Crimes of Wall Street: Report No. 2 - State by State
August 6, 2013 • 9:30AM

WEEKLY CRIME REPORT NUMBER TWO: STATE BY STATE

This is the second installment, of the Weekly Crime Report series initiated by LaRouche PAC in July 2013, documenting, state by state, the criminal action by Wall Street, with the consent of the state or the Federal government, which is destroying the lives of American citizens, and leading to deliberate outright genocide.

The first Crime report was issued July 21, with specifics on 16 states. This grid is organized by region, with specifics on seven states, leading with updates on Detroit.

What is clear is that over the past 20 years, the $3 trillion annual sum total of U.S. budgets of municipalities, counties and specialty entities of all kinds was seen as a looting ground by the trans-Atlantic Wall Street/London/Eurozone banks. Interest rate swaps and other contrived deals were struck, in tandem with manipulated financial rate indices, such as LIBOR (London Interbank Overnight Rate); ISDAfix Index, FOREX, and others.

This assault bilked local governments and states out of multi-billions of dollars. Thousands of localities were targeted and swindled among the 12,000 school districts across the United States; as well as the 19,000 other entities—towns and counties, school districts, special entities (hospital, university systems), port and airport authorities, water and sewer commissions, irrigation and levee districts, pension funds, and the like.

Prior to this, were two decades of looting through inducing locality funds into rigged "investments" into derivatives. This gave rise to rafts of crises, insolvencies and damage to residents, such as, for example, the famous 1994 blow-out of the finances of Orange County, California through derivatives losses set up by Merrill Lynch.

All of this deadly swindling was perpetrated atop the underlying process of erosion of economic activity of the United States and the world. Now the depth of looting has reached life and death, as the record shows.

GREAT LAKES STATES

- Michigan -

DETROIT. The City has been thrown into a Federal Ch. 9 bankruptcy process, on a blitz timetable, in service to the Wall Street predators and state collaborators, intent on extracting the last loot, while obliterating the population and region. A rapid timetable is in motion, in which Oct. 23 is the hearing for whether the state's bankruptcy application is legitimate; but meantime, the apparatus is in motion for cutting government functions and workforce. For example, on Aug. 2, emergency manager Kevin Orr announced his plan to increase fees city workers pay on their health care.

PONTIAC. On Aug. 2, the Pontiac School District, with 4700 students, was officially designated as in a state of financial emergency, activating state law, under which local leaders are now compelleted to choose various options: accepting an emergency manager; filing for Federal Ch. 9 bankruptcy, asking for another "evaluation," etc. The City of Pontiac itself has been dismembered under an emergency manager assigned by the state in 2010.

GENESSEE COUNTY. The county, 60 miles from Detroit, suffered a failure Aug. 2 in its attempt to get loans to build a new water system (separate from relying on Detroit's); its $53 million municipal bond offering failed. There were no buyers. This reflects the chaos now unfolding, without the initiation of credit and aid for essential state and local government functioning, through reinstituting Glass-Steagall for sound banking. Genessee County, 60 miles from Detroit, bonds have an A2 rating by Moody's, nominally meaning, "a strong ability to repay short-term debt obligations," but no credit for government functions comes forth. Only cut-backs and cut-offs.

SAGINAW COUNTY. This week, this county plans a bond offering of $60.6 million, not for infrastructure, but just to fund its pensions. Many Michigan localities, already in dire straits, are now consigned by Wall Street as uncreditworthy because of "Detroit contagion."

- Illinois -

CHICAGO. The Chicago Public Schools authority was paying out in the range of $35.9 mil a year as of 2011, on swaps deals with Bank of America Corp., Goldman Sachs Group Inc., Royal Bank of Canada and Look Capital LLC. One such agreement extends until March 2036. From 2003 to 2011, the swaps claims by the banks forced a net loss on the school system of $120.7 million, according to the Chicago Teachers Union. Now, under Mayor Rahm Emanuel, former Obama chief of staff, the school system itself is being drastically downsized. Some 50 schools and over 2900 staff are being eliminated.

