Bill Black writes: Wall Street billionaires are freaking out about the chance that Bernie Sanders could be elected President. Stephen Schwarzman, one of the wealthiest and most odious people in the world, told the Wall Street Journal that one of the three principal causes of the recent global financial trauma was “the market’s” fear that Sanders may be elected President. Schwarzman is infamous for ranting that President Obama’s proposals to end the “carried interest” tax scam that allows private equity billionaires like Schwarzman to pay lower income tax rates than their secretaries was “like when Hitler invaded Poland.”
Schwarzman and Pete Peterson co-founded the private equity firm Blackstone. Peterson leads the effort to destroy the safety net in America. His greatest dream is to privatize Social Security so that Wall Street could increase its revenues by tens of billions of dollars. Blackstone is a major owner of Sea World, and it was in this sphere that Schwarzman went beyond his delusional rants about Hitler and became vile. When an Orca killed its trainer, Schwarzman lied and blamed the death on the trainer, claiming that Sea World “had one safety lapse — interestingly, with a situation where the person involved violated all the safety rules that we had.”
Schwarzman’s claim that the global financial markets are tanking because of Bernie’s increasing support is delusional, but it is revealing that he used the most recent market nightmare as an excuse to attack Bernie. The Wall Street plutocrats, with good reason, fear Bernie – not Hillary. Indeed, it is remarkable how vigorous and open Wall Street has been in signaling through the financial media that it has no problem with Hillary’s Wall Street plan. CNN, CNBC, and the Fiscal Times, under titles such as: “Here’s Why Wall Street Has Little to Fear from Hillary Clinton,” pushed this meme. [Continue reading…]
The Telegraph reports: Stock markets across the Middle East saw more than £27bn wiped off their value as the lifting of economic sanctions against Iran threatened to unleash a fresh wave of oil onto global markets that are already drowning in excess supply.
All seven stock markets in the Gulf states tumbled as panic gripped traders. London shares are now braced for a second wave of crisis to hit when they open on Monday morning after contagion from China sent the FTSE 100 to its worst start in history last week.
Dubai’s DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia’s Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering to end down 5.44pc at 5,520.41, its lowest level in almost five years. [Continue reading…]
Climate Progress reports: The divestment movement is really gaining steam — non-coal, non-fossil-fuel powered steam.
Investors representing $2.6 trillion in assets have pledged to cut fossil fuels from their portfolios, a fifty-fold increase from last year. At least 436 institutions have pledged to stop investing in fossil fuels — for moral or financial reasons. Large pension funds and private companies make up 95 percent of the assets, according to analysis released Tuesday by Arabella Advisors.
“If these numbers tell us anything, it’s that the divestment movement is catching fire,” said May Boeve, executive director of campaigners 350.org.
Actor Leonardo DiCaprio, who established a fund for conservation projects in 1998, also announced that he would join the movement by divesting his assets and those of the Leonardo DiCaprio Foundation. [Continue reading…]
San Francisco Chronicle reports: California’s huge public pension funds, CalPERS and the California State Teachers’ Retirement System, have lost more than $5 billion on their fossil fuel investments at a time when some legislators are urging the funds to dump their coal company stocks.
An analysis from the environmental group 350.org found that the two pension funds lost $5.2 billion from June 2014 through June of this year on companies that produce coal, oil and natural gas. And many of those stocks have plunged even further since then, driven down by sinking oil and coal prices.
“It’s important to see that fossil fuels in general, and coal in particular, are risky bets for the pension system,” said Brett Fleishman, senior analyst with 350.org, which promotes fossil fuel divestment as a way to fight climate change. “When folks are saying divestment is risky, we can say, ‘Well, not divesting is risky.’” [Continue reading…]
The Wall Street Journal reports: Spies are infiltrating Wall Street.
A wave of companies with ties to the intelligence community is winning over the world of finance, with banks and hedge funds putting the firms’ terrorist-tracking tools to work rooting out employee misconduct before it leads to fines or worse.
