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So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

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Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system. In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.) Instead Goldman Sachs, like the other too-big-to-fail firms, has been handed tens of billions in government subsidies, on the theory that we cannot live without them. They were then permitted to pay politicians to prevent laws being passed to change their business, and bribe public officials (with the implicit promise of future employment) to neuter the laws that were passed—so that they might continue to behave in more or less the same way that brought ruin on us all. And after all this has been done, a Goldman Sachs employee steps forward to say that the people at the top of his former firm need to see the error of their ways, and become more decent, socially responsible human beings. Right. How exactly is that going to happen?

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The US Justice Department has confirmed it will sue Standard and Poor’s over a “scheme to defraud investors” before the financial crisis.

Attorney General Eric Holder announced that the Department had filed a civil lawsuit against the firm over the way it rated mortgage bonds.

“This alleged conduct is egregious and it goes to the very heart of the recent financial crisis,” he said.

[Quote]:

For many years, the ratings agencies have defended themselves successfully in civil litigation by saying their ratings were independent opinions, protected by the First Amendment, which guarantees the right to free speech. Developments in the wake of the financial crisis have raised questions about the agencies’ independence, however. For example, one federal judge, Shira A. Scheindlin, ruled in 2009 that the First Amendment did not apply in a lawsuit over ratings issued by S&P and Moody’s, because the mortgage-backed securities at issue had not been offered to the public at large. Scheindlin also agreed with the plaintiffs, who argued the ratings were not opinions, but misrepresentations, possibly the result of fraud or negligence.

[Quote]:

Goldman Sachs made more than a quarter of a billion pounds last year by speculating on food staples, reigniting the controversy over banks profiting from the global food crisis.

Less than a week after the Bank of England Governor, Sir Mervyn King, slapped Goldman Sachs on the wrist for attempting to save its UK employees millions of pounds in tax by delaying bonus payments, the investment bank faces fresh accusations that it is contributing to rising food prices.

Goldman makes its “food speculation” revenues by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in return for fees and commissions. The firm invented these kinds of funds and continues to dominate the market, together with Barclays and Morgan Stanley. Swiss trading giant Glencore hit the headlines in August when its head of agriculture proclaimed that the US drought will be “good for Glencore”.

Goldman has always shrouded the breakdown of its profits in secrecy, but a WDM commodities derivatives expert has calculated the revenues it believes the bank makes from food speculation through an analysis of its recent results and market information.

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One of the striking features of the drug world is how pharma companies become noticeably more inventive immediately before their patents are due to run out and their drugs are about to enter the public domain. That’s because they need to find a way to differentiate themselves from the generic manufacturers that are then able to offer the same medicines for often vastly lower prices.

Usually this takes the form of modifying the formula of a drug slightly, patenting it, and then seeking to convince the medical profession that the new formulation is better in some way. Butsometimes it involves more novel approaches, as here:

In coming months, generic drug producers are expected to introduce cheaper versions of OxyContin and Opana, two long-acting narcotic painkillers, or opioids, that are widely abused.

But in hopes of delaying the move to generics, the makers of the brand name drugs, Purdue Pharma and Endo Pharmaceuticals, have introduced versions that are more resistant to crushing or melting, techniques abusers use to release the pills’ narcotic payloads.

As the New York Times article quoted above reports, having introduced these “tamper-resistant” designs, the pharma companies are now pushing to get a ban on generic versions that lack this feature. If you think of “tamper-resistant” techniques as a kind of DRM for drugs, the pharma companies are effectively asking for their own version of the DMCA, which forbids the circumvention of DRM.

 

The drug companies have dressed this up as a service to society, but some aren’t buying it:

While companies like Purdue Pharma insist the public’s health is their main concern, others note that producers introduced tamper-resistant versions of their products just as the drugs were about to lose patent protection. In court papers filed in response to Endo’s lawsuit, the F.D.A. described the company’s action as a “thinly veiled attempt to maintain its market share and block generic competition.”

