Re the article that Barry sent along to the
unemployment thread (see below), I've changed the subject.
One point that might also be added about
JPMorganChase is that they were, in fact, the
originators of the CDSs (credit control swaps).
Cooked up in London and its corporate offshoot
Morgan Guaranty in the late 90s, it was these new
types of derivatives that initially mystified and
then swamped the whole financial sector,
particularly the dim retail banks. These CDSs
were the devils in the woodpile that finally
brought the whole structure crashing down in
2008. If I were a Kentuckian I would be very wary
of these bankers having anything to do with my state's finances!
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 |
On July 1, JP Morgan Chase became the
Commonwealths bank. As the states 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 hookand not JPfor 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 Countys 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 Morgans financial
transactions, the corporate giant has been forced
to pay $228 million in damages for rigging bids
on municipal bondspublic 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.
Whats 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 Kentuckys 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 Centers 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 interested, we've now got a website: noclexington.com
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/08/
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