Tag: Politcs

May 31 2013

Corporate Taxes: Getting a Bite of Apple

Cross posted from The Stars Hollow Gazette

At a recent hearing before the Senate Permanent Subcommittee on Investigations, Apple CEO Tim Cooke testified how the company managed to evade paying billions in taxes using tax loopholes particularly and overseas subsidiaries, like Apple’s subsidiary in Ireland.

Apple’s massive cash hoard, and the danger of soaring corporate profits

by Steve Gentile, Up with Steve Kornacki

The major flaw of our recovery has not been the pace, although certainly it could have been much faster. Instead, the major flaw is distribution. The economy is growing, but corporations and the richest Americans are capturing the lion’s share of the proceeds from that growth. You’ve likely heard a lot about the one percent-in the first year of the recovery, they captured 93% of the income gains – but the story of America’s corporations is even more troubling.

We’ve seen systemic inequality in our country growing for decades, even before the latest financial crisis. Between 1979 and 2007, income for the top 1% grew by nearly 300%, while it grew by just 18% for the bottom quintile of earners. [..]

Apple argues that its off-shore profits should only be subject to off-shore taxes. As if those off-shore profits had nothing to do with America. Of course, they do. Apple may sell products across the world, but the company is based in America for a reason. Apple enjoys, indeed exploits, countless legal and economic benefits by operating in America, benefits Apple wouldn’t enjoy anywhere else: basic legal protections, a judiciary that safeguards and enforces the rule of law, an intellectual property regime that affords generous-in fact, overly broad-protections for new ideas and innovations, a world-class system of higher education, a (somewhat) open immigration policy, reliable security, an advanced infrastructure for business development, and countless other benefits  from operating in a functional, developed society with a genuine social contract.

As Elizabeth Warren famously put it, “There is nobody in this country who got rich on his own.” In the same way, there is no company in this country that got rich on its own. Corporations like Apple are hampering the economy and corroding our political system by hoarding hundreds of billions of dollars in cash. They owe the American people back payments.

On her May 25 MSNBC show, Melissa Harris-Perry exams corporate money tactics and tax codes with guests Lawrence J. Korb, Senior Fellow at the Center for American Progress; Stephen Lerner, organizer of the Wall Street Accountability campaign; Pulitzer Prize-winning investigative journalist David Cay Johnston, author of The Fine Print: How Big Companies Use “Plain English” To Rob You Blind; and Yves Smith, the founder and creator of the blog Naked Capitalism.

May 22 2013

Obama’s Never Ending War

Cross posted from The Stars Hollow Gazette

The Authorization to Use Military Force is a joint resolution passed by the United States Congress on September 14, 2001, authorizing the use of United States Armed Forces against those responsible for the attacks on September 11, 2001. During a hearing before the Senate Armed Services Committee, Pentagon officials testified that the authorization would be needed for another 10 to 20 years and could be used anywhere from “Boston to FATA (Pakistan’s federally administered tribal areas).” According to the interpretation of these officials this could be done under the current AUMF without any further authorization from Congress. Those claims elicited disbelief, even from war hawk Sen. John McCain (R-AZ) who said, “For you to come here and say we don’t need to change it or revise or update it, I think is, well, disturbing.”

Indeed, but disturbing is an understatement, but none of the Senators suggested that the powers under the AUMF be dialed back.

Testifying before the committee on May 16 were Assistant Defense Secretary Michael Sheehan; Robert Taylor, the acting general counsel for the Department of Defense; Brig. Gen. Richard Gross, Legal Counsel, Chairman of the Joint Chiefs of Staff; and Gen. Michael Nagata, Deputy Director for Special Operations/Counterterrorism, J-37, Joint Staff

This excerpt of the hearing from Democracy Now includes Sen. Lindsey Graham (R-SC); Robert Taylor, acting general counsel, Department of Defense; Michael Sheehan, assistant secretary of defense for special operations/low-intensity conflict, Department of Defense; and Sen. Angus King (I-Maine).



Transcript is here

From Glenn Greenwald at the Guardian on Pres. Obama’s permanent war on terror:

That the Obama administration is now repeatedly declaring that the “war on terror” will last at least another decade (or two) is vastly more significant than all three of this week’s big media controversies (Benghazi, IRS, and AP/DOJ) combined. The military historian Andrew Bacevich has spent years warning that US policy planners have adopted an explicit doctrine of “endless war”. Obama officials, despite repeatedly boasting that they have delivered permanently crippling blows to al-Qaida, are now, as clearly as the English language permits, openly declaring this to be so.

It is hard to resist the conclusion that this war has no purpose other than its own eternal perpetuation. This war is not a means to any end but rather is the end in itself. Not only is it the end itself, but it is also its own fuel: it is precisely this endless war – justified in the name of stopping the threat of terrorism – that is the single greatest cause of that threat. [..]

The genius of America’s endless war machine is that, learning from the unplesantness of the Vietnam war protests, it has rendered the costs of war largely invisible. That is accomplished by heaping all of the fighting burden on a tiny and mostly economically marginalized faction of the population, by using sterile, mechanized instruments to deliver the violence, and by suppressing any real discussion in establishment media circles of America’s innocent victims and the worldwide anti-American rage that generates.

Though rarely visible, the costs are nonetheless gargantuan. Just in financial terms, as Americans are told they must sacrifice Social Security and Medicare benefits and place their children in a crumbling educational system, the Pentagon remains the world’s largest employer and continues to militarily outspend the rest of the world by a significant margin. The mythology of the Reagan presidency is that he induced the collapse of the Soviet Union by luring it into unsustainable military spending and wars: should there come a point when we think about applying that lesson to ourselves?