“Both Wall Street and the intelligence world want the same thing: to find unknown unknowns in the data,” said Roger Hockenberry, the former chief technology officer of the Central Intelligence Agency’s clandestine services and now a partner at the consulting firm Cognitio Corp. in Washington.
“Financial firms aren’t looking for terrorists, but good customers and attempts at fraud,” he said.
The CIA gave many of these companies their big break: After the terror attacks of September 2001, a private-equity arm of the CIA known as In-Q-Tel began seeding companies that could help it sift through vast repositories of data to quickly identify threats. Those skills have become more valuable on Wall Street as firms try to keep up with rogue traders in increasingly complex and rapidly moving markets.
Of 101 companies publicly seeded by In-Q-Tel, 33 have taken on Wall Street clients in recent years, according to a review by The Wall Street Journal. [Continue reading…]
The Wall Street Journal reports: More top Wall Streeters are California dreaming.
A technology-fueled gold rush is drawing seasoned financial executives with the promise of sunshine, fresh managerial challenges and compensation that can top even the seven-figure paychecks common in the investment world.
Blackstone Group LP said Friday that its chief financial officer, Laurence Tosi, is leaving the private-equity firm to become finance chief at Airbnb Inc., the booming home-rental service. He is just the latest Wall Street executive to move west to take advantage of massive investor interest in fast-growing companies seeking to upend entire swaths of the economy.
Mr. Tosi, 47 years old, has made a good living by any standard since he joined Blackstone following its 2007 initial public offering. He earned about $15 million last year, according to filings, and $33.8 million over the past three years, not including dividends and some other perks, such as proceeds from investments made in the firm’s funds. [Continue reading…]
Chris Arnade writes: One of the first lessons I was taught on Wall Street was, “Know who the fool is.” That was the gist of it. The more detailed description, yelled at me repeatedly was, “Know who the fucking idiot with the money is and cram as much toxic shit down their throat as they can take. But be nice to them first.”
When I joined in Salomon Brothers in ‘93, Japanese customers (mostly smaller banks and large industrial companies) were considered the fool. My first five years were spent constructing complex financial products, ones with huge profit margins for us — “toxic waste” in Wall Street lingo — to sell to them. By the turn of the century many of those customers had collapsed, partly from the toxic waste we sold them, partly from all the other crazy things they were buying.
The launch of the common European currency, the euro, ushered in a period of European financial confidence, and we on Wall Street started to take advantage of another willing fool: European banks. More precisely northern European banks. [Continue reading…]
George Monbiot writes: Greece may be financially bankrupt, but the troika is politically bankrupt. Those who persecute this nation wield illegitimate, undemocratic powers, powers of the kind now afflicting us all. Consider the International Monetary Fund. The distribution of power here was perfectly stitched up: IMF decisions require an 85% majority, and the US holds 17% of the votes.
The IMF is controlled by the rich, and governs the poor on their behalf. It’s now doing to Greece what it has done to one poor nation after another, from Argentina to Zambia. Its structural adjustment programmes have forced scores of elected governments to dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives.
The same programme is imposed regardless of circumstance: every country the IMF colonises must place the control of inflation ahead of other economic objectives; immediately remove barriers to trade and the flow of capital; liberalise its banking system; reduce government spending on everything bar debt repayments; and privatise assets that can be sold to foreign investors.
Using the threat of its self-fulfilling prophecy (it warns the financial markets that countries that don’t submit to its demands are doomed), it has forced governments to abandon progressive policies. Almost single-handedly, it engineered the 1997 Asian financial crisis: by forcing governments to remove capital controls, it opened currencies to attack by financial speculators. Only countries such as Malaysia and China, which refused to cave in, escaped. [Continue reading…]
Yanis Varoufakis, the former finance minister of Greece, writes: In the past two years, the debate in Europe has focused exclusively on issues that sound technical and minor: will there be “conditionality” attached to the purchases of Italian and Spanish bonds by the European Central Bank? Will the ECB supervise all of Europe’s banks, or just the “systemic” ones?
