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Tuesday
Aug292017

A decade of G7 central bank collusion - and counting...

Since late 2007, the Federal Reserve has embarked on grand-scale collusion with other G-7 central banks to manufacture a massive amount of money. The scope and degree of this collusion are historically unprecedented and by admission of the perpetrators, unconventional in approach, and - depending on the speech - ineffective.

Central bank efforts to provide liquidity to the private banking system have been delivered amidst a plethora of grandiose phrases like “unlimited” and “by all means necessary.” Central bankers have played a game with no defined goalposts, no clock rundown, no max scores, and no true end in sight.

At the Fed’s instigation, central bankers built policy on the fly. Their science experiment morphed into something even Dr. Frankenstein couldn’t have imagined. Confidence in the Fed and the U.S. dollar (as well as in other major central banks globally) has dropped considerably, even as this exercise remains in motion, and even though central bankers have tactiltly admitted that their money creation scheme was largely a bust, though not in any one official statement.

Cracks in the Facade

On July 31, 2017, Stanley Fischer, vice chairman of the Fed, delivered a speech in Rio de Janeiro, Brazil. There, he addressed the phenomenon of low interest rates worldwide.

Fischer admitted that “the effects of quantitative easing in the United States and abroad” are suppressing rates. He also said there was “a heightened demand for safe assets affecting yields on advanced-economy government securities.” (Actually, there's been heighted demand for junky assets, as well, which has manifested in a bi-polarity of saver vs. speculator preference.) What Fischer meant was that investors are realizing that low rates since 2008 haven’t fueled real growth, just asset bubbles.

Remember, Fischer is the Fed’s No. 2 man. He was also a professor to former Fed Chair Ben Bernanke and current European Central Bank President Mario Draghi. Both have considered him to be a major influence in their economic outlook.

The “Big Three” central banks — the Fed, the European Central Bank and the Bank of Japan — have collectively held rates at a zero percent on average since the global financial crisis began. For nearly a decade, central banks have been batting about tens of trillions of dollars to do so.

They have fueled bubbles. They have amassed assets on their books worth nearly $14 trillion. That’s money not serving any productive, real-economy purpose – because it happens to be in lock-down.

In his speech, Fischer channeled Bernanke, Yellen and other major central bank leaders who, having been so enthusiastic about the possibilities, later intimated that low rates and massive asset buying and/or holding programs alone aren’t enough to stimulate economic growth. Which begs the question, why they've continued for so long.

As this policy was propagated by the Fed, Fischer essentially admitted that the Fed caused low interest rates globally while failing to achieve the growth it promised.

With a decade of failed policy experiments behind us, why should we have faith that the Fed — or any other central bank — has any clue about what to do next? The answer is simple. We shouldn’t.

As Fischer went on to tell the Financial Times on August 15, 2017:

“It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really, extremely dangerous and extremely shortsighted. One can understand the political dynamics of this but one cannot understand why grown, intelligent people reach the conclusion that [you should] get rid of all the things you have put in place in the last 10 years.”

In other words, why should we hope that a 10-year global “solution” to instill long-term financial stability and economic growth, even as it’s been repeatedly touted as such, should do what central bankers said it will? The answer again is, we shouldn't.

The Winners and Losers

Since the global financial crisis, the biggest G7 winners have been the Big Six US banks that profited from access to cheap money. They benefitted from central bank purchases of their securities that exaggerated the value of the remaining securities on their books. They used “printed” or electronically crafted money to stockpile cash and fund buybacks of their own shares and pay themselves dividends on those shares. By producing and distributing artificial money, central bankers distorted reality in global markets. Multi-national banks were co-conspirators in that maneuver.

After the Big Six banks passed their latest round of stress tests, they began buying even more of their own shares back. The move elevated their stock prices further. The largest U.S. bank, JP Morgan Chase, announced its most ambitious program to buy back its own shares since the 2008 crisis, $19.4 billion worth. Citigroup followed suit with a $15.6 billion buy-bank plan.

