Busted: Bankers and The Global Economy

January 27, 2011

U.S. Mortgage Crisis Tensions Build

A commission was appointed to look into misconduct regarding the national mortgage and banking crisis, signed into being by President Obama on May 20, 2009. The 10-member panel is after any person that may have violated the laws of the United States in relation to the crisis. The scuttlebutt is that a number of financial industry figures and corporations have been found lacking and are being referred for prosecution. All of this portends to make quite a bit of news in the near future.

The media has been working hard at divining any sources of information. The New York Times claims to have obtained a copy of a 576-page report, concluding that the financial disaster was avoidable while laying blame on federal regulators for the failure to act on knowledge of shoddy mortgage lending and reckless risk taking. Keep in mind that at least some of these shoddy practices continue behind the scenes, building on a proliferating number of foreclosures in the United States.

The idea that politicians hope to project is that the financial crisis is being resolved. The truth is that the national financial crisis is just getting underway.

November 4, 2010

U.S. Fed Opens New Office

Filed under: banking, business, central bank, corporatism, economy, federal reserve, recession — Tags: , , , , , , , — digitaleconomy @ 12:58 pm

“The Federal Reserve Board on Thursday established the Office of Financial Stability Policy and Research and appointed Board economist J. Nellie Liang as its director.

The office will bring together economists, banking supervisors, markets experts, and others in the Federal Reserve who will be dedicated to supporting the Board’s financial stability responsibilities. The office will develop and coordinate staff efforts to identify and analyze potential risks to the financial system and the broader economy, including through the monitoring of asset prices, leverage, financial flows, and other market risk indicators; follow developments at key institutions; and analyze policies to promote financial stability. It will also support the supervision of large financial institutions and the Board’s participation on the Financial Stability Oversight Council.”

“The Office of Financial Stability Policy and Research brings together a skilled group of people with a wide range of expertise to focus solely on financial stability,” Federal Reserve Chairman Ben S. Bernanke said. “The financial stability team will play an important role in implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, in our oversight of systemically important financial institutions, and in our overall surveillance of the financial markets and the economy.”

http://www.federalreserve.gov/newsevents/press/other/20101104a.htm

 

July 31, 2010

SEC Lets Citi Execs Go Free After $40 Billion Subprime Lie

The following news analysis was written by AlterNet.org’s economics editor Zach Carter.

What is the penalty for bankers who tell $40 billion lies? Somewhere between nothing and a rounding-error on your bonus.

The SEC just hit two Citigroup executives with fines for concealing $40 billion in subprime mortgage debt from investors back in 2007. The biggest fine is going to Citi CFO Gary Crittenden, who will pay $100,000 to settle allegations that he screwed over his own investors. The year of the alleged wrongdoing, Crittenden took home $19.4 million. That’s right. Crittenden will lose one-half of one percent of his income from the year he hid a quagmire of bailout-inducing insanity from his own investors. That’s it. No indictment. No prison time. Crittenden doesn’t even have to formally acknowledge any wrongdoing.

In 2007, as financial markets were freaking out about the subprime situation, Citi repeatedly told its investors that it owned just $13 billion in subprime mortgage debt. It was true – if you didn’t count an additional $40 billion in subprime debt that the company was also holding onto.

Citi’s CEO at the time, Chuck Prince, has not been charged with anything. As Yves Smith emphasizes, all of the top financial officers of every major corporation are responsible for the accuracy of their quarterly financial statements. Lying on those statements is a federal crime. This is the sort of thing that securities fraud cases are built around.

The SEC’s own statements about what went on at Citi are damning. If the agency can make this kind of information public, they ought to be pursuing criminal prosecutions. The SEC says that senior Citi management had been collecting information about the company’s subprime situation as early as April 2007, but repeatedly cited the $13 billion figure to investors over the next six months, waiting to acknowledge the additional $40 billion in subprime debt until November 2007. The SEC also says that Crittenden knew the “full extent” of Citi’s subprime situation by September at the latest, but the company continued to cite $13 billion in earnings reports through October.

Citi’s subprime shenanigans had consequences for taxpayers, pushing the company to the brink of total collapse and prompting one of the biggest bailouts of 2008.

Phil Angelides and the Financial Crisis Inquiry Commission deserve a lot of credit for highlighting the absurdity of Citi’s actions in a hearing on April 7 of this year (the key passage starts on page 368 of this pdf transcript). Angelides’ line of questioning revealed that even Citi’s board knew that the subprime exposure was much greater than what the company was claiming in public. Citi’s board at the time included Robert Rubin, former Treasury Secretary and architect of much of the deregulation that lead to the current crisis who took home $120 million for his work at Citi.

Either the SEC or the Justice Department could be pursuing criminal cases against Citi executives. What does it take to get the Justice Department’s attention on a financial fraud case? You have to launder $380 billion in drug money, and even then, DOJ lets you off with a slap on the wrist. The DOJ caught Wachovia doing just that, and the bank is getting off with a minor fine that won’t even make a dent in it’s second-quarter profits.