Then there are the threats to Americans’ security. Having their government spend decades proudly touting itself as “A Nation at War” and bringing horrific violence to the world is certain to prompt more and more people to want to attack Americans, as the US government itself claims took place just recently in Boston (and as clearly took place multiple other times over the last several years). [..]

The Obama administration already claims the power to wage endless and boundless war, in virtually total secrecy, and without a single meaningful check or constraint. No institution with any power disputes this. To the contrary, the only ones which exert real influence – Congress, the courts, the establishment media, the plutocratic class – clearly favor its continuation and only think about how further to enable it. That will continue unless and until Americans begin to realize just what a mammoth price they’re paying for this ongoing splurge of war spending and endless aggression.

Harvard Law professor and former Bush DOJ official Jack Goldsmith, who also testified, wrote this at the end of his brief summery of the hearing:

My general impression of the hearing was that (1) DOD officials were very uncomfortable talking about how they interpret the AUMF and what groups are covered by it, (2) those officials interpret the AUMF very broadly, and (3) several members of the Committee were surprised by the breadth of DOD’s interpretation of the AUMF.  I came away thinking that Congress cannot address the problem of extra-AUMF threats until it gets a handle on how the AUMF is being interpreted and deployed.  I also came away thinking more than ever that Congress needs to re-engage in a serious way about the nature and scope of the conflict against al Qaeda and affiliates.  Amazingly, there is a very large question even in the Armed Services Committee about who the United States is at war against and where, and how those determinations are made.

The solutions are for Congress to repeal the AUMF or for the Supreme Court to declare it unconstitutional. Don’t hold your breath for either of those things happening.

Apr 11 2013

Foreclosures: a Nationwide Crime Scene

Cross posted from The Stars Hollow Gazette

The foreclosure fraud perpetrated by the banks and private mortgage companies that was given a pass by the Obama Department of Justice.

Foreclosure Review Finds Potentially Widespread Errors

by  Shahien Nasiripour, Huffington Post

Nearly a third of all foreclosed borrowers who faced proceedings brought by the biggest U.S. mortgage companies during the height of the housing crisis came to the brink of losing their homes due to potential bank errors or under now-banned practices, regulators have revealed. [..]

The estimates, disclosed Tuesday, far exceed projections made over the past few years after document abuses known as robosigning gained widespread attention in late 2010. [..]

They reveal that nearly 700 borrowers who faced foreclosure proceedings had actually never defaulted on their loans (pdf).

More than 28,000 households that faced foreclosure proceedings were protected under federal bankruptcy laws, while roughly 1,100 had been meeting all the requirements of so-called forbearance plans that their mortgage companies had agreed to, which allow for delayed payments.

Some 1,600 borrowers who faced foreclosure proceedings were protected by the Servicemembers Civil Relief Act of 2003, which forces mortgage companies to cap interest rates and follow special procedures when foreclosing on homes belonging to active-duty members of the armed forces and their families.

4 million people wrongfully foreclosed on. Can they get their houses back?

Banks are foreclosing on military members, on people who had been approved for a loan modification, and even on people who were never behind in their payments–all part of an astounding settlement that shortchanged millions of homeowners and left hundreds of thousands wrongfully ejected from their homes.  Former Governor Elliot Spitzer; Alexis Goldstein, former Vice President at Merrill Lynch and Deutsche Bank, now an Occupy Wall Street activist ; and Faith Bautista, who was the victim of wrongful home foreclosure in 2009, join Chris Hayes and paint a stark picture of what happened, who is responsible and why there isn’t more justice from the government.

The big banks continue to receive %83 billion a year in tax payer money to bail them out. Where is the justice for these homeowners?

Jan 23 2013

Seriously, Bloomie, Dancing?

Cross posted from The Stars Hollow Gazette

Back in July, 2012 while returning from  Jazz at Lincoln Center’s Midsummer Night’s Swing, Caroline Stern, 55, and her boyfriend George Hess, 54, were arrested, handcuffed and held by the New york City Police for dancing  the “Charleston” on the subway platform.

“We were doing the Charleston,” Stern said. That’s when two police officers approached and pulled a “Footloose.”

“They said, ‘What are you doing?’ and we said, ‘We’re dancing,’ ” she recalled. “And they said, ‘You can’t do that on the platform.’ ”

The cops asked for ID, but when Stern could only produce a credit card, the officers ordered the couple to go with them – even though the credit card had the dentist’s picture and signature.

When Hess began trying to film the encounter, things got ugly, Stern said.

“We brought out the camera, and that’s when they called backup,” she said. “That’s when eight ninja cops came from out of nowhere.”

Hess was allegedly tackled to the platform floor, and cuffs were slapped on both of them. The initial charge, according to Stern, was disorderly conduct for “impeding the flow of traffic.”

They sued. They won. While NYC Councilman Peter Valone complains that “At $75,000 a dance, the city’s going to go bankrupt sooner than we thought,” he said. “Here, it looks like it was the taxpayers who got served.”

But whose fault is that, Mr. Valone? It’s not illegal to dance in the subway. Maybe the problem is an out of control police department:

For fiscal year 2011, New York City gave out $185.6 million to settle suits against the NYPD. That number rounds out to about $70 per resident, according to the New York Post. Though the New York City Law Department insists there is no blanket policy on settlements, City Councilman Peter Vallone Jr., who also heads the City Council’s Public Safety Committee, said such settlements have only increased since he took office in 2002. [..]

