Larry Summers and the Secret “End-Game” Memo

GregPalast.com

August 26, 2013


When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn’t believe it.

The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3% unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears. The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.

The memo is authentic.

To get that confirmation, I would have to fly to Geneva and wangle a meeting with the Secretary General of the World Trade Organization, Pascal Lamy. I did. Lamy, the Generalissimo of Globalization, told me,

“The WTO was not created as some dark cabal of multinationals secretly cooking plots against the people…. We don’t have cigar-smoking, rich, crazy bankers negotiating.”

Then I showed him the memo.

It begins with Summers’ flunky, Timothy Geithner, reminding his boss to call the then most powerful CEOs on the planet and get them to order their lobbyist armies to march:

“As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the CEOs….”

To avoid Summers having to call his office to get the phone numbers (which, under US law, would have to appear on public logs), Geithner listed their private lines. And here they are:

Goldman Sachs: John Corzine (212)902-8281

Merrill Lynch: David Kamanski (212)449-6868

Bank of America, David Coulter (415)622-2255

Citibank: John Reed (212)559-2732

Chase Manhattan: Walter Shipley (212)270-1380

Lamy was right: They don’t smoke cigars. Go ahead and dial them. I did, and sure enough, got a cheery personal hello from Reed–cheery until I revealed I wasn’t Larry Summers. (Note: The other numbers were swiftly disconnected. And Corzine can’t be reached while he faces criminal charges.)

It’s not the little cabal of confabs held by Summers and the banksters that’s so troubling. The horror is in the purpose of the “end game” itself.

Let me explain:

The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.

Second, the banks wanted the right to play a new high-risk game: “derivatives trading.” JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets.”

Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.

But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?

The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet – in one single move. It was as brilliant as it was insanely dangerous.

How could they pull off this mad caper? The bankers’ and Summers’ game was to use the Financial Services Agreement, an abstruse and benign addendum to the international trade agreements policed by the World Trade Organization.

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives.

Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

Bankers Go Bananas

Why in the world would any nation agree to let its banking system be boarded and seized by financial pirates like JP Morgan?

The answer, in the case of Ecuador, was bananas. Ecuador was truly a banana republic. The yellow fruit was that nation’s life-and-death source of hard currency. If it refused to sign the new FSA, Ecuador could feed its bananas to the monkeys and go back into bankruptcy. Ecuador signed.

And so on–with every single nation bullied into signing.

Every nation but one, I should say. Brazil’s new President, Inacio Lula da Silva, refused. In retaliation, Brazil was threatened with a virtual embargo of its products by the European Union’s Trade Commissioner, one Peter Mandelson, according to another confidential memo I got my hands on. But Lula’s refusenik stance paid off for Brazil which, alone among Western nations, survived and thrived during the 2007-9 bank crisis.

China signed–but got its pound of flesh in return. It opened its banking sector a crack in return for access and control of the US auto parts and other markets. (Swiftly, two million US jobs shifted to China.)

The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade. Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.

Of course, it was not just threats that sold the FSA, but temptation as well. After all, every evil starts with one bite of an apple offered by a snake. The apple: The gleaming piles of lucre hidden in the FSA for local elites. The snake was named Larry.

Does all this evil and pain flow from a single memo? Of course not: the evil was The Game itself, as played by the banker clique. The memo only revealed their game-plan for checkmate.

And the memo reveals a lot about Summers and Obama.

While billions of sorry souls are still hurting from worldwide banker-made disaster, Rubin and Summers didn’t do too badly. Rubin’s deregulation of banks had permitted the creation of a financial monstrosity called “Citigroup.” Within weeks of leaving office, Rubin was named director, then Chairman of Citigroup—which went bankrupt while managing to pay Rubin a total of $126 million.

Then Rubin took on another post: as key campaign benefactor to a young State Senator, Barack Obama. Only days after his election as President, Obama, at Rubin’s insistence, gave Summers the odd post of US “Economics Tsar” and made Geithner his Tsarina (that is, Secretary of Treasury). In 2010, Summers gave up his royalist robes to return to “consulting” for Citibank and other creatures of bank deregulation whose payments have raised Summers’ net worth by $31 million since the “end-game” memo.

That Obama would, at Robert Rubin’s demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.

The “Bankization” of America

Friday, August 16, 2013 by Campaign for America's Future Blog
by Richard Eskow



The share of our national income which goes to corporate profit is the highest it’s been since they started tracking it in 1929, while the share going to people – as salary and wages – is the lowest. And the percentage of that corporate profit which goes to Wall Street is also the highest on record.

We’re becoming a financialized economy. Never before has the manipulation of money counted for so much and the real-world economy of people and consumer goods counted for so little.

And none of it is an accident.

When Wall Street catches a cold …

The Wall Street Journal reported this Thursday that “Stock and bond prices tumbled after stronger-than-expected economic data …”

Why would good news about the economy cause the stock market to fall? The sentences continues: “… raised investor anxiety about a pullback next month in central-bank support for financial markets …”

Investors had been relying on the Federal Reserve to keep pumping up the stock market’s record run, but some mildly favorable economic reports raised fears were raised that the Fed’s market-friendly interventions might come to an end.

“We’re getting another knee-jerk reaction to fears of tapering,” a market analyst told the Journal, referring to the Fed’s monthly purchase of $85 billion in bonds. As Reuters reported last month, “Many on Wall Street believe the Federal Reserve’s monetary policy is behind record corporate earnings and the stock market’s surge to all-time highs this year.”

When Wall Street catches a cold – when it even might catch a cold — the economy catches pneumonia.

Reality Bites

Meanwhile, the “real” economy – the one where people live, and work, and buy things – has suffered even as Wall Street and the stock market have boomed. That trend continued this week, too, Wal-Mart announced disappointing sales and lowered its projections. Its Chief Financial Officer observed that “The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending.”

Cisco also lowered its sales expectations. As the Journal article notes, these announcements added to the fear that the Fed’s interventions might wind down.

This stock market story illustrates the gulf between a stock-market economy increasingly driven by the banking industry – an economy which has been booming, today’s news notwithstanding – and a human economy wracked by consumer fears, falling wages, joblessness, and low-level jobs for a growing number of people who are working.

The gulf between these two economies drove this morning’s stock market story. It’s also driving the long-term depression-like misery which holds millions of Americans in its grip.

This is not the playing out of some divinely-decreed order. The financialization of the US economy is the result of very deliberate governmental choices. Unless different choices are made going forward, we will continue to become a “Bankistan” whose wealth and economic fate is increasingly hijacked by Wall Street.

Financialized

The Federal Reserve’s data on corporate profits were helpfully compiled by a contributor to the investment site The Motley Fool, who notes that financial profits were 11 percent of total corporate profits in the US back in 1947, the first year these numbers were compiled.

These profits soared in the first decade of the 21st Century. After taking a hit in the crisis of 2008 – a crisis which the banking industry caused – they rose again and are now at record highs. Their share of total corporate profits has risen from 11 percent to 42 percent, as of the latest report, and the Fed expects them to keep rising.

Here’s how that looks:

The money nowadays isn’t in manufacturing, or retail, or any of the other traditionally jobs-producing industries. The money now is in money.

How did this happen?

