Why the double-standard lack of accountability for the criminal actions of the financial firms of Wall Street has been a topic of concern of mine for quite some time. The recent story about the woman going to jail for food stamp fraud brings this issue to stark light, as bankers walk free after literally trillions of dollars of fraudulent gains from both criminal activity and unwarranted bailouts from the public treasury. David Sirota addresses this quite well with this piece on the abject criminal hypocrisy that this represents, and the underlying reasoning why justice is simply not being served by our so-called law enforcement agencies.

At the local level, the same governments that plead poverty when they’re asked to enforce their laws on financial fraud have somehow found plenty of resources to deploy their militarized police forces against Occupy protesters. At the federal level, it’s even more blatant. As we learned in a little-noticed Washington Post piece on Tuesday, the same Obama administration that has refused to spend political capital and federal monies to go after Wall Street is expending new resources to crack down on the supposedly rampant problem of food stamp “fraud.”

Tracking an individual example of this phenomenon, Matt Taibbi makes clear that it’s really difficult to overstate just how revealing this kind of thing is. Wall Street crooks who stole trillions of dollars are rewarded by the administration with additional trillions in bailouts. Meanwhile, those crooks - now-impoverished victims, so poor they are on food stamps, mind you - are being targeted by the same administration for criminal investigation for allegedly making a few extra bucks on recycling empty bottles.

Taken together, these microcosmic examples (and there are plenty of others) all illustrate an inconvenient truth: namely, that law enforcement decisions today are not being guided by resource questions or dispassionate analyses of priorities, they are being guided by political will.

In states, it’s not that governors and attorneys general (other than those in New York, Nevada and California) want to go after financial fraud but can’t; it’s that they don’t want to go after that fraud, and they do want to shut down anti-Wall Street demonstrations. Why? Because, in the words of Democratic Gov. John Hickenlooper of Colorado, they fear the demonstrations are “something that could easily catch on.”

Likewise at the federal level, it’s not that President Obama wants to pursue Wall Street crime. It’s that as the biggest recipient of Wall Street cash in American history, he is making deliberate decisions both to avoid prosecuting the financial sector, and to continue past policies that make prospective prosecutions more difficult than they need to be; all while playing to old “welfare queen” demagoguery with a new election-year effort to villainize food-stamp recipients.

In these decisions, we are being taught a lesson we should have learned from the instantaneous changes after 9/11. Before the terrorist attack, we were often told we were so broke, we had no money to address any national priority (other than massive tax cuts for the wealthy, of course). Immediately after the attack, however, we suddenly had unlimited resources to wage adventurist wars and finance the Military/Homeland Security/Police Complex. Of course, nothing about our budget situation changed; the only thing that changed back then was the whims of politicians.

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So, I gather I’m not the only one sensing this? An impending Chernobyl of financial corporate capitalism? The economic fallout could be truly ugly if we are not prepared, or don’t respond effectively to it. There are many in positions of powerful influence in America today who have always truly hated how FDR responded to the previous global crisis with the New Deal. They much prefer Mussolini’s ideas for addressing these issues, both economically and politically.

Lesson number one is that the financial and social causes are linked. Lesson number two is that what links the City banker and the looter is the lack of restraint, the absence of boundaries to bad behaviour. Lesson number three is that we ignore this at our peril.

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Currency markets lost their anchor in 1971 when the US suspended dollar convertibility. Over the years, financial markets have lost their moral anchor, engaging not just in reckless but fraudulent behaviour. According to the US economist James Galbraith, increased complexity was the cover for blatant and widespread wrongdoing.

Looking back at the sub-prime mortgage scandal, in which millions of Americans were mis-sold home loans, Galbraith says there has been a complete breakdown in trust that is impairing the hopes of economic recovery.

“There was a private vocabulary, well-known in the industry, covering these loans and related financial products: liars’ loans, Ninja loans (the borrowers had no income, no job or assets), neutron loans (loans that would explode, destroying the people but leaving the buildings intact), toxic waste (the residue of the securitisation process). I suggest that this tells you that those who sold these products knew or suspected that their line of work was not 100% honest. Think of the restaurant where the staff refers to the food as scum, sludge and sewage.”

