Press release from Whistleblowers United in the US

Four prominent Wall Street whistleblowers – who have identified high-level wrongdoing by the nation’s largest financial institutions and the federal government – will announce on Thursday a challenge to the 2016 presidential candidates to pledge specific, common-sense actions to curb the financial sector’s corrupting influence on political campaigns and government regulators. They have proposed a detailed plan that requires no new legislation or rulemaking to restore the rule of law to Wall Street, end too-big-to-fail and restore the best features of the Glass-Steagall law that used to govern bank activities.

The four – William K. Black, Gary J. Aguirre, Richard Bowen and Michael Winston – have formed a new initiative called Bank Whistleblowers United. They will appear together at a news conference at 10 a.m. Thursday, February 25 hosted by the Campaign for America’s Future at its headquarters, 1825 K Street NW, Suite 400.

Bank Whistleblowers United has as its goal “to create urgent, fundamental changes to break Wall Street’s power over our economy and our democracy,” says Black, an associate professor of Economics and Law at the University of Missouri and a central player in exposing the “Keating Five” savings-and-loan scandal in 1989.

With the political power of the banking sector, and questions concerning over which candidates are likely to be beholden to that power, emerging as central issues in the 2016 presidential campaign, Bank Whistleblowers United will on Thursday unveil a pledge that it will ask each of the presidential candidates to sign. The pledge will include a vow to not accept campaign contributions from those banking institutions and executives engaged in fraudulent behavior during the runup to the 2008 financial crisis. They will also answer questions about why that pledge is important in the context of what has happened in the five years since the Dodd-Frank financial reforms were signed into law.

Gary J. Aguirre is best known as the Securities and Exchange Commission attorney who, while heading an insider trading investigation of Pequot Capital Management, formerly the world’s largest hedge fund, resisted his supervisor’s demands to give preferential treatment to a Wall Street titan involved in the case. Fired for his so-called “insubordination,” Aguirre would prove to the satisfaction of two Senate committees, a federal court and three federal agencies that the SEC had acted unlawfully. In private practice, Aguirre represents whistleblowers and victims of securities fraud and market abuse. He has law degrees from U.C. Berkeley and Georgetown Law Center (LL.M.) and a master in Fine Arts (Film) from UCLA.

William K. Black is an associate professor of economics and law at the University of Missouri – Kansas City (UMKC) and the Distinguished Scholar in Residence for Financial Regulation at the University of Minnesota Law School. He is a white-collar criminologist. He rose to national prominence as a key figure exposing the “Keating Five” savings-and-loan scandal in 1989, in which five U.S. senators were found to have been involved in negotiating favors for Charles H. Keating, Jr., chairman of the Lincoln Savings and Loan Association, in exchange for campaign contributions. His subsequent book, “The Best Way to Rob a Bank is to Own One,” is considered a classic analysis of corrupting influence of Wall Street on the federal government.

Richard Bowen is the Citigroup whistleblower who repeatedly warned Citi executive management, beginning in 2006, about potential losses related to the purchase and sale of mortgage loans. He provided testimony, along with 1,000 pages of documents, to the Securities and Exchange Commission in July 2008, three months before the bank bailouts. He also gave nationally-televised testimony before the Financial Crisis Inquiry Commission in April 2010. A “60 Minutes” story profiling Bowen, “Prosecuting Wall Street,” has been aired multiple times on CBS and CNBC. He is currently a professor of accounting at the University of Texas at Dallas and a popular speaker in the field of business ethics (www.RichardMBowen.com).

Michael Winston was a high-ranking executive at Countrywide Financial who tried to stop the fraud, corruption and deception he observed at the mortgage lender. His warnings were dismissed or ignored by management, and he was eventually fired. He subsequently took Countrywide and Bank of America to court, winning what the trial judge called an “overwhelming” jury verdict. Though the verdict was later thrown out by an appeals court, Winston’s legal fight was favorably chronicled by New York Times columnist Gretchen Morgenson in the article, “How A Whistleblower Conquered Countrywide.” Winston has served as Distinguished Adjunct Professor at Stichting deBaak (The Netherlands) for 16 years.

Is China on the right path?

China is following the right path and is making progress in its bid to rebalance the nation’s economy, according to a World Bank economist.

Franziska Ohnsorge, a lead economist at the World Bank, said Chinese officials had outlined an economic plan at the Third Plenary Session of the 18th Communist Party of China Central Committee in 2013 and were implementing the reforms to enact that plan.

“They are steadily implementing these reforms and these are exactly the reforms that China needs, but they will yield benefits over the long term,” she said.

According to the economist, despite China’s growth will be slower over the long term, “it will be much more resilient, with fewer vulnerabilities, especially in the financial sector.”

The 2013 meeting set a very ambitious agenda and it looks like much of it was reinforced in the most recent Fifth Plenary Session of the 18th CPC Central Committee, according to Ohnsorge.

