"End of Wall Street Boom" - Must-read history

[anothershamus]

Yeah, let me print this right up on the laser printer!

World needs $100 trillion more credit, says World Economic Forum

The world's expected economic growth will have to be supported by an extra $100 trillion (£63 trillion) in credit over the next decade, according to the World Economic Forum.
The planet Earth. World needs $100 trillion more credit, says World Economic Forum
The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009

By Emma Rowley 8:49PM GMT 18 Jan 2011

This doubling of existing credit levels could be achieved without increasing the risk of a major crisis, said the report from the WEF ahead of its high-profile annual meeting in Davos.

But researchers warned that leaders must be wary of new credit "hotspots", where too much lending takes place, as the world emerges from a financial catastrophe blamed in large part "to the failure of the financial system to detect and constrain" these areas of unsustainable debt.

"Pockets of credit grew rapidly to excess – and brought the entire financial system to the brink of collapse," said the report, written in conjunction with consulting firm McKinsey. "Yet, credit is the lifeblood of the economy, and much more of it will be needed to sustain the recovery and enable the developing world to achieve its growth potential."

The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009, according to the report.

The WEF said the continued demand for credit could be met "responsibly, sustainably – and with fewer crises". However, it cautioned that to achieve this goal, financial institutions, regulators, and policy makers need more robust indicators of unsustainable lending, risk, and credit shortages.

[vanlose kid]

Grand Fraud Auto – Reloaded.

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Mortgage Lenders Seeking Court Permission To Destroy 22,100 Boxes Of Original Loan Documents

Submitted by Tyler Durden on 01/24/2011 14:03 -0500


The solution to the ongoing fraudclosure fiasco is so simple and yet so brilliant (in a way that benefits the banks naturally) ... that it has to date evaded most... but not all. The solution: just shred it all. That is what insolvent mortgage lenders Mortgage Lenders Network USA and American Home Mortgage are pushing hard to get permission from their respectively bankruptcy judges in their chapter 7 liquidation cases. Says Reuters: "Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost." With servicer banks increasingly unable and unwilling to provide the original lender docs (since they don't have access to them) to parties curious in seeing if there is a legal case to continue paying their mortgage, what better solution than to have the banks retort that the original document was sadly destroyed in a court-appointed shredding. In that way all the fraud canaries are killed with one stone, and the party responsible is none other than some bankruptcy judge who had given the go ahead for the wholesale destruction. And since we are not talking peanuts, in the case of MLN it comes to 18,000 boxes of records, while in the AHOM case it is just over 4,000 boxes, we wonder just how many other originators have gotten a comparable idea from the banks, and are currently busy shredding every last detail of an original mortgage note. Good luck trying to convince anyone that the bank is not in possession of a mortgage that was "purposefully" destroyed as part of a company's liquidation proceedings. Soon to follow: the burning of all books and the banning of all websites that dare to claim this is nothing but pure, grade-A criminal destruction of evidence.

More from Reuters on this stunning development:

In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts."

The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island.

AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007. The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive.

The reason cited for this scandalous request: warehousing costs:

Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

This is akin to the Fed terminated the reporting of the M3 due to the exorbitant costs associated with keeping track of a few data series...

And, not surprisingly, we find that some have already been going through with document shreeding for a long time already:

In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files.

Gee, we wonder why the banks opted out of picking up files confirming they are not the proper servicer on thousands of mortgages.

And in conclusion:

In court documents, Sass stated that most of the records AHM still has in storage relate to mortgages issued more than eight years ago. He also said that employees had searched the files and pulled out all vital original records, such as promissory notes, and had handed them over to the appropriate mortgage servicers, and that most of the documents had been electronically imaged and retained in a database.

But people involved in winding down AHM's affairs say that neither the contents of the boxes or the database have been audited, and that it's possible the boxes still contain crucial documents such a promissory notes. Investors must have the original promissory notes, not copies, to be able to foreclose.

The take home message: should the bankruptcy court side with the liquidation trustees, Neil Luria and Steven Sass, who without a doubt have had extended discussions with the current batch of TBTFs which will be hung out to dry if the fraudclosure issue is further prosecuted, then it is safe to say that any claim that America has a fair and impartial judicial system can follow the last hopes of Emanuel's mayoral campaign dream right out of the window.


http://www.zerohedge.com/article/mortga ... -documents

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[vanlose kid]

The Pound Has Been Stolen!




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[Pele'sDaughter]

http://www.theatlantic.com/business/arc ... ions/70128

E-mails Suggest Bear Stearns Cheated Clients Out of Billions

Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering. Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit."

News of internal whistleblowers coming forward from Bear's mortgage servicing division, EMC, was first reported by The Atlantic in May of last year. Ex-EMC analysts admitted they were sometimes told to falsify loan-level performance data provided to the ratings agencies who blessed Bear's billion-dollar deals. But according to depositions and documents in the Ambac lawsuit, Bear's misdeeds went even deeper. They say senior traders under Tom Marano, who was a Senior Managing Director and Global Head of Mortgages for Bear and is now CEO of Ally's mortgage operations, were pocketing cash that should have gone to securities holders after Bear had already sold them bonds and moved the loans off its books.

Mike Nierenberg, who ran the adjustable-rate mortgage trading desk at Bear and is now the head of mortgages and securitization for Bank of America, was a key player ensuring the defaulting loans Bear was buying would move off their books right after they bought them, with little concern for the firm's due diligence standards. He was joined in this scheme by Jeff Verschleiser, his peer and Senior Managing Director on the mortgage and asset-backed securities trading desk and head of whole loan trading. He is now an executive in Goldman Sachs' mortgage division.

According to the lawsuit, the Bear traders would sell toxic mortgage securities to investors and then sell back the bad loans with early payment defaults to the banks that originated them at a discount. The traders would pocket the refund, and would not pass it on to the mortgage trust, which was where it should have gone to be distributed to the investors who owned the bonds. The Marano-led traders also cut the time allowed for early payment defaults, without telling the bond investors. That way, Bear could quickly securitize defective loans, without leaving enough time for investors to do their own due diligence after the bonds were sold and put-back any bad loans to Bear.

