June 9, 2011 – In the 1970’s there was a Texas financial scandal known as “Rent-a-Bank.” Fifty bankers were uncovered by regulators as having perpetrated fraudulent loans. No criminal prosecutions resulted, so it was almost predictable most of the scammers were involved in the national savings and loan scandals of the 80’s, with far more impactful results.
“Crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs,” writes Bloomberg reporter William K. Black in MSN Money. “Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.”
MSN Money quotes a 1993 article by George Akerlof and Paul Romer. These two Nobel prize winners, according to Black, explained “how CEOs can use accounting fraud to create ‘a sure thing’ in the form of record short-term gains . . . While it lasts, this fictional income allows the chief executive officer to loot the bank.”