BANKSTERS AND THE RICH PARTNER WITH TRUMP TO FIGHT economic equality.
"JPMorgan Chase CEO Jamie Dimon, who
was known as Barack Obama’s favorite
banker and who has been a major donor to
the Democratic Party, centered his annual
letter to shareholders on a denunciation of
socialism."
BANKSTER SOCIALISM
Dimon’s bank received tens of billions of
dollars in government bailouts and many
billions more from the Obama
administration’s ultra-low interest rate and
“quantitative easing” money-printing policies.
He told his shareholders that “socialism
inevitably produces stagnation, corruption”
and “authoritarian government,” and would
be “a disaster for our country.”
"This paved the way for the elevation of Trump, the personification of the criminality and backwardness of the ruling oligarchy."
"The very fact that the US government
officially acknowledges a growth of popular
support for socialism, particularly among the
nation’s youth, testifies to vast changes taking
place in the political consciousness of the
working class and the terror this is striking
within the ruling elite. America is, after all, a
country where anti-communism was for the
greater part of a century a state-sponsored
secular religion. No ruling class has so
ruthlessly sought to exclude socialist politics
from political discourse as the American ruling
class."
Socialism haunts the American ruling class
In the two months since Donald Trump vowed in his State of the Union Address that “America will never be a socialist country,” the right-wing demagogue president and the Republican Party have embraced anti-socialism as the defining theme of their campaign in the 2020 elections.
Speaking at the National Republican Congressional Committee Dinner last week, Trump declared that he will be running in 2020 to fight a “socialist takeover” of the United States. “I love the idea of ‘Keep America Great’” as a campaign slogan, Trump said, “because the socialists will destroy” the country.
Trump’s rhetoric is increasingly being embraced by the Republican Party as a whole. Last week, Utah Congressman Chris Stewart announced the formation of an “anti-socialist caucus” in the House of Representatives. This “anti-socialism movement” would serve “as a bulwark to stop the advancement of socialist policies and legislation,” Stewart said.
“If we fail to recall those dangerous times,” he added, “the primitive appeal of socialism will advance and infect our institutions.” Socialism wants to “destroy freedom, democracy and the rule of law,” the congressman declared.
Republican ideologue Pat Buchanan went farther, declaring that the 2020 election would be a choice between Trump and socialism, in which “Trump would be the nation’s last line of defense against the coming of a Socialist America.”
While Trump and the Republicans express it in a particularly crude form, both major parties of the American ruling elite are united in their hatred and fear of socialism. Last week,
JPMorgan Chase CEO Jamie Dimon, who
was known as Barack Obama’s favorite
banker and who has been a major donor to
the Democratic Party, centered his annual
letter to shareholders on a denunciation of
socialism.
Dimon’s bank received tens of billions of
dollars in government bailouts and many
billions more from the Obama
administration’s ultra-low interest rate and
“quantitative easing” money-printing policies.
He told his shareholders that “socialism
inevitably produces stagnation, corruption”
and “authoritarian government,” and would
be “a disaster for our country.”
These statements express the fear that pervades the ruling class over the growth of political opposition within the working class to social inequality, which is fueling an international strike wave. Last year, more than half a million US workers went on strike, a 20-fold increase over 2017.
Last week, Ray Dalio, the former CEO of the hedge fund Bridgewater Associates, published an essay warning that the United States may be on the brink of social revolution.
He wrote: “Disparity in wealth, especially when
accompanied by disparity in values, leads to
increasing conflict and, in the government,
that manifests itself in the form of populism of
the left and populism of the right and often in
revolutions.”
He added that “we are now at a juncture in which” the growth of social inequality, unless reversed, would lead to a “great conflict and some form of revolution.”
Stratfor, the private intelligence service, warned that the 2020 US election represents a “global inflection point,” marked by the intersection of soaring social inequality and a crisis of global dominance for the United States. “The ‘socialist’ label is being bandied left and right,” it wrote, “as a way of questioning the very survival and moral legitimacy of US capitalism.”
What haunts the ruling class is not left-talking figures within the Democratic Party such as Alexandria Ocasio-Cortez, but rather the objective impulse toward mass working-class struggle and hostility toward capitalism. Though only as yet in its initial stages, the growth of the class struggle will inevitably bring about a development of explicit anti-capitalist and socialist sentiment.
Facing an international economic, social and political crisis for which they have no answers, the ruling elites around the world are promoting extreme right-wing movements. All of these movements rose to prominence, like Trump, by promoting xenophobia and economic nationalism, but they are increasingly expressing their essential social character, in keeping with all fascist organizations, in their extreme hatred of socialism.
In France, President Emmanuel Macron has made overtures to the far-right National Rally and praised Marshal Philippe Petain, the war-time Nazi collaborationist dictator. In Britain, Brexit has been used to mobilize right-wing extremists, who murdered Labour Party MP Jo Cox, plotted to kill another Labour MP, violently assaulted Labour leader Jeremy Corbyn, and repeatedly desecrated the grave of Karl Marx.
The efforts of the American ruling elite to promote a fascistic movement against the growth of socialist opposition within the working class underscores the critical importance of the meetings being held across the US by the Socialist Equality Party and the IYSSE, beginning this week, under the title “The Threat of Fascism and How to Fight
HAS AMERICA DESTROYED ITSELF MERELY TO MAKE THE RICH SUPER RICH?
Viking
Economics by George Lakey
by Melville
House
This
week, we’re excited to be publishing Viking Economics, George
Lakey’s look at
how the Nordic countries, in a very short span of time, managed to move past
many of the problems faced by nations like the US and UK today — problems with
inequality, infrastructural weakness, the cost of education, and personal
freedom. Today, the people of Denmark, Iceland, Norway, and Sweden enjoy widely-shared prosperity, low
crime rates, reliable infrastructure, affordable education, great personal
freedoms — some of the highest standards of living in the world.
Particularly
as both the US and the UK face some of our biggest challenges in a generation —
and, in both cases, under new leadership — Viking
Economicsoffers some
crucial examples of how we might get some things right.
Here’s a
brief excerpt to read on the longship ride over to your local bookstore to buy a copy; please try not to get herring on it.
Like most
Americans today, Norwegians a century ago didn’t like the results of a wealth
gap: the hunger and poverty, the crime, elderly friends warehoused or left in
isolation, young people without hope of a good job. Norwegians also didn’t like
the attitudes that went with inequality: an inclination toward arrogance among
higher-income people and the feeling among lower-income people that they were
losers, defeated by the system.
Early in
the twentieth century, Norway had the formal institutions of parliamentary
democracy, but ordinary people were not empowered: they did not set the
direction of their society. The direction was set, instead, by the economic
elite, through the political parties they dominated and the businesses they
ran. Career options were limited, and there was little social mobility.
The
differences between then and now are striking: If you’re a Norwegian teenager
today and the job you’re interested in pursuing doesn’t require higher
education, you can choose among good public vocational courses. If you learn
better in a hands-on apprenticeship mode, publicly supported programs help you
do that. If, instead, you prefer to develop a talent in art or music, or follow
a career at sea or in engineering, you can attend a free post-secondary school.
