Bail-Ins: The Legal Framework is in Place to Continue Looting the American Public.

At the expense of the American public (devastating austerity and elimination of the middle-class), 2008 ushered in government bail-outs in order to preserve Wall Street's corrupt and bankrupt system., but what about government bail-ins (confiscation of bank deposits), the likes of which we saw occur in Cyprus, Greece? In addition to bail-outs, so far, we've been witness to severe austerity measures targeted at the masses, including sequestration, a dog-and-pony-show government shutdown, and massive cuts to food stamp that essentially puts a stranglehold on economic recovery (for the masses), not to mention the threat of default. There is no doubt that the intention is to strip away what is left of the social safety net at a time when its most needed. Meanwhile, J.P. Morgan, Goldman Sachs, Bank of America, Citibank, Deutsche Bank, etc., have not only evaded any and all consequences of their egregious actions, they are generously rewarded as they continue to gamble with taxpayer money. It doesn't take a rocket scientist to see what's going on here.

These austerity measures disproportionately affect children, seniors, and people with disabilities. According to the Center on Budget and Policy Priorities (CBPP), this recent $5 billion cut will average less than $1.40 per person per meal and jeopardize the strength of the current economic recovery. Moreover, according to the Center for American Progress (CAP) "each $1 billion dollar reduction in the Supplemental Nutrition Assistance Program eliminates 13,718 jobs," resulting in more than 68,000 job losses in the coming year.

Keep in mind that programs such as SNAP have what economists call a "multiplier effect"—in other words, "a dollar given to an entitlement recipient has amplified economic benefits. In this case, those consist primarily of the grocers who benefit when food stamp users shop in their stores. The estimated multiplier effect for food stamps is as high as 2 to 1."

The report, "Nourishing Change: Fulfilling the Right to Food in the United States," released by the International Human Rights Clinic (IHRC) at the New York University School of Law is timely as our government cut at least $5 billion-with many more cuts to come-- from the government's already inadequate $80 billion food stamp program, Supplemental Nutrition Assistance Program (SNAP), in the Farm Bill.  This report cites a study by the Center for American Progress, that calculates the "hunger bill" for the country, which includes the costs of treating illnesses and other medical conditions related to food insecurity, the impact of hunger on educational outcomes and lifetime earning potential, and the costs of running charity-based emergency food programs. For 2010, that bill came to $167.5 billion. For about half of that, $83 billion, the Center says we could extend the SNAP program to all food insecure households.

Okay, back to bail-ins.  It's the Dodd-Frank Act that passed in 2010-- it took up 848 pages at the time, as of July 2012 an additional 8,843 pages of rules were added, representing only 30% of the rules to-be-written. The estimate for the final length of the Act is 30,000 pages --that provides the legal framework for bail-ins.

According to the April 24, 2012 IMF report, conversion of bank debt to stock is an essential element of bail-in included in Dodd-Frank. “The contribution of new capital will come from debt conversion and/or issuance of new equity, with an elimination or significant dilution of the pre-bail in shareholders. ...Some measures might be necessary to reduce the risk of a ‘death spiral’ in share prices.” In the language of Dodd-Frank, this will “ensure that unsecured creditors bear losses.”

Under the existing legislation, the FDIC has the power to impose losses on unsecured creditors in the process of resolving failing banks. For example, the FDIC resolved Washington Mutual under the least-cost resolution method in 2008 and imposed serious losses on the unsecured creditors and uninsured depositors (deposit amount above USD 100,000). The Orderly Liquidation Authority (OLA) established under the Dodd-Frank Act further expands the resolution authority of FDIC. Subject to certain conditions, the FDIC now also has the powers to cherry-pick which assets and liabilities to transfer to a third party and treating similarly situated creditors differently, eg: favoring short-term creditors over long-term creditors or favoring operating creditors over lenders or bondholders. -- Economist, Nouriel Roubini

The U.S. is far from the only nation with provisions for bail-ins:

Bail-In Rules for Eurozone Banks Should Start In 2016

Bondholders Bail-in Shows Alternative Method to Rescue Banks

Bank Bail-in Rules Confirmed


But who cares, right? The stock market's soaring to new heights while income disparity continues to widen at unprecedented levels.

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Our Banking System: A History of a Government-Sanctioned Ponzi Scheme

Fractional reserve banking dates back to the seventeenth century, when trade was conducted primarily in gold and silver coins. It predates the existence of governmental monetary authorities and originated when bankers realized that not all depositors demand payment at the same time.

From the Chicago Federal Reserve in a booklet called “Modern Money Mechanics”:

“It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

“Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.

“Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could ‘spend’ by writing checks, thereby ‘printing’ their own money.”

Regarding the mathematical impossibility inherent in a system of bank-created money lent at interest:

“[I]magine the first bank which prints and lends out $100. For its efforts it asks for the borrower to return $110 in one year; that is it asks for 10% interest. Unwittingly, or maybe wittingly, the bank has created a mathematically impossible situation. The only way in which the borrower can return 110 of the bank’s notes is if the bank prints, and lends, $10 more at 10% interest . . . . The result of creating 100 and demanding 110 in return, is that the collective borrowers of a nation are forever chasing a phantom which can never be caught; the mythical $10 that were never created. The debt in fact is unrepayable. Each time $100 is created for the nation, the nation’s overall indebtedness to the system is increased by $110. The only solution at present is increased borrowing to cover the principal plus the interest of what has been borrowed.” -- Roger Langrick, author of "A Monetary System for the New Millennium,”

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Sentinal Ruling: You Have No Legal Right To Your Money.

Jon Corzine stole $1.6 billion from segregated client accounts during the collapse of MF Global, and now he has a legal precedent to officially support him thanks to the August 9th  Sentinel Management Group decision.

