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despite 'Splashy' Net-Zero Vows, Big Banks Dumping Trillions Into Fossil Fuels

"With Wall Street banks leading the charge, these financial institutions are directly complicit in undermining a climate-stable future for us all."

JAKE JOHNSON

March 30, 2022

Flouting their public vows to put themselves and their clients on a path to net-zero greenhouse gas emissions, the world's 60 largest private banks have provided a total of $4.6 trillion in financing for the fossil fuel industry since the Paris Agreement entered into force in 2016.

That's according to the latest edition of Banking on Climate Chaos, an annual report that tracks the banking industry's funding of oil and gas initiatives that are threatening global hopes of reining in carbon pollution and averting climate disaster.

In 2021 alone, the report finds, the world's biggest private-sector banks financed oil and gas to the tune of $742 billion. That year, the 60 banks featured in the new analysis poured $185.5 billion into the 100 companies doing the most to expand the fossil-fuel sector worldwide through offshore drilling, fracking, coal mining, liquefied natural gas infrastructure, and more. Authored by Oil Change International, the Rainforest Action Network, the Indigenous Environmental Network, and other groups and endorsed by hundreds of organizations from around the world, the report published Wednesday spotlights the marked contrast between banks' public commitments to net-zero emissions targets and their actions, which reflect a continued stake in fossil fuel development.

The worst offenders in the banking industry, according to the report, are the U.S. financial behemoths JPMorgan Chase, Citi, Wells Fargo, and Bank of America,which together accounted for 25% of all fossil fuel financing identified over the past six years.

The report highlights a number of specific projects, including the Mountain Valley Pipeline (funded by JPMorgan Chase, Wells Fargo, and Bank of America), drilling in offshore Guyana (funded by JPMorgan Chase, Citi, and Bank of America), and the Line 3 Pipeline (funded by TD, Scotiabank, and the Bank of Montreal), efforts that have drawn fierce resistance from Indigenous communities.

"Indigenous peoples have long been leading the fight for the sacredness of the land, water, and Earth," Mea Johnson, divestment campaign coordinator with the Indigenous Environmental Network, said in a statement Wednesday. "Mother Earth has always given us what we need to thrive. We will not back down until our natural balance is restored and anyone helping fund the extractive destruction of our communities will be held accountable."

Alison Kirsch, research and policy manager at the Rainforest Action Network, added that "any further expansion of fossil fuels risks locking humanity into generations of climate catastrophe, yet the top fossil clients of the world's largest banks are still being showered with tens of billions of dollars even as they actively expand drilling, mining, fracking, and other fossil fuel development unabated."

"With Wall Street banks leading the charge," Kirsch added, "these financial institutions are directly complicit in undermining a climate-stable future for us all and must immediately end their support of any further fossil fuel infrastructure expansion."

The banks' financing decisions fly in the face of their own pledges to bring their policies into line with critical climate goals, such as achieving net-zero greenhouse gas emissions by 2050, a benchmark that 44 of the 60 banks profiled in the new report have backed.

"But global banks have massively supported the companies doing the most to open new oil and gas fields," notes the new report. "Banks with net-zero commitments last year... financed the top 20 upstream oil and gas expansion companies, potentially helping to lock the planet into decades of climate-warming emissions." According to the International Energy Agency, reaching net-zero emissions by 2050 would mean ensuring "no new oil and gas fields."

Adele Shraiman, a representative for theSierra Club's Fossil-Free Finance campaign, said Wednesday that the analysis "makes it clear that banks must clean up their act and stop funding the expansion of dirty fossil fuel projects like fracked gas exports, tar sands pipelines, and offshore drilling in order to align with what the science demands and what their own commitments require."

"Despite their splashy climate pledges, big banks have largely continued with business-as-usual and actually increased their overall fossil fuel financing since the Paris Agreement," said Shraiman. "As we look ahead to shareholder season, we'll be keeping up the pressure on the banks and their investors to take these critical reforms seriously and stop bankrolling the fossil fuel industry's reckless expansion plans."

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an 7 23

no lnx

How Wall Street underwriting quietly funnels billions into fossil fuels: analysis

Kenny Stanciland Common Dreams July 25, 2023

A report out Monday sheds light on how big U.S. banks' underwriting of bonds and equities for polluting corporations constitutes a "hidden pipeline" for fossil fuel financing.

It's no secret that financial institutions play a leading role in driving the climate emergency. Since 2016, the year the Paris agreement took effect, the world's 60 largest private banks have provided more than $5.5 trillion in financing to the fossil fuel industry, flouting their pledges to put themselves and their clients on a path to net-zero greenhouse gas emissions as the window to avert the worst consequences of the intensifying climate crisis rapidly closes.

But banks' underwriting activities receive far less attention than their direct lending practices, even though both are instrumental in enabling fossil fuel expansion and must be reformed to rein in the industry most responsible for imperiling the planet's livability.

That's the key takeaway from a new analysis of Wall Street's participation in capital markets published by the Sierra Club's Fossil-Free Finance campaign.

"Banks play a vital role in capital markets," the report explains. "Acting as underwriters, they are the gatekeepers of fossil fuel companies: they advise companies issuing bonds and equities, hold the vital information on the issuer, and help market the instruments to investors disclosing only the necessary risk."

Since 2016, the six largest U.S. banks—JPMorgan Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs—have provided more than $433 billion in lending and underwriting to 30 of the companies doing the most to increase fossil fuel extraction and combustion worldwide, the report notes.More than three-fifths (61%) of that financing comes from underwriting, with those half-dozen banking giants issuing $266 billion in new bonds and equities for the world's top 30 fossil fuel expansion firms.

Climate justice advocates have long criticized the concept of "net-zero" because, they argue, allowing planet-heating pollution to be "canceled out" via dubious carbon offset programs or risky carbon removal technologies is an accounting trick that doesn't guarantee the significant emissions cuts needed to avoid the climate emergency's most destructive impacts.

But even if one accepts the premise of net-zero, big U.S. banks' policies on the topic are misleading.

"Despite the importance of capital markets activities in helping fossil fuel companies secure new funding, banks focus primarily on lending, while downplaying the importance of underwriting,when setting their emissions reduction targets," the report says. "Banks are performing sleight of hand, distracting investors and regulators with net-zero transition plans that are half-finished, while continuing to funnel money to fossil fuel companies via capital markets with limited scrutiny."

In a statement, Adele Shraiman, senior campaign strategist with the Sierra Club's Fossil-Free Finance campaign, said that "without banks, fossil fuel companies cannot raise money through capital markets."

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"By downplaying their role in capital markets and refusing to include facilitated emissions in their climate targets, big U.S. banks are intentionally sidestepping a major source of real-world emissions and making it impossible to meet their own net-zero commitments," said Shraiman.

According to the report: "Only three of the six major Wall Street banks include bond and equity underwriting in their sectoral emissions reduction targets—JPMorgan Chase, Goldman Sachs, and Wells Fargo. The remaining three banks have so far chosen to only apply emissions reduction targets to lending activities."

However, "even among those who have set emissions reduction targets that include underwriting, insufficient disclosures and lack of standardization make it difficult to understand how robust banks' facilitated emissions accounting methodologies are, and what progress they are making toward achieving their emissions reduction targets," the report adds.

In a blog post, Shraiman wrote that "banks don't want us to know all of the ways they help fossil fuel companies raise funds to continue building the pipelines, oil rigs, fracking wells, and coal mines that are destroying the climate and hurting communities."

"But investors, regulators, and customers around the world see through their duplicity," she continued. "We are demanding complete, robust, and transparent net-zero plans that cover all types of financing activities and will lead to real-world emissions reductions in line with our global climate goals."

Monday's report comes at a key moment in the fight to stop Wall Street from continuing to fund climate chaos.

As the Sierra Club observed, "Banks currently point to a lack of industry standardson underwriting to justify why they do not disclose or set targets for facilitated emissions." However, the industry-led Partnership for Carbon Accounting Financials is expected to release its updated methodology on accounting for and reducing facilitated emissions in the near future.

"Underwriting is a huge missing piece of net-zero transition plans, allowing big U.S. banks to continue to help fossil fuel companies raise billions of dollars with limited scrutiny," Shraiman said. "By only focusing on emissions reduction targets for their lending activities, banks are conveniently excluding half of their fossil fuel financing from their climate commitments."

"It's time," she added, "for the major Wall Street banks to adopt a robust and consistent methodology for accounting facilitated emissions, and take full responsibility for the climate impacts of their underwriting decisions."

The International Energy Agency has stated unequivocally that there is "no need for investment in new fossil fuel supply in our net-zero pathway."

After the Intergovernmental Panel on Climate Change released its latest assessment in March, United Nations Secretary-General António Guterres said that limiting temperature rise to 1.5°C is possible, "but it will take a quantum leap in climate action," including a ban on approving and financing new coal, oil, and gas projects as well as a phaseout of existing fossil fuel production.

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blackrock bailed on ESG

https://www.alternet.org/fossil-fuel-2662235056/

https://corpgov.law.harvard.edu/2019/01/31/the-long-view-us-proxy-voting-trends-on-es-issues-from-2000-to-2018/

7 23 an no lnx

Inside the fossil fuel industry’s insidious plan to end responsible investing

Jessica Church, Common Dreams and Inequality.org July 06, 2023

In a recent Gallup poll, the vast majority of Americans surveyed said they were not even “somewhat familiar” with the term “ESG.” But on Capitol Hill, Republicans have developed a fixation on the issue, holding not one but two intensely partisan hearings on the topic.

“Republicans Are Losing Their Minds Over ESG” read one headline.

“Anti-ESG talk leads to partisan fireworks” read another.

Now you may be wondering, what the heck is ESG? What’s anti-ESG? What the heck is “woke” capitalism? And why should I care?

What Is ESG?

ESG stands for “Environmental, Social, and Governance,” which are categories of metrics that businesses use to assess performance and risk on a range of issues.To reduce risk and create value over the long term, businesses may seek to reduce carbon emissions (Environmental), improve working conditions for workers through racial equity and other measures (Social), or take steps to bring executive compensation closer in line with the company’s median salary (Governance).

Companies’ practices on ESG metrics can have an impact on future performance, so there is tremendous value in understanding long-term risks associated with environmental, social, and governance factors.

The simple concept that businesses should care about their communities and their workers and govern themselves accordingly is not new. In the 1980s, some companies and banks stopped doing business in South Africa to protest racial Apartheid. In the 1990s, a number of institutional investors divested from the tobacco industry as a way to take a stand against the harmful and deceptive practices of companies like Phillip Morris and R.J. Reynolds. And in the 2000s and 2010s, support for environmental shareholder proposals grew substantially in response to the worsening climate crisis.

Who’s Against It?

This leads us to the current backlash. “Anti-ESG” efforts, promulgated by long-time conservative organizations like theHeritage Foundation and American Legislative Exchange Council (ALEC) and newly prominent groups like the Committee to Unleash Prosperity, Consumers’ Research, and the State Financial Officers Foundationall have one things in common—connections to conservative big money donors in the oil and gas industry.

“The anti-‘woke investing’ movement was not created by financial experts,” observed environmental reporter Emily Aktin, “It was created by two of the fossil fuel industry’s most notorious climate disinformers.”

The anti-ESG movement is a well-funded and well-organized campaign led by top conservative political operatives.

Big Oil wants to end ESG investing and ESG business practices because they’re at odds with the continued growth of the fossil fuel industry. Big Oil would rather let our planet burn and increase short-term profits than adjust its business practices to stave off the worst of the climate crisis and invest in long-term profits.

