New DVDs By Michael Snyder
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 In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world. But when it comes to offshore banking, what Mitt Romney is doing is small potatoes. The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks. According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks. And that figure does not even count any money being held in Switzerland. That is a staggering amount of money. Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars. So why do the global elite go to such trouble to hide their money in offshore banks? Well, there are two main reasons. One is privacy and the other is low taxation. Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes. Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes. You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes. Unfortunately, the vast majority of the rest of us don’t have the resources or the knowledge to play these games, so we get taxed into oblivion.
So why do they call it “offshore banking”?
Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom. Most “offshore banks” are still located on islands today. The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this. Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.
Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.
These days some governments (particularly the U.S. government) are trying to change this, but we certainly will not see the end of offshore banking any time soon.
The amount of money that goes through these offshore banks is absolutely astounding.
It has been estimated that 80 percent of all international banking transactions take place through these offshore banks. $1.4 trillion is being held in offshore banks in the Cayman Islands alone.
One article in the Guardian estimated that a third of all the wealth on the entire globe is being held in offshore banks, and others believe that as much as half of all the capital in the world flows through offshore banks at some point.
Obviously, all of this tax avoidance means that governments around the world are missing out on a whole lot of money.
It has been estimated that the U.S. government is missing out on $100 billion a year because of these offshore banks. Others would put that figure significantly higher.
Avoiding taxes is a game that the global elite have mastered. They are playing a whole different ballgame than you and I are. They don’t just sit there like idiots and get blasted with taxes. Instead, they hire the best experts and they employ every trick in the book to hold on to as much money as they possibly can.
These days, taking advantage of offshore tax havens is not that complicated to do. The following is from a recent Politico article….
A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.
If it is legal, perhaps more of us should look into this.
After all, if playing these kinds of games is good enough for Mitt Romney, then why isn’t it good enough for all the rest of us?
During a campaign stop recently, Romney said the following….
“I can tell you we follow the tax laws”
I certainly believe him when he says that. But it is what he said next that is troubling….
“And if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity.”
I certainly believe him when he says that too.
ABC News recently revealed that Bain Capital has established an astounding 138 different offshore funds in the Cayman Islands.
Something has got to work pretty well to want to do it 138 times.
But Bain Capital was also very busy over in other offshore banking centers as well.
One of the largest shell companies that Bain set up down in the Caribbean was called Sankaty High Yield Asset Investors Ltd. It did not have an office in Bermuda and it had no staff in Bermuda. But it helped clients of Bain Capital avoid a whole lot of taxes.
The following comes from a 2007 Los Angeles Times article….
In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.
Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory.
“It’s just a mail drop, essentially,” said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. “There’s no one doing any work down there other than lawyers.”
The amount of money being funneled through Sankaty today is absolutely stunning….
Today, Bain Capital manages $60 billion in assets, according to a spokesman. The total includes $23 billion in Sankaty debt and credit funds. Half a dozen Sankaty affiliates now are active in Bermuda, corporate registry records show.
The Sankaty debt hedge funds are organized as partnerships in Delaware that produce taxable business income by investing in fixed-income bonds and other debt instruments. Under tax law, even tax-exempt U.S. institutions may face a 35% tax if they invest directly in such hedge funds. By investing instead through a Bermuda corporation, the taxes are legally blocked, experts say.
Of course all of this is perfectly legal.
So nobody gets into trouble for any of this.
By keeping money offshore, even those managing these kinds of funds can avoid being taxed.
Victor Fleischer, a tax professor at the University of Colorado Law School, recently explained how this works….
“The idea behind some of the Cayman Island strategies was that the income that the fund managers receive for managing the money would be kept offshore in the Cayman Island — and the chief benefit is that you can defer when you recognize that income until a later date and you can reinvest the money from the Cayman islands and none of those reinvested funds get taxed until you bring them back either”
So was Romney doing this?
We may never know unless he shows us his tax returns.
What we do know is that Romney has millions of dollars of his own personal wealth invested in offshore tax havens.
The following comes from ABC News….
In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.
But Romney does not just have money invested down in the Cayman Islands. Apparently his money is invested in a whole host of offshore tax havens.
The following quote comes from a Reuters article….
Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.
So is there anything wrong with this?
Well, it depends on how you define “wrong”.
What Romney is doing is perfectly legal.
But it also stinks. Washington lawyer Jack Blum recently told ABC News the following about Romney’s finances….
“His personal finances are a poster child of what’s wrong with the American tax system”
So now we may have a few hints as to why Romney may not want to release his old tax returns.
But as noted above, what Romney is doing is just small potatoes compared to what the ultra-wealthy do.
The U.S. Congress has been trying to clamp down on offshore banking, but the ultra-wealthy are always two or three steps ahead of them.
The ultra-wealthy will go to just about any extreme in order to avoid paying taxes.
In fact, the Washington Post has reported that an increasing number of wealthy individuals are actually deciding to renounce their citizenship rather than face the wrath of the IRS.
The ultra-wealthy aren’t really concerned that much with national citizenship anyway. If they want to influence an election, they can have far more influence by donating a few million bucks to a “Super PAC” than they can by casting the few votes that they have.
In a previous article, I described how the ultra-wealthy use offshore banks as a “shadow banking system” that plays by rules that most people don’t even know exist….
It is a shadow banking system that most Americans don’t know anything about. Most Americans don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits. Most Americans don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”. Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.
Most among the global elite simply do not care that U.S. debt is climbing into the stratosphere. All they care about is keeping as much of their own money in their pockets as they possibly can.
Of course there are always exceptions to this rule. Warren Buffett recently wrote a check to the U.S. Treasury for a little more than $49,000 to help pay off the national debt.
But considering the fact that the U.S. national debt is increasing by more than 100 million dollars an hour, that didn’t exactly do much to help.
Our system is deeply broken and the global elite are getting away with bloody murder. Over the decades, they have carefully crafted the rules so that as much wealth as possible is funneled into their pockets, and they have carefully crafted the rules so that as much wealth as possible stays in their pockets.
Of course if we got rid of the personal income tax and the corporate income tax entirely and replaced them with a completely new system we could get rid of all of this game playing once and for all.
But what do you think the odds are of that happening?
 What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret. Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the “too big to fail” banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the “too big to fail” banks between 2007 and 2010. So have you heard about this on the nightly news? Probably not. Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture. The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down. The Federal Reserve has been actively picking “winners” and “losers” in the financial system, and it turns out that the “friends” of the Fed always get bailed out and always end up among the “winners”. This is not how a free market system is supposed to work.
According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.
That is an astonishing amount of money.
Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.
