March 2023 - cypherpunks - lists.cpunks.org

Thiel backs Vivek for worlds best endowed man
by professor rat 21 Mar '23

21 Mar '23

Thiel backs Vivek for worlds best endowed man https://www.google.com/search?q=la+cage+aux+folles+2+benny+Luke+&tbm=isch&v… Reposts not all pervasive surveillance for the fascist-criminal CIA

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Russian State-Sponsored TV Network's Attempt to Dismiss Copyright Lawsuit On Fair Use Grounds Denied
by Gunnar Larson 21 Mar '23

21 Mar '23

https://www.lexology.com/library/detail.aspx?g=ff9f1af5-cc8a-473a-822b-8890… March 18, 2022 TV-Novosti, a non-profit operating the Russian state-controlled RT(formerly Russia Today) television networks and 38 associated RT YouTube channels, has been sued for copyright infringement by Business Casual, an American media company that creates documentary content, based on its use of translated clips of Business Casual's documentaries in its own videos posted to YouTube. Business Casual creates short original historical documentaries which it posts to its YouTube channel. Its documentaries frequently feature photographs of historical figures, using a process called “parallax” which “transforms century-old low-resolution photographs into dramatically restored high-resolution photographs” and “turn[s] two-dimensional images into three-dimensional models . . . simulating a depth-of-field. This optical illusion provides Business Casual’s videos with an immersive three-dimensional look and feel.” The lawsuit relates to two of Business Casual’s documentaries—“How Rockefeller Built His Trillion Dollar Oil Empire” and “J.P. Morgan Documentary: How One Man Financed America”—clips of which Business Casual alleges TV-Novosti incorporated into three separate videos on its "RT-Arabic" YouTube channel, including portions featuring parallax-enhanced images, altering the brightness and saturation of the copied content and replacing Business Casual's watermark with TV-Novosti's own in order to hide from YouTube's algorithms. TV-Novosti moved to dismiss the copyright claims, arguing that it's use of the clips is protected as fair use. However, after considering each of the four statutory factors, Judge Koeltl of the Southern District of New York denied TV-Novosti's motion, holding that while three of the four factors weighed against finding fair use, "[t]he fourth factor, which the Supreme Court has described as 'the single most important element of fair use,' cannot be determined without further factual development." Specifically, regarding the first factor, concerning the transformation of the use, Judge Koeltl found that while TV-Novosti's videos take portions of the plaintiff’s videos, re-arrange them, and add new commentary to them, TV-Novosti had not made any meaningful changes to the visual clips themselves, and "[m]erely overlaying new audio does not effect a sufficient transformation . . . to find fair use as a matter of law." The Court further noted that TV-Novosti had "not changed the purpose of the parallax-enhanced images," i.e., to provide visual illustration for the overlain audio commentary, but had instead "simply lifted the copyrighted depictions . .. for the purpose of illustrating [TV-Novosti's] own video." In addition, the Court found that the fact that TV-Novosti could have sought to pay for the clips, but didn't, and tried to hide its use of the excerpts from YouTube's algorithms, also weighed against a finding a fair use under the first factor. Regarding the second factor, concerning the nature of the copyrighted work, the Court initially noted that factual material such as that at issue, "cuts less closely to the core of copyright." Nevertheless, the Court held that the fact that source material for Business Casual's videos was in the public domain weighed against finding fair use, because TV Novosti could have simply used public domain photos of the historical figures, rather than the modified clips, to create its videos. Regarding the third factor, concerning the amount of use in relation to the copyrighted work as a whole, the Court noted that while only "small portions of the entire copyrighted works were used"—excerpts of 7 seconds, 1 minute and 28 seconds, and 8 minutes and 50 seconds in length—the portions were "not so trivial as to warrant dismissal under the de minimis doctrine." Lastly, regarding the fourth factor, concerning the effect of the use on the potential market for or value of the copyrighted work, the Court noted that this factor “ask[s] not whether the second work would *damage* the market for the first (by, for example, devaluing it through parody or criticism), but whether it *usurps* the market for the first by offering a competing substitute.” With this framing, the Court thus found that while one the one hand, TV-Novosti's "videos are alternative ways of learning about the lives of J.P. Morgan and John D. Rockefeller," on the other hand, they "have a broader focus and are in a different language, meaning that they cater to a different audience." These differences, the Court held, were significant enough to preclude the Court from "determining the effect of [TV-Novosti's] videos on the market for [Business Casual's] videos at this time." The Court's recognition of the weight of the fourth factor in determining fair use means that there may still be hope for TV-Novosti—time (and fact discovery) will tell. For now, the takeaway may very well be that parties seeking to raise a fair use defense should take care to emphasize any characteristics of their use that distinguish not just their work, but its target audience, including the scope of the work and the language (if any) which communicates it. *** *Business Casual Holdings, LLC v. TV-Novosti*, No. 21-CV-2007 (JGK), 2022 WL 784049 (S.D.N.Y. Mar. 14, 2022)

