Wednesday, October 13, 2021

JOE BIDEN MEETS WITH BANKSTER JANET YELLEN TO WORK OUT TRICKLE UP BIDENOMICS TO PROTECT JOE'S CRONIES

JANET YELLEN, U.S. TREASURY SECRETARY: I don’t believe that we’re at risk of hyperinflation. We’ve had several months of high inflation that most economists including me believe will be transitory as our economy gets back in full swing after the pandemic.

(END VIDEO CLIP)

CARLSON: It’s just transitory, it’s the price of progress, seven-dollar bacon. Yes, but look what you’re getting in return. Aren’t things great?


Hannity reveals why 'Let's go Brandon' chants are breaking out nationwide


DEMOCRATE SANCTUARY STATES IN ECONOMIC MELTDOWN

https://www.youtube.com/watch?v=iJuVkO2sFuU


Build Back Pricier: Business Inflation Expectations Stuck at Record High

US Treasury Secretary Janet Yellen meets President Joe Biden in the Oval Office of the White House in Washington, DC, on January 29, 2021, for talks on the economy. (Photo by Nicholas Kamm / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
NICHOLAS KAMM/AFP via Getty Images
4:18

A key signal of future inflation has settled in at a highly elevated rate, a development that should jolt the Federal Reserve out of its confidence that the recent inflation surge will fade soon.

A survey of business conducted by the Federal Reserve Bank of Atlanta found that the median expectation for inflation 12 months from now remained at 3.1 percent for the second straight month. That is the highest reading detected in the nearly 10-year-old survey.

It is well above the two percent inflation rate that the Fed says it targeting. Last year, the Fed changed its approach after years of consistently undershooting the target. Now the Fed says it hopes to achieve an average of two percent over time, an indication that it will allow inflation to run over the target for some time to balance out the earlier bouts of low inflation.

 

Fed officials tend to believe that inflation expectations can become self-fulfilling prophecies, powerfully influencing the path of future inflation by changing the behavior of businesses and consumers.

In the decade prior to the pandemic, businesses expected around 1.9 inflation on average. This year the average has been 2.7 percent and has been climbing most months.

In theory, businesses attempt to set prices based on what they expect inflation to be in the future. Businesses see prices rising for both themselves and their competitors and conclude that rising inflation gives them room to raise prices and raise wages.

In a speech yesterday, Atlanta Fed President Raphael Bostic said that persistently high inflation risked pushing up inflation expectations, a process Fed officials refer to as “unanchoring.”

“Up to now, indicators do not suggest that long-run inflation expectations are dangerously untethered,” Bostic said in a speech to the Peterson Institute for International Economics. “But the episodic pressures could grind on long enough to unanchor expectations.”

A recent paper by one Fed economists, however, challenged the view that expectations play a large role in controlling the path of inflation. Staff economist Jeremy Rudd’s paper says the faith in expectations rests on “shaky foundations.” Instead, he argues that it is actual inflation that changes the behavior of consumers, workers, and businesses.

That could be even more troubling given that inflation is now running at a very high level. In a separate report Wednesday, the Department of Labor said that its Consumer Price Index had jumped 5.4 percent on an annual basis in September, a one-tenth of a point acceleration from August and higher than forecast.

In his speech, Bostic said that the staff at the Atlanta Fed have stopped using the word “transitory” to describe current inflationary pressures, believing that the supply chain disruptions that are fueling higher prices are likely to persist for longer than initially expected.

The high level of inflation expected by businesses in the Atlanta Fed survey supports these concerns.

A report released by the New York Fed on Tuesday showed that U.S. consumers’ near-term and medium-term inflation expectations had continued to rise in September to new record highs. Consumers now expect prices to be 5.3 percent higher one year from now.

Like business expectations, consumer expectations are thought to change behavior. When consumers expect prices to rise, they demand higher wages to compensate.  Businesses, expecting rising revenue due to price hikes, are more willing to grant those raises.

Businesses in the survey do not expect inflation to moderate next year. In fact, the median expected inflation for 2022 was four percent, indicating an acceleration. Over the next five years, inflation is expected to run at three percent.

By contrast, the median expectation of members of the Federal Reserve’s Federal Open Market Committee is for inflation measured by the Commerce Department’s Personal Consumption Expenditure Price Index to run at 2.2 percent next year, 2.1 percent the year after that, and 2.0 percent over the long-run. The PCE price index tends to run slightly below the more familiar Consumer Price Index compiled by the Department of Labor.


Jim Banks Reveals the ‘Mind-Blowingly Corrupt’ Carveouts in $3.5 Trillion Infrastructure Bill

WASHINGTON, DC - JULY 27: U.S. Rep. Jim Banks (R-IN) (C) speaks as House Minority Leader Rep. Kevin McCarthy (R-CA) (L) listens during a news conference in front of the U.S. Capitol July 27, 2021 in Washington, DC. Leader McCarthy held a news conference to discuss the Jan 6th Committee. …
Alex Wong/Getty Images
14:42

Rep. Jim Banks (R-SC), the chairman of the Republican Study Committee (RSC), detailed many of the most radical aspects of the $3.5 trillion infrastructure bill.

Biden has gambled his legislative majority on passing two infrastructure bills, the $1.2 trillion bipartisan infrastructure bill, or the Infrastructure Investment and Jobs Act, and the $3.5 trillion reconciliation infrastructure bill, otherwise known as the Build Back Better Act.

Democrats hope to pass their mammoth, $3.5 trillion legislation through reconciliation, which allows the Senate to pass legislation with only a simple majority.

Although Democrats have not agreed to the final tenets of the legislation, Americans can see the tentative details of the Democrats’ marquee legislation.

Rep. Jim Banks (R-IN), the chairman of the Republican Study Committee (RSC), released an exhaustive list of some of the most radical aspects of the Democrats’ “socialist takeover bill.”

Banks’ press release hopes to serve as messaging House Republicans can use to rally against Biden’s marquee bill.

The RSC contended in a press release Tuesday that Democrats plans to hide the bill text to prevent Americans from knowing how radical the bill is.

“They’ve played ‘hide the ball’ with the bill text so as not to tip off the public as to what they’re putting in their bills. Then, they bring it to the floor and tout some poll numbers and scare their members into voting for it,” the RSC wrote.

The RSC noted the bill would:

