Wolf writes: "The notion that the entire global financial system is riddled with systemic fraud is one that would have only recently seemed like the frenzied hypothesis of tinhat-wearers, but this week's headlines make such a conclusion, sadly, inevitable."
Portrait, author and activist Naomi Wolf, 10/19/11. (photo: Guardian UK)
This Global Financial Fraud and Its Gatekeepers
15 July 12
The media's 'bad apple' thesis no longer works. We're seeing systemic corruption in banking - and systemic collusion.
ast fall, I argued that the violent reaction to Occupy and other protests around the world had to do with the 1%ers' fear of the rank and file exposing massive fraud if they ever managed get their hands on the books. At that time, I had no evidence of this motivation beyond the fact that financial system reform and increased transparency were at the top of many protesters' list of demands.
But this week presents a sick-making trove of new data that abundantly fills in this hypothesis and confirms this picture. The notion that the entire global financial system is riddled with systemic fraud - and that key players in the gatekeeper roles, both in finance and in government, including regulatory bodies, know it and choose to quietly sustain this reality - is one that would have only recently seemed like the frenzied hypothesis of tinhat-wearers, but this week's headlines make such a conclusion, sadly, inevitable.
The New York Times business section on 12 July shows multiple exposes of systemic fraud throughout banks: banks colluding with other banks in manipulation of interest rates, regulators aware of systemic fraud, and key government officials (at least one banker who became the most key government official) aware of it and colluding as well. Fraud in banks has been understood conventionally and, I would say, messaged as a glitch. As in London Mayor Boris Johnson's full-throated defense of Barclay's leadership last week, bank fraud is portrayed as a case, when it surfaces, of a few "bad apples" gone astray.
In the New York Times business section, we read that the HSBC banking group is being fined up to $1bn, for not preventing money-laundering (a highly profitable activity not to prevent) between 2004 and 2010 - a six years' long "oops". In another article that day, Republican Senator Charles Grassley says of the financial group Peregrine capital: "This is a company that is on top of things." The article goes onto explain that at Peregrine Financial, "regulators discovered about $215m in customer money was missing." Its founder now faces criminal charges. Later, the article mentions that this revelation comes a few months after MF Global "lost" more than $1bn in clients' money.
What is weird is how these reports so consistently describe the activity that led to all this vanishing cash as simple bumbling: "regulators missed the red flag for years." They note that a Peregrine client alerted the firm's primary regulator in 2004 and another raised issues with the regulator five years later - yet "signs of trouble seemingly missed for years", muses the Times headline.
A page later, "Wells Fargo will Settle Mortgage Bias Charges" as that bank agrees to pay $175m in fines resulting from its having - again, very lucratively - charged African-American and Hispanic mortgagees costlier rates on their subprime mortgages than their counterparts who were white and had the same credit scores. Remember, this was a time when "Wall Street firms developed a huge demand for subprime loans that they purchased and bundled into securities for investors, creating financial incentives for lenders to make such loans." So, Wells Fargo was profiting from overcharging minority clients and profiting from products based on the higher-than-average bad loan rate expected. The piece discreetly ends mentioning that a Bank of America lawsuit of $335m and a Sun Trust mortgage settlement of $21m for having engaged is similar kinds of discrimination.
Are all these examples of oversight failure and banking fraud just big ol' mistakes? Are the regulators simply distracted?
The top headline of the day's news sums up why it is not that simple: "Geithner Tried to Curb Bank's Rate Rigging in 2008". The story reports that when Timothy Geithner, at the time he ran the Federal Reserve Bank of New York, learned of "problems" with how interest rates were fixed in London, the financial center at the heart of the Libor Barclays scandal. He let "top British authorities" know of the issues and wrote an email to his counterparts suggesting reforms. Were his actions ethical, or prudent? A possible interpretation of Geithner's action is that he was "covering his ass", without serious expectation of effecting reform of what he knew to be systemic abuse.
And what, in fact, happened? Barclays kept reporting false rates, seeking to boost its profit. Last month, the bank agreed to pay $450m to US and UK authorities for manipulating the Libor and other key benchmarks, upon which great swaths of the economy depended. This manipulation is alleged in numerous lawsuits to have defrauded thousands of bank clients. So Geithner's "warnings came too late, and his efforts did not stop the illegal activity".
And then what happened? Did Geithner, presumably frustrated that his warnings had gone unheeded, call a press conference? No. He stayed silent, as a practice that now looks as if several major banks also perpetrated, continued.
And then what happened? Tim Geithner became Treasury Secretary. At which point, he still did nothing.
