Saturday , November 18 2017
Home / William Black
William Black

William Black

William Kurt Black (born September 6, 1951) is an American lawyer, academic, author, and a former bank regulator. Black's expertise is in white-collar crime, public finance, regulation, and other topics in law and economics. He developed the concept of "control fraud", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud.

Articles by William Black

It is Impossible to Compete with Unintentional Self-Parody: Trump and Opioids

27 days ago

By William K. Black
October 22, 2017      Kansas City, MO
This is the first in a series of columns I will write that are prompted by the joint 60 Minutes and Washington Post investigations of the role of Congress and the White House in making it far harder to sanction effectively companies selling massive numbers of opioids that they know will go largely to those addicted to opioids.  I will use the case study to illustrate many important points that criminologists know about elite white-collar crime and how to limit it and sanction perpetrators.
In this column, I introduce one of the most important concepts in white-collar crime – “seeming legitimacy.”  The most elite predators use the seemingly legitimate entities in the business, government, and non-profit sectors that they run as

Read More »

Cheap Sexism and Intellectual Dishonesty about Marriage

October 3, 2017

By William K. Black
October 2, 2017     Kansas City, MO
This is the second column in my series about win-win strategies to strengthen the family and countering the conservative culture warriors who use the family as a means to oppose win-win solutions that bring people together.  Mark Regnerus is one of the most notorious of these hard right culture warriors.  He is the disgraced pseudo-scholar who right-wing groups funded to try to gin up evidence that same sex marriage harmed children.  His efforts collapsed in an embarrassing spectacle that made clear that his dogmas rule his work.
Regnerus is back in the Wall Street Journal flogging his new book in an op ed entitled “Cheap Sex and the Decline of Marriage.”  He introduces his thesis with the claim that because unmarried

Read More »

The Job Guarantee Should Unite Anyone Interested in Strengthening Families

October 2, 2017

By William K. Black
Kansas City, MO     September 25, 2017
The University of Missouri – Kansas City recently hosted the first conference on Modern Monetary Theory (MMT) and a closely associated idea, a federally-backed job guarantee for everyone willing and able to work.  On September 25, 2017, the New York Times published an article exemplifying one of the applications of the job guarantee that would provide a win-win that should unite anyone interested in strengthening the family.  The title is “How Did Marriage Become a Mark of Privilege?”  Claire Cain Miller authored the column, and her key takeaway are in these two passages.
Fewer Americans are marrying over all, and whether they do so is more tied to socioeconomic status than ever before. In recent years, marriage has sharply

Read More »

Jared Bernstein Shows the Costs of Not Understanding Sovereign Currencies

September 27, 2017

William K. Black
September 26, 2017      Kansas City, MO
UMKC has just hosted a well-attended conference on Modern Monetary Theory (MMT) and job guarantee (JG) programs in which the federal government would provide the funds for employer of last resort programs.  In conjunction, MMT and JG allow full employment to become the norm.  MMT is based on reality, it explains how the monetary system in a nation with a sovereign currency actually functions.  Most monetary theory taught in conventional economic classes is a fiction arising from carryovers from the era of the gold standard in which nations lacked a sovereign currency.
Jared Bernstein has just published an op ed in the New York Times entitled “Do Republicans Really Care About the Deficit.”  Republican elites, of course, have not

Read More »

Trump Proves Again that it is Impossible to Compete with Unintentional Self-Parody

September 12, 2017

By William K. Black
September 5, 2017      Kansas City, MO
In my immediately prior article I discussed how Politico fell for Third Way’s dishonest discussion of how Democrats should brand themselves as the party committed to jobs.  I explained that progressive Democrats were the party of good jobs in part because they opposed fraudulent for-profit schools while President Trump, the Republicans, and the New Democrats were anti-jobs because they supported the rip offs.  Trump, having run a for-profit “university” so fraudulent that.it was not even a real university, is the most glaring patron of these frauds.
Trump appointed Betsy DeVos as Secretary of Education because she is a fierce enemy of public education and loves the for-profit frauds.  Recently, however, DeVos has taken a step

Read More »

Is Politico or Third Way More Divorced from Reality?

