Economist and white-collar criminologist, Bill Black, reports on the recent Senate grilling of Apple. He begins "Senator Levin continues to do virtually the only real investigation being done in the United States of the elite entities. And he has summarized this as Apple achieving the holy grail of tax evasion, which is that Apple has succeeded in creating the stateless corporation that makes literally tens of billions of dollars and pays taxes to absolutely no one. And at the hearing that was just conducted, it turned into a love fest for Apple instead of a crackdown on this behavior..."

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 theREALnews                                                                               Permalink

Apple Achieves Holy Grail of Tax Avoidance
Bill Black: Senate questions CEO Tim Cook how company earned $30 billion in 'international' profits while paying zero taxes - May 23, 13

Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

IN SPAIN THE POPULATION TOOK TO THE STREETS IN 50 CITIES LAST SUNDAY TO PROTEST IMF-IMPOSED AUSTERITY MEASURES. IN THE U.S. THE PEOPLES' OWN GOVERNMENT IS MOVING TO IMPOSE THE VERY SAME AUSTERITY MEASURES, YET THE U.S. POPULATION'S REACTION IS "FIRST THEY CAME FOR THE WISCONSINANS BUT I DIDN'T LIVE IN WISCONSIN, SO I DIDN'T HAVE TO PROTEST..."

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AlterNet / By Nomi Prins

Dominique Strauss-Kahn Sits in Prison While the IMF Keeps Ravaging Entire Economies Every Day

The IMF can do far more damage trashing global economic well-being than the man behind the sex abuse scandal.


May 18, 2011  |  The sex scandal surrounding the head of the International Monetary Fund has thrust the organization into the media's glare. Yet, the man behind the scandal is far less relevant to trashing global economic well-being than is the institution itself.

Regardless of who takes over for the IMF's disgraced leader, Dominique Strauss-Kahn (DSK), it’s unlikely he or she will bring about a philosophical shift in the IMF’s MO. For the IMF doesn’t care what caused devastating financial hardship to its current "focus" countries like Ireland, Greece and Portugal, nor what deal is struck in return for its aid. Saving the superpower notion of Europe and the euro as a pan-European currency by bailing out (read: lending money in return for "austerity measures" and holding fire sales of national companies) is a goal bigger than DSK.

This ideal is more important to the IMF than the financial security of ordinary citizens. Thus, the IMF will remain the validating and financing arm of the European Union (EU) and maintain the euro’s cohesiveness, no matter the cost to ordinary people. By doing so, it will continue to create debt to pay for bank screw-ups and extract repayment from innocent local populations.

Indeed, any concerns about the IMF altering its method of swapping loans for austerity measures just because its chief is facing felony charges, were alleviated the day he was denied bail. On Monday, Portugal, the third European country in the past year to get a bailout, was approved for a 78-billion-euro rescue package. The price? Public spending cuts. The benefactors? The private Portuguese banks that turned around to raise cash backed by bailout-guarantees a moment later.

In Ireland, where a swish of hot money entered the country during the years leading up to the 2008 crisis, the $113 billion IMF/EU bailout did nothing to bring down the 14.7 percent unemployment rate, even as $23 billion of pension money was requested as a condition of the loan.

It’s the same story in Greece. There, the IMF has backed the EU in exacting austerity measures running the gamut from pension and wage cuts to privatization demands. To comply with its bailout agreement, Greece must continue to sell off its functioning and solvent national companies, such as its electric companies, to the highest international bidder. You know, the bidder that will care about what happens to the local cost of power. (Think Enron and California power plants a decade ago.)

But that’s what the IMF has always done. It provides loans at cheaper rates than countries would receive any other way during times of economic distress, in return for forcing them to open their economies to hot money looking for a good deal. This is based on the premise that public infrastructure and social safety nets are the cause of financial woes, and not the over-leveraged banks that funneled in the hot money to begin with.

As Andy Robinson, a journalist stationed in Athens, who writes for the Spanish paper, La Vanguardia, put it, “The IMF wants the country to sell off its grandmother’s silver to make room for more luxury beachfront hotels.”

Unfortunately for Greece, what the IMF wants more of, is exactly what caused its debt crisis -- hot money that turned cold. External investment banks and funds extracted profits from the country and then headed for the hills.

Three years ago, in May 2008, Bear Stearns was handed to JPM Chase on a Fed-backed platter in Phase I of the great US bank bailout and subsidization strategy. Meanwhile, the Greek finance ministry proudly proclaimed US investment interest (i.e. hot money from banks, hedge funds or private equity funds) was strengthening.

At the time, Greek Economic and Finance minister, George Alogoskoufis further noted, “international financial organizations, such as the International Monetary Fund, also acknowledged the significant progress made by the Greek economy.” At the time, he said “an international credit crisis has not affected the Greek banking system” and “that economic conditions would return to normality in 2009.”