This egregious ruling not only sets precedence for futures brokerages, it sets precedence for every depository institution.   In other words, your funds--customer funds--are now the legal property of the mega-banks. That's right. The banksters can legally use your money to fund its casino transactions with legal impunity.  Not that it makes much difference in an environment where the rich and powerful are above the law.

But, for what its worth, this 7th circuit court decision--that puts Bank of New York Mellon ahead of former customers of Sentinel in the line of those seeking the return of money lost--punishes innocent account holders everywhere. Because, to be sure, the appeals court that affirmed an earlier district court ruling that the bank had a "secured position" on a $312 million loan it gave to Sentinel, which turned out to have been secured by customer money, did so in order that its ruling will be applied in perpetuity.

“Basically, there is a new 7th Circuit opinion saying that there is no reason to impose a constructive trust on a lender's takings of customers' funds from client commodity firms that were used (inappropriately) to secure the firms' borrowings, as long as the lender can say that it did not know WITH CERTAINTY that customers' funds were being repledged. Negligence and misappropriation (vs. knowing criminal intent) are now a sufficient excuse for letting the lender keep the money and go to the head of the line for distributions in bankruptcies of the client commodity firms. Spread the word.” -- Walker Todd of AIER, former legal counsel, Federal Reserve Banks of New York and Cleveland

Links:

Sentinel indictments: Feds say 2 reaped $500 million in fraud

"Federal authorities announced Friday the indictment of Eric Bloom and Charles Mosley, the former chief executive and head trader, respectively, of bankrupt Sentinel Management Group Inc., on charges of defrauding some 70 customers of more than $500 million.

The case, described as one of the largest criminal financial fraud cases prosecuted in federal court in Chicago, stems from the sudden August 2007 collapse of Sentinel, a long-standing, well-connected money-management firm based in Northbrook that allegedly misled clients by exposing their accounts to a portfolio of highly risky derivatives.

$1.6 Billion in Missing MF Global Funds Traced

Email Ties Corzine to Missing Funds

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Will the US Economy Be In Free-fall by Autumn?

Greece and the EU have monopolized headlines recently in the mainstream media. Meanwhile, according to the Global Europe Anticipation Bulletin, another financial crisis is brewing that will make 2008 "seem like a small summer storm."

An IMF working paper, entitled, Systemic Banking Crisis Database: An update  by Luc Laeven and Fabián Valencia shows that most banking crises start in September.

Five of the biggest banks in the United States are crafting living wills in case they fail, as part of government-mandated contingency planning that could push them to untangle their complex operations.

At the same time, banks continue to get backdoor bailouts. 

Below are six ways the big banks rake in cash every day from services that are supposed to help working Americans.

1. Big Contracts for Food Stamps

Suzanne Merkelson at Republic Reports points out that Supplemental Nutrition Assistance Program (SNAP) benefits—the program formerly known as food stamps, which provides food aid to families—increased to $72 billion last year (from $30 billion in 2007).

And as the lousy economy keeps people relying on benefits to feed their families, big banks keep benefiting from the program too. A new paper [PDF] from Michele Simon finds that SNAP “represents the largest, most overlooked corporate subsidy in the farm bill.” Merkelson writes:

While SNAP is a federal program, USDA and the states work together to administer the program. States contract with banks, who authorize payments (Electronic Bank Transfers or EBTs) from the Federal Reserve to retailers. J.P. Morgan Chase has contracts in half the states “indicating a lack of competition and significant market power,” according to Simon. How much are these deals worth? In New York, one seven-year deal originally gave the bank $112 million for its services, but was recently amended to add another $14.3 million.

JP Morgan spends a bunch of money lobbying the Department of Agriculture on this program, making sure they get what they want—a big paycheck from state taxpayers.

And the best part? When you have a problem with your JP Morgan SNAP benefits card? You call a JP Morgan call center for help—and that call center just might be in India.

So to recap: big bank makes money off a program that helps people who are unemployed—and creates jobs in India with that money, rather than creating them here in the US.

2. Making Money Off the Unemployed

The banks get paid directly by the state to handle the SNAP program, but that's far from the only program designed to help the victims of the lousy economy that has turned into a cash cow for the banks that created the crisis in the first place.

Unemployment benefits in 41 states are provided through Wall Street giants like Bank of America, Wells Fargo, and JP Morgan Chase. In South Carolina, for instance, customers get a prepaid debit card from Bank of America to access their unemployment benefits—which is, of course, fee-free at a Bank of America ATM. But for rural South Carolinians, the nearest Bank of America ATM might be 50 miles away. Shawana Busby, a South Carolina user of the program, tells the Huffington Post that she's probably spent $350 in fees to access her benefits—which are $264 a week. Another user of the cards, Sandra Gortman, tells the Huffington Post that she was pressured to adopt the prepaid card, and then when she used it to put gas in her car, the gas station put a hold on her card for $75, which didn't come off for three days. When she called to check on the hold, she was charged a customer service fee. (The bank has now eliminated such fees.)

The bank also collects a 3-cent fee from the state each time it “facilitates” a transfer on a prepaid card. It also gets those fees for direct-depositing unemployment benefits into someone's bank account.

3. Sweet Campus Deals to Prey on Students While Distributing Federal Student Aid Money

A recent report from USPIRG, “The Campus Debit Card Trap,” dug into the deals that universities, both public and private, make with banks to produce student ID cards and more significantly, actually handle and disburse student financial aid. In other words, young people who've already signed up for a lifetime of student debt are being preyed on further by banks that can charge them fees just to access their money. (And, remember, those same big banks are already making big bucks on student aid.)