- Pennsylvania -

More than 20 local governments are at present under state-run emergency management, under which deep cuts in services, workforce and infrastructure are being imposed.

Most, if not all, of these municipalities are among those local government entitites in the state, which have been looted under interest rate swap swindles. A May 9 memorandum issued by state senators opposing swaps, reports, "These risky and complicated swaps have cost Pennsylvania taxpayers billions of dollars. From October 2003 to September 2012, 108 of 500 school districts—a shocking 22 percent—and 105 local government units had $17.25 billion in public debt tied to swaps, according to DCED [Department of Community and Economic Development]....We believe swaps represent gambling with the public's money..." (Senators Mike Folmer, Rob Teplitz, John Blake, John Eichelberger, Lisa Boscola, whose bill S293 bans swaps for all local governments). The major Wall Street predators include: Wells Fargo, Morgan Syanley, Goldman Sachs, Royal Bank of Canada and others.

The last two-decades of swaps-looting by the mega-banks follows on their prior swindling in the 1990s, by roping school districts and other local entities, to put their government funds into derivatives "investments," which blew out. The dozens of localities which lost millions in these rip-offs include Tyrone, Bethlehem....

HARRISBURG. The state capital, which first filed for Ch. 9 Federal bankruptcy in 2011, was instead put under state receivership, which now is in process. The emergency manager is Mr. Lynch, who is presiding over sweeping cuts to essential functions and staff; and selling off, or leasing out long term, urban infrastructure. On Aug. 14, the Harrisburg City Council is to start meeting, under pressure to rubber-stamp the new Lynch killer-austerity proposals.

PHILADELPHIA. The city has been bilked into overpaying $110 million in inflated swaps termination fees by a grouping of 12 banks, which otherwise raked in swaps payments prior to the termination. The particulars are laid out in a lawsuit filed July 26 by the City of Philadephia against the banks, which include JP Morgan Chase, Royal Bank of Canada, Royal Bank of Scotland, UBS and nine others. (See City of Philadephia v. Bank of America Corp. et al, Federal Court, Eastern District).

PENNSYLVANIA TURNPIKE COMMISSION lost $109 million in swaps in recent times, according to January, 2013 report by State Auditor General Jack Wagner. Along with this, there is a concerted effort by Wall Street, to pressure the state to sell- or lease-off the turnpike to private Wall Street interests, which so far, legislators have rebuffed.

WESTERN STATES

- California -

JPMorgan Chase is estimated to have cost California electricity rate-payers about $160 million dollars in fraudulent costs in 2012, and Michigan rate-payers another $83 million, through its electricity market "merchant bank investments" which were prohibited when the Glass-Steagall Act was in force. The bank has been fined some $500 mil for price-rigging, by FERC (Federal Energy Regulatory Commission). Barclay's Bank has been fined $470 mil by FERC, for the same crime, but is refusing to pay.

JP Morgan used the Enron m.o. JP Morgan holds interests—many of them controlling—in 35 electricity-generation plants nationwide, totalling 8,000 megawatts-electric, with 13 of the plants in California. (This is not to mention its ownership of 100 full-sized oil tankers.)

Many of these plants are operated by the electric utility holder AES Corp., but Morgan sells them their fuel supplies, controls their prices, and decides when they go on or off line. It used this control for the following dirty game, among others: Morgan (AES) would submit a very low-priced "next-day operation" bid to the infamous California Independent System Operator (ISO); this being accepted, when it came time actually to operate the plant next day, Morgan would submmit a very high "same-day operation" bid, causing ISO to reverse itself and not buy from that plant. Morgan would then keep the plant idle and collect a substantial "minimum fee" for the day from ISO because it had submitted a bid to operate on the previous day. If ISO somehow accepted the high "same-day" bid, Morgan traders would buy the power from somewhere else and sell it to ISO at a profit. (Ken Lay's ghost was gloating proudly at this sincerest form of flattery.) FERC got fed up in May 2012, ordered Morgan to keep three particular plants operating (one nuclear, two fossil fuel), and when it refused to do so, began the enforcement process leading to the reported large fine.

