Saturday, September 3, 2011
Full-Blown Civil War Erupts On Wall Street: As Reality Finally Hits The Financial Elite, They Start Turning On Each Other
By David DeGraw, AmpedStatus.com
Finally, after trillions in fraudulent activity, trillions in bailouts, trillions in printed money, billions in political bribing and billions in bonuses, the criminal cartel members on Wall Street are beginning to get what they deserve. As the Eurozone is coming apart at the seams and as the US economy grinds to a halt, the financial elite are starting to turn on each other. The lawsuits are piling up fast. Here's an extensive roundup:
As I reported last week:
Collapse Roundup #5: Goliath On The Ropes, Big Banks Getting Hit Hard, It's A "Bloodbath" As Wall Street's Crimes Blow Up In Their FaceWell, well... here's your Shock & Awe:
Time to put your Big Bank shorts on! Get ready for a run... The chickens are coming home to roost... The Global Banking Cartel's crimes are being exposed left & right... Prepare for Shock & Awe...
First up, this shockingly huge $196 billion lawsuit just filed against 17 major banks on behalf of Fannie Mae and Freddie Mac. Bank of America is severely exposed on this lawsuit. As the parent company of Countrywide and Merrill Lynch they are on the hook for $57.4 billion. JP Morgan is next in the line of fire with $33 billion. And many death spiraling European banks are facing billions in losses as well.
FHA Files a $196 Billion Lawsuit Against 17 Banks
The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.You can read the suits filed against each individual bank here. For some more information read Bloomberg: BofA, JPMorgan Among 17 Banks Sued by U.S. for $196 Billion. Noticeably absent from the list of companies being sued is Wells Fargo.
Complaints have been filed against the following lead defendants, in alphabetical order:
1. Ally Financial Inc. f/k/a GMAC, LLC - $6 billion
2. Bank of America Corporation - $6 billion
3. Barclays Bank PLC - $4.9 billion
4. Citigroup, Inc. - $3.5 billion
5. Countrywide Financial Corporation -$26.6 billion
6. Credit Suisse Holdings (USA), Inc. - $14.1 billion
7. Deutsche Bank AG - $14.2 billion
8. First Horizon National Corporation - $883 million
9. General Electric Company - $549 million
10. Goldman Sachs & Co. - $11.1 billion
11. HSBC North America Holdings, Inc. - $6.2 billion
12. JPMorgan Chase & Co. - $33 billion
13. Merrill Lynch & Co. / First Franklin Financial Corp. - $24.8 billion
14. Morgan Stanley - $10.6 billion
15. Nomura Holding America Inc. - $2 billion
16. The Royal Bank of Scotland Group PLC - $30.4 billion
17. Société Générale - $1.3 billion
These complaints were filed in federal or state court in New York or the federal court in Connecticut. The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent misrepresentation. Certain complaints also allege state securities law violations or common law fraud. [read full FHFA release]
And the suits just keep coming...
BofA sued over $1.75 billion Countrywide mortgage pool
Bank of America Corp (BAC.N) was sued by the trustee of a $1.75 billion mortgage pool, which seeks to force the bank to buy back the underlying loans because of alleged misrepresentations in how they were made. The lawsuit by the banking unit of US Bancorp (USB.N) is the latest of a number of suits seeking to recover investor losses tied to risky mortgage loans issued by Countrywide Financial Corp, which Bank of America bought in 2008. In a complaint filed in a New York state court in Manhattan, U.S. Bank said Countrywide, which issued the 4,484 loans in the HarborView Mortgage Loan Trust 2005-10, materially breached its obligations by systemically misrepresenting the quality of its underwriting and loan documentation. [read more]Bank of America kept AIG legal threat under wraps
Top Bank of America Corp lawyers knew as early as January that American International Group Inc was prepared to sue the bank for more than $10 billion, seven months before the lawsuit was filed, according to sources familiar with the matter. Bank of America shares fell more than 20 percent on August 8, the day the lawsuit was filed, adding to worries about the stability of the largest U.S. bank.... The bank made no mention of the lawsuit threat in a quarterly regulatory filing with the U.S. Securities and Exchange Commission just four days earlier. Nor did management discuss it on conference calls about quarterly results and other pending legal claims. [read more]Nevada Lawsuit Shows Bank of America’s Criminal Incompetence
As we’ve stated before, litigation by attorney general is significant not merely due to the damages and remedies sought, but because it paves the way for private lawsuits. And make no mistake about it, this filing is a doozy. It shows the Federal/state attorney general mortgage settlement effort to be a complete travesty. The claim describes, in considerable detail, how various Bank of America units engaged in misconduct in virtually every aspect of its residential mortgage business. [read more]Nevada Wallops Bank of America With Sweeping Suit; Nationwide Foreclosure Settlement in Peril