USPIRG found that 32 of the 50 largest public 4-year universities and 26 of the largest 50 community colleges—the schools in part supported by taxpayers—had deals with banks to provide debit or prepaid cards for students. The campuses often get money from the banks for the privilege of access to students, and the banks then make their money back in fees—and possibly other ways, too. Mela Heestand, writing for AlterNet about the protests at the University of California Davis that drove US Bank to close its campus bank branch, pointed out that “university contracts with banks encourage tuition hikes, because banks stand to profit directly from rising tuition, while the administration comes to rely on funding from bank contracts.” US Bank has agreements at 52 campuses around the country.

(After the protests that shuttered the US Bank branch, twelve activists were arrested and face up to 11 years in prison and $1 million in fines.)

Students are the ones bearing the costs of access to money they're already paying interest on, and USPIRG points out that the fees are “steep and frequent,” including per-swipe fees, inactivity fees (yes, you read that right), overdraft fees and fees to reload their prepaid cards. And financial aid that is paid to students through a debit card is subject, just like any other card, to ATM fees if students use an ATM not owned by the bank that currently has their money. The Department of Education has rules on this practice, banning banks from charging fees if they provide “convenient” ATMs for the students' use, but their definition of “convenient” is vague—leaving students at the mercy of a single ATM on campus, which produces long lines and leaves no alternative if it breaks or runs out of cash.

4. Cashing in on Tax Returns

It's not only your unemployment, financial aid, or SNAP benefits that the big banks control these days—they also might come between you and your tax return.

Once again, South Carolina takes the lead, claiming to save the taxpayer money by cutting a deal with Bank of America, this time to send out tax returns in the form of—you guessed it—prepaid debit cards from Bank of America. And just like with unemployment benefits and financial aid (or your regular, consumer bank card), the bank is making its money collecting fees from people trying to access their own money.

“They’re not even nickel and diming people, they’re five-dollaring and 10-dollaring people,” Sue Berkowitz, Director of the Appleseed Legal Justice Center, says.

Oh, and the bank got this deal through a no-bid contract—the Department of Revenue calls them “the best fit” for the program. The program isn't mandatory but, the Palmetto Public Record notes, it's opt-out, not opt-in. Which means that unless you request otherwise, your money will be given to you through Bank of America—which in addition to sticking you with ATM fees and other charges, is going to make interest on your money while it's sitting in their account.

5. Refinancing Homes Means Big Bucks for Banks

Getting the big banks to refinance mortgages and help people facing foreclosure stay in their homes has been a huge fight, with activists around the country putting their bodies on the line, physically occupying homes to keep residents in them.

Now the program that's supposed to help those struggling homeowners looks instead to be a big fat handout to the same banks that were preying on borrowers to begin with. According to the Wall Street Journal, banks that service mortgages could make as much as $12 billion by refinancing under the newest version of the Home Affordable Refinance Program (HARP 2.0). And the borrowers? Oh, they'll save money, too—somewhere around $2.5 billion, maybe $5 billion tops.

The program is supposed to let underwater borrowers who've made all their payments in good faith refinance their mortgages at current market value. But, Bonnie Kavoussi at the Huffington Post notes, instead those banks are able to charge steep fees and above-market interest rates.

Shaun Donovan, the current Secretary of Housing and Urban Development calls it “a monopoly on refinancing,” saying at a Senate hearing, "Whoever holds their current loan, whoever is the servicer, they can charge [borrowers]—and we're seeing this—very high fees."

6. Profiting Off The Very Idea of Another Big Bailout

In case all this profit enabled by the government wasn't enough for you, perhaps the most disturbing recent bank-related news is a report by the “wild socialists” at Bloomberg that, “JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fund and our own analysis of bank balance sheets.”

They explain:

In recent decades, governments and central banks around the world have developed a consistent pattern of behavior when trouble strikes banks that are large or interconnected enough to threaten the broader economy: They step in to ensure that all the bank’s creditors, not just depositors, are paid in full. Although typically necessary to prevent permanent economic damage, such bailouts encourage a reckless confidence among creditors. They assume the government will always make them whole, so they become willing to lend at lower rates, particularly to systemically important banks.

In other words, because we bailed them out once, the expectation that we'll do it again is actually making the banks money. Other lenders are willing to lend money to the “systemically important banks” (read: banks that got bailed out by the US government because they were “too big to fail”) at lower interest rates because they presume that they'll always get their money back since the government will make sure the banks don't go belly up. So the biggest banks are paying less in interest than medium-size and small banks--and that adds up to billions.

So they're profiting just from being too big to fail. And each time there's a crisis, the expectation of government support actually grows—as of 2009, Bloomberg notes, they're saving about 0.8 percent every time they borrow. The total benefit to the big banks just of the expectation that there will be another bailout? About $76 billion a year—which Bloomberg points out is equal to their total profit from the past twelve months, and is more than the federal government spends each year on education.

Brad Sherman, a Representative from California, asked Jamie Dimon this week, before Congress, “[H]ow can medium size banks compete against you when your cost of capital is reduced by 80 basis points, 0.8 percent, because of a belief that if they go under we'll let 'em go under, but if you go under we'll bail out your creditors?”

Dimon, of course, claimed that it wasn't true, and that he borrowed in the marketplace, “with the smartest people in the world.” But it looks like the smartest people in the world are getting a whole lot of help—and making a whole lot of money—off of college students and taxpayers, off the working poor and unemployed in the U.S.

Household debt has soared far above wages for decades.  In fact, 30 million workers made below $10,000 per year in 2010.Suffice to say, far too many are in crisis already. In other words, the big crisis is here. It just hasn't hit those we call upper middle class yet.