The total U.S. national debt is only a bit above 15 trillion dollars right now.
So 16 trillion dollars is an almost inconceivable amount of money.
But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts. Let’s take a look at them and see what they mean.
$1.2 Trillion
A recent Bloomberg article made the following statement….
The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.
The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans. On December 5, 2008 the “too big to fail” banks owed this much money to the Federal Reserve. Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time. Each time a short-term loan got rolled over that represented a new loan.
$7.7 Trillion
Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009….
Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.
According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report….
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
This report was made available to all the members of Congress, but most of them have been totally silent about it. One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.
The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders….
“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”
So where is everyone else?
Why aren’t leading Republicans and leading Democrats crying bloody murder over this report?
This scandal should have been front page news for months when it was revealed.
But it wasn’t.
And Guess what?
Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the “too big to fail” banks, the Fed also paid them over 600 million dollars to help run the emergency lending program. According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in “fees” to the very financial institutions which caused the financial crisis in the first place.
In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.
So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?
That is a very good question.
Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.
According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates….
While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.
The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.
So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?
Of course not.
Today, the “too big to fail” banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.
So now they are more “too big to fail” than ever.
But this is what happens when we allow unelected central bank bureaucrats to run our financial system.
Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government. In fact, it is about as “federal” as Federal Express is. The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.
The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to. Nobody should be allowed to do this. Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.
This is a point that I made in my article yesterday. The Federal Reserve decided this week that it is going to provide “liquidity support” to Europe. If the American people do not like this move, that is just too bad. We do not get a say in the matter.
Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?
Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.
If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.
 The central banks of the world are acting as if it is 2008 all over again. Desperate times call for desperate measures, and right now the central bankers are pulling out all the stops. The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system. According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars. In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate. The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat. So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates? You guessed it – the Fed is just going to create them out of thin air. Our currency is being debased so that Europe can be helped out. Unfortunately, the impact of this move will be mostly “psychological” because it really does nothing to address the fundamental problems that Europe is facing. It is up to Europe to solve those problems, and so far Europe has shown no signs of being able to do that.
The major central banks of the world say that they want to “enhance their capacity to provide liquidity support to the global financial system.” But essentially what is happening is that the Federal Reserve is going to be zapping large amounts of dollars into existence and loaning them out to the ECB very, very cheaply. Think of it as a type of “quantitative easing” on a global scale.
The decision to do this was reportedly made by the Federal Reserve on Monday morning. For the moment, this move seems to have stabilized the European financial system. It is quite unlikely that any major European banks will fail this weekend now.
But as mentioned above, this move does nothing to solve the very serious financial problems that Europe is facing. This intervention by the central banks is merely just a speed bump on the road to financial oblivion.
Most Americans are not going to understand what the central banks of the world just did, but it really is not that complicated.
The following is how CNN chief business correspondent Ali Velshi broke down what the central banks have done….
In an attempt to stave off the consequences of a global credit freeze, the Federal Reserve, in coordination with major central banks, has created a credit line available to those central banks, whereby they can borrow dollars at reduced interest rates for periods of three months. The central banks, in turn, can lend to commercial banks in their respective countries. This is meant to reduce the cost of short-term borrowing for troubled European banks and to give them immediate access to dollars.
This was done immediately after the collapse of Lehman Brothers as well, to alleviate the consequences of banks being largely unwilling to lend to other banks, even for short periods, for fear that the borrowing banks could fail.
Okay – so the Federal Reserve is loaning giant piles of cheap money to the European Central Bank.
So where in the world does all of that money come from?
As a CNBC article recently explained, all of this money is created right out of thin air by the Federal Reserve….
Neither the dollars nor the Euros come from anywhere. They aren’t moved or debited from anywhere. They are invented right on the spot with a few taps on the key pad. And that’s all. There’s no printing press fired up to make new dollars or euros.
This is sometimes called “fiat money.” But that makes it sound as if some command from a sovereign created the money. It’s really closer to “keyboard money,” since it is created by data entry in a computer.
Does that sound bizarre to you?
It should.
But that is how the global financial system really works.
We live in a crazy world.
So what did the financial markets of the world think of this move by the Federal Reserve?
It turns out that they absolutely loved it.
The Dow was up 490 points, and that was the biggest gain of the year so far.
Unfortunately, this stock market rally is not going to last indefinitely. If you are still in the market, enjoy this while you can because eventually a whole lot of pain is going to be coming.
Again, nothing has been solved. Europe is still in a massive amount of trouble. But the announcement did make everyone feel all “warm and fuzzy” for at least a day.
Michelle Girard, a senior economist at RBS Securities, said the following about this move….
“The impact is more psychological than anything else”
Just think of it as “comfort food” for the financial markets.
It was also a very desperate move.
In fact, some even believe that this move happened because a major European bank was in danger of failing.
Just check out some of the things that Jim Cramer of CNBC has been saying on Twitter….
If the Fed didn’t act we would have had the largest bank failure ever this weekend, i believe.
The actions the governments took today shows that there was without a doubt a major bank about to fall this weekend. That’s very dire….
I believe a major European bank would have gone under this weekend…. That’s why they did this….
An article in Forbes has also speculated that this move was made because a major European bank was in imminent danger of failing….
Did a big European bank come close to failing last night? European banks, especially French banks, rely heavily on funding in the wholesale money markets. Given the actions of the world’s largest central banks last night, it raises the question of whether a major bank was having difficulty funding its immediate liquidity needs.
Perhaps we will never know the truth, but the reality is that the Federal Reserve and the European Central Bank would have never taken coordinated action like this if they did not believe that there was some sort of imminent threat to the global financial system.
Sadly, this latest move is also going to have some side effects.
Pimco senior vice president Tony Crescenzi says that all of this “liquidity” is going to dramatically increase the size of the U.S. monetary base….
Keep in mind that any use of the Fed’s swap facility expands the Fed’s monetary base: all dollars, no matter where they are deposited, whether it be Kazakhstan, Japan, or Mexico, wind up back in an American bank. This means that any time a foreign central bank engages in a swap with the Federal Reserve, the Fed will create new money in order to make the swap. Use of the Fed’s liquidity swap line in late 2008 was the main cause of a surge in the Fed’s monetary base at that time. The peak for the swap line was about $600 billion in December 2008. Some observers will therefore say that the swap line is a backdoor way to engage in more quantitative easing.
When there is more money floating around out there but the same amount of goods and services, prices go up.
So will we eventually see more inflation in the United States because of all this?
That is what some are fearing.
Meanwhile, politicians in Europe have failed to come up with a plan to address the European financial crisis once again.
They are calling it a “delay”, but the truth is that it should be called a “failure”. The following comes from an article in USA Today….
