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The Hunter Biden Criminal Probe Bolsters a Chinese Scholar’s Claim About Beijing’s Influence With the Bidens

Professor Di Dongsheng says China’s close ties to Wall Street and its dealings with Hunter could enable it to exert more power than under Trump

By Glenn Greenwald | December 9, 2020

Hunter Biden acknowledged today that he has been notified of an active criminal investigation into his tax affairs by the U.S. Attorney for Delaware. Among the numerous prongs of the inquiry, CNN reports, investigators are examining “whether Hunter Biden and his associates violated tax and money laundering laws in business dealings in foreign countries, principally China.”

Documents relating to Hunter Biden’s exploitation of his father’s name to enrich himself and other relatives through deals with China were among the cache published in the week before the election by The New York Post — revelations censored by Twitter and Facebook and steadfastly ignored by most mainstream news outlets. That concerted repression effort by media outlets and Silicon Valley left it to right-wing outlets such as Fox News and The Daily Caller to report, which in turn meant that millions of Americans were kept in the dark before voting.

But the just-revealed federal criminal investigation in Delaware is focused on exactly the questions which corporate media outlets refused to examine for fear that doing so would help Trump: namely, whether Hunter Biden engaged in illicit behavior in China and what impact that might have on his father’s presidency.

The allegations at the heart of this investigation compel an examination of a fascinating and at-times disturbing speech at a major financial event held last week in Shanghai. In that speech, a Chinese scholar of political science and international finance, Di Donghseng, insisted that Beijing will have far more influence in Washington under a Biden administration than it did with the Trump administration.

The reason, Di said, is that China’s ability to get its way in Washington has long depended upon its numerous powerful Wall Street allies. But those allies, he said, had difficulty controlling Trump, but will exert virtually unfettered power over Biden. That China cultivated extensive financial ties to Hunter Biden, Di explained, will be crucial for bolstering Beijing’s influence even further.

Di, who in addition to his teaching positions is also Vice Dean of Beijing’s Renmin University’s School of International Relations, delivered his remarks alongside three other Chinese banking and development experts. Di’s speech at the event, entitled “Will China’s Opening up of its Financial Sector Attract Wall Street?,” was translated and posted by Jennifer Zeng, a Chinese Communist Party critic who left China years ago, citing religious persecution, and now lives in the U.S. A source fluent in Mandarin confirmed the accuracy of the translation.

The centerpiece of Di’s speech was the history he set forth of how Beijing has long successfully managed to protect its interests in the halls of American power: namely, by relying on “friends” in Wall Street and other U.S. ruling class sectors — which worked efficiently until the Trump presidency.

Referring to the Trump-era trade war between the two countries, Di posed this question: “Why did China and the U.S. use to be able to settle all kinds of issues between 1992 [when Clinton became President] and 2016 [when Obama’s left office]?” He then provided this answer:

No matter what kind of crises we encountered — be it the Yinhe incident [when the U.S. interdicted a Chinese ship in the mistaken belief it carried chemical weapons for Iran], the bombing of the embassy [the 1992 bombing by the U.S. of the Chinese Embassy in Belgrade], or the crashing of the plane [the 2001 crashing of a U.S. military spy plane into a Chinese fighter jet] — things were all solved in no time, like a couple do with their quarrels starting at the bedhead but ending at the bed end. We fixed everything in two months. What is the reason? I’m going to throw out something maybe a little bit explosive here.

It’s just because we have people at the top. We have our old friends who are at the top of America’s core inner circle of power and influence.

Who are these “old friends” of China’s “who are at the top of America’s core inner circle of power and influence” and have ensured that, in his words, “for the past 30 years, 40 years, we have been utilizing the core power of the United States”? Di provided the answer: Wall Street, with whom the Chinese Community Party and Chinese industry maintain a close, multi-pronged and inter-dependent relationship.

“Since the 1970s, Wall Street had a very strong influence on the domestic and foreign affairs of the United States,” Di observed. Thus, “we had a channel to rely on.”

To illustrate the point of how helpful Wall Street has been to Chinese interests in the U.S., Di recounted a colorful story, albeit one fused with anti-Semitic tropes, of his unsuccessful efforts in 2015 to secure the preferred venue in Washington for the debut of President Xi Jinping’s book about China. No matter how much he cajoled the owner of the iconic D.C. bookstore Politics and Prose, or what he offered him, Di was told it was unavailable, already promised to a different author. So he conveyed his failure to Party leadership.

But at the last minute, Di recounts, he was told that venue had suddenly changed its mind and agreed to host Xi’s book event. This was the work, he said, of someone to whom Party leaders introduced him: “She is from a famous, leading global financial institution on Wall Street,” Di said, “the president of the Asia region of a top-level financial institution,” who speaks perfect Mandarin and has a sprawling home in Beijing.

The point — that China’s close relationship with Wall Street has given it very powerful friends in the U.S. — was so clear that it sufficed for him to coyly laugh with the audience: “Do you understand what I mean? If you do, put your hands together!” They knowingly applauded.

All of that provoked an obvious question: why did this close relationship with Wall Street not enable China to exert the same influence during the Trump years, including avoiding a costly trade war? Di explained that — aside from Wall Street’s reduced standing due to the 2008 financial crisis — everything changed when Trump ascended to the presidency; specifically, Wall Street could not control him the way it had previous presidents because of Trump’s prior conflicts with Wall Street:

But the problem is that after 2008, the status of Wall Street has declined, and more importantly, after 2016, Wall Street can’t fix Trump. It’s very awkward. Why? Trump had a previous soft default issue with Wall Street, so there was a conflict between them, but I won’t go into details, I may not have enough time.

So during the US-China trade war, [Wall Street] tried to help, and I know that my friends on the US side told me that they tried to help, but they couldn’t do much.

But as Di shifted to his discussion of the new incoming administration, his tone palpably changed, becoming far more animated, excited and optimistic. That’s because a Biden presidency means a restoration of the old order, where Wall Street exerts great influence with the White House and can thus do China’s bidding: “But now we’re seeing Biden was elected, the traditional elite, the political elite, the establishment, they’re very close to Wall Street, so you see that, right?”

And Di specifically referenced the work Beijing did to cultivate Hunter:

Trump has been saying that Biden’s son has some sort of global foundation. Have you noticed that?

Who helped [Biden’s son] build the foundations? Got it? There are a lot of deals inside all these.

Some excerpts of Di’s speech can be seen below, and the translated transcript of it here.

The claims in his speech can be seen in a new light given today’s revelations that the U.S. Attorney has resumed its active criminal investigation into Hunter Biden’s business dealings in China and whether he accounted to the I.R.S. for the income (CNN’s Shimon Prokupecz says that “at least one of the matters investigators have examined is a 2017 gift of a 2.8-carat diamond that Hunter Biden received from CEFC [China Energy’]’s founder and former chairman Ye Jianming after a Miami business meeting.”


The pronouncements of this University Professor and administrator should not be taken as gospel, but there is substantial independent confirmation for much of what he claimed. That is even more true after today’s news about Hunter Biden.

That Hunter Biden received large sums of money from Chinese entities is not in dispute. A report from the U.S. Senate Committee on Homeland Security and Government Affairs earlier this year, while finding no wrongdoing by Joe Biden, documented millions in cash flow between Hunter and his relatives and Chinese interests.

Nor can it be reasonably disputed that Wall Street exerts significant influence in Democratic Party politics generally and in the world of Joe Biden specifically. Citing data from the Center for Responsive Politics, CNBC reported in the weeks before the election:

People in the securities and investment industry will finish the 2020 election cycle contributing over $74 million to back Joe Biden’s candidacy for president, a much larger sum than what President Donald Trump raised from Wall Street.

