A Crisis Worse than ISIS? Bail-Ins Begin
While the mainstream media focus on ISIS extremists, a threat that has gone virtually unreported is that your life savings could be wiped out in a massive derivatives collapse. Bank bail-ins have begun in Europe, and the infrastructure is in place in the US. Poverty also kills.

At the end of November, an Italian pensioner hanged himself after his entire €100,000 savings were confiscated in a bank “rescue” scheme. He left a suicide note blaming the bank, where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, which have imposed an “Orderly Resolution” regime that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the “rescue.”

The pensioner’s bank was one of four small regional banks that had been put under special administration over the past two years. The €3.6 billion ($3.83 billion) rescue plan launched by the Italian government uses a newly-formed National Resolution Fund, which is fed by the country’s healthy banks. But before the fund can be tapped, losses must be imposed on investors; and in January, EU rules will require that they also be imposed on depositors. According to a December 10th article on

The rescue was a “bail-in” – meaning bondholders suffered losses – unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros.

Correspondents say [Italian Prime Minister] Renzi acted quickly because in January, the EU is tightening the rules on bank rescues – they will force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders.

. . . [L]etting the four banks fail under those new EU rules next year would have meant “sacrificing the money of one million savers and the jobs of nearly 6,000 people”.

That is what is predicted for 2016: massive sacrifice of savings and jobs to prop up a “systemically risky” global banking scheme.

Bail-in Under Dodd-Frank

That is all happening in the EU. Is there reason for concern in the US?

According to former hedge fund manager Shah Gilani, writing for Money Morning, there is. In a November 30th article titled “Why I’m Closing My Bank Accounts While I Still Can,” he writes:

[It is] entirely possible in the next banking crisis that depositors in giant too-big-to-fail failing banks could have their money confiscated and turned into equity shares. . . .

If your too-big-to-fail (TBTF) bank is failing because they can’t pay off derivative bets they made, and the government refuses to bail them out, under a mandate titled “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” approved on Nov. 16, 2014, by the G20’s Financial Stability Board, they can take your deposited money and turn it into shares of equity capital to try and keep your TBTF bank from failing.

Once your money is deposited in the bank, it legally becomes the property of the bank. Gilani explains:

Your deposited cash is an unsecured debt obligation of your bank. It owes you that money back.

If you bank with one of the country’s biggest banks, who collectively have trillions of dollars of derivatives they hold “off balance sheet” (meaning those debts aren’t recorded on banks’ GAAP balance sheets), those debt bets have a superior legal standing to your deposits and get paid back before you get any of your cash.

. . . Big banks got that language inserted into the 2010 Dodd-Frank law meant to rein in dangerous bank behavior.

The banks inserted the language and the legislators signed it, without necessarily understanding it or even reading it. At over 2,300 pages and still growing, the Dodd Frank Act is currently the longest and most complicated bill ever passed by the US legislature.

Propping Up the Derivatives Scheme

Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.

Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.

The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties.

For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back. State and local governments must also stand in line, although their deposits are considered “secured,” since they remain junior to the derivative claims with “super-priority.”

Turning Bankruptcy on Its Head

Under the old liquidation rules, an insolvent bank was actually “liquidated” – its assets were sold off to repay depositors and creditors. Under an “orderly resolution,” the accounts of depositors and creditors are emptied to keep the insolvent bank in business. The point of an “orderly resolution” is not to make depositors and creditors whole but to prevent another system-wide “disorderly resolution” of the sort that followed the collapse of Lehman Brothers in 2008. The concern is that pulling a few of the dominoes from the fragile edifice that is our derivatives-laden global banking system will collapse the entire scheme. The sufferings of depositors and investors are just the sacrifices to be borne to maintain this highly lucrative edifice.

In a May 2013 article in Forbes titled “The Cyprus Bank ‘Bail-In’ Is Another Crony Bankster Scam,” Nathan Lewis explained the scheme like this:

At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. . . .

The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non-cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. . . .

In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. Considering the extreme levels of derivatives liabilities that many large banks have, and the opportunity to stuff any bank with derivatives liabilities in the last moment, other creditors could easily find there is nothing left for them at all.

As of September 2014, US derivatives had a notional value of nearly $280 trillion. A study involving the cost to taxpayers of the Dodd-Frank rollback slipped by Citibank into the “cromnibus” spending bill last December found that the rule reversal allowed banks to keep $10 trillion in swaps trades on their books. This is money that taxpayers could be on the hook for in another bailout; and since Dodd-Frank replaces bailouts with bail-ins, it is money that creditors and depositors could now be on the hook for. Citibank is particularly vulnerable to swaps on the price of oil. Brent crude dropped from a high of $114 per barrel in June 2014 to a low of $36 in December 2015.

