HSBC whistleblower and political hopeful Everett Stern.
A bank whistle-blower is seeking a more powerful position from which to hold too-big-to-fail companies accountable.
Everett Stern, a former HSBC employee who last summer called for
fresh investigations into the company’s money-laundering controls, has
launched a bid for Congress. Stern is campaigning to be the Republican
nominee for the seat in Pennsylvania’s 13th district, which spans the northern suburbs of Philadelphia.
Incumbent Allyson Schwartz plans to give up the seat as she seeks to
become the state’s governor. Stern is currently raising money and
gathering signatures to have his name on the ballot for the Republican
primary in May.
“These banks are going to have a real problem when I get into
office,” Stern said. “It’s going to be funny when the whistle-blower is
sitting there as a congressman.”
Stern, who worked in HSBC Bank USA’s anti-money-laundering division in 2010 and 2011, filed a lawsuit last year asking
federal regulators to investigate whether the bank continued to violate
money-laundering rules after the period covered by the bank’s record
settlement.
Stern’s campaign is rooted in his frustration that the government has
not taken stronger action against banks that have violated the law.
Beyond that, Stern sees banking scandals as a symptom of widespread
apathy that he hopes to battle as a member of Congress.
“HSBC’s story is not just about HSBC. It’s about people not caring and the government not caring,” he said.
Stern decided to seek office this past fall, after he met with Rep.
Maxine Waters, D-Calif., the top Democrat on the House Financial
Services Committee, to discuss his claims.
Waters later introduced legislation that
would make bank executives personally liable for anti-money-laundering
violations. But Stern was disappointed, feeling that the bill has little
chance of becoming law and that Waters should have pushed for
congressional hearings about his claims.
Stern knows that, with his financial constraints, he faces a tough
job getting elected. At least three other candidates are seeking the
Republican Party’s nomination to take the seat, and the Democratic
candidates are led by Marjorie Margolies, a former member of Congress
whose son is married to Chelsea Clinton. It is a “safe” Democratic seat
for 2014 , according to the Rothenberg Political Report / Roll Call, an
election-analysis website.
Yet he sees his outsider status as a potential benefit. Without a
campaign staff, he has been working long hours to gather signatures and
meet potential voters, in addition to working for the
business-intelligence firm he founded, Tactical Rabbit.
“I’m hoping that American people see my sincerity and say, ‘He’s the real deal,’” he says. “I’m ending the [expletive].” Here is an Everett Stern interview with Luke Rudkowski of We Are Change:
What are we to make of this sudden rash of banker suicides? Does this trail of dead bankers lead somewhere?
Or could it be just a coincidence that so many bankers have died in
such close proximity? There are some common themes that seem to link at
least some of these deaths together. First of all, most of these men
were in good health and in their prime working years. Secondly, most of
these “suicides” seem to have come out of nowhere and were a total
surprise to their families. Three of the dead bankers worked for JP Morgan.
Several of these individuals were either involved in foreign exchange
trading or the trading of derivatives in some way. So when “a foreign exchange trader” jumped to his death from the top of JP Morgan’s Hong Kong headquarters Tuesday, that definitely raised my eyebrows. These dead bankers are starting to pile up, and something definitely stinks about this whole thing. One thing is for certain – dead bankers don’t talk.
From The Economic Collapse Blog:
What would cause a young man that is making really good money to jump off of a 30 story building? The following is how the South China Morning Post described the dramatic suicide of 33-year-old Li Jie…
An investment banker at JP Morgan jumped to his death from the roof of the bank’s headquarters in Central yesterday.
Witnesses said the man went to the roof of the 30-storey Chater House
in the heart of Hong Kong’s central business district and, despite
attempts to talk him down, jumped to his death.
If this was just an isolated incident, nobody would really take notice.
But this is now the 7th suspicious banker death that we have witnessed in just the past few weeks…
- On January 26, former Deutsche Bank executive
Broeksmit was found dead at his South Kensington home after police
responded to reports of a man found hanging at a house. According to reports, Broeksmit had “close ties to co-chief executive Anshu Jain.”
- Gabriel Magee, a 39-year-old senior manager at JP Morgan’s European headquarters, jumped 500ft from the top of the bank’s headquarters in central London on January 27, landing on an adjacent 9 story roof.
- Mike Dueker, the chief economist at Russell Investments, fell down a 50 foot embankment in
what police are describing as a suicide. He was reported missing on
January 29 by friends, who said he had been “having problems at work.”
- Richard Talley, 57, founder of American Title Services
in Centennial, Colorado, was also found dead earlier this month after
apparently shooting himself with a nail gun.
- 37-year-old JP Morgan executive director Ryan Henry Crane died last week.
- Tim Dickenson, a U.K.-based communications director at
Swiss Re AG, also died last month, although the circumstances
surrounding his death are still unknown.
So did all of those men actually kill themselves?
Well, there is reason to believe that at least some of those deaths may not have been suicides after all.
For example, before throwing himself off of JP Morgan’s headquarters in London, Gabriel Magee had actually made plans for later that evening…
China is practicing for a “short, sharp war” with Japan.
That is the assessment of a top U.S. Navy intelligence analyst, who
told colleagues that China’s People’s Liberation Army (PLA) is currently
conducting training exercises in a practice scenario in which the
military takes the Senkaku Islands, near Taiwan.
“We witnessed the massive amphibious and cross-military region
enterprise,” Capt. James Fannell, deputy chief of staff intelligence and
information operations for the U.S. Pacific Fleet (PACFLEET) said at
the West 2014 conference on Feb. 13 in San Diego.
“[We] concluded that the PLA has been given the new task to be able
to conduct a short, sharp war to destroy Japanese forces in the East
China Sea following with what can only be expected a seizure of the
Senkakus or even a southern Ryukyu [islands] — as some of their
academics say.”
It’s alleged that in the past year, China has increased its military
activity, including high-profile actions in the South China Sea as well
as combat drills in the south Philippine Sea.
Fannell’s comments were reported in the U.S. Naval Institute News, the navy’s official media organ.
“There is growing concern that China’s pattern of behavior in the
South China Sea reflects an incremental effort by China to assert
control of the area contained in the so-called 9-dash line despite the
objections of its neighbors, and despite the lack of any explanation or
apparent basis under international law,” Fannell also said.
Japan has in recent months accused a Chinese warship of locking its
missile-targeting radar onto one of its warships, Fannell noted. China
first denied the claim, but later admitted it while downplaying any
danger the incident posed.
Retired U.S. Army Lt. Col. Ralph Peters said China has a habit of
bullying its neighbors with intimidating military drills, though
exercises aimed at Japan are a new and worrisome wrinkle.
“The Chinese have conducted training exercises aimed at Taiwan for
decades–but haven’t invaded,” Peters, also a Fox News military analyst,
told FoxNews.com. “The latest Chinese exercises that appear to rehearse
an invasion of the Senkaku Islands are probably in that vein: Military
exercises as a show of strength, a closed-fist tool of diplomacy, and,
yes, a threat, but not one on which Beijing really desires to act.”
Peters adds that the exercises are likely China’s attempt at posturing.
