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Back to the Nineteenth Century Print
Wednesday, 11 February 2015 10:56

Reich writes: "My recent column about the growth of on-demand jobs like Uber making life less predictable and secure for workers unleashed a small barrage of criticism from some who contend that workers get what they're worth in the market."

Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)
Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)


Back to the Nineteenth Century

By Robert Reich, Robert Reich's blog

11 February 15

 

y recent column about the growth of on-demand jobs like Uber making life less predictable and secure for workers unleashed a small barrage of criticism from some who contend that workers get what they’re worth in the market.

A Forbes Magazine contributor, for example, writes that jobs exist only  “when both employer and employee are happy with the deal being made.” So if the new jobs are low-paying and irregular, too bad.

Much the same argument was voiced in the late nineteenth century over alleged “freedom of contract.” Any deal between employees and workers was assumed to be fine if both sides voluntarily agreed to it.

It was an era when many workers were “happy” to toil twelve-hour days in sweat shops for lack of any better alternative.

It was also a time of great wealth for a few and squalor for many. And of corruption, as the lackeys of robber barons deposited sacks of cash on the desks of pliant legislators.

Finally, after decades of labor strife and political tumult, the twentieth century brought an understanding that capitalism requires minimum standards of decency and fairness – workplace safety, a minimum wage, maximum hours (and time-and-a-half for overtime), and a ban on child labor.

We also learned that capitalism needs a fair balance of power between big corporations and workers.

We achieved that through antitrust laws that reduced the capacity of giant corporations to impose their will, and labor laws that allowed workers to organize and bargain collectively.

By the 1950s, when 35 percent of private-sector workers belonged to a labor union, they were able to negotiate higher wages and better working conditions than employers would otherwise have been “happy” to provide.

But now we seem to be heading back to nineteenth century.

Corporations are shifting full-time work onto temps, free-lancers, and contract workers who fall outside the labor protections established decades ago.

The nation’s biggest corporations and Wall Street banks are larger and more potent than ever. 

And labor union membership has shrunk to fewer than 7 percent of private-sector workers.

So it’s not surprising we’re once again hearing that workers are worth no more than what they can get in the market.

But as we should have learned a century ago, markets don’t exist in nature. They’re created by human beings. The real question is how they’re organized and for whose benefit.

In the late nineteenth century they were organized for the benefit of a few at the top.

But by the middle of the twentieth century they were organized for the vast majority.

During the thirty years after the end of World War II, as the economy doubled in size, so did the wages of most Americans — along with improved hours and working conditions.

Yet since around 1980, even though the economy has doubled once again (the Great Recession notwithstanding), the wages most Americans have stagnated. And their benefits and working conditions have deteriorated.

This isn’t because most Americans are worth less. In fact, worker productivity is higher than ever.

It’s because big corporations, Wall Street, and some enormously rich individuals have gained political power to organize the market in ways that have enhanced their wealth while leaving most Americans behind.

That includes trade agreements protecting the intellectual property of large corporations and Wall Street’s financial assets, but not American jobs and wages.

Bailouts of big Wall Street banks and their executives and shareholders when they can’t pay what they owe, but not of homeowners who can’t meet their mortgage payments.

Bankruptcy protection for big corporations, allowing them  to shed their debts, including labor contracts. But no bankruptcy protection for college graduates over-burdened with student debts.

Antitrust leniency toward a vast swathe of American industry – including Big Cable (Comcast, AT&T, Time-Warner), Big Tech (Amazon, Google), Big Pharma, the largest Wall Street banks, and giant retailers (Walmart).

But less tolerance toward labor unions — as workers trying to form unions are fired with impunity, and more states adopt so-called “right-to-work” laws that undermine unions. 

We seem to be heading full speed back to the late nineteenth century.

So what will be the galvanizing force for change this time?

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Alabama Loses Yet Another Fight to Remain in Eighteenth Century Print
Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=9160"><span class="small">Andy Borowitz, The New Yorker</span></a>   
Tuesday, 10 February 2015 15:15

Borowitz writes: "On Monday, the state of Alabama lost yet another fight to remain in the eighteenth century, extending a losing streak that dates back to the nineteenth century."

Chief Justice Roy Moore of Alabama, who ordered defiance of a same-sex marriage ruling, once fought to keep a Ten Commandments marker in a judicial building. (photo: Jeff Haller/NYT)
Chief Justice Roy Moore of Alabama, who ordered defiance of a same-sex marriage ruling, once fought to keep a Ten Commandments marker in a judicial building. (photo: Jeff Haller/NYT)


Alabama Loses Yet Another Fight to Remain in Eighteenth Century

By Andy Borowitz, The New Yorker

10 February 15

 

The article below is satire. Andy Borowitz is an American comedian and New York Times-bestselling author who satirizes the news for his column, "The Borowitz Report."


n Monday, the state of Alabama lost yet another fight to remain in the eighteenth century, extending a losing streak that dates back to the nineteenth century.

