Wall Street Flacks Have an Increasingly Murky Presence in U.S. Media

By Pam Martens and Russ Martens: September 14, 2017

Andrew Ross Sorkin, Creator of DealBook at the New York Times

Andrew Ross Sorkin, Creator of DealBook at the New York Times

Yesterday, one of our readers sent us a link to an article at Real Clear Politics by Allan Golombek which makes the same error-filled assertions as those of Andrew Ross Sorkin at the New York Times: that the repeal of the Glass-Steagall Act did not lead to the U.S. financial crisis of 2007-2010.

Golombek’s bio at the end of the article says only that he is “a Senior Director at the White House Writers Group.” A check at the firm’s website shows it to be an organization that freely admits to being paid by corporations and other special interests to advance their position in the media. The firm states: “Whether in a campaign or a crisis, we help our clients determine how best to define their messages for media acceptance and then disseminate those messages for maximum exposure and impact.”

There are two key problems here. Not every reader will take the time to ferret out what the White House Writers Group is all about and, more importantly, neither Golombek nor Real Clear Politics discloses who the ultimate client is behind Golombek’s message. If Golombek had disclosed in his bio that his firm was being paid by a major Wall Street bank or trade association to push this position on Glass-Steagall, would Real Clear Politics have run the article? By withholding this information, isn’t the reader left badly misinformed as to motive.

There is also the question as to exactly where the premise of this article originated. According to his LinkedIn bio, Golombek has never worked a day on Wall Street. In fact, he doesn’t even reside in the U.S. His bio says he “resides in his hometown of Toronto.”

His position sounds uncannily like that of Andrew Ross Sorkin at the New York Times and that of the JPMorgan Chase CEO, Jamie Dimon, who also has a curious camaraderie with Andrew Ross Sorkin. Dimon appeared at the 2009 book party for Sorkin’s book, Too Big to Fail, and Dimon headlined the first New York Times DealBook Conference in 2012 where he was interviewed on stage by Sorkin, who serves as the official host of the annual, money-making conference. This year’s upcoming conference on November 9 promises that corporations can “Align your brand with influential consumers, business leaders, entrepreneurs and visionaries through high-impact integrations. Host delegates at private cocktail or dinner receptions, conduct on-site polling, develop custom content, display product and amplify your sponsorship through on-site branding and extensive print, digital and social media promotion.”

The 2012 inaugural DealBook conference raised so many ethical concerns that the Times’ own Public Editor at the time, Margaret Sullivan, questioned it. Sullivan wrote:

“…with the pricey tickets and the all-platforms-blazing corporate sponsorships, the event brought in plenty of much-needed revenue for The Times.

“Here is what the conference did not have going for it: A great deal of distance between sources and those who cover them – something traditionally thought to be a bedrock journalistic idea.”

The Times has removed the ability to be so harshly critiqued in this manner by its own Public Editor. This spring, it eliminated the longstanding position entirely.

Restoring the Glass-Steagall Act is no minor issue. The public deserves the right to know who is lurking in the shadows behind these articles. Restoring the legislation was included in both the Republican and Democratic platforms last year. The debate’s outcome will determine whether the U.S. financial system and the U.S. economy will survive the next major debacle on Wall Street. The public was kept in the dark until 2011 that the financial system and U.S. economy only survived the 2008 crash because the Federal Reserve was secretly pumping $16 trillion in almost zero interest loans to Wall Street and its foreign brethren from 2007 through at least the middle of 2010. The Troubled Asset Relief Program (TARP), whose details were publicly disclosed, represented a tiny portion of the actual, massive bailout.

Glass-Steagall legislation was enacted in 1933 and kept the U.S. financial system safe for 66 years until its repeal in 1999. It was put in place in 1933 as the stock market was on its way to losing 90 percent of its value following the 1929 crash and after the U.S. Senate had spent three years intensely investigating the Wall Street corruption that had caused the crash. It was wisely decided by Congress and President Franklin Delano Roosevelt that the new legislation would ban banks holding insured deposits backstopped by the taxpayer from being housed under the same roof with Wall Street’s casino-like investment banks and brokerage firms, which had a jaded history of blowing themselves up. Nine short years after the repeal of Glass-Steagall, century old iconic names on Wall Street lay in ruins and their demise and interconnectedness led to the worst economic crisis in the United States since the Great Depression.

