As the U.S. Stumbles, the World Is Watching — Nervously

By Pam Martens and Russ Martens: February 14, 2017 

Congressman Jeb Hensarling, Chair of the House Financial Services Committee

Congressman Jeb Hensarling, Chair of the House Financial Services Committee

Today’s news headlines are not the stuff of confidence-building. It seems like a 241-year old democracy should have gotten its act together a lot better by now.

Bloomberg News is reporting that 17 of the most prestigious colleges and universities in the country (including Harvard, Yale and Stanford) have filed court papers seeking to join a lawsuit in a Brooklyn Federal court against President Donald Trump’s hastily constructed Executive Order. The Order called for an immigration ban which has drawn a flurry of lawsuits, nationwide protests and a rebuke by the Ninth Circuit Court of Appeals. The schools told the court that during the last academic year, more than one million international students studied at U.S. universities and now, as a result of the immigrant ban, 42,000 scholars, including Nobel Laureates, are calling for a boycott of educational conferences in the United States. With a tepid growth rate of less than 2 percent since the financial crash, the last thing the U.S. needs is to drive a stake through the heart of the U.S. travel and lodging industry.

As the President is now preoccupied attempting to dig out from under what appears to many as his unconstitutional, oft-promised plan to ban Muslims from the U.S., his promise to rebuild the decrepit infrastructure of the country has moved to the slow lane. That’s really bad news for people driving on dangerous bridges or living near troubled dams. Just ask the folks in Oroville, California. According to a report from Reuters this morning, 188,000 residents in the area of the Oroville Dam have become refugees themselves. They’re under evacuation orders and living in shelters for an unknown period of time until the dam can be rendered safe again.

During the early days of Trump’s immigration order, “chaos” was the word most frequently used to describe the impact at the airports and on people’s lives. The Washington Post is using the word “chaos” again today, following the abrupt resignation of Michael Flynn, the President’s newly installed National Security Adviser, over Flynn having discussions with a Russian diplomat before he took his post. The Post writes: “Once dismissed as growing pains, the chaos that was one of Donald Trump’s trademarks in business and campaigning now threatens to plague his presidency, according to interviews with a dozen White House officials and other Republicans.”

Against this backdrop, one of the most powerful U.S. figures on the global stage, Janet Yellen, Chair of the Federal Reserve, will head over to the Senate Banking Committee this morning to deliver her semi-annual report on monetary policy. Her appearance before the Senate will be a cake-walk compared to what is likely to happen tomorrow when Yellen delivers the same report to the House Financial Services Committee. That Committee is Chaired by Texas Republican Jeb Hensarling, a man who is now attempting to style himself as the Commander-In-Chief of Free Markets, while, in actuality, he is the mouthpiece of the big Wall Street banks who have stuffed his campaign coffers with their outsized largess. (See related article below.)

If past is prologue, Hensarling will open tomorrow’s hearing with a prepared speech insulting the Fed and vaguely suggesting it is engaged in a conspiratorial scheme to take over private businesses in the United States. The last time Yellen was before his Committee for her semi-annual report on September 28, 2016, Hensarling made this remark: “the Fed stands at the center of Dodd-Frank’s codification of Too Big To Fail. It functionally occupies the boardrooms of the largest financial institutions in our nation and decides how they can deploy their capital….”

This is a preposterous statement unhinged from any facts on the ground. The Fed is simply an incompetent, lax regulator of the Wall Street banks and an enabler of their reckless follies. It should simply be stripped of this regulatory function. If the Fed was cracking any whips in the boardrooms of Citigroup or JPMorgan Chase, they wouldn’t be admitted felons or serially charged with plundering the public investor. The way the Fed found out in 2012 that JPMorgan Chase was using depositors’ money to make wild gambles in exotic derivatives in London was the same way every other regulator, Congress and the public found out: from newspaper reporters with good sources in the hedge fund community.

Hensarling is railing against the Fed because his rich campaign donors on Wall Street don’t like its stress tests and don’t want to be constrained by its capital rules. The reason Hensarling is railing against the Consumer Financial Protection Bureau (CFPB) also has nothing to do with “free markets.” That’s a dumb Koch brothers ploy that is wearing very thin these days.