What about FDIC insurance? It covers deposits up to $250,000, but the FDIC fund had only $67.6 billion in it as of June 30, 2015, insuring about $6.35 trillion in deposits. The FDIC has a credit line with the Treasury, but even that only goes to $500 billion; and who would pay that massive loan back? The FDIC fund, too, must stand in line behind the bottomless black hole of derivatives liabilities. As Yves Smith observed in a March 2013 post:

In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositors to fund derivatives exposures. . . . The deposits are now subject to being wiped out by a major derivatives loss.

Even in the worst of the Great Depression bank bankruptcies, noted Nathan Lewis, creditors eventually recovered nearly all of their money. He concluded:

When super-senior depositors have huge losses of 50% or more, after a “bail-in” restructuring, you know that a crime was committed.

Exiting While We Can

How can you avoid this criminal theft and keep your money safe? It may be too late to pull your savings out of the bank and stuff them under a mattress, as Shah Gilani found when he tried to withdraw a few thousand dollars from his bank. Large withdrawals are now criminally suspect.

You can move your money into one of the credit unions with their own deposit insurance protection; but credit unions and their insurance plans are also under attack. So writes Frances Coppola in a December 18th article titled “Co-operative Banking Under Attack in Europe,” discussing an insolvent Spanish credit union that was the subject of a bail-in in July 2015. When the member-investors were subsequently made whole by the credit union’s private insurance group, there were complaints that the rescue “undermined the principle of creditor bail-in” – this although the insurance fund was privately financed. Critics argued that “this still looks like a circuitous way to do what was initially planned, i.e. to avoid placing losses on private creditors.”

In short, the goal of the bail-in scheme is to place losses on private creditors. Alternatives that allow them to escape could soon be blocked.

We need to lean on our legislators to change the rules before it is too late. The Dodd Frank Act and the Bankruptcy Reform Act both need a radical overhaul, and the Glass-Steagall Act (which put a fire wall between risky investments and bank deposits) needs to be reinstated.

Meanwhile, local legislators would do well to set up some publicly-owned banks on the model of the state-owned Bank of North Dakota – banks that do not gamble in derivatives and are safe places to store our public and private funds.

Who Owns the Federal Reserve Bank and Why is It Shrouded in Myths and Mysteries? By Ismael Hossein-Zadeh December 18, 2015 COUNTERPUNCH

December 18, 2015 COUNTERPUNCH

Who Owns the Federal Reserve Bank and Why is It Shrouded in Myths and Mysteries?   by Ismael Hossein-Zadeh

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford

“Give me control of a Nation’s money supply, and I care not who makes its laws.”
— M. A. Rothschild

The Federal Reserve Bank (or simply the Fed), is shrouded in a number of myths
and mysteries. These include its name, its ownership, its purported independence
form external influences, and its presumed commitment to market stability,
economic growth and public interest.
The first MAJOR MYTH, accepted by most people in and outside of the United
States, is that the Fed is owned by the Federal government, as implied by its name:
the Federal Reserve Bank. In reality, however, it is a private institution whose
shareholders are commercial banks; it is the “bankers’ bank.” Like other
corporations, it is guided by and committed to the interests of its shareholders—pro
forma supervision of the Congress notwithstanding.
The choice of the word “Federal” in the name of the bank thus seems to be a
deliberate misnomer—designed to create the impression that it is a public entity.
Indeed, misrepresentation of its ownership is not merely by implication or
impression created by its name. More importantly, it is also officially and explicitly
stated on its Website: “The Federal Reserve System fulfills its public mission as an
independent entity within government. It is not owned by anyone and is not a
private, profit-making institution” [1].
To unmask this blatant misrepresentation, the late Congressman Louis McFadden,
Chairman of the House Banking and Currency Committee in the 1930s, described
the Fed in the following words:
“Some people think that the Federal Reserve Banks are United States Failure of the American
Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves
and their foreign customers; foreign and domestic speculators and
swindlers; and rich and predatory money lenders.”
The fact that the Fed is committed, first and foremost, to the interests of its
shareholders, the commercial banks, explains why its monetary policies are
increasingly catered to the benefits of the banking industry and, more generally, the
financial oligarchy. Extensive deregulations that led to the 2008 financial crisis, the
scandalous bank bailouts in response to the crisis, the continued showering of the
“too-big-to-fail” financial institutions with interest-free money, the failure to
impose effective restraints on these institutions after the crisis, the brutal neoliberal
cuts in social safety net programs in order to pay for the gambling losses of high
finance, and other similarly cruel austerity policies—can all be traced to the
political and economic power of the financial oligarchy, exerted largely through
monetary policies of the Fed.
It also explains why many of the earlier U.S. policymakers resisted entrusting the
profit-driven private banks with the critical task of money supply and credit
“The [private] Central Bank is an institution of the most deadly
hostility existing against the principles and form of our constitution . . .
. If the American people allow private banks to control the issuance of
their currency . . ., the banks and corporations that will grow up around
them will deprive the people of all their property until their children
will wake up homeless on the continent their fathers conquered”
(Thomas Jefferson, 3rd U.S. President).