These are questions that ought to be of no genuine interest to anyone other than those with a morbid interest in the interface between public finance and monetary policy. And yet these questions (and the manner in which they will be answered) will probably prove as important for the future of Europe as the treaties of Westphalia, Versailles or even Rome. For these are the issues that will determine whether Europe holds together or succumbs to the vicious centrifugal forces that were unleashed by the crash of 2008.
Even so, they are not issues that are worth expounding upon here. All they do is to reflect a tragic, underlying reality that can be described in simple lay terms without the use of any jargon whatsoever: Europe is disintegrating because its architecture was simply not sound enough to sustain the shockwaves caused by the death throes of what I call the Global Minotaur: the system of neoliberal capitalism centred on Wall Street, extracting tribute from the world after 1971.
It is quite obvious that the insolvency of Madrid and Rome had nothing to do with fiscal profligacy (recall that Spain had a lower debt than Germany in 2008 and Italy has consistently smaller budget deficits) and everything to do with the way in which the eurozone’s macroeconomy relied significantly for the demand of its net exports on the Global Minotaur. Once the latter keeled over in 2008, and Wall Street’s private cash disappeared, two effects brought Europe to its knees. [Continue reading…]
Costas Douzinas writes: A man visits the Australian consulate in Athens and asks for a work visa. ‘Why do you want to leave Greece?’ asks the official. ‘I am worried that Greece will leave the euro’ answers the man. ‘Don’t worry’ responds the consul ‘I was talking to my German colleague yesterday who assured me that Greece will stay in the euro.’ ‘This is the second reason why I want to emigrate.’
The story expresses the impossible dilemma facing the Greeks. On one side, a continuation of the catastrophic austerity that has destroyed the country. On the other Grexit, a prospect that will further hit, for an unpredictably long period, the living standards of a people who have seen their income halved. Premier Alexis Tsipras’ announcement, early on Sunday, that the people will be asked to vote on the final proposals of the Europeans and the IMF is an attempt to divert this typical aporia (lack of passage) towards a more manageable question: Do the people back the government’s rejection of the worst effects of austerity while accepting its commitment to keep the country in the Eurozone? The stakes are high: besides the Greek destiny, the future of the European Union and of democracy is on the line.
The immediate context of the referendum is the behaviour of the European partners in the last few months. The Syriza government was elected with a clear mandate to put an end to austerity policies. These policies were carried out on two fronts, fiscal austerity and internal devaluation. Fiscal austerity was pursued through the reduction of public spending, the privatisation of key state assets and the increase of tax revenues. Large numbers of civil servants were dismissed, the social services were slashed with the health service in particular unable to meet basic needs. The humanitarian crisis that followed is well documented and there is no point in detailing it again. The creditors’ logic aimed to generate primary budget surpluses, which would not be used to restart the stalled economy but to repay the escalating debt. The previous governments had accepted the obligation to create annual surpluses of up to 5% of GDP in the next seven years, something that no government since Ceaușescu’s Romania has either attempted or achieved.
The internal devaluation was carried out through the repeated reduction of private sector wages and the abolition of the bulk of labour law protections, such a collective bargaining. At the same time, the repeated increase of taxes, including the regressive tax on real estate, meant that the bleeding of the economy reached unprecedented levels. The pauperisation of the working people, the IMF argument goes, would improve competitiveness and help economic growth. But the result was abject economic failure. The economy shrank by 26%, unemployment jumped to 27%, youth unemployment went up to 60% and more than 3 million people on or below the poverty line. The IMF admitted a couple of years ago that it had under-calculated the adverse effect of austerity on the economy – the so-called fiscal multiplier – by a factor of three.