“These are difficult reforms, many of them are very difficult. They(Chinese policymakers) touch on more than economics, they touch on the social sphere as well,” she noted.

Ohnsorge was speaking at a press conference in London to mark the launch of the World Bank’s 2016 Global Economic Prospects report.

During the press conference, Ohnsorge also talked about the recent volatility in Chinese stock markets.

The year of 2015 was a difficult year for the world and 2016 appeared to be challenging again, she said, adding “financial markets are clearly very sensitive to news, including out of China.”

“The (Chinese) policymakers are obviously carefully monitoring and taking steps as needed. ”

“We expect that the Chinese authorities will step in as needed, as they seem to have done so far, and the impact on the real economy seems to be limited.” said Ohnsorge.

A wider effect of stock market volatility on the Chinese economy would be less pronounced, because the links from the equity market to the real economy in China are not that strong yet, according to Ohnsorge.

The economist also commented on the structural rebalancing of the Chinese economy, away from industry-led growth towards services-led growth.

“It is clear that the rebalancing in China is clearly underway. You can really see the industrial sector is declining, industrial employment is declining, industrial share of GDP is declining and services is increasing. In that sense there is a lot of rebalancing,” she said.

She forecasted a decline in the rate of growth of the Chinese economy, but characterized it as a minor downward revision.

“As expected there is a slowdown in growth and we have revised our forecast downward for China for 2015 to 6.9 percent and 6.7 percent for 2016. Really, these are minor downward revisions; compared to the rest of the world, China is slowing and rebalancing as expected,” said Ohnsorge.

Chinese Premier Li Keqiang (front R) meets with World Bank’s President Jim Yong Kim

How to get good financial advice?  The US Department of Labor and the Securities and Exchange Commission disagree.

Staffers at the U.S. Securities and Exchange Commission and the U.S. Labor Department clashed over a controversial plan to curb potential conflicts of interest among brokers who give retirement advice, Senate panel Republicans said in a report on Wednesday.

The Labor Department, which regulates retirement plan advice, rejected numerous recommendations from the SEC and other agencies.

The Labor Department’s plan has been in play for more than five years. On Jan. 29, the White House’s Office of Management and Budget said it had received the department’s final proposed rule. The White House does not have an exact time frame for implementing the rule.

Under the plan, brokers would have to act in clients’ best interests, or as “fiduciaries,” when advising about IRAs. Brokers now must recommend investments that are “suitable,” based on factors such as investors’ ages.

Many Republicans and some Democrats oppose the plan, saying it would drive up customers’ costs and curb commissions.

Part of the Senate panel’s report focused on July 31, 2012 emails between Labor Department economist Keith Bergstresser and SEC economist Matthew Kozora. They discussed types of improper broker activity that the rule should measure: conflicts of interest or impact on investment returns.

“I hate to break it to you, but you’re wrong,” Bergstresser wrote to Kozora, according to the report. “People do not respond to fees or any other costs, but they do chase returns.”

“You keep circling back to the same statements, many or which are unsupported conjectures on your part,” Bergstresser later wrote to Kozora. “If you have nothing new to bring up, please stop emailing me about this topic,” Bergstresser wrote.

“I am also now utterly confused as to what the purpose of the proposed DOL rule is then, if not to limit advisor conflicts when providing retirement advice,” Kozora later wrote.

Djurdjja Varinec writes:  Women in Serbia are underrepresented in firm ownership and management The United States assists Serbia in implementing critical reforms necessary for the country to complete its economic and democratic transition into the EU and other international institutions. The United States Agency for International Development’s (USAID)1 programs in Serbia focuses on building prosperity and increasing democratic practices, both fundamental to Serbia’s Euro-Atlantic integration goals. Business Enabling Project (BEP) is one of the USAID’s initiatives aimed at helping the Government of Serbia (GoS) increase the competitiveness of the Serbian economy and its private sector by streamlining the business enabling environment, improving public financial management, and strengthening financial markets. The USAID Project conducts an annual survey of enterprises and entrepreneurs in Serbia to assist the government in implementing and monitoring economic reforms. The survey is distinct from all others conducted in Serbia because of the large sample size (1,008 businesses), five year time series, and the breadth of the questionnaire, all of which make it a powerful tool to inform advocacy that influences policy-making. The 2015 survey reveals that women are underrepresented in firm ownership and management. Employment of women in the surveyed firms is close to the national average of 43% of employees: the firms in the USAID BEP survey have 37% female employees in average. In companies registered as entrepreneurs, women make up 51% of employees. But men continue to dominate in firm ownership, as illustrated in Figure below. Numbers are similar for management: only 29% of managers are women, which is almost on the same level of the 27% women managers in 2014 survey.

