Photo from Big Pine Key, Florida in Today’s Miami Herald

By Pam Martens and Russ Martens: September 21, 2017

Photo in Today’s Houston Chronicle of Refuse Still Awaiting Pickup in Houston Following Devastation from Hurricane Harvey

Today’s Houston Chronicle carries a photo and report of “thousands of piles of Hurricane Harvey wreckage on Houston curbs” still waiting for removal. The devastating flooding from Hurricane Harvey in late August has impacted low income families the hardest with another article in the paper reporting that residents of a public housing complex in Houston “have been asked to pay rent for flooded units deemed uninhabitable even as the mayor has condemned private landlords for similar practices.”

In the Florida Keys, where major devastation occurred when Hurricane Irma hit the area on September 10 as a Category 4 hurricane, the schools remain closed and will begin to reopen on a staggered basis beginning Monday. The Miami Herald’s digital edition today shows a photo of the devastation unleashed on Big Pine Key by Hurricane Irma, which made landfall at Cudjoe Key, approximately 20 miles north of Key West. Monroe County, home to the Keys, estimates that 20 percent or more of the homes in the Keys were badly damaged or destroyed.

As millions of impacted Americans attempted to assist others and rebuild from Hurricanes Harvey and Irma, another monster Hurricane hit Puerto Rico yesterday, Hurricane Maria, leaving it darkened and without any municipal electric power whatsoever. The U.S. Territory was still attempting to recover from damage caused by Hurricane Irma, which had brushed the northern side of the island two weeks earlier, when Hurricane Maria hit as a Category 4 hurricane yesterday, the strongest hurricane to make landfall in Puerto Rico since 1932. The extent of the devastation there is still uncertain. The San Juan Daily Star newspaper’s website shows that it was last updated two days ago, on September 19. Last evening, weather officials reported that “catastrophic” flooding was occurring in parts of Puerto Rico.

As Americans were attempting to remove water-logged furniture from their homes, rake up debris in their yards, chain saw uprooted trees, repair roofs or, for the more seriously impacted who had lost their homes in their entirety, to find alternate housing for themselves and their families – along comes a devastating magnitude 7.1 earthquake in Mexico which has thus far left 245 dead in central Mexico, thousands injured, and dozens of flattened buildings with an unknown number of people still waiting to be rescued.

Since Hurricane Harvey made landfall in Texas as a Category 4 hurricane on August 25, Americans have experienced an unrelenting cascade of news of these epic disasters. Almost every American has a family member, friend or colleague who has been impacted. But as the 24/7 news cycle and its vivid images of the human suffering emanating from these disasters took its emotional toll on caring Americans, the President of the United States, Donald Trump, failed the nation as a leader in this time of crisis.

Instead of offering reassuring words and comfort to Americans already traumatized by natural disasters, Trump heaped onto the American psyche the specter of nuclear holocaust. In the midst of these disasters, President Trump stated in a speech to the U.N. General Assembly on September 19 that “The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea.”

North Korea has both nuclear and ballistic missile capability. What Americans wanted from their President was a de-escalation of tensions after Trump’s aggressive and inflammatory remarks on August 8, when he stated:

“North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen… he has been very threatening beyond a normal state. They will be met with fire, fury and frankly power the likes of which this world has never seen before.”

The character and stamina and resilience and optimism of the average American is being tested as never before by the daily onslaught of tragic news. What we need from the Oval Office is to put a muzzle on the arrogance, boasts and bravado and find the mature voice of calm reason and reassurance that has been so sadly lacking throughout this interminably tortuous presidency.

By Pam Martens and Russ Martens: September 20, 2017

According to S&P Global Market Intelligence, there have been 35 retail bankruptcies this year, almost double the 18 retail bankruptcies of last year. The filing by Toys ‘R’ Us this week was the latest.

