Thursday, November 15, 2012

No Austerity for the American Empire: Obama Providing Massive Stimulus for His Base-Building Spree

Go To Original

A billion dollars from the federal government: that kind of money could go a long way toward revitalizing a country’s aging infrastructure.  It could provide housing or better water and sewer systems.  It could enhance a transportation network or develop an urban waterfront.  It could provide local jobs.  It could do any or all of these things.  And, in fact, it did.  It just happened to be in the Middle East, not the United States.

The Pentagon awarded $667.2 million in contracts in 2012, and more than $1 billion during Barack Obama’s first term in office for construction projects in largely autocratic Middle Eastern nations, according to figures provided to TomDispatch by the U.S. Army Corps of Engineers Middle East District (USACE-MED).  More than $178 million in similar funding is already anticipated for 2013.  These contracts represent a mix of projects, including expanding and upgrading military bases used by U.S. troops in the region, building facilities for indigenous security forces, and launching infrastructure projects meant to improve the lives of local populations.

The figures are telling, but far from complete.  They do not, for example, cover any of the billions [4] spent on work at the more [5] than 1,000 U.S. and coalition bases, outposts, and other facilities in Afghanistan or the thousands [6] more manned by local forces.  They also leave out construction projects undertaken in the region by other military services like the U.S. Air Force, as well as money spent at an unspecified number of bases in the Middle East that the Corps of Engineers “has no involvement with,” according to Joan Kibler, chief of the Middle East District’s public affairs office.

How many of these projects are obscured by a thick veil of secrecy is unknown, with U.S. Central Command (CENTCOM) refusing to name or even offer a full count of all U.S. bases [7] in the region.  On the record, CENTCOM will acknowledge only 10 bases as in its area of operations outside of Afghanistan, even though there are more than two dozen, according to a CENTCOM official who spoke to TomDispatch on the condition of anonymity.  Exactly how many more and just where all U.S. construction work in the region is taking place continues to be kept under tight wraps.  Still, Army Corps of Engineers data, other official documents, and publicly available contract information offer a baseline indication of the way the Pentagon is garrisoning the Greater Middle East and which countries are becoming ever more integral allies.

Nation Building: Public Talk, Secret Action

In the final days of the presidential campaign, President Obama repeatedly assured Americans that it was time to reap a peace dividend as America’s wars wind down.  Nation-building here at home should, he insisted [8], be put on the agenda: “What we can now do is free up some resources, to, for example, put Americans back to work, especially our veterans, rebuilding our roads, our bridges.”

Setting aside just how slipshod [9] or even downright disastrous [10] Washington’s last decade of nation-building projects [11] in Iraq and Afghanistan have been, the president’s proposal to rebuild roads, upgrade bridges, and retrofit the country’s electrical grid sounds [12] eminently sensible.  After all, the American Society of Civil Engineers (ASCE) gives America’s infrastructure a grade of “D.”  If, in the era of the $800 billion [13] stimulus package, $1 billion at first sounds paltry, ask the mayors of Detroit, [14] Belmar, New Jersey [15], or even New York City what that money [16] would mean to their municipalities.  America may need $2.2 trillion in repairs and maintenance according to ASCE, but $1 billion could radically change the fortunes of many a city.

Instead, that money is flowing into the oil-rich Middle East.  Unknown to most Americans, thousands of State Department personnel, military advisors, and hired contractors remain at several large civilian bases in Iraq where nation-building projects are ongoing; hundreds of millions of taxpayer dollars have been flowing into military construction projects in repressive Persian Gulf states like Bahrain and Qatar; and the Pentagon is expanding its construction program in Central Asia.  All of this adds up to a multifaceted project that seems at odds with the president’s rhetoric.  (The White House did not respond to TomDispatch’s repeated requests for comment.)

Increasing the Power of Airpower in Qatar

The tiny oil-rich emirate of Qatar has been the preeminent site of the Pentagon’s Middle Eastern building boom in the Obama years.  A significant percentage of its population is made up of migrant workers who, according [17] to Human Rights Watch, are “vulnerable to exploitation and abuse,” while “forced labor and human trafficking remain serious problems.” The country even received [18] a failing grade (“not free”) from the U.S. State Department-funded [19] human rights organization Freedom House.  Still, between 2009 and 2012, the U.S. pumped nearly $400 million into Pentagon projects in the country, including troop barracks, munitions storage areas, a communications center, a training range, an aircraft operations center, an aircraft maintenance hangar, an aviation maintenance shop, a warehouse facility, and a vehicle maintenance shop, according to a list provided by the Corps of Engineers.

[20]The Obama administration has continued a build-up in the country that accelerated after 9/11.  In September 2001, U.S. aircraft began to operate [21] out of Qatar’s Al Udeid Air Base. By 2002, the U.S. had tanks, armored vehicles, dozens of warehouses, communications and computing equipment, and thousands of troops at and around the base.  The next year, the U.S. moved its major regional combat air operations center out of Saudi Arabia and into Al Udeid.  Since then, it has served as a major command and logistics hub for U.S. regional operations, including the wars in Iraq and Afghanistan.

According to figures provided to TomDispatch by USACE, at least 10 contracts for construction at Al Udeid, worth nearly $87 million, are anticipated in 2013.  A review of official U.S. government documents reveals a host of upcoming projects there, including a fuels laboratory, a cryogenics facility, a new center for the Air Force’s Office of Special Investigations, an air defense maintenance facility, more parking space for fuel trucks, new roadways, and a precision measurement equipment laboratory where technicians will calibrate the sophisticated gear used in vehicle and weapons maintenance.

Waterfront Development in Bahrain

Despite a brutal crackdown [22] on pro-democracy protesters in 2011, which continues to this day [23], the oil-rich kingdom of Bahrain (also “not free”according [24] to Freedom House) is a top U.S. ally.  In fact, over the last year, the Corps of Engineers awarded contracts for construction in the country worth more than $232 million, the most for any nation in any year of the Obama presidency so far.  Since 2009, Bahrain has seen almost $326 million in USACE contract awards.

In 2010, the U.S. Navy broke ground on a mega-construction project to develop 70 acres of waterfront at the port at Mina Salman.  Scheduled for completion in 2015, the complex is slated to include new port facilities, barracks for troops, administrative buildings, a dining facility, and a recreation center, among other amenities.  Total price tag: $580 million.

In September, USACE awarded a $15 million contract for the expansion of a wastewater treatment plant and the construction of a climate-controlled warehouse, as well as an irrigation pump building, among other facilities at Mina Salman.  That same month, the Corps of Engineers also awarded a $42 million contract for a multistory “bachelor enlisted quarters” in the capital, Manama.  It will contain at least 241 two-bedroom apartments for Navy personnel, as well as administrative offices, laundry facilities, multipurpose rooms, and lounges.