“At present, China would have a great deal to lose by attacking or
otherwise provoking a confrontation with Japan,” he said. “At the same
time, the Chinese feel they’re the regional (and global) rising power
and they rather enjoy flexing their muscles. You might say they’re
proud of their physique, but don’t really want a fight. In that sense,
these exercises are a strategic ‘selfie.’”
The PLA is not the only one with seemingly aggressive moves as of
late. Fannell also mentioned at the West conference that the Chinese
coast guard is engaged in “quasi-military actions.”
“Tensions in the South and East China Seas have deteriorated with the
Chinese coast guard playing the role of antagonist, harassing China’s
neighbors while PLA Navy ships, their protectors, (make) port calls
throughout the region promising friendship and cooperation,” he said,
adding that China has spent $1.6 million on improvements to outposts in
the South China Sea including development of ports, airfields, water
purification and surveillance systems.
The assessments made at the conference are in stark contrasts to
recent US efforts to tighten military-to military ties with China.
The Navy’s head of operations, plans and strategy, Rear Adm. James
Foggo said while on the same conference panel that there was a recent
successful meeting between U.S. Navy officials and the head of the PLA’s
naval forces.
A U.S. delegation also toured PLAN ships and submarines and is
working out plans for the Chinese navy to participate in the Rim of the
Pacific 2014 (RIMPAC) exercise later this year.
Rick
Rule from Sprott Global Resource Investments joins us to talk about
everything precious metals. But towards the end of the interview we get
to the brass tax: “The idea that silver can be manipulated down ignores
the fact that it could easily be manipulated UP. And the consequence of
two years of extraordinary physical demand in the face of the unwinding
of the leveraged long carry trade in silver expressed in SLV and
expressed in the futures markets, tell me that it will be easier to make
money manipulating the price of silver UP than manipulating the price
of silver down. And my suspicion is that the commercial interests in
manipulation will ultimately do the easiest thing to do. If there was $2
Billion employed, not on margin by the way, cash – so the rules could
not be changed like they were on the Hunts – $2 Billion in cash employed
in the futures markets which was held for delivery, cleaning OUT the
good deliver silver that’s available, the short interest would LITERALLY
be uncoverable.”
WSJ
WASHINGTON—A broad measure of home sales fell sharply in January, the
latest sign the housing market is buckling under higher mortgage rates,
tight inventory and severely cold weather.
Sales of previously owned homes fell 5.1% in January from December to
a seasonally adjusted annual rate of 4.62 million, the National
Association of Realtors said Friday. The drop, the fifth in the past six
months, pushed sales down to the lowest level in 18 months.
The decline was steeper than economists’ expectations and raises new
questions about the underlying strength of the housing market. Sales
began slowing in the middle of last year, long before chilly winter and
snowstorms gripped much of the U.S.
Existing-home sales, which reflect more than 90% of all home
purchases, fell across all four regions in January, but the biggest drop
occurred in the West, which has been the warmest. Read More Here
Obama’s
policies are clearly hurting the economy. His stimulus package is
responsible for the continuing bad economic climate. You cannot tax
people who work and at the same time pay people not to work! This is
what Obama’s policies are doing!
The
global banking system has entered DEFCON1 and is in self-preservation
mode as banker deaths continue to surge. We explore why we can sadly
expect the number of banker deaths to intensify over the coming months
as well as additional curious facts about the death of JPMorgan banker
Gabriel Magee brought to light recently by his parents.
A sign is seen outside a Royal Bank of Scotland building in central London January 28, 2014.
Credit: Reuters/Paul Hackett
(Reuters) - Royal Bank of Scotland (RBS.L)
has suspended a senior currency trader in London, bringing to three the
number of traders suspended by the bank since a global investigation
into allegations of rigging reference exchange rates was launched last
year.
Ian Drysdale was put on leave earlier this week and has now been suspended, a source familiar with the matter said.
This follows the suspension of Julian Munson and Paul Nash in October last year.
RBS declined to comment, and Drysdale could not be reached for comment.
On Tuesday RBS said it was reviewing rules on currency dealers trading with their own money.
The
global probe into online communications between traders and allegations
of manipulating benchmark currency rates known as "fixings" has seen
more than 20 traders at many of the world's biggest banks put on leave, suspended or fired.
The
Bank of England, Britain's Financial Conduct Authority (FCA) and the
U.S. Federal Reserve and Department of Justice are among those looking
into the allegations of wrongdoing in the $5.3 trillion-a-day global FX
market, the world's biggest market.
The
FCA's chief executive Martin Wheatley has said the allegations are
"every bit as bad" as those made in the interest rate-rigging scandal
centring on the London Interbank Offered Rate, or Libor, which has
already resulted in banks paying $6 billion (3 billion pounds) in fines and settlements.
Benchmark
currency fixings are a cornerstone of global financial markets, used to
price trillions of dollars worth of investments and deals and relied
upon by companies, investors and central banks.
(Reporting by Jamie McGeever; Editing by Greg Mahlich)
Accurate or deceptive? Investors must learn to tell the difference
China announced its annual GDP figures very quickly, but doubts have been cast on their accuracy. Photo / AP
The world is awash with data and statistics. This is a positive
development, but data can be used in strange ways and, as far as
investors are concerned, it is important to differentiate between
meaningful and questionable statistics.
Facebook, Google and your local store probably know more about you than you would ever imagine.
Target,
the huge American discount retailer, has developed a sophisticated
software programme that can determine when a woman is pregnant because
purchasing data shows that women change their shopping behaviour when
this occurs.
The New York Times Magazine tells the story
of a man who went to a Target store in Minneapolis and criticised the
store manager because his daughter was being bombarded with
pregnancy-related coupons.
"She's still in high school and you're sending her coupons for baby clothes and cribs.
Are you trying to encourage her to get pregnant?" the man asked.
The manager apologised and called the father a few days later to apologise again.
This
time he received a much more subdued response and was told, "It turns
out there's been some activities in my house I haven't been completely
aware of, she's due in August".
Companies now mask the fact they
know women are pregnant by offering other products with their
pregnancy-related promotions knowing full well the women have no
interest in the additional items.
Investors are often faced with
the same dilemma as the Minneapolis father - which information is
accurate and which is misleading?
This is particularly relevant
now, because investors are keeping a close eye on China because its
growth rate is slowing and there are clear signs it has had a credit and
property bubble.
On Thursday, Merkit/HSBC revealed that its
Chinese purchasing managers' index fell to 48.3 last month from 49.5 in
January. A measurement above 50 indicates manufacturing is expanding;
below 50 shows it is contracting.
But how can any general private sector statistic accurately measure the overall state of manufacturing in such a vast country?
The same could be said for China's gross domestic product and many of its other economic statistics.
On January 20, China's National Bureau of Statistics announced that the country's GDP grew by 7.7 per cent last year.
This beat the Government's target of 7.5 per cent and the market's consensus of 7.6 per cent.
How
could China, with a population 302 times greater than New Zealand and
with 36 times more land mass, produce its GDP figures 20 days after
year-end while we take about 80 days?
Is China's National Bureau
of Statistics on speed - and Statistics New Zealand on a go slow - or
are there serious questions about the reliability of China's statistics?
