The Aristocracy of our Monied Corporations

“I hope we shall . . . crush in [its] birth the aristocracy of our monied corporations." Thomas Jefferson Much has been written about the causes and the effects of the financial crisis of 2008. The right blames easy home loan credit they claim was mandated by federal laws and Democratic legislators. The left blames corporate greed run amok after the GW Bush administration gave up regulation of the financial sector to the “free market.” It is important to know who the players were that brought us to a world-wide economic crisis in 2008 and another which is working itself out in Europe right now as a result of the sovereign debt crisis in the Southern tier of European Union countries of Greece, Italy, Spain, and Portugal. The Irish financial crisis was as a result of an exploded housing bubble much as unfolded in the US. It is important to note there are neither “easy home loan credit… mandated by federal laws” or “Democratic legislators” in Ireland. At the core of the crises is a group of US based banks and financial services corporations, chief among which are Goldman Sachs. Bank of America, JP Morgan Chase and Citigroup, along with Goldman Sachs, are still making massive investments in risky derivatives such as credit default swops and credit default options and currently hold over 95% of such contracts in that market. But, Goldman Sachs has had at the nexus of all the actors its players and yet another has just been appointed as the new head of the European Bank, Mario Draghi. Mr. Draghi’s immediate past position was with the Bank of Italy and just before that Mr. Draghi was with Goldman Sachs. It was during Mr. Draghi’s tenure at Goldman that the firm came under heavy fire for mis-stating Greece’s debts so as to ease its entry into the EU. Italy’s likely new appointed PM, Mario Monti, is also a Goldman Sachs alumnus and will have to leave as the Euro Chair of the Trilateral Commission if he enters government service. Lucas Papademos, the newly appointed PM of Greece, is a technocrat and that’s thought to help Greece and the EU but, resigned (as required) as a member of the Trilateral Commission upon his government appointment. Mr. Papademos served as a member of the Trilateral Commission along with the CEOs of Goldman Sachs, JP Morgan Chase and folks from AIG and other major Wall Street players that brought us the 2008 meltdown and now have brought the entire EU sovereign debt crisis to a boil. The very scary reality is that the next economy to falter after the Southern tier is France. France holds the highest amount of any nation of the sovereign debt of the South. Soon, France may lose its AAA credit rating which it has held to even though its debt to GDP ration of 83% is higher than the about 62% of the US. France will next have to enact “austerity measures” such as those already imposed in much of the EU and which have caused riots in Greece. What this all means to us poor average Americans is that while we work hard, pay our taxes, save for our retirements and kids’ college, forces beyond our ken and control are at work around the Western world to make sure that the interests of our monied corporations are those which are served and that our votes, our elections and our very dreams for ourselves and our children just don’t matter any more. And see here and here. There was a war while we slept last night, we lost. Goldman Sachs and its ilk won by removing all our wealth to them, by removing elected officials to be replaced by their former employees and by taking over our dreams and replacing them with their own. "As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." Abraham Lincoln

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Obama Administration continues Bush tradition of free market fundamentalism

William Black was a guest on Bill Moyers Journal yesterday. The conversation was lively and informative, including detailed discussion regarding "liar's loans" (In a liar's loan, the mortgage company doesn't require any verified information from the borrower about the borrower's income, employment, job history or assets). Black indicates that even after all that has come to light regarding the financial collapse, our politicians refuse to use the "F word," fraud. Why? Because too many politicians (and businesses) simply don't believe in fraud. That is the hallmark of free market fundamentalism. To make matters worse, Barack Obama refuses to utter the word "fraud" from his bully pulpit. Nor does Eric Holder or anyone from the Obama Administration:

WILLIAM K. BLACK They can't even get themselves to use the word "fraud."

There's a huge part that is economic ideology. And neoclassical economists don't believe that fraud can exist. I mean, they just flat out -- the leading textbook in corporate law from law and economics perspective by Easterbrook and Fischel, says -- I'll get pretty close to exact quotation. "A rule against fraud is neither necessary nor particularly important." Right?

Notice how extreme that statement is. We don't need laws. We don't need an FBI. We don't need a justice department. We don't even need rules like the SEC. The markets cleanse themselves automatically and prevent all frauds. This is a spectacularly naïve thing. There is enormous ideological content. And it fits with class. And it fits with political contributions.

Do you want to look at these seemingly respectable huge financial institutions, which are your leading political contributors as crooks?

But can't we insist that suspect businesses be audited to determining whether they are committing fraud? Not based on a long sordid track record regarding prestigious accounting firms:

BILL MOYERS: Isn't the accounting firm supposed to report this, once they learn from somebody like him that there's fraud going on?

WILLIAM K. BLACK Yes, they're supposed to be the most important gatekeeper. They're supposed to be independent. They're supposed to be ultra-professional. But they have an enormous problem, and it's compensation. And that is, the way you rise to power within one of these big four accounting firms is by being a rainmaker, bringing in the big clients.

And so, every single one of these major frauds we call control frauds in the financial sphere has been-- their weapon of choice has been accounting. And every single one, for many years, was able to get what we call clean opinions from one of the most prestigious audit firms in the world, while they were massively fraudulent and deeply insolvent.

BILL MOYERS: I read an essay last night where you describe what you call a criminogenic environment. What is a criminogenic environment?

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