They added: “Biden also received a ton of financial support from leaders on Wall Street in the third quarter.” At the same time, said CNN, “professionals on Wall Street are shunning Trump and funneling staggering amounts of money to his opponent.” Wall Street executives, CNBC reported, specially celebrated Biden’s choice of Kamala Harris as his running mate, noting that her own short-lived presidential campaign was deluged with “contributions from executives in a wide range of industries, including film, TV, real estate and finance.”

Moreover, Biden’s top appointees thus far overwhelmingly have massive ties to Wall Street and the industries which spend the most to control the U.S. government. As but one egregious example, Pine Island Investment Corp. — an investment firm in which key Biden appointees including Secretary of State nominee Antony Blinken and Pentagon chief nominee Gen. Lloyd Austin have been centrally involved — “is seeing a surge in support from Wall Street players after pitching access to investors.”

Prior to the formal selection of Blinken and Austin for key Cabinet posts, The Daily Poster reported that “two former government officials who may now run President-elect Joe Biden’s national security team have been partners at a private equity firm now promising investors big profits off government business because of its ties to those officials.” The New York Times last week said “the Biden team’s links to these entities are presenting the incoming administration with its first test of transparency and ethics” and that Pine Island is an example “of how former officials leverage their expertise, connections and access on behalf of corporations and other interests, without in some cases disclosing details about their work, including the names of the clients or what they are paid.”

That China and Wall Street have an extremely close relationship has been documented for years. Financial Times — under the headline “Beijing and Wall Street deepen ties despite geopolitical rivalry” — last month reported that “Wall Street groups including BlackRock, Citigroup and JPMorgan Chase have each been given approval to expand their businesses in China over recent months.”

A major Wall Street Journal story from last week, bearing the headline “China Has One Powerful Friend Left in the U.S.: Wall Street,” echoed Di’s speech by noting that “Chinese leaders have time and again turned to Wall Street for assistance in periods of trouble.” That WSJ article particularly emphasized the growing ties between China and the asset-manager giant BlackRock, a firm that already has outsized influence in the Biden administration. And Michael Bloomberg’s ties to China have been so crucial that he has regularly heaped praise on Beijing even when doing so was politically deleterious.

Even the smaller details of Di’s speech — including his anecdote about the book event he tried to arrange for Xi — check out. Contemporaneous news accounts show that exactly the book event he described was held at Politics and Prose in 2015, just as he recalled.

None of this means that Trump was some sort of stalwart enemy of Wall Street. From massive corporate tax cuts to rollbacks of regulations in numerous industries and many of their own in key positions, the financial sector benefited in all sorts of ways from the Trump presidency.

But all of their behavior indicates that they view a Biden/Harris administration as far more beneficial to their interests, and far more susceptible to their control. And that, in turn, makes Beijing far more confident that they will wield significantly more influence in Washington than they could over the last four years.

That confidence is due, says Professor Di, to Beijing’s close ties to a newly empowered Wall Street as well as their efforts to cultivate Hunter Biden, efforts we are likely to learn much more about now that Hunter’s activities in China are under active criminal investigation in Delaware. We should and could have learned about these transactions prior to the election had the bulk of the media not corruptly decided to ignore any incriminating reporting on Biden, but learning about them now is, one might say, a case of better late than never.

December 10, 2020 Posted by | Corruption, Economics, Timeless or most popular, Video | , , , , , , , | Leave a comment

Holder Deadline for Prosecuting Wall Street Executives for Financial Crisis Passes without a Single Charge

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By Noel Brinkerhoff and Danny Biederman | AllGov | May 26, 2015

Shortly before Attorney General Eric Holder left office, he gave his prosecutors 90 days to decide whether to indict any Wall Street executives for decisions that caused the 2008 financial crisis.

Holder has now left the building at the Department of Justice (DOJ). Also gone is his deadline for punishing big bankers, none of whom were charged with a crime.

Holder’s shop had six years to build cases against key people at institutions like Citigroup and JP Morgan Chase. It’s not known if prosecutors ever did that. What is known is that the only charges actually filed by DOJ lawyers have been against smaller fish, namely those working at small and medium sized banks, according the Center for Public Integrity (CPI).

The investigative news site reviewed enforcement actions and civil lawsuits filed by the Justice Department, Federal Deposit Insurance Corp. (FDIC) and Securities and Exchange Commission (SEC) and found “these agencies have been far more likely to charge or sue individuals who work at small and medium sized banks, and foreign financial firms, than those that work at domestic banking giants such as J.P. Morgan Chase & Co. or Citigroup.”

CPI’s Alison Fitzgerald reported that none of the five largest banks in the country are involved in criminal cases filed by the Justice Department that pertain to the financial crisis.

“Two defendants who were unsuccessfully prosecuted ran a hedge fund for the now-defunct investment bank Bear Stearns,” she wrote. “About a dozen others are from smaller banks or foreign institutions.”

At the SEC, only four of the more than 100 bank executives named in lawsuits were from the top five banks, according to Fitzgerald. The FDIC has sued nearly 2,000 bank executives, none of whom worked at any of the big Wall Street banks.

“There’s no question that these banks have admitted that they’ve violated laws and regulations,” Independent Community Banker of America CEO Camden Fine told CPI. “These guys on Wall Street get their checkbooks out and write a check. This is an issue of unequal enforcement.”

For his part, Holder recently defended his efforts and that of the DOJ to prosecute individuals at the big banks for criminal wrongdoing. “To the extent that individuals have not been prosecuted, people should understand it is not for lack of trying,” he said.

“Nonsense,” countered former U.S. Assistant Attorney General Jimmy Gurulé. “Charges for white-collar crimes are filed every single day by U.S. attorneys across the country,” he told International Business Times. “Just because they’re more difficult with banks is not a legitimate excuse for bringing zero charges against individuals.”

To Learn More:

Bankers From Major Institutions Still Haven’t Been Held Responsible For Financial Crash (by Alison Fitzgerald, Center for Public Integrity)

Who Caused The Financial Crisis? Prosecutors Face 3-Month Deadline for Bringing Charges in the Subprime Mortgage Mess (by Owen Davis, International Business Times )

Instead of Wall St. Prosecutions, Holder Delivers a Deadline (by William Cohan, New York Times )

Eric Holder’s Last Chance to Prosecute Financial Meltdown Bankers (by Noel Brinkerhoff, AllGov )

May 26, 2015 Posted by | Corruption, Progressive Hypocrite | , , , | 3 Comments

The Clintons and Their Banker Friends

The Wall Street Connection (1992 to 2016)

By Nomi Prins | TomDispatch | May 7, 2015

[This piece has been adapted and updated by Nomi Prins from chapters 18 and 19 of her book All the Presidents’ Bankers: The Hidden Alliances that Drive American Powerjust out in paperback (Nation Books).]

The past, especially the political past, doesn’t just provide clues to the present. In the realm of the presidency and Wall Street, it provides an ongoing pathway for political-financial relationships and policies that remain a threat to the American economy going forward.

When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a “champion” for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton.  Such relationships run too deep and are too longstanding.

To grasp the dangers that the Big Six banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley) presently pose to the financial stability of our nation and the world, you need to understand their history in Washington, starting with the Clinton years of the 1990s. Alliances established then (not exclusively with Democrats, since bankers are bipartisan by nature) enabled these firms to become as politically powerful as they are today and to exert that power over an unprecedented amount of capital. Rest assured of one thing: their past and present CEOs will prove as critical in backing a Hillary Clinton presidency as they were in enabling her husband’s years in office.

