OCT. 12. 2011
EXCLUSIVE TO HUSTLER: Reporter Jordan David, at the “Occupy Wall Street”
protest, interviews one of the two young men detained by New York City
police prior to the arrest of the couple seen in the previous video. (See
the video below.)
“It is well enough that the people of the nation do not understand our banking and monetary system for, if they did, I believe there would be a revolution before tomorrow morning.” —Henry Ford
Report by Tyler Downey
Financial catastrophe. Double-digit unemployment. Home foreclosures. An everwidening gulf between the extremely rich and the rest of us. Control of government and media in the hands of a select group of elites. Wall Street destroying the middle class. Are these the harsh realities that face Americans today? Absolutely. But they’ve always been offshoots of crony capitalism, which has a long history of wreaking havoc on this country. Whether it was the railroad bubble of 1893, the rampant financial malfeasance of the Roaring Twenties that led to the Great Depression, the dot-com crash of the late 1990s or the current real estate-driven mess we find ourselves in now, Wall Street speculation and corruption have been at the heart of America’s economic crises.
It takes an extremely courageous and patriotic leader to stand up to the Wall Street banking cartels. Franklin Delano Roosevelt was such a man. When he was elected President in 1932, America was beset by the worst financial crisis it had ever known. Despite assurances from the bankers that the Federal Reserve System (formed in 1913) would forever prevent the panics and economic upheaval that had previously struck the country, the Great Depression of the 1930s nearly wiped out the American middle class.
Seeing the damage inflicted by an outof- control Wall Street, FDR took drastic steps to curb the bankers’ influence. “We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering,” he declared during a campaign speech at New York City’s Madison Square Garden in 1936. “They had begun to consider the Government of the United States as a mere against one candidate as they stand today. They are unanimous in their hate for me— and I welcome their hatred.”
The robber barons certainly didn’t want Roosevelt, a Democrat, reelected. Once FDR took office in 1933, chief counsel Ferdinand Pecora—a former New York City prosecutor—was given the green light to rev up the Senate Banking Committee’s investigation into the practices that had triggered the Stock Market Crash of 1929. Pecora ultimately concluded: “Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker’s stoutest allies.”
Pecora uncovered stock offerings at discounted prices to politicians, the selling of bad loans to unsuspecting investors and the fact that J.P. Morgan Jr. and his partners had paid no income taxes in 1931 and 1932. The president of Citigroup was forced to resign. As Ron Chernow explained in a 2009 New York Times article, it was Pecora’s inquiry that paved the way for the legislation that followed.
Franklin D. Roosevelt first ordered the Treasury Department to close all banks that had been reckless with people’s money. There would be no bailout for them. He then signed into law the Banking Act of 1933, better known as the Glass-Steagall Act, which separated investment and commercial banking. No longer could banks speculate with money that customers had deposited into their private accounts.
FDR also pushed legislation making it much harder for banks to repossess family homes and farms. He instituted the Federal Deposit Insurance Corporation, which safeguarded depositors’ accounts and thus restored public confidence in the nation’s banks. FDR introduced regulation into nearly every sector of the economy— energy, labor, trade—to ensure that the middle class was protected from the predations of crony capitalism.
In his 1944 State of the Union address, Roosevelt even proposed an Economic Bill of Rights. “To assure us equality in the pursuit of happiness,” it basically stipulated that no citizen should be denied employment (with a living wage), “a decent home,” “adequate medical care,” “a good education” and social security. It also called for an end to monopolies and cartels. Unfortunately, FDR died before this great goal could be realized, but his bold actions led to an unprecedented 50 years of prosperity for the American middle class.
Of course, Wall Street would fight back. appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united Abetted by massive campaign donations, media consolidation and good old-fashioned corruption, the robber barons have waged a 75-year war on the policies of FDR.
