Category Archives: banksters

Boeing continues its downward spiral


The plight of Boeing continues to fascinate me. Dad's cousin was a machinist / toolmaker for them from the 1940s to the early 1970s—from the B-29 to the 727. One Sunday afternoon I listened to him explain the problems of producing the tooling for the 727's tail section. Not only did the tail carry important control surfaces, the designers had run a third jet engine through the middle. Not surprisingly, making all this work required fabricating some complex shapes out of high-strength aluminum alloys. This was before computerized milling machines so these tools were built with slide rules, micrometers, Bridgeport mills, and a whole lot of skills. The resulting aircraft exceeded every important performance projection by at least 5%, thousands were made, and there are still people who argue it was the fastest subsonic airliner to ever fly.

My brother-in law was the guy who specified for Boeing which welding method would be used for every part that would be joined using heat. For every potential operation, he would test several welding methods, X-ray the results, and then break the weld to see how much load it would take. His results became part of Boeing's institutional memory. Any time folks needed to weld up a landing gear, or whatever, they could check to see what methods had been certified. My brother-in-law had not gone to engineering school but he was so good at what he did, he was given a "field promotion" to engineer by the company (along with the increased pay grade.) Such was the "old" Boeing.

According to his account, old Boeing began to die with the merger of Boeing and McDonnell Douglas on Aug. 1, 1997. The value of the transaction was $16.3 billion. McDonnell Douglas had been on the ropes for awhile and their senior management had turned to the Wall Street sharpies for "help"—the kind of help that stressed share prices and political connections to the Defense Department over the real work of building quality airplanes. These folks came to Boeing in the merger and began an assault on the company's engineering culture. On February 9, 2000, Boeing's engineers actually went out on strike—egged on, no doubt by the designated management fool / Wall Street darling named Debbie Hopkins who wondered aloud, "Just why does Boeing need engineers anyway?" I don't know Debbie, maybe it's because punching a hole through the air at nearly 600 mph is really hard to do. Maybe it's because without engineers, Boeing does not exist.

Anyway, shortly after the SPEEA strike was settled, my brother-in-law quit in disgust and found a peaceful job teaching non-ferrous welding at a Tacoma community college where he worked into his late 70s. Debbie was soon fired but her work was done. The rot at Boeing soon showed up in airplanes that had serious quality issues. I did a post in 2013 about the troubled Dreamliner and now the 737max fleet is grounded.

Wednesday, January 30, 2013

The Dreamliner is grounded

If anyone ever needs a lesson in what happens when Predators take over a Producer company, Boeing will do perfectly.  In it's glory days, Boeing pretty much defined a Producer company.  Engineers ran the show.  The company would occasionally bet the farm on a breakthrough product.  There was a sense of pride you could feel the moment you passed through the plant gates.  And people who knew aircraft were often fanatically loyal to their output (It's Boeing or I'm not going.)  Yes, there were other companies that made large aircraft but sensible people would often ask "Why?"  Boeing was so sure about its products that for decades, it only had one salesman.  One was plenty because everyone knew what buying from Boeing meant.

And then it started to unravel.  In 1997, Boeing merged with McDonnell Douglas, a company that had lost its airplane-making chops and had become just another cost-plus supplier hanging off the big Defense Department teat.  Boeing also had significant ties to the defense industry but were babes in the woods compared to the sharpies from McDonnell Douglas.  Soon the sharpies were ensconced in senior management at Boeing and the rot began to set in.  The open assault on Boeing's engineering culture came out into the open during the SPEEA (Society of Professional Engineering Employees in Aerospace) strike of 2000.  The cordial atmosphere between the engineers that designed Boeing's products and the engineers that managed the company was broken.  Management even moved the headquarters to Chicago from Seattle to show the divorce was final.

Once the Boeing Producer / engineering culture had been trashed, the chance for breakthrough, industry-defining projects was trashed as well.  The Dreamliner, which was not even that revolutionary to start with, became an expensive, ongoing fiasco that demonstrated the truth of the most famous sign carried during the SPEEA strike "No nerds, No Birds."  And so now, after several years of delays and $Billions of cost over-runs, the few Dreamliners that have been delivered are grounded.  The problem isn't even an aerospace problem but rather faulty lithium batteries.  If the Predators of the "new" Boeing management were actually capable of feeling shame, they would be resigning en mass. Yeah, that's going to happen (NOT)!

