This article is part of an ongoing AlterNet series, "The Age of Fraud."
What do you get when you throw together economic fraudsters, plutocrats and opportunistic criminals? A financial crisis, that’s what. If you look back over the massive frauds that have swept the country in recent decades, from the savings and loan crisis of the 1980s to the 2007-'08 financial crash, this deadly combination always appears.
A dangerous cycle begins when prominent economists pander to plutocrats and bought politicians, who reward them with top posts, where they promote the perverse economic policies that cause fraud epidemics. Crises develop, and millions of people are ripped off. Those who fight for truth are ignored or ruined. The criminals get wealthier, bolder and more politically powerful, and go on to hatch even more devastating cons.
The three most recent financial crises in U.S. history were driven by a special type of fraud called “control fraud” — cases where the officers who control what look like legitimate entities use them as “weapons” to commit crimes. Each time, Alan Greenspan, former chairman of the Federal Reserve, played a catastrophic role. First, his policies created the fraud-friendly (criminogenic) environment that produces epidemics of control fraud, then he failed to identify those epidemics and incipient crises, and finally, he failed to counter them.
At the heart of Greenspan’s failure lies an ethical void in the brand of economics that has dominated American universities and policy circles for the last several decades, a brand known as “free market fundamentalism” or the “neoclassical school.” (I call it “theoclassical economics” for its quasi-religious belief system.) Mainstream economists who follow this school assert a deeply flawed and controversial concept known as the “efficient market hypothesis,” which holds that financial markets magically regulate themselves (they automatically “self-correct”) and are thus immune to fraud. When an economist starts believing in that kind of fallacy, he is bound to become blind to reality. Let’s take a look at what blinded Greenspan:
- Greenspan knew that markets were “efficient” because the efficient market hypothesis is the foundational pillar underlying modern finance theory.
- Markets can’t be efficient if there is control fraud, so there must not be any.
- Wait, there are control frauds! Tens of thousands of them.
- Then control fraud must not really be harmful, or markets would not be efficient.
- Control fraud, therefore, must not be immoral. As crime boss Emilio Barzini put it in The Godfather, “It’s just business.”
As delusional and immoral as this “logic” chain is, many elite economists believe it. This warped perspective has spawned policies so perverse that they turn the world of finance into the optimal environment for criminals. The upshot is that most of our elite financial leaders and professionals have thrown integrity out the window, and we end up with recurrent, intensifying financial crises, de facto immunity for our most elite criminals, and the rise of crony capitalism. Let’s do a little time travel to see exactly how this plays out.
How to Stoke a Savings and Loan Fiasco
The Lincoln Savings and Loan Association of Irvine, California was at the center of the famous crisis that rocked the financial world in the 1980s. A once prudently run company morphed into a casino when S&L associations became deregulated and started doing risky business with depositors’ money. Businessman, GOP darling, and anti-pornography crusader Charles Keating, ironically nicknamed “Mr. Clean,” took over Lincoln in 1984 and got the casino rolling. (It was a special kind of casino where the games were rigged – and not in favor of newlywed brides who were the subject of sexual extortion in Casablanca.) In a classic case of control fraud, Keating devoted himself to turning the company into a weapon of mass financial destruction and a source of wealth for his family. Keating’s “weapon of choice” for his frauds was accounting.
Keating went on a spree buying land, taking equity positions in real estate projects, and purchasing junk bonds. In 1985, the Federal Home Loan Bank Board (FHLBB), where I was the staffer leading the regulation efforts, grew alarmed at the new activities of savings associations like Lincoln. So we made a rule: S&Ls could not put more than 10 percent of company assets in "direct investments” – an activity that led to very large losses.
Alan Greenspan, chairman of an economic consulting firm at the time, urged us to permit Lincoln Savings to go full steam ahead. His memo supporting Lincoln’s application to make hundreds of millions of dollars in direct investments praised the company’s management (Keating) and claimed that Lincoln Savings “posed no foreseeable risk of loss.”
The FHLBB rejected Lincoln’s request to exceed the rule’s threshold because direct investments were a superb vehicle for accounting fraud – they made it easy to hide losses and to create fictional income. Nevertheless, Lincoln continued to violate the rule and created fictional (backdated) board consents with hundreds of forged signatures to make it appear that the investments were “grandfathered” under the rule. The hundreds of millions of dollars in unlawful direct investments were used for fraudulent purposes by Lincoln Savings’ controlling officers and caused enormous losses – many of them to elderly citizens who were conned into buying the junk bonds of Lincoln Savings’ holding company. The massive losses on Lincoln’s illegal direct investments were a major reason those bonds were worthless.