The
statistics are clearly questionable - several credible media outlets,
including the government-controlled Xinhua News Agency, referring to "a
somewhat peculiar math problem".
According to Xinhua the
aggregate GDP of 28 provinces was greater than China's total GDP and
this did not include three provinces that had not reported their GDP.
Local
officials in China are promoted on the basis of their region's growth,
and this gives them a huge incentive to report inflated GDP figures.
As
well, environmental issues are important and if local officials can
show that their region's GDP has grown at a faster rate than coal
consumption then they appear to be energy efficient.
Last weekend's Wall Street Journal raised serious questions about the reliability of US unemployment figures.
The
paper said the US Government began to measure unemployment during the
Great Depression because it had no official way of calculating economic
activity or unemployment.
Today, the unemployment rate is based on two monthly surveys, one of 557,000 businesses and the other of 60,000 households.
Unemployment
is defined as covering those looking for work but unable to find it,
rather than those who don't have a wage-paying job.
To some
extent, these surveys are similar to political opinion polls, which can
predict a result that is different to the result of a general election
held days after the poll was taken.
Economists also say a
national unemployment rate is misleading because there is a vast
difference between regions, race, gender and education attainment.
The
unemployment rate among university-educated women in their 30s in
Boston is totally different to the rate for poorly educated
African-American males under 25 in Detroit.
Nevertheless
sharemarkets often move dramatically when the headline American
unemployment figure is announced and economic policies can be based on
these headline figures.
The US Federal Reserve Board's monetary
policy is strongly influenced by the national unemployment rate and
President Obama justified his US$800 billion stimulus bill in 2009 on
the national unemployment figure.
In New Zealand, we have one official measurement of unemployment and two others compiled by the Ministry of Social Development.
The
official unemployment rate is the Household Labour Force Survey
compiled by Statistics New Zealand. The survey, conducted every three
months, covers about 15,000 private households and about 30,000
individuals.
It samples "households on a statistically
representative basis from areas throughout New Zealand, and obtains
information for each member of the household. The sample is stratified
by geographic region, urban and rural areas, ethnic density, and
socio-economic characteristics."
New Zealand had a seasonally
adjusted unemployment rate of 6 per cent for the three months to
December - representing 147,000 people - compared with 6.8 per cent a
year earlier.
Eleven OECD countries have a lower unemployment rate and 22 have a higher rate.
The
latest New Zealand unemployment rates are males 6.9 per cent, females
5.2 per cent, European 4.6 per cent, Maori 12.8 per cent, Pacific
peoples 13.7 per cent and Asian 5.8 per cent.
Auckland has a 6.3
per cent unemployment rate, Wellington 6 per cent and Canterbury 3.4 per
cent. Canterbury has the country's lowest unemployment rate and Bay of
Plenty the highest at 9.3 per cent.
The 15-19 age group has the
highest unemployment rate at 24 per cent while the 65 years plus age
group the lowest with 1.8 per cent.
The Ministry of Social
Development used to issue a statistic called the unemployment benefit.
But it has changed this definition to "jobseeker support" and has
released estimated figures on jobseeker support back to December 2008.
Comparison
of the jobseeker support figure and the official number of unemployed
show the difference between these two figures can fluctuate
dramatically.
In June last year - the last time we had all three
statistics - 48,400 people were receiving unemployment benefits, 128,600
were receiving jobseeker support and 153,000 were officially
unemployed.
These figures show there can be a material variation
between our unemployment measurements although the official Statistics
NZ figures are the most widely used.
There is an old saying: "There are three kinds of lies: lies, damned lies, and statistics."
This
column is not trying to say all statistics are lies but some headline
figures are questionable and little better than educated estimates.
Because
of the vast amount of data disseminated these days it is important for
investors to decide which figures are accurate and most likely to give a
meaningful indication of overall market movements over the medium term.
• Brian Gaynor is an executive director of Milford Asset Management.
Subscribe to the GoldMoney newsletter athttp://www.goldmoney.com/goldresearch. Episode 129: Andy Duncan has the pleasure to interview former Assistant Secretary of the Treasury, Dr. Paul Craig Roberts.Andy gets straight to it and
asks Dr. Roberts about his view on a manipulated price of gold. Dr.
Roberts elaborates on how he sees what has occurred since early April,
whom was behind it and the reasons why.Dr. Roberts sees inherent
problems with the US dollar system and expresses grave concerns about
the systematic fragility due to excess money printing around the world.Next Andy poses a question as
to what could be done to get things back on track utilising the US
political system, which allows Dr. Roberts to express his concerns with
the current state of the nation before answering an interesting question
regarding his recent book “The Failure of Laissez Faire Capitalism and
Economic Dissolution of the West” (http://www.amazon.com/dp/B00BLPJNWE).Dr. Roberts poses some
important questions about libertarian ideals versus human nature before
offering some advice for listeners regarding the future.This podcast was recorded on the 3rd of June 2013 and posted onhttp://FinanceAndLiberty.com with permission fromhttp://GoldMoney.comSUBSCRIBE (It’s FREE!) to “Finance and Liberty” for more interviews and financial insight ? http://bit.ly/Subscription-Link
President
Obama’s forthcoming budget request will seek tens of billions of
dollars in fresh spending for domestic priorities while abandoning a
compromise proposal to tame the national debt in part by trimming
Social Security benefits.
With the 2015 budget request, Obama will call
for an end to the era of austerity that has dogged much of his
presidency and to his efforts to find common ground with Republicans.
Instead, the president will focus on pumping new cash into job
training, early-childhood education and other programs aimed at
bolstering the middle class, providing Democrats with a policy
blueprint heading into the midterm elections.
As part of that strategy, Obama will jettison
the framework he unveiled last year for a so-called grand bargain
that would have raised taxes on the rich and reined in skyrocketing
retirement spending. A centerpiece of that framework was a proposal —
demanded by GOP leaders — to use a less-generous measure of
inflation to calculate Social Security benefits.
The idea infuriated Democrats and never gained
much traction with rank-and-file Republicans, who also were unwilling
to contemplate tax increases of any kind. On Thursday, administration
officials said that the grand-bargain framework remains on the table
but that it was time to move on.
President
Obama’s budget marks the end of “austerity,” reports
the Washington
Post.
“President Obama’s forthcoming budget
request will seek tens of billions of dollars in fresh spending for
domestic priorities while abandoning a compromise proposal to tame
the national debt in part by trimming Social Security benefits,”
the report reads.
“With the 2015 budget request, Obama will
call for an end to the era of austerity that has dogged much of his
presidency and to his efforts to find common ground with Republicans.
Instead, the president will focus on pumping new cash into job
training, early-childhood education and other programs aimed at
bolstering the middle class, providing Democrats with a policy
blueprint heading into the midterm elections.
Up
106%: Obama Has More Than Doubled Marketable U.S. Debt
The marketable debt of the U.S. government has
more than doubled–climbing by 106 percent–while President Barack
Obama has been in office, increasing from $5,749,916,000,000 at the
end of January 2009 to $11,825,322,000,000 at the end of January
2014, according to the U.S. Treasury’s latest Monthly Statement of
the Public Debt.