A series of policy decisions enabled this explosive growth, including the deregulation of Wall Street; the repeal of Glass-Steagall, which separated bank customers’ money from money which the bank could invest for its own profit; runaway banker salaries and bonuses, which prompted the “best and the brightest” to flock to Wall Street and apply their ingenuity to flouting the rules; and government’s increasing unwillingness to indict bankers for criminal behavior.

And then, when banker criminality and incompetence created the crisis of 2008, they were rescued by the government without being held financially or legally accountable for their wrongdoing.

The Federal Reserve continues to pursue stimulus policies that moderately help the economy as a whole, but which emphasize the economic health of banks and publicly-traded corporations over that of companies that hire workers – and therefore increase the consumption of consumer goods.

Profit by the slice …

Banks have a bigger share of the corporate-profit pie – and that pie’s bigger than ever. As Floyd Norris notes in the New York Times, the government’s revised estimate of wage and salary income is 42.6 percent of GDP, which matches the 2010 figure as the lowest percentage since this data was first captured in 1929.

Using the latest revisions to the national income and product account (NIPA) data produced by the Bureau of Economic Analysis, Norris also notes that corporate profits are now 9.6 percent of GDP. That’s the highest since these figures were first captured.

As Norris also notes, corporate taxes rose slightly in 2012 as a percentage of GDP but are still well below their historical averages. That’s not an accident either.

Meanwhile, as this chart shows, unemployment remains horrendous:

 

 (via Bill McBride, Calculated Risk)

Wages actually fell for most people after the 2008 crisis, as high-income individuals (the top 1 percent) captured all of the economic gains created by the government-sponsored recovery – and even enlarged their share, capturing 121 percent of the recovery as the rest of the country fell behind.

Indebted

You might think that financial institutions feel indebted to the public for rescuing them. But the opposite is true: We’re indebted to them. According to the latest report from the New York Federal Reserve, auto loan balances increased by $20 billion over the previous quarter while credit card balances and student loan debt increased by $8 billion each.

The falling rates of mortgage debt, driven by range of factors which included falling housing values and foreclosures, resulted in an overall decline in total indebtedness. But these figures show that our household debt in many key areas continues to rise.

As wages and salaries decline, people are struggling to keep up with the way of life they once know. So they fall deeper in debt – a debt which allows them, and the banks, to delay the day of reckoning once again.

Fixing a Hole

These figures paint the picture of an economy that has become seriously unbalanced in favor of the banks – “financialized,” as observers increasingly describe it. How can the economy be rebalanced?

Many solutions are well-known to bank reformers and well-informed voters: Reinstate Glass-Steagall, or something very much like it. Insist on strong regulatory oversight of the banking sector, and give regulators the authority to do their jobs. End “too big to fail” banks, instead of encouraging their consolidation (as the government has done in recent years). Prosecute criminal bankers.

Other solutions are equally important. The interbank database and shell company called MERS must be ended, so that financial institutions can’t collude against consumers and the states. The Federal Reserve must demand that banks perform their central economic function – responsible lending to consumers and job-creating businesses – rather than reward them for speculation and other forms of non-productive profiteering.

(That’s why the choice of Federal Reserve head is so important.)

Genuine shareholder reform is also needed, so bankers don’t overpay themselves at shareholder expense or use the bank’s coffers as a “get out of jail” card for massive settlements caused by their own misdeeds.

Lastly, no comprehensive solution can be found until banks and other corporations are once again taxed at reasonable levels and the revenues are used to create well-paying jobs for the American middle class.

A healthy economy needs banks that lend, and consumers with the money to buy. Until that happens we’ll be living in a highly-financialized “Bankistan” that excludes most of its citizens from sharing in the American dream.

The Fiscal Cliff Is A Diversion

The Derivatives Tsunami and the Dollar Bubble

December 17, 2012 | Paul Craig Roberts

The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.

The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.
The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.
Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget. http://www.guardian.co.uk/world/2012/nov/27/fiscal-cliff-explained-spending-cuts-tax-hikes

More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washington’s wars.
The Derivatives Tsunami and the bond and dollar bubbles are of a different magnitude.
Last June 5 in “Collapse At Hand” http://www.paulcraigroberts.org/2012/06/05/collapse-at-hand/ I pointed out that according to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.
Prior to financial deregulation, essentially the repeal of the Glass-Steagall Act and the non-regulation of derivatives–a joint achievement of the Clinton administration and the Republican Party–Chase, Bank of America, and Citibank were commercial banks that took depositors’ deposits and made loans to businesses and consumers and purchased Treasury bonds with any extra reserves.

With the repeal of Glass-Steagall these honest commercial banks became gambling casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.

These bets soon exceeded many times not only US GDP but world GDP. Indeed, the gambling bets of JP Morgan Chase Bank alone are equal to world Gross Domestic Product.

According to the first quarter 2012 report from the Comptroller of the Currency, total derivative exposure of US banks has fallen insignificantly from the previous quarter to $227 trillion. The exposure of the 4 US banks accounts for almost of all of the exposure and is many multiples of their assets or of their risk capital.

The Derivatives Tsunami is the result of the handful of fools and corrupt public officials who deregulated the US financial system. Today merely four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product. When I was a US Treasury official, such a possibility would have been considered beyond science fiction.

Hopefully, much of the derivative exposure somehow nets out so that the net exposure, while still larger than many countries’ GDPs, is not in the hundreds of trillions of dollars. Still, the situation is so worrying to the Federal Reserve that after announcing a third round of quantitative easing, that is, printing money to buy bonds–both US Treasuries and the banks’ bad assets–the Fed has just announced that it is doubling its QE 3 purchases.

In other words, the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.

The purpose of QE is to keep the prices of debt, which supports the banks’ bets, high. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales. But the Fed’s policy is hurting the economy by depriving savers, especially the retired, of interest income, forcing them to draw down their savings. Real interest rates paid on CDs, money market funds, and bonds are lower than the rate of inflation.

Moreover, the money that the Fed is creating in order to bail out the four banks is making holders of dollars, both at home and abroad, nervous. If investors desert the dollar and its exchange value falls, the price of the financial instruments that the Fed’s purchases are supporting will also fall, and interest rates will rise. The only way the Fed could support the dollar would be to raise interest rates. In that event, bond holders would be wiped out, and the interest charges on the government’s debt would explode.

With such a catastrophe following the previous stock and real estate collapses, the remains of people’s wealth would be wiped out. Investors have been deserting equities for “safe” US Treasuries. This is why the Fed can keep bond prices so high that the real interest rate is negative.

The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the US dollar and bond market of the Federal Reserve’s commitment to save four US banks.

Once again, the media and its master, the US government, hide the real issues behind a fake one. The fiscal cliff has become the way for the Republicans to save the country from bankruptcy by destroying the social safety net put in place during the 1930s, supplemented by Lyndon Johnson’s “Great Society” in the mid-1960s.

Now that there are no jobs, now that real family incomes have been stagnant or declining for decades, and now that wealth and income have been concentrated in few hands is the time, Republicans say, to destroy the social safety net so that we don’t fall over the fiscal cliff.

In human history, such a policy usually produces revolt and revolution, which is what the US so desperately needs.

Perhaps our stupid and corrupt policymakers are doing us a favor after all.