In return, today’s titans of finance and their hordes of lobbyists, more than half of whom held prior positions in the government, exact certain requirements from Washington. They need to know that a safety net or bailout will always be available in times of emergency and that the regulatory road will be open to whatever practices they deem most profitable.

Whatever her populist pitch may be in the 2016 campaign — and she will have one — note that, in all these years, Hillary Clinton has not publicly condemned Wall Street or any individual Wall Street leader.  Though she may, in the heat of that campaign, raise the bad-apples or bad-situation explanation for Wall Street’s role in the financial crisis of 2007-2008, rest assured that she will not point fingers at her friends. She will not chastise the people that pay her hundreds of thousands of dollars a pop to speak or the ones that have long shared the social circles in which she and her husband move. She is an undeniable component of the Clinton political-financial legacy that came to national fruition more than 23 years ago, which is why looking back at the history of the first Clinton presidency is likely to tell you so much about the shape and character of the possible second one.

The 1992 Election and the Rise of Bill Clinton

Challenging President George H.W. Bush, who was seeking a second term, Arkansas Governor Bill Clinton announced he would seek the 1992 Democratic nomination for the presidency on October 2, 1991. The upcoming presidential election would not, however, turn out to alter the path of mergers or White House support for deregulation that was already in play one iota.

First, though, Clinton needed money. A consummate fundraiser in his home state, he cleverly amassed backing and established early alliances with Wall Street. One of his key supporters would later change American banking forever. As Clinton put it, he received “invaluable early support” from Ken Brody, a Goldman Sachs executive seeking to delve into Democratic politics. Brody took Clinton “to a dinner with high-powered New York businesspeople, including Bob Rubin, whose tightly reasoned arguments for a new economic policy,” Clinton later wrote, “made a lasting impression on me.”

The battle for the White House kicked into high gear the following fall. William Schreyer, chairman and CEO of Merrill Lynch, showed his support for Bush by giving the maximum personal contribution to his campaign committee permitted by law: $1,000. But he wanted to do more. So when one of Bush’s fundraisers solicited him to contribute to the Republican National Committee’s nonfederal, or “soft money,” account, Schreyer made a $100,000 donation.

The bankers’ alliances remained divided among the candidates at first, as they considered which man would be best for their own power trajectories, but their donations were plentiful: mortgage and broker company contributions were $1.2 million; 46% to the GOP and 54% to the Democrats. Commercial banks poured in $14.8 million to the 1992 campaigns at a near 50-50 split.

Clinton, like every good Democrat, campaigned publicly against the bankers: “It’s time to end the greed that consumed Wall Street and ruined our S&Ls [Savings and Loans] in the last decade,” he said. But equally, he had no qualms about taking money from the financial sector. In the early months of his campaign, BusinessWeek estimated that he received $2 million of his initial $8.5 million in contributions from New York, under the care of Ken Brody.

“If I had a Ken Brody working for me in every state, I’d be like the Maytag man with nothing to do,” said Rahm Emanuel, who ran Clinton’s nationwide fundraising committee and later became Barack Obama’s chief of staff. Wealthy donors and prospective fundraisers were invited to a select series of intimate meetings with Clinton at the plush Manhattan office of the prestigious private equity firm Blackstone.

Robert Rubin Comes to Washington

Clinton knew that embracing the bankers would help him get things done in Washington, and what he wanted to get done dovetailed nicely with their desires anyway. To facilitate his policies and maintain ties to Wall Street, he selected a man who had been instrumental to his campaign, Robert Rubin, as his economic adviser.

In 1980, Rubin had landed on Goldman Sachs’ management committee alongside fellow Democrat Jon Corzine. A decade later, Rubin and Stephen Friedman were appointed cochairmen of Goldman Sachs. Rubin’s political aspirations met an appropriate opportunity when Clinton captured the White House.

On January 25, 1993, Clinton appointed him as assistant to the president for economic policy. Shortly thereafter, the president created a unique role for his comrade, head of the newly created National Economic Council. “I asked Bob Rubin to take on a new job,” Clinton later wrote, “coordinating economic policy in the White House as Chairman of the National Economic Council, which would operate in much the same way the National Security Council did, bringing all the relevant agencies together to formulate and implement policy… [I]f he could balance all of [Goldman Sachs’] egos and interests, he had a good chance to succeed with the job.” (Ten years later, President George W. Bush gave the same position to Rubin’s old partner, Friedman.)

Back at Goldman, Jon Corzine, co-head of fixed income, and Henry Paulson, co-head of investment banking, were ascending through the ranks. They became co-CEOs when Friedman retired at the end of 1994.

Those two men were the perfect bipartisan duo. Corzine was a staunch Democrat serving on the International Capital Markets Advisory Committee of the Federal Reserve Bank of New York (from 1989 to 1999). He would co-chair a presidential commission for Clinton on capital budgeting between 1997 and 1999, while serving in a key role on the Borrowing Advisory Committee of the Treasury Department. Paulson was a well connected Republican and Harvard graduate who had served on the White House Domestic Council as staff assistant to the president in the Nixon administration.

Bankers Forge Ahead

By May 1995, Rubin was impatiently warning Congress that the Glass-Steagall Act could “conceivably impede safety and soundness by limiting revenue diversification.” Banking deregulation was then inching through Congress. As they had during the previous Bush administration, both the House and Senate Banking Committees had approved separate versions of legislation to repeal Glass-Steagall, the 1933 Act passed by the administration of Franklin Delano Roosevelt that had separated deposit-taking and lending or “commercial” bank activities from speculative or “investment bank” activities, such as securities creation and trading. Conference negotiations had fallen apart, though, and the effort was stalled.

By 1996, however, other industries, representing core clients of the banking sector, were already being deregulated. On February 8, 1996, Clinton signed the Telecom Act, which killed many independent and smaller broadcasting companies by opening a national market for “cross-ownership.” The result was mass mergers in that sector advised by banks.

Deregulation of companies that could transport energy across state lines came next. Before such deregulation, state commissions had regulated companies that owned power plants and transmission lines, which worked together to distribute power. Afterward, these could be divided and effectively traded without uniform regulation or responsibility to regional customers. This would lead to blackouts in California and a slew of energy derivatives, as well as trades at firms such as Enron that used the energy business as a front for fraudulent deals.

The number of mergers and stock and debt issuances ballooned on the back of all the deregulation that eliminated barriers that had kept companies separated. As industries consolidated, they also ramped up their complex transactions and special purpose vehicles (off-balance-sheet, offshore constructions tailored by the banking community to hide the true nature of their debts and shield their profits from taxes). Bankers kicked into overdrive to generate fees and create related deals. Many of these blew up in the early 2000s in a spate of scandals and bankruptcies, causing an earlier millennium recession.

Meanwhile, though, bankers plowed ahead with their advisory services, speculative enterprises, and deregulation pursuits. President Clinton and his team would soon provide them an epic gift, all in the name of U.S. global power and competitiveness. Robert Rubin would steer the White House ship to that goal.

On February 12, 1999, Rubin found a fresh angle to argue on behalf of banking deregulation. He addressed the House Committee on Banking and Financial Services, claiming that, “the problem U.S. financial services firms face abroad is more one of access than lack of competitiveness.”

He was referring to the European banks’ increasing control of distribution channels into the European institutional and retail client base. Unlike U.S. commercial banks, European banks had no restrictions keeping them from buying and teaming up with U.S. or other securities firms and investment banks to create or distribute their products. He did not appear concerned about the destruction caused by sizeable financial bets throughout Europe. The international competitiveness argument allowed him to focus the committee on what needed to be done domestically in the banking sector to remain competitive.