Finally, there has been a big change in the way that the spoils of economic success have been divvied up. Back when Nixon was berating the speculators attacking the dollar peg, there was an implicit social contract under which the individual was guaranteed a job and a decent wage that rose as the economy grew. The fruits of growth were shared with employers, and taxes were recycled into schools, health care and pensions. In return, individuals obeyed the law and encouraged their children to do the same. The assumption was that each generation would have a better life than the last.

This implicit social contract has broken down.

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There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism.

But this is a fork in the road. History suggests there is no iron law of progress and there have been periods when things have got worse not better.

Together, the global imbalances, the manic-depressive behaviour of stock markets, the venality of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the riots are telling us something.

This is a system in deep trouble and it is waiting to blow.

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Ellen Brown delivers one of the clearest, most concise, easily understood pieces I’ve read on what makes up our banking and financial system, who runs it and why, and how we got into the current mess that we have, and whose primarily responsible.

Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008. Public services are being slashed and public assets are being sold off in a futile attempt to balance budgets that can’t be balanced because the money supply itself has shrunk. Governments usually get the blame for excessive spending, but governments did not initiate the crisis. The collapse was in the banking system and in the credit that it is responsible for creating and sustaining.

Contrary to popular belief, most of our money today is not created by governments. It is created by private banks as loans. The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally. The system, however, contains the seeds of its own destruction. The source of its power is also a fatal design flaw.

The flaw is that banks advance “bank credit” that must be paid back with interest, continually requiring more money to be repaid than was created as loans; and the only way to get additional money from the private banking system is to take out yet more loans, at interest. The system is, in effect, a pyramid scheme. When the banks run out of borrowers to support the pyramid, it must collapse; and we are nearing that point today.

There are more sustainable ways to run a banking and credit system, as will be shown…

Ellen Brown does indeed proceed to show how this can (and should) be done. Read all about it Here.

Danny Shechter delivers one of the best, concise reviews on what happened, and why it happened, regarding the financial meltdown that our nation has been undergoing. It was not, as the recent film Too Big Too Fail tries to imply, due to a bunch of unforeseen circumstances, triggered by simple personal greed and lack of proper processes; but rather, its underlying causality was crime. It was (and is) the product of criminal intent, not simply foolish, greedy incompetence.

There was greed, ambition, ego and money lust. There were personal rivalries and ideological battles, parochial agendas and narrow self-interest. There was panic on THE Street and in the halls of mighty institutions. In many ways, the program recycled and made an official narrative compelling viewing. In the end, everyone was to blame so no one was to blame.

But … what was missing was any notion of intentionality and premeditation, almost no mention of systemic fraud and CRIME, that one word that sums up what really happened for those millions of Americans who have lost jobs and homes. We never saw victims or felt their pain and bewilderment. We were never shown how a shadow banking system emerged or how the finance industry worked with their counterparts in finance and insurance to transfer wealth from the poor and middle class to the superrich.

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At the same time, in those year I watched TV shows glamorize the bank robbing antics of a man named Willie Sutton who also staged jail breaks wearing masks and costumes. When he was asked why he robbed banks, he responded famously, “That’s where the money is.”

And it still is, except in our era, it is the banks that are robbing us.

That’s because what’s now called the “financial Services sector” has gone from about 30 percent of our economy to over 60 percent. Through a process called financialization, they have transformed how all business is done.

Making money from money soon began to surpass making money from making things. What we were never warned about was the danger of getting too deeply in debt, or how the economy was shifting from production to consumption.

Private equity, credit swaps, derivative deals and collateralized debt obligations soon drove the economy. Markets became captives of high performance trading by powerful computers.

When Wall Street became the defacto capital of the country, the bankers accrued more power than the politicians who they bought up with impunity. Their lobbying power deregulated the economy and decriminalized their activities. They killed many of the reforms enacted during the New Deal designed to protect the public. They built a shadow (and shadowy) banking system beyond the reach of the law.

