Return to the Abyss
One interpretation of financial crises is that they are, in Nassim Taleb’s phrase, “black swan” events – unplanned and unpredictable occurrences that change the course of history. But, in my new book on financial crises, Crisis Economics – which covers not only the recent crisis, but also dozens of others throughout history and across both advanced economies and emerging markets – I show that financial crises are, instead, predictable “white swan” events. What is happening now – the second stage of the global financial crisis – was no less predictable.
Crises are the inevitable result of a build-up of macroeconomic, financial, and policy risks and vulnerabilities: assets bubbles, excessive risk-taking and leverage, credit booms, loose money, lack of proper supervision and regulation of the financial system, greed, and risky investments by banks and other financial institutions.
History also suggests that financial crises tend to morph over time. Crises like those we have recently endured were initially driven by excessive debt and leverage among private-sector agents – households, banks and financial institutions, corporate firms. This eventually led to a re-leveraging of the public sector as fiscal stimulus and socialization of private losses – bail-out programs – caused a dangerous rise in budget deficits and the stock of public debt.
While such fiscal stimulus and bailouts may have been necessary to prevent the Great Recession from turning into Great Depression II, piling public debt on top of private debt carries a high cost. Eventually those large deficits and debts need to be reduced through higher taxes and lower spending, and such austerity – necessary to avoid a fiscal crisis – tends to slow economic recovery in the short run. If fiscal imbalances are not addressed through spending cuts and revenue increases, only two options remain: inflation for countries that borrow in their own currency and can monetize their deficits; or default for countries that borrow in a foreign currency or can’t print their own.
Thus, the recent events in Greece, Portugal, Ireland, Italy, and Spain are but the second stage of the recent global financial crisis. The socialization of private losses and fiscal laxity aimed at stimulating economies in a slump have led to a dangerous build-up of public budget deficits and debt. So the recent global financial crisis is not over; it has, instead, reached a new and more dangerous stage.
Indeed, a practical definition of a financial crisis is an event that forces policy officials to spend a long weekend trying desperately to announce a new bailout package in order to avoid national and global panic before the markets open on Monday. In the past years, such weekend all-nighters dealt with the needed bailouts of private firms – Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, AIG, bank rescues, etc.
And, of course, such weekend dramas are still with us, as EU and eurozone policymakers recently spent a desperate weekend developing a rescue package not only for Greece, but also for other weak eurozone members. The progression is clear: first came rescue of private firms, and now comes the rescue of the rescuers – i.e., governments.
The scale of these bailouts is mushrooming. During the Asian financial crisis of 1997-1998, South Korea – a relatively large emerging-market economy – received what was then considered a very large IMF rescue package – $10 billion. But, after the rescues of Bear Sterns ($40 billion), Fannie Mae and Freddie Mac ($200 billion), AIG (up to $250 billion), the Troubled Asset Relief Program for banks ($700 billion), we now have the mother of all bailouts: the $1 trillion European Union-International Monetary Fund rescue of troubled eurozone members. A billion dollars used to be a lot of money; now one trillion is the “new normal” or – to paraphrase the novel and film The Devil Wears Prada – a trillion is the new ten billion!
Governments that bailed out private firms now are in need of bailouts themselves. But what happens when the political willingness of Germany and other disciplined creditors – many now in emerging markets – to fund such bailouts fizzles? Who will then bail out governments that bailed out private banks and financial institutions? Our global debt mechanics are looking increasingly like a Ponzi scheme.
While the right medicine needed to avoid fiscal train wrecks is well known, the main constraint to fiscal consolidation and discipline is that weak governments around the world lack the political power and willingness to implement austerity. Political gridlock in Washington and in the United States Congress demonstrates the absence of the bipartisanship needed to address America’s fiscal issues. In the United Kingdom, a “hung” parliament has resulted in a coalition government that will have a hard time implementing fiscal discipline.
In Germany, Chancellor Angela Merkel lost a key state election after the rescue of Greece, and Japan has a weak and ineffectual government that seems in denial of the scale of the problem that it faces. In Greece itself, there are riots in the streets and strikes in the factories; in the rest of the PIIGS (Portugal, Ireland, Italy, and Spain), fiscal discipline will be politically and socially painful. So political constraints may prevent fiscal austerity and structural reforms from being implemented.
