Showing posts with label goldman sachs. Show all posts

Wednesday, July 01, 2015

"Washington is brewing armageddon. But Greece can save us. All the Greek people need to do is to support their government and insist that their government, the first in awhile to represent the interests of the Greek people, give the finger to the corrupt EU, default on the debt, and turn to Russia." -- Paul Craig Roberts

Greece Again Can Save The West — Paul Craig Roberts

July 1, 2015 | Original Here Go here to sign up to receive email notice of this news letter

Paul Craig Roberts

Like Marathon, Thermopylae, Plateau and Mycale roughly 2,500 years ago, Western freedom again depends on Greece. Today Washington and its empire of European vassal states are playing the part of the Persian Empire, and belatedly the Greeks have formed a government, Syriza, that refuses to submit to the Washington Empire.

Few people understand that the fate of Western liberty, what remains of it, is at stake in the conflict, and, indeed, the fate of life on earth. Certainly the German government does not understand. Sigmar Gabriel, a German vice-chancellor, has declared the Greek government to be a threat to the European order. What he means by the “European order” is the right of the stronger countries to loot the weaker ones.

The “Greek crisis” is not about debt. Debt is the propaganda that the Empire is using to subdue sovereignty throughout the Western world.

The Greek government asked the collection of nations that comprise the “democratic” European Union for one week’s extension on the debt in order for the Greek people to give their approval or disapproval of the harsh terms being imposed on Greece by the EU commission, the EU Central Bank, and the IMF with Washington’s insistence.

The answer from Europe and the IMF and Washington was “NO.”

The Greek government was told that democracy doesn’t apply when creditors are determined to make Greek citizens pay for the creditors’ mistakes with reduced pensions, reduced health care, reduced education, reduced employment, and reduced social services. The position of the Empire is that the Greek people are responsible for the mistakes of their foreign creditors, and the Greek people must pay for their creditors’ mistakes, especially those mistakes enabled by Goldman Sachs.

As has been proven conclusively, the Empire’s claim is false. The austerity measures that have been imposed on Greece have driven down the economy by 27%, thus increasing the ratio of debt to GDP and worsening the financial situation of Greece. All austerity has accomplished is to drive the Greek people further into the ground, thus making debt repayment impossible.

The Empire rejected Greece’s democratic referendum next Sunday, because the Empire doesn’t believe in democracy. The Empire, like all empires, believes in subservience. Greece is not being subservient. Therefore, Greece must be punished. The Persians Darius and Xerxes had the same view as Washington and the EU. The Greek government is supposed to do what previous Greek governments have done, accept a pay-off and allow Greece to be looted.

Looting is the only way left for the Western financial system to make money. In pursuit of short-term profits, western corporations, encouraged and coerced by the financial sector, have moved offshore western industry, manufacturing, and professional skills such as information technology and software engineering. All that remains for the West are highly leveraged derivative bets and looting. Apple is an American corporation, but not a single Apple computer is made in the US.

The German, French, and Dutch governments together with Washington and the western financial system have come down in favor of looting. For a country to be looted, its people’s voice must be silenced. This is why the Germans and the EU object to the Greek government handing the ability to decide the future of Greece to the Greek people.

In other words, in the West today, the sovereignty of peoples and accountability of governments are inconsistent with the financial interests of the One Percent who control the financial and political order.

To conclude: If democracy can be destroyed in Greece, it can be destroyed throughout Europe.

The Greek people not only hold in their hands the fate of democracy in the West, but also the fate of life on earth. Washington’s mechanism for creating conflict with Russia is the EU and NATO. By violating agreements made by previous US governments, Washington has brought NATO to Russia’s borders and is currently deploying more troops, armaments, and missiles on Russia’s borders, all the while speaking aggressively toward Russia.

Russia has no alternative but to target these insensible military deployments. As military deployments rise and the irresponsible and totally inaccurate Western propaganda against Russia and Russia’s government escalate, war can launch itself.

Clearly Washington and its vassal states have eschewed diplomacy and instead use demonization and attempted coercion to force Russia to accede to the Empire’s will.

This reckless policy continues despite the many warnings from the Russian government to the West not to deliver ultimatums to Russia. As empires are characterized by arrogance and hubris, the Empire doesn’t hear the warnings.

Recently we have had from Washington’s stooge prime minister in London British threats against Russia, despite the fact that the UK can deliver no force against Russia and can be destroyed in a few minutes by Russia. This kind of insanity is what leads to war. The crazed British prime minister thinks he can call out Russia.

Washington is brewing armageddon. But Greece can save us. All the Greek people need to do is to support their government and insist that their government, the first in awhile to represent the interests of the Greek people, give the finger to the corrupt EU, default on the debt, and turn to Russia.

This would begin the unravelling of the EU and NATO and save the world from armageddon. Most likely, Italy and Spain would follow Greece out of the EU and NATO, as these countries also are targeted for merciless looting. The EU and NATO, Washington’s mechanism for creating conflict with Russia, would unravel. The world would be saved and would owe its salvation to the ability of the Greeks to realize what really is at stake. Just as they did at Marathon, Thermopylae, Plateau and Mycale

It is difficult to imagine another scenario that would save us from World War III. Pray that the Greeks understand the responsibility that is in their hands not merely for liberty but also for life on earth.

Friday, January 30, 2015

Against the backdrop of Grecian history including the indomitable Spartans, Paul Craig Roberts explains the uphill contest between the new Greek government and the EU and its kleptocrat banksters.

Paul Craig Roberts – EU And Banksters Threaten: “Defy Us And We Will Destroy You”

January 29, 2015 Original Here

As the West stares into the great abyss and the world prepares for even greater economic turmoil, today Dr. Paul Craig Roberts warned King World News that the EU and banksters are now threatening: "Defy us and we will destroy you." This is an ominous warning from the former U.S. Treasury official as the world prepares to descend into total chaos.

