June 11, 2015 "Information
Clearing House" -
With the longest work day, US workers score lower on the
‘living well’ scale than most western European workers. Moreover, despite
those long workdays US employees receive the shortest paid holidays or
vacation time (one to two weeks compared to the average of five weeks in
Western Europe). US employees pay for the costliest health plans and their
children face the highest university fees among the 34 countries in the
Organization for Economic Cooperation and Development (OECD).
In class terms, US employees face the greatest jump in
income inequalities over the
past decade, the longest period of wage and salary decline or stagnation
(1970 to 2014) and the greatest collapse of private sector union membership,
from 30% in 1950 down to 8% in 2014.
On the other hand,
profits, as a percentage of
national income, have increased significantly. The share of income and
profits going to the financial sector, especially the banks and investment
houses, has increased at a faster rate than any other sector of the US
There are two
polar opposite trends: Employees working longer hours, with costlier
services and declining living standards while finance capitalists enjoy
rapidly rising profits and incomes.
Paradoxically, these trends are
not directly based on
greater ‘workplace exploitation’
in the US.
The historic employee-finance capitalist polarization is
the direct result of the grand success of the trillion dollar
financial swindles, the tax
payer-funded trillion dollar Federal bailouts of the
crooked bankers, and the
illegal bank manipulation of interest rates. These uncorrected and
unpunished crimes have driven up the costs of living and producing for
employees and their employers.
Financial ‘rents’ (the bankers and brokers are ‘rentiers’
in this economy) drive up the costs of production for non-financial capital
(manufacturing). Non-financial capitalists resort to reducing wages, cutting
benefits and extending working hours for their employees, in order to
maintain their own profits.
In other words, pervasive, enduring and systematic
large-scale financial criminality is a major reason why US employees are
working longer and receiving less– the ‘trickle down’ effect of
mega-swindles committed by finance capital.
Mega-Swindles, Leading Banks and Complicit State Regulators
trillions of dollars, are
routine practices involving the top
fifty banks, trading houses, currency speculators, management fund
firms and foreign exchange traders.
These ‘white collar’ crimes have hurt
hundreds of millions of
investors and credit-card holders, millions of mortgage debtors, thousands
of pension funds and most industrial and service firms that depend on bank
credit to meet payrolls, to finance capital expansion and technological
upgrades and raw materials.
Big banks, which have been ‘convicted and fined’ for
mega-swindles, include Citi Bank, Bank of America, HSBC, UBS, JP Morgan,
Barclay, Goldman Sachs, Royal Bank of Scotland, Deutsch Bank and
forty other ‘leading’
The mega-swindlers have repeatedly engaged in a great
variety of misdeeds, including accounting fraud, insider trading, fraudulent
issue of mortgage based securities and the laundering of hundreds of
billions of illegal dollars for Colombian, Mexican, African and Asian drug
and human traffickers.
They have rigged the London Interbank Official Rate (LIBOR),
which serves as the global interest benchmark to which hundreds of trillions
of dollars of financial contracts are tied. By raising LIBOR, the
financial swindlers have defrauded hundreds of millions of mortgage and
credit-card holders, student loan recipients and pensions.
(5/20/2015) reported on an ongoing swindle involving the manipulation of the
multi-trillion-dollar International Swaps and Derivatives Association (ISDA)
fix, a global interest rate benchmark used by banks, corporate treasurers
and money managers to determine borrowing costs and to value much of the
$381 trillion of outstanding interest rate swaps.
Times (5/23/15, p. 10) reported how the top seven banks engaged in
information to their clients, practiced illegal insider trading to profit in
the foreign exchange market (forex), whose daily average turnover
volume for 2013 exceeded $5 trillion dollars.
These seven convicted banks ended up paying less than $10
billion in fines, which is less than 0.05% of their daily turnover. No
banker or high executive ever went to jail, despite undermining the security
of millions of retail investors, pensioners and thousands of companies.
The Direct Impact of Financial Swindles on
Declining Living Standards
Each and every major financial swindle has had a perverse
ripple effect throughout the
entire economy. This is especially the case where the negative consequences
have spread downward through
local banks, local manufacturing and service industries to employees,
students and the self-employed.
The most obvious example of the downward ripple effect was
the so-called ‘sub-prime mortgage’ swindle. Big banks deliberately
sold worthless, fraudulent
mortgage-backed securities (MBS) and collateralized debt
obligation (CDO) to smaller banks, pension funds and local
investors, which eventually foreclosed on overpriced houses causing low
income mortgage holders to lose their down payments (amounting to most of
While the effects of the swindle spread outward and
downward, the US Treasury propped
up the mega-swindlers with a trillion-dollar bailout in working
people’s tax money. They anointed their mega-give-away as the bail out for
‘banks that are just too big to fail”! They transferred funds from the
public treasury for social services to the swindlers.
