By: Jane Hamsher
FDL
Yesterday the White House took the last step to owning all three leftover Bush NAFTA-expansion deals with Korea, Colombia and Panama by announcing that they would send them to Congress imminently. The Economic Policy Institute estimates that we’ll lose 159,000 jobs with the Korea deal alone.
At a time of high unemployment, it’s difficult to fathom why the President would be fighting to increase our trade deficit and ship tens of thousands of jobs overseas.
Even more stunning, however, is the loophole in the Obama deal that will hand billions over to North Korea to spend on their nuclear weapons program (PDF).
Under the terms of NAFTA, goods have to have 50% domestic-made content in order to qualify for inclusion. However under KORUS, goods with up to 65% non-South-Korean content qualify, as long as final assembly off goods happens in South Korea. That means 65% of all parts can be made China, Vietnam, wherever — giving rise to fears that the South Korea deal will be a back-door extension of NAFTA for China.
But surely, somebody thought to exclude North Korean content from the deal, right? I mean, with all the huffing and puffing about the need for increased sanctions against North Korea to keep them from funding their nuclear program. At the very least, somebody must have included language in KORUS that makes an exception for US sanctions against North Korea, which would otherwise violate NAFTA’s ban on import licenses.
Well if that’s what you thought, you would be wrong.
Every day, 44,000 North Koreans are marched into a North Korea border sweat shop zone called Kaesong to work for 28 center per hour — of which the Kim regime keeps 55%. In 2007 Ambassador Jay Lefkowitz, the U.S. Special Envoy for Human Rights in North Korea, wrote that Kaesong was one of the only sources of cold hard currency North Korea had to fund its nuclear program:
Because the North Korean government takes a major portion of workers’ salaries, these arrangements provide material support for a rogue government, its nuclear ambitions, and its human rights atrocities.
According to research done by Public Citizen, Obama’s NAFTA-Korea deal not only fails to exclude North Korean content, it allows for a massive expansion of the Kaesong district — and the profits that North Korea will reap (PDF):
The U.S. government estimates that the North Korean government currently collects $3 million to $4 million a month from the Kaesong operations now, prior to a massive planned expansion of the border sweatshop zone. South Korea cut off most trade with North Korea after attacks last year, but left Kaesong trade open. There was $1.9 billion in total trade between the two Koreas in 2009, about half of which was through production by South Korean firms in Kaesong. While $1.9 billion is not a lot of money relative to the U.S. or South Korean economy, it constitutes more than a third of North Korea’s total external trade. Given the Department of Defense estimates that North Korea’s nuclear program cost the regime as little as $200 million to develop, the hard currency generated by North Korean trade flows is sufficient to finance the North’s nuclear proliferation regime several times over.
The North Korean government is projected to receive $9.55 billion in economic gains from Kaesong over nine years under a planned major expansion. This is equivalent to 36 percent of North Korea’s estimated national income. Hyundai and the Korea Land Corporation, the principal developers of Kaesong, plan to enlarge the complex from its current 800 acres to a more than 6,000-acre complex (or nine square miles), where 1,500 South Korean and other foreign firms will employ 350,000 North Korean workers. This would make the complex more than half the size of Alexandria, Virginia.
Is this an accident? Hardly. Members of Congress like Brad Sherman have been waving red flags about the dangers of the Kaesong provisions in KORUS. The Chamber is pushing this deal hard, however, and there’s a lot of money to be made in Kaesong. And as we all know, what the Chamber wants, the Chamber gets.
But let’s do the math here. The US government estimates that the North Koreans are 5 years and $200 million away from having nuclear capacity. I understand why KORUS would benefit the mega corporations that use the Chamber of Commerce as their front, the ones that hope to profiteer off of “slave labor” in Kaesong. But how exactly is it good for the American people to allow North Korea access to US markets? I just don’t see the upside to offshoring jobs, increasing the trade deficit and writing a check to North Korea to spend on nukes.
But then, few people do. Poll after poll shows that the vast majority of the American public – across stunningly diverse demographics – oppose these NAFTA-style trade deals. It’s an issue that has oddly united union members and Tea Partiers, progressives and conservatives, Democrats and Republicans in opposition. The AFL-CIO, Carpenters, Teamsters, CWA, Machinists, IBEW, Steelworkers, Painters, Boilermakers, the Sierra Club, Public Citizen and the National Farmers Union all oppose the deal., as do Republicans like Walter Jones, Ron Paul, and the Campaign for Liberty.
Earlier this month, even White House Chief of Staff Bill Daley (whose job is to sell these trade deals and who helped former President Bill Clinton sell NAFTA to a skeptical Congress) said that workers “lose from these agreements” and implied that campaigning against these NAFTA-style trade agreements could even be an electoral advantage.
But if we’ve learned one thing over the past few years, it’s that broad popular opposition is meaningless when it comes to Chamber’s ability to bribe impose its will on our elected officials. If KORUS passes, the hawks will soon be banging the war drums and warning us all that the smoking gun of North Korea has become a mushroom cloud, now is the time to act.
Because three wars are just not enough, I guess
Thursday, June 30, 2011
TBW: GSE's Covered Up The Fraud
by Karl Denninger
Oh boy, and then the taxpayers - that's you and I - bailed out both firms, and in fact we continue to right now, with Geithner, under Obama's direction, continuing to pour in the cash.
The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.
But did Fannie tell anyone, like, for instance, The FBI?
Nope.
Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.
Just dump it off on someone else, right? And who else? Well, that would be the other GSE, who they also didn't tell....
Taylor Bean would have collapsed in 2002 “but for the fraud scheme,” according to prosecutors. It also survived because Freddie Mac began picking up the company’s business within a week of Fannie Mae’s cutoff, Jason Moore, Taylor Bean’s former chief operating officer, said in an interview.
Isn't that nice?
Oh yeah, and this little charade factored into the Colonial Bank collapse too.
But all of it would have ended immediately had the government's sponsored enterprises done what they had an obligation to do - turn over evidence of criminal lawbreaking to the authorities.
They did not and as a result serious financial harm was done - and now we, as taxpayers, get to pay for it.
Oh, and both Fannie and Freddie? They're still in business, now 80% owned by Treasury. That's you and I, who were bent over the table not just once, not twice, but each and every day this crap is allowed to continue and these firms are not shut down and the parties responsible for this intentional malfeasance remain free without prosecution.
Incidentally, Geithner and Obama, by supporting these firms, are both personally responsible for this crap continuing, and you, the taxpayer, being repeatedly screwed.
Oh boy, and then the taxpayers - that's you and I - bailed out both firms, and in fact we continue to right now, with Geithner, under Obama's direction, continuing to pour in the cash.
The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.
But did Fannie tell anyone, like, for instance, The FBI?
Nope.
Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.
Just dump it off on someone else, right? And who else? Well, that would be the other GSE, who they also didn't tell....
Taylor Bean would have collapsed in 2002 “but for the fraud scheme,” according to prosecutors. It also survived because Freddie Mac began picking up the company’s business within a week of Fannie Mae’s cutoff, Jason Moore, Taylor Bean’s former chief operating officer, said in an interview.
Isn't that nice?
Oh yeah, and this little charade factored into the Colonial Bank collapse too.
But all of it would have ended immediately had the government's sponsored enterprises done what they had an obligation to do - turn over evidence of criminal lawbreaking to the authorities.
They did not and as a result serious financial harm was done - and now we, as taxpayers, get to pay for it.
Oh, and both Fannie and Freddie? They're still in business, now 80% owned by Treasury. That's you and I, who were bent over the table not just once, not twice, but each and every day this crap is allowed to continue and these firms are not shut down and the parties responsible for this intentional malfeasance remain free without prosecution.
Incidentally, Geithner and Obama, by supporting these firms, are both personally responsible for this crap continuing, and you, the taxpayer, being repeatedly screwed.
While Criminal US Bankers Receive Golden Parachutes, Barbarian Afghanistan Has Just Arrested Executives Of Failed Kabul Bank
by Tyler Durden
Sometimes it is good to put things in perspective when comparing developed democracies like America and barbaric despotic dictatorships like Afghanistan. In one country, radioactively orange criminal heads of imploded mortgage lenders, who are responsible for billions in losses at rescued companies that will soon require more taxpayer bailouts, received multi million dollar golden parachute severance packages and slips on the write from the country's "regulators." In the other, former executives of a major failed bank have been arrested over huge fraud that led to its near collapse, while the head of its central bank flees to the first country on fears of prosecutions. Take a wild guess which country is which...
From the BBC:
Deputy Attorney General Rahmatullah Nazari said the bank's founder and its former chairman Sherkhan Farnood and ex-CEO Khalilullah Ferozi were being held on embezzlement charges.
He told Reuters news agency both men would go on trial within a month.
Revelations of fraud, bad loans and mismanagement prompted a run on the bank last September.
It was bailed out by the central bank as part of efforts to prevent it from collapsing.
In April, it was split into a "good" and "bad" bank, and President Hamid Karzai vowed to take action against those responsible for the crisis.
Mr Farnood and Mr Ferozi, who both owned large stakes in the bank, were placed under house arrest at the time trouble hit, though they were reportedly able to move freely around Kabul nonetheless.
"We had to make arrests because Haji Khalil [Ferozi] and Sherkhan are the kind of people who can easily slip away from the country," Mr Nazari said, Reuters reported.
"Both are responsible for millions of dollars of losses in Kabul Bank and they must appear in court before they go too far from our hands," he said.
Another person who as we reported, and who is implicated in the massive fraud, is none other than the head of the former central bank head: Fitrat.
Earlier this week Afghan authorities issued a warrant for the arrest of the former governor of the Afghan central bank, Abdul Qadeer Fitrat, saying he was being investigated in connection with the fraud at Kabul Bank.
But he had already fled to the US, saying his life was in danger for exposing fraud.
In April, Mr Fitrat himself had accused several key Afghan officials - including President Hamid Karzai's brother Mahmoud Karzai and Vice-President Qasim Fahim - of involvement. Both deny the charges.
Funny: he was being sought in connection with the fraud, while he told all his central banking cohorts that he was in danger due to exposing fraud.
Understandable. Must have been lost in translation.
Sometimes it is good to put things in perspective when comparing developed democracies like America and barbaric despotic dictatorships like Afghanistan. In one country, radioactively orange criminal heads of imploded mortgage lenders, who are responsible for billions in losses at rescued companies that will soon require more taxpayer bailouts, received multi million dollar golden parachute severance packages and slips on the write from the country's "regulators." In the other, former executives of a major failed bank have been arrested over huge fraud that led to its near collapse, while the head of its central bank flees to the first country on fears of prosecutions. Take a wild guess which country is which...
From the BBC:
Deputy Attorney General Rahmatullah Nazari said the bank's founder and its former chairman Sherkhan Farnood and ex-CEO Khalilullah Ferozi were being held on embezzlement charges.
He told Reuters news agency both men would go on trial within a month.
Revelations of fraud, bad loans and mismanagement prompted a run on the bank last September.
It was bailed out by the central bank as part of efforts to prevent it from collapsing.
In April, it was split into a "good" and "bad" bank, and President Hamid Karzai vowed to take action against those responsible for the crisis.
Mr Farnood and Mr Ferozi, who both owned large stakes in the bank, were placed under house arrest at the time trouble hit, though they were reportedly able to move freely around Kabul nonetheless.
"We had to make arrests because Haji Khalil [Ferozi] and Sherkhan are the kind of people who can easily slip away from the country," Mr Nazari said, Reuters reported.
"Both are responsible for millions of dollars of losses in Kabul Bank and they must appear in court before they go too far from our hands," he said.
Another person who as we reported, and who is implicated in the massive fraud, is none other than the head of the former central bank head: Fitrat.
Earlier this week Afghan authorities issued a warrant for the arrest of the former governor of the Afghan central bank, Abdul Qadeer Fitrat, saying he was being investigated in connection with the fraud at Kabul Bank.
But he had already fled to the US, saying his life was in danger for exposing fraud.
In April, Mr Fitrat himself had accused several key Afghan officials - including President Hamid Karzai's brother Mahmoud Karzai and Vice-President Qasim Fahim - of involvement. Both deny the charges.
Funny: he was being sought in connection with the fraud, while he told all his central banking cohorts that he was in danger due to exposing fraud.
Understandable. Must have been lost in translation.
Politics is a Scam – Why I Will Never Vote Again
by James Altucher
I had five seconds to make the secretive most powerful man in the world like me so I could potentially make millions. “James,” Bill McCluskey said to me, “this is Alan Quasha.” Bill was CEO of Brean Murray, one of the mini-banks I considered selling my fund of hedge funds to in 2006. We had a deal on the table and I was desperate at the time to make it work. The table was circular, there were papers on it with numbers, I was bullshitting every which way I could about “synergies”. Whatever. That was months later. But first I had to meet Alan Quasha, the owner of Brean Murray, at an event they were throwing, and he had to like me. Because…
Alan Quasha squinted his eyes, shook my hand. He had no idea who I was. I certainly wasn’t anything like George W. Bush, the man Quasha had personally saved in 1986. The man Bush owes his sobriety to. In 1986 Bush was CEO of some oil company that was going down in flames. Possibly the worst oil company in Texas history.
Some calls were made and Quasha’s Harken Oil bought Bush’s company for millions of dollars. Then, of course, a few years later, Bush sold his shares in Quasha’s Harkin Oil right before Harkin Oil announced a mega-loss and the stock tanked. Bush used his profits to buy a stake in the Texas Rangers, sold that stake later for 10-15 million dollars and was finally able to follow his father’s sage advice (“don’t go into politics until you get rich” ***).
Let’s spell out what that means: if Alan Quasha called up W on September 12, 2001 in the middle of Bush pouring over maps of the jungles of Afghanistan to see where we would invade (do they have jungles in Afghanistan? Do we really need an “h” in Afghanistan?), Bush would say “hold all calls”, close the doors of the Oval Office and say “Hi Daddy Number 2″, to Quasha. He owed his life, his livelihood, the Texas Rangers, the Presidency, all to Alan Quasha and now I was shaking Quasha’s hand. I had five seconds to make Alan Quasha like me almost as much as he liked Bush so he would buy my company. Why? Alan Quasha was Chairman of Brean Murray.
Fast-forward about ten seconds. Alan Quasha had moved on. Now I was being introduced to Terry Mcauliffe. Terry was the Vice-Chairman of Brean Murray. Terry was known in most circles as “Bill Clinton’s best friend”. Terry raised the bulk of the money for the two Presidential campaigns that Bill was in (the first, of course, where he crushed Bush, the Elder). I’m guessing Terry also raised the money for all of Hillary’s political races. If Chelsea Clinton ever ran for Mayor of New York (now that Weiner is out of the running so you never know) I bet Terry would raise all the money for her race as well.
So there you have it. The biggest mastermind in Republican politics, the behind the scenes mover and shaker across the entire Bush family, was Chairman of the company. And the biggest mover-and-shaker in Democrat politics, was Vice Chairman. The war of values, between Democracy and Republicanism that our founders had fought for, had shed blood for, was over between them, if it ever even existed. Screw “The Federalist Papers”! Let’s make some money!
You see why your vote is useless? Not only is it useless, it’s scary. A female friend of mine told me: “it was like the biggest orgasm I had felt in the past 10 years of my marriage” when Obama became President.
But then what happened? Obama extended Bush’s tax cuts, kept Bush’s Secretary of Defense, extended the wars in Afganistan and Iraq, didn’t close Guantanamo Bay, and fought for a healthcare that’s now being disputed (and overturned) in every court in America. What else has he done? I can’t think of it. Planned Parenthood has less government funding now than under Bush. Africa has less funding from the US than under Bush (in fact, Obama has bombed Africa / Libya).
And yet we all fought so much. “Palin is an idiot!” “Biden can’t speak straight!” “Where’s Obama’s birth certificate!” “Is McCain senile?”! “!”!”!” Let’s fight in the streets and pass out pamphlets and wear buttons and lose friends (“I can’t believe he’s voting for Nader!”) and stick on bumper stickers that can never be scratched off once we realize they are as embarrassing as that magic dragon tattoo we got lasered across our backs when we were 17.
