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Triste cosa es no tener amigos, pero más triste ha de ser no tener enemigos porque quién no tenga

enemigos señal es de que no tiene talento que haga sombra, ni carácter que impresione, ni valor temido,

ni honra de la que se murmure, ni bienes que se le codicien, ni cosa alguna que se le envidie.

A sad thing it is to not have friends, but even sadder must it be not having any enemies; that a man

should have no enemies is a sign that he has no talent to outshine others, nor character that inspires,

nor valor that is feared, nor honor to be rumored, nor goods to be coveted, nor anything to be envied. -

Jose Marti

From the desk of Craig B Hulet?

What Does the Cyprus Deal Mean For Individual Investors?

The 147 People Destroying the World … “This is the worst Conspiracy Theory to come out of

the Left in some time!” CBH?

Bill Moyers: Are the Monster Banks on the Verge of Unleashing Fresh Economic Disaster?

Elizabeth Warren Wants HSBC Bankers Jailed for Money Laundering

Now Banks Can Legally Steal Retirement Accounts

Freddie Mac Sues Multiple Banks Over Libor Manipulation

BRICS Nations Plan New Bank to Bypass World Bank, IMF

U.S. Senate Approves Proposed Internet Sales Tax

Craig:

I thought you might find this interesting. I think it goes along with your thinking.

March 24, 2013

What Does the Cyprus Deal Mean For Individual Investors?

Cyprus put another nail in the coffin of Democracy and capitalism over the weekend.

Having found that the Cyprus people and Parliament wouldn't stand for the confiscation

(THEFT) of depositors' savings, the EU bureaucrats simply chose an option in which voting

doesn't occur.

This is precisely what I feared would happen: that any basic rules or laws would be tossed out

the window during times of extreme crisis. This has unfortunately proven to be the case.

The EU has now established that it will not only depose elected officials and replace them with

unelected technocrats (Italy) but that it will impose its own laws and decisions on countries that

do not proceed with its goals.

There is a word for this: it's totalitarianism.

This was essentially an economic act of war. A sovereign nation has now officially seen its

Government superseded by an outside governing body. For the EU, Cyprus is no longer Cyprus,

it's just a troublesome territory of the EU.

How the Cyprus Government and people will react remains to be seen. It's likely that going

forward this option will be promoted more and more, often with an argument such as, "you have

a choice, either you lose x% of your deposits and the bank stays afloat OR you lose everything."

The Cyprus banks will reopen tomorrow. The key issue now is how depositors respond to all of

this. If a bank run begins in Cyprus, then things could get very hairy. The only thing between

Europe and a total banking collapse are bank runs. And if large depositors in Spain and Italy (or

elsewhere in the EU) get spooked by what's happened in Cyprus, then there's little the EU or

anyone else can do.

March 26, 2013

The ECB's Balance Sheet Is Literally a Work of Fiction

As noted in numerous articles, the entire European banking and corporate system is over-

burdened with debt.

Jagadeesh Gokhale of the Cato Institute puts the situation as the following, "The average EU

country would need to have more than four times (434 percent) its current annual gross

domestic product (GDP) in the bank today, earning interest at the government's borrowing

rate, in order to fund current policies indefinitely."

Put another way, for Europe's Government to fund all the entitlements they have, they

would need an amount equal to 400% of GDP to be sitting in the bank collecting interest.

Virtually NO European country is running a surplus, let alone has an amount equal to 100% of

GDP let alone 400% of GDP sitting around.

How come no one is openly admitting this?

The reason none of this shows up is because Europe's accounting for unfunded liabilities as well

as its accounting for banking liabilities. As noted by Mark Grant, the ECB even ADMITS that it

doesn't record most of the garbage it owns:

"Recognition of assets and liabilities

An asset or liability is only recognized in the Balance Sheet when it is probable that any

associated future economic benefit will flow to or from the ECB, substantially all of the

associated risks and rewards have been transferred to the ECB, and the cost or value of the asset

or the amount of the obligation can be measured reliably."

So the ECB has openly admitted: "we don't actually count something as an asset or liability

unless we believe it should be."

In other words, the ECB's balance sheet, which backs up the entire EU banking system it

essentially a work of fiction. Unless the ECB officials feel like admitting something is an asset or

liability, it doesn't exist.

At this point, no sane person could possibly invest in Europe. And given that EU bureaucrats are

now proposing STEALING depositors savings, I can't think why anyone would have a bank

account there either.

At the end of the day, this is all you need to know about Europe's Crisis:

1) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

2) This banking system is officially leveraged at 26 to 1. Realistically it's likely closer to 50 to 1.

3) The ECB's balance sheet is entirely made up based on how the ECB feels like valuing what it

owns (how'd that concept work out for Wall Street banks in 2008?)

4) Over a quarter of the ECB's balance sheet is PIIGS debt which the ECB will dump any and all

losses from onto national Central Banks (read: Germany).

So we're talking about a banking system that is nearly four times that of the US ($46

trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13

to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage

debts, giving it a leverage level of 36 to 1...

And all of this is occurring in a region of 17 different countries none of which have a great

history of getting along... at a time when old political tensions are rapidly heating up.

To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a

problem the size of the coming EU's Banking Crisis. There are already signs that bank runs are

in progress in the PIIGS.

Thus, the World's Central Banks cannot possibly hope to contain the coming disaster. They

literally have one of two choices:

1) Monetize everything (hyperinflation)

2) Allow the defaults and collapse to happen (mega-deflation)

If they opt for #1, Germany will leave the Euro. End of story. They've already experienced

Weimar and will not tolerate aggressive monetization.

So even the initial impact of a massive coordinated effort to monetize debt would be rendered

moot as the Euro currency would enter a free-fall, forcing the US dollar sharply higher which in

turn would trigger a 2008 type event at the minimum.

In simple terms, this time around, when Europe goes down (and it will) it's going to be

bigger than anything we've seen in our lifetimes. And this time around, the world Central

Banks are already leveraged to the hilt having spent virtually all of their dry powder

propping up the markets for the last four years.

Peter

Pulitzer Prize-winner David Cay Johnston has highlighted yet more statistics that illuminate the

spike in income inequality in the U.S. in recent decades. Flagging Johnston’s analysis, HuffPo

noted Monday, “Incomes for the bottom 90 percent of Americans only grew by $59 on average

between 1966 and 2011 (when you adjust those incomes for inflation)… During the same period,

the average income for the top 10 percent of Americans rose by $116,071.”

Johnston offered a visual analogy for the disparity in a column for Tax Analysts last month:

The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the

same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over

1966.

Plot those numbers on a chart, with one inch for $59, and the top 10 percent’s line would extend

more than 163 feet.

Now compare the vast majority’s $59 with the top 1 percent, and that line extends for 884 feet.

The top 1 percent of the top 1 percent, whose 2011 average income of $23.7 million was $18.4

million more per taxpayer than in 1966, would require a line nearly five miles long.

BRICS Nations Plan New Bank to Bypass World Bank, IMF

By Mike Cohen & Ilya Arkhipov - Mar 26, 2013

The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa --

are set to approve the establishment of a new development bank during an annual summit that

starts today in the eastern South African city of Durban.

The biggest emerging markets are uniting to tackle under-development and currency volatility

with plans to set up institutions that encroach on the roles of the World Bank and International

Monetary Fund.

March 22 (Bloomberg) -- South African Trade Minister Rob Davies discusses the likelihood of

starting a foreign-currency pool with Brazil, Russia, China and India, and the establishment of a

BRICS Business Council. He spoke with Bloomberg's Mike Cohen in Cape Town. (Source:

Bloomberg)

March 26 (Bloomberg) -- Stephen Roach, a senior fellow at Yale University and former non-

executive chairman for Morgan Stanley in Asia, talks about Cyprus's bailout and the outlook for

the European debt crisis. Roach also discusses Japan's central bank monetary policy, and China's

new leadership and economic growth. He speaks from Beijing with Susan Li on Bloomberg

Television's "First Up." (Source: Bloomberg)

While BRICS leaders may approve the creation of a development bank in principle at the

summit, there’s still disagreement on how it should be funded and operated.

While BRICS leaders may approve the creation of a development bank in principle at the

summit, there’s still disagreement on how it should be funded and operated. Photographer:

A security guard stands in front of a floral arrangement ahead of the BRICS Summit in Sanya,

Hainan Province on April 12, 2011. The BRICS nations have combined foreign-currency

reserves of $4.4 trillion and account for 43 percent of the world’s population.

A security guard stands in front of a floral arrangement ahead of the BRICS Summit in Sanya,

Hainan Province on April 12, 2011. The BRICS nations have combined foreign-currency

reserves of $4.4 trillion and account for 43 percent of the world’s population. The leaders of the

so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the

establishment of a new development bank during an annual summit that began today in the

eastern South African city of Durban, officials from all five nations say. They will also discuss

pooling foreign-currency reserves to ward off balance of payments or currency crises.

“The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type

institutions that are inclined toward the developing world,” Martyn Davies, chief executive

officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets,

said in a phone interview. “There’s a shift in power from the traditional to the emerging world.

There is a lot of geo-political concern about this shift in the western world.”

The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account

for 43 percent of the world’s population, are seeking greater sway in global finance to match

their rising economic power. They have called for an overhaul of management of the World

Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the

practice of their respective presidents being drawn from the U.S. and Europe.

Reform Needed

“We need to change the way business is conducted in the international financial institutions,”

South African International Relations Minister Maite Nkoana-Mashabane said in a March 15

speech in Johannesburg. “They need to be reformed.”

The U.S. has failed to ratify a 2010 agreement to give more sway to emerging markets at the

IMF, while it secured Jim Yong Kim, an American, as head of the World Bank last year over

candidates from Nigeria and Colombia.

Finance ministers and central bank governors from the BRICS nations, who met in Durban

today, agreed to set up currency crisis fund of about $100 billion, Brazilian Finance Minister

Guido Mantega told reporters today. He didn’t give details of proposed funding for the new

bank, which Brazil wants established by 2014. The nation’s leaders are due to sign a final accord

tomorrow.

