Tuesday, May 20, 2014

5 Ways the Poor Are More Ethical Than the Rich

Paul Buchheit
RINF Alternative News
Many wealthy Americans believe that dysfunctional behavior causes poverty. Their own success, they would insist, derives from good character and a strict work ethic. But they would be missing some of the facts. Ample evidence exists to show a correlation between wealth and unethical behavior, and between wealth and a lack of empathy for others, and between wealth and unproductiveness.
The poor, along with a middle class that is sinking toward them, make up the American meritocracy. Here is some of the evidence.
1. The Poor Don’t Cheat As Much
An analysis of seven different psychological studies found that “upper-class individuals behave more unethically than lower-class individuals.” A series of experiments showed that upper-class individuals were more likely to break traffic laws, take valued goods from others, lie in a negotiation, and cheat to increase their chances of winning a prize.
And this doesn’t even begin to examine the many, many significant cases of fraudulent behavior in the banking industry. Or private equity firms that cheat their investors over 50 percent of the time. Or the many unscrupulous corporate tax avoidance strategies.
2. The Poor Care More About Other People
Numerous reputable sources have concluded that lower class individuals tend to be more generous and trusting and helpful, compared to the upper class. As people gain in wealth, they depend less on others, and thus they have less reason to understand the feelings and needs of the less fortunate. The poor are better at interpersonal relationships because they need other people.
In addition, careful studies have determined that money pushes people further to the right, making them less egalitarian, and less willing, as a practical consequence, to provide broad educational opportunities to all members of society.
One neuro-imaging analysis even suggested that the super-wealthy view photos of impoverished people as things rather than as human beings. They react to the poor not with sympathy, but with contempt.
3. The Rich Focus on Me, Me, Me
The authors of a recent psychological study argue that rich people are different because they have the freedom to focus on self. In support of this, a number of studies have demonstrated that higher social class is associated with increased narcissism, even to the point of looking at themselves more frequently in a mirror. The rich feel entitled. They attribute success to their ‘superior’ traits, while people from lower economic backgrounds attribute success to societal values, such as educational opportunities.
4. The Poor Give a Greater Percentage of Their Money to Others
Research has shown that low-income Americans spend a much higher percentage of their income on charitable giving. Results from three studies average out to 4.5% from low-income people, 2.7% from those with high incomes. With respect to helping people in need, the rich give even less. As Robert Reich notes, about two-thirds of ‘charitable’ donations from the rich go to their foundations and alma maters, and to “culture palaces” – operas, art museums, symphonies, and theaters.
Charles Koch said, “I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.” The well-being of high society, perhaps.
5. Entrepreneurs are in the (Sinking) Middle Class
The meritorious behavior of job creation comes from the middle class, which is quickly sliding toward lower-income status. The very rich generally don’t risk their money in job-creating startup businesses. Over 90% of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), the stock market, and real estate.
With the demise of the middle class, entrepreneurship is decreasing. According to a Brookings Institute report, the “firm entry rate,” a measure of new firms and thus of entrepreneurial startup activity, fell by nearly half in the thirty-plus years between 1978 and 2011. America‘s average entrepreneur is 26 years old, but most of our 26-year-olds are burdened by student loan debt.
Meriting Our Respect and Appreciation
Lower-income Americans serve our food, care for our sick, and clean up after us, with minimal benefits and few complaints. More and more middle-income workers are falling into this struggling group, as 9 out of 10 of the fastest-growing occupations are considered low-wage, generally not requiring a college degree.
These people merit our admiration for persevering in a society where a privileged few are taking almost everything.
Paul Buchheit is a college teacher, a writer for progressive publications, and the founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org)

WARNING! America to Have Tahrir Square Moment in 2014


SMOKING GUN FROM THE FEDERAL RESERVE MURDER OF THE MIDDLE CLASS

“Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.” - Ben Bernanke

“The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.”Alan Greenspan
There you have it – the wisdom of two Ivy League educated economists who are primarily liable for the death of the American middle class. They now receive $250,000 per speaking engagement from the crooked financial parties their monetary policies benefited; write books to try and whitewash their legacies of failure, fraud, and hubris; and bask in the glow of the corporate mainstream media propaganda storyline of them saving the world from financial Armageddon. Never have two men done so much damage to so many people, so quickly, and are not in a prison cell or swinging from a lamppost. Their crimes make Madoff look like a two bit marijuana dealer.
The self-proclaimed Great Depression “expert” Ben Bernanke peddles pabulum about inflation being too low and posing dire risk to the economy, but is blasé that swelling the Federal Reserve balance sheet debt from $900 billion in 2008 to $4.4 trillion today with his digital printing press poses any systematic risk to the country and its citizens. Either his years in academia have blinded him to the reality of his actions upon the lives of real people living in the real world, or his real constituents have not been the American people, but the Wall Street bankers that pulled his puppet strings over the last eight years.
Now that he has passed the Control-P button to Yellen, he is reaping the rewards of bailing out Wall Street and further enriching them with QEfinity. Ben earned a whopping $200,000 per year as Federal Reserve chairman. He now rakes in $250,000 per speech from the very financial interests who benefited from his traitorous monetary machinations. I don’t think he will be invited to speak at any little league banquets by formerly middle class parents whose standard of living has been declining since the 1980s. Is it a requirement that every Federal Reserve chairperson lie, obfuscate, misinform, hide the truth, and do the exact opposite of what they say they will do?
“It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.” - Ben Bernanke – October 2007
Greenspan, Bernanke and Yellen have always been worried about deflation, while even the government suppressed CPI calculation reveals that inflation has risen by 108% since the day Greenspan assumed office in August 1987. The dollar has lost 52% of its purchasing power in the last 27 years of Fed induced bubbles and busts. And these scholarly academic bozos have been worried about deflation the entire time. Since Nixon closed the gold window in 1971 and unleashed the two headed inflation loving gargoyle of debt issuing bankers and feckless self-serving politicians upon the American people, the dollar has lost 83% of its purchasing power (even using the bastardized BLS figures).
Any critical thinking person with their eyes open knows the official inflation figures have been systematically understated since the 1980’s by at least 3% per year. Should the average American be more worried about deflation or inflation, based upon what has occurred during the 100 years of the Federal Reserve controlling our currency?