New York Civil Liberties Union head Donna Lieberman insists the city should start learning from suits, rather than just paying to get rid of them.

The city is still facing million in lawsuits by groups and individuals, including two city council members, resulting from brutal, unlawful tactics and false arrests from the Occupy Wall Street protests.

Mayor Michael Bloomberg and Police Commissioner Ray Kelly are to blame for this. Perhaps Mr. Vallone needs to stop blaming the lawyers for settling these suits, which would cost even more to litigate, and look at the real cause, an out of control mayor and police department.

Nov 15 2012

The Myth of the “Fiscal Cliff”

Cross posted from The Stars Hollow Gazette

No one actually cares about the deficit

Chris Hayes, host of [Up with Chris Hayes ],  discusses the stand-off between President Obama and House Republicans over the “fiscal cliff,” the name given to the combination of the expiration of the Bush tax cuts and the sequestration cuts mandated by last year’s debt ceiling agreement. Chris’ “filibuster” in the first segment is a “Cliff Note” summation of the debate about the so-called “fiscal cliff.”

Chris is joined for a comprehensive, and somewhat wonky, discussion with Hakeem Jeffries, newly elected Congressman representing the 8th Congressional District in Brooklyn, New York State Assemblyman; Teresa Ghilarducci (@tghilarducci), labor economist and director of the Schwartz Center for Economic Policy Analysis at The New Schoo; Edward Conard, former partner at Bain Capital from 1993-2007 and author of “Unintended Consequences: Why Everything You’ve Been Told About The Economy Is Wrong;” Ohio Democratic Senator Sherrod Brown; and Molly Ball (@mollyesque), national political reporter for The Atlantic.

I found this article  about the debt/deficit/”fiscal cliff” from letdgetitdone quite interesting. It presents a very compelling argument, point by point, why this entire discussion about a “fiscal cliff” is a myth. He concludes his argument:

So, current claims that we have a fiscal crisis, must debate the debt, must fix the debt, and must immediately embark on a long-term deficit reduction program to bring the debt-to-GDP ratio under control, all misconceive the fiscal situation because they are based on the idea that fiscal responsibility is about developing a plan to bring the debt-to-GDP ratio “under control,” when it is really about using Government spending to achieve outputs that fulfill “public purpose.” There is no fiscal crisis that will require “a Grand Bargain” and cuts to popular discretionary spending and entitlement programs. It is a phoney issue.

The only real crisis is a crisis of a failing economy and growing economic inequality in which only the needs of the few are served. MMT policies can help to bring an end to that crisis; but not if progressives, and others continue to believe in false ideas about fiscal sustainability and responsibility, and the similarity of their Government to a household. To begin to solve our problems, we need to reject the neoliberal narrative and embrace the MMT narrative about the meaning of fiscal responsibility. That will lead us to fiscal policies that achieve public purpose and away from policies that prolong economic stagnation and the ravages of austerity.

Nov 05 2012

Damn Those Stinking Facts

Cross posted from The Stars Hollow Gazette

The Report the GOP doesn’t want to be seen: “All the hues of a banana republic”

The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economic theory, after Senate Republicans raised concerns about the paper’s findings and wording.

The decision, made in late September against the advice of the agency’s economic team leadership, drew almost no notice at the time. Senator Charles E. Schumer, Democrat of New York, cited the study a week and a half after it was withdrawn in a speech on tax policy at the National Press Club.

But it could actually draw new attention to the report, which questions the premise that lowering the top marginal tax rate stimulates economic growth and job creation.

“This has hues of a banana republic,” Mr. Schumer said. “They didn’t like a report, and instead of rebutting it, they had them take it down.”

The GOP was upset that the report confirmed what most of us already know: Tax cuts for the wealthy have no effect on the economy and don’t create jobs. But, hey if you don’t like the facts them bury them. Writing at The Maddow Blog, Steve Benen explained that Senate Minority Leader Mitch McConnell insisted the report be withdrawn because people outside of Congress concerns about the report. Those concerns were raised by conservatives from think tanks such as The Heritage Foundation who oppose tax increases on the one percent.

It’s important to understand that the Congressional Research Service, generally recognized as Congress’ own think tank, has a well-deserved reputation for non-partisanship. The CRS is counted on to provide lawmakers with the most reliable and accurate information available, and the notion that partisan lawmakers can pressure, censor, and possibly even intimidate independent researchers is simply unacceptable.

In other words, we just can’t have public offices’ scholarship being stifled because Republicans find reality politically inconvenient. Our system of government isn’t supposed to work this way.

Nor as Benen continues is the first time a report has been stifled by Republicans because it was politically inconvenient and didn’t fit their policy agenda.

This was consistently one of the more offensive hallmarks of the Bush/Cheney era. In 2005, for example, after a government report showed an increase in terrorism around the world, the administration announced it would stop publishing its annual report on international terrorism. Reality proved problematic, so rather than addressing the problem, the Republican administration decided to hide the reality.

Soon after, the Bush administration was discouraged by data about factory closings in the U.S., the administration announced it would stop publishing information about factory closings.

When Bush’s Department of Education found that charter schools were underperforming, the administration said it would sharply cut back on the information it collects about charter schools.

