[P2P-F] Bill Black at #Occupy L.A. video

Sat Nov 12 14:24:45 CET 2011

Thanks!

On Sat, Nov 12, 2011 at 8:21 PM, Thomas Greco <thg at mindspring.com> wrote:

>  Michel,
>
> There has been a lot of poor design and execution, but I know of no
> significant fraud that has occurred within the local currency movement in
> this country. There was some in Argentina at the height of the financial
> crisis there when people jumped en masse into the "social money" movement.
> Sergio and I wrote a report on that back in 2003. Basically, a few people
> ripped off the system by a combination of fraud, malfeasance, and
> stupidity. The key to preventing that is transparency in operations and
> participants who are vigilant and knowledgeable enough to spot problems
> before they get out of hand.
>
> There have been a few shady operators in the commercial barter industry,
> but they have mostly fallen by the wayside as businesses do in a
> competitive environment.
>
> Regarding the "free banking" era in America, none other than Alan
> Greenspan had this to say:
>
> While free banking was not actually as free as commonly perceived, it also
> was not nearly as unstable. The perception of the free banking era as an
> era of "wildcat" banking marked by financial instability and, in
> particular, by widespread significant losses to noteholders also turns out
> to be exaggerated. Recent scholarship has demonstrated that free bank
> failures were not as common and resulting losses to noteholders were not as
> severe as earlier historians had claimed.
>
> Read the entire speech, below:
>
> *Remarks by Chairman Alan Greenspan
>  Our banking history
> Before the Annual Meeting and Conference of the Conference of State Bank
> Supervisors, Nashville, Tennessee
> May 2, 1998 * The theme of your meeting this year--Back to the
> Future--made me think about how much the past tells us about the future or,
> put another way, how much we can learn by, in effect, reading the minutes
> of the last meeting. In this period of accelerating change in the
> complexity of our financial structure, and a sharp uptick in the size of
> merged firms, the uncertainty of where we go from here is helpfully served
> by reviewing how we got here. For bank supervision, reflections about our
> banking history also highlight the extent to which our supervisory policies
> mirror the infrastructure and political decisions that create the framework
> in which banks operate.
>
> No matter how regulated and supervised, throughout our history many of the
> benefits banks provide modern societies derive from their willingness to
> take risks and from their use of a relatively high degree of financial
> leverage. Through leverage, in the form principally of taking deposits,
> banks perform a critical role in the financial intermediation process; they
> provide savers with additional investment choices and borrowers with a
> greater range of sources of credit, thereby facilitating a more efficient
> allocation of resources and contributing importantly to greater economic
> growth. Indeed, it has been the evident value of intermediation and
> leverage that has shaped the development of our financial systems from the
> earliest times--certainly since Renaissance goldsmiths discovered that
> lending out deposited gold was feasible and profitable. But it is also that
> very same leverage that makes banks so sensitive to the risk they take and
> aligns the stability of the economy with the critical role of supervision,
> both by supervisors and by the market.
>
> *Chartered Banking (1781-1838)*
> At the very beginning of our banking history, American banks--like banks
> in virtually every other nation--were, in fact, supervised by the market.
> But--in contrast to other countries--our banking system evolved the dual
> structure that so distinguishes our country from others. Those seeking to
> circulate bank notes in the United States in our earliest days usually
> sought a corporate charter either from state or federal authorities.
> However, quite shortly after our founding, the chartering was almost solely
> at the state level. Entry into the banking business was far from free.
> Indeed, by the early 1800s chartering decisions by state authorities became
> heavily influenced by political considerations. Aside from restrictions on
> entry, for much of the antebellum period state regulation largely took the
> form of restrictions inserted into bank charters, which were individually
> negotiated and typically had a life of ten or even twenty years.
>
> The regulation and supervision of early American banks were modest and
> appear to have been intended primarily to ensure that banks had adequate
> specie reserves to meet their debt obligations, especially obligations on
> their circulating notes.
>
> Nonetheless, the very early history of American banking was an impressive
> success story. Not a single bank failed until massive fraud brought down
> the Farmers Exchange Bank in Rhode Island in 1809. Thereafter, a series of
> severe macroeconomic shocks--the War of 1812, the depression of 1819, and
> the panic of 1837--produced waves of failures. What should be emphasized,
> however, is the stability of banking in the absence of severe economic
> shocks, a stability that reflected mainly the discipline of the
> marketplace. A bank's ability to circulate its notes was dependent on the
> public's confidence in its ability to redeem its notes on demand.
>
> When confidence was lacking in a bank, its notes tended to exchange at a
> discount to specie and to the rates of other, more creditworthy, banks.