I’m sure Greenspan is content and proud, as he succeeded through his own endeavors in rewarding, encouraging and propagating excessive risk taking by the Wall Street cabal during his 19 year reign of error. He exited stage left as the biggest bubble in history, created by his excessively low interest rate policy, blew up and destroyed the 401ks and home values of the middle class. This was the second bubble under his monetary guidance to burst. The third bubble created by these Keynesian acolytes of easy money will burst in the near future, further impoverishing what remains of the middle class and hopefully igniting a long overdue revolution.
Greenspan’s pathetic excuse for a career has benefitted those who owned him, while leaving a trail of casualties that circles the globe. His inflationary dogma, Wall Street enriching doctrine and Keynesian motivated schemes have drained the savings and confiscated the wealth of the middle class through persistent and devastating inflation. And it was done by a man who knew exactly what he was doing.
“Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth… The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit… In the absence of the gold standard, there is no way to protect savings from confiscation through inflation” – Alan Greenspan – 1966
The abandonment of the gold standard in 1971 set in motion four decades of consumer debt accumulation on an epic scale, currency debauchment, and real wage stagnation. The consumer debt accumulation was a consequence of the American middle class being lured into debt by the Too Big To Trust Wall Street banks and their corporate media propaganda machine, as a fallacious response to stagnating real wages when their jobs were shipped to China by mega-corporations using wage arbitrage to boost quarterly profits, their stock prices, and executive bonuses.
The bottom four quintiles have made no progress over the last four decades on an inflation adjusted basis. The middle quintile, representing the middle class, has seen their real household income grow by less than 20% over the last 43 years. And this is using the understated CPI. In reality, even with two spouses working today versus one in 1971, real household income is lower today than it was in 1971.
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The more recent data, during the Greenspan/Bernanke inflationary era, is even more disconcerting and destructive. Real median household income has grown at an annualized rate of less than 0.5% over the last thirty years. During the bubblicious years from 2000 through 2014, while Wall Street used control fraud and virtually free money provided by the Fed to siphon off hundreds of billions of ill-gotten profits from the economy, the average middle class family saw their income drop and their debt load soar. This is crony capitalism success at its finest.
The oligarchs count on the fact math challenged, iGadget distracted, Facebook focused, public school educated morons will never understand the impact of inflation on their daily lives. The pliant co-conspirators in the dying legacy media regurgitate nominal government reported income figures which show median household income growing by 30% over the last fourteen years. In reality, the real median household income has FALLEN by 7% since 2000 and 7.5% since its 2008 peak. Again, using a true inflation figure would yield declines exceeding 15%.

Greenspan and Bernanke’s monetary policies loaded the gun; Wall Street bankers cocked the trigger with their no doc negative amortization mortgages, $0 down – 0% interest – 7 year subprime auto loans, introducing the home equity line ATM, and $20,000 lines on dozens of credit cards; the media mouthpieces parroted the stocks for the long run and home prices never fall bullshit storyline, encouraging Americans to pull the trigger; government apparatchiks and bought off politicians and their deficit expanding fiscal policies, pointed the gun; and the American people pulled the trigger by believing this nonsense, blowing their brains all over the fine Corinthian leather interior of their leased BMWs sitting in the driveway in front of their underwater McMansions.
Median household income in the United States peaked in 1999. The internet boom, housing boom and now QE boom have done nothing beneficial for middle class Americans. They have been left with lower real income, less home equity, no savings, and no hope for a better tomorrow. Most states saw their median household income peak over a decade ago, with more than half the states experiencing double digit declines and ten states experiencing declines of 19% or higher. It’s clear who has benefitted from the fiscal policies of spendthrift politicians and the spineless inhabitants of the Mariner Eccles Building in the squalid swamplands of Washington D.C. – the pond scum inhabiting that town. The median household income in D.C. stands at an all-time high. Winning!!!!

A former inhabitant of Washington D.C. spoke the truth about inflation and the men who benefit from it in the 1870’s. He was later assassinated.
“Who so ever controls the volume of money in any country is absolute master of all industry and commerce and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” James Garfield
The Federal Reserve, a private bank representing the interests of its Wall Street owners, has been in existence for 100 years. It has managed to diminish the purchasing power of the dollar by 95%, while causing depressions, enabling never ending warfare, allowing politicians to expand the welfare state to immense unsustainable proportions, and enriched its true constituents on Wall Street beyond the comprehension of average Americans. In 2002 Ben Bernanke made his famous helicopter speech where he promised to drop dollars from helicopters to fight off the ever dangerous deflation. After the Fed created 2008 worldwide financial collapse he fired up his helicopters, but dropped trillions of dollars on only one street in America – Wall Street. He dropped turkeys on Main Street, and we all know from Les Nesman what happens when you drop turkeys from helicopters.
Les Nesman: Oh, they’re crashing to the earth right in front of our eyes! One just went through the windshield of a parked car! This is terrible! Everyone’s running around pushing each other. Oh my goodness! Oh, the humanity! People are running about. The turkeys are hitting the ground like sacks of wet cement! Folks, I don’t know how much longer… The crowd is running for their lives.

Arthur Carlson: As God is my witness, I thought turkeys could fly.
The intellectual turkeys running this treacherous institution create a new and larger crisis with each successively desperate gambit to keep their Ponzi scheme alive. Even though Greenspan, Bernanke and Yellen are highly educated, they are incapable or unwilling to focus on the practical long-term implications of their short-term measures to keep this perverted financial scheme from imploding. Denigrating savings and capital investment, while urging debt financed spending on foreign produced trinkets and gadgets passes for economic wisdom in the waning days of our empire. Courageous and truthful leaders are nowhere to be found as the country circles the drain. Farewell middle class. It was nice knowing you.

“There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.” – Henry Hazlitt – Economics in One Lesson

Dave Kranzler: Smoking Gun on The Fed’s MONEY LAUNDERING T-Bond Purchases


1. Cartel capping gold at $1300 and silver at $20
2. London silver fix to end in August after 117 years- is the end of the silver manipulation at hand?
3. Kranzler discusses the Smoking Gun on The Fed’s money laundering US Treasury purchases through Belgium
4. We break down Ted Butler’s claims that JPM is buying all the Silver Eagles- is Jamie Dimon suddenly attempting to corner the ASE market, or is the American public finally waking up? 

John Williams: Gives 90% chance of beginings of hyperinflation of dollar in 2014….AND THIS WAS BEFORE THE UKRAINE CRISIS



Are Private Banks Unconstitutional?