Boeing's travails show what's wrong with modern capitalism 

Deregulation means a company once run by engineers is now in the thrall of financiers and its stock remains high even as its planes fall from the sky

Matt Stoller, 11 Sep 2019

The plight of Boeing shows the perils of modern capitalism. The corporation is a wounded giant. Much of its productive capacity has been mothballed following two crashes in six months of the 737 Max, the firm’s flagship product: the result of safety problems Boeing hid from regulators.

Just a year ago Boeing appeared unstoppable. In 2018, the company delivered more aircraft than its rival Airbus, with revenue hitting $100bn. It was also a cash machine, shedding 20% of its workforce since 2012 while funneling $43bn into stock buybacks in roughly the same period. Boeing’s board rewarded its CEO, Dennis Muilenburg, lavishly, paying him $23m in 2018, up 27% from the year before.

There was only one problem. The company was losing its ability to make safe airplanes. As Scott Hamilton, an aerospace analyst and editor of Leeham News and Analysis, puts it: “Boeing Commercial Airplanes clearly has a systemic problem in designing, producing and delivering airplanes.”

Something is wrong with today’s version of capitalism. It’s not just that it’s unfair. It’s that it’s no longer capable of delivering products that work. The root cause is the generation of high and persistent profits, to the exclusion of production. We have let financiers take over our corporations. They monopolize industries and then loot the corporations they run.

The executive team at Boeing is quite skilled – just at generating cash, rather than as engineers. Boeing’s competitive advantage centered on politics, not planes. The corporation is now a political machine with a side business making aerospace and defense products. Boeing’s general counsel, former judge Michael Luttig, is the former boss of the FBI director, Christopher Wray, whose agents are investigating potential criminal activity at the company. Luttig is so well connected in high-level legal circles he served as a groomsman for the supreme court chief justice, John Roberts.

The company’s board members also include Nikki Haley, until recently the United Nations ambassador, former Nato supreme allied commander Edmund PGiambastiani Jr, former AIG CEO Edward M Liddy, and a host of former political officials and private equity icons.

Boeing used its political connections to monopolize the American aerospace industry and corrupt its regulators. In the 1990s, Boeing and McDonnell Douglas merged, leaving America with just one major producer of civilian aircraft. Before this merger, when there was a competitive market, Boeing was a wonderful company. As journalist Jerry Useem put it just 20 years ago, “Boeing has always been less a business than an association of engineers devoted to building amazing flying machines.”

High profits masked the collapse in productive skill until the crashes of the 737 Max

But after the merger, the engineers lost power to the financiers. Boeing could increase prices, lay off workers, reduce quality and spend its cash buying back stock.

And no one could do anything about it. Customers and suppliers no longer had any alternative to Boeing, and Boeing corrupted officials in both parties who were supposed to regulate it. High profits masked the collapse in productive skill until the crashes of the 737 Max.

Boeing’s inability to make good safe airplanes is a clear weakness. It is, after all, an airplane aerospace company. But because Boeing is America’s only commercial airplane company, the crisis is rippling across the economy. Michael O’Leary, CEO of Ryanair, which ordered 58 737 Max planes, says his company cannot grow as planned until Boeing, “gets its shit together”. Contractors and subcontractors slowed production of parts for the airplane, and airline customers scrambled to address shortages of airplanes.

Far from being an anomaly, Boeing is the norm in the corporate world across the west. In 2016, the Economist noted that profits across the corporate sector were high and persistent, a function of a lack of competition across swaths of the economy. If corporations don’t have to compete, they can raise prices to buyers, lower what they pay to suppliers and workers, and reduce quality.

High profits result in sloth and corruption. Many of our industrial goliaths are now run in ways that are fundamentally destructive. General Electric, for instance, was once a jewel of American productive capacity, a corporation created out of George Westinghouse and Thomas Edison’s patents for electric systems. Edison helped invent the lightbulb itself, brightening the world. Today, as a result of decisions made by Jack Welch in the 1990s to juice profit returns, GE slaps its label on lightbulbs made in China. Even worse, if investigator Harry Markopoulos is right, General Electric may in fact be riddled with accounting fraud, a once great productive institution strip-mined by financiers.

