The purported work of Wall Street.

What do all of those people in the Wall Street towers actually do? You won't find them doing much of what most people think about when they hear the term "banking." The following description of the business of Wall Street is from Christopher Ketcham's "The Reign of One Percenters" at Orion Magazine:

At one time, the financial sector could be relied upon to allocate capital for the building of things that society needed—projects that also invariably created jobs. But productivity is no longer its purview. . . . Structured investment vehicles, credit default swaps, futures exchanges, hedge funds, complex securitization and derivative pools, the tranching of mortgages—these were shown to have “little or no long-term value,” according to [John Cassidy, a staff writer for The New Yorker]. The purpose was to “merely shift money around” without designing, building, or selling “a single tangible thing.” The One Percenter seeks only exchange value, as opposed to real value. Thus foreign exchange currency gambling has skyrocketed to seventy-three times the actual goods and services of the planet, up from eleven times in 1980. Thus the “value” of oil futures has risen from 20 percent of actual physical production in 1980 to 1,000 percent today. Thus interest rate derivatives have gone from nil in 1980 to $390 trillion in 2009. The trading schemes float disembodied above the real economy, related to it only because without the real economy there would be nothing to exploit. Behold, then, the One Percenter in his Wall Street tower. He creates “value” by tapping on keyboards and punching in algorithms. He makes money playing with money, manipulating abstractions. He manufactures and chases after financial bubbles and then pricks them. . . . A study from the New Economics Foundation in England found that for every pound made in financial services in the city of London, roughly seven pounds of social wealth is lost—meaning the wealth of those in society who do productive work.

Continue ReadingThe purported work of Wall Street.

How corporations buy state Attorneys General

This is the formula for how big money corporations defang state Attorneys General. This story of corruption is presented in a highly detailed well-written piece at Huffpo concerning the firing of two up and coming Assistant Attorneys General who we're gunning for the bad guys on mortgage fraud cases. Once you connect the dots, you can see that these good-guy Assistants were canned because they were trying to do their jobs well.

Many cite the forced departure of Clarkson and Edwards as a vivid example of how mortgage companies and law firms successfully exploit connections to Florida's attorney general to soften legal probes, insulating themselves against the consequences of alleged law-breaking.

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Sixteen Trillion Dollars; Sixteen Tons

Sixteen is a number that rings a bell for me, because when I was a boy I used to listen to a song called "Sixteen Tons." It was a coal miner song expressing the pain and futility of endless work without the possibility of getting out of debt. The song was made famous by Tennessee Ernie Ford: Now I see that the number sixteen has come back into the news in the context of banks. This time, sixteen refers to a secret deal arranged by our government to prop up huge corrupt banks to the tune of $16 trillion dollars. We, the taxpayers would never have approved this deal if it had been made out in the open.  Nonetheless, we are now subsidizing these too-big-to-fail institutions for as long as any of us will live, and further, we've piled huge amounts of this debt onto the backs of our children. It's all part of a new spin on "family values": dumping unimaginable amounts of debt on our children, "justifying" this by the fact that the people who run corrupt banks bought Congress and asked for for this money.   Now our children will have to try to work off endless corporate debt.  My image is that we've just signed them up to work an old-fashioned coal-miner's job of the type described by Tennessee Ernie Ford. Alan Grayson recently included me in a mass emailing, where he puts the number sixteen into context:

Dear Erich: The Government Accountability Office (GAO) says that our Government has handed out $16 trillion to the banks. Let me repeat that, in case you didn’t hear me the first time. The GAO says that our Government HAS HANDED OUT $16 TRILLION TO THE BANKS. That little gem appears on Page 131 of GAO Report No. GAO-11-696. A report issued two months ago. A report that somehow seems to have eluded the attention of virtually every network, every major newspaper, and every news show. How much is $16 trillion? That is an amount equal to more than $50,000 for every man, woman and child in America. That’s more than every penny that every American earns in a year. That’s an amount equal to almost a third of our national net worth -- the value of every home, car, personal belonging, business, bank account, stock, bond, piece of land, book, tree, chandelier, and everything else anyone owns in America. That’s an amount greater than our entire national debt, accumulated over the course of two centuries. A $16 trillion stack of dollar bills would reach all the way to the Moon. And back. Twice. That’s enough to pay for Saturday mail delivery. For the next 5,000 years. All of that money went from you and me to the banks. And we got nothing. Not even a toaster. I have been patiently waiting to see whether this disclosure would provoke some kind of reaction. Answer: nope. Everyone seems much more interested in discussing whether or not they like the cut of Perry’s jib. Whatever a jib may be. In the next few weeks, I’m going to be writing more about this. But right now, I wanted to keep this really simple. Just give folks something to talk about when they’re standing next to the coffee maker. The Government gave $16 trillion to the banks. And nobody else is talking about it. Think about it. Think about what that means. Courage, Alan Grayson

