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<nettime> Naomi Wolf: This global financial fraud and its gatekeepers (G
Patrice Riemens on Sun, 15 Jul 2012 15:57:36 +0200 (CEST)

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<nettime> Naomi Wolf: This global financial fraud and its gatekeepers (Guardian)

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This global financial fraud and its gatekeepers

The media's 'bad apple' thesis no longer works. We're seeing systemic
corruption in banking ? and systemic collusion

By Naomi Wolf
guardian.co.uk, Saturday 14 July 2012 15.47 BST

Protesters at Bank of America shareholders meeting in Charlotte
Protesters outside a Bank of America annual shareholders' meeting in
Charlotte, North Carolina. Photograph: Jason Miczek/Reuters

Last fall, I argued that the violent reaction to Occupy and other protests
around the world had to do with the 1%ers' fear of the rank and file
exposing massive fraud if they ever managed get their hands on the books.
At that time, I had no evidence of this motivation beyond the fact that
financial system reform and increased transparency were at the top of many
protesters' list of demands.

But this week presents a sick-making trove of new data that abundantly
fills in this hypothesis and confirms this picture. The notion that the
entire global financial system is riddled with systemic fraud ? and that
key players in the gatekeeper roles, both in finance and in government,
including regulatory bodies, know it and choose to quietly sustain this
reality ? is one that would have only recently seemed like the frenzied
hypothesis of tinhat-wearers, but this week's headlines make such a
conclusion, sadly, inevitable.

The New York Times business section on 12 July shows multiple exposes of
systemic fraud throughout banks: banks colluding with other banks in
manipulation of interest rates, regulators aware of systemic fraud, and
key government officials (at least one banker who became the most key
government official) aware of it and colluding as well. Fraud in banks has
been understood conventionally and, I would say, messaged as a glitch. As
in London Mayor Boris Johnson's full-throated defense of Barclay's
leadership last week, bank fraud is portrayed as a case, when it surfaces,
of a few "bad apples" gone astray.

In the New York Times business section, we read that the HSBC banking
group is being fined up to $1bn, for not preventing money-laundering (a
highly profitable activity not to prevent) between 2004 and 2010 ? a six
years' long "oops". In another article that day, Republican Senator
Charles Grassley says of the financial group Peregrine capital: "This is a
company that is on top of things." The article goes onto explain that at
Peregrine Financial, "regulators discovered about $215m in customer money
was missing." Its founder now faces criminal charges. Later, the article
mentions that this revelation comes a few months after MF Global "lost"
more than $1bn in clients' money.

What is weird is how these reports so consistently describe the activity
that led to all this vanishing cash as simple bumbling: "regulators missed
the red flag for years." They note that a Peregrine client alerted the
firm's primary regulator in 2004 and another raised issues with the
regulator five years later ? yet "signs of trouble seemingly missed for
years", muses the Times headline.

A page later, "Wells Fargo will Settle Mortgage Bias Charges" as that bank
agrees to pay $175m in fines resulting from its having ? again, very
lucratively ? charged African-American and Hispanic mortgagees costlier
rates on their subprime mortgages than their counterparts who were white
and had the same credit scores. Remember, this was a time when "Wall
Street firms developed a huge demand for subprime loans that they
purchased and bundled into securities for investors, creating financial
incentives for lenders to make such loans." So, Wells Fargo was profiting
from overcharging minority clients and profiting from products based on
the higher-than-average bad loan rate expected. The piece discreetly ends
mentioning that a Bank of America lawsuit of $335m and a Sun Trust
mortgage settlement of $21m for having engaged is similar kinds of

Are all these examples of oversight failure and banking fraud just big ol'
mistakes? Are the regulators simply distracted?

The top headline of the day's news sums up why it is not that simple:
"Geithner Tried to Curb Bank's Rate Rigging in 2008". The story reports
that when Timothy Geithner, at the time he ran the Federal Reserve Bank of
New York, learned of "problems" with how interest rates were fixed in
London, the financial center at the heart of the Libor Barclays scandal.
He let "top British authorities" know of the issues and wrote an email to
his counterparts suggesting reforms. Were his actions ethical, or prudent?
A possible interpretation of Geithner's action is that he was "covering
his ass", without serious expectation of effecting reform of what he knew
to be systemic abuse.

And what, in fact, happened? Barclays kept reporting false rates, seeking
to boost its profit. Last month, the bank agreed to pay $450m to US and UK
authorities for manipulating the Libor and other key benchmarks, upon
which great swaths of the economy depended. This manipulation is alleged
in numerous lawsuits to have defrauded thousands of bank clients. So
Geithner's "warnings came too late, and his efforts did not stop the
illegal activity".

And then what happened? Did Geithner, presumably frustrated that his
warnings had gone unheeded, call a press conference? No. He stayed silent,
as a practice that now looks as if several major banks also perpetrated,

And then what happened? Tim Geithner became Treasury Secretary. At which
point, he still did nothing.

It is very hard, looking at the elaborate edifices of fraud that are
emerging across the financial system, to ignore the possibility that this
kind of silence ? "the willingness to not rock the boat" ? is simply
rewarded by promotion to ever higher positions, ever greater authority. If
you learn that rate-rigging and regulatory failures are systemic, but stay
quiet, well, perhaps you have shown that you are genuinely reliable and
deserve membership of the club.

Whatever motivated Geithner's silence, or that of the "government
official" in the emails to Barclays, this much is obvious: the mainstream
media need to drop their narratives of "Gosh, another oversight". The
financial sector's corruption must be recognized as systemic.

Meanwhile, Britain is sleepwalking in a march toward total email
surveillance, even as the US brings forward new proposals to punish
whistleblowers by extending the Espionage Act. In an electronic world,
evidence of these crimes lasts forever ? if people get their hands on the
books. In the Libor case, notably, a major crime has not been greeted by
much demand at the top for criminal prosecutions. That asymmetry is one of
the insurance policies of power. Another is to crack down on citizens'


And now, for 'balance', don't miss 'the other viewpoint', Czar Boris is
fed up with this dissing of the 'Bollinger Boys':


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