Obama: Banks Broke No Laws

Occupy Wall Street and the World

#Occupy Wall Street: Change will not come until we Understand and Rewrite the Entire Balance of Power in America
The Land Destroyer #OccupyWallStreet Guide

By Tony Cartalucci

Global Research, October 9, 2011
landdestroyer.blogspot.com

As Americans begin pouring into the streets with dissatisfaction, there seems to be some confusion as to who the source of their problem is. That 'who' is a corporate-financier oligarchy that has been destroying America

Contents

Introduction
1. The Federal Reserve Directors
2. The Group of Thirty
3. President Obama's Cabinet, Past & Present
4. America's Unelected Policy Makers & Their Corporate Sponsors
5. Solutions

Introduction

As Americans begin pouring into the streets with dissatisfaction, there seems to be some confusion as to who the source of their problem is. That 'who' is a corporate-financier oligarchy that has been destroying America for nearly a century and until now, has done a good job of parasitically feeding from America in the shadows. They are not the "1%."

They are the 1% of the 1%. They are billionaire banksters the Rothschilds, the Federal Reserve and the directors and chairmen of many of the largest corporations on earth including big oil, the military industrial complex, big pharma, big agri, and the corporate media which combine their resources and collective agenda in self-contrived institutions, think-tanks, and working groups to dominate humanity. Some of these include the Brookings Institution, the International Crisis Group, the Council on Foreign Relations, the Foreign Policy Initiative, and the Foundation for Defense of Democracies.

Below you will see a growing list of these names, companies, corporations, institutions, their agendas and how they interrelate. One thing that should be abundantly clear as one reaches the bottom, is that most of these names are reoccurring and the solution is self-evident. Many of these names are corporations, banks, and institutions we pay into on a daily basis. The solution of course, should we conclude they are indeed the problem, is to no longer pay into them with our time, money, energy, and attention.

1. The Federal Reserve Directors

The Federal Reserve is an unelected, private cartel of bankers who dictate to America, including its elected representatives, the United States' monetary policy. They generally do so with little or no oversight, lie to those charged with inquiring into their activities, and literally conspire against the American people through an additional corporate cartel their associations afford them that uses its vast power, influence, and operational capabilities to lord over the American public.
....

The entire list of Federal Reserve directors can be found on their website, and includes the following perpetrators; James 'Jamie' Dimon of JP Morgan, James S. Tisch of the Loews Corporation, Lee C. Bollinger President of Columbia University, Michael F. Camardo formally of Lockheed Martin, Thomas I. Barkin of McKinsey & Company, Richard H. Anderson of Delta Airlines, Michael A. Cook of Walmart, Patricia E. Yarrington of Chevron, and many more.

Read the entire article with web links and photos at Global Research

Source

We are Anonymous

Words by Michael Mandeville

The 99% Movement

All Hail The 99% Movement To Reclaim The U.S! We were all lost in an entropic
system and are now struggling our way out through the hidden trap doors. Energy
(Wealth) is constantly lost by all operations because the "usury" (which does
nothing to increase the energy) accumulates the energy like a "sink", this is
typically then used to finance more destruction, wars, conquests, etc. This
entropy leads ultimately to death, same as entropy leads to the death of stars
and biological systems.
.
UNDERSTANDING THAT THIS IS A FUNDAMENTAL LAW OF HOMO SAPIEN SOCIOLOGY, AS
IMPORTANT AS THE LAW OF RELATIVITY,

is crucial to understanding the crossroads today. This is not a theory, it is a
statement of what happens: the sun rises, the planets revolve, banker usury
ends in feudalism and universal poverty for the 99% who live as serfs.

If you can't see it in these words and the vast literature which has explained
this, keep reading AND MOST ESPECIALLY YOU MUST MUST MUST READ "THE CREATURE
FROM JEKYLL ISLAND". It exactly lays out the creation of the horror movie we
are living today and explains all the history, dynamics, sociology, and politics
by which the Feudal Class is consolidating its hold on all the resources of the
Earth. For broader understanding, read "Tragedy & Hope" by Carroll Quigley, who
chronicled the rise of the Ango-American upper class and lays out the history,
headspace, and methods of the R&R Cabal which is the driving force behind the
feudalization of humanity in this day and age..

These books will help you realize that there is no free market, in fact no
market at all. No dynamic matrix of free choice, nada. No level field has ever
existed on this planet, etc. These myths rationalize the idea of competition,
which it turns out is just a polite word for piracy. The sociological world we
live in has been created by pirates. The technoid baubles are just distractions
masking the endless decades of dynastic intrigue, conspiracies, imperial
advances and declines, etc.

Once this is understood, it is understandable that ALL WARS ARE THEIR WARS, no
war is necessary and never has been. Most human beings crave cooperation and
will put up with much, perhaps too much, to avoid war. But George Carlin had
it exactly right, the owners, the self-styled masters of the universe, just
don't give a shit about you or me. We aren't in their club, will never be in
their club, we are just pawns who can be looted at will. This one segment of
humanity which some describe as sociopaths or psychopaths does not cooperate,
will not cooperate and have ruined the planet for all of us by making full
cooperation impossible.

Those sitting in on the streets of Wall Street are the historical fulcrum at
this exact time for a deep historical transformation to utterly reject war and
banskterism. The whole dynamic of human history is up for grabs front and
center....

What a moment! You want adventure, excitement, enlightenment, and the challenge
of being able to achieve The Truly Remarkable. This mass movement confrontation
with the Banksters cannot be beat by any other feat of derring do. Please send
some chocolate chip cookies to Cindy Sheehan if you don't know what to do.

Keep in mind the central focus at all time: Kill The Fed, Dissolve Wall Street,
Liquidate The Lying Empire, Full Guaranteed Employment/Retirement

The Global Debt Crisis

The Money Masters: Behind the Global Debt Crisis
by Adrian Salbuchi

In the US, we see untold millions suffering from the impact of mass foreclosures and unemployment; in Greece, Spain, Portugal, Ireland, and Italy, stringent austerity measures are imposed upon the whole population; all coupled with major banking collapses in Iceland, the UK and the US, and indecent bail-outs of “too-big-to-fail” bankers (Newspeak for too powerful to fail).

No doubt, the bulk of the responsibility for these debacles falls squarely on the shoulders of caretaker governments in these countries that are subordinated to Money Power interests and objectives. In country after country, that comes together with embedded corruption, particularly evident today in the UK, Italy and the US.