The movement to break away from Wall Street and form publicly-owned banks continues to gain momentum. But enthusiasts are deterred by claims that a state-owned bank would violate constitutional prohibitions against “lending the credit of the state.”
California’s constitution is typical. It states in Section 17: “The State shall not in any manner loan its credit, nor shall it subscribe to, or be interested in the stock of any company, association, or corporation . . . .”
The language sounds prohibitive, but what does it mean? Hundreds of state and local government entities extend the credit of the state. State agencies make student loans, small business loans, and farm loans. State infrastructure banks explicitly leverage the credit of the state. Legally, state and local governments are extending their credit to private banks every time they deposit their revenues in those banks. When money is deposited, it becomes the property of the bank by law. The depositor becomes a creditor with an IOU or promise to be repaid. The state or local government has thus lent its money to the bank.
How can these blatant extensions of the state’s credit be reconciled with the constitutional prohibitions against the practice?
North Dakota’s constitution has particularly strong language. Article 10, Section 18, provides:
The state, any county or city may make internal improvements and may engage in any industry, enterprise or business, not prohibited by article XX of the constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation except for reasonable support of the poor, nor subscribe to or become the owner of capital stock in any association or corporation.
Yet this prohibition has not prevented the state from establishing its own bank. Currently the nation’s only state-owned depository bank, the Bank of North Dakota has been a stellar success and has been going strong ever since 1919. In Green vs. Frazier, 253 U.S. 233 (1920), the US Supreme Court upheld the bank’s constitutionality against a Fourteenth Amendment challenge and deferred to the state court on the state constitutional issues, which had been decided in the state’s favor.
In the nineteenth century, Mississippi, Arkansas, Florida, Kentucky, and Indiana all had their own state-owned banks. Some were extremely successful (Indiana had a monopoly state-owned bank). These banks, too, withstood constitutional challengeat the US Supreme Court level.
Were the prohibitions against “lending the credit of the state” simply ignored in these cases? Or might that language have meant something else?
The Constitutional Ban on “Bills of Credit”: Colonial Paper Money
Constitutional provisions against lending the state’s credit go back to the mid-nineteenth century. California’s is in its original constitution, dated 1849. There was then no national currency, and the National Bank Act had not yet been passed.
Several decades earlier, the states had been colonies that issued their own currencies in the form of paper scrip. Typically called “bills of credit”, these paper bills literally involved the extension of the colony’s credit. They were credit vouchers used by the colony to pay for goods and services, which were good in trade for an equivalent sum in goods or services in the marketplace.
Prior to the constitutional convention in the summer of 1787, the colonies exercised their own sovereign power over monetary matters, including issuing their own paper money. After the collapse of the Continental currency during the Revolutionary War, largely due to counterfeiting by the British, the framers were so afraid of paper money that they expressly took that power away from the colonies-turned-states, and they failed to expressly give it even to the federal government. Article I, Section 10, of the U.S. Constitution provides:
No State shall . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; . . . .
Congress was given the power “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” But language authorizing Congress to “emit Bills of Credit” was struck out after much debate.
The Supreme Court ruled in the Legal Tender Cases after the Civil War that the power to coin money implied the power to print money under the Necessary and Proper Clause, legitimizing the Greenbacks issued by President Lincoln. But in 1850, no state government had the power to extend its own credit in the form of bills of credit or paper money, and whether the federal government had that power was a subject of debate.
However, the expanding economy needed a source of freely-expandable currency and credit, and when local governments could not provide it, private banks filled the void. They issued their own “bank notes” equal to many times their gold holdings, effectively running their own private printing presses.
Was that constitutional? No. The Constitution nowhere gives private banks the power to create the national money supply – and today, private banks are where virtually all of our circulating money supply comes from. Congress ostensibly delegated its authority to issue money to the Federal Reserve in 1913; but it did not delegate that authority to private banks, which have only recently admitted that they do not lend their depositors’ money but actually create new money on their books when they make loans. In the Bank of England’s latest Quarterly Bulletin, it states:
Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
This broad exercise of the money power by private banks is nowhere to be found in our federal or state constitutions, but courts have managed to get around that wrinkle. In Constitutional Law in the United States, Emlin McClain summarizes the case law like this:
A state cannot, even for the purpose of borrowing money, exercise the sovereign power of emitting paper currency (Craig v. Missouri). But this prohibition does not interfere with the power of a state to authorize banks to issue bank notes in the form of due-bills or of similar character, intended to pass as currency on the faith and credit of the bank itself, and not of the state which authorizes their issuance.
The anomalous result is that state-chartered banks are able to issue credit that passes as currency, while state governments are not. But so the cases hold, and they apply to public banks as well as private banks.
Public Banks Held Constitutional
John Thom Holdsworth wrote in Money and Banking (1937) that in the mid-nineteenth century, “several of the states established banks owned entirely or in part by the state. There was some question as to the right of these state institutions to issue circulating notes, but the Supreme Court held that such notes were not ‘bills of credit’ within the meaning of the constitutional prohibition.”
In Briscoe v. Bank of Kentucky, 36 U.S. 257 (1837), the Court observed that the charter of the challenged Kentucky state bank contained “no pledge of the faith of the state for the notes issued by the institution. The capital only was liable; and the bank was suable, and could sue.” The Court “upheld the issuance of circulating notes by a state-chartered bank even when the Bank’s stock, funds, and profits belonged to the state, and where the officers and directors were appointed by the state legislature.”
The Court narrowly defined the sort of “bill of credit” prohibited by Article 1, Section 10, as a note issued by the state, on the faith of the state, designed to circulate as money. Since the notes in question were redeemable by the bank and not by the state itself, they were not “bills of credit” for constitutional purposes. The Court found that the notes were backed by the resources of the bank rather than the credit of the state. Moreover, the bank could sue and be sued separate from the state.
These cases are still good law. A state bank – or city bank or county bank – is not in violation of state constitutional prohibitions against lending the credit of the state.
Other Ways to Avoid Constitutional Challenge
In light of those Supreme Court cases, it hardly seems necessary for a city to become a chartered city before establishing its own publicly-owned bank; but that is another way to circumvent this debate. The California Constitution gives cities the power to become charter cities; and while General Law Cities are bound by the state constitution, cities organized under a charter have broad autonomy. They can bypass large swaths of state law, including asserting their independence from the state’s supposed restrictions on lending.
For county-owned banks, the case is not as clear. In California, Government Code 23005 forbids counties from giving their “credit to or in aid of any person or corporation. An indebtedness or liability incurred contrary to this chapter is void.” But the US Supreme Court rulings validating state banks should be equally applicable to county banks; and in any case, enabling legislation can be crafted to allow public banks at any level of government.
There is another way to bypass this whole legal debate: by pursuing the initiative and referendum process pioneered in California. It allows state laws to be proposed directly by the public, and the state’s Constitution to be amended either by public petition (the “initiative”) or by the legislature with a proposed constitutional amendment to the electorate (the “referendum”). In California, the initiative is done by writing a proposed constitutional amendment or statute as a petition, which is submitted to the Attorney General along with a modest submission fee. The petitionmust be signed by registered voters amounting to 8% (for a constitutional amendment) or 5% (for a statute) of the number of people who voted in the most recent election for governor.
Before sufficient signatures could be collected, a widespread educational campaign would need to be mounted; but just informing the public on this little-understood subject could be worth the effort. Recall the words of Henry Ford:
It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
When enough people understand that private banks rather than governments create our money supply, imposing interest and fees that constitute an enormous unnecessary drain on the economy and the people, we might wake up to a new day in banking, finance, and the return of local economic sovereignty.
Ellen runs The Web of Debt Blog

Global Finance is A Power Game. Political and Financial Alliances, The Big Six Banks

Lars Schall talks with former senior Wall Street banker Nomi Prins about her latest book, “All the Presidents’ Bankers.”
Prins points out how an elite group of men transformed the American economy and government throughout the 20th century, dictated foreign and domestic policy, and shaped world history.
The discussion spans from the panic of 1907 and the creation of the Federal Reserve through 2 World wars, the decoupling of the dollar from gold in 1971, and the question whether American financial power today is in decline.
If the Video appears as unavailable
 