Big Oil also wants you to think that this “anti-ESG” movement is organic, that it emerged from the conservative grassroots, but that could not be further from the truth. The anti-ESG movement is a well-funded and well-organized campaign led by top conservative political operatives. I recently corresponded with Meaghan Winter, author of All Politics Is Local, who explained that:

“Ideological donors and their foundations and think tanks have deliberately chosen to push their agendas through obscure-seeming front groups that work incrementally on the state level because they don’t want to call attention to the profound (and very unpopular) changes they are initiating. This strategy is decades-old, it has worked against unions and abortion and more, and the anti-ESG effort is just one of the latest incarnations.”

One shining example of this is the recent House Oversight Subcommittee hearing on ESG, where the majority witnesses (those called by the GOP, because Republicans control the House of Representatives right now) wereMandy Gunasekara from the Independent Women’s Forum, Jason Isaac from the Texas Public Policy Foundation, and Stephen Moore from the Heritage Foundation. These organizations have a long history of receiving financial support and carrying water for the oil and gas industry, including Koch Industries, ExxonMobil, and Chevron.

Watch Congresswoman Summer Lee lay it out for us, plain and simple.

Why Does This Matter?

While the right wing foments a culture war crusade and attempts to make ESG the next critical race theory (“CRT”), the fear mongering campaign has real-world impacts on investors and companies who are scared of being caught in the backlash. For example, some private companies are now backpedaling on their climate commitments.

To be clear, this is what the funders of this movement want.

In December, Vanguard, the world’s second largest asset management firm, pulled out of the Net Zero Asset Managers initiative, which was a voluntary industry-led effort to reach net-zero emission targets by 2050. This was a major setback for anyone who cares about the health and shape of our environment, because Vanguard manages roughly $7 trillion in assets. In order to meet the goals of the Paris Agreement—less than 1.5°C of global warming above pre-industrial levels—global markets must shift capital away from the fossil fuel industry and toward renewable energy systems.

But this goes beyond the climate crisis. In recent years, workers and shareholders have been demanding more corporate accountability on workplace safety, workers’ freedom of association, data privacy, racial equity, and executive compensation, among other issues that fall into the Social and Governance categories of ESG. The right-wing campaign against ESG is a campaign to roll back these victories.

How Do We Fight Back?

My organization, Take on Wall Street, is organizing with unions, public interest groups, and grassroots groups to fight back against this regressive movement. But it’s not just about playing defense. We also need a forward-looking vision for worker power, climate justice, and racial equity. Watch this space.

FROM YOUR SITE ARTICLES

1,300+ scientists urge JPMorgan shareholders to vote for ending new fossil fuel financing ›

How fossil fuel lobbyists are pushing the right-wing campaign against 'woke capitalism': report ›

Fossil fuel lobbyists acting as 'double agents' at institutions fighting against climate change: report ›

silicon Valley Bank Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

Ken Klippenstein

Two senior aides to House Speaker Kevin McCarthy were among the top lobbyists for the bank at the center of a new financial crisis.

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ref report

https://www.commondreams.org/news**/2022/03**/30/despite-splashy-net-zero-vows-big-banks-dumping-trillions-fossil-fuels

despite 'Splashy' Net-Zero Vows, Big Banks Dumping Trillions Into Fossil Fuels

"With Wall Street banks leading the charge, these financial institutions are directly complicit in undermining a climate-stable future for us all."

JAKE JOHNSON

March 30, 2022

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hypocrisy: capitalism/invis hand free mkt sez we need info to make ration decisions

https://www.ecowatch.com/new-zealand-climate-risk-reporting-2647698323.html

New Zealand could be the first country in the world to require its major financial institutions to report on the risks posed by the climate crisis.

This means that about 200 of the country's biggest companies and banks would have to report on the impact that extreme weather events or climate polices will have on their business, Stuff explained.

"Today is another step on the journey this Government is taking towards a low carbon future for Aotearoa New Zealandand a cleaner, safer planet for future generations," said Minister for Climate Change James Shaw Tuesday, Scoop reported.

The move builds on New Zealand's emerging legacy of climate action, such as its historic Zero Carbon Bill that committed the country to honoring the goals of the Paris agreement and achieving zero carbon emissions by 2050.

However, New Zealand's parliament is currently dissolved ahead of the Oct. 17 election, The Guardian reported. In order for it to enter into force, Shaw's party, the Green Party, would have to enter a coalition government after the election and the proposal would then have to pass parliament.

If it passes, every New Zealand bank, building society, credit union, insurer or Crown Financial Institution with more than $1 billion in assets will have to report annually on the risk climate change poses to its business or explain why it cannot, according to Stuff. That report would include what the risks are, how the institution is managing them and how it is working to address the impacts of climate change.

"Many large businesses in New Zealand do not currently have a good understanding of how climate change will impact on what they do," Shaw said. "The changes I am announcing today will bring climate risks and resilience into the heart of financial and business decision making. It will ensure the disclosure of climate risk is clear, comprehensive and mainstream."

Shaw said that Australia, Canada, UK, France, Japan and the European Union were developing some form of climate risk reporting, but New Zealand's plan was more ambitious because it included the whole financial system, according to Scoop. The institutions covered by the policy account for 90 percent of the assets controlled in New Zealand, Stuff reported.

If the proposal passes parliament, the climate reporting would begin in 2023.

Nobel Laureate in economics Joseph Stiglitz praised the proposed plan, according to The Guardian.

"Once again, New Zealand is leading the world… It led the world in showing how democratic countries could manage the risks of Covid-19," he said. "And now, New Zealand is leading the way in showing how we can help manage the risk of climate change."

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https://www.alternet.org/2020/08/elizabeth-warren-sounds-the-alarm-on-a-mounting-housing-crisis-and-the-profiteers-who-will-take-advantage/

During her 2020 presidential primary campaign, Sen. Elizabeth Warren had a lot to say about the United States’ housing crisis — and after suspending her campaign and endorsing former Vice President Joe Biden (now the presumptive Democratic nominee), the Massachusetts senator continued to address the subject. Warren, in an op-ed she wrote for the Washington Post with Carroll Fife (director of the Oakland office of the Alliance of Californians for Community Empowerment), stresses that the coronavirus pandemic has made a brutal housing crisis even worse. And private equity firms, according to Warren and Fife, are hoping to cash in on the misery by gobbling up “distressed real estate.”

“The nation is facing an acceleratinghousing crisis,” Warren and Fife warn. “Too many people had no stable housing before the pandemic hit, and COVID-19 has made the problem even worse. Renters who were already facing an affordable housing shortage — with many spending more than half of their income on rent — now have no federal rental assistance or federal protection from eviction. Homeowners have less than a month left of foreclosure protection. And more than 30 million people receiving unemployment insurance just saw their benefits cut by $600 a week, raising the threat of a wave of defaults that could trigger a double-dip recession.”

But while “families” see as a “looming catastrophe,” they add, “private equityfirms just see dollar signs.” And Warren and Fife cite a Wall Street Journal report that investors are hoping to buy “distressed real-estate assets at bargain prices.”

According to Warren and Fife, such “profiteering” is “straight out of private equity’s playbook during the 2008 financial crisis."

"Following the 2008 crash,” they explain, “corporations that grabbed up properties on the cheap, converted those homes into rentals and turned into the worst kind of slumlords — jacking up rents, neglecting maintenance requests and health and safety concerns, and eagerly assessing fines, fees and eviction notices. Other corporate-owned homes were left vacant in a hoarding of housing stock. We cannot stand by while this history repeats itself.”

Warren and Fife’s recommendations range from “strong federal legislation to guard against the coming wave of evictions and foreclosures, including emergency rental assistance” to preventing “predatory companies from further destabilizing neighborhoods and profiting off the displacement of families.”

“If we fail to prevent another private equity real estate grab,” Warren and Fife warn, “we risk allowing another massive upheaval in the housing market that could wreak more havoc on low-income Americans — especially black and brown families still recovering from losing their homes a decade ago. Against a decades-long backdrop of racist federal policies that have impeded black homeownership, lawmakers’ refusal to proactively address this problem would be an indefensible oversight that would again give Wall Street carte blanche to use a national crisis to enact a massive, generational transfer of wealth from vulnerable Americans to corporations."

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https://www.citizen.org/article/plutocrat-politics-how-financial-sector-wealth-fuels-political-ad-spending/

no lnx grfx

mAY 15, 2019

Plutocrat Politics: How Financial Sector Wealth Fuels Political Ad Spending

By ALAN ZIBEL

DOWNLOAD THE FULL REPORT 606.3 KB

Hedge fund managers, bankers and other financial bigwigs wielded massive influence on the 2018 midterms by supplying more than half of all donations to outside political groups set up expressly to influence elections, a Public Citizen analysis has found.

Public Citizen analyzed contributions by the 100 individuals who contributed the most to outside political organizations that reported their donors during the 2017-2018 election cycle, including super PACs and other nonprofits that advocate for or against candidates.

These groups, which are not formally connected to candidates’ campaigns, can accept unlimited donations from individuals, nonprofits and corporations. They have dramatically increased their election spending in recent years following the U.S. Supreme Court’s 2010 Citizens United v. Federal Election Commission decision, which kicked off an unprecedented era of big-money influence in American politics.

The analysis found that political donors whose wealth comes from the financial sector, including several prominent hedge fund billionaires, were the largest reported funders of outside political groups. The top 100 individual donors gave a total of nearly $690 million to outside spending groups, with $359 million, or 52 percent, benefiting Democrats and $312 million, or 45 percent, benefiting Republicans. About $19 million, or 3 percent, benefited outside election groups that did not favor one party over another.

By far the largest source of reported funding for outside election spending efforts was the financial industry. About $344 million, or nearly half of the top 100 individuals’ donations, came from 36 donors with fortunes earned in private equity, hedge funds, investments and banking. Outside the financial industry, gambling, technology, inheritance and industrial supply companies were the most significant sources of wealth for the top 100 individual funders of outside spending efforts.

Out of the top 100 individual political donors to outside spending groups, 74 were men, 18 were women and eight were couples. In addition, 97 out of the 100 largest individual donors to outside spending groups were white. This finding is consistent with research showing that whites make up more than 90 percent donors who give more than $5,000 to congressional campaigns.

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top 100 Individual Donations to Outside Spending Groups In 2017-2018 Election Cycle, By Source of Wealth

Pro-RepublicanPro-DemocratNonpartisan/Other

Finance $76,912,554 $264,383,175

Gambling

$127,290,000

Technology

Inheritance

Industrial Supply/Distribution

$41,138,468

Energy

Real estate/Construction

Media/Publishing

Consumer Goods....

During the 2017-2018 election cycle, spending by outside groups surged to more than $1 billion, the highest-ever for a midterm election, second only to the $1.4 billion spent during the 2016 presidential election, according to the Center for Responsive Politics. Outside spending favoring Democrats exceeded outside spending favoring Republicans in last year’s elections for the first time in the post-Citizens United era.

The Public Citizen analysis of data from the Center for Responsive Politics highlights how the influence of outside spending groups funded by mega-donors has surged over the past decade. The Citizens United decision opened the floodgates for corporations and wealthy individuals to spend money to directly influence elections, as long as such spending is deemed independent of political candidates and parties. Months after the Citizens United decision, the U.S. Court of Appeals for the D.C. Circuit allowed unlimited contributions to outside groups, paving the way for super PACs to become a major force in American politics.

