The Clinton Foundation has again been the victim of a new hack carried out by Guccifer 2.0, leading to the revelation of some interesting details. Among them is an Excel file with a list of donors.

So far (let's face it) there is nothing new. But the problem for Clinton, the banks and Barney Frank is the refrain «Tarp Funds»; basically the 2008 financial crisis. The Bush administration, with a $700 billion maxi-loan (made up by citizens’ taxes), granted instant cash and saved the big banks from bankruptcy.

The infamous measure will be called TARP:

The Troubled Asset Relief Program (TARP) is a United States government program to purchase toxic assets from financial institutions, and actions to strengthen the financial sector. It was signed by US President George W. Bush on October 3, 2008.

A small detail to keep in mind: the loan was funded with taxes paid by US citizens.

However, the banks were saved, speculation continued, and two years later, a decree that negatively changed the American financial system was passed, the infamous Dodd-Frank.

The words of the Wall Street Journal thoroughly explain how the financial giants and the big banking conglomerates have profited from this other law-saving bank:

«Dodd-Frank was allegedly written thinking of Wall Street, but has hit Main Street. The financial community institutions, which make up most of loans to small businesses, are overwhelmed by the complexity of the new law. Government figures indicate that the country is losing an average of a community bank or credit union each day.

Before Dodd-Frank, 75% of banks were offering a free account. Two years later, only 39% of bank still offer that free-of-charge savings account.

Due to the Dodd-Frank, the financial markets will have less ability to cope with shocks and are more likely to panic [and panic = speculation = profits for banks and financial institutions]. Many economists believe this could be the source of the next financial crisis».

Two further details if you have not already guessed the extent of these revelations. The Frank in question is Barney Frank, the guy mentioned several times in the the donations. Guess who Frank received the money from. Banks, of course! The same banks for whom Frank significantly increased their revenue thanks to the law with his name. What better way for JP Morgan, Goldman, Bank of America and company to show appreciation for their future gains than by raising tens of thousands of dollars for Frank and his party?

The revelations are likely to be a disaster for Clinton and the Democrats. The large banking corporations have funded them using money from the TARP fund. They have given the Democratic Party money collected from taxes and granted for a completely different purpose (namely, to deal with the failure of the financial giants).

These hidden financial mechanisms reveal the backstory behind the US electoral system. An elite made up of financiers, bankers and lobbies are the real stakeholders and decisive contributors in presidential elections. They fund all central and vital aspects of democratic and republican campaigns, becoming an indispensable support for any candidate. In return, politicians allow direct procurement and assign huge projects to large industries, or turn a blind eye in case of financial fraud. The consequences are clearly visible in America's deterioration, increasingly grappling with corruption cases, postponed projects, a lagging behind, and a general feeling of backwardness in vital infrastructure.

In the military field, for example, large lobby groups of weapons manufacturers have created a procurement system that threatens to squander forever the tactical and strategic advantage obtained by the United States over the last 70 years. Programs such as the F-35 were delayed and costs surged stratospherically due to likely corruption and a lack of competition in the procurement process. Similarly, a perpetual race to produce more and more weapons systems that are in the end unnecessary and redundant, instead of exploring new pathways, has enriched US policymakers and made the military-industrial complex much wealthier, but in the process has served to reduce the gap between the US and her peer competitors.

This whole process is a vicious cycle that can easily be summarized in the following manner. Politicians often derive their strategies and tactics from the reasoning and the conversations that take place in US think-tanks, which are funded and supported by companies involved in such industries as pharmaceuticals, insurance, the military, and the cyber and space spheres. In the case of war involving weapons systems, for example, it is easy to understand why policymakers are being influenced by their contributors, who often suggest courses of action and strategies based on the need to spend huge amounts of money to acquire their new products, thereby enriching said lobbies and manufacturers in the process. This triangular system – lobby-thinktank-policy – is one of the founding pillars of current American war doctrine that is failing miserably.

In the same manner, the banking and financial system of Wall Street also contributes and enjoys the same privileges. The banks were bound to return the favor, in the form of millions of dollars of donations, to the political class that was responsible for saving them from the 2008 financial crisis stemming from wild speculation and accounting deceptions. Within a few months, billions of dollars were transferred for free into the accounts of the banking giants thanks to the TARP decree, effectively preventing a major bankruptcy. The consequences were so devastating that today we are experiencing a systemic and endemic crisis of the financial sector that is likely to completely overwhelm Western economies the next time a too-big-to-fail scenario arises.

Politicians continue to enact laws in favor of the banking giants, pocketing large sums of money for their election campaigns in the process. The attention is constantly drawn towards effectively increasing the gap between the top 0.1% and the remaining 99.9%, and the politicians are the key factor in this strategy. Laws adopted in recent years have created an environment where banks have become untouchable and beyond reach. It is a situation that is exactly the opposite of what should have happened after the 2008 crisis, with increased oversight and transparency in financial transactions.

The extent of the degeneration of this system has been revealed in recent days with the information released by Guccifer 2.0. Even though nothing should any longer be surprising given what has transpired over the last few years, one is still taken aback by revelations that the banking giants are financing the Clinton campaign directly with American taxpayers’ money. If we add to this the funds that were freely handed over by the government to save those same banking institutions from bankruptcy in 2008, we take another step further into the theater of the absurd.

