How Wall Street Gutted Our Schools and Cities

Thousands of vacant houses in Baltimore's most
blighted neighborhoods should be opportunities
for job training and employment for hundreds of
young adults wanting to change their lives. (photo:
Open Door Baltimore)

[Yes,  again,  but this time in simpler,  clearer language]

By Pam Martens, AlterNet

21 July 12

  
The complex machinations that pitted county treasurers against the deceptive wizards of Wall Street.

all Street banks have hollowed out our communities with fraudulently sold mortgages and illegal foreclosures and settled the crimes for pennies on the dollar. They've set back property records to the early 1900s, skipping the recording of deeds in county registry offices and using their own front called MERS. They lobbied to kill fixed pension plans and then shaved a decade of growth off our 401(K)s with exorbitant fees, rigged research and trading for the house.

When much of Wall Street collapsed in 2008 as a direct result of their corrupt business model, their pals in Washington used the public purse to resuscitate the same corrupt financial model - allowing even greater depositor concentration at JPMorgan and Bank of America through acquisitions of crippled firms.

And now, Wall Street may get away with the biggest heist of the public purse in the history of the world. You know it's an unprecedented crime when the conservative Economist magazine sums up the situation with a one word headline: "Banksters."

It has been widely reported that Libor, the interest rate benchmark that was rigged by a banking cartel, impacted $10 trillion in consumer loans. Libor stands for London Interbank Offered Rate and is supposed to be a reliable reflection of the rate at which banks are lending to each other. Based on the average of that rate, after highs and lows are discarded, the Libor index is used as a key index for setting loan rates around the world, including adjustable rate mortgages, credit card payments and student loans here in the U.S.

But what's missing from the debate are the most diabolical parts of the scam: how a rigged Libor rate was used to defraud municipalities across America, inflate bank stock prices, and potentially rig futures markets around the world. All while the top U.S. bank regulator dealt with the problem by fiddling with a memo to the Bank of England.

Libor is also one of the leading interest rate benchmarks used to create payment terms on interest rate swaps. Wall Street has convinced Congress that it needs those derivatives to hedge its balance sheet. But look at these statistics. According to the Office of the Comptroller of the Currency, as of March 31, 2012, U.S. banks held $183.7 trillion in interest rate contracts but just four firms represent 93% of total derivative holdings: JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.

As of March 31, 2012, there were 7,307 FDIC insured banks in the U.S. according to the FDIC. All of those banks, including the four above, have a total of $13.4 trillion in assets. Why would four banks need to hedge to the tune of 13 times all assets held in all 7,307 banks in the U.S.?

The answer is that most swaps are not being used as a hedge. They are being used as a money-making racket for Wall Street.   READ MORE

Goldman Sachs CEO Describes 'Secret Meetings' at Insider Trading Trial

Blankfein, Lloyd CEO Goldman Sachs

NEW YORK — The CEO of Goldman Sachs, Lloyd Blankfein, told a New York federal court that his former colleague Rajat Gupta regularly attended highly confidential board meetings.

The chief executive took the stand for the second time in as many years to testify about Gupta, accused in one of the highest profile insider trading cases for years.

Talks at board and committee meetings on which Gupta sat -- before allegedly passing insider tips to hedge fund manager Raj Rajaratnam -- were not for public consumption, Blankfein said.

"You're not supposed to discuss," he said.

Referring to a 2008 strategy meeting held by the powerful US bank in Saint Petersburg, Russia, he said: "The fact it was in the board meeting meant it was confidential."

Blankfein is one of the biggest witnesses prosecutors are using against Gupta, an Indian-born immigrant who reached the pinnacle of US business. The former Goldman board member was also on the board of Procter & Gamble and the director of McKinsey & Co.   READ MORE

One Homeowner's Uphill Battle with Wells Fargo and Goldman Sachs Shows How Badly The Courts are Stacked Against Ordinary People

Photo by bloomsberries, Flickr Creative Commons

Photo Credit: Flickr Creative Commons

Mary Glover is taking on Goldman Sachs and Wells Fargo--but a court decision could leave her and thousands of other homeowners without a hope of justice.

May 27, 2012

Mary Glover, a Pittsburgh-area homeowner living on Social Security disability income, is taking on Goldman Sachs and Wells Fargo, charging that they've violated federal and state consumer protection laws and breached contracts.

Yet, because of a decision by one judge, she and thousands of homeowners like her could be priced out of their ability to fight back in court against shady dealings by the nation's biggest banks. And while the decision in this case may seem exceptional, as Dahlia Lithwick and others have pointed out, it's part of a disturbing pattern of the courts shutting their doors to everyday litigants and class-action suits—and in some cases, literally handing corporations a playbook on how to get away with screwing over the little guy.

  READ MORE

Why Greg Smith's Critique Is Way Too Narrow

Portrait, Robert Reich, 08/16/09.
(photo: Perian Flaherty)

By Robert Reich, Robert Reich's Blog

17 March 12

reg Smith, a Goldman Sachs vice president, resigned his post Wednesday with a stinging public rebuke of the firm on the oped page of the New York Times - accusing it of no longer putting its clients before its own pecuniary goals.

But if Mr. Smith believes his experience at Goldman is something new, he doesn't know history. In 1928, Goldman Sachs and Company created the Goldman Sachs Trading Corporation, which promptly went on a speculative binge, luring innocent investors along the way. In the Great Crash of 1929, Goldman's investors lost their shirts but Goldman kept its hefty fees.

If Mr. Smith believes such disregard of investors is unique to Goldman, he doesn't know the rest of Wall Street. In the late 1920s, National City Bank, which eventually would become Citigroup, repackaged bad Latin American debt as new securities which it then sold to investors no less gullible than Goldman Sachs's. After the Great Crash of 1929, National City's top executives helped themselves to the bank's remaining assets as interest-free loans while their investors and depositors were left with pieces of paper worth a tiny fraction of what they paid for them.

The problem isn't excessive greed. If you took the greed out of Wall Street all you'd have left is pavement. The problem is endemic abuse of power and trust. When bubbles are forming, all but the most sophisticated investors can be easily duped into thinking they'll get rich by putting their money into the hands of brand-named investment bankers.  READ MORE