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Timothy Alexander Guzman, Silent Crow News – Professor Antony C. Sutton’s ‘Wall Street and the Bolshevik Revolution’ recently celebrated its 40th anniversary. Professor Sutton taught at California State University, Los Angeles and was a research fellow at Stanford University’s Hoover Institution. He wrote numerous books based on Wall Street corruption and their involvement in world wars including ‘Wall Street and the Rise of Hitler’ and ‘Wall Street and FDR’ both published in 1976. Wall Street and the Bolshevik Revolution is a historical classic based on Professor Sutton’s extensive research on whom and why Wall Street helped fund the Bolshevik Revolution. If you want to understand the conspiracy by the West who overthrew Czarist Russia and replaced it with one of the most dangerous political movements in the 20th century known as the “Bolsheviks”, then Wall Street and the Bolshevik Revolution is one history book you should add to your list. The Bolsheviks murdered millions of Russian people since the start of the Russian revolution in 1917 where it is estimated that between 20 and 66 million who were executed, starved and even tortured to death, many in the labor camps known as the gulags. Nobel Prize winner and author of ‘The Gulag Archipelago’ Aleksandr Solzhenitsyn declared that more than 66 million Russian people were murdered. Solzhenitsyn’s book was based on his personal experience as a prisoner, but it was also a well-researched document of what actually happened in the gulags according to eyewitness accounts. The Western elites wanted total control of Russia’s economy and society with a communist regime in place and they succeeded with their plans as the Bolsheviks became their enforcers; the Czars were eventually removed from power.
Recently in a speech regarding Crimea, President Vladimir Putin had said “In short, we have every reason to assume that the infamous policy of containment, led in the 18th, 19th and 20th centuries, continues today.” There is truth to that statement; according to ‘Wall Street and the Bolshevik Revolution’ it is a historical fact that the Wall Street elites had planned to undermine Russia’s sovereignty dating back to the 19th and 20th centuries. In the early 19th Century, Western Financiers created a revolution to overthrow Czarist Russia; Professor Sutton makes the connection between the United States and German interests in untapped Russian markets with prominent financiers such as J.P. Morgan, David Rockefeller and Leaders of the Bolshevik revolution Vladimir Ilyich Lenin and Leon Trotsky. Sutton explains his methods on how he obtained information:
Since the early 1920s, numerous pamphlets and articles, even a few books, have sought to forge a link between “international bankers” and “Bolshevik revolutionaries.” Rarely have these attempts been supported by hard evidence, and never have such attempts been argued within the framework of a scientific methodology. Indeed, some of the “evidence” used in these efforts has been fraudulent, some has been irrelevant, much cannot be checked. Examination of the topic by academic writers has been studiously avoided; probably because the hypothesis offends the neat dichotomy of capitalists versus Communists (and everyone knows, of course, that these are bitter enemies). Moreover, because a great deal that has been written borders on the absurd, a sound academic reputation could easily be wrecked on the shoals of ridicule. Reason enough to avoid the topic.
Fortunately, the State Department Decimal File, particularly the 861.00 section, contains extensive documentation on the hypothesized link. When the evidence in these official papers is merged with nonofficial evidence from biographies, personal papers, and conventional histories, a truly fascinating story emerges.
We find there was a link between some New York international bankers and many revolutionaries, including Bolsheviks. These banking gentlemen — who are here identified — had a financial stake in, and were rooting for, the success of the Bolshevik Revolution.
Who, why — and for how much — is the story in this book
Professor Sutton asks:
“What motive explains this coalition of capitalists and Bolsheviks?”
He explains Wall Street’s intentions on creating the Bolshevik Revolution against Czarist Russia:
Russia was then — and is today — the largest untapped market in the world. Moreover, Russia, then and now, constituted the greatest potential competitive threat to American industrial and financial supremacy. (A glance at a world map is sufficient to spotlight the geographical difference between the vast land mass of Russia and the smaller United States.) Wall Street must have cold shivers when it visualizes Russia as a second super American industrial giant.
But why allow Russia to become a competitor and a challenge to U.S. supremacy? In the late nineteenth century, Morgan/Rockefeller, and Guggenheim had demonstrated their monopolistic proclivities. In Railroads and Regulation 1877-1916 Gabriel Kolko has demonstrated how the railroad owners, not the farmers, wanted state control of railroads in order to preserve their monopoly and abolish competition. So the simplest explanation of our evidence is that a syndicate of Wall Street financiers enlarged their monopoly ambitions and broadened horizons on a global scale. The gigantic Russian market was to be converted into a captive market and a technical colony to be exploited by a few high-powered American financiers and the corporations under their control. What the Interstate Commerce Commission and the Federal Trade Commission under the thumb of American industry could achieve for that industry at home, a planned socialist government could achieve for it abroad — given suitable support and inducements from Wall Street and Washington, D.C.
In an interesting note, Sutton explains how British Prime Minister Winston Churchill declared that there was a “Jewish Conspiracy” to control the world. He believed that the Bolshevik Revolution was a first step towards that goal:
The argument and its variants can be found in the most surprising places and from quite surprising persons. In February 1920 Winston Churchill wrote an article — rarely cited today —for the London Illustrated Sunday Herald entitled “Zionism Versus Bolshevism.” In this’ article Churchill concluded that it was “particularly important… that the National Jews in every country who are loyal to the land of their adoption should come forward on every occasion . . .and take a prominent part in every measure for combatting the Bolshevik conspiracy.”
Churchill draws a line between “national Jews” and what he calls “international Jews.” He argues that the “international and for the most atheistical Jews” certainly had a “very great” role in the creation of Bolshevism and bringing about the Russian Revolution. He asserts (contrary to fact) that with the exception of Lenin, “the majority” of the leading figures in the revolution were Jewish, and adds (also contrary to fact) that in many cases Jewish interests and Jewish places of worship were excepted by the Bolsheviks from their policies of seizure. Churchill calls the international Jews a “sinister confederacy” emergent from the persecuted populations of countries where Jews have been persecuted on account of their race.
Winston Churchill traces this movement back to Spartacus-Weishaupt, throws his literary net around Trotsky, Bela Kun, Rosa Luxemburg, and Emma Goldman, and charges: “This world-wide conspiracy for the overthrow of civilisation and for the reconstitution of society on the basis of arrested development, of envious malevolence, and impossible equality, has been steadily growing.”
Churchill then argues that this conspiratorial Spartacus-Weishaupt group has been the mainspring of every subversive movement in the nineteenth century. While pointing out that Zionism and Bolshevism are competing for the soul of the Jewish people, Churchill (in 1920) was preoccupied with the role of the Jew in the Bolshevik Revolution and the existence of a worldwide Jewish conspiracy.
Wall Street and the Bolshevik Revolution is a must have for those who want to understand how far Wall Street will go to subjugate populations into perpetual slavery. They wanted total control of Russian society which resulted in the deaths of millions of people. The Russian people were victims of a conspiracy, one that Mr. Sutton’s brilliant research proves.
Many universities do not include ‘Wall Street and the Bolshevik Revolution’ in their syllabus as “required” reading materials. Of course, it can be labeled as “conspiratorial” and not relevant to Russian history especially in the American university system. However, it is a must read for those who wish to understand how Wall Street bankers were involved in funding a revolution to remove the Czars from power.
Every university, public and private schools around the world should include “Wall Street and the Bolshevik Revolution’ as a requirement for their history classes. Sutton connects the Russian revolution to Wall Street elites who funded the operation. It is an essential chapter in world history that allows you to understand how financial elites manipulate the politics and society so they can control the economy for their advantage. Not only educational institutions should include Professor Sutton’s books as part of their lesson plans, but every man, woman, child, historian, political scientist, economist or those who are simply looking for the truth, ‘Wall Street and the Bolshevik Revolution’ is one history book that should be in everyone’s library. It is a history lesson that should not be missed.
Timothy Geithner’s new book about the financial crisis, “Stress Test,” is basically an argument that the Wall Street bailout succeeded. That’s hardly surprising, given that Geithner was in charge of the bailout when Treasury Secretary (as was his predecessor at Treasury, Hank Paulson), and so has an inherent interest in telling the public it succeeded.
Even so, the bailout clearly did succeed, if success means avoiding another Great Depression.
But another Great Depression might have been avoided if the crisis had been handled differently — for example, by allowing the bankruptcy laws to do what they were intended to do, and forcing the big Wall Street banks to reorganize under them.
In fact, the bailout was a colossal failure in several respects Geithner barely mentions in his book, or avoids completely:
(1) The biggest Wall Street banks are now bigger than ever, and no sane person on or off the Street now believes Washington will ever allow them to fail – which means they’ll continue to make big, risky bets because they know they can’t fail. And they’ll get even bigger because big depositors and lenders know they’ll never fail and therefore demand lower interest rates than demanded from smaller banks.
(2) No Wall Street executives have ever been prosecuted for what they did to the country, which means even more rampant irresponsibility in executive suites as well as even deeper cynicism in the public about the political power of Wall Street.
(3) The bailout helped the banks but did little or nothing for the tens of millions of Americans who lost billions of dollars in home equity and savings, and the millions more who lost their jobs. The toll was greatest on the poor and the middle class, who still haven’t recovered their losses, even though Wall Street has fully recovered (and then some). Nor have reforms been enacted that will help the middle class and the poor the next time Wall Street implodes.
So pardon me if I take issue with Tim Geithner. The bailout was a success in the narrowest terms. Seen more broadly it was a terrible failure.
We’d have done better had we forced the biggest Wall Street banks, including the giant insurer AIG, to reorganize under bankruptcy rather than bail them out.
The major political parties have effectively locked-out any serious democratic challengers to their control on creation of public policy. This week, Green Party candidate for CA Controller Laura Wells talks with Ellen Brown (herself a Green running for CA State Treasurer) about the increasingly difficult path required of challenger candidates to even get their voices heard. They discuss Governor Jerry Brown’s proposed constitutionally-mandated rainy fund that would guarantee the state’s commitment to pay Wall Street at the expense of its own needs, the subject of Ellen’s latest article (“Robbing Main Street to Prop Up Wall Street: Why Jerry Brown’s Rainy Day Fund Is a Bad Idea for California“)
On the Public Banking Report, co-host Walt McRee talks with Lauren Steiner about a new initiative underway in Los Angeles to create a public partnership bank even as a new report shows that the city pays significantly more to Wall Street for fees and interest than it does on its own needs – to the tune of over ¾ of a billion dollars!
Filed under: Ellen Brown Articles/Commentary
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
Sixteen of the world’s largest banks have been caught colluding to rig global interest rates. Why are we doing business with a corrupt global banking cartel?
United States Attorney General Eric Holder has declared that the too-big-to-fail Wall Street banks are too big to prosecute. But an outraged California jury might have different ideas. As noted in the California legal newspaper The Daily Journal:
California juries are not bashful – they have been known to render massive punitive damages awards that dwarf the award of compensatory (actual) damages.For example, in one securities fraud case jurors awarded $5.7 million in compensatory damages and $165 million in punitive damages. . . . And in a tobacco case with $5.5 million in compensatory damages, the jury awarded $3 billion in punitive damages . . . .
The question, then, is how to get Wall Street banks before a California jury. How about charging them with common law fraud and breach of contract? That’s what the FDIC just did in its massive 24-count civil suit for damages for LIBOR manipulation, filed in March 2014 against sixteen of the world’s largest banks, including the three largest US banks – JP Morgan Chase, Bank of America and Citigroup.
LIBOR (the London Interbank Offering Rate) is the benchmark rate at which banks themselves can borrow. It is a crucial rate involved in over $400 trillion in derivatives called interest-rate swaps, and it is set by the sixteen private megabanks behind closed doors.
The biggest victims of interest-rate swaps have been local governments, universities, pension funds, and other public entities. The banks have made renegotiating these deals prohibitively expensive, and renegotiation itself is an inadequate remedy. It is the equivalent of the grocer giving you an extra potato when you catch him cheating on the scales. A legal action for fraud is a more fitting and effective remedy. Fraud is grounds both for rescission (calling off the deal) as well as restitution (damages), and in appropriate cases punitive damages.
Trapped in a Fraud
Nationally, municipalities and other large non-profits are thought to have as much as $300 billion in outstanding swap contracts based on LIBOR, deals in which they are trapped due to prohibitive termination fees. According to a 2010 report by the SEIU (Service Employees International Union):
The overall effect is staggering. Banks are estimated to have collected as much as $28 billion in termination fees alone from state and local governments over the past two years. This does not even begin to account for the outsized net payments that state and local governments are now making to the banks. . . .
While the press have reported numerous stories of cities like Detroit, caught with high termination payments, the reality is there are hundreds (maybe even thousands) more cities, counties, utility districts, school districts and state governments with swap agreements [that] are causing cash strapped local and city governments to pay millions of dollars in unneeded fees directly to Wall Street.
All of these entities could have damage claims for fraud, breach of contract and rescission; and that is true whether or not they negotiated directly with one of the LIBOR-rigging banks.
To understand why, it is necessary to understand how swaps work. As explained in my last article here, 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 they are 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 on its separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. The rate owed on the debt is based on something called the SIFMA municipal bond index. The rate owed by the bank is based on the privately-fixed LIBOR rate.
As noted by Stephen Gandel on CNNMoney, when the rate-setting banks started manipulating LIBOR, the two rates decoupled, sometimes radically. Public entities wound up paying substantially more than the fixed rate they had bargained for – a failure of consideration constituting breach of contract. Breach of contract is grounds for rescission and damages.
Pain and Suffering in California
The SEIU report noted that no one has yet completely categorized all the outstanding swap deals entered into by local and state governments. But in a sampling of swaps within California, involving ten cities and counties (San Francisco, Corcoran, Los Angeles, Menlo Park, Oakland, Oxnard, Pittsburgh, Richmond, Riverside, and Sacramento), one community college district, one utility district, one transportation authority, and the state itself, the collective tab was $365 million in swap payments annually, with total termination fees exceeding $1 billion.
Omitted from the sample was the University of California system, which alone is reported to have lost tens of millions of dollars on interest-rate swaps. According to an article in the Orange County Register on February 24, 2014, the swaps now cost the university system an estimated $6 million a year. University accountants estimate that the 10-campus system will lose as much as $136 million over the next 34 years if it remains locked into the deals, losses that would be reduced only if interest rates started to rise. According to the article:
Already officials have been forced to unwind a contract at UC Davis, requiring the university to pay $9 million in termination fees and other costs to several banks. That sum would have covered the tuition and fees of 682 undergraduates for a year.
The university is facing the losses at a time when it is under tremendous financial stress. Administrators have tripled the cost of tuition and fees in the past 10 years, but still can’t cover escalating expenses. Class sizes have increased. Families have been angered by the rising price of attending the university, which has left students in deeper debt.
Peter Taylor, the university’s Chief Financial Officer, defended the swaps, saying he was confident that interest rates would rise in coming years, reversing what the deals have lost. But for that to be true, rates would have to rise by multiples that would drive interest on the soaring federal debt to prohibitive levels, something the Federal Reserve is not likely to allow.
The Revolving Door
The UC’s dilemma is explored in a report titled “Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits.” The authors, a group called Public Sociologists of Berkeley, say that two factors were responsible for the precipitous decline in interest rates that drove up UC’s relative borrowing costs. One was the move by the Federal Reserve to push interest rates to record lows in order to stabilize the largest banks. The other was the illegal effort by major banks to manipulate LIBOR, which indexes interest rates on most bonds issued by UC.
Why, asked the authors, has UC’s management not tried to renegotiate the deals? They pointed to the revolving door between management and Wall Street. Unlike in earlier years, current and former business and finance executives now play a prominent role on the UC Board of Regents.
They include Chief Financial Officer Taylor, who walked through the revolving door from Lehman Brothers, where he was a top banker in Lehman’s municipal finance business in 2007. That was when the bank sold the university a swap related to debt at UCLA that has now become the source of its biggest swap losses. The university hired Taylor for his $400,000-a-year position in 2009, and he has continued to sign contracts for swaps on its behalf since.
Investigative reporter Peter Byrne notes that the UC regent’s investment committee controls $53 billion in Wall Street investments, and that historically it has been plagued by self-dealing. Byrne writes:
Several very wealthy, politically powerful men are fixtures on the regent’s investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous.
Blum’s firm Blum Capital is also an adviser to CalPERS, the California Public Employees’ Retirement System, which also got caught in the LIBOR-rigging scandal. “Once again,” said CalPERS Chief Investment Officer Joseph Dear of the LIBOR-rigging, “the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors.” If the financial services industry cannot be trusted, it needs to be replaced with something that can be.
The Public Sociologists of Berkeley recommend renegotiation of the onerous interest rate swaps, which could save up to $200 million for the UC system; and evaluation of the university’s legal options concerning the manipulation of LIBOR. As demonstrated in the new FDIC suit, those options include not just renegotiating on better terms but rescission and damages for fraud and breach of contract. These are remedies that could be sought by local governments and public entities across the state and the nation.
The larger question is why our state and local governments continue to do business with a corrupt global banking cartel. There is an alternative. They could set up their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. Fraud could be avoided, profits could be recaptured, and interest could become a much-needed source of public revenue. Credit could become a public utility, dispensed as needed to benefit local residents and local economies.
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
By Susan Duclos
Did Russia just declare war on Wall Street and the US Dollar? In Wall Street's eyes and the central bankers, that is eactly what Russia is doing and has been given the perfect opportunity to say they are doing it defensively.
Global Research is reporting that Russia has taken a bold move, claiming they are being "forced" by US and EU sanctions to protect themselves, "that it will sell (and buy) products and commodities – including oil – in rubles rather than in dollars. The move is towards the development of bilateral."
In fact, the Global Research quotes Putin himself, speaking to members of the Upper House of the Duma, the parliament, on March 28.
“Why do we not do this? This definitely should be done, we need to protect our interests, and we will do it. These systems work, and work very successfully in such countries as Japan and China. They originally started as exclusively national [systems] confined to their own market and territory and their own population, but have gradually become more and more popular…”
More from GS:
It is what Putin needed. Since at least 2007, he was trying to launch an independent Ruble System, a financial system that would be based on Russia’s real economy and resources and guaranteed by its gold reserves. No tolerance for looting and financial speculation: A peaceful move, but at the same time a declaration of independence that Wall Street will consider as a “declaration of war”.
As seen in the videos below, the US and EU were warned relentlessly about how sanctions against Russia could not only backfire but bring the US Dollar one step closer to collapse, yet they decided they needed to talk tough and symbolically punish "one" Russian bank anyway, giving Putin the perfect excuse to dump the Dollar.
China, New Zealand and others are also making moves to cut the US Dollar out of their currency trades and others will follow as the Dollar becomes weaker, because it is not backed by the gold standard anymore and is being printed up at a rate that has made it basically worthless. The only thing propping up the USD at the moment is that it is the world's reserve currency and that is what these other countries are trying to change.
This latest step by Russia is just another economic shot fired in this financial "war" being waged.
Cross posted at Before It's News
Indian Oil and Environment Minister Veerappa Moily has added fuel to the debate about genetically modified organisms (GMOs) by approving field trials of 200 GM food crops on behalf of companies like Monsanto, Mahyco, Bayer and BASF. This is despite Supreme Court appointed Technical Expert Committee (TEC) recommending a ten-year moratorium on GM organism approvals until scientifically robust protocols, independent and competent institutions to assess risks and a strong regulatory system are developed.
The stock market surged yesterday after the lousy jobs report. The Dow soared 160 points Friday, while the S&P 500, and Nasdaq also rose.
How can bad news on Main Street (only 113,000 jobs were created in January, on top of a meager 74,000 in December) cause good news on Wall Street?
Because investors assume:
(1) The Fed will now continue to keep interest rates low. Yes, it has announced its intention of tapering off its so-called “quantitative easing” by buying fewer long-term bonds in the months ahead. But it will likely slow down the tapering. Instead of going down to $55 billion a month of bond-buying by April, it will stay at around $60 billion to $70 billion.
(2) The slowdown in the Fed’s tapering will continue to make buying shares of stock a better deal than buying bonds – thereby pushing investors toward the stock market.
(3) Continued low interest rates will also continue to make it profitable for big investors (including corporations) to borrow money to buy back their own shares of stock, thereby pushing up their values. Apple and other companies that used to spend their spare cash and whatever they could borrow on new inventions are now focusing on short-term stock performance.
(4) With the job situation so poor, most workers will be so desperate to keep their jobs, or land one, that they will work for even less. This will keep profits high, make balance sheets look good, fuel higher stock prices.
But what’s bad for Main Street and good for Wall Street in the short term is bad for both in the long term. The American economy is at a crawl. Median household incomes are dropping. The American middle class doesn’t have the purchasing power to keep the economy going. And as companies focus ever more on short-term share prices at the expense of long-term growth, we’re in for years of sluggish performance.
When, if ever, will Wall Street learn?
735. July 29-Aug. 5. Moving Beyond Capitalism conference, San Miguel de Allende, Mexico
734. Feb. 23, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST
733. Feb16, interview with Gary Dubin, The Foreclosure Hour (http://www.foreclosurehour.com/the-host.html), 5 pm PST
732. Feb 9, interview with Stephen Golden, DEFENDING THE AMERICAN DREAM, KABC Los Angeles, 6 am, PST
731. Feb. 6, interview, Move to Amend Reports, http://www.blogtalkradio.com/movetoamend, 5 pm PST
730. Feb. 5, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 9:30 am PST
729. January 30, interview, Kerry Lutz - Financial Survival Network, 12 pm EST
728. January 30, interview with Tom Kiely, INN World Report, 4:30 PST
727. January 29, interview on Latin Waves, 8 pm PST
726. January 28, Green Party Shadow Cabinet response to State of the Union Speech. http://www.livestream.com/greenpartyus 6 pm PST
725. January 26, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST. Listen here.
724. January 23, interview, The Tim Dahaney Show, 12 noon PST. Listen here.
723. January 22, interview with Utrice Leid, "Leid Stories,", PRN.FM, 1 pm EST
722. January 21, interview, Independent Underground Radio LIVE, 9:15 PST. Listen here.
721. January 12, Open Forum with Green Party candidates Luis Rodriguez, Laura Wells and Ellen Brown, hosted by LULAC (League of United Latin American Citizens) 11277 GARDEN GROVE BLVD., Garden Grove, CA. 2-4 pm
720. January 11, interview with Bill Still on running for California Treasurer. Watch it here.
719. January 8, interview, The Tim Dahaney Show, 12 noon PST. Listen here. (It's the one labelled "Take the Fed Reserve Public.")
