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I have recently launched a Kickstarter campaign to try to raise money to support my efforts to finish the first book of what will likely be a series on ‘Power Politics and the Empire of Economics’.
What I am asking of my readers is not only to consider donating to the project, but more importantly, to share and promote it through social media, by sending it to others who you think may be interested, and to help get the word out in any way you can!
Every bit helps, and a great deal of help is needed if this is to be successful!
I have collected below links to the campaign, as well as a video I made to promote it, and links to the sample introduction chapter that I published online so that potential patrons could read the kind of material that they would be supporting.
About the Project:
This book will tell the stories of the rich and powerful oligarchs and family dynasties who collectively rule our world: the global Mafiocracy, operating behind-the-scenes playing their games of power politics, globalization’s Game of Thrones where rich and influential families play their games, balancing collusion and cooperation with fierce competition to rule the world Empire of Economics.
In 1975, Henry Kissinger told President Ford: “The trick in the world now is to use economics to build a world political structure.”
This book is that story.
A small network of banks and other financial institutions dominate the global economy, its wealth and resources. This small network of corporate power functions as a global financial Mafia, complete with excessive criminal behaviour in laundering drug money, funding terrorists, rigging interest rates and manipulating markets.
Name a nation, and there are rich dynasties that rule behind the scenes. The Rockefellers in the United States, the Rothschilds in France and Britain, the Agnelli family in Italy, the Wallenbergs in Sweden, the Tata family of India and Oppenheimers of South Africa, the Koc and Sabanci families of Turkey, the Gulf Arab monarchs and the rich industrial families of Germany with dark Nazi pasts.
Germany once again rules Europe, with the European Union’s institutions of unelected technocrats undertaking a process of internal colonization as they impose their economic empire upon Greece, Spain, Italy, Ireland, Portugal and Cyprus. Finance ministers and central bankers are the agents of empire, cooperating closely with bankers, oligarchs and dynasties to create a world which best serves their interests. The global financial Mafia mingles with political leaders at forums and secret meetings like the Bilderberg group, the Trilateral Commission and the World Economic Forum.
From the streets of Athens, to Egypt, Turkey, Brazil, Spain, China, South Africa, Chile, Canada, and in the streets of Ferguson and Baltimore, people are rising up against exploitation, repression and domination.
This book is not simply a collection of stories of the ruling Mafiocracy; it is designed to encourage strategy among popular and revolutionary movements capable of creating something altogether new. It is time to do away with a world ruled by oligarchs, and save the species from itself. But first, we must know our world better.
Help me to complete the first book in a series on ‘Power Politics and the Empire of Economics’. For four years I have been doing my own research, scouring the archives of the New York Times, Wall Street Journal, Financial Times, government documents, official reports and corporate strategies, studying the world of power and empire, translating the political language of ‘economics’ into plain and simple English.
I have been published in multiple news sources, online and in print, interviewed by radio and television networks, and now I am asking for your help to raise $10,000 so that I can finish the first book in this series, to expose the Empire for all to see, its strengths as well as the weaknesses left exposed for us to exploit. Let us bring true democracy and an end to Mafiocracy. Help me to write this book, and together, let’s help each other to end the Empire.
Donate today. Thank you.
Andrew Gavin Marshall
Global Power Project: Bilderberg and the Global Financial Mafia
By: Andrew Gavin Marshall
11 December 2014
Originally posted at Occupy.com
In the previous Bilderberg article, I wrote that financial markets were “a type of global parasite with unprecedented power capable of determining the fate of nations and peoples.” In truth, the “super-entity” known as financial market power functions like a cartel, or an organized criminal network: a Mafia. This installment examines some of the members of the global financial mafia who are present at Bilderberg meetings and thus are given unparalleled access to political leaders behind closed doors.
At Bilderberg meetings, participants frequently include leading officials and advisers to banks like JPMorgan Chase, Goldman Sachs, Barclays, Deutsche Bank, HSBC and AXA, among others. The participation of leaders and advisers to these and other large financial institutions provides world leaders with direct, “private” access to some of the leading voices at the core of global financial markets. The interests and actions of financial markets can thus be articulated to the leaders of powerful political, media, military, intelligence and technocratic institutions. The “invisible hand” may voice where and when it might smack.
Through Bilderberg, leaders in financial markets are given an inside look at, and access to, those who shape and wield foreign and economic policy in the world’s most powerful nations. Their interests become a part of that process, just as geopolitical interests are integrated into the actions of financial markets. While financial markets command no armies, they determine the flow and functions of money upon which all armies are dependent, and to which nations are obedient. Bilderberg brings these institutions and individuals together for an off-the-record, private chat about global affairs and policy.
Martin Feldstein, who serves on the International Council of JPMorgan Chase, attended all but one Bilderberg meeting between 2010 and 2014. Feldstein is one of the most influential American economists over the past several decades, serving as a professor at Harvard, a member of the Group of Thirty, the Trilateral Commission, the International Advisory Board of the National Bank of Kuwait, and the Council on Foreign Relations. He advised President George W. Bush as a member of the Foreign Intelligence Advisory Board between 2007 and 2009, a position in which he was given access to top-secret intelligence information. He had previously served as one of Ronald Reagan’s chief economic advisers, and President Obama appointed him in 2009 to serve on the Economic Recovery Advisory Board, advising on how to manage the “recovery” following the financial crisis.
Feldstein’s views are well known. Relating to Europe’s debt crisis, for which Bilderberg meetings hold a great deal of significance, Feldstein wrote in the Financial Times in July of 2013 that governments that bowed to “popular political pressure” to lessen the brutal austerity measures widely seen as the cause of mass unemployment, poverty and social unrest, were at risk of facing rising interest rates and “a new fiscal crisis.”
In other words, if governments bend to the will of the people, financial markets will seek to bend them back. A “fiscal crisis” only takes place when creditors (financial markets) decide to stop funding the government. In Europe, nations are largely dependent upon banks to provide them with credit to function. Thus, if the heads of financial markets don’t like the policies of nations, they can cut off their funding, creating a major crisis and even collapsing the government. This leverage forces nations to follow policies favored by financial markets, such as austerity and various other “structural reforms.” Meanwhile, the policies combine to impoverish the population, enrich the elite, allow for mass exploitation of resources and labor, and consolidate control of the economy into the hands of relatively few, large global banks and corporations.
Another key Bilderberg member and leading figure in financial markets is Josef Ackermann, whom I have written about previously. Ackermann has been one of Europe’s most powerful bankers over the past decade, as the CEO of Deutsche Bank and a major power player throughout the debt crisis holding key leadership positions in large industry associations such as the Institute for International Finance (IIF).
The current chairman of the Bilderberg Group, Henri de Castries, is chairman and CEO of the French insurance giant, AXA, one of the top companies on the Swiss study’s list of the “super-entity” of banks and insurance giants. De Castries is also a member of the European Financial Services Round Table (EFR), a lobby group made up of the chairmen and CEOs of Europe’s largest financial institutions.
