Showing posts with label Banks. Show all posts
Showing posts with label Banks. Show all posts
Sunday, April 7, 2013
The Great Cyprus Bank Robbery
The Great Cyprus Bank Robbery Shows That No Bank Account, No Retirement Fund And No Stock Portfolio Is Safe
Michael, on March 18th, 2013
http://theeconomiccollapseblog.com/archives/the-great-cyprus-bank-robbery-shows-that-no-bank-account-no-retirement-fund-and-no-stock-portfolio-is-safe
The global elite have now proven that when the chips are down they are going to go after any big pile of money that they think they can get their hands on. That means that no bank account, no retirement fund and no stock portfolio on earth is safe. Up until now, most people assumed that private bank accounts were untouchable and that deposit insurance actually meant something. Now we see that there is no pile of money that is considered "off limits" by the global elite and deposit insurance means absolutely nothing. The number one thing that any financial system depends on is faith. If people do not have faith in the safety and stability of a financial system, it will not work. Well, the people that rule the world have just taken a sledgehammer to the trust that we all had in the global financial system. They have broken the unwritten social contract that global banking depends on. So now we will see a run on the banks, and this will not just be limited to a few countries in southern Europe. Rather, this will be worldwide in scope. Yoda may have put it this way: "Begun, the global bank run has." All over the world, frightened people are going to start pulling money out of the banks. A lot of that money will go into gold, silver and other hard assets. And as money starts coming out of the banks, this could cause many of the large banks that have been teetering on the edge of disaster to finally collapse.
Many of you may not believe that they would ever come after bank accounts, retirement funds or stock portfolios in the United States.
Many of you may be entirely convinced that the Great Cyprus Bank Robbery could never happen in America.
Well, where do you think this whole plan was dreamed up?
It was the IMF that reportedly pushed the hardest for the wealth tax in Cyprus, and the IMF is headquartered right in the heart of Washington D.C.
Almost every nation on the planet has to deal with the IMF. It is an organization that is dominated by the United States and that is always involved when there is an international debt crisis.
If the IMF thinks that it is a great idea to steal from bank accounts to solve a financial crisis in Cyprus, why wouldn't they impose a similar solution in other countries in the future?
And if bank accounts are no longer safe, are there any truly safe places to put your money?
You can trust the politicians when they tell you that an unannounced "wealth tax" will never happen where you live if you want, but that is the exact same lie that the politicians in Cyprus were telling their people until the day that it happened. The following is from an article in the Cyprus Mail...
And after all, President Anastasiades had emphatically declared in his inauguration speech that “absolutely no reference to a haircut on public debt or deposits will be tolerated,” adding that “such an issue isn’t even up for discussion.” Finance Minister Michalis Sarris made similarly reassuring statements, arguing that it would be lunacy for the EU to impose such a measure because it would threaten the euro system.
At this point, politicians in Cyprus have been given two very unappealing options. Either they vote yes on the wealth tax and destroy all faith in the banking system of Cyprus, or they vote no and they are forced out of the eurozone. In either case, we will probably see the financial system of Cyprus collapse and their economy plunge deep into depression.
At this point, the vote has been delayed until Tuesday. Apparently some additional "arm twisting" was required to get the needed votes.
And there have been proposals to change the terms of the wealth tax. Reportedly, some politicians want to impose a maximum rate of up to 15 percent on bank accounts of over 500,000 euros so that the rate on smaller accounts can be decreased.
It has also been announced that the earliest that banks in Cyprus will reopen will be Thursday.
But what is happening in Cyprus is small potatoes compared to how this will affect the rest of the world. The entire planet is watching this unfold, and as a recent article by Lucas Jackson described, faith in the global financial system is being greatly shaken...
It would be hard to over-emphasize how significant the Cyprus situation is. The EU demonstrated under no uncertain circumstances that they will destroy the rule of law to maintain their own power. It was a recognition of tyranny that many of us have always assumed was the case but yesterday became reality.
The damage done here is not related to the size of the haircut - currently discussed between 3 and 13% - but rather that the legal language which each and every investor on the planet must rely on in order to maintain confidence in the system has been subordinated to the needs of the powerful elite. To the power elite making the major decisions in DC, London, Berlin, France, Brussels, et. al., laws are like ice cream, easily melted.
Which begs the question, who is next? Will it be Portugal? Greece? Spain? Italy? France???
Will they impose a “one-time” tax on your bank account? Your house? Your stocks and bonds? Retirement accounts?
The global elite have declared open season on all large piles of money, and now many people all over the world will consider taking money out of the bank to be the rational thing to do. This will especially be true in countries in southern Europe since they would probably be the next to have wealth confiscated.
This is so abundantly clear that even Paul Krugman of the New York Times understands this...
It’s as if the Europeans are holding up a neon sign, written in Greek and Italian, saying “time to stage a run on your banks!”
Tomorrow and the days immediately following should be very interesting.
The global elite have truly "crossed the Rubicon" by going after private bank accounts. It is almost as if they purposely chose the most damaging solution possible to the financial crisis in Cyprus.
Many in the financial world are absolutely stunned by all of this. For example, David Zervos is describing this move as a "nuclear war on savings and wealth"...
All of us should really take a moment to consider what the governments of Europe have done. To be clear, they initiated a surprise assault on the precautionary savings of their own people. Such a move should send shock waves across the entire population of the developed world. This was not a Bernanke style slow moving financial repression against risk free savings that is meant to stir up animal spirits and force risk taking. This is a nuclear war on savings and wealth - something that will likely crush animal spirits. This is a policy move you expect from a dictatorial regime in sub-Saharan Africa, not in an EMU member state. If the European governments can clandestinely expropriate 7 to 10 percent of their hard working citizen's precautionary savings after the close of business on a Friday night, what else are they capable of doing? Why even hold money in a bank account? Are they trying to start a bank run?
So what motivated the global elite to do this?
According to CNBC, one of the motivations was to go after the Russians that had been using the banking system of Cyprus to launder money...
Indeed, the IMF is reported to have been keen on the levy as a way to stem the flood of Russian money into the island over the last few years which has prompted concerns over money laundering.
Russian money accounts for about 25 percent of all money in the banking system of Cyprus, and obviously the Russians are quite upset by what the IMF and the EU have decided to do. Even Vladimir Putin is loudly denouncing this move...
Russian President Vladimir Putin called the tax “unfair, unprofessional and dangerous,” according to a statement posted on the Kremlin website. Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s.
And you haven't heard a lot about this in the western media, but the Russians have actually stepped forward and have offered to help Cyprus out of this jam. For example, there are reports that Russian investors are interested in buying the two banks that were the primary cause of this bailout...
Officials have also said Russian investors are interested in buying a majority stake in Cyprus Popular Bank and increasing their holdings in Bank of Cyprus - the two biggest banks on the Mediterranean island.
And according to Sky News, Gazprom has offered Cyprus a very large sum of money for the right to explore their offshore gas reserves that have not been developed yet...
The uncertainty comes as Russia's finance minister said his country would consider restructuring its loans to Cyprus.
Russian energy giant Gazprom has also reportedly offered financial assistance to Cyprus in exchange for access to the island's gas reserves.
So far the government of Cyprus has rejected the help of the Russians, but could they change their mind at some point? Apparently the Russians are offering enough money to completely fund the bank bailout...
According Greek Reporter, Gazprom made an offer over the weekend to the Cypriot government to fund the bank restructuring planned under the Cypriot bailout (which is set to cost up to €10bn) in exchange for exclusive exploration rights for Cypriot territorial waters. How reliable this story is remains to be seen, but it does hint at the geopolitical tension which we have been warning about.
Gazprom is known to be very close to the Russian government and despite Russian President Vladimir Putin overtly slamming the deposit tax - calling it "unfair, unprofessional and dangerous" - it is unlikely that they would let this opportunity pass untouched. Fortunately, the Cypriot government is said to have rejected the deal off the bat, but if displeasure towards the eurozone and the EU grows, the Russian option may become increasingly appealing.
It will be very interesting to see what happens.
Meanwhile, some European officials are already suggesting that other nations in southern Europe should have a "wealth tax" imposed upon them. The following comes from an article by Paul Joseph Watson...
Joerg Kraemer, chief economist of the German Commerzbank, has called for private savings accounts in Italy to be similarly plundered. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product,” he told Handelsblatt.
A "tax" of 15 percent on all financial assets?
Could you imagine if you woke up one morning and the government had decided to suddenly steal 15 percent of all the money that you had in bank accounts, retirement funds and stock portfolios?
If I had a bank account in Italy I would be very nervous right about now.
Under normal circumstances these kinds of things don't happen, but governments will use an "emergency" to justify all kinds of things. I recently came across an article that included a great quote by Herbert Hoover that put this beautifully...
"Every collectivist revolution rides in on a Trojan horse of ‘emergency’. It was the tactic of Lenin, Hitler, and Mussolini. In the collectivist sweep over a dozen minor countries of Europe, it was the cry of men striving to get on horseback. And ‘emergency’ became the justification of the subsequent steps. This technique of creating emergency is the greatest achievement that demagoguery attains."
This is what the elite love to do.
They love to create order out of chaos.
And this is just the beginning. The Great Cyprus Bank Robbery was just a beta test for what is coming next.
As the global financial system crumbles, the global elite are going to target our bank accounts, our retirement funds and our stock portfolios. You might want to start thinking about how you will protect yourself.
Wednesday, March 27, 2013
Holder admits megabanks are ‘too big to jail’
Holder admits megabanks are ‘too big to jail’
DARRELL DELAMAIDE
March 7, 2013
Full article:
http://www.marketwatch.com/story/holder-admits-mega-banks-are-too-big-to-jail-2013-03-07
Attorney General Eric Holder, the top U.S. law-enforcement official, finally admitted this week that bank executives truly are above the law and may commit crimes with virtual impunity.
Appearing before the Senate Judiciary Committee, Holder acknowledged under questioning by Republican Chuck Grassley of Iowa, the ranking member, that the megabanks are too big to jail. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,” Holder said.
He continued: “When we are hit with indications that if you do prosecute — if you do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.”
Holder went on to suggest that, until Congress does something about it, the size of these banks will preclude bringing them to justice.
“I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate,” Holder said. “I think that’s something that we — you all — need to consider.”
Sunday, December 16, 2012
1% Wall Street sales tax solution
1% Wall Street sales tax solution to stablize US federal budget
Webster G. Tarpley
Tue Dec 4, 2012
http://www.presstv.ir/detail/2012/12/04/276170/wall-street-tax-solution-to-us-budget/
In the midst of the current haggling over the US federal budget, the main fact is being ignored: the fiscal shortfall of the US government over decades is largely due to Wall Street’s rigging of the tax code so that the main money center banks pay little or nothing in the way of taxes.
Like the haughty nobility in France before the Revolution of 1789, the Wall Street banks are practically exempt from taxation, and the burden of paying for the government is shifted to the middle class. Anybody who is serious about reducing the power of Wall Street bankers in US politics must now mobilize to educate public opinion about the situation and its main remedy - the 1% Wall Street Sales Tax.
Wall Street banks are corporations, and US corporations are supposed to pay a federal corporate income tax of 35% on their profits.
Over recent decades, government revenue from the federal corporate income tax has been in sharp decline, as more and more companies learn the secrets of tax loopholes, offshore tax shelters, and other accounting tricks. Some of the most adept in dodging tax payments are the leading Wall Street institutions.
Some statistics on Wall Street’s amazing ability to evade taxation come from Senator Bernie Sanders of Vermont and from Citizens for Tax Justice, a think tank supported by organized labor.
It turns out that Goldman Sachs, the classic zombie bank, paid just 1.1% tax on its total profits in 2008. This scandalous situation did not prevent Lloyd Blankfein, Goldman’s boss, from appearing on CBS television to demand draconian cuts in the meager entitlement payments received by the poor, the sick, and the old.
Goldman paid 1%, Bank of America, Citigroup, Wells Fargo paid nothing.
Citigroup made out even better, paying 0% taxes on $4 billion in profits. In 2011, Bank of America also managed to pay 0% on 4.4 billion of its profits. Another leading bank which managed to avoid the federal corporate income tax altogether is Wells Fargo, which succeeded in paying nothing to the US Treasury in 2008, 2009, and 2010 (See Pat Garofalo, “30 Major Corporations Paid No Income Taxes in the Last Three Years, While Making $160 billion,” Think Progress, November 3, 2011).
Another spectacular example of Wall Street’s tax dodges is General Electric, which long ago ceased being an industrial corporation and became a hedge fund in drag, built around its financial arm, GE Capital.
GE racked up worldwide profits of $14.2 billion in 2010, but managed to avoid the federal corporate income tax completely. Instead, GE accountants were able to secure a $3.2 billion refund from the US Treasury. This happened even though GE was laying off 21,000 US workers and closing 20 US factories over the years 2007-2009.
And these results were typical of GE’s performance over the most recent decade: GE paid a 2.3% tax rate on profits during 2002-2011, and succeeded in paying zero federal corporate income tax in 2002, 2008, 2009, and 2010 (See Citizens for Tax Justice and Jake Tapper, “General Electric Paid No Federal Taxes in 2010,” ABC News, March 25, 2011).
The scandal is made even greater because GE boss Jeffrey Immelt was serving as Obama’s business liaison in his capacity as Chairman of the White House Council on Jobs and Competitiveness. Rapacious predators like Immelt apparently believe that good corporate citizenship starts with evading all taxes.