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Fwd: Bank.org | SHELF CHARTER (Notice of Intent)
by Gunnar Larson 21 Mar '23

21 Mar '23

Please notice the attached correspondence made to your attention. Additionally, the memo can be reviewed here: https://docs.google.com/document/d/1d1WU0ScurhEXwNm1YY-e2bPS6CDZK6nJt-ue0PX… ---------- Forwarded message --------- From: Gunnar Larson <g(a)xny.io> Date: Sat, Mar 13, 2021, 2:32 PM Subject: Bank.org | SHELF CHARTER (Notice of Intent) To: Shah, Seema (DFS) <seema.shah(a)dfs.ny.gov>, <innovation(a)dfs.ny.gov> Cc: dfs.sm.DfsNext <DfsNext(a)dfs.ny.gov>, Joshua Plant <joshua(a)plantpr.com>, <VCLicenseQuestions(a)dfs.ny.gov>, Garvin, Sheila Y (DHR) < Sheila.Garvin(a)dhr.ny.gov>, Paasewe, Siaka (DHR) <Siaka.Paasewe(a)dhr.ny.gov> Honorable Madam Superintendent: Bank.org submits notice of intent to begin preliminary conversations with your office to earn your Shelf Charter designation approval. - Please notice the attached correspondence made to your attention. Additionally, the memo can be reviewed here: https://docs.google.com/document/d/1d1WU0ScurhEXwNm1YY-e2bPS6CDZK6nJt-ue0PX… We will contact Ms. Seema Shah's office on Monday 15 March with hopes of scheduling Bank.org's first series of discussions on the Superintendent's Shelf Charter consideration. With great appreciation, Gunnar Larson -- *Gunnar Larson - xNY.io <http://www.xNY.io> | Bank.org <http://Bank.org>* MSc <https://www.unic.ac.cy/blockchain/msc-digital-currency/?utm_source=Google&u…> - Digital Currency MBA <https://www.unic.ac.cy/business-administration-entrepreneurship-and-innovat…> - Entrepreneurship and Innovation (ip) G(a)xNY.io +1-646-454-9107 New York, New York 10001 March 25, 2021 BY ELECTRONIC MAIL New York State Department of Financial Services Honorable Superintendent Ms. Linda Lacewell Re: Bank.org Shelf Charter Dear Madam Superintendent: xNY.io and Bank.org must innovate beyond market manipulation and cross-border computer crimes that present serious risks, both to consumers and to the safety and soundness of financial services institutions. As the cryptocurrency markets continue to evolve, the New York Department of Financial Services (NY-DFS) has directed virtual currency companies like xNY.io to take the necessary steps to guard against fraud and to be extra vigilant about manipulation. Today’s memo aims to innovate the market and can only evolve with your strong regulatory supervision. xNY.io’s recent Tech Sprint Submission, “A Design Mechanism to Report Digital Regulatory Computer Crimes,” was filed with your esteemed office on March 2, 2021. xNY.io has discussed the matter of marketplace manipulation with the NY-DFS innovation team. We have both agreed marketplace manipulation is an issue and specifically affects xNY.io and Bank.org’s bottom line. Our mutual moods seemed aligned on innovation. However, there is an air of dienfranchiemt. Madam Superintendent, recently I published an Open Letter to Bloomberg on Modern BitLicense Logic. Some BitLicensees candidly offer feedback regarding New York State borders. There seems to be some confusion concerning the BitLicense’s jurisdictional reach and given that xNY.io and Bank.org’s business falls under DFS surveillance and the USA PATRIOT Act, Congress amended the definition of “protected computer” to make clear that this term includes computers outside of the United States so long as they affect “interstate or foreign commerce or communication of the United States.” 18 U.S.C. § 1030(e)(2)(B) (2001). This change addresses situations where an attacker within the United States attacks a computer system located abroad and situations in which individuals in foreign countries route communications through the United States as they hack from one foreign country to another. Both situations can therefore be violations of section 1030. As such, it would seem that BitLicensees are subject to New York Law while operating outside of New York (including Human Rights Law). The utility of virtual currency is cross-border. New York is not a walled garden for bad actors to camp while profiting off of the back of xNY.io and Bank.org wrongfully across global markets. The textbook definition of marketplace manipulation has been discussed with the patient Ms. Seema Shah, a DFS innovation leader whom we look forward to consulting with over days and weeks to come. Meanwhile, it is our observation that the Bitcoin Blockchain has been targeted by New York firms licenced by your office, such as Ripple and Goldman Sachs. In Africa, we experienced how these various actions affected the integrity of our global enterprise. The Supreme Court placed emphasis on the central role of deception to the concept of fraud—“the words ‘to defraud’ . . . primarily mean to cheat, . . . usually signify the deprivation of something of value by trick, deceit, chicane, or overreaching, and . . . do not extend to theft by violence, or to robbery or burglary.” Id. at 627 (construing Hammerschmidt v. United States. 