As we assess some of the key components of today’s Global Financial, Currency and Banking Model in this article, readers will hopefully get a better understanding as to why we are all in such a crisis, and that it will tend to get much worse in the months and years to come.
Foundations of a Failed and False Model
Hiding behind the mask of false “laws” allegedly governing “globalised markets and economies,” this Financial Model has allowed a small group of people to amass and wield huge and overwhelming power over markets, corporations, industries, governments and the global media. The irresponsible and criminal consequences of their actions are now clear for all to see.
The “Model” we will briefly describe, falls within the framework of a much vaster Global Power System that is grossly unjust and was conceived and designed from the lofty heights of private geopolitical and geo-economic1 planning centres that function to promote the Global Power Elite’s agenda as they prepare their “New World Order” – again, Newspeak for a Coming World Government.2
Specifically, we are talking about key think tanks like the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, and other similar entities such as the Cato Institute (Monetary Issues), American Enterprise Institute and the Project for a New American Century that conform an intricate, solid, tight and very powerful network, engineering and managing New World Order interests, goals and objectives.
Writing from the stance of an Argentine citizen, I admit we have some “advantages” over the citizens of industrialised countries as the US, UK, European Union, Japan or Australia, in that over the last few decades we have had direct experience of successive catastrophic national crises emanating from inflation, hyper-inflation, systemic banking collapse, currency revamps, sovereign debt bond mega-swaps, military coups and lost wars…
Finance vs the Economy
The Financial system (i.e., a basically unreal Virtual, symbolic and parasitic world), increasingly functions in a direction that is contrary to the interest of the Real Economy (i.e., the Real and concrete world of work, production, manufacturing, creativity, toil, effort and sacrifice done by real people). Over the past decades, Finance and the Economy have gone their totally separate and antagonistic ways, and no longer function in a healthy and balanced relationship that prioritises the Common Good of We the People. This huge conflict between the two can be seen, amongst other places, in today’s Financial and Economic System, whose main support lies in the Debt Paradigm, i.e., that nothing can be done unless you first have credit, financing and loans to do it. Thus, the Real Economy becomes dependent on and distorted by the objectives, interests and fluctuations of Virtual Finance.3
Debt-Based System
The Real Economy should be financed with genuine funds; however with time, the Global Banking Elite succeeded in getting one Sovereign Nation-State after another to give up its inalienable function of supplying the correct quantity of National Currency as the primary financial instrument to finance the Real Economy. That requires decided action through Policies centred on promoting the Common Good of We The People in each country, and securing the National Interest against the perils posed by internal and external adversaries.
Thus, we can better understand why the financial “law” that requires central banks to always be totally “independent” of Government and the State has become a veritable dogma. This is just another way of ensuring that central banking should always be fully subordinated to the interests of the private banking over-world – both locally in each country, as well as globally.
We find this to prevail in all countries: Argentina, Brazil, Japan, Mexico, the European Union and in just about every other country that adopts so-called “Western” financial practice. Perhaps the best (or rather, the worst) example of this is the United States where the Federal Reserve System is a privately controlled institution outright, with around 97% of its shares being owned by the member banks themselves (admittedly, it does have a very special stock scheme), even though the bankers running “Fed” do everything they can to make it appear as if it is a “public” entity operated by Government, something that it is definitely not.
One of the Global Banking Over-world’s permanent goals is – and has been – to maintain full control over all central banks in just about every country, in order to be able to control their public currencies.4 This, in turn, allows them to impose a fundamental (for them) condition whereby there is never the right quantity of public currency to satisfy the true demand and needs of the Real Economy. That is when those very same private banks that control central banking come on scene to “satisfy the demand for money” of the Real Economy by artificially generating private bank money out of nothing. They call it “credits and loans” and offer to supply it to the Real Economy, but with an “added value” (for them): (a) they will charge interest for them (often at usury levels) and, (b) they will create most of that private bank money out of thin air through the fractional lending system.
At a Geo-economic level, this has also served to generate huge and unnecessary public sovereign debts in country after country all over the world. Argentina is a good example, whose Caretaker Governments are systematically ignorant and unwilling to use one of the sovereign state’s key powers: the issuance ofhigh power non-interest generating Public Money (see below for a more detailed definition). Instead, Argentina has allowed IMF (International Monetary Fund) so-called “recipes” that reflect the global banking cartel’s own interests to be imposed upon it in fundamental matters like what are the proper functions of its Central Bank, sovereign debt, fiscal policy, and other monetary, banking and financial mechanisms, that are thus systematically used against the Common Good of the Argentine People andagainst the National Interest of the country.
This system and its dreadful results, now and in the past, are so similar in so many other countries –Brazil, Mexico, Greece, Ireland, Iceland, UK, Portugal, Spain, Italy, Indonesia, Hungary, Russia, Ukraine… that it can only reflect a well thought-out and engineered plan, emanating from the highest planning echelons of the Global Power Elite.
Fractional Bank Lending
This banking concept is in use throughout the world’s financial markets, and allows private banks to generate “virtual” Money out of thin air (i.e., scriptural annotations and electronic entries into current and savings accounts, and a vast array of lines of credit), in a ratio that is 8, 10, 30, 50 times or more largerthan the actual amount of cash (i.e., public money) held by the bank in its vaults. In exchange for lending this private “money” created out of nothing, bankers collect interest, demand collateral with intrinsic value and if the debtor defaults they can then foreclose on their property or other assets.
The ratio that exists between the amount of Dollars or Pesos in its vaults and the amount of credit private banks generate is determined by the central banking authority which fixes the fractional lending leverage level (which is why controlling the central bank is so vital strategically for private banker cartels). This leverage level is a statistical reserve based on actuarial calculations of the portion of account holders who in normal time go to their banks or ATM machines to withdraw their money in cash (i.e., in public money notes). The key factor here is that this works fine in “normal” times, however “normal” is basically acollective psychology concept intimately linked to what those account holders, and the population at large, perceive regarding the financial system in general and each bank in particular.
So, when for whatever reason, “abnormal” times hit – i.e., every time there are (subtly predictable) periodic crises, bank runs, collapses and panics, which seem to suddenly explode as happened in Argentina in 2001 and as is now happening in the US, UK, Ireland, Greece, Iceland, Portugal, Spain, Italy and a growing number of countries – we see all bank account holders running to their banks to try to get their money out in cash. That’s when they discover that there is not enough cash in their banks to pay, save for a small fraction of account holders (usually insiders “in the know” or “friends of the bankers”).
For the rest of us mortals “there is no more money left,” which means that they must resort to whatever public insurance scheme may or may not be in place (e.g., in the US, the state-owned Federal Deposit Insurance Corporation that “insures” up to US$250,000 per account holder with taxpayer money). In countries like Argentina, however, there is no other option but to go out on the streets banging pots and pans against those ominous, solid and firmly closed bronze bank gates and doors. All thanks to the fraudulent fractional bank lending system.
Investment Banking
In the US, so called “Commercial Banks” are those that have large portfolios of checking, savings and fixed deposit accounts for people and companies (e.g., such main street names as CitiBank, Bank of America, JPMorganChase, etc.; in Argentina, we have Standard Bank, BBVA, Galicia, HSBC and others). Commercial Banks operate with fractional lending leverage levels that allow them to lend out “virtual” dollars or pesos for amounts equal to 6, 8 or 10 times the cash actually held in their vaults; these banks are usually more closely supervised by the local monetary authorities of the country.
A different story, however, we had in the US (and still have elsewhere) with so-called global “Investment Banks” (those that make the mega-loans to corporations, major clients and sovereign states), over which there is much less control, so that their leveraging fractional lending ratios are far, far higher. This greater flexibility is what allowed investment banks in the US to “make loans” by, for example, creating out of thin air 26 “virtual” Dollars for every real Dollar in cash they held in their vaults (i.e., Goldman Sachs), or 30 virtual Dollars (Morgan Stanley), or more than 60 virtual Dollars (Merrill Lynch until just before it folded on 15 Sept 2008), or more than 100 virtual Dollars in the cases of collapsed banks Bear Stearns and Lehman Brothers.5
Private Money vs Public Money
At this point in our review, it is essential to very clearly distinguish between two types of Money or Currency:
Private Money – This is “Virtual” Money created out of thin air by the private banking system. It generates interests on loans, which increases the amount of Private money in (electronic) circulation, and spreads and expands throughout the entire economy. We then perceive this as “inflation.” In actual fact, the main cause of inflation in the economy is structural to the interest-bearing fractional lending banking system,even among industrialised countries. The cause of inflation nowadays is not so much the excessive issuance of Public Money by Government as all so-called banking experts would have us believe but, rather, the combined effect of fractional lending and interest on private banking money.
Public Money – This is the only Real Money there is. It is the actual notes issued by the national currency entity holding a monopoly (i.e., the central bank or some such government agency) and, as Public Money, it does not generate interest, and should not be created by anyone other than the State. Anybody else doing this is a counterfeiter and should end up in jail because counterfeiting Public Money is equivalent to robbing the Real Economy (i.e., “we, the working people”) of their work, toil and production capabilities without contributing anything in return in terms of socially productive work. The same should apply to private bankers under the present fractional lending system: counterfeiting money (i.e., creating it out of thin air as a ledger entry or electronic blip on a computer screen) is equivalent to robbing the Real Economy of its work and production capacity without contributing any counter-value in terms of work.
Why We Have Financial Crises
A fundamental concept that lies at the very heart of the present Financial Model can be found in the wayhuge parasitic profits on the one hand, and catastrophic systemic losses on the other, are effectively transferred to specific sectors of the economy, throughout the entire system, beyond borders and public control.
As with all models, the one we suffer today has its own internal logic which, once properly understood, makes that model predictable. The people who designed it know full well that it is governed by grand cycles having specific expansion and contraction stages, and specific timelines. Thus, they can ensure that in bull market times of growth and gigantic profits (i.e., whilst the system, grows and grows, is relatively stable and generates tons of money out of nothing), all profits are privatised making them flow towards specific institutions, economic sectors, shareholders, speculators, CEO and top management & trader bonuses, “investors”, etc who operate the gears and maintain the whole system properly tuned and working.
However, they also know that – like all roller coaster rides – when you reach the very top, the system turns into a bear market that destabilises, spins out of control, contracts and irremediably collapses, as happened to Argentina in 2001 and to the better part of the world since 2008, then all losses are socialised by making Governments absorb them through the most varied transference mechanisms that dump these huge losses onto the population at large (whether in the form of generalised inflation, catastrophic hyperinflation, banking collapses, bail-outs, tax hikes, debt defaults, forced nationalisations, extreme austerity measures, etc).
The Four-sided Global “Ponzi” Pyramid Scheme
As we know, all good pyramids have four sides, and since the Global Financial System is based on a “Ponzi” Pyramid Scheme, there’s no reason why this particular pyramid should not have four sides as well.
Below is a summary of the Four-side Global “Ponzi” Pyramid Scheme that lies at the core of today’s Financial Model, indicating how these four “sides” function in a coordinated, consistent, and sequential manner.
Side One – Create Public Money Insufficiency. This is achieved, as we explained above, by controlling the National Public entity that issues public money. Its goal is to demonetise the Real Economy so that the latter is forced to seek “alternative funding” for its needs (i.e., so that it has no choice but to resort to private bank loans).
Side Two – Impose Private Banking Fractional Lending Loans. This, as we said, is virtual private money created out of thin air on which bankers charge interest – often at usury levels – thus generating enormous profit for “investors,” creditors and all sorts of entities and individuals who operate as parasites living off other people’s work. This would never have been the case if each local central bank were to flexibly generate the correct quantity of Public Money necessary to satisfy the needs of the Real Economy in each country and region.
Side Three – Promote a Debt-Based Economic System. In fact, the whole Pyramid Model is based on being able to promote this generalised paradigm that falsely states that what really “moves” the private and public economy is not so much work, creativity, toil and effort of workers, but rather “private investors,” “bank loans” and “credit” – i.e., indebtedness. With time, this paradigm has replaced the infinitely wiser, sounder, more balanced and solid concept of corporate profit being reinvested and genuine personal savings being the foundation for future prosperity and security. Pretty much the way Henry Ford, Sr. originally grew his most successful company.
Today, however, Debt reigns supreme and this paradigm has become entrenched and embedded into people’s minds thanks to the mainstream media and specialised journals and publications, combined with Ivy League universities’ Economics Departments that have all succeeded in imposing such “politically correct” thinking with respect to financial matters, especially those relating to the proper nature and function of Public Money.
The facts are that this Model generates unnecessary loans so that banking creditors can receive huge profits, which includes promoting uncontrolled, unwarranted and often pathological consumerism, which goes hand in hand with the increasing abandonment of the traditional value of “saving for a rainy day.”
Such debts having political and strategic goals rather than merely financial ones, are usually given a thin layer of “legality” so that they may be imposed by the creditor on the debtor (i.e., in the case of The Merchant of Venice, the bond entered into between Antonio and Shylock giving the latter the legal right to a pound of the former’s flesh; in the case of chronically indebted countries like Argentina, such “legality” is achieved through a complex public debt laundering6 mechanism carried out by successive formally “democratic” Caretaker Governments to this very day).
Side Four – Privatisation of Profits/Socialisation of Losses. Lastly, and knowing full well that, in the long run, the numbers of the entire Cycle of this Model never add up, and that the whole system will inevitably come crashing down, the Model imposes a highly complex and often subtle financial, legal and media engineering that allows privatising profits and socialising losses. In Argentina, this cycle has become increasingly visible for those who want to see it, because in our country the local “Ponzi” Pyramid Cycle lasts on average 15 to 17 years, i.e., we’ve had successive collapses involving brutal devaluation (1975), hyperinflation (1989) and systemic banking collapse (2001), however in the industrialised world, that cycle was made to last almost 80 years (i.e., three generations spanning from 1929 to 2008).
Conclusions
The fundamental cause of today’s on-going global financial collapse that exerts massive distortions over the Real Economy – and the ensuing social hardship, suffering and violence – is clear: Virtual Finance has usurped a pedestal of supremacy over the Real Economy, which does not legitimately belong to it.Finance must always be subordinated to, and in the service of, the Real Economy just as the Economy must heed the law and social needs of the Political Model executed by a Sovereign Nation-State (as we back-engineer this entire system, we thus understand why it is necessary for the Global Power Elite to first erode the sovereign Nation-State and to eventually do away with it altogether, in order to achieve its monetary, financial and political ends).
In fact, if we look at matters in their proper perspective, we will see that most national economies are pretty much intact, in spite of having been badly bruised by the financial collapse. It is Finance that is in the midst of a massive global collapse, as this Model of “Ponzi” Finance has grown into a sort of malignant “cancerous tumour” that has now “metastasised,” threatening to kill the whole economy and social body politic, in just about every country in the world, and certainly in the industrialised countries.
The above comparison of today’s financial system with a malignant tumour is more than a mere metaphor. If we look at the figures, we will immediately be able to see signs of this financial “metastasis.” For example, The New York Times in their 22 September 2008 edition explains that the main trigger of the financial collapse that had exploded just one week earlier on 15 September was, as we all know, mismanagement and lack of supervision over the “Derivatives” market. The Times then went on to explain that twenty years earlier, in 1988, there was no derivatives market; by 2002 however, Derivatives had grown into a global 102 trillion Dollar market (that’s 50% more than the Gross Domestic Product of all the countries in the world, the US, EU, Japan and BRICS nations included), and by September 2008, Derivatives had ballooned into a global 531 trillion Dollar market. That’s eight times the GDP of the entire planet! “Financial Metastasis” at its very worst. Since then, some have estimated this Derivatives global market figure to be in the region of One-Quadrillion Dollars…
Naturally, when that collapse began, the caretaker governments in the US, European Union and elsewhere, immediately sprang into action and implemented “Operation Bail-out” of all the mega-banks, insurance companies, stock exchanges and speculation markets, and their respective operators, controllers and “friends.” Thus, trillions upon trillions of Dollars, Euros and Pounds were given to Goldman Sachs, Citicorp, Morgan Stanley, AIG, HSBC and other “too big to fail” financial institutions… which is newspeak for “too powerful to fail”, because they hold politicians, political parties and governments in their steel grip.
All of this was paid with taxpayer dollars or, even worse, with uncontrolled and irresponsible issuance of Public Money bank notes and treasury bonds, especially by the Federal Reserve Bank which has, in practice, technically hyper-inflated the US Dollar: “Quantitative Easing” they call it, which is Newspeak forhyperinflation.
So far, however, like the proverbial Naked Emperor, nobody dares to state this openly. At least not until some “uncontrolled” event triggers or unmasks what should by now be obvious to all: Emperor Dollar is totally and completely naked.7 When that happens, we will then see bloody social and civil wars throughout the world and not just in Greece and Argentina.
By then, however, and as always happens, the powerful bankster clique and their well-paid financial and media operators, will be watching the whole hellish spectacle perched in the safety and comfort of their plush boardrooms atop the skyscrapers of New York, London, Frankfurt, Buenos Aires and Sao Paulo…