Alabama, whose first attempt to remain in the eighteenth century took place between 1861 and 1865, has never shown signs of giving up the fight, even after being dealt a string of stunning defeats in the nineteen-fifties and nineteen-sixties.

According to historians, Monday’s loss brings the number of failed attempts by Alabama to more than four thousand.

But even with this latest defeat, some of the state’s residents, such as Chief Justice Roy Moore, of the Alabama Supreme Court, remained resolute in their fight to return to a time before electricity and indoor plumbing.

“The United States Supreme Court has decided that it is the twenty-first century,” Moore said on Monday. “I say, ‘Not in Alabama, it isn’t.’ ”

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FOCUS | War in Ukraine: Who Wants War? And Who Doesn't? Print
Tuesday, 10 February 2015 13:08

Boardman writes: "Just as NATO allies Germany and France were undertaking a peace initiative with Russia and Ukraine, U.S. secretary of state John Kerry turned up in Kiev at the same time, seeking to poison the talks before they started by spouting yet again the ritual U.S. accusation of 'Russian aggression.'"

President Barack Obama holds a bilateral meeting with Chancellor Angela Merkel of Germany in the Oval Office, February 9, 2015. (photo: David Lienemann/White House)
President Barack Obama holds a bilateral meeting with Chancellor Angela Merkel of Germany in the Oval Office, February 9, 2015. (photo: David Lienemann/White House)


War in Ukraine: Who Wants War? And Who Doesn't?

By William Boardman, Reader Supported News

10 February 15

 

“Russian aggression” – the bad faith mantra of dishonest brokers

ust as NATO allies Germany and France were undertaking a peace initiative with Russia and Ukraine, U.S. secretary of state John Kerry turned up in Kiev at the same time, seeking to poison the talks before they started by spouting yet again the ritual U.S. accusation of “Russian aggression.” The incantation is meaningless without context. Its purpose is to mesmerize a false consciousness. “Russian aggression” may or may not exist in the events of the past year, just like “Russian self-defense.” Reporting on the ground has been too unreliable to support any firm analysis, never mind the provocative “Russian aggression” the U.S. brandishes as a virtual call for war.

Western aggression, political and diplomatic more than military, is a cold reality and has been for two decades. The West, and especially the U.S., has yet to accept responsibility for 20 years of anti-Russian aggression, much less pull back from such perennial hostility. The Obama administration (parts of it at least, given the incoherence of the “administration”) has acted as if its pulling off an only-slightly-violent coup in Kiev in 2014 was a grand triumph. Worse, having grabbed a government on Russia’s borders, the Obama hawks carry on as if the only reasonable choice for Russia is to accept the success of this Western aggression.

Rarely is this context acknowledged in discussions of the natural fissures in Ukraine that feed sectarian civil war. Rather, the issues are over-simplified – falsified – by the U.S. secretary of state, consistent with a hidden agenda of provoking a military confrontation (at the very least) with Russia and eastern Ukrainians. That’s the subtext that makes sense of Kerry’s otherwise seeming blithering in Kiev on February 5:

We talked about the largest threat that Ukraine faces today, and that is Russia’s continued aggression in the east. There’s no other way to call it. We’re not seeking a conflict with Russia. No one is. … The president is reviewing all of his options. Among those options, obviously, is the possibility of providing defensive — defensive — assistance to Ukraine. And those discussions are going on. The president will make his decision, I am confident, soon.

Note the lie: “We’re not seeking a conflict with Russia. No one is.”

When Kerry said that, he was lying, he almost surely knew he was lying, and the question is whether his lie represents only the rogue war-faction in the U.S., or is part of a dicey good-cop/bad-cop routine out of Washington. The only way it’s true that “we’re not seeking a conflict” is that the U.S. is already engaged in conflict with Russia, decades-long and currently escalating. The lie of not seeking a conflict already engaged in is used to mask the lie of “defensive weapons,” a military-diplomatic oxymoron of long standing. So the most obvious answer to the question of who wants war in Ukraine is elements of the U.S. government, whose immediate challenge is to persuade its Kiev client that it’s a good idea to risk turning its country into more of a battlefield than it already is.