Paid
maternity and paternity leave (including for adoptive parents) is built into
the system, and your job is held until you return. After the leave is over,
child support is increased if you choose to be a full-time parent. If your
choice is to go back to work, affordable childcare is available.
Extensive,
subsidized public transport means that you probably won’t need a car to get to
work. High educational standards prevail in big-city schools, as well as in the
suburbs. Small towns receive subsidies to make them attractive for people who
might otherwise feel forced to live in a city for cultural amenities, again
increasing your options. The economy subsidizes family farming both for its own
sake and for food security, so farmers can earn a reasonable income, another
freedom denied in many industrialized countries.
The
government offers free vocational counseling, education, and job-training
resources for people seeking a career change, and entrepreneurialism is
encouraged through free health care and a public pension for all: In Norway,
you have the freedom to fail without becoming a failure.
Money
doesn’t dominate the political system, so citizens are freer to participate
meaningfully in political life—and they’re more likely to be exposed to
newspapers with a variety of points of view, because journalism is subsidized
to avoid a narrowing of perspective. According to Freedom House, in 2013,
Norway was tied with Sweden at number one in the world for freedom of the
press. Denmark was sixth, and Iceland was tenth. (The United States was
twenty-sixth.) Indeed, this approach to public life has a long lineage in the
region: Sweden was the first country in the world to establish freedom of the
press—in 1766.
The
Nordics are among the longest-living people in the world, and older citizens
continue to benefit from an economy designed for personal freedom. The Global
Watch Index studied ninety-six countries and rated Norway as the best place to grow old, followed closely by Sweden.
The pension system enables you to live at home with health aides or in a senior
living facility. You don’t need to fear hunger or lack of medicines or of
health care. Every small town has a music and culture center where you can
enjoy the arts and pursue your hobbies.
The crime
rate is very low, partly because societies with high equality tend to
experience less crime. Even in their largest city, Norwegians enjoy a
remarkable degree of freedom from fear about personal safety.
Designing
an economy that supports freedom and equality pays off in happiness, judging
from the Vikings’ descendants making the top ten in the UN’s International
Happiness Index. In 2015, the ratings showed Denmark, Iceland, and Norway sharing first
place with Switzerland, while Sweden was close to its cousins.
The
Organization for Economic Co-operation and Development (OECD), composed of
thirty-four of the most-developed nations, compared life satisfaction
experienced by the people in each country in 2013. The OECD found Norway second, Iceland third, Sweden fourth, and
Denmark fifth.
And yet
in spite of all this security and support, the Nordic yen for adventure has not
disappeared. Americans, too, have a strong yearning for both freedom and
equality, so the Nordic desire for both isn’t surprising. What is surprising,
though, is that they went ahead and built an economy to serve those values.
That’s the story in this book.
Like
their Viking ancestors, the moderns made mistakes in their explorations.
Iceland’s financial collapse of 2008 was a spectacular error, and, as I’ll
describe, back in the 1980s, the Norwegians and Swedes made a series of serious
economic mistakes. The Nordics haven’t built a utopia: Norwegians see
themselves as “a nation of complainers,” and this book doesn’t shy away from
the challenges that face them and their Nordic cousins.
Still,
it’s useful for us as outsiders to observe the Nordics’ expeditions and to use
them to reflect on our own situations. There are many important lessons to be
learned.
Part of
Trump tax bill bonanza for the
wealthy
"The $100 billion figure is not so much a record as it is
another dimension in corporate plunder."
“It has been estimated that the cost of an iPhone, retailing for
around $650 to $700, is made up of $220 for the components and $5 for the labor
of assembly.”
"In the past week, at least one prominent Republican,
Senator Marco Rubio of Florida, has publicly admitted that
the tax bill was sold under false pretenses."
TRUMPERNOMICS:
The Trickle Up to the Rich Economy
http://mexicanoccupation.blogspot.com/2017/12/congress-passes-tax-windfall-for-super.html
"It will, in fact, no more
provide decent-paying jobs and improved wages than the previous tax “reforms”
carried out over the past three-and-a-half decades. The Reagan tax cuts of 1981
and 1986, Bill Clinton’s capital gains tax cut in 1997 and George W. Bush’s tax
“reform” of 2001 were all part of a ruling class offensive against the working
class, which included sweeping attacks on wages, jobs, pensions, education, health
care, housing and other social benefits."
WALL STREET CRIMINALS and the ultimate death of America’s middle-class
https://mexicanoccupation.blogspot.com/2019/04/jim-carrey-america-doomed-if-capitalism.html
"But what the Clintons do is criminal because they do it wholly at the expense of the American people. And they feel thoroughly entitled to do it: gain power, use it to enrich themselves and their friends. They are amoral, immoral, and venal. Hillary has no core beliefs beyond power and money. That should be clear to every person on the planet by now." ---- Patricia McCarthy - AMERICANTHINKER.com
https://mexicanoccupation.blogspot.com/2019/04/jim-carrey-america-doomed-if-capitalism.html
However, the dominant force in American politics for the last two decades has been economic warfare against American citizens.
This economic warfare has two primary components; the use of government to economically favor one group over another; and the collusion of immigrant groups to economically inhibit Americans who oppose replacement migration.
JOSHUA FOXWORTH – AMERICAN THINKER
Jim Carrey: America ‘Doomed’ If We Don’t Regulate Capitalism
"The American phenomenon of record stock values fueling an ever greater concentration of wealth at the very top of society, while the economy is starved of productive investment, the social infrastructure crumbles, and working class living standards are driven down by entrenched unemployment, wage-cutting and government austerity policies, is part of a broader global process."
*
"Hillary will do anything to distract you from her reckless record and the damage to the Democratic Party and the America she and The Obama's have created."
*
“Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of today.” THEODORE ROOSEVELT
*
"Hillary will do anything to distract you from her reckless record and the damage to the Democratic Party and the America she and The Obama's have created."
"But what the Clintons do is criminal because they do it wholly at the expense of the American people. And they feel thoroughly entitled to do it: gain power, use it to enrich themselves and their friends. They are amoral, immoral, and venal. Hillary has no core beliefs beyond power and money. That should be clear to every person on the planet by now." ---- Patricia McCarthy - AMERICANTHINKER.com
Jamie Dimon Says He Didn't Seriously Consider Running for President
By 2008, America's parasitic monster banksters had nearly brought down the American economy with reverberations through out the global economy. Their toxic mortgages cost millions their lives savings as invested in their homes.
These very criminal banksters were rewarded with bottomless bailouts and no interests loans to buy up their competitors and rig the system even more.
No president in history had sucked in more bribes from banksters even before his first day in office than BARACK OBAMA who went on to serve his crony banksters with devote loyalty.
Both of the Obomb's Attorney Generals, Eric Holder and Loretta Lynch were had selected by Obomb's banksters because of their long history of serving the criminal banksters from their respective law firms.
“Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of today.” THEODORE ROOSEVELT
These very criminal banksters were rewarded with bottomless bailouts and no interests loans to buy up their competitors and rig the system even more.
No president in history had sucked in more bribes from banksters even before his first day in office than BARACK OBAMA who went on to serve his crony banksters with devote loyalty.
