It's all very well to remind us, as William K. Black does, that the real crooks got away with murder in the late great mortgage bubble and meltdown. Of course they did. Otherwise it wouldn't be crony capitalism.
The Office of Thrift Supervision, the successor to the S&L regulator where I worked, made no criminal referrals in the latest crisis. The Office of the Comptroller of the Currency and the Federal Reserve made less than a handful. Mortgage and investment banks also made very few referrals -- and never against their senior officers.
Putting it as concisely as possible, Black tells us:
The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.
But let us look at the cases he gives us.
First there is the "Texas Rent-a-bank scandal" in the 1970s. According to Joseph M. Grant in The great Texas banking crash, crooks looted $10 billion from "fifty thrifts and banks in the South and Southwest."
Notice something? "Thrifts" were special government-subsidized banks.
Then we have the S&L meltdown in the 1980s. Savings and Loans: government subsidized banks were caught short in the 1980s as they were forced to borrow at high short-term interest rates while their loan portfolios were all long-term 30 year mortgages at low rates.
Then, of course, we have the housing bubble in the 1990s and 2000s, at the center of which were the government-subsidized mortgage giants that were encouraging mortgage originators to sell them mortgages for low-income borrowers.
Of course the government went easy on these crooks. The crooks were just implementing government policy, only a little too enthusiastically. After all, if you are setting up a boom with easy money it doesn't take a genius to figure out that sooner or later it is all going to end in tears. So you need people running the show who aren't too worried about consequences. Otherwise your affordable mortgage boom will never get off the ground.
Look. I'm all in favor of prosecuting bad actors and crony capitalists. But to act shocked, shocked, that fraudulent mortgage origination and/or securitization is going on when you have set the system up in the first place to flood the credit markets with bad paper is nothing but play-acting.
Our liberal friends like to think of themselves as the educated ones, the tolerant ones, the supporters of science. But when it comes to the unraveling of their ideas, from the housing subsidy game to the job-training game to the whole welfare state benefits game, our liberals can go into a denial that make climate skeptics look like rank amateurs.
The simple fact is that when the government starts swinging money around it attracts bad actors like honey attracts bees. Whenever the government gets into something it is always trying to game the system. If it's Social Security then the government is giving pensions to people that haven't saved much money. If it is Medicare then the government is giving health care away to people that haven't put aside money to pay for medical costs in their declining years. If government is running welfare it means that government is giving money to people that don't work much. If government is giving money to education it means that a lot of people are going to school that don't value education that much.
Of course the bad actors come out of the woodwork and game the government's system and commit fraud. Of course the worst of the bad actors probably have good connections with politicians. Of course they do. When you are a bad actor you need some friends in high places to slap down the occasional bureaucrat that doesn't know which side his bread is buttered.
We won't crack the code on crony capitalism until we stop government creating subsidies and economic favorites.
But that means we have to break the religion many people have that you can do good with government programs and subsidies. We, the people of the United States, are a long way from losing faith in government spending, especially when it is spending on "me."