As a result, “crisis economics” is likely to be with us for a long time. Indeed, the recent financial crisis is not over, and, worse, the medicine used to treat may have been partly toxic. It seems to have made the patient weaker and more addicted to dangerous drugs, as well as more susceptible to new strains of the virus that may, in some cases, eventually prove fatal.
This piece was originally written for Project Syndicate.
Opinions and comments on RGE EconoMonitors do not necessarily reflect the views of Roubini Global Economics, LLC, which encourages a free-ranging debate among its own analysts and our EconoMonitor community. RGE takes no responsibility for verifying the accuracy of any opinions expressed by outside contributors. We encourage cross-linking but must insist that no forwarding, reprinting, republication or any other redistribution of RGE content is permissible without expressed consent of RGE.
14 Responses to “Return to the Abyss”
Finally, the “Ponzi” and “toxic medicine” words are out. Time for a new generation of cops and doctors. The older generations have failed, the patient is dying from an overdose of Ponzi intoxication.Where’s the new generation that can come to the rescue?
I agree with your larger premise. I agree that the second leg down in the saga was cooked into the books. And most importantly I agree that political fortitude is the cause.I would have hoped that in the US that revenue could have been raised by taxing Soda (sugar water and caffeine, Coke, Sprite, Pepsi) as this tax is optional to the public, should not be focused on food, and in a country of diabetes spreading to younger age groups an optional source of revenue. I would like to see another $1.00/pk cigarettes, another $1.00/6pk beer.Political will, fiscal discipline, and socialized medicine are tough.I agree that not spending during a period of deflationary pressure is wrong. However I think there should be optional means of raising revenue where consumption driven models are sought first as to not retard economic growth.Speaking solely from the standpoint of the USA I would hope that there was the political courage to tax Soda, Beer, Cigarettes, Wine, hard spirits. Maybe if the costs of a pack of cigarettes reached $10/pack I would quit.. But the option to pay the tax should be optional.Just my opine, your thoughts on taxing these items and funding health care? Can we afford to fix the economy if we do not?
One Republic???All The Right Moves LyricsAll the right friends in all the wrong placesSo yeah, we’re going downThey got all the right moves in all the right facesSo yeah, we’re going downJust paint the picture of a perfect placeThey got it better than what anyone’s told youThey’ll be the King of Hearts, and you’re the Queen of SpadesThen we’ll fight for you like we were your soldiersI know we’ve got it goodBut they got it madeAnd the grass is getting greener each dayI know things are looking upBut soon they’ll take us down,before anybody’s knowing our name.They got all the right friends in all the right placesSo yeah, we’re going downWe’ve got all the right moves and all the wrong facesSo yeah, we’re going downThey said, everybody knows, everybody knows where we’re goingYeah, we’re going downThey said, everybody knows, everybody knows where we’re goingYeah, we’re going downSubliminal Messaging??? not so subliminal..
Very good piece professor, thank you.I think that the “medicine used to treat” is not partly but mostly toxic. I wonder how many “real doctors” are in action.It is hard to stay away from drugs if we live with addicts. But if we do stay away from drugs, we will not be drug addicts and could lead a healthy lifestyle.If we defined greedy as excessive risk-taking, leveraging, risky investments, and manipulations intended to lead a wealthy and luxurious lifestyle without real service or production, then it is hard for most people to stay away from greedy life. But if we do stay away from greed, we will not have crisis economics and could live in a healthy, sustainable economy.
To anyone who feels themselves qualified to take as stab: how and when historically do government debt crises like the ones being faced around the world lead to world wars? How will todays global interconnectedness play out? Who will attack who first and why? How will we be distracted for how long and by whom? What will we be taught to want, feel entitled to and responsible for?