  1. Perpetuates labor shortage: Continues welfare benefits without work requirements for able-bodied adults without dependents at a time where there are 10.1 million job openings—more openings than there are people looking for work.
  2. Commissions a climate police: Democrats stuffed $8 billion into the bill to commission a cabal of federally funded climate police called the Civilian Climate Corps (CCC) who will conduct progressive activism on taxpayers’ dime (pages 821, and 926).
  3. Pushes Green New Deal in our public schools: Requires funding for school construction be used largely on enrollment diversity and Green New Deal agenda items (page 55).
  4. Pushes Green New Deal in our universities: Democrats include a $10 billion “environmental justice” higher education slush fund to indoctrinate college students and advance Green New Deal policies (page 1,935).
  5. Forces faith-based child care providers out: The bill blocks the ability of many faith-based providers from participating in the childcare system and will lead to many of their closures (page 280).
  6. Hurts small and in-home daycares: Requires pre-K staff to have a college degree. (page 303)
  7. Includes new incentives for illegal immigration: Illegal immigrants will be eligible to take advantage of Democrats’ new ‘free’ college entitlement (page 92) as well be eligible for additional student aid (page 147) and the enhanced child tax credit (page 1,946).
  8. Includes legislative hull for Biden’s vaccine mandate: Increases OSHA penalties on businesses that fail to implement the mandate up to $700,000 per violation and includes $2.6 billion in funding for the Department of Labor to increase enforcement of these penalties (page 168).
  9. Gives unions near-total control: The bill includes insane prohibitions that would bind employers’ hands in union disputes and dangerously tilt the balance of power, subjecting employers to penalties that exempt union bosses and officials… among other things this bill would prevent employers from permanently replacing striking workers (page 175). It coerces businesses to meet union boss demands by increasing Fair Labor Standards Act penalties by an astronomical 900% (page 168).
  10. Makes unions bigger and more powerful: The bill would subsidize union dues that would only serve to strengthen the influence of union bosses and not American workers (page 2323).
  11. Pushes Democrats’ wasteful and confusing school lunch agenda: $643 million for, among other things, “procuring…culturally appropriate foods” (page 333).
  12. Furthers radical abortion agenda: Does not include the Hyde amendment and would mandate taxpayers pay for abortions (page 198) & (page 336).
  13. Drives up costs on Americans’ utility bills: Issues a punitive methane tax (page 367) and includes a tax on natural gas up to $1,500 per ton that could cost the American economy up to $9.1 billion and cost 90,000 Americans their jobs (page 368).
  14. Includes dangerous & deadly green energy mandate: Effectively forces Americans to get 40% of their energy from wind, solar and other unreliable forms of energy within 8 years (page 392). Reliance on these energy sources has proven deadly.
  15. Includes kickbacks for the Left’s green energy special interest network: $5 billion for “environmental and climate justice block grants” (page 377) and another $100 billion in green energy special interest subsidies, loans and other carve outs.
  16. Gives wealthy Americans tax credits: $222 billion in “green energy” tax credits will be given to those who can afford expensive electric vehicles and other “green” innovative products (page 1832).
  17. Furthers Democrats’ social justice agenda: Includes “equity” initiatives throughout the bill and, in one instance, Democrats inserted “equity” language into a title which should have been focusing on the maintenance of the United States’ cyber security efforts (page 897).
  18. Grants amnesty for millions of illegal immigrants: House Democrats have included in their reconciliation bill a plan to grant amnesty to around 8 million illegal immigrants at a cost of around $100 billion over ten years that would largely be spent on welfare and other entitlements (page 901). Trillions more would be spent long term on their Social Security and Medicare.
  19. Opens border even wider: The bill would waive many grounds for immigration inadmissibility, including infection or lack of vaccination status during a Pandemic, failure to attend removal proceedings in previous immigration cases, and the previous renouncement of American citizenship. DHS may also waive  previous convictions for human trafficking, narcotics violations, and illegal voting (page 903).
  20. Increases visa limit: At least 226,000 family-preference visas would be administered each year (page 905).
  21. Grants fast-tracked green cards for those seeking middle-class careers in America: Language included in the bill exempts certain aliens from the annual green card statutory limits and has been described as a  “hidden pipeline for U.S. employers to flood more cheap foreign graduates into millions of middle-class careers needed by American graduates” (page 910).
  22. Includes pork for Nancy Pelosi: $200 million is earmarked for the Presidio Trust in Speaker Pelosi’s congressional district (page 933).
  23. Increases energy dependence on OPEC, Russia and China: The bill prohibits several mineral and energy withdrawals (page 979). It overturns provisions included in the Tax Cuts and Jobs Act that authorized energy production in the Arctic that will result in 130,000 Americans losing their jobs and $440 billion in lost federal revenue (page 983) and the mineral withdrawals it prohibits would, ironically, include minerals necessary for renewable energy sources (pages 934940943).
  24. Exacerbates the chip shortage: The bill would mandate the conversion of the entire federal vehicle fleet from internal combustion engines to electric engines at a time when there is a global microchip shortage and crippled supply chains (page 1,043).
  25. Democrats’ feckless China bill is included: Concepts from the insanely weak Endless Frontier Act included, including $11 billion in research funding that will likely result in American intellectual property going to China (page 1079 – 1081).
  26. Chases green energy pipe dreams: $264 million to the EPA to conduct research with left-wing environmental justice groups on how to transition away from fossil fuels (page 1063).
  27. Fixes “racist” roads and bridges: Adds a nearly $4 billion slush fund that would help left-wing grassroots organizations that, among other things, want to tear down and rebuild or otherwise alter infrastructure deemed “racist” (page 1183).
  28. Punishes red states for failing to adopt Green New Deal provisions: Mandates “consequences” for conservative states that don’t meet the radical Left’s “green” climate standards while at the same time adding nearly $4 billion for “Community Climate Incentive Grants” for cooperating states (page 1179).
  29. Includes new massive, bankrupting entitlement: The new paid leave entitlement would mandate workers get 12 weeks of paid leave and would cost $500 billion over ten years according to the CBO (page 1245). It would apply to those making up to half a million dollars a year (page 1254).
  30. Advances a totalitarian and paternalistic view of the federal government: Includes grants for organizations to treat individuals suffering from “loneliness” and “social isolation.”
  31. Further detaches individuals from employment and more reliant on government handouts: The bill spends $835 billion on welfare through manipulating the tax code [not including the expansions of Obamacare subsidies] (page 1943).
  32. Tax benefits for the top 1%: The bill will possibly lift the SALT deduction cap meaning many of the top 1% wealthiest Americans would pay less in taxes.
  33. Tax credit for wealthy donors who give to woke universities: The bill creates a new tax credit program that gives tax credits worth 40% of cash contribution that are made to university research programs (page 2094).
  34. Expands worst parts of Obamacare: Obamacare’s job-killing employer mandate will become more severe by adjusting the definition of “affordable coverage” to mean coverage that costs no more than 8.5 percent of income rather than current law’s 9.5 percent of income (page 2041).
  35. Increases taxes on Americans at every income level: $2 trillion in tax hikes will fall on those making under $400,000 per year, contrary to what the White House says. Individuals at all income levels will be affected (Ways and Means GOP).
  36. Lowers wages for working families: The corporate tax rate will increase by 5.5%, meaning American companies will face one of the highest tax burdens in the world. According to analysis, two-thirds of this tax hike will fall on lower- and middle-income taxpayers (page 2110).
  37. Penalizes marriage: The bill would permanently double the EITC’s marriage penalty on childless worker benefits (page 2036).
  38. Imposes crushing taxes on small business: Guts the Tax Cuts and Jobs Act small business deductions that reduced pass-through entity taxes to keep them comparable to taxes imposed on corporations (page 2235) as well as hammer small businesses that file as individual tax earners with the 39.6% rate (page 2221) and Obamacare’s 3.8% tax on net investment income.
  39. Crushes family businesses and farms: The bill would impose a 25% capital gains rate  (page 2226) and makes alterations to the Death Tax including cutting the Death Tax exemption in half (page 2240).
  40. Violates Americans’ financial privacy: $80 billion slush fund to hire an 87,000-IRS-agent army to carry out the Biden administration’s plan to review every account above a $600 balance or with more than $600 of transactions in a year. (page 2283).
  41. Increases out of pocket costs for those who rely on prescription drugs: The bill repeals the Trump-era Rebate Rule which passes through rebates directly to consumers at the point of sale (page 2465).
  42. Imports policies from countries with socialized medicine: The bill includes healthcare policies imported from systems in Australia, Canada, France, Germany, Japan and the United Kingdom—all countries that have government-run healthcare systems (page 2349).

The bill also has other lesser-known provisions, including:

  • $5 million per year for the Small Business Administration for an entrepreneurial program for formerly incarcerated individuals.
  • $2.5 billion for the Department of Justice (DOJ) to award competitive grants or contracts to local governments, community-based organizations, and other groups to support “intervention strategies” to reduce community violence.

“Each of these 42 bullets is enough to vote against the bill. Taken together—it’s mind-blowingly corrupt. We need to loudly oppose it,” Banks charged in the release.

He added, “Democrats are scattered. The Biden agenda is in question. It’s the perfect opportunity to build public sentiment against this bill. The American people need us to be the vanguard against the Left’s radical plans.”

“It’s not an understatement to say this bill, if passed, will fundamentally change our country forever—Americans will wake up in a few years and wonder what happened to their freedom. We can’t let that happen, Banks concluded.

Sean Moran is a congressional reporter for Breitbart News. Follow him on Twitter @SeanMoran3.


FNC’s Carlson: Inflation Caused by ‘Decades of Policy that Have Enriched a Few and Impoverished the Many’

11:28

Tuesday on FNC’s “Tucker Carlson Tonight,” host Tucker Carlson warned how Federal Reserve monetary policy is responsible for the inflation that is plaguing the American economy.

Carlson said that inflation is a product of long-standing monetary policy, which benefiting the rich while hurting others.

Transcript as follows:

CARLSON: There’s probably no institution in American life that has more effect on how you live but that we talk about less than the Federal Reserve. People don’t care to talk about the Federal Reserve because it seems very complex, and a lot of what it does is, in fact, complex unless you have a grounding in monetary policy, it is hard to know exactly what’s going on.

But the basics aren’t that complicated, actually, and here are a few of them.

The Federal Reserve was created way back in 1913 by an act of Congress, and it had really two main goals: Maximize employment and keep prices stable. Keep inflation under control. Those are virtuous goals, but it may be a measure of the way that bureaucracies work that over time, the Federal Reserve has actively undermined both of those objectives. It’s the classic story of the fireman turned arsonist, or for that matter the COVID czar who helped create COVID — irony of ironies, it seems like we read a lot of those lately.

In the case of the Federal Reserve, consider something called quantitative easing. That’s the main thing the Fed has been doing since the financial crisis of 2008. Every month, Federal Reserve officials print more than $100 billion new in American currency, and then they inject those dollars into our financial system by buying assets like bonds and securities.

This is not a normal thing to do, it’s a radical thing to do, and it was supposed to be temporary. It was in response to a crisis. In medical terms, quantitative easing is like chemotherapy. There are times when it can save your life, but fundamentally it’s poison. If you keep taking it, it will kill you. Pretty much everyone agrees on that. And pretty much everyone understands that ultimately quantitative easing causes horrible inflation, and it’s easy to understand why. You don’t need to be an expert.

The more money you print, the less that money is worth. It is supply and demand. You buy diamonds by the karat, but you buy dirt by the yard. Overabundance decreases value.

So every new dollar you print buys less. If you keep printing them, you wind up devaluing your own currency. That’s one thing a responsible government should never do. It may enrich banks and a tiny number of big investors who give to the Democratic Party, but devaluing your currency screws everyone who works and who saves, and that’s immoral.

Those are exactly the people that a legitimate government ought to be trying to help as its core mission, and yet they’re not. All these years later, quantitative easing continues. They are still doing it.

On Wall Street, they joke about how it is going to go on forever. They call it QE-infinity. It’s an incredibly reckless policy and everybody knows it, very much including the people who are getting rich from it.

So, for the better part of a year, Fed officials have been promising they are going to stop doing this. They have sworn they will get sober. They have vowed to begin a process called tapering, that means they’ll start to gradually slow the money they print.

At a Fed meeting in April, officials said they would start to do this very soon, they would taper, but they never did. They made the same promise throughout this summer, but again they didn’t. The binge continued.

This morning, the Vice Chairman of the Fed, Richard Clarida once again insisted that tapering is almost here, we’re about to do it. The conditions to begin detox, he said, have all but been met. And yet as of tonight, the Fed is still partying with your currency like this is the richest country in the world and always will be.

So what are the effects on our country of this? Well, in the short term as with vodka, it makes everybody feel pretty good. It’s 3:00 a.m., your lips are numb, and you can barely see and yet somehow, the breakfast meeting downtown you’ve got in five hours, the one you’re going to have to give a detailed presentation to your boss seems like no problem at all. You’ve got this.

Except you don’t have it at all. Morning always comes. It is always worse than you think.

America’s quantitative easing hangover is going to be ugly. Beneath the manufactured euphoria of our top-line economic numbers — Google is killing it, record profits for Amazon, says CNBC — beneath all of that garbage, the actual American economy is in trouble and there are many signs of it.

Labor markets are tight right now because a lot of Americans have simply dropped out of the labor force, 4.3 million people walked off the job last month, some of them were forced out by Joe Biden’s vaccine mandates.

