Bangla-Pesa Charges Dropped

published by Will Ruddick on Fri, 08/23/2013 - 13:47

http://koru.or.ke/bangla-pesa-charges-dropped

The acquitted walking happily out of Mombasa High Court.The letter from the Office of the Director of Public Prosecutions.

THE CASE IS OVER! Today the Director of Public Prosecutions announced that all charges against Bangla-Pesa are hereby dropped! This is a huge success for Bangladesh and for poverty reduction programs in Kenya.
We are incredibly grateful for the huge amount of support in Kenya and around the world. Without it, this program could have easily been forgotten and the accused held in prison. There is no doubt that we are part of an International Complementary Currency movement that is growing daily!

Watch News coverage on YouTube
Read in English News
Read in Swahili News
Read the letter from the DPP.

What does this mean for Bangla-Pesa?

• That there are no laws in Kenya that have been broken by this program.
• Before re-launching the program we are waiting on two things: confiscated Bangla-Pesa to be returned from the Central Bank, and official government recognition of the program.
• Community Meetings will commence next week to get begin the process of putting Bangla-Pesa back to use.
• We are asking for continued support of these programs, as communities around Kenya and East Africa wish to duplicate the successes of Bangladesh.
• With the support raised so far via Indiegogo we hope to finalize all legal matters and relaunch the program with detailed monitoring and evaluation over the coming years.

Why is Bangla-Pesa so important? As a poverty reduction program, Bangla-Pesa points in a new direction for community development by fundamentally re-thinking our means of exchange and how it issued. It gives those living in dire conditions the ability to create their own means of exchange and stabilize their own economy.

The Merchants of Wall Street

SSRN-id2180647 by MS

MEMO REVEALING BANKERS GAME-PLAN

GREG PALAST'S COLUMN

THE CONFIDENTIAL MEMO AT THE HEART OF THE GLOBAL FINANCIAL CRISIS

By Greg Palast

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it. 

The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.

The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.

The memo is authentic.

I had to fly to Geneva to get confirmation and wangle a meeting with the Secretary General of the World Trade Organisation, Pascal Lamy. Lamy, the Generalissimo of Globalisation, told me,

“The WTO was not created as some dark cabal of multinationals secretly cooking plots against the people... We don’t have cigar-smoking, rich, crazy bankers negotiating.”

Then I showed him the memo.

It begins with Larry Summers’ flunky, Timothy Geithner, reminding his boss to call the Bank bigshots to order their lobbyist armies to march:

“As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the CEOs…”

To avoid Summers having to call his office to get the phone numbers (which, under US law, would have to appear on public logs), Geithner listed the private lines of what were then the five most powerful CEOs on the planet. And here they are:

Goldman Sachs: John Corzine (212)902-8281

Merrill Lynch: David Kamanski (212)449-6868

Bank of America: David Coulter (415)622-2255

Citibank: John Reed (212)559-2732

Chase Manhattan: Walter Shipley (212)270-1380

Lamy was right: They don’t smoke cigars. Go ahead and dial them. I did, and sure enough, got a cheery personal hello from Reed – cheery until I revealed I wasn't Larry Summers. (Note: The other numbers were swiftly disconnected. And Corzine can’t be reached while he faces criminal charges.)

It's not the little cabal of confabs held by Summers and the banksters that’s so troubling. The horror is in the purpose of the "end game” itself.

Let me explain:

The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.

Second, the banks wanted the right to play a new high-risk game: “derivatives trading”. JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets”.

Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.

But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?

The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet -- in one single move. It was as brilliant as it was insanely dangerous.

How could they pull off this mad caper? The bankers' and Summers' game was to use the Financial Services Agreement (or FSA), an abstruse and benign addendum to the international trade agreements policed by the World Trade Organisation.

Until the bankers began their play, the WTO agreements dealt simply with trade in goods – that is, my cars for your bananas. The new rules devised by Summers and the banks would force all nations to accept trade in "bads" – toxic assets like financial derivatives.

Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products”.

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organisation.
 

Bankers Go Bananas

Why in the world would any nation agree to let its banking system be boarded and seized by financial pirates like JP Morgan?

The answer, in the case of Ecuador, was bananas. Ecuador was truly a banana republic. The yellow fruit was that nation’s life-and-death source of hard currency. If it refused to sign the new FSA, Ecuador could feed its bananas to the monkeys and go back into bankruptcy. Ecuador signed.

And so on – with every single nation bullied into signing.

Every nation but one, I should say. Brazil’s new President, Inacio Lula da Silva, refused. In retaliation, Brazil was threatened with a virtual embargo of its products by the European Union's Trade Commissioner, one Peter Mandelson, according to another confidential memo I got my hands on. But Lula’s refusenik stance paid off for Brazil which, alone among Western nations, survived and thrived during the 2007-9 bank crisis.

China signed – but got its pound of flesh in return. It opened its banking sector a crack in return for access and control of the US auto parts and other markets. (Swiftly, two million US jobs shifted to China.)

The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade. Among the notorious transactions legalised: Goldman Sachs (where Treasury Secretary Rubin had been co-chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim – and the continent is now being sold off in tiny, cheap pieces to Germany.

Of course, it was not just threats that sold the FSA, but temptation as well. After all, every evil starts with one bite of an apple offered by a snake. The apple: the gleaming piles of lucre hidden in the FSA for local elites. The snake was named Larry.

Does all this evil and pain flow from a single memo? Of course not: the evil was The Game itself, as played by the banker clique. The memo only revealed their game-plan for checkmate.

And the memo reveals a lot about Summers and Obama.

While billions of sorry souls are still hurting from worldwide banker-made disaster, Rubin and Summers didn’t do too badly. Rubin’s deregulation of banks had permitted the creation of a financial monstrosity called “Citigroup”. Within weeks of leaving office, Rubin was named director, then Chairman of Citigroup – which went bankrupt while managing to pay Rubin a total of $126 million.

