TwistedTimes

Thursday, September 25, 2014

Is the Fed Preparing To Asset-strip Local Government? Bizarre New Rules

From Web of Debt Blog
Posted on September 8, 2014 by Ellen Brown

In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA). That means banks that are the largest holders of munis are liable to start dumping them in favor of the Treasuries and corporate bonds that do satisfy the requirement.

Muni bonds fund the nation’s critical infrastructure, and they are subject to the whims of the market: as demand goes down, interest rates must be raised to attract buyers. State and local governments could find themselves in the position of cash-strapped Eurozone states, subject to crippling interest rates. The starkest example is Greece, where rates went as high as 30% when investors feared the government’s insolvency. Sky-high interest rates, in turn, are the fast track to insolvency. Greece wound up stripped of its assets, which were privatized at fire sale prices in a futile attempt to keep up with the bills.

The first major hit to US municipal bonds occurred with the downgrade of two major monoline insurers in January 2008. The fault was with the insurers, but the taxpayers footed the bill. The downgrade signaled a simultaneous downgrade of bonds from over 100,000 municipalities and institutions, totaling more than $500 billion. The Fed’s latest rule change could be the final nail in the municipal bond coffin, another misguided move by regulators that not only does not hit its mark but results in serious collateral damage to local governments – maybe serious enough to finally propel them into bankruptcy.

Why this unprecedented move by US regulators? It is not because municipal bonds are too risky, since corporate bonds with lower credit ratings are accepted under the new rules. Nor is it that the stricter standard is required by the Basel Committee on Banking Supervision (BCBS), the BIS-based global regulator agreed to by the G20 leaders in 2009. The Basel III Accords set by the BCBS are actually more lenient than the US rules and do not include these HQLA requirements. So what’s going on?

From the Inscrutable, Unaccountable Fed

The rule change was detailed by Pam Martens and Russ Martens in a September 4th article titled “The Fed Just Imposed Financial Austerity on the States.” They write that on September 3rd:

The Federal regulators adopted a new rule that requires the country’s largest banks – those with $250 billion or more in total assets – to hold an increased level of newly defined “high quality liquid assets” (HQLA) in order to meet a potential run on the bank during a credit crisis. In addition to U.S. Treasury securities and other instruments backed by the full faith and credit of the U.S. government (agency debt), the regulators have included some dubious instruments while shunning others with a higher safety profile.

Bizarrely, the Fed and its regulatory siblings included investment grade corporate bonds, the majority of which do not trade on an exchange, and more stunningly, stocks in the Russell 1000, as meeting the definition of high quality liquid assets, while excluding all municipal bonds – even general obligation municipal bonds from states with a far higher credit standing and safety profile than BBB-rated corporate bonds.

This, rightfully, has state treasurers in an uproar. The five largest Wall Street banks control the majority of deposits in the country. By disqualifying municipal bonds from the category of liquid assets, the biggest banks are likely to trim back their holdings in munis which could raise the cost or limit the ability for states, counties, cities and school districts to issue muni bonds to build schools, roads, bridges and other infrastructure needs. This is a particularly strange position for a Fed that is worried about subpar economic growth.

Not Sufficiently Liquid?

In a September 3rd press release, Federal Reserve Governor Daniel K. Tarullo stated that while “most state and municipal bonds are not sufficiently liquid to serve the purposes of HQLA in stressed periods . . . the liquidity of some state and municipal bonds is comparable to that of the very liquid corporate bonds that can qualify as HQLA.” [Cite] Criteria were being developed, he said, for considering these assets. But “it is important to get this final rule adopted now, so that the largest banks can begin to prepare for its implementation on January 1.” In the meantime, muni bonds are in limbo, and it appears that most will still not be accepted as HQLA.

The regulators consider stocks to be more liquid than muni bonds because they are readily traded on the stock market. But as the Martens’ note, stock markets can be quite inaccessible in a crisis. Quoting from the Fed’s own archives on the crash of 1987:

Market makers in the over-the-counter market were not obligated to maintain an orderly market and many withdrew from trading. Delays in processing trades resulted in investors receiving prices very different from what they expected. Many brokers did not answer their phones, leaving investors unable to reach them. Erratic price movements and quotes resulted in frequent lock-ups in the electronic trading system used in the over-the-counter market.

In any case, switching the banks’ holdings from muni bonds to corporate bonds or Treasuries is liable to have little effect in a crash. The stricter rules are supposed to be a defense against bank runs; but in a major derivatives bust and bail-in, the available collateral will go first to the derivatives claimants, through a massive concession to financial institutions in the Bankruptcy Reform Act of 2005. (See my earlier article here.) The FDIC and the depositors are both liable to be out of luck, no matter what form the collateral takes.

