Five years ago today, Lehman Brothers went bankrupt.

Instantly and inevitably, the house of cards otherwise known as Wall Street collapsed.

But after getting bailed out by the American taxpayers, Wall Street is doing just fine.

The people of Main Street? Not so much.

Here are some numbers to think about this Sunday morning.

• Amount the crash cost the U.S. economy: $22 trillion

• How much everyone would get if that $22 trillion were divided equally among the U.S. populace: $69,478.88

• Assets of the four biggest banks in America — JPMorgan Chase, Bank of America, Citigroup and Wachovia/Wells Fargo — when they were “too big to fail” in 2008: $6.4 trillion

• Assets of those four banks today: $7.8 trillion

• Of the 63 former Lehman Brothers employees identified by a bankruptcy examiner as being aware of an accounting scheme Lehman used to mask its true finances, number who are employed in senior financial services positions today: 47

• Number of the 25 banks responsible for the bulk of risky subprime loans leading up to the crash that are back in the mortgage business: 25

• Chances that an American voter thinks that regulating financial products and services is “important” or “very important”: 9 in 10

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When a government suspends Rule of Law it suspends Statutes of Limitation------we have a US Constitution that states all citizens follow Rule of Law and have Equal Protection----- government cannot simply ignore this.

Over on Twitter, friend @WorleyDervish created this pic -- the quote comes from this radio commentary: http://www.jimhightower.com/node/8244 Love it! _________________________________________________________________________
We need to know who tied Maryland to these LIBOR deals------O'Malley as Mayor of Baltimore and now Governor of Maryland. He is running for President and will pretend to be so progressive. THIS IS HYPE. Right now, Gansler, Brown, and Mizeur have all come out for continuing Wall Street financial deals and leverage......public private partnerships that act as if nothing bad happened with Wall Street. Baltimore was one of the hardest hit with LIBOR-----AND THE FRAUD WAS IN THE TRILLIONS OF DOLLARS SO SETTLEMENTS SHOULD REFLECT THAT!

by Ellen Hodgson Brown / April 23rd, 2014Sixteen 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 on its 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.

Remedies

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.


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YOU KNOW A MEDIA OUTLET IS NEO-LIBERAL IF THEY SUGGEST THE IMF IS A GOOD ORGANIZATION! TROIKAs ARE NEVER GOOD.


Since the IMF is recognized around the world as an extension of global corporations and act to destabilize and create indebtedness in sovereign nations just so these global corporations can take control of these nation's economies----just as has happened in Europe and the US with the massive corporate fraud of tens of trillions of dollars off-shored weakening these nations........the IMF needs to be dismantled, not given more money. The world needs to get its money by rebuilding Rule of Law and public justice that will recover the massive corporate fraud and bring back the fraud to government coffers making the public sector flush with money in most nations around the world. So, rather than an organization run by global corporations having the money to manipulate nations, we are going to rebuild Rule of Law and recover all that money owed to our government coffers and individual pockets!

US Blasted on Failure to Ratify IMF Reforms

Sunday, 13 April 2014 10:01 By Jim Lobe,

Washington - While Republicans complain relentlessly about U.S. President Barack Obama’s alleged failure to exert global leadership on geo-political issues like Syria and Ukraine, they are clearly undermining Washington’s leadership of the world economy.

That conclusion became inescapable here during this week’s in-gathering of the world’s finance ministers and central bankers at the annual spring meeting here of the International Monetary Fund (IMF) and the World Bank.

In the various caucuses which they attended before the formal meeting began Friday, they made clear that they were quickly running out of patience with Congress’s – specifically, the Republican-led House of Representatives – refusal to ratify a 2010 agreement by the Group of 20 (G20) to modestly democratise the IMF and expand its lending resources.

“The implementation of the 2010 reforms remains our highest priority, and we urge the U.S. to ratify these reforms at the earliest opportunity,” exhorted the G20, which represent the world’s biggest economies, in an eight-point communiqué issued here Friday.

“If the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and develop options for next steps…” the statement asserted in what observers here called an unprecedented warning against the Bretton Woods agencies’ most powerful shareholder.

The message was echoed by the Group of 24 (G24) caucus, which represents developing countries, although, unlike the G20, its communique didn’t mention the U.S. by name.

“We are deeply disappointed that the IMF quota and governance reforms agreed to in 2010 have not yet come into effect due to non-ratification by its major shareholder,” the G24 said.

“This represents a significant impediment to the credibility, legitimacy and effectiveness of the Fund and inhibits the ability to undertake further, necessary reforms and meet forward-looking commitments.”

The reform package, the culmination of a process that began under Obama’s notoriously unilateralist Republican predecessor, George W. Bush, would double contributions to the IMF’s general fund to 733 billion dollars and re-allocate quotas – which determine member-states’ voting power and how much they can borrow – in a way that better reflects the relative size of emerging markets in the global economy.

In addition to enhancing the IMF’s lending resources, the main result of the pending changes would increase the quotas of China, Brazil, Russia, India, and Turkey, for example, at the expense of European members whose collective representation on the Fund’s board is far greater than the relative size of their economies.

Spain, for instance, currently has voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of Brazil’s. And of the 24 seats on the IMF’s executive board, eight to ten of them are occupied by European governments at any one time.

The reforms would only change the status quo only modestly. While the European Union (EU) members currently hold a 30.2 percent quota collectively, that would be reduced only to 28.5 percent. The biggest gains would be made by the so-called BRICS (Brazil, Russia, India, China, and South Africa) – from 11 percent to 14.1 percent — although almost all of the increase would go to Beijing.

Washington’s quota would be marginally reduced – from 16.7 percent to 16.5 percent, preserving its veto power over major institutional changes (which require 85 percent of all quotas). Low-income countries’ share would remain the same at a mere 7.5 percent collectively, although their hope – shared by civil-society groups, such as Jubilee USA and the New Rules for Global Finance Coalition — is that this reform will make future changes in their favour easier.

Thus far, 144 of the IMF’s 188 member-states, including Britain, France, and Germany and other European countries that stand to lose voting share, have ratified the package. But, without the 16.7 percent U.S. quota, the reforms can’t take effect.

The Obama administration has been criticised for not pressing Congress for ratification with sufficient urgency. But, realising that its allies’ patience was running thin, it pushed hard last month to attach the reform package to legislation providing a one-billion-dollar bilateral aid package for Ukraine during the crisis with Russia over Crimea.

While the Democratic-led Senate approved the attachment, the House Republican leadership rejected it, despite the fact that Kiev would have been able to increase its borrowing from the IMF by about 50 percent under the pending reforms.

House Republicans – who, under the Tea Party’s influence, have moved ever-rightwards and become more unilateralist on foreign policy since the Bush administration – have shown great distrust for multilateral institutions of any kind.

Both the far-right Heritage Foundation and the neo-conservative Wall Street Journal have railed against the reforms, arguing variously that they could cost the U.S. taxpayer anywhere from one billion dollars to far more if IMF clients default on loans, and that the changes would reduce Washington’s ability to veto specific loans.

They say the IMF’s standard advice to its borrowers to raise taxes and devalue their currency is counter-productive and could become worse given the Fund’s new emphasis on reducing income inequalities; and that, according to the Journal, the reforms “will increase the clout of countries with different economic and geo-political interests than America’s.”

Encouraged by, among others, the U.S. Chamber of Commerce and their Wall Street contributors, some House Republicans have indicated they could support the reforms. But thus far they have insisted that they would only do so in exchange for Obama’s easing new regulations restricting political activities by tax-exempt right-wing groups.

Meanwhile, however, the delays are clearly damaging Washington’s global economic and geo-political agenda – persuading other G20 countries to adopt expansionary policies and punish Moscow for its moves against Ukraine – during the meetings here.

“The proposed IMF reforms are a no-brainer,” according to Molly Elgin-Cossart, a senior fellow for national security and international policy at the Center for American Progress. “They modernise the IMF and restore American leadership on the global stage at a time when the world desperately needs it, without additional cost for American taxpayers.”

Further delay, especially now that the G20 appear to have set a deadline, could in fact reduce Washington’s influence.

While she stressed she was not prepared to give up on Congress, IMF managing director Christine Lagarde told reporters Thursday the Fund may soon have to resort to a “Plan B” to implement the reforms without Washington’s consent.

While she did not provide details of what are now backroom discussions, two highly respected former senior U.S. Treasury secretaries suggested in a letter published Thursday by the Financial Times that “the Fund should move ahead without the U.S. …by raising funds from others while depriving the U.S. of some or all of its longstanding power to block major Fund actions.”

C. Fred Bergsten and Edwin Truman, who served under Jimmy Carter and Bill Clinton, respectively, suggested that the IMF could make permanent an initiative to arrange temporary bilateral credit lines of nearly 500 billion dollars from 38 countries who could decide on their disposition without the U.S.

More radically, they wrote, the Fund could increase total country quota subscriptions that would remove Washington’s veto power over institutional changes.

“The U.S. deserves to lose influence if it continues to fail to lead,” the two former officials wrote.

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Regarding world-wide austerity protests---where is the US media coverage?:

Citizens of the world are now understanding that all political parties are captive to global corporate interests. In Europe it is the pols running as socialists that hand public wealth to corporations as quickly as those running as labor or liberals.

THEY ARE ALL NEO-LIBERAL POLS SIMPLY PRETENDING THEY ARE WORKING FOR THE PEOPLE JUST AS WE HAVE IN AMERICA.

The decades between Reagan/Clinton and Bush/Obama has been about dismantling all of public wealth and reverting to the days of empire-building and extreme wealth with a huge dash of totalitarian tyranny. Americans now know their long time democrat was a global corporate pol working to take the US from a first world thriving economy to a third world wealth inequity and stagnant economy.

We hear on corporate NPR/APM ----the global Chamber of Commerce funded with taxpayer money----that IMF's LaGarde thinks that with the increasing massive protests all over the world that the time may be to stop the movement of all the world's wealth to the top and placate the masses. In the US, it looks like the 1960s all over again as progressive issues are tossed during election primaries that have no intention of enforcement. No talk of Rule of Law and recovering tens of trillions of dollars or stopping systemic fraud of workers and citizens----but those progressive bones are flying.

Below you see the IMF is trying to have yet more money sent to its funding. The IMF is run by global corporate interests and uses its money to capture a nation's economy to hand control to the same corporations driving our economies into bankruptcy over and again. So, as neo-liberals push for more money for this global Wall Street organization----we are simply waiting for Trans Pacific Trade Pact (TPP) to be passed to end all US sovereignty and handing all policy power to these same groups.

Luckily, citizens around the world are shaking the neo-liberal bugs from the rug and rebuilding the people's political parties-----here in America that would be a neo-liberal - captured democratic party. The US has a strong Constitution with protections for its citizens that go well beyond those in Europe so we have a stronger ability to reverse all of this. Europe has a stronger system of labor, justice, and media to help them. So, LET'S DO IT!

Did you know the same austerity is happening in the US ending all War on Poverty, New Deal, and Social safety net programs and there is no coverage in the US of what are growing protests?

The US media and what were some of the strongest labor and justice organizations are silent in the US where in Europe they are strong. We need these organizations making lots of noise about global corporate pols in BOTH PARTIES.

LEGARD THINKS THAT THE THEFT OF PUBLIC WEALTH HAS GONE FAR ENOUGH SHE SAYS AS THE MASSES MOVE TO SHAKE THE BUGS FROM THE RUG.

Thousands in Paris and Rome protest austerity measures

america.aljazeera.com

April 12, 2014 5:45PM ET

Anti-austerity protests took over parts of Paris and Rome on Saturday, with one demonstration in Rome spurring violence when protesters threw rocks, eggs and firecrackers at police, with at least one person injured.

Tens of thousands of people took part in protests in central Paris and Rome, organized by hard-left parties opposed to government economic reform plans and austerity measures.

Police in Rome armed with batons charged members of a large splinter group — many wearing masks and helmets — and also used tear gas to push back the crowd, with protesters fighting back with rocks and firecrackers. One man lost a hand when a firecracker exploded before he could throw it.

There were dozens of lighter injuries among police and protesters, and at least six arrests, police said.

The protest was organized as a challenge to high housing costs and joblessness as a result of Italy's long economic slowdown. The procession made its way peacefully through central Rome until the more violent element wearing helmets started throwing objects at police near the Labor Ministry.

In Paris, protesters marched from the Place de la Republique, some carrying banners attacking President Francois Hollande with slogans such as "Hollande, that's enough," and "When you are leftist you support employees."

French police said that about 25,000 joined the protest, which follow new Prime Minister Manuel Valls' unveiling of a plan Tuesday to make tax and spending cuts, vowing to bring down France's public deficit and following on the heels of pro-business reforms announced earlier this year by Hollande.

"This is the first demonstration of the left-wing opposition against the government," Olivie Besancenot, spokesman of the New Anti-Capitalism Party, told i-Tele TV channel.

The turnout, however, was well short of protests in Paris last year in opposition to same-sex marriage that drew hundreds of thousands. The French Communist Party, on its Twitter account, estimated Saturday's turnout at 100,000.

The protest in Rome was smaller, drawing several thousand, according to witnesses. They called for more affordable housing and took aim at 39-year-old Prime Minister Matteo Renzi and his plans to reform labor rules to make it easier for companies to hire and fire employees.

"The problem with the Renzi government is that since it took power, even though he is supposedly of the left, his policies are of the right," said Federico Bicerni, a 23-year-old from Modena with a temporary work contract who is also the youth head of the Italian Marxist Leninist Party.

"They are reducing democracy. Renzi's labor reforms will worsen the situation for workers without job security, hitting young people when they are already struggling. The rage of the people in the squares today is justified," he said.

Renzi, who took power in February, is seeking to make sweeping reforms, including tax cuts, to revive Italy's ailing economy where youth unemployment has risen to well over 40 percent.

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I am as glad as anyone to have a people's Pope appear with words of reason.....although it always seems to happen after everyone has been fleeced. Benedict was shown to have used the Vatican banks to launder the corporate loot from fraud to off-shore accounts and then, we have the people's Pope.

Here in America we have had two decades of naked capitalism without our religious leaders shouting against this immoral casino economy. It will help the poor if religious leaders held power accountable before they get all the loot! Religious leaders that offer to replace the public sector in helping the poor after everyone has been fleeced rather than fighting for a strong, democratic society with public justice and Rule of Law-----taking taxpayer money to replace the public sector-----is not working in the interest of their membership. We learned in the Age of Enlightenment and Protestantism that having the people and a public sector makes for the best path to justice. We thank this Pope for shouting it now!

The Pope's Economic Plan

April 11th, 2014
in Op Ed

by Scott Baker, OpEdNews.com



Recently, Pope Francis released an 84-page document, known as an apostolic exhortation, called an Official Platform for his papacy by Reuters. Frankly, most of it is arcane religious doctrine and prescriptions to this atheist, but the pope's economic plan ought to be of interest to everyone.



Follow up:

This pope lives simply, in a guest house, and has been known to wash the feet of ordinary people, despite having access to vast wealth, like all popes. Further, like his namesake, Saint Francis, he seems to sincerely wish to do something to combat poverty. However, most of the MSM articles are crafting his message in purely moral terms. From the Reuters article:

In (the document), Francis went further than previous comments criticizing the global economic system, attacking the "idolatry of money" and beseeching politicians to guarantee all citizens "dignified work, education and healthcare".

Did the pope just call for universal healthcare? Where was he when Obamacare ruled out the Public Option?   On safer ground, the Reuters article continues:

(The pope) also called on rich people to share their wealth. "Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills," Francis wrote in the document issued on Tuesday.

"How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses 2 points?"

This is safe territory for most media. "Just give a little more...share what you've made with those less fortunate," is safe because how much is enough? How much is too little? One could debate redistribution forever without addressing the reason for maldistribution in the first place.

Senator Bernie Sanders digs a bit further, recognizing the pope's "past passionate criticism of the global financial system, which has plunged more of the world into poverty while benefiting the wealthy few."

From Reuters:

In (the exhortation), economic inequality features as one of the issues Francis is most concerned about, and the 76-year-old pontiff calls for an overhaul of the financial system and warns that unequal distribution of wealth inevitably leads to violence.

"As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world's problems or, for that matter, to any problems," he wrote.

The pope is clearly not a believer in deregulated markets! What would (catholic) Ronald Reagan have thought?

But, there is more to the Pope's plan than just exhortations to - somehow - lessen the wealth gap. Although for some reason, none of the articles I found directly linked to the actual apostolic exhortation, I was able to find it here.

In chapter 2, section I, the pope writes of "SOME CHALLENGES OF TODAY'S WORLD," saying:

"52. In our time humanity is experiencing a turning-point in its history, as we can see from the advances being made in so many fields. We can only praise the steps being taken to improve people's welfare in areas such as health care, education and communications. At the same time we have to remember that the majority of our contemporaries are barely living from day to day, with dire consequences. A number of diseases are spreading. The hearts of many people are gripped by fear and desperation, even in the so-called rich countries. The joy of living frequently fades, lack of respect for others and violence are on the rise, and inequality is increasingly evident. It is a struggle to live and, often, to live with precious little dignity. This epochal change has been set in motion by the enormous qualitative, quantitative, rapid and cumulative advances occurring in the sciences and in technology, and by their instant application in different areas of nature and of life. We are in an age of knowledge and information, which has led to new and often anonymous kinds of power."

So far, this is pretty standard stuff, maybe equivalent to a "papal rant." But Francis goes on to more stridently argue "No to an economy of exclusion," arguing that there should be a new commandment "'thou shalt not' to an economy of exclusion and inequality. Such an economy kills."

Better yet, from the point of view of an atheist like me who looks for rational solutions to defined problems, he is impatient with certain popular, but failed, economic theorems.

"54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting."

Did the Pope just repudiate the trickle-down free market? It sure seems that way. This is sure to not sit well with the typical elite V.I.P.s that normally fill a Pope's daily itinerary!

Furthermore, he is saying that merely trusting in the goodness of others is naive and unworkable as an economic plan. There are specific remedies to be applied, not just spiritual awakening. This is quite refreshing coming from a spiritual leader!

He goes on to say "No to the new idolatry of money," though one can be forgiven for thinking it's all very well for one of the - potentially - wealthiest men in the world to say stop worshiping money, or that "Money must serve, not rule!" But what we want to know what is he proposing to do about it, beyond preaching "A financial reform open to such ethical considerations?"

Well, he squarely says that violence comes from inequality and social injustice, "at its root," not just from a failure of character (or faith).   And the pope has his cross hairs aimed at the hyper-security state too:

No to the inequality which spawns violence

59. Today in many places we hear a call for greater security. But until exclusion and inequality in society and between peoples is reversed, it will be impossible to eliminate violence. The poor and the poorer peoples are accused of violence, yet without equal opportunities the different forms of aggression and conflict will find a fertile terrain for growth and eventually explode. When a society -- whether local, national or global - is willing to leave a part of itself on the fringes, no political programmes or resources spent on law enforcement or surveillance systems can indefinitely guarantee tranquility. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root. Just as goodness tends to spread, the toleration of evil, which is injustice, tends to expand its baneful influence and quietly to undermine any political and social system, no matter how solid it may appear. If every action has its consequences, an evil embedded in the structures of a society has a constant potential for disintegration and death. It is evil crystallized in unjust social structures, which cannot be the basis of hope for a better future."

So, the pope is saying that lack of opportunity and gross inequality creates violent reaction, not jealousy.

I wish he had said something about the lack of faith in one's fellow man. Evil does not just happen; it is driven by fear and distrust. This is a lack of faith in the inherent goodness of people. And it is inherent too. Only a small minority of people, including the oligarchs, disrupts or pathologizes the conditions for the rest of us. The small number of oligarchs taking the wealth through rent-seeking and monopolization is comparable to the number of hard core terrorists, but only one group gets the attention it deserves, or perhaps too much attention, given how the 1% elite create conditions for terrorism to breed.

The pope seems to be calling for an end, or at least curtailment, of the "war on terror" and says it is ultimately futile:

Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts.

The pope goes on to criticize today's consumerism - this, at a time when economists are stuck in the mode of growth at all costs to achieve happiness, instead of asking what it is that makes us happy to begin with, beyond just having more "stuff."

As Francis reminds us:

Human beings are themselves considered consumer goods to be used and then discarded. We have created a "disposable" culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society's underside or its fringes or its disenfranchised - they are no longer even a part of it. The excluded are not the "exploited" but the outcast, the "leftovers"."

This is pretty radical stuff, even the talk of revolutionaries. This is also new, as the pope says. He is telling us that we have actually discarded a whole class of human beings, not merely exploited them. Is he calling for an uprising, even a peaceful one?

60. Today's economic mechanisms promote inordinate consumption, yet it is evident that unbridled consumerism combined with inequality proves doubly damaging to the social fabric.

Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts. Some simply content themselves with blaming the poor and the poorer countries themselves for their troubles; indulging in unwarranted generalizations, they claim that the solution is an "education" that would tranquilize them, making them tame and harmless. All this becomes even more exasperating for the marginalized in the light of the widespread and deeply rooted corruption found in many countries - in their governments, businesses and institutions - whatever the political ideology of their leaders.

The quotes around "education" are his. He is obviously skeptical of today's schooling, and its usefulness later on.

Unfortunately, the pope does not quite follow through with a true understanding of how the Haves take from the Have-Nots, if not by force, than as economic hitmen, making loans with impossible payment requirements, and then seizing collateral, even whole countries. He once again pleads for redistribution:

With due respect for the autonomy and culture of every nation, we must never forget that the planet belongs to all mankind and is meant for all mankind; the mere fact that some people are born in places with fewer resources or less development does not justify the fact that they are living with less dignity.

...instead of for just compensation for the use of resources. Africa, for example, is resource rich, yet its people are among the poorest. Clearly, they are not being compensated for their natural wealth. It is not that their resources are not worth more, without some of them, our modern electronic age could not exist. But those who ought to pay, would rather take the resources by guile or by force. To pay more is not charity, it is justice. For example, a tax on the use/abuse of resources, including location in dense urban areas, would encourage sustainable development while collecting enough money to feed and house all the poor. For that matter, it would force empty warehoused buildings into becoming homes for the poor, or at the very least, make it possible for government to provide a small stipend to make that happen. Right now, most government housing programs are notoriously more expensive than they ought to be, and the dangerous shelter system is no moral solution.

Francis does recognize that:

202. The need to resolve the structural causes of poverty cannot be delayed, not only for the pragmatic reason of its urgency for the good order of society, but because society needs to be cured of a sickness which is weakening and frustrating it, and which can only lead to new crises. Welfare projects, which meet certain urgent needs, should be considered merely temporary responses. As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, [173] no solution will be found for the world's problems or, for that matter, to any problems. Inequality is the root of social ills.

Again, he is rejecting a "market" solution.

We can no longer trust in the unseen forces and the invisible hand of the market. Growth in justice requires more than economic growth, while presupposing such growth: it requires decisions, programmes, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality. I am far from proposing an irresponsible populism, but the economy can no longer turn to remedies that are a new poison, such as attempting to increase profits by reducing the work force and thereby adding to the ranks of the excluded.

Francis defines an economy thusly:

206. Economy, as the very word indicates, should be the art of achieving a fitting management of our common home, which is the world as a whole. Each meaningful economic decision made in one part of the world has repercussions everywhere else; consequently, no government can act without regard for shared responsibility. Indeed, it is becoming increasingly difficult to find local solutions for enormous global problems which overwhelm local politics with difficulties to resolve. If we really want to achieve a healthy world economy, what is needed at this juncture of history is a more efficient way of interacting which, with due regard for the sovereignty of each nation, ensures the economic well-being of all countries, not just of a few.

As Francis says:

"No to a financial system which rules rather than serves."

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Remember when we elected the super-majority of democrats to hold Wall Street accountable and institute changes to keep them from blowing up the economy?  Surprise, because we have neo-liberals instead of democrats in Congress, Wall Street was not only given a free pass, but policies allowed them to super-size overseas with stimulus money under the guise of job creation and the FED policy.  We are now heading for another crash worse than 2008 because of this.

PLEASE STOP ALLOWING A NEO-LIBERAL DNC CHOOSE YOUR CANDIDATES.  RUN AND VOTE FOR LABOR AND JUSTICE IN ALL PRIMARIES!

Evolution in Bank Complexity

March 28th, 2014


by Nicola Cetorelli, James McAndrews, and James Traina - Liberty Street Economics, Federal Reserve Bank of New York

This post is the sixth in a series of thirteen Liberty Street Economics posts on Large and Complex Banks.

In yesterday’s post, our colleagues discussed the historic changes in financial sector size. Here, we tackle a related question on dynamics—how has bank complexity evolved through time? Recently, academics and policymakers have proposed a variety of strong actions to curb bank complexity, stemming from the view that complex banks are undesirable. While the large banks of today are certainly complex, we lack a thorough understanding of how they got that way.



Follow up:

In this post and in our related contribution to the Economic Policy Review (EPR)volume, we focus on organizational complexity, measured by the number and types of entities organized together under common ownership and control. Using a new data set of financial-sector acquisitions, we study the structural evolution of banks and its implications for policy. We argue that banks grew into increasingly complex conglomerates in adaptation to a changing financial sector.

Complexity and Financial Acquisitions

In a 2012 series of blog posts, we debated the role of banks in an evolving financial intermediation industry. Fueled by the advent of asset securitization, intermediation was moving “to the shadow,” with nonbank entities increasingly able to fulfill the functions traditionally provided by banks. We argued—and showed some evidence—that one way for banks to adapt was by reorganizing, developing into larger bank holding companies (BHCs) incorporating the nonbank entities that were becoming so important to the process of intermediation. Here, we build on those original thoughts, presenting a deeper analysis of banks’ evolution into complex conglomerates.

How did this transformation take place? To address this question, we use a comprehensive data set of U.S. financial-sector acquisitions from SNL Financial, focusing on trends in bank structure (and, therefore, bank complexity) by looking at the industry types of buyers and targets. Our deals span 23,451 unique entities across ten different industries from 1989 to 2012. Note that since these are industries, “bank” refers to both commercial banks and bank holding companies.

To get a preliminary sense of trends in structure, consider the buyer and target industry types through time. Who bought whom? As the pie charts below show, although banks and thrifts were the main buyers in the late 1980s (large blue and brown slices), more industry types become involved as buyers over time (more equitable slices). By the second half of the 1990s, all industry types in our sample were buying. The variety in target types also widened gradually over time, with nonbank targets already representing the large majority in the second half of the 1990s (small blue and brown slices). Despite these trends, buyer and target proportions have changed little since the height of the financial crisis.



Cross-Industry Activity

Banks were certainly major players in financial acquisitions, incorporating a large and growing number of subsidiaries into BHC structures. However, we care more specifically about nonbank acquisitions since these deals directly contribute to organizational complexity. The cross-industry activity itself is economically meaningful, comprising about 40 percent of our sample deals over the last thirty years. This fact already hints at a useful context: the banking behemoths of today arose as part of a broad process that has transformed the banking industry more generally.

The charts below show the composition of buyer and target industry types in cross-industry acquisitions through time. Each slice represents the relative observation counts in each four-year period. In these pie charts, we observe that the entire financial sector was reorganizing over time. Banks were buying nonbanks such as specialty lenders, asset managers, and broker-dealers. And so, in the top panel, the big blue chunks illustrate how BHCs grew into increasingly complex conglomerates by gobbling up nonbank intermediaries, whose types are picked up by the colorful variety in the bottom panel. This cross-industry acquisition wasn’t limited to banks; all other financial-entity types were expanding into other industries by the 2000s. What’s more, targets weren’t concentrated in any one industry, suggesting that industry-specific factors didn’t drive the development, nor did a desire to evade regulation explain it, as unregulated sectors were expanding in similar ways.



Two observations jump out: first, banks have become less bank-centric by expanding the types of their subsidiaries, and second, the phenomenon was widespread as even nonbank financial firms expanded their scope. Because it’s so widespread across different types of firms, it’s unlikely that regulatory changes fully explain this evolution—other changes in the underlying technology of financial intermediation seem necessary to explain such widespread and thorough industrial reorganization. Holding company structures apparently offered key advantages in this new environment, collecting nonbank specialists under one organization and internalizing frictions across the intermediaries. In our companion EPR paper, we present other trends that support this interpretation.

Understanding the evolving structure of banks offers insights for the comparative evaluation of policy solutions to bank complexity problems. For instance, blunt fixes such as caps and breakups might fragment the intermediation industry and trade large and complex regulated holding companies for smaller shadow entities outside the scope of oversight. If conglomerate structures are the result of an adaptation to technological advances, then tractable policies, such as enhanced capital requirements, stress tests, and resolution plans, may reduce systemic risk while retaining adaptive synergies. Design of such policies presents a key challenge going forward.



Note: For more on this topic, see this special issue of the Economic Policy Review.



Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.


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As I have said, the loading up of the public sector with debt, whether the failure to pay off the national debt with recovery of massive corporate fraud or the use of large amounts of credit bond and financial leveraging at the state and local level, the point is this.....the plan to dismantle government structures by what will be a depression ties in with Trans Pacific Trade Pact's goal of handing control of the world's economy to global corporate tribunals. What privatizes all that is public better than massive sovereign and municipal debt and a great big depression. The FED and neo-liberals in Congress have allowed the exact conditions that existed in 2007 to happen again, only even more fraud, debt, and leverage.

PLEASE THINK ABOUT WHO WILL BE IN CHARGE WHEN THIS COLLAPSE OCCURS....THAT IS WHAT THIS 2014 ELECTION IS ALL ABOUT. A NEO-LIBERAL WILL DISMANTLE THE PUBLIC SECTOR TO PAY THE DEBT AND A PROGRESSIVE LABOR AND JUSTICE WILL REBUILD RULE OF LAW AND MAKE CORPORATIONS PAY.


6 Signs That 2014 Will Be The Year Of The Super Crash

6 Signs That 2014 Will Be The Year Of The Super Crash Gold Silver Worlds | January 30, 2014 |

As we have finally arrived in the magic year 2014, in which almost every economic and business cycle is trending down, it seems that things are perfectly lining up for a melt down. If it would have been true that the debt crisis was contained (like our political leaders try to make us believe), then there is a huge divergence with recent trends.

Are we pessimistic? No. Are we optimistic? We do our best. Above all, we aim to be unbiased and neutral. In any case, this article is not an attempt to predict prices or to time any market. That is useless and serves only marketing purposes. This article looks at six different trends which are lining up for an historic sell off in the markets. As readers observe, we stay as factual as possible.

Trend 1: Market distortions because of QE appearing in emerging markets Up until now, the vast majority of economic and financial pundits have been praising the Western central banks for their monetary miracles. The last two weeks, however, were extremely important as we got evidence of the direct destructive effects of monetary easing. In particular, the carnage in emerging markets and their respective currencies revealed that things can get out of hand and have the ability to spiral out of control (much faster than governments can intervene).

Bloomberg says this is the worst selloff in emerging-market currencies in five years, revealing the impact from the Federal Reserve’s tapering of monetary stimulus. “Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.”

Once the destructive power of this monetary experiment starts manifesting itself, it is likely to see spill over effects to all markets. Monetary easing could still look like innocent and constructive, but the side effects are unknown at present, as this is the first monetary experiment at this scale. The most concerning fact is that nodoby has an idea about how exactly the markets will react on each slice of tapering, and the precise timing of all effects (including the unintended consequences).

Trend 2: There are almost no buyers left in equities Equity markets have shown exceptional yields in 2013. In a world with no yields, investors are chasing assets which yield more than nothing.

It has been thought that quantitative easing would create bubbles, but as it looks now it is resulting in bubbles in specific asset classes, as Marc Faber correctly predicted a while ago. The problem is that sentiment in the stock market has become far too optimistic. It’s not surprising, nor are investors or traders to blame, in a zero-yield world. The first chart shows the extreme optimism based on a bull/bear ratio.



 Another red flag is related to margin debt, see next chart. It shows the level of leverage in the equity market. We are well past the previous peaks.



However, there are reasons to believe that a crash is not imminent. Equities have surged but the margin debt to equities growth ratio is not as extreme as in the 2000 and 2007 peaks. This metric suggests there is some room for more upside.



We all know what happens when there is nobody left to buy. That point could be very close.

Trend 3: Manipulation is entering the public debate Currency markets, LIBOR, base metals, energy, … almost every single market has been manipulated. That is no news, of course, but the fact that it has become widely accepted is an important trend. Consider these headlines in the last few weeks:

• Federal Reserve Said to Probe Banks Over Forex Fixing (Bloomberg)
• Deutsche, Citi feel the heat of widening FX investigation (Reuters)
• HSBC, Citi suspend traders as FX probe deepens (Reuters)

Even the precious metals manipulation debate is going mainstream. Up until now it remained in the “dark corners” of the internet, in the “blogosphere” and “gold bull” sites. Now it is the German financial regulator Bafin who says that “Metals, Currency Rigging Is Worse Than Libor” (via Bloomberg).

The key is that it has the potential to undermine trust. As readers know by now, trust is the pillar on which the current financial system is built. Once there was a tangible asset backing up the monetary and financial system; it was called gold. Not so anymore. A large scale loss in trust will have disastrous effects.

Trend 4: Banks are once again reporting losses Several mega banks have been reporting losses in the last weeks. Is this a repeat of the 2008 scenario?

Consider Royal Bank of Scotland, who faces £8bn in full year losses. BBC writes: “RBS may face full-year losses of up to £8bn, after the bank said it needed another £3.1bn for claims relating to the financial crisis. RBS boss Ross McEwan said: “The scale of the bad decisions during that period [the financial crisis] means that some problems are still just emerging.”

Another giant, Deutsche Bank, posted EU1.2 billion losses in the fourth quarter. Via Bloomberg: “Deutsche Bank AG, Germany’s biggest bank, said this year will be challenging after a surge in legal costs and lower debt trading revenue spurred a surprise fourth-quarter loss. The shares slumped. Depressed interest rates in Europe and declining demand for banking services are also among the headwinds the bank is confronting in 2014, Co-Chief Executive Officer Anshu Jain said on a conference call with analysts from Frankfurt today.”

Wait a minute. The central banks of this world have injected close to $10 trillions in the banking system since March 2009, in order to prevent a melt down. They have reported happily that, by doing so, they not only saved the world but also generated economic growth. But at the time of victory, mega banks are reporting losses. Something does not add up here.

Trend 5: The alarms of financial repression are deafening It is getting really ugly with financial repression.

Reuters reported this week that Germany’s Bundesbank publicly commented that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help. The Bundesbank’s tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households’ average net wealth is higher than in Germany.

“(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required,” the Bundesbank said in its monthly report. It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency.”

The annoying part here is that the bail-ins debate is becoming mainstream. So it was no mistake from Dijselbloem a year ago when he said bail-ins will become the template for the future.

Moreover, some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it. The BBC writes: “Listeners have told Radio 4′s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000. HSBC admitted it has not informed customers of the change in policy, which was implemented in November. The bank says it has now changed its guidance to staff.”

Over to Russia, where, according to Zerohedge, the bank Lender has introduced complete ban on cash withdrawals until end of week, news agency reports, citing unidentified person in call center.

The subject is also going mainstream in the literature. A recent IMF working paper from Reinhart and Rogoff says: “The endgame to the global financial crisis is likely to require some combination of financial repression (an opaque tax on savers), outright restructuring of public and private debt, conversions, somewhat higher inflation, and a variety of capital controls under the umbrella of macroprudential regulation. Although austerity in varying degrees is necessary, in many cases it is not sufficient to cope with the sheer magnitude of public and private debt overhangs.”

The annoying part is that the financial repression story is intensifying. It is being accepted in the literature, among politicians and now we see an increasing number of initiatives being rolled out. Not good.

Trend 6: Complexity theory points to a collapse Jim Rickards recently suggested that the world has become so interconnected that it has the looks of an extremely complex system. His research points out that complexity theory can be useful as an analogy to determine what comes next. Prior experiments in complexity theory suggest there is a point of no return: when things become too complex and interconnected, they can only come down.

Rickards sees a similar situation in the markets today. In fact, he saw something similar in 2006 and 2007. We all know what happened afterwards.

But what has the central bank noticed? Apparently nothing, as evidenced by their systemic risk model on the next chart. It is at an all-time high.



Should we be concerned when there is nothing to be concerned?

A valid question to ask is why Jim Rickars can detect things that the central bankers cannot. Rickards himself explains it in a very simple and short way: the Fed is using the wrong economic models. Their models could be fine theoretically, but they do not reflect reality.

Protect yourself Are six red flags enough to start protecting yourself? When things get out of hand, our world will become very selfish. The most likely outcome is that everything will come down initially, comparable to what happened in 2008. Chances are high that precious metals will recover fast.

The point in all this is that asset prices will be of secondary importance. Avoiding a total catastrophe could be far more important. There really is a reason why we advocate holding physical precious metals outside the banking system or open an offshore bank account with a debit card in gold or silver at a reserve bank.


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Safety First: Strapping on Your Seat Belt Before the Coming Economic Crash

February 23rd, 2014   Investment Watch


It has been a while since the Global Economic Crisis has been the headline in the news. That doesn’t mean that it has ended. In fact, the world is moving further into a Global Economic Crisis daily, but people’s senses are dulled by the other new headlines such as Justin Beiber’s recent arrest and the Winter Olympics. Although it may seem irrelevant right now, global economic problems are brewing to levels that we have never seen before. These problems will begin to affect the U.S. soon.

Part of the problem is the federal reserves reckless money printing. This money was being used to fuel emerging markets and economies and to keep other economies afloat:

The Fed essentially is printing $85 Billion per month, out of thin air, using that digital money to buy bonds up, and trade them out with cash reserves or ultra-short term notes. Banks and hedge funds that owned the original bonds are then supposed to pump that money into the economy, creating a virtuous cycle.

Now, that they have slowed this process. Investors are taking this as a cue that the fun is over. They are beginning to pull their money from the markets:

Emerging market stocks, bonds and currencies—long coveted by investors attracted by the prospects of faster economic growth and access to young consumers—had a rocky start to 2013 as expectations of reduced U.S. monetary stimulus spurred capital outflows. Economic activity in many regions has slowed and faster inflation has eaten into savings.

This is causing massive financial instability in markets all over the globe.

In the past when nations were having trouble they could turn to financial powerhouses like

China for help. This will not be an option this time around with problems in Europe and Asia continuing to grow. XI Jinping of China has decided to stop letting the market run wild and has a plan for deflation. Deflation would be horrible for many economies because:

-Price deflation results in a real increase in the value of debt and a nominal decline in asset values. Debt can no longer be serviced.

-Price deflation would lead to massive tax revenue declines for the government due to a declining taxable base.

-Deflation would have fatal consequences for large parts of the banking system.

-Central banks also have the mandate to ensure ‘financial market stability‘

With unemployment statistics hitting all time highs in Greece and France and businesses failing at an alarming rate it is easy to see why the people there are in a state of unrest. In developing countries like Venezuela it has gotten so bad that armed military groups roam the streets. Topping this list of economic woes is Ghana who is on the cusp of economic collapse with a prominent economist from the country predicting that the country’s financial market will collapse by June if something is not done.

What messes everyone up is that these crises are not isolated incidents. When these crises strike one nation they affect everyone because all nations are connected. Although popular media would like you to believe that all nations are against each other, it is not that clear cut. All nations are connected through investments they’ve made in each other. So, when one fails all nations feel a little pain that they would like to avoid, so in most cases they band together to help whoever is struggling. This can easily be seen in the relationship between the US and China. The two nations compete in many subjects from sports, education systems, and even in their economies. However, when the US was having some major economic problems China was there to bail the US out. This came with some benefits for China, but it also made China even more invested in the well-being of the US since it has put more assets into the US’s economy. Investment Officer Alexander Friedman explains it perfectly:

The twenty-first-century economy has thus far been shaped by capital flows from China to the United States – a pattern that has suppressed global interest rates, helped to reflate the developed world’s leverage bubble, and, through its impact on the currency market, fueled China’s meteoric rise. But these were no ordinary capital flows. Rather than being driven by direct or portfolio investment, they came primarily from the People’s Bank of China (PBOC), as it amassed $3.US Treasury securities…But selling off US Treasury securities, it was argued, was not in China’s interest, given that it would drive up the renminbi’s exchange rate against the dollar, diminishing the domestic value of China’s reserves and undermining the export sector’s competitiveness

A wise man once said that, “those who don’t learn from the mistakes of the past are doomed to repeat them in the present. This statement rings very true. Especially, since all of these problems are being caused because the problems from the financial crisis of 2008 were never fixed. This is true everywhere considering the economist from Ghana was touching on the same principle when predicting why Ghana’s economy would crash:

The government is facing liquidity problems and if we don’t get the appropriate remedies to address the issues at hand the situation may worsen and by June the economy may crash…I said if they don’t address the fundamental problems facing the economy, by June the country’s economy will crash because the government has not even paid University Lecturers since last year among other pressing issues which needs to be address

The ultimate kicker is how closely the U.S. stock market is mirroring the market in 1929 (right before the Great Depression).

Remember Von Mises’s wise words:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved

The first step in preparing for any crisis is awareness, so at least the readers of this article will know to hold on and to buckle their seat belts before this economic crash.


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DO YOU KNOW THIS IS THE FIRST ACKNOWLEDGEMENT OF THE COMING ECONOMIC CRASH OUTSIDE OF FINANCIAL JOURNALISM AND IT HAS BEEN KNOWN FOR A FEW YEARS.  THE SAME THING HAPPENED IN 2008 WHEN EVERYONE IN THE WORLD OF FINANCE KNEW THAT CRASH WAS COMING.

This crash has huge implications for the American people yet not one supposedly progressive media outlet or pundit is letting people know.  Now, as a social democrat I am not about eliminating capitalism....but allowing the pendulum to swing away from naked capitalism is a must.  Please understand that neo-liberals have allowed the same conditions as neo-con Bush and placed this coming crash on steroids with super-sized sovereign and municipal debt just so the US public sector will be devastated.  This is not hyperbole....it is coming.

REMEMBER, ALL WE NEED TO DO IS REINSTATE RULE OF LAW TO DOWNSIZE CORPORATIONS AND CORPORATE RULE.  YET, ALL ELECTIONS ARE SEEING THESE SAME NEO-LIBERALS RUNNING AS DEMOCRATS!



Comes After Capitalism?
Dennis Trainor, Jr.
Acronym TV / Video Report
Published: Friday 21 March 2014


The financial system is nearing another crash, like the sub-prime mortgage crash of 2007 and 2008, writes Steve Rushton at Occupy.com in his report summarizing a recently published European Green Party paper, The Price of Doing Too Little Too Late.

With another bubble ready to burst, one must wonder: What comes after Capitalism?

Identifying the correct answer to that question is a basic requirement for the life, liberty, and happiness of the human race.
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ISN'T THIS LOL----IT IS THE FED'S REFUSAL TO SEEK JUSTICE AND RECOVER FRAUD THAT HAS SUPER-SIZED THE BANKS WITH SO MUCH WEALTH AND EXPANSION THAT WALL STREET IS NO LONGER CONNECTED TO THE US ECONOMY OTHER THAN CONTINUING TO IMPLODE IT WITH BOOM AND BURST BUBBLES.



Well, the FED policy was all about feeding free money at zero percent so corporations could do nothing for the last several years but merge and acquire and expand overseas. The FED policy was crony and corrupt by every measure and professionals have shouted for years that the FED's actions are no longer matching the goals of its mission. The banks, rather than be nationalized so as to complete investigations, recover tens of trillions of dollars in fraud, and prosecute the criminals that are systemic in the financial industry so as to start to rebuild a healthy economy were instead simply allowed to keep the loot, use it as investments in a BULL market all of which made them extraordinarily rich with other people's money! How crony is that?

The reason the FED notes that banks and corporations will not be effected by the next recessions is just that.....the FED and Obama/Congressional neo-liberals have allowed the banks to grow separate from the US economy and while still working to implode the US economy from fraud and corruption, a collapse for you and me will see Wall Street simply move its money elsewhere until it is over. The FED, Obama, and Congressional neo-liberals have indeed allowed the banks to get to just the same place as 2007 as regards collapse by super-sized leverage and fraud and corruption, this time in the bond market.

The good news for WE THE PEOPLE is that since the banks still have those tens of trillion in massive fraud and made a killing investing our money.....we get all that fraud and the gains Wall Street made from the BULL market back as soon as Rule of Law is reinstated and fraud recovered to government coffers and individual's pockets.

When we do nationalize the Wall Street banks to do this, they will become the regional banks they are meant to be. So, they may weather the coming recession caused by the implosion of the bond market, but they will not weather justice delayed! Remember, when a government suspends Rule of Law, it suspends Statutes of Limitation!


Nearly all top U.S. banks could withstand severe recession, Fed says

WASHINGTON -- Only one of the nation's 30 largest banks would not be able to withstand a severe recession and the firms collectively are in better financial position to handle economic shocks than five years ago, according to Federal Reserve stress test results released Thursday

Under the most extreme of three economic scenarios, Zions Bancorporation of Salt Lake City would be the only large bank at risk of failure because a key measure of financial strength would fall below the Fed's standard.

The Fed conducts two rounds of stress tests and next week will give what amounts to pass/fail grades for the banks after factoring in each firm's plans for dividend payments or stock buybacks this year.



“The annual stress test is one of the Federal Reserve’s most important tools to gauge the resiliency of the financial sector and to help ensure that the largest firms have strong capital positions,” said Fed. Gov. Daniel K. Tarullo, who oversees the central bank's regulatory functions.

“Each year we are making substantial improvements, which have helped make the process even stronger than when we first conducted the stress tests in the midst of the financial crisis five years ago,” he said.

The banks have a combined $13.5 trillion in assets, nearly 80% of the U.S. industry.

Under the Fed's severely adverse economic scenario, those 30 firms would lose about $501 billion over 27 months.

That scenario, designed to replicate a downturn similar to the 2008 financial crisis and Great Recession, involves a sharp rise in the unemployment rate to 11.25%, a 25% decline in home prices and a nearly 50% drop in the stock market.

Under such conditions, Zions would fall below a Fed gauge of bank health. The firm's ratio of capital to its risk-weighted assets would fall to 3.5% from the 10.5% level as of Sept. 30.

Banks are supposed to stay above 5%.

The next weakest bank was M&T Bank Corp., with a ratio of 5.9%. The nation's two largest banks fared only slightly better: Bank of America Corp.'s ratio was 6% and JPMorgan Chase & Co.'s was 6.3%.

The best performers under the scenario were State Street Corp, at 13.3% and the Bank of New York Mellon Corp. and Discover Financial Services, both at 13.1%

Overall, the combined ratio for the 30 largest banks would fall to 7.6% from 11.5%. Those same banks had a ratio of 5.5% at the beginning of 2009, the Fed said.

The Fed's two stress tests are designed to determine the strength of the nation’s largest financial institutions.

The first, whose results were released Thursday, were required by the 2010 Dodd-Frank financial reform law and measure the firms in three economic scenarios -- normal conditions, a moderate recession and a severe economic downturn.

This year, as required by the Dodd-Frank law, the Fed expanded the tests to the 30 largest bank holding companies.

Previous stress tests, which began after the crisis, looked at the top 18 banks.

The second test looks at each bank's plans to pay dividends or buy back stock. The results of the first stress test will be applied to those plans.

On Wednesday, the Fed will announce which banks will be allowed to proceed with their plans and which would first have to raise more capital. The Fed also will determine if the planning processes of the banks, which include how they project revenue and losses, are sufficient.



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I don't like the Ted format-----but Bill Black always does a great job explaining the massive financial frauds of last decade.

IF YOU ARE SILENT REGARDING RECOVERY OF THIS FRAUD, YOU WILL BE WATCHING ALL OF THE PUBLIC WEALTH GENERATED OVER SEVERAL DECADES DISAPPEAR TO THE RICHEST.



Accounting Control Fraud and The Great Financial Crisis
March 19th, 2014
in econ_news, syndication

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Bill Black Explains the Corruption that Produced the Great Financial Crisis

Econintersect:  William K. Black, an authority on banking fraud from his years as a regulator during the Savings & Loan Crisis, has given a TED format lecture at the University of Missouri Kansas City where he is Associate Professor of Law and Economics.  These lectures are local, self-organized occasions which are called TEDx events.

Video available after the Read more >> jump.




Follow up:

You will never see a better presentation under an hour in length about accounting control fraud and how it led to the Great Financial Crisis than this 19 minute lecture.

John Lounsbury

Sources:

• NEP’s Bill Black’s Presentation at UMKC’s TedX (William K. Black, New Economic Perspectives)

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THIS IS A BLOG


Regarding BBC's report on off-shoring national wealth as creating world instability:

'In a country were money dictates over politics, there are NO chances that offshore benefits will EVER be cancelled (compared for example with Channel Islands where pressure mounts against offshore benefits)'. 
This from Joe Biden's state----Mr Blue Collar neo-liberal himself.



As I listen to this talk that clearly identifies the strategy of these massive corporate frauds sucking all public wealth from national Treasuries in Europe, US, and now recently Ukraine I am puzzled by their approach to finding solutions for this off-shoring.  The first thing to stopping bad behavior is to out the system and people doing the bad behavior.  This report did identify the UK and the US as ground zero for off-shoring all over the world.  See why London and NYC are the wealthiest in world history?

I have spoken at length about this industry of off-shoring and with it Dynasty Accounts that hide wealth and circumvent estate taxes at all levels of government. 

THE FIRST THING TO TELL PEOPLE IT IS NEO-LIBERAL STATES DOING THE MOST DAMAGE TO THE WORLD WITH OFF-SHORING AND DYNASTY ACCOUNTS.

Now, the democratic party is the party of the people so would never allow all of this wealth-hiding and laundering of massive corporate fraud to off-shore accounts.  So, the first way to stop it is identify the politicians allowing it to happen.  Maryland has neo-liberals wanting to end estate taxes because after all, Congress is allowing all kinds of laws allowing these industries to incorporate and the US Justice and Maryland Attorney General are allowing them to operate illegally with no oversight. 

