within the next five years

What do we need to do? What can we do in all of this? We need to change the perverse incentive structures that produce these recurrent epidemics of accounting control fraud that are driving our crises.

So we have to first get rid of the systemically dangerous institutions. These are the so-called too-big-to-fail institutions. We need to shrink them to the point,  that they no longer pose a systemic risk.Right now, they are ticking time bombs that will cause a global crisis as soon as the next one fails — not if, when.

Second thing we need to do is completely reform modern executive and professional compensation, which is what they use to suborn the appraisers. Remember, they were pressuring the appraisers through the compensation system, trying to produce what we call a Gresham’s dynamic, in which bad ethics drives good ethics out of the marketplace. And they largely succeeded, which is how the fraud became endemic.

And the third thing that we need to do is deal with what we call the three D’s: deregulation, desupervision, and the de facto decriminalization. Because we can make all three of these changes, and if we do so, we can dramatically reduce how often we have a crisis and how severe those crises are. That is not simply critical to our economy.

You can see what these crises do to inequality and what they do to our democracy.

They have produced crony capitalism, American-style, in which the largest financial institutions are the leading financial donors of both parties, and that’s the reason why even after this crisis, 70 times larger than the savings and loan crisis, we have no meaningful reforms in any of the three areas that I’ve talked about, other than banning liar’s loans, which is good, but that’s just one form of ammunition for this fraud weapon. There are many forms of ammunition they can use.

That’s why we need to learn what the bankers have learned: the recipe for the best way to rob a bank, so that we can stop that recipe, because our legislators, who are dependent on political contributions, will not do it on their own.