These are not the natural, inevitable results of capitalism. Boeing and GE were once great companies, working in capitalist open markets.

So what went wrong? In short, the law. In the 1970s, a host of thinkers on the right and left – from Milton Friedman to George Stigler to Alfred Kahn to the current liberal supreme court justice Stephen Breyer – argued that policymakers should take restraints off capital and get rid of anti-monopoly rules. They used many terms to make this case, including deregulation, cost/benefit analysis, and the consumer welfare standard in antitrust law. They embraced the shareholder theory of capitalism, which emphasizes short-term profits. What followed was a radical consolidation of market power, and then systemic looting.

The disease of inefficiency and graft has spread to the government

Today, high profit margins are a pervasive and corrupting influence across the government and corporate sectors. Private equity firms moved capital from corporations and workers to themselves, destroying once healthy retailers like RadioShack, Toys R Us, Payless and K-Mart.

The disease of inefficiency and graft has spread to the government. In 1992, Harvard Professor Ash Carter, who later become the secretary of defense under Obama, wrote that the Pentagon was too difficult to do business with. “The most straightforward step” to address this, he wrote, “would be to raise the profit margins allowed on defense contracts.” The following year Prof Carter was appointed assistant secretary of defense for international security policy in the first Clinton administration, which followed his advice.

Earlier this year, the defense department found that one defense contractor run by private equity executives had profit margins of up to 4,451% on spare parts it sold to the military. Consulting giant McKinsey was recently caught trying to charge the government $3m a year for the services of a recent college graduate.

The ultimate result of concentrating wealth and corrupting government is to concentrate power in the hands of a few. We’ve been here before. In the 1930s, fascists in Italy and Germany were gaining strength, as were communists in the Russia. Meanwhile, leaders in liberal democracies were confronted by a frightened populace losing faith in democracy. American political leaders were able to take on domestic money lords with a radical antitrust campaign to break the power of the plutocrats. Today we are in a similar situation, with autocrats making an increasingly persuasive case that liberal democracy is weak.

The solution to this political crisis is fairly simple, and it involves two basic principles. One, policymakers have to increase competition for large powerful companies, to bring profits down. Executives should spend their time competing with each other to build quality products, not finding ways of attracting former generals, or administration officials to their board of directors. Two, policymakers should raise taxes on wealth and high incomes to radically reduce the concentration of wealth, which will make looting irrational.

Our system is no longer aligning rewards with productive skill. Despite the 737 Max crisis, Boeing’s stock price is still twice as high as in July 2015, when Muilenburg took over as CEO. That right there is what is broken about modern capitalism. We had better fix it fast. more

The economic nutcase behind the coup attempt in Venezuala


The economic takeover of the country with the largest oil deposits is being planned by a Milton Friedman disciple from Venezuela. He is currently at Harvard—that rat's nest of neoliberalism. Some say ideas don't matter. Well strap yourself in—apparently this guy has the ear of Donald Trump. Just ghastly!

Ricardo Hausmann Is Taking Milton Friedman’s Lessons to Venezuela


Tanya Rawal-Jindia | February 9, 2019


For a few years now, there has been a tendency to compare Donald Trump to Richard Nixon, but the more urgent comparison in the face of the Venezuelan crisis is one between two well-pedigreed economists: Milton Friedman and Ricardo Hausmann.

Under Nixon’s reign, Milton Friedman was the “intellectual” who started to gain excessive power. Friedman was a trained economist, earning a doctorate at Columbia University, with teaching and research stints at the Universities of Chicago and Stanford.

And under Trump, we have another trained economist: Ricardo Hausmann. He received his doctorate from Cornell University and is the director for the Center of International Development at Harvard University.

For years now, Ricardo Hausmann has been suggesting that the solution for Venezuela’s socialist “crisis” is a U.S. invasion or “intervention.”


What we are seeing in Venezuela is not a sudden rise in the people demanding new leadership by Juan Guiadó, a man they just heard of in late January 2019. Rather, this “crisis”—a word that reinforces the illusion of an abrupt disaster—is a careful and hyper-theorized plan that was concocted in the office of a Harvard University professor. A year ago, Hausmann posted on his own blog a solution that asks the National Assembly to impeach Venezuelan president Nicolás Maduro. His expert suggestion is that “the Assembly could constitutionally appoint a new government, which in turn could request military assistance from a coalition of the willing, including Latin American, North American, and European countries.”

