Feb 042014
 

Posted by greydogg, 99GetSmart

My intrepid friend, journalist James Graham (a.k.a. J. Iddhis Bing), has been living in Paris and writing about the disastrous conditions in Greece, where financial collapse has led to widespread violence and homelessness. The situation has been underreported in the mainstream press, and Jim is heading to Greece to research what’s happening and ferret out the implications for the rest of the Europe and the world.

Banking shenanigans by the 1 percent appear to be among the causes of the collapse.

He is crowdsourcing his trip and will send gifts from Greece or other alluring perks to you if you can spare a few bucks. Here’s the link:
http://www.indiegogo.com/projects/greece-and-the-future-of-the-european-union

Jan 222014
 

By J. Iddhis Bing, 99GetSmart

Chronicle of the Time When We All Went Mad: The Bankers Grab The Prosecutors By The Cojones, The Coward Who Could Have Saved Greece, The Economist’s Nightmare, And A Shameless Promo For Myself

 Lanny Breuer, Assistant Attorney General and one of Bill Clinton’s Merry Pranksters.


Lanny Breuer, Assistant Attorney General and one of Bill Clinton’s Merry Pranksters.

And so, like the revolving mechanisms of an old mantelpiece clock, each playing his part without a clue how the whole gizmo works, we tumble into yet another new year. It’s way past midnight, the empty bottles of champagne are scattered around the floor and we begin again, full of resolution that things will be different this time.  The old music, however, continues to play on and so, like the inebriated gangsters they are, the bankers continue at their folly, which is nothing less than pushing the world over the cliff, leaving us behind, as a friend put it, on “the scorched earth of their stampede to Mammogeddon.” Someone is tugging on our sleeve and telling us it’s time to go home. But we’re lost, the streets are a maze and we have no idea where the subway is.

Could we live in a world in a world without banks? Heretical idea. A few years ago the legendary French footballer Eric Cantona  – he who once said that a striker’s goal ought to be as beautiful as a poem by Rimbaud – suggested a solution to our problem: everyone should just withdraw their money from the banks. What came next, he didn’t say. And in any case, compliant governments would rescue their pals by printing more money and delivering it in dump trucks to HQ at high speed. And yet…

The game will go on for a while yet, even if economists tell us it can’t. They have their own night-thoughts, and I’ll get to that, too. Meanwhile the small countries are pulverized, raped of their resources, strangled. Business as usual. For a few details on that, see my columns onGreece and the fundraiser on Indiegogo . My friend François Fleury spent months in and near the Congolese diamond mines, and as good as his photographs are, it’s this quote from a Congolese miner that comes to mind now: “We are cursed because of our gold. All we do is suffer. There is no benefit to us.”

A miner in the Congo, photo copyright François Fleury.

A miner in the Congo, photo copyright François Fleury.

Shall we check in to see how our banker brethren are doing? On Wednesday December 4th the European Union leveled penalties of €1.7bn on seven banks in the Libor-Euribor-Yen rate fix. The banks named were Barclays, UBS, the Royal Bank of Scotland, Deutsche Bank, Société Générale and two American banks, Citigroup and JP Morgan. Morgan plans to fight the charges. According to their regulatory filings, they’ve set aside $23 billionfor just such occasions.

At nearly the same moment in the U.S., the Justice Department stepped forward to announce that they had “reached settlement” in a different case, reaching settlement being a fancy way of saying, No Trial. Everyone wants to avoid going to trial; not only does it cost you thousands of billable hours in legal fees but all sorts of unpleasant things can come out when prosecutors start asking questions. And yet there’s something very strange about this “settlement.”

Lanny Breuer is now Assistant Attorney General, and he made the announcement in the HSBC case, specifically the laundering Mexican and Colombian drug money. Lanny Breuer… the name rings a bell, doesn’t it? Longtime Clinton pal. How’d he get to be Assistant AG in charge of criminal activities? But let’s stay with the case.

English HSBC, frequently referred to as a “banking giant,” or simply “venerable,” has confessed to accepting billions of dollars of deposits from Colombian and Mexican drug cartels (among others), which, as you’ve probably already guessed, violates a few minor inconveniences they choose to overlook, the Bank Secrecy Act and Trading With the Enemy Act among them.

The Justice Department heralded the settlement as a record. $1.9 billion. One analyst took out his pencil and calculated that that equals five weeks income for the bank.

How did they do it? Breuer admitted that drug dealers would “deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows.” No one noticed. Maybe all the tellers at that Mexico City branch should be fired.

There will be no prosecutions. But Breuer did mention that, “As a result of the government’s investigation, HSBC has . . . “clawed back” deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.”

It gets better. America’s very own Pravda, the New York Times, reported that “Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in theprocess, endanger the financial system.” HSBC has already had to clean house: most of its senior management has been replaced. Or rather, they ran out the back door at high speed, hoping no one ever remembers their name.

Matt Taibbi, in his column, argues that, while thousands languish in jail on minor drug charges, this settlement reveals just how hollow America’s massive War Against Selected Illicit Substances really is. But it reveals something else as well: just how close the connections are between the banks and our governments. We’ve all watched as Morgan CEO Jamie Dimon gets the kid-glove treatment in Congress. But here the government had the banks within their grasp on the most serious charges, ones that relate not only to drugs and trading with the enemy but which, if pursued, might lead to the cash nexus of terrorism, the illegal weapons industry… and they backed off, for reasons we are left to surmise: “For surely the bankers would have talked.” Instead they gave up five week’s pay and shuffled the board room. Would the world have ceased to exist if HSBC was no more? No one apart from the U.S. Justice Department thinks so. One is left to wonder just what all this has to do with Hillary Clinton’s chances in 2016.

Beppe Grillo called our current politicos “zombies.” You may or may not agree.

In the next Chronique I’ll take a close look at the incredible exchange between the IMF and the finance ministers of Greece and Germany, a chess move that not only determined the short-term fate of Greece but which almost no one has written about. It’s an eye-opening episode that reveals the human reality behind the politics and to be perfectly shameless about it, I’ll post the story here on Ground Report as soon as I have 700 in the kitty on Indiegogo, the crowdfunding site. Over 7,000 people read my last piece on the banks, for which I’m grateful and not a little amazed. If each of you kicked in 1 big fat dollar, I’d be writing this column from Athens. So go toIndiegogo, toss in a fiver and you can read the inside story about the finance ministers here in a few day’s time. Let’s just call this an experiment in interactive livelihood.

For now I leave you with this, courtesy of an economist who not only has a heart but writes coherently about the world, too. (I’ll leave him unnamed for now.) After a long exegesis on the state of things, he broke down and told me what goes on his head after the lights go out: “I honestly think the revolutions on a grand scale will be sparked this spring and the summer will be a hot one.” It’s not something to look forward to but there it is. He crunched the numbers, analyzed the ratio of debt to GDP and when he laid his head on the pillow, that’s what he saw. Maybe we all do, maybe the bankers do, too, maybe they’re thinking, “Why the hell doesn’t anyone stop us?” when they turn out the lights.

See you then.

J Iddhis Bing

Jan 142014
 

By Iddhis Bing, 99GetSmart

I’ve been writing and reading about European politics, and Greece in particular, for a while now. Long enough, in any case, to call myself reasonably informed. But Greece is a special case. We stay up on the news and know about the Shadow Cabinet in Westminister in great detail; about Angela Merkel’s telephone and her fall on the ski slopes; about François Hollande’s midnight rides on a scooter across Paris to visit his new girlfriend – and yet, apart from sites like 99GetSmart, there’s a kind of news blackout concerning Greece. Maybe people don’t want to know. They can’t bear it. They suspect they might be next.