We fought so hard for beliefs we all thought we had and where do they all end up? Where does it all congeal together right before it flushes down the toilet?
Answer:
One is Chairman and the other is Vice-Chairman of the same company. They’re all laughing together. Slapping backs. Making Money. They are laughing at you and me, my friend. The war is over for them.
We voted them all in there, they served their time, and now they are minting money as if they own the printing press. I watched Quasha and McCaulliffe laugh, sitting next to each other when they used to pretend to be sitting so far apart.
They have no idea who I am, what I want out of life, what ideas I think are good or bad, or would save the world, or whatever. They were laughing as hard as they could just ten feet from me and I knew while I stood there watching them, hoping beyond hope that they would share some of the wealth, I knew that they were laughing at me.
*** Net worth of most recent Presidents and Vice-Presidents (according to celebritynetworth.com)
•Barack Obama: $5 million (will probably end up around a billion)
•George W. Bush: $26 million
•Bill Clinton $85 million (my guess is this is understated by about $50-100 million.)
•George H.W Bush: $15 million (I think this is understated by about a billion)
•And now the big question: Al Gore versus Dick Cheney? Democrats versus Republicans. The winner is….
•Al Gore, coming in at $300 million with Dick Cheney at $90 million (don’t forget Gore was an advisor to Google since 2001 and on the Board of Apple. He also manages a billion dollar “green fund”). Al Gore’s net worth in 2001: $1 million.
I had five seconds to make the secretive most powerful man in the world like me so I could potentially make millions. “James,” Bill McCluskey said to me, “this is Alan Quasha.” Bill was CEO of Brean Murray, one of the mini-banks I considered selling my fund of hedge funds to in 2006. We had a deal on the table and I was desperate at the time to make it work. The table was circular, there were papers on it with numbers, I was bullshitting every which way I could about “synergies”. Whatever. That was months later. But first I had to meet Alan Quasha, the owner of Brean Murray, at an event they were throwing, and he had to like me. Because…
Alan Quasha squinted his eyes, shook my hand. He had no idea who I was. I certainly wasn’t anything like George W. Bush, the man Quasha had personally saved in 1986. The man Bush owes his sobriety to. In 1986 Bush was CEO of some oil company that was going down in flames. Possibly the worst oil company in Texas history.
Some calls were made and Quasha’s Harken Oil bought Bush’s company for millions of dollars. Then, of course, a few years later, Bush sold his shares in Quasha’s Harkin Oil right before Harkin Oil announced a mega-loss and the stock tanked. Bush used his profits to buy a stake in the Texas Rangers, sold that stake later for 10-15 million dollars and was finally able to follow his father’s sage advice (“don’t go into politics until you get rich” ***).
Let’s spell out what that means: if Alan Quasha called up W on September 12, 2001 in the middle of Bush pouring over maps of the jungles of Afghanistan to see where we would invade (do they have jungles in Afghanistan? Do we really need an “h” in Afghanistan?), Bush would say “hold all calls”, close the doors of the Oval Office and say “Hi Daddy Number 2″, to Quasha. He owed his life, his livelihood, the Texas Rangers, the Presidency, all to Alan Quasha and now I was shaking Quasha’s hand. I had five seconds to make Alan Quasha like me almost as much as he liked Bush so he would buy my company. Why? Alan Quasha was Chairman of Brean Murray.
Fast-forward about ten seconds. Alan Quasha had moved on. Now I was being introduced to Terry Mcauliffe. Terry was the Vice-Chairman of Brean Murray. Terry was known in most circles as “Bill Clinton’s best friend”. Terry raised the bulk of the money for the two Presidential campaigns that Bill was in (the first, of course, where he crushed Bush, the Elder). I’m guessing Terry also raised the money for all of Hillary’s political races. If Chelsea Clinton ever ran for Mayor of New York (now that Weiner is out of the running so you never know) I bet Terry would raise all the money for her race as well.
So there you have it. The biggest mastermind in Republican politics, the behind the scenes mover and shaker across the entire Bush family, was Chairman of the company. And the biggest mover-and-shaker in Democrat politics, was Vice Chairman. The war of values, between Democracy and Republicanism that our founders had fought for, had shed blood for, was over between them, if it ever even existed. Screw “The Federalist Papers”! Let’s make some money!
You see why your vote is useless? Not only is it useless, it’s scary. A female friend of mine told me: “it was like the biggest orgasm I had felt in the past 10 years of my marriage” when Obama became President.
But then what happened? Obama extended Bush’s tax cuts, kept Bush’s Secretary of Defense, extended the wars in Afganistan and Iraq, didn’t close Guantanamo Bay, and fought for a healthcare that’s now being disputed (and overturned) in every court in America. What else has he done? I can’t think of it. Planned Parenthood has less government funding now than under Bush. Africa has less funding from the US than under Bush (in fact, Obama has bombed Africa / Libya).
And yet we all fought so much. “Palin is an idiot!” “Biden can’t speak straight!” “Where’s Obama’s birth certificate!” “Is McCain senile?”! “!”!”!” Let’s fight in the streets and pass out pamphlets and wear buttons and lose friends (“I can’t believe he’s voting for Nader!”) and stick on bumper stickers that can never be scratched off once we realize they are as embarrassing as that magic dragon tattoo we got lasered across our backs when we were 17.
We fought so hard for beliefs we all thought we had and where do they all end up? Where does it all congeal together right before it flushes down the toilet?
Answer:
One is Chairman and the other is Vice-Chairman of the same company. They’re all laughing together. Slapping backs. Making Money. They are laughing at you and me, my friend. The war is over for them.
We voted them all in there, they served their time, and now they are minting money as if they own the printing press. I watched Quasha and McCaulliffe laugh, sitting next to each other when they used to pretend to be sitting so far apart.
They have no idea who I am, what I want out of life, what ideas I think are good or bad, or would save the world, or whatever. They were laughing as hard as they could just ten feet from me and I knew while I stood there watching them, hoping beyond hope that they would share some of the wealth, I knew that they were laughing at me.
*** Net worth of most recent Presidents and Vice-Presidents (according to celebritynetworth.com)
•Barack Obama: $5 million (will probably end up around a billion)
•George W. Bush: $26 million
•Bill Clinton $85 million (my guess is this is understated by about $50-100 million.)
•George H.W Bush: $15 million (I think this is understated by about a billion)
•And now the big question: Al Gore versus Dick Cheney? Democrats versus Republicans. The winner is….
•Al Gore, coming in at $300 million with Dick Cheney at $90 million (don’t forget Gore was an advisor to Google since 2001 and on the Board of Apple. He also manages a billion dollar “green fund”). Al Gore’s net worth in 2001: $1 million.
$8.5 Billion Settlement but No Fraud, Right? They Must Think We’re Stupid.
by Larry Doyle
senseoncents.com
They must think we’re stupid.
News that Bank of America is poised to pay an $8.5 billion settlement in a claim by investors that the firm and a predecessor sold packages of loans/securities which did not meet standards and provide proper disclosures is a joke. Regrettably the joke is on us, that is, the citizens of this great land.
$8.5 billion may be a lot of money but what price warrants real justice?
I believe very strongly that real justice is never bought in terms of a mere financial settlement. Real justice does not come with the face of Benjamin Franklin. Dare I say, Ben and the boys would be retching right about now learning of the practices within the financial system and the “supposed” justice dispensed in the form of this settlement.
Where is the admission of fraud in the settlement?
We are supposed to believe that a firm can make an $8.5 BILLION settlement but there was no fraud? Are you kidding me?
We are supposed to believe that this settlement can serve as a precedent for other financial institutions to cut similar deals?
These institutions can borrow funds from the Federal Reserve at 0% and leverage those funds so who really pays this settlement? The American taxpayer in the form of a wealth redistribution into the financial system.
Settlement? Real justice? Bulls&$t!!
For those in the crowd who may think we need to move forward, put this mess in the rear view mirror, and try to heal our economy, I assure you the real price of justice neglected and justice denied comes in the form of capital flight.
Why is it that trading volumes in so many market segments are declining precipitously? For the very simple reason that when capital is not protected and real justice is not dispensed then investors will take their capital elsewhere.
Again, $8.5 billion may be a lot of money but let me assure those in Washington and on Wall Street that real justice can not be bought. Real truth and total integrity are NEVER for sale in the court of public opinion.
Those virtues are embraced only in the form of total accountability and transparency. Regrettably we witness little of these prized virtues in the canyons on Wall Street and the halls on Capitol Hill.
When will Wall Street and Washington wake up and realize that while many in our nation may be easily duped, the American public as a whole is NOT stupid.
senseoncents.com
They must think we’re stupid.
News that Bank of America is poised to pay an $8.5 billion settlement in a claim by investors that the firm and a predecessor sold packages of loans/securities which did not meet standards and provide proper disclosures is a joke. Regrettably the joke is on us, that is, the citizens of this great land.
$8.5 billion may be a lot of money but what price warrants real justice?
I believe very strongly that real justice is never bought in terms of a mere financial settlement. Real justice does not come with the face of Benjamin Franklin. Dare I say, Ben and the boys would be retching right about now learning of the practices within the financial system and the “supposed” justice dispensed in the form of this settlement.
Where is the admission of fraud in the settlement?
We are supposed to believe that a firm can make an $8.5 BILLION settlement but there was no fraud? Are you kidding me?
We are supposed to believe that this settlement can serve as a precedent for other financial institutions to cut similar deals?
These institutions can borrow funds from the Federal Reserve at 0% and leverage those funds so who really pays this settlement? The American taxpayer in the form of a wealth redistribution into the financial system.
Settlement? Real justice? Bulls&$t!!
For those in the crowd who may think we need to move forward, put this mess in the rear view mirror, and try to heal our economy, I assure you the real price of justice neglected and justice denied comes in the form of capital flight.
Why is it that trading volumes in so many market segments are declining precipitously? For the very simple reason that when capital is not protected and real justice is not dispensed then investors will take their capital elsewhere.
Again, $8.5 billion may be a lot of money but let me assure those in Washington and on Wall Street that real justice can not be bought. Real truth and total integrity are NEVER for sale in the court of public opinion.
Those virtues are embraced only in the form of total accountability and transparency. Regrettably we witness little of these prized virtues in the canyons on Wall Street and the halls on Capitol Hill.
When will Wall Street and Washington wake up and realize that while many in our nation may be easily duped, the American public as a whole is NOT stupid.
The U.S. Is a Kleptocracy, Too
By Two Minds
Charles Hugh Smith
If we dare look at the plain facts of the matter, we have to conclude the U.S. is a kleptocracy not unlike Greece, only on a larger and slightly more sophisticated scale.
Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:
1. Neither party has any interest in limiting the banking/financial cartel. The original Glass-Steagal bill partitioning investment banking from commercial banking was a few pages long, and it was passed in a few days. Our present political oligrachy spends months passing thousands of pages of complex legislation that accomplishes essentially nothing.
As Federal Reserve Bank of Kansas City President Thomas Hoenig recently noted (in a rare admission by an insider--I wonder how long it will be before he "resigns to pursue other opportunities," i.e. is muzzled):
The problem with SIFIs ("systemically important financial institutions," a.k.a. too big to fail banks) is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.
Do you really think Dodd-Frank and all the other "fooled by complexity" legislation has accomplished anything? Hoenig cuts that fantasy off at the knees:
As late as 1980, the U.S. banking industry was relatively unconcentrated, with 14,000 commercial banks and the assets of the five largest amounting to 29 percent of total banking organization assets and 14 percent of GDP.
Today, we have a far more concentrated and less competitive banking system. There are fewer banks operating across the country, and the five largest institutions control more than half of the industry’s assets, which is equal to almost 60 percent of GDP. The largest 20 institutions control 80 percent of the industry’s assets, which amounts to about 86 percent of GDP.
In other words, nothing has really changed from 2008 except the domination of the political process and economy by the financial cartel has been masked by a welter of purposefully obfuscating legislation. This is of course the exact same trick Wall Street used to cloak the risk of the mortgage-backed derivatives it sold as "low risk" AAA rated securities: by design, the instruments were so complex that only the originators understood how they worked.
That is the current legislative process in a nutshell. Much of the 60,000 pages of tax code are arcane because they describe loopholes and exclusions written specifically to exempt a single corporation or cartel from Federal taxes.
The U.S. is truly a kleptocracy because its political leadership actually has no interest in limiting the banking/financial cartel. When questioned why their "reforms" are so toothless, legislators wring their hands and bleat, "Honest, I wanted to limit the banks but they're too powerful." Spoken like a true kleptocrat.
2. Our stock markets are dominated by insiders. It is estimated that some 70% of all shares traded are exchanged in private "dark pools" operated by the TBTF banks and Wall Street, and the majority of the remaining 30% of publicly traded shares are traded by high-frequency trading machines that hold the shares for a few seconds, or however long is needed to skim the advantages offered by proximity to the exchange and speed.
If that's your idea of an "open market," then you're the ideal citizen for a kleptocracy.
3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens. Between corporate toadies on the Supreme Court who have granted corporations rights to spend unlimited money lobbying and buying legislators as a form of "free speech"--ahem, how can something that costs billions of dollars be "free"?--and vast regulatory brueacracies that saw nothing wrong with MERS and the complete corruption of land and mortgage transfer rules, the U.S. legal system is now a perfection of kleptocracy.
As economist Hernando de Soto observed in The Destruction of Economic Facts, the ForeclosureGate mortgage mess is not just a series of petty paperwork mistakes--it is the destruction of the entire system of trustworthy transfer of property rights for non-Elites:
Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: "economic facts."
Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The very systems that could have provided markets and governments with the means to understand the global financial crisis—and to prevent another one—are being eroded. Governments have allowed shadow markets to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don't know and can't prove who owns their homes. In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.
The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors—even between banks and other banks.
Frequent contributor Harun I. summarized the reality of this political and financial coup by kleptocrats:
As described by Georgetown University bankruptcy expert Adam Levitin, in testimony to subcommittee of the House Financial Services Committee, "If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever, [and] could cloud title to nearly every property in the United States." It would also raise the question of the legality of the resulting millions of foreclosures on American homeowners, since the banks cannot prove "ownership" of the foreclosed property.
The statement above gets to the elemental issue that apparently is lost on many otherwise intelligent people. This is not about frivolous claims based on technicalities. This is about securities fraud (theft) on a ludicrously massive scale. These so-called securities were sold to governments, pension funds and other financial institutions globally. Trillions were made by banks selling what is becoming clearly understood to be worthless pieces of paper and when the jig was up, which ultimately led to the destruction of economies globally, they made ordinary citizens the losers by sliding their worthless pieces of paper to the balance sheet of taxpayers worldwide.
And while some are quibbling over whether someone should get a free house, those who have perpetrated the greatest swindle in the history of mankind are about to get away with it, because they are "systemically important", code for TBTF (too big to fail).
You think money laundering and tax evasion is a specialty only of Caribbean island "banking centers"? Think again; we have corporate oversight equivalent to that of Somalia. U.S.A. a haven for corporate money laundering: A little house of secrets on the Great Plains:
Among the firm's offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.
"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company's website boasts. "A person you control... yet cannot be held accountable for its actions. Imagine the possibilities!"
"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."
The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states - Alaska, Arizona and Montana - require regular disclosure of corporate shareholders in some form.
4. Just as in Greece, taxes are optional for the nation's financial Elites. In Greece, you don't mention your swimming pool to avoid the "swimming pool tax." Here in the U.S., that sort of tax avoidance is against the law (smirk). Here, you hire a Panzer division of sharp tax attorneys and escape taxation legally (well, mostly legally--whatever it takes to win).
If you are unfortunate enough to be a successful small entrepreneur who nets $100,000 a year, you pay 15.3% self-employment and 25% Federal tax on the bulk of your income, a combined rate of 40.3%, and a combined rate of 43.3% on all income above $82,400.