There’s no doubt that the abuse of painkillers is a significant problem, but according to another recent story, in The Washington Post, alarming levels of addiction to OxyContin and similar painkillers may be partly the drug companies’ fault. For instead of warning doctors about this issue, the latter were assured that there were “minimal risks of addiction and dependence” if they prescribed these kinds of drugs for their patients:

according to a Washington Post examination of key scientific papers, a court document and FDA records, many of those claims [about minimal risks] were developed in studies supported by Purdue Pharma, the maker of OxyContin, or other drug manufacturers. In addition, the conclusions they reached were sometimes unsupported by the data, and when the FDA was struggling to come up with an opioid policy, it turned to a panel populated by doctors who had financial relationships with Purdue and other drugmakers.

So it would seem that rather than mandating the use of tamper-resistant packaging for these kinds of painkillers, a better long-term solution would be to avoid the use of these drugs altogether, where possible.

[Quote]:

So this is apparently a real thing from the Wall Street Journal.

The Onion couldn’t top this. Whether it’s the sad faces of all these put-upon dejected rich people, or the elderly minority couple who is depressed despite not paying extra taxes (or was that the point?), or the distressed single Asian lady making $230,000 who might not be able to buy that extra designer pantsuit this year, or the “single mother” making $260,000 whose kids presumably have a deadbeat, indigent dad just like any other poor family, or that struggling family of six making $650,000 including $180,000 of pure passive income and wondering how to make ends meet, mockery is almost superfluous. The thing mocks itself. That $650,000 family in particular is bizarre to the point of incredulity: those people could literally stop working entirely, live extremely well on $180,000 while doing nothing but watching television all day and staying home with their kids, and leave their high-salary jobs with their oh-so-onerous tax requirements to people who actually appreciate them.

[..]

These folks live in a Versailles bubble, modern day edition. But even they’re not the ones with the real money. The real plutocrats outstrip even these jokers by exponential leaps and bounds. And they’re the ones who drive public policy in this country.

[Quote]:

NEARLY 6,000 UK employees at US banking giant Goldman Sachs are among staff sharing out £8.1 billion in pay and bonuses for 2012 after it posted better-than-expected profits.

The total pay package – based on its global headcount of 32,400 – equates to an average of 399,506 US dollars (£249,977) for each of its employees and is 6% higher than in 2011.

Its bumper pay and bonus deal is likely to further stoke controversy after Goldman was yesterday forced to back down on plans to defer bonus payments to UK staff until the new financial year after Bank of England Governor Sir Mervyn King attacked the move.

Fellow US investment banking group JP Morgan Chase also posted full year figures today revealing its staff salary and bonus bill soared to 30.6 billion dollars (£19.1 billion), up 5% on 2011.

But the company’s chief executive Jamie Dimon saw his annual bonus cut in half – to 10 million dollars (£6.3 million) after a damning report following an investigation into its so-called “London Whale” trading loss.

The groups have ensured a strong start to the US bank reporting season, with both firms smashing market expectations.

Goldman reported net earnings nearly trebling to 7.3 billion dollars (£4.6 billion) in 2012, while JP Morgan posted a record 21.3 billion dollars (£13.2 billion) in profits after a 53% surge in the final quarter.

Goldman’s annual haul comes after fourth quarter earnings soared to 2.83 billion dollars (£1.8 billion) compared with 978 million dollars (£612 million) a year earlier after a strong performance from its investment banking arm.

The group yesterday made a climbdown on tax plans that would have potentially cost the Treasury millions of pounds.

Goldman had been proposing to allow bankers receiving bonuses to benefit from the cut in the top rate of income tax from 50p to 45p, announced by Chancellor George Osborne in last year’s Budget, which comes into effect on April 6.

Its U-turn came after pressure from the Bank and Treasury, with Sir Mervyn telling MPs it was “lacking in care and attention” to the rest of society.

