Where were the Tea Parties on CRomnibus?

Where were the Tea Parties when their Republican party just put taxpayers on the hook for up to $300 trillion in bailouts for banks' risky bets on derivatives??

(NB: America's GDP in 2013 was $17 trillion.)

The TPs, as legend has it, were a spontaneous "grassroots" movement in response to the TBTF bank bailouts, but were actually about opposing a minor proposed bailout for distressed mortgage borrowers. A bailout that never happened. 

At any rate, despite all the TPs' huffing and puffing, the TBTF banks were bailed out to the tune of about $30 trillion, and now the 10 largest banks are 28 percent LARGER than they were before!. Just to show Wall Street's power, JP Morgan CEO Jamie Dimon himself made calls to wavering Congressmen urging them to vote on the CRomnibus bill. (Ask yourself: Why was this provision on derivatives so important to Dimon? The answer should scare you.)

Opposing this CRomnibus rider would seem to be right in the TP's anti-bailout wheelhouse, wouldn't it?

Wouldn't it??  Where are you Tea Parties when America needs you? Where was your outrage?  Your consistency? [Crickets chirping].You're just far-right Republicans, that's all you are. To the dustbin of history with you!

News digest / Catching up on news (08.08.2014)

Lately I can't keep up with my re-posting duties. Quickly, here are several stories you might have missed:

Federal Judge Rules Some College Players Are Entitled To Payment:  http://n.pr/V95KJ7 -- SOME JUSTICE!

How Big Is a $16 Billion Bank Fraud Settlement, Really?:  http://huff.to/1A036VM  -- NOT VERY.

FEAR: 11 TOP BANKS STILL TOO BIG TO FAIL:  http://huff.to/1zS8ZnU  -- TBTF HERE TO STAY, BY DESIGN.

Nine myths about the social safety net, annotated:  http://wapo.st/1pF1Cvr  -- OLD PEOPLE ARE THE BIGGEST WELFARE QUEENS?

Unwealthy in America: New study finds that Top 1 percent hold 37 percent of nation’s wealth. A quarter of US families feel they are under economic stress caused by the Great Recession:  http://www.mybudget360.com/unwealthy-in-america-wealth-in-united-states/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+mybudget360%2FQePx+%28My+Budget+360%29  

The Conflict In Gaza Explained In One Map:  http://huff.to/1ASuhTK  -- UNLESS IT'S A MAP DERIVED FROM THE OLD TESTAMENT, I'M NOT INTERESTED.

Your chicken is about to get more full of feces:  http://gu.com/p/4v9ex  -- YUM!

U.S. recovered from recession faster than everybody but....

Now for all you who disparaged and tore down the stimulus package, aka the American Reinvestment and Recovery Act, here are the facts.

Of course the stimlus could have been bigger and better, and not 1/3 tax cuts that the Republicans would never give the Demcroacts credit for. Nonetheless, the stimulus helped the U.S. recover quicker than every country except Germany from the financial crisis caused by the Too Big Too Fail Banks.

This is a Germany with labor unions as part of every corporate board, with "socialized" medicine and free college education.

Let's not forget history while it's still fresh!

Only One Country Recovered From The Recession Faster Than The U.S.

By Sabrina Siddiqui

March 10, 2014 | Huffington Post

URL: http://huff.to/1i0DVtP

Jamie Dimon shows that crime does pay, and how!

Put this in the Cheater Nation file, copied to the TBTF file. Crime does pay, as long as you do it wearing a tie, with an expensive education under your belt.

In any kind of just country, Jamie Dimon would be walking the plank, breaking stones in a gulag, or wallowing in a dungeon, but in the US of A, he is a very rich and well-respected -- I daresay fawned over -- man.

Crime Doesn't Pay? JPMorgan Chase Begs to Differ

By Richard (RJ) Eskrow

January 24, 2014 | Huffington Post

URL: http://huff.to/1e25mCs

CNBC's ridiculous bias on Dimon, JPMorgan

JPMorgan would be worth more broken up

JPMorgan CEO Jamie Dimon: 'I will dong-slap you with my huge wallet.'

So what's Jamie Dimon and his pocket board's excuse for not voluntarily breaking themselves up and giving their shareholders a 30 percent premium?

We know the answer why not: power.  Dimon doesn't want to give up control of JP Morgan's four main divisions: asset management, retail banking, investment banking and private equity. 

Break up the TBTF banks! 

