Federal Reserve scam: 100 Years Is Enough

100 Years Is Enough: Time to Make the Fed a Public Utility

Posted on December 22, 2013 by Ellen Brown

December 23rd, 2013, marks the 100^th anniversary of the Federal Reserve, warranting a review of its performance.  Has it achieved the purposes for which it was designed?

The answer depends on whose purposes we are talking about.  For the banks, the Fed has served quite well.  For the laboring masses whose populist movement prompted it, not much has changed in a century.

Thwarting Populist Demands

The Federal Reserve Act was passed in 1913 in response to a wave of bank crises, which had hit on average every six years over a period of 80 years. The resulting economic depressions triggered a populist movement for monetary reform in the 1890s.  Mary Ellen Lease, an early populist leader, said in a fiery speech that could have been written today:

Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street. The great common people of this country are slaves, and monopoly is the master. . . . Money rules . . . .Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us and the political speakers mislead us. . . .

We want money, land and transportation. We want the abolition of the National Banks, and we want the power to make loans direct from the government. We want the foreclosure system wiped out.

That was what they wanted, but the Federal Reserve Act that they got was not what the populists had fought for, or what their leader William Jennings Bryan thought he was approving when he voted for it in 1913. In the stirring speech that won him the Democratic presidential nomination in 1896, Bryan insisted:

[We] believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.

He concluded with this famous outcry against the restrictive gold standard:

You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.

What Bryan and the populists sought was a national currency issued debt-free and interest-free by the government, on the model of Lincoln’s Greenbacks. What the American people got was a money supply created by private banks as credit (or debt) lent to the government and the people at interest. Although the national money supply would be printed by the U.S. Bureau of Engraving and Printing, it would be issued by the “bankers’ bank,” the Federal Reserve. The Fed is composed of twelve branches, all of which are 100 percent owned by the banks in their districts. Until 1935, these branches could each independently issue paper dollars for the cost of printing them, and could lend them at interest.

1929: The Fed Triggers the Worst Bank Run in History

The new system was supposed to prevent bank runs, but it clearly failed in that endeavor. In 1929, the United States experienced the worst bank run in its history.

The New York Fed had been pouring newly-created money into New York banks, which then lent it to stock speculators. When the New York Fed heard that the Federal Reserve Board of Governors had held an all-night meeting discussing this risky situation, the flood of speculative funding was retracted, precipitating the 1929 stock market crash.

At that time, paper dollars were freely redeemable in gold; but banks were required to keep sufficient gold to cover only 40 percent of their deposits. When panicked bank customers rushed to cash in their dollars, gold reserves shrank. Loans then had to be recalled to maintain the 40 percent requirement, collapsing the money supply.

The result was widespread unemployment and loss of homes and savings, similar to that seen today. In a scathing indictment before Congress in 1934, Representative Louis McFadden blamed the Federal Reserve. He said:

Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks . . . .

The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. . . .

Some people think that the Federal Reserve Banks are United  States  Government  institutions.  They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.

These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions.

Freed from the Bankers’ “Cross of Gold”

To stop the collapse of the money supply, in 1933 Roosevelt took the dollar off the gold standard within the United States. The gold standard had prevailed since the founding of the country, and the move was highly controversial. Critics viewed it as a crime. But proponents saw it as finally allowing the country to be economically sovereign.

This more benign view was taken by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a presentation before the American Bar Association in 1945. He said the government was now at liberty to spend as needed to meet its budget, drawing on credit issued by its own central bank. It could do this until price inflation indicated a weakened purchasing power of the currency. Then, and only then, would the government need to levy taxes—not to fund the budget but to counteract inflation by contracting the money supply. The principal purpose of taxes, said Ruml, was “the maintenance of a dollar which has stable purchasing power over the years. Sometimes this purpose is stated as ‘the avoidance of inflation.’”

It was a remarkable realization. The government could be funded without taxes, by drawing on credit from its own central bank. Since there was no longer a need for gold to cover the loan, the central bank would not have to borrow. It could just create the money on its books. Only when prices rose across the board, signaling an excess of money in the money supply, would the government need to tax—not to fund the government but simply to keep supply (goods and services) in balance with demand (money).

Ruml’s vision is echoed today in the school of economic thought called Modern Monetary Theory (MMT). But after Roosevelt’s demise, it was not pursued. The U.S. government continued to fund itself with taxes; and when it failed to recover enough to pay its bills, it continued to borrow, putting itself in debt.

The Fed Agrees to Return the Interest

For its first half century, the Federal Reserve continued to pocket the interest on the money it issued and lent to the government. But in the 1960s, Wright Patman, Chairman of the House Banking and Currency Committee, pushed to have the Fed nationalized. To avoid that result, the Fed quietly agreed to rebate its profits to the U.S. Treasury.

