The Fourteenth Banker Blog

May 24, 2010

Recommended Bill Black video and meanderings

Filed under: Running Commentary — thefourteenthbanker @ 11:05 PM

This evening I watched an engaging 67 minute  lecture by William Black delivered at Lewis and Clark College.  He spoke of the economic crisis and the moral crisis.  His last observation is that our not recognizing that we have a moral crisis is part of the moral crisis. Did I say that right?  I commend the speech to you. He articulates the mechanism by which senior management makes its fraudulent intentions known without giving explicit directions to commit fraud.  It is through the incentive systems. Work needs to be done on this. I see it every day.

What is a fraud?

deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.

Does anyone think that fraud goes on in our most reputable financial institutions?   Based on the definition above, fraud is the business model.  Some frauds are illegal and some are just “sport”.  The vast majority are just sport.  They are for profit (bonuses) and for advantage in the competition with peers for recognition, advancement, and money.  If one does not commit these frauds, he/she is not aggressive enough, competitive enough, ambitious enough.  The customers are just actors in these dramas.  Or so it seems.  Really though, it is blood sport.  Like bullfighting.  The bull is really sort of hapless in a bull fight. The Matador knows the bull’s instincts, his eyesight, his agility.  The Matador has the edge, unless he trips.

The [warning graphic photos] goring of the famous matador this past week was at a bullfight during the great celebration of the Festival of Saint Isidro in Madrid.

Isidore the Laborer, also known as Isidore the Farmer, (SpanishSan Isidro Labrador), (c. 1070 – 15 May 1130) was a Spanish day laborer known for his goodness toward the poor and animals. He is the Catholic patron saint of farmers and of Madrid and of La Ceiba,Honduras.

How creepy is that?  Sorry Bill, I’m not sure how the bullfight story got mixed up with your post.  But really, how creepy is it that an animal is tormented and killed during a celebration of a farmer known for his goodness to animals?  Somehow it fits this Financial Crisis morality play.  I’m not sure how, but somehow it fits.   Maybe the Wall Street connection.   Someone make sense of this.



  1. Fourteenth Banker,

    The economist Michael Hudson has an interesting piece in Counter Punch, (What would Jesus say?) Hudson says classical economics evolved out of moral philosophy. He says, “free markets” in classical economics means freeing markets from economic rents and interest (usury). This concept being inverted by Milton Friedman and the Chicago School of Economics so that morality no longer has a role in economics or the financial system. The history of economics, Hudson outlines in this piece, is thought provoking. He says classical economics evolved out of moral philosophy, into political-economics and distributive justice. He calls the current system “junk economics.”

    I am not an economist, but I’ve learned from following Baseline Scenario that Adam Smith’s Wealth of Nations is based on his Theory of Moral Sentiments. Adam Smith was, perhaps, foremost a moral philosopher. A discipline that now belongs to an arcane branch of academe.

    Comment by Tippy Golden — May 25, 2010 @ 1:14 AM | Reply

  2. Hmmm, interesting post. I view ritualistic blood sacrifice as simply a guise for sadism. This includes bullfighting, which is not a sport by any means, just ask the bull, as you aptly pointed out. In any event, the sadism that pulses through out system is evident in the bullfights of Wall Street where the mark is not simply robbed but also toyed with before being slaughtered. Another example of this sadism, cloaked as something else, is illegal torture perpetrated as both offensive and defensive strategies to save us from all of these so-called terrorists.

    The most sadistic and sickest individuals in our society sometimes become serial killers, sometimes use their official title and office (dick cheney) to direct or facilitate the gruesome torture and killing of human beings, sometimes become a police officer and shoot people “in self defense,”sometimes they become wall street trader, hedge fund manager, or CEO of an investment bank like Goldman Sachs.

    Sadistic behavior can and does manifest itself in any number of ways. One simply has to pay attention and you will see it for what it is. I would posit that the banksters and other corporate thugs (think British Petroleum) are worse than any serial killer, as they have destroyed exponentially more, likely infinitely more, lives.

