Bob Pasley's book Anatomy of a Banking Scandal, presents the story of small West Virginia bank that grew through fraud, embezzlement and money laundering to become one of the most profitable community banks in the country, only to then become one of the largest bank failures in history. Most important is that the causes of this failure, mainly subprime lending, were a harbinger of the U.S. financial crisis of 2008. This book is very entertaining and has something of interest for everyone. For example, in addition to the bank crimes, there are illicit affairs and even murders. The book also describes the perpetrators' lavish lifestyle derived from their newfound wealth.
To say that the key characters, the bank president, his successor and the senior executive vice president were colorful, is an understatement. What is also entertaining is how they kept their crimes from far more sophisticated bank regulators, attorneys and the outside auditors from a major accounting firm. The bank always appeared to be one step ahead of the regulators and auditors through the skillful use of deception, sleight of hand and obfuscation. What I enjoyed most was how the author captured the dialogue between the bank employees, regulators, auditors, lawyers and court officials as the crimes are first covered up and then finally uncovered.
Most important for those readers not familiar with banking, is how the author explains in great detail some fairly complex banking activities. This was especially important in explaining a bank's use of brokered deposits, how banks are examined, how securitization works and how both external auditors and bank examiners go about their business. Because most people have little understanding of the bank examiners' role, I believe that even more details of why bank examiners undertake certain activities during examinations would have been welcomed.
While most of the book covers the period of 1977 to 1999 when the bank failed, much of the remainder of the book is devoted to the numerous law cases—both criminal and civil—which followed after the bank failure. All in all, the author keeps readers interested by peppering each case with testimonies from both bank employees and others who failed to carry out their responsibilities. Finally, the book offers some very important recommendations for avoiding another financial crisis.
Anatomy of a Banking Scandal is available to order on Amazon.