> Early in the 1800s, private money brokers seem to have made their first
> appearance. These brokers, our early arbitrageurs, purchased bank notes at
> a discount and transported them to the issuing bank, where they demanded
> par redemption. Moreover, the Suffolk Bank, chartered in 1818, entered the
> business of collecting country bank notes in 1819. In effect, the Suffolk
> Bank created the first regional clearing system. By doing so, it
> effectively constrained the supply of notes by individual banks to
> prudential levels and thereby allowed the notes of all of its associated
> banks to circulate consistently at face value.
>
> *Free Banking (1837-1863)*
> The Second Bank of the United States also played an important role in
> limiting note issuance all over the country by presenting bank notes for
> specie payment. The resultant intense political controversy over the
> charter renewal of the Second Bank of the United States, and the wave of
> bank failures following the panic of 1837 led many states to reconsider
> their fundamental approach to banking regulation. In particular, in 1838
> New York introduced a new approach, known as free banking, which in the
> following two decades was emulated by many other states.
>
> Free banking meant free entry under the terms of a general law of
> incorporation rather than through a specific legislative act. The public,
> especially in New York, had become painfully aware that the restrictions on
> entry in the chartered system were producing a number of adverse effects.
> For one thing, in the absence of competition, access to bank credit was
> perceived to have become politicized--banks' boards of directors seemed to
> regard those who shared their political convictions as the most
> creditworthy borrowers, a view not unknown more recently in East Asia. In
> addition, because a bank charter promised monopoly profits, bank promoters
> were willing to pay handsomely for the privilege and legislators apparently
> eagerly accepted payment, often in the form of allocations of bank stock at
> below-market prices.
>
> While free banking was not actually as free as commonly perceived, it also
> was not nearly as unstable. The perception of the free banking era as an
> era of "wildcat" banking marked by financial instability and, in
> particular, by widespread significant losses to noteholders also turns out
> to be exaggerated. Recent scholarship has demonstrated that free bank
> failures were not as common and resulting losses to noteholders were not as
> severe as earlier historians had claimed.
>
> Nonetheless, it is fairly clear that the strength of banks varied from
> state to state, with regulation and supervision uneven. As a consequence
> mainly of the panic of 1837, the public became aware of the possibility
> that banks could prove unable to redeem their notes and changed their
> behavior accordingly. Discounting of bank notes became widespread. Indeed,
> between 1838 and the Civil War quite a few note brokers began to publish
> monthly or biweekly periodicals, called bank note reporters, that listed
> prevailing discounts on thousands of individual banks. Throughout the free
> banking era the effectiveness of market prices for notes, and their
> associated impact on the cost of funds, imparted an increased market
> discipline, perhaps because technological change--the telegraph and the
> railroad--made monitoring of banks more effective and reduced the time
> required to send a note home for redemption. Between 1838 and 1860 the
> discounts on notes of new entrants diminished and discounts came to
> correspond more closely to objective measures of the riskiness of
> individual banks.
>
> Part of this reduction in riskiness was a reflection of improvement in
> state regulation and supervision. Part was also private market regulation
> in an environment in which depositor and note holders were not protected by
> a safety net. That is, the moral hazard we all spend so much time worrying
> about today had not yet been introduced into the system.
>
> *National Banking (1863-1913)*
> During the Civil War, today's bank structure was created by the Congress.
> It seems clear that a major, if not the major, motivation of the National
> Bank Act of 1863 was to assist in the financing of the Civil War. But the
> provisions of the act that incorporated key elements of free banking
> provide compelling evidence that contemporary observers did not regard free
> banking as a failure. These provisions included free entry and
> collateralized bank notes.
>
> The 1863 act introduced competition to state banks, but in 1864, the
> Congress adopted an important amendment which called for taxing the
> issuance of state bank notes. It is not clear if the intention was to
> assure only one kind of currency or to force the states out of the banking
> business. But whatever its purpose, with the tax on notes the number of
> state banks fell from about 1,500 in 1864 to 250 by the end of the decade.
>
> Any forecast at that time would quite reasonably have concluded that state
> banks would become historic relics. Such a projection, however, would have
> been quite wrong, beginning what has become an unending stream of such
> erroneous forecasts about the demise of state banks. Forced to find a
> substitute for notes, state banks pioneered demand deposits. Within ten
> years after the note tax, state banks had more deposits than national
> banks--a lead maintained, I might add, until 1943. By 1888, only 20 years
> after the low point, there were more state banks than national banks
> (approximately 3,500 vs. 3,100), a lead maintained to this day.
