Bill Black: Thomas Friedman’s Big Idea for Hillary – Embrace Wall Street and Deregulation

Yves here. A comment in addition to the ones Black makes: The idea that risk taking is a good thing and that entrepreneurs seek risk is ideology that helps sell lots of courses and books, and also fosters bad policy idea like everyone should be able to create their own paid employment. Entrepreneurs seek to minimize risk and shift it onto others. Another name for a risk-seeking entrepreneur is “failure”.

Of course, if you are on Wall Street, and enjoy a government backstop, you want to take as much risk as possible because you get the upside and the public bears the cost of your train wrecks. Even though this ought to be patently obvious by now, the fact that the financiers have strong incentives to generate risk has been described in detail by Andrew Haldane of the Bank of England, citing Nobel Prize winner Robert Merton. So Friedman is prescribing more looting.

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. Jointly published with

Thomas Friedman’s economic illiteracy and sycophancy for Wall Street “elites” have never been in doubt, but he has (unknowingly) plumbed new depths in his columns advising Hillary Clinton to remake the Democratic Party in Bill’s image – by embracing Wall Street’s dream of deregulation. Friedman has literally learned nothing from the three great epidemics of accounting control fraud (“liar’s” loans, inflated appraisals, and fraudulent resale of these fraudulently originated mortgages) that drove the financial crisis and the Great Recession.

In other columns in this series on Friedman’s columns advising Hillary on moving the Democratic Party well to the right of the Republican Party on economic issues, I show that Friedman has literally learned nothing from the successes of stimulus, education, and infrastructure, the horrific failures of austerity and deregulation, or his repeated distortion of “capitalism” and “socialism.”. Friedman gives no indication that he realizes that (1) his economic dogmas were all falsified by our recurrent financial crises and (2) the policies implemented on the basis of those dogmas proved disastrous.

Friedman advises Hillary to embrace Wall Street elites and adopt the deregulatory, desupervisory, and de facto decriminalization (the three “de’s”) policies that Ronald Reagan, Bill Clinton, and George W. Bush implemented. The three de’s have created the “criminogenic environments” that led to the epidemics of accounting control fraud that drove the savings and loan debacle, the Enron-era accounting control fraud scandals, and the most recent crisis. Friedman urges Hillary to use Bill as her model and embrace elite bankers and financial deregulation because, what could go wrong?

In his column entitled , Friedman bemoans “the anti-bank sentiment of the Democratic Party.”

Friedman’s only implicit recognition that bank CEOs were the problem rather than the solution was a trademark Friedman slogan that he uses as his substitute for analysis and proposing an actual policy.

We need to prevent recklessness, not risk-taking.

This slogan was a punchier version of the one he had auditioned in his column a week earlier.

Web People also understand that while we want to prevent another bout of recklessness on Wall Street, we don’t want to choke off risk-taking, which is the engine of growth and entrepreneurship.

Friedman tried out the “web people” label in his entitled “Web People vs. Wall People.” Web people are good people – like Friedman – who embrace the rigged financial system, while “wall people” are whiny people who complain that the system is rigged by Wall Street elites with the aid of their political cronies to ensure that Wall Street elites will be the winners at the expense of their fellow citizens. It escapes Friedman’s attention that rather than being the “engine of growth,” the rigged banking system of “capitalist” nations was the engine of the mass destruction of wealth. The rigged system produced deeply negative growth and was saved only by what Friedman derides as “socialism.”

“Recklessness” by CEOs had nothing to do with the U.S. financial crisis. The three fraud epidemics have everything to do with driving the financial crisis. No one serious doubts that the second phase of the savings and loan debacle and the Enron-era accounting scandals were driven by elite frauds. But Friedman will not use the “f” word for the most obvious of reasons – he wants Hillary to go full-Bill and return to openly embracing bank CEOs’ cash and deregulatory dreams. In his “knock out” column, Friedman made his pitch that promising financial deregulation was the KO punch Clinton could deliver to Trump.

Clinton should be reaching out to [business Republicans] with a real pro-growth, start-up, deregulation, entrepreneurship agenda and give them a positive reason to vote for her.