The Democrats Who Unleashed Wall Street and Got Away With It

Thursday, February 2, 2012 by TruthDig.com
by Robert Scheer

That Lawrence Summers, a president emeritus of Harvard, is a consummate distorter of fact and logic is not a revelation. That he and Bill Clinton, the president he served as treasury secretary, can still get away with disclaiming responsibility for our financial meltdown is an insult to reason.

Yet, there they go again. Clinton is presented, in a fawning cover story in the current edition of Esquire magazine, as “Someone we can all agree on. ... Even his staunchest enemies now regard his presidency as the good old days.” In a softball interview, Clinton is once again allowed to pass himself off as a job creator without noting the subsequent loss of jobs resulting from the collapse of the housing derivatives bubble that his financial deregulatory policies promoted.

At least Summers, in a testier interview by British journalist Krishnan Guru-Murthy of Channel 4 News, was asked some tough questions about his responsibility as Clinton’s treasury secretary for the financial collapse that occurred some years later. He, like Clinton, still defends the reversal of the 1933 Glass-Steagall Act, a 1999 repeal that destroyed the wall between investment and commercial banking put into place by Franklin Roosevelt in response to the Great Depression.

“I think the evidence is that I am right about that. If you look at the big players, Lehman and Bear Stearns were both standalone investment banks,” Summers replied, referring to two investment banks allowed to fold. Summers is very good at obscuring the obvious truth—that the too-big-to-fail banks, made legal by Clinton-era deregulation, required taxpayer bailouts.

The point of Glass-Steagall was to prevent jeopardizing commercial banks holding the savings of average citizens. Summers knows full well that the passage of the repeal of Glass-Steagall was pushed initially by Citigroup, a mammoth merger of investment and commercial banking that create the largest financial institution in the world, an institution that eventually had to be bailed out with taxpayer funds to avoid economic disaster for millions of ordinary Americans. He also knows that Citigroup—where Robert Rubin, who preceded Summers as Clinton’s treasury secretary, played leading roles during a critical time—specialized in precisely the mortgage and other debt packages and insurance scams that were the source of America’s economic crisis.

Even Clinton, in a rare moment of honest appraisal of his record, conceded that his signing of the Commodity Futures Modernization Act (CFMA), legalizing those credit default swaps and collateralized debt obligations, was based on bad advice. That advice would have had to come from Summers, his point man pushing the CFMA legislation, which Clinton signed into law during his lame-duck days.

When the British interviewer reminded him of Clinton’s comment, Summers, as is his style, simply bristled: “Again, you make everything so simple, when in fact it’s complicated. Would it have been better if the whole financial reform legislation had passed in 1999, or 1998, or 1992? Yes, of course it would have been better. But … at the time Bill Clinton was president, there essentially were no credit default swaps. So the issue that became a serious problem really wasn’t an issue that was on the horizon.”

That is a lie. Credit default swaps had been sold at least since 1991, and collateralized debt obligations of all sorts quickly became the rage during the Clinton years. Summers surely remembers that Brooksley Born, the legal expert on such matters that Clinton appointed to head the Commodity Futures Trading Commission (CFTC), warned about the ballooning danger of those unregulated derivatives. Born, who served with Summers as one of four members of the President’s Working Group on Financial Markets, tried repeatedly and in vain to get her colleagues to act. When her pleas fell on deaf ears she issued a “concept release” calling attention to an unregulated derivatives market that was even then spiraling out of control.

The CFMA legislation that Summers pushed and Clinton signed was a specific rebuke to Born’s efforts. As Summers testified at the time before a Senate committee: “As you know, Mr. Chairman, the CFTC’s recent concept release has been a matter of great concern, not merely to Treasury, but to all those with an interest in the OTC [over-the-counter] derivatives market. In our view, the Release has cast the shadow of regulatory uncertainty over an otherwise thriving market—raising risks for stability and competitiveness of American derivative trading. We believe it quite important that the doubts be eliminated.”

Those doubts were eliminated by the new law exempting all of that troubling OTC derivatives trading from all existing regulations and regulatory agencies. Summers argued in his congressional testimony that there was no reason for any government regulation of what turned out to be tens of trillions of dollars in toxic assets:

“First, the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies and most of which are already subject to basic safety and soundness regulation under existing banking and securities law.

“Second, given the nature of the underlying assets involved—namely supplies of financial exchange and other financial instruments—there would seem to be little scope for market manipulation of the kind seen in traditional agricultural commodities, the supply of which is inherently limited and changeable.”

Has any economist ever gotten it so wrong?

Totally Corrupt America

Reckless Endangerment

by PAUL CRAIG ROBERTS

 

 

Last March I reviewed Matt Taibbi’s important book Griftopia, an entertaining account of the through-going financial fraud that gave us the financial crisis.  Taibbi shows that the US “superpower” can match any third world backwater in the magnitude of greed and fraud that is endemic in business and government. Taibbi’s Griftopia was published last year. This year Henry Holt publishers have provided us with Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment.

Morgenson and Rosner tell the story again, but with less drama and provocation. Possibly, it might be more acceptable to those gullible Americans who wrap themselves in the flag and refuse to believe that their country could ever knowingly do anything that is wrong.

I am not suggesting that Morgenson and Rosner pull their punches.  To the contrary, the authors deliver enough knockouts to be contenders with Taibbi as world champions in exposing the reckless  fraud that the US financial sector and its regulators now epitomize.

The financial crisis, which is very much still with us, did not result from accident or miscalculation; neither did it result because of a flaw in Alan Greenspan’s theory, as he told Congress when a feeble effort was made to hold him accountable.   It was the intentional result of people motivated by short-term profits who wanted to get theirs and get out.

As Reckless Endangerment shows, fraud characterized every stage of the process from the fraudulent borrower incomes and credit scores that mortgage issuers gave to unqualified buyers, through the securitization of the mortgages and their triple-A investment grade ratings by the rating agencies (Standard & Poor’s especially, but also Moody’s and Fitch) to the investment banks that sold what the banks knew was junk to investors around the world as investment grade securities.  Indeed, Goldman Sachs was simultaneously betting against the mortgage derivatives that it was selling to clients.

Investment banks, such as Goldman Sachs, which once considered it a matter of honor to represent the interests of customers, took advantage of the trust that had been built up in the past to commit fraud against customers in order to advance the banks’ short-term profits and the out-sized multi-million dollar managerial bonuses that these fraudulent profits produced.

Morgenson and Rosner provide a number of unique accounts of how those benefitting from fraud were able to defeat laws that were passed that would have held them to account. For example, the state of Georgia passed perfect legislation that held predatory lending to account. William J. Brennan Jr. and Georgia Governor Roy E. Barnes got the Georgia Fair Lending Act through the state legislature. It was a model for other states.  As the federal regulators had thrown in the towel, the state laws would have prevent the worst part of the financial crisis, it not prevented the crisis altogether.

The Georgia law only lasted a few months, because the rating agencies saw that their enormous profits from issuing fraudulent investment grade ratings were threatened by the law. The corrupt rating agencies mischaracterized the consumer protection act as a jihad by regulators. Standard & Poor’s declared that it would no longer allow Georgia mortgages to be placed in mortgage securities that it rated.

In other words, Georgia mortgages could no longer be securitized.  This announcement banned Georgia  mortgage lenders from securitization. Thus, the law was overturned, and fraud ran wild.