But while Goldman’s total in pay and bonuses rose in 2012, the share of revenues paid out in salary and benefits for 2012 fell to 37.9% from 42.4% – the second lowest on record.

 

[Quote]:

The latest foreclosure horror: the zombie title

The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn’t know they still owned after banks decided it wasn’t worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

via Naked Capitalism:Another Nightmare, “Zombie Title” Shows How Servicer Refusal to Foreclose Hurts Stressed Homeowners and Communities

Home Seizures Rise As Banks Adjust To Foreclosure Flow, especially since Bank Deal Ends Flawed Reviews of Foreclosures:

Federal banking regulators are trumpeting an $8.5 billion settlement this week with 10 banks as quick justice for aggrieved homeowners, but the deal is actually a way to quietly paper over a deeply flawed review of foreclosed loans across America, according to current and former regulators and consultants.

To avoid criticism as the review stalled and consultants collected more than $1 billion in fees, the regulators, led by the Office of the Comptroller of the Currency, abandoned the effort after examining a sliver of nearly four million loans in foreclosure, the regulators and consultants said.

Feds Replace Flawed Foreclosure Review With Vague $8.5 Billion Settlement

The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.

Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.

NC, again:
$8.5 Billion Foreclosure Fraud Settlement: Yet Another Loss for Homeowners Touted as a Victory and
Yes, Virginia, the IRS Does Not Treat the Connected Like the Rest of Us (REMIC Edition)

The failing, as we’ve stressed again and again, was not in the law, the deal design, or the contracts, but that the sell side systematically refused to live up to the terms of its own agreements.

Letters To Bank Of America

Anyway, Detroit used to be a really nice place to live. And lots of people would like to buy homes in Detroit and fix them up and make them pretty again, but Bank of America and Countrywide probably wouldn’t stand to make too much money if houses sold cheaply and mortgages were fair and banks were more flexible when the unemployment rate in America is around 9% (here in Detroit, it’s more like 14%—that’s really high, in case you didn’t know).

With abandoned houses falling into disrepair, the target of thieves who strip appliances, copper, and bathroom fittings, blighting neighborhoods and posing fire hazards, there may be one solution: Inside the Radical Plan to Fight Foreclosures With Eminent Domain

From the comments:

So, once again, if you don’t follow the rules, you get fined, and maybe even go to jail.

If the banks don’t follow the rules, you still get fined, and maybe even go to jail.

[Quote]:

Fresh from paying back a $182 billion bailout, the American International Group Inc. has been running a nationwide advertising campaign with the tagline “Thank you America.”

Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.

The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”

[Quote]:

IF you were hoping that things might be different in 2013 — you know, that bankers would be held responsible for bad behavior or that the government might actually assist troubled homeowners — you can forget it. A settlement reportedly in the works with big banks will soon end a review into foreclosure abuses, and it means more of the same: no accountability for financial institutions and little help for borrowers.

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It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

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Congressional investigators are wrapping up an inquiry into the accounting practices of Apple and other technology companies that allocate revenue and intellectual property offshore to lower the taxes they pay in the United States.

[..]

Apple has long been a pioneer in developing innovative tax strategies that lessen its domestic taxes. At the September hearing, Senator Levin said the investigation indicated that Apple had deferred taxes on over $35.4 billion in offshore income between 2009 and 2011.

Tech companies are able to easily shift “intellectual property, and the profit that goes along with it, to tax havens,” said a former Treasury Department economist, Martin A. Sullivan. “Apple went out of its way to try and ensure that its tax savings didn’t attract too much public attention, because tax avoidance of that magnitude — even though it’s legal and permissible — isn’t in keeping with the image of a socially progressive company.”

In its statement, Apple said it paid “an enormous amount of taxes” to local, state and federal governments. “In fiscal 2012 we paid $6 billion in federal corporate income taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government,” it said.