What many of these retailers have in common is that they were taken private in leveraged buyouts (LBOs) by private equity (PE) firms. Toys ‘R’ Us, Payless ShoeSource, The Limited, Wet Seal, Gymboree Corp., rue21, and True Religion Apparel were all LBOs. Gander Mountain can also be included in this list if you reach back to its 1984 LBO. Far too many LBOs are simply asset stripping operations by Wall Street vultures who load the company with enormous debt, then asset strip the cash from the company by paying themselves obscene special dividends and management fees.

On June 12 of this year, the official committee of unsecured creditors to Payless, consisting primarily of Payless stores’ landlords and vendors, alleged in a filing in U.S. bankruptcy court that the private equity firms involved in the Payless LBO in 2012, Golden Gate Capital and Blum Capital, had “siphoned over $400 million out of Payless. Lawyers for the unsecured creditors wrote the following in their objection:

“The Sponsor Group [Golden Gate Capital and Blum Capital] acquired the Debtors [Payless, et al] in October 2012 through a leveraged buyout (the ‘2012 LBO’) which increased the Debtors’ debt from approximately $125 million as of the fiscal year end immediately prior to the leveraged buyout to approximately $400 million.  After the 2012 LBO, the Sponsor group siphoned over $400 million out of the Debtors…

“In connection therewith, the Committee engaged one of the nation’s foremost valuation experts – Dr. Israel Shaked and the Michel-Shaked Group as an expert witness.  Dr. Shaked worked closely with the Committee professionals to analyze the Sponsor Claims and produced the 160-page Shaked Report which has been provided to counsel for the Debtors, Cremens, certain Term Loan Lenders, and the Sponsor Group, and to the Court under seal.  In the Shaked Report, Dr. Shaked has concluded (among other things) that (i) as of February 27, 2013, immediately following the 2013 dividend recapitalization, the Debtors’ equity value was negative by a substantial margin, and therefore the Debtors were insolvent, (ii) as of March 10, 2014, immediately following the 2014 dividend recapitalization, the Debtors’ equity value was negative by an even more substantial margin, and therefore the Debtors were insolvent and (iii) the Debtors were insolvent at all times after the 2013 and 2014 dividend recapitalizations.

“In light of the findings in the Shaked Report, the Committee believes that the Debtors’ have claims against the Sponsor Parties and others for fraudulent conveyance, illegal dividends, breach of fiduciary duty and other state law causes of action related to the 2013 and 2014 dividend recapitalizations and related transactions that if pursued could provide robust recoveries to general unsecured creditors offered only a token recovery under the Plan in violation of the best interest of creditors confirmation requirement.”

But inexplicably, after making these serious allegations in June, the unsecured creditors agreed to a settlement the same month. According to multiple news reports, the unsecured creditors agreed to wave their claims against the LBO sponsors in exchange for $25 million in cash in the bankruptcy reorganization. The sponsors were allowed to settle “without admitting any wrongdoing of any kind.”

In April, Aisha Al-Muslim, a reporter for Newsday, the Long Island, New York newspaper, found the following after an in-depth review of court documents and data from top research firms like S&P Global Market Intelligence:

“…43 large retail or supermarket companies, which owned chains with 10 or more locations, have filed for bankruptcy in the United States since January 2015. The 43 companies controlled 52 brick-and-mortar chains. Twenty-one of the companies had stores on Long Island. Retailers selling only online and restaurants were excluded from the count.

“Of those 43 companies, 18 — more than 40 percent — were owned by private equity firms. The remainder were public or private companies or owned by a hedge fund.”

When 40 percent of insolvent large retail companies got this way at the hands of the so-called turnaround experts at private-equity firms while huge amounts of money moved from the coffers of the company to the pockets of the “experts,” it’s time for Federal regulators to get involved.

Big Wall Street banks are not likely to blow the whistle on asset-stripping scams in the private equity world. They are frequently involved in collecting fees for advising on the LBOs. Then they reap more huge windfalls in fees when they underwrite the bond offerings that load up the company with debt it can’t service on a long term basis.

