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Banksters Live Up to the Nickname

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Matt Taibbi has done it again.  His latest article in Rolling Stone focused on the case of United States of America v. Carollo, Goldberg and Grimm, in which the Obama Justice Department actually prosecuted some financial crimes.  The three defendants worked for GE Capital (the finance arm of General Electric) and were involved in a bid-rigging conspiracy wherein the prices paid by banks to bond issuers were reduced (to the detriment of the local governments who issued those bonds).

The broker at the center of this case was a firm known as CDR.  CDR would be hired by a state or local government which was planning a bond issue.  Banks would then submit bids which are interest rates paid to the issuer for holding the money until payments became due to the various contractors involved in the project which was the subject of the particular bond.  The brokers would tip off a favored bank about the amounts of competing bids in return for a kickback based on the savings made by avoiding an unnecessarily high bid.  In the Carollo case, the GE Capital employees were supposed to be competing with other banks who would submit bids to CDR.  CDR would then inform the bidders on how to coordinate their bids so that the bid prices could be kept low and the various banks could agree among themselves as to which entity would receive a particular bond issue.  Four of the banks which “competed” against GE Capital in the bidding were UBS, Bank of America, JPMorgan Chase and Wells Fargo.  Those four banks paid a total of $673 million in restitution after agreeing to cooperate in the government’s case.

The brokers would also pay-off politicians who selected their firm to handle a bond issue.  Matt Taibbi gave one example of how former New Mexico Governor Bill Richardson received $100,000 in campaign contributions from CDR.  In return, CDR received $1.5 million in public money for services which were actually performed by another broker – at an additional cost.

Needless to say, the mainstream news media had no interest in covering this case.  Matt Taibbi quoted a remark made to the jury at the outset of the case by the trial judge, Harold Baer:  “It is unlikely, I think, that this will generate a lot of media publicity”.  Although the judge’s remark was intended to imply that the subject matter of the case was too technical and lacking in the “sex appeal” of the usual evening news subject, it also underscored the aversion of mainstream news outlets to expose the wrongdoing of their best sponsors:  the big banks.

Beyond that, this case exploded a myth – often used by the Justice Department as an excuse for not prosecuting financial crimes.  As Taibbi explained at the close of the piece:

There are some who think that the government is limited in how many corruption cases it can bring against Wall Street, because juries can’t understand the complexity of the financial schemes involved.  But in USA v. Carollo, that turned out not to be true.  “This verdict is proof of that,” says Hausfeld, the antitrust attorney.  “Juries can and do understand this material.”

One important lesson to be learned from the Carollo case is a simple fact that the mainstream news media would prefer to ignore:  This is but one tiny example of the manner in which business is conducted by the big banks.  As Matt Taibbi explained:

The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartel­style scheming, are all legitimate market processes that lead to legitimate price discovery.  In this lunatic worldview, the bid­rigging scheme was a system that created fair returns for everyone.

*   *   *

That, ultimately, is what this case was about.  Capitalism is a system for determining objective value.  What these Wall Street criminals have created is an opposite system of value by fiat. Prices are not objectively determined by collisions of price information from all over the market, but instead are collectively negotiated in secret, then dictated from above

*   *   *

Last year, the two leading recipients of public bond business, clocking in with more than $35 billion in bond issues apiece, were Chase and Bank of America – who combined had just paid more than $365 million in fines for their role in the mass bid rigging. Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again.  Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.

By now we are all familiar with the “revolving door” principle, wherein prosecutors eventually find themselves working for the law firms which represent the same financial institutions which those prosecutors should have dragged into court.  At the Securities and Exchange Commission, the same system is in place.  Worst of all is the fact that our politicians – who are responsible for enacting laws to protect the public from such criminal enterprises as what was exposed in the Carollo case – are in the business of lining their pockets with “campaign contributions” from those entities.  You may have seen Jon Stewart’s coverage of Jamie Dimon’s testimony before the Senate Banking Committee.  How dumb do the voters have to be to reelect those fawning sycophants?