Wall Street hates the CFPB because it has an independent source of funding from the Fed and Wall Street’s lackeys in Congress can’t gut its funding. Wall Street also hates the CFPB because it has done what the toothless Securities and Exchange Commission has failed to do: it has created a searchable database of Wall Street’s crimes which can be searched on a bank by bank basis or on a specific crime basis. That provides the opportunity to every American and their lawyers to see patterns of systemic crimes. This is Wall Street’s worst nightmare and eviscerates the very reason Wall Street has created its own private justice system for both employees and customers. These employee and customer claims never see the light of day in a courtroom where public records of the proceedings would be accessible to the press and others. The claims are funneled to arbitrators overseen by the Financial Industry Regulatory Authority (FINRA), a crony self-regulator. As you guessed, there’s no meaningful search function to determine patterns of fraud in FINRA’s private justice proceedings.

Hensarling was shilling for Wall Street in a recent OpEd in the Wall Street Journal. He wrote: “The CFPB is the embodiment of James Madison’s warning in Federalist No. 47 that ‘the accumulation of all powers, legislative, executive and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny.’ ” (That’s pretty funny coming from the party of the President who just told the Federal Courts that his Executive Order on immigration was not reviewable by the judiciary.)

The CFPB had done a herculean job of helping the little guy who is perpetually ripped off by Wall Street’s greed and serial crimes. If we really want to look at “tyranny,” we should take our blinders off and look at the sweeping impact of the richest 1 percent in America funding the campaigns of the members of our Congress and the President.

Related Article:

Wall Street Financed Jeb Hensarling for its Propaganda War – Now In Full Swing

Wall Street Journal Goes With “Alternative Facts” in Hank Greenberg Saga

By Pam Martens and Russ Martens: February 13, 2017

Maurice (Hank) Greenberg

Maurice (Hank) Greenberg

In 2005 and 2006, Wall Street Journal reporters distinguished themselves in covering the charges of fraud being hurled at the giant insurer AIG and its CEO, Maurice (Hank) Greenberg. At that point, the Bancroft family had owned the Wall Street Journal for more than a century. But in 2007, Rupert Murdoch and his corporate entity, News Corp, bought the newspaper. The paper’s editorial page has subsequently taken bizarre positions on Wall Street’s crimes, refusing to allow the facts to get in their way.

Last evening, hitting a new low in the arena of “alternative facts,” the Wall Street Journal opined that Maurice (Hank) Greenberg, the former Chairman and CEO of the giant bailed-out insurer, AIG, had received a “vindication” by last Friday’s settlement with New York State Attorney General, Eric Schneiderman. The editorial characterized the case against Greenberg as a “revenge campaign” started by former Attorney General Eliot Spitzer for Greenberg having dared to “criticize his prosecutions against business.”

Reading the actual documents that New York State Attorney General Schneiderman released, the Wall Street Journal appeared to have stepped into a serious case of brain fog. Schneiderman’s statement included the following headlines:

“Greenberg And [Howard] Smith [former AIG CFO] Agree To Return Multi-Million Dollar Bonuses They Received While The Frauds Were On AIG’s Books;

“When Combined With Previous SEC Settlement, Greenberg Will Have Disgorged Nearly Every Dollar In Bonuses He Received During The Period Of The Fraud.” 

Schneiderman also released the following statement:

“Today’s agreement settles the indisputable fact that Mr. Greenberg has denied for twelve years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented AIG’s finances. After over a decade of delays, deflections, and denials by Mr. Greenberg, we are pleased that Mr. Greenberg has finally admitted to his role in these fraudulent transactions and will personally pay $9 million to the State of New York.”

If you add the $9 million to the $15 million Greenberg paid the Securities and Exchange Commission in 2009 to settle similar charges, that’s $24 million. That doesn’t sound like vindication; it sounds like getting off very cheap for securities fraud.

