Robert Reich on why both Democrats and Republicans won't control the Street with Glass-Steagall

Why Democrats Can't Be Trusted to Control Wall Street

By Robert Reich, Robert Reich's Blog

24 May 13

 ho needs Republicans when Wall Street has the Democrats? With the help of congressional Democrats, the Street is rolling back financial reforms enacted after its near meltdown.

According to the New York Times, a bill that's already moved through the House Financial Services Committee, allowing more of the very kind of derivatives trading (bets on bets) that got the Street into trouble, was drafted by Citigroup - whose recommended language was copied nearly word for word in 70 lines of the 85-line bill.

Where were House Democrats? Right behind it. Rep. Sean Patrick Maloney, Democrat of New York, a major recipient of the Street's political largesse, co-sponsored it. Most of the Democrats on the Committee, also receiving generous donations from the big banks, voted for it. Rep. Jim Himes, another proponent of the bill and a former banker at Goldman Sachs, now leads the Democrat's fund-raising effort in the House.

Bob Rubin - co-chair of Goldman before he joined the Clinton White House, and chair of Citigroup's management committee after he left it - is still influential in the Party, and his protégés are all over the Obama administration. I like Bob personally but I battled his Street-centric views the whole time I served, and soon after I left the administration he persuaded Clinton to support a repeal of the Glass-Steagall Act.

Jack Lew, Obama's current Treasury Secretary, was chief operating officer of Citigroup's Alternative Investments unit, a proprietary trading group, from 2006 to 2008, before he joined the Obama administration. Peter Orszag, Obama's Director of the Office of Management and Budget, left the Obama Administration to become Citigroup's vice chairman of corporate and investment banking, and chairman of the financial strategy and solutions group.

All these men are honorable. None has broken any law. But they and their ilk in congress - the Democrats who are now rolling back Dodd-Frank - don't seem to appreciate the extent to which Wall Street has harmed, and continues to harm, America.

It's not entirely coincidental that the Obama Administration never put tough conditions on banks receiving bailout money, never prosecuted a single top Wall Street executive for the excesses that led to the near meltdown, and still refuses to support a tiny tax on financial transactions that would bring in tens of billions of dollars as well as discourage program trading.

Democrats can't be trusted to control Wall Street. If there were ever an issue ripe for a third party, the Street would be it.

Nation Farmers Union on Glass-Steagall

Glass-Steagall: An Idea Worth Reconsidering

FOR IMMEDIATE RELEASE May 20, 2013 Contact: Melisa Augusto, 202-314-3191 maugusto@nfudc.org Dan McEvily, 202-314-3104 dmcevily@nfudc.org WASHINGTON (May 20, 2013) – National Farmers Union (NFU) President Roger Johnson commends Sen. Tom Harkin (D-Iowa) and Rep. Marcy Kaptur (D-Ohio) for introducing legislation to reinstate the Glass-Steagall Act, which would help protect the U.S. economy from widespread collapse. Sen. Harkin’s bill was dropped in the Senate on May 13th – the 80th anniversary of the original enactment of Glass-Steagall. “Congress must learn from the past in order to prevent future financial crises,” said Johnson. “The Federal Government, in its deregulatory zeal of the 1990s, repealed important laws like Glass-Steagall that separated commercial banking from investment banking. Doing so helped to set up the Great Recession.”   Glass-Steagall, or the Banking Act of 1933, prevented affiliations between banking and investment firms that could collapse simultaneously in a crisis. The Gramm-Leach-Bliley Act of 1999 repealed these provisions. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 made some improvements, but stopped short of the safeguards provided by Glass-Steagall.   “Sen. Harkin and Rep. Kaptur deserve great thanks for bringing these reforms back to the table and I urge all members of Congress to support prudent financial protections.”   National Farmers Union has been working since 1902 to protect and enhance the economic well-being and quality of life for family farmers, ranchers and rural communities through advocating grassroots-driven policy positions adopted by its membership. -30-

Rachel and Me

Had a chat with Rachel Maddow the other night, or at least I tried to.

The topic was economics, which she doesn’t do enough of, and I was on some sort of a panel. I suppose that’s why I was on: My friend and I have a website called Glass-SteagallNow.com. I need to spend more time updating it, because Glass-Steagall could solve the nation’s, and indeed the world’s, economic problems.

There were several economists and big shots on the program, all answering Rachel’s questions about their cockamamie theories about why we were in such a mess and how it was this group’s fault or that group’s fault. I raised my hand several times to get Rachel’s attention, but she just kept calling on the others. It was like I wasn’t even there.

If you don’t know, and you probably don’t, Glass-Steagall is the common name for the Banking Act of 1933. Named after its chief sponsors, Henry Steagall and Carter Glass, it was passed into law as soon as Roosevelt got into office, and stopped the crazy Wall Street speculators who caused the crash and depression of the 30’s. Just like now, you see, there was no real reason for the depression, other than banks that gambled with their depositor’s money, and, just like now, lost it all. Glass-Steagall said that if you took deposits, you were a regular or commercial bank. You had to be conservative and safe with their money, or you went out of business. And, if you behaved yourself, the deposits could be government insured, by a brand new thing called the FDIC.

But if you were the ‘other’ kind of bank, the ones that gambled on risky investments to make huge returns (or mammoth losses), you were an investment bank, and the people who gave you money knew what they were getting into. And no insurance, thank you very much.  Rich people liked to invest with investment banks, ‘cause they had the extra cash to lose, and could reap big benefits if they were careful. Because they knew the risks, investment banks were kept pretty small—rich people didn’t get to be rich by being stupid.

I was assuming that Rachel wanted me to explain how this all worked great until the larger banks, having already screwed the public in a number of ways (health maintenance organizations, airlines, savings & loans, energy, education loans, others) began to systematically undermine the banking system. They messed with Glass-Steagall in the 80’s (now known as the Savings & Loan scandal), but, undeterred by that fiasco continued to whittle away at the 56-page law that had kept banking system safe and reliable for 66 years. Investment banks were where the big profits were, if they could just combine with commercial banks and get their greedy little hands on all that cash they would have it made. Mountains and mountains of insured cash. Then, in 1999, with Bill Clinton’s Wall Street cronies in charge of the Treasury, and the Republicans in charge of the congress, they finally ‘shattered’ Glass-Steagall and opened the floodgates for major craziness.