THIS IS THE PROBLEM WITH THE US BEING GROUND ZERO FOR ALL OF THE WORLD'S MONEY LAUNDERING AND OFF-SHORE ACCOUNTS HIDING MONEY.

I have talk extensively about Delaware and Nevada being tops in the world for these off-shoring and Dynasty businesses.  They operate much like subprime loans did with little information collected and that information collected never verified.  This is the recipe for fraud.  Harry Reid is Senate Democratic leader from Delaware and Joe Biden is democratic Vice President from Delaware.  So, the first thing citizens do is get rid of the neo-liberals by running labor and justice.  If you look at Delaware you see Joe Biden has his son as Delaware Attorney General meaning NO ONE IN DELAWARE IS TRYING TO PROTECT THE PUBLIC AND HOLD CORPORATIONS ACCOUNTABLE.  Do not elect neo-liberals and their families to public justice offices.  In Maryland, all candidates for MD Attorney General are neo-liberals. 

WHERE ARE LABOR AND JUSTICE LAWYERS?
 

BOTH ARE NEO-LIBERALS HAVING VOTED FROM THE DAYS OF CLINTON FOR MASSIVE GLOBAL CORPORATIONS AND MASSIVE WEALTH.  This is why the US is ground zero for laundering money out of countries that are involved in fraud and corruption.  Indeed, this Ukraine leader who was forced from office did just that and we all know that the US whether through these off-shoring businesses or an NSA that tracks world movement of money-----knew this was happening and can track and locate these funds.  Corporate NPR tells us sadly that only 20% of what is stolen is ever recovered. 

THAT WILL CHANGE AS WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION.
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Key issues you should know:


DELAWARE'S CORPORATE ADVANTAGE

    Delaware is considered the most attractive state in the nation for organizing.

    Delaware courts have a reputation of reaching reasonable and fair conclusions when construing the corporation laws.

    Only one incorporator is required. A corporation may be the incorporator.

    There is no minimum capital requirement.

    The franchise tax compares favorably with that of other states (usually $30/year).

    For companies doing business outside of Delaware, there is no corporation income tax.

    Delaware has no sales tax, personal property tax or intangible property tax on corporations.

    No taxation upon shares of stock held by non-residents and no inheritance tax upon non-resident holders.

    A corporation may keep all of its books and records outside of Delaware.

    You may have a principal place of business/address outside of the State of Delaware as well.

Regarding the Federal taxes: if you are US citizen or US resident (US taxpayer)
and you file taxes in the US, a LLC is treated as a partnership and is not subject to corporate income tax.
Any profits or losses are passed through to the members of the LLC to report on their
personal income tax.
Therefore, The LLC DOES NOT PAY ANY INCOME TAXES!

FACTS:

    Delaware has a reputation as a corporate haven and has aggressively protected its stature as the incorporating capital of the United States. As a result, many of the Fortune 500 companies in the United States are incorporated in Delaware. They went to Delaware to protect the interests of their stockholders, directors, officers, and the corporation itself.  More than 230,000 companies are incorporated in Delaware, which leads the nation as a major corporate domicile for American and international corporations.  Each day, over 130 new companies file incorporation papers in Delaware.

    Delaware ’s corporation law is written to protect the rights of shareholders of the public corporations that are the standard-bearers in the Delaware corporation system. The emphasis is placed on shareholder protections to attract the large, public companies that trade shares in the various exchanges across the country. It’s laws regarding corporate takeovers are the most sophisticated in the entire world. There is established legal precedent for any conceivable corporate situation. It is a stable legal environment for many public companies to use as their base.

        In our opinion:

    In a country were money dictates over politics, there are NO chances that offshore benefits will EVER be cancelled (compared for example with Channel Islands where pressure mounts against offshore benefits).


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WHAT IS THE FIRST THING A SUPER-MAJORITY OF DEMOCRATS WOULD DO IN 2009?  PROTECT LABOR AND JUSTICE AND PUBLIC WEALTH BECAUSE THAT IS THE DEMOCRATIC PLATFORM FOR GOODNESS SAKE!

Let's take a look at the thriving US off-shoring and Dynasty account wealth stealth industry:  Is this  wealth creation or money laundering?

Easy-peasy!




 Services available from Delaware USA:


Offshore companies. New or ready-made companies available.
Yacht Registrations

 

Delaware Offshore Companies
Incorporation fees:
(Updated January 2010)

A complete package to form a Delaware Corporation is now US$ 599
One person is enough to incorporate a company.

Incorporation fee includes:
  State filing fees,
  registered agent service until March 1- next year for corporations or June 1- next year for LLCs, ($199)
  a certified copy with Apostille (with gold seal), - you need this to open a bank account,
  our service fee.

Also available for a DE company: Boat or Yacht registration

Available Options:
$150 deluxe corporate kit (which includes the corporate seal, bylaws, stock certificates, stock transfer ledger and corporate minutes)
$100 courier delivery of your documents and kit by Airborne Express
NOMINEE director:  $300 / year.
$150 - 3 days expedited service fee: Delaware corporations are formed within 24 hours of receipt of payment and we receive the documents from the state in 2-4 weeks. With expedited service, we will receive all documents in 3 to 4 business days.
$225 - 1 day expedited service fee:
 

Mail forwarding :
- Max. 60 pieces mail/one year US$350
- Max. 120 pieces mail/one year US$440

Phone/Fax forwarding to email: $15.00 monthly service fee
Numbers available in any of these US States:

$225 Tax ID (EIN) Required if you will want a US bank account. Note taht all US banks require a personal visit to the bank.
See here EIN data sheet

Annual fees:
$299 registered agent.
$225 for Ltd (increased from $100 in 2010 ) or $250 for LLC (increased from $200 in 2010), annual fixed state tax. The state fee is due in the first year after the incorporation, in March for Ltd. and June for LLC.

Annual franchise tax for Ltd type of companies, based on authorized shares.

    3,000 shares or less (minimum tax) $125.00

    each additional 10,000 shares or portion thereof add $62.50

    maximum yearly tax is $165,000.00

We usually file new companies with 1500 shares, to qualify for minimum state tax of $125.

Note: We recommend LLC. type, because starting with 2007, Ltd companies will have to fill a tax report, with director name, address and signature, and the original must be sent to Delaware state registry.

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This is a conservative attack but all the information is correct.  Look at Feinstein and Pelosi found to be suspects involved in insider trading and you see why they are rich and that they are indeed off-shoring their wealth.  See why the US Attorney General and State Attorneys General have suspended Rule of Law?
Neo-liberals have made an industry of off-shoring and hiding wealth.

ALL OF MARYLAND'S POLS ARE NEO-LIBERALS AND ALL RUNNING FOR GOVERNOR EXCEPT CINDY WALSH WILL PROTECT ALL THIS FRAUD AND CORRUPTION.  Don't think so?  Do you hear any of them shouting that corporate fraud and government corruption is #1 issue?  THAT'S HOW YOU KNOW A NEO-LIBERAL.



 August 24, 2012 4:00 AM

Reid’s Glass House
Democratic senators have offshore accounts.
By Betsy Woodruff

   
Betsy Woodruff

Good news for Senator Harry Reid: If he’s a little bored while waiting for Mitt Romney to release his tax returns, there are plenty of other elected officials — in his own party, to boot! — who merit the same eyebrow-raising he’s directed at the presumptive GOP presidential nominee. The Senate majority leader has expressed consternation about the fact that Romney has some money in offshore accounts, which probably reduces his tax burden. According to the Huffington Post, Reid quipped, “Most Americans don’t have the benefit of Swiss bank accounts or tax shelters in the Cayman Islands and Bermuda.” And Gawker just published more than 950 pages of Bain documents related to Romney’s offshore holdings, saying they detail his use of “exotic tax-avoidance schemes available only to the preposterously wealthy.”

Some of the “preposterously wealthy” Americans who do use such “schemes” include Senators Dianne Feinstein (D., Calif.), Richard Blumenthal (D., Conn.), Frank Lautenberg (D., N.J.), and John Kerry (D., Mass.). That should be music to Reid’s ears, since his transparency crusade might be a little easier to pull off within his own party.


He could start with Feinstein. OpenSecrets.org lists her as the seventh-wealthiest senator, with a net worth between $44 million and $94 million, according to her latest disclosure forms. And, just like Romney, she keeps a portion of it in offshore accounts. Her most recent reports say she has an unspecified amount (at least $1 million) “held independently by the spouse or independent child” in Coral Growth Investments, Ltd., in St. Peter Port, Guernsey. Guernsey, a tax haven, is a small island in the English Channel that early this year drew the ire of a British Labour-party leader for helping wealthy Brits dodge taxes. The California senator also has between $500,000 and $1 million in a fund called Cevian Capital II L.L.C. in Jersey, another of the Channel Islands. According to her latest forms, that holding generated between $15,000 and $50,000 in capital gains, interest, and dividends. Feinstein has another $1,000 to $15,000 in Mauritius, an island nation in the Indian Ocean off Madagascar that is an up-and-coming tax haven.

Like Feinstein, Richard Blumenthal is on the Senate Judiciary Committee. Also like Feinstein, he has sheltered funds from taxes in the past — $15,000 to $50,000 in a hedge fund held by his wife in the Cayman Islands, to be exact. That might not sound like a huge number, but his most recent disclosure forms say he made $50,000 to $100,000 from the fund in capital gains, dividends, and interest. A Blumenthal staffer said the fund was sold at the end of April 2011, an action taken after the time frame covered by his most recent available disclosure forms.

Lautenberg appears to be in a similar situation. The New Jerseyan is the fifth-wealthiest senator, with a net worth that, in 2006, was six times the Senate’s average. His most recent forms show that his wife’s family has between $500,000 and $1 million in Port Louis, Mauritius. The money is in a real-estate private-equity fund that does its actual investing in India, and the earnings it generates are subject to taxes, as one of his representatives told National Review Online.

“The Senator’s wife’s family trust invested in a real estate fund that is fully transparent with a website and a reputable board of directors, and income on the investment is taxable,” said the senator’s communications director, Caley Gray. Which makes them just like Mitt Romney’s offshore investments. All Americans, including Romney and Lautenberg, pay applicable taxes on investments they report to the IRS, but often they deliberately set up these investments in places like Mauritius because these countries’ laws can help reduce their tax burdens.

Then there’s John Kerry, the richest person in the Senate. He is considered wealthy because of the fortune of his wife, ketchup heiress Teresa Heinz Kerry, whose wealth came largely from her previous husband, Henry John Heinz III. The senator’s 2010 disclosure forms (the latest available online) show that she had at least $2 million in a fund in Guernsey at filing time. Kerry’s communications director said that according to his 2011 returns, which aren’t online yet, the fund is no longer one of her assets.

Perhaps while Reid is lambasting Romney for his offshore accounts, he could find a moment to politely ask these colleagues to release their returns on the same grounds. And who knows? Maybe Reid’s anonymous source has some insight into the taxpaying status of Senate Democrats, too.

— Betsy Woodruff is a William F. Buckley Fellow at the National Review Institute.
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If you live in Marland or Pennsylvania no doubt we are hearing to attract business and jobs we need to be more 'BUSINESS-FRIENDLY'.......

WELL, WELCOME TO BUSINESS-FRIENDLY.
It is one great big sesspool  with people attached already tagged for Dante's lowest levels of Inferno's lodgings.  Obviously citizens of Maryland do not want to compete with this.  Citizens of Delaware will tell you while corporations and the rich pay no taxes----THE REVENUE-COLLECTION FALL TO THE MIDDLE/WORKING CLASS.  SOUND FAMILIAR MARYLAND?

HERE ARE THE WORD OF A TRUE NEO-LIBERALS:

“We have a system that is the greatest creator of wealth in the history of the world,” said Mr. Geisenberger, the Delaware official. “We will not support any changes that change the friendliness of American business and close our doors to capital formation and the ease of doing business.”


Operating legally because Congress will not pass laws that say this behave is illegal is like saying we needed laws to say subprime loans were legal.  FOLLOW THE MONEY TO FIND THE ILLEGAL ACTIVITY!

How Delaware Thrives as a Corporate Tax Haven


By LESLIE WAYNE
Published: June 30, 2012

Tim Shaffer for The New York Times

This far-from-flashy site in Wilmington, Del., is the legal address of 285,000 businesses.


 A Delaware address has been held by Viktor Bout, a Russian arms dealer recently sentenced to 25 years in prison.
Enlarge This Image
Joe Vitti/The Indianapolis Star, via Associated Press

Timothy S. Durham, who has had a Delaware address, was found guilty of bilking investors of $207 million.
Enlarge This Image
Tim Shaffer for The New York Times

Richard J. Geisenberger, below, Delaware’s chief deputy secretary of state, says, “Companies choose our state and we are proud of it.”


NOTHING about 1209 North Orange Street hints at the secrets inside. It’s a humdrum office building, a low-slung affair with a faded awning and a view of a parking garage. Hardly worth a second glance. If a first one.

But behind its doors is one of the most remarkable corporate collections in the world: 1209 North Orange, you see, is the legal address of no fewer than 285,000 separate businesses.

Its occupants, on paper, include giants like American Airlines, Apple, Bank of America, Berkshire Hathaway, Cargill, Coca-Cola, Ford, General Electric, Google, JPMorgan Chase, and Wal-Mart. These companies do business across the nation and around the world. Here at 1209 North Orange, they simply have a dropbox.

What attracts these marquee names to 1209 North Orange and to other Delaware addresses also attracts less-upstanding corporate citizens. For instance, 1209 North Orange was, until recently, a business address of Timothy S. Durham, known as “the Midwest Madoff.” On June 20, Mr. Durham was found guilty of bilking 5,000 mostly middle-class and elderly investors out of $207 million. It was also an address of Stanko Subotic, a Serbian businessman and convicted smuggler — just one of many Eastern Europeans drawn to the state.

Big corporations, small-time businesses, rogues, scoundrels and worse — all have turned up at Delaware addresses in hopes of minimizing taxes, skirting regulations, plying friendly courts or, when needed, covering their tracks. Federal authorities worry that, in addition to the legitimate businesses flocking here, drug traffickers, embezzlers and money launderers are increasingly heading to Delaware, too. It’s easy to set up shell companies here, no questions asked.

“Shells are the No. 1 vehicle for laundering illicit money and criminal proceeds,” said Lanny A. Breuer, assistant attorney general for the criminal division of the Justice Department. “It’s an enormous criminal justice problem. It’s ridiculously easy for a criminal to set up a shell corporation and use the banking system, and we have to stop it.”

In these troubled economic times, when many states are desperate for tax dollars, Delaware stands out in sharp relief. The First State, land of DuPont, broiler chickens and, as it happens, Vice President Joseph R. Biden Jr., increasingly resembles a freewheeling offshore haven, right on America’s shores. Officials in other states complain that Delaware’s cozy corporate setup robs their states of billions of tax dollars. Officials in the Cayman Islands, a favorite Caribbean haunt of secretive hedge funds, say Delaware is today playing faster and looser than the offshore jurisdictions that raise hackles in Washington.

And international bodies, most recently the World Bank, are increasingly pointing fingers at the state.

Of course, business — the legal kind — has been the business of Delaware since 1792, when the state established its Court of Chancery to handle business affairs. By the early 20th century, the state was writing friendly corporate and tax laws to lure companies from New York, New Jersey and elsewhere. Most of the businesses incorporated here are legitimate and many are using all legal means to reduce their tax bills — something that most stockholders applaud.

President Obama has criticized outposts like the Caymans, complaining that they harbor giant tax schemes. But here in Wilmington, just over 100 miles from Washington, is in some ways the biggest corporate haven of all. It takes less than an hour to incorporate a company in Delaware, and the state is so eager to attract businesses that the office of its secretary of state stays open until midnight Monday through Thursday — and until 10:30 p.m. on Friday.

Nearly half of all public corporations in the United States are incorporated in Delaware. Last year, 133,297 businesses set up here. And, at last count, Delaware had more corporate entities, public and private, than people — 945,326 to 897,934.

One Delaware company was used last year to make an anonymous $1 million donation to Restore Our Future, a super PAC that favors Mitt Romney for president. Restore Our Future ultimately disclosed that the money came from a former Bain Capital executive. The Romney campaign declined comment, and Restore Our Future did not return calls.

Delaware’s tax laws are a bonanza for the state. At a time when many states are being squeezed by a difficult economy, Delaware collected roughly $860 million in taxes and fees from its absentee corporate residents in 2011. That money accounted for a quarter of the state’s total budget.

“Companies choose our state and we are proud of it,” said Richard J. Geisenberger, Delaware’s chief deputy secretary of state and its leading ambassador to business. “We spend a lot of time in the United States and traveling internationally to let people know that Delaware is a great place to do business.”

It is also a great place to reduce a tax bill. Delaware today regularly tops lists of domestic and foreign tax havens because it allows companies to lower their taxes in another state — for instance, the state in which they actually do business or have their headquarters — by shifting royalties and similar revenues to holding companies in Delaware, where they are not taxed. In tax circles, the arrangement is known as “the Delaware loophole.” Over the last decade, the Delaware loophole has enabled corporations to reduce the taxes paid to other states by an estimated $9.5 billion.

State lawmakers in Pennsylvania are now trying to close the loophole, arguing that their state is being robbed of its tax dollars. Of particular concern is that many companies involved in drilling for natural gas in the Marcellus Shale region of Pennsylvania are, in fact, incorporating in Delaware instead.

“Delaware is an outlier in the way it does business,” said David E. Brunori, a professor at George Washington Law School and an expert on taxation. “What it offers is an opportunity to game the system and do it legally.”

WHAT does it take to incorporate a company in Delaware? Not a lot, tax experts say. Shell companies — those with no employees, no assets and, in fact, no real business to speak of — are remarkably easy to establish here, and it doesn’t always matter who you are or what business you are in. Viktor Bout, the Russian arms dealer known as “the merchant of death,” used two Delaware addresses. In April he was sentenced to 25 years in prison on terrorism charges resulting from an American sting operation.

Jack Abramoff, the former Washington lobbyist jailed on corruption charges, set up a sham Delaware corporation to hide millions in payments and circumvent federal laws. Mr. Subotic, the Serbian businessman who was tried in absentia last October for his role in a cigarette smuggling scheme and sentenced to six years, used three airplanes that were registered in Delaware, including two at 1209 North Orange. Mr. Subotic lives in Geneva and denies the charges.

The Organized Crime and Corruption Reporting Project, an international group based in Sarajevo, has identified other Eastern Europeans with Delaware links. Among them is Laszlo Kiss, an Romanian accountant and author of “United States, Tax Heaven — Uncle Sam Will Fight Your Taxes!” that praised the state’s lax rules. He is now awaiting trial in Bucharest on charges of helping embezzle and launder $10 million through Delaware shells.

“Delaware is the state that requires the least amount of information,” says David Finzer, the chief executive of Capital Conservator, a registration agent that sets up accounts in Delaware and elsewhere for non-United States citizens. “Basically, it requires none. Delaware has the most secret companies in the world and the easiest to form.”

Mr. Finzer, an American based in Novi Sad, Serbia, advertises his services online. “Tax-Free Havens for Non-U.S. Citizens,” his Web site, says. It goes on: “More than 50 percent of the major corporations in the world are incorporated in Delaware. Why? Because in provides the anonymity that most offshore jurisdictions do not offer.”

That is exactly what troubles law enforcement agencies and some in Congress who are trying to rein in Delaware. The state is seen as an onshore alternative with regulations more lax than such well-known offshore tax havens as the Isle of Man, Jersey and the Caymans, which require greater disclosure. Even more, a Delaware registration allows a business, legitimate or not, to open a bank account anywhere in the world with the patina of an American address.

“You can have companies in Delaware that have no U.S. bank accounts, no requirements for documentation and no one knows who owns them,” says Anthony B. Travers, chairman of the Cayman Islands Stock Exchange and former chairman of that country’s Financial Services Association. “There should be a level playing field and Delaware should have to comply with the same standards as the Caymans.”

Delaware isn’t the only state that has gone this route. Three others — Nevada, Wyoming and Oregon — have also been cited by the Financial Crimes Enforcement Network, a division of the United States Treasury Department, as “particularly appealing” for the formation of shell companies. Of those four states, Delaware stands out as the one offering the least transparency and the most secrecy, this group says.

“What is so galling about secrecy in the United States is that there is no attempt to document who owns a corporation,” said Richard Murphy, a senior adviser at the Tax Justice Network, an independent organization based in London that researches tax havens. “Two million corporations are formed each year in the United States, more than anywhere else in the world. Delaware, in turn, is the biggest single source of anonymous corporations in the world.”

Mr. Murphy adds: “Why go to the Caymans when you can just go down the street?”

In 2009, the Tax Justice Network named the United States as No. 1 on its Financial Secrecy Index, ahead of Luxembourg and Switzerland. It cited Delaware as one of the reasons.

That, Mr. Murphy says, elicited howls in Wilmington. “The reaction was: ‘This cannot be true.’ Not only can it be true, it is true.” (The United States has since fallen to fifth place, behind Switzerland, the Caymans, Luxembourg and Hong Kong, after the group changed its method.)

For years, Senator Carl Levin, a Michigan Democrat, has been leading a quixotic effort to adopt legislation that would require states to collect information on the “beneficial ownership” of companies incorporated within their borders.

That would require states to add the name of the person standing behind the corporation — its beneficial owner — on incorporation papers. To sweeten the pot, the legislation would exempt public companies, hedge funds and other large corporations, along with mom-and-pop businesses where ownership is clear. In addition, the federal government would pick up the tab for putting the law into effect.

Senator Levin has long complained that it takes more information to get a driver’s license than to set up a corporation in America. Three times since 2000, he has introduced his legislation — once co-sponsored by Barack Obama when he was a senator from Illinois — and each time the effort has been rebuffed. He has never even been able to get the measure out of committee.

Law enforcement agencies, human rights groups and the administration are on his side. Last month, a letter supporting Mr. Levin’s measure and signed by 41 different groups was sent to every member of Congress.

But that has been no match for the opposition. Most vocal is the National Association of Secretaries of State, a politically powerful group. It is backed up by the Chamber of Commerce, the American Bar Association and the state of Delaware, which is the lone state to have hired a lobbyist to work on the matter.

Senator Thomas R. Carper, a Delaware Democrat, is in line to be the next chairman of the Senate Homeland Security and Government Affairs Committee, which has jurisdiction over the measure. Mr. Carper has expressed concerns about the measure but has taken no formal position on it.

“Levin is hitting a brick wall,” said Heather Lowe, director of government affairs for Global Financial Integrity, an anticorruption research group. “It’s frustrating. Delaware is playing a significant role in the committee. Senator Carper is well liked and well respected and he’s not moving on this issue.”

The secretaries of state, along with Delaware, argue that the Levin measure would be costly and burdensome, and would discourage business incorporation and capital formation. They add that their offices are generally ill-equipped to process the additional data that would be required. Even more, determining beneficial ownership may not be a simple matter.

“This would be a sea change in how things are done,” said Ross Miller, Nevada’s secretary of state and president-elect of the National Association of Secretaries of State. “It would add red tape and increasing processing time. And if you had a money launderer and asked for his name, he probably wouldn’t be truthful.”

Mr. Geisenberger, the chief deputy secretary of state of Delaware, said of the Levin measure: “This would be a massive inhibitor to starting a business. It would end up taking weeks or months to get a business started. And I think a lot of them would move underground and into the black market and just not form a legal entity.”

COMPANIES that are incorporated in Delaware need someone on the ground here — an agent or go-between to act on their behalf. That is where the CT Corporation comes in.

CT, a subsidiary of the Dutch information services company Wolters Kluwer, is the largest registered agent in Delaware and, it turns out, the registered agent for 1209 North Orange Street. CT is authorized to transact business at that address, and its main duty is to accept legal notices on behalf of the businesses incorporated here and to pass them along.

CT represents nearly a third of all companies registered in Delaware and 60 percent of Fortune 500 companies. It says that before accepting clients, it screens them against the government’s “Specially Designated Nationals,” a list of people barred from doing business in the United States.

Mainly, however, CT says it acts as a middleman. “We check names and addresses against various federal agency lists,” says Timothy Hall, a spokesman for the company, which has no position on the Levin measure. “We will comply with whatever law is passed,” he added.

(The New York Times Company has seven corporate subsidiaries registered at 2711 Centerville Road in Wilmington. The registered agent for that address is the Corporation Service Company, which is the second-largest agent in the state.)

For corporate tax planners, Delaware is a dream. The state helps companies legitimately reduce their United States taxes and, sometimes, obscure profits in other countries.

“Companies are able to turn taxable income into tax-exempt income in Delaware and then use it to reduce their tax bills in other states,” said Bradley P. Lindsey, an accounting professor at North Carolina State University and one of three authors of a 2011 study titled “Exploring the Role Delaware Plays as a Domestic Tax Haven.” Delaware does not tax certain profit-making intangible items — like trademarks, royalties, leases and copyrights. Yet those same intangibles can be part of a tax strategy that allows them to be classified as deductions in other states, reducing a company’s tax bill there.

“Delaware serves as a domestic tax haven, much like the Cayman Islands serves as an offshore foreign tax haven, and offers a similar level of tax avoidance,” the report states.

American corporations find the Caymans alluring for many reasons. There, they can operate in relative secrecy, attract more foreign customers, avoid regulation and enjoy a low tax rate. In one respect, however, Delaware is even better than the Caymans. At some point, American companies have to bring back their foreign profits from the Caymans and pay federal taxes.  But in Delaware, the state tax savings through the Delaware loophole are permanent.

And on the reputational front, “Delaware doesn’t carry the same stigma as the Caymans or Bermuda,” Mr. Lindsay said, adding, “Why not attract business to my little state and get something at the expense of the other states?”

WorldCom, the telecom giant that collapsed into bankruptcy after an accounting scandal, could be a symbol for the Delaware loophole. Bankruptcy court filings showed that the company had cut $20 billion from state taxes thanks to an intangible asset it called “management foresight.”

Delaware subsidiaries are especially popular with global energy and mining companies like Exxon, Chevron and Rio Tinto. Among the top 10, some 915 subsidiaries have been set up in Delaware, compared with 51 in Switzerland and 49 in the Caymans, according to a report last September by the Norway chapter of Publish What You Pay, a London-based group that studies natural resources. The study said that this allows these resource extraction companies to put up a “wall of silence” about their far-flung operations and profits, especially from poor countries that may want a greater slice of the revenue. Exxon, Chevron and Rio Tinto declined to comment.

STATES like Pennsylvania are increasingly fed up. More than 400 corporate subsidiaries linked to Marcellus Shale gas exploration have been registered in Delaware, most within the last four years, according to the Pennsylvania Budget and Policy Center, a nonprofit group based in Harrisburg that studies the state’s tax policy.

In 2004, the center estimated that the Delaware loophole had cost the state $400 million annually in lost revenue — and that was before the energy boom.

More than two-thirds of the companies in the Marcellus Shale Coalition, an industry alliance based in Pittsburgh, are registered to a single address: 1209 North Orange Street, according to the center.

“So many of these Marcellus Shale companies have figured out that it is fairly easy to siphon profits from Pennsylvania, so that they don’t pay taxes here,” said Michael Wood, research director at the Harrisburg center.

The center is urging Pennsylvania to try to close the Delaware loophole. But it is running into opposition from Pennsylvania companies that want to retain the break. And, in Delaware, state officials say that their approach to business is good for America.

“We have a system that is the greatest creator of wealth in the history of the world,” said Mr. Geisenberger, the Delaware official. “We will not support any changes that change the friendliness of American business and close our doors to capital formation and the ease of doing business.”
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Whereas corporate NPR and the US Justice Department would have us believe that only a very little of this fraud can be recovered, teams of international investigators are tracking these wealth transfers.  The group Anonymous hacked bank accounts to download much of the information we know in these reports from groups justice organizations.  Like this author I too question the integrity of data from groups funded by hedge funds.  The point is this:  there are very many people tracking this money and some will be working for GOOD!

This article highlights as well how pols running as socialists in Europe were the worst Wall Street accomplices, so
KNOW FOR WHOM YOU RUN AND VOTE.


April 5, 2013

Offshore secret bank accounts exposed

Thomas Lifson

What the New York Times approvingly calls a "trove of secret financial information" was released Thursday, highlighting offshore secret bank accounts held by various individuals. The breathless story begins:

    They are a large and diverse group that includes a Spanish heiress; the daughter of the former Philippine dictator Ferdinand Marcos; and Denise Rich, the former wife of the disgraced trader Marc Rich, who was pardoned by President Bill Clinton. But, according to a trove of secret financial information released Thursday, all have money and share a desire to hide it.

    And, it seems safe to say, they - and thousands of others in Europe and far beyond, in places like Mongolia - are suddenly very anxious after the leak of 2.5 million files detailing theoffshore bank accounts and shell companies of wealthy individuals and tax-averse companies.

    The agent for the release of this data is a group calling itself "The International Consortium of Investigative Journalists," which sounds sorta nice. Turns out, they are a "project of The Center for Public Integrity," which also sounds kinda nice, all for transparency and so forth. But if you check out the donors of this aforementioned group, one finds none other than George Soros's Open Society Institute in the first tier.

 
Hmm, doesn't George Soros run hedge funds based offshore, whose clients are unknown, as in secret? I just wonder of the Quantum Fund (one of Soros's main vehicles) is going to have its holders revealed to the public? That would certainly reassure me about "public integrity" being the genuine concern of this crowd. And why the squad of fighter jets on the right side of the CFPI logo? The Blue Angels? What does that have to do with "public integrity"?

Meanwhile, apparently there are some red faces:

    The leaked records, mainly from the British Virgin Islands, the Cook Islands and Singapore, disclose proprietary information about more than 120,000 offshore companies and trusts and nearly 130,000 individuals and agents, including the wealthiest people in more than 170 countries. Not all of those named necessarily have secret bank accounts, and in some cases only conducted business through companies they control that are registered offshore.

    The embarrassment caused by Thursday's revelations has been particularly acute in France, where the Socialist president, François Hollande, who wants to impose a 75 percent tax on millionaires, has been struggling to contain a political firestorm touched off this week by a former budget minister's admission - after months of denials - that he had secret foreign bank accounts.

    The scandal looked set to widen on Thursday as senior members of the government were forced to confront allegations that Mr. Hollande and others may have been aware that the budget minister, Jérôme Cahuzac, who resigned on March 19, was lying but failed to act.

    Adding to the president's trouble, the name of a close friend and treasurer of his 2012 election campaign, Jean-Jacques Augier, appeared in connection with the files released Thursday by the International Consortium of Investigative Journalists. Mr. Augier, according to the newspaper Le Monde, was identified as an investor in offshore businesses in the Cayman Islands, another well-known tax haven.

I am not in favor of tax cheating, but I am in favor of privacy. The idea that tax exempt groups are going around and violating people's privacy does not sit well with me. I think if we end up in a world where everyone's financial records are available to anyone else, we will not have a better world.

I like that French socialists are being 3exposed as hypocrites, but broader issues also worry me enough that I am not celebrating.  The power of selective disclosure of offshore accounts is a bit frightening. Unelected, tax exempt groups deciding whose records stay private and whose go public does not sound like a step forward.

Color me suspicious. 
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We saw most of the legislation coming from the Senate and having great influence..... from pols who are the biggest neo-liberals.  They are implementing Brookings Institute policy and are the reason democrats did nothing for the people while having the supermajority.  Bank reform while all of this wealth stealth industry is in full swing?  REALLY???

All of the democratic party leadership are neo-liberals.  The majority of democrats vote for their leader.  Same in the House of Representatives. 

SHAKE THE NEO-LIBERALS FROM THE RUG TO GET BACK TO THE BUSINESS OF DEMOCRACY IN AMERICA!

Gang of 8: Who are they?
The Democrats

* Sen. Dick Durbin (D-Ill.):. He's also the Senate Majority Whip, so he will play a key role in rounding up Democratic votes for whatever the actual legislation winds up looking like.

* Sen. Robert Menendez (D-N.J.):

* Sen. Chuck Schumer (D-N.Y.):

* Sen. Michael Bennet (D-Colo.):



END OF BLOG
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If your politicians are not shouting what Nader is shouting------they are neo-liberals working for wealth and profit.  If he can recognize all of the crimes, why are your incumbents not?

What a Destructive Wall Street Owes Young Americans
Posted: 03/14/2014 7:55 pm EDT Updated: 03/14/2014 8:59 pm EDT Huffington Post

Wall Street's big banks and their financial networks that collapsed the U.S. economy in 2008-2009 were saved with huge bailouts by the taxpayers, but these Wall Street gamblers are still paid huge money, and are again creeping toward reckless misbehavior. Their corporate crime wave strip-mined the economy for young workers, threw them on the unemployment rolls and helped make possible a low-wage economy that is draining away their ability to afford basic housing, goods and services. Meanwhile, Wall Street is declaring huge bonuses for their executive plutocrats, none of whom have been prosecuted and sent to jail for these systemic devastations of other peoples' money, the looting of pensions and destruction of jobs.

Just what did they do? Peter Eavis of the New York Times provided a partial summary:

Money laundering, market rigging, tax dodging, selling faulty financial products, trampling homeowner rights and rampant risk-taking -- these are some of the sins that big banks have committed in recent years.Mr. Eavis then reported that "regulators are starting to ask: Is there something rotten in bank culture?"

The "rot" had extended long ago to the regulators whose weak laws were worsened by weak enforcement. Veteran observer of corporate criminality, former Texas Secretary of Agriculture and editor of the Hightower Lowdown newsletter, Jim Hightower writes:

Assume that you ran a business that was found guilty of bribery, forgery, perjury, defrauding homeowners, fleecing investors, swindling consumers, cheating credit card holders, violating U.S. trade laws, and bilking American soldiers. Can you even imagine the punishment you'd get?How about zero? Nada. Nothing. Zilch. No jail time. Not even a fine. Plus, you get to stay on as boss, you get to keep all the loot you gained from the crime spree, and you even get an $8.5 million pay raise!Hightower was referring to Jamie Dimon, the CEO of JPMorgan Chase, "the slick CEO who has fostered a culture of thievery during his years as a top executive at JPMorgan, leading to that shameful litany of crime."

Shame? Dimon doesn't know how to spell it: "I am so damn proud of this company. That's what I think about when I wake up every day," he said in October, 2013.

Millions of young Americans (called Millennials, between ages 18 and 33) should start agitating through demonstrations, demand petitions and put pressure on the bankers and members of Congress. First the plutocrats and their indentured members of Congress should drop their opposition to a transaction tax on Wall Street trading. A fraction of a one percent sales tax on speculation in derivatives and trading in stocks (Businessweek called this "casino capitalism") could bring in $300 billion a year. That money should go to paying off the student debt which presently exceeds one trillion dollars. Heavy student debt is crushing recent graduates and alarming the housing industry. For example, people currently between the ages of 30 to 34 have a lower percentage of housing ownership than this age group has had in the past half century.

A Wall Street transaction tax was imposed in 1914 and was more than doubled in 1932 to aid recovery from the Great Depression before it was repealed in 1966. But the trading volume then was minuscule compared to now with computer-driven trading velocity. A tiny tax -- far less than state sales taxes on necessities -- coupled with the current huge volume of trading can free students from this life-misshaping yoke of debt.

Some countries in Europe have a securities transaction tax and they also offer their students tuition-free university education to boot. They don't tolerate the same level of greed, power and callous indifference to the next generation expressed by the monetized minds of the curled-lipped Wall Street elders that we do.

What about young people who are not students? The Wall Street tax can help them with job-training and placement opportunities, as well as pay for tuition for technical schools to help them grow their skills.

A good many of the 30 million Americans stuck in a wage range lower than the minimum wage in 1968, adjusted for inflation, (between $7.25 and $10.50) are college-educated, in their twenties and thirties, and have no health insurance, no paid sick leave and often no full-time jobs.

A youth movement with a laser-beam focus, using traditional forms of demonstration and connecting in person, plus social media must come down on Wall Street with this specific demand. Unfortunately, while Occupy Wall Street started an important discussion about inequality, they did not advance the transaction tax (backed vigorously by the California Nurses Association), when they were encamped near Wall Street and in the eye of the mass media in 2011. A missed opportunity, but not a lost opportunity. Fighting injustice has many chances to recover and roar back.

It is time for young Americans to act! Push Congress to enact a Wall Street speculation tax to help roll back your student debt and give you additional opportunities that are currently denied to you by the inside bank robbers who never had to face the sheriffs. They owe you.

As William C. Dudley, the eminent president of the Federal Reserve Bank of New York recently said of Wall Street: "I think that they really do have a serious issue with the public." Yes, penance and future trustworthiness enforced by the rule of law.

Young America, you have nothing to lose but your incessant text messages that go nowhere.

Start empowering yourselves, one by one, and then connect by visiting Robin Hood Tax.


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Don't you just love when the US speaks of danger lurking all over the world and all the fears come from the US? This is a great article on the state of global leaders and connections. Now that the rich have sucked as much wealth they can from all the world's public wealth.....they need to speak of the problems of wealth inequity. REMEMBER, SIMPLY REINSTATING RULE OF LAW AND RECOVERING TENS OF TRILLIONS OF DOLLARS IN CORPORATE FRAUD IS THE REVERSING OF WEALTH INEQUITY! Neo-liberals plan to take us back to the 1960s with all kinds of labor policies to boost income. Since they stole all the wealth from the 1960 to today----they say ----this was fun, let's do it again!

Note as well Fisher stating that not much will be done about a coming inflation.  Remember, the FED has provided a manipulated inflation rate, not the real one.  Inflation has been at 3-5% since the crash.  What will come after these years of FED manipulation of markets is a spiraling inflation....some say 10-15%.  This will send US citizens into even deeper poverty if that is possible as costs for all goods will soar.  This does not bother neo-liberals because the goal is to impoverish the masses and public sector to privatize and control all public agencies.  THIS SPIRALING INFLATION/NEXT ECONOMIC CRASH WILL DO IT!   Remember, the rich have all their wealth in gold or foreign investments so they will not feel what is coming!

John Kerry also showed himself willing to get “in like Flynn”, by announcing the intentions and capabilities of the State Department in its Annual Report on Human Rights[viii]. In his opening address to this report Secretary Kerry wrote:

“Too many governments continue to tighten their grasp on free expression, association, and assembly, using increasingly repressive laws, politically motivated prosecutions and even new technologies to deny citizens their universal human rights, in the public square and in virtual space”.



Putting the ‘F’ in CFR
Posted on 10 March 2014 by admin Age of Wisdom, Age of Foolishness (17) Written by Adam Whitehead, KeySignals.com


“In Like Flynn”

“Putting the ‘F’ Back in Federal Reserve” observed how “Team America” prepared the way for global cooperation between the Developed and Emerging Nations; in a way that will allow the Fed to “Taper” without the same instability that plagued the global economy, for the second half of 2013, after the “Taper” became reality[i]. G20 Sydney advanced this cause of global cooperation. As the curtains came down on the spectacle of Sochi however, it appeared that the “Fat Lady” was already singing the end of all such cooperative notions. In short order, the Ukraine split into new putative breakaway republics and the Russian Federation moved “in like Flynn” to the Crimea. Capital markets struggled to discount all this new Balkanization.

There are some consistent themes running beneath these apparently confusing global cross currents. Whilst the GOP grandees were busily trying to turn the clock back[ii] President Obama opined that this is not your father’s Cold War; therefore it would be a mistake to discount a return to this form of global attrition[iii].

“Now and Then”

As we noted in “Putting the ‘F’ Back in  Federal Reserve”[iv], President Putin is ostensibly a member of the “Committee to Save the World”; himself being a direct descendent of the original “Committee”. Both he and “Team America” share common threats, which have “Pivoted” from Afghanistan to the Levant and Caucasus. In addition, he has been the great enabler of America’s “Pivot” away from the Middle East towards China. The incursion into the Crimea therefore needs to be seen in this perspective; rather than through the narrow GOP Cold War prism. More than 50% of the Crimean population is ethnic Russian, less than 30% is Ukrainian; and then between 12% and 15% is ethnic Tatar. The Tatars represent the metamorphosis of the common Islamic threat, emanating from the Caucasus, which is the lowest common denominator with America. When President Obama emerged from the huddle, for a rapidly convened press briefing post Russian incursion, his ambivalent tone signaled American understanding of the complexity of the situation and respect for Russian interest[v]. American self-interest is the riddle, inside the mystery of Russian self-interest, wrapped in the enigma of President Putin. The Crimea is a place where great powers redraw maps to fit the unfolding global dialectic; and it would appear that a new redrawing is in process with complicit understanding of the great powers involved.

There is one emerging great power that is still struggling in this new role. This great power is of course the EU. “Team America” is most concerned to elicit the correct response from the EU as “Team Europe”.

This expected response is supposed to be the adoption of an economic stimulus plan and bailout for Peripheral economies. Thus far, “Team Europe” has been a sock puppet that hides the economic and political agenda of Germany. This agenda is associated with the Freshwater School of economics which is anathema to the Saltwater Keynesians from MIT who are now established at the Fed, US Treasury and the ECB.

“Not Your Grandfather’s Yalta Conference”

The Ukrainian incident is now a key event which will be used to make “Team Europe” play the role envisaged by “Team America”. When Mrs Merkel visited Britain last week, the red carpet was extended the full nine-yards longer than what was rolled out for Mr Hollande. She responded with alacrity, in role play worthy of Metternich, by balancing the need for European reform delicately with the need to be more inclusive[vi]. Whilst everything is cosy on the European front, relations between America and Germany are from it. Germany is particularly angered by the NSA spying on Mrs Merkel[vii]. If Germany played the role envisaged by “Team America” however, the need for this kind of spying would go away.

John Kerry also showed himself willing to get “in like Flynn”, by announcing the intentions and capabilities of the State Department in its Annual Report on Human Rights[viii]. In his opening address to this report Secretary Kerry wrote:

“Too many governments continue to tighten their grasp on free expression, association, and assembly, using increasingly repressive laws, politically motivated prosecutions and even new technologies to deny citizens their universal human rights, in the public square and in virtual space”.

This is a signature change in US foreign policy. There was less emphasis on the threat from the Axis of Evil, Al Qaeda or even the Evil Empire as Russia was once known. In fact, America is very keen to say that it is at war with no one at present; nor does it feel specifically threatened. The State Department goes out of its way to opine that Democracy itself is being threatened globally. In so far as Democracy is threatened, then it is implied that American values are indirectly threatened. As Secretary Hagel scales back American military size, to fit the new economic constraints and America “Pivots” in search of free markets that are growing, Democratic values underpin the whole strategy. Thus having sponsored Democracy, with such catalysts as “Arab Spring”, America is keen to see it develop. Where Democracy becomes subverted by dictatorship and conflicting ideology, America criticizes those who it initially encouraged to aspire to democratic values. Thus the Muslim Brotherhood and the regime that recently replaced them are put on watch that America takes the side of the agents of Democracy rather than specific actors. This principle should put the new government of Ukraine on watch, that it must live up to these principles to continue to receive America’s blessing. It should also put President Putin on watch, that cooperation with America does not extend to allowing the democratic cause in Russia to be diminished. “A friend of Democracy is my friend and an enemy of Democracy is my enemy”, becomes the new lexicon of diplomacy in the multipolar world of global relations.

As we observed in “Putting the ‘F’ Back in Federal Reserve”, Liberal Democracy evolves conspiracies to deal with dictatorships. An essential part of these conspiracies are the global agencies and NGO’s, which are financed by the Liberal Democracies, to promote their values. This amounts to policy execution by proxy, to avoid the traditional violent confrontation which follows from direct policy action. It was therefore timely to see Christine Lagarde’s IMF swiftly mobilise to assist “Team America”.

“The Orange Revolution’s Little Orange Book”

The IMF brains trust of Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides recently published the IMF Staff Discussion Note (SDN/14/02) entitled Redistribution, Inequality, and Growth[ix]. The IMF is now changing its own spots as America changes its spots. Having been all for austerity and debt reduction, the IMF is now for income redistribution. The change of rhetoric directly reflects the Obama Administration’s new emphasis on the Middle Class and the Fed’s new interest in the Wealth Effect and Income rather than Unemployment. Income inequality is now being framed as the greatest threat to economic growth. Politically speaking, income inequality is also what leads to instability and the domestic conflicts, which are now unfolding in the Emerging World, as the Fed “Tapers” and removes the rising tide that once supported all. Income inequality and its solution are therefore challenges facing both the Emerging and Developed Nations. These conflicts are also seen developing on the “Periphery” of the Developed Nations. On a more humorous note, it was amusing to see that the IMF omitted to opine that central bank quantitative easing has exacerbated these inequalities in wealth which now threaten the world of nations. Central Banks have therefore threatened the democratic values that America embraces.

For those who are perplexed therefore, by events unfolding in the news and the markets, the guides for the perplexed have been written by the State Department and the IMF. Democracy is to be bolstered; and where it is threatened by income inequality this must be rebalanced. All actions, by policy makers and central bankers in both Developed and Emerging Nations, will be dovetailed along these two broad policy guidelines.

“Pivoting” further east into the Orient, the next testing ground for this new mantra will be the upcoming China Peoples’ Congress. “Likonomics” has thus far reciprocated smoothly with the new global policy agenda. Income inequality is being purged from the system; and where this has been associated with a misallocation of economic resources market derived interest rates are now being applied to resolve it. To the alarmist, the application of this medicine will taste like a crisis. For the observer who has read the guides for the perplexed all this will resonate with the new global agenda.

In Age of Wisdom, Age of Foolishness (15) “Putting the ‘F’ Back in Federal Reserve”[x] the return of Richard Fisher, to become a voting member of the FOMC, was noted because this return was marked by a decline in his vociferous dissent.

The New Old “Team America”
Richard Fisher- “Far Right”!!!

Fisher was noted as a member of Pete Peterson’s original “Team America”. At his latest appearance in Frankfurt, Fisher made it clear that he expected fiscal policy to replace the Fed stimulus; although he admitted that he would lose any argument to accelerate the pace of the “Taper” with his FOMC colleagues. He therefore sent the clear signal that a fiscal policy stimulus is coming; and that the Fed will not respond to the inflationary implications of this stimulus with any zeal. For the normally colourful and outspoken Fisher, this quiet aside was much louder than all his previous canting dissent. Having seen the epiphany of the “Quiet American” Nathan Sheets at Treasury and the coincident minimum wage rhetoric building, it is clear that Fisher was giving the gambler’s tell signal that inflationary fiscal policy is about to be enabled by an obliging Fed. From our perspective the engineering of minimum wage hikes, through the agency of the tax code, with the Fed on hand to enable this policy is the same thing as “Helicopter Money”.

Confirmation of the signal provided by Fisher came from the GOP itself. Firstly, Speaker Boehner embraced President Obama’s offer to address the minimum wage issue in a bipartisan framework[xi]. Secondly, the Republicans themselves have now outdone the Democrats by proposing that Wall Street bank levies should finance new tax cuts. Robin Hood and his Merry Men are now loose in both parties, stealing from the Rich to give to the Poor. Neither party will admit that the Fed has made the Rich richer and the Poor poorer since 2009 however; because they know that the Fed is still required for the next trick. Clearly both parties are now on the same page; in terms of stimulating Democratic values by wealth transfers. In order to finance these transfers however, the Fed will need to support asset prices; and provide companies with liquidity at low interest rates in order to carry the higher payroll cost. The risk is of course that all this democratic fervour will lead to the big threat to democracy known as inflation; but this is some way off in real economic terms and thousands of points away in equity index price terms. The Germans know all about this, which is why they are dragging their heels; Paul Volcker knows all about this and he is remaining quiet for now.


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Obama as President was required by Rule of Law to nationalize the Wall Street banks because they were bankrupt entities having committed massive fraud.  Investigations, prosecutions, and recovery of fraud would have ended with the downsized now regional banks sold to private owners.  THIS IS WHAT NEEDED TO HAPPEN.

Each state needed as well to make these big banks the exception, not the rule in banking by creating public banks.  If the public has the choice.....it will move to a public bank and leave these big banks to hopefully leave the state.  Maryland chose instead not only to give them accolades as good corporate citizens when they 'donated' rather than pay fraud, but the governor and mayor doubled-down on financial instruments tied with Wall Street. 

THIS IS HOW YOU KNOW A NEO-LIBERAL-----THEY ARE LOOKING TO WORK WITH WALL STREET EVEN KNOWING IT IS STILL SYSTEMICALLY CRIMINAL.
The Huffington Post  | by  Shadee Ashtari
15 Vermont Towns Say Yes To Creating A Public State Bank

• 
  

Posted: 03/06/2014 8:28 pm EST Updated: 03/07/2014 2:59 pm EST On the first Tuesday of March, communities across Vermont hold town meetings at which they elect local officials, approve the coming year’s budget and vote on measures announced in advance.

This week, 19 Vermont cities and towns voted on a measure calling for the Vermont Economic Development Authority, a statewide finance lender created in 1974, to be turned into a public bank. Fifteen approved the notion.

In January, state Sen. Anthony Pollina (D) and five other progressive state lawmakers had introduced legislation to advance the proposal. Senate Bill 204 would direct the state government to deposit 10 percent of its unrestricted funds in a public VEDA bank, which could then leverage the money in the same manner as private banks do.

The Senate legislation would:

(1) create statutorily the 10 Percent for Vermont Program within the Vermont Economic Development Authority for the purpose of establishing a banking system owned, controlled, and operated by the State of Vermont;(2) amend the statutory authority of the Vermont Economic Development Authority to permit it to engage in the business of banking; and

(3) direct the State Treasurer to transfer 10 percent of the State government’s cash reserves to the 10 Percent for Vermont Program for initial funding.The pilot program would partner with local private banks to offer loans and boost economic development "by increasing access to capital for businesses in the State,” according to the legislative text. VEDA is currently financed by legislatively appropriated funding, bonds and other means.

