And, it may get significantly worse before it gets any better... I've
pasted an article below Keith's comments. The article discusses how JP
Morgan has taken over all financial services for the state of Kentucky
and is starting to create something similar to the derivatives we saw
implode in the housing market. From what I've seen and read about
lately, this is becoming a very common practice.
Barry
http://www.alternet.org/story/151917/how_jp_morgan_took_over_all_kentucky%27s_financial_services%2C_and_why_you_should_be_scared?akid=7367.111339.FchIx4&rd=1&t=2
On Aug 5, 2011, at 12:31 PM, Keith Hudson wrote:
The real figure for US unemployment is not the official figure of
9.2%. When doorstep figures of those who want full-time jobs and of
those who have given up looking then the real figure is of the order
15%-18%. It's getting pretty close to the 20% figures of the Great
Depression. It's interesting -- perhaps significant -- that the
term 'Great Recession' is being increasingly used for this one -- a
sort of unconscious recognition that this one this is more than a
byproduct of the credit-crunch but something that might last for
many years. Just as the Great Depression was only solved when there
had been a radical shake-up of the job structure after the war, so
the credit-crunch might also have been a catalyst for a new make-
over that has actually been putative for a long time. When we emerge
from this one I think we might see an entirely different job
structure.
Keith
How JP Morgan Took Over All Kentucky's Financial Services, And Why You
Should Be Scared
One of the major players in the global financial crisis is now in
charge of all financial transactions in an entire state. Could this
spread?
August 4, 2011 |
Photo Credit: AFP
On July 1, JP Morgan Chase became the Commonwealth’s bank. As the
state’s official depository, JP now receives all deposits, writes all
checks and makes all wire transfers on the $12-15 billion that flow
through Kentucky state government in the course of a fiscal year. It
will cut payroll checks, receive federal and other funds earmarked for
the state, and disburse educational or transportation or any other
funds to their appropriate monetary endpoints. For its trouble, the
bank will receive $1.3 million in state fees and the ability to re-
lend idle state funds out to customers for private gain.
Yes, you should be worried.
JP's decade
A global corporation with more than $2 trillion in assets and
operations in 60 countries, JP Morgan Chase has been a major figure in
the ongoing global financial crisis. As one of the largest private
banks in the U.S., the bank made incredible amounts of money by
underwriting many of the questionable loans (sub-prime, zero down,
adjustable rate) that fueled the American housing bubble. It then made
even more money by packaging hundreds of these shitty loans into a
single “product,” a mortgage backed security, which it sold like
Twinkies to pious religious non-profits, filthy-rich hedge fund
managers, municipal fire-fighters, retired auto-workers, and the like,
each security effectively putting these groups on the hook—and not JP—
for the shitty loans that it had helped create.
When, inevitably, individual homeowners began to default on their
loans, thereby triggering the stock market collapse of 2008, JP Morgan
found a way to make money on that, too, by buying insurance (known as
credit default swaps) on the shitty securities of shitty mortgages
that it had sold to unwitting investors. For good measure, the U.S.
government handed the corporation $25 billion in TARP funds, $30
billion in U.S. treasury backing to purchase bankrupt Bear Stearns
(previously a global leader in mortgage backed securities), and the
biggest chunk of the $129 billion of taxpayer-provided money earmarked
for creditors of bankrupt credit default swaps provider AIG.
Since 2002, the bank has turned its attention to another easy revenue
source: city, state and national government debt. Along with other
large banks like Goldman Sachs, it began selling a new type of
complicated loan to countries like Greece, states like Connecticut and
Mississippi, and cities as far-flung as Birmingham, Alabama, and
Milan, Italy. Even the Delaware Port Authority and the Pennsylvania
school system have gotten caught in the JP trap.
These derivative packages, named “swaps” to ensure they do not get
officially counted as debt on government balance sheets, essentially
act as second and third and fourth-mortgages on public infrastructure
projects like airports and highways. Loaded with adjustable rates and
a slew of fees and “trigger points” that ensure rapid debt growth, the
swaps essentially ensure the privatization of public government
assets. In the case of Birmingham, Alabama, for example, Rolling Stone
journalist Matt Taibbi has reported how a city sewer project initially
estimated to cost $250 million generated “a total of $1.28 billion
just in interest and fees on the debt,” most of which went into the
private coffers of J.P. Morgan. The result for Birmingham? “Between
2008 and 2009,” Taibbi notes, “the annual payment on Jefferson
County’s debt jumped from $53 million to a whopping $636 million.” The
debt now stands at $4800 per resident.
This is the corporation that our state leaders have chosen to
safeguard and disperse public state money.
Local first
In the most recent of a slew of fraud-related lawsuits targeting JP
Morgan’s financial transactions, the corporate giant has been forced
to pay $228 million in damages for rigging bids on municipal bonds—
public debt incurred to pay for expensive infrastructure projects. The
lawsuit accused JP Morgan of insider dealings that inflated the
taxpayer cost on over 90 projects spanning 31 states. As is standard
in these cases, the money the bank was forced to pay back reflected
only a percentage of what they made off the deals, quarters on the
dollar. What’s more, because the settlement did not require the bank
to admit guilt, it has been effectively insulated from any future
litigation on behalf of the specific localities that were defrauded.
One of these states, it should be known, is Kentucky. A small blurb
appearing in the July 13 Herald-Leader, less than 2 weeks after state
leaders made JP Morgan Chase our Commonwealth bank, cited two separate
bid-rigging schemes that had made their way onto the 31-state lawsuit:
Western Kentucky’s Henderson County received $224,000 from the
lawsuit, while the University of Kentucky stood to recoup $66,000 as
part of the settlement.
“The issue with UK,” the Herald-Leader blurb reported, “involved a
series of bonds totaling $18.695 million dating to May 2001” for the
Peter H. Bosomworth Health Sciences Research Building (described by UK
as “the Medical Center’s marquee research facility”) and its utility
infrastructure.
Writing in response to the JP lawsuit on his Rolling Stone blog,
Taibbi lamented that big banks were getting away with crimes that,
when pulled off by blue-collar muscle outfits like the mob (and they
are), result in lengthy jail sentences. Fraud on the part of JP Morgan
and other corporate banks, he concluded, is “not going to stop until
people start doing hard time for these crimes.”
Unfolding events here in this state attest to how far we still have to
come. Not only does JP Morgan mostly escape prosecution, here in
Kentucky we seem hellbent on giving them the keys to our kingdom's
vault, too.
North of Center is a free bi-weekly paper located in coal-loving
Lexington, KY. We cover sports, politics, music, film, and any other
things that flow through the inner-Bluegrass region. If you're
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