The ministers delayed action on major financial issues — such as the concept of a closer fiscal union that would guarantee more budgetary discipline — until the heads of state meet next week in Brussels.
So will European politicians come up with a real plan next week in Brussels?
That seems unlikely.
The reality is that this latest move by the major central banks of the world does not change the fact that Europe is in a huge amount of trouble and is most likely headed for a very painful financial collapse.
One more thing that this latest move by the central banks of the world highlights is the fact that we do not have any control over what they do.
All of these central banks are run by unelected bureaucrats that answer to nobody. The decisions that these central bankers make affect all of our lives in a very significant way, and yet we have zero input into these decisions.
Most of the decisions that these central bankers make seem to benefit big banks and big financial institutions. They always claim that the benefits will “filter down” to the rest of us. But most of the time what ends up filtering down to us is the economic pain that comes from their bad decisions.
As I have written about so many times before, these central banks need to be abolished. The American people need to tell Congress to shut down the Federal Reserve and to start issuing debt-free United States currency.
We do not want a bunch of unelected central bankers to “centrally plan” the U.S. economy or to “centrally plan” the global economy.
The more these central bankers monkey with things, the more they mess things up.
Yes, this latest move has stabilized things for the moment, but big trouble is on the horizon for the global financial system.
Count on it.
 There is absolutely nothing wrong with working hard and making a lot of money, but there is something wrong with being completely arrogant and smug about it. Today, many among the elite are savagely mocking the poor, and that is a huge mistake. You shouldn’t kick people when they are down. There are tens of millions of Americans that are deeply frustrated about losing their homes, losing their jobs or barely being able to survive in this economy. These frustrations have been one of the primary reasons for the rise of the Tea Party movement and the rise of the Occupy Wall Street movement. What these movements have in common is that people in both movements are sick and tired of the status quo and they want something to be done about our broken system. There are huge numbers of families out there right now that have just about reached the end of their ropes. Instead of showing compassion, many of the ultra-wealthy have decided that it is funny to mock the poor and those that are suffering. So how are all of these protesters going to respond to the “let them eat cake” attitude of the Wall Street elite? The protesters are being told that nothing that they can do will change anything and that they should be grateful for what Wall Street and the ultra-wealthy have done for them. They are essentially being told that they should just shut up and go home. So will we see these protest movements become discouraged and die down, or will the patronizing attitudes of so many among the elite just inflame them even further?
Right now, there really are two different “Americas”. In one America, the stock market is surging, corporate profits are soaring and BMW is operating factories at 110% of capacity just to keep up with demand.
In the other America, unemployment is rampant, millions of families are being kicked out of their homes and more than 45 million Americans are on food stamps.
There is more economic frustration in this country today than there has been at any other time since the Great Depression. We are watching pressure build to very dangerous levels.
It is important to note that I certainly do not agree at all with the solutions being put forward by the organizers of the Occupy Wall Street protests. As I have written about previously, collectivism is one of our biggest problems, and more collectivism is not going to solve anything.
But it is definitely understandable that people are incredibly upset about this economy and that they want to protest. Most Americans realize that something is fundamentally wrong with our economic system.
Unfortunately, most of them do not understand how we have gotten to this point or what it is going to take to fix things. That is one of the reasons why I write about economic issues so much. We desperately need to educate America.
But what is undeniable is that there is a growing rage in this country that protest movements such as the Occupy Wall Street are giving a voice to.
Our system is badly broken. The people out there protesting in the streets may not understand much, but they do understand that something needs to change.
The Wall Street elite should be taking these protests as a signal that they need to get their house in order. The status quo just is not going to cut it. But instead of taking leadership and calling for significant change, many among the elite are openly mocking the protesters.
The incredible arrogance displayed by so many on Wall Street and by so many in Washington D.C. is absolutely appalling.
The following are 10 examples of how the elite are openly mocking the poor in America today….
#1 According to an article in The New York Times, poor families that lost their homes to foreclosure were openly mocked during a Halloween party thrown by the law firm of Steven J. Baum. This particular law firm represents many of the largest mortgage lenders in the United States….
The firm, which is located near Buffalo, is what is commonly referred to as a “foreclosure mill” firm, meaning it represents banks and mortgage servicers as they attempt to foreclose on homeowners and evict them from their homes. Steven J. Baum is, in fact, the largest such firm in New York; it represents virtually all the giant mortgage lenders, including Citigroup, JPMorgan Chase, Bank of America and Wells Fargo.
Photos from this Halloween party are posted on The New York Times website. To say that they are appalling would be a huge understatement. The following is how The New York Times described one of the photos….
In one, two Baum employees are dressed like homeless people. One is holding a bottle of liquor. The other has a sign around her neck that reads: “3rd party squatter. I lost my home and I was never served.” My source said that “I was never served” is meant to mock “the typical excuse” of the homeowner trying to evade a foreclosure proceeding.
#2 To many on Wall Street, the OWS protests are one big joke. In fact, Wall Street executives have been spotted sipping champagne while watching the Occupy Wall Street protests from their balconies.
#3 In response to the Occupy Chicago protests, signs were put up in the windows of the building where the Chicago Board of Trade is located that spelled out this sentence: “We Are The 1%“.
#4 Many columnists for major financial publications have had no fear of mocking the Occupy Wall Street protesters. For example, Doug Hirschhorn recently wrote the following for Forbes….
As your Occupation of Wall Street continues, you may want to grasp a few things. First, it is not going to change anything in the short term and probably not much in the long-term either.
I hate to be the bearer of that news, but money makes the world go round and “Wall Street” is all about money. Second, the top traders, banks and hedge funds are still going to out earn and generate substantial profits from speculating on the disconnects in the prices of things generated from all the moving parts in the global economy and it has nothing to do with why you lost your house or job or can’t find a job. If anything the successful ones are helping you, your pensions funds, retirement savings and the economy in general. If Wall Street stops. The world stops. Period.
#5 Instead of attempting a balanced report on the Occupy Wall Street protests, Erin Burnett of CNN openly made fun of them during a recent broadcast. After being a stalwart on CNBC for so many years, Burnett has very close ties to Wall Street and apparently she does not like anyone criticizing her friends. You can see video of Burnett mocking the Occupy Wall Street movement right here.
#6 Barack Obama continues to mock the poor by telling them to cut back on vacations and little luxuries like going out to eat while at the same time sending his own family out on incredibly expensive vacations. The following is one example I noted in an article earlier this year….