The Fed’s all-clear was just another version of quantitative easing (QE) for banks. Instead of buying bonds via QE programs, the Fed greenlighted banks to further speculate in their own stocks, creating more artificiality in the level of the stock market. In all, US banks have disclosed plans to buy back $92.8 billion of their own stock to say thank you to the Fed for the “A.” That was piling on to their existing trend; according to S&P Dow Jones Indices, “Stock repurchases by financial companies in the S&P 500 rose 10.2% in the first quarter [of 2017] and accounted for 22.2% of all buybacks.”

More ominous than that was another clear sign that a decade of money-conjuring collusion helped the same banks that caused the last crisis. Proof came in the form of a letter to the U.S. Senate banking committee from Thomas Hoenig, the vice-chairman of the U.S. Federal Deposit Insurance Corp. (FDIC), the government agency in charge of guaranteeing people’s deposits. He wrote that in 2017, U.S. banks used 99% of their net earnings toward purchases of their own stock and paying dividends to shareholders (including themselves).

They thus legally manipulated markets in plain sight by pushing their own share prices up with cheap money availed to them by the central bank that is supposed to regulate them.

As of this year, global debt levels stood at 325% GDP, or about $217 trillion. The $14 trillion of assets the G-3 central banks held on their books is equivalent to a staggering 17% of all global GDP. The European Central Bank (ECB), Bank of Japan (BOJ) and Bank of England are still buying collectively $200 billion worth of assets per month.

In the wake of that buying, noncash instruments — crypto currencies and hard assets like gold, unrelated to the main G-7 monetary system — have become increasingly attractive on the fear that in another major downturn or crisis, central banks and private banks will retract cash and liquidity from their customers.

In that likely event, banks will protect themselves and turn to governments and central banks again. In the absence of some sort of outside central bank benchmark, like a modern gold standard or use of currency basket benchmarks like the IMF’s Special Drawing Rights (SDR), currency wars will continue to be fought.

With rates hovering between zero and negative in some countries, there would be little to no room to maneuver in the face of another crisis. Thus — another thing has become increasingly clear: Central bankers have demonstrated gross negligence regarding the consequences of their monetarily omnipotent actions.

If rates were to rise higher in the US (and I don't think we're in for more than another 25 basis points, this year which is under last year's Fed forecast) so would the cost of servicing that debt. That would hurt companies domestically and abroad, iinduce more defaults and a rush by the banks involved in derivatives associated with that debt to concoct more toxic assets. The vicious cycle of central bank bailouts would reverberate again. 

Savers and pensioners are getting close to no interest on their nest eggs. Depositors are paying banks to house their money through fees that offset negligible interest. Small businesses have to jump through hoops to get loans for expansion purposes. Wages are stagnant. Ultimately, big banks had played the system — and us — again, this time with central banks helping to fund them. The threat of an even larger collapse looms as stock markets and global debt have been propelled higher.

As we approach the ninth anniversary of the collapse of one of my former employers, Lehman Brothers, and the 10th anniversary of the beginning of central bank collusion into the financial crisis, there has been – no change – in global G7 central bank monetary policy.

Jackson Hole offered a different spin on the same old verbiage, indicating that a bit of nipping here, means a lot of tucking somewhere else. Janet Yellen took what could be her last hoorah to craft her legacy as potential Fed Chair nominee and current Trump National Economic Council Director, Gary Cohn, awaits his possible turn. And if it’s not him, it’ll remain her, or someone else that will perpetuate more of the same policies.

While speaking to the monetary policy glitterati at central bank base-camp, Yellen declared any dialing back of regulatory reform measures for banks should be “modest.” She said, “The evidence shows that reforms since the crisis have made the financial system substantially safer.” There was no mention of the unprecedented decade of easy money bolstering the financial system - that makes it appear - solvent.

For all the cheap cash offered up, much at the expense of taxpayers who will bear the burden of the associated debt this enabled, and the bank fraud it plastered over, it will be ordinary citizens who will pay the price – yet again.  In the era of money fabrication and monetary policy collusion, a decade of ongoing “emergency” procedure spells an eventual recipe for disaster.