September 12, 2017

William K. Black
September 6, 2017     Kansas City, MO
The Wall Street wing of the Democratic Party (Third Way) is relentless in trying to bring back the days in which the Democratic Party’s leaders buried the Party in Wall Street’s pocket under the label “New Democrats.”  That period led President Clinton and Vice President Gore to implement disgraceful policies that made Wall Street executives fabulously wealthy at the expense of people.  To deliver on their promises to Wall Street, Clinton and Gore had to betray much of what the Democratic Party stood for.  Clinton and Gore’s destruction of effective financial regulation, which President Bush exacerbated, created the massively criminogenic environment that blew up the global economy.
I have written several times and documented that

Read More »

The Right Wing’s Fake Fake News of Hate

September 6, 2017

By William K. Black
September 4, 2017      Kansas City, MO
When people do awful things and know they are doing awful things and want to continue to do them they compound their awfulness by playing cute.  The cuteness demonstrates that they know that what they are doing is indefensible to moral people.  The political “dog whistle” is an example of this cutesy tactic.  Rachel Maddow’s September 4, 2017 program presented a classic example.  She showed video of a white supremacist/Neo-Nazi praising Donald trump’s election victory to an all-white audience.  The speaker ended his talk by proclaiming “Hail Trump” and extending his arm in a Nazi salute – except that he was holding a glass of water.  His audience understood the “dog whistle” immediately.  A number of them leaped to their feet

Read More »

GOP and Democrats Push Trump on Tax Reform

August 7, 2017

NEP’s Bill Black appears on The Real News and says the Democrats’ demands are the result of bad economics and bad politics, while Trump’s vision is “the type of thing that comes from ingesting too much peyote”. You can view with a transcript here.
[embedded content]

[Translate]

Read More »

Trump vs. Sessions: A One-Sided Twitter War

July 27, 2017

“All of this is particularly bizarre because the Trump administration is having enormous difficulty getting any of its supposed agenda done, and the only person who is actively implementing the Trump agenda is Jeff Sessions,” says NEP’s Bill Black. You can view here with a transcript.
[embedded content]

[Translate]

Read More »

Dear Professors Uribe-Teran and Vega-Garcia…

July 27, 2017

More than fifty economists signed onto an open letter, written by professors Ha-Joon Chang of the University of Cambridge and James K. Galbraith of the University of Texas at Austin, ahead of this year’s presidential elections in Ecuador. The letter noted:
Over the past ten years, Ecuador has achieved major economic and social advances. We are concerned that many of these important gains in poverty reduction, wage growth, reduced inequality, and greater social inclusion could be eroded by a return to of the policies of austerity and neoliberalism that prevailed in Ecuador from the 1980s to the early 2000s. A return to such policies threatens to put Ecuador back on a path that leads not only to a more unequal society, but to more political instability as well. It is important to

Read More »

Jamie Dimon: You Make Us Embarrassed to be Americans

July 24, 2017

By William K. Black
July 24, 2017     Kansas City, MO
Jamie Dimon talked about his personal pain recently using the exact phrase that many of us have used to explain his personal anguish that “It’s almost an embarrassment to be an American citizen traveling around the world and listening to the stupid sh—t we have to deal with in this country.”  The Wall Street Journal’s “Market Watch” described Dimon’s fervor.
“J.P. Morgan Chase & Co.’s outspoken CEO on Friday broke into an impassioned, expletive-tinged rant.”
The WSJ, in the introduction of an online video interview of Paul Gigot, its editorial page editor, termed it a “remarkable diatribe.”
Most United States readers share Dimon’s embarrassment at President Trump’s actions and words and can empathize with Dimon’s rant.  Except,

Read More »