It is against this background that the Greeks elected in January 2015 the Syriza government committed to reverse these policies. A period of negotiations followed. But these were not proper negotiations. The huge gap between the two parties in power resources and ideology made the talks brutally asymmetrical. I have called these ‘negotiations’ a European coup, an attempt at ‘regime change’ using banks and not tanks. The economic stakes for the lenders are relatively small – the Greek economy is only 2% of European GDP – and does not justify the risk of a breakdown in relations. The precautionary principle of risk theory, inscribed in the European DNA, demands that the unpredictable effects of Grexit on the European and world economy should be avoided. If the collapse of Lehman Brothers created such a huge crisis, even the consideration of Grexit is more dangerous. [Continue reading…]
In his book Governing by Debt, Maurizio Lazzarato argues that the creditor-debtor centred politics of contemporary capitalism is substantially different from the capital-labour centred politics of post-war capitalism. In fact, to understand what is at stake in contemporary Europe we need to approach debt in its totality – government, corporate, financial and household debt. We have to recognise that the debt relationship is not merely an economic relationship of money owed and collected, but a deeply political relationship of power exercised by one person or institution over another.
Consider the following graph. It shows the total debt by sector in selected EU countries at the end of 2014.
Data from McKinseyGlobal Institute (2015)
A continent sinking under debt
When debt is seen in its totality a different picture emerges from the one usually portrayed by the media. The total debts of the Netherlands and Ireland are nearly seven times their GDP, Denmark’s is 5.5 times and the UK’s more than four times. How sustainable in the long run are the levels of non-government debt in these countries? Is the exceptionally low exposure of the Greek financial sector to debt an indicator that its liabilities have been disguised as Greek government debt? And how sustainable is household debt?
Years of austerity have resulted in European families sinking under debt while experiencing increasing job insecurity, reductions in pensions and the gradual privatisation of welfare services and education.
These different types of debt are not independent from one other. They are mutually constitutive. Behind them are numerous creditor-debtor relations between actors with often diametrically opposed interests and unequal power: states, corporations, banks, financial institutions, small businesses, voters.
This “system” of European debt interacts with a global financial architecture, dominated by the demands of the financial sector. Far from being prudent, this sector is itself exposed to colossal amounts of debt-related risk, endangering all other sectors.
James Kwak writes: One of the central dramas of the early seasons of The Wire is the cat-and-mouse game between Avon Barksdale’s drug operation and the detectives of the Major Crimes Unit. The drug dealers started off using pagers and pay phones. When the police tapped the pagers and the phones, Barksdale’s people switched to “burner” cell phones that they threw away before the police could tap them. By Season 4, Proposition Joe advised Marlo Stanfield not to use phones at all.
Well, apparently, Wall Street currency traders don’t watch The Wire. I don’t think anyone was surprised to learn that major banks including JPMorgan, Citigroup, Barclays, RBS, and UBS conspired to manipulate currency prices — something that regulators have been investigating for over a year and a half. One common strategy was cooperating to time large transactions in order to manipulate daily benchmark rates at which other client transactions are executed.
What is surprising is that these traders — supposedly the smartest people around — carried out their criminal conspiracy in online chat rooms whose contents could be discovered by investigators. (In this day and age, the last thing any bank’s general counsel wants to be accused of is destroying evidence, so you should assume that everything you do over a bank’s networks will be tracked.) Even using their personal cell phones would have been much safer. (Apparently they do watch The Sopranos, however: one of the chat rooms was nicknamed “The Mafia, which is probably not a good idea when you are actually engaged in a criminal conspiracy.)
The game is still to make money any way you can. “If you aint cheating, you aint trying” is the new money quote. The clients are just collateral damage — whether or not JPMorgan says, “Throughout our long and distinguished history, we have been steadfastly committed to putting our clients’ interests first.” The offenses described in the settlement documents extended at least into 2013 — more than four years after the financial crisis. [Continue reading…]
She eats at Chipotle. (Order: chicken burrito bowl.) She travels by van. (Model: A Chevy Express Explorer Limited SE nicknamed the “Scooby” van.) She barely figures in her own presidential campaign announcement video. (Entrance timing: A minute and a half into the two-minute clip.) Her campaign staff is so cheap they don’t have business cards, they commute by Bolt Bus, and they aren’t even equipped with real phones.
