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News Release Archive | Stephany Griffith Jones | Accuracy.Org

LIBOR Scandal: The Conundrum of Bank Regulators

July 10, 2012

STEPHANY GRIFFITH JONES, sgj2108 at columbia.edu,
Stephany Griffith Jones is Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University. With José Antonio Ocampo and Joseph E. Stiglitz she co-edited Time for a Visible Hand: Lessons from the 2008 World Financial Crisis. She was recently featured on the IPA news release “Barclays Scandal Highlights Need to ‘Clean the Cesspit.’” She said today: “An important reason why this potential rigging of LIBOR is so significant is because over $500 trillion of transactions worldwide — of interest rate derivatives, but also of mortgages, credit card debt and student loans of millions of people — are influenced by LIBOR. It is not morally acceptable that such a crucial variable for so many could be lied about so as to benefit a few traders and bankers.”

RICHARD WOLFF, rdwolff at att.net
Wolff is author of the book Occupy the Economy: Challenging Capitalism. He said today on the LIBOR scandal: “The long-standing, mutual assistance relationship between global bankers and regulators has been exposed for serving their interests at the expense of the world economy. Such exposures happen when extreme economic crises such as today’s provoke searches for scapegoats. Punishing big banks and regulators leaves intact the basic economic system that created the incentives and provided the rewards for what they did. The real issue is the need for system change.

On the European economic crisis, Wolff said: “Global capitalism is a system in deep crisis. Beginning in the U.S., it was worse there in 2008 and 2009 than it was in Europe. Then, partly because U.S. policies failed to end the crisis, global markets spread it to Europe and beyond in 2010 and 2011. ‘Austerity’ policies in Europe worsened its crisis that now, via global markets, returns to further depress the weakened U.S. economy. Global capitalism, a broken, dysfunctional system, persists because ideological blinders refuse to question let alone change it.”

He is a Professor of Economics Emeritus, University of Massachusetts, Amherst, and currently a visiting professor in the Graduate Program for International Affairs at the New School University in New York City. Video of his talk “Capitalism Hits the Fan” is available here.

Tagged With: corporations, economy, LIBOR scandal, Richard Wolff, Stephany Griffith Jones,

Barclays Scandal Highlights Need to “Clean the Cesspit”

July 2, 2012

STEPHANY GRIFFITH JONES, sgj2108 at columbia.edu
Stephany Griffith Jones is Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University. With José Antonio Ocampo, and Joseph E. Stiglitz she co-edited Time for a Visible Hand: Lessons from the 2008 World Financial Crisis. Available for a limited number of interviews, she said today: “This is just the latest in a series of scandals. Barclays was simply lying about how much it was costing them to borrow money. They did this partly to appear to be in a better position than they in fact were, but mostly to make more money.

“British banks were also improperly selling derivatives to small and medium enterprises. There was also the recent Royal Bank of Scotland problem for transferring money to their account holders. These financial institutions are not competent, nor efficient. They are also in many cases corrupt.

“There’s been criticism from many quarters, including conservative quarters and calls by the Labour leader Ed Miliband for a broad inquiry. At present the government says it cannot prosecute Barclays, as the LIBOR [The London InterBank Offered Rate] misdemeanors are not covered by law. Also, some are saying: Be careful, you don’t want to undermine a strong local industry, and they have influence over the politicians.

“This shows again that we have an appalling financial system that doesn’t support the real economy, but often hurts it. And for that, there’s a growing outrage, a need to ‘clean the cesspit’ as one politician, Vince Cable — the UK Business Secretary — put it.

“Even the IMF has been saying that a smaller financial system might be better for the rest of the economy. Up until now, many have insisted that a large financial system was better for the economy, but it’s clear that with speculative parts of banking running amok, that is not the case.”

Tagged With: corporations, economy, Europe, Great Britain, Stephany Griffith Jones,

Standing Up to JPMorgan’s Dimon and “Hedginess”

May 15, 2012


STEPHANY GRIFFITH JONES, sgj2108 at columbia.edu
Stephany Griffith Jones is Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University. With José Antonio Ocampo, and Joseph E. Stiglitz she co-edited “Time for a Visible Hand: Lessons from the 2008 World Financial Crisis.” She said today: “Two billion dollar losses in JPMorgan give us further confirmation of the need to regulate the financial system much more, particularly increasing transparency of derivatives, forcing all derivatives on exchanges, and tightening the Volcker rule. Dilution of regulation by financial interests must be resisted strongly. More radical questions need to be asked: whether such complex financial activity, where risks are impossible to measure, and with no positive effect on the real economy, should be allowed at all?”

