Bill Gates, Common Core and Agenda 21

The imposition of federal Common Core standards, which were developed using money from the loudest and wealthiest corporate school reform proponent, Bill Gates, and are suspiciously promoted by Exxon-Mobil (Rockefeller-owned), will exacerbate the high-stakes testing problem. Corporate school reform folks can’t wait for Common Core tests to be implemented so that they can claim that more public schools are “failing.” They will swoop in with fancy plans for new, for-profit charter schools and start stuffing their pockets with public funds that were supposed to be used educating our children. [Source]

Top Ten Scariest People in Education Reform: # 5 – Bill Gates

This is the fifth in a countdown series of introductions, a list of the top ten scariest people leading education in America.  For numbers 6, 7, 8,  9 and 10,  click here.

WhatIsCommonCore.WordPress.com - The biggest philanthropist on earth comes across as the epitome of sincere, nerdy nice-guy.  And he probably is very nice and very sincere. But does sincerity trump truth?

The truth is, Bill Gates’ herculean attempt to fund and market Common Core to Americans, and to circumvent the voting public on educational issues, is dangerously, dangerously misguided.

Thus, not everybody is happy in philanthropy land. The biggest philanthropist in the world got behind the unproven experiment of Common Core. Using money rather than the voice of the American voter, pushed it into schools, circumventing any vetting by legislative, educator or parent groups.

Gates’ astronomical wealth has persuaded millions that Common Core is the solution to education problems, the argument from everywhere, approved (by him) and beyond debate. But let me repeat the fact: regardless of whether the standards are horrible or glorious, the truth remains that whenever unelected philanthropists are permitted to direct public policy, the voting public gets cut out of the process. 

It’s happening all over the U.S., but not just in the U.S. The Gates-directing-world-education effect is happening everywhere.

Since Gates has no constituency, he can’t be un-elected; so it’s not the the wisdom of experienced educators, but simply one man’s money that is directing implementation of  the controversial Common Core. His  money has bought, besides technology, work groups, and a seat at the policy making table, extreme marketing success.

He’s got control of the education opinion factory. When Common Core was debated at the Indiana State Capitol, who showed up to advocate for Common Core?  Stand for Children, which Bill Gates funds.   

He also funds Common Core advocates: 

• the League of Education Voters, 
• the Center for Reinventing Public Education and 
• the Partnership for Learning. 

Gates owns Editorial Projects in Education, parent of Education Week magazine.

No wonder, then, even educators don’t seem to know the full truth about Common Core. They’re reading Education Week and  the Harvard Education Letter.  Translation: they are reading Gates’ dollar bills. (By the way: want to make some money selling out your fellow teachers?  Gates is searching for a grant recipient who will receive $250,000 to accelerate networking of teachers toward acceptance of Common Core.)

Wherever you see advocates for Common Core, you see Gates’ influence.  

• He gave a million dollars to the national PTA to advocate to parents about Common Core.  
• He gave  Common Core developer NGA/CCSSO roughly $25 million to promote it (CCSSO: 2009–$9,961,842, 2009– $3,185,750, 2010–$743,331, 2011–$9,388,911; NGA Center: 2008–$2,259,780.)  
• He gave $15 million to Harvard for “education policy” research.  
• He gave $9 million to universities promoting “breakthrough learning models” and global education.   
• Gates paid inBloom $100 million to collect and analyze schools’ data as part of a public-private collaborative that is building  “shared technology services.” InBloom, formerly known as the Shared Learning Collaborative, includes districts, states, and the unelected Council of Chief State School Officers (CCSSO).  
• The list goes on and on and on.

It’s hard to know exactly how much money Gates has put toward the promotion of Common Core because of the chameleon-like wording of  educational granting areas. 

For example, he gave $3 million to Stanford University and $3 million to Brown University for “college and career readiness.” (The average person wouldn’t know that college and career readiness is a code phrase defined as common core by the Department of Education.)

Sometimes he’s promoting “support activities around educational issues related to school reform” for the CCSSO (common core developer) and other times he’s “helping states build data interoperability,” which not everyone would recognize as Common assessments’ bed-making.

According to Gates himself, he’s spent $5 billion to promote his vision of education since 2000.

He really,  reeally believes in Common Core.  So it doesn’t matter that Common Core is an experiment on our children that’s never been tested and has been rejected by countless top education analysts. It doesn’t matter that Common Core is an un-American, top-down, nonrepresentative system  that state legislatures didn’t even get to vet.  Bill Gates wants it.

And not just in America– he wants global education standards.

Gates’ company, Microsoft, signed a cooperative agreement with the United Nations’ education branch, UNESCO. In it, Gates said, “Microsoft supports the objectives of UNESCO as stipulated in UNESCO’s constitution and intends to contribute to UNESCO’s programme priorities.” 

UNESCO’s  “Education For All” key document is called “The Dakar Framework for Action: Education For All: Meeting Our Collective Commitments.”  Read the full text here:  http://unesdoc.unesco.org/images/0012/001211/121147e.pdf

So Gates partners with the U.N.’s educational and other goals via UNESCO’s “Education for All”, which seeks to teach the same standards to all children (and adults) on a global scale.  Why is this a problem?  It supercedes local control over what is taught to students, and dismisses the validity of the U.S. Constitution, all in the name of inclusivity and education and tolerance for all nations.

At this link you can learn about how Education For All works:

“Prior to the reform of the global EFA coordination architecture in 2011-2012, the Education for All High-Level Group brought together high-level representatives from national governments, development agencies, UN agencies, civil society and the private sector. Its role was to generate political momentum and mobilize financial, technical and political support towards the achievement of the EFA goals and the education-related Millennium Development Goals (MDGs). From 2001-2011 the High-Level Group met annually.”

The six goals of “Education For All” are claimed to be internationally agreed-upon. On the linked Education and Awareness page of the U.N. website, we learn:

“Education, Public  Awareness and Training is the focus of Chapter 36 of Agenda 21. This is a cross-sectoral theme both relevant to the implementation of the whole of Agenda 21 and indispensable”   http://www.un.org/esa/dsd/susdevtopics/sdt_educawar.shtml

Did you get that?  Education is indispensable for the U.N. to get its agenda pushed onto every citizen worldwide.  They just admitted it out loud.  They want a strong hand in determining what is taught worldwide.

So then we click on Chapter 36.  In 36.2 it says we should “reorient” worldwide education toward sustainable development.  (No discussion, no vote, no input needed on this reorientation plan, apparently.)

Chapter 36.3 says:  “Both formal and non-formal education are indispensable to changing people’s attitudes…. It is also critical for achieving environmental and ethical awareness, values and attitudes, skills and behaviour consistent with sustainable development…  To be effective, environment and development education should deal with the dynamics of both the physical/biological and socio-economic environment and human (which may include spiritual) development, should be integrated in all disciplines, and should employ formal and non-formal methods.”

The take-away?  What does Bill Gates agree to in his Microsoft – UNESCO partnership?

• Environmental education will be incorporated in formal education.
• Any value or attitude held by anyone globally that stands independent to that of the United Nations’ definition of “sustainable education” must change.  Current attitudes are unacceptable.
• Education will be belief-and-spirituality based as defined by the global collective.
• Environmental education will be integrated into every subject, not just science.

The stated objectives (36.4) include endorsing “Education for All,” and “giving special emphasis to the further training of decision makers at all levels.”

Hence the need for people like Gates to influence the training of decision makers.  When asked what matters most to him, Gates said: education. His version of education as reported by The Huffington Post:

“I’d pick education, if I was thinking broadly about America,” Gates responded. “It’s our tool of equality.”  Is it coincidence that equality and redistribution are also concepts that Linda Darling-Hammond, Chaka Fattah and Arne Duncan are promoting in the federal Equity and Excellence Commission?

How committed is Bill Gates to the United Nations having a say in American education?

In his annual letter, Gates emphasized the importance of  following the United Nations’ Millennial Goals and measuring teachers more closely.  One of those UN Millennial goals is to achieve universal education.  Also, Gates helped create Strong American Schools (a successor to the STAND UP campaign launched in 2006, which was an outgrowth of UNESCO’s Millennium Campaign Goals for Universal Education). It called for U.S. national education standards. (link 1) (link 2)

Also,  Gates’ Foundation funded the International Benchmarking Advisory Group report for Common Core Standards on behalf of the National Governors Association, Council of Chief State School Officers, and ACHIEVE, Inc. titled, “Benchmarking for Success: Ensuring U.S. Students Receive a World-Class Education.” This report showed the United Nations is a member of the International Benchmarking Advisory Group for Common Core Standards. (link)

It appears that Bill Gates is more than a common core philanthopist; he is a promoter of global sameness of education as defined by UNESCO and the U.N.

That’s scary.

Houghton Mifflin Harcout Partners in Common Core 

From their Website: Making a successful transition to the Common Core State Standards is as much about the tangibles—comprehensive, personalized curricula; tools and skills for analyzing data effectively and productively; informed staff and leader development; and parental involvement—as it is about the intangibles. It will require the positive energy generated by working together to achieve a common goal and the momentum that carries you from implementation to assessment and beyond. In Houghton Mifflin Harcourt you have a trusted partner to rely on as you take on this opportunity, a partner who will share the responsibilities that come with achieving all that the Common Core promises. We have created a wide range of content, curricula, and services to support school leaders, teachers and educators, parents, and especially students with this transition—because ultimately your energy is focused not just on implementing the Common Core standards, but on realizing their intent: guiding all students to 21st-century college and career readiness.

Check out the Executive Leadership and Board of Directors for confirmation that big corporations are profiting from Common Core.

