"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Goldman Sachs’

How The Goldman Vampire Squid Just Captured Europe

In Uncategorized on April 19, 2012 at 2:15 pm

Oldspeak:The Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers. Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.”-Ellen Brown Banks get bailouts while the very governments that issue the bailouts fail because they don’t actually have to money to pay for the bailout. They just run their printing presses and hand over increasingly worthless fiat currency. If you don’t know what quantitative easing, you will soon. Meanwhile, poverty, food, & energy costs grow, while 400 white men get incalculably rich.

Related Story:

Goldman Sachs, Citibank, JP Morgan Chase, Bank Of America Have Assets of $5 trillion & Carry $235 TRILLION In Risk Exposure, 1/3 Of World Total

BBC Speechless As Trader Tells The Truth: “Governments Don’t Rule The World, Goldman Sachs Rules The World.”

Why Isn’t Wall Street In Jail?

By Ellen Brown @ Truthout:

he Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund – the Troubled Asset Relief Program or TARP – was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank President Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by euro zone governments, their creditors and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the euro zone governments?

There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB….

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as member states representing 90 percent of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 YouTube video titled “The shocking truth of the pending EU collapse!” originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion?… [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008.][Article 9]: “,,, ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay…. But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM?…

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 … accordingly.” Question: … 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding and assets … shall enjoy immunity from every form of judicial process…. ” Question: So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall … be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: … [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!

[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them … and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman executive Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent,” but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18 percent interest, debt doublesin just four years. It is this onerous interest burden – not the debt itself – that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse Article 123 of the Lisbon treaty. Then, the ECB could issue credit directly to its member governments. Alternatively, euro zone governments could re-establish their economic sovereignty by reviving their publicly owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest free. This is not a new idea, but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today, the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.

Financial ‘Reform’ Failure: Chase, Bank Of America, Citigroup, Wells Fargo, Goldman Sachs Now 30% Bigger; Control Assests Equal To 56% Of U.S. Economy

In Uncategorized on April 19, 2012 at 1:20 pm

Oldspeak:“Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” & “prevent the further consolidation of our financial system” the nation’s largest banks are bigger than they were before the credit crisis. Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56% of the U.S. economy, according to the Federal Reserve.” Behold! The fruits of toothless, non-regulating financial ‘reform’! Financial oligarchs now control assets equal to a majority of the U.S. economy. They’ve gained complete control of the European economy, and many others around the world. The conditions have been created for a bigger and more devastating global economic crash, that will facilitate the continued consolidation of control over all assets by the International Banking Cartels, and the continued destruction of sovereign states. How long will the rape and pillage of our planet and societies go on? If the Banksters have their way, until there is nothing left.

By Washington’s Blog:

Size of Banks Killing Economy … But Giant Banks Have Only Gotten Bigger Since Financial “Reform” Enacted

For years, many high-level economists and financial experts have said that – unless we break up the giant banks – our economy will never recover, real reform will be blocked, and democracy and the rule of law will be corrupted.

So how did the government respond to the financial crisis which started in 2007?

Let the giant banks get even bigger.

As Bloomberg notes, the five banks that held assets equal to 43% of the US economy in 2007 before the financial crisis and the bank bailout now control assets that equal 56% of the US economy:

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

***

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

***

Regulatory burden could promote further industry consolidation, according to Wilbur Ross, chairman of WL Ross & Co., a private-equity firm.

“We think the little tiny banks, the 90-odd percent of banks that are under $1.5 billion in deposits, are pretty much an obsolete phenomenon,” he told Bloomberg Television on March 14. “We think they’ll all have to merge with each other, be acquired by bigger banks or something.”

***

In 2011, funding costs for banks with more than $10 billion in assets were about one-third less than for the smallest banks, according to the FDIC.

Some presidents of regional Federal Reserve banks have lambasted too big to fail. As Bloomberg notes:

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

But the most powerful Fed bank – the New York Fed – and Bernanke’s Federal Open Market Committee, as well as Tim Geithner’s Treasury Department, have done everything possible to ensure that the the giant banks become too bigger to fail.

Finance Experts: Speculators At Wall Street ‘Casinos’ Continue To Manipulate Prices At The Pump

In Uncategorized on April 5, 2012 at 12:25 pm

Gas Pump PriceOldspeak: “No, high gas prices have NOTHING to do with President Obama. The debate in Washington over cutting oil subsidies is another manufactured issue, diverting attention from the true cause of rising oil and commodities prices; unregulated, unchecked financial speculation and derivatives trading. Coincidentally the cause of the recent crash of the global economic system. Recently passed “financial reform” did nothing to reform this fatally flawed financial system. A simple and totally correctable (stricter regulation) flaw; corporate media, corporate economists,  no one is talking about it. “no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.”- Danny Schechter. The other Ginormous elephant in the room. We’re running out of oil. Tar sands, offshore drilling
its all an indication that the easy to get to oil is gone. The oil we’re consuming now is infinitely harder to process and produce. Speculators are doing what they do best: profiting handsomely from scarcity. Disaster capitalists are having a field day as the people suffer. This is what oligarchy looks like.

Related Stories:

Finance Expert Says Speculators Are Behind High Oil and Gasoline Prices

Unchecked Financial Speculation Drives Oil Price Hikes; Is There A Scam Behind The Rise In Oil And Food Prices?

By Anna Staver @ The Huffington Post: 

Americans are paying for $4-a-gallon gasoline because Wall Street “casinos” have blocked regulators from cracking down on rampant oil speculation, finance experts argued on Capitol Hill Wednesday.

In an effort to counter Republican claims that gas prices are high because the Obama administration does not allow enough drilling, House Democratic leaders staged a hearing featuring former Reagan and Clinton administration oil and trading analysts who blame the surge on speculation.

And the vast profits from that speculation do not go into developing more oil or creating jobs, the analysts argued.

“Your constituents should know that every time they break their heart by buying $4 and maybe soon $5 gasoline, that money isn’t going into production,” said University of Maryland professor Michael Greenberger, who served as director of the division of trading and markets for the Commodity Futures Trading Commission in the Clinton administration. “It’s going into homebuilding in the Hamptons and yacht building.”

And the big finance firms are working overtime to ensure that the speculative commodity keeps flowing, he said.

“They’ve got hundreds of millions of dollars that they are using in lobbying on the Hill” or the Commodity Futures Trading Commission, Greenberger told HuffPost after the session. “Now they are bringing all these lawsuits; they are stopping the action that has already been asked for by Congress to stop the speculation.”

He was referring to suits that seek to limit certain Dodd-Frank financial reforms that, among other things, grant the commission the power to crack down on excessive oil speculation.

Greenberger told the Democratic Steering and Policy Committee that curtailing the speculation — some of which he said was necessary — would cost nothing and would not stop any markets from functioning.

“What are you stopping here? Are you stopping money from going into production? Are you stopping money from [reaching] people creating jobs?” Greenberger asked. “Unless you think casinos — which come to us with names like Goldman Sachs and Morgan Stanley — are job creators, you’re stopping betting. If we’re wrong about this — if everything we’re telling you is incorrect — what will you have done except close a couple of casinos?”

Rep. Xavier Becerra (D-Calif.) pressed Greenberger if there was contradictory evidence when it comes to figuring out whether high gas prices could be cured through increased drilling and domestic oil production.

Greenberger conceded that one or two experts in the country would hold that opinion but said the vast majority in his field believe that Wall Street sets the price of oil.

“Many would like you to believe that this is a supply-demand problem. It’s not,” Greenberger said. “It is excessive speculation, which is a fancy way of saying that gamblers wearing Wall Street suits have taken over and created investment vehicles designed to drive the price of oil up.”

He cited testimony by Goldman Sachs earlier this year asserting that speculation drives up the cost of a barrel of oil by as much as $23.39.

Gene Guildford, a former president of the Maine Oil Dealers Association and a Reagan administration Commerce Department official, estimated that speculation translates into roughly a dollar added to the price of each gallon of gasoline bought by the U.S. consumer. “Instead of spending four dollars, you should have been spending something closer to three dollars for your gallon of gasoline,” he said.

The extra cost to America’s drivers is staggering, Guildford said. “At 11 billion gallons a month that Americans consume, Americans today are paying $10 billion more a month for gasoline today than they did in December.”

Both men urged the committee to fully fund the Commodity Futures Trading Commission and propose legislation in the House aimed at cutting oil speculation to what is required to keep the markets liquid.

Otherwise, it’s just making millionaires richer and middle-class Americans poorer, they and Democrats argued.

“Wall Street speculators are artificially driving up the price at the pump and causing pain to millions of American consumers,” said House Minority Leader Nancy Pelosi (D-Calif.).

