America Watches In Stunned Disbelief As Afghanistan Jails Two Failed Bank Executives

Spot the banana republic:

  • Nation #1 spends and issues tens of trillions in taxpayer funds and debt, crushing the growth potential of future generations, just to bail out a banking sector full to the brim with criminal “riggers” (as today’s settlements once again prove), where bubble mania was so pervasive not a single bank would have survived absent a global central bank bailout, and where bank executives wouldn’t bend over for anything less than a million.
  • Nation #2 just sentenced two senior officials of a bank that collapsed under (a measly by New Normal standards) $1 billion in debt to 15 years in prison each for embezzlement and fraud.

Nation #1 is, of course, the US (or any other western nation). Nation #2 is Afghanistan.

Which one is the banana republic again?

AP reports that the scandal in 2010 shook confidence in Afghanistan’s tiny banking sector, and the loss accounted for around 5 percent of the country’s economy, making it the biggest banking collapse in history. By comparison, just the derivative book of JPMorgan alone is 4 times the size of US GDP.

Like in the US, the government had no choice but to bail out the bank and brought in receivers who, officials say, have traced most of the missing funds.

The scandal struck at the heart of the Kabul political establishment, involving relatives of the former president Hamid Karzai and one of his deputies, Marshall Mohammad Qasim Fahim.

President Ashraf Ghani has put the case at the center of his anti-corruption campaign, and within days of taking office in September ordered it resolved within 45 days.

So banker justice does exist? And this is how non-banana republics deal with a runaway criminal financial sector, which dangles the threat of systemic collapse any time the regulators, at least those who don’t hope to get a job on Wall Street next, come sniffing:

The Kabul Bank’s former chairman Sherkhan Farnood and former chief executive officer Khalillulah Ferozi were sentenced live on television, after a two-day appeal against earlier sentences of five years in prison. They have already served more than four years of the original sentence.

A panel of five judges at the Kabul Appeals Court also fined Farnood more than $237 million.

The court also ordered the assets of Mahmood Karzai and Hasin Fahim, brothers respectively of the former president and deputy president, along with 17 other defendants, frozen until their debts are repaid.

“If there is any delay in returning all the outstanding debt, they will be dealt with by the courts,” the judgment said.

The bank was one of the country’s flagship institutions and until its collapse had been responsible for paying salaries of government employees, army and police across the country.

It was split into two, with the offshoot, the New Kabul Bank now responsible for the salary payments, and holding around $400 million in customer deposits, officials said.

Curious for more? Read “The Great Afghan Bank Heist.”

And while Afghanistan’s banking sector is now well on the road to recovery and doesn’t need endless central bank bailouts (unlike the US, Europe or Japan) the nation does remain a banana republic but for other reasons: namely, US forces refuse to leave. Why? One look at the chart below should explain it.

Why Afghanistan remains an incubator – under constant US supervision – for the heroin trade, read “7.6 Billion Reasons Why The US ‘War On Drugs’ In Afghanistan Failed

Source.

Signs of cabal defeat are now obvious but, expect one last big push for war

This week’s update from Ben Fulford indicates that real change is happening, all around us. The Bank of England has declared that taxpayers will not be on the hook for failing banks. Also, Ben was part of a panel that discussed a wide variety of formerly taboo subjects, that I hope will be available to the public, soon. -LW


November 11, 2014

The signs of cabal defeat are now proliferating to an extent that can no longer be hidden from any but the most deeply brainwashed people in the West. The most obvious sign is the APEC meeting winding up today in China. There three of the world’s largest oil producers, Canada, Russia and Qatar signed new deals to trade oil in Yuan. This makes it a mathematical certainty the petrodollar is finished. Russia also announced it was de-pegging the Ruble from the petrodollar.

In England, meanwhile, multiple senior politicians are working towards creating government currency to replace the 300 year old Rothschild fiat currency regime, according to MI5 sources. On November 20th, for the first time in 170 years, the British Parliament will discuss this issue. This is link to a paper on the subject that has been distributed to all British MPs:

https://www.positivemoney.org/wp-content/uploads/2014/11/Backbench-Briefing-Note.pdf

The Japanese government is also seriously contemplating doing exactly the same thing. This means that all Japanese government debt will be written off in one fell swoop.

There are also indications the corporate government in the United States has gone into full crisis mode. For example, when this writer tried to access the official Russian Ria Novosti news site from his computer and his tablet device, he was redirected to an obvious disinformation site called “Sputnik News.” This came after the Russian government news site put out reports that American mercenaries were shelling the crash site of Malaysian airlines flight 17. This can only be described as an attempt by the American fascist regime to prevent the Europeans from finding out it was their supposed US allies who shot the passenger plane down.

The other sign that something big is going down with the US regime is the fact the Pentagon has warned its troops to not go out with Russian or Chinese women. This is a sort of measure taken in war time to prevent military secrets from leaking out. Finally, CNN has shut down its Russian operations, again the sort of thing that happens in war time.

The Russians, for their part, have started a major push to seize the remaining ethnically Russian districts in the Ukraine as well as the gas fields in the Sea of Azov.

The US corporate government is in no position to win any war against Russia and China at this point in time because neither its NATO allies nor Japan are going to go along with such a suicidal and world-destroying plan.

The more likely outcome will be the overthrow of the US corporate government and the restoration of the Republic of the United States of America.

Another reason for cabal panic is a criminal trial that started on November 10th in London, England where evidence will be presented that the 311 tsunami and nuclear disaster in Japan was a terrorist attack. The trial is being held to determine whether UK lawyer Michael Shrimpton gave false warnings about a nuclear terror threat to the 2012 London Olympics. Here is a link to a Daily Mail article about the trial.

http://www.dailymail.co.uk/news/article-2828974/Barrister-bomb-hoax-calls-Defence-Secretary-claiming-London-2012-Queen-targets-court-hears.html

The defendant has lined up multiple witnesses to bolster his claim that the nuclear terror threat was real and that Japan had already experienced a nuclear terror attack. This writer is scheduled to be one of the witnesses at the trial.