Individual donors are the primary funders of super PACs, which are required to disclose their donors, unlike “dark money” nonprofits, which are not. Individuals provided more than 70 percent of super PAC funding in the 2018 election cycle. Trade associations and corporate donors have tended to fund dark money groups that do not disclose their donors and whose activities are much harder to trace.

Public Citizen’s analysis of the top 100 individual contributors to outside spending groups during the 2017-2018 election cycle also found that:

Pro-Democrat outside spending efforts were highly dependent on financial industry wealth. The financial industry represented 74 percent of funding for pro-Democrat outside spending efforts, followed by inherited wealth (8 percent), technology (6 percent) media (5.5 percent) and real estate (3 percent).

The sources of funding for pro-Republican outside spending efforts reflected far more industries, including gambling (41 percent), finance (25 percent), industrial supply and distribution (13 percent) , energy (6 percent) and technology (2.6 percent).

Individual political donors from just four states – New York, California, Nevada and Illinois – made up nearly 78 percent of the top 100 individuals’ donations to outside spending groups. Groups supporting Democrats were highly reliant on donors from New York, California, Illinois and Massachusetts, while Republican-leaning groups tapped donors in Nevada, Illinois, New York and Texas.

The Public Citizen analysis found that the financial industry’s biggest individual donors to outside spending groups tended to support Democrats. Major donors to groups that backed Democrats included Michael Bloomberg, founder of financial data firm Bloomberg LP, who donated more than $90 million, and Tom Steyer, the billionaire hedge fund founder and climate activist, who donated nearly $70 million. Other major financial industry donors of groups backing Democrats include the hedge fund founders Donald Sussman and James Simons.

While four out of the five largest financial industry donors to outside spending groups supported Democrats, the 20 largest financial industry individual donors were evenly split between supporters of Democrats and Republicans. Prominent Republican outside spenders included prominent hedge fund, private equity, trading and investment executives including Kenneth Griffin, Steven Schwarzman, Jeffrey Yass, Charles Schwab and Paul Singer.

This high concentration of Democratic and Republican donors from the finance industry, and particularly from founders of hedge funds, private equity firms and of high-speed trading firms, may hinder efforts to enact important reforms. For example, Public Citizen has long called for a Wall Street sales tax on financial transactions like stock, bond, and derivative trades, much as individuals pay a sales tax on our everyday purchases. Such a tax would be so small that ordinary investors would hardly notice it but would raise substantial revenue, largely from high- volume traders. Yet this sort of sensible policy change is far less likely if wealthy traders are the biggest political benefactors.

Illustrating how difficult challenging the financial industry can be, President Donald Trump campaigned on a promise to eliminate the “carried interest” tax loophole that benefits private equity executives and hedge fund managers, even saying in 2015 that “the hedge fund guys are getting away with murder.” But despite Trump’s criticism, administration officials sent mixed messages on the issue, and the loophole was not closed during tax legislation signed by Trump in 2017.

Outside the financial industry, Public Citizen’s analysis found that megadonors from the gambling industry supported Republicans exclusively, including Sheldon Adelson, CEO of Las Vegas Sands Corp., who donated more than $122 million to conservative political spending groups. Adelson was followed bycasino executive Cherna Moskowitz, who donated about $2 million, and brothers Frank and Lorenzo Fertitta, Las Vegas casino billionaires who each donated $1.5 million.

The second-largest donor to groups that supported GOP candidates was Richard Uihlein, founder of packaging and supply company Uline Inc,, who donated nearly $38 million. Other major backers of groups supporting Republican candidates included Home Depot founder Bernard Marcus, who donated $6.5 million, and Arkansas poultry magnate Ronnie Cameron and his wife Nina, who donated nearly $5.7 million.

To end the massive influx of corporate and special interest money into our elections, Public Citizen has long championed a constitutional amendment to overturn Citizens United and supports public financing of campaigns. In February, the U.S. House of Representatives passed H.R. 1, a sweeping set of important democracy reforms. This bill, the For the People Act, takes a three-pronged approach to reforming our democratic process:

Voting Rights and Election Security: The For the People Act implements automatic voter registration across the country; ensures that individuals who have completed felony sentences have their full rights restored; expands early voting and simplifies absentee voting; modernizes the U.S. voting system; prohibits voter roll purges and ends partisan gerrymandering to prevent politicians from picking their voters.

Campaign Finance Reform: The For the People Act upgrades online political ad disclosure; creates a publicly funded matching system for small-dollar donations; tightens rules on super PACs and restructures the Federal Election Commission to break the agency’s gridlock.

• Congressional and Executive Ethics: The For the People Act breaks the influence economy in Washington, D.C., by expanding conflict of interest law and divestment requirements; slows the revolving door; and requires presidents to disclose their tax returns.

100 Largest Donors and Sources of Wealth for Top Individual Donors to Outside Spending Groups, 2018

Search:

DONOR CITY AFFILIATION BIO POLITICAL LEAN OF DONOR SOURCE OF WEALTH TOTAL

Adelson, Sheldon G. Las Vegas Las Vegas Sands/Adelson Drug Clinic CEO of Las Vegas Sands/GOP Donor Republican Gambling $122250000

Bloomberg, Michael R. New York Bloomberg LP Founder of Bloomberg LP, former NY Mayor Democratic Finance $94955032

Steyer, Thomas San Francisco NextGen America; Farallon Capital Billionaire hedge fund founder Democratic Finance $72416712

Uihlein, Richard Lake Forest Uline Inc Founder of Wisconsin packaging and supply company Republican Industrial Supply/Distribution $37721968

Sussman, S. Donald Rye Brook, NY Paloma Partners Hedge fund investor and founder Democratic Finance $22445000

Simons, James H. & Marilyn New York Renaissance Technologies/Simons Fdtn Billionaire hedge fund founder Democratic Finance $20716000

Griffin, Kenneth C. Chicago Citadel Invest Group/Aragon Global Mgt Billionaire hedge fund manager Republican Finance $18400000

Soros, George New York Soros Fund Management Billionaire hedge fund manager; founder of Open Society Foundations Democratic Finance $16655886

Schwarzman , Steven A. New York Blackstone Group CEO of private equity/investment firm Blackstone Group LP Republican Finance $11750000

Bezos, Jeff Seattle Amazon.com Founder and CEO of Amazon Nonpartisan Technology $10129170

Eychaner, Fred Chicago Newsweb Corp Founder of printing company Newsweb Democratic Media/Publishing $10050000

Mellon, Timothy Saratoga Investor Heir to Mellon family fortune Republican Inheritance $10010000

Marcus, George M. Palo Alto Marcus & Millichap Founder of commercial real estate brokerage Democratic Real estate/Construction $8500000

Hoffman, Reid Garrett San Francisco LinkedIn Founder of LinkedIn Democratic Technology $7998000

Yass, Jeffrey S Bala Cynwyd Susquehanna International Group Founder of trading firm Republican Finance $7450000

Tuna, Cari San Francisco Asana Former WSJ reporter and wife of Facebook co-founder Dustin Moskovitz Democratic Technology $6797730

Simon, Deborah Carmel Philanthropist Daugher of Simon Property Group Inc. founder Melvin Simon Democratic Inheritance $6768025

Jurvetson, Karla Los Altos Hills Karla Jurvetson MD Ex-wife of venture capitalist Steve Jurvetson Democratic Inheritance $6764928

Bekenstein, Joshua Wayland Bain Capital Co-chairman of private equity firm Bain Capital Democratic Finance $6650000

Marcus, Bernard Atlanta Marcus Foundation Co-founder of Home Depot Republican Consumer Goods $6505700

Schwab, Charles R. & Helen O. San Francisco Charles Schwab & Co Founder of investment firm Charles Schwab Republican Finance $6350000

Cameron, Ronnie & Nina North Little Rock Mountaire Corp CEO of poultry company Republican Consumer Goods $5665000

Klarman, Seth A. Chestnut Hill Baupost Group CEO of hedge fund Democratic Finance $5175000

Beal, D. Andrew Plano Beal Bank Banker/energy investor Republican Energy $5088447

Cynthia Simon-Skjodt Carmel Samerian Foundation Daugher of Simon Property Group Inc. founder Melvin Simon Democratic Inheritance $5046000

Singer, Paul E. New York Elliott Management Hedge fund manager Republican Finance $5044001

Laufer, Henry B. Lantana Renaissance Technologies Former VP of research at hedge fund Democratic Finance $4450500

Tierney, Daniel V. Chicago Wicklow Capital Founder of high-frequency trading firm Democratic Finance $4331831

Mercer, Robert L. East Setauket Renaissance Technologies Former co-CEO of hedge fund Republican Finance $4327100

Sandler, Herbert M. San Francisco Herb & Marion Sandler/Sandler Foundation former co-CEO of Golden West Financial Corporation and World Savings Bank Democratic Finance $4100000

Palmer, Geoff Los Angeles GH Palmer Assoc Los Angeles real estate developer Republican Real estate/Construction $4100000

Ricketts, John Joe Omaha Hugo Enterprises TD Ameritrade Founder Republican Finance $3940000

Bass, Robert M. Fort Worth Keystone Inc Heir to Texas oil fortune; investor Democratic Energy $3900000

Jacobs, Irwin Mark La Jolla Qualcomm Inc Co-founder of Qualcomm Democratic Technology $3725000

Johnson, Charles B. Palm Beach Franklin Resources Mutual fund billionaire Republican Finance $3716000

Goldman, Amy New York Solil Management New York real estate heir Democratic Inheritance $3600000

Hendricks, Diane Ms Beloit Abc Supply Co-founder of building supply company Republican Real estate/Construction $3500000

Saban, Haim Los Angeles Saban Capital Group Television and media entrepreneur and investor Democratic Media/Publishing $3315000

Cohen, Steven A. Greenwich Point72 Asset Management Hedge fund billionaire Republican Finance $3100000

Abraham, S. Daniel West Palm Beach Slim Fast Founder of Slim-Fast diet product company Democratic Consumer Goods $2900000

Stephens, Warren A. Little Rock Stephens Inc Chairman of investment bank Stephens Inc. Republican Finance $2885000

Heising, Elizabeth D. Atherton Medley Partners Daugher of James Simons; wife of investor Mark Heising Democratic Inheritance $2815000

Wexner, Leslie H. Columbus L Brands Founder of retail company that owns The Limited, Victoria's Secret, PINK, Bath and Body Works (left Republican party) Nonpartisan Consumer Goods $2800000

Childs, John W. Waltham JW Childs Assoc Former chairman of private equity firm JW Childs Associates; Charged in prostitution sting Republican Finance $2587553

MacFarlane, Seth W. Los Angeles Fuzzy Door Productions Creator of Family Guy and other TV shows and movies Democratic Media/Publishing $2500000

Humphreys, David C. Joplin TAMKO Building Products CEO of roofing company Republican Real estate/Construction $2343190

Dunn, Timothy M. Midland Crownquest Operating Co-founder of oil and gas company Republican Energy $2331000

Scully, William P. Vero Beach Retired Former partner of investment firm Twin Oaks Partners Republican Finance $2250000

Grantham, Robert Boston Grantham, Mayo et al Co-founder of asset management firm GMO Democratic Finance $2250000

Schwartz, Bernard L. New York Loral Space & Communications Former chairman and CEO of satellite firm Democratic Technology $2225000

Oberndorf, William E San Francisco Oberndorf Enterprises Founder of hedge fund SPO Partners & Co. Republican Finance $2200000