718. Jan 7, interview, The Burt Cohen Show, 12 noon ET
717. Dec. 30, interview, Stuart Vener Tells It Like It Is, see http://stuartvener.com for stations, 11:30 am EST
716. Dec. 26, interview Dr. Rima Truth Reports, with Dr. Rima Laibow and Ralph Fucetola, 10 pm EST
715. Dec. 21, interview, KPRO Radio San Francisco, 9:30 am PST
714. Dec. 18, interview, The Power Hour with Joyce Riley, 8 a.m. CT
713. Dec. 18, interview, Unwrapped Radio, WRFG, http://www.tuneinradio.com/, 12:40 EST
712. Dec. 15, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST, listen here.
711. Dec. 15, presentation, A Public Bank for Mendocino, at the Crown Hall in Mendocino, Ca., 7 pm
710. Dec. 15, presentation, Why We Need to Own Our Own Bank, Mendocino Environmental Center
106 West Standley, Ukiah, CA 95482, 2 pm
709. Dec. 14, presentation, Why We Need to Own Our Own Bank, Little Lake Grange, Willits, Ca. 7 pm
708. Dec. 13, interview on All About Money, KZYX radio, 9 a.m. PST
707. Dec. 13, interview, Radio Islam, WCEV 1450 AM, 12:05 pm, CST
706. Dec. 12, appearance with Doug McKenty, "The Shift," Mendocino TV, 4:30 pm PST
705. Dec. 11, interview on WHDT World News, http://NNN.is/on-WHDT, 5:30 and 11:00 pm EST. Watch the archive here.
704. Dec. 11, interview, WORT Community Radio, Madison, Wisconsin, 6:10 a.m. PST
703. Dec. 11, interview with Sinclair Noe, Financial Review, MoneyRadio.com, 10:30 PST
702. Dec. 9, UnWrapped Radio, Atlanta, 1 pm PST.
701. Dec. 9, GOHarrison, KPFK Los Angeles, 3:30 pm PST.
700. Dec. 9, interview, Air Cascadia show, KBOO radio, Portland, 10 am PST
699. Dec. 5, interview, WHDT World News TV, 2 pm PST
698. Dec. 4, interview with David Swanson, talknationradio, 7pm PST
697. Dec. 4, interview with Rob Kall, The Rob Kall Bottom-Up Radio Show, 1360 AM, 7:30 pm EST
696. Dec. 3, interview with Kim Greenhouse, It's Rainmaking Time, listen here.
695. Dec. 2, interview with Val Muchowski, Women's Voices, KZYX, 7 p.m. PST
694. Nov. 29, interview with Gregg Hunter, USAWatchdog.com, 11:30 PST
693. Nov. 16, interview This is Hell! radio show, WNUR 89.3 fm, thisishell.com/live, 11.20 a.m. EST. Listen to archive here
692. Nov. 15, interview with George Berry, The Financial News Network Show, truthfrequencyradio.com, 1 pm PST
691. Nov. 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 4 pm PSTf
690. Nov. 14, interview with Neil Foster, Reality Bytes show, Awake Radio (UK), Shazziz Radio (US), 8 pm UK time.
689. Nov. 13, interview with Bonnie Faulkner, KPFA, Los Angeles. Listen to archive here.
688. Nov. 12, interview with Tom Kiely, INN World Report, 4:30 PST
687. Nov. 11, interview, Between the Lines News Magazine, WPKN radio, Bridgeport, CT, 9 p.m. ET. Listen to archive here
686. Nov. 10, skype participant, forum at the Putrajaya International Islamic Arts and Cultural Festival, "Global Economic and Monetary Crisis: What Needs to be Done?" Putrajaya, Malaysia, 11 a.m. MYT, 7 pm, Nov. 9 PST
685. Nov. 3, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST
684. Oct. 31, interview with Voice of Russia radio, American edition, 2:30 pm, CET (Central Europe Time.) Listen to archive here.
683. Oct. 23, interview with Daniel Estulin on RT tv
682. Oct. 16, interview with Per Fereng, KBOO radio, Portland, 11 am PST
681. Oct. 15, presentation, "The Public Banking Forum in Ireland," 7-9 PM, Hudson Bay Hotel, Athlone, Ireland.
680. Oct. 14, presentation, Cork, Ireland
679. Oct. 12, presentation, "The Public Banking Forum in Ireland," 2-4 PM, Springfield Hotel in Leixlip, County Kildare, Ireland. Information on these three events here.
678. October 4, interview with Bill Deller, 3CR radio, Melbourne, Australia, 2:30 pm, PST
677. Oct. 3, interview with Joyce Riley, the Power Hour. Listen to archive here.
676. Oct. 1, interview with Tom Kiely, INN World Report 7:30 EST
675. Sept. 29, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST
674. Sept. 27, interviw with Kevin Barrett, AmericanFreedomRadio.com, NoLiesRadio.org:
http://TruthJihadRadio.blogspot.com, 2 pm PST
673. Sept. 19, interview, The Gary Null Show, 9:30 a.m. Pacific
672. Sept. 19, Interview on the Global Research News Hour with Michael Welch--check site for time and archive.
671. Sept. 18, interview with David Sierralupe, Occupy Radio, KWVA, 88.1 FM, Eugene
670. Sept. 15, interview with Niall Bradley, Sott Talk Radio, sott.net, 2 p.m. EST
669. Sept. 14, interview FDLBookSalon, firedoglake.com, 5pm EST
668. Sept. 10, "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 12:30 pm PST. Listen to archive here.
667. Sept. 9, interview with Ken MacDermotRoe and Del LaPietro, In Context Report, 9 am PST. Listen to archive here.
666. Sept 7, interview with Valerie Kirkgaard, WakingUpInAmerica.com, 6 am, PST. Listen here.
665. Sept. 6, Interview with Al Korelin, The Korelin Economics Report, 12:30 pm PST
664. Sept. 5, discussion of how to bring public banking to Colorado on "It's the Economy, Stupid," KGNU, Boulder, 5 p.m. PST
663. Sept. 5, interview with Patrick Timpone, oneradionetwork.com, 8 a.m. PST
662. Sept. 3, interview (along with Elliott Spitzer?), "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 1 pm PST Listen to archive here.
661. Sept. 3, interview with Jeanette LaFeve, The People Speak, 6 pm PST
660. Aug. 25, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT
659. Aug. 22, interview with Christopher Greene, AMTV Radio, simulcast in audio/video over GoogleHangouts and American Freedom Radio, 1 p.m. PST
658. Aug. 22, interview, TheAndyCaldwellShow.com,
CalChronicle.com, 3 pm PST
657. Aug. 21, interview with Merry and Burl Hall, blogtalkradio.com/envision-this, 5 pm PST
656. Aug. 21, interview with Lori Lundin, America's Radio News Network, 10:30 a.m. ET.
655. Aug. 16, interview with Sinclair Noe, Moneyradio.com, 4 pm PST
654. Aug. 15, interview with Justine Underhill, Prime Interest, Russia Today TV, 1:30 pm PST
653. Aug 14, interview with Jim Goddard, This Week in Money, 4 pm, PST. Listen to archive here, starting at minute 32.
652. Aug. 14, interview with Mary Glenney, WMNF 88.5, 10 a.m. PST
651. Aug. 14, interview with Chuck Morse, irnusaradio.com, 8 am, PST
650. Aug. 13, interview with Thomas Taplin, Dukascopy TV, Switzerland, 9 am PST
649. Aug 7-11, Madison Democracy conference, https://democracyconvention.org/
648. Aug. 6, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PST
647. Aug 5, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 9 am PST
646. Aug 3, interview with Diane Horn, Mind Over Matter show, KEXP radio, 90.3 FM, Seattle, 7:00 a.m. PST
645. July 31, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST
644. July 28, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT
643. July 2, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.
642. July 2, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 12:30 EST.
641. June 30, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT. Listen to archive here.
640. June 24, interview on RT tv re student debt, 10:30 am PST
639. June 17, interview on The Andy Caldwell Show, 3:30 pm PST
638. June 16, interview with Jason Erb, 5 pm Pacific
637. June 13, interview with Paul Sanford, "Time 4 Hemp-LIVE," http://www.AmericanFreedomRadio.com, 10 am, PST
636. June 6 presentation with Jamie Brown at the Mt. Diablo Peace and Justice Center in Walnut Creek. Info at Favors.org, 7 to 9 pm
635. June 1, interview with Kris Welch, KPFA Los Angeles, 10 am PST
634. May 28, interview with Malihe Razazan, "Your Call" radio, KALW, San Francisco, 10 am PST.
633. May 26, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT
632. May 23 interview with Simit Patel, InformedTrades.com (youtube) 3:30 pm PST
631. May 22, Thousand Oaks, 3 expert panel, "A Parachute For the Fiscal Cliff," University Village 2-4 pm
630. May 22, interview with Jack Rasmus, 11 am PST. Enjoy the interview here.
629. May 22, Guns and Butter show, KPFA, http://www.kpfa.org/archive/id/91790
628. May 14, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.
627. May 13, live appearance on RTTV, 3 pm PST Watch it here.
626. May 8, interview with Valli Sharpe-Geisler, Silicon Valley Voice, KKUP, 3 pm PST
625. May 8, interview, the Meria Heller Show, 11 am PST
624. May 4, interview, Latin Waves with Sylvia Richardson, 10 am PST
623. April 30, Jay Taylor, VoiceAmerica, 1 pm PST
622. April 29, interview with Rob Kall, Bottom Up Radio, 9 am Pacific
Listen to archive here.
621. April 28, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT
620. April 25, interview, the the Dr. Katherine Albrecht Show, 5 pm EDT
619. April 17, interview with Mike Harris, rense.com, 1 pm PDT
618. April 16th, speaker, Valley Democrats United (Democratic Party of San Fernando Valley), Van Nuys, Ca. 7-9pm
617. April 13, interview with Darren Weeks, Govern America, noon Eastern, listen here
616. April 9, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.
615. April 6, phone conference, Justice Party, http://www.justicepartyusa.org/public_banking_conference_call, 9 a.m.
614. April 5, interview, Butler on Business, 11 a.m. EDT
613. April 3, interview with Michael Welch, Global Research News Hour, 8:30 a.m. PDT
612. April 2, interview with Jay Taylor, VoiceAmerica, 12:30 PDT. Listen here.
611. April 1, interview with Brannon Howse, www.worldviewradio.com, 11 a.m. PDT
610. April 1, interview with Scott Harris, Counterpoint,
WPKN Radio, 8:30 pm, ET Listen to archive here.
609. April 1, interview with Margaret Flowers and Kevin Zeese. Watch and listen to archive here, starting at minute 50. Articles based on the interview are at Truthout.org.
608. March 31, interview with Jason Erb, Exposing Faux Capitalism, Oracle Broadcasting, 11 a.m. Pacific
607. March 31, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT Listen to the archive here.
606. March 29, interview, The Gary Null Show, 9:30 a.m. Pacific
605. March 28, interview with Stan Monteith, radioliberty.com, 9 pm PDT
604. March 28, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PDT
603. March 27, interview with Charlie McGrath, Wide Awake News, 6-7 pm PdT.
602. March 27, interview with Jack Rasmus on PRN, 11 a.m. PDT
601. March 25, interview on the Richard Kaffenberger show, KTOX, Needles, CA. 3:15 PDT
600. March 22, newly available archived radio interview, Mandelman Matters. Listen here.
599. March 22, interview with James Fetzer, The People Speak Radio, 5-7 pm PDT
598. March 22, interview , Our Times With Craig Barnes, KSFR radio, Santa Fe, 10 a.m. MST
597. March 12, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.
596. March 11, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PST
595. March 9, Interview with Sylvia Richardson, Latin Waves, CJSF 90.1FM, 9:30 am PST
594. March 6, interview with Charlie McGrath, wideawakenews.com, 6pm PST. Watch and listen here.
593. March 3, interview with Lateef Kareem Bey, Fix Your Mortgage Mess, 4 pm PST
592. March 2, Interview with Stuart Richardson, Latin Waves, CJSF 90.1FM, 11 am PST
591. Feb. 27, interview with Jim Banks, KGNU, Boulder, 12 pm PST
590. Feb 27, interview with Sinclair Noe, Financial Review, 10 am PST
589. Feb. 25, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.
588. Feb. 6, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 11 am PST. Listen to the archive here: http://talkdigitalnetwork.com/2013/02/this-week-in-money-70/
587. Feb. 4, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 11 am PST.
586. Jan. 31, interview with Tom Kiely, INN World Radio Report, 5:00 pm PST
585. Jan. 27, interview with Stephen Lendman, progressive radio
network, 10 am PST
584. Jan. 23, interview on KPFK, 8pm PST
583. Jan. 22, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.
582. Jan. 3, interview with Mary Glenney, WMNF 88.5, Tampa, 3 pm EST
581. Jan. 2, interview, The Bev Smith Show, thebevsmithshow.net, 5 pm PST
--- 2012 ---
580. Dec. 27, video interview with Charlie McGrath, Wide Awake News, listen and watch here.
579. Dec. 24, October talk at First Unitarian Church in Portland aired on KBOO radio, http://kboo.fm/, 8:00 am PST
578. Dec. 24, interview with Ron Daniels, the WWRL Morning Show with Mark Riley, wwrl1600.com, 5:05 am PST
577. Dec. 21, interview with Andy Caldwell, TheAndyCaldwellShow.com, KZSB AM1290 Santa Barbara / Ventura and KUHL AM1440 Santa Maria / San Luis Obispo, 3:30 pm PST
576. Dec. 20, interview with Fred Smart, aunetwork.tv, 9 pm EST
575. Dec. 19, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST. Listen here.
574. Dec. 19, interview with Dr. Jack Rasmus, Alternative Visions, Progressive Radio Network, 2 pm EST
573. Dec. 17, The Bev Smith Show, thebevsmithshow.net, 4 pm PST
572. Dec. 15, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen here.
571. Dec. 14, interview with Craig Barnes, Our Times With Craig Barnes, KSFR radio, 9 am PST Listen to the archive here.
570. December 9th, speaker, Mayo Arts Center (10 Mayo Street) in Portland, ME
569. Dec. 7, Vermont's New Economy conference, Vermont College of the Find Arts, Montpelier, VT, 9 am to 4 pm and reception at 4:30. $25
www.global-community.org/neweconomy to register
568. Dec. 5, speaker, Pennsylvania Public Bank Project's Forum on Public Banking, at the David Library of the American Revolution, Washington Crossing, PA, 7pm
567. Nov. 26-27, 3rd Annual World Conference on Riba, Kuala Lumpur, Malaysia
566. Nov. 22, presentation before Royal Scottish Academy -- "A Public Bank for Scotland" (here), Riddle's Court, 322 Lawnmarket, Edinburgh EH1 2PG Scotland, 6 pm
565. Nov 8, Healthy Money Summit, speaking with Hazel Henderson at 1-2 pm PST, information here.
564. Sunday, Oct. 28, Keynote Speaker; The Buck Starts Here, 2:00pm, sponsored by the Kairos Occasional Speakers Series & OFOR, Kairos Milwaukie UCC, Milwaukie, OR.
563. Saturday, Oct. 27, Keynote Speaker; OFOR Saturday Symposium: The Buck Starts Here, 10am - 3pm, Molalla, OR
562. Friday-Sunday, Oct. 26-28, Keynote Speaker; Oregon Fellowship of Reconciliation Fall Retreat - The Buck Starts Here, Camp Adams, Molalla, OR, Friday, 5pm- Sunday 12 noon
561. Friday, October 26, Invited Commentator; screening of “HEIST” (new documentary about the roots of the American economic crisis), sponsored by First Unitarian Church of Portland's Economic Justice Action Groups, Alliance for Democracy, KBOO, Move to Amend, 7:00pm, First Unitarian Church, Portland, OR
560. (Oct. 25-28, Bioneers Conference, Portland, OR)
Oct. 25, Keynote Speaker; sponsored by Portland Fellowship of Reconciliation (PFOR) and the First Unitarian Church of Portland's Economic Justice and Peace Action Groups, 7:00-8:30pm, First Unitarian Church, Portland, OR
559. Oct. 24, interview with Per Fagereng, KBOO radio, Portland, 9 am PST
558. Oct. 24, KPFA "Guns and Butter" interview. Listen to archived show here.
557. Oct. 21, speaker at BBQed Oysters and Beer Fundraiser Party for PBI, San Rafael, CA, 4 pm PST
556. Oct. 14, Live Gaiam tv interview appearance. Watch it here free at 7pm EST.
555. Oct. 12, interview with Matt Rothschild of The Progressive, 10 a.m. Central time
554. October 11-14, speaker, Economic Democracy Collaborative, Madison, Wisconsin
553. Oct. 11, radio interview with Norm Stockwell, WORT, 12 pm CST
552. Oct. 9, interview with Kevin Barrett, No Lies Radio, listen to archive here.
551. Oct. 8, interview, "Mountain Hours Revolution Radio" with Wayne Walton, on RBN, 12-1 pm PST
550. Oct. 7, interview with Lloyd D'Aguilar, "Looking Back Looking Forward", http://lookingbacklookingforward.com/, 2 pm EST
549. Sept. 26, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.
548. Sept. 25, interview with Dr. Stanley Montieth, radioliberty.com, 3pm PST
547. Sept. 24, interview with Charlie McGrath, Wide Awake News, 6-7 pm PST.
546. Sept. 22, interview with Stephen Lendman, progressive radio network, 10 am PST
545. Sept. 17 interview along with Hazel Henderson, National Teach In for Occupy Wall Street, http://www.livestream.com/owshdtv 5pm EST
544. Sept. 10, interview with Thomas Taplin, Dukascopy TV (Switzerland), 7 am PST Watch and listen here
543. Sept. 7, interview with Mike Harris, republicbroadcasting.org, 6 am PST
542. Sept. 6, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.
540. Aug 26, interview with Stephen Lendman, progressive radio network, listen to archive here.
539. August 21, interview with Charlie McGrath, wideawakenews.com. Listen to archive here.
538. Aug 20, interview with Kim Greenhouse, It's Rainmaking Time, listen here.
537. Aug 16, interview with Mike Harris, republicbroadcasting.org, 6 am PST
536. Aug. 14, interview, TheAndyCaldwellshow.com, 4:30pm PST
535. August 13, interview with American Free Press, 1 pm PST
534. July 24, interview along with Victoria Grant, The People Speak, 6pm, PST
533. July 24, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST
532. July 23, interview with Charlie McGrath, wideawakenews.com, 6 pm PST
531. July 22, interview with Dave Hodges, The Common Sense Show, 7 pm PST
530. July 22, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.
529. July 19, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST
528. July 10-12, Speaker, Conference on Social Transformation, Faculty of Economics, Split University, Split Croatia
527. July 10, video interview with Max Keiser, the Keiser Report, on the ESM. Watch it here.
526. July 7, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 3 pm PST
525. July 6, video interview with Dr. Mercola, see it here.
524. June 23, Interview with Al Korelin, The Korelin Economics Report, 1 pm PST. Listen to archive here.
523. June 21, interview with Tom Kiely, INN World Radio Report, 4:30 pm PST
522. June 21, interview on the Gary Null Show, 9:20 am PST
521. June 18, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 1 pm PST. Listen to archive here.
520. June 17, interview with Bill Resnick, KBOO radio, 9 am PST
519. June 16 interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.
518. June 9, interview with Sylvia Richardson, Latin Waves, 9:45 am PST. Listen to archive here.
517. June 5, interview, Truth Quest With Melodee, KHEN radio, 7pm PST
516. June 2, interview about Web of Debt, Our Common Ground,http://www.blogtalkradio.com/OCG, 7pm PST
515. June 1, interview with Robert Stark, The Stark Truth listen here.
514. Newly available video of interview on "Moral Politics" -- see it here
513. May 30, interview, The Tim Dahaney Show, ll am PST
512. May 28, interview with Pedro Gatos, "Bringing Light into Darkness", KOOP.ORG, 6 pm CST
511. May 24, interview, Make It Plain With Mark Thompson, SiriusXM Satellite Radio, 2pm PST
510. May 20, interview, Women's View Radio, blogtalkradio.com, 10 am Central Time. Listen here.
509. May 13, interview, www.Blogtalkradio.com/fixyourmortgagemess, 4:15 pm PST
508. May 12, interview with Stephen Lendman, progressive radio network, 10 am PST Listen here.
507. May 9, seminar, Re-imagining Money and Credit, Art bldg. rm 103, El Camino college, Torrance, Ca. 5-7:30 pm
506. May 8, interview with Mike Harris, republicbroadcasting.org, 9 am EST
505. May 7, radio discussion on "The Myth of Austerity", Connect the Dots, KPFK Los Angeles, 7 am PST. Listen here.
504. May 4, interview The Unsolicited Opinion, republicbroadcasting.org, 8 am PST
503. April 27-28, speaker, Public Banking Institute Conference, Friends Center, Philadelphia. Listen here.
502. April 25, speaker Global Teach-In (globalteachin.com), 12 noon EST
501. April 17, Interview with Leo Steel, http://www.blogtalkradio.com/lasteelshoworg, 8:30 pm EST. Listen here.. 31 minutes in.
