Follow the yellow gold road…..

What a couple of days it’s been in the financial world. Allen Stanford, scammer extraordinaire, whereabouts still unknown, is now known to have contributed large sums of money to congressional recipients, to vote against a financial services antifraud bill that would have linked the databases of state and federal banking, securities and insurance regulators. The bill died in the Senate.

Biggest recipients of his cash?

Sen. Bill Nelson, D-Fla. ($45,900); Sen. John McCain, R-Ariz. ($28,150); Sen. Chris Dodd, D-Conn. ($27,500); and Sen. John Cornyn, R-Texas ($19,700). Rep. Pete Sessions, R-Texas, also received $41,375.

The full list is here and here.

Barack Obama’s presidential campaign fund received only $4600 and it was immediately donated, yesterday, to a Chicago charity, according to the Chicago Tribune.

But the other big story is the deal Swiss UBS Bank made with the feds. Accused of assisting U.S. citizens avoid income taxes, UBS Bank has agreed to lift the veil of secrecy and identify “certain” clients. This could be 17,000 of their 20,000 clients whose combined deposits are worth $20 billion dollars.

In July 2008,Sen. Carl Levin (D-Mi) was calling for them to clean up their act. According to The Consumerist Levin told ABC News “UBS’s banking license should be revoked until the bank “cleans up its act.”” He listed the following as what the bank does to conceal its clients names and assets.

* Code Names for Clients
* Pay Phones, not Business Phones
* Foreign Area Codes
* Undeclared Accounts
* Encrypted Computers
* Transfer Companies to Cover Tracks
* Foreign Shell Companies
* Fake Charitable Trusts
* Straw Man Settlors
* Captive Trustees
* Anonymous Wire Transfers
* Disguised Business Trips
* Counter-Surveillance Training
* Foreign Credit Cards
* Hold Mail
* Shred Files

Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

For the record, Levin took no money from Stanford or his PAC. I’ll bet he even pays his taxes – all of them. Can he be Treasury Secretary?

Reuters reports the deal with UBS goes like this:

Swiss bank UBS AG has agreed to a deal with the U.S. Justice Department that would let the bank avoid tax-violation charges in exchange for identifying some of its U.S. account holders and paying $780 million in fines.

Here are the key terms of the deal:

– UBS, under orders by Swiss market regulators, is to give the United States identities and account information of “certain” U.S. customers. Details are to be filed under seal with U.S. federal court and turned over as soon as the court accepts the agreement.

– UBS agrees to pay $780 million in fines, interest and penalties. This includes $200 million to be paid to the U.S. Securities and Exchange Commission. The remainder is to be paid to the Justice Department over 18 months, with options to pay early or extend the terms up to four years.

– UBS acknowledges that it helped U.S. taxpayers open accounts that concealed their identities from the U.S. Internal Revenue Service. About 17,000 of 20,000 U.S. cross-border clients concealed their identities and the existence of their accounts, with $20 billion in assets, from the IRS, the Justice Department said.

Some of these clients are unindicted co-conspirators.

The business generated about $200 million a year in revenue for UBS from 2002 to 2007, it said.

– UBS agrees to quit providing cross-border banking services to U.S. clients with undeclared accounts.

– After 18 months, the U.S. government will recommend dismissal of charges against UBS providing it honors the terms of the agreement.

The Stanford saga, in the meantime, continues to rock the world of the wealthy.

Venezuela seized a local bank affiliated with the Stanford Group, after there was a rush to withdraw funds through online banking. According to Reuters,

Depositors withdrew cash using Internet banking services. The bank takes deposits and makes loans only in the OPEC nation’s local currency.

“Most depositors of Stanford Bank Venezuela are from the (highest) income classes. They move their funds on the Internet, and this allowed for a massive withdrawal that pushed the bank into a precarious state,” Finance Minister Ali Rodriguez told reporters.

“The authorities were forced to take the decision to intervene and there will be an immediate sale,” he added.

And in Antigua, the Associated Press reports that customers were turned away from the Stanford bank there, because its assets were frozen. Depositors were arriving by private jet to withdraw their cash and were panicking when they discovered they couldn’t. One man, who owned a software firm, complained that his life savings was in that bank.

Let me guess. There is no F.D.I.C. insurance in Antigua.