Taking Flight in Oman

In February and March of 2011, protests demanding political reform in Omanled [25] to assaults on and the killing of protesters by the nation’s security forces.  Despite marked restrictions [26] on freedom of expression and freedom of the press, this sultanate (also ranked [26] “not free” by Freedom House) has been a favorite site of military expansion in the Obama years.  Between 2009 and 2012, the Corps of Engineers awarded $144 million in contracts for work there, more than half this year.

During the 1930s, the British Royal Air Force operated an airfield on Oman’s Masirah Island. Today, the U.S. uses Masirah and USACE is carrying out construction there as well as at the country’s Thumrait and Al Musannah Air Bases.

The Un-Withdrawal from Iraq

The Corps’s contract data do not include figures for construction in Iraq prior to August 2011.  In the 15 months since, according to information provided by USACE, it has awarded $113 million in contracts for State Department nation-building-style projects like a wastewater treatment plant in the city of Fallujah and a courthouse in Rusafa.

The Iraqi government is paying USACE to carry out these projects in order to increase its defense capabilities, according to the Middle East District’s Joan Kibler.  These include a counterterrorism center [27], consisting of a headquarters facility, barracks, a warehouse, and a power plant in eastern Baghdad; a military training complex at Al Harthiya; a military security school in Taji; and administrative, security, and dining facilities at Hawk and Tikrit Air Bases.

At the height of the American occupation of Iraq, the United States had 505 bases there, ranging from small outposts to mega-sized air bases.  Of them, some have been stripped clean by Iraqis, others became ghost towns, and one -- Camp Bucca -- a hotel.  What remains open today are State Department facilities, most notably the U.S. Embassy in Baghdad.   Earlier this year, theWashington Post reported [28] that the Department of State was planning to spend up to $115 million to upgrade the massive embassy compound, which it characterized as already the “biggest and most expensive in the world.”  

State Department documents issued last month and examined by TomDispatch offer a snapshot of the civilian “bases” currently being maintained in Iraq.  The Baghdad embassy site in the “international zone” consists of two compounds, Camp Condor and the Chancery Compound, as well as the embassy heliport.  With two dining halls, two gyms, two firehouses, a large post office, a PX, and contractor housing, the site presently hosts about 3,600 personnel.

Another 1,250 persons are currently deployed to the Baghdad Diplomatic Support Center near Baghdad International Airport.  This location boasts a hospital, large dining hall, fire station, post office, contractor housing, and a medical waste incineration facility.  In Basrah, in the south of the country, the U.S. maintains two sites: Consulate General Basrah and Basrah Air Ops.  The dual facility boasts an airfield, a hospital, a fully-equipped recreation center with a gym and a pastry shop, a large laundry facility, a sizeable dining hall, a warehouse and other storage areas, and contractor housing.  There is even shuttle bus service.  About 1,000 people are located at the site.

Close to 1,000 more personnel are also stationed at the Erbil Diplomatic Support Center and Erbil Air Ops in the north of the country.  In addition to an airfield, the site also boasts contractor housing, a main dining hall, a sandwich shop and snack bar, laundry facilities, warehouses, fuel storage tanks, and a fire station. According to CENTCOM, personnel from the U.S. Office of Security Cooperation-Iraq -- military advisors working with that country’s armed forces -- also operate out of Umm Qasar Naval Base in the south of the country, the Taji National Logistics Depot just north of Baghdad, and the nearby Besmaya Combined Training Center.

Today, the Corps of Engineers has essentially ended work on America’s civilian bases in Iraq.  “Anything that we are doing for Department of State at this stage would be very minor,” Kibler told TomDispatch.  While the State Department is now in charge of carrying out the building boom at the embassy compound, the Corps of Engineers continues to support nation-building-type projects for the Iraqis that it carried out from 2004 to 2011, with another four contracts worth $2.3 million anticipated in 2013.

What, Me Pivot? 

During the Obama years, the Corps of Engineers’ Middle East District has also awarded contracts for work in Pakistan ($1.1 million), Jordan ($4.7 million), Saudi Arabia ($5.3 million), the United Arab Emirates ($6.6 million), Kuwait ($33.7 million) and Kyrgyzstan [29] ($58.2 million).  In addition, it anticipates awarding at least another $5.9 million in construction contracts in Kuwait in 2013, while contracting documents indicate that the Air Force plans to install two 20,000-gallon water storage tanks at that country’s Ali Al Salem Air Base in the near future.  The Corps reported no anticipated contracts in the United Arab Emirates for 2013, but documents examined by TomDispatch suggest that the Army is currently planning to build new armory facilities at that country’s Al Minhad Base.

When asked why funding is on the rise for work in Oman, Qatar, and Bahrain -- total expenditures between 2011 and 2012 rose from $2.4 million to $91 million, $41.7 million to $203.4 million, and zero to $232.4 million, respectively -- CENTCOM played down its significance.  This massive jump in construction dollars, the command's spokesman Oscar Seára claimed, represented nothing more than past funding requests winding their way through the Pentagon’s bureaucracy.  “It doesn't signal a pivot or strategic shift.”

The former Central Asian Soviet “socialist republics” of Kyrgyzstan [29],Kazakhstan [30], and Tajikistan [31] (“partly free,” “not free,” and “not free,” respectively, according to Freedom House) are prime sites for new construction as well.  Ten contracts were awarded as fiscal 2012 ended for projects there. Carried out under the auspices of CENTCOM and USACE, they include a string of border checkpoints, customs facilities, and training complexes, in addition to multiple canine training centers and “drug control” offices, for those countries’ security forces.  “Everything that we’re doing there is aimed at helping these countries monitor their borders and helping keep the flow of anything illegal from going in or out of their countries,” says Kibler.

While the flow of construction money into Central Asia may look like part of the Obama administration’s announced “pivot to Asia [32],” a “rebalancing [33]” of Pentagon resources eastward, CENTCOM dismisses the notion.  “What you are seeing is the natural progression of assisting with border-security development where the funding has finally caught up to previous proposals and requests for support,” Seára told TomDispatch. “It takes time for funding to flow, and what you’re seeing is indicative of nothing beyond that.”

Pivot or not, the Obama administration shows little sign of slowing its Middle Eastern building boom, despite the recent rhetoric about a similar pivot from military interventions abroad to nation-building at home.  For the last four years, even while drawing down U.S. forces in Afghanistan, the Pentagon has pumped more than a billion dollars into entrenching and expanding its presence in the Greater Middle East.