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Laundering Money Through Credit Card Transactions & ABCs of Money Laundering

Chances are, whenever you hear the words 'money laundering' images of the movie, "The Godfather", comes to mind; however, according to a former senior business relationship manager - responsible for managing and monitoring business accounts, cash flow, borrowing habits, and the relationship between those business accounts in order to invest money, ensuring profitability - at HSBC Holdings, PLC, a global company located in 80-90 countries, known as the "king of trade", John Cruz, author of World Banking World Fraud: Using Your Identity,  it’s the powerful “too big to fail” banks who are set up to do this dirty deed.

Keep in mind, bank employees - from $9/hour bank tellers to bank managers to loan officers to dime-a-dozen, vice presidents -  are vulnerable to prosecution for the slightest misstep. For instance, years ago, during my bank teller training, I was told that tellers could be prosecuted for adding or subtracting one penny in order to come out even at the end of the day. Adding one penny to your drawer is grounds for prosecution!

Anyway, as an employee of HSBC, John Cruz, after reviewing corporate accounts, started seeing suspicious patterns of deposits and withdrawals, which led Cruz to believe credit card transactions were being used as a means to launder money.   How did he figure this out?  Well, hundreds of thousands of corporate accounts were only being used for wire transfers Paypal, American Express, etc., only,  in even denominations: $20,000... $50,000...$500,000. Cruz tried to visit these corporations.  There was  one problem: they didn't exist.  Oh, on paper, they sure did, but there were no physical entities.   I mean, come on, how many companies do business in even round numbers like that? It's so obvious that Paypal, and American Express - complicit, or not - were/are used as vehicles to launder money. Of course, Paypal and American Express, when contacted, never responded.

"I found many accounts where PayPal and American Express were used as conduits through which hundreds of thousands of dollars were deposited or withdrawn from HSBC customer accounts in a pattern of suspicious transactions that should have been reported to legal authorities under various banking statutes, including the Patriot Act," - John Cruz

Cruz collected thousands of pages of customer account records that he claims are evidence of an international money-laundering scheme involving hundreds of billions of dollars by the global banking giant, which reportedly is under investigation by a U.S. Senate committee.

One would think, how do large corporations get away with this when their "dirty deeds" are so obvious to so many?  Simple. It only takes a few crooked people, strategically placed to set up the system; after that, it's mostly electronic, and once again, all it takes is a few strategically placed employees to monitor and ensure the process runs smoothly.   The rest of the employees are so conditioned not to question authority that they turn a blind eye. When that exceptional someone tries to blow the whistle, he's dealt with, usually fired.  And, on the rare occasion when someone like Cruz, takes it to the next level, the bought and paid for mainstream media totally ignore it.  Not to mention, most people know, deep down,  how whistle-blowers are treated: terribly.

Is HSBC the only corporation involved in laundering money?  Hardly.  Money laundering is built into the system of every large bank. If, by chance these banks are "caught", they pay a trivial fine. No one goes to jail, no one pays the price.  However, god forbid you're a $9/hour teller who deposits one penny to come out even, the all-powerful bank can prosecute her to the fullest extent of the law.

Given the billions of dollars involved in the drug trade, not to mention, human trafficking, there is no way the drug producers could function without banks.

"Why is drug supply prosecuted so vigorously and demand so leniently? Who in the United States is receiving drugs from Colombia, laundering the money, marketing the drugs every day to 30 million U.S. citizens, bribing lawyers, the police, and politicians? There must be U.S. drug barons far more powerful than any Colombian trafficker. But the people who are dying are those fighting them in Colombia, not in the United States. 

 What is the basis of the anti-Mexican phobia…? During a recent visit to Los Angeles, I heard the same arguments over and over… [Mexicans] are…the reason for unemployment in California, and, last but not least, they introduce drugs.

Drugs do not enter the United States through Tijuana and San Diego tied up in migrant workers kerchiefs. They arrive in planes belonging to U.S. dealers whose names no one knows and who are never the objects of the sort of publicity and persecution given their Latin American counterparts.

The United States has washed its hands of its drug barons—-and laundered their money. All guilt is in the offer, none in the demand. It is easier—-and more Pharisaical—-to militarize Bolivia than to militarize the Bronx."

▬Carlos Fuentes, A New Time for Mexico, 1996

Links:

The ABCs of money laundering.

Special Report: Documents allege HSBC money-laundering lapses

UN crime chief: Was the bailout the largest drug money laundering operation in history?

The cycle of terror and intervention

This page is in Spanish. Here is translated excerpt:

"...other facts reveal that the United States intervenes in other ways in Mexico:

• Some sources state that 13,000 guns are introduced every year to Mexico. [...]
• The fact that major commanders of the Zetas, who, prior to desert the Mexican Army have been trained in counterinsurgency tactics at Fort Bragg, North Carolina, by the U.S. Army.
• Continuous raids on Mexican territory, especially in Ciudad Juarez, [...]
• The de facto operation of the Zetas as a kind of casual immigration police, "a migration of death" to contain and regulate the flow of migrants wickedly toward Central America. [...]
• Cartel kingpins...are of American nationality. Furthermore, the presence and operating with impunity in hundreds of Mexican drug traffickers in the cities of that country. The rapid arrest of 600 of them after the assassination of U.S. agent Jaime Zapata in San Luis Potosi merely reveal that in America there is a broad-based operational drug is tolerated until they violate certain rules.

[...]

“Bi-national war where one country makes the decisions and the other pays the price” is the way Quintana begins. He goes on to make the case that the United States incites crises in countries like Mexico so that it can intervene into the internal politics of the country. The reason the United States “perpetrates terror, provokes terror and reacts against terror” is in order to “maintain its very weakened hegemony in the region.”