Those who net millions pay less than half that amount, somewhere between 17% for the top 1/10th of 1% and 21% for the top 1%: Citizens for Tax Justice, which looks at all taxes paid including federal, state and local taxes, said that in 2010 the top 1 percent of earners will pay 21.5 percent of taxes.
Note that the 21.5% paid by the top 1% includes all state and local taxes. Here in California, the small businessperson earning $100,000 pays between 5% and 9% state tax, so their combined state and Federal tax burden on their highest earnings is a whopping 50%. Then there are property taxes and the 9.5% sales tax, and endless junk fees skimmed from small business. Add all that together and the total taxes paid rises to the 60% level, or roughly triple what the top 1% pay.
(Bitter note from a tax donkey: To all those tax-and-spenders who whine that California has "low taxes," please pay my "low" property tax bill, will you? It's "only" $11,000 a year.)
Super Rich See Federal Taxes Drop Dramatically:
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Schoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.
"I simply point out to people, 'Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.
Do you really think you don't live in a kleptocracy? Why? Because the truth hurts?
Charles Hugh Smith
If we dare look at the plain facts of the matter, we have to conclude the U.S. is a kleptocracy not unlike Greece, only on a larger and slightly more sophisticated scale.
Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:
1. Neither party has any interest in limiting the banking/financial cartel. The original Glass-Steagal bill partitioning investment banking from commercial banking was a few pages long, and it was passed in a few days. Our present political oligrachy spends months passing thousands of pages of complex legislation that accomplishes essentially nothing.
As Federal Reserve Bank of Kansas City President Thomas Hoenig recently noted (in a rare admission by an insider--I wonder how long it will be before he "resigns to pursue other opportunities," i.e. is muzzled):
The problem with SIFIs ("systemically important financial institutions," a.k.a. too big to fail banks) is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.
Do you really think Dodd-Frank and all the other "fooled by complexity" legislation has accomplished anything? Hoenig cuts that fantasy off at the knees:
As late as 1980, the U.S. banking industry was relatively unconcentrated, with 14,000 commercial banks and the assets of the five largest amounting to 29 percent of total banking organization assets and 14 percent of GDP.
Today, we have a far more concentrated and less competitive banking system. There are fewer banks operating across the country, and the five largest institutions control more than half of the industry’s assets, which is equal to almost 60 percent of GDP. The largest 20 institutions control 80 percent of the industry’s assets, which amounts to about 86 percent of GDP.
In other words, nothing has really changed from 2008 except the domination of the political process and economy by the financial cartel has been masked by a welter of purposefully obfuscating legislation. This is of course the exact same trick Wall Street used to cloak the risk of the mortgage-backed derivatives it sold as "low risk" AAA rated securities: by design, the instruments were so complex that only the originators understood how they worked.
That is the current legislative process in a nutshell. Much of the 60,000 pages of tax code are arcane because they describe loopholes and exclusions written specifically to exempt a single corporation or cartel from Federal taxes.
The U.S. is truly a kleptocracy because its political leadership actually has no interest in limiting the banking/financial cartel. When questioned why their "reforms" are so toothless, legislators wring their hands and bleat, "Honest, I wanted to limit the banks but they're too powerful." Spoken like a true kleptocrat.
2. Our stock markets are dominated by insiders. It is estimated that some 70% of all shares traded are exchanged in private "dark pools" operated by the TBTF banks and Wall Street, and the majority of the remaining 30% of publicly traded shares are traded by high-frequency trading machines that hold the shares for a few seconds, or however long is needed to skim the advantages offered by proximity to the exchange and speed.
If that's your idea of an "open market," then you're the ideal citizen for a kleptocracy.
3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens. Between corporate toadies on the Supreme Court who have granted corporations rights to spend unlimited money lobbying and buying legislators as a form of "free speech"--ahem, how can something that costs billions of dollars be "free"?--and vast regulatory brueacracies that saw nothing wrong with MERS and the complete corruption of land and mortgage transfer rules, the U.S. legal system is now a perfection of kleptocracy.
As economist Hernando de Soto observed in The Destruction of Economic Facts, the ForeclosureGate mortgage mess is not just a series of petty paperwork mistakes--it is the destruction of the entire system of trustworthy transfer of property rights for non-Elites:
Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: "economic facts."
Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The very systems that could have provided markets and governments with the means to understand the global financial crisis—and to prevent another one—are being eroded. Governments have allowed shadow markets to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don't know and can't prove who owns their homes. In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.
The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors—even between banks and other banks.
Frequent contributor Harun I. summarized the reality of this political and financial coup by kleptocrats:
As described by Georgetown University bankruptcy expert Adam Levitin, in testimony to subcommittee of the House Financial Services Committee, "If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever, [and] could cloud title to nearly every property in the United States." It would also raise the question of the legality of the resulting millions of foreclosures on American homeowners, since the banks cannot prove "ownership" of the foreclosed property.
The statement above gets to the elemental issue that apparently is lost on many otherwise intelligent people. This is not about frivolous claims based on technicalities. This is about securities fraud (theft) on a ludicrously massive scale. These so-called securities were sold to governments, pension funds and other financial institutions globally. Trillions were made by banks selling what is becoming clearly understood to be worthless pieces of paper and when the jig was up, which ultimately led to the destruction of economies globally, they made ordinary citizens the losers by sliding their worthless pieces of paper to the balance sheet of taxpayers worldwide.
And while some are quibbling over whether someone should get a free house, those who have perpetrated the greatest swindle in the history of mankind are about to get away with it, because they are "systemically important", code for TBTF (too big to fail).
You think money laundering and tax evasion is a specialty only of Caribbean island "banking centers"? Think again; we have corporate oversight equivalent to that of Somalia. U.S.A. a haven for corporate money laundering: A little house of secrets on the Great Plains:
Among the firm's offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.
"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company's website boasts. "A person you control... yet cannot be held accountable for its actions. Imagine the possibilities!"
"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."
The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states - Alaska, Arizona and Montana - require regular disclosure of corporate shareholders in some form.
4. Just as in Greece, taxes are optional for the nation's financial Elites. In Greece, you don't mention your swimming pool to avoid the "swimming pool tax." Here in the U.S., that sort of tax avoidance is against the law (smirk). Here, you hire a Panzer division of sharp tax attorneys and escape taxation legally (well, mostly legally--whatever it takes to win).
If you are unfortunate enough to be a successful small entrepreneur who nets $100,000 a year, you pay 15.3% self-employment and 25% Federal tax on the bulk of your income, a combined rate of 40.3%, and a combined rate of 43.3% on all income above $82,400.
Those who net millions pay less than half that amount, somewhere between 17% for the top 1/10th of 1% and 21% for the top 1%: Citizens for Tax Justice, which looks at all taxes paid including federal, state and local taxes, said that in 2010 the top 1 percent of earners will pay 21.5 percent of taxes.
Note that the 21.5% paid by the top 1% includes all state and local taxes. Here in California, the small businessperson earning $100,000 pays between 5% and 9% state tax, so their combined state and Federal tax burden on their highest earnings is a whopping 50%. Then there are property taxes and the 9.5% sales tax, and endless junk fees skimmed from small business. Add all that together and the total taxes paid rises to the 60% level, or roughly triple what the top 1% pay.
(Bitter note from a tax donkey: To all those tax-and-spenders who whine that California has "low taxes," please pay my "low" property tax bill, will you? It's "only" $11,000 a year.)
Super Rich See Federal Taxes Drop Dramatically:
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Schoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.
"I simply point out to people, 'Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.
Do you really think you don't live in a kleptocracy? Why? Because the truth hurts?
Bernie Sanders: The Top Ten U.S. Corporate Tax Avoiders
Tax Time? Not for Giant Corporations
BURLINGTON, Vt. - While hard working Americans fill out their income tax returns this tax season, General Electric and other giant profitable corporations are avoiding U.S. taxes altogether.
With Congress returning to Capitol Hill on Monday to debate steep spending cuts, Sen. Bernie Sanders (I-Vt.) said the wealthiest Americans and most profitable corporations must do their share to help bring down our record-breaking deficit.
Sanders renewed his call for shared sacrifice after it was reported that General Electric and other major corporations paid no U.S. taxes after posting huge profits. Sanders said it is grossly unfair for congressional Republicans to propose major cuts to Head Start, Pell Grants, the Social Security Administration, nutrition grants for pregnant low-income women and the Environmental Protection Agency while ignoring the reality that some of the most profitable corporations pay nothing or almost nothing in federal income taxes.
Sanders compiled a list of some of some of the 10 worst corporate income tax avoiders.
1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings.
2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.
3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.
4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.
5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.
6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.
7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.
8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.
9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.
10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.
Sanders has called for closing corporate tax loopholes and eliminating tax breaks for oil and gas companies. He also introduced legislation to impose a 5.4 percent surtax on millionaires that would yield up to $50 billion a year. The senator has said that spending cuts must be paired with new revenue so the federal budget is not balanced solely on the backs of working families.
"We have a deficit problem. It has to be addressed," Sanders said, "but it cannot be addressed on the backs of the sick, the elderly, the poor, young people, the most vulnerable in this country. The wealthiest people and the largest corporations in this country have got to contribute. We've got to talk about shared sacrifice."
Source - Senator Bernie Sanders
BURLINGTON, Vt. - While hard working Americans fill out their income tax returns this tax season, General Electric and other giant profitable corporations are avoiding U.S. taxes altogether.
With Congress returning to Capitol Hill on Monday to debate steep spending cuts, Sen. Bernie Sanders (I-Vt.) said the wealthiest Americans and most profitable corporations must do their share to help bring down our record-breaking deficit.
Sanders renewed his call for shared sacrifice after it was reported that General Electric and other major corporations paid no U.S. taxes after posting huge profits. Sanders said it is grossly unfair for congressional Republicans to propose major cuts to Head Start, Pell Grants, the Social Security Administration, nutrition grants for pregnant low-income women and the Environmental Protection Agency while ignoring the reality that some of the most profitable corporations pay nothing or almost nothing in federal income taxes.
Sanders compiled a list of some of some of the 10 worst corporate income tax avoiders.
1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings.
2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.
3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.
4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.
5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.
6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.
7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.
8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.
9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.
10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.
Sanders has called for closing corporate tax loopholes and eliminating tax breaks for oil and gas companies. He also introduced legislation to impose a 5.4 percent surtax on millionaires that would yield up to $50 billion a year. The senator has said that spending cuts must be paired with new revenue so the federal budget is not balanced solely on the backs of working families.
"We have a deficit problem. It has to be addressed," Sanders said, "but it cannot be addressed on the backs of the sick, the elderly, the poor, young people, the most vulnerable in this country. The wealthiest people and the largest corporations in this country have got to contribute. We've got to talk about shared sacrifice."
Source - Senator Bernie Sanders
CBO And The Pentagon Are LYING - New Brown University Report Pegs The Real Cost Of Current Wars At $4 TRILLION
Yahoo
A new report out of Brown University estimates that the U.S. wars in Afghanistan and Iraq--together with the counterinsurgency efforts in Pakistan--will, all told, cost $4 trillion and leave 225,000 dead, both civilians and soldiers.
The group of economists, anthropologists, lawyers, humanitarian personnel, and political scientists involved in the project estimated that the cost of caring for the veterans injured in the wars will reach $1 trillion in 30 or 40 years. In estimating the $4 trillion total, they did not take into account the $5.3 billion in reconstruction spending the government has promised Afghanistan, state and local contributions to veteran care, interest payments on war debt, or the costs of Medicare for veterans when they reach 65.
The Congressional Budget Office, meanwhile, has assessed the federal price tag for the wars at $1.8 trillion through 2021. The report says that is a gross underestimate, predicting that the government has already paid $2.3 trillion to $2.7 trillion.
More than 6,000 U.S. troops and 2,300 contractors have died since the wars began after Sept. 11. A staggering 550,000 disability claims have been filed with the VA as of 2010. Meanwhile, 137,000 civilians in Afghanistan and Iraq have died in the conflict. (Injuries among U.S. contractors have also not yet been made public, further complicating the calculations of cost.) Nearly 8 million people have been displaced. Check out Reuters' factbox breaking down the costs and casualties here.
Special Report: A little house of secrets on the Great Plains
SHELL GAMES: A Reuters Investigation
Articles in this series are exploring the extent and impact of corporate secrecy in the United States.
By Kelly Carr and Brian Grow
CHEYENNE/ATLANTA (Reuters) - The secretive business havens of Cyprus and the Cayman Islands face a potent rival: Cheyenne, Wyoming.
At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.
Neighbors say they see little activity there besides regular mail deliveries and a woman who steps outside for smoke breaks. Inside, however, the walls of the main room are covered floor to ceiling with numbered mailboxes labeled as corporate "suites." A bulky copy machine sits in the kitchen. In the living room, a woman in a headset answers calls and sorts bushels of mail.
A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.
Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO. Among its offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.
"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company's website boasts. "A person you control... yet cannot be held accountable for its actions. Imagine the possibilities!"
Among the entities registered at 2710 Thomes, Reuters found, is a shelf company sheltering real-estate assets controlled by a jailed former prime minister of Ukraine, according to allegations made by a political rival in a federal court in California.
The owner of another shelf company at the address was indicted in April for allegedly helping online-poker operators evade a U.S. ban on Internet gambling. The owner of two other firms there was banned from government contracting in January for selling counterfeit truck parts to the Pentagon.
CASTING THE FIRST STONE
All the activity at 2710 Thomes is part of a little-noticed industry in the U.S.: the mass production of paper businesses. Scores of mass incorporators like Wyoming Corporate Services have set up shop. The hotbeds of the industry are three states with a light regulatory touch-Delaware, Wyoming and Nevada.
The pervasiveness of corporate secrecy on America's shores stands in stark contrast to Washington's message to the rest of the world. Since the September 11 attacks in 2001, the U.S. has been calling forcefully for greater transparency in global transactions, to lift the veil on shadowy money flows. During a debate in 2008, presidential candidate Barack Obama singled out Ugland House in the Cayman Islands, reportedly home to some 12,000 offshore corporations, as "either the biggest building or the biggest tax scam on record."
Yet on U.S. soil, similar activity is perfectly legal. The incorporation industry, overseen by officials in the 50 states, has few rules. Convicted felons can operate firms which create companies, and buy them with no background checks.
No states license mass incorporators, and only a few require them to formally register with state authorities. None collect the names and addresses of "beneficial owners," the individuals with a controlling interest in corporations, according to a 2009 report by the National Association of Secretaries of State, a group for state officials overseeing incorporation. Wyoming and Nevada allow the real owners of corporations to hide behind "nominee" officers and directors with no direct role in the business, often executives of the mass incorporator.
"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."
An estimated 2 million corporations and limited liability companies are created each year in the U.S., according to Senate investigators. The Treasury Department has singled out LLCs as particularly vulnerable to being used as shell companies, as they can be owned by anyone and managed anonymously. Delaware, Nevada and Wyoming had 688,000 LLCs on file in 2009, up from 624,000 in 2007.
Treasury and state banking regulators say banks have flagged billions of dollars in suspicious transactions involving U.S. shell companies in recent years. On June 10, a federal judge in Oregon ordered a company registered there to pay $60 million for defrauding a Ukrainian government agency through sham transactions involving shell companies. The civil lawsuit described a network of U.S.-registered shells connected to fraud in Eastern Europe and Afghanistan.
A growing niche in the shell business is shelf corporations. Like paper-only shells, which enable the secrecy-minded to hide real ownership of assets, shelf companies are set up by firms like Wyoming Corporate Services, then left "on the shelf" to season for years. They're then sold later to owners looking for a quick way to secure bank loans, bid on contracts, and project financial stability. To speed up business activity, shelf corporations can often be purchased with established bank accounts, credit histories and tax returns filed with the Internal Revenue Service.
"They just slot in your names, and you walk away with the company. Presto!" says Daniel E. Karson, executive managing director at investigative firm Kroll Inc. "The purpose is to conceal ownership."