By Dr. Paul Craig Roberts Former U.S. Treasury Official

January 29 (King World News) – We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

The Spartans, whose red cloaks and military prowess struck fear into the hearts of both foreign invaders and Greek opponents in the city-states, are no more. Athens itself is a ruin of its historical self. The Greeks, who were once to be contended with, who were able with 300 Spartans, supplemented with a few thousand Corinthians, Thebans, and other warriors, to stop a one hundred thousand man Persian army at Thermopylae, with the final outcome being the defeat of the Persian fleet in the Battle of Salamis and the defeat of the Persian army in the Battle of Plataea, are no more.

The Greeks of history have become a people of legend. Not even the Romans were able to conquer Persia, but little more than a handful of Greeks stopped the attempted Persian conquest of Greece.

But the Greeks, despite their glorious history, could not stop their conquest by the EU and a handful of German and Dutch banks. If the Greece of history still existed, the EU and the private banks would be cowering in fear, because the EU and the private banks have ruthlessly exploited the Greek people and represent the same threat to Greek sovereignty as Persia did.

Greece, stripped of its independence by its EU membership and acceptance of the euro as its currency, has lost is sovereignty. Without control over its own money, Greece cannot finance itself. Greece must rely on private banks from other countries. In the 21st century European private banks are not allowed to lose money simply because they are incompetent and over-lent to EU member countries. This is not considered to be the fault of the banks, but of the borrower governments and populations.

Goldman Sachs Strikes Again

According to reports, the American bankster firm, Goldman Sachs, sometimes known as Gold Sacks, hid Greek debt from view in order that banks would extent more credit to Greece, thus setting the Greek people up for looting.

The EU’s disingenuous argument is that this bankster trickery benefitted the Greek people. The people enjoyed the resources from these loans. Therefore, the Greek people must pay back the loans through reductions in old age pensions, through unemployment, through lower wages, and through the sale of Greek national assets.

This is the austerity that has been imposed on ordinary Greek people by the EU and Greece’s creditors.

Greece is prostrate. Greeks are actually committing suicide, because Greeks cannot provide for themselves in the depressed conditions that the EU and the private banks have created for them for no other reason than that the private banks must not have to write down the loans.

Greek Suicide As Banksters Loot The World

So, one result from “democracy” in Greece is suicide. With enough democracy, we can control world population and halt the destruction of nature’s capital. All we have to do is to enable the banksters to loot the entire world.

What can Syriza do?

Without Spartans, very little.

The party’s intentions and that of its leaders are honest and deserve our respect. Syriza is a people’s party, and that is what marks it for doom. The voice of the people is no longer permitted to affect politics in the Western world. The powerful rich interest groups that rule the West could not care less about the people over whom they rule.

No sooner was Syriza in office than Bloomberg, a business news service, conveyed to the new Greek Prime Minister, Alexis Tsipras, that Syriza needs to play by the creditors’ rules. http://www.bloomberg.com/news/articles/2015-01-28/tsipras-plans-to-avert-catastrophe-as-greek-markets-sink-further

Catastrophic Clash

Tsipras stated that the new Greek government does not intend a “catastrophic clash” with its creditors, only an acceptable amelioration of the unreasonable conditions imposed on Greece, in order that Greece can give some satisfaction to its private bank creditors and also avoid social, political and economic instability in Greece.

Against this reasonable statement, Bloomberg reports that the new Greek cabinet contains communists who favor closer ties with Russia. To remind the newly elected Greek government of the whip that is held over Greek financial markets, Greek bond and stock prices were assaulted and driven down.

"Defy Us And We Will Destroy You"

The warning from the EU and Wall Street is clear: Defy us and we will destroy you.

The punishment of the new Greek government was instant. This from Bloomberg:

“Greek stocks and bonds slumped for a third day, after new ministers said they will cease the sale of some state assets and increase the minimum wage. Yields on three-year bonds rose 2.66 percentage points to 16.69 percent. The benchmark Athens General Index decreased 9.2 percent to its lowest level since 2012, led by a collapse in the value of banks.”

Does Tsipras understand that Greek financial institutions will continue to be punished if they stand behind his government? Bloomberg makes it clear: “Germany warned the Mediterranean nation against abandoning prior agreements on aid, after analysts said that setting Greece on a collision course with its European peers might lead to its exit from the euro region.”

Statements of newly appointed ministers “imply confrontation and tense negotiations in the near future,” Vangelis Karanikas, head of research at Athens-based Euroxx Securities, wrote in a note to clients.”

Collision Course

What is Syriza’s “collusion course”? The new government wants to moderate the agreements made by previous Greek governments that sold out the Greek people. The new government wants to stop giving away at bargain prices Greek public assets to clients of its creditors, and the new Greek government wants to raise the Greek minimum wage so that the Greek people have enough bread and water on which to live.

However, for the private bank creditors, for Merkel’s Germany that stands behind the banks, for Washington which could care less about the Greeks, for the Greek elites who see themselves as “part of Europe,” Syriza is something to be rid of.

Greece Attacked

And so the Greek bonds are attacked, the Greek stocks are attacked, threats are issued that arouse fear in that part of the Greek population that is propagandized into the belief that Greece must be part of the euro and the EU or be bypassed by history.

What it boils down to is that the Greek people, like the Americans, are insouciant. Only about 37% of the voters voted for Syriza. That is far more votes than any rival party received, but it is not enough to show Washington, the EU and creditors that Greeks stand behind their government.

Instead it shows that the new party had to form a government with another party that money, perhaps, can buy off. It shows that Syriza can be demonized in the Western media and presented to the Greek public as a threat to Greece.

The new government is aware of its weakness. The new prime minister says that he does not want confrontation, but that the new government cannot continue the kowtowing of previous Greek governments. A reasonable accommodation must be reached.

Accommodation is unlikely to occur, because a reasonable accommodation is not the desire of Washington, the EU, or of Greece’s creditors.

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

Super-Rich And Serfs

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. The looting that began in Greece has spread into Ukraine, and who knows who is next?

With only 37% of the vote, does Syriza have the clout to stand up for Greece against the looters?

Can Greece escape from a situation comparable to the European Dark Ages when populations were ravaged by marauding raiders? Perhaps if Greece realigns with Russia and gains financing from BRICS. ***ALSO JUST RELEASED: As Europe Disintegrates, Is Full-Scale War Now On The Horizon CLICK HERE.

