Gresham’s Dynamic
From William K. Black at New Economic Perspectives:
“[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”…
The epidemic of accounting control fraud by financial institutions that drove the Great Recession was the largest and most costly example of white-collar crime in history. But all we have heard from Obama and Holder is minimization of the role of fraud in the crisis and the same abject failure as the Bush administration to prosecute the elite frauds that drove the crisis. The minimization of fraud comes from the death of criminal referrals by the regulatory agencies. Neither the banking regulatory agencies nor the FBI has conducted what would have been considered in our era a serious investigation of an elite financial institution. When it comes to elite frauds; if you don’t look you don’t find. Having falsely claimed that there were only trivial violations of the law, the Obama administration has emasculated its ability to go credibly to the public and warn that the House Republicans are about to recreate the criminogenic environment that produces our recurrent, intensifying financial crises. Holder and Obama cannot credibly claim that the House Republicans are about to allow our financial elites to again grow wealthy through fraud because Holder and Obama are continuing Mukasey and Bush’s policy of granting de facto immunity to the elite criminals who caused the crisis.