Rosenthal, Richard H. Cincinnati Rosenthal Foundation Retired CEO of publishing firm Democratic Media/Publishing $2175000

McNair, Robert Houston Houston Texans Died in November 2018. Owned Houston Texans and founded energy firm Republican Energy $2100000

Faison, Jay W. Charlotte Clear Path Foundation Founder of audio-video firm, conservative clean energy think tank Republican Technology $2058000

Moskowitz, Cherna Miami Beach Irving Moskowitz Foundation Casino executive Republican Gambling $2040000

Soros, Alexander New York Philanthropist Son of billionaire George Soros Democratic Inheritance $2036127

Bezos, Miguel A. Mercer Island Bezos Family Foundation Jeff Bezos' stepfather Nonpartisan Technology $2004324

Bergan, Mary A. Fargo Fargo Assembly Former owner of electrical assembly company Republican Technology $2000000

Quillin, Patty Santa Cruz Philanthropist Wife of Netflix CEO Reed Hastings Democratic Technology $2000000

Foster, Paul L. El Paso Western Refining Chairman and Founder of Western Refining Republican Energy $2000000

Ansary, Hushang Houston Stewart & Stevenson Former Iran ambassador to US; chairman of oil and gas equipment firm Stewart & Stevenson LLC; chairman of Parman Capital Group LLC Republican Energy $2000000

Duchossois, Janet J. Oak Brook Duchossois Group Wife of CEO who runs an automatic door/gate company and investment firm Republican Various $1835000

Epstein, Mark Potomac Qualcomm Inc Qualcomm executive,funded wife's unsuccessful campaign for House Republican Technology $1800000

Hostetter, Amos B. Jr. & Barbara Boston Pilot House Assoc/Barr Foundation founder of Continental Cablevision Republican Media/Publishing $1750000

Soros, Andrea New York Trace Foundation Daughter of George Soros Democratic Inheritance $1750000

Bacon, Louis Moore New York Moore Capital Management Hedge fund manager; Founder of Moore Capital Management Democratic Finance $1750000

Lauder, Ronald S. New York Estee Lauder Companies Heir to Estee Lauder companies Republican Consumer Goods $1675000

Fish, John F. Boston Suffolk Construction CEO of Boston construction firm Democratic Real estate/Construction $1640000

Wright, Karen A. Mt. Vernon Ariel Corp CEO of Ariel Corp., a maker of natural gas compressors Republican Energy $1620000

Schuler, Stephen G. Oak Park Wicklow Capital High-speed trader; board member of marijuana company Democratic Finance $1560017

Spielberg, Steven Los Angeles DreamWorks SKG Film director Democratic Media/Publishing $1510000

Angelos, Peter G. Baltimore Angelos Law Offices Trial lawyer and owner of Baltimore Orioles Democratic Law $1500000

Fertitta, Frank J. III Las Vegas Station Casinos Casino/Ultimate Fighting Championship billionaire Republican Gambling $1500000

Fertitta, Lorenzo J. Las Vegas Zuffa LLC Casino/Ultimate Fighting Championship billionaire Republican Gambling $1500000

Headley, Mark San Francisco Matthews International Capital Management Portfolio manager; chairman of Matthews International Capital Management LLC. Democratic Finance $1435000

Shaw, David E. New York DE Shaw Research Hedge fund founder Democratic Finance $1400000

Bonderman, David Fort Worth TPG Capital Founder of private equity firm Democratic Finance $1372500

Mandel, Stephen Frank Jr. & Susan Z. Greenwich Lone Pine Capital Hedge fund manager Democratic Finance $1358333

Rowling, Robert B. Dallas TRT Holdings Founder of holding company that owns, Omni Hotels, Golds Gym, oil and gas, other investments Republican Various $1325000

Chazen, Stephen Bellaire Occidental Petroleum Former CEO of Occidental Petroleum Republican Energy $1290000

Sonnenfeldt, Mark New York Muus & Co Founder of investment club for wealthy investors, alternative energy investor Democratic Finance $1250000

Sacks, Michael J. & Cari Highland Park Grosvenor Capital Management CEO of investment advisory firm Democratic Finance $1215000

Reinsdorf, Jerry Chicago Chicago White Sox Owner of Chicago Bulls, Chicago White Sox, real estate lawyer and investor Democratic Real estate/Construction $1200000

Hull, Megan Washington Consultant Daughter of Wall Street trader Blair Hull Democratic Inheritance $1196500

Reyes, J Christopher West Palm Beach Reyes Holdings Co-chairman of food and beer distributor Reyes Holdings Republican Industrial Supply/Distribution $1165000

Stavis, Robert Larchmont Bessemer Venture Partners Venture capitalist Democratic Finance $1160000

Deason, Darwin A. Dallas Affiliated Computer Services Founder of IT outsourcing firm Republican Technology $1150000

Reyes, M. Jude West Palm Beach Reyes Holdings Co-chairman of food and beer distributor Reyes Holdings Republican Industrial Supply/Distribution $1140000

Earhart, Anne G. Corona Del Mar Investor Granddaughter of oil baron J. Paul Getty Democratic Energy $1125000

Hayden, Marilyn J. Barrington Retired Wife of former CEO of food packaging firm Peacock Engineering Republican Industrial Supply/Distribution $1111500

Hale, Robert & Karen Hingham Granite Telecommunications Founder of telecommunications firm Democratic Technology $1109600

Mary Moriarty Chatham Retired Wife of investment executive Donald Moriarty, who died in 2009 Republican Inheritance $1100000

Thiel, Peter San Francisco Thiel Capital Co-founder of Paypal and Palantir technologies Republican Technology $1100000

Hillman, Tatnall Lea & Roberta W. Chilmark Retired Son of John Hartwell Hillman Jr, an energy and steel billionaire Republican Energy $1092570

Pritzker, Susan San Francisco Tao Capital Partners Wife of bilionaire Nicholas Pritzker, member of Pritzker family, which started the Hyatt hotel chain Democratic Real estate/Construction $1055000

McInerney, Thomas E. Westport Bluff Point Assoc CEO of Conn. private equity firm Republican Finance $1050000

Stephens, Jackson T. Jr. Little Rock Exoxemis Inc Son of investment firm founder; founder of biotech firm Republican Inheritance $1050000

Loeb, Daniel S. New York Third Point LLC Hedge fund founder Republican Finance $1030000

Gilliam, Richard B. Keswick Cumberland Resources Founder of coal company Republican Energy $1025000

Herro, David G. Chicago Harris Assoc Investment manager Republican Finance $1025000

Showing 1 to 100 of 100 entries

Topics

Making Government Work: Corporate Influence in Government

Protecting Democracy: Money in Politics

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https://www.alternet.org/2020/05/whistleblower-wall-street-has-engaged-in-widespread-manipulation-of-mortgage-funds

no lnx

Pro Publica May 16, 2020

Among the toxic contributors to the financial crisis of 2008, few caused as much havoc as mortgages with dodgy numbers and inflated values. Huge quantities of them were assembled into securities that crashed and burned, damaging homeowners and investors alike. Afterward, reforms were promised. Never again, regulators vowed, would real estate financiers be able to fudge numbers and threaten the entire economy.

Twelve years later, there’s evidence something similar is happening again.

Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — as well as other lenders have engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials, according to a previously unreported whistleblower complaint submitted to the Securities and Exchange Commission last year.

Whereas the fraud during the last crisis was in residential mortgages, the complaint claims this time it’s happening in commercial properties like office buildings, apartment complexes and retail centers. The complaint focuses on the loans that are gathered into pools whose worth can exceed $1 billion and turned into bonds sold to investors, known as CMBS (for commercial mortgage-backed securities).

Lenders and securities issuers have regularly altered financial data for commercial properties “without justification,” the complaint asserts, in ways that make the properties appear more valuable, and borrowers more creditworthy, than they actually are. As a result, it alleges, borrowers have qualified for commercial loans they normally would not have, with the investors who bought securities birthed from those loans none the wiser.

ProPublica closely examined six loans that were part of CMBS in recent years to see if their data resembles the pattern described by the whistleblower. What we found matched the allegations: The historical profits reported for some buildings were listed as much as 30% higher than the profits previously reported for the same buildings and same years when the property was part of an earlier CMBS. As a rough analogy, imagine a homeowner having stated in a mortgage application that his 2017 income was $100,000 only to claim during a later refinancing that his 2017 income was $130,000 — without acknowledging or explaining the change.

It’s “highly questionable” to alter past profits with no apparent explanation, said John Coffee, a professor at Columbia Law School and an expert in securities regulation. “I don’t understand why you can do that.”

In theory, CMBS are supposed to undergo a rigorous multistage vetting process. A property owner seeking a loan on, say, an office building would have its finances scrutinized by a bank or other lender. After that loan is made, it would be subjected to another round of due diligence, this time by an investment bank that assembles 60 to 120 loans to form a CMBS. Somewhere along the line, according to John Flynn, a veteran of the CMBS industry who filed the whistleblower complaint, numbers are being adjusted — inevitably to make properties, and therefore the entire CMBS, look more financially robust.

The complaint suggests widespread efforts to make adjustments. Some expenses were erased from the ledger, for example, when a new loan was issued. Most changes were small; but a minor increase in profits can lead to approval for a significantly higher mortgage.

The result: Many properties may have borrowed more than they could afford to pay back — even before the pandemic rocked their businesses — making a CMBS crash both more likely and more damaging. “It’s a higher cliff from which they are falling,” Flynn said. “So the loss severity is going to be greater and the probability of default is going to be greater.”

With the economy being pounded and trillions of dollars already committed to bailouts, potential overvaluations in commercial real estate loom much larger than they would have even a few months ago. Data from early April showed a sharp spike in missed payments to bondholders for CMBS that hold loans from hotels and retail stores, according to Trepp, a data provider whose specialties include CMBS. The default rate is expected to climb as large swaths of the nation remain locked down.

After lobbying by commercial real estate organizations and advocacy by real estate investor and Trump ally Tom Barrack — who warned of a looming commercial mortgage crash — the Federal Reserve pledged in early April to prop up CMBS by loaning money to investors and letting them use their CMBS as collateral. The goal is to stabilize the market at a time when investors may be tempted to dump their securities, and also to support banks in issuing new bonds. (Barrack’s company, Colony Capital, has since defaulted on $3.2 billion in debt backed by hotel and health care properties, according to the Financial Times.)

The Fed didn’t specify how much it’s willing to spend to support the CMBS, and it is allowing only those with the highest credit ratings to be used as collateral. But if some ratings are based on misleading data, as the complaint alleges, taxpayers could be on the hook for a riskier-than-anticipated portfolio of loans.

The SEC, which has not taken public action on the whistleblower complaint, declined to comment....

Some lenders interviewed for this article maintain they’re permitted to alter properties’ historical profits under some circumstances. Others in the industry offered a different view. Adam DeSanctis, a spokesperson for the Mortgage Bankers Association, which has helped set guidelines for financial reporting in CMBS, said he reached out to members of the group’s commercial real estate team and none had heard of a practice of inflating profits. “We aren’t aware of this occurring and really don’t have anything to add,” he said.

The notion that profit figures for some buildings are pumped up is surprising, said Kevin Riordan, a finance professor at Montclair State University. It raises questions about whether the proper disclosures are being made.

Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage. Garbage in, garbage out.”

The whistleblower complaint has its origins in the kinds of obsessions that keep wonkish investors up at night. Flynn wondered what was going to happen when some of the most ill-conceived commercial loans — those made in the lax, freewheeling days before the financial crisis of 2008 — matured a decade later. He imagined an impending disaster of mass defaults. But as 2015, then 2017, passed, the defaults didn’t come. It didn’t make sense to him.