Another $5 billion will be paid in the near future… To these statistics can be added data from a Morgan Stanley report released in August 2015: the five largest banks in the US, plus 20 European banks, have paid $260 billion in fines and compensation for various types of deception and fraud since the 2007-2008 financial crisis. Bank of America owes the most legal fees – $65.6 billion, while JPMorgan is out $42.4 billion, and the British bank Lloyds – 26.6 billion pounds.

Con artist bankers

The years immediately following that global crisis saw a fierce debate in the West over how to prevent a recurrence of that disaster. There were proposals to increase the supervision over banks, toughen their capital requirements, break up the banking giants, stiffen the penalties for violations, make transactions in financial derivatives markets more transparent, and launch investigations to identify and punish those responsible for the crisis.

There were also attempts to take action. In the US, for example, the Dodd-Frank banking reform act was passed in 2010. But by 2011 the economic and financial picture in the US and other Western countries had stabilized, and many of the ideas espoused in 2009-2010 were happily forgotten. 

Perhaps the only example of admirable industry on the part of Western financial regulators was their investigation into the unseemly conduct of large and leading banks. These inquiries were most far-reaching in the US. The series of investigations began by identifying the role of specific banks in the creation of the housing bubble. Then the government began a probe into banking shenanigans in the markets for various types of swaps, which are financial instruments that banks and companies use to ostensibly hedge the risks of defaults and sharp market fluctuations. The circle of the investigations began to widen. US regulators increasingly began to cast their gaze on City of London banks, as well as other European giants.

And financial regulators in Europe launched their own inquiries. Most of the duplicity originated in secret deals between the largest banks. Clues emerged pointing to the existence of international banking cartels and gross violations of antitrust laws, not to mention violations of laws designed to combat the financing of terrorism, drug trafficking, corruption, shady transactions, and tax evasion.

Almost every month the media reports that one or another bank of global significance has agreed to pay millions or even billions of dollars for their transgressions. Increasingly, these payments are not ordered by the courts, but are made as part of an settlement between the offending bank and supervisory agencies. The banks prefer to settle out of court. Bad publicity is worse than a fine. According to media reports, the penalties are either paid to the government or go into special funds to compensate the victims of the deception and fraud.

Bank of America is a top-ranking con artist

In 2013, the US government ordered JP Morgan to pay $13 billion to resolve claims related to the sales of mortgage-backed securities. In late 2013, as part of a similar investigation, Deutsche Bank accepted a settlement deal with US authorities and paid $1.4 billion. Citigroup agreed to pay the US government $7 billion in July 2014 to end an investigation into substandard mortgage-backed securities.

But Bank of America holds the record. In August 2014 that giant negotiated an agreement with the US Justice Department to pay a fine of $17 billion as recompense for its misdeeds involving securities prior to the financial crisis. Sharks from Bank of America had traded various types of residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDO), all based on toxic home loans. As a result, Bank of America has committed to hand over $10 billion to the US Justice Dept., plus another $7 billion to provide a variety of financial assistance to US homeowners struggling with mortgage payments.

Last year the US and British governments ordered several banks to pay fines totaling $5.8 billion for manipulating the currency markets. That list included America’s Citicorp and JP Morgan, the UK banks Barclays and RBS, and Switzerland-based UBS. The largest fine was paid by the British bank Barclays, which was penalized for $2.4 billion.

The Financial Times estimates that from 2007 to 2013 big banks paid US financial regulators a total of 200 fines amounting to approximately $100 billion, while $15 billion was shelled out by foreign banks. Assuming that the fines paid in 2014 and 2015 remained at the 2013 level, that would work out to at least $200 billion that US and foreign banks were forced to pay the US government between 2007 and 2015. Our guess is not far off from the numbers cited in that Morgan Stanley report.

The figures given are stunning. However, Wall Street and City of London banks have adapted to the new scenario fairly quickly. The bankers themselves admit that they see such payments as simply a new line-item expenditure. The profits that the banks receive from their secret cartel agreements and various games and misdeeds more than make up for these «expenditures». Even in 2014 when the crusade for fining banks was at a fever pitch, US banks were raking in record profits. For example, Citicorp, one of the principal defendants in many banking scandals in the first half of 2015, saw its net profits increase 130% compared with the same period in 2014.

Iceland has begun to put bankers behind bars

There are many indications that the battle to instill order in the US banking sector is just for show. For example, the Dodd-Frank Act merely represents a regulatory framework and is itself difficult or even impossible to apply directly. And banking lobbyists have blocked the drafting of a package of more specific legislation, which would have helped inaugurate serious reforms within the banking sector of the US economy. Under pressure from Wall Street banks, US financial regulators have decided that the new international capital requirements known as Basel III will not yet be mandatory within the American banking system.

In addition, although fines are being meted out to banks and the banks are paying them, the bank managers and employees who green-lighted the misconduct have until quite recently gone unpunished. That situation has only begun to change in the last few months.

