BIG FINANCIAL CORPORATION SCANDALS CONTINUE

ABSTRACT: Things are rotten in the big financial corporations. News of illegal activity continues to surface regularly. The fines that have been imposed haven’t been a sufficient deterrent to stop this bad behavior. Multiple big banks have paid penalties of over $100 million for 1) money-laundering for countries subject to US economic sanctions, 2) selling inappropriately risky investments to conservative investors including municipalities and non-profits, 3) fraudulently foreclosing on mortgages, 4) interest rate manipulation in multiple scenarios, and 5) discriminating against minority borrowers.

Despite this repeated wrong doing, the Securities and Exchange Commission (SEC) and the Justice Department announced recently that they have ended their investigation of Goldman Sachs for fraud related to selling mortgage-backed securities to customers when it knew the securities were likely to be bad investments. This is the latest indication that there will be no significant accountability for the banks that brought on the collapse of the financial sector and our economy.

These huge financial corporations are not just too big to fail, they are simply too big and complex to control by either internal management or outside regulators. Either these huge financial corporations need to be broken up into smaller and less complex entities, or government regulation of them needs to be dramatically changed and strengthened. We cannot allow them to continue to pocket the gains from their risky business practices when we know that we will bear the costs when things go wrong.

FULL POST: Things are rotten in the big financial corporations. News of illegal activity continues to surface regularly across a broad range of banks and financial activities. Here are some of the latest. The fines that have been imposed (which sound like big amounts but are small compared to the size and profitability of these corporations) haven’t been a sufficient deterrent to stop this bad behavior. (In terms of the size of these financial firms, JP Morgan Chase took a $6 billion loss on internal, speculative securities trades and still had a profit for the quarter.)

Standard Chartered, a big British bank, has agreed to a $340 million penalty with New York State to settle charges of money-laundering for countries subject to US economic sanctions. It admitted to concealing transactions with Iran of over $250 billion over nearly 10 years. The bank made hundreds of millions of dollars in fees on the transactions. It agreed to increased monitoring but received no other sanctions on its business. A former US Treasury official noted his disappointment in the small penalty and the lack of criminal charges. A federal investigation is on-going. Since 2005, the US Treasury has imposed fines of over $2 billion on banks for violating US economic sanctions including ING Bank ($617 million), Lloyds Bank ($350 million), UBS ($100 million), Barclays ($176 million), and JP Morgan Chase ($88 million). HSBC bank has been accused of laundering billions of dollars for drug cartels and terrorists and has yet to settle, but has set aside $700 million for potential penalties. [1][2]
Wells Fargo bank is paying $6.5 million to settle charges that it sold inappropriately risky investments to conservative investors including municipalities and non-profits. A Wells Fargo vice president will pay $25,000 and serve a 6 month ban on working in the securities industry. Wells Fargo and its vice president have neither admitted nor denied wrongdoing, as is typical in these cases. Last month, Wells Fargo paid $175 million to settle charges that it discriminated against minority borrowers. [3]

Despite repeated wrongdoing, the Securities and Exchange Commission (SEC) and the Justice Department announced recently that they have ended their investigation of Goldman Sachs for fraud related to selling mortgage-backed securities to customers when it knew the securities were likely to be bad investments. They will not pursue criminal charges against the corporation or its employees. This occurred despite President Obama’s announcement of a special investigative task force in January, despite a formal notice from the SEC in February that it intended to pursue legal action, and despite the $550 million fine Goldman Sachs paid in 2010 for failing to make appropriate disclosures to investors on a similar security. This is the latest indication that there will be no significant accountability for the banks that brought on the collapse of the financial sector and the economy, especially given that the deadline to file cases is fast approaching. [4] [5]

Whatever the reasons are for these huge financial corporations not being held accountable, it is clear that they are not just too big to fail, but simply too big and complex to control. Internal management seems unable to control traders and stop illegal activity (assuming they intend to). Outside regulators have an extremely difficult time detecting and responding to illegal and harmful behavior, not to mention doing so in a timely manner that might prevent the worst of the consequences.