The Martens’ conclude:

That the Fed and its regulatory cohorts have to resort to this implausible plan – which crimps the ability of states and localities to raise essential funds to operate – in a strained effort to pretend that they’ve found a means of avoiding another massive bailout of Wall Street in a crisis, is just further proof that the only way to seriously deal with too-big-to-fail banks is to restore the Glass-Steagall Act and break up these complex creatures before they strike again.

Gordon Gekko Goes Muni?

The rule change may not have much effect in a crash, but where it will have a major effect is on the cost of credit, which will increase for municipal governments and decrease for corporate and financial institutions. The result will be to further shift power and financial resources from the public sector to the private sector.

Why would regulators dangerously jeopardize state and local government budgets in this way? Skeptical observers speculate that the intent is to Detroit-ize municipal governments, so that assets can be stripped as is being done in that imperiled city. The international bankers got away with asset-stripping Greece. Why not make the US itself a wholly-owned subsidiary of private banking interests?

If that seems far-fetched, consider what is happening with Argentina, which has been forced into bankruptcy by a US court to satisfy the exaggerated claims of certain hold-out vulture funds. IMF regulators have discussed establishing an international bankruptcy court that could strip a country such as Argentina of its assets, including prime sections of real estate, to pay off the nation’s creditors.

In the US, there is already a trend to force state and municipal governments into austerity measures, if not outright bankruptcy, in order to eliminate labor unions, pension obligations and social services. Bankruptcies can be involuntary, forced by the creditors who caused them. Detroit is the US model. Michigan’s Constitution protects pensions, so the emergency manager appointed by the governor could not unilaterally cut those funds. But in a municipal bankruptcy, a judge would decide the fate of city workers’ pensions, making it an attractive option for banking interests. The oligarchs have long had their eyes on the massive sums represented by the pension funds.

Public Banks to the Rescue?

Whatever the explanation for the Fed’s game-changing move, the vulnerability of state and local governments to unpredictable and unaccountable federal regulators is another strong argument in favor of forming publicly-owned banks. Why be under the thumb of an erratic privately-owned central bank manipulated by Wall Street megabanks now caught in multiple frauds?

Like Eurozone countries, US states cannot print their own currencies. But unlike Eurozone countries, they can borrow from their own public banks, which can create money as credit on their books just as private banks do.

At least, they could if they had their own banks. Only one state – North Dakota – has currently taken advantage of that option. North Dakota is also the only state to have escaped the 2008 credit crisis, sporting a budget surplus every year since then. It has the lowest unemployment rate in the country, the lowest default rate on credit card debt, and one of the lowest foreclosure rates.

True, North Dakota also has oil. But the 2008 crisis happened before oil and gas had made a significant impact on state revenues; and the state was posting a budget surplus all during that period. Other oil and gas states are not doing so well.

Globally, 40% of banks are publicly owned; and they are largely in the BRIC countries – Brazil, Russia, India and China. These countries also escaped the credit crisis largely unscathed.

If state and municipal governments want to protect themselves from the fate of Greece and Detroit, they would do well to follow North Dakota’s lead and form their own publicly-owned banks. And time is of the essence, if they hope to beat the rush before the first US Cyprus-style bail-in consumes the collateral that local governments are counting on to protect their multi-billions in deposits.

_________

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.

"Certain intelligence agencies" created ISIS - Iranian president at #UNGA2014

Saudi Connections to ISIS, Al-Qa’ida, and 9/11

The Sauds are not much more than a oil client state under the direct protection of Global Intel, and Global Corp Inc... Recent threats to reveal their role in 911, is likely nothing more than a shot over their bow to keep them in line!

By Bryson Hull on Sep 20, 2014

Via Who What Why

Getting payback (or is it blowback?) in Iraq and Syria

Now that the U.S. is back at it in Iraq against a new foe, there’s suddenly renewed focus on evidence of Saudi involvement in 9/11.

More specifically, questions are now being asked about whether the U.S. government’s suppression of what it learned about Saudi Arabia during the 9/11 investigationscontributed directly to the rise of the Islamic State in Iraq and Syria.

Former Sen. Bob Graham, who co-chaired the official 9/11 inquiry, told Counterpunch that “the failure to shine a full light on Saudi actions and particularly its involvement in 9/11 has contributed to the Saudi ability to continue to engage in actions that are damaging to the U.S.—and in particular their support for ISIS.”

