By Pam Martens and Russ Martens: January 10, 2020 ~ 

The design of the Boeing 737 Max and the Wall Street banking system are both dangerously flawed. The 737 Max has been grounded for almost 10 months following two airline crashes that killed 346 people. The Wall Street banking system, which crashed in 2008 and spread its wreckage into the lives of millions of Americans with job losses, home foreclosures, and trillions of dollars in lost savings is still being allowed to operate on a wing and a prayer.

In the case of the Boeing 737 Max, Congress did not know beforehand that dangerous problems existed. In the case of the Wall Street banking system, Congress has had repeated warnings since 2012 of systemic dangers that it has simply chosen to ignore under heavy Wall Street lobbying pressure and the allure of tens of millions of dollars in political campaign funding.

Yesterday, Boeing turned over a trove of internal emails, instant messages and documents describing the 737 Max that were eerily reminiscent of the well-documented culture on Wall Street. Among the internal comments were these:

“This airplane is designed by clowns, who in turn are supervised by monkeys.”

“I’ll be shocked if the FAA passes this turd.”

“This is a joke. This airplane is ridiculous.”

“Jesus, it’s doomed.”

“Would you put your family on a MAX simulator trained aircraft? I wouldn’t.”

Had these emails made it into the public domain prior to March of 2019, 346 lives might have been saved. A 737 Max flown by Ethiopian Airlines Group crashed minutes after takeoff on Sunday, March 10, killing all 157 people on board. The March crash followed a similar crash on October 29, 2018 by a Lions Air flight in Jakarta, Indonesia that killed all 189 people on board when it plunged into the sea shortly after takeoff.

The initial reaction of the Federal Aviation Administration (FAA) following the second deadly crash in less than five months was reminiscent of the typical hubris by Wall Street’s regulators.

Instead of immediately grounding the plane, on Monday, March 11, the FAA told international airlines that the 737 Max remained airworthy. That same day, however, both the Civil Aviation Administration in China and Indonesia regulators grounded the 737 Max in their countries.

On Tuesday, March 12, in a major embarrassment to the FAA, the European Union Aviation Safety Agency grounded the 737 Max across Europe. The ban included suspending all foreign airlines from operating the jet into, within, or out of the European Union. Europe, apparently, did not trust the plane to fly over its cities, buildings or people.

On Wednesday, March 13, Canada banned the 737 Max planes, citing similarities between the Ethiopian and Lion Air crashes. There were 45 countries that had banned the plane before the FAA decided to act on March 13.

Following the epic crash on Wall Street in the fall of 2008, when century old financial institutions collapsed in a heap, hundreds of thousands of documents were obtained by both the Financial Crisis Inquiry Commission (FCIC) and the U.S. Department of Justice. The documents clearly demonstrated that insiders within these Wall Street trading houses were knowingly committing vast frauds against the American people. So confident were these miscreants on Wall Street that their actions would crash the whole U.S. financial system that they placed billions of dollars in short derivative bets (a wager that grows in value when an investment instrument declines in price).

But Wall Street was very clever. It made sure that the report from the Financial Crisis Inquiry Commission and the charges and documents from the Justice Department were not made public until after Congress had passed the toothless Dodd-Frank financial reform legislation in 2010.

The public didn’t see the FCIC report until January of 2011. The Government Accountability Office (GAO) didn’t release its audit showing that the Federal Reserve had funneled a cumulative $16 trillion to shore up these corrupt Wall Street institutions until July of 2011. Even the GAO report did not cover all of the bailout funds sluiced to Wall Street by the Federal Reserve to resuscitate a failed and corrupt business model. When the Levy Economics Institute added it all up, it came to over $29 trillion – to resuscitate a failed and corrupt business model with no hope of avoiding a future crash.

The bulk of that $29 trillion was secretly sluiced to Wall Street by the New York Fed – one of 12 regional Federal Reserve banks but the one with myriad crony ties to the largest banks on Wall Street.

And when the Dodd-Frank legislation was passed in 2010, Wall Street got its wish. Its crony regulator, the Federal Reserve, remained at the helm – despite having sat silent as it watched dangerous risks building on Wall Street.

As it did back in 2008, the Federal Reserve has outsourced supervision of the most dangerous Wall Street trading houses, which are allowed to own federally-insured deposit-taking banks, to the New York Fed – which doubles as Wall Street’s blind-folded regulator as well as its source of on-demand bailout money. (See our series on the ongoing 2019/2020 New York Fed bailout of Wall Street that mainstream media refuses to cover.)

And to show just how in-your-face the New York Fed has become about its incestuous role with Wall Street, it is refusing to properly respond to Freedom of Information Act Requests (FOIA). A FOIA request filed by Wall Street On Parade on October 2 has received three stonewalling responses from the New York Fed. Under FOIA law, we should have received a response in 20 business days. It’s now been more than three months and the New York Fed sent us a new message yesterday, saying it would be another three months before we hear from them. (See The Fed Has Created the Big Lie for Congress on its Repo Loans while the New York Fed Blocks Freedom of Information Requests.)

What information is it exactly that the New York Fed does not want to share with the American people? It’s information pertaining to the largest federally-insured bank in the United States – JPMorgan Chase.

Like Boeing, JPMorgan Chase is a component of the Dow Jones Industrial Average – typically seen as a benchmark on the health of the U.S. economy. Also like Boeing, it has a history of withholding incriminating evidence from federal regulators. In 2012 the U.S. Senate Subcommittee on Investigation conducted an in-depth investigation into how JPMorgan Chase had used deposits at its federally-insured bank to gamble in high-risk derivatives in London (London Whale scandal), eventually losing $6.2 billion. Senator Carl Levin, Chair of the Subcommittee at the time, said that JPMorgan Chase had “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”

Senator John McCain, ranking minority member of the Subcommittee at the time, said this about JPMorgan Chase’s actions:

“These losses came to light not because of admirable risk management strategies at JPMorgan or because of effective oversight by diligent regulators. Instead, these losses came to light because they were so damaging that they shook the market, and so damning that they caught the attention of the press. Following the revelation that these huge trades were coming from JPMorgan’s London Office, the bank’s losses continued to grow. By the end of the year, the total losses stood at a staggering $6.2 billion dollars. This case represents another shameful demonstration of a bank engaged in wildly risky behavior. The ‘London Whale’ incident matters to the federal government because the traders at JPMorgan were making risky bets using excess deposits, portions of which were federally insured.

“These excess deposits should have been used to provide loans for main-street businesses. Instead, JPMorgan used the money to bet on catastrophic risk. Through an extensive bipartisan investigation, this Subcommittee has uncovered a wealth of new information. Internal e-mails, memos, and interviews reveal that these trades were not conducted by a group of rogue traders, but that their superiors were well aware of their activities.”

Following the London Whale scandal, JPMorgan Chase has gone on to admit to three criminal felony charges brought by the U.S. Department of Justice. In 2014 it admitted to two felony counts for its role in the Bernie Madoff Ponzi scheme. In 2015 it admitted to one felony count for its role in rigging the foreign exchange market. Today, traders at its bank are under a criminal investigation for turning its precious metals desk into a racketeering enterprise. And throughout all of this, the Board of Directors of this bank has kept Jamie Dimon as its Chairman and CEO. (See Jamie Dimon Tells 60 Minutes He’s a Patriot; There’s Good Reason to Think He’s a Crime Boss.)

As the late Senator McCain made clear in his remarks about JPMorgan’s London Whale scandal, the dangerous bets and losses only came to light because of an inquiring press. By refusing to provide Wall Street On Parade with the requested FOIA information, the New York Fed is obstructing the workings of a free society and an efficient market.