Dramatic changes are needed. Either these huge financial corporations need to be broken up into smaller and less complex entities, or government regulation of them needs to be dramatically changed and strengthened. Otherwise, the risk that they will do serious damage to our economy again is simply too high. We cannot allow them to continue to pocket the gains from their risky business practices when we know that we will bear the costs when things go wrong.

[1] Rooney, B., 8/14/12, “Standard Chartered pays $340 million to settle Iran charges,” CNN Money

[2] Sanati, C., 8/8/12, “Why London bankers are shrugging of Standard Chartered threat,” CNN Money

[3] O’Toole, J., 8/14/12, “Wells Fargo in $6.5 million SEC settlement over risk disclosure,” CNN Money

[4] Protess, B., & Ahmed, A., 8/9/12, “SEC and Justice Dept. end mortgage investigations in Goldman,” DealBook of The New York Times

[5] Mattingly, P., 8/10/12, “US won’t prosecute Goldman Sachs, employees over CDO deals,” Bloomberg Businessweek

GENETICALLY MODIFIED FOODS: WHY NO LABELS?

ABSTRACT: There aren’t laws in the US requiring labeling of genetically modified (GM) food (as there are in the other developed countries) because the large food and agricultural-biotechnology corporations and their trade associations have spent years working to block labeling. They’ve spent $572 million on lobbying and campaign contributions over the last 10 years. In addition, the revolving door moves people back and forth between their organizations and the relevant government agencies. GM organisms are patented and provide their creators with a monopoly, significant market place power, and potentially substantial profits. Farmers are prohibited from producing their own seed for next year’s crop; they are required to buy it from the corporation.

The costs and benefits of GM foods are, at best, unclear. The large agro-biotech corporations and the related chemical corporations are working hard, through campaign contributions, lobbying, and the revolving door, to have minimal regulation and oversight, and to prevent requirements to label foods as having GM content. This is another example of corporate power riding roughshod over the public interest. Our public officials need to stand up to the corporate interests and serve the public interest and demand of over 90% of the public for GM food labeling and oversight.

FULL POST: There aren’t laws in the US requiring labeling of GM food (as there are in the other developed countries) because the large food and agricultural-biotechnology corporations and their trade associations have spent the years since 1994 (when the first GM tomatoes were marketed) working to block labeling. They’ve spent $572 million on lobbying and campaign contributions over the last 10 years. In addition, the revolving door moves people back and forth between their organizations and the Department of Agriculture and the Food and Drug Administration (FDA) – most recently President Obama appointed Michael Taylor, a former vice president and lobbyist for Monsanto, as a senior advisor to the Commissioner at the FDA – they have successful prevented federal and state efforts to require GM food labeling.

GM organisms serve corporate interests in a way that naturally occurring seeds, plants, and animals don’t. Because they are patented, they provide their creators with a monopoly, significant market place power, and potentially substantial profits. This also allows the corporations to restrict independent, objective research into the efficacy, safety, costs, and benefits of GM organisms. It gives seed corporations great power because in their contracts with farmers, the farmers are prohibited from producing their own seed for next year’s crop; they are required to buy it from the seed corporation. The large seed corporations have, through acquisition and other means, concentrated their scope and power and now four large corporations control 50% of the market. Over 200 independent seed companies have ceased to exist over the last 15 years. One of those large seed corporations, Monsanto, has gone so far as to sue thousands of individual farmers whose crops were contaminated by Monsanto’s GM crops for illegally possessing their GM plants. [1]

The costs and benefits of GM foods are, at best, unclear. The costs, beyond the immediate ones (seed, pesticides, and herbicides), are largely uncalculated, and to some extent are unknown. The benefits have not been as great as the agro-biotech corporations have claimed, for example in increased yields, reduced herbicide and pesticide use, improvement of farmers’ economic conditions, and reduction of world hunger. The large agro-biotech corporations and the chemical corporations that produce the herbicides, pesticides, and fertilizers that GM crops require, have substantial market power and profit potential. They are working hard through campaign contributions, lobbying, and the revolving door of sharing personnel with government, to have minimal regulation and oversight, and to prevent requirements to label foods as having GM content. [2]

This is another example of corporate power in the US, in contrast to other countries, riding roughshod over the public interest. There is a clear public interest, as well as public desire (over 90% in multiple polls), to have foods with GM content labeled. And there is a clear need for more effective oversight of the introduction of GM organisms into the environment and our food, as well as monitoring of long term costs and benefits. Our public officials need to stand up to the corporate interests and serve the public interest on GM food labeling and oversight.