The sweeping new suit could have repercussions far beyond Nevada's borders. It further jeopardizes a possible nationwide settlement with the five largest U.S. banks over their foreclosure practices, especially given concerns voiced by other attorneys general, New York's foremost among them.... In a statement, Bank of America spokeswoman Jumana Bauwens said reaching a settlement would bring a better outcome for homeowners than litigation. "We believe that the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality. [read more]FDIC Objects to Bank of America’s $8.5 Billion Mortgage-Bond Accord
The Federal Deposit Insurance Corp. is objecting to Bank of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond settlement with investors, joining investors and states that are challenging the agreement. The FDIC owns securities covered by the settlement and said it doesn’t have enough information to evaluate the accord, according to a filing today in federal court in Manhattan. Bank of America has agreed to pay $8.5 billion to resolve claims from investors in Countrywide Financial mortgage bonds. The settlement was negotiated with a group of institutional investors and would apply to investors outside that group. [read more]Fed asks Bank of America to list contingency plan: report
The Federal Reserve has asked Bank of America Corp to show what measures it could take if business conditions worsen, the Wall Street Journal said, citing people familiar with the situation. BofA executives recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit, the people told the paper. Bank of America and the Fed declined to comment to the Journal. Both could not immediately be reached for comment by Reuters outside regular U.S. business hours. [read more]Bombshell Admission of Failed Securitization Process in American Home Mortgage Servicing/LPS Lawsuit
Wow, Jones Day just created a huge mess for its client and banks generally if anyone is alert enough to act on it. The lawsuit in question is American Home Mortgage Servicing Inc. v Lender Processing Services. It hasn’t gotten all that much attention (unless you are on the LPS deathwatch beat) because to most, it looks like yet another beauty contest between Cinderella’s two ugly sisters. AHMSI is a servicer (the successor to Option One, and it may also still have some Ameriquest servicing).Fraudclosure: MERS Case Filed With Supreme Court
AHMSI is mad at LPS because LPS was supposed to prepare certain types of documentation AHMSI used in foreclosures. AHMSI authorized the use of certain designated staffers signing with the authority of AHSI (what we call robosinging, since the people signing these documents didn’t have personal knowledge, which is required if any of the documents were affidavits). But it did not authorize the use of surrogate signers, which were (I kid you not) people hired to forge the signatures of robosigners. The lawsuit rather matter of factly makes a stunning admission... [read more]
Before readers get worried by virtue of the headline that the Supreme Court will use its magic legal wand to make the dubious MERS mortgage registry system viable, consider the following:Iowa Says State AG Accord Won’t Release Banks From Liability
1. The Supreme Court hears only a very small portion of the cases filed with it, and is less likely to take one with these demographics (filed by a private party, and an appeal out of a state court system, as opposed to Federal court). This case, Gomes v. Countywide, was decided against the plaintiff in lower and appellate court and the California state supreme court declined to hear it
2. If MERS or the various servicers who have had foreclosures overturned based on challenges to MERS thought they’d get a sympathetic hearing at the Supreme Court, they probably would have filed some time ago. MERS have apparently been settling cases rather than pursue ones where it though the judge would issue an unfavorable precedent
3. The case in question, from what the experts I consulted with and I can tell, is not the sort the Supreme Court would intervene in based on the issue raised, which is due process (14th Amendment). But none of us have seen the underlying lower and appellate court cases, and the summaries we’ve seen are unusually unclear as to what the legal argument is. [read more]
The 50-state attorney general group investigating mortgage foreclosure practices won’t release banks from all civil, or any criminal, liability in a settlement, Iowa Attorney General Tom Miller said. [read more]Fed Launches New Formal Enforcement Action Against Goldman Sachs To Review Foreclosure Practices
The Federal Reserve Board has just launched a formal enforcement action against Goldman Sachs related to Litton Loan Services. Litton Loan is the nightmare-ridden mortgage servicing unit, a subsidiary of Goldman, that Goldman has been trying to sell for months. They penned a deal to recently, but the Fed stepped in and required Goldman to end robo-signing taking place at the unit before the sale could be completed. Sounds like this enforcement action is an extension of that requirement. [read more]Goldman Sachs, Firms Agree With Regulator To End 'Robo-Signing' Foreclosure Practices