This is the “new” Hillary Clinton in the early days of her 2016 presidential bid. Absent — for now — are the swagger, the grand pronouncements, the packed gymnasiums and auditoriums, and the claques of well-paid consultants falling over each other to advise and guide her that we saw in Clinton’s last presidential bid. This time around, Clinton is casting herself in a new role: as the humble and understated people’s candidate. She cares about “everyday Iowans” and “everyday Granite Staters.” She really does! Her carefully staged events with those “everyday” Americans at small-town coffee shops and local businesses give her the chance to “share ideas to tackle today’s problems and demonstrate her commitment to earning their votes.”
This effort to recast Clinton as a folksy, down-to-earth, woman of we-the-people is, however, about to collide with the reality of American politics in the money-crazed, post-Citizens United era. Winning the White House in 2016 will cost somewhere between $1 billion and $3 billion — money raised by the candidate’s own campaign and outside groups like super PACs and dark-money nonprofits. And this in an election where it’s already estimated that the overall money may hit $10 billion. Jeb Bush, arguably the most formidable candidate in the GOP field, is on his way to raising $100 million in just the first few months of 2015, a year and a half before the actual election. The prospect of being drastically outgunned by Bush has prodded Clinton to speed up her fundraising schedule and hit the donor circles in New York City and Washington in settings that couldn’t be more removed from the local Chipotle. “I need to get out there earlier,” Politico quoted her telling one of her aides.
In the coming months, whatever hours Clinton spends introducing herself to voters in small-town America, she will spend hundreds more raising money in four-star hotels and multimillion-dollar homes in Hollywood and San Francisco, New York and Boston, Washington and Miami. She will court wealthy liberals across the land and urge them to collectively give tens of millions of dollars to her campaign. The question underlying this inevitable mad dash for cash isn’t “Can Hillary Clinton raise the funds?” The Clintons are practiced buckrakers.
The question is: “Can Clinton claim to stand for ‘everyday Americans,’ while hauling in huge sums of cash from the very wealthiest of us?”
This much cannot be disputed: Clinton’s connections to the financiers and bankers of this country — and this country’s campaigns — run deep, as Nomi Prins, former Wall Street exec and author of All the Presidents’ Bankers: The Hidden Alliances that Drive American Power (just out in paperback), writes in today’s dispatch. As she documents in her book, the Clintons have longstanding ties to the mightiest banks on Wall Street. Those alliances will prove vital as Hillary tries to keep up in the “money primary” of the 2016 campaign. But as she tries to appeal to working and middle class people, you can expect her opponents to use Clinton’s Wall Street connections against her. And it’s reasonable to ask: Who counts more to such a candidate, the person you met over that chicken burrito bowl or the Citigroup partner you met over crudités and caviar? Andy Kroll
The Clintons and their banker friends
The Wall Street connection (1992 to 2016)
By Nomi Prins
[This piece has been adapted and updated by Nomi Prins from chapters 18 and 19 of her book All the Presidents’ Bankers: The Hidden Alliances that Drive American Power, just out in paperback (Nation Books).]
The past, especially the political past, doesn’t just provide clues to the present. In the realm of the presidency and Wall Street, it provides an ongoing pathway for political-financial relationships and policies that remain a threat to the American economy going forward.
When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a “champion” for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton. Such relationships run too deep and are too longstanding.
I noticed recently that the catastrophe area that was once the great city of Detroit — bankruptcy, busted neighborhoods, acres of deserted houses, water shutdowns, and now, as TomDispatch regular Laura Gottesdiener reports, an almost biblical foreclosure crisis that could result in tens of thousands of people being thrown out of their homes — regularly gets compared to “Katrina”; that is, to the destruction Hurricane Katrina visited on New Orleans back in 2005. Here are some typical headlines: “Is the Motor City ‘a five-decade Katrina?,’” “Unprecedented ‘Katrina’ of Tax Foreclosures to Hit Detroit, Wayne County March 31,” “Water Shutoffs: Detroit’s Katrina?,” “Comparing Detroit to Nola After Katrina Not So Far Off,” “A Hurricane Without Water: Foreclosure Crisis Looms in Detroit as State Takes Action.”