Direct violations of Article 2(4) of the United Nations Charter aside, Hausmann openly compares his plan to the U.S. “liberating” Panama in 1989. Do Americans really want to be asked for reparations in 20 years for Venezuela? Currently, the United States is facing such demands for Panamanians with support from the Inter-American Commission on Human Rights (IACHR). Thousands of lives were lost in Panama, countless lives ruined. And Hausmann is asking the United States to repeat this devastation.

Last year was not the first time Hausmann openly spoke of destabilizing Venezuela. In 2014, after Hausmann advocated for Venezuela to default on its loans, the economist was called out by President Maduro for attempting to destabilize Venezuela. It was at this time that Hausmann was given the nickname “academic hitman” by Maduro, who planned to bring legal action against the Harvard professor for speaking on behalf of the agencies that were supporting his well-funded and pro-International Monetary Fund (IMF) research.

Hausmann has been referred to as the informal mentor to Juan Guiadó. Indirect might be a better word to describe the mentorship, as there is a middleman between Hausmann and Guiadó: Leopoldo López, the leader of Popular Will. It is through Hausmann’s mentorship of López (who brought Guiadó under his wing and “plotted” his rise to lead the coup) that Hausmann’s plans are now coming to action. And, as with Milton Friedman in his time, the relationship between López and Hausmann gives us further insight into the use of academic capital to assert its will and, in turn, gain power.

In 2014, when Maduro arrested López for inciting violence in Caracas, Hausmann got Harvard University to rally behind the anti-socialist agitator and give him an honorary degree from the prestigious institution.

It is this ongoing attempt to bring Venezuela to its knees through the strategic use of highbrow higher education and the formal education of economists that conjures up memories of Friedman’s role with Chile. Friedman was able to successfully implement a neoliberal system in Chile by way of Chilean economist Sergio de Castro—whom Friedman trained in a way that Hausmann’s training of López echoes.

Both López and de Castro were indoctrinated with ideas rooted in Milton Friedman’s 1962 manifesto Capitalism and Freedom, where he states:

“The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.”

It is this tricky and somewhat contradictory sentence that people across the globe have been duped into believing—that if we have absolute freedom in the marketplace, we will, therefore, have absolute political freedom. Milton carried on with selling the idea that political freedom and economic freedom were somehow separate, but he did so only by intertwining the two. Somehow, divesting the people of public space—everything from schools to forests—for the sake of privatization was not considered a violation of political freedom. And the fact that individuals would be sharing their freedoms with corporations, in addition to the general lack of equity and capital shared by most individuals, got lost in his rhetoric.

The Friedman promise was—and continues to be—so great that absolute faith in the market became commonplace. Hausmann’s plan for Venezuela is an inheritance of that faith. But if Hausmann’s plans to oust Maduro and bring the IMF into Venezuela are successful, it will not be because of the people’s faith in the market; it will be because of the increasing faith held for elite education.

Maduro was right to call Hausmann a “financial hitman” in September 2014. The term alludes to John Perkins’ Confessions of an Economic Hitman, 2004 book about professionals who convince underdeveloped nations (Venezuela in Hausmann’s case, as well as other countries of the Global South generally) to accept development loans that are designed to benefit the already-elite. Hausmann snapped back at Maduro by calling the president a “tropical thug”—the use of “tropical” here suggests an old-school, Jared Diamond-era geographic bias against the Global South. This attitude might be more easily visible in his own economic theories of “Original Sin” that propose bringing a single currency to emerging markets, leaving them absolutely dependent on the Global North.

In addition to being a “financial hitman,” Hausmann could also aptly be described as an “academic hitman,” as both Maduro and Bloomberg Business Week have done. For the latter, the power of the academic hitman does not come from the individual’s corruptive practices or sales skills. Rather, an academic hitman’s power comes from blind faith in education institutions, especially the ones who are open to making bedfellows with development agencies and corporations that have too much to gain from the fall of elected socialist leaders.