So if Apple is a huge tax-avoiding company, and still manages to pay 1 out every 40 dollars, there’s only two options: either Apple is insanely profitable compared to all the others, or all the others are even bigger tax cheaters. It’s time to change the entire system.

Quote

Royal Bank of Canada and National Bank of Canada led the 7.5 per cent surge in bonus awards among the country’s lenders this year, bucking a global trend of pay cuts on Wall Street and in London.

Royal Bank, Canada’s biggest by assets, and National, the sixth-largest lender, boosted variable compensation 11 per cent in the year ended Oct. 31. Canadian Imperial Bank of Commerce was the only one among the group to pare its bonus pool, trimming 2 per cent from last year’s allocation.

“The Canadian bonuses are not remarkable, but relative to what their peers are getting in London and the U.S., it’s great,” Bill Vlaad, president of Toronto-based recruitment firm Vlaad & Co., said.

“We never saw the true upside of the glory years in the bull market, but we’ve reaped the rewards now by not having the abysmal downside in the tough years.”

Great news chaps! The Canadian government stopped us from wrecking the Canadian economy and we still get bonuses! Paar-tee!!

.

[Quote]:

Two of Iceland’s most senior former bankers have been jailed for making reckless business loans, following investigations stemming from the collapse of the country’s banks in 2008.

Larus Welding, the former chief executive officer of failed Icelandic bank Glitnir, and Gudmundur Hjaltason, a former director at the bank, have each been sentenced to nine months in jail for fraud, a court ruled.

They were sentenced by the Reykjavik District Court after the two men were indicted a year ago on charges that they had “misused their position and grossly endangered the bank’s funds” by lending €102m to a company called Milestone ehf without guarantees or collateral, the prosecutor said. At the time Milestone was a shareholder in the bank.

[Quote]:

It is a dark day for the rule of law. 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 the process, endanger the financial system. They also have not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.

[Quote]:

Google executive chairman Eric Schmidt has dismissed criticism over how little corporation tax his company pays, saying it’s just capitalism.

Schmidt is “very proud” of the corporate structure Google set up to divert profits made in European countries, such as the UK, to its firms in the low-tax havens of Ireland and The Netherlands, thus minimising its tax bill.

“We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.

“It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”

[..]

“Using dubious tactics dubbed the ‘Double Irish’ and the ‘Dutch Sandwich’, Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent,” the group’s privacy project director John Simpson said in the letter.

[Quote]:

The economic crisis in Greece is strangling the country’s hospitals, where budgets have been slashed by more than half. As a result, nearly all doctors in both public and private hospitals have seen their pay cut, delayed or even frozen.

“On top of that, we lack basic supplies to do our jobs,” says Vangelis Papamichalis, a neurologist at the Regional Hospital of Serres in northern Greece and a member of the doctors union here. “We run out of surgical gloves, syringes, vials for blood samples and needles to sew stitches, among other things.”

Last week, the European Centre for Disease Prevention and Control said these shortages will contribute to hospital-acquired infection rates in Greece, which are already among the worst in Europe.

[Quote]:

Citi’s global consumer banking business took the hardest hit on Wednesday, with the bank saying it will eliminate 6,200 positions and close 84 branches worldwide, including in Brazil, Hungary and South Korea, with 44 closings in the United States. Citi will vastly reduce its footprint in some countries and leave five others entirely, including Turkey and Pakistan.

An additional 1,900 jobs will be removed from Citi’s capital markets and transaction processing units. An estimated 2,600 jobs will be cut from its back office operations as well.

[Quote]:

A recent survey of 500 financial services professionals, conducted by market researcher Populus at the behest of law firm Labaton Sucharow, turned up some surprisingly candid results from the folks surveyed. For example:

• 39% of financial industry insiders surveyed “reported that their competitors are likely to have engaged in illegal or unethical activity in order to be successful.”
• And this was more than just suspicion. “26% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace.”
• Nearly one in four “believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful.
• Nearly one in three said they themselves felt “pressured by bonus or compensation plans to violate the law or engage in unethical conduct.