Yet it happens  .  .  .  over and over again.  From the Great Depression to the Savings and Loan scandal to the financial crisis and now this bid-rigging scheme.  The culprits never do the “perp walk”.  Worse yet, they continue on with “business as usual” partly because the voting public is too brain-dead to care and partly because the mainstream news media avoid these stories.  Our political system is incapable of confronting this level of corruption because the politicians from both parties are bought and paid for by the banking cabal.  As  Paul Farrell of MarketWatch explained:

Seriously, folks, the elections are relevant.  Totally.  Oh, both sides pretend it matters.  But it no longer matters who’s president.  Or who’s in Congress.  Money runs America.  And when it comes to the public interest, money is not just greedy, but myopic, narcissistic and deaf.  Money from Wall Street bankers, Corporate CEOs, the Super Rich and their army of 261,000 highly paid mercenary lobbyists.  They hedge, place bets on both sides.  Democracy is dead.

Why would anyone expect America to solve any of its most pressing problems when the officials responsible for addressing those issues have been compromised by the villains who caused those situations?


 

More Dirty Laundry

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Will an Independent candidate please step into the 2012 Presidential campaign?

On November 6, 2012 a good number of citizens who voted for Barack Obama in 2008 will realize that they are faced with the choice of voting for either Black Romney or White Romney.  As a result, those former Obama supporters won’t bother to vote at all.  Barack Obama won’t be seen as a significantly dissimilar alternative to Romney.  The indiscernible difference between those candidates would not justify the effort of standing in line at the polls.

Voter disappointment with the President is now being overshadowed by the rising pile of dirty laundry he has accumulated during his tenure in the White House.  The burgeoning Solyndra scandal is being mishandled by the President himself.  You would think he had learned a lesson from Weinergate, to the effect that fallacious denials about scandal allegations can create more trouble for a politician than the scandal itself.  FactCheck.org recently caught Obama in a lie about the loan guarantee program exploited by Solyndra:

Obama referred to Solyndra’s loan at an Oct. 6 press conference as “a loan guarantee program that predates me.”  That’s not accurate. It’s true that the Energy Policy Act of 2005 created a loan guarantee program for clean-energy companies developing “innovative technologies.”  But Solyndra’s loan guarantee came under another program created by the president’s 2009 stimulus for companies developing “commercially available technologies.”

*   *   *

In a March 2009 press release announcing a $535 million loan guarantee for Solyndra, the Energy Department said:  “This loan guarantee will be supported through the President’s American Recovery and Reinvestment Act, which provides tens of billions of dollars in loan guarantee authority to build a new green energy economy.”  Damien LaVera, an Energy Department spokesman, confirmed that Solyndra’s funding came solely from section 1705.

That revelation is simply the first layer of frosting on a cake with some noxious ingredients baked into the recipe.  ABC News provided this report:

An elite Obama fundraiser hired to help oversee the administration’s energy loan program pushed and prodded career Department of Energy officials to move faster in approving a loan guarantee for Solyndra, even as his wife’s law firm was representing the California solar company, according to internal emails made public late Friday.

“How hard is this? What is he waiting for?” wrote Steven J. Spinner, a high-tech consultant and energy investor who raised at least $500,000 for the candidate before being appointed to a key job helping oversee the energy loan guarantee program.  “I have OVP [the Office of the Vice President] and WH [the White House] breathing down my neck on this.”

Many of the emails were written just days after Spinner accepted a three-page ethics agreement in which he pledged he would “not participate in any discussion regarding any application involving [his wife’s law firm] Wilson [Sonsini Goodrich & Rosati].”

*   *   *

Recovery Act records show Allison Spinner’s law firm, Wilson Sonsini, received $2.4 million in federal funds for legal fees related to the $535 million Energy Department loan guarantee to Solyndra.  That ethics agreement said his wife would forgo pay “earned as a result of its representation of applicants in programs within your official duties.”

