The Ascendancy of a Criminal Financial Elite

The Two Faces of a Police State: Sheltering Tax Evaders, Financial Swindlers and Money Launderers while Policing the Citizens


Global Research
Prof. James Petras

    “The rotten heart of finance” The Economist

    “There is a degree of cynicism and greed which is really quite shocking” Lord Turner Bank of England , Financial Service Authority 

Introduction

Never in the history of the United States have we witnessed crimes committed on the scale and scope of the present day by both private and state elites.

An economist of impeccable credentials, James Henry, former chief economist at the prestigious consulting firm McKinsey & Company, has researched and documented tax evasion. He found that the super-wealthy and their families have as much as $32 trillion (USD) of hidden assets in offshore tax havens, representing up to $280 billion in lost income tax revenue! This study excluded such non-financial assets as real estate, precious metals, jewels, yachts, race horses, luxury vehicles and so on. Of the $32 trillion in hidden assets, $23 trillion is held by the super-rich of North America and Europe .

A recent report by a United Nations Special Committee on Money Laundering found that US and European banks laundered over $300 billion a year, including $30 billion just from the Mexican drug cartels.

New reports on the multi-billion dollar financial swindles involving the major banks in the US and Europe are published each week. England ’s leading banks, including Barclay’s and a host of others, have been identified as having rigged the LIBOR, or inter-bank lending rate, for years in order to maximize profits. The Bank of New York, JP Morgan, HSBC, Wachovia and Citibank are among scores of banks, which have been charged with laundering drug money and other illicit funds according to investigations from the US Senate Banking Committees. Multi-national corporations receive federal bailout funds and tax exemptions and then, in violation of publicized agreements with the government, relocate plants and jobs in Asia and Mexico .

Major investment houses, like Goldman Sachs, have conned investors for years to invest in ‘garbage’ equities while the brokers pumped and dumped the worthless stocks. Jon Corzine, CEO of MF Global (as well as a former CEO of Goldman Sachs, former US Senator and Governor of New Jersey) claimed that he “cannot account” for $1.6 billion in lost client investors funds from the collapse of MF Global in 2011.

Despite the growth of an enormous police state apparatus, the proliferation of investigatory agencies, Congressional hearings and over 400,000 employees at the Department of Homeland Security, not a single banker has gone to jail. In the most egregious cases, a bank like Barclay’s will pay a minor fine for having facilitated tax evasion and engaging in speculative swindles. At the same time, the principle ‘miscreant’ in the LIBOR swindle, Chief Operating Officer (COO) of Barclay’s Bank, Jerry Del Missier, will receive a severance payout of $13 million dollars.

In contrast to the ‘lax’ law enforcement practiced by the burgeoning police state with regard to the swindles of the banking, corporate and billionaire elites, it has intensified political repression of citizens and immigrants who have not committed any crime against public safety and order.

Millions of immigrants have been seized from their homes and work-places, jailed, beaten and deported. Hundreds of Hispanic and Afro-American neighborhoods have been the target of police raids, shootouts and killings. In such neighborhoods, the local and federal police operate with impunity – as was illustrated by shocking videos of the police shootings and brutality against unarmed civilians in Anaheim , California . Muslims, South Asians, Arabs, Iranians and others are racially profiled, arbitrarily arrested and prosecuted for participating in charities and humanitarian foundations or simply for attending religious institutions. Over 40 million Americans engaged in lawful political activity are currently under surveillance, spied upon and frequently harassed.

The Two Faces of the US Government: Impunity and Repression

Overwhelming documentation supports the notion that the US police and judicial system has totally broken down when it comes to enforcing the law of the land regarding crimes among the financial, banking, corporate elite.

Trillion-dollar tax-evaders, billionaire financial swindlers and multi-billionaire money launderers are almost never sent to jail. While some may pay a fine, none have their illicit earnings seized even though many are repeat criminals. Recidivism among financial criminals is rife because the penalties are so light, the profit are so high and the investigations are infrequent, superficial and inconsequential. The United Nations Office on Drugs and Crime (UNODC) reported that $1.6 trillion was laundered, mostly in Western banks, in 2009, one fifth coming directly from the drug trade. The bulk of income from the cocaine trade was generated in North America ($35 billion), two-thirds of which were laundered in North American banks. The failure to prosecute bankers engaged in a critical link of the drug trade is not due to ‘lack of information’, nor is it due to the ‘laxness’ on the part of regulators and law enforcement. The reason is that the banks are too big to prosecute and the bankers are too rich to jail. Effective law-enforcement would lead to the prosecution of all the leading banks and bankers, which would sharply reduce profits. Jailing the top bankers would close the ‘revolving door’, the golden portal through which government regulators secure their own wealth and fortune by joining private investment houses after leaving ‘public’ service. The assets of the ten biggest banks in the US form a sizeable share of the US economy. The boards of directors of the biggest banks inter-lock with all major corporate sectors. The top and middle financial officials and their counterparts in the corporate sector, as well as their principle stockholders and bondholders, are among the country’s biggest tax evaders.