Greenberg started at AIG in 1960 and became CEO in 1967. In 1989, he also became Chairman. Greenberg ran AIG with an iron hand until he was forced to resign in 2005. In 2009, the SEC leveled extremely serious charges against Greenberg and Smith – then accepted payment of monetary fines and no admissions of guilt. The SEC alleged:

“Sham reinsurance transactions to make it appear that AIG had legitimately increased its general loss reserves;

“A purported deal with an offshore shell entity to conceal multi-million dollar underwriting losses from AIG’s auto-warranty insurance business;

“Economically senseless round-trip transactions to report improper gains in investment income;

“The purported sale of tax exempt municipal bonds owned by AIG’s subsidiaries to trusts that AIG controlled in order to improperly recognize realized capital gains.”

The SEC also alleged that “Greenberg knew about the effects that certain improper transactions would have on AIG’s reported financial results, and along with Smith was responsible for false and misleading public statements and material omissions in quarterly reports that AIG filed in the second and third quarters of 2002, and in related press releases and investor conference calls.”

Prior to the SEC charges, AIG had hired outside law firms to investigate the matter. In May 2005, AIG restated five years of financial statements, shaving $3.9 billion off its previously reported profit for those years and reducing its book value by $2.7 billion. The same year, AIG fired Greenberg and in 2006 it settled with Federal and State regulators for $1.6 billion to resolve claims that it had engaged in securities fraud, improper accounting, bid rigging and practices involving workers’ compensation funds. All of the conduct occurred while Hank Greenberg was CEO at the company.

Unfortunately for the investing public, the allegations that Greenberg and AIG have settled are just the tip of the iceberg.

Spitzer had tape recordings of phone calls Greenberg had made to the AIG trading desk. Spitzer stated in his original complaint that Greenberg had authorized AIG traders to buy stock with the company’s money and that Greenberg told the trader: “I don’t want the stock below $66, so keep buying.” The complaint also said Greenberg told the trader in one call to keep buying after 3:50 p.m. Federal securities law on corporate buybacks makes it illegal to trade near the open or close of trading because of the ability to manipulate the stock price. According to the transcript of the phone call provided in the complaint, Greenberg had authorized the trader to buy up to half a million shares.

Criminal charges for stock price manipulation never materialized.

In 2006, the Court of Chancery in Delaware filed a decision allowing a lawsuit by the Teachers’ Retirement System of Louisiana against AIG, Greenberg and others to move forward. The case alleged that Greenberg and other AIG executives had set up a sham operation known as C.V. Starr & Co., Inc. in order to siphon off money from AIG. The Court wrote:

“According to Teachers, Starr did nothing that AIG could not do for itself. Its key employees were all AIG employees. But, by purporting to be a separate entity, Starr was able to secure substantial payments from AIG and from reinsurers dealing with AIG, which generated extremely large compensation for Starr’s stockholders. Teachers alleges that had AIG been operating properly, the hundreds of millions of dollars that flowed from AIG to Starr during the period 1999 to 2004 would have remained with AIG, instead of having been diverted into Starr for the benefit of AIG’s conflicted managers. In other words, Teachers alleges that Starr’s supposedly separate operational status was a sham. All of its know-how and overhead came from AIG itself and there was no need for AIG to use a separate entity to carry out transactions in an insurance industry in which it was the recognized leader. The only reason for the separation was that it permitted Greenberg and his managerial team to reap excess profits in their capacity as Starr stockholders, by siphoning commissions and premiums available to AIG itself into an entity whose profits flowed exclusively to AIG managers.

“The complaint alleges that this pattern of business went on at AIG for at least two decades before the period challenged in the complaint — 1999 to 2004. But, the complaint also makes clear that the decision to continue the practice was one that AIG made annually. According to the complaint, a supine AIG board did not bother to inform itself of the nature of the AIG-Starr relationship. To the extent that it approved the continuation of the Starr relationship, it did so only after cursory presentations from Greenberg himself, who was Starr’s largest stockholder and CEO.”

The Teachers case wore on into the fall of 2008 at which time AIG collapsed from failure to set aside reserves to cover the $400 billion it had issued in Credit Default Swaps to major Wall Street banks. The U.S. taxpayer was forced to bail out AIG to the tune of $185 billion with approximately half of that amount going out the back door to the Wall Street banks and global foreign banks to whom AIG owed mega amounts of money that it had never properly reserved to cover. 