How Private For-Profit Online Learning Corporations, Wall Street & “Education Philanthropists” Bought America’s Pubic Schools

In Uncategorized on January 12, 2012 at 1:13 pm

Oldspeak:” The hostile take over of Public Education is full swing. Your kids education is the next “bubble”. Children’s education is being viewed as a cash cow to be milked dry by wall street investment bankers and computer magnates via their “Educational Philanthropies”.  America’s Public School system is being outsourced to private profit-driven “education” corporations, with the financial backing of wall street titans like Goldman Sachs & Merrill Lynch, and computer titans Microsoft & Dell. In a trend that is great for business and terrible for children, teachers are being replaced with computers.  And in this age of austerity, with dwindling educations budgets,  less money to pay high-quality and well-trained flesh and blood teachers, teacher  are being fired and ‘e-learning’ is being held up as a viable option for the existential task of  effectively educating our children. Nevermind the fact that the “education” provided by cyberschool companies is nowhere near as effective as that provided in traditional schools with people. And much like what was done during the sub-prime morgage lending bubble, poor people and communities are being exploited. Subsidies slated for free public education are being diverted to private, for-profit “education”. High-powered lobbyists are being employed to push “education reform” legislation that is in benfits everyone but children. Left unasked are other important questions – Where will children learn their social skills? Their respect for elders and authority figures? How to work and play well with others?  Social Atomization is being institutionalized. Divide and conquer has gone digital.. “Profit Is Paramount” “Ignorance Is Strength”

Related Story:

Why Is Public Education Being Outsourced to Online Charter Schools?

By Lee Fang @ The Nation:

If the national movement to “reform” public education through vouchers, charters and privatization has a laboratory, it is Florida. It was one of the first states to undertake a program of “virtual schools”—charters operated online, with teachers instructing students over the Internet—as well as one of the first to use vouchers to channel taxpayer money to charter schools run by for-profits.

But as recently as last year, the radical change envisioned by school reformers still seemed far off, even there. With some of the movement’s cherished ideas on the table, Florida Republicans, once known for championing extreme education laws, seemed to recoil from the fight. SB 2262, a bill to allow the creation of private virtual charters, vastly expanding the Florida Virtual School program, languished and died in committee. Charlie Crist, then the Republican governor, vetoed a bill to eliminate teacher tenure. The move, seen as a political offering to the teachers unions, disheartened privatization reform advocates. At one point, the GOP’s budget proposal even suggested a cut for state aid going to virtual school programs.

Lamenting this series of defeats, Patricia Levesque, a top adviser to former Governor Jeb Bush, spoke to fellow reformers at a retreat in October 2010. Levesque noted that reform efforts had failed because the opposition had time to organize. Next year, Levesque advised, reformers should “spread” the unions thin “by playing offense” with decoy legislation. Levesque said she planned to sponsor a series of statewide reforms, like allowing taxpayer dollars to go to religious schools by overturning the so-called Blaine Amendment, “even if it doesn’t pass…to keep them busy on that front.” She also advised paycheck protection, a unionbusting scheme, as well as a state-provided insurance program to encourage teachers to leave the union and a transparency law to force teachers unions to show additional information to the public. Needling the labor unions with all these bills, Levesque said, allows certain charter bills to fly “under the radar.”

If Levesque’s blunt advice sounds like that of a veteran lobbyist, that’s because she is one. Levesque runs a Tallahassee-based firm called Meridian Strategies LLC, which lobbies on behalf of a number of education-technology companies. She is a leader of a coalition of government officials, academics and virtual school sector companies pushing new education laws that could benefit them.

But Levesque wasn’t delivering her hardball advice to her lobbying clients. She was giving it to a group of education philanthropists at a conference sponsored by notable charities like the Bill and Melinda Gates Foundation and the Michael and Susan Dell Foundation. Indeed, Levesque serves at the helm of two education charities, the Foundation for Excellence in Education, a national organization, and the Foundation for Florida’s Future, a state-specific nonprofit, both of which are chaired by Jeb Bush. A press release from her national group says that it fights to “advance policies that will create a high quality digital learning environment.”

Despite the clear conflict of interest between her lobbying clients and her philanthropic goals, Levesque and her team have led a quiet but astonishing national transformation. Lobbyists like Levesque have made 2011 the year of virtual education reform, at last achieving sweeping legislative success by combining the financial firepower of their corporate clients with the seeming legitimacy of privatization-minded school-reform think tanks and foundations. Thanks to this synergistic pairing, policies designed to boost the bottom lines of education-technology companies are cast as mere attempts to improve education through technological enhancements, prompting little public debate or opposition. In addition to Florida, twelve states have expanded virtual school programs or online course requirements this year. This legislative juggernaut has coincided with a gold rush of investors clamoring to get a piece of the K-12 education market. It’s big business, and getting bigger: One study estimated that revenues from the K-12 online learning industry will grow by 43 percent between 2010 and 2015, with revenues reaching $24.4 billion.

In Florida, only fourteen months after Crist handed a major victory to teachers unions, a new governor, Rick Scott, signed a radical bill that could have the effect of replacing hundreds of teachers with computer avatars. Scott, a favorite of the Tea Party, appointed Levesque as one of his education advisers. His education law expanded the Florida Virtual School to grades K-5, authorized the spending of public funds on new for-profit virtual schools and created a requirement that all high school students take at least one online course before graduation.

“I’ve never seen it like this in ten years,” remarked Ron Packard, CEO of virtual education powerhouse K12 Inc., on a conference call in February. “It’s almost like someone flipped a switch overnight and so many states now are considering either allowing us to open private virtual schools” or lifting the cap on the number of students who can use vouchers to attend K12 Inc.’s schools. Listening to a K12 Inc. investor call, one could mistake it for a presidential campaign strategy session, as excited analysts read down a list of states and predict future victories.

Good for Business; Kids Not So Much

While most education reform advocates cloak their goals in the rhetoric of “putting children first,” the conceit was less evident at a conference in Scottsdale, Arizona, earlier this year.

Standing at the lectern of Arizona State University’s SkySong conference center in April, investment banker Michael Moe exuded confidence as he kicked off his second annual confab of education startup companies and venture capitalists. A press packet cited reports that rapid changes in education could unlock “immense potential for entrepreneurs.” “This education issue,” Moe declared, “there’s not a bigger problem or bigger opportunity in my estimation.”

Moe has worked for almost fifteen years at converting the K-12 education system into a cash cow for Wall Street. A veteran of Lehman Brothers and Merrill Lynch, he now leads an investment group that specializes in raising money for businesses looking to tap into more than $1 trillion in taxpayer money spent annually on primary education. His consortium of wealth management and consulting firms, called Global Silicon Valley Partners, helped K12 Inc. go public and has advised a number of other education companies in finding capital.

Moe’s conference marked a watershed moment in school privatization. His first “Education Innovation Summit,” held last year, attracted about 370 people and fifty-five presenting companies. This year, his conference hosted more than 560 people and 100 companies, and featured luminaries like former DC Mayor Adrian Fenty and former New York City schools chancellor Joel Klein, now an education executive at News Corporation, a recent high-powered entrant into the for-profit education field. Klein is just one of many former school officials to cash out. Fenty now consults for Rosetta Stone, a language company seeking to expand into the growing K-12 market.

As Moe ticked through the various reasons education is the next big “undercapitalized” sector of the economy, like healthcare in the 1990s, he also read through a list of notable venture investment firms that recently completed deals relating to the education-technology sector, including Sequoia and Benchmark Capital. Kleiner Perkins, a major venture capital firm and one of the first to back Amazon.com and Google, is now investing in education technology, Moe noted.

The press release for Moe’s education summit promised attendees a chance to meet a set of experts who have “cracked the code” in overcoming “systemic resistance to change.” Fenty, still recovering from his loss in the DC Democratic primary, urged attendees to stand up to the teachers union “bully.” Jonathan Hage, CEO of Charter Schools USA, likened the conflict to war, according to a summary posted on the conference website. “There’s an air game,” said Hage, “but there’s also a ground game going on.” “Investors are going to have to support” candidates and “push back against the pushback.” Carlos Watson, a former cable news host now working as an investment banker for Goldman Sachs specializing in for-profit education, guided a conversation dedicated simply to the politics of reform.

Sponsors of the event ranged from various education reform groups funded by hedge-fund managers, like the nonprofit Education Reform Now, to ABS Capital, a private equity firm with a stake in education-technology companies like Teachscape. At smaller breakout sessions, education enterprises made their pitches to potential investors.

Another sponsor, a group called School Choice Week, was launched last year as a public relations gimmick to take advantage of the opportunity for rapid education reforms. Although it is billed as a network of students and parents, School Choice Week is one of the many corporate-funded tactics to press virtual school reforms. The first School Choice Week campaign push earlier this year featured highly produced press packets, sample letters to the editor, a sign in Times Square and rallies for virtual and charter schools organized with help from the Koch brothers’ Americans for Prosperity. The blitz got positive press coverage, providing “grassroots” cover for newly elected politicians who made school privatization their first priority.

