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This material is taken from the Economic and Political Weekly which has adapted it from the text of the Seth Shantaram Mangesh hulkarni Lecture delivered in Mumbai 'on December 3,2005. I am not reproducing the article as there are chances that it will lose its essence. So it is the exact wordings of an insider who was involved in opening of NSE.DISCLAIMER: Article is very long but is worth reading.Indian capital markets have witnessed a radical transformation over just one decade. There is hardly any country in the world which has witnessed such massive changes in its capita market during such a short period. During the early part of the 1990s, the ranking of the Indian capital market with reference to the standard global indices relating to efficiency, safety, market integrity, etc, was not at all flattering. With reference to the risk indices, in particular, the Indian capital market was regarded a: one of the worst as it figured almost at the bottom of the league The same was the case in regard to its efficiency levels in trading and settlement systems. Strangely, not many people appeared to be bothered about the dismal state of our capital markets. As we are all accustomed to find India figuring in the bottom league in regard to so many other indicators of development such as per capita income, nutritional standards, health amenities to its citizens, literacy levels, etc, we did not seen worried that the capital market was also ranked at the bottom of the global ranking sheet.The same cannot be said about the current state of the Indian capital markets. From the viewpoint of both adoption of sophisticated information technology tools in trading and settlement mechanisms as also the efficiency of capital markets, not only is India ranked in the top league but it is also considered to be way ahead of many developed country capital markets. Even at the risk of being dubbed as personally biased I would affirm that the National Stock Exchange (NSE) has been largely responsible for significantly upgrading the Indian capital markets to the best global standards. I would be the last person not to agree with the proposition that the government and the Securities and Exchange Board of India (SEBI) have also played a very crucial role in this transformation process. But there is a limit to what can be achieved merely through official interventions or directives. It may be recalled that the government did seriously try to bring about several desirable reforms in the capital markets in response to the recommendations of the 1985 G S Patel Committee report. But it was not possible to make much progress in the desired direction as the stock exchange community was not receptive even to a marginal set of, reforms. What is even stranger, the powerful broker community started talking about their fundamental rights to do business as they thought fit, although that may not always have been in the interests of the markets and the investor community.But after the NSE was set up, the entire atmosphere changed. The broker-owned and managed exchanges started worrying more about the competitive threat that NSE posed to their business and how they should meet investors' minimum demands so that they did not lose out completely to NSE. All these exchanges became more receptive to what the government and SEBI were telling about adopting clean business practices. NSE, in that sense, strengthened the hands of the authorities in making the other exchanges conscious of their social responsibilities.How did the Indian capital market, which was considered to be one of the most inefficient and risky, get transformed into one of the best and the safest in such a short period of time? There appear to no parallels to this in any part of the world. In several countries, capital markets have improved in terms of quality and efficiency continually over several decades before they could be bracketed with the top league of the best capital markets of the world. To the best of my knowledge no other country, even in the developed part of the world, has been able to witness a quantum jump in the quality and efficiency of its capital markets in a short period, viz, a decade. Hence, a detailed study of transformation of the Indian capital markets during the last decade will certainly prove to be a fascinating story. All that I am planning to do here is to give a bird's eye view of the developments in the Indian capital markets as I have seen them from close quarters since I was fully involved with the setting up of NSE right from day one and was also its managing director and the chief executive officer for the first seven formative years. It is my humble claim that the NSE has been the most important catalyser of the radical transformation of the Indian capital market during the last decade. Hence, I consider myself to be one of those few fortunate people who could witness and participate in the unfolding of this fascinating story from where most of the catalytic activity took place.Let me begin my story by drawing your attention to the major disaster that struck the Indian financial system during 1991-92. It shook the stock market to its very foundations. During this scam several banks — both small and big, foreign and Indian, and public sector as well as private sector — lost huge amounts