Sorkin’s grossly erroneous position is that none of the Wall Street firms that failed owned insured depository banks so Glass-Steagall was irrelevant to the crash. He has specifically mentioned Lehman Brothers, Merrill Lynch and AIG as having nothing to do with the repeal of Glass-Steagall. But, in fact, they all did own FDIC-insured banks at the time of the crash, holding billions of dollars in insured deposits backstopped by the taxpayer. And Citigroup, parent of the sprawling insured retail bank, Citibank, and its 2,000 investment and insurance-related subsidiaries, was the poster child for the wreckage caused by the repeal of Glass-Steagall. Citigroup became insolvent during the crash and received the largest taxpayer bailout in the history of finance: more than $2.5 trillion in low cost loans, equity infusions and asset guarantees.

In yesterday’s piece by Golombek, he parrots Sorkin with this:

“In fact, knocking down the walls between financial services didn’t help cause the financial meltdown so much as help contain it. None of the institutions that ended up doing the most to prompt the financial meltdown was a financial hybrid.”

Last year, Dimon said on CNBC that the repeal of Glass-Steagall “had nothing to do with the crisis” of 2008.

It’s time to find out exactly whom Golombek speaks for and who is funding his voice.

Jamie Dimon Knows a Fraud When He Sees It – Outside of His Bank

By Pam Martens and Russ Martens: September 13, 2017

Jamie Dimon, Chairman and CEO of JPMorgan Chase, Testifying Before Congress

Jamie Dimon, Chairman and CEO of JPMorgan Chase, Testifying Before Congress

Jamie Dimon became Chief Executive Officer of JPMorgan Chase on December 31, 2005. An inordinate amount of frauds have been perpetrated inside his bank since that time, none of which the eagle-eyed Dimon spotted. But Dimon says he knows a fraud when he sees one outside of his bank. Yesterday, he took on the cryptocurrency known as Bitcoin, calling it a fraud. At a banking conference on Tuesday, Dimon said that “Bitcoin will eventually blow up. It’s a fraud. It’s worse than tulip bulbs and won’t end well.”

We’re not saying Dimon is wrong about Bitcoin. In fact, more than three years ago Wall Street On Parade compared Bitcoin to the tulip bulb bubble and explained in crystal clear terms how it differs from a real currency, such as the U.S. dollar. But we are saying that Dimon’s super sleuth nose for fraud has the uncanny knack of serially failing him when it comes to Ponzi schemes and mortgage frauds and rogue derivative and commodity traders operating inside his own bank – a taxpayer subsidized institution that has richly rewarded Dimon despite the fact that his sniffer can only catch the scent of fraud outside the doors of JPMorgan Chase. (As of June 30, 2017, according to the Federal Deposit Insurance Corporation, JPMorgan Chase held more than $1.5 trillion in deposits, the majority of which are insured by the Federal government and backstopped by the U.S. taxpayer.)

On March 22, 2016, the Government Accountability Office (GAO) released a report that noted that the U.S. Justice Department had earlier assigned a $1.7 billion forfeiture against JPMorgan Chase “for its failure to detect and report the suspicious activities of Bernard Madoff,” the largest fraud ever perpetrated against the investing public. The GAO stunningly found that because the bank “failed to maintain an effective anti-money-laundering program and report suspicious transactions in 2008, it contributed to its own bank customers “losing about $5.4 billion in Bernard Madoff’s Ponzi scheme.”