The traders were essentially double-dipping -- getting paid twice on the deal. How was this possible? Once the security was sold, they didn't have a legal claim to get cash back from the bad loans -- that claim belonged to bond investors -- but they did so anyway and kept the money. Thus, Bear was cheating the investors they promised to have sold a safe product out of their cash. According to former Bear Stearns and EMC traders and analysts who spoke with The Atlantic, Nierenberg and Verschleiser were the decision-makers for the double dipping scheme, and thus, are named as individual defendants in the suit.

Bear deal manager Nicolas Smith wrote an e-mail on August 11th, 2006 to Keith Lind, a Managing Director on the trading desk, referring to a particular bond, SACO 2006-8, as "SACK OF SHIT [2006-]8" and said, "I hope your [sic] making a lot of money off this trade."

It's this blatant internal awareness inside the Bear mortgage trading division that the Ambac suits says led Bear to implement an across-the-board strategy to disregard its contractual promises and conceal the defective loans. By JPMorgan taking over Bear, it became the successor of interest in Bear Stearns. As the lawsuit lays out, JPMorgan is responsible for the flagrant accounting fraud started by Bear designed to avoid, and has continued to avoid, recognition of vast off-balance sheet exposure relating to its contractual repurchase agreements. This allowed executives to reap tens of millions of dollars in compensation from a bank that wouldn't have been able to buy Bear without tax payer assistance.

80% of Loans Went Bad Almost Immediately

In 2007, when Ambac started to realize something was very wrong with its high-rated bonds, it demanded Bear provide loan-level detail and reviewed 695 non-performing loans in its portfolio. Ambac's audit concluded that 80 percent of the loans showed an early payment default. This meant they should have never have been packed in the bonds Bear sold and were required to be repurchased. Bear refused, and of course had already been pocketing buyback money for itself from the originators. Bear also never told investors that its auditor Price Waterhouse and Coopers submitted an internal review in August 2006 that this repurchase process was not in-line with its due diligence standards and not typical for the industry. By January 2007, a Bear internal audit also reported the firm had collected $1.7 billion in repurchase claims -- a 227% increase over the previous year. Yet Marano's group of traders continued their double-dip payment scheme and kept selling the toxic loans with full awareness of the poor quality of the due diligence.

Jeffrey Verschleiser even said in an e-mail that he knew this was an issue. He wrote to his peer Mike Nierenberg in March 2006, "[we] are wasting way too much money on Bad Due Diligence." Yet a year later nothing had changed. In March 2007, Verschleiser wrote to Nierenberg again about the same due diligence firm, "[w]e are just burning money hiring them."

Then in November 2007, Verschleiser wrote to his risk committee that he knew insurers for mortgage securities were going to have big financial problems. He suggested they multiply by ten times the short bet he'd just made against stocks like Ambac. These e-mails show Verschleiser's trading desk bragging to firm leadership that he made $55 million off shorting insurers' stock in just three weeks.

Eventually, as Ambac kept demanding a repurchase of the bad loans, Bear acknowledged in late 2007 it would have to buy some back. The lawsuit lists over $600 million in claims with $1.2 billion in damages from the soured mortgage securities it invested in and insured against. But according to the lawsuit, in the spring of 2008, JPMorgan dismissed an outside audit review of the loans' need to be repurchased and once again refused to pay Ambac. The suit asserts JPMorgan knew a repurchase would result in a huge accounting liability that would put their balance sheet in serious trouble at that time.

Last week, JPMorgan CEO Jamie Dimon said it will take years to get through mortgage litigation risk the bank inherited and had set aside around $9 billion for litigation-related risk. Yet in the bank's January earnings call, Dimon suggested that the bank may not have to buy back any soured mortgages from private investors and said that the issue is "not that material" for JPMorgan. Still, Ambac recently won a court order in December to add accounting fraud against JPMorgan to its suit, which can double or triple lawsuit awards. So it's hard to tell whether America's largest bank is prepared to pay for the sins of Bear. JPMorgan did fight tooth and nail for the Ambac suit not to be made public, however, because the firm argued it could damage the reputations of senior bank executives currently working in the industry. Individuals named as defendants included: Jimmy Cayne, Alan "ACE" Greenberg, Warren Spector, Alan Schwartz, Thomas Marano, Jeffrey Mayer, Mary Haggerty, Baron Silverstein, Jeffrey Verschleiser, and Michael Nierenberg.

Ambac's lawsuit is led by Eric Haas of Patterson Belknap Webb & Tyler LLP. Depositions show internal Bear executives saying Nierenberg and Verschleiser were responsible for deciding how much risk to take when acquiring loans and for aspects of the securitization process. They reported up to Marano. Testimony shows Marano would have known about the decisions his head traders were making. When asked about these accusations, Nierenberg's, Marano's, and Verschleiser's current employers had no comment. The defendants' lawyers at Greenberg Traurig LLP failed to respond to calls for comment.

A public hearing is currently scheduled to be held by the New York State assembly regarding whether legal action should be brought against banks for misleading insurers about mortgage related securities. If approved, the New York Attorney General will likely be asked to bring criminal fraud charges against these banks. Now we must wait and see if JPMorgan will settle or go to trial -- or if the bank tries to claw back tens of millions of dollars in pay from the former Bear executives.

[vanlose kid]

At Davos, Era of Contrition for Bankers May Be Ending
BY JACK EWING

DAVOS, Switzerland — After being on the defensive for the last two years, there were signs that bankers attending the World Economic Forum here were pushing back more assertively against attempts by regulators to cramp their style.

At one of the opening panels on Wednesday, top executives from Goldman Sachs and Standard Chartered warned that new restrictions on their businesses are either irrelevant or threaten to hurt economic growth.

That is an argument bankers have been making for a long time, but the tone of the off-the-record session seemed more confident and less contrite than in recent years.

The bankers, who asked not to be quoted by name, agreed that the financial system was now more stable — one reason they may have become more outspoken. New regulations threaten to overwhelm institutions with red tape, raising the cost of banking services and often targeting the wrong kinds of risk, they said.

For example, the bankers argued that the so-called Basel III rules might encourage banks to load up on sovereign bonds, even though recent experience has shown that government debt is more risky than it used to be. Ultimately the overall economy will suffer, they said.

For at least one member of the audience, the bankers were a little bit too cocky. Phillip Thorpe, chairman of the Qatar Financial Center Regulatory Authority, said the banks were setting the stage for the next crisis.

“With no change, we can expect there will be another one,” Mr. Thorpe said afterward. Banks simply have to get used to taking less risk and earning lower returns, he said.

