Wednesday, May 11, 2016

The Big Bank Bailout

      Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008. But this is a long way from the truth because the bailout is still ongoing. The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail. But it isn’t just the government bailout money that tells the story of the bailout. This is a story about lies, cheating, and a multi-faceted corruption which was often criminal.

• Rating agencies- Rating agencies like Standard and Poor’s are paid by the banks (which is a conflict of interest) and have a huge influence on the ratings of securities. During the housing bubble ratings agencies continued to give triple AAA ratings to toxic mortgages. The justice department wants $5 billion in restitution from Standard and Poor’s for its part in falsifying ratings.

• Money laundering – It has been proven that the American Division of the HSBC bank did money laundering for Mexican drug cartels to the tune of $881 billion according to the Justice Department. The penalty to this bank for blatant corruption was $1.9 billion and the New York Times laments that HSBC was too big to indict. Nobody goes to jail at a time when an unemployed black person gets 10 years for robbing a minute mart.

• Betting Against – Both JP Morgan Chase and Goldman Sachs worked with hedge funds to bet against the toxic mortgages after the crash had started. They made money by selling short on the financial catastrophe they had created. JP Morgan was fined $296.9 million and Goldman Sachs was fined $550 million for actions.

• Insider Trading –The jailed billionaire Raj Rajartmn made nearly $One million a minute by getting inside information from Goldman Schs. The New York attorney has fingered 70 hedge funds but the prosecution is very slow.