FDI Inflows

Goldman Sachs Asset Management Chairman Jim O’Neill coined the BRIC term in 2001 to

describe the four emerging powers he estimated would equal the U.S. in joint economic output

by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South

Africa to join their ranks in December 2010.

Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach

$500 billion by 2015, according to data from Brazil’s government. Foreign direct invesment into

BRICS nations reached $263 billion last year, accounting for 20 percent of global FDI flows, up

from 6 percent in 2000, the United Nations Conference on Trade and Development said on its

website yesterday.

“If they announce a BRICS bank it will be quite something,” O’Neill said in an e-mailed reply to

questions on March 15. “At a minimum it symbolizes they can achieve something as political

group and means lots of other things could follow in the future. It also means that they will have

their own kind of special World Bank, which may aid infrastructure and trade projects.”

Currency Pool

While BRICS leaders may approve the creation of a development bank in principle at the

summit, details on funding and operations may take longer to finalize.

Russia favors capping each side’s initial contribution at $10 billion, Mikhail Margelov, President

Vladimir Putin’s envoy to Africa he said in a March 15 interview in Moscow.

“It will be some time before it will be feasible for this bank to start financing say, a railway

project,” Simon Freemantle, an analyst at Standard Bank Group Ltd., Africa’s biggest lender,

told reporters in Durban yesterday. “That is some way out.”

Interest rates near zero in the U.S., Japan and Europe have fueled foreign investors’ appetite for

higher-yielding assets, driving up currencies from Brazil to Turkey. Brazil has warned of a

global currency war as nations take reciprocal action to weaken their currencies and protect

export industries.

African Leaders

Brazil’s real has gained 1.9 percent against the dollar since the beginning of the year, while

South Africa’s rand has dropped 8.7 percent in the period.

For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the

summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma

has invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s

Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS

leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment

on March 17.

“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as

mechanisms and measures to promote investment in infrastructure and sustainable

development,” Indian Prime Minister Manmohan Singh said in a statement yesterday.

The 147 People Destroying the World This is the worst Conspiracy Theory to come out of

the Left in some time!

How the usual suspects perpetuate economic injustice.

JPMorgan Chase's board "strongly" endorsed Jamie Dimon, pictured June 19, 2012, to continue

serving as both chairman and chief executive despite last year's embarrassing $6.2 billion trading

loss in the "London Whale" debacle.

March 25, 2013

Can 147 people perpetuate economic injustice – and make it even worse? Can they subvert the

workings of democracy, both abroad and here in the United States? Can 147 people hijack the

global economy, plunder the environment, build a world for themselves that serves the few and

deprives the many?

There must be some explanation for last week’s economic madness. Take a look:

Cyprus: The European Union acted destructively – and self-destructively – when it tried to seize

a portion of the insured savings accounts of the citizens of Cyprus. They were telling anyone

with a savings account in the financially troubled nations of the Eurozone: Forget your

guaranteed deposits. If we need your money in order to bail out the big banks – banks which

have already gambled recklessly with it – we’ll take it.

That didn’t just create a political firestorm in Cyprus. It threatened the European Union’s

banking system, and perhaps the Union itself. The fact that the tax on deposits has been partially

retracted doesn’t change the basic question: What were they thinking?

The Grand Bargain: The President and Congressional Republicans reportedly moved closer to a

deal that would cut Social Security and Medicare while raising taxes – mostly on the middle

class – without doing more to create jobs. A “Grand Bargain” like that would run counter to both

public opinion and informed economic judgement.

Who would impose more economy-killing austerity when there’s so much evidence of the harm

it does? Why would the White House want to become the face of a deal to cut Social Security,

killing its own party’s political prospects for a generation?

There’s more:

Him again: Washington reporters once again sought the opinion of Ex-Wyoming senator Alan

Simpson, a vitriolic blowhard with no discernible knowledge of either economics or social

insurance, and then wrote up his opinions on those topics in flattering pieces like this one.

Derivatives, the Sequel: Four short years after too-big-to-fail banks nearly destroyed the world

economy, as the nation continues to suffer the after-effects of the crisis they created, a

Congressional committee moved to undo the already-insufficient safeguards in the Dodd/Frank

law.

Within days of a Senate Report which outlined the mendacity, extreme risk, and potentiality

criminality surrounding JPMorgan Chase’s “London Whale” fiasco, the House Agriculture

Committee approved new bills that would legalize trades like the “London Whale.”

Above the Law: The Attorney General of the United States remained silent as the controversy

continued over his recent admission that banks like Dimon’s were too big to face prosecution.

And yet there were no moves to change either Holder’s policy or the size of these

institutions. Politico, the Washington insiders’ tip sheet, ran a piece entitled “Why Washington

won’t break up the big banks.”

Dimon Unbound: The Senate report also provided evidence that JPMorgan Chase’s CEO, Jamie

Dimon, failed to manage his bank’s risk and concealed information about its losses from

regulators. We learned last week that regulators lowered their rating of Dimon’s bank after

chastising the bank’s leadership for management failures that included inadequate safeguards

against money-laundering, poor risk management, and failure to separate the banks’ own

investments from those of its customers.

Illegalities during Dimon’s tenure as CEO have cost his shareholders billions in settlements and

fines. Poor risk management (and additional potential illegalities) cost it another $6.2 billion in

Whale-related losses. And yet last week Dimon’s own Board “strongly endorsed” his dual role as

CEO and Board Chair, an unusual concentration of power at what is (by some measurements) the

world’s largest bank, and commended itself in aproxy filing for the “strength and independence”

of its oversight, adding: “The Firm has had strong performance through the cycle since Mr.

Dimon became Chairman and CEO.”

All this, in just seven days. Has the world gone insane? What is everybody thinking?

That’s where the number “147″ comes in.

Anthropologist Robin Dunbar tried to find out how many people the typical person “really

knows.” He compared primate brains to social groups and published his findings in papers with

titles like “Neocortex size as a constraint on group size in primates.”

Dunbar concluded that the optimum number for a network of human acquaintances was 147.5, a

figure which was then rounded up to 150 and became known as “Dunbar’s Number.” He found

groups of 150-200 in all sorts of places: Hutterite settlements. Roman army units. Academic sub-

specialties. Dunbar concluded that “there is a cognitive limit to the number of individuals with

whom any one person can maintain stable relationships.”

Around 150 or 200 people form a human being’s social universe. They shape his or her world

view, his or her world.

That means that 147 people can change the course of history. Not necessarily the same147

people, of course. But the small social groups which surround our world’s leaders have

extraordinary power.

Economist Simon Johnson mentioned Dunbar’s Number last week in a column about incoming

Treasury Secretary Jacob Lew and the new SEC chair, Mary Jo White. “The issue is not so much

their track record,” Johnson wrote, “because neither has worked directly on financial-sector

policy issues; it is much more about whom they know.”

“If most financial experts you know work at, for example, Citigroup,” added Johnson, “then you

are more likely to see the financial world through their eyes.”

Lew is a former Citigroup executive. That mismanaged megabank is also the former corporate

home of ex-Clinton Treasury Secretary Robert Rubin, and the current home of Peter Orszag,

formerly President Obama’s OMB Director. For her part, White went from prosecuting criminals

to defending Wall Street bankers. That was also Attorney General Eric Holder’s profession

before he was appointed to his current position.

These are the people who surround our President, our Senators, our Representatives. They talk to

them every day. They say, This is how the world works. They say, Everybodyknows these

things.

Their European counterparts saw the effects of austerity on the economies of their Union:

Unemployment up. Gross domestic product down. Even the deficits, which austerity was meant

to reduce, have been rising as the result of these unwise cuts.

But, they say, we know Angela Merkel. We know George Osborne and Christine Lagarde. We

trust their judgement. How did the predictably disastrous plan to tax guaranteed savings accounts

in Cyprus get approved? It’s not hard to imagine: “Everybody we know” thought it was a great

idea.

That’s how it works here in the US, too. Larry Summers, Alan Greenspan and Robert Rubin

were spectacularly wrong about everything: deregulation, the housing bubble, government

spending, everything. But we know them.

Nobel Prize-winning economists like Paul Krugman and Joseph Stiglitz keep explaining why

more stimulus spending is needed. But we don’t know them – not the way we know Larry, Alan,

and Bob. Same for Simon Johnson, or William K. Black Jr., or Robert Johnson, or any of the

other economists we don’t know very well.

And when we don’t know someone very well, their criticisms make us uncomfortable.

Bill Clinton’s “Third Way” triangulation led to welfare “reform” that’s proven disastrous. His

Wall Street deregulation ruined the economy, and his brand of old-fashioned pseudo-centrism is

out of touch with today’s political and economic realities. But weknow him.

Bill Clinton doesn’t make us uncomfortable at all.

Investigate Jamie Dimon, or Lloyd Blankfein, or Robert Rubin? But they were our clients, and

will be again once we leave government. Investigate them? We know them.

Dimon’s Board of Directors is a case study in Dunbar’s Number. It includes Honeywell CEO

David Cote, who was a member of the Simpson Bowles Commission. There’s a retired senior

executive with another big defense contractor, Boeing. Together with Dimon, that makes three

CEOs who earn their money from government largesse.

The CEO of Comcast is on Dimon’s Board, too. (The media’s leaders are always among the

147.) One seat belongs to the head of one of the accounting groups that overlooked massive bank

fraud when signing off on their annual statements. Another belongs to the former CEO of Exxon

Mobil.

The “147″ run companies. They also hold fundraisers for politicians – in both parties.

When Senator Obama became President Obama, during the gravest unemployment crisis since

the Great Depression, one of his first acts was to create a “Deficit Commission” instead of a

“Jobs Commission.” Why? Because “147 people” thought that was the right priority. Then he

appointed the dyspeptic, unlikable, and uninformed Sen. Simpson to co-chair it.