So the overarching question in all of this is: where is the Securities and Exchange Commission, the so-called cop on the beat that is supposed to be policing the publicly traded corporate bonds involved in these deals?

Following are some of the largest retail names that have sought bankruptcy protection thus far this year:

• Toys “R” Us
• The Limited
• Wet Seal (Second bankruptcy filing)
• Eastern Outfitters
• BCBG Max Azria
• Vanity
• Hhgregg
• RadioShack (Second bankruptcy filing)
• Gordmans
• Gander Mountain
• Payless ShoeSource
• rue21
• Gymboree
• Cornerstone Apparel
• True Religion Apparel
• Perfumania
• Vitamin World
• Aerosoles
• Michigan Sporting Goods Distributors
• Marbles Holdings LLC

By Pam Martens and Russ Martens: September 19, 2017

The year 2017 is likely to be remembered for devastating hurricanes and storm surges, waves of retail bankruptcies amidst record-setting household debt and a stock market that carelessly sailed through these dangerous waters to record highs.

Toys ‘R’ Us was the latest in a growing string of retail bankruptcies to hit the mat last evening. Its bonds have been telegraphing trouble for some time, with one bond due next year careening from 97 cents on the dollar to 22 cents in a little more than two weeks. On September 6, Wolf Richter at WolfStreet.com provided the short narrative of how Toys ‘R’ Us found itself driving toward the ditch. Citing its leveraged buyout in 2005 by private equity firms Bain Capital, KKR & Co. and real estate firm Vornado Realty Trust, Richter wrote:

“So here’s what the three PE firms did to Toys R Us: they stripped out cash and loaded the company up with debt. And these are the results: At the end of its fiscal year 2004, the last full year before the buyout, Toys R Us had $2.2 billion in cash, cash equivalents, and short-term investments. By Q1 2017, this had collapsed to just $301 million. Over the same period, long-term debt has surged 126%, from $2.3 billion to $5.2 billion…It takes a lot of expertise and Wall Street connivance to pull this off.”

If the name, Bain Capital, sounds familiar to you, it’s because it’s the private equity firm that was co-founded by Mitt Romney in 1984 and overseen by him in the 80s and 90s. In his book, Turnaround, Romney writes that he owned 100 percent of the shares of Bain Capital. Romney went on to become the Republican Party’s nominee for President in 2012 and his varnished version of just what Bain Capital did for a living came under close scrutiny.

In 2012, Matt Taibbi of Rolling Stone penned an in-depth report on the dubious history of Bain Capital in the demise of companies. Taibbi wrote:

“And this is where we get to the hypocrisy at the heart of Mitt Romney. Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a ‘turnaround specialist,’ a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.”

For good measure, Taibbi adds that Romney’s history at Bain stands as “an emblem for the resiliency of the entire sociopathic Wall Street set he represents.”

Bain’s handiwork is also present in the bankruptcy filing of children’s clothing retailer, Gymboree, this past June. Bain Capital bought Gymboree in a leveraged buyout for $1.7 billion in 2010.

Romney lost the presidential election of 2012 and the Republicans got smarter over the next four years. They ran a winning candidate with the wholesome slogan of “Make America Great Again” while the candidate buried his financial picture behind a dark curtain, refusing to release his tax returns or disclose how much debt he owes and to whom he owes it. Subsequent investigations suggest that Donald Trump is beholden to dozens of Wall Street firms that hold his mega debt, thus enshrining Taibbi’s nod to the “resiliency of the entire sociopathic Wall Street set he represents.”  While billing himself as the populist president, Trump has packed his administration with former Goldman Sachs bankers.

Toys ‘R’ Us issued an official statement on its bankruptcy, indicating it will continue operations. It wrote: “The company’s approximately 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores around the world — the vast majority of which are profitable — are continuing to operate as usual.”