Linda K. Zecher President, Chief Executive Officer and Director 

Linda K. Zecher joined Houghton Mifflin Harcourt in September 2011 as President, Chief Executive Officer and Director, bringing a strong track record of business transformation and results.  Her extensive sales, marketing and technology experience contribute to her ability to successfully lead HMH’s transformation into a global leader in educational content and media.  Previously, she served as Corporate Vice President of Microsoft's $8 billion Worldwide Public Sector organization, where she led a team of nearly 2,000 sales and marketing professionals serving government, education and healthcare customers in more than 100 countries. Prior to joining Microsoft in 2003, Linda held leadership positions with Texas Instruments, Bank of America, PeopleSoft, Oracle and Evolve Corp. Zecher currently serves on the board of Cradles to Crayons and has also served on the U.S. State Department’s board for overseas schools, the Emily Couric Leadership Forum, the Intelligence and National Security Association board, and James Madison University’s board of visitors.

Eric Shuman Chief, Financial Officer 

Eric joined HMH in 2009 as Chief Operating Officer and was appointed Chief Financial Officer in late 2011 following the appointment of CEO Linda Zecher. He brings a long track record of leadership and results in media and content, and deep experience in business model transformation.  Prior to joining HMH, Eric served as Chief Executive Officer of Thomson Lifelong Learning Group, a division of The Thomson Corporation specializing in training, skills assessment, and higher education publishing. Previously, Eric was Senior Vice President and Chief Financial Officer for Thomson Learning, and Chief Financial Officer for Thomson Newspapers. In those capacities, he led several business integrations, restructurings and significant mergers and acquisitions, spanning fifteen years with Thomson. Eric holds a Bachelor of Science Degree from Boston College.

William Bayers Executive, Vice President and General Counsel 

Bill joined Houghton Mifflin in May of 2007 as Senior Vice President, Secretary and General Counsel and was made Executive Vice President, Secretary and General Counsel in March 2008. Previously, he served as Vice President and General Counsel of Harcourt Education Group. Bill oversees all legal, regulatory and corporate matters for the Company. He is a graduate of Harvard College and Harvard Law School.

Dr. Tim Cannon, Executive Vice President, International Operations and Global Strategic Alliances 

Tim's career in business, organizational and IT strategy spans nearly three decades. Before joining HMH, Tim was Senior Director of Business Strategy for Microsoft's Worldwide Public Sector organization, where he oversaw the development and execution of business strategies to better serve Government, Education and Health customers and partners worldwide. Prior to that role, Tim was Senior Director of Business Strategy for Microsoft’s U.S Public Sector. He has also held leadership roles at companies like Digital Equipment Corporation and Oracle, and helped many large organizations cope with the dynamics of change by implementing responses to maximize shareholder value. Tim is the Chairman of the Advisory Board of the Center for Entrepreneurship and Innovation at the University of Florida.

Brook Colangelo, Executive Vice President and Chief Technology Officer

Brook joined Houghton Mifflin Harcourt in January 2013 from the White House, where he held the role of Chief Information Officer (CIO) since 2009. With over ten years’ experience in technology strategy and implementation, Brook joined the White House team in 2008 to spearhead the Obama-Biden transition project. Prior to that, he held several senior IT leadership roles, including within the Democratic National Convention Committee, The American Red Cross’ Hurricane Recovery Program and QRS Newmedia. Brook holds an honors degree in Political Communications from The George Washington University.

Mary Cullinane, Chief Content Officer and Executive Vice President, Corporate Affairs 

Mary is HMH’s first Chief Content Officer. She has led the transformation of the company’s content development capability, bringing a unique combination of education and business experience. Prior to joining HMH in 2012, Mary spent ten years spearheading Microsoft′s education-related innovation programs and initiatives worldwide, including its national 1:1 access programs and its groundbreaking School of the Future in Philadelphia. With another decade of experience as an educator, Director of Technology and administrator in the public sector, Mary is a recognized thought leader in the area of education reform and the effective use of technology. She has testified before the U.S. Congress, and co- authored the book What Next?, which documents lessons learned during the building of the School of the Future. Mary holds a Master of Public Policy and Administration from Columbia University and a Bachelor of Arts from The College of New Jersey. Mary is a member of the board of the Boston Children's Museum.

John K. Dragoon, Executive Vice President and Chief Marketing Officer

John joined Houghton Mifflin Harcourt in April 2012. Previously, he served as Chief Marketing Officer and Channel Chief of Novell, where he led the company's Marketing and Partner programs for over seven years. Prior to joining Novell, John served as Senior Vice President, Marketing and Product Management at Art Technology Group (ATG). Before ATG, John served as Vice President, Operations at Internet Capital Group, where he served on the board of nine partner companies and guided strategy, marketing, business development, financing and product development. John also spent more than 16 years at IBM, where he held a number of marketing and sales positions. He holds an MBA from Cornell University and a BS from Union College. 
 
Gary Gentel, President, Houghton Mifflin Harcourt Trade & Consumer Publishing 

Gary joined Houghton Mifflin in October of 2003 as Corporate Vice President and Director of Trade Sales and was promoted to Interim President of the combined Trade Group in July 2007. He was given the permanent position in December of that year. Previously, he served as President of Candlewick Press—a children's publisher based in Cambridge, SVP of Trade Sales at Scholastic Books, and SVP and Publisher of The Grosset and Dunlap Group at GP Putnam's Sons—now a division of Penguin Books. Gary started his publishing career as a Sales Representative at Random House in 1980, rising to VP of Children's Sales by 1990.

James G. Nicholson, President, Riverside Publishing 

Since 2010, Jim Nicholson has served as President of Riverside Publishing — the professional and educational assessment arm of HMH.  Prior to his current position, he served as Riverside’s Chief Operating Officer, where he was responsible for the company’s strategic planning and product development, overseeing the integration of the Edusoft® Assessment Management System.  With more than 20 years of experience in educational publishing, Jim previously held senior leadership positions at Pearson, including Vice President of Finance for its Literacy business unit.  He holds an MBA from DePaul University and a BS from Indiana University.

Lee Ramsayer, Executive Vice President, U.S. Sales 

Before joining HMH, Lee served as Senior Vice President of sales for Monster’s Government Solutions sector. While at Monster, Lee built a dedicated sales team that addressed workforce and economic development in regional economies, and also drove change management and new strategy development sales and system integration partnerships. Prior to Monster, Lee served as General Manager, Government Sales and Consulting Services for Microsoft. In this role, Lee led the development of Microsoft’s strategic approach to state and local governments including the development of go-to-market strategies. Lee currently serves on the board of Innovate Education, a national organization focused on STEM education.

Lesa Scott, President, Heinemann 

Lesa Scott is President of Heinemann, a division of Houghton Mifflin Harcourt dedicated to the development of professional resources and educational services for teachers – from kindergarten to college.  A former science, social studies, and health teacher, Lesa’s career in education spans more than thirty years. She left the classroom to market and sell textbooks for Laidlaw Brothers Publishers, subsequently rising to sales and marketing leadership roles at Scott Foresman Educational Publishers, McDougal Littell and Scholastic.  Lesa received a BS and MS in education from Arkansas State University and completed post-graduate studies at Texas Women’s University.

Dr. Nicole Melander, Senior Vice President, Digital Strategy 

Nicole joined Houghton Mifflin Harcourt in January 2014 as Senior Vice President of Digital Strategy. Previously, she served as the Chief Technology Officer of Achieving the Dream (ATD), a national reform network dedicated to community college student success and completion. Prior to joining ATD, Nicole held education and technology leadership positions at Deloitte Consulting, Microsoft and Oracle. In the academic world, she taught on the topics of collaboration technology and social media for business at American University where she won the campuswide “Teaching with Technology Award."

Lawrence K. Fish, Director and Chairman of the Board

Lawrence K. Fish has served as a member of the board of directors since August 2010 and Chairman of the Board since January 2011. Mr. Fish served as Chairman and Chief Executive Officer of Citizens Financial Group, Inc. (“Citizens”) from 2005 to 2008 and before as Chairman, President and Chief Executive Officer, from 1992, of Citizens. Mr. Fish is a member of the Corporation (Board of Trustees) of Massachusetts Institute of Technology. He serves on the boards of Textron Inc., Tiffany & Co., and NBH Holdings Corp. He is also an Honorary Trustee of the Brookings Institution in Washington D.C. Mr. Fish’s extensive experience in the areas of finance, marketing, general management and corporate governance enables him to provide the Company with effective leadership on the board of directors.

Sheru Chowdhry, Director

Sheru Chowdhry served as a member of the board of directors from March 2010 through March 2012 and rejoined the board in June 2012. Mr. Chowdhry joined Paulson & Co. Inc., a hedge fund, in 2004 as a Senior Vice President and has been a Managing Director and Head of Distressed & Bankruptcy Research since 2008. Previously, he was a research analyst at DebtTraders Inc., covering distressed and bankrupt securities, and an investment banker in the Mergers & Acquisitions Group at JP Morgan Securities. Mr. Chowdhry’s financial expertise and significant experience with debt and equity capital markets render him a valuable member of the board.

L. Gordon Crovitz, Director

L. Gordon Crovitz has served as a member of the board of directors since August 2012. From 1980-2007 Mr. Crovitz held a number of positions with Dow Jones and the Wall Street Journal culminating in his role as Executive Vice President for Dow Jones and Publisher of The Wall Street Journal. He was co-founder of e-commerce software company Press+ in 2009. Mr. Crovitz serves on the Board of Directors at Minneapolis Star Tribune, Business Insider, Blurb, Dunn & Bradstreet and Marin Software. He is on the board of the American Association of Rhodes Scholars. Mr. Crovitz’s management roles in the publishing industry and extensive experience as a director enables him to provide the Company with valuable guidance.

Jill A. Greenthal, Director and Chair of Nominating, Ethics, and Governance Committee

Jill A. Greenthal has served as a member of the board of directors since June 2012. Ms. Greenthal has been a Senior Advisor in Private Equity at the Blackstone Group since 2007, working closely with the company’s global media and technology teams to assist in investments in those sectors. She also currently serves as a director of Akamai Technologies, Michaels Stores and The Weather Channel Companies. Prior to 2007, Ms. Greenthal was an investment banker and partner at Blackstone and Credit Suisse First Boston. Ms. Greenthal has extensive experience in the media industry and in advising technology and media companies, which enables her to provide valuable guidance to the Company.