In his homage to “web people,” Friedman told Hillary to repeat Bill’s disastrous embrace of Wall Street elites.

Having been secretary of state, Clinton has been touching the world. She knows America has to build its future on a Web People’s platform, which was first articulated by Bill Clinton, and, to this day, is best articulated by him. But Hillary has not always shown the courage of her own, or her husband’s, convictions.

Yes, the word that comes to mind when one thinks of Bill is “courage.”

Friedman says “It scares me that people are so fed up with elites….” People are not “fed up” with the Wall Street elites – they are furious and disgusted. They realize that the distinguishing characteristics that are “elite” about Wall Street bankers are their egos and pay. Our greatest reason for hoping that we will not repeat for the fourth time the disaster of implementing the three “de’s” is that people are so fed up” with financial “elites.” It is a mystery to me how even Friedman could be so out of touch with reality that he is “scared” because people are fed up with Wall Street elites. Friedman may be the only person in the world who isn’t a Wall Street press flack – wait, that’s exactly what Friedman is – who is not “fed up” with Wall Street elites. Indeed, “fed up” does not begin to capture what people rationally feel about Wall Street’s purported “elites.”

The regulatory and supervisory actions that a competent financial regulator takes to reduce fraud would also reduce recklessness if that were the problem. Friedman does not even attempt to explain how he would make his slogan into a policy and why his adoption of the three de’s would not produce our fourth financial disaster of the modern era – as it has the last three times our politicians made real the bankers’ dreams.

“Bubble” Bill Clinton did not bring the Nation economic success. His bubbles facilitated two catastrophic episodes and those bubbles were hyper-inflated by elite frauds made possible by his embrace of the bankers’ greatest dream – the three de’s. He set the stage for catastrophe.

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33 comments

  1. pretzelattack

    friedman’s so innovative. what a novel idea, clinton moving to the right. she needs to stop oppressing the banks, for sure.

  2. JacobiteInTraining

    “…Indeed, “fed up” does not begin to capture what people rationally feel about Wall Street’s purported “elites.”…”

    I am reminded of the response to a Jon Hilsenrath opinion/’humor’ bit in a WSJ blog entry a little over a year ago. It basically called out consumers for not reverting to their mindless spend Spend SPEND habits and thus driving the ‘recovery’ to still greater heights.

    Comments have long since been scrubbed, but this snapshot captures a variety of the spicier ones. Needless to say, ‘fed up’ was not the term I would use to describe the quotes either:

    1. sharonsj

      Thanks for the link. I read the choice comments and they were great! I cast my vote for revolution as well.

    2. cnchal

      I particularly liked seeing the Goldman Rats – Submit Poors poster, again. Those should be plastered everywhere.

    3. Nelson Lowhim

      Wow, talk about a gold mine of insight (seriously). All the comments seem perfectly apt. Now to turn them into signs for the next protest.

  3. Clive

    I’ve found it interesting to compare the outcomes for people who I know in a range from vaguely well to very well and how they have fared in their various approaches to risk taking. My admittedly small sample size also illustrates how those who take risks to start up enterprises often begin on what is a not-particularly sound legal footing.

    The most spectacular success story was with someone who used to work for a large telecoms provider. He was a fairly low level (but not bottom-rung junior) manager who was in charge of a team who did street works (basically digging holes in the roads and sidewalks to lay, replace or maintain cabling). He allocated the capitally intensive equipment (Caterpillar diggers etc.) and the labour force to operate them, your basic spade-and-wheelbarrow manual work. In the cable TV boom of the early 1990’s he subcontracted to the companies who (being debt financed) were, erm, rather eager to cable up as many households as possible. But these cable companies did not have regional operations actually capable of performing this task. So they placed sub-contracts with anyone and everyone in the hope that some kind of progress might be made. My acquaintance hit upon the idea of, on a weekend, “borrowing” the diggers, tipper trucks, tarmac mixers and so on (without the knowledge or permission of the telco who owned them!) and paying his mates cash-in-hand to do the ditch (trench) digging. I’m presuming that, where needed, he paid off any superior in the telco who might have spotted what was going on. But I suspect that they didn’t know anything about it. Eventually, he earned enough (several hundreds of thousands) to lease the equipment and (with a successful track record) bid for bigger and bigger contracts. He formed a company to do this sort of installation and maintenance which he later sold for £10M+. I’d call him a rough diamond, but that makes him sound better than he is.