In October 2015, courts in Iceland handed down sentences against five bankers who helped usher in the country’s 2008 financial crisis. Among those convicted were three senior managers from Landsbanki Íslands and two senior managers from Kaupthing Bank. Then suddenly, without any particular hoopla, sentences were pronounced against even more bankers working in Iceland. A total of 26 have been convicted. This is the world’s first ruling against the bankers responsible for the financial crisis of 2007-2009.

Is the jig up yet?

On Jan. 11 eleven former employees of Deutsche Bank, Barclays, and Société Générale appeared in a London court, charged with manipulating the Euro Interbank Offered Rate (Euribor), which sets interest rates on many financial products, including mortgages.

The Libor and Euribor interbank rates, which determine the cost at which banks lend to one another, are used to price more than $450 trillion of financial products. More than three years since the British bank Barclays admitted in 2012 that its traders had tried to manipulate the Libor and Euribor rates between 2005 and 2009, legal proceedings have begun. For many bankers the start of the trial in London was a genuine shock.

In the world of banking, where the London lawsuit is currently a hot topic, there are those who point out that only the managers of European banks are in the dock. And they hope that Wall Street banks are not next. Others claim that the trial in London is just the beginning. And finally, a third group is suggesting that it’s not that hard to figure out which bank managers and employees are responsible for the misbehavior.

The long silence on the part of the banks and regulators can only be explained by well-established bonds of corruption. Financial regulators are always guided by two unwritten rules in their work. One rule applies to the banks as legal entities: Too big to fail. The other applies to the managers of large banks: Too big to jail.

The lawsuits in Iceland and London are the first exceptions to the second rule. The government’s frantic reaction to the impending second wave of the financial crisis is a sure sign that the jig is up.

In all the years of testing, the majority of US banks have received a rating of ‘satisfactory’, and even then with a stretch of the imagination. Some banks have had to retake the exam. The examiners are financial regulators, first and foremost the US Federal Reserve System, while the examinees are systematically-important banks that are said to be too big to fail. This means that these banks have such a huge number of links and these links are so wide-ranging that their bankruptcy would have catastrophic consequences for the economy as a whole.

Table 1.

Assets of major US banks (as of 15 September 2014)

As Table 1 shows, the total assets of the ‘big six’ US banks as of 30 September 2014 equalled $9.85 trillion. At that point in time, the total assets of the whole banking system equalled $15.35 trillion. In other words, six banks accounted for almost two thirds of all the assets of the US banking system.

Let us also add the assets of the next six banks to the total assets of the ‘big six’ (trillions of dollars): U.S. Bancorp. (0.39); Bank of New York Mellon (0.39); PNC Financial Services Group (0.33); Capital One (0.30); HSBC North America Holdings (0.28); and State Street Corporation (0.27). It works out that the assets of the ‘big twelve’ equal $11.81 trillion, or 76.8 per cent of the total assets of the entire US banking system. The asset figures of banks outside the top 20 are falling sharply. The Synovus Financial Corporation, for example, which is 50th in the list of US banks, has assets equal to $26.5 billion, i.e. almost 100 times less than JP Morgan Chase.

Incidentally, at the beginning of 2014 there were 6,981 banks in the US. It turns out that a vast number of banks are nothing but small fry in comparison with the ‘big six’ and the ‘big twelve’. Every year, the banking giants on Wall Street consistently swallow up small, medium and even relatively large banks. The FRS has monitored the number of banks in America since 1934. At its peak in the mid-1980s, there were more than 18,000 banks in the US. Over the last three decades, more than 11,000 banks have ceased to exist. In 2013, the number of banks fell below 7,000 for the first time, which is less than there were in 1934. The 2007-2009 financial crisis, when most of the banks with assets of less than $100 million exited the market, played its part in purging the US banking sector.

Financial regulators are only interested in the largest US banks. Every year, 20-30 banks undergo stress testing. The main benchmark for getting a positive mark in the exam is sufficient capital. The bank needs to have its own capital and it needs to be liquid capital so that it will be able to cover its obligations (to customers with deposit accounts, other lending banks etc.) in case of emergency. Unlike companies in other sectors of the economy, banks are allowed to work while partially covering its obligations. But the real secret of their resilience lies in the fact that the Central Bank (the creditor of last resort) and the government rush in to save them at critical moments, providing loans to a drowning bank or increasing a bank’s equity capital. According to various estimates, between $1 trillion and $2 trillion of public money was pumped into the US banking system during the 2007-2009 financial crisis. Despite such generous handouts, however, not all the banks were saved. The biggest loss during the crisis was the banking giant Lehman Brothers. On the eve of the financial crisis, incidentally, some of the leading Wall Street banks (Citigroup, Morgan Stanley and others) had a capital adequacy indicator of around 4 per cent.

So how do matters stand with this figure after the crisis? Here are the 2014 stress testing results for the ‘big six’ US banks (%): Wells Fargo – 8.2; Citigroup – 7.2; Goldman Sachs – 6.9; JP Morgan Chase – 6.3; Morgan Stanley – 6.1; and Bank of America – 5.9.