In 2012, with American cities in desperate need of reconstruction dollars, the U.S. military out of Iraq, and the war in Afghanistan winding down, Mideast construction contracts ballooned to new Obama-era heights.  Even as the president talks about lessening America’s footprint abroad, the Pentagon is quietly digging in and expanding out.  While countless municipalities affected by superstorm Sandy ask for reconstruction funds, taxpayer dollars dedicated to building transportation infrastructure and water treatment plants are headed halfway around the world.

Just as the Pentagon’s refusal to offer an accurate count of regional bases built with taxpayer dollars doesn’t mean they don’t exist, so, too, the White House's no-comment on Washington’s stimulus package in the Greater Middle East can’t erase reality.  Despite the rhetoric about domestic nation-building, there’s a more conflicted narrative playing out in the region, and it won’t remain hidden forever.

Tears of Gaza - The War They Don't Show You

Fiscal Cliff Scare Talk Follows Shock Doctrine Script

The term “fiscal cliff,” first used by Federal Reserve Chairman Ben Bernanke last February, refers to the simultaneous expiration of tax cuts and imposition of spending cuts on January 1, 2013.
The American media has seized on the term “fiscal cliff” and promoted it, in part, to suggest that measures which would otherwise be enormously popular—ending the Bush tax cuts for the wealthy or cutting military spending—are threatening, even dangerous.
The main purpose of the media propaganda about the impending “cliff” is to create a sense of financial emergency and override popular opposition to measures the Obama administration and congressional Democrats and Republicans will put forward to avert it, including sweeping cuts in Medicare, Medicaid and Social Security.
This is bolstered by the reaction in the financial markets, where a sharp sell-off could well serve as a political club to ensure that the policies demanded by Wall Street are adopted in Washington.
Far from an emergency that requires dramatic action to slash the federal deficit, the various components of the “fiscal cliff” are all consequences of legislation passed at various times during the Obama administration and can be averted by the passage of further legislation by Congress, regardless of whether that legislation adds to or subtracts from the deficit.
Deficit reduction is not a requirement of any previous legislation, but a political mandate from the financial aristocracy, which is demanding that its two political parties take joint action to make working people pay for a fiscal crisis that is the product of the 2008 Wall Street crash and the trillions expended to bail out the banks and corporations.
That the deadline is January 1, 2013 is politically revealing. In each of the bipartisan agreements between the Obama White House and congressional Republicans and Democrats—in December 2010, August 2011 and February 2012—the two parties acted deliberately to push back the decision until after the November 2012 elections, in order to prevent the American people from having any say on the measures to be enacted.
The same considerations were at work in the August 2011 agreement to raise the federal debt ceiling, which was increased from $14.3 trillion to $16.4 trillion, a level the Treasury is expected to hit early in 2013, perhaps as soon as mid-February. This will provide an additional pretext for the two big business parties to enact further spending cuts, or it may become part of the proposed “grand bargain” between the Obama administration and congressional leaders.
There are at least seven distinct tax and spending measures that will take effect at the end of the year, with a significant effect on the jobs and living standards of the vast majority of the American people. The estimate produced by the Economic Policy Institute, a liberal Washington think tank, places the total impact at $732 billion.

Expiration of the Bush tax cuts—$202 billion

The largest item is the expiration of the tax cuts first enacted under the Bush administration in 2001, originally to expire January 1, 2011. A deal between Obama and the congressional Republican leadership in December 2010 extended these tax cuts for two years, to January 1, 2013, as Obama capitulated to the refusal of the Republicans to accept any separation between the tax cuts for the wealthy and those for lower- and middle-income families. The deal also extended estate taxes at the low rate that prevailed in 2009.
The same issue is posed in the talks between the White House and Congress set to begin formally this Friday, with Obama again claiming to oppose any extension of the tax cuts for families making more than $250,000 a year or individuals making more than $200,000 a year. These upper-income tax cuts alone account for $52 billion of the total.
Drawing such an income line would require passage of legislation by both the Democratic-controlled Senate and the Republican-controlled House. If Congress deadlocks or Obama vetoes an extension, the tax cuts would expire for all income levels and the average working class family would see a significant reduction in take-home pay.

Across-the-board spending cuts—$128 billion

Spending cuts totaling close to $1 trillion over ten years will begin in January, with the specific programs to be selected by the Obama administration based on a 50-50 split between domestic and military programs. These cuts were part of the August 2011 deal between the White House and congressional Republicans to raise the federal debt ceiling.
This agreement enacted spending cuts of more than $1 trillion and provided for an additional $1 trillion in automatic cuts if a special congressional committee failed to reach agreement on further deficit-reduction. The so-called supercommittee deadlocked in December 2011, triggering the cuts that begin taking effect this January.
These include $50 billion in delayed impact from the initial round of cuts and $78 billion more in the so-called “sequester.”

Expiration of payroll tax cut—$115 billion

The payroll tax that underwrites Social Security and Medicare was temporarily cut from 6.2 percent to 3.1 percent in December 2010, and that cut was extended through the end of this year in February 2012. The expiration of this tax cut will be felt as a 3.1 percent reduction in income for low- and middle-income families, more than the typical pay increase. It will mean a significant drop in real income.

Expiration of extended unemployment benefits—$39 billion

These benefits were coupled to the payroll tax cut as “stimulus” measures in both the December 2010 and February 2012 bipartisan agreements, but in the second deal the Democrats accepted a Republican demand to reduce the duration of extended benefits from 99 weeks to the current 73 weeks for the hardest-hit states, and from 93 weeks to only 63 weeks for most states.
Now, even this inadequate level of benefits for the long-term unemployed is set to end, under conditions where more than five million workers have been out of work for six months or longer. One million long-term unemployed workers who have exhausted all state benefits will lose their extended federal benefits January 1, and a further one million will lose benefits in the first quarter of 2013.

Expansion of the Alternative Minimum Tax—$114 billion

The AMT, first enacted in the 1960s as a measure against tax evasion by the super-rich, was never indexed for inflation, so tens of millions of upper-middle-income families could now come under its provisions. Congress has repeatedly adopted temporary “fixes” to delay imposition of the tax, most recently in December 2010, limited to taxes on 2011 income.
If another “fix” is not adopted, or the AMT is not fully indexed for inflation retroactively, the number of families required to pay the AMT will rise from four million to 30 million next year, sharply increasing the tax bills these families will pay for income earned in 2012.

Expiration of miscellaneous tax provisions—$120 billion

As many as 80 provisions of the 2009 stimulus legislation introduced by the Obama administration and enacted by a Democratic-controlled Congress, or adopted in subsequent deals in December 2010 and February 2012, have either expired this year or will expire January 1. Most of these are incentives to business—$109 billion—while a small fraction, about $11 billion, represents tax credits or expanded deductions for working families.

