Tag Archives: goldman sachs

The Ohio Banksters Who Went to Jail for Crashing the Global Economy

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The Con Part 1

Directed by Patrick Lovell (2021)

Film Review

Part 1 of this five-part documentary concerns one of the rare US criminal prosecutions of the bankers responsible for the 2008 global financial crash.

The prosecutions occurred in Akron Ohio, after a state legislator became suspicious of a tidal wave of foreclosures in a low income African American neighborhood. It really bothered him that local appraisers were consistently appraising homes at two or three times their actual value.*

Police investigators subsequently learned that mortgage brokers were repeatedly falsifying and forging loan applications, as well as going door-to-door pressuring elderly residents to apply for mortgages for costly home repairs. One real estate agent foreclosed on and resold the same home two or three times.

Eventually the agent, and managers at Evergreen Finance (the mortgage company) and Carnation Bank were all arrested, prosecuted and sent to prison.

In the process, investigators learned similar “tidal waves” of fraudulent mortgages were occurring in all 50 states. In many cases, local banks went on to sell these mortgages to Goldman Sachs and other Wall Street investment banks. The latter reaped immense profits by  “bundling” these subprime mortgages (which low income home owners had no hope of repaying) into mortgage-backed securities they sold to clients. However only in Ohio did banksters go to prison for their fraudulent activities.

The film’s producer Patrick Lovell is from Akron and had his own home foreclosed on in during the financial crisis. Akron was also home to Addie Polk, a 91 year old African American woman who shot herself (in 2007) just as sheriff’s officers were arriving to throw her out of her home. She was unable to meet a balloon payment on $58,000 worth of mortgage loans (on a $25,000 house) she was conned into signing up for in 2001 and 2004.

*To help low income residents qualify for subprime mortgages.

The Corporatization of the Climate Movement

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The Planet of the Humans

Directed by Jeff Gibbs (2020)

Executive Producer Michael Moore

Film Review

This very alarming film mainly (released on Earth Day on Michael Moore’s YouTube channel) concerns the capture of the climate movement by Wall Street interests. It places special emphasis on environmental NGOs, like Serra Club, 350.org, and the Nature Conservancy, which are increasingly partnering with Wall Street banks and corporations to promote technological solutions (such as solar panels, wind turbines, concentrated solar mirrors, and large scale biomass and biofuel production). These technologies are immensely profitable for corporations, but as director Jeff Gibbs demonstrates, are unsustainable in the long term without addressing population growth and massive overconsumption in the industrial North.

The film begins by closely examining, in turn, each of these heavily promoted renewable technologies. For me, the issues raised about solar photovoltaic and wind turbine technology, both strongly embraced by climate activists, are the most concerning. Gibbs reminds us that all solar panels and turbines have a fairly short lifespan (20 year), which is most concerning in light of the large environmental and carbon footprint they leave during mining and manufacture of the raw materials they consume. The steel and cement required for wind turbines have a sizeable carbon footprint in themselves, and the mining (in third world countries) of cobalt, lithium, nickel, tin, and rare earth minerals used in solar batteries and electric vehicles produces substantial quantities of uranium, radon, and other radioactive isotopes as waste products. The mining process also produces a significant quantity of sulfur hexafluoride, a  greenhouse gas 23,000 times more potent than CO2.

Gibbs ends by examining specific ties between environmental NGOs and Wall Street players:

Sierra Club

  • received millions in donations from the world’s leading timber company for their support of biomass energy (ie clearing of native forests to produce wood chips).
  • received millions in donations from Michael Bloomberg to replace coal fired power plants with those powered by (equally polluting) natural gas.
  • major backer of Green Century Mutual Funds, which are 1% invested in solar and wind technology and 99% invested in oil, gas, tar sands, and unsustainably produced biofuels.
  • sell solar panels and electric vehicles from their website.
  • is biggest international investor in Viva, the biggest corporate destroyer of native forests.

Bill McKibben and 350.org

  • assisted Goldman Sachs in raising capital for a Brazilian project to increase sugar cane production for ethanol (increasing Amazon deforestation and displacing indigenous populations).