Though it’s now well-known that there was some Saudi involvement in 9/11,WhoWhatWhy was the first news organization to uncover the fact that a Saudi in Florida, who hosted the hijackers, worked directly for the Saudi prince in charge of aviation. We also pointed out that there was no hurry to dig deeper into the story by the mainstream media.

The direct contacts we established are a crucial part of the story. So too is the FBI’s reluctant admission that it knew about—and covered up—“many connections” between a Saudi family and the hijackers. Then there’s also the information contained in 28 pages redacted from the congressional report on 9/11, a part of the puzzle getting a new look in the New Yorker thanks to the ISIS news peg.

***

What all this leads us to ask is this: Why is the U.S. once again plunging into a fight that is at least partially of its own making? (That’s to say nothing of the contribution of America’s failed policy in Iraq to the current fiasco.) ISIS is yet another example of a militant group that grew into a threat in large part due to the support of an ostensible ally.

In this latest case, said ally is going to be hosting training camps for moderate Syrian rebels, who are supposed to be some of the boots-on-the-ground against ISIS. This couldn’t possibly be a bad idea, could it?

That Saudi Arabia has a role, either tacit or implicit, in funneling money to Islamic militants is no secret to anyone, least of all the United States government. Hillary Clinton, when she was Secretary of State, was explicit in her request to put greater pressure on the Saudi government to knock off its loose approach to jihadi financing.

“Saudi Arabia remains a critical financial support base for al-Qa’ida, the Taliban, LeT, and other terrorist groups, including Hamas, which probably raise millions of dollars annually from Saudi sources,” Clinton wrote in a Dec. 30, 2009 cable obtained by WikiLeaks.

Haven’t we seen this before? An ally that, for its own foreign policy or domestic political reasons, supports (or turns a blind eye to homegrown support for) groups that fight directly against the United States? You could start with Pakistan’s nurturing of al Qaeda and the Taliban, which began with the CIA’s backing of Afghan mujahideen who counted Osama bin Laden among their benefactors.

A BAD REMAKE?

Read the rest at WHO WHAT WHY

Complete List of Wonderful Things Eric Holder Did for America

Here's the full list of Wall Street CEOs prosecuted by Attorney General Eric Holder for the financial crisis 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
— Steve Goldstein (@MKTWgoldstein) September 25, 2014

From DeadlineLive:

1) In his final days with the Clinton administration, Holder carried out his duties with Clinton’s last-minute pardon of fugitive and Democratic contributor Marc Rich. Regarding discussions with the White House lawyers on the issue, Holder said he was at first “neutral” on the decision to grant Rich a pardon, but might lean in favor of it if there were national security benefits. Holder said that he was told that Israeli Prime Minister Ehud Barakhad asked Clinton to grant the pardon.

2) Holder briefly served as Acting Attorney General under President George W. Bush until the Senate confirmed Bush’s nominee John Ashcroft

3) From 2001 until he became Attorney General, Holder worked as an attorney at Covington & Burling in Washington, D.C. (Along with Michael Chertoff et al) – representing clients such as Merck and theNational Football League. He represented the NFL during its dog fighting investigation against Michael Vick.

In 2004, Holder helped negotiate an agreement with the Justice Department for Chiquita Brands Internationalin a case that involved Chiquita’s payment of “protection money” to the United Self-Defense Forces of Colombia, a group on the U.S. government’s list of terrorist organizations. In the agreement, Chiquita’s officials pleaded guilty and paid a fine of $25 million. Holder represented Chiquita in the civil action that grew out of this criminal case. In March 2004, Holder and Covington & Burling were hired by Illinois Governor Rod Blagojevichto act as a special investigator to the Illinois Gaming Board. The investigation was subsequently canceled on May 18, 2004.

The firm represented Guantanamo inmates but Holder “never participated directly in the firm’s Guantanamo work”, and is not expected to recuse himself from matters pertaining to it.

*Controversial clients of the firm include: Office Chérifien des Phosphates, Creekstone Farms Quality Beef, Southern Peru Copper Corporation, Philip Morris, Halliburton (War profiteering case), and Xe Services aka Blackwater, and David Samson (Christie / Rockefeller stooge at Port Authority NJ)

4) During his years in private practice, Holder represented the Swiss private bank UBS. Because of this, he recused himself from participating in the Department of Justice investigation of UBS’s abetting of tax evasion by U.S. account-holders and the prosecution of Brad Birkenfeld. (As Attorney General, he also had to bow out of the Roger Clemens contempt of Congress prosecution because the pitcher was once a client of Covington and Burling.

