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The US Internal Revenue Service has announced an increase over the number of Americans living abroad who decided to renounce their citizenship.

A total of 1,335 Americans renounced their citizenship in the first quarter of 2015, which is 18 percent higher than the previous record, Bloomberg reported on Thursday.

The figure comes after 3,415 Americans gave up their passports in 2014.

Americans living outside the US renounce their citizenship due to the country’s tax laws.

The US is the only country within the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.

About six million American citizens are living abroad.

The surge is tied to a 2010 law that gives the Internal Revenue Service access to US citizens’ foreign bank accounts.

Tax laws were rarely enforced for decades, but scrutiny of Americans abroad is intensifying because of the country’s budget deficit that spiked after the Great Recession.

The campaign was intended to target American taxpayers who hide assets in secret foreign accounts in order to pay less taxes, but it also complicated the financial lives of the US citizens living abroad.

Earlier this year, the mayor of London, who holds dual US-British nationality, decided to renounce his American citizenship, citing his bid to run for the UK’s premiership.

“The reason I’m thinking I probably will want to make a change is that my commitment is, and always has been, to Britain,” Boris Johnson said.

However, Johnson’s aides were cited in local media reports as saying that the mayor’s top priority in abandoning his American citizenship was a bid to avoid paying more taxes to US authorities after had recently been forced to settle a large capital gains tax payment statement.

AGB/AGB

Since leaving the White House, the Clintons have earned at least 100 million dollars and currently have a net worth of up to 50 million dollars.  So why in the world do the taxpayers need to give Bill Clinton $944,000 to fund his extravagant lifestyle in 2014?  If ordinary Americans truly understood how much money [...]

Can Putin’s Diplomacy Prevail Over Washington’s Coercion? Paul Craig Roberts June 24, 2014. Russia’s President Vladimir Putin is trying to save the world from war. We should all help him. Today Putin’s presidential press secretary Dmitry Peskov reported that President…

The post Can Putin’s Diplomacy Prevail Over Washington’s Coercion? — Paul Craig Roberts appeared first on PaulCraigRoberts.org.

During a recent interview with Diane Sawyer, Hillary Clinton claimed that Bill and her were "dead broke" when they left the White House.  And then on Sunday, Hillary told the Guardian that they are not "truly well off" despite having earned about a hundred million dollars since leaving the White House and owning a couple of [...]

Washington’s Iraq “Victory” Paul Craig Roberts The citizens of the United States still do not know why their government destroyed Iraq. “National Security” will prevent them from ever knowing. “National Security” is the cloak behind which hides the crimes of…

The post Washington’s Iraq “Victory” — Paul Craig Roberts appeared first on PaulCraigRoberts.org.

Funding infrastructure through bonds doubles the price or worse. Costs can be cut in half by funding through the state’s own bank.

“The numbers are big. There is sticker shock,” said Jason Peltier, deputy manager of the Westlands Water District, describing Governor Jerry Brown’s plan to build two massive water tunnels through the California Delta. “But consider your other scenarios. How much more groundwater can we pump?”

Whether the tunnels are the best way to get water to the Delta is controversial, but the issue here is the cost. The tunnels were billed to voters as a $25 billion project. That estimate, however, omitted interest and fees. Construction itself is estimated at a relatively modest $18 billion. But financing through bonds issued at 5% for 30 years adds $24-40 billion to the tab. Another $9 billion will go to wetlands restoration, monitoring and other costs, bringing the grand total to $51-67 billion – three or four times the cost of construction.

A general rule for government bonds is that they double the cost of projects, once interest has been paid.

The San Francisco Bay Bridge earthquake retrofit was originally slated to cost $6.3 billion, but that was just for salaries and physical materials. With interest and fees, the cost to taxpayers and toll-payers will be over $12 billion.

The bullet train from San Francisco to Los Angeles, another pet project of Jerry Brown and his administration, involves a bond issue approved in 2008 for $10 billion. But when interest and fees are added, $19.5 billion will have to be paid back on this bond, doubling the cost.