The Bush administration worked from a strange assumption: if we get rid of the data pointing to a problem, maybe the problem won’t look so bad. It redefined ridiculous governing, but it seemed to make Republicans feel better to bury their heads in the sand. If a report tells you something you don’t want to hear, the obvious move is to get rid of the report.

“If a report tells you something you don’t want to hear, the obvious move is to get rid of the report”, yeah, that works.

Taxes and the Economy: An Economic Analysis of the Top Tax Rates since 1945

CRS Report: Top Tax Rates

Sep 11 2012

Eurozone Bailout, Not So Fast

Cross posted from The Stars Hollow Gazette

Last Thursday Mario Draghi, the president of the European Central Bank, won almost unanimous support for an unlimited bond purchase that would relieve the pressure on financial troubled countries by spreading the repayment of debt to Euro Zone countries as a whole:

The central bank’s program will not solve the deep structural problems of the euro, Europe’s common currency. But it will buy time for the political leaders of the 17-nation euro zone to follow through on their past promises to discipline each others’ spending more closely and work harder to relax labor regulations and barriers to business creation that are regarded as impediments to growth.

The central bank will buy bonds on open markets, without setting any limits, in contrast to an earlier bond-buying program that proved too hesitant to be effective. The bank said it would act only after countries agreed on certain conditions with the euro zone rescue fund, the European Stability Mechanism. That fund, known as the E.S.M., would buy bonds directly from governments, taking responsibility for imposing the conditions, while the central bank would intervene in secondary markets. [..]

The one dissenting vote came from Germany’s central bank, the Bundesbank, that was cast by Jens Weidmann despite Chancellor Andrea Merkel’s support for the plan.

But no so fast. The plan relies heavily on Spain and Italy to ask for help from the ECB. Both governments expressed reluctance for fear of political back lash at home and the harsh policy changes that they would have to accept. Spanish  Prime Minister Mariano Rajoy took the stance that Spain would not be forced into asking for assiatance from the ECB until the conditions were made “crystal clear”:

After Mario Draghi, European Central Bank governor, made clear that any assistance from the central bank to reduce Spanish borrowing costs would come with “strict and effective” conditionality, the Rajoy government remained steadfast in its view that a request would only be made if, and when, it is ready. High quality global journalism requires investment.

“There is no urgency,” a Spanish official said following a joint press conference between Mr Rajoy and Angela Merkel, where the German Chancellor deftly avoided a series of questions over possible new conditions for Spain. [..]

The Spanish prime minister is aware of the disastrous political consequences a direct request for a bailout would have on a nine-month-old government that was elected on a pledge to avoid the fate of Greece, Portugal and Ireland.

At the FDL News Desk, David Dayen gives his analysis:

Basically, Rajoy is saying “do your worst.” And he has some leverage. The Eurozone might be able to survive without Greece, but Spain is too big to fail. Draghi is adamant that he will not rescue the bond yields of any state that does not comply, but that has not been confirmed by events. So we have a game of chicken. And Rajoy, who campaigned on avoiding the fate of Ireland and Greece and Portugal, has political reasons to remain steadfast. He wants to keep the troika out of Spain; it’s political suicide if they come in and tell him how to manage the Spanish economy.

The knowledge among bondholders that Rajoy could at any time sign up for aid may be enough to keep them at bay relative to Spanish debt, and the debt of other sovereigns. That’s my hope, anyway. Because forcing Spain into more brutal austerity will turn out just the way it has turned out in Britain and any other country with a fragile economy.

From the annual Ambrosetti Forum at Lake Como on Friday, economist Nouriel Roubini gave his assessment:

“The ECB move is helpful but is not a game-changer. The eurozone is still in crisis,” said Nouriel Roubini, head of Roubini Global Economics.

“Unless Europe stops the recession and offers people in the peripheral countries some light at the end of the tunnel – not in five years but within 12 months – the political backlash will be overwhleming, with strikes, riots and weak governments collapsing.”

Professor Roubini said the German Bundesbank and will insist that “severe” conditions are imposed on Spain once the country requests a rescue from the eurozone EFSF/ESM bail-out funds and signs a memorandum ceding budgetary sovereignty.

“Plenty of accidents can still occur. There is austerity fatigue in the periphery and bail-out fatigue in the core. Eveybody is restless,” he said [..]

This current plan only kicks the can down the road. There are structural problems of the Eurozone system that must be addressed to adequately resolve this crisis:

There is a structural contradiction within the euro system, namely that there is a monetary union (common currency) without a fiscal union (e.g., common taxation, pension, and treasury functions). In the Eurozone system, the countries are required to follow a similar fiscal path, but they do not have common treasury to enforce it. That is, countries with the same monetary system have freedom in fiscal policies in taxation and expenditure. So, even though there are some agreements on monetary policy and through European Central Bank, countries may not be able to or would simply choose not to follow it. This feature brought fiscal free riding of peripheral economies, especially represented by Greece, as it is hard to control and regulate national financial institutions. Furthermore, there is also a problem that the euro zone system has a difficult structure for quick response. Eurozone, having 17 nations as its members, require unanimous agreement for a decision making process. This would lead to failure in complete prevention of contagion of other areas, as it would be hard for the Euro zone to respond quickly to the problem.

In addition, as of June 2012 there was no “banking union” meaning that there was no Europe-wide approach to bank deposit insurance, bank oversight, or a joint means of recapitalization or resolution (wind-down) of failing banks. Bank deposit insurance helps avoid bank runs.