In 2012, the Financial Times referred to Henri de Castries as one of France’s “best known captains of industry,” having served as an unofficial adviser to former French President Nicolas Sarkozy, and been school classmates with the current President Francois Hollande. De Castries is considered “as establishment as you can get in France.”
In the wake of the European debt crisis, Henri de Castries supported the policies of austerity and structural reform, warning in 2012 that the crisis would continue for some time. He suggested that governments needed to learn how to “spend less” and the only way to “win back our competitiveness” was “through business investment and not by public spending,” adding: “What we need is a profound cultural change.”
Marcus Agius, a member of Bilderberg’s steering committee, is the chairman of PA Consulting, having previously served as the chairman of Barclays, the bank listed in the number one spot on the list compiled by the Swiss study. As chair of Barclays between 2007 and 2012, Agius also served as chairman of the British Bankers Association, was a director of the BBC from 2006 to 2013, and served as a Business Ambassador of the Trade and Investment Ministry of the British government. Agius also married the daughter of Edmund de Rothschild, bringing him into the family of one of the most prestigious and influential financial dynasties in the world.
Agius resigned from Barclays in 2012 as a result of the massive global financial fraud revealed by the Libor rate scandal, whereby some of the world’s largest banks – including Barclays – formed a cartel at the British Bankers Association to manipulate the interest rate at which banks lend to each other, influencing prices throughout the global economy. Despite the resulting scandal for Agius and others, which forced resignations in 2012, he stayed on the bank’s payroll as an adviser until March of 2014, a full 20 months following his official resignation.
Douglas J. Flint, who is chairman of HSBC, has attended every Bilderberg meeting since 2011. He is also chairman of the Institute of International Finance (IIF), and is a member of the European Financial Services Round Table (EFR), the Financial Services Forum, the International Monetary Conference (IMC), and serves on advisory boards to the Mayors of Shanghai and Beijing.
W. Edmund Clark, the chair of one of Canada’s largest banks, TD Bank, has attended every Bilderberg meeting since 2010.
Peter Sutherland has been a long-time Bilderberg participant, and serves as the chairman of Goldman Sachs International.
Robert Zoellick, former World Bank president and Bilderberg participant at every meeting between 2010 and 2014, now serves as the chairman of the Board of International Advisers of Goldman Sachs.
Peter R. Orszag, a Vice Chairman at Citigroup, attended Bilderberg meetings between 2010 and 2012.
The Vice Chairman of Goldman Sachs, J. Michael Evans, attended Bilderberg meetings in 2012 and 2013.
This is but a small sampling of some of the names of the leaders of financial institutions represented at Bilderberg meetings over the past few years. Apart from leading individual banks and financial institutions, many of the financiers who attend Bilderberg meetings simultaneously hold leadership positions within other large banking lobby groups, industry associations, and major international conferences.
For example, Bilderberg members and participants frequently hold simultaneous leadership positions at the Institute of International Finance (IIF), the International Monetary Conference (IMC), and the Group of Thirty (G30), all of which have been the focus of previous installments of the Global Power Project, as they have been profoundly influential organizations in their own right. The fact that so many leading figures in those organizations are leaders and participants in Bilderberg meetings lends extra weight to the importance of the meetings.
Roger Altman, a Bilderberg steering committee member and head of a large investment bank, wrote in a May 2013 article in the Financial Times that financial markets in the 21st century were “much more powerful than any government leader,” noting that the spread of austerity across Europe was not driven by Angela Merkel of Germany or other political leaders, but rather, by “private lenders… who declined to finance further borrowing by those countries,” and thus, “markets triggered the Eurozone crisis, not politicians.”
The views and the desires of bankers and financiers are important – and influential – precisely because if these individuals don’t get what they want, they wield the power in numbers on screens that can force the hands of even the most powerful governments and politicians. As such, the favored policies of bankers frequently become the implemented policies of states.
Andrew Gavin Marshall is a freelance writer and researcher based in Montreal, Canada.
Globalization’s Game of Thrones, Part 2: Managing the Wealth of the World’s Dynasties
By: Andrew Gavin Marshall
27 May 2014
In part 1 of this series (“Globalization’s Game of Thrones”) I examined the concept of corporate and financial dynasties holding significant power in the modern world. In this, part 2 of the series, I examine the realities of the ‘wealth management’ industry in being responsible for handling the wealth and investments of the world’s richest families, and the role of a unique institution dedicated to protecting and propagating dynastic wealth: the family office.
A Family Affair
In 2010, Forbes – a major financial publication which publishes an annual list of the world’s richest people – noted that the richest of the richest 400 Americans were members of prominent corporate and financial dynasties, with six of the top ten wealthiest Americans being heirs to prominent fortunes, as opposed to being ‘self-made’ billionaires. What’s more, since the financial crisis began in 2007 and 2008, the fortunes of these dynasties – and the other super-rich who made the Forbes list – had only increased in value.
Corporate America can frequently be seen as the emblem of the ‘self-made’ rich, a representation of a supposedly democratic, capitalist society, where firms are run by “professional managers” who received the right education and developed the appropriate talents to make successful companies. The reality, however, is that roughly a third of the Fortune 500 companies (that is, many of the world’s largest multinational corporations) are in fact “family businesses,” frequently run by family members, and often outperforming the “professionally managed” firms “by a surprisingly large margin,” noted the New York Times.
In other words, in the United States – the beacon of the ‘self-made’ millionaire – a huge percentage of the most successful companies are owned by family dynasties, and most of the richest individuals are heirs to these family dynasties. The picture that begins to emerge better reflects that of an aristocracy, rather than a democracy.
As the New York Times noted in 2010, “the increasing use of so-called dynasty trusts” was undermining the notion that America was a meritocracy (where people ‘rise through the ranks’ of society based upon merit instead of money, access or family lineage). Dynastic trusts allow super-rich families “to provide their heirs with money and property largely free from taxes and immune to the claims of creditors,” not only providing for children, but “for generations in perpetuity – truly creating an American aristocracy.” In laws that predate the formation of the United States as an independent nation, such family trusts were only able to limit the term of the existing trust to roughly 90 years, after which the property and wealth which was consolidated into the trust would be owned directly by the family members. However, in changes that were implemented through Congress in the mid-1980s and in state legislatures across the U.S. in the 1990s, the rules were amended – with the pressure of the banking lobby – to allow family trusts to exist “forever,” a quiet coup for the existing and emerging aristocratic American class.
Thus, the modern dynasty trust was officially sanctioned as a legal entity – a type of private family company – that would be responsible for handling the collective wealth – in money, property, land, art, equities (stocks), bonds (debt), etc. – of the entire family, for generation after generation. The focus is on long-term planning to maintain, protect and increase the wealth of the dynasty, and to hold it ‘in trust’ against the inevitable in-fighting that accompanies dynastic succession and generational differences. This would prevent – in theory – one generation or patriarch from mishandling and squandering the entire family fortune.