The CFPB Arbitration Rule is Pro (Honest) Businesses

July 12, 2017

By William K. BlackJuly 11, 2017     Bloomington, MN
Politico has just published a column with a title and analytics that drive white-collar criminologists nuts:  “In a major setback for businesses, CFPB opens door to consumer class actions.”  Logically, the title should have read: “In an important step forward for consumers, investors, and honest bankers and lenders, CFPB begins to restore the rule of law to banking.”
The CFPB is the acronym for the Consumer Financial Protection Bureau.  The problem that led to CFPB to issue its new rule has six parts.  First, it is often profitable for lenders to abuse and defraud borrowers.  Second, lenders are able to do this because financial understanding is highly asymmetric.  Third, even if the borrower eventually spots the fraud or abuse it

Read More »

Wall Street: It’s “Icky and Un-American” to ‘Short’ Frauds

June 28, 2017

By William K. BlackJune 27, 2017     Bloomington, MN
The president of the New York Stock Exchange (NYSE) launched a coordinated attack on “shorts” that mirrored his rival’s (Nasdaq) attack.  The NYSE assault, however, used bizarre rhetoric.
“It feels kind of icky and un-American, betting against a company,” NYSE Group President Tom Farley told lawmakers in Washington Tuesday.
The heads of the NYSE and Nasdaq have appropriated the word “transparency” to support the effort to reduce the shorts’ effectiveness.  When the NYSE purports to champion “transparency” – the key to reducing fraud by the CEOs of the companies whose stocks they exchange – it is time for investors to grab their wallets and hold them tight.  The stock exchanges are very far from being champions of transparency when

Read More »

Those to Blame for the Grenfell Fire Victims Include Tony Blair

June 27, 2017

By William K. BlackJune 26, 2017     Bloomington, MN
There are many people culpable for the mass loss of life in the Grenfell fire in London.  At this time, we know enough about the fire and its causes to be able to discuss these matters with sufficient confidence to draw preliminary conclusions.  As always, we should also keep in mind that we do not have all the facts so some of our conclusions must be tentative.
I do not focus on Tony Blair and Gordon Brown because they are uniquely culpable for the mass deaths in the fire.  Their failures are important to explaining several points that are often unclear to Americans.  First, Blair and Brown, as leaders of the Labor Party, were supposed to protect poorer citizens like those living in the tower blocks through effective health and

Read More »

BWU Makes Its Latest Lemon Award to the UK

June 26, 2017

By Bank Whistleblowers UnitedJune 25, 2017
Bank Whistleblowers United (BWU) makes its non-coveted Lemon award to the United Kingdom (UK) for actions harming whistleblowers and the world.  BWU’s three principals are highly experienced financial experts with combined practical and academic experience of over 120 years.  We are each unemployable in finance because we warned internally at are places of work and then externally about grave misconduct by the most senior financial and regulatory leaders that would (and did) produce terrible losses.
Liam Vaughan of Bloomberg wrote the article that prompted this award.  The UK’s City of London is one of the world’s two largest financial centers.  The City “won” the financial regulatory race to the bottom – barely nosing out Wall Street at the

Read More »

People of Integrity Won’t Work for President Trump

June 8, 2017

By William K. BlackJune 6, 2017     Bloomington, MN
Rupert Murdoch controls the Wall Street Journal and Fox News.  Even before he acquired the WSJ its editorial board was known for its members’ ultra-right wing fervor.  The acquisition intensified that fervor.  The editorial board’s fervor has infected the WSJ’s news pages.  That is the context essential to understanding the significance of its June 6, 2017 editorial eviscerating President Donald Trump.  They entitled their editorial “The Buck Stops Everywhere Else.”  Here is the most damning paragraph.   .
If this pattern continues, Mr. Trump may find himself running an Administration with no one but his family and the Breitbart staff. People of talent and integrity won’t work for a boss who undermines them in public without

Read More »

