An unaddressed cause of the 2008 financial crisis was banks’ reliance on elaborate schemes called repurchase agreements, or “repos,” to fund their operations. Four years later, usual suspects like Goldman Sachs, JPMorgan Chase and Bank of America remain heavily dependent on them, endangering the financial system, as shown in a new Public Citizen report, “The Repo Ruse.”
Flickr by Truthout.org
Repos, often associated with the largely unregulated “shadow banking” system, are loans dressed up to look like sales. In a repo agreement, the borrower, for example Goldman Sachs, “sells” an asset (such as a bond) to another party, for example a money market mutual fund. The borrower also agrees to buy back the asset, often the next day, paying a little bit more as “interest.” These sales and buybacks continue on and on until one party decides to end the agreement.
So why do the parties choose to engage in such contractual gymnastics instead of just agreeing to a conventional loan? There are two big reasons, both of which create excessive risk.
First, Congress has carved out a special exemption for repo transactions from the usual requirements of federal bankruptcy law. Traditionally, if a borrower goes bankrupt, the lender has to compete with other creditors in the bankruptcy process to recoup its investment. Not so with repo agreements. Congress has accepted the buy-and-sell charade of repos and affirmed that repo lenders can sell collateral immediately if repo borrowers go bankrupt. This permission makes repo lenders more willing than normal creditors to engage in sloppy lending practices, and more likely to dash for the exits at the first sign that their borrowers are in trouble–imperiling individual institutions and potentially triggering market panics.
Second, the fiction that repo borrowers “sell” the assets that serve as collateral permits them to cover up problems on their balance sheets.
The Trans-Pacific Partnership (TPP) is a massive package of proposed new economic rules for the Asia-Pacific region (including the US), heavily influenced by corporate priorities through the Office of the United States Trade Representative (USTR) and under negotiation right now. You might not have heard of it, but if it’s eventually signed, its secret texts will affect your life.
At the TPP negotiations’ official stakeholder briefing May 13thoutside Dallas, USTR announced that the nine TPP country Chief negotiators together had just awarded a prize to the first negotiators to finalize their chapter: rules on small and medium enterprises (SMEs).
Meanwhile, negotiators of chapters that are taking time for review and input are now getting a little punishment. For example, intellectual property negotiators who have been appropriately scrutinizing proposals that would transform their countries’ laws regarding generic medicines, internet freedom and much more, have reportedly been dragged before the assembled Chiefs more than once to face pointed questions about what’s taking so long. USTR is driving this new tactic, which even the US Chief Negotiator described as a more “heavy-handed approach.”
KPOFCA would prevent the government from requiring federal contractors to disclose money they’re spending to influence elections. In other words, it would open a corporate corruption loophole that would tremendously weaken reforms that can strengthen disclosure in the wake of the Supreme Court’s ruling in Citizens United v. FEC.
Military corporations are just one example, though it makes sense to emphasize their outsized role in federal contracting – of the $536.8 billion the government spent on contracts in 2011, $374.2 billion (or nearly 70 percent) were with the Department of Defense.
Other federal contractors include huge companies like GE, Verizon, AT&T and others that would welcome a guarantee that their dark money will stay secret even as they are awarded taxpayer dollars from federal contracts.
You might think that the declining price of gasoline means that we don’t have to pay attention to all that talk about oil speculation driving up the price of oil. Right?
Even though the price of gas has fallen, you’re still lining the pockets of Wall Street every time you gas up. As Memorial Day approaches and summer driving season kicks off, remember that speculators will clean up even as the price of oil drops.
It’s a rigged game, with rules that make you give your hard-earned money to financiers no matter what. It’s like the bully on the playground who established the ground rules for a coin toss game as “heads I win, tails you lose.” Under those rules, the bully always wins.
In this case, the bully is Wall Street. With oil markets, loose rules allow speculators – not end users – to dominate the volume of trading, increasing price volatility and making more money the more the price changes – whether that price is going up or down.
Goldman Sachs has admitted that speculation adds as much as $23.39 per barrel to the price of crude. That translates to 56 cents per gallon. (See here if you want confirmation.)
So, we pay more. They get richer. And it has little to do with actual supply and demand.
You would think that since speculators can legally game the system, they wouldn’t need to resort to fraud or illegal manipulation. But last year, federal regulators charged five oil speculators with manipulating the price of oil in the early months of 2008 and making a $50 million profit from the scheme.
Nestle's "health food" - flickr photo by Howard Lake
“This is an amazing day in the city of Newark!” Booker exclaimed. Amazing, indeed. It’s amazing that Newark is partnering with a giant candy bar and infant formula corporation to conquer health problems that the company itself plays a role in perpetuating. A press release announced that Nestlé had helped to devise a nutritional education curriculum for Newark families highlighting “the importance of breastfeeding, increasing fruit and vegetable consumption, healthy snacking, dealing with a fussy eater, portion control and physical activity.” The program draws on “the nutritional expertise of Gerber,” Nestlé’s infant formula brand.
But why would a company that depends for its profits on women not breastfeeding and families purchasing candy (not fruits and vegetables) be an ideal source of nutritional expertise?