In 1836, Andrew Jackson abolished the Bank of the United States, arguing that it
exerted undue and unhealthy influence over the course of the national economy.
From then until 1913, the United States did not allow the formation of a private
central bank. During that period of nearly three quarters of a century, monetary
policies were carried out, more or less, according to the U.S. Constitution: Only the
“Congress shall have power . . . to coin money, regulate the value thereof” (Article
1, Section 8, U.S. Constitution). Not long before the establishment of the Federal
Reserve Bank in 1913, President William Taft (1909-1913) pledged to veto any
legislation that included the formation of a private central bank.

Soon after Woodrow Wilson replaced William Taft as president, however, the
Federal Reserve Bank was founded (December 23, 1913), thereby centralizing the
power of U.S. banks into a privately owned entity that controlled interest rate,
money supply, credit creation, inflation, and (in roundabout ways) employment. It
could also lend money to the government and earn interest, or a fee—money that
the government could create free of charge. This ushered in the beginning of the
gradual rise of national debt, as the government henceforth relied more on
borrowing from banks than self-financing, as it had done prior to granting the
power of money-creation to the private banking system. Three years after signing
the Federal Reserve Act into law, however, Wilson is quoted as having stated:

“I am a most unhappy man. I have unwittingly ruined my country. A
great industrial nation is controlled by its system of credit. Our system
of credit is concentrated. The growth of the nation, therefore, and all
our activities are in the hands of a few men. We have come to be one
of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a
government by free opinion, no longer a government by conviction
and the vote of the majority, but a government by the opinion and
duress of a small group of dominant men” [2].
While many independent thinkers and policy makers of times past thus viewed the
unchecked power of private central banks as a vice not to be permitted to interfere
with a nation’s monetary/economic policies, most economists and policy makers of
today view the independence of central banks from the people and the elected
bodies of government as a virtue!

And herein lies ANOTHER MYTH that is created around the Fed: that it is an
independent, purely technocratic or disinterested policy-making entity that is solely
devoted to national interests, free of all external influences. Indeed, a section or
chapter in every college or high school textbook on macroeconomics, money and
banking or finance is devoted to the “advantages” of the “independence” of private
central banks to determine the “proper” level of money supply, of inflation or of the
volume of credit that an economy may need—always equating independence from
elected authorities and citizens with independence in general. In reality, however,
central bank independence means independence from the people and the elected
bodies of government—not from the powerful financial interests.

“Independence has really come to mean a central bank that has been
captured by Wall Street interests, very large banking interests. It might
be independent of the politicians, but it doesn’t mean it is a neutral
arbiter. During the Great Depression and coming out of it, the Fed
took its cues from Congress. Throughout the entire 1940s, the Federal
Reserve as a practical matter was not independent. It took its marching
orders from the White House and the Treasury—and it was the most
successful decade in American economic history” [3].

Another MAJOR MYTH associated with the Fed is its purported commitment to
national and/or public interest. This presumed mission is allegedly accomplished
through monetary policies that would mitigate financial bubbles, adjust credit or
money supply to commercial and manufacturing needs, and inject buying power
into the economy through large scale investment in infrastructural projects, thereby
fostering market stability and economic expansion.
Such was indeed the case in the immediate aftermath of the Great Depression and
WW II when the Fed had to follow the guidelines of the Congress, the White
House and the Treasury Department. As the regulatory framework of the New Deal
economic policies restricted the role of commercial banks to financial
intermediation between savers and investors, finance capital moved in tandem with
industrial capital, as it essentially greased the wheels of industry, or production.

Under those circumstances, where financial institutions served largely as conduits
that aggregated and funneled national savings to productive investment, financial
bubbles were rare, temporary and small.
Not so in the age of finance capital. Freed from the regulatory constraints of the
immediate post-WW II period (which determined the types, quantities and spheres
of its investments), the financial sector has effectively turned into a giant casino.
Accordingly, the Fed has turned monetary policy (since the days of Alan
Greenspan) into an instrument of further enriching the rich by creating and
safeguarding asset-price bubbles. In other words, the Fed’s monetary policy has
effectively turned into a means of redistribution from the bottom up.