It didn’t work out that way. Five months later, in October, 2008, the global banking crisis arrived in Greece. The Bank of Greece had to pony up 28 billion Euros to bail out its banks (for starters). Blindly optimistic, a month later, the Greek embassy promised that the country's economic growth would exceed the EU average for 2009-2010.

Then, things collapsed. By May, 2010, the EU and IMF pushed a $141 billion euro rescue package on Greece, with strings attached, but on the people of Greece, not the banks whose behavior trashed its economy. The result was widespread street protests.

Now, a year later, with the looming possibility of a default on it debt, and talk of more bailouts in the works, the Greek people are again taking to the streets.

The fact that public austerity measures don’t secure an economy remains lost on the IMF and EU. Instead, they want countries to sell whatever they can at rock bottom "crisis" prices, and extract the rest of the money to repay loans from citizens. The IMF and EU have just asked Italy and Spain to do more of this antiquated policy.

In retaliation, Spain’s population took to the streets in 50 cities last Sunday, protesting national austerity measures. Their chants made it clear they knew that the banks and enabling politicians caused their pain. Spanish banks are sitting on 113 billion euros of bad loans, an overhang from an international housing speculation boom gone wrong. The population faces a 21.3 percent unemployment rate, 40 percent among its youth. Austerity measures don’t create jobs.

This IMF notion of opening a countries’ doors to hot money to demonstrate economic worthiness is completely misguided. The flow of fast money does not, by any measure, help the well-being of a country's population at large. The recent uprising in Egypt, a country given gold stars by the IMF for opening its boundaries to unrestricted, irresponsible hot money to erect luxury condos and beachfront homes, is another obvious sign of this tactic’s failure.

And, yet, again and again, the IMF instills surefire economic destabilization through unaltered money-interested policies, sucking the financial life out of unarmed citizens. The IMF will soon choose a new leader to take the reigns from acting head and former JPM Chase chief economist, John Lipsky. There is talk that for the first time since its inception, this leader may come from outside the core European fold. Chances of that are remote. But, unfortunately, no matter who leads the IMF next, its legacy will continue to impart pain on the people of the countries it vows to assist. And that means more uprisings to come.

Nomi Prins is a senior fellow at the public policy center Demos and author of It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street.

I WAS RIGHT ABOUT S&P! THEY PLAYED A MAJOR CRIMINAL ROLL IN CRASHING THE ECONOMY IN 2008, AND NOW THEY ARE THREATENING TO CRASH IT AGAIN IF THE GOVERNMENT FAILS TO GUT MEDICARE, MEDICAID, AND SOCIAL SECURITY. BUT THEIR THREAT IS HOLLOW; THEY CAN'T POSSIBLY END THE DOLLAR'S REIGN AS RESERVE CURRENCY (see my previous post).

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Original here.



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The S&P debt warning: Wall Street extortionists demand savage cuts

20 April 2011

Five days after the US Senate Permanent Subcommittee on Investigations released a voluminous report detailing the criminal activities of the banks and credit rating firms that precipitated the 2008 Wall Street crash and global recession, one of the named culprits, Standard & Poor's Credit Ratings Services, issued an ultimatum to the White House and Congress demanding an agreement on savage austerity measures ahead of the 2012 elections.

In lowering its outlook from "stable" to "negative" on the top AAA rating for US Treasury bonds, S&P spoke Monday for the entire financial mafia that is headquartered on Wall Street. The ratings firm declared in a press release that failure to reach an agreement in the coming months to reduce the federal deficit by at least $4 trillion over the next decade "could lead us to lower the rating."

This amounts to a threat to crash the US and global economy and undermine the status of the dollar as the world reserve currency. The move is part of an internationally orchestrated drive by the major banks and speculators to push through devastating attacks on the living standards of the American working class.

They are applying to the United States the extortionate methods used previously to stoke up speculative attacks on the sovereign debt of a number of European countries, including Greece, Ireland, Portugal and Spain. S&P and its major ratings rivals Moody's and Fitch have issued strategically timed credit warnings and downgrades to create a crisis atmosphere, which governments have then utilized to override popular opposition and impose mass layoffs and wage cuts and shred social programs.

John Chambers, chairman of the sovereign ratings committee at S&P, virtually admitted as much, according to a report in Tuesday’s Wall Street Journal. The Journal wrote: “If the US reaches a British-style resolution, S&P will restore the US outlook to stable, Mr. Chambers said.”

In May of 2009, S&P lowered Britain’s credit outlook. It reversed the action 17 months later after the newly elected Conservative-Liberal Democrat coalition government announced a program of draconian cuts that will shatter the country’s social safety net.