    But for every one of him there are 5 or 6 who tried starting their own businesses, operating with varying degrees of illegitimacy and morality (neither one approach is guaranteed either success of failure, it is much more to do with luck and being in the right, or wrong, place and the right time) who ended in failure, bankruptcy, significant personal setbacks and on one all-too-memorable incidence, suicide.

    Set against those sorts are people who’ve adopted an approach more similar to my own risk-averseness when it comes to careers and entrepreneurship. Those who became public employees or who worked for large relatively secure commercial enterprises and who stuck at climbing the corporate (or civil service) greasy pole have by-and-large prospered. Those who had the luck to place reasonably leveraged, but not in-over-your-head scale, bets on the UK’s outrageously backstopped housing markets have net worth of £1M+. Almost all have realised that once they got appreciably over 50, they will be edged out but they have got sufficient cushions in place to either retire early or take much lower paid jobs between the age of 50 and 60 without decimating their lifestyles.

    By far the worse outcomes, when looked at in terms of predictability and consistency, are those who took a gamble on extensive but specialised formal educations and then job-hopped amongst smaller companies or joined start-ups. Architects, marketing/advertising, legal (“solicitors” in the UK), accountancy grunt-work and similar. None of them have, unlike the entrepreneurs, made it big or even had any hope of doing so. Where they have stepped on career landmines (job loss due to downsizing or business failures where they worked), they have often found it difficult-to-impossible to get back into a new position at the same level. Some who refused to take lower level positions were unemployed for 2 years and had to rely on a spouse’s income to tide them over. Others who either wouldn’t do that or didn’t even have that option have ended up going from £50-60k positions to £25k ones and had to try to work their ways back up. It is arguable that they’ve not done as badly as the failed entrepreneurs, but, typically, the failed entrepreneurs quickly learned how to protect accumulated wealth against bankruptcy and didn’t seem to mind picking themselves up, dusting themselves off, shrugging their shoulders and starting again. Only in one isolated incident did they end up in what I would call a disastrous outcome.

    Conversely, the niche-skilled job-hoppers ended up being founder members of the precariat but are the ones who are, mentally, least able to deal with it.

    As Yves mentions in the intro, our culture needs a profound shake-up in how it views risk taking, who the real risk takers are, what makes them “tick” and how capriciously risk taking gets rewarded and, where the risks go bad, who really pays.

    1. johnnygl

      Interesting stories. Your anecdote about the telecom ‘entrepreneur’ reminds me of what i read about roman abhramovitz who owns chelsea fc in england. From what i read, his big break came from stealing oil from the russian state and selling it on the side. He just happened to be in a convenient spot to pull off this scam without getting caught. Then, when the big privatization loans-for-shares deal arrived, he really cashed in.

    2. Lambert Strether

      “Behind every great fortune lies a great crime” — Balzac

      Except (via ) what Balzac really wrote was:

      The secret of a great success for which you are at a loss to account is a crime that has never been found out, because it was properly executed.

      Which is truer to what Clive wrote.

  4. KYrocky

    Why wasn’t Friedman suggesting this in 2010? Oh wait, he was.

    Friedman typifies everything about conservatism. He has been consistently wrong about every significant policy he has opined on (Friedman units anyone), yet continues to hold onto one of the most significant perches in commentary journalism. Friedman’s purpose at the Times is not to inform readers or to ever actually be correct about what posits. Friedman’s job is sales. Selling to the public policies which will only benefit the rich, and in the process telling the rich what they want to hear.