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Senator Bernie Sanders proposes changes to America’s corrupt banking system

At Huffpo, Senator Bernie Sanders, who remains one of my heroes, points out that the secret bailout by the Federal Reserve makes the better-known bailout look tiny:

More than three years ago, Congress rewarded Wall Street with the biggest taxpayer bailout in the history of the world. Simultaneously but unknown to the American people at the time, the Federal Reserve provided an even larger bailout. The details of what the Fed did were kept secret until a provision in the Dodd-Frank Act that I sponsored required the Government Accountability Office to audit the Fed's lending programs during the financial crisis. As a result of this audit, the American people have learned that the Federal Reserve provided more than $16 trillion in low-interest loans to every major financial institution in this country, huge foreign banks, multi-national corporations, and some of the wealthiest people in the world. In other words, when Wall Street was on the verge of collapse, the federal government acted boldly, aggressively, and with a fierce sense of urgency to save our financial system from collapse with no strings attached.
The huge backdoor bailout is a slap in the face to American taxpayers, especially since the big Wall Street banks are bigger than ever and because they are taking more risks than ever, presumably emboldened by the fact that they are "too big to fail," and that the federal government will come bail them out yet again. Here's what Bernie Sanders proposes to clean up this despicable situation: 1) Break up the big banks. 2) Cap credit card interest rates ("Today, more than a quarter of all credit card holders in this country are paying interest rates above 20 percent and as high as 59 percent.") 3) Force the Federal Reserve to make low interest loans directly to small businesses. 4) Put an end to speculation that jacks up the price of petroleum products. 5) Demand that Wall Street invest in real businesses instead of "gambling on derivatives." 6) "Establish a Wall Street speculation fee on credit default swaps, derivatives, stock options and futures. Both the economic crisis and the deficit crisis are a direct result of the greed and recklessness on Wall Street." Sanders points out that there was such a fee (.2% tax on all sales and transfers of stock) from 1914 - 1966. Sanders points out that getting these measures passed will be enormously difficult, given that these Wall Street banks spent $5 billion on lobbying over the past decade.  Which leads to another enormous need: to get money out of politics.

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Money talks

During a recent conversation with a friend, I found myself wondering whether I had sufficient evidence for my claim. My claim was that most corporate newspapers and electronic media are reluctant publish stories that make big corporations look bad, the motivation being that big corporations by expensive ads. Don't bite the hand that feeds you. My friend reminded me that her husband works for a newspaper and he's never seen the "smoking gun memo" that substantiates the that corporations are telling the news media what stories to avoid covering. She says that the problem is that the media is understaffed and lazy, not that they are biased. I responded that I don't think that there actually NEEDS to be a memo. As long as the media picks on little targets and celebrity news, there isn't much blow-back. But if they were to take on a big target in a big way, the reporters and editors already KNOW that the switchboard would light up and email will come pouring in from big shots affiliated with corporations, making them wish they they had just stuck with the tried and true (e.g., celebrity news, sports, shootings and accidents). There is a substitute for a smoking gun memo, and it's the overall lack of reporting critical of corporations that is not simply reporting on an ongoing legal dispute or where one corporation criticizes another. Many people think that circumstantial cases are necessarily weak, but this is not true. Criminals are sent to prison based on circumstantial evidence. I'll be on the lookout for a good study that demonstrates the problem, and I'm certainly open to evidence to the contrary. In the meantime, I've just noticed two recent stories that exemplify the political power of money. Example 1: The New Yorker has just published a detailed article explaining how concentrated money is buying elections in North Carolina. Example 2: Contrary to strong studies to the contrary, the Susan G. Komen for the Cure organization is claiming that the common chemical bisphenol A (BPA) presents no risk of cancer. Here's an excerpt from a recent Mother Jones article, "Is Susan G. Komen Denying the BPA-Breast Cancer Link?":

In April 2010 Komen posted an online statement saying that BPA had been "deemed safe." And a more recent statement on Komen's website about BPA, from February 2011, begins, "Links between plastics and cancer are often reported by the media and in email hoaxes." Komen acknowledges in its older statement that the Food and Drug Administration is doing more studies on BPA, but also says that there is currently "no evidence to suggest a link between BPA and risk of breast cancer."

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