It would seem this is just the beginning (of the end?).

Wonder how many of our congresspeople have offshore accounts? We already know they have an aversion to paying taxes.

Wonder if Geithner has one?

But most of all, I wonder if anyone who is caught will go to jail, go directly to jail, not pass go, and not collect $200.

And second I would like to know, will their assets be seized?

If the answer to the second question is yes, I would recommend to the Treasury Department and President Obama, that the assets seized from anyone in the financial industry caught up in these, or any future messes uncovered by the IRS and the FBI, be dumped into an account called the TARP Rebate Fund, which recoups the cash for the taxpayers, from the cheats and thieves who bought us this mess in the first place. (Oh, did I say bought, I meant brought – Freudian slip). And any congresspeople who return campaign contributions from any of these cheats, should also be dumped into this fund.

As a matter of fact, start with Geithner‘s payments, Daschle‘s Kellefer‘s and Solis‘. It would be a good start.

And any congress person who is found to have an offshore account in the UBS debacle, should be bounced from their office, forbidden from holding any public office anywhere in the U.S. or its territories, and prosecuted to the fullest extent of the law.

These people all need to do serious jail time. Nothing like seized assets and jail time to straighten up a class of people.

Is there a law against “betraying the public trust?” Because if there isn’t there should be.

Sentence: 20 to life in a Supermax prison. Enjoy. You built it.

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Most scams are run out of Texas and Florida….

What little people have known for years, apparently wealthy people are learning the hard way. If it seems to good to be true, and it is coming from Florida or Texas…..it is.

First was Madoff, who was running his pyramid scheme for 20 years until it recently fell apart, leaving in its wake West Palm Beach millionaires and a long list of people with cash to burn, selling their estate jewelery to make ends meet and now, Texas enters the financial scam scene.

Texas billionaire Allen Stanford, has been charged by the SEC in a civil complaint with “fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, regional director of the SEC’s office in Fort Worth, Texas, and reported by Reuters.

Stanford, who holds dual U.S.-Antigua citizenship, has dropped off the face of the earth and failed to respond to a subpoena. The SEC can’t understand it.

SIB, his company, oversees $50 billion in assets (this seems to be a magic number, Madoff was charged in a $50 billion fraud scheme).

Maybe the SEC doesn’t consider it worth their time to investigate, unless it amounts to enough money to warrant Barbuda and Antigua’s prime minister to consider the consequences “catastrophic.”

Stanford’s banks are based there and, according to Reuters, “he owns the country’s largest newspaper, heads a local commercial bank, is the biggest private employer, its top investor and is the first American to receive a knighthood from its government.”

He is accused of selling $8 billion in CD’s “by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks.”

Reuters lists additional SEC allegations as the following:

— Stanford’s Antigua-based bank reported identical returns of 15.71 percent in 1995 and 1996, which the SEC called “improbable” and suspicious.

— Ninety percent of the offshore bank’s claimed investment portfolio was in a “black box” shielded from any independent oversight, and only Stanford and aide James Davis, also charged, knew details of the bulk of the portfolio.

— Stanford failed to cooperate with the SEC probe and continued to mislead investors by falsely saying the SEC had frozen accounts or the company had ordered a moratorium on CD redemptions.

— A major, unidentified clearing firm stopped processing wires to SIB for purchase of SIB-issued CDs after the clearing firm was unable to obtain information about the company’s financial condition.

— Stanford used false information to promote a mutual fund program separate from the CDs. The program grew to more than $1.2 billion from less than $10 million in 2004.

In Antigua, hundreds were lining up to get their money out, Panama regulators seized one of the Standford’s local affiliates, the local arm of its financial group pulled itself off of Columbia’s stock exchange, and Adolph Ogi, the former president of Switzerland, quit his post on the advisory board of Stanford Financial Group.

Despite all of this, Reuters states that “There were no signs of imminent criminal charges against Stanford, whose personal fortune was estimated by Forbes Magazine last year at $2.2 billion. A Justice Department spokesman would not confirm or deny the existence of a criminal investigation.”

I would think criminal charges would be a no-brainer, considering the amount of money involved, the 30,000 clients and the 131 countries in which he operated.

But no.

Why, you ask?