Those sentiments met with disdain from several of the bankers. Taking on risk, they said, is what banks do.

http://dealbook.nytimes.com/2011/01/26/ ... ending/?hp

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[Nordic]

I might start a new thread with this one. How are they going to ignore this?

http://www.washingtonsblog.com/2011/01/ ... ssion.html

Financial Crisis Inquiry Commission Slams Greenspan, Bernanke, Geithner, Paulson, Summers, SEC, Rating Agencies and Big Banks for Causing Crisis

The Financial Crisis Inquiry Commission is releasing its report Thursday.

The New York Times has a preview of the report, which shows that the Commission will slam the right people for causing the financial crisis.

Barry Ritholtz gives a good summary of the Times' article:

The many causal factors highlighted in the FCIC report:

• Alan Greenspan’s malfeasance — his refusal to perform his regulatory duties because he did not believe in them — allowed the credit bubble to expand, driving housing prices to dangerously unsustainable levels; Greenspan’s advocacy for financial deregulation was a “pivotal failure to stem the flow of toxic mortgages” and “the prime example” of government negligence;

• Ben S. Bernanke failed to foresee the crisis;

• The Bush administration’s “inconsistent response” — saving Bear, but allowing Lehman to crater — “added to the uncertainty and panic in the financial markets.”

• Bush Treasury secretary Henry M. Paulson Jr. wrongly predicted in 2007 that subprime meltdown would be contained.

• The Clinton White House, including then Treasury Secretary Lawrence Summers, made a crucial error in “shielding over-the-counter derivatives from regulation [CFMA]. This was “a key turning point in the march toward the financial crisis.”

• Then NY Fed President, now Treasury secretary Timothy F. Geithner failed to “clamp down on excesses by Citigroup in the lead-up to the crisis;” Further, a month before Lehman’s collapse, Geithner was still in the dark about Lehman’s derivative exposure;

• Low interest rates brought about by the Fed after the 2001 recession “created increased risks” but were not chiefly to blame, according to the FCIC (I place some more weight on Ultra-low rates than they do);

• The financial sector spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with the industry made more than $1 billion in campaign contributions. The impact of which an incestuous relationship between bankers and regulators, Congress and bankers, and classic regulatory capture by the industry.

• The credit-rating agencies “cogs in the wheel of financial destruction.”

• The Securities and Exchange Commission allowed the 5 biggest banks to ramp up their leverage, hold insufficient capital, and engage in risky practices.

• Leverage at the nation’s five largest investment banks was wildly excessive: They kept only $1 in capital to cover losses for about every $40 in assets;

• The Office of the Comptroller of the Currency along with the Office of Thrift Supervision, “federally pre-empted” (blocked) state regulators from reining in lending abuses;

• The report documents “questionable practices by mortgage lenders and careless betting by banks;”

• The report portrays the “bumbling incompetence among corporate chieftains” as to the risk and operations of their own firms:

-Citigroup executives admitting that they paid little attention to the risks associated with mortgage securities.
-AIG executives were blind to its $79 billion exposure to credit default swaps;
-Merrill Lynch top managers were surprised when mortgage investments suddenly resulted in billions of dollars in losses;

Reuters provides the following synopsis:

Among regulators the report singles out former Federal Reserve Chairman Alan Greenspan and his successor Ben Bernanke. The report faults Greenspan and his allies for pushing the idea that financial institutions could "police themselves."

Bernanke and former Treasury Secretary Henry Paulson were criticized for not seeing the problems in the subprime mortgage markets earlier.

Clinton administration officials were rebuked for pushing to shield over-the-counter derivatives from regulation.

As for the corporate chieftains at the large financial firms that were either toppled or brought to their knees by the crisis, the panel says its examination found "stunning instances of governance breakdowns and irresponsibility."

Among those singled out are American International Group, mortgage giant Fannie Mae and Merrill Lynch.

The report faults investment banks Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley for "operating with extraordinarily thin capital" in 2007. "Less than a 3 percent drop in asset values could wipe out a firm," according to the report.

The report criticized credit rating agencies such as Moody's Corp, McGraw-Hill Cos' Standard & Poor's and Fimalac SA's Fitch Ratings for giving "their seal of approval" to securities that proved to be far more risky than advertised because they were backed by mortgages provided to borrowers who were unable to make payments on their loans.

The report also discussed the role played by "shadow banking," or unregulated financial firms, the securitization of private mortgage debt and over the counter derivatives.

The FCIC places only minor blame on Freddie Mac and Fannie Mae. On the other hand, leading bank analyst Chris Whalen agrees with FCIC Commissioner Peter Wallison (co-director of the American Enterprise Institute's program on financial policy studies) that Freddie and Fannie's shenanigans were a leading cause of the crisis. This is the minority view of the FCIC.

Many people - including me - predicted that the FCIC would be a whitewash. However, the fact that the Commission has named some of the big fish who caused the crisis is encouraging.

And the Commission has indicated that it will make criminal referrals. We'll have to wait and see if the referrals are for big or small fish.

[Pele'sDaughter]

http://www.rawstory.com/rs/2011/01/supr ... aud-cases/

In Halliburton case, Supreme Court may sanction corporations lying to investors

The Supreme Court's decision in the upcoming case Erica P. John Fund Inc v. Halliburton could prevent companies that deceive their investors from being held accountable, according to Jeff McCord of The Investor Advocate.

In early January, the Supreme Court agreed to review a US appeals court ruling that denied a group of investors could sue energy giant Halliburton in a broad class action. The lawsuit was filed in federal court in 2007 by Halliburton shareholders who bought stock between June 1999 and December 2001.

The investors claimed that Halliburton and Chief Executive Officer David Lesar falsely inflated the company's stock prices by overstating revenues in its construction business, along with inflating the benefits of its merger with Dresser Industries. Eventually the company disclosed that it had overstated its revenues and its stock prices consequentially fell, causing a loss to the stockholders.

The US Court of Appeals for the Fifth Circuit ruled that the shareholders could not band together as a class action unless they proved the various misrepresentations caused the stock price to fall. The court's decision was appealed by the shareholders.

"These shareholders, who have already lost money due to demonstrable misrepresentations of Halliburton's financial condition by management, which in-and of-itself is illegal, are being told they must spend more money to hire high priced consulting economists and/or forensic accountants before they are able to take advantage of rules that provide for payment of such costs by the entire class of investors, should they their case succeed," McCord explained.