Al Gore

  • co-founder of Generation Investment Management, a company specializing in biomass and biofuels production (this was prior to the 2005 release of his film An Inconvenient Truth).
  • co-founder of a multibillion dollar sustainability investment fund based in the Cayman Islands.

Koch Brothers

  • largest corporate recipient of federal biomass subsidies.

The second video is a Q&A hosted by Michael Moore (executive producer), Jeff Gibbs (director), and Ozzie Zehner (producer) on April 23rd.

 

 

How a Small Group of Activists Helped Bring Down Corrupt Government In Malaysia

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Borneo Death Blow

Directed by Erik Pauser and Dylan Williams (2017)

Film Review

This is a fascinating documentary about an activist group that campaigned hard to bring two major Malaysian corruption scandals to international attention – including one involving former Prime Minister Najib Razak and 1Malaysia Development Berhad (1MDB).

The story starts in the early nineties when Bruno Manser, a Swiss environmentalist, and Mutanga, a Penan tribesman in Sarawak, paired up to protest wholesale rainforest logging on the island of Borneo (Malaysia). After successfully blockading the logging trucks for more than nine months, the activists and their supporters were imprisoned and torture.

In 1992, they undertook a world tour to bring the plight of Borneo rainforests and the Penan. They visited 24 cities in 13 countries, including the Earth Summit in Rio de Janeiro and the UN. The response they received was underwhelming.

In 2000, Manser returned to Sarawak and was “disappeared” in the jungle. Fearing for his own life, Mutanga went into exile in Montreal.

Fifteen years after Manser’s death – – concerned about a controversial dam project that  permanently displace an additional 50,000 indigenous Penan – Mutanga linked up with activists running Radio Free Sarawak shortwave station from London

Meanwhile the founder of the radio station Claire Rewcastle Brown partnered with the Bruno Manswer Foundation in Switzerland to research the $15 billion in private wealth the Malaysian forestrt minister Taib Mahmoud accrued for allowing foreign companies to illegally log Bornero’s pristine rain forests. It was an extremely complex scenario involving money laundering, off shore accounts and holding companies, as well as Goldman Sachs, UBS, HSBC and Deutsche Bank.

The went public with their findings at a Deutsche Bank shareholder meeting. Their presentation instantly focused international and social media attention on Malaysian corruption for the first time.

Taib was forced to resign, with the new forestry minister committing to ban both logging and new palm oil plantations.

Thrilled by the outcome, Brown subsequently undertook an investigation of the corrupt relationship between Malaysia’s prime minister and 1 MBD. In July 2015, she published a  report revealing that personal bank accounts of Malaysian Prime Minister Najib Razak held nearly $700 million tied to state fund 1Malaysia Development Berhad (1MDB).

The attention her report received led to a prolonged mass protests in Malaysia and the defeat of Razak in the 2018 general election.

*1MDB was a fund set up to finance various Malaysian development projects: Malaysia Corruption 1MDB Scandal

 

 

The End of the Oil Age?

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Petroleum and Crude Oil – the Future of Oil Production

DW (2019) – only online until April 17th

Film Review

This documentary analyzes the long term economic viability of the petroleum industry, in view of climate change, increasing competition from cheap renewable energy and shifting geopolitical allegiances.

It begins with an examination of the 2014 collapse in oil prices – with the cost of a barrel of oil dropping by over 70% between June 2014 and January 2016. Oil bottomed out at $26 a barrel in February 2016.

The filmmakers explore a number of factors keeping the oil price above $100 a barrel prior to 2014. Speculation in oil futures by big banks such as Goldman Sachs and Morgan Stanley seems to be the main one.

These high oil prices made the fracking boom possible. Fracking technology, whereby trapped oil and gas reserves are released by fracturing bedrock, is an extremely expensive technology. According to industry analysts, fracking is only financially viable with oil prices above $70 a barrel.

The fracking industry was a great boon to the US petroleum industry, enabling it to export oil and liquified natural gas (LNG) for the first time in decades.