Flynn, 55, has deep experience in commercial real estate, banking and CMBS. After growing up on a dairy farm in Minnesota, the youngest of 14 children, and graduating from college — the first in his family to do so, he said — Flynn moved to Tokyo to work, first in real estate, then in finance. Jobs with banks and ratings agencies took him to Belgium, Chicago and Australia. These days, he advises owners whose loans are sold into CMBS and helps them resolve disputes and restructure or modify problem loans.

He began poring over the fine print in CMBS filings and noticed curious anomalies. For example, many properties changed their names, and even their addresses, from one CMBS to another. That made it harder to recognize a specific property and compare its financial details in two filings. As Flynn read more and more, he began to wonder whether the alterations were attempts to obscure discrepancies: These same properties were typically reporting higher net operating incomes in the new CMBS than they did for the same year in a previous CMBS.

Flynn ultimately collected and analyzed data for huge numbers of commercial mortgages. He began to see patterns and what he calls a massive problem: Flynn has amassed “materials identifying about $150 billion in inflated CMBS issued between 2013 and today,” according to the complaint.

The higher reported profits helped the properties qualify for loans they might not have otherwise obtained, he surmised. They also paved the way for bigger fees for banks. “Inflating historical cash flows creates a misperception of lower current and historical cash flow volatility, enables higher underwritten [net operating income/net cash flow], and higher collateral values,” the complaint states, “and thereby enables higher debt.”

Flynn eventually found a lawyer and, in February 2019, he filed the whistleblower complaint. The complaint accuses 14 major lenders — including three of the country’s biggest CMBS issuers, Deutsche Bank, Wells Fargo and Ladder Capital— and seven servicers of inflating historical cash flows, failing to report misrepresentations, changing names and addresses of properties and “deceptively and inaccurately” describing mortgage-loan representations. It doesn’t identify which companies allegedly manipulated each specific number. (Spokespeople for Deutsche Bank and Wells Fargo declined to comment on the record. The complaint does not mention Barrack or his company. )

The SEC has the power to fine companies and their executives if fraud is established. If the SEC recovers more than $1 million based on Flynn’s claim, he could be entitled to a portion of it.

When Flynn filed the complaint, the skies looked clear for the commercial mortgage market. Indeed, last year was a boom year for CMBS, with private lenders in the U.S. issuing roughly $96.7 billion in commercial mortgage-backed securities — a 27% increase over 2018, which made it the most successful year since the last financial crisis, according to Trepp. Overall, investors hold CMBS worth $592 billion.

Flynn’s assertions raise questions about the efficacy of post-crisis reforms that Congress and the SEC instituted that sought to place new restrictions on banks and other lenders, increase transparency and protect consumers and investors. The regulations that were retooled included the one that governs CMBS, known as Regulation AB. The goal was to make disclosures clearer and more complete for investors, so they would be less reliant on ratings agencies, which were widely criticized during the financial crisis for lax practices.

Still, the opinion of the credit-ratings agencies remains crucial today, a point reinforced by the Fed’s decision to hinge its bailout decisions on those ratings. That’s a problem, in the view of Neil Barofsky, who served as the U.S. Treasury’s inspector general for the Troubled Assets Relief Program from 2008 to 2011. “Practically nothing” was done to reform the ratings agencies, Barofsky said, which could lead to the sorts of problems that emerged in the bailout a decade ago. If things truly turn bad for the commercial real estate industry or if fraud is discovered, he added, the Fed could end up taking possession of properties that default.

CMBS can be something of a last resort for borrowers whose projects are unlikely to qualify for a loan with a desirable interest rate from a bank or other lender (because they are too big, too risky or some other reason), according to experts. Underwriting practices — the due diligence lenders do before extending a loan — for CMBS have gained a reputation for being less strict than for loans that banks keep on their balance sheets. Government watchdogs found serious deficiencies in the underwriting for securitized commercial mortgages during the financial crisis, just as they did in the subprime residential market.

The due diligence process broke down, Flynn maintains, in precisely the mortgages he was worried about: the 10-year loans obtained before the financial crisis. What Flynn discovered, he said, was that rather than lowering the values for properties that had taken on bigger loans than they could pay off, their owners instead obtained new loans. “Someone should have taken the losses,” he said. “Instead, they papered over it, inflated the cash flow and sold it on.”

For commercial borrowers, small bumps in a property’s profits can qualify the borrower for millions more in loans. Shaving expenses by about a third to boost profit, for instance, can sometimes allow a borrower to increase a loan’s size by a third as well — even if the expenses run only in the thousands, and the loan runs in the millions.

Some executives for lenders acknowledged to ProPublica that they made changes to borrowers’ past financials — scrubbing expenses from prior years they deemed irrelevant for the new loan — but maintained that it is appropriate to do so. Accounting firms review financial data before the loans are assembled into CMBS, they added.

The financial data that ProPublica examined — a sample of six loans among the thousands Flynn identified as having inflated net operating income — revealed potential weaknesses not readily apparent to the average investor. For those six loans, the profits for a given year were listed as 9% to 30% higher in new securities than in the old. After they were issued, half of those loans ended up on watch lists for problem debt, meaning the properties were considered at heightened risk for default.

In each of the six loans, the profit inflation seemed to be explained by decreases in the costs reported. Expenses reported for a particular year in one CMBS simply vanished in disclosures for the same year in a new CMBS.

Such a pattern appeared in a $36.7 million loan by Ladder Capital in 2015 to a team that purchased the Doubletree San Diego, a half-century-old hotel that struggled for years to bring in enough income to satisfy loan servicers, even under a previous, smaller loan.

The hotel’s new loan saddled it with far greater debt, increasing its main loan by 60% — even though the property had landed on a watchlist in 2010 because of declining revenue. Analysts at Moody’s pegged the hotel’s new loan as exceeding the value of the property by 40.5% (meaning a loan-to-value ratio of 140.5%).

Filings for the new loan claimed much higher profits than what the old loan had cited for the same years: The hotel’s net operating income for two years magically jumped from what had previously been reported: 21% and 16% larger for 2013 and 2014, respectively.

Such figures are supposed to be pulled from a property’s “most recent operating statement,” according to the regulation governing CMBS disclosures.

But, in response to questions from ProPublica, lender Ladder Capital said it altered the expense numbers it provided in the Doubletree’s historical financials. Ladder said it wiped lease payments —$700,608 and $592,823 in those two years — from the historical financials, because the new owner would not make lease payments in the future. (The previous owner had leased the building from an affiliated company.)

Ladder, a publicly traded commercial real estate investment trust that reports more than $6 billion in assets, said in a statement, “These differences are due to items that were considered by Ladder Capital during the due diligence process and reported appropriately in all relevant disclosures.”

Yet when ProPublica asked Ladder to share its disclosures about the changes, the firm pointed to a section of the pool’s prospectus that didn’t mention lease payments, or explain or acknowledge the change in income.

The Doubletree did not fare well under its new debt package. Revenues and occupancy declined after 2015 and by 2017, the hotel’s loan was back on the watch list. The hotel missed franchise fee payments. Ladder foreclosed in December 2019, after problems with an additional $5.8 million loan the lender had extended the property.

The Doubletree loan was not the only loan in its CMBS pool, issued by Deutsche Bank in 2015, with apparently inflated profits. Flynn said he was able to track down previous loan information for loans representing nearly 40% of the pool, and all had inflated income figures at some point in their historical financial data.

There was also a noticeable profit increase in two loans Ladder issued for a strip mall in suburban Pennsylvania. The mall’s past results improved when they appeared in a new CMBS. Its 2016 net operating income, previously listed as $1,101,207 in one CMBS, now appeared as $1,352,353 in another, data from Trepp shows — an increase of 23%. The prospectus for the latter does not explain or acknowledge the change in income. The mall owner received a $14 million loan.

Less than a year after it was placed into a CMBS, the loan ran into trouble. It landed on a watchlist after one of its major tenants, a department store, declared bankruptcy.

Ladder said it excluded $203,787 in expenses from the new loan because they stemmed from one-time costs for environmental remediation of pollution by a dry cleaner and a roof repair. Ladder did not explain why the previous lender did not exclude the expense also.

The pattern can be seen in loans made by other lenders, too. In a CMBS issued by Wells Fargo, a 1950s-era trailer park at the base of a steep bluff along the coast in Los Angeles reported sharply higher profits — for the same years — than it previously had.

The Pacific Palisades Bowl Park received a $12.9 million loan from the bank in 2016. The park reported expenses that were about a third lower in its new loan disclosures when compared with earlier ones. As a result, the $1.2 million in net operating income for 2014 rose 28% above what had been reported for the same year under the old loan. A similar jump occurred in 2013. (Edward Biggs, the owner of the park, said he gave Wells Fargo the park’s financials when refinancing its loan and wasn’t aware of discrepancies in what was reported to investors. “I don’t know anything about that,” he said.)

Flynn said he found that for the $575 million Wells Fargo CMBS that contained the Palisades debt, about half of the loan pool appeared to have reported inflated profits at some point, when comparing the same years in different securities.

Another of the loans ProPublica examined with apparently inflated profits was for a building in downtown Philadelphia. When the owner refinanced through Wells Fargo, the property’s 2015 profit appeared 23% higher than it had in reports under the old loan. Wells bundled the debt into a mortgage-backed security in 2016.

The building, One Penn Center, is a historic Art Deco office high-rise with ornate black marble and gold-plated fixtures, and a transit station underneath. One of the primary tenants, leasing 45,000 square feet for one of its regional headquarters, happens to be the SEC. The agency declined to comment

omfg fire whistleblower

https://www.alternet.org/2020/04/heres-what-wall-street-doesnt-want-you-to-know-about-its-grip-on-emergency-rooms/

no lnx

Here’s what Wall Street doesn’t want you to know about its grip on emergency rooms

Written by Eileen Appelbaum, Rosemary Batt / Independent Media Institute April 3, 2020

Doctor Ling Min is the first emergency room doctor to be fired for going public with his concerns about poor hospital emergency room safety practices and shortages of medical supplies and protective gear for health workers.

He won’t be the last.

Like many hospitals in the US, PeaceHealth St. Joseph Medical Center in Bellingham Washington, where Ling Min worked for the past 17 years as an emergency room doctor, has outsourced the management and staffing of its emergency room.So, Min works on-site at the hospital’s ER, but he is employed by a physician staffing firm that runs the ER. These staffing firms are often behind the surprise medical bills for ER services that patients receive after their insurance company has paid the hospital and doctors, but not the excessive out-of-network charges billed by these outside staffing firms.

About a third of hospital emergency rooms are staffed by doctors on the payrolls of two physician staffing companies—TeamHealth and Envision Health—owned by Wall Street investment firms. Envision Healthcare employs 69,000 healthcare workers nationwide while TeamHealth employs 20,000. Private equity firm Blackstone Group owns TeamHealth, Kravis Kohlberg Roberts (KKR) owns Envision.

Care of the sick is not the mission of these companies; their mission is to make outsized profits for the private equity firms and its investors. Overcharging patients and insurance companies for providing urgent and desperately needed emergency medical care is bad enough. But it is unconscionable to muzzle doctors who speak out to advocate for the health of their patients and co-workers during the global pandemic that is rapidly spreading across the US.