Then Rubin took on another post: as key campaign benefactor to a young State Senator, Barack Obama. Only days after his election as President, Obama, at Rubin’s insistence, gave Summers the odd post of US “Economics Tsar” and made Geithner his Tsarina (that is, Secretary of Treasury). In 2010, Summers gave up his royalist robes to return to “consulting” for Citibank and other creatures of bank deregulation whose payments have raised Summers’ net worth by $31 million since the “end-game” memo.

That Obama would, at Robert Rubin’s demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.

Special thanks to expert Mary Bottari of Bankster USA www.BanksterUSA.org without whom our investigation could not have begun.

The film of my meeting with WTO chief Lamy was originally created for Ring of Fire, hosted by Mike Papantonio and Robert F. Kennedy Jr.

Further discussion of the documents I laid before Lamy can be found in “The Generalissimo of Globalization,” Chapter 12 of Vultures’ Picnic by Greg Palast (Constable Robinson 2012).

Follow Greg on Twitter: @Greg_Palast

World Bank reform: Keep your head down

DEVELOPMENT BUZZ

World Bank reform: Keep your head down and just wait?

By Eliza Villarino on 22 August 2013

https://www.devex.com/en/news/world-bank-reform-keep-your-head-down-and-just/81678?source=MostPopularNews_1

World Bank President Jim Yong Kim. Can his ambitious reform plan work? Photo by: CSIS | Center for Strategic & International Studies / CC BY-NC-SA

Reform is good, but the devil, as they say, is always in the details.

The World Bank is undergoing reorganization, orchestrated by its president, Jim Yong Kim. The ambitious plan is a work in progress, with the final strategy to be presented at the World Bank annual meeting in October.

The news has, unsurprisingly, evoked strong reactions from within the aid community. Last week, in response to a feature by Devex Global Development Reporter Michael Igoe, the discussion extended beyond the Devex website and onto social media.

Kim’s desire to put his own stamp on the bank isn’t surprising, wrote Michael Philips via Facebook.

“Every World Bank president tries to reform the bank in some way and they all seem to have at least partial success. Every large institution has bureaucratic problems and needs fresh organizational ideas from time to time,” he observed. “But in my experience working with bank staff on projects in the field, I have found them to be extremely bright, knowledgeable and motivated. Granted, the folks I deal with are not senior managers and are fairly low on the bank’s totem pole, but they’re the ones who run the projects in the countries and in my experience they do it well despite all the procedures or internal fiefdoms they may have to deal with.”

Rafael Pablo Molina Fernando, a quality associate at Quality Partners Co., had a similarly optimistic take on the reform process, which he called “awesome” yet “not impossible.”

He added: “The road to excellence is really the road less traveled. Perhaps, it is time for the World Bank to change their mission-vision and make it more customer-focused, internally and externally.”

A spirited discussion has been underway on the Devex LinkedIn page.

Elvira Beracochea, CEO of global health consulting group Midego, offered several suggestions: Simplify how the bank works, set targets for the delivery of services and reduction of poverty, and make staff accountable for improving the lives of at least 1,000 people.

“Each bank employee is very expensive and there should be a tangible return on investing on each employee,” she argued.

In response, Linn Hammergren, an independent consultant who used to work at the multilateral body, pointed out that the bank is not a humanitarian or community development agency.

Hammergren wrote: “Whatever the bank’s flaws it focuses on development of national economies (including poverty reduction) and the theory is that this is best done, not person by person but with larger projects with collective benefits. Since you [referring to Beracochea] work in health, I would assume that the kind of project in which you might be involved — building better service delivery systems, improving medical education and research capacity in-country, checking the ‘leakage’ of supplies and funds to other purposes — I suppose some of this, but not all, is susceptible to headcounts of beneficiaries, but the additive approach to measuring impact has its limits.”

For her part, Hammergren said she could probably come up with 200 areas that need addressing, but singled out the lack of technical expertise and huge back office as those that need the most attention. She agreed with the article’s observation that defining the bank’s purpose in the 21st century presents the biggest issue. This, she noted, hinges on two factors, its financing and the role of bank members.

“If its main business is making loans, it could ditch 90 percent of its staff; if its business is development, well some will have to go, but who stays and how will they be funded?” she asked. “The sudden departure of [top bank officials Pamela] Cox and [Caroline] Anstey is interesting but probably a result of issues not affecting the larger question (however, as a victim of the decisions of both, well I can’t say I am unhappy).”

So what is the bank’s mission, anyway? Beracochea suggested that it’s in line with Kim’s bold pledge to help eradicate extreme poverty by 2030. Hammergren disagreed, citing the bank’s articles of agreement in arguing that its goal is to promote economic growth and development.

Tom Ward, a business coach for international financial economics and strategy at TW Consult, chimed in that there’s a difference between the bank’s goals and mandate.

Hammergren responded: “I was only objecting to the Elvira’s statement (possibly not intended this way) that poverty reduction was where it starts — which it is not — and tomorrow or under a new president, that part may shift as well.”

The bank’s “glossy publication” outlines several goals, she said, but “the real challenge will be advancing any of them.”

Beracochea then highlighted the importance of consensus at the bank, pointing to the “About” section of the World Bank website. Without consensus among staff, she argued, the bank’s impact will be limited.

Several readers praised Kim’s resolve to improve the bank’s ability to learn from failure, but Hammergren said she won’t be holding her breath.

“The survivors in the WB,” she said, “have learned to keep their heads down, adopt the jargon, and just wait.”

The conversation on the Devex LinkedIn page continues, and we invite you to join and share your views on changes at the World Bank. Or, reread the article which kicked off the debate, “Change is coming to the World Bank… or is it,” and have your say using the comment box below it.