500. April 14, interview with Stephen Lendman, progressive radio network, 10 am PST
499. April 14, interview with Al Korelin, The Korelin Economics Report
498. April 10th-12th Speaker at Claremont Conference, “Creating Money in a Finite World” Claremont, CA . See video here.
497. April 5, interview , This Week In Money with Phil Mackesy (howestreet.com) 12:30 PST. Listen to the archive here.
496. April 3, speaker at COMER with Paul Hellyer, "Escape From the Web of Debt," Toronto, 7:30 pm
495. March 27, speaker on "Why are we so Broke? New ways to look at the Finances of our State and City," League of Women Voters luncheon, San Diego, 12 noon
494.5 March 24, radio interview, Mandelman Matters. Listen here.
494. March 17, speaker via skype, SCADS conference, London
493. March 15, interview with Per Fagereng, Fight the Empire, KBOO radio, 9:30 am PST
492. March 15, speaker, San Rafael City Hall 6 pm
491. March 13, speaker at Sergio Lub's house, Walnut Creek, info at Favors.org, 6pm
490. March 11, speaker, TedxNewWallStreet. See it here.
489. March 10, interview with Stephen Lendman, progressive radio network, 10 am PST
488. March 6, interview with Melinda Pillsbury-Foster, http://radio.rumormillnews.com/podcast/, 11 am PST
487. Feb. 25, interview with Martin Andelman, http://www.mandelman.ml-implode.com, 9:30 am PST
486. Feb. 25, interview, This Week In Money with Phil Mackesy (howestreet.com), 3 pm PST
485. Feb. 25, interview on CIVL Radio, Latin Waves, How Greece Could Take Down Wall Street, 11:30am PST
484. Feb 23, interview with Thomas Kiely, INN World Report Radio, 7:30 pm EST
483. Feb. 17, featured speaker, Public Banking in America weekly call, 9 am PST
482. Feb. 11, interview with Stephen Lendman, progressive radio network, 10 am PST
481. Feb. 8, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST
480. Feb. 7, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST; listen to archive here
479. Feb. 6, participant, Occupiers and Wells Fargo Executives Gather to Discuss the American Foreclosure Crisis, The Center of Nonprofit Management at California Endowment Building 1000 N. Alameda, Los Angeles, meeting 3 pm and press conference 5:30 pm
478. Feb. 2, interview with Tom Kiely, INN World Report Radio, 7:30 pm EST
477. Feb. 2, interview with Patrick Timpone, oneradionetwork.com, naturalnewsradio.com. Listen to archive here
476. Jan. 31, interview, Liberty Coins and Precious Metals, 9 am PST
475. Jan. 27, interview KPFA, Project Censored, 8:30 am PST
474. Jan. 27, FILMS4CHANGE-INSIDEJOB, panel speaker, Edye Second Space, Santa Monica Performing Arts Center, 7:30 pm
473. Jan 22, interview with Dave Hodges, The Common Sense Show, 7:30 pm PST. Listen live here.
472. Jan. 20, interview with Mike Harris, The Republic Broadcasting Network, 7 am PST
471. Jan. 16, interview with Rob Lorei, WMNF fm, Tampa, 2 pm PST
470. Jan. 14, interview with Stephen Lendman, progressive radio network, 10 am PST
469. Jan. 11, interview with Jeff Rense, rense.com, 8pm PST
Timothy Alexander Guzman, Silent Crow News - Protests erupted this past Thursday in San Juan, Puerto Rico’s capitol building. The ongoing economic stagnation of Puerto Rico continues with proposed pension cuts for retired public school teachers according to the Associated Press:
The protest interrupted a special legislative session that Gov. Alejandro Garcia Padilla had called to debate reform measures amid pressure to appease Wall Street ratings agencies as the U.S. territory braces for its eighth year in recession. Garcia said the teachers’ pension system has a $10 billion deficit and will run out of funds by 2020 if nothing is done.
“We cannot remain with our arms crossed,” he said. “Postponing this reform will worsen the state of the system, require more drastic measures to save it and contribute to the country’s worsening credit.” The government is seeking to change the system from a defined benefit plan to a defined contribution one and possibly increase the retirement age, among other things.
This means reducing monthly payments and increasing the retirement age. Wall Street is looking to profit from Puerto Rico’s debt problem through “trading revenue” according to Bloomberg News last month:
Lazard Capital held a meeting Oct. 10 at its New York office with about 75 participants said Peter Santry, head of fixed-income trading. As more hedge funds buy and sell commonwealth securities, the firm wants to capture that trading revenue, Santry said. “You want to get business out of it,” Santry said.
Former Governor Luis Fortuno, who lost a re-election bid in November 2012 and is now a partner at Washington-based Steptoe & Johnson LLP, spoke at the Lazard Capital meeting on the legal structures of Puerto Rico debt and the commonwealth’s economy, Santry said. Fortuno declined to comment in an e-mail, saying he wouldn’t discuss current or potential clients.
Citigroup hosted an Oct. 24 conference that attracted more than 200 attendees, eight times more than the company was expecting, according to two participants, who asked not to be identified because the meeting was private. Bank representatives said in the presentation that the company originally booked a conference room and had to find a bigger space, the attendees said.
Former Puerto Rico Governor Luis Fortuno’s decision not to mention his current and future potential cliental for Puerto Rico’s potential commonwealth securities is troubling. But Fortuno’s law firm Steptoe & Johnson LLP in the past represented CEO and Chairman of Goldman Sachs Lloyd Blankfein in relation to mortgage fraud in 2012 that resulted in no criminal charges for the banking institution after a year-long investigation. That should win the hearts and minds of the Puerto Rican people! The new governor Alejandro Garcia Padilla will bow to Wall Street’s demands. “Teachers protesting the proposed measures say they favor alternatives such as increasing taxes on foreign companies to generate more revenue and receiving unclaimed money from the island’s electronic lottery system” according to Bloomberg. Caribbean Business reported back on October 10th ‘García Padilla administration makes new pitch on Wall Street’:
Despite Moody’s ill-timed move, García Padilla’s top economic brass remain steadfast in a plan that they insist will be instrumental in achieving 2.6% growth by the end of 2016.
During an exclusive roundtable interview with CARIBBEAN BUSINESS, Economic Development & Commerce Secretary Alberto Bacó Bagué, Puerto Rico Industrial Development Co. Executive Director Antonio Medina, Puerto Rico Tourism Co. Executive Director Ingrid Rivera Rocafort and Puerto Rico Commerce & Export Co. Executive Director Francisco Chévere explained that a concerted effort is underway to showcase an integrated plan—the fiscal and economic teams together— in presentations to credit-rating agencies on Wall Street.
The idea is for the rating agencies to see the economic-development plan, not as an afterthought, but as an integral part of a strategy—the next step after raising taxes and fixing the government workers’ retirement plan—that will spur growth even in the face of austerity. To that end, they have commissioned a review of Puerto Rico’s economy by the Boston Consulting Group (BCG) that, they say, will certify 2.6% economic growth and the creation of 90,000 new jobs by the end of 2016—if they execute their plan to perfection.
The government of Puerto Rico and the teachers both agree to raise taxes on foreign companies. It is important to note that raising taxes on companies would force them to leave the island altogether in hopes of finding better tax shelters in other nations with a lower tax rate. In the process, jobs would be eliminated which will increase unemployment rates adding to an already struggling economy. Raising taxes on foreign companies is not the only bad idea. Using unclaimed money from the Puerto Rico lottery system would not “trickle down” down to the local economy. The Puerto Rico government would use unclaimed funds to repay its growing $70 billion debt to Wall Street. Puerto Rico’s austerity measures would not create 90,000 jobs with a 2.6%economic growth rate which will be certified by the Boston Consulting Group (BCG) is unrealistic. The only jobs that will exist in Puerto Rico will be through the US government and the military with its ever expanding defense department budgets and continuous wars. What is more disturbing for Puerto Rico’s retired teachers is that they fully depend on their pensions because they do not receive any form of social security benefits or any other retirement incentives. “Nearly 42,000 teachers contribute to a pension system that supports nearly 38,000 retired teachers. Unlike other government workers in Puerto Rico, teachers do not receive Social Security and depend completely on their pensions upon retirement” according to the Bloomberg report. Once austerity measures take place, Wall Street and other private investors would reap the benefits. Puerto Rico will suffer the economic consequences of their politicians because of their loyalties to Washington and Wall Street. Maybe when Governor Alejandro Garcia Padilla’s term expires or if he loses the next election, he will find himself in a cushy position in a Wall Street firm following his predecessor former Governor Luis Fortuno. Don’t be surprised.
WASHINGTON - October 17 - CNN reports: “Seniors to Get Small Social Security Increase in 2014.”
ARUN GUPTA, arun.indypendent at gmail.com
Independent journalist and regular contributor to AlterNet, Truthout and the Guardian, Gupta is a co-founder of the Occupied Wall Street Journal and the Indypendent.
He said today: “Let’s not forget Obama has been trying to introduce severe austerity ever since he got into office. In January 2009 he told the Washington Post he wanted to cut Social Security and Medicare. He has legitimized the discourse of deficit reduction when it’s all voodoo economics. He wants to cut corporate taxes. He turned the Bush tax cuts into a bargaining chip when he could have swept them away in early 2009.
“One important point that seems to have slipped completely below the radar is how the markets reacted. There was never a fear premium, meaning Wall Street never thought the default was a danger. But related to that is this idea that the Tea Party is some rogue element no longer controlled by big business. If there was real fear that the Tea Party would do damage to the economy you would have seen the markets plunge, which would have forced them into line very quickly. Additionally, there is no evidence that corporations will pull their money from the GOP. Led by the Tea Party, they are still pushing for measures to cut taxes on the wealthy, eliminate regulations and cripple organized labor. That’s the Wall Street agenda, and that’s why they are the big winners in this whole affair.”
Gupta wrote the piece for the Progressive: “Don’t Let Obama Cut Medicare, Medicaid, and Social Security.”
He notes the Washington Post piece from 2009 “Obama Pledges Entitlement Reform President-Elect Says He’ll Reshape Social Security, Medicare Programs.”
The Speculative Endgame: The Government “Shutdown” and “Debt Default”, A Multibillion Bonanza for Wall...
Derivatives and the Government Shutdown: Wall Street Bets One Thousand Trillion Dollars of Everybody...
Reports are that the Department of Homeland Security (DHS) is engaged in a massive, covert military buildup. An article in the Associated Press in February confirmed an open purchase order by DHS for 1.6 billion rounds of ammunition. According to an op-ed in Forbes, that’s enough to sustain an Iraq-sized war for over twenty years. DHS has also acquired heavily armored tanks, which have been seen roaming the streets. Evidently somebody in government is expecting some serious civil unrest. The question is, why?
Recently revealed statements by former UK Prime Minister Gordon Brown at the height of the banking crisis in October 2008 could give some insights into that question. An article on BBC News on September 21, 2013, drew from an explosive autobiography called Power Trip by Brown’s spin doctor Damian McBride, who said the prime minister was worried that law and order could collapse during the financial crisis. McBride quoted Brown as saying:
If the banks are shutting their doors, and the cash points aren’t working, and people go to Tesco [a grocery chain] and their cards aren’t being accepted, the whole thing will just explode.
If you can’t buy food or petrol or medicine for your kids, people will just start breaking the windows and helping themselves.
And as soon as people see that on TV, that’s the end, because everyone will think that’s OK now, that’s just what we all have to do. It’ll be anarchy. That’s what could happen tomorrow.
How to deal with that threat? Brown said, “We’d have to think: do we have curfews, do we put the Army on the streets, how do we get order back?”
McBride wrote in his book Power Trip, “It was extraordinary to see Gordon so totally gripped by the danger of what he was about to do, but equally convinced that decisive action had to be taken immediately.” He compared the threat to the Cuban Missile Crisis.
Fear of this threat was echoed in September 2008 by US Treasury Secretary Hank Paulson, who reportedly warned that the US government might have to resort to martial law if Wall Street were not bailed out from the credit collapse.
In both countries, martial law was avoided when their legislatures succumbed to pressure and bailed out the banks. But many pundits are saying that another collapse is imminent; and this time, governments may not be so willing to step up to the plate.
The Next Time WILL Be Different
What triggered the 2008 crisis was a run, not in the conventional banking system, but in the “shadow” banking system, a collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but are unregulated. They include hedge funds, money market funds, credit investment funds, exchange-traded funds, private equity funds, securities broker dealers, securitization and finance companies. Investment banks and commercial banks may also conduct much of their business in the shadows of this unregulated system.
The shadow financial casino has only grown larger since 2008; and in the next Lehman-style collapse, government bailouts may not be available. According to President Obama in his remarks on the Dodd-Frank Act on July 15, 2010, “Because of this reform, . . . there will be no more taxpayer funded bailouts – period.”
Governments in Europe are also shying away from further bailouts. The Financial Stability Board (FSB) in Switzerland has therefore required the systemically risky banks to devise “living wills” setting forth what they will do in the event of insolvency. The template established by the FSB requires them to “bail in” their creditors; and depositors, it turns out, are the largest class of bank creditor. (For fuller discussion, see my earlier article here.)
When depositors cannot access their bank accounts to get money for food for the kids, they could well start breaking store windows and helping themselves. Worse, they might plot to overthrow the financier-controlled government. Witness Greece, where increasing disillusionment with the ability of the government to rescue the citizens from the worst depression since 1929 has precipitated riots and threats of violent overthrow.
Fear of that result could explain the massive, government-authorized spying on American citizens, the domestic use of drones, and the elimination of due process and of “posse comitatus” (the federal law prohibiting the military from enforcing “law and order” on non-federal property). Constitutional protections are being thrown out the window in favor of protecting the elite class in power.
The Looming Debt Ceiling Crisis
The next crisis on the agenda appears to be the October 17th deadline for agreeing on a federal budget or risking default on the government’s loans. It may only be a coincidence, but two large-scale drills are scheduled to take place the same day, the “Great ShakeOut Earthquake Drill” and the “Quantum Dawn 2 Cyber Attack Bank Drill.” According to a Bloomberg news clip on the bank drill, the attacks being prepared for are from hackers, state-sponsored espionage, and organized crime (financial fraud). One interviewee stated, “You might experience that your online banking is down . . . . You might experience that you can’t log in.” It sounds like a dress rehearsal for the Great American Bail-in.
Ominous as all this is, it has a bright side. Bail-ins and martial law can be seen as the last desperate thrashings of a dinosaur. The exploitative financial scheme responsible for turning millions out of their jobs and their homes has reached the end of the line. Crisis in the current scheme means opportunity for those more sustainable solutions waiting in the wings.
Other countries faced with a collapse in their debt-based borrowed currencies have survived and thrived by issuing their own. When the dollar-pegged currency collapsed in Argentina in 2001, the national government returned to issuing its own pesos; municipal governments paid with “debt-canceling bonds” that circulated as currency; and neighborhoods traded with community currencies. After the German currency collapsed in the 1920s, the government turned the economy around in the 1930s by issuing “MEFO” bills that circulated as currency. When England ran out of gold in 1914, the government issued “Bradbury pounds” similar to the Greenbacks issued by Abraham Lincoln during the US Civil War.
Today our government could avoid the debt ceiling crisis by doing something similar: it could simply mint some trillion dollar coins and deposit them in an account. That alternative could be pursued by the Administration immediately, without going to Congress or changing the law, as discussed in my earlier article here. It need not be inflationary, since Congress could still spend only what it passed in its budget. And if Congress did expand its budget for infrastructure and job creation, that would actually be good for the economy, since hoarding cash and paying down loans have significantly shrunk the circulating money supply.
Peer-to-peer Trading and Public Banks
At the local level, we need to set up an alternative system that provides safety for depositors, funds small and medium-sized businesses, and serves the needs of the community.
Much progress has already been made on that front in the peer-to-peer economy. In a September 27th article titled “Peer-to-Peer Economy Thrives as Activists Vacate the System,” Eric Blair reports that the Occupy Movement is engaged in a peaceful revolution in which people are abandoning the established system in favor of a “sharing economy.” Trading occurs between individuals, without taxes, regulations or licenses, and in some cases without government-issued currency.
Peer-to-peer trading happens largely on the Internet, where customer reviews rather than regulation keep sellers honest. It started with eBay and Craigslist and has grown exponentially since. Bitcoin is a private currency outside the prying eyes of regulators. Software is being devised that circumvents NSA spying. Bank loans are being shunned in favor of crowdfunding. Local food co-ops are also a form of opting out of the corporate-government system.
Peer-to-peer trading works for local exchange, but we also need a way to protect our dollars, both public and private. We need dollars to pay at least some of our bills, and businesses need them to acquire raw materials. We also need a way to protect our public revenues, which are currently deposited and invested in Wall Street banks that have heavy derivatives exposure.
To meet those needs, we can set up publicly-owned banks on the model of the Bank of North Dakota, currently our only state-owned depository bank. The BND is mandated by law to receive all the state’s deposits and to serve the public interest. Ideally, every state would have one of these “mini-Feds.” Counties and cities could have them as well. For more information, see http://PublicBankingInstitute.org.
Preparations for martial law have been reported for decades, and it hasn’t happened yet. Hopefully, we can sidestep that danger by moving into a saner, more sustainable system that makes military action against American citizens unnecessary.
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200-plus blog articles are at EllenBrown.com.
Filed under: Ellen Brown Articles/Commentary
Jeff Connaughton found out Wall Street always wins in DC. (Photo: Courtesy of Jeff Connaughton)It's not always readily apparent how Wall Street pulls the strings in DC. Although sometimes it is indeed blatant, most of the financial "too big to fail" control of the capital is a bit more subtle.
Jeff Connaughton started off on Wall Street at Smith Barney. He gravitated to assisting Joe Biden in his ill-fated 1988 quest for the White House, and then onto Biden's senate staff. After clerking for DC Federal Appellate Judge Abner Mikva, he joined him when Mikva became Clinton's White House counsel. After that, he remained on the inside of DC power manipulation when he opened a K-Street lobbying firm – another member of the revolving door government.
When Biden was elected vice-president, Ted Kaufman, Biden's top aide, was appointed to replace him for two years in the Senate for the remainder of Biden's term. Kaufman, in turn, asked Connaughton to be his chief of staff. Together, they vowed to take on Wall Street. Given that Kaufman was not going to run for a full term, they figured that they had no need to depend on campaign funding that might influence their crusade.
In the end, they stood proud but defeated. Wall Street had prevailed almost entirely across the board.
Eventually, disillusioned and repulsed by the crony capitalism he witnessed and later even facilitated as a lobbyist, he retired from the Wall Street money zone in our nation's capital and moved to Savannah, Georgia.
Connaughton's gradual epiphany is our gain, as he reveals detailed accounts of how the Wall Street chess board works at the expense of sound financial law. Although he was not at the epicenter of power, he was close enough to smell the malodorous scents of a city bought and paid for.
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In the following excerpt from "The Payoff," Connaughton explains how former Democratic Senator, a Wall Street point man, undercut President Bill Clinton on even a minor amendment to hold corporations accountable for intentional deceptive securities fraud.
It's revealing in both how a key Democratic at the time was carrying Wall Street waters – and his loyalties were greater to the financial world than to the president of his party. Furthermore, it reveals that if Wall Street can defeat an amendment that just required honesty to potential stockholders about future company performance, then they were in charge down to the smallest detail.
WALL STREET VETOES THE PRESIDENT
It was past nine o'clock in the evening when President Clinton strode into the room. He was dressed immaculately in a suit and tie, yet he strongly resembled an older version of the Arkansas kid he'd once been, perhaps because of the way his face lit up when he saw Bruce Lindsey, his long-time friend and deputy White House counsel. It was as though [White House Counsel Ab] Mikva and I weren't even there.
The president asked Bruce whether he remembered an old visitor from northwest Arkansas. "Well he was here last night, and I offered to let him stay in the Lincoln Bedroom, and you know what he said to me?" Clinton affected an even deeper Arkansas accent: "Mr. President, I know you think Lincoln was a great president, but if he was so great, why'd we even have to fight that war?" We all laughed, and Clinton continued, "Can you believe that? Half the country wants to see the Lincoln Bedroom, and he didn't want to stay in it."
Clinton turned off the mirth like a faucet. He asked Bruce: "So what have we got?" What we had, as Bruce explained, was the Private Securities Litigation Reform Act of 1995, now before the Senate. A corporate coalition—Wall Street banks and brokers, accountants, insurers, Silicon Valley—wanted the bill, which would make it more difficult to prove securities fraud, passed intact. The bill's opponents felt it would shield securities fraud by these companies. Particularly troublesome to them were provisions regarding the statements companies make about future performance.
The bill's opponents felt that its language threatened their ability to sue for securities fraud when a company's executives talked up the price of its stock by issuing misleading forecasts while simultaneously selling their own shares. Those behind the bill, however, wanted to make it harder to prove wrongdoing in such cases. According to them, whenever a stock's price dropped, securities class-action lawyers quickly filed suits against companies in the hope that they would settle out of court rather than risk losing at trial. Wall Street and others viewed these suits as extortion. They wanted increased protection in such cases, but the bill's opponents felt that the proposed legislation gave Wall Street and the others too much leeway. Mikva, Bruce, and I believed some adjustment may have been needed, but the proposed bill set an almost impossibly high bar, giving Wall Street and the others too much protection. The White House was under tremendous pressure.
Just the day before, White House Deputy Chief of Staff Erskine Bowles, after getting an earful from a number of CEOs, had taken the West Wing stairs two at a time on his way to Mikva's office. From my desk outside the office, I heard Bowles practically yell, "What the hell are y'all doing to make Silicon Valley so upset about this bill?" Wall Street, seeking to hide the blue stock-trader jackets of high finance behind the white lab coats of high tech, had wisely pushed Silicon Valley in the vanguard of lobbying the White House. What we're doing is standing up for a fair outcome, I thought to myself, as Mikva closed the door behind Bowles.
