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Bridging The Fiscal Cliff: A Wall Street Sales Tax

7:40 am in Uncategorized by DSWright

Day after day, day after day,
We stuck, nor breath nor motion;
As idle as a painted ship
Upon a painted ocean.
Water, water, everywhere,
And all the boards did shrink;
Water, water, everywhere,
Nor any drop to drink.
- The Rhyme of the Ancient Mariner

According to the latest reactionary brainwash scheme turned corporate media narrative America has a “spending problem.” We spend too much on taking care of people (stop laughing rest of the developed world) and therefore we have to go on a severe diet of austerity to enrich Wall Street banksters restore fiscal sanity. Because if we do not rich people and their friends the global bond market will punish us with fire and brimstone – like vigilantes they will say “make my day” and years later relive their glory by cursing at an empty chair.

But the question arises when considering government deficits – aren’t there two sides to deficits? Is not another way to balance a budget to increase revenues?

The response from the reactionaries in Congress is no new revenues, period. Taxation is theft! You looting moochers! Stop spending taxpayer money, unless it’s for military contractors who donate to our campaigns! You’ll kill the economy with new taxes, actually with existing taxes, speaking of which how about another tax cut?

In short, while there are revenue sources everywhere, none can be used to balance the budget.

The more reasonable of the lot point out that ending the Bush tax cuts will not make up the shortfall so deep cuts are necessary regardless. While it is true that just restoring the Clinton-era tax levels for higher income earners will not be enough to balance the budget there is another revenue stream that would not only be fair but productive to tap into – Wall Street. It is time for a financial transaction tax.

A financial transaction tax has numerous benefits but let’s talk about the most relevant one. Revenue.

According to a report by Political Economy Research Institute of the University of Massachusetts a financial transaction tax would bring in roughly $350 billion in revenue annually. Enough revenue to maintain the massive defense budget, if that’s something you are into.

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And since we are talking about Wall Street let me move past greed to fear to offer another benefit of taxing sales on Wall Street – financial stability.

James Tobin, a Nobel-Prize winning economist, suggested levying a tax on speculative activity in the global currency market. A tax, Tobin believed, would help curb dangerous speculation such as occurred in Mexico, East Asia, and Russia in the 1990s. By exacting a cost on speculative activity the incentive to destabilize markets/countries through quick flows of money would be reduced as longer term investment would become more lucrative by contrast.

Curbing dangerous speculation was also the motive for one of the first proponents of the financial transaction tax, John Maynard Keynes, who wrote:

Speculators may do no harm as bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation…

The introduction of a substantial government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States.

Would the crash of 2008 have happened had there been a financial transaction tax on derivatives? Could a future financial crisis be averted by dampening speculative activity?

It is difficult to determine the positive effects of a financial transactions tax beyond revenue collection despite strong logic that it would reduce speculation – what is easy to determine is the lack of downside.

The Wall Street rejoinder to this tax proposal will surely be that it will hurt investment, and let me tell you right now why that is total bullshit – America once had a financial transactions tax.

Not only did America have a financial transactions tax, from 1914-1966, but the highest period of growth in American history occurred with it in place. If the tax hurt investment no one told the economy.

But putting aside any ancillary benefits, this is a tax that will collect needed revenues. If this revenue is not collected cuts to vital social programs will have to take place or be exacerbated. Social Security, Medicare, Medicaid, education assistance, anti-poverty programs – all on the chopping block without this revenue to make up the difference.

Budgets are about choices and priorities, they demonstrate our values. So what are our values? Should the poor suffer more, should we break our promises to seniors, or should speculators face a minor tax that may make them think twice about blowing bubbles?

The choice is up to you.

Filed: United States Of America vs. Bank Of America

4:53 pm in Uncategorized by DSWright

Tragically named Bank of America will be back in court following a lawsuit brought by federal prosecutors.

From the New York Times:

On Wednesday, federal prosecutors in New York took aim at Bank of America. They accused it of carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.