The filmmakers point to two main reasons for the 2014 collapse in oil prices. The first was reduced oil demand (due to global economic slowdown) popping the speculative bubble created by the big banks. The second was Saudi Arabia’s attempt to destroy the US fracking industry by flooding the global market with oil.

This scheme seems to have backfired. While numerous small fracking operations went bust, the major oil companies had sufficient financial resources to continue fracking at a loss.

The low oil prices probably hurt Saudi Arabia more than the US, as the Saudis are extremely dependent on oil revenues to finance their national budget.

In 2017, Saudi Arabia and other OPEC* countries reached out to Russia to form OPEC Plus. The latter agreed to limit oil production to stabilize prices. The Saudi oil ministry fully expects Kazakhstan and other former Soviet republics will also join OPEC Plus.

Meanwhile oil producing countries (except for the US under Trump) have learned an important lesson from the 2014 price shock. Both Norway (the world’s largest oil/gas producer) and Saudi Arabia are rapidly diversifying their energy industries to protect themselves from future price volatility. Most industry analysts expect other countries to follow suit. At present China, the world’s largest oil importer, is also the largest investor in renewables. This, in turn, signals a significant reduction in their future oil dependency.

*Organization of Oil Exporting Countries – current members include Algeria, Angola, Austria, Cameroon, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia (the de factor leader), Syria, United Arab Emirates, and Venezuela.

 

The US Occupation: Japan’s Post War Miracle

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Princes of the Yen: Central Banks and the Transformation of the Economy

Directed by Michael Oswald (2014)

Film Review

Based on Richard Werner’s book by the same name, this film examines the economic forces responsible for the Japan’s post war economic miracle. The US occupation of Japan (1945-1952) was characterized by heavy censorship and US control of all political appointments, including central bank governors.

Mindful of the peasant uprising that led to revolution in China, US occupiers immediately implemented major land reform, breaking up large estates to hand the land over to their tenants. In 1951, under US oversight, Japan declared an amnesty for all war criminals. Thus while Nazi war criminals were being tried and hung at Nuremberg (or secretly smuggled into the US or Latin America), Japanese war criminals were forming (with major CIA support) the Liberal Democratic Party, which would rule Japan continuously until 1993.

Because they mainly held war bonds or loans to industries that had been destroyed, private Japanese banks had collapsed. Under US supervision, the Japanese central bank purchased these worthless assets in exchange for bank reserves (a process that would come to be known as quantitative easing).

They then set up a system known as “window guidance” to guarantee the rapid credit creation necessary for economic recovery. Under window guidance, the Bank of Japan issued quarterly directives to each bank on the amount of credit they needed to create for specific industries. The goal was to maintain a war economy with a focus on consumer goods instead of weapons. Growth skyrocketed, producing rapid income recovery with reasonable income equality for Japanese citizens.

By the 1970s, Japan was the world’s second largest economy and held major investments in the US and other western countries. In addition to owning 75% of US treasury bonds, in 1986 Japanese investors owned Columbia Pictures, Rockefeller Center and Pebble Beach Golf Course near Monterey, California.

All this changed in the 1990s, when the Bank of Japan colluded with the IMF, World Bank and Goldman Sachs for the right to be independent of the Japanese government like western central banks. As part of this scheme, which would hand Japan’s central bank over to  western speculators, the BOJ deliberately (according to Werner) created a massive asset bubble which collapsed in the mid-1990s. Between 1991 and 1996, 212,000 Japanese companies went bankrupt, stocks and land lost 80% of their value and over 5 million Japanese became unemployed.

The Japanese economy continues to be in recession to the present day.

Should We Pay Corporations to Destroy the Planet?

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Pricing the Planet Episode 1

Al Jazeera (2018)

Film Review

This documentary is about an endangered species trading scheme in which banks like J P Morgan and Goldman Sacks invest in projects that protect endangered species (eg bees, coral reefs, orangutans) or ecosystem services (eg (rain forests, clean water, wetlands clean air, topsoil). They then sell credits in these projects to corporations who wish to engage in mining and development that kill these species or destroy rain forests and wetlands.