In The Strange Case of Richard Milhous Nixon, published in 1973, Congressman Jerry Voorhis wrote of this concession:

It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation’s money, but on the other hand charging the nation interest on its own credit—which no true national bank of issue could conceivably, or with any show of justice, dare to do.

Rebating the interest to the Treasury was clearly a step in the right direction. But the central bank funded very little of the federal debt. Commercial banks held a large chunk of it; and as Voorhis observed, “[w]here the commercial banks are concerned, there is no such repayment of the people’s money.” Commercial banks did not rebate the interest they collected to the government, said Voorhis, although they also “‘buy’ the bonds with newly created demand deposit entries on their books—nothing more.”

Today the proportion of the federal debt held by the Federal Reserve has shot up, due to repeated rounds of “quantitative easing.” But the majority of the debt is still funded privately at interest, and most of the dollars funding it originated as “bank credit”created on the books of private banks.

Time for a New Populist Movement?

The Treasury’s website reports the amount of interest paid on the national debt each year, going back 26 years. At the end of 2013, the total for the previous 26 years came to about $9 trillion on a federal debt of $17.25 trillion. If the government had been borrowing from its own central bank interest-free during that period, the debt would have been reduced by more than half. And that was just the interest for 26 years. The federal debt has been accumulating ever since 1835, when Andrew Jackson paid it off and vetoed the Second U.S. Bank’s renewal; and all that time it has been accruing interest. If the government had been borrowing from its central bank all along, it might have had no federal debt at all today.

In 1977, Congress gave the Fed a dual mandate, not only to maintain the stability of the currency but to promote full employment.  The Fed got the mandate but not the tools, as discussed in my earlier article here.

It may be time for a new populist movement, one that demands that the power to issue money be returned to the government and the people it represents; and that the Federal Reserve be made a public utility, owned by the people and serving them. The firehose of cheap credit lavished on Wall Street needs to be re-directed to Main Street.

__________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

James Robertson Newsletter No. 44 - January 2013

Newsletter No. 44 - January 2013

Links to previous Newsletters can be found here.

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CONTENTS

1. Introduction

2. South Africa After Nelson Mandela

3. How Money Is Now Created: Centenary of the US Federal Reserve Bank

4. US President John F. Kennedy - his Hopes of Fifty Years ago, when he was Assassinated in Dallas, Texas on 22 November 1963

5. First World War, Centenary 4th August 1913

6. Scottish Independence Referendum, 18 September 2014, following the Seventh Centenary of the Battle of Bannockburn

7. Other Topics

8. An Important Future Event

1. INTRODUCTION

The arrival of New Year 2014 brings a number of centenaries and a half-centenary to reflect on.

Here are some examples. In his moving memorial tribute on 10th December at Soweto, South Africa, US President Barack Obama referred to Nelson Mandela as "the last great liberator of the 20th century "; 23 December 2013 was the centenary of the US Federal Reserve Bank System; on 22 November 1963 fifty years ago President John F. Kennedy was assassinated; 4 August 2014 will be the centenary of the outbreak of the first World War; and 23-24 June 2014 will be seventh centenary of the Scottish defeat of the English at the Battle of Bannockburn, reflected in the Scottish referendum for independence from the UK to be held on 18 September this year.

These are some of the topics in this newsletter. They prompt us to think about the future as well as the past.

2. SOUTH AFRICA AFTER NELSON MANDELA

Sadly, the nation Nelson Mandela leaves behind him remains one of the least equal nations in the world - See www.economist.com/blogs/graphicdetail/2013/12/daily-chart-6.

I am not very surprised at this. When Alison and I visited South Africa in February/March 1996 we were doubtful, though optimistic, about South Africa's socio-economic future. See "Impressions of the New South Africa", Turning Point 2000 atwww.jamesrobertson.com/impressionsofthenewsouthafrica.pdf.

As this newsletter's Introduction mentioned, US President Barack Obama referred in his moving memorial tribute on 10th December to Nelson Mandela as "the last great liberator of the 20th century".

Gandhi and Martin Luther King were the previous two great liberators of that century. Unlike Mandela both had been assassinated.

Who will be the great liberators of the 21st century? They will need to liberate us from domination by a worldwide tangle of dependency-creating groupthink. What sort of people will our liberators be and where will they come from?

Or will it be as much about us being able to liberate ourselves, co-operating peacefully and independently with one another?

Meanwhile, how will our present leaders behave? Here is an example:www.celebuzz.com/2013-12-10/obama-take-a-selfie-at-nelson-mandelas-memorial/

At the same time, a phony interpreter to the deaf was gesticulating nonsense accompanying all the speakers -www.theguardian.com/commentisfree/2013/dec/16/fake-mandela-memorial-interpreter-schizophrenia-signing.

