The Best Way to Rob a Bank is to Own One. Bill Black

[scholarsOrAcademics]

The Best way to rob a bank is to own one: how corporate executives and politicians looted the S&L Industry, William K. Black. 2005
Black was a regulator during the 1980’s wave of control frauds that ravaged the savings and loan (S&L)industry. After the crisis, he went back to school at the University of California at Irvine to learn to be a criminologist, with a dissertation on control frauds.
The non-fiction book reads like fiction. A mass of details lays out the intrigues involved in regulatory agencies, specifically the FHLBB, the Federal Home Loan Bank Board; federal S&L regulator. Surprising detail on House Speaker Jim Wright’s feud with chairman Gray is given; gripping reading.
To highlight a few points. Regarding efficient markets. “Because the waves of S&L control frauds and the ongoing wave consistently fooled entities that had the incentive to exercise private market discipline, the efficient-market hypothesis has often been proven false….The efficient-market hypothesis is the bedrock of modern finance, so the ineffectiveness of markets against waves of control fraud is of major importance.” Pp256
Regarding accountants/lawyers; “Gorgan describes Keating’s response – ‘ was white hot. He said that spineless lawyers would ruin this company, that he had to have talented accounting .That lawyers never made a nickel for the company….And that the accountants and business people made the money for the company.” Pp250
And the final paragraph. “The Clinton-Gore effort to reinvent government did not leave us any better prepared for the current wave of control fraud. Three changes would be helpful. First, the existing strategic plans of few regulatory agencies meaningfully analyze the primary risks threatening the agency’s ability to meet its mission In plain English, a goal of the SEC should be to prevent waves of control fraud. Second, the GAO should change its definition of high risk to include risks to the public should the agency fail in its mission. It is embarrassing that the GAO, as I write, still does not consider the SEC’s antifraud activities a high-risk function. Third, both the OMB and the GAO should establish divisions to locate units suffering system-capacity problems and to recommend steps to fix the problem Someone needs to be rewarded and promoted for recommending more regulation and more spending when that is necessary.”