Ilene’s the editor at Phil’s Stock World, where she keeps readers up to pace with the latest stock market news and events from around the internet. Visit her at Phil’s Favorites site. Her background is in law and biological science, so she may stray from financial matters every so often. (For instance, she has been writing a series on swine flu. Find the latest here.)
J.S. Kim is the founder of maalamalama, an independent investment research and wealth consulting firm. J.S. accurately called the recent global financial crisis, sharing his thoughts on his investment blog, to his subscribers, and in a series of YouTube videos. His articles have been reprinted online by Reuters, the New York Times, USA Today, the Wall Street Journal, the Financial Times and the International Business Times. He recently authored the timely book, “Confessions of a Wall Street Insider, a Zen approach to making a fortune from the coming global economic crisis.” Recently, J.S. Kim and I have been speaking via Skype and email about the banking industry, the Federal Reserve, fixes for the economy, and current investment trends.
Ilene: Hi J.S., thanks for speaking with me and showing me how to use Skype; this is pretty easy. Can you tell me a little about your background and what led you into the financial field?
J.S.: I studied neurobiology at University of Pennsylvania and then earned two masters at the University of Texas, in Public Policy and Business Administration. After graduating, I began working in the Private Wealth Management division of Wells Fargo. Subsequently, I worked for several years at Smith Barney. In 2005, I launched my company, maalamalama.
Ilene: What did you learn while working in the banking industry?
J.S.: I was seeing an unsettling picture of industry excesses. I saw problems developing, for example, with mortgages — no document loans or liar loans. If the loan application didn’t support a mortgage, the loan might be denied at first, but then it was sent through a special process to convert it to a no document loan. Every bank did it. This was not specific to Wells Fargo. All the major U.S. banks had this “don’t ask, don’t tell” policy, so they could say they didn’t know. They either should have known from the start that the mortgages couldn’t be paid back, or they didn’t care because they were making huge commissions up front. So they would make the loans and then slice and dice them up and quickly sell them off.
Ilene: The banks knew what they were doing and knew they’d be bailed out as well?
J.S.: Yes, this happened before in the 1920s and I believe they knew it would happen again. The process of taking the clients’ money and making loans that are gambles (heads I win, tails the taxpayer pays) has a history that goes back to the Great Depression. They have the best of both worlds. The reward for risks stays with the banks top executives, but losses are shifted to the taxpayers.
This is a pattern that happens over and over again — the robbing of a nation’s wealth for the benefit of the elite banking oligarchs. This is nothing new, and nobody should have been surprised by ex-Goldman Sachs CEO and then US Treasury Secretary’s bait and switch with the $700+ billion bailout plan in which he promised to use the money to help American homeowners stay in their homes. Paulson promptly reneged on the deal as soon as Congress passed the bill and gave the money to his banking buddies.
Ilene: So do you believe it was a conspiracy to rid the population of wealth and transfer it to the bankers?
J.S.: I really don’t subscribe to conspiracy theories. Rather the system enables the bankers to do what they do. The banking industry and the media take the tactic of calling people who believe that cycles of boom and bust are intentional, “conspiracy theorists.” It’s the simplest way for the bankers to keep their power by calling everyone that exposes their immorality and greed as crazy conspiracy loonies. As Simon Johnson said in his article, “The Quiet Coup” (The Atlantic, May 2009), the bankers have taken over all major world governments so the public never receives the truth. Instead, we have to look for it.
Education has been taken over by the moneyed elites as well. Keynesian economics, not the Austrian theory, is the predominantly accepted theory and the one taught in every major economics school today. I graduated from the University of Texas at Austin with my MBA, but in that time, I hadn’t learned anything truthful about economics. What I learned since is in almost direct opposition to what my school taught.
The central bankers’ reach extends to academia and permeates the field. There was a good article on this recently in Huffington Post. This is not conspiracy. This is stifling of an opposing viewpoint, the one that would enlighten the world to the fraud of our global monetary system and our global banking system.
Ilene: Was the article by Ryan Grim, “How the Federal Reserve bought the economics profession?”
J.S.: Yes, that’s the one. A journalism professor of mine, Professor Mercedes Lynn de Uriarte from the University of Texas, once told me that if I only read the mainstream newspapers or watched the mainstream TV news channels, I would never understand the truth about any major political event. When I asked her what she meant by this, she told me that all major media outlets frame stories by excluding relevant facts. Therefore, one must dig for these relevant facts that would be reported through independent media channels.
Our education about the economy, the monetary system and the banking system is the same. Government and academic officials continually exclude and withhold relevant facts from us. If one truly wants to consider oneself “educated” in matters of our monetary system, one must dig for the truth. I guarantee what one discovers would be shocking to most people.
Ilene: When you say “they,” who do you mean?
J.S.: The government officials that have allegiances to bankers and the private individuals that control the world’s most important central banks.
Ilene: What do you see as the source of the problems caused by the banking system?
J.S.: Central banks are the original creators of the collapse. For instance, the bankers have caused problems inherent in a fractional reserve lending system by allowing much less than 10% to be kept in reserve. A ten percent reserve was way too much for the bankers, and over time, the member banks of the Federal Reserve system lobbied the U.S. Federal Reserve (through Chairman Alan Greenspan back then) to ensure that today, the real requirement is less than 2%, and in many cases, incredibly, zero percent. The central bankers run the economy, not the government.
Ilene: They lobby the Federal Reserve?
J.S.: Yes, that’s correct, Ilene. The banks lobbied the Fed chairman directly.
To read the rest of this interview, please click here.