Transparency is a real pain for Wall Street.
2) The tax on securities transactions would be inversely proportional to the amount of time you hold the security. If you hold it for five years or more, NO tax. If you hold it for six months or less 50% of the PROFIT (that way you can still dump a stock if it's tanking without an added cost). Wall Street is all about profit without consciemce. So tax the profit and track all the transactions. They'll develop a conscience real fast. This is all obvious stuff. Congressman Welch from Vermont has tried to get a transaction tax and he has been slapped down each time.
3) Require the feed from the electronic trading software to be free and available to EVERYONE. This discourages tape marking, front running and other scams your favorite broker is always pulling on you.
4) Eliminate margin. If you want a stock, you buy it with your own damned money. You don't borrow, capish?
5) Finally, reinstate glass-steagal and make Ralph Nader chair of a committee to create an enforcement agency tilted towards defending the small stock owner from the large brokerage crooks/banks. The setup is the exact reverse right now.
See, this is all simple stuff. It's the old "calculus of political viability" bullshit that stops it. Jennifer is right. Credit unions are the only way to go for now. We DO NOT HAVE a government.
Sioux Rose
AGG: This is a great idea! Can you send it as "Letter to the Editor" either to the Washington, Post or NY Times? Give it a try. When the truth does get out there (if it does), it can make waves!
obama is destined to fail. all the regs has proposed do nothing
to really fix the problem and are tepid at best. he needs to
kick some ass and force through some tough regulation that
will put his friends in jail and make the banksters really think
about committing criminal acts.
**They need to think, before they deregulate, whether they are producing what we refer to as a criminogenic environment – an environment that is going to produce widespread crime.”**
It's crime. It's organized. Government shouldn't be unlocking the back door and driving the getaway car.
President Obama’s financial regulation proposal is doomed to fail.
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President Obama doesn't have a financial regulation proposal.
He has a propaganda offensive designed to make an invitation for a continuation of a banker's orgy appear to be a financial regulation proposal.
Sioux Rose
CYGNUS & PITCH FORK: Right on!
OK....lets do this.