The legal structure of a family trust differs greatly from public corporations, in that their focus is not on maximizing short-term quarterly profits for shareholders, but in maintaining multi-generational wealth and prestige. Family trusts are increasingly used to manage the wealth of the world’s super-rich dynasties, alongside private banking institutions and other wealth management and consulting firms. There is an entire industry dedicated to the management of money, wealth and investments for the super-rich, and it is focused largely – and increasingly – on family dynasties.
Of Rockefellers and Rothschilds
One of the world’s most famous family trusts – the “family office” – is that of Rockefeller & Co., now known as Rockefeller Financial. It was founded in 1882 by the oil baron industrialist John D. Rockefeller as the ‘family office’ to manage the Rockefeller family’s investments and wealth. Roughly a century after it was founded, in the 1980s, Rockefeller & Co. began selling its ‘expertise’ to other rich families, and by the year 2008, the trust had roughly $28 billion under management for multiple clients.
When the CEO of Rockefeller & Co., James S. McDonald, shot himself in an alley behind a car dealership in 2009, the family looked for and found a successor in the former Undersecretary of State for Economic, Energy, and Agricultural Affairs for the Bush administration, Rueben Jeffery III, a former partner at Goldman Sachs. Jeffery was responsible for handling the family’s wealth throughout the global financial crisis, and by 2012, the assets under management by Rockefeller Financial had grown to $35 billion.
As of late 2012, Rockefeller & Co. had approximately 298 separate clients, providing them with “financial, trust, and tax advice.” The typical clients for Rockefeller & Co. are families with more than $30 million in investments, and the group charges new clients a minimum annual fee of $100,000. However, the family office has increasingly been attracting clients beyond other family dynasties, including major multinational corporations awash with cash in a world where nation states are flooded in debt. David Harris, the chief investment officer of Rockefeller Financial, explained in a 2012 interview with Barron’s (a magazine for the super-rich), that as the world’s nations were stuck in a debt crisis, triple-A rated multinational conglomerates represented “the new sovereigns” with “unprecedented” amounts of cash to be invested.
And while prominent family trusts have become increasingly attractive for other rich families and institutions to handle their wealth, they have also become attractive investments in and of themselves. One of Europe’s largest banks, the French conglomerate Société Générale (SocGen) purchased a 37% stake in Rockefeller & Co. in June of 2008. However, with the European debt crisis, the bank had to cut a great deal of its assets, and so in 2012 Rueben Jeffery III managed the sale of the 37% stake in the Rockefeller enterprise from SocGen to RIT Capital Partners, the investment arm of the London Rothschild family, one of the world’s most famous financial dynasties.
Barron’s magazine noted that the official union of these two major financial dynasties “should provide some valuable marketing opportunities” in such an uncertain economic and financial landscape, where “new wealth” from around the world would seek “to tap the joint expertise of these experienced families that have managed to keep their heads down and their assets intact over several generations and right through the upheavals of history.”
Early in 2012, the Rothschild family, with various banks and investment entities spread out across multiple European nations and family branches, was making a concerted effort to begin the process of “merging its French and British assets into a single entity,” aiming to secure “long-term control” over the family’s “international banking empire,” reported the Financial Times. The main goal of the merger was “to cement once and for all the family’s grip on the business,” giving the family a 57 percent share in the voting rights, thus protecting the merged entity from hostile takeovers. Thus, as the Rothschild banking dynasty was seeking to consolidate its own family interests across Europe, they were simultaneously looking to expand into the U.S. through the Rockefellers.
Thus, when Lord Jacob Rothschild – who managed the British Rothschild’s family trust, RIT Capital Partners – announced that RIT would be purchasing a 37% stake in Rockefeller Financial Services in May of 2012 for an “undisclosed sum,” it was announced as a “strategic partnership” that would allow the Rothschilds to gain “a much sought-after foothold in the US,” representing a “transatlantic union” that officially unites the two family patriarchs of David Rockefeller and Jacob Rothschild, “whose personal relationship spans five decades.”
At the time of the announcement, David Rockefeller, who was then 96-years-old, commented that, “Lord Rothschild and I have known each other for five decades. The connection between the two families is very strong.” Rockefeller & Co.’s CEO, Rueben Jeffery III, declared that, “there is a shared vision, at the conceptual and strategic level, that marrying the two names with particular products, services, geographic market opportunities, can and will have resonance. These are things we will want to act on as this partnership and overall relationship evolves.” In a world where families hold immense wealth and power, the official institutional union of two of the world’s most famous and recognizable dynastic names makes for an attractive investment for newer dynasties seeking propagation and preservation.
The Family Office
As the Financial Times noted in 2013, the “family office” for the world’s wealthy dynasties, which had “long been cloaked in a shroud of secrecy as rich families have sought to keep their personal fortunes private” has become more popular with “the explosion of wealth in the past few decades and dissatisfaction with the poor performance of portfolios handled by global private banks.” Still, many so-called “single family offices” continue to operate in secrecy, managing the wealth of a single dynasty, but the emergence of “multi-family offices” (MFOs) has become an increasing trend in the world of wealth management, handling the wealth and investments of multiple families.
The world’s largest private banks have specific “family office arms” which are dedicated to managing dynastic wealth, and these banks continue to dominate the overall market. Bloomberg Markets published a list of the top 50 MFOs in 2013, with HSBC Private Wealth Solutions topping the list, advising assets totaling $137.3 billion, with other banks appearing on the top ten list such as BNY Mellon Wealth Management, Pictet and UBS Global Family Office. Despite the fact that the family office arms of the world’s top private banks dominate the list, many of the oldest family offices made the list, such as Bessemer Trust and Rockefeller & Co. A top official at HSBC Private Bank was quoted by the Financial Times as saying: “Very wealthy families are becoming more and more globalized. It’s not just the fact that they are acquiring assets – like real estate – in several jurisdictions, but family members are scattered around the globe and need to be able to transact in those countries.” In effect, we are witnessing the era of the globalization of family dynasties.
Such a view is shared by Carol Pepper, a former financial adviser and portfolio manager at Rockefeller & Co. who established her own consulting firm – Pepper International – in 2001, specializing in advising families with more than $100 million in net worth. In a 2013 interview with Barron’s, Pepper explained that with the globalization of higher education – where the super-rich from around the world send their children to the same prominent academic institutions – as well as with the emergence of associations designed to bring wealthy families together, “the 19th century [is] coming back,” referring to the era of Robber Baron industrialists and co-operation between the major industrial and financial fortunes of the era. Pepper explained that in the present global environment, she was witnessing “a lot more exchange of ideas among wealthy families from different countries than there ever was before,” with such families increasingly investing in and with each other, noting that “inter-family transactions” had increased by 60% in the previous two years.
The globalization of family dynasties and the ‘return’ to the 19th century is an institutional phenomenon, facilitated by elite universities, business and family associations, international organizations, conferences and other organizations. Thus, regardless of geographic location, the world’s wealthiest families tend to send their children to one of a list of relatively few elite universities, such as Wharton, Harvard or the London School of Economics. At these and similar schools, noted Carol Pepper, the future heirs of family fortunes attain “both the know-how and the contacts for forging overseas collaborations between family businesses.”