Yet, that is what Blackstone-owned TeamHealth just did. Why would an experienced ER doctor be fired in the middle of a pandemic? One clue may be that Blackstone’s CEO, Stephen A. Schwarzman, is part of President Trump’s inner circle. He may not want to risk that relationship by allowing TeamHealth’s doctors to inform the public about Washington’s mishandling of the allocation of supplies and protective gear. The president might conclude that TeamHealth doctors didn’t appreciate him enough, and where would that leave Schwartzman?

PeaceHealth St. Joseph Medical Center may have the distinction of being the first hospital to have a doctor outsourced from a physician staffing firm unceremoniously fired for telling the public the truth. But it won’t be the last. Hospitals are now telling doctors treating coronavirus patients they will be fired if they speak to the press.

The American Academy of Emergency Medicine protested Dr. Min’s ouster and questioned how TeamHealth is allowed to provide hospital services when the law requires that physician practices must be owned by a licensed medical practitioner. TeamHealth skirts the law by owning all the assets of the physician practices it acquires—the real estate, offices, equipment, supplies, inventory, and even accounts receivable.

On paper, the physician practices are owned by a doctor-led organization that TeamHealth has set up to comply with the law. But what does it mean to own a physician practice if the practice has no assets and no possibility to exist on its own?

The furor over patients hit by surprise medical bills revealed that TeamHealth controls the billing for the doctors it supplies to hospital emergency rooms. The firing of Doctor Ling Min pulls back the curtain and reveals that TeamHealth controls the doctors as well.

Eileen Appelbaum is the Co-Director of the Center for Economic and Policy Research and visiting professor, School of Management, University of Leicester, UK.

Rosemary Batt is the Alice Hanson Cook Professor of Women and Work, Cornell University ILR School.

This article was produced by Economy for All, a project of the Independent Media Institute.

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omg risk asses not doing their job?!

https://www.alternet.org/2020/02/extreme-weather-could-spark-an-economic-recession-the-likes-of-which-weve-never-seen-before/

no lnx

Extreme weather could spark an economic crisis the ‘likes of which we’ve never seen before’

Written by Jake Johnson / Common Dreams February 18, 2020

New research published Monday warns that extreme weather driven by the climate crisis could bring about an economic recession “the likes of which we’ve never seen before” if markets don’t do a better job assessing climate risks.

Paul Griffin, an accounting professor at the University of California, Davis Graduate School of Management, wrote in a paper for Nature Energy that financial markets have not sufficiently accounted for the major economic risks posed by the global climate crisis, even as extreme weather—from destructive hurricanes to prolonged drought—wreaks havoc across the globe.

“Unpriced risk was the main cause of the Great Recession in 2007-2008,” Griffin wrote. “Right now, energy companies shoulder much of that risk. The market needs to better assess risk, and factor a risk of extreme weather into securities prices… Without better knowledge of this risk, the average energy investor can only hope that the next extreme event will not trigger a sudden correction to the market values of energy firms.”

Griffin continued:

This past summer, the United States and Europe experienced record-breaking heat. Now linked reliably to climate change, excessive high temperature is among the deadliest of weather extremes. Not only can it disrupt agriculture, harm human health, and stunt economic growth, it can also overwhelm—and temporarily shut down—large parts of a state’s or a nation’s energy system, as in the case of the Pacific Gas and Electric Company (PG&E) in California.

Extreme heat events can create uncertain and longer duration power outages, threaten critical infrastructure, exacerbate energy supply and demand imbalances, and trigger significant legal liability for energy firms. Newer reports of an increase in the frequency and severity of extreme weather events, moreover, amplify those risks for energy firms.

Despite these obvious risks, investors and asset managers have been conspicuously slow to connect physical climate risk from extreme weather events to company market valuations.

Griffin is not the first financial expert to raise alarm about the potentially calamitous economic impacts of the climate crisis—which would come in addition to the emergency’s incalculable effects on humans, animals, plants, insects, and the planet as a whole.

The Switzerland-based Bank for International Settlements warned in a 115-page report (pdf) last month that the “increase in the frequency and intensity of extreme weather events could trigger non-linear and irreversible financial losses.”

“Climate change poses unprecedented challenges to human societies,” the report stated, “and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us.”

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https://www.alternet.org/2020/01/i-made-a-lot-of-bankers-look-very-good-trump-lets-the-mask-slip-as-wall-street-titans-get-32-billion-tax-windfall/

no lnx

‘I made a lot of bankers look very good’: Trump lets the mask slip as Wall Street titans get $32 billion tax windfall

Written by Jon Queally / Common Dreams January 17, 2020

“I made a lot of bankers look very good,” President Donald Trump boasted this week just before it was reported Thursday that the nation’s six largest banks alone have received an estimated $32 billion windfall thanks to Republican tax cuts.

The figures were generated by Bloomberg News after reviewing the 2019 profits earnings of JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.

By looking at the banks’ earnings in relation to effective tax rates that dropped from 20% to 18% last year—and comparing that to the 30% average they paid prior to the tax cut bill passed by Republicans and signed by Trump at the end of 2017—the analysis showed just how well the Wall Street giants have fared even as they cut back their work forces approximately 1,200 people over the same time period.

“The tax savings have spurred the banks to record profit,” Bloomberg‘s Yalman Onaran reported. “The six firms posted $120 billion in net income for 2019, inching past 2018’s mark. They had never surpassed $100 billion before the tax cuts.”

...[ask for thx]

wapo no lnx

https://www.washingtonpost.com/business/big-money-urges-governments-to-tackle-climate-change/2019/09/19/

Big money urges governments to tackle climate change

By Frank Jordans?|?AP

September 18, 2019 at 9:50 p.m. PDT

A group of more than 500 major institutional investors called Thursday for governments to boost efforts to tackle climate change, warning that failure could have serious economic consequences.

The banks, insurance companies and pension funds said in a joint statement ahead of next week’s U.N. climate summit in New York that current national commitments could lead to an “unacceptably high temperature increase that would cause substantial negative economic impacts.”

The group includes financial giants such as France’s Amundi, which manages 1.487 trillion euros ($1.64 trillion); Canada-based Manulife; and Insight Investment in the United States.

Countries that signed the 2015 Paris climate accord have committed to keeping global warming well below 2 degrees Celsius (3.6 Fahrenheit), ideally aiming for an increase of no more than 1.5C (2.7F) by the end of the century compared with pre-industrial times.

But the investment firms, which together say they manage $35 trillion in assets, cited a gap between the modest steps pledged by governments — which in themselves fall short of what’s needed to meet the Paris goals — and actual measures taken so far.

“This ambition gap is of great concern to investors and needs to be addressed, with urgency,” the companies said. “It is vital for our long-term planning and asset allocation decisions that governments work closely with investors to incorporate Paris-aligned climate scenarios into their policy frameworks and energy transition pathways.”

The investors want governments to speed up the shift from fossil fuels to renewable energy, back rules requiring companies to report climate-related information in their financial statements and put a meaningful price on carbon emissions.

Institutional investors have become increasingly vocal about the need to confront climate change lately.

In a separate investor-backed study released Wednesday, the London-based Transition Pathway Initiative said none of the world’s top 50 oil and gas companies are in line with the Paris goal of capping global warming at 2C. By contrast, the researchers found that about 20% of the 59 electric utility companies examine are aligned with that target.

“The majority of companies have yet to establish their 2030 emission reduction targets, let alone set a longer-term vision for their carbon emissions,” said Helena Viñes Fiestas, global head of stewardship and policy at France’s BNP Paribas Asset Management, one of the investment firms behind the report. “We, as a major institutional investor, are concerned that transition risk — the large and growing gap between government targets and company ambitions — is a major source of investment risk.”

For more Associated Press stories about climate change, go to https://www.apnews.com/Climate

"panic in the boardrooms" of europe (developing critieria for green invest? de-valuing FF portfolio;

EU 14% inflection pt b/c of 20% mandate, synergy, cost fell, china came in ... now feed-in tariffs no longer even needed [old shrink vs new grow;] electricity replaced gaslight when only 3%

vol mandate; fed green bank but must have 50% target (pension will invest in grn banks/bonds]; ike hwy to finish 2nd ind revo (coupled w/ war atomic evac route] // grren grid.

$41 trillion in worker pension,(biggest pool of $) need scale places to put in

green energy (wind) now cheaper than nat'l gas, thus massive stranded assets

local power grid resilient b/c it's local, not dependent on larger system.

3rd industrial revo non-hier; must be glob-LOCAL; feed-in tariffs let local ppl go to bank and get loan b/c knew could repay

merkel how do future when plugged into coal and nuke?

china big green grid investment 12 wks after mtg w/ Jeremy Rifkin wrote The Green New Deal: Why the Fossil Fuel Civilization Will Collapse by 2028, and the Bold Economic Plan to Save Life on Earth audio interview 9/19.

rifkin

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https://www.desmog.co.uk/2019/03/20/jpmorgan-chase-tops-banks-financing-fossil-fuels-climate-change

A report published today names the banks that have played the biggest recent role in funding fossil fuel projects, finding that since 2016, immediately following the Paris Agreement's adoption, 33 global banks have poured $1.9 trillion into financing climate-changing projects worldwide.

The top four banks that invested most heavily in fossil fuel projects are all based in the U.S., and include JPMorgan Chase, Wells Fargo, Citi, and Bank of America. Royal Bank of Canada, Barclays in Europe, Japan’s MUFG, TD Bank, Scotiabank, and Mizuho make up the remainder of the top 10.

This report comes as March has already brought deadly weather to places such as the American Midwest, where historic flooding has left four dead and farm losses could reach $1 billion, and Mozambique, where Tropical Cyclone Idai has devastated the East African country and President Filipe Nyusi estimated that more than a thousand people are likely dead.

Both disasters have been linked to climate change. “Increased flooding is one of the clearest signals of a changing climate,” said 350.org co-founder Bill McKibben in a statement published by ThinkProgress, adding that flooded Nebraska’s “current trauma is part of everyone’s future.”

“One inescapable finding of this report is that JPMorgan Chase is very clearly the world’s worst banker of climate change,” the report, titled “Banking on Climate Change,” found. “The race was not even close: the $196 billion the bank poured into fossil fuels between 2016 and 2018 is nearly a third higher than the second-worst bank, Wells Fargo.”

A half-dozen environmental groups — Rainforest Action Network, BankTrack, Sierra Club, Oil Change International, Indigenous Environmental Network, and Honor the Earth — authored the 2019 report, which was endorsed by 160 organizations worldwide. It tracked the financing for 1,800 companies involved in extracting, transporting, burning, or storing fossil fuels or fossil-generated electricity and examined the roles played by banks worldwide.

Global Snapshot of Fossil Fuel Sector Finance

Past report cards by the groups have focused only on coal, or on “extreme” fossil fuel projects, like tar sands extraction, ultra-deepwater oil drilling, and coal mining, and power generation. 2019’s report card expands, for the first time, to cover the fossil fuel sector as a whole.

Total fossil fuel financing, in billions of U.S. dollars, by bank and year, 2016-2018. Credit: Banking on Climate Change 2019 report

This year’s report card also dived deep into lending to shale oil and gas companies for the first time, finding that Wells Fargo and JPMorgan Chase “are the biggest bankers of fracking overall — and, in particular, they support key companies active in the Permian Basin, the epicenter of the climate-threatening global surge of oil and gas production.”

JPMorgan Chase also provided the most financing to LNG projects, Arctic oil and gas projects, and ultra-deep-water oil and gas extraction, the report concluded. The Royal Bank of Canada topped the list on tar sands oil financing.