The Financial Terrorism of Corporate Gangsters in
the ‘Western World’

This is no speculation or conspiracy theory: redistributive effects of the Fed
policies in favor of the financial oligarchy are backed by undeniable facts and
figures. For example, a recent study by the Pew Research Center of income/wealth
distribution (published on December 9, 2015) shows that the systematic and
escalating socio-economic polarization has led to a sharp decline in the number of
middle-income Americans.
The study reveals that, for the first time, middle-income households no longer
constitute the majority of American house-holds: “Once in the clear majority,
adults in middle-income households in 2015 were matched in number by those in
lower- and upper-income households combined.” Specifically, while adults in
middle-income households constituted 60.1 percent of total adult population in
1971, they now constitute only 49.9 percent.

According to the Pew report, the share of the national income accruing to middle income
households declined from 62 percent in 1970 to 43 percent in 2014. Over
the same period of time, the share of income going to upper-income households
rose from 29 percent to 49 percent.
A number of critics have argued that, using its proxies at the heads of the Fed and
the Treasury, the financial oligarchy used the financial crisis of 2008 as a shock
therapy to transfer trillions of taxpayer dollars to its deep pockets, thereby further
aggravating the already lopsided distribution of resources. The Pew study
unambiguously confirms this expropriation of national resource by the financial
elites. It shows that the pace of the rising inequality has accelerated in the
aftermath of the 2008 market implosion, as asset re-inflation since then has gone
almost exclusively to oligarchic financial interests.
Proxies of the financial oligarchy at the helm of economic policy making no longer
seem to be averse to the destabilizing bubbles they help create. They seem to
believe (or hope) that the likely disturbances from the bursting of one bubble could
be offset by creating another bubble! Thus, after dot-com bubble, came the housing
bubble; after that, energy-price and emerging markets bubble, after that, the junk
bond market bubble, and so on. By the same token as the Fed re-inflates one bubble
after another, it also systematically redistributes wealth and income from the
bottom up.

This is an extremely ominous trend because, aside from issues of social justice and
economic insecurity for the masses of the people, the policy of creating and
protecting asset bubbles on a regular basis is also unsustainable in the long run. No
matter how long or how much they may expand financial bubbles—like taxes and
rents under feudalism—are ultimately limited by the amount of real values
produced in an economy.

Is there a solution to the ravages wrought to the economies/societies of the core
capitalist countries by the accumulation needs of parasitic finance capital—largely
fostered or facilitated by the privately-owned central banks of these countries?
Yes, there is indeed a solution. The solution is ultimately political. It requires
different politics and/or policies: politics of serving the interests of the
overwhelming majority of the people, instead of a cabal of financial oligarchs.
The fact that profit-driven commercial banks and other financial intermediaries are
major sources of financial instability is hardly disputed. It is equally well-known
that, due to their economic and political influence, powerful financial interests
easily subvert government regulations, thereby periodically reproducing financial
instability and economic turbulence.

By contrast, public-sector banks can better
reassure depositors of the security of their savings, as well as help direct those
savings toward socially-beneficial credit allocation and productive investment.
Therefore, ending the recurring crises of financial markets requires placing the
destabilizing financial intermediaries under public ownership and democratic
control. It is only logical that the public, not private, authority should manage
people’s money and their savings, or economic surplus. As the late German
Economist Rudolf Hilferding argued long time ago, the system of centralizing
people’s savings and placing them at the disposal of profit-driven private banks is a
perverse kind of socialism, that is, socialism in favor of the few:
“In this sense a fully developed credit system is the antithesis of
capitalism, and represents organization and control as opposed to
anarchy. It has its source in socialism, but has been adapted to
capitalist society; it is a fraudulent kind of socialism, modified to suit
the needs of capitalism. It socializes other people’s money for use by
the few” [4].