The City of Philadelphia is considering a public bank.  Like the State of North Dakota, Philadelphia can create its own bank to hold and invest City funds to fulfill our needs, not the needs of multinational corporations funded by monopoly banks.

City Council will hold hearings on the creation of a Philadelphia Public Bank

Here are just some of the specific things a public bank can do that Wall Street can’t.  a Philadelphia Public Bank that we can’t do when we leave our money with Wall Street.

1.  Invest City dollars in capital-starved small businesses, including those owned and controlled by neighborhood residents through community development corporations, and consumer and worker-owned co-ops

2.  Direct lending at low rates to college students

3.  Finance and refinance mortgage loans at low rates

4.  Partner with community banks now threatened with extinction because they don’t have enough capital to lend

5.  Finance green energy improvements to homes and businesses throughout our City

6.  Issue bonds at low interest rates, save the City and School District millions of dollars, and free up precious resources to serve the needs of our families and residents.

Greek Prime Minister Alexis Tsipras is using the European Council negotiations on the UK’s draft proposals for EU reform as chance to secure a pledge from other member states that they will keep their borders open.

Using leverage provided by the negotiations, Tsipras is threatening to withdraw support for the British deal if there’s an attempt to seal off Greece over the EU migrant crisis.

Greece wants a pledge by all EU countries that they will keep their borders open for refugees until March, or may not sign any deal on Prime Minister David Cameron’s reform proposals.

“Tsipras will have a global approach towards the summit conclusions. If he is to show support for Cameron, he wants to see support when it comes to migration,” a spokesperson for the Greek government said.

However the spokesperson said this does not equate to a veto on the draft proposals.

The move comes after the EU set Greece a deadline of three months to fix its border controls last week, in a move that could allow other Schengen zone states to maintain border controls.

The Greek Prime Minister’s threat will be another thorn in the side of Cameron, who is trying to persuade eastern European countries to accept his reforms on benefit cuts for migrants.

Austria – with the help of Slovenia – has imposed a daily cap on migrants entering the country at 3,200, while it will also limit the number of asylum claims it receives daily to 80.

A Richmond Federal Reserve Report:  Since the Federal Reserve’s founding, it has paid a regular dividend to banks that are Fed members in exchange for those banks holding stock in Federal Reserve Banks. Recent transportation legislation reduced these dividends and used the savings to help fund the bill. While this move provided a shortterm financing fix, it also raised a bigger question of whether banks will want to remain members of the Fed. Economic Brief

Prime Minister David Cameron’s hopes to secure a reform deal on Britain’s relationship with the European Union.

A Number 10 source said the first session of the highly-anticipated European Council meeting had ended with a “significant gap on a number of issues”, including Cameron’s plans to obtain new safeguards for the City of London and a limit on welfare benefits for EU migrants.

EU leaders are also understood to be at odds over Cameron’s proposals to exempt Britain from the EU’s “ever closer union” commitment, as well as his desire for all 28 EU member states to sign up to a future treaty change.

Cameron told reporters earlier yesterday that he would be “battling for Britain” at the negotiating table.

“We’ve got some important work to do today and tomorrow and it’s going to be hard,” Cameron said, adding, “If we can get a good deal, I’ll take that deal. But I will not take a deal that doesn’t meet what we need.”

Cameron had hoped to hammer out a final agreement today, paving the way for an in/out vote on Britain’s EU membership as soon as 23 June. Yet last night’s gridlock raised questions about whether a deal – and a referendum – are likely to happen anytime soon.

Cameron has promised to hold the referendum by the end of 2017.

Bloomberg reported that Cameron had made a surprise bid to extend a so-called emergency brake on welfare payments to non-British citizens for a total of 13 years, nearly double the seven-year brake first proposed.

The PM told EU leaders that they had a make-or-break opportunity to “settle” the issue of Britain’s EU membership “for a generation”.

“The question of Britain’s place in Europe has been allowed to fester for too long and it is time to deal with it,” Cameron said.

Cameron is expected to hold multiple one-on-one meetings today in a last-ditch attempt to persuade other EU leaders to get behind his demands before the European Council meeting officially resumes later this morning.

The two-day meeting had been scheduled to wrap up around lunchtime, but EU officials warned last night that negotiations could last well into the weekend if an agreement cannot be reached.

Brahma Chellaney writes:  When identifying threats to Himalayan ecosystems, China stands out. For years, the People’s Republic has been engaged in frenzied damming of rivers and unbridled exploitation of mineral wealth on the resource-rich Tibetan Plateau. Now it is ramping up efforts to spur its bottled-water industry – the world’s largest and fastest-growing – to siphon off glacier water in the region.

Nearly three-quarters of the 18,000 high-altitude glaciers in the Great Himalayas are in Tibet, with the rest in India and its immediate neighborhood. The Tibetan glaciers, along with numerous mountain springs and lakes, supply water to Asia’s great rivers, from the Mekong and the Yangtze to the Indus and the Yellow. In fact, the Tibetan Plateau is the starting point of almost all of Asia’s major river systems.