In 1988, Bush Senior was the first to promote this model of environmental protection with his No Net Wetlands Loss policy. It enabled corporations that were destroying wetlands to purchase credits in wetlands that being set aside for preservation. This model was later employed in carbon trading schemes in which industries are allowed to emit CO2 pollution if they purchase credits in reforestation projects that capture CO2. After nearly 20 years of operations, this scheme has made speculators in carbon credits fantastically rich while allowing CO2 emissions increase exponentially.

Bankers and corporate executives argue that endangered species trading is the only way to save the planet because government regulation hasn’t worked (largely because banks and corporations have blocked effective environmental regulation). Most grassroots environmentalists oppose species trading. They argue that bees, reefs, orangutans and rain forests can only be saved with a total ban on activities that endanger them.

Globally Malua BioBank runs the largest “mitigation” project. They recently purchased the Malua Forest in Borneo for $64 million. They sell credits in the Malua Forest to palm oil companies to enable them to destroy other Indonesian rain forests, as well as companies that use palm oil products.

The Nature Conservancy (whose current CEO is a former Goldman Sachs banker) and other large environmental NGOs support “species banking” because they rely on large corporate donations to cover their staff salaries.

The video can be viewed free at the Al Jazeera website: Pricing the Planet

 

What Silicon Valley Has Planned for Public Education

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What Silicon Valley Has Planned for Public Education

Alison McDowell (2017

This troubling presentation concerns a well-advanced plan by corporate America to gradually replace public schools with 100% digital education. The attack on American schools is multi-pronged – with anti-public school forces closing schools, laying off teachers and neglecting crumbling infrastructure while stealthily increasing the availability of digital notepads, Chrome books and other digital platforms in existing schools.

Education Reform 2.0 would build on high stakes testing and school closures to replace teachers with digital learning platforms designed to incorporate “cradle to grave” tracking of students’ skill sets and online activity. Increasingly employers would rely on this information to determine suitability for employment.

The institutional backers of this digital revolution include some of the most powerful corporations and foundations in the US. Prominent names include the Gates Foundation, the MacArthur Foundation, the American Legislative Exchange Council (ALEC), Goldman Sachs, the Institute for the Future (offshoot of Rand Corporation), Amazon, Google, Dell (the company Snowden worked for), and Halliburton.

The US military is also involved and planning and development of 100% digital learning with Army Research and DARPA (Defense Advanced Research Projects Agency) assuming responsibility for the “behavior modification” (ie mind control aspects) that reward students for appropriate engagement with the digital platform.

McDowell describes how many schools across the US are already replacing class time with Skype sessions with Halliburton “mentors” and on-line math lessons with carton “peers.”

Proponents of 100% digital learning are working closely with focus groups to “market” this new technology that tracks and mind controls children to skeptical Americans who value their privacy.

At 38 minutes, McDowell shows a promotional film for “tracked online learning.” It explains how high school and adult learners are earning “edu-blocks for a variety of learning experiences (including reading books, volunteer work, watching videos and “teaching” skills to other learners. Also how companies are already using your ledger blocks to evaluate potential employees’ suitability for specific projects or even investing in their university education by paying their tuition. One edu-block enthusiast describes how participating in the online program is enabling her to reduce her student loan debt.

The ledger is designed to keep track of all the YouTube videos you watch and even all the texts you send (and delete).

Wall Street: More Deeply Corrupt than We Thought (No Really)

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flash boys

Flash Boys: A Wall Street Revolt

By Michael Lewis

W W Norton (2015)

 Book Review

 Flash Boys is a true story about front running, the unethical practice of a stockbroker executing orders on a stock while taking advantage of advance knowledge of pending orders from elsewhere in the market.* From the bleak picture Lewis paints, it appears that investors – whether institutional or private – have virtually no way of protecting themselves against front running.

Like Lewis’s 2010 book The Big Short, Flash Boys reads just like a thriller, complete with exquisitely drawn heroes and villains. In this case, the heroes are crusading Canadian banker Brad Katsuyama and the assorted geeks and nerds who helped him start his own stock exchange. Katsuyama started IEX in 2013, after the Royal Bank of Canada and the Securities and Exchange Commission (SEC) refused to support his efforts to expose and end the practice of front running. By purposely slowing their transmission rates, IEX makes it impossible for high frequency traders to “front run” the trades occurring on the exchange. This has enabled Katsuyama to protect investors who use his exchange, while simultaneously collecting data on suspicious trades.