You see, the “147 people” in Washington’s political and media circles like Alan Simpson. To

them he’s not an embarrassment to his President, a paid pitchman for billionaire Pete Peterson’s

anti-Social Security jihad. (We know Pete!) To them Simpson’s not an ill-informed and

misogynistic bully who taunts women with comments about “310 million tits.” To them

he’s Al. They know him. They say he’s a lot of fun when you get to know him.

They really say that.

Then there are the news anchors and journalists who say things like this: Everybodyknows that

we need to cut Social Security. Everybody knows the deficit is our most urgent problem.

Everybody knew that Saddam had weapons of mass destruction, too.

Everybody understands that the right-wing, anti-government Simpson Bowles plan represents the

“political center,” although it’s far to the right of public opinion – even of Republican or Tea

Party voters’ opinion – on issues that range from job creation to increasing Social Security

benefits.

You can’t fit millions of frustrated voters into a social group of 147 people.

When Teddy Roosevelt became President, J.P. Morgan (the person, not the bank) suggested he

“send your man to my man and they can fix it up.” He was shocked that the new President chose

instead to operate outside the Circle in order to create real change. And when Franklin D.

Roosevelt became President he brought in new faces, new voices, new ideas. He broke the social

circle that had paralyzed government and the economy.

But the circle of right-wing Republicans and corporatist Clintonite Democrats is still intact. That

means Barack Obama, Nancy Pelosi and other Democratic leaders will keep on promoting the

right-wing agenda known as Simpson Bowles until their party loses all its political power at the

polls.

It also means that Republican extremism will still be reported with straight-faced

gravity.Congressional committees will keep deregulating big banks, the Justice Department will

avoid prosecuting them, and their Boards of Directors will keep rewarding their executives.

They’ll all keep doing exactly what they’re doing – until the economy blows up again, perhaps

with far worse consequences than the last time.

And when the next crisis comes, “147 people” will react to it exactly the same way they reacted

to the last one. You can almost hear them now, can’t you? You can’t blame us, they’ll say.

Nobody could’ve seen this coming. How do we know that?

Because we asked everybody we know.

Elizabeth Warren Wants HSBC Bankers Jailed for Money Laundering

By Chris Good Mar 7, 2013 5:20pm

Image credit: Andrew Harrer/Bloomberg via Getty Images

Elizabeth Warren has a question: How much money does a bank have to launder before people

go to jail?

Warren, the Democratic senator from Massachusetts and financial-regulatory maven, posed that

question numerous times to financial regulators at a Senate Banking Committee hearing

Thursday on banks and money laundering.

In December, U.S. Justice Department officials announced that HSBC, Europe’s largest bank,

would pay a $1.92 billion fine after laundering $881 million for drug cartels in Mexico and

Colombia. At the time, the Justice Department disputed accusations that it views some banks as

too big to prosecute.

The two regulators, Under Secretary for Terrorism and Financial Intelligence David S. Cohen

and Federal Reserve Governor Jerome H. Powell, deflected Warren’s questions, saying that

criminal prosecutions are for the Justice Department to decide.

“If you’re caught with an ounce of cocaine, the chances are good you’re going to jail. If it

happens repeatedly, you may go to jail for the rest of your life,” an exasperated Warren said, as

she wrapped up her questioning. “But evidently, if you launder nearly a billion dollars for drug

cartels and violate our international sanctions, your company pays a fine and you go home and

sleep in your own bed at night — every single individual associated with this — and I just think

that’s fundamentally wrong.”

Last month, Senator Elizabeth Warren (D-MA) clashed with Fed chairman Ben Bernanke about

“too big to fail” banks and the $83 billion subsidy the biggest banks receive because investors

believe the government would bail out the largest financial institutions again if necessary.

Bernanke argued that Dodd-Frank had given the government tools that could handle the failure

of a megabank without taxpayer support — even though the legislation was seriously weakened

by Senator Scott Brown on behalf of the Wall Street titans who now employ him.

Bernanke clarified his position on Wednesday and it seems he agrees with Warren that more

needs to be done to fix the situation. ”I agree with Elizabeth Warren 100 percent that it’s a real

problem,” he said.

“Too big to fail was a major source of the crisis,” he added, “and we will not have successfully

responded to the crisis if we do not address that successfully.”

The Fed chair’s admission follows Attorney General Eric Holder telling the Senate Banking

Committee that the massive size of America’s largest financial institutions prevents the

government from prosecuting financial crimes they may have committed.

There is definitely a conservative case against “too big to fail.” Bernanke was a registered

Republican before he took over his nonpartisan position at the Fed. But there are definitely

Republicans who believe something needs to be done to constrain the big banks that are bigger

now than they were before the crisis.

Here are 5 other members of the Grand Old Party who want to break up the big banks.

U.S. Senate Approves Proposed Internet Sales Tax

GREGORY FERENSTEIN Saturday, March 23rd, 2013

An Internet sales tax is inching its way closer to being the law of the land: The U.S. Senate

supported a non-binding vote of approval, 75-to-24, for a law that would allow states to collect

taxes from Internet retailers. If enacted as is, it would allow states to levy taxes on some online

retail purchases from businesses with over $1 million in gross receipts.

Internet retailers can thank their mostly tax-free existence to a 1992 Supreme Court Case, Quill

Corp. v. North Dakota, which declared that companies without a “substantial nexus” in a state

didn’t have to pay sales tax. “Quill became a seminal case for online retailers: It meant, in

essence, that they didn’t have to pay state and local sales taxes,” writes the Washington Post’s

Ezra Klein.” That’s allowed them to undercut traditional brick-and-mortar stores on price. It’s

also meant that state and local governments, which rely heavily on sales taxes, have lost

enormous amounts of revenue as more and more commerce has moved online.”

There are some exceptions: Amazon currently charges California residents sales tax, and will

soon charge residents of Massachusetts and Connecticut, after new offices and acquisitions

gave it a significant presence in those states.

A score of Internet lobbies, such as Netchoice, representing Facebook, Yahoo, and

(TechCrunch’s parent company) Aol, argue that the senate’s bill “does nothing to address what

the Supreme Court says was an unreasonable burden on interstate commerce,” explains Steve

Delbianco of Netchoice.

An equally self-interested set of lobbies, such as the National Retail Federation, representing the

big box likes of OfficeMax, Macy’s, And Saks, argue that an Internet sales tax ban gives online

retailers an unfair advantage and deprives states of billions in revenue.

The current law will give readers a flavor for the sausage factory that is the U.S. Congress. The

tax was offered as a non-binding amendment to the Democratic budget by Senators Mike Enzi

and Dick Durbin.

“The strategy of the bill’s supporters is to offer this general amendment and then claim that all

the senators that vote for it support the bill,” explains Brian Bieron, eBay’s senior director for

federal government relations and global public policy, to CNET. “That is not just a stretch, it is

not accurate. But the game plan is to rack up a sizable vote and then make the claim the bill itself

should jump over the Finance Committee and go right to the floor.”

So nothing is law yet, but it’s getting closer.

Bill Moyers: Are the Monster Banks on the Verge of Unleashing Fresh Economic Disaster?

Culture change in the financial world may be coming, but not fast enough says banking expert

Shelia Blair.

March 24, 2013

From BillMoyers.com

BILL MOYERS: Welcome to the question of the week: are the banks – banks too big to fail and

too big to jail – are these monsters courting another disaster?

That's what it looks like. As you no doubt heard, last week, the Senate Permanent Subcommittee

on Investigations issued a report and hauled in key executives from JP Morgan Chase -- the

world's biggest derivatives trader -- demanding to know how the bank blew 6.2 billion dollars in

funny money -- I mean, derivatives – and hid the losses with some fancy accounting tricks aimed

at fooling both regulators and the public.

Senator Carl Levin, the Chairman, bluntly summed up what they found out: “It exposes a

derivatives trading culture at JP Morgan that piled on risk, hid losses, disregarded risk limits,

manipulated risk models, dodged oversight, and misinformed the public.”

The trail led directly to JP Morgan’s celebrated silver-haired Chairman and CEO, Jamie Dimon,

said to be Barack Obama’s favorite banker. An e-mail requesting an increase in the bank's "risk-

taking" received a two-word reply from Dimon: "I approve."

But the well-connected Dimon -- whose bank was being bailed out by almost $25 billion from

taxpayers even as he was making $35 million a year -- was spared from testifying personally and

having to disclose exactly what he knew about the shenanigans of his lieutenants -- and when he

knew it.

Among the many of us who will be anxiously awaiting those revelations, should they come, is

my guest, Sheila Bair. A long-time Republican, she was appointed by President George W. Bush

in 2006 to head the FDIC, the Federal Deposit Insurance Corporation. During the financial

collapse, she oversaw the takeover of more than 300 banks that went belly up and was an

outspoken opponent of the taxpayer bailouts. As one influential observer wrote during that time,

Sheila Bair never forgot that her most important constituency isn’t the thousands of banks she

regulates, but the millions of Americans who use them.

She now heads the Systemic Risk Council. That’s an independent committee formed by the Pew

Charitable Trusts to monitor what’s being done to prevent another financial collapse. She was at

this table a few months ago to talk about her book, Bull by the Horns: Fighting to Save Main

Street from Wall Street and Wall Street from Itself.

And I’m pleased to welcome you back.

SHEILA BAIR: Thank you. Thanks for having me.

BILL MOYERS: I felt perhaps we were getting the bull by the horns until I saw those hearings

last week.

SHEILA BAIR: Yeah, it really was amazing. I mean, a lot of that we knew already. But it was

really laid out in gruesome detail in that report. It was quite shocking. You know, I don't think-- I

think the system's got incrementally safer, a little bit safer but nothing like the dramatic reforms

that we really need to see to tame these large banks and to give us a stable financial system that

supports the real economy, not just trading profits of large financial institutions.

BILL MOYERS: Were you surprised by anything that you heard at those hearings?

SHEILA BAIR: Well, I was, you know? I viewed, like a lot of people viewed JPMorgan Chase

as a pretty well-managed bank. And so yes, I was surprised at the ability of this trader in London

to build these huge positions. And even when he started calling foul the senior, the next level of

management above him really didn't get on top of it. I was not surprised but appalled by the way

they were manipulating their models that are supposed to be able to determine how much risk is

involved in various trading positions.