Conspiracy of Banks Rigging States Came With Crash (Update1)Share Business ExchangeTwitterFacebook| Email | Print | A A ABy Martin Z. Braun and William SelwayMay 18 (Bloomberg) — A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.California to PennsylvaniaThe workings of the conspiracy — which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits — can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials.“The whole investment process was rigged across the board,” said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service’s tax-exempt bond division. “It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.”Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.“This will go on for a long time and a lot of people will be indicted,” he said in a telephone interview.Bidding EncouragedThe U.S. Treasury Department encourages public bidding for GIC contracts to ensure that localities are paid proper market rates. Banks that conspired in the bid rigging for GICs paid kickbacks to CDR ranging from $4,500 to $475,000 per deal in at least 10 different transactions, government court-filed documents say.A GIC is similar to a certificate of deposit, but its rates aren’t advertised publicly. Instead, towns rely on advisory firms such as CDR to solicit competing offers.In the bid-rigging deals, CDR gave false information to municipalities and fed information to bankers allowing them to win with lower interest rates than they were otherwise willing to pay, the indictment says. Banks took their illegal gains from the additional returns and paid CDR kickbacks, according to the indictment.Not Guilty PleaWolmark, 54, who was indicted by a federal grand jury in Manhattan on antitrust, conspiracy and wire fraud charges, to which he pleaded not guilty, declined to comment when reached by telephone at CDR’s office. Goldberg, who hasn’t been charged, declined to comment, says his attorney, John Siffert.Court records in the broadest-ever criminal investigation of public finance shed new light on how Wall Street’s biggest banks were cheating cities and towns during the same decade in which they were setting the stage for a global economic collapse.As the banks were steering the world’s financial system to the brink of catastrophe by loading more than $1 trillion of subprime mortgage loans into opaque debt investments, they were also duping public officials across the U.S.Many of the same bankers and advisers who sold public officials interest-rate swap deals that backfired for taxpayers are now subjects of the criminal antitrust investigation involving GICs.The swaps are derivatives designed to keep monthly interest payments low as lending rates change. Municipal- derivative units of the largest U.S. banks also sold the contracts, public records across the nation show.Key WitnessDerivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Options and futures are the most common types of derivatives.A key witness in the government’s case is a former banker whom the government hasn’t named, according to a civil lawsuit filed by Baltimore, Maryland, and six other municipal borrowers against Bank of America, JPMorgan and nine other banks. The banker is providing evidence against his peers.The witness, who was employed by Bank of America Corp. starting in 1999, has laid out the inner workings of the scheme in confidential meetings with investigators, according to the civil lawsuit.Bank of America, based in Charlotte, North Carolina, has also been providing prosecutors with evidence since at least 2007. The bank voluntarily reported its own illegal activity and agreed to cooperate with the Justice Department’s antitrust division, according to a press release from the company.Amnesty AgreementIn exchange, the government promised in an amnesty agreement not to prosecute the bank. Bank of America spokeswoman Shirley Norton in San Francisco said in an e-mail the firm is continuing to cooperate.The banker who has been cooperating with the Justice Department said he overheard his colleagues change Bank of America’s bids after coaching from brokers or other banks bidding on the same deal, according to information that the firm provided to plaintiffs in the civil case filed by seven municipalities.At least five former bankers with New York-based JPMorgan, the second-biggest U.S. bank by assets, conspired with CDR to rig bidding on investment deals sold to local governments, according to the Justice Department list now under seal.At least three other former JPMorgan bankers are targets of the investigation, according to filings with the Financial Industry Regulatory Authority. Six bankers with Bank of America, the biggest U.S. lender, are also named in the sealed Justice Department list as participants.16 CompaniesEighteen employees at 16 other companies, including units of General Electric Co., UBS AG and FSA, then a unit of Brussels lender Dexia SA, are also cited as co-conspirators by the Justice Department, according to the list under seal. None have been charged in the case.Citigroup spokesman Alex Samuelson, Dexia spokesman Thierry Martiny, GE spokesman Ned Reynolds, JPMorgan spokesman Brian Marchiony, UBS spokesman Doug Morris, and Ferris Morrison, a spokeswoman for Wells Fargo & Co., which acquired Wachovia in 2008, declined to comment.Former CDR employees Douglas Goldberg, Daniel Naeh and Matthew Rothman, pleaded guilty in federal court in Manhattan in February and March to wire fraud and conspiracy to rig bids.In October, CDR was charged with criminal conspiracy and fraud, along with Chief Executive Officer David Rubin, 48, vice president Evan Zarefsky and Wolmark. They pleaded not guilty. Rubin, who was also charged with making fraudulent bank transactions, faces as much as $3 million in fines and more than 30 years in jail if convicted.No Law BrokenRubin declined to comment in a telephone call.