Projections for GDP growth just dropped from six percent to one and a half percent. Small businesses across the country are dying. And maybe most ominous of all, inflation is here. It’s not just a temporary problem caused by COVID disrupted supply chains, it is absolutely real.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (voice-over): The American economy is starting to sizzle once again as it emerges from the pandemic and workers’ paychecks are, too with businesses practically begging for help.

But there’s a flip side to all the raises and that’s inflation. Prices rising at the fastest rate since 2008, everything from washing machines, up almost 30 percent, to furniture, up 11 percent and television sets up eight percent.

(END VIDEO CLIP)

CARLSON: So it’s happening throughout the economy, it’s not just washing machines and television sets, consumer electronics. It is everything including the big things. Try to buy a house, it’s now more expensive to buy a home than it has ever been at any time in American history.

The median existing-home price last year was $310,000.00. It is now over $356,000.00 and a lot more in the zip codes you might want to live in. Part of the reason is the cost of building materials. They are completely out of control.

Last October, lumber went for about $580.00 per thousand board feet. As of last week, it was $712.00.

Last August, used cars which you might need were selling for an average price of $21,000.00. This August, a year later they were almost $28,000.00. Same car, seven grand more.

Over the same period by the way, as you well know, the price of gas jumped a full dollar a gallon and a lot more than that in some places.

Been to the grocery lately? The cost of a pound of steak is up by two bucks, a pound of bacon costs over seven dollars right now. And suddenly, everything costs more. Eggs, milk, coffee, mustard, et cetera, et cetera, et cetera. These are not luxury items. This is not a trip to St. Bart’s. These are things you buy every week and you have to buy.

The question is, are your wages rising as fast as your costs? Well, let’s see. Vegetable oil is up 60 percent, so probably not, and that means you’re getting poorer whether you realize it or not. But that’s what inflation does, it causes poverty.

So because we can prove that the population of the United States is getting poorer by the day, you’d think the Biden administration would be actively concerned about this and working to make it better, but they’re doing the opposite. They are actively making it much worse.

And here’s how they’re doing it: By spending.

No government in the history of the world has ever spent more money than Joe Biden is spending right now. That is a fact.

In fiscal year 2019, just the other day, the entire Federal government spent $6.6 trillion, then COVID hit the following year and those numbers went up, they went up by 40 percent. Federal spending in 2020 jumped to $9.1 trillion. Was that too much? Of course, it was. What do we get for it? Not enough.

But here’s the shocking thing. Under Joe Biden, as COVID recedes, it’s going up even higher, because they’re no longer using COVID as a pretext.

Through the end of this August, which is to say a month and a half ago, the Federal government has already spent more in 2021 than it did over the entire calendar years of 2019 and 2018.

So all of this drives inflation to scary levels, but they’re not scary to everyone.

If you’re a massively leveraged financial institution that owes a lot of money to a lot of people and that’s how you’re making your money, this is not necessarily bad news. If money is worth less, that means that your debt service costs less. You don’t fear inflation, inflation helps you. The problem is it crushes the American middle class.

Now in a normal country, this would be a huge concern, but because the people who make our policy don’t care about the middle class, this is a bargain well worth making.

Bloomberg News just published a piece with this headline which we’re not making up. They’re celebrating the disaster, quote: “America needs higher longer-lasting inflation.” If you can even imagine writing something like this. Does America need more emphysema, too? It’s grotesque.

Now, most people may not know this is happening, normal people don’t read Bloomberg News, they may be unaware that these attitudes even exist in what they assumed was their country and the Biden administration would like to keep it that way. They’d like to keep the population from finding out what’s happening.

So here is the Treasury Secretary Janet Yellen. She is the reptile who once ran the Federal Reserve and is, therefore, more responsible than any single living person for your growing poverty. Here she is assuring you that seven-dollar bacon isn’t actually a problem. That’s not really inflation, it’s something called transitory inflation.

(BEGIN VIDEO CLIP)

JANET YELLEN, U.S. TREASURY SECRETARY: I don’t believe that we’re at risk of hyperinflation. We’ve had several months of high inflation that most economists including me believe will be transitory as our economy gets back in full swing after the pandemic.

(END VIDEO CLIP)

CARLSON: It’s just transitory, it’s the price of progress, seven-dollar bacon. Yes, but look what you’re getting in return. Aren’t things great?

Until just a few hours ago, that was the official line in Washington, along with those Southwest delays were caused by weather, and our withdrawal from Afghanistan was actually a huge success. What are you talking about? That’s what they were telling us.

And then the President of the Atlanta Fed, a man called Raphael Bostic admitted what was very obvious to anyone who goes to the grocery store. This actually is inflation, it is real inflation. It is not transitory inflation and it’s going to be here for a long time.

What he didn’t say was that this is not an Act of God. This isn’t a hurricane, it’s not an earthquake, it’s not something we can’t control. This is the result of decades of policy that have enriched a few and impoverished the many.

 

 WELOME TO JOE BIDEN'S NEO-FASCISM FOR WALL STREET


Eric Holder didn't send a single banker to jail for the mortgage crisis. Is that justice?

US attorney general’s tenure has proven unhelpful to the five million victims of mortgage abuses in the US

David Dayen


Yellen: IRS Plan to Monitor $600+ Bank Transactions ‘Absolutely Not’ Spying — ‘There’s a Lot of Tax Fraud’

1:47

Treasury Secretary Janet Yellen said on Tuesday’s broadcast of “CBS Evening News” that the proposed $600 IRS reporting requirement for banks is “absolutely not” a way for the government to spy on Americans.

Anchor Norah O’Donnell asked, “You want banks to report transactions of 600 dollars or more? That is what the IRS wants. Does this mean that the government is trying to peek into our pocketbooks? If you want to look at $600 transactions?”

Yellen replied, “Absolutely not. I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual. The big picture is, look, we have a tax gap that over the next decade is estimated at $7 trillion. Namely, a shortfall in the amount the IRS is collecting due to a failure of individuals to report the income that they have earned.”

O’Donnell said, “But that is among billionaires, is that among people who are transfers 600 dollars?”

Yellen said, “No, it tends to be among high-income individuals whose income is opaque, and the IRS doesn’t receive information about it. If you earn a paycheck, you get a W-2 the IRS knows about it. High-income individuals with opaque sources of income that are not reported to the IRS, there is a lot of tax fraud and cheating that is going on. All that is involved in this proposal is a few arrogate numbers about bank accounts, the amount that was received in the course of a year, the amount that went out in the course of a year.”

Follow Pam Key on Twitter @pamkeyNEN

BANKSTERS COME FIRST. BAILOUTS FOR BANKSTER PROFITS ARE OUR PRIORITY!

HOW THE HOUSING BUBBLE WILL BURST... HOME PRICES TO CRASH? REAL ESTATE MARKET UPDATE, MORTGAGE RATES




The Five react to the meltdown of Biden's 'Build Back Better' agenda



WORKING CLASS BEING DESTROYED, POVERTY AND DEBT EXPLODE, WORLD WIDE BORROWING BING




BIDENOMICS: WATCH HOW WELL THE SUPER RICH COME OUT OF THIS ONE!

Next Recession Imminent (Ignore Fed)

https://www.youtube.com/watch?v=Vh50ErhG8lY


Yellen: McConnell Could Cause Catastrophic Financial Crisis with Debt Ceiling Brinkmanship

1:56

Treasury Secretary Janet Yellen said Sunday on ABC’s “This Week” that if Senate Minority Leader Mitch McConnell’s (R-KY) followed through on his threat that Republicans would not help to raise the debt ceiling in December, there could be a financial crisis.

Anchor George Stephanopoulos said, “We all dodged a bullet this week. Senator McConnell has warned President Biden that Republicans won’t help next time on the debt limit. I want to read part of his letter to President Biden. Quote, ‘I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement. Your lieutenants on Capitol Hill now at the time they claim they lack to address the debt ceiling through stand-alone reconciliation and all the tools to do it.’ What are the consequences if he keeps his word?”

Yellen said, “Well, it is absolutely imperative that we raise the debt ceiling. Debt’s necessary not to fund any new spending programs but to pay the bills that result from Congress’ past decisions. A group of business and community leaders met with President Biden and me last week to talk about the disastrous impact it would have for the first time America not paying its bills. Fifty million Americans who would receive Social Security payments would be put at risk. Our troops won’t know when or if they would be paid. The 30 million families that receive a child tax credit, those payments would be in jeopardy. And the nation’s credit rating would be in jeopardy as well. U.S. treasuries are the world’s safest possible asset that would be at risk as well. And that really underpins the reserve status, currency status of the dollar. So there is an enormous amount at stake. A failure to raise the debt ceiling would probably cause recession and could even result in a financial crisis. It would be a catastrophe.”

Follow Pam Key on Twitter @pamkeyNEN


Treasury Secretary Yellen warns US government could run out of money unless debt ceiling is lifted

A crisis for the US and global financial system is looming, unless a conflict over lifting the US debt ceiling can be quickly resolved.

The conflict came into public prominence last week, when US Treasury Secretary Janet Yellen wrote a letter to Congress, warning that the government was running out of money, after a debt limit on government borrowing was reinstated on August 1. The limit had been suspended for the previous two years.

Since then, Yellen wrote, the Treasury had been “employing certain extraordinary measures” to ensure that the government could continue to fund itself, but these measures were reaching their limit.

Janet Yellen in Congress in 2017 (Source: Federal Reserve)

“Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations, for the first time in our history,” she said.

The Treasury was not able to provide a specific estimate of how long the extraordinary measures would last, but the best and most recent estimate was that money would run out some time in the middle of October.

This is not the first time a conflict has arisen over the debt ceiling. The last major battle was in 2011, during the Obama administration. While it was ultimately resolved, and a default avoided, the conflict produced significant turbulence in financial markets and led to a downgrade of the US government’s credit rating, for the first time in history. Standard and Poor’s lowered the nation’s credit worthiness from AAA to AA+.