Wall Street banks appear to be engaged in the extend and pretend game with Toys ‘R’ Us. Bloomberg News reports that a syndicate of banks, led by JPMorgan Chase, will provide a $3 billion loan to allow the company to continue operations while it restructures its liabilities. Some banks in the syndicate are existing lenders, notes Bloomberg.

Related Articles:

Why Isn’t the Justice Department Investigating Citibank’s Student Loan Scandal (Part I)

Citibank’s Student Loan Debt Slaves (Part II)

Student Loan Crisis Threatens U.S. Economic Recovery (Part III)

The Harry Walker Agency Boasts of Speakers Bill and Hillary Clinton in its 2017 Brochure but Stays Mum on the Obamas

By Pam Martens and Russ Martens: September 18, 2017

The “Wall Street Democrats” is the wing of the party created by the Clintons and nurtured further by Barack Obama. It takes money hand over fist from Wall Street for political campaigns, wags a warning finger at Wall Street from the public podium while stuffing its administrations with Wall Street execs, then its leadership reaps millions of dollars in personal speaking fees from the robber barons after leaving office. As of this morning, there’s no longer any debate that Obama is firmly entrenched in this cozy world of money.

Bloomberg News is reporting that former President Obama has accepted upwards of $400,000 a clip to speak before Wall Street firms Northern Trust Corp. and Cantor Fitzgerald and an unspecified sum from Carlyle Group LP. The speeches at Northern Trust and Carlyle Group occurred over the past month and a half. The Cantor Fitzgerald speech is scheduled for next week.

Adding to the intrigue, Obama’s future roster of private speeches to Wall Street banks is not available for public inspection. Equally problematic, while it was widely reported in February that Obama has signed with the Harry Walker Agency to represent him for speaking engagements, that agency showcases Bill and Hillary Clinton in its 2017 Speakers Bureau brochure while Obama goes missing.

Adding to the curiosity, which went unreported in the Bloomberg article, the Twitter account for the Harry Walker Agency is promoting appearances by its other speakers from Obama’s administration (it represents a stable full) but when we went back months on its Twitter account, we found no mention of Obama’s private speeches that have already occurred since he left office.

There were plenty of Harry Walker Agency Tweets promoting speeches by Obama’s former Treasury Secretary Jack Lew; his former speechwriter Cody Keenan; his former White House Press Secretary Josh Earnest; and Obama’s former Commerce Secretary Penny Pritzker.

One might be prone to speculate that Obama has a contractual clause in his agreement with the Harry Walker Agency that it cannot advertize his speaking schedule or to whom he is delivering his highly compensated speeches.

The Cantor Fitzgerald fee of $400,000 was reported by multiple media outlets in April. While Cantor was historically known as a government bond house, in the leadup to the 2008 financial crash it also dealt in the credit default swaps that played a key role in the crisis. In April of this year, Jill Abramson reported on the $400,000 fee to be paid by Cantor in an article for The Guardian, writing that “The habitual kowtowing of senior Democrats to the billionaire class has left their party close to morally bankrupt. Bernie Sanders was right to hammer Hillary during the primaries for her speaking fees from Wall Street. Even her most ardent supporters found these speaking fees indefensible. They were certain to be fodder for her opponents.”

The Associated Press has previously reported that both the former First Lady, Michelle Obama, and Barack Obama are being represented by the Harry Walker Agency for speaking engagements.

It’s not like the Obamas need the money. According to multiple reports early this year by major media, the couple will receive upwards of $65 million from Penguin Random House to publish their respective memoirs.

What the Obamas are doing now would seem to follow in lockstep with the road to riches followed by the Clintons after leaving the White House. As Wall Street On Parade previously reported in 2014 in an article titled “Hillary and Bill: Their Rugged Journey from Paupers to One-Percenters in 365 Days,” Hillary Clinton’s on-air statement to ABC’s Diane Sawyer in 2014 that she and former President Bill Clinton were “dead broke” when they left the White House in January 2001 missed the mark by a mile.