While the Security and Exchange Commission, the Treasury Department and the Senate Banking Committee all make a public pretense of investigating high financial crimes, their real function is to protect these institutions from any efforts to transform their structure, operations and role in the US economy. The fines, which were recently levied, are high by previous standards but still only amount to, at most, a couple of weeks’ profits.

Elites Bilk Populace through Manipulation of Currency, Interest Rates and Precious Metals

J.T. Waldron

The mechanisms for transferring wealth from the majority to the elite involve a massive conspiracy to deceive with the primary goal of getting all to jump into tangled heaps of collapsing markets. 

Starting with the currency market, the Federal Reserve responds to increased public scrutiny and pending audits by posting a study extolling the virtues of  quantitative easing to keep high prices for the stock market.   As reported by CNBC, the Federal Reserve claims that stock market prices woud be 50% lower without the Federal Reserve.  The question should be, "So what?  Do the prices accurately reflect the value of the stocks or not? "  This inflation is fueled by the misconception that the price of stocks somehow reflect the state of the economy.  Stocks from companies that rely on cheap labor overseas, downsizing, consolidation, liquidation - anything that could dismantle the domestic labor force. 

Keeping news pundits with ample filler on their tele-prompters, one can often hear the excuse du jour for why indexes have slipped on any given day.  This becomes its own clever PR technique suggesting concerns with the war on terror, public trends less favorable to investors, or whatever the desired suggestion is laid out for those who've bought into the system. 

In the name of saving the market from dismal price performance on behalf of a handful of investors, U.S. currency has incurred a 97% loss in purchasing power since the Federal Reserve's formation in 1913.  

The Federal Reserve is directly accountable for an average of 10% inflation in the last 10 years.  The result is a population indirectly taxed through the reduction of real purchasing power, especially among those for whom purchasing power actually means something.  They are robbed to please an elite handful of investors depending upon inflated stock prices. 

But that is only one avenue for bilking the public.  Apparently, interest rates were manipulated to draw more unwitting families and individuals into financial traps like various credit lines and mortgages.   As a Barclay's employee reported to the New York Federal Reserve, “Our feeling is that Libors are again becoming rather unrealistic and do not reflect the true cost of borrowing.”. 

There was nothing ambiguous about what was communicated by the Barclay employee to the New York Fed:  “Where I would be able to borrow in the interbank market … without question it would be higher than the rate I’m actually putting in.”

Libor serves as a benchmark interest rate for trillions of dollars worth of loans to consumers and corporations.

Recollections of Geithner's handling of interest rate-fixing are no different from skilled bureaucracies at all municipal levels - make sure there is one memo or piece of paper to pull out of your ass for culpable deniability.  A sincere effort to restore credibility to the markets would have seen Geithner demanding an end to the practice, stating the implications for fraud at this scale, and threats to go public.   The staid approach in itself suggests that systemic deception is the norm, not the exception.
  

As much as 800 trillion dollars of financial products were were initially valued based on Libor rates.  The consistent pattern was to present lower interest rates to sell more loans and financial products.   This makes the market so inefficient, there is no reliance in determining the value of these debt instruments.  

Some analysts, like Bruce Kastling, make the claim that consumers enjoyed initial lower rates and, because they entered at a lower rate, they have no claim.  

How many people would have never qualified for or purchased mortgages or consumer loans had the cost truly reflected the market?  Setting aside the folly of variable interest rate loans, illegal rescission of various credit lines, and extreme interest rate hikes, what about the effects from a massive fraud of this scale on the economy?  

How many times have vast market corrections induced default and foreclosure among those who didn't see it coming?  Are we to blame the victim for not anticipating huge market volatility that results from mass conspiracy to commit fraud?  Probably not. 

And what's in store for those who choose precious metals as a means of protecting real purchasing power?   Are those investing in gold going to see an accurate reflection of their wealth over time? 

According to Ned Taylor-Leland, an investment director at Cheviot, "like interest rates, gold and silver reflect the true value of money the same way interest rates do."