But pressure need not be succumbed to. Surely these financial industry professionals put their ethics, and the interests of their clients, ahead of personal gain, right?

Well … not necessarily.

• 16% of respondents admitted that they — personally — would break the law by trading on insider information “if they could get away with it.”
• Fewer than half could say unequivocally that they would not engage in insider trading in a situation where they knew for sure that they would get away with it.
• What’s more, chances are they can get away with it. Because “only one in four financial services professionals believe [financial watchdogs such as the SEC or other government regulators] are effective.”

[Quote]:

In early October Doug Kass, the president of Seabreeze Partners and a frequent guest on CNBC, published a manifesto on The Street listing 10 reasons he believed Apple had “lost its mojo.”

Nine of his 10 reasons were fundamental and irreversible. Things like the death of Steve Jobs. The increasing complexity of Apple’s product line. The loss of its ecosystem advantage. And worst of all: “Apple is selling an equal to worse product than the competition for more money.”

If he was correct in mid October, it would follow that he was even more correct this week, when Apple — which was trading for $674 a share when Kass started his campaign — traded for as low as $533.74.

But no. Having helped knock more than $130 billion off Apple’s market valuation, Kass on Friday cheerfully announced that he is buying Apple again.

“Hey, I never said it was a forbidden fruit,” he told the Wall Street Journal. Then he preceded to tick off five reasons he’s turned bullish on the stock. You can read them here.

Here’s the thing: None of his five reasons for buying Apple now address the fundamental concerns he raised in October. Steve Jobs is still dead, Apple’s products are still more expensive than the competition, etc. etc.

[Quote]:

The Federal Court of Australia ruled that S&P’s AAA rating of constant proportion debt obligation notes created by banking giant ABN AMRO and sold to the councils of 13 Australian towns, had been “misleading and deceptive”.

It is the first time a ratings agency has faced trial over synthetic derivatives and the case could set an important precedent for future litigation.

“(It is a) decision that is likely to have global implications, and be felt hardest in Europe and the U.S. where similar products were sold to banks and pension funds,” said Piper Alderman, the law firm representing the councils.

“No longer will rating agencies be able to hide behind disclaimers to absolve themselves from liability.”

[Quote]:

He can earn million-dollar gains without anybody knowing. He can execute make-believe trades by sending fake emails from hacked computers. He doesn’t always lose money. But when he does, he loses more than $6 billion. He is … the most indebted man in the world.

Jérôme Kerviel is learning one of life’s harsher lessons: It stinks to be $6.3 billion in debt. That’s how much his fraudulent trades in 2007 and 2008 cost French bank Société Générale, and how much he has been ordered to pay in restitution — after he gets out of jail in three years. A judge recently upheld these terms on appeal.

[Quote]:

‘Only the little people pay taxes,” the late American corporate tax evader Leona Helmsley famously declared. That’s certainly the spirit of David Cameron and George Osborne’s Britain. Five years into the crisis, the British economy has just edged out of its third downturn, but construction is still reeling from government cuts and most people’s living standards are falling.

Those at the sharp end are being hit hardest: from cuts to disability and housing benefits, tax credits and the educational maintenance allowance and now increases in council tax while NHS waiting lists are lengthening, food banks are mushrooming across the country and charities report sharp increases in the number of children going hungry. All this to pay for the collapse in corporate investment and tax revenues triggered by the greatest crash since the 30s.

At the other end of the spectrum though, things are going swimmingly. The richest 1,000 people in Britain have seen their wealth increase by £155bn since the crisis began – more than enough to pay off the whole government deficit of £119bn at a stroke. Anyone earning over £1m a year can look forward to a £42,000 tax cut in the spring, while firms have been rewarded with a 2% cut in corporation tax to 24%.