During the eight-year presidency of George W.
Bush, the marketable debt of the U.S. government almost
doubled–climbing 93 percent–from $2,977,328,000,000 at the end of
January 2001 to $5,749,916,000,000 at the end of January 2009
STICK-UP: ‘HOUSE OF CARDS’ threatens to
quit state without more tax breaks
A
few weeks before Season
2 of “House of Cards” debuted online, the show’s
production company sent Maryland Gov. Martin O’Malley a
letter with this warning: Give us millions more dollars in tax
credits, or we will “break down our stage, sets and offices and set
up in another state.”
A similar
letter went to the speaker of the House of Delegates,
Michael E. Busch (D-Anne Arundel), whose wife, Cynthia, briefly
appeared in an episode of the Netflix series about an
unscrupulous politician — played by Kevin Spacey — who
manipulates, threatens and kills to achieve revenge and power.
What else can we do with the $1.25 trillion we’ll save by eliminating these obsolete financial middleman parasites? A lot. Technology has leapfrogged the banking sector, rendering it
as obsolete as buggy whips. So why are we devoting 9% of our economy to
an obsolete parasite? Financial sector profits now total a
staggering 4.5% of GDP (gross domestic product), while the expenses
generated by financial churning account for another 4.5% of the economy. Software and existing non-Wall Street/too-big-to-fail
institutions could replace the entire Wall Street/banking sector and
drop costs to .5% of GDP, saving us 8+% of our GDP ($1.25
trillion) that is currently siphoned off by parasitic middlemen. The
banking sector is Exhibit A in the Middleman-Skimming Economy (February 11, 2014). The pull of habit and propaganda is so strong that most
people haven’t even recognized that software and the Web can replace the
entire financial/banking sector for a fraction of the cost of the
current parasitic system, a system that (as we all know) has
captured the regulatory and governance machinery of the central state,
making a mockery of democracy. The benefits of eliminating the financial/banking sector are immense and far-reaching. What exactly do banks do? Banks perform these basic functions:
1. They hold depositors’ money.
2. They act as a clearing house for payments, transferring funds from payor to payee.
3. They issue loans on a fractional reserve basis, i.e. a few dollars in cash deposits supports $100 in loans.
4. They originate and trade derivatives, run high-speed trading
desks, operate various money-laundering and embezzlement schemes,
influence elected officials with lobbying and campaign contributions and
subvert both free market capitalism and democracy at every turn. This entire parasitic middleman sector could be replaced with
automated digital clearing houses and crowdfunded or non-bank loans. Why do we need banks to pay bills online? We don’t; any clearing house could charge a small fee for the transaction. Why do we need banks when loans can be crowdfunded? If
we can invest money in start-ups via Kickstarter, Indiegogo, RocketHub,
AngelList, etc., why can’t we own a piece of someone’s auto loan or
home mortgage? The web and software now enable the elimination of the entire middleman skimming operation of banking. Those
with capital can invest that capital directly in loans that the
investors choose. Risk is distributed throughout the system, and the
process of verifying credit scores, income, valuations, assets, and so
on–the building blocks of risk assessment and a market for debt and
cash–can also be automated. The entire notion that 100 savers put their money in a bank
which then buys a mortgage with their savings and sells it as a security
that supports a pyramid of derivatives is obsolete. Each saver
can directly own (and sell on a transparent market) a piece of a
mortgage, auto loan, business loan, etc. There is no need for a
middleman banking sector at all–no skim, no concentration of risk, no
opportunities for selling derivatives to unwary investors. All that goes away with the banking sector. But what about holding deposits? We already have two
institutions that could serve this role: credit unions and the post
office. If those holding depositors’ cash do not issue loans,
they have no source of income to defray operating expenses. The solution
is obvious: charge fees for holding deposits and payor-payee
transactions. If
the fee structures are transparent, those who charge too much will
disappear as customers go elsewhere. That’s the purpose of transparent
competition in an open marketplace. Many other advanced nations have long combined postal and simple banking services: France
and Japan come to mind. Here we have a postal service that is
struggling to fund its operations in the era of email, and here we have
millions of people who prefer to (or have to) do simple banking in
person. There is no technical or administrative reason that the post
office could not operate as it does in Japan, as a place to deposit
funds (including auto-deposit of Social Security checks), take out cash,
etc. US Post Office Could Rack Up Billions By Offering Money Services–NPR (via Joel M.) Please note that what I am suggesting is a transparent open
market for these services provided by a range of enterprises and
institutions. Assemble a marketplace of local credit unions,
the post office, enterprises that handle payor-payee transactions such
as Dwolla and PayPal, and you have a wide spectrum of choices to suit
every need. As for business loans: you can get small-business loans on PayPal right now. It’s called Working Capital, and the borrower is given the total amount due right up front. As for the commercial paper market: there is no
technical reason why a transparent exchange couldn’t enable borrowers
and owners of capital to set short-term loan rates via transparent
bidding with automated software. The obsolescence of banking includes the Federal Reserve–the ultimate middleman skimming operation. But
what about providing liquidity in credit panics? Well, to start with,
once the banking sector is gone then the concentrations of risk and the
obscuring of risk that go hand in hand with banking also disappear– the
forces that generate panics will have been dispersed. Those forces will
have vanished along with the middleman financial sector that created all
the risks, speculative excesses and panics. If there were a liquidity
crisis, the Treasury could create and lend whatever funds were needed.
But what about manipulating interest rates and other forms of
financial repression? Interest rates would be set by millions of
borrowers and owners of capital in transparent transactions. What about all those great investing services offered by big banks and Wall Street? As many have observed, automated index funds outperform 99% of fund managers over 10 year time frames. So Wall Street is also obsolete. Once we get rid of these obsolete middleman parasites–Wall
Street, the banking sector and the Federal Reserve–we have a delightful
question to answer: what else can we do with the $1.25 trillion we’ll save every year by eliminating these obsolete financial middleman parasites? A lot.
Between snow days, official holidays and the government shutdown,
federal employees have worked a normal business day less than 75 percent
of the time since Oct. 1, marking a startlingly chaotic beginning to
the fiscal year.
Offices have been closed in whole or in part for 27 of the 105 weekdays so far in the fiscal year, according to a Washington Times
analysis of announcements from the federal Office of Personnel
Management that found the government was closed for 21 days because of
the shutdown, snow days or holidays. Delayed openings or unscheduled
leave and telework policies were in effect for six more days.
Congress is the worst offender when it comes to time away from the
main office. Neither the House nor the Senate has worked a full
Monday-to-Friday workweek in 2014. House members have been in session
for 17 of the 35 weekdays so far this year, less than 50 percent.
Senators have met in full session for 18 days, slightly better than 50
percent.
Blame for federal employees’ crazy schedule is widespread: Congress
and President Obama forced the shutdown when they were unable to agree
on spending bills for the fiscal year, and the calendar this time of
year is always full of official holidays. As for the snow – well, that’s
either Mother Nature or climate change, depending on your perspective.
OPM officials didn’t respond to a request for comment on the
closures, which have come under extra scrutiny in recent days as bitter
weather has led to more snow days.