Mandated cuts in Medicare reimbursement—$14 billion

The 1997 Balanced Budget Act, negotiated by the Clinton administration and then-House Speaker Newt Gingrich, established what was titled the Medicare sustainable growth rate, or SGR, to restrain the growth of payments to health care providers under Medicare. The SGR provision has never actually been put into practice, as pressure from hospitals and the American Medical Association has induced Congress to enact repeated versions of one-time provisions known in Washington jargon as the “doc fix.”
The most recent versions were incorporated into the December 2010 and February 2012 bipartisan agreements under the Obama administration. The latest one expires on January 1, 2013. If the much lower ceiling is imposed, with Medicare reimbursement cut by 27 percent, many doctors and hospitals may stop accepting new Medicare patients and even phase out treating current patients.

How Wealth Is Systematically Transferred From Main Street To Wall Street

Go To Original

In the 2012 edition of Occupy Money released last week, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our GDP. That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.
 
This hidden tribute to the banks will come as a surprise to most people, who think that if they pay their credit card bills on time and don’t take out loans, they aren’t paying interest. This, says Dr. Kennedy, is not true. Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills. They must pay for labor and materials before they have a product to sell and before the end buyer pays for the product 90 days later. Each supplier in the chain adds interest to its production costs, which are passed on to the ultimate consumer. Dr. Kennedy cites interest charges ranging from 12% for garbage collection, to 38% for drinking water to, 77% for rent in public housing in her native Germany.

Her figures are drawn from the research of economist Helmut Creutz, writing in German and interpreting Bundesbank publications.  They apply to the expenditures of German households for everyday goods and services in 2006; but similar figures are seen in financial sector profits in the United States, where they composed a whopping 40% of U.S. business profits in 2006.  That was five times the 7% made by the banking sector in 1980.  Bank assets, financial profits, interest, and debt have all been growing exponentially.



http://www.oftwominds.com/blogsept12/cui-bono-Fed9-12.html. 

Exponential growth in financial sector profits has occurred at the expense of the non-financial sectors, where incomes have at best grown linearly.



http://lanekenworthy.net/2010/07/20/the-best-inequality-graph-updated/ 

By 2010, 1% of the population owned 42% of financial wealth, while 80% of the population owned only 5% percent of financial wealth.  Dr. Kennedy observes that the bottom 80% pay the hidden interest charges that the top 10% collect, making interest a strongly regressive tax that the poor pay to the rich.

Exponential growth is unsustainable. In nature, sustainable growth progresses in a logarithmic curve that grows increasingly more slowly until it levels off (the red line in the first chart above). Exponential growth does the reverse: it begins slowly and increases over time, until the curve shoots up vertically (the chart below). Exponential growth is seen in parasites, cancers . . . and compound interest. When the parasite runs out of its food source, the growth curve suddenly collapses.



People generally assume that if they pay their bills on time, they aren’t paying compound interest; but again, this isn’t true.  Compound interest is baked into the formula for most mortgages, which compose 80% of U.S. loans.  And if credit cards aren’t paid within the one-month grace period, interest charges are compounded daily.

Even if you pay within the grace period, you are paying 2% to 3% for the use of the card, since merchants pass their merchant fees on to the consumer.  Debit cards, which are the equivalent of writing checks, also involve fees.  Visa-MasterCard and the banks at both ends of these interchange transactions charge an average fee of 44 cents per transaction—though the cost to them is about four cents.

How to Recapture the Interest: Own the Bank

The implications of all this are stunning. If we had a financial system that returned the interest collected from the public directly to the public, 35% could be lopped off the price of everything we buy. That means we could buy three items for the current price of two, and that our paychecks could go 50% farther than they go today.

Direct reimbursement to the people is a hard system to work out, but there is a way we could collectively recover the interest paid to banks. We could do it by turning the banks into public utilities and their profits into public assets. Profits would return to the public, either reducing taxes or increasing the availability of public services and infrastructure.

By borrowing from their own publicly-owned banks, governments could eliminate their interest burden altogether.  This has been demonstrated elsewhere with stellar results, including in Canada, Australia, and Argentina among other countries.

In 2011, the U.S. federal government paid $454 billion in interest on the federal debt—nearly one-third the total $1,100 billion paid in personal income taxes that year.  If the government had been borrowing directly from the Federal Reserve—which has the power to create credit on its books and now rebates its profits directly to the government—personal income taxes could have been cut by a third.

Borrowing from its own central bank interest-free might even allow a government to eliminate its national debt altogether.  In Money and Sustainability: The Missing Link (at page 126), Bernard Lietaer and Christian Asperger, et al., cite the example of France.  The Treasury borrowed interest-free from the nationalized Banque de France from 1946 to 1973.  The law then changed to forbid this practice, requiring the Treasury to borrow instead from the private sector.  The authors include a chart showing what would have happened if the French government had continued to borrow interest-free versus what did happen.  Rather than dropping from 21% to 8.6% of GDP, the debt shot up from 21% to 78% of GDP.

“No ‘spendthrift government’ can be blamed in this case,” write the authors. “Compound interest explains it all!”




More than Just a Federal Solution


It is not just federal governments that could eliminate their interest charges in this way. State and local governments could do it too.

Consider California.  At the end of 2010, it had general obligation and revenue bond debt of $158 billion.  Of this, $70 billion, or 44%, was owed for interest.  If the state had incurred that debt to its own bank—which then returned the profits to the state—California could be $70 billion richer today.  Instead of slashing services, selling off public assets, and laying off employees, it could be adding services and repairing its decaying infrastructure.

The only U.S. state to own its own depository bank today is North Dakota.  North Dakota is also the only state to have escaped the 2008 banking crisis, sporting a sizable budget surplus every year since then.  It has the lowest unemployment rate in the country, the lowest foreclosure rate, and the lowest default rate on credit card debt.

Globally, 40% of banks are publicly owned, and they are concentrated in countries that also escaped the 2008 banking crisis.  These are the BRIC countries—Brazil, Russia, India, and China—which are home to 40% of the global population.  The BRICs grew economically by 92% in the last decade, while Western economies were floundering.

Cities and counties could also set up their own banks; but in the U.S., this model has yet to be developed. In North Dakota, meanwhile, the Bank of North Dakota underwrites the bond issues of municipal governments, saving them from the vagaries of the “bond vigilantes” and speculators, as well as from the high fees of Wall Street underwriters and the risk of coming out on the wrong side of interest rate swaps required by the underwriters as “insurance.”

One of many cities crushed by this Wall Street “insurance” scheme is Philadelphia, which has lost $500 million on interest swaps alone.  (How the swaps work and their link to the LIBOR scandal was explained in an earlier article here.)  Last week, the Philadelphia City Council held hearings on what to do about these lost revenues.  In an October 30th article titled “Can Public Banks End Wall Street Hegemony?”, Willie Osterweil discussed a solution presented at the hearings in a fiery speech by Mike Krauss, a director of the Public Banking Institute.