Afterwards, I begged Mikva to ask to see the president again. I was determined that the White House not undercut Arthur Levitt, the chairman of the Securities and Exchange Commission, who was standing up to the bill's authors to force modifications. Levitt was trying his best to gain revisions to the bill so it wouldn't eviscerate private securities-fraud actions, an important supplement to the SEC's own enforcement efforts.
Mikva asked for time on Clinton's schedule, and I quickly banged out a briefing memo for him. When Clinton's scheduler finally called, much later that night, Mikva turned to me and said, "Come on." This would be the only time I would personally brief the president on an issue.
The meeting, which Bruce Lindsey also attended, was in Clinton's personal study in the White House mansion rather than in the Oval Office. That was a plus. Few staffers got to see the study, with its famous painting of Lincoln and his Union Generals with a rainbow in the background. The minus was at that late hour no official photographer would be on duty. So there would never be a picture of me seated on the couch, Leaning Forward to Educate the President on a Momentous Issue.
Bruce provided an overview of the standard in the Senate bill, and I filled in the specifics. The standard required a showing of three elements, connected by an "and." This meant a plaintiff would have to prove all three of the elements to get past a defense motion to dismiss the suit. The president looked at Bruce and me and said "Did y'all say 'and'? They have to show the first two and the third?"
"Yes, Mr. President."
"Well that's just too high." I recognized the "high" as pronounced by a fellow Southerner, with mouth wide open to give the I its full effect. "I've stood out there in Silicon Valley, and I've heard them go on and on about how bad some of these class action suits are, but I can't be in a position where it looks like I'm protecting securities fraud." Clinton even started to mimic the voice of an imaginary radio ad against him on the issue. I was urging him to take this position, so I didn't point out that it was highly unlikely any Republican opponent would try to use it against him.
"I can call Chris if you need me to," the president said, referring to Senator Chris Dodd of Connecticut, the Senate bill's author and then-current chairman of the Democratic National Committee. Dodd was Corporate America's point man in the Senate effort to curb class action securities action suits. Bruce said he'd call him and would keep the president informed.
As the meeting broke up, Clinton told Mikva and Bruce to go next door and say hello to Hillary, the First Lady, who was having dinner with Ann Landers, an old friend of Mikva's from Chicago. We left the president in his study.
While Mikva and Bruce went into the dining area, I stayed in the hallway, amazed that I was standing alone in the White House living quarters. A couple minutes later, President Clinton exited the study and smiled as he approached me. "Go on in there. Don't be shy," he said, again prolonging the vowel in "shy" a whole note.
"Thank you, Mr. President. I don't really need to meet Ann Landers," I said.
Then, in a moment I'll never forget, the President of the United States looked me in the eye and said, "You think I'm doing the right thing, don't you?" My passion apparently had shown during the briefing. Like most who had trod those historic halls, I turned out to be a yes-man: "Absolutely, Mr. President. You can't undercut the Chairman of the Securities and Exchange Commission on a question of securities fraud."
President Clinton reflected, "Yeah, that's right. And Levitt is an Establishment figure, right?" Clinton was trying to reassure himself that the heat he'd take from Corporate America was worth it because even Levitt, one of its own, thought the legislation went too far. If the President has to think very hard before taking on this kind of fight, I thought to myself, imagine how disproportionately unlikely it is for Washington's lower castes to dare do the same.
"Yes, Mr. President. That's right."
That night, I couldn't sleep. It was intoxicating to have talked to the President. I knew I'd be meeting the next day with a dozen staffers from various White House offices—National Economic Council, Domestic Policy, Legislative Affairs, the Vice President's office and even the first lady's staff—who had been weighing in on this issue. I'd been arguing with all of them. Most of them had wanted to appease Silicon Valley because its support had burnished the images of Clinton and Gore as forward-thinking, pro-business Democrats.
When the meeting began the next morning, I said: "We met with the president last night," and I laid out his decision. For the first and only time in my life, I felt presidential power surge through my body. It was electric. Every staffer who just the day before had been an obstacle now lay down like a forest blown flat by a nuclear blast. There was no further discussion. Mikva, Bruce, and I had the president's decision. It was time to implement.
I called a staffer in Senator Paul Sarbanes's office. I briefed him that if Sarbanes would offer an amendment that would preserve the viability of a securities-fraud action against company executives who had "actual knowledge" that a forward-looking statement was fraudulent, the White House would support it. Sarbanes's staffer didn't believe me. Just watch, I said. I'll get you a letter within an hour. Move forward with the amendment.
Sarbanes offered his amendment. As he spoke in the well of the Senate, he held aloft a letter from Mikva stating the White House strongly supported this amendment, which, to be honest, was hardly a radical notion. All it said was that company executives who knowingly lie about future performance won't be protected from securities-fraud lawsuits.
The vote began, and it looked for a while like we were going to win. Then Dodd started working his fellow senators. It soon became apparent it was going to be a tie. Finally, Dodd voted against the amendment, which failed by one vote.
Bruce had called Dodd and told him that President Clinton had personally requested this change. Yet Dodd still opposed the amendment. He sided with Republicans against a vast majority of Democratic senators. Dodd, for years one of the biggest recipient's of financial services industry campaign contributions, was too deeply in the pocket of Wall Street and the accountants to go against them. Admittedly, many of the Democratic senators who supported the amendment had long received campaign contributions from securities class-action lawyers.
Dodd's excuse was that the issue could be worked out when the slightly different versions of the bill passed by the House and the Senate were reconciled in conference before being sent to the president. Bruce was deeply disappointed that Dodd had voted against the president. I was outraged. It was my first experience of how Wall Street, accountants, and insurance companies could combine to bend Washington to its will. I knew the accounting industry—because it had activated its professional members in virtually every state—had been a particularly effective fundraising machine. Partners at the big accounting firms had spoken about the bill with hundreds of members of Congress and dozens of senators at campaign donor events across the country. Accountants were often the deep pockets targeted by class-action lawyers after the fraudulent company those same accountants had audited each year had turned feet upwards.
My role at this stage became to negotiate a compromise provision while reporting to Bruce. I never met with a senator or representative or their staff; all of my negotiations were directly with the corporate coalition. Because I wasn't an experienced attorney (I'd graduated from law school only a year earlier), I relied on input from two respected academics: John Coffee of Columbia Law School and Donald Langevoort, then at Vanderbilt Law School. I called them frequently for objective advice on how judges would apply the various drafts of the provision.
During the negotiations, I was invited to hold a video conference call with the general counsels of Apple, Hewlett Packard, and five other Silicon Valley firms. At one point, one of the general counsels said, "Jeff, where is all this fraud you're so worried about?" I'm not claiming to have been clairvoyant. But Enron, WorldCom, Arthur Andersen, and other prominent cases of systematic fraud would soon prove that questioner's confidence in corporate rectitude to be ill-founded.
After weeks of discussion, I offered a compromise. The White House would agree to a two-pronged approach. The standard would be "actual knowledge" that a forward-looking statement was false, or a higher "willfulness" standard if the statement had been accompanied by "bespeaks caution" language: in other words, if the statement was followed by a description of risk factors and a warning to investors not to rely on the prediction's accuracy.
The coalition never accepted or rejected my proposal and the impasse dragged on for months. Mikva, who just a year before had hired me as one of his judicial clerks, even joked at one of the Counsel's office staff meetings, "Who knew that Jeff would become a household name on Wall Street?"
By this point, Mikva, Bruce, and I had also established that the White House was opposed to the product liability reform bill—which targeted the standards governing private suits for negligence against manufacturers of faulty products—making its way through Congress. Mikva was fielding phone calls from a handful of Democratic senators, including Jay Rockefeller, who were furious that White House lawyers were placing roadblocks in front of that bill, too.
Meanwhile, Arthur Levitt at the SEC had been under siege to soften his position on the securities-fraud bill. During a visit to meet with Mikva, Levitt told me how personally offended he was by the insulting language and the threat of SEC budget cuts that Dodd and other senators had used when they berated him by telephone. These were important issues; the SEC should've played a leading role in crafting the standards in the bill. Instead, Congress was bullying the SEC chairman to support legislation slanted toward the interests of a corporate coalition that had raised millions of dollars for members of the House and Senate.
The bill emerged from conference. Now the question became would Clinton sign it? Mikva, Bruce, and I lobbied hard for a veto. We encouraged independent legal scholars—who didn't have a dog in the fight—to write letters to Clinton. As it turned out, Clinton was very close to John Sexton, the president of New York University and a securities law expert. Sexton spoke to the President and urged him to veto, which Clinton did. Some have speculated that Clinton wanted to have it both ways: he vetoed the bill, but also signaled to Dodd that he wouldn't be overly displeased if two-thirds of Congress voted to override it. I don't know whether that's true or false.
Regardless, that's exactly what happened. Even Ted Kennedy, the great champion of civil rights and liberties, who had assured plaintiffs' groups that he was with them, flipped and went along with the corporate coalition and voted to override Clinton's veto. For Bruce, Mikva, and me, the defeat was devastating. The next morning, Dodd was quoted on the front page of the Washington Post as saying that Clinton's veto had been the result of "poor staff work." For unrelated reasons, Mikva left the White House a short time later. Because he'd brought me with him, I followed him out the door.
In his second term, President Clinton made mistakes—deregulating the financial services industry, supporting the repeal of the Glass-Steagall Act, and leaving derivatives transactions unregulated—that would, within a decade, have devastating consequences. Once upon a time, though, in 1995, we had a president who—with the support of his advisors—was willing to do the right thing and stand up to Wall Street, which even then had already taken over most of Washington.
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Copyright by Jeff Connaughton. Not to be reproduced with permission of the author or Anderson Literary Management, LLC.
This week marks the tenth anniversary of the “Shock and Awe” US invasion of Iraq.
The ravages of that invasion continue at home and in Iraq, the US is still at war in Afghanistan (troops and contractors remain in Iraq) and unofficially waging war on countries like Pakistan and Yemen, is aggravating aggression with North Korea as part of an Asian pivot encircling China, is putting more military into Africa and Obama is in Israel where he sings a duet for war with Netanyahu against Syria and Iran. Meanwhile, poverty, unemployment and homelessness continue to grow in the US with threats of austerity for everything except the national security state.
When we occupied Freedom Plaza in October, 2011, we made the connection between US Empire and the corporate control of our political process, between unlimited military spending and cuts to necessary domestic programs. We understood the misreporting in the corporate media about the Iraq War. Kathy Kelly from Voices for Creative Nonviolence was in Baghdad during Shock and Awe. On this tenth anniversary, she reminds us of the horrible price of war and warns of never ending war as the US seems to edge toward more war in the region. The need to understand those connections grows more important each day as we see the costs of war affecting people on every level.
And this report details the tremendous costs in loss of life, the US legacy of cancer in Iraq from poisons we brought there, the number of refugees, orphans, widows and people now living in poverty. Violence continues in Iraq including a series of attacks on the tenth anniversary that left 98 people dead and 240 wounded.
Iraq War veteran Tomas Young is bringing increased attention to the human costs at home as he prepares to die from his wounds. Over 130,000 Iraq vets have been diagnosed with PTSD. Over 250,000 are suffering from traumatic brain injuries. The ongoing costs of caring for veterans is expected to bring the total cost of the Iraq invasion alone to $6 trillion. And, vets fight homelessness, sometimes with the aid of Occupy activists who protest to save the homes of vets. Veterans are also experiencing unemployment and medical debt.
These are some of the costs of war, not to mention that the US Military is the greatest polluter on the planet.
As we join the national week of actions in solidarity with the Strike Debt Rolling Jubileeand the coast-to-coast actions in support of the Tar Sands Blockade, let us remember that all of these issues are connected. As our allies at Veterans For Peace have been saying lately it is time to Stop the War on Mother Earth. VFP has been joining with groups like Radical Action for Mountain People’s Survival and the Tar Sands Blockade to protect the planet.
The breadth of opposition to the extraction economy that undermines the ecology of the planet is shown by the people involved in the Great Plains Tar Sands Resistance and the “Sacred Journey for Future Generations,” a march across Canada by hundreds in support of the Idle No More Movement. The fracking movement has also shown the kind of culture of resistance needed to stop hyrdo-fracking as we saw in Watkins Glen, NYthis week.
Let us remember that there is strength in solidarity and all these issues are connected by policies that put corporate greed before human needs and protection of the Earth.
Solidarity has produced some real successes recently. In the UK, 21 climate activists were being sued by the energy giant EDF for shutting down an energy plant for 8 days. But when 64,000 customers signed a petition in support for the “No Dash for Gas” activists; EDF dropped its civil suit. Criminal charges remain, so solidarity with the activists continues to be important. And in Cyprus, the EU tried to impose a tax on the population in exchange for assistance with their debt. Massive protests resulted in the Cypriot Parliament saying no to the tax.
The plague of Wall Street banking affects people across the globe. Wall Street was a key focus of Occupy. This week, activists in Philadelphia explained their protest against Wells Fargo which led to their arrest and acquittal, indeed being thanked by the judge for their actions. This was one of five recent court victories for Occupy. Now, people are standing up in New York with a class action lawsuit against the abusive stop and frisk searches which had beenprotested by occupiers and others.
Single payer groups are joining with Strike Debt to fight medical debt and our debt-based society. Chicago Teachers invited Occupy Wall Street to teach them protest skills. And, the Imokalee workers are walking across Florida to protest low wages. In Maryland, Fund Our Communities is holding a day long“Prosperity Not Austerity” Bus Tour that links issues such as health care, education and food security with the cost of war. The Strike Debt Resistor’s Manual provides a guide for communities to learn more about ways that debt affects them and what they can do about it.Perhaps you see opportunities for making connections around issues where you are?
It is through these connections that we can grow stronger and become more effective. And it is through these connections that we can have real conversations about the root causes of our shared situations, about the real needs that we have and how we can meet them together and build a unified movement that can say “No” to war at home and abroad. Let us not be afraid to talk about US imperialism and the effects of capitalism and a debt-based world. Let us look for the truth and not be lied into another war in Syria, Iran or North Korea. And let us all join together in the urgent need for climate justice.
We can succeed too. As we make connections and build solidarity, we are preparing for the day when we will shift power to the people. An important issue that needs your attention, particularly next week, is the hunger strike in Guantanamo. Don’t let these prisoners die in vain. Witness Against Torture is calling for a week of national solidarity actions starting March 24th. Join them.
Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and were organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.
The economic news this week highlights what happens when governments are unable to confront the root cause of the financial collapse – the risky speculation and securities fraud of the big banks. What happens? They blame the people, cut their benefits, tax their savings and demand they work harder for less money.
In the United States there have been no criminal prosecutions for securities fraud in the big banks. Just as the Justice Department has made it clear that the big banks are too big to jail because doing so jeopardizes the stability of the banking system; financial fraud investigator Bill Black points out that the SEC cannot institute fines that are too big for the same reason. “The art is to make the number sound large to fool the rubes, but to insure that the fine poses only a modest inconvenience to our ‘most reputable’ fraudulent banks.” So, the SEC trumpets “more than 150 firms and individuals, with sanctions totaling $2.7 billion.” Black points out that this number sounds big, but it isn’t compared to the losses caused by the fraud epidemic in the US which are well in excess of $15 trillion. A trillion is a thousand billion. Are we, ‘the rubes’ or do we know that our government is in cahoots with big finance?
In fact, the big banks have been engaged in all sorts of nefarious activity for a long time, asWashington’s Blog points out with this jaw-dropping list of crimes, and are rife with fraud. And, this week the biggest of the too big to prosecute, JP Morgan, had its financial fraud and disrespect for government on display when the Senate Banking Committee issued a massive 300 page indictment, errr report, documenting the $6.2 billion “London Whale” scandal. The report traces the scandal right to the top, CEO Jamie Dimon, and shows how the bank lied to bank examiners and investors. Experts state the obvious from this evident fraud; investigations and fines, and possibly a large monetary settlement are possible but a prosecution by DOJ remains unlikely. Obvious because everyone knows the game in Washington is one of no criminal prosecutions.
Although, another too big to jail bank, Goldman Sachs did have a loss in court this week, when the US Supreme Court refused to overturn a Court of Appeals decision requiring the bank to defend a civil suit by investors claiming securities fraud. There are lots of hurdles ahead, but this provides a glimmer of hope.
This week our too big to prosecute philosophy of the (lack of) Justice Department was shown to apply to foreign banks as well. The second largest bank in Germany got a pass when it offered a job to an IRS agent who cut its tax burden. Again, the rubes were told that Commerzbank paid $210 million in tax liability, sounds good, but it was only 62% of what it owed. The day after the agreement the IRS officer was offered a job at Commerzbank. The agent pled guilty to charges this week, but the bank and the officers involved were not prosecuted.
Europe is showing us what happens when government fails to confront the big banks – the people pay and the economy collapses into depression. Is this our future?
The horror story of the week for struggling workers and poor countries has to be Cyprus. The country was being built up as a big banking area but when it all went sour, they went to the EU for a bailout. The EU hemmed and hawed and finally agreed, but with a very big requirement which takes structural adjustment to a new level of abuse – they required “a one-off 10 percent tax on savings over €100,000 and a 6.75 percent tax on small depositors. Senior bank bondholders and investors in Cyprus’ sovereign debt will be left untouched.” [See update below.]
This is causing a run on the banks in Cyprus, but is also raising red flags in many other struggling Euro countries. Can bank accounts in Greece, Italy, Spain, Portugal or any other country in Europe be safe? Are more and more people going to take their money out of the banks and keep it under their mattress? It may seem like the sane thing to do but a run on the banks will just weaken shaky banks further.
Leaders of the EU, IMF and Germany are all staying with their demand for more austerity and greater productivity (i.e. lower wages for greater output). At the same time they are urging bailout of the banking system which remains weak. This same leadership recognizes their approach may lead to a “social explosion” and Standard & Poors is also warning that the situation is socially explosive. The reality is that southern Europe is essentially in a depression and Germany, EU and IMF are demanding that they squeeze more money out of impoverished people.
In Washington, DC, the two Wall Street parties keep talking about cuts to the budget – austerity measures that will hurt the old, the poor, the young and working class – and disregard the fact that government spending is actually not the problem. While they push austerity, they remain silent as big business interests go into their sixth year of big tax avoidance. Paul Buchheit summarizes “For over 20 years, from 1987 to 2008, corporations paid an average of 22.5 percent in federal taxes. Since the recession, this has dropped to 10 percent – even though their profits have doubled in less than ten years.” He highlights the worst of the worst. On top was Obama’s jobs czar, General Electric.
There is some sanity, but not much, among the US financial elite. Dallas Fed Chairman Richard Fisher told the Conservative Political Action Conference that it was time to break up the big banks and end the crony capitalism that protects them. Liberal Democrat Sherrod Brown has introduced a bill to do just that. Of course it is opposed by the administration so it will probably not go anywhere.
Instead, President Obama is pushing the anti-democratic Trans Pacific Partnership which is a gift to the big banks and other transnational corporate interests. For the big banks it will require countries to let capital flow in and out without restriction, not allow the banning or regulation of risky investments like derivatives and credit-default swaps and will prevent the formation of much-needed public banks. Our Wall Street government continues to serve Wall Street first at the expense of the people’s necessities.
All of this shows it is time to remake the banking system: hold security fraud violators criminally accountable, break up the too big to jail banks, support community banks and credit unions and create public banks at least at the state and local level; and make the Fed transparent and accountable to democracy. This would be a transformed banking system that would serve the people and the economy, move toward economic democracy and take power away from corrupt Wall Street. Failure to confront and remove the plague of Wall Street-centered banking will continue to infect the entire economy. Is Cyprus in our future? It doesn’t have to be.
Update: On Tuesday, March 19, the Parliament in Cyprus rejected the tax on bank accounts after mass protests by the people. This leaves Cyprus in a mess with no bailout and no money to contribute to a bailout. Will Russia invest in future oil found recently off the coast of Cyprus in return for the Parliament protecting $30 billion in Russian deposits that are in Cyprus banks? Will Germany and the EU bend, not requiring Cyprus to raise money for the bailout? Will Cyprus leave the EU? Lots of questions without answers right now, but the banks in the country will remain closed until they figure it out.
In testimony before the Senate Judiciary Committee last week, US Attorney General Eric Holder made an extraordinary admission.
Responding to questioning from Republican Senator Chuck Grassley, who noted that there had been no major prosecutions of financial institutions or executives by the Obama administration, Holder said: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them, when we are hit with indications that if we do prosecute—if we do bring a criminal charge—it will have a negative impact on the national economy, perhaps even the world economy…”
In other words, major banks are so economically important that, according to Holder, it is impossible to prosecute them for criminal activity. They are above the law.
This exchange occurred during a discussion of the Justice Department’s settlement last month with British-based HSBC, the world’s third-largest bank. HSBC had been charged with laundering billions of dollars for Mexican and Colombian drug cartels. In exchange for avoiding charges, HSBC agreed to pay $1.9 billion, or roughly two months’ profits. Top US officials explicitly vetoed any criminal charges, even on lesser counts than money laundering.
HSBC is only the latest bank to have received a free pass. Earlier this year, ten financial firms agreed to pay $3.3 billion in cash to settle charges of mortgage fraud: amid the housing market collapse, they had employees fraudulently sign off on thousands of mortgage foreclosures a month.
Last year, the government ended an investigation into Goldman Sachs without charges over its promotion of mortgage-backed securities at the height of the speculative bubble—even as Goldman Sachs bet against the assets itself.
In 2010, the Obama administration reached a settlement with Wachovia Bank on similar charges as those brought against HSBC: laundering billions of dollars of drug money, in this case for the Sinaloa Cartel. The fine was $160 million, less than 2 percent of the previous year’s profits.
Many similar arrangements could be cited. In each case, a check is signed—if there is any punishment at all—and business goes on as usual. Whatever money the financial institutions lose is more than balanced by their take of the $85 billion funneled into the markets every month by the US Federal Reserve.
In justifying the administration’s refusal to prosecute, Holder cites the banks’ immense power over economic life. That these institutions exercise dictatorial control over the economy and engage in unchecked criminal behavior is not an argument for refusing to prosecute them, however. Rather, it is an argument for expropriating them, taking them out of the hands of the criminals that run them, and placing them under the democratic control of the working class.