John F. Killian, Director and Chair of Audit Committee

John F. Killian has served as a member of the board of directors since January 2011. Mr. Killian was Executive Vice President for Verizon and served as Verizon’s Chief Financial Officer from March 2009 through October 2010. Prior to becoming CFO, Mr. Killian was President of Verizon Business from October 2005 until March 2009, the Senior Vice President and Chief Financial Officer of Verizon Telecom from June 2003 until October 2005, and the Senior Vice President and Controller of Verizon Telecom from April 2002 until June 2003. Mr. Killian serves on the board of directors at ConEdison Inc. and is a Chairman of the Board of Providence College. Mr. Killian brings extensive financial expertise to the board, as well as significant management and leadership experience.

John R. McKernan Jr., Director and Chair of Compensation Committee

John R. McKernan, Jr. served as a member of the board of directors from August 2010 through June 2012 and rejoined the board in September 2012. Mr. McKernan is currently Chairman and Chief Executive Officer of McKernan Enterprises, Inc., in Portland, Maine. He is the former Chairman of Education Management Corporation, a provider of post-secondary education in North America, where he served as Chief Executive Officer from September 2003 until February 2007 and continues to serve as a director. Mr. McKernan is a director of BorgWarner Inc. and served as Governor of the State of Maine from 1987 to 1995. Mr. McKernan is currently Chairman of the Board of Directors of The Foundation for Maine’s Community Colleges and serves on the board of the U.S. Chamber of Commerce’s Institute for a Competitive Workforce. Mr. McKernan brings to the board superior leadership capabilities, knowledge of the legal and legislative processes and significant prior experience as a director.

Jon Miller, Director

Jon Miller joined the board of directors in May 2013. Mr. Miller served as the Chairman and Chief Executive Officer of the Digital Media Group at News Corp. and was its Chief Digital Officer from April 2009 to September 2012. Previously, Mr. Miller was the Founder and Partner at Velocity Interactive Group, an investment firm focusing on internet and digital media, from its inception in February 2007 to April 2009. Prior to founding Velocity, Mr. Miller served as the Chief Executive Officer of America Online, Inc., or AOL and previously as Chief Executive Officer and President of USA Information and Services. Mr. Miller is a trustee of the American Film Institute and The Paley Center for Media. Mr. Milller serves on the boards of TripAdvisor, Radio Télévision Luxembourg and Shutterstock. Mr. Miller has extensive experience in the internet and digital media industry, which enables him to provide valuable guidance to the Company.

E. Rogers Novak Jr., Director

E. Rogers Novak, Jr. has served as a member of the board of directors since November 2012. He is a founder and managing member of Novak Biddle Venture Partners, an early-stage venture fund focused on investment opportunities in businesses focused on education, security, big data analytics, and business-to-business-to-consumer. Roger formerly served as Lead Director of Blackboard which was acquired by Providence Equity Partners. Roger currently serves on several private company boards and is a member of the External Relations Council for the Department of Homeland Security’s Predict project. He also serves on the Board of Trustees for Kenyon College where he sits on the Budget, Financial and Audit Committee and the Information Resources Committee. From 2008 to 2011, Roger held a seat on the Board of the National Venture Capital Association and was their Treasurer and a member of their Executive Committee from 2009 to 2011. Mr. Novak’s significant prior experience as a director, especially in the education technology sector, render him a valuable member of the board.

Linda K. Zecher, Director

Linda K. Zecher joined Houghton Mifflin Harcourt in September 2011 as President, Chief Executive Officer and Director. Previously, she served as Corporate Vice President of Microsoft's $8 billion Worldwide Public Sector organization, where she led a team of nearly 2,000 sales and marketing professionals serving government, education and healthcare customers in more than 100 countries. Prior to joining Microsoft in 2003, Linda held leadership positions with Texas Instruments, Bank of America, PeopleSoft, Oracle and Evolve Corp. She currently serves on the U.S. State Department's Board for Overseas Schools, the Focused Ultrasound Surgery Foundation Advisory Council, and the Emily Couric Leadership Forum. Linda is also a former member of the Intelligence National Security Association, the Virginia Piedmont Technology Council, and James Madison University's Board of Visitors.  

Related: 

The Bill and Melinda Gates (of Hell) Foundation
Bill Gates' Agenda for the 21st Century
Tax-exempt Foundations in the U.S. Operate to Promote Collectivism (Communism)
The World's Richest Give Billions to Remake the World in Their Image
The Gates Foundation, Vaccines World Population from Seven Billion Down to 500 Million Using Vaccines
Gulen Islamist Charter School Movement in the U.S. is Funded By Taxpayers
Common Core standards shake up the education business
Rupert Murdoch Wins Contract to Develop Common Core Tests
Klein’s Amplify Tablets Crack the $17 Billion Market
Following the Money Trail: Who Profits From the Implementation of Common Core State Standards?
A Common Core of Corporate Profit
Is Profit Driving the Common Core State Standards (CCSS) Initiative?
Obama program making these people filthy rich
How Bill Gates pulled off the swift Common Core revolution
THE BUSH FAMILY WILL PROFIT HANDSOMELY FROM COMMON CORE IMPLEMENTATION
Profit motive behind Common Core Standards
Flow Chart Exposes Common Core's Myriad Corporate Connections





CCS: A Cash Cow For Corporate Education Raiders 
David Coleman is one of these consultants (see Schools Matter and Susan Ohanian) and the “chief architect” of CCS. Like many of the most well-known Ed Deformers (e.g., Bill Gates, Eli Broad, Walton Family, Arne Duncan, Michelle Rhee, Joel Klein, Mike Bloomberg), Coleman had virtually no real experience in the classroom. In fact, according to Schools Matter, his only pedagogical experience was a little tutoring he did while an undergrad at Yale, where he studied English. After this, he went on to work in business, making a lot of money with the Grow Network, which was bought by McGraw-Hill in 2005. In 2007 he left McGraw-Hill and co-founded the nonprofit Student Achievement Partners, which played a leading role in creating the Common Core Standards. He now leads Student Achievement Partners in their work helping teachers and policymakers to implement the Common Core State Standards.

December 2007 Warning About the September 2008 Financial Crisis

EXIT 2007: A Year of Denials of the Bad Loans Credit Crisis and Inflation

December 26, 2007

Jim_Willie_CB, The Market Oracle - The spirit of the holiday should not be denied despite the mayhem building at an unstoppable clip.

Wall Street is in deep sneakers. They are busy putting a positive spin on 2007, which in mid-year unleashed the beginning of an unstoppable nightmare. The first cracks were revealed in gory fashion in the form of subprime mortgages blasting fissures through the entire bank and bond system. The next cracks will blossom into a mindboggling series of shocks next year.

The US Federal Reserve planted millions of seeds, led by Alan Appleseed Greenspan, during almost two years of ridiculously irresponsible low interest rates so as to assure a doomed outcome. One should never entrust US-based lending institutions to create mortgage products, to approve of loans, to work (collude) with appraisers, the end result of which is massive creation of new debt destined to implode. Recall that the Good Crazed Maestro, who resembles Mr Magoo even more since his retirement, endorsed the housing bubble, begged for it even, urging down long-term interest rates in 2001 & 2002. He desperately needed for housing inflated so-called wealth to save his bacon from the stock bust a year earlier. Both the stock bubble and housing/mortgage bubbles had his fingerprints on them. 

GREENSPAN MORTGAGED THE ENTIRE BANKING SYSTEM AND ECONOMY WITH BAD LOANS, WHICH ARE IN SYSTEMIC DEFAULT. He actually blessed the housing bubble as a legitimate foundation for an entire US Economy, a fact that should never be forgotten. One must knock down a fifth martini or whiskey to buy such heretical garbage, but the entire nation lapped it up like hopeless drunkards grasping at overturned bottles. The past several weeks have included a boatload of denials and a large dose of tontaria (Spanish: nonsense). This article is a brief attempt to address the denials and tontaria, a reflection upon the completed year. In no way is any claim made of being a comprehensive listing of blatant deceptions. That requires a 200-page book.

The Robert Rubin mentality has prevailed for well over a decade, wherein US banking policy is designed to recklessly put off problems until tomorrow in order to buy some time today. And yes, during the many todays, the Manhattan Made Men crowd have profited handsomely. Well, Bob, tomorrow is 2008. You are busy covering your hind parts with a fresh Abu Dhabi infusion at Citigroup, a guarantee of some bought time but not any reprieve of eventual bankruptcy. Rubin ushered in, with zero fanfare or broad recognition, the age of the Mussolini Fascist Business Model. The merger of state of big business started in the mid-1990 years with the financial sector, and has extended to energy and military defense in the 2000 years. Get nervous if and when it extends to the pharmaceutical industry in coming years and forced innoculations. 

Their motives are almost uniformly self-serving, not for the public sector service and benefit. This is about profit and control. In fact, a syndicate has had control of the White House since the Ole Gipper took one in the ribcage in a close call with the Grim Reaper in 1981. This group crosses political party lines with excellent disguise. Nationalism and security are their calling cards these days. The tragedy of this business model is the spread of corruption throughout an entire system, hidden at first, boasted in midstream, enforced at the point of a gun later on. My claim of US institutionalized dishonesty made in 2005 in public manner, even at conferences, has been verified with bold examples for all to see. It extends far and wide, to charity organizations, even to sports. 

Next year, a reign of financial and economic terror will befall the world banking system, with the United States as its origin. The shock waves will have California as its epicenter, the creative laboratory of nutty mortgage design. The US banking system will finally be recognized as destroyed, insolvent, and entirely dysfunctional. The repair process in reaction will be interesting to behold, as money will be printed, created, and dispensed at a clip never seen before in a multi-national fashion in the history of mankind. So far, no level of desperation can be detected. That will surely change in 2008. The Wall Street criminal fraud artisans, at the focal point of responsibility for dissemination of trillion$ of mortgage bonds, could not resist temptation. In fact, the US Federal Reserve seems still unaware of crisis.