These "merchant banking investments" were prohibited to commercial banks or holding companies by the 1933 Glass-Steagall Act.

California has likewise been hit by the infamous swaps rip-offs. Dozens of government and specialty entities in the state were roped into swaps deals rigged to oblige them to pay multi-millions to Wall Street; these include the University of California system, the cities of Richmond, Riverside, and 18 cities in the County of San Diego, the County of Sacramento and others. In 2013 so far, 15 entities have filed lawsuits against a raft of named banks, including Deutsche Bank, Bank of America, Citigroup, Bear Stearns, Merrill Lynch, Morgan Stanley and more.

Besides rigging the LIBOR, the Wall Street/London/Eurozone banks are implicated in the manipulation of another rate-setter, the ISDAfix Index, which has been used to rig derivatives and other kinds of speculative deals. Last year, the Commodities Futures Trade Commission began tracking through a million emails associated with the banks and ISDAfix Index, and according to an Aug. 1 Bloomberg report, there are patterns showing how the banks used the rigged trends on ISDAfix Index to impose losses on companies, governments, and pension funds, such as Calpers, the California pension fund, largest in the nation.

The ISDAfix Index, as well as LIBOR, figures in how Detroit was made to have to pay an average of $107 million per year in wrong-way swaps-bets, over a period of eight years; and now faces a trigger of a $225 million "termination payment" to the banks, all the while that the city is supposed to default on workers' pensions and health benefits.

CENTRAL STATES

- Texas -

The city of Houston has suffered making multi-millions of dollars of artificially high payments to a group of predator banks, including Bank of America, Barclays, Citigroup and others, against whom Houston filed suit in July, 2013, over their the banks' manipulation of interest rates, in particular, the LIBOR.

NORTHEASTERN STATES

- New York -

NEW YORK. Throughout the state—as nationally—there has been a loss of medical facilities, sufficient for ratios of health care delivery. In Brooklyn, for example, Long Island College Hospital is lined up for shutdown by owner, SUNY Downstate, while area residents and medical staff fight to keep it open.

- Massachusetts -

BOSTON. Numbers of entities serving the entire metro-Boston region have been bleeding from swaps deals. Partners HealthCare, the big medical complex involving Massachusetts General and Brigham and Women's Hospitals, in August 2012, reported swaps losses for its recent fiscal period as $59 million. MBTA, the Massachusetts Bay Transportation Authority has been running at about $25 + mil in annual swaps losses, in favor of its swap counter-parties: Deutscher Bank, JPMorgan Chase, Morgan Stanley, UBS.

APPALACHIA

- West Virginia -

There are now 23,000 coal miners, centered in West Virginia, and in the other Eastern coal states, facing health care cut-off in October, because of deliberate Wall Street/London actions to de-structure their cartel commodity operations, in order to dump "excess" people and carbon.

The corporate screw-you maneuvering is simple. When "coal was king" the commodities wing of Wall Street had its stake in Arch, Peabody, and other famous-name companies, worldwide. They made a bundle, while mine-safety regulations were kept below minimum, notoriously so, under the successive Bush regimes, when many U.S. miners' lost their lives in repeated mine disasters.

Then, the moneybags behind the commodities cartels pulled their stake out, de-structured their corporations, and went off with their loot before the greenie "carbon-is-out" campaign hit full force. Patriot Coal Corp. was created as a shell company, to later walk away from any and all obligations to the workforce, nor to even continue in coal-mining activities at all.

Specifically: Peabody spun off Patriot in 2007, giving it about 11% of its assets, but over 43% of its retiree liability. In 2008, an-Arch spin-off, Magnum Coal, was combined into Patriot. In the process of the Magnum transfer, Patriot got 12% of Arch's assets, and 96% of its retiree health-care liabilities. Then in 2012, Patriot Coal declared bankruptcy; it soon announced that it could no longer afford to pay pensions and health benefits to its workers, retirees and their families. On May 29, this was upheld by a Federal bankruptcy judge in St. Louis, headquarters of Patriot, Arch and Peabody.

On June 25, Obama delivered the imperial-greenie epitaph: 'Carbon is out. Coal is out. People are out.'