Posts Tagged ‘Wealthy Criminal Class’

The passing scene: Links & comments 11/9/13

November 9, 2013

South Africa breaks out of ‘partnership’ agreement trap by Joseph Stiglitz for the Bangkok Post.

The government of South Africa is party to trade treaties that, like the proposed Trans-Pacific Partnership and the Transatlantic Trade and Investment Treaty, grant international corporations privileged positions over the nation’s citizens.  But it is letting these treaties expire and renegotiating them.  Other countries should and are following suit.

America’s Death Spiral in the Middle East by Bob Dreyfuss for TomDispatch.

In the Middle East, the United States is despised by its enemies, its supposed allies, and even leaders it put in power.  The only hope of salvaging the U.S. position, according to this writer, is an alliance with Iran.  I think he’s right.

Syria’s Assault on Doctors by Annie Sparrow for The New York Review of Books.

I think President Obama was right to back off from attacking Syria, because this would have made a bad situation even worse, but the plight of the Syrian people remains.

Meet the Private Companies Helping Cops Spy on Protesters by John Knefel for Rolling Stone.

A U.N. report finds the global private security industry is booming by Elliott Hannon for Slate.

President Eisenhower warned of danger of a military-industrial complex.  Now we have a surveillance-industrial complex and a police-industrial complex.

Obama Gets Behind Democrats’ $10.10 Minimum Wage Proposal by Dave Jamieson for Huffington Post.

Obama wants to cut Social Security by Ben Strubel for New Economic Perspectives.

I am glad of the President’s decision to support a higher minimum wage.  I wish he were as relentless in pressing for that as he is for indexing Social Security to the “chained CPI”.

Billionaire Steven Cohen Can’t Make His Mommy’s Monkey Jump by Greg Palast for Truthout.

Palast profiles a member of what Theodore Roosevelt called “the wealthy criminal class.”  No matter how many billions he has, he thinks he needs more.

American kleptocracy

July 11, 2012

Charles H. Ferguson, producer of the Oscar-winning documentary film “Inside Job,” argues in his new book, PREDATOR NATION: Corporate Criminals, Political Corruption and the Hijacking of America, that the executives of the largest financial firms are criminals—literally, not metaphorically.

Ferguson dug into investigative reports and civil lawsuits, and, being a successful academic and entrepreneur himself, was able to talk to many high-status people who might not have talked to the likes of Michael Moore (or me).  On the basis of this, he named names, and laid out evidence of lawbreaking.  Unlike many financial writers, he was able to explain clearly how the various financial scams worked, what harm they did and why they were against the law.

This is the best book I’ve read on what’s wrong with the financial system.  If you have time to read just one book, I recommend you read this one.

Neither the financial sector nor the U.S. economy as a whole will be restored to health until people are sent to prison when they commit financial fraud, accounting fraud, price rigging, bribery, perjury and other crimes.  Wall Street financiers, like everyone else, are entitled to be presumed innocent by the legal system until proven guilty, but Ferguson lays out reasons why various individuals should be the subject of criminal investigations.

Here are some examples:

1.  Jefferson County, Alabama, home of the city of Birmingham, decided to refinance a major sewer project when interest rates fell in the early 2000s.  Instead of offering new financing at a lower interest rates, a consortium of banks led by JPMorgan Chase talked local officials into buying something called auction-rate securities, in which the interest rate is reset every three weeks, and paying six times the normal amount in fees. This was made possible by paying local officials and brokerage firms, and paying $3 million to Goldman Sachs and $1.4 million to Rice Investments not to compete.  All these bribes were added the fees charged to the county government.  One week in 2008 nobody wanted to bid on auction-rate securities, and the obligation fell to Jefferson County’s taxpayers, most of whom were not rich.  Two county commissioners were prosecuted and sent to prison.  JPMorgan Chase paid some small fines and two of its executives were barred from securities trading, but that is all, even though bribery is a crime.

2.  Morgan Stanley in 2007 was one of many companies selling a security called a synthetic collateralized debt obligation—a debt backed by no collateral, but structured as if it was.  It was set up to duplicate the results of a package of collateralized subprime mortgages, which would soon be revealed to be worthless.  Morgan Stanley officials persuaded the Virgin Islands government employees’ pension fund, among others, to invest the fund in these securities, which they at the time knew to be worthless and were selling short—that is, selling with an option to buy back later after the price had plummeted.  The Virgin Island civil servants lost their pension rights.  Through the short selling, the value of the pension fund was transferred to Morgan Stanley.