It is estimated the conflict cost the government $1.3 billion in increased interest charges on its debt in 2011, with additional costs in the years that followed.

Reporting on the present dispute, the Financial Times wrote that “stand-offs over the debt limit are sometimes dismissed as political theatre that is ultimately resolved, but top Biden administration officials view the stand-off with increasing seriousness.”

Those concerns were set out in Yellen’s letter.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she wrote.

“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the US economy and global financial markets.”

She urged that Congress address the debt limit with “broad partisan support,” in order to “protect the full faith and credit of the United States by acting as soon as possible.”

But “broad partisan support” is the least likely of all outcomes, as the debt ceiling issue has become part of Republican opposition to the Biden administration’s spending programs.

The Republicans have insisted that any resolution must be part of a budget reconciliation vote. It can be passed in the House, where the Democrats have a majority, and by the Senate, which is split 50–50, with Democratic Vice-President Kamala Harris having a tie-breaking vote, without any Republicans having to vote for it.

They have refused to pass stand-alone legislation that would lift the debt ceiling, with 46 Republican senators signing a letter to that effect, meaning that it would not reach the level of 60 votes needed to defeat a filibuster.

Their position was summed up in an interview given by Wisconsin Senator Ron Johnson, who said the Democrats “shouldn’t be expecting Republicans to raise the debt ceiling to accommodate their deficit spending.”

Republican Senate leader Mitch McConnell has insisted in the past that Democrats not expect any Republican support on the debt limit, a position he repeated in an interview last week.

“This debt ceiling is going to cover all of the things that all of us have been opposing,” he said, and the Democrats “need to do the responsible thing and raise the debt ceiling because America must never default on its debt.”

In fact, the raising of the ceiling is needed to cover measures already authorised by Congress and reductions in revenue, going back to the Trump tax cuts of 2017, as well as relief packages carried out under his administration.

White House Press Secretary Jen Psaki appealed for bipartisan support, saying the debt issue was a “shared responsibility,” and “Congress should move forward as they have multiple times.”

But these times are very different. Large swathes of the Republican Party continue to insist that the election was “stolen” and provided crucial support for the attempted coup by Trump of January 6, with the fascist-led storming of the Capitol.

House Speaker Nancy Pelosi told reporters last week: “We have several options.” But she maintained that an increase in the debt ceiling would not be part of the Biden spending package, which the Democrats are now seeking to put through Congress.

In what could become a high-stakes conflict, the Wall Street Journal reported last month that one option being considered was a stand-alone bill, that would put pressure on Republicans to support it or risk rattling financial markets.

But given the overriding concern of the Democrats for the stability of Wall Street, and their continued subservience to the Republicans, this option would have to be considered as highly unlikely. Another option may be to attach the debt ceiling to another piece of necessary government funding.

While it has not been featured heavily in news coverage, the debt ceiling issue is attracting international concern, because of its possible impact on highly fragile global financial markets.

Last week, the Financial Times ran the Yellen letter as its lead news story, warning of the “mounting risk of a US sovereign debt crisis.”

In Australia, a column last Friday, by Sydney Morning Herald financial commentator Stephen Bartholomeusz, warned that America could be only weeks away from a debt default that would throw the “US economy and global financial markets into chaos.”

He wrote that a default on US debt was “almost unthinkable,” and Congress had always found a way to avert such an outcome. However, he continued, it “can’t be ruled out entirely given how intense and unpredictable politics has become since last year’s US election, and Trump’s eviction from the White House.”

A study in contrasts: Wall Street and the underlying economy

The contrast between the rise of the stock market and the underlying state of the US economy was highlighted on Monday when Wall Street’s main index, the S&P 500, reached a level double its low of March 2020 as the initial effects of the COVID-19 pandemic led to chaos in US financial markets.

The new high was recorded despite the debacle in Afghanistan, sharply falling consumer confidence, slowing growth in China and the widening impact of the Delta variant both in the US and internationally.

Traders work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

The markets fell on Tuesday with the S&P 500 having its worst day for a month, falling by 0.7 percent and the Dow dropping by 500 points at one stage, on the back of data which showed a 1.1 percent fall in retail sales in July compared to June.

But with money continuing to pour into the financial system from the Fed the general sentiment appears to be that the Wall Street surge will continue. “I don’t think it portends a precipitous drop around the corner. I think it’s very temporary,” one financial manager told the Wall Street Journal .

Fears of worsening conditions in the underlying economy were revealed in the results of the widely watched Michigan consumer confidence survey published at the end of last week.

It showed that the Consumer Sentiment index fell by 13.5 percent from July to August to a level just below the April 2020 low. The University of Michigan (UofM) survey reported that the only faster rates of decline in the Sentiment Index were in April 2020, when it recorded a drop of 19.4 percent and in October 2008, during the global financial crisis, when it dropped 18.1 percent.

“The losses in early August were widespread across income, age, and education subgroups and observed across all regions,” according to the survey. Richard Curtin, the UofM economist in charge of the survey called the results “stunning.”

It indicates that the Biden administration’s economic policies and its claims that the US economy is on the way to recovery could well be going the same way as Afghanistan.

A survey of small businesses conducted by the Wall Street Journal showed a fall in sentiment similar to that recorded by the UofM.

It found that small business confidence in August had dropped to its lowest level since the early spring, largely as a result of the rise in COVID-19 infections due to the more infectious Delta variant.

Some 39 percent of small business owners expected economic conditions in the US to improve in the next 12 months, down from 50 percent in July and 67 percent in March. Reporting on the survey, the Journal cited the owner of one small business, an event production company, which reported a flurry of cancellations.

“We were slowly ramping up in anticipation of a robust third and fourth quarter,” he said. “You can drop the ‘ro’ part. It seems like it is just bust.”

The resurgence of the pandemic via the Delta variant is also putting a damper on international economic growth, particularly in China.

According to data released by China’s National Bureau of Statistics on Monday, the economy slowed in July by more than expected. This was the result of Delta infections as well as flooding due to extreme weather events in parts of the country.

Retail sales in July rose by 8.5 percent in July compared with the same month a year ago and industrial production increased by 6.4 percent. But both these figures were below the level anticipated by economists of 10.9 percent and 7.9 percent respectively.

China has imposed strict travel restrictions in response to an outbreak of the coronavirus that began in the middle of last month in Nanjing. But even before the latest outbreak there were signs that the initial bounce back of the Chinese economy was slowing.

Reporting on the latest data, Fu Linghui, a spokesman for the statistics bureau said; “Growth in some consumer sectors and services slowed.” He warned that growth in the second half of the year was likely to be lower than the first six months.

International banks and forecasting agencies are revising down their estimates for Chinese growth. Goldman Sachs, Morgan Stanley and Nomura as well as other investment banks have all reduced their forecasts. The ANZ bank added its voice on Monday when it downgraded its forecast for full year growth from 8.8 percent to 8.3 percent. It pointed to a “broad-based slowdown in domestic activities in July, which suggests that the economy is rapidly losing steam.”

Julian Evans-Pritchard, senior economist at Capital Economics, told the Financial Times (FT) that in addition to the fall in the growth of retail sales, investment spending and industrial activity that were less sensitive to COVID-19 restrictions were also weaker.

“The drop back in consumption should reverse once the virus situation is brought under control and restrictions are lifted,” he said. “But we think the slowdown elsewhere will deepen over the rest of the year.”

And if there is a slowdown in the rest of the world, it will heavily impact on China as can be seen in the latest figures on exports which showed growth of 19 percent in July as compared with 32 percent in June.

The increasingly complex situation in the global economy is adding to the problems confronting the major central banks as they consider whether they should start to ease or “taper” their support for financial markets.

There appears to be something of a shift among members of the Fed’s governing body towards tapering. In an interview with the FT last week, San Francisco Fed president Mary Daly, regarded as being on the dovish side, said it was “appropriate” to start dialling back accommodation, starting with asset purchases.

“Talking about potentially tapering those later this year or early next year is where I’m at,” she said.

Esther George, the president of the Kansas City Fed, has also indicated that it is time to “transition from extraordinary monetary policy accommodation to more neutral settings.”

The key issue here is inflation and whether this will lead to a push by workers for higher wages. George alluded to this issue, referring to “firm inflation expectations” and a “recovering labour market” as being consistent with Fed objectives that could provide the basis for “bringing asset purchases to an end.”

The question was dealt with more bluntly in remarks by David Kelly, chief global strategist at JPMorgan Asset Management, reported in the FT.

The official Fed position is that the present spike in US inflation is “transitory.” “But there is nothing transitory about wage inflation,” Kelly said, warning that present Fed policies “will trigger higher wages and pressure corporate margins.”

On the other side, there is a fear that such is the dependence of Wall Street on the flow of cheap money from the Fed and the mountain of debt and fictitious capital it sustains that any move to curb it in order to counter inflation and a wages push by workers will set off financial turbulence.

The financial markets will be closely following the remarks by Fed chair Jerome Powell at the annual conclave of central bankers and financial analysts at Jackson Hole, Wyoming at the end of this month which may give some indication of the direction in which the US central bank is heading.

At present the differences, at least as they appear in public, are relatively muted. But that could rapidly change as indicated by developments in Britain.

In the middle of July, the House of Lords economic affairs committee, which includes former Bank of England governor Mervyn King, issued a scathing report on the Bank of England’s (BoE) quantitative easing (QE) asset purchasing program.

Lord Michael Forsyth, the chair of the committee, said the BoE “has become addicted” to QE using it as the “answer to all the country’s economic problems.”

The report said there were wide perceptions the bank was “using QE mainly to finance the government’s spending priorities” and if these continued to grow “it would lose credibility destroying its ability to control inflation and maintain financial stability.”

BoE governor Andrew Bailey responded testily to the use of the word “addicted” saying it had a “very damaging meaning for many people who are suffering.”

Last week the BoE made a tentative move towards tightening monetary policy when it announced a plan to start reducing its holding of £900 billion worth of government bonds, equivalent to about 40 percent of GDP.