A combination of factors has made this year what Moe calls an “inflection point” in the march toward public school privatization. For one thing, recession-induced fiscal crises and austerity have pressured states to cut spending. In some cases, as in Florida, where educating students at the Florida Virtual School costs nearly $2,500 less than at traditional schools, such reform has been sold as a budget fix. At the same time, the privatization push has gone hand in hand with the ratcheting up of attacks on teachers unions by partisan groups, like Karl Rove’s American Crossroads and Americans for Prosperity, seeking to weaken the union-backed Democrats in the 2012 election. All of this has set the stage for education industry lobbyists to achieve an unprecedented expansion in for-profit elementary through high school education.

From Idaho to Indiana to Florida, recently passed laws will radically reshape the face of education in America, shifting the responsibility of teaching generations of Americans to online education businesses, many of which have poor or nonexistent track records. The rush to privatize education will also turn tens of thousands of students into guinea pigs in a national experiment in virtual learning—a relatively new idea that allows for-profit companies to administer public schools completely online, with no brick-and-mortar classrooms or traditional teachers.

* * *

Like many “education entrepreneurs,” Moe remains a player in the education reform movement, pushing policies that have the potential to benefit his clients. In addition to advising prominent politicians like Senator John McCain, Moe is a board member of the Center for Education Reform, a pro-privatization think tank that issues policy papers and ads to influence the debate. Earlier this year, the group dropped $70,000 on an ad campaign in Pennsylvania comparing those who oppose a new measure to expand vouchers to segregationist Alabama Governor George Wallace, who blocked African-American children from entering white schools.

Moe isn’t the only member of the Center for Education Reform with a profound conflict of interest. CER president Jeanne Allen doubles as the head of TAC Public Affairs, a government relations firm that has represented several top education for-profits. Allen, whose clients have included Kaplan Education and Charter Schools USA, served as transition adviser to Pennsylvania Governor Tom Corbett on education reform.

Corbett, a Republican who rode the Tea Party election wave in 2010, supports a major voucher expansion that is working its way through the state legislature. The expansion would be a windfall for companies like K12 Inc., which currently operates one Pennsylvania school under the limited charter law on the books. According to disclosures reported in Business Week, Pennsylvania’s Agora Cyber Charter School—K12 Inc.’s online school, which allows students to take all their courses at home using a computer—generated $31.6 million for K12 Inc. in the past academic year.

Thirteen other states have enacted laws to expand or initiate so-called school choice programs this year. Indiana Governor Mitch Daniels has pushed the hardest, enacting a law that removes the cap on the number of charter schools in his state, authorizes all universities to register charters and expands an existing voucher program in the state for students to attend private and charter schools (in some cases managed by for-profit companies). Critics note that Daniels’s law allows public money to flow to religious institutions as well. Twenty-seven other states, in addition to Pennsylvania, have voucher expansion laws pending. And states like Florida are embracing tech-friendly education reform to require that students take online courses to graduate. In Idaho this November, the state board of education approved a controversial plan to require at least two online courses for graduation.

“We think that’s so important because every student, regardless of what they do after high school, they’ll be learning online,” said Tom Vander Ark, a prominent online education advocate, on a recently distributed video urging the adoption of online course requirements. Vander Ark, a former executive director of education at the influential Bill and Melinda Gates Foundation, now lobbies all over the country for the online course requirement. Like Moe, he keeps one foot in the philanthropic world and another in business. He sits on the board of advisors of Democrats for Education Reform and is partner to an education-tech venture capital company, Learn Capital. Learn Capital counts AdvancePath Academics, which offers online coursework for students at risk of dropping out, as part of its investment portfolio. When Vander Ark touts online course requirements, it is difficult to discern whether he is selling a product that could benefit his investments or genuinely believes in the virtue of the idea.

To be sure, some online programs have potential and are necessary in areas where traditional resources aren’t available. For instance, online AP classes serve rural communities without access to qualified teachers, and there are promising efforts to create programs that adapt to the needs of students with special learning requirements. But by and large, there is no evidence that these technological innovations merit the public resources flowing their way. Indeed, many such programs appear to be failing the students they serve.

A recent study of virtual schools in Pennsylvania conducted by the Center for Research on Education Outcomes at Stanford University revealed that students in online schools performed significantly worse than their traditional counterparts. Another study, from the University of Colorado in December 2010, found that only 30 percent of virtual schools run by for-profit organizations met the minimum progress standards outlined by No Child Left Behind, compared with 54.9 percent of brick-and-mortar schools. For White Hat Management, the politically connected Ohio for-profit operating both traditional and virtual charter schools, the success rate under NCLB was a mere 2 percent, while for schools run by K12 Inc., it was 25 percent. A major review by the Education Department found that policy reforms embracing online courses “lack scientific evidence” of their effectiveness.

“Why are our legislators rushing to jump off the cliff of cyber charter schools when the best available evidence produced by independent analysts show that such schools will be unsuccessful?” asked Ed Fuller, an education researcher at Pennsylvania State University, on his blog.

The frenzy to privatize America’s K-12 education system, under the banner of high-tech progress and cost-saving efficiency, speaks to the stunning success of a public relations and lobbying campaign by industry, particularly tech companies. Because of their campaign spending, education-tech interests are major players in elections. In 2010, K12 Inc. spent lavishly in key races across the country, including a last-minute donation of $25,000 to Idahoans for Choice in Education, a political action committee supporting Tom Luna, a self-styled Tea Party school superintendent running for re-election. Since 2004, K12 Inc. alone has spent nearly $500,000 in state-level direct campaign contributions, according to the National Institute on Money in State Politics. David Brennan, Chairman of White Hat Management, became the second-biggest Ohio GOP donor, with more than $4.2 million in contributions in the past decade.

The Alliance for School Choice, a national education reform group, set up PACs in several states to elect state lawmakers. According to Wisconsin Democracy Campaign, American Federation for Children spent $500,000 in media in the lead-up to Wisconsin’s recall elections. AFC shares leaders, donors, and a street address with ASC. Bill Oberndorf, one of the main donors to the group, had been associated with Voyager Learning, an online education company, for years. A few months ago, Cambium Learning, the parent company of Voyager, paid Oberndorf’s investment firm $4.9 million to buy back Oberndorf’s stock. Cambium currently offers a fleet of supplemental education tools for school districts. With the recent acquisition of Class.com, a smaller online learning business, the company announced its entry into the virtual charter school and online course market.

Allies of the Right

Lobbyists for virtual school companies have also embedded themselves in the conservative infrastructure. The International Association for Online Learning (iNACOL), the trade association for EdisonLearning, Connections Academy, K12 Inc., American Virtual Academy, Apex Learning and other leading virtual education companies, is a case in point. A former Bush appointee at the Education Department, iNACOL president Susan Patrick traverses right-leaning think tanks spreading the gospel of virtual schools. In the past year, she has addressed the Atlas Economic Research Foundation, a group dedicated to setting up laissez-faire nonprofits all over the world, as well as the American Enterprise Institute in Washington.

Two pivotal conservative organizations have helped Patrick in her campaigns for virtual schools: the American Legislative Exchange Council and the State Policy Network. SPN nurtures and establishes state-based policy and communication nonprofits with a right-wing bent. ALEC, the thirty-eight-year-old conservative nonprofit, similarly coordinates a fifty-state strategy for right-wing policy. Special task forces composed of corporate lobbyists and state lawmakers write “template” legislation [see John Nichols, “ALEC Exposed,” August 1/8]. Since 2005, ALEC has offered a template law called “The Virtual Public Schools Act” to introduce online education. Mickey Revenaugh, an executive at virtual-school powerhouse Connections Learning, co-chairs the education policy–writing department of ALEC.

At SPN’s annual conference in Cleveland last year, held two months before the midterm elections, the think tank network adopted a new push for education reform, specifically embracing online technology and expanding vouchers. Patrick opened the event and led a session about virtual schools with Anthony Kim, president of the virtual-school business Education Elements.

SPN has faced accusations before that it is little more than a coin-operated front for corporations. For instance, SPN and its affiliates receive money from polluters, including infamous petrochemical giant Koch Industries, allegedly in exchange for aggressive promotion of climate denial theories. But SPN’s conference had less to do with policy than with tactics. Kyle Olson, a Republican operative infamous in Michigan and other states for his confrontational attacks on unionized teachers, gave a presentation on labor reform in K-12 education. Stanford Swim, heir to a Utah-based investment fortune and head of a traditional-values foundation, ran a workshop at the conference on creating viral videos to advance the cause. He said policy papers wouldn’t work. Tell your scholars, “Sorry, this isn’t a white paper,” Swim advised. “You gotta go there,” he continued, “and it’s because that’s where the audience is.” “If it’s vulgar, so what?” he added.