A companion bill, HB 627, has been introduced in the state House.

Also in January, a report by Vermonters for a New Economy -- a coalition of state groups, businesses and individuals backing the initiative -- concluded that the creation of a public bank could create 2,535 new jobs in Vermont, $192 million in Gross State Product and $342 million in increased state output.

According to Vermont Public Radio, the following towns voted for the proposal: Bakersfield, Craftsbury, Enosburg, Marshfield, Montgomery, Montpelier, Plainfield, Putney, Randolph, Rochester, Royalton, Ryegate, Tunbridge, Warren and Waitsfield. The communities of Marlboro, Barnet, Fayston and Greensboro rejected the measure.

The only state to currently operate a public state bank is North Dakota. Twenty other states are considering a similar banking reform.



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Financial Reform Newsletter March 14, 2014   Better Markets

Department of Justice, like the SEC, knowingly misleads the American public about being tough on financial crimes that victimize Main Street. DOJ's independent inspector general just released a report showing that the DOJ and the Attorney General himself  "wildly overstated" the work of their so-called "mortgage fraud task force."  For example, the IG reported that, at a press conference in October 2012, the AG overstated the number of criminal defendants charged by a whopping 400% and overstated the estimated losses by an unbelievable 1000%. Proving that this was no accident, but an intentional policy, DOJ continued to use these false and misleading numbers for more than 10 months after knowing they were totally wrong. The IG report is couched in polite language and preposterously frames the matter as a reporting and classification problem, but it can't hide the fact that DOJ has misled the American people about its failure to fight financial crimes.  Unfortunately, pretending to be tough on financial crimes and Wall Street has also been common at the SEC, as reported here in February 2013 and again here in October 2013.  While DOJ and the SEC fight a PR war to convince the American people that they are doing their job when they are not, the crime spree on Wall Street continues, the number of Main Street victims continues to go up, and the confidence of the American people in their government continues to go down, which is why Better Markets recently sued the DOJ for transparency, accountability, and oversight.

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For those not understanding what the FED bond buy-back these few years was about, the FED has accumulated trillions of dollars in debt from basically taking much of the toxic subprime mortgage bonds off bank's accounting and at the same time lowering mortgage interest rates to almost zero right after the crash.  Now, the FED looks like a ponzi scheme as it reaches its limits for holding debt it must now stop all the 'economic stimulus' moving the economy into a position to crash.  WE NEVER RECOVERED....THEY SIMPLY MOVED DEBT AROUND SO THE BANKS AND CORPORATIONS COULD TAKE ON MORE LEVERAGE ----NOW BACK AT PRE-CRASH LEVELS OF $600 TRILLION DOLLARS.

So, this allowed part 2 of the massive mortgage fraud to play out.  Zero interest on mortgages made bundling foreclosures and buying and selling homes almost free for the same people enriching themselves by massive mortgage fraud.  Consolidation of real estate holdings to a few was the goal of this housing scheme.  Meanwhile, the FED, which has never been involved in policy that has it accumulating debt or trying to earn profit must shed this debt.  The word is that this $4 trillion in debt will simply be moved to US Treasury where taxpayers will pay for it.  LOSSES TO THE AMERICAN PEOPLE FROM THIS MASSIVE FRAUD.....TENS OF TRILLIONS OF DOLLARS STILL NEEDING TO BE RECOVERED.

Below you see a great presentation by charts of a FED acting as a financial bank rather than a Federal institution charged with providing stability to the economy and maximized employment.  These policies have actually done the opposite and that is why they are illegal and the term crony is now attached to the FED and Treasury.

Fed's Balance Sheet 12 March 2014: Grows Again Marginally

March 13th, 2014


Total Fed Balance Sheet

Fed's Balance Sheet grew to a record $4.138 trillion (up from the last week's record $4.129 trillion). The complete balance sheet data and graphical breakdown of the cumulative and weekly changes follows the "read more".


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Going with a public bank is the only way to escape the criminal madness that is Wall Street.  Maryland pols are all neo-liberals so they are pushing more and more Wall Street on the public.  This article shows how we can move forward with public banking!

Use public pensions at home and not buoying some developed world's debt

Investment Risk Redefined in Light of
World Chaos and the Need for Local Resilience



By Jerry Allen, MFT,
MPH



© Copyright 2011 Jerry Allen, MFT,
MPH, all rights reserved


Many of us as investors have been schooled in the value of
diversified investments, drawn from across the world investment universe, with
as many uncorrelated risk profiles as possible. It was thought unsafe to invest
locally because it was not diverse enough. This has been a winning strategy over
the last thirty years for many investors. However in 2008 we saw the supposedly
most diversified, broadly invested portfolios move to a correlation of one. That
means that virtually every investment type nose-dived in unison. That was quite
a shock and forced a fundamental rethinking of the concept of systemic risk.
Since that time, the appearance of peak oil and other resource depletion
examples, the rise of environmental crises, and the advent of economies
teetering on the brink of insolvency, under a growing mountain of unsustainable
debt, have led to awareness that all our old assumptions require
re-examination.

The picture now emerging into clarity is that contrary to
what we previously thought, the highly complex, global, just-in-time economy, is
both interdependent and highly vulnerable--vulnerable in the sense that a
catastrophe, such as a tsunami and a nuclear meltdown in Japan, a war in Libya,
or a debt crisis in Europe or the US, can jeopardize the whole of economic
activity all around the world. It is also vulnerable because this complex world
economy cannot function without cheap energy and there is no way to “stimulate”
our way out of this economic predicament. Massive debt spending cannot erase the
effect of runaway energy and other resource prices.

Troubling questions
emerge. What will happen to local food supplies when the food growing and
distribution system in major production areas fails due to fuel shortages,
collapse of supply lines, or a banking system crisis? What will happen when the
major world economies can grow no more, while the debt burden remains? A little
thought will call to mind many recent examples of these vulnerability
relationships. This vulnerability undermines the old axiom that a broadly
diversified world portfolio achieves investment safety and low risk. If our
predictions of risk are based on the past thirty years of cheap energy and
relative economic stability, we place our solvency in great jeopardy.

It
is absolutely crucial that each region prepare to feed its people and provide as
many local jobs as possible—to essentially re-localize our economy. Such a local
economy is not as vulnerable to the price of fuel to air freight food from Chile
or ship it from the Midwest of America. Local food producers can feed a local
population even in hard times. This was proven in England during WWII. The owner
of Oliver’s Markets in Sonoma County recently commissioned an academic study
that found that the job multiplier of buying food and other products
locally-Sonoma County-made is 140%. By switching a major portion of buying to
local food and products, we can literally cause a wave of local job creation. We
also have a much greater opportunity to express our values by buying local
sustainably-produced foods and products. Such a locally oriented economy is less
vulnerable to the collapse of complex global economies. Hence, local risk
reduction.

An analysis of the quantity of total money leaving Sonoma
County each month, flowing to the big money banks and global corporations shows
the following:  according to census data, Sonoma County
credit card debt was $ 1.5 billion in 2009, with $214 million in interest
payments, mostly to big eastern banks. The all inclusive data that includes
mortgage interest, credit card payments, spending on non-local products, food
and fuel, is not yet available. Sonoma County families and businesses have
assets of $53 billion, while only $20 billion of that is invested in Sonoma
County. That means $33 billion of those assets are invested in big banks or
investment firms outside of Sonoma County. The combination of this exit of
capital and exit of money in the form of payments, has dealt the local economy a
massive body blow. Let’s stop this in its tracks, and reduce risk at the same
time.

How do local investments fit into this concept of risk reduction?
Several ways:  first, when local investors place
investments in local Sonoma County agriculture and businesses, we address a
crucial local need—to greatly increase food and other security through local
production of food and other products, lowering the risk of population
starvation.  Second, by using sound investment
structures and local loan underwriting processes, with local accountability and
transparency, confidence among potential investors is built up that the local
investments are sound, well-placed, and have the best possible chance of being
repaid. This can happen by utilizing local credit unions and banks that have a
commitment to invest locally. Their great advantage is local knowledge, leading
to more informed underwriting of loans. Local business development teams stand
ready to ally with local lenders, such as the local banks and credit unions, to
bring forward entrepreneurs and encourage business development in key local
industries such as food. Research from the micro-lending field has shown that
the recipients of small business loans, who participate in local accountability
support groups, have an extremely high track record of repaying loans. This
yields risk reduction.

This brings us back to the original
issue—redefining investment risk. Which is more risky, to invest locally in food
production and other industries, that can provide food security to our
communities; with accountability structures and strong underwriting to assure
that local investments have risks reasonably controlled? 
Or continue to send our money to the big banks and investment houses on
Wall Street, with no transparency, little accountability, no focus on
rejuvenating our local economy, and at the same time great dependency on the
complex global systems of trade that are vulnerable to collapse if one major
player goes into the ditch? When framed this way, local investments, well placed
and underwritten, provide not only a less risky investment, but one that can pay
huge dividends to local community vitality and resilience. 
In Sonoma County, teams of business development agencies, local credit
unions and banks, sustainability consultants and community leaders are right now
developing these investment vehicles in exactly this direction. For more
information contact jerryallen at sonic.net .



__________________________________________________________


This is a good overview of life after the massive subprime mortgage fraud and the absence of justice



Eminent Domain: An Underwater Mortgage
Solution


  March 6th, 2014
in Op Ed     
by Ellen
Brown, Web of Debt



In a nearly $13
billion settlement with the US Justice Department in November 2013, JPMorganChase admitted
that it, along with every other large US bank, had engaged in mortgage fraud as
a routine business practice, sowing the seeds of the mortgage meltdown. JPMorgan
and other megabanks have now been caught in over a dozen major frauds, including
LIBOR-rigging and bid-rigging; yet no prominent banker has gone to jail.
Meanwhile, nearly a quarter of all mortgages
nationally remain underwater (meaning the balance owed exceeds
the current value of the home), sapping homeowners' budgets, the housing market
and the economy. Since the banks, the courts and the federal government have
failed to give adequate relief to homeowners, some cities are taking matters
into their own hands.
 Follow up

Gayle
McLaughlin, the bold mayor of Richmond, California, has gone where no woman
dared go before, threatening to take underwater mortgages by eminent domain from
Wall Street banks and renegotiate them on behalf of beleaguered homeowners. A
member of the Green Party, which takes no corporate campaign money, she proved
her mettle standing up to Chevron, which dominates the Richmond landscape. But
the banks have signaled that if Richmond or another city tries the eminent
domain gambit, they will rush to court seeking an injunction. Their grounds: an
unconstitutional taking of private property and breach of contract.


How to refute
those charges? There is a way; but to understand it, you first need to grasp the
massive fraud perpetrated on homeowners. It is how you were duped into paying
more than your house was worth; why you should not just turn in your keys or
short-sell your underwater property away; why you should urge Congress not to
legalize the MERS scheme; and why you should insist that your local government
help you acquire title to your home at a fair price if the banks won't. That is
exactly what Richmond and other city councils are attempting to do through the
tool of eminent domain.


The
Securitization Fraud That Collapsed the Housing Market


One settlement
after another has now been reached with investors and government agencies for
the sale of "faulty mortgage bonds," including a suit brought by Fannie and
Freddie that settled in October 2013 for $5.1
billion. "Faulty" is a euphemism for "fraudulent." It means that
mortgages subject to securitization have "clouded" or "defective" titles. And
that means the banks and real estate trusts claiming title as owners or nominees
don't actually have title - or have standing to enjoin the city from proceeding
with eminent domain. They can't claim an unconstitutional taking of property
because they can't prove they own the property, and they can't claim breach of
contract because they weren't the real parties in interest to the mortgages (the
parties putting up the money).


"Securitization" involves bundling mortgages into a
pool, selling them to a non-bank vehicle called a "real estate trust," and then
selling "securities" (bonds) to investors (called "mortgage-backed securities"
or "collateralized debt obligations"). By 2007, 75% of all mortgage
originations were securitized. According to investment banker and
financial analyst Christopher Whalen, the purpose of
securitization was to allow banks to avoid capitalization
requirements, enabling them to borrow at unregulated levels.


Since the real
estate trusts were "off-balance sheet," they did not count in the banks' capital
requirements. But under applicable accounting rules, that was true only if they
were "true sales." According to Whalen, "most of the securitizations done by
banks over the past two decades were in fact secured borrowings, not true sales,
and thus potential frauds on insured depositories." He concludes, "bank abuses
of non-bank vehicles to pretend to sell assets and thereby lower required
capital levels was a major cause of the subprime financial crisis."


In 1997, the
FDIC gave the banks a pass on these disguised borrowings by granting them "safe
harbor" status. This proved to be a colossal mistake, which led to the implosion
of the housing market and the economy at large. Safe harbor status was finally
withdrawn in 2011; but in the meantime, "financings" were disguised as "true
sales," permitting banks to grossly over-borrow and over-leverage.
Over-leveraging allowed credit to be pumped up to bubble levels, driving up home
prices. When the bubble collapsed, homeowners had to pick up the tab by paying
on mortgages that far exceeded the market value of their homes. According to
Whalen:



[T]he largest
commercial banks became "too big to fail" in large part because they used
non-bank vehicles to increase leverage without disclosure or capital backing. .
. .


The failure of
Lehman Brothers, Bear Stearns and most notably Citigroup all were largely
attributable to deliberate acts of securities fraud whereby assets were "sold"
to investors via non-bank financial vehicles. These transactions were styled as
"sales" in an effort to meet applicable accounting rules, but were in fact bank
frauds that must, by GAAP and law applicable to non-banks since 1997, be
reported as secured borrowings. Under legal tests stretching from 16th Century
UK law to the Uniform Fraudulent Transfer Act of the 1980s, virtually none of
the mortgage backed securities deals
of the 2000s met the test of a true sale.


. . . When the
crisis hit, it suddenly became clear that the banks' capital was
insufficient.


Today . . .
hundreds of billions in claims against banks arising from these purported
"sales" of assets remain pending before the courts.


Eminent
Domain as a Negotiating Tool


Investors can
afford high-powered attorneys to bring investor class actions, but underwater
and defaulting homeowners usually cannot; and that is where local government
comes in. Eminent domain is a way to bring banks and investors to the bargaining
table.


Professor
Robert Hockett of Cornell University Law School is the author of the plan to use
eminent domain to take underwater loans and write them down for homeowners. He
writes on NewYorkFed.org:



[In] the case
of privately securitized mortgages, [principal] write-downs are almost
impossible to carry out, since loan modifications on the scale necessitated by
the housing market crash would require collective action by a multitude of
geographically dispersed security holders. The solution . . . Is for state and
municipal governments to use their eminent domain powers to buy up and
restructure underwater mortgages, thereby sidestepping the need to coordinate
action across large numbers of security holders.


The problem is
blowback from the banks, but it can be blocked by requiring them to prove title
to the properties. Securities are governed by federal law, but real estate law
is the domain of the states. Counties have a mandate to maintain clean title
records; and legally, clean title requires a chain of "wet" signatures, from A
to B to C to D. If the chain is broken, title is clouded. Properties for which
title cannot be established escheat (or revert) to the state by law, allowing the
government to start fresh with clean title.


New York State
law governs most of the trusts involved in securitization. Under it, transfers
of mortgages into a trust after the cutoff date specified in the Pooling and
Servicing Agreement (PSA) governing the trust are void.


For obscure
reasons, the REMICs (Real Estate Mortgage Investment Conduits) claiming to own
the properties routinely received them after the closing date specified in the
PSAs. The late transfers were done throu gh the fraudulent
signatures-after-the-fact called "robo-signing," which occurred so regularly
that they were the basis of a $25 billion settlement between a
coalition of state attorneys general and the five biggest mortgage
servicers in February 2012. (Why all the robo-signing? Good
question. See my earlier article here.)


Until recently, courts have
precluded homeowners from raising the late transfers into the
trust as a defense to foreclosure, because the homeowners were not parties to
the PSAs. But in August 2013, in Glaski v. Bank of America, N.A., 218
Cal. App. 4th 1079 (July 31, 2013), a California appellate court ruled that the
question whether the loan ever made it into the
asset pool could be raised in determining the proper party to
initiate foreclosure. And whether or not the homeowner was a party to the PSA,
the city and county have a clear legal interest in seeing that the PSA's terms
were complied with, since the job of the county recorder is to maintain records
establishing clean title.


Before the rise
of mortgage securitization, any transfer of a note and deed needed to be
recorded as a public record, to give notice of ownership and establish a
"priority of liens." With securitization, a private database called MERS
(Mortgage Electronic Registration Systems) circumvented this procedure by
keeping the deeds as "nominee for the beneficiary," obscuring the property's
legal owner and avoiding the expense of recording the transfer (usually about
$30 each). Estimates are that untraceable property assignments concealed behind
MERS may have cost counties nationwide billions of
dollars in recording fees. (See my earlier article here.)


Counties thus
have not only a fiduciary but a financial interest in establishing clean title
to the properties in their jurisdictions. If no one can establish title, the
properties escheat and can be claimed free and clear. Eminent domain can be a
powerful tool for negotiating loan modifications on underwater mortgages; and if
the banks cannot prove title, they have no standing to complain.


The End
of "Too Big to Fail"?


Richmond's city
council is only one vote short of the supermajority needed to pursue the eminent
domain plan, and it is seeking partners in a Joint Powers Authority that will
make the push much stronger. Grassroots efforts to pursue eminent domain are
also underway in a number of other cities around the country. If Richmond pulls
it off successfully, others will rush to follow.


The result
could be costly for some very large banks, but they have brought it on
themselves with shady dealings. Christopher Whalen predicts that the FDIC's
withdrawal of "safe harbor" status for the securitization model may herald the
end of "too big to fail" for those banks, which will no longer have the power to
grossly over-leverage and may have to keep their loans on their
books.


Wall Street
banks are deemed "too big to fail" only because there is no viable alternative -
but there could be. Local governments could form their own publicly-owned banks,
on the model of the state-owned Bank of North Dakota. They could then put their
revenues, their savings,
and their newly-acquired real estate into those public utilities, to be used to
generate interest-free credit for the local government (since it would own the
bank) and low-cost credit for the local community. For more on this promising
option, which has been or is being explored in almost half the state
legislatures in the US, see here.



______________________________________________________________
Regarding the structural deficit in Maryland caused by neo-liberal policy:

Do you know that giving the Port of Baltimore over to a private contractor which has Johns Hopkins as a major shareholder sent billions in state revenue into the hands of HighStar as profit? A neo-liberal policy of public private partnerships have made Maryland king of corporate welfare. THIS IS THE STRUCTURAL BUDGET DEFICIT AS ALL COSTS OF RUNNING THE GOVERNMENT COMES FROM HIGHER TAXES, FEES, AND FINES ON THE WORKING AND MIDDLE CLASS.

So, you need to vote for republicans say the current cast of republican candidates for governor! Yet, we all know that ending taxation on the rich and corporations IS THE REPUBLICAN POLICY. Indeed, Ehrlich lost to O'Malley for doing what O'Malley is doing now. Once no taxes are paid by the richest.....both parties will soak you and I!!!!! RUN AND VOTE FOR LABOR AND JUSTICE FOR PROGRESSIVE TAX POLICIES!

It starts with financial reform. You know, that massive bill neo-liberals spent 3 years writing that has not seen the light of day and when it does, it is entirely watered-down to nothing! Remember, TPP ends all financial regulation and none of this reform will be valid and ALL MARYLAND POLS ARE NEO-LIBERALS PASSING LAWS TIED WITH TPP!

Who controls the writing of financial reform? The FED and Treasury all appointed and approved by neo-liberals. But the republicans made them do it you say! Do you think if they were shouting loudly and strongly these problems exist that rules would not be written right?
Wall Street Now Controls Both Sides of the Market

Posted on March 6, 2014 by Joshua Schwitzerlett

•A loophole hole in financial legislation is allowing banks to buy commodities and artificially influence markets. It’s a disaster and, yes, the sky is falling.

The law that allowed this abomination of a behavior to go on is known called the Financial Services Modernization Act of 1999, or the Gramm-Leach-Bliley Act, and it continued the tradition of  Wall Street deregulation that had been started during the Reagan administration.

As part of its revisions, a situation was created that allowed American banks to merge in order to compete in a more global economy. To do this, Congress had to remove the barrier that prevented commercial banks from merging with investment banks and insurance companies.

What this did was allow commercial banks to start buying investment banks, which are permitted to buy and own commodities.

And buy and own commodities, they did.

According to Rolling Stone, “banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals.” Goldman Sachs even owns a uranium business.

The practice of owning stockpiles of raw materials and manipulating the means of processing and distribution fits right into the hands of these bankers driving up the costs of products and raking in unforetold profits.

________________________________________________________________
As we see below, as corporate NPR/APM and mainstream media try to tell US audience that the uprising in Ukraine is about Russia vs Euro.....it is about crony, naked capitalism and the fleecing of all wealth by the same people stealing tens of trillions of dollars from you and me.  World-wide hundreds of millions of people are out in the street fighting TPP------TROIKA-----and the massive fraud taking all people's wealth.

When the media spins this to make it seem the problem is Russia, or China, or anyone other than the VISIGOTHS at the top-----that is propaganda.

NEO-LIBERALS = NAKED CAPITALISM  = TOTALITARIANISM.  ALL MARYLAND POLS ARE NEO-LIBERALS.

Crony capitalism is the fuel to the fire that has flamed from protest to riot to mass casualties in Ukraine over a few short months. Not unlike the mood that surrounded our Boston Tea Party, citizens feel they were not considered as political deals were made that served economic special interests. Is this what it must come to if America is to push back against our economic elite? ~Jeanene

Ukraine’s real problem: crony capitalism
By James Nadeau, The Hill
http://thehill.com/blogs/congress-blog/foreign-policy/195549-ukraines-real-problem-crony-capitalism

Image thanks to REUTERS/Gleb Garanich, as a part of the story written by Adam Taylor, Business Insider, "Why One Million Ukrainians are Protesting: http://www.businessinsider.com/ukraine-protests-what-you-need-to-know-2013-12

January 15, 2014, 04:00 pm

Ukraine’s real problem: crony capitalism

By James Nadeau

Share on facebook39 Share on twitter22 Share on google_plusone_share More Sharing Services 20 Share on email 7 The protests in Ukraine’s capital, Kiev, had reached their apogee when Rep. Eliot L. Engel (D-N.Y.) introduced a bipartisan resolution aimed at “supporting the democratic and European aspirations of the people of Ukraine.” The resolution, already largely forgotten, spares little ink in criticizing Ukraine’s police force and the country’s general leadership, denouncing perceived affronts to the Ukrainian people’s “constitutional rights to freely assemble and express their opposition to President Yanukovych’s decision.”

The real threat to democracy, however, stems less from the country's security apparatus than from the country's elite class of untouchable oligarchs, who act as a corrupting force at every level of society.

ADVERTISEMENTYanukovych’s decision was to back out of negotiations with the European Union on a free-trade agreement aimed at strengthening ties between Kiev and Brussels, at the expense of Moscow. The ‘Association Agreement’, which was due to be signed at a summit in Vilnius, Lithuania last November, was widely perceived as an attempt to extend EU influence in Putin’s backyard. In response, Russia, which accounts for a quarter of Ukrainian exports, used economic sanctions to send a message to Kiev’s political elites: sign the Association Agreement and we will make sure your economy collapses. With little financial help pledged from the EU (there is a crisis, after all), Yanukovych pulled out.While tens of thousands of demonstrators stormed Kiev’s central square in protest of Ukraine’s decision to not sign the agreement with the EU, it quickly became clear that most were not declaring their attachment to the EU per se, but rather their attachment to the idea of Europe. In Ukraine, Europe is seen as the diametric opposite of all that is Russian. Where Russia stands for elite corruption, dysfunctional democracy, and an overall lack of transparency, Europe is seen as a beacon of liberal democratic values and economic prosperity.

In polarized Ukraine, where the country is split between a Russian-speaking East and a Ukrainian-speaking West, one thing on which all citizens could most likely agree is that corruption is impeding the country’s economic potential. For this, Ukraine’s oligarchs, who often escape criticism, must answer.

Ukraine’s oligarchs are a force to be reckoned with. Though less notorious than their Russian counterparts, Ukraine’s billionaires together command a greater share of their country’s wealth than their Russian counterparts. The wealth of only a dozen Ukrainian oligarchs makes up roughly one-fifth of the country’s GDP. Having, for the most part, made their fortunes in the lawless transition period between Soviet and capitalist economies, these oligarchs thrive in the shadows, far away from the rule of law.

Indeed, in the rough and tumble Ukrainian business world, the term ‘violent takeover’ takes on a much more literal meaning. Controversial billionaires like Igor Kolomoisky and Gennady Bogolyubov of the Privat Group, known colloquially in the Ukrainian business world as ‘The Raiders’, have perfected their own brand hostile takeovers. A minimum stake in a company is acquired by one of the many companies Kolomoisky and Bogolyubov control and then a mix of phony court orders (often involving corrupt judges and/or registrars) and strong-arm tactics are deployed to replace the existing members of the board of directors with men loyal to Privat. In the takeover of the Kremenchuk steel factory in 2006, Privat’s raid was literal, with Kolomoisky and Bogolyubov hiring an army of thugs to descend upon the plant with baseball bats, gas and rubber pistols, iron bars and chainsaws. Needless to say, Kremenchuk’s steel production was soon under Privat’s control.

In countries with credible courts and general respect for the rule of law in economic affairs, Kolomoisky and Bogolyubov’s takeover attempts have been much less successful. Active in the Australian manganese ore industry, Bogolyubov sought to oust two directors of the company OM Holdings in 2011 yet failed when other shareholders recognized the coup and rallied to the board’s defense. In London, Kolomoisky and Bogolyubov launched a full-scale attack against Paul Davies, the chief executive of JKX Oil & Gas, in which they and their allies retain a 39% stake. The coup failed and went to trial in London’s High Court. In pronouncing her verdict, Judge Cynthia Dubin stated that there were “strong grounds for doubting the honesty of Mr. Kolomoisky and Mr. Bogolyubov”.

A fair trial and a judge free from the corrupting influence of billionaires is what many Ukrainians want and what the country desperately needs. And though the necessary judicial changes are more likely to come through Brussels than Moscow, it is curtailing the seeming omnipotence of the country’s oligarchs rather than signing an agreement that will truly secure Ukraine’s economic future.

Nadeau is a writer and consultant on European affairs based in Brussels.




_______________________________________________________________
The uber-rich are indeed having a laugh at our expense as massive corporate frauds of tens of trillions remain with the looters and all public justice being dismantled.  It seems they have won they say.  Statutes of Limitation are 5 years on financial fraud they say and even if Rule of Law doesn't work for the losers.....we like that law!

WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION AND WE WILL RECOVER THIS MONEY.  AS WITH THE LOOTING DURING THE HOLOCAUST.....DECADES OF LAWSUITS BROUGHT MUCH LOST BACK TO FAMILIES.

The American people simply have to run and vote for labor and justice and we can declare all of what is being put into place NULL AND VOID because of all of the illegality.  Contracts......treaties with global corporate tribunals.....SORRY....NOT LEGAL!!


It's good to see the excess......debauchery is what brought the Roman Empire down.

• Today at 12:05 AM
• 272 Comments

One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society

• By Kevin Roose

  Recently, our nation’s financial chieftains have been feeling a little unloved. Venture capitalists are comparing the persecution of the rich to the plight of Jews at Kristallnacht, Wall Street titans are saying that they’re sick of being beaten up, and this week, a billionaire investor, Wilbur Ross, proclaimed that “the 1 percent is being picked on for political reasons.”

Ross's statement seemed particularly odd, because two years ago, I met Ross at an event that might single-handedly explain why the rest of the country still hates financial tycoons – the annual black-tie induction ceremony of a secret Wall Street fraternity called Kappa Beta Phi.

Adapted
from Kevin Roose’s book Young Money, published today by Grand Central Publishing. “Good evening, Exalted High Council, former Grand Swipes, Grand Swipes-in-waiting, fellow Wall Street Kappas, Kappas from the Spring Street and Montgomery Street chapters, and worthless neophytes!”

It was January 2012, and Ross, wearing a tuxedo and purple velvet moccasins embroidered with the fraternity’s Greek letters, was standing at the dais of the St. Regis Hotel ballroom, welcoming a crowd of two hundred wealthy and famous Wall Street figures to the Kappa Beta Phi dinner. Ross, the leader (or “Grand Swipe”) of the fraternity, was preparing to invite 21 new members — “neophytes,” as the group called them — to join its exclusive ranks.

Looking up at him from an elegant dinner of rack of lamb and foie gras were many of the most famous investors in the world, including executives from nearly every too-big-to-fail bank, private equity megafirm, and major hedge fund. AIG CEO Bob Benmosche was there, as were Wall Street superlawyer Marty Lipton and Alan “Ace” Greenberg, the former chairman of Bear Stearns. And those were just the returning members. Among the neophytes were hedge fund billionaire and major Obama donor Marc Lasry and Joe Reece, a high-ranking dealmaker at Credit Suisse. [To see the full Kappa Beta Phi member list, click here.] All told, enough wealth and power was concentrated in the St. Regis that night that if you had dropped a bomb on the roof, global finance as we know it might have ceased to exist.

During his introductory remarks, Ross spoke for several minutes about the legend of Kappa Beta Phi – how it had been started in 1929 by “four C+ William and Mary students”; how its crest, depicting a “macho right hand in a proper Savile Row suit and a Turnbull and Asser shirtsleeve,” was superior to that of its namesake Phi Beta Kappa (Ross called Phi Beta Kappa’s ruffled-sleeve logo a “tacit confession of homosexuality”); and how the fraternity’s motto, “Dum vivamus edimus et biberimus,” was Latin for “While we live, we eat and drink.”

On cue, the financiers shouted out in a thundering bellow: “DUM VIVAMUS EDIMUS ET BIBERIMUS.”

The only person not saying the chant along with Ross was me — a journalist who had sneaked into the event, and who was hiding out at a table in the back corner in a rented tuxedo.

Several Kappas at the table next to me, presumably discussing the coming plutocracy. I’d heard whisperings about the existence of Kappa Beta Phi, whose members included both incredibly successful financiers (New York City's Mayor Michael Bloomberg, former Goldman Sachs chairman John Whitehead, hedge-fund billionaire Paul Tudor Jones) and incredibly unsuccessful ones (Lehman Brothers CEO Dick Fuld, Bear Stearns CEO Jimmy Cayne, former New Jersey governor and MF Global flameout Jon Corzine). It was a secret fraternity, founded at the beginning of the Great Depression, that functioned as a sort of one-percenter’s Friars Club. Each year, the group’s dinner features comedy skits, musical acts in drag, and off-color jokes, and its group’s privacy mantra is “What happens at the St. Regis stays at the St. Regis.” For eight decades, it worked. No outsider in living memory had witnessed the entire proceedings firsthand.

A Kappa neophyte (left) chats up a vet. I wanted to break the streak for several reasons. As part of my research for my book, Young Money, I’d been investigating the lives of young Wall Street bankers – the 22-year-olds toiling at the bottom of the financial sector’s food chain. I knew what made those people tick. But in my career as a financial journalist, one question that proved stubbornly elusive was what happened to Wall Streeters as they climbed the ladder to adulthood. Whenever I’d interviewed CEOs and chairmen at big Wall Street firms, they were always too guarded, too on-message and wrapped in media-relations armor to reveal anything interesting about the psychology of the ultra-wealthy. But if I could somehow see these barons in their natural environment, with their defenses down, I might be able to understand the world my young subjects were stepping into.

So when I learned when and where Kappa Beta Phi’s annual dinner was being held, I knew I needed to try to go.

Getting in was shockingly easy — a brisk walk past the sign-in desk, and I was inside cocktail hour. Immediately, I saw faces I recognized from the papers. I picked up an event program and saw that there were other boldface names on the Kappa Beta Phi membership roll — among them, then-Citigroup CEO Vikram Pandit, BlackRock CEO Larry Fink, Home Depot billionaire Ken Langone, Morgan Stanley bigwig Greg Fleming, and JPMorgan Chase vice chairman Jimmy Lee. Any way you count, this was one of the most powerful groups of business executives in the world. (Since I was a good 20 years younger than any other attendee, I suspect that anyone taking note of my presence assumed I was a waiter.)

I hadn’t counted on getting in to the Kappa Beta Phi dinner, and now that I had gotten past security, I wasn’t sure quite what to do. I wanted to avoid rousing suspicion, and I knew that talking to people would get me outed in short order. So I did the next best thing — slouched against a far wall of the room, and pretended to tap out emails on my phone.

The 2012 Kappa Beta Phi neophyte class. After cocktail hour, the new inductees – all of whom were required to dress in leotards and gold-sequined skirts, with costume wigs – began their variety-show acts. Among the night’s lowlights:

• Paul Queally, a private-equity executive with Welsh, Carson, Anderson, & Stowe, told off-color jokes to Ted Virtue, another private-equity bigwig with MidOcean Partners. The jokes ranged from unfunny and sexist (Q: “What’s the biggest difference between Hillary Clinton and a catfish?” A: “One has whiskers and stinks, and the other is a fish”) to unfunny and homophobic (Q: “What’s the biggest difference between Barney Frank and a Fenway Frank?” A: “Barney Frank comes in different-size buns”).

• Bill Mulrow, a top executive at the Blackstone Group (who was later appointed chairman of the New York State Housing Finance Agency), and Emil Henry, a hedge fund manager with Tiger Infrastructure Partners and former assistant secretary of the Treasury, performed a bizarre two-man comedy skit. Mulrow was dressed in raggedy, tie-dye clothes to play the part of a liberal radical, and Henry was playing the part of a wealthy baron. They exchanged lines as if staging a debate between the 99 percent and the 1 percent. (“Bill, look at you! You’re pathetic, you liberal! You need a bath!” Henry shouted. “My God, you callow, insensitive Republican! Don’t you know what we need to do? We need to create jobs,” Mulrow shot back.)

• David Moore, Marc Lasry, and Keith Meister — respectively, a holding company CEO, a billionaire hedge-fund manager, and an activist investor — sang a few seconds of a finance-themed parody of “YMCA” before getting the hook.

• Warren Stephens, an investment banking CEO, took the stage in a Confederate flag hat and sang a song about the financial crisis, set to the tune of “Dixie.” (“In Wall Street land we’ll take our stand, said Morgan and Goldman. But first we better get some loans, so quick, get to the Fed, man.”)

A few more acts followed, during which the veteran Kappas continued to gorge themselves on racks of lamb, throw petits fours at the stage, and laugh uproariously. Michael Novogratz, a former Army helicopter pilot with a shaved head and a stocky build whose firm, Fortress Investment Group, had made him a billionaire, was sitting next to me, drinking liberally and annotating each performance with jokes and insults.

“Can you fuckin’ believe Lasry up there?” Novogratz asked me. I nodded. He added, “He just gave me a ride in his jet a month ago.”

The neophytes – who had changed from their drag outfits into Mormon missionary costumes — broke into their musical finale: a parody version of “I Believe,” the hit ballad from The Book of Mormon, with customized lyrics like “I believe that God has a plan for all of us. I believe my plan involves a seven-figure bonus.” Amused, I pulled out my phone, and began recording the proceedings on video. Wrong move.

The grand finale, a parody of "I Believe" from The Book of Mormon “Who the hell are you?” Novogratz demanded.

I felt my pulse spike. I was tempted to make a run for it, but – due to the ethics code of the New York Times, my then-employer – I had no choice but to out myself.

“I’m a reporter,” I said.

Novogratz stood up from the table.

"You’re not allowed to be here," he said.

I, too, stood, and tried to excuse myself, but he grabbed my arm and wouldn’t let go.

“Give me that or I’ll fucking break it!” Novogratz yelled, grabbing for my phone, which was filled with damning evidence. His eyes were bloodshot, and his neck veins were bulging. The song onstage was now over, and a number of prominent Kappas had rushed over to our table. Before the situation could escalate dangerously, a bond investor and former Grand Swipe named Alexandra Lebenthal stepped in between us. Wilbur Ross quickly followed, and the two of them led me out into the lobby, past a throng of Wall Street tycoons, some of whom seemed to be hyperventilating.

Once we made it to the lobby, Ross and Lebenthal reassured me that what I’d just seen wasn’t really a group of wealthy and powerful financiers making homophobic jokes, making light of the financial crisis, and bragging about their business conquests at Main Street’s expense. No, it was just a group of friends who came together to roast each other in a benign and self-deprecating manner. Nothing to see here.

But the extent of their worry wasn’t made clear until Ross offered himself up as a source for future stories in exchange for my cooperation.

“I’ll pick up the phone anytime, get you any help you need,” he said.

“Yeah, the people in this group could be very helpful,” Lebenthal chimed in. “If you could just keep their privacy in mind.”

I wasn’t going to be bribed off my story, but I understood their panic.  Here, after all, was a group that included many of the executives whose firms had collectively wrecked the global economy in 2008 and 2009. And they were laughing off the entire disaster in private, as if it were a long-forgotten lark. (Or worse, sing about it — one of the last skits of the night was a self-congratulatory parody of ABBA’s “Dancing Queen,” called “Bailout King.”) These were activities that amounted to a gigantic middle finger to Main Street and that, if made public, could end careers and damage very public reputations.

After several more minutes spent trying to do damage control, Ross and Lebenthal escorted me out of the St. Regis.

As I walked through the streets of midtown in my ill-fitting tuxedo, I thought about the implications of what I’d just seen.

The first and most obvious conclusion was that the upper ranks of finance are composed of people who have completely divorced themselves from reality. No self-aware and socially conscious Wall Street executive would have agreed to be part of a group whose tacit mission is to make light of the financial sector’s foibles. Not when those foibles had resulted in real harm to millions of people in the form of foreclosures, wrecked 401(k)s, and a devastating unemployment crisis.

The second thing I realized was that Kappa Beta Phi was, in large part, a fear-based organization. Here were executives who had strong ideas about politics, society, and the work of their colleagues, but who would never have the courage to voice those opinions in a public setting. Their cowardice had reduced them to sniping at their perceived enemies in the form of satirical songs and sketches, among only those people who had been handpicked to share their view of the world. And the idea of a reporter making those views public had caused them to throw a mass temper tantrum.

The last thought I had, and the saddest, was that many of these self-righteous Kappa Beta Phi members had surely been first-year bankers once. And in the 20, 30, or 40 years since, something fundamental about them had changed. Their pursuit of money and power had removed them from the larger world to the sad extent that, now, in the primes of their careers, the only people with whom they could be truly themselves were a handful of other prominent financiers.

Perhaps, I realized, this social isolation is why despite extraordinary evidence to the contrary, one-percenters like Ross keep saying how badly persecuted they are. When you’re a member of the fraternity of money, it can be hard to see past the foie gras to the real world.

Copyright 2014 by Kevin Roose. Reprinted by permission of Grand Central Publishing. All rights reserved.






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Reagan and Clinton rang in the policy called Cost Benefit Analysis and tied it to all laws passed in their administrations and Bush and now Obama have as well.  This policy states that all laws must measure the costs to corporate profit the implementation of a law would bring.  If it is cut into profits.....ergo, shareholder wealth......it could not be passed.  TPP does this on steroids.  Neo-liberals work for wealth and profit as do republicans.  If a REAL democrat were elected....all of this could be changed!


The myth of maximizing shareholder value

By Harold Meyerson, Published: February 11

In a well-intentioned op-ed in The Post [“Dialing up the power in people’s phone calls,” op-ed, Feb. 9], Wikipedia founder Jimmy Wales recently extolled his new phone venture, which has pledged to devote a quarter of its profits to “good causes” selected by an independent foundation. Now, I support good causes as much as the next fellow, and I have nothing negative to say about this initiative. I am compelled, however, to note that in delineating the obligations that corporations must meet, Wales made an error at once so common and so fundamental that it screams for correction.

In his discussion of the ways in which increasingly unpopular big businesses defend themselves against their critics, Wales wrote: “They argue, correctly, that the legal requirement of for-profit companies to maximize returns to shareholders limits their behavior.”



I never sought the opportunity to correct Wikipedia’s founder. Nevertheless, facts are facts, and the fact is that there is no legal requirement for for-profit companies to maximize returns to shareholders. When a company is for sale, its directors are required to do all they can to maximize its value. At any other time, corporate law simply dictates that directors are supposed to help the company prosper and do nothing to benefit themselves at the company’s expense. But no law requires corporations to maximize returns to shareholders. Say a company would prosper by hiring more skilled but more costly workers, by building a new factory or outlet, by spending more on research and development — even if such actions reduce returns to shareholders in the next dividend payment. Those actions are entirely legal, not to mention existentially smart.

Don’t believe me, Mr. Wales? Check the Wikipedia entry on “Corporation.” Check the Wikipedia entry on “Corporate law in the United States.” No such law in any of the 50 states even raises the topic of maximizing shareholder returns. A survey by Cornell law professor Lynn Stout couldn’t find a corporate charter that listed as the company’s mission maximizing shareholder value.

The idea that corporations exist to reward their shareholders arose not in a body of law but from the work of ideologically driven economists. In 1970, Milton Friedman wrote that business properly had but one goal: to maximize profits. The same year, Friedman’s University of Chicago colleague Eugene Fama argued that a corporation’s share price was always the accurate reflection of the enterprise’s worth, an idea that trickled down into the belief that the proper goal of a corporation was to boost its share value — particularly after most CEO salaries and bonuses became linked to that value.

Beginning in the 1980s, when General Electric chief executive Jack Welch laid off more than a quarter of GE’s employees while driving its share value higher, American business abandoned its earlier “stakeholder” model — in which it sought to balance the interests of workers, shareholders and the larger community — in favor of the shareholder model, under which investment in promising new ventures and the pay and benefits of employees were sacrificed on the altar of short-term profits and share value. So stocks soar — the share value of the Standard & Poor’s 500 rose 30 percent last year — while wages and investment languish. In the fiscal year ending in June, the same S&P 500, according to the data company Factset, is on track to have raised capital expenditures by a piddling 1.3 percent. Americans’ real disposable income in 2013 increased by a meager 0.7 percent, a figure that includes the income derived from those soaring stocks, which should convey some sense of how dismally wages are faring and how few Americans have significant stock holdings.

Apologists for the 1 percent generally argue that our rising levels of inequality are the consequence of globalization and technological change — forces of nature over which mere people and nations have had no control. They often blame U.S. workers for lacking sufficient training. But they omit from their diagnosis the shift from stakeholder to shareholder capitalism. This is not surprising, as it’s a shift that Wall Street and corporate executives brought about. Indeed, the German economy is every bit as subject to the forces of globalization and technology as ours, but inequality is lower there, and German workers have more security and opportunity than ours, because German capitalism still adheres to the stakeholder model.

If we think, as Wales apparently does, that our own form of capitalism is required by the legal obligations on corporations, we’re sadly misinformed. Shareholder capitalism is sustained not by law but by an institutional edifice of greed. The U.S. economy will not work again for the American people until they tear down that edifice.

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Anyone as nerdish as I am will like this research and analysis of how the same financial scheme brought to us with the subprime mortgage loan fraud with trillions of dollars of fraudulent loans insured with Credit Default Swaps by mainly one large insurance agency.....AIG all the time knowing these loans were toxic and all would collapse.  So, the Dodd Frank financial reform was to address this and of course nothing has been done and these same people are now thinking the subprime mortgage loan fraud was such a success as tens of trillions of dollars in fraud was left with the looters now think......let's do it again.

This time rather than the goal of capturing all of the nation's real estate holdings and consolidating land ownership to a few at the top.....this fraud has as its goal blowing up the public sector by super-sizing municipal debt and imploding the economy to make a crash that would create huge sovereign debt default.  You can do that only if you again use the Credit Default Swap insurance so that as everyone else loses all their wealth, you have this insurance that protects the very people imploding the economy.  None of this is legal as banks deliberately hid sovereign debt and municipal debt with financial instruments so more debt could be taken on.....ergo, the implosion we have in Europe in 2008. 

This is important because the same thing is now happening in the US these few years of Obama's term as US state governors and mayors.....like O'Malley and Rawlings-Blake are doing to you and me what was done in the PIIGS nations in Europe.  Loading up municipal debt while insuring it all with Credit Default Swaps.  You know this is a plan as municipal bonds and public debt have never been allowed to use these CDS and now they are.  So, as governors and mayors load our government coffers with tons of debt tied to Wall Street financial instruments, the investment firms are protecting themselves from loss when the economic crash comes while the public sector.......MECU and the State of Maryland/City of Baltimore will default on their terms and lose most of the investment.

AGAIN, THIS IS ALL PUBLIC MALFEASANCE....IT IS ILLEGAL AND ALL TERMS CAN BE VACATED BECAUSE INVESTMENT FIRMS KNOW THIS IS ALL FRAUDULENT.

This article below is great and it is very long so I could not copy it here.......go to the webpage to see it in its entirety to see how these 1% are working to steal all that is public!


Analysis of European Sovereign Credit Default Swap during theSovereign Debt Crisis in Portugal, Ireland, Italy and Spain.
 byBerkay OrenA dissertation submitted in partial of theMSc Finance and InvestmentAtThe University of BrightonFaculty of Management and Information SciencesBrighton Business School(May 2013)

  Abstract

This thesis has represented the determinants of sovereign CDS spreads during currentsovereign debt crisis in periphery countries namely Ireland, Italy, Portugal and Spain. The period of analysis is between 4 March 2008 and 3 May 2012. After the demise of LehmanBrothers, the sovereign CDS market has attached significant attention and the credit marketshave been issue to an unprecedented re-pricing of credit risk. Moreover, Lehman Brothersdevastated investor confidence and decrease in the availability of credit. Massive assistanceof the banks was heightened public sector deficit. Thus it has led to high level sovereign debt.This means that the risk of default of sovereign became real in periphery countries. Thisthesis has been classified three phases. Firstly an analysis of credit default swaps and their use in the financial World. Secondly development of the European periphery economy on amacro level in Portugal, Ireland, Italy and Spain. Finally the statistical approach of ordinaryleast square is to be analysed. Main purpose of this thesis will identify sovereign creditdefault swaps associated with the current sovereign debt crisis.


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The next economic crash is coming soon and it will be bigger than the one in 2007.....a great depression will follow with lots of winners and losers in the banking industry as the Federal government has no money for bailouts.

Third prominent banker found dead in six days

Trey Garrison January

31, 2014 11:33AM  Bloomberg is reporting this morning that former Federal Reserve economist Mike Dueker was found dead in an apparent suicide near Tacoma, Washington.

Dueker, 50, a chief economist at Russell Investments, had been missing since Jan. 29 and was reportedly having troubles at work.

Normally HousingWire wouldn’t cover deaths in the industry, but what’s strange is that Dueker is the third prominent banker found dead since Sunday.

On Sunday, William Broeksmit, 58, former senior manager for Deutsche Bank, was found hanging in his home, also an apparent suicide.

On Tuesday, Gabriel Magee, 39, vice president at JPMorgan Chase & Co’s (JPM) London headquarters, apparently jumped to his death from a building in the Canary Wharf area.


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PLEASE LOOK BELOW AFTERSHOCK POST FOP NEW POSTS....I WANT TO KEEP THIS FRONT AND CENTER FOR A WHILE!!!



‘Aftershock’ Book Predicts Economic Disaster Amid Controversy

Sunday, 24 Jul 2011 04:40 PM  NewsMax



 

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Robert Wiedemer’s new book, “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown,” quickly is becoming the survival guide for the 21st century. And Newsmax’s eye-opening Aftershock Survival Summit video, with exclusive interviews and prophetic predictions, already has affected millions around the world — but not without ruffling a few feathers.

Initially screened for a private audience, this gripping video exposed harsh economic truths and garnered an overwhelming amount of feedback.

“People were sitting up and taking notice, and they begged us to make the video public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog.

But that wasn’t as simple as it seems. Various online networks repeatedly shut down the controversial video. “People were sending their friends and family to dead links, so we had to create a dedicated home for it,” DeHoog said.

This wasn’t the first time Wiedemer’s predictions hit a nerve. In 2006, he was one of three economists who co-authored a book correctly warning that the real estate boom and Wall Street bull run were about to end. A prediction Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan, were not about to support publicly.

Realizing that the worst was yet to come, Wiedemer and company quickly penned “Aftershock.” However, just before it was publicly released, the publisher yanked the final chapter, deeming it too controversial for newsstand and online outlets such as Amazon.com.

“We got lucky,” DeHoog said. “I happened to read the original version, which contained this ‘unpublished chapter,’ which I think is the most crucial in the entire book. Wiedemer gave Newsmax permission to share this chapter with our readers.”

With daily economic forecasts projecting doom and gloom and no recovery in sight, people need to learn how to survive economic disaster. During the past quarter alone, unemployment skyrocketed to 9 percent. Inflation continues to soar and the U.S. national debt crisis is still on the fence between raising the debt ceiling or massive budget cuts, with no resolution in sight.

During Newsmax’s Aftershock Survival Summit video, Wiedemer discusses the dire consequences of Washington, D.C.’s, bipartisan, multi-decade “borrow-and-spend” agenda. He also explores the inflation nightmare, the impending plunge in home prices, the looming collapse of the stock and bond markets, a possible historic surge in unemployment, and how to survive what life in America will be like in the days of the “Aftershock.”

Despite appearances, Aftershock is not a book with the singular intention of scaring the heck out of people. Although it does provide a harsh outlook for the economic future of America, the true value lies in the wealth of investment tips, analyses, predictions, budget advice, and sound economic guidance that people can act on immediately, offering a ray of recovery hope and an indispensable blueprint for life after shock.

Viewers of Newsmax’s Aftershock Survival Summit video heard detailed advice for handling credit card debt, home and car loans, life insurance, unemployment issues, how to beat inflation, making personal budget cuts and many more recovery tools to survive the economic aftershock. They also took advantage of a special Newsmax offer for a free copy of the new edition of “Aftershock,” which includes the final “unpublished chapter.”