Wall Street pays no tax on its transactions
But these scandals, though outrageous, barely beginning to scratch the surface of the insane world of US tax law. US states collect sales taxes usually ranging from 6% to 12% on transactions involving merchandise, sometimes including even groceries. But when the Wall Street banks, hedge funds, and brokerage houses sell their stocks, bonds, derivatives, debt instruments, etc., they pay no sales tax whatsoever.
This outdated approach goes back to when the stock and bond markets were considered capital markets. But today, in the era of high frequency trading and flash trading in which one computer can carry out a million trades per second using algorithms, we are obviously dealing with a high-tech gambling casino that poses grave dangers to the public.
In short, the greatest single flow of untaxed money is the stocks, bonds, and derivatives which cross the exchanges in New York and Chicago, as well as the over-the-counter derivatives which are contracted behind the scenes. If sacrifices are required, this is obviously the place to start.
The obvious way to stabilize the US federal budget is to levy a sales tax on these financial market transactions. A sales tax will be paid immediately on every trade, without regard for the yearly profits and losses reported by smart accountants, making it much harder to cheat.
The US federal government collected a financial transaction tax of between 0.04% (0.0004) and 0.1% (0.001) between 1914 and 1966. Even today, the US government still collects the Section 31 fee, a microscopic tax of 0.0034% on stock transactions, which in 1998 produced $1.8 billion and financed the operations of the Securities and Exchange Commission.
The State of New York currently has a small financial transaction tax on the books, but since the late 1970s the proceeds (estimated at about $25 billion per year) have been remitted to the bankers in response to their blackmail threats to move their operations out of state. In any case, there is no serious constitutional challenge to the legality of a Wall Street sales tax.
The AFL-CIO, European Trade Union Confederation, the International Metal Workers Federation (including the UAW), National Nurses United, and other labor organizations all support some version of the Wall Street Sales Tax, but usually at a very low rate, and without a clear demand that the proceeds be used to maintain and expand the in-country social safety net. There is a proposal for a Global Tobin Tax, and for a Robin Hood Tax - not a clever name. The G-20 has discussed a financial transaction tax, and the European Union is slowly implementing a tiny financial transaction tax.
The average American, who pays sales tax every day, often demands that Wall Street pay exactly the same sales tax (6% to 12%) on its transactions as the general public pays on purchases. This is an important political fact, which ought to encourage lawmakers to substantially increase the narrow scope and miniscule transaction tax rates contained in their proposals, especially in view of the inevitable resistance by reactionary princes of privilege.
The goal should be a 1% across-the-board Wall Street Sales Tax, paid by the seller, on stocks, bonds, and the notional value of derivatives. It also makes sense for the federal government to share half of the proceeds with the states, in order to support the key role of state and local governments in preserving the essentials of modern civilization.
While flash trading and high frequency trading have driven stock transactions up to unprecedented levels, the real mother lode of transactions is to be found in the area of derivatives. Futures, options, and indices and their various combinations are traded on public exchanges and can be easily tracked.
Over-the-counter derivatives, which take the form of private contracts between counterparties, are still a matter of guesswork because of the failure of the Dodd-Frank law to force the reporting of these trades.
The best remedy might be to specify in legislation that any over-the-counter derivatives contracts which have not paid the 1% Wall Street Sales Tax cannot be enforced in court, meaning that the losing counterparty would always be able to renege if the tax has not been paid.
World derivatives must currently be in excess of two quadrillion dollars in notional value. As these derivatives are bought and sold, some estimates put the resulting turnover in the range of six to seven quadrillion dollars. This suggests that revenues on the order of tens of trillions of dollars would be available from a 1% Wall Street Sales Tax.
At the same time, it should be clear that the presence of such a tax would cause many derivatives transactions and many high frequency trading operations to cease. Even so, we can be confident that a 1% levy can provide several trillion dollars in new tax revenue.
By contrast, competing proposals for a wealth tax may face prolonged constitutional challenges. They will require police state methods to carry out a census of taxable assets. In return for this effort, a 1% wealth tax cannot hope to exceed several hundred billion dollars of yearly revenue -- not the many trillions which the Wall Street sales tax can deliver.
A wealth tax does nothing to discourage speculation nor foster real production. Finally, a wealth tax provides an easy way for reactionary forces to pose as the defenders of the middle class, as seen through the eagerness of Bill O’Reilly of Fox News to invite wealth tax advocates on his show. The justifiable concern about the exorbitant size of certain family fortunes can be met by better enforcement of the Estate Tax.
In order to avoid an excessive burden on families and individuals who are buying and selling stocks to finance college education, retirement, or medical emergencies, it will be wise to establish a $1 million per person exclusion; only if securities trading goes over this threshold will the Wall Street Sales Tax be paid.
A society which taxes the sales of industrial manufacturing and agricultural products, but which establishes a tax exemption for speculation, derivatives, and financial services has tilted the playing field in favor of a parasitical casino economy of the type which has historically led to widespread immiseration and recurring financial panics.
The Wall Street Sales Tax will tend to reduce the social evil of speculation, while ending the tax subsidy to financial gambling at the expense of tangible, physical production. It will enhance the possibilities for rational investment choices. In the current season of debate about tax policy, the 1% Wall Street Sales Tax is the idea whose time has come.
German man locked up over HVB bank allegations
German man locked up over HVB bank allegations may have been telling truth
Gustl Mollath was put in a psychiatric unit for claiming his wife was involved in money-laundering at the Bavarian bank. But seven years on evidence has emerged that could set him free.
Kate Connolly in Berlin
guardian.co.uk, Wednesday 28 November 2012
http://www.guardian.co.uk/world/2012/nov/28/gustl-mollath-hsv-claims-fraud
A German man committed to a high-security psychiatric hospital after being accused of fabricating a story of money-laundering activities at a major bank is to have his case reviewed after evidence has emerged proving the validity of his claims.
In a plot worthy of a crime blockbuster, Gustl Mollath, 56, was submitted to the secure unit of a psychiatric hospital seven years ago after court experts diagnosed him with paranoid personality disorder following his claims that staff at the Hypo Vereinsbank (HVB) – including his wife, then an assets consultant at HVB – had been illegally smuggling large sums of money into Switzerland.
Mollath was tried in 2006 after his ex-wife accused him of causing her physical harm. He denied the charges, claiming she was trying to sully his name in the light of the evidence he allegedly had against her. He was admitted to the clinic, where he has remained against his will ever since.
But recent evidence brought to the attention of state prosecutors shows that money-laundering activities were indeed practiced over several years by members of staff at the Munich-based bank, the sixth-largest private financial institute in Germany, as detailed in an internal audit report carried out by the bank in 2003. The report, which has now been posted online, detailed illegal activities including money-laundering and aiding tax evasion. A number of employees, including Mollath's wife, were subsequently sacked following the bank's investigation.
The "Mollath affair", as it has been dubbed by the German media, has taken on such political dimensions that it now threatens to bring down the government of Bavaria. Under the weight of public and political pressure Horst Seehofer, the prime minister of the rich southern state and a member of the Christian Social Union (CSU) – the sister party to Angela Merkel's Christian Democrats – has now called for the case to be reopened, amid charges that Mollath was possibly the victim of a gross miscarriage of justice.
"The judiciary would be well-advised to reassess the case," Seehofer said this week. "I want them to concentrate on the question of whether everything has been done correctly."
His justice minister, Beate Merk, who has refused repeated calls to resign, said she had no doubt the case had been carried out "by the book and quite correctly".
Mollath has been inundated with public support in the form of thousands of letters and internet posts, many comparing his fight to that of David versus Goliath. He said he was delighted that what he called the "murky business of the bank" is now emerging, 10 years after he first made his claims.
"This is precisely what I wanted to achieve all along," he told the Süddeutsche Zeitung, which brought the audit report to light earlier this month. In an interview in his sparsely furnished room in Bayreuth's hospital for psychiatry, he pointed out the irony that he had suffered the fate he had repeatedly warned his wife she would face, telling her: 'Please be careful. One day you will end up in handcuffs and then you'll be banged up for a few years'", he said.
Asked whether it felt any responsibility towards Mollath, a spokeswoman for HVB told the Guardian: "We don't recognise any connection between the results of our audit report and either the criminal trial or the commitment of Mr Mollath."
Asked why the bank kept the report to itself and did not approach the authorities, the spokeswoman added: "In 2003 HVB initiated extensive investigations via internal audits in response to information provided by Mr Mollath on transactions that had taken place a long time before … It was determined that employees had acted contrary to their instructions regarding Swiss banking transactions".
But while the findings, it said, had resulted in sackings, the audit "did not produce sufficient evidence indicating criminal conduct … that would have made a criminal charge seem appropriate".
Monday, September 17, 2012
What Past Presidents Thought About Big Banks
Stephen D. Foster Jr.
June 3, 2012
http://www.addictinginfo.org/2012/06/03/what-past-presidents-thought-about-big-banks
The Occupy Wall Street protesters have been standing against the big banks for a few months now. They are protesting the greed, irresponsibility, and fraud that banks like Bank of America, Citigroup, and JPMorgan Chase commit on a daily basis. The big banks of Wall Street caused an economic collapse. As a result of that collapse, Americans suffered job losses and money losses while the banks got a bail out on the taxpayer’s dime. Not one banker has been arrested for stealing billions of dollars from the American people.
Throughout American history, big banks have sought to fleece the people and control government. They have a caused economic turmoil, social injustice, war, hunger, and crises too numerous to mention, all because of greed and a lust for absolute power. Many American Presidents have risen to challenge them and hold them accountable for their actions. So which Presidents would cheer on Occupy Wall Street? What did past Presidents think about big banks? I’ll let the quotes speak for themselves.
1. “Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.”
~John Adams
2. “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”
~Thomas Jefferson to Albert Gallatin, 1803.
3. “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” ~James Madison
4. “I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. … You are a den of vipers and thieves.”
~Andrew Jackson, 1834, on closing the Second Bank of the United States
5. “I have two great enemies, the southern army in front of me and the financial institutions, in the rear. Of the two, the one in the rear is the greatest enemy….. I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of the war.”
~Abraham Lincoln
6. “Whosoever controls the volume of money in any country is absolute master of all industry and commerce… And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
~James Garfield (assassinated within weeks of release of this statement during first year of his Presidency in 1881)
7. “Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day.”
~Theodore Roosevelt, April 19, 1906
8. “A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world– no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.”
~Woodrow Wilson
9. “We had to struggle with the old enemies of peace-business and financial monopoly, speculation, reckless banking, class antagonism, sectionism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know that Government by organized money is just as dangerous as Government by organized mob. Never before in history have these forces been so united against one candidate as they stand today. They are unanimous in their hatred for me – and I welcome their hatred. I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second administration that in it these forces met their master.”
?~Franklin Delano Roosevelt, Speech at Madison Square Garden
10. “All problems, depressions, wars, disasters, assassinations, all of them were planned, caused, instigated, and implemented by the International Bankers and their attempt to establish a central bank in every country in the world, which they have now done, thanks to corrupt politicians who have been bought and paid for. This is all you need to know about the history of the world.”
~John F. Kennedy
For more than a decade now, banks have brought this country to near economic ruin. They have successfully lobbied to repeal key regulations that have prevented them from employing the harmful tactics they use to fleece the American people in the name of profit. The big banks bet against America and then expect taxpayers to bail them out when they fail. They then gamble with that money and pay their executives millions. It’s wrong and should not be tolerated. The above Presidents knew how dangerous and harmful big private banks can be. Presidents like Andrew Jackson and Theodore Roosevelt fought hard against the “den of vipers,” and the “invisible government,” and FDR had finally put the banks in their place during his own Presidency. These Presidents would most certainly stand with the Occupy protesters and would fiercely call for breaking up and regulating the big banks. The banks have grown powerful and corrupt once again and it will take another great President to rein them in. The question is, who will be that great President?
Friday, August 31, 2012
Majestic Mo'Mints: Interview with Chris Brown
Going back on the Majestic Mo'Mints Radio Show to talk about the National Foreclosure Settlement (its impact on the ability to get a loan mod and other effects), state of foreclosure challenges in VA, and US, state, county and municipal debt - how it will impact you.
You can listen or even watch on Ffx Public TV / online!! Mo has advised me that those interested in listening / watching should go to:
Radio Show-Majestic Momints
http://www.fcac.org
Please forward to anyone you think might benefit from hearing the interview -- those seeking loan mods, short sales, to challenge a foreclosure, or those interested in the state of the economy given the economic downturn caused by the reckless and criminal behavior of the largest banks (libor rigging, money laundering, targeting minorities with predatory loans, defrauding investors into purchasing "certificates" backed by loans designed to go into default, defrauding Fannie and Freddie by selling them loans that did not comply with underwriting requirements, bribery in municipal bond deals, etc).
MajesticMo'Mints: Interview with Chris Brown on September 14, 2011
http://majesticmomints.blogspot.com/2011/09/interview-with-chris-brown-on-september.html
Christopher Brown followed in his grandfather and father’s footsteps as a third generation principal of BB&B. He graduated from Duke University with a degree in philosophy and history, excelling in the classroom and on the football field as running back for Duke's 1989 ACC Championship football team. Mr. Brown graduated from Georgetown University Law Center in 1995 and joined the firm in 1997 after a judicial clerkship in the D.C. Superior Court. He immediately made an impact litigating insurance defense cases and to date has tried over 75 jury trials in the DC and Virginia State and Federal Courts.
Mr. Brown has experience handling matters involving government leaders, top government officials, and local administrative bodies. He is widely-known and widely-cited in briefs across the country for his 2003 record-setting $5.2 million verdict in the case of White v. BFI, an employment discrimination case in the Eastern District of Virginia - a reputedly difficult jurisdiction for discrimination claimants.
A seasoned litigator, Mr. Brown consistently proves that a small firm with the right talent can truly "level the playing field."