The trial is important because it will bring lots of information that has appeared online under the forensic scrutiny of a criminal court. If the evidence is good, it will then lead to criminal charges eventually being filed against the perpetrators of 311. The Japanese and North Koreans involved in the attack have been offered, and have accepted, amnesty in exchange for providing information about 311.

The trial is expected to be a fair one because there are proliferating signs the UK is freeing itself of cabal influence. The ongoing investigation into a high level pedophile ring there is the clearest evidence of this. British newspapers are now reporting, for example, that Sir Peter Hayman, former Deputy Head of MI6 British foreign intelligence was a pedophile rapist. Investigators into the pedophilia network are particularly interested in cases where pedophilia was used to blackmail politicians and influence government policy.

The other indication is that the British and European dominated Financial Stability Board, an international financial regulator, has come up with regulations to make sure tax payers never again have to bail out “too big to fail” financial institutions like happened after the Lehman shock of 2008. This is clearly aimed at the big US banking institutions that own the Federal Reserve Board and looted US taxpayers in 2008.

Japan is also showing signs of being ready to make a decisive break with the cabal. On November 10th, for example, this writer spent much of the day in a Rupert Murdoch owned TV studio with a group of panelists who were allowed to openly discuss previously taboo subjects. This writer talked about how ebola was a US cabal bio-weapon, that Malaysian Air flight 370 and flight 17 shot down in the Ukraine were the same plane and that ISIS was a creation of Mossad and US intelligence. Other panelists made similar claims. One of them, blogger Richard Koshimizu, talked about a homosexual blackmail network involving senior Japanese politicians.

It remains to be seen how much of this will appear when the show is broadcast after editing but the fact that Murdoch is recording such shows is a sign at least one corporate media oligarch is interested in the truth.

Japan is expected to hold another general election in December that could lead to fundamental regime change, multiple government sources here say. There will be a big fight behind the scenes between the old guard behind Abe and the Japan revolutionary faction over the coming days to decide this issue.

Abe has been damaged in Japan after he was forced promise to stop provoking China and to eat humble pie in in order to get a token meeting with Chinese strongman Xi Jinping.

In North Korea, the US agencies recently secretly helped keep Kim Jong Un in power and prevented the take-over of that country by a Chinese led faction, according to pentagon sources. That is why North Korea released its last two American prisoners.

The Pentagon forces in Asia know that it is the Japanese and Chinese who are paying their bills these days. That is why they have an interest in acting as a peace-keeper in the region.

Source.

This year, I will wear a poppy for the last time

More and more people are waking up to the lies we’ve been told . . . -LW


I will remember friends and comrades in private next year, as the solemnity of remembrance has been twisted into a justification for conflict

'Come 2014 when the government marks the beginning of the first world war I will declare myself a conscientious objector.' Photograph: Leon Neal/AFP/Getty Images

Over the last 10 years the sepia tone of November has become blood-soaked with paper poppies festooning the lapels of our politicians, newsreaders and business leaders. The most fortunate in our society have turned the solemnity of remembrance for fallen soldiers in ancient wars into a justification for our most recent armed conflicts. The American civil war’s General Sherman once said that “war is hell”, but unfortunately today’s politicians in Britain use past wars to bolster our flagging belief in national austerity or to compel us to surrender our rights as citizens, in the name of the public good.

Still, this year I shall wear the poppy as I have done for many years. I wear it because I am from that last generation who remember a war that encompassed the entire world. I wear the poppy because I can recall when Britain was actually threatened with a real invasion and how its citizens stood at the ready to defend her shores. But most importantly, I wear the poppy to commemorate those of my childhood friends and comrades who did not survive the second world war and those who came home physically and emotionally wounded from horrific battles that no poet or journalist could describe.

However, I am afraid it will be the last time that I will bear witness to those soldiers, airmen and sailors who are no more, at my local cenotaph. From now on, I will lament their passing in private because my despair is for those who live in this present world. I will no longer allow my obligation as a veteran to remember those who died in the great wars to be co-opted by current or former politicians to justify our folly in Iraq, our morally dubious war on terror and our elimination of one’s right to privacy.

Come 2014 when the government marks the beginning of the first world war with quotes from Rupert Brooke, Rudyard Kipling and other great jingoists from our past empire, I will declare myself a conscientious objector. We must remember that the historical past of this country is not like an episode of Downton Abbey where the rich are portrayed as thoughtful, benevolent masters to poor folk who need the guiding hand of the ruling classes to live a proper life.

I can tell you it didn’t happen that way because I was born nine years after the first world war began. I can attest that life for most people was spent in abject poverty where one laboured under brutal working conditions for little pay and lived in houses not fit to kennel a dog today. We must remember that the war was fought by the working classes who comprised 80% of Britain’s population in 1913.

This is why I find that the government’s intention to spend £50m to dress the slaughter of close to a million British soldiers in the 1914-18 conflict as a fight for freedom and democracy profane. Too many of the dead, from that horrendous war, didn’t know real freedom because they were poor and were never truly represented by their members of parliament.

My uncle and many of my relatives died in that war and they weren’t officers or NCOs; they were simple Tommies. They were like the hundreds of thousands of other boys who were sent to their slaughter by a government that didn’t care to represent their citizens if they were working poor and under-educated. My family members took the king’s shilling because they had little choice, whereas many others from similar economic backgrounds were strong-armed into enlisting by war propaganda or press-ganged into military service by their employers.