WILLIAM K. BLACK, blackw at umkc.edu
Available for a limited number of interviews, Black is now an associate professor of economics and law at the University of Missouri, Kansas City and the author of The Best Way to Rob a Bank is to Own One. He was the deputy staff director of the national commission that investigated the cause of the savings and loan debacle. He just wrote a piece for CNN which states: “Financial institutions such as JPMorgan love to buy derivatives because they are opaque, create fictional income that leads to real bonuses and when (not if) they suffer losses so large that they would cause the bank to fail, they will be bailed out. The Dodd-Frank Act’s Volcker Rule was designed to solve the problem.

“However, JPMorgan led the effort to gut the Volcker Rule and the provision that requires transparency. JPMorgan is the world’s largest proprietary purchaser of financial derivatives — precisely what the Volcker Rule sought to end. The bank claims that it does not engage in proprietary trading and that it purchases derivatives solely to hedge. That claim is an example of what Stephen Colbert meant when he invented the term: ‘truthiness.’

“A hedge is an investment that offsets losses in another investment. JPMorgan’s supposed hedges aren’t hedges under accounting rules because they haven’t been shown to perform as hedges. JPMorgan bought tens of billions of dollars of derivatives that increased its losses rather than reduced them. It calls these anti-hedges ‘hedges’ — in other words, it practiced ‘hedginess.’”

On Friday, Black will be speaking at a United Nations summit on the “State of the World Economy and Finance in 2012.”

GERALD EPSTEIN, gepstein at econs.umass.edu
Professor of economics and a founding co-director of the Political Economy Research Institute at the University of Massachusetts, Amherst, Epstein just wrote the piece “Standing Up to Jamie Dimon: Is it Safe?” which states: “How do we stand up to Jamie Dimon and the other tax payer subsidized bankers that use the privileged position of tax payer underwritten banks to engage in risky activity that harms the real economy and generates massive salaries and bonuses for the bankers (Ina Drew is reportedly in line to make $14 million this year).

“First, we must unmask the Republican and Democratic politicians that have actively served to eviscerate the Dodd-Frank rules on proprietary trading, derivatives and swaps regulations and other parts of the Dodd-Frank regulations, in the name of job creation and liquidity enhancement. The regulators at the Federal Reserve, Securities and Exchange Commission and others must be badgered to write and enforce rules that implement strict enforcement of the Dodd-Frank rules against proprietary trading, controls over derivatives…

“But such provisions will not be enough because banks will eventually find ways around them and continue to act like the world is one big casino and ponzi palace. There is increasing recognition by economists and public officials that the too big to fail banks need to be cut down to size. Senator Sherrod Brown has introduced the SAFE banking act”

Epstein was just interviewed by The Real News

Filed Under: Tagged With: corporations, economy, Gerald Epstein, JP Morgan, JP Morgan Trading Loss, JP Morgan Volcker Rule, Stephany Griffith Jones, William K. Black,

JPMorgan “Shock Disclosure” a “Wake-Up Call We Dare Not Ignore”

May 11, 2012

The Financial Times reports today: “JPMorgan Chase announced a surprise $2 billion trading loss on credit derivatives trading, which chief executive Jamie Dimon blamed on ‘errors, sloppiness and bad judgement’ and warned ‘could get worse.’

“The shock disclosure, made after the market closed on Thursday in a regulatory filing, prompted renewed calls for tougher regulation. Investors reacted by sending the bank’s shares down by more than 9 percent when Wall Street opened on Friday. Other U.S. banking stocks also suffered sharp falls.”

STEPHANY GRIFFITH JONES, sgj2108 at columbia.edu
Stephany Griffith-Jones is Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University.