Ricardo Hausmann is both an economic and academic hitman, one who is willing to sell off his own birth country—a task Milton Friedman never had to face. more

The economic nutcase behind the coup attempt in Venezuala


The economic takeover of the country with the largest oil deposits is being planned by a Milton Friedman disciple from Venezuela. He is currently at Harvard—that rat's nest of neoliberalism. Some say ideas don't matter. Well strap yourself in—apparently this guy has the ear of Donald Trump. Just ghastly!

Ricardo Hausmann Is Taking Milton Friedman’s Lessons to Venezuela


Tanya Rawal-Jindia | February 9, 2019


For a few years now, there has been a tendency to compare Donald Trump to Richard Nixon, but the more urgent comparison in the face of the Venezuelan crisis is one between two well-pedigreed economists: Milton Friedman and Ricardo Hausmann.

Under Nixon’s reign, Milton Friedman was the “intellectual” who started to gain excessive power. Friedman was a trained economist, earning a doctorate at Columbia University, with teaching and research stints at the Universities of Chicago and Stanford.

And under Trump, we have another trained economist: Ricardo Hausmann. He received his doctorate from Cornell University and is the director for the Center of International Development at Harvard University.

For years now, Ricardo Hausmann has been suggesting that the solution for Venezuela’s socialist “crisis” is a U.S. invasion or “intervention.”


What we are seeing in Venezuela is not a sudden rise in the people demanding new leadership by Juan Guiadó, a man they just heard of in late January 2019. Rather, this “crisis”—a word that reinforces the illusion of an abrupt disaster—is a careful and hyper-theorized plan that was concocted in the office of a Harvard University professor. A year ago, Hausmann posted on his own blog a solution that asks the National Assembly to impeach Venezuelan president Nicolás Maduro. His expert suggestion is that “the Assembly could constitutionally appoint a new government, which in turn could request military assistance from a coalition of the willing, including Latin American, North American, and European countries.”

Direct violations of Article 2(4) of the United Nations Charter aside, Hausmann openly compares his plan to the U.S. “liberating” Panama in 1989. Do Americans really want to be asked for reparations in 20 years for Venezuela? Currently, the United States is facing such demands for Panamanians with support from the Inter-American Commission on Human Rights (IACHR). Thousands of lives were lost in Panama, countless lives ruined. And Hausmann is asking the United States to repeat this devastation.

Last year was not the first time Hausmann openly spoke of destabilizing Venezuela. In 2014, after Hausmann advocated for Venezuela to default on its loans, the economist was called out by President Maduro for attempting to destabilize Venezuela. It was at this time that Hausmann was given the nickname “academic hitman” by Maduro, who planned to bring legal action against the Harvard professor for speaking on behalf of the agencies that were supporting his well-funded and pro-International Monetary Fund (IMF) research.

Hausmann has been referred to as the informal mentor to Juan Guiadó. Indirect might be a better word to describe the mentorship, as there is a middleman between Hausmann and Guiadó: Leopoldo López, the leader of Popular Will. It is through Hausmann’s mentorship of López (who brought Guiadó under his wing and “plotted” his rise to lead the coup) that Hausmann’s plans are now coming to action. And, as with Milton Friedman in his time, the relationship between López and Hausmann gives us further insight into the use of academic capital to assert its will and, in turn, gain power.

In 2014, when Maduro arrested López for inciting violence in Caracas, Hausmann got Harvard University to rally behind the anti-socialist agitator and give him an honorary degree from the prestigious institution.

It is this ongoing attempt to bring Venezuela to its knees through the strategic use of highbrow higher education and the formal education of economists that conjures up memories of Friedman’s role with Chile. Friedman was able to successfully implement a neoliberal system in Chile by way of Chilean economist Sergio de Castro—whom Friedman trained in a way that Hausmann’s training of López echoes.

Both López and de Castro were indoctrinated with ideas rooted in Milton Friedman’s 1962 manifesto Capitalism and Freedom, where he states:

“The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.”

It is this tricky and somewhat contradictory sentence that people across the globe have been duped into believing—that if we have absolute freedom in the marketplace, we will, therefore, have absolute political freedom. Milton carried on with selling the idea that political freedom and economic freedom were somehow separate, but he did so only by intertwining the two. Somehow, divesting the people of public space—everything from schools to forests—for the sake of privatization was not considered a violation of political freedom. And the fact that individuals would be sharing their freedoms with corporations, in addition to the general lack of equity and capital shared by most individuals, got lost in his rhetoric.