Krauss’ solution was to do as Iceland did: just walk away. He proposed “a strategic default until the bank negotiates at better terms.” Osterweil called it “radical,” since the city would lose it favorable credit rating and might have trouble borrowing. But Krauss had a solution to that problem: the city could form its own bank and use it to generate credit for the city from public revenues, just as Wall Street banks generate credit from those revenues now.

A Radical Solution Whose Time Has Come

Public banking may be a radical solution, but it is also an obvious one. This is not rocket science. By developing a public banking system, governments can keep the interest and reinvest it locally. According to Kennedy and Creutz, that means public savings of 35% to 40%. Costs can be reduced across the board; taxes can be cut or services can be increased; and market stability can be created for governments, borrowers and consumers. Banking and credit can become public utilities, feeding the economy rather than feeding off it.

Hillary Clinton’s “Democracy” for Syria


US imperialism has a long and sordid record of bloody military interventions and interference in the affairs of other countries for the purpose of securing the interests of Wall Street and corporate America.

Ever since William Howard Taft declared that “our little brown brothers” of the Philippines would need “50 to 100 years of close supervision” to develop functioning self-government, these interventions have been justified with assertions of Washington’s unique role in bringing democracy to less fortunate peoples of the world, generally at the point of a gun.

Seldom, however, has this pretense been proclaimed so shamelessly as in the announcement last week by US Secretary of State Hillary Clinton that Washington had decided to appoint a new leadership for the “Syrian revolution.”

Clinton unceremoniously dismissed the former leadership, the Syrian National Council, a Muslim Brotherhood-dominated outfit that Washington had proclaimed little more than a year ago as the “legitimate representative” of the Syrian people. Now she says they are just a bunch of out-of-touch exiles who haven’t set foot in Syria for decades.

The problem is, Clinton declared, the SNC is insufficiently representative of the Syrian people. So the US State Department has handpicked a new group of individuals and organizations that is to form the basis of a transitional government. “We have recommended names and organizations that we believe should be included in any leadership structure,” Clinton told a press conference in Zagreb, Croatia on October 31.

Here one has a text-book example of democracy “made in the USA,” or, more precisely, neocolonialism.

To qualify for inclusion in Washington’s handpicked roster of “representative” leaders, one must “be on record strongly resisting the efforts by extremists to hijack the Syrian revolution,” Clinton decreed.

The aim is clear. The State Department wants a “respectable” face for the grisly conflict that Washington has fomented in Syria, elevating the pro-US businessman Riad Seif and similar figures as a government in waiting, even as the fighting is being carried out more and more by Al Qaeda-linked Islamist militias receiving covert US backing.

When it comes to hijacking dissent, however, no one can compete with Washington. This is precisely what it has done in Syria, just as it did earlier in Libya.

Having seen two of its longest-standing and most trusted stooges in the region—Tunisia’s Ben Ali and Egypt’s Mubarak—toppled by uprisings of the working masses, Washington decided to seize the initiative by using the “Arab Spring” as a cover for promoting regime-change.

First in Libya, it exploited popular protests and a trumped-up claim that the population of Benghazi was in imminent danger of annihilation as the pretext for launching a US-NATO war to topple Muammar Gaddafi. Now, in Syria, it has helped turn similar protests into a vicious sectarian civil war through which it seeks the overthrow of Bashar al-Assad.

In Syria, US imperialism has relied more heavily on proxy forces, including Islamist foreign fighters, which have been aided and armed by US allies in the region, principally Qatar, Saudi Arabia and Turkey, with the CIA orchestrating the operation from a newly created station in southern Turkey.

This is by no means the first time that Washington has attempted to install a government of its own choosing in Damascus, in contempt of the aspirations and rights of the Syrian people. For nearly a decade, from 1949 to 1958, the CIA waged a non-stop campaign to instigate, finance and support right-wing coup plots aimed at bringing to power a regime subordinate to US interests.

Beginning in 1948, CIA operatives plotted with Syrian Army Chief of Staff Col. Husni Zaim, described by the agency in declassified documents as a “‘Banana Republic’ dictator type,” to bring to power an anti-communist military dictatorship.

On March 30, 1949, Zaim carried out his coup and proceeded to enact Washington’s agenda, rounding up left-wing and nationalist forces, signing an armistice with Israel, and approving a pipeline deal with the Arabian American Oil Company (ARAMCO).

Barely nine months later, however, Zaim was himself ousted in another coup. In the early 1950s, this process was repeated, with a more nationalist government being overthrown by a US-backed right-wing officer, only to see a countercoup topple Washington’s man.

Then followed Operation Straggle and Operation Wappen, with the CIA collaborating with Britain’s Secret Intelligence Service (SIS) in assassinations and coup plots involving right-wing officers and politicians as well as Islamist forces. By 1957, the US nearly provoked World War Three over Syria, sending the Sixth Fleet to its shores, deploying warplanes in Turkey, convincing the Turkish government to mass 50,000 troops on Syria’s border, and placing the Strategic Air Command on high alert.

During this period, President Eisenhower justified US intervention by describing Syria as a country “ripe to be plucked at any time,” while accusing Moscow of attempting to do the same thing as Washington.

Once again, Washington views Syria as a country “ripe to be plucked” and has unleashed a bloodbath against the Syrian people to that end. Its aims have nothing to do with “democracy” or “human rights,” but are bound up, just as they were more than half a century ago, with asserting US hegemony in the energy-rich and geo-strategically vital region of the Middle East and advancing the interests of America’s financial and corporate oligarchy. Once again, this intervention carries with it the threat of a far wider war.

One thing that distinguishes the present US intervention in Syria from those carried out in the 1950s is the support it has received from a whole layer of pseudo-left organizations, from the International Socialist Organization in the US, to the New Anti-capitalist Party in France, to the Socialist Workers Party in Britain. Their unique contribution has been to cast the sectarian civil war as a “revolution” and portray imperialist intervention as a justifiable means of advancing human progress.

Hillary Clinton’s brazen statements and Washington’s cobbling together of a new leadership for this “revolution” at a luxury hotel in Doha have served to expose the real role of these organizations, which have integrated themselves directly into the operations of US imperialism, serving as willing stooges of the State Department.

The reality is that the working people of Syria and the entire Middle East can advance their interests only through a relentless struggle against imperialism, which is intervening through Hillary Clinton’s Doha “revolutionaries” and the Islamist gangs armed by Washington and its allies.