Editor's Note: Over 30 million have watched The Aftershock Survival Summit. You can see the original, uncut version here.
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Know where the rich moved as the 2008 crash happened------INTO GOLD SINCE BOTH STOCKS AND BONDS WILL IMPLODE THIS TIME!!!


Gold: Ready to Move Higher?

January 14th, 2014


Bears Losing Grip on Gold Market

Written by Poly, Zentrader  Global Economic Intersection

This is an excerpt from this week's premium update from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly. Now offering monthly & quarterly subscriptions with 30 day refund. Promo code ZEN saves 10%.



(click to enlarge)



Follow up:

The action in the Gold pits this Friday was definitely positive, even bullish. If Gold were still locked in a bear market downtrend, Friday would have provided a great opportunity for the bears. With price still below the current Cycle's day 4 peak, yet $65 higher than the prior Cycle Low, the setup was ripe for the bears to take control and push Gold back below the 10dma.

Instead, the opposite occurred. On Friday (10 January 2014), we saw a rush of fresh buying which pushed Gold comfortably off the 10dma and up to a new Daily Cycle high. This was the kind of move that we would expect from a 1st Daily Cycle, so it pushes us much further down the path to confirming that a new Investor Cycle is underway. Along with the favorable price action, the oscillators have responded well. The MACD has begun to show separation, and the RSI is approaching short term overbought territory. And, as reported last week, there have never been 6 Daily Cycles in 1 Investor Cycle. The bullish confirmations we're seeing at present serve to bolster the case that Gold is in the 1st DC of a new IC.

Gold is still a few confirmations from a final declaration that this is a 1st Daily Cycle, but the evidence is mounting. For now, we'll treat the first DC scenario as primary. "If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck".



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As corporate NPR and local WYPR pretend they do not know the economy is ready to implode with the same conditions as last time only instead of subprime mortgage fraud in the trillions it will be sovereign and muncipal bond debt that took Europe last crash.  We are over the $600 trillion leverage mark now!

This is why Fischer and Yellen are so important for the global tribunal because they both will use the same system of bailout and coverup that Bernanke and Geithner did in 2007-2008.


Derivatives: The $600 Trillion Time Bomb That's Set to Explode

• By Keith Fitz-Gerald, Chief Investment Strategist, Money Map Report  ·   October 12, 2011  ·
  

Do you want to know the real reason banks aren't lending and the PIIGS have control of the barnyard in Europe?

It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States.

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.

The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS).

Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.

Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.

Think I'm exaggerating?

The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble.

Compounding the problem is the fact that nobody even knows if the $600 trillion figure is accurate, because specialized derivatives vehicles like the credit default swaps that are now roiling Europe remain largely unregulated and unaccounted for.

Tick...Tick...Tick To be fair, the Bank for International Settlements (BIS) estimated the net notional value of uncollateralized derivatives risks is between $2 trillion and $8 trillion, which is still a staggering amount of money and well beyond the billions being talked about in Europe.

Imagine the fallout from a $600 trillion explosion if several banks went down at once. It would eclipse the collapse of Lehman Brothers in no uncertain terms.

A governmental default would panic already anxious investors, causing a run on several major European banks in an effort to recover their deposits. That would, in turn, cause several banks to literally run out of money and declare bankruptcy.

Short-term borrowing costs would skyrocket and liquidity would evaporate. That would cause a ricochet across the Atlantic as the institutions themselves then panic and try to recover their own capital by withdrawing liquidity by any means possible.

And that's why banks are hoarding cash instead of lending it.

The major banks know there is no way they can collateralize the potential daisy chain failure that Greece represents. So they're doing everything they can to stockpile cash and keep their trading under wraps and away from public scrutiny.

What really scares me, though, is that the banks

think this is an acceptable risk because the odds of a default are allegedly smaller than one in 10,000.

But haven't we heard that before?

Although American banks have limited their exposure to Greece, they have loaned hundreds of billions of dollars to European banks and European governments that may not be capable of paying them back.

According to the Bank of International Settlements, U.S. banks have loaned only $60.5 billion to banks in Greece, Ireland, Portugal, Spain and Italy - the countries most at risk of default. But they've lent $275.8 billion to French and German banks.

And undoubtedly bet trillions on the same debt.

There are three key takeaways here:

• There is not enough capital on hand to cover the possible losses associated with the default of a single counterparty - JPMorgan Chase & Co. (NYSE: JPM), BNP Paribas SA (PINK: BNPQY) or the National Bank of Greece (NYSE ADR: NBG) for example - let alone multiple failures.
• That means banks with large derivatives exposure have to risk even more money to generate the incremental returns needed to cover the bets they've already made.
• And the fact that Wall Street believes it has the risks under control practically guarantees that it doesn't.

Seems to me that the world's central bankers and politicians should be less concerned about stimulating "demand" and more concerned about fixing derivatives before this $600 trillion time bomb goes off.
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For those liking to follow the financial fraud this is the next connection of dots in the revolving door of cronyism.  It is important because as more people see how corrupt this system is, the more people will move to revolution.  Fischer is MIT material tied to Summers and Italy's Draghi.  Draghi is now head of the European ECB.  We all know Summers as Clinton's global market king and MIT is of course farm team for Wall Street.  Fischer's connection with the BAnk of Israel coincides with the exact time Wall Street was moving massive amounts of money off-shore and guess where the top off-shore location was according to International Investigative Journalists using WIKILEAKS hacking download of Wall Street banks showing the movement of $35 trillion dollars?????  ISRAEL WAS ONE TO THE TOP LOCATIONS.  Know why Pope Benedict retired suddenly...Draghi's Italy used the Vatican Bank to move money from NYC through the Vatican.  See the crony?  It is all illegal and it is all documented by International Justice groups!!!!



Obama to nominate Stanley Fischer, 2 others to Federal Reserve seats

By Jim Puzzanghera January 10, 2014, 8:35 a.m. Los Angeles Times


WASHINGTON -- President Obama will nominate Stanley Fischer, the former head of the Bank of Israel, to be vice chair of the Federal Reserve, and also tapped two other people for seats on the central bank's Board of Governors, the White House said Friday.

Lael Brainard, who recently stepped down as Treasury undersecretary for international affairs, was chosen to fill one of the vacant seats on the seven-member Fed board.

And Jerome H. Powell, a former Treasury official and investment banker who has served on the Fed board since 2012, will be renominated. Powell was confirmed to an unexpired term that expires on Jan. 31.

PHOTOS: Federal Reserve chairs through the years

"These three distinguished individuals have the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy," Obama said.

The nominations, which had been expected, add to the major changes coming at the Fed as it tries to pull back on its aggressive stimulus efforts without damaging the economic recovery.

Current Vice Chair Janet L. Yellen was confirmed this week to replace Ben S. Bernanke, whose second four-year term as central bank chair expires on Jan. 31. She will lead a different, and potentially more fractious Fed policy-making team.

This month, four new regional Federal Reserve Bank presidents will rotate into the 12 voting positions on the Federal Open Market Committee, or FOMC, which sets monetary policy. All seven Fed governors are voting members.

Friday's disappointing government report showing the economy created just 74,000 net new jobs in December highlighted the difficulties for Fed policymakers. They must decide if the economy is strong enough to continue the reduction started last month in the Fed's bond-buying stimulus program, when most data pointed to an improving labor market.

Fischer, who was governor of the Bank of Israel from 2005-13, is a legendary economist who brings a wealth of experience to the Fed board.

He has worked at the World Bank, the International Monetary Fund and was vice chairman of Citigroup Inc. from 2002-05.

Fischer was the PhD advisor for outgoing Fed Chair Ben S. Bernanke at the Massachusetts Institute of Technology. Fischer also taught European Central Bank President Mario Draghi and former Treasury Secretary Lawrence H. Summers.

If confirmed by the Senate, Fischer would replace Yellen as the Fed's No. 2 official.

"He is widely acknowledged as one of the world’s leading and most experienced economic policy minds and I’m grateful he has agreed to take on this new role and I am confident that he and Janet Yellen will make a great team," Obama said.

Brainard also brings international experience to the Fed. And she helps close a pending gender gap on the central bank's board. Elizabeth Duke stepped down last year and Sarah Bloom Raskin is awaiting confirmation as deputy Treasury secretary.

If Raskin departs as expected, Yellen would be the only woman remaining on the board.

Obama said Brainard's "knowledge of international monetary and economic issues will be an important addition to the Fed."

Powell served as an assistant secretary and under secretary at the Treasury Department under President George H.W. Bush.

Fed governors have 14-year terms but rarely serve all of it. Powell is nominated to a full 14-year term. Fischer would fill a term expiring in 2020 and Brainard one expiring in 2026.

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The two issues in financial reform were banks having enough capital to cover leverage and the Glass Steagall separation of bank's money from its consumers....the Volcker Rule was advanced for this. So, capitalization many thought needed to be 20% as it had historically been 70%. When the financial reform debate was hot we were told we would get 8-10% which was a start, but now we see below they are back where it was before the crash....3%. NOT ONE CHANGE HAS BEEN MADE....NOT ONE BIT OF ACCOUNTABILITY.....AND THIS IS BECAUSE WE HAVE A NEO-LIBERAL PRESIDENT AND CONGRESS.

Debt Rule Faces Dilution as Regulators Heed Bank Warnings

By Jim Brunsden Jan 10, 2014 8:05 AM ET

Lenders are poised to win concessions from central bank chiefs and global regulators over a debt limit they criticized as a blunt instrument that would penalize low-risk activities and curtail lending.

A revised leverage-ratio plan is set to be laxer than a draft published last year by the Basel Committee on Banking Supervision, said a person familiar with the scope of a Jan. 12 meeting of the group’s oversight body at which the measure will be discussed.

Leverage ratios are designed to curb banks’ reliance on debt by setting a minimum standard for how much capital they must hold as a percentage of all assets on their books. A quarter of large global lenders would have failed to meet the draft version of the leverage limit had it been in force at the end of 2012, according to data published by the committee in September.

“I expect considerable change in the rule to defer to applicable national accounting systems,” Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc., said in an e-mail. “If the rule in fact doesn’t do this, it will wreak tremendous havoc in securities financing, repo, and other capital-market activities and send them over to the shadows.”

Photographer: Chris Ratcliffe/Bloomberg Bank of England Governor Mark Carney said, “My personal view, is that a leverage ratio... Read More

Some supervisors have called for greater use of leverage ratios instead of standard Basel capital requirements, which are measured as a ratio of banks’ equity against risk-weighted assets, because banks are inconsistent in the way they calculate these standards.

Asset Size The draft leverage rule published last year would have required banks to hold capital equivalent to at least 3 percent of their assets, without any possibility to take into account the riskiness of their investments. Stefan Ingves, the Basel committee’s chairman, has said that discussions in the group have focused on calibrating how banks should calculate the size of their assets, as opposed to reopening talks on the 3 percent figure.

“In our view, the final leverage rule will be significantly moderated to avoid it becoming a binding constraint on bank lending activity,” research firm Capital Alpha Partners LLC wrote in a note to clients yesterday.

The “most likely adjustments will be to allow for greater netting for derivatives and securities financing transactions,” according to the note. There is also “a good chance” that regulators will scale back rules on how banks must calculate the size of some off balance sheet commitments, it said.

Stated Intentions The Basel committee declined to comment on the leverage ratio talks.

“Overall and in contrast to publicly stated intentions, a binding leverage ratio may actually encourage increased risk-taking by European banks while at the same time forcing them to cut back on low-risk exposures” such as derivatives used to hedge risk, Jan Schildbach, senior economist at Deutsche Bank Research, said in an e-mail. This would potentially hurt “their clients and the European economy as a whole.”

Global regulators have met for almost 40 years in Basel, Switzerland, to negotiate common standards for supervising the banking system.

The Jan. 12 meeting will be of the Group of Governors and Heads of Supervision, or GHOS, which oversees the committee’s work and is comprised of central bank and regulatory chiefs. The GHOS is led by Mario Draghi, the president of the European Central Bank.

Bank Strength Relying on leverage ratios to assess a bank’s strength wouldn’t be sensible as the measure can easily be influenced and is hard to compare between lenders under different reporting standards, Rabobank Groep Chief Financial Officer Bert Bruggink said in an interview this week.

“For banks reporting under European accounting rules, a leverage ratio of 3 percent or 4 percent is very well defendable,” Bruggink said. “Requiring higher numbers, especially if that’s done with reference to U.S. banks, would be wrong and harmful to the economy.”

Main Item The leverage measure is the main item on the agenda for the GHOS talks, according to two other people familiar with the talks. All three asked not to be identified because the discussions are private.

Under the published Basel timetable, banks will be expected to publicly disclose how well they measure up to the standard from 2015, with the rule to become a binding minimum standard in 2018.

Banks such as BNP Paribas SA (BNP), Bank of America Corp. and Citigroup Inc. (C) have called for a rewrite of the draft leverage rule published in June, saying it would adversely affect economic growth and job creation, make it more expensive for governments to sell their debt and give banks incentives to invest in riskier assets.

“The leverage ratio instrument sets the wrong incentives by discriminating against low-risk business, which also accounts for a larger share of European banks’ operations than for U.S. institutions,” Schildbach said. “In addition, in the U.S., a compulsory leverage ratio has been in place for many years already, whereas the Europeans are used to align their business models to a system of risk-weighted capital ratios.”

More Scope Banks have called on the committee to alter the rule by giving lenders more scope to carry out netting, which would allow them to reduce the size of the pool of assets used to calculate the leverage ratio.

Netting is an accounting term describing the process of banks offsetting the value of different assets and liabilities they have taken on with a single counterparty.

Lenders have argued that they should be allowed to net the collateral received on derivatives trades because otherwise the protection they gain wouldn’t be taken into account by the leverage ratio. They have also called for more scope to use netting on securities financing transactions such as repurchase agreements, or repos.

Other requests from banks have included that assets perceived to bear little risk of loss, such as high quality mortgage debt, should be exempted or partially exempted from the leverage ratio calculation.

Playing Field Knowing how the international leverage ratio is defined “is important domestically for a level playing field,” Bank of England Governor Mark Carney told U.K. lawmakers in November, according to a public record of the proceedings.

“My personal view, is that a leverage ratio is an integral part of the capital framework of banks, so it is absolutely necessary,” Carney said.

There is no chance that all high quality assets will be removed from the calculations, Simon Hills, executive director at the British Bankers’ Association, said in a telephone interview.

“The most we can probably hope for on scope is a little movement,” he said. “Our priority is that cash held with central banks should be excluded from the leverage ratio calculations, as well as gilt purchases made as part of central bank monetary policy operations. We think that merits another look.”


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THIS IS A BLOG TO UPDATE ON THE STATE OF THE SUBPRIME MORTGAGE FRAUD YET TO HAVE JUSTICE!!!

AS NEO-LIBERAL ECONOMISTS LIKE REICH AND KRUGMAN SHOUT OUT AGAINST THE WEALTH INEQUITY OF TODAY WITHOUT EVER ACKNOWLEDGING THAT IT ISN'T INEQUITY-----IT WAS A VISIGOTH LOOTING OF THE AMERICAN SOCIETY BY MASSIVE CORPORATE FRAUD------WE SAY, A GOVERNMENT THAT SUSPENDS RULE OF LAW SUSPENDS STATUTES OF LIMITATION!

I see in Baltimore all these middle-class homeowners that were able to keep their homes in hard times and I am shouting----financial analysts are warning to get rid of houses as this coming economic crash will bring a depression so you may be next! Gentrification will go up the income scale!

I spoke last time about how Obama and neo-liberals played this entire crisis like a playbook written by Wall Street. We saw how these main street bailouts were deliberately written so that only the affluent homeowners would access help and the FHA, a vital agency with a long service to families was targeted to be shut out. Neo-liberals are working just as hard as republicans to end all War on Poverty and New Deal programs and fair housing goes!!!! So, the middle-class holding on to jobs and their homes now had better buckle-up because financial analysts are calling for people owning homes to get rid of them as the next, more powerful economic collapse comes soon......

THIS IS OBAMA'S LEGACY AND ALL OF MARYLAND'S DEMOCRATS ARE NEO-LIBERALS AND ALL EQUALLY RESPONSIBLE.

SHAME AND DISGRACE FOR MARYLAND NEO-LIBERALS WATCHING SILENTLY AS THIS UNFOLDED.

What could we do, they say? When 50 states attorney general shout out in 2005 that the mortgage industry is systemically criminal--------

YOU SHOUT OUT TO MARYLAND CITIZENS NOT TO GET INVOLVED IN THESE LOANS. THEN, YOU SHOUT OUT OVER AND OVER THAT JUSTICE HAS NOT OCCURRED!

That is what a democrat would do!

Below you see the housing program that Obama and neo-liberals pretended was the bailout of main street and help in curbing foreclosures. It was a ruse of course as they fumbled the roll-out long enough for most people that could have gotten help went under trying to get it! Mind you....some people were helped. The percentage I see over and again is 10% of foreclosures were saved.

I sit and watch the same banks and mortgage corporations that created the massive subprime mortgage fraud now connected with HARP, earning more money from fees attached to yet another mortgage refinance. From Quickens Loans to Wells Fargo and Bank of America.....they are earning billions on HARP.

HARP Program Requirements In order to participate in HARP you need to meet the following requirements:

Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac
You must be current on your mortgage, and cannot have made a payment more than 30 days late in the past year.
You must have negative home equity (you owe more on your mortgage than your home is worth), but your mortgage cannot exceed 125% of the value of your home.
Refinancing must help the affordability or stability of your mortgage.
You must have the ability to continue making payments
Mortgage owned or guaranteed by the FHA, VA, or USDA are not eligible for HARP.
Your property must be 1-4 units.
Your property must also be your primary residence. 2nd homes are not eligible for refinancing under HARP.

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As you see, HARP deliberately excludes FHA and the other government mortgages from this 'stimulus' and these loans are for those needing the help the most. See why tens of millions of people went into foreclosure? They were the ones most affected by the massive frauds and simple Rule of Law would have kept those homes with those families.

The reason Obama and neo-liberals in Congress chose Freddie and Fannie for this stimulus is that these loans were private mortgages and they wanted bank mortgages to be stabilized with the higher end prices and they are trying to end FHA and low-income homeownership. Neo-liberals work with republicans to end all War on Poverty and New Deal programs!

Obama and neo-liberals called these homeowners 'responsible' because they were able to weather years of recession.

Remember, they wanted everyone out of property ownership and into rentals because Pottersville landlords can keep people poor with high rents and control where they live! Neo-liberals are socially engineering this return to Medieval society with the serfs outside the castle gates....into what is suburbia. What about equal housing and access? THE BILL OF RIGHTS GOES WITH TPP YOU KNOW! In Maryland, the ACLU is actually helping with this even as it is unconstitutional.

The FHA was a successful program for decades causing very little cost for taxpayers. So, the only reason to get rid of it is that it took away profit for banks wanting the mortgage business.

Fannie Mae and Freddie Mac purchase mortgages from financial institutions, providing a way for those financial institutions to have more cash to continue to lend money for additional mortgages. Congress enacted a statutory mission for these GSEs to bring "liquidity, stability and affordability to the U.S. housing and mortgage markets."

FHA mortgages were created by the United States government to give borrowers with low credit scores and down payments who could not qualify for a Freddie Mac mortgage the opportunity to buy a home.

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When Obama chose to suspend Rule of Law and allow all this mortgage fraud go without justice it was the old, women, and children who were hit the hardest. Seniors taking home equity loans thinking they would be able to address them over time did not know massive corporate fraud was being allowed to go unabated. These were the 'irresponsible' homeowners Obama and neo-liberals allowed to be taken under.

Now, Wall Street wanted all real estate back into the hands of the banks so if you watch TV you are familiar with the REVERSE MORTGAGE DEALS THAT HAND HOMES TO THE BANKS AFTER SENIORS DIE. This is handy for families with seniors struggling to survive, but it was yet another device to move homeownership away from average people as these families who would normally have inherited these homes now had no inheritance. Meanwhile, the estate taxes are being eliminated slowly but surely for the wealthy.

THE FIRST THING A DEMOCRATIC SOCIETY DOES IS PROTECT THE OLD AND YOUNG....NOT NEO-LIBERALS!

THIS WAS MASSIVE FRAUD AND THE ECONOMY WAS DAMAGED BY THIS FRAUD. ALL OF THE AID BY CONGRESS SHOULD HAVE COME TO MAIN STREET. RULE OF LAW DEMANDS IT SO------WHEN GOVERNMENT SUSPENDS RULE OF LAW THEY SUSPEND STATUTES OF LIMITATIONS!

Senior Citizens Worst Hit By Foreclosures in America
Filed Under Repo Homes

It is the senior citizens that have been worst hit by the foreclosure crisis in America. About 28% of those boiling in the foreclosure cauldron are aged above 50. A recent study by AARP has questioned the validity of the hitherto popular surmise that the seniors have escaped the crisis because of they had built up sufficient equity on their houses.

The research done by AARP show that 684,000 persons aged 50 are in foreclosure during the last six months of 2007. Those who were above 50 comprised of 28% of all those who were in the foreclosure soup. Of these 684,000 senior borrowers, 50,000 were in foreclosures and lost their houses.

At the close of 2007 the rate among senior citizens of America who were in foreclosure was 0.24%. This was half of those who were aged less than 50 and have less equity than their elders.

Susan Reinhard of Public Policy Institute said that the seniors of America are dependent on their houses both as a shelter and an asset when retirement knocks. She said, “Losing a home jeopardizes long-term financial security with limited time to recover.”

The report also highlights the effects of the sub-prime mortgage crisis on those who were aged 50 and above. This group was 17 times more likely to be caught by foreclosure than those with prime mortgages. The states with high repo home rates among the seniors are California, Nevada, Colorado and Michigan.

Older Americans had made use of the equity on their houses for making repairs to their property and financing the higher education of their children. But seniors with fixed income are facing problems making mortgage payments. The sluggish economy with inflation is making the going even tougher for those with advancing age. Fall in the real estate market has affected all age groups.

Daniel Alpert of Westwood Capital that both young and old who had siphoned off the equity on their houses are now rocking on the same boat of foreclosure Many seniors like the juniors contracted teaser loans thanks to the aggressive peddling of the same by agents. The mortgage forms were also difficult to comprehend. The call of the hour is simplified mortgages. So it was a question of sales talk and trust that were misused for disastrous consequences for all – the lender, the borrower and the community together with the hapless individual whether young or old.

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Below you see an article from Fall 2011 talking about how very few on main street were able to access HARP from the time it rolled out with the bank bailout. This was supposedly main street's bailout but between the long-term unemployment creating the environment of missed payments and the banks constantly 'losing paperwork' that basically caused most people applying to fail to be considered.

ALL OF THIS WAS DELIBERATE AS THIS ENTIRE MORTGAGE FRAUD WAS ABOUT GETTING MAIN STREET OUT OF THEIR HOMES SO THE GOAL WAS TO GET AS MANY HOMEOWNERS AS POSSIBLE INTO FORECLOSURE.

Here in Maryland advocates for people heading to foreclosure shouted even into 2012 that the money intended to augment people heading to foreclosure from the $25 billion mortgage fraud settlement was not getting to people. So, just think, people who we all know were struggling from the economic downturn were left from 2009-2012 mostly unable to get the help they needed with this HARP policy.

Flash forward to 2013 and we see Obama shouting that those funds set aside for HARP be used. By now, most people of average means have lost their homes to foreclosure.

The Home Affordable Refinance Program (HARP): What you need to know

By Hayley Tsukayama, Published: October 24, 2011

On Monday, the federal government announced that it would revise the Home Affordable Refinance Program (HARP), implementing changes that The Washington Post’s Zachary A. Goldfarb reported would “allow many more struggling borrowers to refinance their mortgages at today’s ultra-low rates, reducing monthly payments for some homeowners and potentially providing a modest boost to the economy.”

The HARP program, which was rolled out in 2009, is designed to help. Those who are “underwater” on their homes and owe more than the homes are worth. So far, The Post reported, it has reached less than one-tenth of the 5 million borrowers it was designed to help. Here’s a quick breakdown of what you need to know about the changes.

Video

Oct. 24 (Bloomberg) -- Edward J. DeMarco, acting director of the Federal Housing Finance Agency, talks about the regulator's mortgage relief program that will expand to allow homeowners to refinance regardless of how much their houses have dropped in value.

Gallery

Flashback: Last year, some mortgage lenders and government officials took action after discovering that many mortgage documents were mishandled.

What was announced? The enhancements will allow some homeowners who are not currently eligible to refinance to do so under HARP. The changes cut fees for borrowers who want to refinance into short-term mortgages and some other borrowers. They also eliminate a cap that prevented “underwater” borrowers who owe more than 125 percent of what their property is worth from accessing the program.

Am I eligible? To be eligible, you must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, sold to those agencies on or before May 31, 2009. The current loan-to-value ratio on the mortgage must be greater than 80 percent. Having a mortgage that was previously refinanced under the program disqualifies you from the program. Borrowers cannot not have missed any mortgage payments in the past six months and cannot have had more than one missed payment in the past 12 months.

How do I take advantage of HARP? According to the Federal Housing Finance Agency, the first step borrowers should take is to see whether their mortgages are owned by Fannie Mae or Freddie Mac. If so, borrowers should contact lenders that offer HARP refinances.

When do the changes go into effect? The FHFA is expected to publish final changes in November. According to a fact sheet on the program, the timing will vary by lender.

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I speak quite often about the targeted families in urban centers because of what is happening in Baltimore. The black middle-class was hit hardest as their wealth was often tied to these urban areas hit with mortgage fraud and as we know the US Justice Department has failed to give any justice to people of color in these urban centers. City Hall is not only allowing the subprime loan fraud go without justice......I have spoken about how City Hall is actually preying on these citizens with home seizures from faulty utility bills or small amounts of back taxes.

THIS IS NOT A DONE DEAL AS ALL OF THIS HAS YET TO SEE JUSTICE AND RULE OF LAW WILL HAVE LOW-INCOME HOUSING FOR VICTIMS OF FRAUD IN THE CITY CENTER!

The Great Eviction: Black America and the Toll of the Foreclosure Crisis From predatory loans to evictions at gunpoint, neighborhoods are hosting bitter conflicts between activists and market forces—By Laura Gottesdiener

| Thu Aug. 1, 2013 1:04 PM

We cautiously ascend the staircase, the pitch black of the boarded-up house pierced only by my companion's tiny circle of light. At the top of the landing, the flashlight beam dances in a corner as Quafin, who offered only her first name, points out the furnace. She is giddy; this house—unlike most of the other bank-owned buildings on the block—isn't completely uninhabitable.

It had been vacated, sealed, and winterized in June 2010, according to a notice on the wall posted by BAC Field Services Corporation, a division of Bank of America. It warned: "entry by unauthorized persons is strictly prohibited." But Bank of America has clearly forgotten about the house and its requirement to provide the "maintenance and security" that would ensure the property could soon be reoccupied. The basement door is ajar, the plumbing has been torn out of the walls, and the carpet is stained with water. The last family to live here bought the home for $175,000 in 2002; eight years later, the bank claimed an improbable $286,100 in past-due balances and repossessed it.

It's May 2012 and we're in Woodlawn, a largely African American neighborhood on the South Side of Chicago. The crew Quafin is a part of dubbed themselves the HIT Squad, short for Housing Identification and Target. Their goal is to map blighted, bank-owned homes with overdue property taxes and neighbors angry enough about the destruction of their neighborhood to consider supporting a plan to repossess on the repossessors.

"Anything I can do," one woman tells the group after being briefed on its plan to rehab bank-owned homes and move in families without houses. She points across the street to a sagging, boarded-up place adorned with a worn banner—"Grandma's House Child Care: Register Now!"—and a disconnected number. There are 20 banked-owned homes like it in a five-block radius. Records showed that at least five of them were years past due on their property taxes.

Where exterior walls once were, some houses sport charred holes from fires lit by people trying to stay warm. In 2011, two Chicago firefighters died trying to extinguish such a fire at a vacant foreclosed building. Now, houses across the South Side are pockmarked with red Xs, indicating places the fire department believes to be structurally unsound. In other states--Wisconsin, Minnesota, and New York, to name recent examples—foreclosed houses have taken to exploding after bank contractors forgot to turn off the gas.

Most of the occupied homes in the neighborhood we're visiting display small signs: "Don't shoot," they read in lettering superimposed on a child's face, "I want to grow up." On the bank-owned houses, such signs have been replaced by heavy-duty steel window guards. ("We work with all types of servicers, receivers, property management, and bank asset managers, enabling you to quickly and easily secure your building so you can move on," boasts Door and Window Guard Systems, a leading company in the burgeoning "building security industry.")

The dangerous houses are the ones left unsecured, littered with trash and empty Cobra vodka bottles. We approach one that reeks of rancid tuna fish and attempt to push open the basement door, held closed only by a flimsy wire. The next-door neighbor, returning home, asks: "Did you know they killed someone in that backyard just this morning?"

The Equivalent of the Population of Michigan Foreclosed
Since 2007, the foreclosure crisis has displaced at least 10 million people from more than four million homes across the country. Families have been evicted from colonials and bungalows, A-frames and two-family brownstones, trailers and ranches, apartment buildings and the prefabricated cookie-cutters that sprang up after World War II. The displaced are young and old, rich and poor, and of every race, ethnicity, and religion. They add up to approximately the entire population of Michigan.

However, African American neighborhoods were targeted more aggressively than others for the sort of predatory loans that led to mass evictions after the economic meltdown of 2007-2008. At the height of the rapacious lending boom, nearly 50% of all loans given to African American families were deemed "subprime." The New York Times described these contracts as "a financial time-bomb."

Over the last year and a half, I traveled through many of these neighborhoods, reporting on the grassroots movements of resistance to foreclosure and displacement that have been springing up in the wake of the explosion. These community efforts have proven creative, inspiring, and often effective—but in too many cities and towns, the landscape that forms the backdrop to such a movement of hope is one of almost overwhelming destruction. Lots filled with "Cheap Bank-Owned!" trailers line highways. Cities hire contractors dubbed "Blackwater Bailiffs" to keep pace with the dizzying eviction rate.

In recent years, the foreclosure crisis has been turning many African American communities into conflict zones, torn between a market hell-bent on commodifying life itself and communities organizing to protect their neighborhoods. The more I ventured into such areas, the more I came to realize that the clash of values going on isn't just theoretical or metaphorical.

"Internal displacement causes conflict," explained J.R. Fleming, the chairman of the Chicago Anti-Eviction Campaign. "And there's no other country in the world that would force so much internal displacement and pretend that it's something else."

Evictions at Gunpoint
It was three in the morning when at least a dozen police cruisers pulled up to the single-story, green-shuttered house in the African American Atlanta suburb where Christine Frazer and her family lived. The precise number of sheriffs and deputies who arrived is disputed; the local radio station reported 25, while Frazer recalled seeing between 40 and 50.

A locksmith drilled off the home's locks and dozens of officers burst into the house with flashlights and handguns.

"Who's in the house?" they shouted. Aside from Frazer, a widow with a vocal devotion to the Man Above, there were three other residents: her 85-year-old mother, her adult daughter, and her four-year-old grandson. Things began to happen fast. Animal control rounded up the pets. Officers told the women to get dressed. Could she take a shower? Frazer asked. Imagine there's a fire in your house, the officer replied.

"They came to my home like I was a drug dealer," she told reporters later. Over the next seven hours, the officers hauled out the entire contents of her home and cordoned off the street to prevent friends from helping her retrieve her things.

"I have no idea where some of my jewelry is, stuff I bought when I was 30 years old," said Frazer. "I am sixty-three. They just threw everything everywhere, helter-skelter on the front lawn in the dark."

The eviction-turned-raid sparked controversy across Atlanta when it occurred in the spring of 2012, in part because Frazer had a motion pending in federal court that should have stayed the eviction, and in part because she was an active participant of Occupy Homes Atlanta. But this type of militarized reaction is often the outcome when communities—especially those of color—organize to resist eviction.

When Nicole Shelton attempted to move back into her repossessed home in a picket-fence subdivision in North Carolina, the Raleigh police department sent in more than a dozen police officers and an eight-person SWAT team. Officers were equipped with M5 submachine guns. A helicopter roared overhead. In Boston, one organizer with the community group City Life/Vida Urbana remembers the police acting so aggressively at an eviction blockade in a Haitian neighborhood that the grandmother of the family had a heart attack right in the driveway.

And sometimes it doesn't require resistance at all. On the South Side of Chicago, explained Toussaint Losier, a community organizer completing his Ph.D. at the University of Chicago, "They bust in the door, and it's at the point of a gun that you get evicted."

Exiles in America
There have been widespread foreclosures—and some organized resistance—in predominately white communities, too. Kevin Kirkman, captain of the civil division of the Lee County sheriff's office, explained, "I get so many [eviction] papers in here, it's unbelievable."

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More than 75% of the residents in North Carolina's Lee County are whites. But Kirkman still sees the ripple effects of mass foreclosure here. "You're talking about a mudslide where a lot of things are affected. You're talking about taxes, about retail sales if people move, about food services, about gasoline. You see what I'm talking about? When you lose a family in the community? Some people leave the community. I have seen people leave the state of North Carolina."

He added, "I'm going be honest with you, my feeling is that I would not do these evictions."

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I wanted to end with this main stream shout out that the subprime mortgage loan fraud is recognized by all and the amount of these frauds are in the trillions of dollars and as of now we have gotten maybe a trillion in subprime loan settlement and most of that has been sent right back to banks as developers......WE ALL KNOW THIS!

Op-Ed Columnist The Mortgage Fraud Fraud

By JOE NOCERA Published: June 1, 2012

I got an e-mail the other day from Richard Engle telling me that his son Charlie would be getting out of prison this month. I was happy to hear it.

Charlie’s ordeal isn’t over yet, of course. When he leaves prison on June 20, Charlie, 49, will move temporarily to a halfway house, after which he will be on probation for another five years. And unless he can get the verdict overturned, he will have to spend the rest of his life with a felony on his record.

Perhaps you remember Charlie Engle. I wrote about him not long after he entered a minimum-security facility in Beaver, W.Va., 16 months ago. He’s the poor guy who went to jail for lying on a liar loan during the housing bubble.

There were two things about Charlie’s prosecution that really bothered me. First, he’d clearly been targeted by an agent of the Internal Revenue Service who seemed offended that Charlie was an ultramarathoner without a steady day job. The I.R.S. conducted “Dumpster dives” into his garbage and put a wire on a female undercover agent hoping to find some dirt on him. Unable to unearth any wrongdoing on his tax returns, the I.R.S. discovered he had taken out several subprime mortgages that didn’t require income verification. His income on one of them was wildly inflated. They don’t call them liar loans for nothing.

Charlie has always insisted that he never filled out the loan document — his mortgage broker did it, and he was actually a victim of mortgage fraud. (The broker later pleaded guilty to another mortgage fraud.) Indeed, according to a recent court filing by Charlie’s lawyer, the government failed to turn over exculpatory evidence that could have helped Charlie prove his innocence. For whatever inexplicable reason, prosecutors really wanted to nail Charlie Engle. And they did.

Second, though, it seemed incredible to me that with all the fraud that took place during the housing bubble, the Justice Department was focusing not on the banks that had issued the fraudulent loans, but rather on those who had taken out the loans, which invariably went sour when housing prices fell.

As I would later learn, Charlie Engle was no aberration. The current meme — argued most recently by Charles Ferguson, in his new book “Predator Nation” — is that not a single top executive at any of the firms that nearly brought down the financial system has spent so much as a day in jail. And that is true enough.

But what is also true, and which is every bit as corrosive to our belief in the rule of law, is that the Justice Department has instead taken after the smallest of small fry — and then trumpeted those prosecutions as proof of how tough it is on mortgage fraud. It is a shameful way for the government to act.

“These people thought they were pursuing the American dream,” says Mark Pennington, a lawyer in Des Moines who regularly defends home buyers being prosecuted by the local United States attorney. “Right here in Des Moines,” he said, “there was a big subprime outfit, Wells Fargo Financial. No one there has been prosecuted. They are only going after people who lost their homes after the bubble burst. It’s a scandal.”

The Justice Department has had a tough run recently. Last week, Eric Schneiderman, the New York attorney general — who was recently given a role by President Obama to investigate the mortgage-backed securities issued during the bubble — complained publicly that he wasn’t getting the resources he needed from the Justice Department. And, of course, on Thursday, a federal judge declared a mistrial on five charges of campaign finance fraud and conspiracy in the trial of the former presidential candidate John Edwards.

In the Edwards case, the Justice Department spent tens of millions of dollars, and trotted out novel legal theories, to prosecute a man who was essentially trying to keep people from discovering that he had had a mistress and an out-of-wedlock child. Salacious though it was, the case has zero public import. Yet this same Justice Department isn’t willing to use similar resources — and perhaps even trot out some novel legal theories — to go after the pervasive corporate wrongdoing that gave us the financial crisis and the Great Recession. (I should note that the Justice Department claims that it “will not hesitate” to prosecute any “institution where there is evidence of a crime.”)

Think back to the last time the federal government went after corporate crooks. It was after the Internet bubble. Jeffrey Skilling and Kenneth Lay of Enron were prosecuted and found guilty. Bernard Ebbers, the former chief executive of WorldCom, went to jail. Dennis Kozlowski of Tyco was prosecuted and given a lengthy prison sentence. Now recall which Justice Department prosecuted those men.

Amazing, isn’t it? George W. Bush has turned out to be tougher on corporate crooks than Barack Obama.

THIS IS A BLOG TO UPDATE ON THE STATE OF THE SUBPRIME MORTGAGE FRAUD YET TO HAVE JUSTICE!!!
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Dodd-Frank and Another Bank Meltdown
Posted on 31 December 2013 by Elliott Morss Dodd-Frank (w/Volcker Rule) Is Being Implemented:  So Are We Safe From Another Bank Meltdown?

by Elliott Morss, Morss Global Finance

Background

In 1933, Congress passed the Glass-Steagall Act. It established the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits. It also required banks to get rid of their trading activities: buying and selling stocks was considered too dangerous for depository institutions.




In 1999, Sandy Weil, supported by a coterie of other bankers and lobbyists, got the US Congress to repeal Glass-Steagall: that Act had kept depository institutions safe since the ’30s. With restrictions removed, US banks purchased, packaged and traded mortgages and their derivatives. And in late-2008, the market for these financial packages disappeared resulting in the US banking collapse and the largest global recession since 1929. And European bank purchases and packaging of Greek and other sovereign debt caused another global meltdown.

Nobody wanted a repeat, so the Dodd-Frank was passed in 2010. The 1,000+ page act was supposed to protect the banking industry from another collapse. But in key areas, the legislation was not specific. It was left to Congressional staff, the Financial Stability Oversight Council, and lobbyists to fill in the critical details. So what do we know about the Oversight Council?

The Financial Stability Oversight Council

So who is on this Financial Stability Oversight Council? It is be chaired by the Secretary of the Treasury with the Chairman of the Fed, the Comptroller of the Currency, the Director of the Bureau of Consumer Financial Protection Bureau, the Chairman of the Securities and Exchange Commission, the Chairperson of the Federal Deposit Insurance Corporation, the Chairperson of the Commodity Futures Trading Commission, the Director of the Federal Housing Finance Agency, the Chairman of the National Credit Union Administration Board, and an independent member appointed by the President by and with the advice and consent of the Senate (S. Roy Woodall, Jr., a Washington “insider”. In short, this is a group of politically-driven bureaucrats. They have nice offices at 1500 Pennsylvania Avenue, NW. They are “hard at work”. They just published their 2013 Annual Report. It is 195 pages long.

So what is really happening in Washington? Just after the Dodd-Frank was enacted, I wrote a piece quoting from an article by Binyamin Appelbaum in the New York Times on what will happen next:

“…Brett P. Barragate, a partner in the financial institutions practice at the law firm Jones Day, estimated that Congress had fixed in place no more than 25 percent of the details of that vast expansion….Interest groups have been preparing for months. When the Consumer Bankers Association convened its annual meeting in early June, there was still plenty of time to lobby Congress. But the group’s president, Richard Hunt, told his board that the group should shift its focus to the rule-making process. The board voted to increase the group’s budget and staff. ‘Now we hope to have a good give and take with the regulators on the best interests of the consumer and the industry,’ said Mr. Hunt. One clear consequence is a surge in the demand for lawyers with expertise in financial regulation….Most of the major trade groups are hiring lawyers. The major banks say they are employing more, too.”

Dodd-Frank and the Volker Rule

Former Treasury Secretary Paul Volker does not believe banks should be allowed to trade for their own account – too risky. And a version of his rule is included in Dodd-Frank: Title VI, Sec. 619, (a)(1) reads:

“Unless otherwise provided in this section, a banking entity shall not- (A) engage in proprietary trading; or (B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund….in no case may the aggregate of all of the interests of the banking entity in all such funds exceed 3 percent of the Tier 1 capital of the banking entity.”

But work remained to be done on just what that meant. Lobbying is one reason it took regulators more than two years to come out with a final version of the Volker Rule after they released an initial proposal in 2011. And a third of the hundred of rules mandated by Dodd-Frank remain to be written.

In early December, it appeared that work on the Volker Rule had been completed. I quote from an upbeat Bloomberg news article:

“With the release of the Volcker rule, the Dodd-Frank Act’s regulatory overhaul is largely complete, giving banks a new degree of certainty about the limits of their business in the wake of the 2008 credit crisis. The rule, issued yesterday by five U.S. agencies, bars banks from speculating with their own money.”

This sounds pretty good, BUT….

What the Dodd-Frank Rule Says and Missed

The Legislation is quite clear: “a banking entity shall not- (A) engage in proprietary trading; or (B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund….” Read on.

1. The Hedge Loophole

Reports indicate that the rule will allow hedging if not for speculative purposes! Amazing! As the Speaker of the House of Representatives said recently on another subject: “Are you kidding me?” But that is not all.

Reports also indicate that banks will be allowed to trade! The following was widely reported in news stories. This quote comes from the Bloomberg story referenced above: “In the rule adopted yesterday, regulators granted a broader exemption for banks’ market-making desks, on the condition that traders aren’t paid in a way that rewards proprietary trading.” A market making desk has no other role but to find and make trades. So you allow more trading but do it in a way that staff working those desks are rewarded for not making trades? Okay? Fine?

2. Sales Commissions Not Eliminated

In earlier articles on this subject, I have made a more basic point. In earlier times, banks made money by getting paid more from lenders than they had to pay to attract deposits. In bankers’ parlance, they made money on the spread (the interest rate on loans minus the interest rate paid depositors). Banks knew their survival depended on a positive “spread”, so they were very careful to make low risk loans. And after making them, they stayed in touch and worked with the borrowers to insure interest payments were kept up to date.

Everything changed when banks started selling off their loans. Instead of lending to low risk individuals and firms and worrying about how their borrowers were doing, banks focused on generating commissions by selling off their mortgages and other loans. This constituted a fundamental change in incentive structures – from worrying about the soundness of their loans to writing as many loans as they possibly could for commissions.

Think about it: when loans are sold off, repackaged, and sold off again, nobody knows (or cares unless payments stop) who the borrower is. As long as banks are allowed to sell off their loans for commissions, concern about the quality of loans they make will take second fiddle to earning commissions. This is not healthy for either the banks or the economy. That is why I believe banks should not be allowed to sell off any of the loans they make. Let them hold them to maturity. Let bank survival depend on the quality of the loans they make.

Think about the real estate bubble leading to the global collapse. Would banks have written the all bad mortgages if they had been required to hold them to maturity? Of course not.

3. Bank Regulators Can Deal With the Situation

Dodd-Frank is replete with terms such as “transparency” and “more information for regulators”. I quote again from the Bloomberg piece: “Accounting has become more transparent. Regulators have much better information about the prices realized on completed swap trades, and large hedge funds now report previously secret financial information to regulators.”

This is supposed to make us feel good. Unfortunately, it is based on the faulty underlying premise that getting more information to regulators will help. It is faulty because:

• Regulators are already overwhelmed with information they do not understand and
• The Basel Accords (global bank regulations) failed to prevent the US and European bank collapses.

As I have reported, the Basel Accords were interpreted to allow banks to treat government debt (like Greek government debt) as safe as money in calculating their allowable capital ratios – in retrospect, a horrible mistake. And before we get too relaxed over providing more information to banks, I urge you to take a look at what they already have: go to the Fed’s database on banks and click on any bank, then click on create report and you will get a 27 pages of quantitative data. I repeat: the regulators are already overwhelmed with data.

What Big Bankers Think

Joe Nocera, one of the most astute US financial journalist, made two interesting points in his recent review of “The Wolf of Wall Street:

• Scorsese did the right thing in the movie; he used it to portray the greed of an individual; trying to portray the greed of a banking institution such as Goldman is too complex;
• Big bankers are essentially salesmen: “The brokers (or traders in the case of Goldman) are, at bottom, salesmen. As the saying goes, ‘Stocks are sold, not bought.’ What is mesmerizing about Mr. Belfort (played in the film by Mr. DiCaprio) is that he is an extreme example of the smooth-talking, I-can-sell-anything, salesman. And he’s hardly the first such type in finance. In the early 1960s, a man named Bernard Cornfeld used to draw people into his financial empire by asking, “Do you sincerely want to be rich?” And they say Charles Ponzi was a pretty good salesman, too. What does Goldman Sachs do if not sell? It’s just a different product.

So bankers have become salesmen.

A good friend is a senior executives at one of our biggest banks. I asked him about Dodd-Frank and related matters. He said:

“In our view, not much has changed. Big banks like ours sell financial products. That’s mostly what we do. All of us have divisions scouring the landscape for some new product we can package and sell. Will we get caught short every so often and lose $6 billion like JP Morgan recently did? Of course, if you take risks you will lose money every so often. But keep in mind JPM’s loss is not all that big [Elliott: JPM's 2012 net income was $21 billion].”

I asked him about the new regulations.

“The new regs? We will take risks as long as we can. We have large teams of lawyers and financial geeks working to insure we are in compliance. We also have DC lobbyists. Our sales commissions pay for them.”

Banking Futures

What will start the next big banking collapse occur? Table 1 provides data on the world’s largest banks as measured by total assets. It is notable that only three are American.

Table 1. – The World’s Largest Banks



Source: relbanks.com

Investment Implications

For the immediate future, we can expect more huge fines will be levied on US banks and there will be the odd mammoth loss such as the one JP Morgan (JPM) just experienced. But except for these problems, times should be good for the big banks. Table 2 lists the 5 largest US banks as measured by deposits.

Table 2. – Largest US Banks





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As this article shows Obama hails from a university known for deregulation and that is what we will see as his term ends. All those years writing the financial reform bill and almost none of it is enacted and that which does get placed into law is so watered down as to be useless. Obama's replacements for his second term are more anti-bank regulation than Geithner and Summers if that's possible.

So, we can only work to replace neo-liberals in Congress -----especially in the HOUSE----to hold a neo-liberal Senate in control and ELECT A SOCIALIST LIKE SANDERS TO PRESIDENCY!


John Cochrane: Less Regulation for Financial System

January 2nd, 2014 Global Economic Intersection


from the Federal Reserve Bank of Richmond - Econ Focus Third Quarter 2013

There are many similarities between physics and economics. Both fields explore movement of objects. In one case, and economic variables in the other and they use many of the same mathematical tools and techniques. It is not uncommon for economists to follow theoretical physics as a hobby.

Follow up:

Economist John Cochrane takes his interest in physics up a level — or, more accurately, several levels: He flies unpowered planes, known as gliders, competitively. Many people would find that hobby less daunting than another way Cochrane spends his nonresearch time: discussing reforms to the financial system, the tax code, and health care in newspaper and magazine articles and on his blog, The Grumpy Economist.

Cochrane is known for arguing against the popular view that more regulation is needed to fix the financial system; typically, he says, regulation ends up encouraging risk taking. He has also studied the fiscal theory of the price level, the some what controversial view that large fiscal deficits can overpower the central bank’s attempts to control inflation. His wide-ranging work has made Cochrane a key voice in the public policy debates of the last several years.

Cochrane joined the faculty of the University of Chicago’s economics department in early 1985, and moved to its Booth School of Business in 1994. He is also a Senior Fellow at the Hoover Institution, and is the author of Asset Pricing, one of the most commonly used graduate textbooks for finance. Aaron Steelman interviewed Cochrane at his office in Chicago in late August 2013. Renee Haltom and Lisa Kenney contributed to the interview.


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The top two issues for progressives is reinstating Rule of Law and ending financial domination with PUBLIC BANKS!  Do you hear your candidates shouting out on these two issues?  If not, they are neo-liberals working for wealth and profit!

RUN AND VOTER FOR LABOR AND JUSTICE!

Why the Progressive Majority Needs a Common Front vs. Finance Capital, War and the Far Right  

By Chris Hedges
Beaver County Blue via Common Dreams    Dec 20, 2013 – Money, as Karl Marx lamented, plays the largest part in determining the course of history. Once speculators are able to concentrate wealth into their hands they have, throughout history, emasculated government, turned the press into lap dogs and courtiers, corrupted the courts and hollowed out public institutions, including universities, to justify their looting and greed.

Today’s speculators have created grotesque financial mechanisms, from usurious interest rates on loans to legalized accounting fraud, to plunge the masses into crippling forms of debt peonage. They steal staggering sums of public funds, such as the $85 billion of mortgage-backed securities and bonds, many of them toxic, that they unload each month on the Federal Reserve in return for cash. And when the public attempts to finance public-works projects they extract billions of dollars through wildly inflated interest rates.

Speculators at megabanks or investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the vulnerable from the powerful—to steal from everyone, including their shareholders. They are parasites. They feed off the carcass of industrial capitalism. They produce nothing. They make nothing. They just manipulate money. Speculation in the 17th century was a crime. Speculators were hanged.

We can wrest back control of our economy, and finally our political system, from corporate speculators only by building local movements that decentralize economic power through the creation of hundreds of publicly owned state, county and city banks.