There are compelling reasons not only for higher degrees of reliability but also
higher levels of efficacy of public-sector banking and credit system when
compared with private banking—both on conceptual and empirical grounds.
Nineteenth century neighborhood savings banks, Credit Unions, and Savings and
Loan associations in the United States, Jusen companies in Japan, Trustee Savings
banks in the UK, and the Commonwealth Bank of Australia all served the housing
and other credit needs of their communities well. Perhaps a most interesting and
instructive example is the case of the Bank of North Dakota, which continues to be
owned by the state for nearly a century—widely credited for the state’s budget
surplus and its robust economy in the midst of the harrowing economic woes in
many other states.
The idea of bringing the banking industry, national savings and credit allocation
under public control or supervision is not necessarily socialistic or ideological. In
the same manner that many infrastructural facilities such as public roads, school
systems and health facilities are provided and operated as essential public services,
so can the supply of credit and financial services be provided on a basic public
utility model for both day-to-day business transactions and long-term industrial
Provision of financial services and/or credit facilities after the model of public
utilities would allow for lower financial costs to both producers and consumers.
Today, between 35 percent and 40 percent of all consumer spending is appropriated
by the financial sector: bankers, insurance companies, non-bank lenders/financiers,
bondholders, and the like [5]. By freeing consumers and producers from what can
properly be called the financial overhead, or rent, similar to land rent under
feudalism, the public option credit and/or banking system can revive many stagnant
economies that are depressed under the crushing burden of never-ending debt servicing

[1] “Who owns the Federal Reserve?”
[2] This statement of President Wilson is quoted in numerous places. A number of
commentators have argued that some of the damning words used in this much quoted
statement are either not Wilson’s own, or taken out of context. Nobody
denies, however, that regardless of the exact words used, he had serious
reservations about the formation of the Federal Reserve Bank, and the misguided
policy of delegating the nation’s money supply and/or monetary policy to a cabal
of private bankers.
[3]. Ellen Brown, “How the Fed Could Fix the Economy—and Why It Hasn’t”
[4] Hilferding’s book, Finance Capital: A Study of the Latest Phase of Capitalist
Development, has gone through a number of prints/reprints. This quotation is from
Chapter 10 of an online version of the book, which is available at:
[5]. Margrit Kennedy, Occupy Money: Creating an Economy Where Everybody
Wins, Gabriola Island, BC (Canada): New Society Publishers, 2012.
Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He
is the author of Beyond Mainstream Explanations of the Financial
Crisis (Routledge 2014), The Political Economy of U.S. Militarism (Palgrave–
Macmillan 2007), and the Soviet Non-capitalist Development: The Case of
Nasser’s Egypt (Praeger Publishers 1989). He is also a contributor to Hopeless:
Barack Obama and the Politics of Illusion.




This article is about the term for systematic corruption and thievery by the state or state-sanctioned corruption. For a state with ties or aid from organized crime syndicates, see Mafia state.
Kleptocracy, alternatively cleptocracy or kleptarchy, (from Greek: κλέπτης – kleptēs, “thief”[1] and κράτος – kratos, “power, rule”,[2] hence “rule by thieves”) is a term applied to a government seen as having a particularly severe and systemic problem with officials or a ruling class (collectively, kleptocrats) taking advantage of corruption to extend their personal wealth and political power. Typically this system involves the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service.


Kleptocracies are generally associated with dictatorships, oligarchies, military juntas, or other forms of autocratic and nepotist governments in which external oversight is impossible or does not exist. This lack of oversight can be caused or exacerbated by the ability of the kleptocratic officials to control both the supply of public funds and the means disbursal for those funds. Kleptocratic rulers often treat their country’s treasury as a source of personal wealth, spending funds on luxury goods and extravagances as they see fit. Many kleptocratic rulers secretly transfer public funds into hidden personal numbered bank accounts in foreign countries to provide for themselves if removed from power.

Kleptocracy is most common in developing countries whose economies are based on the export of natural resources. Such export incomes constitute a form of economic rent and are easier to siphon off without causing the income to decrease.


The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the welfare of the state’s economy, political affairs and civil rights. Kleptocracic governance typically ruins prospects of foreign investment and drastically weakens the domestic market and cross-border trade. As kleptocracies often embezzle money from their citizens by misusing funds derived from tax payments, or engage heavily in money laundering schemes, they tend to heavily degrade quality of life for citizens.[citation needed]

In addition, the money that kleptocrats steal is diverted from funds earmarked for public amenities such as the building of hospitals, schools, roads, parks – having further adverse effects on the quality of life of citizens.[3] The informal oligarchy that results from a kleptocratic elite subverts democracy (or any other political format).[4]


In early 2004, the German anti-corruption NGO Transparency International released a list of what it believes to be the ten most self-enriching leaders in the past two decades.[5] In order of amount allegedly stolen USD, they were:

Former Indonesian President Suharto ($15 billion – $35 billion)
Former Philippine President Ferdinand Marcos (at least $10 billion by 1986,[6][7][8][9] equivalent to about $21.6 billion in 2014 dollars[10])
Former Congolese President Mobutu Sese Seko ($5 billion)
Former Nigerian Head of State Sani Abacha ($2 billion – $5 billion)
Former Yugoslav President Slobodan Milošević ($1 billion)
Former Haitian President Jean-Claude Duvalier (“Baby Doc”) ($300 million – $800 million)
Former Peruvian President Alberto Fujimori ($600 million)
Former Ukrainian Prime Minister Pavlo Lazarenko ($114 million – $200 million)
Former Nicaraguan President Arnoldo Alemán ($100 million)
Former Philippine President Joseph Estrada ($78 million – $80 million)
The Russian president Vladimir Putin is alleged to be the “head of the clan”,[11] whose assets are estimated at $200 billion.[12]

Sources have also shown that Egyptian President Hosni Mubarak stole up to $70 billion.[13]

In addition, other sources have listed former PLO Chairman Yasser Arafat as having stolen $1 billion to $10 billion; and Pakistani President Asif Ali Zardari to have received kickbacks on contracts and misappropriating public funds, siphoning over $2 billion to his Swiss accounts.[14][15][16][17][18]

Nursultan Nazarbayev is a head of the Kazakhstan ruling clan with $7 billion assets.[19]

The partially recognized state of Kosovo is also run by a kleptocratic regime, mainly formed of members from one of the country’s largest political parties, Democratic Party of Kosovo. A report on the wealth of Kosovan politicians showed that despite their relatively low incomes as civil servants, a significant number had amassed personal wealth sometimes amounting to sums exceeding several million euros.[20] More recently, EULEX reported on a specific case where illegal payments of 1.4 million euros had been made between the Kosovan Ministry of Internal Affairs and the Austrian State Printing Company which had previously won a tender to print Kosovan passports,[21] and a former transport minister and current deputy-president of the ruling Democratic Party of Kosovo Fatmir Limaj was also arrested by EULEX together with six other suspects on charges of organised crime and embezzling at least two million euros.[22]

China’s former prime minister, Wen Jiabao, left office in 2013 with his close relatives controlling assets worth at least $2.7 billion.[23] These revelations were censored in print and censored online in China.[24]

The term kleptocracy was also used to refer to the Russian economy soon after the Soviet collapse in 1991. The “democrats,” led by Yegor Gaidar and Anatoly Chubais, freed prices in 1992 and unleashed hyperinflation before they privatized Russia’s assets. Most Russian citizens lost their savings in only a few weeks. A few billionaire “oligarchs” amassed fortunes not by creating new enterprises, but by arbitraging the huge difference between old domestic prices for Russian commodities and the prices prevailing on the world market. Instead of investing in the Russian economy, they stashed billions of dollars in Swiss bank accounts. Experts estimate that as much as $15 billion left Russia each year as either capital flight or laundered money from illegal transactions.[25] Referring to Russia Daniel Kimmage also used the terms: “kerdocracy” (“rule based on the desire for material gain”) or “khrematisamenocracy” (“rule by those who transact business for their own profit”).[26]

South Sudan obtained independence in July 2011 as a kleptocracy – a militarized, corrupt neo-patrimonial system of governance. By the time of independence, the South Sudanese “political marketplace” was so expensive that the country’s comparatively copious revenue was consumed by the military-political patronage system, with almost nothing left for public services, development or institution building. The efforts of national technocrats and foreign donors produced bubbles of institutional integrity but the system as a whole was entirely resistant to reform. The January 2012 shutdown of oil production bankrupted the system. Even an experienced and talented political business manager would have struggled, and President Salva Kiir did not display the required skills. No sooner had shots been fired than the compact holding the SPLA together fell apart and civil war ensued. Drawing upon long-term observation of elite politics in South Sudan, this article explains both the roots of kleptocratic government and its dire consequences.[27]

Other terms

A narcokleptocracy is a society in which criminals involved in the trade of narcotics have undue influence in the governance of a state. The term has its origin in a report prepared by a subcommittee of the United States Senate Foreign Relations Committee, chaired by Massachusetts Senator John Kerry.[28] The term was used specifically to describe the regime of Manuel Noriega in Panama. The term narcostate has the same meaning.[citation needed]