Notes

1. The concept of “Geoeconomics” was coined by the New York-based Council on Foreign Relations, through a studies group honouring Maurice Greenberg, the financier who was for decades CEO of American International Group (AIG) which collapsed in 2008 and had strong conflict-of-interest ties with major insurance and reinsurance broker Marsh Group whose CEO was his son Jeffrey. Both father and son were indicted for fraud by then New York Attorney General Elliot Spitzer. Spitzer would later pay a very heavy price for this after becoming Governor of New York State when someone “discovered” his sex escapades which were quickly blown up into a major scandal by The New York Times…

2. We have described the basic Global Power Elite structure, model and objectives in our e-Book The Coming World Government: Tragedy & Hope?, available through www.asalbuchi.com.ar.

3. For more information, see the Third Pillar of the Second Republic Project “Reject the Debt-Based Economy” on www.secondrepublicproject.com.

4. Some notable exceptions: Today: Libya, Iran, Syria, China; In the past: Peron’s Argentina, Germany and Italy in the 30’s and 40’s…. Are we seeing a pattern here?

5. See The New York Times, 22 September 2008

6. See White Paper comparing Debt Laundering mechanisms to Money Laundering mechanisms, lodged under Pillar No 3 “Reject the Debt-Based Economy” of Second Republic Project inwww.secondrepublicproject.com.

7. This is more fully described in the author’s book

The Coming World Government: Tragedy & Hope?, in the chapter “Death & Resurrection of the US Dollar”. Details on www.asalbuchi.com.ar. Also available upon request by E-mail: salbuchi@fibertel.com.ar.

Adrian Salbuchi is a political analyst, author, speaker and radio talk-show host in Argentina. He has published several books on geopolitics and economics in Spanish, and recently published his first eBook in English: The Coming World Government: Tragedy & Hope? which can be ordered through his web site www.asalbuchi.com.ar, or details can be requested by E-mail to arsalbuchi@gmail.com. Salbuchi also works as strategic consultant for domestic and international companies. He is also founder of the Second Republic Project in Argentina, which is expanding internationally (visit: www.secondrepublicproject.com).

The above article appeared in New Dawn No. 128 (September-October 2011). www.newdawnmagazine.com.

Trader says Eurozone Market will crash

Costs Of Euro Break Up

The Walls are starting to tumble down, it is a slow decent for sure
Bring Out Your Dead - UBS Quantifies Costs Of Euro Break Up, Warns Of Collapse Of Banking System And Civil War
By Tyler Durden
Created 09/05/2011
Any time a major bank releases a report saying a given course of action is too costly, too prohibitive, too blonde, or simply too impossible, it is nearly guaranteed that that is precisely the course of action about to be undertaken. Which is why all non-euro skeptics are advised to shield their eyes and look away from the just released report by UBS (of surging 3 Month USD Libor rate fame) titled "Euro Break Up - The Consequences." UBS conveniently sets up the straw man as follows: "Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change." So far so good. Yet where it gets scary is when UBS quantifies the actual opportunity cost to one or more countries leaving the Euro. Notably Germany. "Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. " It also would mean the end of UBS, but we digress. Where it gets even more scary is when UBS, like many other banks to come, succumbs to the Mutual Assured Destruction trope made so popular by ole' Hank Paulson : "The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war." So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist). The scariest thing, however, by far, is that for this report to have been issued, it means that Germany is now actively considering dumping the euro.

Executive summary:

Fiscal confederation, not break-up

Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries can not be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move.

The economic cost (part 1)

The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

The economic cost (part 2)

Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over EUR1,000 per person, in a single hit.

The political cost

The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.

A little more on that particularly troubling last point:

Do monetary unions break up without civil wars?

The break-up of a monetary union is a very rare event. Moreover the break-up of a monetary union with a fiat currency system (ie, paper currency) is extremely unusual. Fixed exchange rate schemes break up all the time. Monetary unions that relied on specie payments did fragment – the Latin Monetary Union of the 19th century fragmented several times – but should be thought of as more of a fixed exchange rate adjustment. Countries went on and off the gold or silver or bimetal standards, and in doing so made or broke ties with other countries’ currencies.

If we consider fiat currency monetary union fragmentation, it is fair to say that the economic circumstances that create a climate for a break-up and the economic consequences that follow from a break-up are very severe indeed. It takes enormous stress for a government to get to the point where it considers abandoning the lex monetae of a country. The disruption that would follow such a move is also going to be extreme. The costs are high – whether it is a strong or a weak country leaving – in purely monetary terms. When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences.

With this degree of social dislocation, the historical parallels are unappealing. Past instances of monetary union break-ups have tended to produce one of two results. Either there was a more authoritarian government response to contain or repress the social disorder (a scenario that tended to require a change from democratic to authoritarian or military government), or alternatively, the social disorder worked with existing fault lines in society to divide the country, spilling over into civil war. These are not inevitable conclusions, but indicate that monetary union break-up is not something that can be treated as a casual issue of exchange rate policy.

