December 2012 - Represent Consumers

In drug war, big bank plays get out of jail free card

For years U.S. authorities have been lecturing our Mexican neighbors on how to crack down on their murderous drug cartels, which seem to operate freely any without fear of law enforcement.

What an embarrassment for the U.S. that it had the drug cartel’s biggest money launderer in its clutches but, incredibly, declined to prosecute, even though the money launderer had the blood of the Sinaloa gang on its hands.

And for what greater good did the U.S. give up the moral high ground in the war on drugs?

To protect a “too big to fail” bank and its top officials.

The U.S. declined to prosecute because the money launderer was a giant global bank, and to seek criminal sanctions might undermine the world financial system.

While it was engaged in massive illegal money laundering, HSBC was also the recipient of a backdoor bailout worth $3.5 in 2008, conveyed to the bank through insurance giant AIG.

According to a report issued earlier this year from the Permanent Senate Subcommittee on Investigations, HSBC “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls.”

In 2007 and 2008, the Senate committee found, HSBC moved $7 billion in bulk cash from Mexican to its U.S. operations, even though authorities warned that the money was proceeds from drug sales. According to the New York Time, HSBC’s Sinaloa associates gross about about $3 billion a year, which puts the cartel in the saome league as Netflix and Facebook..

HSBC was doing a thriving business with cash exchanges used by the drug cartels known as casas de cambio, despite repeated warnings that they were nothing more than fronts for the drug cartels. Years after other banks had cut them off, HSBC continued to do business with the casas de cambio.

The report stated that Middle East bankers with links to Al Queda also banked with HSBC.

What a terrible example the U.S. is setting for how to enforce the rule of law.

U.S. authorities claimed prosecuting the bank or individuals responsible for the money-laundering activities might threaten the stability of the world economy. Prosecutors tried to obscure the vile preposterousness of this cop-out beneath an avalanche of public relations puffery.

Authorities touted the $1.9 billion fine levied against HSBC as the largest of its kind, though it’s more like the U.S. taking it’s unseemly cut of the bank’s billions in money-laundering proceeds. But the PR campaign couldn’t cover the foul odor rising from the deal.

As part of the deal, bank officials officials apologized and promised never to misbehave again. But the notion that prosecutors couldn’t figure out how to hold the individuals responsible for years of lawlessness while reaping profits from the drug trade makes a mockery of law enforcement’s tough drug war rhetoric.

I wonder how other targets of the U.S. government’s harsh drug war tactics view prosecutors’ soft-pedaling on HSBC. Take for example Russ Caswell, who owns a cheap motel outside Boston where rooms rent for $57 a night. Authorities have made some drug busts at the motel, and they don’t think Caswell is doing enough to root out the lawbreakers at his motel. So prosecutors are moving to take the entire motel away from him. Not just the portion of his profits he allegedly made from drug dealers, but the entire motel, which is worth about $1.3 million.

HSBC buying its way out of accountability for its lawless behavior while Russ Caswell fights for his motel highlights one of the ugliest and most corrosive aspects of the country’s growing income inequality.

If you’re big and powerful enough, you can break the law with impunity.

We shouldn’t allow this shameful deal to stand. We should demand that the Senate Judiciary Committee hold public hearings on it and soon – before the stench spreads to all of us and we can’t get it off. Here are the members of the Judiciary committee. Call them and remind them we’re supposed to be setting the example for Mexico, not adopting their corrupt ways.

D.C. Disconnect: Whose cliff is this?

Think big money didn’t win in the last election? Think again.

It’s a pretty safe bet that the majority of Americans who voted for President Obama didn’t want unemployment to go up and the safety net shredded.

But we’re now in the midst of some extended Washington lunacy over the “fiscal cliff” negotiations, with both sides trying to whip the public into a frenzy with scary scenarios of economic hardship

Is this what the majority voted for?

I don’t think so.

This is what America’s CEOs want. If they’re going to be forced to pay slightly more in taxes, they want cuts to Social Security and Medicare in exchange – even if those programs have nothing to do with the federal government’s budget deficit.

If you’re looking for a reason why our leaders would so eagerly flout the will of the majority, you might start with the money spent in the recent election – one of the most expensive in history.

Which brings is back to the Supreme Court’s Citizens United ruling. One of the big mistakes the Supreme Court made in the Citizens United case unleashing corporate spending in politics was in its overly literal definition of how money works in elections.