Kiev’s desire is more obscure, and likely divided. Having taken power in something of a slow-motion coup d’état last spring, the government faced a restive-to-defiant population in eastern Ukraine. Rather than seeking to negotiate legitimate grievances with the eastern region, the Kiev government chose instead to escalate quickly, from political hostilities into civil war. When that didn’t work out militarily, when Kiev started losing what it had started, it agreed on September 5 to the terms of a ceasefire that it then failed to honor with consistency (as did the separatists). Now the Ukrainian president has been to Moscow for early peace talks, but only after he staked out a preposterous public position seeking to win with a losing negotiating hand what Kiev has already lost on the ground.

Ukrainian president Petro Poroshenko met with German chancellor Angela Merkel and French president François Hollande in Kiev on February 5 (when Kerry was in town but not part of the meeting). In his public statement, Poroshenko referred self-servingly to September’s Minsk Agreement signed by Ukraine, Russia, and the break-away Ukrainian states that call themselves the People’s Republic of Donetsk and the People’s Republic of Luhansk. The only other Minsk signatory was the Organization for Security and Co-operation in Europe (OSCE), giving the agreement the tacit endorsement of Europe without any individual European nation signing on. The United States was not directly involved in the Minsk Agreement, but a week later expressed its support for finding a peaceful solution by sending American troops to take part in NATO military exercises in Ukraine’s western provinces.

Understood in its actual context, Poroshenko’s February 5 statement is ludicrously disingenuous:

The Minsk plan is very simple: immediate ceasefire; releasing all the hostages; closing the border, or renew the internationally recognized border on Ukrainian (side); withdrawal all of the foreign troops from the Ukrainian territory; launching very important process of the political regulation by the election on the municipal election, local election, under Ukrainian legislation in the territory of Donetsk and Luhansk.

All signatories must take Minsk accord seriously to avoid war

It’s hard to find anyone who doesn’t urge compliance with the Minsk Agreement, even if that means different things to different people. Neither side in Ukraine has come close to significant compliance for any length of time. Poroshenko calls for the ceasefire, but omits the international monitoring called for in the agreement. He calls for closing the border with Russia, which is NOT part of the agreement. When he calls for the withdrawal of foreign troops, he omits mention of NATO. When he refers to elections, he omits Kiev’s failure to pass the legislation it promised, and he omits the elections that have already been held in the Republics of Donetsk and Luhansk (see “Election Note” at the end of this article). Poroshenko also omits amnesty for separatists, improving humanitarian conditions in the region, and the recovery program, all of which are part of the Minsk Agreement.

Nevertheless, Poroshenko went to Moscow with his German and French colleagues to take part in peace talks with Russian president Vladimir Putin there on February 6, at Russia’s initiative. When similar talks had been proposed for mid-January, Chancellor Merkel had been instrumental in making sure they didn’t happen. This time her public posture going in was appropriately statesmanlike:

It is a question of peace and preserving the European peace order. It is a question of free self-determination of the people as part of this European peace order. And we are doing what we believe to be our duty at this time, namely trying to do everything in our power to end the bloodshed.

Merkel’s reference to “free self-determination” is diplomatically murky and allows for a wide range of possible solutions for the self-proclaimed Republics in eastern Ukraine, and even hints at a resolution for Crimea. Her focus on peace serves all the parties’ best interest, seeking to avoid a war that would, inevitably, cause much more suffering for Europe than for the United States.

U.S. policy seems designed to turn Ukraine into the “European Iraq”

Presumably none of the parties meeting in Moscow on February 6 want to see Ukraine become “another Iraq,” even if Ukraine is already part way there. Where Iraq had been a coherent, modern state with cultural cohesion despite its dictatorship, Ukraine has a long history of quasi-chaos, internal squabbling, and corruption. Where it took an American invasion and occupation to reduce Iraq to a near-failed state, the U.S. sees an opportunity now to manipulate proxies into destroying Ukraine (and even Russia) for the next generation or so.

Germany, France, Russia, and especially Ukraine must be acutely tuned to the potential horrors they face. After meeting for four hours, the parties were generally low-key and discreet in what they said about the substance discussed. This reality produced European coverage by the BBC and others characterized by cautious hopefulness. U.S. media more typically characterized uncertainty as failure, offering the talismans of magical thinking and instant gratification in place of accuracy or analysis.

