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Triple Crunch Log                                                                                                            

ways of cutting greenhouse gas emissions by more than 80 per cent by investing in renewables, such as wind and solar power, finding that the impact of this on electricity prices in the long term would be little different to "business as usual". Reasons: the operating costs of renewables are far lower than for fossil-fuel power stations; and Europe's existing high-carbon electricity infrastructure will need to be replaced in coming decades. The report, for the European Climate Foundation, says a supergrid will be needed.269

Toulouse tests renewable pedestrian power. The weight of people on pavements will be tested for street lighting. The modules will be the same as used in Dutch nightclubs.270

As microfinance grows, big banks are increasingly making big profits from tiny loans. 60% of all microloans now come from banks and finance firms, rather than NGOs (35%), credit unions and rural banks (5%). Some banks charge 100% or more. Mohamed Yunus: “We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks. Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.” Chuck Waterfield, who runs mftransparency.org, a Web site that promotes transparency: “They call it ‘social investing,’ but nobody has a definition for social investing, nobody is saying, for example, that you have to make less than 10 percent profit.” The microfinance industry now has over $60 billion in assets The rush was started when Compartamos, a Mexican firm that began life as a tiny nonprofit organization, generated $458 million through a public stock sale in 2007. Mr. Yunus says interest rates should be 10 to 15 percent above the cost of raising the money. 75 percent of microfinance institutions would exceed that. NYT: “Questions had already been raised about Kiva because the Web site once promised that loans would go to specific borrowers identified on the site, but later backtracked, clarifying that the money went to organizations rather than individuals.” These sometimes are high rate chargers.271

15.4.10. Goldman Sachs charged by SEC with $1bn fraud over toxic sub-prime securities. The 22-page charges Goldman Sachs with working with a US hedge fund, Paulson & Co, to structure and sell a complex package of mortgages to clients knowing Paulson would take a “short” position betting that the very same mortgages would fail. Investors lost €1bn and Paulson gained around the same.272

Goldman Sachs prosecution threatens to open the floodgates on Wall Street as Geithner says banks must be made to pay. The case against Goldman could be the tip of an iceberg. Rabobank is accusing Merrill Lynch of a similar misdemeanour: marketing of a collateralised debt obligation (CDO) while omitting to mention a relationship with a hedge fund betting against the product's success. Bill Clinton meanwhile expresses regret, saying he should not have listened to the former treasury secretaries Robert Rubin and Larry Summers when they opposed tight protection when derivatives were gaining popularity during the 1990s.273

BP Shareholders reject a call to investigate the tar sands project. BP expects to make a final decision on its $2.4bn (£1.6bn) Sunrise project by next year. About 140 institutions backed the call for a review.274

Citi analysts, concerned about tar sands emissions, warn that shareholder action will grow. This is a setback, given that CalPers, the US’s largest public pension fund, has already joined the tar sands campaign.275

18.4.10. “Labour and the Tories are just too scared to take on the bankers,” Ruth Sutherland writes. Whereas SEC investigators are feeling Goldman Sachs’s collar in the States, and the Volcker Rule which would in effect restore Glass-Steagall and limit the size of banks so that their failure would not imperil the entire financial system. the Labour manifesto, however, simply proposes making banks keep more capital as a cushion against losses, a global levy on financial services and "living wills" to help wind down failed institutions without putting the entire system at risk. The Tories have promised a levy on banks, even if other countries do not do the same, clamping down on bankers' bonuses, and says he will seek international agreement on separating banks' speculative activities from their useful ones. “But the two main parties remain horribly in thrall to a powerful cabal of financiers and corporate executives, and are terrified of being accused of banker-bashing. It is so obvious that it should not need saying, but the financial elite to which they genuflect is both unelected and unaccountable.”276

“Now we know the truth. The financial meltdown wasn't a mistake – it was a con.So writes Will Hutton in The Observer. “The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud.”  “Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank – a bank which looks after the Post Office's financial services – was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.” “….The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured.”  “….Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations. The banks were gaming the regulators and investors alike – and they knew full well what they were doing.” “….We need to break up our banks, limit their capacity to speculate and bring them back to earth. Britain should also launch an official investigation into what went wrong – and hand the findings to the Serious Fraud Office. This needs to become this election campaign's number one issue.”

Crisis timetable

September 2007 Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.

April 2008 Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.

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