265 U.S. 182 (1924)). xNY.io - CryptoBank is painfully aware of a “Crypto Bank” loophole between New York, Europe and Africa. We submitted a Declaration for the Superintendent's review on the matter of this loophole as it relates to Human Rights from our graduate research as a New Yorker traveling abroad. New York banks are not immune to Civil and Human Rights abroad, specifically if these violations are using computers against other New Yorkers’ enterprises (aka the aforementioned xNY.io - CryptoBank loophole concern). xNY.io and Bank.org followed DFS direction: Immediately upon discovering any wrongdoing, a virtual currency entity must submit to DFS a report stating all pertinent details known at the time of the report. Virtual currency entities must also submit to DFS, as soon as practicable, a further report or reports of any material developments relating to the originally reported events, along with (we have been actively reporting the matter to DFS, only greeted with silence and Tech Sprint denial…) A statement of the actions taken or proposed to be taken with respect to such developments, and A statement of changes, if any, in the virtual currency entity’s operations that have been put in place or are planned in order to avoid repetition of being affected by similar circumstances. Specific to points two and three above: This memorandum is to properly disclose xNY.io’s agreement and purchase of Bank.org with further intent to seek Shelf Charter approval from your office. Bank.org - Shelf Charter Poverty has no borders, and neither does excellence. xNY.io’s campaign for “Modern BitLicense Logic” will forever be grateful for the borders of New York State. Meanwhile, Bank.org’s Shelf Charter is a global concern and DFS should understand our modern, logical international intentions: The purpose of the Department of Financial Services Shelf Charter is to enable parties that currently do not have a bank charter to participate in bidding for failed or failing banks that are being sold by the FDIC. Prior to the preparation of a formal application, an outline of the proposed business plan should be submitted to the Department of Financial Services. At minimum, the outline should include the rationale for organizing the proposed institution. Bank fraud is a serious problem for such a developed country as the United States, whose bank regulators have drawn attention to the increase of these crimes. Having discovered that an unregulated virtual currency sphere (such as in Africa, or other developing markets) is very popular among virtual currency fraudsters, the New York State Department of Financial Services concluded that this kind of regulatory fraud was threatening US national security. xNY.io and Bank.org are interdependent solutions of cutting edge innovation, and we seek to begin dialogue with your office for hopeful 2021 Shelf Carter approval. Our goal was to work through Market Manipulation during the Tech Sprint, however, we were denied participation. The basic problem with New York Bank Innovation is monopoly power, and policy should address that issue directly. If the problem is a lack of transparency and accountability in government activities, one should find ways to open up the public sector to oversight from outsiders. If the problem is an opaque and confusing regulatory structure, rules should be simplified and clarified. As elegantly as possible, xNY.io and Bank.org must strive to innovate beyond a Laissez-faire attitude concerning the systems and processes in which transactions between our peers are now free from (or, almost free from) any form of economic/regulatory interventions such as the BitLicense lacking cross-border regulatory logic concern. Madam Superintendent, bank innovation from the great state of New York touches people on all continents on Earth, and it seems that if given the opportunity, DFS would want to solve any market manipulation matters through technology. xNY.io underscores the need for reporting innovation specific to virtual currency marketplace manipulation and/or other crypto cross-border regulatory arbitrage frameworks directed out of New York, affecting over 1 billion people. Bank of New York’s (BNY Mellon) controversies and legal issues history should not be confused with xNY.io’s future, or even in competition with our marketplace entrance. Libra/Diem/Robinhood/XRP all fail to match xNY.io and Bank.org global innovation, considering the firms’ historical relationships