On its website, Wyoming Corporate Services currently lists more than 700 shelf companies for sale in 37 states. The older they are, the more expensive, like Scotch whisky. Brookside Management Inc., formed in December 2004, sells for $5,995, while Knotty Management LLC, formed in May, costs just $645. In Delaware, incorporator Harvard Business Services markets First Family LLC, created in May 1997, for $10,000.
"If they're signing a large contract, they may not want it to look like they've just formed a company," said Brett Melson, director of U.S. sales at Harvard Business Services. But he added: "Unsavory characters can do a lot of bad things with the companies."
Shell and shelf companies do serve legitimate purposes. They provide a quick and cheap way for entrepreneurs to jump into business and create jobs. Businesses can use them to protect trade secrets. Politicians or other public figures may use a shell company to hold their home so that people with ill intent have a harder time locating them.
The state of Wyoming says it cracked down on incorporation services in 2009 after discovering that nearly 5,700 companies were registered to post-office boxes. New laws require companies to have a physical presence in the state through an owner or a registered agent, and make it a felony to submit false filings.
"What we want to have is good, quality legitimate businesses," said Patricia O'Brien, Wyoming's Deputy Secretary of State. "We don't regulate what the business itself does, but we are not recruiting businesses here that are questionable or illegal."
Wyoming Corporate Services is run by Gerald Pitts, its 54-year-old founder and president. On paper, he is a prolific businessman. Incorporation data provided by Westlaw, a unit of Thomson Reuters, show that Pitts is listed as a director, president or principal for at least 41 companies registered at 2710 Thomes Avenue.
Another 248 firms name Edge Financial Inc., another incorporation service, as their "manager." Gerald Pitts is the president of Edge Financial, according to records on file with the Wyoming secretary of state's office.
Companies registered at 2710 Thomes Avenue have been named in a dozen civil lawsuits alleging unpaid taxes, securities fraud and trademark infringement since 2007, a review of Westlaw data shows. State and federal tax authorities have filed liens against companies registered at the address seeking to collect more than $300,000 in unpaid taxes, according to Westlaw.
Pitts says Wyoming Corporate Services fully complies with the law and doesn't have any knowledge of how clients use the companies he registers. "However, we recognize that business entities (whether aged, shell or traditional) may be used for both good and ill," Pitts wrote in an email to Reuters. "WCS will always cooperate with law enforcement agencies who request information or assistance. WCS does not provide any product or service with the intent that it be used to violate the law."
THE UKRAINE CONNECTION
Gerald Pitts and his own incorporation firms have never been sued or sanctioned, according to federal and state court records. Wyoming officials said Wyoming Corporate Services operates legally. "If they do it by cubby holes and they are really representing each person, they meet the law," said O'Brien, the deputy secretary of state.
But clients of his have run into trouble.
Among those registered at the little house in Cheyenne are two small companies formed through Wyoming Corporate Services that sold knock-off truck parts to the U.S. Department of Defense, according to a Reuters review of two federal contracting databases and findings from an investigation by the Pentagon's Defense Logistics Agency. The owner of those firms, Atilla Kan, awaits sentencing on a 2007 conviction for wire fraud in a related matter.
Also linked to 2710 Thomes is former Ukrainian Prime Minister Pavlo Lazarenko, who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. He is now serving an eight-year jail term in California for a 2004 conviction on money-laundering and extortion charges. According to court records, that scheme used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.
Court records submitted in Lazarenko's criminal case and documents from a separate civil lawsuit, as well as interviews with lawyers familiar with the matter, indicate Lazarenko controls a shelf company incorporated in Cheyenne that owns an estimated $72 million in real estate in Ukraine through other companies.
The U.S. government continues to seek more than $250 million from bank accounts in Antigua, Barbuda, Guernsey and other countries that it says were controlled by Lazarenko and his associates, according to a forfeiture action filed by the Department of Justice.
The paper trail linking Lazarenko to the real estate in Ukraine is labyrinthine. At the heart of it is a shelf company called Capital Investments Group, registered at 2710 Thomes Avenue.
U.S. lawyers for a Ukrainian businessman named Gennady Korban submitted documents claiming that Lazarenko is the true owner of Capital Investments Group and other U.S. companies.
Lazarenko and Korban are rivals in Ukraine, and for years have traded allegations of corruption and assassination. An organization chart accompanying Korban's submission alleges Capital Investments Group owns 99.99 percent of a Ukrainian firm called OOO Capital Investments Group. That company, the chart claims, is the owner of another company, OOO Ukrainsky Tyutyun, where Pavlo Lazarenko is a director. Each of the firms and several others are used as corporate fronts to control properties in Dnepropetrovsk, Ukraine, the filing alleges.
Seven properties are named in the 2009 filing by Korban, including 55 Pushkin Street and 58 Komsomolskaya Street. The dossier on Capital Investments Group claims that other directors of the alleged front companies include Lazarenko's wife, son and mother-in-law.
Federal prosecutors successfully urged the court in late 2009 to disregard Korban's submissions, arguing that it would take too much time to vet his account and thus delay his resentencing after a lengthy appeal.
A few months later, in February 2010, Capital Investments Group sued Korban and others in federal court in Delaware. That lawsuit claims two properties in the Ukraine controlled by Capital Investments Group - 55 Pushkin Street and 58 Komsomolskaya Street - were stolen from it using forged documents.
The lawsuit says Capital Investments was formed in September 2005. It is registered at 2710 Thomes Avenue, and Gerald Pitts, the court documents say, is "President, Secretary, Chairman and director."
But Capital Investments Group doesn't disclose the name of its owners. Daniel Horowitz and Martin Garbus, attorneys for the company, have represented Pavlo Lazarenko in other U.S. and Ukrainian litigation. They declined to provide the owners' names, citing client confidentiality, and wouldn't comment on Lazarenko's links to CIG.
The U.S. Attorney's office in San Francisco declined to comment. Asked about his association with Lazarenko and Capital Investments Group, Gerald Pitts declined to provide information on specific clients. Pitts said he is aware of the Delaware lawsuit and "is cooperating fully with authorities in the matter."
POKER EMPIRE
Another man linked to 2710 Thomes is Ira N. Rubin. Prosecutors allege he created a Rube Goldberg-style network of shell and shelf corporations to further his scams.
In December 2006, the Federal Trade Commission sued Rubin for fraud in federal court in Tampa. Documents in the civil lawsuit allege Rubin used at least 18 different front companies to obscure his role as a credit-card processor for telemarketing scams.
These operations, the FTC alleged, offered subprime credit cards that charged an upfront fee debited from customers' bank accounts, but the cards were never delivered. The complaint also alleged Rubin processed payments for online gambling rings and pharmacy websites selling controlled substances.
One company in that network was Elite Funding Group Inc. It was registered at 2710 Thomes Avenue in August 2004 and offered for sale by Wyoming Corporate Services for $1,095. Gerald Pitts was listed in public documents as the original director, wrote an investigator hired by the FTC in a January 2007 report filed in federal court in Tampa. Pitts had resigned six months earlier as director and was replaced by Rubin, according to court records.
Rubin's maze-like network served as the back office for alleged consumer scams operating from Canada, the Philippines, Cyprus and the U.S., with names like Freedom Pharmacy and Fun Time Bingo. His companies took consumer bank account information obtained by the clients, charged the accounts via an electronic transactions network that enables direct debits, kept a portion of the proceeds, and forwarded the rest to the alleged fraudsters, according to documents in the FTC's civil lawsuit.
To minimize scrutiny, Rubin used at least 18 different firms to handle his operations. A firm called Global Marketing Group processed payments for telemarketers offering bogus credit cards, the FTC alleged. Elite Funding, the Wyoming shelf corporation, was a subsidiary of Global Marketing. Rubin used Elite to open bank accounts with Wells Fargo Bank which held more than $300,000 in proceeds from the payment processing, according to court records.
Just hours after Rubin was visited by a court-appointed receiver in the case in December 2006, $249,000 vanished from the Wells Fargo account. Rubin refused to say if he transferred the money, citing his 5th Amendment right against self-incrimination. At least $125,000 then made its way to a bank account in Chennai, India, and has never been recovered, according to documents in the civil lawsuit.
Why use a shelf company? "To hide who they are and what they are doing. In the case of Ira Rubin, he had a payment processing empire that worked on behalf of many different industries, all of which were engaged in illegal conduct," said James Davis, an attorney with the Federal Trade Commission. "It was to his benefit to make it as difficult as possible for law enforcement to connect these companies back to him."
In 2008, Rubin fled to Costa Rica to avoid arrest for contempt in the civil case. Authorities allege he went on to run another payment-processing operation from abroad: This March 10, he and 10 others were indicted in New York for allegedly running a massive scheme to hide payments made by U.S. customers to the three largest online-poker websites, in violation of a ban passed by Congress in 2006. He was extradited from Guatemala the same month. On June 8, a New York judge denied bail for Rubin. (link.reuters.com/jud42s)
Stuart Meissner, an attorney for Rubin, said his client was not available for comment. Pitts declined to comment.
AMERICAN LOOPHOLES
The loopholes in U.S. disclosure of bank-account and shell-company ownership have drawn fire.
The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states - Alaska, Arizona and Montana - require regular disclosure of corporate shareholders in some form, according to the 2009 report by the National Association of Secretaries of State.
Some lawmakers want tighter rules. Senator Carl Levin (D-Mich.), chairman of the Senate Homeland Security Committee's Permanent Subcommittee for Investigations, has introduced the Incorporation Transparency and Law Enforcement Assistance Act each year since 2008. The bill would require states to obtain and update information about the real owners of companies, and impose civil and criminal sanctions for filing false information.
"Criminals use U.S. shell companies to commit financial fraud, drug trafficking, even terrorist financing, in part because our states don't require anyone to name the owners of the companies they form," Levin said in an email to Reuters.
The bill has been beaten back by a coalition of state officials and business groups, citing concerns about the cost of implementing the new law and federal government infringement on state incorporation rights.
A leading opponent is the National Association of Secretaries of State. Kay Stimson, a spokeswoman, said in an email that the Levin bill "would have placed new burdens upon states and legitimate, law-abiding businesses-many of which are struggling to stay afloat during these difficult financial times-while continuing to provide lawbreakers with the means to evade the law."
An aide for Levin said the bill is expected to be re-introduced soon. The new bill will add provisions requiring incorporation agents who sell shelf companies to provide beneficial owner data, said a Senate aide familiar with it.
CAT AND MOUSE
Shell companies remain a headache for law-enforcement authorities. Officials say court-ordered subpoenas served on incorporators of shell and shelf corporations generally do deliver the names of the real owners hiding behind nominees. But if the owners are not U.S. citizens or companies, the investigation often hits a dead-end, they say.
There are additional hurdles. Wyoming Corporate Services charges $2,500 per year to supply an attorney who can provide an extra shield. Cheyenne attorney Graham Norris Jr. tells prospective clients sent to him by WCS that he will create a company on their behalf. That way, he says, he can invoke attorney-client privilege-adding a layer of privacy anytime there is an inquiry about their identities.
"When you do need to contact Wyoming Corporate Services, you may do so through me," advises a June 13 "Dear Client" letter supplied by Norris to Reuters. "If you contact them directly, there is a greater risk they may disclose that information in response to a subpoena; remember there is no privilege with Wyoming Corporate Services, only with your attorney."
For a fee, clients can request that Norris file a motion to quash any subpoena, the letter says. It warns that in cases where fraud or criminal conduct is alleged, a court might order Norris to name the owners. Still, after any inquiry about identity, the letter says, Norris must inform the client-and "I must also decline to answer the inquiry."
Investigators say they are sometimes loath to use subpoenas for the very reason highlighted in Norris' letter-fear of tipping off targets. "In the initial stages of investigation, when we encounter a domestic shell corporation, we know we can't subpoena the company that sold the corporation to the end users, because we don't want the target to find out they are being investigated," says FTC attorney James Davis.
Other U.S. agencies raise similar complaints about shells. The 2006 U.S. Money Laundering Threat Assessment, prepared by 16 federal agencies, devotes a chapter to the ways U.S. shell companies can be attractive vehicles to hide ill-gotten funds. It includes a chart to show why money launderers might like to create shells in Wyoming, Nevada or Delaware, which offer the highest levels of corporate anonymity.
The information in the chart is credited to the Web site of a firm called Corporations Today-an incorporation service run by Gerald Pitts in Cheyenne, Wyoming.
Articles in this series are exploring the extent and impact of corporate secrecy in the United States.
By Kelly Carr and Brian Grow
CHEYENNE/ATLANTA (Reuters) - The secretive business havens of Cyprus and the Cayman Islands face a potent rival: Cheyenne, Wyoming.
At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.
Neighbors say they see little activity there besides regular mail deliveries and a woman who steps outside for smoke breaks. Inside, however, the walls of the main room are covered floor to ceiling with numbered mailboxes labeled as corporate "suites." A bulky copy machine sits in the kitchen. In the living room, a woman in a headset answers calls and sorts bushels of mail.
A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.
Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO. Among its offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.
"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company's website boasts. "A person you control... yet cannot be held accountable for its actions. Imagine the possibilities!"
Among the entities registered at 2710 Thomes, Reuters found, is a shelf company sheltering real-estate assets controlled by a jailed former prime minister of Ukraine, according to allegations made by a political rival in a federal court in California.
The owner of another shelf company at the address was indicted in April for allegedly helping online-poker operators evade a U.S. ban on Internet gambling. The owner of two other firms there was banned from government contracting in January for selling counterfeit truck parts to the Pentagon.
CASTING THE FIRST STONE
All the activity at 2710 Thomes is part of a little-noticed industry in the U.S.: the mass production of paper businesses. Scores of mass incorporators like Wyoming Corporate Services have set up shop. The hotbeds of the industry are three states with a light regulatory touch-Delaware, Wyoming and Nevada.
The pervasiveness of corporate secrecy on America's shores stands in stark contrast to Washington's message to the rest of the world. Since the September 11 attacks in 2001, the U.S. has been calling forcefully for greater transparency in global transactions, to lift the veil on shadowy money flows. During a debate in 2008, presidential candidate Barack Obama singled out Ugland House in the Cayman Islands, reportedly home to some 12,000 offshore corporations, as "either the biggest building or the biggest tax scam on record."
Yet on U.S. soil, similar activity is perfectly legal. The incorporation industry, overseen by officials in the 50 states, has few rules. Convicted felons can operate firms which create companies, and buy them with no background checks.
No states license mass incorporators, and only a few require them to formally register with state authorities. None collect the names and addresses of "beneficial owners," the individuals with a controlling interest in corporations, according to a 2009 report by the National Association of Secretaries of State, a group for state officials overseeing incorporation. Wyoming and Nevada allow the real owners of corporations to hide behind "nominee" officers and directors with no direct role in the business, often executives of the mass incorporator.
"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."
An estimated 2 million corporations and limited liability companies are created each year in the U.S., according to Senate investigators. The Treasury Department has singled out LLCs as particularly vulnerable to being used as shell companies, as they can be owned by anyone and managed anonymously. Delaware, Nevada and Wyoming had 688,000 LLCs on file in 2009, up from 624,000 in 2007.
Treasury and state banking regulators say banks have flagged billions of dollars in suspicious transactions involving U.S. shell companies in recent years. On June 10, a federal judge in Oregon ordered a company registered there to pay $60 million for defrauding a Ukrainian government agency through sham transactions involving shell companies. The civil lawsuit described a network of U.S.-registered shells connected to fraud in Eastern Europe and Afghanistan.
A growing niche in the shell business is shelf corporations. Like paper-only shells, which enable the secrecy-minded to hide real ownership of assets, shelf companies are set up by firms like Wyoming Corporate Services, then left "on the shelf" to season for years. They're then sold later to owners looking for a quick way to secure bank loans, bid on contracts, and project financial stability. To speed up business activity, shelf corporations can often be purchased with established bank accounts, credit histories and tax returns filed with the Internal Revenue Service.