Even with a paucity of case studies, what evidence we have does lend credence to the political cost argument. Clearly, not all parts of a fracturing monetary union necessarily collapse into chaos. The point is not that everyone suffers, but that some part of the former monetary union is highly likely to suffer.

The fracturing of the Czech and Slovak monetary union in 1993 led to an immediate sealing of the border, capital controls and limits on bank withdrawals. This was not so much secession as destruction and substitution (the Czechoslovak currency ceased to exist entirely). Although the Czech Republic that emerged from the crisis was considered to be a free country (using the Freedom House definition), with political rights improving relative to Czechoslovakia (also considered to be a free country), Slovakia saw a deterioration in the assessment of its political rights and civil liberties, and was designated “partially free” (again, using Freedom House criteria).

Similarly the break-up of the Soviet Union saw authoritarian regimes in the resulting states. Of course, this was not a change from the previous status quo, but that is not the point. The question is not how a liberal democracy develops, but whether a liberal democracy could withstand the social turmoil that surrounds a monetary union fracturing. We lack evidence to support the idea that it could.

Even the US monetary union break-up in 1932-33 was accompanied by something close to authoritarianism. Roosevelt’s inauguration was described by a contemporary journalist as being conducted in “a beleaguered capital in wartime”, with machine guns covering the Mall. State militia were called out to deal with the reactions of local populations, unhappy at what had happened to the monetary union (and specifically their access to their banks).

Older examples are less helpful, as they tend to be more akin to fixed exchange rate regimes under a gold standard or some other international monetary arrangement. Nevertheless, the Irish separation from the UK, or the convulsions of the Latin Monetary Union in Europe (particularly around the Franco-Prussian war in 1870 and its aftermath) saw monetary unions fragment with varying degrees of violence in some parts of the union.

Writing in 1997, the Harvard economist Martin Feldstein offered a view that seems to be somewhat chillingly precognitive. He said “Uniform monetary policy and inflexible exchange rates will create conflicts whenever cyclical conditions differ among the member countries... Although a sovereign country... could in principle withdraw from the EMU, the potential trade sanctions and other pressures on such a country are likely to make membership in the EMU irreversible unless there is widespread economic dislocation in Europe or, more generally, a collapse of the peaceful coexistence within Europe.” (emphasis added).

As for what happens if UBS, and the Euro Unionists lose the fight for the euro:

Our base case for the Euro is that the monetary union will hold together, with some kind of fiscal confederation (providing automatic stabilisers to economies, not transfers to governments). This is how the US monetary union was resurrected in the 1930s. It is how the UK monetary union, and indeed the German monetary union, have held together.

But what if the disaster scenario happens? How can investors invest if they believe in a break-up, however low the probability? The simple answer is that they cannot. Investing for a break-up scenario has not guaranteed winners within the Euro area. The growth consequences are awful in any break-up scenario. The risk of civil disorder questions the rule of law, and as such basic issues such as property rights. Even those countries that avoid internal strife and divisions will likely have to use administrative controls to avoid extreme positions in their markets.

The only way to hedge against a Euro break-up scenario is to own no Euro assets at all.

Alas, this will be the final outcome. Unfortunately trillions more in taxpayer capital will be lost before we get there.

In the meantime, enjoy as UBS just unwittingly announced the final countdown for the EUR.

Source

Wall Street Crimes SEC Coverup?

Is the SEC Covering Up Wall Street Crimes?
A whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals.
by: Matt Taibbi
Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission's records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted NARA to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission's improprieties.

As a federally protected whistle-blower, Flynn is not permitted to speak to the press. But in evidence he presented to the SEC's inspector general and three congressional committees earlier this summer, the 13-year veteran of the agency paints a startling picture of a federal police force that has effectively been conquered by the financial criminals it is charged with investigating. In at least one case, according to Flynn, investigators at the SEC found their desire to bring a case against an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating. In another case, the agency farmed out its inquiry to a private law firm – one hired by the company under investigation. The outside firm, unsurprisingly, concluded that no further investigation of its client was necessary. To complete the bureaucratic laundering process, Flynn says, the SEC dropped the case and destroyed the files.

Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."

The destruction of records by the SEC, as outlined by Flynn, is something far more than an administrative accident or bureaucratic fuck-up. It's a symptom of the agency's terminal brain damage. Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money – a blow from which the agency has never recovered. "From what I've seen, it looks as if the SEC might have sanctioned some level of case-related document destruction," says Sen. Chuck Grassley, the ranking Republican on the Senate Judiciary Committee, whose staff has interviewed Flynn. "It doesn't make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law."

How did officials at the SEC wind up with a faithful veteran employee – a conservative, mid-level attorney described as a highly reluctant whistle-blower – spilling the agency's most sordid secrets to Congress? In a way, they asked for it.

On May 18th of this year, SEC enforcement director Robert Khuzami sent out a mass e-mail to the agency's staff with the subject line "Lawyers Behaving Badly." In it, Khuzami asked his subordinates to report any experiences they might have had where "the behavior of counsel representing clients in... investigations has been questionable."

Khuzami was asking staffers to recount any stories of outside counsel behaving unethically. But Flynn apparently thought his boss was looking for examples of lawyers "behaving badly" anywhere, including within the SEC. And he had a story to share he'd kept a lid on for years. "Mr. Khuzami may have gotten something more than he expected," Flynn's lawyer, a former SEC whistle-blower named Gary Aguirre, later explained to Congress.

Flynn responded to Khuzami with a letter laying out one such example of misbehaving lawyers within the SEC. It involved a case from very early in Flynn's career, back in 2000, when he was working with a group of investigators who thought they had a "slam-dunk" case against Deutsche Bank, the German financial giant. A few years earlier, Rolf Breuer, the bank's CEO, had given an interview to Der Spiegel in which he denied that Deutsche was involved in übernahmegespräche – takeover talks – to acquire a rival American firm, Bankers Trust. But the statement was apparently untrue – and it sent the stock of Bankers Trust tumbling, potentially lowering the price for the merger. Flynn and his fellow SEC investigators, suspecting that investors of Bankers Trust had been defrauded, opened a MUI on the case.

A Matter Under Inquiry is just a preliminary sort of look-see – a way for the SEC to check out the multitude of tips it gets about suspicious trades, shady stock scams and false disclosures, and to determine which of the accusations merit a formal investigation. At the MUI stage, an SEC investigator can conduct interviews or ask a bank to send in information voluntarily. In the Deutsche case, Flynn and other SEC investigators collected sworn testimony and documents indicating that plenty of übernahmegespräche indeed had been going on when Breuer spoke to Der Spiegel. Based on the evidence, they sent an "Action Memorandum" to senior SEC staff, formally recommending that the agency press forward and transform the MUI into a full-blown fraud case against Deutsche. Bumping a MUI up to a formal investigation is critical, because it enables investigators to pull out the full law-enforcement ass-kicking measures – subpoenas, depositions, everything short of hot pokers and waterboarding.

Breuer responded to the threat as big banks like Deutsche often do: He hired a former SEC enforcement director to lobby the agency to back off. The ex-insider, Gary Lynch, launched a creative and inspired defense, producing a linguistic expert who argued that übernahmegespräche only means "advanced stage of discussions." Nevertheless, the request to proceed with the case was approved by several levels of the SEC's staff. All that was needed to move forward was a thumbs-up from the director of enforcement at the time, Richard Walker.

But then a curious thing happened. On July 10th, 2001, Flynn and the other investigators were informed that Walker was mysteriously recusing himself from the Deutsche case. Two weeks later, on July 23rd, the enforcement division sent a letter to Deutsche that read, "Inquiry in the above-captioned matter has been terminated." The bank was in the clear; the SEC was dropping its fraud investigation. In contradiction to the agency's usual practice, it provided no explanation for its decision to close the case.

On October 1st of that year, the mystery was solved: Dick Walker was named general counsel of Deutsche. Less than 10 weeks after the SEC shut down its investigation of the bank, the agency's director of enforcement was handed a cushy, high-priced job at Deutsche.

Deutsche's influence in the case didn't stop there. A few years later, in 2004, Walker hired none other than Robert Khuzami, a young federal prosecutor, to join him at Deutsche. The two would remain at the bank until February 2009, when Khuzami joined the SEC as Flynn's new boss in the enforcement division. When Flynn sent his letter to Khuzami complaining about misbehavior by Walker, he was calling out Khuzami's own mentor.

The circular nature of the case illustrates the revolving-door dynamic that has become pervasive at the SEC. A recent study by the Project on Government Oversight found that over the past five years, former SEC personnel filed 789 notices disclosing their intent to represent outside companies before the agency – sometimes within days of their having left the SEC. More than half of the disclosures came from the agency's enforcement division, who went to bat for the financial industry four times more often than ex-staffers from other wings of the SEC.

Even a cursory glance at a list of the agency's most recent enforcement directors makes it clear that the SEC's top policemen almost always wind up jumping straight to jobs representing the banks they were supposed to regulate. Lynch, who represented Deutsche in the Flynn case, served as the agency's enforcement chief from 1985 to 1989, before moving to the firm of Davis Polk, which boasts many top Wall Street clients. He was succeeded by William McLucas, who left the SEC in 1998 to work for WilmerHale, a Wall Street defense firm so notorious for snatching up top agency veterans that it is sometimes referred to as "SEC West." McLucas was followed by Dick Walker, who defected to Deutsche in 2001, and he was in turn followed by Stephen Cutler, who now serves as general counsel for JP Morgan Chase. Next came Linda Chatman Thomsen, who stepped down to join Davis Polk, only to be succeeded in 2009 by Khuzami, Walker's former protégé at Deutsche Bank.