And those heavy charges pale in comparison to the financing of “capital appreciation bonds.” As with the “no interest” loans that became notorious in the subprime mortgage crisis, the borrower pays only the principal for the first few years. But interest continues to compound; and after several decades, it can amount to ten times principal or more.

San Diego County taxpayers will pay $1 billion after 40 years for $105 million raised for the Poway Unified School District.

Folsom Cordova used capital appreciation bonds to finance $514,000. The sticker price after interest and fees will be $9.1 million.

In 2013, state lawmakers restricted debt service on capital appreciation bonds to four times principal and limited their term to 25 years. But that still means that financiers receive four times the cost of the project itself – the sort of return considered usurious when we had anti-usury laws with teeth.

Escaping the Interest Trap: The Models of China and North Dakota

California needs $700 billion in infrastructure over the next decade, and the state doesn’t have that sort of money in its general fund. Where will the money come from? Proposals include more private investment, but that means the privatization of what should have been public assets. Infrastructure is touted to investors as the next “fixed income.” But fixed income to investors means perpetual payments by taxpayers and rate-payers for something that should have been public property.

There is another alternative. In the last five years, China has managed to build an impressive 4000 miles of high-speed rail. Where did it get the money? The Chinese government has a hidden funding source: it owns its own banks. That means it gets its financing effectively interest-free.

All banks actually have a hidden funding source. The Bank of England just admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. If someone is going to be creating our national money supply and collecting interest on it, it should be we the people, through our own publicly-owned banks.

Models for this approach are not limited to China and other Asian “economic miracles.” The US has its own stellar model, in the state-owned Bank of North Dakota (BND). By law, all of North Dakota’s revenues are deposited in the BND, which is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”). That means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.

The BND is a major money-maker for the state, returning a sizable dividend annually to the state treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. While California and other states have been slashing services and raising taxes in order to balance their budgets, North Dakota has actually been lowering taxes, something it has done twice in the last five years.

The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors or farm the loans out to Wall Street. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.

North Dakota has the lowest unemployment rate in the country, the lowest default rate on credit card debt, one of the lowest foreclosure rates, and the most local banks per capita of any state. It is also the only state to escape the credit crisis altogether, boasting a budget surplus every year since 2008.

Consider the Possibilities

The potential of this public banking model for other states is huge. California’s population is more than 50 times that of North Dakota. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account earning a meager 0.264% annually. California also has over $400 billion in its pension funds (CalPERS and CalSTRS).

This money is earmarked for specific purposes and cannot be spent on the state budget, but it can be invested. A portion could be invested as equity in a state-owned bank, and a larger portion could be deposited in the bank as interest-bearing certificates of deposit. This huge capital and deposit base could then be leveraged by the bank into credit, something all banks do. Since the state would own the bank, the interest would return to the state. Infrastructure could be had interest-free, knocking 50% or more off the sticker price.

By doing its own financing in-house, the state can massively expand its infrastructure without imposing massive debts on future generations. The Golden State can display the innovation and prosperity that makes it worthy of the name once again.

___________________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

Filed under: Ellen Brown Articles/Commentary Tagged: | infrastructure financing, public banking

This Memorial Day, Barack Obama and members of Congress will honor our veterans by wearing ribbons and laying wreaths, but what they should really do is apologize to the entire nation for treating them like human trash for the past five years.  You see, the truth is that this VA scandal is nothing new.  The [...]

Russia has offloaded a fifth of its holdings of US Treasury debt in March at a time of heightened speculation that its assets would be frozen as part of sanctions over the crisis in Ukraine.
It was the largest seller during the month while Belgium extended its big buying streak, according to US Treasury International Capital data released on Thursday.

A decline of $25.8bn in Russia’s Treasury holdings to $100.4bn involved the selling of short-term bills.

We know that Belgium didn’t have any money to buy $141 billion worth of bonds over a three month period. That sum comes to 29% of the Belgium GDP. So, they don’t have a surplus in their budget that is 29% of their GDP, and they don’t have trade or current account surplus in that amount. In fact, everything is in the red. Their budget deficit is in the red, and their trade and current accounts are in the red. So, Belgium didn’t have the money, and yet, they managed to pick up $141.2 billion in U.S. Treasuries over a three month period. So, where did they get the money?