"It is effectively an intervention in two ways; one would be the fact that for central banks, gold and silver going up doesn't make their currency look any good, and secondly a number of the big commercial banks have very large short positions which they like to manage and make easy money from."

Under the guise of a safe haven for value, smaller investors are finding their prices subject to an elite group of investors corrupting market accuracy in exchange for speculative profits and the concerted effort to keep the value of the U.S. dollar artificially high in the wake of massive Bernanke-style currency dumps.  

These conspiracies to deceive the public should open renewed dialog over U.S. taxpayer funded bailouts for institutions hiding behind the fascist concept of "too big to fail".  Bailouts are another example of how the majority is bilked into thinking they are somehow supporting the saviors of capitalism when they are actually handing more wealth over to the criminal elite.

This whole system relying  on  the "magic of the market place" needs to be dismantled.  Here are some additional statistics indicating this mass exodus of wealth from the majority to the criminal elite from an earlier article by J.D. Sayles:

#1 - The “corporate-tax-percentage” of all federal revenue plummeted from 32% to7% since 1960.

#2 - Two out of three U.S. corporations paid no federal taxes from 1998-2005 on sales of $2.5 trillion

#3 - Tax rates for the wealthiest plummeted from 91% to 36% - which goes far lower with loopholes.  All of which combined to cause a collapse in tax revenues from these sectors.  Our revenue this past decade was about $41 trillion.  Had we received just an additional 10% over this time period we could have our debt reduced by:  $4.1 trillion

#4 - Multi-Billion dollar corporate subsidies have doubled over the past decade to over 2000 programs.  Energy subsidies cost roughly $200 billion the past 20 years and farm subsidies over the same period of time cost taxpayers roughly $300 billion more:  $500 billion

#5 - Tax-payer bailouts for bankers, who provide 40% of all campaign donations:  $700 billion

#6 - More than one trillion tax dollars have been wasted on wars, subsidizing the corporate war machine with another $2 trillion predicted in future commitments resulting from these wars:  $1.167 trillion plus $45 billion for aid to repair the destruction that we caused.

#7 - Trillions of dollars were admittedly "misplaced" by the Pentagon, subsidizing the corporate war machine:  $2.3 trillion

#8 - Billions of tax dollars given in foreign “aid”, subsidizing the corporate war machine:  $200 billion

#9 - Trillions of dollars in salaries and bonuses for the political/corporate elite the past few decades

#10 - The corporate elite (top 1%) own almost 50% of America’s wealth and 23% of America’s income.  The last time these numbers happened were as we exited the "Guilded Age", the collapse of the stock market in 1929 and entered into the age of "The Great Depression".  Yet they push for more...

#11 - Politicians make fortunes legislating to the gain of their personal corporate stock portfolios

#12 - Politicians make fortunes in the political after-life with corporate lobbying income

#13 - An unfunded big PHRMA bill (03 modernization act) cost taxpayers another:  $534 billion

#14 - Due to market manipulations, pensions lost:  $3.3 trillion

#15 - Small investors and 401ks invested in the stock market lost:  $9.3 trillion

#16 - In addition to 3 million foreclosures, homeowners lost in home equity:  $9 trillion

Dallas Fed: Top five U.S. banks hold over half of industry’s assets

Raw Story
Stephen C. Webster

 In its annual report for 2011, issued on Wednesday, the Federal Reserve Bank of Dallas released a startling report revealing that 52 percent of all the assets held by the entire banking industry have now become aggregated into the hands of just five companies, and the top 10 institutions have swollen so large that they possess wealth that equates to roughly half of America’s annual gross domestic product (GDP).

It is for those reasons that Dallas Fed president Richard Fisher, who’s otherwise known as a conservative budget hawk, has embraced the radical cause of breaking up the nation’s largest banks and forever ending “too big to fail.” In a letter introducing the 2011 report, he cautions that Congress may not have gone far enough with prior attempts at financial reforms, and that those bills may even be working against the struggling economic recovery underway.

Alarming as that sounds, it’s the Dallas Fed’s chart of U.S. banking assets that’s most startling.

In his letter, Fisher adds that if the wealthiest sample group is expanded to the top 10 banks, their total assets are worth approximately half of America’s annual GDP, which eclipsed $14.5 trillion in 2010.
He goes on to suggest that Congress did not go far enough with the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act (PDF) because it did not effectively deal with the problem of institutions growing to such heights that their fall threatens the whole economy.