Flash Boys, a bestseller, originally came out in 2014. The 2015 edition includes an afterward in which Lewis describes being viciously attacked by the big Wall Street banks and brokers. He also enumerates a number of prosecutions of high frequency traders and brokerage firms (by the FBI, SEC and Financial Regulatory Authority) resulting from from the publicity Katsuyama’s work received from Flash Boys’ publication.

*The way this works in practice is you order 10,000 shares of a stock at a given price and a high frequency trader somewhere buys 10,000 shares at that price and resells them to you at a slightly higher price. Complex computer algorithms enable high frequency traders to exploit minute differences in transmission frequency to execute these secret trades – which usually take place in “dark pools” – private stock exchanges which keep no public record of their trades. All the major investment banks (Goldman Sachs, JP Morgan, Bank of America etc) have dark pools and high frequency traders pay for the privilege of trading in their dark pools.

Goldman Sachs the Vampire Squid

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money and power

The Secret is Not Getting Caught

The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming it’s blood funnel into anything that smells like money.” Matt Taibbi, Rolling Stone 2009

In his classic Rolling Stone article, Matt Taibbi blames Goldman Sachs for causing the Great Depression, the Internet bubble and the skyrocketing price of gasoline. Author William D Cohan dismisses the article as a “screed” and “conspiracy theory journalism.” Yet after reading Cohan’s 604-page Money and Power: How Goldman Sachs Came to Rule the World, I have to agree with Taibbi. For over 133 years, the secret of Goldman’s success has been an uncanny ability to extract a fee from any transaction involving human need.

It’s hard to read a book like this without understanding the complicated derivatives trading responsible for the 2008 Wall Street crash. Cohen does a credible job of explaining these complex financial trades. What comes across loud and clear is that derivatives trading is merely a sophisticated form of gambling. Like the owner of a Las Vegas casino, Goldman knows exactly how to turn the odds in their favor. This almost always entails unethical and illegal conduct. Goldman executives excel at not getting caught, which seems to be the main reason they receive such massive bonuses. They’re also really good at maximizing their high level connections in the federal government.

After reading Money and Power, I’m more convinced than ever that the only way to end Wall Street corruption is to break up the big banks by ending their ability to create money out of thin air. Once the creation and control of our money supply is rightfully restored to public control, no bank will ever be too big to fail.*

US Justice System Too Slow and Cumbersome

Goldman’s history is filled with a litany of criminal indictments and civil lawsuits stemming from unethical and illegal activities. Although both federal and state government’s have a wealth of anti-corruption laws they could use to prosecute Goldman and other Wall Street banks, the American criminal justice system is far too slow to inflict severe enough penalties the criminal activity. The close involvement of Goldman chief executives in federal government (which Cohan refers to as “government Sachs”), most notably Robert Rubin in the Clinton administration and Hank Paulson in the Bush junior administration, is also be a major factor in the bank’s enduring financial success. Remaining limited Goldman partners while holding cabinet appointments, both men were responsible for a range of federal initiatives favorable to their “former” employer.

Goldman’s Role in 1929 Crash

The first federal indictment against Goldman was lodged in 1947, an antitrust lawsuit related to the fraudulent and speculative activity by Goldman and sixteen other Wall Street banks which caused the massive 1920s stock market bubble and 1929 crash. In 1929 alone, Goldman created $1.7 billion of market value through a pyramid scheme in which they resold the same shares of stock seven times. The lawsuit was dismissed in 1950 – the Department of Justice couldn’t produce convincing evidence the seventeen banks actively colluded.

Finding Charges that Would Stick

In 1970 Goldman faced over twenty lawsuits and a SEC complaint for selling commercial paper (from Penn Central Railroad and Mill Factors Corporation) when they knew it was worthless. This time the court found for the SEC and Goldman was forced to settle the civil cases.