$1 billion is not a lot of money for Bank of America who already repaid the $45 billion TARP loan. But one revelation from the suit contradicts one of BofA’s talking points – namely that Countrywide are the real villains and BofA is being victimized due to a poor acquisition done during a crisis.

In the lawsuit on Wednesday, the Justice Department attacked a home loan program known as the “hustle,” which the bank inherited from Countrywide in 2008 and kept alive through 2009.

Prosecutors say the venture was a symbol of Wall Street’s slipshod standards during the mortgage bubble. According to the lawsuit, Countrywide rubber-stamped mortgage loans to risky borrowers and passed them on to Fannie Mae and Freddie Mac, the two government-controlled mortgage financial giants that guaranteed the loans. The two entities were ultimately stuck with heavy losses and a glut of foreclosed properties.

“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bharara, the United States attorney in Manhattan, said in a statement.

Brazen works. Especially as Wall Street through surrogates in Congress has tried to shift blame squarely on Freddie and Fannie, institutions it was committing fraud against according to the filings.

Occupy Wall Street before it Occupies You.

Fmr. Morgan Stanley CEO “Banker Pay Is Too High”

4:15 pm in Uncategorized by DSWright

I am noticing a trend here.

Many former Wall Street leaders are willing to advocate for reforms or even decry old norms – once they leave. The most breathtaking still has to be Sandy Weill’s epic reversal on Glass Steagall repeal. Honestly, that is just amazing.

But let’s look at former Morgan Stanley CEO John Mack’s comments:

Let’s be totally honest. A lot of people who have done really well have not handled that wealth very well. That gets to part of the issue with Wall Street. I think it’s really changing.

I think the kind of money that’s made and the way it was flaunted — look it’s wrong. [...] The money was really unbelievably generous, to say the right word…At the end of the day the one area that has to be squeezed [to give a return to shareholders] is the compensation number.

Whether or not Wall Street is “really changing” is debatable. What is not debatable is that speculators are wildly compensated when compared to other, more productive, jobs.

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(Source: Bloomberg News)

Traders are more compensated than brain surgeons and 4 star generals. Does that make sense to you?

Though it may be a little late in coming, let’s applaud the fmr. Morgan Stanley CEO for having the integrity to speak out – even if in retirement.

The Kings Speak: Blankfein and Dimon Preach Austerity

3:58 pm in Uncategorized by DSWright

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The banksters have launched a new offensive in their never ending quest to get the rest of society to pay for the crisis they created and capitulate to a life of debt slavery.

It began with JP Morgan Chase CEO Jamie Dimon participating in a one on one interview appropriately located at Neoliberal dream factory the Council On Foreign Relations in D.C.

Dimon claimed he did the Federal Reserve a favor by taking over Bear Stearns (at $2 a share) and that JP Morgan was expanding its business operations, including a recent move into Africa highlighting JP Morgan’s relationship with the energy industry (what could go wrong?). FYI, that means we now have a stronger “American Interest” there so defense cuts will have to wait.

The next day Goldman Sachs CEO Lloyd Blankfein appeared with Erskine Bowles and Alan Simpson – namesakes of the commission whose recommendation was to cut taxes for the rich yet again while forcing austerity on the 99% – to paint President Obama’s positions on the economy as the opposite “extreme” of the Republican position. Therefore of course Blankfein called for “compromise” between those “extremes.”

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So the banksters are not content to bribe Congress and throw money at both “extremists” running for President, they also want to set the terms of the debate for whomever wins – austerity for the poor, socialism for Wall Street. And hey, if the Federal Reserve makes you take a company for $2 a share then gives you endless loans while you get TARP from Congress, well somehow you have to find a way to make it through the day.

Guys, you aren’t fooling anyone with your phony patriotism and crocodile tears.

When Occupy called for transparency this wasn’t exactly the goal…

Occupy Retrospection: What Have We Learned?