WILLIAM K. BLACK, blackw at umkc.edu
Available for a limited number of interviews, Black is now an associate professor of economics and law at the University of Missouri, Kansas City and the author of “The Best Way to Rob a Bank is to Own One.” He was the deputy staff director of the national commission that investigated the cause of the savings and loan debacle. He said today: “JPMorgan has announced that it has suffered large losses, and remains exposed to far greater losses, because purported ‘economic hedges’ did not perform as ‘expected’ because they were poorly designed. These purported hedges are not real. JPMorgan was speculating wildly and its panicky releases reveal that it is afraid that the positions it took exposed it to grave risks. The experience demonstrates the importance of the Volcker rule, the largest banks’ efforts to gut and evade the rule, and the continuing refusal of bank regulators to say ‘no’ to practices of the systemically dangerous institutions or SDIs (the roughly 20 ‘too big to fail’ banks) that are unsafe and unsound. As long as we permit the SDIs to remain so large that regulators fear that their failure will produce a global crisis we are rolling the dice 20 times a day wondering when (not ‘if’) the next SDI failure will occur and blow up the economy. JPMorgan’s losses on its faux hedges are the wake-up call we dare not ignore.”

Also see: “‘JOBS Act’ a ‘Recipe for Fraud’ Creating a ‘Race to the Bottom’.”

Filed Under: , Tagged With: corporations, economy, JP Morgan, JP Morgan Speculating, JP Morgan Stocks Fall, JP Morgan Trading Loss, Stephany Griffith Jones, William K. Black,

World Bank: First Qualified President?

March 23, 2012

MARK WEISBROT, via Dan Beeton, beeton at cepr.net
Weisbrot is co-director of the Center for Economic and Policy Research. He said today: “The Obama administration’s announcement that it will nominate health expert and Dartmouth College president Jim Yong Kim for World Bank president represents a historic milestone in the institution’s history, with the U.S. nominating, for the first time, a qualified candidate. This is a huge step forward. If Kim becomes World Bank President, he’ll be the first qualified president in 68 years. Kim’s nomination is a victory for all the people, organizations, and governments that stood up to the Obama administration and demanded an open, merit-based process.

“Much of Kim’s career was with Partners in Health, which Kim co-founded. Partners in Health is a uniquely dynamic and enormously capable organization that has implemented important changes in approaches to preventing and treating diseases and other health problems, and Kim deserves much credit for that.

“However, the Bank’s process is still deeply flawed because the majority of the world’s countries are not really involved and I hope that for the next presidency, they will come together long in advance to agree on a candidate.”

Weisbrot noted the importance of Jeffrey Sachs’ candidacy as having busted open the process and “raised the bar for whom could be nominated. Sachs’ campaigning for the Bank’s presidency was unprecedented in its openness, in Sachs’ platform of reform for the Bank, and in terms of Sachs’ qualifications as an economist with extensive experience in economic development and as a health expert, who, like Kim, has worked to fight diseases such as HIV/AIDS and tuberculosis.

“Once Sachs was nominated, it was clear it would be very difficult for the Obama administration to follow past practice and simply choose, again, a political insider or a banker,” Weisbrot said. Weisbrot noted that Nigerian Finance Minister Ngozi Okonjo-Iweala’s nomination by several African countries today also “represents an unprecedented challenge to the U.S. government’s traditional domination in choosing the next World Bank president.”

STEPHANY GRIFFITH JONES, sgj2108 at columbia.edu
Chilean and British economist Stephany Griffith-Jones, currently Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University recently wrote the piece “What Makes Jose Antonio Ocampo a Good Candidate for President of the World Bank.”

She said today: “Jim Yong Kim is certainly an interesting choice, and he might be a great candidate to head up a health organization, but the World Bank is focused on development and infrastructure. Someone like Ocampo has that background in economics and development, and he has chosen to spend an important part of his career working in Colombia, the developing country where he was born.”

In her recent article, Griffith-Jones wrote: “Jose Antonio provides the rare combination of an experienced and successful policy-maker at the highest level (he was Minister of three portfolios in Colombia, including Finance, but also Agriculture and Planning), an outstanding international civil servant again at the highest level (including as Under Secretary General at the United Nations, as well as well as Head of the UN Commission for Latin America and the Caribbean), and a leading academic researcher in key issues relating to development and macro-economic policy.”

Griffith-Jones notes that Reuters recently reported: “While Ocampo had agreed to stand and Brazil was willing to nominate him, Colombian Finance Minister Juan Carlos Echeverry said on Thursday that Colombia was instead focusing on a bid for the presidency of the International Labor Organization.”

Tagged With: economy, Mark Weisbrot, Stephany Griffith Jones, World Bank,