of money. Strangely, many stockbrokers prefer to refer to this disaster as a banking scam, as if the broker community did not have any role in perpetrating the scam. The real truth was that money was siphoned off from the banking system by the stock-brokers through many devious ways. Equity prices were manipulated by several prominent brokers with the help of money diverted form the banking system. Although brokers used to issue their contract notes, their concerned stock exchanges did not bother to conduct regulatory surveillance on these transactions. There is hardly any doubt or dispute about the proposition that the stockbrokers were the kingpins of the major fraud that shook the financial system and the capital markets. It was in this context that an urgency was felt to bring about necessary reforms in the capital markets so that such serious mishaps did not recur. This prompted the government of India to delegate powers to SEBI under the Securities Contracts (Regulations) Act, 1956 (SCRA) and later to enact a special legislation called the SEBI Act. But it was soon realised that merely empowering SEBI with more powers exchanges not enough. Since the governance of the stock exchanges was very poor something more in the nature of setting up a new model stock exchange was needed so that competitive pressure would force other stock exchanges to reform themselves. The government agreed to bless/support the lead taken by IDBI to set tip a modern stock exchange that would help introduce the best international practices, both in the areas of trading and settlement.It is worth noting in this context that in the initial stages, there was not much enthusiasm in favour of setting up exchange even among influential official circles. There was some scepticism as whether there was any need for such an exchange that would compete with the broker-owned-dominated stock exchanges. It was widely believed that the right course of action should be that SEBI should crack its regulatory whip. It was hoped that this would ensure good corporate governance among the stock exchanges, make markets function more efficiently and protect investors' interests. The then chairman of SEBI G V Ramakrishna did act tough to make stock exchanges fall in line. But the well-entrenched brokers were in no mood to listen to wise counsel. Prominent broker associations as also some of the stock exchanges were almost on a collision course with the market regulator. Soon it became abundantly clear that, in the absence of competitive pressure from a well functioning and professionally managed stock exchange, market standards could not be significantly improved.The second point that needs to be noted is that the NSE as has emerged was not the one to which we find reference in the Pherwani Committee. The concept of the stock exchange given in the Pherwani Committee was quite a timid one. The NSE, as proposed by the Pherwani Committee, was primarily meant for creating a corporate debt market as also creating liquidity in mid-range stocks that lacked liquidity on the main stock exchanges like the BSE. Foreseeing the opposition such a proposal would meet with from BSE and the powerful broker lobby the Pherwani Committee had suggested that such a stock exchange should be set up in New Bombay. Despite the fact that the NSE, as recommended by the Pherwani Committee, would have posed hardly any threat to the strongly entrenched BSE and other exchanges, there was tremendous opposition to the very idea of an exchange with different feathers. At that time the broker community a strongly believed that of stock exchanges were their exclusive preserve.It was certainly a difficult journey as we faced several difficulties, often from quarters, which should have, in the fitness with of things, supported us in our task. My intention is to share you an insider's story so as to dispel the wrong impression some people have, that it was cakewalk for us. It is also my desire to emphasise that the changes that the NSE has been able to bring about may appear to be irreversible; but it need not necessarily be so. If we are keen that our journey on the path of capital market reform is not slowed down or that the reform process does not get reversed, we should remain ever watchful of the games that the detractors play. We should try to see through the clever games which a number of powerful market operators repeatedly play to achieve their selfish objectives.NSE as a Trend SetterThe anonymous order matching system adopted by NSE is perhaps one of the best in the world, The New York Stock Exchange (NYSE), for example, would have remained free from the bad name that the floor specialists brought to the exchange, had it adopted NSE’s automated trading system. In terms of the geographical reach of real time trading facilities to the nooks and corners of the country, the Indian capital market is way ahead of most of the global capital markets. Investors can trade from close to 400 cities/towns across the length and breadth of the country on a real time basis. Today, investors in distant parts of the country feel happy that they enjoy parity with investors located in Mumbai as they also have the same type of access to the best prices as are available to investors in Mumbai. Before NSE came into existence the country was not even aware or the ironclad settlement guarantee