There were no radical changes in 2015 from the year before. The capital adequacy assessment was 6.5 per cent for JP Morgan Chase, 6.3 per cent for Goldman Sachs, 6.2 per cent for Morgan Stanley and so on. Of the major banks that make up the top ten, the Bank of New York Mellon came out top with 12.6 per cent. Experts believe that the value of this indicator across the US banking system as a whole is at the 5 per cent level. This is considered to be the minimum level allowed for banks undergoing testing. In other words, the situation regarding the stability of US banks is far from satisfactory.

Banks are also being tested in Europe, but there are stricter examinee requirements there than in America. In comparison with American financial organisations, some European banks seem like A-star students. Deutsche Bank, for example, has a capital adequacy ratio of 34.7 per cent.

The US Federal Reserve System is not hiding the fact that four of the leading banks on Wall Street only just passed the test in 2015. These are JP Morgan Chase, Morgan Stanley and Citigroup Inc. The banks have been presented with conditions and restrictions in implementing proposed financial and investment plans. The main restriction is in the payment of dividends to shareholders. Problem banks are also being presented with restrictions in buying back their own shares (as you know, this kind of operation is a way of increasing a bank’s market capitalisation).

Citigroup’s top managers are pleased with even a relatively satisfactory mark, since the bank has completely failed the test twice before. This reflected badly on its ranking and market capitalisation, and dividend payments were postponed to a much later date.

This year, two US subsidiaries of European banks – Deutsche Bank AG and Banco Santander SA – took part in the Federal Reserve’s stress tests and both failed. Some experts are referring to these ‘fails’ as a biased assessment, a kind of banking protectionism. European banks like Credit Suisse, Barclays and UBS had said they are were going to put their US subsidiaries forward for the Federal Reserve’s annual exam, but the failure of the European banks in the latest exam has forced them to rethink.

Wall Street banks are currently paying for the lack of control that existed in the US financial sector from the beginning of the 1980s to the 2007-2009 financial crisis. Under Ronald Reagan, a process began to ‘deregulate’ the banking sector. In particular, interest rate restrictions on banks’ deposit operations were lifted. An important milestone was reached in 1999, when the Glass-Steagall Act, one of the first banking laws passed under President Franklin Roosevelt in 1933, was repealed. The law had introduced a strict separation of banking into commercial and investment, allowing the speculation of bankers on financial markets that would risk customers losing their money to be curbed. The final major act in the ‘deregulation’ of banking activities took place under George W. Bush. In 2004, the US Securities and Exchange Commission allowed investment banks to extend unlimited amounts of credit for the purchase of securities (which is exactly what led to the 1929 stock market crash). Banks did not fail to take advantage of this right, having already started to pump up the bubble on the mortgage-backed securities market.

Today, Wall Street banks are stuck between a rock and a hard place. On the one hand, shareholders are demanding generous dividend payments and an increase in the market capitalisation of banks, i.e. share prices, and senior bank managers are unhappy that their bonuses were cut dramatically after the crisis. On the other, financial regulators are trying to curb the greedy aspirations of shareholders and managers. The 2007-2009 financial crisis has still not faded from the minds of Americans, and regulators are giving very specific recommendations. On the results of last year’s stress test, Morgan Stanley was strongly advised to increase its equity capital by $13.66 billion, Goldman Sachs by $9.46 billion, and JP Morgan Chase by $8.38 billion.

The results of the stress testing shows that America is living on a delayed-action mine called the US banking system, and sooner or later this mine is going to explode. According to Simon Johnson, a former chief economist of the IMF, the fact that banks have too little equity capital in conjunction with the sluggishness of financial regulars is creating a serious threat to the US economy. Today, says Simon Johnson, the situation in the American economy is reminiscent of the events that led to the financial crisis: «We already saw this movie, and it ended badly. Next time could be an even worse horror show»

JPMorgan Chase Becomes the Main Target

While at first the main target of prosecution on charges of discreditable mortgage practices was Bank of America, which was traditionally one of the top five, if not the top three banks on Wall Street, in autumn 2013 JPMorgan Chase topped the black list. Among Wall Street banks it has consistently occupied first place in assets (currently 2.3 trillion dollars).

JPMorgan Chase will pay the U.S. government 13 billion dollars in exchange for dropping the investigation into the bank's activities in the mortgage field. An agreement to this effect was reached by the bank's management and the U.S. Department of Justice. This is an absolute record for compensations received by the U.S. government from a private business… Incidentally, JPMorgan Chase became a «record holder» in a number of activities even earlier, but the bank prefers not to publicize some of its «achievements». For the period from 2008 to early September 2013, JPMorgan's court and legal costs exceeded 18 billion dollars, which is a record for American banks. This includes costs connected with all the bank's various sins: money laundering, manipulation of LIBOR rates, falsification of financial reports, misleading clients with regard to the real price of stock being purchased (trust activities), etc. The most recent big scandal surrounding the bank is connected with the episode called the «London Whale trades». A trader at the British office of JPMorgan Chase caused losses of over 6 billion dollars as a result of manipulations with derivatives. During their investigation of the «London Whale» incident, financial regulators in the U.S. and Great Britain uncovered a heap of violations on the part of the bank and fined JPMorgan Chase 1 billion dollars. That was in September 2013. And in October the bank became the «main character» in a scandalous episode related to mortgages and mortgage securities. 