Wall Street did what they do best, package and sell, with regard only for their fees, paychecks, and bonuses, as they organized collusion toward fraud and misrepresentation never seen before in modern history. Well, this time, they got stuck with a huge amount of inventory. Big domestic institutions followed by foreign institutions wised up, but not quickly enough. The private equity movement was in full swing also, leading to more accumulated inventory. Then it slammed shut. Unfortunately for them, the assembly line was halted abruptly. IMAGINE SALMONELLA in a meat packing business with huge volume in shipping products. As the production line halted, much of the toxic output ended up in the meat packer balance sheet, even dinner table. Some CEO executives took sick and fell by the wayside. Their customers are all sick, very sick, and will get even sicker.

BOLDFACED DENIAL WITH YET MORE SPIN

The 2007 year started out reasonably calm, and ended with constant damaging storms in an utter barrage. Wall Street denials of the housing crisis and mortgage debacle were as consistent as they were a departure from reality. The next big facade of deception to be smashed will be that the mortgage loan and bond problem is a subprime issue. By summertime, a gigantic crisis in mortgages will be recognized far beyond the boundaries of subprime. It is instead an adjustable mortgage issue, whose emphasis is firmly on recently written loans. By late next year, the climax to the mortgage debacle will be the horribly painful writedowns to prime mortgage bonds, from basic falling national housing collateral value. 

If the Untied States suffers another 5% to 7% decline in home values, the entire mortgage bond structure will be downgraded, lowered in value, sufficient to threaten the entire banking system. Below is a quick list of specific denials with ample spin, hard to swallow but heard frequently. Let this be a record of 2007, a litany recitation of corrupted information. Wall Street and their attendant media outlets and advertiser accomplices must paint a decent face on a turning point year coming to a close in 2007. It ended in truly deadly fashion.  

In just a few days recently, the following claims were made in the financial networks, from anchors to guests alike. They looked like liars because they are liars.
 
The real estate downturn was overblown. A modest correction took place, rendering prices more reasonable, taking the froth off the market, removing the speculators, bringing the system back to normal. What a crock! Watch inventory growth and continued home foreclosures. Watch housing values continue painfully down another 5% at the very least next year. Watch the incredible effect when prime mortgage loans and bonds crash as the next phase of this powerful bear market unfolds. National prices are down 6.7% for the last twelve months ending October in the top10 cities, and down 6.3% in the top 20 cities. In eleven of the top 20 cities, the largest single annual price decline has been recorded. Data comes from the S&P Case Shiller index. The prices are actually accelerating downward, in synch with inventories, as a valid expression of Supply & Demand dynamics.

The ugly side to this story is horrendous mortgage fraud at every conceivable level. Small rings engaged in fraud with appraisers at the loan level, then abandoned loans. Lenders engaged in fraud at the volume level by promising refinances never to occur. The system enaged in NINJA loans on a rampant scale, requiring No Income, No Job or Income. Bankers engaged in fraud at packaged bond levels by blatant misrepresentation. This downturn has already caught the attention of some more diligent analysts, who have begun to recognize it as deep and damaging as anything seen since the Great Depression. We will witness a depression with an Orwellian spin, all the pain but little of the recognition. On the footpaths traveled by prospective home buyers, they hold back, realizing the market has not stabilized, anticipating better bargains ahead, as they assess that housing is not a safe investment, period. The American dream of a home has morphed into a nightmare, a prescription for losing your lifelong savings.

The worst is over in financial firm bond loss writedowns, as the bank sector offers huge stock bargains. The stock selloff in bank equities is overblown. What a crock! They openly admit that the smartest guys in the room missed the big bond problem. Of course, they missed the problem, since they were feverishly trying to sell their lethal fraud-ridden bonds, the centerpiece to the problem. An old adage is appropriate, that hidden losses are triple the size of initial estimates. By the time more dust clears, Wall Street banker broker dealers in toxin will report bond writedowns totaling over $300 billion, perhaps over $500 billion. If the upper figures are a reality, then the financial nucleus on Wall Street is bankrupt. If lawsuits come fast & furious, their losses will easily surpass $1000 billion. The BKX banking stock index shows freefall, not any conceivable hint of reversal or stability. The funniest chapter of this tragedy is the continual renaming of the packaged bond toxin for sale by Wall Street. Collateralized Debt Obligations are not too bad sounding.

Structured Investment Vehicles sounds more like trucks circling the city endlessly, whose bond cargo is unwelcome in any garage. Unidentified Financial Objects sound like they belong in Roswell New Mexico with other UFO sightings. They were designed to hold the unlabeled portions of dead bond packages, but jettisoning off the dead parts. The Master Liquidity Enhancement Conduit (MLEC ) was a bold attempt by Wall Street to obtain USGovt bailout help, deceiving the US Congress and the public with a fancy label. The name of the game is to rename toxic agents, like salmonella, trichinosis, ptomaine. The public is not very educated, a strong advantage for the shell game artisans. There is innovation here, but only in packaging, nothing in value. This is not your father's typical credit cycle. There is nothing healthy about what is happening, and no signs anywhere of stability of the situation. This is NOT the system working it out, but rather the system NOT working much at all.

The USEconomy has suffered no spillover from the housing crisis and mortgage debacle. Never under-estimate the US consumer. Claims continue to flow in that the economy is resilient, its back is not broken, growth continues, and consumers are hanging in there. What a crock! Those who embrace such spurious views must pay too much attention to the official USGovt statistics, and not enough of the regional sources (Philly Fed, Chicago PMI, business investment) relating to manufacturing and services. Has anyone noticed that the consumer retail figures are not inflation adjusted, and are running well below even the doctored CPI series? Retail is in decline in real terms.

The consumers and households where they live are under strain never seen before in several decades. Energy bills this winter have absolutely slammed households, the worst being in the NorthEast with heating oil. The last resort has been credit cards, since $500 billion less in home equity extraction was pulled in 2007. The credit card delinquency is rising. In fact, most delinquencies are rising, probably juvenile delinquencies also. The occupant of the highest office in the land might be another. When bonds backed by credit cards and car loans go bust in 2008, the denial will fade away.

A USEconomic recession is not being indicated in the stock market, which is still an efficient market mechanism. The major stock indexes have held firm, withstood corrections and sudden selloffs. What a crock! Most major sector indexes have broken down, including banks (BKX), brokerage (XBD), mortgage finance (MFX), homebuilders (HGX), real estate investment trusts (RMZ), chips (SOX), retail (RLX), but not pharmaceuticals (DRG). America continues to be the sickest and most medicated in the industrialized world. And to be sure, the energy sector (XLE) is a strong as Atlas, while the Global Energy War rages on. Lest one forget, the defense industry (DFI) is doing swimmingly, as war is this administration's middle name. Sorry, got distracted by details. The claims of an efficient market mechanism should bring laughter from the lowest portion of the human gut, with deep guffaws and bellows. The Plunge Protection Team has never been more active, and its activity has finally been admitted by the chieftains of the Titanics at sea, the ships of state.

The Working Group for Financial Markets has worked overtime in 2007, rescuing the S&P500 with timely leveraged buys at 3pm . The PPT reach is broad, from stocks to bonds to currency to gold to oil. They have totally corrupted the entire financial market system. There is an efficient market mechanism at work, no denial here by me, since the PPT has efficiently destroyed the markets. So the S&P index is not pricing in a recession. Fine, everything else is!!! We have a situation where the top level overall measures show resilience, while all the components are breaking down. The Gross Domestic Product to measure economic growth has not faltered, while almost all economic components are in recession. The insult is to the doctors who falsify the all important aggregate measures, for the greater good. This is like saying every child in your family is sick, parents included, home structure also, but the family itself remains healthy and the home is strong. In the earliest school years, one should have learned that 1+1+1+1 does not equal 10. Every lie requires three more to support it. They powers forgot to lie with the components.

Foreign investment in US banks and institutions is a sign of strength, as they are attracted to opportunity in the United States. They see value in the US with bargain prices. What a crock! Foreign investors and institutions are actually racing to infuse cash into the several large banks in order to prevent a very ugly series of public declarations of bankruptcy. Start with Citigroup. Add Bear Stearns. Maybe pitch in Wells Fargo. The words ‘insufficient capital' should tip off intelligent people, but so far that has yet to occur. The words mean insolvent and bankrupt, with absent cash liquidity being the linchpin for filing for bankruptcy. Foreign infusions like from Abu Dhabi , Singapore , even Citadel, these have stemmed the capital inadequacy condition, but not the insolvency. They are still suffering from assets being outweighed by liabilities. Their bonds and related derivatives have gone sour, resulting in magnificent losses. This is nowhere over. My view leans more on reality. Most Wall Street banks are now vampires, walking dead. They almost all seek huge gifts from the USGovt, at costs born eventually by the US taxpayers. Even that entity (taxpayers) is something of a joke.

The Untied States does not pay its own bills, not when gargantuan federal deficits are financed by Arabs and Asians via recycled trade surplus. The printing press might soon be the biggest single support mechanism for US debts. The foreign institutions are taking a stake in control of the US system itself, even while they attempt to prevent the bankruptcy of some of their largest investments. If Citigroup did not receive the multi-billion$, how far would a bankruptcy filing be down the road? These banks are as busy trying to dump mortgage bonds as they are resisting compliance of accounting rules. They have so much garbage assets sitting off balance sheet, it has become openly humorous. No, the US system is being sold. Sovereignty is being compromised in open visible fashion. Expect in a few years to apply for a car loan from Arab and Chinese banks. They might actually be more honest.

Reasonable credit standards have returned to the lending process, an indication that the system has corrected itself. What a crock! Bankers and mortgage agencies have turned into scaredycats, afraid to lend even to qualified borrowers. They distrust all collateral presented, since either assets are questionable in value or markets are too opaque. Many loans are approved, but down payments are much higher than ever before. Lenders are properly afraid that home collateral will gradually vanish. Anyone who makes the above claim must not be watching the interbank commercial paper market, as sizeable amounts shrink every week, almost without exception. Anyone who makes the above claim must not be watching the LIBOR rates, which continue to give the US Federal Reserve skimpy shallow myopic solutions a failing grade.