Goldman Sachs and two other firms have agreed with the New York banking regulator to end the practice known as robo-signing, in which bank employees signed foreclosure documents without reviewing case files as required by law, the Wall Street Journal said. In an agreement with New York's financial-services superintendent, Goldman, its Litton Loan Servicing unit and Ocwen Financial Corp also agreed to scrutinize loan files for evidence they mishandled borrowers' paperwork and to cut mortgage payments for some New York homeowners, the Journal said. [read more]Banks still robo-signing, filing doubtful foreclosure documents
Reuters has found that some of the biggest U.S. banks and other "loan servicers" continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures. In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts. Reuters also identified at least six "robo-signers," individuals who in recent months have each signed thousands of mortgage assignments -- legal documents which pinpoint ownership of a property. These same individuals have been identified -- in depositions, court testimony or court rulings -- as previously having signed vast numbers of foreclosure documents that they never read or checked. [read more]JPMorgan fined for contravening Iran, Cuba sanctions
JPMorgan Chase Bank has been fined $88.3 million for contravening US sanctions against regimes in Iran, Cuba and Sudan, and the former Liberian government, the US Treasury Department announced Thursday. The Treasury said that the bank had engaged in a number of "egregious" financial transfers, loans and other facilities involving those countries but, in announcing a settlement with the bank, said they were "apparent" violations of various sanctions regulations. [read more]This Is Considered Punishment? The Federal Reserve Wells Fargo Farce
What made the news surprising, of course, was that the Federal Reserve has rarely, if ever, taken action against a bank for making predatory loans. Alan Greenspan, the former Fed chairman, didn’t believe in regulation and turned a blind eye to subprime abuses. His successor, Ben Bernanke, is not the ideologue that Greenspan is, but, as an institution, the Fed prefers to coddle banks rather than punish them.Exclusive: Regulators seek high-frequency trading secrets
That the Fed would crack down on Wells Fargo would seem to suggest a long-overdue awakening. Yet, for anyone still hoping for justice in the wake of the financial crisis, the news was hardly encouraging. First, the Fed did not force Wells Fargo to admit guilt — and even let the company issue a press release blaming its wrongdoing on a “relatively small group.”
The $85 million fine was a joke; in just the last quarter, Wells Fargo’s revenues exceeded $20 billion. And compensating borrowers isn’t going to hurt much either. By my calculation, it won’t top $20 million. [read more]
U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes. The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA's market regulation unit. [read more]And here's part of the Collapse Roundup I wrote on August 25th, referenced in the beginning of this report - as you will see, I would probably make a lot more money as an investment adviser:
Collapse Roundup #5: Goliath On The Ropes, Big Banks Getting Hit Hard, It's A "Bloodbath" As Wall Street's Crimes Blow Up In Their Face
Time to put your Big Bank shorts on! Get ready for a run...
The chickens are coming home to roost. Reality is catching up with the market riggers (Fed, ECB, PPT, CIA) and the "too big to fail" banks are getting whacked. Trillions of dollars in bailouts and legalized (FASB) accounting fraud cannot save these insolvent zombie banks any longer. The Grim Reaper is on the horizon and his sickle will do what paid off politicians won't, cut 'em down to size. So get your silver stake ready, time to plunge it into their vampire squid hearts....
What about Warren Buffet? He saved Goldman Sachs with a bailout in 2008. Can he save Bank of America?...
Warren’s bailout will help BofA over the short run, but $5 billion is just a drop in the bucket when it comes to their problems. The only thing his $5 billion will accomplish is a temporary run up in stock value so everyone who has been killed on the plummeting stock price can then jump out without complete loss....
Trouble a-comin'...
Goldman Sachs TANKS After CEO Lloyd Blankfein Hires Famous Defense Lawyer
Speaking of hiring lawyers...Is the Goldman Sachs CEO facing a new lawsuit?
The market seems to think so. Goldman Sachs just tanked in minutes before the close after news that Lloyd Blankfein hired a lawyer famous for defending vilified execs. It's back up a bit since dropping over 5%, but the news is still concerning.
It's unclear whether the lawyer is for him, Goldman Sachs, or both, but Goldman Sachs's CEO Lloyd Blankfein hired Reid Weingarten, a high profile defense attorney who says "I'm used to these monstrously difficult cases where everybody hates my clients," according to Reuters.