The establishment of city, regional and state banks, such as the state public bank in North Dakota, permits localities to invest money in community projects rather than hand it to speculators. It keeps property and sales taxes, along with payrolls for public employees and pension funds, from lining the pockets of speculators such as Jamie Dimon and Lloyd Blankfein. Money, instead of engorging the bank accounts of the few, is leveraged to fund schools, restore infrastructure, sustain systems of mass transit and develop energy self-reliance.

The Public Banking Institute, founded by Ellen Brown, the author of “Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free,” Marc Armstrong and other grass-roots activists are attempting to build a system of public banks. States such as Vermont and Washington and cities such as Philadelphia, Washington, D.C., San Francisco and Reading, Pa., have begun public banking initiatives. Public banks return economic power, and by extension political power, to the citizens. And because they are local they are possible. These and other grass-roots revolts, including sustainable agriculture, will be the brush fires that will, if they succeed, ignite the overthrow of the corporate state.

"We can wrest back control of our economy, and finally our political system, from corporate speculators only by building local movements that decentralize economic power through the creation of hundreds of publicly owned state, county and city banks."

“The debate about public or private control of the monetary system has been going on for hundreds of years,” Armstrong, the executive director of the Public Banking Institute, said when I reached him by phone. “The American Revolution had everything to do with who controlled our economic destiny. The money supply is central to that control. North Dakota has proven that a state can use a public bank to further the economic interests of its people. North Dakota funds its own infrastructure and capital investment projects. It provides funding for commercial lending throughout the state. It develops the areas of its economy it wants to prioritize, areas that are often not funded by private banks.”

“When a public bank such as the bank in North Dakota funds infrastructure projects the interest costs, which [otherwise] are often 50 percent or more of a project, in essence fall to zero because the interest is returned to same people who own the bank and paid the interest in the first place,” said Armstrong, who previously worked for IBM Finance. “[Americans typically] hold labor costs under a microscope, but … don’t hold interest costs under a microscope. North Dakota can offer commercial loans as low as 1 percent. Compare this with Wall Street banks that charge 14 or 15 percent. We can use bank credit, the tool Wall Street banks use to amass wealth and power, to empower ourselves.” And because credit, Armstrong notes, is the source for 97 percent of the nation’s money supply, this power would be huge.

The Bank of North Dakota, the vision of socialists from a century ago, has been in operation for 90 years. It offers the state’s farmers and businesses low interest rates on loans. After floods destroyed much of Grand Forks in 1997 the bank provided a six-month moratorium on mortgage payments and gave low-interest loans to the community to rebuild, a sharp contrast with the raw exploitation that marked the arrival of Wall Street bankers and speculators in Gulf Coast areas hit by Hurricane Katrina. Public banks in the United States, like the public banks in Germany, fund things such as solar power because it is good for communities rather than the portfolios of speculators.

Public banks also protect us from the worst forms of predatory capitalism. Reporters Trey Bundy and Shane Shifflett last January wrote in the San Francisco Chronicle on how one of Wall Street’s numerous scams works. When the Napa Valley Unified School District in California needed funds in 2009 to build a high school in American Canyon it took out a $22 million loan with no payments due for 21 years. “By 2049, when the debt is paid,” the paper noted, “the $22 million loan will have cost taxpayers $154 million—seven times the amount borrowed.” And Napa, the paper reported, is one of at least 1,350 school districts and government agencies across the nation that have engaged in this form of borrowing, called capital appreciation bonds, to finance major projects. Capital appreciation bonds mean billions in debt for the public and hundreds of millions of dollars for the speculators, the reporters pointed out. And this kind of scam is writ large across the entire society.

“California public schools received $9 billion in loans over the last seven years,” said Armstrong, who is from California. “In 25 to 30 years the interest due on that $9 billion will be $27 billion. This is just one example of the massive societal crisis being caused by big banks. Wall Street investment banks should not be permitted to handle public financing, which has become simply another way for Wall Street to monetize and extract our nation’s wealth.”

The potential windfall for communities through the establishment of public banks is huge. In a study prepared in Vermont in support of establishing a public bank it was estimated that a public bank could make loans equal to 66 percent of state funds on deposits, or $236.2 million in credit for economic development in the state. This would expand the total credit supply available for state lending agencies by $236.2 million. Furthermore, the credit would be at a low cost to the state because public banks do not have to borrow money by selling bonds. Public banks make loans based on deposits. Interest returns to the state on loans and deposits. In essence, the state lends money to itself. The availability of $236.2 million in new lending, the study estimates, would create 2,535 new jobs, $192 million in value added (gross state product) and a $342 million increase in state output. “If used to finance state capital expenditures, funding through a public bank could save close to $100 million in interest costs on [fiscal year] 2012-13 capital spending, due to most interest payments no longer leaving the state,” the report says.

U.S. Sen. Bernie Sanders of Vermont and U.S. Rep. Peter DeFazio of Oregon have called for a national infrastructure bank. The U.S. Postal Service would fund the proposed bank. The Postal Service—which from 1911 until 1967 provided basic checking and savings services to the public—with its offices in nearly every community has the physical infrastructure to jump-start a national public bank. Deposits would be invested in government securities. These securities would be used to finance infrastructure projects. And the proposal would not require raising taxes. The plan, which I doubt the banking lobbyists and their lackeys in Congress will ever permit, would in addition to saving the Postal Service itself provide access to banking for the one in four households that cannot get such services.

Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America.  His most recent book is Empire of Illusion: The End of Literacy and the Triumph of Spectacle.
more Chris Hedges   


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This is a very good look at the state of the European union. While US corporate media tells us that European nations are wanting to pay the piper.....banks.....and stay in the union, the opposite is actually happening. Whether leftist parties or far-right nationalist parties....both see this union as unhealthy for their countries.....THEY WILL RUN FROM THE TROIKA! YOU BETCHA!

When and if European nations decide to just default and disband the Euro....the US economy will crash because it is the US FED and our pensions holding the European sovereign debt afloat!


A Gathering Storm: Eurozone in 2014
Posted by revoltingeurope ⋅ December 21, 2013 ⋅

Is Europe’s single currency bloc stabilising? Behind the current picture of calm storm clouds are gathering, says French economist Jacques Sapir, in this recent interview with Greek newspaper Kefalaio (Capital)

Kefalaio: What is your reaction to the image of stability in the Eurozone promoted by European leaders? What are the possible ruptures (eg in the case of a US “tapering”, that is easing off of its injections of free money into the financial markets?)

Jacques Sapir: The image of a “stabilization” in the euro area has come about because of a temporary shift in instability, from the financial sector to the real economy. Since autumn 2012 the European Central Bank, chaired by Mario Draghi, has decided to buy sovereign debt in the secondary market of those countries struggling the most, and therefore more vulnerable to speculation. This has allowed interest rates to return to a somewhat lower level and has given the illusion of stabilization. But at the same time, the crisis in the real economy, seen by the explosion of unemployment and the fall in production, continues in the countries of Southern Europe. This crisis is actually growing stronger because its effects are cumulative. In all the countries of southern Europe, there has been a temporary halt to the slide. But this stability does not mean a resumption of growth. Thus, the trade balance of these countries has improved mainly through a sharp contraction in imports and not a significant increase in exports. Today, we have probably reached the point where the decline will resume. There are several reasons for this. On the one hand, investment in the countries of Southern Europe has fallen since 2010 (and in some cases since 2008). At some point, this will result in a weakening of the productive apparatus, and therefore labour productivity, one of the determinants of competitiveness. This weakening is actually accelerated by the strong contraction of credit that we are seeing in these economies (Greece, Italy and Spain, but also in France). This contraction penalizes small and medium enterprises most, the sectors which – in theory – are best placed to take advantage of lower costs in these economies. Austerity as an exit strategy from the crisis is based on the idea that lower costs will cause a sharp increase in supply. But for this to happen companies must still be able to invest to launch new products or simply finance the continuation of activity. However, they no longer have the means to do this because of the contraction of production has resulted in a strong squeeze on profit margins [therefore they lack their own funds to invest], and they cannot borrow from banks. This is what explains the absence of a supply-driven recovery.

On the other hand, households have managed so far to absorb, with varying degrees of success, downward pressure on wages and income tax increases, by drawing on their savings. But this is like trying to plug the gap in production by drawing down stocks. After a while, the stocks (in this case, savings) are exhausted and demand will decline sharply, bringing production down with it. Societal mechanisms, particularly intergenerational transfers [of wealth], are exhausted too. People have reached the limit economically, but also – and this is important – politically. If you add to this that outside of Germany, industrial production is declining or stagnant in the Eurozone (including Germany, it is broadly stagnant overall). In addition, while there is a slight decrease in nominal interest rates, because inflation has also declined, real interest rates are moving upwards. The capacity of southern European countries to regain fiscal balance and ensure the financing of their debt is thus compromised by all these factors. In fact, debt continues to grow, and in some cases very quickly, such as in Spain. The increase in debt, amplified by the interest rate, weighs increasingly on the public finances of the concerned countries. There will be a time when financial markets understand that the ECB does not have the means to redeem all of the debts of the exposed countries without a radical change in policy that will cause a major conflict with Germany. From this point, a new wave of speculation will begin.

Thus, the factors that have halted the slide are unfortunately not sustainable. In early 2014 we should see the situation deteriorate again. The fact that the Spanish industrial output is declined in October is probably a harbinger.

In this context, it is clear that any external shock, even if relatively small, could send the eurozone back into an acute crisis. For example, a change in the policy of the U.S. Federal Reserve. But a slowdown in China could also play a negative role. In fact, the Euro zone is in an extremely fragile situation, that could take a turn for the worse, from one day to the next.

Kefalaio: What is the future of Franco-German relations after the CDU-SPD coalition agreement? Do you expect some sort of compromise especially with regard to the banking union?

Jacques Sapir: Hiding behind the pretence of diplomatic hugs, and joint communiqués, are growing tensions between France and Germany. The French government must have the honesty to say, it hoped for the defeat of Merkel and for the SPD to come to power, or at least a coalition dominated by the SPD, which would establish a pay raise in Germany. But what was predicted, and I stress here the deep illusions of the French government, has occurred. Mrs Merkel has limited her loss of seats. A coalition dominated by CDU-CSU is in power. There will be no wage recovery in Germany. If Merkel, as part of the coalition agreement, had to agree to a minimum wage, it should be noted that the date of application is postponed to … 2017. This is the same scenario that is at work with banking union in which France had invested many hopes. Between October 2012 to today, we have seen the scope of this banking union drastically reduced, and Germany, not content with this, is constantly delaying the date of introduction. The last “trick” invented in Berlin was to invoke the need for a treaty change. This postpones banking union to at least 2016 or later.

In reality, it is clear that Germany said “yes” publicly, because it does not want to bear the political responsibility of a breakup of the Eurozone, but it will apply a policy of “Nein! once the agreement is signed, using various tricks, both political and economic. Germany schemes, as in the time of Weimar’s Gustav Stresemann, but this time from a strong position. Indeed, France abandoned any intention – and therefore any means – of actually negotiating with Germany the day when its leaders said that European integration was their ultimate goal. You can only negotiate if you can convince the other side of the table that you have other options.

However, since 1983, from what is called the “European turning point” of François Mitterrand, France has put its head on the block and now simply asks Germany “five minutes, Mr. Executioner “. German leaders have understood this, and they make superficial sacrifices that allow the French government to save face. In practice, we have become spectators of German policy, a policy that looks after the interests of Germany, but masks this under the guise of the European construction. This is one of the reasons for the rise of a powerful anti-European sentiment in France but also in Italy, Spain and Britain.

Kefalaio: In your opinion, what is the determining cause of disappointing growth figures, employment and deflation in France? Restrictive fiscal policy – and if so, how?

Jacques Sapir: Poor economic performance in France has several explanations, which combine and reinforce one another. The first explanation is simple: these results derive from a Euro at $ 1.35 and, the very existence of the Euro. France’s trade with the eurozone represents about half of its total trade and, after Greece, it is one of the least integrated into the bloc. France is paying for a very expensive Euro exchange rate, which perhaps suits Germany because of its industrial specialization, but certainly not the French economy. Calculations show that for the French economy, the exchange rate should be $1.04. Whenever the rate increases by 10%, and $1.35 is 30% above that amount, France loses about 1% growth. In fact, we lost the equivalent of 3% growth with a rate of $1.35. Also, being at the same level as Germany, which is an important partner, we also disadvantaged because of the gap in competitiveness between our two economies. A decrease in the exchange rate of the Euro against the Dollar would be a partial solution. Here we must add that for countries like Italy and Spain, which are much more integrated, it would not be a solution at all. For these countries, it is the exchange rate with Germany and with Northern Europe in general that is important.

Then there is budgetary and fiscal policy. This policy, moreover, is the result of the existence of the Euro. France gives tax benefits to companies equivalent to 3.5% of its GDP to partially compensate them for the loss in competitiveness linked to the Euro. In 1995, these tax deductions were about 0.5% of GDP. The increase in corporate tax breaks has been very strong since 1999. France has made a great effort to reduce our deficit for more than two years. This effort began with the previous [right-wing UMP] government (François Fillon) and continues with the current socialist government. But it is not very effective, and this year we have a deficit of 4% of GDP, while in 2014 a deficit of 3.7% is expected. But if we left the Euro, we could easily remove the greater part of these tax deductions, and thus return to obtaining 3% of GDP in tax revenues.

One can see immediately that under these conditions the deficit would fall to very low levels. So France is penalized directly and indirectly by the Euro. Note that if France left the euro, the rapid gain in growth due to the large devaluation that would accompany exit, would automatically lead to a rise in tax revenues, and that the budget would therefore end up very quickly in surplus. The current budget deficit is the product of economic stagnation which causes stagnation of tax revenues. But attempts to reduce or increasing taxes (which has been done for two years) or bearing down on public spending (which the Right wants to do), causes a significant depressive effect on the economy. The IMF’s Olivier Blanchard [1], indicates that the fiscal multiplier, that is, the relationship between rise or fall in government spending or tax collection and GDP growth is greater than 1. We know that it is 1.7-1.9 for Spain and Italy, and probably around 1.4 for France.

Kefalaio: What are the possibilities within the eurozone, of introducing compensating mechanisms to correct the imbalances caused by the architecture of the monetary union? Notably, what margin to renegotiate austerity plans do peripheral countries in the euro zone have?

Jacques Sapir: A monetary union can only work if you have significant cash transfers within it. In the late 1970s, when we started talking about a single currency in Europe – and yes the Euro was not born yesterday – it was felt that there would need to be a federal budget of approximately 10% of Eurozone GDP. Currently, the EU budget is 1.23%, eight times less! In practice, this means that Northern Europe should transfer to southern Europe (and consider that France does not belong to this latter group, which is highly debatable) between 250 and 260 billion Euros. This means that Germany would have to pay 220 to 232bn Euros annually, or approximately 8% to 9% of its GDP [2]. Who seriously believes that such a thing is possible, and moreover, on an ongoing basis [3]? This critically undermines so-called European “federalism” strategies.

Of course, in theory, such theories are elegant and may even be desirable. But in reality, it would require an unbearable pressure on Germany. The only way to make Germany pay would be to invade! A beautiful illustration of the idea of unity that turns into its opposite when confronted with reality. A war on Germany to run Europe in a Federal fashion. If we now look at the possibility of renegotiation of austerity measures that have been imposed by the EU and the ECB in Southern Europe (within the Troika it has been the EU and the ECB that have been the advocates of the hard line, not the IMF) we can conclude that they are almost nil. Should either Greece or Portugal reject an austerity plan, European payments would stop immediately. If in these countries, political leaders understood that it is better to leave the Euro than to accept this slow death, and they said to the Troika: enough! If you stop the payments we will exit the Euro and we will default on our debt! Perhaps, in this case, these countries would have some possibility of renegotiating austerity plans. But as they are not willing to do this, they have no chance.

Which takes us back to acknowledging the failure of the Euro, and thus the need to exit it as quickly as possible, if possible in a co-ordinated manner, if not by breaking it up. The persistence of very different inflation rates across the different Eurozone economies [4] despite a unified monetary policy, in theory (and practice) is lethal for a single currency, save in the case of huge fiscal transfers, for which there are no political conditions.

Kefalaio: You suggest the solution is an organised return to national currencies. What political balance for forces could lead to an advance of such a plan? What political forces or what sectors of capital are more willing to embrace a policy of returning to national currencies? What are the risks?

Jacques Sapir: The situation is quite different depending on whether it is viewed from a small peripheral country(Greece, Portugal) or a country like France or Italy. It is clear that the day the French or Italian government, say to other governments: “The Euro is dead, do what you want, but we are leaving the Euro area whatever happens,” the Eurozone disappear instantaneously. France cannot remain in the Euro if Italy comes out, due to the structural similarity of these two economies, so if France exits, Italy, and Spain must leave too. From the perspective of Germany, the benefits from the Euro disappear and the zone becomes a kind of “Grand Deutschmark”, but for Germany, greater disadvantages (management of the ECB, negotiations with other countries , …). In fact, the balance of power is actually in favour of countries like France and Italy at this point. If they act, they start an irreversible momentum, compelling other countries to negotiate an agreed solution.

In these countries, the issue of the Euro has cemented divisions between, on the one hand, financial capital, or more precisely “financial-industrial” capital, which includes banks, insurance companies, but also very large companies with a large share production outside the eurozone but which can borrow in Euros, and on the other hand, the more traditional “industrial” capital, the small and medium enterprises. You can add to this divide the opposition between capital that has become “comprador”, and capital that remains bound to its national base. Within the population, objectively only the elite whose incomes are detached from the activities of the real economy, who make up between 5% and 10% of the population, actually have an interest in maintaining the Euro. Even the middle classes have no interest in keeping it, and the popular classes (private sector workers, low and middle income public servants) certainly not. You see this in the polls, which show that the popular classes have largely concluded that the Euro is an economic evil.

The main problem is, on the one hand, the lack of autonomy of “industrial” capital with respect to “financial-industrial” capital, and secondly the ideological dimension, which we can describe as religious, that traditional Left’s attachment to the Euro. Without this, the Euro would already have died two or three years ago. A break between the “financial-industrial” capital and “industrial” capital appears to be underway in Italy, where important debates pitting supporters and opponents of the Euro within the business community. But it will take the destruction of the hegemony of the traditional left before we see a radical shift in opinion. This destruction can take many forms, from a split within the social democratic parties, to their electoral collapse in favour of new forces. In France, this collapse seems to be in favour of forces on the far-right, the Front National, which is its changing nature today because of this process. In Italy, there is a new movement, Beppe Grillo’s Five Star Movement, which seems to enjoy the erosion of the traditional left. The story, from this point of view, has yet to be written.


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Obama ran as a democrat and then oversaw the policy of allowing massive fraud in the mortgage industry to go without justice moving millions of homes into foreclosure and into the hands of the same investors creating the fraud. This was the plan. Obama started the massive bundled foreclosure scheme when he had Fannie and Freddie moved their foreclosures off these agency books saying that the families in foreclosure acted IRRESPONSIBLY and do not need to be 'BAILED OUT'. This comment was for the history books as the 1% are determined to make this about the working and middle class largesse and not about massive Wall Street fraud!

OBAMA AND NEO-LIBERALS DELIBERATELY ALLOWED ALL THESE FORECLOSURES TO STAND BECAUSE THE GOAL WAS MOVING PROPERTY TO THE WEALTHY.....GOODBY BAILEY'S SAVINGS AND LOAN AND HELLO POTTERSVILLE!


The Wolf of Bedford Falls

December 25th, 2013


Econintersect:  What would Frank Capra's "It's a Wonderful Life" have been like if the film had "The Wolf of Wall Street" writers and Martin Scorsese as director?  Click through Read more >> to view the two-minute trailer of "The Wolf of Bedford Falls".


Follow up:

John Lounsbury


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THE ECONOMIC CRASH IS COMING WHETHER NPR PRETENDS IT ISN'T!


This is a great article on the European debt crisis and the PIGS status as profligate debtors to Germany and the German taxpayers being held hostage to paying for defaulted debt.  Remember, it is the German bank Deutsche Bank and US Goldman Sachs that committed sovereign debt fraud that hid these PIGS sovereign debt with 'complex financial instruments' AKA.....fraud.....and so the PIGS taxpayers and citizens have until now been paying for the massive debts from the collusion of banks with each of these nation's political leaders.  The money stolen through this sovereign debt fraud was sucked up by the rich just as is happening in the US with our financial frauds.

Understandably the PIGS want out of this TROIKA banking capture and are looking to default one way or the other.  They see Iceland and know they made the wrong choice in agreeing to these bailout deals.  As this article shows, the behind the scenes wheeling and dealing will hit next year and will create a huge economic collapse at the same time the FED is forced to end its policies because it is leveraged out!

If you listen to corporate NPR they will tell you the PIGS have been dutiful and are proud to have met there debt obligations just as they aired US credit card debtors as being glad to pay back debt accumulated because of the massive Wall Street fraud and economic collapse!  NOT SO!!!!  ALL OF THESE COUNTRIES WANT OUT BECAUSE THEY ARE SICK AND TIRED OF PAYING DOWN THE BANKER'S DEBT!  So, there will be rebellion in Europe and it will hit the US at the same time the FED is forced to end free money for the rich.


Beware of Hedge Funds Bearing Gifts

December 11th, 2013


Written by Adam Whitehead, KeySignals.com   Global Economic Intersection

BLUF (Bottom Line Up Front) When Greek politicians and a Hedge Fund which has tendered to buy 10% of all outstanding Greek Debt start to make noises, just as the Fed starts to look as though it is serious about Tapering, we get interested.

Japonica Partners started buying Greek debt in June[i]. It was paying a 25% premium to where the debt was in 2012.

In November Japonica started talking its book; in an open letter demanding that Greece be rated A+[ii]. The rhetoric is quite instructive:

"Call-to-action: It is an irrefutable fact that Greece has accomplished one of history's most extraordinary sovereign fiscal rejuvenations, an A+ performance. Now is the time to progress beyond the current economically irrational and anachronistic accounting that obfuscates that Greece merits an A+ credit rating and government bond interest costs below 5%. Now is the time to recognize that this accounting is the single biggest and most easily removed obstacle to extraordinary growth in Greece. And, now is the time for public policy makers to expeditiously advocate accounting as well as presentation that reflects economic reality, improves decision making,and increases accountability."



Follow up:

If we read it correctly, Japonica is demanding an accounting change to "rejuvenate" Greece's credit rating (and Japonica's P&L). Greece's A+ for effort allegedly translates into an A+ credit rating. It's an elaborate form of accounting casuistry, in an economy which has literally returned back to the Classical Age in order to balance the national accounts. One wonders how a primitive agrarian society will be able to generate the economic activity to pay even 5% on its debt. 5% of no economic activity is still nothing. All that Greece has done is to seize the money injected by the Troika and then move it around the system without allowing it to leak out. Since this money is denominated in Euros, it will leave very swiftly however. Normally investing strategies like this turn the debt into equity in the "rejuvenated" economy. This "rejuvenated" equity is usually in the form of natural resources, such as Oil, which can then be sold for hard currency. Japonica does not appear to be interested in taking a position in Olives or Fetta Cheese however. Japonica has very little faith in the "rejuvenated" Greek economy; nor can it find any hard assets worth owning. Japonica therefore wants to realise "hard currency" in the form of Euros and then get the hell out of Dodge.

Presumably, the Greeks have encouraged Japonica to opine the "call to action". Greece gets a sub 5% interest cost and Japonica makes the trade of the decade.

Let's take a closer look at the Greek position. Currently, Greece has a primary surplus; which is defined as its fiscal revenues being greater than its expenditure, "ex-interest cost". This means that if Greece did not have to pay interest on its debt (quite a big if) that it could finance its projected fiscal expenditures without having to seek another Troika bailout. Ignoring interest payments, Greece has balanced its books. It is clear where this is going. Since Greece does not need another bailout, it is being cute and seeing if it can get away with lowering its interest payments. Japonica is a convenient tool to see how much leverage can be applied in this way.

The dark side of this tale is that since Greece can finance itself without another bailout, it has a pecuniary incentive to default on its interest payments. Most of the debt that is not owned by Japonica is owned by the Greek banks. The banks will implode; but this doesn't matter because they are Greek anyway. At this point Japonica will suddenly cease to be a friend of Greece; and will sue in the hope of triggering a default, which will then force the Troika to bail Greece out rather than risk a domino effect rippling through Portugal, Spain, Italy and Ireland. Said domino effect could then go global and cause America to apply pressure on Europe to go down the bailout rather than bail-in route. The problem for Japonica is that if Greece defaults, only its banks and Japonica go under. The Troika will thus let Greece default and then turn the debt it owns into real Greek "hard assets". If Greece refuses or rebels, it will then face years in the political wilderness. Greece no longer represents the threat it once did on its own. It only becomes a threat if other nations follow.

In our opinion Portugal, Spain , Italy and Ireland are watching the situation carefully; and are hoping that it comes to the brink of default. Currently, they are all following the Greek model. Public expenditure is being cut so that a primary surplus is created. The creation of the primary surplus is the bargaining chip to be used against Northern Europe. Northern Europe is blindly walking in to this trap, by forcing these counties to apply fiscal austerity in order to create the primary surplus. Like Greece, these Peripheral countries have nothing to lose. They have everything to gain, by getting their interest rate costs down and/or getting further fiscal support from Northern Europe. The ECB has been facilitating the process by applying the LTRO to keep Peripheral interest costs down. The LTRO has now however been repaid, so either the ECB must do another one or these countries must do what Greece is doing to get their interest costs down.

It is a totally different story in Northern Europe; and we suggest that they are in no mood to be blackmailed. Germany has in fact hardened its position against a central resolution of the debt crisis and a central banking authority. This has forced the Peripheral countries to rely on blackmail once the ECB stops holding Peripheral interest rates down. Over this weekend the European finance ministers meet to discuss a banking union amongst other things. It should be noted that Jens Weidmann has been getting more militant in his assertions that not all European debt is rated equally; and that capital requirements should be adjusted by the banks to reflect this reality. He has also said that the ECB should not regulate the banks in the long term; and that national regulators should exist under the ECB umbrella. Reading between the lines, we think that he is waiting for a position to attack. Coming out of this weekend we would expect him to turn up the criticism and invective; especially as what he will perceive as charlatans and blackmailers are trying to upgrade Greece.

We have no idea how this will play out; but we have a strong opinion that it will get played out with very volatile consequences in 2014. Factor in the US Taper and the picture looks even more volatile. Our suspicion is that Mario Draghi is resigned to another LTRO; but he cannot do anything until Peripheral interest rates spike upwards. He also has to contend with Angela Merkel; who has now been re-elected and can afford a nasty fight to save German taxpayer funds.

Finally, there is also a strong overweight investor position in Europe, from the likes of Japonica, who are of the view that the ECB -


"will do whatever it takes."

Although not saying actually that he will do whatever it takes to save the Periphery, Draghi intended that he,

"will do whatever it takes to save the Euro."




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This article is a good reminder that the US will not be healthy again until we address the massive corporate frauds and recovery of tens of trillions of dollars!

Government Excuses for Letting the Banksters Off Scot-Free Are Bogus

December 12th, 2013
in Op Ed

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The Failure To Punish Wall Street Criminals Is The Core Cause Of Our Sick Economy by Washington's Blog

U.S. Attorney General Eric Holder said:

I am concerned that the size of some of these institutions [banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy

As we've repeatedly noted, this is wholly untrue.


Follow up:

If the big banks were important to the economy, would so many prominent economists, financial experts and bankers be calling for them to be broken up?

If the big banks generated prosperity for the economy, would they have to be virtually 100% subsidized to keep them afloat?

If the big banks were helpful for an economic recovery, would they be prolonging our economic instability?

In fact, failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 ... and will cause huge crashes in the future.

After all, the main driver of economic growth is a strong rule of law.

Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won't recover:

The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that's really the problem that's going on.

***


I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That's the point. There were victims all over the world.

***

Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.

Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals - and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.

Indeed, professor of law and economics (and chief S&L prosecutor) William Black notes that we've known of this dynamic for "hundreds of years". And see this, this, this and this.

(Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down.)

The Director of the Securities and Exchange Commission's enforcement division told Congress:

Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public's fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.

Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank's Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, showing that enforcing the rule of law - i.e. prosecuting white collar fraud - is necessary for a healthy economy.

One of the leading business schools in America - the Wharton School of Business - published an essay by a psychologist on the causes and solutions to the economic crisis. Wharton points out that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:

According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. "Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG." The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. "Normal expectations of what is safe and dependable were abruptly shattered," Sachs noted. "As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred."

People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.

He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. "She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.

"By no means a sophisticated economist, she knew ... that some people had become fantastically wealthy by misusing other people's money - hers included," Sachs said. "In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished."

Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to "hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again." In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.

Note that Sachs urges "hold[ing] the perpetrators of the economic disaster responsible." In other words, just "looking forward" and promising to do things differently isn't enough.

Robert Shiller - one of the top housing experts in the United States - says that the mortgage fraud is a lot like the fraud which occurred during the Great Depression. As Fortune notes:

Shiller said the danger of foreclosuregate - the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt - is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.

Indeed, it is beyond dispute that bank fraud was one of the main causes of the Great Depression.

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith's, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy.

In 2004, the FBI warned publicly of "an epidemic of mortgage fraud." But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ....

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.

***

The government that permits this to happen is complicit in a vast crime.

Galbraith also says:

There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that's a process which needs to get underway.

Galbraith recently said that "at the root of the crisis we find the largest financial swindle in world history", where "counterfeit" mortgages were "laundered" by the banks.

As he has repeatedly noted, the economy will not recover until the perpetrators of the frauds which caused our current economic crisis are held accountable, so that trust can be restored. See this, this and this.

No wonder Galbraith has said economists should move into the background, and "criminologists to the forefront."

The bottom line is that the government has it exactly backwards. By failing to prosecute criminal fraud, the government is destabilizing the economy ... and ensuring future crashes.

Earlier this month, a prominent New York Federal Court Judge - and former Chief of the fraud unit for the U.S. Attorney's Office for the Southern District of New York (Jed Rakoff) - said:

Not a single high level executive has been successfully prosecuted in connection with the recent financial crisis ....

[If] the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.

***

The stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word "fraud" no fewer than 157 times in describing what led to the crisis, concluding that there was a "systemic breakdown," not just in accountability, but also in ethical behavior. As the Commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising 20-fold between 1998 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker, was publicly warning of the "pervasive problem" of mortgage fraud, driven by the voracious demand for mortgage-backed securities. Similar warnings, many from within the financial community, were disregarded, not because they were viewed as inaccurate, but because, as one high level banker put it, "A decision was made that 'We're going to have to hold our nose and start buying the product if we want to stay in business.'"

The prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud.

[The Department of Justice doesn't disagree.] Attorney General Holder himself told Congress 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."

***

No one that I know of has ever contended that a big financial institution would collapse if one or more of its high level executives were prosecuted, as opposed to the institution itself.

***

The Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent, but rather has offered one or another excuse for not criminally prosecuting them - excuses that, on inspection, appear unconvincing. So, you might ask, what's really going on here?

***

[Deferred prosecutions - the current government approach of letting big banks off easy and leaving the individual fraudsters alone - are not the way to go.] Although it is supposedly justified in terms of preventing future crimes, I suggest that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing. Just going after the company is also both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility.

These criticisms take on special relevance, however, in the instance of investigations growing out of the financial crisis, because, as noted, the Department of Justice's position, until at least very, very recently, is that going after the suspect institutions poses too great a risk to the nation's economic recovery.

Rakoff thoroughly debunks the government's other lame excuses for failing to prosecute Wall Street criminals as well, such as the "difficulty" of proving "intent" or the "sophistication" of the counter parties.

Unfortunately, the government made it official policy not to prosecute fraud, even though criminal fraud is the main business model adopted by the giant banks.

Indeed, Judge Rakoff notes that the government had a large hand in creating the fraud in the first place. In fact, the government has done everything it can to cover up fraud, and has been actively encouraging criminal fraud and attacking those trying to blow the whistle.

The failure to punish the fraudsters is the core cause of our sick economy.


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What does it say about Capitol Hill when people have to shout that none of what is happening is legitimate? Do you hear you elected official shouting that none of the financial reform bill has been implemented and the banks are in the same shape as 2008 only worse?

Volcker Says He Didn’t Help Write Rule Bearing His Name

By Yalman Onaran Dec 11, 2013 9:29 AM ET  Bloomberg Financial

Save Dec. 10 (Bloomberg) -- The Federal Deposit Insurance Corp. board votes unanimously to adopt a final version of the Volcker rule that imposes stricter restrictions on how banks may buy and sell financial products for their clients. (This report is an excerpt. Source: Bloomberg) 

Paul Volcker said he wasn’t involved with writing the final version of the rule that bears his name, staying abreast of developments from a distance as regulators crafted details of his curbs on trading by banks.

“It’s not my function to stay involved with the agencies,” Volcker, 86, said in an interview yesterday. “I get reports and updates, a problem here and a problem there, but nothing directly involved. I personally stayed away from talking with any of the principals.”

The former Federal Reserve chairman said he didn’t know how the final draft was worded before it was published yesterday. “You probably have read the rule more than I have,” Volcker said. “It’s complicated, but I was gratified to see that the rule itself is shorter than my own home insurance policy.”

Explaining the Volcker Rule

The Fed and four other regulators adopted the Volcker rule almost five years after he introduced the idea. The measure, prompted by the 2008 financial crisis, seeks to keep banks from taking positions that could cause their collapse. It takes full effect in 2015 over objections from lobbyists seeking to protect the $44 billion that the biggest U.S. banks make from trading securities.

“I talked to the regulators today,” Volcker said after the final version was released. “They’ve done a good job of balancing. You can either regulate by rule or by principle. This regulation attempts to do both. Principle part is the one I talk a lot about.”

Photographer: Andrew Harrer/Bloomberg Paul Volcker, director of financial analysis at the International Tax & Investment... Read More

Volcker’s Role Volcker was the Fed’s chairman from 1979 to 1987 and pushed interest rates up to 20 percent to tame U.S. inflation that had persisted for a decade. He advised President Barack Obama’s first election campaign and led an advisory committee in the first two years of the administration. That’s when Volcker persuaded Obama to include curbs on trading in the 2010 Dodd-Frank Act’s overhaul of the banking industry.

The result is 71 pages long, with a preamble of about 850 pages.

Volcker proposed the idea in January 2009 when he called for rules to curtail risk-taking by systemically important financial institutions and limit their share of deposits. The plan was outlined in a report from a panel of former central bankers, finance ministers and academics known as the Group of Thirty. He called banking “a mess” and said the financial system had “failed the test of the marketplace.”

Obama introduced the rule in January 2010 with Volcker standing beside him.

Pushing Back The proposal drew opposition from bank lobbyists, and the onslaught became so intense by January 2010 that Volcker went before 1,200 people at the Economic Club of New York to appeal for help. The former Fed chairman accused the industry he once oversaw of promoting “reform light” that wouldn’t stave off future crises.

Related: Wall Street Exhales as Volcker Rule Seen Sparing Market-Making

“If you agree, make your voices heard somehow or another,” Volcker told the group, whose members included bankers, hedge-fund managers, economists, lawyers and former government officials.

Turf wars among regulators contributed to the difficulty of completing the rule, Volcker said.

“Without doubt, when you have five agencies that have to come together on a common rule, it’s obviously a field day for people finding reasons to disagree,” he said. “Everybody thinks they have leverage because every vote is needed.”

Looking Ahead Volcker said he’s concerned that, when times are good, regulators will relax their grip on how they monitor the restrictions as they did in the run-up to the 2008 crisis.

“What I hope is that they’ve learned a lesson and they have more structure going forward,” he said.

Bankers including Jamie Dimon, the chief executive officer at JPMorgan Chase & Co. (JPM), and Richard Kovacevich, the former CEO of Wells Fargo & Co. (WFC), said lenders will be able to manage with the version that has emerged. The industry had attacked the rule, saying it could damage markets and boost borrowing costs for companies and consumers. Some investors have said their ability to trade easily will be hampered.

Less trading might be a good thing, Volcker said.

“They will have to think a little more about what they buy and sell when they don’t have automatic liquidity,” he said. “Before the crisis, the market was highly liquid and then it all of a sudden disappeared. You need to have some balance. Just looking for too much liquidity shouldn’t be the only goal.”

He said that banks need to focus on lending and serving their customers instead of “the next speculative opportunity.”


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Have you noticed that the major business development in the downtown area is the supersizing of the very banks committing massive fraud on the citizens of America?  Each one of them is still actively defrauding and breaking all laws, domestic and international.  So, why do City Hall and Baltimore Development load our downtown skyscape with criminal elements?  CITY HALL AND MD ASSEMBLY ARE NEO-LIBERALS WORKING FOR WEALTH AND PROFIT AND DO NOT SEE FRAUD AND CORRUPTION!

Indeed, that is the problem.  We do not want these criminal banks on our skyline saying to the world, come to Baltimore, we are VISIGOTHS just like you!  We want to reinstate Rule of Law and send these global banks over to third world countries as we work through the International Criminal Court to get our tens of trillions of dollars in fraud back.  The US cannot be democratic, first world, or Rule of Law until this happens.  Hands up for US citizens wanting to be a third world society?  NO ONE!

Corruption of America starts at home, not abroad JPMorgan Chase has been hiring China's "princelings" in exchange for business deals with their parents -- a serious offense that's all to similar to practices here in America

• By Robert B. Reich 6:00 a.m. EST, December 11, 2013  Baltimore Sun
  
  
  
  

The Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street's biggest bank, has been hiring the children of China's ruling elite in order to secure "existing and potential business opportunities" from Chinese government-run companies.

"You all know I have always been a big believer of the Sons and Daughters program," says one JPMorgan executive in an e-mail, because "it almost has a linear relationship" to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank's "track record" for converting hires into business deals.

It's a serious offense. But let's get real. How different is bribing China's "princelings," as they're called there, from Wall Street's ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, President Obama's first Treasury secretary, is now president of the private-equity firm Warburg Pincus; his budget director Peter Orszag is now a top executive at Citigroup.

Or, for that matter, how different is what JPMorgan did in China from Wall Street's habit of hiring the children of powerful American politicians? (I don't mean to suggest Chelsea Clinton got her hedge-fund job at Avenue Capital Group, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)

And how much worse is JPMorgan's putative offense in China than the torrent of money JPMorgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians -- making the Street one of the major backers of Democrats as well as Republicans?

The Foreign Corrupt Practices Act, under which JPMorgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of "securing any improper advantage." Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.

JPMorgan couldn't even defend itself by arguing it didn't make any particular deal or get any specific advantage as a result of the hires. Under the Foreign Corrupt Practices Act, the gift doesn't have to be linked to any particular benefit to the American firm as long as it's intended to generate an advantage its competitors don't enjoy.

Compared to this, corruption of American officials is a breeze. Consider, for example, Countrywide Financial's generous "Friends of Angelo" lending program -- named after its chief executive, Angelo Mozilo -- that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst. No criminal or civil charges have ever been filed related to these loans.

Even before the Supreme Court's shameful 2010 "Citizens United" decision -- equating corporations with human beings under the First Amendment, and thereby shielding much corporate political spending -- Republican appointees to the court had done everything they could to blunt anti-bribery laws in the United States. In 1999, in "United States v. Sun-Diamond Growers," Justice Antonin Scalia, writing for the court, interpreted an anti-bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies.

We don't even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians. Last year around this time, when the Securities and Exchange Commission released its 2013 to-do list, it signaled that it might formally propose a rule to require corporations to disclose their political spending. The idea had attracted more than 600,000 mostly favorable comments from the public, a record response for the agency.

But the idea mysteriously slipped off the 2014 agenda released last week, without explanation. Could it have anything to do with the fact that, soon after becoming SEC chair in April, Mary Jo White was pressed by Republican lawmakers to abandon the idea, which was fiercely opposed by business groups?

The Foreign Corrupt Practices Act is important, and JPMorgan should be nailed for bribing Chinese officials. But, if you'll pardon me for asking, why isn't there a Domestic Corrupt Practices Act?

Never before has so much U.S. corporate and Wall Street money poured into our nation's capital, as well as into our state capitals. Never before have so many Washington officials taken jobs in corporations, lobbying firms, trade associations, and on the Street immediately after leaving office. Our democracy is drowning in big money.

Corruption is corruption, and bribery is bribery, in whatever country or language it's transacted in.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of "Beyond Outrage," now available in paperback. His new film, "Inequality for All," was released in September. He blogs at http://www.robertreich.org.

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LET'S UPDATE THE ACTIONS ON FINANCIAL REFORM BY LOOKING AT THE PAST AND SEEING WHAT IS HAPPENING TODAY:

Regarding corporate NPR/APM talk of Dodd Frank reform:

Did you LOL when you heard corporate NPR/APM state that rules making the bank CEO legally responsible for fraud was included in the financial reform laws revealed today?  WAS THAT A HOOT!

WE ARE NOW PROTECTED BY A LAW THAT SAYS A BANK EXECUTIVE WILL NOW BE RESPONSIBLE FOR THE FRAUD HE TELLS HIS/HER EMPLOYEES TO COMMIT AS IF WE NEEDED A LAW FOR THAT!

Did you know the US has a Sarbanes-Oxley law that makes the corporate executive responsible for the accounting statements released by his financial officers?  That happened because of the massive Enron fraud.

I asked my Congressman Sarbanes why he was not shouting that his father's namesake law----Sarbanes Oxley was being completely ignored and he said  'I DON'T FEEL THAT WAY ABOUT BUSINESS'!  So, that translates to ----I don't care if business commits massive fraud.  HE'S SUCH A NICE GUY THEY SAY AROUND HERE----

My point is that any new law holding executives responsible for fraud in their companies will not be enforced if we cannot get executives from previous frauds prosecuted by existing laws!  Sarbanes-Oxley was the easiest law to prosecute as all these executives signed off on financial documents they knew were full of fraud.  50 STATES ATTORNEY GENERAL SHOUTED LOUDLY IN 2005 THAT THE MORTGAGE LOAN MARKET WAS SYSTEMICALLY FRAUDULENT FOR GOODNESS SAKE!



Why Isn't Sarbanes-Oxley Enforced?

December 06, 2011

Board: Macro Economics

Author: WatchingTheHerd

The December 4 edition of 60 Minutes aired a two-segment summary of two absolute smoking gun cases of fraudulent business practices at CountryWide and Citi that

a) were detected by the auditing and financial control teams within the firm
b) were reported to executive management as required under SEC regulations and SOX
c) resulted in suspicious termination of employment or material changes in employment responsibilities of those doing the whistleblowing
d) failed to stop CEOs and CFOs from signing quarterly financial statements certifiying the use of adequate financial controls

In the case of CountryWide, its SVP of auditing was notified of issues with loans issued in its Boston office, dispatched a team to the office in off-hours and salvaged documents from recycling bins which proved loan officers were cutting out customer signatures from documents and pasting them on forged documents then photocopying the pasted versions for use as "final" documents. By the end of the mortgage boom, nearly thirty three percent of Countrywide's loans were going bad, sometimes within a handful of months of origination. The SVP reporting the problem was promoted when BoA bought CountryWide but was let go a day before she was to provide information to the SEC

In the case of Citi, a senior executive overseeing audits of mortgage backed securities sold by Citi found glaring performance problems with the mortgages being bundled together in the MBS being sold. Nearly sixty percent of the securities were defaulting. Yet, the papers accompanying the MBS offering stated the underlying securities in question substantially complied with Citi's own internal guidelines for mortgage loans (they DIDN'T). The senior executive wrote emails and issued weekly reports citing the concerns regarding the particular MBS issue and the larger problem with the financial controls in place. Finally, a letter was written to the executive team AND Citi board member Robert Rubin stating that Ciit's financial controls were NOT adequate and that the company had material financial losses lurking which were not reflected on its books and financial statements. Despite the warnings, Citi's CEO signed a quarterly SOX statement eight days later.


Besides the obvious problem posed by a corrupt / incompetent / lazy SEC and Department of Justice, an interview with a key prosecutor in the DoJ seems to point out a larger problem. The pat answer provided when asked why no prosecutions in what appear to be obvious cases of criminal activity have been pursued seems to be: These cases are very hard to prove because one not only has to prove mis-representations were made but that those charged actually intended to make the fraudulent representations.

I think we can all join together to ask in unison: WHAT THE #)@%!

By definition, if you are operating a lending operation that is originating mortgages with a THIRTY THREE PERCENT or SIXTY PERCENT default rate and you know that and that figure is NOT being disclosed to your shareholders or other customers who are buying securities from you, you are committing a fraud. The purpose of Sarbanes-Oxley was to explicitly put executives on notice that the bar for the accuracy of financial reports was being raised and to REMIND them of that higher standard EVERY QUARTER.

"Adequate controls" in the financial world should be equated to the idea of a civil or mechanical engineer being charged with criminal negligence for failure to meet a duty of care in designing a bridge or building that winds up collapsing and killing people. If you are operating a bank that cannot stop lending operations that are producing default rates above a few percent, you are operating a criminally negligent financial institution. If you continue to operate such an institution and have those default rates in front of you and fail to report those default rates to your shareholders, bondholders or customers purchasing securities from you, you are perpetrating a criminal fraud.

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As we see below Obama has been working as hard as he can for the TPP and making US global corporations free from any oversight and regulation. WHAT YOU SAY?  HE CHAMPIONED DODD-FRANK!  You silly goose......the financial market is worse than in 2008 because none of the financial reform has been implemented and after 5 years in office all Obama has been doing is working on TPP which eliminates the ability of nation's to regulate the banking industry!  So, we are being told by US media that progress is being made on financial reform as TPP works to stop all reform.  DON'T YOU JUST LOVE AUTOCRATIC PRESS!

Now, for those who follow international financial journals you know that Obama and Geithner spent these years in office lobbying against all bank reforms and bank transaction taxes that would have negated the TPP they were allowing the banks to write. 


 Obama Faces Backlash Over New Corporate Powers In Secret Trade Deal

Posted: 12/08/2013 6:24 pm EST  |  Updated: 12/09/2013 4:47 pm EST


WASHINGTON -- The Obama administration appears to have almost no international support for controversial new trade standards that would grant radical new political powers to corporations, increase the cost of prescription medications and restrict bank regulation, according to two internal memos obtained by The Huffington Post.

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Below you see the 2010 view that Wall Street won right out of the starting gate.  Remember, all a supermajority of democrats had to do was nationalize the banks to recover fraud which would downsize them, reinstate Glass Steagall and capital requirements in the 20-30%, and actually create a well-defined fraud law.  All of this could have been done in one month.  Rather, they pretended to be holding the banks accountable knowing that none of what they wrote would be implemented. HAVE YOU HEARD YOUR NEO-LIBERAL SHOUTING THESE YEARS ABOUT OBAMA AND REGULATORS WATERING DOWN ALL RULES?  Not a word! 


Dodd-Frank Bill's Volcker Rule a Win for Big Banks

Daniel Indiviglio Jun 25 2010, 1:48 PM ET 1
 More Late last night, a revised version of the Volcker rule was passed by Congress' conference committee. It was watered down significantly from its original conception, championed by former Federal Reserve Chairman Paul Volcker. It allows banks to invest up to 3% of their tier 1 capital in private equity and hedge funds, but they cannot own more than a 3% ownership stake in any private equity group or hedge fund. The 3% capital threshold is a big enough loophole that most big banks won't have to curb their proprietary trading much, if at all. Moreover, the 3% ownership limit might even make banks riskier.

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Glass-Steagall Fans' New Assault in Case Volcker Rule Deemed Weak
  Bloomberg Financial


By Phil Mattingly and Cheyenne Hopkins December 09, 2013
Former Federal Reserve Chairman Paul Volcker

Former Federal Reserve chairman Paul Volcker said in testimony to Congress in 2010, “The basic point is that there has been, and remains, a strong public interest in providing a ‘safety net’ - in particular, deposit insurance and the provision of liquidity in emergencies - for commercial banks carrying out essential services.” Photographer: Joshua Roberts/Bloomberg

Five U.S. agencies will finish the Volcker rule tomorrow after more than three years of Wall Street resistance to its limits on trading and investing. Lawmakers and their allies who want to rein in big banks are ready to pounce if it isn’t strict enough.

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As corporate US media made headlines for Obama as fighter for financial reform, Geithner was overseas making sure that Europe did not implement any financial reform.  From bank tax to derivatives reform, European pols were wanting to hold banks more accountable while Obama and Geithner were lobbying against this!  NEO-LIBERALS WERE ALLOWING BANKS TO WRITE BANKING LAWS THROUGH TPP WHILE PRETENDING THEY WERE WRITING US BANKING LAWS THAT HELD BANKS ACCOUNTABLE-----

THEY WERE LYING!


Why is Geithner Lobbying EU on Behalf of Hedge and Private Equity Funds?


Posted on March 11, 2010 by Yves Smith  Naked Capitalism

A war of words has broken out between the Treasury Department and the EU over proposed EU financial services regulations. The first salvo in this dispute occurred earlier this week, when, as reported in the Guardian, American banks were excluded from the sovereign bond market, which means new issues (they obviously cannot be prohibited from making secondary trades in an OTC market). This is seen as punishment for their role in helping various states evade EU rules on deficit spending via using currency swaps. But as the Guardian noted, the EU increasingly has broader concerns about the appropriateness of an Anglo Saxon finance model that looks predatory:

    “Governments do not have the confidence that the excessive risk-taking culture of the big Wall Street banks has changed and they still cannot be trusted to put the stability of the financial system before profit,” said Arlene McCarthy, vice chair of the European parliament’s economic and monetary affairs committee. “It is no surprise therefore that governments are reluctant to do business with banks that have failed to learn the lesson of the crisis. The banks need to acknowledge the mistakes that were made and behave in an ethical way to regain the trust and confidence of governments.”