Since the conference, SPN’s state affiliates have taken a lead role in pushing virtual schools. Several of its state-based affiliates, like the Buckeye Institute in Ohio, set up websites claiming that unions—the only real opposition to ending collective bargaining and the expansion of charter school reforms—led to overpaid teachers and budget deficits. In Wisconsin, the MacIver Institute’s “news crew” laid the groundwork for Governor Walker’s assault on collective bargaining by creating news reports denouncing protesters and promoting the governor. In March, while busting the teachers unions in his state, Walker lifted the cap on virtual schools and removed the program’s income requirements.

State Representative Robin Vos, the Wisconsin state chair for ALEC, sponsored the bill codifying Walker’s radical expansion of online, for-profit schools. Vos’s bill not only lifts the cap but also makes new, for-profit virtual charters easier to establish. As the Center for Media and Democracy, a Madison-based liberal watchdog, notes, the bill closely resembles legislative templates put forward by ALEC.

Although SPN’s unique contribution to the debate has been clever web videos and online smear sites, the group’s affiliates have also continued the traditional approach of policy papers. In Washington State, the Freedom Foundation published “Online Learning 101: A Guide to Virtual Public Education in Washington”; Nebraska’s Platte Institute released “The Vital Need for Virtual Schools in Nebraska”; and the Sutherland Institute, a Utah-based SPN affiliate, equipped lawmakers with a guide called “Thinking Outside the Building: Online Education.” SPN think tanks in Maine, Maryland and other states have pressed virtual school reforms. Patrick visited SPN state groups and gave pep talks about how to sell the issue to lawmakers.

Meanwhile, ALEC has continued to slip laws written by education-tech lobbyists onto the books. In Tennessee, Republican State Representative Harry Brooks didn’t even bother changing the name of ALEC’s Virtual Public Schools Act before introducing it as his own legislation. Asked by the Knoxville News Sentinel’s Tom Humphrey where he got the idea for the bill, Brooks readily admitted that a K12 Inc. lobbyist helped him draft it. Governor Bill Haslam signed Brooks’s bill into law in May. The statute allows parents to apply nearly every dollar the state typically spends per pupil, almost $6,000 in most areas, to virtual charter schools, as long as they are authorized by the state.

SPN’s fall 2010 conference featured the man perhaps happiest with the explosion in virtual education: Jeb Bush. “I have a confession to make,” he said with grin. “I am a real policy geek, and this is like the epicenter of geekdom.” Bush shared his experiences initiating some of the nation’s first for-profit and virtual charter school reforms as the governor of Florida, acknowledging his policy ideas came from some in the room. (The local SPN affiliate in Tallahassee is the James Madison Institute.)

Bush: Man Behind the Virtual Curtain

Jeb Bush campaigned vigorously in 2010 to expand such reforms, with tremendous success. About a month after the election, he unveiled his road map for implementing a far-reaching ten-point agenda for virtual schools and online coursework. Former West Virginia Governor Bob Wise, a Democrat, has barnstormed the country to encourage lawmakers to adopt Bush’s plan, which calls for the permanent financing of education-technology reforms, among other changes. In one promotional video, Wise says it is “not only about the content” of the online courses but the “process” of students becoming acquainted with learning on the Internet.

The key pillar of Bush’s plan is to make sure virtual education isn’t just a new option for taxpayer money but a requirement. And several states, like Florida, have already adopted online course requirements. As Idaho Republicans faced a public referendum on their online course requirement rule last summer, Bush arrived in the state to show his support. “Implemented right, you’re going to see rising student achievement,” said Bush, praising Idaho Governor Butch Otter and school superintendent Tom Luna, who was elected with campaign donations from the online-education industry. Bush also claimed that making high school students take online classes would “put Idaho on the map” as a “digital revolution takes hold.” Bush was in Michigan in June to testify for Governor Rick Snyder’s suite of education reform ideas, which include uncapped expansion of virtual schools, and he was back in the state in July to continue to press for reforms.

In August, at ALEC’s annual conference in New Orleans, the education task force officially adopted Bush’s ten elements agenda. Mickey Revenaugh, the virtual school executive overseeing the committee, presided over the vote endorsing the measure. But when does Bush’s advocacy, typically reported in the press as the work of a former governor with education experience advising the new crop of Republicans, cross the threshold into corporate lobbying?

The nonprofit behind this digital push, Bush’s Foundation for Excellence in Education, is funded by online learning companies: K12 Inc., Pearson (which recently bought Connections Education), Apex Learning (a for-profit online education company launched by Microsoft co-founder Paul Allen), Microsoft and McGraw-Hill Education among others. The advisory board for Bush’s ten digital elements agenda reads like a Who’s Who of education-technology executives, reformers, bureaucrats and lobbyists, including Michael Stanton, senior vice president for corporate affairs at Blackboard; Karen Cator, director of technology for the Education Department; Jaime Casap, a Google executive in charge of business development for the company’s K-12 division; Shafeen Charania, who until recently served as marketing director of Microsoft’s education products department; and Bob Moore, a Dell executive in charge of “facilitating growth” of the computer company’s K-12 education practice.

Like other digital reform advocates, the Bush nonprofit is also supported by Microsoft founder Bill Gates’s foundation. The fact that a nonprofit that receives funding from both the Gates Foundation and Microsoft pressures states to adopt for-profit education reforms may raise red flags with some in the philanthropy community, as Microsoft, too, has moved into the education field. The company has tapped into the K-12 privatization expansion by supplying a range of products, from traditional Windows programs to servers and online coursework platforms. It also contracts with Florida Virtual School to provide cloud computer solutions. Similarly, Dell is seeking new opportunities in the K-12 market for its range of desktop products, while the Michael and Susan Dell Foundation, the charitable nonprofit founded by Dell’s CEO, promotes neoliberal education reforms.

Through Bush, education-technology companies have found a shortcut to encourage states to adopt e-learning reforms. Take his yearly National Summit on Education Reform, sponsored by the Foundation for Excellence in Education.

At the most recent summit, held in San Francisco in mid-October, a group of more than 200 state legislators and state education department officials huddled in a ballroom over education-technology strategy. Rich Crandall, a state senator from Arizona, said to hearty applause that he had developed a local think tank to support the virtual school reforms he helped usher into law. Toward the end of the discussion, Vander Ark, acting as an emcee, walked around the room acknowledging lawmakers who had recently passed pro–education tech laws this year. He handed the microphone to Kelli Stargel, a state representative from Florida, who stood up and boasted of creating “virtual charter schools, so we can have innovation in our state.”

Throughout the day, lawmakers mingled with education-technology lobbyists from leading firms, like Apex Learning and K12 Inc. Some of the distance learning reforms were taught in breakout sessions, like one called “Don’t Let a Financial Crisis Go to Waste,” an hourlong event that encouraged lawmakers to use virtual schools as a budget-cutting measure. Mandy Clark, a staffer with Bush’s foundation, walked around handing out business cards, offering to e-mail sample legislation to legislators.

The lobbying was evident to anyone there. But for some of those present, Bush didn’t go far enough. David Byer, a senior manager with Apple in charge of developing education business for the company, groaned and leaned over to another attendee sitting at the edge of the room after a lunch session. “You have this many people together, why can’t you say, ‘Here are the ten elements, here are some sample bills’?” said Byer to David Stevenson, who nodded in agreement. Stevenson is a vice president of News Corporation’s education subsidiary, Wireless Generation, an education-technology firm that specializes in assessment tools. It was just a year ago that News Corp. announced its intention to enter the for-profit K-12 education industry, which Rupert Murdoch called “a $500 billion sector in the US alone that is waiting desperately to be transformed.”

As attendees stood up to leave the hall, the phalanx of lobbyists surrounding the room converged, buttonholing legislators and school officials. On a floor above the main hall, an expo center had been set up, with companies like McGraw-Hill, Connections Academy, K12 Inc., proud sponsors of the event, providing information on how to work with politicians to make education technology a reality.

Patricia Levesque, a Bush staffer speaking at the summit and the former governor’s right hand when it comes to education reform, does not draw a direct salary from Bush’s nonprofit despite the fact that she is listed as its executive director, and tax disclosures show that she spends about fifty hours a week at the organization. Instead, her lobbying firm, Meridian Strategies, supplies her income. The Foundation for Florida’s Future, another Bush nonprofit, contracts with Meridian, as do online technology companies like IQ-ity Innovation, which paid her up to $20,000 for lobbying services at the beginning of this year. The unorthodox arrangement allows donors to Bush’s group to avoid registering actual lobbyists while using operatives like Levesque to influence legislators and governors on education technology.

Levesque’s contract with IQ-ity raises questions about Bush’s foundation work. As Mother Jones recently reported, the founder of IQ-ity, William Lager, also founded an education company with a poor track record. Lager’s other education firm, Electronic Classroom of Tomorrow, is the largest provider of virtual schools in Ohio. ECOT schools have consistently underperformed; though the company serves more than 10,000 children, its graduation rate has never broken 40 percent. The company was fined for billing the state to serve more than 2,000 students in one month, when only seven children logged on during the same time period. Nevertheless, after Levesque spent at least two years as a registered lobbyist for Lager’s firm, Bush traveled to Ohio to give the commencement speech for ECOT. “ECOT proves a glimpse into what’s possible,” Bush said with pride, “by harnessing the power of technology.”

