By Pam Martens and Russ Martens: February 12, 2016
Starting last July, the share prices of the biggest banks on Wall Street have been on a steady downward trajectory. That trend heated up yesterday with Citigroup and Bank of America both dropping over 6 percent by the close of trading. Goldman Sachs and Morgan Stanley were down by over 4 percent. All four of the banks set new 12-month lows in intraday trading.
A strong argument can be made that much of the public’s lack of confidence in these complex banking and gambling behemoths is a result of the dark curtain that has been drawn around their operations. Evidence is piling up that government regulators of Wall Street no longer see themselves as the protectors of the people but as the protectors of Wall Street’s secrets.
The American historian, Henry Steele Commager, once wrote that “The generation that made the nation thought secrecy in government one of the instruments of old world tyranny and committed itself to the principle that a democracy cannot function unless people are permitted to know what their government is up to.”
In that vein, on his very first day in office, January 21, 2009, as the U.S. economy was in tatters from the greatest era of Wall Street corruption in the history of the nation, President Obama promised the American people a new era of transparency. Two months later, under the President’s orders, the U.S. Attorney General’s office issued detailed guidelines on how government agencies were to respond to public and press requests for documents under the Freedom of Information Act (FOIA).
We’ve been living in a dark hole ever since when it comes to Wall Street.
Yesterday, we reported on the Federal Reserve defying a Congressional subpoena over a Federal Reserve leak of market-moving information to a company whose business model involves sniffing out tidbits of information from government sources and selling it to hedge funds and Wall Street banks. The Fed has stonewalled this House committee for a year.
Making chumps out of elected representatives of Congress is just the new low in how the Federal Reserve and other Wall Street regulators have been treating the press for years.
On November 25, 2009, at age 52, Mark Pittman, a reporter for Bloomberg News, died while still waiting for the Fed to release details of its emergency lending programs during the financial crisis that he had sought under a FOIA and then through the courts. The case, Bloomberg v. Board of Governors of the Federal Reserve System, was decided in Bloomberg’s favor on March 19, 2010 by the Second Circuit Court of Appeals. Even then, the stonewalling continued as a Wall Street consortium of the big banks tried to get the U.S. Supreme Court to hear the case. They failed in that effort.
Pittman and Bloomberg News wanted information that should have already been made public: how much emergency lending was taking place and what were the names of the banks receiving it.
The public has every right to be cynical about why the Fed withheld this information for so long. President Obama signed the tepid financial reform measure known as Dodd-Frank on July 21, 2010. The Fed did not comply with the court order until 2011. Had the public known the dire financial circumstances of the banking system during the crisis, there might have been greater demands to restore the Glass-Steagall Act. It had been repealed in 1999, which had allowed the mass speculation with insured bank deposits to happen and created the too-big-to-fail banks.
Once the Fed data was released, the public learned that the $700 billion TARP program approved by Congress was a drop in the bucket compared to what had actually been doled out behind a black curtain. Bloomberg’s data showed the Fed had opened its spigots to the tune of $1.2 trillion. The Government Accountability Office (GAO) came up with $16 trillion in “total transaction amounts” that were cumulatively sluiced to Wall Street banks and foreign banks in revolving loans.
The U.S. Treasury department also stonewalled Pittman and Bloomberg in what, in hindsight, now clearly appears to have been an effort to intentionally withhold from the public the fact that Citigroup was insolvent at the time the government was using hundreds of billions of dollars of taxpayer funds to shore it up. On Jan. 28, 2009, Pittman filed a FOIA with the U.S. Treasury asking it to identify the $301 billion in securities owned by Citigroup that the government had agreed to guarantee. He also requested details of any contracts the Treasury had with outside firms hired to calculate the assets’ values. It took the Treasury over 20 months to respond, after allowing Citigroup to have input into what would be disclosed.
The level of sophistry in the response had all the hallmarks of Citigroup’s legal team. Bob Ivry, writing at Bloomberg News in 2010, explained the outcome:
“Treasury officials responded with 560 pages of printed-out e-mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as ‘Did you just try to call me?’ and ‘Monday will be a busy day!’ ”
Making chumps out of FOIA requesters seems to have been honed to an art form thanks to the gold-plated revolving door between Washington and Wall Street.
In April 2015, Wall Street On Parade attempted to get one piece of very basic information from the Fed. We inquired if JPMorgan Chase, a Wall Street bank which at that time was operating under a deferred prosecution agreement for two felony counts in the Bernie Madoff Ponzi scheme, was still the custodian of $1.7 trillion of mortgage backed securities owned by the Federal Reserve, as we had reported on November 3, 2014. We were stonewalled from receiving this information that the public had every right to know. JPMorgan Chase, as of May 20, 2015, is now an admitted felon for its role in rigging foreign currency markets.
Even trying to find out who the second most powerful person in government is meeting with during office hours is repeatedly stymied. Greg Ip wrote in the Wall Street Journal in 2006 that the Federal Reserve would not provide the appointment calendar of Alan Greenspan, the former Fed Chairman, for his last seven months in office. The Fed used the bogus logic that “his personal calendar wasn’t an agency record and, therefore, according to court interpretations, not subject to the FOIA.”
Greenspan had been one of the key cheerleaders of the mass deregulation of Wall Street and the repeal of the Glass-Steagall Act. After he stepped down from the Fed, Ben Bernanke would take the helm and sluice trillions of dollars into the bankrupt or nearly bankrupt carcasses on Wall Street that had used the deregulation to embark on an orgy of greed and corruption.
In December of 2013, Wall Street On Parade asked the communications office of the Fed for Bernanke’s 2007 and 2008 appointment calendars. We were told we would have to file a Freedom of Information Act (FOIA) request for them.
When we finally received the appointment calendars, there were redactions of 84 meetings that occurred between January 1, 2007 and the pivotal collapse of Bear Stearns on the weekend of March 15-16, 2008. The calendar for March 7, 2008 shows a full day of appointments blacked out. The calendar for Monday, March 10 shows that Bernanke held a meeting in his office from 11:00 a.m. to 12 noon but the names of whom he met with are redacted. This was clearly a meeting on the taxpayer’s dime but the public is denied basic facts about the parties or the topic.
In 2013, Wall Street On Parade attempted to obtain a simple photograph of the trading floor of the New York Fed – the only regional Fed bank to have a trading floor and speed dials to Wall Street while simultaneously serving as its regulator.
No photo was forthcoming. Instead, we had to spend endless weeks researching the matter in order to show the public the level of sophisticated trading occurring daily at the New York Fed.
President Obama has failed miserably in his promise for transparency. Now Hillary Clinton wants to take his seat in the Oval Office on the premise that she’s for the little guy. She makes this claim after she and Bill Clinton have personally accepted at least $7.7 million in speaking fees from Wall Street banks according to CNN. Now the media is asking her to release the transcripts of these speeches. Behind closed doors, did she really tell Wall Street to “cut it out,” or, as Politico reports, did she sound like a Managing Director at Goldman Sachs.
Last night, the Wall Street Journal posted the following report on its web site:
“In the two years between resigning as secretary of state and launching her presidential campaign, Hillary Clinton personally received $4.1 million in fees from financial institutions for closed-door talks that attendees described as friendly and light.”
It’s long past the time to demand better of our government and those who profess to serve us.