Reuters says the hire might have something to do with accusations of Blankfein's committing perjury. Or something else:
One former federal prosecutor, who was not authorized to speak publicly, said Blankfein may have hired outside counsel after receiving a request from investigators for documents or other information. [read full report]
The Global Banking Cartel's Crimes Are Being Exposed Left & Right...
Blowing Up In Their Face... Prepare for Shock & Awe...
BOOM! Moody's exposed:
MOODY'S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts
A former senior analyst at Moody's has gone public with his story of how one of the country's most important rating agencies is corrupted to the core.BOOM! The SEC Caught Covering Up Wall Street Crimes:
The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.
Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform....
Here are some key points:
* Moody's ratings often do not reflect its analysts' private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings--but then vote with management to give the securities the higher ratings that issuer clients want.
* Moody's management and "compliance" officers do everything possible to make issuer clients happy--and they view analysts who do not do the same as "troublesome." Management employs a variety of tactics to transform these troublesome analysts into "pliant corporate citizens" who have Moody's best interests at heart.
* Moody's product managers participate in--and vote on--ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody's business.
* At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management's emphasis on giving issuers what they wanted, skipped the hearings altogether. [read full report]
Matt Taibbi Exposes How SEC Shredded Thousands of Investigations
An explosive new report in Rolling Stone magazine exposes how the U.S. Securities and Exchange Commission destroyed records of thousands of investigations, whitewashing the files of some of the nation’s largest banks and hedge funds, including AIG, Wells Fargo, Lehman Brothers, Goldman Sachs, Bank of America and top Wall Street broker Bernard Madoff. Last week, Republican Sen. Chuck Grassley of Iowa said an agency whistleblower had sent him a letter detailing the unlawful destruction of records detailing more than 9,000 information investigations. We speak with Matt Taibbi, the political reporter for Rolling Stone magazine who broke this story in his latest article....
KA-BOOM! The Fed And All Their Crony-Capitalist Cartel Members Exposed, Yet Again:
Wall Street Pentagon Papers Part III – Are The Federal Reserve’s Crimes Still Too Big To Comprehend?
Speaking of the $16 trillion GAO audit...Another day, another trillion plus in secret Federal Reserve “bailouts” revealed. Bloomberg News exposes this latest Fed “deal” after winning a long Freedom of Information Act (FOIA) legal battle to get the details on what was done with the American people’s money. Their report runs with an AmpedStatus style headline: “Wall Street Aristocracy Got $1.2 Trillion From Fed.”
The aristocracy is alive and well… thanks to the Fed, of course.
Keep in mind, this $1.2 trillion is in addition to the $16 trillion the Government Accountability Office (GAO) audit revealed and the over $2 trillion in Quantitative Easing the Fed dished out, not to mention the now continued promise of the Zero Interest Rate Policy (ZIRP). This is also separate from the $700 billion TARP program that Congress approved. This is yet another unknown secret program, throwing another mere $1.2 trillion in public money at the Wall Street elite (global banking cartel), just being revealed now.
Those of us paying attention over the past three years have had Fed crony-capitalism on steroids fatigue for awhile now. Nonetheless, this is deja vu all over again as another mindbogglingly huge story that must be covered comes to light.
Here are the details of this latest revelation:
[read full report]
BOOM! GAO audit exposed, missing some vital details:
More on how the GAO's Fed audit failed to disclose some dirty secrets about BlackRock and JP Morgan
In its review of the Fed's outsourcing practices, it failed to mention the most damaging and suspicious sole-source (no bid) contract awarded to BlackRock, which was for handling the New York Fed's toxic Bear Stearns portfolio, otherwise known as Maiden Lane. This contract would generate $108,000,000 in fees and was one of the largest awarded during the bailout period, but it might also have saved JP Morgan $1.1 billion in losses from its Bear Stearns acquisition....BOOM! Bear Stearns exposed:
Also, BlackRock was also one of the managers of the NY Fed's separate $1.25 trillion MBS purchase program as part of QE1. Contrary to the lie on the NY Fed's webpage (that the MBS auctions were conducted via competitive bidding), the NY Fed's own purchasing manager, Brian Sack, admitted in a paper that, "the MBS purchases were arranged with primary dealer counterparties directly, [and] there was no auction mechanism to provide a measure of market supply."