They turned their attention to the real estate market—huge, safe, reliable and so vulnerable for exploitation. The banks immediately went to work getting their hands on these huge amounts of money that they could use to that make more money. And as long as the banking and real estate systems worked in cahoots they could make lots and lots and lots of money. All they really needed to do was to make sure that the real estate business just kept getting bigger and bigger and bigger. Everybody needs a house! Everybody needs a loan!

I really wanted to explain to Rachel that that’s not how the real estate business works. Real estate is based on something real and tangible. It grows at a steady regular, conservative pace. And if it doesn’t then it creates a bubble and when there’s a bubble then all hell breaks loose. And this bubble just grew and grew and grew for seven or eight years! Houses cost more and more and there was so much money and people would use their house as an ATM and everybody got a loan if they wanted one. And even if you didn't!

Until 2007 when everybody realized the houses weren’t worth what they were paying for them and suddenly the bubble burst.

I kept holding my hand up hoping that Rachel would call on me so that I could explain that all of these guys just had more and more complicated and unnecessary changes that need to be made when really the only problem was that Glass-Steagall shouldn't have been repealed in 1999.

I was getting very, very angry.  “Glass-Steagall”, “Glass-Steagall”, “Glass-Steagall” was all I wanted to say. But she wouldn't call on me.  Rachel, please!

Finally reaching extreme heights of anger, I sat up in my bed and looked around.

I turned off the TV and went back to sleep.

They’ll never get it, I remember thinking.

Couple articles from Larouche sources:

NEWS COVERAGE OF HARKIN'S INTRODUCTION OF S 985, CITING LAROUCHE,SPREADS WIDELY

May 19 (LPAC)--News coverage of Senator Tom Harkin's introduction of Senate Bill 985, calling for the reinstatement of Glass-Steagall, introduced on May 16, the 80th anniversary of the passage of the original FDR Glass-Steagall law, has been posted on numerous websites across the country during the past 48 hours.

        The Project Avalon Forum reproduces in full the LPAC press release on Harkin's introduction of the bill, and has the YouTube version of the May 17 LPAC TV news coverage of the Harkin bill, with Leandra Bernstein, so that all one has to do is click on the arrow that activates the show. The News.Silobuster.com website also has a similar link to the LPAC show.

        The Exchange Gold for Cash.com website features the May 17 LPAC press release in full.

        The very good story that appeared in the May 17 Examiner, "Bankster Alert: Tom Harkin Introduces Glass-Steagall Bill in Senate," which article directly states "Lyndon LaRouche, an economist and former presidential candidate applauded Harkin on Thursday [May 16]," and otherwise uses information extensively from LPAC's press releases on the fight for Glass-Steagall, is reproduced in full on the Topix.com and the Ed Steer websites.

        These postings are updated with what Lyndon LaRouche, talking about the Harkin bill, told associates on May 18, "I imagine there's a certain amount of optimism that has been stirred up by these developments... This is going to be an epidemic. Unless something changes, there can be very radical changes very suddenly." [ref]

ARTICLE ASSERTS "MIDDLE CLASS HAS TO BECOME OBSESSED" WITH PASSAGE OF GLASS-STEAGALL

May 17 (LPAC)--Under the title, "Until We Restore Glass-Steagall, More Big Bank Bailouts Are Inevitable," the May 18 Eclecta Blog, which describes itself as "Progressive News and Commentary," promotes the urgent adoption of Glass-Steagall, which cause, it says, must become an "obsession" of the population.

        The article states, "Attorney General Eric Holder made actually some news this week: ... he told the House Judiciary committee that big banks are not too big to jail. He was willing to criminally prosecute the nation's largest banks, though he hasn't done so since the financial crisis.

        "`Let me be very, very, very clear banks are not too big to jail,' Holder added.

        "This is a small relief because the fact remains that the big banks are bigger than ever,...

        "Since the 1930s, Glass-Steagall prevented another depression by separating investment and commercial banks by law. In 1999, conservatives passed and Bill Clinton signed a repeal of this crucial New Deal reform. You know what happened less than a decade later.

        "Not restoring Glass-Steagall after the financial crisis is like sending the Space Shuttle up with the same flawed O-rings the Challenger had.

        After it dismisses the Brown-Vitter bill, the article asserts, "This is an issue the middle class has to become obsessed with and not just because the big banks are getting an $83 billion implied taxpayer subsidy, and not because another crisis will lead to trillions more in debt that the right will use to justify gutting our social safety net. The fact that we cannot fix this glaring injustice, this obvious flaw in our economy, is the worst symptom of a sick political system."

Why Glass-Steagall, from Bloomberg News

War Veteran’s Fund Losses Explain Glass-Steagall

By Jonathan Weil 2012-12-06T23:30:42Z

One of the great debates to emerge from the financial crisis is whether the U.S. Congress should resurrect some form of the Depression-era Glass-Steagall Act and bring back the separation of commercial and investment banking. It should, but not for the reasons usually cited.
Put aside the tired arguments about whether the law’s repeal in 1999 caused the crisis. It did help banks deemed too big to fail get larger, but the crisis had no single proximate cause. We would have systemically dangerous financial institutions even if the law had stayed in place.
There’s a better argument for separating securities firms from commercial banks: to protect consumers. The banking industry has a long history of preying on unsophisticated depositors by selling them garbage investments without regard to suitability. This was a big reason Glass-Steagall was originally enacted.
Consider the $61 billion in settlements between large banks and the Securities and Exchange Commission over sales of auction-rate securities, the market for which collapsed in early 2008. Citigroup Inc., Bank of America Corp. and other banks told customers the securities were safe, highly liquid investments comparable to money-market funds. They weren’t.