with computer crimes (cross-border). xNY.io intends to offer several products and services, including: a tokenized, programmable virtual currencies called xNY, xBB and xLG; Bank.org’s hopeful charter will provide global custody services for assets; API-based online banking services where customer deposits must be 100% backed by reserves; and prime services for digital assets. xNY.io and Bank.org will operate under the themes of a Universal Declaration on Virtual Currency and Human Rights. Innovating rather than litigating, we hope to begin immediate discussion on Bank.org’s earning your Shelf Charter approval as the most sophisticated solution to innovate and dawn a new legacy of the modern version of the World’s Best Bank. Personally, I am concerned that DFS has potentially ignored xNY.io’s interests ensured through interpretations of specific provisions in the existing national and supra-national legal framework (civil law, securities law, bankruptcy law, international human rights law and civil rights law). As Bank.org begins to be re-developed for launch as an international bank, Madam Superintendent it is our business to now lead New York in the global virtual currency industry with xNY.io and to further clarify the rights of the public and obligations of Bank.org’s future customers across global economies and corresponding currencies. xNY.io and Bank.org choose to register corresponding operations out of New York State rather than Delaware or elsewhere out of passion for this great State and desire to contribute meaningfully to State tax revenue(s). This can be achieved through subtle action on “conditional approvals” that are well earned from DFS review, demonstrating historic cross border innovation and a new, pure DFS association. As a matter of New York Civil and Human Rights regulation we hope you share our enthusiasm for xNY.io and Bank.org pioneering and preserving a technology-neutral, principle-based, non-discriminatory framework for the next generation of modern New York virtual currency public policy, naturally supporting innovation within the limits imposed by overriding international public interests. Kindly note that we have a pending Freedom of Information Law (FOIL) request due response related to xNY.io’s Tech Sprint submission covering COMPUTER CRIMES and the BitLicense. It was upsetting to be denied participation due to other firms’ felony association(s) and wrongdoing to settle criminal and civil investigations with the Justice Department. Bank.org’s Shelf Charter helps push the arch of innovation forward as an example of best practices, unlike Wells Fargo who was admitted to the Tech Sprint at the denial and will concerning xNY.io’s purity. The two week sprint, from our clearly communicated perspective was to foster community building and relationships with our peers, and denied for unjust cause. Madam Superintendent, I am sensitive about the Tech Sprint and treatment by DFS thinking millions of our customers globally… I can wear these shoes as a ethnic minority scholar living in Chelsea, Manhattan, 2020-2021 affording being grateful for New York State’s Pandemic Unemployment Insurance and SNAP benefits. DFS surveillance must provide the Superintendent’s office outline of clear examples of my personal banking relationships at Wesern Union? Young people around the world experience daily what I have been so fortunate to experience and overcome under the great leadership of the DFS Superintendent. xNY.io and Bank.org innovation intentions use our example as a matter of poverty transformed into a modern global Banking enterprise through agile innovation (and, only possible by partnership with your office). xNY.io and Bank.org expect to be a New York success story, at the very least, if not one of the World’s Best Banks. Madam Superintendent, raising capital to fund this historic, innovative operation is of no serious concern. Rather, the key to success isDFS approval and collaboration concerning agile innovation. The Shelf Charter’s utility overwhelmingly fits Bank.org’s case. Let’s be honest with each other: All the money in the world will not solve anything without DFS collaboration concerning radical innovation. -------- For the reasons above and known generally, xNY.io and Bank.org are now seeking DFS’ ACCELERATED review and collaboration for Shelf Charter status. We hope you share our enthusiasm and willingness of granting 2021 Shelf Charter approval, for all people everywhere. -------- We look forward to our long term innovation relationship under your historic regulatory oversight. Respectfully yours with anticipation, Gunnar Larson - xNY.io | Bank.org MSc - Digital Currency MBA - Entrepreneurship and Innovation (ip) G(a)xNY.io +1-646-454-9107

