Open thread for night owls: Another bad choice for an economic advisor. What else is new?

William K. Black is Associate Professor of Law and Economics at the University of Missouri-Kansas City. He writes:

Presidential nominees of either U.S. party can secure economic advice from any economist in the world.  This makes it all the more amazing and sad that they choose economists with track records of disastrous policy advice.  Bill Clinton chose Robert Rubin, George W. Bush chose Gregory Mankiw, Obama chose Lawrence Summers, and Mitt Romney chose Mankiw.  Rubin and Summers led the Clinton administration's efforts to gut financial regulation.  Mankiw led the efforts under Bush.  Collectively, these efforts created the criminogenic environment that produced endemic financial fraud ('green slime').

 I have often emphasized the importance of George Akerlof and Paul Romer's 1993 article ('Looting: the Economic Underworld of Bankruptcy for Profit') to understand the economics of why we suffer epidemics of accounting control fraud and recurrent, intensifying financial crises.  Mankiw was the 'discussant' when they formally presented their paper.  I was also present at their invitation.  Mankiw was unconcerned about looting.  It was my first introduction to Mankiw morality:  'it would be irrational for savings and loans [CEOs] not to loot.'  I was appalled, but my outrage at Mankiw paled when I observed that the members of the audience, professional economists, were not even made visibly uncomfortable by such a depraved response to elite fraud.  CEOs owe fiduciary duties to the shareholders.  Mankiw's response to the findings that CEOs were looting their shareholders was to praise the rationality of the fraudulent CEOs (if you don't loot you aren't moral ' you're insane).  One cannot compete with theoclassical economists' unintentional self-parody. [...]

 The entire crew of leading economists for the last three Presidents and Romney has proven catastrophically wrong about financial regulation.  The remarkable thing is that they do not drop their dogmas even after they engineer multiple crises over the course of three decades.  We will soon experience the 30th anniversary of the Garn-St Germain Act of 1982, which set off a renewed 'competition in laxity' among the States (principally California and Texas; whose S&Ls, collectively, caused roughly two-thirds of all S&L losses) and produced the criminogenic environment that led to the second phase of the S&L debacle. [...]

High Impact Posts.  Top Comments. Overnight News Digest.