So-called ‘non-profit’ associations like the International Family Office Association, the Family Business Network, and ESAFON, among others, are institutional representations of “intentional efforts by rich clans to rub shoulders with one another.” Instead of a rich family in one region hiring an outside firm to introduce them to a new market, they simply are able to reach out directly to the wealthy families within that market, and, as Pepper explained, their interests will be increasingly aligned and “hopefully you’ll all make money together.”
Instead of relying on banks as intermediaries between markets, rich families with more than $47 million to invest are pooling their wealth into the multi-family offices (MFOs). The Financial Times explained that such wealthy families were “crying out for something financial institutions have singularly failed to provide: a one-stop shop to manage both their business and personal interests.” Further, as banks have been coming under increased scrutiny since the financial crisis, “there is still a clandestine nature to the family-office world that will continue to attract clients.” Explaining this, the Financial Times appropriately quoted advice by the character Don Corleone from The Godfather, when he told his son: “Never tell anybody outside the family what you’re thinking.”
As the Wall Street Journal noted, family offices “are private firms that manage just about everything for the wealthiest families: tax planning, investment management, estate planning, philanthropy, art and wine collections – even the family vacation compound.” As such, regardless of where many family fortunes are made, the family office has come to represent the central institution of modern dynasties. And the growth of multi-family offices has been astounding, with the number increasing by 33% between 2008 and 2013, with more than 4,000 in the United States alone, the country with the highest number of wealthy families and individuals, including 5,000 households that have more than $100 million in assets. The Wall Street Journal noted: “You don’t have to be a Rockefeller to join a family office.” However, it does help to have hundreds of millions of dollars.
In 2012, the list of the largest multi-family offices were largely associated with major banks, including HSBC, BNY Mellon, UBS, Wells Fargo and Bank of America, but Rockefeller Financial maintained a prominent position as the 11th largest multi-family office (according to assets under advisement and number of families being served). And beyond the specific arm of the ‘multi-family office’ to the list of the top wealth management groups as a whole, private bank branches of some of the world’s most recognizable bank names dominated the list: Bank of America Global Wealth & Investment Management, Morgan Stanley Smith Barney, JPMorgan, Wells Fargo & Company, UBS Wealth Management, Fidelity, and Goldman Sachs, among others. However, after the top 19 wealth management companies in the world – all of which were arms of major global banking and financial services conglomerates – came number twenty on the list: Rockefeller Financial.
Indeed, things have never been better for the super-rich. A 2012 poll of 1,000 wealthy Americans by the Merrill Lynch Affluent Insights Survey revealed that 58% of respondents felt more financially secure in 2012 than they did the previous year. In 2013, U.S. Trust, the private banking arm of Bank of America, released a survey of 711 individuals with more than $3 million in investable assets, of whom 88% reported that they were more financially secure today than they were before the financial crisis in 2007. Further, the main goal for the super-rich in 2013 was reported to be “asset appreciation” as opposed to “extreme caution”, as the survey reported for 2012.
In 2013, Bloomberg Markets Magazine reported that the number of wealthy people in the world with more than $1 million in investable assets had increased by 9.2% over 2012, reaching a new record of 12 million individuals, and the assets by the rich increased by roughly 10%, reaching a combined total of roughly $46.2 trillion. With this growth in extreme wealth, the wealth management business is itself becoming a major growth industry, with independent firms competing against the big banks in a race to manage the spoils of the world’s super-rich.
And the world’s big banks want to get more of this investable wealth. For example, Goldman Sachs has boosted its private wealth management services. The number of partners at the bank working in asset management in 2010 represented 4.5% of the bank’s total partners, a number which grew to 12% by 2012. Tucker York, the head of private wealth management in the U.S. for Goldman Sachs, noted: “This is a relationship business, and long-term relationships matter… The focus for us is to have the right quality and caliber of people come into the business and stay in the business for a long, long time.”
The managing director and chief investment officer of Goldman Sachs’ private wealth management arm, Mossavar-Rahmani, told Barron’s in 2012: “This is the time to be a long-term investor… There are very few market participants in today’s environment who can truly be long-term investors. Who can really afford to be a long-term investor? The ultra-high-end client is the only one we could think of, because they generally have more money than their spending needs.” In addition, he noted, “their assets are multigenerational,” and, what’s more, “they are not accountable to anyone.”
In a world of immense inequality, with the super-rich controlling more wealth than the rest of humanity combined, the wealth management industry – and within it, the ‘family office’ – have become growth industries and increasingly important institutions. The whole process of globalization has facilitated not only the internationalization of financial markets, multinational corporations and the economies they dominate, but it has in turn facilitated the globalization of family dynasties themselves, whose wealth is largely based on control over corporate and financial assets and institutions.
In globalization’s ‘Game of Thrones’, the world’s super-rich families compete and cooperate for control not simply over nations, but entire regions and the world as a whole. As dynasties seek perpetuation, most people on this planet are concerned with survival. Whoever wins this ‘Game of Thrones,’ the people lose.
The research for this series has been undertaken as part of The People’s Book Project. For this – and similar – research to continue, please consider making a donation today:
Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.
Global Power Project, Part 9: Banking on Influence With Morgan Stanley
By: Andrew Gavin Marshall
Originally published at Occupy.com
Morgan Stanley, one of the largest banks in the United States, reported a 66% increase in earnings in July over the same period last year. Morgan Stanley had taken more than $107 billion of U.S. taxpayer money through the bailout programs in the wake of the financial crisis that it helped to create, making it the largest U.S. recipient of bailout funds.
Like the other big banks, Morgan Stanley had been busy paying settlements for the massive criminal fraud conspiracies it engaged in, particularly related to the housing crisis. In 2011, the banks came to a $40 million settlement with the state of Nevada over mortgage fraud.
In 2012, Morgan Stanley paid a settlement of $4.8 million regarding electricity price-fixing charges leveled against the bank in New York State, costing consumers roughly $300 million, after generating $22 million in revenue for the bank. In a settlement over foreclosure fraud in 2013, the bank along with Goldman Sachs agreed to pay $557 million to more than 200,000 homeowners who had been foreclosed on.
A former real estate executive for Morgan Stanley pleaded guilty in 2012 to violating anti-corruption laws, and was “charged with secretly acquiring millions of dollars’ worth of property investments for himself and a Chinese government official.” In 2012, one Morgan Stanley executive was charged with a hate crime for using racial slurs and stabbing a cab driver of Egyptian descent, after having refused to pay the cab fare.
And yet it’s not simply enough for this financial behemoth to defraud the American public and profit from the economic crisis it helped create. It has also managed to profit from increasing hunger and land grabs across the so-called Third World. As big banks speculate on food prices, they drive the costs of food up, sparking food riots and increasing hunger across much of the world while making banks a nice profit in the process.
The three financial institutions most active in food speculation are Barclays, Goldman Sachs and Morgan Stanley. Thus, as millions more people get pushed into hunger, rest assured: Morgan Stanley will be there to swoop up the profits, as untold numbers of people get displaced and foreign investors purchase their lands at giveaway prices. In just one example, Morgan Stanley bought 40,000 hectares of land in Ukraine.