Announcing the policy at a press conference, Bailey said when interest rates reached 0.5 percent the central bank would stop reinvesting the proceeds of bonds it owns and when they reached 1 percent it would consider selling some of them. The process of unwinding QE would proceed on “autopilot” along a “gradual and predictable path.”

But as the FT reported this “breeziness” seemed odd given the “market upheavals” when the Fed sought to reduce its balance sheet in 2013 and 2018. In 2013 the initial move to end QE resulted in a spike in interest rates.

In 2018, when Fed chair Powell indicated further rate rises in 2019 following four rises over the previous 12 months and that the reduction in asset holdings was on “autopilot,” Wall Street responded with a significant fall, recording its worst December since the Depression.

Wall Street cracks the whip and Senate passes short-term extension of debt ceiling

Late Thursday evening, the US Senate passed a bill by a 50–48 party-line vote extending the government debt ceiling into early December. While all voting Republicans opposed the debt extension, passage of the legislation was virtually assured when 11 Republican senators joined all 50 Democrats to supply the necessary super-majority needed to end a filibuster.

Senate Minority Leader Mitch McConnell set the stage for the compromise bill on Wednesday when he bowed to immense pressure from Wall Street and offered to avert a looming government default by allowing passage of a $480 billion extension of the debt limit. This was a retreat from his previous insistence that any extension would have to be passed by Democratic votes alone under the complicated and potentially lengthy budget reconciliation process, which averts a filibuster and permits passage of certain measures in the Senate by a simple majority.

Treasury Secretary and former Fed chair Janet Yellen, who had been warning of a collapse of the financial markets and damage to the dollar, estimated that the $480 billion increase in the debt ceiling would allow the government to meet its obligations until December 3. That is the same day that a temporary extension of funding for federal government operations is set to expire, posing the possibility of a simultaneous debt default and partial government shut-down.

Senate Majority Leader Chuck Schumer of New York, known as the “senator from Wall Street,” announced his acceptance of McConnell’s offer on Thursday morning. The plan of McConnell and his leadership team in the Senate was to forego a filibuster and simply allow the Democrats to pass the measure, using their 50 votes in the 100-member chamber plus the tie-breaking vote of Vice President Kamala Harris.

Senate Majority Leader Chuck Schumer of N.Y. [Credit: AP Photo/Jacquelyn Martin]

However, during a closed-door meeting of the Republican caucus prior to the Thursday night floor vote, far-right Trump acolytes Rand Paul and Ted Cruz rejected that approach and insisted on mounting a filibuster, requiring McConnell and his allies to come up with at least 10 Republican votes to break the filibuster.

Republicans who voted to end the filibuster and allow the Democrats to pass the short-term debt extension included McConnell (Kentucky), John Thune (South Dakota), John Cornyn (Texas), Roy Blunt (Missouri), Mike Rounds (South Dakota), Lisa Murkowski (Alaska), John Barrasso (Wyoming), Susan Collins (Maine), Richard Shelby (Alabama), John Portman (Ohio) and Shelley Moore Capito (West Virginia).

Following the Senate vote, Democratic House Majority Leader Steny Hoyer announced that the House would be recalled from its recess on Tuesday to vote on the bill and send it to President Biden for his signature on Tuesday, just days ahead of the October 18 date when, according to Yellen, the US would no longer be able to pay its debts.

While the debt limit extension provides only a short reprieve, the process by which it is being enacted is an object lesson on who rules America. When it comes to the basic financial interests of the corporate-financial oligarchy, and Wall Street cracks the whip, partisan gridlock in Congress suddenly dissipates.

McConnell’s shift coincided with a White House event Wednesday morning in which Biden met with the CEOs of Citigroup, JPMorgan Chase and Nasdaq to denounce the Senate Republicans’ blockade of a debt extension. Biden warned that the approaching debt limit deadline risked a default that would act like a “meteor” in crushing the US economy and undermining the position of the US internationally.

He berated his Senate Republican “friends” for actions that “risk the market tanking.”

The White House did not shoot down reports that Democrats were considering carving out an exception for bills to raise the debt ceiling from the Senate filibuster rule, allowing all such measures to pass by a simple majority. When it comes to amending or scrapping the anti-democratic filibuster rule to pass legislation defending voting rights and abortion rights, or to enact measures to address the catastrophic social crisis and raise taxes on the rich, Biden and the Democratic Party resist any change. But it is a different story when it comes to protecting the markets and the wealth of the ruling elite.

McConnell reportedly told his Republican caucus on Wednesday that increasing pressure among Democrats to weaken the filibuster was a major factor in his decision to propose a stop-gap extension of the debt ceiling. Prior to his announcement on Wednesday, he met with the two most prominent right-wing Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who have staunchly opposed any change in the filibuster rule. They presumably advised him that they might have to change their position on the filibuster in relation to the debt limit unless the logjam was broken.

The Senate deal was all the more politically significant given the ferocious intervention of Donald Trump against the agreement and its author, McConnell. The Senate minority leader has gone out of his way to appease the fascist ex-president, and the Republican Party as a whole has promoted his lie of a stolen election and worked to block any investigation of the January 6 coup attempt.

“Looks like Mitch McConnell is folding to the Democrats, again,” Trump said in a statement issued through his Save America PAC. “He’s got all of the cards with the debt ceiling, it’s time to play the hand. Don’t let them destroy our Country!” Less than an hour before the scheduled Senate vote, Trump again urged Republicans not to vote for “this terrible deal.”

Trump’s co-conspirator and former White House adviser Stephen Bannon titled his Wednesday podcast, “McConnell’s Betrayal of America Will Create Debt Slaves.” The openly fascist wing of the Republican Party headed by Trump, following the Hitler playbook, considers a financial crash a potential boon to its ongoing plot to establish a dictatorship.

Bernie Sanders, who as chairman of the Senate Budget Committee is playing a key role in drastically downsizing Biden’s social spending and climate bill to accommodate the most right-wing Democrats, hailed the debt ceiling deal, calling McConnell’s offer “very good news.” The self-styled scourge of the “billionaire class” spoke unabashedly as a supporter of the “wealthiest nation on earth” and its need to “pay its debts.”

Jeff Bezos’ Washington Post summed up the position of the ruling elite on the use of obstructionist tactics for partisan political gain, editorializing: “This may be fair legislative play in many other realms of congressional business, but it should be off-limits when it comes to raising the debt limit.” The Democrats, the Post demanded, should choose either the budget reconciliation process or a change in the filibuster rule to push through a debt limit hike, and “get on with it.”

ERIC HOLDER’S LONGTIME EXCUSE FOR NOT PROSECUTING BANKS JUST CRASHED AND BURNED

New evidence supports critique that Holder, for a combination of political, self-serving, and craven reasons, held his department back from prosecuting big banks.

 

David Dayen


July 12 2016, 8:05 a.m.

ERIC HOLDER HAS long insisted that he tried really hard when he was attorney general to make criminal cases against big banks in the wake of the 2007 financial crisis. His excuse, which he made again just last month, was that Justice Department prosecutors didn’t have enough evidence to bring charges.

Many critics have long suspected that was bullshit, and that Holder, for a combination of political, self-serving, and craven reasons, held his department back.

A new, thoroughly-documented report from the House Financial Services Committee supports that theory. It recounts how career prosecutors in 2012 wanted to criminally charge the global bank HSBC for facilitating money laundering for Mexican drug lords and terrorist groups. But Holder said no.

When asked on June 8 why his Justice Department did not equally apply the criminal laws to financial institutions in the wake of the 2008 economic crisis, Holder told the platform drafting panel of the Democratic National Committee that it was laboring under a “misperception.”

He told the panel: “The question you need to ask yourself is, if we could have made those cases, do you think we would not have? Do you think that these very aggressive U.S. attorneys I was proud to serve with would have not brought these cases if they had the ability?”

The report — the result of a three-year investigation — shows that aggressive attorneys did want to prosecute HSBC, but Holder overruled them.

In September 2012, the Justice Department’s Asset Forfeiture and Money Laundering Section (AFMLS) formally recommended that HSBC be prosecuted for its numerous financial crimes.

The history: From 2006 to 2010, HSBC failed to monitor billions of dollars of U.S. dollar purchases with drug trafficking proceeds in Mexico. It also conducted business going back to the mid-1990s on behalf of customers in Cuba, Iran, Libya, Sudan, and Burma, while they were under sanctions. Such transactions were banned by U.S. law.

Newly public internal Treasury Department records show that AFMLS Chief Jennifer Shasky wanted to seek a guilty plea for violations of the Bank Secrecy Act. “DoJ is mulling over the ramifications that could flow from such an approach and plans to finalize its decision this week,” reads an email from September 4, 2012, to senior Treasury officials. On September 7, Treasury official Dennis Wood describes the AFMLS decision as an “internal recommendation to ask the bank [to] plead guilty.” It was a “bombshell,” Wood wrote, because of “the implications of a criminal plea,” and “the sheer amount of the proposed fines and forfeitures.”

But after British financial minister George Osborne complained to the Federal Reserve chairman and the Treasury Secretary that DOJ was unfairly targeting a British bank, senior Justice Department leadership reportedly sought to “better understand the collateral consequences of a conviction/plea before taking such a dramatic step.”

The report documents how Holder and his top associates were concerned about the impact that prosecuting HSBC would have on the global economy. And, in particular, they worried that a guilty plea would trigger a hearing over whether to revoke HSBC’s charter to do banking in the United States.

According to internal documents, the DOJ then went dark for nearly two months, refusing to participate in interagency calls about HSBC. Finally,on November 7, Holder presented HSBC with a “take it or leave it” offer of a deferred prosecution agreement, which would involve a cash settlement and future monitoring of HSBC.

No guilty plea was required.

But even the “take it or leave it” offer was apparently not the last word. HSBC was able to negotiate for nearly a month after Holder presented that offer, getting more favorable terms in the ultimate $1.9 billion deferred prosecution agreement, announced on December 11, 2012.