Contact Info:
Brown, Brown & Brown, P.C.
6269 Franconia Road
Alexandria, Virginia 22310
Phone: 703.924.0223
Fax: 703.924.1586
brownfirm@lawyer.com
http://www.metrotriallaw.net
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Ex-UBS Bankers Guilty Of Scamming U.S. Cities
Basil Katz and Grant McCool
http://www.huffingtonpost.com/2012/08/31/ex-ubs-bankers-guilty_n_1847501.html
Christopher Brown's Note: Manipulating Libor, laundering drug cartel money, selling assets to clients knowing they are worthless (mortgage backed securities), targeting minority communities with toxic loans, lying to shareholders about risk, using legally meaningless documents to foreclose on homes, and now bribing officials to get contracts to handle municipal bond transactions. Is there anything these banks do with any integrity?
NEW YORK, Aug 31 (Reuters) - Three former UBS AG executives were convicted on Friday of conspiring to deceive U.S. cities and towns by operating a scheme to rig bids to invest municipal bond proceeds.
The verdict by a federal court jury in Manhattan is the latest victory for the U.S. Department of Justice in its broad investigation of the $3.7 trillion U.S. municipal bond market. The widespread probe has touched some of the world's largest banks.
The three defendants, Peter Ghavami, Gary Heinz and Michael Welty, were charged in 2010 as part of a probe focused on rooting out schemes to fix prices and rig bids on bond transactions. The former bankers denied wrongdoing and said government witnesses had lied to ensnare them.
Each defendant was found guilty on two counts of conspiracy. The jury also convicted Heinz and Welty on other charges, but found Welty not guilty on one wire-fraud count, and Heinz not guilty of witness tampering. Heinz was the only one of the three to face that charge.
Ghavami, a Belgian national, left UBS in 2007 as global head of commodities. Both Heinz, of Jersey City, New Jersey, and Welty, of New York, worked on UBS' municipal bond reinvestment and derivatives desk at the time of the suspected offenses.
The two conspiracy charges involved rigging bids in 2001 and 2002 for guaranteed investment contracts, which cities and counties use to park proceeds from municipal bond sales.
The conspiracy charges carry a maximum of five years in prison each. No sentencing date has been set.
Charles Stillman, a lawyer for Ghavami, told reporters: "We are obviously disappointed with the verdict. We are looking forward to an appeal ... "
Lawyers for the other two defendants declined to comment.
Stillman told the jury in his closing arguments this week that his client "did nothing more than his job entirely in good faith and that he never intended to and never did cheat a municipality, the Internal Revenue Service, anyone."
During the trial, the jury heard from government witnesses who pleaded guilty to similar crimes and agreed to testify against the defendants, and also heard audio recordings of conversations between the bankers.
"It was fraud, plain and simple. It involved greed, deception and betrayal," prosecutor John Van Lonkhuyzen said in his closing statement to the jury on Aug. 27.
The jury began deciding the case on Wednesday afternoon. The trial began on July 30.
"It was horrendously difficult. It was a big deal, what we had to weigh," said one juror, who asked not to be identified, after the verdict.
Thirteen people and one company have pleaded guilty to charges stemming from the bid-rigging investigation. A total of 19 people have been charged.
The U.S. government has a 10-year window to bring criminal charges over suspected crimes that affect financial institutions.
In this case, since the three bankers were charged in December 2010, the case falls within the statute of limitations, U.S. District Judge Kimba Wood has ruled.
In May, three former financial executives were convicted of similar charges by another federal jury in Manhattan.
In July, former JPMorgan Chase & Co banker Alexander Wright pleaded guilty to one count of conspiracy to commit wire fraud for manipulating the bidding process for a June 2002 contract.
Wright and former UBS employee Mark Zaino testified for the government at the trial of the former UBS executives. Zaino pleaded guilty in 2010 to bid-rigging charges.
The case is USA v. Peter Ghavami et al, U.S. District Court for the Southern District of New York, No. 10-cr-1217.
Wednesday, February 29, 2012
The Top Twelve Reasons Why You Should Hate the Mortgage Settlement
Yves SmithThursday, February 9, 2012
http://www.nakedcapitalism.com/2012/02/the-top-twelve-reasons-why-you-should-hate-the-mortgage-settlement.html
As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.
The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.
The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.
The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.
The mortgage settlement terms have not been released, but more of the details have been leaked:
1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.
Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:
“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.
The Times is also subdued:
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.
3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.
4. The five big players in the settlement have already set aside reserves sufficient for this deal.
Here are the top twelve reasons why this deal stinks:
1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.
3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.
4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.
5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.
6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.
7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.
8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.
9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.
10. A deal on robosiginging serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.
11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.
12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.
As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.
http://www.nakedcapitalism.com/2012/02/the-top-twelve-reasons-why-you-should-hate-the-mortgage-settlement.html
As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.
The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.
The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.
The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.
The mortgage settlement terms have not been released, but more of the details have been leaked:
1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.
Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:
“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.
The Times is also subdued:
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.
3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.
4. The five big players in the settlement have already set aside reserves sufficient for this deal.
Here are the top twelve reasons why this deal stinks:
1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.
3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.
4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.
5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.
6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.
7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.
8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.
9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.
10. A deal on robosiginging serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.
11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.
12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.
As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.
Volcker defends ban on proprietary trading in comments to regulators
Former Fed Chair Volcker defends ban on proprietary trading in comments to regulators
February 13, 2012http://www.washingtonpost.com/business/industries/former-fed-chair-volcker-defends-ban-on-proprietary-trading-in-comments-to-regulators/2012/02/13/gIQArIwVBR_story.html
WASHINGTON — Former Federal Reserve Chairman Paul Volcker on Monday issued a broad defense of a federal rule bearing his name that would prohibit banks from trading for their own profit.
Commercial banks backed by government deposit insurance shouldn’t be able to engage in speculative trading, Volcker said in a letter supporting the so-called Volcker rule.
“Proprietary trading is not an essential commercial bank service that justifies taxpayer support,” he wrote.
The letter was sent to the five regulatory agencies that have approved a draft version of the rule, including the Federal Reserve and the Securities and Exchange Commission.
The rule is expected to be finalized by summer. Banks will then have until July 2014 to comply.
Congress directed regulators to draft the rule under the 2010 financial overhaul. It was a response to bets banks had placed on mortgage-backed securities, which hastened the financial crisis and led to taxpayer-funded bailouts.
Wall Street executives have opposed the rule. They say it would limit trading on behalf of customers and put them at a disadvantage with non-U.S. banks, which aren’t subject to the ban.
Banks, financial services trade groups and individuals have submitted hundreds of comments in opposition. Monday was the deadline for comments.
Tim Ryan, a lobbyist for the securities industry, called the rule “unworkable” and said it will slow economic growth.
The industry says the rule will reduce trading volumes, or the “liquidity” of stocks, bonds and other instruments. Banks won’t be able to trade with their own money and will likely cut back on trading for their customers to avoid running afoul of the rule. Lower trading will reduce demand for stocks and other securities, cutting into their prices.
Members of Congress from both parties have echoed the industry’s criticism. About 120 members of the House signed a letter asking regulators to drop the current proposal and draft an entirely new rule.
Volcker disagreed. He noted that excessive liquidity can increase risk by encouraging more trading.
“The restrictions... are not at all likely to have an effect on liquidity inconsistent with the public interest,” Volcker wrote.
Regarding the industry’s concerns about competition from overseas, Volcker wrote that they seem “superficial at best.” The rule’s bar on trading could make U.S. banks more appealing to many customers, he wrote.
Volcker indicated that small banks should be subject to less scrutiny under the rule. The vast majority of proprietary trading is done by a handful of large banks, he noted.
“At the end of the day, I feel confident that the restrictions imposed by the ‘Volcker Rule’ can be reasonably and effectively administered,” he wrote.
February 13, 2012http://www.washingtonpost.com/business/industries/former-fed-chair-volcker-defends-ban-on-proprietary-trading-in-comments-to-regulators/2012/02/13/gIQArIwVBR_story.html
WASHINGTON — Former Federal Reserve Chairman Paul Volcker on Monday issued a broad defense of a federal rule bearing his name that would prohibit banks from trading for their own profit.
Commercial banks backed by government deposit insurance shouldn’t be able to engage in speculative trading, Volcker said in a letter supporting the so-called Volcker rule.
“Proprietary trading is not an essential commercial bank service that justifies taxpayer support,” he wrote.
The letter was sent to the five regulatory agencies that have approved a draft version of the rule, including the Federal Reserve and the Securities and Exchange Commission.
The rule is expected to be finalized by summer. Banks will then have until July 2014 to comply.
Congress directed regulators to draft the rule under the 2010 financial overhaul. It was a response to bets banks had placed on mortgage-backed securities, which hastened the financial crisis and led to taxpayer-funded bailouts.
Wall Street executives have opposed the rule. They say it would limit trading on behalf of customers and put them at a disadvantage with non-U.S. banks, which aren’t subject to the ban.
Banks, financial services trade groups and individuals have submitted hundreds of comments in opposition. Monday was the deadline for comments.
Tim Ryan, a lobbyist for the securities industry, called the rule “unworkable” and said it will slow economic growth.
The industry says the rule will reduce trading volumes, or the “liquidity” of stocks, bonds and other instruments. Banks won’t be able to trade with their own money and will likely cut back on trading for their customers to avoid running afoul of the rule. Lower trading will reduce demand for stocks and other securities, cutting into their prices.
Members of Congress from both parties have echoed the industry’s criticism. About 120 members of the House signed a letter asking regulators to drop the current proposal and draft an entirely new rule.
Volcker disagreed. He noted that excessive liquidity can increase risk by encouraging more trading.
“The restrictions... are not at all likely to have an effect on liquidity inconsistent with the public interest,” Volcker wrote.
Regarding the industry’s concerns about competition from overseas, Volcker wrote that they seem “superficial at best.” The rule’s bar on trading could make U.S. banks more appealing to many customers, he wrote.
Volcker indicated that small banks should be subject to less scrutiny under the rule. The vast majority of proprietary trading is done by a handful of large banks, he noted.
“At the end of the day, I feel confident that the restrictions imposed by the ‘Volcker Rule’ can be reasonably and effectively administered,” he wrote.
Monday, January 30, 2012
Occupy the Neighborhood
How Counties Can Use Land Banks and Eminent Domain Ellen Brown, Truthout
Saturday 14 January 2012
http://truth-out.org/occupy-neighborhood/1326472096
An electronic database called MERS (Mortgage Electronic Registration Systems) has created defects in the chain of title to over half the homes in America. Counties have been cheated out of millions of dollars in recording fees, and their title records are in hopeless disarray. Meanwhile, foreclosed and abandoned homes are blighting neighborhoods. Straightening out the records and restoring the homes to occupancy is clearly in the public interest, and the burden is on local government to do it. But how? New legal developments are presenting some innovative alternatives.
John O'Brien is register of deeds for Southern Essex County, Massachusetts. He is mad as hell and he isn't going to take it anymore. He calls his land registry a "crime scene." A formal forensic audit of the properties for which he is responsible found that:
•Only 16 percent of the mortgage assignments were valid.
•Twenty-seven percent of the invalid assignments were fraudulent, 35 percent were "robo-signed" and 10 percent violated the Massachusetts Mortgage Fraud Statute.
•The identity of financial institutions that are current owners of the mortgages could be determined for only 287 out of 473 (60 percent).
•There were 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership could be traced.
At the root of the problem is that title has been recorded in the name of a private entity called MERS as a mere placeholder for the true owners. The owners are a faceless, changing pool of investors owning indeterminate portions of sliced and diced securitized properties. Their identities have been so well hidden that their claims to title are now in doubt. According to the auditor:
What this means is that ... the institutions - including many pension funds - that purchased these mortgages don't actually own them....
The March of the Attorneys General
John O'Brien was thrilled when Massachusetts Attorney General Martha Coakley went to court in December against MERS and five major banks - Bank of America Corp., JPMorgan Chase, Wells Fargo, Citigroup and GMAC. Coakley says banks have "undermined our public land record system through the use of MERS."
Other attorneys general are also bringing lawsuits. Delaware Attorney General Beau Biden is going after MERS in a suit seeking $10,000 per violation. "Since at least the 1600s," he says, "real property rights have been a cornerstone of our society. MERS has raised serious questions about who owns what in America."
Biden's lawsuit alleges that MERS violated Delaware's Deceptive Trade Practices Act by:
•Hiding the true mortgage owner and removing that information from the public land records.
•Creating a systemically important, yet inherently unreliable, mortgage database that created confusion and inappropriate assignments and foreclosures of mortgages.
•Operating MERS through its members' employees, whom MERS confusingly appoints as its corporate officers so that they may act on MERS' behalf.
•Failing to ensure the proper transfer of mortgage loan documentation to the securitization trusts, which may have resulted in the failure of securitizations to own the loans upon which they claimed to foreclose.
This last allegation - that there are fatal defects in the loan documentation - may be even more conclusive than the MERS defect in establishing a break in the chain of title to securitized properties. Mortgage-backed securities are sold to investors in packages representing interests in trusts called REMICs (Real Estate Mortgage Investment Conduits). REMICs are designed as tax shelters; but to qualify for that status, they must be "static." Mortgages can't be transferred in and out once the closing date has occurred. The REMIC Pooling and Servicing Agreement typically states that any transfer after the closing date is invalid. Yet few, if any, properties in foreclosure seem to have been assigned to these REMICs before the closing date, in blatant disregard of legal requirements. The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS, but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.