This merry-go-round of current and former enforcement directors has repeatedly led to accusations of improprieties. In 2008, in a case cited by the SEC inspector general, Thomsen went out of her way to pass along valuable information to Cutler, the former enforcement director who had gone to work for JP Morgan. According to the inspector general, Thomsen signaled Cutler that the SEC was unlikely to take action that would hamper JP Morgan's move to buy up Bear Stearns. In another case, the inspector general found, an assistant director of enforcement was instrumental in slowing down an investigation into the $7 billion Ponzi scheme allegedly run by Texas con artist R. Allen Stanford – and then left the SEC to work for Stanford, despite explicitly being denied permission to do so by the agency's ethics office. "Every lawyer in Texas and beyond is going to get rich on this case, OK?" the official later explained. "I hated being on the sidelines."

Small wonder, then, that SEC staffers often have trouble getting their bosses to approve full-blown investigations against even the most blatant financial criminals. For a fledgling MUI to become a formal investigation, it has to make the treacherous leap from the lower rungs of career-level staffers like Flynn all the way up to the revolving-door level at the top, where senior management is composed largely of high-priced appointees from the private sector who have strong social and professional ties to the very banks they are charged with regulating. And if senior management didn't approve an investigation, the documents often wound up being destroyed – as Flynn would later discover.

After the Deutsche fiasco over Bankers Trust, Flynn continued to work at the SEC for four more years. He briefly left the agency to dabble in real estate, then returned in 2008 to serve as an attorney in the enforcement division. In January 2010, he accepted new responsibilities that included helping to manage the disposition of records for the division – and it was then he first became aware of the agency's possibly unlawful destruction of MUI records.

Flynn discovered a directive on the enforcement division's internal website ordering staff to destroy "any records obtained in connection" with closed MUIs. The directive appeared to violate federal law, which gives responsibility for maintaining and destroying all records to the National Archives and Records Administration. Over a decade earlier, in fact, the SEC had struck a deal with NARA stipulating that investigative records were to be maintained for 25 years – and that if any files were to be destroyed after that, the shredding was to be done by NARA, not the SEC.

But Flynn soon learned that the records for thousands of preliminary investigations no longer existed. In his letter to Congress, Flynn estimates that the practice of destroying MUIs had begun as early as 1993, and has resulted in at least 9,000 case files being destroyed. For all the thousands of tips that had come in to the SEC, and the thousands of interviews that had been conducted by the agency's staff, all that remained were a few perfunctory lines for each case. The mountains of evidence gathered were no longer in existence.

To read through the list of dead and buried cases that Flynn submitted to Congress is like looking through an infrared camera at a haunted house of the financial crisis, with the ghosts of missed prosecutions flashing back and forth across the screen. A snippet of the list:
PARTY MUI # OPENED/CLOSED ISSUE
Goldman Sachs MLA-01909 6/99 - 4/00 Market Manipulation
Deutsche Bank MHO-09356 11/01 - 7/02 Insider Trading
Deutsche Bank MHO-09432 2/02 - 8/02 Market Manipulation
Lehman Brothers MNY-07013 3/02 - 7/02 Financial Fraud
Goldman Sachs MNY-08198 11/09 - 12/09 Insider Trading

One MUI – case MNY-08145 – involved allegations of insider trading at AIG on September 15th, 2008, right in the middle of the insurance giant's collapse. In that case, an AIG employee named Jacqueline Millan reported irregularities in the trading of AIG stock to her superiors, only to find herself fired. Incredibly, instead of looking into the matter itself, the SEC agreed to accept "an internal investigation by outside counsel or AIG." The last note in the file indicates that "the staff plans to speak with the outside attorneys on Monday, August 24th [2009], when they will share their findings with us." The fact that the SEC trusted AIG's lawyers to investigate the matter shows the basic bassackwardness of the agency's approach to these crash-era investigations. The SEC formally closed the case on October 1st, 2009.

The episode with AIG highlights yet another obstacle that MUIs experience on the road to becoming formal investigations. During the past decade, the SEC routinely began allowing financial firms to investigate themselves. Imagine the LAPD politely asking a gang of Crips and their lawyers to issue a report on whether or not a drive-by shooting by the Crips should be brought before a grand jury – that's basically how the SEC now handles many preliminary investigations against Wall Street targets.

The evolution toward this self-policing model began in 2001, when a shipping and food-service conglomerate called Seaboard aggressively investigated an isolated case of accounting fraud at one of its subsidiaries. Seaboard fired the guilty parties and made sweeping changes to its internal practices – and the SEC was so impressed that it instituted a new policy of giving "credit" to companies that police themselves. In practice, that means the agency simply steps aside and allows companies to slap themselves on the wrists. In the case against Seaboard, for instance, the SEC rewarded the firm by issuing no fines against it.

According to Lynn Turner, a former chief accountant at the SEC, the Seaboard case also prompted the SEC to begin permitting companies to hire their own counsel to conduct their own inquiries. At first, he says, the process worked fairly well. But then President Bush appointed the notoriously industry-friendly Christopher Cox to head up the SEC, and the "outside investigations" turned into whitewash jobs. "The investigations nowadays are probably not worth the money you spend on them," Turner says.

Harry Markopolos, a certified fraud examiner best known for sounding a famously unheeded warning about Bernie Madoff way back in 2000, says the SEC's practice of asking suspects to investigate themselves is absurd. In a serious investigation, he says, "the last person you want to trust is the person being accused or their lawyer." The practice helped Madoff escape for years. "The SEC took Bernie's word for everything," Markopolos says.

At the SEC, having realized that the agency was destroying documents, Flynn became concerned that he was overseeing an illegal policy. So in the summer of last year, he reached out to NARA, asking them for guidance on the issue.

That request sparked a worried response from Paul Wester, NARA's director of modern records. On July 29th, 2010, Wester sent a letter to Barry Walters, who oversees document requests for the SEC. "We recently learned from Darcy Flynn... that for the past 17 years the SEC has been destroying closed Matters Under Inquiry files," Wester wrote. "If you confirm that federal records have been destroyed improperly, please ensure that no further such disposals take place and provide us with a written report within 30 days."

Wester copied the letter to Adam Storch, a former Goldman Sachs executive who less than a year earlier had been appointed as managing executive of the SEC's enforcement division. Storch's appointment was not without controversy. "I'm not sure what's scarier," Daniel Indiviglio of The Atlantic observed, "that this guy worked at an investment bank that many believe has questionable ethics and too cozy a Washington connection, or that he's just 29." In any case, Storch reacted to the NARA letter the way the SEC often does – by circling the wagons and straining to find a way to blow off the problem without admitting anything.

Last August, as the clock wound down on NARA's 30-day deadline, Storch and two top SEC lawyers held a meeting with Flynn to discuss how to respond. Flynn's notes from the meeting, which he passed along to Congress, show the SEC staff wondering aloud if admitting the truth to NARA might be a bad idea, given the fact that there might be criminal liability.

"We could say that we do not believe there has been disposal inconsistent with the schedule," Flynn quotes Ken Hall, an assistant chief counsel for the SEC, as saying.

"There are implications to admit what was destroyed," Storch chimed in. It would be "not wise for me to take on the exposure voluntarily. If this leads to something, what rings in my ear is that Barry [Walters, the SEC documents officer] said: This is serious, could lead to criminal liability."

When the subject of how many files were destroyed came up, Storch answered: "18,000 MUIs destroyed, including Madoff."

Four days later, the SEC responded to NARA with a hilariously convoluted nondenial denial. "The Division is not aware of any specific instances of the destruction of records from any other MUI," the letter states. "But we cannot say with certainty that no such documents have been destroyed over the past 17 years." The letter goes on to add that "the Division has taken steps... to ensure that no MUI records are destroyed while we review this issue."

Translation: Hey, maybe records were destroyed, maybe they weren't. But if we did destroy records, we promise not to do it again – for now.

The SEC's unwillingness to admit the extent of the wrong doing left Flynn in a precarious position. The agency has a remarkably bad record when it comes to dealing with whistle-blowers. Back in 2005, when Flynn's attorney, Gary Aguirre, tried to pursue an insider-trading case against Pequot Capital that involved John Mack, the future CEO of Morgan Stanley, he was fired by phone while on vacation. Two Senate committees later determined that Aguirre, who has since opened a private practice representing whistle-blowers, was dismissed improperly as part of a "process of reprisal" by the SEC. Two whistle-blowers in the Stanford case, Julie Preuitt and Joel Sauer, also experienced retaliation – including reprimands and demotions – after raising concerns about superficial investigations. "There's no mechanism to raise these issues at the SEC," says another former whistle-blower. Contacting the agency's inspector general, he adds, is considered "the nuclear option" – a move "well-known to be a career-killer."

In Flynn's case, both he and Aguirre tried to keep the matter in-house, appealing to SEC chairman Mary Schapiro with a promise not to go outside the agency if she would grant Flynn protection against reprisal. When no such offer was forthcoming, Flynn went to the agency's inspector general before sending a detailed letter about the wrongdoing to three congressional committees.