Barack Obama recently made the following statement to American families that are struggling to survive in this economy: “If you’re a family trying to cut back, you might skip going out to dinner, or you might put off a vacation.” A few days after making that statement Obama sent his wife and children off on yet another vacation, this time to a luxury ski hotel in Vail, Colorado.
Later on in that same article I mentioned another outrageously expensive vacation taken by the Obamas that was paid for by our taxes….
Back in August, Michelle Obama took her daughter Sasha and 40 of her friends for a vacation in Spain.
So what was the bill to the taxpayers for that little jaunt across the pond?
It is estimated that vacation alone cost U.S. taxpayers $375,000.
During a time when so many millions of American families are deeply, deeply suffering it is truly appalling that the residents of the White House would be so insensitive.
#7 Republican presidential candidate Herman Cain recently declared that anyone that is unemployed or poor in America should only blame themselves….
“Don’t blame the big banks. If you don’t have a job and you’re not rich, blame yourself.”
#8 Sometimes our politicians are so insensitive that it is almost hard to believe. In an interview with George Stephanopoulos of ABC News while she was still the Speaker of the House, Nancy Pelosi stated that we need poor people to have less children because it costs the government so much money to take care of them….
PELOSI: Well, the family planning services reduce cost. They reduce cost. The states are in terrible fiscal budget crises now and part of what we do for children’s health, education and some of those elements are to help the states meet their financial needs. One of those – one of the initiatives you mentioned, the contraception, will reduce costs to the states and to the federal government.
STEPHANOPOULOS: So no apologies for that?
PELOSI: No apologies. No. we have to deal with the consequences of the downturn in our economy.
#9 Warren Buffett has some interesting observations on class warfare. He is one of the few wealthy Americans that is willing to say what everyone else is thinking. Back in 2006, Buffett was quoted as saying the following in an article in The New York Times….
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
Buffett was not taking pride in the fact that the elite have won, but there are many others among the elite that are very proud of what they have done and they are not afraid to look down on the poor.
The level of income inequality that we have in the United States today is absolutely amazing. According to data from a few years ago, the average household income for the top 0.01% of all Americans was $27,342,212. According to that same data, for the bottom 90% of all Americans the average household income was just $31,244.
#10 Every single day, our “representatives” in Washington D.C. are living the high life at our expense. It is amazing that out of the entire population of the United States, we continue to overwhelming elect rich people to Congress. As I noted in a recent article, more than half of all the members of Congress are millionaires, and the median wealth of a U.S. Senator in 2009 was 2.38 million dollars.
Without a doubt, the wealthy rule over us all and they intend to maintain control and perpetuate the system which has rewarded them so handsomely.
When necessary, they are not afraid to call in the police to bust some skulls. Sadly, we are already seeing some brutally violent confrontations between law enforcement authorities and Occupy Wall Street protesters in many areas of the country. The other day, I wrote about the horrific violence that took place in Oakland recently….
Unfortunately, the authorities are not just going to sit by and watch these protests happen. In fact, they are already clamping down hard in many areas of the nation. For example, police in Oakland recently used tear gas and rubber bullets to break up the Occupy protest in that city. When police opened fire, the streets of Oakland literally became a war zone for a few minutes. You can see shocking videos of the violence here, here and here.
Power and wealth have become incredibly concentrated in the United States today. As one scientific study demonstrated recently, the elite control almost the entire global economy. In fact, the University of Zurich study discovered that there are just 147 gigantic corporations at the core of it all.
It is not a good thing that such a very small group of people completely dominates all the rest of us.
Once again, there is absolutely nothing wrong with working hard, making great contributions to society and becoming very wealthy.
However, what we have today is a fundamentally broken system that funnels most of the wealth and most of the power into the hands of the ultra-wealthy and the gigantic corporations that they own.
It would be great if the American people could come together and work to make some positive changes to our system.
But right now, it appears that strife, discord and hatred are going to continue to rapidly grow in this country. We have become a very divided nation and we are watching anger and frustration grow to very dangerous levels.
All of this is a recipe for mass chaos. Our country is marching toward a date with disaster and right now we show no signs of changing course.
Please pray for America.
We definitely need it.
 Millions of Americans are about to get stabbed in the back by their banks. Bank of America, JPMorgan Chase, Wells Fargo, Citibank and several other large banks are either already implementing outrageous new bank fees or are currently testing them. So are these ridiculous new bank fees going to be enough to get millions of Americans to finally boycott the big banks? When millions of Americans start paying a $5 fee every month to use their debit cards and when millions of Americans start paying a $20 fee every single month just to have a checking account hopefully that will be enough to wake them up. These fees are certainly not going to cause an “economic collapse”, but they are incredibly annoying. The truth is that the big banks are trying to take advantage of us. It shouldn’t cost $60 a year just to use a debit card. It shouldn’t cost $240 a year just to have a checking account. What we need to do is to send an unequivocal message to the big banks: we don’t want your stinking bank fees and we are switching banks.
When I was growing up, I remember how banks would bend over backwards to get your business. The customer service was generally very good and banks were not gouging us with ridiculous fees.
But now thousands of smaller banks have been gobbled up by the banking giants and things have dramatically changed. The big banks don’t value us anymore. They seem to believe that they have a “captive audience” and that they can treat us however they want to.
Well, it is time for us to draw a line in the sand.
We didn’t mind so much that they were paying us next to nothing on our savings accounts.
We didn’t say too much when ATM fees soared into the stratosphere. For example, the average cost of using an “out of network” ATM in America today is approximately $3.81.
We didn’t even object too much when they started charging us fees for things such as getting paper statements, receiving wire transfers, or closing our accounts.
But now they have really crossed the line.
On October 1st, new federal regulations went into effect that capped what banks can charge merchants for debit card transactions.
The average fee on a debit card transaction used to be about 44 cents.
The new federal regulations cap the fee on merchants at 21 cents.
So will banks be unable to make money under these new regulations?
Well, according to U.S. Senator Dick Durbin, each debit card transaction costs the banks somewhere between 4 and 12 cents.
So a cap of 21 cents is not going to kill the banks.
However, it is going to hurt the profits that they have been making. The new rules are expected to reduce total bank revenue by a whopping $6.6 billion a year.
Ouch.
So what are the big banks doing about it?
Well, they have decided to recoup that revenue by sticking it to us.
For example, Bank of America recently announced that it is about to start charging a $5 per month debit card fee.
This has sparked a firestorm of criticism.
Even members of Congress are getting involved.
According to ABC News, U.S. Senator Dick Durbin stood on the floor of the U.S. Senate this week holding up a plastic debit card and launched into a tirade about Bank of America….
“Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”
But that is not the only outrageous fee that you will be hit with at Bank of America.
