‘Justice Deferred [sic]’ And ‘Too Big To Jail’

First, let me offer my thanks to friends/neighbors George and Barbara B-not-Bush, who provided me unasked with their print copy of this month's New York Review of Books. And while I do not know the man face to face (perhaps fortunately, as that is because I have not confronted the federal bench), I have come to have great respect for Jed S. Rakoff, US District Judge for the Southern District of New York, writer for NY Review of occasional reviews of nontechnical legal books, such as the one this post focuses on, Brandon L. Garrett's Too Big to Jail: How Prosecutors Compromise with Corporations.

I don't think I need to explain to any of you why you should care about this matter, but here's the short of it: in the past couple of decades, Justice departments of presidents of both major political parties have worked out agreements with large corporations such that the corporation is not prosecuted and not punished for clearly illegal misdeeds... and the persons responsible, be they board members, upper-level managers, legal teams, professional investment staff, or anyone else employed by these corporations, are not prosecuted or retrained at all. In other words, crimes are committed and noted, slaps on wrists are administered, and the people who committed them are not so much as formally reprimanded, let alone charged. Needless to say, the frequency of such crimes is growing greatly; that's what happens when felonies are simply neglected without any attempt to punish their perpetrators or to repair the faulty corporate procedures that allow them... indeed, encourage them... to be committed.

Judge Rakoff outlines the contents of Mr. Garrett's book much better than I can. Please read the review at the link above.

(Aside: regrettably, HPL seems not to have even one copy of this book, though they have at least one other book by Garrett in their catalog. Too Big to Jail is not even an expensive book on Amazon; I may get one myself.)

So — What's In The New FY 2015 Federal Budget, And What Does It Do To Financial Regulations?

See how your money flies!

Sharmini Peries, executive producer at The Real News Network (TRNN), interviews Gerry Epstein, codirector of the Political Economy Research Institute (PERI) at UMass Amherst:

PERIES: So, Gerry, let's begin with what you see as changes as a result of this budget to Dodd-Frank rules and legislation.

EPSTEIN: Well, it's outrageous what is going on. The Republicans and the Democrats are negotiating this huge budget bill, as you described, in order to prevent another government shutdown, which is an admirable thing to do.

But, of course, when this happens, people try to sneak in all kinds of irrelevant sort of wish-list bills in--provisions into these bills. And one of the most outrageous ones is the banks have stuck in a provision that's going to [blunt (?)] one of the most important aspects of the Dodd-Frank legislation, which, as you said, was designed to reduce the chances of another big financial crisis, and therefore it was designed to reduce the chances that the taxpayers would have to bail out these massive banks.

A provision of the Dodd-Frank that they're repealing by sticking this into this budget bill was designed to prevent the big banks from speculating using derivatives. These derivatives are these complex financial instruments that they use to speculate to make billions of dollars. But when they turn south, they caused Citicorp and Bank of America and these other big banks to virtually go bankrupt, and then the government bailed them out.

So the Dodd-Frank bill said, look, financial institutions can engage in these kinds of complex derivatives speculation if they want, but banks that are supported by the government through FDIC insurance, through deposit insurance, and through having access to the Federal Reserve bailouts and so forth, they can no longer engage in this kind of speculation. ...

And now they see the chance to get into this big must-do bill, and it's going to gut even further the Dodd-Frank legislation and make it much more likely that these big banks could start speculating or continuing to speculate, and it makes it much more likely that the taxpayer is going to have to bail them out again. ...

EPSTEIN: Well, first of all, they don't need to be doing this. There are all kinds of other institutions that can do it. But second of all, that's not how they use the derivatives. They use the derivatives to speculate on commodities. They use derivatives to speculate on municipal bonds, as we saw in Detroit. They use derivatives to cheat their customers. They use derivatives to cheat homeowners when they write these mortgages and pack them into these complex products, like collateralized debt obligations. And they do it with subsidized funds. That is, when these big banks that have deposit insurance and that they know the Federal Reserve will bail them out if they get into trouble, they get to borrow money more cheaply. Therefore, they get to speculate using cheaper money. They make much more profits. They pay their CEOs and their rainmakers millions and millions of dollars each year. And then, when things go bust, we have to bail them out.

...

Read the whole thing; see the whole sorry scam. As CSN&Y sang in "Deja Vu," we have all been here before. Remember the S&L scandals and bailouts from about 1986 to 1995? Who paid for that? (Hint: it wasn't the scandalous S&Ls themselves!)

Now the banks want to do it all over again. Now that there's no distinction between commercial banks and investment banks, the whole of Wall Street is one big criminal enterprise... backed by your tax dollars, if this bill passes and is signed into law.

Better start stuffing those mattresses, folks...

Blogger wendydavis at FDL quotes Lambert Strether at Naked Capitalism:

What could go wrong? The bottom line here is that the legalities and the contractual relations and whatever moral commitments were made don’t really matter. What does matter is that whenever there’s a big pot of money lying around that theoreticallly should go to working people — say, retirement funds, but it could be anything — Congress can retrade whatever deal put the money into the pot, and years after the fact, too. Oh, and workers lose the right to challenge the cuts in court. Nice!