[...]

We know their central bank couldn’t have printed euros to buy the bonds with because the Belgium central bank can’t print euros. Belgium is part of the euro system and has lost the ability to create its own money. So, the only source for that kind of money would have been the Federal Reserve. The Federal Reserve thought it needed to hide the fact it was buying $141 billion in bonds over a three month period when it was officially reducing or tapering the quantitative easing down to $65 billion. It didn’t want to have to admit it was really purchasing $112 billion a month, almost double the announced purchases.”

Dr. Roberts also says, “I think also the Fed did not want it to get out that some large country is unloading Treasuries. Somebody dropped over $100 billion in Treasuries in one week. If that was a large holder and that became known, it could panic smaller holders and you could see a stampede, and the Fed could lose control of interest rates. So, I think the Fed thought the best thing to do is launder its purchase through a different country; and, thereby, disguise what is actually happening.”

There is no need to sequester funds urgently needed by Main Street to pay for Wall Street’s malfeasance. Californians can have their cake and eat it too – with a state-owned bank.

Governor Jerry Brown is aggressively pushing a California state constitutional amendment requiring budget surpluses to be used to pay down municipal debt and create an emergency “rainy day” fund, in anticipation of the next economic crisis.

On the face of it, it is a sensible idea. As long as Wall Street controls America’s finances and our economy, another catastrophic bust is a good bet.

But a rainy day fund takes money off the table, setting aside funds we need now to reverse the damage done by Wall Street’s last collapse. The brutal cuts of 2008 and 2009 shrank the middle class and gave California the highest poverty rate in the country.

The costs of Wall Street gambling are being thrust on its primary victims. We are given the draconian choice of restoring much-needed services or maintaining austerity conditions in order to pay Wall Street the next time it brings down the economy.

There is another alternative – one that California got very close to implementing in 2011, before Jerry Brown vetoed the bill. AB750, a bill for a feasibility study for a state-owned bank, passed both houses of the state legislature but the governor refused to sign it. He said the study could be done by the Assembly and Senate Banking Committees in-house; but 2-1/2 years later, no further action has been taken on it.

Having a state-owned bank can substitute for a rainy day fund. Banks don’t need rainy day funds, because they have cheap credit lines with other banks. Today those credit lines are at the extremely low Fed funds rate of 0.25%. A state with its own bank can take advantage of this nearly-interest-free credit line not only for emergencies but to cut its long-term financing costs in half.

That is not just California dreaming. There is already a highly successful precedent for the approach. North Dakota is the only state with its own state-owned depository bank, and the only state to fully escape the credit crisis. It has boasted a budget surplus every year since 2008, and its 2.6% unemployment rate is the lowest in the country. Contrast that to California’s, one of the highest.

In a 2009 interview, Bank of North Dakota President Eric Hardmeyer stated that when the dot-com bust caused North Dakota to go over-budget in 2001-02, the bank did act as a rainy day fund for the state. To make up the budget shortfall, the bank declared an extra dividend for the state (its owner),  and the next year the budget was back on track. No massive debt accumulation, no Wall Street bid-rigging, no fraudulent interest-rate swaps, no bond vigilantes, no capital appreciation bonds at 300% interest.

California already has a surfeit of surplus funds tucked around the state, which can be identified in state and local Comprehensive Annual Financial Reports (CAFRs). Clint Richardson, who has made an exhaustive study of California’s CAFR, writes that he has located nearly $600 billion in these funds. California’s surplus funds include those in a Pooled Money Investment Account managed by the state treasurer, which currently contains  $54 billion earning a mere 0.24% interest – almost nothing.

The money in these surplus funds is earmarked for particular purposes, so it cannot be spent on the state budget. However, it can be invested. A small portion could be invested as capital in the state’s own bank, where it could earn a significantly better return than it is getting now. The Bank of North Dakota has had a return on equity ranging between 17% and 26% every year since 2008.