BILL MOYERS: And what advantage did they gain from manipulating those--

SHEILA BAIR: Well, there were--

BILL MOYERS: --models?

SHEILA BAIR: There were a couple things going on. One was it's clear that they were trying to

boost their regulatory capital ratios in anticipation of some new capital rules coming into effect.

This is a key defect with the way regulators, bank regulators view capital adequacy at these large

banks. They let those capital ratios to be determined in part by the risk models of the banks. So if

the banks produce models that say, "These assets are safer," it means they can report a higher

capital ratio. So it really gives them upside down incentives to manipulate their models.

BILL MOYERS: So for the layman, what is the capital ratio? And why is it so important?

SHEILA BAIR: A capital ratio is simply the percentage of your assets, what's on your balance

sheet, the percentage of that that is funded with common equity.

So when banks have a low capital level, that means that they're borrowing a lot to support

themselves. Whether it's a household or a big bank, you borrow too much and you don't have

enough common equity to absorb losses you-- that's what it means to fail. You start having

losses. You don't expect them. You have a very thin capital base. You can't make good on your

debt obligations. You fail.

BILL MOYERS: And this is what--

SHEILA BAIR: We fail.

BILL MOYERS: --happened in the buildup to the big crash?

SHEILA BAIR: Yeah, exactly.

BILL MOYERS: What surprised me and others that they could hide these hundreds of millions

of dollars in losses, as you say, and survive even internal scrutiny.

SHEILA BAIR: Yes, and even after it was in the Wall Street Journal, you know it--

BILL MOYERS: Hiding in plain site.

SHEILA BAIR: Yeah I think it, what was going on was they were in this big power game with a

bunch of hedge funds who were trying to, who realized that this London Whale trader was

building up huge positions in a fairly narrowly traded product called tranche CDS. And so they

outed them. You know, they were trying to squeeze them. They let the public know, "Hey, you

know, JPMorgan Chase is exposed here." And then the losses really started to mount. And it's

amazing that the papers picked up on it before the senior managers or the regulators, for that

matter.

BILL MOYERS: Yeah, where were the regulators?

SHEILA BAIR: I don't know. You know, I think we need a culture change with the regulators. I

think and I talk about this a lot in my book. You've got a lot of good, well-intentioned people.

But they confuse bank profitability with bank safety and soundness. They are not the same

things.

There's the right way and there's the wrong way to make money. They're almost aligned

themselves to some extent with bank managers and wanting to have the appearance of

profitability, because they think that makes a sound banking system. And it's really upside down.

You can't ignore the problems here. And some of that is overlooked. It’s overlooked a lot.

BILL MOYERS: We thought we were going to get a culture change after the big crash.

SHEILA BAIR: Yeah, well, I think it's coming slowly. But not fast enough. It's, you know, it's

amazing that, you know, so many years after the crisis hardly, you know, less than half of the

Dodd-Frank rules have been completed. The ones that have been completed, a lot of them are

watered down.

BILL MOYERS: By? By?

SHEILA BAIR: It really needs to, well, the regulators succumbed to industry pressure to do

this. And even some of the statutory provisions in Dodd-Frank had too many exceptions. But

then we get even more exceptions since these proposed rules come out, things like the Volker

Rule. You know, it should be just a simple ban on proprietary trading, but we get these very

complicated rules that are very hard to enforce and easy to game.

BILL MOYERS: When Dodd-Frank and the Volker Rule managed to get through a recalcitrant

Congress, many of us were hopeful. Would you tell us briefly what Dodd-Frank was supposed to

do and what's happened to it and what the Volker Rule was supposed to do and what's happened

to it?

SHEILA BAIR: Right. So Dodd-Frank was, is a very large, a very, it is a complicated law.

Probably more complicated than I would have preferred. But it is what it is. But at the heart of it

is ending "too big to fail." Giving the government new tools to resolve large financial institutions

when they fail in a way that will not hurt taxpayers, not subject taxpayers to risk.

Well, it forced the losses on the shareholders and creditors of those large financial institutions,

which is where they belong. It also requires the Federal Reserve Board to have much tougher

what we call prudential standards. So higher capital more stable liquidity, more stable funding

sources, less reliance on short-term debt.

Those are the types of things that were problems during the crisis. And the Fed has been

mandated. And they haven't finished those rules yet to have better regulation to prevent these

banks from getting in trouble to begin with.

And the Volker Rule, too, a key part was designed to prohibit prop trading by those institutions

that are in the government safety net. So if you're a bank holding company that has an insured

bank that has FDIC backed deposits or access to the Federal Reserve's discount window, you

know, you have a lot of government support, as is provided to traditional banks.

So Volcker’s really about customer service. And your banking model should be you serving

customers, making loans or, you know, if you're facilitating trading, you make your money off of

a commission, not by by trying to make a profit off the spread.

And that's really what Volker was about. And it turned into a lot more complicated thing than it

should have been.

So I do think, you know, I talk a little bit about structural changes, too, that I think could make,

give us a more robust regulatory system, because now I think we have cognitive capture, which

means basically--

BILL MOYERS: Wait a minute, what does that mean?

SHEILA BAIR: It means the regulators tend to look at the world through the eyes of the banks.

So they don't look at themselves as independent of the banks. They view themselves as aligned

with the banks, that their charter is not to protect the public, but to protect the banks. And this is

the premise of the bailouts, that somehow if you take care of the banks, you're going to take care

of the broader economy. And it just didn't turn out that way. They're two very different things.

BILL MOYERS: As coincidence would have it, I took your book with me on a trip last week.

And I was actually reading the last chapter again, in anticipation of your coming, before I

actually looked at some of the hearings. You say, "When you read about problems like the Libor

or Whale scandal or the JPMorgan Chase trading losses, don't accept gobbledygook about

regulators needing more information or needing more power." Then the next day I look at the

hearings and--

BILL MOYERS: --more gobbledygook, right.

SHEILA BAIR: Well, you know, they had the information.

I mean, there were plenty of warning flags. Those examiners should have been all over this.

Senior managers at JPMorgan Chase should have been all over this. It really was remarkable

how kind of lackadaisical things were until the losses were right there in front of them. And then

it was, you know, all hands on deck. But that was too late, at that point.

BILL MOYERS: This is what is actually scary to me. The Senate found that not only did the

regulators fail to act aggressively in uncovering the risk, but that Dimon on his own for a period

of time decided not to comply with federal regulations and flatly denied the regulators crucial

data. Does that scare you?

SHEILA BAIR: Right. Right. Right. Well, that was amazing. And what’s troubling in that, you

know, to the extent it reflects how he views examines and their role.

He was apparently worried about leaks. But I, you know, I think that most examiners are quite,

you know, confidentiality is sacred with examiners. So I wouldn't, giving examiners information,

I wouldn't worry about leaks. I don't think that was a legitimate concern. And one that couldn't

justify denial in any event.

BILL MOYERS: Could reckless behavior like this bring the system down again?

SHEILA BAIR: It was a very big loss. But, you know, I think it underscores how even in banks

that are viewed as very well-managed, how there can be major management breakdowns.

And how these derivatives, these actively-traded derivatives can generate very, very large losses

in a very short period of time, how volatile they are. So, you know, I think this is all problematic

and should inform some future regulatory choices. One is on the Volker Rule. Another is on

bank capital. Because we don't know the next time that six billion could be $16 billion, so the

capital rules are all upside-down, they need to be fixed, and the Volcker Rule needs to be fixed.

BILL MOYERS: Do they need to be fixed? Or do they just need to be used? I thought both

Dodd-Frank and Volker had pretty well put into place the tools that regulators need.

SHEILA BAIR: Well, I think they do, too. You know, the statute could have been more

prescriptive. Instead, it delegated authority to the regulators to fix it. And the regulators wanted it

that way. The Fed and the Treasury wanted-- they didn't want a lot of prescriptive rules in the

statute itself. They wanted the authority to do it themselves.

And so they got what they wanted. But the record has not been as good as it should be. You

know, the Volker Rule is still not finalized.

And what's been proposed is very weak. It needs to be strengthened. The bank capital rules still

haven't been changed. It's, and again, what's been put out there is pretty weak. It needs to be

strengthened dramatically.

BILL MOYERS: So for the stranger who came up to me in the Dallas Airport, where I was

reading this book, looked at it, and said, "You know, I don't understand it. I don't even know why

I should care."

SHEILA BAIR: Yeah, he should care. Or she.

BILL MOYERS: Why should he care? Why should he care?

SHEILA BAIR: Well, because look, when this crisis hit, first of all, there were a lot of bad loans

were made by large institutions that should have known better. And were there borrowers that

took advantage of it? Yeah. But there were a lot of innocent victims, as well. But it wasn't just

the mortgages. When all those losses came home to roost with financial institutions that did not

have enough capital to absorb those losses, what did they have to do?

They had to pull back on their credit lines. They had to pull back on their lending. And people,

small businesses couldn't get their credit lines renewed or they couldn't get their -- a lot of

homeowners couldn't get their mortgages refinanced. You know, people who were in the middle

of development projects had had their money pulled.

There was this huge pullback in credit, because these large financial institutions had too much

leverage. And they had to pull in their horns and nurse their balance sheet.

So you have these large financial institutions with these huge trading operations that can be

subject to very sudden, volatile losses, not enough capital to absorb them. You get into another

recession.

BILL MOYERS: Is the banking system safer today?

SHEILA BAIR: Yes, it is. There is more capital in the system now. That's been done through

the stress testing process that the Federal Reserve Board has led. And that has helped. That has

helped a lot. We do have more capital, more of these banks balance sheets being funded with

common equity and less with debt. But the ratios are still far too low.

I think people can understand that basic notion. And if you get capital levels up, you reduce the

leverage. And that makes the system much, much more resilient. You know, it also-- they're

better than prescriptive rules, too. Because we never know what the next stupid thing is going to

be that's going to get a bank into trouble, but if you make--

BILL MOYERS: We human beings are brilliant at figuring out the next stupid thing.