Nice indeed. Nice screw job, from Wall Street to your ear...

Warren, Markey, Baldwin Challenge Back-Door Financial Dereg Smuggled Into TPP

Rich Uncle Pennybags,
a.k.a. Monopoly Man

There is nothing big corporations' lackeys in Congress won't do to benefit their masters at taxpayers' expense. In this case, Senators Elizabeth Warren (D-MA), Ed Markey (D-MA), and Tammy Baldwin (D-WI), challenging the lackeys, "sent a letter to US Trade Representative Michael Froman demanding answers about backdoor financial deregulation in the Trans-Pacific Partnership."

What, exactly, are the Senators challenging? These provisions inserted in the TPP bill, provisions having little if anything to do with the TPP, though they benefit the same corporate entities and wealthy individuals:

1. Investor-state dispute settlement (ISDS), which allows foreign companies or investors to sue governments for losses in expected profits
2. "Market access" provisions that could prohibit restrictions on predatory financial products, like risky forms of derivatives
3. Limitations on governments' ability to impose capital controls, which could stymie efforts to prevent future financial crises as well as efforts to pass a financial transaction tax

Hey, you small business owners and sole practitioners out there: who among you has the privilege of suing a government for "losses in expected profits"? Right... this is a sop to the corp's and the very wealthy, and if the provisions pass into law and Rich Uncle Pennybags sues our gummint and wins, his "losses in expected profit" come out of your taxpaying pocket. What's right about that? And the other two provisions are no better. Combined, these provisions could utterly soak you, the taxpayer, to make the wealthy wealthier.

Think About This Senator From Massachusetts — Think Long And Hard About What She Could Do

... in an office with a great deal more power.

One thing she could do is make my broker and yours sh!t their pants, and that's no bad thing...

Ain't We Got Funds?

There's nothing surer:
The rich get rich, and the poor get poorer.

- "Ain't we got fun," 1920, Whiting - Egan and Kahn
(wiki) (lyrics)

Yep, that's right, though some conservative singers rendered it "and the poor get children," which is IMO inhumanely inexcusable. But the canonical version, the one that rhymes properly, is the one that is to the point of this post.

Your bank account goes south

This post is about banks, and banksters, and how they're about to rob us all this time around. You know how they did it last time; they had to be bailed out by the government with our tax money, and then... and then, what? To all appearances, they didn't do a damned thing to correct the problems that got them in trouble in the first place, and they didn't do a damned thing to help people with their home loans; indeed, they... oh, you know, and this graf is getting out of hand.

So they're planning to get into trouble again. Yes, planning: it worked so well last time... for the banks and the banksters. But this time, things will be different. How? psychomax at Kos gives a good summary, citing Ellen Brown at The Web of Debt (the blog, not the book):

...

Since the financial crisis of 2008 central bankers and regulators have been busy drawing up plans for avoiding the next bank melt-down. Here in the US, banks considered by the government Too Big To Fail (TBTF) were bailed out six years ago with our tax money on the arguable rationale that if they were permitted to fail, they would take the entire economy down with them. The crisis led to a loud outcry from taxpayers and many savvy experts. ...

... the big banks, like Bank of America, Wells Fargo, JP Morgan Chase, were not broken up, contrary to the public interest. In fact, they are far larger today than they were in 2008, making the TBTF threat worse than ever.

So what plan have the geniuses come up with that both pacifies taxpayers and still saves the TBTF banks? You will be appalled.  ... Theoretically. deposit accounts are insured by the FDIC for up to $250,000. The wrinkle is that the amount of money in the FDIC insurance fund is approximately $25 billion, while the total of deposits at US commercial banks is approximately $9,300 billion, yes that's $9.3 trillion The failure of just one mega-bank would easily wipe out that fund. Since the FDIC would be unable to keep failing huge banks solvent an alternative is required.

...

(Bolded sentence original. - SB)

So what is this mysterious alternative? It's no wonder they're not loudly broadcasting their plans, as you'll soon see.

The Financial Stability Board (FSB), an unofficial international organization whose recommendations for maintaining banking system stability almost always become law in the G20 nations, has made a recommendation regarding bailouts. Here's psychomax again:

At the G20 meeting last month in Australia, the FSB presented and received approval for their latest plan for conducting the "resolution proceeding", i.e. bankruptcy, for a troubled TBTF bank. Cutting to the chase, the pertinent part for my dear readers is that instead of their tax money going to bail out the banks, it will potentially be their bank deposit money! The FSB recommended that governments make statutory the confiscation of depositors' money (also known as unsecured debt) if the assets of the bank plus all secured debt is insufficient to keep them afloat. This has come to be known as a bail-in.

Jeebus! IOW, if the bank's assets and the secured debt it holds, taken together, are not enough to keep them solvent, they can confiscate the money in your bank accounts to solve their bankruptcy. (NOTE: it is not clear to me that this is the only meaning of bail-in; see FT's lexicon entry on it.)

And indeed, Ellen Brown's current newest post, December 1, is this: New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners. So your pensions could go bye-bye, too.

What gives? Have I misunderstood? If not, why is this not front-page news around the country? or have I simply missed such news?