Big US banks are bigger than before the crisis. They float atop a life-raft, among other things, of $4.5 trillion Fed asset book, as part of a total $14 trillion G7 central bank asset book. Yellen’s speech was code for preserving the status quo and central bank elasticity high. As for Cohn’s sentiment on the matter? Well, he feels the same. So does Trump. So did Obama.

Take the composite of all that and what are you left with? Ongoing G7 central bank monetary policy collusion, zero percent interest rates globally, unlimited QE potential, and major asset bubbles.

 

Tuesday
Aug152017

Transcript of my Speech in Tokyo on global monetary policy, big banks & geo-politics in the Trump era

The following is the transcript from my speech: Shifting US-Japan Geo-Politics, Banking Landscape and Financial Regulations in the Trump Era. It was given on July 11, 2017 at the Canon Institute for Global Studies in Tokyo, Japan:

 

President Trump has talked a lot about America First. Over the last 6 months, we have seen that America First means that the United States could also be excluded from the rest of the world’s trade policy. For instance, Japan and the European Commission (EC) have recently agreed to an economic partnership agreement (EPA), which could be the largest trade agreement ever. This is an example of the United States being excluded from trade alliances. The new climate in the United States has created opportunities for other countries like Japan.

The shift toward America First and isolationism is not wholly because of President Trump. It is the result of a trend that started approximately 10 years ago. It has much to do with the lack of regulation in the US banking system.

Prior to 1999, the United States regulated banks under the Glass-Steagall Act. This Act required that banks separate their commercial banking operations from their trading, speculation, and securities businesses. That act was repealed in 1999, and the repeal has had a number of consequences.

For one thing, the repeal led to a series of corporate scandals in the United States just a few years later. It also led to the creation of the “Too Big to Fail” concept. It allowed Citigroup, JPMorgan Chase, and Bank of America to become conglomerate banks. It led each bank to increase the risks they hold, and it increased the interdependency of banks throughout the world.

That increased risk and interdependency eventually resulted in the global financial crisis. And yet banks still hold many of the same risky investments they had prior to the crisis, and are still interdependent.

Many in the United States have been talking about reintroducing the Glass-Steagall Act in order to mitigate that risk and interdependency. When President Trump ran for office, he discussed this. It was in the Republican platform as well. 

However, since the election, two interesting things have happened. President Trump gave an interview in which he said he still needed to think about Glass-Steagall. Since then, he has not talked much about it. Meanwhile, Secretary of the Treasury Steven Mnuchin has said that President Trump does not intend to bring back the old Glass-Steagall Act, but is rather considering a “21st century Glass-Steagall” that would merely require banks to set aside money for emergencies related to risky investments rather than actually restructure. 

I would like to talk more in detail about some of the risks that banks now face in order to highlight why the discussion about regulations like Glass-Steagall is so important.

One emerging risk today is corporate defaults. Thanks to quantitative easing, there is a lot of cheap money available in the market right now. According to S&P Global Ratings, as a result of all the cheap money, corporate debt is expected to climb from $51 trillion today to $75 trillion by 2020. At the same time, the global speculative-grade default rate is now 4.2 percent. This is the highest level since 2009, which was the worst year of the financial crisis. A total of 162 companies defaulted in 2016. This is the second time we have seen annual defaults above 100 since 2009. This has a large impact. When companies default, jobs suffer, research and development suffers, and the market suffers. It reduces confidence, which can catalyze a crisis.

Even with the level of risk we are seeing around corporate defaults today, central banks continue to buy assets, to the tune of $200 billion per month. Will this pace slow in the future? Many are now talking about whether the central banks will change their policies on quantitative easing. The Federal Reserve has been slowly raising interest rates. On the other hand, the Bank of Japan has announced that it will begin an ‘unlimited’ Japanese Government bond buying program.  