5) Holder defended the legality of drone strikes against terrorists. Addressing the death of Anwar al-Aulaqi, an American citizen (As well as his 16 year old son, whom had no provable ties to terrorism)

6) On April 1, 2009, Holder announced that he had ordered the dismissal of the indictment against former Senator Ted Stevens on corruption charges. Stevens had been found guilty, but hadn’t been sentenced; Holder’s action effectively vacated Stevens’ conviction

7) In 2010, in the run up to the referendum on California Proposition 19, which would have legalized marijuanause for personal recreation, Holder stated that the DOJ would continue to prosecute individuals on the federal level for possession of marijuana even if voters approved a ballot measure

* House Oversight Committee chairman Darrell Issa and Iowa Republican Sen. Chuck Grassley sent Holder a letter in May 2011 asking for details about Operation Fast and Furious, a “botched federal firearms sting” operation that allowed about 2,000 weapons to reach Mexican drug gangs. Grassley and Issa “urged Holder to cooperate and turn over subpoenaed records that would reveal the scope of the government coverup.” (We are all still waiting….)

8) On March 6, 2013, Holder testified to the Senate Judiciary Committee that the size of large financial institutions has made it difficult for the Justice Department to bring criminal charges when they are suspected of crimes, because such charges can threaten the existence of a bank and therefore their interconnectedness may endanger the national or global economy. (See his connections to Banks above – Under Holder, Prosecution rates against crimes by large financial institutions are at 20-year lows)

Holder has also endorsed the notion that prosecutors, when deciding to pursue white-collar crimes, should give special consideration to “collateral consequences” of bringing charges against large corporate institutions, as outlined in a 1999 memorandum by Holder. Nearly a decade later Holder, as head of the Department of Justice, put this into practice and has demonstrated the weight “collateral consequences” has by repeatedly sought and reached deferred prosecution and non-prosecution agreements and settlements with large financial institutions such as J.P. Morgan Chase, HSBC, Countrywide Mortgage, Wells Fargo, Goldman Sachs, and others where the institution pays a fine or penalty but faces no criminal charges and admits no wrongdoing. Whereas in the previous decade EVEN the Bush administration’s Department of Justice often sought criminal charges against individuals of large institutions regardless of “collateral consequences” such as cases involving Enron, Adelphia Communications Corporation, Tyco International, and others.

9) On May 13, 2013, the Associated Press announced telephone records for 20 of their reporters during a two-month period in 2012, had been seized by the Justice Department. They described these acts as a “massive and unprecedented intrusion” into news-gathering operations. Holder testified under oath in front of theHouse Judiciary Committee and made it clear he recused himself from the leak investigations to avoid any appearance of a conflict of interest. Holder said his Deputy Attorney General, James Cole, was in charge of the AP investigation and would’ve ordered the subpoenas. When questioning turned to possibility of journalists being charged under the Espionage Act for reporting classified material, Holder stated: “With regard to the potential prosecution of the press for the disclosure of material, that is not something that I’ve ever been involved in, heard of or would think would be a wise policy.”

It was later reported the DOJ monitored Fox News reporter, James Rosen’s activities by tracking his visits to the State Department, through phone traces, timing of calls and his personal emails. NBC confirmed with the Justice Department that Holder had personally signed off on the Rosen subpoenas.

10)

ARTICLES OF IMPEACHMENT AGAINST

On November 14, 2013, Representative Pete Olson (R-TX), along with 19 Republicans, introduced an Articles of Impeachment resolution against Holder for his role in Operation Fast and Furious and other scandals of President Barack Obama’s administration. As of June 2014, there awere 26 co-sponsors to the bill.

via NPR (National Petroleum Radio / or… National Protection Racket)

Eric Holder Jr., the nation’s first black U.S. attorney general, is preparing to announce his resignation Thursday after a tumultuous tenure marked by civil rights advances, national security threats, reforms to the criminal justice system and 5 1/2 years of fights with Republicans in Congress.

Two sources familiar with the decision tell NPR that Holder, 63, intends to leave the Justice Department as soon as his successor is confirmed, a process that could run through 2014 and even into next year. A former U.S. government official says Holder has been increasingly “adamant” about his desire to leave soon for fear that he otherwise could be locked in to stay for much of the rest of President Obama’s second term.

Holder already is one of the longest-serving members of the Obama Cabinet and ranks as the fourth-longest tenured AG in history. Hundreds of employees waited in lines, stacked three rows deep, in early February 2009 to witness his return to the Justice Department, where he previously worked as a young corruption prosecutor and as deputy attorney general — the second in command — during the Clinton administration.

But some of that early glow faded in part due to the politicized nature of the job and in part because of Holder’s own rhetoric, such as a 2009 Black History Month speech where he said the country was “a nation of cowards” when it comes to discussions about racial tension.