Justice Department investigative material, much of which came from Irving Picard, the trustee for the Madoff victims’ fund, showed that JPMorgan Chase had relied on unaudited financial statements and skipped the required steps of bank due diligence to make $145 million in loans to Madoff’s business. Lawyers for Picard wrote that from November 2005 through January 18, 2006, JPMorgan Chase loaned $145 million to Madoff’s business at a time when the bank was on “notice of fraudulent activity” in Madoff’s business account and when, in fact, Madoff’s business was insolvent. The JPMorgan Chase loans were needed because Madoff’s business account, referred to as the 703 account, was “reaching dangerously low levels of liquidity, and the Ponzi scheme was at risk of collapsing,” according to Picard. JPMorgan, in fact, “provided liquidity to continue the Ponzi scheme,” the Picard investigators found.

In November 2013, Picard had asked the U.S. Supreme Court to review an appellate court’s ruling that barred him from suing JPMorgan and other banks for aiding the Madoff fraud in order to recover additional funds for victims. In his Supreme Court petition, Picard stated that JPMorgan Chase stood “at the very center of Madoff’s fraud for over 20 years.” This assertion was based on Picard’s lower court filing that demonstrated that the bank was aware that Madoff was claiming to invest tens of billions of dollars in a strategy that involved buying large cap stocks in the Standard and Poor’s 500 index while simultaneously hedging with options. But the Madoff firm’s business account at JPMorgan, which the bank had access to review for over 20 years, showed no evidence of payments for stock or options trading.

Picard’s petition to the Supreme Court noted:

“As JPM [JPMorgan] was well aware, billions of dollars flowed from customers into the 703 account, without being segregated in any fashion. Billions flowed out, some to customers and others to Madoff’s friends in suspicious and repetitive round-trip transactions. But in the 22 years that JPM maintained the 703 account, there was not a single check or wire to a clearing house, securities exchange, or anyone who might be connected with the purchase of securities. All the while, JPM knew that Madoff was using the account to run an investment advisory business with thousands of customers and billions under management and knew that Madoff was using its name to lend legitimacy to his enterprise…”

According to evidence obtained by Picard, JPMorgan Chase invested over $250 million of  its bank’s money with Madoff feeder funds while it simultaneously created structured investment products that allowed its customers to make leveraged bets on the returns of the feeder funds invested with Madoff.

In September 2008, just two months before Madoff confessed to running an unprecedented investment fraud, JPMorgan conducted a new round of due diligence and decided it was time to get out of its own $250 million investment with the Madoff feeder funds.

On October 28, 2008, JPMorgan Chase sent a “suspicious activity report” not to the U.S. government, the country backstopping its insured deposits and where its primary regulators were based, but to the United Kingdom’s Serious Organized Crime Agency (SOCA). The document stated:

[JPMorgan’s] “concerns around Madoff Securities are based (1) on the investment performance achieved by its funds which is so consistently and significantly ahead of its peers, year-on-year, even in the prevailing market conditions, as to appear too good to be true – meaning that it probably is; and (2) the lack of transparency around Madoff Securities’ trading techniques, the implementation of its investment strategy, and the identity of its OTC option counterparties; and (3) its unwillingness to provide helpful information. As a result, JPMCB has sent out redemption notices in respect of one fund, and is preparing similar notices for two more funds.”

In addition to paying the forfeiture of $1.7 billion to the Justice Department, JPMorgan Chase was charged by the agency with two criminal felony counts and given a deferred prosecution agreement. It said it would do much better in the future. But the very next year, on May 20, 2015, JPMorgan Chase was charged with a new felony count, which it admitted to, for involvement in rigging foreign currency markets. Other banks were charged as well.

The crime spree at JPMorgan Chase became so prolific that two trial lawyers, Helen Davis Chaitman and Lance Gotthoffer, published a breathtaking book on the matter, noting the similarities to the Gambino crime family. In addition to the above frauds, the authors add more details as to what has occurred on Dimon’s watch, such as:

“In April 2011, JPMC agreed to pay $35 million to settle claims that it overcharged members of the military service on their mortgages in violation of the Service Members Civil Relief Act and the Housing and Economic Recovery Act of 2008.

“In March 2012, JPMC paid the government $659 million to settle charges that it charged veterans hidden fees in mortgage refinancing transactions.