 EDITED TRANSCRIPT – Finance is a Power Game
LS: Hi Nomi, Let’s talk about your new book. What was the motivation to write the book and what is the main idea behind it?
Nomi Prins: My motivation stemmed from a novel I had written before this book, which was called ‘Black Tuesday’, a work of historical fiction about the 1929 crash. In order to do the research for that book, which was not as substantial as the research I wound up doing for ‘All the Presidents’ Bankers’ I discovered this meeting that took place at the Morgan Bank on 23 Wall Street, just a quick little walk from the back of the New York Stock Exchange on October 24th, 1929. This was when the stock market was beginning its initial decent, after which it bumped up and down a few times but ultimately lost 90 percent or so of its value over the next few years.
But on that day, there were six bankers, the big six bankers of the time that convened at the house of Morgan under the request of a man named Tom Lamont, who was the acting chairman of Morgan. Jack Morgan, the actual chairman, was over in Europe traveling. Lamont called the five main bankers of the city to come and after a 20-minute meeting they decided after 20 minutes to each put in 25 million dollars to save the stock markets. They all had these secrets that they were hiding in that room, aside from the fact that the market was spinning out of their control. One of the men was Al Wiggin; the head of Chase; he was shorting Chase shares while he was talking about buying them to save the markets. Charles Mitchell was another fellow in that room, who ran National City Bank, which is now part of Citigroup. He had this deal that he wanted to do – the biggest merger of the time would go through if he could keep his shares up which would be used to pay for the merger. So he really had other reasons to save the markets besides helping the general population from spill-out or the economic fall-out.
That whole meeting and drama of the scene and the way in which these big six decided what to do, and the way that they were supported by president Herbert Hoover was fascinating. After their decision, they were touted in the press, in the New York Times and so forth as having saved the markets again and there was so much congratulation. All of that really stuck with me. And so for the book ‘All the Presidents’ Bankers’ I followed this idea of the big six; the today we have big six banks again, as well as we did before the crash of 1929. Six banks in the US controlled much of the financial markets, and not just from a wealth and power perspective; for there was a political financial line that could be drawn around bankers and presidents during that time, and today.
I started examining this through the presidents’ perspective – which bankers they had relationships with, that they trusted to fix the country, that they hung out with socially, that they went yachting with, that they were in clubs with, that they went to Ivy League universities with and so forth. This is how I further shaped the idea and research for this book, which took me to all the presidents’ archives around the country, from Teddy Roosevelt, who was the president during the panic of 1907, which is where I start the book, through Barack Obama who does not have an archive yet because he is still in office, and all the documents in between I could find.
LS: You have mentioned 1907, and the most dominant banker back then was John Pierpont Morgan. Was he basically the representative of the City of London and British banking on Wall Street?
NP: He was the one who had the closest ties, both from a personal standpoint and from the fact that the Morgan Bank had ties with the City of London as well as Paris. At the time they had companies that they were associated with in both of those cities. As for the background to the panic of 1907, it was a huge bank panic in the United States, people particularly in New York were rushing the banks to get their deposits out because there was a confidence problem and a larger banking crisis brewing. Teddy Roosevelt was scared that that it would spill into a larger economic crisis for the country. He called upon J. P. Morgan to fix the situation; this was in 1907, 22 years before the crash in 1929 where his bank was also at the center. Morgan certainly represented international interests with respect to the US financiers; he was the most powerful, most international of the US financiers, but he was also very deeply concerned about his growth in status in the United States. After that point there was much more growth for the Morgan bank after World War I and World War II.
Even before the panic in 1907, in the 1890s, it was the Morgan family – and this is one of the other large themes of my book, that not just individuals controlled the political/financial alliances and policies of the US domestically and globally, but these are a small handful of elite families that have retained power for decades, for over a century, whose legacies continue to maintain that influence and power. The Morgan family was certainly one of the main families that did that. In the 1890s one of the Morgan’s, J.S. Morgan had helped save the City of London financially when the Bank of England could not do it. So this idea of the private banker saving other private bankers, both internationally as well as domestically, was born a little bit before my book but certainly continued into the 20th century.
LS: If I asked you related to the panic of 1907 cui bono, what would be your answer?
NP: The real benefactor of the panic of 1907 was J. P. Morgan, of course, who ran the Morgan Bank at the time and was the key influencer and economic confidante of president Teddy Roosevelt, who gave him the power and the decision making ability backed by the White House and the Treasury Department to decide which banks would live and which banks would die during the bank panic of 1907, which is what Morgan did. He chose to support the banks that were related to him in some manner, whether they were run by his friends or associates or relationships or in which he just had financial interests. After the panic of 1907 it was really the Morgan family, the Stillman family, who were running National City Bank, the Bakers, who were running First National City Bank, (and those two banks ultimately became what we know today as Citigroup, which is one of the big six banks today, as of course Morgan still exists today in the form of J.P. Morgan Chase, another of the big six banks.) The benefit was really to Morgan and helped make him confident to steer the ship for the establishment of what became the Federal Reserve that became THE bank for the big banks.
LS: How was the panic of 1907 used by Morgan and Rockefeller interests to create the Federal Reserve?
NP: That is a very interesting question. What happened was – even before the panic – these financiers; the new power league in America, wanted to find a way to push forward into what I call the age of financial capitalism – though they did not call it that. The idea was that you could make money now out of money as opposed to just having it be connected to industrial interests like steel and oil – although the Rockefellers had made a substantial amount of money and would continue to do so with the Standard Oil Company and other interests. But they, particularly William Rockefeller was looking for a way of making money for the sake of making money and becoming part of one of the “money trusts” in the early 1900s.
After the panic of 1907 J. P. Morgan and to a lesser extent Rockefeller – the Rockefellers were not involved in the actual meeting that took place at Jekyll Island although William Rockefeller did have a membership at the Jekyll Island Club at the time. There in a meeting that took place in 1910, six men met to bang out the blueprints for the Federal Reserve. They included a fellow from the United States Government, Senator Nelson Aldrich, who was a Rhode Island senator and very connected to the banking community. He knew Morgan; he knew the Rockefellers and so forth. And he and one of his assistant treasury secretaries met with four bankers, Frank Vanderlip, Henry Davison, Paul Warburg and Benjamin Strong, all whom were connected to Morgan. It was J. P. Morgan’s membership as I talk about in the book that allowed them to even meet at Jekyll Island. It was a very exclusive club at the time; you needed to be a member. None of these people were members and J. P. Morgan was not at the meeting that took place.
In fact, and this is sort of where the Rockefeller contingent comes in on the outside of that, Nelson Aldrich was not even planning on going or asking about going to Jekyll Island; he wanted to have these meetings in his Rhode Island estate to still get away from the public but also to be in his own estate, which was north of New York and certainly north of Georgia, which is where Jekyll Island is. But he wound up getting hit by a trolley car in Manhattan, in New York City, while he was visiting there to talk to Morgan and some other people about this whole idea. So he was convalescing; he was not sure he was going to go anywhere and that was when J. P. Morgan suggested he go to this area to get this done, and gave the invitation. A lot of arrangements were made on Jekyll Island to have these people come because it was still November; it was not in season yet. Jekyll Island was into season in December and January, when all the rich families would come down for the holidays and all the rich men would talk and all the rich ladies and children would sort of hang out and play.
But this meeting happened because of J. P. Morgan and also Nelson Aldrich, whose son Winthrop Aldrich became a head of Chase Bank for two decades, and whose great-nephew, David Rockefeller, became also the head of Chase for two decades, and whose other great-nephew, Nelson Rockefeller, became the four-time governor of New York City. So this family line that started from this Federal Reserve period was evident more recently as well.
The bankers’ interests were to make sure that in a panic situation there would be a Federal Reserve that would back the banks so that there would not be a greater crisis, and that they would not have to put up their own money or scrounge around to figure out how to save themselves or to save their system. That was the impetus for the Fed – to have a consolidated entity that could also create currency that could back them in times of panic. And from the American government perspective, from William Taft, who was the president after Teddy Roosevelt and Woodrow Wilson, who was the president after him – they both believed that a Federal Reserve was required to basically – and this is not what is discussed in history so much but it is in my book – to promote American power into the new century. This idea of having a competitive central bank that was aligned with the private banks was something that was very important to these presidents of both parties; both of whom had very strong personal connections to the Morgan’s, to the Aldrich’s and to the Rockefellers and to other families that were operating the money trusts at the time.