It is very hard, looking at the elaborate edifices of fraud that are emerging across the financial system, to ignore the possibility that this kind of silence - "the willingness to not rock the boat" - is simply rewarded by promotion to ever higher positions, ever greater authority. If you learn that rate-rigging and regulatory failures are systemic, but stay quiet, well, perhaps you have shown that you are genuinely reliable and deserve membership of the club.
Whatever motivated Geithner's silence, or that of the "government official" in the emails to Barclays, this much is obvious: the mainstream media need to drop their narratives of "Gosh, another oversight". The financial sector's corruption must be recognized as systemic.
Meanwhile, Britain is sleepwalking in a march toward total email surveillance, even as the US brings forward new proposals to punish whistleblowers by extending the Espionage Act. In an electronic world, evidence of these crimes lasts forever - if people get their hands on the books. In the Libor case, notably, a major crime has not been greeted by much demand at the top for criminal prosecutions. That asymmetry is one of the insurance policies of power. Another is to crack down on citizens' protest.
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Comments
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When will we begin throwing these crooked bastards in jail alongside Big LeRoy --- doing hard labor for for extended periods of time?
As long as the only consequences for crooked and unethical bankers sins are seven-and-eight figure incomes, nothing will change for the better --- the rich 1% will continue to get richer at our expense!.
AMEN to that!!!!
Pretty soon - those "responsible" homeowners who had government checks will now be left will significantly less $$$ and they too will be faced with the trauma and stress of either buying groceries, paying the electric bill or paying their fraudulent mortgage - even after they had it so-called "modified"... What a sad, pathetic joke!
Shine the light on the pension fund managers and their agents and they'll sing like canaries - or go to jail for mismanagement of public trust funds. Who told them to buy these securities, when and why? And why did they not do their due diligence because by the end of 2006 the global investor market had dried up... All but for the idiots that were providing favors for the politicians and the banks.
The American Dream
is a pyramid scheme
That'll make you smile
If you're a pig on top of the pile.
-I said that
"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."
- John Maynard Keynes
"If you want to get along, go along."
- Sam Rayburn
"It is difficult to get a man to understand something when his salary depends upon his not understanding it."
- Upton Sinclair
"For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still."
- John Maynard Keynes
I am often taken with our righteous indignation at fraud in the marbled halls of the money industry...then I calm down and remember all the angst I felt in the 80's and 90's about deregulation, free market philosophies becoming the des rigeur and THEN I remember how prolific greed is amongst my fellow men...
How often at the dinner table a common someone grabs the prime pieces of meat, how frequently do we each suspect we have been somehow flimm-flammed, but can't prove it, or how universal is a $35 late fee being slapped on one for a $5 account shortfall?
Greed, taking advantage, what the market will bear vs fair market value, sucker born every minute, insider gain, political and social tips for the few to get the best tickets or the prime land in a future expansion, using eminent domain by 'insiders' (bushco/basebal l stadium)...
One would figure that at some point 'institutional knowledge' would be codified, kinda like the Christian Big Ten on those stone tablets, so that WETHEPEOPLE now obviously sheeple, would have consistent rule of law fall back...
But...Noooooo, 'they' keep figuring out ways to milk the masses, fleece the sheeple, starve the eaters, animate the muppets etc...all in the name of...
G R E E D
This was brought to you courtesy the Department of Redundancy Department.
I know all of the "vote for the lesser of two evils" arguments. I will vote for ANYONE, right now, who is not a Republican or Democrat. The current two parties must be brought down and the big banks as well as Wall Street corporate power. Heads need to be placed on poles, metaphorically speaking, of course.
Couple this support for fraud and inequality with the bipartisan assault on civil liberties, and we are entering bad time indeed-- regardless of what we name it.
The question is whether grassroots social change movements can unite effectively, and in time, to present (a) true alternative(s) to this obscenity.
Squealers die. Silence is rewarded with promotion and Party Support . (in Hawaii, Dan Inouye vernacular, coined 'a Wink and a Nod')
It is now so blatant, world-wide, as to be the 'Open Rule Of Politics'.
'Voting' is now a Joke, like it or not.
Geithner is no Elliott Ness. For that matter neither are Holder or any President or Presidential candidate or his AG in the last 50 years. Kennedy came pretty close and look what happened.
We've focused our efforts on the wrong wars. We should have cleaned house first.
The public actually has the ability to take down the banks by withdrawing their money. As long as we feed them deposits they will continue to thrive and participate in the world of crime and corruption.
If you think new money rich is safe at this point - think again. Only about .015% of the 1% will survive the forth coming worldwide crash. Take your money and invest in tangibles before the dollar totally collapses... And if you want a safer, stronger America - take your money out of the banks.
The public actually has the ability to take down the banks by withdrawing their money. As long as we feed them deposits they will continue to thrive and participate in the world of crime and corruption.