These kind of mafia strong-armed tactics in order to protect at all costs the short-term mega-bonuses that drove the totally fraudulent system have never been held accountable or punished.  Totally innocent people are held indefinitely and tortured by the US government for no other reason than to convince the gullible public that they are endangered by terrorists, but those who wiped out the home ownership and retirement pensions of millions of Americans now hold high and honorable positions on corporate boards and US regulatory agencies.

Federal regulatory agencies totally failed. Brooksley Born tried to use her statutory authority to regulate over-the-counter derivatives, but she was blocked by the Federal Reserve chairman, the US Treasure secretary, and the SEC chairman and forced to resign. As University of Chicago Nobel economist George Stigler predicted, regulatory agencies are captured by those who are intended to be regulated.  This was the case.

Regulators turned a blind eye to obvious criminal fraud, and were rewarded with lucrative positions in the financial community. The same for the US senators and representatives who repealed Glass-Steagal and other financial regulations.

For example, former US senator Phil Gramm who spearheaded the repeal of the Glass-Steagall Act, which separated commercial from investment banking, the repeal of which set up the financial crisis, was rewarded by being made vice chairman of the mega-bank UBS, a Swiss global financial services company.

What Taibbi, Morgenson and Rosner make clear is that while monster criminals continue to collect their multi-million dollar annual incomes, depressed single mothers, deserted by the men who fathered their child, are sent to prison for having small quantities of illegal drugs to boost their depressed spirits, and their children are put out to adoption.

This is “justice” in America where there is “freedom and democracy.”

5 Behemoth Banks That Hold Our Political System Hostage

The banks' ranks are based on how shamelessly they game the political process through lobbying, revolving door politics and campaign donations.
By Sarah Jaffe and Joshua Holland, AlterNet
Posted on October 19, 2011


The economic crash led to the loss of 9 million jobs and the biggest drop in American home-ownership since the Great Depression. Long-term unemployment, poverty and hunger have increased dramatically. People are angry. The Occupy Wall Street movement, a stand against Wall Street's greed, excess and criminality, has captured the imagination and participation of millions across the nation and the globe.

The giant mortgage bubble and the irresponsible and corrupt practices that caused the catastrophic economic crash didn't emerge out of thin air. They were a consequence of decades of pay-to-play politics rife with conflicts of interest; a political system awash in cash and legal pay-offs, designed to undermine the checks and balances that could have prevented the meltdown.

Many of these checks and balances were implemented during the Great Depression. How they were eroded and eventually abandoned is the story of a small group of banks, financial companies and elites involved in major conflicts of interest, revolving-door politics and backroom deal-making -- all to protect the interests of the global elite at the expense of the American public.

Big Finance has a long history of working hard to deregulate the American economic system on behalf of global capitalism run amok. One of its biggest coups was the overturning of the Glass-Steagall Act, a Depression-era law that created a firewall between investment banking and the commercial banks that hold deposits and make loans.

The first victory in the quest to overturn this major protection came in 1986. Under intense pressure from Wall Street, the Federal Reserve reinterpreted a key section of Glass-Steagall, deciding that commercial banks could make up to 5 percent of their gross revenues from investment banking. After the board heard arguments from Citicorp, J.P. Morgan and Bankers Trust, it loosened the restrictions further: in 1989, the limit was raised to 10 percent of revenues, and in 1996, they hiked it up to 25 percent.

Then, according to a report by PBS' Frontline, “In the 1997-'98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spen[t] more than $200 million on lobbying and [made] more than $150 million in political donations” – most of which were “targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.”

The following year, after 12 unsuccessful attempts, Glass-Steagall, which would have made the crash of 2007-2009 impossible, was finally repealed. And it was only then that the explosion of shaky mortgage-backed securities began. “Subprime” loans, which made the mortgage system so vulnerable, made up 5 percent of all mortgages in the U.S. the year before repeal, but had skyrocketed to 30 percent of the total at the time of the crash.

The Glass-Steagall act was killed by financial interests seeking to maximize deregulation. The result was a casino-like environment that almost destroyed the U.S. and global economy. The giants of Wall Street enjoyed a massive bailout courtesy of American taxpayers, and they're still hard at work gaming the system, lobbying hard against new regulations that might avert the next bubble-led crash.

AlterNet, in partnership with the Media Consortium, looked at the five banks that exert the most influence on our democracy. Based on their size, the amount of money they spend on campaign donations and lobbying, and the number of employees who’ve gone through the revolving door into public service, or vice versa, we determined which banks have had the worst impact on the country. We’ll rank each one based on our research, and come up with the worst of the worst--the big bank that’s done the most damage to America's economy and society.

A word of caution is in order. This report is based only on what the banks are forced to disclose. It doesn't include lobbying by corporate front-groups like the Chamber of Commerce, and it doesn't include the “independent” campaign spending that has exploded in the wake of the Supreme Court's Citizens United decision, which corporations are no longer required to disclose to the public. This is a classic story of American political corruption writ large.


Meet the Big Banks
You’re no doubt familiar with Bank of America. Just recently BofA has made news because it's been sued for $10 billion over “toxic” mortgage-backed securities, and it's imposing an arbitrary and unfair $5-a-month fee for customers who use their debit cards. Bank of America’s on shaky ground these days and its stock price has dropped significantly, in part because of its purchase of Countrywide Financial, a mortgage lender that wrote a huge chunk of the bad mortgages that broke the economy. Still, it remains a giant company, ranked number 9 on the Fortune 500 list of largest corporations for 2011, right under General Motors and right above Ford.

BofA is the behemoth it is because the bank has taken over 13 other financial institutions since the 1990s, including US Trust, NationsBank, BayBanks, and most recently the large investment company Merrill Lynch, but it's no longer the biggest of all. According to its most recent filings, JPMorgan Chase is the biggest financial firm in the country (it ranks number 13 on the Fortune 500, right below AT&T), with $2.29 trillion in assets. In 2010, the bank had $115 billion in revenues, and turned a neat profit of $17.4 billion. Chase is the conglomerate’s retail banking and credit branch, while JP Morgan has been the investment, asset management and private banking end of operations since the merger in 2000 of JP Morgan and Chase Manhattan. In 2008, JPMorgan Chase swallowed up Bear Stearns and Washington Mutual; despite common complaints of “too big to fail,” the big banks mostly got even bigger after the economic crisis. JPMorgan Chase is now headquartered in midtown Manhattan, many blocks north of the Occupy Wall Street encampment in the financial district.

Bank of America still has $2.22 trillion in assets even after a steep decline. Last year, it made $134 billion in revenues, and reported a loss of $2.24 billion. (The protest group US Uncut loves to point out that Bank of America received a $1 billion tax refund in 2010.) It's headquartered in Charlotte and has branches around the country -- though it may be closing up to 600 of them. Interestingly, the Democratic party will hold its 2012 convention in Charlotte, where BofA is the big dog in town.

Hot on JPMorgan and BofA’s heels in the size race is Citigroup, which just announced this week that it would be charging its depositors a $15 monthly fee if they don’t maintain a $6,000 balance in their checking accounts--yet another unfair and regressive fee, even though Citigroup isn’t exactly hurting for money. It is number 14 on the Fortune 500, with $1.91 trillion in assets, $111 billion in revenues and $10.6 billion in profits in 2010.

