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Archive for the ‘Crony Capitalism’ Category

From CNBC:

Someone affiliated with the Department of Energy has been going back to make changes to press releases posted on the Internet weeks and months ago, CNBC has found.

The changes occurred in two press releases from the Department of Energy’s loan guarantee program.

Both were changed to remove the name of a company that has received negative press attention in recent days, SunPower, and replace it with the name of another company, NRG Energy.

In the April case, the Department of Energy loan programs office announced in a press release on April 12 “conditional commitment” to a $1.187 billion loan guarantee to support the California Valley Solar Ranch project, which it said was “sponsored by SunPower Corporation.”

But that release was later changed on one website to say the project was “sponsored by NRG Energy.” The date on the release remained “April 12, 2011.”

In a second instance of retroactive press release revision, someone changed a release from September 30 that announced the finalization of the California Solar Generation project. In an early version of the September 30 press release, the government said the project was “sponsored by SunPower.” That was later changed to “sponsored by NRG Energy.”

In a statement, a spokesman for the Department of Energy said that the changes were made by outside contractors for the department responsible for maintaining the Loan Programs Office website.

“The only website that changed was a separately maintained loan program webpage that is managed by support services contractors,” the spokesman said. “While updating the project fact sheet to reflect the changes in the ownership of the California Valley Solar Ranch project, those contractors inadvertently changed the news bulletins posted on the LPO website.”

UPDATE: On Wednesday evening, a Department of Energy spokesman said that the press releases had been returned to their original content as a result of CNBC’s inquiry about the changes.

 

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The Government Accountability Office has just completed its second audit of the Federal Reserve. The report, a summary available here, focuses on “the enormous conflicts of interest that existed at the Federal Reserve during the financial crisis.”

Some of its findings:

  • The affiliations of the Federal Reserve’s board of directors with financial firms continue to pose “reputational risks” to the Federal Reserve System.
  • The policy of the Federal Reserve to give members of the banking industry the power to both elect and serve on the Federal Reserve’s board of directors creates “an appearance of a conflict of interest.”
  • The GAO identified 18 former and current members of the Federal Reserve’s board affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis including General Electric, JP Morgan Chase, and Lehman Brothers.
  • There are no restrictions on directors of the Federal Reserve Board from communicating concerns about their respective banks to the staff of the Federal Reserve.
  • Many of the Federal Reserve’s board of directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve. These board members oversee the Federal Reserve’s operations including salary and personnel decisions.
  • Under current regulations, Fed directors who are employed by the banking industry or own stock in financial institutions can participate in decisions involving how much interest to charge to financial institutions receiving Fed loans; and the approval or disapproval of Federal Reserve credit to healthy banks and banks in “hazardous” condition.
  • The Federal Reserve does not publicly disclose its conflict of interest regulations or when it grants waivers to its conflict of interest regulations.
  • 21 members of the Federal Reserve’s board of directors were involved in making personnel decisions in the division of supervision and regulation at the Fed.

The GAO included several instances of specific individuals whose membership on the Fed’s board of directors created the appearance of a conflict of interest including:

Stephen Friedman, the former chairman of the New York Fed’s board of directors.

During the end of 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap loans from the Federal Reserve. During this time period, Stephen Friedman, the Chairman of the New York Fed, sat on the Board of Directors of Goldman Sachs, and owned shares in Goldman’s stock, something that was prohibited by the Federal Reserve’s conflict of interest regulations. Mr. Friedman received a waiver from the Fed’s conflict of interest rules in late 2008. This waiver was not publicly disclosed. After Mr. Friedman received this waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009. According to the GAO, the Federal Reserve did not know that Mr. Friedman continued to purchases Goldman’s stock after his waiver was granted.

Jeffrey Immelt, the CEO of General Electric, and board director at the New York Fed
The GAO found that the Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility established during the financial crisis. The Fed later provided $16 billion in financing to General Electric under this emergency lending program. This occurred while Jeffrey Immelt, the CEO of General Electric, served as a director on the board of the Federal Reserve Bank of New York.