One issue surrounding quantitative easing is that it is honestly very difficult to tell what the true effect of this policy is. There is no guarantee that when a central bank purchases bonds that it will result in more long-term hires or higher wages, for example. We cannot look at inflation or deflation to see how quantitative easing has impacted the market, because the money from quantitative easing doesn’t go to consumers. It goes to banks and financial speculators. We cannot be certain that any of the money has gone toward jobs or infrastructure. No regulatory requirement even attempted to guarantee that. 

That said, there are some who feel that quantitative easing has been successful in revitalizing our economies. In June, Fed Chair Janet Yellen said in a speech, “Would I say there will never, ever be another financial crisis? You know probably that would be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes and I don’t believe it will be.”

This remark echoes a similar comment made by former Fed Chair Ben Bernanke in 2007 just before the financial crisis. Partly because of that, it is really difficult to accept what she is saying. For instance, the Federal Reserve subjected a number of banks to stress tests this year, and 34 banks passed. However, those tests don’t look at massive corporate defaults. They don’t look at interdependency. There are risks they don’t consider.

The risks faced by banks in the United States today are greater than even before the financial crisis. The amount of assets that the big six banks hold is about 70% to 80% larger than it was prior to 2008. The amount of deposits they hold is about 40% higher. For these reasons, I think we need to be really careful about the rate at which defaults are increasing, how stocks are supported by share buybacks, and other risks fed by artificial, or conjured money.

Central banks around the world are now pursuing a coordinated zero percent money policy and increasing their assets. The big three central banks in the United States, Europe and Japan now hold assets equivalent to about 17% of global GDP. If this money was liquidated into the real economy instead, it would have a huge positive impact. 

In recent years, central banks have used quantitative easing to inject more liquidity ostensibly into the economy. However, as I mentioned, that liquidity hasn’t necessarily reached the real economy. Quantitative easing has failed to produce real sustainable growth. There have been very low increases in wages throughout the world. For many people, even though their country’s economy may be considered stable by generic measures mostly touted by central banks and governments, their personal economies are instable.

One outcome of that is that people are starting to question the ability of their governments to understand the economy. When that happens, people tend to vote out whoever is in power. This is one of the things that I think contributed to Trump’s victory in the United States. In turn, the economic situation globally has affected political decisions domestically, and those decisions are affecting our international alliances.

The shift in our policies toward international alliances might again have an impact on the global economy. It’s a circle. President Trump seems to be shying away from multilateral agreements and toward more isolationist ideas. The last time the United States did that was in the 1920s. In fact, isolationist policies were one of the reasons there was such a speculative mood in the United States in the 1920s, and that speculation led to the financial crash of 1929.

It looks like, for the time being, the United States will continue to act in a more isolationist manner. That is good and bad. It is bad from the standpoint of general global connectedness. It is good for other countries, including Japan. It gives other countries the opportunity to take on a stronger role in the international community. Japan is already moving to do that, as we can see with the Japan-EU EPA.

Ever since President Trump came into office, alliances excluding the United States have been completed much more rapidly. These alliances were already being planned and executed before he came into office, mostly since the financial crisis to be sure and apprehension about the current dollar-based monetary system, but he seems to have accelerated them. This is happening all over the world. China is getting involved in more alliances. Japan is as well.

I was in Mexico a couple of weeks ago and I spoke with people there about the North American Free Trade Agreement (NAFTA) and trade alliances. Since President Trump has come into power, he has been talking about how to get Mexico to pay for the wall he wants to build between the United States and Mexico. He has also made a number of negative comments about Mexico and about NAFTA. Furthermore, President Trump has also pulled out of the Trans-Pacific Partnership (TPP). Prime Minister Abe seems to be trying to save the TPP. He will not be able to move forward with the United States, but with all that has happened, we now have countries like Mexico that are looking at the situation with the United States and actively wanting the TPP to continue without the United States. Japan could thus, take a larger leadership role regarding the TPP.. 

With President Trump continuing to push his wall idea, US-Mexico relations are deteriorating. This presents a very good opportunity for China to develop its alliance with Mexico. When I spoke in Mexico, a trade delegation from China was there at the same time. These sorts of things are already happening more frequently. There has been movement on the part of other countries to create alliances outside of the partnerships with the United States ever since the financial crisis. With the election of President Trump, these movements are only accelerating. 