Cross Selling

At Wachovia Corp., the SEC said bank employees helped recruit retail depositors for the investments. Wachovia, which was bought by Wells Fargo & Co. (WFC) in 2008, later agreed to repurchase $7 billion of the securities. Regulators in Washington state made similar findings about Wells Fargo as part of a $1.3 billion settlement in 2009, saying the bank and its investment divisions “engaged in cross-selling in connection with ARS sales.”
Cross-selling junk to mom and pop depositors wasn’t limited to auction-rate securities. Last year the Memphis, Tennessee- based brokerage Morgan Keegan & Co. agreed to a $200 million settlement with state and federal securities regulators over seven mutual funds that lost $1.5 billion in 2007 and 2008. Morgan Keegan brokers sold the proprietary bond funds to more than 30,000 account holders. The SEC said the funds’ managers mismarked their asset values.
Morgan Keegan, then a subsidiary of Regions Financial Corp. (RF), “targeted Regions Bank depository customers with maturing certificates of deposits or other depository assets,” the Alabama Securities Commission and other state regulators said in their complaint. “More money could be made on broker- dealer fees than on the interest spread on interest-bearing deposits.”
One of those customers was Donald G. Smith, 66, who owns an auto-repair business in Hot Springs, Arkansas. Several years ago, he and his wife had a $96,000 Treasury bond. After it matured, he said a Regions financial adviser sent him to see a Morgan Keegan broker in the same branch.
He put the money in the funds the broker recommended, which soon crashed. The funds’ holdings included complex instruments with names like synthetic collateralized debt obligations, first-loss pieces and pooled trust preferred securities. Smith, a Vietnam War veteran and former oilfield worker, said he isn’t a sophisticated investor. His last year of school was eighth grade.
“I told her this was our nest egg, and we couldn’t afford to lose it,” he said, referring to the Morgan Keegan broker. Why did he trust Morgan Keegan? “It was right there inside the bank. One employee that I had trusted recommended me to another one.”
After the Smiths filed claims against Morgan Keegan, a securities-industry arbitration panel in August awarded them about $11,000, after hearings fees, which was a small fraction of their losses.

Wealth Destruction

Their experience is reminiscent of a story about another bank customer: Edgar D. Brown, of Pottsville, Pennsylvania. His testimony at the 1933 Senate Banking Committee hearings on the 1929 stock market crash was recounted in Michael Perino’s acclaimed book, “The Hellhound of Wall Street,” about the committee’s chief counsel, Ferdinand Pecora.
In 1927, Brown responded to an advertisement by City Bank (now Citigroup) offering to help with financial advice. Brown, who had $100,000 in cash and government bonds from selling a theater chain, received a reply from a salesman at National City Co., City Bank’s securities affiliate.
The salesman said Brown should sell the bonds, borrow two or three times the money he had, and invest in securities the company recommended. “Brown took the company’s advice, insisting only that he wanted bonds instead of stock,” Perino wrote. “Other than that Brown trusted the company implicitly.”
Perino wrote: “Over the next year a welter of bonds came in and out of Brown’s portfolio. There were railroad bonds, utility bonds, and industrial bonds. Brown’s foreign bond holdings spanned the globe -- Peruvian and Chilean bonds; bonds from the State of Rio Grande do Sul in Brazil; Vienna and Budapest bonds; the bonds of the Belgian National Railroad, Norwegian Hydro, German General Electric, and the Saxon Public Works; Greek, Italian, and Irish bonds. They seemed to have only one thing in common -- they all went down in value.”
When Brown complained the next year, the salesman blamed Brown for insisting upon bonds. So Brown took his advice to buy stocks. “I bought,” Brown testified, “thousands of shares of stock on their suggestion which I did not know whether the companies they represented made cake, candy or automobiles.” Following the company’s advice was, he thought, “the only safe thing to do.” In 1929, at age 40, he lost almost everything.
Brown’s testimony helped persuade Congress to pass Glass- Steagall that same year. It was a good idea at the time to separate securities firms from commercial banks. It still is.
(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this article: Jonathan Weil in New York at jweil6@bloomberg.net.
To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.

Reagan Administration official calls for Glass-Steagall

David Stockman comments on Mitt Romney’s version of capitalism

Erich Vieth | January 23, 2012 | 0 Comments

Appearing on Dylan Ratigan’s show today, David Stockman, an ardent traditional capitalist, criticized the leveraged buyouts engaged in by Mitt Romney at Bain, labeling this behavior speculation, crony capitalism and “an inside job.” Stockman served as Director of the OMB during Ronald Reagan’s Administrations.

Stockman hammered Obama as well, based on Obama’s acquiescence toward out-of-control Wall Street banks. He points out that the elephant in the room is the Federal Reserve, which is churning out endless money, thus bloating the financial sector. Stockman urges that we need to bring back Glass-Steagall as the starting point for a solution to this mess. Stockman also sharply criticized Newt Gingrich’s claim that he served as an “historian” for Freddie Mac.

[thanks to Dangerous Intersections blog]

Margin Call – A Real Disappointment

by Elliott R. Morss Morss Global Finance

Introduction

After all the hype Margin Call received, I expected more. In my view, the movie was a real disappointment: it said virtually nothing about the banking crisis: just a bunch of people I can’t feel sorry for losing their jobs. And on that theme, how about the millions of people who lost their jobs because of the foolish and destructive things the bankers were doing?

After seeing the flick, I read some of the reviews. They were positive, with the emphasis on how entertaining the movie was. OK: the primary aim of movies is to entertain. But I think a movie providing a more complete picture of what happened could be even more entertaining than Margin Call. I offer an outline of such a movie below.

Scene One: 1933 – Glass-Steagall Act Enacted

The movie would start with an actor playing Senator Carter Glass arguing for passage of the Glass-Steagall Act. Glass, a former Treasury secretary and the founder of the U.S. Federal Reserve System, was the primary force behind the Act. Glass would explain why trading activities were too risky for banks and why the “investment banking” activities of banks had to be split off.

Scene Two: 1998 – Glass-Steagall Overturned

In the next scene, we would again be in Congress – this time for the repeal of the key provision of the Glass-Steagall Act. An actor playing Sandy Weill would lead off. Sandy owned Travelers, which owned Salomon Smith Barney, and he was arranging a merger with Citicorp. But Citicorp was a bank and Salomon was an investment bank – not a legal merger under Glass-Steagall. So the lobbyists go to work for Weill. In the following year, Congress passed the Financial Services Modernization Act of 1999, known as the Gramm-Leach-Bliley Act. This law effectively deleted the prohibition on commercial banks owning investment banks and vice versa.

An actor playing Treasury Secretary Larry Summers should then say what Summers was quoted as saying: ”Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. ‘This historic legislation will better enable American companies to compete in the new economy.”

