FacebookTwitterRedditEmail

The Financial Road to Ruin

Apologise and carry on, is a ruse played by corporate tax dodgers. And, banks are no exception. The 2007 HSBC scandal, where 106,000 clients from more than 200 countries dodged hundreds of millions of tax dollars has only seen one person prosecuted. With little done, are governments powerless at the financial legal quandary, or is there something we’re not being told?

The whistleblower, Herve Falciani, redefined British understanding of the forces at work. For a bank to assist clients to dodge taxes into secret Swiss banks was unthinkable. But it went further. Falciani also claimed many banks adopt similar tax fraud practices.

It’s a claim familiar to the U.S. In 2012, Bank of America ensured its clients avoided taxes on stock dividends in hedge fund trading by using its subsidiary bank in Europe, all done with government backing.

It saw Bank of America hide $17.2 billion in offshore accounts. An estimated $4.3 billion of federal taxes was evaded. Prior to 2012, the banking giant was bailed out by the Federal Reserve Bank and the Treasury Department of a staggering $1.3 trillion.

It’s the same story with Citigroup, offshoring $42.6 billion resulting in the loss of $11.5 billion in taxes. The bank also received a bailout, to the sum of $2.5 trillion.

This reflects the cosy relationship a State has with banks. It’s rooted in history but has steadily diminished a government’s authority.

Banking took off in the U.S in an event known as the Panic of 1907. The instigators of this public panic were four private bankers, J.D Rockefeller, J.P Morgan, Paul Warburg and Baron Rothschild, which led to the collapse of major banks and trusts.

The bankers decided to combine their wealth to form a private bank, with 100% private shareholding. The bank would create money and lend it to the government under their terms.

The Senate strongly opposed the idea, but in 1910, the four bankers wrote the Federal Reserve Act in secrecy, and the recommendation was pushed through congress by their allies. In 1913, after heavy lobbying and political donations to President Woodrow Wilson, the bill was voted through, and the Federal Reserve Bank was formed.

To make sense of banking irregularities the principle of how money is created needs to be understood.

This was apparent in a landmark Minnesota court case in 1969. In the First National Bank of Montgomery vs. Daly. The defendant, Jerome Daly, an attorney representing himself, opposed the bank’s foreclosure on his home mortgage loan on the basis the bank had put up no real money for his loan. This was known as no actual consideration, (i.e. the thing exchanged), for the loan. When the bank’s president, Mr Morgan, took the stand, to everyone’s astonishment, he admitted the bank created money, ‘out of thin air’, for its loans, adding this was standard banking practice.

In the end, the court rejected the bank’s claim for foreclosure, and the defendant kept his house. The decision wasn’t enough to reform banking practice. It remains standard practice, but questioning continues of why this exclusive treatment of corporations even exists.

In the U.K, the Bank of England confirmed private banks unchecked economic hold. In its 2014 analysis, entitled: “Money Creation in the Modern Economy”, it stated money creation in education is skewed. It is when banks make loans they create new money.

This is explained by Richard Werner, an economist and professor, in his book, New Paradigm in Macroeconomics. He says: ‘the credit extended by banks do not remove purchasing power or claims on resources form anywhere else in the economy. Strictly speaking it cannot be described as ‘lending’. Banks do not lend, they create it.’

The think tank, Citizens for Tax Justice (CTJ) noted that 15 of the Fortune 500 companies paid no federal income tax on $23 billion in profits in 2014 alone, and paid almost no tax on $107 billion in profits over the past five years. Amongst the big hitters of tax breaks were General Electric, the toy makers Mattel, and media giants, Time Warner, and CBS.

Exploiting the loopholes is the reason why corporations get away with paying between 0% and 15% tax, instead of the 35% rate. The FACT (Financial Accountability & Corporate Transparency) coalition reported the U.S treasury loses $150 billion a year in tax revenue, with decade losses of $1.5 trillion.

Lobbying influence also undermines governance. Wells Fargo, for example, spent millions of dollars on lobbying, which influenced laws in 2009, and in 2012, when the legislators were thinking of putting measures on foreclosure practices and reforming property-tax.

A study by Martin Gilens, a Professor at Princeton University, in September 2014, entitled Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, showed the influential factors involved in determining public policy.

Using data collected from 1981 to 2002, the report looked at the U.S political system from 3 interest groups. The groups were the average citizens, economic elites (affluent Americans), and organized interest groups; mass-based or business-oriented.

After examining nearly 1,800 U.S policies during that period, and comparing them to the groups, the research concluded U.S policy is dominated by its economic elite.

The researchers say, “The central point that emerges from our research is that economic elites and organised groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence.”

The researchers conclude government policies rarely meet the preferences of majority of Americans, and instead overwhelmingly express the preferences of special interests and lobbying organisations: “When a majority of citizens disagrees with economic elites and/or with organised interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S political system, even when fairly large majorities of Americans favour policy change, they generally do not get it.”

The Regan era in the 1980’s was seen as the golden age of ‘free’ enterprise capitalism. In truth, this era never really left. Banks are operating beyond their call of duty by seizing public assets, while the government turns a blind eye.