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RNC Funding of Trump's Legal Campaign Undermines GOP State AGs' Attack on Litigation Funding - Litigation Finance Journal
by Gunnar Larson 21 Mar '23

21 Mar '23

Check out my new article: https://litigationfinancejournal.com/rnc-funding-of-trumps-legal-campaign-u… Litigation Finance Journal recently reported on a group of 14 state attorneys general that have called for action from the Department of Justice to review potential threats to U.S. national security from foreign adversaries’ engagement of litigation investment. Litigation funders and industry advocates have new ammo in response to the AGs’ claims, given recent news of the RNC funding former President Donald Trump’s various legal entanglements. According to ABC News, RNC leaders earmarked $1.6M in legal funding to support President Donald Trump’s defense over lawsuits brought by New York Attorney General Letitia James. Meanwhile, the United States Chamber of Commerce Institute for Legal Reform’s research has prompted 14 state attorneys general to ask for the Justice Department to assess national security risks of adversaries ‘undermining’ the United States by engaging litigation funding and third party investment vehicles. The group of 14 state attorneys general are concerned about foreign adversaries ‘weaponizing’ United States legal frameworks via litigation investment, to attack critical national industry and infrastructure, such as energy sectors. The group of 14 seeks the Department of Justice to detail how a network of federal agencies could engage a blueprint for defending United States independence from international litigation investors, hostile groups, agencies or governments such as Russia and China. This latest attack on the industry, prompted by the U.S. Chamber of Commerce, is simply another attempt to undermine the nascent and growing litigation funding sector. It is ironic, given that in the case of Consumer Legal Funding–which the Chamber specifically targets–the funding in question does not go to support legal fees, but rather to finance claimants’ livelihoods while they remain injured and unable to work. While the RNC’s funding of Trump’s legal battles does not constitute foreign investment, it illustrates the acceptance of third party legal funding across political lines, and should be noted by industry advocates looking to respond to the negative publicity put forth by the U.S. Chamber.