for all the trades done on an exchange. NSE is the only exchange in the country which has set up a d clearing corporation which acts as the central counter party guaranteeing all settlements.NSE happens to be the first truly demutualised stock exchange of the world; it has almost fully resolved the conflict of interest issues that arise when brokers are in control of the boards of the stock exchanges. NSE represents a basic paradigm shift as the ownership and management of the exchange have been fully separated from the trading rights. NSE is owned by a set of premier financial institutions/banks and is managed by professionals who do not trade directly or indirectly on the exchange. NSE is the only stock exchange in the country which decided not to seek exemption from corporate tax, which all other stock exchanges in the country routinely enjoy. NSE has been paying sizeable corporate taxes every year, right from the first year of its operation.NSE believes in the philosophy of a fully competitive system insofar as its trading membership is concerned. There are no entry or exit barriers in regard to NSE membership. Since NSE does not limit arbitrarily as to how many members it will admit in any of its trading segments, any eligible corporate or non-corporate entity can aspire to become a trading member by paying the required security deposits and meeting other normal membership requirements. Similarly, its members are also to free to exit later if they find that they have other more profitable business opportunities; such exiting members can seek a refund of all the Membership deposits kept with NSE once they meet the dues of the exchange and their clients.Before we crystallised our architectural design for the proposed stock exchange we felt that we should have some idea as to how some of the best stock exchanges in the world functioned. We undertook a study tour of stock exchanges of Asia (Australia, Bangkok and Hong Kong), Europe (London, Paris), America (NYSE and NASDAQ, Vancouver). These visits convinced us that we should not copy the model of any particular stock exchange, Instead we felt that we should adopt an eclectic approach which implied incorporating in the conceptual design of NSE the best features that we found in different exchanges of the world. NSE thus incorporates today the features of(a) the big board of NYSE dealing mainly in very large stocks that are widely known across length and breadth of a vast country like ours,(b) a nationwide presence of trading terminals on the pattern of NASDAQ(c) a computerised order-driven trading system of the type found on the Paris bourse or in Vancougver, which is free from the manipulative behaviour of the market makers or specialists, and(d) a settlement guarantee system akin to the Chicago's future exchanges.We also needed a communication technology that would help us connect the trading terminals of our members to the exchange computers. In this area we borrowed the idea of the nationwide departmental stores of the US, many of which rely on their captive satellite communication network for executing instantaneous settlements. There was also another strong reason for choosing satellite-based communication technology (SBCT) in our context. When NSE was being set up, the terrestrial communication system provided by BSNL would not have provided a fault tolerant, time critical, and high bandwidth communication link between NSE, and its members. Even within Mumbai, broadband telecommunication links were not highly reliable, besides-the fact that they were relatively more expensive. For example, in Mumbai an end-to-end 64 kbps leased line from MTNL, used to cost NSE members almost `2 lakh per annum whereas NSE's highly reliable satellite link cost around half that amount. Secondly, quick availability of leased lines was also a problem in those days as there was no competition to the BSNL or MTNL. In retrospect, NSE's decision to go in for its own captive VSAT network proved to be a very wise decision. Such a highly reliable telecom link that enabled NSE to establish links with its rapidly expanding member community with a minimum time lag put NSE way ahead of all its competitors. This was perhaps one of the most important reasons which helped NSE's trading volumes grow almost exponentially. Secondly, given the state of the terrestrial telecom infrastructure of BSNL, and MTNL when NSE started its operations in 1994 it would have been practically impossible to establish NSE's nationwide trading network, connecting such far off places like Srinagar, Jorhat (Assam), Nagercoil (Tamil Nadu), Nainital (Uttaranchal) and Salasar (Rajasthan).Opposition to NSEThe proposal to set up NSE was met with tremendous hostility. The broker community was up in arms against any such idea for the simple reason that it was against their interests. They sincerely believed in the concept of mutuality of a stock exchange and firmly believed that only brokers should own and manage a stock exchange. They could sell such an idea to the lay people as the global history of the stock exchanges supported their contention. All over the world, almost all the stock exchanges are broker-owned and managed. Even in India history not only was in their favour but the spirit of SCRA was also in sympathy of their contention. The SCRA defines the stock exchange as follows: -Stock exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities".The second objection was that NSE, was given a mandate to spread to all the parts of the country, whereas the then existing stock exchanges were permitted to operate within a strictly defined narrow geographical territory. The area in which a stock exchange could operate, was most of the time coterminus with city limits where the particular exchange was set up. For example, the area of operation of BSE was confined to the municipal 'inn of Mumbai and that of DSE to Delhi. The design accepted by the authorities at that time was to divide the country into geographically non-competitive securities markets; in other words the then accepted policy frame was to create geographical monopolies for respective stock exchanges and to protect them from competition with other stock exchanges. With the arrival of NSE, with a mandate to operate in all parts of the country, the monopoly status of all the stock exchanges came to an end abruptly. The smaller stock exchanges were particularly worried that they would have to compete with the proposed exchange which was backed by powerful financial institutions of the country.They also took great objection to the proposition that NSE..., It would enter in a big way into the equity segment by setting up computerised trading facilities in equities all over the country. Most of those who were opposed to NSE were under the wrong et impression that we were implementing NSE as was conceived in the Pherwani Committee report. However, our design of NSE was radically different. All that we borrowed from the Pherwani Committee report was the attractive name of the NSE for the proposed stock exchange. The broker community therefore accused e us that we were going beyond our charter, which, according to them, was merely setting up of an exchange for trading in debt instruments.Misplaced FearsIt was then very widely believed that computerised trading would not succeed especially in a country like India where computer literacy was quite poor, especially among the stock market fraternity. When the NSE was being set up, most of the people that took up broking activity were not only not very well educated, most of them had not even touched a computer key board. In view of this, it would be very difficult to attract truly business savvy brokers into NSE's fold as they would detest computerised trading systems. It was widely believed that computerised trading requires highly complex computer skills and those who have such skills are unlikely to be good brokers. In a way, we were also worried about the difficulties of enticing the broker community into the fold of the NSE. Hence we planned to provide training in computerised trading to our members before we actually commenced our formal trading on the NSE. We set up trading floors in NSE's office premises by setting up a local area network (LAN) where members could be actually trained to do computer trading. We estimated that it would require at least three full days' training for each dealer. Our LAN could accommodate almost 100 dealers at any point of time. After the training started we were in for a major surprise. Most of the dealers at these training courses took just about two hours to learn all the tricks of the trade and they became quite proficient in computerised trading system. The main reason for dealers learning the skills fast was due to the high quality trading software that we had procured from a foreign software company and the subsequent improvements/modifications/ customisation done by Tata Consultancy Services (TCS), our main software vendor at NSE. The trading software had kept all the complexities at the host computers at NSE and the dealer terminal or front-end was kept as simple and user friendly as possible.NSE as Market ReformerConcept of a Demutualised ExchangeThe NSE brand of demutuality is perhaps unique in the world as it aims at a total separation of exchange ownership and management from the trading rights of members. In other parts of the world, demutualisation has meant converting the mutualised exchange into a corporate entity, with trading members having both ownership rights as also representation on the board of the company. Australia was the first country where a mutualised exchange got transformed into a demutualised corporate body in the latter half of the 1990s. In the Australian demutualisation case, brokers still have a strong voice in management as their shareholding in the exchange company continues to be sizeable. True demutualisation is one in which ownership and management of an exchange are totally separate from members' trading rights in the exchange. In a broker dominated exchange, all the office-bearers such as the president, vice-president/s, treasurer, and other board members are all elected by the general body of members who are trading members. It is also obvious that once you resort to election as a method for choosing office-bearers of the exchange, group politics is bound to emerge. As office-bearers of an exchange continue to remain active in their own day-to-day brokerage business, there is always a temptation to misuse their official position to have access to information about other members' market position in different stocks. It is not possible to prevent all such malpractices, unless all the office-bearers in control of