The Trillion-Dollar Conspiracy (6 page)

BOOK: The Trillion-Dollar Conspiracy

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So the big banks pocket the money and the poor, strapped taxpayers are left with the bill, not to mention ownership of banks that continued to be troubled financially well into 2010.

By mid-2009, Americans were driving less and spending less and the economy was deflating. Even though products became cheaper in the face of inflation, people stopped buying what they couldn’t afford. The housing market, which is a key indicator of economic strength, continued to lag far behind projections. Housing start-ups were doing particularly poorly. In April 2009, the U.S. Department of Housing and Development announced that non-government-backed housing starts, even after seasonal adjustments, were 54 percent lower (458,000) than the April 2008 rate of 1,001,000. Privately backed housing starts are any homes being built that are not being financed by the government. These have long been a prime indicator of the national economy.

There was also blame tossed at the unequal distribution of money. Chuck Collins, director of the Program on Inequality and the Common Good for the Institute for Policy Studies, said, “In our view, extreme inequalities contributed to the economic collapse…. This matters because wealth is power—the power to shape the culture, to distort elections, and shape government policy. A plutocracy is a ‘rule by wealth’—and more and more the priorities of the society are shaped by the interests of organized wealth.”

IMPROPRIETIES AND DEATH

A
PPARENTLY THE STRESS CREATED
by the gargantuan amounts of money involved in the economic squeeze can be hazardous to your health as well as your wealth. Stress may have contributed to the untimely deaths of at least five high-profile financial officers who died in the months following financial collapse in October 2008.

In January 2009, German billionaire Adolf Merckle apparently threw himself under a train after losing money shorting Volkswagen stock. Patrick Rocca, an Irish property speculator who was close to both President Bill Clinton and British prime minister Tony Blair, was found shot in the head following the crash of the real estate market. Chicago real estate mogul Steven Good was found fatally shot in his car. Financial adviser Rene-Thierry Magon de la Villehuchet reportedly committed suicide in his Manhattan office just before Christmas 2008 after losing both his and his clients’ money in the Bernie Madoff scandal.

One particularly troubling death was that of Freddie Mac acting chief financial officer David Kellermann, who was found, the apparent victim of suicide, in his Vienna, Virginia, home on April 22, 2009. In 2008, the U.S. Treasury Department had to pump $45 billion into the government-sponsored mortgage firm to shore up $50 billion in losses. Questions immediately arose over reports about Kellermann’s role in the massive losses at Freddie Mac and about the nature of his death. One police spokesman told All Headline News that Kellermann died from a gunshot wound. Strangely enough, however, another police officer initially said he had hanged himself.

There was more controversy when reporters found that Kellermann was deeply involved in the Securities and Exchange Commission’s and the U.S. Justice Department’s investigations into questionable bookkeeping practices within Freddie Mac. “Kellermann figured in several recent controversies at Freddie Mac,” reported the
Washington Post
in April 2009. “He and a group of company attorneys tussled with regulators in early March as the firm prepared to file its quarterly earnings report with the Securities and Exchange Commission. [Kellermann’s] group insisted that Freddie Mac inform shareholders of the cost to the company in helping carry out the Obama administration’s housing recovery plan. The regulators urged the company not to do so.”

“This isn’t the story of a guy who was trying to cover something up. It’s the story of a guy who was trying to do the right thing,” commented one housing industry veteran, who asked for anonymity, apparently suspecting the possibility of danger in telling the truth in such matters.

More than one conspiracy-minded researcher believed that something more than suicide was at work in Kellermann’s death and that there may have been other deaths connected to an effort to silence insiders who might have knowledge of the situation that someone does not want made public.

In a statement from his political action committee, perennial office seeker and conspiracy advocate Lyndon LaRouche said, “There is no evident motive for suicide in this case, but there is a motive for suppressing making Kellermann’s views known. The guy is killed, probably murdered. He deserves justice. His right to justice is overriding. The question is what else did David Kellermann know which influential circles did not want him to reveal?”

THE RICH GET RICHER

I
T HAS LONG BEEN
said that the rich get richer while the poor get poorer. Many researchers equate the term “plutocracy”—rule by the wealthy—with the New World Order.

Although the belief that an organized plutocracy controls the world has long been derided as merely a “conspiracy theory,” G. William Domhoff, a professor in psychology and sociology at the University of California, Santa Cruz, has the statistics to prove its existence. Domhoff’s first book,
Who Rules America?,
was a controversial 1960s bestseller that argued that the United States is dominated by an elite political and economic ownership class.

Using updated figures, Domhoff stated in a posting: “In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1 percent of households (the upper class) owned 34.3 percent of all privately held wealth, and the next 19 percent (the managerial, professional, and small business stratum) had 50.3 percent, which means that just 20 percent of the people owned a remarkable 85 percent, leaving only 15 percent of the wealth for the bottom 80 percent (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1 percent of households had an even greater share: 42.2 percent.”

Domhoff defined “total assets” as the gross value of owner-occupied housing plus other real estate owned by the household, cash and savings deposits, money market accounts, stocks and bonds, retirement plans, and other financial securities. He defined “total liabilities” as mortgage debt; consumer debt, including auto loans; and any other debt.