>
> While the emphasis on demand deposits showed the creativity and innovation
> of state banks, I must tell you the first Comptroller of the Currency won
> the rhetoric contest. In the 1863 Annual Report of the Comptroller of the
> Currency, he proposed that the National Bank Act
>
>  . . . be so amended that the failure of a national bank be declared
> prima facie fraudulent, and that the officers and directors, under whose
> administration such insolvency shall occur, be made personally liable for
> the debts of the bank, and be punished criminally, unless it shall appear,
> upon investigation, that its affairs were honestly administered. (p. 51)
>
>  So much for moral hazard! And, surely, here we observe the intellectual
> origin of prompt corrective action!
>
> *Central Banking and the Safety Net*
> By the latter decades of the 19th century, both the economy and our
> banking system grew rapidly. A fully functioning gold standard governed
> monetary expansion and was perceived to provide an "automatic" stabilizing
> policy. It was only with the emergence of periodic credit crises late in
> the century and especially in 1907, that creation of a central bank gained
> support. These crises were seen largely as a consequence of the inelastic
> currency engendered by the National Bank Act. But, even with the advent of
> the Federal Reserve in 1913, monetary policy through the 1920s was largely
> governed by gold standard rules.
>
> *Creation of the Federal Safety Net*
> When the efforts of the Federal Reserve failed to prevent the bank
> collapses of the 1930s, the Banking Act of 1933 created federal deposit
> insurance. The subsequent evidence appears persuasive that the combination
> of a lender of last resort (the Federal Reserve) and federal deposit
> insurance have contributed significantly to financial stability and have
> accordingly achieved wide support within the Congress. Inevitably, however,
> such significant government intervention has been a mixed blessing. The
> federal safety net for banks clearly diminishes the effectiveness of
> private market regulation, creates perverse incentives for some banks to
> take excessive risk, and requires that we substitute more government
> supervision and regulation for the market discipline that played such an
> important role through much of our banking history.
>
> To cite the most obvious and painful example, without federal deposit
> insurance, private markets presumably would never have permitted thrift
> institutions to purchase the portfolios that brought down the industry
> insurance fund and left taxpayers responsible for huge losses. To be sure,
> government regulators and politicians have learned from this experience and
> taken significant steps to diminish the likelihood of a recurrence. But,
> the safety net undoubtedly still affects decisions by creditors of
> depository institutions. Indeed, the lower cost of funds provided to banks
> by the federal safety net provides a significant subsidy to banks, and
> limiting this subsidy has proved to be one of the most difficult aspects of
> current efforts to achieve financial modernization.
>
> While the safety net requires more supervision and regulation, in recent
> years rapidly changing technology has begun to render obsolete much of the
> bank examination regime established in earlier decades. Bank regulators are
> perforce being pressed to depend increasingly on ever more complex and
> sophisticated private market regulation. Indeed, these developments
> reinforce the truth of one of the key lessons from our banking
> history--that private counterparty supervision is still the first line of
> regulatory defense. This is certainly the case for the rapidly expanding
> bank derivatives markets and other off-balance sheet transactions. The
> complexity and speed of transactions and the growing complexity of the
> instruments have required both federal and state examiners to focus more on
> supervising risk management procedures rather than actual portfolios.
> Indeed, I would characterize recent examination innovations and proposals
> as attempting both to harness and simulate market forces in the supervision
> of banks. Again, the lessons of early American banking should encourage us
> in this endeavor--a real move back to the future. Indeed, state supervisors
> are used to adjusting to market realities, having led their federal
> counterparts in permitting more experiments and flexibility, from NOW
> accounts to adjustable rate mortgages, from insurance sales to regional
> compacts.
>
> It is not just the experimenting and the flexibility that state banking
> has brought to the system that is so beneficial. The dual banking system
> also offers protection against overzealousness in regulation by permitting
> banks to have a choice of more than one federal regulator by the act of
> selecting a state or federal charter. That choice has served as a
> constraint on arbitrary and capricious policies at the federal level. True,
> it is possible that two or more federal agencies can engage in a
> "competition in laxity"--but I worry considerably more about the
> possibility that a single federal regulator would inevitably become rigid
> and insensitive to the needs of the marketplace. In my judgment, so long as
> the existence of a federal guarantee of deposits and other elements of the
> safety net call for federal regulation of banks, such regulation should
> entail a choice of federal regulator in order to ensure the critical
> competitiveness of our banks.