Courts Are Taking Notice
The title issues are so complicated that judges themselves have been slow to catch on, but they are increasingly waking up and taking notice. In some cases, the judge is not even waiting for the borrowers to raise lack of standing as a defense. In two cases decided in New York in December, the banks lost although their motions were either unopposed or the homeowner did not show up, and in one, there was actually a default. No matter, said the court; the bank simply did not have standing to foreclose.
In Citigroup v. Smith, 2011 NY Slip Op 52236 (U) (December 13, 2011), the mortgage document acknowledged that MERS was not the lender, but was "a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns." The court held that since MERS was not a party to the underlying note, when it assigned the mortgage to plaintiff Citigroup there was no assignment of the note; and "a transfer of [a] mortgage without the debt is a nullity and no interest is acquired by it."
Failure to comply with the terms of the loan documents can make an even stronger case for dismissal. In Horace v. LaSalle, Circuit Court of Russell County, Alabama, 57-CV-2008-000362.00 (March 30, 2011), the court permanently enjoined the bank (now part of Bank of America) from foreclosing on the plaintiff's home, stating:
[T]he court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with New York Law in attempting to obtain assignment of plaintiff Horace's note and mortgage....
[P]laintiff's motion for summary judgment is granted to the extent that defendant trust ... is permanently enjoined from foreclosing on the property....
Relief for Counties: Land Banks and Eminent Domain
The legal tide is turning against MERS and the banks, giving rise to some interesting possibilities for relief at the county level. Local governments have the power of eminent domain: they can seize real or personal property if (a) they can show that doing so is in the public interest, and (b) the owner is compensated at fair market value.
The public interest part is easy to show. In a 20-page booklet titled "Revitalizing Foreclosed Properties with Land Banks," the US Department of Housing and Urban Development (HUD) observes:
The volume of foreclosures has become a significant problem, not only to local economies, but also to the aesthetics of neighborhoods and property values therein. At the same time, middle- to low-income families continue to be priced out of the housing market while suitable housing units remain vacant.
The booklet goes on to describe an alternative being pursued by some communities:
To ameliorate the negative effects of foreclosures, some communities are creating public entities - known as land banks - to return these properties to productive reuse while simultaneously addressing the need for affordable housing.
States named as adopting land bank legislation include Michigan, Ohio, Missouri, Georgia, Indiana, Texas, Kentucky and Maryland. HUD notes that the federal government encourages and supports these efforts. But states can still face obstacles to acquiring and restoring the properties, including a lack of funds and difficulties clearing title.
Both of these obstacles might be overcome by focusing on abandoned and foreclosed properties for which the chain of title has been broken, either by MERS or by failure to transfer the promissory note according to the terms of the trust indenture. These homes could be acquired by eminent domain both free of cost and free of adverse claims to title. The county would simply need to give notice in the local newspaper of an intent to exercise its right of eminent domain. The burden of proof would then transfer to the bank or trust claiming title. If the claimant could not prove title, the county would take the property, clear title and either work out a fair settlement with the occupants or restore the home for rent or sale.
Even if the properties were acquired without charge, counties might lack the funds to restore them. Additional funds could be had by establishing a public bank that serves more functions than just those of a land bank. In a series titled "A Solution to the Foreclosure Crisis," Michael Sauvante of the National Commonwealth Group suggests that properties obtained by eminent domain can be used as part of the capital base for a chartered, publicly owned bank, on the model of the state-owned Bank of North Dakota. The county could deposit its revenues into this bank and use its capital and deposits to generate credit, as all chartered banks are empowered to do. This credit could then be used not just to finance property redevelopment, but for other county needs, again on the model of the Bank of North Dakota. For a fuller discussion of publicly owned banks, see http://PublicBankingInstitute.org.
Sauvante adds that the use of eminent domain is often viewed negatively by homeowners. To overcome this prejudice, the county could exercise eminent domain on the mortgage contract rather than on title to the property. (The power of eminent domain applies both to real and to personal property rights.) Title would then remain with the homeowner. The county would just have a secured interest in the property, putting it in the shoes of the bank. It could renegotiate reasonable terms with the homeowner, something banks have been either unwilling or unable to do, since they have to get all the investor-owners to agree, a difficult task; and they have little incentive to negotiate when they can make more money on fees and credit-default-swaps on contracts that go into default.
Settling With the Investors
What about the rights of the investors who bought the securities allegedly backed by the foreclosed homes? The banks selling these collateralized debt obligations represented that they were protected with credit-default-swaps. The investors' remedy is against the counterparties to those bets - or against the banks that sold them a bill of goods.
Foreclosure defense attorney Neil Garfield says the investors are unlikely to recover on abandoned and foreclosed properties in any case. Banks and servicers can earn more when the homes are bulldozed - something that is happening in some counties - than from a sale or workout at a loss. Not only is more earned on credit-default-swaps and fees, but bulldozed homes tell no tales. Garfield maintains that fully a third of the investors' money has gone into middleman profits rather than into real estate purchases and "with a complete loss no one asks for an accounting."
Not only homes and neighborhoods, but 400 years of property law are being destroyed by banker and investor greed. As Barry Ritholtz observes, the ability of a property owner to confidently convey his property is a bedrock of our society. Bailing out reckless financiers and refusing to hold them accountable has led to a fundamental breakdown in the role of government and the court system. This can be righted only by holding the 1 percent to the same set of laws as are applied to the 99 percent. Those laws include that a contract for the sale of real estate must be in writing signed by seller and buyer, that an assignment must bear the signatures required by local law and that forging signatures gives rise to an actionable claim for fraud.
The neoliberal model that says banks can govern themselves has failed. It is up to county government to restore the rule of law and repair the economic distress wrought behind the smokescreen of MERS. New tools at the county's disposal - including eminent domain, land banks and publicly owned banks - can facilitate this local rebirth.
This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.
Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com. She is also chairman of the Public Banking Institute.
Saturday 14 January 2012
http://truth-out.org/occupy-neighborhood/1326472096
An electronic database called MERS (Mortgage Electronic Registration Systems) has created defects in the chain of title to over half the homes in America. Counties have been cheated out of millions of dollars in recording fees, and their title records are in hopeless disarray. Meanwhile, foreclosed and abandoned homes are blighting neighborhoods. Straightening out the records and restoring the homes to occupancy is clearly in the public interest, and the burden is on local government to do it. But how? New legal developments are presenting some innovative alternatives.
John O'Brien is register of deeds for Southern Essex County, Massachusetts. He is mad as hell and he isn't going to take it anymore. He calls his land registry a "crime scene." A formal forensic audit of the properties for which he is responsible found that:
•Only 16 percent of the mortgage assignments were valid.
•Twenty-seven percent of the invalid assignments were fraudulent, 35 percent were "robo-signed" and 10 percent violated the Massachusetts Mortgage Fraud Statute.
•The identity of financial institutions that are current owners of the mortgages could be determined for only 287 out of 473 (60 percent).
•There were 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership could be traced.
At the root of the problem is that title has been recorded in the name of a private entity called MERS as a mere placeholder for the true owners. The owners are a faceless, changing pool of investors owning indeterminate portions of sliced and diced securitized properties. Their identities have been so well hidden that their claims to title are now in doubt. According to the auditor:
What this means is that ... the institutions - including many pension funds - that purchased these mortgages don't actually own them....
The March of the Attorneys General
John O'Brien was thrilled when Massachusetts Attorney General Martha Coakley went to court in December against MERS and five major banks - Bank of America Corp., JPMorgan Chase, Wells Fargo, Citigroup and GMAC. Coakley says banks have "undermined our public land record system through the use of MERS."
Other attorneys general are also bringing lawsuits. Delaware Attorney General Beau Biden is going after MERS in a suit seeking $10,000 per violation. "Since at least the 1600s," he says, "real property rights have been a cornerstone of our society. MERS has raised serious questions about who owns what in America."
Biden's lawsuit alleges that MERS violated Delaware's Deceptive Trade Practices Act by:
•Hiding the true mortgage owner and removing that information from the public land records.
•Creating a systemically important, yet inherently unreliable, mortgage database that created confusion and inappropriate assignments and foreclosures of mortgages.
•Operating MERS through its members' employees, whom MERS confusingly appoints as its corporate officers so that they may act on MERS' behalf.
•Failing to ensure the proper transfer of mortgage loan documentation to the securitization trusts, which may have resulted in the failure of securitizations to own the loans upon which they claimed to foreclose.
This last allegation - that there are fatal defects in the loan documentation - may be even more conclusive than the MERS defect in establishing a break in the chain of title to securitized properties. Mortgage-backed securities are sold to investors in packages representing interests in trusts called REMICs (Real Estate Mortgage Investment Conduits). REMICs are designed as tax shelters; but to qualify for that status, they must be "static." Mortgages can't be transferred in and out once the closing date has occurred. The REMIC Pooling and Servicing Agreement typically states that any transfer after the closing date is invalid. Yet few, if any, properties in foreclosure seem to have been assigned to these REMICs before the closing date, in blatant disregard of legal requirements. The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS, but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.
Courts Are Taking Notice
The title issues are so complicated that judges themselves have been slow to catch on, but they are increasingly waking up and taking notice. In some cases, the judge is not even waiting for the borrowers to raise lack of standing as a defense. In two cases decided in New York in December, the banks lost although their motions were either unopposed or the homeowner did not show up, and in one, there was actually a default. No matter, said the court; the bank simply did not have standing to foreclose.
In Citigroup v. Smith, 2011 NY Slip Op 52236 (U) (December 13, 2011), the mortgage document acknowledged that MERS was not the lender, but was "a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns." The court held that since MERS was not a party to the underlying note, when it assigned the mortgage to plaintiff Citigroup there was no assignment of the note; and "a transfer of [a] mortgage without the debt is a nullity and no interest is acquired by it."
Failure to comply with the terms of the loan documents can make an even stronger case for dismissal. In Horace v. LaSalle, Circuit Court of Russell County, Alabama, 57-CV-2008-000362.00 (March 30, 2011), the court permanently enjoined the bank (now part of Bank of America) from foreclosing on the plaintiff's home, stating:
[T]he court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with New York Law in attempting to obtain assignment of plaintiff Horace's note and mortgage....
[P]laintiff's motion for summary judgment is granted to the extent that defendant trust ... is permanently enjoined from foreclosing on the property....
Relief for Counties: Land Banks and Eminent Domain
The legal tide is turning against MERS and the banks, giving rise to some interesting possibilities for relief at the county level. Local governments have the power of eminent domain: they can seize real or personal property if (a) they can show that doing so is in the public interest, and (b) the owner is compensated at fair market value.
The public interest part is easy to show. In a 20-page booklet titled "Revitalizing Foreclosed Properties with Land Banks," the US Department of Housing and Urban Development (HUD) observes:
The volume of foreclosures has become a significant problem, not only to local economies, but also to the aesthetics of neighborhoods and property values therein. At the same time, middle- to low-income families continue to be priced out of the housing market while suitable housing units remain vacant.
The booklet goes on to describe an alternative being pursued by some communities:
To ameliorate the negative effects of foreclosures, some communities are creating public entities - known as land banks - to return these properties to productive reuse while simultaneously addressing the need for affordable housing.
States named as adopting land bank legislation include Michigan, Ohio, Missouri, Georgia, Indiana, Texas, Kentucky and Maryland. HUD notes that the federal government encourages and supports these efforts. But states can still face obstacles to acquiring and restoring the properties, including a lack of funds and difficulties clearing title.
Both of these obstacles might be overcome by focusing on abandoned and foreclosed properties for which the chain of title has been broken, either by MERS or by failure to transfer the promissory note according to the terms of the trust indenture. These homes could be acquired by eminent domain both free of cost and free of adverse claims to title. The county would simply need to give notice in the local newspaper of an intent to exercise its right of eminent domain. The burden of proof would then transfer to the bank or trust claiming title. If the claimant could not prove title, the county would take the property, clear title and either work out a fair settlement with the occupants or restore the home for rent or sale.
Even if the properties were acquired without charge, counties might lack the funds to restore them. Additional funds could be had by establishing a public bank that serves more functions than just those of a land bank. In a series titled "A Solution to the Foreclosure Crisis," Michael Sauvante of the National Commonwealth Group suggests that properties obtained by eminent domain can be used as part of the capital base for a chartered, publicly owned bank, on the model of the state-owned Bank of North Dakota. The county could deposit its revenues into this bank and use its capital and deposits to generate credit, as all chartered banks are empowered to do. This credit could then be used not just to finance property redevelopment, but for other county needs, again on the model of the Bank of North Dakota. For a fuller discussion of publicly owned banks, see http://PublicBankingInstitute.org.
Sauvante adds that the use of eminent domain is often viewed negatively by homeowners. To overcome this prejudice, the county could exercise eminent domain on the mortgage contract rather than on title to the property. (The power of eminent domain applies both to real and to personal property rights.) Title would then remain with the homeowner. The county would just have a secured interest in the property, putting it in the shoes of the bank. It could renegotiate reasonable terms with the homeowner, something banks have been either unwilling or unable to do, since they have to get all the investor-owners to agree, a difficult task; and they have little incentive to negotiate when they can make more money on fees and credit-default-swaps on contracts that go into default.
Settling With the Investors
What about the rights of the investors who bought the securities allegedly backed by the foreclosed homes? The banks selling these collateralized debt obligations represented that they were protected with credit-default-swaps. The investors' remedy is against the counterparties to those bets - or against the banks that sold them a bill of goods.