In its dealings with these institutions, however, the government acts as a direct representative of the financial aristocracy. First Bush and then Obama justified the bank bailouts after the 2008 crash by citing the need to “save the economy.” Since then, millions of jobs have disappeared. To pay for such bank bailouts, governments around the world are implementing brutal austerity measures, wiping out public education, health care, retirement and other social programs.
A stench of corruption hangs over the whole process. There is hardly a single Obama administration official in a position important to the banks that does not have previous ties to Wall Street. These include:
Jacob Lew was confirmed this month by the Senate as Obama’s new treasury secretary. Lew, Obama’s former chief of staff, is also the former chief operating officer of Citigroup’s Alternative Investment Unit, which bet against the housing market as it collapsed.
Mary Jo White is Obama’s pick to head the Securities and Exchange Commission. White, who will likely be confirmed easily after hearings scheduled for today, is a former attorney at the corporate law firm Debevoise & Pimpleton, where she defended Wall Street banks and executives, often against investigations by the SEC itself.
Then there is the extraordinary case of David S. Cohen and Stuart Levey. As members of corporate law firm Miller Cassidy in the 1990s, they defended banks and other corporations from white-collar criminal charges, including money laundering. They passed in and out of the Treasury Department and private practice.
In 2004, Levey joined the Bush administration as undersecretary for terrorism and financial intelligence, responsible for overseeing narcotics trafficking and money laundering. He left in March 2011 to become HSBC’s chief legal officer. His deputy at the treasury department, and his successor, was none other than David S. Cohen. The two ex-colleagues would have both been heavily involved in forging the recent deal to settle HSBC’s money-laundering charges.
No banks or executives are prosecuted, because the individuals who would do the prosecuting and the individuals who would be prosecuted are, more or less, the same people.
Holder made his statements on the banks at the same hearing in which he laid out the Obama administration’s position that it has the authority to assassinate citizens within the United States without judicial review.
The coming together of these two statements is not simply coincidental. There is a class logic at work. With the active assistance of the state, the financial aristocracy is engaged in a looting operation, and criminality has become an integral part of the mode of wealth accumulation.
Anticipating social opposition, this same aristocracy is engaged in a conspiracy against democratic rights. While the banks and executives cannot be touched, anyone opposing these policies will face repressive police-state methods.
The political and economic system is rotten to the core. The only rational and appropriate response to such a state of affairs is to overturn this system, capitalism, and institute a new form of social organization based on the principle of social need—that is, socialism.
The active involvement of the state and all its institutions and parties in the criminal operation makes clear that the interests of the working class cannot be advanced except through a mass social and political movement, which aims to replace the government of the banks with a government of, by and for the working class.
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
Since we’ve bailed out the 10 largest banks $83 billion this year alone, should they give it back to us by paying into the U.S. Treasury the amount of this year’s sequester? After all, it’s the same amount.
On February 20th, Bloomberg News editors headlined, “Why Should Taxpayers Give Big Banks $83 Billion a Year?” and issued the first-ever thorough and current analysis of the taxpayer-subsidy to the Wall Street mega-banks. They found that this subsidy is $83 billion this year, but they made no note of the fact that this amount is only $2 billion less than this year’s sequester cuts are estimated to be, so that all that would need to be done, in order to avoid those cuts, would be to have those mega-banks that we bail out every year forego their subsidy from taxpayers, for just one year. Unfortunately, this would be easier said than done.
That $83 billion subsidy this year is, according to Bloomberg’s, also approximately the amount of profits that those banks are “earning” this year. So, if the mega-banks wouldn’t refund it out of what we gave them last year, then they could just refund it by paying to us – who, after all, bailed out their stockholders enormously in 2009 – the “profits” that they made this year.
The editors at Bloomberg News (hardly a bunch of populists) calculated this $83 billion figure based upon their analysis of the figures in a sadly ignored but rigorous study that had been done by IMF economists, a study that had been issued months back, in May 2012, and which was titled “Quantifying Structural Subsidy Values for Systemically Important Financial Institutions.” As Bloomberg’s editors summarized the reason for this ongoing federal subsidy: “The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail,” due to the special Government backing for too-big-to-fail (TBTF) institutions.
The taxpayer-funded annual subsidy to these TBTF banks has never before been calculated as to its actual annual dollar-value, but this rigorous IMF study finally provided the means for doing that. Bloomberg’s summarizes: “What if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?”
“The top five banks – JP Morgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits.”
This $83 billion, in other words, is the current value of the annual subsidy received by America’s 10 mega-banks, from our Government’s special treatment of them as “Systemically Important Financial Institutions” (i.e., fully guaranteed by U.S. taxpayers, irrespective of the normal $250,000-per-account limit in savings and checking accounts), or TBTF institutions, which the other 7,053 (out of the total 7,063 FDIC-insured) banks are not – other banks can fail without destroying the U.S. economy. In a certain sense, these are the banks where the super-rich can enjoy FDIC protection without that $250,000-per-account limit, and can even gamble under the protection of that comforting umbrella.
The Dallas Federal Reserve has issued a superb study showing that even at the peak of the crash, when the highest percentage of loans were in arrears, which had occurred around January 2010, only around 3% of loans were in arrears at banks that had “less than $1 billion” in assets, whereas banks that had “over $250 billion” (and only 12 banks are in that august category) were experiencing around 12% of loans in arrears. The following chart on page 7 of the Dallas Fed’s study showed that the 2008 crash was virtually entirely a Wall Street (or mega-bank) phenomenon:
The big-ten banks are the ones that benefited from that $83 billion handout this year, and, as was noted, they did so because they are TBTF. Because these banks (basically the top line there) are TBTF, their top executives can have them engage in, essentially, high-risk gambling (such as “no-doc” or “liars” loans) with the vast sums that are under their command, since the people who buy stock in these banks know in advance that if these high-risk bets fail, then U.S. taxpayers (we) will eat their losses. Consequently, the only incentive for CEOs of these banks is to increase their bank’s size even more, so as to increase their bonuses even bigger, since these executives don’t really need to worry about risk (except as a PR issue, perhaps, but they hire PR people – including politicians – to deal with that).
When Wall Street got bailed out to the tune of trillions of dollars by the U.S. Treasury, and the Federal Reserve (and with Fannie Mae, and Freddie Mac serving as a conduit between them and Wall Street), this left very little remaining for the Government to spend on the rest of the economy, such as infrastructure and education (the kinds of things that we supposedly pay taxes for), which might be why the recovery has been so slow, from the 2008 crash that was caused by Wall Street’s federally-insured gambling with the trillions that they control of everybody else’s money. If so, then this sequester is a result of Wall Street’s failed bets: instead of cutting back on the subsidy to Wall Street, the politicians in Washington have chosen to cut back on government services to the public. Politicians like Barack Obama and his team, and the George W. Bush team before them, and all of the supporters of TBTF in Congress, made the basic choice to subsidize the mega-banks instead of the needy or the deserving, and this is also why the “Top 1% Got 93% of Income Growth as Rich-Poor Gap Widened” under Obama. It really is a plutocracy; that’s precisely the way today’s USA is functioning – no doubt about it.
There were other possible ways of dealing with the 2008 crash than to continue to throw trillions of dollars at Wall Street, but that is what “our” Government did, and continues to do, because, essentially, this is what the super-rich pay them to do.
Bloomberg’s $83 billion/year finding here is so vast that it suggests that the U.S. is a crony-capitalism, hardly an authentic capitalism. The “cronies” are these giant Wall Street firms and their “counterparties” (namely, each other, plus Fannie & Freddie and the government officials and lobbyists, who all serve Wall Street), and also the stockholders and bondholders in these huge financial institutions: the mega-banks that would otherwise be “cleaned out” but for the TBTF backing they receive from U.S. taxpayers. We’re getting reamed by Wall Street and K Street, and this is the first estimate of the actual circumference of that reaming. The Dallas Fed’s study says that this reaming must stop, and that, despite what the Federal Reserve itself says, the mega-banks must be broken up. The easiest way to do that might be for Congress to pass a law that prohibits the largest ten banks from participating in the FDIC. That would transform the entire financial system, but Wall Street would hate it because it would yank their honey-pot.
Because Wall Street’s Mayor Michael Bloomberg made his roughly $20 billion fortune by serving the mega-banks, this editorial from Bloomberg News constituted remarkable news, in and of itself.
One other study of “Valuation in Systemic Risk at U.S. Banks During 1974-2010” found that the taxpayer-subsidy was $300 billion in 2008 but supposedly near zero after 2009. Matt Levine linked to that study on 7 May 2012 under the optimistic headline “Markets Are Telling Us That Too Big To Fail Is All Better.” The editors at Bloomberg ignored that study. The financial expert Yves Smith, when I called to her attention that that study, which she had relied upon, zeroed-out the megabanks’ systemic risk after 2009, wrote in reply, “I didn’t realize they were doing this using bank equity volatility as the proxy. He did not make clear how he was going to do about it in the talk. Methodologically, that’s crap.” So, Bloomberg’s editors have issued the only reliable study that has ever been done on the size of this important subsidy.
Bloomberg’s editors were courageous to do this, and they are already getting flak for having done it. On February 24th, they issued a follow-up, “Remember That $83 Billion Bank Subsidy? We Weren’t Kidding,” and explained in more detail how they had calculated this $83 billion sum. They explained why the $83 billion estimate was far likelier an underestimate than an overestimate.
Anyway, this subsidy is a major problem, probably at least as big as the sequester, which it might have helped to cause.
On February 28th, Yves Smith posted at her “Naked Capitalism” website, “Occupy the SEC, Frustrated With Regulatory Defiance of Volcker Rule Implementation Requirements, Sues Fed, SEC, CFTC, FDIC and Treasury,” and she linked to a new legal filing in the Eastern District of New York “over the failure of the relevant financial regulators to issue a Final Rulemaking as stipulated in Dodd Frank.” She summarized what the evidence clearly showed: “Not only are the[y] out of compliance [with the Dodd-Frank Act’s Volcker Rule provision for these regulators to draft rules restricting the mega-banks from gambling with investors’ money], they [the regulatory agencies over the mega-banks] appear to have no intent of finalizing the Volcker Rule.” She went on to say: “Much of the public still fails to understand the degree to which the ruling classes no longer represent their interests. Oh, they may resent the banks, and they may also hate Congress, but most people deeply need to believe they live in a system that is fair and where business and political leaders (some if not all) still deserve respect and admiration.”
Meanwhile, click here to find out why Republicans want the sequester, even though economists, the International Monetary Fund, and even the Congress’s own research service (the Congressional Research Service), have amply warned that it will be destructive to the nation.
The president's "sequester" offer slashes non-defense spending by $830 billion over the next ten years. That happens to be the precise amount we're implicitly giving Wall Street's biggest banks over the same time period.
We're collecting nothing from the big banks in return for our generosity. Instead, we're demanding sacrifice from the elderly, the disabled, the poor, the young, the middle class - pretty much everybody, in fact, who isn't "too big to fail."
That's injustice on a medieval scale, served up with a medieval caste-privilege flavor. The only difference is that nowadays injustices are presented with spreadsheets and PowerPoints, rather than with scrolls and trumpets and kingly proclamations.
And remember: The White House represents the liberal side of these negotiations.
The $83 billion 'subsidy' for America's ten biggest banks first appeared in an editorial from Bloomberg News - which, as the creation of New York's billionaire mayor Michael Bloomberg, is hardly a lefty outfit. That editorial drew upon sound economic analyses to estimate the value of the US government's implicit promise to bail these banks out.
Then it showed that, without that advantage, these banks would not be making a profit at all.
That means that all of those banks' CEOs, men (they're all men) who preen and strut before the cameras and lecture Washington on its profligacy, would not only have lost their jobs and fortunes in 2008 because of their incompetence - they would probably lose their jobs again today.
Tell that to Jamie Dimon of JPMorgan Chase, or Lloyd Blankfein of Goldman Sachs, both of whom have told us it's imperative that we cut social programs for the elderly and disabled to "save our economy." The elderly and disabled have paid for those programs - just as they paid to rescue Jamie Dimon and Lloyd Blankfein, and just as they implicitly continue to pay for that rescue today.
Dimon, Blankfein and their peers are like the grandees of imperial Spain and Portugal. They've been given great wealth and great power over others, not through native ability but by the largesse of the Throne.
Lords of Disorder
Just yesterday, in a rare burst of candor, Dimon said this to investors on a quarterly earnings call: "This bank is anti-fragile, we actually benefit from downturns."
It's true, of course. Other corporations - in fact, everybody else - has to survive or fail in real-world conditions. But Dimon and his peers are wrapped in a protective force field which was created by the people, of the people, and for ... well, for Dimon and his peers.
The term "antifragile" was coined by maverick financier and analyst Nassim Taleb, whose book of the same name is subtitled "Things That Gain From Disorder." That's a good description of JPMorgan Chase and the nation's other megabanks.
Dimon's comment was another way of saying that his bank, and everything it represents, is The Shock Doctrine made manifest. The nation's megabanks are arbitraging their own failures, and the economic crises that flow from those failures.
These institutions are designed to prey off economic misery. They suppress genuine market forces in order to thrive, and they couldn't do it without our ongoing help. The Treasury Department and the Federal Reserve are making it happen.
We who have made these banks "antifragile" have crowned their leaders our Lords of Disorder.
Once Dimon told reporters that he explained to his seven-year-old daughter what a financial crisis is - "something that happens ... every five to seven years," which "we need to do a better job" managing.
Thanks to fat political contributions, Dimon manages them well. So do his peers. Misery is the business model. And by Dimon's reckoning another shock's coming any day now.
Money For Nothing
Bloomberg's use of the word 'subsidy' in this instance can be slightly misleading. Public institutions don't issue $83 billion in checks to Wall Street's biggest banks every year. But they didn't let them fail as they should have - through an orderly liquidation - after they created the crisis of 2008 through fraud and chicanery. Instead it allowed them to prosper from it, creating that $83 billion implicit guarantee.
As we detailed in 2011, the TARP program didn't "make money," either. Banks received a free and easy trillion-plus dollars from our public institution, on terms that amounted to a gift worth tens of billions, and possibly hundreds of billions.
That gift prevented them from failing. In private enterprise, this kind of rescue is only given in return for part ownership or other financial concessions. But our government asked for nothing of the kind.
Breaking up the big banks would have protected the public from more harm at their hands. That didn't happen.
Government institutions could have imposed a financial transaction tax, whose revenue could be used to repair the harm the banks caused while at the same time discouraging runaway gambling. They still could.
They could have imposed fees on the largest banks to offset the $83 billion per year advantage we've given them. They still could.
But they haven't. This one-sided giveaway is the equivalent of an $83 billion gift for Wall Street each and every year.
Cut and Paste
$83 billion per year: Our current budget debate is framed in ten-year cycles, which means that's $830 billion in Sequester Speak. You'd think our deficit-obsessed capital would be trying to collect that very reasonable amount from Wall Street. Instead the White House is proposing $130 billion in Social Security cuts, $400 in Medicare reductions, $200 billion in "non-health mandatory savings," and $100 billion in non-defense discretionary cuts.
That adds up to exactly $830 billion.
No doubt there is genuine waste that could be cut. But $830 billion, or some portion of it, could be used to grow our economy and brings tens of millions of Americans out of the ongoing recession that is their daily reality, even as the Lords of Disorder continue to prosper. It could be used for educating our young people and helping them find work, for reducing the escalating number of people in poverty, for addressing our crumbling infrastructure, for giving people decent jobs.
It's going to Wall Street instead.
The right word for that is tribute. As in, "a payment by one ruler or nation to another in acknowledgment of submission ..." or "an excessive tax, rental, or tariff imposed by a government, sovereign, lord, or landlord ... an exorbitant charge levied by a person or group having the power of coercion." (Courtesy Merriam-Webster)
In this case the tribute is made possible, not by military occupation, but by the hijacking of our political process by the corrupting force of corporate contributions.
The fruits of that victory are rich: Bank profits are at near-record highs. Most of the country is still struggling to dig out from the wreckage they created but, as Demos' Policy Shop puts it, "for the banks it's 2006 all over again."
On Bended Knee
"Millions for defense," they said in John Adams' day, "but not one cent for tribute."
Today we're paying for both. That doesn't leave much for the elderly, the disabled, the impoverished, the children, or anybody else who doesn't "benefit from disorder." Nobody's fighting for them in this budget battle.
That leaves the public with a clear choice: Demand solutions that are more just and democratic - or submit willingly to the Lords of Disorder.
WASHINGTON - February 22 - The U.S. stock market may have just lost a critical safeguard – accountability to investors. On Thursday, a panel at the Financial Industry Regulatory Authority (FINRA), an industry-run group that regulates brokerage firms and exchange markets, disregarded its own policy, ruling that brokerage firm Charles Schwab and Company may insert class-action bans in its take-it-or-leave-it contracts with investors.
Schwab sought to capitalize on a recent corporate trend, following the 2011 U.S. Supreme Court decision in AT&T Mobility v. Concepcion, which permitted corporations to insert class-action bans within forced arbitration clauses in their one-sided contracts with consumers, investors and employees.
Forced arbitration clauses are used overwhelmingly by the securities and financial services industries. The practice deprives individuals of their right to seek redress in court. Studies and surveys on FINRA arbitration have shown that biases in favor of corporate entities and against weaker investors are evident in the private arbitration process.
Although limited to arbitration, investors who had similar claims against a broker-dealer could, under FINRA rules, band together in a single action in court against the firm. However, FINRA’s decision eliminates class actions, leaving serious claims such as fraud, unsuitable trading, breach of fiduciary duty and other securities law violations to be resolved in secret forums on an individual basis.
Even before FINRA’s ruling, Massachusetts Secretary of the Commonwealth William Galvin took a public stance against arbitration clauses in investor-broker contracts, calling them “troubling” and a “cause for concern.” He then rightly called for the Securities and Exchange Commission (SEC) to take action.
The SEC can and must protect its investors and preserve the integrity of securities markets by exercising authority granted to it under the 2010 Dodd-Frank financial reform law. It should immediately issue a rule to eliminate forced arbitration by Wall Street. It should prohibit forced arbitration and class-action bans in broker-dealer contracts with investors. It’s the only way that investors will be able to hold broker-dealers accountable for their malfeasance.
Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.
In 2008, as the financial crisis picked up steam, one by one the big bank Wall Street CEOs came forward to assure everyone that “everything is fine” and that their banks were “well capitalized.”
Anyone who did a bit of actual research knew this was not the case. But a large component of corporate (and political) leadership is to maintain confidence and calm no matter how bad things get.
As a result of this, in May 2008 alone, executives at Citigroup, Goldman Sachs, JP Morgan, Lehman Brothers, and Merrill Lynch all stated that the worst was over for financials. That’s right, in just one month executives at ALL of these firms issued proclamations that everything was just dandy for the banks.
The market took about five months to realize the truth, at which point these firms imploded taking the market with them.
I bring this up because we’re seeing this same game played out on a much larger scale in Europe today. Starting in November, various political bigwigs from the EU, whether it be Germany’s Finance Minister Wolfgang Schauble, France’s Prime Minister Francois Hollande, of Spain’s Prime Minister Mariano Rajoy have all stated that the EU Crisis is either over… or that at least the worst of it is over.
It’s rather incredible when you consider the complete and utter failure of these folks to solve the debt problems for a country as small as Greece (which makes up only 2% of the EU’s GDP).
Greece entered a crisis in 2010. Three years later, its major banks are STILL insolvent, the Greece economy has contracted over 20% (the sort of collapse Argentina saw in 2001 when its entire financial system failed), and nothing has been fixed.
So… the EU, with the help of the ECB, IMF, and the US Fed (QE 2 and 4 were basically EU bank bailouts in disguise), COULDN’T SOLVE GREECE’S PROBLEMS. And we’re supposed to believe that these folks can solve Spain, Italy or even France’s!?!
Let’s cut through the crap here.
The European banking system is a complete and total disaster. Remember how bad Wall Street was in 2008? Europe’s banks are many multiples worse than that. The US at least recapitalized its banking system after the Crisis.
Europe hasn’t. At all. That’s right, the banks in Europe have not raised capital to bring down their leverage rations, which is why the ENTIRE EU BANKING SYSTEM IS LEVERAGED AT 26 TO 1.
Lehman, which was a total sewer of garbage debt, was leveraged at 30 to 1. Europe’s ENTIRE SYSTEM is leveraged at 26 to 1.
Let’s take Spain by way of example.
In the run up to the Spanish banking crisis, Spain sported a housing bubble that DWARFED the US’s. Spain is the DARK blue line in the chart below. The US housing bubble is the little green lump below it.
How does a housing bubble get that out of control? By banks lending to anyone with a pulse. Indeed, a little know fact is that the banks sitting on 56% of the Spanish mortgage market were TOTALLY unregulated up until about 2010. As bad as US lending standards leading up to our housing bust, Spain had us beat by many multiples as the above chart illustrates.
The Spanish Government’s solution to this mess was to merge one garbage bank with another. They’ve been doing this for three years… but the Spanish banking system remains screwed up beyond anyone’s comprehension.
Take Bankia for example.
Bankia was formed in December 2010 when the Spanish Government merged seven bankrupt smaller banks in
The bank was touted as a success story, posting a profit in 2011 and even considering paying a dividend. Then the following happened in 2012...
- May 9th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
- May 21st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
- May 23rd: Bankia’s bailout needs grows to €11 billion
- May 24th: Bankia’s bailout needs grow to €15 billion
- May 25th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)…
- December 27th: Spanish bailout fund announces that Bankia still has a “negative value of €4.2 billion” and will need another €13.5 billion in capital
- January 2nd (2013): Bankia shares halted on Spanish stock exchange.
As a summary… Bankia was considered profitable in 2011… it was actually talking about paying out a dividend in April 2012. And in the following eight months, it was discovered that the bank was not only un-profitable, but completely and totally insolvent.