JPMorgan Chase Would Be Worth More If It Were Broken Up: Analyst

By Eleazar David Melendez

August 26, 2013 | Huffington Post

URL: http://huff.to/13Uiozp

No accident U.S. is most unequal

I'll continue to hammer away at America's growing wealth inequality that is here by design, not by accident. What do I mean? 

One the one hand, we have government policies that help out the rich: the tax code (that gives U.S. corporations an effective tax rate lower than any official rate among G-20 countries, encourages overseas outsourcing and offshoring of income, favors capital gains and executive stock options over wages, protects 401-k and IRAs for rich people who save anyway, and has dramatically lowered inheritance tax over the past 30 years); deregulation of banking combined with the $30 trillion TBTF bank bailouts; deregulation of health, safety and environmental codes; fraudulent H1B visas that displace U.S. workers to cut corporate costs; and allowing more money -- and more independent money -- into our elections.  

One the other hand, we have government policies that hurt workers and the poor: a regressive tax system that targets workers; Social Security cuts; laws against unions; public transportation fee hikes and service cuts; public employment cuts; public education cuts; falling real minimum wage; and exploding student debt that is immune from personal bankruptcy.

Some anti-worker policies are well-intended. For example, cities often seek to outbid each other with ever-growing subsidies and tax breaks to attract large retailers that promise job creation... with the unintended effect of ruining local mom-and-pop businesses that used to offer better wages and benefits -- wages and benefits that never come back -- and degrading their local tax base.  

We Democrats and liberals can't ignore inequality or its root causes and hope they go away, or fear accusations of "class warfare" for our speaking out. Class warfare is already being waged against the poor and working class, whether we admit it or not.

The U.S. Has The Worst Income Inequality In The Developed World, Thanks To Wall Street: Study

By Mark Gongloff

August 15, 2013 | Huffington Post

Hey, who says America is in decline? The U.S. is still more awesome than the rest of the world at making at least one thing. And that thing is income inequality.

A new paper by economists Facundo Alvaredo, Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez lays out just how much better at making inequality the U.S. is than everybody else and tries to explain how it got that way.

Since the 1970s, the top 1 percent of earners in the U.S. has roughly doubled its share of the total American income pie to nearly 20 percent from about 10 percent, according to the paper. This gain is easily the biggest among other developed countries, the researchers note. You can see this in the chart below, taken from the paper, which maps the income gains of the top 1 percent in several countries against the massive tax breaks most of them have gotten in the past several decades. (Story continues after chart.)

The higher the dot, the more income inequality has grown in that country. See the red dot waaaay up in the left-hand corner, far away from everybody else? That is the United States, where the top earners have made more while getting their taxes slashed by over 40 percent.

This echoes an OECD study from earlier this year that found the U.S. had the highest income inequality in the developed world. It followed only Chile, Mexico and Turkey among all nations.

So how did America get so darn great at ratcheting open the chasm between the haves and have-nots? Thank the dynamic duo of Wall Street and Washington, which have been working so well together for the past few decades to make laws that favor banks. Turns out this Axis Of Making It Rain has also been making laws that favor the exorbitantly wealthy. Win-win. Unless you are poor, in which case: Sorry, be born to richer parentsnext time, maybe?

One thing you'll notice in this chart is that, typically, the bigger the tax cuts given to the 1 percent (the horizontal scale on the chart), the bigger the income inequality. This is consistent with other studies that have shown the tax code has a big effect on income distribution. That's one way Washington has boosted inequality: By slashing taxes on the rich, for freedom and growth and trickling down on the poor. Unfortunately, the paper points out, contrary to what you will hear from conservatives, lower tax rates on the wealthy offer no obvious benefits to growth, or to the poor.

One other thing you'll notice from the chart is that the United Kingdom has slashed taxes on the top 1 percent almost as aggressively the U.S. has, and yet the share of income going to the top 1 percent is not nearly as big. So there's something else going on here besides just tax breaks.

That something is Wall Street, more or less, as Matthew O'Brien of The Atlantic points out. The same politicians that have busily been slashing taxes on the wealthy have also been loosening fetters on banking, allowing the financial sector to swell to bloated size and mop up ever-more income while contributing ever-less back to the economy. Again, this is consistent with other studies that have attributed much of the rise in in inequality to the pay being sucked up by bankers and overpaid CEOs.

At the same time, U.S. lawmakers have also made it easier and more tax-friendly for the wealthy to pile up more capital gains on their investments. As O'Brien puts it, "The top 1 percent leveraged itself to the market, and haven't looked back."