Litigation between JPMorgan Chase and the U.S. government over the settlement of claims for the mortgage schemes of last decade had been going on for a long time. The bank had been steadily retreating. At the beginning of the year JPMorgan Chase made an offer to the U.S. government to pay around 3 billion dollars both for federal claims (from financial regulators) and for the claims of cheated investors who had at some time bought «junk» mortgage securities issued by the bank. The government considered this to be too little. Several more months passed, and in September of this year reports appeared in the media that the parties might settle on 11 billion dollars. On October 18 unofficial reports appeared that JPMorgan Chase had agreed to pay 4 billion dollars toward settling the claims of the Federal Housing Finance Agency. However, this was only part of the final agreement with the U.S. Department of Justice, which came to 13 billion dollars, as mentioned above. At the same time, the payment of 13 billion dollars is to guarantee that all further civil claims against the bank will be closed on both the federal and state level. But JPMorgan Chase, like Bank of America, is having to pay not only for its own mortgage sins, but for the sins of those companies it acquired during the crisis. In this regard it is worth noting the acknowledgements of Joseph Grundfest, a former commissioner of the U.S. Securities and Exchange Commission (SEC). He stated that most of the questionable mortgage deals were made by banks which JPMorgan bought during the financial crisis at the request of the American government, and not of its own volition. Apparently this was some kind of tacit deal with the government by means of which the bank was then able to receive astronomical amounts of money from the Treasury Department and from the Federal Reserve to save itself. In 2008 JPMorgan came to the assistance of the American government and acquired Bear Stearns and Washington Mutual, which were on the brink of bankruptcy. It was these two companies which had issued the lion's share of the «toxic» securities totaling 33 billion dollars which the bank is being accused of selling to the federal mortgage agencies Fannie Mae and Freddie Mac. 

JPMorgan Chase Goes into the Red

The «raids» of financial regulators have begun to tell on the financial status of the bank. JPMorgan Chase was one of the few Wall Street banks which had been able to weather the storm of the financial crisis with no losses in its yearly and even quarterly reports. Starting in 2004, JPMorgan Chase had been showing positive financial results, i.e., a profit, in its quarterly reports. But in the report for Q3 2013, the bank for the first time showed a loss of 380 million. Incidentally, a year before this, in Q3 2012, the bank made a profit of 5.7 billion dollars, and in the second quarter of 2013 a profit of 6.5 billion dollars was recorded. Analysts note that the losses arose from legal costs of 7.2 billion dollars. This includes legal fees, preparation and conducting of negotiations with financial regulators, and payment of fines and compensations. The main part of the legal costs in the third quarter was contributions to the special fund for covering costs within the scope of the agreement reached with the Department of Justice. However, the bank was only able to insure itself against further «raids» by regulators in one area; in other areas, regulating organizations are continuing to investigate JPMorgan. For example, charges of taking bribes (in particular, in connection with the employment of relatives of the heads of Chinese state companies), manipulating key market rates, falsifying financial reports, etc. are being prepared. The topic of mortgages is not completely closed either; criminal charges could still be brought, which would also cause the bank serious expenses. 

Government pressure from financial regulators, district attorney's offices and courts is becoming more palpable each year. In late August 2013 Bloomberg experts reported that since 2008, six leading U.S. banks had spent 103 billion dollars on payment of compensations and settlement of various claims from individuals (investors, mortgage holders, and other categories of bank clients) and from the government. The Bloomberg experts calculated that over these five years the banks had paid their shareholders less in dividends than they had left in the courts. The authors of the study warned that the banks' losses most likely will not be limited to a hundred billion dollars; suits from dissatisfied investors and the government could continue to be filed for a decade. In other words, Bloomberg is hinting that as a result of these «raids», many «untouchable» banks could go into the red.

Anti-bank Sentiments in American Society

The question arises as to what is causing the increased legal pressure on leading banks. There are several reasons. First and foremost, there is a growing dissatisfaction with the banking world in American society. This is shown by numerous public opinion surveys. Perhaps never before since the crisis of 1929-1933 have the American people felt such hatred toward bankers, whom they have started calling «banksters» (banker-gangsters). From 2005 through 2010 banks sent around 9.3 million foreclosure notices to U.S. households, which means approximately 35 million people lost their homes. According to some estimates, U.S. foreclosures could reach 14 million by 2014. Of course, the number of evictions is not the same as the number of foreclosures, but over three-fourths of the more than 7.2 million foreclosures in the period of 2005-2010 led to the eviction of families from their homes. That means that over 20 million Americans lost the roof over their heads. In 2010 alone banks confiscated 1.05 million pieces of real estate. Of course, not all evicted bank clients end up on the street. Some move to less expensive houses or apartments, others move in with relatives or friends. But at the same time, many Americans are now living in tent cities, in squatter communities like Slab City in the desert, and in homeless shelters. Last decade's mortgage crisis continues to be felt painfully by millions of Americans who justifiably link their difficulties and sufferings with banks. The number of lawsuits which ordinary Americans throughout the country have filed in connection with various violations and abuses on the part of banks number in the hundreds of thousands. Among those seriously wronged by bankers are representatives of the more prosperous strata of American society as well: those who purchased mortgage-backed securities which turned out to be «junk» or «toxic» securities. Tens of thousands of lawsuits have been filed by such investors. Never before in the history of the U.S. (even in the 1930s) have such an enormous number of lawsuits been filed against bankers. 