Hoping to use his political clout to continue the fraud, Keating hired Greenspan to lobby the senators who eventually became the known as the “Keating Five.” I remember well when these senators intervened at Keating’s request to try to prevent me and my colleagues from taking an enforcement action (or conservatorship) that would have saved over a billion dollars. (I took the notes of that meeting, which led to the Senate ethics investigation of the Keating Five.) The cronyism was so thick in Washington that William Weld, then a top Department of Justice official and later the Republican governor of Massachusetts, actually tried to gin up a criminal investigation of the regulators rather than Keating at the request of Lincoln’s lawyers who had just left the DOJ! Eventually, Keating and many of the senior managers of Lincoln Savings were convicted of felonies and Lincoln Savings became the most expensive failure of the S&L debacle.
When you look back on this expensive fiasco, you see that the work of respected professional economists was frequently called upon to support the fraudulent activities. One of the ways Greenspan tried to advance Keating’s effort to have the courts strike down the direct investment rule was to use a study conducted by a less famous economist, George Benston, who showed that S&Ls that violated the direct investment rule earned higher profits than those who didn’t. So he recommended the rule be dropped. Small problem: In less than two years all 33 of the companies Benston studied had failed. Most were accounting control frauds in which executives cooked the books to show fictional profits.
Keating had a talent for obtaining endorsements from prominent economists. He got Daniel Fischel to conduct a study that purported to show that Lincoln Savings was the best S&L in America. Fischel invoked the efficient market hypothesis to opine that our examiners provided no useful information because the markets had already perfectly taken into account any information to which we had access. In reality, of course, this was nonsense, and Lincoln Savings was the worst S&L in the country.
Economists who pander to plutocrats have a great advantage over scholars in other fields: There is no reputational penalty among your peers for being dead wrong. Benston got an endowed chair at Emory, Fischel was made dean of the Univerisity of Chicago’s Law School, and Greenspan was made Chairman of the Fed. Those who got control fraud right and fought the elite scams and their powerful political patrons – people like Edwin Gray, head of the FHLBB, and Joe Selby, head of supervision in Texas – saw their careers ended.
Consider what that perverse pattern indicates about how badly ethics have fallen in the both economics and government.
How to Create a Regulatory Black Hole
Alan Greenspan was Ayn Rand’s protégé, but he moved radically to the wacky side of Rand on the issue of financial fraud. And that, friends, is pretty wacky. Greenspan pushed the idea that preventing fraud was not a legitimate basis for regulation, and said so in a famous encounter with Commodities Futures Trading Commission (CFTC) Chair Brooksley Born. “I don’t think there is any need for a law against fraud,” Born recalls Greenspan telling her. Greenspan actually believed the market would sort itself out if any fraud occurred. Born knew she had a powerful foe on any regulation.
She was right. Greenspan, with the rabid support of the Rubin wing of the Clinton administration, along with Republican Chairman of the Senate Banking Committee Phil Gramm, crushed Born’s effort to regulate credit default swaps (CDS). The plutocrats and their political allies deliberately created what’s known as a regulatory black hole – a place where elite criminals could commit their crimes under the cover of perpetual night.
Greenspan chose another Fed economist, Patrick Parkinson, to testify on behalf of the bill to create the regulatory black hole for these dangerous financial instruments. Parkinson offered the old line that efficient markets easily excluded fraud — otherwise, they wouldn’t be efficient markets! (Parkinson would later tell the Financial Crisis Inquiry Commission in 2011 that the “whole concept” of a related financial instrument known as an “ABS CDO” had been an “abomination”). Greenspan’s successor richly rewarded Parkinson for being stunningly wrong in his belief: Ben Bernanke appointed Parkinson — who had no experience as a supervisor or examiner — as the Fed’s head of supervision.
Lynn Turner, former chief accountant of the SEC, told me of Greenspan’s infamous question to his group of senior officials who met at the Fed in late 1998 or early 1999 (roughly the same time as Greenspan’s conversation with Born): "Why does it matter if the banks are allowed to fudge their numbers a little bit?" What’s wrong with a “little bit” of fraud?