Whatever they were, the four-way talks in Moscow were not a failure. All sides called them “constructive,” which is diplo-speak for: there’s still a chance for a settlement. The parties are continuing the negotiations with apparent openness to a range of solutions. Hollande called this process “one of the last chances” to settle eastern Ukraine peacefully. Poroshenko has expressed hope for an early agreement to an “unconditional ceasefire” and one step toward reducing tensions. An unconditional ceasefire is beyond what was agreed to at Minsk in September, but creates no barrier to implementing the agreement later. Moscow’s tactful obliqueness leaving room for the parties to maneuver was in sharp contrast to the bloviating cries for war coming mostly from U.S. senators and the vice president at the simultaneous regional security gathering in Munich.

The lesson of Munich for 2015: “War in our time?”

Meeting for the 51st year in Munich during February 6-8, the Munich Security Conference (MSC) provided a setting for mostly U.S. hawks to try to undermine the chances for peace in Ukraine. Founded in 1963, the Munich conference identifies itself as “a key annual gathering for the international ‘strategic community’… an independent forum dedicated to promoting peaceful conflict resolution and international cooperation and dialogue in dealing with today’s and future security challenges.”

What the Munich conference seems to be is something of a foreign policy free-for-all, to which almost anyone from anywhere can come and pontificate regardless of whether they hold any actual decision-making authority. The American delegation, including a dozen war-minded Congress members, seems not to have gotten the memo about “promoting peaceful conflict resolution,” like the British lapdog also barking loudly for war.

Like any good multinational circus, the Munich show offered a variety of clown acts and sideshows to distract from the U.S. rush to war. The Turks decided not to take part rather than share a panel with Israelis. Non-office-holder Arnold Schwarzenegger stumped tor action on climate change. Some European Union members ganged up on Greece (again), this time for opposing some sanctions on Russia, while support for Greece (and peace) came from Cyprus, Austria, Hungary, Italy, Luxembourg, Slovakia, Slovenia, and the Czech Republic – most of which are closer to the likely war zone than those brave distant states ready to start a fight. In the Munich streets, some 2,000 peaceful protestors demonstrated against NATO, otherwise known as an American sphere of influence (if not a Trojan horse).

Joe Biden toes the official line, smoothly riffing on official lies

Other members of the American delegation included Kiev coup supporters Vice President Joe Biden, Secretary of State Kerry, and Assistant Secretary of State Victoria Nuland, none of whom showed any public willingness to look at the realities of the present or the past 20 years. Like a good apparatchik of the American war party, Biden’s address to the conference included a subtle version of the requisite “Russian aggression” trope, along with 45 minutes of neo-Cold-War boilerplate propaganda. In one of the more hilarious highlights of this taken-very-seriously-by-the-media speech, Biden quoted himself from the same conference in 2009:

Six years ago at this podium, I said and I quote, “To paraphrase President Obama, it is time to press the reset button and reinvest in the many areas where we can and should be working together with Russia.”

That’s what everybody remembers. But they don’t often repeat what I then said.

I said, “We will also not recognize any nation having a sphere of influence. We will remain – it will remain our view that sovereign states have the right to make their decisions and choose their own alliances.”

I meant it when I said it then, and America means it as I repeat it now.

The “reset button” rhetoric did not include changing U.S. support for the relentless push for NATO to include countries on Russia’s border, a form of blatant – and mindless – political aggression. NATO, the European Union, Europe itself are all U.S. spheres of influence, no matter what the Biden-shills of the world may say. Even as he lied sanctimoniously about spheres of influence in 2009, his country was still enjoying its half-century of punishing Cuba for not being a loyal and subservient of the American hemisphere of influence.

And when Biden claimed, “it will remain our view that sovereign states have the right to make their decisions and choose their own alliances,” an honest audience would have laughed as derisively at that as the same audience laughed at perceived absurdity from Russian foreign minister Sergey Lavrov during his address to the Munich conference.

Having destabilized Ukraine, the U.S. blames Russia for piling on

Remember how the present Ukraine crisis came about? In the fall of 2013, Ukraine was weighing a political, economic choice between a European proposal requiring exclusivity (and implying future NATO membership) and a somewhat more open Russian proposal (with no military alliance component). In Ukraine, as politically divided as ever, the western population yearned for Europe, the eastern population was content with Russia. When the legitimate, democratically-elected Ukraine government rejected the European offer, protesters mostly from western Ukraine launched the months-long Euro-Maidan demonstrations in Kiev (presumably with the connivance of the U.S. and others). In time, including on the scene visits from Biden (whose son reportedly has significant economic interests in Ukraine) and Nuland (with her cookies for the mob), the Maidan evolved into the coup d’état that produced the current Ukraine government.

So when Biden says that “sovereign states have the right to make their decisions and choose their own alliances,” he’s lying. He’s lying about Ukraine and he’s lying about U.S. behavior in the present and the recent past (and the not so recent past as well, to be sure).