The American Elite vs. the Wall Street Banks

Some among the politically active part of American society are seeking a cardinal restructuring of the entire U.S. financial and banking system. Many understand that the current monetary model of the American economy threatens America's existence as a sovereign state. After all, power in America today belongs not to the people or the people's representatives (the U.S. Congress), but to the main shareholders of the Federal Reserve System. This private corporation issues the American dollar (according to the U.S. Constitution this is one of the powers of Congress), keeps the government in a noose of debt (lending through the purchase of treasury securities), controls almost all American banks and supports many leading banks of the London City, Switzerland and other countries of continental Europe through loans. The sober-minded among the American elite understand perfectly that it is banks that are to blame for the fact that over the past fifty years such dangerous processes have been taking place as the consistent deindustrialization of the country, the social polarization of American society, the erosion of the middle class and the mass pauperization of the lower classes, the drawing of the country into military ventures in various regions of the world, and the intensification of the unreasonable burden of providing for American interests on a global scale. This part of the American elite (called «patriots», «isolationists», «constitutionalists», «nationalists», etc.) perceive Wall Street banks as obvious cosmopolitan institutions for which America is just a temporary base. 

Bold representatives of the patriotic part of the American elite are the well-known public figure and economist Lyndon Larouche; the father of Reaganomics Paul Craig Roberts; Republican congressman, «Tea Party» member and outspoken opponent of the Federal Reserve System Ron Paul; and his son Randall Paul (currently a senator from the state of Kentucky), also an active member of the «Tea Party». One could also name Patrick Buchanan, Jesse Helms, Curt Weldon, Paul Weyrich and others. Mainly all these people identify with the right wing of the Republicans, although there are Democrats among them, as well as a number of «independents» or representatives of small parties. Some analysts believe that many «isolationists» and «patriots», and hence opponents of Wall Street, can be found among Pentagon officers and generals, as well as in the Justice Department. There are also a fair number of «isolationists» and Wall Street opponents in the lower house of Congress. This can be seen in particular from the voting results for a number of bills directed against banksters (for example, a bill that would reinstate the Glass-Steagall Act and one for the complete audit of the Federal Reserve). In cannot be ruled out that it is members of these circles who stand behind the actions of financial regulators described above. 

Other Theories about the «Raids» on Banks

There are other theories about the «raids» on banks as well. Some authors name law firms as the initiators of the «raids». It is true that the law business in the U.S. is extremely aggressive, constantly looks for new niches, and lobbies for the passage of laws that would increase demand for its services. Currently in the U.S. there are around 50,000 law firms. In 2008 the revenues of all the law firms and individually practicing lawyers in the U.S. came to 170.8 billion dollars, and the 13 leading law firms had a gross income of over 1 billion dollars per year. After the financial crisis, law firms began to actively feed off of banks. First, banks themselves can be plaintiffs. Many suits were filed by banks as a result of the recent financial crisis; banks try to «shake» their loans and other assets out of clients, and there are also numerous squabbles between banks. Second, banks need to defend themselves in court from financial regulators and disgruntled clients. Third, in order to succeed in their fight with the banks, the financial regulators and disgruntled clients need legal assistance. By the end of last year the number of collective and individual lawsuits filed by individuals against banks with regard to mortgages was approaching 100,000. To this we must add the suits filed by investors who bought «junk» mortgage securities on the financial market, as well as the demands of financial regulators and various government agencies. All this requires expensive legal services. Still, it is unlikely that law firms could be considered the initiators (or at least the main ones) of the «raids» on banks.

There exists an even more exotic explanation of the causes of the «raids» on banks – that supposedly the government is trying to close gaps in the budget that way. The fines that the banks pay into the government coffers today are measured in billions of dollars, but it is unlikely that they could be considered a significant budget source (remember that the annual expenses of the U.S. federal budget are measured in trillions of dollars). 

There is also a theory that the current «raids» on Wall Street banks are a manifestation of the endless «behind the scenes» struggle of the Rockefeller clan and the Rothschild clan. The latter, supposedly, are acting on the principle «worse is better» and are trying to undermine the U.S. banking system, leading to the collapse of the Federal Reserve System and its printing press. According to a number of estimates, the Rockefellers and their minions occupy key positions in the Federal Reserve. And in place of the current paper dollar standard whose collapse they are trying to hasten, the Rothschilds will propose some variant of the gold standard. Thus they will once again be tall in the saddle, as in the age of the classic gold coin standard of the 19th century, or at least the gold dollar standard of the Bretton Woods currency system era. 

The Consequences of the «Raids»

Incidentally, the «raids» on banks are not limited to investigations by financial regulators and court litigation. This line of attack on banks could be called the legal line. Besides this there is the legislative line: the drafting and promotion in the U.S. Congress of various laws aimed at limiting the omnipotence and lack of supervision of bankers. The most noticeable and consistent fighter in this area was Ron Paul, and now his son Randall is continuing his work on Capitol Hill. 