* * *

Levesque is no ordinary lobbyist. She is credited with encouraging the type of bare-knuckle politics now common in the wider education-reform movement. In an audio file obtained by The Nation, she and infamous anti-union consultant Richard Berman outlined a strategy in October 2010 for sweeping the nation with education reforms. The two spoke at the Philanthropy Roundtable, a get-together of major right-wing foundations. Lori Fey, a representative of the Michael Dell Foundation, moderated the panel discussion.

Rather than “intellectualize ourselves into the [education reform] debate…is there a way that we can get into it at an emotional level?” Berman asked. “Emotions will stay with people longer than concepts.” He then answered his own question: “We need to hit on fear and anger. Because fear and anger stays with people longer. And how you get the fear and anger is by reframing the problem.” Berman’s glossy ads, which have run in Washington, DC, and New Jersey, portray teachers unions as schoolyard bullies. One spot even seems to compare teachers to child abusers. Although Berman does not reveal his donors, he made clear in his talk that the foundations in the room were supporting his campaign.

Levesque ended the strategy discussion with a larger strategic question. She pointed to the example of Facebook founder Mark Zuckerberg donating $100 million to Newark schools. She then asked the crowd to imagine instead raising $100 million for political races where we “could sway a couple of seats to have more education reform.” “Just shifting a little bit of your focus,” she added, noting that new politicians could have a greater impact.

Levesque’s ask has become reality. According to author Steven Brill, ex–DC school chancellor Michelle Rhee’s new group, StudentsFirst, raised $100 million within a few months of Levesque’s remarks. Rhee’s donors include Rupert Murdoch, philanthropist Eli Broad and Home Depot founder Ken Langone. Rhee’s group has pledged to spend more than $1 billion to bring for-profit schools, including virtual education, to the entire country by electing reform-friendly candidates and hiring top-notch state lobbyists.

A day before he opened his education reform conference to the media recently, Bush hosted another education meeting. This event, a private affair in the Palace Hotel, was a reconvening of investors and strategists to plan the next leg of the privatization campaign. Michael Moe, Susan Patrick, Tom Vander Ark and other major players were invited. I waited outside the event, trying to get what information I could. I asked Mayor Fenty how I could get in. “Just crash in, come on in,” he laughed, adding, “so what company are you with?” When he learned that I was a reporter, he shook his head. “Oh, nah, you’re not welcome, then.”

An invitation had billed the exclusive gathering as a chance for “philanthropists and venture capitalists” to figure out how to “leverage each other’s strengths”—a concise way to describe how for-profit virtual school companies are using philanthropy as a Trojan horse.

Goldman Sachs Threatens Legal Action, Withdraws Pledged TARP Funds To Lower East Side People’s Federal Credit Union; Occupy Wall Street’s Bank

In Uncategorized on October 25, 2011 at 2:26 pm

Oldspeak:”Some of the biggest members of the Transnational Corporate Network’s International Banking Cartel are using their vast resources as a political weapon to attack small low-income community banks that support and do business with Occupy Wall Street. And the resources they’re withholding are taxpayer bailout funds they’re mandated to use for community reinvestment.  So they’re retaliating against the people protesting their practices by withholding money, PUBLIC MONEY (the peoples money they took to remain ‘solvent’), that is owed.  “You’ve had basically Goldman has started a kind of run on low-income banks that will associate with Occupy Wall Street. This is a dangerous use of public money. I’ve got to emphasize this: it’s TARP money, that is bailout money that we gave these banks in 2008. They were required, as part of the deal—in Goldman Sachs’ case, explicit—that they give back some of the money to low-income communities and reinvest there. It’s our money. It’s not a donation. And this is just little bits. And they’re withholding these payments. I haven’t seen Goldman put out—they’ve put out less than half a cent on the dollar we gave them, the lowest of any bank. But they are setting a—they’re basically setting a course that all of the other banks are now following, saying, “Hey, you want our money? You have to clear your political positions with us at the big banks.” This is a very dangerous new business.” –Greg Pallast Corporatocracy in action. Only an organization with no fear of reprisal could conceive of so blatantly disregarding actions its been lawfully ordered to carry out. Predictably, very coverage of this in corporate media, and the little there is distorted and inaccurate. If you’ll notice there is no mention of the fact the Goldman is witholding taxpayer money they’ve been ordered to pay. It’s referred to as their money in the wall st. journal article below.” “Ignorance Is Strength

Related Video:

Greg Palast: ‘Goldman Sachs vs. Occupy Wall Street’

Related Story:

Goldman Sachs Sends Its Regrets to This Awkward Dinner Invitation

By Greg Palast @ Democracy Now:

Guest:

Greg Palast, investigative reporter with the BBC and author of the books Armed Madhouse and The Best Democracy Money Can Buy. His next book, out in November, is calledVultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores.

AMY GOODMAN: We turn now to a controversy in the banking community around the Occupy Wall Street movement. Recently, the financial giant Goldman Sachs pulled out of a fundraiser for a small Lower East Side bank that caters to poor people after it learned the event was honoring the protesters at Occupy Wall Street. The investment bank withdrew its name from the fundraiser and also canceled a $5,000 pledge.

But did Goldman Sachs actually use U.S. taxpayer bailout money to attack Occupy Wall Street’s not-for-profit community bank? Investigative reporter Greg Palast filed this report from Wall Street.

GREG PALAST: Downtown New York, near Wall Street, these are the towers of Goldman Sachs, the mega-bank. With over $933 billion in assets, nearly a trillion dollars, Goldman has declared war on one of the smallest banks in New York City.

The story begins here at Occupy Wall Street. It all started here, with these buckets. Unexpectedly, the donation buckets were filling up with thousands of dollars in cash, and the anti-bank protesters suddenly needed a bank.

BOBBY “BAILOUT”: We basically started out here just thinking we were going to a protest, and maybe some people would come out. Then, very soon, we were collecting large amounts of donations, and we were in way over our head.

GREG PALAST: Occupy Wall Street chose to bring their bucket of bills to the nearby Latino neighborhood. This is New York’s Lower East Side, and this is the not-for-profit community bank, Lower East Side People’s Federal Credit Union.

Inside, the bank was serving lines of residents from housing projects, bodega owners, other locals, most of whom had been refused service by the big commercial banks. In their cramped back office, the only space to speak with the bank’s leader was inside their vault.

DEYANIRA DEL RIO: So this is our old-fashioned safety deposit boxes that many of our members still use.

GREG PALAST: People’s Credit Union chairwoman, Deyanira Del Rio.

DEYANIRA DEL RIO: So, our membership is 80 percent low income, approximately, and we also have about, I would say, 65 percent or so of our members are Latino.

GREG PALAST: What makes you different—

DEYANIRA DEL RIO: Right.

GREG PALAST: —from Capital One or Goldman Sachs—

DEYANIRA DEL RIO: Yeah.

GREG PALAST: —or any of the other big, giant banks?

DEYANIRA DEL RIO: We started off when the last bank branch in a hundred-block radius of the neighborhood was closing its doors. And community residents came together to initially protest the closure of that bank, and ultimately did something very different, which was start their own institution, an alternative to the mainstream bank.

GREG PALAST: They’re holding a dinner next week, and they’ve announced they’re honoring their new big member owner, Occupy Wall Street, to celebrate Occupy’s call for its supporters to move their money out of big banks to people’s and other community banks.

UNDERCOVER POLICE OFFICER: You were inside with everybody else.

CUSTOMER: I’m a customer. I’m a customer.

WITNESS 1: She is a customer.

CUSTOMER: I’m a customer.

UNDERCOVER POLICE OFFICER: You were inside. Yes, but you were inside with the whole—no, no, no.

WITNESS 2: What are you doing?

WITNESS 1: Hey, what the—hey!

WITNESS 3: What are you doing? What are you doing? What are you doing?

GREG PALAST: Twenty-three protesters protesters were arrested at a branch of Citibank following the call to move their money.

WITNESS 3: Oh, my god! This is wrong! This is wrong! This is wrong! What you’re doing is wrong! This is wrong!

GREG PALAST: And Goldman Sachs, which had donated $5,000 to the credit union, threatened legal action over the little bank’s honoring Occupy Wall Street. When the credit union refused to back down, Goldman took back its $5,000. The credit union members we spoke with backed their little bank.

LYLE WALFORD: I mean, it was a courageous thing to do. It’s their saying, that “We have members who are part of us. We are part of the community. We are people-oriented. We are the people’s institution, not the money’s institution.” So, yes, I think it was a great thing for them to do.

GREG PALAST: We waited all day and night for an answer to our calls to Goldman.

Were you trying to threaten the credit union for its support for Occupy Wall Street? We’re waiting outside your building.