West's real commitment to human rights concerns in Azerbaijan

In Azerbaijan, Bank Tied To EBRD Breaks Seal On Controversial Libel Law

August 21, 2013 - 2:33pm, by Kenan Aliyev and Daisy Sindelar 

• Azerbaijan
 
• Azerbaijani Politics
 
• Internet Freedom

A EurasiaNet Partner Post from: 

 RFE/RL

After losing his job as a loans specialist at a reputable bank, Mikail Talibov, a native of the southern Azerbaijani city of Ojakaran, spent two years haplessly fighting his dismissal in court.

Frustrated, Talibov finally aired his grievances on Facebook, posting comments accusing his former employer, AccessBank, of corruption and greed.

AccessBank hit back, becoming the first plaintiff in Azerbaijan to file a lawsuit under a controversial new provision criminalizing online defamation. Talibov was found guilty and sentenced to a year of "corrective labor" and a 20-percent loss of earnings. He has also been asked to post a withdrawal of his accusations.

Talibov, 31 and married, said he wasn't surprised by the sentence, admitting he was expecting something "much harsher."

But the August 14 ruling was sharply criticized by Amnesty International and the Council of Europe, whose human rights commissioner, Nils Muiznieks, said on Twitter that the debut of new defamation law "further chills freedom of expression."

Equally disappointing, for many rights watchers, is the fact that one of the entities behind Azerbaijan's first online libel conviction is the European Bank for Reconstruction and Development (EBRD), an institution that pledges to uphold democratic values and freedom of expression in the countries where it operates.

Rashid Hajili, a lawyer who heads the Baku-based Media Rights Institute, says the EBRD's role in the case is "regrettable."

"Yes, we have big problems in Azerbaijan," says Hajili, who represented Talibov during the trial. "But people here still hoped these international organizations would never take these kinds of steps. Unfortunately, we're now witnessing a blow to free speech by these very organizations."

'Accessible, European'

AccessBank, which began operations in Azerbaijan in 2002 and has branded itself "Your Accessible European Bank," is almost entirely held by international stockholders.

The EBRD holds a 20-percent stake, as do the Black Sea Trade and Development Bank, the International Finance Corporation (IFC), and Kreditanstalt fur Wiederaufbau.

Two additional foreign-based firms, Access Microfinance Holding AG and LFS Financial Systems GmbH, share the remaining 20 percent.

Contacted in London and Tbilisi, the EBRD declined to discuss the bank's connection to Talibov's trial, saying it does not comment on individual court cases.

The bank also refused to immediately clarify its link to decision-making structures within AccessBank. The EBRD is not directly represented on the AccessBank management board. However, the board's chairman, Michael Hoffman, is a former EBRD employee, with a seven-year track record that includes a stint in Russia.

Any link between the EBRD and the controversial defamation case would appear to contradict the EBRD's founding mandate of upholding freedom of speech and other principles of democracy and rule of law in its countries of operation.

It would also underscore doubts about the West's real commitment to human rights concerns in Azerbaijan, an oil-rich country that observers have accused of gift-giving "caviar diplomacy" in its dealings with the Council of Europe and other potential critics.

The EBRD, founded in 1991 to promote private-sector development in the countries of the former Eastern bloc, has invested more than $1.6 billion in Azerbaijan alone.

The bank formally cooperates with the Council of Europe in assessing reforms and has acknowledged the bleak state of human rights in Azerbaijan. The EBRD's own strategy document for the country, available online, even notes that "decriminalization of libel is needed to protect freedom of expression for members of the media and is a vital component of democratic governance."

Grudge Match

In an interview with RFE/RL, AccessBank openly acknowledged bringing the defamation suit against Talibov, although it did not discuss whether the management board or any of the shareholders participated in the decision to launch the court case.

The IFC, a member of the World Bank Group, also refused to comment on the court decision.

An AccessBank spokesperson said the court case became necessary after Talibov -- who the bank says was fired after an unexcused absence from work -- refused to remove a Facebook page he had created mocking the bank's name and posting false accusations about corruption.

Talibov's page, created in March 2012, was titled "AccessBank-Haqsizbank," which translates as "AccessBank-Unfair Bank." Most of the posts took the form of unsubstantiated, sometimes nationalistic slogans accusing the bank of working in collusion with Armenia and taking 10-percent kickbacks on $60,000 deposits.

Another post criticized the bank as working "against Azerbaijan with money earned by Azerbaijanis."

Talibov says he originally reported his corruption allegations to Azerbaijan's Central Bank but took his complaints online amid continued harassment from AccessBank.

He also claims not all the accusations are his, and that other, unidentified, people added their own accusations to the page. But he says he refuses to refute the claims, insisting they are "realities" and that he did not post "false facts."

In its final ruling, posted by AccessBank on its own Facebook page, a judge in Azerbaijan's southern Astara district ruled that Facebook was not immune from libel law and constituted a form of "mass media." The court also said that Talibov's posts had been found to be "lies" that had damaged the bank's "professional image."

(The extent of Talibov's damage to AccessBank remains difficult to quantify: a screen capture of the Facebook page provided by AccessBank shows that Talibov had received just 26 "likes" at the time charges were filed, a dismal showing in Internet-crazed Azerbaijan.)

'The Rifle Has Been Fired'

The AccessBank case has garnered little attention in Baku, a possible result of the trial's isolated location and the fact that Talibov has been perceived as less a heroic truth-teller and more a disgruntled ax-grinder.

But rights watchers say the verdict is a grim harbinger, and that more serious cases may lie ahead.

When the Azerbaijani parliament in May moved to criminalize online defamation -- which now carries a maximum punishment of a $1,200 fine and a six-month jail term -- many saw the move as a warning to Internet journalists ahead of presidential elections in October in which the autocratic incumbent, Ilham Aliyev, is set to run for a third term.