Monday, January 26, 2015

Paul Craig Roberts (slightly edited for this over view): “The new principle in Europe that the IMF has relentlessly applied to Latin American and Third World debtors, is that when foreign lenders make mistakes and over-lend to foreign governments, loading them up with debt, the bankers’ mistakes are rectified by robbing the poor populations. Pensions, social services, and public employment are cut, valuable resources are sold off to foreigners for pennies on the dollar, and the government is forced to support US foreign policy. The EU and the euro were deception and trickery. Countries lost their sovereignty. So much for Western 'self-rule,' 'freedom,' and 'democracy.' In the entire West there is nothing but the looting of people by the One Percent who control the governments. In America, the looting does not rely on indebtedness because the US dollar is the reserve currency and the US can print all the money needed in order to pay its bills and redeem its debt. In America the looting of labor has been through jobs offshoring.”

Freedom, Where Are You? Not in America or Europe — PCR

January 25, 2015 | Original Here Go here to sign up to receive email notice of this news letter

Freedom, Where Are You?
Not in America or Europe

Paul Craig Roberts

When the former Goldman Sachs executive who runs the European Central Bank (ECB) announced that he was going to print 720 billion euros annually with which to purchase bad debts from the politically connected big banks, the euro sank and the stock market and Swiss franc shot up. As in the US, quantitative easing (QE) serves to enrich the already rich. It has no other purpose.

The well-heeled financial institutions that bought up the troubled sovereign debt of Greece, Italy, Portugal, and Spain at low prices will now sell the bonds to the ECB for high prices. And despite depression level unemployment in most of Europe and austerity imposed on citizens, the stock market rose in anticipation that much of the 60 billion new euros that will be created each month will find its way into equity prices. Liquidity fuels the stock market.

Where else can the money to go? Some will go into Swiss francs and some into gold while gold is still available, but for the most part the ECB is running the printing press in order to boost the wealth of the stock-owning One Percent. The Federal Reserve and the ECB have taken the West back to the days when a handful of aristocrats owned everything.

The stock markets are bubbles blown by central bank money creation. On the basis of traditional reasoning there is no sound reason to be in equities, and sound investors have avoided them.

But there is no return anywhere else, and as the central banks are run by the rich for the rich, sound reasoning has proved to be a mistake for the past six years. This shows that corruption can prevail for an indeterminable period over fundamentals.

As I demonstrated in my book, The Failure of Laissez Faire Capitalism, first Goldman Sachs deceived lenders into over-lending to the Greek government. Then Goldman Sachs former executives took over Greece’s financial affairs and forced austerity upon the population in order to prevent losses to the foreign lenders.

This established a new principle in Europe, one that the IMF has relentlessly applied to Latin American and Third World debtors. The principle is that when foreign lenders make mistakes and over-lend to foreign governments, loading them up with debt, the bankers’ mistakes are rectified by robbing the poor populations. Pensions, social services, and public employment are cut, valuable resources are sold off to foreigners for pennies on the dollar, and the government is forced to support US foreign policy. John Perkins’ Confessions of an Economic Hit Man describes the process perfectly. If you haven’t read Perkins book, you have little idea how corrupt and vicious the United States is. Indeed, Perkins shows that over-lending is intentional in order to set up the country for looting.

This is what Goldman Sachs did to Greece, intentionally or unintentionally.

It took the Greeks a long time to realize it. Apparently, 36.5 percent of the population was awoken by rising poverty, unemployment, and suicide rates. That figure, a little over one-third of the vote, was enough to put Syriza in power in the just concluded Greek election, throwing out the corrupt New Democracy party that has consistently sold out the Greek people to the foreign banks. Nevertheless, 27.7 percent of the Greeks, if the vote reporting is correct, voted for the party that has sacrificed the Greek people to the banksters. Even in Greece, a country accustomed to outpourings of people into the streets, a significant percentage of the population is sufficiently brainwashed to vote against their own interests.

Can Syriza do anything? It remains to be seen, but probably not. If the political party had received 55% or 65% or 75% of the vote, yes. But the largest vote at 36.5% does not show a unified country aware of its plight and its looting at the hands of rich banksters. The vote shows that a significant percentage of the Greek population supports foreign looting of Greece.

Moreover, Syriza is up against the heavies: the German and Netherlands banks who hold Greece’s loans and the governments that back the banks, the European Union which is using the sovereign debt crisis to destroy the sovereignty of the individual countries that comprise the European Union, Washington which backs EU sovereign power over the individual countries as it is easier to control one government than a couple of dozen.

Already the Western financial presstitutes are warning Syriza not to endanger its membership in the common currency by diverting from the austerity model imposed from abroad on Greek citizens with the complicity of New Democracy.

Apparently, there is a lack of formal means of exiting the EU and the euro, but nevertheless Greece can be threatened with being thrown out. Greece should welcome being thrown out.

Exiting the EU and the euro is the best thing that can happen to Greece. A country without its own currency is not a sovereign country. It is a vassal state of another power. A country without its own currency cannot finance its own needs. Although the UK is a member of the EU, the UK kept its own currency and is not subject to control by the ECB. A country without its own money is powerless. It is a non-entity.

If the US did not have its own dollar, the US would be of no consequence whatsoever on the world scene.

The EU and the euro were deception and trickery. Countries lost their sovereignty. So much for Western “self-rule,” “freedom,” “democracy,” all slogans without content. In the entire West there is nothing but the looting of people by the One Percent who control the governments.

In America, the looting does not rely on indebtedness, because the US dollar is the reserve currency and the US can print all the money needed in order to pay its bills and redeem its debt. In America the looting of labor has been through jobs offshoring.

American corporations discovered, and if they did not they were informed by Wall Street to move offshore or be taken over, that they could raise profits by moving their manufacturing operations abroad. The lower labor cost resulted in higher profits, higher share prices, huge managerial bonuses based on “performance,” and shareholder capital gains. Offshoring greatly increased the inequality in income and wealth in the US. Capital succeeded in looting labor.

The displaced well-paid manufacturing workers, if they were able to find replacement jobs, worked part-time minimum wage jobs at Walmart and Home Depot.