“In October 2012, JPMC paid $1.2 billion to settle claims that it, along with other banks, conspired to set the price of credit and debit card interchange fees.

“On January 7, 2013, JPMC announced that it had agreed to a settlement with the Office of the Controller of the Currency (‘OCC’) and the Federal Reserve Bank of charges that it had engaged in improper foreclosure practices.

“In September 2013, JPMC agreed to pay $80 million in fines and $309 million in refunds to customers whom the bank billed for credit monitoring services that the bank never provided.

“On November 15, 2013, JPMC announced that it had agreed to pay $4.5 billion to settle claims that it defrauded investors in mortgage-backed securities in the time period between 2005 and 2008.

“On December 13, 2013, JPMC agreed to pay 79.9 million Euros to settle claims of the European Commission relating to illegal rigging of benchmark interest rates.

“In February 2012, JPMC agreed to pay $110 million to settle claims that it overcharged customers for overdraft fees.

“In November 2012, JPMC paid $296,900,000 to the SEC to settle claims that it misstated information about the delinquency status of its mortgage portfolio.

“In July 2013, JPMC paid $410 million to the Federal Energy Regulatory Commission to settle claims of bidding manipulation of California and Midwest electricity markets.

“On November 19, 2013, JPMC agreed to pay $13 billion [that’s billion with a ‘b’] to settle claims by the Department of Justice; the FDIC; the Federal Housing Finance Agency; the states of California, Delaware, Illinois, Massachusetts, and New York; and consumers relating to fraudulent practices with respect to mortgage-backed securities.

“In December 2013, JPMC paid $22.1 million to settle claims that the bank imposed expensive and unnecessary flood insurance on homeowners whose mortgages the bank serviced.”

Not only has Jamie Dimon not been fired from his position as Chairman and CEO of JPMorgan Chase after presiding over this unprecedented wave of charges but he’s now dually serving as the Chairman of the Business Roundtable, a national organization of corporate CEOs whose stated goal is to “build a better future for the nation and its people.”

Wall Street Is Attempting to Clone Loyal, Non-Whistleblower Workers

By Pam Martens and Russ Martens: September 12, 2017 

Traders on Floor of NYSE Stop Trading to Listen to High Frequency Trading Debate on CNBC Following Michael Lewis' Charges on 60 Minutes That the Market Is Rigged

Traders on Floor of NYSE Stop Trading to Listen to High Frequency Trading Debate on CNBC Following Michael Lewis’ Charges on 60 Minutes That the Market Is Rigged

Last month, Reuters reported that Goldman Sachs was planning “to begin” using personality tests to assist it in hiring personnel “in its banking, trading and finance and risk divisions.”

It’s highly unlikely that Goldman Sachs is just beginning to use personality tests since other major firms on Wall Street have been using them for at least three decades – and not in a good way.

The Reuters article was penned by Olivia Oran, who also wrote in June of 2016 that major Wall Street firms such as Goldman Sachs, Morgan Stanley, Citigroup and UBS were “exploring the use of artificial intelligence software to judge applicants on traits – such as teamwork, curiosity and grit.” The article further noted that one of the goals of the artificial intelligence software is to “avoid the expense of problem hires and turnover…”

All of the firms mentioned have experienced employees that, in their view, were “problem hires.” The public, however, has viewed those same employees as public interest-motivated whistleblowers.

In 2012, Goldman Sachs Vice President Greg Smith stunned the firm by submitting his resignation via an OpEd in the New York Times, charging the firm with a corrupt environment: “It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail,” Smith said. He called the environment at Goldman “as toxic and destructive as I have ever seen it.”

It takes a lot of guts to resign from Goldman Sachs via the New York Times. But there has been lots of gutsy whistleblowing by brilliant recruits with pristine resumes. Richard Bowen was a former Citigroup Senior Vice President who repeatedly alerted his superiors in writing that potential mortgage fraud was taking place in his division. At one point, Bowen emailed a detailed description of the problem to top senior management, including Robert Rubin, the former U.S. Treasury Secretary and then Chairman of the Executive Committee at Citigroup. Bowen’s reward for elevating serious ethical issues up the chain of command was to be relieved of most of his duties and told not to come to the office. Bowen testified before the Financial Crisis Inquiry Commission in 2010. In 2011, Bowen made the ultimate gutsy move: he revealed the sordid details on the CBS program 60 Minutes.