Wells Fargo reported profits of $12.36 billion last year, and sits at number 23 on the Fortune list, just above Procter & Gamble. The California-headquartered bank acquired Wachovia, which had itself previously absorbed First Union and the Money Store among others, in 2008, in the throes of the financial meltdown, and as of 2010 has $1.26 trillion in assets and $93 billion in revenues.

Goldman Sachs, the famed “vampire squid” in Matt Taibbi’s formulation, is the only investment bank on our list. However, no look at the corrupting influence of Big Finance would be complete without it. It's “only” at 54 on Fortune’s list, but still higher than, among others, Intel, Chrysler and Sears, with $911.3 billion in assets and $46 billion in revenues, and profits of $8.35 billion in 2010. For many, Goldman Sachs is the face of all that’s wrong with Wall Street, stoking massive anger when CEO Lloyd Blankfein told a reporter that he was “doing God’s work.”

Meet Their Bailouts
The big banks weathered the economic crash thanks to large injections of taxpayer dollars. The original bailout plan, the Troubled Asset Relief Program, was signed into law by George W. Bush and gave direct handouts to the banks to keep them from collapsing.

Economist Dean Baker told AlterNet that Big Finance “never wanted to see the removal of the government from the market. They wanted the government to come in and bail them out.”

They were also happy to accept “government deposit insurance or the back-up lines of credit provided by the Fed through the discount window,” he said. “What the financial industry wants is to have these incredibly valuable government safeguards without restrictions on the banks' behavior.”

Among our big five, Citigroup was the largest beneficiary of these funds, with $45 billion, but even Goldman Sachs got $10 billion. Wachovia/Wells Fargo and JPMorgan got $25 billion each, while Bank of America got $30 billion. According to ProPublica’s calculations, the big five have all paid back their TARP funds.

Click here to enlarge.

But TARP was only one way in which the federal government subsidized the big banks. The Federal Reserve also handed out trillions in unsupervised loans during the so-called crisis period.

Dean Baker noted in his book False Profits that the Fed loans were actually more significant than the bailouts. “The vote on the TARP was a way to get Congress’s fingerprints on the policy of subsidizing the banks,” he wrote, “just as the war authorization bill approved in October 2002 implicated Congress in President Bush’s subsequent decision to wage war on Iraq under false pretenses.”

Click here to enlarge.

And if those numbers weren't big enough, just this August Bloomberg reported even more secret Fed loans to the big banks: “The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.”

These staggering numbers in direct bailouts and loans don’t even take into account the other ways in which these banks benefited from federal handouts: loans to other banks that were used to pay back debts to the big five; government support for consolidation, making the too-big-to-fail banks even bigger. For instance, in addition to its own bailout funds, Goldman Sachs got $12.9 billion from the funds the government used to bail out insurance giant/seller of derivatives AIG.

“Without question, direct government support was critical in stabilizing the financial system, and we benefitted from it,” Goldman’s Lloyd Blankfein said.

Campaign Donations
The big banks are some of the biggest donors to political campaigns in the country. Yet, when you compare what they spend on candidates to what they got in bailouts, it’s pennies on the dollar. In other words, it’s a worthwhile investment to spend money on candidates.

Corporations can't give money directly to politicians running for federal office. They get around that sticking point in several ways. First, they can donate to campaigns through their political action committees (PACs). (A corporation can't fund its PACs from its revenues directly; it can create a PAC, pick up its administrative costs, and then solicit contributions from the company's executives and shareholders.) But corporate PACs can give no more than $5,000 a year to a given federal candidate.

Another way is through the use of what's known as “soft money.” Soft money is used to build party infrastructure or to buy political ads that are produced independently from a campaign. Soft money ads are ostensibly used to educate voters about various issues, but they often look exactly like campaign ads that convey a clear message of whom a voter should or shouldn't support.

“Bundling” is another way corporations inject money into politics. There are limits on how much an individual can give to a candidate for federal office, so wealthy donors seek out contributions from friends, family and business associates, and “bundle” them into large pots of cash. In exchange, they usually become part of a club – like the Bush “Rangers” – and get invited to insiders' events where they have plenty of opportunities to influence a candidate.

OpenSecrets.org's list of the top all-time political donors from 1989 to 2012 includes contributions from individuals associated with a company, from Corporate PACs and soft money through 2010 (more on that below). Where do the banks stack up? Goldman Sachs is number 25, five slots higher than the National Rifle Association. It also spends more on candidates than the American Hospital Association, the AFL-CIO and defense contractor Lockheed Martin. Citigroup (number 39 on the list, just above Microsoft), JPMorgan Chase (number 46, just below Blue Cross/Blue Shield) and Bank of America (number 50) are all heavy hitters. Of our big-spending financial institutions, only Wells Fargo didn't make the cut for the top 50.

Click here to enlarge.

As far as corporate PACs alone, Bank of America leads among commercial banks this election cycle, despite – or perhaps because of – its struggles, having already spent $249,500 on candidates for 2012--$153,000 of that on Republicans. Wells Fargo and JPMorgan Chase are close on its heels, with $171,500 and $166,499 respectively, and they both follow the trend, in 2012, of leaning Republican. (The finance industry as a whole gives about 69 percent of its donations to the GOP). Citigroup's PAC donated $56,000 thus far for 2012. And Goldman Sachs leads the pack among investment banks this cycle, having already shelled out nearly $300,000.

Just who are the recipients of all this largesse? There are many, but most play key roles on Congressional committees that oversee their businesses. Consider just one example: Senator Chuck Schumer, D-New York, one of the most powerful members of Congress (Schumer is known as “the senator from Wall Street”).

According to the National Journal's rankings, Schumer is tied with two others as the 10th “most liberal” member of the upper chamber. But he owes his career to Wall Street. As Salon editor Steve Kornacki noted, in the early 1980s, when he was a little-known back-bencher in the House, Schumer managed to get himself a seat on the House Banking Committee, and immediately “set about making friends on Wall Street, tapping the city’s top law firms and securities houses for campaign donations.” "I told them I looked like I had a very difficult reapportionment fight. If I were to stand a chance of being re-elected, I needed some help," he would later tell the Associated Press.

Wall Street would continue to have his back as his career progressed. According to Open Secrets, between 2007 and the current cycle, Schumer raked in $3.9 million from the securities, banking and insurance industries – over 20 percent of all his fundraising. He has raised more from Wall Street than any other lawmaker over the last two years. Over the course of his political career, the securities and investment industries are his top contributors; the four most generous institutions during his time in the Senate have been Goldman Sachs, Citigroup, Morgan Stanley and JPMorgan Chase, in that order.

The ostensibly liberal senator from New York, who sits on the Senate Finance and Banking, Housing and Urban Affairs Committees – and chairs the all-important Committee on Rules and Administration (which deal with, among other things, lobbying restrictions) – has returned that friendship consistently.

Although he voted for the Dodd-Frank financial reform bill in 2010, earlier this year, he joined several other lawmakers in a letter urging federal legislators not to adopt new regulations on derivatives, arguing that they would “inevitably result in significant competitive disadvantages for U.S. firms operating globally.” He voted to extend the Bush tax cuts on capital gains in both 2005 and 2006.

In 2008, the New York Times analyzed Schumer's voting record, and found that he has consistently sided with Wall Street on issue after issue, often crossing the aisle to do so.