For many of you 1914 probably seems like a long time ago but I’ll be 91 next year, so it feels recent. Today, we have allowed monolithic corporate institutions to set our national agenda. We have allowed vitriol to replace earnest debate and we have somehow deluded ourselves into thinking that wealth is wisdom. But by far the worst error we have made as a people is to think ourselves as taxpayers first and citizens second.

Next year, I won’t wear the poppy but I will until my last breath remember the past and the struggles my generation made to build this country into a civilised state for the working and middle classes. If we are to survive as a progressive nation we have to start tending to our living because the wounded: our poor, our underemployed youth, our hard-pressed middle class and our struggling seniors shouldn’t be left to die on the battleground of modern life.

–Harry Lee Smith

Source.

Truth Frequency Radio Interviews “The Ambassador”

For now, I can’t vouch for the identity of “The Ambassador,” but he brings some interesting opinions about what’s going on in global banking and politics. -LW

Video Description

Have you heard about The Red Dragon Family? The Ambassador of the Chinese Red Dragon family reveals insider plans to take down the Illuminati Cabal, and what he has to say is mind blowing.

This interview is full of information and is a follow up from the show the night before which can be heard here – THE AMBASSADOR: Red Dragon Bloodline Family Vs The ILLUMINATI CABAL!
https://www.youtube.com/watch?v=GGu2J…

The Ambassador talks about plans that are underway to bring down the European Bloodlines, the economic system and also covers Ukraine, religion, media, pyramids, occulted knowledge, vatican, space, royal bloodlines, paranormal and so much more.

Could we be about to see a paradigm shift as we move into the new age? The Ambassador says his family are ready to make the changes needed for the betterment of humanity

Then in the 3rd hour of the show, Mrs Joe Joseph then joins the show and we pick up from last weeks halloween special with tales of ghosts and shadow figures.

Whistleblower Alayne Fleischmann on How JPMorgan Chase Helped Wreck the Economy

As a follow-up to the Rolling Stone article, here’s a recent interview with the “$9 Billion Witness”

http://democracynow.org – A year ago this month the U.S. Department of Justice announced that the banking giant JPMorgan Chase would avoid criminal charges by agreeing to pay $13 billion to settle claims that it had routinely overstated the quality of mortgages it was selling to investors. But how did the bank avoid prosecution for committing fraud that helped cause the 2008 financial crisis? Today we speak to JPMorgan Chase whistleblower Alayne Fleischmann in her first televised interview discussing how she witnessed “massive criminal securities fraud” in the bank’s mortgage operations. She is profiled in Matt Taibbi’s new Rolling Stone investigation, “The $9 Billion Witness: Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking.”

The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare

Recently, Carmen Segarra made headlines as a Goldman Sachs whistleblower. Now,  Chase whistle-blower Alayne Fleischmann is coming forward, saying, “If we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.” Before she went to Wall Street, she did human rights work, but she had to pay-off her student loans… Ladies and Gentlemen, the show has begun! -LW


Chase whistle-blower Alayne Fleischmann risked it all. Photo credit: Andrew Querner

Chase whistle-blower Alayne Fleischmann risked it all. Photo credit: Andrew Querner

Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

By  | November 6, 2014

She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn’t take it anymore.

“It was like watching an old lady get mugged on the street,” she says. “I thought, ‘I can’t sit by any longer.'”

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She’s had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.

 Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as “massive criminal securities fraud” in the bank’s mortgage operations.

Thanks to a confidentiality agreement, she’s kept her mouth shut since then. “My closest family and friends don’t know what I’ve been living with,” she says. “Even my brother will only find out for the first time when he sees this interview.”

Six years after the crisis that cratered the global economy, it’s not exactly news that the country’s biggest banks stole on a grand scale. That’s why the more important part of Fleischmann’s story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. “Every time I had a chance to talk, something always got in the way,” Fleischmann says.

This past year she watched as Holder’s Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called “statements of facts,” which were conveniently devoid of anything like actual facts.

Jamie Dimon (Photo: Bloomberg/Getty)

Jamie Dimon (Photo: Bloomberg/Getty)

And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption. “I could be sued into bankruptcy,” she says. “I could lose my license to practice law. I could lose everything. But if we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.”

Alayne Fleischmann grew up in Terrace, British Columbia, a snowbound valley town just a brisk 18-hour drive north of Vancouver. She excelled at school from a young age, making her way to Cornell Law School and then to Wall Street. Her decision to go into finance surprised those closest to her, as she had always had more idealistic ambitions. “I helped lead a group that wrote briefs to the Human Rights Chamber for those affected by ethnic cleansing in Bosnia-Herzegovina,” she says. “My whole life prior to moving into securities law was human rights work.”

But she had student loans to pay off, and so when Wall Street came knocking, that was that. But it wasn’t like she was dragged into high finance kicking and screaming. She found she had a genuine passion for securities law and felt strongly she was doing a good thing. “There was nothing shady about the field back then,” she says. “It was very respectable.”

In 2006, after a few years at a white-shoe law firm, Fleischmann ended up at Chase. The mortgage market was white-hot. Banks like Chase, Bank of America and Citigroup were furiously buying up huge pools of home loans and repackaging them as mortgage securities. Like soybeans in processed food, these synthesized financial products wound up in everything, whether you knew it or not: your state’s pension fund, another state’s workers’ compensation fund, maybe even the portfolio of the insurance company you were counting on to support your family if you got hit by a bus.

As a transaction manager, Fleischmann functioned as a kind of quality-control officer. Her main job was to help make sure the bank didn’t buy spoiled merchandise before it got tossed into the meat grinder and sold out the other end.

A few months into her tenure, Fleischmann would later testify in a DOJ deposition, the bank hired a new manager for diligence, the group in charge of reviewing and clearing loans. Fleischmann quickly ran into a problem with this manager, technically one of her superiors. She says he told her and other employees to stop sending him e-mails. The department, it seemed, was wary of putting anything in writing when it came to its mortgage deals.