Although many Obama apologists have characterized the Solyndra scandal a nothing more than a “Republican smear campaign”, Ryan Reilly of the non-Republican Talking Points Memo offered this analysis of the allegations:

Solyndra was raided by the FBI earlier this month.  The Government Accountability Office had raised concerns that the Energy Department agreed to back five companies — including Solyndra — with loans without properly assessing their risk of failure.  All this from a company that Obama described as a company with a “true engine of economic growth.”

And the details that are emerging from the investigators at the Republican-controlled House Energy and Commerce Committee are making things look worse for the administration.

Nine days before the administration formally announced the loan, a White House budget analyst wrote an email calling the deal “NOT ready for prime time,” according to documents given to ABC News by the House Energy and Commerce Committee investigators.

Despite the ongoing Occupy Wall Street protest, President Obama has seen fit to launch an assault on the Sarbanes-Oxley Act, which was created after the Enron scandal.  Sarbanes-Oxley most notably assigned responsibility to corporate officers for the accuracy and validity of corporate financial reports and established criminal penalties for destruction or alteration of financial records, interference with investigations, as well as providing protection for whistle-blowers.  The Business Insider reports that President Obama is advancing the recommendations of his jobs council which call for attenuating the Sarbanes-Oxley regulations, in order to make it easier for small companies to go public, by way of initial public offerings (IPOs):

The jobs council, headed by GE CEO Jeff Immelt and including Sheryl Sandberg and Steve Case, found that the Sarbanes-Oxley was a key factor in reducing the number of IPOs smaller than $50 million from 80 percent of all IPOs in the 1990s to 20 percent in the 2000s.

Obama also said the “Spitzer Decree,” which bans investment banks from using banking revenues to pay for research and expert analysis of publicly-traded companies, deserves reconsideration as well.  The council said the rule shares the blame for the decline in IPOs among small companies.

Yves Smith of Naked Capitalism reacted to the news with this remark:

This is ridiculous.  Do you know what happens with small stocks?  Pump and dump (and I’ve seen this at closer range than I would like.  I had a former client get involved by having his private company merged into a public company controlled by small stock low lifes.  They ran it from $1 to about $12 twice, and then it went back to under $2 and stayed there).

We were reminded of Obama’s hypocrisy on the subject of financial reform by a fantastic article written by Suzanna Andrews for Vanity Fair, which detailed how Elizabeth Warren was thrown under the bus by Obama, who shocked his supporters with his refusal to nominate Warren as chair of the Consumer Financial Protection Bureau (which she created).

Another disillusioned 2008 Obama supporter, Bill McKibben, wrote an essay for Tom’s Dispatch about how the President has sold out to Big Oil:

Here’s an example:  by year’s end the president has said he will make a decision on the Keystone XL pipeline, which would carry crude oil from the tar sands of northern Alberta to the Gulf of Mexico.  The nation’s top climate scientists sent the administration a letter indicating that such a development would be disastrous for the climate.  NASA’s James Hansen, the government’s top climate researcher, said heavily tapping tar-sands oil, a particularly “dirty” form of fossil fuel, would mean “game over for the climate.” Ten of the president’s fellow recent Nobel Peace Prize laureates pointed out in a letter that blocking the prospective pipeline would offer him a real leadership moment, a “tremendous opportunity to begin transition away from our dependence on oil, coal, and gas.”

But every indication from this administration suggests that it is prepared to grant the necessary permission for a project that has the enthusiastic backing of the Chamber of Commerce, and in which the Koch Brothers have a “direct and substantial interest.”  And not just backing.  To use the words of a recent New York Times story, they are willing to “flout the intent of federal law” to get it done.  Check this out as well:  the State Department, at the recommendation of Keystone XL pipeline builder TransCanada, hired a second company to carry out the environmental review.  That company already considered itself a “major client” of TransCanada.  This is simply corrupt, potentially the biggest scandal of the Obama years.  And here’s the thing:  it’s a crime still in progress.  Watching the president do nothing to stop it is endlessly depressing.

We shouldn’t be too surprised to learn that Obama’s dirty laundry has a few oil stains.  The BIG surprise would be Obama’s reelection.


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