Foreclosure defense attorney Neil Garfield says the investors are unlikely to recover on abandoned and foreclosed properties in any case. Banks and servicers can earn more when the homes are bulldozed - something that is happening in some counties - than from a sale or workout at a loss. Not only is more earned on credit-default-swaps and fees, but bulldozed homes tell no tales. Garfield maintains that fully a third of the investors' money has gone into middleman profits rather than into real estate purchases and "with a complete loss no one asks for an accounting."
Not only homes and neighborhoods, but 400 years of property law are being destroyed by banker and investor greed. As Barry Ritholtz observes, the ability of a property owner to confidently convey his property is a bedrock of our society. Bailing out reckless financiers and refusing to hold them accountable has led to a fundamental breakdown in the role of government and the court system. This can be righted only by holding the 1 percent to the same set of laws as are applied to the 99 percent. Those laws include that a contract for the sale of real estate must be in writing signed by seller and buyer, that an assignment must bear the signatures required by local law and that forging signatures gives rise to an actionable claim for fraud.
The neoliberal model that says banks can govern themselves has failed. It is up to county government to restore the rule of law and repair the economic distress wrought behind the smokescreen of MERS. New tools at the county's disposal - including eminent domain, land banks and publicly owned banks - can facilitate this local rebirth.
This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.
Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com. She is also chairman of the Public Banking Institute.
Thursday, January 5, 2012
Privatizing Money
Thu, 22 Dec 2011
Alan Grayson
alangrayson@graysonforcongress.com
WHAT THE EUROPEAN BANKS GOT FOR CHRISTMAS.
Yesterday, the European Central Bank (ECB) announced that it will hand out $645,000,000,000 in three-year loans to European banks. Which the ECB printed out of thin air, like Monopoly money! The interest rate will be one percent per year.
The ECB will not be lending this money to the Government of Greece, even though that government is running a budget deficit of just under 10% of GDP – and the Greek GDP dropped by 5% this year. The Government of Greece is now paying 37% per year on its ten-year bonds, when it can borrow anything at all.
The ECB will not be lending this money to the people of Spain, even though official unemployment in Spain is now at 23%. Spain’s Economy Minister said recently that “Spain faces its deepest recession in half a century.” Tough luck; their Christmas tree has nothing under it.
And when the European banks get this $645 billion, to whom will the banks be lending? Anybody, or nobody. No strings attached. They can borrow from the ECB at 1%, lend it back to the German Government at 2%, lock in that profit, and take the next three years off.
I just have one question.
Why?
The world continues to face the greatest economic crisis since the Great Depression. Unemployment throughout Europe is over ten percent. Entire national governments are on the verge of going broke. Why would anyone think that THE THING THAT WE HAVE TO DO RIGHT NOW is to hand out $645 billion in more funny money to the banks? In Europe or anywhere else?
The ECB is a public institution. How can it possibly justify yet another bailout for selfish private interests, while the public is sent straight to hell?
If a Martian were to land in Paris today, and just read the headlines of the newspapers today, he could reach only one conclusion. That there has been a coup in Europe, the banks are now in charge, and they’re grabbing everything that they can get their hands on.
Mark my words: at some point, people are just not going to take it anymore.
Courage,
Alan Grayson
P.S. On a more positive note, a very sizable number of you answered the call on Tuesday. In less than three hours, you helped us to meet our $500,000 fundraising goal for the quarter. To all those who helped, thank you. To anyone who didn’t, it’s not too late; you can still click that Contribute button below. And to everyone, from Aaron to Zuzzana, Happy Holidays.
Paid for and Authorized by the Committee to Elect Alan Grayson
8419 Oak Park Road, Orlando, FL 32819
Alan Grayson
alangrayson@graysonforcongress.com
WHAT THE EUROPEAN BANKS GOT FOR CHRISTMAS.
Yesterday, the European Central Bank (ECB) announced that it will hand out $645,000,000,000 in three-year loans to European banks. Which the ECB printed out of thin air, like Monopoly money! The interest rate will be one percent per year.
The ECB will not be lending this money to the Government of Greece, even though that government is running a budget deficit of just under 10% of GDP – and the Greek GDP dropped by 5% this year. The Government of Greece is now paying 37% per year on its ten-year bonds, when it can borrow anything at all.
The ECB will not be lending this money to the people of Spain, even though official unemployment in Spain is now at 23%. Spain’s Economy Minister said recently that “Spain faces its deepest recession in half a century.” Tough luck; their Christmas tree has nothing under it.
And when the European banks get this $645 billion, to whom will the banks be lending? Anybody, or nobody. No strings attached. They can borrow from the ECB at 1%, lend it back to the German Government at 2%, lock in that profit, and take the next three years off.
I just have one question.
Why?
The world continues to face the greatest economic crisis since the Great Depression. Unemployment throughout Europe is over ten percent. Entire national governments are on the verge of going broke. Why would anyone think that THE THING THAT WE HAVE TO DO RIGHT NOW is to hand out $645 billion in more funny money to the banks? In Europe or anywhere else?
The ECB is a public institution. How can it possibly justify yet another bailout for selfish private interests, while the public is sent straight to hell?
If a Martian were to land in Paris today, and just read the headlines of the newspapers today, he could reach only one conclusion. That there has been a coup in Europe, the banks are now in charge, and they’re grabbing everything that they can get their hands on.
Mark my words: at some point, people are just not going to take it anymore.
Courage,
Alan Grayson
P.S. On a more positive note, a very sizable number of you answered the call on Tuesday. In less than three hours, you helped us to meet our $500,000 fundraising goal for the quarter. To all those who helped, thank you. To anyone who didn’t, it’s not too late; you can still click that Contribute button below. And to everyone, from Aaron to Zuzzana, Happy Holidays.
Paid for and Authorized by the Committee to Elect Alan Grayson
8419 Oak Park Road, Orlando, FL 32819
Friday, December 23, 2011
Occupy’s next frontier: Foreclosed homes
A campaign to defend families from evictions and protest foreclosure fraud launches next week
Justin Elliott
Wednesday, Nov 30, 2011
http://www.salon.com/2011/11/30/occupys_next_frontier_foreclosed_homes
Occupy Wall Street is promising a “big day of action” Dec. 6 that will focus on the foreclosure crisis and protest “fraudulent lending practices,” “corrupt securitization,” and illegal evictions by banks.
The day will mark the beginning of an Occupy Our Homes campaign that organizers hope will energize the movement as it moves indoors as well as bring the injustices of the economic crisis into sharp relief.
Many of the details aren’t yet public, but protesters in 20 cities are expected to take part in the day of action next Tuesday. We’ve already seen eviction defenses at foreclosed properties around the country as well as takeovers of vacant properties for homeless families. Occupy Our Homes organizer Abby Clark tells me protesters are planning to “mic-check” (i.e., disrupt) foreclosure auctions as well as launch some new home occupations.
“This is a shift from protesting Wall Street fraud to taking action on behalf of people who were harmed by it. It brings the movement into the neighborhoods and gives people a sense of what’s really at stake,” said Max Berger, one of the Occupy Our Homes organizers and a member of Occupy Wall Street’s movement-building working group.
The backdrop for all this is a new study suggesting the foreclosure crisis is only half over, with 4 million homes in some stage of foreclosure. Meanwhile, reports of illegal or questionable behavior by banks and mortgage lenders continue to stream in.
Like many of the Occupy actions that have focused on specific policy questions, this one is being organized by established progressive and labor-affiliated groups along with their allies in the movement. Among the allied groups listed on Occupy Our Homes’ website, for example, are the New Bottom Line and New York Communities for Change. On the Occupy Wall Street side of things, members of the direct action working group and the movement-building group in New York have been involved in the project.
Occupy Our Homes’ website (which was registered by a former SEIU official staffer) has the trappings of a slick professional campaign, with videos featuring the stories of families facing foreclosures and a pledge visitors are encouraged to sign stating:
… that until the banks do their part to help homeowners and to fix the economy, by writing down mortgage principal to current home values, I will:
•I will support homeowners resisting wrongful foreclosure evictions.
•I will resist any attempt by the bank to take my home.
•If they come to foreclose, I will not go.
A network of groups organized as Take Back the Land has been doing eviction defenses and related actions around the country for five years, according to organizer Max Rameau.
“Now with this Occupy movement ramping up, I think we have a significant chance to keep large numbers of people in their home,” Rameau told Democracy Now earlier this month. “[The goal is to] not only force the banks to allow the family to stay in the home. But also then force policy changes that would help thousands of other people for whom we’re not doing eviction defenses.”
We saw a similar dynamic in the preexisting campaign to extend the millionaire’s tax in New York, which has benefited from new energy and a new banner offered by the Occupy movement.
Will the new Occupy push on foreclosures pick up any steam? I’ll be covering whatever happens on Dec. 6, so stay tuned to find out.
Justin Elliott is a Salon reporter. Reach him by email at jelliott@salon.com and follow him on Twitter @ElliottJustin
Justin Elliott
Wednesday, Nov 30, 2011
http://www.salon.com/2011/11/30/occupys_next_frontier_foreclosed_homes
Occupy Wall Street is promising a “big day of action” Dec. 6 that will focus on the foreclosure crisis and protest “fraudulent lending practices,” “corrupt securitization,” and illegal evictions by banks.
The day will mark the beginning of an Occupy Our Homes campaign that organizers hope will energize the movement as it moves indoors as well as bring the injustices of the economic crisis into sharp relief.
Many of the details aren’t yet public, but protesters in 20 cities are expected to take part in the day of action next Tuesday. We’ve already seen eviction defenses at foreclosed properties around the country as well as takeovers of vacant properties for homeless families. Occupy Our Homes organizer Abby Clark tells me protesters are planning to “mic-check” (i.e., disrupt) foreclosure auctions as well as launch some new home occupations.
“This is a shift from protesting Wall Street fraud to taking action on behalf of people who were harmed by it. It brings the movement into the neighborhoods and gives people a sense of what’s really at stake,” said Max Berger, one of the Occupy Our Homes organizers and a member of Occupy Wall Street’s movement-building working group.
The backdrop for all this is a new study suggesting the foreclosure crisis is only half over, with 4 million homes in some stage of foreclosure. Meanwhile, reports of illegal or questionable behavior by banks and mortgage lenders continue to stream in.
Like many of the Occupy actions that have focused on specific policy questions, this one is being organized by established progressive and labor-affiliated groups along with their allies in the movement. Among the allied groups listed on Occupy Our Homes’ website, for example, are the New Bottom Line and New York Communities for Change. On the Occupy Wall Street side of things, members of the direct action working group and the movement-building group in New York have been involved in the project.
Occupy Our Homes’ website (which was registered by a former SEIU official staffer) has the trappings of a slick professional campaign, with videos featuring the stories of families facing foreclosures and a pledge visitors are encouraged to sign stating:
… that until the banks do their part to help homeowners and to fix the economy, by writing down mortgage principal to current home values, I will:
•I will support homeowners resisting wrongful foreclosure evictions.
•I will resist any attempt by the bank to take my home.
•If they come to foreclose, I will not go.
A network of groups organized as Take Back the Land has been doing eviction defenses and related actions around the country for five years, according to organizer Max Rameau.
“Now with this Occupy movement ramping up, I think we have a significant chance to keep large numbers of people in their home,” Rameau told Democracy Now earlier this month. “[The goal is to] not only force the banks to allow the family to stay in the home. But also then force policy changes that would help thousands of other people for whom we’re not doing eviction defenses.”
We saw a similar dynamic in the preexisting campaign to extend the millionaire’s tax in New York, which has benefited from new energy and a new banner offered by the Occupy movement.
Will the new Occupy push on foreclosures pick up any steam? I’ll be covering whatever happens on Dec. 6, so stay tuned to find out.
Justin Elliott is a Salon reporter. Reach him by email at jelliott@salon.com and follow him on Twitter @ElliottJustin
Economic Doomsday Quote of the Week
"The world is watching Europe, waiting upon a solution. It’s not just the euro that’s at stake. If the euro fails, so too does the 27-nation European Union. Bank lending would freeze, stock markets would likely crash, and Europe’s economies would follow. Nations in the euro-zone would see their economic output decline, though temporarily, by as much as 50%, according to UBS forecasters. That economic meltdown would then spread to the U.S. and Asia, who would find themselves caught up in the credit freeze while their exports to Europe would collapse."
Source:
http://finance.yahoo.com/news/Euro-Finance-Ministers-wscheats-3060132077.html
Thanks to NaturalNews.com for the tipoff
Source:
http://finance.yahoo.com/news/Euro-Finance-Ministers-wscheats-3060132077.html
Thanks to NaturalNews.com for the tipoff
Bail-out Bombshell
Fed "Emergency" Bank Rescue Totaled $29 Trillion Over Three Years
J. Andrew Felkerson, AlterNet
Posted on December 15, 2011
http://www.alternet.org/story/153462/bail-out_bombshell%3A_fed_%22emergency%22_bank_rescue_totaled_%2429_trillion_over_three_years
Speculation about the the Fed’s actions during the financial crisis has made headlines on and off again over the last several years. The latest drama occurred on November 27 when Bloomberg published an article, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress," which gives an account of the news agency’s struggle to bring to light the details of the Fed’s emergency programs. Bloomberg throws out some very large numbers, revealing that as of March 2009, the Fed lent, spent, or committed $7.77 trillion worth of aid to the financial system and that banks used the low interest rates charged on these loans to make an estimated $13 billion in income.
On December 6, the Fed struck back, issuing a four page unsigned memo intended to correct recent “egregious errors and mistakes” found in various reports of its emergency lending facilities. The Fed argues that the “total credit outstanding under liquidity programs was never more than about $1.5 trillion.” While Bloomberg wasn’t mentioned explicitly in the Fed memo, it was fairly clear to whom the response was directed. The following day Bloomberg defended its reporting, and the Wall Street Journal’s David Wessel came to the Fed’s defense, characterizing Bloomberg’s methodology as a “great story,” but ultimately not “true.”