There is also the information line, wherein the media criticizes the U.S. banking system (including the Federal Reserve), reveals the various schemes and cons of individual banks, conducts financial education among the populace, and supports civic movements like Occupy Wall Street. Many analysts are noting that there are many times more anti-bank publications in the U.S. media after the financial crisis than there were before the crisis. A critical tone toward banks has become the norm even in such conservative publications as The Wall Street Journal. Perhaps only in the 1930s, in the period of crisis and depression and in the years of the fairly bold actions of President F. Roosevelt for limiting the greed of banks, was such a pitch of criticism toward banks observed in the American press. 

Of course, for now it is impossible to fully understand who initiated the «raids» on the once «sacred cows» of American capitalism. Suggestions that it was the Pentagon generals, the leaders of the Justice Department, the Rothschilds, some anonymous White House employees or someone else are only hypotheses. Whoever these initiators may be, they are all dependent on the sentiments of protest in all levels of American society. In any case, these «raids» are undermining the existing U.S. banking system and could result in the collapse of the American dollar.

After the crisis, the leaders of the U.S. and other Western countries, under the pressure of public indignation, formally announced that «banking socialism» had come to an end and that the government would no longer rescue «sacred cows». Barack Obama announced his program for radically reforming the U.S. financial and banking system. He was even able to push the Dodd-Frank Act, also called the Wall Street Reform Act, through Congress. However, everything in the banking world gradually started to resume its normal course. The banks returned to financial speculation and again started accumulating «bad» assets, using client funds for risky transactions, paying top managers astronomical bonuses, manipulating financial statements, etc. All this gave rise to pessimism among political figures, public activists and common citizens. The smell of a new crisis was in the air. Or a second wave of the crisis, to be more precise.

«Raids» on Banks, or the Loss of Reverence for «Sacred Cows»

To be fair, one must admit that during the crisis there were exceptions to the principles of «banking socialism» with regard to several «sacred cows». Some of them were led to the slaughter after all. The largest such «cow» was the American bank Lehman Brothers, which was declared bankrupt. In the past two years there has been a marked increase in the number of «raids» on large banks on the part of financial regulators and other state agencies. This includes various actions of financial regulators in investigating the illegal activities of banks, lawsuits filed against banks by aggrieved investors and other clients, and demands from financial regulators for banks to pay fines and compensation to victims. Often the regulators propose that banks settle claims out of court. Sometimes this takes the form of collective agreements between the financial regulators and several banks. Usually in such a collective agreement the parties determine the total amount of fines, compensation and other claims. Then this amount is distributed over time and between banks.

The financial regulators of the U.S. and Great Britain have been the most active. Financial regulators in the U.S. consist of various organizations under the jurisdiction of the Department of the Treasury, the Department of Justice and the Federal Reserve System, as well as organizations independent of these departments. They specialize in various financial markets, various types of financial organizations, and various types of financial instruments. They include the Securities and Exchange Commission (SEC), the National Futures Association (NFA), the Commodity Futures Trading Commission (CFTC), the National Credit Union Administration (NCUA), etc. New regulators are appearing in the U.S. For example, at the height of the mortgage crisis in 2008 the Federal Housing Finance Agency (FHFA) was created. Until recently, in Great Britain there was only one financial regulator: the Financial Services Authority (FSA). Recently a reorganization began there, and the creation of several new regulators is planned.

Before the financial crisis of 2007-2009, U.S. banks paid fines in the millions, or at most in the tens of millions of dollars. In the end of the last century and the beginning of this century, the main objects of government investigations and prosecutions were arguably companies in the real sector of the economy. Most often the grounds for the charges were violations of ecological standards, safety regulations, health standards, etc. For example, in 1999 the U.S. government compelled General Motors to pay 4.9 billion dollars in fines and compensation for the fire-susceptible design of the gas tank in the Chevrolet Malibu (of course, the corporation's lawyers were later able to convince the judge to reduce the payments to 1.2 billion dollars).

The biggest «raid» on banks in the U.S. in the pre-crisis period took place in 2003. Regulators fined the banks for misleading clients who entrusted their funds to them for investment transactions (the banks' analytics departments overstated the prices of the stocks being purchased by the investment departments on behalf of the clients). Among the banks fined were such Wall Street giants as Goldman Sachs, Morgan Stanley and J.P. Morgan. A total of 1.4 billion dollars was paid, i.e. an average of 140 million dollars per bank.

It was no secret to anyone that American judges were traditionally very cautious about any lawsuits against large banks. They understood perfectly that a large bank is a special institution on which the prosperity not only of its employees and clients, but often of America as a whole depends. After all, a large fine could inadvertently cause a bank to go bankrupt, which in turn could spark a «domino effect» throughout the American financial and banking system. Thus judges would avoid considering cases against banks (especially large ones) whenever possible, and if they did consider them, they would consult with the relevant financial regulators. This kind of «telephone justice» was accepted as a norm of American life.