Yves here. Now despite the howls from the US (more on that shortly) this is not as unreasonable as it sounds to people conditioned to think that regulators have no business…..regulating. For instance, it standard operating procedure that when a defense contractor has violated certain rules, that it will be frozen out of the contracting process for a while, the length of exclusion depending on the seriousness of the misconduct. Similarly, foreign regulators have taken much more serious actions against US miscreants in the past (Citi was forced to shut down its private banking operations in Japan, which had a major focus of their business in that country, as a result of serious regulatory violations and resulting termination of licenses. That’s not a bug, that goes with the terrain in any regulated businesses). These firms operate with the sufferance of the state, and the state reserves the right to intervene if it does not like the behavior that results. Now there is an implicit obligation on the part of the state not to intervene capriciously, otherwise no one would take up these franchises to begin with.

The other reason this action is not as unreasonable as it is being seen in the US is that the EU operates on a principles based system, while our legal system is rules based. We have a peculiar notion here that if a business manages to weave its way through a legal thicket, or better yet, tear down rules that constrain behavior, then all is fair, no matter how fraudulent or predatory the behavior is by any common sense standard. That sort of posture does not go over very well in a principles based regime.

So now go back and re-read the excerpt above. The right response, from the EU perspective, is for the US firms to roll over and show their bellies, which means apologize in public and private, and make at least vague, better yet specific, promises not to do certain bad things again.

But Ed Harrison called correctly what the likely response would be, namely to escalate:

    I would expect the U.S. bank lobby to pressure the Obama Administration into developing demarche communiqués at the State and Commerce Departments condemning this as a protectionist move. This is the type of work that State and Commerce does regularly on behalf of companies like Chiquita Brands International. The bank lobby is much more powerful. So, one should expect this to rise to an Ambassador-level talking point.

Yves here. What he did not anticipate was how quickly temperatures have risen. As this and other blogs noted, the EU is also considering restricting the reach of private equity funds, both their ability to make investments in Europe, and the ability of EU investors to put money in US funds.

The next step was Geithner issuing a letter contend that proposed EU regulations of that suggested that these proposals were discriminatory. While on paper that argument might appear sensible, it deliberately obscures a bigger reality: the way these firms operate, particularly the PE firm practice of using leverage, and the consequences of leverage (if you get it wrong, firms go bankrupt more so that if they had not borrowed, leading to unemployment) runs afoul of other government policies. This is a matter of sovereignity conflicting with an ideology that more open markets are ever and always better. You cannot have both in absolute form, and the EU is deciding to trade off one versus the other in a manner different than the US does.

Needless to say, the EU is not taking this lying down, and points out that some of the actions that Geither was taking aim at in his broadly-worded letter were in fact consistent with G-20 commitments:

    A spokesman for Michel Barnier, the new EU internal market commissioner who is responsible for financial services regulation and to whom Mr Geithner addressed his concerns, said that the EU decision to act on hedge funds was in line with a G20 decision to reinforce transparency in the financial system.

    He added that the new commissioner wanted to “work closely” with the US, to ensure “robust standards” in financial services.

Yves again. While this is all very entertaining, the focus on the tit-for-tat misses the elephant in the room: what the hell is Geithner doing lobbying for hedge funds and PE funds?

The Volcker rule makes clear that the US does not regard these as functions integral to the operation of a healthy financial system and deserving of backstopping. The vast majority of PE and hedge funds, in terms of their staffing, are small businesses. Since when do small businesses have the Treasury secretary going to bat for them in a major international spat (this is the lead story in the Financial Times right now, lest you have any doubt).

Follow the money. Its “change” and populist pre election branding to the contrary, Obama raised more money from the financial services industry than any previous Presidential candidate. And the procurer-in-chief, Rahm Emanuel, concentrated his impressive fund-raising efforts on hedge funds and private equity firms (see here, here, and here). They expect a handsome return on investment, and it sure looks like they are getting it.



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Blackstone Group Buys Houses in Bulk to Profit from Mortgage Crisis

by Laura Gottesdiener, TomDispatch.com
November 28th, 2013


Jesse Jackson at foreclosure protest at San Francisco Federal Reserve Bank. Photo: Steve Rhodes. Used under Creative Commons license You can hardly turn on the television or open a newspaper without hearing about the nation’s impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.

Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.

Wall Street’s foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It’s going to rent these foreclosed houses back to us. In the process, it’s devised a new form of securitization that could cause this whole plan to blow up -- again.                 

Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.

In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.

Few outside the finance industry have heard of Blackstone. Yet today, it’s the largest owner of single-family rental homes in the nation -- and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.

Blackstone manages more than $210 billion in assets, according to its 2012 Securities and Exchange Commission annual filing. It’s also a public company with a list of institutional owners that reads like a who’s who of companies recently implicated in lawsuits over the mortgage crisis, including Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase, which just settled a lawsuit with the Department of Justice over its risky and often illegal mortgage practices, agreeing to pay an unprecedented $13 billion fine.

In other words, if Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks -- generally regarded as the main culprits in creating the conditions that led to the foreclosure crisis in the first place -- make money too.

An All-Cash Goliath

In neighborhoods across the country, many residents didn’t have to know what Blackstone was to realize that things were going seriously wrong.

Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something strange happening. Home prices were rising. And they were rising fast -- up 20 percent between October 2012 and the same month this year. In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping, the first sign for Alston that the market was somehow out of whack.

The second sign was the buyers themselves.

“I went two years without selling to a black family, and that wasn’t for lack of trying,” says Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Hispanic. Instead, all his buyers -- every last one of them -- were besuited businessmen. And weirder yet, they were all paying in cash.

Between 2005 and 2009, the mortgage crisis, fueled by racially discriminatory lending practices, destroyed 53 percent of African American wealth and 66 percent of Hispanic wealth, figures that stagger the imagination. As a result, it’s safe to say that few blacks or Hispanics today are buying homes outright, in cash. Blackstone, on the other hand, doesn’t have a problem fronting the money, given its $3.6 billion credit line arranged by Deutsche Bank. This money has allowed it to outbid families who have to secure traditional financing. It’s also paved the way for the company to purchase a lot of homes very quickly, shocking local markets and driving prices up in a way that pushes even more families out of the game.

“You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,” says Alston. “It’s almost like they planned this.”

In hindsight, it’s clear that the Great Recession fueled a terrific wealth and asset transfer away from ordinary Americans and to financial institutions. During that crisis, Americans lost trillions of dollars of household wealth when housing prices crashed, while banks seized about five million homes. But what’s just beginning to emerge is how, as in the recession years, the recovery itself continues to drive the process of transferring wealth and power from the bottom to the top.

From 2009-2012, the top 1 percent of Americans captured 95 percent of income gains. Now, as the housing market rebounds, billions of dollars in recovered housing wealth are flowing straight to Wall Street instead of to families and communities. Since spring 2012, just at the time when Blackstone began buying foreclosed homes in bulk, an estimated $88 billion of housing wealth accumulation has gone straight to banks or institutional investors as a result of their residential property holdings, according to an analysis by TomDispatch. And it’s a number that’s likely to just keep growing.

“Institutional investors are siphoning the wealth and the ability for wealth accumulation out of underserved communities,” says Henry Wade, founder of the Arizona Association of Real Estate Brokers.

But buying homes cheap and then waiting for them to appreciate in value isn’t the only way Blackstone is making money on this deal. It wants your rental payment, too.

Securitizing Rentals

Wall Street’s rental empire is entirely new. The single-family rental industry used to be the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented is the financial alchemy that Blackstone added. In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.

Depending on whom you ask, the idea of bundling rental payments and selling them off to investors is either a natural evolution of the finance industry or a fire-breathing chimera.

“This is a new frontier,” comments Ted Weinstein, a consultant in the real-estate-owned homes industry for 30 years. “It’s something I never really would have dreamt of.”

However, to anyone who went through the 2008 mortgage-backed-security crisis, this new territory will sound strangely familiar.

"It's just like a residential mortgage-backed security," said one hedge-fund investor whose company does business with Blackstone. When asked why the public should expect these securities to be safe, given the fact that risky mortgage-backed securities caused the 2008 collapse, he responded, “Trust me.”

For Blackstone, at least, the logic is simple. The company wants money upfront to purchase more cheap, foreclosed homes before prices rise. So it’s joined forces with JP Morgan, Credit Suisse, and Deutsche Bank to bundle the rental payments of 3,207 single-family houses and sell this bond to investors with mortgages on the underlying houses offered as collateral. This is, of course, just a test case for what could become a whole new industry of rental-backed securities.

Many major Wall Street banks are involved in the deal, according to a copy of the private pitch documents Blackstone sent to potential investors on October 31st, which was reviewed by TomDispatch. Deutsche Bank, JP Morgan, and Credit Suisse are helping market the bond. Wells Fargo is the certificate administrator. Midland Loan Services, a subsidiary of PNC Bank, is the loan servicer. (By the way, Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank are all members of another clique: the list of banks foreclosing on the most families in 2013.)

According to interviews with economists, industry insiders, and housing activists, people are more or less holding their collective breath, hoping that what looks like a duck, swims like a duck, and quacks like a duck won’t crash the economy the same way the last flock of ducks did.

“You kind of just hope they know what they’re doing,” says Dean Baker, an economist with the Center for Economic and Policy Research. “That they have provisions for turnover and vacancies. But have they done that? Have they taken the appropriate care? I certainly wouldn’t count on it.” The cash flow analysis in the documents sent to investors assumes that 95 percent of these homes will be rented at all times, at an average monthly rent of $1,312. It’s an occupancy rate that real estate professionals describe as ambitious.

There’s one significant way, however, in which this kind of security differs from its mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at least the assumption (often incorrect due to botched or falsified paperwork from the banks) that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single home-rental bond blows up, thousands of families could be evicted, whether or not they ever missed a single rental payment.

“We could well end up in that situation where you get a lot of people getting evicted... not because the tenants have fallen behind but because the landlords have fallen behind,” says Baker.

Bugs in Blackstone’s Housing Dreams

Whether these new securities are safe may boil down to the simple question of whether Blackstone proves to be a good property manager. Decent management practices will ensure high occupancy rates, predictable turnover, and increased investor confidence. Bad management will create complaints, investigations, and vacancies, all of which will increase the likelihood that Blackstone won’t have the cash flow to pay investors back.

If you ask CaDonna Porter, a tenant in one of Blackstone's Invitation Homes properties in a suburb outside Atlanta, property management is exactly the skill that Blackstone lacks. “If I could shorten my lease -- I signed a two-year lease -- I definitely would,” says Porter.

The cockroaches and fat water bugs were the first problem in the Invitation Homes rental that she and her children moved into in September. Porter repeatedly filed online maintenance requests that were canceled without anyone coming to investigate the infestation. She called the company’s repairs hotline. No one answered.

The second problem arrived in an email with the subject line marked “URGENT.” Invitation Homes had failed to withdraw part of Porter’s November payment from her bank account, prompting the company to demand that she deliver the remaining payment in person, via certified funds, by five p.m. the following day or incur “the additional legal fee of $200 and dispossessory,” according to email correspondences reviewed by TomDispatch.

Porter took off from work to deliver the money order in person, only to receive an email saying that the payment had been rejected because it didn’t include the $200 late fee and an additional $75 insufficient funds fee. What followed were a maddening string of emails that recall the fraught and often fraudulent interactions between homeowners and mortgage-servicing companies. Invitation Homes repeatedly threatened to file for eviction unless Porter paid various penalty fees. She repeatedly asked the company to simply accept her month’s payment and leave her alone.

“I felt really harassed. I felt it was very unjust,” says Porter. She ultimately wrote that she would seek legal counsel, which caused Invitation Homes to immediately agree to accept the payment as “a one-time courtesy.”

Porter is still frustrated by the experience -- and by the continued presence of the cockroaches. (“I put in another request today about the bugs, which will probably be canceled again.”)

A recent Huffington Post investigation and dozens of online reviews written by Invitation Homes tenants echo Porter’s frustrations. Many said maintenance requests went unanswered, while others complained that their spiffed-up houses actually had underlying structural issues.

There’s also at least one documented case of Blackstone moving into murkier legal territory. This fall, the Orlando, Florida, branch of Invitation Homes appeared to mail forged eviction notices to a homeowner named Francisco Molina, according to the Orlando Sentinel. Delivered in letter-sized manila envelopes, the fake notices claimed that an eviction had been filed against Molina in court, although the city confirmed otherwise. The kicker is that Invitation Homes didn’t even have the right to evict Molina, legally or otherwise. Blackstone’s purchase of the house had been reversed months earlier, but the company had lost track of that information.

The Great Recession of 2016?

These anecdotal stories about Invitation Homes being quick to evict tenants may prove to be the trend rather than the exception, given Blackstone’s underlying business model. Securitizing rental payments creates an intense pressure on the company to ensure that the monthly checks keep flowing. For renters, that may mean you either pay on the first of the month every month, or you’re out.

Although Blackstone has issued only one rental-payment security so far, it already seems to be putting this strict protocol into place. In Charlotte, North Carolina, for example, the company has filed eviction proceedings against a full 10 percent of its renters, according to a report by the Charlotte Observer.

About 9 percent of Blackstone’s properties, approximately 3,600 houses, are located in the Phoenix metro area. Most are in low- to middle-income neighborhoods.

Forty thousand homes add up to only a small percentage of the total national housing stock. Yet in the cities Blackstone has targeted most aggressively, the concentration of its properties is staggering. In Phoenix, Arizona, some neighborhoods have at least one, if not two or three, Blackstone-owned homes on just about every block.

This inundation has some concerned that the private equity giant, perhaps in conjunction with other institutional investors, will exercise undue influence over regional markets, pushing up rental prices because of a lack of competition. The biggest concern among many ordinary Americans, however, should be that, not too many years from now, this whole rental empire and its hot new class of securities might fail, sending the economy into an all-too-familiar tailspin.

“You’re allowing Wall Street to control a significant sector of single-family housing,” said Michael Donley, a resident of Chicago who has been investigating Blackstone’s rapidly expanding presence in his neighborhood. “But is it sustainable?” he wondered. “It could all collapse in 2016, and you’ll be worse off than in 2008.”

Laura Gottesdiener is a journalist and the author of A Dream Foreclosed: Black America and the Fight for a Place to Call Home, published in August by Zuccotti Park Press. She is an editor for Waging Nonviolence and has written for Rolling Stone, Ms., Playboy, the Huffington Post, and other publications. She lived and worked in the People’s Kitchen during the occupation of Zuccotti Park.




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Nobel Prize economist Robert Shiller warns of U.S. stock market bubble
Posted by StormCloudsGathering December 6, 2013

Nobel Prize economist Robert Shiller warns of U.S. stock market bubble With the Dow recently setting a new all time record at 16,000 some are ecstatic, however Robert Shiller, winner of the Nobel Prize in Economics in 2013, has joined the list of heavy hitters who say that the U.S. stock market is in a bubble. In a recent interview with German magazine Der Spiegel, Shiller says:
I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable… Bubbles look like this. And the world is still very vulnerable to a bubble.

Larry Fink, the CEO of BlackRock, the world’s largest money manager with $4.1 trillion in assets, has made similar comments in October saying that Federal Reserve policy is contributing to "bubble-like markets."
It’s imperative that the Fed begins to taper, We’ve seen real bubble-like markets again. We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.

Billionaire investor Carl Icahn agrees. "I am very cautious on equities today. This market could easily have a big drop,". "Very simplistically put, a lot of the earnings are a mirage," Icahn told the Reuters Global Investment Outlook Summit. "They are not coming because the companies are well run but because of low interest rates." Icahn's views on markets and individual companies are widely followed due to the strong returns he has generated over the years.

It's actually not at all surprising to see Robert Shiller calling this a bubble. After all, in our recent video (below) we talked about how his price to earnings ratio (Shiller P/E) indicated that a serious correction was in the works.


Older Sources Nobel Prize economist warns of U.S. stock market bubble: http://www.reuters.com/article/2013/12/01/us-economy-shiller-idUSBRE9B00...

Original interview with Der Spiegel: http://www.spiegel.de/spiegel/vorab/robert-shiller-nobelpreistraeger-war...

Translated version of the Der Spiegel interview: http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&i...

BlackRock’s Larry Fink Says There Are ‘Bubble-Like Markets Again: http://www.bloomberg.com/news/2013-10-29/blackrock-s-fink-says-there-are...

Billionaire investor Carl Icahn warns stock market could face 'big drop': http://www.reuters.com/article/2013/11/18/us-investment-summit-icahn-idU...



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The Justice Department isn't clueless Bill Black----it deliberately is denying fraud exists.  There is too much information written on the fraud for anyone not to understand it exists!


Documents in JPMorgan settlement reveal how every large bank in U.S. has committed mortgage fraud
Bill Black: Justice Dept.'s failure to understand pervasive schemes of fraud in financial industry obstructs meaningful prosecution of banks -   November 29, 13



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JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I'm Jaisal Noor in Baltimore. And welcome to this latest edition of The Black Financial and Fraud Report.Now joining us is Bill Black. He's an associate professor of economics and law at the University of Missouri-Kansas City. He's a white-collar criminologist, a former financial regulator, author of The Best Way to Rob a Bank Is to Own One, and he's regular contributor to The Real News. Thank you so much for joining us, Bill.BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

NOOR: So, Bill, what do you have for us this week?

BLACK: So, this'll be the first installment in what can we learn from the statement of facts that constitutes JPMorgan's admissions. This in that settlement that the Department of Justice is billing as the $13 billion settlement. As I've explained in the past, it's not that big, but it's still quite large in dollar terms. And we owe a debt of gratitude to Judge Rakoff, who's been giving the Securities and Exchange Commission a hard time about settling cases and getting absolutely no useful admissions from the people that perpetrated the frauds. And so the Justice Department was embarrassed into getting this statement of fact, which was obviously closely negotiated with JPMorgan to try to not establish its criminal liability, but still is a remarkable document in terms of what it tells us about the fraud second epidemics, not just at JPMorgan, but also the criminality at Washington Mutual and at Bear Stearns. And it tells us about the whole secondary market frauds. And it tells us a great deal about why the Justice Department is batting .000 against the elite frauds. So, to back up, the Department of Justice is only investigating the secondary markets sales. But there, the Justice Department has finally gotten to the point of essentially saying that there was a epidemic of fraud in sales to the secondary market. And what they've done in particular is endorse and piggyback and take advantage of the work of the Federal Housing Finance Administration, which is the conservator for Fannie and Freddie, and in that capacity has sued 18 of the largest financial institutions in the world and said that each of them engaged in fraud. So, you know, stop right there. The United States government, now with the endorsement of the Justice Department, has said that after investigation it found that essentially every large bank involved in the secondary market sales to Fannie and Freddie committed fraud. And frauds and intentional crime. Right? So that's an extraordinary thing. There were three of these epidemics of mortgage fraud that drove this crisis. Individually, each of the three fraud epidemics would have been the most destructive financial fraud in world history, but all three of them occurred at the same time and they're related. So the first two are in the mortgage origination phase, and that is what I've described in the past: the epidemic of appraisal fraud, led by lenders, and the epidemic of liars loans, also led by lenders and their agents. And that generated literally millions of fraudulent mortgages originated each year, most of which they sold to the secondary market. And since there's no fraud [incompr.] they had to, of course, engage in fraud in the representations and warranties--what we call reps and warranties for short--in the sale of these fraudulent mortgages through a further fraudulent representation to the secondary market. So the first thing that we have is that there are admissions not just as to JPMorgan in this statement of facts, but also as to Bear Stearns and Washington Mutual. And collectively, of course, we're talking about three of the largest and most elite financial institutions in the world. And the Justice Department says each of these engaged in fraud, which ought to be sort of the headline news, right, that three of the largest financial entities in the world engaged in pervasive fraud. Now, this is particularly remarkable in the case of Bear Stearns and in the case of Washington Mutual, both of them acquired by JPMorgan (Washington Mutual is called WAMU by most people for short), because they're infamous from past investigations. So the famous phrase used by the industry--remember, the industry used the phrase liars loans. That was not something that prosecutors came up with to try to bias juries. Well, the phrase in the industry was "Bear don't care", meaning that Bear Stearns could care less about the quality of the loans that it was buying in the secondary market, that it was most happily deceived and such. And Washington Mutual's infamous for the investigations that found that it was one of those places that did have a literal blacklist of honest appraisers who refused to inflate appraisals, in which WAMU refused to send future business to honest appraisers because it wanted to engage in this massive fraud scheme of inflating appraisals. Okay. So we've got not just really big, really elite, but incredibly infamous places, and we're getting confirmation from the Justice Department and from JPMorgan, the acquirers of these entities, that says, yes, these two entities ran this fraud scheme in the secondary market sales. But, of course, there's also the same allegations against JPMorgan and JPMorgan conceding to these facts as well, which, of course, leads to the obvious question: why haven't these senior officers controlling JPMorgan, Washington Mutual, and Bear Stearns been prosecuted for the crimes? And if for some reason they don't think they can prosecute the individuals, why don't you prosecute the corporation instead of letting it get off scot-free, apparently, with no criminal case? So that's the big take away at this point. But as I say, there's a second story, and that is that the Justice Department still doesn't understand this industry, the fraud schemes at all, and it is still living in this mythical world in which this is supposedly the first virgin crisis. And that's why you still don't see President Obama or Attorney General Eric Holder actually just making a flat-out statement that says, you know, we were wrong; this crisis really was driven by fraud, and it was driven by fraud in our most elite institutions, and it's a national scandal that they've gotten away with it without any prosecutions and that not a single one of the leading officers who led the frauds and became wealthy through the frauds, not only has a single one not been prosecuted, but we have not taken back a significant chunk of the money and left them, you know, with none of the fraud proceeds. We've done that in zero cases as to elite bankers. So in next installment we'll look at what the statement of facts tells you about how the Department of Justice unfortunately remains largely clueless.

NOOR: Thank you so much for joining us, Bill.BLACK: Thank you. And happy Thanksgiving, everybody.NOOR: Thank you for joining us on The Real News Network.

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Below you see the next phase of the massive mortgage fraud. Remember, we have yet to have justice from the massive subprime mortgage fraud and the damages it did to the economy with the collapse of 2008. Trillions of dollars lost from the fraud and tens of trillions of dollars in damages to individuals and government coffers yet to come back! People who lost their homes in the actual fraud and those families losing their homes from the unemployment caused by the fraud all will be getting homes back as soon as Rule of Law is reinstated.

Neo-liberals had planned the movement of real estate ownership from the middle/lower class to a few at the top with this massive fraud. Remember, this subprime mortgage scam started in the Clinton Administration as Robert Rubin and CitiBank started this financial scheme. So, targeted fraud on the lower-class and the long economic downturn from the tens of trillions of dollars sucked from the US economy from fraud are the culprits of lost home ownership. Now the Obama Administration has suspended Rule of Law and refuses to reverse the fraud and loss of homes.

In cities like Baltimore the movement of real estate is so crony and corrupt that you feel as though you were in Kabal, Afghanistan watching Visigoths looting the landscape. City real estate agents have been sidelined as the city buys property and hands it to developers of choice. Subprime mortgage fraud settlements so far simply help make people renters and fail to return those defrauded to home ownership. As this article shows the intent is to make most US citizens prey for these investment firms that created the fraud and now have been handed all the foreclosed homes.

SIMPLE REINSTATEMENT OF RULE OF LAW WILL BRING THESE HOMES BACK TO THOSE DEFRAUDED. THE WEALTH PEOPLE LOST AS THE RESULT OF THE FRAUD WILL COME BACK AND PEOPLE CAN RETURN TO OWNING HOMES!

Skeptics Criticize Single-Family REITs

Published on: Tuesday, August 28, 2012 Written by: Rosa Eckstein Schechter inShare

Single-family real estate investment trusts (REITs) are springing up in response to the rise in availability of distressed properties. The new funds focus on buying up blocks of foreclosed single-family homes to rehab and then use for rentals and sales are increasing. Critics argue it will reshape society by turning the majority of Americans into tenants and that there will be no regulations preventing abuse of the new system, which may include passing off maintenance and other responsibilities to the new tenants. It’s further believed that many purchasers have no rental management experience and are not concerned with getting any before they start renting. For more on this continue reading the following article from JDSupra.

As more and more investment chatter centers around the possibility of investing in the huge volume of single family homes that have, or will be, foreclosed upon in the United States, many are seeing an opportunity in Single Family REITs. (Read our earlier posts about this blossoming investment vehicle here.)

However, there are those that are very concerned about what Rental REITs (both apartments and SFDs) will mean in the long run to the American economy - and the U.S. Citizen. Here are some of their concerns and criticisms (with a hat tip to Yves Smith at Naked Capitalism for collecting most of these in his column and its commentary):

1. The expected popularity of this investment vehicle, together with the decline in homeownership in this country, may mean that many Americans will be tenants to private equity landlords: it will change the very essence of our society. These private equity landlords won't be like beloved Stanley Roper in the old Three's Company TV Series - nearby, quick to respond to complaints, always involved in maintainance. Nope. The worry is that Private Equity Landlords will be anonymous, unapproachable and possibly mysterious owners of properties without any regard for their tenants' concerns or the property's needs.

2. This is a new concept, and even if Rental REITs have some interest in being good landlords, they've got no pattern to follow, no example in the past to use in figuring out how to be the Corporate Stanley Roper.

3. Gretchen Morgenson of the New York Times points to skullduggery happening in New York City with apartment REITs: including suspicions of sending fake notices and fraudulent notices of non-payment (when payments have been made) to replace low paying tenants.

4. Some are predicting that these new Private Equity Landlords are going to transfer the responsibility of maintaining the property to the tenant as part of the lease terms.

5. If the Rental REITs fails to meet its own obligations, like Tishman Speyer did a couple of years ago on a NY apartment REIT, a large number of tenants are suddenly in limbo - and may not even be aware that their Private Equity Landlord has defaulted on its own agreements.

As more discussion occurs on this new investment vehicle, especially its latest version - the Single Family REIT, these and other worries will be a part of the conversation. And they should be. However, here's the big elephant in the room: there are unprecedented numbers of homes sitting on bank balance sheets right now because of all the foreclosures that have happened in this country. We know the impact of this very well here in Florida.

Something needs to be done to move forward, and we have no pattern here for how to fix this mess. It's something new.

So, new answers are being developed like Single Family REITs, not in a sinister way to thwart the American Dream, but in an optimistic way to get the economy moving again. Those homes have to get off the bank's shoulders so banks can get back to the industry of finance and not housing.
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As you see here, the Gary Kain was manager for Freddie and Fannie during the time of the movement of subprime loans into the hands of government insured agencies....$.800 billion in subprime loans were dumped on these government/taxpayer agencies during this man's term as Obama has refused to protect taxpayers from this massive fraudulent dump by demanding these loans just be written off. So, the man who knowingly imploded Freddie and Fannie now works with a corporation getting the bulk of mortgage buy-backs from the FED at discounted prices and 0% mortgage interest rates and using REIT to make record profits. These are foreclosed homes landing with an investment firm in bulk numbers and they are avoiding paying property taxes with REIT. The same person creating the fraud is now heading a second round of profit-making from the fraud and it is based in Maryland.

MERS WAS MARYLAND BASED AND NOW THIS AMERICAN CAPITAL IS THE FRONT FOR MOVING MILLIONS OF HOMES OFF THE BANKS' BOOKS BY THE FED AND INTO THE HANDS OF CONNECTED INVESTORS.

SEE WHY OBAMA WENT TO MARYLAND POLS IN FILLING FEDERAL POSTS? WE ARE FRAUD UNLIMITED!!!

We simply need to reinstate Rule of Law and we can reverse all this fraud and return wealth to the people!

Maryland and New York are key to this fraud because both states are the locations of the bulk of the fraud.

Bloomberg News MAR 28, 2013 10:18am ET

REITs Trigger Fed Warning as Gary Kain Tops $100 Billion

Gary Kain spent 20 years at Freddie Mac managing as much as $800 billion of bonds before the U.S. took over the company. Since 2009, he’s used his knowledge of the home-loan market to help turn American Capital Agency Corp. into the fastest growing mortgage debt investor.

American Capital’s assets grew to $100.5 billion at the end of last year from less than $5 billion three years earlier, making the Bethesda, Md.-based real estate investment trust the largest after Annaly Capital Management Inc., in an industry that’s drawing attention from investors and the Federal Reserve for its double-digit yields and rapid expansion.

REITs bought more than $100 billion of government-backed mortgage securities in 2012, the most since at least the credit crisis, and will purchase another $60 billion in 2013, JPMorgan Chase & Co. estimated this month. Fed Gov. Jeremy Stein pointed to the expansion of mortgage REITs, which have amassed almost $400 billion of the debt, during a speech last month on risky behavior in credit markets influenced by the central bank holding borrowing costs near zero for a fifth year and investors searching for high-yielding assets.

“Agency mortgage REITs deserve attention in particular because they have exploded in size,” said John Gilbert, chief investment officer at General Re-New England Asset Management, a unit of Warren Buffett’s Berkshire Hathaway Inc. that oversees $64 billion. “We’ve been dealing with the unintended consequences of monetary policy for a long time. We have to be on the lookout for the downside.”

American Capital, along with growing the fastest, has also been one of the most successful of the mortgage REITs. Since Kain, 48, was named chief investment officer, it’s returned 258%, including reinvested dividends, almost double the returns of a 34-company index.

The firm was started by private-equity financier Malon Wilkus and went public in February 2008, just as the Fed was responding to the biggest financial crisis since the 1930s.

Wilkus, chief executive officer of investment firm American Capital Ltd., hired Kain to help “navigate the evolving mortgage landscape,” he said in a statement at the time. The original management team had left in January 2009, about four months after the government seized Fannie Mae and Freddie Mac, when loan losses pushed the two firms to the brink of bankruptcy.

Kain, now president of the REIT, joined the firm when it held a little more than $2 billion and the Fed was preparing to start buying government bonds to resuscitate the housing market.

He took advantage of the central bank’s buying and used cheap borrowing costs to increase leverage for the REIT’s purchases of government-backed mortgage securities. The bets paid off, with the company returning 53 percent in 2009 including reinvested dividends.

Kain oversaw an average of about $700 billion during his last few years with the company, primarily government-backed mortgages. Since these bonds don’t take credit risks, his main responsibility was hedging for changes in interest rates. The portfolio also included non-agency mortgage-backed securities, including the subprime debt that helped fuel the housing boom and contributed to the company’s losses that led to the government rescue.

“A major emphasis of the subprime AAA portfolio was around hitting affordable housing goals so it was not as pure of an investment mindset,” Kain said.

When the government seized the company and sought to shrink the portfolio and the company’s imprint on housing finance, Kain said he “knew life at Freddie Mac was going to be very different” and started considering other options.

“His background was a perfect fit for American Capital,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “There’s been a lot of problems at Fannie and Freddie so it’s not surprising that someone would want to go out and do something else rather than be under the umbrella of the U.S. government.”

REITs have been among the biggest winners from government policies to resuscitate housing and stimulate the economy. The Fed has made it easier and cheaper for the companies to borrow through the so-called repo market. The central bank’s buying has also pushed up the value of mortgage bonds that REITs invest in.

Dividend yields that average about 12% have also lured investors seeking alternatives to corporate and government debt paying shrinking coupons. American Capital is yielding more than 15%.

Kain has applied knowledge from his experience at Freddie Mac to buy mortgage bonds that have a lower risk of refinancing, helping the firm return 17% this year. Since the debt typically trades above 100 cents on the dollar, homeowners taking out new loans when interest rates fall can erase the value of the securities.

The resurgence of REITs has attracted the attention of Fed officials and regulators, including the Securities and Exchange Commission, which has said it’s examining whether the companies should be allowed to continue borrowing without restrictions.

The concerns are overstated as REITs are limited by the quality of assets or lender confidence in how they manage their businesses, according to Kain.

“Fannie Mae and Freddie Mac were not regulated by the markets,” Kain said. “That was a key complaint which turned out to be very fair. There weren’t any market forces that were controlling the government sponsored enterprises. They could borrow money irrespective of their risk posture because of the implied guarantee” of the government, he said.

Kain’s team at American Capital, which includes longtime Freddie Mac colleagues Peter Federico and Christopher Kuehl, managed more in assets as of Dec. 31 than regional banks such as Keycorp and M&T Bank Corp. Kain is also chief investment officer of American Capital Mortgage Investment Corp., a separate REIT with $7.7 billion in assets that buys securities not backed by the government. The two companies have a staff of about 50 people, according to Wilkus.

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Keep in mind that while Federal coffers are going dry from lack of revenue coming from corporations and massive corporate fraud.....and public services and assets are being used to pay for it......the stock market is making huge money from the ability of corporations not to pay property taxes!

Can you imagine how many people would invest in these stocks if shareholders actually paid the taxes required?

SIMPLY AUDITING SHAREHOLDER TAX PAYMENTS WILL BRING TRILLIONS OF DOLLARS BACK TO GOVERNMENT COFFERS AND END THIS RALLY AT THE EXPENSE OF THE PUBLIC!

REITs Set Record, Raise $51.3 Billion
in 2011 January 20, 2012

The total returns of listed U.S. equity real estate investment trusts were approximately four times those of the broader stock market in 2011, according to the National Association of Real Estate Investment Trusts. REITs are securities that sell like stocks and invest in real estate directly through properties or mortgages.

NAREIT said the total return of the FTSE (Financial Times Stock Exchange) NAREIT All Equity REITs Index was up 8.28 percent for the year, and the FTSE NAREIT All REITs Index, which includes both equity and mortgage REITs, was up 7.28 percent, compared with a 2.11 percent gain for the S&P 500.

The more than 8 percent gain for equity REITs in 2011 came on top of a 27.95 percent gain in 2010 and a 27.99 percent increase in 2009—years in which the S&P 500 gained 15.06 percent and 26.46 percent, respectively. Equity REITs outperformed the S&P 500 for the past 1-, 3-, 10-, 15-, 20-, 25-, 30-, and 35-year periods, according to NAREIT.

Dividends Boost Performance

Much of REITs’ performance advantage has come from the stocks’ dividend payouts, since almost all of a REIT’s taxable income is paid to shareholders as dividends. The FTSE NAREIT All Equity REITs Index’s 8.28 percent total return in 2011 included a share price return of 4.32 percent, and the FTSE NAREIT All REITs Index’s 7.28 percent total return included a share-price return of 2.37 percent.

The dividend yield of the FTSE NAREIT All Equity REITs Index at December 30, 2011, was 3.82 percent, and the dividend yield of the FTSE NAREIT All REITs Index was 4.83 percent, compared to 2.22 percent for the S&P 500.

“The strong, continuing income stream from REITs is an important component of the appeal of REIT shares for investors,” said NAREIT President and CEO Steven A. Wechsler. “REIT dividends boost an investment portfolio’s performance in good times and help insulate it from downside shocks in turbulent market conditions,” he said.

REITs Set Capital Record

REITs raised a record amount of capital in the public markets in 2011, including a record amount of equity.

REITs raised $51.3 billion in public equity and debt in 2011, more than the $49 billion raised in the previous record year of 2006. Additionally, in spite of 2011’s volatile stock market, $37.5 billion of the capital raised in the year was in public equity, compared with $22 billion in 2006 and $32.7 billion in 1997, the prior record year for REIT equity offerings.
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PIMCO is the one that moved the people's investments and retirements into stocks just before the crash in 2007.  They are largely responsible for the 1/2 value losses because they use pensions as fodder.  Pensions were used then to buoy the big banks that crashed the economy and unlike private investors who had all their investments insured with CDS-----pensions were left to crash and burn.  This time they have pensions heavily invested in all of the European and US sovereign debt bonds and municipal bonds just as the bond market is going to crash.  Again, the people's wealth is being used as fodder.  This article shows pensions municipal investments being used for global expansion even as US citizens are shouting against global corporate rule and stolen wealth.  WE NEED TO END PENSIONS TIED TO THESE INVESTMENT FIRMS----DEMAND YOUR INVESTMENTS BE TAKEN FROM THE BOND AND STOCK MARKET NOW!

PIMCO
'We manage investments for a wide range of clients, including public and private pension and retirement plans and other assets on behalf of millions of people from all walks of life around the world. We are also advisors and asset managers to companies, central banks, educational institutions, financial advisors, foundations and endowments'.


Pimco Sees $3.7 Trillion Reason for Adding Yuan: China Credit

By David Yong & Kyoungwha Kim - Nov 21, 2013 11:14 PM ET

The yuan ranks in the top three on Pacific Investment Management Co.’s emerging-market investment radar, partly because of a $3.66 trillion currency pile that China’s central bank this week described as excessive.

Saudi Arabia, China and Russia ranked above 43 other developing nations when given equal consideration to reserves, short-term debt-to-economy ratios and current-account surpluses, according to data compiled by Bloomberg. Chief Executive Officer Mohamed El-Erian outlined the Pimco filters at an Oct. 10 conference in Washington. The yuan has gained 2.3 percent against the dollar this year, beating the pegged Saudi riyal and a 7.6 percent slump in the Russian ruble.

Enlarge image The yuan, which closed little changed at 6.0932 per dollar in Shanghai yesterday, touched 6.0802 on Oct. 25, the strongest level since the government unified the official and market exchange rates at the end of 1993. Photographer: Qilai Shen/Bloomberg

6:56 Nov. 21 (Bloomberg) -- Richard Clarida, global strategic adviser at Pacific Investment Management Co., talks about the outlook for Federal Reserve policy and Janet Yellen in her likely role as the next Fed chairman. Clarida speaks with Adam Johnson on Bloomberg Television's "Street Smart." Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC, and Matthew McLennan, portfolio manager at First Eagle Funds, also speak. (Source: Bloomberg)

Pimco, State Street Global Advisors and Aberdeen Asset Management Plc are among companies favoring China, after scanning the globe for markets least at risk to a tapering of Federal Reserve stimulus. An acceleration in China’s shift in its economic growth model away from investment and exports is also encouraging investment. The nation’s central bank said increases in foreign-exchange holdings no long benefit the country, adding to signs that policy makers will rein in dollar purchases that limit yuan appreciation.

“Reaction to Fed policy is certainly the critical driver of asset prices in the near term, but it’s not the only driver over a longer period of time,” Ramin Toloui, Singapore-based head of emerging markets at Pimco, said in a Nov. 14 interview. “The leadership has articulated the principles and priorities, so the focus will now be on the implementation and timing. These are critical to finding a growth model that evolves away and weans off the dependency on investment and credit.”

Toloui, who oversees $100 billion of assets, didn’t reply to a Bloomberg e-mail yesterday seeking comment on El-Erian’s criteria.

Foreign Investors Foreign investors boosted their ownership of Chinese government bonds for an eighth straight month in October to a record, according to data compiled by Bank of America Corp. Their holdings rose 8.9 percent from September to an unprecedented 109.6 billion yuan ($18 billion), or 1.4 percent of tradeable securities. China’s 10-year sovereign notes yielded 4.67 percent on Nov. 18, or 200 basis points more than Treasuries, the widest gap since October 2011.

President Xi Jinping, after a meeting of the Communist Party leadership last week, reiterated a goal to make the yuan fully convertible, as part of the biggest set of economic reforms in China since the 1990s. The central bank will “basically” end daily foreign-exchange intervention and broaden the yuan’s trading band, People’s Bank of China Governor Zhou Xiaochuan wrote in a book after the party plenum.

Yuan Advance The yuan, which rose 0.01 percent to 6.0923 per dollar in Shanghai today, touched 6.0802 on Oct. 25, the strongest level since the government unified the official and market exchange rates at the end of 1993.

China’s economy grew 7.8 percent in the three months through September, after a two-quarter slowdown, helping shield the yuan from emerging-market volatility stoked by speculation on when the Fed will eventually trim its bond purchases. One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, was 1.53 percent today, compared with 11.48 percent for India’s rupee and 14.38 percent for Indonesia’s rupiah.

Right Direction “The yuan is a low-volatility currency and we’re in a high-volatility environment,” said Kenneth Akintewe, a Singapore-based money manager at Aberdeen, which managed $324.6 billion globally as of Sept. 30. “The steps are in the right direction and while progress will be gradual, they have probably moved quicker than people expected a few years ago.”

The Chinese currency will appreciate as much as 4 percent next year, Akintewe said in a Nov. 19 interview. Median forecasts in surveys conducted by Bloomberg have the yuan rising 0.7 percent by June, the fourth-best among 22 emerging currencies, while Goldman Sachs Group Inc. on Nov. 21 upgraded its 2014 forecast to 6.05 per dollar from 6.15.

State Street bought yuan-denominated government bonds maturing in August 2016, October 2020, May 2023 and August 2023, according to October filings. Aberdeen purchased June 2017 notes, a September statement shows, while funds managed by BNP Paribas SA added July 2014 securities, based on July releases. Investors are treating China, South Korea and Taiwan like developed markets and these places could be immune should there be another stumble in emerging markets, Simon Derrick, London-based chief currency strategist at Bank of New York Mellon Corp., said in a Bloomberg TV interview yesterday.

Currency Management “We expect the yuan to continue its gradual appreciation,” said Gerard Teo, head of strategy and currency in Singapore at Fullerton Fund Management Co., which manages S$12 billion ($9.6 billion). “We see this as a medium-term positive for the currency” while the timeline or appreciation bias in China’s currency management remain to be seen, he said in a Nov. 20 e-mail interview.

Efforts to rein in shadow banking, or unregulated lending, and the debt burden incurred by local-government financing vehicles have led to cash squeezes that helped drive up borrowing costs in June and October, hurting bond performance.

Investors in China’s local-currency government debt have lost 2.6 percent this year, a JPMorgan Chase & Co. Index shows. In Hong Kong, yuan-based Dim Sum bonds have produced monthly gains for U.S.-based investors since June, according to the HSBC Offshore Renminbi Bond Index.

FX Reserves China’s foreign-exchange reserves surged $166 billion in the third quarter to a record, suggesting money poured into the nation’s assets even as developing nations from Brazil to India saw an exit of capital because of concern the Federal Reserve will taper stimulus. “It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the PBOC, said in a Nov. 20 speech at Tsinghua University.

Quotas under the Qualified Domestic Institutional Investor and Qualified Foreign Institutional Investor programs will be expanded and then scrapped, PBOC Governor Zhou said in a guidebook explaining reforms outlined following the Communist Party plenum. The central bank will start a trial program, called QDII2, that will allow individuals to invest overseas, Yi said.

China approved 5.3 billion yuan in quotas last month for companies investing offshore yuan in onshore markets, State Administration of Foreign Exchange data show. The total so far was 139.6 billion yuan for 47 institutions as of end-October.

“China’s new leadership has sent a clear message about what they want to achieve and the market reaction so far reflects optimism,” said Raymond Tang, chief investment officer in Kuala Lumpur at CIMB-Principal Asset Management Bhd., which manages about $14 billion. “This should underpin foreign inflows into China, as people are beginning to reduce their underweights in regional portfolios.”

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What is happening today is what happened in 2007 as the market prepared to implode.  In 2007 all private and public sector pensions were pulled from the then safety of the bond market and thrown into the stock market giving the 2007 market the same soaring look of success.  Today, it is the bond market Wall Street is imploding so everyone is being forced from the once safety of bonds into the stock market.  In just several months the entire economy will collapse in a crash of the bond market this time and it will be worse than 2008.  Don't worry about Wall Street investment firms----they have credit default swaps and investments overseas that will be protected from another crash of US and European markets.  American and European citizens will see all that municipal credit bond leverage their neo-liberal placed the city and state under bankrupt from the bond crash.  THIS IS PLANNED AS THE 1% ARE FORCING ALL PUBLIC ASSETS INTO CORPORATE HANDS AND EMPTYING GOVERNMENT COFFERS TO END PUBLIC SECTOR SERVICES AND EMPLOYEE BENEFITS.  They are doing to the public sector what Bains Capital did with private pensions and assets----gutting the company with debt and bankrupting to place debt on employees and public!  SAME THING! 

What is the public to do?  Record all of this publicly and with complaints to the US and State Attorneys and all media outlets to record the fact that this is all premeditated and public malfeasance.  Politicians like O'Malley and Rawlings-Blake and City Hall and Maryland Assembly cannot knowingly place citizens in harms way----it is illegal.  They did this last crash.  We need to make the next elections about getting rid of neo-liberals by running labor and justice in all primaries and making sure we have a REAL STATE AND CITY ATTORNEY to elect.  So far, all Maryland candidates are crony!

THIS IS WHAT THE FEDERAL RESERVE POLICY AND OBAMA AND CONGRESSIONAL NEO-LIBERAL POLICIES ON BOND MARKET CREATED-----THE NEXT MASSIVE CRASH SET TO WIPE OUT THE PUBLIC SECTOR!

Stock Funds Lure Most Cash in 13 Years as Market Rallies
By Charles Stein - Nov 21, 2013 12:00 AM ET

Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising.

Stock funds won $172 billion in the year’s first 10 months, the largest amount since they got $272 billion in all of 2000, according to Morningstar Inc. (MORN) estimates. Even with most of the cash going to international funds, domestic equity deposits are the highest since 2004.

Enlarge image A trader works on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Jin Lee/Bloomberg

5:13 Nov. 21 (Bloomberg) -- Charles Schwab, founder and chairman of Charles Schwab Corp., and Walter Bettinger, chief executive officer, talk about investor sentiment and the impact of Federal Reserve policy on financial markets. They speak with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

5:55 Nov. 20 (Bloomberg) -- Wells Fargo Asset-Management Chief Executive Officer Mike Niedermeyer talks about China's central bank's reform plan, the implications for Asia, and global investment strategy. Niedermeyer also discusses Federal Reserve monetary policy and its impact on markets. He speaks with Angie Lau on Bloomberg Television's "First Up." (Source: Bloomberg)

The move marks a reversal from the four years through 2012, when investors put $1 trillion into fixed income as the financial crisis drove many to redeem from stocks and miss out as the Standard & Poor’s 500 Index almost tripled from its low. Rare losses this year in core bond portfolios, coupled with a 25 percent gain in the S&P 500, spurred the switch back to equities that some professionals call risky performance chasing.

“The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Massachusetts, who oversees $200 million. The deposits may be a contrarian indicator of a market near a top, he said.

Jeremy Grantham, chief investment strategist at Boston-based money manager Grantham Mayo Van Otterloo & Co., told clients in a letter this week, “We will have the third in the series of serious market busts since 1999.” BlackRock Inc. Chief Executive Officer Laurence D. Fink said this month that stocks may decline as much as 15 percent because of political risks in China, Japan, France and the U.S.

Equity Allocations The market run-up has left investors as a group with an unusually high allocation to equities, at 57 percent, said Francis Kinniry, a principal at Valley Forge, Pennsylvania-based Vanguard Group Inc., the world’s largest mutual-fund company.

Equity allocations were higher only twice in the past 20 years, Kinniry said: in the late 1990s leading up to the technology stock crash of 2000, and prior to the 2007-2009 global financial crisis. He based his calculations on the total amounts of money in mutual funds and exchange-traded funds across asset classes at U.S. firms.

People shifting into equities “are jumping from one frying pan to another,” Eric Cinnamond, manager of the $694 million Aston/River Road Independent Value Fund, said in an interview from Louisville, Kentucky.

Intermediate-term bond funds, a category often used for primary fixed-income holdings, declined 0.9 percent in 2013 through Nov. 19, according to Chicago-based Morningstar. Fixed-income funds had net redemptions of $11.2 billion in this year’s first 10 months, the firm estimated.

Statement Shock Bonds have lost value since Federal Reserve Chairman Ben S. Bernanke in May raised the possibility of the U.S. central bank scaling back its asset-buying program. The yield on the 10-year Treasury note rose to 2.79 percent as of 4:15 p.m. yesterday in New York from 1.93 percent on May 21, the day before Bernanke first mentioned the idea of reducing monetary stimulus. Bond prices fall as rates rise. Pacific Investment Management Co., the biggest manager of bond funds, lost $39 billion to net withdrawals in the third quarter.

“People are rotating into stocks because they opened up their statements and saw losses in their bond funds for the first time in god knows how long,” Michael Mullaney, who oversees $10.7 billion as Boston-based chief investment officer for Fiduciary Trust Co., said in a telephone interview.

Investors added $13.6 billion to stock mutual funds in the week ended Oct. 23, the most since early January, according to the Investment Company Institute, a Washington-based trade group. The $9.2 billion they put into funds that buy U.S. stocks that week was the highest total since weekly records began in 2007.

Bullishness Readings Sentiment among individual investors grew increasingly positive as the S&P 500 set new highs. Bullishness in the American Association of Individual Investors’ weekly survey has averaged 43 percent this quarter, up from 29 percent in August and a long-term average of 39 percent.

Money managers have noticed the change.

“There is no doubt that people are moving further out the risk curve and it’s manifesting in the equity side of the house,” Henry Herrmann, CEO of Overland, Kansas-based Waddell & Reed Financial Inc. (WDR), said on an Oct. 29 conference call for investors.

Greg Johnson, CEO of San Mateo, California-based Franklin Resources Inc. (BEN), told investors on a conference call last month that he was “encouraged by the improved flows to equity and hybrid strategies,” which saw their strongest deposits in three years. Hybrid funds buy both stocks and bonds.

Even so, some firms say the return to stocks is still modest.

Not 1990s “It doesn’t feel like the 1990s,” said Douglas Orton, vice president of Boston-based MFS Investment Management (SLF), which oversaw $398 billion as of Oct. 31. In that decade, mutual-fund assets soared from less than $1 trillion to almost $7 trillion, according to the ICI, as rising prices fueled demand from households and retirement savers.

Orton, whose firm regularly surveys individual investors to gauge risk appetites, said 38 percent of respondents to the latest questionnaire, taken in May, called asset growth their top priority, an increase from 30 percent in October 2012 while below the 60 percent level from before the financial crisis.

As a percentage of assets in stock funds, this year’s deposits are on par with those made in 2005 to 2006, Morningstar’s data show.