In 1986 two Goldman vice presidents pleaded guilty to insider trading.

In the late 1980s and early 1990s, Goldman lost a series of sexual discrimination suits by female traders.

In 1994, two pension funds sued Goldman for disposing of Maxwell Communications Assets and disturbing the proceeds to Maxwell’s estate rather than the pension funds. Goldman settled for $400 million after the Justice Department threatened them with criminal charges.

Enter Eliot Spitzer**

In 2002, Goldman faced a series of federal and state indictments related to their role in the dot com bubble. Specifically the SEC and New York attorney general Eliott Spitzer charged them with bribing independent analysts to issue favorable reports on worthless Internet stocks, as well as with “spinning and laddering”*** to drive up the share price. Goldman eventually settled with the SEC for $40 million and with the state of New York for $110 million.

The following year Spitzer charged them with fraud and “front running” (ie insider trading) in trading in non-traditional insurance products and reinsurance. Goldman settled for $800 million.

Goldman faced a rash of new indictments and lawsuits stemming from the 2007-2008 crash. In December 2007 the Massachusetts attorney general cited Goldman for selling mortgage backed securities without informing them that the mortgagees were at high rate of delinquency. Goldman settled for $10 million, as well as spending another $50 million to alter the terms of the mortgages to reduce the risk of default.

Later in 2007, a Mississippi pension fund (representing 300,000 pensioners) sued them for knowingly selling worthless mortgage backed securities.

The 2008 Wall Street Collapse

In 2010, the Securities and Exchange Commission (SEC) sued Goldman for incorrectly forecasting the performance of mortgage backed securities they sold to clients while betting against the MPS’s by purchasing credit default swaps (CDS)**** on them. Goldman began purchasing credit default swaps in February 2006 as soon as they realized the mortgage market was unraveling. Goldman settled this suit for a record $800 million.

Goldman was the only Wall Street bank not to suffer major losses in 2007 and 2008. Because of their massive holding holdings in credit default swaps, they easily absorbed losses from mortgage backed securities that became worthless when real estate values crashed and mortgages became delinquent.

In 2007 they had a net profit of $11.4 billion, despite a $1.2 billion loss in their mortgage backed securities. In 2008, their net profit was $2.3 billion, despite a $1.7 billion loss in their mortgage division.

Goldman CEO Lloyd Blankfein argued against receiving a TARP bailout because they obviously didn’t need it. Treasurer Secretary Hank Paulson insisted they take a $10 billion bailout anyway to “inspire investor confidence.” Goldman repaid it with a 23.5% annualized dividend in July 2009 – banks with outstanding TARP loans were restricted in the size of CEO bonuses they could pay.

Goldman would also receive $14 billion of the bailout AIG insurance received. This covered the credit default swaps AIG had sold them.

*See An IMF Proposal to Ban Banks from Creating Money
**Eliot Spitzer was one of the few government prosecutors willing to go after Wall Street banks for white collar crime. His popularity resulted in his election as governor of New York in 2007. The banks fought back behind the scene and forced his resignation in 2008 by exposing his involvement with a high end prostitution ring. This is described in the 2010 documentary The Rise and Fall of Eliot Spitzer
***”Spinning,” which is illegal, is defined as the offering of free or discounted IPO (initial public offering) shares to executives of an outside company, in the hope they will influence the company to buy additional shares at an inflated price. “Laddering” is another illegal practice in which underwriters and clients collude to drive up share prices (by trading them at inflated prices) and selling them once they hook in enough suckers. Many analysts suspected laddering occurred in the Amazon initial public offering (IPO), with the share price bottoming out when all the insiders sold their shares.
****A credit default swap (CDS) is a type of insurance, a bet that pays off if a particular security goes belly up. CDS’s are traded like other derivatives and you don’t have to own the security for the CDS to pay off.

Also posted at Veterans Today

Profits, Not Crime, Drive Incarceration Rates

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prison-call-centerInmate-run call center

This second post deals with the corporatization of US prisons and the private companies who profit from high incarceration rates.

