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Monday, December 7, 2015

Hillary Clinton, "Hillary Clinton: How I’d Rein In Wall Street": Can a Leopard Change Its Spots?

If Hillary Clinton is elected president, do you believe she is going to get tough with the world's financial institutions? As was reported in a July 30, 2015 Wall Street Journal article entitled "UBS Deal Shows Clinton’s Complicated Ties" by James V. Grimaldi and Rebecca Ballhaus:

"A few weeks after Hillary Clinton was sworn in as secretary of state in early 2009, she was summoned to Geneva by her Swiss counterpart to discuss an urgent matter. The Internal Revenue Service was suing UBS AG to get the identities of Americans with secret accounts.

If the case proceeded, Switzerland’s largest bank would face an impossible choice: Violate Swiss secrecy laws by handing over the names, or refuse and face criminal charges in U.S. federal court.

Within months, Mrs. Clinton announced a tentative legal settlement—an unusual intervention by the top U.S. diplomat. UBS ultimately turned over information on 4,450 accounts, a fraction of the 52,000 sought by the IRS, an outcome that drew criticism from some lawmakers who wanted a more extensive crackdown.

From that point on, UBS’s engagement with the Clinton family’s charitable organization increased. Total donations by UBS to the Clinton Foundation grew from less than $60,000 through 2008 to a cumulative total of about $600,000 by the end of 2014, according to the foundation and the bank."

More about Hillary's relationship with some of the world's largest banks? In a May 22, 2015 editorial entitled "Banks as Felons, or Criminality Lite," The New York Times informed us:

"As of this week, Citicorp, JPMorgan Chase, Barclays and Royal Bank of Scotland are felons, having pleaded guilty on Wednesday to criminal charges of conspiring to rig the value of the world’s currencies. According to the Justice Department, the lengthy and lucrative conspiracy enabled the banks to pad their profits without regard to fairness, the law or the public good.

. . . .

In all, the banks will pay fines totaling about $9 billion, assessed by the Justice Department as well as state, federal and foreign regulators. That seems like a sweet deal for a scam that lasted for at least five years, from the end of 2007 to the beginning of 2013, during which the banks’ revenue from foreign exchange was some $85 billion."

Or stated otherwise, these banks paid fines of $9 billion on foreign exchange revenue of $85 billion. Sweet!

However, the Times didn't tell us about the connection of some of these banks (not Royal Bank of Scotland) to the Clinton Foundation and the Clinton Global Initiative ("CGI"). The Clinton Foundation lists Barclays Capital and the Citi Foundation as donors in the $1,000,001 to $5,000,000 range. It also lists JPMorgan Chase as a donor in the $100,001 to $250,000 range.

In addition, with regard to Barclays, a March 3, 2015 CNN article entitled "Base wary of Clinton Foundation's ties to troubled banks" by Alexandra Jaffe stated:

"British banking giant Barclays emerged as a 'strategic partner' with CGI for its 2010 annual meeting, and gave the same level of support every year after that.

. . . .

In August of 2010, the Justice Department announced Barclays would pay nearly $300 million in fines for breaking sanctions against Iran, Cuba, Sudan and others.

. . . .

According to a Justice Department statement issued in June 2012, Barclays 'admitted and accepted responsibility for its misconduct' at the center of a scheme to manipulate global interest rates, which in turn affected prices for consumer lending.

The bank agreed to pay $450 million in total to the Justice Department, the U.S. Commodity Futures Trading Commission and the UK's Financial Services Authority to resolve the violations.

. . . .

In July 2014, the Senate Permanent Subcommittee on Investigations accused both Barclays and Deutsche Bank of helping hedge funds avoid paying more than $6 billion in taxes."

But never mind any of the above. Today, in a New York Times op-ed entitled "Hillary Clinton: How I’d Rein In Wall Street," Hillary Clinton tells us of her plans to reform the financial industry:

"My plan proposes legislation that would impose a new risk fee on dozens of the biggest banks — those with more than $50 billion in assets — and other systemically important financial institutions to discourage the kind of hazardous behavior that could induce another crisis. I would also ensure that the federal government has — and is prepared to use — the authority and tools necessary to reorganize, downsize and ultimately break up any financial institution that is too large and risky to be managed effectively. No bank or financial firm should be too big to manage.

My plan would strengthen the Volcker Rule by closing the loopholes that still allow banks to make speculative gambles with taxpayer-backed deposits. And I would fight to reinstate the rules governing risky credit swaps and derivatives at taxpayer-backed banks, which were repealed during last year’s budget negotiations after a determined lobbying campaign by the banks.

My plan also goes beyond the biggest banks to include the whole financial sector."

In addition, Hillary says that she "would appoint tough, independent regulators and ensure that both the Securities and Exchange Commission and the Commodity Futures Trading Commission are independently funded," and would also hold financial industry executives "more accountable." Do you believe her?

What is missing from Hillary's op-ed is any mention of the repeal of the Uptick Rule in July 2007, which enabled hedge funds to freely manipulate American stock markets to their advantage. An illustration of the consequences of its repeal:

Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies

In her op-ed, Hillary declares, "we need to reform stock market rules to ensure equal access to information, increase transparency and minimize conflicts of interest." How about also doing something to make US stock markets a place where small investors are not habitually - pardon my French - screwed?

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