Here’s L. Randall Wray, an economics professor at the University of Missouri-Kansas City.
…Bill Black joined our department in 2006. At UMKC (and the Levy Institute) we had long been discussing and analyzing the GFC that we knew was going to hit, using the approaches of Hyman Minsky and Wynne Godley. Bill insisted we were overlooking the most important factor, fraud. To be more specific, Bill called it control fraud, where top corporate management runs an institution as a weapon to loot shareholders and customers to the benefit of top management. Think Bob Rubin, Hank Paulson, Bernie Madoff, Jamie Dimon and Jon Corzine.
Long before, I had come across Bill’s name when I wrote about the S&L scandal, and I had listed fraud as the second most important cause of that crisis. While I was open to his argument back in 2006, I could never have conceived of the scope of Wall Street’s depravity. It is all about fraud. As I’ve said, this crisis is like Shrek’s Onion, with fraud in every layer. There is, quite simply, no part of the financial system that is not riddled with fraud.
The fraud cannot be reduced much less eliminated. First, there are no regulators to stop it, and no prosecutors to punish it. But, far more importantly, fraud is the business model. Further, even if a financial institution tried to buck the trend it would fail. As Bill says, fraud is always the most profitable game in town. So Gresham’s Law dynamics ensure that fraud is the only game in town.
As Sherrill said, without regulation, capitalism is thievery. We stopped regulating the financial system, so thieves took over…