The tide turned in Wall Street’s favor with the election of Ronald Reagan in 1980. It was his administration that first allowed financiers to write laws that their servants on Capitol Hill enacted. How did the politicians become captives of the ruling class? Since 1990 the financial sector has spent over $2.5 billion on campaign donations alone, not including the astronomical amount spent on lobbying.
This is far and away the most money donated by a single industry—and it’s going to Republicans and Democrats! That’s why it’s impossible to differentiate between Ronald Reagan’s “deregulation” policies and those of Democrat Bill Clinton. Both Presidents were bought and paid for by Wall Street bankers. According to bestselling author Charles Geisst, the culmination of this silent war against the legacy of FDR was the repeal of the Glass-Steagall Act in 1999. Thanks to Clinton, the robber barons came back in full force, and it took less than ten years to see the result of those efforts.
The Federal Reserve’s record-low interest rates had spawned a colossal real estate bubble. Freed from the regulations of FDR, Wall Street investment firms issued riskier and riskier loans. By 2008 the corrupt system became untenable. Ordinary Americans lost $17 trillion in retirement savings, announced Treasury Department chief economist Alan Krueger. When it all came crashing down, the bankers threatened to destroy the entire financial system if they didn’t get paid off.
Democrat Barack Obama was elected with a mandate to again make government work for the people, not Wall Street. However, his campaign received nearly $40 million in contributions from Wall Street entities. It appears that despite his promises and speeches, Obama is just another politician bought and paid for by the financial industry.
Even after securing his party’s Presidential candidacy in 2008, Obama supported President George W. Bush’s decision to hand over $700 billion of American taxpayer money—with no claw-backs, no oversight and no controls—to bail out Goldman Sachs, Citigroup, Bank of America, AIG and other firms. The recipients then spent about $114 million of our tax money in campaign donations in 2008 alone. They also planned to dole out roughly $14 billion in bonuses to executives.
QUESTION: WHEN IS A CRIME NOT CONSIDERED CRIMINAL? ANSWER: WHEN IT’S HATCHED ON WALL STREET.
By Danny Schechter
for HUSTLER Magazine January 2011
All over Europe and in much of the rest of the world, a new fictional hero has engaged the fascination of millions of readers. His name is Mikael Blomkvist, and he’s the protagonist of the late Stieg Larsson’s Millennium trilogy. These thrillers, set against the background of high financial crimes and misdemeanors, have become global best-sellers, doubtless in part owing to their gripping plots, elaborate mysteries and engaging characters. But their success is also indisputably a by-product of the macroeconomic chicaneries of our era and the human catastrophes they have wrought.
Larsson understood that financial crimes are far from victimless. They have upended millions of people’s lives, even if most of the victims don’t understand how they’ve been shortchanged and who is responsible.
Although the financial crisis that swept the world may have started on Wall Street, it has brought down governments and shredded economic security worldwide, resulting in the loss of millions of jobs and homes as businesses collapse, foreclosures grow, credit tightens and communities are devastated. One estimate of the damage: $197 trillion.
The Pew Economic Policy Group reports the average U.S. household lost $66,000 in stock holdings and $30,000 in real estate values from June 2008 through March 2009 due to the upheaval in world markets. This brings us close to $100,000 per family. Against that backdrop, it’s not hard to see the appeal of Larsson’s hero Blomkvist, whose “contempt for his fellow financial journalists” the author encapsulates with stinging clarity: “A bank director who blows millions on foolhardy speculations should not keep his job. A managing director who plays shell company games should do time…. The job of the financial journalist was to examine the sharks who created interest crises and speculated away the savings of small investors, to scrutinize company boards with the same merciless zeal with which political reporters pursue the tiniest steps out of line of ministers and members of Parliament.”
This is why I identified with Blomkvists’s fictional mission; in some ways it captured my own frustrations in a media world for which “the c-word”— as in financial crime—seems must never be spoken.