Back at the Wall Street occupation, a street performer showed Goldman’s system of the old give-and-grab-back.

STREET PERFORMER: There you go, buddy!

GREG PALAST: Thank you.

STREET PERFORMER: For your boys. All right, all right, take care. Make sure you spend it the right way. Adios. Excuse me, I want my money back, please. Give me back my money!

GREG PALAST: Oh, no!

STREET PERFORMER: Give me back my money!

GREG PALAST: From the Occupied territory, Wall Street, New York, this is Greg Palast for Democracy Now!, news for the 99 percent.

AMY GOODMAN: Greg Palast, investigative reporter with the BBC, author a number of books, including Armed MadhouseThe Best Democracy Money Can Buy. His new book, out in November, is called Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores. We are joined by Greg Palast right now.

Continue to explain what exactly happened.

GREG PALAST: It’s not about $5,000 donation. First of all, it’s not a donation. The issue is about a multi-billion-dollar battle over TARP money and the finance community. Back in 2008, Goldman Sachs, which is an investment bank—that meant that all their losses were there—was turned into a commercial bank, within 24 hours, so they could qualify for $10 billion in bailout funds. But as part of the deal—as part of the deal, Amy—

AMY GOODMAN: And explain commercial bank.

GREG PALAST: OK, commercial bank is the types where you put in your savings, and we, the taxpayers, and the government guarantees the profits, or guarantees the solvency of that bank. So, for Goldman to get into the $10 billion—to get their $10 billion check for bailout, they had to become—go from a gambling house, an investment bank, into a nice commercial bank. But they had to agree that they would then be subject to what’s called the Community Reinvestment Act and return some of that money, a chunk of it—most banks put in a billion dollars—return a chunk of it back into low-income communities. Well, Goldman doesn’t have any branches, so they gave money to the designated low-income bank of New York, Lower East Side People’s Federal Credit Union, and—but they’ve been giving out the money in eyedroppers, like this $5,000. Now remember, it’s not a donation. It’s a required payment under the law that they got in return for our $10 billion, OK? So it’s not a donation. This is mischaracterized. It’s a payment required by law, with an eyedropper.

But what they are doing is starting off something very dangerous and new, which is to say—there are literally tens of billions of dollars in these funds for community reinvestment, boosted by the bailout funds. They see this as a political weapon, as a hammer to control the political discussion. These community development credit unions have been joining the Occupy Wall Street movement nationwide. It’s about moving your money from the big banks to the small banks. And they’re not worried about losing little deposits. What they are worried about is losing political control of the discussion. Right now, people like Paul Volcker are calling for removing the rights of banks like Goldman, now a commercial bank, to stay in the gambling trading business. Well, Goldman is very much afraid of that. So the Occupy Wall Street movement has put back on the table these issues of bank deregulation, these issues of community reinvestment.

And Goldman, I think they’re actually quite smart. They figured out, “Well, we’ve got—there’s like a hundred billion dollars on the table here. Why don’t we start saying, ’You’re not going to get any of it unless you dance to our tune?’” And I have to tell you, from inside, it wasn’t minor. It wasn’t just, “Oh, take—give us back our donation money.” It was legal threats saying, if you—you cannot—if you’re going to get our money, you may not back Occupy Wall Street and the “move your money” movement, without getting approval from us at Goldman Sachs. That’s a whole new business. So, it’s very dangerous, because it involves billions of dollars in public money. It’s not Goldman’s money. It’s our money. And that’s what they’re doing with it.

AMY GOODMAN: And explain the significance of this credit union.

GREG PALAST: Well, the Lower East Side People’s Federal Credit Union, and I—listen, my ex is the CEO, and so I hope she’s not mad at me doing this report. But I’ve got to tell you, Lower East Side People’s Federal Credit Union has been designated by federal charter to be the bank for all New Yorkers of low income, if you own—if you earn less than $38,000 or work or live on the Lower East Side. What’s happened is, is that the big banks give Lower East Side a few dollars and then send all the poor people to that bank. You walk in poor, you say, “I’m in a housing project and on public assistance,” “Oh, go down to Lower East Side.” So they dump the poor there. They can’t even open bank accounts, let alone get loans at these big banks. So it’s a dumping ground so that the—it’s a brilliant bank. It does very well, and it serves all the entire poor community of New York. It’s got branches in Harlem.

But what the banks now want to do is say, as this bank is growing not only as an economic force, but a political force, in the low-income communities in New York, and they are being used as the model nationwide, they are taking a political stance, saying, “We honor Occupy Wall Street, because we are against people putting their money in these commercial banks. It’s time that banking become for the people, not for the money.” And that message is a no-go with the banking community.

So it’s not, by the way, just Goldman Sachs. Capital One said, “Take our name off.” You’ve had basically Goldman has started a kind of run on low-income banks that will associate with Occupy Wall Street. This is a dangerous use of public money. I’ve got to emphasize this: it’s TARP money, that is bailout money that we gave these banks in 2008. They were required, as part of the deal—in Goldman Sachs’ case, explicit—that they give back some of the money to low-income communities and reinvest there. It’s our money. It’s not a donation. And this is just little bits. And they’re withholding these payments. I haven’t seen Goldman put out—they’ve put out less than half a cent on the dollar we gave them, the lowest of any bank. But they are setting a—they’re basically setting a course that all of the other banks are now following, saying, “Hey, you want our money? You have to clear your political positions with us at the big banks.” This is a very dangerous new business. And I hope that with this report here on Democracy Now!, that the regulators are going to step in and say, “No, no. This is not your money. This is our money. This is not a political weapon.” It’s a very dangerous new thing that the banks are doing.

AMY GOODMAN: You tried to speak to Goldman Sachs.

GREG PALAST: Boy, we tried to speak to Goldman. We actually staked them out, if you saw me at night in front of their big office buildings just outside Wall Street on the West Side Highway. So we’ve tried. They won’t speak to us, at all. They certainly won’t speak to Democracy Now! They gave a good spin of a little story that went on the front page of the Wall Street Journal about, “Oh, this little credit union, they were slapping us around by taking our money and then backing Occupy Wall Street.” It’s not about that. It’s about the billions of dollars at stake with community reinvestment funds, out of the bailout money, and who has political control.

AMY GOODMAN: You’re not just a journalist, Greg. You started off in finance. You got your degree in finance.

GREG PALAST: Yeah, believe it or not. I was a protégé of a little guy named Milton Friedman. Pretty strange stuff. Yeah, and I was—

AMY GOODMAN: University of Chicago.

GREG PALAST: And before I was a journalist, as an investigative journalist, I was actually an investigator. And then I said, no one is putting out the news of the real stories, so maybe I’ll do something for U.S. news, and ended up having to leave the country, work for BBC.

AMY GOODMAN: So, what do you think has to happen right now?

GREG PALAST: What has to happen right now is that the regulators in the Obama administration, the Federal Reserve Board, has to step in and tell Goldman, “No, it’s not your money. You may not use the community reinvestment funds as a political hammer to beat up the small community groups, credit unions, community banks, to which you’re giving this money.” It’s a very dangerous thing to be saying, “We’re going to be giving out money based on your political positions and based on whether you are telling people that the banking system has to change,” because community banks like Lower East Side People’s Federal Credit Union are taking the position that the commercial banking system is rotten and should be replaced by a people’s banking system. So it’s not just—they don’t want to be the little safety valve, “Just send us your poor people.” They want to replace the banking system. And believe me, Goldman, and the other banks following them, don’t want to hear that message.

AMY GOODMAN: Greg Palast, I want to thank you for being with us. We will continue to talk to you. His new book coming out just in a few weeks is called Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores. Thank you very much.

Report: Wall Street To Slash 10,000 Jobs By End Of 2012 As Thousands Continue To Protest Against Corporate Greed

In Uncategorized on October 12, 2011 at 1:00 pm

Oldspeak: “Wall Street is the 99%. In a case of chickens coming home to roost, a pothole was reported on Wall Street today with the prediction that 10,000 people working in the city’s securities industry will lose their jobs. In a report released Tuesday, Comptroller Thomas P. DiNapoli also said bonuses are likely to shrink this year, reflecting lower profits on Wall Street. But it is not all bad news. The report revealed the average salary in the industry jumped by 16.1 per cent last year to $361,330. This is in comparison to an average salary of $66,120 in the private sector.”

Related Story:

Wall Street Job Losses Are Seen Hitting 10,000

By Lee Moran @ The U.K. Daily Mail:

New York’s financial sector has been hit by a further setback – with the prediction that 10,000 people working in the city’s securities industry will lose their jobs.

The announcement, forecast for 2012, will mean a staggering 32,000 people in the city’s industry would have lost their jobs since January 2008.

But it may come as good news for the Occupy Wall Street movement – which has taken over the city’s Zuccotti Park to protest against corporate greed.