Dodd-Frank Was Designed to Fail – and Trump Will Make it Worse

April 17, 2017

By William K. BlackApril 17, 2017     Bloomington, MN
William Cohan’s April 14, 2017 column in the New York Times discusses Daniel Tarullo’s swan song talk on bank regulation.  Here are the key passages from that column for the first half of my discussion.
Much to the relief of Wall Street executives, who feared and hated him in equal measure, Daniel K. Tarullo left his powerful perch on the Federal Reserve Board of Governors last week, but not before delivering one last lecture on how big banks should be regulated in his absence.
His swan song was pretty surprising, all things considered. It also went largely unnoticed, much like Mr. Tarullo himself during his eight years at the Federal Reserve. Many people have never heard of him, even though his decisions affected their lives in ways big and small.
Once described as the “Wizard of Oz,” for the power he wielded behind the scenes, Mr. Tarullo was appointed to the Federal Reserve by President Barack Obama in January 2009. At the Fed, Mr. Tarullo took over the important responsibility of regulating the big Wall Street banks, a job that, understandably, had been the purview of the president of the Federal Reserve Bank of New York. The oversight moved to Washington from New York in the wake of the financial crisis.
“It was obvious that a lot in the U.S.

Read More »

Reality Virus Infects Kansas Legislators, Brownback Immune

March 29, 2017

By William K. BlackMarch 28, 2017      Bloomington, MN
The good news is that the Kansas legislature, the land of the lunatics, experienced an outbreak of the reality virus (first diagnosed and named by Steve Keen among neoclassical economists).  The bad news is that the Kansas’ Crazy-in-Chief, Governor Sam Brownback, has proven immune to the virus.
Brownback decided to put Art Laffer in charge of Kansas’ taxation policy.  Even neoclassical economists roll their eyes when it comes to Laffer’s claims that dramatic tax decreases lead to significantly increased net tax revenues.  Laffer’s batting average on this claim is .000 and his “proof” of his claim is a graph (the “Laffer curve”) that he drew that contradicts reality.  Brownback knew that Laffer was batting .000 on his claims and that Laffer never drops his claims when reality (repeatedly) falsifies his graph.  To no one’s surprise, Brownback’s tax cuts produced a fiscal disaster for Kansas.
Brownback also launched an unholy war against the people of Kansas in other spheres vital to their lives, including health care and education.  In particular, Brownback denied 150,000 Kansans access to the Medicaid expansion that was a pure win-win for the State and its citizens.  Brownback, with the aid of the Koch brothers, launched a purge of Republican state legislators to remove “moderates.

Read More »

The 2016 Nobel Prizes in Economics Go to those Who Pushed Criminogenic Policies

February 27, 2017

By William K. BlackFebruary 27, 2017     Bloomington, MN
How has the Swedish Central Bank’s committee that awards prizes in Economics in honor of Nobel responded to the field’s abject failures regarding the recent financial crisis and the Great Recession?  A lesser group would display humility, acknowledge its failures, and promise a fundamental rethink of the field.  Neoclassical economists, however, are made of sterner stuff.  The committee’s response is to praise the discipline for its theoretical advances and proposed policies related to finance, regulation, and corporate governance.  Eugene Fama, Jean Tirole, Oliver Hart, and Bengt Holmström exemplify this pattern.  This series of articles discusses the joint award in 2016 to Hart and Holmström.  In this introduction to the series, I outline the major errors that I will address in this series.
The major errors fall into several categories.  The awards, and the committee’s explanation for the awards, give us the ability to look at how the committee thinks of economics.  The committee’s message is one of complacency.  Economics is progressing brilliantly and now understands the key things that can go wrong in the economy and has developed optimal solutions to those problems.

Read More »

Why Was Tom Perez Willing to be the New Democrats’ DNC Stalking Horse?

February 23, 2017

By William K. BlackFebruary 22, 2017     Bloomington, MN
Hillary Clinton did not lose the presidential race because she is stupid.  The New Democrats have dominated the Democratic Party’s presidential candidates for decades.  This means that they are extremely good at internal Democratic Party politics.  The New Democrats faced a major challenge after Hillary’s loss to the worst presidential candidate in our Nation’s history.  The loss discredited the New Democrats’ leaders, policies, institutions, and funders.  It proved the accuracy of Tom Frank’s efforts to warn the Party about the price it would pay for abandoning the Party’s traditional working class base.
Bernie Sanders posed a major challenge both to Hillary in the nomination contest and to the New Democrats’ domination of Party organs such as the Democratic National Committee (DNC).  Keith Ellison, one of the Nation’s rising stars among progressives, announced his candidacy to lead the DNC.  Ellison was among Bernie’s most effective surrogates.  Ellison gained the support of Senator Schumer and became the odds on favorite to become the next DNC head.  At that point, however, the New Democrats’ leaders showed their cleverness, the depths of their hostility to Bernie and progressives, and their ruthless determination to maintain their dominance of the Party.