Scene Three – Efforts to Regulate Derivatives

Shortly later, Summers teams up with U.S. Securities and Exchange Commission Chairman Arthur Levitt, Fed Chairman Greenspan, and Secretary Rubin to torpedo an effort to regulate the derivatives market. Actors playing Greenspan and Leavitt should concede, as they have publicly, that this was a big mistake. Summers should be quoted as well on his back peddling in saying that not regulating AIG’s financial insurance activities was outrageous.

Scene Four – Changing Bank Objectives

The scene should switch to a single bank. But instead of focusing on the market collapse and lost jobs (Margin Call), the first scene should be the bank president telling the troops that the time for holding onto (and worrying) about their own loans was over: the future was in writing up and selling off as many loans as possible for commissions. Traders would then buy them back, package them, and sell them off again.

Next the new bank hires: instead of green eye shade people worrying about loan quality, aggressive salesmen to sell bank mortgages and other loans would be brought in. And young MBA types to develop derivative packages would also be recruited.

Portraying this change in bank objectives and incentives is fundamental to understanding the reasons for the Western banking collapse.

Scene Five – Bank Insurance

It was not just AIG that sold insurance on mortgage-backed securities. Banks did as well. This could be captured in a short scene where a bank “seller” tells his boss that one of their major clients is showing some reluctance in buying a mortgage-backed security package. His boss responds: “tell the client the bank will insure the package”.

Scenes Six & Seven – Loss of Mortgage Documentation

The loss of mortgage documentation is critical, both for understanding why the mortgage-backed securities market collapsed as well as why finding ways to help mortgage recipients failed. On the former, more than 90% of mortgages are performing well. Why, then, would the whole market collapse. Lack of documentation – nobody knew where the bad mortgages were. These points can be captured in two related scenes.

First, a scene focuses on the packaging process where two bank staffers talk about keeping or not keeping accurate documentation trails on mortgages being packaged. The scene should end with them agreeing on taking shortcuts. A good final line might be “I am sure if we asked Joe in the buying department, he would have no documentation on the mortgage derivative packages he is buying.”

Second, a scene where the bank president calls in his mortgage packagers/buyers/sellers and said I want to sell off all our non-performing loans. The buyers and packagers would then say “we have no idea which mortgages in our derivative packages are performing and which are not”.

Scene Eight – The Market Collapse

We are now at the point where Margin Call started. The real estate market starts down, banks want to sell of the mortgage-backed security packages, but nobody knows where the 90% good mortgages are, so the whole market tanks. And because nobody knows where the bad mortgages are, all MB holders become suspect. So banks won’t lend to one another…. A real quote from a Senator following a briefing with Treasury Secretary Paulson could set the stage. This could be followed by a series of panic calls among bank salesmen.

The AIG Bailout

The AIG bailout warrants a movie of its own. However, as an end to the moving I am proposing, I offer the following.

Scene Nine – Early September Phone Call

Lloyd Blankfein, the man who replaced Paulson as the head of Goldman, calls the now Treasury Secretary Paulson. Blankfein: “We need the insurance money AIG owes us immediately.” Paulson: “I will see what I can do.” Paulson calls Tim Geithner, the head of the Federal Reserve Bank of New York. Paulson: “I want you to lend AIG $85 billion so it can make insurance payments to banks.” Geithner: “OK. Let’s arrange a meeting with AIG”.

Scene Ten – The Mid-September Meeting

In mid-September 2008, Secretary Paulson and Geithner met with senior executives of AIG and the Bank’s headquarters in New York. Guess who else shows up at the meeting? Lloyd Blankfein. Geithner asks Paulson why Blankfein is there. Paulson says “because I asked him”. Geithner agrees to lend AIG $85 billion. Ultimately, the government pledged $182 billion to save AIG.

Scene Eleven – November 2008 – Pay Full Value

In the October-November 2008 period, claims against AIG mounted. Inasmuch as AIG was effectively insolvent without massive government backing, senior AIG staff believed it could settle claims at 60 cents on the dollar and were prepared to move ahead on that basis. Paulson said “No. Pay out 100 cents on the dollar”.

Scene Twelve – Attempted Cover-up

Geithner holds a meeting with AIG and says: “in your next report to the SEC, do not name the banks that you paid.” AIG official responds: “I doubt the SEC will accept a statement that does not include the names of recipients getting more than $1 billion from us.” Geithner: “try it.” On December 30, 2008, Jeffrey P. Riedler, Assistant Director of the SEC, send a letter to AIG requesting the details on who got paid. Geithner was able to keep the names from being released until March 15, 2009.

The movie ends with the following Table.

AIG Payments (in billions)
Goldman Sachs .... 12.9
Societe General ... 11.9
Deutsche Bank ... 11.8
Barklays ... 7.0
Merrill Lynch ... 6.8
Bank of America ... 5.2
etc.
Total ... $93,200,000

Source: AIG

Conclusion

In my humble view, this would make a great movie.

But until I get a call from Harvey Weinstein or Oliver Stone, the best movie on the banking collapse is Charles Ferguson’s “Inside Job”.

Glass Steagall News

Growing Glass-Steagall Support for HR 1489: Resolution in Essex County, NJ

Jan. 10, 2012 (LPAC)--The Essex County, NJ, Board of Freeholders passed a resolution on December 14, 2011, in support of H.R. 1489 to restore Glass-Steagall. With Newark as the County seat, Essex County is the third-largest county in NJ, with nearly 800,000 residents, just below Middlesex County, which had passed a similar resolution. Thus, two county and four municipal governing bodies representing two million Jerseyans have called for Congressional re-establishment of Glass-Steagall (as has the NJ AFL-CIO).

Essex County includes the districts of Rep. Donald Payne, Rep. Albio Sires, Rep. Rodney Frelinghuysen, and Rep. Bill Pascrell. Payne signed onto 1489 in the course of the months-long campaign to get the Freeholders' resolution. Payne's son is both a Freeholder and President of the Newark City Council, which Council was addressed at least twice by LPAC candidate Diane Sare.

LPAC representatives addressed the Essex Freeholders on at least four occasions.