Amnesty International warned Azerbaijani authorities against using the vote "as a pretext to silence critical voices and meaningful debate."

Still, some -- like Hajili -- harbored hopes the law would never be used. Now that it has, he says, there is reason to expect similar cases may soon be filed against online reporters and news outlets.

"When the law was passed, there was a lot of concern that it would be used against critical voices, even though the government was saying they weren't planning to seriously implement it," he said. "They said it would be like a loaded rifle handing on the wall. But it didn't take too long. The rifle has already been fired and claimed its first victim."

Hajili says Talibov will appeal his sentence. The former loan officer -- who's spent two years out of work -- says he's ready to return to court. But he admits a certain weariness at the thought of facing off against AccessBank one more time.

"I will appeal, but it's difficult for me financially," he says. "I've been offered free lawyer services, but it's only an offer, nothing concrete."

Editor's note: 

 Correspondents Seadet Akifqizi and Mustacab Mammadov contributed to this report from Baku and Astara.

Cypriot depositors prepare legal battle

Cypriot depositors prepare legal battle over EU bank bailout

Published 07 August 2013

http://www.euractiv.com/euro-finance/cypriot-depositors-prepare-legal-news-529735?utm_source=EurActiv%20Newsletter&utm_campaign=406d135922-newsletter_weekly_update&utm_medium=email&utm_term=0_bab5f0ea4e-406d135922-245523965

A victim of Cyprus's chaotic financial rescue, Georgiou cannot be sure his stressful legal battle for the lost money wrecked his family's health. But, as he said with grim understatement, "it sure as hell didn't help".

Georgiou is one of an estimated 20,000 account holders who had large amounts of savings wiped out almost overnight at Laiki, the island's second-largest bank, which was wound down under the €10 billion international aid package.

"My initial reaction was utter disbelief. Now I am just angry," Georgiou, 56, told Reuters. He has spent the best part of the past four months arguing with his bank manager and in lawyers' offices, trying to reclaim funds his father and three sisters had in the now-defunct bank.

The Georgiou family's case is one of hundreds of actions against commercial lenders, the central bank and the government that are pending in the courts. If successful, they could unravel the "bail-in" which saved Cyprus from bankruptcy in March but, unlike the bailouts of other troubled EU countries, targeted savings in two major banks.

Tiny Cyprus became the testing ground for EU leaders who realised their electorates would no longer accept using any more taxpayers' money to save banks from collapse.

Depositors hit

Whereas a long line of EU banks were rescued at huge public expense during the 2008-09 financial crisis, this time the EU excluded Laiki and its peer, Bank of Cyprus, from any aid.

Instead, their clients paid. About €4.3 billion in deposits belonging to 14,000 entities were affected by the winding-down of Laiki. This left savers with at most 100,000 euros, the ceiling on deposit insurance under EU regulations.

Altogether the Georgiou family had €750,000 in Laiki. Some of this is covered by the insurance but exactly how much remains unclear due to confusion over entitlements on the several joint accounts they held. Bank officials have revised the size of their estimated losses several times, adding to the anxiety.

Unlike Laiki, Bank of Cyprus is being saved but the authorities slapped a 47.5% loss on deposits exceeding the €100,000 limit to help recapitalise it, exchanging the seized funds for shares in the lender.

Both banks had gambled on high-yielding Greek government bonds which blasted holes in their balance sheets when the country's debt was restructured under another EU/IMF rescue. The Cyprus government would have gone bankrupt had it tried to rescue the banks itself.

Seeking relief in court

Lawyers for the plaintiffs, who range from Russians who wrongly thought their savings were in a safe place to ordinary Cypriots like the Georgious, say they have a strong case.

"There are very solid grounds to believe their action will succeed," said Costas Velaris, a Nicosia lawyer.

"Now whether the defendant - the bank concerned, the Central Bank and the government of Cyprus - will have the money to compensate the successful applicant is another matter," said Velaris, who is one of a team advising depositors.

Neither the Attorney General's office nor the Central Bank, which took over responsibility for the two banks, responded immediately to requests for comment. However, central bank officials have stressed they had to make very difficult decisions after the European Central Bank said it would halt emergency funding for the two lenders, unless Cyprus agreed to the terms of the EU and International Monetary Fund's rescue.

Under this deal, Cyprus approved a "bank resolution framework" which split Laiki into a "good" and a "bad" bank. The good assets, including the insured deposits under €100,000, were transferred to Bank of Cyprus

Velaris said the legal action will not stop in Cyprus, but extend to the European Court of Justice and further afield if necessary. Action would be taken against European institutions, officials and "whomever we can lay a hand on", he said.

EurActiv.com with Reuters

• Français

Greece Surrenders to Germany

Euro Krieg!
Greece Surrenders to Germany 2013
Greg Palast Interviewed by Greek Radio

Monday, August 12, 2013

By Michael Nevradakis for Truthout

In his career as an investigative journalist, economist, and bestselling author -Vultures' Picnic, Billionaires and Ballot Bandits, The Best Democracy Money Can Buy - Greg Palast has not been afraid to tackle some of the most powerful names in politics and finance.