Readers can make their own judgment as to S&P’s standing to be issuing such ultimatums. The Senate report on the Wall Street crash describes the corrupt process by which S&P routinely slapped AAA ratings on worthless securities marketed by the banks as follows: “Credit rating agencies were paid by Wall Street firms that sought their ratings and profited from the financial products being rated… The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom.”

Senator Carl Levin, the chairman of the subcommittee, described what the investigation uncovered as “a financial snake pit rife with greed, conflicts of interest and wrongdoing.”

By rights, the top S&P executives who presided over this fraud and pocketed multi-million-dollar salaries in the process should be sitting in prison. Instead, still at their posts and having suffered no consequences, they are using the disaster of their own making to gut bedrock social programs such as Medicare, Medicaid and Social Security upon which tens of millions of people depend.

The statement issued by S&P on Monday described both the Republican fiscal year 2012 budget plan and that outlined by President Obama last week as a basis for cutting the federal deficit by $4 trillion. However, the two sides had to come to an agreement before the national election in 2012, the company insisted.

This demand underscores the anti-democratic character of the so-called budget debate. It is an elaborate charade, behind which stands the dictatorship of the banks. The deal to eviscerate what is left of the social reforms of the 20th century has to be sealed before the elections to make sure that the vote in no way becomes a referendum on austerity and the electorate has absolutely no say in the matter.

The mass opposition to the measures being proposed by both parties is well known to Wall Street and its political servants in Washington. On Monday, the same day as the S&P announcement, McClatchy Newspapers published the results of a McClatchy-Marist poll showing that voters by a margin of 2-to-1 support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed. They oppose cutting Medicare and Medicaid by 80-18 percent.

S&P intervened at the behest of the banks to shift the phony budget debate even further to the right and create the conditions for even deeper cuts than those being currently proposed. Interviewed Monday on Bloomberg Television, David Beers, S&P’s global head of sovereign finance ratings, said the $4 trillion deficit-cutting target was “not enough to ultimately halt the rising trajectory of US debt.” It was, he said, merely “a useful starting point.”

The establishment media immediately signaled that it had gotten the message. The Los Angeles Times editorialized that “Congress and the White House can’t afford to ignore this warning shot.” The Financial Times of London published an editorial that declared, “S&P’s warning shot should galvanise America’s leaders.”

Democratic leaders rushed to reassure Wall Street that they were on board. Speaking at a community college in Virginia Tuesday, Obama said, “I believe that Democrats and Republicans can come together to get this done.”

Steny Hoyer of Maryland, the No. 2 Democrat in the House of Representative, said Monday, “Today’s revised outlook shows the urgent, bipartisan action needed to put our nation on a serious path to reduce deficits.”

Erskine Bowles, a former White House chief of staff for Bill Clinton and co-chair of last year’s bipartisan fiscal commission, was even more emphatic. Speaking to the Financial Times, he said S&P had been “absolutely right” in lowering its outlook on US debt. “If anything, they understate the extent of the problem,” he said.

Only a mass, independent movement of implacable opposition by the working class can defeat this criminal conspiracy. The World Socialist Web Site and the Socialist Equality Party urge workers and young people to reject the entire framework of the so-called budget debate. There must be uncompromising opposition to any cuts in jobs, wages or social programs and services. The working class bears no responsibility for the crisis of the capitalist system.

We propose an alternate policy. As a down payment, to begin to recoup the wealth plundered by the financial elite, we propose a 50 percent tax surcharge on all household wealth over $5 million.

This should be supplemented by raising the income tax on households taking in more than $500,000 a year to 90 percent.

These measures will not only generate hundreds of billions of dollars for jobs, schools, health care, housing and pensions, they will attack the profligate squandering of resources and contribute mightily to the moral as well as the economic health of society.

These initial steps lead inexorably to the nationalization of the banks and major corporations and their transformation into public utilities under the democratic control of the working population. This is a socialist program. It requires that the working class break politically from the two parties of big business and build a mass movement to fight for a workers’ government.

Barry Grey
The author also recommends:
Senate report on Wall Street crash: The criminalization of the American ruling class
[18 April 2011]

Coup d'Etat: Standard & Poor's Is Now Giving Orders to Congress ... and the American People

Coup d'Etat: Standard & Poor's Is Now Giving Orders to Congress ... and the American People

Richard (RJ) Eskow
Consultant, Writer, Senior Fellow with The Campaign for America's Future
Posted: August 30, 2010 03:05 PM

There's been a lot of talk recently about the enormous power that's been given to the Deficit Commission, which is co-chaired by Alan "Social Security recipients are milking it" Simpson and dominated by people who have advocated cuts to Social Security and Medicare. But here's an aspect of the story that's gone unremarked: Standard & Poor's, the credit rating agency whose reputation should rightfully have been shattered by the economic crisis, is now dictating policy to the United States government. S&P just put our elected officials on notice: Submit to the proclamations of the Deficit Commission or we'll downgrade our rating of government debt.