Anyone who makes the above claim must not be watching the parade of banker bond writeoff losses. Anyone who makes the above claim must not be watching the collapse in mortgage bond indexes, even the significant losses to primes. Anyone who makes the above claim must not be watching the banker capital ratios plummet. Anyone who makes the above claim must not be watching the delinquency rates on loans of almost every conceivable type. Anyone who makes the above claim must not be watching the decline in residential home values, the collateral for many asset backed bonds. 

The US banking system is heading deeper into crisis. Just like the Japanese banking system went insolvent during the 1990 decade, so has the US banking system. This has been a Hat Trick Letter forecast, registered in 2005. Japan kept many insolvent banks afloat, refusing to log soured failed assets on their balance sheets. Japan ran trade surpluses. Neither does the US run surpluses, nor its banking system fully enable prevent dead assets from showing up on balance sheets. Few properly link the resuscitation of the Japanese banks with the rise of China in the Asian sphere. The industrial buildup in China owes its equipment investment primarily to Japan , not the US . The majority of Japanese trade takes place with China nowadays, not the US. The US banking system will continue to implode. Wait until the prime mortgage implosion next year. We are not even in middle stages to the housing crisis and mortgage debacle. IT WILL CHANGE THE ENTIRE US SYSTEM, IN EVERY PHASE, NOT JUST FINANCIAL.

Globalization has made America strong, a successful initiative in free trade. High trade volumes mean improved wealth and living standards. What a crock! No doubt that global trade has advanced to great heights and huge volumes. Imagine a corporation with very high worker wages and not great reliability either. Expose that corporation to increased competition, and that US firm gradually liquidates. Imagine a corporation with moderate costs from regulations and high taxes. Expose it to foreign competition from rival firms who have absent regulatory burden and lower taxes, and the US firm gradually liquidates. Executives of US firms see fully the high wage, regulatory, and tax costs. They want to capitalize on greener pastures overseas. This is capitalism, and the loser is the US worker and tax base. 

The winners have been investors in multi-national firms. The list of US firms doing over 50% of their business overseas is growing. The other list of US firms whose employee base is over 50% overseas is also growing. The list of US firms with Research & Development located overseas is also growing. These US firms benefit from globalization trends, but not the US workers. By the way, the Chinese yuan currency is not the problem. My assessment is that the yuan could be upwardly revalued by 100%, but the wage differential would not be totally addressed. That ratio is between 5:1 and 10:1, not to be fixed even by a big currency adjustment. Their country has a few more people than the United States, with more migrating from the rural areas every year. Story of globalization reads like another chapter of a US tragedy novel.

Gold is giving the wrong inflation signal, since the Consumer Price Index has yet to show any surge whatsoever. The rise in gold has no basis. What a crock! The most crucial of all economic indexes is the CPI, whose doctored numbers permit broad price inflation to be misrepresented as economic growth. Cost of living increases must be kept low for Social Security payments, for government pension payments, and for all manner of official statistics often reported after adjustment for price inflation. The export of inflation has been increasingly difficult recently, sure to be more difficult in 2008 after the global revolt against the USDollar and toxic bond export from Wall Street, not to mention trade war with China. When money supply is growing at 14% to 15% in the US and Europe, systemic price inflation must be immediately in its wake. IT IS! The Shadow Govt Statistics folks report a CPI without gimmicks over 10% steadily in monthly figures, more in touch with reality. They also report a GDP in reverse, as in minus 2.3% for 3Q2007 and running negative in almost every quarter since 2001. No no no! Gold is flashing a warning signal from unprecedented Western bank monetary inflation, the likes of which have never been seen in modern history. Gold is flashing a warning signal for banking system breakdown, even geopolitical global tensions. To be sure, some new money supplied to the system has gone to offset dying assets in bailouts. The rest spills into gold and crude oil and other materials. In 2008, gold will hit $1000 per ounce without the slightest exertion. After the banking panic, economic recession recognition, continued revolt against the US $, and utter desperation to seek remedy, gold will advance toward $2000 very quickly.

The crude oil price is heading down, since the majority of analysts and principal observers believe in unison that it is heading up. Contrarian principles rule, since buyers have already bought their positions. What a crock! This is not a contrary investment setting. They must not have been seeing the USDollar distress, the revolt by Arabs and Asians alike (not to mention Russians), the relentless growth demands from emerging economies, or the gradual depletion in major oil fields. To be sure, a slowdown in the piggish USEconomy will result in lower US-based oil demand. The Untied States account for 25% of world crude oil demand, and 10% of world gasoline demand. 

However, emerging economy growth remains rapid, from Brazil to Russia to India to China. Will their growth eclipse the falloff in the US demand? We will see. Any further weakness in the USDollar will cause the crude oil price to climb in offset. The only ground worth giving here is that the USDollar might stage an intermediate level rally, in counter-trend. If it does, then crude oil will head toward $80 per barrel. Such a counter rally might be underway, and might be almost over as the year closes out. The problems behind the fundamentals in the oil market are too grotesque to fix. The producers need higher prices to develop difficult oil fields. My forecast is that gold will outperform crude oil in future months, as the economies slow further and the bank system implodes further. 

The most perverse side of the crude oil market can be described in disturbing terms. In order to finance the USGovt debt, a higher oil price is necessary. Why? Since the Arab nations, or more generally the Persian Gulf nations, feel compelled to recycle their surpluses into US$-based financial securities. They depend upon the USMilitary for protection. Call it a Protection Racket, more precisely. If it isn't a pack of infidels occupying bases next door, it might be a terrorist attack out of nowhere, to rattle the Arab cages into continued USDollar support. Watch the Saudis for a sever or crack in support. Another truly perverse factor is involved. The USEconomy needs fuel to power its many functions.

Therefore it needs to ensure oil supply. The military offers assistance via annexation. Try the converse. The USMilitary needs fuel to wage war for its own objectives. With its security groups, it acts much like a sovereign entity, but whose costs are largely covered. Therefore it needs to conquer and control the nations rich in oil. Does it matter which drives which? Just Wednesday, the mere story of Turkish military attacks in Kurdistan, an Iraqi province rich in oil, drove the crude oil price up toward 96. This demonstrates the frailty of any crude oil selloff.

CNBC has degraded in 2007 in its integrity, let it be known. The US financial news network has always served as a platform for Wall Street spin, blatant promotion. In 2007, in my view the network slid further down the slope of deception and basic pumping the propaganda. The loudest and most obnoxious player is clearly Larry Kudlow, whose specialty is to interrupt his guests when they explain opposing viewpoints. The Kudlow byline is “Right on the USEconomy, where if the Congress comes through on low taxes, limited government, and free trade, you will make money.” In the last several years, taxes continue to plague the entire US spectrum, led by the problem child of Alternative Minimum Tax. 

The size of the USGovt has grown to frightening levels, leading in job growth, as the state rises in power. Free trade has been the open door for exploiting cheaper foreign labor, in the hidden liquidation of important segments of the USEconomy, resulting in an unprecedented Middle Class squeeze from falling wages. Since 2003, the average price-adjusted wage in the Untied States has fallen by 4% to 5%, depending upon men or women. If one properly adjusts wages for inflation, the fall is more like 25% in real wage decay!!! The CNBC network continues to talk down gold, to embrace CPI price inflation data as valid, to embrace GDP economic growth data as valid, to embrace BLS jobless data as valid. The CNBC network does not provide the information you need or put forward the people you trust. They serve as a potent dominant Wall Street mouthpiece and promotional vehicle, one Orwell himself could comment on in clear prose.

The CNBC network has its majority of advertisers come from Wall Street and the related financial sector. They are biased. They do give 5% of their time to tremendously adept guys like Greg Weldon, who just finished a quick interview. He explained how the US and European central banks are providing a huge monetary stimulus even though their own price inflation figures are rising, specifically citing the $500 billion by the Europeans to ensure adequate credit to their banking system. He points out the huge liquidity stimulus by the Europeans, not yet by the American counterparts, in pumping up monetary inflation. Weldon still likes gold, and even more platinum, since the USFed has crossed the line in stimulus despite the price inflation warning signals. He believes the US consumer is saturated with debt, so central bank efforts will result on pushing on a string. That usually results in a vast increase in the central bank stimulus. If it does not work, do more of it!!!

Lastly a happy note, for those who embrace truth. No longer are we hearing nonsense like how trade deficits are a sign of US financial strength. The foreign central banks and major financial institutions continue to be flush with cash, most being basically monetary inflation exported from the Untied States. With recent unraveling of the US $-based recycle process, with the advent and rise of the powerful Sovereign Wealth Fund, the landscape has changed. The hedge funds have been put to the back pages, as the SWF funds have been elevated to the front pages. The SWF funds have become weapons used by nations hostile to the US interests, utilized to oppose the USDollar, utilized to oppose the hegemony, utilized to resist the global structure. During the great recycle resistance, as manifested in more accurate terms as the breakdown of the Bretton Woods II pseudo-agreement, the risks of such grand foreign credit dependence is more recognized these days as a weakness. Bring in Wall Street fraud hucksters, export a couple trillion$ worth of toxic bond sludge, and this so-called advantage is seen as an avenue for Wall Street corruption, and foreign anger, revenge, revolt, and retribution. Now that same Recycle Avenue has become more of a One-Way Street.

WE ARE WITNESSING THE SLOW MOTION MELTDOWN OF THE US $-BASED BANKING AND BOND SYSTEM, AND THE RISK MODEL ITSELF. THE GREENSPAN DESIGN OF ECONOMIC DEPENDENCE UPON HOUSING AND MORTGAGES FAILED. US FINANCIAL ENGINEERING THROUGH COCKEYED INNOVATION HAS FAILED MISERABLY. THE FLIGHT INTO GOLD WILL ACCELERATE IN BREATHTAKING FASHION IN 2008. BUT FOR 2007, THE SHILLS NEEDED TO PAINT A NICE PICTURE, AS WE RING OUT THE OLD YEAR. DO NOT BE FOOLED. THE YEAR 2007 WAS A TURNING POINT TOWARD CATASTROPHE. PROTECT YOURSELF WITH GOLD AND RELATED INVESTMENTS, AND FLEE FROM BONDS AND HOUSING. THE FASTEST ROUTE TO POVERTY IS EMBRACE OF USDOLLAR INSTRUMENTS AND US-BASED CREDIT INSTRUMENTS OF ALL KINDS, INCLUDING HOMES AND MORTGAGE BONDS.