The original settlement documents would have forced any HSBC executive officers to void their year-end bonuses if they showed future failures of anti-money laundering compliance. The final documents say that, in the event of such failures, senior executives merely “could” have their bonuses clawed back.

In addition, HSBC successfully negotiated to have individual executives immunized from prosecution over transactions with foreign terrorist organizations and other sanctioned entities, even though the original agreement only covered the anti-money laundering violations and explicitly left open the possibility of prosecuting individuals.

As a Justice Department functionary in 1999, Holder wrote the infamous “collateral consequences” memo, advising prosecutors to take into account economic damage that might result from criminally convicting a major corporation.

In 2013, he unwittingly earned his place in history for telling the Senate Judiciary Committee, “I am concerned that the size of some of these [financial] institutions becomes so large that it does become difficult for us to prosecute them,” which became known as the “Too Big to Jail” theory.

Holder told the Democratic platform drafting committee that “it was not lack of desire or lack of resources” that led to the lack of prosecutions for any major bank executive following the financial crisis. “We had in some cases statutory and sometimes factual inabilities to bring the cases that we wanted to bring,” he said.

The HSBC case, however, shows that lack of desire at the highest levels of the Justice Department was indeed the primary reason that no prosecutions took place.

Former Rep. Brad Miller, D-N.C., who also testified to the drafting committee, cited the HSBC case as an example of the lack of equal application of justice in the Holder era. Referring to the concern over destabilizing the financial system with an HSBC prosecution, Miller said, “That’s not an argument that’s available to too many people: ‘You can’t arrest me for selling cigarettes, it might destabilize the financial system!’ ”

The internal communications in the House report all come from the Treasury Department. The Justice Department, they say, did not comply with subpoenas for information about the settlement.

Holder has returned to Covington & Burling, a corporate law firm known for serving Wall Street clients in 2015. He had worked at Covington from 2001 until he was sworn in as attorney general in Feburary 2009. Covington literally kept an office empty for him, awaiting his return.

Jennifer Shasky, the AFMLS chief who requested the prosecution of HSBC but was overruled, recently resigned as the head of the Financial Crimes Enforcement Network to become a senior compliance officer with HSBC.

 

Eric Holder, Wall Street Double Agent, Comes in From the Cold

Barack Obama’s former top cop cashes in after six years of letting banks run wild

By 

MATT TAIBBI 

 

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Eric Holder is back at Covington & Burling after serving as U.S. attorney general for six years.

Saul Loeb/AFP/Getty

Eric Holder has gone back to work for his old firm, the white-collar defense heavyweight Covington & Burling. The former attorney general decided against going for a judgeship, saying he’s not ready for the ivory tower yet. “I want to be a player,” he told the National Law Journal, one would have to say ominously.

Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence.

The office thing might have been improper, but at this point, who cares? More at issue is the extraordinary run Holder just completed as one of history’s great double agents. For six years, while brilliantly disguised as the attorney general of the United States, he was actually working deep undercover, DiCaprio in The Departed-styleas the best defense lawyer Wall Street ever had.

Holder denied there was anything weird about returning to one of Wall Street’s favorite defense firms after six years of letting one banker after another skate on monstrous cases of fraudtax evasionmarket manipulationmoney launderingbribery and other offenses.

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“Just because I’m at Covington doesn’t mean I will abandon the public interest work,” he told CNN. He added to the National Law Journal that a big part of the reason he was going back to private practice was because he wanted to give back to the community.

“The firm’s emphasis on pro bono work and being engaged in the civic life of this country is consistent with my worldview that lawyers need to be socially active,” he said.

Right. He’s going back to Covington & Burling because of the firm’s emphasis on pro bono work.

Here’s a man who just spent six years handing out soft-touch settlements to practically every Too Big to Fail bank in the world. Now he returns to a firm that represents many of those same companies: Morgan Stanley, Wells Fargo, Chase, Bank of America and Citigroup, to name a few.

Collectively, the decisions he made while in office saved those firms a sum that is impossible to calculate with exactitude. But even going by the massive rises in share price observed after he handed out these deals, his service was certainly worth many billions of dollars to Wall Street.

Now he will presumably collect assloads of money from those very same bankers. It’s one of the biggest quid pro quo deals in the history of government service. Congressman Billy Tauzin once took a $2 million-a-year job lobbying for the pharmaceutical industry just a few weeks after helping to pass the revolting Prescription Drug Benefit Bill, but what Holder just did makes Tauzin look like a guy who once took a couple of Redskins tickets.

In this light, telling reporters that you’re going back to Covington & Burling to be “engaged in the civic life of this country” seems like a joke for us all to suck on, like announcing that he’s going back to get a doctorate at the University of Blow Me.

Holder doesn’t look it, but he was a revolutionary. He institutionalized a radical dualistic approach to criminal justice, essentially creating a system of indulgences wherein the world’s richest companies paid cash for their sins and escaped the sterner punishments the law dictated.

Here are five pillars of the Holder revolution:

One is that he failed to win a single conviction in court for any crimes related to the financial crisis. The only trial of any consequence brought by his Justice Department for crimes related to the crisis involved a pair of Bear Stearns nimrods named Ralph Cioffi and Matthew Tannin, who confided in each other via email that the subprime markets were “toast” but told their clients something very different to keep them invested.

After a jury acquitted both in early 2009, the Holder Justice Department turtled. Sources inside the DOJ told me over the years that both Holder and his deputy, fellow Covington & Burling alum Lanny Breuer, were obsessed with winning and refused to chance any case where they felt a jury might go sideways on them. Thus the Cioffi-Tannin case was the last financial crisis case they dared to bring into to a criminal courtroom – virtually every other case ended in settlements.

Two: Holder famously invented a concept called “collateral consequences,” under which the state could pursue non-criminal alternatives for companies if they believed prosecuting them might result in too much “collateral” damage. Britain’s HSBC bank, which admitted to massive money laundering violations, and the Swiss bank UBS, which was caught manipulating the Libor interest rate benchmark, were examples of firms that escaped vigorous prosecution because Holder and his lackeys were, ostensibly anyway, concerned about market-altering consequences.

Significantly, both banks were later caught up in even more serious scandals, leading to criticism that stiffer punishments the first time around might have prevented future damage. Holder’s successor Loretta Lynch was even forced to rip up Holder’s UBS deal for being insufficiently punitive. It’s worth noting that Holder, before he became attorney general, represented UBS at Covington & Burling.

Holder’s lenient policies were deployed at a time when fellow officials like Tim Geithner and Ben Bernanke were using bailout monies to merge troubled firms together and create even larger mega-companies. Chase and Wells Fargo, which swallowed up Washington Mutual and Wachovia in state-aided takeovers, were prototypes of the modern mega-bank. So when Holder wedded “collateral consequences” to these new Too Big to Fail mega-firms, he created Too Big to Jail. This is a huge part of his legacy, the creation of an unjailable class.

Three: Holder also pioneered the extrajudicial settlement, striking huge deals with companies in which judges did not sign off on the agreements. The arrangement prevented pesky judges like the irksome Jed Rakoff (who voided a pair of settlements he felt were inadequate) from protesting lenient justice.

This essentially institutionalized the backroom deal. Everything was done in secret, and there was no longer any opportunity for judges or anyone else to check the power of the executive branch to hand out financial indulgences.

The watchdog group Better Markets described the $13 billion Chase settlement, one of the biggest extrajudicial deals, as “an unprecedented settlement amount [that] cannot…immunize the DOJ from having to obtain independent judicial review of its otherwise unilateral, secret actions.”

Four: There is a huge misconception, pushed equally by odd bedfellows in the financial community and Obama supporters, that Eric Holder didn’t send anyone from Wall Street to jail because “no one broke any laws.”

This preposterous meme grew out of something Barack Obama said on 60 Minutes. Here are the president’s exact words:

“Some of the most damaging behavior on Wall Street — in some cases some of the least ethical behavior on Wall Street — wasn’t illegal.”

Obama, a brilliant lawyer and wordsmith, was not saying that all of the behavior leading to the crash was legal. He merely said that some of the worst behavior wasn’t illegal. Which is true. Meaningless, but true.

Of course, some of the worst behavior was very illegal. This is confirmed in the fact that Holder extracted billions of dollars in settlement monies and even, in a few cases, obtained guilty pleas for crimes like fraud, manipulation, bribery, money laundering and tax evasion.

Anyone who even tries to claim that none of the banks actually did anything illegal should be directed to the HSBC settlement of December 2012. In this deferred prosecution agreement, Europe’s largest bank paid $1.92 billion to settle their responsibility for violations of the Bank Secrecy Act and other laws.

This is from a description of HSBC’s crimes by Holder’s Justice Department:

“As a result of HSBC Bank USA’s AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico…were laundered through HSBC Bank USA.”

You might remember the Sinaloa cartel for their ISIS-style, unforgettably upsetting torture videos. HSBC washed their cash. They even created special teller windows to make their deposits easier. This is admitted, not alleged.

But Holder went out of his way to let them keep their U.S. charter. He gave their executives a grand total of zero days in jail, zero dollars in individual fines.

To reiterate: HSBC laundered money for guys who chop peoples‘ heads off with chainsaws. So we can dispense with the “but no one broke any laws” thing.

When asked about this in testimony before the Senate, Holder told elected officials he was concerned harsher penalties against firms like HSBC would “have a negative impact on the national economy,” and that this “has an inhibiting influence…on our ability to bring resolutions that I think would be more appropriate.”

Compare this to what he just said after returning to Covington & Burling:

“I think that what we did in the department was, I always like to say, appropriately aggressive. There may be clients that, for whatever reason, will not decide to work with me…”

Oddly enough, Holder used that same phrase – “appropriately aggressive” – in his Senate testimony. In other words, the attorney general said he was “inhibited” from giving “appropriate” punishments just a few moments before claiming his punishments were appropriate. This is classic Clintonian politics, saying two things at the same time, neither of them true.