3:19 pm in Uncategorized by DSWright

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“Those who profess to favor freedom and yet depreciate agitation want crops without plowing up the ground, they want rain without thunder and lightning. They want the ocean without the awful roar of its many waters. If there is no struggle, there is no progress. Power concedes nothing without a demand. It never did and it never will.” – Frederick Douglass

It has been over a year since Americans took to the streets to voice opposition to the established order – in all that vague glory. Many were disgusted by Wall Street’s numerous crimes and a lack of accountability from a corrupt government, others with a poor job market, and some did not even know why they were protesting but for a deep intuitive sense that something was wrong.

So after a year what have we all learned? Five lessons from the Occupy Wall Street movement (feel free to add your own).

Lesson #1 America Is Extremely Unequal

America has always had rich and poor, fat cats and starving dogs, but by 2012 the gap between the rich and everyone else had yawned to levels unseen in generations.

From Forbes:

The average annual income of the top 1 percent of the population is $717,000, compared to the average income of the rest of the population, which is around $51,000. The real disparity between the classes isn’t in income, however, but in net value: The 1 percent are worth about $8.4 million, or 70 times the worth of the lower classes.

The 1 percent are executives, doctors, lawyers and politicians, among other things. Within this group of people is an even smaller and wealthier subset of people, 1 percent of the top, or .01 percent of the entire nation. Those people have incomes of over $27 million, or roughly 540 times the national average income. Altogether, the top 1 percent control 43 percent of the wealth in the nation; the next 4 percent control an additional 29 percent.

It’s historically common for a powerful minority to control a majority of finances, but Americans haven’t seen a disparity this wide since before the Great Depression — and it keeps growing.

So the Top 5% control roughly 72% of the nation’s wealth.

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To dice it down even further, the top 400 richest Americans have more wealth than the bottom half – 155 million – Americans combined.

Dice it further? Fine. Six members of one family – the Waltons – have more wealth than the bottom 30% of Americans.

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(Occupy Wall Street Protester)

This is extreme inequality by any measure and only getting worse as – according to the Federal Reserve – the only class of Americans to increase their wealth post-crash has been the top 1%.

Lesson #2 Property Rights, For Some

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Did @Jack Just Endorse The Occupy Movement?

2:23 pm in Uncategorized by DSWright

(photo: edenpictures / flickr)

Jack Dorsey, a founder of Twitter and currently CEO of Square, gave a disruptive speech at this year’s TechCrunch Disrupt in San Fransisco.

Speaking at TechCrunch Disrupt in San Francisco, Dorsey called on the room packed with entrepreneurs to “pick a movement, pick a revolution, and join it.”

For some background, it is important to understand that the Disrupt conferences are actually a celebration of the volatility of capitalism not a critique of it. For example, it is not uncommon to hear Joseph Schumpeter’s famous creative deconstruction theory cited – as it was this year during one of the interviews with Yammer CEO David Sacks and conference founder Michael Arrington – to justify or even elevate the behavior of the firms being discussed or promoted.

Being disruptive is a good thing.

This is how many in Silicon Valley see their endeavors – that the havoc caused by the introduction of new technologies is creative destruction. That while the momentary shock of the change introduced is unpleasant for some, the holistic or net contribution is positive.

The Silicon Valley culture embraces rather than rejects the principles that underlay the theory of creative destruction, principles ironically first articulated in the Communist Manifesto by Karl Marx – from whom Schumpeter adapted his theory – that capitalism is a revolutionary force that transforms the world. The Silicon Valley adherents to ‘capitalism as revolution’ would likely rather embrace Schumpeter’s narrative frame of “innovation” than version 1.0′s frame of “commodification” but this is a stylistic (sorry, I promised myself I wouldn’t make a semantic web pun) not substantive change.

OK, so what the hell was Mr. Dorsey talking about if not the capitalist revolution of creative destruction?

http://www.5min.com/Video/Jack-Dorsey-Co-Founder-of-Twitter-and-Square-Delivers-His-Keynote-at-Disrupt-SF-517474731

Disruption is like an earthquake. It has no purpose. It has no values. It has no organizing principle. It has no direction. And it has no leadership. I think we have to change the name of this conference. This is not what we want to bring into the world.

What we want to bring into the world, is revolution.
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Bernanke Lies To Congress

6:00 pm in Uncategorized by DSWright

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Another chapter of Banksters and the “Regulators” That Love Them.