Putting it all together, it looks like Jamie Dimon signed off on hiring BlackRock for no justifiable reason to trade the very Maiden Lane portfolio that could have caused his bank, JP Morgan, to lose up to $1.1 billion. And, it was entirely possible that BlackRock saved the portfolio by trading the MBS portion of ML with the New York Fed directly as QE1 was underway. [read full report]
Report Says Bear Stearns Executives Sold Illegal RMBS and Covered It Up
Former back office employees from Bear Stearns are coming out of the woodwork to explain how Tom Marano’s mortgage group cheated their own clients out of billions. This week I reported at The Distressed Debt Report, EMC insiders say they were told to make up the classification for whole loans, packaged into mortgage securities, to get them switched out of the trust. By classifying the loans as ‘prepaid’ or having ‘subsequent recoveries’ Bear employees were able to fool the trustee into giving them back loans they were not able to legally service. A move New York Attorney General Eric Schneiderman is actively investigating now.The big banks are getting lit up!
In my latest DealFlow story we hear from EMC staffers who describe how subprime loans, that would have been sold by Bear Stearns trader Jeff Verschleiser’s team, never had a proper servicing license in West Virginia when they were packaged into the residential mortgage backed security. In 2003 Bear/EMC put $100 million of subprime loans from West Virginia into a few RMBS transactions. EMC, the banks wholly owned mortgage servicing shop, would service all of Bear’s RMBS after they were sold.
A year latter, when senior executies realized the mishap instead of Bear going out and informing their regulator and applying for a license, they orchestrated a cover up and even threaten EMC employees not to talk about it. [read full report]
You shall reap what you sow.
Karma is a ... bit@h. [read full report]
Let's end with this video. We need to keep in mind that the Federal Reserve has known about all of this criminal activity from the start. Yet, they have done everything they could, and are still trying, to keep this criminal operation up and running. As all these criminal banks begin to blow up, let's not forget who their central bank is and what they have done to the American people.
Cenk, take it away and drive the point home:
- David DeGraw is the founder and editor of AmpedStatus.com. His long-awaited book, The Road Through 2012: Revolution or World War III, will finally be released on September 28th. He can be emailed at David[@]AmpedStatus.com. You can follow David's reporting daily on his new personal website: DavidDeGraw.org
Friday, August 12, 2011
Both Consumer Confidence And The Labor Participation Rate Are At A 30 Year Low ... That's Not A Coincidence
A new poll from Thomson Reuters and University of Michigan shows that consumer confidence is the lowest its been for 30 years.
A new report from Wells Fargo Securities shows that the labor participation rate is also "at a 30-year low".
That's not a coincidence.
If people can't find work, they'll have no confidence in their ability to pay for the things they want or need, or in the economy as a whole.
The administration - despite its rhetoric - is doing nothing to decrease unemployment (and see this), and is solely helping the super-rich at the expense of everyone else.
Given this situation, it shouldn't be a huge surprise that:
Monday, August 8, 2011
Obama The Pretend Populist: Says He's Fighting For Jobs ... But His Policies Only INCREASE Unemployment
Mitt Romney was properly criticized for being a fake populist when he said:
I'm also unemployed.
He's worth more than $200 million, so he doesn't need to work.
But president Obama is no better.
Obama Fights for Jobs ... In Word Only
Obama says he is "pivoting to jobs" now that the lame debt ceiling compromise was reached.
But as Huffington Post notes, he's said the same things many times in the past:
Indeed, while Obama talks a good game, his actions haven't actually focused on job creation.
Obama Administration Policies Are Actually Increasing Unemployment
As I noted last month:
Government policy guarantees rising unemployment.
For example, I wrote last September:I predicted a growing, long-term unemployment problem last year.
***
In fact, as demonstrated below, the government's actions have directly contributed to the rising tide of unemployment.The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years
President Eisenhower re-wrote the tax laws so that they would favor investment abroad. President Kennedy railed against tax provisions that "consistently favor United States private investment abroad compared with investment in our own economy", but nothing has changed under either Democratic or Republican administrations.
For the last 50-plus years, the tax benefits to American companies making things abroad has encouraged jobs to move out of the U.S.
AP noted last year:
Most of the Emergency Money Went AbroadCorporate profits are up. Stock prices are up. So why isn't anyone hiring?Actually, many American companies are — just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.
***
The trend helps explain why unemployment remains high in the United States, edging up to 9.8% last month, even though companies are performing well: All but 4% of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9%, says Robert Scott, the institute's senior international economist.
"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.
***
Many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.