SHEILA BAIR: Yeah, so exactly. But if they have a nice thick cushion of capital, whatever that

next stupid thing is, they're going to have a much better chance of surviving it and continuing to

lend to the economy than if they have very thin capital levels, which means they have a lot of

leverage, a lot of borrowed money there.

BILL MOYERS: Are these big banks still too big?

SHEILA BAIR: Well, I think they are. I think it's more complexity than size. You know, most

of the, all the London Whale, Libor even most of the losses during the crisis, those were

occurring in the trading operations, not the lending parts of these banks. The loans, they made

some bad loans, but we probably could have handled the losses on the loans.

A bank, even a very big bank, if it takes deposits and makes loans, I think we can deal with that.

The FDIC's been dealing with that kind of business model for a long time. When loans get into

trouble, generally, it's a slower process. You have time to work with the borrower, try to mitigate

losses. But with a trading loss, it's immediate and you're really in the soup if it's unexpected.

BILL MOYERS: Give me a quick definition of the Libor scandal?

SHEILA BAIR: The Libor, the London Inter-Bank Offered Rate, was a process that was easy to

game. It was basically a survey to a bunch of large banks that said, "If you had to borrow today,

what do you think the interest rate would be that you'd have to pay?"

And so they were allowed to guess, right? They didn't have to base it on actual transactions. And

so the Libor, the traders at these large institutions figured out that if they could manipulate the

rate, if they colluded and gave information together that would raise or lower the rate, that they

could make money. So it was just good old-fashioned manipulation of an interest rate that's very

important to a lot of municipalities and corporations that use interest rate swaps to manage

interest rate risk, as well as people who have mortgages and credit cards.

BILL MOYERS: So it could impact all of us?

SHEILA BAIR: It absolutely could. I think, you know, there's nothing more sacred than an

interest rate to the financial system. I mean, the interest rate is the primary cost of credit

products. And so if you're manipulating that rate you've got a problem with your financial

system. And the thing that frustrates me about Libor is that this is criminal manipulation. There's

no doubt about it.

You read their e-mails that show these guys colluding with one another. And I think only two

traders at UBS have been charged with criminal charges. Nobody's gone to jail yet on it. The

settlements that have occurred there again are forcing the corporations, the corporate entities at

the banks to pay these huge fines. But individuals aren't being prosecuted or brought to justice. --

I don't understand that.

BILL MOYERS: Our attorney general, as well as other Washington officials say, "Well, we

can't really prosecute them, because they're too big they would hurt related companies."

SHEILA BAIR: I mean, honestly, I just look, if prosecuting the individual is going to -- I mean,

even if you accept the premise of too big to fail, which I don't accept, you can still sue the

individuals. That's not going to bring the system down.

BILL MOYERS: So what's going on?

SHEILA BAIR: The financial regulatory enforcement system. It's basically become a cost of

doing business, right? So you bring these cases. You settle them. It's paid out of the corporate

pocketbook. Individuals aren't held accountable. Very few people have gone to jail. And you

don't change behavior.

You know, the whole point of this is to change behavior. We're just not doing it.

BILL MOYERS: I read the other day that between 2009 and 2012, JPMorgan Chase, Jamie

Dimon's bank, paid $16 billion for legal defense fees and eight billion dollars in settlement for

cases involving regulatory avoidance. I mean, that's almost a third, this estimate was, of their

profits. If I was a shareholder, I'd say, "Why are you spending all that money on that?"

SHEILA BAIR: It's amazing that the easiest way to avoid all this is to stop doing these, you

know, change these behaviors.

Yeah. Well, they do. And, you know, I'm hoping Mary Jo White is going to be the new SEC

chairman. She's got a long history in law enforcement. She was obviously in the private sector

for many years and that's created some controversy. But--

BILL MOYERS: Defending big banks.

SHEILA BAIR: Yeah, but I'm going to hope with her because I think, yeah, and I think she's at

the end of her career. Her legacy's going to be how well she does at the SEC. She's not actually

someone like her could be the very best regulator. Because they've been they know where all the

bodies are buried.

She's not trying to cultivate a client list to go back into practice. She, this is the last thing she's

going to be doing. But I hope she looks at the SEC enforcement strategy and starts suing

individuals and looks at it as a way to change behavior, just not to rack up a bunch of press

releases. And, I, you know, I think that fresh look is going to be helpful, so let’s all wish her

luck.

BILL MOYERS: There are some proposals floating around Congress to break up these last

remaining big banks. Are you sympathetic toward them?

SHEILA BAIR: Well, I am, though I think, you know, government's not doing much of

anything these days. You know, and I never know, these large financial institutions still have a

lot of clout on the hill. So reopening Dodd-Frank and trying to get Congress to do something on

this, I think it's a very healthy discussion. But it, you know, at the end of the day, I'm not sure

where it'll take us. And so my focus has been and the focus of the Systemic Risk Council, which

I chair, has really been on the regulatory tools that are already available under Dodd-Frank to

deal with this problem.

The Fed and the FDIC have the authority to order a restructuring of these large banks or

divestiture if they cannot show that they can be resolved in a way that doesn't hurt the rest of the

system. If they fail, they can go into a government controlled bankruptcy or a traditional

bankruptcy and not impose losses on anybody else. So that's an important showing that they have

to make. And if they can't make it, the Fed and the FDIC now have joint authority to go in there

and say, "Well, you need to get smaller. You need to restructure, so we can resolve you in a way

that won't hurt the rest of the system."

BILL MOYERS: But they also--

SHEILA BAIR: Those both need to be used.

BILL MOYERS: They also have armies of lobbyists, these big banks, that--

SHEILA BAIR: Well, they do.

BILL MOYERS: --came after you, when you were at FDIC.

SHEILA BAIR: They, well, they still do.

BILL MOYERS: Now that you're running the Systemic Risk Council. Describe how that

lobbying and the pressure works--

SHEILA BAIR: Yeah, well, it's--

BILL MOYERS: That culture of Washington.

SHEILA BAIR: It is not good. It's, you know, I think the lobbyists view their success rate by

how much good stuff they can get for their clients, right? And their clients want to make money.

So their focus is regulatory changes that will make money for their clients, not that will promote

system stability.

And I'm not saying, you know, "Listen to everybody." Sure, but, you know, understand that

when those lobbyists come in, whether you're a regulator or a member of Congress, they're

arguing their own bottom line. They're advancing positions that are going to make them more

profitable. And making them more profitable is not members of Congress' job and it is not a

regulator's job.

So there needs to be more separation. And people need to rise up and say, "I'm sick of this, you

know? And I'm going to start voting-- about my vote about you is going to, you know, determine

whether I think you're on top of financial reform and whether you're standing up to these big

banks, not whether you're coddling them or your staff's getting jobs with them or what have

you."

BILL MOYERS: You know, as I say, I was reading this the day before the hearings. And I went

back to your final chapter, where you said, "We need to reclaim our government and demand

that public officials, be they in Congress, the administration, or the regulatory community, act in

the public interest, even if reforms mean lost profits for financial players who write big campaign

checks." I mean, that's a marvelous aspiration, but in practice?

SHEILA BAIR: Well, you know, I think members of Congress need to rise above, look, I know

they're under tremendous pressure to raise money to get reelected. But why are they there to

begin with if they don't want to do the public service? And, you know, my sense is do what's

right. And let the chips fall where they may. But, you know, you and I have talked nostalgically

about the 1980s when we had the World War II generation in leadership ranks in Congress, and

especially in the Senate. And they did rise above a lot of the special interests with tax reform and

fixing the Social Security system.

You know what? They managed to survive reelection. I think really if you take principled

positions, stand up for them, explain them to your constituents, you know, it may be that they'll

raise more money by refusing the Wall Street guys and going to the Main Street constituents who

vote for them. And I think, at the end of the day, they'll sleep better at night, too.

BILL MOYERS: And that's all the more reason to read Bull by the Horns: Fighting to Save

Main Street from Wall Street and Wall Street from Itself. Sheila Bair, thank you very much for

what you're doing and for being with me today.

Now Banks Can Legally Steal Retirement Accounts

Posted by Dominique de Kevelioc de Bailleul on Aug 15, 2012

By Dominique de Kevelioc de Bailleul

“If you don’t understand what ‘get the hell out’ means, there’s not much I can do for you,” Ann

Barnhardt passionately told blogger Warren Pollock, as she warned viewers of systemic failure

in the U.S. financial system, as well as the certainty that American savers will be robbed of their

retirement, brokerage and savings accounts in the process.

Barnhardt, the former commodities broker, cites the latest and hushed court ruling in the 2007

case of a failed Chicago-based futures brokerage firm Sentinel Management Group—another

Ponzi bankruptcy, according to her, totaling $600 million of segregated customer funds tied up in

bankruptcy awaiting determination of whether those segregated funds will be used to pay off a

“secured position” of a $312 million loan held by Bank of NY Mellon.

According to a federal appeals court ruling, Thursday, Bank of New York Mellon’s secured

loan will be put ahead of customer segregated accounts held by Sentinel—a landmark ruling that

turns individual segregated accounts into the property of a third party under circumstances of

duress. In other words, if a financial institution fails, clients, depositors and pension funds may

not get some or all of their money back in a bankruptcy.

In essence, under the ruling, Securities Investor Protection Corporation (SPIC), Federal Deposit

Insurance Corporation (FDIC) and other insurance programs no longer will/can protect customer

funds, leaving millions of investors, depositors and retirees unaware that they are no longer

account holders of their own funds, per se, but, instead, have suddenly become stockholders of

the institution with which they have deposited their money.

Copy of the Sentinel Ruling from the U.S. Court of Appeals, Seventh Circuit.

Barnhardt goes on to say that many emails she receives from readers of her blog mock her as a

Cassandra, but the woman who warned last year of the coming failures and the government’s

disregard of the basics of Common Law have been proved correct. Customers who thought their

money was insured with MF Global, PFGBest and, now, Sentinel, were not insured after all, and

will lose some or all of their money due to a bankruptcy of the firm in which they’ve placed

faith.