Perhaps not coincidentally, Rep. Payne and Rep. Frank Pallone both co-sponsored at the point that the scandal around MF Global and Jon Corzine broke open. Former New Jersey Governor and Goldman Sachs CEO Corzine had been the moneybags/controller of the NJ Democratic Party for a decade, and a key Wall St. fundraiser for Obama [EIG/JPS]


Elliot Spitzer Declares for Glass-Steagall in German Interview

Jan. 9, 2011 (EIRNS)--Elliot Spitzer, the former New York State Attorney General and Governor, was interviewed by German financial paper Wirtshaftswoche, on the financial collapse, and his support for the Occupy movement. After a discussion of the Occupy movement, and Obama's complete lack ("No, absolutely not") of meaningful reform, he was asked, "What should we do now?"
Spitzer replied, "Two things above all: We have to solve the housing market problems. I believe that write-downs by the banks are unavoidable. And we must attack the problem known as too-big-to- fail. Because in the end, these mega-financial companies will get us in trouble again. At some point these institutions will make mistakes again, and the taxpayer will have to save them again. In my view it would be better to go back to the system of bank separation, as we had with relative stability in the 50 years prior to the repeal of Glass-Steagall."
This is the first time Spitzer has definitively declared himself on the Glass-Steagall issue, after hovering around it for years.

from
The Bain of Capitalism
January 11, 2012 Robert Reich

Rick Perry criticizes Romney and Bain pushing the quest for profits too far. “There is nothing wrong with being successful and making money,” says Perry. “But getting rich off failure and sticking someone else with the bill is indefensible.”

Yet getting rich off failure and sticking someone else with the bill is what Wall Street financiers try to do every day. It’s called speculation – and at least since the demise of the Glass-Steagall Act, investment bankers have been allowed to gamble with commercial bank deposits, other people’s money.

So is Perry proposing to resurrect Glass-Steagall? Not a chance.

FDIC'S Bair: Not Volcker Rule, But Glass-Steagall Principle Needed

A column by former FDIC head Sheila Bair in Forbes and CNN Money, deceptively headlined "We need a new Volcker rule for banks," actually calls for the principle of Glass-Steagall. Bair calls the Volcker rule -- "a 300-page Rube Goldberg contraption" that has failed in separating depository commercial banking from speculation and gambling.

She calls the Volcker Rule and Dodd-Frank a failure, and calls for a regime in which transactions should be Federally protected or not, and we "should return to Glass-Steagall in all its 32-page simplicity." The link:

The article is from the December 26, 2011 issue of Fortune

Banking institutions are more dangerous to our liberties than standing armies

Click on this link for :

Another great Glass-Steagall site

Occupy Loves Glass Steagall

Luke Rosseel, from the Occupy Movement has a new video out:

Volcker says bring back Glass-Steagall

The rule will come into effect 7/21/12. I agree that the problem is corporate donors. The fact the corporate banks lobbied so strongly for Glass-Steagall repeal, which was done to make legal Citibank's 1998 merger with Travelers, shows its power to stem the kind of trading that allows them to redistribute our savings into their trading accounts in order to fund political campaigns. We must remind everyone that power lies with voters, not corporations. This is a first small step toward sanity.

Zombie Glass–Steagall [Pseudo Glass-Steagall?]

by Glyn A. Holton, author and consultant with twenty years experience managing financial risk.

October 13, 2011
Zombie Glass-Steagall will soon be stalking the land.On Tuesday, the FDIC released proposed rules for implementing Section 619 of the Dodd-Frank Act—the so-called Volcker Rule. On Wednesday, the SEC did the same. This is a joint effort of the FDIC, Federal Reserve Board, SEC and OCC. Their—largely identical—proposed rules are based on a 79 page study released by Tim Geithner’s Department of Treasury in January 2011.

The Volcker Rule was, of course, an attempt to restore some of the safeguards that were lost in 1999, when Congress scrapped the 1933 Glass–Steagall Act’s separation of commercial and investment banking. In its original form—as Paul Volcker first proposed it in early 2009—the Volcker Rule would:

1. prohibit banks from engaging in proprietary trading, and


2. prohibit them from investing their own capital in hedge funds or similar speculative funds.
   

The first item is the crux of the rule. The second is a safeguard to prevent banks from indirectly speculating through a hedge fund or other entity. Volcker explained the rule’s intent as:

We ought to have some very large institutions whose primary purpose is a kind of fiduciary responsibility to service consumers, individuals, businesses and governments by providing outlets for their money and by providing credit. They ought to be the core of the credit and financial system. Those institutions should not engage in highly risky entrepreneurial activity. Barack Obama ignored Volckers proposal for a year, but with frustration over his coddling of Wall street near a boil, on January 21, 2010, he publicly endorsed it. With Volcker gleaming by his side, he dubbed it the “Volcker Rule.”

The actual rule he sent to Congress was weak. Senators Jeff Merkley (Democrat of Oregon) and Carl Levin (Democrat of Michigan) strengthened it, and it was their version that made its way into the Dodd-Frank Act. The Treasury Department’s January report weakened it, proposing that, instead of prohibiting banks from investing in hedge funds, that they be allowed to invest up to 3% of their capital in them. The document just released by the FDIC embraces that proposal.

Volcker was unhappy with what happened to his rule, even before Treasury did their hatchet job. We should probably rename it. One possible name would be “Zombie Glass-Steagall”. The rule doesn’t bring any of Glass-Steagall back to life. At best, it disturbs the grave of Glass-Steagall. It makes Glass-Steagall not alive, but undead. And the 298 pages of proposed regulations just released by the FDIC are an abomination—onerous, convoluted and riddled with loopholes.I have always opposed Zombie Glass-Steagall in any form because, fundamentally, it is flawed. While Glass-Steagall prohibited commercial banks from trading certain instruements, Zombie Glass-Steagall prohibits only the proprietary trading of those instruments. Proprietary trading can be indistinguishable from trading related to market making, hedging, underwriting, price discovery, liquidity management, asset-liability matching or a host of other practices. If a trader wants to disguise proprietary trading as one off these, believe me, he can.

Let me give you an example. It is called “trading around order flow”. Suppose a bank makes markets in certain bonds. They are negative on a particular bond, so, when a client places an order to buy that bond, they sell it without purchasing an offsetting position in the same bond. Selling the bond was “market making” but, by doing nothing at all, the bank now has a proprietary short position in the bond. The mere fact that the bank has that short position doesn’t make this proprietary trading. The bank will tell you that it is ineficient to hedge positions transaction-by-transaction—that they look at their portfolio overall and hedge its net exposures. Fair enough, but analyzing whether a trading book is hedged can be devilishly difficult. The trading book might have tens of thousands of positions in equities, bonds, derivatives, repos, you name it. Do you remember the debate over whether Goldman Sachs had shorted the mortgage market heading into the 2008 crisis? They smugly claim they were market neutral. How do you argue with something like that? It is all posturing.