One nifty benefit to having nine metric craptons of money is that you can use it to buy politicians to help you craft the laws you like, particularly those that will help you end up with 10 metric craptons of money. The poor and middle class, meanwhile, just get ever more discouraged about the political system and stop bothering to fight it, increasingly turning the whole process over to the wealthy and the politicians they own, according to arecent paper by Frederick Solt at Southern Illinois University. Sound familiar?

Black: Conservatives should back Glass-Steagall

My man Bill Black explains why real conservatives should support re-instituting Glass-Steagall.  Bottom line: if President Obama is against it, they ought to be for it!

Conservatives and Libertarians should Support the Return of Glass-Steagall

By William K. Black

July 21, 2013 | New Economic Perspectives

Glass-Steagall prevented a classic conflict of interest that we know frequently arises in the real world.  Commercial banks are subsidized through federal deposit insurance.  Most economists support providing deposit insurance to commercial banks for relatively smaller depositors.  I am not aware of any economists who support federal “deposit” insurance for the customers of investment banks or the creditors of non-financial businesses.

It violates core principles of conservatism and libertarianism to extend the federal subsidy provided to commercial banks via deposit insurance to allow that subsidy to extend to non-banking operations.  Absent Glass-Steagall, banks could purchase anything from an aluminum company to a fast food franchise and (indirectly) fund its acquisitions and operations with federally-subsidized deposits.  If you run an independent aluminum company or fast food franchise do you want to have to compete with a federally-subsidized rival?

Deposit insurance is a material federal subsidy, but it pales in comparison to the implicit federal subsidy we provide to systemically dangerous institutions (SDIs) (so-called “too big to fail” banks).  The SDIs are precisely the banks most likely to purchase non-commercial banks. The general creditors of SDIs are protected against all loss so they funds to SDIs at a substantially lower interest rate than smaller competitors.  The largest SDIs are commercial banks that get both the explicit subsidy of federal deposit insurance and the larger subsidy unique to SDIs.

No conservative or libertarian should want the SDIs to maintain their political and economic dominance.  The SDIs’ dominance comes about not due to their efficiency but their size and the size of their lobbying wallet and force that allows them to extort greater federal subsidies than their rivals.  If conservatives and libertarians have any uncertainty about their position on Glass-Steagall they should consider these facts: (1) President Obama opposes ending the SDIs, (2) has done nothing effective to end the large federal subsidy provided to the SDIs, and (3) opposes bringing back Glass-Steagall and removing the explicit federal subsidy to banks that indirectly provides a competitive advantage to their commercial affiliates.

JPMorgan Chase: The 'good' TBTF bank?

Remember when I pointed out that JP Morgan -- the "good" Wall Street bank -- was paying 20 percent of its annual net profits in fines and litigation?

Here we have Matt Taibbi pointing out that JP Morgan just recently paid another $1 billion to the FERC for manipulating energy prices in California and Michigan.

And let's keep in mind, this was the settlement price.  That means, whatever JP Morgan did, it was much worse than $1 billion.

Taibbi reminds us that, "In the three-year period between 2009-2012, Chase paid out over $16 billion in litigation costs," or 12 percent of Chase's net revenue over the same period.

What kind of bank, what kind of business, can allow itself to do that?  Only a corrupt and broken business, that's what.  Break up the TBTF banks!

Chase, Once Considered "The Good Bank," Is About to Pay Another Massive Settlement

By Matt Taibbi

July 18, 2013 | Rolling Stone

URL: http://www.rollingstone.com/politics/blogs/taibblog/chase-once-considered-the-good-bank-is-about-to-pay-another-massive-settlement-20130718#ixzz2Zq64tuNd

Ritholtz: Why Congress might pass 'TBTF' bill

Simplicity, broad ideological support, splitting the banking lobby, and FDIC support -- these are the four reasons Barry Ritholtz gives why Brown-Vitter's "TBTF" bill has a good chance of becoming law.

Here's how Ritholtz sums it up:

The idea that two senators from opposite sides of the ideological spectrum can find common ground to attack a problem with a simple solution is novel in the Senate these days. If Brown and Vitter manage to end the subsidies to banks deemed “too big to fail,” they will have accomplished more than “merely” preventing the next financial crisis. They will have helped to create a blueprint for how to get things done in an era of partisan strife.

That is a worthy goal all Americans should be grateful for.

