Professor William Black:

When I used that language, I was actually testifying explicitly about the accounting rule on loss reserves. It is true that in general, financial regulation has not been transformed. We are still vulnerable to precisely the things I have laid out. That is because we have not focused on the Gresham's dynamic and we have not focused on the concept that is referred to in the economics literature as "looting". The key document in this regard was written by Professor George Akerlof, who is a Nobel laureate in economics, and Professor Paul Romer in 1993. The article in question, Looting: The Economic Underworld of Bankruptcy for Profit, lays out precisely the strategy I have discussed. They chose to conclude that article with a paragraph emphasising that because economists had no concept of looting, they were unable to aid "the regulators in the field who understood what was happening from the beginning" and suggesting that "now we know better". In other words, if we learn the lessons of this crisis, we need not experience this again. That very concept is forgotten. If the committee checks all the articles and all the testimony it is given, I bet it will find I am the only person who has cited Professor Akerlof, who is a Nobel laureate in economics in the heart of this specialty.