After the Financial Crisis

However, in the past two or three years financial regulators, district attorney's offices and U.S. courts have unexpectedly started showing an increased interest in banks, initiating investigations and handing down verdicts in a bold and principled manner. At first the main victims of these «raids» were for some reason non-American banks, mainly European and especially British. At the beginning of this decade the large European bank HSBC Holdings Plc., which has subsidiaries in the U.S., was accused of money laundering and collusion with drug cartels on the territory of Mexico. The bank's leadership tried to sweep the scandal under the rug and quickly admitted its guilt. It apologized to the U.S. Senate, and in early 2012 it paid a fine of 1.9 billion dollars. That summer in the U.S. a new series of investigations into the bank's activities began; it was accused of dubious transactions in various regions and countries, including the Cayman Islands, Iran, Saudi Arabia, Mexico and Syria.

In the same year a scandal started in the U.S. over some (almost all European) banks' manipulations of LIBOR rates (at the height of the financial crisis in autumn 2008 they understated these rates). This time the fines amounted to hundreds of millions of dollars per bank. In late 2012 the largest bank in Switzerland, UBS, was fined 1.5 billion dollars, 1.2 billion dollars of which was paid in the U.S. and the remainder in Great Britain, Switzerland and Japan. Giants of the London City were also among the banks fined, most notably Barclays.

Some experts and journalists believed that at the beginning of this decade U.S. financial regulators began conducting selective «raids», choosing European banks as their main targets. The idea was that American banks were fighting their competitors with the help of their financial regulators. However, this theory did not stand the test of time. The facts showed that Wall Street banks also made it onto the list of targets for prosecution. American banks were fined for many of their sins: money laundering, concealment of income from taxes in offshore zones, falsification of financial records, etc.

Payback for Discreditable Practices on the Mortgage Market

The biggest sin of U.S. banks was unscrupulous transactions on the mortgage market, which is what sparked the financial crisis. Banks gave mortgages, then «packaged» them and sold them as mortgage-backed securities which were traded on the securities market. Such manipulations are called the «securitization» of loans. The original mortgages were of extremely low quality, so the mortgage-backed securities were practically «junk bonds». They were purchased by the U.S. state mortgage agencies Fannie Mae and Freddie Mac, and then they ended up on the brink of bankruptcy and the government rescued the agencies using taxpayer money. Before the crisis was even over, a real commotion began in the country: banks started evicting hundreds of thousands of bank clients who had taken out mortgages from their homes. And many such clients, in turn, began filing lawsuits in American courts complaining of the unscrupulous behavior of the banks and demanding the return of their houses. The plaintiffs claimed that the banks did not pay due attention to details and often annulled mortgages wholesale using so-called robo-signing, that is, signing documents without verifying their content. Barack Obama charged various agencies with sorting out the situation which had taken shape, returning residences to conscientious clients when required, punishing unscrupulous bankers and creating funds for reparation of damages through fines imposed on banks. A key figure in making mortgage-related claims on the part of the government was the Federal Housing Finance Agency.

First on the black list of American banks was Bank of America. In June 2011 it paid 8.5 billion dollars as part of an agreement with regulators. But the story of Bank of America didn't end there. In autumn 2013 the FHFA stated its intention to fine the bank another 6 billion dollars. To be fair, it must be said that before 2008 Bank of America was not the main player on the mortgage market. However, at the very height of the crisis (in 2008) it bought Countrywide Financial, which was actively involved in the «repackaging» of mortgages and in the end found itself on the brink of bankruptcy. Thus, Bank of America acquired a company laden with hidden debts. The bank, accustomed to life as an «untouchable», was confident that it would find a way to «digest» the acquired company.

Financial regulators calculated that Bank of America and the acquired company Countrywide Financial sold mortgage securities to the U.S. agencies Fannie Mae and Freddie Mac for a record sum of 57 billion dollars. In second place is the American bank JPMorgan Chase (33 billion dollars), and in third place is the British bank Royal Bank of Scotland (30 billion dollars). There are a total of 17 American and European banks on the list of suspects. Among the American banks are practically all the leading banks of Wall Street. Among the European banks, besides the Royal Bank of Scotland, are the Swiss bank Credit Suisse and the British bank Barclays.

Approximately a year later, in summer 2012, five banks involved in mortgage schemes (Wells Fargo, JPMorgan Chase, Citigroup, Bank of America and Ally Financial) agreed to pay regulators 25 billion dollars as part of a pre-trial agreement. It is planned for 17 billion dollars out of that amount to go towards easing the payment terms on mortgage contracts for bank clients (in non-cash form, averaging up to 1,500-2,000 dollars per family). Another 5 billion dollars will be allocated to special state funds. From these funds victims will receive direct monetary compensation for losses resulting from eviction from their homes in the period from 2008 through 2011 (upon presentation of documents proving that the eviction took place in violation of the terms of the loan agreements).

The U.S. government reached the most recent large collective agreement in March 2013. The agreement encompasses 13 large banks, which agreed to pay a total of 9.3 billion dollars in compensations into a special fund. Among the American banks, first place for the size of its contribution to the fund once again went to Bank of America. Next came such Wall Street residents as Wells Fargo, JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley.

(To be continued)