A labor union representing many federal employees said the workers are not to blame.
“The idea that federal employees are sipping cocoa by the fire when
the government declares a snow emergency went out with the rotary
phone,” said J. David Cox Sr., national president of the American
Federation of Government Employees. “Federal employees are teleworking
more than ever and remain connected to their jobs through email, voice
mail and the Internet – whether their offices are open or closed. So
snow days are now work days for many federal employees, which is a good
thing since it improves employee safety without decreasing
productivity.”
Washington-area Internet chat boards have been inundated in recent
weeks with questions about how the government handles telework.
For some agencies, employees who agree to telework are required to be
on the job even when their offices are closed because of weather
conditions. That left some of them struggling with ways to manage their
schedules at a time when their children may be home, too.
The government shutdown presents an altogether different story for federal employees.
Some were banned from working – which meant not being allowed to even
pick up a government mobile device – while others were deemed essential
and had to report.
Regardless of whether the government employees were considered
essential or not, none of them was paid until the shutdown ended.
Congress then approved pay for all federal employees, including those
who did not work.
Some workers who were required to work “essential” jobs, who received
only their base pay retroactively, have filed a lawsuit demanding
compensatory damages of double pay for the hours they worked to make up
for missed bill payments and other financial problems caused by the
shutdown.
That lawsuit now has more than 1,000 plaintiffs. They have asked that
a notice be sent to all 1.3 million workers who had to work throughout
the shutdown.
Mr. Cox said the shutdown should be a warning to Congress.
“Federal employees are motivated by delivering services to the
American people, and no one was more frustrated by the shutdown than
federal employees who were forced to stay home,” he said. “Hopefully
Congress has learned a lesson that shutting down the government to score
political points benefits no one and harms everyone.”
Fiscal year 2013 was slightly less chaotic for federal employees,
many of whom were furloughed because of the “sequester” budget cuts that
reduced agency budgets nearly halfway through the fiscal year.
On the other side of the ledger, the federal government is generous
with paid holidays, tallying a standard 10 every year. The number
sometimes is higher because the president can declare extra holidays,
including Christmas Eve.
Mr. Obama didn’t give employees Dec. 24 off last year, however.
Analysts said that is usually reserved for when Christmas falls on a
Tuesday or a Friday and a Christmas Eve holiday would create a four-day
weekend.
White House Senior adviser Valerie Jarrett wants women to get the men in their lives to sign up for Obamacare.
"We know that women also have the ability to encourage the men in
their lives, whether it’s brothers, sons, husbands, friends. So women’s
reach extends beyond themselves," she explained in a special interview
published in Cosmopolitan Magazine.
During the interview, Jarrett acknowledged that more women were signing up for Obamacare than men.
"That should be no surprise!" she noted. "Women are very responsible, particularly younger women."
Jarret reminded women readers that contraception was free under the plan.
"All insurance plans are required to cover contraception without a copay — for free. Free!" she announced.
Jarrett reminded women that if their preferred "brand" of birth control wasn't covered, there might be a way to get it anyway.
"Women should talk to their insurance company about which brands are
covered," she says. "And if your doctor thinks you need a particular
brand but it’s not on your plan, then the insurance company has to cover
that, too."
Audio: Kevyn Orr press conference on plan of adjustment: Listen to
Kevyn Orr as he holds press conference on 'Plan of Adjustment.'
Detroit’s comprehensive bankruptcy reorganization blueprint calls for
shedding billions of dollars in debt, spending more than $500 million
for blight removal. DFP
Detroit’s comprehensive bankruptcy reorganization blueprint calls for
shedding billions of dollars in debt, spending more than $500 million
for blight removal and investing $1 billion to improve city services.
The
city’s Chapter 9 bankruptcy plan of adjustment — filed Friday in U.S.
Bankruptcy Court — details offers to more than 100,000 creditors, and a
disclosure statement reveals emergency manager Kevyn Orr’s plan to
reshape the city’s bureaucracy.
The documents illuminate a
potential path to resolve the city’s bankruptcy, paving the way for the
city to dramatically reduce an estimated $18 billion in debt and
liabilities.
The city will continue negotiations with creditors in
a bid to reach a consensual restructuring plan, which must be approved
by Judge Steven Rhodes. That means the plan could change significantly
before it is approved.
■ Free Press investigation:How Detroit went broke: The answers may surprise you
■ Full coverage: Detroit's financial crisis
The
city’s goal is to pay less money to Wall Street, retirees and
bondholders — which collectively receive about 4 in 10 of the city’s
sparse general fund dollars — and to invest about $1.5 billion over 10
years to ramp up public safety, improve city services and reduce blight.
But also keeping close tabs on details of Orr’s plan are retirees, many of whom survive on city pensions earned years ago.
Orr
proposes 34% cuts to the pension checks of general city retirees and
10% to police and fire retirees, levels he called “very fair.”
But
those cuts would be reduced to 26% and 4%, respectively if the city’s
two independently controlled pension boards agree to support the plan of
adjustment. The city has about 24,000 retirees.
The city proposed
paying secured bondholders 100% of what they’re owed, while unsecured
general obligation bondholders would receive 20%.
“We think our
plan is reasonable, we think it is feasible,” Orr said in a conference
call Friday from Philadelphia with journalists from across the country.
“There are 700,000 residents who deserve an adequate level of
services.”
The city proposed paying about 20% to 30% of its
retiree health care liabilities to a newly created trust fund called a
VEBA, or Voluntary Employees’ Beneficiary Association, which would
manage insurance benefits. Orr proposed contributing $526.5 million over
20 years to the fund.
The city’s two pension funds — the General
Retirement System and the Police and Fire Retirement System — released
statements deriding Orr’s plan as unnecessarily harsh on pensioners.
“We
believe the City of Detroit can afford much better treatment of its
pension beneficiaries who dedicated years of their lives in service of
the city,” said Bruce Babiarz, a spokesman for Detroit’s police and fire
pension board. “We believe there are reasonable and viable options that
could negate the need for drastic pension cuts.”
American
Federation of State, County and Municipal Employees Council 25 President
Al Garrett, who represents the city’s largest employee union, promised
to fight Orr’s restructuring plan.
“The proposed plan of
adjustment is a gut punch to Detroit city workers and retirees,”
Garrett said. “The plan essentially eliminates health care benefits for
retirees and drastically cuts earned pension benefits. Retirees cannot
survive these huge cuts to the pensions they earned. The plan is unfair
and unacceptable.”
Orr blamed poor investment strategies and a
pattern of excessive bonuses — called 13th checks — for underfunding the
city’s pension funds and making cuts necessary. He also called for
restitution of some of those excess payments — likely in the form of
higher cuts in future checks.
■
Faces of Detroit: How 16 residents want their city to change
■
Detroit’s year of bankruptcy: Photos of heartbreak, joy, resolve amid the crisis
Orr,
who as Washington, D.C., bankruptcy attorney was appointed emergency
manager by the state in March, is betting that pensioners will
eventually agree to a reduced level of cuts, following the emergence of a
potential grand bargain in which several nonprofit foundations and the
state of Michigan would provide funds to reduce pension cuts and
preserve the Detroit Institute of Arts.