But in a country in which Congress has trouble raising money for essential highway upkeep, not a single mile of real high-speed rail exists (the Acela Express in the Northeast being a high-speed joke), the national infrastructure gets a D+ grade from the American Society of Civil Engineers, and one of its formerly great cities makes the phrase “hollowed out” sound like a euphemism, perhaps we should change our metaphors. Maybe when something devastates part of this country, it’s not a “Katrina” any longer, but a “Detroit.” Maybe the next time a city is hit by a hurricane, the headlines should refer to it as “a five-hour Detroit.” Maybe when the next set of aging natural gas pipelines blows up, we should speak of “an underground Detroit.”
It’s a small wonder of American life that something close to a trillion dollars a year goes into what is called “national security,” while the actual security of Americans has generally been starved of funding and insecurity is on the rise. Meanwhile, the biblical continues to happen to the former Motor City, a sign of what neglect means in the insecure heartland of twenty-first-century America. Gottesdiener, TomDispatch’s roving correspondent in forgotten America, offers a devastating account of the latest chapter in the saga of a city on the road to hell. Tom Engelhardt
A foreclosure conveyor belt
The continuing depopulation of detroit
By Laura Gottesdiener
Unlike so many industrial innovations, the revolving door was not developed in Detroit. It took its first spin in Philadelphia in 1888, the brainchild of Theophilus Van Kannel, the soon-to-be founder of the Van Kannel Revolving Door Company. Its purpose was twofold: to better insulate buildings from the cold and to allow greater numbers of people easier entry at any given time.
On March 31st at the Wayne Country Treasurer’s Office, that Victorian-era invention was accomplishing neither objective. Then again, no door in the history of architecture — rotating or otherwise — could have accommodated the latest perversity Detroit officials were inflicting on city residents: the potential eviction of tens of thousands, possibly as many as 100,000 people, all at precisely the same time.
Little wonder that it seemed as if everyone was getting stuck in the rotating doors of that Wayne County office building on the last day residents could pay their past-due property taxes or enter a payment plan to do so. Those who didn’t, the city warned, would lose their homes to tax foreclosure, the process by which a local government repossesses a house because of unpaid property taxes.
Zeynep Tufekci writes: The machine hums along, quietly scanning the slides, generating Pap smear diagnostics, just the way a college-educated, well-compensated lab technician might.
A robot with emotion-detection software interviews visitors to the United States at the border. In field tests, this eerily named “embodied avatar kiosk” does much better than humans in catching those with invalid documentation. Emotional-processing software has gotten so good that ad companies are looking into “mood-targeted” advertising, and the government of Dubai wants to use it to scan all its closed-circuit TV feeds.
Yes, the machines are getting smarter, and they’re coming for more and more jobs.
Not just low-wage jobs, either.
Today, machines can process regular spoken language and not only recognize human faces, but also read their expressions. They can classify personality types, and have started being able to carry out conversations with appropriate emotional tenor.
Machines are getting better than humans at figuring out who to hire, who’s in a mood to pay a little more for that sweater, and who needs a coupon to nudge them toward a sale. In applications around the world, software is being used to predict whether people are lying, how they feel and whom they’ll vote for.
To crack these cognitive and emotional puzzles, computers needed not only sophisticated, efficient algorithms, but also vast amounts of human-generated data, which can now be easily harvested from our digitized world. The results are dazzling. Most of what we think of as expertise, knowledge and intuition is being deconstructed and recreated as an algorithmic competency, fueled by big data.
But computers do not just replace humans in the workplace. They shift the balance of power even more in favor of employers. Our normal response to technological innovation that threatens jobs is to encourage workers to acquire more skills, or to trust that the nuances of the human mind or human attention will always be superior in crucial ways. But when machines of this capacity enter the equation, employers have even more leverage, and our standard response is not sufficient for the looming crisis. [Continue reading…]