By annexing Tibet, China thus changed Asia’s water map. And it is aiming to change it further, as it builds dams that redirect trans-boundary riparian flows, thereby acquiring significant leverage over downriver countries.

But China is not motivated purely by strategic considerations. With much of the water in its rivers, lakes, and aquifers unfit for human consumption, pristine water has become the new oil for China – a precious and vital resource, the overexploitation of which risks wrecking the natural environment.

China seems to think that the bottling of Himalayan glacier water can serve as a new engine of growth, powered by government subsidies. As part of the official “Share Tibet’s Good Water with the World” campaign, China is offering bottlers incentives like tax breaks, low-interest loans, and a tiny extraction fee of just CN¥3 ($0.45) per cubic meter (or 1,000 liters).

Some 30 companies have already been awarded licenses to bottle water from Tibet’s ice-capped peaks.

Ominously, the Chinese bottled-water industry is sourcing its glacier water mainly from the eastern Himalayas, where accelerated melting of snow and ice fields is already raising concerns in the international scientific community.

One of the world’s most bio-diverse but ecologically fragile regions, the Tibetan Plateau is now warming at more than twice the average global rate. Beyond undermining the pivotal role Tibet plays in Asian hydrology and climate, this trend endangers the Tibetan Plateau’s unique bird, mammal, amphibian, reptile, fish, and medicinal-plant species.

Nonetheless, China is not reconsidering its unbridled extraction of Tibet’s resources. On the contrary, since building railways to Tibet – the first was completed in 2006, with an extension opened in 2014 – China’s efforts have gone into overdrive.

Beyond water, Tibet is the world’s top lithium producer; home to China’s largest reserves of several metals, including copper and chromite (used in steel production); and an important source of diamonds, gold, and uranium.

China is forcing a growing number of people and ecosystems to pay the price for its imprudent approach to economic growth.

Glacier-water mining has major environmental costs in terms of biodiversity loss, impairment of some ecosystem services due to insufficient runoff water, and potential depletion or degradation of glacial springs. Moreover, the process of sourcing, processing, bottling, and transporting glacial water from the Himalayas to Chinese cities thousands of miles away has a very large carbon footprint.

Bottling glacier water is not the right way to quench China’s thirst.

Kingsley Chiedu Moghalu writes: The global commodity slump and China’s economic slowdown have pummeled several African economies, making clear that the continent’s “rise” was a myth. Now is the time to re-examine the basis of Africa’s recent “boom” and move from feel-good rhetoric to action that will drive genuine economic transformation.

Commodity exporters such as Angola, Ghana, Nigeria, South Africa, and Zambia are reeling, with their currencies crashing since the prices of commodities such as oil and copper began falling sharply.

The heart of the matter is this: African countries mistook a commodity supercycle-fed boom for a sustainable economic transformation.

Africa benefited from higher GDP growth and expanded opportunity over the last decade. But hundreds of millions of Africans have yet to be lifted out of poverty in the manner China has accomplished – a path that other Asian countries, such as India and Vietnam, are following as well.

Without question, many individual Africans have become stupendously wealthy and are playing more assertive roles in the world of business. Entrepreneurship is on the rise, especially among young Africans, gradually replacing the dead end of foreign aid. But the vast majority of Africans lag far behind.

Despite the spread of formal democracy on the continent, the nature of domestic politics in most African countries has hardly changed. Real leadership involves not just mobilizing citizens to vote for candidates, but also effective management, strategy, and execution of public policy. And yet power often is sought for its own sake or to secure control of state resources on behalf of ethnic kin or co-religionists. Politics is not yet, as it ought to be, a contest of ideas and programs affecting all citizens. Corruption thrives in such an environment.

Moreover, a proper understanding of economics is necessary. The continent and its leaders have so far failed to understand – or, where they have understood, to apply – historical lessons concerning how the wealth of nations is created. Instead, we often see uncritical acceptance of the received but self-interested conventional wisdom of globalization.

Achieving prosperity in the overarching context of globalization requires creating a competitive economy based on value-added production and export. But it also requires selective engagement with international treaties that favor today’s competitive good producers but put at a disadvantage the developing countries that are increasingly the markets for these goods.

This is precisely why Africa’s biggest folly is to believe that mineral resources and other raw commodities are automatically a source of wealth.

Africa’s future competitiveness and prosperity lie in the opportunities afforded by science, technology, and innovation.

Africa’s leaders in the public and private sectors have an opportunity to clear the policy bottlenecks that have prevented the commercialization of African inventions, especially in large economies such as Nigeria, South Africa (which has a more advanced innovation policy than the rest of the continent), and Kenya. Innovation must be deployed to cost-effective, competitive manufacturing and service industries.