The truth is, complex bills are not a bad thing, per se, and elegant solutions cannot be found for all policy problems.  Complex bills are bad when they are too abstruse for the public to care about, and then the armies of paid lobbyists who definitely do care march in and skewer and mangle them with loopholes in the rules-making process, which is what has been going on with Dodd-Frank for about two years.  Big banks have been making the law more complex, then turning around and complaining about how complex it is... and wouldn't it just be easier to scrap it altogether, they have the gall to ask us?  

Trying to find a similarly simple, elegant solution to, say, immigration reform would probably be impossible.  Ditto the budget.  Or health care.  A carbon tax is another one of those elegant solutions that would unleash a virtuous cascade of market-driven responses, but it fails Ritholtz's bipartisan test, because conservatives reject any new taxes out of hand, and there is no opposing big industry lobby in favor of it.  

You can try to come up with your own examples.  Talk amongst yourselves....

Can two senators end ‘too big to fail’?

By Barry Ritholtz

May 12, 2013 | Washington Post

URL: http://www.washingtonpost.com/business/can-two-senators-end-too-big-to-fail/2013/05/09/aa01cc70-b5dc-11e2-b94c-b684dda07add_story.html

Taibbi: 'TBTF' bill faces opposition from...S&P?!

In the bizarro world of high finance, the ostensibly conservative ratings agency Standard & Poor's has come out against the bipartisan Brown-Vitter "TBTF" bill in the Senate Banking Committee that would "elegantly" eliminate, according to Matt Taibbi, the Too Big To Fail problem by requiring any bank with more than $500 billion in assets to keep about 15 percent of its capital in reserve, so as not to require a government bailout if their risky investments fail.  

Here's S&P excuse during Senate testimony:

Under our methodology, we would potentially no longer factor in government support if we believed that once large banks are broken up, we would not classify these banks as having high systemic importance.

Here's Taibbi's response to that:

S&P writes about having to factor out the implicit government backing of big banks as though that would be a bad thing. But if implicit government support is the only thing keeping the ratings of these companies even as high as they are now, that means they really should be rated lower, in a true free market.  And Standard and Poor's is, what – against admitting that?  It's nuts.

On the other hand, the Brown-Vitter TBTF bill is supported by the Independent Community Bankers of America, that is ostensibly sick and tired of borrowing at higher rates and having a constant institutional disadvantage compared to Wall Street banks. 

If the voting public continues to pay attention to the TBTF problem then we'll win, because both the far Left and far Right and everybody in between supports ending TBTF, ideologically. But if we get distracted, then the TBTF lobbyists and the corrupt institutions like S&P will cut and gut this bill in the Senate. They don't mind sounding absurd and hypocritical to protect their advantages with the status quo.  

Stay tuned, everybody!....

UPDATE (05.04.2013): For those who are interested, here's a summary from my man Ritholtz of the Brown-Vitter 'TBTF' bill:

• Stricter capital requirements on megabanks, defined as institutions with over $500 billion in assets.
• Six U.S. banks — JPMorgan Chase., Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo — meet the TBTF criteria.
• Eliminates risk-weights as part of a capital assessment (less reliance on unreliable ratings).
• Does not rely on ratings agency grades.
• Removes off-balance-sheet assets and liabilities as different class — they are treated as if they were on-balance sheet.
• Requires derivatives positions to be included in a bank’s consolidated assets.
• Requires capital cushion that a bank hold be liquid.
• Mandates capital measures be more transparent.
• Eliminates Basel III as a regulatory requirement.
• Restores competition to industry by removing competitive disadvantages mega banks have over smaller and regional community bankers.

Too-Big-to-Fail Takes Another Body Blow

By Matt Taibbi

May 1, 2013 | Rolling Stone:

URL: http://www.rollingstone.com/politics/blogs/taibblog/too-big-to-fail-takes-another-body-blow-20130501#ixzz2S8uS0vvn

We Need To Talk About JPMorgan

It's too facile and self-serving to call things that we simply disagree with "evil," but Eskrow makes a deliberate and compelling case why JPMorgan Chase is indeed an evil bank.  Sociopathic may be a better term. (You may also check out "JPMorgan Chase: Out of Control" by Joshua Rosner, an investment analyst at GrahamFisher.)

What else do you call a bank that pats itself on the back while paying over the past 4 years 20 percent of its net profit for fines and litigation? Name me another kind of firm that can tolerate -- and even brag about -- that kind of business model. 