All this may sound like controversy, but it’s little more than a tempest in a teacup.
Here’s the hurricane: In reality, no less than $29.616 trillion is the total emergency assistance provided by the Fed to foreign and domestic entities during the Global Financial Crisis. Let’s repeat that: $29 trillion. This astounding number is over twice U.S. gross domestic product, the nominal value of all goods and services produced for the year 2010. This is the total of the bailout as calculated by Nicola Matthews and myself as part of the Ford Foundation project, A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis. We will be presenting the results of our analysis in a series of papers published by the Levy Economics Institute, the first of which, “29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient,” is already available here.
The results we have calculated are presented below, and it is important to note that the totals are cumulative and in billions of U.S. dollars. (The numbers in parentheses indicate amounts still outstanding as of November 10, 2011).
Facility Total Percent of Total
Term Auction Facility $3,818.41 12.89%
Central Bank Liquidity Swaps 10,057.4 (1.96) 33.96
Single Tranche Open Market Operations 855 2.89
Term Securities Lending Facility and Term Options Program 2,005.7 6.77
Bear Stearns Bridge Loan 12.9 0.04
Maiden Lane I 28.82 (12.98) 0.10
Primary Dealer Credit Facility 8,950.99 30.22
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.73
Commercial Paper Funding Facility 737.07 2.49
Term Asset-Backed Securities Loan Facility 71.09 (10.57) 0.24
Agency Mortgage-Backed Security Purchase Program 1,850.14 (849.26) 6.25
AIG Revolving Credit Facility 140.316 0.47
AIG Securities Borrowing Facility 802.316 2.71
Maiden Lane II 19.5 (9.33) 0.07
Maiden Lane III 24.3 (18.15) 0.08
AIA/ ALICO (AIG) 25 0.08
Totals $29,616.4 100.0%
I want to be clear. These are the totals of Fed lending and asset purchases actually undertaken since the bail-out began. There is no double-counting. And we do not include any credit facilities created by the Fed unless they were actually used. These figures accurately reflect the cumulative totals over the approximately three years actually used by the Fed to prop-up domestic and international banks, shadow banks, central banks, and even some non-financial institutions.
The programs above constitute the crisis prevention machinery rolled out by the Fed to combat the worst financial panic since 1929. All the programs above were designed and implemented to target domestic financial and nonfinancial corporations or foreign central banks or markets, or both. Only one of the facilities, the Term Auction Facility, can be viewed as being consistent with the Fed’s mandate to protect the commercial banking system from systemic failure. The rest are the result of the increasing relevance of the “shadow banking” to our economy—and of the Fed’s attempt to rescue the shadow banking sector.
Shadow banks are highly leveraged financial institutions that perform functions historically relegated to the commercial banking system. It is important to note that these financial concerns do not have access to the conventional means of Fed support. Nor were they ever really regulated or supervised by the Fed. They engaged in extremely risky behavior that in large part led to the global financial crisis. And when it hit, the Fed spent and lent $29 trillion, much of it devoted to rescuing the shadow banking system.
Thus, we see a host of unconventional programs designed to aid these institutions rather than the Fed’s traditional patrons. The information used to calculate the totals above is freely available (thanks in large part to the valiant efforts of a group of lawmakers led by Senator Bernie Sanders) as the result of an amendment inserted into the Dodd Frank bill. Moreover, this information has been freely available since December 10, 2010 on the Fed’s website.
So why didn’t someone else already put the data together in this way?
Obviously, $29 trillion is much bigger than the previous estimates of $7.77 trillion (Bloomberg) or $1.5 trillion (the Fed and the Wall Street Journal). An in-depth account of each of the facilities above is a rather lengthy process as the Levy working paper attests; therefore we will only lay out the reason for the difference between the Bloomberg and Fed numbers. So, how is it that we arrive at such a number? The main difference in our analysis is the variables we identify as essential in understanding the Fed’s response. In our paper we report three measures that we view as essential to capturing the size and magnitude of the bailout. Each of the three measures deals exclusively with programs put into place by the Fed that transcend its conventional lender of last resort function. That is, we only include the emergency facilities the Fed created. We agree with the Fed that only facilities which were actually made operational should be considered in any account of the Fed’s actions. But we take the side of Bloomberg regarding the general lack of transparency by the Fed—the Fed fought tooth and nail to keep the details of its programs secret.
At any given moment inspection of the amount owed to the Fed resulting from nonconventional lender of last resort actions provides a reasonable account of what the Fed was doing in the period leading up to that time. However, looking at this number over time and in the context of the weekly amount lent provides insight into how the Fed’s efforts evolved over the run of the crisis. These two approaches to measurement (a “stock” or outstanding balance and a “flow” or cumulated amount spent and lent weekly) only provide us with details regarding the scope of the Fed’s bailout. To get a clear picture we need some account of the magnitude. We believe that this is captured by looking at the cumulative totals of all programs.
Perhaps the largest difference in our analysis is that we learned our money and banking theory from the late Hyman Minsky. He taught us that the modern economy is essentially financial, and as such, is prone to systemic financial crises that if left unchecked can lead to “bone crunching depressions”. Therefore it is essential to have a LOLR. Thus, any transaction between the Fed and the markets which is not part of conventional monetary operations, such as lending from the discount window or open market operations, represents an instance in which private markets were not able to or were unwilling to engage in the normal financial intermediation process. If it any point in time the private markets were capable (or willing) to carry out business as usual, Fed intervention would not have been required. Thus, we need to account for each extraordinary event, and the best way that we know to do this is by summing each instance--which results in a cumulative total of over $29 trillion dollars.
A figure as large as $29.616 trillion should not be taken lightly, but focus on the specific magnitude of the figure diverts our attention from a larger issue that is at stake: how should the LOLR responsibility to be discharged in the future? With unemployment remaining persistently high and millions continuing to lose their homes to foreclosure as the result of lost income from a poor economy or outright fraud in the mortgage lending and foreclosure process, it becomes increasingly difficult to justify the ability of a single institution staffed by unelected officials to carry out such a targeted commitment of the obligations of the United States citizenry. Thanks to the actions of Senator Sanders and other individuals possessing the temerity to question the authority of the Fed we now have access to much of the data regarding what the Fed did during the recent crisis.
But we still need to go through the data from the past three years of bail-outs to answer the following questions: Who got funds from the Fed? How much did they get? And why did they get them? The Fed has not adequately explained why its emergency lending and asset purchases went on for so long and accumulated to such a large number.
J. Andrew Felkerson is a Interdisciplinary PhD student at the University of Missouri- Kansas City
J. Andrew Felkerson, AlterNet
Posted on December 15, 2011
http://www.alternet.org/story/153462/bail-out_bombshell%3A_fed_%22emergency%22_bank_rescue_totaled_%2429_trillion_over_three_years
Speculation about the the Fed’s actions during the financial crisis has made headlines on and off again over the last several years. The latest drama occurred on November 27 when Bloomberg published an article, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress," which gives an account of the news agency’s struggle to bring to light the details of the Fed’s emergency programs. Bloomberg throws out some very large numbers, revealing that as of March 2009, the Fed lent, spent, or committed $7.77 trillion worth of aid to the financial system and that banks used the low interest rates charged on these loans to make an estimated $13 billion in income.
On December 6, the Fed struck back, issuing a four page unsigned memo intended to correct recent “egregious errors and mistakes” found in various reports of its emergency lending facilities. The Fed argues that the “total credit outstanding under liquidity programs was never more than about $1.5 trillion.” While Bloomberg wasn’t mentioned explicitly in the Fed memo, it was fairly clear to whom the response was directed. The following day Bloomberg defended its reporting, and the Wall Street Journal’s David Wessel came to the Fed’s defense, characterizing Bloomberg’s methodology as a “great story,” but ultimately not “true.”
All this may sound like controversy, but it’s little more than a tempest in a teacup.
Here’s the hurricane: In reality, no less than $29.616 trillion is the total emergency assistance provided by the Fed to foreign and domestic entities during the Global Financial Crisis. Let’s repeat that: $29 trillion. This astounding number is over twice U.S. gross domestic product, the nominal value of all goods and services produced for the year 2010. This is the total of the bailout as calculated by Nicola Matthews and myself as part of the Ford Foundation project, A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis. We will be presenting the results of our analysis in a series of papers published by the Levy Economics Institute, the first of which, “29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient,” is already available here.
The results we have calculated are presented below, and it is important to note that the totals are cumulative and in billions of U.S. dollars. (The numbers in parentheses indicate amounts still outstanding as of November 10, 2011).
Facility Total Percent of Total
Term Auction Facility $3,818.41 12.89%
Central Bank Liquidity Swaps 10,057.4 (1.96) 33.96
Single Tranche Open Market Operations 855 2.89
Term Securities Lending Facility and Term Options Program 2,005.7 6.77
Bear Stearns Bridge Loan 12.9 0.04
Maiden Lane I 28.82 (12.98) 0.10
Primary Dealer Credit Facility 8,950.99 30.22
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.73
Commercial Paper Funding Facility 737.07 2.49
Term Asset-Backed Securities Loan Facility 71.09 (10.57) 0.24
Agency Mortgage-Backed Security Purchase Program 1,850.14 (849.26) 6.25
AIG Revolving Credit Facility 140.316 0.47
AIG Securities Borrowing Facility 802.316 2.71
Maiden Lane II 19.5 (9.33) 0.07
Maiden Lane III 24.3 (18.15) 0.08
AIA/ ALICO (AIG) 25 0.08
Totals $29,616.4 100.0%
I want to be clear. These are the totals of Fed lending and asset purchases actually undertaken since the bail-out began. There is no double-counting. And we do not include any credit facilities created by the Fed unless they were actually used. These figures accurately reflect the cumulative totals over the approximately three years actually used by the Fed to prop-up domestic and international banks, shadow banks, central banks, and even some non-financial institutions.
The programs above constitute the crisis prevention machinery rolled out by the Fed to combat the worst financial panic since 1929. All the programs above were designed and implemented to target domestic financial and nonfinancial corporations or foreign central banks or markets, or both. Only one of the facilities, the Term Auction Facility, can be viewed as being consistent with the Fed’s mandate to protect the commercial banking system from systemic failure. The rest are the result of the increasing relevance of the “shadow banking” to our economy—and of the Fed’s attempt to rescue the shadow banking sector.
Shadow banks are highly leveraged financial institutions that perform functions historically relegated to the commercial banking system. It is important to note that these financial concerns do not have access to the conventional means of Fed support. Nor were they ever really regulated or supervised by the Fed. They engaged in extremely risky behavior that in large part led to the global financial crisis. And when it hit, the Fed spent and lent $29 trillion, much of it devoted to rescuing the shadow banking system.
Thus, we see a host of unconventional programs designed to aid these institutions rather than the Fed’s traditional patrons. The information used to calculate the totals above is freely available (thanks in large part to the valiant efforts of a group of lawmakers led by Senator Bernie Sanders) as the result of an amendment inserted into the Dodd Frank bill. Moreover, this information has been freely available since December 10, 2010 on the Fed’s website.
So why didn’t someone else already put the data together in this way?
Obviously, $29 trillion is much bigger than the previous estimates of $7.77 trillion (Bloomberg) or $1.5 trillion (the Fed and the Wall Street Journal). An in-depth account of each of the facilities above is a rather lengthy process as the Levy working paper attests; therefore we will only lay out the reason for the difference between the Bloomberg and Fed numbers. So, how is it that we arrive at such a number? The main difference in our analysis is the variables we identify as essential in understanding the Fed’s response. In our paper we report three measures that we view as essential to capturing the size and magnitude of the bailout. Each of the three measures deals exclusively with programs put into place by the Fed that transcend its conventional lender of last resort function. That is, we only include the emergency facilities the Fed created. We agree with the Fed that only facilities which were actually made operational should be considered in any account of the Fed’s actions. But we take the side of Bloomberg regarding the general lack of transparency by the Fed—the Fed fought tooth and nail to keep the details of its programs secret.
At any given moment inspection of the amount owed to the Fed resulting from nonconventional lender of last resort actions provides a reasonable account of what the Fed was doing in the period leading up to that time. However, looking at this number over time and in the context of the weekly amount lent provides insight into how the Fed’s efforts evolved over the run of the crisis. These two approaches to measurement (a “stock” or outstanding balance and a “flow” or cumulated amount spent and lent weekly) only provide us with details regarding the scope of the Fed’s bailout. To get a clear picture we need some account of the magnitude. We believe that this is captured by looking at the cumulative totals of all programs.
Perhaps the largest difference in our analysis is that we learned our money and banking theory from the late Hyman Minsky. He taught us that the modern economy is essentially financial, and as such, is prone to systemic financial crises that if left unchecked can lead to “bone crunching depressions”. Therefore it is essential to have a LOLR. Thus, any transaction between the Fed and the markets which is not part of conventional monetary operations, such as lending from the discount window or open market operations, represents an instance in which private markets were not able to or were unwilling to engage in the normal financial intermediation process. If it any point in time the private markets were capable (or willing) to carry out business as usual, Fed intervention would not have been required. Thus, we need to account for each extraordinary event, and the best way that we know to do this is by summing each instance--which results in a cumulative total of over $29 trillion dollars.