    The banksters (and British Petroleum) have committed crimes against humanity and if they were not antisocial, would actually not sleep well at night.

    Comment by victoriap — May 25, 2010 @ 1:38 AM | Reply

  3. Excellent post and comments today.

    Comment by D Winborne — May 25, 2010 @ 9:07 AM | Reply

  4. i liked the lecture by Dr. Black, but i cant say i’m surprised by the structure or the behavior… sad to say i think i’ve become cynical in my old age… i know not everyone involved in that industry is “immoral” and “corrupt”, however, in an environment driven by commission and bonus structure… it aint easy to be successful if you are not pushing the envelope…

    yes, not recognizing a moral crisis as a moral crisis is, indeed, the problem – and we got there with small steps, death by a thousand small cuts… much like the way the matador slowly “dances” with the bull – small cuts to let the animal bleed and weaken before delivering the final killing stroke when it is really more a mercy killing…(i’m trying to pull in the bullfight metaphor here… there must be something in that metaphor that someone better than me can explore pulling in the whole notion of a “BULL” market)… the questions become is it that we have become anesthetized to this behavior? are we afraid to call it as it is? “this is deceit… that is fraud…though TECHNICALLY not ILLEGAL”.

    like i said, i think i’ve become cynical in my old age…so it is heartening to see the conversation move from merely the “legal” arena into the realm of something greater which speaks to “character” and “morality”… where to go from here… that is the challenge…

    Comment by mccauley — May 25, 2010 @ 12:38 PM | Reply

    • McCauley, there will be no change until we change the way elected officials pay for their campaigns. As long as they have to pimp themselves to the highest bidder to raise campaign cash, they will never call BS, let alone “fraud” on these practices. We need publicly financed elections, AND term limits, AND we need to shut the revolving door between congress and the industries they are supposed to oversee and protect the public from.
      Just recently, a group of senators had a hissy fit because the “buy local” and organic farm folks got a $65 million dollar stipend. Bear in mind, Cargill, ADM, etc. got billions, the factory farmers got $7 billion in aid, but god forbid the little guy, the one who really IS a “family farm” might get a minuscule crumb from that pie! THAT is what we have in Washington.

      Comment by Sandi — May 25, 2010 @ 4:32 PM | Reply

  5. These people are amoral – many exhibit socio-pathological traits:
    1. Glibness and Superficial Charm, 2. Manipulative and Conning, 3.Grandiose Sense of Self, 4.Lack of Remorse, Shame or Guilt, 5. Need for Stimulation, 6.Callousness/Lack of Empathy, 7. Poor Behavioral Controls/Impulsive Nature

    If they were moral people, or uncorrupted people, they wouldn’t be able to do what they do.
    Watching Professor Black’s lecture made me furious and sick to my stomach, by turns. And just when I was beginning to feel more hopeful about things generally.

    Comment by Sandi — May 25, 2010 @ 1:26 PM | Reply

  6. Let me share a perfect example of continuing sociopathic behaviour at our TBTFs.

    A branch manager at a TBTF was coaching his staff to opt into the overdraft protection scheme so that they can feel more comfortable selling the service to their customers.

    For those of you who might not know what I’m talking about, banks uses to put everyone on OD protection and then charge $32 a piece for each OD item. With new regulation they have to ask the customer to opt into such a service, else they must refuse OD but also don’t get to charge the hefty fees either.

    Thier fix, coerce the employees first, that right there is couple hundred thousand accounts. And who could be in worse shape then those poor tellers! And then by using them fool customers into spending money they don’t have.

    It’s business as usual at the TBTFs!!!! Fleecing of America continues, you could always invest in their companies. Goldman Sachs says banking will garner at least 13% ROEs going forward and will benefit from further consolidation in the industry ( that’s a nicer way of saying, “watch out! Here we come to gobble you up)

    Comment by Vocalbanker — May 25, 2010 @ 2:57 PM | Reply

    • My local bank WAS Wachovia. Its stock was also the lion’s share of my ROTH. Like an idiot, I trusted that the new guys (Robert Steel) would be as honorable as the old regime had been. Stupid me! (Had I looked into where Steel came from, I wouldn’t have lost so much money). I waited too late and watched them get handed to Wells Fargo on a silver platter. I still do a small amount of banking there, but I use my credit union now. I really feel sorry for the gals I’ve come to know and like in the Wachovia branch where I’ve been for years – they lost their retirements, too, and most were within 10 years of retiring.
      There must be a special place in hell for these SOBs. I sure hope so.