How does JPMorgan tolerate it? At least three ways: 1) they get nearly free money from the Fed; 2) being Too Big To Fail lets them enjoy lower borrowing costs and higher stock price; and 3) their shareholders pay the fines and litigation fees, not the bank's directors like Jamie Dimon. As long as the managers get their fat paychecks, what do they care?

(Full disclosure: I actually have a Chase account. I don't have much choice, for now. However, most people's beef with Chase is not about how well it serves its retail clients, but how irresponsibly it gambles in risky securities and then tries to cover up its losses. Besides, Chase complained that it loses money on nearly half its retail banking clients. I hope I'm one of them.)

The Price of Evil at JPMorgan Chase

By Richard (RJ) Eskrow

March 20, 2013 | Huffington Post

URL: http://huff.to/148EMUa

Fed prez at CPAC: Break up TBTF banks!

The Left and the Right, perhaps for different reasons, may be converging on a consensus that it's time to break up the unmanageable Too Big To Fail banks.

About Dallas Fed President Richard Fisher's critique of Dodd-Frank, I would remind everybody that Congress has been been waiting for more than two years to adopt regulations while banking industry lobbyists have spent $400 million and submitted thousands of pages of comments and suggested corrections. Thus the very banks that say Dodd-Frank is overly complex are the same ones making it overly complex. For a detailed post-mortem of the Dodd-Frank bill, read Matt Taibbi's "How Wall Street Killed Financial Reform."

Richard Fisher Says Too-Big-To-Fail Banks Need To Be Broken Up

March 16, 2013 | Reuters

By Pedro Nicolaci da Costa

The largest U.S. banks are "practitioners of crony capitalism," need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday.

Richard Fisher, president of the Dallas Fed, has been a critic of Wall Street's disproportionate influence since the financial crisis. But he was now taking his message to an unusual audience for a central banker: a high-profile Republican political action committee.

Fisher said the existence of banks that are seen as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.

"These institutions operate under a privileged status that exacts an unfair tax upon the American people," he said on the last day of the annual Conservative Political Action Conference (CPAC).

"They represent not only a threat to financial stability but to fair and open competition (and) are the practitioners of crony capitalism and not the agents of democratic capitalism that makes our country great," said Fisher, who has also been a vocal opponent of the Fed's unconventional monetary stimulus policies.

Fisher's vision pits him directly against Fed Chairman Ben Bernanke, who recently argued during congressional testimony that regulators had made significant progress in addressing the problem of too big to fail. Bernanke asserted that market expectations that large financial institutions would be rescued is wrong.

But Fisher said mega banks still have a significant funding advantage over its competitors, as well as other advantages. To address this problem, he called for a rolling back of deposit insurance so that it would extend only to deposits of commercial banks, not the investment arms of bank holding companies.

"At the Dallas Fed, we believe that whatever the precise subsidy number is, it exists, it is significant, and it allows the biggest banking organizations, along with their many nonbank subsidiaries - investment firms, securities lenders, finance companies - to grow larger and riskier," he said.

Fisher argued Dodd-Frank financial reforms were overly complex and therefore counterproductive.

"Regulators cannot enforce rules that are not easily understood," he said. 

Justice Dept.: TBTF banks now 'Too Big To Jail'

This is an outrage. The Too Big To Fail banks are now also the Too Big To Jail banks, and that's the official word from America's top prosecutor, Attorney General Eric Holder:

"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them 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."

As Borsage notes, Attorney General Holder's statement renders bank supervision and regulation meaningless:

Holder's outrageous admission means that bankers operate -- and know they operate -- above the law. That renders all the argument about regulations and legal limits laughable. Bankers spend tens of millions lobbying to weaken regulations and starve regulators of authority and resources. But when the action gets hot, the bubble starts to inflate, the music keeps playing, they can trample the laws, mislead the regulators and defraud their customers, swathed in the confidence that the laws will not apply to them.

Meanwhile, Sen. Elizabeth Warren, creator of the Consumer Financial Protection Bureau, noted the hypocrisy of Too Big To Jail:

"If you're caught with an ounce of cocaine, the chances are good you're gonna go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your bed at night -- every single individual associated with this. And I think that's fundamentally wrong."

It's Official: Too Big to Fail Banks Are Too Big to Jail

By Robert L. Borosage

March 7, 2013 | Huffington Post

URL: http://huff.to/13Hlg0I

Sirota: 5 ways GOP can shrink government

Make GOP end the drug war

By David Sirota

March 5, 2013 | Salon

URL: http://www.salon.com/2013/03/05/beating_gop_at_its_own_small_government_game/

Taibbi: U.S. Gov't. let banksters get away with murder

Here's how Matt Taibbi sums up what British bank HSBC did:

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico's Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that "they make the guys on Wall Street look good." The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

"They violated every goddamn law in the book," says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. "They took every imaginable form of illegal and illicit business."