"They just slot in your names, and you walk away with the company. Presto!" says Daniel E. Karson, executive managing director at investigative firm Kroll Inc. "The purpose is to conceal ownership."
On its website, Wyoming Corporate Services currently lists more than 700 shelf companies for sale in 37 states. The older they are, the more expensive, like Scotch whisky. Brookside Management Inc., formed in December 2004, sells for $5,995, while Knotty Management LLC, formed in May, costs just $645. In Delaware, incorporator Harvard Business Services markets First Family LLC, created in May 1997, for $10,000.
"If they're signing a large contract, they may not want it to look like they've just formed a company," said Brett Melson, director of U.S. sales at Harvard Business Services. But he added: "Unsavory characters can do a lot of bad things with the companies."
Shell and shelf companies do serve legitimate purposes. They provide a quick and cheap way for entrepreneurs to jump into business and create jobs. Businesses can use them to protect trade secrets. Politicians or other public figures may use a shell company to hold their home so that people with ill intent have a harder time locating them.
The state of Wyoming says it cracked down on incorporation services in 2009 after discovering that nearly 5,700 companies were registered to post-office boxes. New laws require companies to have a physical presence in the state through an owner or a registered agent, and make it a felony to submit false filings.
"What we want to have is good, quality legitimate businesses," said Patricia O'Brien, Wyoming's Deputy Secretary of State. "We don't regulate what the business itself does, but we are not recruiting businesses here that are questionable or illegal."
Wyoming Corporate Services is run by Gerald Pitts, its 54-year-old founder and president. On paper, he is a prolific businessman. Incorporation data provided by Westlaw, a unit of Thomson Reuters, show that Pitts is listed as a director, president or principal for at least 41 companies registered at 2710 Thomes Avenue.
Another 248 firms name Edge Financial Inc., another incorporation service, as their "manager." Gerald Pitts is the president of Edge Financial, according to records on file with the Wyoming secretary of state's office.
Companies registered at 2710 Thomes Avenue have been named in a dozen civil lawsuits alleging unpaid taxes, securities fraud and trademark infringement since 2007, a review of Westlaw data shows. State and federal tax authorities have filed liens against companies registered at the address seeking to collect more than $300,000 in unpaid taxes, according to Westlaw.
Pitts says Wyoming Corporate Services fully complies with the law and doesn't have any knowledge of how clients use the companies he registers. "However, we recognize that business entities (whether aged, shell or traditional) may be used for both good and ill," Pitts wrote in an email to Reuters. "WCS will always cooperate with law enforcement agencies who request information or assistance. WCS does not provide any product or service with the intent that it be used to violate the law."
THE UKRAINE CONNECTION
Gerald Pitts and his own incorporation firms have never been sued or sanctioned, according to federal and state court records. Wyoming officials said Wyoming Corporate Services operates legally. "If they do it by cubby holes and they are really representing each person, they meet the law," said O'Brien, the deputy secretary of state.
But clients of his have run into trouble.
Among those registered at the little house in Cheyenne are two small companies formed through Wyoming Corporate Services that sold knock-off truck parts to the U.S. Department of Defense, according to a Reuters review of two federal contracting databases and findings from an investigation by the Pentagon's Defense Logistics Agency. The owner of those firms, Atilla Kan, awaits sentencing on a 2007 conviction for wire fraud in a related matter.
Also linked to 2710 Thomes is former Ukrainian Prime Minister Pavlo Lazarenko, who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. He is now serving an eight-year jail term in California for a 2004 conviction on money-laundering and extortion charges. According to court records, that scheme used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.
Court records submitted in Lazarenko's criminal case and documents from a separate civil lawsuit, as well as interviews with lawyers familiar with the matter, indicate Lazarenko controls a shelf company incorporated in Cheyenne that owns an estimated $72 million in real estate in Ukraine through other companies.
The U.S. government continues to seek more than $250 million from bank accounts in Antigua, Barbuda, Guernsey and other countries that it says were controlled by Lazarenko and his associates, according to a forfeiture action filed by the Department of Justice.
The paper trail linking Lazarenko to the real estate in Ukraine is labyrinthine. At the heart of it is a shelf company called Capital Investments Group, registered at 2710 Thomes Avenue.
U.S. lawyers for a Ukrainian businessman named Gennady Korban submitted documents claiming that Lazarenko is the true owner of Capital Investments Group and other U.S. companies.
Lazarenko and Korban are rivals in Ukraine, and for years have traded allegations of corruption and assassination. An organization chart accompanying Korban's submission alleges Capital Investments Group owns 99.99 percent of a Ukrainian firm called OOO Capital Investments Group. That company, the chart claims, is the owner of another company, OOO Ukrainsky Tyutyun, where Pavlo Lazarenko is a director. Each of the firms and several others are used as corporate fronts to control properties in Dnepropetrovsk, Ukraine, the filing alleges.
Seven properties are named in the 2009 filing by Korban, including 55 Pushkin Street and 58 Komsomolskaya Street. The dossier on Capital Investments Group claims that other directors of the alleged front companies include Lazarenko's wife, son and mother-in-law.
Federal prosecutors successfully urged the court in late 2009 to disregard Korban's submissions, arguing that it would take too much time to vet his account and thus delay his resentencing after a lengthy appeal.
A few months later, in February 2010, Capital Investments Group sued Korban and others in federal court in Delaware. That lawsuit claims two properties in the Ukraine controlled by Capital Investments Group - 55 Pushkin Street and 58 Komsomolskaya Street - were stolen from it using forged documents.
The lawsuit says Capital Investments was formed in September 2005. It is registered at 2710 Thomes Avenue, and Gerald Pitts, the court documents say, is "President, Secretary, Chairman and director."
But Capital Investments Group doesn't disclose the name of its owners. Daniel Horowitz and Martin Garbus, attorneys for the company, have represented Pavlo Lazarenko in other U.S. and Ukrainian litigation. They declined to provide the owners' names, citing client confidentiality, and wouldn't comment on Lazarenko's links to CIG.
The U.S. Attorney's office in San Francisco declined to comment. Asked about his association with Lazarenko and Capital Investments Group, Gerald Pitts declined to provide information on specific clients. Pitts said he is aware of the Delaware lawsuit and "is cooperating fully with authorities in the matter."
POKER EMPIRE
Another man linked to 2710 Thomes is Ira N. Rubin. Prosecutors allege he created a Rube Goldberg-style network of shell and shelf corporations to further his scams.
In December 2006, the Federal Trade Commission sued Rubin for fraud in federal court in Tampa. Documents in the civil lawsuit allege Rubin used at least 18 different front companies to obscure his role as a credit-card processor for telemarketing scams.
These operations, the FTC alleged, offered subprime credit cards that charged an upfront fee debited from customers' bank accounts, but the cards were never delivered. The complaint also alleged Rubin processed payments for online gambling rings and pharmacy websites selling controlled substances.
One company in that network was Elite Funding Group Inc. It was registered at 2710 Thomes Avenue in August 2004 and offered for sale by Wyoming Corporate Services for $1,095. Gerald Pitts was listed in public documents as the original director, wrote an investigator hired by the FTC in a January 2007 report filed in federal court in Tampa. Pitts had resigned six months earlier as director and was replaced by Rubin, according to court records.
Rubin's maze-like network served as the back office for alleged consumer scams operating from Canada, the Philippines, Cyprus and the U.S., with names like Freedom Pharmacy and Fun Time Bingo. His companies took consumer bank account information obtained by the clients, charged the accounts via an electronic transactions network that enables direct debits, kept a portion of the proceeds, and forwarded the rest to the alleged fraudsters, according to documents in the FTC's civil lawsuit.
To minimize scrutiny, Rubin used at least 18 different firms to handle his operations. A firm called Global Marketing Group processed payments for telemarketers offering bogus credit cards, the FTC alleged. Elite Funding, the Wyoming shelf corporation, was a subsidiary of Global Marketing. Rubin used Elite to open bank accounts with Wells Fargo Bank which held more than $300,000 in proceeds from the payment processing, according to court records.
Just hours after Rubin was visited by a court-appointed receiver in the case in December 2006, $249,000 vanished from the Wells Fargo account. Rubin refused to say if he transferred the money, citing his 5th Amendment right against self-incrimination. At least $125,000 then made its way to a bank account in Chennai, India, and has never been recovered, according to documents in the civil lawsuit.
Why use a shelf company? "To hide who they are and what they are doing. In the case of Ira Rubin, he had a payment processing empire that worked on behalf of many different industries, all of which were engaged in illegal conduct," said James Davis, an attorney with the Federal Trade Commission. "It was to his benefit to make it as difficult as possible for law enforcement to connect these companies back to him."
In 2008, Rubin fled to Costa Rica to avoid arrest for contempt in the civil case. Authorities allege he went on to run another payment-processing operation from abroad: This March 10, he and 10 others were indicted in New York for allegedly running a massive scheme to hide payments made by U.S. customers to the three largest online-poker websites, in violation of a ban passed by Congress in 2006. He was extradited from Guatemala the same month. On June 8, a New York judge denied bail for Rubin. (link.reuters.com/jud42s)
Stuart Meissner, an attorney for Rubin, said his client was not available for comment. Pitts declined to comment.
AMERICAN LOOPHOLES
The loopholes in U.S. disclosure of bank-account and shell-company ownership have drawn fire.
The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states - Alaska, Arizona and Montana - require regular disclosure of corporate shareholders in some form, according to the 2009 report by the National Association of Secretaries of State.
Some lawmakers want tighter rules. Senator Carl Levin (D-Mich.), chairman of the Senate Homeland Security Committee's Permanent Subcommittee for Investigations, has introduced the Incorporation Transparency and Law Enforcement Assistance Act each year since 2008. The bill would require states to obtain and update information about the real owners of companies, and impose civil and criminal sanctions for filing false information.
"Criminals use U.S. shell companies to commit financial fraud, drug trafficking, even terrorist financing, in part because our states don't require anyone to name the owners of the companies they form," Levin said in an email to Reuters.
The bill has been beaten back by a coalition of state officials and business groups, citing concerns about the cost of implementing the new law and federal government infringement on state incorporation rights.
A leading opponent is the National Association of Secretaries of State. Kay Stimson, a spokeswoman, said in an email that the Levin bill "would have placed new burdens upon states and legitimate, law-abiding businesses-many of which are struggling to stay afloat during these difficult financial times-while continuing to provide lawbreakers with the means to evade the law."
An aide for Levin said the bill is expected to be re-introduced soon. The new bill will add provisions requiring incorporation agents who sell shelf companies to provide beneficial owner data, said a Senate aide familiar with it.
CAT AND MOUSE
Shell companies remain a headache for law-enforcement authorities. Officials say court-ordered subpoenas served on incorporators of shell and shelf corporations generally do deliver the names of the real owners hiding behind nominees. But if the owners are not U.S. citizens or companies, the investigation often hits a dead-end, they say.
There are additional hurdles. Wyoming Corporate Services charges $2,500 per year to supply an attorney who can provide an extra shield. Cheyenne attorney Graham Norris Jr. tells prospective clients sent to him by WCS that he will create a company on their behalf. That way, he says, he can invoke attorney-client privilege-adding a layer of privacy anytime there is an inquiry about their identities.
"When you do need to contact Wyoming Corporate Services, you may do so through me," advises a June 13 "Dear Client" letter supplied by Norris to Reuters. "If you contact them directly, there is a greater risk they may disclose that information in response to a subpoena; remember there is no privilege with Wyoming Corporate Services, only with your attorney."
For a fee, clients can request that Norris file a motion to quash any subpoena, the letter says. It warns that in cases where fraud or criminal conduct is alleged, a court might order Norris to name the owners. Still, after any inquiry about identity, the letter says, Norris must inform the client-and "I must also decline to answer the inquiry."
Investigators say they are sometimes loath to use subpoenas for the very reason highlighted in Norris' letter-fear of tipping off targets. "In the initial stages of investigation, when we encounter a domestic shell corporation, we know we can't subpoena the company that sold the corporation to the end users, because we don't want the target to find out they are being investigated," says FTC attorney James Davis.
Other U.S. agencies raise similar complaints about shells. The 2006 U.S. Money Laundering Threat Assessment, prepared by 16 federal agencies, devotes a chapter to the ways U.S. shell companies can be attractive vehicles to hide ill-gotten funds. It includes a chart to show why money launderers might like to create shells in Wyoming, Nevada or Delaware, which offer the highest levels of corporate anonymity.
The information in the chart is credited to the Web site of a firm called Corporations Today-an incorporation service run by Gerald Pitts in Cheyenne, Wyoming.
Fed official: Biggest banks put ‘future of capitalism’ at risk
By Zachary Roth
Senior National Affairs Reporter
The Lookout
Are Wall Street mega-banks so powerful and sprawling that they threaten our entire capitalist system? That's the claim being made by one top Federal Reserve official.
In a speech at New York University Monday (pdf), Thomas Hoenig, the president of the Kansas City Fed, argued that the biggest and most complex banks are "fundamentally inconsistent with capitalism." His remarks came just two days after global banking regulators agreed to require big banks to hold onto extra capital in order to reduce the risk of bank failures like those that occurred during the financial crisis of 2008.
"So long as the concept of a [systemically important financial institution, or SIFI] exists, and there are institutions so powerful and considered so important that they require special support and different rules," declared Hoenig, who is known as a hawk on monetary policy, "the future of capitalism is at risk and our market economy is in peril."
That's because, he argued, the existence of banks that are understood to be "too big to fail" distorts the functioning of the free market. "For capitalism to work, businesses, including financial firms, must be allowed, or compelled, to compete freely and openly and must be held accountable for their failures," Hoenig said. "Only under these conditions do markets objectively allocate credit to those businesses that provide the highest value."
The financial reform legislation passed by Congress almost a year ago was intended to ensure that banks could never again grow so large that a collapse could threaten the global financial sector, forcing taxpayers to come to the rescue.
But things haven't worked out that way. "Now, with their bailout costs amounting to billions of taxpayer dollars, SIFIs are larger than ever," Hoenig said.
Hoenig proposed rules that would prevent banks that take deposits from making trades--a shift away from the financial supermarket concept that has proliferated since the 1990s.
The new capital requirements were agreed to by the Group of Governors and Heads of Supervision (GHOS), an international group of banking regulators meeting in Basel, Switzerland, this weekend. If the new rules are approved at the G20 summit in November, they'd force big banks to keep an additional 1-3.5 percent of extra capital on hand, so they'd be better able to weather big losses.
Another rule agreed to previously, with a similar goal, requires all banks to hold a minimum of 7 percent core capital at all times.
Not everyone thinks the new requirements, which even if approved won't go into effect until later in the decade, will make much difference. Slate's Bethany McLean argues that capital requirements wouldn't have prevented the 2008 crisis. But Felix Salmon of Reuters counters: "[W]hile the Sifi surcharge won't stop banks growing to the point at which they have to be bailed out in extremis, it might make such growth significantly less profitable than it was in the past."
What's clear, though, is that almost three years after a financial crisis that plunged the world economy into a deep hole and nearly brought down the global financial sector, there's little reason to believe the same thing couldn't happen again.
Senior National Affairs Reporter
The Lookout
Are Wall Street mega-banks so powerful and sprawling that they threaten our entire capitalist system? That's the claim being made by one top Federal Reserve official.
In a speech at New York University Monday (pdf), Thomas Hoenig, the president of the Kansas City Fed, argued that the biggest and most complex banks are "fundamentally inconsistent with capitalism." His remarks came just two days after global banking regulators agreed to require big banks to hold onto extra capital in order to reduce the risk of bank failures like those that occurred during the financial crisis of 2008.
"So long as the concept of a [systemically important financial institution, or SIFI] exists, and there are institutions so powerful and considered so important that they require special support and different rules," declared Hoenig, who is known as a hawk on monetary policy, "the future of capitalism is at risk and our market economy is in peril."