The Supreme Court is expected to hear arguments in April and make a decision in June. The court will only rule on whether the investors can be granted a class action status and will not address the merits of the fraud allegations.

"If allowed to stand, the Fifth Circuit’s 'Catch-22' barrier to investors' pursuit of valid fraud claims, the federal civil justice system doors will be locked for the tens of thousands of defrauded investor who cannot on their own afford to hire high-priced experts to essentially prove their case before they even enter court," McCord warned.

Ira Schochet, president of the National Association of Shareholder and Consumer Attorneys, told The Investor Advocate that the Supreme Court could prevent companies from being held responsible for fraud if it upholds the Fifth Circuit's ruling. Without being able to band together as a class action, investors would not be able to acquire the funds needed to hire the experts to prove their claims.

"If the Supreme Court and Congress will not permit investors to band together in classes in order to bring white collar criminals to court and hold them accountable, the vast majority of fraud perpetrators will never be punished," McCord said.

A study published in December found the Supreme Court, under Chief Justice John Roberts, had undergone a fundamental shift in its outlook, ruling in favor of businesses much more often than previous courts.

In the study, commissioned by the New York Times, researchers found the Roberts court has sided with business interests in 61 percent of relevant cases, compared to 46 percent in the last five years of Chief Justice William Rehnquist, who passed away in 2005.

[StarmanSkye]

This is as blatant a case of perverting justice against the small-guys and FOR the corporations as I've seen. Does the court really think that a substantial over-stated value misrepresentation by a corporate business which is itself illegal WOULDn'T cause the stock price to fall? But the bigger issue of Catch-22 here really takes the case. IMHO, just goes to show how pervasive the systemic corruption is, re: Legal System AND business/capitalism.

But you know, the know-nothing public keeps faithfully beating the 'liberal' and 'socialist' threat meme, just like the corporate masters want them to.

They'll parrot the GOP party-line about the Constitution never authorizing national health care (the common good?) while ignoring the insidious corrosive of Fed funding never-ending foreign Imperialist wars-for-profit (corporate entitlement programs?) that leaves a legacy of fraud, corruption, genocide, war crimes, atrocities & human rights abuses -- essentially repudiating everything the Constitution stands for.

The capacity of stupid people to be willfully ignorant, manipulated & foolish never ceases to astonish me with ever-greater excesses of apathy, distraction and irresponsibility.

[vanlose kid]

Interactive Map Of Recent Food Riots And Price Hikes
Submitted by Tyler Durden on 01/26/2011 19:00 -0500

While the Fed refuses to extract its head from deep within the sand of ignorant hubris that only a career in Ivy League education can provide, the world continues to burn, in many places quite literally. For all those who are finding it hard to juggle all the rioting, and confuse their Cairos with their Calcuttas, below we present an interactive map disclosing all recent documented food price hikes, protests, and riots.


full map after the jump

http://www.zerohedge.com/article/intera ... rice-hikes

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[Pele'sDaughter]

http://www.bbc.co.uk/news/world-us-canada-12294466

Allen Stanford ruled unfit to stand trial for fraud

A US federal judge has ruled that Texan billionaire Allen Stanford is unfit to stand trial at present over accusations he led a $7bn (£4.5bn) fraud scheme.

Mr Stanford is facing trial over allegations that he ran a pyramid scheme based in Antigua which defrauded investors.

He has pleaded not guilty to fraud, conspiracy and obstruction.

District Judge David Hittner ruled that Mr Stanford did not have the present mental capacity to assist his lawyers.

But he ordered Mr Stanford to undergo treatment at a US prison hospital for an addiction to an anti-anxiety medication, and also receive additional psychiatric testing.

"The court finds Stanford is incompetent to stand trial at this time based on his apparent impaired ability to rationally assist his attorneys in preparing his defence," Judge Hittner wrote in his ruling in Houston, Texas.

"The court's finding that Stanford is incompetent, however, does not alter the court's finding that Stanford is a flight risk and that no combination of conditions of pretrial release can reasonably assure his appearance at trial," he added.

The charges against Mr Stanford capped a rapid fall from grace for a man who had shot to prominence in the UK and the Caribbean for his lavish sponsorship of cricket.

'Too good to be true'

Mr Stanford, 60, is accused of running a scheme which persuaded investors to buy certificates of deposit from Stanford International Bank, located in Antigua.

Prosecutors have said they "promised returns that were too good to be true".

Mr Stanford has been in custody since June 2009, when he surrendered to the US authorities after a warrant was issued for his arrest.

His trial had been expected to start this week, but the judge said he would set a new trial date once the results of the detox and further testing were in.

Psychiatrists testified at a prior hearing that Mr Stanford was suffering bouts of delirium linked to his addiction and also said he was incompetent to stand trial due to a brain injury he suffered as a result of a fight with a prison inmate in 2009.

Mr Stanford invested heavily in West Indies cricket and built his own cricket ground in Antigua, where Stanford Financial Services was based.

In 2008 he bankrolled a high-profile $20m cricket match between England and a Stanford All-Stars team on the island.

[Laodicean]

Wall Street's Best Year Ever

As predicted, total Wall Street pay in 2010 rose to its highest level in history: $135 billion. Income as a percentage of revenue was up, as was average compensation per employee. They couldn't have done it without you, America. [WSJ]

http://gawker.com/5749843/wall-streets- ... 8Gawker%29

[freemason9]

what was this about the "end of wall street boom"

have you seen the dow lately

it looks to me as if wall street is doing just fine

fineness on wall street is inversely proportional to fineness on main street

[JackRiddler]

.

In recent weeks I was very busy and mostly absent here because of work helping my friend finish her doctoral dissertation. In that lengthy treatise there was a section (not about the main subject) that I wanted to share here, a bit paraphrased. It’s about a new discovery in capital’s perpetual search for financial products to allow betting in the guise of raising capital. Like many such schemes, the government quasi-insures the profit. And as such schemes are sometimes presented, it's all actually noble charity -- To Serve Mankind!

The Social Impact Bond

(Based on excerpt from unpublished dissertation of Friend of JackRiddler’s, Ronda, 2011, with permission.)