From uncovering Katherine Harris' purge of African-American voters from Florida's voter rolls in the year 2000 to revealing the truth behind the "assistance" provided by the International Monetary Fund and the World Bank to ailing economies, Palast has not held back in revealing the corruption and criminal actions of the wealthy and powerful.
In a recent interview on Dialogos Radio, Palast turned his attention to Greece and to the austerity policies that have been imposed on the country by the IMF, the European Union, and the European Central Bank.
"To me, Greece is a crime scene," said Palast. "Greece is dying, and austerity is one of the things that killed it." He rebuked the recent proclamations made by Greek and EU officials deeming Greece an economic "success story," describing them as "nonsense."
"Austerity has destroyed Greece and the euro has destroyed Greece," said Palast. "Austerity in the middle of a recession is a death sentence."
One of the hallmarks of austerity programs is privatization. Palast, who has investigated the impact of privatization programs in Latin America, drew parallels between those countries' experiences and the demands now being imposed on Greece.
"You see the kind of brutal practices which were first tested on Argentina, Ecuador and Brazil brought to Greece with more severe consequences," said Palast. "You get ripped off. You still need water, you still need electricity. You privatize these things, you're still going to have to buy water and electricity, but now you'll pay a fortune to German and American and Canadian companies."
In his critique of privatization programs, Palast referenced Joseph Stiglitz, the Nobel Prize-winning economist who had been the World Bank's chief economist prior to being fired for expressing dissent against its policies. "[Stiglitz] called privatization 'briberization' because ... when we talk about privatization, we talk about a couple of guys who are close to the government in Greece, who are close to the German government, and they pick up the properties for next to nothing."
One of the biggest controversies in Greece over the past year has involved the Skouries gold mine. Originally transferred to private hands by the Greek state in 2004 for the paltry sum of 11 million euros, the mine has since come into the possession of the Canadian company Eldorado Gold, which has commenced mining activities. This has resulted in a vociferous grassroots movement, protesting the mine on both economic and environmental grounds. According to Palast, companies like Eldorado Gold prey on vulnerable countries.
"What they do is, they wait for the moment where a nation is really weak and on its back, and has to give away its gold. Tanzania sold its gold mines for nothing under IMF pressure to Barrick Gold. They've made billions and billions and billions."
"Let's not kid ourselves," added Palast. "Nobody gets a gold mine without making a payoff to the powers that be. That's just how it is ... they're not privatizing, they're stealing your gold."
For Palast, the solution for Greece is to leave the Euro.
"You don't want to be in the euro, take my word for it," said Palast. "To stay in the euro zone is like saying we want to stay in the leper colony. The euro is a monstrous creation. The euro is not about having a happy trade zone. It's about imposing the elimination of the progressive state. The euro is the Fourth Reich ... and you have to give it up."
Palast drew upon the paradigm of several Latin American countries as examples that Greece could follow.
"The Argentines ... disconnected from the dollar; they told the creditors to go to hell and they are a booming economy," said Palast, adding that determined leadership is needed in Greece in order to accomplish this.
"The difference between Greece and Argentina is that the Greek people are gutless. Greek people are cowards by nature, whereas the Argentines are tough. I'm trying to push people to not give up. There's no one standing up against the euro. You had one independent party [Syriza] which completely caved in ... you do need that third voice." Such third parties, according to Palast, were able to attain electoral success in Latin America by saying no to the IMF and to policies imposing austerity and privatization. As a result, he argued, those countries' economies are now booming.
Palast was sharply critical of Germany for its role in the Greek crisis. "I keep saying that the Germans want to change the name of the euro to the Panzer. They're accomplishing through economic manipulation what they tried to do with tanks during World War II. You're going to become a German colony unless you get out of their currency."
Palast also had harsh words for Greece's political establishment. Describing Greece's two major parties, New Democracy and PASOK, as "indistinguishable," he stated: "Morally, the leadership of both main parties is equally responsible for lying to the people and causing massive harm to the public, and I think that they should be held accountable."
Palast cited the actions of Goldman Sachs and other banks in helping successive Greek governments hide the country's deficit."It was a fraud, and they charged almost a half a billion dollar fee to the Greek government to help it hide its deficits. Why would you hide your deficits? For a single reason: to stay within the euro."
Palast's harshest criticism was addressed towards Theodoros Pangalos, a prominent former government minister with PASOK. Palast recently interviewed Pangalos at the Eurasia Media Forum in Kazakhstan.
"I couldn't resist the temptation to interview him," said Palast. "He weighs about 300 pounds, he has a stomach that's about three feet ahead of him ... If someone's overweight, that's usually a personal issue, but in his case, it isn't, because you have people in Greece that are literally starving ... and he's saying that if you complain about austerity measures, you're a communist or an anarchist. You're not a communist or an anarchist: you're just someone that's trying to feed your kids."
"Pangalos has a phrase, 'We ate it all together'," added Palast. "No we didn't. He's fat, and other people are starving."
Palast urged the people of Greece to respond to the crisis by protesting the ongoing austerity measures. "Why are the Greek people agreeing to their own destruction? It's crazy! This is when you have to act. You cannot give up now ... I've seen successful movements formed around the world by people who thought their situation was hopeless."
Palast stated his desire to provide his support to Greece, while expressing his interest to hear from ordinary Greeks, in advance of his upcoming visit to the country in September.
"I would like people to contact me and give me their stories, their ideas, their information, and when I come to Greece, I want to meet you and speak with you. I would like to really speak with people about what the people of Greece think are the best solutions. Let's work this out together, and I will bring the best minds in the field of economics to your side, to discuss how movements are formed."
* * * * * * * *
Greg Palast’s book Vultures' Picnic (Constable Robinson UK/Penguin USA), including chapters on Greece and Goldman, will be published in Greek this fall by Livani.  Download the first chapter, Goldfinger, and videos at VulturesPicnic.org.
Greg Palast's other books are the New York Times bestsellers Billionaires & Ballot Bandits: How to Steal an Election in 9 Easy Steps, The Best Democracy Money Can Buy and Armed Madhouse.
Visit the Palast Investigative Fund's store or simply make a contribution to keep our work alive!
Subscribe to Palast's Newsletter and podcasts.
Follow Palast on Facebook and Twitter.

Lucky Lucke targets the Euro

Moody’s downgrade of the Bank of England

Moody’s downgrade of the Bank of England is a nonsense

Julian D. A. Wiseman

Abstract: despite Moody’s downgrade, the Bank of England can’t default in sterling.

