William K. Black on ‘Financial Racketeering;’ Government Coverup; a 250% Tax Increase

William K Black on ‘Financial Racketeering;’ Government Coverup; a 250% Tax Increase

The interview with William K. Black starts at 13:00 in this video and is well worth seeing.

Gresham’s Dynamic: The least ethically inclined have an advantage in the US financial system (in which regulatory capture nullifies enforcement) driven by perverse incentives of oversized bonuses and the failure to investigate and prosecute criminal activity.

In addition to the overhang of unindicted and undeclared fraud that is still in place, distorting the clearing of the markets, there is the issue of an imbalanced economy in which an oversized financial sector exacts what amounts to a draconian tax on the real economy, that is, fees and tariffs and other unproductive drains in excess of anything that the government is levying.

What Do You Get for a 250% Tax Increase?

As I recall the percentage of financial sector profits to corporate profits recently peaked at 41%, from a long run average of less than 16%. Granted, this is a bit theoretical because of the pervasive accounting fraud in the banks and the corporations.

I wonder what the percentage of profit, pre-bonus, is being enjoyed now?

This can be viewed as a form of a tax. If the government raised taxes from 16% to 41% what do you think the impact on the US economy would be? And yet there is little discussion of this, or the racketeering that accompanied such a festival of looting.

Yet conceptually this is what has been accomplished through the deregulation of the banks and the repeal of Glass-Steagall, and of course, regulatory capture. The financial sector acts primarily as a capital accumulation and allocation system, and secondarily to facilitate wealth transferals through pure investment and speculation, the famous school of winners and losers. I would suggest that this latter function has grown out of control like a cancer, and metastasized to drain and debilitate the better part of the political system and the non-financial economy.

I would suggest that this system is broken, and that there can be no sustainable recovery until it is fixed. How can confidence return when most of those in the know realize that the fraud is still in play? Who can take positions with confidence in such a corrupt environment wherein the government acts as the handmaiden to a handful of powerful Banks which engage in large scale frauds as a mainstay of their business, and with virtual impunity?

Stimulus that is not targeted, and especially any subsidy that passes through the Banks, is liable to this tax. It reminds me of warlords stealing charitable relief as it arrives in a Third World country before it can be distributed to the people.

But austerity is even worse, because the kinds of austerity being discussed are specifically targeting the ordinary people who have been badly used already to say the least, and not the perpetrators of one of the biggest financial frauds in the history of the world, and those wealthy few who benefited from a culture of deception which they helped to form.

This is a compounding of the suffering and injustice. If one were to set a recipe for a social and civil revolution it would fit the bill nicely. No one ever said that the pigmen are not self-destructive in their lifestyles and obsessions.

The comparison to the aftermath of the Savings and Loan crisis could not be more stark. Why the inability and reluctance to investigate and indict? What is the government covering up? Who is pulling Obama’s strings?

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Picture credit: The Nonist