“The cycle of intervention-terror-intervention is the only way to keep us following the doctrine of the decadent empire.,” Quintana continues. “Against this the Mexican government has responded as we suspected: slowly and fearfully.

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Bank Transfer Day: Is There an Underlying Agenda?

When I first heard about Bank Transfer Day,, supposedly, an effort completely independent of “Occupy Fill-in-the-blank” that wants to ensure the banking institutions will always remember the 5th of November by encouraging everyone to dump their banks and transfer our money to credit unions, I thought it was a great idea. One can imagine the impact, if 99% of us actually take this step, or can one? 

Then, with the knowledge that Bank Transfer day is endorsed by Occupy Wall Street, and, moreover, the mainstream media coverage it's receiving, I considered the possibility that there is an underlying agenda of which we're not aware. Because anyone who pays any attention at all knows the msm only pays attention to what it's instructed to pay attention to from the few corporations that run, basically, 99% of the mainstream media entities, not to mention, a good percentage of the alternative media entities.

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Bank of America, Citigroup, Wells Fargo, JPMorgan Chase Report Billions in Profit

Must be nice. No federal tax expense and billions in profit.

Bank Of America Rakes In $6.2 Billion Profit

Bank of America reported net income of $6.2 billion, or 56 cents per share, for the third quarter of 2011, compared with a net loss of $7.3 billion, or 77 cents per share a year-ago period.

The nation’s largest bank reported total revenue of $28.5 billion, a 6% increase. Analysts’ consensus forecast for earnings per share of 20 cents on revenue of $25.9 billion.

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The Deregulation Deindustrialization Connection and How the Middle Class Got Screwed.

The system of global capitalism fundamentally changed in the 1970s. From the end of the second world war until 1973, there were relatively few financial crisis because finance was tightly regulated. Banking was confined to the states; therefore, regulated on a state by state basis.

In the 1960s, there were three local banks that dominated the state of Maryland, and this was the case across the nation until the consolidation of banks across state lines began, and then, shortly after, across international lines. Thus, the deregulation of financial institutions began.

However, the easy transference of funds that made finance capital so fluid, enabling it to chase the highest return, also permitted industry and production to go off shore very easily. As a result, the flow of production capacity to China, the Philippines, etc, which, of course, effected the labor force in more ways than one: lack of jobs and wage repression, and eventually, the deindustrialization of America.

Initially, the deregulation process impacted the African American community. The elimination of so many occupations that used to lift minorities out of poverty led to the marginalization and disenfranchisement of black males, in particular. The criminal justice system gladly stepped in and scooped them up. Then the "war on drugs" sealed the deal, skyrocketing the black inmate population. Between 1986 and 1997, the number of blacks incarcerated for drug offenses alone increased by 799%! The total incarceration rate for black males in 1980 was 3,544 versus 528 for white males. In 1990 one in four black males, under 30, was under the control of the criminal justice system, and in 1995 the percentage had increased to one-third.

Fast forward to 2008, and although the black population continues to bear the brunt of the financial crisis, as usual, people of all races, including the white middle-class population, cannot escape its brutality this time.

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Too Above the Law to Fail.

The phrase "Too big to fail" is hogwash. It was coined in order to instill fear into the public. Why? To avoid backlash when the government claims they must rescue the elitist banks and corporations from the consequences of their criminal behavior.

Do you think pressure and protest from American citizens will change anything? Well, if enough people participate...Hell yeah! And, by enough, you mean? Oh, maybe...100 million people.

Here are some people who are starting the ball rolling.

On behalf of Grass Roots Organizing (GRO) in conjunction with National People's Action (NPA), as many as 900 clergy, homeowners and union members from across Ohio and the Midwest gathered to protest the JPMorgan Chase shareholders meeting at corporate park outside Columbus, Ohio as part of a national campaign called  Showdown in America



And in Colorado, a group of people targeted Bank of America.

Stapel bought her home in Johnstown about six years ago while she had a good job at Colorado State University.

Since then, she said, she was struck with a disability, is no longer able to work and is burning through her savings and an inheritance to pay her loan.

She has tried to get her loan modified but says Bank of America has given her the runaround and claims never to have received documentation that she said she has proof she sent.

“I want to pay them back,” she said, and just needs help.

And up until a protest in the rain Wednesday, she says the company did not respond to her requests.

Links:

Foreclosing on Ohio

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Greenspan Admits To Fraud In U.S. Banking System

At the Jekyll Island Federal Reserve Conference - A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve - this past weekend, marking 100 years from the 1910 Jekyll Island meeting that resulted in legislation for the creation of a U.S. central bank, Greenspan admitted the truth:

"There are two fundamental reforms that we need: adequate capital, and two, to get far higher levels of enforcement of fraud statutes. Existing ones...I'm not even talking about new ones. Things were being done that were certainly illegal and clearly criminal in certain cases.  Fraud is a fact..fraud creates very considerable instability in competitive markets. If you cannot trust your counterparties, it won't work, and indeed, we saw that it didn't."

 

The November 1910 Jekyll Island meeting that gave birth to the Federal Reserve was shrouded in secrecy. According to author Edward Griffin, Forbes founder Bertie Charles Forbes said the event was so secret that the full names of the attendees were not mentioned once. Attendees of this "most secret expedition in the history of American finance" reportedly included the powerful Senator Nelson Aldrich and several leading bankers of the time.

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Megabanks Continue to Devour America's Banking System.

Regulators seized seven small banks last week. That brings the total U.S. bank failures to 103 so far this year compared to 57 at the same time last year. The FDIC now estimates that their funds will experience a $60 billion reduction due to additional bank closings between now and 2014. The agency's deposit insurance fund stood at negative-$20.7 billion at the end of the first quarter, and the FDIC estimates that the seven bank failures on Friday will reduce the fund by another $431 million.