“Mr. Rubin doesn’t think that CDR broke the law in any of these transactions,” said Laura Hoguet, his attorney in New York.Daniel Zelenko, a lawyer for Zarefsky in New York, said he was confident his client will prevail at trial.“The government continues to show that it simply doesn’t understand how this market operated,” Zelenko said in an e- mail.During more than three years of investigation, federal prosecutors amassed nearly 700,000 tape recordings and 125 million pages of documents and e-mails regarding public finance deals.$400 BillionMunicipalities and states raise $400 billion a year by selling bonds. They invest much of those proceeds in GICs, sold by banks or insurance companies. Those accounts hold taxpayer money and earn interest before public agencies spend it.Banks and advising firms illegally siphoned money from taxpayers by paying artificially low interest rates in the GICs, the CDR indictment says. The money was intended to build schools, hospitals, roads and sewers and refinance higher-cost debt.The bid-rigging schemes were orchestrated by CDR and other advisory firms, according to the indictment and the civil suits. Advisers are unregulated private firms hired by local governments to consult on public finance deals — and are almost always paid by the banks that arrange the transactions or manage the GICs.Wilshire BoulevardCDR, which was located on Wilshire Boulevard in Beverly Hills, California, during the transactions under investigation, has provided advice on more than $158 billion in public transactions since it was founded in 1986, according to its website.CDR helped arrange deals in which financial firms took millions of dollars in profits from GICs, Bloomberg News reported in October 2006. Almost all of the deals were shams: As much as $7 billion in bond-issue proceeds were invested in GICs but never spent for the intended purpose of providing services to taxpayers.CDR signed off on interest-rate swaps to municipalities, as banks took hidden fees sometimes 10 times as much as they charged on fixed-rate bond deals, according to data compiled by Bloomberg. For the public, the swaps were fraught with risks.In the past decade, banks have peddled swaps the world over, from Jefferson County, Alabama — which was forced to the brink of bankruptcy — to the hill towns of the Umbria region of Italy. Many of these swaps soured when the credit crisis began in 2007.Getting OutDozens of municipalities have paid banks billions to get out of swap contracts. The agency that oversees the San Francisco-Oakland Bay Bridge said it spent $105 million to escape its deal in July 2009.“They were gouging the municipalities,” said retired IRS investigator Anderson, 59. “Beside the excessive fees, some of the swap deals just didn’t work. It was just awful. The same people were involved in the GIC end of the market.”Bid rigging not only cheated cities and towns, it also illegally denied the IRS required taxes from GIC income, Anderson said. The evidence is clear in telephone recordings made on GIC desks, he said. “We could hear people talking about how everyone knew who was going to win the bid. You could tell it was just everyday business.”The Securities and Exchange Commission is conducting a probe of bid rigging from its Philadelphia office that’s parallel to the Justice Department investigation.More ProbesState attorneys general in California, Connecticut and Florida are also investigating. Bank of America, JPMorgan, Fairfield, Connecticut-based GE, and Zurich-based UBS have disclosed in regulatory filings that they may be sued by the SEC.The Federal Bureau of Investigation has raided at least two of CDR’s competitors, Pottstown, Pennsylvania-based Investment Management Advisory Group Inc., known as Image, and Eden Prairie, Minnesota-based Sound Capital Management. Neither has been charged.Robert Jones, a managing director of Image, declined to comment, after answering a call to the firm’s office. Johan Rosenberg of Sound Capital didn’t return calls seeking comment.Tape recordings cited in a letter by Justice Department prosecutor Rebecca Meiklejohn show how those deals worked. In two GIC bids for the Utah Housing Corp., CDR’s Zarefsky advised an unidentified trader that his firm could lower its offer by “a dime,” or 10 basis points (a basis point is 0.01 percentage point).‘A Couple Bucks’The West Valley City-based housing agency accepted contracts with GE’s FGIC Capital Market Services division for 5.15 percent and 3.41 percent in 2001, public records show. Zarefsky didn’t return calls seeking comment.