Both of the Obomb's Attorney Generals, Eric Holder and Loretta Lynch were had selected by Obomb's banksters because of their long history of serving the criminal banksters from their respective law firms.
“This was not because of difficulties in securing indictments or convictions. On the contrary, Attorney General Eric Holder told a Senate committee in March of 2013 that the Obama administration chose not to prosecute the big banks or their CEOs because to do so might “have a negative impact on the national economy.”
“Attorney General Eric Holder's tenure was a low point even within the disgraceful scandal-ridden Obama years.” DANIEL GREENFIELD
“Obama’s new home in Washington has been described as the “nerve center” of the anti-Trump opposition. Former attorney general Eric Holder has said that Obama is “ready to roll” and has aligned himself with the “resistance.” Former high-level Obama campaign staffers now work with a variety of groups organizing direct action against Trump’s initiatives. “Resistance School,” for example, features lectures by former campaign executive Sara El-Amine, author of the Obama Organizing.”
“Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of today.” THEODORE ROOSEVELT
“Our entire crony capitalist system, Democrat and Republican alike, has become a kleptocracy approaching par with third-world hell-holes. This is the way a great country is raided by its elite.” – Karen McQuillan AMERICAN THINKER.com
"But what the Clintons do is criminal because they do it wholly at the expense of the American people. And they feel thoroughly entitled to do it: gain power, use it to enrich themselves and their friends. They are amoral, immoral, and venal. Hillary has no core beliefs beyond power and money. That should be clear to every person on the planet by now." ---- Patricia McCarthy - AMERICANTHINKER.com
“The couple parlayed lives supposedly spent in “public service” into admission into the upper stratosphere of American wealth, with incomes in the top 0.1 percent bracket. The source of this vast wealth was a political machine that might well be dubbed “Clinton, Inc.” This consists essentially of a seedy money-laundering operation to ensure big business support for the Clintons’ political ambitions as well as their personal fortunes."
"The tax overhaul would mean an unprecedented windfall for the super-rich, on top of the fact that virtually all income gains during the period of the supposed recovery from the financial crash of 2008 have gone to the top 1 percent income bracket."
“Truthfully, It Is Tough To Ignore Some Of
The Gross Immoral Behavior By The
President” WASHINGTON POST
Immigration as Economic Warfare
Political influence in America is garnered through a number of mechanisms -- campaign contributions, social media, YouTube, news channels, and authority from moral figures such as the church, to name a few. However, the dominant force in American politics for the last two decades has been economic warfare against American citizens.
This economic warfare has two primary components; the use of government to economically favor one group over another; and the collusion of immigrant groups to economically inhibit Americans who oppose replacement migration.
The first aspect of this warfare is simple. The government institutes programs that give special privileges to one group of people in the form of educational access and benefits, exclusive contracts with the government, quotas within the job market, and legal protections that are exclusive to those people. While many of these benefits are subtle, on multigenerational timelines they effectively destroy the unprotected group while ensuring the success of the protected group. In addition to this, there is the selective enforcement of laws and the absolution of some groups from many laws.
However, the more important aspect of this warfare is the collusion of immigrants to exclude portions of the native population from the economy. This activity has two facets -- exclusion from the market and denial of service.
Consider a nation where the native people makes up 70% of the population and the immigrant population makes up 30%. If the entirety of the immigrant population refuses to purchase the products of the native population, then as long as the native population does not reciprocate this behavior, immigrant businesses have access to 100% of the market and the native businesses have access to only 70% of the marketplace. The end result of this activity is that immigrant businesses will always win out over native businesses.
In practice, the immigrant population need not exclude all the native population. They only need to target those who openly oppose their goals of mass legal and illegal immigration. Add in the portion of the native population that goes along with the boycott of the nativists, and it becomes impossible for anyone within the native group who opposes replacement migration to complete in the marketplace.
In effect, a smaller population of people willing to engage in this economic exclusion can unquestionably control the policies of a nation when the larger group is unwilling or incapable of implementing similar policies. The smaller population has effectively conquered the larger population and controls the political future of the nation.
While marketplace exclusion is passive, the denial of service phase of the warfare is active. Here, the immigrant population and those who support the policy of replacement migration implement the following practices:
- Place pressure on employers to fire natives openly opposed to replacement
- Deny platforms to the native population that opposes replacement
- Payment processors
- YouTube
- Email, etc
- Write articles condemning the natives and ensure that anyone who employs them will be targeted as well
- Engage in violence against the natives and protest their house and employment
- Deny legal protections to those nativists as a recourse of defense from violence
- Prosecute any physical defense mounted by the nativists as initiatory violence
- Place the same pressures on their families
Using these practices, the immigrant population and their supporters can effectively destroy the ability of any native member to economically support themselves. Opposition to the immigrant group is impossible as members cannot raise capital, are not protected from violence, and have their personal sources of income destroyed. Their First Amendment rights are effectively nonexistent as exercising that right results of violence and economic destruction at the hands of foreign powers.
It is in this state that the American people now find themselves. Any citizen who openly opposes replacement migration and supports the enforcement of U.S. laws is denigrated by foreign media, has their personal businesses attacked, and if they attempt to peaceably assemble, then they are set upon by violent political groups like Antifa that assault them in the open without fear of police or legal punishment.
The end result of this economic warfare is the usurpation of power from American citizens to foreign nationals. First, this is hidden but as their power grows it moves into the open. This can be seen in Congresswoman Ocasio-Cortez asserting that immigration laws should not apply to Latinos as this land is rightfully theirs, as well as Senator Kamala Harris asserting that foreign nationals have the right to make laws with respect to U.S. citizens.
There is no good response to this type of cultural and economic warfare, but the first step in defeating it is acknowledging both that it is happening and that the American people have both the right and the obligation to oppose it.
Jim Carrey: America ‘Doomed’ If We Don’t Regulate Capitalism
10:09
LAS VEGAS (AP) — At the just-wrapped CinemaCon, celebrities talked about their upcoming movies but much much more. From Linda Hamilton and her “strange” return to the “Terminator” franchise to Jamie Lee Curtis demanding Joe Biden apologize to Anita Hill to Jim Carrey talking about his politically inspired paintings, stars had a lot to say at the Las Vegas event.
Carrey also said a few words as to why it was important to him to continue to draw political cartoons to post on his Twitter feed.
“Well you know, it’s just a little solace to me in this odd time of complete capitalism breakdown,” he said. “Just a little regulation would help, you know. That’s all. It’s just without that, we are doomed so we are spiraling out of control and its corruption on every level and every walk of life. It’s all attributed to that, so I really think we need to turn that around.”
THE WALL STREET BOUGHT AND OWNED DEMOCRAT PARTY
CITY JOURNAL
A decade ago, as the financial crisis raged, America’s banks were in ruins. Lehman Brothers, the storied 158-year-old investment house, collapsed into bankruptcy in mid-September 2008. Six months earlier, Bear Stearns, its competitor, had required a government-engineered rescue to avert the same outcome. By October, two of the nation’s largest commercial banks, Citigroup and Bank of America, needed their own government-tailored bailouts to escape failure. Smaller but still-sizable banks, such as Washington Mutual and IndyMac, died.