One of the offices Flynn contacted was that of Sen. Grassley, who was in the midst of his own battle with the SEC. Frustrated with the agency's failure to punish major players on Wall Street, the Iowa Republican had begun an investigation into how the SEC follows up on outside complaints. Specifically, he wrote a letter to FINRA, another regulatory agency, to ask how many complaints it had referred to the SEC about SAC Capital, the hedge fund run by reptilian billionaire short-seller Stevie Cohen.

SAC has long been accused of a variety of improprieties, from insider trading to harassment. But no charge in recent Wall Street history is crazier than an episode involving a SAC executive named Ping Jiang, who was accused in 2006 of enacting a torturous hazing program. According to a civil lawsuit that was later dropped, Jiang allegedly forced a new trader named Andrew Tong to take female hormones, come to work wearing a dress and lipstick, have "foreign objects" inserted in his rectum, and allow Jiang to urinate in his mouth. (I'm not making this up.)

Grassley learned that over the past decade, FINRA had referred 19 complaints about suspicious trades at SAC to federal regulators. Curious to see how many of those referrals had been looked into, Grassley wrote the SEC on May 24th, asking for evidence that the agency had properly investigated the cases.

Two weeks later, on June 9th, Khuzami sent Grassley a surprisingly brusque answer: "We generally do not comment on the status of investigations or related referrals, and, in turn, are not providing information concerning the specific FINRA referrals you identified." Translation: We're not giving you the records, so blow us.

Grassley later found out from FINRA that it had actually referred 65 cases about SAC to the SEC, making the lack of serious investigations even more inexplicable. Angered by Khuzami's response, he sent the SEC another letter on June 15th demanding an explanation, but no answer has been forthcoming.

In the interim, Grassley's office was contacted by Flynn, who explained that among the missing MUIs he had uncovered were at least three involving SAC – one in 2006, one in 2007 and one in 2010, involving charges of insider trading and currency manipulation. All three cases were closed by the SEC, and the records apparently destroyed.

On August 17th, Grassley sent a letter to the SEC about the Flynn allegations, demanding to know if it was indeed true that the SEC had destroyed records. He also asked if the agency's failure to produce evidence of investigations into SAC Capital were related to the missing MUIs.

The SEC's inspector general is investigating the destroyed MUIs and plans to issue a report. NARA is also seeking answers. "We've asked the SEC to look into the matter and we're awaiting their response," says Laurence Brewer, a records officer for NARA. For its part, the SEC is trying to explain away the illegality of its actions through a semantic trick. John Nester, the agency's spokesman, acknowledges that "documents related to MUIs" have been destroyed. "I don't have any reason to believe that it hasn't always been the policy," he says. But Nester suggests that such documents do not "meet the federal definition of a record," and therefore don't have to be preserved under federal law.

But even if SEC officials manage to dodge criminal charges, it won't change what happened: The nation's top financial police destroyed more than a decade's worth of intelligence they had gathered on some of Wall Street's most egregious offenders. "The SEC not keeping the MUIs – you can see why this would be bad," says Markopolos, the fraud examiner famous for breaking the Madoff case. "The reason you would want to keep them is to build a pattern. That way, if you get five MUIs over a period of 20 years on something similar involving the same company, you should be able to connect five dots and say, 'You know, I've had five MUIs – they're probably doing something. Let's go tear the place apart.'" Destroy the MUIs, and Wall Street banks can commit the exact same crime over and over, without anyone ever knowing.

Regulation isn't a panacea. The SEC could have placed federal agents on every corner of lower Manhattan throughout the past decade, and it might not have put a dent in the massive wave of corruption and fraud that left the economy in flames three years ago. And even if SEC staffers from top to bottom had been fully committed to rooting out financial corruption, the agency would still have been seriously hampered by a lack of resources that often forces it to abandon promising cases due to a shortage of manpower. "It's always a triage," is how one SEC veteran puts it. "And it's worse now."

But we're equally in the dark about another hypothetical. Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm's executives were suspected of insider trading in September 2008?

It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases. "Street-level law enforcement is increasingly data-driven," says Bill Laufer, a criminology professor at the University of Pennsylvania. "For a host of reasons, though, we are starved for good data on both white-collar and corporate crime. So the idea that we would take the little data we do have and shred it, without a legal requirement to do so, calls for a very creative explanation."

We'll never know what the impact of those destroyed cases might have been; we'll never know if those cases were closed for good reasons or bad. We'll never know exactly who got away with what, because federal regulators have weighted down a huge sack of Wall Street's dirty laundry and dumped it in a lake, never to be seen again.

Source

Venezuela moving Cash & Gold Reserves

Venezuela Plans to Move Reserve Funds
By JOSé DE CóRDOBA And EZEQUIEL MINAYA

CARACAS—Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal.

The planned moves would include transferring $6.3 billion in cash reserves, most of which Venezuela now keeps in banks such as the Bank for International Settlements in Basel, Switzerland, and Barclays Bank in London to unnamed Russian, Chinese and Brazilian banks, one document said.

Venezuela also plans to move 211 tons of gold it keeps abroad and values at $11 billion to the vaults of the Venezuelan Central Bank in Caracas where the government keeps its remaining 154 tons of bullion, the document says.

Venezuelan officials were tight-lipped. Representatives of the ministry of finance and the central bank said there was no official comment, and no one was authorized to address the issue.

Lately, senior Venezuelan officials have criticized Venezuela's dependence on the dollar. Last Saturday, Venezuelan Foreign Minister Nicolas Maduro said the world's financial system, based on the dollar, "had entered into a crisis of uncertainty and we are planning to construct a new international monetary system, and especially in South America, protect ourselves from this situation," he said.

The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.

A spokesman for the Bank for International Settlements where Venezuela keeps $3.7 billion of its cash reserves, and 11.2 tons of gold, Venezuela values at $544 million, according to the document, also declined to comment.

Analysts said the planned move made little economic or financial sense, since Venezuela would be taking its money out of secure banks in safe countries and putting it in countries that are not as safe and perhaps in currencies such as the Chinese yuan or the Russian ruble, which are not reserve currencies. "It's a big risk," said José Guerra, a former official at Venezuela's central bank. Mr. Guerra said he also had heard about the documents whose authenticity was confirmed to him by Central Bank officials.

Mr. Guerra said one possible reason for the planned moves could be that Venezuela is afraid it could be compelled to pay billions of dollars in compensations to foreign companies that have gone to court to recover damages for companies Venezuelan President Hugo Chávez has nationalized. Another reason could be that China may have asked for collateral for billions of dollars it has loaned Venezuela, Mr. Guerra said.

Venezuela faces a sizable bill from arbitration but it's difficult to pin down a reliable estimate.

"It's a wide range from $10 billion to $40 billion and beyond," says Tamara Herrera, chief economist of Síntesis Financiera, an economic consulting firm based in Caracas. "There are many ongoing negotiations; the major ones of course are with oil companies."

One of the documents outlining the moves appears to have been drafted by Jorge Giordani, Venezuela's planning and finance minister, in conjunction with Nelson Merentes, the central bank president, for Mr. Chávez's approval. It calls for the transfer of the cash and gold reserves as of Aug. 8 in a maximum of two months.

Another document prepared by Foreign Minister Nicolas Maduro for Mr. Chávez's approval calls for Messrs. Giordani and Merentes to prepare a plan to safeguard Venezuela's international reserves given "the recent U.S. debt crisis and its impact on the dollar as a world reserve currency."

The crisis, the document says, "has lit all the alarm signals as to whether it's convenient to maintain our reserves in that currency."

The document also notes that "the powers of the North" have "pillaged" Libya's international reserves as a result of the sanctions applied to Libya. "That makes us reflect on the need to elaborate a plan to monitor and secure the funds that the Republic maintains in international banks to meet its commitments abroad.

For some analysts, the reference to Libya signaled a possible political motive. The charismatic Mr. Chávez, who has said he will run again for president next year's elections, is being treated with chemotherapy for cancer in Cuba. Neither Mr. Chávez's type of cancer nor Mr. Chávez's prognosis has been made public. Moving the reserves may signal that Mr. Chávez and his associates could be preparing some drastic political moves—such as canceling elections—that could incur international condemnation and perhaps trigger sanctions.

"It doesn't augur well for Venezuela," says Roger Noriega, a former high-ranking state department official during the Bush administration.

Opposition congressman Julio Montoya said he received leaked copies of the proposal to move the funds from concerned officials of the finance ministry.

"We don't know if (Chávez) has signed it," Mr. Montoya said during a press conference Tuesday. The congressman from Zulia state criticized what he called the "secretive" nature of the president's deliberation over the measure.

Mr. Montoya said that the proposal raised the question if Venezuela was being pressured into transferring its reserves because of its growing ties with China and Russia.

To fund the country's large-scale social programs, Mr. Chávez has turned to resource-hungry China for assistance on everything from financing to housing and machinery. Last year, Venezuela received a $20 billion credit line from the China Development Bank for housing, which it is paying back with oil shipments.

While China has been Venezuela's largest creditor in recent years, Russia has been a major arms supplier to the South American nation.