The media failed us on the most crucial story of our era. Our newspapers and TV sources contributed to an economic disaster so cynically engineered even billionaire investor Jim Chanos was prompted to ask, “So where are the perp walks? How long does it take before we see any investigations? It boggles the mind that $150 billion is vaporized…there haven’t been any arrests, any indictments, nor any convictions at any major bank or at any of the government-owned financial institutions Fannie, Freddie and AIG.”
I know how hard it is to alarm the public with mere facts. They don’t have the context within which to interpret complicated stories. In 2006 I released the film In Debt We Trust, exposing illegal subprime scams and warning of the coming meltdown. It was well reviewed, but no mainstream TV outlet would air it.
I was dismissed as an alarmist and a “doom and gloomer.” A mass denial of the dangers ahead seemed to be embedded in the euphoria of the very bubble that was bringing in billions for Wall Street’s financial alchemists, who themselves seemed oblivious to the risks and indifferent to the social impact their practices courted.
The media coverage has made a complex reality deliberately complicated, even incomprehensible. The satirical paper The Onion put the financial press in its place regarding the totally obtuse reporting for which financial journalists were justly infamous even before the biggest scoop since 1929 fell into their laps: “JPMORGAN CHASE ACQUIRES BEAR STEARNS IN TEDIOUS-TO-READ NEWS ARTICLE.” The Onion witheringly characterized the coverage as “bogging down the news for anyone who might be remotely interested in grasping what the fuck is going on.”
Yet there were truth-tellers out there who were largely ignored. Investors like Warren Buffett compared the new exotic financial instruments to weapons of mass destruction— financial nuclear bombs.
Even guru of the right Ayn Rand had warned in Atlas Shrugged about greed destroying her beloved free market: “When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.”
Doomed or not, in the second year of the Age of Obama the hoped-for economic turnaround has yet to occur. Even as the stock market goes up again, benefitting institutional investors with the capabilities to exploit it, unemployment remains high and loan defaults continue to rise. The best projections forecast a “jobless recovery,” which for millions is no recovery at all. How did we get into this mess? Put ten economists in a room, and you get 20 explanations. Most of them revolve around business mistakes, poor risk models or even psychological problems like delusion and market madness. Few will concede Senator Ted Kaufman (D-Delaware) is right in charging that “fraud and potential criminal conduct were at the heart of the financial crisis.” Missing has been a hard-nosed look at the crisis as a crime story. Former bank examiner William Black understands this. Focusing on looting and CEO fraud, he helped send over 1,000 bankers to prison during the S&L crisis in the 1980s. This time there were neither dogged sleuths nor crime-busting newshounds on the beat.
Even Alan Greenspan has finally admitted in his all-too-polite exchange with a government inquiry that has come to resemble a Princeton seminar, “If you don’t have enforcement, and a lot of that stuff was just plain fraud, you’re not coming to grips with the issue.” Of course, this “maestro” didn’t go into detail on “a lot of that stuff.”
What we are watching is an abstruse debate about banks that are “too big to fail,” not too big to jail.Very little of the discourse speaks in terms of the victims—the millions of families now without breadwinners or homes. Most of the commentary still looks up at CEOs, not down at the people whom they robbed by design, as folk singer Woody Guthrie put it, not with a six-gun but “with a fountain pen.”
When most of us think of crime, we think of gangsters with guns, not banksters with elaborate schemes designed to transfer your wealth to their accounts. Graydon Carter, the editor of Vanity Fair—a publication more at home with Groucho Marx than Karl—said of the meltdown: “[This] may well turn out to be the greatest nonviolent crime against humanity in history…never before have so few done so much to so many.”