“Coal mining finance is dominated by the four major Chinese banks, led by China Construction Bank and Bank of China,” the 2019 report found, adding that Bank of China provided the most financing to coal power projects as well.

On March 19, China’s State Development & Investment Corp., listed as one of the report’s top coal power companies, reportedly confirmed that it would stop investing in thermal coal power plants three years ahead of schedule.

“Since the Paris Agreement, JPMorgan Chase has provided $196 billion in finance for fossil fuels,” the groups wrote, “10 percent of all fossil fuel finance from the 33 major global banks.”

A JPMorgan Chase spokesperson declined to comment.

In 2017, JPMorgan Chase pledged to “facilitate $200 billon in clean financing through 2025,” adding that it had helped finance $18 billion of wind, solar, and geothermal projects between 2003 and 2017.

Barclays, which offered a total of $109 billion for fossil fuel projects, topped the 2019 report’s list of “worst in Europe,” followed by HSBC, with $77 billion in financing.

More Money for Fossil Fuels Since Paris Agreement

All told, financial backing for fossil fuel projects has grown, not shrunk, each year since the Paris Agreement, the report found. Banks provided $612 billion for fossil projects in 2016, $646 billion in 2017, and $654 billion in 2018.

That’s despite the fact that Article 2 of the Paris Agreement calls for “[m]aking finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” — and in the run-up to Paris, major banks positioned themselves as supporting a strong global response to climate change.

“Scientific research finds that an increasing concentration of greenhouse gases in our atmosphere is warming the planet, posing significant risks to the prosperity and growth of the global economy,” JPMorgan Chase Bank, Bank of America Corp., Wells Fargo, Citibank, Goldman Sachs, and Morgan Stanley wrote in a 2015 statement. “As major financial institutions, working with clients and customers around the globe, we have the business opportunity to build a more sustainable, low-carbon economy and the ability to help manage and mitigate these climate-related risks.”

In 2017, JPMorgan CEO Jamie Dimon told CNBC that he opposed President Trump’s plan to pull the U.S. out of the Paris Agreement.

[Guerrilla street painting against fossil fuel pipeline investment outside Wells Fargo World Headquarters in San Francisco, November 6, 2017. Credit: Peg Hunter,CC BY-NC 2.0]

Activist pressure campaigns focused on individual banks have recently claimed successes. This week, JPMorgan Chase and Wells Fargo both announced plans to stop financing private prisons, which Moody’s Investment Services said in a comment “builds on the trend of negative publicity and uncertainty prevalent in the sector.”

The past year has brought increasing awareness of climate-related risks in some financial circles — but banks headquartered in the U.S. and Canada have lagged behind.

“According to a survey conducted by Boston Common Asset Management in 2018, European banks are far ahead of large banks in the U.S. and Canada in implementing climate-related risk assessments,” American Banker reported in January. “Specifically, 80 percent of European banks surveyed are, in some way, stress-testing their loan and investment portfolios for a 2-degree-Celsius increase in global temperatures, versus just 44 percent of banks in North America.”

A report issued last month by U.S.-based Morgan Stanley tallied $650 billion in climate-related disasters over the past three years — and predicted $54 trillion in damages worldwide by 2040, citing figures from the UN. “We expect the physical risks of climate change to become an increasingly important part of the investment debate for 2019,” the Morgan Stanley strategists wrote.

The Banking on Climate Change report finds that nonetheless, Morgan Stanley offered fossil fuel companies $19.48 billion in financing in 2018 (down from $23.7 billion the prior year), making it the world’s 11th largest financier of fossil fuel projects.

“Alarming is an understatement,” said lead author Alison Kirsch, a Rainforest Action Network researcher. “This report is a red alert.”

they're baaack

https://www.alternet.org/2019/03/the-global-economy-is-a-time-bomb-waiting-to-explode/

In the aftermath of the greatest financial calamity since the Great Depression, then–chief of staff for the Obama administration Rahm Emanuel made the call for aggressive action to prevent a recurrence of the meltdown of 2008.

Although the U.S. government’s system of checks and balances typically produces incremental reform, Emanuel suggested that during times of financial upheaval, the traditional levers of powers are often scrambled, thereby creating unique conditions whereby legislators could be pushed in the direction of more radical reform. That’s why he } that we should never let a crisis go to waste. Ironically, that might be the only pearl of wisdom we ever got from the soon-to-be ex-mayor of Chicago, one of those figures who otherwise embodied the worst Wall Street-centric instincts of the Democratic Party. But give Rahm props for this one useful insight.

But we did let the crisis of 2008 go to waste. Rather than reconstructing a new foundation out of the wreckage, we simply restored the status quo ante, and left the world’s elite financial engineers with a relatively free hand to create a wide range of new destructive financial instruments.

To cite some examples, consider the case of the UK, where England’s local councils have taken on significant risk via structural financial products known as “LOBO loans” (lender option borrower option). Financial blogger Rob Carver explains how they work:

https://www.c-span.org/video/?457500-1/bankers-bailouts-struggle-tame-wall-street

2/19

Bankers, Bailouts, and the Struggle to Tame Wall Street

Kathleen Day talked about her book, Bankers, Bailouts, and the Struggle to Tame Wall Street, in which she provides a history of the federal government’s oversight of the financial sector.

https://www.alternet.org/environment/big-banks-just-flunked-their-own-test-climate-indigenous-rights

October 16, JPMorgan Chase, Wells Fargo, Crédit Agricole and 91 other global banks met in Washington, DC, to revise the Equator Principles, industry-led due diligence standards meant to prevent banks from supporting environmentally and socially harmful projects.

On the very same day, in a bitter irony, many of those same banks re-upped their support for Enbridge, the Canadian company behind the Line 3 tar sands pipeline, which tramples Indigenous rights and is flatly incompatible with the goals of the Paris climate agreement. They did so just days after the publication of a landmark United Nations report showing the desperate urgency of taking concrete steps to tackle the climate crisis. It’s as if the banks wanted to supply their own headline example of exactly why the Equator Principles are broken and in dire need of repair.

The current round of soul-searching around the Equator Principles dates back to the Dakota Access Pipeline (DAPL) and the Indigenous-led campaign calling out the banks behind the project. DAPL was a crisis for those banks, and it was a scandal for the Equator Principles Association. How did such an obviously flawed project pass muster?

In response to activist pressure, in 2017, the Equator Principles Association agreed to a revision process, including examining how the principles deal with the internationally accepted standard that projects cannot be built unless directly impacted Indigenous communities give their free, prior and informed consent. The Equator Principles currently ignore these principles in rich countries like the US — and ignore climate impacts everywhere.

It’s astonishing that the banks were discussing those revisions on exactly the same day that many of them reaffirmed their support for Enbridge, when the Line 3 pipeline — the company’s largest new investment — is in danger of becoming DAPL 2.0. In a clear echo of DAPL, Enbridge has failed to secure the free, prior and informed consent of Indigenous communities impacted by Line 3: three Ojibwe tribes in the Minnesota portion of the pipeline’s proposed path remain staunchly opposed. There’s been a steady and growing drumbeat of Indigenous-led legal and direct action, up to and including peaceful civil disobedience.

Of course, all this comes on the heels of the historic report recently released by the Intergovernmental Panel on Climate Change that describes food shortages, growing wildfires and massive coral reef destruction by 2040 unless we take immediate action to curb greenhouse gas emissions.

We urgently need to stop expanding and start phasing out fossil fuels to have any chance of meeting the goals of the Paris climate agreement. Flying in the face of these facts, the Line 3 pipeline would increase extraction and burning of tar sands, one of the dirtiest forms of oil. Enbridge is a company going in exactly the wrong direction: Last year, it even sold off a huge wind farm to free up capital to build Line 3.

JPMorgan Chase, Wells Fargo and Crédit Agricole are the lead banks behind two key Enbridge credit facilities, loans that act like giant credit cards for Enbridge to use as it pleases. They are crucial for Enbridge’s ability to build Line 3. When these loans are set to mature, banks have a choice: They can let them expire, or they can renew their support. One of Enbridge’s credit facilities was renewed recently, with another scheduled for renewal in December. At the beginning of October, Minnesota-based Native rights group Honor the Earth and a coalition of Indigenous and environmental organizations sent a letter to those three banks laying out the case against Line 3 and calling on them not to renew their support.

Because Enbridge is funding Line 3 from its general corporate coffers, the pipeline illustrates another fundamental shortcoming of the Equator Principles: Since the standards only cover direct finance for projects, Line 3 is outside of their scope, despite the project’s clear impacts on Indigenous rights and the climate. This is a litmus test for the current revision of the Equator Principles, which should cover projects like Line 3 if they’re going to be worth anything. As a start for companies sponsoring harmful projects, the Equator Principles evaluation should be triggered when these companies are up for credit renewals as well.

But JPMorgan Chase, Wells Fargo and Crédit Agricolecan’t hide behind the revision of the Equator Principles. They should immediately end their support for Line 3 by dropping their financing for Enbridge, so long as the company is pushing forward this destructive project. The December credit renewal will serve as another test. This time they should make sure they pass it.

This article was produced by Earth | Food | Life, a project of the Independent Media Institute, and originally published by Truthout.

https://www.ran.org/endfinanceline3/

honor the earth 3 banks ltrs

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Why did you recently call the Republican Party “the most dangerous organization in world history”?

Take its leader, who recently applied to the government of Ireland for a permit to build a huge wall to protect his golf course, appealing to the threat of global warming, while at the same time he withdrew from international efforts to address the grim threat and is using every means at his disposal to accelerate it. Or take his colleagues, the participants in the 2016 Republican primaries. Without exception, they either denied that what is happening is happening – though any ignorance is self-induced – or said maybe it is but we shouldn’t do anything about it. The moral depths were reached by the respected “adult in the room,” Ohio governor John Kasich, who agreed that it is happening but added that “we are going to burn [coal] in Ohio and we are not going to apologize for it.” Or take a recent publication ofTrump’s National Highway Traffic Safety Administration, a detailed study recommending an end to regulations on emissions.It presented a rational argument: extrapolating current trends, by the end of the century we’ll be over the cliff and automotive emissions don’t contribute very much to the catastrophe – the assumption being that everyone is as criminally insane as we are and won’t try to avoid the crisis. In brief, let’s rob while the planet burns, putting poor Nero in the shadows.

This surely qualifies as a contender for the most evil document in history.

There have been many monsters in the past, but it would be hard to find one who was dedicated to undermining the prospects for organized human society, not in the distant future -- in order to put a few more dollars in overstuffed pockets.

And it doesn’t end there. The same can be said about the major banks that are increasing investments in fossil fuels, knowing very well what they are doing. Or, for that matter, the regular articles in the major media and business press reporting US success in rapidly increasing oil and gas production, with commentary on energy independence, sometimes local environmental effects, but regularly without a phrase on the impact on global warming – a truly existential threat. Same in the election campaign. Not a word about the issue that is merely the most crucial one in human history.

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City of Angels Funds Some Hellish Fossil Fuel Projects

By Doug Norlen

This month the United Nations Intergovernmental Panel on Climate Change released a startling report, which finds that severe impacts of climate change are happening much sooner than previously expected, and that countries must take far more aggressive actions to avoid the most catastrophic impacts. The report finds that the burning of fossil fuels must be curbed sharply.