Somewhat measured language from the White House

On February 5, as the flurry of events in Kiev, Moscow, and Munich was beginning, the White House expressed some awareness that military escalation might only make matters worse in Ukraine. White House press secretary Josh Earnest said, in part:

… the United States has been saying for some time that it’s a diplomatic negotiation that is required to bring this conflict in Ukraine to an end, that this is not something that’s going to be solved or resolved militarily, but rather through diplomatic negotiations. So we certainly are encouraging and supportive of ongoing efforts to try to find a peaceful diplomatic resolution to the conflict in Ukraine…. [But] we need serious engagement from the Russians and the separatists, the likes of which we’ve not seen before….

… the President is going to make a decision [on weapons to Ukraine] that he believes is in the broader national security interests of the United States…. But certainly the President takes very seriously the views of our allies and is going to consult very closely as we evaluate any needed strategic changes ahead…. [But] this conflict was not going to rise to the level of a military confrontation between the United States and Russia. The President has been very clear about that. So there are things that we are going to continue to avoid.

But one of the concerns that we have about providing military assistance is it does contain the possibility of actually expanding bloodshed, and that’s actually what we’re trying to avoid. The whole reason that we are trying to encourage both sides to sit down and hammer out a diplomatic agreement is to end the bloodshed and end the escalating conflict in that country.

The press secretary made no effort to offer a balanced analysis of the Minsk Agreement, blaming the separatist Republics and Russia for virtually all the problems. He did allow that Ukraine had not lived up to all its commitments under the agreement.

Who actually speaks for the United States?

The same day the White House offered this view, NATO ministers in Brussels adopted a plan to ring Russia’s European perimeter with a network of command centers and rapid reaction forces. According to NATO secretary general Jens Stoltenberg, this plan is NATO’s biggest reinforcement of collective defense since the end of the Cold War. He added that the first six multinational command and control units — in Estonia, Latvia, Lithuania, Poland, Romania, and Bulgaria. Estonia and Latvia border on Russia. Poland and Romania border on Ukraine.

The secretary of state is carrying on as if he believes that this might be his legacy moment. He’s acting as if he’s thinking: Hillary Clinton led the charge on Libya and made magnificent regional chaos there, so why shouldn’t I be able to top that, and make a mess of Ukraine, and possibly create global chaos?

But what if “Russian aggression” is real? As matters stand now, U.S. policy aggression for two decades has served as a self-fulfilling prophecy that created “aggression” in response. What would happen if the U.S. especially, and the West in general, sent a clear signal that Western aggression was over? How long would it take for Russia (or China) to trust that as reality? And would that persuade the Russians to relax what we now call their aggression? (We don’t hear much about “Chinese aggression” these days, but chances are that Kerry or Biden or someone already has that speech written.)

The course the U.S. has been on since 1990 has no good ending, unless one assumes that the Russians (or the Chinese) will fold under pressure. That seems unlikely. Nor does the result seem worth the risk. But also unlikely is a U.S. course change, as long as we remain enamored of our own exceptional face in the magic mirror that keeps telling us we’re indispensible and can do no wrong. In Ukraine, today, probably the most dispensible nation is the U.S.

As this is written February 9, President Obama and Chancellor Merkel have met at the White House and offered vague public assurances that diplomatic efforts will continue to try to settle Ukraine issues peacefully. It’s not reassuring that Obama’s companions in his meeting with Merkel were committed aggressors: Biden, Kerry, and National Security Advisor Susan Rice. We don’t know if this president is strong enough to be in control of his administration as it speaks with conflicting voices. What we know pretty surely is that this is a moment when President Obama could actually earn his Nobel Peace Prize by calling off “American aggression.”

Or he could just follow the lead of the mindless, bi-partisan weapons-gaggle in Congress and elsewhere. The president could do the bidding of all those shrill demagogues who cry for escalating bloodshed, those grandstanding testosterone puffs who will never accept responsibility for the death and dismemberment they advocate. In that event, the president would once again ignore his own earlier wisdom when he once said: “Don’t do stupid stuff.”