A decade ago, as the financial crisis raged, America’s banks were in ruins. Lehman Brothers, the storied 158-year-old investment house, collapsed into bankruptcy in mid-September 2008. Six months earlier, Bear Stearns, its competitor, had required a government-engineered rescue to avert the same outcome. By October, two of the nation’s largest commercial banks, Citigroup and Bank of America, needed their own government-tailored bailouts to escape failure. Smaller but still-sizable banks, such as Washington Mutual and IndyMac, died.
After the
crisis, the goal was to make banks safer. The 2010 Dodd-Frank law, coupled with
independent regulatory initiatives led by the Federal Reserve and other bank
overseers, severely tightened banks’ ability to engage in speculative ventures,
such as investing directly in hedge funds or buying and selling securities for
short-term gain. The new regime made them hold more reserves, too, to backstop
lending.
Yet the
financial system isn’t just banks. Over the last ten years, a plethora of
“nonbank” lenders, or “shadow banks”—ranging from publicly traded investment
funds that purchase debt to private-equity firms loaning to companies for
mergers or expansions—have expanded their presence in the financial system, and
thus in the U.S. and global economies. Banks may have tighter lending standards
today, but many of these other entities loosened them up. One consequence:
despite a supposed crackdown on risky finance, American and global debt has
climbed to an all-time high.
Banks
remain hugely important, of course, but the potential for a sudden, 2008-like
seizure in global credit markets increasingly lies beyond traditional banking.
In 2008, government officials at least knew which institutions to rescue to
avoid global economic paralysis. Next time, they may be chasing shadows.
The 2008 financial crisis vaporized 8.8 million American jobs,
triggered 8 million house foreclosures, and still roils global politics. Many
commentators blamed a proliferation of complex financial instruments as the
primary reason for the meltdown. Notoriously, financiers had taken subprime
“teaser”-rate mortgages and other low-quality loans and bundled them into
opaque financial securities, such as “collateralized debt obligations,” which
proved exceedingly hard for even sophisticated investors, such as the overseas
banks that purchased many of them, to understand. When it turned out that some
of the securities contained lots of defaulting loans—as Americans who never
were financially secure enough to purchase homes struggled to pay housing
debt—no one could figure out where, exactly, the bad debt was buried (many
places, it turned out). Global panic ensued.
The
“shadow-financing” industry played a role in the crisis, too. Many nonbank
mortgage lenders had sold these bundled loans to banks, so as to make yet more
bundled loans. But the locus of the 2008 crisis was traditional banks. Firms
such as Citibank and Lehman had kept tens of billions of dollars of such debt
and related derivative instruments on their books, and investors feared (correctly,
in Lehman’s case) that future losses from these soured loans would force the
institutions themselves into default, wiping out shareholders and costing
bondholders money.
The
ultimate cause of the crisis, however, wasn’t complex at all: a massive
increase in debt, with too little capital behind it. Recall how a bank works.
Like people, banks have assets and liabilities. For a person, a house or
retirement account is an asset and the money he owes is a liability. A bank’s
assets include the loans that it has made to customers—whether directly, in a
mortgage, or indirectly, in purchasing a mortgage-backed bond. Loans and bonds
are bank assets because, when all goes well, the bank collects money from them:
the interest and principal that borrowers pay monthly on their mortgage, for
example. A bank’s liabilities, by contrast, include the money it has borrowed
from outside investors and depositors. When a customer keeps his money in the
bank for safekeeping, he effectively lends it money; global investors who
purchase a bank’s bonds are also lending to it. The goal, for firms as well as
people, is for the worth of assets to exceed liabilities. A bank charges higher
interest rates on the loans that it makes than the rates it pays to depositors
and investors, so that it can turn a profit—again, when all goes well.
When the
economy tanks, this system runs into two problems. First, a bank’s asset values
start to fall as more people find themselves unable to pay off their mortgage
or credit-card debt. Yet the bank still must repay its own debt. If the value
of a bank’s assets sinks below its liabilities, the bank is effectively
insolvent. To lessen this risk, regulators demand that banks hold some money in
reserve: capital. Theoretically, a bank with capital equal to 10 percent of its
assets could watch those assets decline in value by 10 percent without
insolvency looming.
Yet
investors would frown on such a thin margin, and that highlights the second
problem: illiquidity. A bank might have sufficient capital to cover its losses,
but if depositors and other lenders don’t agree, they may rush to take their
money out—money that the bank can’t immediately provide because it has locked
up the funds in long-term loans, including mortgages. During a liquidity “run,”
solvent banks can turn to the Federal Reserve for emergency funding.
By 2008,
bank capital levels had sunk to an all-time low; bank managers and their
regulators, believing that risk could be perfectly monitored and controlled,
were comfortable with the trend. By 2007, banks’ “leverage ratio”—the
percentage of quality capital relative to their assets—was just 6 percent, well
below the nearly 8 percent of a decade earlier. Since then, thanks to tougher
rules, the leverage ratio has risen above 9 percent. Global capital ratios have
risen, as well. Many analysts believe that capital requirements should be
higher still, but the shift has made banks somewhat safer.
The
government doesn’t mandate capital levels with the goal of keeping any
particular bank safe. After all, private companies go out of business all the
time, and investors in any private venture should be prepared to take that
risk. The capital requirements are about keeping the economy safe. Banks tend to hold similar assets—various types of
loans to people, businesses, or government. So when one bank gets into trouble,
chances are that many others are suffering as well. A higher capital reserve
lessens the chance of several banks veering toward insolvency simultaneously,
which would drain the economy of credit. It was that threat—an abrupt shutdown
of markets for all lending, to good borrowers and bad—that led Washington to
bail out the financial industry (mostly the banks) in 2008.
But what if the financial industry, in creating credit, bypasses
the banks? According to the global central banks and regulators who make up the
international Financial Stability Board, this type of lending constitutes
“shadow banking.” That’s an imprecise, overly ominous term, evoking Mafia dons
writing loans to gamblers on betting slips and then kneecapping debtors who
don’t pay the money back on time, but the practice is nothing so Tony
Soprano-ish. The accountancy and consultancy firm Deloitte defines shadow
banking, wonkily, as “a market-funded credit intermediation system involving
maturity and/or liquidity transformation through securitization and
secured-funding mechanisms. It exists at least partly outside of the
traditional banking system and does not have government guarantees in the form
of insurance or access to the central bank.”
“Shadow banking is nothing new, encompassing everything from
corporate bond markets to payday lending.”
In plain
English, “maturity and/or liquidity transformation” is exactly what a bank
does: making a long-term loan, such as a mortgage, but funding it with
short-term deposits or short-term bonds. Outside of a bank, the activity
involves taking a mortgage or other kind of longer-term loan, bundling it with
other loans, and selling it to investors—including pension funds, insurers, or
corporations with large amounts of idle cash, like Apple—as securities that
mature far more quickly than the loans they contain. The risks here are the
same as at the banks, but with a twist: if people and companies can’t pay off
the loans on the schedule that the lenders anticipated, all the investors risk
losing money. Unlike small depositors at banks, shadow banks don’t have
recourse to government deposit insurance. Nor can shadow-financing participants
go to the Federal Reserve for emergency funding during a crisis—though, in many
cases, they wouldn’t have to: pensioners and insurance policyholders generally
don’t have the right to remove their money from pension funds and insurers overnight,
as many bank investors do.