California has massive potential capital and deposit bases, which could be leveraged into credit, as all banks do. The Bank of England just formally admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. The deposits remain in demand accounts, available as needed by the depositors (in this case the state).

The Wall Street megabanks in which California invests and deposits its money are not using this massive credit power to develop California’s economy. Rather, they are using it to reap short-term profits for their own accounts – much of it extremely short-term, “earned” by skimming profits through computerized high-frequency program trading. Meanwhile, Wall Street is sucking massive sums in interest, fees, and interest rate swap payments out of California and into offshore tax havens.

Rather than setting aside our hard-earned surplus to pay the piper on demand, we could be using it to create the credit necessary to establish our own economic independence. California is the ninth largest economy in the world, and the world looks to us for creative leadership.

“As goes California, so goes the nation.” We can lead the states down the path of debt peonage, or we can be a model for establishing state economic sovereignty.

___________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

Filed under: Ellen Brown Articles/Commentary

Privatization Is A Ramp For Corruption and Insouciance Is a Ramp for War The New York Times has acquired a new Judith Miller Paul Craig Roberts Libertarian ideology favors privatization. However, in practice privatization is usually very different in result…

The post Privatization Is A Ramp For Corruption and Insouciance Is a Ramp for War — Paul Craig Roberts appeared first on PaulCraigRoberts.org.

Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it. According to an SEIU report:

Derivatives . . . have turned into a windfall for banks and a nightmare for taxpayers. . . . While banks are still collecting fixed rates of 3 to 6 percent, they are now regularly paying public entities as little as a tenth of one percent on the outstanding bonds, with rates expected to remain low in the future. Over the life of the deals, banks are now projected to collect billions more than they pay state and local governments – an outcome which amounts to a second bailout for banks, this one paid directly out of state and local budgets.

It is not just that local governments, universities and pension funds made a bad bet on these swaps. The game itself was rigged, as explained below. The FDIC is now suing in civil court for damages and punitive damages, a lead that other injured local governments and agencies would be well-advised to follow. But they need to hurry, because time on the statute of limitations is running out.

The Largest Cartel in World History

On March 14, 2014, the FDIC filed suit for LIBOR-rigging against sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks. Bill Black, professor of law and economics and a former bank fraud investigator, calls them “the largest cartel in world history, by at least three and probably four orders of magnitude.”

LIBOR (the London Interbank Offering Rate) is the benchmark rate by which banks themselves can borrow. It is a crucial rate involved in hundreds of trillions of dollars in derivative trades, and it is set by these sixteen megabanks privately and in secret.

Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined. According to the Office of the Comptroller of the Currency, in 2012 US banks held $183.7 trillion in interest-rate contracts, with only four firms representing 93% of total derivative holdings; and three of the four were JPMorgan Chase, Citigroup, and Bank of America, the US banks being sued by the FDIC over manipulation of LIBOR.

Lawsuits over LIBOR-rigging have been in the works for years, and regulators have scored some very impressive regulatory settlements. But so far, civil actions for damages have been unproductive for the plaintiffs. The FDIC is therefore pursuing another tack.

But before getting into all that, we need to look at how interest-rate swaps work. It has been argued that the counterparties stung by these swaps got what they bargained for – a fixed interest rate. But that is not actually what they got. The game was rigged from the start.

The Sting

Interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how it’s supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay out on this separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. As explained by Stephen Gandel on CNN Money:

The rates on the debt were based on something called the Sifma municipal bond index, which is named after the industry group that maintains the index and tracks muni bonds. And that’s what municipalities should have bought swaps based on.

Instead, Wall Street sold municipalities Libor swaps, which were easier to trade and [were] quickly becoming a gravy train for the banks.

Historically, Sifma and LIBOR moved together. But that was before the greatest-ever global banking cartel got into the game of manipulating LIBOR. Gandel writes:

In 2008 and 2009, Libor rates, in general, fell much faster than the Sifma rate. At times, the rates even went in different directions. During the height of the financial crisis, Sifma rates spiked. Libor rates, though, continued to drop. The result was that the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work.

