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Is this the reason behind the rash of banker suicides? (Video)

Does the possible explanation in this video for the rash of banker suicides have any basis in reality?Watch and decide for yourself! H/T Free Zone Media Advertisement

Continue reading Is this the reason behind the rash of banker suicides? (Video)

Is this the reason behind the rash of banker suicides? (Video)

Does the possible explanation in this video for the rash of banker suicides have any basis in reality?Watch and decide for yourself! H/T Free Zone Media Advertisement

Continue reading Is this the reason behind the rash of banker suicides? (Video)

Obama and Goldman Sachs: A Quid Pro Quo?

Obama nominated Timothy Geithner to be Secretary of the Treasury. While president of the New York Federal Reserve Bank, he had played a key role in forcing AIG to pay Goldman Sachs’ claims dollar for dollar. Put another way, Geithner, as well as Henry Paulson, Goldman’s ex-CEO serving as Secretary of the Treasury as the financial crisis unfolded, stopped AIG from using the leverage in its bankrupt condition to pay claimants much less than full value. At Treasury, Mark Patterson was Geithner’s chief of staff. Patterson had been a lobbyist for Goldman Sachs.

To head the Commodity Futures Trading Commission—the regulatory agency that Born had headed during the previous administration—Obama picked Gary Gensler, a former Goldman Sachs executive who had helped ban the regulation of derivatives in 1999. Born had pushed for the securities to be regulated, only to be bullied by Alan Greenspan (Chairman of the Federal Revere) and Larry Summers, whom Obama would have as his chief economic advisor. To head the SEC, Obama nominated Mary Shapiro, the former CEO of FINRA, the financial industry’s self-regulatory body.

In short, Obama stacked his financial appointees during his first term with people who had played a role in or at least benefitted financially from financial bubble that came crashing down in September 2008. Put another way, Obama selected people who had taken down the barriers to spreading systemic risk to fix the problem. Why would he have done so? Could it have been part of the quid pro quothe president had agreed to when he accepted the $1 million campaign contribution from Goldman Sachs (the largest contribution to Obama in 2007)? Might Goldman’s executives have wanted to hedge their bets in case the Democrat wins. Getting Goldman alums in high positions of government would essentially make the U.S. Government a Wall Street Government—that is, a plutocracy with the outward look of a democracy. It is no accident, we can conclude, that the spiraling economic inequality increased during the Democrat’s first term of office.

Source:

Inside Job, directed by Charles Ferguson

Continue reading Obama and Goldman Sachs: A Quid Pro Quo?

Obama and Goldman Sachs: A Quid Pro Quo?

Obama nominated Timothy Geithner to be Secretary of the Treasury. While president of the New York Federal Reserve Bank, he had played a key role in forcing AIG to pay Goldman Sachs’ claims dollar for dollar. Put another way, Geithner, as well as Henry Paulson, Goldman’s ex-CEO serving as Secretary of the Treasury as the financial crisis unfolded, stopped AIG from using the leverage in its bankrupt condition to pay claimants much less than full value. At Treasury, Mark Patterson was Geithner’s chief of staff. Patterson had been a lobbyist for Goldman Sachs.

To head the Commodity Futures Trading Commission—the regulatory agency that Born had headed during the previous administration—Obama picked Gary Gensler, a former Goldman Sachs executive who had helped ban the regulation of derivatives in 1999. Born had pushed for the securities to be regulated, only to be bullied by Alan Greenspan (Chairman of the Federal Revere) and Larry Summers, whom Obama would have as his chief economic advisor. To head the SEC, Obama nominated Mary Shapiro, the former CEO of FINRA, the financial industry’s self-regulatory body.

In short, Obama stacked his financial appointees during his first term with people who had played a role in or at least benefitted financially from financial bubble that came crashing down in September 2008. Put another way, Obama selected people who had taken down the barriers to spreading systemic risk to fix the problem. Why would he have done so? Could it have been part of the quid pro quothe president had agreed to when he accepted the $1 million campaign contribution from Goldman Sachs (the largest contribution to Obama in 2007)? Might Goldman’s executives have wanted to hedge their bets in case the Democrat wins. Getting Goldman alums in high positions of government would essentially make the U.S. Government a Wall Street Government—that is, a plutocracy with the outward look of a democracy. It is no accident, we can conclude, that the spiraling economic inequality increased during the Democrat’s first term of office.

Source:

Inside Job, directed by Charles Ferguson

Continue reading Obama and Goldman Sachs: A Quid Pro Quo?

Beyond the Banks’ Price-Fixing and Racketeering


A lawsuit filed in a district court in Florida alleges that JPMorgan, Goldman Sachs, and the London Metal Exchange (LME) artificially inflated aluminum prices.  The plaintiffs accuse the companies of anti-trust practices and racketeering, including the “manipulation of the aluminum market through supply price fixing.”[1] This sounds like what led to the forced break-up of Rockefeller’s Standard Oil Company, though in that case the restraint of trade had to do with the company’s main line of business: oil. In the case of the banks, owning commodity assets such as storage facilities and trading in raw materials do not constitute banking per se. Lest the bankers breathe a sigh of relief, the point triggers a larger question involving the repeal of Glass-Steagall.