LS: Was the creation of the Fed a conspiracy?
NP: It is not a conspiracy, but a fact that Wall Street was behind the Fed; these are real people from real Wall Street who had a real meeting who worked with Nelson Aldrich, the head of the Senate Finance Committee for two years, gathering information together and traveling in Europe to determine how the make-up of the banks in England and in France in particular could be used for the blueprints for the Federal Reserve. James Stillman, who was one of the money trust leaders and a friend of Morgan and the Rockefellers and running National City Bank, which was one of the largest banks in the country at the time, (Citigroup today) traveled for months with Nelson Aldrich in Europe over a period of two years, before that Jekyll Island meeting. So it is not a conspiracy; this is documented fact.
The fact that there were four bankers and two people from Washington at the Jekyll Island meeting itself is also not a conspiracy; it is fact. Also it is a fact that– because as I mentioned, Nelson Aldrich had been hit by this trolley car and he was still not in the best of health after the Jekyll Island meeting; when he was supposed to present the report of that meeting to Washington, it was instead presented by two bankers – Frank Vanderlip, who was the number two guy at National City Bank, who worked for James Stillman, as well as Henry Davison, a senior partner at the Morgan Bank. This is not a conspiracy, this is just what happened.
LS: Yeah, but did those people at the meeting at Jekyll Island conspire with each other to get the Federal Reserve created?
NP: There was nothing to conspire about, it was far easier than that in practice. These men worked together to create the Federal Reserve because they wanted it: Washington wanted it, so did the leaders of Wall Street. They were all on the same page, so there was no need for anything conspiratorial; they collaborated.
LS: But the public was not allowed to know this, right? And they were very careful that the public did not find out about it.
NP: Oh yes, absolutely. But I think when the term ‘conspiracy’ gets batted around, you know, it has this darker context like did this happen this way, did it not happen this way, were they trying to get together to take something away from the public? But no, they were not; they were just trying to protect their own interests because they could. The public was not involved politically in any manner that would get in the way of the design of the Fed, but the public generally isn’t allowed into decisions of Washington or Wall Street or anything related to these power relationships.
What I write in the book is that there were a lot of conversations that took place under the Taft administration, in the 1910 period and towards 1913, when the Federal Reserve was passed and signed upon in December 1913. During the later years under the Woodrow Wilson administration, many conversations happened about the Fed make-up occurred in Washington as they do today where senators and bankers and presidents have conversations, have midnight meetings, decide how structures should be implemented and what is going to get signed, and how it is going to get spun to the public. So if you think of that as a conspiracy, all of government is a conspiracy.
But the reality is, this is how these men operate because they could. The idea was mainly how it would succeed and in what format. And when after the Federal Reserve Act was passed by Woodrow Wilson, he sold it to the public as a Reserve Bank that would help provide credit to the general public, to small farmers, to small banks, that would help America in general by providing credit to the system when there are negative financial situations going on.
But the reality is that from its beginning the Fed was fashioned to protect the largest, which also happened to be the most powerful politically, socially and personally connected institutions in the United States, and that is how it has continued to operate. That is why it has preserved all the mergers that have happened over the century since; that is why it has provided liquidity at a benefit towards the largest banks; and that is why today the big six banks are larger – they are not all the same six banks as back then, but they are larger derivations of them – and they are larger than they have ever been before, and they have more Federal Reserve subsidies than they have ever had before; and the Federal Reserve has a larger book than it has ever had before. All this has culminated over a century; some of it has been open in that we see the results.
LS: Does the US need the Fed?
NP: The US banking system needs the Fed because without its subsidies it would have probably failed many times over the years, certainly over the recent years. But again it is really important to know that this is one of the main themes of the book that … from the beginning of the Fed, they needed the Fed. So the Fed is as much a bank for the banks as it is a political instrument of financial power for the government. The government believes it needs the Fed to subsidize and to save the largest institutions that are integrated in so many different ways with the government as well. These banks deal with the public, we give them our deposits, taxpayers subsidize their failures and their bailouts. But at the same time the philosophies of the political and financial elite members of America are aligned behind the Fed.
So do we need the Fed? The public does not need the Fed. The activities that the Fed provides that relate to the public such as maneuvering interest rates or so forth could be done by the Treasury Department, although the Treasury Department is equally subsidizing and has politically, personally, socially, and financially supporting the big banking institutions as well. Yeah, it is useful to have one entity to maintain rates but that is not really what the Fed does as its full job; what it does and what it has done is subsidize a faulty banking system in disguise of regulating that banking system and protecting the overall credit availability to the country, over which it really has had no power. That was one of the lies under which it was created back 100 years ago.
LS: And has the Fed not become an international bailout bank?
NP: Well yes, because of the whole globalization of finance, in different ways, over the past century. The American banks are not the only banks that are at risk, for financial crises. These crises are increasingly global and will be so in the future. So when the Fed decides to protect the big American banks, it has to protect their largest counter-parties which due to the nature of globalized finance include European banks, they are going to include Asian banks, they basically include any of the major counter-parties of the big six banks. But not only that – the policies of the Fed themselves – aside from the subsidies, but the idea of subsidizing and philosophy behind it has globalized, too.
The Fed has pushed its policies, as we have seen over the last few years, into Europe. So now you have effectively zero interest rate policy throughout Europe along with the subsidizing and bailing out and artificial fortification of all the larger institutions at the expense of the smaller institutions and fortification of the larger countries at the expense of the smaller countries. This is an institutionalized policy that the Fed is promoting, so is the Treasury Department and the government of the United States. You know this is a collaborative promotion that has become global as well.
LS: Because it is 100 years now since the outbreak of World War I, what has to be said about big banking on Wall Street and the slaughter that went on in Europe?
NP: Again it ties back to the Morgan Bank and the Morgan family. When Woodrow Wilson was contemplating not involving the US in the war originally, he had a meeting at the White House, and it was a very interesting meeting because he had campaigned on a platform of being separate from the big banking interests, which were called the Money Trust at the time. But he was really friends with the Morgan’s; the family had supported him before he became president and into his presidency as well.
This meeting that he had in July of 1914 at the White House was criticized by the press because it was odd to them that Morgan was visiting the White House after Wilson had publicly campaigned against the banking interests. But it turned out that Morgan was talking to Wilson about financing a war. And in fact, when the war started, and the United States immediately was financing the French and the British, it was because of the push of the Morgan Bank to do that, and through the course of the war, the Morgan Bank financed or directed the financing of 75 percent of all the private moneys and investments that went into the US war effort and to the allies of the US. There was a very strong collaboration at that point between the Morgan Bank organizing the other banks and Woodrow Wilson into the war. They are very directly related because without money countries do not tend to be able to go to war.
LS: Was the Treaty of Versailles beneficial to big banking on Wall Street?
NP: What happened in the Treaty of Versailles, and there was a Morgan partner who was active with Woodrow Wilson when the treaty was being negotiated and signed, a man named Tom Lamont, who was involved in the Morgan Bank for decades afterwards as well. In 1919, he was instrumental in negotiating reparations that would become part of the Treaty of Versailles. One reason for that was that it was important for the banks, the big banks in particular, to have some sort of stability in Europe so that they could basically get involved in investments, in rebuilding infrastructure in Europe. And they would finance infrastructure and reconstruction on all sides of the participants in the World War.