Yesterday Federal Reserve Chairman Bernanke testified before the House and Senate and, as is customary, avoided giving direct answers to direct questions. But while it is also customary for Bernanke to make questionable assertions (like there was no Housing Bubble) he went the extra mile yesterday in his dishonesty.

From Reuters:

Bernanke said the very notion of a monetary policy audit was misleading.

“The term ‘audit the Fed’ is deceptive. The public thinks that auditing means checking the books, looking at the financial statements, making sure that you’re not doing special deals, and that kind of thing. All of those things are (already) completely open,” he said.

That is a complete lie.

I am sure many of the news organizations that had to sue the Federal Reserve to get information on special deals would be quite confused by that statement.

So would Senator Sanders, Congressman Paul, fmr. Congressman Grayson and all the legislators that had to pass a bill before Bernanke would open the books.

To recap, if what Bernanke asserted about Fed special deals being “completely open” was true, why the lawsuits? Why the bi-partisan legislation forcing an audit?

From Bloomberg (after winning the lawsuit):

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.

Oh that “anyone” that included Congress.

Lawmakers knew none of this…

Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size…

“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”

The Left and the Right clearly do not agree on how to reform monetary policy but they can agree on the facts – and the fact is, as Mr. Bernanke well knows, the Federal Reserve does not have an open process let alone a “completely open” process as to how it operates and to whom it gives preferential treatment.

Luckily for Bernanke, he gives those secret loans to the people that buy Congress, otherwise his lying might get him into trouble.

LIBORGate: Grand Jury Impaneled In DC

12:34 pm in Uncategorized by DSWright

theEconomistBanksters 

From Reuters:

More than a dozen current and former employees of several large banks under investigation for allegedly trying to manipulate benchmark interest rates have hired defense lawyers over the past year, according to people familiar with the matter.

The individuals, some whom were employed in either New York or London by Barclays, UBS and Citigroup, have retained lawyers as a federal grand jury in Washington, D.C. gathers evidence for potential criminal charges, these people said.

In the case of Barclays and UBS, multiple law firms are representing individuals who have worked at those banks, sources said.

Remember, after the Banksters were caught ripping off the world the CFTC and the Department of Justice assigned fines on Barclays. It now appears Barclays may have cooperated against the other banks, there is no way Barclays could have rigged LIBOR by itself given the way the survey works it is possible all 16 banks participated. Are we FINALLY going to see the Banksters face prosecution?

Pay To Play: JP Morgan Paid $190K To Regulator’s Wife

4:18 pm in Uncategorized by DSWright

Matt Taibbi has claimed Wall Street operates like the mafia, Eliot Spitzer claims the mafia learned from Wall Street. But given the economic system is now Neo-feudalism perhaps the corruption more resembles a royal soap opera with lots of naughty palace intrigue – and like the serfs of old we get to eat the fallout.

From Wall Street On Parade:

On May 10 of this year, Jamie Dimon, Chairman and CEO of JPMorgan, announced that billions of insured deposits at his bank had been invested in high risk derivatives and had sustained at least a $2 billion loss. The Department of Justice and FBI have commenced investigations. Dimon is expected to announce the current extent of those losses this Friday in an earnings conference call.

Following the May 10 announcement, there were numerous calls for Dimon to step down from the Board of Directors of the Federal Reserve Bank of New York. That organization is the primary regulator of the firm. There was widespread public outrage that the CEO of a bank had no business serving on the governing body of his regulator. (The New York Fed has a long history of such conflicts.)

Now it has emerged that not only was Dimon conflicted in his role on the New York Fed but the President and CEO of the New York Fed had an equally dubious conflict of interest.

The Federal Reserve doesn’t have “conflicts of interest” the Federal Reserve IS a conflict of interest. Allowing Wall Street to control the money supply may be the definition of conflict of interest and has now lead to two depressions.

