Saturday, June 30, 2012

How America's biggest banks took part in a nationwide bid-rigging conspiracy - until they were caught on tape

The Scam Wall Street Learned From the Mafia

June 21, 2012 11:20 AM ET
national affairs
Illustration by Victor Juhasz
Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo.
But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.
In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.
USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.
More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.
But USA v. Carollo marks the first time we actually got incontrovertible evidence that Wall Street has moved into this cartel-type brand of criminality. It also offered a disgusting glimpse into the enabling and grossly cynical role played by politicians, who took Super Bowl tickets and bribe-stuffed envelopes to look the other way while gangsters raided the public kitty. And though the punishments that were ultimately handed down in the trial – minor convictions of three bit players – felt deeply unsatisfying, it was still a watershed moment in the ongoing story of America's gradual awakening to the realities of financial corruption. In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.
This was no trial scene from popular lore, no Inherit the Wind or State of California v. Orenthal James Simpson. No gallery packed with rapt spectators, no ceiling fans set whirring to beat back the tension and the heat, no defense counsel's resting a sympathetic hand on the defendant's shoulder as opening statements commence. No, the setting for USA v. Carollo reflected the bizarre alternate universe that exists on Wall Street. Like so many court cases involving big banks, the proceeding looked more like a roomful of expensive lawyers negotiating a major corporate merger than a public search for justice.
The trial began on April 16th in a federal court in Lower Manhattan. The courtroom, an aerielike setting 23 stories up, offered a panoramic view of the city and the East River. Though the gallery was usually full throughout the three-plus weeks of testimony, the spectators were not average citizens come to witness how they had been robbed blind by America's biggest banks. Instead, there were row after row of suits – other lawyers eager to observe a long-awaited case, one that could influence the outcome in a handful of civil suits pending across the country. In fact, the defendants themselves, whom the trial would reveal as easily replaceable cogs in a much larger machine of corruption, were barely visible from the gallery, obscured by the great chattering congress of prosecution and defense attorneys.
Only the presence of the mostly nonwhite and elderly jury, which resembled the front pew of a Harlem church, served as a reminder that the case had any connection to the real world. Even reporters from most of the major news outlets didn't bother to attend. The judge in the trial, the right honorable and amusingly cantankerous Harold Baer, acknowledged that the case was not likely to set the public's pulse racing. "It is unlikely, I think, that this will generate a lot of media publicity," Baer sighed to the jury in his preliminary instructions.
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Friday, June 29, 2012

Ron Paul Fights Back Against Banksters, but is Overshadowed By Obamacare and Holder

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Ron Paul Fights Back Against Banksters but is Overshadowed By Obamacare and Holder
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Thursday's Supreme Court ruling on President Obama's flagship legislation and Attorney General Eric Holder's vote of contempt are stealing the headlines this week. The 24-hour news stations are devoting all their energies into covering every nuanced angle of each decision, interviewing prominent politicians, and monitoring the public's reaction to these significant changes in Washington D.C. In the shadow of these two monumental decisions, presidential candidate and Congressional Baseball Hall of Fame inductee Ron Paul held a hearing in the Domestic Monetary Policy and Technology subcommittee, chaired by Dr. Paul, entitled: Fractional Reserve Banking and the Federal Reserve: The Economic Consequences of High-Powered Money. 

Chairman Paul, an adherent to the Austrian School of economics, invited fellow Austrians Dr. Joseph Salerno, Dr. John Cochran, and Dr. Lawrence H. White to discuss the effects fractional reserve banking and central economic planning have on the economy. If the need for massive government intervention in health care - that will benefit Big Pharma more than the Average Joe - and the Fast and Furious gun-running scandal are the symptoms; central planning, along with fractional reserve banking is the disease.

The unintended consequences of any government intervention, whether it be foreign or domestic, rarely affects those who enact the legislation in the same way as those who are on the receiving end. Both sides of the Congressional aisle make millions trading stocks of companies who lobby on bills that come before their committees. Sure it's legal, but the conflict of interest is so obvious even a NBA referee could see it. The military-industrial complex continues to reap massive profits from the perpetual warfare state. Big Pharma loves government involvement in health care. In fact, the pharmaceutical industry has received a 77,500% return on their lobbying investment. This merging of state and corporate powers on the backs of the taxpayer, is a symptom of the Federal Reserve system and fractional reserve banking.

As Dr. Salerno's testimony stated, "Fractional reserve banking occurs when the bank lends or invests some of its deposits, payable on demand, and retains only a fraction in cash reserves." Salerno goes on to explain how fractional reserve banking is inherently inflationary. Since all banks engage in fractional reserve banking, the money supply continues to increase, prices go up, markets are distorted, we have the booms, and then the inevitable busts. The law of diminishing marginal utility tells us that the marginal utility of each homogeneous unit decreases as the supply of units increases. The more money Ben Bernanke drops from his helicopters, the less valuable the currency becomes. Purchasing power lost.

