Trump’s Fed protects banks from stress tests

Bill Black, an expert on banking and white-collar crime, described how Donald Trump’s appointees to the Federal Reserve Board are revising “stress tests” to free Goldman Sachs and Morgan Stanley from a requirement to prove they are solvent enough to weather the next recession.

To pass the “stress test,” they’d have to put a larger fraction of their profits into capital reserves.   Black said they could easily do this, but it would cut into bonuses and dividends.

He also noted that Germany’s Deutsche Bank in Germany can’t even pass the easier stress test.  Deutsche Bank is Germany’s largest bank and, according to Black, the only large bank willing to lend to Donald Trump’s businesses.

LINK

Fed Lets Goldman Sachs, Morgan Stanley Off Hook, Investors Profit Billions, a transcript of an interview of Bill Black for the Real News Network.

Three good articles about the political scene

The U.S. Presidential election campaign offers a choice between a candidate of the status quo, and a candidate who represents a leap in the dark.  Here are three good articles about why voters might risk a leap in the dark.

Defying the Investors: Thomas Ferguson on how voter alienation from corporate candidates produced this year’s dizzying election results, an interview in Jacobin magazine.  (via Mike the Mad Biologist)

The Terrible Cost to Democrats and Our Nation of Ignoring Tom Frank’s Warnings by William K. Black for New Economic Perspectives (via naked capitalism)

Why Trump Wins: He knows border wars have replaced culture wars by Scott McConnell for The American Conservative

Bill Black on why financial crime isn’t prosecuted

Bill Moyers did a great interview with Bill Black, an expert on white-collar crime and former financial regulator, on the Obama administration’s failure to prosecute financial fraud.  He sums up the situation accurately, clearly and briefly.  Here are highlights from the transcript.

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WILLIAM K. BLACK:  Yeah, in baseball terms they’re batting 0.000.  But they’re not just batting 0.000, they took called strikes. They never got the bat off their shoulder and even swung.  They didn’t even try.

BILL MOYERS:  Do you remember when President Obama told “60 Minutes,” I think it was late December of 2011 that, “Some of the most damaging behavior on Wall Street…wasn’t illegal?”

BLACK: I do.

MOYERS: What did you think?

BLACK: I thought that he was wrong. That in fact if he listened to what the United States of America has demonstrated in court and through investigations, the activity was clearly illegal, it was a violation of a whole series of laws that make it felonies.

And these are just the frauds that caused the crisis. In addition to the frauds that caused the crisis, which are massive and we could talk about, we have the largest cartel in world history. This was the bid rigging of Libor, which is an international standard that sets the prices [interest rates] on over $300 trillion in [loans and financial] contracts.

A trillion is a thousand billion, right?  And then we have the foreclosure frauds where we have false affidavits [that the records were verified].  Over 100,000 felonies in that context.  And then we have the bid rigging on bond prices where all the major banks, according to the Justice Department, were involved.

And then we had the Federal Housing Finance Administration, a federal agency suing virtually every largest, of the largest 20 banks in the United States of America, saying they defrauded Fannie and Freddie through false sales.  And it goes on and on.

The savings and loan debacle, we made over 30,000 criminal referrals [during the administration of the elder George Bush].  Here, zero criminal referrals as far as we can get any public information.  So the first thing Holder should’ve done is re-establish the criminal referral process.  Because, you know, banks don’t make criminal referrals against their own CEOs.

MOYERS: Do you tell yourself, well, there is a justifiable and understandable reason why they don’t prosecute?

BLACK: No, there is no justifiable reason.  Apparently modern financial regulators are vastly more sophisticated than we were as financial regulators 25 years ago.  Because we had never figured out that the key to financial stability was leaving felons in charge of the largest financial institutions in the world.

The legacy of Eric Holder

The Real News Network interviewed Bill Black, an expert on white-collar crime and a former financial regulator, on the legacy of Attorney General Eric Holder.  Here is part of what he said:

Eric Holder has surprised me.  I always predicted that he would at least find one token case to prosecute some bank senior executive for crimes that led to the creation of the financial crisis and the global Great Recession. … …

Well, he’s actually going to leave without even a token conviction, or even a token effort at convicting. 