She reiterates from numerous previous interviews: run for the hills with your money. The

federal appeals court ruling in the case of Sentinel demonstrates that financial institutions have

suddenly taken precedence over segregated customer funds, including their largest customers of

all—pension funds.

Few know that the game has changed, and the lack of mainstream media coverage of the shock

ruling from the seventh circuit court highly suggests fears within the Fed of a full-blown bank

run if the news of Sentinel’s case were to become a front-page headline, underscoring the

fragility of the banking system of the United States.

“Insurance is designed to cover discreet, individual catastrophes. Okay? If one bank fails, the

FDIC can come in and backstop that one bank, no problem,” Barnhardt explains.

“What do you think is going to happen if the entire system collapses? What happens, do you

think, if, even, let’s say 25 percent of the banks or the banking capacity in the United States

fails?” she asks, rhetorically. “We are now talking trillions and trillions of dollars in deposits.”

In fact, the FDIC shows $15.3 billion (Q1 2012) available to insure approximately $4.7 trillion of

deposits (last reported, Q4 2008), or an insurance pool equivalent to one-third of one cent

(0.0033) held at the FDIC for each dollar insured within the banking system.

Presently, the FDIC cannot make whole on even one percent of bank deposits covered under its

insurance program, though it claims to cover up to $250,000 for each account, a promise that

surely will be broken (at least when compared with today’s purchasing power of one dollar)

during a systemic banking system failure, according to Barnhardt.

“The analogy is to the fire department,” she adds. “The fire department work great if one house

is on fire. What happens if the entire city, if every structure in the city is on fire?”

Barnhardt concludes her interview with two thoughts:

Firstly, in a democratic republic, collectively, Americans are ultimately responsible for the

financial system by voting for “psychopaths” to guard against allowing other psychopaths to run

the banking system. The coming financial collapse would not be possible with an informed and

vigilant electorate, according to her.

Secondly, Barnhardt, a devout Christian, prays for people to wake up in time to protect

themselves before the collapse takes place, which she says could be tomorrow, or as far out as

two years from now.

Source: Barnhardt.biz

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Clinton Is Strongest-Ever Frontrunner. If She Runs.

By Albert R. Hunt Mar 24, 2013 8:39 AM PT

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Q

Last week, when Hillary Clinton released a video announcing her support for gay marriage,

Twitter went wild.

It was totally expected -- her husband and daughter took the same position months earlier --

and didn’t have as much political import as Ohio Republican Senator Rob Portman’s

announcement this month that he now favors same-sex marriage.

About Albert R Hunt»

Albert R. Hunt is a Bloomberg View columnist appearing on Mondays. He was formerly the

executive editor of Bloomberg ... MORE

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More from Albert R Hunt:

Hillary Clinton's Deja Vu

Q

McCain Praising Obama Backs Revenue Compromise on Budget

Q

McCain Praising Obama Backs Revenue Compromise (Transcript)

Q

The rules are different for Hillary Clinton. No non- incumbent in the history of

contemporary U.S. presidential politics ever looked so formidable three years before an

election.

Ask almost any Democrat and the automatic assumption is that Clinton will be the party’s

2016 nominee; a top West Virginia Democrat predicts she would carry that state, which

President Barack Obama lost 62 percent to 35 percent in 2012. Ask most Republicans who

has the best shot to be the 45th President, and they’ll acknowledge it is Clinton.

In conversations last week with more than a half dozen Clinton associates -- people who

know her very well politically or personally -- there was a consensus: She’s more likely to

run than not. The presidential bug hasn’t left her and she passionately wants to see a woman

president. Still, her candidacy isn’t a foregone conclusion; those who say they know, don’t;

and there are several pressing questions outstanding.

Health Questions

First is her health. She just went through a fairly serious illness in December that sidelined

her for a month. She developed a blood clot, an ailment she had suffered at least once

before. Doctors who stress they have no knowledge of her particular condition say a pattern

of clots is worrisome.

She’ll turn 69 a week before the 2016 election -- younger than Ronald Reagan in 1980 or

John McCain in 2008, and questions about her age reflect sexism. But questions about

whether she can still bring her extraordinary vibrancy to any political task don’t.

Then there’s the health of the country in a few years. If the economy continues to improve

and the world is relatively stable, her credentials to succeed and expand on Obama’s record,

to build a more prosperous middle class and enhance America’s global standing, will be

potent.

If the world economy deteriorates and U.S. unemployment hits double digits again or if

there’s a conflict in the Middle East or on the Korean Peninsula, all bets are off.

Over the past 60 years, only once, in 1988, has an incumbent party been given more than

eight consecutive years in the White House.

Finally, what did she learn from the 2008 primary run? It was a disaster. She sought to

inherit the nomination rather than capture it. She ran as a tough, hawkish, establishment

candidate when most Democrats wanted an antiwar, anti-establishment nominee. Her

campaign dissolved into chaos as she stubbornly refused to change. Ultimately, she dumped

her campaign manager and the chief strategist of the flawed effort, but it was too late.

Would she pick better people next time and master the profound changes in political

elections? She might start with Sasha Issenberg’s book, “The Victory Lab,” which describes

the analytical revolution in U.S. politics. In 1991, there was a so- called “Carville primary,”

as Democratic contenders vied for the services of the hottest political consultant, James

Carville.

The equivalent this time might be the Teddy Goff primary, to earn the assistance of the

digital wunderkind who directed social media for the Obama campaign.

Global Role

Then, unlike in 2008, Clinton would have to adopt a strategy that fits the times. There is no

need for her to rush. She’s selectively staying in touch with key players, is expected to write

a book, settle into a role in a nonprofit focusing on global and domestic issues of prime

concern and get some rest.

One of the reasons Democrats are so eager for Clinton to run is that they have a weak bench.

Vice President Joe Biden, popular within the party and a loyal and important Obama

lieutenant, would be almost 74 on Election Day 2016. That’s four years older than Reagan

was in 1980, when he was the oldest man ever elected president.

New York Governor Andrew Cuomo’s incurs animosity with more than a few national

Democrats and his controlling, secretive ways would be a challenge in a national campaign.

Maryland Governor Martin O’Malley, attractive and articulate, doesn’t seem ready for prime

time.

Democrats have a long tradition of upending frontrunners by picking nominees such as

George McGovern, Jimmy Carter and Obama. Hierarchical Republicans usually go with the

establishment candidate. Thus the cliche that Republicans like to fall in line and Democrats

like to fall in love.

With Clinton -- who has rebounded from a defeat better than any recent presidential

aspirant, including Reagan post-1976 -- Democrats want to fall in line. Republicans are

desperate to find a candidate to love.

There are more than 1,000 days before any votes are cast. Another cliche is more telling:

That’s an eternity in politics.

(Albert R. Hunt is a Bloomberg View columnist. The opinions expressed are his own.)

Why the Rich Don't Give to Charity

The wealthiest Americans donate 1.3 percent of their income; the poorest, 3.2 percent. What's up

with that?

Ken SternMar 20 2013, 9:50 PM ET

When Mort Zuckerman, the New York City real-estate and media mogul, lavished $200 million

on Columbia University in December to endow the Mortimer B. Zuckerman Mind Brain

Behavior Institute, he did so with fanfare suitable to the occasion: the press conference was

attended by two Nobel laureates, the president of the university, the mayor, and journalists from

some of New York’s major media outlets. Many of the 12 other individual charitable gifts that

topped $100 million in the U.S. last year were showered with similar attention: $150 million

from Carl Icahn to the Mount Sinai School of Medicine, $125 million from Phil Knight to the

Oregon Health & Science University, and $300 million from Paul Allen to the Allen Institute for

Brain Science in Seattle, among them. If you scanned the press releases, or drove past the many

university buildings, symphony halls, institutes, and stadiums named for their benefactors, or for

that matter read the histories of grand giving by the Rockefellers, Carnegies, Stanfords, and

Dukes, you would be forgiven for thinking that the story of charity in this country is a story of

epic generosity on the part of the American rich.

It is not. One of the most surprising, and perhaps confounding, facts of charity in America is that

the people who can least afford to give are the ones who donate the greatest percentage of their

income. In 2011, the wealthiest Americans—those with earnings in the top 20 percent—

contributed on average 1.3 percent of their income to charity. By comparison, Americans at the

base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their

income. The relative generosity of lower-income Americans is accentuated by the fact that,

unlike middle-class and wealthy donors, most of them cannot take advantage of the charitable

tax deduction, because they do not itemize deductions on their income-tax returns.

But why? Lower-income Americans are presumably no more intrinsically generous (or

“prosocial,” as the sociologists say) than anyone else. However, some experts have speculated

that the wealthy may be less generous—that the personal drive to accumulate wealth may be

inconsistent with the idea of communal support. Last year, Paul Piff, a psychologist at

UC Berkeley, published research that correlated wealth with an increase in unethical behavior:

“While having money doesn’t necessarily make anybody anything,” Piff later told New York

magazine, “the rich are way more likely to prioritize their own self-interests above the interests

of other people.” They are, he continued, “more likely to exhibit characteristics that we would

stereotypically associate with, say, assholes.” Colorful statements aside, Piff’s research on the

giving habits of different social classes—while not directly refuting the asshole theory—suggests

that other, more complex factors are at work. In a series of controlled experiments, lower-income

people and people who identified themselves as being on a relatively low social rung were

consistently more generous with limited goods than upper-class participants were. Notably,

though, when both groups were exposed to a sympathy-eliciting video on child poverty, the

compassion of the wealthier group began to rise, and the groups’ willingness to help others

became almost identical.

Last year, not one of the top 50 individual charitable gifts went to a social-service organization

or to a charity that principally serves the poor and the dispossessed.