In addition, a large percentage of the bailouts went to foreign banks (and see this). And so did most of money from the second round of quantitative easing.
That's not going to help the American worker.
Continuing on with my post from last September:The Government Has Encouraged Mergers
The government has actively encouraged mergers, which destroy jobs.
For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry.
This is nothing new.
Citigroup's former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Alan Greenspan told him, “I have nothing against size. It doesn’t bother me at all”.
And the government has actively encouraged the big banks to grow into mega-banks.
The Government Has Let Unemployment Rise in an Attempt to Fight Inflation
As I noted last year:
In fact, the Fed intentionally curbed lending by banks in an attempt to stem inflation, [and see this] without addressing whether public banks could provide credit.The Federal Reserve is mandated by law to maximize employment. The relevant statute states:
***The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke failed to do so.
Ryan Grim argues that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:In fact, [many] leading economists say that - under Mr. Bernanke's leadership - America is suffering a permanent destruction of jobs.The Fed is mandated by law to maximize employment, but focuses on inflation -- and "expected inflation" -- at the expense of job creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.
Board members expressed concern "that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation." That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting...
Suffering high unemployment in order to keep inflation low cuts against the Fed's legal mandate. Or, to put it more bluntly, it may be illegal.
For example, JPMorgan Chase’s Chief Economist Bruce Kasman told Bloomberg:
[We've had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.The chief economists for Wells Fargo Securities, John Silvia, says:And former Merrill Lynch chief economist David Rosenberg writes:Companies “really have diminished their willingness to hire labor for any production level,” Silvia said. “It’s really a strategic change,” where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.
The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed — again a record high — and this is a proxy for permanent job loss, in other words, these jobs are not coming back. Against that backdrop, the number of people who have been looking for a job for at least six months with no success rose a further half-percent in August, to stand at 5 million — the long-term unemployed now represent a record 33% of the total pool of joblessness.And see this.The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands
... FDR’s Fed chairman Marriner S. Eccles explained:
As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.***
When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the "too big to fails" crowd out everyone else.
And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion's share of economic activity. If most consumers are out of chips, the economy slumps.And unemployment soars.
As former Secretary of Labor Robert Reich wrote yesterday:
Where have all the economic gains gone? Mostly to the top.
***
It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.
***
THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.
***
And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity.
And see Wednesday's extensive post on government policy increasing inequality.
The Rich Love Unemployment
As Mark Provost has pointed out - the rich love high unemployment.
Because all branches of government and the Federal Reserve are wholly captured by the top .1% (and see this, this and this), they are not very motivated to decrease unemployment.
Indeed, the government has made it official policy to protect the fat cats instead of helping the little guy.
Not "More Stimulus" Versus "Debt Reduction" - But Policy for the Wealthiest Versus Policy for the People
As I noted in December, Keynesians who think more stimulus will fix everything and conservatives who think that cutting the debt will solve our problems are both painting with too broad a brush:
I am not really pro- or anti- any school of economics ... I am simply for doing what will work and against doing what won't work.
As I pointed out on August 11th:
In truth and in fact, the government's policies are not only not working to stem the rising tide of unemployment, they are making it worse."Deficit doves" - i.e. Keynesians like Paul Krugman - say that unless we spend much more on stimulus, we'll slide into a depression. And yet the government isn't spending money on the types of stimulus that will have the most bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps - let alone rebuilding America's manufacturing base. See this, this and this. [Indeed, as Steve Keen demonstrated last year, it is the American citizen who needs stimulus, not the big banks.]
***
Keynes implemented his New Deal stimulus at the same time that Glass-Steagall and many other measures were implemented to plug the holes in a corrupt financial system. The gaming of the financial system was decreased somewhat, the amount of funny business which the powers-that-be could engage in was reined in to some extent.
As such, the economy had a chance to recover (even with the massive stimulus of World War II, unless some basic level of trust had been restored in the economy, the economy would not have recovered).
Today, however, Bernanke, Summers, Dodd, Frank and the rest of the boys haven't fixed any of the major structural defects in the economy. So even if Keynesianism were the answer, it cannot work without the implementation of structural reforms to the financial system.
A little extra water in the plumbing can't fix pipes that have been corroded and are thoroughly rotten. The government hasn't even tried to replace the leaking sections of pipe in our economy.
Forget the whole "Keynesian" versus "deficit hawk" debate. The real debate is between good and bad policy.