Meanwhile, the six biggest banks in the United States (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to 60% of America’s gross national product. In the mid-1990s, these "six banks" had less than 20%. Their assets were less than 20 percent of the gross national product.

These megabanks are slowly transferring the wealth of our nation to themselves and to the international financial interests that control them. They can make money no matter what happens in our economy because as bank credit continues to contract  - outstanding consumer credit fell $2.2 billion; real estate lending contracted $9.2 billion; and commercial industrial loans slid $5.1 billion - they continue to make money hand over fist.

As Matt Taibbi so eloquently put it in his article, The Great American Bubble Machine,

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Anyway, the megabanks continue to report very large profits as they devour enormous shares of the U.S. banking market.  The new reality is that the legislation and regulations implemented over the last few decades were deliberately designed to continue the consolidation of power under way right now, while we the taxpayers financially suffer as we continue to pay the price.

To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.

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Deleveraging the Monster Bubble

From Econotwist's blog:

How long will the deleveraging process take? How painful? Will it create the conditions for growth, and if so, what kind of growth?  Will we seek and find light at the end of this dark tunnel?  Or will we let it get progressively darker to the point where seeking becomes damned near impossible?

The point of the chart above is to emphasize the enormous growth of leverage within the global financial system (individuals, corporations, banks, and governments) over time and the "deleveraging of the greatest economic/finance bubble in history" according to Christopher Laird:

Once the level of leverage reached 60 to 1, it becomes impossible to stay ahead of the deleveraging, even for central banks. The implications are staggering. Every major economy in the world is involved. The outcomes of deleveraging this monster bubble, represented by the green oval, will be what I term Credit Crisis II. At 60 to 1 leverage, a loss of 1 to 2% wipes out the capital.

It is in crisis that the seeds of opportunity are supposed to take root. However, instead, it appears all the seeds of opportunity planted themselves in and around the Big Six.

"Fifteen years ago, the assets of the six largest banks in this country totaled 17 percent of GDP ... The assets of the six largest banks in the United States today total 63 percent of GDP." -- Sen. Sherrod Brown of Ohio quoted from Simon Johnson's book, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

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Reform Passes But Six Banks With More than $9 Trillion in Assets Still Dominate

After an economic crisis that pushed the banking industry to the brink of collapse, froze credit markets, and led to $700 billion in taxpayer bailouts, the toughest set of market rules since the Great Depression will soon become law, with Senate passage of the legislation hours ago. The bill will promote financial stability by improving accountability and transparency in the financial system, improve oversight, bolster consumer protection, and reform the derivatives market, amongst other things. Sounds pretty good so far, right?

Well, when you consider President Obama's 90-page white paper that he proposed back in June 2009 grew to a 2,300-page bill due to the addition of lobbied provisions that no doubt diluted the Bank Act considerably, one has to wonder if the bill tackles the rot at the very core of our financial system. The overhaul won’t shrink banks deemed too big to fail, and it leaves intact a financial industry dominated by six banks with more than $9 trillion of combined assets.

Yet, at the end of the day, essentially nothing in the entire legislation will reduce the potential for massive system risk as we head into the next credit cycle. -- Simon Johnson

While the reform has now been passed, it leaves plenty of unanswered questions:

“Although we agree that there needs to be careful consideration and application of the legislation, the outcome in the short run seems to be that banks continue to conserve capital and maintain excess levels of liquidity while they await the final rules. This could have the effect of dampening economic growth and delaying the economic recovery, until there is a clearer picture of where some of these major issues will shake out,” CreditSights says.

Moreover, it is not convinced that the bill does enough to correct the problems in the financial industry that led to the crisis in the first place. CreditSights argues that the bill doesn’t do enough to improve the credit risk assessment process, and does not address the frequent power imbalance between the front office exposure originators/traders and the back-office risk managers. It also worries that the new oversight bodies are comprised of regulators and central bankers who missed the red flags leading up to the crisis in the first place.

Raters and regulators must be independent of, and possess the authority needed to gain the respect of the banksters, otherwise financial reform is meaningless.

The deregulation of the last 30 years has all but destroyed the the banking reforms and size caps on the banks imposed in the 1930s. However, The Kanjorski Amendment , part of the Dodd-Frank bill gives federal regulators the right and the responsibility to limit big banks and break them up if and when they pose a “grave risk” to financial stability.

So, while regulators can be very effective in curbing the abuses that led us to the brink of financial collapse in 2008, they must have the power to instill the fear of severe consequences should the banksters step out of line.

“The key lesson of the last decade is that financial regulators must use their powers, rather than coddle industry interests.” --Representative Paul Kanjorski,

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Banksters Will Not Reveal Recipients of $2 Trillion.

Even after the "U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help."

Instead, all the biggest U.S. commercial banks and their lobbyists - uniting in an effort to oppose letting we, the public know which banks received how much of 2008's $2-trillion federal bailout for banks - are taking their case to the Supreme Court. That's right. The same court that always sides with Big Money against the interests of the American people. The same court that upheld "corporate personhood" in allowing corporations to spend unlimited amounts to buy our elections.

And if that's not bad enough, Comcast partnered with teabaggers to bring new right-wing broadcast network online as they fight a battle to acquire NBC and related assets (including MSNBC) without being deemed a monopoly. Fox News on steroids, perhaps?

Here's a look at their joint venture: RightNetwork

How does this tie into the Supreme Court's decision favoring "corporate personhood" and the decision it will make in keeping us from seeing where "our" $2 trillion went?

Well, Congress already enabled five corporations to control 80% of U.S. media. Considering that the ruling elite depend on the corporate media to maintain its ability to control our minds, and considering the brain-washing that is already going on, do we really need another right-wing network like this?