Understood
broadly, shadow banking is nothing new, encompassing everything from corporate
bond markets to payday lending. And much of it isn’t very shadowy; as a recent
U.S. Treasury report noted, the government “prefers to transition to a
different term, ‘market-based finance,’ ” because applying the term “shadow
banking” to entities like insurance companies could “imply insufficient
regulatory oversight,” when some such sectors (though not all) are highly
regulated. It isn’t always easy to separate real banks from shadow banks,
moreover. Just as before the financial crisis, banks continue to offer shadow
investments, such as mortgage-backed securities or bundled corporate loans,
and, conversely, banks also lend money to private-equity funds and other shadow
lenders, so that they, in turn, can lend to companies.
Such
market-based finance has its merits; sound reasons exist for why a pension-fund
administrator doesn’t just deposit tens of billions of dollars at the bank,
withdrawing the money over time to meet retirees’ needs. For people and
institutions willing, and able, to take on more risk, market-based finance can
offer higher interest rates—an especially important consideration when the
government keeps official interest rates close to zero, as it did from 2008 to
2016. Shadow finance also offers competition for companies, people, and
governments unable to borrow from banks cheaply, or whose needs—say, a
multi-hundred-billion-dollar bond to buy another company—would be beyond the
prudent coverage capacity of a single bank or even a group of banks.
Theoretically,
bond markets and other market-based finance instruments make the financial
system safer by diversifying risk. A bank holding a large concentration of
loans to one company faces a major default risk. Dispersing that risk to dozens
or hundreds of buyers in the global marketplace means—again, in theory—that in
a default, lots of people and institutions will suffer a little pain, rather
than one bank suffering a lot of pain.
But too much of a good thing is sometimes not so good, and, in this
case, the extension of shadow banking threatens to reintroduce the risks that
innovation was supposed to reduce. Recent growth in shadow banking isn’t
serving to disperse risk or to tailor innovative products to meet borrowers’
needs. Two less promising reasons explain its expansion. One is to enable
borrowers and lenders to skirt the rules—capital cushions—that constrain
lending at banks. The other—after a decade of record-low, near-zero interest
rates as Federal Reserve policy—is to allow borrowers and lenders to find
investments that pay higher returns.
The world
of market-based finance has indeed grown. Between 2002 and 2007, the eve of the
financial crisis, the world’s nonbank financial assets increased from $30
trillion to $60 trillion, or 124 percent of GDP. Now these assets, at $160
trillion, constitute 148 percent of GDP. Back then, such assets made up about a
quarter of the world’s financial assets; today, they account for nearly half
(48 percent), reports the Financial Stability Board (FSB).
Within
this pool of nonbank assets, the FSB has devised a “narrower” measure of shadow
banking that identifies the types of companies likely to pose the most systemic
risk to the economy—those most susceptible, that is, to sudden, bank-like
liquidity or solvency panics. The FSB believes that pension funds and insurance
companies could largely withstand short-term market downturns, so it doesn’t
include them in this riskier category. That leaves $45 trillion in narrow
shadow institutions and investments, a full 72 percent of it held in
instruments “with features that make them susceptible to runs.” That’s up from
$28 trillion in 2010—or from 66 percent to 73 percent of GDP.
Of that
$45 trillion market, the U.S. has the largest portion: $14 trillion. (Though,
as the FSB explains, separation by jurisdiction may be misleading; Chinese
investment vehicles, for example, have sold hundreds of billions of dollars in
credit products to local investors to spend on property abroad, affecting
Western asset prices.) Compared with this $14 trillion figure, American
commercial banks’ assets are worth just shy of $17 trillion, up from about $12
trillion right before the financial crisis. Banks as well as nonbank lenders
have grown, in other words, but the banks have done so under far stricter
oversight.
An analysis of one particular area of shadow financing shows the
potential for a new type of chaos. A decade ago, an “exchange-traded fund,” or
ETF, was mostly a vehicle to help people and institutions invest in stocks. An
investor wanting to invest in a stock portfolio but without enough resources to
buy, say, 100 shares apiece in several different companies, could purchase
shares in an ETF that made such investments. These stock-backed ETFs carried
risk, of course: if the stock market went down, the value of the ETF tracking
the stocks would go down, too. But an investor likely could sell the fund
quickly; the ETF was liquid because the underlying stocks were liquid.
Over the
past decade, though, a new creature has emerged: bond-based ETFs. A bond ETF
works the same way as a stock ETF: an investor interested in purchasing debt
securities but without the financial resources to buy individual bonds—usually
requiring several thousand dollars of outlay at once—can purchase shares in a
fund that invests in these bonds. Since 2005, bond ETFs have grown from
negligible to a market just shy of $800 billion—nearly 10 percent of the value
of the U.S. corporate bond market.
These
bond ETFs are riskier, in at least one way, than stock ETFs. Some bond ETFs, of
course, invest solely in high-quality federal, municipal, and corporate
debt—bonds highly unlikely to default in droves. Default, though, isn’t the
only risk: suddenly higher global interest rates could cause bond funds to lose
value (as new bonds, with the higher interest rates, would be more attractive).
And with the exception of federal-government debt, even the highest-quality
bonds aren’t as liquid as stocks; they have maturities ranging anywhere from
hours remaining to 100 years.
Investors
in bond-based ETFs, then, face a much bigger “liquidity” and “maturity”
mismatch risk. If the investors want to sell their ETF shares in a hurry, the
fund managers might not be able to sell the underlying bonds quickly to repay
them, particularly in a tense market. That’s especially true, since bond
markets are even less liquid than they were pre–financial crisis. Because of
new regulations on “market making,” banks will be highly unlikely to buy bonds
in a declining market to make a buck later, after the panic subsides.
Alook at a related type of debt-based ETF raises even bigger
mismatch concerns. “In 2017, investors poured $11.5 billion into U.S. mutual
funds and exchange-traded funds that invest in high-yield bank loans,” notes
Douglas J. Peebles, chief investment officer of fixed-income—bonds—at the
AllianceBernstein investment outfit. A high-yield bank loan is one that carries
particular risk, such as a loan to a company with a poor credit rating or to a
company borrowing money to merge with another firm or to expand; the “yield”
refers to the higher interest rate required to compensate for this risk. Rather
than keep this loan on its books, the bank is selling it, in these cases, to
the exchange-traded funds that are a rising component of shadow banking.
This new
demand has induced lending that otherwise wouldn’t exist—in many cases, for
good reason. “The quality of today’s bank loans has declined,” Peebles observes,
because “strong demand has been promoting lax lending and sketchy supply. . . .
Companies know that high demand means they can borrow at favorable rates.”