Increasingly, it feels like the opinion writers at the Wall Street Journal think we’re all fools with no ability to ferret out the real facts for ourselves.

Related Articles:

Putting John Paulson on AIG’s Board Is an Insult to Every Law-Abiding Citizen 

Ryan Chittum Has Had It With Hank Greenberg and Maria Bartiromo 

One Forgotten Document Casts Embarrassing Light on Krugman’s “Sanders Over the Edge” Column 

PricewaterhouseCoopers Gets More Work from AIG and Peregrine, After Failing to Detect Trickery

Facing Down Trump in Court: A 37-Year Old Hero Emerges

By Pam Martens and Russ Martens: February 10, 2017

Noah Purcell, Solicitor General of the State of Washington

Noah Purcell, Solicitor General of the State of Washington (Photo from Court Live Stream)

Students and teachers at Franklin High School in Seattle are walking a little taller and prouder this morning. One of their own, 37-year old Noah Purcell, the Solicitor General of the State of Washington, has in the span of less than a week, beat the most powerful man in the world – not once but twice. Purcell convinced District Court Judge James Robart in oral arguments on February 3 and all three judges sitting at the Ninth Circuit Court of Appeals in oral arguments on February 7 that President Donald Trump had illegally imposed an Executive Order banning immigrant entry into the United States from seven majority-Muslim countries.

The 29-page wide-ranging decision from the Ninth Circuit says as much about the power of Purcell to hone sweeping constitutional concepts into a finely-tuned legal argument as it does about the ability of Americans to successfully challenge a President determined to rule by Executive Order and intimidating Tweets.

When Purcell stepped to the podium on Friday, February 3, to make his oral arguments to Judge Robart, there was a faint hint of nervousness in his voice. But that quickly dissipated as he described the chaos and disruption of lives that was occurring as a result of the ill-conceived Executive Order. Not only had persons with valid visas been denied entry to the United States under the order, but persons who were Lawful Permanent Residents (LPRs) with green cards were denied re-entry when the order was first imposed. The government, he told the court, continued to flip-flop on exactly who was covered under its amorphous order.

Judge Robart was convinced by Purcell’s arguments and imposed a nationwide Temporary Restraining Order, blocking Trump’s order from taking effect while the case moved forward in his courtroom. The government quickly appealed the ruling to the Ninth Circuit Appellate Court. That’s when a large swath of America rose to its feet to confront the arrogance and unconstitutionality of the new President’s assertion that he could make rulings with a pen that were unreviewable by the courts; throw the innocent lives of teachers and students and traveling professors and tech employees with valid visas into chaos and inflict anxiety and fear into permanent residents in America.

Washington State Attorney General Bob Ferguson (left) and Solicitor General Noah Purcell Read the Ninth Circuit Decision on February 9, 2017

Washington State Attorney General Bob Ferguson (left) and Solicitor General Noah Purcell Read the Ninth Circuit Decision on February 9, 2017 (Washington State Photo)

Purcell’s army began to form on the docket at the Ninth Circuit. More than a hundred companies filed an Amicus brief explaining how the Executive Order would disrupt their business and the lives of their employees. Among those companies were some of the most important technology companies in America – and the world: Google, Microsoft, Intel – who need to hire the best and the brightest, regardless of nationality, to keep America globally competitive.

Law professors and constitutional scholars filed arguments against the order. Nonprofits stepped forward with their own Amicus briefs. And the Attorneys General of 17 states and the District of Columbia backed up the arguments being made by the States of Washington and Minnesota in their own legal brief.

At the tender age of 37, Purcell has a formidable resume. He graduated magna cum laude from Harvard Law School, where he was an Editor of the Harvard Law Review. Next he clerked for former U.S. Supreme Court Justice David Souter and U.S. Court of Appeals Judge David Tatel of the D.C. Circuit. From 2009 to 2010, Purcell worked at the U.S. Department of Homeland Security’s Office of General Counsel in the areas of security and immigration. Prior to becoming Solicitor General to the State of Washington in 2013, Purcell worked for the corporate law firm, Perkins Coie, in their Litigation and Appellate practices.