See also

Failed state
Mafia state
Political corruption
Rentier state

^ κλέπτης, Henry George Liddell, Robert Scott, A Greek-English Lexicon, on Perseus
^ κράτος, Henry George Liddell, Robert Scott, A Greek-English Lexicon, on Perseus
^ “Combating Kleptocracy”. Retrieved 8 August 2008.
^ “National Strategy Against High-Level Corruption: Coordinating International Efforts to Combat Kleptocracy”. Archived from the original on 10 July 2008. Retrieved 8 August 2008.
^ “Plundering politicians and bribing multinationals undermine economic development, says TI” (PDF). Transparency International. 2004. Retrieved October 16, 2006.
^ Hunt, Luke (January 8, 2013). “End of 30-Year Hunt for Marcos Billions?”. The Diplomat, Asian Beat section.
^ Komisar, Lucy (August 2, 2002). “Marcos’ Missing Millions”. In These Times.
^ Ezrow, Natasha M. & Franz, Erica (2011). Dictators and Dictatorships: Understanding Authoritarian Regimes and Their Leaders. Continuum Publishing. p. 135. ISBN 978-1-4411-7396-6.
^ Henry, James S. & Bradley, Bill (2005). “Philippine Money Flies”. The Blood Bankers: Tales from the Global Underground Economy. Basic Books. p. 43. ISBN 978-1-56025-715-8.
^ “Bureau of Labor Statistics CPI Inflation Calculator”. United States Department of Labor.
^ Luke Harding. “WikiLeaks cables condemn Russia as ‘mafia state'”. the Guardian.
^ “Putin’s judo cronies put lock on billions in riches – The Sunday Times”.
^ “Hosni Mubarak’s ‘stolen’ $70 billion fortune”.
^ Alon, Gideon; Amira Hass (2002-08-14). “MI chief: terror groups trying hard to pull off mega-attack”. Haaretz. Retrieved 2007-07-21.
^ Nashashibi, Karim; Adam Bennett (2003-09-20). “Business & Economy: IMF audit reveals Arafat diverted $900 million to account under his personal control”. The Electronic Intifada. Retrieved 2007-07-21.
^ For a general overview of the crucial importance of foreign funding in the peace process, and the PNA’s use of such aid, see Rex Brynen, A Very Political Economy: Peacebuilding and Foreign Aid in the West Bank and Gaza, United States Institute of Peace Press, 2000
^ Stahl, Lesley (2003-11-09). “Arafat’s Billions, One Man’s Quest To Track Down Unaccounted-For Public Funds”. CBS News. Retrieved 2007-07-21.
^ Backgrounder: Corruption in the PLO’s Financial Empire Archived December 14, 2014 at the Wayback Machine
^ SPIEGEL ONLINE, Hamburg, Germany (13 March 2013). “European Social Democrats Lobby for Kazakhstan Autocrat”. SPIEGEL ONLINE.
^ Aliu, Majlinda (2011-06-07). “How Wealthy are Kosovo Politicians Really?”. BalkanInsight. Retrieved 2012-12-02.
^ “Detention on remand against German citizen”. EULEX. 2012-11-15. Retrieved 2012-12-02.
^ “EU prosecutors indict Kosovo ex-minister for corruption”. EUBusiness. 2012-11-16. Retrieved 2012-12-02.
^ “Billions in Hidden Riches for Family of Chinese Leader”. New York Times. October 25, 2012.
^ “New York Times blocked in China over Wen Jiabao wealth revelations”. Guardian. October 26, 2012.
^ Johanna Granville, “Dermokratizatsiya and Prikhvatizatsiya: The Russian Kleptocracy and Rise of Organized Crime,”Demokratizatsiya (summer 2003), pp. 448-457.
^ Kimmage, Daniel (2008-08-12). “Russian ‘Hard Power’ Changes Balance In Caucasus”. Retrieved 2014-03-29.
^ Drugs, Law Enforcement and Foreign Policy, Subcommittee on Terrorism, Narcotics and International Operations of the United States Senate Committee on Foreign Relations, December 1988
Further reading

Machan, Tibor (2008). “Kleptocracy”. In Hamowy, Ronald. The Encyclopedia of Libertarianism. Thousand Oaks, CA: SAGE; Cato Institute. pp. 272–3. ISBN 978-1-4129-6580-4. LCCN 2008009151. OCLC 750831024.


Juan Cole: Top 10 Signs the U.S. Is the Most Corrupt Country in the World (TRUTHDIG)

Juan Cole

Top 10 Signs the U.S. Is the Most Corrupt Country in the World

This is a revised version of a post that originally ran on Truthdig contributor Juan Cole’s website.

Those ratings that castigate Afghanistan and some other poor countries as hopelessly “corrupt” always imply that the United States is not corrupt.

While it is true that you don’t typically have to bribe your postman to deliver the mail in the US, in many key ways America’s political and financial practices make it in absolute terms far more corrupt than the usual global South suspects. After all, the US economy is worth over $16 trillion a year, so in our corruption a lot more money changes hands.