But Greece really is an exception, isn’t it? So the argument runs. Its ancient culture, its oligarchs, its Mediterreanan dependence on agriculture, its subterreanean ties to the ancient cults in the Near East, all of these things added together… therein lies the contradiction at the heart of what I am going to propose to you: that Greece is different culturally, that many other European states were opposed to its entry into the Union and it only got in through with the help of some imaginative book-keeping, and yet its fate and ours are now inextricably linked. The only meaningful difference being that Greece is ahead of us on line to the scaffold.

And so I got the crazy idea that I would go to Greece and report what I saw. The proposed trip is now up on Indiegogo, the crowdfunding site. The goal is to write a book which gives us a sense of the human reality in a country trapped between the Scylla and Carybdis of the financiers and the politicos.

This idea is a reality because Linda Ross encouraged me, badgered me, supplied me with endless contacts in Greece – which resulted in articles here on 99 and elsewhere – and essentially wouldn’t give up until I said I was going.

I’ve been writing for 99 since it picked up one of my pieces. Actually, Linda lifted an article from another site and reposted it and I wrote her to ask her who the hell did she think she was. (Little did I know back then. I was a newbie.) I was lucky – theft is the sincerest form of flattery. And thus began a conversation that’s still chugging along fruitfully.

The economy of internet journalism is the pits. Everybody knows that. And if you’re not in the business of taking cheesy ads or innovating your way to the next time-saver app, it hurts on the publishing side as well. Nobody knows what’s coming next but Linda meanwhile plugs away and keeps a terrifically informative site currant. Hats off, says I.

You, the reader, can help out. You read 99GetSmart on a regular basis so you know better than most what’s going on in Greece and maybe you feel we should get the word out to a larger public, especially among the Anglos (as the world calls us when they aren’t inventing much kinder names). You can visit Greece and the Future of the European Union and chip in a few dollars or euros or whatever you have laying around. And you can spread the word, both about 99 and the crowdfunding project. Pass it around, post it, repost it, tweet it, let your friends know that a writer is going to Greece and will report back what he sees and hears.

Merci en avance, as they say in these parts.

Bing

Dec 142013
 

By J. Iddhis Bing, 99GetSmart

Bob Diamond

Where’s Bob Diamond Now?

Early in the summer of 2012, Bob Diamond was an American banker with a talent for making numbers say what he wanted them to say. He was legit and was sitting in the catbird seat at Barclays Bank UK. He’d made $100 million over the previous six years.

A few weeks later, in early July, the world had flipped. Instead of sitting at his desk at Barclays Diamond was answering questions from a Parliamentary committee investigating LIBOR rate-fixing in 2008. A week after that he was out of work.

What’s LIBOR? The London Interbank Offered Rate measures the price at which banks lend currencies to each other. It gauges how much banks charge each other when they carry out interbank trades and it affects the rates businesses and households all over the world pay on loans and other financial products.

Diamond lost his job and Barclays was fined £290m. It was the financial scandal of the summer. Some say of the century, but we’ve got plenty of time to go yet.

July, 2012 was just the first act. The European Union wasn’t asleep at the wheel and started to investigate two other currency markets, the EURIBOR and the Yen LIBOR. They took their time and announced their findings two days ago. It turns out to be a good deal more serious than having to sweat through a rough morning in Parliament. Barclays got off with a £290m penalty in 2012 for their bad behavior. Maybe that wiped out a quarter or a half year’s earnings, and brought them some bad publicity. They found a way to dodge the bullet this time.

On Wednesday it was Joaquín Almunia’s job to announce EU charges against the banks involved. Almunia is the European Commission Vice-President in charge of competition policy. He stood behind the podium in Brussels looking like the stern accountant with the big glasses who comes in to set things straight after the wild party’s over. The European Commission was going to levy €1.7bn in fines on seven banks and a brokerage firm for their roles in the worldwide interest rate manipulation. Banks named were Barclays, UBS, the Royal Bank of Scotland (RBS, bailed out at taxpayer expense), Deutsche Bank, Société Générale and two American banks, Citigroup and JP Morgan. A brokerage house, RP Martin, is in the mix, too. They’re contesting the charges and the fine. The tables with the damages, courtesy the EC, are included here as illustrations.

EU penalties in the Euribor scandal, by duration and number of incidents

EU penalties in the Euribor scandal, by duration and number of incidentsOfficial EU data on the instances and duration of Yen Euribor violations.Official EU data on the instances and duration of Yen Euribor violations

For its part of the deal, RBS will pay another £300m on top of the £390m it has already paid to US and UK regulators. RBS is a nationalized bank. That means English taxpayers will pick up the tab for the bank’s behavior.

Barclays was the first bank caught in the sting back in 2012. They knew which way the wind was blowing. They decided to cut a deal: by exposing the cartel in Euribor rate-fixing they avoided an additional £570m fine. Swiss bank UBS was spared a £2bn fine by doing the same for the rigging of yen interest rates. A cartel? The banks were working together? This is where things get interesting.

“What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other,” Almunia said.

Barclays tried to make it sound like they were Boy Scouts who got a little lost in the woods and stumbled on a coven of witches: “The European Commission has today announced that it has reached a settlement with Barclays and a number of other banks in relation to anti-competitive conduct concerning Euribor. The settlement acknowledges that the banks’ conduct infringed EC competition law by attempting to distort the normal course of pricing components for interest rate derivatives referencing Euribor. As today’s announcement from the Commission confirms, Barclays voluntarily reported the Euribor conduct to the Commission and cooperated fully with the Commission’s investigation.”

Which is a nice, elaborate way of saying, we burned the witches and got off scot-free. Would the EU have known about the Euribor fix if they hadn’t?

JPMorgan Chase, not a bank that makes nice to anybody, used the “Rogue” defense, citing “two former traders during a one-month period in early 2007.”

“The settlement makes no finding that JPMorgan Chase management had any knowledge or involvement in the conduct at issue, or that the traders’ actions had any impact on the firm’s LIBOR submissions or the published LIBOR rates. JPMorgan Chase has cooperated fully with the European Commission throughout its investigation and does not believe that the firm engaged in wrongdoing with respect to the EURIBOR benchmark. The company intends to defend itself fully.”

What we know now that we didn’t know in June 2012 was that the banks acted in concert. They didn’t compete on rates, they put their heads together and figured out a way to make even more money by jiggering them. Maybe you’ve read the emails where the traders promise each other crates of champagne if they help each other out. Which is something else that makes it difficult to believe in those “two former traders during a one-month period in early 2007.” The banks are all bonus-driven, and maybe the best way to survive is not to let your boss know what you’re doing. Results are what matter. JP Morgan and the others have cleaned house, and those two rogues won’t be heard from again.

Welcome to the world of the international cartels. The banks now work together to raise interest rates on everybody across the globe. The compliance officer at UBS saved his bank a €2.5bn by blowing the whistle on the yen scam. Maybe bankers only object when the numbers go over a billion.

Almunia said there is more to come. “This will not be the end of the story.” The EU is investigating the firms that refused to settle with the EC over the EURIBOR and yen LIBOR charges, and is taking a look at possible shenanigans in the FOREX market. Regulators in other countries are hard at work as well.

But that’s the problem. We’ve been stuck at the beginning for a while now: the banks find a new way to transgress, they make a bundle, investigators announce fines a few years later, somebody walks the plank and on we go to the next round.

The fines are big but they won’t hurt the banks too much. Nobody’s going out of business. They’ve got Quantitative Easing to thank for that. It’s a nice little program that helps out when the banks get tight.

You get knocked around on the market these days but there’s always a government somewhere to help you out. Even the moderate Socialist “enemy of finance” French government. Whenever Dexia in Belgium gets in a tight spot, François Hollande sends somebody over with a few billion to stop the bleeding. Too much old French money there to take any chances.