Economists, if they are entitled to the designation, such as Michael Porter and Matthew Slaughter, promised Americans that the fictional “New Economy” would produce better, higher-paying, and cleaner jobs for Americans than the “dirty fingernail” jobs that we were fortunate our corporations were moving offshore.

Years later, as I have proven conclusively, there is no sign of these “New Economy” jobs. What we have instead is a sharp decline in the labor force participation rate as the unemployed cannot find jobs. The replacement jobs for the manufacturing jobs are mainly part-time domestic service jobs.

People have to hold 2 or 3 of these jobs to make ends meet. These part time jobs offer no medical or pension benefits.

Now that this fact, once controversial believe it or not, has proven completely true, the same bought-and-paid-for spokespersons for robbing labor and destroying unions claim, without a shred of evidence, that the offshored jobs are coming home.

According to these propagandists, we now have what is called “reshoring.” A “reshoring” propagandist claims that the growth of “reshoring” over the past four years is 1,775 percent, an 18 times increase. http://www.manufacturingnews.com/news/2015/A.T.Kearny-No-Data-Supporting-Reshoring-0112151.html

There is no sign whatsoever of these alleged “reshoring” jobs in the monthly BLS payroll jobs statistics.

What reshoring is all about is propaganda to counteract the belated realization that “free trade” agreements and job offshoring were not beneficial to the American economy or its work force, but were beneficial only to the super-rich.

Like people throughout history, the American people are being turned into serfs and slaves because the fools believe the lies that are fed to them. They sit in front of Fox News, CNN, and whatever. They read the New York Times. If you want to learn how badly Americans have been served by the so-called media, read Howard Zinn’s A People’s History of the United States and Oliver Stone and Peter Kuznick’s The Untold History of the United States.

The media helps the government, and the private interests that profit from their control of government, control the brainwashed public. We have to invade Afghanistan because a faction there fighting for political control of the country is protecting Osama bin Laden, whom the US accuses without any proof of embarrassing the mighty US with the 9/11 attack. We have to invade Iraq because Saddam has “weapons of mass destruction” that he surely has despite the reports to the contrary by the weapons inspectors. We have to overthrow Gaddafi because of a slate of lies that have best been forgotten. We have to overthrow Assad because he used chemical weapons even though all evidence is to the contrary. Russia is responsible for Ukraine problems, not because the US overthrew the elected democratic government but because Russia accepted a 97.6% vote of Crimeans to rejoin Russia where the province had resided for hundreds of years before a Ukrainian Soviet leader, Khrushchev, stuck Crimea into Ukraine, at the time a part of the Soviet Union along with Russia.

War, War, War, that is all Washington wants. It enriches the military/security complex, the largest component of the US GNP and the largest contributor, along with Wall Street and the Israel Lobby, to US political campaigns.

Anyone or any organization that offers truth to the lies is demonized. Last week the new chief of the US Broadcasting Board of Governors, Andrew Lack, listed the Russian TV Internet service Russia Today as the equivalent of Boko Haram and the Islamic State terrorist groups. This absurd accusation is a prelude to closing down RT in the US just as Washington’s puppet UK government closed down Iran’s Press TV. http://rt.com/usa/225819-rt-isis-point-view-competition/

In other words, Anglo-Americans are not permitted any different news than what is served to them by “their” governments.

That is the state of “freedom” in the West today.

Monday, April 15, 2013

My header on Friday's post asserted that: "This blog features only the very best economists that money CAN'T buy." and that "These include Republicans as well as Democrats." However, the two economists in Friday's posts are very likely Democrats. Here below is a timely observation and analysis by a bona fide Republican. Read it and you will see that the common denominators of my selected economists are "deep understanding of macro economics and intellectual honesty." By contrast, our insane government buys off economists and puts them to work illegally tinkering with the economy in an incompetent effort to cover up the government's crimes against We The People.

Assault On Gold Update — Paul Craig Roberts

April 13, 2013 | Original Here

I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.

A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big too fail” balance sheets. The financial system would be in turmoil, and panic would reign.

Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.

According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.

A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal.

In other words, with naked shorts, no physical metal is actually sold.

People ask me how I know that the Fed is rigging the bullion price and seem surprised that anyone would think the Fed and its bullion bank agents would do such a thing, despite the public knowledge that the Fed is rigging the bond market and the banks with the Fed’s knowledge rigged the Libor rate. The answer is that the circumstantial evidence is powerful.

Consider the 500 tons of paper gold sold on Friday. Begin with the question, how many ounces is 500 tons? There are 2,000 pounds to one ton. 500 tons equal 1,000,000 pounds. There are 16 ounces to one pound, which comes to 16 million ounces of short sales on Friday.

Who has 16 million ounces of gold? At the beginning gold price that day of about $1,550, that comes to $24,800,000,000. Who has that kind of money?

What happens when 500 tons of gold sales are dumped on the market at one time or on one day? Correct, it drives the price down. Investors who want to get out of large positions would spread sales out over time so as not to lower their sales proceeds. The sale took gold down by about $73 per ounce. That means the seller or sellers lost up to $73 dollars 16 million times, or $1,168,000,000.

Who can afford to lose that kind of money? Only a central bank that can print it.

I believe that the authorities would like to drive the gold price down further and will, if they can, hit the gold market twice more next week and put gold at $1,400 per ounce or lower. The successive declines could perhaps spook individual holders of physical gold and result in actual net sales of physical gold as people reduced their holdings of the metal.

However, bullion dealer Bill Haynes told kingworldnews.com that last Friday bullion purchasers among the public outpaced sellers by 50 to 1, and that the premiums over the spot price on gold and silver coins are the highest in decades. I myself checked with Gainesville Coins and was told that far more buyers than sellers had responded to the price drop.

Unless the authorities have the actual metal with which to back up the short selling, they could be met with demands for deliveries. Unable to cover the shorts with real metal, the scheme would be exposed.