A figure as large as $29.616 trillion should not be taken lightly, but focus on the specific magnitude of the figure diverts our attention from a larger issue that is at stake: how should the LOLR responsibility to be discharged in the future? With unemployment remaining persistently high and millions continuing to lose their homes to foreclosure as the result of lost income from a poor economy or outright fraud in the mortgage lending and foreclosure process, it becomes increasingly difficult to justify the ability of a single institution staffed by unelected officials to carry out such a targeted commitment of the obligations of the United States citizenry. Thanks to the actions of Senator Sanders and other individuals possessing the temerity to question the authority of the Fed we now have access to much of the data regarding what the Fed did during the recent crisis.
But we still need to go through the data from the past three years of bail-outs to answer the following questions: Who got funds from the Fed? How much did they get? And why did they get them? The Fed has not adequately explained why its emergency lending and asset purchases went on for so long and accumulated to such a large number.
J. Andrew Felkerson is a Interdisciplinary PhD student at the University of Missouri- Kansas City
Thursday, December 1, 2011
10 Biggest Banks Could Lose $185 Billion In Deposits Next Year
10 Biggest Banks Could Lose $185 Billion In Deposits Next Year As Customers Move Their Money Pat Garofalo on Nov 21, 2011
http://thinkprogress.org/economy/2011/11/21/373191/banks-185-billion-deposits-loss
During “Bank Transfer Day” earlier this month, 40,000 Americans moved their money from the nation’s biggest banks to credit unions, voicing their distaste with the action’s of America’s financial behemoths. About 650,000 Americans joined credit unions in October, which is more people than in all of 2010 combined. According to cg42, a consulting firm that does work for the biggest banks, “the nation’s 10 biggest banks could stand to lose as much as $185 billion in deposits in the next year due to customer defections.” Of the banks, “Bank of America is the most vulnerable and could lose up to 10% of its customers and $42 billion in consumer deposits in the next year.”
http://thinkprogress.org/economy/2011/11/21/373191/banks-185-billion-deposits-loss
During “Bank Transfer Day” earlier this month, 40,000 Americans moved their money from the nation’s biggest banks to credit unions, voicing their distaste with the action’s of America’s financial behemoths. About 650,000 Americans joined credit unions in October, which is more people than in all of 2010 combined. According to cg42, a consulting firm that does work for the biggest banks, “the nation’s 10 biggest banks could stand to lose as much as $185 billion in deposits in the next year due to customer defections.” Of the banks, “Bank of America is the most vulnerable and could lose up to 10% of its customers and $42 billion in consumer deposits in the next year.”
Friday, November 18, 2011
Big Banks Plead with Customers Not to Move Their Money
November 9, 2011
http://www.washingtonsblog.com/2011/11/big-banks-plead-with-customers-not-to-move-their-money.html
Yes, The Big Banks DO Care If We Move Our Money
650,000 customers moved $4.5 billion dollars out of the big banks and into smaller banks and credit unions in the last month.
But there is a myth making the rounds that the big banks don’t really care if we move our money. For example, one line of reasoning is that no matter how many people move their money, the Fed and Treasury will just bail out the giants again.
But many anecdotes show that the too big to fails do, in fact, care.
Initially, of course, if the big banks really didn’t care, they wouldn’t have prevented protesters from closing their accounts.
NBC notes that – in response to inquiries regarding how many people have moved their money – Bank of America refused to provide figures, and instead sent the following defensive email:
“Bank of America continues to be a great place for customers to manage their everyday finances and achieve their savings goals,” [Colleen Haggerty, a spokeswoman for Bank of America's Southern California operations] said in an email. “We offer customers more choice and convenience, including industry-leading fraud protection, access to thousands of banking centers and ATMs, and the best online and mobile banking, which allow customers to bank on their terms 24/7.”
A writer noted at Daily Kos:
At Wells Fargo, my sister walked up to the teller and politely asked to close her account. The teller said, “No problem.” She pulled up her account and saw the balance and told her that due to the amount she had to speak with the branch manager. The branch manager came out. He was probably 30 years old and was very arrogant. He asked my sister why she wanted to close her account and my sister told him she thought Wells Fargo was part of the problem with the economy. He went thru some talking points about why she shouldn’t move her money, but my sister didn’t back down. When he asked her where she was going she told him that she would be banking at the North Carolina State Employees Credit Union. She isn’t a state employee, but anyone can join if you are related to a state employee. It turns out her husband is. Anyway, the bankster told her “You’ll be back. Credit unions can’t provide the services you need.” We’ll see about that. She withdrew over $200k from Wells Fargo.
Next we went to Bank of America. I closed my last account with hardly any questions asked. Of course, I had taken most of my money out so there wasn’t much left to take. My sister on the other hand had a large balance in multiple accounts. They actually refused to cut her a check for the full amounts. They only gave her 1/3 of her money and told her she’d have to come back to withdraw the rest. They claimed they were only allowed to make checks for a certain amount, and that they had no authority to cut additional checks on the same day. Stupid BofA. She had her check in hand and politely told off the branch manager when he told her she had to come back another day or two to withdraw the rest.
At BofA, we weren’t the only ones closing accounts. There was a line of people. Most had small accounts because they weren’t even being challenged, but she actually had to wait in line to speak with a branch manager.
At SunTrust, the branch manager went off his rocker. He just kept asking her “is there anything I can do or anything I can say to change your mind?” He asked probably twenty times. He even offered to have the market executive meet with her and hear out her concerns. She told him she wasn’t interested. He really looked nervous about it.
And a writer at Daily Bail pointed out:
I went in, asked to speak with a banker and was seated in an office. When the young associate came in and asked the purpose of my visit, I handed her my ATM card and requested that she tell me the balance. When she did, I then asked for a cashiers check in that amount. That’s when things got wonky. She froze, stumbled over her words and asked why I needed that amount (It was not a small sum). This gave me an opportunity to explain that although I personally would not be affected by their new fees I know plenty of friends and family that would feel the pain. In solidarity with them, I wished to close the account and move on. She unwittingly suggested that if I just use my debit card once a month then there would be no fee. That was good for a belly laugh from me, then I again requested the balance to be issued to me in the form of a cashier’s check. She then told me that there would be a $10 fee for this service. Another laugh. I guess it didn’t sink in when I told her that I was fee adverse. There was an easy work-around anyway – I requested the cash. That finished my time with this associate banker as the amount I was requesting was “well past” her daily limit for withdrawals. I asked if there would be an issue with securing the cash and she said “I honestly don’t know if we have that here” and walked out to get the branch manager.
The manager was pleasant enough and very direct. After introducing herself she flat out asked “What can we do to change your mind?” “We don’t want to see you go” she emphasized. This opened a door for me to further explain my decision to leave the bank and why I was doing it. Amazingly, it did not fall on deaf ears. She indicated that understood where I was coming from and actually showed genuine surprise at some of the facts I provided her about the less than consumer friendly policies and machinations of her employer. She did make some feeble counter-arguments and repeatedly asked me if I would change my mind (with a hint of desperation!). I stood firm and by the end of our conversation she asked if I would be willing to put it all in writing so she could send it up the chain.
She shared that management is nervous, they are seeing money leaking out of the bank and realize that they have made mistakes…. They are also aware of the growing momentum behind the November 5th move your money movement.
Management is aware that people are angry (how could they not be!) and have put an ear to the ground.
Hundreds of similar stories are being told all over America.
Even though the government may keep throwing money at the dinosaurs, the Basel regulations do have some capital requirements, and so the big banks need to bring in some actual deposits to fund their casino gambling.
Moreover, if too many depositors leave, the illusion that the big banks are serving the American public will be burst, and a critical mass of consciousness will occur, so that the banks’ questioned control over the American political and financial systems will start to be questioned.
So moving our money is an effective step towards reclaiming America.
http://www.washingtonsblog.com/2011/11/big-banks-plead-with-customers-not-to-move-their-money.html
Yes, The Big Banks DO Care If We Move Our Money
650,000 customers moved $4.5 billion dollars out of the big banks and into smaller banks and credit unions in the last month.
But there is a myth making the rounds that the big banks don’t really care if we move our money. For example, one line of reasoning is that no matter how many people move their money, the Fed and Treasury will just bail out the giants again.
But many anecdotes show that the too big to fails do, in fact, care.
Initially, of course, if the big banks really didn’t care, they wouldn’t have prevented protesters from closing their accounts.
NBC notes that – in response to inquiries regarding how many people have moved their money – Bank of America refused to provide figures, and instead sent the following defensive email:
“Bank of America continues to be a great place for customers to manage their everyday finances and achieve their savings goals,” [Colleen Haggerty, a spokeswoman for Bank of America's Southern California operations] said in an email. “We offer customers more choice and convenience, including industry-leading fraud protection, access to thousands of banking centers and ATMs, and the best online and mobile banking, which allow customers to bank on their terms 24/7.”
A writer noted at Daily Kos:
At Wells Fargo, my sister walked up to the teller and politely asked to close her account. The teller said, “No problem.” She pulled up her account and saw the balance and told her that due to the amount she had to speak with the branch manager. The branch manager came out. He was probably 30 years old and was very arrogant. He asked my sister why she wanted to close her account and my sister told him she thought Wells Fargo was part of the problem with the economy. He went thru some talking points about why she shouldn’t move her money, but my sister didn’t back down. When he asked her where she was going she told him that she would be banking at the North Carolina State Employees Credit Union. She isn’t a state employee, but anyone can join if you are related to a state employee. It turns out her husband is. Anyway, the bankster told her “You’ll be back. Credit unions can’t provide the services you need.” We’ll see about that. She withdrew over $200k from Wells Fargo.
Next we went to Bank of America. I closed my last account with hardly any questions asked. Of course, I had taken most of my money out so there wasn’t much left to take. My sister on the other hand had a large balance in multiple accounts. They actually refused to cut her a check for the full amounts. They only gave her 1/3 of her money and told her she’d have to come back to withdraw the rest. They claimed they were only allowed to make checks for a certain amount, and that they had no authority to cut additional checks on the same day. Stupid BofA. She had her check in hand and politely told off the branch manager when he told her she had to come back another day or two to withdraw the rest.
At BofA, we weren’t the only ones closing accounts. There was a line of people. Most had small accounts because they weren’t even being challenged, but she actually had to wait in line to speak with a branch manager.
At SunTrust, the branch manager went off his rocker. He just kept asking her “is there anything I can do or anything I can say to change your mind?” He asked probably twenty times. He even offered to have the market executive meet with her and hear out her concerns. She told him she wasn’t interested. He really looked nervous about it.
And a writer at Daily Bail pointed out:
I went in, asked to speak with a banker and was seated in an office. When the young associate came in and asked the purpose of my visit, I handed her my ATM card and requested that she tell me the balance. When she did, I then asked for a cashiers check in that amount. That’s when things got wonky. She froze, stumbled over her words and asked why I needed that amount (It was not a small sum). This gave me an opportunity to explain that although I personally would not be affected by their new fees I know plenty of friends and family that would feel the pain. In solidarity with them, I wished to close the account and move on. She unwittingly suggested that if I just use my debit card once a month then there would be no fee. That was good for a belly laugh from me, then I again requested the balance to be issued to me in the form of a cashier’s check. She then told me that there would be a $10 fee for this service. Another laugh. I guess it didn’t sink in when I told her that I was fee adverse. There was an easy work-around anyway – I requested the cash. That finished my time with this associate banker as the amount I was requesting was “well past” her daily limit for withdrawals. I asked if there would be an issue with securing the cash and she said “I honestly don’t know if we have that here” and walked out to get the branch manager.
The manager was pleasant enough and very direct. After introducing herself she flat out asked “What can we do to change your mind?” “We don’t want to see you go” she emphasized. This opened a door for me to further explain my decision to leave the bank and why I was doing it. Amazingly, it did not fall on deaf ears. She indicated that understood where I was coming from and actually showed genuine surprise at some of the facts I provided her about the less than consumer friendly policies and machinations of her employer. She did make some feeble counter-arguments and repeatedly asked me if I would change my mind (with a hint of desperation!). I stood firm and by the end of our conversation she asked if I would be willing to put it all in writing so she could send it up the chain.
She shared that management is nervous, they are seeing money leaking out of the bank and realize that they have made mistakes…. They are also aware of the growing momentum behind the November 5th move your money movement.
Management is aware that people are angry (how could they not be!) and have put an ear to the ground.
Hundreds of similar stories are being told all over America.
Even though the government may keep throwing money at the dinosaurs, the Basel regulations do have some capital requirements, and so the big banks need to bring in some actual deposits to fund their casino gambling.
Moreover, if too many depositors leave, the illusion that the big banks are serving the American public will be burst, and a critical mass of consciousness will occur, so that the banks’ questioned control over the American political and financial systems will start to be questioned.
So moving our money is an effective step towards reclaiming America.
Sunday, October 16, 2011
Banks Foreclosure Solution
From PublicRadio.org:
The great flaw in the American housing market right now is pretty fundamental: too much supply, not enough demand. There are just way too many foreclosed and abandoned properties out there, which is making everything else tougher to sell.
So since they haven't been able to drive any new demand, some banks are doing the completely rational -- if kind of unbelievable -- thing and cutting their supply. In states like Ohio, banks are finding it's cheaper to tear houses down than to try and sell them...
Banks demolish foreclosed homes, raise eyebrows
Jeff Tyler
Thursday, October 13, 2011
http://marketplace.publicradio.org/display/web/2011/10/13/pm-banks-demolish-foreclosed-homes-raise-eyebrows
The great flaw in the American housing market right now is pretty fundamental: too much supply, not enough demand. There are just way too many foreclosed and abandoned properties out there, which is making everything else tougher to sell.
So since they haven't been able to drive any new demand, some banks are doing the completely rational -- if kind of unbelievable -- thing and cutting their supply. In states like Ohio, banks are finding it's cheaper to tear houses down than to try and sell them...