A new up-and-coming model for funding social programming initiatives almost serves as a parable for the most extreme rendering of “Third Way” optimism and reliance on the will of the rich and supposed mechanisms of the market: the “social impact bond.”

Already being tried out in the UK and under consideration for New South Wales, this new form of equity investment (called a bond for convenience) is “in effect a contract between private investors and government” (Perkins, 2011).

The idea is attracting enough attention in policy and academic circles that its proposal in the United States seems inevitable. In May 2010 a strategic dialogue was sponsored by the J.W. McConnell Family Foundation and “Tamarack – An Institute for Community Engagement in Canada” to explore new place-based poverty reduction strategies. Social impact bonds were promoted as a resource for this agenda.

Here is a brief summary of how social impact bonds are supposed to work: When people run into deep troubles, the kind that result in victimization, incarceration, institutionalization, hospitalization or long-term unemployment, the costs to the public sector are great. Maximizing the prevention of such cases would therefore result in saved expenditures amounting to many times the cost of the preventive measures. That assumes the preventive measures actually work, of course. Social impact bonds are based on a calculation by the government (or potentially another overseeing entity) of the difference between the cost of prevention and the cost of later intervention. Investors are encouraged to buy the bonds with the resulting funds used to finance organizations (non-profits, so far) that conduct preventive measures. Targets are set in advance to determine the effectiveness of these preventive measures. If the targets are not met, the investment is lost, and presumably no one will want to buy bonds in that particular non-profit or type of program again. If the targets are met, the public sector is considered to have saved a multiple of what the bonds actually cost (based on the initial calculation of the difference in cost between prevention and intervention). From this assumed saving, the bonds are paid off by the government at a profit to the bond buyer. A “market” is created wherein investing in preventive measures makes dollars and sense.

Why doesn’t the government invest in the preventive measures in the first place, both saving the later intervention expenditures and obviating the need to pay off any social impact bonds? This question is begged in the treatments I have so far seen, but from the logic as invoked so far, the answer surely would be that the market over time would more efficiently reward what works and root out what doesn’t, producing a more successful and widespread prevention of social problems over time. Supporters might also argue that a profit mechanism will more readily attract money that voters don’t want to see come out of their taxes.*

The UK pilot case involves issuance of social impact bonds to finance a recidivism prevention program including job and training measures for 3,000 inmates sentenced to less than one year at Peterborough Prison. Investors, drawn together by Social Finance, an “ethical investment bank,” invested 5 million pounds that could potentially leave them with 8 million pounds from the government and lottery funds if the organizations that will provide social services to those incarcerated can demonstrate a decrease in recidivism over the expected rate (“Private backers,” BBC News, 2010). If the three groups funded to support prisoners can produce such a decrease of 7.5%, then the investors will be rewarded with a profit, so rather than donating to charity, they are investors in prevention.

Left unexamined in the media reports on social impact bonds are the implications of turning the lives of people leaving prison and the nonprofits that provide social services to them into investment vehicles. We recall how people who were known to not have the means to sustain mortgages at subprime conditions were nevertheless aggressively recruited for them by banks that needed more material for packaged securities.** One cannot help but wonder if a derivatives market in social impact bonds will also be tolerated as an acceptable form of hedging the risk? What prompted the question in the title of this section is that social impact bonds seem to offer a new extreme in the perpetual effort to continue conceiving finance models for social welfare based on attracting the money of those who have it toward profitable outlets, rather than even considering a return to the traditional means for paying for social welfare, that of taxing the wealthy, that had also worked to ameliorate wealth inequality in the postwar history of the industrial nations until the advent of neoliberalism. It seems the government and the non-profit sector prefer to beg for grants and investments, rather than demand the wealthy pay a proper share of maintaining social security in a society that has rewarded them so well.

-------

Riddler’s Notes:

* One might believe that and still also ask: Since the supporters of SIBs are convinced of the superiority of preventive measures over later intervention, and since they're concerned about fiscal issues, then, instead of lobbying the government to back social impact bonds that pay off at a profit (which takes some effort), why don’t they use the same effort to lobby the government to invest in the preventive measures? After all, the cost of the preventive measures alone is always going to be less than the cost of paying off the social impact bonds (which is the same cost, plus a profit to the investor). So why lobby for one and not the other? Are we allowed to wonder about the purity of motives here? Some of the literature supporting SIBs also fails to inspire trust (see below).

** We could go on with the comparison, and wonder too, if social impact bonds fail, thus causing financial troubles to their investors, if this will then be blamed on the deadbeat recidivists, the same way the financial crisis was blamed on deadbeat mortgage holders? Also, if this model catches on, and there are many millions of dollars in SIB investments with known banksters like JPM involved as brokers (see below), what’s going to prevent the usual Wall Street fixing and cheating from coming into play? Because SIBs are not an actual market! Contracts would pay off based on a complex judgment of whether the target had been met.



Sources

“Private Backers,” BBC News, 2010:
http://www.bbc.co.uk/news/uk-11254308

10 September 2010 Last updated at 08:41 ET

Private backers fund scheme to cut prisoner reoffending

Justice Secretary Ken Clarke has embraced the scheme

A "payment-by-results" pilot project aimed at cutting reoffending has officially been launched.

Investors have put £5m in social impact bonds to fund rehabilitation work with 3,000 Peterborough Prison inmates.

They could earn a return of up to £8m from the government and the Big Lottery Fund if their cash helps rehabilitate criminals.

Labour gave the groundbreaking scheme the go-ahead but new Justice Secretary Ken Clarke has fully embraced it.

The government has said the pilot is the first project of its kind in the world.

Toby Eccles from Social Finance explains how the scheme will work

Mr Clarke has indicated the scheme, which may also cut court and jail costs, might be introduced in other prisons in England and Wales if it is successful.

The social impact bond scheme is jointly run by the Ministry of Justice and Social Finance, an ethical investment bank run by a former top City banker.

The money raised by Social Finance from charitable trusts and social investment groups will fund organisations including the St Giles Trust, a specialist charity with a proven record in rehabilitating offenders.

Earlier this year the trust published an economic evaluation of its Through the Gates rehabilitation programme which suggested that the government saved £10 for every £1 invested in such schemes.

(Insert The Great Begged Question Here.)

Actually, the more I think about it, the less I see how these people don't get angry at themselves! They see a chance to "save 10 pounds" for the public on every 1 spent and the first damn thought is not, how can we get the government to do that, but how can we scheme some of that into the hands of rich investors!