Conservatives often support the “broken windows” theory of criminal activity, which asserts that you stop serious blue-collar crime by cracking down on minor offenses. Yet mysteriously, they never apply the concept to white-collar financial crimes by elites. The little-bit-of fraud-is-ok concept got made into law in the Commodities Futures Modernization Act of 2000, which created the regulatory black hole for credit default swaps. That black hole was compounded by the Commodity Futures Trading Commission under the leadership of Wendy Gramm, spouse of Senator Phil Gramm.
Enron’s fraudulent leaders were delighted to exploit that black hole, because they were engaged in a massive control fraud. They appointed Wendy Gramm to their board of directors and proceeded to use derivatives to manipulate prices and aid their cartel in driving electricity prices far higher on the Pacific Coast. In a bizarre irony, the massive increase in prices led to the defeat of California Governor Gray Davis (the leading opponent of the cartel) and his replacement by Governor Schwarzenegger – a man who was part of the group that met secretly with Enron’s leadership to try to defeat Davis’s efforts to get the federal regulators to kill the cartel.
How damaging was Greenspan’s dogmatic and delusional defense of elite financial frauds in the case of Enron? If you look closely, you can see that Enron brought together all the critical elements of a financial crisis: big-time accounting control fraud, derivatives, cartels, and the use of off-balance sheet scams to inflate income and hide real losses and leverage. On top of all that, many of the world’s largest banks aided Enron and its extremely creative CFO Andrew Fastow to create frauds. The Fed could have responded by adopting and enforcing mandates to end the criminal practices that were driving the epidemic, but it didn’t. Instead, Greenspan and other Fed economists championed Enron’s leadership and cited the company as proof that regulation was unnecessary to prevent control fraud. They were so extreme that they attacked their own senior supervisors for daring to criticize the banks’ role in aiding and abetting Enron’s activities.
Later, when risky derivatives activities and control frauds at large financial institutions were pushing us toward the catastrophic crash of 2007-2008, the Fed took no meaningful action based on the lessons learned from Enron. Greenspan and the senior leadership of the Fed had learned absolutely nothing, which shows how disabling economic dogma is to regulators – making them worse than simply useless. They become harmful, again attacking their supervisors for criticizing the banks’ fraudulent “liar’s” loans. When Bernanke placed Patrick Parkinson (an economist blind to fraud by elite banksters) in a supervisory role at the Fed, he sealed the fate of millions of Americans whose financial well-being would be sucked right into that regulatory black hole – and removed the ability of the accursed supervisors to criticize the largest banks.
How to Protect Predatory Lenders
Finally, we come to the mortgage meltdown of 2008, when the entire housing industry went into freefall. Central to this crisis is the story of the liar's loan — mortgage-industry slang for a mortgage that a lender gives without checking tax returns, employment history, or anything else that might reliably indicate that the borrower can make the payments.
The Fed, and only the Fed, had authority under the Home Ownership and Equity Protection Act (HOEPA) to ban liar’s loans by all lenders. At a series of hearings mandated by Congress, dozens of witnesses representing home mortgage borrowers and state and local criminal investigators urged the Fed to do this. The testimony included a study that found a 90 percent incidence of fraud in liar’s loans.
What did Greenspan and Bernanke do? Exactly nothing. They consistently refused to act.
Greenspan went so far as to refuse pleas to send Fed examiners into bank holding company affiliates to find the facts and collect data on liar’s loans. Simultaneously, the Fed’s economists dismissed the warnings from progressives about fraudulent liar’s loans as “merely anecdotal.” In 2005, the desperate Fed regulators, blocked by Greenspan from sending in the examiners to get data from the banks, resorted to simply sending a letter to the largest banks requesting information. The Fed supervisor who received the banks’ response to that letter termed the data “very alarming.”
If you suspect that the banks would typically respond to such requests by understating their problem assets significantly, then you have the right instincts to be a financial regulator.
By 2003, loan quality was so bad that it could only be explained as the inevitable product of endemic accounting control fraud and it continued to collapse through 2007 until the bubble burst. By 2006, over two million fraudulent liar’s loans were originated annually. We know that it was overwhelmingly lenders and their agents who put the lies in liar’s loans. Liar’s loans make the perfect “natural experiment” because no governmental entity ever required a lender or a purchaser (and that includes Fannie and Freddie) to make or purchase a liar’s loan. Banks made, and purchased, trillions of dollars in liar’s loans because doing so lined the pockets of their controlling officers.