Do the authorities have the metal with which to cover shorts? I do not know. However, knowledgeable dealers are suspicious. Some think that US physical stocks of gold were used up in sales in efforts to disrupt the rise in the gold price from $272 in December 2000 to $1,900 in 2011. They point to Germany’s recent request that the US return the German gold stored in the US, and to the US government’s reply that it would return the gold piecemeal over seven years. If the US has the gold, why not return it to Germany?

The clear implication is that the US cannot deliver the gold.

Andrew Maguire also reports that foreign central banks, especially China, are loading up on physical gold at the low prices made possible by the short selling. If central banks are using their dollar holdings to purchase bullion at bargain prices, the likely results will be pressure on the dollar’s exchange value and a declining market supply of physical bullion. In other words, by trying to protect the dollar from its quantitative easing policy, the Fed might be hastening the dollar’s demise.

Possibly the Fed fears a dollar crisis or derivative blowup is nearing and is trying to reset the gold/dollar price prior to the outbreak of trouble. If ill winds are forecast, the Fed might feel it is better positioned to deal with crisis if the price of bullion is lower and confidence in bullion as a refuge has been shaken.

In addition to short selling that is clearly intended to drive down the gold price, orchestration is also indicated by the advance announcements this month first from brokerage houses and then from Goldman Sachs that hedge funds and institutional investors would be selling their gold positions. The purpose of these announcements was to encourage individual investors to get out of gold before the big boys did. Does anyone believe that hedge funds and Wall Street would announce their sales in advance so the small fry can get out of gold at a higher price than they do?

If these advanced announcements are not orchestration, what are they?

Monday, December 17, 2012

THE "FISCAL CLIFF" IS POCKET CHANGE WHETHER OR NOT CONGRESS DOES ANYTHING ABOUT IT, WHEREAS JUST FOUR "TOO BIG TO FAIL" U.S. BANKS HAVE DERIVATIVE EXPOSURE EQUAL TO 3.3 TIMES THE WORLD GROSS DOMESTIC PRODUCT. SHOULD THE AMERICAN POOR, STRUGGLING MIDDLE CLASS, AND ELDERLY HAVE TO FOREFIT THEIR SOCIAL SAFETY NET TO COVER ONE HALF OF ONE PERCENT OF THESE IRRESPONSIBLE BANKS' GAMBLING DEBTS?

The Fiscal Cliff Is A Diversion: The Derivatives Tsunami and the Dollar Bubble

December 17, 2012 | Original Here

The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.

The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget. http://www.guardian.co.uk/world/2012/nov/27/fiscal-cliff-explained-spending-cuts-tax-hikes More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washington’s wars.

The Derivatives Tsunami and the bond and dollar bubbles are of a different magnitude.

Last June 5 in “Collapse At Hand” http://www.paulcraigroberts.org/2012/06/05/collapse-at-hand/ I pointed out that according to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.
Prior to financial deregulation, essentially the repeal of the Glass-Steagall Act and the non-regulation of derivatives–a joint achievement of the Clinton administration and the Republican Party–Chase, Bank of America, and Citibank were commercial banks that took depositors’ deposits and made loans to businesses and consumers and purchased Treasury bonds with any extra reserves.

With the repeal of Glass-Steagall these honest commercial banks became gambling casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.

These bets soon exceeded many times not only US GDP but world GDP. Indeed, the gambling bets of JP Morgan Chase Bank alone are equal to world Gross Domestic Product.
According to the first quarter 2012 report from the Comptroller of the Currency, total derivative exposure of US banks has fallen insignificantly from the previous quarter to $227 trillion. The exposure of the 4 US banks accounts for almost of all of the exposure and is many multiples of their assets or of their risk capital.

The Derivatives Tsunami is the result of the handful of fools and corrupt public officials who deregulated the US financial system. Today merely four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product. When I was a US Treasury official, such a possibility would have been considered beyond science fiction.

Hopefully, much of the derivative exposure somehow nets out so that the net exposure, while still larger than many countries’ GDPs, is not in the hundreds of trillions of dollars. Still, the situation is so worrying to the Federal Reserve that after announcing a third round of quantitative easing, that is, printing money to buy bonds–both US Treasuries and the banks’ bad assets–the Fed has just announced that it is doubling its QE 3 purchases.

In other words, the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.

The purpose of QE is to keep the prices of debt, which supports the banks’ bets, high. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales. But the Fed’s policy is hurting the economy by depriving savers, especially the retired, of interest income, forcing them to draw down their savings. Real interest rates paid on CDs, money market funds, and bonds are lower than the rate of inflation.

Moreover, the money that the Fed is creating in order to bail out the four banks is making holders of dollars, both at home and abroad, nervous. If investors desert the dollar and its exchange value falls, the price of the financial instruments that the Fed’s purchases are supporting will also fall, and interest rates will rise. The only way the Fed could support the dollar would be to raise interest rates. In that event, bond holders would be wiped out, and the interest charges on the government’s debt would explode.

With such a catastrophe following the previous stock and real estate collapses, the remains of people’s wealth would be wiped out. Investors have been deserting equities for “safe” US Treasuries. This is why the Fed can keep bond prices so high that the real interest rate is negative.

The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the US dollar and bond market of the Federal Reserve’s commitment to save four US banks.

Once again, the media and its master, the US government, hide the real issues behind a fake one. The fiscal cliff has become the way for the Republicans to save the country from bankruptcy by destroying the social safety net put in place during the 1930s, supplemented by Lyndon Johnson’s “Great Society” in the mid-1960s.

Now that there are no jobs, now that real family incomes have been stagnant or declining for decades, and now that wealth and income have been concentrated in few hands is the time, Republicans say, to destroy the social safety net so that we don’t fall over the fiscal cliff.
In human history, such a policy usually produces revolt and revolution, which is what the US so desperately needs.

Perhaps our stupid and corrupt policymakers are doing us a favor after all.

Wednesday, September 19, 2012

A Rare Look at Why The Government Won't Fight Wall Street

POSTED: SEPTEMBER 18, 10:28 AM ET

Original here
Read more here

Wall Street sign in New York
Michael Evans/Getty Images

The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who've come at the issue from the inside.