The two rates had decoupled, and it was chiefly due to manipulation. As noted in the SEUI report:

[T]here is . . . mounting evidence that it is no accident that these deals have gone so badly, so quickly for state and local governments. Ongoing investigations by the U.S. Department of Justice and the California, Florida, and Connecticut Attorneys General implicate nearly every major bank in a nationwide conspiracy to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.

Changing the Focus to Fraud

Suits to recover damages for collusion, antitrust violations and racketeering (RICO), however, have so far failed. In March 2013, SDNY Judge Naomi Reece Buchwald dismissed antitrust and RICO claims brought by investors and traders in actions consolidated in her court, on the ground that the plaintiffs lacked standing to bring the claims. She held that the rate-setting banks’ actions did not affect competition, because those banks were not in competition with one another with respect to LIBOR rate-setting; and that “the alleged collusion occurred in an arena in which defendants never did and never were intended to compete.”

Okay, the defendants weren’t competing with each other. They were colluding with each other, in order to unfairly compete with the rest of the financial world – local banks, credit unions, and the state and local governments they lured into being counterparties to their rigged swaps. The SDNY ruling is on appeal to the Second Circuit.

In the meantime, the FDIC is taking another approach. Its 24-count complaint does include antitrust claims, but the emphasis is on damages for fraud and conspiring to keep the LIBOR rate low to enrich the banks. The FDIC is not the first to bring such claims, but its massive suit adds considerable weight to the approach.

Why would keeping interest rates low enrich the rate-setting banks? Don’t they make more money if interest rates are high?

The answer is no. Unlike most banks, they make most of their money not from ordinary commercial loans but from interest rate swaps. The FDIC suit seeks to recover losses caused to 38 US banking institutions that did make their profits from ordinary business and consumer loans – banks that failed during the financial crisis and were taken over by the FDIC. They include Washington Mutual, the largest bank failure in US history. Since the FDIC had to cover the deposits of these failed banks, it clearly has standing to recover damages, and maybe punitive damages, if intentional fraud is proved.

The Key Role of the Federal Reserve

The rate-rigging banks have been caught red-handed, but the greater manipulation of interest rates was done by the Federal Reserve itself. The Fed aggressively drove down interest rates to save the big banks and spur economic recovery after the financial collapse. In the fall of 2008, it dropped the prime rate (the rate at which banks borrow from each other) nearly to zero.

This gross manipulation of interest rates was a giant windfall for the major derivative banks. Indeed, the Fed has been called a tool of the global banking cartel. It is composed of 12 branches, all of which are 100% owned by the private banks in their districts; and the Federal Reserve Bank of New York has always been the most important by far of these regional Fed banks. New York, of course is where Wall Street is located.

LIBOR is set in London; but as Simon Johnson observed in a New York Times article titled The Federal Reserve and the LIBOR Scandal, the Fed has jurisdiction whenever the “safety and soundness” of the US financial system is at stake. The scandal, he writes, “involves egregious, flagrant criminal conduct, with traders caught red-handed in e-mails and on tape.” He concludes:

This could even become a “tobacco moment,” in which an industry is forced to acknowledge its practices have been harmful – and enters into a long-term agreement that changes those practices and provides continuing financial compensation.

Bill Black concurs, stating, “Our system is completely rotten. All of the largest banks are involved—eagerly engaged in this fraud for years, covering it up.” The system needs a complete overhaul.

In the meantime, if the FDIC can bring a civil action for breach of contract and fraud, so can state and local governments, universities, and pension funds. The possibilities this opens up for California (where I’m currently running for State Treasurer) are huge. Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities and other public entities across the state. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose. My next post will explore the possibilities for California in more detail. Stay tuned.

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Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

Filed under: Ellen Brown Articles/Commentary Tagged: | FDIC, interest rate swaps, JPMorganChase, LIBOR manipulation

Paul Craig Roberts and Dave Kranzler As we documented in previous articles, the gold price is driven down in the paper futures market by naked short selling by the Fed’s dependent bullion banks. Some people have a hard time accepting…

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