The Citi settlement is worse than a get-out-of-jail free card for Crittenden, Prince and their cohorts. The SEC actually fined Citi’s shareholders $75 million for the alleged wrongdoing of their executives. For some varieties of corporate misconduct, like Wachovia’s drug money laundering, hitting shareholders with the fine is appropriate. Wachovia’s money laundering operations directly enriched the company and its shareholders. This was not the case with Citi’s subprime scandal. Citi’s executives were hurting their own shareholders. Instead of meting out serious punishment to those executives, the SEC is fining Citi’s shareholders, the very people wronged in the incident.

This deference to the elites who wrecked the economy just keeps playing out. When Bank of America lied to its shareholders about billions of dollars in bonus payments it was about to make, the SEC decided to fine BofA shareholders and let the firm’s executives off the hook. The decision-makers at Wachovia, who allowed the firm to funnel drug money despite repeated warnings by whistleblowers, have not been indicted. Nobody at Washington Mutual has been indicted despite clear evidence of rampant mortgage fraud at the firm. Lehman Brothers’ repo 105 accounting scam is going unpunished, as are similar schemes at other banks including Bank of America. After much public relations flogging, the SEC let Goldman Sachs off easy.

More than 1,100 bankers went to jail in the aftermath of the savings and loan crisis. Massive financial crises simply do not occur without widespread fraud. The failure to prosecute that fraud poses systemic risks for the global economy. With too-big-to-fail behemoths dominating the financial landscape, the prospect of prison is the only serious check on executives interested in cannibalizing the economy for personal gain. If the SEC and the Department of Justice continue to let executives get away with outrageous acts without even taking the case to court, our financial system is doomed to repeat the same excesses and abuses we’ve seen over the past decade. If Crittenden did what the SEC claims he did, he screwed over his own investors and scored a huge bonus in the process. Everybody on Wall Street understands the implications: breaking the law is a great way to make a lot of money. When a class of elites can thumb its nose at the law with impunity, the result is not only a threat to the efficiency of our economy, but a threat to the basic functioning of our democracy.

You can read Mr. Carter’s news analysis in context here: blogs.alternet.org/speakeasy/2010/07/30/where-are-the-prosecutions-sec-lets-citi-execs-go-free-after-40-billion-subprime-lie/ Mr. Carter is a fellow at Campaign for America’s Future, and a frequent contributed to The Nation magazine.

July 11, 2010

Recession: The Ol’ Double Dip?

What is happening in the U.S. economy? The  newborn atmosphere of a slow recovery has plummeted since the start of the year when financial agencies were debating when to announce an interest rate increase. That is no longer the case.

The tax credit for first-time home buyers for up to $8,000 was over in April. Since then, housing transactions have nearly vanished. The mortgage loan interest rate has fallen to historic lows. The economic upturn that authorities claimed earlier this year simply the result of economic stimulus measures by the United States government.

Events are just as somber outside of the United States. From all appearances, a $1 trillion relief package ended the financial crisis that hit Europe. Still there is not a sign of recovery. Germany provided the needed stimulus funds, but is no longer providing capital to keep failed economies that have squandered credit with bankers solvent. Efforts to revive the economy have resulted only in more loss as bankers continue to plunder with their derivative cons. The U.S. has been fearful of making changes for the banking and finance community. Central bankers are still in charge, printing dollars as if there were no tomorrow.

Job are gone in the United States, likely forever. This is the admission of VP Joe Biden a little more than a week ago. States are looking at emergency measures to see what they can do to avoid the bleeding of jobs to other lands and to other peoples. Arizona is due to begin enforcement of a controversial immigration policy that is designed to return employment back to Arizona residents since measures by the federal government have been lackluster to non-existent in many places. The nation is full of illegals, the exact number unknown.

The price of a global economy is likely to be high. Every economy is subject to bring another one down. No one has discovered a way to move out of the doldrums. $787 billion in the U.S. was designed to boost domestic consumption, but the market is still cold. Congress has moved to bolster the economy through The Buy American Act, a ancient law passed in 1933 that requires the suppliers of the government to use American made products. Lawmakers are afraid to close tax loopholes that have remained open for corporations since 1991. As a result, nothing changes.

This has cooled temporary benefits of trade by corporations in the U.S.  known as the trade deficit. Corporations don’t care about this public denuding of wealth. They simply look to their own profits, not a sustainable relationship over time. Politicians outside of the U.S. want to promote free trade, as if the United States has more to offer in this regard. Even during the recession, the States were the primary agent of consumption for the world. Reckless spending, careless law and the rise of the corporate oligarchy has resulted in a new world, with a more level playing field. That is, after all, what globalists have wanted. This means that the big players that the globe depended on for economic sustenance are no longer the powerhouses they once were.

The nation is in an economic quagmire because it has ceded its wealth to corporations, a.k.a. multinationals and central bankers. The common opinion is that nations should not try to survive at the expense of other nations. Even so, the reality is that this has always been the case. The homogenized sameness of global balance supports only those that are in place to take advantage of it. The majority of the world will suffer at the hand those few that won’t. What’s new about that? It’s simply more political pandering that benefits a few.

