The shame prize award was made in Davos during the World Economic Forum as a counter-WEF event.  Shell also “won” a shame prize, but I spoke on Goldman Sachs, the role of epidemics of accounting control fraud, and the WEF’s anti-regulatory and pro-executive compensation policies.  I explained that the anti-regulatory policies were intended to fuel the destructive regulatory “race to the bottom” and why the executive and professional compensation policies maximized the incentives to defraud.  I also explained that WEF was a fraud denier.  Collectively, these three WEF policies contributed to creating the intensely criminogenic environments that produce the epidemics of accounting control fraud driving our worst financial crises.

Goldman Sachs Proof that God hates its Customers

By William K. Black, New Economic Perspectives

Posted on January 26, 2013

Goldman Sachs is a fitting recipient of the “Public Eye” shame prize, but it is vital to remember that Goldman is not a singular rotten apple in a healthy bushel.  It is characteristic of the abuses that become endemic when powerful plutocrats achieve de facto immunity from the criminal laws.

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Indeed, this discussion understates Goldman’s culpability because Goldman’s executives were principal architects of the crisis.  Its former CEO, Robert Rubin, led the disastrous deregulation in the Clinton administration and was a leader in pushing Citicorp to become a major contributor to the hyper-inflation of the bubble.  Henry Paulson, when he was Goldman’s CEO, made Goldman a leading “vector” spreading fraudulent mortgages through the global financial system (and creating Goldman’s holdings of toxic mortgages that produced huge, fictional, accounting income in the short-term – making Paulson’s already large compensation massive).

Goldman Sachs: Doing "God’s Work" by inflicting the Wages of Sin Globally

By William K. Black, New Economic Perspectives

Posted on January 26, 2013

The central point that I want to stress as a white-collar criminologist and effective financial regulator is that Goldman Sachs is not a singular “rotten apple” in a healthy bushel of banks.  Goldman Sachs is the norm for systemically dangerous institutions (SDIs) (the so-called “too big to fail” banks).  Impunity from the laws, crony capitalism that degrades democracy, and massive national subsidies produce exceptionally criminogenic environments.  Those environments are so perverse that they produce epidemics of “control fraud.”  Control fraud occurs when the persons who control a seemingly legitimate entity use it as a “weapon” to defraud.  In finance, accounting is the “weapon of choice.”  It is important to remember, however, that other forms of control fraud maim and kill thousands.

Large, individual accounting control frauds cause greater financial losses than all other forms of property crime – combined.  Accounting control frauds are weapons of mass financial destruction.  One of the crippling flaws of the World Economic Forum (WEF) is ignoring private sector control frauds.  Control fraud makes a mockery of “stakeholder” theory.  Accounting control fraud, for example, aims its stake at the heart of its stakeholders.  The principal intended victims are the shareholders and the creditors (which includes the workers).  Other forms of control fraud primarily target the customers.  If the WEF wishes to effectively protect stakeholders it is imperative that they undertake a sea change and make the detection, prevention, and sanctioning of control fraud one of their central priorities.  WEF does the opposite, it wishes away fraud with propaganda because the alternative is to admit that many of its dominant participants are the central problem – they are degrading the state of the world.

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WEF has been acting for decades to make banking criminogenic.  They have pushed the three “de’s” – deregulation, desupervision, and de facto decriminalization.  They have favored executive compensation systems.  They have pushed for ease of entry.  And they have spread the myth that fraud by corporate elites is “rare.”  WEF has optimized the intensely criminogenic environments that produce recurrent, intensifying fraud epidemics, bubbles, and financial crises.

WEF’s complacency about accounting control fraud has led to its embarrassing failures in finance.  It’s “competitiveness” scales and “financial market development” scales have praised the most criminogenic financial systems – Iceland, Ireland, the UK, the U.S., and Spain – even as the largest banks in those Nations were (in reality) destroyed along with the much of the national economy.  Similarly, the WEF’s “global risks” series has proven unable to identify the major financial risks until the hurricane has roared through the system.  The central problems are the same – the WEF “stakeholder” premise and the WEF’s domination by powerful corporations is an elaborate propaganda apparatus that assumes away the reality of how CEOs running control frauds use compensation (and the power to hire, promote, and fire) and political power to deliberately create the perverse incentives that produce widespread fraud.  The irony is that the WEF’s dogmas have encouraged elite frauds to drive stakes through the stakeholders.

a modus operandi.