Bob Diamond’s long gone. He at least lost his job. Nobody remembers him. Where’d he go with all his millions? Who cares? There’s another millionaire to take his place, saying the same things about how it was all done by subordinates and he had no knowledge. Nobody knows what’s going on at the banks, the traders and compliance officers are running wild. Then one or two of them get caught, there’s an investigation, the bank shells out, somebody leaves and somebody else takes his place and life goes on, right over the waterfall until we all get soaked. Where’s Bob Diamond these days? In some nice paradise where he’s laughing his head off. What’s that to any of us?

J Iddhis Bing
Paris

Dec 132013
 

By J. Iddhis Bing, 99GetSmart

Doublethink in Action: France 2013

Rachida Dati in 2009

Rachida Dati in 2009

Ever since George Orwell described the practice of doublethink and newspeak in his novel 1984, politicians of all stripes have made it their business to perfect the art of saying one thing while meaning something else entirely. They have, to their immense profit, used 1984 as a textbook rather than as a warning, taking to it with real vigor and professional pride. It’s now a kind of hobby in which they try to outdo each other. Those who master it go a long way on coded messages and innuendo. (Maybe we should call it “turning things inside out.”) With our current debate over “freedom” vs. “security” we may even have entered a golden age of doublethink, the ability to hold beliefs in complete contradiction to their stated objective. (“I am in favor of freedom, and in order to remain free the government must read everyone’s private communications.”) Even so, you can still be startled by individual instances of the craft, when its practitioner scores a bullseye.

“Doublethink means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them,” Orwell wrote. Here’s a current instance of the phenomenon.

Christiane Taubira in the National Assembly after the vote on the Gay Marriage law.

Christiane Taubira in the National Assembly after the vote on the Gay Marriage law.

Christiane Taubira is the Minister of Justice in the Hollande government in France. She is a visible and even controversial cabinet minister. She is also black. Given her public stances on issues such as gay marriage and prison reform, she is a lightning rod for discontent during a time of financial crisis, when the French, like people all over Europe, are disgruntled and like to point the finger at “foreigners” they think are stealing parts of the pie. (She was born in Guyana and has represented that country in the French Assembly.) She is insulted on a regular basis and was in October compared to a monkey by a member of the Front National, who has since been drummed out of the party.

A new report is out about racism in France. It has caused a bit of a stir since it was released earlier this week, with its color coded charts depicting town and cities where varying degrees of discrimination exist. Populist and rightwing politicians have been quick to seize on the report for their own ends. Which brings us to this week’s Golden Doublethink, courtesy of Rachida Dati, a member of the populist UMP. (The full report, in French, is available here.)

“Les Français ne sont pas racistes,” Dati said on LCI, a French television station. “L’elite, oui. Je pense qu’ils instrumentalisent et utilisent Christiane Taubira pour se donner bonne conscience.”

“The French are not racists. The elites, yes. I believe they put Christiane Taubira in office and make use of her in order to give themselves a clean conscience.”

A classic, rife with contradictions. The French people are instantly freed of responsibility while unnamed elites, whom every populist must run against, are blamed. The virus is somehow magically contained within this small (by definition), shadowy (by insinuation) group, who, since they are never defined, are easy to hate. (And who, it must be said, provide the money for every political party in France.) And not, it is implied, just any elites but left-leaning elites of the sort running the government now, who are putting Christiane Taubira through her calvary.

Voilà! Ms. Dati subtly asserts that it is the appointment of Taubira that is causing the fuss. She is a diversity hire. Cynical elites are using her as a salve and a battering ram. Subtract Taubira, her statement insinuates, and the problem goes away. The same sort of talk is going on in the conservative press about Harlem Desir, also black and the current spokesman for the Socialist party. Unfortunately for the UMP, all of this “Make the World Go Away” talk leads straight to the Front National and not to them.

Alert readers have already grasped that the rigorous practice of doublethink requires leaving as much up in the air as possible. Insinuation is a subtle art. Definition is the enemy, shadowy forces your friends. Facts and clear opinions are verboten. Dati does not offer an opinion on Taubira or criticize her positions but instead suggests she is the object of an ill-defined conspiracy. Not a lot of sisterhood there, folks.

Behind much of this is, of course, the divisive issue of gay marriage, which is now legal in France but nevertheless provoked large demonstrations in opposition all across France both before and after its enactment. A perfect issue to seize on, because, while it affects a small percentage of the population and changes nothing substantial, it rallies people to the cause. Whatever that cause may be.

But as to elites and their shadowy machinations Ms. Dati perhaps knows whereof she speaks. The politician, who runs Paris’s bougie 7th arrondissement and is of North African descent, was, as it happens, Minister of Justice in the Sarkozy government from 2007 to 2009. To her our first Golden Touché.
*
I’d be interested to hear from readers about doublethink, if they know of current instances. A weekly column on the subject seems possible, or, if they are familiar with French politics, perhaps they strongly disagree with my diagnosis. Either way, let me know and we’ll make more statuettes.

J Iddhis Bing
Paris

Nov 142013
 

By J. Iddhis Bing, 99GetSmart

Greeks protest austerity cuts in Syntagma Square, Athens. Photography by Elias Theodoropoulos

Greeks protest austerity cuts in Syntagma Square, Athens. Photography by Elias Theodoropoulos

It’s hard work getting the news from the news these days, especially if you want to know about a country like Greece. Far-away birthplace of democracy, a bit exotic, Mediterranean lifestyle, Zorba, rumored to be different. What does any of that mean? Strange things are happening there but what is going on precisely? The Greeks ran up quite a tab at the bar, or so the financial dailies tell us on a regular basis.

Almost everything we read is filtered through the point of view of the Troika – the IMF, the European Central Bank and the European Commission – or the Greek government. We know that representatives of the Troika – established during the first stage of Greece’s “rescue” in May 2010 – have been in Greece since Tuesday of last week, meeting with the Greek government about the latest round of potential bailouts for that country. Beyond the leaks from either side, the rest, for us at any rate, is guesswork.

As of Tuesday evening, November 12, no decision had been announced. The Troika is typically very business-like with its clients, out with the whip, sign here, see you later – and then the next round of what the press like to call “belt-tightening” begins. The coalition government survived a no-confidence vote on Monday the 11th but that hardly quelled the sense that they are a very fragile edifice indeed. The people are out in the streets on a constant basis. They’re an after-thought, at least as far as the world’s media is concerned.

We do know a few things: that the Troika is a quasi-legal junta, created during the first stage of Greece’s trauma. The IMF was invited to the party at the insistence of Angela Merkel. Readers with long memories may remember that Dominique Strauss-Kahn was on his way to meet Merkel to present his plan to “save Greece,” when he was abruptly detained in New York.

The Troika’s mission is to enforce an austerity program that includes the selling-off of government assets and the decimation of public services, and that even within the IMF, there is dissension over the absurd goal of turning Greece into a productive satellite of Germany. We also know or suspect that any “bailout” of Greece will only impoverish the country yet further. That’s the public record regarding employment, savings, pensions, access to housing and food. You can read it here on Ground Report and find it many other places as well.

Language, meanwhile, gets so knocked around by the pros it throws its hands up in despair. Defeat comes at the price of rational thought: being rescued by the Troika means becoming a pauper in your own country, means your pension has vanished, you are a month or so away from losing the roof over your head and your hand is in the garbage looking for food.

None of the rescues perpetrated by the Troika have successfully rescued their target countries but instead have pitched them ever further into chaos. Bailouts are not a transfusion of money but a way of channeling money from one country (Germany, in this case) to another country (Greece) where the money is then re-routed to banks in, among other places, Germany and France in the form of debt payments.