“If you sent him an e-mail, he would actually come out and yell at you,” she recalls. “The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome.” One former high-ranking federal prosecutor said that if he were taking a criminal case to trial, the information about this e-mail policy would be crucial. “I would begin and end my opening statement with that,” he says. “It shows these people knew what they were doing and were trying not to get caught.”

In late 2006, not long after the “no e-mail” policy was implemented, Fleischmann and her group were asked to evaluate a packet of home loans from a mortgage originator called GreenPoint that was collectively worth about $900 million. Almost immediately, Fleischmann and some of the diligence managers who worked alongside her began to notice serious problems with this particular package of loans.

For one thing, the dates on many of them were suspiciously old. Normally, banks tried to turn loans into securities at warp speed. The idea was to go from a homeowner signing on the dotted line to an investor buying that loan in a pool of securities within two to three months. Thus it was a huge red flag to see Chase buying loans that were already seven or eight months old.

“I COULD LOSE EVERYTHING. BUT IF WE DON’T START SPEAKING UP, WE’RE GOING TO GET THE BIGGEST FINANCIAL COVER-UP IN HISTORY.”

What this meant was that many of the loans in the GreenPoint deal had either been previously rejected by Chase or another bank, or were what are known as “early payment defaults.” EPDs are loans that have already been sold to another bank and have been returned after the borrowers missed multiple payments. That’s why the dates on them were so old.

In other words, this was the very bottom of the mortgage barrel. They were like used cars that had been towed back to the lot after throwing a rod. The industry had its own term for this sort of loan product: scratch and dent. As Chase later admitted, it not only ended up reselling hundreds of millions of dollars worth of those crappy loans to investors, it also sold them in a mortgage pool marketed as being above subprime, a type of loan called “Alt-A.” Putting scratch-and-dent loans in an Alt-A security is a little like putting a fresh coat of paint on a bunch of junkyard wrecks and selling them as new cars. “Everything that I thought was bad at the time,” Fleischmann says, “turned out to be a million times worse.” (Chase declined to comment for this article.)

When Fleischmann and her team reviewed random samples of the loans, they found that around 40 percent of them were based on overstated incomes – an astronomically high defect rate for any pool of mortgages; Chase’s normal tolerance for error was five percent. One mortgage in particular that sticks out in Fleischmann’s mind involved a manicurist who claimed to have an annual income of $117,000. Fleischmann figured that even working seven days a week, this woman would have needed to work 488 days a year to make that much. “And that’s with no overhead,” Fleischmann says. “It wasn’t possible.”

But when she and others raised objections to the toxic loans, something odd started happening. The number-crunchers who had been complaining about the loans suddenly began changing their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator verbally abuses the target until he starts producing the desired answers. “What happened,” Fleischmann says, “is the head diligence manager started yelling at his team, berating them, making them do reports over and over, keeping them late at night.” Then the loans started clearing.

As late as December 11th, 2006, diligence managers had marked a full 33 percent of one loan sample as “stated income unreasonable for profession,” meaning that it was nearly inevitable that there would be a high number of defaults. Several high-ranking executives were copied on this report.

Then, on December 15th, a Chase sales executive held a lengthy meeting with reps from GreenPoint and the diligence team to examine the remaining loans in the pool. When they got to the manicurist, Fleischmann remembers, one of the diligence guys finally caved under the pressure from the sales executive. “He had his hands up and just said, ‘OK,’ and he cleared it,” says Fleischmann, adding that he was shaking his head “no” even as he was saying yes. Soon afterward, the error rate in the pool had magically dropped below 10 percent – a threshold that itself had just been doubled to clear the way for this deal.

After that meeting, Fleischmann testified, she approached a managing director named Greg Boester and pleaded with him to reconsider. She says she told Boester that the bank could not sell the high-risk loans as low-risk securities without committing fraud. “You can’t securitize these loans without special disclosure about what’s wrong with them,” Fleischmann told him, “and if you make that disclosure, no one will buy them.”

A former Olympic ski jumper, Boester was such an important executive at Chase that when he later defected to the Chicago-based hedge fund Citadel, Dimon cut off trading with Citadel in retaliation. Boester eventually returned to Chase and is still there today despite his role in this affair.

This moment illustrates the most basic element of the case against Chase: The bank knowingly peddled products stuffed with scratch-and-dent loans to investors without disclosing the obvious defects with the underlying loans.

Years later, in its settlement with the Justice Department, Chase would admit that this conversation between Fleischmann and Boester took place (though neither was named; it was simply described as “an employee . . . told . . . a managing director”) and that her warning was ignored when the bank sold those loans off to investors.

Chase Witness

Photo: Illustration by Victor Juhasz

A few weeks later, in early 2007, she sent a long letter to another managing director, William Buell. In the letter, she warned Buell of the consequences of reselling these bad loans as securities and gave detailed descriptions of breakdowns in Chase’s diligence process.

Fleischmann assumed this letter, which Chase lawyers would later jokingly nickname “The Howler” after the screaming missive from the Harry Potter books, would be enough to force the bank to stop selling the bad loans. “It used to be if you wrote a memo, they had to stop, because now there’s proof that they knew what they were doing,” she says. “But when the Justice Department doesn’t do anything, that stops being a deterrent. I just didn’t know that at the time.”