So countries like Greece, Ireland, Italy, Spain and Portugal, who find themselves in a financial crunch, must rely on the not so “goodwill” of countries like Germany who are reluctant to share the pain.

Sep 01 2012

The American Taliban

Cross posted from The Stars Hollow Gazette

HBO’s series The Newsroom debuted ten weeks ago. Written by Alan Sorkin it is a fictional behind the scenes look at a cable news network, Atlantis Cable News (ACN), its star, Will McAvoy, the Republican anchor for its premier news program, News Night and his staff. Each episode has focused around a major event in the recent past, such as the Deepwater Horizon oil spill and the killing of Osama Bin Laden. In the last episode of the season, the News Room took on the issue of voter ID laws and the non-issue of voter fraud.

Sometimes it takes a fictional character to poke the hive.

The American Taliban cannot survive if Dorothy Cooper is allowed to vote

Ouch

Aug 12 2012

The “Rule of Lawsky”

Cross posted from The Stars Hollow Gazette

Yves Smith at naked capitalism and Marcy Wheeler at emptywheel have been following the latest banking scandal with a certain amount of “glee” as New York Superintendent of Financial Services, Benjamin Lawsky, Federal regulators (mainly Treasury and the Federal Reserve) and Mr. Lawsky’s target, the British bank, Standard Charter, all do the “Rule of Law” waltz in the media.

The “dance” so far has resulted in a flurry of furious responses to Mr. Lawsky’s charges that the Standard Charter Bank (SCB) laundered billions of dollars for Iran hiding the transaction from federal investigators for 10 years.

These are the latest developments over the last few days since the story broke:

First from Yves where she confesses her enjoyment of the “dust up” and the latest counter by SCB to sue Mr. Lawsky:

The lead story in the Financial Times on SCB is so obviously barmy that I’m astonished that the pink paper would give it prominent play. The headline: StanChart seeks advice over countersuit. Even floating this as an course of action reeks either of desperation to create positive news hooks or delusion:

   The bank’s legal advisers believe “there is a case” for claiming reputational damage, according to two people close to the situation, although StanChart is conscious of the delicacy of taking an aggressive stance towards its regulators.

The whole “delicacy” part is code for this having odds of close to zero of happening, so this looks like yet more spin.

The damage was done by the threat to yank the license and access to dollar clearing services, not the “rogue institution” label in the order. And as we’ve written in earlier posts, despite the spinmeister’s efforts to contend otherwise, Lawsky has cited violations of New York law that appear to let him get there, in addition to the charge under the Federal laws on transfers to Iran.

Yves notes that the likelihood of this lawsuit going forward is “zero” since the risk of losing in a NY civil court and the exposure of any other damning evidence that the superintendent has would be a disaster for SCB.

She also highlighted a comment made by Frank Partnoy, former derivatives salesman, now law professor, who noted:

   Indeed, the order puts the bank’s senior attorneys and compliance officers at the heart of the wire stripping scheme, even when outside counsel advised otherwise. As early as 1995, soon after President Bill Clinton announced economic sanctions against Iran, the bank’s general counsel allegedly “embraced a framework for regulatory evasion”. He allegedly strategised about how to avoid scrutiny by the US Office of Foreign Assets Control, known as OFAC, and instructed employees that a memorandum describing the plan to avoid regulatory compliance was “highly confidential & MUST NOT be sent to the US”….

   As recent debacles at Barclays, HSBC and now Standard Chartered demonstrate, employees of big global banks increasingly lack a moral compass. Some general counsels and compliance officers do provide ethical guidance. But many are facilitators or loophole instructors, there to show employees the best way to avoid the law. Not even mafia lawyers go that far; unlike many bankers, mobsters understand the value of an impartial consigliere who will tell them when to stop.

If silly civil lawsuits weren’t enough, the original Reuters’ article, the source of Marcy Wheeler’s original post, was edited to exclude the orders of magnitude of the fraud:

The Reuters article was a pretty damning picture of how the Get Out of Jail Free industry works.

And then, the most damning parts of the article disappeared (Update from Briinhild: the full story is back up). As Yves discovered later in the day yesterday, Reuters pulled those paragraphs of the story that described this whole process.

Yves then posted that Reuters was running interference for elite corruption by scrubbing the article clean of the damning parts and posted original Reuters’ article:

Now I decided to go have a look myself. Being on the vampire shift, I didn’t go looking until mid afternoon. And guess what, the story that was now at that URL was not the same story. Yes, there was a story on Standard Chartered. But the version that Marcy worked from was apparently the original, released at 00:28 AM, titled “U.S. regulators irate at NY action against StanChart.” I’ve loaded that version in a Word and put it up at ScribD, and am embedding it below. It’s 1766 words. Be sure to download it if you are interested in this topic.

Apparently, as was pointed out by an emptywheel reader, Briinhild, Marcy and Yves must have embarrassed Reuters because they reposted the original article later that day.

The latest today from Yves, this “plot thickens” as Federal regulators try to “leash and collar” Superintendent Lawsky:

Today, the Wall Street Journal reported that, “Regulators Seek Unity in U.K. Bank Talks.”

If you read the article, a more accurate headline would be “Federal regulators desperate to get in front of Lawsky mob and call it a parade.” All the article says is the mucho unhappy and very much outflanked Federal regulators have gotten a meeting with Lawsky. Just look at the disconnect between the PR in the first paragraph and the actual state of play in the second:


   U.S. authorities are forming a group with New York’s top financial regulator to negotiate a settlement with Standard Chartered over allegations it illegally hid financial dealings with Iran.