Settling accounts with the Assad regime in Syria, just as with the US-backed dictatorships and monarchies in the region, is the task of the working class, which must be mobilized and united across all religious and ethnic lines on the basis of an internationalist and socialist program.

The Permanent Militarization of America

Go To Original

IN 1961, President Dwight D. Eisenhower left office warning of the growing power of the military-industrial complex in American life. Most people know the term the president popularized, but few remember his argument.

In his farewell address, Eisenhower called for a better equilibrium between military and domestic affairs in our economy, politics and culture. He worried that the defense industry’s search for profits would warp foreign policy and, conversely, that too much state control of the private sector would cause economic stagnation. He warned that unending preparations for war were incongruous with the nation’s history. He cautioned that war and warmaking took up too large a proportion of national life, with grave ramifications for our spiritual health.

The military-industrial complex has not emerged in quite the way Eisenhower envisioned. The United States spends an enormous sum on defense — over $700 billion last year, about half of all military spending in the world — but in terms of our total economy, it has steadily declined to less than 5 percent of gross domestic product from 14 percent in 1953. Defense-related research has not produced an ossified garrison state; in fact, it has yielded a host of beneficial technologies, from the Internet to civilian nuclear power to GPS navigation. The United States has an enormous armaments industry, but it has not hampered employment and economic growth. In fact, Congress’s favorite argument against reducing defense spending is the job loss such cuts would entail.

Nor has the private sector infected foreign policy in the way that Eisenhower warned. Foreign policy has become increasingly reliant on military solutions since World War II, but we are a long way from the Marines’ repeated occupations of Haiti, Nicaragua and the Dominican Republic in the early 20th century, when commercial interests influenced military action. Of all the criticisms of the 2003 Iraq war, the idea that it was done to somehow magically decrease the cost of oil is the least credible. Though it’s true that mercenaries and contractors have exploited the wars of the past decade, hard decisions about the use of military force are made today much as they were in Eisenhower’s day: by the president, advised by the Joint Chiefs of Staff and the National Security Council, and then more or less rubber-stamped by Congress. Corporations do not get a vote, at least not yet.

But Eisenhower’s least heeded warning — concerning the spiritual effects of permanent preparations for war — is more important now than ever. Our culture has militarized considerably since Eisenhower’s era, and civilians, not the armed services, have been the principal cause. From lawmakers’ constant use of “support our troops” to justify defense spending, to TV programs and video games like “NCIS,” “Homeland” and “Call of Duty,” to NBC’s shameful and unreal reality show “Stars Earn Stripes,” Americans are subjected to a daily diet of stories that valorize the military while the storytellers pursue their own opportunistic political and commercial agendas. Of course, veterans should be thanked for serving their country, as should police officers, emergency workers and teachers. But no institution — particularly one financed by the taxpayers — should be immune from thoughtful criticism.

Like all institutions, the military works to enhance its public image, but this is just one element of militarization. Most of the political discourse on military matters comes from civilians, who are more vocal about “supporting our troops” than the troops themselves. It doesn’t help that there are fewer veterans in Congress today than at any previous point since World War II. Those who have served are less likely to offer unvarnished praise for the military, for it, like all institutions, has its own frustrations and failings. But for non-veterans — including about four-fifths of all members of Congress — there is only unequivocal, unhesitating adulation. The political costs of anything else are just too high.

For proof of this phenomenon, one need look no further than the continuing furor over sequestration — the automatic cuts, evenly divided between Pentagon and nonsecurity spending, that will go into effect in January if a deal on the debt and deficits isn’t reached. As Bob Woodward’s latest book reveals, the Obama administration devised the measure last year to include across-the-board defense cuts because it believed that slashing defense was so unthinkable that it would make compromise inevitable.

But after a grand budget deal collapsed, in large part because of resistance from House Republicans, both parties reframed sequestration as an attack on the troops (even though it has provisions that would protect military pay). The fact that sequestration would also devastate education, health and programs for children has not had the same impact.

Eisenhower understood the trade-offs between guns and butter. “Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed,” he warned in 1953, early in his presidency. “The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some 50 miles of concrete highway. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.”

He also knew that Congress was a big part of the problem. (In earlier drafts, he referred to the “military-industrial-Congressional” complex, but decided against alienating the legislature in his last days in office.) Today, there are just a select few in public life who are willing to question the military or its spending, and those who do — from the libertarian Ron Paul to the leftist Dennis J. Kucinich — are dismissed as unrealistic.

The fact that both President Obama and Mitt Romney are calling for increases to the defense budget (in the latter case, above what the military has asked for) is further proof that the military is the true “third rail” of American politics. In this strange universe where those without military credentials can’t endorse defense cuts, it took a former chairman of the Joint Chiefs, Adm. Mike Mullen, to make the obvious point that the nation’s ballooning debt was the biggest threat to national security.

Uncritical support of all things martial is quickly becoming the new normal for our youth. Hardly any of my students at the Naval Academy remember a time when their nation wasn’t at war. Almost all think it ordinary to hear of drone strikes in Yemen or Taliban attacks in Afghanistan. The recent revelation of counterterrorism bases in Africa elicits no surprise in them, nor do the military ceremonies that are now regular features at sporting events. That which is left unexamined eventually becomes invisible, and as a result, few Americans today are giving sufficient consideration to the full range of violent activities the government undertakes in their names.

Were Eisenhower alive, he’d be aghast at our debt, deficits and still expanding military-industrial complex. And he would certainly be critical of the “insidious penetration of our minds” by video game companies and television networks, the news media and the partisan pundits. With so little knowledge of what Eisenhower called the “lingering sadness of war” and the “certain agony of the battlefield,” they have done as much as anyone to turn the hard work of national security into the crass business of politics and entertainment.

Police Can Now Put Hidden Cameras In Your Home Without Your Permission

Look, first off, I'm not one of those nutters who thinks we should do away with federal law enforcement agencies, or spy agencies, or the Coast Guard, or the interstate system, or the SEC. BUT.

Strange things are happening here in the United States of America, right now, that are so troubling it is almost hard to believe they are occurring. Your taxpayer money is going toward these things. And your silence and/or apathy is tacit approval, not only in my eyes but in the eyes of the government.

What am I talking about?

Aside from the terrifying results of a NYU/Stanford non-partisan study on the use of American drones in Pakistan -- the Spark Notes version of the data-rich study is that our drones are, in some cases, performing 'double-tap' sorties... which sounds all well and good, until you learn that 'double-tap' means the drone returns after it strikes and launches additional missiles into the building, killing rescue workers, innocent bystanders trying to help burn victims, and local medics.

And the victims of these strikes are targeted based on remote 'pattern of life' analysis -- if you don't know what that means, that's OK, because I don't either. But it doesn't sound terribly judicial or transparent.