That's because, he argued, the existence of banks that are understood to be "too big to fail" distorts the functioning of the free market. "For capitalism to work, businesses, including financial firms, must be allowed, or compelled, to compete freely and openly and must be held accountable for their failures," Hoenig said. "Only under these conditions do markets objectively allocate credit to those businesses that provide the highest value."
The financial reform legislation passed by Congress almost a year ago was intended to ensure that banks could never again grow so large that a collapse could threaten the global financial sector, forcing taxpayers to come to the rescue.
But things haven't worked out that way. "Now, with their bailout costs amounting to billions of taxpayer dollars, SIFIs are larger than ever," Hoenig said.
Hoenig proposed rules that would prevent banks that take deposits from making trades--a shift away from the financial supermarket concept that has proliferated since the 1990s.
The new capital requirements were agreed to by the Group of Governors and Heads of Supervision (GHOS), an international group of banking regulators meeting in Basel, Switzerland, this weekend. If the new rules are approved at the G20 summit in November, they'd force big banks to keep an additional 1-3.5 percent of extra capital on hand, so they'd be better able to weather big losses.
Another rule agreed to previously, with a similar goal, requires all banks to hold a minimum of 7 percent core capital at all times.
Not everyone thinks the new requirements, which even if approved won't go into effect until later in the decade, will make much difference. Slate's Bethany McLean argues that capital requirements wouldn't have prevented the 2008 crisis. But Felix Salmon of Reuters counters: "[W]hile the Sifi surcharge won't stop banks growing to the point at which they have to be bailed out in extremis, it might make such growth significantly less profitable than it was in the past."
What's clear, though, is that almost three years after a financial crisis that plunged the world economy into a deep hole and nearly brought down the global financial sector, there's little reason to believe the same thing couldn't happen again.
ANONYMOUS Seeks Legal Counsel For RICO Class Action Lawsuit Against The Federal Reserve - #OpESR
Transcript and details inside.
Have Anonymous Operations against the Federal Reserve uncovered secret information? It appears so. A99 OpESR has just released a new video seeking legal counsel pertaining to a RICO Class Action Lawsuit against the Federal Reserve and it’s shareholders.
A previous statement by Anonymous A99 released on June 15th, the day after OpESR launched, revealed:
“Phase 1 Cyber Operation Success (P1CO)
OpESR Cyber Operations have been successfully launched and are progressing as planned…. OpESR is designed to expose corruption and scandalous actions on the part of central bankers and their servants within government….” [read more]
After reading that, knowing Anonymous’ recent track record of obtaining secret information, (see: Anonymous Exposes a Sinister Cyber-Surveillance Scheme) and viewing this new video seeking legal counsel, you get the impression that the Federal Reserve may be in serious trouble.
---
TRANSCRIPT
"Hello American People,
This is a message from Anonymous to you.
We cordially invite any and all, Anonymous and non-anons, to join OpESR in demanding Federal Reserve accountability.
We are crafting a class action lawsuit against the Fed.
Can you provide legal and research support?
Please respond by submitting a http://typewith.me/ pad to one of our *connectors in Anonymous.
If you can help us, get in contact with one of our *connectors by logging into our public chat area at: http://a99.fss34.com/
This is a class action lawsuit against the private Federal Reserve Bank and it's shareholders.
It falls under the Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970 for criminal acts of Fraud, Usury, Conspiracy to commit Grand Larceny and Theft by Deception, and for systematically looting the Treasury of The United States of America for a total that has yet to be determined.
For nearly 100 years, The Federal Reserve Bank has debased and debauched our currency by illegally authorizing an ODIOUS DEBT to be encumbered by our citizens without their knowledge, or in any way for their collective benefit.
The Fed, allowed Banks to defraud the American public, so as to leave them living like refugees in their own land. This ruthless cabal now has the temerity to pass off this ODIOUS DEBT to the American people, thereby destroying not only our future, but Americas' ability to be a free, sovereign nation.
The US Constitution says we have to go against domestic enemies.
The Fed, allowed this crisis to happen, they allowed banks to kick you out of your homes to pay their bills.
The Fed, allowed people to live on the streets, hungry.
And the Fed, got paid for it.
Something is very wrong, don't you think.
So, are you going to stay seated in front of your TV, PC or whatever and let them do whatever they want?
COME ON! WAKE UP AMERICA!!!
DO SOMETHING, NOT JUST FOR YOU, BUT FOR YOUR SOCIETY!
For your children, for your children's children!
Or they are destined to be enslaved by a fraudulent national debt created by the greed of the 1.
So, Anonymous or not, it doesn't matter.
What we ask is that you spread the Truth and take ACTION!
WE ARE ANONYMOUS.
WE DO NOT FORGIVE.
WE DO NOT FORGET.
EXPECT US."
Source
Tuesday, June 28, 2011
Why GDP Is Useless and Deceptive: There Was No Recovery
by Econophile
This article originally appeared in The Daily Capitalist.
We have not recovered from the Great Recession and thus our current economic stagnation is less a new event than a continuation of the original collapse. The basis for the so-called "recovery" was a rise in GDP, that measure of what we have spent in the economy. It's a fairly useless bit of data.
As we all know, GDP measures private Consumption, plus gross private Investment, plus Government spending, plus eXports minus iMports. It is a simple formula:
GDP=C+I+G+(X-M)
According to Ludwig von Mises:
It is possible to determine in terms of money prices the sum of the income or the wealth of a number of people. But it is nonsensical to reckon national income or national wealth. As soon as we embark upon considerations foreign to the reasoning of a man operating within the pale of a market society, we are no longer helped by monetary calculation methods. The attempts to determine in money the wealth of a nation or of the whole of mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimensions of the pyramid of Cheops.
If a business calculation values a supply of potatoes at $100, the idea is that it will be possible to sell it or to replace it against this sum. If a whole entrepreneurial unit is estimated $1,000,000, it means that one expects to sell it for this amount. But what is the meaning of the items in a statement of a nation's total wealth? What is the meaning of the computation's final result? What must be entered into it and what is to be left outside? Is it correct or not to enclose the "value" of the country's climate and the people's innate abilities and acquired skill? The businessman can convert his property into money, but a nation cannot.
Human Action, 4th ed., p. 217.
At best GDP is a defective measure of a nation's economic productivity. It isn't as if the "economy" is a thing that produces stuff. Nations don't produce anything, people do. I don't know any business owner who uses GDP to tell him anything about his business. (I'm not talking about you traders.) Let's face it, one can't get any real important information by averaging the prices of Diet Coke and memory chips.
What does this mean:
Not much, yet that is what the GDP calculation does.
Let me give you another example of the problem in trying to measure economic growth. If GDP measures spending then, does the introduction of more fiat money into the economy represent organic economic growth or is it just a measure of the influx of new dollars. If we all wake up the next morning and find that our money has magically doubled and we go on a spending spree, does 2X spending mean that GDP has increased 100%? I think we know the answer to that. That is why economists and statisticians use deflaters to discount the impact of monetary inflation on prices. [1] As Rick Davis of Consumer Metrics Institute points out, the inflation rate Bureau of Economic Analysis uses for the deflater is behind the curve and if revised upward to reflect the current CPI-U, it would put GDP at a 0.73% annualized rate.
Even if you believe that you can measure "the economy" why does government spending get as much credit as private spending and investment? Talking about a deflater, it's like comparing FedEx with the USPS in terms of efficiency and productivity. One could effectively argue that much of what the government spends is wasteful since they produce nothing. Yet, an important part of GDP spending measures.
That is why GDP doesn't yield any useful information.
I don't wish to get into the entire Austrian theory methodology (methodological individualism, as Mises put it), but it is an important concept in order to understand where I am going with this article.
The concept of GDP was developed during the New Deal by economist Simon Kuznets, a pioneer in econometrics. The New Dealers liked the concept because, as advocates of central economic planning, they believed they could control the economy and needed something to measure the efficacy of their meddling. Austrian theory economics rejects the notion of "national accounts" and the government's ability to "manage" the economy. This argument goes back almost 200 years, but let's say that history has not been very kind to economic meddlers. Especially to Keynesians.
What it all comes down to is the Keynesian belief that a lack of spending is what ails the economy, and conversely, spending, any spending, is good for the economy. If we consumers aren't spending enough, according to this idea, it is the duty of the government to spend in our stead. And if the government doesn't have the money, it is OK to borrow and spend.
Economic growth doesn't start with spending: it starts with saving and production and ends with spending. And that is why we should not rely on GDP to measure the health of the economy.
If spending were the key to economic growth, then, after running Federal deficits of more than $4.8 trillion since 2008, why haven't we recovered? According to Keynesian theory, at least as defined by Paul Krugman, Brad DeLong, Ben Bernanke, Larry Summers, and Tim Geithner, it should have worked. Of course Krugman would say that we haven't spent enough, but he always says that when evidence shows that it doesn't work.
So when the conventional wisdom says that the economy recovered in June 2009, it didn't. There are a number of other ways to measure this, and the dollar volume of industrial production and unemployment are two ways.
Here is an unemployment chart comparing various recessions:
This chart shows that since the official NBER dating for the beginning of the recession, December, 2007, to the present, we have 41 months of high unemployment. Compared to past recessions we can see this event is far more serious. We are at 9.1% unemployment now, a rate that is far higher and far longer than in the past.
Another measure to look at it is industrial production:
The dollar measures of industrial output, especially the private ones (such as the ISM and NFIB business surveys), reveals that it is stagnating which doesn't give you a warm fuzzy feeling about the "recovery." While we have the same problem in measuring industrial production that we do in measuring GDP, it does measure a specific sector of the economy, (some) manufacturing, which is a capital intensive business, and is a fair proxy for capital investment.
Industrial production and unemployment measures are real indicators of economic health. So how can we have a recovery when unemployment is still very high and industrial production is falling?
The same factors that caused the so-called 2007-2009 recession still exist. Thus, papering over the problems with fiat money and stimulus spending just gave the appearance of economic growth but it wasn't real. That is why we have economic stagnation: the problems were still there when the money stopped.
Stimulus spending and fiat monetary expansion don't create organic economic activities. That is, once the federal stimulus spending stops or the money "printing" stops, the economic activity they supported stops. Whereas in the private sector, assuming a business is doing something right, customers will come back and the business continues, jobs are created, and profits are made.
The lesson to take away from this is that you can't trust GDP numbers to tell you anything important about the quality of the economy. It is a fiction created by economists who believe that the formulas of econometrics is a valid way to understand our behavior. It is even worse than that because they use such data to further meddle with the economy by targeting interest rates, to set money supply goals, to formulate fiscal policy, and to pass laws they think will make the economy grow.
What they miss are the real causes of economic prosperity.
In order to make the economy grow again we need to liquidate the projects that were built on fiat money during the boom years. We need to liquidate the debt attached to these malinvested projects. It's called 'bite the bullet and take the pain.' We need to build up new capital through savings so that we can invest in new productive enterprises and create jobs that aren't built on money steroids.
This is what people (the economy) do when they aren't being manipulated by government actions.
If you wish to place blame then start with the Fed and your federal government. High unemployment and stagnation are painful to real people, not the "nation" yet it is government policies that prolong the problems. That is a cruel thing to do to our fellow Americans.
If you made economic decisions on the back of these GDP reports, that would be a mistake. More often than not, these numbers are false flags of growth. You may have bought a home based on a tax credit last year only to find that your new home is worth less than what you paid. You may have been an employer who hired new staff members based on tax credits only to find that demand has not materialized. You may have bought commercial real estate thinking the economy had turned around, but you will find your turnaround period will be far longer than you thought. You may have bought financial assets such as stocks based on a market that was inflated by QE money, and as money growth slows down the markets will suffer.
Caveat GDP.
____________________________
Footnote 1. Here is a thought. If Dr. Bernanke thinks that a little price inflation is good for the economy, then why would he or any economist believe in using a deflater for any data. If inflation "works," as they believe, isn't such "growth" always real and thus doesn't need adjustment? Turning that argument around, if they don't believe price inflation is good for calculating GDP because it isn't "real" why would they believe it is good for the economy?
This article originally appeared in The Daily Capitalist.
We have not recovered from the Great Recession and thus our current economic stagnation is less a new event than a continuation of the original collapse. The basis for the so-called "recovery" was a rise in GDP, that measure of what we have spent in the economy. It's a fairly useless bit of data.
As we all know, GDP measures private Consumption, plus gross private Investment, plus Government spending, plus eXports minus iMports. It is a simple formula:
GDP=C+I+G+(X-M)
According to Ludwig von Mises:
It is possible to determine in terms of money prices the sum of the income or the wealth of a number of people. But it is nonsensical to reckon national income or national wealth. As soon as we embark upon considerations foreign to the reasoning of a man operating within the pale of a market society, we are no longer helped by monetary calculation methods. The attempts to determine in money the wealth of a nation or of the whole of mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimensions of the pyramid of Cheops.
If a business calculation values a supply of potatoes at $100, the idea is that it will be possible to sell it or to replace it against this sum. If a whole entrepreneurial unit is estimated $1,000,000, it means that one expects to sell it for this amount. But what is the meaning of the items in a statement of a nation's total wealth? What is the meaning of the computation's final result? What must be entered into it and what is to be left outside? Is it correct or not to enclose the "value" of the country's climate and the people's innate abilities and acquired skill? The businessman can convert his property into money, but a nation cannot.
Human Action, 4th ed., p. 217.
At best GDP is a defective measure of a nation's economic productivity. It isn't as if the "economy" is a thing that produces stuff. Nations don't produce anything, people do. I don't know any business owner who uses GDP to tell him anything about his business. (I'm not talking about you traders.) Let's face it, one can't get any real important information by averaging the prices of Diet Coke and memory chips.
What does this mean:
Not much, yet that is what the GDP calculation does.
Let me give you another example of the problem in trying to measure economic growth. If GDP measures spending then, does the introduction of more fiat money into the economy represent organic economic growth or is it just a measure of the influx of new dollars. If we all wake up the next morning and find that our money has magically doubled and we go on a spending spree, does 2X spending mean that GDP has increased 100%? I think we know the answer to that. That is why economists and statisticians use deflaters to discount the impact of monetary inflation on prices. [1] As Rick Davis of Consumer Metrics Institute points out, the inflation rate Bureau of Economic Analysis uses for the deflater is behind the curve and if revised upward to reflect the current CPI-U, it would put GDP at a 0.73% annualized rate.
Even if you believe that you can measure "the economy" why does government spending get as much credit as private spending and investment? Talking about a deflater, it's like comparing FedEx with the USPS in terms of efficiency and productivity. One could effectively argue that much of what the government spends is wasteful since they produce nothing. Yet, an important part of GDP spending measures.
That is why GDP doesn't yield any useful information.
I don't wish to get into the entire Austrian theory methodology (methodological individualism, as Mises put it), but it is an important concept in order to understand where I am going with this article.
The concept of GDP was developed during the New Deal by economist Simon Kuznets, a pioneer in econometrics. The New Dealers liked the concept because, as advocates of central economic planning, they believed they could control the economy and needed something to measure the efficacy of their meddling. Austrian theory economics rejects the notion of "national accounts" and the government's ability to "manage" the economy. This argument goes back almost 200 years, but let's say that history has not been very kind to economic meddlers. Especially to Keynesians.
What it all comes down to is the Keynesian belief that a lack of spending is what ails the economy, and conversely, spending, any spending, is good for the economy. If we consumers aren't spending enough, according to this idea, it is the duty of the government to spend in our stead. And if the government doesn't have the money, it is OK to borrow and spend.
Economic growth doesn't start with spending: it starts with saving and production and ends with spending. And that is why we should not rely on GDP to measure the health of the economy.
If spending were the key to economic growth, then, after running Federal deficits of more than $4.8 trillion since 2008, why haven't we recovered? According to Keynesian theory, at least as defined by Paul Krugman, Brad DeLong, Ben Bernanke, Larry Summers, and Tim Geithner, it should have worked. Of course Krugman would say that we haven't spent enough, but he always says that when evidence shows that it doesn't work.