You can't help wondering how much the world's taxpayers pay for the thousands of people at hundreds of international jamborees on our behalf.Who can tell us? and who can tell us what it's all worth?

Not much, the critics would say. See –www.politicalcleanup.wordpress.com/2013/12/20/nelson-mandela-clinton-obama-bush-blair-cameron-tributes-of-shameful-hypocrisy.

3. HOW MONEY IS N0W CREATED: Centenary of the US Federal Reserve Bank

December 23, 2013, was the one hundredth anniversary of the signing of the Federal Reserve Act. Not everyone has celebrated it.

For example, a paper from the American Monetary Institute regards it as "the culmination of centuries of political, financial, intellectual, and moral corruption" - see www.monetary.org/wp-content/uploads/2013/12/Viable-Solution-to-Economic-Crisis.pdf.

Ellen Brown agrees that "100 years is enough; it's time to make the Fed a Public Utility" - see www.huffingtonpost.com/ellen-brown/100-years-federal-reserve_b_4490472.html.

There are many arguments for reforming how the public money supply is created - known as "monetary reform".

One benefit, as I explained in Future Money (pp 112-113), is that changing the way money is created and circulated in the UK could result, first in an annual saving to all citizens of about £75bn, and second in a one-off benefit to the public purse totalling £1.5bn over a three-year transition period. These results would be achieved by:

(1) eliminating the hidden tax that we all pay to commercial banks as interest on the bank account money in circulation; and
(2) profiting from the one-off increase in public revenue by converting the money supply now created by commercial banks as debt into money created free of debt by the Bank of England.

In the short term this would relieve the unjust "austerity" now being inflicted on the poorer sections of society. In the longer term it would create a fairer and more efficient economy for everyone in a 21st-century society.

The benefits of monetary reform are now widely recognised, e.g. by Positive Money in recent communications, including the following:

www.positivemoney.org/issues/debt

www.positivemoney.org/issues/inequality and

www.positivemoney.org/2013/12/george-osborne-misses-real-debt-problem.

The following two discussions are among those well worth studying:

www.monetary.org/wp-content/uploads/2013/09/Huber-Modern-Money-Paper.pdf

www.truth-out.org/opinion/item/20527-amend-the-fed-we-need-a-central-bank-that-serves-main-street, including comments.

4. US PRESIDENT JOHN F. KENNEDY - his hopes of fifty years ago, when he was assassinated in Dallas, Texas on 22 November 1963

The following are two important reports by President Kennedy's nephew. I am grateful to Barbara Panvel for them. They suggest why it is risky for political leaders to pursue peace policies that threaten the career prospects of their experts in warfare:

www.civilisation3000.wordpress.com/2013/12/31/john-f-kennedys-vision-of-peace-1

www.civilisation3000.wordpress.com/2013/12/31/john-f-kennedys-vision-of-peace-2-nuclear-disarmament.

These reports inevitably leave one with a sense of regret that the Cold War wasn't ended quarter of a century earlier than it might have been. They also leave us with conspiracy questions about how Kennedy's assassination was arranged and who by. And they leave us with no guarantee that the world won't be similarly cheated again in favour of choosing war against peace.

I don't want to distract attention from the particular importance of the field of peace and war. But it is worth noting that there are similar relationships in other fields too, such as:

• health, where staying healthy reduces the need for expensive sickness cures by medical professionals of all kinds; or
• work, where "own work" will remove the need to depend on high paid employers to decide what employment you will do.

Becoming more self-reliant in many such fields of life may turn out to be essential to the survival of our species.

An extreme example of the reverse of self-reliance would be a "lucrative symbiosis" combining profit from the production of agrochemical herbicides growing food for people, with profit from responding to people's diseases from the herbicides - seewww.politicalcleanup.wordpress.com/2013/12/16/us-uk-rising-use-of-gm-herbicides-prostate-cancer-parkinsons-dementia-autism-etc.

That would be an example of "Civilization's Vicious Circle": we "must keep solving the problems of complexity, for that is the sine qua non of civilized existence; but every solution creates new, ever more difficult problems, which then require new, ever more demanding solutions".

See www.csrwire.com/blog/posts/1116-sustainability-and-complexity-are-we-doomed-to-repeat-history.

5. FIRST WORLD WAR, CENTENARY 4TH AUGUST 1913

The official response in the UK is that from 2014 to 2018, nations, communities and individuals of all ages across the world, will come together to mark, commemorate and remember the lives of those who lived, fought and died in the First World War. See www.1914.org/about.

Much wider activity is suggested atwww.theguardian.com/world/2013/jun/09/authors-first-world-war-books.

Two among many interesting recent commentaries are as follows.

"The Great War was a Just War" - www.historytoday.com/gary-sheffield/great-war-was-just-war argues that, although no one wants to see five years of German-bashing, the UK government would be wrong to take a non-judgemental view about the ethics of the Great War.

