Citigroup announced on Friday that it would move its headquarters from New York to the actual U.S. Capitol Building, in Washington, D.C.
Citi outbid JP Morgan and Goldman Sachs to lease thirty thousand square feet of prime real estate on the floor of the House of Representatives.
Can You Say BANK OWNED?
WASHINGTON (The Borowitz Report)—The banking giant Citigroup announced on Friday that it would move its headquarters from New York to the U.S. Capitol Building, in Washington, D.C., in early 2015.
Tracy Klugian, a spokesperson for Citi, said that the company had leased thirty thousand square feet of prime real estate on the floor of the House of Representatives and would be interviewing “world-class architects” to redesign the space to suit its needs. READ MORE
Did you know that the banks greased enough palms to repeal Dodd Frank, they are now leasing space right in the Capitol Building and managed to increase the donation limitation from $32,400 to $324,000.
The continuing resolution to fund the gov’t $1.1 trillion, the sum of the entire national debt under President Reagan in 1980, narrowly passed the House late Thursday by a 219-206 vote; then The Senate passed a $1.1 trillion spending package Saturday night. -See NPR
Search the legislation for these key inserts:
- Donations to political parties raised from $32,400 to $324,000.
Language raising donation limits to the Democratic National Committee or the Republican National Committee from $32,400 per donor to $324,000
- The promised pension benefits of up to 1.5 million workers and retirees to be cut. It would affect the pooled pension plans — called multiemployer plans — of mostly union workers
- Funding until September 2015 for 11 of 12 federal agencies. The Department of Homeland Security is only funded until early next year, setting up another spending fight over immigration in just a few weeks
- No new funding for the Affordable Care Act, but funding for the health care law is also not cut
- $5.4 million to fight Ebola abroad and prepare for potential outbreaks at home
- Changes to the 2010 Dodd-Frank banking reform bill concerning derivatives trading – lobbied for heavily by the banking industry
- Language prohibiting the District of Columbia from legalizing marijuana, which city residents greenlighted in a November ballot initiative by a wide margin
- About $8 billion in funding for the Environmental Protection Agency, a substantial cut from last year’s funding that will likely force a hefty reduction in staffing
- $5 billion to fight the Islamic militant group known as ISIS
- A ban on the transfer of Guantanamo Bay prisoners to the United States
- Funding to aid the State Department, the Department of Health and Human Service and local school districts in immigration-related programs
- A cut of almost $350 million to the budget of the IRS
- Cuts to multi-employer pension plans
- Language allowing school districts more flexibility in instituting the nutrition standards championed by Michelle Obama
Reblogged this on Spartan of Truth.
10 Dec 2014 Budget Busters
Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives
The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend.
Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries.
Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.
It was not only a notable about-face for the president but represented an apparent shift in position for the banks. Before Jamie Dimon intervened, it had been reported that the bailout provision was not a big deal for the banks and that they were not lobbying heavily for it, because it covered only a small portion of their derivatives. As explained in Time:
The best argument for not freaking out about the repeal of the Lincoln Amendment is that it wasn’t nearly as strong as its drafters intended it to be. . . . [W]hile the Lincoln Amendment was intended to lasso all risky instruments, by the time all was said and done, it really only applied to about 5% of the derivatives activity of banks like Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, according to a 2012 Fitch report.
Quibbling over a mere 5% of the derivatives business sounds like much ado about nothing, but Jamie Dimon and the president evidently didn’t think so. Why?
A Closer Look at the Lincoln Amendment
The preamble to the Dodd-Frank Act claims “to protect the American taxpayer by ending bailouts.” But it does this through “bail-in”: authorizing “systemically important” too-big-to-fail banks to expropriate the assets of their creditors, including depositors. Under the Lincoln Amendment, however, FDIC-insured banks were not allowed to put depositor funds at risk for their bets on derivatives, with certain broad exceptions.
In an article posted on December 10th titled “Banks Get To Use Taxpayer Money For Derivative Speculation,” Chriss W. Street explained the amendment like this:
What was and was not included in the exemption was explained by Steve Shaefer in a June 2012 article in Forbes. According to Fitch Ratings, interest rate, currency, gold/silver, credit derivatives referencing investment-grade securities, and hedges were permissible activities within an insured depositary institution. Those not permitted included “equity, some credit and most commodity derivatives.” Schaefer wrote:
A fraction, but a critical fraction, as it included the banks’ bets on commodities. Five percent of $280 trillion is $14 trillion in derivatives exposure – close to the size of the existing federal debt. And as financial blogger Michael Snyder points out, $3.9 trillion of this speculation is on the price of commodities.
Among the banks’ most important commodities bets are oil derivatives. An oil derivative typically involves an oil producer who wants to lock in the price at a future date, and a counterparty – typically a bank – willing to pay that price in exchange for the opportunity to earn additional profits if the price goes above the contract rate. The downside is that the bank has to make up the loss if the price drops.
As Snyder observes, the recent drop in the price of oil by over $50 a barrel – a drop of nearly 50% since June – was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.
When Markets Cannot Be Manipulated
Interest rate swaps compose 82% of the derivatives market. Interest rates are predictable and can be controlled, since the Federal Reserve sets the prime rate. The Fed’s mandate includes maintaining the stability of the banking system, which means protecting the interests of the largest banks. The Fed obliged after the 2008 credit crisis by dropping the prime rate nearly to zero, a major windfall for the derivatives banks – and a major loss for their counterparties, including state and local governments.
Manipulating markets anywhere is illegal – unless you are a central bank or a federal government, in which case you can apparently do it with impunity.
In this case, the shocking $50 drop in the price of oil was not due merely to the forces of supply and demand, which are predictable and can be hedged against. According to an article by Larry Elliott in the UK Guardian titled “Stakes Are High as US Plays the Oil Card Against Iran and Russia,” the unanticipated drop was an act of geopolitical warfare administered by the Saudis. History, he says, is repeating itself:
Now, says Elliott, the oil card is being played to force prices lower:
War on the Ruble
If the plan was to break the ruble, it worked. The ruble has dropped by more than 60% against the dollar since January.
On December 16th, the Russian central bank counterattacked by raising interest rates to 17% in order to stem “capital flight” – the dumping of rubles on the currency markets. Deposits are less likely to be withdrawn and exchanged for dollars if they are earning a high rate of return.
The move was also a short squeeze on the short sellers attempting to crash the ruble. Short sellers sell currency they don’t have, forcing down the price; then cover by buying at the lower price, pocketing the difference. But the short squeeze worked only briefly, as trading in the ruble was quickly suspended, allowing short sellers to cover their bets. Who has the power to shut down a currency exchange? One suspects that more than mere speculation was at work.
Protecting Our Money from Wall Street Gambling
The short sellers were saved, but the derivatives banks will still get killed if oil prices don’t go back up soon. At least they would have been killed before the bailout ban was lifted. Now, it seems, that burden could fall on depositors and taxpayers. Did the Obama administration make a deal with the big derivatives banks to save them from Kerry’s clandestine economic warfare at taxpayer expense?
Whatever happened behind closed doors, we the people could again be stuck with the tab. We will continue to be at the mercy of the biggest banks until depository banking is separated from speculative investment banking. Reinstating the Glass-Steagall Act is supported not only by Elizabeth Warren and others on the left but by prominent voices such as David Stockman’s on the right.
Another alternative for protecting our funds from Wall Street gambling can be done at the local level. Our state and local governments can establish publicly-owned banks; and our monies, public and private, can be moved into them.
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.