      Comment by Sandi — May 25, 2010 @ 5:12 PM | Reply

  7. We have become a society who have forgotten that just because we can doesn’t mean we should. There is just too much money involved for the “fraud” not to happen.

    Comment by oldgal — May 25, 2010 @ 7:09 PM | Reply

  8. 14th Banker wrote: “Someone make sense of this.”

    Well maybe you (?) are secretly hoping the matadors on Wall Street will get their just desserts, metaphorically speaking of course. Or perhaps you are channeling a more general mood of outrage against the financial establishment.

    Then again this bull might qualify among the “animal spirits” identified by Akerloff and Shiller. This is not a Wall Street bull. But the spirit of an angry bull who (mixing metaphors here) gets to land the final punch for San Isidro Labrador and all the farmers, animals and poor laborers protected by this kind and gentle saint.

    How’s that for some extemporizing 🙂

    Comment by Anonymous — May 25, 2010 @ 7:16 PM | Reply

    • Bravo!

      Comment by thefourteenthbanker — May 25, 2010 @ 10:34 PM | Reply

      • Fourteenth Banker. Somehow I got posted as anonymous. Ouch! I hope that poor man survives. I took a quick look. He will definitely need cosmetic surgery. But at least it did not look like brain damage.

        (PS: Sorry to post this reply twice, it is meant for here.)

        Comment by tippygolden — May 26, 2010 @ 12:13 AM

  9. Make sense out of what happened? First, every aspect William Black’s lecture is on point, to say the least. It is very unpleasant but the first obervation must be that almost every perpetrator of control fraud believed they were doing what was required by their systemic beliefs. These people are doing the ” American Thing”. Black uses the example of George Patton’s speech to his Army before embarking to go into action in North Africa. Patton states a truism… Americans cannot abide a loser and only love winners. I grew up in the 40’s and 50’s and the only thing considered worse than the loser was the Rat. The same old schtick is alive and well except that Americans now have masses of losers and a huge crop of winners cum losers.

    One must be a moron today to not understand that one wins or else. If one fails to win you may as well die. The winner is reminded of their precarious state every day when simply observing the corporate loser. Fear of monetary failure is now a national psychosis in my view.

    What scare’s me is the ultimate reaction when those that think themselves winners lose it all from financial losses. Then we see fireworks. TeaParty morphed into the single party leader of a nationalist state. ( Tea Party may look moronic but so too were the Fascists and Nazi’s in their early days.)

    Right now, the future winners turned losers are all agog over their personal concoctions of morality. I see this as an intermediate stage. When and if savings and pension losses really materialize in another loss conflagration , heaven help us. The morality will get meaner than hell.

    Is today’s Social Darwinism comparable to other mental conflagrations like the protestant ethos 500 years ago?

    Comment by Jerry J — May 25, 2010 @ 9:09 PM | Reply

    • Jerry J, what do you mean by “protestant ethos of 500 years ago?

      Comment by tippygolden — May 25, 2010 @ 10:32 PM | Reply

      • Luther went on his rampage. It caught on and tore Europe apart from belief in another version of ” A true and Only Heaven”. Social Darwinism/ Free Market Captalism is another such true belief. A strong dominant belief .

        Comment by Jerry J — May 25, 2010 @ 11:06 PM

      • Yes the wars of religion that tore up Europe for a few hundred years. John Calvin is up there along with Luther. And the Catholics had their Inquisition and auto de fe.