Read More »

Kenneth Arrow’s (Ignored) Impossibility Theorem

February 23, 2017

By William K. BlackFebruary 22, 2017     Bloomington, MN
Kenneth Arrow, one of the giants of economics, has died at the age of 95.  He became a Nobel Laureate in 1972.  As a young lawyer in 1977, I saw him in action as an expert witness on the subject of risk.  The context was setting the rates for shipping oil through the Trans-Alaska Pipeline System (TAPs).  Arrow testified about the risks of oil prices falling.  The FERC administrative law judge thought such a scenario was ridiculous.  Within four years, oil prices fell sharply.  Arrow’s experience was a common one for economists dealing with lawyers – the ALJ ignored him.
The New York Times obituary for Arrow is revealing about how the conventional wisdom distorts economic theory in a predictably skewed fashion.  It begins by discussing Arrow’s “impossibility theorem,” which states that where there are more than two choices it is impossible to construct perfect majority choice systems.
The author of the obit stressed the impossibility of such systems being optimal.  Contrast that emphasis with the author’s treatment of Arrow’s work on “general equilibrium.”
Professor Arrow proved that their system of equations mathematically cohere: Prices exist that bring all markets into simultaneous equilibrium (whereby every item produced at the equilibrium price would be voluntarily purchased).

Read More »

Quis custodiet ipsos custodies? Jean Tirole’s Proposal to Appoint Felons to Monitor CEOs

February 20, 2017

By William K. BlackFebruary 18, 2017     Roma, Italia (5th in my series on Jean Tirole)
When in Rome, trot out a venerable Latin quotation from Juvenal: “Who will guard the guards?”  I have “buried the lead” in this series of article about Jean Tirole by relegating my discussion of his proposal for fixing the problem of the criminal CEO – appoint a criminal “monitor” – to the fifth article in this series.  His proposal is in his 2001 article titled “Corporate Governance.”
Tirole’s proposal for optimal monitoring of CEOs is supposed to prevent predation by CEOs against shareholders.  Tirole begins his article with a catalog of some of the many ways that CEOs predate on shareholders.  His list includes this passage
They may collect private benefits by building empires, enjoying perks, or even stealing from the firm by raiding its pension fund, by paying inflated transfer prices to affiliated entities, or by engaging in insider trading [p. 1].
Tirole defines “insider trading” by the CEO as a form of “stealing from the firm.”  Tirole’s proposed “natural” way to prevent the CEO from stealing from the firm through insider trading is to have the shareholders hire a “monitor” of the CEO who will be compensated through –insider trading.  The insider trading by CEOs that Tirole deplores and the insider trading by the monitor that Tirole proposes both constitute felonies.

Read More »

Jean Tirole’s Core Contradiction of Corporate Governance

February 17, 2017

By William K. BlackFebruary 14, 2017     Bloomington, MN (4th in a series on Jean Tirole)
In my second article in this series I began to discuss Tirole’s 2001 article (“Corporate Governance”), which contains this remarkable admission about orthodox economists’ ‘group faith’ (no thinking involved) that results in the “implicit assumption” that some unexplained force “perfectly” protects employees, creditors, and the public from predation by firms.
The economists’ implicit assumption is that employees, suppliers, customers, and other natural stakeholders are protected by very powerful contracts or laws that force controlling investors to perfectly internalize their welfare whereas the contractual protection of investors when the natural stakeholders have control is rather ineffective, and so investors must receive the control rights. The details of the argument have not yet been worked out [p. 4].
My next article uses the specifics of Tirole’s article to illustrate many of the failures of how orthodox economists treat firms and their CEOs and stakeholders.  This article introduces the logical contradiction that lies at the heart of Tirole’s fantastic claims about corporate governance.