That's just Congress. The presidential election in 2012 will be the most expensive in history; Barack Obama has already raised over $89 million for his reelection, while his GOP opponents are raising and spending boatloads of cash as well.

The banking industry is by and large leaning more Republican for 2012 than it did in 2008 (This only includes direct contributions to the campaigns; it doesn't include money Obama has raised for the Democratic National Committee, which will help support his re-election efforts). Through the 2nd quarter of 2011, the Obama campaign has only raised $857,000 from the securities and investment industries, $44,750 from Goldman Sachs, the only one of our top five to make it onto OpenSecrets’ top contributors' list.

Two of Obama’s top bundlers are also connected to Goldman Sachs. Vicki Heyman has brought in between $100,000 and $200,000 for Obama, according to OpenSecrets, and David Solow between $50,000 and $100,000. (In comparison, by the end of the 2008 election, Obama had gotten $1,013,000 from Goldman Sachs, $808,000 from JPMorgan Chase and $736,000 from Citigroup.)

Mitt Romney is the clear favorite candidate of Wall Street this year, having taken in $2,339,588 from securities and investment companies. Goldman Sachs is the top contributor to Romney’s campaign, having given $293,250 between political action committees, employees and their families. Bank of America has kicked in $59,000, Wells Fargo and JPMorgan around $45,000 each and Citigroup brings up the rear with $33,000.

Wells Fargo tossed a few thousand to Newt Gingrich and Herman Cain as well. It's always good to cover one's bases.

We should note that this report, like all others on this topic, is necessarily incomplete. Corporations don't like airing their campaign spending in public, and there are two ways they can and do avoid it.

First, corporate front-groups like the Chamber of Commerce effectively “launder” corporate campaign cash, keeping a company's fingerprints from appearing on lobbying and campaign disclosure reports. The Chamber is not required, and does not disclose its members, but according to Think Progress, “several confirmed Chamber members are banks which were bailed out by taxpayers.” These include Citigroup, Marshall & Ilsley Bank and the New York Private Bank & Trust. According to Americans for Financial Reform, Bank of America, JPMorgan, Morgan Stanley, PNC Financial Services and M&I Bank are also Chamber members.

Prior to the Supreme Court's 2010 ruling in Citizens' United v. FEC, there were limits on corporations' (and unions') independent expenditures and on “electioneering communications” – ads that explicitly call for the election or defeat of a candidate before an election. All campaign spending had to come from individual execs and shareholders or be funneled through corporate PACs. But the decision changed the entire landscape, allowing corporations and unions to spend unlimited dollars on politics, directly from their treasuries and without the disinfecting light of disclosure. Following the decision, a bill that would have forced corporations to disclose these donations had enough bipartisan support for passage, but a vote on the measure was blocked three times by Senate Republicans.

Lobbying
After the economic crisis, one might have expected the big banks to have less money to spend on lobbying. But financial reform was on Washington's agenda, so the bankers coughed up the cash for lobbyists in an effort to make sure the final result wasn't too hard on them or their bottom line. The lobbying numbers for all five of the banks in our report went up dramatically in recent years, starting their dramatic spike in 2006 and peaking in 2010, when the Dodd-Frank financial reform bill was under consideration.

Click here to enlarge.

Banks have spent more than any other sector on lobbying between 1998 and 2011, and Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, and Wells Fargo were at the top, dropping $12,020,000 between them in 2011 alone. And those efforts have paid off for them, as they’ve been able to maintain most of their business practices practically unchanged since before the crash.

Their interests were clear. According to a report by the inspector general of the Troubled Assets Relief Program, the banks lobbied heavily against limitations on executive pay that legislators had tried to attach to the bailout money. They worked hard to preserve their fat bonuses, their right to virtually no oversight and their ability to continue business as usual.

Anupama Narayanswamy at the Sunlight Foundation wrote of the Dodd-Frank Wall Street Reform and Consumer Protection Act, “The Wall Street reform bill was a mammoth undertaking, consisting of more than 2,300 pages, and requiring agencies to write a total of more than 240 new regulations. With 108 new rules due to be adopted this summer on the first anniversary of its enactment, and a dozen bills introduced by Republican members to repeal the bill in whole or in part, government-relations wings of the Wall Street banks and lobbying firms in Washington, D.C., have been busy.”

Bill Allison, also at Sunlight, reported, “Since passage of Dodd-Frank, federal agencies implementing the law have logged more than 2,100 meetings with interests aiming to influence the many new rules that Dodd-Frank requires, including 83 with executives and lobbyists for Goldman Sachs, 73 with JP Morgan Chase, 58 with Morgan Stanley and 55 with Bank of America.”

The banks also lobby through the American Bankers Association, which has spent $4.6 million this year alone on lobbyists, and the Financial Services Roundtable, which the New York Times’ Ben Protess describes as “a fellow trade group that represents 100 of the nation’s largest financial firms.” These two organizations and others helped fund the slew of lobbyists fighting to keep regulators from having much of an impact on the financial sector.

The vast army of lobbyists that represent the big banks in Washington include some former power brokers from Congress; former Democratic House Majority Leader Dick Gephardt, through his Gephardt Group, got $60,000 from Goldman Sachs to argue for their cause, which according to the Center for Responsive Politics, he did personally. John Breaux, former Democratic Senator from Louisiana, also lobbies for Goldman, and his partner in the Breaux Lott Leadership Group, Trent Lott, driven out of his position as Senate Minority Leader for comments that appeared to endorse Strom Thurmond’s segregationist campaign for president, represents both Goldman and Citigroup. (Citigroup paid them $180,000 for lobbying last year, and Goldman a full $300,000, as much as General Electric.)

The Gephardt Group took in $3.2 million just last year, from Boeing, Comcast, Sodexho and many more as well as Goldman Sachs, and Breaux and Lott pocketed nearly $6 million from clients ranging from Citigroup and Delta Airlines to AT&T and defense contractor Raytheon.

Bank of America and Wells Fargo both retain the services of the Podesta Group, run by well-known Washington insider Tony Podesta, who was a founder of People for the American Way. (Podesta's brother, John Podesta, is president of the Center for American Progress, an influential liberal DC think tank and a former Clinton chief of staff -- he also headed Obama's transition.) Wells Fargo paid the Podesta Group $340,000 in 2011, $100,000 more than Wal-Mart, another Podesta client.

While JPMorgan Chase’s lobbyist roster doesn’t have quite the pedigree of some of the others, it makes up for that in sheer spending power, having dropped $66,696,173 in lobbying dollars between 1998 and 2011. In total spending it still comes in second, though, behind Citigroup’s $82,350,000, handing it the crown for biggest spender as far as lobbying goes.

All together, the finance sector is the top spender on lobbying between the years of 1998 and 2011, according to the Center for Responsive Politics, having poured $4,631,844,938 into lobbyists’ pockets. $230,200,953 of that came directly from the five banks surveyed here.

And what did they get for all that money? Nomi Prins, a former managing director at Goldman Sachs and author of the new book Black Tuesday, explained to AlterNet:

“The Dodd-Frank Bill contains a slew of minor, cosmetic adjustments to the status quo manner in which the largest banks operate, and even they are being battled against by the financial industry lobbyists. The bottom line is that this bill does not fundamentally alter the structure of Wall Street - it does not separate banks cleanly, or in any other way remotely reminiscent of the Glass-Steagall Act of 1933, into commercial banks that deal with the basics of deposit and lending operations vs. investment banks that create dangerous and complex securities and leverage them into all manner of speculative activity.