Rubin stressed the necessity of HR 665, the Financial Services Modernization Act of 1999, or the Gramm-Leach-Bliley Act, that was officially introduced on February 10, 1999. He said it took “fundamental actions to modernize our financial system by repealing the Glass-Steagall Act prohibitions on banks affiliating with securities firms and repealing the Bank Holding Company Act prohibitions on insurance underwriting.”

The Gramm-Leach-Bliley Act Marches Forward

On February 24, 1999, in more testimony before the Senate Banking Committee, Rubin pushed for fewer prohibitions on bank affiliates that wanted to perform the same functions as their larger bank holding company, once the different types of financial firms could legally merge. That minor distinction would enable subsidiaries to place all sorts of bets and house all sorts of junk under the false premise that they had the same capital beneath them as their parent. The idea that a subsidiary’s problems can’t taint or destroy the host, or bank holding company, or create “catastrophic” risk, is a myth perpetuated by bankers and political enablers that continues to this day.

Rubin had no qualms with mega-consolidations across multiple service lines. His real problems were those of his banker friends, which lay with the financial modernization bill’s “prohibition on the use of subsidiaries by larger banks.”  The bankers wanted the right to establish off-book subsidiaries where they could hide risks, and profits, as needed.

Again, Rubin decided to use the notion of remaining competitive with foreign banks to make his point. This technicality was “unacceptable to the administration,” he said, not least because “foreign banks underwrite and deal in securities through subsidiaries in the United States, and U.S. banks [already] conduct securities and merchant banking activities abroad through so-called Edge subsidiaries.” Rubin got his way. These off-book, risky, and barely regulated subsidiaries would be at the forefront of the 2008 financial crisis.

On March 1, 1999, Senator Phil Gramm released a final draft of the Financial Services Modernization Act of 1999 and scheduled committee consideration for March 4th. A bevy of excited financial titans who were close to Clinton, including Travelers CEO Sandy Weill, Bank of America CEO, Hugh McColl, and American Express CEO Harvey Golub, called for “swift congressional action.”

The Quintessential Revolving-Door Man

The stock market continued its meteoric rise in anticipation of a banker-friendly conclusion to the legislation that would deregulate their industry. Rising consumer confidence reflected the nation’s fondness for the markets and lack of empathy with the rest of the world’s economic plight. On March 29, 1999, the Dow Jones Industrial Average closed above 10,000 for the first time. Six weeks later, on May 6th,  the Financial Services Modernization Act passed the Senate. It legalized, after the fact, the merger that created the nation’s biggest bank.  Citigroup, the marriage of Citibank and Travelers, had been finalized the previous October.

It was not until that point that one of Glass-Steagall’s main assassins decided to leave Washington. Six days after the bill passed the Senate, on May 12, 1999, Robert Rubin abruptly announced his resignation. As Clinton wrote, “I believed he had been the best and most important treasury secretary since Alexander Hamilton… He had played a decisive role in our efforts to restore economic growth and spread its benefits to more Americans.”

Clinton named Larry Summers to succeed Rubin. Two weeks later, BusinessWeek reported signs of trouble in merger paradise — in the form of a growing rift between John Reed, the former Chairman of Citibank, and Sandy Weill at the new Citigroup. As Reed said, “Co-CEOs are hard.” Perhaps to patch their rift, or simply to take advantage of a political opportunity, the two men enlisted a third person to join their relationship — none other than Robert Rubin.

Rubin’s resignation from Treasury became effective on July 2nd. At that time, he announced, “This almost six and a half years has been all-consuming, and I think it is time for me to go home to New York and to do whatever I’m going to do next.” Rubin became chairman of Citigroup’s executive committee and a member of the newly created “office of the chairman.” His initial annual compensation package was worth around $40 million.  It was more than worth the “hit” he took when he left Goldman for the Treasury post.

Three days after the conference committee endorsed the Gramm-Leach-Bliley bill, Rubin assumed his Citigroup position, joining the institution destined to dominate the financial industry. That very same day, Reed and Weill issued a joint statement praising Washington for “liberating our financial companies from an antiquated regulatory structure,” stating that “this legislation will unleash the creativity of our industry and ensure our global competitiveness.”

On November 4th, the Senate approved the Gramm-Leach-Bliley Act by a vote of 90 to 8.  (The House voted 362–57 in favor.) Critics famously referred to it as the Citigroup Authorization Act.

Mirth abounded in Clinton’s White House. “Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the twenty-first century,” Summers said. “This historic legislation will better enable American companies to compete in the new economy.”

But the happiness was misguided. Deregulating the banking industry might have helped the titans of Wall Street but not people on Main Street. The Clinton era epitomized the vast difference between appearance and reality, spin and actuality. As the decade drew to a close, Clinton basked in the glow of a lofty stock market, a budget surplus, and the passage of this key banking “modernization.” It would be revealed in the 2000s that many corporate profits of the 1990s were based on inflated evaluations, manipulation, and fraud. When Clinton left office, the gap between rich and poor was greater than it had been in 1992, and yet the Democrats heralded him as some sort of prosperity hero.

When he resigned in 1997, Robert Reich, Clinton’s labor secretary, said, “America is prospering, but the prosperity is not being widely shared, certainly not as widely shared as it once was… We have made progress in growing the economy. But growing together again must be our central goal in the future.”  Instead, the growth of wealth inequality in the United States accelerated, as the men yielding the most financial power wielded it with increasingly less culpability or restriction. By 2015, that wealth or prosperity gap would stand near historic highs.

The power of the bankers increased dramatically in the wake of the repeal of Glass-Steagall. The Clinton administration had rendered twenty-first-century banking practices similar to those of the pre-1929 crash. But worse. “Modernizing” meant utilizing government-backed depositors’ funds as collateral for the creation and distribution of all types of complex securities and derivatives whose proliferation would be increasingly quick and dangerous.

Eviscerating Glass-Steagall allowed big banks to compete against Europe and also enabled them to go on a rampage: more acquisitions, greater speculation, and more risky products. The big banks used their bloated balance sheets to engage in more complex activity, while counting on customer deposits and loans as capital chips on the global betting table. Bankers used hefty trading profits and wealth to increase lobbying funds and campaign donations, creating an endless circle of influence and mutual reinforcement of boundary-less speculation, endorsed by the White House.

Deposits could be used to garner larger windfalls, just as cheap labor and commodities in developing countries were used to formulate more expensive goods for profit in the upper echelons of the global financial hierarchy. Energy and telecoms proved especially fertile ground for the investment banking fee business (and later for fraud, extensive lawsuits, and bankruptcies). Deregulation greased the wheels of complex financial instruments such as collateralized debt obligations, junk bonds, toxic assets, and unregulated derivatives.

The Glass-Steagall repeal led to unfettered derivatives growth and unstable balance sheets at commercial banks that merged with investment banks and at investment banks that preferred to remain solo but engaged in dodgier practices to remain “competitive.” In conjunction with the tight political-financial alignment and associated collaboration that began with Bush and increased under Clinton, bankers channeled the 1920s, only with more power over an immense and growing pile of global financial assets and increasingly “open” markets. In the process, accountability would evaporate.

Every bank accelerated its hunt for acquisitions and deposits to amass global influence while creating, trading, and distributing increasingly convoluted securities and derivatives. These practices would foster the kind of shaky, interconnected, and opaque financial environment that provided the backdrop and conditions leading up to the financial meltdown of 2008.