The following articles provide details:
Indeed, the government hasn't spent money on the right kind of things to stimulate employment, and the "stimulus" money is really going to big banks and the military. See this and this.
And the government's lame attempts to prop up asset prices and leverage have failed miserably, so that malinvestments can't be cleared, and so we have a stagnant, zombie economy which prevents job creation.
In other words, we have the worst possible world, where neither Keynesian or Austrian wisdom are being followed, but the country is being plundered by the richest and everyone else is suffering.
Friday, July 22, 2011
The Great Global Debt Depression: It’s All Greek To Me
Andrew Gavin Marshall is an independent researcher and writer, who has authored dozens of articles, essays, and reports online and for various magazines and other publications, and is regularly interviewed by radio and television programs on a number of different issues. He recently co-edited a book with Professor Michel Chossudovsky entitled, “The Global Economic Crisis: The Great Depression of the XXI Century,” a collection of essays by a number of authors and researchers presenting a more critical and nuanced examination of the economic crisis that began in 2008.The Great Global Debt Depression: It’s All Greek To Me
By Andrew Gavin Marshall
Introduction
In late June of 2011, the Greek government passed another round of austerity measures, ostensibly aimed at getting Greece “back on track” to economic progress, but in reality, implementing a systematic program of ‘social genocide’ in the name of servicing an endless and illegitimate debt to foreign banks. Right on cue, protests and riots broke out in Athens against the draconian measures, and the state moved in to do what states do best: oppress the people with riot police, tear gas and bashing batons, leaving roughly 300 people injured.
Is Greece simply a case of a country full of lazy people who spent beyond their means and are now paying for their own decadence? Or, is there something much larger at stake – and at play – here? Greece is, in fact, a microcosm of the global economy: mired in excessive debt, economically ruined, increasingly politically repressive and socially explosive. This report takes a look at the case of the Greek debt crisis specifically, and places it within a wider global context. The conclusion is clear: what happens in Greece will happen here.
This report examines the Greek crisis, as well as the larger global economic crisis, including the origins of the housing bubble, the bailouts, the banks, and the major actors and institutions which will come to dominate the stage over the next decade in what will play out as ‘The Great Global Debt Depression.’
Thursday, July 21, 2011
Senator Sanders: "The Fed Outsourced Most Of Its [$16 Trillion In] Emergency Lending Programs To Private Contractors, Many Of Which Also Were Recipients Of Extremely Low-Interest And Then-Secret Loans [In] No-bid Contracts ... The Federal Reserve Must Be Reformed To Serve The Needs Of Working Families, Not Just CEOs On Wall Street"
Senator Sanders writes today:
Of course, the Fed and other central banks are owned by the big private banks, and they - not the people of the countries in which they sit - are the stakeholders who they serve.The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.
For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.
The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.
The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.
A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. "The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street."
To read the GAO report, click here.
Saturday, July 9, 2011
Of Course Unemployment Is Rising ... Government Policy Is GUARANTEEING It
In fact, as I have demonstrated, unemployment may rival the Great Depression.
These bad numbers caught many by surprise. But as I repeatedly noted, government policy guarantees rising unemployment.
For example, I wrote last September:
I predicted a growing, long-term unemployment problem last year.
***
In fact, as demonstrated below, the government's actions have directly contributed to the rising tide of unemployment.The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years
President Eisenhower re-wrote the tax laws so that they would favor investment abroad. President Kennedy railed against tax provisions that "consistently favor United States private investment abroad compared with investment in our own economy", but nothing has changed under either Democratic or Republican administrations.
For the last 50-plus years, the tax benefits to American companies making things abroad has encouraged jobs to move out of the U.S.
AP noted last year:
Most of the Emergency Money Went AbroadCorporate profits are up. Stock prices are up. So why isn't anyone hiring?Actually, many American companies are — just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.
***
The trend helps explain why unemployment remains high in the United States, edging up to 9.8% last month, even though companies are performing well: All but 4% of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9%, says Robert Scott, the institute's senior international economist.
"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.
***
Many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.
In addition, a large percentage of the bailouts went to foreign banks (and see this). And so did most of money from the second round of quantitative easing.
That's not going to help the American worker.
Continuing on with my post from last September:
The Government Has Encouraged Mergers
The government has actively encouraged mergers, which destroy jobs.
For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry.
This is nothing new.
Citigroup's former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Alan Greenspan told him, “I have nothing against size. It doesn’t bother me at all”.
And the government has actively encouraged the big banks to grow into mega-banks.