The Japan-EU EPA is a major agreement that has impacted that movement. Japan is a part of the shift that we are seeing as power in the international community moves slightly away from the United States. To a large extent, Japan can greatly influence how this shift plays out. Japan is already also involved in a number of other large trade deals, such as the TPP or the Regional Comprehensive Economic Partnership (RCEP). These deals could create a large amount of trade, and Japan is playing a leadership role in their negotiations. These deals are being worked out in opposition to US policies. Unless US policies change soon, they will move forward.

And as the rest of the world moves forward with its own deals, the situation in the United States today is one in which the financial crisis and the concept of “Too Big to Fail” has led many to question whether we don’t need more regulation in the banking sector to avoid another crisis.  However, many of the senior people in the Trump administration seem to be not very interested in bringing back something like the Glass-Steagall Act, so not enough is happening. There is action taking place around military spending. Although the new budget hasn’t passed yet, the draft does include a large boost for the military. We have a lot of people now working in Congress to figure out how the new budget will work, whether they can cut corporate taxes, or cut social spending, and so on.

The latest draft budget will increase defense spending by approximately $53 billion. It earmarks an extra $2.8 billion for spending on homeland security. To make that budget balanced, President Trump is cutting from social insurance programs and institutions related to international alliances. President Trump’s isolationist tendencies are not supported just by the things he says; if the budget is passed, that isolationism will be carried out through budget cuts.   

Meanwhile, he is doing no meaningful work on his campaign promise to bring back the Glass-Steagall Act. In fact, there is movement in his ranks toward further deregulation. A recent bill passed in the House of Representatives, dubbed “The Financial Choice Act”  called for the loosening of banking regulations. If this new legislation is passed, it will likely just require that banks hold onto more money for emergencies, in reserves, rather than actually separate deposits and lending activities from speculative ones. 

I think the lesson here is that there is a lot of inconsistency in what President Trump has said and what his administration is doing, and I think that people around the world understand this and that it is catalyzing the shifts in power and new economic alliances that we are seeing globally. The Trump presidency is accelerating the movement of world currencies away from the United States dollar.

Alongside all of that is the problem of whether or not the markets are sustainable at their current levels. They are not. There is a lot of risk in markets and in the economy right now. There exists a large disconnect between how the financial sector feels about the economy and how normal people outside of the financial sector feel about it. There remains a disconnect between how politicians view the economy and markets and the banking and monetary system and how it's viewed by populations on the ground. This dichotomy fueled by ongoing money conjuring policies can't end well, it can only result in another crisis. The question isn't if, but when. 

 

Thursday
May042017

The Trump Family Empire Expands

(Note, this piece first appeared in TomDispatch, May 2nd)

President Trump, his children and their spouses, aren’t just using the Oval Office to augment their political legacy or secure future riches. Okay, they certainly are doing that, but that’s not the most useful way to think about what’s happening at the moment. Everything will make more sense if you reimagine the White House as simply the newest branch of the Trump family business empire, its latest outpost.

It turns out that the voters who cast their ballots for Donald Trump, the patriarch, got a package deal for his whole clan.  That would include, of course, first daughter Ivanka who, along with her husband, Jared Kushner, is now a key political adviser to the president of the United States.  Both now have offices in the White House close to him.  They have multiple security clearances, access to high-level leaders whenever they visit the Oval Office or Mar-a-Lago, and the perfect formula for the sort of brand-enhancement that now seems to come with such eminence. President Trump may have an exceedingly “flexible” attitude toward policymaking generally, but in one area count on him to be stalwart and immobile: his urge to run the White House like a business, a family business.

The ways that Jared, “senior adviser to the president,” and Ivanka, “assistant to the president,” have already benefited from their links to “Dad” in the first 100 days of his presidency stagger the imagination. Ivanka’s company, for instance, won three new trademarks for its products from China on the very day she dined with President Xi Jinping at her father’s Palm Beach club.