In February 2008, less than two years after joining the bank, Fleischmann was quietly dismissed in a round of layoffs. A few months later, proof would appear that her bosses knew all along that the boom-era mortgage market was rotten. That September, as the market was crashing, Dimon boasted in a ball-washing Fortune article titled “Jamie Dimon’s SWAT Team” that he knew well before the meltdown that the subprime market was toast. “We concluded that underwriting standards were deteriorating across the industry.” The story tells of Dimon ordering Boester’s boss, William King, to dump the bank’s subprime holdings in October 2006. “Billy,” Dimon says, “we need to sell a lot of our positions. . . . This stuff could go up in smoke!”

In other words, two full months before the bank rammed through the dirty GreenPoint deal over Fleischmann’s objections, Chase’s CEO was aware that loans like this were too dangerous for Chase itself to own. (Though Dimon was talking about subprime loans and GreenPoint was technically an Alt-A pool, the Fortune story shows that upper management had serious concerns about industry-wide underwriting problems.)

In January 2010, when Dimon testified before the Financial Crisis Inquiry Commission, he told investigators the exact opposite story, portraying the poor Chase leadership as having been duped, just like the rest of us. “In mortgage underwriting,” he said, “somehow we just missed, you know, that home prices don’t go up forever.”

When Fleischmann found out about all of this years later, she was shocked. Her confidentiality agreement at Chase didn’t bar her from reporting a crime, but the problem was that she couldn’t prove that Chase had committed a crime without knowing whether those bad loans had been sold.

As it turned out, of course, Chase was selling those rotten dog-meat loans all over the place. How bad were they? A single lawsuit by a single angry litigant gives some insight. In 2011, Chase was sued over massive losses suffered by a group of credit unions. One of them had invested $135 million in one of the bank’s mortgage–backed securities. About 40 percent of the loans in that deal came from the GreenPoint pool.

The lawsuit alleged that in just the first year, the security suffered $51 million in losses, nearly 50 times what had been projected. It’s hard to say how much of that was due to the GreenPoint loans. But this was just one security, one year, and the losses were in the tens of millions. And Chase did deal after deal with the same methodology. So did most of the other banks. It’s theft on a scale that blows the mind.

In the spring of 2012, Fleischmann, who’d moved back to Canada after leaving Chase, was working at a law firm in Calgary when the phone rang. It was an investigator from the States. “Hi, I’m from the SEC,” he said. “You weren’t expecting to hear from me, were you?”

A few months earlier, President Obama, giving in to pressure from the Occupy movement and other reformers, had formed the Residential Mortgage-Backed Securities Working Group. At least superficially, this was a serious show of force against banks like Chase. The group would operate like a kind of regulatory Justice League, combining the superpowers of investigators from the SEC, the FBI, the IRS, HUD and a host of other federal agencies. It included noted anti-corruption- investigator and New York Attorney General Eric Schneiderman, which gave many observers reason to hope that finally something would be done about the crimes that led to the crash. That makes the fact that the bank would skate with negligible cash fines an even more extra-ordinary accomplishment.

New York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27th, 2012.

New York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27th, 2012. (Photo: Mark Wilson/Getty)

By the time the working group was set up, most of the applicable statutes of limitations had either expired or were about to expire. “A conspiratorial way of looking at it would be to say the state waited far too long to look at these cases and is now taking its sweet time investigating, while the last statutes of limitations run out,” says famed prosecutor and former New York Attorney General Eliot Spitzer.

It soon became clear that the SEC wasn’t so much investigating Chase’s behavior as just checking boxes. Fleischmann received no follow-up phone calls, even though she told the investigator that she was willing to tell the SEC everything she knew about the systemic fraud at Chase. Instead, the SEC focused on a single transaction involving a mortgage company called WMC. “I kept trying to talk to them about GreenPoint,” Fleischmann says, “but they just wanted to talk about that other deal.”

The following year, the SEC would fine Chase $297 million for misrepresentations in the WMC deal. On the surface, it looked like a hefty punishment. In reality, it was a classic example of the piecemeal, cherry-picking style of justice that characterized the post-crisis era. “The kid-gloves approach that the DOJ and the SEC take with Wall Street is as inexplicable as it is indefensible,” says Dennis Kelleher of the financial reform group Better Markets, which would later file suit challenging the Chase settlement. “They typically charge only one offense when there are dozens. It would be like charging a serial murderer with a single assault and giving them probation.”

Soon Fleischmann’s hopes were raised again. In late 2012 and early 2013, she had a pair of interviews with civil litigators from the U.S. attorney’s office in the Eastern District of California, based in Sacramento.

One of the ongoing myths about the financial crisis is that the government is outmatched by the legal talent representing the banks. But Fleischmann was impressed by the lead attorney in her case, a litigator named Richard Elias. “He sounded like he had been a securities lawyer for 10 years,” she says. “This actually looked like his idea of fun – like he couldn’t wait to run with this case.”

She gave Elias and his team detailed information about everything she’d seen: the edict against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were ignored, all of it. She assumed that it wouldn’t be long before the bank was hauled into court.

bank of america
 Instead, the government decided to help Chase bury the evidence. It began when Holder’s office scheduled a press conference for the morning of September 24th, 2013, to announce sweeping civil-fraud charges against the bank, all laid out in a detailed complaint drafted by the U.S. attorney’s Sacramento office. But that morning the presser was suddenly canceled, and no complaint was filed. According to later news reports, Dimon had personally called Associate Attorney General Tony West, the third-ranking official in the Justice Department, and asked to reopen negotiations to settle the case out of court.

It goes without saying that the ordinary citizen who is the target of a government investigation cannot simply pick up the phone, call up the prosecutor in charge of his case and have a legal proceeding canceled. But Dimon did just that. “And he didn’t just call the prosecutor, he called the prosecutor’s boss,” Fleischmann says. According to The New York Times, after Dimon had already offered $3 billion to settle the case and was turned down, he went to Holder’s office and upped the offer, but apparently not by enough.

