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Commentary on The Capital Markets- Category [Corruption]
2017-09-08 09:12 by Karl Denninger
in Corruption , 1266 references
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It's time to start locking people up and destroying businesses with federal criminal indictments.

The Internet has made many things very easy -- and fast.  But it has also made many things quite-insecure, especially when corners are cut.

I can design and implement extremely secure internet-connected data facilities and services.  I not only have done so they're in active use right now.  Some are more-important than others, but all are important to me.   Among other things my home is connected via same, never mind the work product I've developed for the last, oh, 30ish years when working on various pieces of computer-technology.

It has never been penetrated.

Do you know why?  Because to get in you need cryptographic keys that you don't have, and as technology has advanced so has my willingness to regenerate said keys to keep step with same, along with taking proper security precautions with the necessary components to issue said credentials.

In other words I do my ****ing job.

Equifax did not.  Nor did all of the other places that have had ridiculous data breaches over the last few years.  Nor did the people who called me a couple of years ago in a panic because one of their "senior" IT people stripped the protection from their master key and stuck it on a network volume that was backed up to the cloud for convenience purposes.  For the record, that person was not fired and the firm in question did not immediately re-generate all the keys issued by same.

So far I haven't read anything in the paper about them being compromised, but that doesn't mean they haven't been.  It just means it didn't hit the papers.


Equifax, along with Trans-Union and Experian, hold data on virtually every US Citizen over the age of about 18 and a large number of those who are not adults.  If you have any sort of credit relationship with anyone they have a file on you.  That file is indexed by something that until about 20 years ago was stamped on the face of said card "Not for Identification" -- your Social Security number.

Congress has permitted these firms to pervert that which it designated not for identification use, but only for the use of the Federal Government in administering retirement and disability benefits under the Social Security program, with the IRS having access to it so as to make sure your contributions to same were accurately recorded.  Since deliberately turning its back on the outrageous abuse of same by private industry Congress has then gone even further and not only allowed and mandated its use by other firms, such as banks, for identification purposes it has effectively barred you from having any such account or access without same.

This, despite the fact that on the face of said cards until fairly recently it was explicitly stated: NOT FOR IDENTIFICATION as that was written into the original law that resulted in the issuance of same.

But what's even worse than that perversion for which every Congresscritter and Executive Branch member should be tried and imprisoned for the rest of their lives is what Congress and the Executive have not done since -- on purpose.

They have not enforced the law with regard to intentional and willful misconduct when it comes to cyber security in these large data stores nor do they give a damn about the material and incalculable harm these large firms inflict on consumers when your data is either stolen or misused because of their intentionally lax security.  Further, the Congress and Executive allow effective extortion of every consumer in the nation by allowing these companies to charge you to freeze your credit, thus denying scammers access, they can charge you again to "unfreeze" it temporarily if you wish to obtain new credit and they deem said data "theirs" instead of "yours" which means you can't insist that they either not collect and store it or delete it.

See, proper security costs money and can be inconvenient.  Having access to such data only when properly-secure machine certificates are used to encrypt same and all communication all the way back to a traceably-secure device would mean that "instant credit" decisions at millions of cash registers (e.g. to sell you a credit card while in the checkout line) could not be made.

Forcing these companies to allow consumers to turn "on" and "off" access to their credit files whenever they want, without cost, would mean that these companies couldn't sell your data to anyone and everyone who has a few bucks, and they'd have much smaller businesses than they have now.  And prosecuting and jailing the executives of firms who put convenience for their customers, which are businesses -- not consumers -- ahead of security would mean they'd have no business at all.  But at the same time it would make defending against someone opening a credit account in your name and stealing your identity very easy since you could disable access to your credit information any time you wish without having to pay to turn it on and off.

Because of how these firms operate and their business practices, choices they have voluntarily made, you get screwed -- again.  This breach is so large and so egregious that no amount of "monitoring" and "credit watching" will do a damn thing.  You're going to get ****ed as a consequence of this and your obsession with posting crap on Facesucker, Twatwaffle and Instrascrew instead of immediately demanding that strong, effective action be taken to put a stop to this crap.

The solution is to force Equifax to eat the cost of ANY fraud that ensues and all costs of its cleanup including liquidated damages for your time and effort on a permanent basis since they, and not you, decided to use an identifier never intended for that purpose and in addition they, and not you, were grossly negligent in failing to secure said data.  In addition forcing all of these firms to allow no-cost lock and unlock options for consumers where locking your file at one bureau does so at all of them and can be  done at zero cost at any time for any reason on a permanent basis would actually mitigate said risk.  Finally, deeming any credit opened while you have locked your file as conclusively fraudulent and uncollectable with liquidated damages payable to you if someone does it anyway would shift the burden from you for said incidents to them.

And finally we can start by indicting right now the executives at Equifax who sold stock after the breach occurred and before it was reported along with indicting the company itself under federal Racketeering statutes -- they claim they didn't know but I call bull**** on that and demand an immediate felony criminal investigation of both the executives and company including but not limited to the immediate seizure of every single electronic device owed by said executives and the company that might hold evidence documenting that they're lying.

But instead of doing the right thing what we get is more mealy-mouthed bull****, and you, America, sit for it.

The breach is Equifax's fault.

The lack of immediate prosecutorial and policy response by the government is your fault, America, because you refuse to demand that it happen right damn now backed up by immediate and no-holds-barred protest, up to and including destroying all credit-issuing businesses through lawful economic action until the above occurs.