Publication history: only at www.jdawiseman.com/papers/finmkts/20130224_moodys_downgrades_bank_england.html. Usual disclaimer and copyright terms apply.

Contents: What is a rating?; Legal tender; Institutional quality; The problem; Afterword.

---

What is a rating?

On 22 February 2013 Moody’s downgraded the United Kingdom and the Bank of England to Aa1 from Aaa.
What does this mean? What is a rating? Turn to page 8 of Moody’s: Rating Symbols & Definition, dated June 2009.

Moody’s long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings use Moody’s Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.

All very fair — a rating is an opinion about a relative probability of default.
Before going further, observe what this is not. This is not a probability that the numéraire of the debt will devalue relative to other currencies. Indeed, in mid 2008 the pound was above $2; by early 2009 it had fallen to below $1.40, yet this was not default. Gilt coupons were paid in the promised number of pounds, which had become fewer dollars. Yet Moody’s, far from deeming the UK to be in any form of selective default, instead continued to rate the UK, and the BoE, at triple-A.
Likewise, inflation (devaluation against bread or beer rather than against USD) is not default. Since 1978 the RPI-based purchasing power of the pound has fallen almost five-fold; and for most of 2011 year-on-year RPI inflation was over 5%. Yet this was not deemed default: all the rating agencies had the UK and the BoE at triple-A.
So, importantly, default means actual default. I owe you £1; I fail to pay that £1 punctually; I have defaulted. Whether that £1 changes in value is not relevant to the presence or absence of default, and hence not directly relevant to a rating.
Whilst at SocGen I wrote that UK £ default is not only unlikely, it is de facto impossible (9^th November 2011). Much of that argument was about the legislation and Parliamentary procedure by which a government could compel the issuer of GBP, the Bank of England, to lend or give sterling to the government. (Summary: s.12 of the National Loans Act 1968 gives the Treasury much more power than is held by, for example, the US Treasury; and if that fails s.19 of the BoE Act 1998 gives the gov’t all the power it needs to extract money from the BoE.)
But Moody’s has gone further than lowering the UK: in a one-sentence aside, it has lowered the rating of the Bank of England.

In a related rating action, Moody's has today also downgraded the ratings of the Bank of England to Aa1 from Aaa.

That greatly simplifies the argument.

Legal tender

If I owe you £100, how can I settle that debt? There are two forms of legal tender.
First, bank notes. Residents of the UK are familiar with folding portraits of Her Majesty The Queen. But there used to be bigger banknotes, much bigger. There used to be ‘Giants’, each being a £1,000,000 note. They were needed, only inside the Bank of England, never leaving the Bank of England, for an obscure reason relating to the Bank Charter Act 1844, a reason that was made redundant by s.217(2)(c) of the Banking Act 2009. In 2003 I held a £1,000,000 banknote: A5, blank one side, the one printed side being black-and-white. It might have been laser printed! This was legal tender, for a million pounds. Cool: off to the pub—“got change for this love?” Some years later the BoE printed some ‘Titans’, bank notes with a face value of £100,000,000, but I never touched one.
So the BoE could easily make legal tender with which to pay its debts. If the BoE owes me a trillion pounds, all it would take is a few hours of work to design and laser print some new pictures, and a wave of the Governor’s magic this-is-legal-tender wand, and then I’m paid. Of course, if the BoE were to start handing out easily forged £1×10¹² notes, the value of the pound would fall, internally and externally. But that would not be default.
The second form of legal tender is money on account at the Bank of England. Money on account at the BoE is a liability of the BoE’s. The BoE, by acknowledging that debt, and allowing it to be in the form of a bank balance, would have paid. No need even for laser printing.
So there is no form of economic problem or weakness that could push the BoE into default.

Institutional quality

This doesn’t quite make default impossible. The Nazis, after Kristallnacht, wanted to ban German insurers from paying Jewish claims. The insurers argued against this, saying it would damage their creditworthiness in international markets. So instead the government imposed a 100% tax on such claims. But this ‘default’ was caused by a breakdown of both the quality of institutions and access to justice. This is not applicable to this case: Moody’s argument for a downgrade is all about economics, whilst praising the “robust institutional structure”.

The problem

The downgrade of the Bank of England has been caused by a methodological error of Moody’s. Moody’s methodology takes no account of the degree and quality of the issuer’s control over the numéraire of the debt. Instead, sovereigns are treated as large railroads, with tax income, debts, and various other outgoings. Perhaps that might be fair for eurozone sovereigns, which have ceded their control over the currency. Perhaps that might be part-fair for the USA, which has unwisely split control over the numéraire between the Executive and the Legislative, who are sometimes keener on squabbling than on the public interest. But for the Bank of England or the Federal Reserve or the European Central Bank, it is a nonsense.

— Julian D. A. Wiseman London, 24rd February 2013 www.jdawiseman.com

---

Afterword

Monday 25^th February 2013: this essay was the subject of an FT Alphaville article at http://ftalphaville.ft.com/2013/02/25/1397752/this-downgrade-is-nonsense/.

The question then is: what exactly does a rating mean for a sovereign which borrows in its own currency? Right now, it seems little bar political pain.

Moody’s should not be pleased that its rating is thought to have little meaning.

QE for Students: Economic Breakthrough?

Elizabeth Warren's QE for Students: Populist Demagoguery or Economic Breakthrough?

Monday, 17 June 2013 10:10By Ellen Brown, The Web of Debt Blog | News Analysishttp://truth-out.org/news/item/17019-elizabeth-warrens-qe-for-students-populist-demagoguery-or-economic-breakthrough

Dollarmen graduates. (Image: Jared Rodriguez / Truthout)On July 1, interest rates will double for millions of students – from 3.4% to 6.8% – unless Congress acts; and the legislative fixes on the table are largely just compromises. Only one proposal promises real relief – Sen. Elizabeth Warren’s “Bank on Students Loan Fairness Act.” This bill has been dismissed out of hand as “shameless populist demagoguery” and “a cheap political gimmick,” but is it? Or could Warren’s outside-the-box bill represent the sort of game-changing thinking sorely needed to turn the economy around?