The conservative government of Prime Minister Antonis Samaras, along with his coalition partner, Socialist Evangelos Venizelos, is said to be desperate not to tamper with what they consider Greece’s “success story,” one which includes massive unemployment and at least 20 percent of the population dependent on soup kitchens for the next meal. His figure is 700 million Euros to meet the debt payment schedule. The Troika is said to be looking for 2.9 billion Euros in savings from the current budget.

That explains the lack of an agreement since last Tuesday at least in part. The Troika is being held hostage. Round One to Greece.

Spectacularly, no one in the government mentions the list of 2,062 Greeks who are holding at least $1.95 billion in secret Swiss bank accounts. A list the government has had in its possession for at least three years without a single prosecution. (Interested readers can learn more here.) Articles in the local press do muse a bit about “tax collection” being a bit in arrears but without much enthusiasm.

Rumblings, such as they are, continue to be at such a low volume they can be hard to hear. Internal documents leaked from the IMF last week reveal that as early as May 2010, more than 40 IMF member states, all outside Europe, were opposed to the aid plan drawn up for Athens. (This in a report from last week’s Wall Street Journal.) The Troika itself is said to be headed for divorce. “The ECB must refrain from intervening in highly political decisions with its advice on taxes or cuts in spending. And yet that is just what it has been doing inside the troika. It must get out of it as soon as possible,” says Paul De Grauwe, a professor at the London School of Economics. In June of this year, a high official at the IMF publicly disagreed with the Troika’s agenda in Greece.

Even the pro-government publication Ekathimerini paints a decidedly gloomy picture: “Unfortunately, what this means in practical terms is that the current political system is not in a position to lead the country any further in terms of reforms. It doesn’t truly believe in these reforms and it does not have the stamina to clash with its traditional clientele,” writes Alexis Papachelas on November 10. Not exactly a ringing endorsement from a pro-government journo.

In other words: it isn’t working, it isn’t working at all, and yet our bedazzled technocrats continue to insist that it does, even if they don’t particularly believe it either. It’s the way the world does its “business.” Consider this: the Financial Times reported last weekend that Stephen King, chief economist at HSBC, “discovered” that nearly all of his bank’s country forecasts stated that the country-in-question planned to export its way to growth. (Ah, growth, endless growth. The Holy Grail, the never-ending rainbow at the end of the road. Line it up next to the other sacred cows, bailouts and rescues, and fire away.) Where they will all export to is the question, with every other country on earth frantically exporting its way to prosperity. Mars and Venus are at the head of the list, and why not? (William Pfaff has more on this.)

Greece lost some 35,000 jobs in October. So much for that success story. My sense is that the Troika’s technocrats simply live too high up in the stratosphere – somewhere near their very own cloud 9 – to be concerned with anything so gritty as jobs or hunger or survival. For them “the people” are an abstraction on the order of heroic rescues and bailouts.

The Washington Consensus is dead. Long Live the Consensus! The world, meanwhile, hangs by a thread. No one believes, fewer and fewer people vote and countries like Greece twist in the wind. Who reaps the advantage? The far right, the angry ones, the xenophobes who see us lined against each other in a global race to the End of the Line. One wonders exactly when Angela Merkel and that ardent enemy of finance François Hollande will get the message. (Before or after the rainbow? Place your bets here.)

The Troika, intent on getting in and out of Greece quickly with as few questions asked as possible, seem to have gotten stuck in transit. On Tuesday night, they were so afraid of angry cleaning ladies demonstrating in front of the Finance Ministry that they crawled on hands and knees out the building’s fire-escape to an underground garage en route to their own private cloud. That might not be, to employ yet another word that’s taken a few body blows, progress, but if a modern-day Aristophanes was anywhere nearby, he can make use of it.

As of Wednesday morning, November 13, no agreement between Greece and the IMF was in sight.When there is one, we’ll take a close look at it to see if there are any changes to the formula that has had such devastating consequences for Greece.

May 032013
 

By Iddhis Bing, 99GetSmart

Jerome Cahuzac, May 2012. Photo: Lionel Bonaventure

Jerome Cahuzac, May 2012. Photo: Lionel Bonaventure

“What bothers me is that I still have an account open with UBS… The only way to close it is to go there? With an account open there I’m fucked, since UBS is not necessarily the most hidden of banks. It stinks. Is any sort of proxy possible?…Above all, so that the holdings somehow stay at UBS and can be managed from here. It’s a word game pure and simple.”

Jerome Cahuzac was, until March 19, Budget Minister in François Hollande’s socialist government, in charge of the enforcement of tax laws during a time of fiscal crisis and high unemployment.

Regarded as one of the more effective ministers in the new government, Cahuzac lost little time before lowering the boom. He grilled members of the new administration about their finances, pointedly asking Marylise Lebranchu if there wasn’t a zero missing from her husband’s tax declaration, and in September 2012, announced a 19.6% levy on plastic surgery, an industry with powerful clients which may have felt untouchable, not least because Cahuzac is a plastic surgeon.

On December 5, 2012, the Mediapart website published the recording transcribed above, claiming it was Cahuzac’s voice speaking to a third party about a secret Swiss bank account.1

Despite his ardent denials over the next three months – first that the voice was not his, and later that the account had been closed in 2010 - Cahuzac’s position became untenable. He resigned his post and made a public apology.

Such are the twists and turns of fate that, in November, 2012, Cahuzac announced a crackdown on tax fraud and on April 2 of this year appeared before anti-corruption judges Renaud Van Ruymbeke and Roger Le Loire to face charges of concealing his UBS account (« blanchiment de fraude fiscale »).

Undeclared income transferred to a second country – in this case, Switzerland – in order to avoid taxes in the person’s home country – in this case, France – was and is a crime. As such, the actions Cahuzac confessed to on the phone tape are but a miniscule yet revealing part of the worldwide tax avoidance game which was detailed in the Invisible Money series on this site. The scandal in France is still in its initial stages. Deniability has now been exhausted. More bankers will come under pressure from prosecutors and more information about other tax evaders will leak out.

Cahuzac was able to hold on for more than three months because of support from within the Hollande regime. Pierre Moscovici, Minister of the Economy, cleared Cahuzac of wrong doing on February 5 and publicly embraced him in the Assembly, while Prime Minister Jean-Marc Ayrault stated he had “total confidence” in his Budget Secretary. The position taken by the Socialist government raises many questions about both the veracity of their public statements as well as their competence. People in France, from different parts of the political spectrum, find the assertion that they didn’t know about Cahuzac’s hidden holdings after early December to be stretching credulity past the breaking point.

Part of President François Hollande’s response was the swift passage of the bill requiring his ministers to register their holdings in the public record. They are now available on-line; the entire country can see how much each minister is worth. While not exactly a millionaire’s club, it comes close. Hollande has spent a good deal of his time since Cahuzac’s resignation on trade trips, to Morocco and last week, China.

On April 2, Cahuzac made a public statement to the effect that he had been “trapped in a spiral of lies and went astray,” and that his UBS account, some 600,000 Euros, had not been added to in a dozen years, was closed in 2010 and the monies would be returned to France. With his rugged good looks and forthright manner it was a splendid “modified, limited hang-out,” to steal a phrase from Richard Nixon.

Reality has continued to spiral out of control since then, with more information becoming public. There remain many problems with Cahuzac’s account.

This article, although it breaks no new ground, attempts to review important aspects of the story for English-speaking readers. L’Affaire Cahuzac is much more than the story of a fallen minister: it’s an x-ray of the French class system in which one can observe how one gets ahead these days. Cahuzac’s contacts and alliances among politicians and Important People are legion as are his friendships with those behind the scene.