the affairs of an exchange are not its trading members.This argument is sometimes countered by pointing out that a number of chief/senior executives of brokerage firms also sit on the board of NYSE. It is further argued that if that is considered to be reasonable in the case of NYSE — a premier stock exchange of the world — what is wrong in having brokers on boards of the Indian stock exchanges? The major point that should be noted in this context is that the senior member representatives on the board of NYSE are not only very far removed from the normal trading desks of their firms but that they scrupulously avoid having any contact even remotely with all those departments which are involved in the actual exchange activity. In spite of the self discipline observed by NYSE board members, there has been frequent criticism about the influence of powerful trading members on the management quality of functioning of NYSE. Recently, there has been intense criticism about the detrimental influence of the floor specialists on the price discovery process of NYSE and the role of powerful NYSE members firms in this.As of now there is hardly any disagreement in our country of the necessity of having demutualised stock exchanges. After the stock exchange crisis in 2001, the government announced that demutualisation will be made mandatory. However, the actual move in that direction has got considerably delayed. The main difficulty that arose in this area is about the beneficial ownership of the property that belonged to the exchanges after they got demutualised. Many people including me have argued that most oldie property that the exchanges had accumulated has been due to the favours by the government to the exchanges. They were exempt from all types taxes besides the fact that the land on which the buildings of most of the stock exchanges were constructed was given at almost throwaway prices to the exchanges. Since the exchange was considered to be a public utility it enjoyed so many other benefits including listing fees that are to be paid by the listed Companies. Recently, SEBI has come out with a broad demutualisation scheme for the exchanges where brokers will have 49 per cent of the share capital of the new exchange company and broker representation on the governing board will be to the extent of 25per cent of the total. It should be noted in this context that this scheme of demutualisation is materially different from that of NSE. Hence one is not fully sure as to what this will mean in reality for the quality of governance and resolution of the issues relating to conflicts of interests as noted above with broker members sitting on the boards of the stock exchanges. There is also one more puzzle that needs to be noted in this context. Before turn to NSE's attempt to, set up a nationwide exchange let me draw your attention to the tremendous pressure that was brought to bear on NSE from highly powerful quarters to have broker members on its board. Very ingenious arguments were being put forth in justification of having brokers on the board of NSE. It was said that just as we cannot have bar councils without lawyers on the bar or medical councils without doctors as its members how can we have stock exchanges without stock brokers on their boards? The major point that was missed all along was that bar councils or medical councils are like clubs of their own members and they are not on par with stock exchanges, which are granted recognition by the regulator so that they scrupulously follow a code discipline, protect integrity of the market and fully protect investors' interests. Common citizens do not deal with the bar councils or the medical councils in the same fashion that investors deal with the stock exchanges. Hence, it is meaningless to compare bar councils or medical councils with stock exchanges. Although NSE's trading members were fully aware that NSE's trading membership does not grant them any rights to its board membership, they also started an agitation to have board representation. However, NSE's board stood firm on this issue and refused to yield to pressures of the vested interest groups.Concept of Nationwide ExchangeWhen NSE, got its recognition as a stock exchange these powers were being exercised by the ministry of finance, government of India. When NSE was given a clear mandate that permitted it to extend its operations to all the parts oldie country it was not clear to the stock exchange community as to how we would be able implement such a difficult project. Hence most of them felt that this nationwide trading mandate would remain merely on paper, It is possible that most of the regional stock exchanges were not worried in th9 beginning that NSE would ever compete with them for business. With the resounding success of NSE's order driven anonymous computerised trading system, which rode a highly reliable satellite communication system, all the stock exchanges got very much worried about its competitive threat. BSE also got much more worried as we started eating in a big into its order flow that used to originate from the rest of the country. As NSE's trading volumes started spurting, all the stock exchanges started putting pressure on the regulator not to permit the spread of NSE to centres where the regional stock exchanges were located. We from the NSE took a stand that since NSE had