Thus, based on mortgage fraud, the housing crisis, bailouts, the food crisis and the great global land grabs, it’s fair to say that Morgan Stanley is a bank seeking profits at the expense of people, the environment and the world at large. The Global Power Project investigated 24 individuals on both the executive committee and board of directors of Morgan Stanley. The most highly represented institution shared by elites at Morgan Stanley is the Council on Foreign Relations, with six individual affiliations between the two organizations.
It is followed by four mutual affiliations with McKinsey & Co., and three affiliations each between the bank and the former Merrill Lynch (now owned by Bank of America), Columbia University, the Brookings Institution, and the Peterson Institute for International Economics. Further, the bank has two individual affiliations with each of the following: the World Economic Forum, the Business Council, Merck & Co., President Obama’s Economic Recovery Advisory Board, PricewaterhouseCoopers (PwC), the Conference Board, the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Financial Group, Stanford University and Alcoa.
Meet the Elites
James P. Gorman is Chairman and CEO of Morgan Stanley, a former executive at Merrill Lynch, and a former Senior Partner at McKinsey & Co. He is a current member of the Board of Overseers of Columbia Business School, a member of the Business Council, the Partnership for New York City, the Financial Services Forum, the board of directors of the Institute of International Finance, and the International Advisory Panel of the Monetary Authority of Singapore.
Klaus Kleinfeld is on the board of directors of Morgan Stanley, and is Chairman and CEO of Alcoa, the world’s leading aluminum producer. Kleinfeld is also the former CEO of Siemens and a former director of Citigroup. He is a member of the Supervisory Board of Bayer AG, Chairman of the Board of the U.S.-Russia Business Council, a Trustee of the Conference Board, and a member of the Business Roundtable, the Board of Trustees of the Brookings Institution, the International Business Council of the World Economic Forum, the board of directors of the World Economic Forum USA, the board of directors of the U.S. Chamber of Commerce, and the Steering Committee of the Bilderberg Meetings.
Hutham S. Olayan is Senior Executive Director of the Olayan Group, President and CEO of Olayan America Corporation, and is a Trustee of the American University of Beirut. She is a member of the board of directors of the Peterson Institute for International Economics, a member of the International Board of the U.S.-Middle East Project, and a member of the International Advisory Council of the Brookings Institution. She is founding member of the Arab Bankers Association of North America, a member of the board of the MasterCard Foundation, a member of the International Advisory Board of the Blackstone Group, a member of the boards of Georgetown University and the Memorial Sloan-Kettering Cancer Center and is a Counselor of the Conference Board. Olayan is a member of the Advisory Council of the Carnegie Middle East Center and is a member of the Council on Foreign Relations.
James W. Owens is the former Chairman and CEO of Caterpillar, and a member of the board of directors of IBM, Alcoa and the Council on Foreign Relations. Owens is also Chairman of the Executive Committee of the Peterson Institute of International Economics, a Senior Advisor to Kohlberg Kravis Roberts & Co. (KKR), a former Chairman of the Executive Committee of the Business Council, and a former member of President Obama’s Economic Recovery Advisory Board. He is currently a member of the Board of Trustees of North Carolina State University.
Laura Tyson, who sits on the board of Morgan Stanley, is Professor of Global Management at the Walter A. Haas School of Business at the University of California Berkeley, and is former Dean of the London Business School and former Dean of Haas Business School. Tyson was the former National Economic Adviser to President Clinton from 1993 to 1996 and was a member of President Clinton’s National Security Council and Domestic Policy Council, as well as Chair of the White House Council of Economic Advisers. Tyson was director of the Council on Foreign Relations from 1997 to 2007, where she remains as a member, and is also a member of the MIT Corporation, as well as a former member of President Obama’s Economic Recovery Advisory Board. A Senior Advisor to McKinsey Global Institute, Credit Suisse Research Institute, The Rock Creek Group, and a Senior Fellow of the Center for American Progress, Tyson is currently a member of President Obama’s Council on Jobs and Competitiveness and has been a member of the Foreign Affairs Policy Board to the U.S. Secretary of State since 2011. She is also a member of the Advisory Council of the Brookings Institution Hamilton Project, a member of the board of AT&T, a former member of the board of Eastman Kodak Company from 1997 to 2011, and a member of the board of CB Richard Ellis and Silver Spring Network. Tyson is additionally a former director of New America Foundation, a former member of the board of the Peterson Institute of International Economics, and currently sits as a member of the Committee on Capital Markets Regulation, the Global Agenda Council of the World Economic Forum, the advisory board of Generation Investment Management and H&Q Asia Pacific, as well as a member of the National Academies’ Board on Science, Technology and Economic Policy and on the board of directors of the Committee for Responsible Federal Budget.
At Morgan Stanley, like elsewhere among the big Wall Street banks, an elite class of individuals connected through their institutional affiliations and social groups exert incredible influence over finance, corporations, the government, media, policy, educational institutions and global society at large. Regardless of the immense suffering that Morgan Stanley and its like institutions inflict on the world, so long as it is able to profit from that suffering, it considers itself safe and secure.
Too big to fail. Too big to jail. Too cancerous to care.
Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project, and hosts a weekly podcast show with BoilingFrogsPost.
Global Power Project, Part 5: Banking on Influence With Goldman Sachs
By: Andrew Gavin Marshall
Originally posted at Occupy.com
Anyone who has paid even minimal attention to the global economic and financial crises gripping the world since 2007 has heard the name Goldman Sachs.
One of the largest banks in the United States, Goldman Sachs was central to the process of creating the housing bubble that popped in 2007-8, which led to the largest economic crisis since the Great Depression. As Matt Taibbi famously documented in Rolling Stone, Goldman has been involved in “every major market manipulation since the Great Depression,” profiting along the way as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Let’s go back to a little history.
In 2006 and 2007, as Goldman was selling high risk securities on home mortgages worth $40 billion, it was simultaneously betting against the housing market, ensuring that as the housing market crashed, the bank would make a significant profit. Thus, “the nation’s premier investment bank pass[ed] most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.”
In late 2007, as the mortgage crisis was accelerating, executives at Goldman Sachs sent each other emails explaining that they would make “some serious money” betting against the housing market. Like a self-fulfilling prophecy, the bank helped the market crash harder and faster.
A U.S. Senate investigation into Goldman Sachs concluded that the bank “profited from the financial crisis [which it helped cause] by betting billions against the subprime mortgage market, then deceived investors and Congress about the firm’s conduct,” and referred the Securities and Exchange Commission (SEC) and the U.S. Justice Department to investigate the bank for criminal or civil action.
As Goldman’s CEO Lloyd Blankfein himself stated: “We focused a lot of ourselves on trying to benefit from the crisis that happened… we were going to use that opportunity to make ourselves a better firm.”
In 2012, however, President Obama’s Justice Department announced that it would not pursue criminal charges against the bank. This, after the bank received over $12 billion in bailouts from the U.S. government to save the bank from the crisis that it created and profited from.