They benefitted from that because they were able to expand their reach and their business into Europe in a way they would not have been able to do before the war; so the treaty itself in the end of the war was very helpful. Now of course the treaty ultimately was not helpful enough, because we did have a second war after that, after the great 1929 crash and the great depression, through which the bankers continued to push the US government to help fund some of the countries with whom they also were doing private financing in order to continue to do that private financing. There was a series of agreements after the Treaty of Versailles that the bankers were involved in because the Treaty of Versailles was not really working well enough, where they were still able to push for US government financing of certain restructuring in Europe so that they could piggy-bank upon that and again increase their own financial reach into Europe.
LS: Was the Federal Reserve a crucial factor in creating the Great Crash of 1929?
NP: It was not as great a factor then as the Fed pushing cheap money into Wall Street today. But it was a factor; in fact, one of the Big Six bank heads, Charles Mitchell was also a New York Federal Reserve Class A director, and chairman of National City Bank. While the markets were starting to falter in the early part of 1929, he pushed the whole Fed to reduce interest rates to allow for cheaper money and liquidity into the system because he knew from his own bank’s books, and from his business dealings that things were deeply problematic.
So in a way the Fed’s moves might have exacerbated the intensity of the crash but it was really the maneuvers of the largest banks that were the main cause. They had been getting involved in all sorts of speculation after World War I, because the three presidents in the United States after World War I, Warren Harding, Calvin Coolidge, and Herbert Hoover, had a very hands-off policy to the types of speculation these bankers could engage in and they definitely engaged in a lot. So was the Treasury Secretary at the time, Andrew Mellon, who was himself a crook; he was a millionaire, an industrialist, and had run a bank as well. He ultimately left in disgrace from the Hoover administration because of allegations of various types of tax evasion and using the tax policies he was creating to help himself in this whole bubble of speculation. So really everyone was involved.
LS: Did the policies of the Fed do any good during the Great Depression?
NP: Again not really. The main policy that helped during the great depression was the Glass-Steagall Act, and the confidence it instilled with the US population for the banking system because that act separated speculative activities from depositors’ money as well as the potential for people in the country, for tax payers, to have to shoulder additional risks with respect to what the banking industry was doing.
The Federal Reserve today talks about the Federal Reserve back then as being involved in helping the great depression (though Ben Bernanke contended it should have helped more quickly) but the reality is, it was not as evolved as it has become today; it was not quite mature enough, the Fed. So a lot of what was going on had to come from legislation, it had to come from leadership, it had to come also from the ground up and one bank leader in particular, the chairman of Chase, under FDR, Winthrop Aldrich, was a friend of FDR’s and worked with FDR to push and promote and endorse the Glass-Steagall Act because he believed it was important for the nation and for confidence in banking in general to have a more safe and stable system.
LS: Why has there been a power shift from Morgan to Rockefeller taking place during and after World War II?
NP: As I mentioned that before, the Morgan Bank had been the pre-eminent financer, commanding 75 percent of private financing, into World War I, and very closely connected to Woodrow Wilson and to the Treasury Secretary at the time. It was very involved in the decisions that Washington made on financing the war bond effort throughout the United States to raise additional funds and so forth. But by the time World War II came along – Chase (which was more of a Rockefeller bank) because of Winthrop Aldrich, the chairman of Chase who was friends with FDR, pressed a shift to financing the war from the Morgan Bank.
So the Liberty Bond effort, or the War Bond effort for World War II in the United States, really was led by Aldrich, as well as National City Bank, the other big bank, lead by chairman James Perkins, and after he died, by a couple of other executives including a man named Randolph Burgess, who had been a New York Fed director before becoming a senior vice president at National City Bank had a very close relationship with FDR’s Treasury Secretary Morgenthau.
These stronger relationships with the FDR administration, and the Truman administration, and the Eisenhower administration started to tilt toward Chase and National City. Also, those banks had a different model than the Morgan Bank, which is they use individual people’s money in the war drive and they would ask people to open accounts with them and also to buy war bonds at the same time. Thus, throughout the war they were gaining customers, which also helped their strength afterwards since it gave them more capital for the future as well as being intricately involved with Washington, the war bond effort, and private financing efforts. And so the balance tilted from a relationship as well as due to the philosophy of getting individuals on the ground to participate more.
LS: How did financial power shape the world order after World War II?
NP: After World War II when Truman was president and the World Bank had just been created through the Bretton Woods Agreement along with the IMF and so forth, there was a man named John McCloy who had been the Assistant Secretary of War under FDR, and has also been a private lawyer and worked very closely with the Rockefeller family, with Nelson Rockefeller and later David Rockefeller. After World War II, he was asked to become the second president of the World Bank. When he accepted that position he did it with one stipulation – that Wall Street would be the engine that distributed bonds that funded many World Bank initiatives. So he requested something outside of legislation because of conversations he had with Truman’s Treasury Secretary – that Wall Street would be really the decider of what countries the World Bank would support.
These countries were capitalist countries and into the Cold War the capitalist countries got better deals. The Eisenhower administration would fund the countries that were most aligned with the ideals of John McCloy who became the chairman of Chase later on, as well as other bankers of the time. So a lot of what happened militarily as well as financially in terms of America’s expansion after World War II and through the Cold War was this alignment of financiers having military backing from the United States and this ideological backing in the United States government wanting the bankers to expand branches into the countries in which they had footholds as well. There was this mutual alignment as America was growing its super power status, politically and financially, after the war. The World Bank and IMF were just components, or instruments, in that growth.
LS: One part of the Bretton Wood system was that the US Dollar was almost as good as gold. Why did so many prominent US bankers advocate ending the gold standard in the late 1960s, early 1970s? Could it be that the gold standard serves as an effective check on the growth of excessive financial sector growth and abusive banking practices??
NP: Oh, gold absolutely was a more effective check on excessive financial growth and abuses. Gold was effectively a regulation in a way. It did restrain bankers’ expansion because they had to have a certain reserve amount set aside and with a real asset that other World participants were involved in as well. Because of this, US bankers’ had less control of the movement of gold in and out of their firms. Once they convinced the US government to get off of the gold standard and away from this requirement that gold back transactions or speculations or expansions, they then had access to a whole new level of expansion.
That is why today, they much prefer having zero interest rate money, cheap money, so they have less barriers to their activities. This is part of the same pattern and logic of getting off the gold standard – they prefer the less constrained path to speculation. There was a tremendous expansion globally of the US banking interests, which had already started, after the wars, but increased after the gold standard was eliminated because it was just easier to do. There just less barriers for the bankers. They advocated very publicly that the gold standard be removed and in fact, when Nixon finally announced this in ’71 he did not come up with the idea himself; it was something that Walter Wriston, who was chairman of National City Bank and David Rockefeller, who was chairman of Chase and advocated very strongly through letters and correspondence and other types of personal conversations that I discuss in my book.
LS: Do you think that gold will have a future in the monetary system?
NP: I think there is certainly a ground full of people who want that in countries outside the US because of how the financial system has evolved globally; the US banks in particular have so much power, politically and financially. Politically because of their alliance with the US government and financially, because of how much they leveraged cheap capital without reserves like gold behind it.
But that is also the reason why I think it is going to take a very major shift in power, political and financial power, to have gold really … have that kind of future -because these bankers are going to be fighting it tooth and nail. These institutions, these relationships that they have with leadership in Washington, with the Federal Reserve, reveal how a tremendous amount of might has gone into not having gold backing speculative transactions and expansions throughout the world.
So I think it is going to be a very tough battle for gold to make a comeback as an actual requirement to back speculation. It is going to be a very long haul if it is possible at all, given the opposition from a very strong concentrated and powerful political and financial alliance in the US.
LS: One thing that sustained the US Dollar after the early 1970s was the fact that oil was only sold in US Dollars. How did the petro dollar change in the 1970s the relationship between Wall Street and Washington??
NP: That is an excellent question because the history that I traced back from the early 1900s through the 70s is a history of very close relationships, family ties and societal associations between bankers on Wall Street and leaders in Washington being primarily on the same page policy wise. But by the time the bankers discovered that they could be involved in recycling petro dollars, the money that was made in dollars off of the oil profits in the Middle East, they started to fragment from having to even pretend to be aligned with US policies that helped the national population at home or people globally.