    1. James Levy

      A few years back I opined that Friedman exists to tell rich people what they want to hear in a way that makes them feel clever, right, and good. He’s excellent at this. He also writes like a bright but smug, undisciplined undergrad, pitching at exactly the mental level of the average corporate executive or real estate developer (moderately educated but without depth or polish). That he married an heiress yet still refuses to think for himself or engage the world as it is speaks volumes about the internalization of aspirational values even in a man who need no longer aspire. Like the products of Mills Power Elite, he doesn’t need to conspire, as he functions completely within the norms of the system, believing what it is necessary to believe and defining his goals in perfect alignment with those of the system: a true android.

      1. NotTimothyGeithner

        If you talked to your Pakistani or some kind of Mooslim (I assume this is how Friedman pronounces the word) cab driver as often as Tom Friedman imagines he does, you would know that isn’t true. The voices give Friedman the straight dope from which he knows people dependent on tips will agree with the potential tip giver. We know Friedman is a journalist because he strikes me as the kind of guy who only tips when he needs to impress someone or believes the waitress likes him.

  5. weinerdog43

    Why anyone pays an iota of attention to the always wrong Friedman is mystifying to me. This is the same idiot who gave us “The Friedman Unit” aka, “6 more months and the Iraq debacle will be doing fine”. I stopped paying attention years ago. It took me longer to abandon Krugman, but the result is the same… when I see their byline, I skip immediately to something else.

  6. david lamy

    About one score and seven FUs (friedman units) ago I bypassed any prose appearing under his byline.
    However, should he author “The Mall has Melted” or “The Google Car and the Guillotine” then maybe I’ll check out a copy from the library.

  7. Adams

    Too late Tommy. Hill has already announced that she will put Bill in charge of “fixing the economy.” May 16, NYT:

    “Mrs. Clinton told voters in Kentucky on Sunday that Mr. Clinton would be “in charge of revitalizing the economy, because, you know, he knows how to do it,” especially “in places like coal country and inner cities.” On a campaign swing this month before the West Virginia primary, she said her husband has “got to come out of retirement and be in charge” of creating jobs.”

    What could possible go wrong, Tommy? BTW, suck on this.

  8. FriarTuck

    Anecdote: On the way in to work this morning, I was listening to the Eric and Cathy show, a popular Chicago morning radio program. They regularly play advertisements targeted at wide swaths of people.

    The ad that caught my attention this morning was one of, I think, First American bank. It had the traditional character “son” talking to his “granny” (which have appeared in many ads before) about how great banking at First American was. And it was advertising home equity loans – and it was doing this through granny wanting to take out an equity loan to buy a horse for the horse races.

    While the ad was cleverly written and the actors amusing, the overall tone was, I thought, odious. “Hey bank with us and we’ll give you home equity loans to do anything, including blowing it on racing horses, just because. The terms are reasonable, you don’t have to worry. Despite granny probably never being able to pay it back. Despite not reasonably ever getting anything back out of the horse.

    The son character went along with it quite cheerfully, in a bemused “granny will be granny” sort of way.

    Why are people angry at bankers, Mr. Friedman? Maybe because even in advertisements they call the general population rubes to their faces.

    1. NotTimothyGeithner

      Wow. Can this ad go under guillotine watch? Who is this even being pitched to? It’s so oddly specific. Did the bank bet on horse racing taking off after the Triple Crown winner and can’t get a good deal from he glue factory?

      1. polecat

        ….pitched to all those soon to be empty-handed ‘former’ Illinois state, county, …. and possibly school district(s) pensioners would be my guess…. !!

  9. John Wright

    Some years ago I went to a hiking book lecture given by the author, a former Silicon Valley tech worker.

    He mentioned, “They say follow your dreams and the money will follow, well, my wife is waiting for it to catch up.”

    I remember reading that Bill Hewlett, of the 20th century success story Hewlett-Packard, mentioned that HP could have gone broke in the early years, so it wasn’t always up and to the right for this wildly successful company.

    Friedman MUST be aware enough of the variations in economic outcomes with risky leveraged behavior if he looks at his wife’s Bucksbaum family company,,General Growth Properties.