“I can actually probably save you a couple bucks here,” Zarefsky told the trader, according to the letter citing the tape recording.The Utah agency, which finances mortgages for low-income residents, didn’t know that financial firms were cheating it out of money that could have been used to help home buyers, said Grant Whitaker, who runs the agency. “It sounds like somebody got a better deal than we did,” he said in a telephone interview.Such deals could produce large illegal profits by banks, said Bartley Hildreth, public finance professor at the Andrew Young School of Policy Studies at Georgia State University in Atlanta.A New Wrinkle“Just a basis point on many of these deals is tens to hundreds of thousands of dollars,” he said.This isn’t the first time Wall Street has faced accusations of reaping excessive fees on investment deals with public officials. Goldman Sachs Group Inc., Lehman Brothers, which filed for bankruptcy in 2008, Merrill Lynch & Co. and other securities firms agreed by 2000 to pay more than $170 million to settle SEC charges that they had sold overpriced Treasury bonds to municipalities.The so-called yield burning drove down the returns that local governments earned and trimmed required payments to the IRS. The firms neither admitted nor denied wrongdoing.Even as the banks were settling with regulators, they devised another way to burn yield, this time by skimming money from GICs, according to the indictment, which said the conspiracy went from 1998 to at least 2006.In the lawsuit against Bank of America and JPMorgan filed in New York in June 2009, the city of Baltimore, two Mississippi universities and four other municipal borrowers say that bankers from those two companies colluded in bidding for GIC contracts in Pennsylvania.Holiday PartyAt a holiday party sponsored by advising firm Image at Sparks Steak House in Manhattan early in the past decade, the Pennsylvania deals were discussed by the Bank of America trader who is cooperating with prosecutors and Sam Gruer of JPMorgan, the civil antitrust lawsuit says.The Bank of America trader told Gruer that he was happy that the two banks weren’t “kicking each other’s teeth out” on bidding for certificates of deposits for bond proceeds, the suit says. That information was provided by Bank of America to the plaintiffs.Gruer, who was informed by prosecutors in 2007 that he was a target of the investigation, declined to comment.Coaching a BidderThe trader who is now a federal witness joined Bank of America after being recommended by Image, according to information that the bank turned over to the Baltimore-led plaintiffs. He was assigned by Phil Murphy, who headed the municipal trading desk, to be Bank of America’s point person for investment contracts bid by Image, the lawsuit says.Image coached Bank of America in winning an investment contract in Pennsylvania, according to an internal e-mail exchange in May 2001 between Bank of America trader Dean Pinard and Image’s Peter Loughhead that was obtained by Bloomberg News. The e-mail was provided to Bloomberg by a person who got it from Bank of America and asked to remain unidentified.Loughead, who ran bids for Image, advised Pinard on how much to offer for managing the cash fund for a $10 million bond issued by the sewer authority of Springfield Township, York County, 100 miles (161 kilometers) west of Philadelphia.‘Don’t Fall on Any Swords’Pinard said in the e-mail to Loughead that Bank of America was willing to pay the town as much as $40,000 upfront to win the deal. Loughead wrote that the bank didn’t need to pay that much.“Don’t fall on any swords,” Loughead wrote to Pinard the day before bids were submitted. He suggested that the bank could win the contract with a bid of slightly more than $30,000. The next day, Bank of America offered $31,000. It won the bidding, authority records show.Loughead didn’t return calls seeking comment. Pinard didn’t respond to telephone requests for an interview and no one responded to a knock on the door at his Charlotte home.Image ensured that Bank of America would dominate GIC deals in Pennsylvania by soliciting sham bids from other banks to make the process look legitimate, according to testimony from the trader cooperating with the Justice Department.Bank of America would return the favor to Image by submitting so-called courtesy bids at the adviser’s request, allowing JPMorgan to win some of the deals, according to information that Bank of America gave plaintiffs’ attorneys.Switching JobsBank of America has cooperated with the municipalities that were suing the bank as part of its 2007 amnesty agreement with the Justice Department.Traders such as FSA’s Goldberg often had worked for several banks and insurance companies that had a role in GIC contracts, according to employment records with Finra, the self-regulator of U.S. securities firms. CDR employees went on to work in the derivative departments of Deutsche Bank AG and UBS, the records show.Before joining Bank of America, Pinard, 40, worked at Wheat, First Securities Inc. in Philadelphia with two bankers who would later join Image, according to broker registration records.