If you want to get a basic checking account at Bank of America you will be slapped with a $12 monthly fee unless you maintain an average balance of at least $1,500.
Other large banks are instituting debit card fees as well.
Starting in November, SunTrust will be hitting account holders with a $5 per month debit card fee.
Last February, J.P. Morgan began testing a $3 per month debit card fee in Wisconsin.
Wells Fargo has also been testing a $3 per month debit card fee in certain markets.
But it is not just new debit card fees that are getting people upset.
For example, according to CNN large numbers of Citibank account holders will soon be paying a 15 or 20 dollar monthly fee if they do not maintain very high balances in their accounts….
Starting in December, customers who hold its mid-level Citibank Account will be charged $20 a month if they fail to maintain a minimum balance of $15,000 in their combined accounts. Previously, account holders had to carry a minimum balance of $6,000.
At the same time, customers who have the bank’s EZ Checking account will start being charged $15 a month if they don’t carry a minimum balance of $6,000.
They know that the vast majority of American families cannot afford to keep $6,000 sitting around.
It almost seems like the big banks are trying to eliminate as many small accounts as they can.
In the old days, virtually anyone could get a free checking account, but now all that has changed.
Sadly, the era of the free checking account seems to be ending. According to a recent survey by bankrate.com, only 45 percent of all checking accounts in the United States that don’t pay interest are still free. Two years ago that figure was sitting at 76 percent.
All over the nation, monthly fees on checking accounts are absolutely soaring. In 2010, the average monthly fee on non-interest checking accounts was $2.49. Today, the average monthly fee on non-interest checking accounts is $4.37.
It is almost as if the banks don’t even care about our money anymore. They don’t want to give us free checking, they don’t want to send us paper statements, they don’t want us to use tellers and they don’t even want to treat us with common decency.
The truth is that we are the ones that deserve some compensation for all of the lousy service that we have been receiving. For example, the Bank of America online banking system has been down for five days in a row.
The average American family is barely scraping by right now and cannot afford all of these outrageous fees. Right now, economic conditions are rapidly deteriorating and millions more Americans are falling into poverty every year. It is absolutely disgusting that these big banks are trying to drain hundreds of extra dollars a year out of each of us.
Well, perhaps we need to start voting with our feet. We need to tell the banksters that we don’t want their stinking bank fees and that we are switching banks.
There are lots of credit unions and small community banks that would be more than happy to have us as customers. Yes, banking with them might not be quite as “convenient”, but the big banks have pushed us way too far this time.
These new bank fees are beyond outrageous.
We cannot allow them to do this to us.
So do you have a story about how your current bank is abusing you? Are you completely frustrated with the big banks? Please feel free to share your thoughts below….
 If you still have a good job, you certainly have something to celebrate on Labor Day 2011. So far you have survived the decline of the U.S. economy. But your day may be coming soon. This weekend, there will be millions of Americans that will not be doing any celebrating. They are not enjoying a break from their jobs because they don’t have any jobs. In fact, it seems kind of heartless for the rest of us to be celebrating while so many of our countrymen are destitute. What are we celebrating on Labor Day 2011? The lack of jobs in America? At this point, the U.S. economy closely resembles a gigantic game of musical chairs. Every time the music stops, even more good jobs are pulled out of the game and even more workers are added. Once upon a time, if you really wanted a job in America you could get one. But now the competition for even the most basic jobs is absolutely brutal. If you gathered together all of the unemployed people in the United States, they would constitute the 68th largest country in the world. It would be a nation larger than Greece. All of those unemployed people are not going to be taking trips with their families this holiday weekend. Instead, most of them are going to be trying to figure out what to do with their shattered lives.
With the economy in such a mess, you would think that someone out there would be suggesting that Labor Day 2011 should really be a day of mourning. This economic downturn has shredded the lives of millions of American families.
Is there any other crisis in recent years that has had more of an impact on a national level?
On Friday, the U.S. Bureau of Labor Statistics reported that no new jobs were created during the month of August and that the official unemployment rate remained steady at 9.1 percent.
Wait, aren’t we supposed to be in the middle of an economic recovery?
Actually, we need at least 125,000 new jobs or so each month just to keep up with the growth of the U.S. population. So it seems odd that the economy would add zero jobs but the unemployment rate would not increase.
But that is what the government is saying.
In any event, things don’t look good. According to the U.S. Bureau of Labor Statistics, the civilian employment-population ratio was at 58.2 percent last month. This is an incredibly low figure.
In a recent article, John Mauldin explained what would have to happen to return the employment-population ratio to where it was in the year 2000….
The US has roughly the same number of jobs today as it had in 2000, but the population is well over 30,000,000 larger. To get to a civilian employment-to-population ratio equal to that in 2000, we would have to gain some 18 MILLION jobs.
Does anyone have an extra 18 million jobs laying around somewhere? The following is a chart showing what has happened to the employment-population ratio over the last several decades….
What makes this chart even more startling is that the number of women in the workforce was constantly rising for most of the time period reflected in this chart. So when you take that into account our current situation is far worse.
For example, back in 1969 95 percent of all men between the ages of 25 and 54 had a job. Pretty much any man in his prime working years that wanted a job could get a job.
In July, only 81.2 percent of men in that age group had a job.
But that is only part of the story. Another significant trend has been how flat wages have been. Average hourly earnings fell 0.1% in August. Meanwhile, the prices in the stores continue to go up.
In this column, I write a lot about how the middle class is being destroyed in this country. When you look at the ratio of employee compensation to GDP, it is now the lowest that is has been in about 50 years. In other words, U.S. workers are taking home a smaller share of the pie than at any other time in modern U.S. history.
But at this point those that still actually do have jobs consider themselves to be the lucky ones.
Tonight, there will be millions of desperate unemployed Americans that will blankly stare at their televisions as they try to figure out how their dreams got flushed down the toilet.
Remember how I mentioned at the beginning of the article that unemployed Americans would constitute a country larger than Greece? Well, 42 percent of all of those unemployed Americans have been out of a job for 27 weeks or longer.
What would you do if you lost your job and you were unemployed for half a year?
Would you be able to survive?
In America today, the longer that you are unemployed, the harder it is for you to get another job. If you have been unemployed for at least one year, there is a 91 percent chance that you will not find a new job within the next month.
Out of sheer desperation, many Americans have taken jobs that they never even dreamed that they would take.
Only 47 percent of the U.S. workforce is “fully employed” at this point. Right now there are hordes of Americans that are waiting tables, flipping burgers or stocking shelves at Wal-Mart because that is all that they can find right now.
Sadly, this is all part of a long-term trend.
Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.