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The truth is that most of the bigger banks have emerged from the financial crisis stronger than ever, with executives cashing in with higher salaries and bigger bonuses. That old saying about criminals who “laughed all the way to the bank” has to be revised because in this case they never left the bank.

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Why are so many us banking on a financial recovery to bring back jobs and a modicum of justice created by the very people and institutions responsible for the crisis?

And why didn’t I learn about these dangers when I first discovered the wonderful world of banking? Isn’t that what schools are for?

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Richard D. Wolff weighs in on the issue in The Crisis Enters Year Five

As Wolff succinctly points out…”The largest corporations and richest citizens long ago learned that if you want to sustain an extremely unequal distribution of wealth and income, you need an equally unequal distribution of political power.”

Plus, Robert Scheer weighs in on the rather disingenuous portrayal of the facts of the matter with his piece Access Journalism: The Movie.

A must see for anyone wishing to understand the real root causes of the current financial problems plaguing this country.

Insightful and educational article by Ellen Brown on our banking system, and why North Dakota has a model well worth emulating in the rest of the country. Highly recommended for those interested in better understanding our current financial situation, and for some real-world, workable public interest solutions to effectively solving them.

Pouring money into the private banking system has only fixed the economy for bankers and the wealthy; it has not done much to address either the fundamental problem of unemployment or the debt trap so many Americans find themselves in.

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In this dark firmament, however, one bright star shines. The sole state to actually gain jobs is an unlikely candidate for the distinction: North Dakota. North Dakota is also one of only two states expected to meet their budgets in 2010. (The other is Montana.) North Dakota is a sparsely populated state of less than 700,000 people, largely located in cold and isolated farming communities. Yet, since 2000, the state’s GNP has grown 56 percent, personal income has grown 43 percent and wages have grown 34 percent. The state not only has no funding problems, but this year it has a budget surplus of $1.3 billion, the largest it has ever had.

Why is North Dakota doing so well, when other states are suffering the ravages of a deepening credit crisis? Its secret may be that it has its own credit machine. North Dakota is the only state in the Union to own its own bank. The Bank of North Dakota (BND) was established by the state legislature in 1919, specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. The bank’s stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota.

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The BND’s populist organizers originally conceived of the bank as a credit union-like institution that would free farmers from predatory lenders, but conservative interests later took control and suppressed these commercial lending functions. The BND is now chiefly a “bankers’ bank.” It acts like a central bank, with functions similar to those of a branch of the Federal Reserve. It avoids rivalry with private banks by partnering with them. Most lending is originated by a local bank. The BND then comes in to participate in the loan, share risk and buy down the interest rate.

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The BND studiously avoids competition with private banks, but a publicly-owned bank could profitably engage in commercial lending. A successful model for that approach was the Commonwealth Bank of Australia , which served both central bank and commercial bank functions. For nearly a century, the publicly-owned Commonwealth Bank provided financing for housing, small business, and other enterprise, affording effective public competition that “kept the banks honest” and kept interest rates low. Commonwealth Bank put the needs of borrowers ahead of profits, ensuring that sound investment flows were maintained to farming and other essential areas; yet, the bank was always profitable, from 1911 until nearly the end of the century.

Indeed, it seems to have been too profitable, making it a takeover target. It was simply “too good not to be privatized.” The bank was sold in the 1990s for a good deal of money, but it’s proponents consider it’s loss as a social and economic institution to be incalculable.

A State Bank of Florida?

Could the sort of commercial model tested by Commonwealth Bank work today in the United States? Economist Farid Khavari thinks so. A Democratic candidate for governor of Florida, he proposes a Bank of the State of Florida (BSF) that would make loans to Floridians at much lower interest rates than they are getting now, using the magic of fractional reserve lending…

The state could earn billions yearly on these loans, while saving hefty sums for consumers. It could also refinance its own debts and those of its municipal governments at very low interest rates. According to a German study , interest composes 30 percent to 50 percent of everything we buy. Slashing interest costs can make projects such as low-cost housing, alternative energy development, and infrastructure construction not only sustainable, but profitable for the state, while at the same time creating much-needed jobs.