[1] Farm Aid, see above

[2] Moyers, B., with Shiva, V., 7/13/12, “The problem with genetically modified seeds,” Moyers & Company

GENETICALLY MODIFIED FOODS: REASONS AND RISKS

ABSTRACT: Genetically modified (GM) foods have been developed to resist herbicides or pesticides, to resist pests or viruses, and for other reasons. Large portions of common crops in the US are GM, such as sugar beets (95%), soybeans (93%), cotton including for cottonseed oil (93%), canola (93%), and corn and maize (86%). As with any new technology, all the risks associated with genetically modified organisms have almost certainly not yet been identified. Known risks include Allergic reactions, Antibiotic resistance, Toxicity, Decreased biodiversity, Undesired spreading, Resistant weeds and pests, and Poisoning wildlife. In addition, once GM genes are out in the environment, it is impossible to recall them. Furthermore, there is no way to assess, in advance, their full, long term impact and there is no monitoring system in place.

FULL POST: Genetically modified (GM) foods have been developed to resist herbicides or pesticides (so the herbicides can be used to kill weeds or the pesticides to kill pests without harming the desired crop), to resist pests or viruses, and for other reasons. Large portions of common crops in the US are GM, such as sugar beets (95%), soybeans (93%), cotton including for cottonseed oil (93%), canola (93%), and corn and maize (86%). [1]

The known risks of GM foods include those listed below. However, as with any new technology, all the risks associated with genetically modified organisms have almost certainly not yet been identified. Clear risk assessment procedures for known risks are not yet in place, let alone attempts to uncover and analyze currently unknown risks. Some of the risks, such as health issues such as cancer, are long term and possibly cumulative, so risk assessment is challenging. From a scientific perspective, this should put a substantial burden on those who wish to use the new technology to clearly demonstrate its benefits. [2]

Allergic reactions: GM foods routinely contain new proteins, including ones that have never been in any food before. Proteins are the basis of most food allergies. Examples of GM foods where new proteins cause allergic reactions include soybeans with Brazil nut proteins (which trigger Brazil nut allergies) and vegetables with milk proteins (which trigger milk allergies).
Antibiotic resistance: The genetic modification process often brings new genes that produce antibiotic resistance into a GM product. These can reduce the effectiveness of antibiotics in a person eating such a GM product and can also accelerate the development of antibiotic resistant diseases. Because of the widespread presence of antibiotic genes in GM foods, this impact needs to be analyzed cumulatively across the whole food supply.
Toxicity: a) Some GM plants concentrate toxins (such as heavy metals like mercury) from the soil in the non-edible parts of the plant. However, there is a risk that toxins could also be concentrated in the edible part of the plant or that contamination of the edible part of the plant could occur. b) All organisms produce toxic substance to defend themselves against diseases and predators. GM foods could have increased levels of these toxins that could be harmful to humans.
Decreased biodiversity: The push to use GM plants reduces the biodiversity of crops. The resulting monoculture of a single or a few varieties of a crop tends to require increased herbicide, pesticide, and fertilizer use, increasing costs for farmers and likely harm to the environment.
Undesired spreading (specific examples below): GM plants (or animals) can spread in undesired ways. Notably, when insects pollinate GM plants they carry GM genes in the pollen they pick up and do not stay within prescribed boundaries. When they carry the pollen to non-GM plants, they can create seeds for undesired GM plants. This is a particular concern for organic farmers who do not want GM genes in their crops but whose fields are within the range of pollinating insects.
Resistant weeds and pests: The herbicide or pesticide resistant genes in GM organisms or the changed usage patterns of herbicides and pesticides with GM crops may result in weeds, pests, and viruses that are resistant to current herbicides and pesticides. At least 10 species of herbicide resistant weeds have been identified.
Poisoning wildlife: GM organisms may poison wildlife that feeds on them.