The Fed’s leadership, dominated by economists devoted to false theory, was enraged when the Fed’s supervisors presented evidence of endemic control fraud by the most elite lenders, particularly in the making of fraudulent liar’s loans. How dare the supervisors criticize our most reputable bank CEOs by showing that they were making hundreds of thousands through scams?
Bernanke finally acted under Congressional pressure on July 14, 2008 to ban liar’s loans. He cited evidence of endemic fraud available since early 2006 – evidence which would have been available way back in 2001 had Greenspan moved to require examiners to study liar’s loans. Even in the face of overwhelming evidence, Bernanke delayed the ban for 18 months — one would not wish to inconvenience a fraudulent lender, after all.
We did not have to suffer this crisis. Economists who were not blinded by neoclassical theory, like George Akerlof (who won the Nobel Prize in 2001) and Christina Romer (adviser to President Obama from 2008-2010), had warned their colleagues about accounting control fraud and liar’s loans, as did criminologists and regulators like me. But Greenspan (and Timothy Geithner) refused to see the obvious truth.
Alan Greenspan had no excuse for assuming fraud out of existence, and his exceptionally immoral position on fraud and regulation proved catastrophic to America and much of the world. We cannot afford the price, measured in many trillions of dollars, over 10 million jobs, and endless suffering, of unethical economists.
The Greenspan quote about “what’s wrong with a little bit of fraud” reminded me of the quote by Greg Mankiw (which I’m sure I first read referenced by Dr. Black):
This is a perversion of the neoclassical framework that Bill has, in the past, called “theoclassical economics” which is quite an appropriate term given that its adherents religiously follow anti-government dogma and interpret rationality to mean only monetary enrichment.
The way to alter the perceived rationality of committing fraud is to criminalize it and prosecute/penalize the act so as the short-term profit motive doesn’t exceed the punishment one must face for engaging in such unlawful activity.
How one interprets the “rational agent” is a sort of Rorschach test to determine how an economist views the world and humanity in general. Those who insist that rationality is bound by purely monetary self-interest are exposing their proclivity for greed. Those who embrace a more utilitarian framework are demonstrating they are in fact human.
Looking back on things, it’s amazing that right-wing radicals (or über-liberal anti-state economic doctrine) like Greenspan were running the central bank and influencing policy at the upper echelons of government. It would be the equivalent of installing a fairly radical socialist at the Fed (on the opposite end of the spectrum).
A two-tiered justice system. One (or lack thereof) for the top 1-2 percent, and one for everybody else.
Oh, I think we have a single-tired justice system—What’s best for the stronger is most just.
The anti-regulation “efficient markets” approach reminded me of some things that Hannah Arendt wrote in the Origins of Totalitarianism. Just substitute “elites” or “economists” for “the masses” and it works quite well:
This is, of course, a good description of modern economics generally, of which the efficient markets hypothesis is one example: a consistent logical system with no relation to reality.
Great quote, but why substitute any words. Arendt’s depiction of the effectiveness of propganda describes precisely what modern economics has achived—An indeology every bit as effective, pervasive, and brutal as the Nazi, Lenin, or Mao could create, and with a simley face too boot!
Some day no doubt we will live in a Star Trek world, a not-so-far-off time when all earth inhabitants work for the same great team, but at present, the planet is divided and subdivided into good and bad (predominantly bad) entities called nation-states.
That’s just the way it is.
And by my way of reckoning, because it’s 2013 and not 2150 and I have no choice but to live in one, if you are an extremely powerful person who has the means to wantonly damage huge sectors of my entity for some kind of personal gain, and then you do so, you have committed treason, not just against me, but also against all the other members of my particular entity* and perhaps against our entity itself (if that’s possible).
And you should be shot** for doing so.
*Called America, in this case.
**In the not-so-far-off future, for sure, we’ll line up the Greenspans-of-the-world in front of a phaser squads, but for now, we still gotta waste good bullets.
Gotta should read outta, as in, we outta waste good bullets.
Clearly, we don’t got gotta do anything, as the question of whether or not good bullets are being wasted on the Greespans-of-the-world will likely, never arise.
Bill Black and The Massive Crime Wave
Bill Black has a lot on his plate as do other criminologists.