Morgan Stanley had its hiring epiphany moment with Frank Partnoy’s 1997 bestseller, F.I.A.S.C.O. – Blood in the Water on Wall Street. Partnoy had worked at the firm as a derivatives structurer. Obviously, the firm did not foresee his potential to write a bestselling book exposing its predatory underbelly. Partnoy wrote: 

 “…my ingenious bosses became feral multimillionaires: half geek, half wolf. When they weren’t performing complex computer calculations, they were screaming about how they were going to ‘rip someone’s face off’ or ‘blow someone up.’ Outside of work, they honed their killer instincts at private skeet-shooting clubs, on safaris and dove hunts in Africa and South America, and at the most important and appropriately named competitive event at Morgan Stanley: the Fixed Income Annual Sporting Clays Outing, F.I.A.S.C.O. for short. This annual skeet-shooting tournament set the mood for the firm’s barbarous approach to its clients’ increasing derivatives losses. After April 1994, when these losses began to increase, John Mack’s [President of Morgan Stanley] instructions were clear: ‘There’s blood in the water. Let’s go kill someone.’ ”

Nomi Prins is another of those “problem hires.” A highly respected former Managing Director at Goldman Sachs who is now a prolific author, Prins penned the 2004 book Other People’s Money: The Corporate Mugging of America. Prins wrote:

“When I left Wall Street, at the height of a wave of scandals uncovering scores of massively destructive deceptions, my choice was based on a very personal sense of right and wrong…So, when people who didn’t know me very well asked me why I left the banking industry after a fifteen-year climb up the corporate ladder, I answered, ‘Goldman Sachs.’

“For it was not until I reached the inner sanctum of this autocratic and hypocritical organization – one too conceited to have its name or logo visible from the sidewalk of its 85 Broad Street headquarters [now relocated to 200 West Street] that I realized I had to get out…The fact that my decision coincided with corporate malfeasance of epic proportions made me realize that it was far more important to use my knowledge to be part of the solution than to continue being part of the problem.”

The quintessential problem hire, of course, is Michael Lewis – the brilliant author who has singlehandedly spawned multiple Senate investigations into stock market rigging; dropped his market rigging bombshell on 60 Minutes, and sold his book The Big Short to Hollywood so that tens of millions of Americans could finally understand how Wall Street’s greed and corruption imploded the U.S. housing market and collapsed the financial system in 2008.

It’s tough to say if even artificial intelligence could have predicted to a major Wall Street firm that Michael Lewis had this rebellious quality. Lewis holds a degree in economics from the London School of Economics. He got his start on the trading floor of Salomon Brothers as a bond salesman. Lewis turned that experience into the bestselling classic “Liar’s Poker,” in which he exposed the crass and vulgar antics of the trading floor.

We know from first-hand experience that personality tests have been used by Wall Street’s biggest firms for decades.  Susan Antilla chronicled one such test given by Merrill Lynch in her book, Tales from the Boom-Boom Room. (Details of that test were also documented in a Federal lawsuit against Merrill Lynch.) Antilla explained that Helen O’Bannon, who had “graduated with honors from Wellesley and had an M.A. in economics from Stanford,” had been asked to take a personality test at Merrill Lynch in the 1970s. One question on the test asked:

“Which quality in a woman do you consider most important? 1) beauty 2) intelligence 3) dependency 4) independence or 5) affectionateness?”

It turns out that if the applicant answered “intelligence” or “independence,” no points were given while an answer of “dependency” or “affectionateness” scored two points. One point was given for beauty. O’Bannon had answered “intelligence.” She was denied a broker training spot at Merrill Lynch.