The Friedman promise was—and continues to be—so great that absolute faith in the market became commonplace. Hausmann’s plan for Venezuela is an inheritance of that faith. But if Hausmann’s plans to oust Maduro and bring the IMF into Venezuela are successful, it will not be because of the people’s faith in the market; it will be because of the increasing faith held for elite education.

Maduro was right to call Hausmann a “financial hitman” in September 2014. The term alludes to John Perkins’ Confessions of an Economic Hitman, 2004 book about professionals who convince underdeveloped nations (Venezuela in Hausmann’s case, as well as other countries of the Global South generally) to accept development loans that are designed to benefit the already-elite. Hausmann snapped back at Maduro by calling the president a “tropical thug”—the use of “tropical” here suggests an old-school, Jared Diamond-era geographic bias against the Global South. This attitude might be more easily visible in his own economic theories of “Original Sin” that propose bringing a single currency to emerging markets, leaving them absolutely dependent on the Global North.

In addition to being a “financial hitman,” Hausmann could also aptly be described as an “academic hitman,” as both Maduro and Bloomberg Business Week have done. For the latter, the power of the academic hitman does not come from the individual’s corruptive practices or sales skills. Rather, an academic hitman’s power comes from blind faith in education institutions, especially the ones who are open to making bedfellows with development agencies and corporations that have too much to gain from the fall of elected socialist leaders.

Ricardo Hausmann is both an economic and academic hitman, one who is willing to sell off his own birth country—a task Milton Friedman never had to face. more

Financing the Green New Deal


Sister Ellen—Keep on preaching the truth as demonstrated by the successful social actions of North Dakota's Non-Partisan League, the KfW Bank of Germany, and FDR's RFC. The BIGGEST single impediment to a more enlightened approach to the oncoming catastrophe that is climate change is the fact that we allow our monetary system to be run by thieves.

The Financial Secret Behind Germany’s Green Energy Revolution

Ellen Brown | January 26, 2019

The “Green New Deal” endorsed by Rep. Alexandria Ocasio-Cortez, D.-N.Y., and more than 40 other House members has been criticized as imposing a too-heavy burden on the rich and upper-middle-class taxpayers who will have to pay for it. However, taxing the rich is not what the Green New Deal resolution proposes. It says funding would come primarily from certain public agencies, including the U.S. Federal Reserve and “a new public bank or system of regional and specialized public banks.”

Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, as do China, Germany and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belong to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the U.S. Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.

China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former adviser on President Donald Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”


The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s nonprofit Sparkassen banks, KfW has largely funded the country’s green energy revolution.

Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KfW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.

KfW is one of the world’s largest development banks, with assets totaling $566.5 billion as of December 2017. Ironically, the initial funding for its capitalization came from the United States, through the Marshall Plan in 1948. Why didn’t we fund a similar bank for ourselves? Simply because powerful Wall Street interests did not want the competition from a government-owned bank that could make below-market loans for infrastructure and development. Major U.S. investors today prefer funding infrastructure through public-private partnerships, in which private partners can reap the profits while losses are imposed on local governments.

KfW and Germany’s Energy Revolution

Renewable energy in Germany is mainly based on wind, solar and biomass. Renewables generated 41 percent of the country’s electricity in 2017, up from just 6 percent in 2000; and public banks provided over 72 percent of the financing for this transition. In 2007-09, KfW funded all of Germany’s investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide on a major scale. This is the sort of catalytic role that development banks can play—kickstarting a major structural transformation by funding and showcasing new technologies and sectors.

KfW is not only one of the biggest financial institutions but has been ranked one of the two safest banks in the world. (The other, Switzerland’s Zurich Cantonal Bank, is also publicly owned.) KfW sports triple-A ratings from all three major rating agencies—Fitch, Standard and Poor’s, and Moody’s. The bank benefits from these top ratings and the statutory guarantee of the German government, which allow it to issue bonds on very favorable terms and therefore to lend on favorable terms, backing its loans with the bonds.