Past Reversals Investors returning to stock funds may not be a bearish signal, based on historic patterns. In ICI data going back to 1984, annual mutual-fund flows turned positive twice before: in 1989, preceding market gains in eight of the next 10 years, and in 2003, when the S&P 500 kept rallying until October 2007.

The money hasn’t flowed to all equity-fund managers. Los Angeles-based Capital Group Cos.’ American Funds, the third-largest mutual fund firm in the U.S., had redemptions of $9.4 billion from its equity lineup in the first 10 months of 2013, Morningstar estimates.

Among the beneficiaries, MFS drew $14.5 billion to its stock funds, Chicago-based Harris Associates LP’s Oakmark Funds attracted $13.6 billion and Springfield, Massachusetts-based Massachusetts Mutual Life Insurance Co.’s Oppenheimer Funds got $13 billion, Morningstar’s estimates show. Vanguard Group, whose $2.4 trillion in assets make it the largest mutual-fund company, won equity deposits of $61 billion.

Technology Crash In the past, investors returned more quickly to stocks after market declines. When the S&P 500 Index (SPX) plunged almost 50 percent from March 2000 to October 2002 following the collapse of the technology bubble, retail investors shook off the damage and added $140 billion to stock funds in 2003.

The 38 percent drop for stocks in 2008, the worst year for the U.S. benchmark since World War II, had a deeper impact on psychology because the losses were so widespread, said Burton Greenwald, a mutual-fund consultant based in Philadelphia.

“The public was beaten down,” he said in a telephone interview. “It took a long time for confidence to return.”

The S&P 500 Index has risen from 676.53 in March 2009 to 1,781.37 at yesterday’s close, lifting equity-fund returns.

“A lot of people may regret not getting in earlier,” Michael Rawson, a Morningstar analyst, said in a telephone interview.

Bond Losses For now, the gap between stock and bond returns is widening. The Barclays U.S. Aggregate Index, a common bond-fund benchmark, declined 1.4 percent this year through Nov. 19, headed toward its first loss since 1999.

Dismal fixed-income returns, and the potential for worse, are on clients’ minds, said Theresa Wan, a financial planner who advises individual investors in Dumont, New Jersey.

“People seem to realize that if they want their money to grow they have to be willing to take more risk,” Wan said in a telephone interview.

One of her clients, retired doctor Michael Resnick of Suffern, New York, in July agreed with her suggestion to increase his allocation to stock funds to 35 percent from 30 percent.

Resnick, 77, said he was wary because he has a low tolerance for absorbing losses.

“But expectations for bonds are very low, maybe 2 percent or less,” he said in a telephone interview.

So far, Resnick is comfortable with the change.

“I’m sleeping all right,” he said.

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This is what is happening all across the country.  Banks are loading municipalities with credit bond debt knowing the economy is going to crash and they don't care----because just like the subprime mortgage fraud----they have credit default swaps====CDS that will insure against most losses.  So, a city can go into such leveraged debt that taxpayers will be on the hook for decades for work that could have been paid in cash had corporations been paying taxes and not defrauding government to the tune of tens of trillions of dollars.


Some hedge funds benefited by purchasing defaulted bonds for about 65 cents to 70 cents on the dollar from banks that dumped the debt and received about 80 cents on the dollar as part of the bankruptcy plan, according to a person familiar with the purchases who asked for anonymity to discuss the matter.


Jefferson County’s Bankruptcy Left Few Winners
By Martin Z. Braun - Nov 23, 2013 3:11 PM ET Bloomberg Financial


The impact of Jefferson County’s bankruptcy will reverberate for decades in Alabama and in the $3.7 trillion U.S. municipal bond market.

Creditors, including JPMorgan Chase & Co. (JPM), agreed to forgive $1.4 billion of the county’s $3 billion sewer bonds. Ratepayers, like Charles Hicks, a retired landscaper who lives on a fixed income in Birmingham, will see his sewer rate rise about 8 percent annually for the next four years and 3.5 percent annually thereafter, under a plan approved by a federal judge on Nov 21.

Enlarge image Joe Minter, Harry Turner, and Mabel Nunn demonstrate outside the Jefferson County courthouse as the county commissioners meet about the Jefferson County bankruptcy in this Aug. 12, 2011 file photo in Brimingham, Ala. Photographer: Butch Dill/AP Photo

“There’s a lot of pain going around -- bondholders are taking large losses, but ratepayers are as well,” said Matt Fabian, a managing director at Concord, Massachusetts-based Municipal Market Advisors.

For the next 40 years, residents and businesses that already have some of the highest sewer rates in the country will pay back more in principal and interest than they owed before the bankruptcy, according to an analysis by Jim White, a Birmingham-based financial adviser who did an analysis for residents challenging the bankruptcy plan. Until Detroit’s July filing, Jefferson County was the nation’s largest municipal bankruptcy.

Negotiating Deals U.S. Bankruptcy Judge Thomas Bennett dismissed objections to the county’s debt-reduction plan based on White’s analysis.

The willingness of Alabama’s most populous county to enter bankruptcy, along with the losses imposed on creditors, may make bondholders of other distressed municipalities more willing to negotiate outside of court. Taxpayer groups will look at Jefferson County and see that bankruptcy won’t wipe away their obligations, Fabian said.

“It does take the thunder out of taxpayer groups who are looking to get into bankruptcy just to shed debt, because it shows that those taxpayers could also be put on the hook to contribute in the future,” Fabian said.

Some hedge funds benefited by purchasing defaulted bonds for about 65 cents to 70 cents on the dollar from banks that dumped the debt and received about 80 cents on the dollar as part of the bankruptcy plan, according to a person familiar with the purchases who asked for anonymity to discuss the matter.

Funds that bought Jefferson County bonds include Brigade Capital Management LLC, Claren Road Asset Management LLC, Fundamental Advisors LP, all based in New York, and Monarch Capital Master Partners LP, according to court records.

Attorney Fees Since filing the $4.2 billion case in November 2011, the county has spent more than $24 million on attorneys and other advisers. Most of the payments went to the county’s two main law firms.

Klee, Tuchin, Bogdanoff & Stern LLP in Los Angeles, which is led by Ken Klee, the lawyer who helped rewrite the U.S. Bankruptcy Code in the 1970s, collected $10.1 million in fees and was reimbursed about $204,000 for expenses. The second firm, Bradley Arant Boult Cummings LLP, which has offices in Birmingham, collected $8.2 million in fees and was reimbursed about $294,000 for expenses.

Under an unusual provision in the exit plan approved by Bennett, Jefferson County’s commissioners’ power to set and enforce rates will be limited until almost $1.8 billion in bonds sold this week to pay creditors are paid off in 2053. The trustee for bondholders can ask the court to force sewer rate increases that may be needed to pay the debt.

‘High Burden’ The challenges facing the county’s finances and its sewer system won’t end with bankruptcy. Because the new bond issue pushes debt service payments into the future, rising 67 percent in 2024, the county is facing a projected $1.2 billion gap in money available to maintain the sewer system. A consulting firm that conducted a feasibility study for the county said it couldn’t identify where the county would get money to pay for capital spending.

The rate increases pledged to pay debt service will impose a “high burden” on ratepayers, and would cause rates to “approach the limits of reasonableness,” according to the Chicago-based consulting company, Galardi Rothstein Group.

Sewer rates will rise 7.9 percent each year for four years, starting in 2014, and by almost 3.5 percent annually through 2053. That’s on top of a 329 percent increase from 1997 to 2008 after the county embarked on a capital program to comply with a U.S. Environmental Protection Agency decree to clean up discharges into the Cahaba River.

Costs Rose The cost of Jefferson County’s sewer system ballooned to $3 billion as the county built treatment plants and laid pipe without a strategic plan and local officials accepted bribes from construction contractors and financial advisers seeking business with the county.

In 2009, JPMorgan agreed to a $722 million settlement with the U.S. Securities and Exchange Commission over payments that the agency said its bankers made to people tied to county politicians to win business. It also provided more than $900 million in concessions to allow the county to end its bankruptcy.

The sewer rate increases will disproportionately affect the poor. Seventy percent of the sewer system’s users reside in the commission districts with poorest residents, according to County Commissioner George Bowman, who voted against the bankruptcy.

‘Fraudulent’ Process “This whole process had been fraudulent to the ratepayer,” said Hicks, 67, the retiree.

Under Alabama law, sewer rates must be reasonable and nondiscriminatory. Ratepayers who objected to the county’s plan are vowing to continue legal challenges.

Some residents in wealthy Birmingham suburbs, who have septic tanks and aren’t connected to the sewer system, don’t have to pay additional charges even though they get the indirect benefit of the county having clean water.

Calvin Woods, president of the Birmingham Chapter of the Southern Christian Leadership Conference, said it was wrong that county officials didn’t spread the pain of rate increases evenly.

“Unless you’re going to put it across the board on everybody, you’re still going to have a lot of trouble,” Woods said. “All of us live in the county.”

The case is In re Jefferson County, 11-bk-05736, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).

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This is just one article on the complete corruption of Delaware....it is why Biden's son stayed to become State AG.....
Letter - Barack Obama Statement on Offshores
Report - Financial Secrecy Rankings - 2009
Report - Financial Secrecy Index - 2009


Delaware - The Onshore Offshore


Saturday, 20 November 2010


Offshore tax havens bring to mind tropical islands or Alpine towns.  But the preferred location for organized crime figures and corrupt politicians worldwide is the US state of Delaware.

Last month, prosecutors for the Romanian Unit to Fight Organized Crime and Terrorism arrested an offshore registry agent named Laszlo Kiss for masterminding an embezzlement and laundering operation for executives of a Romanian oil services company. Kiss is the author of a book promoting his business – and outlining just how to take advantage of the tiny state of Delaware to avoid taxes and launder money.

Delaware has long been criticized for an incorporation process that leaves it vulnerable to criminal activity. Despite complaints from federal law enforcement officials, congressional testimony, and reports from the Government Accountability Office, procedures in Delaware – and similar processes in other states – still let criminal groups infiltrate the corporate system.

Delaware is becoming the choice of drug dealers, organized crime and corrupt politicians to evade taxes and launder money, an investigation of the Organized Crime and Corruption Reporting Project (OCCRP) found.  The International Consortium of Investigative Journalists (ICIJ) assisted in the investigation.

“The biggest problem in the world is the US when it comes to shell companies, we are the biggest international problem,” said Denis Lormel, a FBI agent for 28 years and former chief of FBI’s financial crimes section. Lormel now runs his own consulting firm.  “Because of the lack of transparency, shell companies become a vehicle of choice for the bad guys.”

The Tax Justice Network listed the tiny state as their No. 1offender in their 2009  Financial Secrecy Index, a ranking based on the scale of cross-border financial activity and on “Delaware's commitment to corporate secrecy, and resolute lack of cooperation and compliance with international norms.”  (See the Full Delaware report here)

Professor Jason Sharman, an expert in offshore havens for the Center for Governance and Public Policy at Griffith University in Australia agrees: “The US has been pretty robust in making sure that other countries live up to these standards, but they have been lax about applying the same degree of rigor to themselves. It’s nowhere near what the US has signed on to do,” he said.

Delaware requires no information on actual ownership when companies fill out incorporating documents. Federal law enforcement agencies complain that this lack of identification makes it difficult at best for investigating suspected wrong-doing.

The US Department of Justice’s Office of Public Affairs provided comments in a 2009 congressional hearing on incorporation transparency. Jennifer Shasky Calvery, then senior counsel to the deputy attorney general, testified that law enforcement cannot determine who is perpetuating illegal activity through state records. “So, ironically, US law enforcement must try to get information about a US company from the foreign country, which is difficult for many reasons, and often simply not possible at all.”

Rick Geisenberger, Delaware’s deputy secretary of state and chief of the corporations division, said that asking for additional information from companies would interfere with a speedy and efficient incorporation system and could divert investment activity elsewhere. He said the overwhelming majority of companies that incorporate in Delaware are legitimate.

“I’m under no illusions that some of them are bad guys,” Geisenberger said. “But does that mean you put in place procedures that take longer to form entities in order to prevent those bad guys?”

Geisenberger’s comments parallel what is said in offshore havens around the world.

“Many high-taxing, high-spending governments would like everyone to believe that offshore companies are only used by fraudsters, terrorists and crooks. That`s completely unjustified. While there is always a rotten apple in any box (especially, if the box is large enough), 99 percent of all business transacted through offshore companies is completely legitimate,” said the website for Fidelity Corporate Services, a Seychelles offshore registry firm.

However, nobody knows for sure how much illegal business is taking place largely because offshore haven like Delaware don’t look.  Anecdotal data suggest that a growing number of companies registering in Delaware from abroad that are involved in criminal activity.

“One of the other reasons people will incorporate in Delaware from a foreign jurisdiction is that you get this patina of respectability for registering in the US. But, in fact, you can’t really find anything out about the company. People are using our system and abusing our system,” said Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity, a Washington, DC-based watchdog.

OCCRP easily gathered the names of dozens of instances of offshore companies used to evade taxes, launder money, hide monopolies, hide ownership or other criminal purposes.

Geisenberger said that indications of criminal activity should be taken seriously, and said the state would be willing to provide more transparency, as long as it did not interfere with corporate activity.

In 2000, the Government Accountability Office, the investigative arm of the US Congress, released a  report on Russian groups setting up companies in Delaware, and concluded: “It is relatively easy for foreign individuals or entities to hide their identities while forming shell companies that can be used for the purpose of laundering money.” John Flattery, president of the Delaware Coalition for Open Government, said the report raised serious questions, but little was done in response.

Geisenberger said Delaware has been at the forefront of improving state incorporation politics, particularly as the first state in the country to pass a statute that ensures all corporations in the state have a registered office. It also doesn’t allows them marketing anonymity as a benefit to potential clients.

All Delaware companies are required to have a registered agent, which must maintain an address in the state, be open during normal business hours, and act as the liaison between a company and the Delaware corporations’ division. Incorporating documents will list that agent’s name and address as the company’s only contact, without providing details about the real ownership. The purpose of the company may also be listed although the following standard language is often used: “To engage in any lawful act of activity for which corporations may be organized under the General Corporation Law of Delaware.”

But in practice, these actions are self serving.  The requirement has actually made it easier for criminals to start offshore shell companies. Using Delaware’s all-too-accommodating registry companies means organized crime can register Delaware companies in minutes.  OCCRP also found that while Delaware companies might not advertise the state’s anonymity laws, just about every registration company abroad does and this is where much of the criminal activity originates.

The state turns a blind eye to the fact that its agents do not verify information they are given nor does this solve the problem of offshore companies using proxies to register companies in Delaware. Delaware’s law does do one thing – its swells state coffers by requiring everyone to pay Delaware agents to register a company increasing their income and collection of Delaware taxes.

“In 2007, in Delaware, their operating budget for incorporating companies was a little over $12 million and they were pulling in over $700 million each year. So clearly that’s one of the ways they’re financing services for the state,” Lowe said.

According to congressional testimony, business incorporation and related fees account for as much as 25 percent of the state’s general fund revenues.[1]

Kiss and other registration agents abroad register dozens of companies at a time through Delaware agents and then resell those companies to clients.  Because agents like Kiss use the same proxies on all their companies, no ownership change is needed when they “sell” a company.  In a proposal to undercover OCCRP reporters, Kiss offered to sell them pre-registered companies with matching names in Delaware, Seychelles and Cyprus. This amounts to a turnkey money laundering or tax evasion system.

Kiss told reporters from OCCRP before his arrest that he had a virtual “factory” in Delaware minting companies for him.  Kiss registered hundreds of companies through the same Delaware firm without raising any alarm bells in the state or with the agent.

Delaware’s Division of Corporations processes incorporating documents for the state and Geisenberger said he is proud of their quick turn around which makes it easy to move capital and generates investment activity.

Flattery said the state touts its advantages for businesses.

“Delaware looks at is as a revenue-raising measure,” Flattery said. “But as a national issue, it’s a disgrace. Fictitious companies that are allegedly violating the law are using Delaware as a shield.”

OCCRP found numerous companies registered in Delaware by offshore businesses controlled by persons accused of organized criminal activities.  For example:

• Serbian fugitive Stanko Subotic registered the planes in Delaware that Italian prosecutors said were used to ferry stacks of illegally earned cash to banks in Cyprus and Liechtenstein. The money was earned, prosecutors say, from tobacco smuggling between the Montenegrin government and the Italian Sacra Corona Unita mafia group.
• Fugitive Serbian drug lord Darko Saric, who allegedly tried to move 2.1 tons of cocaine from South America to Montenegro last year, registered many of his companies in Delaware where they are still active.
• Marian Iancu, a Romanian businessmen charged with organizing a criminal group by Romania prosecutors, used Delaware based companies in his takeover of a state oil refinery through an alleged corrupt privatization and in its eventual resale to controversial Russian businessman Mikhail Chernoy.
• And Laszlo Kiss used Delaware companies to bill Petrom Service more than €8 million in consulting contracts for work that was never done.

Last year, Sen. Carl Levin, a Democrat from Michigan, proposed the “Incorporation Transparency and Law Enforcement Assistant” bill that would require names and addresses of actual individual owners on incorporating documents. That information, he said, could be vital for investigations.

Levin said that only federal legislation can “level the playing field among states” and that states are not willing to reach a solution because they compete with each other to bring in corporations.  The bill was never acted on.

“This bill died because we had two Delaware senators and a Nevada senator on the committee,” said Lowe of Global Financial Integrity. “That’s just frustrating. They’re protecting their positions, and they’re protecting their revenue.

“And to put state revenue ahead of global security to my mind is not OK.”

The following journalists contributed to this project.

_________________________________________

 21 November 2013 08:13

Revolving Door Sham: JPMorgan CFO Admits $7 Billion of DOJ Settlement is Tax-Deductible

MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

To hear the number $13 billion dollars as a fine in the much-leaked-but-finally-announced Department of Justice (DOJ) settlement with JPMorgan Chase is meant to imply that the DOJ is getting tough on Wall Street. After all, $13 billion dollars is a jaw-dropping pile of money.

In reality, it is, according to The New York Times only "half the bank’s annual profit." As BuzzFlash at Truthout has pointed out in the past, that still means roughly $6.5 billion dollars in profit for the behemoth financial institution, no apparent cut in the oligarchical compensation of the likes of JPMorgan's chief executive, Jamie Dimon, and no major changes in the salaries or composition of Dimon's executive team.

Furthermore, the NYT reports that "Marianne Lake, JPMorgan’s chief financial officer, emphasized that $7 billion of the settlement was tax-deductible." In addition, as BuzzFlash reported in an earlier commentary, JPMorgan may -- if you can believe this -- may receive several billions of dollars in FDIC coverage that would offset as much as a third of the $13 billion fine.

But then we get down to the basic fact that the DOJ still cannot answer.  How can a bank-too-bit-to-fail commit $13 billion worth of fraud and yet no one committed a crime? Yes, the agreement allows for a Sacramento US prosecutor to pursue some relatively minor criminal charges in California, but that looks like about it.

As the NYT also reports:

Still, some critics of Wall Street are seeking harsher penalties. They question why the Justice Department’s has pursued civil penalties, rather than criminal charges, against the nation’s biggest banks.

“Unless you hold the executives accountable, it really is just the cost of doing business,” said Bart Naylor, a policy advocate at Public Citizen, who noted that the settlements hurt shareholders more than executives.

The answer to that may lie in the fact that there is very little separating Wall Street from the DOJ and other regulators other than a revolving door.

Combat the epidemic of misinformation that plagues the corporate media! Click here to make a tax-deductible donation to Truthout and BuzzFlash, and help keep independent media strong.

Journalist Kevin Connor connects many of the dots and collegial interrelationships: "It is quickly becoming clear that JPMorgan’s tentative $13 billion settlement with the Department of Justice is not the massive, overly-punitive sanction that some press reports have made it out to be. The weaknesses in the deal may be explained in part by the fact that in arranging the settlement, JPMorgan was negotiating through the revolving door."

Connor further notes (and provides a damning graphic showing the incestuous relationships between the regulators and regulated -- click here to see):

We have the names of the key players involved, thanks to the New York Times: attorney general Eric Holder, associate attorney general Tony West, and deputy attorney general James Cole at the Justice Department, and JPMorgan CEO Jamie Dimon, general counsel Stephen Cutler, and outside counsel H. Rodgin Cohen on the other side of the negotiating table.

Stephen Cutler, JPMorgan’s general counsel, is the former director of the SEC’s enforcement division, a job which gave him experience and contacts that likely serve him well as he fends off legal challenges to the bank. His new position, of course, is much more financially lucrative: he earned over $5 million from JPMorgan in stock awards alone in 2012 (this excludes all cash compensation).

On the other side of the negotiating table (if there are two sides), Holder, Cole, and West are all former white collar defense attorneys. Holder was a partner at Covington & Burling, where his clients included Bank of America and UBS. Cole was a partner at Bryan Cave, where he was appointed as an independent consultant overseeing AIG’s disclosure and compliance practices (and appears to have failed spectacularly in this task).

And lastly, West was a partner at Morrison & Foerster, where his clients in 2008 included none other than Washington Mutual. WaMu, of course, was acquired by JPMorgan Chase in 2008, and its mortgage lending practices are one major reason JPMorgan has such significant legal exposure. West’s disclosure form lists WaMu as a client in 2008, but does not shed light on the nature of the services that he provided.

Yes, $13 billion dollars in fines sounds gargantuan, but it's really just another public relations stunt to give the appearance of cracking down on epic financial crime.  Jamie Dimon is still running JPMorgan Chase, surrounded by former government regulators and DOJ officials -- and Eric Holder and his crew are doing the resume polishing necessary to return to multi-million dollar legal partnerships defending clients, well ones like Jamie Damon and JPMorgan Chase.

It's all so nice and cozy: you blow up an economy and get a big parking ticket, paid for by the shareholders not the culpable staff of the financial firm.

As the journalist Connor sardonically observes as to the larger issue of unfathomable financial crime going unpunished, "unfortunately, democracy is footing the bill."


_____________________________________________________________________________
Below we see what is a good look at who the subprime loan borrowers were.  We are often given the impression that those caught in the fraud were IRRESPONSIBLE and PLAYING THE SYSTEM.  In actuality many were good people being deliberately placed in bad loans.
The Subprime Mortgage Crisis: Debunking Myth and Reality?
Recently, Yuliya Demyanyk, a Senior Research Economist, at the Cleveland Federal Reserve Bank issued a very interesting Economic Commentary entitled “Ten Myths about Subprime Mortgages.” Demyanyk contends that many of the popular explanations for the subprime crisis were in reality myths. Further, Demyanyk takes the position that empirical research proves that the causes of the subprime crisis are multifaceted and complicated; going far beyond mortgage rate resets, declining underwriting standards, or declining home values that we typically are quick to point a finger towards.

In addressing and debunking the ten myths she perceives about the subprime mortgage crisis, Demyanyk makes the following observations:

* Subprime mortgages went to all kinds of borrowers, not just borrowers with damaged or impaired credit.

* Subprime mortgages did not promote homeownership.

* Declining home prices and values did not cause the crisis. Declining home prices served to reveal the quality of subprime mortgages that had been deteriorating for years.

* Declining underwriting standards did not trigger the subprime crisis. Yes, standards were declining, but not to a level to account for the enormous rise in mortgage defaults.

* Borrowers did not use their homes as ATM’s to extract cash from home equity loans and lines of credit. Data shows that mortgages originated for refinance performed better than mortgages originated solely to buy a home.

* Mortgage rate resets did not solely cause the subprime crisis. Fixed rate mortgages showed all the signs of distress that adjustable-rate mortgages showed.

* Subprime borrowers with hybrid mortgages were not offered low “teaser rates.”

* The subprime mortgage crisis was not totally unexpected.

* The subprime crisis in the United States is not totally unique; it follows a classic cycle of boom-and-bust that has been observed historically in many countries.

Demyanyk’s Economic Commentary makes for an interesting read to better understand the complicated causes of the subprime mortgage crisis. I tend to agree with some of Demyanyk’s assertions. On the other hand, I tend to disagree with some of Demyanyk’s assertions. Again, Demyanyk’s Economic Commentary is an insightful and thoughtful piece. Do you agree or disagree with Demyanyk’s perspective? I look forward to hearing what you think about the causes of the subprime mortgage crisis.



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Freddie and Fannie are the governmental agencies made private so they could process these subprime loans and harbor much of the debt when the crash came.  Indeed, they are estimated in having about $750 billion in subprime loans on record.  This is why Obama and neo-liberals are trying to get taxpayers to write down the debt rather than demanding Wall Street do it.....protecting Wall Street from losses with yet another taxpayer bailout.

What we know is that regardless of how many times we are told 'there was no fraud' -----there was trillions of dollars in fraud.  Below you see a good overview of those guilty and the parking ticket fines paid.  Remember, millions of homeowners were taken and we see these few examples of tens of thousands getting some settlement.

THE IMPORTANT THING TO REMEMBER IS THAT A GOVERNMENT CANNOT DELIBERATELY WORK AGAINST PUBLIC INTEREST TO THE BENEFIT OF CORPORATE PROFIT.....IT IS AIDING AND ABETTING.  SO, THESE SETTLEMENTS THAT DO NOT BEGIN TO ADDRESS THE FRAUD ARE NOT THE FINAL SAY IN JUSTICE FOR THESE CRIMES.

Fannie and Freddie were used to facilitate the crimes in that they were used to insure what everyone knew were bad loans.  If Fannie and Freddie had not insured them......banks would not have taken the risk.

Sunday, November 6, 2011

The Real Subprime and Predatory Fraud (Fannie and Freddie Acquitted Again and Again II)
Facts are stubborn things but ideologues are immune. Extreme right wing rhetoric concerning the role of Fannie and Freddie in the subprime debacle, is an example. As readers of this blog already know, nine out of 10 commissioners of the bi-partisan Financial Crisis Inquiry Commission rejected the thesis that Fannie Mae and Freddie Mac (the "GSEs") operated as the primary cause of the financial debacle. No matter the facts, the right twists some new tale about how the GSEs caused it all (as opposed to being essentially bit players or one of many causes).

Therefore, I anxiously await the response to the following: the real culprits have already fessed up to (or at least paid for) monumental frauds of unprecedented audacity and scale in the subprime market. And, Fannie and Freddie played zero role in this story. A massive number of real estate loans were made with the specific intent of default (i.e. the ultimate in predatory lending) so that Wall Street could make a killing (killing American capitalism for their enrichment) on undisclosed short positions on subprime assets they selected for portfolios that they then foisted on investors across the globe. THEY DEMANDED LOAN DEFAULTS! Wall Street literally loaded up mortgage backed securities (in the form of collateralized debt obligations or CDOs) with the riskiest loans possible so they could cash in on their secret short positions on the very securities they were selling to firm clients.

So, Goldman Sachs paid an all time record $550 million to settle charges that it marketed securities based upon subprime loans without disclosing that a hedge fund was short those very same securities and that the hedge fund played a role in selecting the underlying mortgages for inclusion in the portfolio. In Goldman's own words: "it was a mistake for the Goldman marketing materials to state that the reference portfolio was 'selected by' ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors." This rare admission, betrays a brazen fraud and explains why so many senseless loans were made at the height of the subprime frenzy. In short, the great Wall Street derivatives machine demanded subprime loans that would default.

Citigroup also settled similar charges, on Oct. 19, 2011, with the SEC, for $285 million. Here, Citigroup held an undisclosed short position in the very securities they were selling to investors. Citigroup also allegedly exercised "significant influence" in selecting the underlying portfolio. According to the SEC complaint: "One experienced CDO trader characterized the . . . portfolio in an e-mail as 'dogsh!t' and 'possibly the best short EVER!' An experienced collateral manager commented that “the portfolio is horrible.'” Again, Citi sold securities that it wanted to default, and therefore demanded the riskiest loans possible. Perhaps this explains why private subprime loans failed at over twice the rate of even the riskiest Fannie loans as shown on the chart at right. Banks like Citi wanted loans that would default and default fast. In fact, the portfolio at issue in the SEC action closed in February of 2007, and defaulted by November, in synch with the subprime collapse. Citi made $160 million on this sordid deal.

JP Morgan Chase paid the SEC $153.6 million for its misconduct in subprime lending. According to an SEC official: “What J.P. Morgan failed to tell investors was that a prominent hedge fund that would financially profit from the failure of CDO portfolio assets heavily influenced the CDO portfolio selection. With today’s settlement, harmed investors receive a full return of the losses they suffered.” The SEC also alleged that when the deal closed in May 2007, the hedge fund--called Magnetar--held a $600 million short position that dwarfed its $8.9 million long position in the portfolio. "In an internal e-mail, a J.P. Morgan employee noted, 'We all know [Magnetar] wants to print as many deals as possible before everything completely falls apart.'" The SEC further found that Chase frantically sold interests in the portfolio because it knew how bad the portfolio and it knew the market was starting to come unglued.

The SEC continues this line of enforcement actions. Still, we probably will never know the full scale of these predatory frauds. The FCIC found that more than half of all CDOs generated in the second half of 2006 appeared infected with this so-called "Magnetar Trade." (FCIC Report, p. 192). Notably, all the deals underlying the SEC securities fraud actions hail from 2007. The three settlements above already total in excess of $1 billion. Thus, billions and billions worth of subprime mortgages resulted from this demand for loans that would default.

This newfangled source of predatory lending adds to the predatory loans generated for fees, or to grab collateral, or other old-fashioned predatory lending. Thus, Illinois Attorney General Lisa Madigan (Loyola University Chicago, Law Alum) spearheaded a multistate predatory lending action against Countrywide leading to an $8.7 billion dollar settlement (affecting over 400,000 homeowners nationwide) and currently is again suing Countrywide as well as Wells Fargo for steering racial minorities into high-cost, subprime loans. And, even the Fed took action against Wells Fargo for predatory lending and steering involving 10,000 home mortgages, as noted on this blog, by dre cummings. The bottom line is that massive predatory lending occurred, by any measure, and formed a core cause of the subprime debacle. According to the Wall Street Journal, 61% of all subprime loans in 2006 went to prime borrowers. An LA Times expose' found that 32 former Ameriquest employees "across the country say they witnessed or participated in improper practices, mostly in 2003 and 2004. This behavior was said to have included deceiving borrowers about the terms of their loans, forging documents, falsifying appraisals and fabricating borrowers' income to qualify them for loans they couldn't afford."

So, my question to the right is simply this: given the indisputable evidence of massive predatory lending, how can you ignore this as one (of many) cause? Do you really want to continue to maintain that it was all the GSEs in the face of overwhelming evidence of this massive predatory lending and fraud?

Professor Steven A. Ramirez
Loyola University Chicago

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See why the Obama Administration is considered the most corrupt in US History? He is just a neo-liberal working for the man---WALL STREET!!!! Hillary, Biden, Cuomo, and O'Malley are all neo-liberals running in 2016----TELL RUSS FEINGOLD, A REAL PROGRESSIVE LABOR AND JUSTICE CANDIDATE TO RUN FOR PRESIDENT IN 2016!!!!!

Top investment banker at BofA nominated for Commerce Dept job Thu Nov 7, 2013 8:08pm EST

Stefan Selig, executive vice chairman of global corporate and investment banking at Bank of America Merrill Lynch, speaks at the Reuters Consumer and Retail Summit in New York, September 11, 2013.

(Reuters) - The White House said on Thursday that it has nominated a senior investment banking executive at Bank of America Corp (BAC.N) to a high-level position at the Commerce Department.

President Barack Obama picked Stefan Selig, executive vice chairman of global corporate and investment banking at Bank of America Merrill Lynch, to be the next under secretary for international trade.

Selig would replace Francisco Sanchez, a former official in the Clinton administration who left the Commerce Department earlier in November.

If confirmed by the U.S. Senate, Selig would serve Commerce Secretary Penny Prtizker and lead the department's International Trade Administration, a 2,400 person body that is tasked with promoting the competitiveness of U.S. businesses abroad.

Selig first joined Bank of America in 1999.

"We congratulate Stefan on his public service aspirations and wish him the very best," said Bank of America spokesman John Yiannacopoulos in an email.



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If you listen to corporate 'public' NPR you would think that Ireland is the king of coming out of the disaster of economic collapse because it has done everything the TROIKA has told it to do....austerity they say is needed to pay for the trillions of dollars stolen from the Irish economy by financial fraud.  Austerity means public asset grabs as are happening all over Europe and the US.  THE BANKS TAKE TENS OF TRILLIONS AND THE PUBLIC LOSES ITS ASSETS TO FILL THE HOLE!  As this article shows the Irish aren't the troopers  media is telling us.  They trusted at first and now they see they are being robbed blind.  Remember, Iceland simply defaulted on the bank's fraudulent debt -------simply recovering trillions in corporate fraud makes government coffers flush with money!

OpEdNews Op Eds 11/4/2013 at 01:02:18

Ireland: Ground Zero for the Austerity-driven Asset Grab

By Ellen Brown (about the author)     Permalink      

                               
Ire at Anglo Irish by The Guardian


The Irish have a long history of being tyrannized, exploited, and oppressed--from the forced conversion to Christianity in the Dark Ages, to slave trading of the natives in the 15th and 16th centuries, to the mid-nineteenth century "potato famine" that was really a holocaust. The British got Ireland's food exports, while at least one million Irish died from starvation and related diseases, and another million or more emigrated.

Today, Ireland is under a different sort of tyranny, one imposed by the banks and the troika--the EU, ECB and IMF. The oppressors have demanded austerity and more austerity, forcing the public to pick up the tab for bills incurred by profligate private bankers.

The official unemployment rate is 13.5%--up from 5% in 2006--and this figure does not take into account the mass emigration of Ireland's young people in search of better opportunities abroad. Job loss and a flood of foreclosures are leading to suicides. A raft of new taxes and charges has been sold as necessary to reduce the deficit, but they are simply a backdoor bailout of the banks.

At first, the Irish accepted the media explanation: these draconian measures were necessary to "balance the budget" and were in their best interests. But after five years of belt-tightening in which unemployment and living conditions have not improved, the people are slowly waking up. They are realizing that their assets are being grabbed simply to pay for the mistakes of the financial sector.

Five years of austerity has not restored confidence in Ireland's banks. In fact the banks themselves are packing up and leaving. On October 31st, RTE.ie reported that Danske Bank Ireland was closing its personal and business banking, only days after ACCBank announced it was handing back its banking license; and Ulster Bank's future in Ireland remains unclear.  

The field is ripe for some publicly-owned banks. Banks that have a mandate to serve the people, return the profits to the people, and refrain from speculating. Banks guaranteed by the state because they are the state, without resort to bailouts or bail-ins. Banks that aren't going anywhere, because they are locally owned by the people themselves.  

The Bank Guarantee That Bankrupted Ireland

Ireland was the first European country to watch its entire banking system fail.   Unlike the Icelanders, who refused to bail out their bankrupt banks, in September 2008 the Irish government gave a blanket guarantee to all Irish banks, covering all their loans, deposits, bonds and other liabilities.

At the time, no one was aware of the huge scale of the banks' liabilities, or just how far the Irish property market would fall.

Within two years, the state bank guarantee had bankrupted Ireland.  The international money markets would no longer lend to the Irish government.

Before the bailout, the Irish budget was in surplus. By 2011, its deficit was 32% of the country's GDP, the highest by far in the Eurozone. At that rate, bank losses would take every penny of Irish taxes for at least the next three years.

"This debt would probably be manageable," wrote Morgan Kelly, Professor of Economics at University College Dublin, "had the Irish government not casually committed itself to absorb all the gambling losses of its banking system."

To avoid collapse, the government had to sign up for an --85 billion bailout from the EU-IMF and enter a four year program of economic austerity, monitored every three months by an EU/IMF team sent to Dublin.

Public assets have also been put on the auction block. Assets currently under consideration include parts of Ireland's power and gas companies and its 25% stake in the airline Aer Lingus.

At one time, Ireland could have followed the lead of Iceland and refused to bail out its bondholders or to bow to the demands for austerity. But that was before the Irish government used ECB money to pay off the foreign bondholders of Irish banks. Now its debt is to the troika, and the troika are tightening the screws.   In September 2013, they demanded another 3.1 billion euro reduction in spending.



Some ministers, however, are resisting such cuts, which they say are politically undeliverable.  

In The Irish Times on October 31, 2013, a former IMF official warned that the austerity imposed on Ireland is self-defeating. Ashoka Mody, former IMF chief of mission to Ireland, said it had become "orthodoxy that the only way to establish market credibility" was to pursue austerity policies. But five years of crisis and two recent years of no growth needed "deep thinking" on whether this was the right course of action. He said there was "not one single historical instance" where austerity policies have led to an exit from a heavy debt burden.

Austerity has not fixed Ireland's debt problems. Belying the rosy picture painted by the media, in September 2013 Antonio Garcia Pascual, chief euro-zone economist at Barclays Investment Bank,   warned that Ireland may soon need a second bailout. 

According to John Spain, writing in Irish Central in September 2013:

The anger among ordinary Irish people about all this has been immense. . . . There has been great pressure here for answers. . . . Why is the ordinary Irish taxpayer left carrying the can for all the debts piled up by banks, developers and speculators? How come no one has been jailed for what happened?   . . . [D]espite all the public anger, there has been no public inquiry into the disaster. Bail-in by Super-tax or Economic Sovereignty?

In many ways, Ireland is ground zero for the austerity-driven asset grab now sweeping the world. All Eurozone countries are mired in debt. The problem is systemic.

In October 2013, an IMF report discussed balancing the books of the Eurozone governments through a super-tax of 10% on all households in the Eurozone with positive net wealth. That would mean the confiscation of 10% of private savings to feed the insatiable banking casino.

The authors said the proposal was only theoretical, but that it appeared to be "an efficient solution" for the debt problem. For a group of 15 European countries, the measure would bring the debt ratio to "acceptable" levels, i.e. comparable to levels before the 2008 crisis.

A review posted on Gold Silver Worlds observed:

[T]he report right away debunks the myth that politicians and main stream media try to sell, i.e. the crisis is contained and the positive economic outlook for 2014. . . . Prepare yourself, the reality is that more bail-ins, confiscation and financial repression is coming, contrary to what the good news propaganda tries to tell.

  A more sustainable solution was proposed by Dr Fadhel Kaboub, Assistant Professor of Economics at Denison University in Ohio. I n a letter posted in The Financial Times titled " What the Eurozone Needs Is Functional Finance," he wrote:

   The eurozone's obsession with "sound finance" is the root cause of today's sovereign debt crisis. Austerity measures are not only incapable of solving the sovereign debt problem, but also a major obstacle to increasing aggregate demand in the eurozone. The Maastricht treaty's "no bail-out, no exit, no default" clauses essentially amount to a joint economic suicide pact for the eurozone countries.

. . . Unfortunately, the likelihood of a swift political solution to amend the EU treaty is highly improbable. Therefore, the most likely and least painful scenario for [the insolvent countries] is an exit from the eurozone combined with partial default and devaluation of a new national currency. . . .

The takeaway lesson is that financial sovereignty and adequate policy co-ordination between fiscal and monetary authorities are the prerequisites for economic prosperity.

Standing Up to Goliath

Ireland could fix its budget problems by leaving the Eurozone, repudiating its blanket bank guarantee as "odious" (obtained by fraud and under duress), and issuing its own national currency. The currency could then be used to fund infrastructure and restore social services, putting the Irish back to work.



Short of leaving the Eurozone, Ireland could reduce its interest burden and expand local credit by forming publicly-owned banks, on the model of the Bank of North Dakota. The newly-formed Public Banking Forum of Ireland is pursuing that option. In Wales, which has also been exploited for its coal, mobilizing for a public bank is being organized by the Arian Cymru "BERW' (Banking and Economic Regeneration Wales).

Irish writer Barry Fitzgerald, author of Building Cities of Gold, casts the challenge to his homeland in archetypal terms:

The Irish are mobilising and they are awakening. They hold the DNA memory of vastly ancient times, when all men and women obeyed the Golden rule of honouring themselves, one another and the planet. They recognize the value of this harmony as it relates to banking. They instantly intuit that public banking free from the soiled hands of usurious debt tyranny is part of the natural order. In many ways they could lead the way in this unfolding, as their small country is so easily traversed to mobilise local communities.   They possess vast potential renewable energy generation and indeed could easily use a combination of public banking and bond issuance backed by the people to gain energy independence in a very short time.

When the indomitable Irish spirit is awakened, organized and mobilized, the country could become the poster child not for austerity, but for economic prosperity through financial sovereignty.



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We need to know that almost none of the Financial Reform bill has been implemented and those issues that have been addressed have been written in favor of the banks and not accountability.  As you see below all of neo-liberals are voting for protecting the banks.....and a strong neo-liberal Senate will as well.  Take a look at the video below as Black is an excellent progressive academic on economics!

Remember as well, Citigroup was ground zero for the subprime mortgage fraud.  It's leadership were Clinton's economic team that broke Glass Steagall.

Bill Black: Citigroup Wrote New Deregulation Bill

November 2nd, 2013


Econintersect:  William K. Black, appearing on Jessica Reports, The Real News this week, charged that a bill just passed by the House of Representatives was almost entirely written by Citigroup.  The bill, which passed with support from both parties, received a veto proof majority.  According to Black, the Bill would remove some important provisions of the 2010 Dodd-Frank Act regarding banking regulation that would help prevent future government bail-outs of banks.

Click through Read more >> to view video.


Follow up:

The video is 7 1/2 minutes long.

Black has contributed to Global Economic Intersection, most recently Economics Could be a Science If ...

Bill let's us know that the democrats on the financial committee in the House voted for the bank protection with the republicans----YOU KNOW THEY ARE NEO-LIBERALS.  MARYLAND'S DELANEY/HOYER IS THERE FOR MONTGOMERY COUNTY!  I would like to encourage all to go to the site to see how your pol voted because this will show for sure who is a neo-liberal.  Now, not voting yes means you were not needed for the vote to pass. 

Look at Duckworth from Illinois highlighted in red.  I'm going to pick on her because she was sold by all progressive political organizations as a true progressive working for the people-----she voted to protect banks!!!  Look at those civil rights leaders....Remember, it was people of color targeted often by the banks!

Maxine Waters, California, Ranking Member Carolyn B. Maloney, New York
Nydia M. Velázquez, New York Melvin L. Watt, North Carolina Brad Sherman, California
Gregory W. Meeks, New York Michael E. Capuano, Massachusetts Rubén Hinojosa, Texas
Wm. Lacy Clay, Missouri Carolyn McCarthy, New York Stephen F. Lynch, Massachusetts
David Scott, Georgia Al Green, Texas Emanuel Cleaver, Missouri Gwen Moore, Wisconsin
Keith Ellison, Minnesota Ed Perlmutter, Colorado James A. Himes, Connecticut
Gary C. Peters, Michigan John C. Carney, Jr., Delaware Terri A. Sewell, Alabama
Bill Foster, Illinois  Daniel T. Kildee, Michigan  Patrick Murphy, Florida John K. Delaney, Maryland
Kyrsten Sinema, Arizona Joyce Beatty, Ohio  Denny Heck, Washington

Aye   D   Duckworth, Tammy IL 8th  Aye   D   Rangel, Charles  Aye   D   Clyburn, Jim SC 6th

H.R. 992: Swaps Regulatory Improvement Act On Passage of the Bill in the House



House Votes To Scale Back Dodd Frank Provision
Reuters  |  By Douwe Miedema and Emily Stephenson Posted: 10/31/2013 7:47 am EDT  |  Updated: 10/31/2013 8:16 am EDT Huffington Post


WASHINGTON, Oct 30 (Reuters) - The U.S. House of Representatives voted on Wednesday to scale back a much-debated provision of the Dodd-Frank Wall Street reform law, handing bank lobbyists a token victory in their fight against the tougher rules.

Big banks and their allies in Congress have been pushing to undo part of the law that calls for walling off risky derivatives trading by investment banks from government backstops such as deposit insurance. They say the rule is unnecessary and would be expensive for banks.

A total of 70 Democrats joined Republican lawmakers in a vote to scrap the so-called push-out provision for most types of derivative trades, defying the will of the White House, which had called for the rule to remain in place.

"This bill does not expose the taxpayer to any additional risk," said Representative Carolyn Maloney, a New York Democrat who voted to scale back the rule.

Govtrack.us, a website which assigns the likelihood of a bill passing, saw only a 19 percent chance of the bill being enacted before the vote. It is unlikely to make it through the Senate, which is held by Democrats.

Still, the high number of Democrats voting in favor of the bill in the House could make it a bargaining chip toward the end of the congressional session, when last-minute deals are often hammered out between the two parties.

Enacting the bill would be the first major change to Dodd-Frank, as the White House and Senate Democratic leadership have resisted any changes, in part out of concern that would open the door for Republicans to weaken the law.

The push-out provision has been one of the most widely criticized parts of the Dodd-Frank law, having been slipped in by a senator who has since left Congress.

Former Rep. Barney Frank, for whom the law was named, later said he never thought it was necessary, and Federal Reserve Chairman Ben Bernanke has also said it is not clear that setting up separate swaps entities would make banks safer.

And while Obama on Monday did call for the push-out rule to remain in place, he stopped short of threatening to veto the legislation, as he has with other bills.

Still, backers of the pushout idea say it would keep banks from making wild trades while counting on federal support, such as the Fed's discount window, if their trades go wrong.

"This bill would allow Wall Street's too big to fail banks to use insured deposits for their derivatives trading and gambling. That is indefensible," said Dennis Kelleher at Better Markets, a financial reform lobby group.

Following the law's directions, regulators wrote a rule forcing banks to either split swaps trading off into separate arms or else forgo federal support.

But they gave large investment banks such as JPMorgan Chase , Citigroup and Bank of America two extra years to comply with the rule. (Editing by Bob Burgdorfer)
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American citizens are forced to watch a crippled, criminal, and corrupt system of government and business go on around them as if the citizens did not even exist.  That is because they think they have a capture of the political process-----THEY HAVE A GOOD HOLD ON THE POLITICAL PROCESS BUT WE CAN GET RID OF THEM EASY PEASY----RUN AND VOTE FOR LABOR AND JUSTICE!

Mainstream economics is in denial: the world has changed Despite the crash, the high priests of economics refuse to look at the big picture – and continue to prop up world elites

• • Aditya Chakrabortty
  • The Guardian, Monday 28 October 2013 16.00 EDT
  
  

Karl Marx: time he went back on the syllabus? Photograph: Alamy Rebellions aren't meant to kick off in lecture theatres – but I saw one last Thursday night. It was small and well-read and it minded its Ps & Qs, and I think I shall remember it for some time.

We'd gathered at Downing College, Cambridge, to discuss the economic crisis, although the quotidian misery of that topic seemed a world away from the honeyed quads and endowment plush of this place.

Equally incongruous were the speakers. The Cambridge economist Victoria Bateman looked as if saturated fat wouldn't melt in her mouth, yet demolished her colleagues. They'd been stupidly cocky before the crash – remember the 2003 boast from Nobel prizewinner Robert Lucas that the "central problem of depression-prevention has been solved"? – and had learned no lessons since. Yet they remained the seers of choice for prime ministers and presidents. She ended: "If you want to hang anyone for the crisis, hang me – and my fellow economists."

What followed was angry agreement. On the night before the latest growth figures, no one in this 100-strong hall used the word "recovery" unless it was to be sarcastic. Instead, audience members – middle-aged, smartly dressed and doubtless sizably mortgaged – took it in turn to attack bankers, politicians and, yes, economists. They'd created the mess everyone else was paying for, yet they'd suffered no retribution.

In one of the world's elite institutions, the elites were taking a pasting – from accountants, entrepreneurs and academics. They knew what they were on about, too. Given his turn on the mic, one biologist said: "I'll believe economists have reformed when the men behind Black and Scholes [the theory that helps traders value financial derivatives] have been stripped of their Nobel prizes."

One of the central facts of post-crash Britain is that the elites still hold power, but no longer command the credibility to wield it. You see that when Russell Brand talks on Newsnight about the corrupt lilliputian world of Westminster, and the various YouTube clips total more than 3m views. And I certainly saw it in Cambridge.

Like all the other plebs in Britain – whether on minimum wage, or a five-figure salary – the people in that lecture theatre had been told for decades to trust the politicians, policymakers and employers to provide the jobs, the houses and pensions, and the prospects for their kids. In the wake of the biggest economic rupture since the 1930s, they're evidently no longer so willing to extend that trust.

But at the same time, the elites – whether in Whitehall or the City – remain in charge. Looking at mainstream economists gives us as good an idea as any as to how reform has been warded off.

As Bateman points out, by rights these PhD-armed boosters of The Great Moderation should have been widely discredited after the crash. After all, the most significant thing to emerge from academic economics in the past five years has not been any piece of research, but the superb documentary Inside Job, in which film-maker Charles Ferguson showed how some of the best minds at American universities had been paid by Big Finance to produce research helping Big Finance.

Yet look around at most of the major economics degree courses and neoclassical economics – that theory that treats humans as walking calculators, all-knowing and always out for themselves, and markets as inevitably returning to stability – remains in charge. Why? In a word: denial. The high priests of economics refuse to recognise the world has changed.

In his new book, Never Let a Serious Crisis Go to Waste, the US economist Philip Mirowski recounts how a colleague at his university was asked by students in spring 2009 to talk about the crisis. The world was apparently collapsing around them, and what better forum to discuss this in than a macroeconomics class. The response? "The students were curtly informed that it wasn't on the syllabus, and there was nothing about it in the assigned textbook, and the instructor therefore did not wish to diverge from the set lesson plan. And he didn't."

Something similar is going on at Manchester University, where as my colleague Phillip Inman reported last week, economics undergraduates are petitioning their tutors for a syllabus that acknowledges there are other ways to view the world than as a series of algebraic problem sets. I was puzzled by this: did that mean Smith, Marx and Malthus weren't taught? Yes, I was told, by final-year undergraduate Cahal Moran: in development studies. What about Joseph Schumpeter and his theory of creative destruction? Oh, he gets a mention – but literally only a mention.