In effect, the banks profited from their widely exposed
crimes while US employees lost their jobs, homes, savings and social
services. As the US Treasury pumped trillions of dollars into the coffers of
the criminal banks (especially on Wall Street), the builders, major
construction companies and manufacturers faced an unprecedented credit
squeeze and laid off millions of workers, and reduced wages and increased
the hours of un-paid work.
Service employees in consumer industries were hit hard as
wages and salaries declined or remained frozen. The costs of the
FOREX, LIBOR and ISDA fix
swindles’ fell heavily on big business, which passed the pain onto labor:
cutting pension and health coverage, hiring millions of ‘contingent or temp’
workers at minimum wages with no benefits.
The bank bailouts forced the Treasury to shift funds from
‘job-creating’ social programs and national infrastructure investment to the
FIRE (finance, insurance and real estate) sector with its
highly concentrated income
As a result of the increasing concentration of wealth
among the financial swindlers, inequalities in income grew; wages and
salaries were frozen or reduced and manufacturers outsourced production,
resulting in declines in production.
Employees, suffering from the loss of income brought on by
the mega-swindles, found that they were working longer hours for less pay
and fewer benefits. Productivity suffered. With the total breakdown of the ‘capitalist
rules of the game’, investors lost confidence and trust in the system.
Mega-swindles eroded ‘confidence’ between investors and traders, and made a
mockery of any link between performance at work and rewards. This severed
the nexus between highly
motivated workers, engaged in ‘hard work, long hours’ and rising
living standards, and between investment and productivity.
As a result, profits in the finance sector grew while the
domestic economy floundered and living standards stagnated.
Financial Impunity: Regulatees Controlling the
proliferation of mega-swindles and their pervasive ripple effects
throughout the economy and society, none of the dozens of federal or state
regulatory agencies intervened
to stop the swindle before it undermined the domestic economy. No CEO or
banker was ever arrested for their
part in the swindle of trillions. The regulators only reacted after
trillions had ‘disappeared’ and swindles were ‘a done deal’. The
impunity of the swindlers in
planning and executing the pillage of hundreds of millions of employees,
taxpayers and mortgage holders was because the federal and state regulatory
agencies are populated by ‘regulatory administrators’ who
came from or
aspired to join the
financial sector they were tasked with ‘regulating’.
Most of the high officials appointed to lead the
regulatory agencies had been selected by the ‘Lords of Wall Street,
Frankfurt, the City of London or Zurich.’ Appointees are chosen on the basis
of their willingness to enable
financial swindles. It therefore came as no surprise on May 28 2015 when US
President Obama approved the appointment of Andrew Donahue, Managing
Director and Associate General Council for the repeatedly felonious,
mega-swindling banking house of Goldman Sachs to be the ‘Chief of Staff’ of
the Security and Exchange Commission. His career has been typical of the
Washington-Wall Street ‘Revolving Door’.
Only after fraud and swindles evoked the nationwide public
fury of mortgage holders, investors and finance companies did the regulators
‘investigate’ the crimes and even then not a single major banker
was jailed, not a single
major bank was closed down.
There were a few low-level bond traders and bank employees
who were fired or jailed as scapegoats. The banks paid puny (for them)
fines, which they passed on to their customers. Despite pledges to ‘mend
their ways’ the bankers concocted
new schemes with their windfalls of billions of Federal ‘bailout’
money while the regulators looked
on or polished their CV’s for the next pass through the ‘revolving
Every top official in Treasury, Commerce and Trade, and
every regulator in the Security Exchange Commission (SEC) who ‘retired to
the private sector’ has ended up working for the same mega-criminal banks
and finance houses they had investigated, regulated and ‘slapped on the
As one banker, who insists on anonymity, told me: ‘The
most successful swindlers are those who investigated financial
Mega-swindles define the nature of contemporary
capitalism. The profits and power of financial capital is not the outcome of
‘market forces’. They are the result of a system of criminal behavior that
pillages the Treasury,
exploits the producers and consumers, evicts homeowners and robs taxpayers.
The mega swindlers represent much less than 1% of the
class structure. Yet they hold over 40% of personal wealth in this country
and control over 80% of capital
They grow inexorably rich and richer, even as the rest of
the economy wallows in crisis and stagnation. Their swindles send powerful
ripples across the national economy, which ultimately freeze or reduce the
income of the skilled (middle class) employees and undermine the living
conditions for poor working-class whites, and especially under and
unemployed Afro-American and Latino American young workers.
Efforts to ‘moralize’ capital have failed
repeatedly since the regulators are controlled by those they claim to
The rare arrest and prosecution of any among the current
tribe of mega-swindlers would only results in their being replaced by new
swindlers. The problem is systemic and requires deep structural changes.
The only answer is to build a political movement
independent of the two party system, willing to nationalize the banks and to
pass legislation outlawing derivatives, forex trading and other unnatural
parasitic speculative activities.