A few days later, Fleischmann, who had by then moved back to Vancouver and was looking for work, was at a mall when she saw a Wall Street Journal headline on her iPhone: JPMorgan Insider Helps U.S. in Probe. The story said that the government had a key witness, a female employee willing to provide damaging testimony about Chase’s mortgage operations. Fleischmann was stunned. Until that moment, she had no idea that she was a major part of the government’s case against Chase. And worse, nobody had bothered to warn her that she was about to be effectively outed in the newspapers. “The stress started to build after I saw that news,” she says. “Especially as I waited to see if my name would come out and I watched my job possibilities evaporate.”

Fleischmann later realized that the government wasn’t interested in having her testify against Chase in court or any other public forum. Instead, the Justice Department’s political wing, led by Holder, appeared to be using her, and her evidence, as a bargaining chip to extract more hush money from Dimon. It worked. Within weeks, Dimon had upped his offer to roughly $9 billion.

In late November, the two sides agreed on a settlement deal that covered a variety of misbehaviors, including the fraud that Fleischmann witnessed as well as similar episodes at Washington Mutual and Bear Stearns, two companies that Chase had acquired during the crisis (with federal bailout aid). The newspapers and the Justice Department described the deal as a “$13 billion settlement,” hailing it as the biggest white-collar regulatory settlement in American history. The deal released Chase from civil liability. And, in what was described by The New York Times as a “major victory for the government,” it left open the possibility that the Justice Department could pursue a further criminal investigation against the bank.

But the idea that Holder had cracked down on Chase was a carefully contrived fiction, one that has survived to this day. For starters, $4 billion of the settlement was largely an accounting falsehood, a chunk of bogus “consumer relief” added to make the payoff look bigger. What the public never grasped about these consumer–relief deals is that the “relief” is often not paid by the bank, which mostly just services the loans, but by the bank’s other victims, i.e., the investors in their bad mortgage securities.

Moreover, in this case, a fine-print addendum indicated that this consumer relief would be allowed only if said investors agreed to it – or if it would have been granted anyway under existing arrangements. This often comes down to either forgiving a small portion of a loan or giving homeowners a little extra time to pay up in full. “It’s not real,” says Fleischmann. “They structured it so that the homeowners only get relief if they would have gotten it anyway.” She pauses. “If a loan shark gives you a few extra weeks to pay up, is that ‘consumer relief’?”

The average person had no way of knowing what a terrible deal the Chase settlement was for the country. The terms were even lighter than the slap-on-the-wrist formula that allowed Wall Street banks to “neither admit nor deny” wrongdoing – the deals that had helped spark the Occupy protests. Yet those notorious deals were like the Nuremberg hangings compared to the regulatory innovation that Holder’s Justice Department cooked up for Dimon and Co.

Instead of a detailed complaint naming names, Chase was allowed to sign a flimsy, 10-and-a-half-page “statement of facts” that was: (a) so short, a first-year law student could read it in the time it takes to eat a tuna sandwich, and (b) so vague, a halfway intelligent person could read it and not know anyone had done anything wrong.

Businessman working on computer in office
 The ink was barely dry on the deal before Chase would have the balls to insinuate its innocence. “The firm has not admitted to violations of the law,” said CFO Marianne Lake. But the deal’s most brazen innovation was the way it bypassed the judicial branch. Previously, federal regulators had had bad luck with judges when trying to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart deals worked out between banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real punishments.

Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showing the settlement to a judge. The settlement, says Kelleher, “was unprecedented in many ways, including being very carefully crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds and prevent public scrutiny of their sweetheart deal.” Kelleher asks a rhetorical question: “Can you imagine the outcry if [Bush-era Attorney General] Alberto Gonzales had gone into the backroom and given Halliburton immunity in exchange for a billion dollars?”

The deal was widely considered a good one for both sides, but Chase emerged with barely a scratch. First, the ludicrously nonspecific language surrounding the settlement put you, me and every other American taxpayer on the hook for roughly a quarter of Chase’s check. Because most of the settlement monies were specifically not called fines or penalties, Chase was allowed to treat some $7 billion of the settlement as a tax write-off.

Couple this with the fact that the bank’s share price soared six percent on news of the settlement, adding more than $12 billion in value to shareholders, and one could argue Chase actually made money from the deal. What’s more, to defray the cost of this and other fines, Chase last year laid off 7,500 lower-level employees. Meanwhile, per-employee compensation for everyone else rose four percent, to $122,653. But no one made out better than Dimon. The board awarded a 74 percent raise to the man who oversaw the biggest regulatory penalty ever, upping his compensation package to about $20 million.

While Holder was being lavishly praised for releasing Chase only from civil liability, Fleischmann knew something the rest of the world did not: The criminal investigation was going nowhere.

In the days leading up to Holder’s November 19th announcement of the settlement, the Justice Department had asked Fleischmann to meet with criminal investigators. They would interview her very soon, they said, between December 15th and Christmas.

But December came and went with no follow-up from the DOJ. She began to wonder: If she was the government’s key witness, how was it possible that they were still pursuing a criminal case without talking to her? “My concern,” she says, “was that they were not investigating.”

The government’s failure to speak to Fleischmann lends credence to a theory about the Holder-Dimon settlement: It included a tacit agreement from the DOJ not to pursue criminal charges in earnest. It sounds outrageous, but it wouldn’t be the first time that the government used a wink and a nod to dispose a bank of major liability without saying so publicly. Back in 2010, American Lawyer revealed Goldman Sachs wanted a full release from liability in a dozen crooked mortgage deals, while the SEC didn’t want to give the bank such a big public victory. So the two sides quietly agreed to a grimy compromise: Goldman agreed to pay $550 million to settle a single case, and the SEC privately assured the bank that it wouldn’t recommend charges in any of the other deals.