Morgan Stanley imported 4 million barrels of oil and petrol into the U.S in June 2012, Goldman Sachs stored aluminium in warehouses in Detroit, and continues to own and operate airports in many countries, and makes vast profits from toll roads in the U.S, Puerto Rico, India and Australia.

The Colorado toll road is of particular importance. The 50 year contract, covering 18 miles, was approved by the Senate on 20 February 2014. Under the terms of the contract, the Colorado Senators and Representatives were not allowed to read the contract prior to signing, or to amend or vote on the contract. Goldman Sachs is not spending a dime funding the project, instead the $552 million is pocketed from tax payer dollars, while the company will secretly profit from hiked up toll charges.

The challenges are monumental but futile unless there is a political will, to stand against corporations buying their way out of justice. Only then can there be some credibility to the meaning of democracy, a term derived from the Greek language, “Rule by the people”.

Ridwan Sheikh, is a contributor on Muslim and political issues. He holds a post graduate diploma in Journalism from London School of Journalism. He has also visited Israel and occupied Palestine, and has written about the region. He can be contacted at ridwan.sheikh@gmail.com

More articles by:
bernie-the-sandernistas-cover-344x550
Weekend Edition
February 21, 2020
Friday - Sunday
Anthony DiMaggio
Election Con 2020: Exposing Trump’s Deception on the Opioid Epidemic
Joshua Frank
Bloomberg is a Climate Change Con Man
Jeffrey St. Clair
Roaming Charges: Billion Dollar Babies
Paul Street
More Real-Time Reflections from Your Friendly South Loop Marxist
Jonathan Latham
Extensive Chemical Safety Fraud Uncovered at German Testing Laboratory
Ramzy Baroud
‘The Donald Trump I know’: Abbas’ UN Speech and the Breakdown of Palestinian Politics
Martha Rosenberg
A Trump Sentence Commutation Attorneys Generals Liked
Ted Rall
Bernie Should Own the Socialist Label
Louis Proyect
Encountering Malcolm X
Kathleen Wallace
The Debate Question That Really Mattered
Jonathan Cook
UN List of Firms Aiding Israel’s Settlements was Dead on Arrival
George Wuerthner
‘Extremists,’ Not Collaborators, Have Kept Wilderness Whole
Colin Todhunter
Apocalypse Now! Insects, Pesticide and a Public Health Crisis  
Stephen Reyna
A Paradoxical Colonel: He Doesn’t Know What He is Talking About, Because He Knows What He is Talking About.
Evaggelos Vallianatos
A New Solar Power Deal From California
Richard Moser
One Winning Way to Build the Peace Movement and One Losing Way
Laiken Jordahl
Trump’s Wall is Destroying the Environment We Worked to Protect
Walden Bello
Duterte Does the Right Thing for a Change
Jefferson Morley
On JFK, Tulsi Gabbard Keeps Very Respectable Company
Vijay Prashad
Standing Up for Left Literature: In India, It Can Cost You Your Life
Gary Leupp
Bloomberg Versus Bernie: The Upcoming Battle?
Ron Jacobs
The Young Lords: Luchadores Para La Gente
Richard Klin
Loss Leaders
Gaither Stewart
Roma: How Romans Differ From Europeans
Kerron Ó Luain
The Soviet Century
Mike Garrity
We Can Fireproof Homes But Not Forests
Fred Baumgarten
Gaslighting Bernie and His Supporters
Joseph Essertier
Our First Amendment or Our Empire, But Not Both
Peter Linebaugh
A Story for the Anthropocene
Danny Sjursen
Where Have You Gone Smedley Butler?
Jill Richardson
A Broken Promise to Teachers and Nonprofit Workers
Binoy Kampmark
“Leave Our Bloke Alone”: A Little Mission for Julian Assange
Wade Sikorski
Oil or Food? Notes From a Farmer Who Doesn’t Think Pipelines are Worth It
Christopher Brauchli
The Politics of Vengeance
Hilary Moore – James Tracy
No Fascist USA! Lessons From a History of Anti-Klan Organizing
Linn Washington Jr.
Ridiculing MLK’s Historic Garden State ‘Firsts’
L. Michael Hager
Evaluating the Democratic Candidates: the Importance of Integrity
Jim Goodman
Bloomberg Won’t, as They Say, Play Well in Peoria, But Then Neither Should Trump
Olivia Alperstein
We Need to Treat Nuclear War Like the Emergency It Is
Jesse Jackson
Kerner Report Set Standard for What a Serious Presidential Candidate Should Champion
ADRIAN KUZMINSKI
Home Sweet Home: District Campaign Financing
Kollibri terre Sonnenblume
The Latest BLM Hoodwinkery: “Fuel Breaks” in the Great Basin
Wendell Griffen
Grace and Gullibility
Nicky Reid
Hillary, Donald & Bernie: Three Who Would Make a Catastrophe
David Yearsley
Dresden 75
FacebookTwitterRedditEmail