Bill Black: “Budget Hero” – Public Media’s Most Despicable Financial Propaganda
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives
We know that the supporters of austerity simultaneously urge us to reject “European socialism” while adopting the key European strategies that drove Europe into recession – twice. American conservatives assume that Europe must epitomize stringent financial regulation. The opposite is true. Europe adopted “light touch” financial regulation pursuant to neo-liberal economic theory. Its embrace of the three “de’s” – deregulation, desupervision, and de facto decriminalization was far more extreme than the United States. The City of London “won” the regulatory race to the bottom with the U.S. European’s adopted the full Basel II reduction in capital requirements without the minimum gearing ratio that the Federal Deposit Insurance Corporation (FDIC) insisted upon. The FDIC prevailed over the intense, but fortunately unsuccessful opposition of the Federal Reserve economists who were the principal architects of Basel II’s disastrous reduction in capital requirements. The result was that European Union banks had roughly twice the leverage of U.S. banks and faced no meaningful regulatory restraints. The result was far larger real estate bubbles in several European nations (as a percentage of GDP) than in the U.S., multiple financial crises, and a Great Recession that reached depression levels in several nations.
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