In a similar fashion, thanks to her chance to socialize with Japanese Prime Minister Shinzo Abe, her company could be better positioned for deal negotiations in his country.  One of those perks of family power includes nearing a licensing agreement with Japanese apparel giant Sanei International, whose parent company’s largest stakeholder is the Development Bank of Japan -- an entity owned by the Japanese government.  We are supposed to buy the notion that the concurrent private viewing of Ivanka’s products in Tokyo was a coincidence of the scheduling fairy. Yet since her father became president, you won’t be surprised to learn that global sales of her merchandise have more or less gone through the roof.

Here’s where things get tricky. We can’t pinpoint the exact gains generated from any one meeting of the next generation Trump. They rely on the idea that, because their brand was so huge to begin with, profits and deals would have come anyway. That’s why we won’t ever see their books or tax returns.

Conflicts of interest? They now permeate the halls of 1600 Pennsylvania Avenue, but none of this will affect or change one thing President Trump holds dear -- and believe it or not, it’s not the wishes of his base in the American heartland.  It’s advancing his flesh and blood, and their flesh-and-blood-once-removed spouses and relatives.

Federal Regulations and Trump Family Interpretations

The Trumps and Kushners will behave in ways that will benefit their global businesses. There’s just one catch.  They have to get away with it, legally speaking. So the first law of family business in the Oval Office turns out to be: get stellar legal counsel. And they’ve done that. Their lawyers have by now successfully created trusts that theoretically -- but only theoretically -- separate Ivanka from her businesses and deflect any accusations over activities that may, now or in the future, violate federal rules. And there are two of those in particular to consider.

The Code of Federal Regulations is a set of rules published by the executive departments and agencies of the government. Title 18 section 208 of that code deals with “acts affecting a personal financial interest.” This criminal conflict of interest statute states “an officer or employee of the executive branch of the United States Government” can’t have a “financial interest” in the result of their duties. What that should mean, legally speaking, for a family occupying the executive office is: Ivanka could not have dinner with the president of China while her business was applying for and receiving provisional approval of pending trademarks from his country, if one of those acts might impact the other. To an outsider, the connection between those acts seems obvious enough and it’s bound to be typical of what’s to come.

Meanwhile, there are real penalties for being convicted of violating this rule. These include fines or imprisonment or both as set forth in section 216 of Title 18.

Certain lawyers have argued that Ivanka’s and Jared’s appointments don't violate Rule 208 or other nepotism statutes because they are not paid advisers to the president. In other words, because Ivanka doesn’t get a salary for her service to her... uh, country... conflicts automatically vanish. She’s already done her Trumptilian best to demonstrate her affinity for ethical behavior by cordoning herself off from her business responsibilities (sort of). According to the New York Times, “Ivanka has transferred her brand’s assets into a trust overseen by her brother-in-law, Josh Kushner, and sister-in-law, Nicole Meyer.” Phew, no family connections there!  Or maybe she just doesn’t care for her siblings-in-law.

But not all assets, it turns out, are created equal. So the daughter-in-chief will, it seems, keep her stake in the Trump International Hotel, a 15-minute stroll from the White House, which just happens to boast "the Ivanka Trump Suite" and "The Spa by Ivanka Trump." ("The Spa by Ivanka Trump™ and Fitness Center transitions guests from the Technogym setting of the Fitness Center to the tranquil spa haven that is calming, balancing, purifying, revitalizing, and healing...") There, many a foreign diplomat or special interest mogul can "calm, energize, [and] restore" himself or herself, while angling for an "in" with the family. We don’t know precisely the nature of what the Trump family stands to gain from the hotel because its books aren’t made public, but it’s reasonable to assume that we’re not talking losses. Besides this other D.C. domain, Ivanka and Jared will remain the beneficiaries of their mutual business empires now valued at about three quarters of a billion dollars, according to White House ethics filings.

But wait. There’s an even more explicit rule against using public office (like, say, the White House) for private gain: Title 5 section 2635.702. On that subject, the section states that “an employee shall not use his public office for his own private gain, for the endorsement of any product, service, or enterprise, or for the private gain of friends, relatives, or persons with whom the employee is affiliated in a nongovernmental capacity.”