This middle class is being pummeled out of existence, and most Americans don’t even understand what is happening.
It certainly does not help that both the Republicans and the Democrats have stood by as millions upon millions of our jobs have been shipped out of the country.
It also certainly does not help that both the Republicans and the Democrats have stood by as millions upon millions of illegal immigrants have taken jobs away from American citizens.
It also certainly does not help that both the Republicans and the Democrats have stood by as U.S. businesses have been absolutely crushed by mountains of nightmarish regulations and have been taxed into oblivion.
The decade that just ended was the worst decade for job growth in America since the Great Depression. In fact, even though thirty million people were added to the U.S. population during the decade, there was essentially zero job growth.
Sadly, things look like they are going to continue to get even worse. For example, the United States Postal Service is in such trouble that it is asking Congress to allow it to lay off 120,000 workers. Overall, the Postal Service wants to eliminate 220,000 positions by 2015.
So is this big speech that Obama is going to give on Thursday going to solve anything?
Of course not.
The reality is that if Obama or any of his advisors had any grand ideas for fixing our situation they would have implemented them by now.
And what is the big deal in making us wait until Thursday to hear these “new ideas”? Why not just tell us now?
Sadly, the truth is that everything that our politicians do now is about setting themselves up for the 2012 election.
Most likely, Obama is just going to take a bunch of tired ideas that do not work and “spin” them into a grand new plan.
Millions of Americans will actually buy into it.
But it is not as if establishment Republican candidates have anything to offer either.
You know, if Obama wanted to do something substantial, one place to start would be to order the Federal Reserve to stop paying banks not to make loans to individual and small businesses.
But just like all of our other weak-minded recent presidents, Barack Obama is not going to confront the Federal Reserve.
In fact, everything that Obama actually does “for the economy” only seems to make things worse.
As I have outlined before, we know exactly why our economy is losing jobs and we know things that we could start doing right now to reverse the long-term trends that are absolutely killing us.
But Barack Obama is not talking about real solutions and neither are the establishment Republican candidates.
So things are going to continue to get worse. The number of Americans on food stamps has increased 74% since 2007. Every month we have been setting a new record. The middle class is going to continue to disappear as the number of good jobs continues to decrease.
So, no, there are not too many reasons to celebrate on Labor Day 2011. Our economy is dying and millions upon millions of our fellow citizens are deeply suffering.
Urgent action is required in order to prevent our situation from rapidly getting worse, but right now the vast majority of our politicians are asleep at the switch.
So instead of celebrating this Labor Day, why don’t you say a prayer for America instead?
We really could use it.
 Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that “as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.”
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog….
“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe….
- Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
- Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off
This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities.
The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in “improper” behavior during 2006 and 2007.
For much more on the history of all this, please see this article: “How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps“.
So will Goldman Sachs ever get into serious trouble for any of this?
No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the “too big to fail” banks and they are going to continue to do pretty much whatever they feel like doing.
Sadly, the power of the “too big to fail” banks just continues to grow. At this point, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product.
Goldman Sachs was the second biggest donor to Barack Obama’s campaign in 2008, so don’t expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart.
Sadly, the 54 page report mentioned above is right – we really are facing a global debt meltdown and we really are heading for an economic collapse.
You aren’t going to hear the truth from the mainstream media or from our politicians because “keeping people calm” is much more of a priority to them than telling the truth is.
The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike.
But let there be no doubt – it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific.
Keep watch and get prepared. We don’t know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.
 Back during the financial crisis of 2008, the American people were told that the largest banks in the United States were “too big to fail” and that was why it was necessary for the federal government to step in and bail them out. The idea was that if several of our biggest banks collapsed at the same time the financial system would not be strong enough to keep things going and economic activity all across America would simply come to a standstill. Congress was told that if the “too big to fail” banks did not receive bailouts that there would be chaos in the streets and this country would plunge into another Great Depression. Since that time, however, essentially no efforts have been made to decentralize the U.S. banking system. Instead, the “too big to fail” banks just keep getting larger and larger and larger. Back in 2002, the top 10 banks controlled 55 percent of all U.S. banking assets. Today, the top 10 banks control 77 percent of all U.S. banking assets. Unfortunately, these giant banks are also colossal mountains of risk, debt and leverage. They are incredibly unstable and they could start coming apart again at any time. None of the major problems that caused the crash of 2008 have been fixed. In fact, the U.S. banking system is more centralized and more vulnerable today than it ever has been before.
It really is difficult for ordinary Americans to get a handle on just how large these financial institutions are. For example, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product.
These huge banks are giant financial vacuum cleaners. Over the past couple of decades we have witnessed a financial consolidation in this country that is absolutely unprecedented.
This trend accelerated during the recent financial crisis. While the big boys were receiving massive bailouts, the hundreds of small banks that were failing were either allowed to collapse or they were told that they should find a big bank that was willing to buy them.
As a group, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo held approximately 22 percent of all banking deposits in FDIC-insured institutions back in 2000.
By the middle of 2009 that figure was up to 39 percent.
That is not just a trend – that is a landslide.
Sadly, smaller banks continue to fail in large numbers and the big banks just keep growing and getting more power.
Today, there are more than 1,000 U.S. banks that are on the “unofficial list” of problem banking institutions.
In the absence of fundamental changes, the consolidation of the banking industry is going to continue.
Meanwhile, the “too big to fail” banks are flush with cash and they are getting serious about expanding. The Federal Reserve has been extremely good to the big boys and they are eager to grow.
For example, Citigroup is becoming extremely aggressive about expanding….
Citigroup has been hiring dozens of investment bankers, dialing up advertising and drawing up plans to add several hundred branches worldwide, including more than 200 in major cities across the United States.
Hopefully the big banks will start lending again. The whole idea behind the bailouts and all of the “quantitative easing” that the Federal Reserve did was to get money into the hands of the big banks so that they would lend it out to ordinary Americans and get the economy rolling again.
Well, a funny thing happened. The big banks just sat on a lot of that money.
In particular, what they did was they deposited much of it at the Fed and drew interest on it.
Since 2008, excess reserves parked at the Fed have grown by nearly 1.7 trillion dollars. Just check out the chart posted below….
The American people were promised that TARP and all of the other bailouts would enable the big banks to lend out lots of money which would help get the economy going for ordinary Americans again.
Well, it turns out that in 2009 (the first full year after Congress passed the bailout legislation) U.S. banks posted their sharpest decline in lending since 1942.
Lending has never fully recovered since the crash of 2008. The big financial institutions like Goldman Sachs, Morgan Stanley and JPMorgan Chase have been able to get all the cash that they need, but they have not passed that generosity along to ordinary Americans.