Krugman On Morning Joe: How Many Times Do I Have To Be Right?

By Susie Madrak, Crooks and Liars

January 28, 2013 10:00 AM

“Have you been living in the same country I’m in these past five years?” Krugman retorted, saying the deficit is far down on his list of things to worry about.

In response, Mika gasped and said, “I feel like we’re talking about climate change! My God!” (What a dope.) Krugman said that was a destructive comparison, and explained why. But I doubt she listened.*

I especially liked it when he responded to Joe Scarborough: “How many times do people like these have to be wrong and people like me have to be right?”

Remember, Paul: Ignorance can be fixed. Stupidity is forever.

This is what lambert strether calls a “category error.”  They are not stupid.

My brother sent me a postcard the other day with this big sattelite photo of the entire earth on it. On the back it said: ‘Wish you were here.’ — Steven Wright

British Banter

Separation by degrees

Independent Development

At Davos, Is the Party Over?

By ANDREW ROSS SORKIN, The New York Times

January 22, 2013, 9:52 pm

In previous years, the Friday night of the World Economic Forum was always filled with big dinners and blowout parties.

Certain bashes were among the most coveted. Google held a standing-room only party at Steigenberger Belvedere Hotel, complete with bands flown in from New York and beyond. Across the street, Accel Partners, the venture capital firm behind Facebook, held a wine tasting at the Kirchner Museum, often flying in cases of vintage wine from California. And Nike held a huge dinner with the slogan, “No Speeches. No Powerpoint. And no ties.”

This Friday, however, the operative slogan could be “No dinner. No parties.”

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Have those companies given up on Davos for good? Is there something bigger here at play than just parties? Those are some of the questions being asked, however, answers have been forthcoming – at least not yet.

Oxfam says world’s rich could end poverty

Al Jazeera

20 Jan 2013 07:49

The world’s 100 richest people earned enough money last year to end world extreme poverty four times over, according to a new report released by international rights group and charity Oxfam.

The $240 billion net income of the world’s 100 richest billionaires would have ended poverty four times over, according to the London-based group’s report released on Saturday.

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(Jeremy) Hobbs (executive director at Oxfam) said that “a global new deal” is required, encompassing a wide array of issues, from tax havens to employment laws, in order to address income inequality.

Closing tax havens, the group said, could yield an additional $189bn in additional tax revenues. According to Oxfam’s figures, as much as $32 trillion is currently stored in tax havens.

In a statement, Oxfam warned that “extreme wealth and income is not only unethical it is also economically inefficient, politically corrosive, socially divisive and environmentally destructive.”

Can we fight poverty by ending extreme wealth?

by Olga Khazan, Washington Post

January 20, 2013 at 8:00 am

In a sign that the “Occupy” and “99 percent” movements that swept the United States in recent years have taken on increased global relevance, Oxfam International this week called (.pdf) for “a new global goal to end extreme wealth by 2025,” as a way to stem income inequality and continue the fight against poverty.

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Oxfam does have a point. The movement against income inequality has been gaining momentum as the world’s rich have continued to amass larger shares of their countries’ fortunes. In the United States, according to the group, the share of national income going to the top 1 percent of the population has increased to 20 percent, from 10 percent in 1980.

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The World Economic Forum (Davos) also recently rated “severe income disparity” as one of its top global risks for 2013.

Oxfam’s idea is basically the opposite of the trickle-down theory: Rather than creating jobs and lifting others out of poverty, the group says, super-rich minorities cause social unrest and depress demand for goods and services, limiting growth and innovation as a result. It’s an argument that’s also been echoed recently by several vocal billionaires.

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The group also suggested some measures that have been at the center of some of the fiercest policy battles in the United States and elsewhere:

“Limits to bonuses, or to how much people can earn as a multiple of the earnings of the lowest paid, limits to interest rates, limits to capital accumulation are all only recently-abandoned policy instruments that can be revived. Progressive taxation that redistributes wealth from the rich to the poor is essential,” Oxfam continued.

Those tactics sound good, but they’d require something else that unfortunately the most unequal countries also lack: governments willing to risk angering their wealthiest citizens in order to improve life for the poorest.

I wouldn’t hold my breath.