Again, I said ASIDE from all of that -- yes, I'm worried about what we're doing in Pakistan with taxpayer money, but I'm more worried about what we are doing right here.

And I also mean, aside from the billions we are allegedly spending on data centers to intercept and store Americans' electronic communications without a warrant, in fairly clear violation of the Fourth Amendment of the United States Constitution.

Ready to put on your tinfoil hat? Here's where things get weird.

Ready to put on your tinfoil hat? Here's where things get weird.
This government, our government, a supposedly moderate government of Barack Obama (he has an iPad and a Spotify playlist and likes dogs and is funny on Jay Leno! He must be moderate!) is now claiming the legal right to install surveillance cameras in your home or on your property without a warrant. And is doing so, in some cases.

If they hate us for our freedoms over in Pakistan or wherever, I'm pretty certain the hatred will dry up soon, because this is not freedom. As CNET reported, "Police are allowed in some circumstances to install hidden surveillance cameras on private property without obtaining a search warrant, a federal judge said yesterday."

The government has evidently lost its mind, as have our federal judges. Tricky situation.

And no, I'm not suggesting things would be fantastic or magically better under a Romney administration -- that's not the point of this article. I suspect if Romney won, which according to Nate Silver he won't, this insanity would continue at the same pace, if not faster.

Regardless of who wins on Tuesday, we need to put our collective feet down and Just Say No. Respect our right to privacy. Respect our Constitutionally guaranteed rights. And treat us, taxpayers and citizens, with more than a shred of dignity.

HSBC Caught in New Drug Money Laundering Scandal


While HSBC’s Canary Wharf masters are back-peddling furiously over charges that they gave a leg up to terrorist financiers and drug traffickers as a recent U.S. Senate report charged, new evidence emerged that its business as usual for the multinational banking giant founded by Hong Kong-based British opium merchants.

Earlier this month, The Independent reported that French police had “intercepted one of the dozens of ‘go-fast’ cars which transport cannabis at high speed from Spain to Paris. The seizure–banal in itself–unravelled an extraordinary network of drug-trafficking, money-laundering, fraud and tax evasion which sprawled over the invisible barrier which separates Paris from the city’s poor, multiracial suburbs.”

The bank embroiled in this latest scandal? Why HSBC, of course!

According to reporter John Lichfield, “bank notes handed by clients to street drug dealers in the suburbs were ending up, French and Swiss investigators discovered, in the safes of seemingly law-abiding, well-heeled citizens in the French capital.”

But that’s not the only place where crisp bundles of cash were turning up.

“A trio of Moroccan brothers, including a prominent fund manager in Geneva, are alleged to have concocted an elaborate scheme to launder money by balancing two illegal flows of cash,” The Independent averred.

At the center of this multimillion euro money laundering spider’s web were: Meyer El-Maleh, the managing director of the fund management firm GPF SA, and brothers Mardoché El-Maleh, the alleged bagman of the cannabis-for-cash scheme and Nessim El-Maleh, a fund management specialist with the Swiss private banking arm of HSBC, HSBC Private Bank (Suisse) S.A.

The Independent reported that the trio “are suspected of handling up to €12m (£9.6m) in cash in the past seven months (and far more over the past four years). Assets seized by the police include €2m in cash, gold ingots, art treasures and guns.”

“The HSBC bank has confirmed that its employee was involved in the affair,” Swiss Info disclosed, “but says that it has been ‘cooperating actively with the authorities about this over the past few months’. The Swiss newspaper Le Temps reports that GPF SA is about to dismiss the other brother.”
Talk about closing the barn door after the horses have escaped!

Among the well-heeled perps arrested by authorities on charges of “conspiracy to launder money and association with criminals” was Florence Lamblin, a prominent Green Party politician and deputy mayor of the 13th arrondissement in Paris.

Her arrest was all the more ironic considering that fake “left” Greens are currently in coalition with François Hollande’s pro-austerity “Socialist” government. Lamblin and her coalition partners had run on a platform demanding tougher action against (wait for it) international money laundering!

When Lamblin’s home was raided “police discovered €400,000 (SFr484,000) in low-value notes” in safes belonging to the “progressive” politician, Swiss Info averred.

In the wake of her arrest, Lamblin was forced to resign although she denied “any involvement” in the drug smuggling scheme.

Her lawyer, Jérôme Boursican told AFP “she had held 350,000 euros from a family legacy in a Swiss account.”

“If anything, my client may be guilty of tax fraud, over the transfer back to France of a sum of €350,000 from a family inheritance which was placed in a Swiss bank account in 1920,” Boursican explained.

The attorney told France 24 that he would ask a judge “to dismiss the case against his client ‘as soon as possible’ and blamed her involvement on a ‘judicial error’.”

The “error” of getting caught perhaps?

Despite Lamblin’s professed innocence, Swiss Info reported that “the sums involved are huge.” French police have charged that “the sum involved in the money laundering is about €40 million, while French Interior Minister Manuel Valls says that the drug smuggling must have brought in about €100 million.”

As preliminary reports suggest it appears that Lamblin was keen on keeping more than the environment “green.”

A typical money laundering “placement” scheme, “cannabis profits leaving France were ‘swapped’ for assets hidden in Switzerland which tax cheats or business fraudsters wished to repatriate,” The Independent reported.

“The risky job of smuggling drug-trafficking proceeds over the Franco-Swiss border was avoided,” Lichfield wrote. “Instead, the drugs cash was handed over in plastic bags to Parisians who had hidden Swiss accounts.”

“The same sums were debited from their banks in Geneva and sent on a complex route through shell companies in London and offshore tax havens to purchase assets for the drug barons in Morocco, Dubai or Spain. A commission was allegedly paid on both transactions,” The Independent averred.

Referred to as “layering,” the transfer of funds took place through a series of opaque financial transactions that camouflaged their illegal origins. In the case of our well-heeled Parisians, drug profits were swapped through bank-to-bank and bulk cash transfers via private banks in Geneva, one of which was owned by HSBC.

As Senate investigators disclosed, “Bulk cash shipments typically use common carriers … to ship U.S. dollars by air, land, or sea. Shipments have gone via airplanes, armored trucks, ships, and railroads.”

“Shippers,” Senate staff averred, “may be ‘currency originators,’ such as businesses that generate cash from sales of goods or services; or ‘intermediaries’ that gather currency from originators or other intermediaries to form large shipments. Intermediaries are typically central banks, commercial banks, money service businesses, or their agents.”

Eschewing armored cars, airplanes or ships, the “originators” of these illegal cash flows preferred ubiquitous black plastic trash bags and “go-fast” limousines as the method of choice for bulk cash transfers. It would certainly cut down on shipping costs as the loot moved “offshore” and entered the shadow world of private banking!