This isn't all the tutors' fault: when you have to lecture to 400 students at once, it's hard to find time and space to go off-piste. But the result is that economics students come out of exam halls and go off to government departments or the City with exactly the same toolkit that just five years ago produced a massive crash.

Economics ought to be a magpie discipline, taking in philosophy, history and politics. But heterodox approaches have long since been banished from most faculties, claims Tony Lawson. In the 1970s, when he started teaching at Cambridge, the economics faculty still boasted legends such as Nicky Kaldor and Joan Robinson. "There were big debates, and students would study politics, the history of economic thought." And now? "Nothing. No debates, no politics or history of economic thought and the courses are nearly all maths."

How do elites remain in charge? If the tale of the economists is any guide, by clearing out the opposition and then blocking their ears to reality. The result is the one we're all paying for.

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Did you know that the economy is ready to collapse harder than it did in 2008, this time from massive bond malfeasance and the market is ready to implode.  Did you know that all of this involves all that is public....municipal bonds are the target this time whereas city real estate was the target of the subprime loan frauds.  Why do I say malfeasance?  Your neo-liberal pol is loading states and cities with credit bond debt knowing the market is going to crash and leaves states near default.  THEY DO THIS TO TIE PUBLIC ASSETS TO FINANCIAL INSTRUMENTS THAT WILL LEAVE THIS IN THE HANDS OF INVESTORS AND THEY DO THIS TO IMPOVERISH GOVERNMENT COFFERS TO THE POINT OF NOT AFFORDING PUBLIC PENSIONS, EMPLOYEES, SOCIAL SERVICES.  IT IS DELIBERATE AND IS WHAT HAPPENED TO THE EUROPEAN NATIONS.

'But about two-thirds of Dodd-Frank's rules have not yet been finalized, and more than one hundred rulemaking deadlines have been missed'.

The 5 Things Obama Must Do For Financial Reform
Posted: 01/16/2013 12:01 am EST  |  Updated: 01/24/2013 1:48 pm EST

  When President Barack Obama first swore the oath of office, the backdrop was a financial system in flames. Four years on, the fires are out, but those who hoped Obama would make capitalism fundamentally safer are disappointed.

Barring another crisis in the next four years, the president may have missed his best chance for a more significant overhaul of finance. But there are still things he can do in a second term to at least ensure that the accomplishments of his first term, embodied in the Dodd–Frank Wall Street Reform and Consumer Protection Act, don't go to waste.

Obama can't rewrite laws or bend independent agencies such as the Federal Reserve to his whim. Any reform efforts are countered by a multitude of tireless financial lobbyists who have resisted every step of the way -- often successfully -- bankrolled by a deep-pocketed industry with influence over regulators, lawmakers and the media.

But Obama can set the agenda, with his words and with the people he puts in key jobs, to let Wall Street know that Main Street will always come first.

Because Main Street may be starting to wonder.

"We are losing public support," said Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, expressing disappointment with the sluggish pace of reform. "The longer this drags on, the more people get cynical."

The sprawling Dodd-Frank reform act, passed in 2010, is chock full of rules that could help avert another crisis. It forces banks to pay penalties for being too large and gives officials tools to possibly wind down a failing big bank safely. It orders the regulation of complex derivatives and tries to make it harder for banks to gamble with their own money. It establishes new bodies to oversee risks in the financial system and protect consumers.

But about two-thirds of Dodd-Frank's rules have not yet been finalized, and more than one hundred rulemaking deadlines have been missed. Meanwhile, no banker has yet gone to jail for any of the actions leading up to the crisis, and efforts to hold the banks accountable have been few and far between, consisting mainly of modest fines, with the banks neither admitting nor denying wrongdoing.

That raises questions about where financial reform will rank among Obama's many second-term priorities, from seemingly endless battles with Congress over the federal budget deficit to gun control, immigration and national security.

"In fairness, the president has very big issues he has to deal with," said University of Maryland law professor Michael Greenberger, a former director of the Division of Trading and Markets at the Commodity Futures Trading Commission. "But I don't see the inner workings of the White House worrying about the market reform issue."

The White House did not respond to a request for comment.

Reform advocates warn that retreating from even the modest advances of Obama's first term mean his presidency could ultimately be known, like those of Ronald Reagan and Bill Clinton, as having planted the seeds of future financial disasters.

There are reasons to doubt the system is significantly safer than it was before the crisis. The biggest banks are bigger than ever, and their risks are still mainly hidden from public view. At the same time, financial markets are more complex, and financial regulators are still outgunned, outstaffed and outsmarted by the powerful banks they regulate.

"I think the failure to set our economy straight with regard to the financial sector could well be the blight that the president had a chance to but did not correct," said Bart Naylor, financial policy advocate for the nonprofit group Public Citizen.

Many reformers were particularly discouraged by Obama's recent nomination of White House Chief of Staff Jacob "Jack" Lew for the post of Treasury secretary in his second term. As secretary, Lew would be one of the nation's top financial regulators and chair the Financial Stability Oversight Council established by Dodd-Frank to watch out for risks in the financial markets.

Though all agree that Lew is smart and a peerless expert on the federal budget, he has professed limited understanding of financial markets. He also made millions working for Citigroup just before it was bailed out in the crisis, in a unit that made bets against mortgage-backed securities. He got that job on the recommendation of a colleague in the Clinton administration, former Treasury Secretary Robert Rubin, one of the chief architects of market deregulation in the 1990s. Lew has said that he didn't think deregulation led to the financial crisis, a view in line with Rubin's laissez-faire approach. Lew's pick signals that financial reform will take a back seat in Obama's second term to matters of the budget. That may prove shortsighted.

"If you care about the fiscal crisis, the first place to start is to make sure we prevent another financial crisis," said Neil Barofsky, former inspector general for the Troubled Asset Relief Program, the crisis-era bailout fund. "We're having this fiscal crisis now because of the financial crisis. If we have a $4 trillion or $5 trillion hit from another crisis, negotiations over the sequester will be nothing."

In interviews with The Huffington Post, Barofsky and other reform advocates identified at least five things that must happen in Obama's second term to maintain the momentum for reform and make another devastating crisis less likely.

They agree that there is almost certainly no chance that Obama will embrace more dramatic reform ideas being advocated in some circles, including breaking up large banks or reinstating the Depression-era Glass-Steagall Act separating commercial and investment banking. Even the five modest goals presented here might be too much of a stretch, they fear. But they are possible.

One: First, Do No Harm

Dodd-Frank is far from perfect. It does not clear up the murk of bank balance sheets, bring sanity to executive compensation or much reduce the influence of flawed credit-rating agencies. Its provisions for winding down big banks might not work. But doing away with Dodd-Frank could be much worse; even the administration's harshest critics on the left admit it is better than nothing.

Critics on the right, meanwhile, wish it would just disappear, and they have been working with bank lobbyists to kill it, or at least water it down as much as they can. If he accomplishes nothing else on financial reform in his second term, Obama at least needs to keep fighting to preserve Dodd-Frank, these advocates said.

"Protecting what we have is first and foremost," said Bair.

Bair is hopeful that Obama and the Democratic senators who created Dodd-Frank have a strong incentive to preserve it. Others see Obama's attention wandering and worry the banks have an even stronger incentive to neuter the law.

Two: Finish The Rules Already

Congress passed the buck on putting Dodd-Frank's rules into effect to various regulatory agencies, where they have often gotten bogged down for one reason or another. According to a recent tally by the law firm Davis Polk, just a third of Dodd-Frank's rules are done. Only about half of the law's rules for derivatives have been finalized. Only about a quarter of the rules for winding down troubled banks are in place. Less than 10 percent of the bank regulations are done.

The Securities and Exchange Commission is still on the hook for finishing dozens of rules. But the process has ground to a halt with the departure of former chairman Mary Schapiro, leaving only four commissioners on the SEC: two Democrats who will vote to put rules in place and two Republicans who often won't.

"We need three votes to get rules through, or Dodd-Frank will be crippled," said Greenberger.

Three: Solve Too Big To Fail

One reform concept with bipartisan support is the idea that the biggest banks are still too big to fail -- in fact, they are bigger than before the crisis. The five biggest U.S. banks held about $8.7 trillion in assets at the end of the third quarter, the latest data available, or about 55 percent of the entire U.S. annual gross domestic product. That's up from about 43 percent before the crisis, Bloomberg noted recently.

Dodd-Frank offers at least two possible solutions to this problem, according to Marcus Stanley, policy director at the nonprofit Americans For Financial Reform: higher capital requirements for big banks, and the so-called Volcker Rule, which prohibits banks from gambling with their own money.

Both provisions could force big banks to get smaller, hiving off trading operations or other parts that make them too bulky. So far, neither provision has been finalized, and the Volcker Rule has been riddled with exemptions before it even takes effect.

Four: Get The Right People In Place

Though Lew may not eventually run the Treasury as a natural-born regulator, he should at least have a top deputy who will play the role of riding herd on regulation in a second term, many reformers said -- someone to speak up for Dodd-Frank, rebut bank lobbyists and understand the risks lurking in the system. The reported top pick to be Lew's No. 2, Morgan Stanley chief financial officer Ruth Porat, has the necessary expertise, but has lobbied regulators frequently on behalf of Wall Street since Dodd-Frank's passage.

Other key personnel decisions include getting that fifth SEC commissioner in place and making sure Commodity Futures Trading Commission Chairman Gary Gensler, the reformers' favorite Wall Street regulator, gets another term after his current stint ends in 2013.

The problem, though, is that even if you get good people in key positions, the agencies will be understaffed relative to the banks and lobbying firms they're opposing.

"The CFTC is radically underfunded," said Stanley. "Their personnel count is roughly pretty similar to the mid-1990s, and Dodd-Frank has increased their workload by eight-fold."

Five: Loophole-Free Derivatives Regulation

Perhaps even more important than fixing the problem of too-big-to-fail banks is making sure regulators can keep tabs on the exotic derivatives that contributed to the last crisis, from credit default swaps (CDS) to collateralized debt obligations (CDO) to CDOs stuffed with CDSs.

Again, Dodd-Frank has rules for that, but banks are pushing hard for a way out. Republicans last year introduced HR 3283, the Swap Jurisdiction Certainty Act, which would exempt overseas derivatives trades from Dodd-Frank rules as long as they were routed through a foreign subsidiary.

The bill is in limbo, but it's just one of many examples of banks tirelessly working to carve loopholes into obscure corners of the law dealing with obscure matters, where they can quietly make tons of money, while leaving the financial system at risk.

If anything is certain in Obama's second term, it is that this will continue.

"Part of the lobbying strategy is to wear you down, drag it out, until people get frustrated and lose confidence in regulators to do anything and the pressure subsides," said Bair. "That's why it's important that this stuff get done soon, not later, and as cleanly and effectively as possible.

"You will never make this industry happy," Bair warned of banks. "They will always want more."



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The US economy was more than bruised by the policies of Lew during the Clinton Administration as he was the economic teamplayer back then pressing the breaking of the Glass Steagall wall and advancing free trade all so we could have the global corporate rule and unaccountability we have today.  Don't you think that is the real threat to the US economy today?  Of course.  Yet, not a word from US corporate media!

As Lew knows the threat lies with Wall Street and the fact that it is systemically criminal and corrupt and sucking tens of trillions from the US economy in massive corporate fraud.  This will crash any economic system.  It is the failure of the US Justice and Congress to make recovering that fraud front and center in 2009 that has our economy crippled, criminal, and corrupt.  The national debt is a result of this massive corporate fraud and all Congress does is give more money to wealth and profit as an excuse to cut public services and programs and sell public assets.  Neo-liberals and neo-cons work to move all wealth to the top and Lew was the original designer of this plan.


The gridlock in Congress would not be happening if all that corporate fraud was in the government coffers----it would be flush with money and doing the people's work.  That is not the Wall Street plan as they created this massive public debt so as to get its way and that means gutting more public programs like Medicare and Social Security to pay for more corporate tax cuts.  This is what Lew wants Congress to move forward with.  After all, Reagan tripled payroll taxes on workers back in the 1980s just so the baby boomers would have plenty to cover them in Medicare and Social Security and sent all those payroll taxes to the Treasury not the Trusts.   As Lew says---the Treasury is bare so where are those $4 trillion in payroll taxes?  Paying for the NSA surveillance and securitization of the US to protect the rich against a mad 3 million people who want their wealth back!

So, since we have the same neo-liberals in office that created this mess with ending Glass Steagall and starting NAFTA now going for TPP we will simply need to move to voting all of these incumbents out of office and running labor and justice in all elections to reverse this ABSURD COURSE OF EVENTS!

  U.S. economy bruised by fiscal fight: Treasury Secretary


U.S. Treasury Secretary Lew testifies before the Senate Finance Committee in Washington. (Gary Cameron/Reuters)

Reuters 10:16 a.m. EDT, October 20, 2013


WASHINGTON (Reuters) - The U.S. economy has been hurt by a recent budget standoff in Washington and it is important that the nation does not go through another around of brinkmanship, Treasury Secretary Jack Lew said on Sunday.

Speaking on NBC's "Meet the Press" program, Lew said he was confident the economy, which he described as resilient, would recover from the 16-day partial shutdown of the federal government.

He described events leading to the shutdown, which eroded both business and consumer confidence, as a political crisis rather than an economic one.

"We know that from the shutdown, there was a loss of economic activity," Lew said. "We need to make sure that government does not go through another round of brinkmanship. This can never happen again."

A last minute deal in Congress pulled the country from the edge of an unprecedented debt default. It restored government funding through January 15 and extended its borrowing authority through February 7, though the Treasury Department might be able to stave off a default for several weeks past that point.

There are worries that Wednesday's deal may have set the stage for another standoff in the future.

Lew, the administration's front man during the stalemate over increasing the country's borrowing limit, has attempted to separate the debt ceiling from other policy conditions.

"I think the message that we have to send going forward is that there was a turning point on Wednesday night and this won't happen again. It can't happen again," he said.

Similar sentiments were echoed by Republican John McCain, who told the NBC's "Meet the Press" program that the shutdown hurt his party. McCain said there would be no second shutdown.

"Those involved in it went on a fool's errand, that's just a fact," McCain said. "This has harmed the lives of millions of people and thousands of people in my state ... I have an obligation to them to try to prevent that from happening."

Lew did not quantify the damage to the economy.

Economists estimate the shutdown shaved as much a half a percentage point from fourth-quarter gross domestic product growth, with much of the direct hit through the loss of output from the federal government.

"It took an economy that is fighting hard to get good economic growth going, to create jobs for the American people, and it took it in the wrong direction," Lew said. "This one was a little bit scary because it got so close to the edge."

There's a need to shift the focus away from fiscal policy, Lew said, arguing that the budget deficit as a share of the economy has been reduced significantly.

"Fiscal policy is very important. But there's a lot we need to do to build and grow this economy," Lew said. "We need some infrastructure. The farm bill needs to pass. The immigration bill is hugely important to the economy."



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Actually, all that is needed is a short term plan to recover the tens of trillions in corporate fraud and that would take care of Wall Street and its overreaching hold on the US economy!  Stop allowing the press to scare us into believing we have to allow them to cut all our public wealth to pay down the national debt in order to appease the markets.



Wall Street Bets a Quadrillion of Everybody Else’s Money
Wed, 10/09/2013 - 13:48 — Glen Ford


Americans are driven to panic at the prospect of a technical federal default, later this month – an event that could cost the public treasury billions. But Wall Street’s quadrillion dollar gambling obsession actually does threaten to bring down the whole system. “The Lords of Capital are pure gamblers who have transformed the global financial marketplace into a machinery of perpetual uncertainty.”

Wall Street Bets a Quadrillion of Everybody Else’s Money

by BAR executive editor Glen Ford

“Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.”

The clock is ticking, we are told, on the “good faith and credit” of the United States government, which might technically be unable to pay its bills after October 17 if the two corporate parties don’t make a deal on the debt limit. Congressional Republicans and the White House are “playing Russian roulette with the global economy,” says an editorial in the Dallas Morning News, warning of impending “economic Armageddon” as financial markets “crater,” the economy stalls and interest on future federal borrowing skyrockets.

Given that capitalism has entered a terminal stage of acute and escalating crises, the Dallas editorialists may be right; anything could set off another spasm of financial mayhem in a system that is ever more unstable. However, it is the “markets” – a euphemism for the financial capitalist class – that are the ultimate source of instability, the folks who play Russian roulette 24-7 and have dragged humanity to a place where an actual Armageddon is only a twirl of the chamber away. In this game, everybody’s head is in play.

It is proper that the corporate press speak of the impending fiscal threat – a minor one, in the maelstrom of crises that beset the system – in gambling terms. An increase of interest rates by a few basis points (fractions of a percent) on trillions of borrowed dollars amounts to quite a chunk of public money, to be paid directly into the accounts of these very same private “markets” that are supposedly biting their nails with anxiety over the budget. The Dallas Morning News and its fellow corporate propaganda spores spread the myth that the “markets” (bankers, hedge funds, etc.) crave stability, when the vital statistics of the real world of finance capitalism scream the opposite.

The Lords of Capital (the “markets”) are pure gamblers who have transformed the global financial marketplace into a machinery of perpetual uncertainty, in which all the wealth of the world is bet many times over by people who don’t actually own it, in a casino whose operators scheme against each other as well as their patrons, most of whom are not even aware that they are in the game – much less, that it is Russian roulette.

“Derivatives are valued at six times more than the total accumulated wealth of the world.”

The notional value of derivative financial instruments is now estimated at $1.2 quadrillion – that is, one thousand two hundred trillion dollars. This statistic is fantastic in every sense of the word, amounting to 16.7 times the Gross World Product, which is the value of all the goods and services produced per year by every man, woman and child on the planet: $71.83 trillion. Derivatives are valued at six times more than the total accumulated wealth of the world, including all global stock markets, insurance funds, and family wealth: $200 trillion.

The great bulk of known derivative deals are held by banks that are considered too big to be allowed to fail, with the top four banks accounting for more than 90 percent of the exposure: J.P. Morgan Chase, Citibank, Bank of America, and Goldman Sachs.

We are told that derivatives are simply bets between knowledgeable partners – hedges against loss – and that every time one of these financial institutions loses, another gains, so that there is no net loss or threat of global collapse. But that’s a lie. Never in the history of the world has finance capital so dominated the real economy, and only in the past two decades have derivatives been so central to finance capitalism. The players do not know what they are doing, nor do they care. The meltdown of 2008 was caused primarily by derivatives, requiring a bailout in the tens of trillions of dollars that is still ongoing, with the Federal Reserve buying up securities that no one would purchase – that is, bet on – otherwise. Yet, the universe of derivatives deals has grown much larger than in 2008, effectively untouched by President Obama’s so-called financial reforms.

The casino has swallowed the system. The sums the players are betting are not only far larger than the value of the rest of their portfolios, but six times larger than the combined assets of every human institution and family on Earth, and almost 17 times bigger than the worth of humankind’s yearly output. Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.

“Detroit has been rendered a failed city by the full range of derivatives and securitization.”

The events of 2008 demonstrated that derivatives collapses, like other speculative financial events, behave as cascades of consequences, rather than orderly “resolutions.” Derivatives deals infest or overhang every nook and cranny of the U.S. and other “mature” economies, poisoning pension systems and municipal finance structures. Detroit has been rendered a failed city by the full range of derivatives and securitization. When the casino is the economy, everyone is forced to play, and the poor go broke first.

Reformers of various stripes tell us that derivatives can either be regulated to a less lethal scale or abolished, altogether, while leaving Wall Street otherwise intact. That’s manifestly untrue. Finance capital creates nothing, reproducing itself through the manipulation of money. The derivatives explosion occurred because Wall Street needed a form of “fictitious” capital to continue posting ever higher profits, and ultimately, fictitious portfolios full of tradable bets. Derivatives deals are the ultimate expression of financial capitalism: they are primarily bets on transactions, rather than investments in production. The rise of derivatives signals that capitalism has run its course, and can only do further harm to humanity. The derivatives economy – all $1.2 quadrillion of it – is the last stage of capitalism.

If the Occupy Wall Street movement had understood this, and articulated the necessity to overthrow and abolish Wall Street, its impact would have been far more profound. As it stands, Americans are directed to quake in fear as the clock ticks down to some technical federal budgetary deadline on October 17 – as if that’s the sword of Damocles hanging over the world.

BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.


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Justice Dept. Mistakes Slapping Wall Street Wrists for True Punishment for Fraud

  Monday, February 25, 2013 (graphic: stateofsearch.com)

Stung by criticism that it has given Wall Street a “Get out of Jail Free Card” despite its role in causing the 2008 financial crisis and subsequent Great Recession, the Justice Department (DOJ) is talking tough about what it calls a new model for going after Wall Street fraudsters. Instead of settling for consent agreements and fines, DOJ claims it is now insisting on actual guilty pleas to felony charges. But critics remain skeptical, particularly because there is no indication that corporate executives will be held responsible for the crimes committed by the businesses they run.  Matt Taibbi of Rolling Stone called the new model “beyond laughable.”

The new approach, which surfaced in recent settlements with UBS and the Royal Bank of Scotland for their roles in the LIBOR rate-fixing fraud, involved demanding that their Japanese subsidiaries plead guilty to felony wire fraud. Now, prosecutors are said to be setting their sights on the Japanese subsidiaries of Citigroup, Deutsche Bank and JPMorgan Chase.

“This Department of Justice will continue to hold financial institutions that break the law criminally responsible,” claimed Lanny A. Breuer, head of DOJ’s criminal division.

Critics retort, however, that none of the corporate parent companies involved in LIBOR pleaded guilty, nor did any of their executives. Even the impact on the Japanese units was softened, as Japanese authorities assured UBS that they would not de-license its subsidiary. While the plea has depressed its stock price, the subsidiary is operating normally and clients remain.

“Extracting a guilty plea from a wholly-owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty,” observed Evan T. Barr, an ex-prosecutor who now defends white-collar criminal cases at the law firm Steptoe & Johnson.

Barr’s reference to the corporate death penalty is telling, because the claim that job losses would follow strict enforcement of the law is one that DOJ officials themselves have cited in defending their lenient approach to Wall Street fraud.

As Taibbi has pointed out however, protecting jobs at fraudster firms may seem like a good idea in the short run, but “the long-term job losses are going to be much greater when investors around the world lose confidence in the U.S. financial system because they recognize that individuals do not face punishment for criminal activity.” 

This type of what economists call “moral hazard,” arises when an individual has no incentive to obey the law because he or she faces no risk of punishment, while others will actually bear the consequences of the law-breaking. That is what happened in 2008, and even under the DOJ’s new strategy, “the individual incentive not to commit crime on Wall Street now is almost zero.”




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Did you know that simply reinstating Rule of Law and bringing back tens of trillions in corporate fraud would eliminate all public debt?  Imagine if the Wall Street Rating companies now saying public pensions are a burden were seized for facilitating massive fraud in valuing toxic stock as AAA and their assets sent to repay the losses to pension funds.

ALL YOU WOULD HAVE TO DO IS IMAGINE A RULE OF LAW NATION JUST DOING ITS JOB.

August 22, 2012

Warren Buffet Dumps Muni Bonds

John Ellis

Regular Via Meadia readers are by now well versed in the perils of state and municipal finance. Simply put, vast unfunded liabilities (pensions and retiree health benefits) are bearing down on taxpayers who cannot afford to make up the shortfall. Consequently, a once placid  and predictable market for state and municipal bonds is beginning to roil.

Yesterday, it roiled a lot, with the news that Berkshire Hathaway, under the direction of legendary investor Warren Buffett, announced its departure from the state and municipal bond market.

Discerning signal from noise isn’t easy in the cacophony of financial markets, but there was no mistaking this particular signal.  It was front-page news.  Everybody got the message.

In early 2011, Meredith Whitney famously told the CBS News program 60 Minutes that the state and municipal bond markets were headed for disaster. She predicted defaults and bankruptcies.  Tens of billions of dollars would be lost, she said, over the course of the year.

In the event, there were a few declarations of bankruptcy and a few defaults, but the state and municipal bond market, as a whole, rebounded nicely from the mini-panic that followed Ms. Whitney’s prediction.  The market for state and municipal bonds finished the year strong.

So it was that Ms. Whitney was denounced as a fraud and a charlatan. Anyone who defended her (like me, for instance) was deluged with emails and comments unfit for family viewing.  The state and municipal bond chorus was both righteous and vengeful.  They wanted this heretic burned at the stake.

Although Ms. Whitney’s timing was off, her arithmetic was inarguably correct.  Take the municipal bond market as an example.

Municipalities have two ways to raise revenue: property taxes and sales taxes.  There is as well a mind-numbing array of “fees” that have been concocted for cushion, but property and sales taxes account for the vast majority of municipal revenues.

According to a study by the Joint Center for Housing Studies at Harvard University, the amount of equity Americans have in their homes has been cut by more than half in the last six years.  In 2006, home equity stood at nearly $15 trillion.  Today, it stands at $6.2 trillion. You can’t raise property taxes on people whose property is worth less than half as much as it was 6 years ago.

As for sales tax revenue, it’s better than it was in 2009, but it’s not nearly as robust as it needs to be to keep feeding the municipal debt beast.  Nor will it soon be.  Middle class Americans are tapped out.  At the same time, they are deleveraging (paying off home equity loans, student loans, etc).  Higher taxes aren’t just politically difficult.  They’re all but impossible on middle class Americans.

Unless you live in energy-boom North Dakota or the Silicon Valley or a few other selected “hot spots,” this combination of depressed property values and diminished retail activity is the new normal. It will be the new normal for some time. It couldn’t come at a worse time.

An aging work force is preparing for retirement.  There aren’t nearly enough people in back of them to help pay the taxes that will keep retirement benefits flowing.  Immigrants, in theory, could make up the difference, but immigration trends have recently reversed.  Mexicans, for example, are no longer coming to America.  They’re staying in or going back to Mexico.

Over the course of the last four decades, public employee unions have been the only segment of the union “movement” that has seen membership growth.  In their negotiations with local and state governments across that time span, public employee unions consistently swapped out sharply higher wage increases for ever-more generous retirement benefits. The deal being that politicians could claim credit for holding the line on present costs, union leaders could claim credit for much richer retirement benefits and no one would have to pay for it any time soon.

Those public employee retiree health and pension benefits, once so far away, are now upon us.  They get more and more expensive as the baby boomers age.  And the money to pay for all those benefits simply isn’t there.

What about the state and local pension funds?  Didn’t they kill it over the length and breadth of the great bull market of the last 30 years? Well, yes they did.  And then they didn’t.  They now struggle to make half of their promised (8%) rate of return.

To make matters worse, the accounting that was used to describe assets and liabilities, was, shall we say, suspect.  So much so that Moody’s recently announced that given new and stricter accounting rules for state and local pensions, it was tripling the size of the total unfunded liability, from roughly $700 billion to $2.2 trillion.  In one day.

Further revisions (upward) are expected.  Which is one reason, no doubt, why Mr. Buffett chose to make his exit.

There are serious students of state and municipal debt who believe that the actual size of the total unfunded liability is closer to $4 trillion than it is to Moody’s $2.2 trillion.  Whatever the real number is, it will eventually require (and sooner would be better than later) that all involved take some kind of haircut.  There is simply no way, barring the discovery of the fountain of youth and the erection of a state and muni bottling plant next to it, that these gigantic unfunded liabilities can be made whole.

Mr. Buffett saw that nearly 20 months after Ms. Whitney.  He got out while he still could. It will be hard, if not impossible, for the state and municipal bond chorus to call him a fraud and a charlatan.




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Absolutely!  It was Wall Street and Deutsche Bank that used massive financial fraud to implode these social democracies with the goal of widening markets....the social unrest is a direct result!

The racism that is growing all across Western nations is a direct result of limited resources for the 99%.  Fighting for resources is a third world social structure and this is what is happening in Europe and the US as wealth inequity and injustice is left without justice.  Golden Dawn is a very bad racist group that did not have a following before the collapse.


The Golden Dawn Murder Case, Larry Summers and the New Fascism
Monday, 07 October 2013 09:03 By Greg Palast, Truthout | News Analysis

(Image: Jared Rodriguez / Truthout)On September 18, hip-hop artist Pavlos Fyssas, aka Killah P, was stabbed outside a bar in Keratsini, Greece. 

Larry Summers has an airtight alibi.  But I don't believe it.

Larry didn't hold the knife: The confessed killer is some twisted little fuckwit member of Golden Dawn, a political party made up of skinhead freaks, anti-immigrant fearmongers, anti-Muslim, anti-Semitic, anti-Albanian sociopaths and ultra-patriot crazies.  Think of it as the Tea Party goes Greek.

Following Fyssas' killing, other groups of dangerous psychopathic misfits, namely the European Union and Greece's governing coalition, moved to ban Golden Dawn. 

Over the weekend, Greece's rulers arrested six members of Parliament who belong to Golden Dawn.  Apparently, Greece's political leaders prefer democracy as defined by Egypt's General Sisi.

To my friends on the Greek left: It's sickening to watch you cheer the arrest of Golden Dawn parliamentarians.  Mark my words: You are next.

Listen up:

My investigation reveals that behind the banning of Golden Dawn, besides the usual European distaste for democracy, is something far more sinister: The ruling parties are distracting the public from their own involvement in the crime.

The rise in violence and hate crimes is no surprise. The official unemployment rate in Greece is 28 percent, and over 60 percent among young men.  No wonder desperate youths are wrapping batons in Greek flags and beating immigrants: When people are pressed to the wall, they hunt for their tormentors - and too often find their fellow victims to blame.

Economic devastation breeds fascism. In the 1930s, the hungry and angry sought relief in hyper-patriotism, racism and pogroms.  In the 1980s Reagan recession in the United States, when factories shut down in the Midwest, the hopeless unemployed joined right-wing skinhead cults and went on a killing rampage - beginning with the murder of Jewish journalist Alan Berg and ending with the bombing of a government building in Oklahoma, killing 168.

Vultures Over Athens

Golden Dawn is a symptom of the nation's illness, not its cause.  Unfortunately, the brown-shirts go after easy targets - Pakistanis, Gypsies, Africans, whoever is different and easy to whack.  It's a lot easier to stab a hip-hop artist than it is to go after a hedge-fund shark.

The real culprits behind the suffering are well camouflaged.  So let me name some: In Greece, we begin with billionaires Kenneth Dart and Paul "The Vulture" Singer.

Dart and Singer bought up Greek government bonds for pennies on the dollar. While the holders of 97 percent of Greek bonds agreed to accept a loss of 75 percent of their value, Dart and Singer demanded several hundred percent more than they paid.  Then Dart and Singer threatened the dead-broke Greek government. If Greece did not pay this ransom, Dart and Singer would declare Greek bonds in default.  Every bank in Europe holding these government debts as reserve funds would face technical bankruptcy; the value of government bonds worldwide would implode in value; and the entire hemisphere would face a new financial collapse.

It was financial terrorism, and the Greek government gave in.  It paid the full ransom demanded.  Dart grabbed over half a billion dollars ($513 million) from the Greek treasury - and only the gods know how much Singer has pocketed.

How was this vulture food paid for?  With "austerity" - tightening a belt that's already not much bigger than its buckle.  To pay Singer and Dart, the Greek government announced it would fire 15,000 workers.

What's sick is that the ruling coalition (or misruling coalition) does not say this is to cover the payoffs to the vultures.  Rather than stand up to these financial terrorists, the government blames their victims, pointing to its own citizens as lazy and greedy who must be punished. The victims' punishment is called "austerity."

The Austerity Fairy Tale

My children often ask me, "Daddy, where does 'austerity' come from?"  And I tell them: 

Once upon a time, there was a good fairy named John Maynard Keynes. He wanted to stop depressions, financial crises and suffering, so he conceived of the International Monetary Fund and the World Bank.  He said, 'When a nation's foreign exchange earnings drop (say, if the price of oil rises or Greek tourism falls because its currency is overvalued), the countries taking the poor nations' money, rich countries like Germany and the United State, would lend it back via the IMF.

By this rule, the rich lending to the poor, the world prospered and lived happily ever after . . .  until the 1980s, when a wicked witch, known as the Iron Lady, and America's gaga grandpa, Reagan of the Rich, insisted that the IMF and the World Bank beat poor nations with a stick called, "structural adjustment."

Nations facing destitution because of higher oil costs, currency imbalance or predatory interest rate demands were "structurally adjusted."  Structural adjustment is a cruel and debilitating potion of mass firings of public employees, cheap sell-offs of national assets and deregulation of corporate profiteering.  This ripping the wings off the better angels of government is called, "austerity."

The good fairy Keynes had warned about this evil potion, this snake oil called "austerity."  Cutting government spending during a recession, he said, will only make things worse. 

And that's what happened:  In every single case, the "adjusted" nations' economies were devastated.

Structural adjustment reached its cruel apotheosis in the early 1990s under the guidance of the World Bank's chief economist, one Larry Summers. 

But then, in 1997, Summers' post was taken by Professor Joseph Stiglitz.

In 2001, I met Stiglitz whom I'd heard was quietly expressing grave doubts about austerity and structural adjustment à la Summers.  He agreed to go public.  Over several hours of discussion, which I recorded for BBC TV, Stiglitz charged that IMF-imposed austerity was " a little like the Middle Ages. When the patient died, they would say, well, we stopped the bloodletting too soon; he still had a little blood in him."

Stiglitz detailed for me the ill effects of the "structural adjustment" demands, including "free" trade, which he likened to the Opium Wars; bank deregulation, which he found ludicrously dangerous; privatization, which Stiglitz called "briberization"; and budget-cutting austerity. 

The budget cuts and free-market nostrums, Stiglitz told me, were as cruel as they were stupid.  And he said of those who profited off these IMF diktats, "They don't care if people live or die."

Stiglitz went on to win the Nobel Prize in economics for his skepticism of Markets über Alles.

So how, a decade after austerity, briberization and all their cruelties were exposed and discredited, did Greece (and Spain, and Portugal and too many others) end up under austerity's bloody grip? 

To begin with, in 2000, Larry Summers, as US treasury secretary, successfully demanded the World Bank fire Stiglitz and purged the bank and IMF of austerity apostasy. 

Why? Austerity may fail the public, but it's damn profitable for those on the inside. 

All you need is a riot and a few dead bodies.

The IMF Riots

Among Stiglitz's stunning revelations to me was his description of "the IMF riot." I showed him confidential World Bank and IMF plans for the nation of Ecuador. These included what seemed to be a warning to that nation's finance minister that austerity could lead to violence in the streets, "social unrest"- which the World Bank recommended be crushed with "resolve." In Ecuador, "resolve" meant tanks. 

Did the IMF really write the riots into the plans?

Yes, Stiglitz said, matter-of-factly. "We had a name for it: 'The IMF Riot.' "

When a nation is "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole caldron blows up."

And that's what we're seeing in Greece.  It began in May 2010, when some sick, misguided berserker set fire to a bank in Athens and killed four bank employees.  The killings did the trick: The left's protests against insane austerity and banker gangsterism came to a halt.

Still, people could see that the austerity medicine was making Greece ill. So, they put their hopes in a new party, Syriza, which, from nowhere, became the second highest vote-getter in Greece by promising to oppose austerity. Once in office, the faux-left Syriza completely sold out its positions.

That leaves Golden Dawn, although diseased by racism and violently bent, as the only one of Greece's top four parties to stand firm against rabid austerity and the economy being chained like a beaten dog to Germany's currency.

In 2010, the bank burning was used to discredit protests by the left.  Today, once again, the Greek government, dancing on its hind legs, begging for a biscuit from German bankers, has used a murder as an excuse to outlaw the only major party dissenting from the austerity suicide pact.

I wish I could say that the reason Golden Dawn is being banned is because of the violent bend of its racist followers. But that's just not what's going on here.

Dimitris Kazakis, the leader of Greece's true progressive party, the United People's Front (EPAM), has spoken out against Golden Dawn's racist violence - and the greater danger of the bogus charges created to arrest members of Parliament.  He scolds Greeks, reminding them that this is how the military dictatorship seized power in 1967. 

So, who are the real fascists?

Fascism, as defined since the days of Il Duce, is the official combination of government and big business.  By that definition, Golden Dawn is the only non-fascist party among Greece's top four.  And that is why Golden Dawn has been targeted for elimination.

I hope my fellow progressives will excuse me for not applauding.


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Here we have an example of a $1.7 billion payout for on a worldwide fraud.  Look at the volume of transactions this fraud included....$5.3 trillion a day.  WE CANNOT ALLOW THESE SETTLEMENTS TO STAND---WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION!

Swiss authorities did not give any indication Friday of how much money might have been
Involved in any manipulation, but the potential is enormous. Currencies worth $5.3 trillion are traded every day, according to the Bank for International Settlements in Basel, Switzerland.


Swiss Investigate Banks Over Currency Trading By JACK EWING Published: October 4, 2013New York Times

FRANKFURT — The banking industry, already troubled by official inquiries that have badly damaged its reputation, got hit by another on Friday. Swiss authorities said they were investigating whether financial institutions had colluded to manipulate foreign exchange markets.

In a terse statement, the Swiss financial industry regulator, known as Finma, said it was investigating several Swiss banks but did not name them. The agency also said it was cooperating with authorities in other countries and that banks outside the country were also suspected. A spokesman for Finma declined to comment further.

Spokesmen for Switzerland’s two largest banks, UBS and Credit Suisse, declined to comment. UBS is fourth among global banks in currency trading, according to Euromoney. Credit Suisse is a relatively minor player, with 3.7 percent of the currency market vs. 10.1 percent for U.B.S.

The largest currency trader globally is Deutsche Bank in Frankfurt, with 15.2 percent of the market. A spokesman for Deutsche Bank also declined to comment.

In earlier inquiries, more than a dozen global banks have been accused or suspected of manipulating the London interbank offered rate, or Libor, a benchmark used to set interest rates on trillions of dollars of mortgages and other loans. In December, UBS agreed to pay approximately 1.4 billion Swiss francs ($1.6 billion) as part of a settlement with American, British and Swiss authorities in connection with the Libor inquiry.

Swiss authorities did not give any indication Friday of how much money might have been involved in any manipulation, but the potential is enormous. Currencies worth $5.3 trillion are traded every day, according to the Bank for International Settlements in Basel, Switzerland.

“Finma is currently conducting investigations into several Swiss financial institutions in connection with possible manipulation of foreign exchange markets,” the regulator said in a statement. “Finma is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated.”

A spokesman for the German bank regulator, known as Bafin, said he could not comment on whether German authorities were involved in the investigation.

In June, Britain’s financial regulator said it was examining claims that traders at large banks manipulated some foreign exchange benchmark rates and that it might start an official investigation. It was not immediately clear if that preliminary inquiry was related to the Swiss investigation.

The Financial Conduct Authority said in June that it was talking to individuals in the foreign exchange market about claims that traders rigged the so-called WM/Reuters rates. On Friday, the F.C.A. reiterated that it was in discussions with all of the relevant parties, but would not comment further.

Because the foreign exchange market is not regulated, any F.C.A. inquiry would focus on individuals authorized by the regulator to act in the market and whether companies did enough to prevent market abuse.
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Please keep in these articles that these settlements were parking tickets and next to nothing.  We have yet to get justice for the tens of trillions of dollars in bank fraud.  It is not only the prosecutions!  We want to emphasize to all that the government has suspended Rule of Law and as such, suspends Statutes of Limitation.  A government cannot simply decide not to recover massive amounts of fraud....it is operating illegally under Equal Protection and Rule of Law.  PLEASE MAKE THESE ARTICLES EMPHASIZE THAT ALONG WITH PROSECUTION THERE IS ENOUGH FINANCIAL FRAUD TO PAY THE ENTIRE NATIONAL DEBT!  Also, talk about Sarbanes-Oxley as those protecting the financial industry love to say it is too hard to gather proof of fraud.  All the evidence is already there for Sarbanes-Oxley and that alone will put higher executives in jail for a decade or more.





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Remember I have been telling you for two years there is an economic crash coming that will be bigger than 2008 and it will be the bond bubble? THAT IS WHY YOUR NEO-LIBERAL HAS USED CREDIT BONDS AND TIFs .......TO BREAK THE PUBLIC BUDGETS!

Stocks are about to plunge, Wells Fargo warns
By Alex Rosenberg | CNBC – Fri, Sep 20, 2013 7:24 AM EDT @cnbc on Twitter

• 
  

Gina Martin Adams is sticking to her guns.

The Wells Fargo strategist has been bearish on stocks all year, even as she watched the S&P 500 (^GSPC) add 21 percent. And on Thursday's " Futures Now ," Adams reiterated her call that the index would close out the year at 1,440.

"Our target is based on fundamentals," Adams insisted. "We're basing our target on typical valuation measures, given the level of interest rates and also on earnings forecasts. And that's why our target is relatively low."

In fact, "low" is somewhat of an understatement. Adams' target implies that the market will drop 16 percent in little more than three months, erasing everything that stocks gained after the year's first day of trading. This makes her one of the lone bears on the Street.


So what could produce such a dismal fourth quarter for stocks? First of all, Adams is highly skeptical about the rally that the market has enjoyed thus far.

"It's all about emotion at this point. The entirety of the S&P 500's increase this year has come via the multiple," Adams said. "It's been simply through the amount that investors are willing to bid up the value of the future earnings stream."

Indeed, the S&P 500's price-earnings multiple has risen from 17 on Jan. 1 to nearly 20. That means the market has largely been rising due to investors' willingness to pay more for those earnings.

Adams goes on to argue that the recent rise in Treasury yields could put an end to this inclination.

"The multiple is one of the most valuable components" of the rally, and "typical drivers of the multiple are interest rates." So despite the fact that yields have cooled off recently, "simply the fact that we moved from 1.6 [percent] on the 10-year Treasury rate to now the 2.7 [percent] range is a potential tremendous shock over the next six months," Adams contended.

Adams believes that stocks haven't yet digested the rate rally. "Stocks tend to follow rates over time," she said. "Typically, when you get a 100 basis point [or 1 percent] move in Treasury rates, you get a contraction on the P/E multiple on stocks of about a full turn. That, by itself, implies you get something of a 10-percent-plus correction in stocks."

And while the Fed's decision that it wouldn't slow its rate of asset purchases has driven the market to yet another all-time high this week, Adams doesn't believe the surprising announcement will ultimately make a difference.

"Unless bonds can actually rally substantially with the so-called Fed bid, and the Fed is able to manipulate yields significantly lower, the damage has been done, and I think the cat is quite frankly out of the bag."

Couple the rise in rates with slow earnings growth, and Adams believes the market is in for a very tricky fall.

"We're going to have to face the music come October," she said.






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Chase: ‘Incredibly Guilty’

An outside observer might be forgiven for thinking JPMorgan Chase isn’t so much a bank as it is a criminal enterprise with a bank attached to it. Even before the London Whale scandal, Chase’s documented list of crimes included repeated fraud, perjury, forgery, bribery, and violations of laws against trading with Iran and Syria.

It also shot a man in Reno just to watch him die.

Okay, that last statement isn’t true. But the rest of the crimes on that list, and a number of others, are well-documented. And yet, remarkably, not a single senior executive at the bank has been indicted – or, to our knowledge, even been the subject of a criminal investigation. The bank just agreed to pay nearly a billion dollars in fines over the “Whale” case. And the SEC finally ending its practice of allowing criminal banks to “neither admit nor deny wrongdoing” when paying for their misdeeds. Chase admitted its guilt as part of the settlement.

In an even more dramatic break with recent practice, the Justice Department is pursuing criminal prosecutions in this case. But it’s not clear that the indictments against two low-level employees will even lead to a trial.

We have written extensively about JPMorgan Chase’s crime spree, but we have tried to be scrupulous about avoiding assumptions of guilt or innocence on the part of the bank’s senior management. And in all fairness, the bank’s leaders may not be involved in any criminal activity. They may simply be incompetent managers, incapable of ending criminal and reckless behavior among the employees for whom they are responsible. In that case the Board should step in and relieve them of a burden they’re clearly incapable of carrying.

But fair is fair: At least theoretically, Chase’s executives may be trying to run an honest bank. And Tony Soprano may just be running a waste management company.  But our outside observer would also be forgiven for concluding that crime is part of Chase’s business model.

Sound harsh? A report on JPM’s lack of proper risk management controls, appropriately entitled “Out of Control,” documented a list of crimes which, as David Dayen noted, “reads like a rap sheet.” Dayen helpfully summarized the offenses documented in the report, and you’re encouraged to read his list in full. Even this heavily abridged version will have you wondering why the police dispatcher hasn’t sent officers to the scene:

“Bank Secrecy Act violations; money laundering for drug cartels; violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor; executing fictitious trades where the customer … was on both sides of the deal; misrepresentations of CDOs and mortgage-backed securities; violations of the Servicemembers Civil Relief Act; fraudulent sale of unregistered securities; auto-finance deceptions; violations of state and federal ERISA laws; filing of unverified affidavits for credit card debt collections; energy market manipulation that triggered FERC lawsuits; “artificial market making” at Japanese affiliates; shifting trading losses on a currency trade to a customer account; fraudulent sales of derivatives to the city of Milan, Italy; and obstruction of justice (including refusing the release of documents in the Bernie Madoff case).”

“1-Adam 12. There are 487‘s and other violations in progress at 270 Park Avenue …”

And the list excerpt above is by no means complete. It leaves out Chase’s central role in bribing officials in Jefferson County, Alabama to rig municipal bonds, and overlooks the “Burger King kids” – college-age youngsters hired by the bank to mass-generate foreclosure filings (so named by fellow bank employees because of their propensity for eating take-out fast food while generating the court documents they reportedly falsified).

JPMorgan Chase was one of five banks which agreed to pay billions in fines to settle charges stemming from massive and systematic foreclosure fraud. Twenty-four states have enacted some version of the “three strikes” rule, which requires a jail sentence for anyone convicted of a third felony. And yet, as this chart shows, JPMorgan Chase has committed a total of four violations on one count alone, “Purposeful or negligent fraud in interstate commerce,” which violates section 17(a) of the Securities Act of 1933.

Connecticut’s Office of Legal Research clearly summarizes the penalties which individual bankers may face for violating the Securities Act and its companion legislation, the Securities Exchange Act of 1934:

“Corporate directors, officers, and others who violate these laws are subject to criminal penalties, administrative fines, civil penalties, cease and desist orders, injunctions, disgorgement (an equitable remedy to provide restitution to defrauded members of the public), private lawsuits, and orders barring them from acting as officers or directors of public companies.”

Pop quiz: How many senior executives at JPMorgan Chase have faced criminal prosecution for the bank’s serial crimes? How many have been personally fined, served with cease and desist orders, or been barred from acting as officers and directors of public companies?

Answer: Zero.

Instead, bank executives have been allowed to “settle” these crimes by paying large fines with other people’s money – specifically, shareholders who may have been deceived in the bank’s latest “London Whale” case. It’s almost as if the bank’s senior executives lead charmed lives – or have very well-placed friends.

Even as the “Whale” legal crisis was exploding, Chase CEO Jamie Dimon appeared at the Davos financial “summit” sporting FBI cufflinks. Was he trying to tell the world something?

Now the government’s issued “Whale” arrest warrants for two relatively low-level Chase bankers. That’s encouraging, especially after so many years of inaction – but their choice of targets is not. Both indicted bankers are foreign nationals who may or may not be extradited under current agreements.

Yves Smith has an excellent overview of the state of play in the Whale investigation. The bottom line is this: Of all the targets the government might have pursued, these two bankers are among the hardest to locate and “turn” into witnesses against more highly-placed executives.

And it’s far from clear there will be a government appetite for doing that. JPMorgan Chase CEO Jamie Dimon is a major contributor to political campaigns. Senior bankers were Attorney General Eric Holder’s primary clients in his lucrative private law career. The same is true for SEC head Mary Jo White.

Good for them for finally taking more aggressive action. But the burden of proof is still on them, and especially Holder, to demonstrate that they will pursue bank crimes aggressively. That means picking cases and targets that can be brought to justice, and finding witnesses who can be persuaded to testify in return for leniency. It’s hard to believe that there aren’t more cases like that to be found in JPMorgan Chase’s rich vein of lawbreaking.

Fairness demands that we say it again: It may very well be that the leadership team at JPMorgan Chase is  shocked – shocked! – at all this criminality, and may simply lack the basic managerial skills needed to end it. But we can’t help thinking of the line from Mel Brooks’ The Producers, when the jury foreman is asked to read the verdict against Zero Mostel and Gene Wilder. “We find the defendants incredibly guilty,” intones the foreman.

JPMorgan Chase’s crimes cry out for a jury like that.



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Now, the goal for Bush and Wall Street in creating this massive mortgage fraud was to move not only public wealth in money....but property to the top. 

Neo-liberals are jumping on the band wagon as Chicago and now Baltimore choose to disregard Rule of Law and simply give the property to the rich to then sell to whomever they want.  In Baltimore development so far has all been affluent with deliberate policy to keep low-income/working class out!

Land Banks


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What's New Land Bank Study
This report contains three case studies of the effectiveness of the use of land banks and how local governments can enable productive use of foreclosed properties.
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Land Bank Q’s & A's
This discusses questions resulting from HERA amendments limiting use of land banking to foreclosed properties. 

At the forefront of issues affecting today's housing market, foreclosed properties have become a significant problem, not only to local economies, but also to the aesthetics of the area. Moreover, middle- to low-income families continue to be priced out of the housing market while suitable housing units remain vacant. Local governments can enable productive reuse of these properties and simultaneously address the affordable housing crisis by creating public entities known as land banks to acquire, hold, and manage foreclosed properties. This report examines the concept of land banking and discusses barriers and solutions to the successful implementation of land banks. The report contains case studies from the Genesee County Land Bank Authority, the Baltimore City Land Bank, and the Atlanta/Fulton County Land Bank. Each case study provides a detailed description of the land banking programs and their effectiveness in revitalizing declining neighborhoods.

NSP Fact Sheet
Discusses land bank as an organization, as an eligible use or strategy, and as an activity.
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