Most recently, Venezuela announced it was finalizing agreements for two additional credit lines of $4 billion each with Russia and China, with a portion of the Russian funds earmarked for the Venezuelan military. Venezuelan officials have also said they have recently reached an agreement with Brazil for a $4 billion line of credit.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

Source

Economic Collapse of the World Currencies

Below are comments by a man I have complete trust and faith in, his words sometimes are anti but mostly he rings true. He is responding to a youtube video link is below if you want to view it. I do not want to embed here. Like Micheal says Love Prevails

MWM responds: Thanks Janis for sending it. It is useful foil for what to avoid.
It is grade B propaganda for a theme and not at all prophetic. It has several
fallacies. Here's the basic. The pirate class pays the salaries of the world's
best mathematicians and computers. The inventors of "game theory" were Jews and
have been long hired up into the hierarchy. They know much better than anyone
about the relative values, potential moments of collapse, etc. The Masters of
the Ponzi are the Masters of the Ponzi World. Look, all currency collapsed for
good in the 1930's, that's what the Great Depression was about. They have been
running pure scams since then. This guy's logic is 80 years behind the
realities. The New World Order Scam has a lot more life to it, as they will
attempt to show us very soon. Additionally, keep in mind that portions of the
aristocracy has lived through many centuries in unbroken family successions and
collectively they have witnessed many currency collapses, imperial collapses,
etc. Some portions of them have developed an entirely different knowledge base
and ideological world understanding about how to manipulate their societies
through these deconstruction and fire-sale times. They live in a completely
different "reality" than you and I and we are almost completely ignorant of
their reality construct. We can merely guess at so far a distance, which is of
course exactly how they want it and go to great lengths to maintain. The
aristocracies learned this trick several millennia ago. Notice almost none of
them EVER speak publically about a serious issue. Wouldn't be seemly, as GHW
Bush might say. Do you think they are eunuchs? Nope, it is because they do
not think the public is entitled to be involved in their discussions. It is
always nobodies from nowhereland who seem to be speaking (hired finger puppets
on the stage). They are pros at stealing from Peter to pay Paul to rob Jack
blind, and so it goes.

Massive fear of the collapse of the dollar plays into the hands of their
bankster's hands in many ways. It makes absolutism and Darwinism socially
acceptable on many levels to allow autocratic measures to be used with maximum
force. But since THEY determine if the dollar is worth something, (it certainly
isn't you or I), I think you can smell the rat here.

Like wars, these crises are now merely tools of the Feudal Lords. In the long
historical struggle of several hundred years since the Renaissance, which pit
the feudalists against the merchant pirates, industrialists, the idealists of
the ideologies, and the organizers of mass movements, the Feudal Lords have more
or less won. For a while it looked like the isms would win out, but this turned
out to be an illusion. The aristocratic world view of conceited self-chauvinism,
otherwise known as narcissism, has clearly become the dominating and ruling
force in this generation and there is no other competition in formal view.

It is not a dollar collapse to fear, dear Janis, but a driving economic squeeze
to reduce the incomes of people to induce them into greater robotic behaviours
to support the next imperial military expansion under Dear Leader(s) who offer
Change We Can Believe so that more idiots can be sent abroad to murder more
little brown people to make the Never Never-Land Shining City On The Hill safe
and secure for some obscure myths called democracy and freedom.

The Whip and the Carrot. Laugh at them both, Janis, and the hand which
proffers them. Laugh, laugh, laugh, and when their fund raisers, pollsters, and
military recruiters call, tell them to go pick up a truckload of blue cheese on
the Moon.

Meanwhile stare down this video below and see through its mongering. Mind you,
the believable portion is that there will be violence in all of the places
mentioned. Yes, of course, that will all be part of the drama of the squeeze.
A lot of people need a good emotional release. The V meme is widely
distributed. When invited, some will go for a pig roast and barbeque on a
summer night.

However, it all goes, all this reactionary fleeing, to nowhere so long as the
pirate class owns the transmissions of intelligence and control the content of
the memes. The only way out of this madness is a consolidated universal push
for an exact agenda, call it the Human Agenda, which dissolves the aristocratic
humbuggery.
http://www.metasynmedia.com/
ONLY LOVE PREVAILS

http://www.youtube.com/watch?v=b3-vwYJiD8g&feature=youtu.be

Rupert Murdoch's American Scandals

One could not even begin to speak of the Australian Scandals

All the corruption exposed in England – hacking, political payoffs, dirty cops, hush-money settlements – is also happening here
by: Tim Dickinson

As CEO, Murdoch not only tolerates employees and executives who push the boundaries of legality and good taste, he celebrates them — at least until the cops show up.
Rupert Murdoch would like you to believe that the voicemail-hacking scandal at the News of the World "went against everything that I stand for." In his recent testimony before Parliament, the 80-year-old billionaire insisted that the criminal wrongdoing at the London tabloid betrayed the 53,000 "ethical and distinguished professionals" he commands from the pinnacle of News Corp. — the world's second-largest media empire. Besides, he claimed, the scandal at the News of the World involved "a tiny part of our business," which he helpfully quantified as "less than one percent of our company."

At first glance, the systemic campaign of bribery and wiretapping at the News of the World certainly does seem extraordinary. Reporters and editors at what was the largest-circulation Sunday paper in the English-speaking world stand accused of bribing police, hacking the private voicemails of everyone from the royal family to the parents of soldiers killed in Iraq and Afghanistan, and paying more than $2 million in gag settlements to victims — allegedly with the full knowledge of Murdoch's son and heir apparent, James.

But the corruption exposed at the News of the World is not the work of a "rogue" element within News Corp. — it's a reflection of the lawless culture that defines the company. As CEO, Murdoch not only tolerates employees and executives who push the boundaries of legality and good taste, he celebrates them — at least until the cops show up. "There's a broader culture within the company," Col Allan, editor of Murdoch's New York Post, crowed in 2007. "We like being pirates." Whatever veneer of integrity News Corp. may have accrued after its purchase of The Wall Street Journal the very same year masks an ingrained corporate ethos that believes integrity is for suckers. The attitude passed down from the top, says one veteran of Murdoch's tabloids, is aggressive and straightforward: "Anything we do is OK. We're News Corp. — so fuck you and fuck your mother."

Indeed, an examination of Murdoch's corporate history reveals that each of the elements of the scandal in London – hacking, thuggish reporting tactics, unethical entanglements with police, hush-money settlements and efforts to corrupt officials at the highest levels of government – extend far beyond Fleet Street. Over the past decade, News Corp. has systematically employed such tactics in its U.S. operations, exhibiting what a recent lawsuit filed against the firm calls a "culture run amok." As a former high-ranking News Corp. executive tells Rolling Stone: "It's the same shit, different day."

HACKING AND HUSH MONEY News America Marketing, a News Corp. subsidiary based in Connecticut, has been accused of engaging in "illegal computer espionage," repeatedly hacking a rival firm's computer system between 2003 and 2004 — a period that happens to coincide with NOTW's voicemail hacking in London. According to a lawsuit against News America, which dominates the lucrative market for ads on supermarket shelves and shopping carts, the Murdoch subsidiary grew alarmed when a competitor called Floorgraphics Inc. entered the market in the late 1990s with a novel concept — ad decals pasted on supermarket aisles. Paul Carlucci, the CEO of News America, responded by convening a meeting with FGI executives and allegedly delivering a Mafia­like ultimatum: Sell to Murdoch or be destroyed. "I work for a man who wants it all," Carlucci warned, "and doesn't understand anyone telling him he can't have it all."

When FGI rebuffed the takeover bid, according to a lawsuit the company filed in 2004, News America embarked on a campaign of "illegal, anti-competitive and unfair business practices." After hacking into FGI's database, the suit alleged, News America used the information to steal away top clients like Safeway, effectively destroying its rival's business. FGI petitioned Chris Christie, then a U.S. attorney, to launch a criminal investigation into the alleged hacking, but the future governor of New Jersey refused to file charges. By then, the damage was done. News America was able to snap up FGI for $30 million — not only achieving Murdoch's original goal of market domination but also quashing FGI's lawsuit in the process.

News Corp. shareholders have paid far more to hush up other complaints about News America's monopolistic abuses. To box out two more rival firms, Valassis Communications and Insignia, News America used its market position to hike ad rates for supermarket clients who refused to also advertise in Murdoch newspaper circulars. "It feels like they are raping us and they enjoy it," an executive at Sara Lee complained. In 2009, a Michigan court awarded Valassis $300 million for News America's illegal attempt to corner the market. News Corp. eventually silenced the affair with a $500 million payment to Valassis that blocked the threat of further litigation. It also reached a $125 million settlement with Insignia. The combined settlements of $655 million more than wiped out the profits News Corp. reaped from its record box-office smash Avatar.

THUGGISH REPORTING Instead of firing the man responsible for the legal and financial fiasco at News America, Murdoch promoted him. In addition to serving as CEO of News America, Carlucci was tapped in 2005 to become publisher of Murdoch's flagship American tabloid, the New York Post. Under Carlucci's leadership, the two businesses appear to have drawn inspiration from a similar source: organized crime. Carlucci reportedly encouraged teamwork at News America by showing his salesmen a clip from The Untouchables in which Al Capone brains a disloyal deputy with a baseball bat. And shortly after Carlucci arrived at the Post, the newspaper was rocked by a scandal in which a star Page Six reporter allegedly attempted to shake down billionaire Ron Burkle for "protection" from the gossip sheet, telling him, "It's a little like the Mafia."

Burkle secretly recorded Page Six reporter Jared Stern offering to go easy on him in the gossip sheet in exchange for a hefty payoff. "We know how to destroy people," Stern reportedly threatened. "It's what we do." To shield himself from character assassination, Stern allegedly suggested, Burkle could make a one-time payment of $100,000, followed by monthly installments of $10,000.

