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Entries in Matt Taibbi (1)

Sunday
Jul012012

It's A Big Club, And You Ain't In It

In former Senator Bill Bradley’s new book, We Can All Do Better, he states that non-financial companies in the United States have liquid assets—including cash—in the amount of $1.8 Trillion on their balance sheets.

Bradley says if those companies invested 20% of that $1.8 Trillion in job creation, the national unemployment rate would lower from it’s current level of over 8% to 5%.

Why are these companies sitting on all that money and creating an unnecessary job recession? Bradley calls it an age of “stinginess.”

So who took all the cash out of the system?

That answer is difficult to find in one place. However, the "New York Post" recently published a list of the Top 20 S&P 500 companies in cash holdings, with $2 Trillion in total cash. 

The Top 20 Cash-Holding Companies

1. Citigroup $526B
2. JPMorgan Chase $414B
3. Wells Fargo $112B
4. General Electric $82B
5. Microsoft $53B
6. Google $39B
7. Oracle $29B
8. Apple $28B
9. Johnson & Johnson $27B
10. Pfizer $24B
11. Chevron $18B 
12. Coca-Cola $14B 
13. Intel $12B 
14. IBM $12B 
15. Exxon Mobil $10B 
16. Walmart $9B 
17. Schlumberger $5B 
18. AT&T $4B 
19. Procter & Gamble $3B 
20. Philip Morris $2B

The top three companies on that list are financial services companies (and the fourth, G.E., has moved heavily into financing over the past decade). Financial services companies as large as Citigroup, Chase and Wells Fargo live off government. They have direct access to the Federal Reserve. They create rules outside of any market. They are “too big to fail.”

"Wave Of Change" photo by kfann

These too-big banks are so attached to the Federal government that Yves Smith, editor of NakedCapitalism.com, said on a Bill Moyers & Company interview, these banks should be run as utilities with salaries commiserate with those of public servants.

Instead, these banks run the government with corruption and pay themselves exorbitant salaries. Chase, under its CEO Jamie Dimond, was a major recipient of billions in public bailout funds in 2008. A few months later, in 2010, Chase handed out record bonuses to its executives. 

Matt Taibbi, a reporter with "Rolling Stone," says the scariest part of all is that these bankers honestly believe they created and earned that wealth. They don’t think they took it from taxpayers. They don’t think they transfered it from the Federal reserve. These people truly think they are financial geniuses who are profiting from their skill in a free market. 

This is of course delusional—and perhaps sociopathic—behavior. As Taibbi details in his article “The Scam That Wall Street Learned From The Mob,” this behavior is also called by other names: bid rigging and organized crime. 

It's a Deal: Banks Steal From Government, And Government Trades On Inside Information

In a "60 Minutes" television report titled “Insiders: The Road To The STOCK Act,” journalist Steve Kroft exposed the legal custom of insider stock trading in Congress and focused his report on the overlooked proposed law to prevent it: the Stop Trading On Congressional Knowledge Act.

(Since Kroft’s report aired, the STOCK Act passed with sponsorship from more than 200 in Congress. Before his story went public the act had six sponsors, and few in Congress said they had heard of it.)

In the story, Kroft details some of the winning land deals and stock trades members of Congress have enjoyed, specifically former Speakers of the House of Representatives.

Kroft reports former Speaker Dennis Hastert began his job in Congress with a net worth of a few hundred thousand dollars. He has since retired from Congress a multi-millionaire, in part due to an land deal he made in his home state of Illinois before passing legislation which directly increased that land’s value.

John Boehner changed financial positions in health insurance stocks the day after a closed-door decision on health insurance legislation was made—and long before that decision became public knowledge. He made money on that trade. 

Nancy Pelosi and her husband have participated in eight IPOs during her public service, including purchasing Visa stocks before the public knew that major regulatory credit card legislation was to be killed before reaching the House floor. Visa’s stock price—and Pelosi’s captial gains—soared because of a decision she knew about beforehand. 

Pelosi has called Kroft’s report “a right-wing smear.”

This is all related behavior.

Why would people spend millions to get elected to a job that pays less than $200k in salary? Prestige and power, perhaps. “To serve the public” is what they say. But more likely, our political leaders want access to all that cash that they’ve handed over to private companies, who are now sitting on it instead of creating jobs.

As Kroft reports, this kind of activity has spawned a whole new industry called “political intelligence,” with former legislators now employed by firms that sell policy information to financial services companies before it becomes public information.

In April 2012, the STOCK Act passed in the House and Senate and was signed into law by the President, making direct insider trading in Congress illegal. By the time the bill was signed, however, the part of the STOCK Act requiring participants in the political intelligence industry to register their names had been taken out. 

None of this is conspiracy. 

It’s all in public records and mainstream reports. Nothing is done under the table. The reason we aren't shocked is that the criminals aren’t whispering. They are loud and proud. They get re-elected term, after term, after term. Or they go from public to private enterprise and give themselves bonuses year after year.

George Carlin once put it in the most simple terms, “It’s a big club...and you ain’t in it." It's okay to stop pretending that you are or ever will be or ever wanted to be in the first place.