Five: Holder contributed countless subtle inventions to soften punishments. The most revolting in my view was allowing banks like Chase the courtesy of calling their settlements “remedial payments” instead of fines for wrongdoing.

This seemingly insignificant semantic tweak allowed the bank to call $7 billion of their settlement a business expense, which meant they could claim it as a tax deduction, which in turn meant that taxpayers like you and me paid a whopping $2.45 billion of Chase’s penalty.

Some of the write-ups of these decisions emanating from the financial and legal press were hilarious. Law360.com, noting that the settlement language meant that 35 percent of the bank’s regulatory burden would be shifted “onto the backs of taxpayers,” pointed out, as if surprised, that the tax treatment “sparked debate” and that “some are even angry about it.” Shocking!

Of course, none of us mortals can deduct so much as a speeding ticket, since we wouldn’t want to use the tax code to encourage speeding. So why was it OK for the nation’s top cop to make fraud or money laundering a tax-subsidized activity?

There were other tricks. Banks that committed multiple violations of the same offense were often allowed to settle or plead to just one count. And in many cases the fines were staggeringly low compared to the volume of crime – BNP-Paribas, for instance, paid $8.9 billion after laundering $30 billion, meaning they paid about 27 cents per dollar of violations.

Holder is a cynic of a type that’s increasingly common in Washington. To follow his Justice Department was like watching an endless reel of The Good Wife – smart lawyers half-cleverly constructing one unseemly moral compromise after another, always justifying it to themselves in the end somehow in the name of keeping the ball rolling.

Holder doubtless seriously believed at first that in a time of financial crisis, he was doing the right thing in constructing new forms of justice for banks, where nobody but the shareholders actually had to pay for crime. You’ve heard of victimless crimes; Holder created the victimless punishment.

But in the end, it was pretty convenient, wasn’t it, that “the right thing” also happened to be the strategy that preserved Democratic Party relationships with big-dollar donors, kept the client base at Holder’s old firm nice and fat, made the influential rich immeasurably richer and allowed Eric Holder himself to crash-land into a giant pile of money upon resignation.

What a coincidence! In any civilized country, it’d be a scandal. In America, though, he’s just another guy selling whatever he can to get by. It was just too bad that what Holder had to sell was the criminal justice system.

 

Attorney General Eric Holder's bank prosecution legacy

Darrell Delamaide

Special for USA TODAY

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WASHINGTON — Is lying on a mortgage application fraud when lenders aren't interested in the truth?

This may sound like an abstract philosophical question similar to trees falling in the forest with no one around to hear, but it was in fact a novel legal tactic that got four defendants in California acquitted of mortgage fraud.

A jury of their peers bought the defense argument that the real fraud was being perpetrated by executives at the lending institutions.

"In the Sacramento case, the jury essentially found that the truth or falsity of the documentation the borrowers provided was immaterial," the Los Angeles Times reported, "the lenders would have made the loans anyway."

The case turned on the expert testimony of William Black, a law professor and tireless critic of the banks, who told the jury that the lenders involved wanted so-called "liar loans" to acquire mortgages rapidly so they could sell them off at a profit. They specifically instructed loan officers not to verify stated income — an invitation for applicants to inflate the figure.

Black, who is affiliated with the University of Missouri-Kansas City, was involved as a regulator in investigating and prosecuting the widespread fraud and corruption in the savings and loan crisis in the late 1980s.

"The saying in the savings and loan debacle is you never wanted to be the guy that was chasing mice while lions roamed the campsite," Black said on the Bill Moyers show last weekend. "So the mice are these alleged tiny frauds type of thing, where they ignore the lions, who are the CEOs of the banks and such."

The acquittal in the California case in August came just ahead of the announcement last month that Attorney General Eric Holder would step down as soon as a successor can be confirmed.

"He will leave behind a mixed scorecard," Moyers said. "A for civil rights, C for civil liberties and F for failing to prosecute the banking executives who brought about the financial calamity of 2008."

The complete failure of the Justice Department to prosecute a single bank executive while levying billions of dollars of fines with individual banks for fraud and other felonies continues to draw criticism from journalists, legal experts and lawmakers.

Not so coincidentally, a story in the New York Times this week said that the Justice Department, still headed by Holder, may indeed prosecute individual traders in connection with its investigation of fixing the foreign exchange markets.

"The charges will most likely focus on traders and their bosses rather than chief executives," the Times dryly reported, citing anonymous lawyers. "As a result, critics of the Justice Department might view the cases as little more than an exercise in public relations."

Eventual fines and guilty pleas for the banks over currency trading would come on top of billions in fines already levied against many of these same big banks — JPMorgan Chase, Citigroup, Deutsche Bank, Barclays and UBS are named in the latest Times story — for fixing the benchmark LIBOR rate.

These fines — in addition to settlements for fraud in mortgage securities, in illegal foreclosures and robo-signings, bid rigging in municipal bonds and a host of other infractions in recent years — make it hard to see these banks as anything other than rogue institutions who are willing to systematically violate the law.

Somebody is responsible for that.

Black, who likes to point out that regulators in the S&L crisis made many thousands of criminal referrals that resulted in more than a thousand successful prosecutions, makes no secret of his scorn of the current tactics of the regulators and the Justice Department.

"Apparently modern financial regulators are vastly more sophisticated than we were as financial regulators 25 years ago" Black told Moyers. "Because we had never figured out that the key to financial stability was leaving felons in charge of the largest financial institutions in the world."

Black has argued since the onset of the financial crisis in 2009 that prosecution of individuals will not, as former Treasury secretary Timothy Geithner maintained, destabilize the financial system.

The prosecutions in the S&L crisis, he told Moyers, "greatly enhanced financial stability instead of the other way around."

The guilty executives were no longer a danger to the financial system because they had criminal records. This is not the case in the wake of the recent crisis and heightens the risk of a new crisis.

"If you want to create the next crisis and make it vastly worse," Black said, "leave the people in charge who led the frauds in the senior ranks at the banks in charge of those banks. So now they have all the postgraduate education in how to run a fraud. And they learned that there are no consequences other than good consequences."

Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones News Service, Barron's, Institutional Investor and Bloomberg News, among others.

 

Eric Holder didn't send a single banker to jail for the mortgage crisis. Is that justice?

US attorney general’s tenure has proven unhelpful to the five million victims of mortgage abuses in the US

 

Holder has a mixed legacy: excellent on civil and voting rights, bad on press freedom and transparency. Photograph: JONATHAN ERNST/Reuters

David Dayen

Thu 25 Sep 2014 16.11 EDT

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The telling sentence in NPR’s report that US attorney general Eric Holder plans to step down once a successor is confirmed came near the end of the story.

“Friends and former colleagues say Holder has made no decisions about his next professional perch,” NPR writes, “but they say it would be no surprise if he returned to the law firm Covington & Burling, where he spent years representing corporate clients.”

A large chunk of Covington & Burling’s corporate clients are mega-banks like JP Morgan Chase, Wells Fargo, Citigroup and Bank of America. Lanny Breuer, who ran the criminal division for Holder’s Justice Department, already returned to work there.

In March, Covington highlighted in marketing materials their award from the trade publication American Lawyer as “Litigation Department of the Year,” touting the law firm’s work in getting clients accused of financial fraud off with slap-on-the-wrist fines.

Covington, American Lawyer says, helps clients “get the best deal they can.”

Holder has a mixed legacy: excellent on civil and voting rights, bad on press freedom and transparency.

But if you want to understand what he did for the perpetrators of a cascade of financial fraud that blew up the nation’s economy in 2008, you only have to read that line from his former employer: he helped them “get the best deal they can.”

As for homeowners, they received a raw deal, in the form of little or no compensation for some of the greatest consumer abuses in American history.

Before Holder became Attorney General, banks fueled the housing bubble with predatory and at times, allegedly fraudulent practices.

As far back as 2004, the FBI warned of an “epidemic” of mortgage fraud, which they said would have “as much impact as the Savings & Loan crisis.”

They were wrong; it was worse.

 

Brian T Moynihan, chief executive officer of Bank of America Corp, one of the banks accused of extensive mortgage abuses. Very little of the money from its settlements has gone to help homeowners. Photograph: Bloomberg via Getty Images

And banks and lenders carried through that fraud to every level of the mortgage process. They committed origination fraud through faulty appraisals and undisclosed trickery.

They committed servicing fraud through illegal fees and unnecessary foreclosures.

They committed securities fraud by failing to inform investors of the poor underwriting on loans they packaged into securities.

They committed mass document fraud when they failed to follow the steps to create mortgage-backed securities, covering up with fabrications and forgeries to prove the standing to foreclose.

By the time the bubble collapsed, the recession hit and Holder took over the Justice Department, Wall Street was a target-rich environment for any federal prosecutor. Physical evidence to an untold number of crimes was available in court filings and county recording offices.

Financial audits revealed large lapses in underwriting standards as early as 2005. Provisions in the Sarbanes-Oxley Act, passed during the last set of financial scandals in 2002, could hold chief executives criminally responsible for misrepresenting their risk management controls to regulators.

Any prosecutor worth his salt could have gone up the chain of command and implicated top banking executives.

In 2009, Congress passed the Fraud Enforcement and Recovery Act, giving $165m to the Justice Department to staff the investigations necessary to bring those accountable for the financial crisis to justice.

Yet, despite the Justice Department’s claims to the contrary, not one major executive has been sent to jail for their role in the crisis.

The department has put real housewives in jail for mortgage fraud, but not real bankers, saving their firepower for people who manage to defraud banks, not for banks who manage to defraud people.

Most of the “investigations” of financial institutions over the past six years have swiftly moved to cash settlements, often without holding anyone responsible for admitting wrongdoing or providing a detailed description of what they did wrong.

The headline prices of these settlements usually bore no resemblance to the reality of what they cost the banks.