In fact, the biggest U.S. banks have actually reduced small business lending by about 50 percent since the crash of 2008.
That doesn’t sound like what we were promised.
These “too big to fail” banks have been able to borrow gigantic amounts of money from the Fed for next to nothing and yet they still refuse to let credit flow to local communities. Instead, the big banks have found other purposes for all of the super cheap money that they have been getting from the Fed as Ellen Brown recently explained….
It can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get banks to lend again. Instead, they are, indeed, paying “outrageous bonuses to their top executives;” using the money to engage in the same sort of unregulated speculation that nearly brought down the economy in 2008; buying up smaller banks; or investing this virtually interest-free money in risk-free government bonds, on which taxpayers are paying 2.5 percent interest (more for longer-term securities).
What makes things even worse is that these big banks often pay next to nothing in taxes.
For example, between 2008 and 2010, Wells Fargo made a total profit of 49.37 billion dollars.
Over that same time period, their tax bill was negative 681 million dollars.
Do you understand what that means? Over that 3 year time period, Wells Fargo actually got 681 million dollars back from the U.S. government.
Isn’t that just peachy?
Meanwhile, the big financial giants have not learned their lessons and they continue to do business pretty much as they did it prior to 2008.
The big banks continue to roll up massive amounts of risk, debt and leverage.
Today, Wall Street has become one giant financial casino. More money is made on Wall Street by making side bets (commonly referred to as “derivatives“) than on the investments themselves.
If the bets pay off for the big financial institutions, mind blowing profits can be made. But if the bets go against the big financial institutions (as we saw in 2008), firms can collapse almost overnight.
In fact, it was derivatives that almost brought down AIG. The biggest insurance company in the world almost folded in 2008 because of a whole bunch of really bad bets.
The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”. It has been estimated that the notional value of the worldwide derivatives market is somewhere in the neighborhood of a quadrillion dollars.
The largest banks have tens of trillions of dollars of exposure to derivatives. When the next great financial collapse happens, derivatives will almost certainly be at the center of it once again. These side bets do not create anything real for the economy – they just make and lose huge amounts of money. We never know when the next great derivatives crisis will strike. Derivatives are essentially like a “sword of Damocles” that perpetually hangs over the U.S. financial system.
When I start talking about derivatives I get a lot of people in the financial community mad at me. On Wall Street today you can bet on just about anything you can imagine. Almost everyone in the financial world has gotten so used to making wild bets that they couldn’t even imagine a world without them. If anyone even tried to put significant limits on futures, options and swaps it would cause Wall Street to throw a hissy fit.
But someday the dominoes are going to start to fall and the house of cards is going to come crashing down. It is an open secret that our financial system is fundamentally unsound. Even a lot of people working on Wall Street will admit that. It is just that people are so busy making such big piles of money that nobody wants the party to stop.
It is only a matter of time until some of these big banks get into a huge amount of trouble again. When that happens, we might really find out whether they are “too big to fail” or whether we could get along just fine without them.
 Today, average Americans have less power relative to the monolithic corporate and governmental institutions that dominate our society than at any other point in U.S. history. Sadly, this is not what our founding fathers ever envisioned. Our founding fathers established a government “of the people, by the people, for the people”, but what we have today is very far from that ideal. In America today, wealth and power are very highly concentrated, and if you have neither wealth nor power than most of our politicians really do not have any interest in you. Over the past several decades, those with huge amounts of money and power have been busy rigging the game so that the rest of the money and power slowly but surely funnels into their hands. If current trends continue, the banksters and the corpocracy will eventually own it all. Below you will find 29 statistics about extreme income inequality in America. Sadly, most of these statistics will be out of date in a year or two because wealth and power will be much more concentrated by that time.
If you are a “Kool-Aid drinking Democrat” you are going to be really upset by this article. If you are a “Kool-Aid drinking Republican” you are going to be really upset by this article.
Most Republicans have been brainwashed into believing that “capitalism” means cheerleading while the big corporations hoover up money and power.
Most Democrats have no trouble with big corporations either because most establishment Democrats have been brainwashed into believing that large concentrations of power (whether governmental or corporate) are generally good. Most Democrats just wish that big corporations were a little less greedy and were a little more “socially responsible”.
Today, the big banks, the big corporations and the federal government are all in bed with one another and it is average Americans that always lose out.
Our founding fathers tried to warn us about large concentrations of power. They attempted to establish a very limited central government, they wanted to keep us free from the tyranny of the big banks and they were very suspicious of large corporations.
In a 2010 article, Rick Ungar noted that corporations were very seriously restricted in the early days of America….
After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, they could not own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their corporate business goals.
My how things have changed.
“Capitalism” is supposed to be about the empowerment of individuals and families and small businesses.
Instead, today “capitalism” has come to mean something completely different. Today, the biggest, meanest concentrations of wealth devour everyone else with a big assist from the government.
At this point, average Americans mean next to nothing in the political process. This point was eloquently made in a recent column by Robert Reich….
The unemployed are politically invisible. They don’t make major campaign donations. They don’t lobby Congress. There’s no National Association of Unemployed People.
Their ranks are filled with women who had been public employees, single mothers, minorities, young people trying to enter the labor force, and middle-aged men who have been out of work for longer than six months. You couldn’t find a collection of people with less political clout.
I would not normally quote Robert Reich, but he made a good point. If you don’t have an army of lobbyists or any money to give to them then most of our politicians don’t really care what you think or how much you are hurting.
Just think about the amount of power and money that Exxon Mobil or Wal-Mart has compared to the amount of power and money that an average American has.
Our society has veered very far from the egalitarian ideal that our founding fathers once hoped for.
The corporate giants are so powerful that it is next to impossible for small businesses to directly compete with them.
Just try it some time.
Many banks and corporations have become so big that the world literally cannot afford for them to fail.
For example, three U.S. corporations control approximately 90% of the world’s grain trade.
So what happens if those three corporations collapse?
That is something to think about.
But of course average Americans are never “too big to fail”. The big banks begged and begged for bailouts, but if you are late on your debt payments they will chuck you into prison.
Also, when wealth and power are so highly concentrated, economic rewards flow only to a few. Corporatism (as opposed to true capitalism) produces a handful of winners and a whole lot of losers.
As I have written about previously, the middle class is being destroyed. If current trends are allowed to continue long enough we eventually won’t have much of a middle class left at all.
The following are 29 statistics about extreme income inequality in America that will blow your mind….
#1 In the United States today, the richest one percent of all Americans have a greater net worth than the bottom 90 percent combined.
#2 The wealthiest 1% of all Americans now own more than a third of all the wealth in the United States.