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

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Will the Next Credit Tsunami Drown Us All?

Many of us are still feeling, and some even reeling, from the effects of the financial credit crisis last year. Well, prepare yourself, because another tsunami of defaults might just be on the horizon, threatening any chance of full economic recovery. Once again, as excess on Wall Street continues, despite the disastrous results of their previous actions, another sector - the private equity industry - is about to deliver another giant credit disaster.

What are private equity firms?

Essentially they are companies that buy other companies with the help of huge loans. In a nutshell, these companies put 20% down, raised mostly from public pensions, in much the same way you and I would arrange a mortgage, with one major difference. While we put 20% down and borrow 80% for a mortgage, PE firms make the companies they acquire borrow the 80% to finance the deal and the companies they acquire are responsible for that debt. They then try to resell the companies or take them public before the loans come due. Often times, private equity companies make huge profits while destroying the companies they buy and sell.

The giant tax loophole that makes this all possible is called, interest tax deductibility, which states that any company can deduct the interest they pay on loans from their taxes.

Joshua Kosman predicts this crisis in his new book, The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis . Kosman said, the Boston Consulting Group predicts that half of the 3,188 companies purchased by PE firms will default on their loans by the end of 2011. The problem is that the companies owe more than $1 trillion in debt and if a significant amount of those loans become worthless, that will cause a freeze in lending. Not to mention, PE firms are the largest employers in the country when combined. They employ one out of every ten Americans.

Remember the Collatorized Debt Obligation (CDO) - mortgage debt sliced and diced, packaged and repackaged, sold and resold in the form of exotic instruments - involved in our current crisis? Well, the Collatorized Loan Obligation (CLO) will replace the CDO in the next crisis. the "exotic instrument that PE firms use to make it much easier for them to fund leveraged buyouts (LBO).

The same hedge funds that were creating CDOs which caused the mortgage market to boom also created collatorized loan obligation funds which made it much easier for PE firms to borrow money to finance LBOs. Hedge funds and banks would buy a pool of LBO loans, slice them up, and sell them to Sub-Saharan African countries. Ratings agencies gave these CLOs triple A ratings just as they did the CDOs, when they knew they were junk. When the LBOs collapse, these CLOs will be nearly worthless.

In addition, private equity fund managers, like hedge fund managers are taxed at a much lower rate than most Americans pay, even though they are providing services that are normally taxed at the ordinary income tax rate up to 39%. They take in 20% of the profits from investments, and under current law, this is often treated as long-term capital gains, therefore much of their pay is being taxed at the capital gains tax rate of 15%.

Should private equity firms register with the SEC?

In September 2008, the Federal Reserve relaxed bank ownership rules for private equity firms, allowing an investor to buy up to a 15 percent voting stake instead of the previous 9.9 percent limit. It also allowed investors to buy up to 33 percent total equity interest, including voting and nonvoting shares, instead of the 25 percent prior limit.

In other words, private equity firms are engaging in activities that closely resemble what investment banks do: operate hedge funds, taking ownership interest in banks and acting as counter-parties in derivative transactions.

“Leveraged private investment funds with assets under management over a certain threshold should be required to register with the SEC to provide greater capacity to protect investors and market integrity.” – Tim Geithner

Related news:

Report Says Big Buyouts Are Likelier to Default - "The 10 largest companies bought by private equity companies are performing worse than similar stand-alone companies or smaller private equity deals, according to a new report from Moody’s, the rating agency."

Private equity's get-rich-quick days 'are over' -- "Banks are not interested in cleaning up their balance sheets because they would have to recognise additional losses, forcing them to take more government bail-out cash. This could stop increased lending, which would otherwise help recovery."

Which private equity firms return the most bang for the buck? -- The three biggest names in private equity firms are the Carlyle Group, Blackstone Capital Partners, and Kohlberg Kravis Roberts, however, one recent study using the HEC-Gottschalg method looked at which private equity firms return the most bang for the buck, and found few brand names. The top 10 shown in the image at left.

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Purposely Reordering Customer Charges to Maximize Overdraft Fees

45% of the nation’s banks and credit unions collect more in overdraft services than they make in profits. This year alone, banks are expected to bring in $27 billion from overdraft fees alone. They allow customers to continually make purchases on their debit cards, once their checking account is overdrawn, which then automatically sets off a cascade of fees, at up to $39 a pop, sometimes for purchases less than $5, continuously. When the customer calls to complain that they've been charged over $300 in fees, they tell the customer that they are doing him or her a favor by not embarrassing them. That's what Wachovia told me when I went into the branch to complain.

Apparently, I'm not the only one.

When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theater — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.

Mr. Means, who is 59 and lives in Colorado, figured employees at his bank, Wells Fargo, would show some mercy since each purchase was less than $12. In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear. But they would not budge.

Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances — for a price.

Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.

But because consumers use debit cards far more often than credit cards, a cascade of fees can be set off quickly, often for people who are least able to afford it. Some banks further increase their revenue by manipulating the order of a customer’s transactions in a way that causes more of them to incur overdraft fees.

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Taking a Stand Against the Banksters.

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Follow the Interlocking Directorates To See Who Rules America.

Why look at interlocking directories? Most shares in most companies are held by proxies, therefore it is only by looking at interlocking directorships that you can see the kind of power groups behind the economy.

On August 23, 1913, four months before the Federal Reserve was officially created, an article appeared in the NY Times stating the defeat of "currency radicals" who tried to add a provision that would prohibit interlocking directorates - defined as the linkages among corporations created by individuals who sit on two or more corporate boards - among banks in the proposed reserve banking system.