Foundations have pledged
$365 million; the DIA has agreed to raise $100 million; and Lansing may
contribute $350 million over 20 years.
Without a deal, pensioners
could try to pursue a liquidation of the DIA’s art — worth hundreds of
millions of dollars — while the city could try to force the
implementation of the restructuring plan through a court process called a
“cram down.”
“I don’t know how anyone can walk away from a
billion dollars that we didn’t have a month ago,” Orr said. “We really
do not have time for a lot of acrimony and litigation.”
Court hearings
Friday’s filings pave the way for a contentious round of court
hearings over Detroit’s restructuring plan, which is likely to be
altered as the city continues negotiations with creditors.
As
expected, the city proposed higher payouts for its 24,000 retired
pensioners than other unsecured creditors, in part because of the grand
bargain.
A coalition of powerful bond insurers said Detroit should
evaluate the DIA’s entire collection for sale and criticized the city’s
plan that favors pensioners over bondholders.
“While we
understand that favoring pensioners and discriminating against
bondholders and other creditors might be politically popular, we believe
this is contrary to bankruptcy law and will result in costly litigation
that will hamper the City’s emergence from bankruptcy,” Steve Spencer,
an adviser to Financial Guaranty Insurance, said in a statement.
Orr
said: “For 30 years, I’ve been doing restructuring, and I’ve never
entered a case where any unsecured creditor thought that their cut was
fair.”
Jones Day attorney David Heiman, one of Detroit’s lead
bankruptcy lawyers, said bankruptcy law allows unsecured creditors to
receive different payouts. He also said that the grand bargain would
allow the city to pay more to financial creditors.
Too much for services?
In their fight for a greater share of the pie, creditors may seek to
block Orr’s proposal to invest $1.5 billion in city services.
■
DIA in peril: A look at the museum’s long, tangled relationship with Detroit politics and finances
■
Photo gallery: Detroit bankruptcy cast of characters
■
Photo gallery: Editorial Cartoonist Mike Thompson’s take on Detroit bankruptcy
Among
the improvements the city plans is $520 million to remove blight over
six years. With that cash, the city would demolish about 450 abandoned
homes per week, up from a weekly pace of 114 in a city with an estimated
78,000 unsalvagable structures.
Blight is one of many factors that contributes to Detroit’s extraordinarily high violent crime rate and low property values.
Fresh
investments also include $148 million to rehab Detroit’s antiquated
information technology system and $447 million on major capital
improvements, including the city’s vehicle fleet and facilities for
police and fire services and the city’s recreation department.
Over
the next five years, the plan would devote $114 million in increased
funding for the Police Department and $82 million for the Fire
Department.
The documents call for “significant modifications” to
union contracts, compensation and work rules for active employees. The
city said it would consider outsourcing some services.
“However,
the potential for reductions in wages and salaries must be balanced
against likely reductions in benefits and the City’s need to attract and
retain skilled workers,” according to the disclosure statement.
The
city had more than $246 million in uncollected taxes and fees as of
2011 — and it is pursuing actions to increase its collection rates.
Judge
Rhodes has firmly emphasized that the plan must be “feasible” and must
improve people’s lives while also treating creditors fairly.
He
has said “profound change” may be necessary in pension and health care
benefits, has cautioned against one-time fixes and has urged the state
of Michigan to contribute to the bankruptcy settlement.
Republican
Gov. Rick Snyder, who appointed Orr, said that securing $350 million in
state funding to reduce pension cuts and spin off the DIA is a work in
progress. He will have to convince state legislators to sign off, but
Republicans are sensitive to the prospect of a Detroit bailout.
“Detroit’s
comeback is under way,” Snyder said in a statement. “Kevyn Orr has
submitted a thoughtful, comprehensive blueprint directing the city back
to solid financial ground, a crucial step toward a fully revitalized
Detroit.”
Snyder added: “There will be difficult decisions and
challenges for all sides as this process moves forward. The state’s
focus is on protecting and minimizing the impact on retirees, especially
those on fixed, limited incomes, restoring and improving essential
services for all 700,000 Detroit residents and building a foundation for
the city’s long-term financial stability and economic growth.”
Wayne
State University bankruptcy law professor Laura Beth Bartell said the
bankruptcy restructuring may hinge on the grand bargain moving forward.
“The grand bargain is at the center of this. That’s the source for virtually all the funds for the pensioners,” she said.
Missing
from the city’s proposed plan of adjustment is an agreement to a deal
to spin off the Detroit Water and Sewerage Department, which the city
has estimated could be worth $1.9 billion over 40 years to the city.
That proposal was included in a draft plan last month.
Friday’s proposal included references to the creation of the Great Lakes Water Authority.
The city is still negotiating a potential water deal, which suburban politicians have opposed.
With a deal to spin off the water department, creditors could get more, including retirees.
As
part of its restructuring plan, the city said it plans to obtain $300
million in new financing as it leaves bankruptcy. The city said it will
need the new financing to help operate the city and provide services.
The
city previously arranged $350 million in new financing from
London-based Barclays, but that credit agreement was contingent on the
city’s ability to settle its disastrous swaps agreement made with UBS
and Merrill Lynch in 2005.
That swaps settlement has been rejected
by Judge Rhodes twice. A third agreement has been reached, and details
are expected in a few days when the new deal is filed in bankruptcy
court. Orr said the new figure is “significantly lower” than the
$165-million settlement rejected by Rhodes in January.
Separately,
the city has filed a lawsuit seeking to wipe out $1.4 billion in
pension debt held mostly by European banks that was issued in 2005 by
Mayor Kwame Kilpatrick’s administration to eliminate the city’s unfunded
pension liabilities.
The city argued the pension obligation certificates of participation were illegal and do not have to be paid. Contact Matt Helms: 313-222-1450 or mhelms@freepress.com. Follow him on Twitter @MattHelms. Contact Nathan Bomey: 313-223-4743 or nbomey@freepress.com. Follow him on Twitter @NathanBomey. Staff writer Mark Stryker contributed to this report.
Kevin Doran, senior fund
manager at Brown Shipley, and David Bloom, global head of foreign
exchange strategy at HSBC, discuss the global economic outlook and the
chance the U.S., U.K. and Japan could default on their debt.
China has
supplanted India as the number-one consumer of the world’s gold,
according to new numbers from the World Gold Council, even as the global
supply of gold fell last year. Erin Ade reports.Then, Erin sits down with
George Selgin of the University of Georgia and the Cato Institute to
discuss whether the inflexibility of the gold standard contributed to
debt-deflation in the 1930′s.The famous Bretton Woods
conference still has a huge impact on our global financial system, and
has become shorthand for international monetary cooperation. Dr. Benn
Steil, Director of International Economics at the Council on Foreign
Relations, does some myth-busting on the meeting.Comedian and author Lee Camp
makes his debut on the “Big Deal” to talk about Chevron’s customer
relations department, and whether free pizza could ever be a bad thing.Also check us out on Facebook — and feel free to ask us questions: http://www.facebook.com/BoomBustRT
They took gold from people in the U.S. in the 1930?s…but I’ve never heard of them taking bank accounts.