This, after Goldman Sachs helped create the Greek debt crisis for which entire populations of European countries are being punished into poverty while allowing the bank (among other banks) to continue to profit from the deepening depression and crisis in Europe.
This, after Goldman Sachs (along with other investment banks) helped create a global food crisis by speculating on food prices, sending the prices sky-high, then making immense profits while tens of millions of people around the world were pushed into hunger and starvation.
Obama’s decision not to prosecute the bank, of course, had nothing to do with the fact that Goldman Sachs was one of the top contributors to the Obama campaign in 2008 and again to his re-election campaign in 2012.
CEO Blankfein turned more heads when he told CBS News in November of 2012: “You’re going to have to undoubtedly do something to lower people’s expectations – the entitlements and what people think that they’re going to get, because it’s not going to – they’re not going to get it.” Suggesting that benefits like social security, Medicare and Medicaid were providing too much “support” to everyday people, Blankfein explained that “entitlements have to be slowed down and contained… because we can’t afford them.”
Apparently, the fact that Goldman Sachs received more than $10 billion in government welfare in exchange for its role helping to create a national and global financial crisis did not strike Blankfein as hypocrisy. The lesson he imparted: there is plenty of money to support the bank but not old-age pensioners. Because as Blankfein lectured the public about its need to “lower expectations” and lose its social benefits, bonuses for Wall Street executives were going up, with Goldman Sachs’s bonuses and salaries for 2012 topping $13 billion.
Goldman’s Reach into Other Institutions
For the Global Power Project, we examined a total of 83 individuals at Goldman Sachs, including executives, the board of directors, and several advisory boards. The most highly represented institution was Harvard University, where 12 (or 14%) of the 83 individuals hold leadership positions.
Following Harvard was the Council on Foreign Relations, where 10 Goldman Sachs representatives are members. The University of Pennsylvania and the World Economic Forum each have five individuals sharing leadership positions with the bank; four individuals are affiliated with the Bilderberg Meetings, four with Columbia University; and three with the Federal Reserve Bank of New York, the Brookings Institution, Rockefeller University, the Nature Conservancy, the Securities Industry Association, and the World Bank.
And the list goes on from there, as Goldman Sachs shares two individual leadership positions or affiliations with Tsinghua University, Cornell University, the Partnership for New York City, Wal-Mart, the Aspen Institute, New York University, Fannie Mae, Yale University, the Carnegie Endowment for International Peace, the American Academy of Arts and Sciences, Credit Suisse, Oxford, Barnard College, Prudential, the Bank of England, EastWest Institute, the London School of Economics, the Trilateral Commission, DiamlerChrysler, the OECD, the Central Park Conservancy, the Museum of Modern Art, Caterpillar, the International Rescue Committee and the Asia Society. The bank also includes two former European Commissioners.
Goldman Sachs shares one leadership position – past or presently – with the following institutions: the Financial Services Forum, Catalyst, the Monetary Authority of Singapore, Stanford, Investor AB, Stockholm School of Economics, the President’s Foreign Intelligence Advisory Board, George W. Bush’s National Economic Council, ExxonMobil, Novartis, Honeywell International, Target, UnitedHealth Group, Perseus, EADS, PepsiCo, Royal Philips Electronics, Zurich Financial, PricewaterhouseCoopers, BP, Allianz, European Round Table of Industrialists, Royal Bank of Scotland, HSBC, Siemens, the Bank of Spain, IMF, the Group of Thirty, the Population Council, the European Central Bank, Princeton, Soros Fund Management, New York Stock Exchange, the Ford Foundation, Google, BHP Billiton, and the People’s Bank of China, among many others.
Meeting the Elites
There are several individuals holding leadership positions with Goldman Sachs who represent what we refer to as the global ruling class – or global plutocracy – by virtue of their multiple positions on numerous boards and advisory groups, think tanks, educational institutions, and other important institutions of influence, giving them unparalleled access to policy-makers around the world.
Let’s start with Goldman CEO Lloyd Blankfein, who has been chairman and CEO of the bank since 2006, and who is also a member of the Dean’s Advisory Board of Harvard Law School, a member of the Dean’s Council of Harvard University and is a member of the Advisory Board of Tsinghua University School of Economics and Management. Blankfein is also a member of the Board of Overseers of Weill Medical College at Cornell University, the board of directors of the Partnership for New York City, and is a member of the Council on Foreign Relations and the International Advisory Committee of the Federal Reserve Bank of New York. He is additionally a member of the board of Catalyst, Chairman of the Financial Services Forum and is a member of the International Advisory Panel of the Monetary Authority of Singapore.
Stephen Friedman is on the board of directors of Goldman Sachs and has been Chairman of Stone Point Capital since 2005. He was previously Chairman of President George W. Bush’s Intelligence Advisory Board and Intelligence Oversight Board from 2006 to 2008, and was Chairman of the Federal Reserve Bank of New York between 2008 and 2009. Friedman was also the Assistant to the President for Economic Policy and Director of the National Economic Council in George W. Bush’s White House from 2002 to 2004, and was previously the Chairman of Goldman Sachs. He is a Trustee of the Memorial Sloan-Kettering Cancer Center, a Trustee of Columbia University, a Trustee of the Aspen Institute, a former director of Wal-Mart and Fannie Mae, and is a member of the board of advisers of the Center for New American Security and the board of directors of the Council on Foreign Relations.
Also on the board of Goldman Sachs is Lakshmi N. Mittal, a director of ArcelorMittal, the world’s largest steel company, and is also a director of the European Aeronautic Defense and Space Company (EADS) N.V., as well as a member of the International Business Council of the World Economic Forum. He is a member of the Advisory Board of the Kellogg School of Management, a member of the Executive Committee of the World Steel Association, a member of the Foreign Investment Council of the Government of Kazakhstan, a member of the Indian Prime Minister’s Global Advisory Council, a member of the International Advisory Board to the President of Mozambique, and a member of the Domestic and Foreign Investors Advisory Council to the President of the Ukraine.
The Chairman of Goldman Sachs International is Peter D. Sutherland, former Attorney General of Ireland from 1981 to 1984, who was European Commissioner for Competition Policy in the EU from 1985 to 1989, after which he was Chairman of Allied Irish Banks from 1989 to 1993. Between 1990 and 1995, Sutherland was Chairman of the European Institute of Public Administration, and was the Director-General of the General Agreement on Tariffs and Trade (GATT) from 1993 and the first Director-General when it became the World Trade Organization (WTO), which he led until 1995. Sutherland was the Chairman of BP from 1997 to 2009, the former CEO of Ericsson, a former Director of the Royal Bank of Scotland, and former Chairman of the General Assembly and President of the Advisory Council of the European Policy Center. Sutherland was additionally the former European Chairman of the Trilateral Commission from 2000 to 2009, and remains at the Trilateral Commission as a member and Honorary European Chairman. He was previously the Vice Chairman of the European Round Table of Industrialists, from 2006 to 2009. He is a member of the Foundation Board of the World Economic Forum, the Supervisory Board of Allianz SE, a member of the boards of BW Group and Koc Holding, and President of the Federal Trust. He is a former member of the Council of International Advisors to the Chief Executive of Hong Kong, ia member of the Board of Directors Emeriti of the European Institute, and is on the International Advisory Board of BritishAmerican Business. Sutherland is also the Special Representative of the Secretary-General of the UN for Migration and Development and has been the Consultor of the Extraordinary Section of the Administration of the Patrimony of the Apostolic See (financial adviser to the Pope).