However, to date and to my knowledge, no criminologist has produced a study indicating how many business/white collar criminals we have operating on Wall Street, DC, major corporations, Sickcare, War Racket (see USMC General Smedley Butler), etc.
Such a study would be a great teaching tool and vehicle to demonstrate to the public that there is indeed a very serious situation. And also a great proof to those of us who believe that, yes indeed, there is a Massive Crime Wave.
One wonders also if the criminologist who produced such a report would have much of a career afterwards. Most criminonlogy I am acquainted with is concerned with drugs, minor property theft/damage and other minor, compared to Trillions looted, street and Nixon law ‘n order issues. Criminologists should be embarassed for not analysing and discussing the Massive Crime Wave underneath their stuffed noses. Lawyers and Doctors make way for another Profession which has disgraced itself.
My understanding is also that when crime is not prosecuted, it proliferates and accelerates. The criminals, I suppose, learn new tricks and techniques and also have to put their criminal gains to work. Like most Americans, business criminals don’t want to retire but want more, more, more. I would suspect that the billionaire criminals now use software to manage their crimes and do risk analysis on it. They may even have consultants advising them.
So, there is one helluva Big Elephant in the room but no detailed analysis of how Big.
Maybe NC could run a contest for the estimation of the size of the Corporate Crime Wave. My entry: I would estimate, based on the Trillions looted and stolen, a minimum of 3 Million serious criminals with underlings at a 5 to 1 ratio. Prosecutors START YOUR ENGINES! Oh sorry, there are no Prosecutors.
Today in the news in Ontario the headline is about a government cover up and deleted emails. Everyone agrees they broke the law. They also agree there is no punishment for breaking this law. There is your two tier system! People will shake their heads upon hearing this news, maybe mutter something nasty about politicians, then turn around and vote the same people back into office the next election!
Keep in mind that it is the job of politicians to oversee the enforcement of laws. Also to create laws and punishments that benefit society. It’s certainly not their job to give tax payer money to select groups. And do not forget who keeps electing these same politicians!
It’s the job of financiers to make money. If they can buy influence with that money so be it. If we could all afford the best accountant we’d hire him to find every income tax loop hole available. If we can use our influence to get a better job or a pay raise we do so. If the black market presents itself to us we usually will deal under the table just to avoid the sales tax.
One entity that has been ripping off US taxpayers for years is the military-industrial complex. Not only that, they are also Murder Inc. I don’t hear of bankers bumping off people, not yet anyway. It seems to me financiers are getting flak for doing exactly what they’re suppose to do – make as much money as possible. Meanwhile, each election citizens run to the voting booth to pick Democrats, Republicans, Labour, Conservatives, Liberals, Reform etc… Just the same people over and over again. Which gives us four more years to whine about everything. Is that the whole point?
“Catch-22 says they can do anything we can’t stop them from doing.”
For an economist like a magician there is no money in reality or truth.
FEED RICH OR NEEDY
House Ag Committee passed $940B five year Ag bill.
It cut $20B from the Supplemental Nutrition Assistance Program.
Those cuts would take away Food Stamps for nearly 2 million and hundreds of thousands of free school lunches for low income kids.
“Categorical eligibility” was cut. If it stays scrapped 1.8 million low income families will get no Food Stamps and 210,000 needy kids stop getting free school lunches.
To heck with it just be certain the needy rich keep Bush Tax Cuts.
Viva La Christian Democracy.
We owe such a debt to people like Bill who have been talking about this for years and years.
What’s sad to me is that we don’t lack technical tweaks or knowledge. We just lack the ability to install leaders who care about the Constitution and the rule of law.
I’ve been thinking for awhile that it would be fun to organize some sort of ten year party next year to celebrate the FBI’s 2004 testimony to Congress about the epidemic of fraud, kind of like schools have reunions and whatnot.
It’s important to note that despite all of Greenspan and the deregulate everything crowd’s talk for not wanting to legislate morals and ethics in the marketplace, that the prohibition on intervention and legal prosecution is in itself a form of morality and an ethical act.
Why is it taboo to intervene in the marketplace whenever you wish? Why should one not be allowed to prosecute any and all executives who do fraudulent things? This is a very strict ethical stance, one which forbids actions to correct or repress any number of unpleasant actions or situations.
This was the best pasage to me that could show how regulation and politics should not be involved in banking jsut because people think that there should be regulation.