There are solid reasons to be suspicious about exactly what type of candidates Wall Street is attempting to filter out and filter in. On November 20, 2014 the Senate’s Permanent Subcommittee on Investigations released a 396-page report and 8-inch stack of exhibits.  Among the exhibits was a resume submitted to JPMorgan Chase by a young, recent graduate of George Washington University Law School.

This young man attempted to stand out from his law grad peers who were also applying for jobs at JPMorgan by announcing prominently on his resume that during his job in power procurement at Southern California Edison, he had “identified a flaw in the market mechanism Bid Cost Recovery that is causing the CAISO [the California grid operator] to misallocate millions of dollars.” The young job applicant went on to note that he had “showed how units in reliability areas can increase profits by 400%.”

The applicant was making it clear that he felt he had the ability to exploit electricity markets in California and that would make him a valuable job candidate at JPMorgan Chase. He was apparently right. Part of the same exhibit 76 is a JPMorgan email from the person who would become this young man’s boss, Francis Dunleavy, advising: “Please get him in ASAP.”

Within three months of JPMorgan hiring the new law grad in July 2010, he was actively engaged in developing manipulative bidding strategies for JPMorgan in California electric markets. A few months later, the plan was deployed. By fall of the same year, JPMorgan was estimating that the strategy “could produce profits of between $1.5 and $2 billion through 2018.”

Three years later, on July 30, 2013, the gambit was exposed in a scathing report by the Federal Energy Regulatory Commission (FERC), which included the names of JPMorgan personnel who were involved. JPMorgan, which had company-wide profits of $18 billion in 2013, was let off the hook by the Federal Energy Regulatory Commission for $410 million in penalties and disgorgement. No one went to jail.

Hurricanes Katrina, Sandy, Harvey and Irma: It’s Time for the Public to Reclaim the National Budget

By Pam Martens and Russ Martens: September 11, 2017

Flooding in Houston Continues

Flooding in Houston from Hurricane Harvey

After the devastation of Hurricane Katrina and Super Storm Sandy, most rational nations would have imposed restrictions on coastal building and devoted meaningful portions of the national treasury to fund scientific research to limit future loss of life and economic hardships from such monster storms. And yet, here we are in 2017 facing the current reality: vast swaths of a major economic hub, Houston, lies in ruins from the flooding unleashed by Hurricane Harvey while the entire State of Florida awoke this morning to the chaos unleashed yesterday and overnight by the bizarre 415 mile-wide Hurricane Irma, with a reported 4.5 million homes and businesses currently without power in Florida, a state where temperatures routinely reach into the 90s in September and air conditioning is a necessity, not a luxury.

The leadership in Washington has not reflected that of a rational nation for many years now and, tragically, U.S. citizens, for the most part, have allowed their  democracy to become a spectator sport.

We currently have a President who has withdrawn the United States from the Paris Climate Accord, putting at risk international cooperation to combat global warming and sea level rise, two clear contributing factors to the increasing frequency of the so-called 500-year storm. As David Dayen wrote recently at the New Republic:

“The city [Houston] suffered a ‘500-year flood,’ defined as one with a 0.2 percent chance of occurring in a given year based on past experience, in 2015. It had another 500-year flood in 2016. And it’s experiencing something much bigger than a 500-year flood right now. Maybe it’s time to admit that past performance is no longer any indication of future results.”

The leadership in Washington has, for many years now, cared so little about its responsibility to its citizens that it doesn’t even bother to keep the national books in order to account for how it is spending taxpayers’ money. According to a report released last year by the watchdog for Congress, the nonpartisan Government Accountability Office (GAO), an audit showed that the U.S. government can’t reliably report a significant portion of its assets, liabilities, or expenditures. The Department of Defense is one of the largest black holes. The GAO reported that “serious financial management problems at DOD” had “prevented its financial statements from being auditable.” While the U.S. spends more in military outlays than the eight other largest spending countries combined, the leadership in Washington doesn’t feel it needs to account to the public as to where and how billions of dollars in military outlays are being deployed. The public tolerates this insanity.