Election Note [see above]: The Donetsk and Luhansk elections held November 2 were supported by Russia and rejected as illegitimate by Ukraine, as well as spokespersons for the European Union, Germany and others in the West. The election results mostly confirmed the local authority already in place, including the chief executive and parliamentary majorities in both Republics, which were popularly approved in referendums in May. An OSCE spokesperson called the November elections a violation of the spirit and letter of the Minsk Agreement, which seemed to contemplate such elections taking place on December 7, under Ukrainian law. Ukraine had excluded Donetsk and Luhansk from its presidential election in May and its parliamentary election in October. The last apparently legitimate presidential election held in Ukraine chose Viktor Yanukovych president in February 2010. Yanukovych, whose support reached 90% of the vote in some districts of Donetsk and Luhansk, was forced from office in February 2014 by the coup that emerged from the Maidan protest. Ukraine has almost 34 million voters in all, of which more than 5 million are (or were) in Luhansk and Donetsk. Another 1.8 million voters in Crimea have not taken part in the 2014 elections outside Crimea.



William M. Boardman has over 40 years experience in theatre, radio, TV, print journalism, and non-fiction, including 20 years in the Vermont judiciary. He has received honors from Writers Guild of America, Corporation for Public Broadcasting, Vermont Life magazine, and an Emmy Award nomination from the Academy of Television Arts and Sciences.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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Will HSBC Deal Come Back to Haunt Loretta Lynch? Print
Tuesday, 10 February 2015 09:05

Taibbi writes: "This time, the global mega-bank is being exposed in a massive scheme to help wealthy clients avoid taxes."

Loretta Lynch. (photo: Lucas Jackson/Reuters)
Loretta Lynch. (photo: Lucas Jackson/Reuters)


Will HSBC Deal Come Back to Haunt Loretta Lynch?

By Matt Taibbi, Rolling Stone

10 February 15

 

Deal to save HSBC's American office looks very bad in retrospect

hree years ago, then-U.S. Attorney of the Eastern District of New York Loretta Lynch crafted a soft-touch deferred-prosecution deal for Europe's largest bank, HSBC, which had only been caught in the largest drug-money-laundering case in history.

Today, as Lynch awaits approval for the Attorney General job, HSBC is in the news again. This time, the global mega-bank is being exposed in a massive scheme to help wealthy clients avoid taxes. This is from the New York Times:

In a report released on Sunday, the International Consortium of Investigative Journalists… said that secret documents revealed that bank employees had reassured clients that HSBC would not disclose details of their accounts to tax authorities in their home countries and discussed options to avoid paying taxes on those assets.

This story traces back to a leak of files apparently stolen by a former HSBC IT employee named Herve Falciani in Switzerland in 2007.

Taken out of Switzerland, the files were then shared with authorities in France, Spain, the United States and Britain. The monster cache of info about wealthy tax avoiders came to be referred to as the "Lagarde List," after Christine Lagarde, who was the French Finance minister at the time the information first began to be circulated.

What HSBC's Swiss unit was doing went far beyond passive bank secrecy. The bank was actively helping its wealthiest clients avoid paying taxes in their home countries, sometimes using highly creative methods – a sort of criminal advice service, if you will. The Guardian details one such instance:

In one case that illustrates the bank's conduct, a wealthy British client, Stoke City football club director Keith Humphreys, frankly told his HSBC manager that his father's $430,000 (£280,000) Swiss account was "not declared" to the U.K. tax authorities.

Humphreys, whose wealth originated from the sale of a local supermarket chain, explained that one HSBC manager had already advised how to extract undeclared offshore money via a credit card.

"The credit card is thus used to enable the Humphreys family to make withdrawals from 'cash points' when they are outside the U.K.," he said.

The paper went on:

On clinching arrangements in London, the bank manager wrote: "We subsequently repaired to the Ritz, for a very enjoyable lunch." Humphreys told the Guardian his father eventually had to repay about $224,000 (£147,000) for evading tax due to the U.K.

Countless similar examples are appearing the in the press. The numbers being thrown out are incredible. The Swiss arm of the bank at its height apparently hid as much as $120 billion. The bank unit was essentially, as one observer described it, a "tax avoidance and tax evasion service."

This HSBC story is an incredibly explosive one when one takes into account the recent regulatory history of this company. The bank has been a central player in two recent lurid criminal scandals, one involving the rigging of currency markets, the other the aforementioned case involving money-laundering.

Both cases involved historically enormous schemes to profit from illegal banking activities. HSBC has set aside $378 million to pay fines for its role in the Forex scandal, in which it was one of a handful of banks whose currency traders ripped off their clients in a variety of ways, for instance using inside client info to make prescient bets seconds before a currency's price was set.

In the money-laundering case, HSBC paid a $1.9 billion fine – about five weeks of profit – for its role in an amazing scandal in which the bank admitted laundering up to $850 million for a pair of Central and South America drug cartels, including the infamous Sinaloa gang.