If you think new money rich is safe at this point - think again. Only about .015% of the 1% will survive the forth coming worldwide crash. Take your money and invest in tangibles before the dollar totally collapses... And if you want a safer, stronger America - take your money out of the banks.
The big scam scum are able to exist only if people [willingly]part icipate in their cons. People participate because of the seductive power of desire. Desire often blinds one to perfidy. Undisciplined, desire is never sated; it constantly seeks MORE.
Ergo, do not let one's desires lead one to consort with the wicked and greedy.
Their modus operandi is [calculated] exploitation.
Play nice.
Cooperate.
(1) The fines levied by the regulatory agencies are supposed to be punitive. In other words, severe enough to motivate the bad actors to cease their bad actions. But in fact the fines levied -- here and abroad -- have typically been only a fraction of the profits gained by the fraudulent schemes. Therefore there is no motivation for them to stop doing it.
(2) When fines are levied, the money typically goes to the regulators (government), NOT to the people who were actually defrauded. This motivates the regulators themselves to remain in bed with the fraudsters.
When fraud like this becomes apparent, the perpetrators should be forced to turn over whatever evidence they have of WHO was defrauded, and by how much. Only after recompense to the victims where possible (preferably with interest), should the regulators be considering additional punitive measures.
Make the punishment fit the crime... and be a DETERRENT to crime. Until then, it probably won't stop.
We must return to the law of the jungle, natural law, God's law, social and financial Darwinism. Instead of behaving like herd animals, we should become snapping turtles. Then all will be right with the world.
The same thing that motivated the Penn State silence.
Al Davis Oakland Raiders) said it best ... "JUST WIN BABY!"
The Tea Party, which was originally inspired in part by the fact that no Banksters went to jail, has been co-opted by the religious right and corporatists and anarcho-capital ists. The Occupy movement has been successfully intimidated. You only have to seriously injure a few people without punishment to do that. As far as I can tell, none of the presidential candidates offer a credible promise of improving the situation.
Is the problem that the banksters' actions were legal? Is the problem that the laws against them were not effectively enforced or that the revolving door between corporate executive suites and government offices preclude effective enforcement? Is the problem that the enforcement consists of fines that are so small as to be symbolic and no jail time or felony conviction for the responsible parties? Who should do what about any of this?
My best guess is that it would be hard to prevent crimes in the past, but maybe less hard to make the rules clearer and be able to enforce them in the future. Thoughts?
Naomi's excellent article raises so many questions to be answered: who knew what when? what happens to the money collected from those fines that have been levied? And above all, when are prosecutions of the crooks going to start???
I suspect if ALL of this story eventually comes out the entire world will go into utter shock at the pervasiveness of the corruption at the top, in the banks and governments alike. Enough has already been made public about the big banks here in America to sicken even those with the strongest stomachs.
Given that, I simply cannot understand why more people have not moved their money out of the big banks and found local ones, or credit unions. The big banks' sleazy operations are still continuing only because WE ALLOW THEM TO by supporting them with our use of their credit cards and by allowing them to use our money -- OUR money! There is nothing about that that makes sense.
It's a crazy, nightmarish world these days.
As long as the gene of greed is more
dominant than the gene of compassion
we will be doomed.
John and Caroline educated me and my ex as we cruised together, during the early 2000's, regarding how crippling and global the terrible greed and power takeover was. We and the Lawrenson's borrowed a marina car, and drove in upstate New York to see St. Michael Moore's (Mike, like me, is an 'Irish devil') newly released documentary, "9/11". With all of us cringing at fully scripted 'W's' ploy, John, who had opened Reuters offices across the world, commented that all across the globe we should be thanking Michael for his truthouting.
A couple of years later, in their 'Old Rectory' in Sudbury, Suffolk, John advised us re. all the bank/politician defrauding, hidden well, that was going on. How upsetting it was to hear, especially for my ex, a pioneer in the software industry, had been for years a consultant to Citigroup, JPMorgan, etc., and got noxious regularly at the banker CEO's totally unethical greed that he'd seen.
How hopeful we folks, including the Lawrensons, were in 2008, that finally, with Obama, we would see the evil bastards outed and punished, and real change begin. Ha, ha, ha,not at all funny joke's on us.
GLOBAL REVOLUTION IS THE SOLUTION
When every spouse, parent, child, relative, friend and neighbor of every cop and military person in every jurisdiction gets out front of OWS, we'll have the revolution without bloodshed.
Without a constitutional amendment to enact public financing of state and federal elections, meaningful reform to bring about a routing out of institutionaliz e and pervasive corruption will not become reality.
All of our observations and complaining will accomplish nothing without demanding such reform now, for it's the cornerstone for all other reforms. At every occasion, we must sound off loudly in our demands for such reform, and vote out those who will not actively support such an amendment. Undoing Citizens United is not sufficient, since it still keeps mechanisms for corruption in place.