So, in baseball terms, he struck out every time, batting 0.000, but he actually never took a swing.  So he was called out on strikes looking, as we would say in baseball.

And I couldn’t believe that he would leave without at least having one attempted prosecution against these folks.

So he hasn’t done the most–he never did the most elementary things required to succeed. He never reestablished the criminal referral process, which is from the banking regulatory agencies, who are the only ones who are going to do widescale criminal referrals against bank CEOs, because, of course, banks won’t make criminal referrals against their own CEOs.

Holder could have reestablished that criminal referral process in a single email on the first day in office to his counterparts in the banking regulatory agencies, and he’s going to leave never having attempted to do so.

On top of that, if you’re not going to have criminal referrals from the agencies, the only other conceivable way that you’re going to learn about elite criminal misconduct of this kind is through whistle-blowers.  And as you mentioned, this administration, and Eric Holder in particular, are known for the viciousness of their war against whistle-blowers.

What the public doesn’t know—and it doesn’t know because of Eric Holder—is that in the three biggest cases involving banks–again, none of them, not a single prosecution of the elite bankers that drove this crisis—all three of those cases, against Citicorp, against JPMorgan, and against Bank of America, were made possible by whistle-blowers.

via After Eric Holder Resigns, A Look at His Record on Bank Prosecutions.

Instead of prosecutions, Holder negotiated settlements in which the big banks agreed to pay big fines.  That would have shifted the penalty from the actual wrongdoers to the stockholders.  Black pointed out that the stockholders didn’t suffer, either, because when the settlements were announced, the stock prices of the banks rose by more than the amount of the settlements.

Neo-conservatives, neo-liberals and Ukraine

American foreign policy during the past couple of decades has been directed by two groups of people — the so-called neo-conservatives (who are not conservative) and the so-called neo-liberals (who are not liberal).  They are part of the deep state, the part of the government that is not affected by election results.

The goal of the neo-conservatives is to make the United States the dominant world military power by, among other things, keeping Russia weak and preventing China from growing strong.  They say that the only way the United States can be save is by preventing the emergence of any country with the power to threaten it.

The goal of the neo-liberals is to free corporations and banks from the control of all governments, including the United States government, and to force nations to repay their debts to international banks at whatever cost to the well-being of the citizens.  They say this is the only path to a world that is prosperous and free.

Sometimes these groups work at cross purposes, and the Ukraine situation is a good example.

As Prof. Bill Black was written, if the U.S. government and the European Union wanted to stabilize the current Ukrainian government and detach it from Russian influence, the best way to do it would be to refinance their debt to the International Monetary Fund so that it could be repaid at low interest and in hryvnia, the Ukraine’s currency, rather than dollars or euros.

But evidently this is not on the table.   US and EU policy is to insist Ukraine accept the IMF terms, even though this means higher taxes, cuts in government services, higher prices and, most importantly, the selloff of Ukrainian national assets at bargain prices.

http://www.nakedcapitalism.com/2014/04/bill-black-ukraine-austerity-and-kamikaze-economics.html

Jobs Act 2012: enabling financial fraud

I think the federal government should exercise better oversight over corporations and financial institutions, and leave individuals alone.  But the trend is in the opposite direction – more government interference with individuals and less control over abuses by powerful organizations.

President Obama last Thursday signed the Jumpstart Our Business Startups Act, which was passed with bipartisan support by the Republican-controlled House of Representatives and the Democratic-controlled Senate.  The new law make it easier for companies to make stock offerings to the public without filing financial information with the Securities and Exchange Commission.   For reasons why this is a bad idea, view the above video or click on Heard Off the Street from the Pittsburgh Post-Gazette.   There is nothing about requiring transparency and honest reporting of financial information that interferes with the operation of a competitive free market.