Hillary had explained to Sawyer: “We came out of the White House not only dead broke, but in debt. We had no money when we got there, and we struggled to, you know, piece together the resources for mortgages, for houses, for Chelsea’s education. You know, it was not easy.”

Wall Street On Parade countered that with this:

“Former Presidents are not ‘dead broke’ by any possible interpretation. They receive a pension, which is currently 10 times the poverty level for a family of three; monies for staff, travel, an office, postage and supplies and Secret Service protection for themselves and their spouse.

“The President’s pension kicks in as soon as he leaves office. According to the Congressional Research Service, former President Clinton received in pension and other perks, adjusted for 2013 dollars, $335,000 in fiscal year 2001; $1.285 million in 2002, and over $1 million every year thereafter through 2011. Since 2011, the outlay by the taxpayer for former President Clinton has been just under $1 million. Including what is budgeted for fiscal year 2014, Clinton will have received a taxpayer outlay of $15,937,000 since leaving the White House in 2001.”

As for Bill Clinton’s speaking fees in his first year out of the White House, we reported the following:

“Both of the Clintons likely knew they would become multi-millionaires very rapidly upon leaving the White House. Just sixteen days after George W. Bush was sworn in on January 20, 2001, Bill Clinton delivered his first speech for $125,000 to Wall Street brokerage and investment bank Morgan Stanley.  The speeches continued every few days, with the former President earning an eye-popping $1.475 million in just his first two months out of office. The price per speech has reached $250,000, $300,000 even $500,000 at times. The Clintons earned millions more in book advances and royalties.

“According to the joint tax return released by the Clintons, in that 2001 year of financial desperation, the couple reported unadjusted gross income of $15.6 million in business income (mostly from Bill Clinton’s speeches); pension payments of $152,700; dividends of $172,621 and wages of $154,952.”

After Hillary lost the Presidential election in 2016, in no small part because of her close financial ties to Wall Street and her obscene speaking fees from Goldman Sachs and other Wall Street firms, it is a tragic commentary on the greed within the so-called leadership of the party that former President Obama is following along the same jaded path. We can only hope it will be the final straw to give the real progressive wing of the Democratic Party, that led by supporters of Senators Bernie Sanders and Elizabeth Warren, a groundswell of support from the bench sitters.

By Pam Martens and Russ Martens: September 14, 2017

Andrew Ross Sorkin, Creator of DealBook at the New York Times

Yesterday, one of our readers sent us a link to an article at Real Clear Politics by Allan Golombek which makes the same error-filled assertions as those of Andrew Ross Sorkin at the New York Times: that the repeal of the Glass-Steagall Act did not lead to the U.S. financial crisis of 2007-2010.

Golombek’s bio at the end of the article says only that he is “a Senior Director at the White House Writers Group.” A check at the firm’s website shows it to be an organization that freely admits to being paid by corporations and other special interests to advance their position in the media. The firm states: “Whether in a campaign or a crisis, we help our clients determine how best to define their messages for media acceptance and then disseminate those messages for maximum exposure and impact.”

There are two key problems here. Not every reader will take the time to ferret out what the White House Writers Group is all about and, more importantly, neither Golombek nor Real Clear Politics discloses who the ultimate client is behind Golombek’s message. If Golombek had disclosed in his bio that his firm was being paid by a major Wall Street bank or trade association to push this position on Glass-Steagall, would Real Clear Politics have run the article? By withholding this information, isn’t the reader left badly misinformed as to motive.

There is also the question as to exactly where the premise of this article originated. According to his LinkedIn bio, Golombek has never worked a day on Wall Street. In fact, he doesn’t even reside in the U.S. His bio says he “resides in his hometown of Toronto.”