      Should we allow banks to expand even beyond these functions to owning commodities and related real-estate? What does this do to the banks’ systemic risk?    Image Source: salisburyareafoundation.org
 

Under Glass-Steagall, commercial banks were not permitted to engage in investment-banking activities, such as proprietary trading and market-making. The law’s repeal in the late 1990s is ironic, for in just a decade the notion of systemic risk would flash into the public’s consciousness under the label of banks being “too big to fail.”

Rather than confront systemic risk directly, U.S. lawmakers and regulators tend to prefer focusing on incremental change in particular areas. For example, when the lawsuit was filed in Florida, regulators were “scrutinizing ownership of commodity storage facilities by major U.S. banks.”[2]Unfortunately, the scrutiny was limited to price-fixing and racketeering, and those regulators probably were not talking to regulators at the SEC who were still promulgating regulations as part of the Dodd-Frank Act of 2010, which was ostensibly geared to reducing systemic risk through providing for the “orderly liquidation” of banks and other financial institutions too big to fail.

Were the various government regulators to compare notes, they might ask each other whether branching off into trading commodities and owning storage facilities increase the banks’ systemic risk. By taking on market risk (i.e., of commodity and commercial real-estate markets) that is higher than the risks in commercial banking, the banks increase their systemic risk. Factor in the legal and reputational liabilities associated with price-fixing and racketeering and the systemic risk increases even more.

Therefore, beyond the question of collusion and restraint of trade in a side business, it can and should be asked whether banks should go into side businesses at all, given the matter of systemic risk. Focusing narrowly on whether lines formed at warehouses, and, moreover, debating secondary issues more generally, are at the very least distractions from the fundamental matter of systemic risk. To the extent that Dodd-Frank fails to curb such risk, we as a society put the economy and financial system at a higher risk of collapsing if we follow the government and the media in focusing too narrowly on just the possible wrong-doing of the bankers. Ironically, sustaining such a focus may be in the banks’ own financial interest.

[1]Melanie Burton, “Glencore, JPMorgan Sued Over Warehouse Aluminium Prices,” Reuters, August 7, 2013.

[2] Ibid.

Continue reading Beyond the Banks’ Price-Fixing and Racketeering

Beyond the Banks’ Price-Fixing and Racketeering


A lawsuit filed in a district court in Florida alleges that JPMorgan, Goldman Sachs, and the London Metal Exchange (LME) artificially inflated aluminum prices.  The plaintiffs accuse the companies of anti-trust practices and racketeering, including the “manipulation of the aluminum market through supply price fixing.”[1] This sounds like what led to the forced break-up of Rockefeller’s Standard Oil Company, though in that case the restraint of trade had to do with the company’s main line of business: oil. In the case of the banks, owning commodity assets such as storage facilities and trading in raw materials do not constitute banking per se. Lest the bankers breathe a sigh of relief, the point triggers a larger question involving the repeal of Glass-Steagall.

      Should we allow banks to expand even beyond these functions to owning commodities and related real-estate? What does this do to the banks’ systemic risk?    Image Source: salisburyareafoundation.org
 

Under Glass-Steagall, commercial banks were not permitted to engage in investment-banking activities, such as proprietary trading and market-making. The law’s repeal in the late 1990s is ironic, for in just a decade the notion of systemic risk would flash into the public’s consciousness under the label of banks being “too big to fail.”

Rather than confront systemic risk directly, U.S. lawmakers and regulators tend to prefer focusing on incremental change in particular areas. For example, when the lawsuit was filed in Florida, regulators were “scrutinizing ownership of commodity storage facilities by major U.S. banks.”[2]Unfortunately, the scrutiny was limited to price-fixing and racketeering, and those regulators probably were not talking to regulators at the SEC who were still promulgating regulations as part of the Dodd-Frank Act of 2010, which was ostensibly geared to reducing systemic risk through providing for the “orderly liquidation” of banks and other financial institutions too big to fail.

Were the various government regulators to compare notes, they might ask each other whether branching off into trading commodities and owning storage facilities increase the banks’ systemic risk. By taking on market risk (i.e., of commodity and commercial real-estate markets) that is higher than the risks in commercial banking, the banks increase their systemic risk. Factor in the legal and reputational liabilities associated with price-fixing and racketeering and the systemic risk increases even more.

Therefore, beyond the question of collusion and restraint of trade in a side business, it can and should be asked whether banks should go into side businesses at all, given the matter of systemic risk. Focusing narrowly on whether lines formed at warehouses, and, moreover, debating secondary issues more generally, are at the very least distractions from the fundamental matter of systemic risk. To the extent that Dodd-Frank fails to curb such risk, we as a society put the economy and financial system at a higher risk of collapsing if we follow the government and the media in focusing too narrowly on just the possible wrong-doing of the bankers. Ironically, sustaining such a focus may be in the banks’ own financial interest.

[1]Melanie Burton, “Glencore, JPMorgan Sued Over Warehouse Aluminium Prices,” Reuters, August 7, 2013.

[2] Ibid.

Continue reading Beyond the Banks’ Price-Fixing and Racketeering