Tax evasion has become a way of life for those in the upper strata of society, in France as in other countries. People do what they think they can get away with, and Cahuzac’s case provides but one example of how it’s done. French newspapers speak of the “scandals doubtless to come.”

“Shit, Jerome, you’ve got a few contradictions!”

Jerome Cahuzac, 60 years old, has used the rural department of Lot et Garonne as his political base for years. Until March of this year he represented it in the National Assembly. (French law allows politicians to hold multiple positions at the same time; for a few days after he resigned his ministry he publicly toyed with the idea of keeping his elected post.)

Trained as a surgeon, he began his medical career as a cardiologist before changing, in the early ’90s, to the lucrative profession of plastic surgery, where he specialized in hair transplants.

From 1988 to 1991, he worked for the government under Minister of Social Affairs Claude Evin, on policy relating to cigarettes and alcohol as well as pharmacology and medicines. In 1993, while maintaining his plastic surgery practice, he set up Conseil Cahuzac, where he acted as a “purely technical advisor” to the pharmaceutical laboratories. At the Conseil, he worked closely with Daniel Vial, the lobbyist’s lobbyist, the man who knows everyone in the “Paris that counts.”

A member of the Socialist Party since 1977, he first ran for the National Assembly in the Lot et Garonne in 1997, picking up other offices such as regional Counsellor General and Mayor of Villeneuve-sur-Lot along the way. A rebarbative critic of the Sarkozy government’s handling of finances and debt, he was also known as the “hairsplitter” in his position as the president of the Assembly’s Commission of Finances. (In short, make a lot of noise but do little, as Edouard Perrin learned when he tried to interest the Assembly in his findings on tax evasion.) He has, at various times, either worked for or taken Michel Rocard, Lionel Jospin, Dominique Strauss Kahn and François Hollande as his mentors.

He is known to frequent the Cercle de l’Union interalliée, and is a member of the Grand Orient de France, whose ruling counsel has now asked for his suspension.

In 2000, he made the now-fatal phone recording. In June of 2008, Remy Garnier, a pol from the Lot et Garonne, tried to interest Eric Woerth of the UMP (Sarkozy’s party) in allegations that Cahuzac had a Swiss bank account. No takers. Likewise, the far-right National Front has been suspiciously quiet throughout a debacle that should play to their benefit, saying only that they believe in the presumption of innocence. In 2007, Cahuzac was found guilty of paying a Filipina maid 250 Euros a month for 40 hours work off the books. He paid a fine and later helped the woman become legal in France.

So much for the Official Story, which raises a few questions of its own.2 Let’s look at a little more closely at Jerome Cahuzac’s other life.

Although he joined the Socialist Party in 1977, he has maintained long-standing connections to the right and far right through personal relationships. Jean-Pierre Emié is a close friend of thirty four years. Emié has ties to GUD, a far-right student union and was, until 2004, counsellor to the National Front for Paris and its suburbs. It was Emié who introduced Cahuzac to Philippe Peninque, the lawyer who opened Cahuzac’s UBS account. (Peninque and Emié share an office on Rue Marbeuf.) Peninque, a militant ideologue in GUD during his student days, is one of Marine le Pen’s “shadow advisors.”

Gilles August, Cahuzac’s lawyer until earlier this month (April, 2013), is a former member of UNI, a conservative student union. Manuel Valls, Minister of Security in the Hollande government, celebrated his 50th birthday at August’s house last summer, in company with Cahuzac and numerous stars from the firmament: singers Patrick Bruel and Nolwenn Leroy, the Marseille real estate mogul Marc Pietri, TV producer Michel Drucker… Cahuzac is a militant sportif, and one of his bike partners is (or was) Patrick Sayer of Eurazeo Investment Bank, a member of the CAC40, the upper crust of the French Bourse.

Among the many clients at Cahuzac’s plastic surgery practice were former GUD militants, Philippe Peninque, Stephane Fouks of Havas Worldwide Marketing, Socialist Party leader François Patriat, as well as, by Cahuzac’s admission, one Hervé Dreyfus.

Jerome Cahuzac’s younger brother, Antoine, worked at CCF (Crédit Commercial de France) from 1985 to 1988, and again from 1994 to 2000 in a variety of different capacities before taking a senior position at HSBC Bank France.

None of this is grist for the conspiracy mill but it does establish just how deep and wide ranging Cahuzac’s contacts are within French society. When Jean-Pierre Emié complained to Cahuzac that, “Shit, Jerome, you’ve got a lot of contradictions, you’ve got robbery and delinquence in Villeneuve and you support Socialist immigration and security policy!” Cahuzac did not seize on the particulars but replied, like the song says, on a whole other level: “Who doesn’t have contradictions? You, Jean-Pierre, you don’t have any contradictions?” Cahuzac once characterised himself as a “maquisard,” a resistance fighter; a man capable of many disguises and identities. In his case, the war being fought is entirely on behalf of the career of one Jerome Cahuzac.

Reyl & Co.

If Jerome Cahuzac is the fuse that lit the scandal, the dynamite – at least the first stick of dynamite to explode – is definitely the private investment bank Reyl & Co. Or as one of Mediapart’s sources put it, “If there’s one den of thieves that has as its clients French show biz personalities, captains of industry and politicians, it’s Reyl.” 3

The history of Reyl closely parallels what we might call The Golden Age of Tax Evasion, with an explosive growth of revenue in the first decade of this century when cheating on taxes reached the level of a national sport.

Reyl & Co. was founded by Dominique Reyl in 1978 as a private management company in Geneva. For twenty years or so it was indistinguishable from dozens of other financial “boutiques.” With increased pressure from the European Union on big banks like UBS, the unregulated, extremely discreet Reyl & Co. came into its own, converting into a full-fledged bank in 2010. Its modus operandi is to advise clients how they might conceal their money behind unnamed accounts or fictive organizations, giving them the ability to disavow holdings at one of the large banks.

A massive sum of money left Switzerland in 2010, the year Jerome Cahuzac “closed” his account. New regulations had come into effect: the Swiss had agreed to furnish information about certain kinds of accounts to the EU. His money did not come back to France; it moved to Singapore, where along with Hong Kong, Reyl had established subsidiaries. From Singapore it moved “off-shore,” to fiscal paradises with names like Wind Charm Corporation, Fame Eagle Corporation, Oceania City International Inc., Sunny Ridge Group Limited, Jade Green Investments Limited, Moonlite Overseas LTD. in the Seychelles – all Reyl subsidiaries. To add yet another layer of secrecy, these transaction are carried out by middlemen like Swiss-Asia Holding Ltd., so that nothing can be traced back to Reyl or its clients.4

Further questions regarding Cahuzac’s accounts are raised by my sources in the banking industry. In his confession the ex-Budget Minister employed the figure of 600,000 Euros to describe his holdings in Switzerland. This is obviously a very strict definition. 600,000 – barely enough, as one joker commented, to buy a modest apartment in Paris – is the kind of figure held in a individual’s name, while a significantly larger amount is hidden behind the bank’s firewall. Is Jerome Cahuzac the beneficiary, either directly or indirectly, of other non-declared accounts in Switzerland? Did he only confess to the one account that could be traced back to him?

Second, Singapore law makes it impossible for non-residents to transfer money into their banks in amounts less than 1,000,000 Euros. If Cahuzac’s Swiss account was closed in 2010, and the money transferred to Singapore, as he has confessed, exactly how much was transferred? This second line of inquiry obviously casts doubt on the veracity of Cahuzac’s “confession” as to just how much money he had in Switzerland in the first place.

Who is the man on the other end of the phone line in that call from 2000? Who was Cahuzac speaking to? Obviously an intimate, at least financially. We may never know for certain but one thing we do know: undeclared money traveling from France to Switzerland does not travel by check or wire or any other traceable route. It crosses the border by suitcase or van. And for that the services of a porter are required. A discreet porter who knows how to keep quiet.

