[D66] The Wall Street settlements and the new aristocracy

[Oto]

http://www.wsws.org/en/articles/2014/04/02/pers-a02.html

The Wall Street settlements and the new aristocracy
2 April 2014

Last week, Bank of America became the latest major financial institution
to announce a multi-billion-dollar settlement with US regulators of
charges related to the 2008 financial meltdown. In a settlement worked
out with the Federal Housing Finance Agency, the bank agreed to pay
$5.83 billion in fines and buy back $3.2 billion in mortgage-backed
securities from the government-sponsored mortgage finance companies
Fannie Mae and Freddie Mac, to whom it sold the toxic assets in the
run-up to the Wall Street crash. The settlement involves the largest
fine levied by a single federal regulator in US history.

The agreement adds to the more than $100 billion in fines that have been
levied by US regulators on major American and global banks since the
financial crisis, more than half of which has been imposed over the past
year.

The record size of the settlements points to the pervasiveness and scale
of the criminality of the banks and their top officials. And yet, not a
single leading bank executive has been criminally charged.

This is not for lack of evidence. The 2011 reports by the Senate
Permanent Subcommittee on Investigations and the Financial Crisis
Inquiry Commission document in considerable detail the fact that the
2008 crash was triggered by criminal wrongdoing by bank executives. Carl
Levin, the chairman of the Senate Permanent Subcommittee on
Investigations said that the committee had found “a financial snake pit
rife with greed, conflicts of interest and wrongdoing.”

The most egregious crimes by Wall Street and international banks that
have led to financial settlements with US regulators include the following:

     Goldman Sachs, Deutsche Bank, JPMorgan Chase and other banks sold
mortgage-backed securities they knew to be virtually worthless, helping
to trigger the 2008 crash. Even as the banks were selling these
securities to investors, they were making huge profits by betting
against the same securities, without telling those to whom they were
palming off the securities.

     Major US banks, including Citigroup, Wells Fargo and Bank of
America, illegally processed and even forged home mortgage documents in
order to more quickly foreclose on the homes of families that had fallen
behind on their mortgage payments. The number of people illegally
foreclosed on will never be known because the Obama administration put a
stop to the tally, but the figure is likely in the millions.

     Nearly all of the major US and international banks manipulated the
London Interbank Offered Rate (Libor), the benchmark global interest
rate used to set rates on some $350 trillion in financial assets,
including mortgages, credit cards, student loans and bonds. By falsely
reporting the interest they paid for loans from other banks, these
institutions concealed their losses and increased their profits—at the
expense of individual retirees, home and car owners, pension funds and
municipalities all over the world.

     Major banks, including JPMorgan and UBS, were key partners in the
$65 billion Ponzi scheme operated by Bernard Madoff. Earlier this year,
JPMorgan, Madoff’s main banker, agreed to pay $2 billion to settle
charges that it knowingly profited from Madoff’s scam. The deal shielded
JPMorgan and its CEO, Jamie Dimon, from criminal charges through a
“deferred prosecution” provision.

The settlements themselves were worked out between the banks and their
regulators so as to have the maximum public relations effect, creating
the appearance that the banks were being held accountable while
minimizing the financial impact on the companies. The banks write off
the fines—many of which are tax deductible—as part of the “cost of doing
business.”

Not only have no top bankers been prosecuted, no major US banks have
been broken up or nationalized. The big banks have grown even bigger and
more powerful and have recovered their previous levels of profitability.
Even taking into account the settlements with regulators, the six
largest US banks made $76 billion in profits last year, just under the
record set in 2006 and eclipsing every other year since 2008.

Wall Street pay, too, has hit record levels. The average bonus payout
for Wall Street employees grew by 15 percent in 2013, reaching its
highest level since the crash. Last week, both Bank of America and
Morgan Stanley announced they were nearly doubling the pay of their
respective chief executives for 2013.

Prior to the great democratic revolutions of the 18th and 19th
centuries, Europe was dominated by an entrenched economic and political
aristocracy that enjoyed special privileges and immunities—enshrined in
law—that set it apart from the rest of society.

What has emerged today in the United States and the other capitalist
countries is a new, financial aristocracy, consisting of
multimillionaires and billionaires who make their wealth through
financial speculation and manipulation, diverting untold resources from
the development of the productive forces, infrastructure and the
well-being of the population into their own bank accounts and stock
portfolios.

The refusal of the government of the United States or that of any other
major industrialized country to prosecute the bankers whose illegal
operations triggered the crash of 2008 and subsequent global recession,
or take any action against the banks that they head, demonstrates that
society is once again dominated by a parasitic elite that, like the
aristocrats of old, is above the law.

The government serves not to oversee and regulate the financial elite,
let alone hold it accountable. It is their servant and protector. The
regulatory agencies, such as the Federal Reserve and the Securities and
Exchange Commission, are themselves filled with former or future
employees of the banks they are supposed to regulate.

The Hill reported last week that over two dozen officials who worked on
the Obama administration’s Dodd-Frank financial overhaul have moved on
to “lucrative jobs in the private sector,” with many working for law
firms and consultancies that advise banks how to avoid the very
regulations they drafted.

Democracy in America and around the world is collapsing under the weight
of immense and ever-growing levels of social inequality, bound up with
the domination of a financial mafia that uses its political power to
enrich itself at the expense of society. Congress, the White House, the
courts, the regulators, the Democrats and Republicans are all
subservient to this financial aristocracy.

Holding to account the criminals who are responsible for the crisis is a
vital part of the defense of the social rights of the working class and
the struggle to break the grip of the financial kleptocracy on social
and political life.

This cannot be carried out through appeals to Congress, the courts or
the Democratic Party, which is no less subservient to the banks than the
Republicans. The stranglehold of the financial aristocracy can be broken
only through a mass political offensive by the working class. Such a
movement must be based on the perspective of reorganizing society on a
socialist basis, in which the banks and corporations are removed from
private ownership and control and transformed into publicly owned
utilities under the democratic control of the people.

Andre Damon