All of a sudden they had this outside source of tremendous profitability and capital that they then recycled into debt into Latin American countries where they had wanted to expand but now they had this additional capital with which to do it. They started to detach from aligning with the government, except where it suited their own interests exclusively, even though they still have tight ties with the elite members of the US government and continue to push for their own interests today. Additionally, the pre-1970s accountability has declined as recklessness has increased in the most powerful Wall Street banks and bankers.
LS: Yeah. One illustration might be the following: In your book you are writing about the revolution in Iran in 1979 and how that was caused in part by very selfish action undertaken by David Rockefeller. Could you tell us about this please??
NP: Yes, I spent a lot of time at all the libraries of the presidents in my book, but at Jimmy Carter’s archives, in Atlanta, Georgia, they have a system called the RAC system, which has many files, particularly national security files that have recently been unveiled. Through tracing those it was evident that there was a lot of tension in Washington over the relationship that David Rockefeller had had with the Shah of Iran before the Iran crisis, during the Iran hostage crisis, but also after that, when Chase unilaterally chose to do something very ballsy, at the bequest of David Rockefeller, which was to not accept an interest payment from the Central Bank of Iran. Chase decided this without consulting a syndicate of lenders for this loan, including European lenders as well as US lenders, and after not accepting that interest payment, they then declared the bank in default.
This was the first default that had ever occurred for the Iranian Central Bank, it really heightened the tensions over what was happening with the hostage crisis and in general relationships between the US and Iran. Even at the end of the hostage crisis the agreement to release the hostages came down to receiving a lot of the moneys back that had been sequestered by Chase and other banks and this continued in the last moments before the release of the hostages, which happened under Ronald Reagan’s administration and not Carter’s. There was a lot of activity between the banks involved about changing numbers and not trusting numbers on one side from the US relative to Iran and so forth.
It is a very intricate story but basically it does show that David Rockefeller’s relationship with the Shah was part of why the hostage crisis even happened, and the fact that it went for so long, in particular the negotiations at the very end that came down to money. These were problems caused by Chase and other banks that delayed the entire thing.
LS: Let’s go fast forward. Do you see the US financial power on the globe in decline?
NP: I don’t because – and this is different from what a lot of my contemporaries are saying – because of this power alliance that exists, because of the tightness and the historical connections between the White House and the most powerful players and institutions and legacies on Wall Street. There is so much at stake for both sides, and there are such epic subsidies thrown at keeping the financial system as it is because it reinforces the power of the Washington government and vice versa.
This is why the government allows these major bankers and institutions to get away with what they do and subsidizes them to the extent that it does. These banks are being artificially propped up because of subsidies and not by their own inherent profitability. This is a very dangerous position that they are in, and that they place all of us in. The Fed hold 4.2 trillion dollars of securities on its book, due to an epic level of bond purchasing, in addition to pursuing a zero interest rate policy for nearly six years now in the wake of the 2008 crisis.
This is just another indication of how much might, how much power, how many dumb, but real decisions, are being made in Washington to maintain this power alliance. I don’t think there is any other nation in the world right now who has such a strong and historic connection between its politics and its banking system, and that is why the US continues to do what it does and make these decisions and allow impunity for these individuals in this power game. I think that as long as there is so much subsidization and so little accountability of the banking system, US financial power will be maintained. It is a bad way of maintaining power, but I think that is what we are seeing right now and will be.
LS: One spontaneous question: Do you think the intelligence agencies of the US are also involved in this; in sustaining the financial system in the US?
NP: It is not really something I researched in my book and it is really a whole other can of worms. But intelligence systems in the US form part of the glue between – from a technology perspective – the glue between finance and government. National security policies in general have been aligned with the policies of expansion of banks for decades. And as I mentioned before regarding analyzing the 70s, those were national security records that I was looking at, not Treasury records, to figure out what had really gone on during the Iran hostage crisis; so I am sure as the years go on we will see more documents, that will show a strong alignment of more recent national security initiatives with political and financial elite.
LS: What do see as the end game of the ongoing financial crisis and how can people prepare for it?
NP: That is also an excellent question. The end game is the game that we are in now. The major financial players, have in the wake of the 2008 crisis, been ridiculously subsidized by governments, predominantly in the US as we have been talking about, but also in Europe – the ECB has made some record types of decisions to maintain the largest banks in Europe and to help them.
I see this continuing, and the result will be more concentration and consolidation at the hands of the biggest banks and the biggest bank leaders than we have never had before. In the US, for example, the big six banks today have more assets, more deposits, and control more derivatives than in any other time in US history. As such a small group of individuals and institutions control so much capital and implicitly those connections to the political elite as well, this game continues; this concentration of greater power and capital continues.
Where does that goes? I mean it has so far continued to go in the wrong direction with respect to a stabilizing situation for individuals. So how do we protect ourselves? We can minimize the money that we keep in the largest banks. Even if we have mortgages in those banks, we can try and still minimize the other amounts of capital that we involve because that is a way to at least be partly outside of this rigged system a little bit. I think that is important. We have to realize that the euphoria of this supposed recovery that we have been hearing about since 2009 is really a manufactured recovery on the back of zero percent interest rates and epic bond buying program and all the other things that are going on behind the scenes between political leaders and bank leaders that maintain the appearance of health but are really a manipulated appearance.
LS: One final question: Why did you give up your career in banking, Nomi?
NP: I was done with it and this was over twelve years ago now. For me it was a decision that had been brewing already and in 2001, it was a combination of the Enron scandals, WorldCom, 9/11, you know, I had been in banking for a while and seen a lot of things change in the time that I had been there, that fueled my own disillusionment with the types of people that were rising in the institutions. It was all deeply distasteful: the level of secrecy, the level of just sheer – not just greed – but this denial of transparency to costumers or clients or investors of the transactions and securities being created and what the downsides of those transactions were. When I first started on Wall Street it was more important for us to show clients what the downside of any particular trade would be. You know, if you buy this, if you sell this, if you do this combination, this could happen in an adverse scenario. But that became something of less and less interest within banking. The credit derivatives market, of course, was blowing up at the time that I was leaving the industry.
I warned about what would happen when I became a writer; in my very first book, ‘Other People’s Money’ that came out in 2004, in the wake of Glass-Steagall appeal if we did not get Glass-Steagall back, if we continued on the path of credit derivatives and CDOs and using loans to line faulty securities – that it was going to create a large crisis, and it did. I still believe it will again. What I do now is try to do is alert people as to what is happening using the experiences that I gained while I was there. The disillusionment and criticism that I felt when I left, I have kept. And I think I have been proven right publicly as well. Plus, I have a much better life as a writer than I did as a banker because I am much clearer with my own conscience as well.
For the new book by Nomi Prins, “All the Presidents’ Bankers: The Hidden Alliances that Drive American Power,“ April 2014, Nation Books.
Nomi Prins, who grew up in the US state of New York, worked after her studies in mathematics and statistics for Chase Manhattan, Lehman Brothers, Bear Stearns in London and as a Managing Director at Goldman Sachs on Wall Street. After she left the financial industry in 2001/02, she became an outstanding financial journalist who has written by now five books including: “It Takes a Pillage: Behind the Bailout, Bonuses, and Backroom Deals from Washington to Wall Street,” that was published in September 2009 by Wiley. Furthermore, she is a Senior Fellow at “Demos” in New York City, gave numerous interviews to international outlets such as BBC World, BBC, Russia Today, CNN, CNBC, CSPAN and Fox, and her articles appear in The New York Times, Fortune, The Nation, The American Prospect and The Guardian in Britain. The website of Nomi Prins can be found here: http://www.nomiprins.com/. She lives in Los Angeles, USA.
Click the link to see the 2011 interview from Lars Schall with Nomi Prins on behalf of Gold Switzerland, “Market Manipulation and the Second Great Depression”.