Further, says Peebles, “first-time, lower-rated issuers”—companies without a
good track record of repaying debt—are responsible for the recent boom in loan
borrowers, from fewer than 300 institutions in 2007 to closer to 900 today. The
number of bank-loan ETFs (and similar “open-ended” funds) expanded from just
two in 1992 to 250 in June 2018.
Peebles
worries as well about the extra risk that this financing mechanism poses to
investors. “In the past, banks viewed the loans as investments that would stay
on their balance sheets,” he explains, but now that banks sell them to ETFs,
“most investors today own high-yield bank loans through mutual funds or ETFs,
highly liquid instruments. . . . But the underlying bank loan market is less
liquid than the high-yield bond market,” with trades “tak[ing] weeks to
settle.” He warns: “When the tide turns, strategies like these are bound to run
into trouble.”
The peril to the economy isn’t just that current investors could
lose money in a crisis, though big drops in asset markets typically lead people
to curtail consumer spending, deepening a recession. The bigger danger is a
repeat of 2008: fear of losses on existing investments might lead shadow-market
lenders to cut off credit to all potential new borrowers, even worthy ones.
Banks, because they’re dependent on shadow banks to buy their loans, would be
unlikely to fill the vacuum. “Although non-bank credit can act as a substitute
for bank credit when banks curtail the extension of credit, non-bank and bank
credit can also move in lockstep, potentially amplifying credit booms and
busts,” says the FSB. The porous borders between the supposedly riskier parts
of the nonbank financial markets—ETFs—and the less risky ones also could work
against a fast recovery in a crisis. Thanks to recent regulatory changes,
insurance companies, for example, are set to become big purchasers of bond ETF
shares.
Worsening
this hazard, just as with the collateralized debt securities of the financial
meltdown, many bond-based ETFs contain similar securities. Such duplication
could eradicate the diversification benefit that the economy supposedly gets
from dispersing risk. Contagion would be accelerated by the fact that
debt-based ETFs, like stock-based ETFs, must “price” themselves continuously
during the day, according to perceived future losses; this, in effect,
introduces the risk of stock-market-style volatility into long-term bond
markets. (Bond-based mutual funds, of course, have existed for decades, but
they did not trade like stocks and thus did not feature this particular risk.)
Via the plunging price of collateralized debt obligations, we saw, in 2008,
what happened to the availability of long-term credit when exposed to the
pricing signals of an equity-style crash, but those collateralized debt
obligations traded far less frequently than bond ETFs do today. Bond ETFs may
be more efficient, yes, in reflecting any given day’s value; that supposed
benefit could also allow a panic to spread more rapidly.
During
the last global panic, the answer to getting credit flowing again—so that
companies could perform critical tasks, such as meeting payrolls, before
revenue from sales came in—was to provide extraordinary government support to
the large banks. But even if one believes that such bailouts are a sensible
approach to financial crises—a highly tenuous position—how would the government
provide longer-term support to hundreds of individual funds, to ensure that the
broader market keeps functioning for credit-card and longer-term corporate
debt? This would greatly expand the government safety net over supposedly
risk-embracing financial markets—by even more than it was expanded a decade
ago.
“When both regular banks and shadow banks are tapped out, we may
need shadow-shadow finance to take up the slack.”
Unwise lending also harms borrowers. Private-equity firms, too, are
increasingly lending companies money, instead of just buying those firms
outright, their older model. As the Financial Times recently reported,
private-equity funds—or, more accurately, their related private-credit
funds—have more than $150 billion in money available for investment. They make
loans that banks won’t, or can’t, make, though this is leading banks to take
greater risks to compete. “It’s been great for borrowers,” says Richard Farley,
chair of law firm Kramer Levin’s leveraged-finance group, as “there are deals
that would not be financed,” or would not be financed on such favorable terms.
Competition
is usually healthy, and risky finance can spark innovation that otherwise
wouldn’t have happened. But easy lending can also make economic cycles more
violent. Even in boom years, excess debt can plunge firms that otherwise might
muddle through a recession deep into crisis, or even cause them to fail, adding
to layoffs and consumer-spending cutbacks. We can see this happening already,
as the Financial Times reports, with bankrupt
firms like Charming Charlie, an accessories store that expanded too fast; Six
Month Smiles, an orthodontic concern; and Southern Technical Institute, a
for-profit technical college.
The
numbers are troubling. The expansion of shadow banking has unquestionably
brought a pileup of debt. The Securities Industry and Financial Markets
Association, a trade group, estimates that U.S. bond markets, overall, have
swollen from $31 trillion to nearly $42 trillion since 2008. Federal government
borrowing accounts for a lot of that, but not close to all of it. The
corporate-bond market, for example, went from $5.5 trillion to $9.1 trillion
over the same decade. Corporations, in other words, owe almost twice as much
today in bond obligations as they did a decade ago. That’s sure to make it
harder for some, at least, to recover from any future downturn.
There are policy approaches to resolving these debt issues. An
unpopular idea would be to treat markets that act like banks, as banks—requiring
ETFs, say, to hold the same capital cushions and adhere to the same prudence
standards as banks. In the end, though, the bigger problem is cultural and
political. What we’re seeing, more than a decade after the financial crisis,
results from the government’s mixed signals about financial markets. On the one
hand, the U.S. government, along with its global counterparts, realized in 2008
that debt had reached unsustainable levels; that’s partly why it sharply raised
bank capital requirements. On the other hand, the government recognized that
the economy is critically dependent on debt. Absent large increases in workers’
pay, consumer and corporate debt slowdowns would stall the economy’s until-recently
modest growth. That’s why the U.S. and other Western governments have kept
interest rates so low, for so long.
Thus, we
find ourselves with safer banks but scarier shadows. Global debt levels are now
$247 trillion, or 318 percent, of world GDP, according to the Institute of
International Finance, up from $142 trillion owed in 2007, or 269 percent of
GDP. When both regular banks and shadow banks are tapped out, we may have to
invent shadow-shadow finance to take up the slack.
Nicole Gelinas is a City Journal contributing editor, a senior
fellow at the Manhattan Institute, and the author of After the Fall: Saving Capitalism from Wall
Street—and Washington.
THE BANKSTERS’ RENT BOYS & GIRLS IN CONGRESS GATHER ROUND
TO UNLEASH THE WHOLESALE LOOTING OF THEIR BANKSTER PAYMASTERS EVEN MORE….
BOTTOMLESS
BAILOUTS AROUND THE CORNER WAITING!
After eight years of the
Dodd-Frank bank “reform,” the American financial oligarchy exercises its
dictatorship over society and the government more firmly than ever. This
unaccountable elite will not tolerate even the most minimal limits on its
ability to plunder the economy for its own personal gain.
“Democrats Move Towards ‘Oligarchical Socialism,’
Says Forecaster Joel Kotkin.”
NO POL IN HISTORY SUCKED IN MORE BRIBES FROM BANKSTERS THAN BARACK
OBAMA, AND HE DID IT BEFORE HIS FIRST DAY IN OFFICE. What did the Wall Street
banksters know that took us so long to find out???