According to Domhoff, wealth distribution has been extremely concentrated throughout American history. During the nineteenth century, the top 1 percent of wealth owners owned 40 to 50 percent of assets in large port cities like Boston, New York, and Charleston. He said this disparity remained stable during the twentieth century, “although there were small declines in the aftermath of the New Deal and World War II, when most people were working and could save a little money. There were progressive income tax rates, too, which took some money from the rich to help with government services.

“Then there was a further decline, or flattening, in the 1970s, but this time in good part due to a fall in stock prices, meaning that the rich lost some of the value in their stocks,” wrote Domhoff. “By the late 1980s, however, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1 percent had 44.2 percent of all wealth. It has continued to edge up since that time, with a slight decline from 1998 to 2004, before the economy crashed in the late 2000s and little people got pushed down again.”

Domhoff recorded that as of 2007, “income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01 percent…receiving 6 percent of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917.”

The numbers are even more shocking when viewed on a global scale. Using numbers from the World Institute for Development Economics Research, Domhoff concluded the top 10 percent of the world’s adults control about 85 percent of global household wealth. “That compares with a figure of 69.8 percent for the top 10 percent for the United States. The only industrialized democracy with a higher concentration of wealth in the top 10 percent than the United States is Switzerland at 71.3 percent,” he noted. At the same time, the U.S. government’s income is declining. According to the White House, 2008 individual income tax receipts were estimated at $1.168 trillion. Yet when tax receipts were tallied, the total was $155 billion less than that at $1.043 trillion.

Domhoff’s work presents a strong argument that wealth indeed equals power. Such power comes with the ability to donate to political parties, engage lobbyists, and provide grants to experts to think up new policies beneficial to the wealthy. Money also can hire public relations firms to improve one’s image or make large donations to universities and cultural entities such as museums, music halls, and art galleries. Wealth in the form of stock ownership can be used to control whole corporations, which today have inordinate influence in society, media, and government.

And just as wealth can lead to power, so can power lead to wealth. Recent presidents such as Lyndon B. Johnson and Richard M. Nixon entered office without an extraordinary amount of money but left as millionaires. This is because those who control a government can use their positions to feather their own nests. Domhoff said this can be done by means of a favorable land deal for relatives at the local level or perhaps a huge federal government contract to a new corporation run by friends who will hire you when you leave government. “If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth,” commented Domhoff.

PUBLIC DEBT, PRIVATE PROFIT

W
HETHER RICH OR POOR
, most Americans believe their finances are safe, thanks to a federal government corporation created in the Great Depression year of 1933.

About eight-four hundred American banks participate in the Federal Deposit Insurance Corporation (FDIC), an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by insuring deposits, supervising banks for safety and soundness, and managing receiverships. These banks allocate a small portion of their profits to collectively insure bank deposits in cases where a bank fails.

And fail they did in late 2008 and 2009. Between the two years, 111 banks failed and many more teetered on collapse, effectively depleting the FDIC reserve fund from $52.8 billion in 2008 to a mere $10.4 billion in the first quarter of 2009, its lowest point since the height of the savings and loan scandal in 1992.

But what is more disturbing is that this reserve fund, much like Social Security, is merely an illusion.

In 2008, the former chairman of the FDIC, William M. Isaac, wrote an article titled “The Mythical FDIC Fund,” in which he revealed the FDIC’s insolvency: “When I became Chairman of the FDIC in 1981, the FDIC’s financial statement showed a balance at the U.S. Treasury of some $11 billion…. I decided it would be a real treat to see all of that money, so I placed a call to [then] Treasury Secretary Don Regan.”

The conversation went like this:

I
SAAC
: Don, I’d like to come over to look at the money.

R
EGAN
: What money?

I
SAAC
: You know…the $11 billion the FDIC has in the vault at Treasury.

R
EGAN
: Uh, well you see, Bill, ah, that’s a bit of a problem.

I
SAAC
: I know you’re busy. I don’t need to do it right away.

R
EGAN
: Well…it’s not a question of timing…. I don’t know quite how to put this, but we don’t have the money.

I
SAAC
: Right…ha ha.

R
EGAN
: No, really. The banks have been paying money to the FDIC, the FDIC has been turning the money over to the Treasury, and the Treasury has been spending it on missiles, school lunches, water projects, and the like. The money’s gone.

I
SAAC
: But it says right here on this financial statement that we have over $11 billion at the Treasury.

R
EGAN
: In a sense, you do. You see, we owe that money to the FDIC, and we pay interest on it.

I
SAAC
: I know this might sound pretty far-fetched, but what would happen if we should need a few billion to handle a bank failure?

R
EGAN
: That’s easy—we’d go right out and borrow it. You’d have the money in no time…same day service most days.

I
SAAC
: Let me see if I’ve got this straight. The money the banks thought they were storing up for the past half century—sort of saving it for a rainy day—is gone. If a storm begins brewing and we need the money, Treasury will have to borrow it. Is that about it?