She continued,

“Even though the bill calls for a consumer financial protection agency, it should be noted that such a department existed already within the Fed during the build-up to this crisis, that by virtue of political weakening and position within the Fed and political hierarchy was rendered ineffective in practice. The bill does not end the conflicts of interest and the revolving doors between the regulatory bodies and other key positions in Washington vs. those coming from, or going to, Wall Street.”

Revolving Door
Perhaps the most alarming aspect of the financial industry's influence on our political system is the extent to which financial insiders end up in positions where they're actually making policy.

The “revolving door” works both ways. According to Open Secrets, fully 74 percent of registered lobbyists for the finance and insurance industry previously worked in government, many of them for members of Congress sitting on committees that set banking regulations, or for the regulatory agencies that enforce them.

The nuts and bolts of legislation is crafted by Congressional staffers, and in the Senate, the Finance Committee (117) is second only to the Judicial Committee (119) in the number of staffers-turned-lobbyists or lobbyists-turned-staffers.

Building relationships as an elected official, regulator or legislative staffer can later bring rich financial rewards when one moves to the private sector. Economists Jordi Blanes Vidal, Mirko Draca and Christian Fons-Rosen tried to figure how much those relationships were worth in a 2010 study conducted for the Center for Economic Performance (PDF). Using disclosure forms, they looked at how former staffers-turned-lobbyists' income changed when their former bosses left Congress. The researchers found “evidence that the existence of a powerful politician to whom the lobbyist is connected is a key determinant of the revenue that he or she is able to generate... in other words, lobbyists are able to 'cash in on their connections,' since connections are an asset with a separate value to their experience, human capital or general knowledge of how government works.”

Specifically, they found that when a senator left office, their former staffers-turned-lobbyists saw their incomes drop by an average of 24 percent and when members of the House left office, their old staffers' incomes dropped by 10 percent. But those are the averages. They also found, “Consistent with the notion that lobbyists sell access to powerful politicians," that lobbyists lost more revenue if their departing ex-bosses were more senior and held powerful committee assignments.

As you can see in the graphic below, Citigroup leads through Congress' revolving door, followed by JPMorgan Chase, Bank of America, Wells Fargo and followed up by Goldman Sachs, according to Legistorm's database.

Lobbyists who worked for members of Congress or were themselves legislators
	20	Including Sanders Larsen Adu, former staff director of a House Financial Services subcommittee, Tim Keeler, former staffer on the Senate Finance Committee (Keeler has also lobbied on behalf of BofA and JP Morgan Chase, among others) and Chris Rosello, a former staffer on the House Financial Services Committee.
	81	Including former Senator John Breaux, D-Louisiana, who was a senior member of the Senate Finance Committee, and chairman of the Subcommittee on Social Security and Family Policy.
	72	Including former Rep. Rick Lazio, R-NY, who served as Deputy Majority Whip, Assistant Majority Leader, and chairman of the House Banking Subcommittee on Housing and Community Opportunity.
	39	Including, until recently, Senator Dan Coats, R-Indiana, who served in the Senate until 1999, retired to lobby his former colleagues and serve a stint as ambassador to Germany, and then returned to the Senate this year. The New York Times reported that Coats, lobbying for Cooper Industries, “served as co-chairman of a team of lobbyists in 2007 who worked behind the scenes to successfully block Senate legislation that would have terminated a tax loophole worth hundreds of millions of dollars in additional cash flow” for the company. Coats curently sits on the Joint Economic Committee.
	18	Including former Rep Dick Gephardt, D-Missouri and former Rep. Harold Ford, Sr., D-TN. Gephardt served as the House Majority leader; Ford sat on the House Banking Committee.

The revolving door between Wall Street and government doesn't just lead into and out of Congress. Consider the circuitous career path taken by former White House Chief of Staff Joshua Bolten. Bolten graduated with a law degree in the early 1980s, and between 1985 and 1989, he bounced between the Office of the U.S. Trade Representative, the law firm of O'Melveny & Myers, which represents Goldman Sachs -- and is a registered lobbyist for Citigroup, according to Legistorm ($$) -- and the Senate Finance Committee.

After a brief stint in the first Bush administration, Bolten went over to Goldman Sachs, where he served as executive director of legislative affairs for five years. Then he became policy director on George W. Bush's 2000 campaign. After the election, he worked his way up from assistant to the president to director of the Office of Management and Budget and, finally, to White House Chief-of-Staff, which some believe to be the second most powerful position in the government. In that role, he was credited with recruiting then-Goldman CEO Henry Paulson to head up the Treasury Department, where he would preside over the bank bailouts – much to Goldman's benefit. After leaving the White House, Bolten got a cushy sinecure as the John L. Weinberg/Goldman Sachs & Co. Visiting Professor at Princeton.

It's an exceptional career, but not an unusual story. Robert Rubin, Bill Clinton's Treasury Secretary, was vice-chairman at Goldman before helping to orchestrate the deregulation of just the kinds of complex financial instruments that took down the economy. After his stint at Treasury, Rubin landed at Citigroup, where he raked in $128 million over the course of eight years. In 2008, as the financial sector was teetering on the brink of collapse – and just after Citi had written down $24 billion in losses due in large part to, as Fortune put it, “greed, cynicism, and bad judgment” -- Rubin downplayed the mess he'd helped create, saying it was "all part of a cycle of periodic excess leading to periodic disruption." He blamed the crash “on just about everyone but the major U.S. financial players.”

The Obama White House is no exception to the rule. Last spring, Politico reported that Rubin, who “watched his reputation as an economic titan shatter after he left the Clinton White House...still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team.”

Lewis Alexander went from the Federal Reserve to the Commerce Department and then did a stint at Citi before returning to politics as a counselor at the Treasury Department, and Maura Solomon went from the Office of Thrift Supervision, one of the bank regulators, to Citigroup, where she is presumably better compensated. And so, of course, did Peter Orzsag. Jacob J. Lew, who replaced Orzsag at the Office of Management and Budget (an office he also held under President Clinton), spent his time between those appointments as executive vice president of New York University and then at Citigroup. Gary Gensler, a former assistant secretary of the Treasury who spent 18 years at Goldman Sachs, now oversees the Commodity Futures Trading Association.

According to the Project on Government Oversight (POGO), the Securities and Exchange Commission – the primary agency for policing the financial industry – is inundated with former bankers. POGO's database of lobbyists includes, “219 former SEC employees [who] filed 789 statements between 2006 and 2010 announcing their intent to appear before the SEC or communicate with its staff on behalf of private clients.”

"Many former SEC employees leave the agency to join [lobbying] firms that represent clients in the securities industry. Several recent reports by the SEC Inspector General have raised troubling questions about whether the promise of future employment representing Wall Street causes some SEC officials to treat potential employers and their clients with a lighter touch."

Social Costs
Does anyone need to be reminded how the big banks broke the economy and then pocketed billions of tax dollars in bailouts? Have people already forgotten Henry Paulson (Treasury Secretary, 2006-2008; Goldman Sachs, 1974-2006) standing before Congress and demanding $700 billion in nearly oversight-free money to buy up the banks’ “toxic assets”—which were, of course, bad mortgages packaged into securities that were suddenly worthless. The bailouts received bipartisan support, and Obama pressed for the passage of what eventually became TARP, proving the value of those bipartisan campaign donations.