Okay, that’s wordy. And though the rule doesn’t apply to the president or vice president -- we have Nelson Rockefeller to thank for that, but more on him later -- for any other executive office position, the rule explains that “status as an employee is unaffected by pay or leave status.” That means that you can’t say someone is not an employee just because she isn’t drawing a paycheck, which means she isn’t, in fact, exempt just because she can’t show a W-2 form.

The second rule of family business is undoubtedly: control the means of enforcement. And President Trump just got his man onto the Supreme Court, so even if ethical charges rose to the highest court in the land, the family has at least a little insurance.

Bankers and Presidents: A Walk Through History

The idea of powerful bloodlines collaborating is nothing new in either business or politics. At the turn of the twentieth century, mogul families routinely intermarried to spawn yet more powerful and profitable business empires. And when it comes to Oval Office politics, American history is littered with multi-generational public servants with blood ties to presidents.  Abraham Lincoln’s oldest son, Robert, a Republican, served as secretary of war in the administrations of Presidents James Garfield and Chester Arthur, and finally as U.S. minister to Great Britain during President Benjamin Harrison’s administration. Dwight D. Eisenhower’s son, John, became a decorated brigadier-general, served as assistant staff secretary in the White House while his father was in office and was later appointed ambassador to Belgium under President Richard Nixon (once his father’s vice-president). But neither of them inflated the coffers of the family business in the process.

Whether family business connections might influence prominent figures in the White House isn’t a subject new to the Trump era either. In 1974, when Gerald Ford, who took over the presidency after Richard Nixon’s impeachment, nominated Nelson Rockefeller to be his vice president, Nelson’s brother David ran the Chase Manhattan Bank (now JPMorgan Chase).  Questions naturally arose about the notorious wealth and political reach of the Rockefeller family. Nelson, the grandson of oil magnate John D. Rockefeller, had even worked at the bank and had been on the boards of multiple oil companies.

That same year, the Department of Justice conveniently concluded that conflict of interest laws did not apply to the office of the vice president -- but not before Democratic Senator Robert Byrd asked, “Can't we at least agree... that the influence is there, that it is a tremendous influence, that it is more influence than any president or vice president ever had?"  And yet, as fabulously wealthy and linked in as Nelson Rockefeller was, his situation doesn’t even compare to the family business tangle in the Trump White House.

There have been other family members than the Trumps and Jared Kushner in positions of significance in the White House. When, for instance, Woodrow Wilson fell gravely ill in 1919, his second wife, Edith, stepped in to act on his behalf, essentially running the government in a blanket of secrecy from his bedside. Her intention, however, was never to make hay with a family business, but to ensure that her husband’s policies prevailed.  The two Bush presidents, with a business and banking legacy that snaked back a century, were elected, not handed power.  And though Bill Clinton’s reign in the Oval Office enabled wife Hillary to garner enough public recognition (and banking connections) to successfully run for senator in New York State, become secretary of state under President Obama, and launch two ultimately unsuccessful presidential bids, the Clintons only became super-wealthy after Bill’s time in office. Though their charity foundation’s ties to foreign governments remain suspect, they never had a private business while Bill was in the White House.

What can’t be found in the historical record is someone’s child, wife, or relations holding court in the West Wing while expanding a family business, no less a network of them. The present situation, in other words, is unique in the annals of American history. Only 100 days into Donald Trump’s presidency, he already has something of the look of the authoritarian kleptocrats elsewhere on the planet who siphon state wealth into their own bank accounts and businesses.

And remember, the Trump empire is also the Kushner empire.  Jared's family business depends on global investors hailing from countries that just happen to be in his White House portfolio. He, for example, led the efforts to prepare for the state visit to Mar-a-Lago of the Chinese president (while the Kushner business was engaged in high-level talks with a major Chinese financial conglomerate).  A Russian state-owned bank under U.S. sanctions whose chairman met with Jared in December referred to him as the head of Kushner Companies, though he was already visibly if not yet officially a Trump adviser.