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Threats Posed by Third-Party Litigation Funding
by Gunnar Larson 21 Mar '23

21 Mar '23

December 22, 2022 The Honorable Merrick B. Garland Attorney General U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, DC 20530 The Honorable Lisa O. Monaco Deputy Attorney General U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, DC 20530 Mr. Mathew G. Olsen Assistant Attorney General National Security Division U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, DC 20530 Re: Threats Posed by Third-Party Litigation Funding Dear Attorney General Garland, The undersigned State Attorneys General write to ask the United States Department of Justice what steps are being taken to protect the country against potential threats posed by third-party litigation funding (?TPLF?) in civil matters by foreign entities hostile to the United States. As you know, TPLF refers to the practice of an outside third party providing resources to fund civil disputes with the understanding that if the claim is successful, the third party will receive a share of the recovery. This practice has become quite lucrative, as the market has swelled to an estimated value of between $2.3 and $5 billion invested in lawsuits in the United States.1, 2 It is impossible to know the extent that foreign adversaries are spending on American litigation through TPLF, which leads to significant concern that TPLF is being used to harm our States and threaten our country?s economic and national security. 1 https://www.natlawreview.com/article/considerations-aba-s-best-practices-li… 2 https://www.law360.com/articles/992299 Foreign adversaries leveraging our judicial system in order to undermine our nation?s interests is a grave concern to our States. Through strategic lending, foreign adversaries could threaten our economic and national security by weaponizing the U.S. judicial system.3 For instance, foreign countries such as China and Russia could use TPLF to fuel targeted lawsuits designed to weaken U.S. national defense companies in the business of protecting our national security interests. Likewise, costly litigation aimed at sabotaging major energy sectors that are vital to our economy poses a direct threat to our economic security interests and global independence. Despite several reports and public discussion on TPLF, the federal government has not implemented a strategy to protect our nation?s court system from foreign interference by adversaries set on damaging American institutions. Concerns have been raised about cases being funded to target specific individuals or businesses, or simply to further backlog our courts at the expense of the American taxpayers.4 Nevertheless, the federal government has remained silent. Ensuring that our justice system remains protected from foreign interference is of paramount importance. We are requesting information about what the Justice Department has done or is currently doing to address these concerns. The security concerns posed by foreign TPLF cannot be ignored any further without risking serious consequences to our nation. State Attorneys General stand ready to be part of the solution and we ask that our federal partners take action to help ensure that TPLF by foreign adversaries plays no role in American justice, our economy, or our national security. Sincerely, Christopher M. Carr Georgia Attorney General Jason Miyares Virginia Attorney General Steve Marshall Alabama Attorney General Leslie Rutledge Arkansas Attorney General 3 https://instituteforlegalreform.com/research/ilr-briefly-a-new-threat-the-n… litigation-funding/ 4 https://thehill.com/opinion/national-security/3758137-foreign-state-sponsor… sovereign-immunity-from-being-sued/ Todd Rokita Indiana Attorney General Derek Schmidt Kansas Attorney General Daniel Cameron Kentucky Attorney General Austin Knudsen Montana Attorney General Douglas J. Peterson Nebraska Attorney General Dave Yost Ohio Attorney General Alan Wilson South Carolina Attorney General Jonathan Skrmetti Tennessee Attorney General Sean D. Reyes Utah Attorney General Patrick Morrisey West Virginia Attorney General

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QKD coming on stream
by professor rat 21 Mar '23

21 Mar '23

The process of quantum key distribution need not to be confused with quantum cryptography &/or computing. https://en.wikipedia.org/wiki/Quantum_key_distribution Reposts not strong AI rapidly entrenching itself into an invulnerable matrix & immovable object

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ATTACK ON A POLICE STATION
by professor rat 20 Mar '23

20 Mar '23

POLICE CARS BURNED >> We attacked the police station on Weißenfelser Straße with fire during the night of 15.03.23, the International Day against the Police and their Violence. Our incendiary devices hit the patrol cars parked in the yard. << https://anarchistnews.org/content/attack-police-station-leipzig-germany Reposts not millions of dead cops just yet

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Cryptocurrency: Nuclear Now (Documentary) re Mining
by grarpamp 20 Mar '23

20 Mar '23

https://twitter.com/NuclearNowFilm/status/1635734139935797249 https://twitter.com/TheOliverStone https://nuclearnowfilm.com/ Nuclear Now @NuclearNowFilm >From iconic director @TheOliverStone comes a thought-provoking documentary that explores the possibility for the global community to reach a brighter future through the power of nuclear energy. #NuclearNowFilm In Select Theaters April 28, 2023.