been given a mandate to spread its trading network to provide real time and equal access to investors spread across the length and breadth of the country we cannot stop our drive of going to newer and newer places where investors existed.This became a highly contentious policy issue; hence it had to be finally referred to the government as the original mandate to NSE for nationwide trading was given by the government itself. The government was requested to review the policy in regard to NSE so that it is also obliged to seek appropriate approvals for all its future plans to expand its network to new geographical locations. The logic was that since other exchanges had to obtain approval before spreading their trading terminals to locations outside their licensed areas, NSE should also be subjected to the same rule. However, we from the NSE were vocal that the ban put on other exchanges from spreading to locations outside their pre-approved areas of operations should be removed so that all the recognised exchanges freely spread their operations to places of their choice. Since NSE was conceived from the beginning as a model exchange to significantly upgrade capital markets of the country and put competitive pressure on the existing exchanges to reform themselves, it was not necessary to set up different NSE type model exchanges in all places where the stock exchanges already existed. The technology adapted by NSE facilitates spreading its trading network to all the parts or the country therefore it is a cost-effective option to provide exchange infrastructure rather than duplicating the NSE model in cities and towns. The NSE model discards the archaic then prevailing capital market concept which identified a market with a particular geographical location. Prior to NSE, the capital market of the country was divided into isolated markets which were identified with the cities of their location, viz, BSE in Mumbai, DSE in Delhi, etc. When the policy about NSE's expansion was being reviewed, NSE had put on hold its expansion plans. However, it did not take much time for the government to reaffirm its earlier decision that NSE should be allowed to spread its trading network, without any hindrance, to all the parts of the country.Settlement GuaranteeThe concept of a settlement guarantee, which NSE currently operates, was almost unknown in India until 1995. Interestingly, the SCRA also does not talk much about settlement of trades done on the exchanges, except mentioning that the exchanges can set up their own clearing houses. We realised this was one area where a major reform was overdue. Our review of global practices indicated that even some of the major stock exchanges like NYSE, NASDAQ and LSE, did not have their own clearing and settlement infrastructure/entities. Even today, brokers of these exchanges trade on their respective exchanges but take their trades to an independent clearing corporation for the settlement. For example, NYSE brokers report all their trades to a clearing corporation which also clears and settles trades on other exchanges. But we realised this model was not suitable for the Indian conditions as there are even today no such independent clearing corporations that could take the responsibility of settlement by offering iron-clad settlement guarantee. NSE, therefore decided to set up a wholly owned subsidiary called the National Securities Clearing Corporation (NSCCL) for this purpose. The major advantage of NSE owning the NSCCL is that there is seamless integration of the two most important functions of trading and settlement with hill guarantee. Investors' interests can be thus be fully protected.Some argue that NSE itself could settle all the trades with a settlement guarantee by having an in-house clearing and settlement arrangement called a clearing house. But this is not a highly satisfactory solution for some important reasons. The major reason for setting up a separate legal entity for handling clearing and settlement is that an activity is a commercially risky proposition which the stock exchange itself should not undertake as an in-house activity. A clearing corporation may face the prospects of bankruptcy in extremely volatile market conditions, it the margin money and other funds on the basis of which settlement guarantee is extended to the clearing members is not adequate to cover the risks that may emanate when some of the clearing members become bankrupt and the guarantee fund is not enough to complete the settlement. From an overall point of view, an exchange is considered to be a public entity which should not ever face the prospects of bankruptcy. Hence there is justification to segregate the clearing and settlement activity by entrusting it to another corporate entity and not make it part of exchange activity.Given the speculative instincts that dominate market players in India, NSCCL introduced some of the most stringent regulations for its members. The mechanism of upfront or initial margins was introduced by NSCCL right from day one in a different garb. Each member was given trading exposure limits (net in each stock and gross across all the securities), based on the deposits that the member placed with NSE plus NSCCL. To begin with, the net exposure ratio was fixed at 10, meaning thereby that no member can have, at any point of time, an aggregate exposure of