"One of the premier institutions of
big business, JP Morgan Chase, issued an internal report on the
eve of the 10th anniversary of the 2008 crash, which warned that
another “great liquidity crisis” was possible, and that a
government bailout on the scale of that effected by Bush and Obama
will produce social unrest, “in light of the potential impact
of central bank actions in driving inequality between asset owners
and labor."
Obama, of course, covered up his own
role, depicting his presidency as eight years of heroic efforts to
repair the damage caused by the 2008 financial crash. At the end of those
eight years, however, Wall Street and the financial oligarchy were
fully recovered, enjoying record wealth, while working people were
poorer than before, a widening social chasm that made possible the
election of the billionaire con man and Demagogue in November 2016.
“The response of the administration was to
rush to the defense of the banks. Even before coming to power, Obama expressed
his unconditional support for the bailouts, which he subsequently
expanded. He assembled an administration
dominated by the interests of finance
capital, symbolized by economic adviser Lawrence Summers and Treasury
Secretary Timothy Geithner.”
Trump criticized Dimon in 2013 for
supposedly contributing to the country’s economic downturn. “I’m not
Jamie Dimon, who pays $13 billion to settle a case and then pays $11
billion to settle a case and who I think is the worst banker in
the United States,” he told reporters.
10 years after the
financial crisis,
Americans are divided on security of U.S. economic
system
A decade after
the 2008 financial crisis, the public is about evenly split on whether the U.S.
economic system is more secure today than it was then. About half of Americans
(48%) say the system is more secure today than it was before the 2008 crisis,
while roughly as many (46%) say it is no more secure.
Opinions have
changed since 2015 and 2013, when majorities said the economic system was no
more secure than it had been prior to the crisis (63% in both years), according
to the new survey, conducted Sept. 18-24 among 1,754 adults.
Republicans are
now far more likely to view the system as more secure than they were during
Barack Obama’s presidency. Three years ago, just 22% of Republicans and
Republican-leaning independents said the economic system was more secure than
before the crisis. Today, the share saying the same has increased 48 percentage
points to 70%.
Views among
Democrats and Democratic-leaning independents have moved in the opposite
direction. Today, Democrats are less confident that the economy is more secure
than it was before the 2008 financial crisis: Just a third say the economy is
more secure – a drop of 13 percentage points from 2015 (46%).
Meanwhile, the
public’s views of current economic conditions – and the trajectory of the U.S.
economy over the next year – have changed little since March.
About half of
Americans (51%) now rate the national economy as excellent or good, among the
most positive measures in nearly two decades.
As has been the
case since Donald Trump took office, Republicans are far more positive than
Democrats about economic conditions: 73% of Republicans and Republican-leaning
independents say economic conditions are excellent or good while just 35% of
Democrats and Democratic leaners agree.
Partisans also
are divided in their expectations for the economy. Republicans (57%) are much
more likely than Democrats (12%) to say they expect the national economy to get
better in the next year. Partisan differences in opinions about the economy –
current and future – are about as wide as they were in March.
Similarly,
there has been little recent change in Americans’ views of their own financial
situations. About half (49%) say their finances are in excellent or good shape.
Partisan
differences in people’s assessments of their personal finances, which were
modest during most of Obama’s presidency, have increased since then.
A majority of
Republicans (61%) say their personal financial situation is excellent or good,
compared with about four-in-ten Democrats and Democratic leaners (41%).
Most Americans
remain optimistic about their personal financial future. Almost seven-in-ten
adults (68%) expect their financial situation to improve some or a lot over the
next year. Republicans (79%) more than Democrats (59%) are optimistic about
their finances getting better next year.
White House report on socialism
The specter of Marx haunts the
American ruling class
Last month, the Council
of Economic Advisers, an agency of the Trump White House, released an
extraordinary report titled “The Opportunity Costs of Socialism.” The report
begins with the statement: “Coincident with the 200th anniversary of Karl
Marx’s birth, socialism is making a comeback in American political discourse.
Detailed policy proposals from self-declared socialists are gaining support in
Congress and among much of the younger electorate.”
The very fact that the
US government
officially acknowledges
a growth of popular
support for socialism,
particularly among the
nation’s youth,
testifies to vast changes taking
place in the political
consciousness of the
working class and the
terror this is striking
within the ruling
elite. America is, after all, a
country where
anti-communism was for the
greater part of a
century a state-sponsored
secular religion. No
ruling class has so
ruthlessly sought to
exclude socialist politics
from political
discourse as the American ruling
class.
The 70-page document is
itself an inane right-wing screed. It seeks to discredit socialism by
identifying it with capitalist countries such as Venezuela that have expanded
state ownership of parts of the economy while protecting private ownership of
the banks, and, with the post-2008 collapse of oil and other commodity prices,
increasingly attacked the living standards of the working class.
It identifies socialism
with proposals for mild social reform such as “Medicare for all,” raised and
increasingly abandoned by a section of the Democratic Party. It cites Milton
Friedman and Margaret Thatcher to promote the virtues of “economic freedom,”
i.e., the unrestrained operation of the capitalist market, and to denounce all
social reforms, business regulations, tax increases or anything else that
impinges on the oligarchy’s self-enrichment.
The report’s arguments
and themes find expression in the fascistic campaign speeches of Donald Trump,
who routinely and absurdly attacks the Democrats as socialists and accuses them
of seeking to turn America into another “socialist” Venezuela.
What has prompted this
effort to blackguard socialism?
A series of recent
polls in the US and Europe have shown a sharp growth of popular disgust with capitalism
and support for socialism. In May of 2017, in a survey conducted by the Union
of European Broadcasters of people aged 18 to 35, more than half said they
would participate in a “large-scale uprising.” Nine out of 10 agreed with
the statement, “Banks and money rule the world.”
Last November, a poll
conducted by YouGov showed that 51 percent of Americans between the ages of 21
and 29 would prefer to live in a socialist or communist country than in a
capitalist country.
In August of this year,
a Gallup poll found that for the first time
since the organization
began tracking the figure, fewer than half
of Americans aged 18–29
had a positive view of capitalism, while
more than half had a
positive view of socialism. The
percentage of young
people viewing
capitalism positively
fell from 68 percent
in 2010 to 45 percent
this year, a 23-
percentage point drop
in just eight years.
This surge in interest
in socialism is bound up with a resurgence of class struggle in the US and
internationally. In the United States, the number of major strikes so far this
year, 21, is triple the number in 2017. The ruling class was particularly
terrified by the teachers’ walkouts earlier this year because the biggest
strikes were organized by rank-and-file educators in a rebellion against the
unions, reflecting the weakening grip of the pro-corporate organizations that
have suppressed the class struggle for decades.
The growth of the class
struggle is an objective process that is driven by the global crisis of
capitalism, which finds its most acute social and political expression in the
center of world capitalism—the United States. It is the class struggle that
provides the key to the fight for genuine socialism.
Masses of workers and
youth are being driven into struggle and politically radicalized by decades of
uninterrupted war and the staggering growth of social inequality. This process
has accelerated during the 10 years since the Wall Street crash of 2008. The
Obama years saw the greatest transfer of wealth from the bottom to the top in
history, the escalation of the wars begun under Bush and their spread to Libya,
Syria and Yemen, and the intensification of mass surveillance, attacks on
immigrants and other police state measures.
