Adverse Impact of Robber Barons Funding Elections

Sankarshan Acharya[1]
Founder, Pro-Prosperity.Com and Citizens for Development

April 15, 2016

President Barack Obama
Mr. Donald J. Trump, Republican Presidential Candidate
Senator Bernie Sanders, Democratic Presidential Candidate
Other leaders and followers

Sub:     Adverse of Impact Robber Barons Funding Elections

This is available at pro-prosperity.com. Please feel free to distribute.

In the Democratic presidential debate yesterday, Senator Sanders failed to provide a single example in which Mrs. Clinton decided in favor of the Robber Barons like Goldman Sachs of Wall Street that have heavily funded her election campaign.  Senator Sanders simply stated that Mrs. Clinton did not favor his plan to break down the Big Banks.  Senator Sanders' only rationale for his plan is that Big Banks are fraudulent and their large size has unwarranted consequence on public policy. 

Senator Sanders willy-nilly did not say how the Robber Barons have adversely influenced public policy.  He also failed to illustrate a single instance in which Mrs. Clinton was swayed by the massive funding of her campaign by the Robber Barons. 

This memo illustrates (A) how Robber Barons have swayed government policy to serve their bests interest by inflicting irreversible damage to public and economy and (B) how Mrs. Clinton parrots as the political proxy for Robber Barons guided by elite pundits of systemic robbery.

A.  Robber Barons' Adverse Impact on Public Policy

  • After thoroughly and systemically robbing enterprising wealth creators by 1913, Robber Barons secretly crafted the Federal Reserve Act of 1913 to create the Federal Reserve.  The FRA mandates creation of cheap money only for the Robber Barons, not for smaller banks, corporations or households.  [Soon after I submitted my critique of FRA to Federal Reserve, Congress and President in 2008, the Fed took unprecedented steps by bending the FRA to fund smaller banks and non-banks.]  The money created by the Federal Reserve is really backed by the enterprising wealth creators.  The FRA also mandates that the Federal Reserve set interest rate on the savings of enterprising wealth creators. 
  • The Robber Barons have also established a system (rules) - and keep buttressing this system through new laws - to facilitate systemic robbery of enterprising wealth creators and to go scot free, legally.  This is why no Robber Baron has been jailed even after a massive destruction of $13 trillion of wealth and 9 million of good paying jobs in the financial catastrophe of 2008.  Self-serving laws foisted by Robber Barons on We the People have made them too-big-to-be-jailed. 
  • The systemic robbery is facilitated by the following:
    • Federal Deposit Insurance Corporation and Federal Reserve help Robber Barons (i) rob valuable assets of smaller banks and 'shadow' banks not protected by the FRA and (ii) get massive taxpayer funds in the name of 'rescuing' the smaller banks and 'shadow' banks. 
    • FDIC was created though Banking (Glass-Steagall) Act of 1933 to provide federal insurance of deposits held under the custody of 'private' banks.  The federal deposit insurance provision of the law effectively blackmails We the People to create new money on the back of people for the 'private' banks whenever the latter default on repayment of deposits under their custody.  This law thus facilitates a 'private' bank to rob insured deposits and then handover itself to the FDIC.  The FDIC then transfers the valuable assets of this bank to Robber Barons along with more taxpayer funds to the latter for 'rescuing' the failed bank.  This makes the banks run by Robber Barons ever larger and too-big-to-fail with protection by the FRA-1913. Robber Barons in the process have become too-big-to-be-jailed.
    • The Security and Exchange Act of 1934 permits Robber Barons to control Market Making and Clearing operations.  This facilitates Robber Barons to see vividly on real-time the flow of orders for trades submitted by everyone else like pension plans, mutual funds, and individual investors. Robber Barons can then trade against the interest of everyone else in the market with massive cheap public funds. This guarantees Robber Barons to rob everyone else with impunity.  They quickly privatize the profits and leave the corporate banking shells as wards of the public. The Security and Exchange Commission, created by this act, permits artificial creation and selling of securities not owned by the sellers.  Due to their privilege to view short and long positions of every other investor/trader in the clearing house and real-time order flows, the Robber Barons thus have a legally guaranteed privilege to squeeze wealth with impunity from other short-sellers and shareholders..
    • The Dodd-Frank Act of 2010 made the SEC's short-selling rule beyond judicial purview and made the TBTF banks systemically crucial (not subject to shut-down).
    • The Housing Economic Recovery Act of 2008 facilitated a takeover of Fannie Mae and Freddie Mac (which were well-capitalized according to the Treasury Secretary) under conservatorship to use them as 'bad banks' to rob their equity as well as $187 billion of taxpayer funds lent by Treasury to Fannie and Freddie to bail out insolvent TBTF banks.  Fannie and Freddie were forced to buy worthless (toxic) mortgage assets from TBTF banks at par.  The DOJ later charged TBTF banks more than $100 billion in fine for mortgage fraud so committed. 
    • Robber Barons want to pass new law to shut down Fannie and Freddie to collect usurious interest rates from credit-worthy mortgage borrowers.  
  • The established system (rules) thus facilitates Robber Barons to legally rob enterprising wealth creators with impunity. When the enterprising wealth creators panic and salvage their investments to save in guaranteed deposits, the Federal Reserve cuts in the interest rate on deposits.  Elite pundits of systemic robbery are now advocating negative interest rates on deposits.  If they have their way, insured depositors will receive less than their deposits and the government will pay less than par on Treasury securities. This will amount to default by U.S. government and banks, thanks to systemic robbery.

