📚 Roger's Highlights

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Control frauds almost always report fabulous profits, and top-tier audit firms bless those financial statements. The S&L control frauds used a fraud mechanism that produced record profits and virtually no loan defaults, and had the ability to quickly transform any (real) loss found by an examiner into a (fictitious) gain that would be blessed by a Big 8 audit firm. It doesn’t get any better than this in the world of fraud! Chapter 3 discusses this fraud mechanism.

The Best Way to Rob a Bank Is to Own One

William K. Black

In the off-season after that first year, we pared down our offense. It was one of the best moves we made. We executed better at what we really wanted to run because we had more time to rep it at practice.

Swing Your Sword

Mike Leach, Bruce Feldman, Michael Lewis, and Peter Berg

Protectionism “The Chinese Communist Party made a deliberate decision in the late 1990s to build the biggest steel industry in the world, even though China lacks most of the things you need to make steel—namely raw materials and affordable energy,” said Jim Darsey, executive vice president of Nucor Corporation—the biggest steelmaker in the United States—in a submission to the U.S. Congress. In 2015, the U.S. steel industry lost twelve thousand jobs. That year, facing massive overcapacity problems at home, China exported 112 million tons of steel, more than what was produced by the United States, Canada, and Mexico combined, a feat made all the more amazing given that ten years earlier, China was still a net importer of steel. “These imports aren’t coming here because the United States is an uncompetitive place to make steel. The opposite is true. We have plentiful raw materials, low-priced energy; and we have the most productive steel workers in the world,” said Darsey. “But we cannot compete with foreign governments who are willing to pour unlimited resources into growing an industry that does not have to yield any rate of return.” According to researchers Usha Haley and George Haley in their 2013 book, Subsidies to Chinese Industry, between 2000 and 2007, subsidies to China’s steel producers rose 3,800%, with the bulk coming through subsidized thermal coal, coking coal, and electricity. In 2007, energy subsidies to the steel industry alone came to $15.7 billion, about as much as Nucor generated in total sales. Something similar happened with paper, another industry mired in overcapacity. In 2008, China took over from the United States as the biggest papermaker in the world, producing paper products that are significantly cheaper than those produced in either the United States or the European Union. Yet China has few forests, and water—another important ingredient in making paper—is relatively scarce. Labor makes up only 4% of the cost of making paper. “In all these capital-intensive industries where labor costs play minor roles . . . in the space of approximately five years, China rose from a net importer to among the largest producers and exporters in the world,” the Haleys write in their book, which tracks Chinese subsidies to steel, paper, glass, and auto parts. The problem is not simply that China is able to dominate those industries it deems important. It’s that the policies that deliver dominance also create a huge amount of waste. “When the government chooses to support certain industries by imposing development policies . . . those industries all end up in overcapacity,” said Fan Gang, one of China’s most prominent economists. “Once we enter into these sorts of policies, each level of government then gives out its own subsidies, everyone in the market hustles, and in a short period it turns into an overcapacity industry.”

China's Great Wall of Debt

Dinny McMahon

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