3.  Goldman Sachs sold an investment package which was created on the basis of its bad quality, just so an investor named John Paulson could bet that it would collapse.  Yet most of these bad securities were rated AAA, and Goldman Sachs in its prospectus said they’d been subject to an intensive credit review process.  Selling securities knowingly based on false information is a crime.

This was not just a case of a few bad applies, Ferguson wrote.  Almost all the apples were bad.  He said the whole housing price bubble was based on fraud, Ferguson said.  Wall Street firms sold securities based on mortgages in which they falsely stated that the loan did not exceed the value of the property, the property did not have liens taking priority over the mortgage, the property was occupied and the borrower had the financial ability to pay back the mortgage.  There is a legal requirement of “due diligence” to make sure the information in a securities offering is correct.  This wasn’t done, Ferguson said.

Borrowers in some cases were also victims of fraud, he said.  Some of them, especially minorities and immigrants, were misinformed about the terms of the loan; some who qualified for standard loans were told they only qualified for subprime loans, which carried higher interest rates and charges.  This is illegal under the truth and ending laws.

In an earlier era, lawbreaking financiers such as Charles Keating, Michael Milken, Ivan Boesky and Enron’s Jeff Skilling went to prison.  Martha Stewart went to prison for the comparatively trivial offense of selling stock based on a tip by somebody who had inside information.  In the savings and loan scandals of the 1980s, several thousand financial executives were criminally prosecuted and hundreds were sent to prison.  But in today’s scandals, nobody has been criminally prosecuted.

The evidence of criminal fraud is just as great now as it was then, but the Obama administration, like the Bush administration before it, is dominated by representatives of the very firms that are suspected of criminal activity.  President Obama has said that no laws have been broken.  That is a statement he would be justified only after an extensive investigation had shown it to be so.  It is not justified as an excuse for not conducting the investigation.

Not just the government, but the top echelons of the economics profession have fallen under the sway of Wall Street, Ferguson wrote.  There is a three-way revolving door, from Wall Street to government to the economics departments of the top universities.  Top economists get consulting fees, corporate directorships, and big lecture fees from Wall Street firms and the foundations they set up.  Hardly any universities have financial disclosure or conflict-of-interest rules.  The economics establishment, unsurprisingly, is unsympathetic to points of view that conflict with Wall Street interests.

Again, Ferguson names names, and cites chapter and verse.  I don’t do justice in this post to his detailed facts.  I recommend you read the book.  If you don’t have time to read a whole book, you can sample Ferguson by clicking on the links below.

Click on Where We Are Now for an excerpt from Predator Nation on how financial corruption affects the U.S. economic future.

Click on The Sellout of the Ivory Tower and the Crash of 2008 for an excerpt from Predator Nation on the corruption of the economics profession.

Click on Wall Street Has Turned the U.S. Into a Predatory Nation for the first part of a TV interview of Ferguson by Amy Goodman on her Democracy Now program.

Click on Corporate Criminals, Political Corruption and the Hijacking of America for the second part of Amy Goodman’s interview.

The wealthy criminal class

June 29, 2012

I’m currently reading a book, Predator Nation: Corporate Criminals, Political Corruption and the Hijacking of America
by Charles H. Ferguson, the maker of “Inside Job,” the outstanding documentary movie about the Wall Street crash.

Ferguson says that the financial crises, such as the housing bubble, are the result of criminal behavior which has gone unpunished, and until people who commit crimes are sent to prison, like Ivan Boesky, Michael Milken and Charles Keating in an earlier era, the situation will not improve.  This sounds like a radical statement, but he backs up his assertions with facts and examples.

It makes me wonder about the point of the Dodd-Frank Act, which grants the government new regulatory powers, when the Bush and Obama administrations refused to use the legal authority they have.

I will post about the book when I have finished it, and digested its conclusions.  Meanwhile you can click on The Scam Wall Street Learned From the Mafia, by Matt Taibbi in Rolling Stone, for an example of what Ferguson was talking about.  Taibbi reported how big banks cheated American municipal and county governments out of billions of dollars by rigging bids on bond issues.  Even when they are exposed, they get off with token civil penalties, not criminal charges.  This is big news.

It is not quite right to refer to “Wall Street” banks, because that implies that the wrongdoers are all American.  This is not the case.   The practices of worst British, German and Swiss banks are at least as bad as the big U.S. banks.

“Wealthy criminal class” is an expression used by Theodore Roosevelt when he was President in the first decade of the 20th century.