We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a new book by Jeff Connaughton, the former aide to Senators Ted Kaufman and Joe Biden. Jeff is well known to reporters like me; during a period when most government officials double-talked or downplayed the Wall Street corruption problem, Jeff was one of the few voices on the Hill who always talked about the subject with appropriate alarm. He shared this quality with his boss Kaufman, the Delaware Senator who took over Biden's seat and instantly became an irritating (to Wall Street) political force by announcing he wasn’t going to run for re-election. "I later learned from reporters that Wall Street was frustrated that they couldn’t find a way to harness Ted or pull in his reins," Jeff writes. "There was no obvious way to pressure Ted because he wasn’t running for re-election."

Kaufman for some time was a go-to guy in the Senate for reform activists and reporters who wanted to find out what was really going on with corruption issues. He was a leader in a number of areas, attempting to push through (often simple) fixes to issues like high-frequency trading (his advocacy here looked prescient after the "flash crash" of 2010), naked short-selling, and, perhaps most importantly, the Too-Big-To-Fail issue. What’s fascinating about Connaughton’s book is that we now get to hear a behind-the-scenes account of who exactly was knocking down simple reform ideas, how they were knocked down, and in some cases we even find out why good ideas were rejected, although some element of mystery certainly remains here.

There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

Most damningly, Connaughton writes about something he calls "The Blob," a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from.

In one amazing example described in the book, Kaufman decided he wanted to try to re-instate the so-called "uptick rule," which had existed for seventy years before being rescinded by the SEC in 2007. The rule prevents investors from shorting a stock until the stock had ticked up in price. "Forcing short sellers to wait for the price to tick up before they sell more shares gives a breather to a stock in decline and helps prevent bear raids," Connaughton writes.

The uptick rule is controversial on Wall Street – I’ve had some people literally scream at me that it doesn’t do anything, while others have told me that it does help prevent bear attacks of the sort that appeared to help finally topple already-mortally-wounded companies like Bear Stearns and Lehman Brothers – but what’s inarguable is that Wall Street hates the rule. Hedge fund types or employees of really any company that engages in short-selling will tend to be most venomous in their opinions of the uptick rule.

Anyway, Connaughton and Kaufman were under the impression that new SEC chief Mary Schapiro would re-instate the uptick rule after taking office. When she didn’t, Kaufman wrote her a letter, asking her to take action. When that didn't do the trick, he co-sponsored (with Republican Johnny Isakson) a bill that would have required the SEC to take action.

Nothing happened, and months later, Kaufman gave a grumbling interview to Politico about the issue. One June 30, the paper’s headline read: "Ted Kaufman to SEC; Do Your Job."

The next day, the Blob bit back. Connaughton was in the basement of the Russell building when a Senate staffer whose wife worked for Shapiro shouted at him. From the book:

"Hey, Jeff, you’re in the doghouse." He meant: with his wife.
"Why?" I asked.
"That Politico piece by your boss."
I was taken aback but tried to downplay the matter. "We just want the SEC to get its work done."
"Remember," he said. "We all wear blue jerseys and play for the Blue Team. I just don’t think that helps."

When Connaughton told Kaufman over the phone what the staffer said, Kaufman exploded. "You call him back right now and tell him I said to go fuck himself in his ear," Kaufman said.

Similarly, when Kaufman tried to advocate for rules that would have prevented naked short-selling, Connaughton was warned by a lobbyist that it would be "bad for my career" if he went after the issue and that "Ted and I looked like deranged conspiracy theorists" for asking if naked short-selling had played a role in the final collapse of Lehman Brothers. Naked short-selling is another controversial practice. Essentially, when you short a stock, you're supposed to locate shares of that stock before you go out and sell it short. But what hedge funds and banks have discovered is that the rules provide "leeway" – you can go out and sell shares in a stock without actually having it, provided you have a "reasonable belief" that you can locate the shares.

This leads to the obvious possibility of companies creating false supply in a stock by selling shares they don't have. Without getting too much into the weeds here, there is an obvious solution to the problem, which essentially would be forcing companies to actually locate shares before selling them. In their attempt to change the system, Kaufman and Connaughton discovered that the Depository Trust Clearing Corporation, the massive quasi-private organization that clears most all stock trades in America, had come up with just such a fix on their own. Kaufman recruited some other senators to endorse the idea, and as late as 2009, Connaughton and Kaufman were convinced they were going to get the form. "I said to Ted, 'We’re going to change the way stocks are traded in this country.'"

But before the change could be made, Goldman, Sachs issued "data" showing that there was "no correlation" between naked short selling and price movements. When Connaughton asked an Isakson staffer what the data said, the staffer, intimidated by Goldman, replied, "The data proves we're full of shit." Connaughton looked at the data and realized instantly that it was a bunch of irrelevant gobbledygook, even firing off an angry letter to Goldman telling them the tactic was beneath even them.

But Goldman’s tactic worked. A roundtable to discuss the idea was scheduled by the SEC on September 24, 2009. Of the nine invited participants, "all but one" were for the status quo. Connaughton expected the DTCC representatives to unveil their reform idea, but they didn’t:

Afterwards, I went over to [the DTCC representatives] and asked, "What happened?" Sheepishly, and to their credit, they admitted: "We got pulled back." They meant: by their board, by the Wall Street powers-that-be.

Essentially the same thing happened in Kaufman’s biggest reform attempt, the amendment to the Dodd-Frank bill he co-sponsored with Ohio’s Sherrod Brown, which would have broken up the Too-Big-To-Fail banks. But the Brown-Kaufman amendment, which was really the meatiest thing in the original Dodd-Frank bill, the one reform that really would have made a difference if it had passed, just died in the suffocating mass of the Blob. The key Democrats one after another failed to line up behind it, and in the end it was defeated soundly, with Dick Durbin, the number two man in the Democratic leadership, giving it this epitaph: "a bridge too far."

Again, those interested in understanding the mindset of the people who should be leading the anti-corruption charge ought to read this book. It's the weird lack of concern that shines through, like Khuzami’s comment that he’s "not losing sleep" over judges reprimanding his soft-touch settlements with banks, or then Southern District of New York U.S. Attorney Ray Lohier’s comment that the thing that most concerned him – this is the period of 2008-2009, the middle of a historic crimewave on Wall Street – was "cyber crime."

