CRIMINALITY IN HIGH FINANCE: THE BEAT GOES ON


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Two of the Federal Reserve’s regional presidents, Robert Kaplan of the Dallas district and Eric Rosengren of the Boston district, resigned on 27 September after being exposed as having engaged in activities that smacked of insider trading; see “BANKSTER BANDITS GET RICHER PLAYING THE INSIDE TRACK” (14 Sep 2021) and “FED ETHICS? FU!” (21 Sep 2021). 
The two presidents had traded the same type of assets that the Fed had been purchasing in order to stimulate the economy and counter the economic damage of the COVID War. 
But their resignations have hardly let the two Banksters off the hook, nor does the scandal end with them.
Wall Street on Parade reports, on 2 November, that the Federal Reserve’s Office of Inspector General (OIG) is conducting a probe of the activities of the two former presidents and other Fed officials. 
TRENDPOST: “Other Fed officials” casts a wide net, one that already includes the Fed’s chairman, Jerome “Jay” Powell, as well as Richard Clarida, the vice-chair; see “FEDERAL RESERVE’S CHAIRMAN COMES UNDER SCRUTINY” (26 Oct 2021).
Details of Kaplan’s activities reveal that his trades, valued at $1 million or more, were done via a type of futures contract that “affords a much larger window of opportunity” for those who “might want to trade on insider information.”
Also of note is that Kaplan “appeared to have a trading relationship with [the global investment firm] Goldman Sachs,” which is supervised by the Federal Reserve. Kaplan had worked for Goldman Sachs for 22 years, and left his post as Vice Chairman there to join the Federal Reserve.
The findings of the OIG’s investigators can be turned over to the Dept. of Justice for criminal or civil prosecution. But Wall Street on Parade doesn’t foresee any significant fallout from this scandal, based on a similar OIG investigation, in 2014, of the “London Whale” incident.
TRENDPOST: “The London Whale” was a person, Bruno Iksil, a trader in derivatives at the London office of JP Morgan Chase. Derivatives are financial instruments whose values are connected to “underlying assets” such as stocks, bonds, interest rates, currencies, interest rates, commodities and so on; essentially, money can be made (or lost) by making “side bets” on whether such assets will go up or down. Iksil got his nickname from the huge sums he bet on the derivatives market.
Gregory Mannarino wrote about derivatives in “STOCK MARKET: A SUPER BUBBLE BY DESIGN” (15 Dec 2020).
In that incident, JP Morgan Chase had put $100 billion in federally-insured funds into derivatives, and had lost $6.2 billion. The investigation revealed that New York had seen “red flags” in JP Morgan’s derivatives trades, but its warnings had been ignored. 
Despite the various rationales proffered, Wall Street on Parade ascribes the problem to the “cronyism” between the Federal Reserve Banks and the institutions they are supposed to be supervising; in this case, Jamie Dimon, JP Morgan Chase’s chairman and CEO, also sat on the Board of Directors of the New York Fed; see “GLOBAL CORRUPTION INDEX: HOW LOW CAN YOU GO?” (28 Jan 2020) and “THIS BANKSTER AIN’T SINGIN’ THE BLUES” (27 Jul 2021).
A Senate Subcommittee on Financial Institutions and Consumer Protection hearing in 2014 found that the Fed was “excessively deferential” to the institutions it supervised, amounting to “regulatory capture” of the Fed by those very institutions. And tapes released by a New York Fed bank examiner (who had been fired for refusing to alter her negative assessment of Goldman Sachs) revealed what WSOP calls “a lapdog regulator afraid to take on a powerful Wall St. firm.”
WSOP also lays blame on the repeal of the Glass-Steagall Act, which had, since 1933, prevented commercial banks from making risky investments using depositors’ funds. The act’s repeal in 1999 opened the door for “federally-insured banks to become trading casinos supervised by the Fed,” noting that the Fed had liabilities of $534 billion in 1998, compared to $8.5 trillion today, “with the U.S. taxpayer on the hook for 98 percent of that amount”; see “THE NEXT PHASE: NUCLEAR DEBT, SLAVE SOCIETY” (19 Jan 2021). 
So, WSOP doesn’t envisage any real change coming from this latest scandal or investigation, adding:
“The central bank of the United States has now lost credibility with other central banks around the world because of this trading scandal. But the trading scandal is just a symptom of a far more malignant disease—the structure of the Federal Reserve System.
“All 12 of the regional Federal Reserve Banks are owned by the very banks that they supervise. These commercial banks elect two-thirds of the nine-member Board of Directors.”
And while the Fed may have “now lost credibility with other central banks around the world,” those other central banks are hardly paragons of ethical virtue. The Financial Times reports, also on 2 November, that the latest Fed scandal has brought to light similar conflicts of interest or lack of deterrents to such breaches.
TRENDPOST: See “ANOTHER CORRUPT BANKSTER. IT’S GLOBAL.” (19 Oct 2021).
Examples cited by the FT include a European Central Bank director who owned shares in more than ten companies whose bonds were bought by the ECB; a Bank of England officer with shares in Goldman Sachs, his former employer; and the governor and deputy governor of Sweden’s Riksbank who have been summoned before parliament to account for holding shares in companies whose debt was bought by Riksbank. 
While the Fed is said to be implementing new ethical rules, some European banks are emulating such policies; The ECB “recommends” practices to avoid appearance of impropriety, but only two officers have complied, with many claiming no questionable investments. And there are still banks, such as the Bank of England, the Swiss National Bank and the Bank of Canada, which simply do not disclose top officials’ investments.
TREND FORECAST: So, if financial institutions could just be purged of all the individuals taking advantage of their “insider” status to feather their own nests—see “FINANCIAL EXECUTIVE EXECUTED FOR CORRUPTION” (2 Feb 2021)—would everything then be hunky-dory? Hardly. As this very article has shown, the criminality goes far beyond the foxes in charge of the henhouse doing what they can only be expected to do; the criminality in the tangled web of financial speculation and manipulation is not a bug, it is a feature; see “THE MARKETS, THE GOVERNMENT & THE FED: A CRIME IN PROGRESS” (22 Sep 2020).

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