The Realities of 2016

Hillary Clinton is, of course, not her husband. But her access to his past banker alliances, amplified by the ones that she has formed herself, makes her more of a friend than an adversary to the banking industry.  In her brief 2008 candidacy, all four of the New York-based Big Six banks ranked among her top 10 corporate donors. They have also contributed to the Clinton Foundation. She needs them to win, just as both Barack Obama and Bill Clinton did. 

No matter what spin is used for campaigning purposes, the idea that a critical distance can be maintained between the White House and Wall Street is naïve given the multiple channels of money and favors that flow between the two.  It is even more improbable, given the history of connections that Hillary Clinton has established through her associations with key bank leaders in the early 1990s, during her time as a senator from New York, and given their contributions to the Clinton foundation while she was secretary of state. At some level, the situation couldn’t be less complicated: her path aligns with that of the country’s most powerful bankers. If she becomes president, that will remain the case.

Nomi Prins is the author of six books, a speaker, and a distinguished senior fellow at the non-partisan public policy institute Demos. Her most recent book, All the Presidents’ Bankers: The Hidden Alliances that Drive American Power (Nation Books) has just been released in paperback and this piece is adapted and updated from it. She is a former Wall Street executive.

Copyright 2015 Nomi Prins

May 7, 2015 Posted by | Book Review, Corruption, Economics, Progressive Hypocrite | , , , , , , , , | Leave a comment

Soros Looks to Co-Own Ukraine

By Alex Freeman • TFC • March 30, 2015

Vienna, Austria – Billionaire hedge fund manager George Soros has proposed a $1 Billion contribution of a combined $50 Billion investment package in the Ukraine in order to form an economic barrier to Russia’s entry to the war torn nation.  In an interview with an Austrian newspaper, Soros said, “The West can help Ukraine by increasing attractiveness for investors.”  The Hungarian-born economic hitman may be more interested in helping his, and other investor’s, pockets, rather than the people of Ukraine. The speculation here could undermine any truly democratic action in Ukraine.  By using low EU Central Bank interest rates to achieve his investments, Soros’s plans begin to bear marked similarities to speculations that destroyed the British Pound and took severe tolls in places like Argentina.

The business model is nothing new for Soros, who has engaged in similar investment projects in West Africa.  He continues, “There are concrete investment ideas, for example in agriculture and infrastructure projects. I would put in $1 billion. This must generate a profit. My foundation would benefit from this … Private engagement needs strong political leadership.”  In Nigeria, Cameroon, Uganda and others, Soros has leveraged his political connections to protect his business interests in those nations.  Revenue Watch International, a Soros firm, assisted Uganda in the development of its fossil fuel drilling regulations.  Open Society Institute, another Soros Non-Governmental Organization, has recently been responsible for setting up and later overthrowing presidents of Senegal and Congo.  Soros maintains significant oil, gold and diamond drilling operations in these nations.  The International Crisis Group, yet another Soros NGO, has repeatedly advised the US Government to provide American military intervention in these fragile societies heavy in natural resources.

The profits would certainly roll in for the relentless investor.  Soros Fund Management, LLC maintains ownership of large share percentages in key corporations that will benefit from investment in Ukraine. Soros owns over 5 million shares of the chemical giant Dow Chemicals, with diversified products and services from industrial to agricultural applications.  Another big agricultural winner would be Monsanto.  Soros owns half a million shares of the bio-tech firm, which has been a part of most Ukraine political discussions since the civil conflict broke out two years ago.  Ukraine has vast supplies of oil and natural gas.  Energen, a natural gas utility, could be a prime developer of Ukraine’s fossil fuel reserves.  Soros owns nearly two million shares of that company. PDC Energy, with one million shares owned, might be another contender for drilling profits.  Soros also owns significant stakes of Citigroup, which stands to be a primary financial intermediary for any investment in Ukraine.

Soros’ investment strategy is not restricted to diversified holdings of major national and international corporations or mutual funds.  A significant tactic is the investment in supportive elements within the US government.  In 2014, Soros ranked 11th on OpenSecrets.org list of “Top Individual Contributors.”  His nearly $4 Million open investment (contributions sourced directly to him and not channeled through 501c4 “dark money” organizations) could potentially amount to $400 Million dollars in returns, if not more.  The Carmen Group, for instance, a lobbying company in Washington, has claimed that for every dollar invested in lobbying, their clients receive $100 in return.  RepresentUs, a campaign finance reform advocacy group, has measured similar extensive gains for political contributions and lobbying expenditures.

United Republic Infographic for Return on Lobbying Investment

United Republic Infographic for Return on Lobbying Investment

If Soros senses a $100 Billion profit, diversified through a number of companies he holds stakes in, he will not mind selling other countries, individual investors, or the IMF to provide the remainder of the $50 Billion total investment he thinks Ukraine needs.  In fact, this was probably a major conversation topic this year at the Davos World Economic Forum meeting.  The majority of these banks and corporations, however, will mine the profits from Ukraine, exporting them to other Western nations.   Meanwhile, these corporations will burden Ukraine with significant loans, even if the rates are near zero.  Even though these practices have devastated countries like Greece and Argentina, as long as the profits keep rolling in, the investments will continue.

April 2, 2015 Posted by | Corruption, Economics | , , , , , , , , , , , , , | Leave a comment

Banks Say “Thanks for the Bailout,” Now We’ll Park our Profits in Overseas Tax Havens

By Steve Straehley | AllGov | March 16, 2015

Giant financial institutions that benefitted from federal bailouts during the depths of the recession have repaid the American people’s largesse by hiding profits overseas to avoid paying their fair share of taxes.

According to a report (pdf) commissioned by Senator Bernie Sanders (I-Vermont), four big banks—Citigroup, Goldman Sachs, Bank of America and JPMorgan Chase—which received massive amounts of money and loan guarantees to keep them afloat in the wake of the financial crisis, park large amounts of money in tax haven nations.

Citigroup got the most help of the four in the bailout, $2.5 trillion. That company has at least 427 offshore divisions where it squirrels away profits out of reach of the American people. Those funds, as of early 2014, totaled $43.8 billion, which would mean $11.7 billion in tax revenue for the United States if they were brought to this country. Citigroup CEO Michael Corbat was rewarded with $1.5 million in salary, $4.5 million in bonuses and $8 million in stock for his work in 2014.

Bank of America received a $1.3 trillion bailout from the American people. In 2014, it had $17 billion in profits stashed offshore, which would bring $4.3 billion in funding for education, infrastructure and other badly needed projects in the United States. Bank of America CEO Brian Moynihan made $1.5 million in salary, $13 million in bonuses and $11.5 million in stock in 2014.

JPMorgan Chase got a $416 billion bailout from American taxpayers. That bank has hidden $28.5 billion overseas which would bring in $6.4 billion to the U.S. Treasury. Chase CEO Jamie Dimon was paid $1.5 million in salary, $7.4 million in bonuses and $11.1 million in company stock in 2014.

Goldman Sachs was the recipient of $814 billion in virtually zero-interest loans, as well as $10 billion from the government. It’s holding $22.5 billion offshore that would bring $4.1 billion back to the American people. Goldman CEO Lloyd Blankfein made $2 million in salary, $7.33 million in bonuses and $7.33 million in stock in 2014.

Of course, banks aren’t the only companies taking advantage of tax havens. Apple, for instance, famously worked it out so two of its subsidiaries have no home country to which to pay taxes. But then Apple didn’t come hat-in-hand begging the American people not to let it go under.