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2017-08-21 16:00 by Karl Denninger
in Corruption , 508 references
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During the crash Fannie and Freddie were "nationalized" and bailed out.  The public was told that the firms were on the verge of failure, and that said failure was inevitable.

Shareholders, in due course, sued -- they didn't believe it.

And now, it appears, the government lied.

It didn't lie a little, it lied a lot.  It turns out that it appears the government knew that the firms were on the edge of massive profitability and that they were in fact not insolvent.

So why did the government do it?  They did it to steal the profits from the company -- which means they stole the shareholder's property to fund other things - including Obamacare.

What does this mean?

We shall see if there is any shred of the rule of law remaining in this country.

The odds are with "No", by the way.  If the medical and insurance system can screw you out of north of $2 trillion a year by violating 100+ year old laws and neither federal or state prosecutors will lift a finger to stop it what makes anyone believe that a "mere" $100 billion or so ripped off by the Obama Administration from the shareholders of a couple of companies will find any solace in the courts?

Let's be real here: Until there's a genuine fear that as long as these big thefts remain unaddressed the people might eventually decide that rope and lampposts are the only remaining remedies I see no evidence whatsoever that anyone's going to get one nickel of what was stolen by them in this regard back.

Further, the beneficiaries of said theft are in fact lawmakers who are in office today in no small part due to the campaign contributions made by those who benefited from those funds and the firms who profited from Obamacare and other Obama administration initiatives, all of whom under the principles of civil law should be forced to disgorge every single penny of said benefit to compensate the victims.  But they won't be -- and you know it -- and again, the reason is that neither the politicians or judiciary fear any public backlash for their willful and intentional refusal to follow and enforce the law.

And by the way, this isn't new news either.  Do you recall anyone caring about it when the depositions were unsealed?  Since when is stealing $100 billion not news?

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Oh, so the banks don't just bilk investors and rip off municipalities, they also help Mexican Gangs run drugs?

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

That's nice.  Guns and ammunition cost money - lots of it.  Getting that money requires some means of transporting it and "laundering" it.  For that, we turn to the largest financial institutions in the world, who, it turns out, have never been prosecuted for these felonious acts.

Wachovias blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations, says Jeffrey Sloman, the federal prosecutor who handled the case.

Blatant disregard?  Sounds like something you'd say at a sentencing hearing, right?  Well, no....

No big U.S. bank -- Wells Fargo included -- has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.

No Capacity to Regulate

Large banks are protected from indictments by a variant of the too-big-to-fail theory.

Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.

The theory is like a get-out-of-jail-free card for big banks, Blum says.

Theres no capacity to regulate or punish them because theyre too big to be threatened with failure, Blum says. They seem to be willing to do anything that improves their bottom line, until theyre caught.


Facilitating drug-running is just one small part of it.  There's also ripping off municipal governments, such as the Jefferson County sewer deal in Alabama.  There's bid-rigging in the GIC market.  And, of course, there's laundering money for violent Mexican drug cartels, who used that money to buy automatic weapons (no, not from America - from China, Venezuela and even from corrupt Mexican law enforcement officials!) with which they then shoot civilians and government officials who refuse to be corrupted.

Oh, and it's not just Wachovia accused in this story.  It's also Western Union and Bank of America.

Workers in more than 20 Western Union offices allowed the customers to use multiple names, pass fictitious identifications and smudge their fingerprints on documents, investigators say in court records.

In all the time we did undercover operations, we never once had a bribe turned down, says Holmes, citing court affidavits.

Very impressive.

To make their criminal enterprises work, the drug cartels of Mexico need to move billions of dollars across borders. Thats how they finance the purchase of drugs, planes, weapons and safe houses, Senator Gonzalez says.

They are multinational businesses, after all, says Gonzalez, as he slowly loads his revolver at his desk in his Mexico City office. And they cannot work without a bank.


And we have a banking system that, in the United States, has insulated itself from having to obey the law or be prosecuted for violating the law by threatening the government.

Henry Paulson and Ben Bernanke in 2008, remember?  "Tanks in the streets, martial law"?

Dateline September 21, 2008

Gee, it's not enough to steal from ordinary Americans, it's not enough to rip off state and city governments, it's not enough to rig bids in the municipal bond markets, we must sit still while these institutions literally make possible funding criminal gangs that are committing murder.

There's a name for this folks.

Formally this sort of thing is supposed to be called "Operating A Continuing Criminal Enterprise", or "OCCE":

The FBI defines a criminal enterprise as a group of individuals with an identified hierarchy, or comparable structure, engaged in significant criminal activity. These organizations often engage in multiple criminal activities and have extensive supporting networks. The terms Organized Crime and Criminal Enterprise are similar and often used synonymously. However, various federal criminal statutes specifically define the elements of an enterprise that need to be proven in order to convict individuals or groups of individuals under those statutes.

The Racketeer Influenced and Corrupt Organizations (RICO) statute, or Title 18 of the United States Code, Section 1961(4), defines an enterprise as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity."

The Continuing Criminal Enterprise statute, or Title 21 of the United States Code, Section 848(c)(2), defines a criminal enterprise as any group of six or more people, where one of the six occupies a position of organizer, a supervisory position, or any other position of management with respect to the other five, and which generates substantial income or resources, and is engaged in a continuing series of violations of subchapters I and II of Chapter 13 of Title 21 of the United States Code.


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