Examples of undesired spreading are well documented. Canada’s organic canola industry is basically extinct due to contamination from GM canola. In the US, in 2000, GM corn that represented only 1% of planted acreage contaminated at least 25% of the harvest that year. The GM corn was not approved for human consumption. The result was the recall of over 300 food products, export markets rejecting US corn, and corn prices plummeting for all US corn farmers. A class action suit against the GM corn creator, Aventis, led to a $112 million settlement for corn farmers. Corn farmers and users are concerned that a similar incident could occur with a new GM corn intended for biofuel production. [3]

In addition to the risks identified above, once GM genes are out in the environment, it is impossible to recall them. And because of the complexity of natural ecology, there is no way to assess, in advance, the full, long term impact of these genes. Moreover, there is no monitoring system in place to even look for such effects.

The next post will wrap up this discussion of GM foods by taking a look at what’s behind the lack of GM food labeling in the US.

[1] Wikipedia, retrieved 8/16/12, “Genetically modified food,” en.wikipedia.org/wiki/Genetically_modified_food

[2] Union of Concerned Scientists, retrieved 8/16/12, “Risks of genetic engineering,” http://www.ucsusa.org/food_and_agriculture/science_and_impacts/impacts_genetic_engineering

[3] Farm Aid, retrieved 8/16/12, “New GE crops on the market,” http://www.farmaid.org/site/apps/n1net/content2.aspx

GENETICALLY MODIFIED FOODS AREN’T LABELED

ABSTRACT: Federal regulators are allowing a growing number of genetically modified (GM) agricultural products into our food. What is surprising is that these foods are not labeled. This is the result of a powerful and concerted effort by big corporations in the GM business. Over 90% of the American public in multiple polls supports GM labeling and forty-nine countries, including Russia and even China, require labeling. From a public health perspective, labeling is the only way to track unintended health effects.

FULL POST: Federal regulators are allowing a growing number of genetically modified (GM) agricultural products into our food [1]. What is surprising is that these foods are not labeled as being or containing GM products. In general, foods are required to be labeled with their ingredients so consumers can know what they are eating. The lack of GM labeling is the result of a powerful and concerted effort by big corporations who make significant profits from the raising and selling of GM products.

This lack of labeling flies in the face of the economic theory of free markets, which requires consumers to have full information and make knowledgeable decisions when purchasing goods and services. It also contradicts a basic premise of democracy – that citizens are informed.

Over 90% of the American public in multiple polls supports labeling of food to indicate GM content. Forty-nine countries, including Russia and even China, require the labeling of food that contains GM ingredients. The United Nations (UN) food safety organization supports labeling. Furthermore, the US is the only developed country that does not require safety testing of GM plants, which also is supported by the UN. The lack of testing and labeling creates the risk that other countries will block the importation of US agricultural products.

The US Senate in June 2012 voted 73 – 26 against an amendment to the 2012 Farm Bill that would have allowed states to require GM labeling of food. At least 19 states have introduced legislation on GM labeling of food. A bill in Vermont died this year after Monsanto, a dominant player in the GM field, threatened to sue the state if the bill passed.

From a public health perspective, labeling is the only way to track unintended effects. Neither you as an individual nor public health officials can know that a GM food triggers allergic reactions or other health problems if you don’t know the food that’s being eaten contains GM content. [2] For these reasons, the American Public Health Association and the American Nurses Association, among others, have called for labeling GM foods. [3]

In California, there will be a ballot question this November known as the California Right to Know if Your Food has Been Genetically Engineered Act (Proposition 37). It would require food manufacturers and retailers to label GM foods. Over 1 million people signed the petition to get this measure on the ballot. The opposition includes the big agro-biotech and herbicide / pesticide corporations such as Monsanto, BASF, DuPont, Syngenta, Bayer, and Dow Chemical, as well as big food manufacturers such as PepsiCo, Coca-Cola, and Kellogg, which are some of the biggest users of high-fructose corn syrup, soy lecithin, and sugar beets, commonly used GM ingredients. [4]

The next two posts will also be on GM foods. The next one will examine the reasons for GM organisms and foods along with the risks they present. The subsequent post will look at what’s behind the lack of GM food labeling in the US.

[1] GM foods are also referred to as Genetically Modified Organisms (GMOs), Genetically Engineered (GE) foods, and biotech foods.