So when the conventional wisdom says that the economy recovered in June 2009, it didn't. There are a number of other ways to measure this, and the dollar volume of industrial production and unemployment are two ways.
Here is an unemployment chart comparing various recessions:
This chart shows that since the official NBER dating for the beginning of the recession, December, 2007, to the present, we have 41 months of high unemployment. Compared to past recessions we can see this event is far more serious. We are at 9.1% unemployment now, a rate that is far higher and far longer than in the past.
Another measure to look at it is industrial production:
The dollar measures of industrial output, especially the private ones (such as the ISM and NFIB business surveys), reveals that it is stagnating which doesn't give you a warm fuzzy feeling about the "recovery." While we have the same problem in measuring industrial production that we do in measuring GDP, it does measure a specific sector of the economy, (some) manufacturing, which is a capital intensive business, and is a fair proxy for capital investment.
Industrial production and unemployment measures are real indicators of economic health. So how can we have a recovery when unemployment is still very high and industrial production is falling?
The same factors that caused the so-called 2007-2009 recession still exist. Thus, papering over the problems with fiat money and stimulus spending just gave the appearance of economic growth but it wasn't real. That is why we have economic stagnation: the problems were still there when the money stopped.
Stimulus spending and fiat monetary expansion don't create organic economic activities. That is, once the federal stimulus spending stops or the money "printing" stops, the economic activity they supported stops. Whereas in the private sector, assuming a business is doing something right, customers will come back and the business continues, jobs are created, and profits are made.
The lesson to take away from this is that you can't trust GDP numbers to tell you anything important about the quality of the economy. It is a fiction created by economists who believe that the formulas of econometrics is a valid way to understand our behavior. It is even worse than that because they use such data to further meddle with the economy by targeting interest rates, to set money supply goals, to formulate fiscal policy, and to pass laws they think will make the economy grow.
What they miss are the real causes of economic prosperity.
In order to make the economy grow again we need to liquidate the projects that were built on fiat money during the boom years. We need to liquidate the debt attached to these malinvested projects. It's called 'bite the bullet and take the pain.' We need to build up new capital through savings so that we can invest in new productive enterprises and create jobs that aren't built on money steroids.
This is what people (the economy) do when they aren't being manipulated by government actions.
If you wish to place blame then start with the Fed and your federal government. High unemployment and stagnation are painful to real people, not the "nation" yet it is government policies that prolong the problems. That is a cruel thing to do to our fellow Americans.
If you made economic decisions on the back of these GDP reports, that would be a mistake. More often than not, these numbers are false flags of growth. You may have bought a home based on a tax credit last year only to find that your new home is worth less than what you paid. You may have been an employer who hired new staff members based on tax credits only to find that demand has not materialized. You may have bought commercial real estate thinking the economy had turned around, but you will find your turnaround period will be far longer than you thought. You may have bought financial assets such as stocks based on a market that was inflated by QE money, and as money growth slows down the markets will suffer.
Caveat GDP.
____________________________
Footnote 1. Here is a thought. If Dr. Bernanke thinks that a little price inflation is good for the economy, then why would he or any economist believe in using a deflater for any data. If inflation "works," as they believe, isn't such "growth" always real and thus doesn't need adjustment? Turning that argument around, if they don't believe price inflation is good for calculating GDP because it isn't "real" why would they believe it is good for the economy?
Bank Of America To Pay $8.5 Billion To Settle Mortgage (Mis)Representation Suit With BlackRock, Pimco, New York Fed Et Al.
by Tyler Durden
Bank of America may be about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry to date According to the WSJ, the Charlotte, NC-based bank is preparing to pay $8.5 billion to settle mortgage (mis)representation claims (aka the Mortgage putback issue) brought on by such high profile figures as BlackRock, Pimco, MetLife and, of course, the Federal Reserve, previously discussed on Zero Hedge. "A deal would end a nine-month fight with a group of 22 investors that hold more than $56 billion in mortgage-backed securities at the center of the dispute, including giant money manager BlackRock Inc., insurer MetLife Inc. and the Federal Reserve Bank of New York." Keep in mind that this is actually not good news for the bank, contrary to what the company's stock is doing after hours, as this still keeps the company exposed to a multitude of other rep and warranty litigation (which will now be largely underreserved), not to mention fraudclosure issues, which are totally unrelated, and which will plague the bank for years and years. Lastly, BAC is largley underreserved (see below) for a settlement of this size which means its Tier 1 capital ratio will likely be impacted due to a major outflow of cash.
From the WSJ:
The deal could embolden mutual-fund managers, insurance companies and investment partnerships to go after similar settlements with other major U.S. banks, arguing that billions in loans scooped up before the U.S. housing collapse didn't meet sellers' promises or were improperly managed. Most vulnerable would be Wells Fargo & Co and J.P. Morgan Chase & Co., which along with Bank of America collect loan payments on about half of all outstanding U.S. mortgages.
The dispute between Bank of America and the mortgage investors began last fall when they alleged that securities they bought before the financial crisis from Countrywide Financial Corp. were composed of loans that didn't meet sellers' promises about the quality of the borrowers or the collateral.
While it is still very much unclear what the terms of the settlement are, one thing is certain: BofA acquisition of Countrywide for $4 billion is rapidly becoming the worst purchase in the history of M&A. Luckily, Angelo "Agent Orange" Mozillo, has a permanent get out of jail card. One wonders just what dirty secrets old Angelo know about the housing market (or regulators' sexual lifestyles) that not one regulatory agency or DA office is willing to go after him?
And, as often happens, we were quite correct when we speculated back in January that Bank of America is woefully underreserved for this development:
Can You Spell U-N-D-E-R-R-E-S-E-R-V-E-D? If Not, Here Is A Visualization Aid
Following today's news of an imminent lawsuit to be filed against Bank of America by such entities as the New York Fed (which, by the way, it had to do, and not voluntarily, but merely as a function of its fiduciary duty to taxpayers through its Maiden Lane holdings, managed, conveniently enough, by Bank of America minority holding BlackRock) everyone promptly has taken a quick look back at the bank's earnings presentation, and especially one little piece of data: the putback reserve. Taking a quick look a page 23 on the pdf we read: "3Q10 reps and warranties provision of $872M is $376M lower than 2Q10, as the current quarter included an increase in expected repurchases from GSEs while 2Q10 included additional provision for monolines." So how does this stack up relative to the $47 billion in putback demands by such legal "dilettantes" as Bill Gross, Bill Dudley and Larry Fink? We have created the chart below to assist in that particular question. We are also confident that with each passing day we will have to add to the red-shaded area as more and more putback lawsuits come out of the woodwork. And as to where the deficiency amount will have to be funded from? Think cold, hard cash. The same cash that until recently would have been on the "sidelines."
Bank of America may be about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry to date According to the WSJ, the Charlotte, NC-based bank is preparing to pay $8.5 billion to settle mortgage (mis)representation claims (aka the Mortgage putback issue) brought on by such high profile figures as BlackRock, Pimco, MetLife and, of course, the Federal Reserve, previously discussed on Zero Hedge. "A deal would end a nine-month fight with a group of 22 investors that hold more than $56 billion in mortgage-backed securities at the center of the dispute, including giant money manager BlackRock Inc., insurer MetLife Inc. and the Federal Reserve Bank of New York." Keep in mind that this is actually not good news for the bank, contrary to what the company's stock is doing after hours, as this still keeps the company exposed to a multitude of other rep and warranty litigation (which will now be largely underreserved), not to mention fraudclosure issues, which are totally unrelated, and which will plague the bank for years and years. Lastly, BAC is largley underreserved (see below) for a settlement of this size which means its Tier 1 capital ratio will likely be impacted due to a major outflow of cash.
From the WSJ:
The deal could embolden mutual-fund managers, insurance companies and investment partnerships to go after similar settlements with other major U.S. banks, arguing that billions in loans scooped up before the U.S. housing collapse didn't meet sellers' promises or were improperly managed. Most vulnerable would be Wells Fargo & Co and J.P. Morgan Chase & Co., which along with Bank of America collect loan payments on about half of all outstanding U.S. mortgages.
The dispute between Bank of America and the mortgage investors began last fall when they alleged that securities they bought before the financial crisis from Countrywide Financial Corp. were composed of loans that didn't meet sellers' promises about the quality of the borrowers or the collateral.
While it is still very much unclear what the terms of the settlement are, one thing is certain: BofA acquisition of Countrywide for $4 billion is rapidly becoming the worst purchase in the history of M&A. Luckily, Angelo "Agent Orange" Mozillo, has a permanent get out of jail card. One wonders just what dirty secrets old Angelo know about the housing market (or regulators' sexual lifestyles) that not one regulatory agency or DA office is willing to go after him?
And, as often happens, we were quite correct when we speculated back in January that Bank of America is woefully underreserved for this development:
Can You Spell U-N-D-E-R-R-E-S-E-R-V-E-D? If Not, Here Is A Visualization Aid
Following today's news of an imminent lawsuit to be filed against Bank of America by such entities as the New York Fed (which, by the way, it had to do, and not voluntarily, but merely as a function of its fiduciary duty to taxpayers through its Maiden Lane holdings, managed, conveniently enough, by Bank of America minority holding BlackRock) everyone promptly has taken a quick look back at the bank's earnings presentation, and especially one little piece of data: the putback reserve. Taking a quick look a page 23 on the pdf we read: "3Q10 reps and warranties provision of $872M is $376M lower than 2Q10, as the current quarter included an increase in expected repurchases from GSEs while 2Q10 included additional provision for monolines." So how does this stack up relative to the $47 billion in putback demands by such legal "dilettantes" as Bill Gross, Bill Dudley and Larry Fink? We have created the chart below to assist in that particular question. We are also confident that with each passing day we will have to add to the red-shaded area as more and more putback lawsuits come out of the woodwork. And as to where the deficiency amount will have to be funded from? Think cold, hard cash. The same cash that until recently would have been on the "sidelines."
The Killing Fields
By Golem XIV
They may be the lowest form of human life, but when it comes to defending their wealth the Financial class are not stupid. They know they need to make us, not them, pay for those debts whatever it costs. That’s why, to quote one leading market analyst, ‘there are still doubts on whether the peripheral countries can deliver on austerity.’ That's their worry now. That is what the financial class sees as the proper and apparently only role of government. DELIVER ON AUSTERITY. That is what your government is for. Welcome to your future.
There is now no easy way out of the killing field we have been led into. And it must be coming clear to people that a killing field is a good description of the place they are taking us.
Men in fine suits, with fine degrees, who live golden lives have led us and our children to a desperate place. Our political leaders have helped them take us there. They chose not to spend our future taxes on education, on health, on investment in a better future, but instead they sacrificed it all to save the banks. That sacrifice will involve tearing from us every thread in the fabric of our national life that is not tied down and defended tooth and nail. It is the ultimate failure of imagination and courage by a generation of political leaders.
The pain they have stored up for us will not go away. This means, in my opinion there are only two futures remaining. One in which the pain comes quickly but where we do everything to make sure it is the financial class, and not us, who suffer the most. But there is another future, the one they have planned for us, where it happens slowly, the pain getting greater and greater with time, but where it is made to fall on us rather than the immensely rich people and institutions that caused the crisis.
It is the future where everything we have sacrificed and struggled to build to make this country a better place - our universities, our schools, our pensions, our health service - is hacked down and the little left is subjected to the laws and logic of the market where nothing is valued but profit. That is the future they want; it is the future we must resist.
With that future in mind our political leaders know everything now is about enforcement - about enforcing this future upon us. In simple terms it means what we are seeing in Greece and what we saw in Iceland. It means police versus people. It is where Democracy and Finance run into each other like bulls in a field. It will come here too.
If you believe, like me, that the only long-term and sustainable path out of the killing fields we have been led to is for the ordinary people of all countries to force the bad debts to be taken by those who made them and put an end to public money being misused to bail out the wealthy then we must act now. The longer we delay, the longer we put off the inevitable, the greater the pain for all of us.
In my opinion democracy - when you have it already - is about peaceful voting. When you don’t have it, or you are in danger of having it hollowed out and what is left serves only the rich and the powerful then it is time for standing up and confronting those who would deny you. That time is now. Our political leaders, if we let them, will deliver us to the killing fields. A different leadership will have to come from the bottom, from you and me, to stop them.
We have to confront this disaster together or each of us will be pulverized by it on our own.
I wrote those words on 10th May 2010. They are the final words of The Debt Generation,
They may be the lowest form of human life, but when it comes to defending their wealth the Financial class are not stupid. They know they need to make us, not them, pay for those debts whatever it costs. That’s why, to quote one leading market analyst, ‘there are still doubts on whether the peripheral countries can deliver on austerity.’ That's their worry now. That is what the financial class sees as the proper and apparently only role of government. DELIVER ON AUSTERITY. That is what your government is for. Welcome to your future.
There is now no easy way out of the killing field we have been led into. And it must be coming clear to people that a killing field is a good description of the place they are taking us.
Men in fine suits, with fine degrees, who live golden lives have led us and our children to a desperate place. Our political leaders have helped them take us there. They chose not to spend our future taxes on education, on health, on investment in a better future, but instead they sacrificed it all to save the banks. That sacrifice will involve tearing from us every thread in the fabric of our national life that is not tied down and defended tooth and nail. It is the ultimate failure of imagination and courage by a generation of political leaders.
The pain they have stored up for us will not go away. This means, in my opinion there are only two futures remaining. One in which the pain comes quickly but where we do everything to make sure it is the financial class, and not us, who suffer the most. But there is another future, the one they have planned for us, where it happens slowly, the pain getting greater and greater with time, but where it is made to fall on us rather than the immensely rich people and institutions that caused the crisis.
It is the future where everything we have sacrificed and struggled to build to make this country a better place - our universities, our schools, our pensions, our health service - is hacked down and the little left is subjected to the laws and logic of the market where nothing is valued but profit. That is the future they want; it is the future we must resist.
With that future in mind our political leaders know everything now is about enforcement - about enforcing this future upon us. In simple terms it means what we are seeing in Greece and what we saw in Iceland. It means police versus people. It is where Democracy and Finance run into each other like bulls in a field. It will come here too.
If you believe, like me, that the only long-term and sustainable path out of the killing fields we have been led to is for the ordinary people of all countries to force the bad debts to be taken by those who made them and put an end to public money being misused to bail out the wealthy then we must act now. The longer we delay, the longer we put off the inevitable, the greater the pain for all of us.
In my opinion democracy - when you have it already - is about peaceful voting. When you don’t have it, or you are in danger of having it hollowed out and what is left serves only the rich and the powerful then it is time for standing up and confronting those who would deny you. That time is now. Our political leaders, if we let them, will deliver us to the killing fields. A different leadership will have to come from the bottom, from you and me, to stop them.
We have to confront this disaster together or each of us will be pulverized by it on our own.
I wrote those words on 10th May 2010. They are the final words of The Debt Generation,
Monday, June 27, 2011
Secretary Of Predation Geithner, Bank Of America, And The Law Of The Foreclosure Jungle
Submitted by a hedge fund manager who wishes to remain anonymous.