Hey! Don't look now, but the Canadian Dollar has recovered almost back to 102.

EDITOR NOTE: Fitch Ratings contacted me to make a clarification on last week's article, that they have not covered a debt rating on ACA Capital since 2004. My confusion came from a public article written on a major news service, which was the source of error. 

Ferguson Missouri Police Fire Tear Gas at Crowd Protesting Police Shooting Death of Teen, Michael Brown; Governor Declares Emergency and Imposes Curfew

Tear gas fills Ferguson's streets again

August 13, 2014

STORY HIGHLIGHTS

• Ferguson-Florissant district pushes back the start of school
• "We understand the anger ... that people want answers," police chief says
• Officials decline to identify officer who shot the teen, citing safety concerns
• Family's attorney: Police should be transparent, "not try to sweep it under the rug".

Ferguson Police Chief Tom Jackson is surrounded by his officers as he leaves a news conference on Friday.

CNN - A new witness in the police shooting of unarmed teen Michael Brown in Ferguson, Missouri, told CNN that Brown and the police officer tussled at the police car window, then the officer shot the teen multiple times, as Brown backed away.

"What I saw was when Michael and the cop were wrestling through the window," Tiffany Mitchell told CNN's Don Lemon. 

A shot was fired while Brown was out the window. He got free, and the officer got out of the vehicle, followed Brown and shot him, she said.

He raised his hands, and the officer kept firing, she said.

Police fired tear gas at a crowd of protesters late Wednesday for another night, as the group gathered to protest Brown's deadly shooting.

Officers in riot gear then marched toward the protesters near a burned out gas station, which has become the gathering point for demonstrations.

Police announced that they no longer considered the protest peaceful, before they fired the canisters, CNN producer Yon Pomrenze said. People fled in all directions, as the stinging clouds wafted by them.

A separate small group of over a dozen people gathered outside Ferguson's police station holding up signs and chanting protests for a fifth day.

Officer not named

Police have said Brown died in a dangerous struggle after trying to grab the officer's weapon, but witnesses say it seemed a brazen act of aggression by the officer on Saturday, and that Brown was unarmed and not threatening.

On Wednesday, Ferguson Police Chief Thomas Jackson told CNN that the officer had been hit and suffered swelling on the side of his face. He was taken to a hospital and released the same day, Jackson said.

Five days have passed since Brown's killing, and the public still does not know the name of the person who pulled the trigger.

There have been cries of a cover-up.

"That doesn't give the community confidence. That doesn't make it transparent," attorney Benjamin Crump told reporters. "And remember, we've got a long way to go before this community starts to believe that the police are going to give them all the answers and not try to sweep it under the rug."

Crump was one of the attorneys who represented the family of Trayvon Martin, the teenager who was killed in a 2012 altercation with Florida man George Zimmerman.

But Mayor James W. Knowles said police have received death threats against the officer and his family. They want to prevent further violence, he said.

Hackers have gone after his personal information and worked people up against members of government and the police, he said.

Trouble at night 

Police have asked protesters to restrict their gatherings to daylight hours, after violence has broken out repeatedly after nightfall. Protests during the day have been peaceful.

Protests on Sunday and Monday ended with clashes with police and looting . Police have made 47 arrests after Brown's shooting, KMOV reported.

"We understand the anger; we understand that people want answers. We understand that we've got a problem, but we're just asking people to be peaceful," Jackson said.

The Ferguson-Florissant School District announced that it was pushing back the start of classes this year. School had been scheduled to resume Thursday.

Civil rights

Federal civil rights investigators and the FBI carry out their own inquiry into the controversial case. In the town of 21,000, there's a history of distrust between the predominantly black community and the largely white police force.

"Race relations is a top priority right now and, as I said, I'm working with the Department of Justice to improve that," Jackson told reporters Wednesday.

Only three of the city's 53 officers are African-American, and Jackson said he is working to change that.

Dorian Johnson, who said he saw the shooting, told CNN on Tuesday that the officer who opened fire is white.

Brown wanted to pursue an education and was keen on staying out of trouble, his mother said. He was to start classes at a local technical college this semester.

Gov declares emergency, imposes curfew in Ferguson

August 16, 2014

AP - Missouri Gov. Jay Nixon declared a state of emergency and imposed a curfew Saturday in the St. Louis suburb where a black teenager was shot to death by a white police officer a week ago.

Nixon said that though many protesters were making themselves heard peacefully, the state would not allow a handful of looters to endanger the community. The curfew will run from midnight to 5 a.m.

Tensions in Ferguson flared late Friday after police released the name of the officer who fatally shot 18-year-old Michael Brown and documents alleging Brown robbed a store before he died.

Nixon also said the U.S. Department of Justice is beefing up its investigation of the shooting.

Missouri State Highway Patrol Capt. Ron Johnson, who is in charge of security in Ferguson, said there were 40 FBI agents going door-to-door talking to people who might have seen or have information about the shooting.

Nixon and Johnson spoke at a church in Ferguson, where they were interrupted repeatedly by people demanding justice and objecting to the curfew.

Johnson assured those in attendance that police would communicate with protesters and give them ample opportunity to observe the curfew.

"You saw people sitting in the street and they had the chance to get up," he said. "And that's how it's going to continue."

Brown's death had already ignited several days of clashes with furious protesters. Tensions eased Thursday after Nixon turned oversight of the protests over to the Missouri Highway Patrol. Gone were the police in riot gear and armored vehicles, replaced by the new patrol commander who personally walked through the streets with demonstrators. But Friday night marked a resurgence of unrest.

Local officers faced strong criticism earlier in the week for their use of tear gas and rubber bullets against protesters. Johnson said one tear gas canister was deployed Friday night after the group of rioters became unruly.

The officer who killed Brown was identified as 28-year-old Darren Wilson, a six-year police veteran who had no previous complaints filed against him.

The Ferguson Police Department has refused to say anything about Wilson's whereabouts, and Associated Press reporters were unable to contact him at any addresses or phone numbers listed under that name in the St. Louis area.

Wilson has been on paid administrative leave since the shooting. St. Louis County prosecutor Bob McCulloch said it could be weeks before the investigation wraps up.

St. Louis County Executive Charlie Dooley asked Missouri Attorney General Chris Koster on Friday to take over the case, saying he did not believe McCulloch could be objective. Koster said Missouri law does not allow it unless McCulloch opts out, and McCulloch spokesman Ed Magee said the prosecutor has no plans to surrender the case.

Related:

Ferguson Officer Darren Wilson earned police honor before shooting

Gaza Conflict Will Lead to Armageddon - Mideast Prepares for Retaliation Against Israel with a Strategic Alliance of Iran, China and Russia

"The Third World War must be fomented by taking advantage of the differences caused by the 'agentur' of the 'Illuminati' between the political Zionists and the leaders of Islamic World. The war must be conducted in such a way that Islam (the Moslem Arabic World) and political Zionism (the State of Israel) mutually destroy each other. Meanwhile the other nations, once more divided on this issue, will be constrained to fight to the point of complete physical, moral, spiritual and economical exhaustion…We shall unleash the Nihilists and the atheists, and we shall provoke a formidable social cataclysm which in all its horror will show clearly to the nations the effect of absolute atheism, origin of savagery and of the most bloody turmoil. Then everywhere, the citizens, obliged to defend themselves against the world minority of revolutionaries, will exterminate those destroyers of civilization. And the multitude, disillusioned with Christianity — whose deistic spirits will from that moment be without compass or direction, anxious for an ideal, but without knowing where to render its adoration — will receive the true light through the universal manifestation of the pure doctrine of Lucifer, brought finally out in the public view. This manifestation will result from the general reactionary movement which will follow the destruction of Christianity and atheism, both conquered and exterminated at the same time." - Albert Pike, 33° Mason, Pike's 1871 Letter to Giuseppe Mazzini

For thousands of years there was no conflict in Palestine. In the 19th century, the land of Palestine was inhabited by a multicultural population of Palestinian Arabs – approximately 86 percent Muslim, 10 percent Christian, and 4 percent Jewish. For centuries these groups lived in harmony.

In the late 1800s, a group in Europe decided to colonize this land. Known as "Zionists," this group consisted of an extremist minority of the Jewish population who wanted to create a Jewish homeland. They considered locations in Africa and the Americas before settling on Palestine, where the Jewish State of Israel was established in 1948.

Largely due to one-sided special-interest lobbying by AIPAC, the U.S. has given more funds to Israel than to any other nation: $85 billion in grants, loans and commodities since 1949, with an additional $50 billion in interest costs for advance payments, for a total cost of $135 billion or $23,240 per Israeli. During Fiscal Year 2011, the U.S. provided Israel with at least $8.2 million per day in military aid and $0 in military aid to the Palestinians... Continue Reading -->

Egypt Negotiates Cease Fire Between Palestine and Israel

August 10, 2014

Reuters - Israel and the Palestinians agreed on Sunday to an Egyptian proposal for a new 72-hour ceasefire in Gaza starting at 1700 ET, officials from the warring sides said.

"Israel has accepted Egypt's proposal," a senior Israeli government official said, adding Israeli negotiators would return to Cairo on Monday to resume indirect talks with the Palestinians if the truce held.

The Israeli team had flown home on Friday before a previous three-day truce expired and hostilities in the month-old conflict broke out again.

A Hamas official said Palestinian factions had accepted Egypt's call and that the Cairo talks would continue.
In a statement, Egypt's Foreign Ministry urged "both sides to exploit this truce to resume indirect negotiations immediately and work towards a comprehensive and lasting ceasefire agreement".