This paved the way for
the elevation of Trump, the personification of the criminality and backwardness
of the ruling oligarchy.
Under conditions where
the typical CEO in the US now makes in a single day almost as much as the
average worker makes in an entire year, and the net worth of the 400 wealthiest
Americans has doubled over the past decade, the working class is looking for a
radical alternative to the status quo. As the Socialist Equality Party wrote in
its program eight years ago, “The Breakdown of
Capitalism and the Fight for Socialism in the United States”:
The change in objective
conditions, however, will lead American workers to change their minds. The
reality of capitalism will provide workers with many reasons to fight for a
fundamental and revolutionary change in the economic organization of society.
The response of the
ruling class is two-fold. First, the abandonment of bourgeois democratic forms
of rule and the turn toward dictatorship. The run-up to the midterm elections
has revealed the advanced stage of these preparations, with Trump’s fascistic
attacks on immigrants, deployment of troops to the border, threats to gun down
unarmed men, women and children seeking asylum, and his pledge to overturn the
14th Amendment establishing birthright citizenship.
That this has evoked no
serious opposition from the Democrats and the media makes clear that the entire
ruling class is united around a turn to authoritarianism. Indeed, the Democrats
are spearheading the drive to censor the internet in order to silence left-wing
and socialist opposition.
The second response is
to promote phony socialists such as Bernie Sanders, the Democratic Socialists
of America (DSA) and other pseudo-left organizations in order to confuse the
working class and channel its opposition back behind the Democratic Party.
In 2018, with Sanders
totally integrated into the Democratic Party leadership, this role has been
largely delegated to the DSA, which functions as an arm of the Democrats. Two
DSA members, Alexandria Ocasio-Cortez in New York and Rashida Tlaib in Detroit,
are likely to win seats in the House of Representatives as candidates of the
Democratic Party.
The closer they come to
taking office, the more they seek to distance themselves from their supposed
socialist affiliation. Ocasio-Cortez, for example, joined Sanders in eulogizing
the recently deceased war-monger John McCain, refused to answer when asked if
she opposed the US wars in the Middle East, and dropped her campaign call for the
abolition of Immigration and Customs Enforcement (ICE).
OBAMA:
SERVANT OF THE 1%
Richest
one percent controls nearly half of global wealth
The
richest one percent of the world’s population now controls 48.2 percent of
global wealth, up from 46 percent last year.
Supreme Court Considers
Who Bears Responsibility for Security Fraud
December 3, 2018 Updated: December 3, 2018
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An investment banker who sent deceptive
emails dramatically overstating the financial health of a failing clean energy
company shouldn’t be held responsible for securities fraud because he was only
following his supervisor’s directions, the man’s attorney told a skeptical
Supreme Court.
U.S. securities laws forbid those offering
securities for sale from making false statements or participating in fraudulent
schemes. Whether a person who merely passes the bad information along is
legally liable is at issue in this case.
The company, Waste2Energy Holdings Inc. of
Neptune Beach, Florida, founded in 2007, went out of business in 2013
after filing for Chapter 11 bankruptcy. The company had hoped to develop
technology to convert waste into energy but failed to do so.
In 2009 Francis V. Lorenzo, then the
director of investment banking at the brokerage Charles Vista LLC, emailed
prospective investors offering for sale $15 million in debentures secured only
by W2E’s earning capacity.
The emails indicated that W2E had $10
million in assets and purchase orders north of $40 million, and that the
brokerage was willing to raise money to repay investors if needed.
But at the time the emails were sent, the
company had already acknowledged that an audit had determined its assets were
worth much less than $1 million.
Lorenzo’s boss and the brokers settled the
claims the U.S. Securities and Exchange Commission (SEC) brought but Lorenzo
refused. An SEC administrative law judge found Lorenzo’s superior drafted the
emails but that Lorenzo had nonetheless broken the law by sending them because
they contained false information about W2E’s financial situation.
The SEC banished Lorenzo from the
securities industry for life and imposed a $15,000 civil penalty.
A three-judge panel of the U.S. Court of
Appeals for the District of Columbia Circuit ruled against Lorenzo in 2017,
finding that he participated in a scheme to defraud investors by sending the
misleading emails even though he was not deemed to have made the untrue
statements himself.
Lorenzo disagreed with the circuit court
and the Supreme Court decided June 18 to hear his appeal. He argues that at
most he may have aided and abetted a fraudulent scheme as a “secondary”
violator of securities laws.
Borrowing language from the Supreme Court’s
ruling in the 2011 case, Janus Capital Group Inc. v. First Derivative Traders,
Lorenzo argued that because he did not have “ultimate authority over the
statement, including its content and whether and how to communicate it,” he
cannot be held liable under Rule 10-5(b) of the Securities Exchange Act. The
rule forbids fraudulent schemes or devices, making false statements, and
engaging in fraud that harms investors.
Justice Brett Kavanaugh, who sat on the
circuit court panel at the time, dissented from its majority opinion, writing
that Lorenzo hadn’t violated securities laws. “How could [petitioner] have
intentionally deceived the clients when he did not draft the emails, did not
think about the contents of the emails, and sent the emails only at his boss’s
direction?”
Kavanaugh recused himself from the Supreme
Court case, leaving the other eight justices to participate in oral arguments
Dec. 3.
Justices Have Doubts
During those oral arguments, Lorenzo’s
attorney, Robert Heim, said that sending the email was not an inherently
deceptive act. Justice Neil Gorsuch appeared to agree that Lorenzo was not the
author of the false statements in the emails.
But Justices Ruth Bader Ginsburg, Samuel
Alito, and Sonia Sotomayor seemed to disagree with Heim.
Ginsburg asked Heim why it wasn’t
“inherently deceptive to send a succession of untruths?”
“Lorenzo is essentially a conduit,” Heim
replied. “He’s somebody that’s transmitting statements … on behalf of another …
simply sending an e-mail is not enough to transform Frank Lorenzo into a
primary violator from, perhaps, somebody who gave substantial assistance.
The language of the statutes and the rules
make “a clear distinction between statements and … conduct.”
Alito asked why Lorenzo’s behavior wouldn’t
“fall squarely” within the language of the rule used by the SEC.
Sotomayor was just as blunt, telling Heim:
“I’m having a problem from the beginning. Once you concede … that you’re not
challenging that your client acted with an intent to deceive or defraud, that
you aren’t challenging the D.C. Circuit’s conclusion to that effect? Is that
correct?”
Heim replied, “Yes, Your Honor.”
Sotomayor continued: “I don’t understand,
once you concede that mental state, and he has the act of putting together the
email and encouraging customers to call him with questions, not to call his
boss with questions, how could that standing alone give away your case?
“That makes him both the maker of a false
statement, but it’s also engaging in an act, practice, or course of conduct
which operates or would operate as a fraud or deceit.”
The Trump administration argues the
treatment Lorenzo received at the hands of the SEC was just.
“I don’t think
you’re likely to see a … more
egregious fraud than this,” Christopher Michel,
assistant to the solicitor general, told the justices.
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