Writing for the majority, Justice Anthony Kennedy said independent corporate spending does “not give rise to corruption or the appearance of corruption” and “influence over or access to elected officials does not mean that these officials are corrupt.”

According to the justices, corruption is defined only by a very specific quid pro quo.

Those who are dismissing the role of big corporate donors in the 2012 elections are making a similar misjudgment: Just because some of the most notorious big spenders, Sheldon Adelson and the Koch Brothers, didn’t win.

So the fact that Adelson, the Las Vegas mogul, and the Kochs, the energy magnates, couldn’t buy the election for Mitt Romney, means that the role of big money has been exaggerated, according to some analysts. “Spending by outside groups. it turns out,” the Washington Post reported, “was the dog that barked but did not bite.”

This isn’t the right way to view the 2012 election results, or the influence money has in our politics. Rather than focus on who wins and who loses in a particular race, or whether a particular bill is passed or defeated, we need to examine whose interests benefit, especially over a long period of time.

That’s what those big donors are after – gains over the long term. For example, the financial industry fought for 20 years before it finally won repeal of Glass-Steagall, the Depression-era law that kept separate publicly-insured banking from riskier bank investing.

Most donors and politicians are more sophisticated than to offer flat-out bribes. Elected officials, donors and lobbyists long ago learned to speak in code they understand but sounds innocuous to the public. In the case of Glass-Steagall, the bankers and their backers didn’t say they wanted to make gajillions while leaving taxpayers on the hook for bailouts when the bankers’ bets went bad. No, what they talked about publicly was “modernizing” antiquated banking laws.

A more recent example is the work of the man who Los Angeles Times columnist Michael Hiltzik dubbed the “influential billionaire in national politics.” He’s not one of the Koch Brothers or Adelson. He’s former Nixon Commerce secretary and retired hedge fund mogul Pete Peterson, who has spent $457 million in the past 5 years in a campaign to convince the politicians and public that “entitlements” are in crisis and need to be cut. He has gathered around him leading politicians, intellectuals and corporate CEOs. What do all they share? The conviction that if there’s a problem with the federal budget, those who are most vulnerable economically should have to suffer to fix it.

That’s why we end up with our current debate and the “fiscal cliff” focused on the government deficit, not creating jobs and repairing the housing mess.

That’s why we end with a political debate that somehow manages to equate cuts to badly needed social programs for people still hurting from the recession with tax increases for the nation’s wealthiest.

Peterson isn’t focused on the result of one election or one skirmish in the battle over the safety net. He’s in it for the long haul.

As for Adelson, he is learning from his 2012 mistakes so he can invest his millions more successfully in pursuit of his anti-government agenda.

While President Obama has criticized the Citizens United ruling and supported a constitutional amendment to overturn it, neither he nor the Democrats are about do without their mega-donors and super-PACs in the meantime, nor are they about to make money in politics it a priority.

In this atmosphere, will the president keep his promises to fight for the interests of the middle class for increased economic security and better jobs?

The politicians’ chase for the big money is like the nuclear arms race of the 1950s and 60s between the U.S. and Russia, which both sides acknowledged was a disaster for their economies. Neither side was willing to give up. Meanwhile, more and more of the expensive, dangerous weapons were stockpiled. There’s an important difference, however: our politicians and corporate chieftains have grown fatter on the current money race in politics. The ones who are facing a dire threat to our existence are the rest of us.

Fiscal cliff / Martin Column / President Barack Obama / Social Security - 12/10/2012

Did the Mayans Predict the Fiscal Cliff?

We’re so worried about the fiscal cliff that we’ve all but forgotten the end of the 25,000 year Mayan calendar, supposedly on December 21, at which time – depending on who you talk to – the Earth’s poles will reverse, the Sun will disappear for awhile, and a select few will enter the Age of Aquarius, when shag haircuts will once again be in style.

Whoa. What if this is no coincidence and the two are related? Maybe the Mayans were off by ten days, and the global catastrophe they predicted was the expiration of tax breaks on New Year’s Eve!

I have no evidence linking the Maya to the Tea Party – except that they both liked to dress up in costumes.

One of the weirdest events of 2012 – putting aside for a moment the melting of the polar ice caps – occurred at exactly 1:00 am the day after Election Day. Without any warning, the discussion of creating more jobs in America completely disappeared. Jobs had dominated American politics since September 17, 2011, when a group of angry, out of work Americans occupied a park near Wall Street and ignited a debate over the distribution of wealth in the U.S. between the .1% super-haves and the 99.9% have-nots. Eventually the presidential race became a debate over the best way to generate more jobs.