Trump now faces a slippery slope if he elects to appeal. In an immediate Tweet following the decision, Trump used all caps, interpreted on the Internet as screaming, to state: “SEE YOU IN COURT, THE SECURITY OF OUR NATION IS AT STAKE!” This morning, Trump is back to upper and lower case, calling the Ninth Circuit’s action “A disgraceful decision!” It is considered really bad form for a sitting President of the United States to undermine confidence in the Judiciary. The decision of the Ninth Circuit judges was unanimous and one of the judges was a George W. Bush appointee.

Trump apparently missed reading one section of the Ninth Circuit’s decision. It specifically spelled out that the government had failed totally in making its case that the security of our nation was at stake. The Judges wrote:

“Despite the district court’s and our own repeated invitations to explain the urgent need for the Executive Order to be placed immediately into effect, the Government submitted no evidence to rebut the States’ argument that the district court’s order merely returned the nation temporarily to the position it has occupied for many previous years.

“The Government has pointed to no evidence that any alien from any of the countries named in the Order has perpetrated a terrorist attack in the United States.

“Rather than present evidence to explain the need for the Executive Order, the Government has taken the position that we must not review its decision at all…”

The Ninth Circuit mapped out the next steps for Trump. If he wants to file a motion for reconsideration or reconsideration en banc (before a majority of active circuit judges) he has to file it within 14 days of the decision. There is no guarantee that either request would be granted or that he would win if the case was reheard. Trump could try appealing to the U.S. Supreme Court, but it might decline to hear the case, leading to further embarrassment for Trump.

Because the Ninth Circuit unanimously agreed that the government failed to show any evidence suggesting an imminent threat to the United States to justify the Executive Order and because the matter has not been fully briefed and no discovery taken yet at the District Court level, the Supreme Court would be put in the untenable position of ruling in the dark if it accepted the case.

The path forward for Trump is uncertain. But one thing is quite clear. The new President, testing the expanse of his powers, never expected such a rapid and brilliantly constructed outpouring from the best legal minds in America. It sends a desperately-needed message of hope to the country that America can still come together when it really matters.

Related Articles:

Trump’s Immigration Ban: Americans Can Listen In on Court Hearing Today

Trump’s Immigration Court Battle Just Became a States’ Rights Case

Trump Loses His Appeal to the Ninth Circuit on Immigration Ban

By Pam Martens and Russ Martens: February 9, 2017

At 3:08 p.m. Pacific time, the Ninth Circuit Court of Appeals issued a 29-page decision on President Donald Trump’s Executive Order regarding banning immigration to the United States for 120 days and banning people from seven majority Muslim countries from entering the United States for 90 days.

The Court found that the States of Washington and Minnesota, which had taken their case to a lower Federal District Court and won a Temporary Restraining Order, did indeed suffer harms from the Executive Order. The Court wrote:

“We therefore conclude that the States have alleged harms to their proprietary interests traceable to the Executive Order. The necessary connection can be drawn in at most two logical steps: (1) the Executive Order prevents nationals of seven countries from entering Washington and Minnesota; (2) as a result, some of these people will not enter state universities, some will not join those universities as faculty, some will be prevented from performing research, and some will not be permitted to return if they leave. And we have no difficulty concluding that the States’ injuries would be redressed if they could obtain the relief they ask for: a declaration that the Executive Order violates the Constitution and an injunction barring its enforcement. The Government does not argue otherwise.”

On the government’s assertion that Trump’s Executive Order was non-reviewable by a Court, the Ninth Circuit stridently voiced the opposite opinion, writing:

“There is no precedent to support this claimed unreviewability, which runs contrary to the fundamental structure of our constitutional democracy. See Boumediene v. Bush, 553 U.S. 723, 765 (2008) (rejecting the idea that, even by congressional statute, Congress and the Executive could eliminate federal court habeas jurisdiction over enemy combatants, because the ‘political branches’ lack ‘the power to switch the Constitution on or off at will’). Within our system, it is the role of the judiciary to interpret the law, a duty that will sometimes require the ‘[r]esolution of litigation challenging the constitutional authority of one of the three branches.’ Zivotofsky ex rel. Zivotofsky v. Clinton, 566 U.S. 189, 196 (2012) (quoting INS v. Chadha, 462 U.S. 919, 943 (1983)). We are called upon to perform that duty in this case.”