Warren and her co-sponsor John Tierney propose that students be allowed to borrow directly from the government at the same rate that banks get from the Federal Reserve — 0.75 percent. They argue:

Some people say that we can’t afford low interest rates for students. But the federal government offers far lower rates on loans every single day — they just don’t do it for everyone. Right now, a bank can get a loan through the Federal Reserve discount window at a rate of less than one percent. The same big banks that destroyed millions of jobs and broke our economy can borrow at about 0.75 percent, while our students will be paying nine times as much as of July 1.

This is not fair. And it’s not necessary, either. The federal government makes 36 cents on every dollar it lends to students. Just last week, the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year — more than the annual profit of any Fortune 500 company, and about five times Google’s yearly earnings. We should not be profiting from students who are drowning in debt while we are giving great deals to big banks.

The archly critical Brookings Institute says the bill “confuses market interest rates on long-term loans (such as the 10-year Treasury rate) with the Federal Reserve’s Discount Window (used to make short-term loans to banks), and does not reflect the administrative costs and default risk that increase the costs of the federal student loan program.”

Those criticisms would be valid if the provider of funds were either a private bank or the American taxpayer; but in this case, it is the U.S. Federal Reserve.  Warren and Tierney assert, “For one year, the Federal Reserve would make funds available to the Department of Education to make these loans to our students.” For the Fed, completely different banking rules apply. As “lender of last resort,” it can expand its balance sheet by buying all the assets it likes. The Fed bought over $1 trillion in “toxic” mortgage-backed securities in QE 1, and reportedly turned a profit on them.  It could just as easily buy $1 trillion in student debt and refinance it at 0.75%.

Which Is a Better Investment, Banks or Students?

Students are considered risky investments because they don’t own valuable assets against which the debt can be collected. But this argument overlooks the fact that these young trainees are assets themselves. They represent an investment in “human capital” that can pay for itself many times over, if properly supported and developed.  This was demonstrated in the 1940s with the G.I. Bill, which provided free technical training and educational support for nearly 16 million returning servicemen, along with government-subsidized loans and unemployment benefits. The outlay not only paid for itself but returned a substantial profit to the government and significant stimulus to the economy. It made higher education accessible to all and created a nation of homeowners, new technology, new products, and new companies, with the Veterans Administration guaranteeing an estimated 53,000 business loans. Economists have determined that for every 1944 dollar invested, the country received approximately $7 in return, through increased economic productivity, consumer spending, and tax revenues.

Similarly in the 1930s and 1940s, the Reconstruction Finance Corporation funded the New Deal and World War II and wound up turning a profit, without drawing on taxpayer funds. It’s an initial capitalization was only $500 million; yet the RFC eventually lent out $50 billion – the equivalent of about $500 billion today. It raised money by issuing debentures, a form of bond. It got all of this money back, made a profit for the government, and left a legacy of roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more that the country did not have before.

In 1944, President Franklin Roosevelt proposed an Economic Bill of Rights, in which higher education would be provided by the government for free; and in the progressive 1960s, tuition actually was free or nearly free at state universities. Some countries provide nearly-free higher education today. In Norway, Denmark, France and Sweden, the cost of college is less than 3% of median income, as compared to 51% in the U.S.

Other countries make loans available to their students interest-free. For more than twenty years, the Australian government has successfully funded students by giving out what are in effect interest-free loans. They are “contingent loans,” which are repaid only if and when the borrower’s income reaches a certain level.  New Zealand also offers 0 percent interest loans to New Zealand students, with repayment to be made from their incomes after they graduate.

Banks Are Good Credit Risks Only Because They Are Backed by the Government

In a National Review article titled “Warren’s Student-loan Demagoguery,” Ian Tuttle argues that the discount window should not be available to students because the Fed defines that resource as “an instrument of monetary policy that allows eligible institutions to borrow money, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions,” and because the discount window is “an emergency measure used to prevent runs on banks.”

It may be true that the Fed’s discount window is open only to banks, but the Federal Reserve Pact was passed by Congress and can be modified by Congress. The reasoning behind the policy needs to be re-examined.

The question is, why do banks routinely have “shortages of liquidity”?  What does that mean?  It means they have lent out depositor funds that don’t properly belong to them, gambling that they will be able to replace the money before the depositors demand it back. The banks have a binding commitment to return customer money “on demand.” They can make good on that commitment because, and only because, the Fed and the FDIC back them up in a massive shell game, in which they borrow from each other or the Fed overnight – just long enough to make their books appear to balance – and then give the money back the next day. Banks are good credit risks only because they have the backstop of the Fed and the government behind them. Without those guarantees, we would be back to the cycle of endless bank runs of the 19th and early 20^th centuries.

“Our students are just as important to our recovery,” says Warren, “as our banks.” What if students, too, were backed by the government’s guarantee? What if, as in Australia and New Zealand, students were not required to repay the investment in human capital represented by their educations until the economy provided them with jobs? What if the government made it a policy to provide them with jobs? This too has been done before, quite successfully. It was part of Roosevelt’s New Deal. As detailed by Prof. Randall Wray, citing N. Taylor’s The Enduring Legacy of the WPA:

The New Deal jobs programs employed 13 million people; the WPA was the biggest program, employing 8.5 million, lasting 8 years and spending about $10.5 billion. It took a broken country and in many important respects helped to not only revive it, but to bring it into the 20th century. The WPA built 650,000 miles of roads, 78,000 bridges, 125,000 civilian and military buildings, 700 miles of airport runways; it fed 900 million hot lunches to kids, operated 1500 nursery schools, gave concerts before audiences of 150 million, and created 475,000 works of art. It transformed and modernized America.