In neither case did the penalties do much to dent the bank's bottom line. Late last year, even after the markets digested the news of the Forex scandal and other fines (including one involving mortgage fraud here in the U.S.), the bank was still a giant cash factory. This is from a third-quarter report from the Guardian:

The bank's shares slipped as the market digested the impact of the regulatory breaches, which knocked 9 percent off its profits for the first nine months of the year, leaving them at $17bn.

Here's the really disturbing part of this story. Everything being reported in the last few days (including a 60 Minutes report and a "Panorama" documentary) indicates the United States knew about an apparent systematic tax evasion scheme as far back as 2010.

This raises a huge question about the deal Lynch's office gave to HSBC back in 2012.

The United States, remember, had to bend over backwards in that deal to make sure that HSBC kept its American bank charter. Also, the money-laundering case was already far from HSBC's first money-laundering offense, as detailed in a scathing 334-page report by Senate investigators in early 2012.

In fact, by the time we wrote about the case in early 2013, HSBC had been ordered to improve its anti-money-laundering procedures by banking regulators at least twice during the 2000s, including formal orders in 2003 (by the Fed) and 2010 (by the Office of the Comptroller of the Currency). During one absurd stretch between 2005 and 2006, the OCC issued 30 separate warnings to HSBC about its lax money-laundering procedures.

The DOJ acted very tough after the 2012 deferred-prosecution deal, swaggering in a strangely self-congratulatory public ceremony. Then-Criminal Division chief Lanny Breuer shared a podium with Loretta Lynch here in New York, detailing how the bank's Mexican branches had fashioned specially-made teller windows so that drug gangs could more quickly slide in their cash.

Still, no individual had to pay a dime in fines, and nobody was charged. In fact, the harshest penalty any individual at HSBC had to suffer in that case was the partial deferral of some bonuses.

That looked bad back then, but now the Breuer/Lynch deal looks preposterous even by Eric Holder's standards. If our government knew back then that HSBC had been engaged in a sweeping global tax-evasion scheme, how could it have dealt out such a sweetheart deal on the money-laundering caper after being so informed?

This is a little like dropping a felony burglary charge to misdemeanor trespassing at a time when you've found out that your bug-eyed suspect with the rope and zip-ties in his trunk is wanted in a string of violent home invasions in another state. It's inexplicable, something no sane law enforcement official would ever entertain.

Already, in light of this tax case, there are a lot of new questions about that 2012 deal. Senator Sherrod Brown of Ohio, who was among the few elected officials at the time to respond to the HSBC deal with appropriate fury, is already wondering who knew what when that deal was made. From the Guardian:

I will be very interested to hear the government's full explanation of its actions – or lack thereof – upon learning of these allegations in 2010… If the charges are true, the same institution that was first caught violating US sanction laws and laundering money for Mexican drug cartels could then escape accountability for promoting widespread evasion of US tax laws. I intend on pressing regulators, the IRS, and the DOJ for answers.

The logic behind the original Holder deal was always, supposedly, about global stability. With banks like HSBC being so big and wielding such weight in the global economy, what happens when you file criminal charges against one of them, or, worse, strip them of a charter to operate in America?

We know Holder was worried about this back then. That's both because he said so in his infamous "Too Big to Jail" Senate testimony in March 2013, and also because the Treasury Undersecretary for terrorism and financial intelligence, David Cohen, told a Senate panel that the Justice Department had asked Treasury about the financial consequences of an HSBC prosecution.

So yes, they had a reason to toss HSBC a softball on the money-laundering case. It was a bad reason, a terrible one in fact, but a reason nonetheless.

Now, however, that deal makes zero sense. It was bad enough when we were merely enabling drug lords for the sake of "financial stability." But it looks now like the U.S. government knowingly bent over backwards to make sure that a major Western tax evader kept its license to operate here in America. Even worse, our next Attorney General was the person responsible for negotiating the deal.

The only reason you'd bend over backwards to save a company caught with its hand in the cookie jar is because you think the firm is basically a viable and otherwise reliable corporate actor that had a few bad apples get up to some mischief.

But if you know, for a fact, that the whole bank is essentially a giant money-hiding business, there's no possible excuse for letting them keep their charter. It's abject surrender to crime.

Put another way, what can you say about a government that allows a major bank to systematically help the world's richest people evade taxes when it not only has the power, but an excellent reason to put that bank out of business? The only conclusion to draw is that said government doesn't have strong feelings about the rich evading taxes.

What does a bank have to do to get shut down by regulators in this day and age? Be small?