June 27, 2010

Jobs & G20: Budget Slashing Fever & Fantasy

To hear the G-20 proclaim it, the U.S. and other “prime economies” had better slash their budget deficits before the world comes to an end. The U.S. Senate quashes continued aid for the unemployed. Wall Street investment firms and banking succeeds in watering down financial reform. The fantasy continues while economists and politicians worry behind the scenes.  Even VP Joe Biden openly admitted that the United States will not regain the jobs that were lost in the “Great Recession.”

The official jobless rate, projected at below 10%, is pure fiction and must treated as such by those that seek the truth. It doesn’t consider many unemployed people that have dropped off the charts into oblivion. Underemployment is a national plague that the Labor Bureau of Statistics has revealed. Many are the discouraged job seekers and those that have settled for part-time work. The U.S. Labor Department shows that there are 79 million men in America between the ages of 25 and 65. Nearly 18 million of them, a record 22%, are out of work. This doesn’t include the underemployed. The impact is larger in African-American men.

The financial markets, like the government lawmakers, could care less about the deficit. Perhaps they should. As a result, investment rates in bonds is down. Almost all of them ignore engineered inflation which pays off central bankers to the tune of about 10% yearly, the real loss in buying power for the nation. In the meantime, the official inflation rate is a “convenient” 3% most years. Powers that be project an inflation rate 2.3% yearly for the next 30 years. Dreamland. Because of what is really a stagflation economy, falling prices and deflation of the dollar are more likely.

Wall Street and multinational capitalism seems to be in robust condition, to the cost of everyone but them. Corporate profit margins have reached record levels at 36% as the average American is short circuited entirely. These profits have never been so high since record keeping began. These figures are much the same as they were in the Reagan administration.

More than half of the national budget funds defense (don’t forget the wars), national debt interest and Social Security/Medicare. Politicians are eyeballing cuts on the latter, often silent as a senior political voice fades away. Don’t kid yourself. You’ll pay for seniors and the disabled one way or the other. Don’t kid yourself about the other major expenses either. Meanwhile, the national budget has climbed steadily for decades in the 6% to 10% range, much higher than the professed inflation rate.

There are no easy answers beyond beginning to live within our means as a nation. For years, Americans had forgotten about this necessity, encouraged by the system to spend endlessly, until the recession hit us between the eyes. Only bankers, multinationals and Wall Street have profited in their own economic bubble. Government has forgotten what economic balance and locally productive jobs mean, threatening to destroy their own system of weights and balances with unfettered spending and wars overseas, designed to keep terrorist attacks overseas and out of America. We have created our own reality. Are we willing to change?

April 20, 2010

Video: Obama and Economic Reform

Filed under: banking, business, economy, globalization, government, money — Tags: , , , , , , — digitaleconomy @ 3:49 pm

President Obama hosts a public meeting of the Presidents Economic Recovery Advisory Board.

November 23, 2009

New World Authority: The Fed’s Automatic Bailout Bill

Congress intends to grant the Federal Reserve even more powers to control the economy of the United States with HR 3996. This gives the Fed complete power on top of  dollar creation worldwide, excess credit, and low interests rates to cause financial bubbles and control corporate financial power. This power allows for full-scale abuse and manipulation of the system while profiting from transactions and time spent a/k/a administrative expenses. This gives authority of global banking system to run the economy of the United States at their own comfort. The bill secures automatic bailouts for the banks and powerful corporations through the power of the Federal Reserve, which is part of a global consortium of bankers (what I call the International Society of Central Bankers).

“Upon the written approval of the Board of Governors of the Federal Reserve System… and the Board of Directors of the Corporation … and with the written consent of the Secretary of the Treasury, the Corporation may extend credit to or guarantee obligations of solvent insured depository institutions or other solvent companies that are predominantly engaged in activities that are financial in nature, if necessary to prevent financial instability during times of severe economic distress. There shall be available to the Corporation to carry out this section amounts in the Treasury not otherwise appropriated, including for the payment of reasonable administrative expenses.” (pages 43-44/253)

HR 3996 gives power to the Federal Reserve to force companies to obey financial orders from the Federal Reserve, making them an authority of power in their own right. (The nation has already been moving in this direction.) The Fed has the power to take over companies that Fed deems a threat to their own “safety and soundness” or to the “financial stability of the United States.”

Section 1105 gives the Federal Reserve the power to force financial holding companies into bankruptcy: “an involuntary case may be commenced by the Board of Governors of the Federal Reserve System against an identified financial holding company.” (page 38/253)

Section 1701 gives the Federal Reserve the power “in unusual and exigent circumstances” to authorize immediate bailouts and assistance to any “individual, partnership, or corporation.” (page 253/253) Section 1701 enables the Federal Reserve the authority to bypass Congress when the next fiscal crisis occurs.

You can now see the danger that the Federal Reserve and global bankers pose to the national security and the solvency of all Americans if HR 3996 passes.

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