Enter Hervé Dreyfus, according to Le Temps Dominque Reyl’s half-brother, a man who is a senior partner at both Reyl & Co. and Raymond James Asset Management International (“managers for private clientele”) in Paris – an off-shore specialist. A man with a myriad of contacts, who knows how to lay low: there are few photos of him in circulation. A man Jerome Cahuzac claims he met only once – in his office, for a “transplant consultation.” They must have had a lot to talk about: Dreyfus is, or was, as bald as an egg.

If what Cahuzac says is true, Dreyfus, who has advised Nicholas Sarkozy’s ex-wife Cecilia among many others, is one of the few important people in France he doesn’t know.

Dreyfus and Cahuzac’s younger brother Antoine both worked at Credit Commercial de France in the 1990s, where Dreyfus was responsible for “portfolio management for non-resident private citizens” (according to his biography on the Raymond James site) and both men worked in European markets. It’s hard to imagine the two men not knowing each other.

Mediapart and Antoine Peillon, author of The 600 Billion Missing in France, have named Dreyfus as Reyl’s “delivery man for French affairs.” Mediapart went further: on December 10, 2012 the site flatly stated that Dreyfus is Cahuzac’s money manager. Neither Dreyfus nor the younger Cahuzac have spoken publicly since the scandal broke.

This is just the beginning. More names with secret accounts in Switzerland and elsewhere are sure to follow. The French are incensed: Gerard Depardieu at least had the grace to leave the country rather than pay. The other rich stay home, complain endlessly about taxes and hide the loot elsewhere. Cahuzac’s slow motion striptease, a little bit of truth at a time, gave them three extra months to move the money around. It will be interesting to see who flees across the border or to the prosecutor first, Jerome Cahuzac or Hervé Dreyfus. Or, to use a homely metaphor, who serves whom on a platter.

Iddhis Bing

Paris

April 30, 2013

Footnotes

1 The phone conversation was inadvertantly recorded in 2000 by Michel Gonelle, Cahuzac’s rival in the 2001 municipal elections in Villeneuve-sur-Lot (Lot-et-Garonne), on his phone machine. Cahuzac, having spoken to Gonelle, believed he had terminated the call when he began a second conversation about his private finances. Gonelle, for whom the tape was a “heavy weight” he carried for 12 years, furnished the recording to Mediapart in 2012.

2 Questions are now being asked about his privileged relationship with the pharmaceutical companies and whether it affected his work for the government in 1988-1991 and, given his access to health officials, afterward; what exactly was the nature of the “purely technical advice” he gave to Big Pharma at his consulting agency – did it amount to government access?; whether it’s true that many of his hair transplants were done off the books. Finally, what is the real extent of his wealth, and how was it acquired?

3 « S’il y a bien une officine qui avait comme clients français des personnalités du show-biz, des grands capitaines d’industrie, et des hommes politiques, c’est Reyl. » Unnamed sources can say whatever they like. Unlike the average rumor mongers, Mediapart’s sources in L’Affaire Cahuzac have been proven right. Believe what you like.

4 Swiss-Asia is a “booking platform” operating between banks and financial management companies in different countries. Its on-line prospectus says, “Swiss-Asia Holding Pte. Ltd. operates from the core of its investment universe, where proximity and access to investment opportunities make it possible to produce superior returns with a pro-active and efficient risk monitoring. While Swiss-Asia’s mission is to build a sustainable “East meets West” style of Asset Management out of Singapore and Hong Kong, its dedicated team strives itself to provide High Net Worth Individuals, Financial Institutions and Corporate clients with the best-in-class asset-management, advisory and execution services.” Which reads like it was written on Ecstasy on the sundeck of a yacht passing through the Straits of Malacca.

Plenty more Bing here: 

 

Feb 062013
 

 

DRINKING WITH MÉLENCHON

“O my God / am I here all alone?”

Iddhis Bing

Jean-Luc Mélenchon

Jean-Luc Mélenchon

I want to tell you a story. Yes, I know, 99GetSmart is not exactly a story teller’s site – although we could debate that – but I am going to tell it because it illumines a few dark corners that can not only bear the light, but that could be useful to those who are engaged in airing and publicizing what Ed Dorn once called Heavy Business in the White World, while attempting to aide those who are on the receiving end of the World’s Big Stick.

If I do that, I have to pass up the chance to talk about the untold juicy morsels that flew across the desk in the last few days, viz., in cash-strapped, austeritarian Spain, where the priest’s favorite altar boy, Mariano Rajoy, is in power, it has just now been discovered that party of which he is the head, the Partido Popular, keeps two set of organizational books, and in the second and more compelling one, they have parked 22 million Euros in a Swiss bank account. For what purpose? This seems to me worth investigating for any number of reasons (how it got out, the persons involved, how badly it will damage the PP, etc.) Maybe the Partido Popular is just planning ahead and when Austerity collapses, as it inevitably will, the upper echelons will flee to Switzerland and retire on their savings. Plus there is news from Greece, where Blackwater, the security firm close to the Bush mafia, will now be protecting the Greek parliament from the rabble.

But instead I am going to tell you a story, a bit of old news, because I think it reveals a little bit about the current state of things. It’s just too damn good to pass up.

Jean-Luc Mélenchon is a French politician, a long-time Socialist close to François Mitterand, who eventually split with the Socialist Party because he could not tolerate their drift towards the center, and formed the Front de Gauche. The F de G ran seriously for the first time in 2012′s presidential race and then in the legislative elections in June. Mélenchon ended up doing very poorly, scoring 11.4% of the vote (in contrast to Marine le Pen’s 17.3%) for a variety of reasons that if you try to explain it, becomes a kind of Rohrsach Test of your feelings about French politics: it was his first national campaign, the party was new, everyone was sick of Sarkozy so they coalesced around the one candidate who offended almost no one and had a chance to win, François Hollande, and who did. There are many other possibilities, none of which explain the dreaded Le Pen’s 17% share of the electorate.

You could argue that a large swath of the French electorate might say that Mélenchon, his quick verbal repartee and aggressive, unashamed leftwing take on issues appeals to them but they would never actually go into the voting booth and pull the lever for the man.

Now I read what Mélenchon writes and have published a translation of an interview with the man, and I find him smart, energetic, straight-on – even when, during the course of an interview it looks like his eyes are about to pop out of his head. Does he wake up angry in the morning? Is that a problem for you? Maybe we need a few more angry people around. The man engages with individuals when he meets them, he is committed to social revolution (yes, he dares to use the word from time to time), and he has provided the best ongoing criticism of Hollande’s presidency over the last six months. The French elect a monarch and give him five years to prove he deserves the kingdom. If not, off with his head. Mélenchon keeps the blade sharp.

OK, since I am not a Protestant and believe neither in purity of motive nor even in the desirability of a pure outcome, I find the following story vastly instructive and even infuriating – but not for the reasons you think. Revealing, certainly, because it tells us a little bit about our current politicians and about us.

It’s a true story, I have it direct from the horse’s mouth, that is to say, one of the participants – the man who found himself with Melénchon’s hands aimed at his throat. The story had a little play in the French press but never a whisper of it among the English speakers so, you read it here first. The photojournalist is Guillaume Binet and the journalist who accompanied him is Marion Mourgue. The story is old and it’s still good.

My friend works in politics, knows Mélenchon, has photographed and spoken with him on several occasions. And he also knows that Mélenchon had, in 2010, characterized the UMP politico and then-Minister of the Interior Brice Hortefeux in the following words: “C’est sa tête qui est un terrain vague, à cet homme-là. Il n’y a rien dedans: des mauvaises herbes, des pensées névrosées, la peur de l’étranger, la haine de tout le monde. Pour dire autant de bêtises et s’y prendre aussi mal.”