But the moment Romney stepped up to the podium to concede he had lost the election, the concern over jobs vanished. Now, we are back once again to debating the U.S. budget deficit – the issue Romney and his supporters cared the most about. The losers’ agenda is now driving the national debate.

It’s as if the polls got reversed on Election Day.

That’s the kind of strange phenomenon that occurs when our national leadership sacks out, as it did in July, 2011, when Congress decided it could not decide on a budget and the Republicans did not want to approve the government’s authority to borrow more money to cover federal programs.

The compromise was to kick the deficit issue down the road, till after the presidential election. So the Congress, treating itself like a child, set up a set of onerous financial consequences that will take effect if it doesn’t figure out some other plan by midnight on the 31^st of this month. These include deep cuts in unemployment benefits and defense spending, and the elimination of payroll and income tax cuts, some dating back to President George W. Bush.

It’s like the classic Cold War satire “Dr. Strangelove,” in which the Soviets reveal they have constructed a doomsday device that will blow up the entire planet in the event the United States attacks Russia.

Though it’s not quite an extinction level event, the FC is not going to be shopping as usual either.

Everyone’s going to feel the effects if we careen off the edge. The United States will slip back into a recession, according to many economists. That’s particularly dark, given that the economists say the U.S. recession ended three years ago, but most Americans are still struggling to survive. And if America’s economy turns upside down, the ripple effect will trigger a global economic tailspin.

But you probably won’t be surprised to learn that the doomsday measures in the fiscal cliff will fall hardest upon the middle class and the poor. According to a Wall Street Journal analysis, wealthy people will pay the most in additional taxes, but their tax increase will average 20.3%. Single persons, students, and retirees will see their taxes go up by 55.2%, 37.9% and 42.4%, respectively.

It’s hard to fathom that we are even debating severe cuts in government spending at this point, with 12.3 million Americans unemployed and the economy far from recovered.

It’s just common sense: if your family runs into financial trouble, and your expenses are greater than your income, what do you do? Sure, you cut out the unnecessary expenditures. But then you borrow money to pay the important bills: food, the mortgage, health care. Stop paying those bills and you are dead, figuratively if not literally. Borrowing money can be dangerous, but it’s what keeps you afloat so you can survive – and repay the debt later.

Borrowing is standard practice in the business world: think of all those Silicon Valley start-ups like Apple, Google and Twitter that need capital infusions to get off the ground and keep growing. What kept the U.S. banks and credit card companies alive after the house of cards they constructed collapsed in 2008? Money they borrowed from the federal government – us. The trillion dollar taxpayer bailout was essential, according to their friends in high places, because bankruptcy would have been more devastating to the economy.

So what’s wrong with the government offering the rest of us more assistance?

Government deficit spending is most needed when times are tough and people need extra support – like unemployment benefits. Or jobs funded by the government because the private sector is too weak to hire. Think of it as your Uncle Sam taking care of a family member in need. If he’s got the cash – or can borrow it – that’s the right thing to do. He can deal with the debt later – when the family member recovers and can pay him back.

Barring Uncle Sam from providing aid and comfort to Americans in distress sits well with those who don’t need the government (at least for benefits) because they have enough money to ride out the storm on their own – like those captains of Wall Street who are earning record executive salaries once again. But check out what’s happened in Europe, where “deficit hawks” have imposed their will on nations trying to work their way out of the economic calamity triggered by Wall Street’s implosion in 2008. Drastic cuts in government spending have devastated the economies of Greece, Spain, Italy and France, creating despair and rage among their citizens.

The drama of the fiscal cliff feeds our fascination with disaster. There’s a strong undercurrent in the American spirit that yearns for change – even radical change – as much as fears it. The closer we get to the edge, the more exciting it is. Angelenos were mesmerized by scenes of sections of their city sliding into the Pacific in the apocalyptic movie “2012.” We’re not there yet, but decisions we make or evade now will have grave consequences. America is not too big to fail: just ask the Mayans, who disappeared a millennium ago. Thanks to the election, U.S. politics are as polarized as ever, and no one in Washington seems able to exert the political gravity needed to order the planets into alignment.

Harvey Column - 12/04/2012