Who benefits from the inflationary, debt based pyramid scheme that is the Federal Reserve system? The banksters who get the secret trillion dollar loans, the special interests that throw millions to the legislatures, and the ever-expanding state apparatus that continues to threaten the life and liberty of its citizens. Who doesn't benefit from paper money and central planning? BothGreeks and Americans. Those on fixed incomes. Those burdened by massive student loan debt. The savers. The job creators. 
The Federal Reserve system is the culprit. The gun-running scandal that has led to Eric Holder being held in contempt of Congress is a symptom of big, mischievous government - fueled by endless, funny money. Our health care crisis is a result of previous government interventions, including the Fed's monetary manipulation. Murray Rothbard explained the unintended consequences of government intervention, "Our very real medical crisis has been the product of massive government intervention, state and federal, throughout the century; in particular, an artificial boosting of demand coupled with an artificial restriction of supply. The result has been accelerating high prices and deterioration of patient care. And next, socialized medicine could easily bring us to the vaunted medical status of the Soviet Union: everyone has the right to free medical care, but there is, in effect, no medicine and no care.
It's important to understand that failed government policies aren't only the inevitable result of central planning -- they're also ripping us off! 

Sunday, June 24, 2012

Banks step up spending on lobbying to fight proposed stiffer regulations


Expenditures jumped 12% to $29.8 million last year among the eight financial firms that spent the most to influence legislation.

February 16, 2010|By Nathaniel Popper
  • New York banking giant JPMorgan Chase's lobbying budget rose to $6.2 million in 2009, up 12% from the previous year.
New York banking giant JPMorgan Chase's lobbying budget rose to $6.2… (Don Emmert / AFP/Getty Images )
Reporting from New York — Even as the financial industry has sought to keep a low public profile, some of the country's largest banks have ramped up their spending on lobbying to fight off some of the stiffest regulatory proposals pending in Congress.
Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress.
The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.
"I have never seen such a scrum of bank lobbyists as I have in the last year -- and I've worked on quite a few bank issues over the years," said Ed Mierzwinski, a lobbyist for the U.S. Public Interest Research Group, a coalition of state consumer organizations. "It seems like everybody is out of work except for bank lobbyists."
Much of the increase in spending on lobbying in 2009 came in the final three months of the year as Congress voted on financial reform bills. Many Washington observers say industry lobbying has been even more intense this year, as President Obama has proposed a new tax on big banks, caps on their size, and curbs on their investment in often lucrative but risky hedge funds and private equity funds.
"This is a watershed moment," said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents about 100 of the largest financial firms. "The industry will be changed forever after this year."
Bank lobbyists, however, are trying to limit just how much the industry has to change. They are fighting some provisions in the Obama administration's broad industry-overhaul proposal, especially a plan to create a consumer protection agency to oversee financial services.
The House passed its version of the legislation in December. But its prospects are uncertain in the Senate, where talks between Republicans and Democrats on a compromise version recently broke down.
At a hearing this month, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), who has had a generally warm relationship with the financial community, lashed out at the "refusal of large firms to work constructively with Congress."
"Too many people in the industry have decided to invest in an army of lobbyists, whose only mission is to kill the common-sense financial reforms that we are working so hard up here to try to achieve," Dodd said.
Lobbying by insurers and banks, including Morgan Stanley, may kill a provision in the overhaul bill that would make retail brokers more accountable to their clients, Bloomberg News reported last week.
The intensified efforts on Capitol Hill have come as banks, facing unrelenting anger over the financial crisis and government bailouts, have avoided publicly resisting a push to reform the industry. Many of the firms even reduced campaign contributions by their political action committees last year. And three big banks that have faced especially heavy public criticism -- Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. -- cut back or held steady on lobbying last year.
But the increased spending by other firms -- as well as by industry groups -- suggests financial firms are making their voices heard more than ever.
"Despite the decline in credibility with the public, the banks appear to have increasing power" on Capitol Hill, said Travis Plunkett, a lobbyist with the Consumer Federation of America.
The banks generally declined to comment on their lobbying. Wells Fargo said its 27% increase was justified because the bank nearly doubled in size by acquiring struggling Wachovia at the height of the financial crisis.
The banks have emphatically proclaimed a desire to see reform of the sort being discussed by legislators. At a Senate hearing this month, JPMorgan and Goldman Sachs executives said they wanted to see the government help make the financial industry more stable.
"I fully and enthusiastically agree that we have to put 'too big to fail' behind us," said Gerald Corrigan, a senior executive at Goldman Sachs.
But outside of public view, bank executives have expressed concerns about the steps that Congress and the Obama administration have been looking at.
In a survey late last year by the Center for the Study of Financial Innovations, an industry-sponsored think tank, bankers said the biggest risk to the financial system was "political interference," with "too much regulation" coming in third. In the last such survey, in May 2008, liquidity was named as the top risk, "too much regulation" was No. 8 and "political interference" was not in the top 30.

Saturday, June 23, 2012

Why do white collar criminals, especially banksters, have so little to worry about in the USA?


