Danny Schechter - ColdType

94
Pons. “The second period (securitization and insurance derivatives)
gave rise to convoluted scams, still caused by the attraction
of bonuses and the very complexity of the operations
themselves. The fraud changed in nature; conflicts of interest
between rating agencies and banks, banks and insurance companies
multiplied along with appraisals and contracts.
“Above all, the burdensome loans were leaving balance
sheets veritable ‘gasworks,’ in which the fictive was incorporated
with the real, were set up. At the moment of final reckoning,
losses must be regularized: balance sheets manipulated
and accounting statements falsified. The specter of Enron
reappears!”
Former Bank Regulator Bill Black says many of the frauds
on the Street originated at the top of the corporate ladder,
when he told Laura Flanders on GRIT TV about his experience
during the S&L crisis:
“First we learned what was causing the problem, so we correctly
identified the epidemic, and it was an epidemic of fraud
led by the CEO’s, and they were using accounting to commit
that fraud. We found there was a distinctive pattern to how
they did this so we looked for that pattern.
“And even though savings and loans were reporting they
had record profitability we made them priorities for enforcement
actions if they were following this pattern.
“The second thing found was the way they maximized their
gains was to act like a Ponzi and to grow extremely rapidly. So
we passed a rule that restricted growth to 25% a year which is
an absurd number but the frauds were growing at an average
annual rate of 50% a year. They couldn’t survive unless they
grow at least that fast. I mean the Ponzi dynamic is that you
have to keep growing faster as the fraud progresses.
“So in 2 years we had eliminated either directly by taking
them on or once we ran out of money through the rule that
restricted growth, all 300 of the control frauds.”