“401k plans, IRA’s, and pensions plans which the government knows about
[may be next]. We’re going to take your pension plan and give you
government bonds so that you have a guaranteed return.”
Portugal raids pension funds to meet deficit targets
It’s not just that banks are no longer
needed–they pose a needless and potentially catastrophic risk to
the nation. To understand why, we need to understand the key
characteristics of risk.
The entire banking sector is based on two
illusions:
1. Thanks to modern portfolio management, bank
debt is now riskless.
2. Technology only enhances banks’ tools to
skim profits; it does not undermine the fundamental role of banks.
The
global financial meltdown of 2008-09 definitively proved riskless
bank debt is an illusion. If
you want to understand why risk cannot eliminated, please read Benoit
Mandelbrot’s book The
(Mis)Behavior of Markets.
Unfortunately for banks, higher education,
buggy whip manufacturers, etc., monopoly and propaganda are no match
for technology. Just because a system worked in the past in
a specific set of technological constraints does not mean it
continues to be a practical solution when those technological
constraints dissolve.
The current banking system is essentially
based on two 19th century legacies. In that bygone era,
banks were a repository of accounting expertise (keeping track of
multitudes of accounts, interest, etc.) and risk
assessment/management expertise (choosing the lowest-risk borrowers).
Both of these functions are now
automated. The funny thing about technology is that those
threatened by fundamental improvements in technology attempt to
harness it to save their industry from extinction. For example,
overpriced colleges now charge thousands of dollars for nearly
costless massively open online courses (MOOCs) because they retain a
monopoly on accreditation (diplomas). Once students are accredited
directly–an advancement enabled by technology–colleges’
monopoly disappears and so does theirraison d’etre.
The same is true of banks. Now that accounting
and risk assessment are automated, and borrowers and owners of
capital can exchange funds in transparent digital marketplaces, there
is no need for banks. But according to banks, only they have the
expertise to create riskless debt.
It’s not just that banks are no longer
needed–they pose a needless and potentially catastrophic risk to
the nation. To understand why, we need to understand the key
characteristics of risk.
Moral hazard is what happens when people who
make bad decisions suffer no consequences. Once
decision-makers offload consequence onto others, they are free to
make increasingly risky bets, knowing that they will personally
suffer no losses if the bets go bad.
The current banking system is defined by
moral hazard. ”Too big to fail” also means “too big to
jail:” no matter how criminal or risky the bank managements’
decisions, the decision-makers not only suffered no consequences,
they walked away from the smouldering ruins with tens of millions of
dollars in personal wealth.
Absent any consequence, the system created
perverse incentives to pyramid risky bets and derivatives to increase
profits–a substantial share of which flowed directly into the
personal accounts of the managers.
The perfection of moral hazard in the
current banking system can be illustrated by what happened to the
last CEO of Lehman Brother, Richard Fuld: he walked away from the
wreckage with $222 million. This is not an outlier; it is
the direct result of a system based on moral hazard, too-big-to-jail
and perverse incentives to increase systemic risk for
personal gain.
And who picked up all the losses? The
American taxpayer. Privatize profits, socialize losses:
that’s the heart of moral hazard.
Concentrating the ability to leverage
stupendous systemic bets in a few hands leads to a concentration of
risk. Just before America’s financial sector imploded,
banks had pyramided $2.5 trillion in dodgy mortgages into derivatives
and exotic financial instruments with a face value of $35 trillion–14
times the underlying collateral and more than double the size of the
U.S. economy.
In a web-enabled transparent exchange of
borrowers bidding for capital, the risk is intrinsically dispersed
over millions of participants. Not only is risk dispersed,
but the consequences of bad decisions and bad bets fall solely to
those who made the decision and the bet. This is the foundation of a
sound, stable, fair financial system.
In a transparent marketplace of millions of
participants, a handful of participants will be unable to acquire
enough profit to capture the political process. The present
banking system is not just a financial threat to the nation, it is a
political threat because its outsized profits enable bankers to
capture the regulatory and governance machinery.
The problem with concentrating leverage and
moral hazard is that risk is also concentrated. And when
risk is concentrated rather than dispersed, it inevitably breaks out
of the “riskless” corral. This is the foundation of my
aphorism: Central planning perfects the power of threats to
bypass the system’s defenses.
We can understand this dynamic with an
analogy to bacteria and antibiotics. By attempting to
eliminate the risk of infection by flooding the system with
antibiotics, central planning actually perfects the search for
bacteria that are immune to the antibiotics. These few bacteria will
bypass the system’s defenses and destroy the system from within.
The banking/financial sector claims to be
eliminating risk, but what it’s actually doing is perfecting the
threats that will destroy the system from within. Another
way to understand this is to look at what happened to home mortgages
in the runup to the meltdown of 2008: the “safest” part
of the financial sector ended up triggering the collapse of the
entire pyramid of risk.
Once we concentrate risk and impose perverse
incentives and moral hazard as the foundations of our
financial/banking system, then we guarantee the risk will explode out
of whatever sector is considered “safe.”
Once you eliminate the “risk” of weak
bacteria, you perfect the threat that will kill the host.
The banking sector cannot be reformed, for
its very nature is to concentrate systemic risk and moral hazard into
breeding grounds of systemic collapse. The only way to
eliminate the threat posed by banks is to eliminate the banks and
replace them with transparent exchanges where borrowers and owners of
capital openly bid for yield (interest rates) and capital.
Bankers (and their fellow financial parasites)
will claim they are essential and the nation will collapse without
them. But this is precisely opposite of reality: the very existence
of banks threatens the nation and democracy.
One last happy thought: technology cannot be
put back in the bottle. The financial/banking sector wants
to use technology to increase its middleman skim, but the technology
that is already out of the bottle will dismantle the sector as a
function of what technology enables: faster, better, cheaper, with
greater transparency, fairness and the proper distribution of risk.
There may well be a place for credit unions and
community banks in the spectrum of exchanges, but these localized,
decentralized enterprises would be unable to amass dangerous
concentrations of risk and political influence in a truly transparent
and decentralized system of exchanges.
Has the German gold gone, at least the part vaulted by the US Fed?
What is the reason that Germany’s gold repatriation goes ten times
slower than initially planned (after one year), see here? Why was a new repatriation planning set up (after one year)?
These questions have intrigued many gold observers, to the extent
that the interest was sparked even outside the precious metals
community. Recently, the German newspaper Handelsblatt released an
article in which they openly express their doubts if Germany’s gold
is still available. That speculation came after a new release that
Germany’s first year of repatriation brought back much less gold than
initially intended.
Yesterday, the German Central Bank (Bundesbank) released an interview
with Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche
Bundesbank. This is remarkable because it was conducted by journalists
from the same newspaper (Handelsblatt). The article appeared in German
in Handelsblatt on 19 February 2014 and on the site of the Bundesbank. The interview is copied below.
The underlying dynamic can’t be more obvious. The Bundesbank was
obviously not pleased by the questions that Handelsblatt brought up. The
interview gives the impression that all is good with Germany’s gold. It
is very likely that the Bundesbank asked the newspaper to make up on
their previous article. Readers are invited to draw their own
conclusions, based on the facts.