To Learn More:

Legalized Tax Fraud: How Top U.S. Corporations Continue to Profit Through Offshore Tax Havens (by Senator Bernie Sanders, U.S. Senate) (pdf)

Offshore Shell Games (U.S. PIRG) (pdf)

The Bailouts 4 Years Later: Were They Worthwhile Investments?  (by Matt Bewig, AllGov )

March 16, 2015 Posted by | Corruption, Economics | , , , , | 2 Comments

How to rob a bank: William Black

TEDx Talks | March 3, 2014

William Black is an associate professor of economics and law at UMKC. He has held many prestigious positions, including executive director for Fraud Prevention. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae’s former senior management. He is a criminologist and former financial regulator.

KPFA interviews:

Guns and Butter | April 4, 2012

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“Formula For Fraud” with William K. Black from the first Italian economic Summit on Modern Money Theory in Rimini, Italy. How to become a billionaire – the four necessary ingredients in the recipe for fraud; the three sure consequences of banking control fraud; gutting of the underwriting process; Gresham’s Law; The Business Roundtable; hyperinflation of a bubble. – link

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Guns and Butter | February 29, 2012

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“The Greatest Bank Robbery Ever” with William K. Black. Banks, intensifying financial crises; money manager capitalism; sovereign currency; crony capitalism; theoclassical economists; control fraud, Commodities Future Modernization Act of 2000; S&L Liars’ Loan Crisis of 1990-91; Reinventing Government Movement; deregulation, desupervision and defacto decriminalization; fraud incentives; looting; subprime; Enron; Parmalat; BofA; Citigroup; Ameriquest; Washington Mutual; systemically dangerous institutions; Financial Accounting Standards Board (FASB); faux stress tests; European austerity crisis; Mario Draghi, President of the ECB. – link

March 16, 2014 Posted by | Corruption, Deception, Economics, Timeless or most popular, Video | , , , , , , | Leave a comment

Obama Admin’s TPP Trade Officials Received Hefty Bonuses From Big Banks

By Lee Fang | Republic Report | February 18, 2014

Officials tapped by the Obama administration to lead the Trans-Pacific Partnership trade negotiations have received multimillion dollar bonuses from CitiGroup and Bank of America, financial disclosures obtained by Republic Report show.

Stefan Selig, a Bank of America investment banker nominated to become the Under Secretary for International Trade at the Department of Commerce, received more than $9 million in bonus pay as he was nominated to join the administration in November. The bonus pay came in addition to the $5.1 million in incentive pay awarded to Selig last year.

Michael Froman, the current U.S. Trade Representative, received over $4 million as part of multiple exit payments when he left CitiGroup to join the Obama administration. Froman told Senate Finance Committee members last summer that he donated approximately 75 percent of the $2.25 million bonus he received for his work in 2008 to charity. CitiGroup also gave Froman a $2 million payment in connection to his holdings in two investment funds, which was awarded “in recognition of [Froman’s] service to Citi in various capacities since 1999.”

Many large corporations with a strong incentive to influence public policy award bonuses and other incentive pay to executives if they take jobs within the government. CitiGroup, for instance, provides an executive contract that awards additional retirement pay upon leaving to take a “full time high level position with the U.S. government or regulatory body.” Goldman Sachs, Morgan Stanley, JPMorgan Chase, the Blackstone Group, Fannie Mae, Northern Trust, and Northrop Grumman are among the other firms that offer financial rewards upon retirement for government service.

Froman joined the administration in 2009. Selig is currently awaiting Senate confirmation before he can take his post, which collaborates with the trade officials to support the TPP.

The controversial TPP trade deal has rankled activists for containing provisions that would newly empower corporations to sue governments in ad hoc arbitration tribunals to demand compensation from governments for laws and regulations they claim undermine their business interests. Leaked TPP negotiation documents show the Obama administration is seeking to prevent foreign governments from issuing a broad variety of financial rules designed to stem another bank crisis.

A leaked text of the TPP’s investment chapter shows that the pact would include the controversial investor-state dispute resolution system. A fact-sheet provided by Public Citizen explains how multi-national corporations may use the TPP deal to skirt domestic courts and local laws. The arrangement would allows corporations to go after governments before foreign tribunals to demand compensations for tobacco, prescription drug and environment protections that they claim would undermine their expected future profits. Last year, Senator Elizabeth Warren warned that trade agreements such as the TPP provide “a chance for these banks to get something done quietly out of sight that they could not accomplish in a public place with the cameras rolling and the lights on.”

Others have raised similar alarm.

“Not only do US treaties mandate that all forms of finance move across borders freely and without delay, but deals such as the TPP would allow private investors to directly file claims against governments that regulate them, as opposed to a WTO-like system where nation states (ie the regulators) decide whether claims are brought,” notes Boston University associate professor Kevin Gallagher.

February 18, 2014 Posted by | Corruption, Economics, Progressive Hypocrite | , , , , , , , , | Leave a comment

House Votes to Protect Citigroup if It Gambles and Loses

By Noel Brinkerhoff and Danny Biederman | AllGov | November 12, 2013

One of the nation’s leading banks wants Congress to amend federal law adopted in the wake of the 2008 financial crisis so it and other Wall Street institutions can go back to gambling with risky investments and have taxpayers cover the losses again if they bet wrong.

Under the Dodd-Frank Act of 2010 (pdf), banks can no longer use monies backed by the Federal Deposit Insurance Corporation (FDIC) to invest in high-risk derivatives, such as “swaps.” This prohibition was adopted because derivatives crippled numerous key players on Wall Street five years ago, including Countrywide Mortgages, Bear Stearns, AIG, Lehman Brothers, Washington Mutual, Wachovia and others.

One of those “others” was Citigroup, which had to be bailed out by the federal government to the tune of $45 billion. A Citigroup lobbyist, though, was primarily responsible for authoring the Swaps Regulatory Improvement Act, which was approved by the U.S. House of Representatives two weeks ago.

The bill would wipe out Section 716 (pdf) of Dodd-Frank that requires banks to use a non-bank entity for trading commodity, energy and other swaps. In other words, if the legislation becomes law, financial institutions could return to conducting high-risk trading with funds that are backed by the FDIC (i.e. the taxpayer).

Dennis Anderson, who’s running for Congress from Illinois, says “to propose an easing of the controls on such behavior is irresponsible.”

“The behavior of these large banks and financial institutions cost all of us in loss of value in our retirement accounts, in lowered property values and, most importantly, in the general and deep recession that followed the failure of their gambling,” Anderson wrote at Daily Kos. “The idea of ‘too big to fail’ is still with us, and has grown even more threatening as these institutions have continued to grow.”

Citigroup was responsible for recommendations made in 70 lines of the 85-line bill, according to Eric Lipton and Ben Protess of The New York Times. In fact, reported the writers, a couple key paragraphs in the bill had been copied word for word from Citigroup’s submitted draft, which it had developed in conjunction with other Wall Street banks.

The legislation cleared the House on a 292-122 vote that saw 70 Democrats join all but three Republicans. Republicans voting against the measure were Representatives John Duncan of Tennessee, Walter Jones of North Carolina and Thomas Massie of Kentucky.

One of the Democrats supporting the change was Representative Carolyn Maloney of New York, the second-ranking Democrat on the House Financial Services Committee. She told The Hill that the bill would “protect safety and soundness,” per Federal Reserve Chairman Ben Bernanke.

“Even Federal Reserve Chairman Ben Bernanke opposed Section 716 as written, stating that the way it forces these activities out of insured depository institutions ‘would weaken both the financial stability and strong regulation of the derivatives activities,’” she said.

Bernanke has supported certain changes to the law, but never backed the Citigroup bill, according to the Times.

The White House said it opposes the bill, noting that the law is still being implemented by regulators. Legislation to amend it is “premature and could be disruptive and harmful to the implementation of these reforms,” it added.

Only about 40% of the rules required by the law have been implemented to date. Whether the Citigroup bill passes or not, such attempted legislation has “a chilling effect on regulators,” according to the Times.

“After inflicting so much pain and suffering on the American people, now is not the time to let the largest banks back into the casino,” Representative Maxine Waters (D-California) said in a statement.

Why are so many other Democrats supporting a bill that the Obama administration opposes? House aides interviewed by the Times theorized that “Republicans have enough votes to pass it themselves, so vulnerable House Democrats might as well join them, and collect industry money for their campaigns,” wrote Lipton and Protess.

Indeed, lawmakers who currently support bills advocated by big banks have, this month, received double the amount of donations from Wall Street firms as those who opposed such bills, according to MapLight, a nonprofit group that analyzes campaign financial records.

Additionally, Wall Street has, in the past few weeks, hosted special fundraisers for the bills’ co-sponsors.

A Democrat who supports the industry bills and is a top cash recipient of Wall Street—Representative Jim Himes of Connecticut, who was once a Goldman Sachs banker—confessed that the “system” has “problems.” “It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption,” he told the Times. “It’s unfortunately the world we live in.”

To Learn More:

Heard about the Swaps Regulatory Improvement Act (H.R.992 – 113th Congress)? (by Dennis Anderson, Daily Kos)

House Votes for Bipartisan Change to Dodd-Frank on Bank Swaps (by Pete Kasperowicz, The Hill)

House, Set to Vote on 2 Bills, Is Seen as an Ally of Wall St. (by Eric Lipton and Ben Protess, New York Times)

Banks’ Lobbyists Help in Drafting Financial Bills (by Eric Lipton and Ben Protess, New York Times)

November 12, 2013 Posted by | Corruption, Economics | , , , , | Leave a comment

Wall Street is writing its own regulation bill

RT | May 24, 2013

Bank lobbyists have a direct influence on financial legislation drafted in Congress, and are in some cases even writing the measures themselves. Citigroup this month drafted a regulation bill that has already passed through a House committee.

To soften financial regulations, bank lobbyists frequently ‘assist’ lawmakers in writing draft legislation that serves to benefit them at the expense of American taxpayers, according to a New York Times investigation.

Lobbyists working for Citigroup Inc., a multinational financial services corporation, wrote 80 percent of a regulation bill that was approved by the House Financial Services Committee this month. Citigroup wrote 70 lines of 85-line bill, which exempts “broad swathes of trades” from new regulation, the Times reported based on e-mails it obtained.

Two paragraphs of the bill were copied “nearly word for word” from what Citigroup drafted. The only difference between the versions were two words, which lawmakers changed to make plural.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in 2010, inflicted heavy financial regulatory reform following the most recent recession. The bill was pushed into law by Democrats, but now, both Democrats in the House and Senate are siding with bank lobbyists to roll back parts of the regulation overhaul.

The bill drafted primarily by Citigroup this month was starkly opposed by the Treasury Department, but easily made it through the House Financial Services Committee, the Times reports. MapLight, a nonprofit group that analyzes campaign finance records, found that lawmakers who supported Wall Street’s legislation received twice as much in contributions from financial institutions than those who opposed such measures, which appears to indicate that lawmakers’ support can be bought.

This month, Wall Street groups also held fundraising dinners for lawmakers who co-sponsored the bills they backed and in some cases co-wrote. As a reward for siding with bank lobbyists, these lawmakers were granted a dinner in which attendees paid up to $2,500 for a plate.

When questioned by the Times, bank industry officials said that helping draft legislation was a common practice on Capitol Hill, but argued that they do not undermine Dodd-Frank.

“We will provide input if we see a bill and it is something we have interest in,” said Kenneth E. Bentsen Jr., a Wall Street lobbyist. Bentsen is a former lawmaker himself, and many financial institutions’ lobbyists have worked as Capitol Hill aides and staffers before taking on their current roles.

Jeff Connaughton, a former lobbyist and former congressional staffer, said that Wall Street has so much influence on the Hill that it “skews the thinking of Congress.”

“It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption,” Rep. Jim Himes, a top recipient of Wall Street donations and a former banker at Goldman Sachs, told the Times, admitting his own faults. “It’s unfortunately the world we live in.”

May 25, 2013 Posted by | Corruption, Economics | , , , , , | Leave a comment

Private Bank Profits Don’t Represent the Health of the Economy

By Arthur Phillips | CEPR | May 8, 2013

Bloomberg’s Nathan Gill wrote a particularly one-sided article on Thursday, in which he states that “Ecuador’s bid to reduce poverty by taxing its banks is threatening to deepen the nation’s economic slump.”

“Slump” seems somewhat dire to describe the state of the Ecuadorian economy. In 2012 the economy grew by 5 percent, and it is projected to grow by 4.45 percent for 2013.

The report also offers no convincing evidence that Ecuador’s taxation of its banks is hurting the economy.

The article specifically focuses on a set of reforms that took effect on January 1, including the elimination of banks’ tax deductions for reinvested profits and a 0.35 percent tax on assets held abroad. The reporter argues that a sharp drop in bank profits in the first quarter of this year was a result of the taxation. He then argues that an increase in the banks’ interest rates must also be due to the reforms:

Non-government banks, including Citigroup Inc (C).’s local unit, raised rates on corporate loans by an average 0.21 percentage point in the first quarter to 8.88 percent, the highest since November 2010, according to central bank data. That compares with a decline of 0.72 percentage point to 8.81 percent in Colombia and an increase of 0.01 percentage point to 5.79 percent for similar loans in Peru.

However, this causality is not at all clear.  It is more likely that this modest increase in interest rates is attributable to a recent uptick in inflation. Consumer prices increased at an annualized rate of 4.6 percent in the first quarter of this year, as compared to a rate of 0.2 percent in the last quarter of last year.

The reforms that increased taxes on the banks were reportedly enacted to pay for increasing cash subsidies for the country’s poor, and they were passed by congress in a 79-5 vote. Gill describes these changes as having been motivated by an election race that Correa was all but certain to win, rather than being the latest step in a determined and so-far successful process to transform a country that, like many in the hemisphere, has been historically plagued by inequality. It is perhaps worth noting that Ecuador has seen some of the region’s highest growth over the past few years. Furthermore, economic gains have been broadly shared and increased social spending has significantly improved the quality of life of a broad portion of the country’s citizens.

As CEPR’s recent report on Ecuador’s financial reforms describes, President Rafael Correa’s actions in recent years are a major reason why the government has raised revenue and consequently been able to pursue expansionary fiscal policy and increased social spending. The results of this policy regime have included the lowest unemployment rate on record, a near-halving of the poverty rate, and a doubling of education funding, among other gains.

Yet, from this article, one would be led to believe that new taxes on the financial sector have only led to lower bank profits, which are presented as a serious problem for the country’s macroeconomic outlook. Among Gill’s quoted sources are the CEO of Ecuador’s biggest brokerage firm, the director of a market research and consulting firm, and the president of the country’s Private Banking Association. Their views should come as no surprise, but they are not necessarily the full picture or even accurate.

The article (on the second page) also quotes Pedro Solines, Ecuador’s banking superintendent, as saying “Less profits for the banks, yes, but where does it go? To the people who receive the subsidy.” The quote continues with Solines saying, “If I receive the subsidy, I’m going to say that the impact is very good. If I run a shop where the person who receives the subsidy spends not $35 but $50, I’m going to say it’s good. If I’m a bank, I’m going to say I’m doing badly.”