Today, nine months later, the bank has swallowed up over €19 billion in bailouts and still has a NEGATIVE value. With the additional €13.5 billion Spain claims it needs (assuming that is the actual limit… which I doubt) the bank will have consumed over €32 billion in bailouts.
If you think Bankia is an isolated incident, you’re out of your mind.
The point of this? Europe’s banks are totally insolvent and have not been fixed. No EU leader is going to tell you this because their jobs depend on convincing people that everything is fine. Bankia was supposedly “fine” right up until the truth came out. Just like the Wall Street banks were “fine” going into 2008.
Just like Europe is “fine” today.
I know the markets have yet to fully realize this...the S&P 500 is approaching its all-time highs. But back in late 2007, the last time the markets were at this level... did stocks get what was coming then too? Nope. And by the time stocks "got it" things moved VERY quickly.
So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding, potentially taking down the financial system with them. Think I'm joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.
We have produced a FREE Special Report available to all investors titled What Europe’s Collapse Means For You and Your Savings.
This report features ten pages of material outlining our independent analysis real debt situation in Europe (numbers far worse than is publicly admitted), the true nature of the EU banking system, and the systemic risks Europe poses to investors around the world.
It also outlines a number of investments to profit from this; investments that anyone can use to take advantage of the European Debt Crisis.
Best of all, this report is 100% FREE. You can pick up a copy today at:
Phoenix Capital Research
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Firms like Standard & Poor, charged with fraud by the DOJ, are criminally incompetent and serve no public purpose.
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February 5, 2013 |
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Is Eric Holder’s “See No Evil, Hear No Evil” Department of Justice finally getting serious about investigating fraud on Wall Street? At first glance, it would seem so, given the news that the Department of Justice has filed civil fraud charges against the nation’s largest credit-ratings agency, Standard & Poor’s, accusing the firm of inflating the ratings of mortgage investments and setting them up for a crash when the financial crisis struck.
On the one hand, there is no question that without the credit rating agencies the Wall Street guys would not have been able to pull off this colossal heist against the American people, and the ratings agencies cannot be excused. In fact, Standard & Poor’s employees openly joked about the company’s willingness to rate deals “structured by cows” and sang and danced to a mock song inspired by “Burning Down the House” before the 2008 global financial collapse, according to the DOJ lawsuit. On the other, the ratings agencies are simply the gift wrappers. DOJ has yet to go after the banksters who created these packages in the first place and who seem to be in the clear as a result of a series of unconscionably low settlements recently reached with the Justice Department.
I suppose we ought to be grateful for these baby steps in the right direction. The ratings agencies themselves have admitted to US government enquiries recently that they took money in return for ratings that were not based on any fundamental assessments other than the cash they were being paid. They have lied about the risk of default in many corporate cases and then marked down debt when the game was up further destabilizing the financial system. Hence, to say that their behavior was at the heart of the great crisis is absolutely correct.
Of course, that inevitably begets the obvious question: what took you so long and why leave it at S&P? As early as September 2004, the FBI warned that there was an “epidemic” of mortgage fraud and predicted that it would cause a financial crisis if it were not stopped. It was not contained. Everyone agrees that the mortgage fraud epidemic expanded massively after the FBI warning and still not one Wall Street figure of any note has gone to jail.
Under Treasury Secretary Geithner, and the Keystone Cops of the Department of Justice, led by Eric Holder and Lanny Breuer, we established a doctrine of “too big to jail” for the very institutions which perpetrated massive frauds on millions of Americans. Those who called for regulations that would take even that most minimal of steps necessary to reestablish the rule of law and restore our nation’s democracy and financial stability were essentially ignored. Geithner’s express rationale was that the financial system's extreme fragility made vigorous investigations of the elite frauds too dangerous, in effect giving the banksters a get-out-of-jail-free card and in effect enshrining crony capitalism and imperiling our economy, our democracy, and our national integrity.
So what’s changed? Well, obviously one has to ask if the departure from Treasury of Mr. Geithner, along with the ignominious resignation of the odious Lanny Breuer at the DOJ heralds a new approach, or are there are other motives in mind?
There is a school of thought which suggests that this lawsuit is an attempt by the US government to intimidate the ratings agencies against any further US debt downgrades. If so, it’s a pretty stupid shakedown. The truth is that sovereign governments like the US empower these agencies simply by listening to them, in the same way they listen to the IMF, and put the interests of these undemocratic and crooked agencies ahead of their own national interests.
Wall Street execs continue getting richer off the backs of regular Americans.
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February 5, 2013 |
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In January, Richard W. Fisher, president of the Federal Reserve Bank of Dallas, said that Wall Street banks, "... as a result of their privileged status, exact an unfair tax upon the American people."
If a president of a regional Federal Reserve bank (hardly a socialist), is telling us that Wall Street is not only privileged, but using its privileges to "tax" the hell out of us, it might be wise to take a closer look. While he's not literally talking about a tax, he's talking about a kind of extortion -- a virtual tax that ends up in the pockets of our Wall Street barons.
While our political elites warn us about becoming the next Greece (do we get the tasty retsina, good weather and nice beaches too?), the real "tax and spend" game is taking place on Wall Street, hidden from view. In fact, Wall Street is essentially exerting a hidden tax on us day in and day out -- but we don't even notice or get anything back in return.
Before describing how Wall Street does it, let's try to wrap our minds around how big our biggest banks really are. In 1970, the top five U.S. banks owned 17 percent of all U.S. banking assets. By 2010, well after the crash, the top five banks owned 52 percent of all our banking assets.
Who are these giant banks today? The usual suspects -- JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup and Morgan Stanley. These five alone have assets that account for more than one quarter of the entire U.S. economy. They form an oligopoly, defined by Investepedia.com as "a situation in which a particular market is controlled by a small group of firms. An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market."
As a result, a very small group of banks can exert power over markets to boost profits and gouge consumers -- that would be us. The extra we pay to them is precisely like a tax, except we don't know we're paying it. This puts an entirely new spin on "no taxation without representation."
Here are four Wall Street ploys that create a hidden and unfair tax on all Americans.
1. Too-big-to-fail banks jack up every mortgage rate in the country.
The largest U.S. banks use their oligopoly power to siphon money from the mortgage markets. This means they can charge consumers higher interest rates for loans and credit card debt, and they can keep interest rates on home mortgages higher than they should be. For example, the five largest banks are the primary buyers of loans originated by community banks and mortgage companies. It's still enormously prosperous for giant banks, but the smaller community banks are squeezed. As Jeff Horowitz writes in the American Banker, "The country's biggest banks are again making handsome profits from buying and servicing home mortgages. The smaller institutions that produce the loans have not been so fortunate."
Neither has the consumer. Although mortgage rates are low because of the financial crash, they would be even lower if the big banks did not extract extra oligopolistic profits. It's just a fact of economics that when competition among banks declines, the cost of mortgages to consumers goes up. How much? This amounts to a hidden tax of $1,000 per year for anyone taking out a 30-year mortgage. But this hidden tax is so subtle that the average consumer has no idea that she is being fleeced. As the New York Times, reports, "Banks are making unusually large gains on mortgages because they are taking profits far higher than the historical norm, analysts say. That 3.55 percent rate for a 30-year mortgage could be closer to 3.05 percent if banks were satisfied with the profit margins of just a few years ago. The lower rate would save a borrower about $30,000 in interest payments over the life of a $300,000 mortgage."
'Too Big to Fail' banks including JP Morgan Chase, U.S. Bancorp and Bank of America have seized on an opportunity to profit off the nation's jobless by siphoning millions of dollars in fees from state unemployment programs, according to a new report by the National Consumer Law Center.
(Charles Krupa/Associated Press) Privatizing the task of distributing unemployment benefits, the banks have created a "fee-heavy" check card system. Instead of having payments deposited directly to bank accounts or recieving checks sent in the mail from their state governments, individuals across the nation are increasingly forced to use costly bank issued payment cards that are loaded with a "plethora" of costly fees for the recipient.
The large banks pitched the operation to states as a scheme that would "save millions in overhead costs" but have instead externalized such costs to America's jobless.
The Associated Press reports:
People are using the fee-heavy cards instead of getting their payments deposited directly to their bank accounts. That’s because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. [...]
Banks make more money when more people use the cards. In the past, some of their deals with states prevented states from offering direct deposit, or required states to promote the card program as a first option.
To cover the cost of issuing cards and running the programs, banks charge a plethora of fees, including charges for balance inquiries, phone calls to customer support, leaving an account inactive for a period of months, or making a purchase using a personal identification number.
Read more on this story here.
For many years one of the best jobs on Wall Street in terms of a mix of job safety and compensation, was to be a fixed income trader-cum-salesman working for a major bank with a deep balance sheet, which could hold illiquid securities on its prop account, to dispose of as the "flow" (or clients) required, and on unsupervised and unregulated terms that were simply a verbal arrangement between the bank trader and the end client, usually a counterparty trader working for a major institutional buyside shop, including mutual or hedge funds.
Since for the most part, the buyside traders operated with other people's money, they were largely indiscriminate on the fine pricing nuances of the acquisition (or disposition) of the securities at hand, and while to the "other people's money" under management whether a given bond was bought for 55 or 55.75, or a given MBS was sold for 72-6 or 72-16 meant little (after all the trade was driven by a big picture view that the security would go up or down much more and certainly enough to cover the bid/ask spread, resulting in much larger profits upon unwind), the transaction price had a huge impact for the bank traders-cum-salesmen arranging said deals. Because when one is selling a $40 million MBS block, a 1 point price swing equals a difference of $400,000. Make 15 such deals per year, and one's $1,000,000 bonus (assuming a ~15% cut on the profits) is in the bag.
It wasn't necessarily an easy job - it required an extensive rolodex, a keen ear for who held what securities in one's given space, constant schmoozing, and manning the phones constantly. More importantly, everyone knew how the game is played: everyone knew that the middlemen would usually skim a few basis points on the top or bottom of the bid-ask spread, in exchange for having the first call the next time a juicy security was being shopped around, or whenever one had to offload some debt in a hurry.
Keep in mind this type of trading of OTC (Over The Counter) instruments, which included and still includes most corporate bonds, Credit Default Swaps and all other derivatives, Mortgage Backed Securities, Bank Loans, Bankruptcy Claims, and other blocky piece of paper, was always vastly different from equity trading where every trade was electronically recorded, where the bid/ask spreads were negligible due to infinite competition for every trade, yet which ultimately led to the advent of such robotic predators as High Frequency Trading algorithms which do at the micro scale what the old equity specialist and current bond salesman/trader do at the macro level. In short: the highly lucrative and extremely profitable bid/ask skimming that every bond trader engaged in for years has been impossible in equities for the simple reason that the bid/ask spread on most equity-related securities is minute and the market is far deeper and (at least used to be) far more liquid.
It also explains why 4 years after the Great Financial Crisis, there is still no centralized, computerized trading portal for OTC trades, including corps, CDS, loans, etc. Doing so would mean that the banks would give up billions in additional commissions that they could charge if all such trades were facilitiated by the kind of sales coverage middlemen described above. Because while a salesman was incentivized to peel as much as they could of a given trade, they would at best pocket some 10-15% of the total spread. The rest went to the bank, and thus to management in the form a massive bonuses: comp at banks is not 40% of revenue for nothing, with some money left over for "retained earnings."
But back to the credit traders which for years had built up their reputations in given product verticals, and which had a coverage of fiercely guarded clients, which no other salesmen at a given firm were allowed to converse with. Now was it well-known that salesguy X would pick an additional 50 bps on top of the price being quoted? Sure. After all, someone had to pay for those weekly trips to the Hustler Club, and that's precisely what the Salesmen did. And who really cared about a little vig? Remember - it was all being down with "other people's money."
Well, the days of rampant skimming on top of the bid/ask spread, and with them record bonuses for bond traders and salesmen, may just ended with a whimper not a bang, and all bond traders hoping to make millions by misrepresenting what the true purchase or sale prices are to buysider clients, even if completely voluntary on both sides, may want to seek employment elsewhere.
They have Jesse Litvak to thank for it.
Jesse is a former MBS trader from Jefferies, who got just a little too greedy, and proceeded to rip virtually all of his clients on seemingly every single trade he executed for the three years he was employed at Jefferies, lying to everyone in the process: both clients and in house colleagues, generating some $2.7 million in additional revenue for Jefferies for the duration of his tenure, and who knows how much in personal bonuses.
What excatly was the charge? The SEC summarizes it briefly as follows:
Jesse Litvak arranged trades for customers as part of his job as a managing director on the MBS desk at Jefferies. Litvak would buy a MBS from one customer and sell it to another customer, but on many occasions he lied about the price at which his firm had bought the MBS so he could re-sell it to the other customer at a higher price and keep more money for the firm. On other occasions, Litvak misled purchasers by creating a fictional seller to purport that he was arranging a MBS trade between customers when in reality he was just selling MBS out of his firm’s inventory at a higher price. Because MBS are generally illiquid and difficult to price, it is particularly important for brokers to provide honest and accurate information.
The SEC alleges that Litvak generated more than $2.7 million in additional revenue for Jefferies through his deceit. His misconduct helped him improve his own standing at the firm, as his bonuses were determined in part by the amount of revenue he generated for the firm.
A more detailed summary of what Litvak did over and over:
The MBS market operates through relationships between customers, who buy
and sell the bonds, and broker-dealers, like Jefferies, that arrange the trades. Customers seek to pay the lowest price for purchases and get the highest price on sales. It is not unusual for a customer’s view of the current market price for a security to come from the broker-dealer that is selling the security. Because of this, there is an emphasis on establishing relationships, building trust, and having a good reputation within the industry. In part because of the opacity of the market, and in part because the market relies on repeat transactions between the same parties, customers seek to avoid broker-dealers who are not honest with them. Upon learning that Litvak had lied to them about the price he paid for MBS, some customers indicated that their firms would have temporarily stopped doing business with Jefferies had they known the truth. At least one customer, upon learning that Litvak had lied, temporarily stopped doing business with Jefferies. Some customers indicated they would have sought lower prices on trades, or even tried to re-negotiate trades, had they known the truth.
As an intermediary, Litvak generally purchased MBS from one customer and then sold the same security to another customer. In those circumstances, Jefferies and Litvak typically re-sold the MBS on a riskless, principal basis; this meant that, while Jefferies would momentarily own the MBS in a principal account, it had minimal or no risk because it knew that it could re-sell the MBS to another customer. Litvak earned compensation for Jefferies by reselling the MBS at a higher price and collecting the spread (or difference) between the purchase price and the sale price. The customers were aware that Jefferies was compensated in this way, and the amount and source of the compensation were part of the negotiations around the purchase and sale of the MBS.
From 2009 to 2011, Litvak engaged in misconduct on over 25 trades. In each instance, Litvak made misrepresentations to, or otherwise misled, customers about the price at which Jefferies had purchased the MBS before re-selling it to the customer and Jefferies’ compensation for arranging the trade. In some cases, Litvak also pretended to be arranging the trade between customers when Jefferies was actually selling MBS out of its own inventory.
When Litvak offered customers MBS, he lied to them about how much Jefferies had paid (or was paying) for the securities. In order to negotiate a higher sale price to the customers, Litvak misled them into believing that Jefferies had paid a higher price for the MBS than it actually had.
By misrepresenting Jefferies’ purchase price, Litvak misled customers about the amount of compensation Jefferies would receive on the transaction. For example, if Litvak told the customer that Jefferies’ purchase price was 80 and the sale price was 80 and 4 ticks, the customer understood that Jefferies received 4 ticks in compensation. However, if Jefferies’ purchase price was actually 79 and the sale price was 80 and 4 ticks, then Jefferies received an extra point in compensation as a result of Litvak’s misrepresentation. On some occasions, Litvak and the customer explicitly agreed on the amount of Jefferies’ compensation based on the purchase price as represented by Litvak.
Sometimes, in addition to misrepresenting the price and Jefferies’ compensation, Litvak also misled his customers into believing that Jefferies was arranging a trade between two customers, when Jefferies actually was selling a MBS out of its own inventory. In these instances, Litvak pretended to be actively negotiating with an outside party to buy a MBS that he would then re-sell to his customer. Litvak communicated precise details to customers about the state of negotiations with the imaginary seller. But none of these negotiations were taking place; instead, Litvak fabricated the existence of the seller and every detail about active negotiations with it. In fact, as Litvak knew, Jefferies had purchased these MBS days (and even months) before and already held them in its inventory.
The above is the basis of SEC's just announced case. In reality, Litvak's biggest crime was getting too greedy. Because all of the above is well-known to everyone in the industry, and it certainly was known to Litvak's clients, most of whom were sell-side traders and salesmen before they moved to the buyside, and certainly knew how the game is played.
And what the result of today's civil charge against Litvak is that, for at least the foreseeable future, every single bank will come down like a brick house on any and all inhouse bond, loan, CDS and OTC salesmen and make sure that every single transaction is recorded, the entry and exit prices are fair and honest, and as represented, and in the process both banks and salespeople will make millions less in profits. This will continue at least for a year or so, or until the SEC finds some other major case to focus on, far away from the realities of modern day bond trading.
Another direct result is that courtesy of 31 page SEC complaint, the general public will now be aware just how much even very sophisticated traders were being abused as muppets by those who had the information about both sides of the trade. Because at the end of the day, as the old saying goes, the only true commodity on Wall Street is information.
While arranging a trade on May 28, 2009, Litvak lied to both the seller and buyer of $25 million of a MBS called IndyMac INDX Mortgage Loan Trust (“INDX”) 2007-AR7 2A1 (INDX 2007-AR7 2A1).
A representative of MFA Mortgage Investments, Inc. (“MFA”) told Litvak he was interested in bidding 42-00 for $25 million in the INDX MBS. After negotiating with the seller, Litvak told the MFA representative in an instant message, “I can sell to you at 42-8 . . . I Bot EM AT at 42-4.” MFA agreed to buy the MBS at 42-8.
Litvak lied to MFA about the acquisition price. He had bought the security at 41-4, not “42-4” as he had reported. The next day, Litvak admitted to a Jefferies colleague that he had lied to MFA, while also misrepresenting the purchase price to his colleague. Litvak wrote, “we bot at 41-12. Sold to him a[t] 42-8. He thinks we bot em @42-4 fyi.” Thus, he misrepresented the purchase price (41-4) both to MFA and to his own colleague.
While he was lying to the buyer, Litvak was also lying to the seller of the MBS, Third Point LLC (“Third Point”). Although he knew MFA was willing to pay 42-00 for the MBS, Litvak told a Third Point representative that the MFA representative—whom Litvak referred to as “one of my circle of trust guys”—had bid only 41-00. Litvak then reported that he had convinced MFA to raise its bid to 41-16.
Litvak acknowledged to a Jefferies colleague that he misled Third Point, writing, “So we bot [INDX] bonds from [the Third Point representative] at 41-4. . . . she thinks we sold at 41-16 . . . we really sold em at 42-8.”
Through his misconduct, Litvak generated more than $200,000 in extra profit for Jefferies on this trade.
A whole lot of lying to everyone involved to scalp a $200,000 profit.
On December 23, 2009, Litvak approached a representative at Wellington Management LLP (“Wellington”) about purchasing a MBS called Wells Fargo Mortgage Backed Securities 2006-AR12 1a1 (WFMB 06-AR12 1a1). Litvak suggested to the representative that he was arranging a trade with an active outside party:
yo yo yo….if there is any color you can share on your wfmbs 06-ar10 4A1 from yest…maybe i can use that as leverage to go beat the guy up that owns the 06-ar12 1a1 bonds….as of late last nite it sounded like he was starting to warm up to the idea of coming off his level…..
The Wellington representative asked Litvak, “what’s the current size and offer” on the MBS, and Litvak responded, “its 3+mm current and he was offering them at 77….” About twenty minutes later, Litvak reported that the seller was not in yet: “he … usually rolls in around now…..so should know soon brotha…..” Half an hour later, Litvak told the Wellington representative that he had bought the MBS at 75-28 and provided details of the supposed negotiation:
winner winner chicken dinner…he is gonna sell em to me at 75-28 as I told him to not get cute and just sell the bonds so you can own them at 76….he said cool…..its 6.23mm orig….a’ight?
Wellington agreed to purchase $6.23 million of the MBS at 76. 42.
In actuality, Jefferies had purchased the MBS on December 14, 2009 at 70 (not “75-28”) and held it in its inventory at the time of the sale to Wellington. On December 23, 2009, Litvak concocted the supposed seller and fabricated the details of a negotiation. As he had done before, Litvak lied about the purchase price, Jefferies’ compensation on the trade, and the fact that the MBS was being sold out of Jefferies’ inventory.
Through his misconduct, Litvak made over $150,000 in additional compensation for Jefferies on this trade.
Many more lies, just to add another $150,000 in the bag.
It goes on:
On January 7, 2010, Litvak communicated with a representative at York Capital Management Global Advisors, LLC (“York”) about selling $40 million of a MBS called DLSA Mortgage Loan Trust 2006-AR1 2A1A (DLSA 2006-AR1 2A1A), held by York, to another customer. Litvak told the representative that the other customer had bid 60-24. The York representative asked Litvak how much he wanted to be compensated for the trade:
Litvak: i am happy when I get any trades…..lol…in all seriousness….i think 8/32s is great….so maybe you sell em to me at 60-28 and i sell em to him at 61- 4….something like that..but im also happy to get you 61 and just tell him to pay me 61-8…..wanna get you the highest i can…
York representative: well i want best execution obv so try to get him to 61-8!
Litvak: we are doneski gorgeous! im selling him bonds at 61-8……will buy em from you at 61 k?. . .
York representative: great! . . . .
As a result of this back-and-forth, York agreed to sell the MBS at 61.
Litvak misrepresented the resale price and the compensation he would receive for Jefferies. He did not sell the MBS at “61-8,” as stated, but at 62-12. Thus, instead of the “8/32s” he represented Jefferies would make, the firm actually was compensated 44 ticks for the trade.