To wit: “The man’s head is a vacant lot. There’s nothing inside it except weeds, neurotic thoughts, fear of foreigners, hatred for everyone. Just talking about it is bad for you.”

Strasbourg. The European Parliament building, the 26th of October. 1:30 in the afternoon, after a vote on the budget. Binet is passing through with Mourgue and in crossing the ground floor, takes a short cut through the bar.

And there at the bar, sharing a glass of champagne with none other than Brice Hortefeux on a beautiful autumn day in Strasbourg, is Jean-Luc Mélenchon. The only customers at that hour.

Binet walks on. He does not take out his camera, he does not play the paparazzi, he does not do anything more than gently poke his friend in the ribs with his elbow.

This is an interesting scene. From my own, limited point of view, I’m not sure I want politicians to talk to each other. Every time they communicate it’s a conspiracy against the people. Maybe they should be kept in isolation, or some sort of public pillory. Of course, I also believe in the moderate application of the guillotine for pols. (Every other week?) But there’s no law against talking.

And what happens next? Mélenchon charges my friend, who let it be observed, enjoys a rather strong height advantage over Jean-Luc, as well being twenty years younger. But – ah, champagne, the great equalizer. Mélenchon decides to go for broke and screaming that he knows this piece of shit journalist is going to make a story out of the fact that he, the one and only Jean-Luc Mélenchon, is drinking with a prominent right wing pol in the Parliament bar. He charges Binet, yelling “Mais racontez-le donc, hein ! Jean-Luc Mélenchon et Brice Hortefeux qui discutent ensemble, ah ça vous plaît, hein, ça vous amuse !” (“Go ahead and tell the story, so what! Jean-Luc Mélenchon and Brice Hortefeux talking together, you really like it, ha! You think it’s amusing!”) Clearly, Mélenchon shares my opinion of what happens when politicians get together for a chat.

He gets his hands up around my friend’s neck and maybe he starts to squeeze but Mr. Vacant Lot Hortefeux comes to the rescue and slipping his arms around Mélenchon, pulls him off. Upshot? A brief media flurry and for the next several months Mélenchon regards the photo-journalist – who did not do his job, that is to say, took no photos before, during or after, they did not tweet the incident – with a withering contempt and a refusal to talk.

A rich scene, no? Maybe not Shakespeare but still compelling. In a perverse way I admire Mélenchon for being so explicit about his relation to the press, for making the point irrefutably clear that the press and the politicians have completely different interests. If M. makes it to the Palais Elysée one day, maybe he’ll put a boxing ring in the back yard.

I told this story last night to a mixed crowd of French and Americans and the response was, stupefaction on the part of the Americans, who hardly know who Mélenchon is and disbelief on the part of the French – that takes some doing. A few denied that it was even possible. “Never! Mélenchon hates Hortefuex, he would never drink champagne with him….!” Hence, this scene, which can be viewed from so many angles, becomes the Rohrsach test mentioned earlier.

I want to argue that this incident, based on your knowledge of Melénchon and your partiality or aversion to left-wing politics, reveals your regard for politicians as a class.

Because that is what they are – a class with a specific function. In the U.S. it is obligatory to believe in a politician, to believe that this or that self-motivated hustler is going to fix things. He is going to change things – even when it is obvious that the politician, as a member of a class, has absolutely no interest in the vague wave of change that he constantly alludes to in his speeches. His goal, if he has one, is to readjust the status quo ever so slightly in favor of his pals. But that doesn’t stop large numbers of people from falling in love with a politician, and the true believer stays in love after all evidence of infidelity is in. One stays in love with a politician after they have betrayed – by necessity – everything they said to get elected, and go on betraying until their last day in office. (I can’t help but remember Clinton’s pardon of Marc Rich on his very last day as president. But that boyo offers such rich, copious evidence of betrayal, one hardly knows where to begin.) Reagan, Clinton, Obama – recent American history offers such splendid examples of betrayal. The great advantage possessed by the Bush dynasty is that they never betrayed anyone – they simply and brazenly acted on the interests of their monied class, and never apologized for it.

This is the moment when you, dear reader, leap out of your chair and accuse me of being a cynic. Maybe you even hurl your glass at me – because I have dared to tell you that most love is not love, and in any case, the mere act of believing in a politician of whatever stripe is tantamount to asking to be betrayed.  Don’t worry, you’re in good company. Most journalists make the same mistake, and are, in effect, in one camp or another. Melénchon knew this – he simply chose the wrong target, and made an enemy when he didn’t have to. Which may help explain his 11.4% of the vote.

Politicians occupy a very small portion of the political bandwidth, and the untiring obsession with what they are doing or saying obscures a simple fact: their power derives, not wholly but substantially, from the people from whom they stole it. If people really and truly stopped waiting for politicians to deliver a fraction of what they say they will… the jig would be up. The obsession with politicians makes it endlessly easy for us to avoid looking closely at what the people are doing and making a critique of that. It is the blind trance of our love affair, the demise of a republic.

Meanwhile, Greece, whose government is as close to a protection racket as can be imagined, has just announced a deal with the notorious American firm Blackwater, to provide “security” – from the people. Drones will in all likelihood be patrolling the skies over the Parthenon very soon. But if the Greeks stopped paying attention to their governors, if they stopped waiting to see how Syriza does in the next election, if they decided to take back a bit of the power they have so recklessly given away… ?

None of which should be construed as that lowly seconal, advice, to the Greek people but taken for exactly what it is: the description of a predicament. Criticism never solves anything. It isn’t meant to. It’s meant to break the silence about an intolerable situation. That’s enough, but it will have a tough time with Americans, who want instant solutions to intractable problems. And meanwhile half of Paris dreams of living in New York and the world pines for American solutions that after 200 years have yet to arrive.

The politicians have their hands around all of our throats, while we, ever patient, persist in believing that this is their tortured form of love, and if we just wait awhile, they will come to their senses and set things aright. Who is the cynic in this equation?

Iddhis Bing

Dec 292012
 

 An Interview with Luc Frieden, Finance Minister of Luxembourg

By Iddhis Bing, 99GetSmart

Luxembourg Finance Minister Luc Frieden

Luxembourg Finance Minister Luc Frieden

Of great wealth there is no real use, except in its distribution, the rest is just conceit. Francis Bacon

Tax havens and fiscal paradises, what they are and how they work, are the subject of the Invisible Money series. Some 67 trillion USD moves in and out of what is now called the “shadow banking system,” a staggering amount, enough to put EU or US budgets back in surplus if it were properly accounted for. (As if, you sigh.) The series has taken a close look at Luxembourg, a notorious tax haven, and how it manages to operate within the structure of European Union governance. Switzerland gets the bad press and deservedly so – but it is not a member of the EU. Luxembourg is, and so, beyond the dubious legality of its tax regime, questions concerning exchange of information and cooperation between EU states are unavoidable, as well as its membership in international bodies like the OECD.  (Ireland and Liechtenstein also come to mind as a kind of Premiere League of EU tax havens.)

As noted elsewhere in the series, Luc Frieden is public point man for Luxembourg’s ingenious interpretation of European law. Frieden is the heir apparent in Luxembourg and he, not Vice-Premier and Foreign Minister Jean Asselborn, takes the lead in the tricky business of fending off attacks on Luxembourg’s status quo. He is on record as saying, “Our financial approach is totally European and applies all laws in the struggle against financial criminality.” But what goes on in Luxembourg, stays in Luxembourg.