Perhaps you are underwater on your mortgage because of the crash in home values after the popping of the housing bubble, which was created by the insatiable need for profits, for more mortgages to package into securities to sell on the market. Perhaps you’re dealing with Bank of America or another one of the banks that are still unwilling to modify the majority of mortgages, continuing to foreclose on homes and throw families out.

Or perhaps you rent, but are unemployed. Perhaps you have a job but haven’t seen a raise since the crash, or have been pressured to put in more hours. The core problem in the brick-and-mortar economy is a lack of demand, and that drop in demand is a result of the $14 trillion in household wealth lost in the crash that Wall Street’s gamblers precipitated -- from stocks and bonds, real estate values and retirement accounts. The popping of the housing bubble alone and the corresponding drop in home values, according to Dean Baker, creates the loss of some $8 trillion in wealth, or $110,000 per homeowner.

The size of the financial industry alone is worrisome. As Katrina vanden Heuvel pointed out at the Washington Post, “Obama has said that we can't go back to an economy where the banks make 40 percent of all corporate profits. But the big banks are emerging from the crisis more concentrated than ever, and financial sector profits are already up to nearly 30 percent of total corporate profits.” Banking, like trucking, is known as an “intermediary good” -- nothing is produced by the industry – and if any other intermediary good represented around 10 percent of the U.S. economy, people would consider that a major problem.

To create those complex financial instruments, finance has begun to cannibalize the “best and brightest” college graduates--or at least those looking for the fattest paychecks, whether purely out of greed or a need to pay off heavy student loan burdens (often owed to the same banks).

Pat Garofalo at Think Progress noted that “The four biggest banks issue 50 percent of mortgages and 66 percent of credit cards: Bank of America, JPMorgan Chase, Wells Fargo and Citigroup issue one out of every two mortgages and nearly two out of every three credit cards in America.” Not only that, but he also pointed out that the five banks we’ve tracked here are the ones that control 95 percent of the derivatives in the country--the complex financial instruments that investor Warren Buffet called “financial Weapons of Mass Destruction.”

Perhaps the most pernicious effect of Wall Street’s influence is yet to come. By watering down or killing off new regulations designed to prevent the next bubble-induced meltdown, they imperil future generations’ prosperity just as they did when they lobbied hard to kill financial regulations in the 1990s--resulting in, to give one example, the passage of the Commodity Futures Modernization Act in 2000, which kept derivatives and credit default swaps unregulated and allowed the banks to keep gambling without oversight.

The banks have simply gotten too powerful; ”too big to fail” has become too big to regulate. Yet, even as they grow, spend on lobbying and campaigns and institute fees, they represent a giant ticking time bomb at the heart of our economy.

It can be difficult to gauge which of the big banks has had the greatest negative impact on society, as so many of the problems were created by the combined practices of the entire industry. Bank of America stands out for its sheer size. It is the country’s biggest bank, controlling 12 percent of the nation’s deposits, and 20 to 25 percent of the mortgage market (and a huge chunk of its mortgage fraud as well). While it continues to face lawsuit after lawsuit for fraudulently selling securities -- from both the government and private companies -- its plummeting stock price is bringing it ever closer to collapse. What’s the endgame if America’s largest bank runs out of money? If ever a bank was too big to fail, it is Bank of America.

Robert Kuttner, co-founder of the American Prospect, wrote of the prospect of the giant going under:

"Worst of all would be to let a large institution like Bank of America just fail. Outside of the hard-core Tea Party right, nobody supports this.

"The second worst policy would be to just keep throwing money at a zombie institution to keep up the pretense that it is solvent. We tried that policy in 2008 and 2009. It helped entrenched bankers keep their jobs and their outsized profits, but a wounded banking system continued to be a lead weight on the rest of the economy."

Bank of America is no doubt the biggest lead weight on the economy right now, and its zombie status keeps everyone wondering what the endgame will be. One of the things that was included in the Dodd-Frank bill was a provision that would allow the FDIC to take failing banks into receivership, seize them, break them up and reorganize them. The question is, will an administration that’s proven unwilling to make any serious changes to the financial industry take that step? Or will it instead bail out BofA yet again -- a step that Kuttner warns could be a political and economic disaster.

Even with all this, it's hard to rank the banks in this category. Citigroup just last weekend had 24 people arrested for criminal trespass in New York City when they attempted to close out their accounts, and is hiking fees while its profits soar. JPMorgan's purchase of the failing Washington Mutual was nearly as toxic as Bank of America's purchase of Countrywide, taking over more fraudulent loans. Goldman Sachs has tentacles in absolutely everything; Wells Fargo has some of the worst predatory lending practices to people of color. It's clear that the social costs of the banking industry as a whole are simply too big to bear.

And the Winner Is...

Ranking of 'Worst' Mega Banks in Political Corruption
	Campaign Contributions	Lobbying	Revolving Door	Negative Social Costs	"Worst" Score
Citigroup	2	1	1	2	18
JP Morgan Chase	3	2	2	3	14
Bank of America	4	3	3	1	13
Goldman Sachs	1	4	5	4	10
Wells Fargo	5	5	4	5	5
A bank gets 5 points for being the 'worst' in a category, 4 for second worst, etc.

Ranking the big banks isn’t an easy task. Sure, it’s easy enough to add up the size of the bailouts and the amount spent on campaign donations, or the number of people who’ve spun through the revolving door. It’s harder to gauge the impact on millions of people as the economy collapsed and continues to sputter. And the story of lobbyists and well-placed former employees isn’t just one of numbers, but of influence and success.

Still, when we looked at all of our research, there was one bank that came in first in two categories, and second in another. That bank is Citigroup. It was the clear winner in lobbying spending with $82,350,000, has the most former politicians, executives and lobbyists spinning through its revolving door, and followed only Goldman Sachs in terms of measurable campaign donations.

It’s the current employer of former Office of Management and Budget chief Peter Orszag and former employer of ex-Treasury Secretary Robert Rubin, the donor of nearly $17 million to campaigns Republican and Democratic, and the recipient of $45 billion in TARP funds.
Of course, one could make an argument for nearly every bank on this list. Goldman Sachs far outspends the others on campaign donations, and Citi might have won the overall lobbying spending race but has been outspent in the past few years by JPMorgan Chase--by nearly $3 million. And Bank of America’s snowballing legal troubles seem evidence enough of malfeasance.

What is clear, any way you slice it, is that the big banks have far too much influence over our politics, and it has enabled them to gain far too much influence over our entire economy.

We are living with the results: real unemployment in the double digits, falling incomes, skyrocketing debt. What can we do about it? With the banks’ deep connections to both parties in Washington, it has long seemed that reining them in is an uphill battle. Yet Wall Street appears to have over-reached, and we're now seeing the blow-back as tens of thousands of people join the Occupy Movement in cities and towns across the country and across the world. Americans are tired of the reign of the big banks, and they're coming together to do something about it. People are moving their money to credit unions, they're fighting to keep families in their homes and they're taking their anger directly to the Titans of Wall Street. Most importantly, they're building a people-powered movement to hold the banks accountable, and if history is any guide, once united in a cause, the American people usually win.