How Elite Economic Hucksters Drive America’s Biggest Fraud Epidemics
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The Fed’s leadership, dominated by economists devoted to false theory, was enraged when the Fed’s supervisors presented evidence of endemic control fraud by the most elite lenders, particularly in the making of fraudulent liar’s loans. How dare the supervisors criticize our most reputable bank CEOs by showing that they were making hundreds of thousands through scams?
Bernanke finally acted under Congressional pressure on July 14, 2008 to ban liar’s loans. He cited evidence of endemic fraud available since early 2006 – evidence which would have been available way back in 2001 had Greenspan moved to require examiners to study liar’s loans. Even in the face of overwhelming evidence, Bernanke delayed the ban for 18 months -- one would not wish to inconvenience a fraudulent lender, after all.
We did not have to suffer this crisis. Economists who were not blinded by neoclassical theory, like George Akerlof (who won the Nobel Prize in 2001) and Christina Romer (adviser to President Obama from 2008-2010), had warned their colleagues about accounting control fraud and liar’s loans, as did criminologists and regulators like me. But Greenspan (and Timothy Geithner) refused to see the obvious truth.
Alan Greenspan had no excuse for assuming fraud out of existence, and his exceptionally immoral position on fraud and regulation proved catastrophic to America and much of the world. We cannot afford the price, measured in many trillions of dollars, over 10 million jobs, and endless suffering, of unethical economists.