Such an amendment should be demanded by members of all political parties, since we are all adversely impacted by corruption and fiscal crimes. Only a simpleton would fail to realize this self-evident truth.
On this issue, progressives and conservatives have a common cause and duty. So let's not just complain...let' s tighten the garrote on corruption.
Then, yes, when ability to vote and have the vote honestly counted, public financing (never to be exceeded), and official, multi-universit y created histories/votin g records, etc. of each candidate shall be made available to voters via internet.
Bye bye karlroving MSD (manipulation, spin, distraction), say it often enough (via villainaires silly but expensive ads on the corp. owned/controlle d 'mess media'), and the dumbed down sheeple will buy into anything, m.o.. But, first and foremost, make certain all who are able can vote, and the vote is honestly counted. No more 'non'election electing of fully scripted, dumber than dumb puppet whore like George 'W' Bush.
The current weird right-wing streak in America would probably dissolve in a week if real information were accessible to all.
Money is the power transformer that takes the low volage high current people movements and turns it into a high voltage low current government, but since the money has been so exponentially concentrated - it does not behave democratically anymore, in more and more militant control centers money is being used to control the population like animals. This is as inhuman as Al-Qaeda if you think about it or where it will be in 20 more years.
Hmmmmm, something is rotten in Bankmark.
Good question. Answers (select your favorites): religious intoxication, lack of free press, outdated educational system, fear mongering in the press, provincial attitude passed off as patriotism, riding on the coat tails of WWII veterans, most citizens do not travel outside the continental US, no interest in the rest of the world, demonizing dissent, no civics in high schools, a dearth of intellectual commentary in the country, no national purpose, a nation of addicts untreated due to antiquated legal system.
The immediate major reform all of us should get behind is massive support for the bill coming up in the House of Representatives that will audit the Federal Reserve. Then work for its passage by the Senate.
The United States is a corrupt bankocracy preying on all of us.
The Fed is the great enabler of this corporatist welfare-warfare state, of its hegemonic imperial empire overseas and its domestic surveillance tyranny at home.
The Fed's fractional-rese rve banking cartel was created one hundred years ago in 1913. Since that time it has only benefited the plutocratic power elite based in Washington, D.C. and Wall Street at the expense of all of us.
Each of us must personally contact and lobby Congress to first audit the Fed and to later revoke the Fed’s charter when it comes up next year for renewal.
Vampires cannot survive without blood.
Cut off the Fed’s blood supply and drive a stake through its diseased and putrefying heart.
We can then begin the massive prosecution and conviction of the thieving bankers who have plundered our country.
There is no "too big to fail" safety net for these predators.
Marcus Agius of Barclays, and Paul Tucker of the Bank of England, by the Treasury Select Committee in the UK, it is perfectly clear that they all live in a parallel universe. As highly paid managers, they did not seem to think that they had any responsibility for the work of Desk traders and submitters. In fact as long as the corporation was making as much money as possible, bankers and traders can do as they like. An implication of this irresponsibilit y is that they do not have any sense of guilt. If someone has behaved badly, then they are responsible and have to be punished. The senior managers work in the interests of the Board. They have no responsibility for upholding codes of conduct!
Supervision and regulation are essential in a parallel universe where hundreds of trillions of dollars are being handled every day!
go to www.kelvynrichards.com
Then the stock market crash of the same time led people (the investors who didn't get ripped off in the crash) to invest in property, which eventually led to the mortgage bankruptcy crash of blah blah blah.
Don't these idiots ever get tired of stealing our hard earned money with such ease? Wait, that means we're the idiots who keep getting ripped off by such obvious means.
Oh well, it is difficult to expect politicians and business leaders to have any morals when none of us do either. Keep on drinking and debauching. It's bound to work out one day.
There is no one out there who could possibly manage to get a bill passed by as many states necessary to adopt such a law (remember the ERA, anyone?).
Therefore, there is only one place left for us to depend on...the Supreme Court. With "lifetime tenure", they have no one they have to please to keep their jobs, but are unfortunately comprised of a 5-4 majority of RW ideologues.
This is why we must re-elect President Obama. His choices so far have shown that he is more likely to appoint "centrist/liber als" than conservatives, and the chances are good that the next four years will give him at least two chances to do so.
This action may very well be the most important of his Presidency, and might be the way forward on cleaning up the banks and moving to a fair "Clean Election" system of elections that will finally give us representatives that have no one to answer to other than "We the People".
If that is all that President Obama would be able to accomplish in a second term, I would consider that to be a successful Presidency, as the SC justices appointed by him would have a far-lasting effect on our lives vastly exceeding that of the next four or five Presidents combined.
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