"Look back with angst" -www.economist.com/news/leaders/21591853-century-there-are-uncomfortable-parallels-era-led-outbreak argues that the parallels between the present time and the run-up to the First World War are troubling:

"The United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly. Modern Japan is France, an ally of the retreating hegemon and a declining regional power. The parallels are not exact—China lacks the Kaiser's territorial ambitions and America's defence budget is far more impressive than imperial Britain's—but they are close enough for the world to be on its guard."

6. SCOTTISH INDEPENDENCE REFERENDUM, 18 SEPTEMBER 2014.

As a child brought up in Scotland I was taught to enjoy the story of the glorious Scottish defeat of the English at Bannockburn in 1314.

I was taken to support Scottish rugby teams against the English at Murrayfield. I still support them after a long adult life in England. I have more cousins who live in Scotland than in England. It feels strange to think that we may become foreigners within the year.

It is hard to believe it can happen. Perhaps it won't matter too much if it does. We will surely find ways to keep alive the concept of UK Britain.

7. OTHER TOPICS

This section contains shorter notes on important topics.

(1) The Madness of Nuclear Power

My last newsletter discussed this - seewww.jamesrobertson.com/newsletter.htm#nuclearpower.

The view of nuclear power as madness is strengthened by further reports from Japan - see www.rt.com/news/fukushima-destroy-japan-us-290.

(2) The Future of UK Politics

(a) Why politics fails - George Monbiot -www.monbiot.com/2013/11/11/why-politics-fails.

"When a state-corporate nexus of power has bypassed democracy and made a mockery of the voting process, when an unreformed political funding system ensures that parties can be bought and sold, when politicians of the three main parties stand and watch as public services are divvied up by a grubby cabal of privateers, what is left of this system that inspires us to participate"?

(b) Why old style politics are collapsing - Neal Lawson -www.theguardian.com/commentisfree/2013/nov/29/old-style-politics-collapse-like-berlin-wall-westminster.

"The art of political leadership in the 21st century is to help grow the capacity of people to collectively make change happen, not impose change on them."

(3) References to Local Developments

www.antidotecounteragent.wordpress.com/2013/12/11/a-new-build-british-village

www.localisewestmidlands.org.uk/mainstreaming_ced

www.neweranetwork.info/2013/10/26/news-from-james-bruges

www.neweranetwork.info/2013/11/22/news-from-tracy-worcester-2

(4) References to Energy

www.greenallianceblog.org.uk/2013/12/02/why-politicians-are-ducking-responsibility-for-bringing-down-energy-bills

www.postcarbon.org/issues

A community wind turbine in Fetterangus

www.greenallianceblog.org.uk/2013/11/12/forget-help-to-buy-lets-have-help-to-generate

(5) A Reference to "Ownwork"? - see Item 4 above.

www.mattblacksystems.com/system/site/uploads/ content/docs//Designing the Void - A Manifesto for Self-Managed Work.pdf

(6) Important Books

The Mason Gaffney Reader - www.amazon.com/The-Mason-Gaffney-Reader-Unsolvable/dp/0974184462.

Colin Hines on Progressive Protectionism -www.progressiveprotectionism.com/wordpress.

8. AN IMPORTANT FUTURE EVENT (related to Item 3 above). 

Saturday 1st March 2014, POSITIVE MONEY CONFERENCE. Seewww.positivemoney.org/conference.

James Robertson

6 January 2014

Bitcoin: Questions, Answers, and Analysis of Legal Issues

Bitcoin: Questions, Answers, and Analysis of Legal Issues (2013) by marco saba

BANK EMAIL REVEALS OFFER TO SPY ON OCCUPY

BANK EMAIL REVEALS OFFER TO SPY ON OCCUPY ANONYMOUS PROTESTERS FOR POLICE

 Kerry-anne

 January 8, 2014
http://iacknowledge.net/bank-email-reveals-offer-to-spy-on-occupy-and-anonymous-protesters-for-police/

 Class Warfare Exists




Last year, Bank of America offered the services of its “social media trolling” team to police in order to monitor the social media activity of people affiliated with the Occupy movement, boasting that it could gather intelligence and on activists ahead of planned demonstrations.

The information comes from emails written by Kim Triplett-Kolerich, Vice President for Global Security at the Bank, offering to provide Washington State Police with surveillance of activists ahead of the Million Mask March on November 5th 2013.  The emails were published thanks to a Washington State public records request.

In his email, Triplett-Kolerich, himself an ex-Washington State Patrol sergeant, writes:

“I will most likely find it first as Social Media trolling is not what the WSP does best–Bank of America has a team of 20 people and that’s all they do all day and then pass it to us around the country!!”