The proposed rules that the FDIC and SEC just released envision banks implementing elaborate reporting and compliance systems to help senior executives and regulators spot proprietary trading. Banks will also have to calculate and track five categories of metrics:

• Risk-management measurements – VaR, Stress VaR, VaR Exceedance, Risk Factor Sensitivities, and Risk and Position Limits;


• Source-of-revenue measurements – Comprehensive Profit and Loss, Portfolio Profit and Loss, Fee Income and Expense, Spread Profit and Loss, and Comprehensive Profit and Loss Attribution;


• Revenues-relative-to-risk measurements – Volatility of Comprehensive Profit and Loss, Volatility of Portfolio Profit and Loss, Comprehensive Profit and Loss to Volatility Ratio, Portfolio Profit and Loss to Volatility Ratio, Unprofitable Trading Days based on Comprehensive Profit and Loss, Unprofitable Trading Days based on Portfolio Profit and Loss, Skewness of Portfolio Profit and Loss, and Kurtosis of Portfolio Profit and Loss;
  Customer-facing activity measurements – Inventory Turnover, Inventory Aging, and Customer-facing Trade Ratio; and


• Payment of fees, commissions, and spreads measurements – Pay-to-Receive Spread Ratio.
  All this is staggeringly complex. Larger banks could spend millions of dollars a year complying with this mess. Smaller banks will receive exemptions from much of the reporting—Zombie Glass-Steagall isn’t intended for them.

What are regulators going to do with all the data they receive on the various metrics? No matter how much data there is, any determination on its meaning will be subjective. Regulatory agencies are under budgetary pressure, so it is not clear how they will afford additional enforcement. With Congress and the White House beholden to Wall Street, so are the heads of those regulatory agencies. How much career risk are their employees going to take to enforce Zombie Glass-Steagall? It isn’t going to happen.

What is really sad is the fact that the objectives of Zombie Glass-Steagall could easily be achieved by merely prohibiting banks from trading non-exempt instruments, as was the case under Glass-Steagall before it was repealed. That solution would be simple, inexpensive and objective. We didn’t need commercial banks trading mortgage-backed securities or credit default swaps prior to 1999. We don’t need them doing so now.

Don’t blame the FDIC, Federal Reserve Board, SEC or OCC for this mess. The regulators are doing the best they can with an impossible legislative mandate. It was Congress and the White House who imposed that mandate. Zombie Glass-Steagall will soon be stalking the land. Call your elective representatives and tell them to repeal the monster.

from BoldProgressives.org

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Click here to sign a "Jail bankers who broke the law" statement -- and then pass it on.

When asked about why no Wall Street executives have gone to jail for crashing our economy, President Obama said Wall Street behavior "wasn’t necessarily illegal, it was just immoral."

Wasn't illegal?!

It's well established that Wall Street banks resorted to forgeries and phony paperwork to kick families out of their homes. State prosecutors like New York Attorney General Eric Schneiderman are currently investigating other fraud and illegal activity -- after federal prosecutors dropped the ball.

It's time for the 99% of us to speak out loudly -- and tell our political leaders: Wall Street bankers who broke the law must go to jail. Let's make this message go viral over the weekend.

Sign the petition

Matt Taibbi knows Glass-Steagall works!

The $2 Billion UBS Incident: 'Rogue Trader' My Ass
by Matt Taibbi, Rolling Stone

The news that a "rogue trader" (I hate that term – more on that in a moment) has soaked the Swiss banking giant UBS for $2 billion has rocked the international financial community and threatened to drive a stake through any chance Europe had of averting economic disaster. There is much hand-wringing in the financial press today as the UBS incident has reminded the whole world that all of the banks were almost certainly lying their asses off over the last three years, when they all pledged to pull back from risky prop trading. Here’s how the WSJ put it:

The Swiss banking giant has been struggling to rebuild trust after running up vast losses in the original financial crisis. Under Chief Executive Oswald Grubel, the bank claimed to have put in place new risk management practices, pulled back from proprietary trading and focused on a low-risk client-driven model.

All the troubled banks, remember, made similar promises in the wake of the financial crisis. In fact, some of them used the exact same language. Some will recall Goldman’s executive summary from earlier this year in which the bank pledged to respond to a "challenging period" in its history by making changes.

"We reviewed the governance, standards and practices of certain of our firmwide operating committees," the bank wrote, "to ensure their focus on client service, business standards and practices and reputational risk management."

But the reality is, the brains of investment bankers by nature are not wired for "client-based" thinking. This is the reason why the Glass-Steagall Act, which kept investment banks and commercial banks separate, was originally passed back in 1933: it just defies common sense to have professional gamblers in charge of stewarding commercial bank accounts.

Investment bankers do not see it as their jobs to tend to the dreary business of making sure Ma and Pa Main Street get their $8.03 in savings account interest every month. Nothing about traditional commercial banking – historically, the dullest of businesses, taking customer deposits and making conservative investments with them in search of a percentage point of profit here and there – turns them on.

In fact, investment bankers by nature have huge appetites for risk, and most of them take pride in being able to sleep at night even when their bets are going the wrong way. If you’re not a person who can doze through a two-hour foot massage while your client (which might be your own bank) is losing ten thousand dollars a minute on some exotic trade you’ve cooked up, then you won’t make it on today’s Wall Street.

Nonetheless, thanks to the Gramm-Leach-Bliley Act passed in 1998 with the help of Bob Rubin, Larry Summers, Bill Clinton, Alan Greenspan, Phil Gramm and a host of other short-sighted politicians, we now have a situation where trillions in federally-insured commercial bank deposits have been wedded at the end of a shotgun to exactly such career investment bankers from places like Salomon Brothers (now part of Citi), Merrill Lynch (Bank of America), Bear Stearns (Chase), and so on.

These marriages have been a disaster. The influx of i-banking types into the once-boring worlds of commercial bank accounts, home mortgages, and consumer credit has helped turn every part of the financial universe into a casino. That’s why I can’t stand the term "rogue trader," which is always tossed out there when some investment-banker asshole loses a billion dollars betting with someone else’s money.