Senator Judd Gregg, a member of the International Advisory Board of Goldman Sachs, is a former member of the U.S. House of Representatives from 1980 to 1988, former Governor of New Hampshire from 1989 to 1993, and a U.S. Senator from 1993 to 2011. As a Senator, Gregg was the Chief Negotiator for the Emergency Economic Stabilization Act of 2008 (the bailout bill), and is a member of President Obama’s Bipartisan National Commission on Fiscal Responsibility and Reform. He is also a Senior Adviser to New Mountain Capital, and is on the boards of IntercontinentalExchange and Honeywell International.
Another member of Goldman Sachs’ International Advisory Board is Lord Griffiths of Forestfach, a member of the British House of Lords and member of the board of directors of Times Newspaper Holdings Ltd and Telereal Trillium. He is Vice Chairman of Goldman Sachs International, was a former Professor at the London School of Economics, former Dean at City University Business School, and was a director of the Bank of England from 1983 to 1985. Between 1985 and 1990, he was the head of Prime Minister Margaret Thatcher’s Policy Unit, where he “was a chief architect of the government’s privatization and deregulation programs.” In 2009, following a record-breaking $22 billion that was given out to Goldman Sachs executives and leadership in payment and bonuses, Lord Griffiths told a British audience that they should “tolerate the inequality as a way to achieve greater prosperity for all.”
Victor Halberstadt, a member of the International Advisory Board of Goldman Sachs, is also a Professor of Economics at Leiden University in the Netherlands, and former Crown-Member of the Netherlands Social-Economic Council. He is former Chairman of the International Advisory Board of DiamlerChrysler, former advisor to the Secretary-General of the OECD, former member of the Council on Defence for the Government of the Netherlands, and former Informateur to the Queen of the Netherlands, as well as the former President of the International Institute of Public Finance. Halberstadt is a former Honorary Secretary-General of the Bilderberg Meetings, where he remains as a member of the Steering Committee, and is a director of ING Group, Stork, DiamlerChrysler, KPN and PA Consulting Group. He is a member of the board of Koc University, the Lee Kuan Yew School for Public Policy in Singapore, and a member of the Board of Trustees of the Population Council. He is additionally Chairman of the Board of the American European Community Association (AECA), a member of the board of the Netherlands Opera and is a member of the Faculty of the World Economic Forum.
A Senior Director of Goldman Sachs is John C. Whitehead, who was former U.S. Deputy Secretary of State in the Reagan administration from 1985 to 1989, the founding Chairman of the Lower Manhattan Development Corporation, and was an employee, partner, Co-Chairman and Senior Partner for Goldman Sachs between 1947 and 1976. He is a former member of the board of directors of the New York Stock Exchange, former Chairman of the Securities Industry Association, former Chairman of the Board of the Federal Reserve Bank of New York, former Chairman of the United Nations Association, the International Rescue Committee, International House, the Andrew W. Mellon Foundation, and former Chairman of the Harvard Board of Overseers. Whitehead is an Honorary Life Trustee and former Chairman of the Asia Society, Chairman Emeriti of the International Rescue Committee, a former director of the Nature Conservancy, a board member emeriti of the Watson Institute for International Studies and a director emeriti of the EastWest Institute. He is former Chairman of the Hungarian-American Enterprise Fund, a former member of the Steering Committee of the Bilderberg Meetings, Chair Emeriti of the Brookings Institution, a Commissioner of the Global Commission on Drug Policy, a member of the board of the National September 11th Memorial and Museum at the World Trade Center and is a member of the Council on Foreign Relations.
It’s not surprising that with individuals like Stephen Friedman, Peter Sutherland and John C. Whitehead holding leadership positions with Goldman Sachs, the bank has established a highly influential network of affiliations with some of the world’s major institutions and policy-makers. The “vampire squid” has indeed spread its tentacles far beyond mere financial influence; through its affiliations with global plutocrats who serve on its boards, Goldman is a cosmopolitical conglomerate with ever-expansive power.
Even mother nature can’t seem to take on Goldman Sachs. When Hurricane Sandy hit New York City in November of 2012, power was knocked out for more than 1 million New Yorkers. But the bank’s 200 West Street headquarters were shining bright, “lights glowing and music playing.” With heaps and sandbags surrounding the building and generators running, Goldman sent off a lone, ominous blue glow into the stormy night: a symbol to all that even in the worst of circumstances, amid a sea of human suffering, Goldman Sachs remains ever present, lights on…doing business and making money.
Andrew Gavin Marshall is a 26-year old independent researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, head of the Geopolitics Division of the Hampton Institute, the research director of Occupy.com’s Global Power Project, and has a weekly podcast with BoilingFrogsPost.
Cash Hoarding, Tax Evasion, and the Corporate Coup
By: Andrew Gavin Marshall
The following is Part 3 of my three-part exclusive series for Occupy.com
Corporate profits are good, right? Low taxes on corporations are also good, right? With high profits and low taxes, corporations have large amounts of money to “invest” in new businesses and jobs, meaning everyone else benefits. This is what we are told by politicians, it is what the majority of economists are taught to think, and it’s what corporate executives and their spokespeople say constantly so therefore it must be true…right?
Let’s get a reality check.
With record-breaking profits and record-low taxes, the truth is that corporations around the world have been hoarding record-high amounts of cash while finding legal loopholes to pay less, or none, of their taxes.
Holding trillions of dollars in cash would, in theory, allow corporations to invest in new businesses and create jobs: the old promise of trickle down economics. Instead, corporations have decided to firmly hold on to their cash, perhaps in preparation for the next financial crisis (which their refusal to invest in new opportunities and jobs is helping to create).
Or perhaps the executives are only waiting for our standards of living to decline far enough that austerity and “adjustment” policies produce desirable “investment environments” like those in existence across the “Third World,” where unhindered corporate plundering and exploitation is the norm.
In 2010, Apple recorded roughly $13 billion in foreign profits but paid a negligible $130 million in taxes, par for the course for giant corporations. The result of Apple and other multinationals getting away with tax loopholes means disastrous consequences for governments. Google, for example, is able to move its billions in profits out of Europe, paying almost no taxes there as it deposits the revenues into the company’s administrative headquarters in Bermuda, where there is no corporate income tax.
Tax havens and loopholes allow corporations to move around globally, creating a problem for national governments that seek to tax corporations at higher rates by establishing a “race to the bottom” in competition for reduced corporate taxes. Belgium, for example, with one of the highest corporate tax rates in the world, at roughly 34%, collects far less from companies due to its own tax loopholes.