That's blackmail, plain and simple. This threat comes from a privately-owned company whose rating process is riddled with conflicts, and which has gotten virtually every critical assessment of recent years spectacularly wrong. Enron? Lehman? Subprime mortgages? They were zero for three. Yet rather than reining back their penchant for reckless proclamations, the chairman of S&P's "sovereign rating committee" said that our elected officials' response to the Deficit Commission would be crucial to its analysis of US debt. John Chambers said last week: "It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes." Just in case his intent wasn't clear enough, he added: "It is very important for Congress to take the required steps."

"Sovereign" is right. That's a kingly proclamation.

Bear in mind, we supposedly don't know yet what the Deficit Commission will propose. (We have a good idea, of course, since both the Democratic and Republican co-chairs are long-time advocates for cutting Social Security.) The total extent of the Commission's recommendations, and the extent to which they'll actually provide financial stability, are supposed to be completely unknown at this point. S&P's statement isn't an analysis, since there's nothing to analyze. It's a threat: Turn your authority as elected representatives over to this unelected body or we'll cause financial damage to the United States Government.

It's not a hollow threat, either. This statement was made one day after S&P downgraded Ireland's debt. A downgrade could cause massive harm to the United States government at a time of extreme difficulty. Debt could be harder to obtain, and it would become more expensive. That, in turn, would plunge the US deeper into debt. So who, exactly, is issuing this warning? What kind of credibility do they have?

Standard & Poor's is a division of McGraw-Hill, a publicly traded publishing company. They are a for-profit company, as is their fellow rating agency Moody's (which issued a similar threat last March). Both of these for-profit companies have eagerly pursued the very institutions they were rating, to disastrous effect. Internal documents obtained by the Levin Subcommittee showed that both Moody's and S&P let the profit motive compromise their judgments in the run-up to the economic meltdown. As we noted in a previous analysis, one internal S&P email said this about a rating they did for a customer: ""I don't think this is enough to satisfy them. What's the next step?"

Here's another example of S&P's integrity. When an analyst asked to review loan files for a security he was asked to rate, his supervisor told him the request was "TOTALLY UNREASONABLE!"

And consider this reported comment, which occurred during exploratory acquisition talks with investment research company Morningstar: "The S&P people insisted to Joe Mansueto (Founder/Chairman) that he was leaving big mounds of money on the table by not charging mutual funds for their 'star' ratings. Joe replied to the S&P bidders that it was an obvious conflict of interest to charge the funds for their own ratings -- how would Morningstar maintain its independence? They called him naive -- and stopped the merger talks."

The comments, though unconfirmed, have not been denied. Expert money manager Barry Ritholtz, who reported the story, indicated his confidence in his source and added, "This anecdote rings rather true to me."
Moody's fared even worse in our review of Levin Subcommittee documents. Of four key objectives for its Structured Finance Group, responsible for ratings, "high quality ratings and research came in dead last - behind "generating increased revenue," "increasing market share ...," and "fostering good relationships with issuers and investors."

Get the picture?

Why would companies like Standard & Poor's and Moody's issue threats of this kind? There could be many reasons. One might be to please its corporate clients, who would like to see government spending cut for both ideological and business reasons. Another might be to encourage cuts in Social Security because, under current proposals from both parties, that would place more retirement savings in funds and accounts managed by S&P's key clients. Moody's may also legitimately believe that the deficit needs to be reduced immediately, which is debatable on economic grounds. But if the Moody's action was arguable, S&P's statement is indefensible.

The ratings agency system is broken. These private companies have accrued enormous power without earning it. A lot of that power has been handed to them by government actions that rely on their ratings. That's why the Senate voted for the Franken Amendment, which -- while leaving these companies private -- would have removed the inevitable conflict of interest that's created when they compete for business. (The House/Senate Conference eliminated the Franken Amendment, calling instead for a two-year study. While the final bill is weighted toward an action of the kind called for by Franken's amendment, two years gives lobbyists a long time to influence the outcome.)

Standard & Poor's are called "agencies," but they should be called by their proper name: For-profit companies. These "ratings companies" have undermined the free market by allowing powerful issuers and investors to influence their own ratings. Markets with bad information - information that's bought and paid for - aren't really "free."

Now the "rating companies" are targeting the democratic process, too. We need a national discussion about the proper role of these companies, before they cause even more damage. Standard & Poor's should be reprimanded for its inappropriate and unprofessional intrusion into the working of government. And everyone needs to be reminded: Neither Congress nor the Executive Branch can 'outsource' the democratic process. They are our elected representatives. They must not be forced to submit to conflict-ridden private companies with a track record of failure.


_______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street and Strengthen Social Security projects. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates