Thursday, July 19, 2012

The Banksters

Adding compound fraud to compound interest

By Mike Krauss
Bucks County Courier Times

The vastness of the fraud and criminality at the heart of the international private banking cartel can no longer be denied or explained away.

Let’s look at the news of only the past two weeks.

In a courtroom in New York, a long investigation culminated in the prosecution of three wheeler-dealers for their role in rigging the U.S. municipal bond market. The scope of the scam and cost to ordinary Americans are extraordinary. Here is how it was reported by Matt Taibbi, the investigative journalist writing for Rolling Stone.

“The defendants in the case… worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America… By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from ‘virtually every state, district and territory in the United States,’ according to one settlement. And they did it so cleverly that the victims never even knew they were being ¬cheated.”

Unbelievable? Hold on to your hat and let’s look in on the news last week from London.

LIBOR is the London Interbank Offered Rate. It is a key interest rate set daily by the biggest banks. It affects the cost of, by some estimates, more than $800 trillion of “financial instruments” worldwide: credit cards, consumer and business loans, mortgages, corporate bonds and more.

Investigators have established that the rate has for years been fixed to enhance the profits of the banks that set the rate. One bank, Barclays, has admitted its culpability. More are under investigation.

The rigging was reported (in the Wall Street Journal, no less) almost five years ago. But it has taken the underfunded and understaffed regulators this long to uncover the evidence.

More tellingly, even with an investigation underway, the banksters felt secure enough to continue running the scam.

And as the veteran Wall Street watchdog Pam Martens explains, the LIBOR fraud is directly connected to the magnitude of the multi million dollar losses suffered by individual municipalities large and small across America, in the interest rates swaps peddled by Wall Street con men.

“The Libor rate was used to manipulate, not just tens of trillions of consumer loans, but hundreds of trillions in interest rate contracts (swaps) with municipalities across America and around the globe.”

The banksters added compound fraud to their compound interest.

How can ordinary mortals who don’t hold an MBA from Harvard or the London School of Economics make sense of this?

Here is how Robert Scheer summed it up. “Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor… reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.”

And they get away with it on both sides of the Atlantic in exactly the same way: a bought and paid for political and governing elite.

President Obama should be vowing to put the likes of JP Morgan CEO Jamie Diamon in jail. Mitt Romney should be all over the administration for its failure to go after the banksters. Legislation to break up the big banks, and a constitutional amendment to end corporate campaign contributions should be flying through Congress.

Instead, much of the political elite in Washington are sucking up to the barons for campaign cash and post Washington payoffs, while they gear up for another Obamacare sideshow. Another diversion.

There is an obvious alternative to allowing our money, credit and public finances to be controlled by a corrupt and rapacious private banking cartel: public control. And it will fall to the American people to make it a reality.

States, municipalities, unions, school districts, foundations, churches and charities control perhaps trillions of dollars, much on deposit with Wall Street. That money needs to be moved to Main Street, into local banks, and a significant portion set aside to capitalize the public banks which can guarantee the sustainable and affordable credit required to rebuild American prosperity, and re-establish the accountability and transparency necessary to the finances of a democracy.

But more is needed. While the scale of the fraud is international, the impacts are local - touching your family, your neighbors and your community. It is time for state and municipal officers to take action to begin to recover the stolen wealth of their citizens.

And such actions have begun - from Milan, Italy to Baltimore, MD, New Britain, CT and Oakland, CA.

For too long, the people of the United States and Europe have been the servants of finance. Now, finance must serve the people. We can begin with a simple action at the local level: take the money back.

What happened to banking?

Kill Wall Street before Wall Street kills America

By Mike Krauss
Bucks County Courier Times

Not so long ago, the words “banker” and” banking” were synonymous with prudence, probity and respectability. But say those words today, and across the U.S. and Europe tens of millions now react with anger and scorn.

What happened?

Political power flows from wealth. In the decades after World War II, the American people built up perhaps the greatest and (this is the important part) most broadly shared wealth the world had known. A democratic economics insured a democratic politics.

But beginning in the 1970s, federal tax, budget and economic policy began to favor the concentration of wealth in the hands of the already wealthy. As wealth was concentrated, so too was political power.

Until well after World War II, the finance industry accounted for no more than about 18 percent of U.S. domestic profit. It was one among many important industries. But as U.S. manufacturing was dismantled in order to maximize corporate profit, and as banking was allowed to consolidate into the “too-big-to-fail” banks, by 2010 the finance industry grew to account for 60 percent of U.S. domestic profit.

The power of that wealth was projected in Washington through legalized bribes that now make a mockery of democratic elections, and gutted the regulation that once protected homeowners, pensioners, savers and investors. Fraud became a business model. Wall Street exploded in a riot of greed, finding ever more clever ways to extract wealth from the American people.

So great is Wall Street’s power in Washington, that when its recklessly leveraged house of cards came tumbling down in 2008, two presidents and the Congress tried to put it back together, rather than let it die the death it had earned.

Instead of coming to the aid of the American people, and allowing the many thousands of responsible American banks and many more thousands of responsible bankers to retake their industry and market share from the con men and criminals, Washington caved to the wealth of Wall Street.

And the barons went right back at it, using every device known to man — and apparently taught in U.S. business schools for much of the past fifty years — to continue their campaign to extract every last nickel from anybody they could, any way they could.

Hyperbole? If only.

The mortgage market was a criminal enterprise. Deceit and double dealing were standard in the interest rate and credit default swaps markets. The municipal bond market was rigged. Wall Street wizards like former New Jersey governor and U.S. senator Jon Corzine gambled for their own account with huge sums of clients’ money without their consent or knowledge — and lost big.

It’s still going on. Now, the news from London. It is called the biggest scandal in history. The numbers are mind boggling.

LIBOR is the London Interbank Offered Rate. It is the interest rate set daily by the big banks and affects the cost of an estimated $800 trillion of “financial instruments,” including credit cards, mortgages, corporate bonds and bank loans worldwide. It has been rigged — and regulators have known it was rigged since at least 2008.

So blatant is the fraud and criminality, that even the British newspaper The Economist, a bastion of 1 percent capitalism, had to lead its coverage of this latest and greatest scandal with a headline it has so far tried to avoid: “Banksters.”

The storm now centers on Barclay’s Bank in London, but it is growing and will engulf all the big banks. And once again, regulators and governments on both sides of the Atlantic will bark, but they will not bite. There will be some fines and someone will get fired and walk away with a $20 million dollar severance package. Poor baby.

Finance has usurped our democracy. How do we take back it back?

In the United States, there is again a great hue and cry to break up the big banks and reinstate the Glass-Steagall Act, which separated the banks and investment houses after the Great Depression, but was repealed by Democratic President Clinton and a Republican Congress when they bowed to Wall Street a decade ago.

Great ideas. Don’t hold your breath; at least, not in the United States. The barons own this Congress, they will own the next and they are placing their markers with both Obama and Romney.

Rather, states and municipalities, unions, foundations, churches and not for profit organizations, which control perhaps trillions of dollars and much of it on deposit with Wall Street, can take those dollars out of the Wall Street banks, bank locally and set up a network of public banks, to put the money of the American people to work for the American people.

There may not be much time. When Merrill Lynch went down in 2008, it was leveraged 42 to 1. Today, of the $230 trillion derivatives market — 15 times larger than the entire U.S. economy — 97 percent is held by five banks. Those bets are insanely leveraged at 200 and 300 to 1. One more bad bet of the kind JP Morgan CEO Jamie Diamon could not explain to Congress (at least, not under oath), and the entire economy could go with it.

It is no longer enough to regulate Wall Street. We must take the money back. Americans must kill Wall Street, before Wall Street kills America.