The Peterborough prisoners will be given mentors when they are released and they will be given assistance to find jobs and housing and wean themselves off drugs if they need to.

If the money helps cut reoffending, this scheme could return up to £8m to investors, comparable with an annual return of 7.5% in a conventional bond-market investment.

Reoffending among the target group must fall by at least 7.5% to trigger the dividend payments in each of the six years of the bond's operation.

Kevin Bigg is 26 years old and was jailed for 14 weeks for shoplifting. He entered prison with a £300-a-week drug habit. He will leave prison later this month and receive intensive support.

"I've been in and out of prison since I was 19. I hung around with the wrong type of people, taking drugs, unfortunately. I think this scheme is a good thing.

"If they can help me to keep out of prison, if they can help me to find work, and that's my problem, that will stop me reoffending."

No guaranteed return

The return on social impact bonds is seen as a share of the financial benefit gained by society when a criminal goes straight.

But as with other finance bonds, there is no guarantee of a return and investors could lose all their money if reoffending does not fall.

Male prisoners sentenced to less than a year at Peterborough Prison will take part in the scheme.

Although the official launch was on Friday, the scheme began on 16 August - with the first prisoners to go through it leaving the facility on Thursday.

Mr Clarke said that reoffending was the "weakest bit of the criminal justice system" and that the radical bonds would help tackle it without using taxpayers' money.

"It pays by results," said Mr Clarke. "We're going to pay what works and what works should therefore grow and what doesn't work will vanish.

"I like the innovative funding, the payment by results, the collaborative groups, and if it succeeds it will grow and if it doesn't, by that time we will be trying something else.

"But sooner or later, something has got to be done about reoffending."

Economics of reoffending
60% of criminals who serve short sentences reoffend within a year of leaving prison
Each prisoner costs the taxpayer approximately £50,000 a year
One study of rehabilitation work by St Giles Trust found that every £1 invested in its kind of programme saved the public purse £10
The charities involved in this scheme are St Giles Trust, Ormiston Trust and the YMCA

Social Finance said there would be indications of whether the project was succeeding within a year but the full return would not be known until the end of the six-year investment term.

Social Finance director Emily Bolton said: "Investors benefit and the government gets some cost savings. The better the reductions in reoffending, the higher the investors' return.

"It's not taking money out of the system, in fact it's enabling us to transfer the money to more socially valuable things."

Barrow Cadbury Trust chief executive Sara Llewellin said she was delighted the charitable foundation was among the first batch of investors.

"For us this is a win-win; we can invest rather than just give a grant. If the intervention is successful, we can then invest any money gained in more socially useful projects," she said.

Tailored

Rob Owen, the chief executive of St Giles Trust said the scheme provided a "rehabilitation revolution" and he was pleased six caseworkers from the charity had been involved from the outset.

"It is about engaging the offenders while they're in prison and assessing their needs and helping to deal with them. They are literally met by one of our caseworkers as soon as they leave the prison and we give them the guidance we can.

"Most of these men will be in prison for just 30-35 days before they're on release - for us it's an intense period but we have to tailor our approach. One size does not fit all in these cases."

Jack Straw, Shadow Justice Secretary: "I hope it will be extended"

Paddy Scriven, general secretary of the Prison Governors Association, said the scheme was a postive step foward but must not exclude the most persistent offenders.

She said: "The thing that has to be guarded against is that if this sort of scheme spreads and it is payment by results, that the not-for-profit sector people and charities that are administering it don't cherry-pick the most likely successes and leave the very hardline cases to the Prison Service, or more importantly the Probation Service. Then the success is measured unevenly."

Labour MP Jack Straw, who first announced the scheme in March while justice secretary, told the BBC the project involved an element of risk, but added: "If you look at the difference between costs between turning someone round in probation rather than in prison, the benefits will flow back to the state rather quickly."

Jon Collins of the Criminal Justice Alliance, a reform campaign group, said the project could have the potential to help thousands and added: "Bringing money in from new investors to fund this work will also ensure that it is able to continue at a time when the Ministry of Justice's budget is facing severe cuts."

What we see in the above is a conflation of a supposedly successful model for rehabilitation (a good thing) with a highly dubious means of financing it, although there is no necessary relation between the two.

Perkins, 2011:
https://secure.globeadvisor.com/servlet ... BIZ0111ATL

News from globeandmail.com
Business makes push for charity changes

Wednesday, January 19, 2011

Proponents argue that creation of a social finance sector in Canada would make philanthropists out of investors

TARA PERKINS

FINANCIAL SERVICES REPORTER

Most investors expect a financial return when they buy a bond. But what if they could also help young offenders get back on track, increase home care for the elderly, or reduce the incidence of lung disease?

Proponents of "social finance" contend it's possible to do both. It's an idea that's been gaining traction in the U.K. and North America, and now a group of influential Canadians is trying to give it a push here.

A task force that includes former prime minister Paul Martin and Stanley Hartt is lobbying the federal government for changes that would make it easier for charities and non-profits to issue bonds and start businesses.

They argue that the creation of a social-finance sector in Canada would make philanthropists out of investors and ease the burden on government-funded social services. To do so, not-for-profit organizations would be allowed to tap into types of financing normally reserved for business, and to earn revenue. The group, known as the Task Force on Social Finance, met recently with Finance Minister Jim Flaherty.

The concept has been percolating in Britain for a decade, and recently, it has been gaining traction. Last year the British Ministry of Justice in conjunction with Social Finance, an organization affiliated with venture capitalist Sir Ronald Cohen, announced the launch of what was billed as the world's first social impact bond.

A social impact bond, which resembles an equity investment more than a traditional bond, is in effect a contract between private investors and government. Money raised by the bond issue pays for programs or experiments undertaken by not-for-profit organizations. If these projects achieve a targeted outcome, investors are paid out of the ensuing savings to government.

In the U.K. case, money raised by the £5-million ($7.9-million) bond issue goes to a pilot program at Peterborough Prison to rehabilitate short-term prisoners. If, as a result, re-offending drops by more than 7.5 per cent within six years, investors will receive a proportion of the money saved by keeping people out of jail, to a maximum return of 13 per cent. (Developers of the bond say every re-offender costs the state a minimum of £143,000 a year, not including the costs to the victims of their crimes.)

