The fourth of a six part series airing on the McCuistion Television Program, which has been focused on the 2008 financial crisis, “Have Dodd- Frank and Other Regulations Been Effective?” (watch it here), featured my Bank Whistleblowers United colleague, William K. Black.
William, a white collar criminologist and former financial regulator as well as the author of The Best Way to Rob a Bank Is to Own One, was joined by: George A. Selgin, PhD: Director of the Cato Institutes’ Center for Monetary and Financial Alternatives, Professor Emeritus of Economics at the University of Georgia and C.K. Lee, a former bank regulator, now Managing Director, Investment Banking, Commerce Street Capital. Jeb Hensarling (R- TX): Chair of the House Financial Services Committee gave his views via a prior taped interview.
The diverse comments were unanimously not in agreement. Yet each one believes to some extent that regulations and the way they are enforced have set up a tyranny in our financial system which favors the big banks at the expense of community banks which are crippled with the cost of regulations. As Representative Hensarling emphasized, Dodd-Frank and other regulations are imposing huge costs on banking because of their complexity and volume.
C. K. Lee pointed out our challenges with regulatory overkill – Dodd-Frank itself is 19,000 plus pages and costs those regulated $35 billion in compliance costs alone! He believes that the Dodd-Frank act institutionalized the TBTF! And this from a former regulator!
Dr. Selgin agreed and asked how can regulations be effective when the problem is regulatory “institutionalization.” You can’t rely on government (read regulators) regulating especially when the same regulatory institutions are taken over by the banks they are supposed to be regulating.
William Black believes that there is a failure to discuss the real problems resulting in the dismal economic growth. He states that the primary reason why regulations have not been effective are the three D’s which have been increasingly followed since the late ‘90’s: “Deregulation, De-Supervision and De-facto De-criminalization.” He used one example, pointing out that the Federal Reserve did not ban ”liars loans,” even though they had the authority since 1994 and it was well documented that 90% of loans were fraudulent…until finally Bernanke banned them during the crisis, but the ban was not effective until November of 2009 – after the huge losses caused by them.
The regulations and their enforcement which were supposed to help our economy have actually hindered growth. We seem to have a conspiracy of fools at the helm! Change is called for before we step backward into the same quagmire that got us to 2008!
The McCuistion TV episode can be viewed by following the link here
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