His position sounds uncannily like that of Andrew Ross Sorkin at the New York Times and that of the JPMorgan Chase CEO, Jamie Dimon, who also has a curious camaraderie with Andrew Ross Sorkin. Dimon appeared at the 2009 book party for Sorkin’s book, Too Big to Fail, and Dimon headlined the first New York Times DealBook Conference in 2012 where he was interviewed on stage by Sorkin, who serves as the official host of the annual, money-making conference. This year’s upcoming conference on November 9 promises that corporations can “Align your brand with influential consumers, business leaders, entrepreneurs and visionaries through high-impact integrations. Host delegates at private cocktail or dinner receptions, conduct on-site polling, develop custom content, display product and amplify your sponsorship through on-site branding and extensive print, digital and social media promotion.”

The 2012 inaugural DealBook conference raised so many ethical concerns that the Times’ own Public Editor at the time, Margaret Sullivan, questioned it. Sullivan wrote:

“…with the pricey tickets and the all-platforms-blazing corporate sponsorships, the event brought in plenty of much-needed revenue for The Times.

“Here is what the conference did not have going for it: A great deal of distance between sources and those who cover them – something traditionally thought to be a bedrock journalistic idea.”

The Times has removed the ability to be so harshly critiqued in this manner by its own Public Editor. This spring, it eliminated the longstanding position entirely.

Restoring the Glass-Steagall Act is no minor issue. The public deserves the right to know who is lurking in the shadows behind these articles. Restoring the legislation was included in both the Republican and Democratic platforms last year. The debate’s outcome will determine whether the U.S. financial system and the U.S. economy will survive the next major debacle on Wall Street. The public was kept in the dark until 2011 that the financial system and U.S. economy only survived the 2008 crash because the Federal Reserve was secretly pumping $16 trillion in almost zero interest loans to Wall Street and its foreign brethren from 2007 through at least the middle of 2010. The Troubled Asset Relief Program (TARP), whose details were publicly disclosed, represented a tiny portion of the actual, massive bailout.

Glass-Steagall legislation was enacted in 1933 and kept the U.S. financial system safe for 66 years until its repeal in 1999. It was put in place in 1933 as the stock market was on its way to losing 90 percent of its value following the 1929 crash and after the U.S. Senate had spent three years intensely investigating the Wall Street corruption that had caused the crash. It was wisely decided by Congress and President Franklin Delano Roosevelt that the new legislation would ban banks holding insured deposits backstopped by the taxpayer from being housed under the same roof with Wall Street’s casino-like investment banks and brokerage firms, which had a jaded history of blowing themselves up. Nine short years after the repeal of Glass-Steagall, century old iconic names on Wall Street lay in ruins and their demise and interconnectedness led to the worst economic crisis in the United States since the Great Depression.

Sorkin’s grossly erroneous position is that none of the Wall Street firms that failed owned insured depository banks so Glass-Steagall was irrelevant to the crash. He has specifically mentioned Lehman Brothers, Merrill Lynch and AIG as having nothing to do with the repeal of Glass-Steagall. But, in fact, they all did own FDIC-insured banks at the time of the crash, holding billions of dollars in insured deposits backstopped by the taxpayer. And Citigroup, parent of the sprawling insured retail bank, Citibank, and its 2,000 investment and insurance-related subsidiaries, was the poster child for the wreckage caused by the repeal of Glass-Steagall. Citigroup became insolvent during the crash and received the largest taxpayer bailout in the history of finance: more than $2.5 trillion in low cost loans, equity infusions and asset guarantees.

In yesterday’s piece by Golombek, he parrots Sorkin with this:

“In fact, knocking down the walls between financial services didn’t help cause the financial meltdown so much as help contain it. None of the institutions that ended up doing the most to prompt the financial meltdown was a financial hybrid.”

Last year, Dimon said on CNBC that the repeal of Glass-Steagall “had nothing to do with the crisis” of 2008.

It’s time to find out exactly whom Golombek speaks for and who is funding his voice.