Bank of America Discovers Some Trivial Technical Problems With a Small Number of Mortgages
Bank of America announced that it has discovered a few trivial, easily-remedied technical problems with some of its mortgages. “We will stop foreclosure sales in some states until our assessment has been satisfactorily completed, or until the politicians whom we have compensated so generously do their damn jobs and get rid of those pesky laws and rights that are slowing us down. Our ongoing assessment shows the basis for foreclosure decisions is accurate, except in those few regrettable cases where we repossessed a house that actually had no mortgage on it whatsoever—hey, nobody’s perfect, ha ha,” a Bank of America spokescreature said. “It’s really quite a lot of trouble to verify the address before we take someone’s house,” the spokescreature continued. “Comparing addresses on two documents slows us up by a good fifteen seconds. After all, we have a lot of houses to foreclose on. Anyway, many of those people actually do owe money to us, or to somebody, anyway. I know it is a bit confusing to citizens when our competitor HSBC and another bank simultaneously try to foreclose on the same property, especially when they are in a federal foreclosure prevention program. It’s sort of like one of those programs on Animal Planet where each hyena grabs a leg of the still twitching gazelle and tries to pull it away from the other hyenas. But that’s the way nature works—nobody asks those hyenas petty-minded questions about whether title to the gazelle was properly transferred, and to which hyena, and whether the title was properly notarized by an authorized local cheetah. Sometimes a company just has to sink its fangs into a customer, lock its jaws, which can exert a pressure of 1,000 pounds per square inch, brace its legs, yank, and see what tears loose. If we get the wrong gazelle, we will make every effort to compensate it for our erroneous gnawing, bone-crushing, and marrow-sucking.”
“It appears that some of our process servers may not have actually served the owners with notice of our intent to foreclose. But, honestly, wouldn’t warning them make it a whole lot harder to catch them? It is a myth that hyenas giggle and cackle before they attack. Actually, they are usually quite silent until they get close enough to bite. On the Serengeti, due process means that the gazelle runs as fast as it can and the pack keeps ripping small chunks off until the gazelle collapses due to shock and blood loss and inability to pay for a lawyer. There may have been some trivial, unimportant problems with the relevant documents, but we are confident that many of those gazelles really did owe us money, and we believe that our ripping them into pieces, digesting them, and regurgitating their horns and hooves is ecologically sound and generally in accord with the law of nature. Now, if you’ll excuse me, I will have to go mark the boundaries of my pack’s territory with the musk from my anal scent gland. We don’t want other hyena packs like J.P. Morgan invading our turf. That could be a real mess—those guys know how to sink their fangs in, and they know how to break down the door of a house and change the locks even when they haven’t foreclosed on the property.”
Asked for comment, a J.P. Morgan spokesperson said, “We have no interest in invading the grasslands turf of Bank of America or HSBC because we are not hyenas. We are amphibious apex predators, and our preferred mode of foreclosure is to lurk underwater by the bank of a river. When a gazelle or a wildebeest sticks its muzzle in the water, we surge upward and, um, serve papers on it, or something. Or grab a leg and go into our famous death roll, spinning and thrashing until the leg comes off. Then we like to take the borrower’s corpse up-river for a few days of what we in the mortgage business call ‘seasoning’. We would also like to remind you puny, pathetic citizens that we can grow to twenty-three feet long, we can gallop at up to seventeen miles per hour for short distances, we have maintained our distinctive business culture successfully since before dinosaurs evolved, we have thick dorsal osteoderms which are hard to penetrate even with an axe, and we are much more biologically complex than other reptiles: unlike them, we have features like a cerebral cortex and a four-chambered heart, and many of us have Ivy League degrees. We recommend that AMBAC and Pimco think carefully about all of these features before trying to push their mortgage-backed securities back onto our balance sheet. As for any legislators or prosecutors who might be thinking about going after us, we have very slow metabolisms. We can submerge for an hour and go for months without eating. We will outwait you and probably eventually hire you as a lobbyist. We would also like to note, though, that we are not without compassion. We honor our prey and weep for it: do you see the large tears rolling out of our eyes and down our scaly cheeks? You probably thought crocodile tears were a mere myth or proverb, but we do in fact have lachrymal glands that secrete a proteinaceous fluid. Crying has an important place in our corporate culture: it lubricates our eyes and cleans our nictitating membranes.”
The Senate and the House, with remarkable foresight, passed HR 3808, a bill to facilitate the sharing of taxpayer carcasses across state lines. The bill’s sponsor, Representative Robert Aderholt, an Alabama Republican, said, “It is important to ensure that multiple species of predators can efficiently divide a taxpayer carcass and transport pieces of it from one waterhole to another.” The banking industry suffered a temporary setback when President Obama was forced to veto HR 3808. David Axelrod, an advisor to President Obama, said, “Many gazelles and springboks still seem to be agitated about this issue. But we can ignore them—they are, after all, mere herbivores, and their lobbying efforts lack teeth. We have complete confidence in our ability to find some swift, quiet resolution of this problem now that the election is over.” Iowa Attorney General Tom Miller concurred, saying, “We’d like to resolve this as soon as possible. No predator needs to be seriously inconvenienced, but all fifty attorneys general are united in their determination to see that state governments get their fair share of the taxpayer carrion. Our model is the tobacco settlements, where the tobacco companies got to keep trying to addict precocious adolescents and we got the money we needed to raise the salaries of state employees. Our other model is the marabou stork, a scavenger which mainly eats after the big predators have finished and is happy to eat feces as well as carrion and fish eggs, and which has a naked head and neck to ensure that its feathers don’t become clotted with blood.” Secretary of Predation Timothy Geithner added, “I think we can all agree that our nation’s highest priority is to ensure a steady and increasing flow of protein to our apex predators. Crocodiles and hyenas are actually very delicate creatures, and any regulatory interference with their feeding habits could have a catastrophic effect on the entire ecosystem.” Despite their superficial differences, both parties fervently agree on the crucial importance of making life easier for apex predators.
Bank of America Discovers Some Trivial Technical Problems With a Small Number of Mortgages
Bank of America announced that it has discovered a few trivial, easily-remedied technical problems with some of its mortgages. “We will stop foreclosure sales in some states until our assessment has been satisfactorily completed, or until the politicians whom we have compensated so generously do their damn jobs and get rid of those pesky laws and rights that are slowing us down. Our ongoing assessment shows the basis for foreclosure decisions is accurate, except in those few regrettable cases where we repossessed a house that actually had no mortgage on it whatsoever—hey, nobody’s perfect, ha ha,” a Bank of America spokescreature said. “It’s really quite a lot of trouble to verify the address before we take someone’s house,” the spokescreature continued. “Comparing addresses on two documents slows us up by a good fifteen seconds. After all, we have a lot of houses to foreclose on. Anyway, many of those people actually do owe money to us, or to somebody, anyway. I know it is a bit confusing to citizens when our competitor HSBC and another bank simultaneously try to foreclose on the same property, especially when they are in a federal foreclosure prevention program. It’s sort of like one of those programs on Animal Planet where each hyena grabs a leg of the still twitching gazelle and tries to pull it away from the other hyenas. But that’s the way nature works—nobody asks those hyenas petty-minded questions about whether title to the gazelle was properly transferred, and to which hyena, and whether the title was properly notarized by an authorized local cheetah. Sometimes a company just has to sink its fangs into a customer, lock its jaws, which can exert a pressure of 1,000 pounds per square inch, brace its legs, yank, and see what tears loose. If we get the wrong gazelle, we will make every effort to compensate it for our erroneous gnawing, bone-crushing, and marrow-sucking.”
“It appears that some of our process servers may not have actually served the owners with notice of our intent to foreclose. But, honestly, wouldn’t warning them make it a whole lot harder to catch them? It is a myth that hyenas giggle and cackle before they attack. Actually, they are usually quite silent until they get close enough to bite. On the Serengeti, due process means that the gazelle runs as fast as it can and the pack keeps ripping small chunks off until the gazelle collapses due to shock and blood loss and inability to pay for a lawyer. There may have been some trivial, unimportant problems with the relevant documents, but we are confident that many of those gazelles really did owe us money, and we believe that our ripping them into pieces, digesting them, and regurgitating their horns and hooves is ecologically sound and generally in accord with the law of nature. Now, if you’ll excuse me, I will have to go mark the boundaries of my pack’s territory with the musk from my anal scent gland. We don’t want other hyena packs like J.P. Morgan invading our turf. That could be a real mess—those guys know how to sink their fangs in, and they know how to break down the door of a house and change the locks even when they haven’t foreclosed on the property.”
Asked for comment, a J.P. Morgan spokesperson said, “We have no interest in invading the grasslands turf of Bank of America or HSBC because we are not hyenas. We are amphibious apex predators, and our preferred mode of foreclosure is to lurk underwater by the bank of a river. When a gazelle or a wildebeest sticks its muzzle in the water, we surge upward and, um, serve papers on it, or something. Or grab a leg and go into our famous death roll, spinning and thrashing until the leg comes off. Then we like to take the borrower’s corpse up-river for a few days of what we in the mortgage business call ‘seasoning’. We would also like to remind you puny, pathetic citizens that we can grow to twenty-three feet long, we can gallop at up to seventeen miles per hour for short distances, we have maintained our distinctive business culture successfully since before dinosaurs evolved, we have thick dorsal osteoderms which are hard to penetrate even with an axe, and we are much more biologically complex than other reptiles: unlike them, we have features like a cerebral cortex and a four-chambered heart, and many of us have Ivy League degrees. We recommend that AMBAC and Pimco think carefully about all of these features before trying to push their mortgage-backed securities back onto our balance sheet. As for any legislators or prosecutors who might be thinking about going after us, we have very slow metabolisms. We can submerge for an hour and go for months without eating. We will outwait you and probably eventually hire you as a lobbyist. We would also like to note, though, that we are not without compassion. We honor our prey and weep for it: do you see the large tears rolling out of our eyes and down our scaly cheeks? You probably thought crocodile tears were a mere myth or proverb, but we do in fact have lachrymal glands that secrete a proteinaceous fluid. Crying has an important place in our corporate culture: it lubricates our eyes and cleans our nictitating membranes.”
The Senate and the House, with remarkable foresight, passed HR 3808, a bill to facilitate the sharing of taxpayer carcasses across state lines. The bill’s sponsor, Representative Robert Aderholt, an Alabama Republican, said, “It is important to ensure that multiple species of predators can efficiently divide a taxpayer carcass and transport pieces of it from one waterhole to another.” The banking industry suffered a temporary setback when President Obama was forced to veto HR 3808. David Axelrod, an advisor to President Obama, said, “Many gazelles and springboks still seem to be agitated about this issue. But we can ignore them—they are, after all, mere herbivores, and their lobbying efforts lack teeth. We have complete confidence in our ability to find some swift, quiet resolution of this problem now that the election is over.” Iowa Attorney General Tom Miller concurred, saying, “We’d like to resolve this as soon as possible. No predator needs to be seriously inconvenienced, but all fifty attorneys general are united in their determination to see that state governments get their fair share of the taxpayer carrion. Our model is the tobacco settlements, where the tobacco companies got to keep trying to addict precocious adolescents and we got the money we needed to raise the salaries of state employees. Our other model is the marabou stork, a scavenger which mainly eats after the big predators have finished and is happy to eat feces as well as carrion and fish eggs, and which has a naked head and neck to ensure that its feathers don’t become clotted with blood.” Secretary of Predation Timothy Geithner added, “I think we can all agree that our nation’s highest priority is to ensure a steady and increasing flow of protein to our apex predators. Crocodiles and hyenas are actually very delicate creatures, and any regulatory interference with their feeding habits could have a catastrophic effect on the entire ecosystem.” Despite their superficial differences, both parties fervently agree on the crucial importance of making life easier for apex predators.
Graham Summers’ Weekly Market Forecast (All Eyes on Greece Edition)
by Phoenix Capital Research
This week we won’t be looking at charts, but instead discussing the most important macro issues that will determine the future trends of all asset classes.
Tomorrow Greece’s parliament votes on whether or not to implement more “austerity” measures, also known as cutting social programs and raising taxes. Greek citizens, enraged that they keep picking up the tab for banks (both domestic and international) that made poor bets on Greece, will be implementing a series of strikes and riots.
However, the facts remain the same. The world is awash in garbage debt. The only reason the banks and others haven’t taken the “hit” that they NEED to take is because they’ve bought out the politicians. Put another way, we are seeing clearly that the two primary principles of the West (capitalism and democracy) have both become jokes: alleged “capitalists” like the banks don’t ever actually see losses for mistakes and “democratically elected” leaders are in fact owned outright by the banks via donations/ bribes.
Greece, while ultimately a small player in the global debt game, will set the course of the rest of the financial world this week. If Greece implements more austerity measures, that the “extend and pretend” game will continue a little longer, the Euro, stocks and commodities will rise, and the US Dollar will fall.
However, if Greece doesn’t pass more austerity measures, indicating that the bailout/ stimulus nonsense has hit a wall, expect a serious “risk off” move in which stocks, commodities, and the Euro to take a hit, and investors rush into the US Dollar.
However, this will not be a simple one-way street. The EU, and now China are both committed to helping the failed experiment of the Euro continue its death march.
Yes, you read that correctly, China has committed to insuring that Eurozone debt holders don’t take a haircut. It’s even mentioned possibly buying European sovereign bonds outright.
The reasons for this a multiple… but ultimately they boil down to:
1) China wants to flex its “dump the Dollar” political muscles
2) China wants to support its primary export market.
China’s been warning about the US Dollar as an investment for years. They’ve lowered their Treasury holdings for five months straight and have even hinted they might cut their holdings by 2/3. So China’s move to support the Euro can be seen as a continuation of this “anti-Dollar trend.”
Regarding exports, the EU accounts for roughly $400 billion of China’s exports, making it China’s single largest export market. So if Europe collapses, China’s economy takes a BIG hit.
And all of these issues (China’s exports, the bailout madness, European bank debt holdings, Greece’s sovereign collapse, the future of the Euro, and stocks, commodities, and the Dollar’s trends) hang on Greece’s shoulders this week.
With that in mind, the Greece situation needs to be watched very, very carefully as all investments will trade based on this outcome and the subsequent interventions by the EU/ China. With that in mind, stay nimble and don’t over-commit to anyone outcome just yet.
This week we won’t be looking at charts, but instead discussing the most important macro issues that will determine the future trends of all asset classes.
Tomorrow Greece’s parliament votes on whether or not to implement more “austerity” measures, also known as cutting social programs and raising taxes. Greek citizens, enraged that they keep picking up the tab for banks (both domestic and international) that made poor bets on Greece, will be implementing a series of strikes and riots.
However, the facts remain the same. The world is awash in garbage debt. The only reason the banks and others haven’t taken the “hit” that they NEED to take is because they’ve bought out the politicians. Put another way, we are seeing clearly that the two primary principles of the West (capitalism and democracy) have both become jokes: alleged “capitalists” like the banks don’t ever actually see losses for mistakes and “democratically elected” leaders are in fact owned outright by the banks via donations/ bribes.
Greece, while ultimately a small player in the global debt game, will set the course of the rest of the financial world this week. If Greece implements more austerity measures, that the “extend and pretend” game will continue a little longer, the Euro, stocks and commodities will rise, and the US Dollar will fall.
However, if Greece doesn’t pass more austerity measures, indicating that the bailout/ stimulus nonsense has hit a wall, expect a serious “risk off” move in which stocks, commodities, and the Euro to take a hit, and investors rush into the US Dollar.
However, this will not be a simple one-way street. The EU, and now China are both committed to helping the failed experiment of the Euro continue its death march.
Yes, you read that correctly, China has committed to insuring that Eurozone debt holders don’t take a haircut. It’s even mentioned possibly buying European sovereign bonds outright.
The reasons for this a multiple… but ultimately they boil down to:
1) China wants to flex its “dump the Dollar” political muscles
2) China wants to support its primary export market.
China’s been warning about the US Dollar as an investment for years. They’ve lowered their Treasury holdings for five months straight and have even hinted they might cut their holdings by 2/3. So China’s move to support the Euro can be seen as a continuation of this “anti-Dollar trend.”
Regarding exports, the EU accounts for roughly $400 billion of China’s exports, making it China’s single largest export market. So if Europe collapses, China’s economy takes a BIG hit.
And all of these issues (China’s exports, the bailout madness, European bank debt holdings, Greece’s sovereign collapse, the future of the Euro, and stocks, commodities, and the Dollar’s trends) hang on Greece’s shoulders this week.
With that in mind, the Greece situation needs to be watched very, very carefully as all investments will trade based on this outcome and the subsequent interventions by the EU/ China. With that in mind, stay nimble and don’t over-commit to anyone outcome just yet.
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