Because Reuters also reported this:

Stanford was also expanding his political reach, opening a Washington lobbying office about two years ago after buying the Washington Research Group, a policy study unit of Charles Schwab & Co, in 2005.

Stanford spent $2.8 million on lobbying in 2008, according to records accessed through the Center for Responsive Politics, which tracks campaign contributions. His political action committee and employees donated about $2.4 million to parties and candidates for federal office since 1989.

Campaign finance reform won’t fix this, the only thing that will is term limits for Congress and supermax prisons for the influence purchasers.

From Chicago – signs of the economic hard times

On Friday and Monday, my train was empty, as were others I checked with – all coming from different directions into Chicago’s Loop (financial center). Layoffs? Four-day work weeks?

Normally one cannot find a parking space ANYWHERE near Union Station (home of Metra and Amtrak) at any time of the day, even when gas prices were $4 a gallon and our (Metra’s) ridership was up. This week – park anywhere, not a problem.

Traffic has been a nightmare for a few years now. I can’t tell you how many times an ambulance can’t get down the street because of all the cars (and the stupid people driving them who won’t get out of the way). Last week? Ambulances were flying down the street with only a siren blaring – no horns honking at all. Clear passage.

That’s good for them, but to me, is not a sign of good economic times. Sorry, they are not all riding their bikes. Actually – haven’t seen many of them lately either.

The Edens expressway, which normally starts rush hour at about 6:30am (rush hour being a euphemism for an expressway that is a parking lot), is also traffic free. Yesterday at 7:30 am, it was 19 minutes from Dempster to the Circle interchange. Normally, at that hour, it would be at least 40 minutes. 19 minutes is how long it takes at 3 in the morning.

For those of you not familiar with Chicago, this expressway leads into the Loop, the heart of Chicago’s downtown where banks, the Board of Trade, the Chicago Mercantile Exchange, the Board of Options Exchange, and the Futures Market call home. It is also the seat of city government has congressional offices, the mayor is here, the Cook County Board, courts, lawyers, pick ’em, they’re here.

No traffic.

Not good.

Obama – there aren’t two sets of rules

President Obama deserves credit for taking responsibility for the the last two cabinet nominees who turned out to be tax cheats, Kellefer and Daschle. But what about Geithner, who will now head the agency he cheated?

In his admission the President said,

I’ve got to own up to my mistake, which is that ultimately it’s important for this administration to send a message that there aren’t two sets of rules. You know, one for prominent people and one for ordinary folks who have to pay their taxes.

Though Daschle owed a significant amount of money for a car and driver, and Kellefer didn’t pay her D.C. unemployment taxes, Geithner’s offense was worse. National Review online explained it best.

But the IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.

The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a “gross-up,” to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.

At the end of the tax allowance form were the words, “I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund.” Geithner signed the form. He accepted the allowance payment. He didn’t pay the tax. For several years in a row.

Perhaps President Obama doesn’t realize this part. Perhaps all of the legislators who confirmed him don’t realize this. But just who on Obama’s staff recommended and vetted this guy, and who is he kidding when he told Congress,

At his confirmation hearing, Geithner called the transgressions “careless mistakes” and unavoidable ones.

He told the Senate Finance Committee the failure to pay was “unintentional.” But he also said, “I should have been more careful.”

He blamed his accountant, he blamed Turbo Tax, then finally came up with the above pathetic excuse. More frightening is the fact that he was confirmed because of the skills he has that will get us out of this economic mess.

He was involved in the original TARP distribution, the decision to bail out everyone but Lehman Brothers, and was the head of the N.Y. Federal Reserve while the economy was in a meltdown.

I trust him?

Prior to this job he served as Under Secretary of the Treasury for International Affairs from 1998 to 2001 under Secretaries Robert Rubin and Lawrence Summers, where he was a principal adviser and member of the executive branch’s senior team.

Funny, these are the guys that brought us part of this mess by weakening the Glass-Steagall Act, removing the line between commercial and investment banks which was put in place after the Depression to ensure that it would never happen again!

Guess where many of our former government employees worked before and after their stints in our government?

Goldman Sachs.

The list, for this one financial institution, includes Rubin, Paulson, Steel, Flowers (involved in a bid to take student loan lender Sallie Mae private), Whitehead (deputy secretary of state under Reagan), and Josh Bolten, Bush’s chief of staff, and now Geithner.