   The U.S. Treasury Department, Federal Reserve, U.S. Department of Justice and Manhattan district attorney’s office are scrambling to reach an understanding with the New York State Department of Financial Services over the ground rules for negotiations with the U.K.’s fifth-largest bank by assets, according to people familiar with the talks.

This is hysterical. “Ground rules for negotiations”? Lawsky does not need the permission of Geithner et. al. to negotiate with Standard Chartered. As long as Lawsky has Cuomo’s backing, he has all the leverage here. And three independent sources told me as of today that Cuomo was fully behind Lawsky. That means he is likely to remain free to operate as he sees fit. It’s a given that if the White House had any real sway over Cuomo and saw fit to intervene, they would have done so by now. There is no downside to Lawsky in going through the motions of seeing if there is a way for him to proceed and have the Feds save a bit of face.

Let me stress again: Lawsky has all the cards, and he must know that.

Yves also cites this article from Bloomberg:

   New York’s financial-services regulator has grounds to shut Standard Chartered Plc (STAN) in the state even if he accepts the firm’s argument that it illegally laundered only a fraction of the $250 billion he claims.

   As the state’s top banking regulator, Benjamin Lawsky has power to act in his discretion against any financial institution he deems untrustworthy, according to the charter of his year-old department.

   Penalties he could impose include fines and the revocation of the bank’s license to operate in the state…

   Even if Standard Chartered’s position is legally sound, the order’s disclosure of internal e-mails suggesting a conspiracy to hide the identity of Iranian clients from regulators has given Lawsky grounds to act when the two sides face off at an administrative hearing Aug. 15, according to experts on both sides of the Atlantic.

   “I don’t care whether it is a half of one percent that weren’t right,” said Arthur Levitt, former chairman of the Securities and Exchange Commission,…

   “There are going to be more that weren’t right…The e-mails are really outrageous. I think Lawsky has uncovered something that probably has a much deeper depth.”…

   Neil Barofsky, who oversaw the U.S. Troubled Asset Relief Program and criticized the U.S. Treasury Department in his book, Bailout, objected to the criticism heaped on Lawsky.

   “This is not Lawsky getting ahead of other regulators,” said Barofsky. “This is Lawsky doing his job.”…

   “Willful non-compliance is very serious,” said Tariq Mirza, a former Federal Deposit Insurance Corp. official now with Grant Thornton. “If those allegations can be substantiated, regulators throw the book at institutions.”

Another article from the International Business Times that speculates what SBC’s sentence would be if it were an individual found guilty of these crimes:

Under New York state statutes against those two crimes, a defendant found guilty could be sentenced to a penalty of between eight-and-one-third and 25 years. The attorney noted that “it seems likely that a maximum sentence would be given because of the extent of criminality alleged in this case.” And if the judge really wanted to throw the book at them, the attorney explained, they could consider every instance where Standard Chartered Bank engaged in alleged illegal conduct, no doubt hundreds of them, as a “discrete act of criminality” rather than “one criminal transaction.”

Federal involvement would make the possible prison term even stiffer, with the appropriate federal money-laundering statute carrying a penalty of “roughly 15 to 19 years,” and a racketeering conviction “punishable by up to 20 years” in Club Fed.

(emphasis mine)

Wouldn’t that be a delightful sight?

As Yves notes in her discussion of these news articles, there is a lot of spin or, as with the case of a New York Times article, misinformation:

There is also an article at the New York Times on Lawsky which comes close to being a hatchet job. It does not look as if the Times made any effort to get to anyone in Lawsky’s camp (by contrast, I know of at least one reporter working on a profile who says everyone who Lawsky has worked with him is extremely complimentary). It also has sources that are spinning (one might say misrepresenting) the genesis. It acknowledges that Lawsky discussed his findings and theories, so it undermines the “blindsided claim. We were told three months ago, with the Fed; the article says April, so this is pretty close to the same time frame and sounds like the same meeting. [..]

(emphasis mine)

The traditional MSM is going to do a lot of the work for federal regulators by sniping at Mr. Lawsky and painting him as a “rogue” and “over-stepping his authority”. It’s bloggers like Marcy Wheeler and Yves Smith that sort out the facts from the hype and innuendo. The ladies rock.

As Yves requested, if you live in New York and support what Mr. Lawsky is doing, especially since the New York Times is taking shots at him now, drop him a note using this form.

Thanks and a h/t to naked capitalism reader Bryan Sean McKown for the title.

Aug 09 2012

Sleeping with the Enemy

Cross posted from The Stars Hollow Gazette

The LIBOR scandal continues to rattle the banking industry revealing the fraud that has gone unchecked by regulators in the US and Europe. The latest scandal that is now rocking international banking involves billions of dollars that were laundered by the British bank, Standard Charter, for Iran:

Standard Chartered bank ran a rogue unit that schemed with Iran’s government to hide more than $250bn (£160bn) in illegal transactions for nearly a decade, according to a scathing report by New York regulators that may put intense pressure on the management of the UK-based bank.

According to the report filed by the New York state department of financial services (NYSDFS), when warned by a US colleague about dealings with Iran, a Standard Chartered executive caustically replied: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.” [..]

The 27-page report claims that Standard Chartered bankers helped Iranian clients skirt US financial sanctions against their country for nearly a decade.

Benjamin Lawsky, superintendent of the NYSDFS, said a Standard Chartered subsidiary in New York had also sought to do business with other US-sanctioned countries, including Libya, Burma and Sudan.