1. The rich are well placed to bribe our politicians to reduce taxes on the rich. A nonentity like Donald Trump got filthy rich via tax loopholes, and is now trying to buy the presidency. The way the Supreme Court got rid of campaign finance reform and allowed open, unlimited buying of elections is the height of corruption. Note that despite his supposed “populism,” Trump never talks about the unfairness of our current tax system, instead dividing and ruling working and middle class Americans by stirring racial and religious hatreds. As it stands, 400 American billionaires are worth $2 trillion, as much as the bottom 150 million Americans. That kind of wealth inequality hasn’t been seen in the US since the age of the robber barons in the nineteenth century. Both eras are marked by extreme corruption.

2. Money and corruption have seeped so far into our media system that people can with a straight face assert that scientists aren’t sure human carbon emissions are causing global warming. Fox Cable News is among the more corrupt institutions in American society, purveying outright lies for the benefit of the billionaire class. The US is so corrupt that it is resisting the obvious urgency to slash carbon production. Even our relatively progressive president talks about exploiting all sources of energy, as though hydrocarbons were just as valuable as green energy and as though hydrocarbons weren’t poisoning the earth. All of the GOP candidates for the 2016 presidential election are climate change deniers, all of them in the back pockets of Big Oil, and this includes Trump.

Even Qatar, its economy based on natural gas, freely admits the challenge of human-induced climate change. American politicians like Jim Inhofe are openly ridiculed when they travel to Europe for their know-nothingism on climate.

3. Instead of having short, publicly-funded political campaigns with limited and/or free advertising (as a number of Western European countries do), the US has long political campaigns in which candidates are dunned big bucks for advertising. They are therefore forced to spend much of their time fundraising, which is to say, seeking bribes. All American politicians are basically on the take, though many are honorable people. They are forced into it by the system. Former House Majority leader John Boehner has actually just handed out cash on the floor of the House from the tobacco industry to other representatives.

When French President Nicolas Sarkozy was defeated in 2012, soon thereafter French police actually went into his private residencesearching for an alleged $50,000 in illicit campaign contributions from the L’Oreale heiress. I thought to myself, seriously? $50,000 in a presidential campaign? Our presidential campaigns cost a billion dollars each! $50,000 is a rounding error, not a basis for police action. Why, George W. Bush took millions from arms manufacturers and then ginned up a war for them, and the police haven’t been anywhere near his house.

American politicians don’t represent “the people.” With a few honorable exceptions, they represent the the 1%. American democracy is being corrupted out of existence.

4. That politicians can be bribed to reduce regulation of industries like banking (what is called “regulatory capture”) means that they will be so bribed. Billions were spent and 3,000 lobbyists employed by bankers to remove cumbersome rules in the zeroes. Thus, political corruption enabled financial corruption (in some cases legalizing it!) Without regulations and government auditing, the finance sector went wild and engaged in corrupt practices that caused the 2008 crash. Too bad the poor Afghans can’t just legislate their corruption out of existence by regularizing it, the way Wall street did.

5. That the chief villains of the 2008 meltdown (from which 90% of Americans have not recovered) have not been prosecuted is itself a form of corruption.

6. The US military budget is bloated and enormous, bigger than the military budgets of the next twelve major states. What isn’t usually realized is that perhaps half of it is spent on outsourced services, not on the military. It is corporate welfare on a cosmic scale. I’ve seen with my own eyes how officers in the military get out and then form companies to sell things to their former colleagues still on the inside.

7. The US has a vast gulag of 2.2 million prisoners in jail and penitentiary. There is an increasing tendency for prisons to be privatized, and this tendency is corrupting the system. It is wrong for people to profit from putting and keeping human beings behind bars. This troubling trend is made all the more troubling by the move to give extra-long sentences for minor crimes, to deny parole and to imprison people for life for e,g, three small thefts.

8. The National Security Agency’s domestic spying was a form of corruption in itself, and lends itself to corruption. With some 4 million government employees and private contractors engaged in this surveillance, it is highly unlikely that various forms of insider trading and other corrupt practices are not being committed. If you knew who Warren Buffett and George Soros were calling every day, that alone could make you a killing. The American political class wouldn’t have defended this indefensible invasion of citizens’ privacy so vigorously if someone somewhere weren’t making money on it.

9. As for insider trading, it turns out Congress undid much of the law it hastily passed forbidding members, rather belatedly, to engage in insider trading (buying and selling stock based on their privileged knowledge of future government policy). That this practice only became an issue recently is another sign of how corrupt the system is.

10. Asset forfeiture in the ‘drug war’ is corrupting police departments and the judiciary.

So don’t tell the Philippines or the other victims of American corruption how corrupt they are for taking a few petty bribes. Americans are not seen as corrupt because we only deal in the big denominations. Steal $2 trillion and you aren’t corrupt, you’re respectable.