Through his misconduct, Litvak made over $220,000 more for Jefferies on this trade.
More lies, another $220,000.
And on, and on, and on.
This continues to this day, and will continue tomorrow, albeit at a more modest pace for at least a few months, at every single Wall Street firm, and such skimming off the top is precisely what ends up going into both the bank's bottom line, and the trader's bonus.
Is it any wonder that virtually all Wall Street "professionals" are habituated sociopaths who lie for a living just to skim a few pennies (metaphorically speaking: make that millions of "other people's" dollars in the real world). And is it any wonder that all banks demand their inner workings never see the light of day so they can operate in absolute secrecy, and exchanges like the above, and 22 more, are never read by the public.
Take these examples and multiply them by a thousand: only then will you have a sense of what truly goes on behind the scene of every Wall Street firm in the US and around the world on any given day: a shadowy netherworld populated by uber-wealthy sociopaths, whose ethics are dominated not by what is right or wrong, but who can lie the most, rip their clients off without their clients pulling the plug, and, of course, who has the biggest year-end bonus and shiniest and newest toys at the end of the year. Everything else is of tertiary importance.
And since everyone on the inside knows that only the most conniving, most sociopathic survive and, most importantly, make the most money, nobody complains, or else is shown the door.
That is how Wall Street truly works, for better or worse (we have omitted the inevitable bailout that happens once bank after bank loads up on too much prop risk and has to be bailed out by the government, but that is, by now, well-known).
The full complaint against Litvak can be found here.
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The accolades for Timothy Geithner came on so thick and heavy in the last week that it’s necessary for those of us in the reality-based community to bring the discussion back to earth. The basic facts of the matter are very straightforward. Timothy Geithner and the bailout he helped engineer saved the Wall Street banks. He did not save the economy.
We can’t know exactly what would have happened if we did not have the TARP in October of 2008. We do know there was a major effort at the time to exaggerate the dangers to the financial system in order to pressure Congress to pass the TARP.
For example, Federal Reserve Board Chairman Ben Bernacke highlighted the claim that the commercial paper market was shutting down. Since most major companies finance their ongoing operations by issuing commercial paper, this raised the threat of a full-fledged economic collapse because even healthy companies would not be able to get the cash needed to pay their bills.
What Bernanke neglected to mention was that he personally had the ability to sustain the commercial paper market through direct lending from the Fed. He opted to go this route by announcing the creation of a Fed special lending facility to support the commercial paper market the weekend after Congress voted to approve the TARP.
It is quite likely that Bernanke could have taken whatever steps were necessary himself to keep the financial system from collapsing even without the TARP. The amount of money dispersed through the Fed was many times larger than the TARP, much of which was never even lent out. The TARP was primarily about providing political cover and saying that the government stood behind the big banks.
Of course we can never know the right counterfactual had the TARP and related Treasury efforts not been put in place, but even if we assume the worst, the idea that we would have seen a second Great Depression was always absurd on its face. The example of Argentina proves otherwise.
In December of 2001 Argentina did have a full-fledged financial collapse. In other words, all the horrible things that we feared could happen in the United States in 2008 actually did happen in Argentina. Banks shut down. People could not use their ATMs or get access to their bank accounts.
This led to a 3-month period in which the economy was in free fall. It stabilized over the next 3 months. Then it began growing rapidly in the second half of 2002. By the middle of 2003 it had made up all the ground lost in financial crisis. Its economy continued to grow strongly until the world economic crisis brought it to a standstill in 2009.
Even if Obama’s economic team may not have been quite as competent as the folks in Argentina, they would have to be an awful lot worse to leave us with a decade of double-digit unemployment, the sort of story that would be associated with a second Great Depression. In short, the second Great Depression line was just a bogeyman used to justify the government bailout of the Wall Street banks.
As it is, the economy has already lost more than $7 trillion in output ($20,000 per person) compared to what the Congressional Budget Office projected in January of 2008. We will probably lose at least another $4 trillion before the economy gets back to anything resembling full employment. And, millions of people have seen their lives turned upside down by their inability to get jobs, being thrown out of their homes, or their parents’ inability to get a job. And this is all because of the folks in Washington’s inability to manage the economy.
But the Wall Street banks are bigger and fatter than ever. As a result of the crisis, many mergers were rushed through that might have otherwise been subject to serious regulatory scrutiny. For example, J.P. Morgan was allowed to take over Bear Stearns and Washington Mutual, two huge banks that both faced collapse in the crisis. Bank of America took over Merrill Lynch and Countrywide. By contrast, there can be little doubt that without the helping hand of Timothy Geithner, most or all of the Wall Street banks would have been sunk by their own recklessness.
There is one other hoary myth that needs to be put to rest as Timothy Geithner heads off to greener pastures. The claim that we made money on the bailout is one of those lines that should immediately discredit the teller. We made money on the loans in the same way that if the government issued mortgages at 1 percent interest it would make money, since the vast majority of the mortgages would be repaid.
The TARP money and other bailout loans were given to banks at way below market interest rates at a time when liquidity carried an enormous premium. Serious people know this, and the people who don’t are not worth listening to. It was a massive giveaway as the Congressional Oversight Panel determined at the time.
It’s impossible to know whether the economy would have bounced back more quickly and we would be closer to full employment now without the bailouts, since none of us know what other policies would have been pursued. We do know that we would have been freed of the albatross of a horribly bloated financial sector that sucks the life out of the economy and redistributes income upward to the very rich. For that fact, Timothy Geithner bears considerable responsibility.
"Fog is often useful in getting things done."
Turbo Timothy Geith-Law
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Why on earth would your librul media not want to investigate how outgoing Treasury Secretary Tim "Turbo Tax" Geithner was accused of leaking inside information to Wall Street --by the Richmond Fed president? I can't imagine, because it does seem like a story to those of us outside the Beltway bubble. Maybe the complicit ladies and gentlemen of the corporate media could get up off their knees and, you know, actually cover this story? Maybe earn those paychecks for doing something other than parroting the conventional wisdom of the elite?
Columbia Journalism Review's Ryan Chittum, about the 2007 Federal Reserve transcripts released last week:
Of all the majors, Reuters does the best, and it advances the story by getting Lacker to stand by his 2007 comments about Geithner and to expand them to include other banks beyond BofA:
“My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives.”
But Reuters still falls well short of telling the whole story here. It doesn’t take the obvious next step and look at what happened in markets that day.
For that we turn to… Zero Hedge, which appears to have been the first to spot the Geithner-Lacker exchange last Friday:
What makes this much more interesting, as Zero Hedge notices, is that the Lacker-Geithner spat came at about 6:15 p.m. on August 16, four hours after stocks had jumped a stunning 4 percent in the span of sixty minutes.
Many shorts ended up being carted out of the front door that day, unsure what has just happened. Sure enough, the next day at 8:00 am the Fed did what it had decided the previously it would do, and announce the 50 bps cut to the discount rate to fed funds rate spread…
…the S&P futures moved from a low of 1320 (and 1330 at the 2:00 pm moment that the market saw a mysterious “invisible hand” pushing it higher), all the way to well over 1410 the next day: an unprecedented 90 ES point move in a few hours!
The Times headline called it a "tiff" and stuck the story deep inside. Chittum notes, "The Wall Street Journal, the Financial Times, and Bloomberg haven’t even touched the story."
Gee. I wonder why. As Zero Hedge's "Tyler Durden" says, "If he leaked one, he leaked them all." From the transcript:
MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.
VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.
Maybe Tim is telling the truth. But it sure is odd that so many people made so much money such a short time after he 'splained things!
As the world's most vulnerable populations succumb to surging global food prices—driven in part by drought, climate change, and a global food system increasingly vulnerable to the whims of commodity speculation—Goldman Sachs has managed to turn the poverty and suffering of others into profits for itself.
Farmer Darren Becker sifts through arid topsoil under a ruined crop on the family farm on August 24 in Logan, Kansas. (Getty) Pulling in more than $400 million in profits last year through risky and damaging food speculation practices, the Wall Street financial titan has once again profited from others' misfortune, The Independent reports Tuesday.
According to an analysis conducted for The Independent by the World Development Movement (WDM), 2012 investment practices in the "soft commodities" trade (e.g. wheat and maize) by financial institutions such as Goldman Sachs, drove prices to unprecedented highs while bank profits increased and banker bonuses were handed out readily.
"While nearly a billion people go hungry, Goldman Sachs bankers are feeding their own bonuses by betting on the price of food. Financial speculation is fueling food price spikes and Goldman Sachs is the No 1 culprit."
Goldman's food speculation contributed to a roughly 68 per cent jump in profits for 2012, The Independent reports, while it increased the average pay and bonus package of its bankers to nearly $396, 500.
Christine Haigh of the WDM stated: "While nearly a billion people go hungry, Goldman Sachs bankers are feeding their own bonuses by betting on the price of food. Financial speculation is fueling food price spikes and Goldman Sachs is the No 1 culprit."
The Independent explains:
Goldman makes its "food speculation" revenues by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in return for fees and commissions. The firm invented these kinds of funds and continues to dominate the market, together with Barclays and Morgan Stanley. Swiss trading giant Glencore hit the headlines in August when its head of agriculture proclaimed that the US drought will be "good for Glencore".
The extent of Goldman's food speculation can be revealed after the UN warned that the world could face a major hunger crisis in 2013, after failed harvests in the US and Ukraine. Food prices surged last summer, with cereal prices hitting a record high in September.
As the global food crisis has worsened due to extreme weather brought on by global climate change, Rob Nash, Oxfam's private sector adviser, says the group is increasingly alarmed by financial food speculation.
"Especially in the light of increasingly extreme weather conditions which can reduce supply suddenly and severely deplete stocks," he said, the last thing the world's poor need is for that "volatility to be exacerbated by speculation and exploited for short-term profit."
With money laundering “lapses” and CEO mea culpas all the rage on Wall Street and the City of London, you would think that Hope and Change™ grifter Barack Obama’s Justice and Treasury Departments would want to send a strong message to banksters who break the law.
You’d be wrong of course.
‘There’s Nothing to See Here…’
While the financial press is all aflutter over news that JPMorgan Chase (JPMC) CEO Jamie Dimon had his annual pay package cut by 50 percent, from $23 million (£14.5m) to $11.5 million (£7.25m) over $6.2 billion (£3.91bn) in losses in the risky derivatives market, you’d almost believe that Dimon was lining up for food stamps or hunting down mittens to stave off New York’s bone-chilling winter.
Despite allusions to what are euphemistically called “bad bets” by JPMC trader Bruno Iksil, the so-called “London Whale” on the hook for proverbial “shitty deals” that cost shareholders billions, Bloomberg News reported that JPMC’s “fourth-quarter profit rose 53 percent, beating analysts’ estimates as mortgage revenue more than doubled on record-low interest rates and government incentives.”
Incentives? Now there’s a polite word for a megabank with more than $2.3 trillion (£1.45tn) in assets handed some $600 billion (£378.24bn) in TARP funds, which included Federal Reserve engineered deals for their buy-out of Bear Stearns and Washington Mutual that wiped out shareholder equity as the capitalist system threatened to implode in 2008.
Adding to the sleaze factor, it emerged in 2011 that JPMC had wrongfully overcharged thousands of military families on their mortgages, including active duty personnel serving in Afghanistan. As a result of a class-action lawsuit, the bank was forced to admit they had illegally overcharged 6,000 active duty military personnel, had seized the homes of 18 military families and then paid out $27 million (£17.05m) in compensation. At a shareholder’s meeting later that year Dimon “apologized” for the “error” and lending chief David Lowman fell on his sword as he was shown the door.
Talk about stand-up guys!
And never mind, as Rolling Stone’s Matt Taibbi pointed out, “at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large.”
While drug-tainted Citigroup’s former CEO Vikram Pandit “bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans,” that other paragon of banking virtue, Jamie Dimon, who “respects” the JPMC board’s decision to slice his pay in half “bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans.”
Such “stock purchases by America’s top bankers,” Taibbi wrote, “raise serious questions of insider trading.” Yet not a single bankster has been seriously investigated let alone held to account, by the Justice Department.
How sweet a year was it for JPMorgan Chase? Pretty sweet by all accounts.
Overall, Bloomberg reported, “revenue increased 10 percent to $23.7 billion [£14.96bn] from $21.5 billion [£13.57bn] in the fourth quarter of 2011. Annual revenue was $97 billion [£61.23bn], down from $97.2 billion [£61.35bn] the prior year.” This included investment banking fees which jumped 54 percent to $1.7 billion (£1.07bn) and revenue in the commercial banking sector which rose to $1.75 billion (£1.1bn). And with the formation of a new housing bubble due to taxpayer-subsidized record low interest rates, JPMC’s profits in the mortgage writing mill rose to $418 million (£263.5m) in 2012, compared to losses which topped $263 million (£165.8m) a year earlier.
But far from being a sign that the economic black hole opened by 2008′s financial collapse has contracted, there’s bad news on the horizon for distressed homeowners and taxpayers who will be forced to pay the piper for the next round of predatory loans.
As analyst Mike Whitney recently pointed out in CounterPunch a new rule defining a “qualified mortgage” by the US Consumer Financial Protection Bureau “creates vast new opportunities for the nation’s biggest banks to engage in predatory lending practices with impunity.”
According to Whitney, while the financial press have described the rule “as an attempt to protect borrowers from the risky types of loans that caused the financial crisis, the opposite is true. The real purpose of the rule is to provide legal protection for the banks from homeowner lawsuits, and to lay the groundwork for more reckless lending that could inflate another housing bubble.”
“In other words,” Whitney noted, “the rule was designed to serve the interests of the banks and the banks alone. This is why bankers everywhere are celebrating the final draft.”
Never mind that leading financial institutions were forced to cough up $25 billion (£15.76bn) in a settlement with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve over shady foreclosure practices and wrongful homeowner evictions that ruined millions of lives.
JPMC’s $2 billion (£1.26bn) portion of the settlement, which included “a one-time pretax charge [write down] of $700 million [£441.77m] in the fourth quarter to cover the costs associated with [the] settlement” according to Bloomberg, was a pittance compared to the trillions of dollars in assets controlled by the bank.
‘A Trillion Here, a Trillion There…’
But as bad as these gift horses are, they pale in comparison with federal government inaction when it comes to policing financial predators who inflate their balance sheets with laundered drug money and loot derived from terrorist financing and organized crime.
As Yury Fedotov, the Executive Director of the United Nations Office on Drugs and Crime (UNODC), pointed out in that agency’s 2011 report, Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime: “Prior to this report, perhaps the most widely quoted figure for the extent of money laundering was the IMF’s ‘consensus range’ of between 2-5 per cent of global GDP, made public in 1998. A study-of-studies, or meta-analysis, conducted for this report, suggests that all criminal proceeds are likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009.”
The UNODC research team averred: “If only flows related to drug trafficking and other transnational organized crime activities were considered, related proceeds would have been equivalent to around US$650 billion per year in the first decade of the new millennium, equivalent to 1.5% of global GDP or US$870 billion in 2009 assuming that the proportions remained unchanged. The funds available for laundering through the financial system would have been equivalent to some 1% of global GDP or US$580 billion in 2009.”
However you slice these grim estimates, it should be obvious that banks have every incentive to remain key players in the transnational narcotics complex and will continue to do so thanks to the federal government.
Last week, the Office of the Comptroller of the Currency (OCC) released their cease-and-desist order against JPMC.
Unlike other drug money laundering banks such as Wells Fargo-owned Wachovia Bank, which agreed to a mere $160 million (£100.86m) settlement in 2010 in a deferred prosecution agreement (DPA) after admitting to laundering upwards of $368 billion (£231.99bn) for Colombian and Mexican drug cartels or the recent $1.9 billion (£1.2bn) DPA with Britain’s HSBC global financial empire, the OCC’s consent order didn’t even impose a fine on JPMC for money laundering “lapses.”
Now that’s juice!
Though short on details the order however, is a damning indictment of JPMC “indiscretions” when it comes to drug and other criminal money laundering. Keep in mind this is an institution that was slapped with an $88.3 million (£55.66m) fine less than 18 months ago for shipping a ton of gold bullion to Iran in breach of harsh Treasury Department sanctions. (I neither endorse nor support draconian sanctions imposed by the imperialists on the Islamic Republic, my purpose here is to point out the double standards which would land the average citizen in the slammer under “material support” statutes for trading with Iran). The January 2013 Consent Order stated although the Comptroller found serious “flaws” in their accounting practices, “the Bank neither admits nor denies” the following:
(1) The OCC’s examination findings establish that the Bank has deficiencies in its BSA/AML [Bank Secrecy Act/anti-money laundering] compliance program. These deficiencies have resulted in the failure to correct a previously reported problem and a BSA/AML compliance program violation under 12 U.S.C. § 1818(s) and its implementing regulation, 12 C.F.R. § 21.21 (BSA Compliance Program). In addition, the Bank has violated 12 C.F.R. § 21.11 (Suspicious Activity Report Filings).
(2) The Bank has failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls, and ineffective independent testing. The Bank did not develop adequate due diligence on customers, particularly in the Commercial and Business Banking Unit, a repeat problem, and failed to file all necessary Suspicious Activity Reports (“SARs”) related to suspicious customer activity.
(3) The Bank failed to correct previously identified systemic weaknesses in the adequacy of customer due diligence and the effectiveness of monitoring in light of the customers’ cash activity and business type, constituting a deficiency in its BSA/AML compliance program and resulting in a violation of 12 U.S.C. § 1818(s)(3)(B).
Wait a minute, if these were “previously identified systemic weaknesses” and if JPMC “failed to adopt and implement a compliance program” that would shield the American financial system from a tsunami of drug-tainted cash annually washing through the economy, especially “in light of the customers’ cash activity and business type,” why then has OCC issued another toothless Consent Order rather than forcing the bank to comply with the law? Accordingly, federal regulators charge:
(4) Some of the critical deficiencies in the elements of the Bank’s BSA/AML compliance program, resulting in a violation of 12 U.S.C. § 1818(s)(3)(A) and 12 C.F.R. § 21.21, include the following:
(a) The Bank has an inadequate system of internal controls and independent testing.
(b) The Bank has less than satisfactory risk assessment processes that do not provide an adequate foundation for management’s efforts to identify, manage, and control risk.
(c) The Bank has systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.
(d) The Bank does not have enterprise-wide policies and procedures to ensure that foreign branch suspicious activity involving customers of other bank branches is effectively communicated to other affected branch locations and applicable AML operations staff. The Bank also does not have enterprise-wide policies and procedures to ensure that on a risk basis, customer transactions at foreign branch locations can be assessed, aggregated, and monitored.
(e) The Bank has significant shortcomings in SAR decision-making protocols and an ineffective method for ensuring that referrals and alerts are properly documented, tracked, and resolved.
(5) The Bank failed to identify significant volumes of suspicious activity and file the required SARs concerning suspicious customer activities, in violation of 12 C.F.R. § 21.11. In some of these cases, the Bank self-identified the issues and is engaged in remediation.
(6) The Bank’s internal controls, including filtering processes and independent testing, with respect to Office of Foreign Asset Control (“OFAC”) compliance are inadequate.
How large were the “significant volumes” of “suspicious activity” alluded to opaquely? Where did they originate? Who were the “suspicious customers” and why did JPMC not have “enterprise-wide policies and procedures” after being previously ordered to do so to ensure that said “suspicious customers” at foreign bank branches didn’t include drug lords or terrorist financiers? All of these are unanswered questions for which the Obama administration should be held to account.
In fact, according to OCC’s own regulations, 12 C.F.R. § 21.21 clearly states that the federal government “requires every national bank to have a written, board approved program that is reasonably designed to assure and monitor compliance with the BSA.”
At a minimum, an anti-money laundering program “must” (this is not optional): “1. provide for a system of internal controls to assure ongoing compliance; 2. provide for independent testing for compliance; 3. designate an individual responsible for coordinating and monitoring day-to-day compliance; and 4. provide training for appropriate personnel. In addition, the implementing regulation for section 326 of the PATRIOT Act requires that every bank adopt a customer identification program identification program as part of its BSA compliance program.”
Keep in mind that Wachovia and HSBC under terms of their DPA’s were forced to admit that illegal transactions “ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico.”
Furthermore, those risks were compounded, wilfully in this writer’s opinion, in order to inflate bank balance sheets with drug money, through their failure to correct “systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.”
On every level, JPMorgan Chase failed to comply with existing rules and regulations that have earned penny-ante offenders terms in federal prison.
In fact, just last week Los Angeles-based “G&A Check Cashing, its manager, Karen Gasparian, and its compliance officer, Humberto Sanchez” were sentenced by US Judge John Walker to stiff prison terms, The Wall Street Journal reported. For violating the Bank Secrecy Act, Gasparian was “ordered to prison for five years and Sanchez for eight months.”
Are you kidding me! The Journal averred, “While it is common for banks to face scrutiny from the U.S. for complying with the Bank Secrecy Act, it is rare for authorities to pursue check-cashing businesses for anti-money laundering compliance issues, as they are often used by the poor, who may not have the funds to maintain a bank account.”
In full clown-car mode, Assistant Attorney General Lanny Breuer, Obama’s chieftain over at the Justice Department’s Criminal Division, who last month refused to file criminal charges against drug-money laundering banksters at HSBC said in a statement: “Karen Gasparian, Humberto Sanchez and their company G&A Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity. They knew they were required to report transactions over $10,000, but deliberately failed to do so.”
Although the OCC Consent Order does not spell out who benefited from JPMC’s “systemic weaknesses” when it came to lax drug money laundering controls, the suspicion persists that somewhere fugitive billionaire drug lord Chapo Guzmán is smiling as he enlarges his stable of thoroughbreds.