But here's why the U.S Government didn't prosecute HSBC in its own words:

"Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

Again, about a week later, the U.S. Justice Department gave a pass to UBS, which helped to illegally fix the LIBOR rate:

But the Justice Department wasn't finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions ("trillions," with a "t") of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

"Our goal here," Breuer said, "is not to destroy a major financial institution."

HSBC was given warning after warning. An HSBC employee charged with detecting money-laundering blew the whistle to the FBI. Nothing. This gives the lie, once again, that businesses can be left to regulate themselves. 

And, not to sound like a blood-and-guts conservative, but, without the death penalty (prosecutions, jail time) there is no deterrent. We now have, according to our own government, "an unarrestable class" of banksters who are too socially and economically important to prosecute. To which I say: destroy away!  Off with their heads!  After all, isn't "creative destruction" what free enterprise is all about?  

Gangster Bankers: Too Big to Jail

How HSBC hooked up with drug traffickers and terrorists. And got away with it

By Matt Taibbi

February 14, 2013 | Rolling Stone

URL: http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214#ixzz2L6TJerww

GOP establishment pundit: 'Break up the banks!'

Here we have none other than George "I do protest too much I like baseball" Will coming out in favor of breaking up the TBTF banks, albeit four years too late.

His coming to Jesus on this issue should give sufficient "intellectual" cover to conservatives to get behind it.

But getting conservatives on board is just the beginning. The real battle is overcoming the lobbying $ might of the TBTF banks, who are like the mythical giant Argus with 100 eyes that never stop watching Congress and bank supervisors for an instant. So far, the big banks have cared way more about keeping TBTF intact than we have about breaking it up. That's gotta change. And we've got to get $ money and candidates behind the effort.

Time to break up the big banks

By George F. Will

February 9, 2013 | Washington Post

URL: http://wapo.st/XtFxRi

U.S. inequality, or, The cost of missed opportunities

Leopold's article is worth reading just for the chart in the middle. Look at those two lines: the blue one for Wall Street and the banks' wages; the magenta line for the rest of us, in 2010 dollars. Look at how the two lines steadily rise together, year after year... until the Reagan '80s and then... liftoff! The blue line takes off and never looks back, while the line representing our wages goes down and has stayed nearly horizontal since then.

As Leopold assures us, "None of this is accidental."

Use your finger and follow the slope of that magenta colored line and where it should have taken us. Average yearly wages should be around $80,000 by now. Sadly, in fact, the median U.S. household income was only $50,500 in 2011; and a household making more than $100,000 was already in the top 20 percent of all U.S. households. 

Yet imagine if it was the normal thing to have two income-earners in a household (which is the norm nowadays, out of necessity) each making $80,000 a year (which is definitely not the norm)! 

So you want to talk about the cost of national debt? How about the cost of the bailouts that resuscitated and then exalted the Too Big To Fail banks, ensuring the boom-bust financialization of our economy will continue? More to the point: how about the cost of missed opportunities, of missed growth? This is what Paul Krugman, Joseph Stiglitz, et al have been trying to tell us for the past 5 years, this is what Leopold's chart clearly illustrates, but nobody's paying attention. 

Nope, we would rather get pissed off about welfare moms and food stamps. We would rather demonize unions who negotiate freely with their management for win-win wages and benefits. We would rather hate Obama for trying to give us affordable health care. Meanwhile, Tea Party anger at the bailouts has dissipated. They forgot the banks years ago, if they ever cared at all. 

The truth is, conservatives are just fine with two Americas with two completely different economies playing by two sets of rules. Liberals oppose. I oppose. Unlike conservatives who say they yearn for a better time, some mythical golden era, I really do want America to go back to the 1950s... or 60s or 70s, take your pick. They all beat the past 30 years, ever since the "Reagan Revolution."

Inequality Is Much Worse Than You Think

By Les Leopold

February 7, 2013 | Huffington Post

•  In 2010, the top hedge fund manager earned as much in one HOUR as the average (median) family earned in 47 YEARS.

•  The top 25 hedge fund managers in 2010 earned as much as 658,000 entry level teachers.

•  In 1970 the top 100 CEOs made $40 for every dollar earned by the average worker. By 2006, the CEOs received $1,723 for every worker dollar.