They’re not "rogue" for the simple reason that making insanely irresponsible decisions with other peoples’ money is exactly the job description of a lot of people on Wall Street. Hell, they don’t call these guys "rogue traders" when they make a billion dollars gambling.

The only thing that differentiates a "rogue" trader like Barings villain Nick Leeson from a Lloyd Blankfein, Dick Fuld, John Thain, or someone like AIG’s Joe Cassano, is that those other guys are more senior and their lunatic, catastrophic decisions were authorized (and yes, I know that Cassano wasn’t an investment banker, technically – but he was in financial services).

In the financial press you're called a "rogue trader" if you're some overperspired 28 year-old newbie who bypasses internal audits and quality control to make a disastrous trade that could sink the company. But if you're a well-groomed 60 year-old CEO who uses his authority to ignore quality control and internal audits in order to make disastrous trades that could sink the company, you get a bailout, a bonus, and heroic treatment in an Andrew Ross Sorkin book.

In other words, "rogue traders" are treated like bad accidents and condemned everywhere from the front pages to Ewan McGregor films. But rogue companies are protected at every level of the regulatory structure and continually empowered by dergulatory legislation giving them access to our bank accounts.

There is a movement in the UK for a thing called “ringfencing” that would separate investment bankers from commercial bankers. Some people think this UBS incident will aid that movement, even though UBS can apparently absorb the loss without necessitating a bailout or endangering client accounts.

The U.S. missed its own chance for ringfencing when a proposal for a full repeal of Gramm-Leach-Bliley was routed during the Dodd-Frank negotiations.

That means we’re probably stuck here in the states with companies like Bank of America, JP Morgan Chase and Citigroup, giant commercial banks in charge of stewarding trillions in client bank accounts and consumer credit accounts who also behave like turbocharged gamblers via their investment banking arms.

Sooner or later, this is going to blow up in our faces, and it won't be one lower-level guy with a $2 billion loss we'll be swallowing. It'll be the CEO of another rogue firm like Lehman Brothers, and it'll cost us trillions, not billions.

Matt Taibbi: Corporate Tax Holiday in Debt Ceiling Deal: Where's the Uproar?

Have been meaning to write about this, but I’m increasingly amazed at the overall lack of an uproar about the possibility of the government approving another corporate tax repatriation holiday.

I’ve been in and out of DC a few times in recent weeks and one thing I keep hearing is that there is a growing, and real, possibility that a second “one-time tax holiday” will be approved for corporations as part of whatever sordid deal emerges from the debt-ceiling negotiations.

I passed it off as a bad joke when I first saw news of this a few weeks ago, when it was reported that Wall Street whipping boy Chuck Schumer was seriously considering the idea. Then I read later on that other Senators were jumping on the bandwagon, including North Carolina’s Kay Hagan.

This is what Hagan’s spokesperson said:

Senator Hagan is looking closely at any creative, short-term measures that can get bipartisan support and put people back to work. One such potential initiative is a well-crafted and temporary change to the tax code that encourages American companies to bring money home and put it towards capital, investment, and–most importantly–American jobs.

For those who don’t know about it, tax repatriation is one of the all-time long cons and also one of the most supremely evil achievements of the Washington lobbying community, which has perhaps told more shameless lies about this one topic than about any other in modern history – which is saying a lot, considering the many absurd things that are said and done by lobbyists in our nation’s capital.

Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it.

Think of it as a gigantic global IRA. Companies that put their profits in the offshore IRA can leave them there indefinitely with no tax consequence. Then, when they cash out, they pay the tax.

Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.

Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. Some of those companies promising waves of new hires have already committed to massive layoffs..

It was bad enough when lobbyists managed to pull this trick off once, in 2004. But in one of the worst-kept secrets in Washington, companies immediately started to systematically “offshore” their profits right after the 2004 holiday with the expectation that somewhere down the road, and probably sooner rather than later, they would get another holiday.

Companies used dozens of fiendish methods to keep profits overseas, including such scams as “transfer pricing,” a technique in which profits are shifted to overseas subsidiaries. A typical example might involve a pharmaceutical company that licenses the rights or the patent to one of its more successful drugs to a foreign affiliate, which in turn manufactures the product and sells it back to the U.S. branch, thereby shifting the profits overseas.

Companies have been doing this for years, to incredible effect. Bloomberg’s Jesse Drucker estimated that Google all by itself has saved $3.1 billion in taxes in the past three years by shifting its profits overseas. Add that to the already rampant system of loopholes and what you have is a completely broken corporate tax system.

And the whole thing is predicated on that dirty little secret – the notion, long known to all would-be major corporate taxpayers, that there would come a day when there would be another tax holiday.

That time, they hope, is now. According to Drucker, lobbyists met with President Obama last December to ask for another holiday. And now the drumbeats are rolling on the Hill for a new holiday to be included in the debt-ceiling deal.

Senator Carl Levin of Michigan, the same Senator who produced the damning report of corruption on Wall Street, has been trying to fight the problem, introducing a measure that would prevent companies from accessing offshored money through correspondent accounts and branches of offshore banks.

Levin’s Permanent Subcommittee on Investigations has also been investigating how companies might use the cash they save from a tax holiday, surveying companies like DuPont, presumably to find out just how many of these firms really intend to create new jobs with their tax savings.

I’m shocked there isn’t more of an uproar about this. Could you imagine what the Tea Party would be saying right now if there was a law on the books that allowed immigrants to indefinitely avoid taxes on income sent back to family members in the old country, in Mexico and Venezuela and India?

Imagine the uproar if Barack Obama, in the middle of this historic revenue crunch and "We're so broke the world is going to end tomorrow!" debt-ceiling hystgeria, decided to declare a second “one-time tax holiday” for, say, unwed single mothers, or recipients of public assistance? Middle America would be running through the streets, firing shotguns out its truck window, waving chainsaws in mall lobbies, etc.

As it is, leading members of the Senate are seriously considering giving the most profitable companies in the world a total tax holiday as a reward for their last seven years of systematic tax avoidance. Hundreds of billions of potential tax dollars would disappear from the Treasury. And there isn’t a peep from anyone, anywhere, on this issue.