Correa was re-elected on February 17, receiving 57 percent of the vote compared to his closest competitor’s 23 percent.

May 9, 2013 Posted by | Deception, Economics, Mainstream Media, Warmongering | , , , , | Leave a comment

Big Banks Back to Old Tricks Bundling Loans and Mortgages for Investments

By Matt Bewig | AllGov | April 22, 2013

Proving that those who are not punished for their misdeeds are allowed to repeat them, the Wall Street banks that created and sold risky combinations of mortgages and loans during the pre-2008 boom—and crashed the world economy with them—are doing exactly the same thing again. Once again, financial products with obscure, complex-sounding names like “collateralized debt obligations” and “securitized mortgage instruments,” are being sold by Wall Street to people on Main Street.

The ominous return from the dead of these investments, also called structured financial products, has largely evaded new regulations meant to avert another crisis, prompting concern from financial industry observers. Manus Clancy, managing director at commercial real estate research firm Trepp, worries that “All of this seems like a fairly quick round trip. You are seeing a fair number of sins being forgiven.”

And the sinners who committed those sins are acting like they’ve been forgiven as well. “The players in the business are generally the same as they were before,” noted Tad Philipp, a commercial real estate analyst at Moody’s. “Because it’s the old players, they know how to push the boundaries.”

Wall Street is certainly pushing boundaries on securitized commercial mortgage-backed securities, in which a pool of commercial mortgages are mixed together into bonds, ranked by varying levels of risk. So far in 2013, banks have issued $33.5 billion in such bonds, slightly more than they did in early 2005. Before the 2008 crash, 57% of the outstanding money in such securities was in high-risk interest-only loans, a number that fell hard and fast, to just 11% two years ago. Today, that number has more than tripled to 34%.

Even faster to revive have been collateralized loan obligations, which are pools of loans given to companies with junk ratings. In the first quarter of 2013, banks issued about $26 billion of them—more than in the same period of the last boom year of 2007. Demand has been so strong that banks have started to loosen underwriting standards on the underlying loans and bonds, prompting the Federal Reserve to warn last month that “prudent underwriting practices have deteriorated.”

Those willing to learn from history will recall that securitization—the bundling of many loans into one investment—proved dangerous during the real estate bubble because when the bubble burst, investors learned that the complexity of the instruments had obscured their real risks, leading to unexpected losses by those investors, chaos in the financial system and the Great Recession. They will also recall that those who created these “shoddy deals” and then defrauded their investors escaped wealthy but largely unpunished, and are still working on Wall Street today.

To Learn More:

Wall St. Redux: Arcane Names Hiding Big Risk (by Nathaniel Popper, New York Times)

SEC Tricks Judge to Help Citigroup (by Noel Brinkerhoff and David Wallechinsky, AllGov)

Why No Prison for Banksters Who Caused Financial Crisis…Yet? (by David Wallechinsky and Noel Brinkerhoff, AllGov)

April 22, 2013 Posted by | Corruption, Deception, Economics, Progressive Hypocrite | , , , , | Leave a comment

Architect of too-big-to-fail banks says it was a ‘mistake’

By Dave Lindorff | Press TV | July 27, 2012

Imagine for a moment what would happen if former President George W. Bush were to give an interview on television and declare that his invasion of Iraq, and the ensuing nine years of death and mayhem that resulted from that war, had been the wrong thing to do. Imagine if he were to say “mistakes were made.”

Well, something equally momentous happened yesterday when Sanford I. Weill, the former CEO of Citigroup back when it was the nation’s largest bank, announced in an interview on the cable network CNBC, that banks should never have been permitted to merge with insurance companies and investment banks. Discussing the financial crisis that continues to wreak havoc in the US and the global economy, he said, “What we should probably do is go and split up investment from banking. Have banks done something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”

Incredibly, this shocking comment, surely as big as Bush announcing that he was wrong to invade Iraq, was buried on the business page in the New York Times. Many other major newpapers, including the Philadelphia Inquirer, didn’t even run the story!

Sanford Weill, it must be recalled, was the Wall Street financier who pushed the government to the wall to get banks deregulated, and to end the Depression-era law, called Glass-Steagall, that since 1933 had barred them from engaging in investment banking and dealing in insurance.

As principle shareholder and head of Travelers Group, an insurance company and brokerage he had acquired for less than $5 billion, Weill thumbed his nose at the law and arranged a merger with Citicorp, in which the big bank bought the Travelers Group for $72 billion. The merger was a blatant violation of the law, but Weill and Citicorp CEO John S. Reed didn’t care.

They pushed the deal through and essentially dared the Securities and Exchange Commission and the Justice Department to stop them. The SEC and Justice Department, as well as Congress and the president at the time, who was Bill Clinton, were “rolled” by Weill and Reed, who together hired former Republican President Gerald Ford and Former Clinton Treasury Secretary Robert Rubin to lobby for the repeal of Glass-Steagal, which happened in 1999. There followed a wave over the next decade of ever bigger mergers between banks and investment banks, and a decade of increasingly wild gambling by bankers who played with dodgy derivatives and with other people’s money.

People like Weill became rich beyond human imagining, and enormous bubbles were created, first in the start-up technology industry where gambling on initial public offerings of stock in companies that had no appreciable sales or profits to show (remember the dot.com boom and bust, featuring the epic collapses of Enron and Worldcom?), and then in residential and commercial property. It was all designed to enrich the executives at these unregulated banking giants, who then would leave their posts, if possible, before the inevitable crash and collapse.

Weill did that handily. In 2005, after he had left Citicorp, he was ranked 72nd among Forbes Magazine’s list of the world’s richest people.

Some journalists are writing now that it is “ironic” that Weill would now be calling the elimination of the barrier between banks and investment banks and other financial industries a “mistake.”

It may be something else though–something more calculated than ironic: a case of the architect of the biggest theft in the history of mankind trying to get away before an increasingly desperate and angry public starts to call the criminals to account.

The American public, in particular, is slow to explode. Years of meaningless elections and deliberately dumbed-down news and dumbed-down campaign debates have left most people feeling helpless and powerless politically. Where Greeks and Spaniards and even the French are quick to take to the streets in huge numbers to protest against government outrages, Americans are more apt to sign an internet petition and then turn on the TV to escape from the harsh reality of shrinking paychecks and shrinking home values.

But the continuing recession, which has left nearly one-in-five Americans still jobless or underemployed after six years of an unrelenting economic collapse, and which has erased some $7 trillion in home equity from family balance sheets, is finally starting to light a fire, especially amid growing concern that the country could be heading for another economic slide, and a new rise in unemployment numbers.

Calls for bankers to be arrested and punished are starting to be heard, and even though the news media don’t say much about the arrest of bankers in Iceland and Ireland, word of those country’s moves to prosecute criminal bankers is spreading.

The latest scandal, involving the conspiracy among the big US and European banks to artificially manipulate the setting of LIBOR, the interest rate that is a benchmark for many if not most mortgages and other loans with floating interest rates, has made people even angrier and has widened the list of targets of that anger to include the politicians and bank regulators — Democrat and Republican — who knew of the bankster fraud and either encouraged it or did nothing to stop it.

At a time when people are talking about putting bankers in jail, Weill’s mea culpa on CNBC may have been not ironic, but rather a deliberate attempt to try and remove the target from his own back.

He shouldn’t get away with it. It should stay there.

July 27, 2012 Posted by | Corruption, Timeless or most popular | , , , , | 1 Comment