Readers of Nicholas Shaxson’s Treasure Islands will remember more than one instance of the rebuffs inquiring reporters got when asking around about who’s who and how things work. Things can even get lethal in places like the Cayman Islands or at the very least, damn unpleasant if you ask too many questions on the isle of Jersey. Hence, getting the top dog to answer questions is a bit of a coup.

Although there is no “gotcha” moment in the interview, it is instructive to watch a member of what used to be called the permanent government bob and weave, fending off attacks and keeping the truth at a comfortable remove. Governors of fiscal paradises only rarely make a public defense of their actions. This short transcript serves as an open window into a closed house.

The interview with Luc Frieden is part of Edouard Perrin’s documentary. It can be seen in full here

Elise Lucet is the interviewer for the Cash Investigations series. Lucas Frieden is the Minister of Finance in Luxembourg’s Juncker/Asselborn government and is the man in charge of their extremely laissez faire fiscal regime, which, one is inclined to believe, he knows something about.

*

Cash Investigations: We’ve seen a lot of those documents. They cover Liechtenstein, the Caymen Islands and… Luxembourg. If we’re talking about tax havens, we find you, Luxembourg, in the middle of those schemes.

Lucas Frieden: We abide by European law, which is not the case with all the countries you just mentioned. We should be compared to the UK and the Netherlands.

CI: So you reject the term tax haven?

LF: Absolutely. It’s an insult to my country because Luxembourg abides by every single OECD convention and we work in close cooperation with every single EU state. You cannot prove that Luxembourg does not adhere to EU law.

CI: But we’ve seen all the [tax haven] schemes and you’re in league with those countries. You say it’s an insult to your country to be called a tax haven but you are always mentioned with those other countries. So, according to you, are Liechtenstein and the Caymens fiscal paradises?

LF: I’m not sufficiently versed in the tax laws of those countries or regions to be able to judge.

CI: You’re kicking off-side.

LF: No, I don’t want to judge in a superficial manner.

CI: If a large French company makes use of a subsidiary in Luxembourg, a non-active subsidiary, and succeeds in avoiding taxes in France, what happens?

LF: If it’s contrary to European law, and if the French mention it to us, I will take care to make sure it doesn’t happen.

CI: You won’t bring it up yourself?

LF: I would only be aware of it if the French tell me there’s a problem.

CI: You can guess that this presents a problem -

LF: You suppose that it’s always that way but you never raise a question about whether a contrary might exist. When laws are not the same in every single country, it is highly possible that a company in another country reduces their taxes somewhere else through a subsidiary. It’s not against the law. If there are abuses, I will make sure they are stopped because I don’t want to live off another country, to which we owe so much and with which we enjoy excellent relations.

CI: So you will stay with this approach?

LF: Absolutely.

CI: If you pledge that in the future there will be contact between your country and other countries and say, here we are, we are going to sign these agreements, would that not be to the detriment of the services you offer?

LF: I could imagine that that could be one way of doing things. Once again, with respect to European law, to enhance cooperation between European countries -

CI: So, according to you it’s a bit shocking -

LF: The way you present things, yes, because it suggests that people escape their own legislation.

CI: That’s the impression we got. Frankly, we looked at the activity of those companies, British and French, in your country, and they are not strikingly active here in Luxembourg. What is striking is the absence of real activity here in your country.

LF: I am not an expert regarding shell companies but one does not need to have many employees to be able to say it’s a real company. There are rules, European and OECD rules, regarding a stable company.

CI: When a French company has an office which it shares along with 31 other subsidiaries and where, quite blatantly, nothing goes on except for financial movement, for you as Finance Minister in Luxembourg, is this something you find shocking? I need to know your real position on this.

LF: Yes. If the description you made is accurate, I find it unacceptable.

CI: When the ATAs allow GlaxoSmithKline, for example, to avoid paying 40 million in taxes in their country, it’s a problem, isn’t it?

LF: Yes, I agree.

CI: By the way, it created problems with Revenue in the UK.

LF: Yes. I fully understand that but we have to know what the solution to such problems would be because creating subsidiaries is not illegal per se.

CI: If they are void of any real substance, it raises serious questions.

LF: Yes.

*

Apart from his sterling manners, Frieden’s defense essentially reduces to I have no way of knowing and when pushed, prove we’re breaking the rules – all of which beggars belief coming from the mouth of a government minister. It hardly seems enough – but it’s working. Interestingly, Frieden points his finger – correctly – at the UK, by which he means the City of London, certainly the greatest facilitator of illegal cash flows in the world today. (We’re just small fry around here.)

And as we shall surely see sooner rather than later, everyone is involved, from pop stars to budget ministers. Does that mean Luc Frieden again ? No, Jérôme Cahuzac in France. When Perrin’s documentary won the Louise Wiese Award, the French journalist Paul Moreira said in dismay, “Edouard Perrin’s stunning investigation wins the Louise Weiss Prize and the Budget Ministry completely fails to react… We’re not talking about peanuts but tens of billions of Euros. It could give the Budget Ministry a few ideas.” In early December the website Mediapart published an inadvertant phone recording of Budget Minister Cahuzac discussing his secret Swiss account. (Not enough to cost him his position, so the experts say. Even Copé has rushed to his defense.) Pardon the Minister if he doesn’t get too tough on Luxembourg. He understands the need for secrecy, for putting a little aside for a rainy day. And dammit, if he had just hung up the phone correctly, none of this would be public. The Cahuzac interlude is a portrait, in miniature, of the way the system survives and flourishes.

Interestingly, in November, Avinash Persaud, no small fry himself (Chairman of Intelligence Capital Limited, Senior Fellow with the Caribbean Policy Research Institute and Co-Chair of the OECD Emerging Market Network) speculated that when push comes to shove, countries like Luxembourg would go along with a reform that puts the places like the Cayman Islands out of business. “The large financial centres are going to try, and have been trying, to strangle the Caribbean banking sectors,” Persaud stated. A bit like a declaration of war.

Where does that leave us ? Is it nearly High Noon among the warring Secrecy and Acquisition Clans ? Every system has the limitations particular to it built in, and it’s no surprise to learn that capitalists despise each other and will, under pressure, turn other members of their class out. So, please, enough of the polite manners. For the next act, the crocadiles, under the increasingly watchful eyes of the crowd, will tear each other to pieces. Stand back, ladies and gentlemen. The show is just getting under way.

 

Iddhis Bing

For the full text of Invisible Money 5, see elsewhere on this site or Ground Report/Iddhis Bing.

————

Invisible Money Series by Iddhis Bing:

- Invisible Money 1: How It Gets That Way: http://99getsmart.com/?p=4736

- Invisible Money 2: Voyage to Luxembourg: http://99getsmart.com/?p=4914

- Invisible Money 3: http://99getsmart.com/?p=5319

- Invisible Money 4: Of Luxembourg, London and Paris, and a Lady Named Merkiavelli: http://99getsmart.com/?p=5411

- Invisible Money 5: The cloud Factory Revisited Up The Ladder, Marius Kohl to Luc Frieden: http://99getsmart.com/invisible-money-5-the-cloud-factory-revisited-up-the-ladder-marius-kohl-to-luc-frieden/

Dec 272012
 

Many thanks to GreyDog for posting my article from the Invisible Money series.

For those who can bear it, all my political pieces are archived at GroundReport (http://www.groundreport.com/JIBing) and I write about art and culture for NY Arts, but as their site is in some sort of hazy-maybe reconstruction, good luck!

In a day or so I will post the full transcript of the ElistLucet/Cash Investigation Luc Frieden one-on-one from Perrin’s film. Nothing precisely revelatory but it is a rare occasion when one of the honchos at a tax haven lets himself be grilled by the press, and the Logic of Avoidance is on full display.

So, we made it though the End of the World. Next up, end of the year. End of Time?