He is similarly the administration’s point man for Middle East “peace,” even though his family has financial relationships with Israel. Meanwhile, in his role as head of the newly formed White House Office of American Innovation, the potential opportunities to fuse government and private business opportunities are likely to prove endless.

Nepotism on Parade

Faced with the dynasty-crushing possibility of selling his business or even placing it in a blind trust, Donald Trump chose instead to let his two older sons, Eric and Donald Jr., manage it. Talk about smoke and mirrors.  While speaking with Forbes in March, Eric indicated that he would provide his father with updates on the Trump Organization “quarterly” -- but who truly believes that father and sons won’t discuss the family empire far more frequently than that?

The family has already racked up a laundry list of global conflicts of interest that suggest ways in which the White House is likely to become a moneymaking vehicle for the Trump line. There’s Turkey, for instance, where the Trump Organization already has a substantial investment, and where President Trump recently called President Recip Tayyip Erdogan to congratulate him on his power-grabbing, anti-democratic victory in a disputed election to change the country’s constitution.  Given Trump business interests globally, you could multiply that call by the world.

Meanwhile, Ivanka’s brand isn’t just doing business as usual, it’s killing it. Since 2017, according to the Associated Press, “global sales of Ivanka Trump merchandise have surged.” As a sign of that, the brand’s imports, mostly from China, have more than doubled over the previous year. As for her husband, he remained the CEO of Kushner Companies through January, only then abdicating his management role in that real-estate outfit and 58 other businesses, though remaining the sole primary beneficiary of most of the associated family trusts. His and Ivanka’s children are secondary beneficiaries. That means any policy decision he promotes could, for better or worse, affect the family business and it doesn’t take a genius to know which of those options he’s likely to choose.

Kleptocrats, Inc.

Despite an already mind-boggling set of existing conflicts of interest, ranging from business affiliations with oligarchs connected to the Iranian Revolutionary Guard to the Secret Service and the Pentagon leasing space in Trump Tower (for at least $3 million per year), the Trump family business is now looking to the glorious, long haul. The family is already scouting for a second hotel in Washington. Trump has reportedly used nearly $500,000 from early campaign money raised for his own 2020 presidential bid to bolster the biz. It’s evidently been poured into “Trump-owned restaurants, hotels and golf clubs,” as well as rent at Trump Tower in New York City.

According to the latest polls, the majority of registered voters believe that the installation of Ivanka and Jared in the White House is inappropriate. But that could matter less to Donald Trump. Ask Stephen Bannon or Chris Christie what happens when Ivanka or Jared don’t like you.  That’s the family version of mob-style power.

Ivanka noted in her book, The Trump Card: Playing to Win in Work and Life, that “in business, as in life, nothing is ever handed to you.” Except, of course, when your father is president and he hands you the keys to grow the family business on a silver platter.

Four decades ago, at a Senate hearing on his potential conflicts of interest, Vice President Rockefeller was asked, “Can you separate the interests of big business from the national interest when they differ?"  It’s a question some senator should pose to Ivanka and Jared, replacing “big business” with “big family business.”

Making the future yet murkier, the family may be on the precipice of major problems. The most striking of them: Kushner’s marquee building, 666 Fifth Ave (an 80-story, ultra-luxury Manhattan skyscraper) has a greater than 25% vacancy rate. It hasn’t made enough money to even cover its interest payments for several years, and in two years it will have to pay principal as well on its $1.2 billion mortgage. That’s going to hurt if foreign companies don’t step in to staunch the flow of dollars out of the firm and that, undoubtedly, could require a quid pro quo or two.

In our era, it’s no secret that presidents leave office with the promise of quickly growing exponentially wealthier. But for the first family to gain such wealth while still in the White House would be a first.  Yet the process that could make that possible already seems to be well underway. All this, as Donald Trump, his children, and his son-in-law continue to carve out an unprecedented role for themselves as America’s business-managers-in-chief, presiding not so much over the country as over their own expanding imperial domains.