The Ninth Circuit also agreed with the States that the government had produced no evidence that an irreparable harm was imminent, writing:

“The Government has not shown that a stay is necessary to avoid irreparable injury. Nken, 556 U.S. at 434. Although we agree that ‘the Government’s interest in combating terrorism is an urgent objective of the highest order,’ Holder v. Humanitarian Law Project, 561 U.S. 1, 28 (2010), the Government has done little more than reiterate that fact. Despite the district court’s and our own repeated invitations to explain the urgent need for the Executive Order to be placed immediately into effect, the Government submitted no evidence to rebut the States’ argument that the district court’s order merely returned the nation temporarily to the position it has occupied for many previous years.

“The Government has pointed to no evidence that any alien from any of the countries named in the Order has perpetrated a terrorist attack in the United States.

“Rather than present evidence to explain the need for the Executive Order, the Government has taken the position that we must not review its decision at all. We disagree, as explained above.”

The Court went on to indicate that it believed the States of Washington and Minnesota had presented convincing evidence of harm, writing:

“By contrast, the States have offered ample evidence that if the Executive Order were reinstated even temporarily, it would substantially injure the States and multiple ‘other parties interested in the proceeding.” Nken, 556 U.S. at 434 (quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)). When the Executive Order was in effect, the States contend that the travel prohibitions harmed the States’ university employees and students, separated families, and stranded the States’ residents abroad. These are substantial injuries and even irreparable harms. See Melendres v. Arpaio, 695 F.3d 990, 1002 (9th Cir. 2012) (‘It is well established that the deprivation of constitutional rights ‘unquestionably constitutes irreparable injury.’ (quoting Elrod v. Burns, 427 U.S. 347, 373 (1976))).”

The lower Federal Court’s blocking of Trump’s Executive Order from being implemented will thus remain in effect and that case will continue under a previous briefing schedule.

Wall Street Financed Jeb Hensarling for its Propaganda War – Now In Full Swing

By Pam Martens and Russ Martens: February 9, 2017

Jeb Hensarling, Chair of the House Financial Services Committee, at FSOC Hearing, December 8, 2015

Jeb Hensarling, Chair of the House Financial Services Committee

Jeb Hensarling is the Republican Chair of the Financial Services Committee in the U.S. House of Representatives. Despite the seriousness of that job, Hensarling displays amazing ignorance of the inner workings of Wall Street at the hearings over which he presides. Unlike Senator Bernie Sanders who stumped around the country for more than a year during his primary campaign, reinforcing to Americans what they already suspected, that “the business model of Wall Street is fraud,” Hensarling wants to kill the few restraints on this criminal cartel that currently exist. He has been well financed by Wall Street to get the job done.

Among Hensarling’s largest donors for his 2016 re-election campaign were every major Wall Street bank, including two admitted criminal felons (JPMorgan Chase and Citigroup’s Citicorp) as well as those charged with market rigging and serial frauds against the investing public. Wall Street mega banks giving $10,000 or more to Hensarling’s campaign included: Bank of America, $15,000; JPMorgan Chase $14,700; Goldman Sachs $12,700; UBS $10,500; Citigroup $10,000; Credit Suisse $10,000; Morgan Stanley $10,000; Wells Fargo $10,000; and Wall Street’s trade association, the Securities Industry and Financial Markets Association (SIFMA), which gave Hensarling $10,000. (Our source is the Center for Responsive Politics which notes that “The organizations themselves did not donate, rather the money came from the organizations’ PACs, their individual members or employees or owners, and those individuals’ immediate families.” Corporations are not legally allowed to donate directly to campaigns.) 