Set back: Another 10,000 jobs are set to be lost in New York's securities industrySet back: Another 10,000 jobs are set to be lost in New York’s securities industry (file picture)

The news will pile even further pressure on New York’s battered economy, which is struggling to cope with the fall out from the European debt debacle and turbulence in the financial markets.

New York State Comptroller Thomas DiNapoli said in his 2011 statement: ‘The securities industry had a strong start to 2011.

‘But its prospects have cooled considerably for the second half of this year. It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year.

‘These developments will have a rippling effect through the economy and adversely impact State and City tax collections.’

He said the securities industry had lost 4,100 jobs in August, wiping out many of the 9,900 job gains between January 2010 and April 2011.

According to the report, by the Office of the State Comptroller, securities-related activities accounted for one in eight jobs in the city.

Solidarity: Singer Kanye West joined with demonstrators at the Occupy Wall Street movement - which is drawing attention to corporate greed and corruptionSolidarity: Singer Kanye West joined with demonstrators at the Occupy Wall Street movement – which is drawing attention to corporate greed and corruption 

It also represented 14 per cent of New York State’s tax revenues and nearly 7 per cent of New York City’s.

The report also said that each job gained or lost in the industry leads to the creation or loss of almost two additional jobs in other industries in New York City.

Mr DiNapoli added: ‘As we know, when Wall Street slows, New York City and New York State’s budgets feel the impact and that is a concern.’

A slew of financial services companies have disclosed plans to cut jobs in recent months, including Goldman Sachs, Bank of America, HSBC and Barclays.

Investment banks are forecasted to report big declines in third-quarter earnings in the coming weeks due to big trading losses in the financial markets.

Profits for member firms of the New York Stock Exchange are seen tumbling to $18 billion in 2011, marking a one-third decline from the year before.

 

Timing: The Occupy Wall Street movement may take comfort in news of the job lossesTiming: The Occupy Wall Street movement may take comfort in news of the job losses

The OSC said the expected new job cuts are due to the current debt crisis in Europe, the ‘sluggish’ domestic economy, turbulence in the stock markets and regulatory changes aimed at forcing banks to be less risky.

Like many analysts, the OSC said cash bonuses are expected to shrink this year, marking the second-straight year of declines.

But it is not all bad news. The report revealed the average salary in the industry jumped by 16.1 per cent last year to $361,330.

This is in comparison to an average salary of $66,120 in the private sector.

The protests against the state of the U.S. political and economic systems, which started with a handful of people, have now spread to more than 25 cities – from Sacramento to Seattle, Anchorage to Atlanta and Mobile to Minneapolis.

New York City Mayor Michael Bloomberg said he will allow Occupy Wall Street protesters to stay indefinitely at their Manhattan village – but suggested some have only camped out there because of the warm weather.

He also said demonstrators will only be allowed to stay in Zuccotti Park as long as they obey the laws.

Goldman Sachs, Citibank, JP Morgan Chase, Bank Of America Have Assets of $5 trillion & Carry $235 TRILLION In Risk Exposure, 1/3 Of World Total

In Uncategorized on October 4, 2011 at 5:17 pm


Oldspeak
:”With Megabanks carrying 50 to 1 leverage on a hundreds of trillions dollar sized largely unregulated and non-public OTC derivatives market, the next collapse of the global economic system is not a matter of if, but when. “OTC derivatives are an unregulated dark pool of money with no public market.  These are basically debt bets between two entities on things such as credit risk, currencies, interest rates and commodities.  According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.)  As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding!” –Greg Hunter It’s going to be really interesting to see what happens when this gargantuan house of cards falls down. I’ll bet quite a few more people will be for occupying wall street then.”

By Greg Hunter @ USAWatchdog.com :

I keep hammering away at the fact the Fed doled out $16 trillion in the wake of the credit crisis of 2008.  This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year.  Domestic banks and companies got the money, right along with foreign banks and companies.  In effect, the Federal Reserve bailed out the world financial system.  Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt.  If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?”  The simple answer is it wasn’t enough money.

The Bank of International Settlements pegs the total world over-the-counter (OTC) derivative exposure at around $600 trillion, but many experts say the real figure is more than twice that amount.  No matter which figure you use, it is a gargantuan sum.  OTC derivatives are an unregulated dark pool of money with no public market.  These are basically debt bets between two entities on things such as credit risk, currencies, interest rates and commodities.  According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.)  As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding!  The banks are listed below in order of size and approximate OTC exposure:

1.)     JP MORGAN CHASE BANK NA OH

$78.1 trillion OTC derivatives

2.)    CITIBANK NATIONAL ASSN

$56.1 trillion OTC derivatives

3.)    BANK OF AMERICA NA NC

$53.15 trillion OTC derivatives

4.)    GOLDMAN SACHS BANK USA NY

$47.7 trillion OTC derivatives

Considering that the total assets of these four banks are a little more than $5 trillion, I see a frightening amount of risk with a total derivative exposure of $235 trillion!  This is nearly 50 to 1 leverage.  On top of that, assets such as real estate or mortgage-backed securities can be held on the books at whatever value the banks think they can sell them for in the future.  I call this government sanctioned accounting fraud, or mark to fantasy accounting.  Who knows what the true value of the banks “assets” really are.

I am sure the banks would say that the net exposure is really not near that great because the banks have hedged their bets.  The banks will probably say, by and large, these debt bets will cancel out or back up one another.  It is known in the banking world as “bilateral netting.”  A recent article in Zerohedge.com explained the enormous risk by saying, “The best example of how the flaw behind bilateral netting almost destroyed the system is AIG: the insurance company was hours away from making trillions of derivative contracts worthless if it were to implode, leaving all those who had bought protection from the firm worthless, a contingency only Goldman hedged by buying protection on AIG. And while the argument can further be extended that in bankruptcy a perfectly netted bankrupt entity would make someone else whole on claims they have written, this is not true, as the bankrupt estate will pursue 100 cent recovery on its claims even under Chapter 11, while claims the estate had written end up as General Unsecured Claims which as Lehman has demonstrated will collect 20 cents on the dollar if they are lucky.”(Click here to read the complete Zerohedge.com story.) 

The global economy is still in trouble.  Everyone is focusing on Europe because the sovereign debt crisis there is likely to cause the European Union to break apart and kill the Euro.  The Head of UniCredit global securities, Attila Szalay-Berzeviczy said recently, “The euro is beyond rescue . . . . “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits . . . . A Greek default will trigger an immediate “magnitude 10” earthquake across Europe.” (Click here for more on that story.)  If the EU goes under, do not expect all the highly leveraged U.S. banks to walk away unscathed.  They will need another bailout to stay afloat.

You must remember the U.S. still is at the epicenter of the ongoing credit crisis.  At the moment, America looks like it is in better shape than Europe, but that will not last.  According to the latest report from John Williams of Shadowstats.com“The root source of current global systemic instabilities largely has been the financially-dominant United States, and it is against the U.S. dollar that the global markets ultimately should turn, massively.  The Fed and the U.S. Treasury likely will do whatever has to be done to prevent a euro-area crisis from triggering a systemic collapse in the United States.  Accordingly, it is not from a euro-related crisis, but rather from within the U.S. financial system and financial-authority actions that an eventual U.S. systemic failure likely will be triggered, seen initially in a rapidly accelerating pace of domestic inflation—ultimately hyperinflation.” 

Sure, the dollar may gain in value for a while in absence of the Euro as a competing currency, but, ultimately, the dollar too will crash, right along with a few very big banks.

BBC Speechless As Trader Tells The Truth: “Governments Don’t Rule The World, Goldman Sachs Rules The World.”

In Uncategorized on September 27, 2011 at 8:03 pm

Oldspeak:”The collapse is coming…The market is toast, the stock market is finishedThe savings of millions of people is going to vanish….This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late. –Alessio Rastani. In a moment of utter candor, we glimpse a sliver or reality than very few publicly acknowledge. While this man is in all probability a sociopath, he’s articulating an elusive truth. Making incessant changes around the edges of a fatally flawed monetary system will do nothing to change or improve it. It will just postpone its inevitable collapse. This man and many like him would like nothing better than to see a full-fledged global depression. So they can profit from it. These are the people who control governments, topple them, build them up, manipulate them with hidden in plain sight financial terrorism. These amoral, anti-humanistic, ‘happiness machines’ care very little about people. They trade ‘commodities’ like food, energy, water, and farmland, with little regard for the devastatingly real life impacts their digitized keystrokes have on the lives of billions of human beings. This is why people are camped out on Wall Street. As Mr. Rastini says, their job is to make money. The rest of us, can get on board with their nihilistic, sociopathic worldview, or get fucked. “Profit Is Paramount.”

Madison Ruppert @ Activist Post:

In a surprisingly blunt interview aired on the BBC, an independent trader admits that he “dreams of another recession” since some people can prepare and treat a market crash as an opportunity to “make a lot of money from this.”