Evidence that the Meritocracy is Made Up of Poor People

Paul Buchheit
RINF Alternative News

Many wealthy Americans believe that dysfunctional behavior causes poverty. Their own success, they would insist, derives from good character and a strict work ethic. But they would be missing some of the facts. Ample evidence exists to show a correlation between wealth and unethical behavior, and between wealth and a lack of empathy for others, and between wealth and unproductiveness.
The poor, along with a middle class that is sinking toward them, make up the American meritocracy. Here is some of the evidence.

1. The Poor Don’t Cheat As Much

An analysis of seven different psychological studies found that “upper-class individuals behave more unethically than lower-class individuals.” A series of experiments showed that upper-class individuals were more likely to break traffic laws, take valued goods from others, lie in a negotiation, and cheat to increase their chances of winning a prize.

And this doesn’t even begin to examine the many, many significantcases of fraudulent behavior in the banking industry. Or private equity firms that cheat their investors over 50 percent of the time. Or the many unscrupulous corporate tax avoidancestrategies.

2. The Poor Care More About Other People

Numerous reputable sources have concluded that lower class individuals tend to be more generous and trusting and helpful, compared to the upper class. As people gain in wealth, they depend less on others, and thus they have less reason to understand the feelings and needs of the less fortunate. The poor are better at interpersonal relationships because they need other people.

In addition, careful studies have determined that money pushes people further to the right, making them less egalitarian, and less willing, as a practical consequence, to provide broadeducational opportunities to all members of society.

One neuro-imaging analysis even suggested that the super-wealthy view photos of impoverished people as things rather than as human beings. They react to the poor not with sympathy, but with contempt.

3. The Rich Focus on Me, Me, Me

The authors of a recent psychological study argue that rich people are different because they have the freedom to focus on self. In support of this, a number of studies have demonstrated that higher social class is associated with increased narcissism, even to the point of looking at themselves more frequently in a mirror. The rich feel entitled. They attribute success to their ‘superior’ traits, while people from lower economic backgrounds attribute success to societal values, such as educational opportunities.

4. The Poor Give a Greater Percentage of Their Money to Others

Research has shown that low-income Americans spend a much higher percentage of their income on charitable giving. Results from three studies average out to 4.5% from low-income people, 2.7% from those with high incomes. With respect to helping people in need, the rich give even less. As Robert Reich notes, about two-thirds of ‘charitable’ donations from the rich go to their foundations and alma maters, and to “culture palaces” – operas, art museums, symphonies, and theaters.

Charles Koch said, “I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.” The well-being ofhigh society, perhaps.

5. Entrepreneurs are in the (Sinking) Middle Class

The meritorious behavior of job creation comes from the middle class, which is quickly slidingtoward lower-income status. The very rich generally don’t risk their money in job-creating startup businesses. Over 90% of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), the stock market, and real estate.

With the demise of the middle class, entrepreneurship is decreasing. According to a Brookings Institute report, the “firm entry rate,” a measure of new firms and thus of entrepreneurial startup activity, fell by nearly half in the thirty-plus years between 1978 and 2011. America‘s average entrepreneur is 26 years old, but most of our 26-year-olds are burdened by student loan debt.

Meriting Our Respect and Appreciation

Lower-income Americans serve our food, care for our sick, and clean up after us, with minimal benefits and few complaints. More and more middle-income workers are falling into this struggling group, as 9 out of 10 of the fastest-growing occupations are considered low-wage, generally not requiring a college degree.

These people merit our admiration for persevering in a society where a privileged few are taking almost everything.
Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.