Banks demolish foreclosed homes, raise eyebrows
Jeff Tyler
Thursday, October 13, 2011
http://marketplace.publicradio.org/display/web/2011/10/13/pm-banks-demolish-foreclosed-homes-raise-eyebrows
Saturday, October 15, 2011
How Is Credit Created?
From WashingtonsBlog.com:
The model of money creation that Obama’s economic advisers have sold him was shown to be empirically false over three decades ago.
The first economist to establish this was the American Post Keynesian economist Basil Moore, but similar results were found by two of the staunchest neoclassical economists, Nobel Prize winners Kydland and Prescott in a 1990 paper Real Facts and a Monetary Myth...
Australian economist Steve Keen notes that in a debt based society, expansion of credit comes first and reserves come later.
This angle of the banking system has actually been discussed for many years by leading experts:
“[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.”
- 1960s Chicago Federal Reserve Bank booklet entitled “Modern Money Mechanics”
“The process by which banks create money is so simple that the mind is repelled.”
- Economist John Kenneth Galbraith
“[W]hen a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposit; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.“
- Robert B. Anderson, Secretary of the Treasury under Eisenhower, in an interview reported in the August 31, 1959 issue of U.S. News and World Report
“Do private banks issue money today? Yes. Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities. . . . The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they ‘create’ it.”
-Congressman Wright Patman
Indeed, the Fed is pushing to eliminate all reserve requirements. If banks can lend without having any reserves, then agreeing to extend credit obviously comes before having the reserves...
We Don’t Need the Giant Banks To Do It
If private banks can create credit out of thin air – without actually having excess reserves – then the government could do so as well. In other words, if banks don’t need to have extra money lying around before they can make loans, then states and local governments don’t either...
Moreover, as the Congressional Research Service confirms, the government has been loaning vast sums to the biggest banks at practically no interest, and then borrowing the money back from the banks at much higher interest.
Why do we need to spend huge sums of money to have the banks loans our own money back to us?
Indeed, a new report from Demos – a non-partisan public policy organization – in conjunction with the Center for State Innovation, issued a report in April looking at the potential for “partnership banks” across the country, including 11 states already considering such legislation...
Partnership Banks can raise revenue for states without raising taxes, and increase loans to small businesses precisely when Wall Street banks have cut back on lending and raised public borrowing costs. A Partnership Bank would act as a “banker’s bank” to in-state community banks and provide the state government with both banking services at fair terms and an annual multi-million dollar dividend.
If modeled on the successful Bank of North Dakota, Partnership Banks in other states would:
* Create new jobs and spur economic growth. Partnership Banks are participation lenders, meaning they partner—never compete—with local banks to drive lending through local banks to small businesses. If Washington State had a fully-operational Partnership Bank capitalized at $100 million during the Great Recession, it would have supported $2.6 billion in new lending and helped to create 8,212 new small business jobs. A proposed Oregon bank could help community banks expand lending by $1.3 billion and help small business create 5,391 new Oregon jobs in its first three to five years. All of this would be accom- plished at a profit, which Partnership Banks should share with the state.
* Generate new revenues for states directly, through annual bank dividend payments, and indirectly by creating jobs and spurring local economic growth…
* Lower debt costs for local governments. Like the Bank of North Dakota, Partnership Banks can get access to low-cost funds from the regional Federal Home Loan Banks. The banks can pass savings on to local governments when they buy debt for infrastructure investments. The banks can also provide Letters of Credit for tax-exempt bonds at lower interest rates.
* Strengthen local banks even out credit cycles, and preserve real competition in local credit markets. There have been no bank failures in North Dakota during the financial crisis. BND’s charter is clear that its goal is to “be helpful to and to assist in the development of [North Dakota banks]… and not, in any manner, to destroy or to be harmful to existing financial institutions.” By purchasing local bank stock, partnering with them on large loans and providing other sup- port, Partnership Banks would strengthen small banks in an era when federal policy encourages bank consolidation.
* Build up small businesses. Surveys by the Main Street Alliance in Oregon and Washington show at least 75 percent support among small business owners. In markets increasingly dominated by large corporations and the banks that fund them, Partnership Banks would increase lending capabilities at the smaller banks that provide the majority of small business loans in America.
These various proposals would “move general revenue deposits out of the Wall Street banks that dominate the banking business today, and use them to capitalize a new local public structure with a mission to grow the local economy.”
Let’s Give the Giant Banks Some Competition
Some people are understandably skeptical of state banks. Specifically, they don’t trust state politicians to exercise fiscal constraint, or they think that states with their own public banks would spend money on frivolous projects.
I understand and respect both concerns.
But as financial writer Yves Smith notes, state banks – even if imperfect – would at least give some competition to the too big to fails which have driven our economy into a ditch, and which are state-supported anyway:
The most important potential use of this type of bank in our era could again be to level the playing field with powerful interests, in this case, the TBTF banks...
Before readers argue that this is tantamount to socialism, that would be better than what we have now. As we noted in an earlier post “Why Do We Keep Indulging the Fiction That Banks Are Private Enterprises?“:
Big finance has an unlimited credit line with governments around the globe. “Most subsidized industry in the world” is inadequate to describe this relationship. Banks are now in the permanent role of looters, as described in the classic Akerlof/Romer paper. They run highly leveraged operations, extract compensation based on questionable accounting and officially-subsidized risk-taking, and dump their losses on the public at large.
The usual narrative, “privatized gains and socialized losses” is insufficient to describe the dynamic at work. The banking industry falsely depicts markets, and by extension, its incumbents as a bastion of capitalism. The blatant manipulations of the equity markets shows that financial activity, which used to be recognized as valuable because it supported commercial activity, is whenever possible being subverted to industry rent-seeking. And worse, these activities are state supported.
Consider Fannie and Freddie pre-conservatorship. They were at least branded more accurately as “government sponsored enterprises” and “agencies” making their public/private role explicit. Yet they were over time allowed more and more latitude to act as private enterprises, particularly as far as employee pay was concerned. We know how that movie ended…
So, the reality is that banks can no longer meaningfully be called private enterprises, yet no one in the media will challenge this fiction. And pointing out in a more direct manner that banks should not be considered capitalist ventures would also penetrate the dubious defenses of their need for lavish pay. Why should government-backed businesses run hedge funds or engage in high risk trading, or for that matter, be permitted to offer lucrative products that are valuable because they allow customers to engage in questionable activities, like regulatory arbitrage? The sort of markets that serve a public purpose should be reasonably efficient and transparent, which implies low margins for intermediaries.
Right now, we have much of the banking sector operating so as to privatize gains and socialize losses. We might as well socialize the gains, as North Dakota does...
The Giant Banks Are ALREADY State-Sponsored … So Why Not Create Public Banks to at Least Share the Gains, Help Out Main Street, and Grow Our Local Economies?
June 13, 2011
http://www.washingtonsblog.com/2011/06/the-giant-banks-are-already-state-sponsored-so-why-not-create-public-banks-to-at-least-share-the-gains-help-out-main-street-and-grow-our-local-economies.html
The model of money creation that Obama’s economic advisers have sold him was shown to be empirically false over three decades ago.
The first economist to establish this was the American Post Keynesian economist Basil Moore, but similar results were found by two of the staunchest neoclassical economists, Nobel Prize winners Kydland and Prescott in a 1990 paper Real Facts and a Monetary Myth...
Australian economist Steve Keen notes that in a debt based society, expansion of credit comes first and reserves come later.
This angle of the banking system has actually been discussed for many years by leading experts:
“[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.”
- 1960s Chicago Federal Reserve Bank booklet entitled “Modern Money Mechanics”
“The process by which banks create money is so simple that the mind is repelled.”
- Economist John Kenneth Galbraith
“[W]hen a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposit; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.“
- Robert B. Anderson, Secretary of the Treasury under Eisenhower, in an interview reported in the August 31, 1959 issue of U.S. News and World Report
“Do private banks issue money today? Yes. Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities. . . . The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they ‘create’ it.”
-Congressman Wright Patman
Indeed, the Fed is pushing to eliminate all reserve requirements. If banks can lend without having any reserves, then agreeing to extend credit obviously comes before having the reserves...
We Don’t Need the Giant Banks To Do It
If private banks can create credit out of thin air – without actually having excess reserves – then the government could do so as well. In other words, if banks don’t need to have extra money lying around before they can make loans, then states and local governments don’t either...
Moreover, as the Congressional Research Service confirms, the government has been loaning vast sums to the biggest banks at practically no interest, and then borrowing the money back from the banks at much higher interest.
Why do we need to spend huge sums of money to have the banks loans our own money back to us?
Indeed, a new report from Demos – a non-partisan public policy organization – in conjunction with the Center for State Innovation, issued a report in April looking at the potential for “partnership banks” across the country, including 11 states already considering such legislation...
Partnership Banks can raise revenue for states without raising taxes, and increase loans to small businesses precisely when Wall Street banks have cut back on lending and raised public borrowing costs. A Partnership Bank would act as a “banker’s bank” to in-state community banks and provide the state government with both banking services at fair terms and an annual multi-million dollar dividend.
If modeled on the successful Bank of North Dakota, Partnership Banks in other states would:
* Create new jobs and spur economic growth. Partnership Banks are participation lenders, meaning they partner—never compete—with local banks to drive lending through local banks to small businesses. If Washington State had a fully-operational Partnership Bank capitalized at $100 million during the Great Recession, it would have supported $2.6 billion in new lending and helped to create 8,212 new small business jobs. A proposed Oregon bank could help community banks expand lending by $1.3 billion and help small business create 5,391 new Oregon jobs in its first three to five years. All of this would be accom- plished at a profit, which Partnership Banks should share with the state.
* Generate new revenues for states directly, through annual bank dividend payments, and indirectly by creating jobs and spurring local economic growth…
* Lower debt costs for local governments. Like the Bank of North Dakota, Partnership Banks can get access to low-cost funds from the regional Federal Home Loan Banks. The banks can pass savings on to local governments when they buy debt for infrastructure investments. The banks can also provide Letters of Credit for tax-exempt bonds at lower interest rates.
* Strengthen local banks even out credit cycles, and preserve real competition in local credit markets. There have been no bank failures in North Dakota during the financial crisis. BND’s charter is clear that its goal is to “be helpful to and to assist in the development of [North Dakota banks]… and not, in any manner, to destroy or to be harmful to existing financial institutions.” By purchasing local bank stock, partnering with them on large loans and providing other sup- port, Partnership Banks would strengthen small banks in an era when federal policy encourages bank consolidation.
* Build up small businesses. Surveys by the Main Street Alliance in Oregon and Washington show at least 75 percent support among small business owners. In markets increasingly dominated by large corporations and the banks that fund them, Partnership Banks would increase lending capabilities at the smaller banks that provide the majority of small business loans in America.
These various proposals would “move general revenue deposits out of the Wall Street banks that dominate the banking business today, and use them to capitalize a new local public structure with a mission to grow the local economy.”
Let’s Give the Giant Banks Some Competition
Some people are understandably skeptical of state banks. Specifically, they don’t trust state politicians to exercise fiscal constraint, or they think that states with their own public banks would spend money on frivolous projects.
I understand and respect both concerns.
But as financial writer Yves Smith notes, state banks – even if imperfect – would at least give some competition to the too big to fails which have driven our economy into a ditch, and which are state-supported anyway:
The most important potential use of this type of bank in our era could again be to level the playing field with powerful interests, in this case, the TBTF banks...
Before readers argue that this is tantamount to socialism, that would be better than what we have now. As we noted in an earlier post “Why Do We Keep Indulging the Fiction That Banks Are Private Enterprises?“:
Big finance has an unlimited credit line with governments around the globe. “Most subsidized industry in the world” is inadequate to describe this relationship. Banks are now in the permanent role of looters, as described in the classic Akerlof/Romer paper. They run highly leveraged operations, extract compensation based on questionable accounting and officially-subsidized risk-taking, and dump their losses on the public at large.
The usual narrative, “privatized gains and socialized losses” is insufficient to describe the dynamic at work. The banking industry falsely depicts markets, and by extension, its incumbents as a bastion of capitalism. The blatant manipulations of the equity markets shows that financial activity, which used to be recognized as valuable because it supported commercial activity, is whenever possible being subverted to industry rent-seeking. And worse, these activities are state supported.
Consider Fannie and Freddie pre-conservatorship. They were at least branded more accurately as “government sponsored enterprises” and “agencies” making their public/private role explicit. Yet they were over time allowed more and more latitude to act as private enterprises, particularly as far as employee pay was concerned. We know how that movie ended…
So, the reality is that banks can no longer meaningfully be called private enterprises, yet no one in the media will challenge this fiction. And pointing out in a more direct manner that banks should not be considered capitalist ventures would also penetrate the dubious defenses of their need for lavish pay. Why should government-backed businesses run hedge funds or engage in high risk trading, or for that matter, be permitted to offer lucrative products that are valuable because they allow customers to engage in questionable activities, like regulatory arbitrage? The sort of markets that serve a public purpose should be reasonably efficient and transparent, which implies low margins for intermediaries.
Right now, we have much of the banking sector operating so as to privatize gains and socialize losses. We might as well socialize the gains, as North Dakota does...
The Giant Banks Are ALREADY State-Sponsored … So Why Not Create Public Banks to at Least Share the Gains, Help Out Main Street, and Grow Our Local Economies?
June 13, 2011
http://www.washingtonsblog.com/2011/06/the-giant-banks-are-already-state-sponsored-so-why-not-create-public-banks-to-at-least-share-the-gains-help-out-main-street-and-grow-our-local-economies.html
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