But in Canada, proponents say charities and non-profits must jump through hoops designed for corporations in order to raise revenue or issue their own bonds. Tax laws and guidance from the Canada Revenue Agency on what charities are allowed to do are narrower than those in many other jurisdictions, such as Australia, and have stifled innovative ways of raising money, advocates say.

The supporters add that now is an ideal time to remove those barriers. "When governments are strapped financially, as they are in an economic downturn, they should reach out to as many innovative things as they can find, and this is a very innovative way of meeting those needs," Mr. Martin said in an interview. "With relatively few changes in regulations or taxation, this could be a win-win situation."

Part of the reason for the traditional separation between charities and business is that the former are advantaged by their tax-exempt status.

But Mr. Hartt, chairman of Macquarie Capital Markets Canada, says that rule-makers need to be more open-minded.

"I think what we have to do is get our minds past the idea that charity is in one world and business is in another," he said. "There's no reason whatsoever why a charity shouldn't be able to raise financing."

The two worlds should be allowed to collide, with the proper checks and balances, he says. One of the changes sought is the creation of a "profits destination test" to ensure profits are reinvested in the charity or non-profit and go toward its goals.

A spokeswoman for Finance Minister Flaherty declined to comment in depth on the task force's report, saying only, "We consult and receive input from numerous Canadians during our pre-budget consultations and examine them in the context of the current fiscal realities and the best interest of taxpayers."

There are already some examples of social finance at work in Canada. For instance, the Regent Park Revitalization Project, a community housing project in Toronto, was partly financed by $450-million worth of market-rate bonds that were sold to provincial governments, pension funds and institutional investors.

In 2009, Mr. Martin launched the $50-million Capital for Aboriginal Prosperity and Entrepreneurship fund, which is backed by many of the country's largest firms and foundations including the five largest banks, Barrick Gold Corp., Manulife Financial Corp., Sun Life Financial Inc. and SNC-Lavalin Group. It aims to boost economic independence among native people through the creation of successful businesses.

But experts say Canadian efforts are only scratching the surface. Tim Draimin, executive director of Social Innovation Generation, can see a multitude of opportunities for social impact bonds.

For example, the bonds could be designed to support and expand the promotion of lung health and disease prevention, in order to reduce the number of people affected by lung disease and potentially save the government billions in health-care spending. Lung disease currently costs the Canadian economy $154-billion a year, according to the Lung Association.

All told, the Task Force on Social Finance estimates that impact investment could reach 1 per cent of all managed Canadian assets, or $30-billion.

In the U.S., JPMorgan released a report late last year that argued social "impact investments" are emerging as an alternative asset class in the same way that hedge funds and emerging markets did. The report estimated the potential global market for impact investment at $400-billion (U.S.) to $1-trillion over the next 10 years.

In Canada, the task force's specific requests include:

Allow foundations to invest in projects related to their goals, such as affordable housing units or a community loan fund.

Ask provincial and territorial governments to establish legislation governing the public sale of "community bonds," which are debt securities issued by non-profits to raise financing.

Ask all levels of government to pilot "green bonds" to finance renewable energy projects.

With a thriving social enterprise economy, Canada would also be able to tap into the resources of small and mid-sized companies, Mr. Martin said.

"We're doing very well, but could do a great deal more if some of the changes that are being recommended were brought forth," he said. "I think [Ottawa] should provide social entrepreneurs with the same opportunities, both in terms of regulation and in terms of tax incentives, that they provide business entrepreneurs."

***********

IMPACT INVESTMENTS

Impact investments merge two activities - investing for maximum financial returns, and donating for social purposes - in a way designed to ease pressure on government resources.

Here's another begged question: Do the investments get written off this year's taxes, in the same way as straight charitable donations? How ironic that this is supposed to help finance needed social spending.

What are social impact investments?

Social impact investing (or, more simply, "impact investing") attempts to channel private capital for the public good, while still achieving traditional financial returns. "Social impact bonds" premiered in the U.K. last year, with a £5-million ($7.9-million) issue that aims to reduce the number of ex-prisoners who re-offend. If the program meets its target, investors will be repaid by the government out of savings achieved by having to incarcerate fewer people.

Who is involved in the market?

Investors range from philanthropic foundations to commercial financial institutions and high-net-worth individuals. Often, a funded project is undertaken by a not-for-profit organization and investment returns paid by government if targeted goals are met.

What makes it an emerging asset class?

Impact investments require unique investment and risk-management skills, organizational structures, benchmarks and ratings. Organizations in the U.K., the U.S. and Canada are working to develop these standardized measurements.

Source: JPMorgan;

Ministry of Justice, U.K.

Here’s a fellow who’s already adapted a familiar creepy sales-pitch for SIBs:

http://www.instituteforgovernment.org.u ... a-beginner’s-guide/

Social Impact Bonds: a beginner’s guide

Adrian Brown
20 January 2011
New models of governance and public services

To help explain Social Impact Bonds, I’m going to make you an offer you can’t refuse: you can save £100 in a year’s time by spending £50 today.

At face value my offer is fantastic news. The more sceptical amongst you might ask how certain is that future payment. For example, if it is only 50% likely then the deal is only break even (ignoring inflation). Any worse than that and you’ll lose money.

At this point I’ll have to admit that the £100 isn’t a certainty.

Fair enough, I say, let me sweeten the deal a little more. I’m so confident about the future saving that I’m prepared to spend the £50 myself, right now, out of my own pocket. All I ask is that you sign a contract agreeing that if the full saving does materialise you’ll pay me £60 (to cover the £50 I spent plus £10 for my trouble).

This really is a no-lose situation. In the worst case scenario you save nothing, but have spent nothing. In the best case scenario you get £40 for doing nothing.

Well, except that you don’t get the £40, you are rather considered to have saved £100 and you give me £60 for doing you this great favor!

Here's one lobbying to expand the use of SIB.
http://www.civilsociety.co.uk/finance/n ... ond_trials

News
Treasury hints at more Social Impact Bond trials
Finance | Vibeka Mair | 20 Apr 2010

Topics: Social investment

The chief secretary to the Treasury, Liam Byrne, has revealed that Social Impact Bond (SIB) trials could be expanded across government departments.

The first Social Impact Bond trial, aimed at reducing the reoffending rate of short-term prisoners in HMP Peterborough, was announced by the Ministry of Justice last month.