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Euro Bankers Kick Syriza in the Face Print
Monday, 09 February 2015 14:36

Weisbrot writes: "On Wednesday the European Central Bank (ECB) announced that it would no longer accept Greek government bonds and government-guaranteed debt as collateral."

Prime Minister Alexis Tsipras of Greece. (photo: Reuters)
Prime Minister Alexis Tsipras of Greece. (photo: Reuters)


Euro Bankers Kick Syriza in the Face

By Mark Weisbrot, CounterPunch

09 February 15

 

n Wednesday the European Central Bank (ECB) announced that it would no longer accept Greek government bonds and government-guaranteed debt as collateral. Although Greece would still be eligible for other, emergency lending from the Central Bank, the immediate effect of the announcement was to raise Greek borrowing costs and squeeze its banks, and to increase financial market instability within Greece.

We should be clear about what this means. The ECB’s move was completely unnecessary, and it was done some weeks before any decision had to be made. It looks very much like a deliberate attempt to undermine the new government. They are trying to force the government to abandon its promises to the Greek electorate, and to follow the IMF program that its predecessors signed on to.

Clarity is important here because the European authorities, or the troika, as they are commonly called, plunged the eurozone into at least two additional years of unnecessary recession that began in 2011 because they were playing a similar game of chicken. The ECB, for its part, deliberately and repeatedly allowed the eurozone to go the brink of financial meltdown during this period. It was not because the financial markets had the power to collapse the euro when they pushed the yield on the 10-year sovereign bonds of Italy and Spain to unsustainable levels in the range of 7 percent. It was because the ECB deliberately allowed these market actors to create an existential crisis for the euro, in order to force concessions from the governments of Spain, Italy, Greece, Portugal, and Ireland.

These concessions were not just about paying off debt but also “structural reforms” that sought to remake the European welfare state in the weaker countries, including shrinking the size of the state; cutting spending on health care, pensions, and unemployment compensation; and changing labor laws that favored workers.

The European authorities were willing to take great risks in order to force these changes, and as is now widely recognized by most economists, their macroeconomic policies added additional years of unnecessary recession and mass unemployment (currently at 11.5 percent, more than twice that of the United States).

If we understand this recent history, we can see clearly what they are doing to Greece right now. The main difference is that, since the ECB reversed course and made a firm commitment to the survival of the euro in July of 2012, the blows that they are dealing to the Greek economy are much more contained. The yields on Italian and Spanish bonds have risen a bit since Syriza was elected but are still very low — 1.58 percent for Italy, and 1.47 percent for Spain.

The ECB could also stabilize Greek bond yields at low levels, but instead it chose this week to go to the opposite extreme — and I mean extreme — to promote a run on bank deposits, tank the Greek stock market, and drive up Greek borrowing costs.

Syriza’s leadership, headed by Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, are playing it smart. They responded to the ECB’s assault without animosity or denunciations. They are not going to voluntarily leave the euro or even suggest the possibility. Like the peaceful protesters of the U.S. civil rights movement in the 1960s, they are facing down the police dogs and fire hoses with courage and equanimity.

They want the world to know who is the aggressor here and who is being reasonable. This is important because we are witnessing a political battle for democracy in Europe, and the outcome of this chapter will be partly decided by what the troika can get away with politically. Much noise is made about German voters opposing concessions to the Greeks, but this is only possible because the whole fight has been misrepresented to them for years. The European authorities transferred massive amounts of debt from reckless private lenders to EU governments (including Germany) and at the same time increased Greece’s debt load from 115 percent to more than 170 percent of GDP by shrinking the Greek economy at a rate comparable to the worst of the U.S. Great Depression. Most Europeans, including Germans, would not blame the Greek people for the resulting unpayable debt if they understood what really happened.

The troika should be happy with what they have already “accomplished.” The Greek state has been shrunk by 19 percent of its labor force. Six years of depression and a 25-percent decline in living standards (actually much greater than that if you count the decline in imports) should discourage any European country from ever reaching the terrifying predicament of having to borrow from the punishers at the troika. The economic adjustment has been done: The country is running a primary (not including interest payments) budget surplus and a current account surplus.

Syriza has backed off from its initial demand that Greece’s debt stock be reduced and is offering reasonable proposals to allow them the fiscal space to be able to recover (i.e., a primary budget surplus of 1 to 2 percent of GDP rather than 4 to 5 percent under the troika’s program). After six years of depression, that is hardly too much to ask. Nor is reversing some of the worst abuses such as the minimum wage cuts.

The ECB should be ashamed of its latest assault on Greek democracy. And they should not be able to get away with disguising it as anything less than that.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He is also president of Just Foreign Policy.


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