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Friday, March 14, 2014

The Best Way to Rob a Bank

Here's a chance to get a quick and dirty education in the real reasons behind the worldwide financial meltdown. Be prepared to hear the "f" word quite a lot, as in "fraud." That $11 trillion the public lost, along with 10 million job losses? Completely avoidable. 

So says William Black, former director of the Institute for Fraud Prevention who now teaches Economics and Law at the University of Missouri, Kansas City. In this TEDx talk, based on his all-too-prescient book, The Best Way to Rob a Bank Is to Own One, he explains how banks instigate recurring and intensifying financial crises. Their weapon of choice? Accounting. Follow this recipe:

1) grow like crazy

2) make or buy crappy loans at a high rate

3) use leverage

4) keep only trivial reserves to cover your losses

Follow this recipe, and "you are mathematically guaranteed" to report record bank profits; CEOs will be made massively wealthy, and the bank will eventually suffer massive losses. Rinse, repeat.  (h/t @nakedcapitalism) -- Barbara Bedway

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