Ponder the ongoing spectacle of thousands of unindicted bank fraudsters roaming free and enjoying the fruits of their crimes.  
Former S&L investigator and prosecutor William K. Black testifies as follows in the video linked below:  
By 2006 there were 2 million liar's loans being made every year, half of them by the nation's biggest banks, yet there have been very few attempts to prosecute any of the senior bank officers or mortgage loan officers who have been directly responsible for the origination of these millions of fraudulent loans.   The S&L crisis of the 1980s was 1/70 th as large, but there were _1000_ felony convictions and a 90% conviction rate with regard to the prosecutions that were carried forward, after many _thousands_ of criminal referrals were made by regulatory agencies which at that time were adequately staffed and not controlled by the institutions they were supposed to regulate.   Yet following our recent mortgage and banking crisis, our nation's regulatory agencies have made _zero_ criminal referrals.   As a result, there has been no real investigation of any of these large entities (banks & mortgage companies) whose frauds drove and caused the crisis that this country has gone through and which has not yet finished taking its immense toll.
America's largest banks issued millions of fraudulent mortgages many of which were then then sold downstream to government-backed guarantor Fannie Mae.   By 2006, 1/3 rd of home loans made that year were liar loans.   In liar loans, new evidence shows that the incidence of fraud by banking officers is 90%, which is to say that lenders and their agents were overwhelmingly the ones who put the lies into those liar loans.   Fully 75% of nontraditional loans made by our biggest banks were liar's loans.   Therefore hundreds of these banks and their senior officers should now be facing prosecution, yet none of these top officers at these banks have yet been indicted.   Why is this?   Could it have something to do with the fact that these banks are currently allowed to contribute many millions of dollars to the political campaign funds of our presidential and congressional candidates seeking re-election?   You be the judge after watching the video linked here , which consists of an interview with former S&L investigator and prosecutor William K. Black.

Thursday, June 21, 2012

U.S. Banks to Pay $125,000 to Many Hurt in Foreclosures

By Jesse Hamilton on June 21, 2012

    Companies Mentioned

    • JPM
      • $35.51 USD
      • -0.94
      • -2.65%
    • C
      • $27.83 USD
      • -1.03
      • -3.7%
    • BAC
      • $7.82 USD
      • -0.32
      • -4.09%
    • WFC
      • $32.34 USD
      • -0.47
      • -1.45%
    U.S. banks including JPMorgan Chase & Co. (JPM) (JPM)and Citigroup Inc. (C) (C) will pay as much as $125,000 plus equity to individual customers most harmed by mishandled foreclosures in 2009 and 2010, according to a remediation plan released by federal regulators.
    “While we’ve made great strides since we took enforcement action against large mortgage servicers last year, much work is still ahead,” said Thomas Curry, U.S. comptroller of the currency, in a statement. This industry guidance “helps people who are considering requesting a free review to understand how they may be compensated for the financial injury they may have suffered,” he said.
    A group of the largest mortgage servicers were ordered by the Office of the Comptroller of the Currency and other banking regulators last year to clean up their foreclosure practices and hire independent consultants to see whether their methods in 2009 and 2010 unfairly hurt customers. The 14 firms, also including Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) (WFC), could be instructed to give lump-sum payments between $500 and $125,000 in each case involving improper practices, the regulators said.
    Besides lump-sum payments, loan servicers who improperly handled foreclosures may have to rescind them, modify loans or correct credit reports, according to industry guidance issued today by the OCC and the Federal Reserve.
    “I think the range of potential recovery is surprisingly large,” said David Dunn, a lawyer who represents lenders at Hogan Lovells U.S. LLP in New York. “Is there a rationale for those numbers? I haven’t seen it if there is.”

    Potential Claimants

    The universe of potential claimants includes an unknown portion of the 4.4 million borrowers to whom regulators sent letters informing them they can ask for reviews. Of those, 4.4 percent, or 193,630, had done so by the end of May, according to a six-month report on the process also released by the regulators today. The independent consultants picked another 144,817 files to examine. About 12,000 cases have gone through review so far.
    The guidance says a person whose house was foreclosed on when the mortgage wasn’t officially in default should be given $125,000 if the foreclosure can’t be rescinded. That borrower would also be entitled to any positive difference between what was owed on the mortgage and what the house was worth at the time of the error.
    People who lost homes to foreclosure in 2009 and 2010 are being given a deadline extension from July 31 to Sept. 30 for filing to have their cases reviewed for potential errors and misrepresentations, and can do so through

    Top States

    Borrowers from California have so far led the requests for review with 35,480, followed by Florida and Texas, according to the report.
    “The servicers see this guidance as an important step toward completion of the Independent Foreclosure Review process,” according to a statement from the Housing Policy Council of the Financial Services Roundtable, a Washington-based trade group representing the largest mortgage servicers.
    Consumer groups are concerned the payouts won’t amount to much in regions with high real-estate costs.
    “Whether it’s enough really depends a lot on where you live,” said Paul Leonard, the California director for the Durham, North Carolina-based Center for Responsible Lending. “If you no longer have your home, $125,000 may or may not get you back in a home in California.”
    To contact the reporter on this story: Jesse Hamilton in Washington at
    To contact the editor responsible for this story: Maura Reynolds at