Monday, April 05, 2010

Avoiding 'Nomadic Thievery'

"We live in a gangster state, and our days of laughing at other countries are over."
-- Matt Tabbi, Rolling Stone

In the latest issue of Rolling Stone, Matt Taibbi has a caustic summary of the Jefferson County sewer fiasco that has reduced Birmingham, Ala. to "the status of an African debtor state." Today, every single resident of Birmingham, from new-born babes to the oldest nursing home resident, now owes Wall Street $4,800. ["Looting Main Street: How the Nation's Biggest Banks are Ripping Off American Cities with the Same Predatory Deals that Brought Down Greece"].

In Birmingham --
Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America's biggest banks, across a vast fruited plain of bribes and felonies — "the price of doing business," as one JP Morgan banker says on tape — all the way down to [Birmingham resident] Lisa Pack's sewer bill and the mass layoffs in Birmingham.

Once you follow that trail and understand what took place in Jefferson County, there's really no room left for illusions. We live in a gangster state, and our days of laughing at other countries are over. It's our turn to get laughed at. In Birmingham, lots of people have gone to jail for the crime: More than 20 local officials and businessmen have been convicted of corruption in federal court. Last October... Birmingham's mayor was convicted of fraud and money-laundering for taking bribes funneled to him by Wall Street bankers — everything from Rolex watches to Ferragamo suits to cash. But those who greenlighted the bribes and profited most from the scam remain largely untouched. "It never gets back to JP Morgan," says Pack.

At the root of the scandal one finds--
  • ordinary city department heads unable to understand the impossible complexities of financing contracts cooked up by Wall Street
  • a local politically-connected fixer paid by Wall Street to offer 'consultant' expertise who recommends those contracts to municipal officials
  • criminal bribes handed out like Easter candy by Wall Street to greedy local politicians
  • good-ol'-boy pay-offs by one Wall Street bank to another Wall Street bank to preserve the first bank's lucrative monopoly on farming Birmingham residents for every last nickle they own, and
  • predatory lending practices that "at one point" left Birmingham holding more worthless toxic credit default swaps than New York City.
It's a cautionary tale for any municipal board of modest talents with an ambitious development project that's spending oodles of money for nothing much visible in an effort to find financing from out-of-state sources who won't make their own financial statements public except to a limited number of insiders.

What you want to avoid is the Birmingham fiasco, where the bankers "find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive."
In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance."

And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery.


best beach vacation said...

Thanks a lot, I like your information on the your blog,

Anonymous said...

Me thinks you might be referring to the Maritime Park.