[2] Silver, C., 6/26/12, “How Monsanto is sabotaging efforts to label genetically modified food,” Inter Press Service

[3] Sanders, B., 6/19/12, “Label genetically engineered food,” The Huffington Post

[4] Sauve, C., retrieved 8/16/12, “This is the food fight California cannot afford to lose,” San Jose Mercury News

CAMPAIGN FUNDRAISING: THE PERFECT STORM

ABSTRACT: The unprecedented spending and the unprecedented secrecy in the current election campaigns are creating the perfect storm and it’s battering our democracy. They are the result of three factors: 1) great concentration of wealth, 2) unlimited campaign contributions, and 3) secrecy through weakly regulated non-profit organizations. Non-profit organizations don’t have to report contributors and are spending tens of millions of dollars on political activity. These non-profit organizations have accounted for two-thirds of the outside spending to-date – close to $100 million. The Internal Revenue Service has, so far, failed to exercise its oversight responsibilities. Corporations, in particular, like the secrecy.

The DISCLOSE Act in Congress would require disclosure of contributors of over $10,000 by all organizations. Senate Republicans have filibustered it (including a watered down version) multiple times. We need to demand that our elected officials require disclosure of campaign contributors. And we need a Constitutional Amendment that will reverse the Citizens United decision and allow limitations on contributions to political campaigns. Otherwise, the voices of we the people are drowned out by the purchased – not free but purchased – speech of wealthy individuals and corporations.

FULL POST: The unprecedented spending in the current election campaigns and the unprecedented secrecy about who’s contributing to the campaigns are creating the perfect storm and it’s battering our democracy. As Supreme Court Justice Louis Brandeis said, “we can have a democracy or we can have great wealth in the hands of a comparatively few, but we cannot have both.” This perfect storm is the result of three factors:

The greatest concentration of wealth in more than a century,
Unlimited campaign contributions (thanks to the Supreme Court’s Citizens United decision that allows unlimited spending by corporations, unions, and other groups), and
Secrecy for many of the contributors, especially corporations, through weakly regulated non-profit organizations. [1]

In addition to the Super PACs, which have to disclose contributors, there arenon-profit trade associations (such as the US Chamber of Commerce) and non-profit “social welfare” organizations [501(c)(4)s] that don’t have to report contributors. Politics is not supposed to be the primary purpose of these organizations. However, the US Chamber of Commerce is spending tens of millions of dollars on political activity, while refusing to disclose its contributors. Republican strategist Karl Rove’s Crossroads GPS, for example, is a 501(c)(4) that is raising and spending tens of millions of dollars on political activity in close alliance with his Super PAC, while refusing to disclose its contributors. [2]

So far in the 2012 election, these non-profit organizations have accounted for two-thirds of the outside spending – close to $100 million spent primarily on advertising. Back in 2010, they spent $130 million, outspending Super PACs 3-to-2. The Internal Revenue Service has, so far, failed to exercise its oversight responsibilities for these non-profit entities. It has no clear test for what constitutes excessive political activity and these tax-exempt groups are permitted to raise and spend money before being officially reviewed and approved. The tax exempt status of Karl Rove’s Crossroads GPS is still pending more than two years after being created and after having spent tens of millions back in the 2010 elections. [3]

Corporations, in particular, like the secrecy these non-profit groups provide. For example, insurance giant Aetna secretly gave $3 million to a non-profit running ads attacking Obama’s health care plan, while publicly supporting the President. Not a single Fortune 500 company has been reported as contributing to a Super PAC, but they are giving millions to non-profit organizations where their contributions can be kept secret. [4]

At the time of the Citizens United decision, eight of the nine justices made it clear that transparency on contributions for political activity was important and that it was Congress’s responsibility to require appropriate disclosure. The DISCLOSE Act in Congress would require disclosure of contributors of over $10,000 by all organizations, Super PACs, trade associations, unions, and 501(c)(4)s. However, Senate Republicans have filibustered it (including a watered down version) multiple times. Many of the Republicans filibustering the DISCLOSE Act previously supported disclosure, including Senator McCain and Senate Minority Leader McConnell, and 14 Republicans who supported it just a couple of years ago. [5] “[T]he essence of free speech, and democracy, is openness and accountability. … but Republican leaders remain adamantly opposed, and for an obvious reason. Republicans raise far more secret money than the Democrats and have far more to hide.” [6]

We the people are going to have to weather this perfect storm as best we can in this election. And then we will need to demand that our elected officials require disclosure of campaign contributors so we know who is trying to influence our elections. Ultimately, we need a Constitutional Amendment that will reverse the Citizens United decision and allow limitations on contributions to political campaigns. Otherwise, the voices of we the people are drowned out by the purchased – not free but purchased – speech of wealthy individuals and corporations who have amounts of money that far exceed that of everyone else.