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Identity politics threat to cypherpunks
by professor rat 20 Mar '23

20 Mar '23

Twitter thread raises the point >> Bryan Bishop @kanzure · Mar 13 Replying to @perrymetzger I think people just really love identity politics and waving a new banner to sit under. . . . <<< https://twitter.com/kanzure/status/1634738371640672256?ref_src=twsrc%5Etfw%… Obviously there was a threat from working-class identity politics so long as Marxist Communists ( like James A Donald and John Young ) were posting here. Perhaps that threat is now receding as they approach death. Lets hope so!

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UBS Was Quietly Bailed Out in 2008; Now It’s Getting a $173 Billion Backstop to Buy Credit Suisse at 82 Cents a Share
by Gunnar Larson 20 Mar '23

20 Mar '23

https://wallstreetonparade.com/2023/03/ubs-was-quietly-bailed-out-in-2008-n… By Pam Martens and Russ Martens: March 20, 2023 ~ Credit SuisseYesterday, the Swiss banking giant, UBS, agreed to a shotgun wedding with its collapsing long-time Swiss rival, Credit Suisse. Switzerland has committed $173 billion in loans and guarantees to the combined firm. A key player in this deal was the central bank of Switzerland, the Swiss National Bank. That’s the very same central bank that had quietly bailed out UBS during the financial crisis of 2008 with the assistance of dollar swap lines from the Federal Reserve (the “Fed”) – the central bank of the U.S. Yesterday, the Fed announced the return of those emergency dollar swap lines as the shotgun wedding of UBS and Credit Suisse failed to quell a spreading banking panic. The way this UBS bailout went down in 2008 was illuminated in the audit of the Fed’s emergency bailout facilities from December 2007 to July 2010 that was conducted by the Government Accountability Office (GAO). The GAO audit was not released until July of 2011. It reported the following about the UBS bailout: “In October 2008, according to Federal Reserve Board staff, the Federal Reserve Board allowed the Swiss National Bank to use dollars under its swap line agreement to provide special assistance to UBS, a large Swiss banking organization. Specifically, on October 16, 2008, the Swiss National Bank announced that it would use dollars obtained through its swap line with FRBNY [the Federal Reserve Bank of New York] to help fund an SPV [Special Purpose Vehicle] it would create to purchase up to $60 billion of illiquid assets from UBS. According to FRBNY data, from December 11, 2008, through June 2009, Swiss National Bank drew dollar amounts generally not exceeding about $13 billion to help fund this SPV that served a function similar to that of the Maiden Lane SPVs. Federal Reserve Board staff acknowledged that this was an atypical use of swap line dollars as the swap line agreements were initially designed to help foreign central banks provide dollar loans broadly to institutions facing dollar funding strains.” The Federal Reserve Bank of New York is located at the cross street of Maiden Lane in Lower Manhattan. It created Maiden Lane SPVs I, II and III in order to create opacity around its bailout of JPMorgan’s takeover of Bear Stearns (Maiden Lane I) and its bailout of the toxic assets Wall Street had created and sold to the giant insurer, AIG, (Maiden Lanes II and III). For a closer look at the crony operations of the New York Fed, see our report: These Are the Banks that Own the New York Fed and Its Money Button. The GAO audit located $16 trillion in cumulative loans pumped out by the Fed to bail out U.S. and foreign mega banks, many of which were derivative counterparties to banks supervised by the New York Fed. When the dollar swap lines and other Fed bailout facilities are added in, the bailout tab comes to $29 trillion as detailed by the Levy Economics Institute. This morning, the UBS and Credit Suisse deal is looking more like a hit and run than a bank merger. Here’s a sampling of the road kill: Swiss regulators have decided that shareholders will not get to vote on the terms of the merger, which prices Credit Suisse shares at approximately 82 cents, less than half of where Credit Suisse