What exactly is “this”? Well, according to Alessio Rastani, “this” is the inevitable crash in the markets that is headed our way. Rastani, an independent trader, does not treat the crash of the Euro and the stock market as a possibility. He treats it as an inevitability.

He pulls no punches in this interview and it is clear that the BBC presenter is shocked by what he has to say.  When asked what would keep investors happy and mitigate the economic crisis currently unfolding, Rastani reveals, “Personally, it doesn’t matter. See, I’m a trader. Uh, I don’t really care about that kind of stuff.”

He continues, “If I see an opportunity to make money, I go with that. So, for mosttraders, it’s not about… we don’t really care that much how they’re going to fix the economy, how they’re going to fix the, uh, the whole situation. Our job is to make money from it.”

I’ve never heard a trader come right out on mainstream media and lay it out in such a plain way.

Indeed he is correct, a traders job is to make money. Period. A trader need not worry about what will be done to fix an economic crash because as long as they are making money, they couldn’t care less.

This is something that the mainstream media likes to pretend is not the case, as though investors actually have an interest in keeping the stock market and the global economy afloat. This is simply untrue as Rastani reveals.

Traders and investors are just like corporations, they are only interested in the bottom line. If this means profiting off of an economic downturn while their neighbors are foreclosed on and their entire nation is robbed blind then so be it. As long as the cash keeps coming in, who cares?

Speaking of the current global economic meltdown unfolding around us, Rastani says, “I’ve been dreaming of this one for three years.”

He also reveals the mindset of many a trader in saying, “I go to bed every night, I dream of another recession. I dream of another moment like this.”

He then gives the example of the market crash of the 1930s which was not only a market crash, but an opportunity for some people to make a lot of money.

After his frank statements the presenter says, “If you could see the people around me, jaws have collectively dropped at what you’ve just said.” I guess she wasn’t expecting him to tell the truth.

She says, “We appreciate your candor, however it doesn’t help the rest of us, the rest of the Eurozone.”

Rastani then likens the economic crisis to a cancer, telling us that if we wait and wait, it will be too late.

He recommends that everyone prepare while also saying that this is not a time for wishful thinking, hoping for government to ride in like a white knight and save the day.

Then he drops the biggest bombshell of the entire interview.

In a statement that likely sent BBC producers into a frenzy, Rastani stated, “The governments don’t rule the world, Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package, neither does the big funds.”

He gives the average person a bit of hope in saying that it isn’t just traders and investors that can make money off of an economic downturn.

Rastani says that average people need to learn how to make money from a downward market. The first thing people need to do is protect their assets, what they already have.

Rastani concludes with this grim projection, “In less than 12 months, my prediction is, the savings of millions of people is going to vanish. And this is just the beginning.”

He continues, “I would say, be prepared and act now. The biggest risk people can take right now is not acting.”

You can find Alessio Rastani on Facebook here.

Update: Some are saying this was a Yes Men hoax.

Madison Ruppert is the Editor and Owner-Operator of the alternative news and analysis database End The Lie and has no affiliation with any NGO, political party, economic school, or other organization/cause. If you have questions, comments, or corrections feel free to contact him at admin@EndtheLie.com

Wall Street Aristocracy Got $1.2 Trillion In Secret Loans From Private “Federal” Reserve Bank

In Uncategorized on September 2, 2011 at 11:14 am

Lloyd Blankfein, CEO of Goldman Sachs; Jamie Dimon, CEO of JPMorgan Chase and Co.; Robert P.Kelly, CEO of the Bank of New York; Ken Lewis, CEO of the Bank of America; Ronald E. Logue, CEO of State Street; John Mack, CEO of Morgan Stanley; Vikram Pandit, CEO of Citigroup; and John Stumpf, CEO of Wells Fargo, testify during the House Financial Services oversight hearing of the Troubled Assets Relief Program

Oldspeak:”More 21st century welfare queens, Goldman Sachs, Bank Of America, Citigroup, JP Morgan Chase and numerous other foreign banks. Here we have here a stark and largely unreported example of the two-tiered nature of oligarchy. One set of rules and provisions for the Oligarchs, and another for the rest of us. Can you imagine if the rest of us were allowed to proclaim our financial heath and outlook as excellent to the world, all the while borrowing billions and using old shoes and ratty underwear as collateral? Leaving aside the fact that the “Federal” Reserve is about as Federal as Federal Express, this is basically what happened with the above mentioned welfare queens, except, old shoes and ratty underwear was junk stocks and bonds, and assets of “unknown ratings”. Why does this omniscient privately owned bank posing as a federal agency have all the money to bail out banking cartel members but not the rest of us? Because they’re one and the same. The banking cartel of over 300 private banks have ownership stakes in the “Federal” Reserve. Therefore the “Fed” is obliged to accommodate said banks in any way they can. The same does not apply for everyone else.  Essentially the our banking system is a global shell game, moving fiat currency from computer to computer, while professional gamblers, otherwise known as “Brokerage Firms”, “Hedge Fund Managers” and “Traders”, make and take bets on people’s homes, food, energy, and livelihoods, pocketing winnings as often as they can. And when the gambler go in the hole, they just borrow money from themselves with very little in the way of real consequences. “Moral Hazard” par excellence.”

By Bradley Keoun and Phil Kuntz @ Bloomberg News:

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)

Foreign Borrowers

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America’s bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above whereLehman Brothers Holdings Inc. (LEHMQ)’s bond insurance was priced at the start of the week before the firm collapsed. Citigroup’s shares are trading below the split-adjusted price of $28 that they hit on the day the bank’s Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don’t take effect until 2015. Another proposed requirement for lenders to keep “stable funding” for a one-year horizon was postponed until at least 2018 after banks showed they’d have to raise as much as $6 trillion in new long-term debt to comply.

‘Stark Illustration’

Regulators are “not going to go far enough to prevent this from happening again,” said Kenneth Rogoff, a former chief economist at theInternational Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

“The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread,” the council said in its July 26 report.

21,000 Transactions

Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.

That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to “fundamentally re- evaluate” the way it manages its cash.

“We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward,” Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans — Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn’t repaid. That meant the central bank’s main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

‘Willingness to Lend’

“What you’re looking at is a willingness to lend against just about anything,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks’ capital and collateral, Eisenbeis said.

“The markets were just plain shut,” said Tanya Azarchs, former head of bank research at Standard & Poor’s and now an independent consultant in Briarcliff Manor, New York. “If you needed liquidity, there was only one place to go.”

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc (BARC) borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG (DBK) got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.

‘Larger Than TARP’

Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed’s bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed’s liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.

TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury’s investments were made in the form of preferred stock, they were considered riskier than the Fed’s loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale (GLE), France’s second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley’s top borrowing came four months later, after Lehman’s bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America’s heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn’t hit their peaks until February or March 2010.

Using Subsidiaries

“At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization,” said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley’s borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

“The cash flow was all drying up,” said Roger Lister, a former Fed economist who’s now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. “Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed.”

While Morgan Stanley’s Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program’s first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.

Tapping Six Programs

By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender’s capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education’s 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

‘Help Motivate Others’

“Citibank basically was sustained by the Fed for a very long time,” said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that “achieved the goal of instilling confidence in the markets.”

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, “but this was done at the request of the Federal Reserve to help motivate others to use the system.”

The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF’s creation, JPMorgan’s borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

“Our prior comment is accurate,” said Howard Opinsky, a spokesman for JPMorgan.

‘The Cheapest Source’

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing “from the cheapest source, because this was supposed to be secret and never revealed.”

Whether banks needed the Fed’s money for survival or used it because it offered advantageous rates, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

“The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors,” the IMF said in a separate report in April.

Access to Fed backup support “leads you to subject yourself to greater risks,” Herring said. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.”

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Phil Kuntz in New York at Pkuntz1@bloomberg.net.

U.S. Federal Reserve Audit Reveals $16 TRILLION In Secret Loans To Bailout U.S. And Foreign Bankers

In Uncategorized on July 22, 2011 at 4:31 pm

Oldspeak:” Hmm.  Maybe this is why there’s no money for paying teachers, cops, nurses, sanitation, and government workers. Maybe this is why the U.S. Government is on the verge of default. Maybe this is why we’re pretending not to notice more and more homeless people. Tens of trillions of U.S. dollars have gone to bankers. An audit of the Fed reveals why the establishment resisted an audit for so long.  In “a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else “, the audit revealed widespread corruption, collusion, conflicts of interest, double dealing and profiteering among the individuals who facilitated this monumental transfer of wealth to the people responsible for crashing the global economic system with their reckless, unregulated speculative gambling with people’s savings, homes, jobs, food, health, and well being. Why is there money to bailout banks in South Korea and Scotland, but none for Main Street, the working poor, and homeless? The rich have the best government money can buy, that’s why. Socialism is here America! It’s just that’s it’s not for you. Just the unfathomably wealthy.”

By Newsroom @ Sen. Bernie Sanders

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”

To read the GAO report, click here