“Few people understand this part of public finance,” Georgia State’s Hildreth said. “It is a very small band of brothers who know the market. So, of course, they are going to reap the benefits.”34 StatesFor nearly a decade, CDR founder Rubin, Wolmark, and Zarefsky helped fix prices on investment deals that cheated taxpayers in at least 34 states, according to their indictments and records filed in the case.FSA’s Goldberg, who received a bachelor’s degree in accounting from St. John’s University in Queens, New York, worked with CDR employees on GIC deals, according to the indictment and public records. Goldberg worked from 1999 to 2001 at GE, which gets 35 percent of its revenue from financial services.Goldberg was referred to only as “Marketer A” in the CDR indictment. “Marketer A” was then later identified as FSA’s Steven Goldberg in the Justice Department list of co- conspirators.At GE, Goldberg worked with Dominick Carollo, a senior investment officer for FGIC, and Peter Grimm, who worked there from 2000 until at least 2006, according to court documents and public records. GE sold FGIC in 2003 to a group led by mortgage insurer PMI Group Inc.Funneling KickbacksGoldberg and Grimm worked with CDR to increase their gains on GIC deals, according to the CDR indictment and conspirator list. Carollo left GE in 2003, joining the derivatives unit of Royal Bank of Canada. Grimm and Carollo didn’t respond to telephone calls and e-mails seeking comment.Goldberg continued to participate in the conspiracy after he left for FSA in 2001 and used swap deals with Toronto-based Royal Bank of Canada and UBS to funnel kickbacks to CDR, according to the indictments and the Justice Department list of conspirators. Royal spokesman Kevin Foster said the company is cooperating the government.FSA, Royal Bank of Canada and UBS all worked on public finance deals in West Virginia that prosecutors say involved bid rigging.At least three times, Goldberg conspired with CDR to pick up deals with West Virginia agencies, according to a guilty plea by former CDR employee Rothman and other records filed in federal court in Manhattan. Among them was a $147 million investment contract with the West Virginia School Building Authority.‘Raw Greed’That state’s schools need every penny they can get, said Mark Manchin, executive director of the school authority. With 17 percent of West Virginians below the poverty line in 2008, the state was 45th among the 50 U.S. states, according to a 2009 Census Bureau report. Manchin said some students study in dilapidated, century-old buildings.“It’s just raw greed at the expense of the most vulnerable,” he said in a telephone interview. “With deteriorating facilities all over the state, that money is what we use to build schools.”Bank of America’s municipal derivatives division, which was formed in 1998, worked on the 14th floor of the Hearst Tower in Charlotte. The space was so tight that the banker who’s cooperating with the Justice Department said he could hear others in the office change their bids when they got word from financial advisers, according to information Bank of America gave Baltimore.Bank of America’s Murphy told the banker helping prosecutors that Image would use sham auctions to steer deals to Bank of America if the employee told Image that he “wanted to win” and “would work with” Image, according to the civil suit filed by Baltimore. Murphy declined to comment.Verbal CuesThey would use verbal cues to communicate. The banker would ask whether the bid was a “good fit” to get information on competing bids from Image. Sometimes Image’s Martin Stallone said Bank of America’s bids were “aggressive,” or too high, and had to be reworked.At other times, Stallone would ask the banker to bid a specific number, according to the civil suit.Stallone didn’t respond to messages left for him at work or to a list of questions faxed and e-mailed to Image.Like Financial Security Assurance, Bank of America also paid kickbacks to brokers for their help in getting deals, according to the Baltimore lawsuit, which based its allegations on information provided by Bank of America.On June 28, 2002, Douglas Campbell, a former municipal derivatives salesman at Bank of America, wrote in an e-mail to his boss, then managing director Murphy, that he had paid $182,393 to banks and brokers not tied to any particular deals.‘Better Relationship’Three payments totaling $57,393 went to CDR, which played no role in any transaction connected to that amount. A copy of the e-mail was contained in a North Carolina lawsuit filed by Murphy against Bank of America in 2003.“The CDR fees have been part of the ongoing attempt to develop a better relationship with our major brokers,” Campbell wrote.The bid rigging in GIC contracts has reduced public funding for schools and housing across the U.S.“If this was going on in a small state like West Virginia, it must have been huge elsewhere,” the state’s Assistant Attorney General Doug Davis said.For Related News and Information: For map showing municipalities affected, click here.)To contact the reporters on this story: William Selway in San Francisco at firstname.lastname@example.org; Martin Z. Braun in New York at email@example.comLast Updated: May 18, 2010 08:55 EDT