[1] Reich, R., 7/13/12, “The selling of American democracy: The perfect Storm,” RobertReich.org

[2] Roberts, C., & Roberts, S.V., 7/18/12, “Shine a light on political donations,” Daily Times Chronicle

[3] McIntire, M., & Confessore, N., 7/7/12, “Corporate money funneled to nonprofits with an agenda,” The New York Times

[4] Moyers, B., & Winship, M., 7/17/12, “Presto! The DISCLOSE Act disappears,” Moyers & Company

[5] Moyers & Winship, 7/17/12, see above

[6] Roberts & Roberts, 7/18/12, see above

CAMPAIGN FUNDRAISING: WHO RUNS FOR OFFICE

ABSTRACT: Because of the way we fund campaigns, we have two elections every cycle, the money election and the voting election. For Congressional races, fewer than 1 in 400 people contribute $200 or more to a campaign. This one-quarter of 1% of the population determines who will show up on the ballot for the voting election. Consequently, these campaign contributors, this 1 out of 400 people, have the power to block candidates from getting on the ballot and, therefore, the power to block – to veto – issues and policies from even getting on the agenda. There are many ways to change the funding of campaigns and broaden who can afford to run.

The current elections will have huge amounts of money spent on negative advertising. Voters will be turned off and disillusioned by the whole process and therefore will not bother to vote. We the voters must stay engaged and elect the best candidates we can find. And then we must hold our elected officials accountable for their actions after they are elected.

FULL POST: Because of the way we fund campaigns, we have two elections every cycle, the money election and the voting election. If you don’t win the first, or at least show that you’re competitive, you don’t even get to the second one. For Congressional races, fewer than 1 in 400 people contribute $200 or more to a campaign. This one-quarter of 1% of the population determines who will show up on the ballot for the voting election, the one everyone thinks is the real election. To succeed as a Congressional candidate, you must gain the support of these large contributors.

Consequently, these campaign contributors, this 1 out of 400 people, have the power to block candidates from getting on the ballot and, therefore, the power to block – to veto – issues and policies from even getting on the agenda. This tilts our democracy toward plutocracy, where the wealthy rule and the rest of us try to hold on for the ride. “[A] nation in which so few have the power to block change is not a nation that can thrive.” [1]

And the proof is in the pudding; it’s not what candidates say on the campaign trail, it’s what they do in office. There’s plenty of winking and nodding that goes on during the campaign, where the one quarter of 1% know that it’s just rhetoric and that they don’t have to worry that action will follow.

There are many ways to change the funding of campaigns and broaden who can afford to run. One that is in place in Arizona, Maine, and a few other places is to match small campaign contributions from individuals with public funds. Presidential elections used to have a mix of private and public funds until the public funding got overwhelmed by huge sums of private money. A newer idea is to give every taxpayer a voucher that can only be used to contribute to campaigns. Another approach would be to reduce the cost of campaigns and the importance of money by requiring broadcasters – who get to use the public airwaves – to provide free air time to candidates so they don’t have to spend small fortunes on advertising.

The current elections will have huge amounts of money spent by supposedly independent groups outside of the candidates’ own campaigns. The bulk of this money will be spent on negative advertising. The small number of wealthy individuals and corporations that are funding these outside groups hope, in part, that voters will be turned off and disillusioned by the whole process and therefore will not bother to vote.

We, the voters, cannot fall into this seductive trap of cynicism and apathy. We must stay engaged and active in the election, and elect the best candidates we can find, even though they are rarely if ever perfect. And then we must hold our elected officials accountable for their actions after they are elected.

[1] Lessig, L., 7/13/12, “Big campaign spending: Government by the 1%,” The Atlantic