Jamie Dimon, the CEO of JP Morgan Chase and board director at the New York Federal Reserve

Dimon served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and while his bank was used by the Fed as a clearinghouse for the Fed’s emergency lending programs. In March of 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. During this time period, Jamie Dimon was successful in getting the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. Dimon also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.

You can read the the full GAO report here.

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James Sinclair finds commonality.

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Bailouts, subsidies, tax breaks, special rights and privileges, regulations designed to restrict competition—to name a few of the many ways the government protects and stimulates corporate interests, and those things are every bit as anti-free market as, not to mention directly related to, the high taxes and excessive bureaucracy that gets Tea Partiers riled up. In other words, aren’t these two groups—Occupy Wall Street and the Tea Party—raging against different halves of the same machine?

Plus this:

It’s a myth that big corporations are anti-government, right? They don’t want to have to compete in a free market, they want to “compete” in an artificially restricted market.

Read the whole thing.

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So says Jon Huntsman:

More than three years after the crisis and the accompanying bailouts, the six largest American financial institutions are significantly bigger than they were before the crisis, having been encouraged to snap up Bear Stearns and other competitors at bargain prices. These banks now have assets worth over 66% of gross domestic product—at least $9.4 trillion, up from 20% of GDP in the 1990s. There is no evidence that institutions of this size add sufficient value to offset the systemic risk they pose.

The major banks’ too-big-to-fail status gives them a comparative advantage in borrowing over their competitors thanks to the federal bailout backstop. This funding subsidy amounts to roughly 50 basis points, or one-half of a percentage point in today’s market.

Read the whole thing.

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A federal prosecutor said Thursday that the government has recovered only a third of the $9 million that authorities charge a Perry Hall businessman with taking from his customers in a massive biofuel fraud scheme.

Hailey, 33, was charged last week with wire fraud, money laundering and violating the federal Clean Air Act in what could be the beginning of a government crackdown on abuse and fraud in the lucrative trading of renewable fuel credits. Oil companies are required by federal law to either produce a certain quantity of renewable fuels or buy credits to satisfy their quotas.

Authorities charge that Hailey generated more than 21 million gallons’ worth of “renewable identification numbers,” or RINs, for biodiesel, but produced no actual fuel from used restaurant cooking oil, as he claimed. Investigators contend that he spent millions from the sale of bogus credits on a five-bedroom house, a fleet of luxury cars and trucks, and diamond jewelry. If convicted on all three charges, Hailey could receive a combined maximum sentence of 32 years in prison and $750,000 in fines.

I have a feeling we’re going to see a lot more of this kind of thing.

Sigh.

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The Department of Energy announced last week its 80% guarantee for a $168.9 million loan for Granite Reliable Power Wind Project in New Hampshire.  The joint venture is 75% owned by a firm created by a Canadian subsidiary of Brookfield Asset Management of New York,  Brookfield Renewable Power Fund.

Why would a subsidiary of a (very) profitable company that’s backed by a $2.7 billion private fund need federal loan guarantees?  The New Hampshire Union Leader asks:

Granite Reliable’s wind farm is not proven, and Granite Reliable is a limited liability company, which provides broad investor protection if the company goes down. If the wind farm flops, and investors cut their losses, the taxpayers stand to lose $135 million. What is the justification for risking $135 million in public money, especially on a company with access to so much private cash?

By the way, another subsidiary of Brookfield Asset Management, Brookfield Office Properties, is the owner of One Liberty Plaza in New York, along with the adjacent Zuccotti Park (unofficial home of Occupy Wall Street).

And as Business Insider reports, Mayor Michael Bloomberg’s longtime domestic partner Diana Taylor is on the Board of Directors at Brookfield Office Properties along with John E. Zuccotti himself.

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