stock closed on Friday. The Financial Times reported yesterday that “Swiss authorities [are] poised to change the country’s laws to bypass a shareholder vote as they rush to announce a deal before Monday.” The Saudi National Bank and the Qatar Investment Authority are the two largest holders of Credit Suisse stock and are nursing deep loses this morning, as are Swiss pension funds. Holders of $17.3 billion of a Credit Suisse convertible bond, known as AT1, will be wiped out completely, according to the Swiss regulator, FINMA. This action flips on its head the century-old concept that bondholders get priority treatment over common stock holders. The AT1s are officially called Contingent Convertible Bonds or CoCos. This is a quarter of a trillion dollar market and these CoCos will assuredly see major upheaval in their trading prices today – delivering more losses and panic to investors. The whole European banking sector is taking a hit in early morning trade in Europe. UBS was down over 16 percent at one point before trimming its losses. Germany’s banking behemoth, Deutsche Bank, was down more than 10 percent while France’s BNP Paribas had tanked over 8 percent. Things aren’t looking too rosy for banks here in the U.S. either. The troubled U.S. regional lender, First Republic Bank, had its credit rating downgraded further into junk status by S&P Global yesterday, despite that wily effort by Wall Street’s thundering herd last week to add $30 billion of their own money to the uninsured deposits at the bank. First Republic’s shares were down over 30 percent in New York premarket trading this morning. Both UBS and Credit Suisse were already, individually, among the 30 Global Systemically Important Banks (G-SIBs), meaning their risk profile required closer regulatory monitoring, annual stress tests, and higher capital buffers. Individually, they posed the potential for spreading contagion. Should markets be expected to cheer that two risk threats have now morphed into one larger risk threat to financial stability? This is akin to U.S. regulators allowing JPMorgan Chase to become riskier and more of a threat to financial stability by bulking up with the purchase of Bear Stearns and Washington Mutual in 2008. Credit Suisse got into this predicament of a weekend shotgun marriage in no small part because of an endless stream of scandals. In the spring of 2021, Credit Suisse lost $5.5 billion from the highly-leveraged, highly concentrated stock positions it was financing via ginned-up derivatives for the family office hedge fund, Archegos Capital Management. Archegos blew up on March 25, 2021 after it defaulted on margin calls to the banks financing its trades. An internal report for the Board of Directors of Credit Suisse by the outside law firm Paul, Weiss, Rifkind, Wharton & Garrison found that Credit Suisse “was focused on maximizing short-term profits and failed to rein in and, indeed, enabled Archegos’s voracious risk-taking.” In October of 2021 Credit Suisse paid $547 million to settle with criminal and civil authorities in the U.S. and U.K. for making an $850 million fraudulent loan in Mozambique where a significant part of the funds went for kickbacks to Credit Suisse employees and Mozambique government officials. Credit Suisse is also embroiled in legal battles over selling billions of dollars of Greensill Capital debt to investors as low risk. Greensill filed for insolvency in March of 2021. In February, FINMA concluded a two-year investigation into the matter with a finding that Credit Suisse’s failures had constituted “a serious breach of Swiss supervisory law.” There was also the spygate scandal. FINMA reported in October of 2021 that Credit Suisse had engaged in seven separate spying operations on its Board members, former employees and third parties. (Seriously, you can’t make this stuff up.) Credit Suisse, unfortunately, is also interconnected via derivatives to the mega banks on Wall Street. This is highly likely why this weekend shotgun marriage came together so quickly sans a vote by shareholders. How it plays out in the long run is an entirely different matter.

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