Yet economists, even progressive ones like James Kwak, deeply mired in the labyrinthian world of financial transactions, still don’t believe it. The day the SEC filed a complaint against Goldman Sachs, he wrote on BaselineScenario.com, one of the more critical Web sites covering the collapse of this vast swindle: “One of the things I say now and then that most annoys people is that the financial crisis was not caused by criminal behavior…. My general line is that I’m sure there was some bad behavior that rose to the level of criminal liability—like lying in disclosure documents—but that it wasn’t necessary for the crisis, and we could have had the crisis without any criminal activity at all.” The problem with this thinking is that it defines financial crime too narrowly, only in terms of securities laws concerned primarily with protecting investors.
It doesn’t acknowledge that financial institutions spent nearly a billion dollars underwriting efforts to erode government controls and change rules, regulations and even laws to allow them to get away with whatever enhanced their bottom lines, no matter who got hurt. Their well-documented history of aggressive lobbying and buying up politicians qualifies them as avaricious manipulators, not law-abiding companies. Their legal and moral defenses for this conduct are entirely bogus.
Let’s look at Goldman Sachs. In my film I report that Goldman was accused by Massachusetts authorities of deliberately designing mortgages to fail. They settled the complaint by paying a $60-million fine and wrote it off as a cost of doing business. The SEC later filed civil fraud charges on similar grounds. This was followed by turbulent hearings on the Hill during which Senator Carl Levin (D-Michigan) repeatedly cited an internal correspondence reference to “shitty” deals that Goldman Sachs peddled only to bet against them. The Justice Department, in a separate action, was asked to open a criminal file.Among the allegations: shady accounting schemes. The giant firm has certainly come in for excoriation and ridicule, but none of Goldman’s officers has been convicted of wrongdoing, and they are “lawyered up” to the gills. Leslie Griffith on Reader Supported News writes: “A modern-day financial monarchy, Goldman acts with the impunity once reserved for kings. Controlling legislators. Electing Presidents. Filling the Executive Branch with well-heeled lackeys, manipulating world markets and betting against the welfare of its own clients…the American people. When their equivalent of ‘tax time’ came, they squeezed the peasants for billions of bail-out bucks.”
In their testimony before Congress, Goldman bankers defended themselves by saying all big banks did what they did. A weak alibi at best, it nonetheless seems to be working for them. The assignment of criminal liability is hardly underway. As one lawyer said to Bloomberg News, “In order to proceed criminally in a case, you need to have very clear evidence of lying, cheating and stealing.” In plain English: Don’t get your hopes up. The government has not declared war on Wall Street even after Wall Street declared war on Main Street. The housing bubble was built on a bedrock of fraud linking shady subprime brokers and appraisers to an industry of financial products that were then resold with misrepresented values thanks to the connivance of unethical ratings agencies.
The selling and reselling of assetless asset-backed securities is a central element of the vast fraud, as is the practice of insuring while simultaneously betting against these investments through companies like AIG. We are talking about a criminal enterprise involving tens of thousands of people working in the financial services industry. Martin Wolf of The Financial Times explained that three industries worked together almost like a cabal to perpetuate these schemes. The architects of the FIRE economy (structured around Finance, Insurance and Real Estate), operated in the shadow of bent rules and apathetic regulators. They built a huge infrastructure of collaborators and henchmen called “financial service professionals.”
Writes Wolf: “In between the ultimate borrowers and the risk-takers were loan-originators, designers and packagers of securitized assets, ratings agencies, sales staff, managers of banks and SIVs [Structured Investment Vehicles] and managers of pension—and other—funds.” What chance did some poor homeowner or credit card customer have against this savvy and well-funded phalanx of operatives whose one mission was to separate them from their property and money?
Many knew the people they were selling to could not afford to buy their products. They didn’t care. It was all done deceptively and by design. It was deliberate, engineered in public and hidden in plain sight. At the local level, mortgage companies said they were under pressure from Wall Street to keep selling homes to the poor so the paper could be resold in an atmosphere of trickle-down corruption.