In the 1930s, the government was in a worse financial position to achieve all this than it is now; but the commitment and the will were there, and the means were found. In World War II, the means were found again. The government always seems to be able to find the means to fund a war. We can just as easily find the means to fund our economic recovery. And if the funding comes from the Federal Reserve, the government need not be propelled into a mounting debt owed at mounting interest. The funds can be provided interest-free; and because they represent an investment in productive capital, the debt itself can be repaid with the fruits of the investment – the jobs that create the salaries that generate taxes and consumer demand.

The default rate on student loans is close to 10% today because there are no jobs available to repay the loans, and because the interest rate is so high that the debt is doubled or tripled over the life of the loan. Give students loans and jobs, and the default problem will cure itself.

Investing in our young people has worked before and can work again; and if Congress orders the Fed to fund this investment in our collective futures by “quantitative easing,” it need cost the taxpayers nothing at all. The Japanese have finally seen the light and are using their QE tool as economic stimulus rather than just to keep their banks afloat, and we need to do the same.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

U.S. accuses Bank of America of fraud

U.S. accuses Bank of America of mortgage-backed securities fraud

By David Ingram and Peter Rudegeair

WASHINGTON/NEW YORK | Tue Aug 6, 2013 7:04pm EDT

http://www.reuters.com/article/2013/08/06/us-bofa-justice-idUSBRE9750ZU20130806

(Reuters) - The U.S. government on Tuesday filed two civil lawsuits against Bank of America that accuse the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities.

The lawsuits are the latest legal headache for the second-largest U.S. bank, which has already agreed to pay in excess of $45 billion to settle disputes stemming from the 2008 financial crisis.

While most of the cases Bank of America has already confronted pertain to its acquisitions of brokerage Merrill Lynch and home lender Countrywide, the lawsuits filed on Tuesday pertain to mortgages the government said were originated, securitized and sold by Bank of America's legacy businesses.

The residential mortgage-backed securities at issue, known as RMBS, were of a higher credit quality than subprime mortgage bonds and date to about January 2008, the government said, months after many Wall Street banks first reported billions of dollars in write-downs on their holdings of subprime mortgage securities.

The Justice Department and the U.S. Securities and Exchange Commission filed parallel lawsuits in U.S. District Court in Charlotte, North Carolina, accusing Bank of America of making misleading statements and failing to disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.

The investors included the Federal Home Loan Bank of San Francisco and Wachovia Bank National Association, the Justice Department lawsuit said.

Bank of America, which is based in Charlotte, responded to the lawsuits with a statement: "These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that.

"The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

Bank of America shares fell 1.1 percent to close at $14.64 on the New York Stock Exchange following news of the lawsuits, which were filed late in the afternoon.

Bank of America had warned in a securities filing on Thursday about possible new civil charges linked to a sale of one or two mortgage bonds.

According to the lawsuits, Bank of America made misleading statements and failed to disclose important facts about the mortgages underlying a securitization named BOAMS 2008-A. More than 40 percent of the 1,191 mortgages in the securitization did not comply with the bank's underwriting standards, according to the complaint.

"These misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected," the Justice Department said in its statement.

Threats of costly mortgage litigation have been dogging Bank of America for years.

"It has been shown repeatedly that the origination process at Bank of America and its subsidiaries failed to live up to their own internal guidelines and the resulting loans did not reflect the way they were characterized to investors," said Donald Hawthorne, a partner at Axinn Veltrop & Harkrider LLP, who has represented monoline insurers and RMBS investors in suits against mortgage originators, including Countrywide, relating to mortgage securities.

In 2011, the bank's shares fell more than 20 percent in a single day after American International Group filed a $10 billion lawsuit accusing the bank of mortgage fraud.

Weeks later, Warren Buffett's Berkshire Hathaway Inc swooped in with a $5 billion investment to shore up confidence in the bank. Since then, Bank of America's stock has more than doubled as the bank has announced agreements to settle major disputes, and investors have regained confidence in its outlook.

Among major deals, the company agreed to an $8.5 billion settlement with mortgage-backed securities investors, a $1.6 billion settlement with bond insurer MBIA Inc, and a settlement worth more than $10 billion with Fannie Mae, the government-controlled mortgage finance provider.

The lawsuit signals the federal government's willingness to pursue litigation challenging banks securitizations and marketing practices even as the financial crisis recedes further into the past.

The Justice Department's lawsuit was brought under the Financial Institutions Reform, Recovery and Enforcement Act, a savings-and-loan-era law that federal prosecutors have revived in recent years to continue pursuing civil fraud charges against financial institutions. It has a 10-year statute of limitations, double the deadline under other securities fraud laws.

The U.S. attorney's office in Manhattan brought a separate suit against Bank of America under that act last October over losses that Fannie Mae and Freddie Mac suffered on loans the government said were deficient.

Attorney General Eric Holder said in a statement on Tuesday that President Barack Obama's Financial Fraud Enforcement Task Force, which brought the latest lawsuit against Bank of America, "will continue to take an aggressive approach to combatting financial fraud and uncovering abuses in the residential mortgage-backed securities market," and is pursuing "a range of additional investigations."

Whether future investigations will succeed remains to be seen.

"Is this the first shot across the bow in terms of a larger campaign or is it trying to satisfy the press that the federal government is awake at their station but really only taking aim at a very small piece of a very big problem?" Hawthorne said.

(Reporting by David Ingram in Washington and Peter Rudegeair in New York; Additional reporting by and Lauren Tara LaCapra and Jonathan Stempel; Editing by Gary Hill and Leslie Adler)