The attitude by U.S. leadership in Washington to just throw some money at each passing monster storm and sit back and wait for the next disaster stands in stark contrast to the attitude of the Dutch. In a 2015 report for the Environmental Defense Fund, Shan­non Cun­niff wrote:

“The Netherlands doesn’t fool around with floods. After a devastating North Sea flood in the 1953 resulted in 1,800 deaths, the nation adopted a ‘never again’ attitude.

“Today, a national system of dikes and surge barriers provide a level of protection unheard of in the U.S. – protection against an event with a probability of occurring once every 10,000 years. That’s not a typo.”

Most, if not all, of the major problems that plague the United States today are merely symptoms of one overarching, malignant disease: a corrupt campaign finance system that is preventing U.S. citizens from having a real voice in their government; a system that fosters a pay-to-play model that is creating perverse economic outcomes. Big Oil benefits greatly from Trump’s stance on climate change; the citizens devastated by the latest monster storms do not.

NYT Editorial Board Is Pounding the Wrong Table Again on Bank Reform

By Pam Martens and Russ Martens: September 8, 2017 

President Franklin Delano Roosevelt Signing the Glass-Steagall Act on June 16, 1933

President Franklin Delano Roosevelt Signing the Glass-Steagall Act on June 16, 1933 (Courtesy St. Louis Fed)

Wall Street On Parade is something of an historian when it comes to the shifting sands of the New York Times Editorial Board and its position on riding herd on one of its richest and serially corrupt hometown industries – Wall Street. The Times has vacillated over the decades between truculent finger wagging at Wall Street (typically after the public is already wielding pitchforks) to irrational indulgence of its excesses, to outright egging on of its wealth transfer schemes.

The Times is out with a new editorial today which is peculiarly titled: “Why the Return of Bigger Banks Means Bigger Risks for Everyone Else.” The title makes it seem like the Trump administration has had something to do with “the return of bigger banks.” In fact, it was the failure of the eight year Democratic administration of Barack Obama to enact reforms to break up these monster banking behemoths that has put us all at peril today. We’ll get to that in a moment, but first, some required background on the vacillations at the Times.

On March 12, 1988, the New York Times published an editorial titled: Dispel This Banking Myth. It was filled to the brim with whoppers. Consider the following paragraph:

“The Glass-Steagall Act of 1933 was intended to prevent another market crash by prohibiting banks from selling and underwriting securities. But in practice it merely built a wall around banking, a barrier that reduced competition and raised fees in the closely related securities industry without adding to financial stability.”

In fact, the Glass-Steagall Act kept the U.S. financial system safe for 66 years – from its passage in 1933 to its repeal in 1999. Just nine years after its repeal, Wall Street collapsed and brought down the U.S. economy in a repeat of 1929 and the economic crisis that followed. Glass-Steagall kept the U.S. financial system safe by preventing investment banks from sucking in insured deposits, backstopped by the taxpayer, and then churning the money into monster gambles and losses that could take down the entire mega bank and interconnected financial system.

Glass-Steagall did not result in “reduced competition” as the Times states. While Glass-Steagall was on the books, there was no Wall Street banking cartel of a handful of banks controlling 90 percent of all derivatives and almost half of all deposits in the United States, the situation we find ourselves in today.

In another editorial on September 22, 1990, the New York Times lauded “The Fed’s Sensible Bank Experiment.” It wrote:

“The Glass-Steagall Act was passed in part to settle a turf war between competing interests in U.S. financial markets. But it also reflected a belief, fueled by the 1929 crash on Wall Street and the subsequent cascade of bank failures, that banks and stocks were a dangerous mixture.

“Whether that belief made sense 50 years ago is a matter of dispute among economists. But it makes little sense now. In a recent study of Glass-Steagall, George Benston, a professor of finance at Emory University, provides compelling evidence that cutting off banks from stocks and bonds makes them more risky: a bank reduces risk by diversifying its investments.”

On April 8, 1998, the Times editorial writers effectively saluted John Reed and Sandy Weill for putting together a mega bank merger that was illegal at the time:

“Congress dithers, so John Reed of Citicorp and Sanford Weill of Travelers Group grandly propose to modernize financial markets on their own. They have announced a $70 billion merger — the biggest in history — that would create the largest financial services company in the world, worth more than $140 billion… In one stroke, Mr. Reed and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies.”