If Piff’s research suggests that exposure to need drives generous behavior, could it be that the

isolation of wealthy Americans from those in need is a cause of their relative stinginess? Patrick

Rooney, the associate dean at the Indiana University School of Philanthropy, told me that greater

exposure to and identification with the challenges of meeting basic needs may create “higher

empathy” among lower-income donors. His view is supported by a recent study by The

Chronicle of Philanthropy, in which researchers analyzed giving habits across all American

ZIP codes. Consistent with previous studies, they found that less affluent ZIP codes gave

relatively more. Around Washington, D.C., for instance, middle- and lower-income

neighborhoods, such as Suitland and Capitol Heights in Prince George’s County, Maryland, gave

proportionally more than the tony neighborhoods of Bethesda, Maryland, and McLean, Virginia.

But the researchers also found something else: differences in behavior among wealthy

households, depending on the type of neighborhood they lived in. Wealthy people who lived in

homogeneously affluent areas—areas where more than 40 percent of households earned at least

$200,000 a year—were less generous than comparably wealthy people who lived in more

socioeconomically diverse surroundings. It seems that insulation from people in need may

dampen the charitable impulse.

Wealth affects not only how much money is given but to whom it is given. The poor tend to give

to religious organizations and social-service charities, while the wealthy prefer to support

colleges and universities, arts organizations, and museums. Of the 50 largest individual gifts to

public charities in 2012, 34 went to educational institutions, the vast majority of them colleges

and universities, like Harvard, Columbia, and Berkeley, that cater to the nation’s and the world’s

elite. Museums and arts organizations such as the Metropolitan Museum of Art received nine of

these major gifts, with the remaining donations spread among medical facilities and fashionable

charities like the Central Park Conservancy. Not a single one of them went to a social-service

organization or to a charity that principally serves the poor and the dispossessed. More gifts in

this group went to elite prep schools (one, to the Hackley School in Tarrytown, New York) than

to any of our nation’s largest social-service organizations, including United Way, the Salvation

Army, and Feeding America (which got, among them, zero).

Underlying our charity system—and our tax code—is the premise that individuals will make

better decisions regarding social investments than will our representative government. Other

developed countries have a very different arrangement, with significantly higher individual tax

rates and stronger social safety nets, and significantly lower charitable-contribution rates. We

have always made a virtue of individual philanthropy, and Americans tend to see our large,

independent charitable sector as crucial to our country’s public spirit. There is much to admire in

our approach to charity, such as the social capital that is built by individual participation and

volunteerism. But our charity system is also fundamentally regressive, and works in favor of the

institutions of the elite. The pity is, most people still likely believe that, as Michael Bloomberg

once said, “there’s a connection between being generous and being successful.” There is a

connection, but probably not the one we have supposed.

That Giant Sucking Sound...it's the Oligarchs

Monday, 25 March 2013 14:54 By The Daily Take, The Thom Hartmann Program

The oligarchs are sucking dry America's middle and working class, while the rest of us are being

left to feed off of their crumbs.

Paul Buchheit, a professor of economic inequality at DePaul University, has written a

brilliant piece, detailing just how large, and outrageous, the wealth gap between the

oligarchs and the rest of America has become.

Let's start off by looking at the Koch Brothers.

Each of the Koch brothers saw his investments grow by a staggering $6 billion last year,

which, if you do the math, means that they each made about $3 million per hour last year,

based on a 40-hour workweek.

Meanwhile, as Buchheit points out, the average restaurant server made just $2.13 per hour

last year, less than one millionth of what the Koch brothers pulled in.

And while these numbers alone seem incredibly startling, they only begin to paint the

picture of wealth inequality in America.

On any given day during the winter of 2012, there were around 633,000 homeless

Americans on the streets, trying to survive another day.

According to Buchheit, based on an annual single room occupancy cost of $558 per month,

any one of America's ten richest citizens would have enough money from his 2012 income

to pay for a room for EVERY homeless person in the U.S. for the ENTIRE YEAR. One rich

person not even sacrificing a penny of their more-than-a-billion-dollars wealth, just setting

aside one year's income, could end all homelessness in America.

And if that's not mind-boggling enough, the total combined wealth of these ten wealthiest

Americans is more than the entire U.S. federal housing budget. Even if all ten were to give

up a year's income, their wealth is mind-boggling.

According to a survey by the U.S Conference of Mayors, nearly 20 percent of the homeless

population in America is Hispanic, and the number is growing each day.

In fact, for every single dollar of assets that a single black or Hispanic woman has, a

member of the Forbes 400 has over $40 million.

To put that wealth number in perspective, as Buchheit notes in his piece, for every one can

of soup owned by a single Black or Hispanic woman one of our wealthiest Americans owns

a $30 million mansion AND a $10 million yacht.

As of 2009, the poorest 47% of Americans owned an unbelievable zero percent of America's

wealth, because their debts exceeded their assets. Contrast that with the era before

Reaganomics, when the poorest 47% of Americans owned 2.5% of America's wealth.

The nation's wealth is now instead in the hands of the wealthiest Americans – the oligarchs.

Right now, the 400 wealthiest Americans own as much wealth as 62% of our nation, which

is the driving force behind America having the fourth highest level of wealth inequality in

the world.

But why is it that America's oligarchs have managed to obtain so much wealth, while the

rest of us have nearly nothing, and that one of America's wealthiest businessmen can afford

to buy a yacht and a mansion, when a Hispanic woman just trying to survive is barely able

to pay for a can of soup?

It's thanks in part to the high levels of financial secrecy in the U.S.

The Tax Justice Network's Financial Secrecy Index highlights places around the world that

provide the safest havens for tax refugees – otherwise known as millionaires and billionaires

who want to escape having to pay their fair share to help their economies so that they can

accumulate massive piles of wealth.

And, not surprisingly, the United States ranks 5th in the 2011 Financial Secrecy Index,

behind the traditional tax havens of Switzerland, the Cayman Islands, Luxembourg, and

Hong Kong.

In other words, as millions of Americans struggle to survive each and every day, the

wealthiest Americans, the oligarchs, are accumulating vast sums of wealth, without anyone

saying a word, or raising a finger.

Just look at Mitt Romney.

During the campaign of 2012, there was a huge battle over his disclosure, or lack thereof, of

just how rich he is. And in the end, while Romney did disclose some information about his

assets, including the fact that he was able to hide the vast sums of wealth in tax havens

across the globe.

The bottom-line is that the outrageous levels of wealth inequality in America have been

driven in large part by our society's coddling of, and the media's willful ignorance towards,

our nation's oligarchs.

For too long, the wealthiest Americans have been able to slip under the radar, while robbing

us blind. The Reaganomics era has seen the largest transfer of wealth from working people

to the very, very rich in the history of the world – trillions of dollars. As Elizabeth Warren

pointed out a few weeks ago, if workers wages had kept up with productivity in the years

since Reagan, like they did during the generations before Reagan, the minimum wage today

would be over $22.

It's time to start calling our oligarchs what they are – oligarchs. And tax cheats. And people

who have corrupted both our politicians, our media, and our market-based economic system.

When enough Americans have figured out how badly we've been gamed and ripped off,

things will start to change. Spread the word. And check out www.nobillionaires.com!

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any

form without permission or license from the source.

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — The latest InvestmentNews cover is so

powerful you can actually hear sirens atop a flashing neon billboard, megawarning in huge

bold type: “Tick, Tick ... Boom!”

A warning: InvestmentNews wants to make damn sure its readers, the 90,000 professional

financial advisers who rely on the timeliness and accuracy of every INews forecast, understand:

“What will your clients’ portfolios look like when the bond bomb goes off?” Get it? Not “if” but

“when” that happens.

Yes, they do expect the bond bomb to explode and are publishing “a special report on the

impending crisis in the bond market.”

Yes, you heard them. “Tick, Tick ... Boom!” Wake up, it’s an “impending crisis,” and it lies dead

ahead. And to punctuate the message, InvestmentNews added a photo of an alarm clock with

huge bells, wired to rolled-up bonds looking like a stack of dynamite sticks. “Tick, Tick ...

Boom!”

InvestmentNews is not staffed by a bunch of alarmists. Quite the opposite — it’s conservative,

trustworthy and methodical. The publication knows that the 90,000 registered investment

advisers who rely on it are, in turn, responsible for advising millions of Americans and managing

trillions of dollars’ worth of retirement assets. Yes, the audience demands reliable forecasts.

So listen closely, and we’ll summarize Andrew Osterland’s lead article, “Fear Rising With

Rates,” along with an interview with bond king Bill Gross. And INews editorials on

“repositioning client money” with “strategies for rising rates.” And a couple of opposing

portfolio suggestions: “The case for, and against, stocks.”

The bull says we’re on the verge of an even bigger run-up. The bear warns that if your goal is to

avoid losses, stay out of equities altogether.

Either way, the INews report reads like a Stephen King story, and in the background you hear the

ticking ... ticking ... louder ... and louder ... ”

Bond bubble has doubled in four years

Since the crash four years ago, investors have been wary of stocks and have been putting their

money in bond mutual funds. In the INews interview with Gross it’s noted that assets in bond

mutual funds have more than doubled to more than $2 trillion.

Gross reiterated Pimco’s “new normal” warning: “The future for bonds is a lower-return future

than investors have come to assume. Bond investors should be expecting 2% to 3% returns over

the future years ... bond returns will be lower than expected, but ... still better than cash and will

provide positive returns.” Also see Tell post on Pimco’s view of the euro zone and the Cyprus

crisis.

Interesting that Gross is warning that while interest rates will go up 10 or 15 basis points

annually, “a big spike in interest rates is certainly a worry for bonds, but it wouldn’t be friendly

for stocks, either.”

Latest stock bubble even more deceptive, more deadly

Over at Bloomberg BusinessWeek, Peter Coy also picked up on the “imbalance between the

Dow and the economy. ... Bond yields are so low that savers who used to keep their money in,

say, Treasurys are being driven into the stock market in search of positive returns. They have no

choice.”

Then he borrows economist Roger Farmer’s metaphor of “two staggering drunks connected by a

long rope. Sometimes the stock market and the economy go in the same direction, sometimes

not. But ... it won’t go on forever.” The party will soon be over.