As financial researcher James S. Henry pointed out in The Price of Offshore Revisited: “The term ‘offshore’ refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth–always in the interests of those who manage it, supposedly in the interests of its beneficial owners, and often in indifference or outright defiance of the interests and laws of multiple nation states.”

“A painting or a bank account may be located inside Switzerland’s borders,” Henry wrote, “but the all-important legal structure that owns it–typically that asset would be owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction (and that is one of the simplest offshore structures)–is likely to be fragmented in many pieces around the globe.”
Given Switzerland’s strict bank secrecy laws, we do not know, and Senate investigators did not disclose, how many billions of dollars were hidden for HSBC’s private banking clients in Geneva, where it originated or whether or not occult wealth shielded from scrutiny was derived from organized criminal activities.

In July however, when the Senate pointed a finger directly at HSBC over anti-money laundering “lapses,” The Bureau of Investigative Journalism revealed that “British clients of an HSBC-owned private Swiss bank that is the focus of a major HM Revenue & Customs investigation are alleged to have evaded tax by an amount likely to exceed £200m.”

Lord Stephen Green, Baron of Hurstpierpoint and current Minister of Trade and Investment in David Cameron’s Conservative government, was previously HSBC’s chief executive and the chairman and director of HSBC Private Banking Holdings (Suisse) N.A. for ten years.

During Green’s tenure, journalist Nick Mathiason disclosed that “the sums allegedly evaded by Britons using HSBC’s Swiss bank are massive. HMRC told the Bureau ‘the early indications are that the amounts are significant’.”

According to Mathiason, in 2010 the HMRC “received data smuggled out of HSBC by a former bank IT worker, now under arrest in Spain and facing possible extradition to Switzerland, that contained details of 6,000 UK-linked individuals, companies and trusts. Two senior tax investigators who both worked at HMRC told the Bureau the average amount evaded in the 6,000 accounts is likely to range between £33,000 and £50,000.”

While the sums involved in the Parisian money laundering and drugs scandal may be chump change in comparison to the trillions of dollars in illicit drug money that enters the system each year as a result of “normal business relations” between global drug cartels and the international financial system as the United Nations Office on Drugs and Crime (UNODC) revealed last year, it does demonstrate the utterly corrupt nature of the system as a whole.

Indeed, seeming ideological foes are joined at the hip when it comes to fleecing the working class and imposing austerity and privatization schemes that profit their real constituents–the global class of financial parasites who “win” regardless of which party of hucksters gain power.

As Henry observed, “private elites … had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing ‘structural adjustment’ and low growth, and holding fire sales of public assets.”

Public sector thefts that enrich the shareholders and officers of corrupt institutions like HSBC.

Although settlement talks between U.S. regulatory agencies and HSBC has forced the bank to set aside at least $700m (£441m) to meet the cost of any fines, it is highly unlikely that officials at the bank will be criminally charged.

Currently negotiating with the Justice Department, the Federal Reserve and the Office of the Comptroller of the Currency over serious allegations that the bank conducted a multiyear, multibillion dollar business with terrorist financiers and global drug cartels, the price tag may balloon even higher.

“HSBC’s $700 million set-aside, if paid, would constitute the largest U.S. settlement reached over such allegations, topping the $619 million in penalties and forfeitures paid in June by ING Groep NV, the biggest Dutch financial-services company,” Bloomberg News reported.

According to The New York Times, “federal authorities think HSBC could end up paying at least $1 billion. The bank itself said ‘it is possible that the amounts when finally determined could be higher, possibly significantly higher’.”

A spokesperson for HSBC however, told the Times this “case is not about HSBC complicity in money laundering. Rather, it’s about lax compliance standards that fell short of regulators’ expectations and our expectations, and we are absolutely committed to remedying what went wrong and learning from it’.”

But as Rowan Bosworth-Davies, a former financial crimes specialist with London’s Metropolitan Police observed: “You don’t launder this volume of money by accident, because somewhere along the line, your systems and controls for preventing money laundering just ‘broke down’! You do it because you work in a bank which is willing to flout every rule in the book and engage in layer upon layer of criminal conduct if the money is right! You do it because your management structure is defined by a criminogenic determination to amplify the anomic environment within which you operate and in which you expect your staff to co-operate.”

For their part, Swiss bankers are scrambling to put as much daylight as possible between themselves, the Paris money laundering scandal and HSBC.

Bernard Droux, the chairman of the Geneva Financial Center foundation, an umbrella group of independent banks and wealth managers told Swiss Info: “We were surprised that it should still be possible to do this today. This is a practice that has been forbidden by law for more than 20 years.”

But as with other recent examples of financial skullduggery, Droux reverted to form and claimed “You can never rule out the possibility of black sheep in any profession. No international centre is totally protected from this kind of thing.”

He hastened to add that Switzerland was at the “forefront” of the international fight against drug money.

However, Droux’s “black sheep” brush-off was undercut by a recent Bloomberg Businessweek report. We were informed that “Swiss private banks are looking for footholds in Latin America as the lower fees and higher interest rates offered by local wealth managers deter the region’s super-rich from traveling to Geneva and Zurich.”

This “changing relationship,” Bloomberg reported, began “in the 19th century when Swiss banks guarded the fortunes of plantation owners and mining magnates. UBS AG (UBSN), Credit Suisse Group AG (CSGN) and other Swiss banks are being forced to seek acquisitions as Latin America’s $3.5 trillion wealth management market is set to grow by more than half by 2016, according to Boston Consulting Group.”

“‘People are becoming richer and richer,’ said Gustavo Raitzin, head of Latin America for Julius Baer Group Ltd. (BAER). ‘An emerging consumer class wants to make liquid investments and they need private banks and wealth managers’.”

It is worth recalling in this context that Julius Baer’s Cayman Islands division, as the whistleblowing web site WikiLeaks revealed, was instrumental in squirreling away “several million dollars” of funds controlled by late Mexican Army General Mario Acosta Chaparro and his wife, Silvia, through a shell company known as Symac Investments.

Acosta, who served time in prison for his ties to the late drug trafficking kingpin Amado Carrillo Fuentes, the self-styled “Lord of the Heavens” who ran the Juárez Cartel, was killed in May when an assassin fired three rounds from a a 9mm revolver into his head.

The secret-spilling web site averred: “With the assistance of Julius Baer, Mr Chaparro was able to invest several millions of USD in Symac with all the secrecy which the Caymans allowed and to draw out some $12,000 a month.”

Who else might be in need of “private banks and wealth managers” employed by the likes of HSBC and Julius Baer to make such “liquid investments” possible with no questions asked?

Paging Chapo Guzmán, white courtesy telephone!