        I’ve made an attempt to understand why Wittgenstein is so important. From what I gather one of his main contributions to philosophy (and it is revolutionary) is that all the preceding philosophers and theologians, and more philosophers, who claimed to define to what is “essence” (eg, Platonic ideals) should give it up because it is not there. There is no final orthodoxy. We will never find it no matter how hard we look. Rather, Wittgenstein invites us to understand language, its constructions, and the meanings language construct, without diminishing what we can discover. I’m inclined to agree with this analysis.

        Comment by tippygolden — May 26, 2010 @ 12:02 AM

  10. If anyone hasn’t read James’ piece on Baseline Scenario, and the New Yorker magazine article he references, do so. It is more proof that the men in charge of Wall St. live in a different universe than we do. If what the senate passed, flimsy as it is, is “anti-capitalist” and “anti-wealth”, I’ll eat my hat!

    I’m sure I’m not the only one who’s noticed that ANY suggestion of any kind of regulation -from clean air to minimum wage – gets the same boiler plate from the Chamber of Commerce Chorus – “Oh, you can’t do THAT; it will stifle business (innovation, the Second Coming, etc). It is sickening that they keep being proved wrong, but Joe and Jill Six-pack still take up the hue and cry and vote against their own best interests. If they bother to vote.

    Comment by Sandi — May 26, 2010 @ 11:41 AM | Reply

  11. NYTimes Week in Review

    “From the earliest days of capitalism, those skilled at making money have proven creative at evading the regulators.”

    Yep, I think we get that. And it doesn’t help when the regs have no chance of being enforced either. So, where does that leave us? Are we doomed to be at the mercy of the “legal thieves”?

    Comment by Sandi — May 27, 2010 @ 9:58 AM | Reply

  12. The entire problem goes to participants being unable to change viewpoints. To accept defeat. To accept magnanimous victory. What better example than the results of the afternoon of April 9, 1865 at Appomattox Court House , Virginia. The two principle Generals set a tone of conciliation and ending. Specifically, Robert E Lee decided the issue had been settled and acted accordingly for the rest of his life. Ulysses S Grant likewise tried to honor the victor’s agreement in the bargain for the rest of his political career. Grant reached beyond his powers but in the end made the settlement stick. Both sought endings.

    Literally nothing can be settled politically today. I view this as a fatal development that forces political and economic collapse to a simpler level until political accomodation is reached.

    Comment by Jerry J — May 27, 2010 @ 2:42 PM | Reply

  13. Yes, Jerry, the partisanship is deafening, but could it be that this goes beyond ideology and speaks to how deeply indebted (pun intended) each side is to their corporate donor-masters? I truly believe both sides are corrupt beyond redemption.

    Comment by Sandi — May 27, 2010 @ 3:02 PM | Reply

    • Who are both sides? Both sides to any issue of importance number in the many millions in the US. If both sides are beyond redemption, to whose redemption are they indebted? All, the many millions, are therefore beyond redemption and will eventually see their way to conciliation. Grant decided to exceed his orders and meant to make it stick. Shortly after Johnson became President, he, some cabinet members and some Radical Senators met Grant and told him they were going to arrest Lee and others. Grant understood his power of the moment and threatened to provoke the Army against them if they dared arrest the senior Confederate military people. He courageously stood his ground. He could no longer abide Senator Sumner ever afterwards. He triumphed over the sickeningly righteous proving Machiavelli’s maxim of sometimes needing to do evil to secure a better result. This step takes balanced courage…. very rare, the definition of a great leader.

      Comment by Jerry J — May 27, 2010 @ 3:32 PM | Reply

      • I’m sorry Jerry, I was unclear – I was referring to the politicians in this instance, not the millions of voters on both (or all?) sides.
        As for great leaders – we don’t have any – we have craven, spineless sycophants where the leaders used to be.

        Comment by Sandi — May 27, 2010 @ 4:05 PM

  14. […] of major white-collar crimes that are clearly larceny on a greater scale.  Note also this, and this, and this. Leave a […]

    Pingback by Somebody is Waking Up on the Legal Front « The Fourteenth Banker Blog — August 18, 2010 @ 7:56 AM | Reply

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