Interlocking directories is one of the mechanisms that inspire organizations to coordinate and cooperate with each other. This, in turn, can can create the existence of an elite group of board members in control of a large percentage of corporate political donations which disproportionally influences political candidates, therefore legislation.

This is, then, the political game, in which a few players are capable of influencing a whole range of organizational decisions, which are supposedly disconnected, and independent of each other, in such a way, as to make them interdependent. -- Yitzhak Samuel, author of The Political Agenda of Organizations

So, unfortunately, for us, the defeat of the currency radicals, almost 100 years ago, allowed an elitist group of executives to rule, not only the American corporate world, but also the American government, hence, we, the people.

Democracy relies on a certain amount of conflict, not cohesion amongst its elites, according to Joseph Schumpeter an economist and political scientist, famous for popularizing the term "creative destruction" in economics.

Cooptation, a tactic of neutralizing or winning over a minority by assimilating them into the established group or culture, is an accepted political procedure in the business world. It effectively neutralizes competition and extends the external support for the organization and its activities.

So, in other words, very little happens in the West without this elite group's approval.
No matter what we're told by the mainstream media, by those who hold top government positions, and/or anyone with power and influence, we should not forget that those people are either controlled by or are part of a very small group of individuals who form an elite class who ruthlessly look out for their own financial and political interests, caring little, if at all, for the interests of the electorate in general, or of the working class in particular.

"The world gasps for liquidity, not because the supply of money has contracted but because too much of it now goes to pay off old debts rather than fund new productive investments." Forbes Magazine stated October 11, 1982

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Break the Power of the Wealth Sucking Financial Oligarchy Now.

There is nothing like hearing or reading reports of top executives - the very same ones who contributed to the current financial crisis - planning to pay themselves the biggest bonuses ever in their 140 year history, to wake Americans up from the cultural trance we've allowed ourselves to succumb, to smell the corruption and hubris that underpins our current financial and political system. Goldman Sachs, according to The Guardian, is having its most profitable year ever, citing lack of competition as the chief reason.

Why is this a problem?

Well, a few months ago, Goldman Sachs, frustrated by federally mandated pay caps imposed on TARP recipients, started plotting and planning to get out from under those restraints. The Obama administration was against Goldman Sachs paying the $10 billion in TARP money back early because they were afraid it would send the wrong signal by encouraging the very thing - "too big to fail" -that contributed to the collapse of our economy in the first place. They feared Goldman Sachs would receive an unfair advantage over all the rest of the banks, because it will appear stronger in the market, while at the same time, continuing to receive government subsidies, including guarantees on debt they already issued, and discounted credit lines from the Federal Reserve, therefore, eliminating the healthy competition our financial system needs to thrive in what is supposed to be a "free market" economy.

Here's the thing. The government (American taxpayers) saved their day, and now that Goldman Sachs and the rest of the banks are back on their feet, at tremendous cost to us, they are deliberately undermining the TARP program, despite the fact that it saved their derriere, and despite the fact that they still rely on government assistance, and despite the fact that they will not have to pay back a good portion of bailout assistance ($13 billion from AIG as a counter party thru AIG bailout and the ability to change their legal forms to access more credit) they received that enabled them to become profitable once again.

We the people must become aware that many of the underlying assumptions we once believed in are no longer valid. For example, the belief that what is good for Wall Street is good for Washington, therefore good for our country must be abolished. The financial sector that started to become more powerful under Reagan, that produces nothing of real value, yet accounts for well over 40% of corporate profits, if allowed to continue, or even worse, grow, will make

The only way to achieve real reform is to break the power and hubris of the financial oligarchy that is currently sucking real wealth from our system and reconstitute the structure of the financial system going forward.

Chart 1: Share of Total U.S. Income Accruing to the Top 10%, 1917-2006











Chart 2: Decomposing the Top 10% of U.S. Income Share into Three Groups, 1913-2006

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As the Corporate Bread Line Turns.

AIG, who received more than $152 billion from American taxpayers, is handing out more cash rewards, that serve to double or triple the salaries of some senior executives. Did I say cash rewards? My mistake. AIG refers to these bonuses as retention payouts. This "retention" program will pay out as much as $4 million to 38 managers.

Retention? Where are these people going? Haven't they heard? Thanks to them, the economy is in rapid free-fall. And, if they do decide to leave...who cares? What did they achieve?

The "Cockroach Theory" certainly applies to AIG. We still can't see the extent of the "infestation" for all the solid walls still standing...a fresh $10 billion in losses just found. In other words, retaining inefficient, greedy and exploitative employees at our expense should not be tolerated, but it is.

"The gibberish about needing to pay that much just to keep superstars from fleeing to private-equity firms or hedge funds is just another Wall Street myth. The truth is most of them are lucky to have a job at all and they know it." - William D. Cohan

Merrill Lynch’s chief executive requested a $10 million bonus this year for all the hard work he had to do putting "Humpty Dumpty" back together. However, it appears CEO, John Thain may not get his wish, as well as many other Merrill execs.

Morgan Stanley is getting tough. They are attaching strings by imposing claw-back provisions to the bonuses they will eventually pay out, but they will be paid out.

The collective liability clause honored by partners was replaced with a system where bankers and traders were encouraged to take short-term risks with shareholders’ money. Gone, too was the idea of being held responsible for your actions (short of outright fraud). Managers at publicly traded banks constantly exhorted their traders to do bigger and bigger deals and to take increasing amounts of risk, and then rewarded them with millions of dollars in compensation — money that belonged to shareholders. Reputations were made not by turning down imprudent business but by seeing how much business could be done. - William D. Cohan

The same lack of oversight issues remain, as the Treasury has yet to do anything about it further enabling the corporate breadline.

Executive Paywatch Database

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