Not that many of them pay anything like that, even now. The scale of tax avoidance by high-street brand multinationals has now become clear, in no small part thanks to campaigning groups such as UK Uncut. Asda, Google, Apple, eBay, Ikea, Starbucks, Vodafone: all pay minimal tax on massive UK revenues, mostly by diverting profits earned in Britain to their parent companies, or lower tax jurisdictions via royalty and service payments or transfer pricing.

[Quote]:

Andrew Haldane, a member of the Bank’s financial policy committee, said the Occupy movement was correct in its attack on the international financial system.

[Quote]:

Manufacturers feared that Apple would use licensing rules to restrain the availability of non-Apple Lightning accessories. Now, those fears appear to have been valid. Sources for iLounge have confirmed that Apple has significantly altered its MFi Program rules, limiting the manufacture of Lightning connector accessories to Apple-approved factories. Since no such factories have been approved thus far, accessory makers don’t expect to have any accessories available before the busy holiday shopping season.

(…)

Manufacturing sources also said the Lightning connector and its authentication chip have "proved difficult to copy," suggesting that "unauthorized" Lightning cables and adapters won’t be appearing anytime soon. Those hoping for a $4 Lightning cable from the likes of Monoprice.com will likely be sorely disappointed, as Apple’s $19 cable and pricier adaptors will be the only options until early 2013.

I haven’t had problems with third party cables catching on fire or stealing my data. Is there a legitimate reason (legitimate = benefiting consumers) for the need to have cables contain ‘authentication chips’?

[Quote]:

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

[..]

Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value. The early Romans used bronze tablets. Their worth was entirely determined by law – a doctrine made explicit by Aristotle in his Ethics – like the dollar, the euro, or sterling today.

Some argue that Rome began to lose its solidarity spirit when it allowed an oligarchy to develop a private silver-based coinage during the Punic Wars. Money slipped control of the Senate. You could call it Rome’s shadow banking system. Evidence suggests that it became a machine for elite wealth accumulation.

Unchallenged sovereign or Papal control over currencies persisted through the Middle Ages until England broke the mould in 1666. Benes and Kumhof say this was the start of the boom-bust era.

[Quote]:

Interest rate swap derivatives have not only turned sour for local governments and agencies across the United States. London-based banks are accused of massive mis-selling to dozens of Italian cities and regions.
In 2009, Alfredo Robledo, the prosecutor in Milan, suspected the banks made $130 million in illicit profits, so the Guardia di Finanza in Milan, the financial police of Italy, took over real estate properties, bank accounts and stock holdings for four banks. In 2010, Deutsche Bank, JPMorgan, and UBS were charged With fraud in Italy (YT, also available on Bloomberg TV). Also in 2010, L’Espresso reported that Nomura Holdings Inc. paid two financial advisers for the region of Sicily 18.5 million euros ($22.3 million) in alleged kickbacks, and there are even allegations that former Governor of Sicily, Salvatore Cuffaro, taking kickbacks from Nomura (Google auto-translation of an Italian article on Il Sole 24 Ore).

In March of this year, four banks charged with defrauding Milan with derivatives offered to unwind the swap at a discount and pay the city its profit from the transaction under a proposed settlement with the municipality. Alfredo Robledo asked for a court to ban four banks from doing business with Italian local governments for a year for mis-selling swaps to the city, and told a court hearing that nine bank officials should be jailed for up to 12 months. Around the same time, Sicily, Italy’s poorest region, faced increasing losses on about 860 million euros ($1.1 billion) of derivatives that are weighing on its debt as the local administration faces a liquidity crisis. The banks finally settled with Milan, paying the city almost 500m euros (~655m USD) and terminating the swap contracts, though there are a number of outstanding civil and criminal proceedings by other Italian municipalities.

Recently, Nomura sued Sicily in London, though neither representatives from Nomura nor Sicily provided comments to elaborate on the potential outcome of that lawsuit.