Read More »

Andrew Ross Sorkin’s Attempt to Make Tim Geithner a Hero

February 15, 2017

By William K. BlackFebruary 12, 2017       Bloomington, MN
I am watching the film Too Big to Fail based on Andrew Ross Sorkin’s book of the same name.  It led me to check out the price of the used book, which has fallen to $1.02, which is low enough that I am willing to buy a copy of the book, particularly since not a penny will go to Andrew Ross Sorkin.  The financial analytics displayed in the movie and the book are so poor and dishonest that I need to have a copy by my keyboard as an inspiration to keep trying to cut through the calculated dishonesty about Wall Street pumped out nearly every day in the pages of the New York Times.
The movie starts with the imminent failure of Lehman.  It is an astonishingly sympathetic portrait of Wall Street, Hank Paulson, Tim Geithner, and Ben Bernanke.  The movie invents a scene in which the Treasury leadership explains “in English” the causes of the crisis to the Treasury PR person.  There is not a word about the three fraud epidemics that hyper-inflated the bubble, drove the crisis, and produced the Great Recession.  As one expects of a Sorkin tale, it is all about personalities and “great men.” (Women are rare and powerless, even FDIC Chair Sheila Bair.)  The movie and book have a patina of financial jargon that Sorkin thinks constitutes analytics, and a nearly total failure to probe the Wall Street BS about the crisis.

Read More »

Jean Tirole Proves Why Heterodox Economists are Essential to Save the Field

February 15, 2017

By William K. BlackFebruary 12, 2017     Bloomington, MN (Part 3 in my Tirole series)
I discussed Jean Tirole’s 2001 article (“Corporate Governance”) and this remarkable admission about orthodox economists in my second article in this series.
The economists’ implicit assumption is that employees, suppliers, customers, and other natural stakeholders are protected by very powerful contracts or laws that force controlling investors to perfectly internalize their welfare…. [The] details of the argument have not yet been worked out.”  [p. 4]
I explained that this was a particularly pernicious example of “group think” that furthered the dominant ideology of orthodox economists (laissez faire) and served their self-interest in getting hired, published, honored, and advanced.  I explained that it was anti-scientific and failed Tirole’s test of what it took to be a scientist.  I noted that Tirole’s admissions also demonstrate the dishonest nature of his and his disciples’ attacks on heterodox economists and promised to discuss that point in this subsequent article.
Tirole’s attack on heterodox French economists consisted of the pure ad hominem description of them as a “motley crew” and the assertion that they represented academic failures because they had not published in the top orthodox journals.

Read More »

Jean Tirole Fails the Tirole Test of What Makes an Economist a Scientist

February 14, 2017

By William K. BlackFebruary 11, 2017     Bloomington, MN (Part 2 in my Tirole series)
In his letter to the French education minister denouncing French heterodox economists as a “motley crew” of academic failures, Jean Tirole, the 2014 Nobel Laureate in Economics, stated his test for the standard for an economist to be a scientist.
Secondly, like the other great scientific disciplines, modern economic science relies on the continuous questioning of its hypotheses, testing its models against the facts, and abandoning theories that fail the test of reality.
Tirole and his Toulouse school of orthodox economists fail the Tirole test.  Their models, policies, and theories, typically “fail the test of reality” – yet they do not abandon the falsified theories.  Further, they ignore reality-based scholarly work.  Worse, as Tirole admits, the Toulouse school’s failures are typical of orthodox economists.  Tirole shows that the foundational errors fall into three categories, and the nature of those errors supports three other underlying errors.  Tirole’s admissions also demonstrate the dishonest nature of his and his disciples’ attacks on heterodox economists, as I will explain later in this series of articles.
Tirole’s 2001 article (“Corporate Governance”) contains this remarkable admission.

Read More »