The National Mortgage Settlement, for example, was touted by Holder’s Justice Department as a $25bn deal. In reality, banks were able to pay one-quarter of that penalty with other people’s money, lowering principal balances on loans they didn’t even own.

Other penalties featured similarly inflated numbers that didn’t reflect the true cost. Banks could satisfy their obligations under the settlements through routine business practices (including some, like making loans to low-income homeowners, that make them money).

A recent series of securities fraud settlements with JP Morgan, Bank of America and Citigroup, which DoJ said cost the banks $36.65bn, actually cost them about $11.5bn. And shareholders, not executives, truly bear that cost.

Incidentally, the Wall Street Journal found last week that the Justice Department only collects around 25% of the fines they impose. So the banks may have gotten off even easier.

 

The Justice Department has reportedly collected only 25% of the fines it has imposed on banks. Photograph: Petros Giannakouris/AP

These settlements have actually perverted the notion of justice, turning accountability into a public relations vehicle. And Holder’s Justice Department has been guilty of cooking the books: they admitted last August to overstating the number of criminal financial fraud charges by over 80%.

The DoJ’s Inspector General criticized this in a March report, and also found that DoJ de-prioritized mortgage fraud, making it the “lowest-ranked criminal threat” from 2009-2011.

As for homeowners, the biggest victims of Wall Street misconduct, they received little relief. Victims who already lost their homes got checks in the National Mortgage Settlement for between $1,500-$2,000, compensating people wrongly foreclosed upon with barely enough money for two month’s rent.

Despite claims that 1m borrowers still in their homes would get principal reductions under the settlement, when the final numbers came in this March, just 83,000 families received such a benefit, an under-delivery of over 90%.

Considering that over five million families experienced foreclosures since the end of the crisis, that relief is a drop in the bucket.

For those still eligible for relief, thanks to the expiration of a law called the Mortgage Forgiveness Debt Relief Act, any principal forgiveness will count as earned income for tax purposes, meaning that homeowners struggling to avoid foreclosure will subsequently get hit with a tax bill they cannot afford.

The Justice Department only recognized this belatedly, creating a fund in a recent Bank of America settlement to “partially” defray tax costs.

For others without that benefit, the help the Justice Department provided will look more like harm.

More important, the settlements didn’t end the misconduct.

Homeowners today continue to lose their homes based on false documents. Because the Justice Department just put a band-aid over the fraud, and didn’t convict any of the ringleaders, the problems went unaddressed, and the root causes never got fixed.

In fact, the entire banking sector’s get-out-of-jail free card gives them confidence that they could commit the same crimes again, with little if any legal implications.


The decision to protect banks instead of homeowners should be laid at the feet of the president and his administration, not one man in the Justice Department. But Holder certainly carried out the policy, even if he didn’t devise it.

We’ll soon find out if Holder merely presided over DoJ in a pause between helping corporate clients at Covington & Burling. But the failure to prosecute during his time in office certainly makes it look like Holder’s sympathies were with those clients even while serving as attorney general.

 

STREET SCENE

A Clue to the Scarcity of Financial Crisis Prosecutions

 

 

Eric Holder, the former United States attorney general, in 2015. Mr. Holder said in May that the Justice Department did not charge specific individuals after the 2008 financial crisis because it “simply did not have the proof.”

Credit...Zach Gibson/The New York Times

By William D. Cohan

· July 21, 2016

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One of the enduring mysteries of the 2008 financial crisis has been why the Justice Department made so few attempts to prosecute the individuals responsible for it, given the abundance of tangible evidence of wrongdoing by Wall Street bankers, traders and executives in the years leading up to the great unwinding.

Yes, the United States attorney in the Eastern District of New York tried, and failed, to prosecute the Bear Stearns executives who were responsible for the two hedge funds that collapsed in July 2007. And yes, in November 2013, Kareem Serageldin, a former senior trader at Credit Suisse, was sentenced to 30 months in prison for inflating the value of mortgage bonds in his trading portfolio, allowing them to appear more valuable than they really were in hopes of receiving a bigger bonus. (Mr. Serageldin was released from prison in March.) But that is pretty much it. The Justice Department’s main accomplishment was extracting $200 billion in civil fines and penalties from a variety of financial institutions in exchange for releasing them from the threat of future prosecutions.

We might never know why Eric H. Holder Jr., the former attorney general, chose to let Wall Street off the hook with just a proverbial slap on the wrist. After six years as attorney general and a short break after leaving government last year, he recently rejoined his old Wall Street law firm, Covington & Burling, in Washington as a partner focused on litigation, complex investigations and regulatory matters.

Mr. Holder does not give many interviews. He declined Gretchen Morgenson’s request last week to discuss his logic for not prosecuting the giant British bank HSBC for money laundering, despite the recommendations of his staff to do so. But in late May, Mr. Holder sat down with David Axelrod, who was the chief strategist for Barack Obama’s two presidential campaigns, for an hourlong conversation on Mr. Axelrod’s “The Axe Files” podcast. Toward the end of the conversation, Mr. Axelrod, a friendly interviewer for sure, asked Mr. Holder about the elephant in the room: Why were so few Wall Street bankers, traders and executives held accountable for the 2008 financial crisis, compared to the many individuals who were sent to jail for their roles in the savings-and-loan crisis of the 1980s?

“There is a fundamental question people have to ask themselves,” Mr. Holder responded. “Do you actually think that if we could have brought these cases, we would not have?” That’s the party line, of course.

He then added that Preet Bharara, the United States attorney in the Southern District of New York, and Loretta Lynch, Mr. Holder’s successor as attorney general and a former federal prosecutor in Brooklyn, would have brought cases against Wall Street if they could have. They didn’t, he said, because “we have a responsibility in the Justice Department to only bring those cases where we think we have a better than 50 percent chance of winning, and if you look at the different ways in which decision-making was made in these financial institutions, we simply didn’t have the ability to point to specific individuals to say that person was responsible for this specific action. We simply did not have the proof. If we could have made these cases, we certainly would have brought them.” He said that he, too, was “frustrated” by the lack of prosecutions of individual wrongdoing, but he did seem to take pride in the “record-breaking” amount of money collected from the banks in the form of civil penalties.

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But forcing big banks to hand over their shareholders’ money in exchange for burying forever the evidence of wrongdoing is not nearly the same as holding people accountable for their behavior.

Leaving aside for the moment the long list of Wall Street whistle-blowers — among them Richard M. Bowen III at Citigroup, Alayne Fleischmann at JPMorgan Chase, Michael Winston at Countrywide Financial and Peter Sivere at Barclays Capital — who tried to interest law enforcement officials in what they had witnessed at their companies (instead, each of them was fired), there may be another reason the Justice Department has proved to be less than vigilant in its sworn duty to prosecute Wall Street wrongdoing. It has more to do with legal arcana than with a supposed lack of evidence: The Justice Department was afraid that it was misapplying the law — the Financial Institutions Reform, Recovery and Enforcement Act of 1989, known as Firrea — used to force Wall Street into financial settlements.

That law gives the government wide latitude to bring civil fraud cases against federally insured depository institutions and has lower burdens of proof than those found in criminal business fraud statutes. Importantly, it also has a 10-year statute of limitations, allowing the government more time to bring a case, or to threaten to bring a case. And since the investigations into Wall Street wrongdoing got such a late start — they really got going in 2012, about four years after the start of the crisis — the 10-year statute of limitations proved to be an effective weapon to get the big banks to settle. Bank after bank capitulated.

But one bank tried to fight, arguing in part that the law had been misapplied. In October 2013, a jury found that Countrywide Financial, by then a subsidiary of Bank of America, had sold about 17,000 shoddy mortgages in 2008 to Fannie Mae and Freddie Mac under a short-lived program known colloquially as the “hustle.” In July 2014, after the jury’s decision, federal Judge Jed Rakoff imposed a $1.27 billion penalty on Bank of America.

“While the process lasted only nine months,” Judge Rakoff wrote in his decision, “it was from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.”

Bank of America appealed the case to the United States Court of Appeals for the Second Circuit. The bank argued that Judge Rakoff — long known for his tough stance against big Wall Street banks — was unfairly biased against it, that it was unable to present “a meaningful defense” and that “from beginning to end, what took place in this case was not only unfair, but utterly unprecedented.” In a brief filed in support of Bank of America, lawyers at WilmerHale, on behalf of four powerful organizations — the Clearing House Association, American Bankers Association, Financial Services Roundtable and Chamber of Commerce of the United States — argued instead that the very use of Firrea to go after Bank of America in the “hustle” case was the problem because that law was intended to protect a bank from the harm of others, not from itself.

The appeal was the first of a case that relied upon Firrea, so the Second Circuit’s ruling was watched carefully. If it were overturned, that could mean the end of using Firrea as a cudgel to get banks to pay in the remaining 175 or so civil lawsuits still pending against Wall Street.

On May 23, the Second Circuit threw out the verdict against Bank of America and vacated the penalty against it. In its opinion, the court decided not to address the specific issue of the use of Firrea against Bank of America because the bank had “persuaded” the court that the government had not proved that Bank of America violated the law in the first place.

But that the Second Circuit reversed the decision deeply troubles Mr. Bowen, the Citigroup whistle-blower, who was fired from his Wall Street job after alerting his bosses to wrongdoing at the bank and whose pleas for justice have continued to go unheeded.

“Bottom line,” he wrote me in an email from Dallas, where he is a senior lecturer in accounting at the University of Texas campus there, “the D.O.J. could not stand the embarrassment of pursuing prosecutions, only to then have the courts throw out those convictions because the D.O.J. had no legal grounds to pursue them under Firrea. That would be the ultimate proof of the D.O.J.’s incompetence and the reason they have not pursued prosecutions despite the evidence.”

The mystery continues.

William D. Cohan is a former senior mergers and acquisitions banker who has written three books about Wall Street. His latest book is “The Price of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of Our Great Universities.”

 

 

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