As the administration and Congress argue over cuts in social programs, inequality in America grows more extreme each day. Even the great financial crash didn't derail this trend. The richest 400 Americans, for example, increased their wealth by 54 percent between 2005 and 2010, while the median middle-class family saw its wealth decline by 35 percent.

None of this is accidental. 

It's not the result of mysterious global forces, or technology, or China, or structural problems concerning the skills and education of our workforce.  Rather, it is the direct result of policy choices made by Democrats and Republicans alike. Together, they swallowed the Kool-Aid of unregulated market mania, and now we are paying the price.

In exploring this story for my new book, How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America's Wealth , it became clear that New Deal policy makers shared a deep fear that democratic capitalism could not function unless Wall Street was tightly controlled. After all, Europe was sinking into the fascist camp while the new Soviet Union seemed invulnerable to the global depression. As a result, to put it crudely, the New Dealers quickly regulated the hell out of high finance through a myriad of programs including the formation of the S.E.C and Glass-Steagall. The goal was to turn Wall Street into a sleepy place to work, rather than an adrenalin-fueled arena of stock manipulation and fraud. At the same time income tax rates on the wealthy sky-rocketed with top marginal rates reaching over 90 percent. The results were nothing short of stupendous.

•  For more than a quarter of a century there were no financial crises anywhere in the globe (except Brazil in 1964).

•  The average wage in the financial sector collapsed so that its compensation was similar to the average wage of non-financial jobs.

•  Inequality fell rapidly -- the top one percent accounted for more than 23 percent of all income in 1928. By the 1970s it had fallen to less than 9 percent.

These policies gave birth to middle-class America, as the average income of working families grew steadily during the WWII period. This was the new America that would out-compete world communism for the support of working people all over the world.

Then we forgot. 

After a series of economic mishaps, (largely due, but not limited, to the excessive costs of the Vietnam War and the Cold War), both inflation and unemployment rose simultaneously. This led many economists and policy makers to believe that Keynesian economics no longer applied (meaning that you could not successfully use government spending to combat rising unemployment without triggering excessive inflation.) Neo-liberal economists, led by Milton Friedman, filled the breach by arguing that less government and more free enterprise were desperately needed. In fact, they claimed that the determined pursuit of profit invariable created the most wealth (and freedom) for all.

The message was well received, especially by the Reagan administration. Taxes were slashed for the super-rich, (with the blessing of the Democrats, as well.) Unions were suppressed. Regulations, especially on Wall Street, vanished. A boom was to follow to make all boats rise.

It didn't happen as planned.

The income of the average worker stalled and the top 1 percent flourished. Inequality rose as financial gambling became a way of life. (In fact, after accounting for inflation, real average weekly wages in 1977 were higher than they are today.)

Wall Street, however, sprung to life. As deregulation increased, so did Wall Street incomes compared to the rest of the economy.

With the financial sector leading the charge, non-financial CEOs climbed on board. If 30-year-old traders could make tens of millions of dollars playing financial roulette with other people's money, then why shouldn't CEOs get paid more... and more... and more? "Greed is good" became more than a memorable phrase from a movie. It became a badge of honor -- a sign of recognition among the highest-paid players who knew precisely how to game the system.

And then we paid the price with another crash. Not quite as bad as 1929, but close. But this post-crash period is remarkably different. Rather than constraining inequality, the bailouts resurrected high finance and the inequality it inevitably spawns.  Instead of putting our foot back on the neck of finance, we're talking about slashing social programs.  Rather than dramatically increasing taxes on the super-rich through a wealth tax, we're debating how to slash Social Security and Medicare benefits.

Are Americans Socialists?

One reason our priorities are so favorable to inequality is because most Americans have no idea how skewed our income distribution really is. As Michael Norton and Dan Ariely have demonstrated through their research, over 90 percent of Americans prefer to live in a country with an income distribution like Sweden's. That doesn't mean, of course, that Americans are closet social democrats. Rather, it reflects that they believe America is much more egalitarian than it really is.

The Norton/Ariely study builds from an idea developed by philosopher John Rawls in his book, A Theory of Justice. Rawls argues that to create the principles for a fair and just social order we need to take part in a rational but imaginary exercise. We need to imagine ourselves coming together as free and equal individuals to form a compact to create a society. But to engage in our imaginary negotiations, we must do so behind a "veil of ignorance" -- we must have no idea where we would end up in the new society we would be creating. We have to make our choices about the principles of social justice without knowing our individual talents or health or financial resources. So given that "veil of ignorance," what would be our principles of justice? Rawls argues convincingly that we would select two. First, we would only agree to enter a new society if it protected as many of our basic freedoms as possible. And second, we would only permit inequality if it also benefited those with the least incomes and resources in society.