US rates of violent and property crime have been declining steadily since 1990. Logically dropping crimes rates should produce a drop in incarceration rates. Yet until 2009, when 26 states acted to reduce prison populations, the exact opposite was true. As crime rates declined in state after state, the number of people they locked up skyrocketed.

Presently the US “enjoys” the highest incarceration rate in the world. At 500 per 100,000 population, it’s  five times higher than other developed countries.

A number of factors contribute to this disgrace. In my view, the first and most important is the enormous profit potential of American’s prison industry, resulting in major pressure on state legislatures from private for-profit prison companies and their friends at the American Legislative Exchange Council place on state legislatures. The second is a raft of tough-on-crime legislation driven by deliberate neoconservative race-based fear mongering. The third is the systematic defunding of mental health services in the US, leading to the warehousing of mentally ill patients in federal and state correctional facilities.

Profit, Not Crime, Drives Prison-Building Spree

Prison privatization, which began under Reagan in the 1980s, has turned incarceration and immigration detention into a multibillion dollar growth industry with its own trade shows, conventions, mail order catalogs and state and federal lobbyists. Unsurprisingly Corrections Corporation of America (CCA), Wackenhut and the 16 other for-profit prison companies are major campaign donors to federal and state lawmakers who advocate tough-on-crime and tough-on-immigrant policies. These are usually the same legislators who sponsor bills to replace state prisons with private for profit correctional facilities.

Who’s Making Big Bucks Off Prison Privatization?

The booming private prison industry provides numerous opportunities for banks and other corporate interests to skim off profits at taxpayer expense:
1. The Wall Street investment banks (e.g. Goldman Sachs) who issue the bonds to finance the building of state and local prisons.
2. The private companies who run prisons – Corrections Corporation of America (CCA) and Wackenhut are the largest, but there are now 18 altogether. CCA also operates our federal immigration detention facilities and helped write Arizona ‘s controversial immigration law.
3. Private companies that provide food services, health care, and assorted security paraphernalia to prisons.
4. Bed brokers who, in Texas, earn $2.50 – 5.50 per man-day (for the duration of a prisoner’s sentence) by recruiting prisoners from out of state.
5. Major corporations who save on labor costs in 37 states by contracting cheap prison labor.

The list of corporations employing cheap prison labor is extensive: IBM, Boeing, Motorola, Microsoft, AT&T, Wireless, Texas Instrument, Dell, Compaq, Honeywell, Hewlett-Packard, Nortel, Lucent Technologies, 3Com, Intel, Northern Telecom, TWA, Nordstrom’s, JC Penny, Best Western Hotels, Honda, Chevron, BP, Victoria’s Secret, Revlon, Macy’s, Pierre Cardin, Target Stores, and many more.

Virtual Slave Labor

Inmates in state penitentiaries generally receive the minimum wage ($7.25). Not all do, though. In Colorado state prisons, they get about $2 per hour. In private prisons, they receive as little as 17 cents per hour. The highest-paying private prison is CCA in Tennessee, where prisoners receive 50 cents per hour.

As Vicky Pelaez writes in Global Research, thanks to dirt cheap prison labor, manufacturing jobs that corporations previously outsourced to third world sweatshops are returning to the US. She gives the example of a company operating a maquiladora (Mexican assembly plant near the border) that closed down operations and relocated to San Quentin State Prison in California.

The virtual slave labor that occurs in state prisons also drives down wages in neighboring communities. Pelaez gives the example of a Texas factory that fired its 150 workers and contracted the services of prisoners at the private Lockhart Texas prison, who assemble circuit boards are assembled for IBM and Compaq.

BP also made profitable using of cheap prison labor in cleaning up Deepwater Horizon disaster in the Gulf of Mexico.

Many US corporation employ prison labor to staff their call centers. According to NBC News, If you recently called your motor vehicle department or received a telemarketing call from Microsoft or Hitatchi, it’s likely the person on the other end was a prisoner.

Another great resource on the scandalous prison industrial complex are is the excellent series Nation at Risk  at Deconstructing Myths.

photo credit: The Politics of Information

To be continued.