“We know that it was overwhelmingly lenders and their agents who put the lies in liar’s loans. Liar’s loans make the perfect “natural experiment” because no governmental entity ever required a lender or a purchaser (and that includes Fannie and Freddie) to make or purchase a liar’s loan. Banks made, and purchased, trillions of dollars in liar’s loans because doing so lined the pockets of their controlling officers.”
since there is no way to avoid fraud because people will do it if they can, then let them do it and let them pay the consequences of making these decicions, let them fail. You should not blame the banks alone, while the pockets of these executives or officeres were getting lined up, so was the treasury’s cofferes at all levels of government. if you want to remedy crisis start with the US tax code (ability of government to steal earnings), thus not allowing politicians to have the ability to distribute money at their whims, like bailing out banks or GM, the S&L in the 80s or LTM in the late 90s. But government wants the banks and needs the banks, becasue where else would they borrow trillions of dollars to spend, who would create the market for US treasuries and municipals.
(second attempt, with link variation, sorry if a duplicate)
This piece had me searching for your commentary on the ever present, rarely even penalized, let alone brought to justice, Big Four Auditor Role in the Fraud you’ve referenced above, I was happy to find your April 2012 piece, Bill Black: The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor, at this site..
I also tried to find a Los Angeles Times piece on why California let Ernst &Young [Arthur Young] off the hook, after quite loud huffing and puffing (oopsie! that was sleep apnea), and of course, couldn’t find it.
Would love to see a piece dedicated to the role of the BIG EIGHT to FOUR Auditors, over (at the very least) a thirty year timeline; replete with explanatory genetics graphs, to include a quite a few paragraphs dedicated to their London Fore Fathers, in the 1800s (yup, a thoroughly unredeemed Scrooge should certainly pop right into the thought process).
(Re that Los Angeles Times (LAT), I did find this though, bolding mine:
03/04/92 Banking/finance [yes, that was the only “headline” allowed, apparently]
March 04, 1992|James S. Granelli / Times staff writer
I pray Mr. James S. Granelli did not get immediately served up a Gary Webb scenario, and is at least doing okay.)
They can’t do this crap without majority participation, and as long as they have it, they are going to use it.
So, things are going to get worse, until they get much worse, as they throw each layer of family law under the bus, to protect themselves. In their short memory they have never lost employing this method. History says they lose every time. The bigger the demographic ponzi, the greater the loss.
It’s not a negotiation.
In case anyone has not been able to follow along, we are at the ‘family office’ level, of which SAC is a simple low-level example. Take a look at the Private Investment Counsel.
Is the Fed family office too big to fail?
The tornados are getting pretty large…
The operative words are: “A dangerous cycle begins when prominent economists pander to plutocrats and bought politicians, who reward them with top posts, where they promote the perverse economic policies that cause fraud epidemics.”
But, it’s even worse than that.
Yes, the upper .1% buys politicians (via campaign contributions and promises of lucrative employment) and economists (via university contributions and promises of lucrative employment).
But the resultant economic policies cause something far worse than fraud.
By instigating deficit reduction, these policies cause widespread poverty and a widening of the gap between the rich and the rest.
The belief in deficit reduction and reductions in all spending that benefits the middle and the poor, is the primary reason for stubborn unemployment and ongoing recession.
And while the voting public may resent the bank fraud that has caused them billions, they actually support the financial fraud of austerity, that costs them trillions.
Austerity is the far more expensive, far more difficult to stop, than is bank fraud.
After all, austerity is legal.
The “efficient markets hypothesis” establishes the intellectual foundation for the U.S. Supreme Court’s pro-plaintiff “fraud-on-the-market” jurisprudence in securities litigation. See Amgen v. Connecticut Retirement Plans, decided just this term.
Were the economists who testified in favor of this outcome hucksters, too?
There are still aspects of markets that are efficient, but that doesn’t mean they’re self-regulating and perfect.
Arbitrage is one example of efficiency. Usually you won’t see mispriced assets in liquid markets where there’s an arbitrage condition (see the London Whale fiasco), and if it stays mispriced a while it’s usually a major blowup with a lot of money keeping it mispriced.
So just because there’s a rejection of aspects of efficient markets, does not mean that markets are worthless inefficient mechanisms of resource allocation (quite the opposite). It just means that markets aren’t perfectly self-regulating or producing efficient social outcomes. Although that essentially makes it a tautology.