    From

    “Starting in 1993, GGP expanded its portfolio dramatically by acquiring existing properties and constructing new malls. In 1995, it acquired Homart Development Company, the mall development subsidiary of Sears.[10] On November 13, 2004, GGP acquired The Rouse Company, including its Howard Hughes Corporation land development subsidiary, in the largest retail real estate merger in American history. GGP grew to be the nation’s second-largest mall operator.”

    “GGP reported in excess of $25 billion in debt (mostly mortgages) as of September 30, 2008. In late November 2008, GGP missed a deadline to repay $900 million in loans backed by two Las Vegas retail properties. This meant that GGP lenders could issue a notice of default, which would make GGP seek protection from its creditors under Chapter 11 bankruptcy.

    “In December 2008 the Wall Street Journal reported that GGP would seek bankruptcy protection if it could not renegotiate its loans.[12] Its share price had fallen by 97% over the previous six months.”

    If ONLY GGP had listened to their wise in-law Tom Friedman and been able to distinguish “reckless behavior” from “prudent risk”.

    BTW, maybe more Times readers are starting to catch on,

    A reader commented (and it gathered 102 readers’ recommends):

    “Mr. Friedman has outdone himself in issuing a totally moronic column. Not since he urged us into the Iraq War has he published such a total piece of drek.”

    I hope to see the day the NY Times gives Friedman an “opportunity to be entrepreneurial” by finding a robotic replacement and showing TF the door..

  10. Enquiring Mind

    The fourth “de” under a Friedman-inspired regime would be Depression.

    My wish is that Bill Black be nominated to a cabinet post to bring some much-needed sunlight and transparency.

    1. montag47

      Little chance of that. The last things the Clintons want in their cabinet are regulators and peaceniks.

      The Clintons have been kissing asses up and down Wall Street for three decades, so it’s tres doubtful they’re going to want Bill Black around in any capacity.

      Black is the skunk at the Robber Barons’ Picnic.

  11. Mark John

    New content please.

    We do not need another sequel to the “Friday the 13th” economic series. NYTimes, take Friedman and his ilk and flush them down the toilet.

    1. polecat

      well … the NYT would have no choice but to ‘flow’ down the drain with him, considering where their allegiance lies……

      oh wait…they already have!

  12. oho

    apologies for sounding like a crank—-people need to stop “ing the beast” …ie in this case lavishing attention/ad clicks on Friedman et al.

    Carlos Slim wants the NYT to be his (his cohort’s) mouthpiece? Fine, force him to privatize the NYT a la WaPost and Bezos and move the NYT’s losses onto his own books.

    Fiendman never has any new ideas and giving him attention only notches another tick at a Google Adsense/advert analytics account somewhere in the tubes.

    1. Clive

      While it is definitely more than a little drudgery, we absolutely, in my completely unhumble opinion, must challenge and provide (as here) counterarguments to Friedman and his fellow travellers. For one, they are hugely influential and anything which we can do to debunk their nonsense reduced their influence. And for another, it discourages incipient, borderline elite defenders like Paul Krugman from going all out when it comes to their tendency towards class warfare.

      And such approaches are effective. Take the Guardian (yes, somebody, please do take it) in the UK. It has noticeably toned down its rabid Blairite support when it runs pieces on the Labour Party. And it dare not mention the Liberal Democrats, festering in their own electoral drubbing and victims of their own Grand Bargaining treachery. If the Guardian runs an anti-Corbyn story or skews Labour Party reporting to a Blairite angle, it gets a few thousand comments piling in to dis it for its troubles. So it is an effective strategy.

      I do agree that one shouldn’t the beast. But I’m quite happy to give the beast a bit of a kick when I see it. Cthulhu only, I reckon, got to be Cthulhu because nobody told him he wasn’t the foundation of all evil, but a very naughty boy who needed to mind his manners and not talk a load of rubbish.

  13. Carolinian

    Since the Mustache has been around so long his resume seems lost in the mists of history I consulted Wikipedia.

    Bottom line: Friedman was trained at Brandeis and Oxford in Middle Eastern Studies and he subsequently served as a reporter in that region including Israel bureau chief for the NYT. He seems to have no training in economics whatsoever. At the NYT he is officially the Foreign Affairs columnist.