On the outside we can only deduce the mindset from actions and non-actions, but Connaughton’s actually seen it, and with the book you get to see it too. It’s scary and definitely worth a read.

Thursday, August 23, 2012

HOW THE BIG BANKS ACCIDENTALY ON PURPOSE "LOSE" THEIR DEPOSITOR'S RETIREMENT SAVINGS AND GET AWAY WITH IT, AS TOLD BY ECONOMIST AND WHITE-COLLAR CRIMINOLOGIST BILL BLACK -- WHO SENT OVER 1,000 SAVINGS-AND-LOAN CEOs TO JAIL FOR SIMILAR CRIMES IN THE EARLY 1990s. (IT APPEARS THAT TODAY'S BANKSTERS ARE "TOO BIG TO JAIL.")

theREALnews Permalink

Black Report: No Criminal Prosecution of Wall St. and Who is the European, Romney or Obama?

Bill Black Finance and Fraud Report: Goldman and MF Global avoid criminal charges and Romney accuses of Obama of being a "European"

Watch full multipart The Black Financial and Fraud Report:

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.

Saturday, August 18, 2012

THE FINANCIAL WORLD WAR THREE IS LIKELY TO BREAK OUT IN EUROPE.

Max Keiser - World is witnessing financial WWIII - 11 aug 2011 (french sub)

http://youtu.be/ZlDnbSuet2Q

Uploaded by raspail2 on Aug 15, 2011

Max Keiser : This is a war. This is World War III. This is the new war using financial derivatives. And the objective is to preserve the speculative rates given to the Wall Street bankers of zero percent. You know, Ben Bernanke this week came out and said "we're gonna be keeping this rate of zero percent for over two years or indefinetly". That doesn't help workers, that doesn't help savers, that doesn't help society, that only helps speculators, that only helps the plunderers. And if you look at those riots in London, all those plunderers on the streets would be doing was mimicking the plundering at Goldman Sachs and JP Morgan. I'm surprised Goldman Sachs is not down on the street trying to recruit these kids to work at Goldman Sachs and JP Morgan ! They are excellent plunderers, why don't they work on Wall Street ? They've proven themselves ! Let's give them the job ! Bernanke's job is to be down in the mouth and say that he must keep interest rates low. That's its job ! And to determine where interest rates should be, he looks at a series of statistics that do not include energy or food ! So he does not see inflation ! He only looks at things that are falling in price. And therefore he concludes that there's deflation and that the interest rates must be near zero. And in Switzerland now interest rates have gone negative. They're charging people to keep money at the bank, also the United States are utilizing negative interest rates. That's to be... my prediction would be... that's to be widespread all over the G20 nations, negative interest rates forcing people into those speculative bets, which of course benefit to terrorists, the financial terrorists, JP Morgan, Goldman Sachs, HSBC, Barclays, the central banks, the Bank of International Settlement, the rating agencies, the hedge funds ! This is a war !

Sunday, July 22, 2012

THE LIBOR SCANDLE: ELLEN BROWN'S ANALYSIS OF POSSIBLE CONSEQUENCES, JULY 20TH

Titanic Banks Hit LIBOR Iceberg: Will Lawsuits Sink the Ship?

By Ellen Brown Original here

At one time, calling the large multinational banks a “cartel” branded you as a conspiracy theorist. Today the banking giants are being called that and worse, not just in the major media but in court documents intended to prove the allegations as facts. Charges include racketeering (organized crime under the U.S. Racketeer Influenced and Corrupt Organizations Act or RICO), antitrust violations, wire fraud, bid-rigging, and price-fixing. Damning charges have already been proven, and major damages and penalties assessed. Conspiracy theory has become established fact.

In an article in the July 3^rd Guardian titled “Private Banks Have Failed – We Need a Public Solution”, Seumas Milne writes of the LIBOR rate-rigging scandal admitted to by Barclays Bank:

It’s already clear that the rate rigging, which depends on collusion, goes far beyond Barclays, and indeed the City of London. This is one of multiple scams that have become endemic in a disastrously deregulated system with inbuilt incentives for cartels to manipulate the core price of finance.

. . . It could of course have happened only in a private-dominated financial sector, and makes a nonsense of the bankrupt free-market ideology that still holds sway in public life.

. . . A crucial part of the explanation is the unmuzzled political and economic power of the City. . . . Finance has usurped democracy.

Bid-rigging and Rate-rigging

Bid-rigging was the subject of U.S. v. Carollo, Goldberg and Grimm, a ten-year suit in which the U.S. Department of Justice obtained a judgment on May 11 against three GE Capital employees. Billions of dollars were skimmed from cities all across America by colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. Other banks involved in the bidding scheme included Bank of America, JPMorgan Chase, Wells Fargo and UBS. These banks have already paid a total of $673 million in restitution after agreeing to cooperate in the government’s case.

Hot on the heels of the Carollo decision came the LIBOR scandal, involving collusion to rig the inter-bank interest rate that affects $500 trillion worth of contracts, financial instruments, mortgages and loans. Barclays Bank admitted to regulators in June that it tried to manipulate LIBOR before and during the financial crisis in 2008. It said that other banks were doing the same. Barclays paid $450 million to settle the charges.

The U. S. Commodities Futures Trading Commission said in a press release that Barclays Bank “pervasively” reported fictitious rates rather than actual rates; that it asked other big banks to assist, and helped them to assist; and that Barclays did so “to benefit the Bank’s derivatives trading positions” and “to protect Barclays’ reputation from negative market and media perceptions concerning Barclays’ financial condition.”

After resigning, top executives at Barclays promptly implicated both the Bank of England and the Federal Reserve. The upshot is that the biggest banks and their protector central banks engaged in conspiracies to manipulate the most important market interest rates globally, along with the exchange rates propping up the U.S. dollar.

CFTC did not charge Barclays with a crime or require restitution to victims. But Barclays’ activities with the other banks appear to be criminal racketeering under federal RICO statutes, which authorize victims to recover treble damages; and class action RICO suits by victims are expected.