My own investigation led me to produce a new film, Plunder: The Crime of Our Time, out on DVD from Disinfo. (PlunderTheCrimeOfOurTime.com). I also wrote a companion book, The Crime of Our Time (Disinformation Books) with more documentation than you can get into any film of reasonable length. I was surprised when the Wall Street Journal characterized it as an “anti-Wall Street film [that] isn’t just for Michael Moore fans.” The Hollywood Interview blog called it “fascinating and nailbiting, much like All the President’s Men.”
Movie City News elaborated: “Plunder: The Crime of Our Time describes how Wall Street interests greased the skids for just such a collapse, consciously breaking laws they knew government regulators were unlikely to defend. Michael Moore has trod similar ground, but in a more overtly entertaining style…. It’s a sobering documentary, but one that’s too important to ignore…in Schechter’s case, again.”
This crisis can be explained in a way most people will understand, and when the public “gets it” they will get angry and act. It’s the oldest truism: Where there is a will, there’s a way.
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News Dissector Danny Schechter, graduate of Cornell University and the London School of Economics, has been a radio news director, local TV news reporter, CNN show producer and Emmy Award-winning ABC News broadcast producer. He is cofounder of Globalvision, an independent film and television production company. He has directed 25 documentaries, including his latest, Plunder: The Crime of Our Time, about the financial crisis as a crime story. He has been honored as a blogger and has written 11 books, including The Crime of Our Time, further detailing his findings regarding financial crime. He has reported from 60 countries. Comments to Dissector@MediaChannel.org.
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by Mark Johnson
for HUSTLER Magazine – July 2010
Just a year after sucking in over $700billion in taxpayer-funded bailouts, the Wall Street banks have again posted record profits and paid out huge bonuses.
Defending the latest free-for-all, banks say that they have paid back most of the money from the Troubled Assets Relief Program with interest. But the TARP bailout sum of $700 billion represents only a small fraction of the trillions of dollars in federal funds made available to rescue the U.S. financial system. According to TARP’s own special inspector general, estimates of how much the total aid package will cost reach as high as $23.7 trillion.
After the 2008 bailouts, Wall Street’s biggest banks doled out bonuses that far exceeded their profits. These bonuses are enshrined in contracts, so it doesn’t matter whether the banks are making money or losing it; the bankers still get rewarded. This blatant profiteering is sanctioned by bank boards, which are run by the same executives who enrich themselves with bonus income.
Wall Street firms currently account for35% of all U.S. corporate profits, and investment bankers typically pull in bonuses worth up to ten times their six-figure base salaries. The 38 largest Wall Street financial institutions paid out over $145 billion in employee compensation for 2009. That’s 18% more than for 2008. By comparison, average personal earnings for the nation as a whole rose only 2.2%.
A glaring example of Wall Street greed is Goldman Sachs. The investment bank raked in$45.2 billion in revenue for 2009, made a profit of $13 billion and paid out $16.19 billion to employees. That included stock bonuses worth $45 million for its top executives, with CEO Lloyd Blankfein pocketing $9 million. Insurance and investment giant AIG, which got slammed for its huge 2008 bonuses, paid out bonuses totaling $100 million for 2009.AIG received a $180-billion rescue package in late 2008 and still hasn’t paid it all back.
JPMorgan Chase reported profits of $11.7billion for 2009 and paid out $26.9 billion, a major chunk of it in the form of bonuses. Bank of America raked in $119.6 billion in2009, paid out $31.5 billion to employees and awarded its investment bankers $4.4 billion in bonuses. BofA also boosted the base salaries of its top executives.
Despite their profits and bonus payouts, Wall Street banks are still drawing on the trillions of dollars made available to them by the U.S. government. Worse still, economists are projecting fresh foreclosure waves to hit Wall Street, giving the banks more excuses to line their pockets with taxpayer dollars.
The same banks profiting from taxpayer dollars are also making sure no one clamps down on their con game. Wall Street’s biggest banks are increasing political contributions and boosting budgets and manpower in their Capitol Hill lobbying corps to block any meaningful banking regulation.
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