http://ampedstatus.com/how-the-business-roundtable-and-chamber-of-commerce-are-killing-financial-reform.AmpedStatus FeaturesHow the Business Roundtable and Chamber of Commerce Are Killing Financial ReformA “shadow bank lobby” has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts.Financial Reform Report Card: Banksters 37, People 10, Partisans 53The financial reform process is providing definitive proof as to what the true priorities are for each Senator. 10 Senators have emerged as American heroes, 37 Senators have revealed themselves as puppets of the Financial Oligarchy.Take Action! How We Can Save OUR EconomyAmpedStatus has joined a new coalition to fight for economic justice. We are sick of reporting upon the crimes of Wall Street and watching our future go up in flames without any accountability or measures being taken to defend against blatant criminality. The Wall Street Elite have controlled our political process for too long! The following is our first announcement and call to action.The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United StatesDemocracy is devolving into fascism before our eyes, the “iron law of oligarchy” is once again asserting itself. You cannot have a concentration of vast wealth and Democracy at the same time, and we currently have the greatest concentration of wealth in history…High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United StatesBy David DeGraw & Max KeiserThe stock market plunge on May 6th was an act of domestic financial terrorism in America. A day that will live in infamy.On the Edge with Max Keiser & David DeGraw: Goldman Sachs, AIG, Hank Paulson and Market Manipulation [Video]Keiser and DeGraw discuss the unreported underlying elements of the SEC’s case against Goldman Sachs, Hank Paulson’s background and role in causing the economic crisis, the Federal Reserve’s illegal activities, the epidemic of accounting fraud on Wall Street, and expose clear examples of trillions of dollars stolen through market manipulation.How the SEC and Congress Can Bring Down Goldman Sachs and Expose the Financial CoupNot only did Goldman Sachs profit on betting against CDOs they designed to fail; more importantly, they insured them through AIG which led to a $182 billion taxpayer bailout.As the Middle Class Collapses and the American Poverty Rate Soars, the Economic Elite Have Never Had It Better [Audio & Transcript]David DeGraw recently gave a speech to World War II veterans summing up his recent reporting: “The Robber Barons of the Gilded Age have now been displaced as America’s most despotic and depraved ruling class.”Shocking Censorship at Google News and the Future of Net NeutralityFor those of you who want to know what the internet will end up like when the Comcast, AT&T, Verizon and Time Warner interests take it over, you need to look at this shocking new case of censorship by Google News.David DeGraw Interviewed on Ring of Fire & RT [video]Mike Papantonio talks with David DeGraw about the REAL America, the one that those of us who aren’t CEOs of major corporations live in. David also appeared on RT TV and called for “a mass movement to restore the rule of law.”Is It Time for Law Abiding American Citizens to Stop Paying Their Taxes and Start a New Government?The evidence is now overwhelming. The United States government has facilitated the theft of trillions of dollars of national wealth and 99% of the US population no longer has political representation.The Best Way to Rob a Country, Own a Bank [Video]The best way to understand the theft of trillions of our dollars, listen to William Black on The Real News Network…———————————————————————————-How the Business Roundtable and Chamber of Commerce Are Killing Financial ReformPosted on Saturday, May 15th, 2010 at 11:29 am, Filed under Economy,By Kevin Connor, Our FutureEditor’s note: Kevin Connor from LittleSis.org has put together a report through the Institute for America’s Future exposing the “shadow bank lobby” that has been working behind the scenes to kill vital financial reform amendments. We feature an excerpt from the report below.In 2008, economist Nouriel Roubini popularized the term “shadow banking system” to describe the non-bank financial institutions that eventually helped spur the collapse of the financial system: highly-leveraged hedge funds, investment banks, and the like. This shadow system fueled Wall Street profits for years before eventually necessitating massive bailouts of the financial sector.These days, a “shadow bank lobby,” has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts. I discuss this “shadow bank lobby” in Big Bank Takeover, the report on the big banks’ army of lobbyists released yesterday by the Campaign for America’s Future.Just as the shadow banking system threatens the integrity of financial markets, the shadow bank lobby threatens the integrity of the financial reform process). Both are designed to help Wall Street avoid oversight and accountability for its actions.Two of the principal players in the shadow bank lobby are large business associations: the US Chamber of Commerce and the Business Roundtable. As Big Bank Takeover details, each institution has morphed into an aggressive financial industry lobby over the bailout period of the past two years. During the bailout period of the past two years, as Wall Street influence has come to be seen as toxic, big banks appear to have directed significant portions of their political budget to these institutions, rather than hiring more lobbyists to lobby directly on their behalf………
max & co..http://maxkeiser.com/2010/05/.rogers. and of course, stacy.!!
Hi roga,i am not qualified, your question is unthinkable. human race can not afford international war anymore, cause the weapons we have today are able to destruct world civilization, including you and me.i think people should go back to their own religions, in the long long run, “smart” people are only greedy fools. it seems like mankind did not learn from past failures, but what is more important is, am i learning? and do you learn?
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