#3 The wealthiest 1% of all Americans own over 50% of all the stocks and bonds.
#4 The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.
#5 According to a joint House and Senate report entitled “Income Inequality and the Great Recession“, the top one percent of income earners in the United States brought in a total of 10.0 percent of all income income in 1980, but by the time 2008 had rolled around that figure had skyrocketed to 21.0 percent.
#6 Between 1979 and and 2007, the average household income of the top 1% of all Americans soared from $346,600 to $1.3 million. During that same time period the average household income for middle class Americans increased only slightly.
#7 According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.
#8 More than 3 billion people, close to half the world’s population, live on less than 2 dollar a day.
#9 According to a new report from the AFL-CIO, the average CEO made 343 times more money than the average American did last year.
#10 The number of “low income jobs” in the U.S. has risen steadily over the past 30 years and they now account for 41 percent of all jobs in the United States.
#11 Since 1979, real median weekly earnings for high school dropouts has declined by 22 percent.
#12 During this economic downturn, employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years.
#13 Half of all American workers now earn $505 or less per week.
#14 Since the year 2000, we have lost 10% of our middle class jobs. In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs. Meanwhile, our population has gotten significantly larger.
#15 Ten years ago, the United States was ranked number one in average wealth per adult. In 2010, the United States fell to seventh.
#16 According to one recent study, approximately 21 percent of all children in the United States were living below the poverty line in 2010. In the UK and in France that figure is well under 10 percent.
#17 Today, one out of every four American children is on food stamps.
#18 It is being projected that approximately 50 percent of all U.S. children will be on food stamps at some point in their lives before they reach the age of 18.
#19 According to Moody’s Analytics, the wealthiest 5% of households in the United States now account for approximately 37% of all consumer spending.
#20 The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.
#21 The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.
#22 Approximately half of all American workers make $25,000 a year or less.
#23 The wealthiest 1% of the earth’s population controls 39% of the wealth.
#24 It is estimated that over 80 percent of the world’s population lives in countries where the income gap between the rich and the poor is widening.
#25 One year after the recent financial collapse the top 25 hedge fund managers earned a total of approximately $25 billion. That breaks down to an average of $1 billion each.
#26 Bill Gates has a net worth of somewhere in the neighborhood of 50 billion dollars. That means that there are approximately 140 different nations that have a yearly GDP which is smaller than the amount of money Bill Gates has.
#27 It is estimated that the entire continent of Africa owns approximately 1 percent of the total wealth of the world.
#28 The top 0.01% of Americans make an average of $27,342,212. The bottom 90% make an average of $31,244.
#29 58 percent of the members of Congress are millionaires while only about 1 percent of the general population is made up of millionaires.
So what is the solution?
Well, our liberal friends insist that the solution to all of this inequality is to tax the rich and to distribute the wealth to the poor.
Well, there are three major problems with that.
Number one, when you raise taxes too high you eliminate the incentive to work hard.
Number two, when you make it too easy to depend on government handouts you create an underclass of economic parasites.
Number three, the big corporations and the ultra-wealthy have become masters at avoiding taxation no matter what the rates are.
Before you tax the rich too much, you might want to consider the consequences of doing so.
Why should someone bust his or her rear end to run a business and make a lot of money if the government is just going to come along and take over half of all the money that is made?
Personally, if I ever get into a tax bracket where over half the money I make goes to the government then I simply will not work nearly as hard at that point.
But if that starts happening on a large scale, then you have a significant loss of economic activity which hurts the economy overall.
Already, the top 20 percent of all income earners in the United States pay approximately 86 percent of all federal income taxes.
When the government “steals from the rich” and “gives to the poor”, that also tends to create a large group of people that decides that it is easier to take from the government than it is to work for a living.
In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for 18.4% of all income.
That is not a good trend.
At this point, U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes.
That is not even close to sustainable, but nobody wants to give up their “government benefits”.
Today, 59 percent of all Americans receive money from the federal government in one form or another.
Yes, there will always be those that cannot help themselves and we should always have a “safety net”.
But when you look around it doesn’t take a genius to figure out that things have gotten completely and totally out of control.
Right now, an all-time record 44 million Americans are on food stamps.
Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.
The U.S. government is even handing out billions of dollars to homeowners that are delinquent on their mortgages.
This is not a formula for long-term economic success.
When people get addicted to government checks they never want to stop.
But this is not what the poor need.
What the poor need are good jobs that pay good wages. Unfortunately, we keep shipping millions of those jobs overseas. So now the Chinese economy is thriving and our formerly great manufacturing cities are turning into hellholes.
Handouts do not give people hope, dignity and a future, but jobs can.
Also, as I have written about before, the big corporations and the ultra-wealthy have become masters at avoiding taxes. There is a reason why approximately a third of all the wealth in the world is held in “offshore” tax havens.
What U.S. corporations are able to get away with is absolutely amazing.
The following figures come directly out of a report by Citizens for Tax Justice. These are combined figures for the tax years 2008, 2009 and 2010.
During those three years, all of the corporations below made a lot of money. Yet all of them paid net taxes that were below zero for those three years combined.
How is that possible? Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.
So for these corporations, their rate of taxation was actually below zero.
If you have not seen these before, you are going to have a hard time believing some of these statistics…..
*Honeywell*
Profits: $4.9 billion
Taxes: -$34 million
*Fed Ex*
Profits: $3 billion
Taxes: -$23 million
*Wells Fargo*
Profits: $49.37 billion
Taxes: -$681 million
*Boeing*
Profits: $9.7 billion
Taxes: -$178 million
*Verizon*
Profits: $32.5 billion
Taxes: -$951 million
*Dupont*
Profits: $2.1 billion
Taxes -$72 million
*American Electric Power*
Profits: $5.89 billion
Taxes -$545 million
*General Electric*
Profits: $7.7 billion
Taxes: -$4.7 billion
Are you starting to get the picture?
I wish I could make $7.7 billion, pay no taxes and have the government give me $4.7 billion on top of it.
Our system has become corrupted beyond all recognition.
We need to throw out the current system of taxation and come up with something entirely new.
In fact, the truth is that for most of U.S. history there was not a federal income tax at all. But that is a story for another day.
If you believe in the U.S. Constitution and in the republic that our founding fathers established, then the very high concentrations of wealth and power in our society today should greatly concern you. Income inequality is not a “Democrat” or a “Republican” issue. A vibrant, thriving middle class should be a goal all of us can embrace.
But I have a feeling a whole lot of “Democrats” and a whole lot of “Republicans” were deeply offended by this article. Feel free to express your opinion by leaving a comment below….
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