It is the latest blow to the reputation of the City, already criticised in Washington following the HSBC money-laundering debacle and JP Morgan’s multibillion-dollar trading losses at its London office. [..]

The New York regulator has provided emails between members of Standard Chartered staff. In one the head of the US operations warned, among others, the executive director of risk in London, that the dealings with Iran could cause “very serious or even catastrophic reputational damage” to the group.

The email, dated October 2006, warned: “There is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal reputational damages and/or serious criminal liability.” It was this memo that provoked the response about “you f—ing Americans”.

But it wasn’t the Treasury Department or the Federal Reserve that dropped the bomb with these charges, it was  Benjamin Lawsky, the New York Superintendent of Financial Services. Yves Smith at naked capitalism asked yesterday, “where were the Feds?”

The lack of action by everyone ex the lowly New York banking supervisor is mighty troubling. The evidence presented in Lawsky’s filing is compelling; he clearly has not gone off half cocked. Why has he pressed forward and announced this on his own? The Treasury Department’s Office of Terrorism and Financial Intelligence has supposedly been all over terrorist finance; the consultants to that effort typically have very high level security clearances and top level access (one colleague who worked on this effort in the Paulson Treasury could get the former ECB chief Trichet on the phone). For them not to have pursued it anywhere as aggressively as a vastly less well resourced state banking regulator, particularly when Iran is now the designated Foreign Enemy #1, does not pass the smell test.

At a minimum, this lack of sufficient inquisitiveness on behalf of the Feds would the bank snookered them by being terribly forthcoming (as in it was responding only to specific inquiries, and then as narrowly as possible). But it raises the more troubling specter that Federal regulators (oh, and the US Department of Justice) wanted to keep this all quiet so as not to lead to embarrassing headlines. Although there is nothing in the filing to point to failure to act by the New York Fed, which was presumably the lead party in the 2003 sanctions against SCB (indeed, it says specifically that SCB deceived Federal regulators), the flip side is there would be only downside to Lawsky in doing anything that would make Fed or Treasury think he was trying to make then look bad.

There was a huge furor in the UK over who among the banking regulators knew what when on the Libor scandal. If our Congresscritters are at all worth their salt, they ought to be putting Geithner and the relevant folks at the New York Fed under the hot lights. We’ll see soon enough how the Fed and Treasury play this. If they don’t launch parallel actions pronto, it will be a damning sign as to where they think their, and perhaps most importantly, Geithner’s, interests lie.

At emptywheel, Mary Wheeler, wondered as well why the Superintendent of Financial Services is policing our Iran sanctions?

Normally, we’d see accusations like SFS released today from Treasury’s OFAC (Office of Terrorism and Financial Intelligence), perhaps (for charges as scandalous as these) in conjunction with the NY DA and/or a US Attorney. And yet OFAC has had these materials in hand for 2 years, and has done nothing.

In fact, we have a pretty good idea what OFAC’s action would look like, because earlier this year it sanctioned ING for actions that were similar in type, albeit larger in number (20,000 versus 60,000) and far larger in dollar amount ($1.6 billion involving Cuba versus $250 billion involving Iran). Both banks were doctoring fields in SWIFT forms to hide the source or destination of their transfers. [..]

My wildarsed guess, in this case, is that we have an understanding with our allies that they’ll allow us to require the rest of the world to comply with our sanctions so long as it doesn’t affect that country’s businesses. That is, I suspect countries like Britain are happy to comply with our sanctions so long as British banks don’t lose competitive advantages as a result. Of course, these sanctions are different that-say-our stupid Cuba sanctions in that the UK is as enthusiastic about sanctioning Iran into docility as the US is, and this scheme is all about retaining lucrative business with Iran.

But we may never learn what reason that is, because that would make things uncomfortable for the entities that claim there is rule of law for banks while they ensure that usually is not the case.

But no matter, the Feds are now upset with Lawsky who had the cajones to do what they were obviously trying to cover up. Barry Ritholtz at Economonitor points out that Lawsky has virtually declared the Treasury and Federal reserve as “too corrupt” to handle this:

   “Pursuant to the statutory powers vested in him by the People of the State of New York . . . [and] extensive investigation included the review of more than 30,000 pages of documents, including internal SCB (Standard Chartered Bank) e-mails that describe willful and egregious violations of law.

  For almost ten years, SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB’s actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.

   –NYS Department of Financial Services

Benjamin Lawsky, head of the New York State Department of Financial Services, has declared that the Treasury Department and the Federal Reserve is “too corrupt” to be involved in NY’s actions against money launderers and Iran sponsors at Standard Chartered bank.

At least, that corruption is what was implied by his actions (note those are my words, not his). Lawsky refused to give Tim Geithner or Ben Bernanke or anyone else at Treasury or the Fed any advance notice of pending legal/regulatory actions. Sorry, Treasury, he seemed to be saying, but your track records preceded you. [..]

This Treasury Department, like the one that preceded it, along with Congress and the White House, have proven themselves to be utterly incapable of overseeing the banking industry. Rather than adhere to this betrayal of the public trust, Mr. Lawsky decided to do something amazing: He actually followed the law. The rest of the regulatory sector should take note.

Have a read of the paragraph at the top of this page to see how prosecution of banking felons and their crony capitalist allies is supposed to be done.

We live in the Banana Republic formerly known as the United States. Its time to turn this nation back into a Democracy . . .