The Government Has Let Unemployment Rise in an Attempt to Fight Inflation
As I noted last year:
In fact, the Fed intentionally curbed lending by banks in an attempt to stem inflation, [and see this] without addressing whether public banks could provide credit.The Federal Reserve is mandated by law to maximize employment. The relevant statute states:
***The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke failed to do so.
Ryan Grim argues that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:In fact, [many] leading economists say that - under Mr. Bernanke's leadership - America is suffering a permanent destruction of jobs.The Fed is mandated by law to maximize employment, but focuses on inflation -- and "expected inflation" -- at the expense of job creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.
Board members expressed concern "that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation." That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting...
Suffering high unemployment in order to keep inflation low cuts against the Fed's legal mandate. Or, to put it more bluntly, it may be illegal.
For example, JPMorgan Chase’s Chief Economist Bruce Kasman told Bloomberg:
[We've had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.The chief economists for Wells Fargo Securities, John Silvia, says:And former Merrill Lynch chief economist David Rosenberg writes:Companies “really have diminished their willingness to hire labor for any production level,” Silvia said. “It’s really a strategic change,” where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.
The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed — again a record high — and this is a proxy for permanent job loss, in other words, these jobs are not coming back. Against that backdrop, the number of people who have been looking for a job for at least six months with no success rose a further half-percent in August, to stand at 5 million — the long-term unemployed now represent a record 33% of the total pool of joblessness.And see this.The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands
... FDR’s Fed chairman Marriner S. Eccles explained:
As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.***
When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the "too big to fails" crowd out everyone else.
And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion's share of economic activity. If most consumers are out of chips, the economy slumps.And unemployment soars.
As former Secretary of Labor Robert Reich wrote yesterday:
Where have all the economic gains gone? Mostly to the top.
***
It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.
***
THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.
***
And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity.
And see Wednesday's extensive post on government policy increasing inequality.
The Rich Love Unemployment
As Mark Provost has pointed out - the rich love high unemployment.
Because all branches of government and the Federal Reserve are wholly captured by the top .1% (and see this, this and this), they are not very motivated to decrease unemployment.
Indeed, the government has made it official policy to protect the fat cats instead of helping the little guy.
Not "More Stimulus" Versus "Debt Reduction" - But Policy for the Wealthiest Versus Policy for the People
As I noted in December, Keynesians who think more stimulus will fix everything and conservatives who think that cutting the debt will solve our problems are both painting with too broad a brush:
I am not really pro- or anti- any school of economics ... I am simply for doing what will work and against doing what won't work.
As I pointed out on August 11th:
In truth and in fact, the government's policies are not only not working to stem the rising tide of unemployment, they are making it worse."Deficit doves" - i.e. Keynesians like Paul Krugman - say that unless we spend much more on stimulus, we'll slide into a depression. And yet the government isn't spending money on the types of stimulus that will have the most bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps - let alone rebuilding America's manufacturing base. See this, this and this. [Indeed, as Steve Keen demonstrated last year, it is the American citizen who needs stimulus, not the big banks.]
***
Keynes implemented his New Deal stimulus at the same time that Glass-Steagall and many other measures were implemented to plug the holes in a corrupt financial system. The gaming of the financial system was decreased somewhat, the amount of funny business which the powers-that-be could engage in was reined in to some extent.
As such, the economy had a chance to recover (even with the massive stimulus of World War II, unless some basic level of trust had been restored in the economy, the economy would not have recovered).
Today, however, Bernanke, Summers, Dodd, Frank and the rest of the boys haven't fixed any of the major structural defects in the economy. So even if Keynesianism were the answer, it cannot work without the implementation of structural reforms to the financial system.
A little extra water in the plumbing can't fix pipes that have been corroded and are thoroughly rotten. The government hasn't even tried to replace the leaking sections of pipe in our economy.
Forget the whole "Keynesian" versus "deficit hawk" debate. The real debate is between good and bad policy.
The following articles provide details:
Indeed, the government hasn't spent money on the right kind of things to stimulate employment, and the "stimulus" money is really going to big banks and the military. See this and this.
And the government's lame attempts to prop up asset prices and leverage have failed miserably, so that malinvestments can't be cleared, and so we have a stagnant, zombie economy which prevents job creation.In other words, we have the worst possible world, where neither Keynesian or Austrian wisdom are being followed, but the country is being plundered by the richest and everyone else is suffering.
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