Byrne (pictured) has now announced that further government departments are considering using the SIB model:

“The Department for Children, Schools and Families have pledged to explore the potential of SIBs to lever in additional resources to support early intervention approaches with children and young people,” he said in Parliament.

“Communities and Local Government are also working with Leeds City Council and NHS Leeds to enable them to use a SIB approach to reduce health and social care costs among older people. Similarly Bradford Metropolitan District Council are considering applying this model as part of their involvement in the government’s Total Place programme.”

Meanwhile, the Social Investment Taskforce, a group formed by the Chancellor of the Exechequer in 2000, has said in its final report on social investment that SIBs have the potential to become a new social asset class, comparable to microfinance.

Social Investment Ten Years On says SIBs have the potential to unlock an unprecedented flow of social investment for preventative intervention and urges the government to provide funding.

The report also urges government to establish a properly capitalised social investment bank using unclaimed assets from dormant bank accounts. The government has pledged £75m to set up a social bank, but the report warns it is insufficient to capitalise a power, sustainable organisation.

The Taskforce also asks the government to commit to a UK Community Reinvestment Act to promote greater engagement by financial institutions with under-invested communities and recommends the setting up of a dedicated organisation to social investment, with the suggested name Social Investment Initiative.

.

[wintler2]

Epic, JR! Thanks for drawing attention to Social Impact Bonds, and dissecting them too. They are crazy crazy crazy, "assumed benefit" my arse, can i get a job doing the modelling and accreditation, i'm very good with crayons and stamps!

What we see in the above is a conflation of a supposedly successful model for rehabilitation (a good thing) with a highly dubious means of financing it, although there is no necessary relation between the two.

Hmm, remind me of something..

--

At one of the opening panels on Wednesday, top executives from Goldman Sachs and Standard Chartered warned that new restrictions on their businesses are either irrelevant or threaten to hurt economic growth.

That is an argument bankers have been making for a long time, but the tone of the off-the-record session seemed more confident and less contrite than in recent years.

I think the bankers have noticed that western citizens are content to continue as hamsters in the wheel. Banking regulation is nowhere on the agenda in my country, haven't seen much news of serious attempts elsewhere, so why should bankers be humble? Their greed and self-regard precludes the possibility of the desperately needed reforms; 'those whom the gods would destroy they first drive mad'. Perhaps the economic rationalist headlock can only be broken by the breaking of its host societies.

[JackRiddler]

.

Thanks wintler2.

And now more in the same goddamn vein -- seeking the profit in misery. The sheer number of places where the leeches can attach themselves constantly grows and amazes. This one again has JPM in the lead...

http://www.alternet.org/newsandviews/ar ... ax_dollars

JP Morgan Makes Big Bucks from Food Stamp Growth,
Then Hires Workers in India with Our Tax Dollars



JP Morgan is the largest processor of food stamp benefits in the United States. JP Morgan has contracted to provide food stamp debit cards in 26 U.S. states and the District of Columbia. JP Morgan is paid for each case that it handles, so that means that the more Americans that go on food stamps, the more profits JP Morgan makes. Yes, you read that correctly. When the number of Americans on food stamps goes up, JP Morgan makes more money. In the video posted below, JP Morgan executive Christopher Paton admits that this is "a very important business to JP Morgan" and that it is doing very well. Considering the fact that the number of Americans on food stamps has exploded from 26 million in 2007 to 43 million today, one can only imagine how much JP Morgan's profits in this area have soared. But doesn't this give JP Morgan an incentive to keep the number of Americans enrolled in the food stamp program as high as possible?

There are just some things that are a little too "creepy" to be "outsourced" to private corporations. The JP Morgan executive in the interview below does his best to put a positive spin on all this, but it just seems really unsavory for a big Wall Street bank to be making so much money off of the suffering of tens of millions of Americans....


http://www.youtube.com/watch?v=5zf8v7RYk6Y

So if unemployment goes down will this ruin JP Morgan's food stamp business?

Well, apparently not. In the interview Paton says that 40% of food stamp recipients are currently working, and he seems convinced that there could be further "growth" in that segment.

So is this what America is turning into?

A place where tens of millions of the unemployed and the working poor crawl over to Wal-Mart and the dollar store every month to use the food stamp debit cards provided to them by JP Morgan?

It turns out that JP Morgan also provides child support debit cards in 15 U.S. states and they also provide unemployment insurance benefit debit cards in seven states.

Apparently states have found that they can save millions of dollars by "outsourcing" the provision of these benefits to big financial firms like JP Morgan.

So what happens if you have a problem with your food stamp debit card?

Well, you call up a JP Morgan service center. When you do this, there is a very good chance that you are going to be helped by a JP Morgan call center employee in India.

That's right - it turns out that JP Morgan is saving money by "outsourcing" food stamp customer service calls to India.

When ABC News asked JP Morgan about this, the company would not tell ABC News which states have customer service calls sent to India and which states have them handled inside the United States....



JP Morgan is the only one today still operating public-assistance call centers overseas. The company refused to say which states had calls routed to India and which ones had calls stay domestically. That decision, the company said, was often left up to the individual states.



JP Morgan has been moving some of these call center jobs back inside the United States due to political pressure, but this whole situation is a really good example of what the "global economy" is doing to middle class Americans.

Just try to imagine the irony - a formerly middle class American that has lost a job to outsourcing calls up to get help with food stamp benefits only to be answered by a call center employee in India.

Welcome to the global economy, eh?

But wait, there is more.

It has just been announced that JP Morgan has admitted that they wrongly foreclosed on over a dozen military families and that they have been overcharging "thousands" of other military families on their mortgages.

Ouch.

It is a really bad public relations move to mess with military families.

Is anyone over at JP Morgan even paying attention?

JP Morgan has also been one of the primary financial institutions involved in the foreclosure "robo-signing" scandal.

They just seem to be having all kinds of problems lately. But they are not alone.

The truth is that we have gotten to the point where big Wall Street banks such as JP Morgan, Goldman Sachs, Citibank and Morgan Stanley just have way, way too much power.

The biggest Wall Street financial institutions had no trouble begging for bailouts from the U.S. government during the financial crisis, but when the American people have needed a little grace and mercy from them they have been less than helpful.

So what do you think about how the big Wall Street banks have been behaving? Feel free to post a comment with your opinion below....