We’re seriously talking about defaulting on our debt, and cutting Medicare and Social Security, so that Google can keep paying its current 2.4 percent effective tax rate and GE, a company that received a $140 billion bailout en route to worldwide 2010 profits of $14 billion, can not only keep paying no taxes at all , but receive a $3.2 billion tax credit from the federal government. And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?

Reinstate Glass-Steagall – Now

[Another contribution from Seeking Alpha]

by: Joseph L. Shaefer December 29, 2009

Once upon a time, banks did banking and brokers made people broker and ne’er the twain did meet. Ditto for insurers and S&Ls and all the other sub-sectors Wall Street has now euphemistically titled the “financial services” industry, an oxymoron akin to “airline food” or “Congressional ethics.”

Sometimes I find a particularly well-written article on a subject and say, “I couldn’t have written it any better myself.” Such was the case with a recent article by Sy Harding of Street Smart Report (see his free daily blog at www.streetsmartpost.com). I’ve quoted much of it below, followed by my comments and ideas for possible purchases…

The Glass-Steagall Act was passed in the 1930’s to help prevent a recurrence of the 1929 market crash and the Great Depression. It provided strict separation of the activities of various types of financial firms, the overlapping of which had been significantly responsible for creating the late 1920’s market bubble and subsequent crash.

Under Glass-Steagall financial firms had to divest themselves of over-lapping operations and focus on their core business.

Basically, savings banks could take in deposits from customers and loan the money out in home mortgages, auto loans and other types of personal lending.

Commercial banks could handle deposits and checking accounts of businesses and make commercial loans.

Investment banks could provide investment banking services, including arranging for companies to go public, merger and acquisition activities, making bridge loans, etc.

Brokerage firms could handle investment services for investors.

Insurance companies provided insurance and annuities.

Real estate brokerage firms provided real estate services on a commission basis.

Mutual funds invested in stocks, bonds, or other assets and sold shares to the public to provide them with diversified portfolios.

The financial sector screamed and yelled, but the separations were made fairly quickly and enforced. And none of the dire consequences Wall Street firms warned would be the result if government set up such restrictions took place. All sectors of the financial system managed to flourish very well for the next 60 years under the separations and restrictions.

But in the late 1990’s, banks and insurance companies began looking over their walls in envy at the big profits that brokerage firms and mutual funds were making from the booming stock market. Brokerage firms looked over their wall at the profits that could be made from packaging home mortgages, auto loans, etc. into leveraged investment derivatives…

…in 1998 they began lobbying Congress, and bombarding the media with articles and interviews aimed at having the public accept the idea of tearing down the walls… Overnight the walls disappeared. Banks were suddenly in the brokerage business, introduced their own mutual funds, were neck deep in investment banking, had huge trading departments trading for their own profits, etc. Brokerage firms were providing home mortgages, packaging the mortgages of other lenders and selling them to investors, etc.

And we soon saw the results with the stock market bubble in 2000, and the subsequent real estate bubble just a few years later, and the near collapse of the entire financial system last year under the weight of all the toxic assets that had mushroomed on the balance sheets of all types of financial firms…

…Wall Street of course claims that the abolishment of Glass-Steagall in 1999 was a good thing, that it resulted in innovative investment changes that strengthened the economy and markets.
Huh? We’ve had two recessions and two severe bear markets since 1999, with buy and hold investors still way underwater over the last 10 years, consumers in worse trouble than they’ve been in since the great Depression, and the financial system near total collapse for the first time since the 1929 crash and its aftermath…

In the late 1990s, Congress and President Clinton embraced the campaign spearheaded by Sandy Weill, then head of Citicorp (C), to rescind Glass-Steagall. Weill and his ilk paid $200 million in lobbying fees for this endeavor in the 1997-98 election cycle alone (and contributed another $150 million directly to various Congressmen and other politicians during those months). That was chump change to Wall Street – and, in fact, it came out of the pockets of Citicorp and other shareholders, without Weill or his cabal of cohorts having to put up a penny of their own to pull off this taxpayer heist. No matter the source, it was enough to buy respect, votes, or whatever. And we are still paying for it today.

(According to PBS's "Frontline," just days after the Treasury Department agreed to support the repeal, Treasury Secretary Robert Rubin accepted the job as Weill's chief lieutenant at Citigroup. Weill and co-boss John Reed thanked President Clinton, whom Weill called in the middle of the night to keep the deal going, personally.)

There are only two times our elected representatives give a damn what we think – the first Tuesday in November in the years we elect our President and the first Tuesday in November two years hence. In fact, they still don’t care what we “think” even on these dates but they sure as hell worry about how we’ll vote. If enough of us tell them we will vote them out of office unless they restore Glass-Steagall, this is the year – these are the key months in which they will listen. Not because they care what we think, but because if we vote them out, they’ll have to find honest work somewhere (or become lobbyists, of course) and they’ll then be saddled with the same health care system and pension system they voted for the rest of us.

If we are successful in restoring Glass-Steagall, I would look at a number of regional banks like Wilmington Trust (WL), Bank of Marin (BMRC), Bank of Hawaii (BOH), United Bankshares (UBSI), Trustmark (TRMK), Heartland Financial (HTLF), Sterling Bancshares (SBIB) and Capital City Bank Group (CCBG) to do exceedingly well and recommend them for your further research. If we fail to reinstate Glass-Steagall, these banks might still do quite well, but more as takeover candidates by money-center banks Too Big Too Fail, Too Stupid to Succeed Without Regularly Reaching Into Our Pockets.

Write your Congresspersons, every one. Tell them you will vote them out in a flash if they don’t immediately reinstate Glass-Steagall. I live at Lake Tahoe in Nevada, 10 minutes from the People’s Republic border. If I believe we can vote out Harry Reid, the man who gave Congressional ethics its standing as an oxymoron – and I do – and his cohorts to the far left of us on the map – and I do -- your representatives should be easy!

Author's Disclosure: We and/or clients for whom it is appropriate are currently long WL, BOH, UBSI and CCBG, and are buyers of all the others at the right price as we free up funds from other sectors.

The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.

Also, past performance is no guarantee of future results, rather an obvious statement if you review the records of many alleged gurus, but important nonetheless – for example, our Investors Edge ® Growth and Value Portfolio beat the S&P 500 for 10 years running but will not do so for 2009. We plan to be back on track on 2010 but then, “past performance is no guarantee of future results”!

It should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.