(Million Mask Marchers head toward Capitol building Nov 5th 2013, image by twitter user @BatmanWI)

With its Million Mask March on 5th November, hacktivist group Anonymous succeeded in mobilising hundreds of thousands of people in 477 locations in over 150 countries around the world.  Protesters wearing Guy Fawkes masks hit the streets of in Indonesia, North America, Asia, Europe and South America, calling time on our current political and economic system.

In Olympia, 100 protesters gathered and the protest was non-violent from start to finish.  Despite this, local activist Andrew Hendricks (who helped publicise the emails) days authorities spent 600 hours of response time and $28,000 on policing it.

This is not the first time Bank of America have been caught surveilling Occupy or Anonymous activists.  Last February, an Anonymous-affiliated group leaked hacked emails containing internal reports from the Bank that confirmed one of its sub-contractors was spying on activists.  Bank of America also cut off donations to whistle blowing site Wikileaks, after they claimed to be in possession of sensitive documents of the Bank’s.   Anonymous responded with cyber attacks that saw a panicked Bank of America hastily buy up a tranche of abusive web domains for its senior executives.

It has been revealed previously that Corporate America joined with security agencies and the police, to spy in Occupy protesters in 2011.

A Freedom of Information request by the Partnership for Civil Justice Fund revealed the Occupy Movement had been heavily surveilled by a specially established Domestic Security Alliance Council, which saw all the major security agencies coordinating a crackdown with Banks and Corporations.

Writing on the issue in The Guardian, Naomi Klein states:

“The crackdown, which involved, as you may recall, violent arrests, group disruption, canister missiles to the skulls of protesters, people held in handcuffs so tight they were injured, people held in bondage till they were forced to wet or soil themselves –was coordinated with the big banks themselves…The documents, in short, show the cops and DHS working for and with banks to target, arrest, and politically disable peaceful American citizens.”

This is a proven collaboration of corporate interests and the state to suppress a political movement challenging their power. The purpose of the infiltration was to pass information on the composition and the plans of the Occupy Movement to the financial services industry they were demonstrating.  The tax payer funded security agencies were effectively spying on tax payers, for banks.  They were passing information to The Federal Reserve, Bank of America, Wells Fargo, Goldman Sachs and JPMorgan to name but a few.

Perhaps the most sinister revelation in the documents, is the outline plans for assassination of ‘prominent’ activists by sniper fire, whilst the heavily redacted documents mean we do not know by who, when, how or under what conditions.

Mara Verheyden-Hilliard, Chief Executive of the PCJF commented on the findings:

“This production [of documents], which we believe is just the tip of the iceberg, is a window into the nationwide scope of the FBI’s surveillance, monitoring, and reporting on peaceful protestors organizing with the Occupy movement … These documents also show these federal agencies functioning as a de facto intelligence arm of Wall Street and Corporate America.”

These latest revelations confirm that corporate America is partaking in continued and pervasive surveillance of American citizens, in collusion with and occasionally on behalf of, police and security agencies.  Will US citizens really stand for this level of intrusion into their basic freedoms to associate, assemble and protest?  For democracy’s sake, we must hope not.

• US Navy Accidentally Emails Reporter Plans to Dodge his FOIA Request on Naval Yard Shooting

U.S. Regulator was warned against JPMorgan

Regulator was warned against JPMorgan charges

JPMorgan is subject of up to a dozen investigations by federal prosecutors

By Evan Pérez CNN Justice Reporter

UPDATED 4:03 AM CST Jan 08, 2014

http://www.kmbc.com/news/politics/regulator-was-warned-against-jpmorgan-charges/-/11664068/23823856/-/i0pmm9z/-/index.html

Shannon Stapleton/Reuters

VIEW LARGE

WASHINGTON (CNN) —Five years after the financial crisis, the debate over whether some of the biggest banks in America are "too big to jail" is causing tensions among prosecutors and regulators.

As federal prosecutors in Manhattan finalized their investigation of JPMorgan Chase & Co. for failing to blow the whistle on Ponzi-schemer Bernard Madoff, the question arose: What happens if federal prosecutors file criminal charges against the bank?

The answer was stark at a meeting in recent weeks in Washington between prosecutors and the bank's chief regulator, the Office of the Comptroller of the Currency.

Prosecutors asked for assurance that charging the bank wouldn't lead to regulators starting proceedings to revoke the bank's charter, according to people familiar with the discussions. Prosecutors thought forcing the bank to accept a guilty plea could serve as a deterrent. But they also feared that if regulators moved to pull the bank's license, it could lead to destruction of the nation's largest bank and potentially the loss of hundreds of thousands of jobs. OCC officials said they could provide no such assurance, the people familiar with the discussions said.

On Tuesday, U.S. Attorney Preet Bharara announced a deferred prosecution agreement with JPMorgan, under which the bank would pay $1.7 billion in restitution to victims of the Madoff fraud. The bank agreed to improve its anti-money laundering practices and other changes over the next two years to avoid facing criminal charges.