As Fleischmann was waiting for the Justice Department to call, Chase and its lawyers had been going to tremendous lengths to keep her muzzled. A number of major institutional investors had sued the bank in an effort to recover money lost in investing in Chase’s fraud-ridden home loans. In October 2013, one of those investors – the Fort Worth Employees’ Retirement Fund – asked a federal judge to force Chase to grant access to a series of current and former employees, including Fleischmann, whose status as a key cooperator in the federal investigation had made headlines in The Wall Street Journal and other major media outlets.

Photo: Spencer Platt/Getty

Photo: Spencer Platt/Getty

In response, Dorothy Spenner, an attorney representing Chase, told the court that Fleischmann was not a “relevant custodian.” In other words, she couldn’t testify to anything of importance. Federal Magistrate Judge James C. Francis IV took Chase’s lawyers at their word and rejected the Fort Worth retirees’ request for access to Fleischmann and her evidence.

Other investors bilked by Chase also tried to speak to Fleischmann. The Federal Home Loan Bank of Pittsburgh, which had sued Chase, asked the court to force Chase to turn over a copy of the draft civil complaint that was withheld after Holder’s scuttled press conference. The Pittsburgh litigants also specified that they wanted access to the name of the state’s cooperating witness: namely, Fleischmann.

In that case, the judge actually ordered Chase to turn over both the complaint and Fleischmann’s name. Chase stalled. Later in the fall, the judge ordered the bank to produce the information again; it stalled some more.

Then, in January 2014, Chase suddenly settled with the Pittsburgh bank out of court for an undisclosed amount. Months after being ordered to allow Fleischmann to talk, they once again paid a stiff price to keep her testimony out of the public eye.

Chase’s determination to hide its own dirt while forcing Fleischmann to keep her secret was becoming more and more absurd. “It was a hard time to look for work,” she says. All that prospective employers knew was that she had worked in a department that had just been dinged with what was then the biggest regulatory fine in the history of capitalism. According to the terms of her confidentiality agreement, she couldn’t even tell them that she’d tried to keep the bank from committing fraud.

Despite it all, Fleischmann still had faith that the Justice Department or some other federal agency would make things right. “I guess I was just a trusting person,” she says. “I wasn’t cynical. I kept hoping.”

One day last spring, Fleischmann happened across a video of Holder giving a speech titled “No Company Is Too Big to Jail.” It was classic Holder: full of weird prevarication, distracting eye twitches and other facial contortions. It began with the bold rejection of the idea that overly large financial institutions would receive preferential treatment from his Justice Department.

Bernie Madoff

Bernie Madoff

Then, within a few sentences, he seemed to contradict himself, arguing that one must apply a special sort of care when investigating supersize banks, tweaking the rules so as not to upset the world economy. “Federal prosecutors conducting these investigations,” Holder said, “must go the extra mile to coordinate closely with the regulators who oversee these institutions’ day-to-day operations.” That is, he was saying, regulators have to agree not to allow automatic penalties to kick in, so that bad banks can stay in business.

Fleischmann winced. Fully fluent in Holder’s three-faced rhetoric after years of waiting for him to act, she felt that he was patting himself on the back for having helped companies survive crimes that otherwise might have triggered crippling regulatory penalties. As she watched in mounting outrage, Holder wrapped up his address with a less-than-reassuring pronouncement: “I am resolved to seeing [the investigations] through.” Doing so, he added, would “reaffirm” his principles.

Or, as Fleischmann translates it: “I will personally stay on to make sure that no one can undo the cover-up that I’ve accomplished.”

That’s when she decided to break her silence. “I tried to go on with the things I was doing, but I just stopped sleeping and couldn’t eat,” she says. “It felt like I was trying to keep this secret and my body was literally rejecting it.”

Ironically, over the summer, the government contacted her again. A new set of investigators interviewed her, appearing to have restarted the criminal case. Fleischmann won’t comment on that investigation. Frustrated as she has been by the decisions of the higher-ups in Holder’s Justice Department, she doesn’t want to do anything to get in the way of investigators who might be working the case. But she emphasizes she still has reason to be deeply worried that nothing will be done. Even if the investigators build strong cases against executives who oversaw Chase’s fraud, Holder or whoever succeeds him can still make the whole thing disappear by negotiating a soft landing for the company. “That’s the thing I’m worried about,” she says. “That they make the whole thing disappear. If they do that, the truth will never come out.”

In September, at a speech at NYU, Holder defended the lack of prosecutions of top executives on the grounds that, in the corporate context, sometimes bad things just happen without actual people being responsible. “Responsibility remains so diffuse, and top executives so insulated,” Holder said, “that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual.”

In other words, people don’t commit crimes, corporate culture commits crimes! It’s probably fortunate that Holder is quitting before he has time to apply the same logic to Mafia or terrorism cases.

Fleischmann, for her part, had begun to find the whole situation almost funny.

“I thought, ‘I swear, Eric Holder is gas-lighting me,’ ” she says.

Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Chase committed criminal fraud: It’s right there in the documents; just hand her a highlighter and some Post-it notes – “We lawyers love flags” – and you will not find a more enthusiastic tour guide through a gazillion-page prospectus than Alayne Fleischmann.

She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.

She’d like to see something done about it, emphasizing that there still is time. The statute of limitations for wire fraud, for instance, has not run out, and she strongly believes there’s a case there, against the bank’s executives. She has no financial interest in any of this, no motive other than wanting the truth out. But more than anything, she wants it to be over.

In today’s America, someone like Fleischmann – an honest person caught for a little while in the wrong place at the wrong time – has to be willing to live through an epic ordeal just to get to the point of being able to open her mouth and tell a truth or two. And when she finally gets there, she still has to risk everything to take that last step. “The assumption they make is that I won’t blow up my life to do it,” Fleischmann says. “But they’re wrong about that.”