The harmful role Wall Street banks play in propping up fossil projects around the world is increasingly known. Yet there is much less awareness of the role major cities play when they place billions of dollars of their public funds into these same Wall Street banks. According to L.A. city records, as of July 2018, Los Angeles had banking and/or investment relationships with several Wall Street banks, many of which are notorious for their financing of fossil fuel and human rights debacles around the world, including JP Morgan Chase, Citi, Bank of America and Wells Fargo.

According to Banking on Climate Change, a fossil fuel finance report card, between 2015 and 2017 these Wall Street banks collectively provided over $50 billion in financing for tar sands, ultra-deep water drilling, coal mining, coal power and liquid natural gas projects around the world. These projects contribute vast amounts of greenhouse gases into the atmosphere, and many of them have severe local environmental, social and human rights impacts as well.

But in 2018, cities have more ethical options. Rather than investing the public's money in environmental and human destruction, cities can establish public banks. When properly structured and operated, public banks can prohibit the use of their funds for fossil fuel and other harmful projects. Instead, they can fund renewable energyand other green enterprises, affordable housing, education and low-cost loans to job-creating entrepreneurs—all while avoiding paying hundreds of millions of dollars in exorbitant fees to Wall Street banks.

The movement to establish public banks is growing nationwide. California is at the forefront, with efforts to pass state-wide legislation allowing establishment of municipal banks as well as campaigns to establish public banks in San Francisco, Oakland and other East Bay cities, Los Angeles and other municipalities.

When Los Angeles voters go to the polls next week, they will decide whether to approve Charter Amendment B, which amends the city's charter to enable it to take affirmative steps to establish a public bank. And Los Angeles is a great case study on the need for public banks. According to Public Bank L.A., the city maintains bank accounts with between $4 billion and $12 billion in cash, and manages up to $45 billion in investments through large commercial banks.

The enormous sum of public funds that L.A. entrusts to fossil fuel banks undercuts the climate leadership of city officials. For example, this past August L.A. Mayor Eric Garcetti joined a coalition of hundreds of mayors across the country to condemn Donald Trump's plans to weaken vehicle efficiency standards and rescind California's waiver right to set stronger greenhouse gas regulations. In December 2016, Garcetti joined other mayors to denounce Trump's decision to walk away from the Paris agreement. The city council has shown progressive streaks on banking issues as well. In December 2017, the Council unanimously voted to enforce both federal and state Community Reinvestment Act ratings disqualifying Wells Fargo from submitting a Request for Proposal for the city's commercial banking services. And yet, the city still banks with Wells Fargo.

If L.A. voters approve Charter Amendment B, the city will be one step closer to creating a municipal bank and redirecting its billions of dollars of public funds to environmentally sound, fiscally smart, sustainable community needs. In doing so, L.A. will serve as a beacon of progress to inspire the larger national movement to establish public banks.

For a sense of why Los Angeles so badly needs to approve Charter Amendment B, we've included descriptions of just a handful of the harmful projects Los Angeles is currently supporting by keeping its money in fossil fuel banks (based on publicly available information).Here is a sample of some of the projects that LA's banks support:

Dakota Access Pipeline (United States):

Citi — $235 million in project finance
MUFG — $235 million in project finance
Wells Fargo — $120 million in project finance

The Dakota Access Pipeline, or DAPL, extends over 1,000 miles across several U.S. states, damaging Native American ancestral lands and water. Passing within just a half-mile of the Standing Rock Indian Reservation, the pipeline has destroyed sacred sites and threatens the tribe's drinking water with potential oil spills. Beginning in 2016, Native American water protectors, including Standing Rock Sioux tribal elders and members, led opposition to DAPL. Supported by thousands of allies, this grew into one of the largest and most iconic movements in the world to halt fossil fuel pipelines. In response to peaceful, prayerful resistance, police from several states and agencies, members of the U.S. National Guard and armed private security forces used military equipment and tactics, including attack dogs, to intimidate, assault, arrest and otherwise commit grievous human rights abuses against water protectors and their allies. Opposition to the pipeline expanded far beyond the project site and supercharged the growing global movement against financial institutions that support fossil fuel projects.

Atlantic Coast Pipeline (United States):

Bank of America — $673.5 million in corporate loans (13)
Citi — $673.5 million in corporate loans (14)
JP Morgan Chase — $648 million in corporate loans (15)
MUFG — $1.182 billion in corporate loans (16)
Wells Fargo — $673.5 million in corporate loans (17)

The proposed 600-mile Atlantic Coast Pipeline, running from West Virginia through North Carolina, is the third longest gas pipeline in production or in some phase of development over the past 20 years in the U.S. Trees have been cleared along the pipeline route and infrastructure development has begun. Although two lawsuits against the pipeline are now pending in federal and North Carolina courts, federal law allows pipelines to be constructed prior to the resolution of all litigation. The ACP was the only oil or gas pipeline to be on Donald Trump's list of 50 Priority National Security Projects prior to his election.

According to published reports, the central purpose of the ACP is to enter South Carolina and eventually reach Elba Island, Georgia where gas will be exported from a liquid natural gas facility now under construction. This recognition raises serious concerns regarding the use of eminent domain to take privately owned property for private gain instead of public use.

The ACP threatens the livelihood of more than 30,000 indigenous peoples that live along the pipeline route. In May 2018, an alliance of community, statewide and national groups filed a complaint to the U.S. Environmental Protection Agency (EPA) Civil Rights Compliance Office, alleging that the North Carolina Department of Environmental Quality discriminated on the basis of race and color in issuing permits and certifications to the ACP as part of the permitting process. In September 2018, environmental groups filed legal challenges in an appeals court against federal permitting agencies.

Kusile Power Station (South Africa):

Bank of America — financial advisor
JP Morgan Chase — financial advisor
MUFG — part of 705 million euro corporate loan to South Africa's state power company, Eskom, to purchase boilers from Hitachi Power Europe for the Kusile coal power plant

Once completed, the 4,800-megawatt Kusile coal plant in South Africa will be one of the largest coal plants in the world. The estimated annual greenhouse gas equivalent emissions of the plant—30 million tons—would increase South African energy sector emissions by 12.8 percent and the country's total contribution to climate change by 9.7 percent. South Africa already has the distinction of being among the top global greenhouse gas emitters per capita. The Kusile project area already exceeds permitted ambient levels of hazardous air pollutants that create soot and smog, which cause harm to respiratory, cardiovascular and nervous systems, leading to heart disease, cancer, stroke and chronic lower respiratory diseases, according to Physicians for Social Responsibility. If completed, Kusile will increase the cost of electricity for the poor and household consumers to compensate for Apartheid-era "special pricing agreements" that give large industrial users, which consume most of South Africa's electricity, guaranteed rates that are among the lowest in the world. The cost of Kusile, which in 2007 was estimated by Eskom to be 80 billion rand, had more than doubled to 172 billion rand by 2016. It is "expected to further strain Eskom's financial resources, and place upward pressure on Eskom's electricity price trajectory in the years ahead." In 2015 the U.S. Securities and Exchange Commission charged Hitachi with violations of the Foreign Corrupt Practices Act in connection with contracts to build Kusile and Medupi (another enormous coal plant in South Africa), resulting in a $19 million settlement.

Long Phu-1 Coal Plant (Vietnam):

MUFG and JP Morgan Chase — among the lead financial arrangers, with potential combined $650 million in finance

Long Phu-1 in Vietnam would emit an estimated 6.3 million tonnes of CO2 per year. As a "supercritical" coal power plant, Long Phu-1 is prohibited from being financed by most official government export credit agencies (ECA), including the U.S. Export-Import Bank. However, the former director of the EPA's Air Enforcement Division, Bruce Buckheit, revealed that the project consulting firm Environmental Resources Management doctored the coal plant's greenhouse gas emissions estimates to make Long Phu-1 appear to be a more efficient "ultra-supercritical" plant, which would be allowed under ECA coal financing restrictions. Analysis of Long Phu-1 by Friends of the Earth U.S. reveals that the project violates other international policies, including requirements to analyze alternatives, identify cumulative and associated risks and impacts, evaluate labor and working conditions, prevent pollution, protect community health, provide safety and security, and ensure biodiversity conservation. In February 2018, the New York Times reported that U.S. Export-Import Bank financing for Long Phu-1 had collapsed after it was revealed that project financiers included Vnesheconombank, a Russian bank that is on the U.S. government's sanctions list and is part of a federal investigation into possible collusion between the Russian government and the Trump presidential campaign. It was also reported that a top Long Phu-1 project official had been sentenced to prison for corruption. MUFG and JP Morgan Chase, like the U.S. Export-Import Bank, must also comply with U.S. sanctions. However, it remains unclear whether these banks continue to be potential financiers of Long Phu-1.

...While the nation pays attention to some of the most obviously outrageous things President Donald Trump does — his grotesque behavior, the Muslim ban, the policy of family separations, the neglect of Puerto Rico — some of his most pernicious actions pass by without much discussion.

One of those actions was the rolling back of the Department of Labor's fiduciary rule under Secretary of Alex Acosta. The rule had been initiated under President Barack Obama, but the Trump administration put a stop to it.

Essentially, the rule was designed to require anyone providing financial advising services to be a fiduciary, someone who works in their clients' interests. Without this rule in place, advisers have more leeway to upsell clients on certain financial services that might earn the adviser a hefty commission — even if it's not what would be best for the client.

As a new report in the Wall Street Journal revealed, under Trump, the market for these types of sketchy services is roaring back. One way to tell is the strong surge in annuity sales, a financial instrument designed to provide payouts for elderly people at the cost of a huge lump sum. While this can be appealing for some seniors, the products often come with hidden fees — not to mention ample payouts for financial advisers who make the sales.

"The boom shows how Washington’s push to roll back financial regulations is giving new life to products that industry watchdogs say aren’t always good for investors," wrote reporters Ben Eisen and Lisa Beilfuss. "The annuities resurrection stems from the demise of the Labor Department’s fiduciary rule, an Obama-era proposal that would have required brokers who oversee retirement savings to act in their clients’ best interests."

“The door has opened for bad brokers to have more free rein with these things,” attorney Michael Lynch told the Journal.

Many people in the market for smart investment opportunities may find themselves buying products that they don't fully understand. And they may mistakenly believe that the financial adviser has their best interests in mind even if, in reality, the adviser is essentially working for someone else.

"The fiduciary rule wouldn’t have prevented all unscrupulous sales practices," the reporters note. "But it could have forced brokers to be more transparent about their commissions and constrained them from putting customers in high-fee annuities if similar low-fee products were available."

Trump campaigned as if he would govern in opposition to these types of practices, "draining the swamp" and fighting against financial titans who exploit the average American. Instead — as was always the predictable outcome — he has ruled as a plutocrat dishing out favors to his friends in the moneyed classes.

Climate risk and shareholders’ interest

In recent years, the financial sector has ramped up its warning that failing to tackle climate change could disrupt financial stability and the economy.

Earlier this year, Bank of England governor Mark Carney said climate change could have a “catastrophic impact” on the financial system and that companies had to acknowledge and disclose climate-related risks to their business.

Commenting on InfluenceMap’s findings, Tom Burke, chairman of the environment policy think tank E3G, told DeSmog UK that “it was not rare for businesses to speak out of both sides of their mouth” but warned that failing to positively engage with climate policy was not in the interest of these companies’ shareholders.

“If climate policy succeeds, it will be tough on the fossil fuel industry who will be out of business. But they represent about 10 percent of the market.

“If climate policy fails, the remaining 90 percent of the market will have its interest damaged. The fossil fuel industry is effectively eating the lunch of the rest of the financial sector,” he said.

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