OCC officials also announced a settlement with the bank, levying a $350 million penalty -- money which goes to the U.S. Treasury. The regulator also ordered the bank to improve its internal programs that are supposed to flag suspicious transactions.

Bryan Hubbard, an OCC spokesman, said, "I can't comment on discussions between agency officials." Spokesman for the U.S. Attorney for New York's Southern District declined to comment.

Tensions between regulators and prosecutors

Prosecutors complain that when they push for tougher penalties, regulators warn of consequences that could mean damage to the U.S. economy. Regulators say they are required by U.S. law to pull banking licenses if banks are convicted of criminal charges.

Hubbard said Tuesday that federal law requires the regulator to initiate proceedings that could lead to revoking banking charter if a bank is convicted of banking law violations. "DOJ independently decides whether to pursue criminal charges and prosecution against a bank for criminal violations of [money-laundering] statutes. The OCC does not make recommendations regarding criminal prosecution."

At the same time, there's public clamor for consequences against big banks blamed for reckless practices that led to the global financial crisis from which much of the world is still recovering.

The result is that highly profitable banks pay large settlements and move on. JPMorgan alone is the subject of up to a dozen investigations by federal prosecutors.

An official close to the discussions said the result is a "conundrum where bad guys get away" with crimes.

Attorney General Eric Holder, in a moment of candor at a 2013 congressional hearing, said, "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy."

After much criticism, he returned months later to another hearing and said he wasn't implying that some banks are too big to prosecute: "Let me make it very clear that there is no bank, there's no institution, there's no individual, who cannot be investigated and prosecuted by the United States Department of Justice."

Criticism for settling cases

Holder's department came under criticism in 2012 when it settled for $1.9 billion in an investigation of British banking giant HSBC, which for years allowed drug cartels and countries subject to sanctions to launder money.

The tension between regulators and prosecutors showed at a news conference in Brooklyn in which then-Assistant Attorney General Lanny Breuer spoke of fears of collateral damage to the U.S. economy as the reason for not charging HSBC. Thomas Curry, head of the OCC, told reporters his agency couldn't be tougher on HSBC because prosecutors weren't going after the bank.

At Tuesday's news conference on the JP Morgan settlement, Bharara again took tough questions from reporters on why there wasn't a tougher stance against the bank and its bankers.

"You have to consider consequences such as employees being laid off, the bank failing. ... You have to consider consequences such as innocent shareholders losing substantial value. You have to consider the possibility that regulators will take action against the charter of the financial institution," Bharara said.

JPMORGAN kickback to the US DoJ: $1.7 billion dollars

JPMORGAN FINED $1.7BN FOR TURNING BLIND EYE TO MADOFF PONZI SCHEME
 Kerry-anne

 January 7, 2014

 Class Warfare Exists

http://iacknowledge.net/jpmorgan-fined-1-7bn-for-turning-blind-eye-to-madoff-ponzi-scheme/

Bernie Madoff’s ponzi scheme, just netted JPMorgan the largest Department of Justice penalty for breaching the Bank Security Act in US history.  JP Morgan is to pay $1.7 billion for ignoring obvious signs of Madoff’s corrupt practices, federal authorities announced today.

The Madoff scheme was a long con that went on for several decades.  Throughout this time, JP Morgan was his bank of choice.  As Larry Nuemeister writes for AP:

“Account statements for thousands of clients showing $60 billion in assets were fiction. Of the roughly $17.5 billion in principal that was real, most of it was gone.

Since then, a court-appointed trustee has recovered more than $9.5 billion to redistribute to burned clients. The trustee sued JPMorgan for $6.4 billion in 2010, accusing the bank of being “willfully blind” and “thoroughly complicit” in the fraud, but an appeals court found in 2012 that he had no legal standing to make the claim.

The JPMorgan settlement is the latest in a series of major deals it has made to resolve its legal troubles. In November, the bank agreed to pay $13 billion over risky mortgage securities it sold before the financial crisis — the largest settlement to date between the Justice Department and a corporation.”

In 2011, JPMorgan CEO Jamie Dimon wrote his annual letter to shareholders, arguing that Banks should be able to corrupt the political system by lobbying legislators for favourable legislation.  He wrote:

“You read constantly that banks are lobbying regulators and elected officials as if this is inappropriate. We don’t look at it that way.”

Given JPMorgan’s ever expanding rap sheet, it seems the cost of their criminal behaviour is about to rise a lot higher than the $7.5m they spent on lobbying that year.

January 4th 2014: Agreed to settle a lawsuit with Lawyers for the Federal Home Loan Bank of Pittsburgh, but did not disclose the amount.  The Pittsburgh FHLB sued JPMorgan and credit-ratings companies in 2009 over losses on $1.8 billion in mortgage-backed securities it bought in 2006 and 2007.