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Also, for more on issues regarding the almost ponzi-like scams inherent in our current banking system, check out Brown’s webofdebt.com

Ever wonder how North Dakota seems to be surviving the recession (depression?) as well as it is? Perhaps it’s their “socialist” banking system.

It has no automatic tellers or drive-up windows, doesn’t issue credit cards, and tends only a few thousand checking and savings accounts. Its only location is a glass, steamboat-shaped headquarters near the Missouri River, where the business moved from its original 1919 home in a former auto assembly plant.

The Bank of North Dakota — the only state-owned bank in the United States — might seem to be a relic. It was the brainchild of a failed flax farmer and one-time Socialist Party organizer during World War I.

But now officials in other states are wondering if it is helping North Dakota sail through the national recession.

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Dean Baker nails it again…

It would difficult to imagine someone with a comparable record of disastrous failures being allowed to remain in most jobs. Would a nurse who routinely administers the wrong medicine and causes his patients to die be allowed to keep his job? Would a bank teller who leaves the cash drawer open remain in her position? How about the school bus driver who comes drunk to work?

In most lines of work, a certain level of competence is expected. Unfortunately, this is not the case for those who set US economic policy.

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Also, it truly is a “Question of Priorities,” as Baker brings additional clarity and concision to the unnecessarily (and purposefully) convoluted economic situation, as well as detailing the negligence and even stupidity of the bank bail-outs, with this insightful interview.

Highly recommended.

Read The Interview

This is one of the best, most concise, explanations I’ve ever read on how Wall Street banking firms are controlling the economy. Ellen Hodgson Brown describes an ongoing drama between Wall Street and Washington that gets next to zero coverage in the corporate press, and lays lie to the ongoing mythology of the “free market” that continues to intoxicate our nation’s prevailing political orthodoxy.

We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Rubin). Left strewn on the battleground could be your pension fund and 401K.

The late Libertarian economist Murray Rothbard wrote that US politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.

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Here’s an additional gem to help drive the point forward…
JPMorgan Chase Aided and Abetted a $250 million Ponzi Scheme

The biggest Ponzi scheme of all is the one that the President of the United State and Congress are playing on the rest of the world.

We borrow more and more money and pay the interest with the new borrowed money.

Every year we have to borrow more and more money for wars and of course, to pay the interest.

Congress is in the process of raising the debt limit to over $14 trillion.

The Republicans are standing in the way to make the Democrats look bad but the Republicans had no problem with the finances spinning out of control during the Reagan and Bush administrations.

But Congress will, of course, raise the debt limit because if they don’t the whole Ponzi scheme will come to an end and we will be desperately poor as every tax payer in the United States now owes $150,000 toward the debt and we can hardly pay our own bills as it is…except for the people living under the local bridge who can’t do that.

How are all of those investors going to feel when the Ponzi scheme falls apart and we try to pay them off with worthless dollars? Perhaps they won’t be happy with us.

I think that will cause a world depression like we can not imagine.

The biggest joke that I can think of now is the United States lending our banks money at close to zero percent interest and then the banks buy US treasury bonds paying about 4 percent interest and make 4 percent interest on the billions that they borrowed.

Of course these huge banks get preferred interest rates of zero percent because they are too big to fail and are the biggest joke of all.

I met a banker in NYC several months ago and I asked him about the government’s Ponzi scheme.

He said that every time the federal government looks to borrow money there are all kinds of people lined up wanting to lend money. He thinks this will go on forever since the US government never defaults.

That may be the case but the dollars they pay in interest are usually worth less and less.

I don’t know why other countries line up to lend US money at 4 percent interest when the value of the dollar has dropped 14 percent since March.

But, all of our creditors are as much interested in keeping the biggest Ponzi scheme going as we are.

Perhaps we shouldn’t tell anyone that we are running the biggest Ponzi scheme of all. We might end up in the cell next to Madoff.

- Posted by Stephen Bickford