As a sidenote, it would have been great if the journalists would have
asked questions like “how comes tightness in the physical gold market
has been that high since Germany announced its repatriation” or “did you
check the serial numbers on the gold bars that the auditors were shown”
or lots more as suggested by Jesse here and here Obviously, those questions would have gone too far for the Executive Board member.
Bundesbank President Jens Weidmann described the
partial transfer of German gold from New York as a trust-building
measure in Germany.You are the one responsible for organising this major
logistical undertaking.
Indeed, we are inspiring trust by storing half of the 3,400 tonnes of
gold in Frankfurt by 2020. Building trust also means being transparent.
We were the first central bank to publish details of our storage
facilities, including the respective quantities of gold stored there. Is there a scenario in which gold could begin to be used in monetary policy?
A highly theoretical scenario would involve extreme turmoil on the
foreign exchange markets. Germany safeguards its solvency through
reserve assets. In addition to foreign currency, our reserve assets
include gold reserves. This gold could be pledged or exchanged directly
for foreign currency. That is also why we have left the other half of
our gold reserves in New York and London. Although we thankfully do not
envisage such a crisis scenario, central banks are designed for the long
term. In October 2012, you promised the German Bundestag that you
would transfer a total of 150 tonnes of gold from New York to Frankfurt
by 2015.In January 2013, you extended the time frame to 2020 and
increased the amount to 300 tonnes. What time frame are you looking at
now?
The plans are not contradictory. We specified our initial target in
October 2012. In January 2013, we then presented a new gold storage plan
and specified a new target that is considerably higher than the first.
Instead of only 150 tonnes, we are now transferring 300 tonnes of gold
from New York to Germany. So both targets still apply?
We now consider ourselves bound to the new gold storage plan. But the
three years have not yet passed. We shall wait and see. We are on the
right track in any case. But the members of the German Bundestag have acted on the
assumption of the initial promise.The second has got a more long-term
oriented time frame. Was your initial promise overly ambitious? In the
first year, you only returned five tonnes from the USA.
It is not a question of “returning”. The gold is being transferred to
Germany for the first time. Until 1998, only 2% of our gold, or
thereabouts, was stored in Germany. In the first year, we transported
five tonnes from New York. This year, we will transfer 30 to 50 tonnes,
or perhaps even more, from New York to Frankfurt. And there is still
next year to come. Does that mean that the target of 150 tonnes is still attainable?
Since we are in the midst of an ongoing process, I would like you to
ask me the question again in two years’ time. In any case, we will store
half of the German gold reserves in Germany by 2020 at the latest. Why are you content with such a low target for this year?Is
the programme still experiencing teething problems in its second year?
No, it is not. We have planned the timing of the transfers in such a
way as to ensure that 300 tonnes are transferred from New York to
Germany by 2020 at the latest. There are these rumours that either the gold in New York is
no longer there or you do not have unrestricted access to it.Why have
you not called in auditors or other externals to oversee the transfers
in response to such rumours?
It astounds me that Handelsblatt pays any attention to such absurd
rumours. I was in New York myself in June 2012 with the colleagues
responsible for managing the gold reserves and saw for myself how our
money is stored in the vault there. The Americans have never stonewalled
or hindered us in any way. On the contrary, their cooperation has been
most constructive in every respect. Our internal audit team was present
last year during the on-site removal of gold bars and closely monitored
everything. The smelting process is also being monitored by independent
experts. Does this also apply to opportunities to inspect the
stocks?You said a year ago that discussions on the matter with the
Federal Reserve Bank of New York were making good progress.
That is correct. We have enjoyed an excellent relationship of trust
with the New York Fed for many decades. As regards the details of the
contracts, however, we are bound by confidentiality which we cannot
unilaterally break. From my visit to New York, I can tell you that a
number of bars selected by us were removed, inspected and reweighed even
while I was there. The inspections conducted by our internal audit
team, during which an external auditor was also present, were also
completed to our utmost satisfaction. Was an external auditor present during your visit to the New York Fed gold storage facility in June 2012?
No, not during my visit. However, an external auditor was present for
part of the time during the internal audit team’s inspection of stocks. Did the gold from New York have to be melted down immediately?
The gold was removed from the vault in the presence of the internal
audit team and transported to Europe. Only once the gold had arrived in
Europe was it melted down and brought to the current bar standard. Some
of the bars in our stocks in New York were produced before the Second
World War. It was confirmed after the melting process, as anticipated,
that these bars were absolutely fine. The Federal Court of Auditors (FCA) sparked the debate by
calling for an inspection of Germany’s gold holdings abroad.When you
announced in October 2012 that part of the holdings were to be
transferred to Germany, the FCA responded that this was a first step,
but not a comprehensive procedure. Is the FCA now satisfied?
The FCA never demanded that the Bundesbank transfer gold to Germany.
It was more concerned with extending its rights with regard to
inspecting gold reserves abroad. The Bundesbank’s internal audit
department now has rights it never used to have. The Budget Committee
has acknowledged the FCA’s report, which concludes this discussion.
Incidentally, the FCA examined the Bundesbank’s annual accounts for 2012
and found no irregularities. The FCA claims it has no knowledge of newly agreed audit rights.
The FCA has access to all information at all times. I am sure the President of the FCA will be able to confirm this for you. If the intention was to build trust, would it not have been
better to postpone the smelting processso that you would have been able
to present sceptics with the original bars?
Prior to transportation, the original gold bars were handed over to
us in New York. Our internal audit team checked the numbers of the bars
there and then against its own lists. The very same gold arrived at the
European gold smelters that we had commissioned. This ought to
demonstrate to everyone that such conspiracy theories are completely
unfounded. Calling in external auditors or critics was not an option?
The Bundesbank’s internal audit department is involved in the process
from start to finish. Independent experts were present during the
smelting process. Are there any advantages for the Americans in storing gold
for other nations?After all, they are protecting our reserves free of
charge.
To answer this question, you need to look at the historical context.
As you may know, gold reserves were established during the Bretton Woods
fixed exchange rate system. Given the threat from the East at the time,
it seemed the safest option was to store German gold as far west as
possible. The gold was therefore stored in New York from the outset. So the Americans are taking on high storage costs for nothing in return?
No, why high storage costs? The gold has been stored there for decades. The storage rooms already exist. Security guards cost money…
It is not just our gold that they protect, but also that of other central banks. But that is a matter for the New York Fed. Just over a year ago, you were asked whether storing gold
with the victors of the Second World War was not perhaps an echo of the
old Bonn Republic when Germany was not yet a fully sovereign state.Back
then, your answer was rather vague. What is your answer today?
To my knowledge, gold was stored in New York, London and Paris mainly
for security policy reasons. We transferred 930 tonnes of gold from
London more than ten years ago without experiencing any difficulties
with the Bank of England or upsetting German-British relations. The
same applies to the Banque de France and the New York Fed.
HSBC whistleblower and political hopeful Everett Stern.
If
the fee structures are transparent, those who charge too much will
disappear as customers go elsewhere. That’s the purpose of transparent
competition in an open marketplace.