B.  Mrs. Hillary Clinton Parroting Robber Barons and Pundits of Systemic Robbery

  • Mrs. Clinton has tacitly agreed to Ex-President Bill Clinton's signing of the 1999 act that repealed the crucial provision of the Glass-Steagall Act which had for six decades kept investment banking separated from commercial banking.  This allowed Robber Barons to leverage massive public funds (federally insured deposits and tacitly guaranteed bank debt) in their custody to raise stock prices dramatically to squeeze unprivileged short-sellers and then bring down prices precipitously to rob stockholders.  NASDAQ rose 250% and then fell about 75% within one year.  This perhaps led to anger and the 9/11 WTC bombing.  The massive loss of wealth in 2000-2001 market crash led enterprising wealth creators to shun financial markets and invest in real estate by supposing falsely that this investment would be out of purview of Robber Barons.  But the Robber Barons did not fall behind: they used the public funds in their custody to bet against home mortgage industry to bring down the home prices.  The 1999 act thus underwrote the disaster of the US economy.
  • Now, Mrs. Clinton publicly parrots (a) exactly whatever the failed Robber Barons would like the public to believe, which is: unregulated institutions like Lehman Brothers, Bear Stearns, Washington Mutual, AIG as well as Fannie and Freddie - that came down due to shenanigans of Robber Barons in collusion with the government regulators - caused the 2008 financial crisis and (b) to accept the failed established punditry of systemic robbery as the only gospel available to the robbed public.  [The term failed represents the finding of the Financial Crisis Inquiry Commission.]
  • Mrs. Clinton has publicly repudiated the finding of the Financial Crisis Inquiry Commission that failure of Robber Barons and of associated pundits and regulators was the cause of the 2008 financial catastrophe.  This is obviously because of heavy funding of her election by the Robber Barons. 
  • The FCIC finding is known to the public since 2011.  The public cannot be fooled any longer. 

Conclusion

The so-called 'private' banks serve as corporate shells to leverage cheap public funds in their custody to privatize profits by ruining private wealth of enterprising wealth creators and by piling risks (public debt) on the public exchequer.  The privatized profits are obviously shared with (i) political leaders who have voted for such self-serving system of robbery of enterprising wealth creators and (ii) the elite pundits of systemic robbery who publish self-serving research and opinion in elite media they together control. 

The unique banking reform needed to revive the U.S. economy include (a) unanimously agreeable safe central banking and (b) independence of market making and clearing through an automated system not accessible to anyone without court permission. These reforms will (i) obviate breaking down of banks and (ii) make banks truly private without public funding or government regulation and with enough capital needed to attract private uninsured deposits. 

With best regards,
Dr. Sankarshan Acharya
Director, Research Center on Finance and Governance