Why? Coy highlights the no-win scenarios of economist David Rosenberg: “If the economy

slips into recession, even the Fed won’t be able to keep the market aloft. On the other hand, if the

economy finally catches fire, investors will conclude that the Fed’s extreme unction will

eventually be withdrawn. They’ll sell bonds in anticipation, driving up interest rates and possibly

pushing down stocks.”

It gets worse. Rosenberg doesn’t like what’s dead ahead: “His worry,” writes Coy, “is simply

that no one else is particularly worried — that the stock market’s rise has been so steady calm,

and untroubled,” and that nobody seems concerned.

Which reminds him that “stock-market volatility is back to the lows of 2006 and 2007 (right

before, ahem, the biggest crisis since the Great Depression). Says Rosenberg: “If there’s a bubble

right now, it’s in complacency.”

Investors are in for a rude awakening.

Warning: ‘Investors have no idea what’s about to happen’

Why are investors complacent? Because “the public thinks bonds are safe, but they’re not. ...

Bonds are a big problem, and most people don’t understand that yet,” according to Harry Clark,

chief executive of Clark Capital Management. Deep down, the public has a vivid memory of the

$10 trillion in market value lost on Wall Street in the 2008 collapse. But after four years of

being lulled into feeling safe in bonds, “they have no idea what’s about to happen to them.”

Listen to the warnings. Start planning now. You have no excuse. Something big is “about to

happen,” and you are not going to like it.

Fortunately for investors, Osterland and InvestmentNews couldn’t be more blunt: “Fear among

financial advisers of a bond-market crash that could devastate the portfolios of millions of

investors is growing amid improving economic news and rising U.S. bond yields,” as Osterland

sees an “imbalance between the Dow and the economy,” which BusinessWeek warns “won’t go

on forever.”

But what’s really scary is not just the prospect of higher rates, or bonds going down, or stocks

hitting a bear patch, or the economy stalling. No, what’s really scary is that investors are

complacent — clueless, in fact. They just don’t get it. As a result, when the ticking time bombs

detonate (and not just the bond bomb and the rate bomb, but the stock bomb and the economy

bomb) volatility will go on a wild ride that will trigger panic selling, even a full-blown crash,

repeating the 2008 disaster.

“Buyer beware. There’s a big yellow sign saying, ‘Caution ahead.’ It’s not going to be pleasant

when rates go up,” said David Sherman, president of Cohanzick Management.” In fact, it could

be downright insane, if you remember the last crash.

Even brokers see worst-case scenario

InvestmentNews added a warning from FINRA, the chief regulator of the brokerage industry:

“Last month, the Financial Industry Regulatory Authority Inc. took the unusual step of issuing an

investor alert about the vulnerability of bonds and bond funds.”

“Many economists believe that interest rates are not likely to get much lower and will eventually

rise. If that is true, then outstanding bonds, particularly those with a low interest rate and high

duration, may experience significant price drops as interest rates rise along the way.”

Hear that? “Significant” interest-rate increases ... bond prices crashing ... rippling through the

stock market, and the global economy. Investors have been lulled into complacency by Ben

Bernanke’s long-running cheap-money policy.

Warning: Your complacency, and everyone’s complacency, will soon end with a shock when

rates jump. But by then it may be too late to plan ahead because it will be a right-here-right-now

situation.

Do the ticking math

Osterland relies on some solid numbers to make his point that the market’s turn has already

begun and will spiral downward out of control: “The yield on the 10-year Treasury bond, just

under 2%, is up more than 35% from the record low in July. Investors are almost certainly going

to see negative real returns on their Treasury portfolios in the first quarter, a rare event that many

feel has the potential to trigger a wider selloff in the market.”

And adding to the selloff risk, we’re coming into federal tax season and a couple more debt-

ceiling cliffs: “With the Federal Reserve keeping short-term rates near zero and long-term rates

near historic lows with its bond-buying program, there’s little room for further price

appreciation. That means ... interest rates have nowhere to go but up.”

And, unfortunately, Osterland warns that “a rapid rise in interest rates would bludgeon many

existing bond portfolios. Simple bond math holds that a one-percentage-point rise in interest

rates would result in a roughly 1% decline in prices for every year of a bond’s duration.” Yes, a

“bludgeoning” of your portfolio once rates start ratcheting up.

InvestmentNews takes its responsibility to America’s 90,000 professional financial advisers

seriously, and in its “Special Report: Tick, Tick ... Boom!” it’s painfully clear INews sees

enormous danger ahead for millions of complacent investors with “no idea what’s about to

happen to them. ... Tick ... Tick ... Boom!”

Freddie Mac Sues Multiple Banks Over Libor Manipulation

By Tom Schoenberg & Andrew Zajac - Mar 20, 2013

Freddie Mac (FMCC) sued Bank of America Corp., UBS AG (UBSN), JPMorgan Chase & Co.

(JPM) and a dozen other banks over alleged manipulation of the London interbank offered rate,

saying the mortgage financier suffered substantial losses as a result of the companies’ conduct.

Government-owned Freddie Mac accuses the banks of acting collectively to hold down the U.S.

dollar Libor to “hide their institutions’ financial problems and boost their profits,” according to a

complaint filed in federal court in Alexandria, Virginia.

Enlarge image

Andrew Harrer/Bloomberg

A Freddie Mac sign stands outside the headquarters in McLean, Virginia. Freddie Mac accuses

the banks of fraud, violations of antitrust law and breach of contract.

“Defendants’ fraudulent and collusive conduct caused USD LIBOR to be published at rates that

were false, dishonest, and artificially low,” Richard Leveridge, a lawyer for Freddie Mac, said in

the complaint, which was made public yesterday.

Manipulation of interest rates by some of the world’s biggest banks has spawned probes by half a

dozen agencies on three continents in what has become the industry’s largest and longest-

running scandal. More than $300 trillion of loans, mortgages, financial products and contracts

are linked to Libor.

Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the British

Bankers’ Association, an industry lobby group that asks firms to estimate how much it would

cost to borrow from each other for different periods and in different currencies.

Dozen Banks

The complaint lists 15 banks as defendants as well as the British Bankers’ Association. They

include Citigroup Inc. (C), Barclays Plc, Royal Bank of Scotland Group Plc (RBS), the Royal

Bank of Canada, Deutsche Bank AG and Credit Suisse Group AG. (CSGN)

Freddie Mac accuses the banks of fraud, violations of antitrust law and breach of contract. The

housing financier is seeking unspecified damages for financial harm, as well as punitive damages

and treble damages for violations of the Sherman Act.

“To the extent that defendants used false and dishonest USD LIBOR submissions to bolster their

respective reputations, they artificially increased their ability to charge higher underwriting fees

and obtain higher offering prices for financial products to the detriment of Freddie Mac and other

consumers,” the U.S.-owned company said in the complaint.

Banks Named

Representatives of the banks who declined to comment on the lawsuit were Danielle Romero-

Apsilos, a spokeswoman for New York-based Citigroup; Jennifer Zuccarelli, a spokeswoman for

New York-based JPMorgan; Brandon Ashcraft, a Barclays spokesman; Bill Halldin, a Bank of

America spokesman; Victoria Harmon, a spokeswoman for Credit Suisse; and Ed Canaday, a

spokesman for Edinburgh-based Royal Bank of Scotland.

Eberhard Roll, a Portigon AG spokesman, didn’t respond to e-mail and phone messages

requesting comment.

Calls to Bank of Tokyo-Mitsubishi UFJ Ltd. and Norinchukin Bank, both of Tokyo, which also

were named in the complaint, weren’t answered on a public holiday.

“The BBA is aware of the lawsuit in the United States and is unable to comment,” Brian Mairs, a

spokesman for British Bankers’ Association, said in an e-mail.

Brad German, a spokesman for McLean, Virginia-based Freddie Mac, said the company doesn’t

comment on litigation. Denise Dunckel, a spokeswoman for the Federal Housing Finance

Agency, the conservator of Freddie Mac, also declined to comment.

Freddie Mac and its sister company, Washington-based Fannie Mae, could have lost a combined

$3 billion because of Libor manipulation, the auditor of the FHFA said in a Nov. 3 internal

memo urging the regulator to investigate further.

Floating Rate

Freddie Mac and Fannie Mae use Libor to determine interest payments on their investments in

floating-rate financial instruments such as bonds and swaps.

The two companies, which package mortgages into securities on which they guarantee payments

of principal and interest, have been under U.S. conservatorship since 2008.

Barclays, UBS and RBS have been fined more than $2.5 billion following a global probe into

Libor manipulation. Traders rigged the benchmark to profit from bets on derivatives, while

banks sought to submit artificially low rates to appear financially healthier than they were,

according to regulators.

From August 2007 and through at least May 2010, the defendants “formed a combination,

conspiracy, or agreement,” to submit false Libor rates, Freddie Mac alleged in the complaint.

The case is Federal Home Loan Mortgage Corp. v. Bank of America Corp. (BAC), 13-cv-00342,

U.S. District Court, Eastern District of Virginia (Alexandria).

Craig B Hulet was both speech writer and Special Assistant for Special Projects to Congressman

Jack Metcalf (Retired); he has been a consultant to federal law enforcement DEA, ATF&E of

Justice/Homeland Security for over 25 years; he has written four books on international relations

and philosophy, his latest is The Hydra of Carnage: Bush’s Imperial War-making and the Rule of

Law - An Analysis of the Objectives and Delusions of Empire. He has appeared on over 12,000

hours of TV and Radio: The History Channel “De-Coded”; He is a regular on Coast to Coast

AM w/ George Noory and Coffee Talk KBKW; CNN, C-Span ; European Television "American

Dream" and The Arsenio Hall Show; he has written for Soldier of Fortune Magazine,

International Combat Arms, Financial Security Digest, etc.; Hulet served in Vietnam 1969-70,

101st Airborne, C Troop 2/17th Air Cav and graduated 3rd in his class at Aberdeen Proving

Grounds Ordnance School MOS 45J20 Weapons. He remains a paid analyst and consultant in

various areas of geopolitical, business and security issues: terrorism and military affairs. Hulet

lives in the ancient old growth Quinault Rain Forest.