The blow to the banking defendants could be crippling. RICO laws, which carry treble damages, have taken down the Gambino crime family, the Genovese crime family, Hell’s Angels, and the Latin Kings.

The Payoff: Not in Interest But on Interest Rate Swaps

Bank defenders say no one was hurt. Banks make their money from interest on loans, and the rigged rates were actually LOWER than the real rates, REDUCING bank profits.

That may be true for smaller local banks, which do make most of their money from local lending; but these local banks were not among the 16 mega-banks setting LIBOR rates. Only three of the rate-setting banks were U.S.banks—JPMorgan, Citibank and Bank of America—and they slashed their local lending after the 2008 crisis. In the following three years, the four largest U.S. banks—BOA, Citi, JPM and Wells Fargo—cut back on small business lending by a full 53 percent. The two largest—BOA and Citi—cut back on local lending by 94 percent and 64 percent, respectively.

Their profits now come largely from derivatives. Today, 96% of derivatives are held by just four banks—JPM, Citi, BOA and Goldman Sachs—and the LIBOR scam significantly boosted their profits on these bets. Interest-rate swaps compose fully 82 percent of the derivatives trade. The Bank for International Settlements reports a notional amount outstanding as of June 2009 of $342 trillion. JPM—the king of the derivatives game—revealed in February 2012 that it had cleared $1.4 billion in revenue trading interest-rate swaps in 2011, making them one of the bank’s biggest sources of profit.

The losers have been local governments, hospitals, universities and other nonprofits. For more than a decade, banks and insurance companies convinced them that interest-rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools.

The swaps are complicated and come in various forms; but in the most common form, counterparty A (a city, hospital, etc.) pays a fixed interest rate to counterparty B (the bank), while receiving a floating rate indexed to LIBOR or another reference rate. The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels.

Defenders say “a deal is a deal;” the victims are just suffering from buyer’s remorse. But while that might be a good defense if interest rates had risen or fallen naturally in response to demand, this was a deliberate, manipulated move by the Fed acting to save the banks from their own folly; and the rate-setting banks colluded in that move. The victims bet against the house, and the house rigged the game.

Lawsuits Brewing

State and local officials across the country are now meeting to determine their damages from interest rate swaps, which are held by about three-fourths of America’s major cities. Damages from LIBOR rate-rigging are being investigated by Massachusetts Attorney General Martha Coakley, New York Attorney General Eric Schneiderman, officers at CalPERS (California’s public pension fund, the nation’s largest), and hundreds of hospitals.

One victim that is fighting back is the city of Oakland, California. On July 3, the Oakland City Council unanimously passed a motion to negotiate a termination without fees or penalties of its interest rate swap with Goldman Sachs. If Goldman refuses, Oakland will boycott doing future business with the investment bank. Jane Brunner, who introduced the motion, says ending the agreement could save Oakland $4 million a year, up to a total of $15.57 million—money that could be used for additional city services and school programs. Thousands of cities and other public agencies hold similar toxic interest rate swaps, so following Oakland’s lead could save taxpayers billions of dollars.

What about suing Goldman directly for damages? One problem is that Goldman was not one of the 16 banks setting LIBOR rates. But victims could have a claim for unjust enrichment and restitution, even without proving specific intent:

Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing. . . . [It is a] general equitable principle that a person should not profit at another’s expense and therefore should make restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained.

Goldman was clearly unjustly enriched by the collusion of its banking colleagues and the Fed, and restitution is equitable and proper.

RICO Claims on Behalf of Local Banks

Not just local governments but local banks are seeking to recover damages for the LIBOR scam. In May 2012, the Community Bank & Trust of Sheboygan, Wisconsin, filed a RICO lawsuit involving mega-bank manipulation of interest rates, naming Bank of America, JPMorgan Chase, Citigroup, and others. The suit was filed as a class action to encourage other local, independent banks to join in. On July 12, the suit was consolidated with three other LIBOR class action suits charging violation of the anti-trust laws.

The Sheboygan bank claims that the LIBOR rigging cost the bank $64,000 in interest income on $8 million in floating-rate loans in 2008. Multiplied by 7,000 U.S. community banks over 4 years, the damages could be nearly $2 billion just for the community banks. Trebling that under RICO would be $6 billion.

RICO Suits Against Banking Partners of MERS

Then there are the MERS lawsuits. In the State of Louisiana, 30 judges representing 30 parishes are suing 17 colluding banks under RICO, stating that the Mortgage Electronic Registration System (MERS) is a scheme set up to illegally defraud the government of transfer fees, and that mortgages transferred through MERS are illegal. A number of courts have held that separating the promissory note from the mortgage—which the MERS scheme does—breaks the chain of title and voids the transfer.

Several states have already sued MERS and their bank partners, claiming millions of dollars in unpaid recording fees and other damages. These claims have been supported by numerous studies, including one asserting that MERS has irreparably damaged title records nationwide and is at the core of the housing crisis. What distinguishes Louisiana’s lawsuit is that it is being brought under RICO, alleging wire and mail fraud and a scheme to defraud the parishes of their recording fees.

Readying the Lifeboats: The Public Bank Solution

Trebling the damages in all these suits could sink the banking Titanic. As Seumas Milne notes in The Guardian:

Tougher regulation or even a full separation of retail from investment banking will not be enough to shift the City into productive investment, or even prevent the kind of corrupt collusion that has now been exposed between Barclays and other banks. . . .

Only if the largest banks are broken up, the part-nationalised outfits turned into genuine public investment banks, and new socially owned and regional banks encouraged can finance be made to work for society, rather than the other way round. Private sector banking has spectacularly failed – and we need a democratic public solution.

If the last quarter century of U.S. banking history proves anything, it is that our private banking system turns malignant and feeds off the public when it is deregulated. It also shows that a parasitic private banking system will NOT be tamed by regulation, as the banks’ control over the money power always allows them to circumvent the rules. We the People must transparently own and run the nation’s central and regional banks for the good of the nation, or the system will be abused and run for private power and profit as it so clearly is today, bringing our nation to crisis again and again while enriching the few.

Ellen Brown
Web of Debt

Posted: Friday, 20 July 2012