Earlier, Prime Minister Benjamin Netanyahu said "Israel will not negotiate under fire" and warned of a protracted Israeli military campaign in the Gaza Strip if rocket salvoes continued.

Hamas has demanded an end to Israeli and Egyptian blockades of the coastal territory and the opening of a Gaza seaport - a project Israel says should be dealt with only in any future talks on a permanent peace deal with the Palestinians.

Israeli air strikes and shelling on Sunday killed five Palestinians in Gaza, including a boy of 14 and a woman, medics said, in a third day of renewed fighting.

Since the previous ceasefire expired, Palestinian rocket and mortar salvoes have focused on Israeli kibbutzim, or collective farms, just across the border in what appeared to be a strategy of sapping the Jewish state's morale without triggering another ground invasion of the tiny Gaza Strip.

A month of war has killed 1,895 Palestinians and 67 Israelis while devastating wide tracts of densely-populated Gaza. But international pressure for a ceasefire has been weaker than in earlier rounds of Israeli-Palestinian conflict given other international security crises, notably in Iraq and Ukraine, distracting major powers.

Men salvage belongings from the ruins of a home that residents say was hit by an Israeli air strike

However, the violence over the past three days has been less intense than at the war's outset, with reduced firing on both sides. Israel withdrew ground forces from Gaza on Tuesday.

BLOCKADES

Before the truce ran out, Israel said it was ready to agree to an extension. Hamas did not agree, calling for an end to the economically stifling blockade of the enclave that both Israel and Egypt, which regards the Islamist movement as a security threat, have imposed.

Israel has resisted easing access to Gaza, suspecting Hamas could then restock with weapons from abroad.

A sticking point has been Israel's demand for guarantees that Hamas would not use any reconstruction supplies sent to Gaza to build more tunnels of the sort that Palestinian fighters have used to infiltrate the Jewish state.

A Palestinian protester hurls stones towards Israeli troops during clashes at a protest

Egypt is meeting separately with each party, given that Hamas rejects Israel's right to exist and Israel regards the group as a terrorist organization.

Gaza hospital officials say the Palestinian death toll has been mainly civilian since the July 8 launch of Israel's military campaign to quell Gaza rocket fire.

Israel has lost 64 soldiers and three civilians to the war, where losses of non-combatants in Gaza and the destruction of thousands of homes have drawn international condemnation.

Israeli tanks and infantry left the enclave on Tuesday after the army said it had completed its main mission of destroying more than 30 tunnels dug by militants for cross-border attacks.

In renewed fighting since the end of a three-day truce on Friday, Israel has killed 16 Palestinians in air strikes. Militants have fired more than 100 projectiles, mostly short-range rockets and mortar bombs, at Israel.

Though Israel's Iron Dome rocket interceptor does not work at such short ranges - a version called "Iron Beam" is being developed to shoot down mortars - there have been few casualties, largely because as many as 80 percent of the border kibbutzim's 5,000 residents fled before last week's ceasefire.

Some said on Sunday they would not return to their communities, which have long been symbols of Israel's pioneering spirit - an abandonment likely to raise pressure on Netanyahu.

China calls for new security pact with Russia, Iran

Russian President Vladimir Putin and China's President Xi Jinping review an honor guard during a welcome ceremony at the Xijiao State Guesthouse ahead of the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) summit, in Shanghai, May 20, 2014. Reuters

May 21, 2014

AP - China's president called Tuesday for the creation of a new Asian structure for security cooperation based on a regional group that includes Russia and Iran and excludes the United States.

President Xi Jinping spoke at a meeting in Shanghai of the Conference on Interaction and Confidence-building measures in Asia, an obscure group that has taken on significance as Beijing tries to extend its influence and limit the role of the United States, which it sees as a strategic rival.

"We need to innovate our security cooperation (and) establish new regional security cooperation architecture," said Xi, speaking to an audience that included President Vladimir Putin of Russia and leaders of Central Asian countries.

Xi made no mention of Beijing's conflict with Vietnam over the deployment of a Chinese oil rig in a disputed portion of the South China Sea.

CICA, whose 24 member nations also include Korea, Thailand and Turkey, should become a "security dialogue and cooperation platform" and should "establish a defense consultation mechanism," Xi said. He said it should create a "security response center" for major emergencies.

The proposal marks the latest effort by Beijing to build up groups of Asian or developing governments to offset the influence of the United States and other Western governments in global affairs.

In 2001, it founded the Shanghai Cooperation Organization with Russia and four Central Asia nations to counterbalance rising American influence in the region and to combat Islamic and separatist political movements. Beijing also is a force in the BRICS group of major developing countries with Russia, India, Brazil and South Africa.

Beijing sees common cause with other CICA members such as Russia and Sri Lanka in promoting a political model that pairs autocratic government with a market-oriented economy in defiance of the Western liberal democratic model.

CICA was formed in 1992 at the initiative of Kazakhstan but has been little more than a discussion forum. Other members include U.S. allies such as Israel, Mongolia and Uzbekistan. Japan, seen by Beijing as a strategic rival, is an observer.

The group is unlikely to produce a real security alliance, said Ross Babbage, chairman of Australia's Kokoda Foundation, a security think tank.

"Alliances are not based on a piece of paper. They're the result of real trust and interaction," he said. "There may be some agreements ahead, but in reality, I don't see an alliance emerging."

However, Babbage said Putin's presence at the meeting was significant for China-Russia relations at a time when both are diplomatically isolated -- Russia over Ukraine and China over its territorial disputes and U.S. accusations of cyber spying.

Both Putin and Xi are grappling with economic and political challenges and being assertive abroad can help to build nationalist support at home, Babbage said.

"There's an interesting synergy from shared circumstances, with large parts of the world lining up against them and expressing strong concerns over their behavior," he said.

China is embroiled in conflicts with Japan over the East China Sea and with Vietnam and other Southeast Asian countries over conflicting claims to portions of the South China Sea.

Washington has complained China is being provocative. Beijing says the Obama administration's effort to shift foreign policy emphasis toward Asia and expand its military presence in the region is emboldening Japan and other neighbors and fueling tension.

Xi said Asian nations need to respond collectively to mounting problems including terrorism, transnational crime, cyber security, energy security and natural disasters.

"We should have zero tolerance for terrorism, separatism and extremism and should strengthen international cooperation and step up the fight against the 'three forces'," he said.

Too-Big-to-Fail Bankers Have Not Been Charged Criminally for the Mortgage-backed Securities Collapse But Plenty of People Have Been Criminally Charged for Mortgage Fraud Perpetrated by the Bankers

As early as 2004, the FBI was warning of widespread mortgage fraud. CNN reported, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an epidemic of financial crimes which, if not curtailed, could become the next S&L crisis.” Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. “It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.” (Click here for the complete 2004 story from CNN.)  The financial crisis caused by mortgage fraud was not even close to the size of the S&L crisis—it was at least 40 times bigger!!  Why didn’t the FBI stop it, and why are they not prosecuting the crime now? [Source]

Michael P. Stephens is the Federal Housing Finance Agency’s acting inspector general. Stephens leads the Office of Inspector General section of the Residential Mortgage-Backed Securities Working Group, whose other members include the Department of Justice and state attorneys general. The group coordinated a $13 billion settlement between JPMorgan Chase & Co. and the government in 2013, among other actions. His own agency is the watchdog for the overseer of taxpayer-backed Fannie Mae and Freddie Mac. Stephens said he’s “not a big fan” of the idea that banks shouldn’t be charged criminally because it could hurt their employees and shareholders.[Source]

U.S. accuses Bank of America of mortgage-backed securities fraud

August 6, 2013

Reuters - The U.S. government on Tuesday filed two civil lawsuits against Bank of America (NYS:BAC) that accuse the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities.

The lawsuits are the latest legal headache for the second-largest U.S. bank, which has already agreed to pay in excess of $45 billion to settle disputes stemming from the 2008 financial crisis.

While most of the cases Bank of America has already confronted pertain to its acquisitions of brokerage Merrill Lynch and home lender Countrywide, the lawsuits filed on Tuesday pertain to mortgages the government said were originated, securitized and sold by Bank of America's legacy businesses.

The residential mortgage-backed securities at issue, known as RMBS, were of a higher credit quality than subprime mortgage bonds and date to about January 2008, the government said, months after many Wall Street banks first reported billions of dollars in write-downs on their holdings of subprime mortgage securities.

The Justice Department and the U.S. Securities and Exchange Commission filed parallel lawsuits in U.S. District Court in Charlotte, North Carolina, accusing Bank of America of making misleading statements and failing to disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.

The investors included the Federal Home Loan Bank of San Francisco and Wachovia Bank National Association, the Justice Department lawsuit said.

Bank of America, which is based in Charlotte, responded to the lawsuits with a statement:  

"These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that.

"The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

Bank of America shares fell 1.1 percent to close at $14.64 on the New York Stock Exchange following news of the lawsuits, which were filed late in the afternoon.

Bank of America had warned in a securities filing on Thursday about possible new civil charges linked to a sale of one or two mortgage bonds.

According to the lawsuits, Bank of America made misleading statements and failed to disclose important facts about the mortgages underlying a securitization named BOAMS 2008-A. More than 40 percent of the 1,191 mortgages in the securitization did not comply with the bank's underwriting standards, according to the complaint.

"These misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected," the Justice Department said in its statement.

Threats of costly mortgage litigation have been dogging Bank of America for years.

"It has been shown repeatedly that the origination process at Bank of America and its subsidiaries failed to live up to their own internal guidelines and the resulting loans did not reflect the way they were characterized to investors," said Donald Hawthorne, a partner at Axinn Veltrop & Harkrider LLP, who has represented monoline insurers and RMBS investors in suits against mortgage originators, including Countrywide, relating to mortgage securities.

In 2011, the bank's shares fell more than 20 percent in a single day after American International Group (NYS:AIG) filed a $10 billion lawsuit accusing the bank of mortgage fraud.

Weeks later, Warren Buffett's Berkshire Hathaway Inc (NYS:BRK.A) swooped in with a $5 billion investment to shore up confidence in the bank. Since then, Bank of America's stock has more than doubled as the bank has announced agreements to settle major disputes, and investors have regained confidence in its outlook.