19th November 2013: Agreed to a record $13bn settlement with US authorities for misleading investors during the housing crisis.

15th November 2013: $4.5bn settlement with investors over mortgage-backed security losses that contributed to the 2007 Financial Crisis.

25th October 2013: $5.1bn settlement with the US Federal Housing Finance Agency (FHFA) over charges it misled mortgage giants Fannie Mae and Freddie Mac during the housing boom.

19th September 2013: agreed to pay four regulators $920m relating to a $6.2bn loss incurred as a result of the “London Whale” trades.

And the Bank had already settled $7bn in no fewer than 11 other suits during the previous two years.

As Zero Hedge reported back in Summer of 2013:

“There was a time when Jamie Dimon liked everyone to believe that his JPMorgan had a “fortress balance sheet”, that he was disgusted when the US government “forced” a bailout on it, and that no matter what the market threw its way it would be just fine, thanks. Then the London Whale came, saw, and promptly blew up the “fortress” lie. But while JPM’s precarious balance sheet was no surprise to anyone (holding over $50 trillion in gross notional derivatives will make fragile fools of the best of us), what has become a bigger problem for Dimon is that slowly but surely JPM has not only become a bigger litigation magnet than Bank of America, but questions are now emerging if all of the firm’s recent success wasn’t merely due to crime. Crime of the kind that “nobody accept or denies guilt” of course – i.e., completely victimless. Except for all the fines and settlements.”

It is important to remember that there are real victims of JPMorgan’s behaviour.  Between 2007 and 2011, 5 million Americans lost their homes.  When challenged on this practise of throwing families out onto the street, Dimon replied callously:

“Giving debt relief to people that really need it, that’s what foreclosure is.”

It was later revealed that JPMorgan had engaged in widespread mortgage abuse and the bank agreed to settle $9.2bn with homeowners they had illegally foreclosed upon.

So it’s refreshing to see Dimon and JPMorgan under some pressure. And times are not set to get any easier for Dimon and his renegade bank any time soon.  There is a whole lot of litigation waiting in line.

JPMorgan requested the addition of a non-prosecution agreement into the $13bn settlement for misleading federal regulators over the housing crisis.  But US Attorney General Eric holder refused.  Benjamin Wagner, the U.S. attorney for the Eastern District of California, is has opened a criminal probe into the bank’s activities, which helped cause the catastrophic Financial Crisis of 2007. “Going forward, we will have very substantial discretion in how we handle the investigation, and we will go where the evidence takes us,” Wagner toldBloomberg.

On top of this criminal case, there are a number of civil suits still under way regarding reckless and fraudulent behaviour conducted by JPMorgan in the run up to the Financial Crisis.

Dimon once said “I am not embarrassed to be a banker. I am not embarrassed to be in business.” He may well be shameless – but a growing number of people are pretty embarrassed to share a species with this frat boy bankster, whose chickens may finally be coming home to roost.

Excellent music video for Dimon below. Give it a chance, it kicks in at about 49 seconds.

Banks nab $400B in USTs for "Window Dressing"

JANUARY 02, 2014

Banks nab $400B in USTs for "Window Dressing"

Book Cooking on New Year’s Eve

by MIKE WHITNEY

http://www.counterpunch.org/2014/01/02/book-cooking-on-new-years-eve/

“Increasing the Fed’s transparency, openness and accountability has been one of my top priorities as chairman.” -Fed Chairman Ben Bernanke on the 100th anniversary of the Federal Reserve

Ben Bernanke is a big believer in transparency. Transparency, transparency, transparency. Hardly a day goes by that Bernanke doesn’t reiterate his commitment to transparency. He thinks the Fed should be as open and honest as possible. That’s why he named his new program something everyone could get a handle on. He named it “The Fed’s Overnight, Fixed-Rate, Full-Allotment Reverse Repo Facility.”

You can’t get much more transparent than that, can you?

Now the average working stiff probably doesn’t give a hoot about Bernanke’s new program. But that’s really a shame, because it looks like old Bennie is going to sock it to us one more time before he rides off into the sunset. Here’s the scoop:

US Treasuries have been plunging for the last few days because the Fed has been swapping tons of US debt with banks and other financial institutions so they can conceal the condition of their books from nosy shareholders. Sound familiar?

It should, because it all hearkens back to April 2010 when the Wall Street Journal ran a story about the way banks were using a dodgy accounting device to mislead investors about the true state of their financial health. Here’s a clip from the article in the WSJ:

“Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York. A group of 18 banks…understated the debt levels used to fund securities trades by lowering them an average of 42 per cent at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.” (“Big Banks Mask Risk Levels”, Kate Kelly, Tom McGinty, Dan Fitzpatrick, Wall Street Journal)

Whoa. Now that sounds a lot like what’s been going on for the last few days, now doesn’t it? Just take a look. This is from yesterday’s Wall Street Journal:

“A push to tidy up balance sheets among banks and other financial firms is driving surging demand at a Federal Reserve lending facility currently in a testing phase, market participants say.