>
> *Back to the Future*
> For all of these reasons, as well as our historical experience as a
> nation, we at the Federal Reserve remain strong supporters of the dual
> banking system. Our experience with examination partnerships with the
> states has been positive, and the empirical evidence on failure rates
> speaks well for the quality of state bank examinations. The ability of the
> states to produce an innovative and vibrant alternative to the federal
> structure has continued for over 130 years and can only be applauded.
>
> However, as you look back to your roots for inspiration and example, we
> should all be aware of the challenges you are facing. On the one hand,
> state banks have increased their share of the number of banks each year
> since 1965, but on the other, your share of banking assets, after rising
> each year since 1989, fell by about 2.5 percentage points last year as
> interstate consolidation began to leave its mark.
>
> It is too early to tell whether this is the beginning of an irreversible
> trend or a short-term adjustment. Clearly, conventional wisdom argues that
> interstate branching is less burdensome for national banks dealing with one
> supervisory authority. However, in 1997, all of the components were put in
> place for you to revise this perception. In July of last year, the Congress
> enacted the home state rule for state banks. This legislation, as you know,
> permits home state laws to apply in host states to branches of out-of-state
> banks, and for such branches to get equal footing with national banks for
> permissible activities. The congressional action followed the 1996
> state/federal protocol and nationwide supervisory agreement designed to
> facilitate the seamless supervision and examination of interstate,
> state-chartered banks.
>
> I am told that the agreement is generally working well and that state and
> federal regulators are continuing to refine their coordination and
> cooperation. The State-Federal Working Group is planning a survey to find
> out exactly where impediments exist and how further enhancements could be
> made. But, if state jurisdictional issues make it inefficient for state
> banks to branch across state lines, the national bank charter will gain
> more adherents. Indeed, I must emphasize that state bank supervisors, by
> how you use the flexibility now permitted to you, control the future of the
> dual banking system. You have it in your own power to recover from a
> federal action, as your predecessors did in the 1870s and 1880s. Or, if
> states make the costs of interstate expansion relatively expensive for
> state-chartered banks, then the state banks will continue to lose share to
> national banks, as occurred in the 1860s and last year. Either way, the
> future you go back to is very much in your own hands.
>
>
> Thomas H. Greco, Jr.thg at mindspring.com
> Mobile phone (USA): 520-820-0575
> Beyond Money: http://beyondmoney.net
> Tom's News and Views: http://tomazgreco.wordpress.com
> Archive Website: http://www.Reinventingmoney.com
> Photo gallery: http://picasaweb.google.com/tomazhg
> Skype/Twitter name: tomazgreco
> My latest book, "The End of Money and the Future of Civilization" can be ordered from Chelsea Green Publishing, Amazon.com, or your local bookshop.
>
>
> On 11/11/2011 4:34 AM, Michel Bauwens wrote:
>
> hi Thomas ,
>
> I know you dealt with the fraud issue regarding compl. currencies,
>
> do you have any reference? (and from o-hers)
>
> Michel
>
>
>
> On Fri, Nov 11, 2011 at 12:55 PM, <ideasinc at ee.net> wrote:
>
>> Bill Black is a extraordinary speaker, imo, clear, direct, empirical, and
>> intelligent. In that he holds a dual posting at the University of Missouri
>> at Kansas City in both the Law School and in the Economics Department is
>> not an accident. His pursuit of the dysfunctionals of the banking sector,
>> both as a regulator and as a professor is part of the reform in MMT
>> monetary reform and the regulation of the dys-functional as per Functional
>> Finance.
>>
>> In this context I have yet to see anyone anywhere promoting the lesser
>> forms of community currencies and exchanges, which I will not list here,
>> in all the possible breathlessness applied in promoting these "community
>> alternatives" I have yet to see even a single clause recognizing the
>> massive potential for fraud within the nominal "alternative"  category.
>> There simply are no standards whatsoever relative to transparency or
>> accountability. This is the Ronald Reagan/Margaret Thatcher version of
>> opening access to fraud under the pretense of higher principles, TINA. It
>> seems that this is an "alternative" version of a TINA assertion, presented
>> as a recitation of various mantras as "community, " "Free!,"
>> ALTERNATIVE,"  and then multiple attempts to compartmentalize the
>> perpetration of fraud.
>>
>>
>> As I referenced way earlier The US had a period of monetary history which
>> became known as the "Free Banking" era. By most measures it was a major
>> fiscal disaster, levels of fraud had not been exceeded from that era up
>> until the late 1980'a and the beginnning of the US Savings and Loan crisis
>> which Black was a lead prosecutor
>>
>> Tadit
>> .
>>
>> http://www.youtube.com/watch?feature=player_embedded&v=N_AuvLTJNh0
>>
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>
>
>
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