KfW does not work through public-private partnerships, and it does not trade in derivatives and other complex financial products. It relies on traditional lending and grants. The borrower is responsible for loan repayment. Private investors can participate, but not as shareholders or public-private partners. Rather, they can invest in “Green Bonds,” which are as safe and liquid as other government bonds and are prized for their green earmarking. The first “Green Bond—Made by KfW” was issued in 2014 with a volume of $1.7 billion and a maturity of five years. It was the largest Green Bond ever at the time of issuance and generated so much interest that the order book rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only 0.375 percent. By 2017, the issue volume of KfW Green Bonds reached $4.21 billion.

Investors benefit from the high credit and sustainability ratings of KfW, the liquidity of its bonds, and the opportunity to support climate and environmental protection. For large institutional investors with funds that exceed the government deposit insurance limit, Green Bonds are the equivalent of savings accounts—a safe place to park their money that provides a modest interest. Green Bonds also appeal to “socially responsible” investors, who have the assurance with these simple and transparent bonds that their money is going where they want it to. The bonds are financed by KfW from the proceeds of its loans, which are also in high demand due to their low interest rates, which the bank can offer because its high ratings allow it to cheaply mobilize funds from capital markets and its public policy-oriented loans qualify it for targeted subsidies.

Roosevelt’s Development Bank: The Reconstruction Finance Corporation

KfW’s role in implementing government policy parallels that of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the 1930s. At that time, U.S. banks were bankrupt and incapable of financing the country’s recovery. President Franklin D. Roosevelt attempted to set up a system of 12 public “industrial banks” through the Federal Reserve, but the measure failed. Roosevelt then made an end run around his opponents by using the RFC that had been set up earlier by President Herbert Hoover, expanding it to address the nation’s financing needs.

The RFC Act of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). With those resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. As with KfW’s loans, its funding source was the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms and much more; it funded all of this while generating income for the government.

The RFC was so successful that it became America’s largest corporation and the world’s largest banking organization. Its success, however, may have been its nemesis. Without the emergencies of depression and war, it was a too-powerful competitor of the private banking establishment; and in 1957, it was disbanded under President Dwight D. Eisenhower. That’s how the United States was left without a development bank at the same time Germany and other countries were hitting the ground running with theirs.

Today some U.S. states have infrastructure and development banks, including California, but their reach is very small. One way they could be expanded to meet state infrastructure needs would be to turn them into depositories for state and municipal revenue. Rather than lending their capital directly in a revolving fund, this would allow them to leverage their capital into 10 times that sum in loans, as all depository banks are able to do, as I’ve previously explained.

The most profitable and efficient way for national and local governments to finance public infrastructure and development is with their own banks, as the impressive track records of KfW and other national development banks have shown. The RFC showed what could be done even by a country that was technically bankrupt, simply by mobilizing its own resources through a publicly owned financial institution. We need to resurrect that public funding engine today, not only to address the national and global crises we are facing now but for the ongoing development the country needs in order to manifest its true potential.

© 2019 TruthDig

Financing the Green New Deal


Sister Ellen—Keep on preaching the truth as demonstrated by the successful social actions of North Dakota's Non-Partisan League, the KfW Bank of Germany, and FDR's RFC. The BIGGEST single impediment to a more enlightened approach to the oncoming catastrophe that is climate change is the fact that we allow our monetary system to be run by thieves.

The Financial Secret Behind Germany’s Green Energy Revolution

Ellen Brown | January 26, 2019

The “Green New Deal” endorsed by Rep. Alexandria Ocasio-Cortez, D.-N.Y., and more than 40 other House members has been criticized as imposing a too-heavy burden on the rich and upper-middle-class taxpayers who will have to pay for it. However, taxing the rich is not what the Green New Deal resolution proposes. It says funding would come primarily from certain public agencies, including the U.S. Federal Reserve and “a new public bank or system of regional and specialized public banks.”

Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, as do China, Germany and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belong to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the U.S. Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.

China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former adviser on President Donald Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”


The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s nonprofit Sparkassen banks, KfW has largely funded the country’s green energy revolution.

Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KfW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.

