Morgan Stanley

The Unbelievably Rampant Corruption On Wall Street

In order for a financial system to be able to function properly, it is absolutely essential that the general population has faith in it.  After all, who is going to want to invest in the stock market or entrust their money to big financial institutions if there is not at least the perception of honesty and fairness in the financial marketplace?  For decades, the American people did have faith in Wall Street.  But now that faith is being shattered by a string of recent revelations.  It seems as though the rampant corruption on Wall Street is seeping up almost everywhere now.  In fact, some of the things that have come out recently have been absolutely jaw-dropping.  The truth is that the corruption on Wall Street is much deeper and much more systemic than most of us ever dared to imagine.  As the general public digests these recent scandals, it is going to result in a tremendous loss of faith in the U.S. financial system.  Once faith in a financial system is lost, it can take years or even decades to get back.  So how is the U.S. financial system supposed to work properly when large numbers of people simply do not believe in it anymore?

Just consider some of the recent revelations of Wall Street corruption that have come out recently….

*Bloomberg is reporting that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraud that cost taxpayers across the U.S. billions of dollars.  The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments.  Apparently what was going on was that it was decided in advance who would win the auctions of guaranteed investment contracts, which public entities purchase with the proceeds from municipal bond sales, and then other intentionally losing bids were submitted in order to make the process look competitive.  The U.S. Justice Department claims that this fraud has been industry-wide and has been going on for years.  In fact, at least four financial professionals have already pleaded guilty in this case.

*An industry insider has come forward with “smoking gun” evidence that some of the biggest banks have been openly and blatantly manipulating the price of gold and silver.  For a time it looked like the federal government was just going to ignore all of this fraud, but after substantial public uproar some action is indeed being taken.  In fact, it has been reported that federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals markets.

*Goldman Sachs is getting most of the press about fraud in the mortgage-backed securities market these days.  Of course Goldman is strenuously denying that it “bet against its clients” when it changed its position in the housing market in 2007.  But we all know the truth at this point.  The truth is that Goldman Sachs clearly bet against its clients and was involved in a whole lot of things that were even worse than that.  Many did not think the U.S. government would dare go after Goldman, but that is what we are starting to see.  U.S. federal prosecutors have opened a criminal investigation into whether Goldman Sachs or its employees committed securities fraud in connection with its trading of mortgage-backed securities, and it will be very interesting to see if anything comes of that investigation.

*But not everyone is being held accountable for their actions.  The guy who helped bring down AIG is going to get off scott-free and is going to be able to keep the millions in profits that he made in the process.

*Entire U.S. cities have been victims of this rampant Wall Street fraud.  In fact, it is now being alleged that the biggest banks on Wall Street are ripping off some of the largest American cities with the same kind of predatory deals that brought down the financial system in Greece.

*The really sad thing is that fraud is very, very lucrative.  Executives at many of the big banks that received large amounts of money during the Wall Street bailouts are being lavished with record bonuses as millions of other average Americans continue to suffer economically.  Even the CEOs of bailed-out regional banks are getting big raises.  It must be really nice to be them.

So does all of this make you more likely or less likely to invest in the stock market?

Do you think that the American people can see all of this and still believe that the financial system is “fair” and “honest”?

The truth is that Wall Street is full of rip-off artists and fraudsters who don’t even try to hide their greed anymore.

It is as if a thousand junior Gordon Gekkos have been unleashed and they are all trying to be masters of the universe at any cost.

But what they are doing is ripping the heart out of the U.S. financial system.

If people lose faith in the system the system will ultimately fail.

A financial system that allows open fraud and manipulation is operating on borrowed time.

So will the rampant corruption on Wall Street now be cleaned up?

Only time will tell.

But one thing is for certain.

The American people will be watching.

SILVER MART

 

Megabanks: The Banking Oligarchy That Controls Assets Equivalent To 60 Percent Of America’s GNP

Today financial power is being concentrated in the hands of fewer and fewer individuals.  In fact, the six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product.  Back in the 1990s that figure was less than 20 percent.  These six banks – Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – literally dictate what goes on in the U.S. banking industry.  These entities are the poster children for “too big to fail”, and they donate massive amounts of cash to the campaigns of both Republicans and Democrats to ensure that they will continue to receive favorable treatment.  The vast majority of Americans have had a banking account, a credit card and/or a mortgage with one of these institutions at some point.  If they acted in concert, these six banks could literally bring down the U.S. economy overnight if they wanted to.  Together with the Federal Reserve, these six banks represent the real financial power in America.  They are the 800 pound gorilla in the room that influences nearly every major financial deal that gets done and virtually every major political decision that gets made.  As the last couple of years have demonstrated, top politicians from both parties (John McCain and Barack Obama for example) will instantly jump into action and start advocating that the U.S. government spend billions upon billions of dollars when the interests of these behemoths are threatened.  The frightening thing is that the power of these megabanks is growing at a frightening pace.  As dozens upon dozens of smaller U.S. banks are “allowed to fail”, they either go out of existence or the Feds actually encourage these smaller banks to sell themselves to one of the big sharks.  In either event, the banking power in the United States becomes further consolidated in the hands of the megabanks.

Bill Moyers recently interviewed Simon Johnson and James Kwak, the authors of a new book entitled 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown.  During that interview Kwak described to Moyers just how explosive the growth of the power of these megabanks has been….

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Does it alarm you that the banking elite have accumulated such a large amount of financial power?

It should.  These institutions have the power to wreck entire economies.  Just consider what happened in Greece lately.  Now, it is being alleged that the megabanks are ripping off American cities with the same kinds of predatory deals that brought down the financial system in Greece. 

And that is what these megabanks are.

They are predators.

In fact, a very revealing article in Rolling Stone described Goldman Sachs this way….

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Unfortunately, they may have actually been understating things a bit.

These megabanks have rigged the game so that the wealth of the nation is slowly transferred from us to themselves and to the international financial interests that control them.

They can make money if the markets are going up, and they can make money if the markets are going down.

For example, in a newly released email from the height of the housing crash, the CEO of Goldman Sachs bragged that his firm “made more than we lost” by betting against the housing market.

Thankfully the SEC is starting to look into the fraud that Goldman Sachs committed during this time period, but the truth is that Goldman is not likely to receive any more than a slap on the wrist for what it has done.

They are way too big, way too powerful and have too many friends in high places for them to get into any real trouble.

For example, it has come out that Barack Obama does not intend to return any of the campaign contributions that he received from Goldman Sachs.  And surely they will be glad to continue to pour big money into his political coffers.

So where does that leave the rest of us?

Well, the rest of us can expect higher taxes and a lower standard of living according to the IMF.  The IMF (which has deep connections to these megabanks) says that the party is “over” for nations that have been enjoying the good life.  In a recent article, the Washington Post summarized the message that the IMF is trying to communicate through their recent policy papers….

To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.

So are you ready to work longer, pay higher taxes, expect less from government and have a lower standard of living?

That is what the IMF says we are all going to be facing in the years ahead.

We are all going to financially suffer as the megabanks continue to thrive and consolidate power.

Isn’t that wonderful?

You say you don’t like that so much?

Well, good luck taking on the 800 pound gorilla.

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