Good for her, and great for her that it’s finally out. But the big-picture ending still stings. She hopes otherwise, but the likely final verdict is a Pyrrhic victory.

Because after all this activity, all these court actions, all these penalties (both real and abortive), even after a fair amount of noise in the press, the target companies remain more ascendant than ever. The people who stole all those billions are still in place. And the bank is more untouchable than ever – former Debevoise & Plimpton hotshots Mary Jo White and Andrew Ceresny, who represented Chase for some of this case, have since been named to the two top jobs at the SEC. As for the bank itself, its stock price has gone up since the settlement and flirts weekly with five-year highs. They may lose the odd battle, but the markets clearly believe the banks won the war. Truth is one thing, and if the right people fight hard enough, you might get to hear it from time to time. But justice is different, and still far enough away.

 

 

Source.

Rampant financial crime in City of London eroding public trust

Wow! The corrupt banking stories are starting to focus on the City of London–the heart of the central banking cartel. We must be getting close to the end of this chapter…  -LW


Published time: October 28, 2014 19:58
Edited time: October 29, 2014 00:05

The exterior of the headquarters of the Bank of England in London. (AFP Photo)

The exterior of the headquarters of the Bank of England in London. (AFP Photo)

In her first public address since adopting the position of BoE Deputy Governor, Nemet Minouche Shafik denounced the actions of UK traders in foreign exchange, currencies and bonds markets, warning financial misconduct in these sectors goes well beyond a few rogue financiers.A top Bank of England (BoE) official warns widespread financial crime in the City of London is eroding public trust. The BoE’s criticism surfaced as it launched a review to tackle market manipulation.

Referencing LIBOR riggers’ behavior as unacceptable, she suggested fines for such fraudulent activity were inadequate and signified “salt rubbed into the wounds to public confidence in financial markets.”

LIBOR (London Interbank Offered Rate) currently determines the cost of up to $350 trillion worth of global financial products. While the 21st century has been littered with financial scandals, Libor rigging by leading global banks has been dubbed the most flagrant in modern history.

Approximately £4 billion worth of fines have been issued for the manipulation of core benchmark rates to date, and the City is expecting further fines for the rigging of currency markets to be publicly announced in November.

(AFP Photo/DOMINIQUE FAGET)

(AFP Photo/DOMINIQUE FAGET)

(AFP Photo/DOMINIQUE FAGET)

Speaking at the London School of Economics (LSE) on Monday, Shafik warned Britain’s financial system is rigged and characterized by disproportionate rewards.

“When people read of malpractice in financial markets, of trading profits being claimed through manipulation, collusion or dishonesty, they naturally wonder if they are one of the people who have been wronged,” she said.

Joel Benjamin, a leading researcher and campaigner at UK ethical finance group Move Your Money is investigating the impact of LIBOR rigging on UK citizens and stakeholders. Benjamin warns such rate manipulation is anything but a victimless crime, and those who have suffered most in its wake remain largely uncompensated.

“The real victims of LIBOR are pension funds, SME’s fraudulently mis-sold interest rate swaps, public authorities with cash investments in the banks, and LOBO loans and PFI contracts where interest repayments increased as LIBOR was rigged lower by the banks,” he told RT on Tuesday.

‘Fix the barrel – to get rid of the bad apples’

Shafik’s address at LSE accompanied the launch of the BOE’s long-awaited review of fixed income, foreign exchange and commodities markets, collectively termed FICC. The results of the Bank’s review, first announced by Chancellor George Osborne in June, are expected to surface following the general election in May 2015.

Commenting on the implications of rate rigging, Osborne warned on Monday that financial integrity is a vital prerequisite for a thriving British economy.

But Benjamin argues Osborne has done little to help small businesses and local authorities that have suffered as a result of such financial crimes.

Britain's Chancellor of the Exchequor, George Osborne. (AFP Photo)

Britain’s Chancellor of the Exchequor, George Osborne. (AFP Photo)

Britain’s Chancellor of the Exchequor, George Osborne. (AFP Photo)

“Instead of investigating victims of LIBOR fraud and pursuing compensation, George Osborne has handed LIBOR fines to armed forces charities. LIBOR fines should be going to SMEs defrauded by the banks and to fund public services ravaged by austerity cuts borne of the bank bailouts,” he said.

Reflecting on questionable aspects of Britain’s financial sector, the BoE’s deputy governor said the tired argument that financial misconduct relates to the behavior of a “few bad apples” is “no longer credible.” Shafik suggested UK financial regulation lacks efficacy and robustness, and a regulatory overhaul is needed to“fix the barrel and to get rid of the bad apples.”

Responding to the BoE Deputy Governor’s comments, Benjamin told RT the Bank must drive and oversee a dramatic shift in Britain’s regulatory architecture.

“If the Bank of England are serious about changing the culture of British banking, that means ensuring bankers take responsibility for their actions, and that regulators hold criminal behavior to account,” he said.

Benjamin warns that “deferred prosecution agreements” currently deployed under UK law are particularly problematic. Such legislation facilitates banks in avoiding criminal penalties and keeping damning details of fraudulent activity from public knowledge, he argues.

LIBOR rigging is currently illegal under UK law. And the manipulation of currency and gold markets are set to be classified as criminal offences by the end of 2014.

But Benjamin warns political motivation to prosecute bankers responsible for rate rigging remains paltry at best.

“LIBOR was a clear conspiracy to defraud, and should be treated as such under UK law. But there is no political will to prosecute the bankers who provide over 50 percent of party political donations,” he said.

Benjamin argues that the City of London is characterized by a culture of impunity that reinforces the concept “that crime in the City by elites is tolerable and understandable, while crime on the streets is unacceptable – irrespective of personal circumstances and need.”

Source.