How about no one involved in the financial industry ever gets to hold a position such as this. Personally I would nominate the chief auditor for the IRS for the job.

But that’s me. I don’t put much stock in “experts”. Though I predicted this mess a couple of years ago, the “experts”, until last year, were still debating whether we were in a recession.

All I have to do is look at the lack of business in downtown restaurants, the 24-hour diners that are no longer open 24 hours and the Chicago rush hour that is devoid of cars.

Think Geithner should resign to remove the appearance of a double standard?

Take the poll

The IRS has a mission

The mission of the Office of Terrorism and Financial Intelligence is to marshal the Treasury Department’s policy, enforcement, regulatory, and intelligence functions in order to sever the lines of financial support to international terrorists, proliferators of Weapons of Mass Destruction, narcotics traffickers, and other threats to our national security.  There are financial networks that underlie all of these threats, and those networks are sources of valuable intelligence and present vulnerabilities that can be exploited.

Somehow I think they should add current and former bank officers (commercial and investment), mortgage brokers, Wall Street wizards, investment firms, politicians who are willing to confirm a tax-dodger as the Secretary of the Treasury, and all other politicians because frankly, they are more of a threat to our national security than any of the other networks the IRS is protecting us from.

Please. Save us from the WCTN (White Collar Terrorist Network)…..NOW

PS. Don’t worry about Morgan Stanley, they currently get the revenue from the City of Chicago Parking Garages and now…..masquerading as Chicago Parking Meters LLC, they have the parking meter franchise and they managed to dig up $1.15 billion for the 75 year lease.  Morgan Stanley received $10 billion in TARP money which they told ABC went into a capital account. Is that how they paid Daley for the parking meters?

Economists living in a dream world

WBBM radio reported today that economists are increasingly convinced that the United States will fall into recession soon. One economist they quoted said he believed that we were already in a recession, that it probably started in the fourth quarter of last year, and that it will probably be over by mid-year when people start spending their rebate checks.

This guy can’t really believe these rebate checks will stop a recession can he?

The ContraCosta Times reported in December that an Associated Press  analysis of financial data from 17 of the largest credit card issuers and found

The value of credit card accounts at least 30 days late jumped 26 percent from a year earlier to $17.3 billion in October.

Does this sound like something a $600 check is going to fix?

The foreclosure rate continues to grow, the dollar is worth .47 compare to what it was worth in 1984 (DOL statistics), the cost of milk alone has jumped 13% since last year.

And then there are the banks. They are borrowing billions from the Fed, which, not being a government agency but merely a conglomeration of private banks owned by the Rothschild’s, Rockefeller and JP Morgan, probably does NOT have an unlimited supply of money and will likely cut that little auction jackpot out at some point.

What happens then?

Step in the government who wants to bail people out, some of  whom made bad decisions, bought houses they couldn’t afford, and lived large on the equity which has now all but disappeared due to the drop in housing prices.

The idea of a moratorium on foreclosures is lovely, but the banks borrowed the money to loan people to begin with. Who is going to make the payments they owe, do they just borrow more from the fed?

People victimized by predatory lenders should be helped, but the predatory lenders should be on the hook. Prosecute them for their practices and fine them for each mortgage they sold. Pool that money and help these people out, but only these people.

The Wall Street jerks who brought us this mess, and received billions in bonuses for doing it,  should also be held responsible. But don’t expect that to happen if Clinton gets in because the top people, CEO’s, CFO’s of the major investment firms, Goldman Sachs, JP Morgan, Lehman Brothers, etc., all contributed tens of thousands to her campaign  for president.  (Check out huffington.fundrace.com) Somehow I don’t think she’s looking our for us. If I’m not mistaken I heard her say she would bail out homes up to a value of $650,000.

Sounds like idiots who bought property with Wall Street bonuses to me.

No, it’s time to stop listening to the economists and just look around us with a critical eye. There is no way we can avoid a recession and I would be amazed if we didn’t avoid a depression.

My guess is as soon as the election is over and the new president in is in place, the fed policy will abruptly change, the discount window will be slammed shut, the auction will be over and the banks will be on their own, probably to fail.

At least that way Bush won’t have to add a depression to the long list of dismal failures his two terms will already be remembered for.

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