Five years later, violence erupted between police and protesters in Ferguson, Mo., after a white policeman killed an unarmed black 18-year-old. And this time, the White House dispatched Holder to speak his piece, in effect jump-starting that conversation and helping to settle nerves in the frayed community.

Another huge controversy — over his decision to try the Sept. 11 plotters in a New York courthouse in the shadow of the Twin Towers of the World Trade Center — prompted venomous reaction from lawmakers, New York City officials and some victims’ families.

Under pressure that threatened his job and his legacy, the attorney general reversed his decision and instead sent the cases to military court — where they continue to languish even as Osama bin Laden’s son-in-law and other terrorism defendants are serving life sentences in maximum-security prisons on American soil.

Holder most wants to be remembered for his record on civil rights: refusing to defend a law that defined marriage as between one man and one woman; suing North Carolina and Texas over voting restrictions that disproportionately affect minorities and the elderly; launching 20 investigations of abuses by local police departments; and using his bully pulpit to lobby Congress to reduce prison sentences for nonviolent drug crimes. Many of those sentences disproportionately hurt minority communities.

And then there’s his relationship with Congress. From the day Holder’s nomination was announced, Republicans led by Sen. Mitch McConnell, R-Ky., signaled that he would be a political lightning rod.

The attorney general’s portfolio, which spans sensitive law enforcement cases and hot-button social issues including marijuana and gay marriage, didn’t help. But even longtime aides say Holder didn’t do enough to help himself by shrugging off preparations and moot sessions before congressional appearances and speaking off the cuff — and obliquely.

Things hit a crisis point when the GOP-led House voted him in contempt for refusing to hand over documents about a gun trafficking scandal known as Fast and Furious. That represented the first time an attorney general had ever been rebuked that way, but still Holder held on to his job.

In the end, the decision to leave was Holder’s alone — the two sources tell NPR that the White House would have been happy to have him stay a full eight years and to avoid what could be a contentious nomination fight for his successor. Holder and Obama discussed his departure several times and finalized things in a long meeting over Labor Day weekend at the White House.

The attorney general told DOJ staff the news this morning and has called civil rights icon Rep. John Lewis, D-Ga., and Ethel Kennedy, the widow of former AG Robert F. Kennedy.

The sources say a leading candidate for that job is Solicitor General Don Verrilli, the administration’s top representative to the Supreme Court and a lawyer whose judgment and discretion are prized in both DOJ and the White House.

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

The friends say Holder is also considering donating his papers to a university in Washington, D.C., or his native New York, where he could establish a civil rights center to work more on law enforcement interactions with communities of color and host public forums on those issues.

Even though the attorney general has his eyes on the door, the two sources say several more policy and enforcement initiatives are underway and could be announced soon.

For instance, Holder sent a memo to U.S. attorneys Wednesday urging them not to use sentencing enhancements known as “851” tools to gain leverage in plea negotiations with defendants — in essence, threatening defendants into avoiding trial with huge amounts of prison time. The practice has been criticized by U.S. District Judge John Gleeson in Brooklyn and other jurists.

Holder is also expected to notify federal prosecutors in coming days that the Justice Department will no longer require defendants who plead guilty to waive their rights to appeal based on ineffective lawyering. Many U.S. attorneys now forgo that practice, but not all.

Long-awaited racial profiling guidelines for federal agents will be released soon, too. Those guidelines will make clear that sexual orientation, ethnicity and religion are not legitimate bases for law enforcement suspicion, but controversial mapping of certain communities — including Muslim Americans — would still be allowed for national security investigations, one of the sources said.

What Should We Do? Arrest the SOB!

Wednesday, September 24, 2014

Keiser Report - 655 - Drought and Cold, Hungry and in the Dark

Published on Sep 18, 2014

In this episode of the Keiser
Report, Max Keiser and Stacy Herbert discuss how only those who can
leave behind everything that they ever believed in can hope to escape
the coming desperation. From buying water to keeping your plants green
in a drought, to fracking for natural gas at a loss, however, it appears
very few are willing to leave behind all that they believe. In the
second half, Max interviews Bill Powers, author of “Cold, Hungry and in
the Dark: Exploding the Natural Gas Supply Myth,” about the zero percent
interest rate that keep people in the dark on the high costs of
fracking and the coming 70s style energy crisis due to growing demand
based on fundamental lies.

Imperialist Obama is a war criminal – Bolivian President Evo Morales

The REAL reason we are bombing #Syria... My latest article, an important read: http://t.co/E7udKkAGTo #NationalSecurity #911to1111 #ISIS USA
— Dennis Kucinich (@Dennis_Kucinich) September 24, 2014