For the last generation, our free market ideologues have argued that inequality would trickle down and, in effect, fulfill Rawls' second condition for justice. However their real-time experiment failed. Increasing inequality has not increased the well-being of the poor, or even the middle class. It is by and for the well-to-do. In short, we are unlikely to find a rational or moral justification for increasing inequality.

For a brief moment, Occupy Wall Street changed the national discourse away from the insanity of belt-tightening and towards inequality and Wall Street. If we care about justice, we need to find ways to do so again.

Bill Black: Loan fraud caused the Great Recession

Sorry, I hate to be that guy who keeps bringing up stuff that happened, like, six years ago, but getting the history right on the financial crisis that caused the Great Recession matters, 'cos this is gonna happen again.

I'm just going to quote two-fisted regulator Bill Black verbatim, because there is only so much condensing I can do:

The ultra brief version is (1) by 2006 roughly 40 percent of total mortgage loans originated were "liar's loans," (fyi, roughly half of all loans called "subprime" were also liar's loans -- the categories are not mutually exclusive, (2) the incidence of fraud among liar's loans is 90 percent, (3) an honest real estate lender would not make pervasively fraudulent loans because doing so would inevitably cause the firm to fail (absent a bailout), (4) liar's loans, however, are optimal "ammunition" for "accounting control fraud", (5) investigations (and logic) have confirmed that it was overwhelmingly lenders and their agents who put the lies in liar's loans, (6) no lender was ever required or encouraged by the government to make or purchase liar's loans -- the opposite was true, the government discouraged such loans and industry documents confirm this fact, (7) liar's loans make an excellent "natural experiment" because even Fannie and Freddie were not encouraged to make these loans -- because they did not aid them in meeting the "affordable housing goals", (8) Fannie and Freddie, eventually, purchased enormous amounts of liar's loans for the same reason that the investment banks (not subject to the CRA or any affordable housing goals did) they created massive (albeit fictional) short-term accounting income, which flowed through to the bonuses of many Fannie and Freddie executives. Let me put these data in another format -- by 2006, lenders were making over two million fraudulent liar's loans annually. Fraudulent liar's loans grew massively because lenders (and purchasers) created perverse incentives to make and purchase massive amounts of these fraudulent loans.

This level of fraud is massively greater than during the S&L debacle, where accounting control fraud never became a dominant national lending strategy. Liar's loans grew so rapidly, and became such a large share of the market that they constituted the loans "on the margin" that hyper-inflated the financial bubble, which drove the Great Recession.

A liar's loan, by the way, is a low-documentation or no-documentation home mortgage loan. This is not the same as a subprime loan, where the lender (usually a bank) knows the borrower has bad credit, sketchy employment history, etc., and therefore gives the borrower a higher rate of interest to compensate the lender for taking such a risk.  

So, the whole line that "lenders were greedy" during the housing bubble is only half true. Mobsters and bank robbers are also greedy, you could say. I'm greedy. You're greedy. Children are greedy with cookies and crayons. The difference is that robbers and banksters are also criminals. Financial fraud and lending fraud are crimes.

Besides the media and of course Wall Street actively covering up this fraud, Dubya and especially Obama deserve the most blame and contempt for referring zero fraud cases to the Justice Department for criminal prosecution. Sums up Black:

One of our mantras in white-collar criminology is: "if you don't look, you won't find." The Frontline documentary begins the process of explaining what those of us who are aware of what a real investigation is and what it requires have been saying for years -- neither the Bush nor the Obama administration has been willing to conduct a real investigation of the elite banksters whose frauds made them wealthy and drove the financial crisis and the Great Recession. This is one of the hallmarks of crony capitalism. It cripples our economy, our democracy, and our integrity.

[...] Any bank that is too big to fail and to prosecute is a clear and present danger that should be promptly shrunk to the point that it can no longer hold the global economy hostage in order to extort immunity from the criminal laws for the controlling officers who became wealthy by being what Akerlof and Romer aptly described as "looters."

The OCC's Tragic Response to the Frontline Expose: The Untouchables 

By William K. Black

January 26, 2013 | Huffington Post

URL: http://www.huffingtonpost.com/william-k-black/frontline-banking-crisis_b_2557146.html