(Image courtesy of Daniel Hopsicker’s MadCow Morning News)
Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly and Global Research, he is a Contributing Editor with Cyrano’s Journal Today. His articles can be read on Dissident Voice, Pacific Free Press, Uncommon Thought Journal, and the whistleblowing website WikiLeaks. He is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press and has contributed to the new book from Global Research, The Global Economic Crisis: The Great Depression of the XXI Century.
Powerful firms like Goldman Sachs have made hundreds of millions of dollars in food future trades. Critics accuse them of profiting off starvation and market manipulation, while traders claim their profits are due to increasing consumption in China.
World food prices tracked by the UN Food and Agriculture Organization (FAO) have more than doubled in the past 10 years. The FAO’s Food Price Index, which baskets prices for five prime food commodities, peaked in 2008 and 2011, each time rising more than 50 percent from the previous year. The latest price spike was one of the key factors that triggered the series of uprisings in the Arab world resulting in the fall of several governments.
The year 2013 may see another price hike, following the worst draught in the US in 50 years and poor harvests in Russia and Ukraine. The UN has warned that the world may be approaching a major hunger crisis.
At the same time, the industry is bringing millions in profits to those who rushed to invest in food. Goldman Sachs made an estimated $400 million in 2012 from investing its clients' money in a range of "soft commodities," from wheat and maize to coffee and sugar, according to an analysis by the World Development Movement (WDM).
"While nearly a billion people go hungry, Goldman Sachs bankers are feeding their own bonuses by betting on the price of food. Financial speculation is fueling food price spikes and Goldman Sachs is the No, 1 culprit," Christine Haigh of the WDM told the British newspaper The Independent.
The London-based organization – along with similar NGOs like Foodwatch, Oxfam, or Weed (World Economy, Ecology and Development) – have for years blamed financiers for inflating food prices, or for at least making the market dangerously volatile.
They argue that the amount of speculative money is too big in proportion to the physical inventories of the commodities. Deregulation in the late 1990s allowed financial institutions to bet on food prices, resulting in some $200 billion being poured into the market.
For example, hedge fund Armajaro virtually single-handedly sent the global price of cocoa to a 33-year high in July 2010 by buying around 15 percent of global cocoa stocks.
The overall effect of speculation on food prices is an issue of dispute. Influential analysts, such as US economist Paul Krugman, have argued that speculation is a marginal factor compared to rising demand from developing countries, as well as the expanding production of corn and maize for biofuels at the expense of foodstuffs.
Diagram from "The Food Crisis: Predictive validation of a quantitative model of food prics including speculators and ethanol conversion" By Marco Lagi, Yavni Bar-Yam, Karla Z. Bertrand and Yaneer Bar-Yam
A study by the New England Complex Systems Institute last year showed that the Food Price Index should only change if ethanol production had an impact. The study estimated that a 2008 ethanol price hike was largely due to speculation, while a 2011 spike was significantly fueled by investors.
Many financiers dismiss the accusations, and say they will continue bidding against food prices. On Saturday, Deutsche Bank Co-Chief Executive Juergen Fitsche told the Global Forum for Food and Agriculture that Germany’s biggest lender “will continue to offer financial instruments linked to agricultural products.”
"Agricultural futures markets bring numerous advantages to farmers and the food industry," he said.
Others seem to be yielding to pressure. Last year, several German banks, including the second-largest Commerzbank, ceased to speculate on basic food prices for moral reasons.
As a sop to outraged public opinion over Wall Street’s looting of the real economy, criminal banksters are coming under increased scrutiny by federal regulators.
Scrutiny however, is not the same thing as enforcement of laws such as the Bank Secrecy Act and other regulatory measures meant to stop the flow of dirty money from organized crime into the financial system.
And never mind that President Obama and his hand-picked coterie of insiders from Bank of America, Citigroup, JPMorgan Chase and Wells Fargo (all of whom figured prominently in recent narcotics scandals) are moving to impose Eurozone-style austerity measures that threaten to ravage the social safety net, the American people are spoon-fed a pack of lies that this cabal will protect their interests and enforce the law when it comes to drug money laundering.
Late last week, Reuters reported that “U.S. regulators are expected to order JPMorgan Chase & Co to correct lapses in how it polices suspect money flows … in the latest move by officials to force banks to tighten their anti money-laundering systems.”
In December, the Department of Justice cobbled together a widely criticized deferred prosecution agreement (DPA) with Europe’s largest bank, HSBC, over charges that the institution, founded in 1865 by British drug lords when the British Crown seized Hong Kong from China in the wake of the First Opium War, knowingly laundered billions of dollars in drug and terrorist money for some of the most violent gangsters on earth.
Despite the fact that DOJ imposed a $1.9 billion (£1.2bn) fine which included $655 million (£408m) in civil penalties, not a single senior officer at HSBC was criminally charged with enabling Mexican drug cartels and Al Qaeda terrorists to illegally move money through its American subsidiaries.
More outrageously, even when stiff fines are levied against criminal banks and corporations, as likely as not “some or all of these payments will probably be tax-deductible. The banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks’ loads,” The New York Times disclosed.
“The action against JPMorgan,” Reuters reported,
“would be in the form of a cease-and-desist order, which regulators use to force banks to improve compliance weaknesses, the sources said. JPMorgan will probably not have to pay a monetary penalty, one of the sources said.”
Read that sentence again. America’s largest bank, responsible for some of the worst depredations of the housing crisis which tossed millions of citizens out of their homes and fined $7.3 billion (£4.53bn) for doing so, will not be fined nor will their officers be criminally charged for presumably washing black money for organized crime.
Despite the recklessness of senior officials at JPMorgan, including CEO Jamie Dimon, former CFO Doug Braunstein and former CIO Ina Drew over the bank’s massive losses in the credit derivatives market last year, Bloomberg News reported that the board will only “consider” whether to release a report on the fiasco which wiped out close to $51 billion in shareholder value at this “too big to fail” bank.
The Office of the Comptroller of the Currency (OCC), severely criticized by the US Permanent Subcommittee on Investigations in their 335-page report into HSBC, along with the Federal Reserve are expected to issue the cease-and-desist order as early as this week.
Last April however, when OCC issued a cease-and-desist order against Citigroup for alleged “gaps” in their oversight of cash transactions similar to those of drug-tainted HSBC and Wells-owned Wachovia, which laundered hundreds of billions of dollars for narcotics traffickers through dodgy cash exchange houses in Mexico, no monetary penalties were attached.
A “person close” to Citigroup “attributed part of the problem to an accident when a computer was unplugged from anti-money-laundering systems,” according to The New York Times.
While such bald-faced misrepresentations may pass muster with America’s “newspaper of record,” Citigroup’s sorry history when it comes to facilitating criminal money flows is not so easily swept under the rug.
Late last year investigative journalist Bill Conroy reported in Narco News: “In the 1990s, Raul Salinas de Gortari, the brother of former Mexican President Carlos Salinas, tapped US-based Citibank to help transfer up to $100 million out of Mexico and into Swiss bank accounts. Although US authorities investigated the suspicious money movements, ultimately no charges were brought against Raul Salinas or Citibank–a Citigroup Inc. subsidiary.”
“Again,” Conroy reported,
“in January 2010, Citigroup popped up on banking regulators’ radar, this time in Mexico, when a Mexican judge accused a half dozen casa de cambios (money transmitters) of laundering drug funds through various banks, including Citigroup’s Mexican subsidiary. In that case, Citigroup again was not accused of violating any laws.”
However, despite that fact that the OCC’s cease-and-desist order against Citigroup accused the bank of systemic “internal control weaknesses” that opened the institution up to shady transactions by “high-risk customers,” presumably including flush-with-cash narcotics traffickers, the bank was not indicted for criminal violations under the Bank Secrecy Act and did not admit wrongdoing, instead promising to “institute reforms.”
As with Wachovia and HSBC, OCC charged that Citigroup’s “lapses” included “the incomplete identification of high risk customers in multiple areas of the bank, inability to assess and monitor client relationships on a bank-wide basis, inadequate scope of periodic reviews of customers, weaknesses in the scope and documentation of the validation and optimization process applied to the automated transaction monitoring system, and inadequate customer due diligence.”
Additionally, Citigroup “failed to adequately conduct customer due diligence and enhanced due diligence on its foreign correspondent customers, its retail banking customers, and its international personal banking customers and did not properly obtain and analyze information to ascertain the risk and expected activity of particular customers.”
According to OCC auditors, Citigroup “self-reported” that “from 2006 through 2010, the Bank failed to adequately monitor its remote deposit capture/international cash letter instrument processing in connection with foreign correspondent banking.” As I have pointed out, correspondent and private banking are gateways for laundering drug and other criminal money flows.
In other words, replicating patterns employed for decades by the world’s leading financial institutions, organized criminals and terrorist financiers were enabled, with a wink-and-a-nod by the US government, above all by US secret state agencies which siphoned off part of the loot for covert operations, to wash black cash through the system as a whole.
Already stung by billions of dollars in losses due to risky trades in credit derivatives as noted above, MoneyWatch reported “CEO Jamie Dimon can’t blame this on a ‘flawed, complex, poorly reviewed, poorly executed and poorly monitored’ strategy, like he did when the bank lost $6.2 billion on the so-called ‘London Whale’ trade.”
“In many ways,” reporter Jill Schlesinger wrote, “the current potential regulatory action is worse than any trading loss, because it indicates a systemic lapse in controls.”
According to MoneyWatch, regulators “appear to have found a company-wide lapse in procedures and oversight connected to anti-money-laundering (AML) surveillance and risk management. AML controls are intended to deter and detect the misuse of legitimate financial channels for the funding of money laundering, terrorist financing and other criminal acts.”
But there’s the rub; federal regulators are loathe to police, let alone hold to account those responsible for such illicit transactions precisely because the infusion of dirty money into the system is a splendid means to keep failed capitalist financial institutions afloat, a process which Global Research political analyst Michel Chossudovsky has termed “the criminalization of the state.”
In fact, as former London Metropolitan Police financial crimes specialist Rowan Bosworth-Davies recently wrote on his website: “These institutions exist … to handle and facilitate the through-put of the staggering volume of criminal and dirty money which daily flows through the financial sector, because the profits there from are just so incredibly valuable.”
“The biggest problem for these banks,” Bosworth-Davies observed,
“is that by far the greatest amount of this money is illegal to handle under international money laundering laws. All banking institutions are now effectively subject to international laws which prohibit the handling or the facilitation of criminally-acquired money from whatever source, and that money includes the proceeds of drug trafficking, all other criminal activities (including tax evasion), and the proceeds of terrorism.”
Indeed, “The money they were moving was so huge … that it became very easy to persuade Governments to turn a blind eye, while regulators were encouraged to look the other way, when the banks began engaging in a series of wholesale criminal activities.”
Until OCC reveals the content of its cease-and-desist order pending against JPMorgan Chase we do not know the extent of the bank’s potential criminal “lapses” under the Bank Secrecy Act.
However, as Reuters reported although “no immediate action is expected from US prosecutors,” it is a near certainty that the federal government and complicit media will disappear whatever dirty secrets eventually emerge down the proverbial memory hole.
Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly and Global Research, he is a Contributing Editor with Cyrano’s Journal Today. His articles can be read on Dissident Voice, Pacific Free Press, Uncommon Thought Journal, and the whistleblowing website WikiLeaks. He is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press and has contributed to the new book from Global Research, The Global Economic Crisis: The Great Depression of the XXI Century.
The news from the world of finance has been incredibly depressing of late, as the big Wall Street banks keep winning round after round in their battles with regulators. The flurry of deals, which in part were closed pre-Jan 1st to allow the banks to clean up their books before the end of the year, were just one big win for the banks after another: the $10 billion Bank of America deal with Fannie Mae; the deal between 2 regulatory agencies and 10 major banks to come up with $3.3 billion dollars for 3.8 million homeowners; the international Basel 3 capitulation caving into everything the big international banks were asking for on regulation. Compared with the size of the crimes, the number of people who got badly hurt, and the amount of money these banks made off the fraudulent deals they committed, this money is pocket change, an insult to the millions of hard working families who have had their lives ripped apart by bank fraud.
Now even the Consumer Financial Protection Bureau, the one agency which has been rightly lauded for fighting for consumers on other issues since it got created due to Elizabeth’s Warren’s work, has caved into Wall Street demands on a new rule they just issued relating to mortgages and given the big banks a major edge against homeowners in legal issues going forward. People at Americans for Financial Reform and the other groups working on these issues tell me they are appalled by these new rules.
The best hope for investigating and prosecuting fraudulent bankers has been in the inter-agency task force co-chaired by NY AG Eric Schneiderman, but the DOJ has refused to give the task force the staff that it needed, and as a result things have been moving slower than molasses, and it is not at all clear at this point whether anything is going to come of it.
Media figures enamored of Wall Street think all this is a swell thing. WP writer Neil Irwin thinks it’s terrific because “every dollar a bank holds as part of its liquidity buffer is a dollar they are not lending out…as a loan to build a factory.” This was Obama’s argument in his first State Of The Union speech, where he talked about how he hated to bail out the banks but only by helping them would they be able to start making loans again so that the economy would recover. It has pretty much been Geithner’s entire philosophy while at Treasury: anything that gets in the way of the big banks’ ability to make money will hurt the economy. The problem is that while the big banks have been swimming in money most of the last 4 years, making record profits and handing out record bonuses to execs in some years, the rest of the economy is flat. Small businesses are still having trouble getting loans, factory start-ups have been slow, housing remains weak even with its recent uptick, and in case nobody has noticed in a DC obsessed by deficits, unemployment is still appallingly high.
Here’s the other thing: if people steal money and commit fraud and never have to go to jail or pay any real penalty, they generally keep doing it. It is equally true of street criminals and Wall Street bankers. With a government that is doing nothing to prosecute these crimes, that is settling for light slap on the wrist settlements time and time again, and that is still allowing banks to get bigger and bigger, what exactly will stop future financial crises caused by big bank greed and fraud?
One other extremely important point here: this is also about the functioning of the day to day economy, not just occasional financial crises. When the financial sector is as big and powerful and corrupt as the American financial sector is, and when tax law and special interest loopholes are so weighted to the finance sector and speculative finance as they are today, it drains money out of the real economy- out of manufacturing, out of small business start-up loans, out of housing, out of construction, out of Main Street business and workers’ pocketbooks.
What is especially painful to a loyal Democrat like me is how much of the power of Wall Street has flourished on my party’s watch. I was proud to be a member of the Bill Clinton ’92 campaign and White House, we did a lot of good things the years he was President- progressive budget packages, S-CHIP, a minimum wage increase, the Brady Bill and Assault Weapons Ban, Family and Medical Leave, etc. I was proud to support Barack Obama in his 2 races, and be a part of his transition team. He too has accomplished many things I am proud of: a progressive stimulus bill, Obamacare, the CFPB, the Lily Ledbetter Act, the end of Don’t Ask Don’t Tell, and many others. But these Presidents have a blind spot the size of the Bank of America building about Wall Street, and have appointed 3 Treasury Secretaries and other financial regulators who have done way more for Wall Street than for working families.
Which brings me to Jack Lew. Personally, I am quite biased toward Jack Lew, as he and I worked together on health care reform for Hillary Clinton in the 1993-94. Before he worked on health care reform he worked with my dear friend and mentor the late Eli Segal on creating AmeriCorps. He was the intellectual father of the S-CHIP program. I found him to be a straight shooter with a good heart who was a tried and true heir to the politics of the man he worked for a few years, Tip O’Neill. He is certainly not, as some have described him, a protege of Bob Rubin. And as OMB director, he worked on budget issues not financial issues, so he doesn’t deserve the blame for truly god-awful bill that repealed Glass-Steagall.
However, as fond as I am of Jack, he is not the progressive answer to the power of the big banks. He once said that financial deregulation had little to do with the financial collapse of 2008, which is very disappointing, and he certainly isn’t my style of a strong progressive in terms of taking on the power of Wall Street. (Of course, someone with my view about taking on the power of Wall Street would not be appointed by this President or confirmable by this Senate.) And regardless of Jack’s views, he will still be surrounded by what Jeff Connaughton in his book The Payoff: Why Wall Street Always Wins calls the Wall Street “blob”: the Treasury appointees who come from Wall Street and plan to return there after they leave; the Capitol Hill staffers who want high paid Wall Street jobs after they leave the Hill; the armies of Wall Street lawyers, lobbyists, political operatives, PR guys; the members of Congress whose campaigns are well-funded by those Wall Street denizens; the think tanks given huge Wall Street contributions to spout the party line.
I think Jack will be a better Treasury Secretary than Rubin, Summers, or Geithner. He may well be the best a financial reform activist like me could have hoped for, given the alternatives. I hope so, because you never want your friends to sorely disappoint you. But it will take a renewed and impassioned movement to take on Wall Street and have a chance at lessening their economic stranglehold on the nation’s throat, and the nation’s political system. Having a champion like Elizabeth Warren in the Senate will help, but the rest of us who care about these issues will need to fight like cats and dogs to make anything happen where the rest of can win, rather than Wall Street.
Via Michael Krieger of Liberty Blitzkrieg blog,
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
- Letter from Thomas Jefferson to John Taylor, May 28, 1816
Well they aren’t really your “new” slumlord in the sense you have been debt slaves to the financials system for decades. What I really mean is that it is now becoming overt and literal. Literal because financiers are now the main players in the real estate market and are buying all the homes ordinary citizens were kicked out of over the past few years. Yep, we bailed out the financial system so that financiers with access to cheap credit can buy up all of America’s real estate so that they can then rent it back to you later.
Of course, my opinion is that this will ultimately backfire on all the private equity buyers once they find out multiple generations will start living together and a weak economy will not provide the rental income they envision going forward. Particularly once we have another severe slowdown…which always happens eventually. Incredibly, Blackstone has spent $1.5 billion to buy homes in the last 2-3 months alone!
Blackstone has spent more than more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.
“The market is moving much faster than anybody thought possible,” Gray said during an interview in Blackstone’s New York headquarters. “Housing is much stronger than people anticipated.”
Of course the market is improving. Not because citizens are buying, but because financiers with access to cheap credit are in a bidding war to become America’s slumlords.
The firm, along with Thomas Barrack’s Colony Capital LLC and Two Harbors Investment Corp., is seeking to transform a market dominated by small investors into a new institutional asset class that JPMorgan Chase & Co. estimates could be worth as much as $1.5 trillion.
No more small banks, only mega banks. No more small real estate investors, only mega real estate investors. Get the joke?
It’s bought so quickly it’s “warehousing” more than half of the homes it’s acquired as it completes the purchase and hires staff and contractors to renovate and rent the properties, Gray said. It takes about 30 days to fix each home and then as much as 30 days to lease the property, he said.
“While leverage is currently limited, potential financing options include secured credit lines, lending syndicates, high- yield debt, government sponsored enterprise-provided financing, and securitization,” Jade Rahmani, an analyst with Keefe, Bruyette & Woods Inc. in New York, wrote in a note yesterday.
In the case of the single-family business, Blackstone will rent and manage the homes through Invitation Homes, which it founded last year with Riverstone Residential Group, an apartment management company based in Dallas.
Oh and so next time you go to rent a home or apartment and the leasing company is called “Invitation Homes” don’t be fooled. It is actually Blackstone; your Wall Street slumlord.
Full article here.
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America desperately needs to downsize the financial system. Citigroup alumnus Jack Lew is not the man for the job.
January 9, 2013 |
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As Tim Geithner packs his bags, America will be treated to a new Treasury Secretary. It seems that Citigroup alumnus Jack Lew is President Obama's pick. What can we expect? What sort of Secretary do we need? And what are we likely to get?
Straight from the horse’s mouth, this is how the U.S. Department of the Treasury describes its mission:
“Maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government’s finances and resources effectively.”
Note what the mission statement does not say: that Treasury exists only to preserve the vestiges of a crony capitalist system. Or that it’s only about saving financial players rather than enforcing the law. Or that it’s supposed to be incompetent in bailout negotiations. Yet somehow since the days of the Clinton Administration, the Treasury Secretary has morphed into the custodian of Wall Street interests, paying little or no heed to the concerns of Main Street on matters of economic growth or employment. This new-fangled Secretary tends to ignore the mandate to establish a genuinely stable financial system. It’s all about papering over cracks and simply setting us up for a bigger financial crisis down the road.
If one is to judge from the discussions of the likely new Treasury Secretary, it appears that nothing will change. It is sadly ironic that the last person to occupy this office who cared at all about US interests outside of finance was James Baker. Even under the Presidency of George W. Bush, Enron executives were jailed, yet over the past few years we have read much of widespread criminality and a total disregard for ethics and values. Led by Treasury, however, the authorities have seen fit to go soft on the banks and will prosecute only a few rogue traders when it seems many were involved. The point is that we are not talking about the isolated act of a rogue trader or two. Criminality and greed is embedded in the culture of the financial sector and only major reform will get rid of it. Unfortunately, the Obama Administration, largely through the actions (or non-actions) of Tim Geithner, has been a major impediment to adopting the kinds of reforms that would allow the Treasury genuinely to fulfil its mission statement.
We have a financial system today in which the volume of financial transactions in the global economy is 73.5 times higher than the entire world economic output (GDP). The overall increase in financial trading is exclusively due to the spectacular boom of the derivatives markets. Most of the financial flows comprise wealth-shuffling speculation, transactions which have nothing to do with the facilitation of trade in real goods and services across national boundaries, as economist Bill Mitchell has noted.
In fact, we’ve really done nothing but tread water economically since the onset of the Great Recession of 2008. In the United States, financial institutions are still failing and as of May 2012, a whopping 441 FDIC-insured banks had failed. The employment-population ratio has dropped sharply. Nine million jobs were lost from the peak of January 2008 and, at the current pace of sluggish job creation, it will take at least seven and half years to regain them; only in the Great Depression did it take longer for employment to recover in the U.S. Worldwide, as of May 2012, fifty million jobs are still missing compared to the pre-2008 crisis. According to the International Labor Organization, they are not expected to be regained until late 2016.