KfW is one of the world’s largest development banks, with assets totaling $566.5 billion as of December 2017. Ironically, the initial funding for its capitalization came from the United States, through the Marshall Plan in 1948. Why didn’t we fund a similar bank for ourselves? Simply because powerful Wall Street interests did not want the competition from a government-owned bank that could make below-market loans for infrastructure and development. Major U.S. investors today prefer funding infrastructure through public-private partnerships, in which private partners can reap the profits while losses are imposed on local governments.

KfW and Germany’s Energy Revolution

Renewable energy in Germany is mainly based on wind, solar and biomass. Renewables generated 41 percent of the country’s electricity in 2017, up from just 6 percent in 2000; and public banks provided over 72 percent of the financing for this transition. In 2007-09, KfW funded all of Germany’s investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide on a major scale. This is the sort of catalytic role that development banks can play—kickstarting a major structural transformation by funding and showcasing new technologies and sectors.

KfW is not only one of the biggest financial institutions but has been ranked one of the two safest banks in the world. (The other, Switzerland’s Zurich Cantonal Bank, is also publicly owned.) KfW sports triple-A ratings from all three major rating agencies—Fitch, Standard and Poor’s, and Moody’s. The bank benefits from these top ratings and the statutory guarantee of the German government, which allow it to issue bonds on very favorable terms and therefore to lend on favorable terms, backing its loans with the bonds.

KfW does not work through public-private partnerships, and it does not trade in derivatives and other complex financial products. It relies on traditional lending and grants. The borrower is responsible for loan repayment. Private investors can participate, but not as shareholders or public-private partners. Rather, they can invest in “Green Bonds,” which are as safe and liquid as other government bonds and are prized for their green earmarking. The first “Green Bond—Made by KfW” was issued in 2014 with a volume of $1.7 billion and a maturity of five years. It was the largest Green Bond ever at the time of issuance and generated so much interest that the order book rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only 0.375 percent. By 2017, the issue volume of KfW Green Bonds reached $4.21 billion.

Investors benefit from the high credit and sustainability ratings of KfW, the liquidity of its bonds, and the opportunity to support climate and environmental protection. For large institutional investors with funds that exceed the government deposit insurance limit, Green Bonds are the equivalent of savings accounts—a safe place to park their money that provides a modest interest. Green Bonds also appeal to “socially responsible” investors, who have the assurance with these simple and transparent bonds that their money is going where they want it to. The bonds are financed by KfW from the proceeds of its loans, which are also in high demand due to their low interest rates, which the bank can offer because its high ratings allow it to cheaply mobilize funds from capital markets and its public policy-oriented loans qualify it for targeted subsidies.

Roosevelt’s Development Bank: The Reconstruction Finance Corporation

KfW’s role in implementing government policy parallels that of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the 1930s. At that time, U.S. banks were bankrupt and incapable of financing the country’s recovery. President Franklin D. Roosevelt attempted to set up a system of 12 public “industrial banks” through the Federal Reserve, but the measure failed. Roosevelt then made an end run around his opponents by using the RFC that had been set up earlier by President Herbert Hoover, expanding it to address the nation’s financing needs.

The RFC Act of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). With those resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. As with KfW’s loans, its funding source was the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms and much more; it funded all of this while generating income for the government.

The RFC was so successful that it became America’s largest corporation and the world’s largest banking organization. Its success, however, may have been its nemesis. Without the emergencies of depression and war, it was a too-powerful competitor of the private banking establishment; and in 1957, it was disbanded under President Dwight D. Eisenhower. That’s how the United States was left without a development bank at the same time Germany and other countries were hitting the ground running with theirs.

Today some U.S. states have infrastructure and development banks, including California, but their reach is very small. One way they could be expanded to meet state infrastructure needs would be to turn them into depositories for state and municipal revenue. Rather than lending their capital directly in a revolving fund, this would allow them to leverage their capital into 10 times that sum in loans, as all depository banks are able to do, as I’ve previously explained.

The most profitable and efficient way for national and local governments to finance public infrastructure and development is with their own banks, as the impressive track records of KfW and other national development banks have shown. The RFC showed what could be done even by a country that was technically bankrupt, simply by mobilizing its own resources through a publicly owned financial institution. We need to resurrect that public funding engine today, not only to address the national and global crises we are facing now but for the ongoing development the country needs in order to manifest its true potential.

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