The resulting behemoth that came out of this merger, Citigroup, forced the hand of Congress to repeal the Glass-Steagall Act the very next year. And the resulting Too-Big-to-Fail Citigroup was on secret life support from the Federal Reserve just eight years later. After playing an outsized role in the fraudulent practices and products that brought down Wall Street, the U.S. economy and housing market in 2008, this is what Citigroup was able to extort from the taxpayer under the Too-Big-to-Fail model: The U.S. Treasury infused $45 billion in capital into Citigroup to prevent its total collapse; the government guaranteed over $300 billion of Citigroup’s assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; the Federal Reserve secretly funneled $2.5 trillion in almost zero-interest loans to units of Citigroup between 2007 and 2010. And that’s just what we know thus far.

It might be possible to write all of this off as just bad judgment on the part of the New York Times – but for this: it has steadfastly refused to correct well-documented errors in a grossly distorted article on the financial crash of 2008 that diminished the role that the repeal of Glass-Steagall played in that epic financial meltdown.

On May 21, 2012, the Times published a piece by business writer, Andrew Ross Sorkin, titled: “Reinstating an Old Rule Is Not a Cure for Crisis.” In the article, Sorkin writes:

“The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking.  Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.

“Next in line was the American International Group, an insurance company that was also unrelated to Glass-Steagall.”

Sorkin was not just wrong but outrageously dead wrong on every single bank. As we wrote in 2012:

“There are four companies mentioned in those five sentences and in every case, the information is spectacularly false.  Lehman Brothers owned two FDIC insured banks, Lehman Brothers Bank, FSB and Lehman Brothers Commercial Bank. Together, they held $17.2 billion in assets as of June 30, 2008, 75 days before Lehman went belly up…Merrill Lynch also owned three FDIC insured banks… Bear Stearns owned Bear Stearns Bank Ireland, which is now part of JPMorgan and called JPMorgan Bank (Dublin) PLC…AIG owned, in 2008 at the time of the crisis, the FDIC insured AIG Federal Savings Bank.  On June 30, 2008, it held $1 billion in assets.  AIG also owned 71 U.S.-based insurance entities and 176 other financial services companies throughout the world, including AIG Financial Products which blew up the whole company selling credit default derivatives. What this has to do with Glass-Steagall is that the same deregulation legislation, the Gramm-Leach-Bliley Act that gutted Glass-Steagall in 1999, also gutted the 1956 Bank Holding Company Act and allowed insurance companies and securities firms to be housed under the same umbrella in financial holding companies.”

We wrote to the New York Times Public Editor asking for a correction of the many gross errors in the article. Nothing happened. We wrote to the editor. Nothing happened. We wrote to the publisher. Nothing happened. The same errors that appeared in that article in 2012 are still in the article today, effectively serving as a grossly false narrative (read propaganda) on the role that the repeal of Glass-Steagall played in the second largest financial crash in U.S. history.

Today, the latest Times editorial is attempting to blame the Trump administration for putting the nation’s financial system at risk through rollbacks in the Dodd-Frank reform legislation signed into law under Obama in 2010.  The editorial writers state: “The Republican-controlled Congress is too jammed up to move ahead with legislation to weaken Dodd-Frank. But that won’t be necessary, since the administration is doing a good job of dismantling the regulations on its own.”

What the New York Times knows it should be saying is that the Dodd-Frank legislation is an illusion of financial reform while it allows the New York Times’ hometown boys to become billionaires while running the largest wealth transfer system in U.S. history – fleecing the pockets of the 99 percent across America. 

Related Articles: 

President Obama Repeats the Falsehoods of the New York Times and Andrew Ross Sorkin on Restoring the Glass-Steagall Act 

Readers Pummel New York Times Writer Over His Big Bank Stance 

What Went Wrong in Wall Street Reform: Obama Versus FDR