The average tax rate for the 50 most profitable companies in Belgium – which totaled some 27 billion euros in profits in 2010 – was a mere 1.04%. Thus, as the government considers establishing a “minimum tax rate” of 12.5% to ensure revenue for the debt-ridden country, others fear that establishing such a rule would simply lead to corporations leaving the country and migrating to other tax havens across Europe.
As reported in Der Spiegel, “[a]n international treaty could prevent corporations from outsmarting countries,” however, “so far not even the European Union has been able to harmonize the rules of its member states.” Obviously, such an endeavor is not high on the priority list for European and international decision makers, which is hardly surprising since their main interest is in serving global corporations and banks.
At the same time that reports emerged last fall about major European and international corporations avoiding taxes, the Wall Street Journal wrote in November of 2012 that the continent’s biggest banks were “continuing to stash more money at central banks” rather than investing it, hoarding a combined total of $1.43 trillion in cash on reserve at several central banks.
Since 2010, the major banks have increased their cash hoarding by 84%. French bank Société Générale reportedly held 81 billion euros ($103 billion) at central banks in the third quarter of 2012.
This hoarding frenzy is happening even as banks across Europe continue to receive national and international bailouts, while demanding that countries further impoverish their populations through austerity measures so as to pay back their bad debts. This is a year after the European Central Bank provided 1 trillion euros to the continent’s banks in short-term cheap loans, supposedly “to jump-start lending to the businesses, individuals and other financial institutions.”
As the Wall Street Journal stated bluntly: “Across Europe, corporations are sitting on a mountain of cash.” Despite their massive reserves of cash, major corporations aren’t spending, and thus “one possible way out of Europe’s economic crisis – a big boost in business investment – is closed off.” According to the Institute of International Finance, the principle international banking lobby, this is common practice across most “mature and emerging economies.” Collectively, corporations in the United States, the Eurozone, the U.K. and Japan held roughly $7.75 trillion in cash, “an unprecedented sum.”
The Centre for European Reform, a think tank in London, reported that the ratio of investment to gross domestic product is at a 60-year low as corporations hoard more cash than ever before — money which, in theory, could facilitate investment. In the Eurozone, corporate cash hoarding reached roughly 2 trillion euros (or $2.64 trillion). Meanwhile, austerity policies in European countries has led to a predictable retraction of growth, which in turn has led to more corporate hoarding.
Moving over to the U.S., it was reported in 2011 that corporations there had been hoarding cash to a larger degree than at any time in nearly half a century, with non-financial companies holding more than $2 trillion by the end of June 2011. This figure only acknowledged domestic cash hoarding by U.S. corporations, and didn’t include their foreign earnings. According to released IRS documents in 2009, major corporations, which held $1.7 trillion in cash from domestic operations, held a total of $5.13 trillion when including foreign cash assets.
As recently as 2008, the Government Accountability Office reported that despite trillions in earnings for corporations, the majority of U.S. and foreign-based corporations doing business in the United States managed to avoid paying any income taxes, with 72% of foreign and 57% of U.S. conglomerates successfully avoiding paying income tax for at least one year between 1998 and 2005.
Between 2008 and 2010, 30 large and profitable U.S. corporations paid no income taxes, even though the U.S. corporate tax rate was officially 35%. Among the companies that avoided paying any taxes were General Electric, PG&E and Boeing. Congress and state governments have encouraged the establishment of “pass-throughs,” allowing corporations to avoid paying any taxes by “passing” the profits along to investors.
This has been an exception given to businesses for decades, though the percentage of nontaxable corporations has rapidly grown, from 24% in 1986 to 69% in 2008, allowing private-equity giants like Blackstone Group and construction firms like Bechtel Group to avoid paying any taxes on their revenue.
In 2011, despite the 35% tax rate for corporations, the ten largest corporations in the United States paid an average federal tax rate of 9%, including companies like Exxon Mobil, Apple, Microsoft, JP Morgan Chase, and General Electric. Not surprisingly, the eight corporations that spent the most money on lobbying had lower tax rates, including Exxon Mobil, Verizon, GE, AT&T, Altria, Amgen, Northrop Grumman, and Boeing.
In 2010, when General Electric recorded worldwide profits of $14.2 billion, with $5.1 billion coming from operations within the United States, the company – one of the largest in the world – managed to pay no taxes at all, and, in fact, claimed a tax benefit of $3.2 billion. Between 2008 and 2011, 280 of the largest publicly traded American corporations paid an average tax rate of 18.5% on their profits, just slightly over half of what the actual tax rate is and less than most of their competitors in foreign industrialized countries.
Canadian companies have also been hoarding mountains of cash, not to be left on the sidelines by their American and Europe-based counterparts. In fact, it was reported that Canada’s corporations had hoarded more than half a trillion dollars in cash reserves, about $525 billion, by the end of 2011. This amounted to almost a third of the size of the entire economy, with at least 45% of Canada’s biggest corporations hoarding cash instead of investing or creating jobs.
Cash hoarding also allows companies to avoid paying taxes, giving companies further reason to not invest. In the U.K., corporate cash hoarding amounted to roughly $1.2 trillion, about half the size of the British economy — though small compared to the $5.1 trillion hoarded in the United States, an amount larger than the GDP of Germany. An analyst at Ernst & Young stated, “Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list.”
Over the previous 22 years, the biggest American banks created more than 10,000 subsidiaries around the world, “using legal structures to pay lower taxes and escape tighter regulation,” according to figures released from the Federal Reserve. JP Morgan Chase, the largest American lender, had 3,391 subsidiaries, followed closely by Goldman Sachs, Morgan Stanley, and Bank of America, each with over 2,000 subsidiaries. Citigroup maintained over 1,500 global subsidiaries.
Since the repeal of the Glass-Steagall Act in 1999 (which had been put in place in 1933 to avoid another Great Depression), the big banks got even bigger, with even the Federal Reserve admitting that the law’s repeal was the “main catalyst” for the growth in the size of banks, whose assets tripled since that time to $15 trillion.
The combined assets of the five largest banks in the United States in 2011 was roughly $8.5 trillion, equal to 56% of the U.S. economy, compared to five years earlier, before the financial crash, when the total assets of these banks equaled roughly 43% of the American economy. The five banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs – are twice as large now as they were ten years ago.
The facts are in. The reality is this:
Big banks, corporations, and powerful states created the global economic crisis for which the people of the world are forced to pay, and suffer, with declining wages, decreased opportunities, increased debt and expanding poverty. Meanwhile, those who created the crisis make record profits, pay little or no taxes, hoard trillions in cash, and fail to “invest” their revenues.
The question is now, what are we going to do about it?
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, with a focus on studying the ideas, institutions, and individuals of power and resistance across a wide spectrum of social, political, economic, and historical spheres. He has been published in AlterNet, CounterPunch, Occupy.com, Truth-Out, RoarMag, and a number of other alternative media groups, and regularly does radio, Internet, and television interviews with both alternative and mainstream news outlets. He is Project Manager of The People’s Book Project and has a weekly podcast show with BoilingFrogsPost.