Let’s hope that Mr. Lawsky doesn’t cave to pressure like NY State Attorney General Eric Scneiderman did.

Jun 25 2012

Moyers, Taibbi and Smith on Banks

Cross posted from The Stars Hollow Gazette

Contributing editor for Rolling Stone, Matt Taibbi and Yves Smith, creator of the finance and economics blog Naked Capitalism appeared with Bill Moyers on his PBS program, Moyers and Company to discuss How Big Banks Victimize Our Democracy.

JPMorgan Chase CEO Jamie Dimon’s appearances in the last two weeks before Congressional committees – many members of which received campaign contributions from the megabank – beg the question: For how long and how many ways are average Americans going to pay the price for big bank hubris, with our own government acting as accomplice? [..]

Taibbi’s latest piece is “The Scam Wall Street Learned from the Mafia.” Smith is the author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.

Full transcript

May 10 2012

The Democratic Gutting of the Social Safety Net

Cross posted from The Stars Hollow Gazette

It will be a Democratic Congress and President that will destroy the social safety. Ryan Grimm at Huffington Post reports that House Minority Leader Nancy Pelosi supports the Simpson-Bowles plan:

During a recent press conference, and again during an interview with Charlie Rose, the California Congresswoman said that she would support what’s known as the Simpson-Bowles plan, a budget proposal that was created by the co-chairs of a fiscal commission set up by President Obama (dubbed the “Catfood Commission” by progressives). The plan was rejected by members of the commission, failing to win the necessary votes to move to a vote in Congress. Yet the co-chairs — former Republican Sen. Alan Simpson of Wyoming and Morgan Stanley director Erskin Bowles, a Democrat — have worked recently to revive it, and the political class speaks of it as if it passed and is an official recommendation of the commission.

At the end of March, a version of the Simpson-Bowles plan was given a vote on the House floor. It was annihilated, 382-38, with Pelosi and most Democrats voting against it.

But Pelosi, the day after the vote, said that she could still support the plan if it stuck more closely to the original version put out by Simpson and Bowles. “I felt fully ready to vote for that myself, thought it was not even a controversial thing … When we had our briefing with our caucus members, people felt pretty ready to vote for it. Until we saw it in print,” she said. “It was more a caricature of Simpson Bowles, and that’s why it didn’t pass. If it were actually Simpson-Bowles, I would have voted for it.”

Yet when the Simpson-Bowles plan had been originally unveiled, Pelosi called it “simply unacceptable.”

In early April, Pelosi was asked about her initial opposition. “My problem with it was what it did as far as Social Security is concerned. Apart from that we said, there’s a lot to work with,” she told Charlie Rose. “It was a good framework in terms of revenue and in terms of cuts, in terms of defense spending and the rest. It was very bold.”

The Simpson-Bowles plan is a mix of tax increases and spending cuts that trims four trillion dollars off the deficit in ten years. Its cuts to social spending and entitlement programs made it “simply unacceptable” to the Democrats’ liberal base almost as soon as it was announced. Pelosi’s rhetorical retreat from that hard-line position has progressives worried they’ll have nobody left to defend the social safety net, even Medicare and Social Security.

Progressives need to be really worried, as Gaius Publius at AMERICAblog tells us the “push is on” to “compromise” on Social Security:

All you need to know? Pete Peterson lives for one reason only – to kill off Social Security. Every crazed billionaire has a project. This is his. (No exaggeration; check the link. It’s an excellent William Greider piece.)

From the “Summit” invite (but click fast; pages that name these names disappear fast at the “Summit” website). The underscoring below is mine:

   

Media Advisory

   PETERSON FOUNDATION TO CONVENE 3RD ANNUAL FISCAL SUMMIT IN WASHINGTON ON MAY 15

  Participants to include President Bill Clinton, Speaker of the House John Boehner, Secretary of the Treasury Timothy Geithner, Senator Rob Portman, Congressman Paul Ryan, Congressman Chris Van Hollen, and National Commission on Fiscal Responsibility and Reform Co-Chair Alan Simpson

   NEW YORK (May 08, 2012) – Against the backdrop of the upcoming elections, and with a series of key fiscal deadlines approaching at the end of the year, the Peter G. Peterson Foundation’s 2012 Fiscal Summit: America’s Case for Action will feature the nation’s leading experts and elected officials in discussions about the fiscal, economic, and political crossroads facing the country. …

   This year’s summit will explore opportunities for compromise and establish the urgent need for action on these challenges, as well as highlight the voices of engaged citizens from across the country. The 2012 Fiscal Summit will work to generate the momentum necessary to motivate lawmakers to take action essential to preserving the American Dream.

Two videos that Gaius featured are significant because as he points out President Barack Obama is on the same page Bill Clinton, Paul Ryan and Pete Peterson.

5-25-2011 Leaked cell phone footage of Bill Clinton cozying up to Paul Ryan. The day after the stunning upset in the special congressional election in upstate New York, Rep. Paul Ryan is a man under fire.

Barack Obama’s speech on April 5, 2006 at the launch of The Brookings Institute’s Hamilton Project where Obama says that “most of us are strong free traders” and praises the goals of the Hamilton Project.

This is the “real grand bargain”

The real Grand Bargain isn’t between the Dems and Republicans. It’s between both of them and you. They’re offering to sell out your children’s Social Security, in exchange for letting you keep your own.

Send Nancy a message. Sign the petition and tell her: Draw a line in the sand on cuts to Social Security, Medicare and Medicaid benefits

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