Over recent days, financial firms that are eligible to participate in the Federal Reserve Bank of New York’s overnight fixed-rate reverse repurchase agreement facility have been very active.

On Monday, the penultimate day of 2013, participating firms, which include large Wall Street banks as well as many investment funds, borrowed $102.6 billion in Fed-owned securities in exchange for cash, at a rate of three basis points. On Friday, the total was a similarly hefty $95 billion, with $47 billion done on Thursday. Typical borrowing amounts have been much smaller…

Scott Skyrm, a repo market expert and former trader, said “year-end financing is most important to the repo market.” He explained that a wide range of market participants are likely engaged in what’s called “window dressing” and are shifting around securities and cash to make their balance sheets look less risky. Some financial firms will now be able to report to clients an active engagement with the risk-free Fed, while others are rejiggering their positions to reduce capital charges, Mr. Skyrm said.” (“Year-end Factors Drive Demand for Fed’s Reverse Repos” Wall Street Journal)

“Tidy up balance sheets”, you say? And what’s this gabble about “‘window dressing’ to make balance sheets look less risky”? Am I mistaken, or is their a bit of central bank chicanery going on here?

Keep in mind, that “window dressing” is a term that has one meaning alone, that is, to deceive shareholders. So, the question is, is the Fed actively involved in this practice?

Do you really need to ask?

Just for the sake of argument, let’s look back a few years to 2010 when it looked like the Federal Reserve Bank of New York was helping Lehman Brothers hide $50 billion in debt off its books with a maneuver called Repo 105. The NY Fed was headed by–you guessed it–”honest” Timmy Geithner. Here is a short recap of what transpired between the Geithner’s NY Fed and Lehman according to ex-regulator William Black and former NY governor Eliot Spitzer from an article on Huffington Post:

“The FRBNY [i.e., New York Fed] knew that Lehman was engaged in smoke and mirrors designed to overstate its liquidity and, therefore, was unwilling to lend as much money to Lehman. The FRBNY did not, however, inform the SEC, the public, or the Office of Thrift Supervision (which regulated an S&L that Lehman owned) of what should have been viewed by all as ongoing misrepresentations.

The Fed’s behavior made it clear that officials didn’t believe they needed to do more with this information. The FRBNY remained willing to lend to an institution with misleading accounting and neither remedied the accounting nor notified other regulators who may have had the opportunity to do so… We now know from Valukas and from former Treasury Secretary Paulson that the Treasury and the Fed knew that Lehman was massively overstating its on-book asset values.” (Time for the Truth” William Black and Eliot Spitzer, Huffington Post)

“Misrepresentations”? “Misleading accounting”? “Overstating liquidity”? “Smoke and mirrors”?

Hmmm? That sounds a lot like what’s going on right now, doesn’t it?

Of course, the financial media is doing a fine job of covering up these latest shenanigans by posting stories that provide fake explanations for the sudden spike in yields, like this gem from Bloomberg on New Years Day:

“Treasuries fell, pushing 10-year note yields to the highest level in more than two years, as gains in U.S. consumer confidence and home sales bolstered bets thee Federal Reserve will end bond purchases next year.” (Bloomberg)

Sorry, guys, but the yield on 10-year US Treasuries didn’t jump from 2.98% to 3.04% in 24 hours because investors suddenly felt all warm and fuzzy about the shitty economy. That just didn’t happen. The reason yields shot up was because the Fed was swapping boatloads of USTs for cash with the big boys on Wall Street. But, don’t take my word for it. Check out this clip from Bloomberg which I dug up under the Google heading of “reverse repos”:

“Usage of the Federal Reserve’s fixed-rate reverse repo facility surged before the end of the year as rates for borrowing and lending securities slide and banks shored up balance sheets.

The Fed Bank of New York drained $197.8 billion today, the largest amount in a test of its fixed-rate reverse repo facility that began operation in September, through 102 bidders. Yesterday, it drained $102.6 billion from the banking system with 75 bidders.” (“Fed Reverse Repo Facility Usage Soars, Rates Low at Year End“, Bloomberg) (Fri-$95 bil. Thurs-$47 bil)

Got that? That’s over $400 billion smackers in four effing days! That ain’t normal, pal. It looks to me like the Fed is helping these jokers cook the books again so Joe Shareholder doesn’t see that they’re leveraged up to their eyeballs and headed for another crackup.

But that can’t be right, after all, if there was any book-cooking going on, old transparent Bennie would let us in on it, right?

Right.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.