William C. Dudley has been employed by the New York Fed since January 1, 2007, first heading up the powerful Markets Group. That Group manages the supply of bank reserves in the banking system according to the mandate of the Federal Open Market Committee (FOMC). On January 27, 2009, Dudley was elevated to President and CEO of the New York Fed. Financial disclosure forms for 2008 through 2010 show that Dudley’s wife, Ann Darby, was a former Vice President of JPMorgan and had holdings of more than $1,500,000 in deferred income accounts at the firm as well as between $250,000 to $500,000 in a 401(K) plan there.

In a letter dated January 22, 2009, authored by the New York Fed’s General Counsel, Thomas C. Baxter, Jr. and Deputy General Counsel, Michael Held, two financial waivers were sought for Dudley. One involved $1.45 million in Treasury Inflation Protected Securities (TIPS) and the other involved a small monthly pension of $124.38 that Dudley would receive from his previous employer, Goldman Sachs, at age 65. (Dudley’s financial disclosure forms show over $1 million in his Federal Reserve Retirement Thrift Plan, which seems an extraordinary sum for his 5-year tenure. It could be that he was permitted to roll over most of his Goldman pension into the Federal Reserve plan, explaining why his monthly Goldman benefit at age 65 is so small.)

Of course a former Goldman Sachs executive should be a regulator! And if thou doth will it shall a portion of the benefits flow to his good lady?

Organized LIbor: Banksters Rip Off The World

4:19 pm in Uncategorized by DSWright

What is Libor? Why should I care that Barclays and possibly other banks have been caught manipulating it?

The London Interbank Offered Rate (LIBOR) is the benchmark for interest rates around the world. Benchmark as in many banks set their interest rates in accordance with or relative to Libor. Given this fact Libor is also a major indicator for the health of global financial markets.

So what happened?

The British Bankers Association (BBA) uses reports submitted by banks to calculate the Libor rate, Barclays and other banks submitted false reports and therefore manipulated the rate to mask poor health and gain profits for their trading positions.

From the United States Commodity Futures Trading Commission (CFTC):

The U.S. Commodity Futures Trading Commission (CFTC) issued an Order today filing and settling charges against Barclays PLC, Barclays Bank PLC (Barclays Bank) and Barclays Capital Inc. (Barclays Capital) (collectively Barclays or the Bank). The Order finds that Barclays attempted to manipulate and made false reports concerning two global benchmark interest rates, LIBOR and Euribor, on numerous occasions and sometimes on a daily basis over a four-year period, commencing as early as 2005.

According to the Order, Barclays, through its traders and employees responsible for determining the Bank’s LIBOR and Euribor submissions (submitters), attempted to manipulate and made false reports concerning both benchmark interest rates to benefit the Bank’s derivatives trading positions by either increasing its profits or minimizing its losses. This conduct occurred regularly and was pervasive. In addition, the attempts to manipulate included Barclays’ traders asking other banks to assist in manipulating Euribor, as well as Barclays aiding attempts by other banks to manipulate U.S. Dollar LIBOR and Euribor.

The Order also finds that throughout the global financial crisis in late August 2007 through early 2009, as a result of instructions from Barclays’ senior management, the Bank routinely made artificially low LIBOR submissions to protect Barclays’ reputation from negative market and media perceptions concerning Barclays’ financial condition.

CFTC fined Barclays $200 million and asked for better internal controls.

From the United States Department of Justice:

Barclays Bank PLC, a financial institution headquartered in London, has entered into an agreement with the Department of Justice to pay a $160 million penalty to resolve violations arising from Barclays’s submissions for the London InterBank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR), which are benchmark interest rates used in financial markets around the world…

“Barclays Bank’s illegal activity involved manipulating its submissions for benchmark interest rates in order to benefit its trading positions and the media’s perception of the bank’s financial health,” said Assistant Director in Charge McJunkin.

Barclays was also fined by British Financial Services Authority. Prominent Barclays executives have resigned including the CEO Bob Diamond. Apparently British Banksters at least have to resign when their companies get caught breaking the law – not so in America.

The Libor probe has also expanded and now other banks are under investigation for similar illegality.

OK, Why Should I Care?
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