    Here’s the late Alex Cockburn, quoted in the above link

    Friedman exhibits on a weekly basis one of the severest cases known to science of Lippmann’s condition, named for the legendary journalistic hot-air salesman, Walter Lippmann, and alluding to the inherent tendency of all pundits to swell in self-importance to zeppelin-like dimensions. Friedman’s conceit is legendary. “I have won not one, but two Pulitzer prizes, and I won’t stand for being called a liar by the next president,” George Stephanopoulos recalls in his memoir Friedman as shouting down the phone during the Clinton transition in early 1993.

    Cockburn goes on to describe how Friedman stole an incident that happened to Cockburn’s brother Patrick and pretended it happened to him. It says all you need to know about the elites that they take this guy seriously (yes you Charlie Rose).

  14. phichibe

    The following is the comment I submitted to the NYT after reading the Friedman column in question. IT would have been substantially longer except for the NYT limit on comments’ wordcounts . To Bill Black, all I can add is “amen”

    ——————–

    This is the true Tom Friedman. A country-club Republican by virtue of his membership-by-marriage into the Simon family, one of the biggest commercial property owners (indoor shopping malls) in the country. The fact of the matter is that the “growth” that we’ve had in this country since the 1970s has largely gone to the capital-gains crowd who have not even “trickled” it down except to their realtors, their art galleries, and their Ferrari dealers.

    I’m an entrepreneur and have started multiple companies, all in tech. I could write a book on what Friedman gets wrong about the tech world since his forays in the 90s like “The World is Flat”, “The Lexus and the Olive Tree”, etc, but that’s for another day/Friedman column. What I’ll say here is that Friedman knows as much about bank loans and startups as he does about quantum computing. Banks do not lend to startups. They only lend to going businesses with “callable” assets like real-estate, inventory, and accounts-receivables. I’m not saying it’s the wrong policy – banks need to have collateral they can repossess if loans go wrong. But that fact excludes 99% of startups. Startups get funded by founders, friends and family, and if you’re lucky (or unlucky, depending on the details) by VCs. Friendman needs to stop listening to his in-laws (who filed one of the biggest commercial bankruptcies after the real-estate crash but are still billionaires, I’m sure) and also stop listening to John Doerr (Kleiner Perkins).

  15. DarkMatters

    Friedman role is to show us the correct way to think about things. He only sprinkles in enough facts or anecdotes to make the imperative plausible. That’s his main qualification. Otherwise, with so many others to choose from, why else would the NYT have selected him? Just look at all his .

    No problem being shamelessly wrong about predictions, as long as you guide public opinion as needed on a day-to-day basis. No one remembers a week back anyway.

    1. St Thomas

      This fool has answers for everything every other day. Like all true believers in any religion, his answer is more of the same. Idiot.

  16. Patrick

    Friedman is actually lamenting the fact that there is no need to turn to spineless “moderates” like himself in an election as one sided as this one. Hillary doesn’t need a “knock out punch”. Elites have to support her whether she panders to them or not.

    I worry that Hillary will pander anyway. She’s been doing this too long and doesn’t know any other way. If Obama couldn’t embrace an opportunity for progressive change when liberals controlled the executive and legislature, I doubt that Hillary can.

  17. mrtmbrnmn

    Once upon a time Tom Friedman was a pretty astute NYT reporter in the Middle East, but that was back in those bygone days now lost in the amnesia of history when the NYT was mostly a serious newspaper not just a propaganda delivery device. Between then and now Friedman must have been body-snatched by aliens. Or, perhaps, he was always a double agent.

    Thanks, as usual, is due Bill Black for his keen analysis of our current berserk world.

    ps: Yves, though I was unable to speak with you and could hardly hear you at last week’s NYC meetup, it was, nonetheless, the best of recent vintages. And the presence of Michael Hudson was a yuuuuge bonus. So thnx.

  18. Hung Bosefski

    Some of Friedman’s environmental critics question his support of still undeveloped ” clean coal ” technology and coal mining as emblematic of Friedman’s less than “green” commitment to renewable energy.

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