Among major deals, the company agreed to an $8.5 billion settlement with mortgage-backed securities investors, a $1.6 billion settlement with bond insurer MBIA Inc (NYS:MBI), and a settlement worth more than $10 billion with Fannie Mae (OBB:FNMA), the government-controlled mortgage finance provider.

The lawsuit signals the federal government's willingness to pursue litigation challenging banks securitizations and marketing practices even as the financial crisis recedes further into the past.

The Justice Department's lawsuit was brought under the Financial Institutions Reform, Recovery and Enforcement Act, a savings-and-loan-era law that federal prosecutors have revived in recent years to continue pursuing civil* fraud charges against financial institutions. It has a 10-year statute of limitations, double the deadline under other securities fraud laws. 

The U.S. attorney's office in Manhattan brought a separate suit against Bank of America under that act last October over losses that Fannie Mae and Freddie Mac suffered on loans the government said were deficient.

Attorney General Eric Holder said in a statement on Tuesday that President Barack Obama's Financial Fraud Enforcement Task Force, which brought the latest lawsuit against Bank of America, "will continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market," and is pursuing "a range of additional investigations."

Whether future investigations will succeed remains to be seen.

"Is this the first shot across the bow in terms of a larger campaign or is it trying to satisfy the press that the federal government is awake at their station but really only taking aim at a very small piece of a very big problem?" Hawthorne said.

Editor's Notes:
 
* Individuals committing mortgage fraud are subject to criminal charges yet banks are subject only to civil charges.

The Fraud Enforcement and Recovery Act of 2009 (FERA), which Obama signed into law on May 20, 2009, enables the Justice Department:

1. to prosecute mortgage fraud cases as bank fraud 
2. to seek enhanced penalties under the mail and wire fraud statutes
3. extends the statute of limitations on mortgage fraud from 5 years to 10 years 
4. extends the prison sentence and increases the maximum fine

By amending the definition of “financial institution” to include a “mortgage lending business,” FERA gives the Justice Department the capability to prosecute mortgage fraud cases as bank fraud and to seek enhanced penalties under the mail and wire fraud statutes. As a result, convictions for mortgage fraud can now carry a 30-year maximum prison sentence or a maximum $1 million fine, or both. Even more importantly, mortgage fraud cases will now have a 10-year statute of limitations, as opposed to the 5-year statute of limitations for other frauds, which will give federal prosecutors much more time to develop such cases.

There is a 10-year statute of limitations on mortgage fraud cases committed by individuals. In comparison, there is only a 5-year statute of limitations for securities fraud committed by Wall Street.

In February 2013, regulators for the Securities and Exchange Commission argued before the U.S. Supreme Court that the five-year clock should begin when investigators first detect the crime, rather than when the alleged fraud occurred. On February 27, 2013, the U.S. Supreme Court ruled in favor of Wall Street and limited the authority of the SEC to seek civil penalties to five years from the time a securities fraud took place:

The nine-member court ruled by a unanimous vote that the five-year clock for the government to act on securities fraud begins to tick when the fraud occurs, not when it is discovered. Wednesday’s decision is a defeat for securities regulators, who would have benefited from a favorable ruling because it could have bought them more time to bring complex cases, including cases springing from the 2007-2009 financial crisis.

Banks Can Scam Individuals and Face No Criminal Prosecution But Individuals Who Scam Banks Face Up to 30 Years in Prison - U.S. Seeks New Tactic to Criminally Charge Wall Street Bankers

July 17, 2013

U.S. federal prosecutors are considering a new strategy for criminally charging Wall Street bankers who packaged and sold bad mortgage loans at the height of the housing bubble, according to a federal official familiar with the investigation.

WallStreetPit - The official said federal authorities are finding new evidence they say indicates intent to commit fraud over the packaging and sale of mortgage bonds backed by subprime home loans in some of the civil lawsuits plaintiffs’ lawyers have filed against large banks.

And they are exploring whether they can build criminal cases against bankers by using a 1984 law intended to punish individuals for scamming commercial banks.

The investigators are part of the Justice Department’s Residential Mortgage-Backed Securities Working Group, a network of law enforcement agents and prosecutors – both state and federal – working together to probe the mortgage market meltdown that helped trigger the financial crisis.

“The RMBS Working Group members are aggressively investigating both civil and criminal matters across the country. RMBS Working Group members expect to announce more law enforcement actions in the future,” said Adora Jenkins, a spokeswoman for the Justice Department.

The group keeps a close eye on every civil suit filed and holds regular conference calls to update its members on developments. It held a day-long meeting on Friday to discuss ongoing investigations and potential new targets, as well as legal strategies, according to the Justice Department.

The strategy involves a shift away from the more widely used securities fraud charge to a less common offense: bank fraud. The advantage is that perpetrators of bank fraud can be charged up to 10 years after their crimes, compared with the five-year statute of limitations on securities fraud, which has already run out on most events leading up to the 2008 financial crisis. A bank fraud conviction carries up to $1 million in fines and a maximum prison sentence of 30 years.

Rita Glavin, a partner at Seward & Kissel in New York who specializes in white-collar, criminal defense, said she thought the statute’s broad scope gave prosecutors an opportunity to use it, and adding a conspiracy charge could help.

“When you charge conspiracies or schemes to defraud it gives you a lot of leeway in terms of the types of evidence you’re allowed to get in, because it speaks to the defendant’s state of mind,” she said.

Some legal critics express misgivings. They say it has the whiff of a face-saving measure by the U.S. government in light of criticisms about prosecutors’ inability to bring criminal cases over the financial crisis.

The bank fraud statute is more often used to pursue people trying to forge checks, falsify loan documents or make other false statements to banks. Applying the charge to behavior in the securities market would be a novel use of the statute.

“You’re taking a statute that predates the entire phenomenon of securitization and trying to apply it to the securities market,” said V. Gerard Comizio, a Washington-based partner at Paul Hastings, a law firm.

“I don’t think any prosecutor wants to start his or her day dealing with a statute that it’s not clear they have jurisdiction to apply,” added Comizio, who previously served as an attorney for the U.S. Securities and Exchange Commission, and deputy general counsel of the Office of Thrift Supervision.

But using the bank fraud statute could inject new life into the U.S. government’s effort to hold accountable the people on Wall Street whose overzealous approach to mortgage lending and securitization is what many economists say resulted in the crippling wave of home foreclosures, the financial crisis and the resulting deep recession.

Only one person faces jail time for activities related to mortgage-backed securities: former Credit Suisse Group AG (CSGN.VX) managing director, Kareem Serageldin, who allowed traders working for him to artificially inflate the values of mortgage-backed securities they were holding in 2007. He pleaded guilty to a conspiracy charge in April and faces up to five years in prison. His sentencing is scheduled for August.

His case, however, isn’t like the ones the RMBS group is investigating now because he and his subordinates tried to defraud their own institution, not an outside entity.

SECOND WIND

Federal prosecutors had previously ruled out criminal charges in many investigations into the causes of the financial crisis.

As part of the attempt to breathe new life into criminal cases, Federal Bureau of Investigation agents are monitoring civil fraud suits against major banks like JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N), which acquired two of the largest players in the mortgage securitization world – Bear Stearns and Countrywide Financial – in 2008, according to two government sources.

FBI spokesman James Margolin said the bureau sometimes has to rely on civil court cases to turn up evidence of criminal behavior. Amy Bonitatibus, a spokeswoman for JPMorgan, and Lawrence Grayson, a spokesman for Bank of America, both declined to comment.

Civil cases can involve detailed document discovery processes and interviews that law enforcement agents may not have the time or the resources to do, Columbia University School of Law Professor Daniel Richman said.

According to legal experts who have been monitoring the fallout from the mortgage crisis, at the greatest risk of being charged are former mid-level investment bank employees who, during the peak years of mortgage bond issuance in 2005-2007, stitched together hundreds of thousands of doomed home loans into packages and sold them as highly rated securities.

To prove any banker committed bank fraud, the government would have to show that those packaging and selling the securities deliberately lied about their quality, and that they targeted commercial banks in sales pitches.

“Prosecutors would be looking at the offering memos, prospectuses and so on to see if there were any misrepresentations in them to the banks that purchased them,” said David Rosenfield, counsel at Herrick Feinstein specializing in white collar criminal defense. He has no specific connection to the MBS lawsuits.

Related:

Fraud and folly: The untold story of General Electric’s subprime debacle
Five years after the financial collapse and no Wall Street executive has been criminally charged
Obama administration’s phony crackdown on the banks

Dump Companies That Move Overseas to Avoid Paying U.S. Taxes

Mark Cuban Threatens To Dump Companies That Move Offshore

July 25, 2014

The Huffington Post - Corporate greed is getting out of hand, and Mark Cuban isn't going to take it anymore.

The billionaire investor and owner of the NBA's Dallas Mavericks took to Twitter Friday morning to shame companies for moving offshore to buck taxes.

The Mavericks owner is known for his loud and sometimes distasteful comments. His latest comments are pretty docile in comparison. His message: If I don't like the way you do business, I'm going to take my business elsewhere.

Cuban's rant came the day after President Obama voiced his own opposition to a tax-avoidance scheme called an inversion, in which a U.S. company establishes or merges with a foreign company and moves its headquarters overseas to avoid paying U.S. taxes. The Obama administration has put pressure on Congress to close this loophole, which according to CNBC could cost the government up to $20 billion in the next 10 years.

Aside from physically moving their headquarters offshore, many major companies also simply stash overseas profits offshore to avoid paying tax on that income. General Electric leads all other U.S. companies in that regard with $110 billion overseas.

Unfortunately, if you put your money into something like a 401(k), its pretty hard to stop investing in companies that avoid paying taxes, either by inversion or by keeping money outside of the country. The odds are high that at least some of your mutual funds invest in GE, Apple, Microsoft and others that top the list of companies with the most money offshore. You also probably don't have the deep pockets and investment managers that Cuban has to help him.