Over the past week, Hensarling has been on a public relations mission to portray the Wall Street-hated Consumer Financial Protection Bureau (CFPB) as a “rogue” federal agency and smear Senator Elizabeth Warren as its mastermind. Last night, this headline appeared over an opinion piece by Hensarling in the Wall Street Journal:How We’ll Stop a Rogue Federal Agency: Congress can defund Elizabeth Warren’s unaccountable and unconstitutional CFPB.”

Millions of Americans understand that this is simply more of the new Trump-era Orwellian Reverse Speak. The danger is that big media is carrying Hensarling’s false propaganda to millions of uninformed Americans who are too busy struggling to feed their families to follow the Machiavellian plunderings by Wall Street. Hensarling has also been making the rounds of cable news shows repeating his attacks on the CFPB and calling for its courageous Director, Richard Cordray, to be fired by President Donald Trump.

In reality, the CFPB is the most consumer-friendly of the Wall Street watchdogs. It allows those who have been victimized by financial firms, even where small amounts of money are involved, to file a complaint and receive a response. Wall Street hates the fact that these complaints go into a permanent database, which can be mined by class-action attorneys and prosecutors looking for patterns of fraud and by media outlets like Wall Street On Parade to keep the public informed. (See our related articles below.)

Hensarling was a long time aide to the master of fronting for Wall Street deregulation – Senator Phil Gramm. Gramm served as Chair of the Senate Banking Committee from 1995 to 2000, which included the fateful year that the Gramm-Leach-Bliley Act was passed in 1999. That legislation repealed the Glass-Steagall Act which had protected the nation by separating banks holding insured deposits from the speculating investment banks of Wall Street. Just nine years after it was repealed, Wall Street crashed in epic fashion, taking the U.S. economy with it. Gramm’s blind march to the drumbeat of special interests was blamed by Time Magazine as a key contributor to the financial collapse in 2008. Time wrote:

“…Gramm was Washington’s most prominent and outspoken champion of financial deregulation. He played a leading role in writing and pushing through Congress the 1999 repeal of the Depression-era Glass-Steagall Act, which separated commercial banks from Wall Street. He also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG, which has cost the U.S. $150 billion thus far.”

According to the database at the Center for Responsive Politics, Gramm’s largest campaign donors included the very same serially charged Wall Street banks that are now financing Hensarling. (See here.)

Gramm’s deregulation push was a family affair. His wife, Wendy Gramm, was the Chair of the Commodity Futures Trading Commission (CFTC) from 1988 to January 1993. Public Citizen reported on her tenure as follows:

“In 1992, as the first step in its business plan to profit on the speculation of energy, Enron petitioned the CFTC to make regulatory changes that would limit the scope of the commission’s authority over certain kinds of futures contracts.  Immediately before leaving the CFTC, Gramm muscled through approval of an unusual draft regulation that would do just that – it narrowed the definition of futures contracts and excluded Enron’s energy future contracts and swaps from regulatory oversight.  Although her actions were criticized by government officials who feared the change would have severe negative consequences (as, in fact, it did), Gramm was rewarded five weeks after she left the CFTC with a lucrative appointment to Enron’s Board of Directors. Between 1993 and 2001, when the company declared bankruptcy, Enron paid Gramm between $915,000 and $1.85 million in salary, attendance fees, stock option sales, and dividends.”

Phil Gramm also became a very wealthy man while the U.S. suffered the worst financial collapse since the Great Depression, in no small part because of his handiwork. In the same year that he left Congress, 2002, Gramm joined the large Wall Street bank, UBS – one of his largest campaign donors – as Vice Chairman. He remained in that post for a decade. According to the Wall Street Journal, in 2012 Gramm stepped down as Vice Chairman of UBS but remained on as a “consultant.”

Related Articles:

Database Reveals U.S. as Financial House of Horrors Since Repeal of Glass-Steagall Act

The Debate Is Over: Banking Has Become a Criminal Enterprise in the U.S.

Wall Street Today: Fake Accounts, Fake Money, Fake Courts, Fake Regulators

Citibank’s Student Loan Debt Slaves (Part II)