News Corp. axed Stern, dismissing him as a rogue reporter and calling his behavior "highly aberrational." But according to a 2007 affidavit by a fellow Post veteran, the alleged shakedown was an integral part of the company's culture. "The spineless hypocrites in senior management at the New York Post and News Corp. have always used 'expendable' employees as scapegoats for the misdeeds of its senior executives," Post reporter Ian Spiegelman testified. Spiegelman revealed that Page Six's top editor Richard Johnson and two others had accepted cash from a restaurateur whose business had received a positive mention the day before. Johnson also allegedly accepted a $50,000 all-expenses-paid bachelor party to Mexico from Joe Francis, the founder of Girls Gone Wild, whom the Post subsequently hyped as "the next Hugh Hefner." Spiegelman further charged that Col Allan, the Post's top editor, received free lap dances at the strip club Scores in return for favorable coverage by the paper.

News Corp. conceded that Johnson had accepted a $1,000 "gift," but Murdoch let the editor off with a reprimand. Indeed, as Murdoch biographer Michael Wolff later observed, the incident only served to enhance Johnson's reputation. "The bribery business actually seemed to confirm Johnson's status for Murdoch as an old-time, walk-on-the-wild-side, dangerous, rule-bucking, proudly cynical newsman," Wolff concluded. Insiders make clear that the worst impulses exhibited by the Post and other News Corp. publications come directly from the top. "Murdoch tries to wash his hands of everything when it's convenient and pretend he has no involvement in the day-to-day running of the paper — which is just nonsense," says a former Post reporter. "He's always been very hands-on. There were no major decisions taken, even at Page Six, where Murdoch's interests would not be considered."

POLITICAL CORRUPTION Murdoch has built News Corp. into a media empire second only to Disney by horse-trading editorial support for political favors, repeatedly persuading officials at the highest levels of government to bend, break or rewrite rules meant to safeguard the public interest. "Murdoch has made himself almost a partner of certain political movements," says Reed Hundt, who tried to rein in monopolistic practices by media giants like News Corp. as chairman of the Federal Communications Commission. "Politicians believe he's going to win in the end, so why tangle with him?"

Long before the rise of Fox News, Murdoch used News Corp. to influence friends in high places. Shortly after purchasing the Post in 1977, he plucked Ed Koch out of obscurity and used the tabloid to propel him into Gracie Mansion. "I couldn't have been elected without Rupert Murdoch's support," Koch said later. "Suddenly I was mayor of New York." In 1980, when Jimmy Carter was battling Ted Kennedy for the Democratic nomination and badly needed a primary win in New York, the Post endorsed the president. Six days later, Murdoch received a $290 million loan from the federal government to bail out one of his Australian companies. News Corp. received an even bigger payoff after it gave House Speaker Newt Gingrich a $4.5 million book deal in 1994 — just as Congress began debating a new law that removed federal restrictions on Murdoch's media holdings. Under George W. Bush, who owed his election in large part to the inaccurate and biased reporting of Fox News, the FCC blocked the sale of DirecTV to a News Corp. rival, then rubber-stamped its acquisition by Murdoch.

But Murdoch's coziest political bond has been with Rudy Giuliani. In 1994, Giuliani was elected mayor of New York by a narrow margin, thanks largely to the full-bore support of the Post. With Giuliani in office, the Post continued to back the mayor so slavishly that Rep. Charlie Rangel took to calling it the City Hall Post. News Corp. even hired Giuliani's wife, Donna Hanover, as a Fox television reporter, quickly quadrupling her salary to $123,000.

Giuliani was not shy about rewarding his media patron. When Murdoch moved News Corp. into its current Midtown headquarters, the mayor secured the company a tax break worth more than $20 million. Then, when Time Warner tried to keep Murdoch out of the New York market in 1996 by refusing to give Fox News a spot in its cable lineups, Giuliani threatened to revoke Time Warner's cable franchise and offered to air Fox News on one of the city's public-access channels. A federal judge blocked the move, upbraiding the mayor for acting "to reward a friend and to further a particular viewpoint." But the rank political favoritism paid off: During Giuliani's first term, according to a study by researchers at the University of Southern California, not a single negative editorial about him appeared in the Post.

POLITCAL ENTANGLEMENTS Just as the News of the World scandal toppled the head of Scotland Yard, News Corp. also brought down one of America's top cops. In 2001, one of Murdoch's publishing chiefs, Judith Regan, signed New York Police Commissioner Bernie Kerik to a book advance worth six figures. In an affair worthy of Page Six, the News Corp. executive was soon literally in bed with the police czar, meeting for sex in an apartment overlooking Ground Zero that was intended to house exhausted recovery workers. Before long, Kerik was tasking NYPD officers as if they were Regan's personal bodyguards, at one point reportedly dispatching them to track down the publisher's lost cellphone.

According to a source familiar with details of the affair, the relationship soured when Regan tried to break it off. Unable to call the cops, she confided in fellow News Corp. executive Roger Ailes, the head of Fox News, hoping he could get Giuliani to rein in Kerik. But Ailes was more concerned about the political fallout. According to legal filings by Regan, Ailes anticipated the damage the scandal could cause the mayor and personally confronted Murdoch, telling him that Regan was "out of control." Ailes grew even more concerned in 2004, when President Bush nominated Kerik — by then a senior vice president in Giuliani's national security firm — to head the Department of Homeland Security. If Regan disclosed her tawdry ties to the former commissioner, Ailes feared, it might harm Kerik's nomination and "more importantly, Giuliani's planned presidential campaign."

To keep the affair hush-hush, Ailes "advised Regan to lie to and withhold information from investigators," and even coached her on limiting her disclosures "as is typically done when Fox News on-air talent receive their 'talking points.'" The alleged obstruction of justice by Ailes has since made headlines, but Regan also fingered "another News Corp. executive," whom she claimed advised her "not to produce clearly relevant documents in connection with a governmental investigation of Kerik."

Regan laid these allegations bare in a wrongful-termination lawsuit she filed in 2007. As it did with its accusers in London, News Corp. moved to paper over the matter by reaching a settlement with Regan worth more than $10 million. The only one punished in the Kerik affair was Kerik himself, who was sentenced to four years in prison for lying to federal investigators and failing to report income from a News Corp. book advance to the IRS.

Murdoch may soon find himself in even deeper trouble for his dealings with New York police. The Justice Department is currently investigating allegations that News Corp. reporters tried to bribe a New York cop, seeking to hack the phones of 9/11 victims — a charge that has outraged even the staunchest Fox News Republicans. "It is revolting to imagine that members of the media would seek to compromise the integrity of a public official for financial gain in the pursuit of yellow journalism," Rep. Peter King of New York wrote in a letter to FBI director Robert Mueller, demanding that any wrongdoing be met with the "harshest sanctions available under law."

But the "revolting" practice that King describes is actually at the core of Murdoch's business model. Until the News of the World scandal became public, deplorable judgment and even outright criminal behavior have not been firing offenses for Murdoch's top deputies, either in London or New York. A willingness to push the boundaries of the law and common decency, in fact, is what has made Murdoch a billionaire nearly eight times over. Murdoch himself has bragged of possessing files, replete with photographs detailing the sexual escapades of prominent liberals. You know, for leverage. All of which makes laughable Murdoch's claim before Parliament that "I'm the best person to clean this up."

The phone-hacking scandal engulfing News Corp. has led members of the extended Bancroft clan that sold The Wall Street Journal to Murdoch to repent of their decision — even though they received what amounted to a $3 billion overpayment from News Corp. for the paper. "Murdoch thinks he is completely above the law, as he always has," former top shareholder Bill Cox III recently told ProPublica. "We made a deal with the devil."

The sharks are already circling in England, where politicians long cowed by Murdoch's bullying now appear determined to curb News Corp.'s influence. Labor Party leader Ed Miliband, decrying Murdoch for having "too much power over British public life," has called for a breakup of his U.K. holdings. Here in the United States, institutional shareholders filed suit in July, seeking to change News Corp. from the inside by reforming its board of hand-appointed cronies. The board, the suit claims, has "abdicated its fiduciary duties" by enabling Murdoch to run the publicly-traded News Corp. "without any restraints on his pursuit of his political and personal agendas, which has led the company to engage in improper and illegal conduct."

The lawsuit highlights Murdoch's outrageous pay: He's pocketed $75 million in compensation over the past three years, even as News Corp.'s stock has yielded a negative return. It also blasts his "rampant nepotism," noting the extravagant overpayment he made to acquire his daughter Elizabeth's production company, Shine — a deal that made her $250 million richer at the expense of the company. But even as Murdoch's children have come back into the News Corp. fold, his dreams of creating a media dynasty have never been more troubled. As the fallout from the hacking scandal continues in London, the News of the World's former editor is accusing heir apparent James Murdoch of lying to Parliament about his knowledge of the hush money paid to hacking victims.

As each News of the World revelation exposes the root and branch of corruption at News Corp., the increasingly desperate Murdoch has responded by hacking off branches. In removing Les Hinton, the publisher of The Wall Street Journal, he cut off an executive he once said he would trust his life to. In getting rid of Rebekah Brooks at News of the World, he abandoned a deputy he favored like a daughter. Son James now looks like the next branch to go. But until Rupert Murdoch sees fit to remove himself, the root of all that's vile at News Corp. will remain the same.

This story is from the August 18, 2011 issue of Rolling Stone.

Source