inure that, 10 times his deposits. If a member deposits say `2 crore he can trade within an exposure limit of `20 crore. To track member positions, NSCCL developed unique software which tracks each member's aggregate trading exposure on a real time basis. The software has the capability of not only informing the member of his exposure position on a real time basis, but can also disconnect all his trading terminals the moment he crosses the limit granted to him on the basis of the deposits made with NSE/NSCCL. The NSCCL has been making variations in the exposure ratio depending on the market conditions. Later NSE calculated security-wise margins, based on the volatility which different stocks are subject to. As of now, it would be no exaggeration to state that India has one of the most sophisticated systems that implements a scientific margining mechanism. It is also one of the few countries that has built strong capabilities to deny trading connectivity to members who exceed their exposure limits on a real time basis.When NSCCL introduced the concept of a settlement guarantee fund for smoothly managing the settlements, there was a lot of misunderstanding about the concept of settlement guarantee itself. In real life situations it is very rare that in each settlement all the pay-ins are made fully by the members. Temporary shortages of either funds :tor securities invariably happen for various genuine reasons, given the fact that members/investors trade on NSE from nearly 400 places across the country. For example, a member may find that his client has not been able to remit funds in time for the member to complete the pay-in before the predetermined time. In some cases, investors may not be able to give delivery of shares to the members in time if the members maintain their depository account with some other depository participant. It is also possible that the client of a broker or the broker himself has traded excessively and is not in a position to honour his obligations to the clearing corporation. In this context, it should be noted that just because all the pay-ins have not come forth the settlement should be aborted. In all such cases of shortages, the NSCCL which acts as the central counter-party for the whole settlement process steps in and completes the settlement. If there is a shortage of funds the settlement guarantee fund is used to complete settlement. If there are security shortages NSCCL procures the shares by buying them through an audio, or borrowing the securities as recently permitted by SEBI. Late the NSCCL recovers the dues from the members who are short in deliveries and also levies fines for not having made the required pay-in on time. It is only when the concerned member fails to pay up his dues to the NSCCL within the time frame stipulated by it that the procedure for declaring him a defaulter kicks in.In the beginning, when this system was introduced there was a great deal of misunderstanding about it. Some even unfairly and maliciously accused NSCCL as encouraging speculation by funding settlement shortages. They ignored the fact that before BSE put up its own form of a settlement guarantee arrangement, it had to shut down the exchange during the mid-1990s for three consecutive days to resolve the problems caused by settlement default by a member of a relatively small amount. A settlement guarantee fund helps to fund settlement shortages as a bridging mechanism so that the settlement goes though smoothly and there are no cascading defaults. During its existence so far, NSCCL has been able to manage all the settlements on time with the help of the settlement guarantee fund even when there were large pay-in shortfalls. In most of these cases, NSCCL has been able to recover later the pay-in shortfalls from the members. In all those cases where members failed to meet their obligations to the NSCCL, even after they were given reasonable time to make good their shortfalls, such members were declared as defaulters and the shortfalls were met out of the incomes NSCCL earns by way of interest on the settlement guarantee fund as also the small fees it collects from the members as settlement charges. By now the concept of the settlement guarantee fund and guaranteed settlements have become accepted folklore in our capital markets. But it should not be forgotten that when we introduced them for the first time in the country, we had to face a lot of malicious criticism from the market players and hostility from unexpected quarters. Some market players even went to the extent of spreading false-hood that IDBI was continually funding NSE's settlement short-ages as also losses incurred by NSCCL, just because IDBI was the main promoter of NSE.NSE: Third Largest ExchangeIn terms of the number of number of transactions, NSE is today the third largest exchange in the world, next only to NASDAQ and NYSE. How did NSE come to occupy this position within a decade. It has also been able to establish another major land-mark. It is the first stock exchange in the world to cross the turnover of an already well entrenched stock exchange in its own country, viz, BSE, in a very short period of one year. It is worth noting in this context that the initial run for the NSE was not at all that smooth. During the first few months of its existence, its trading turnover was quite modest, often less than `10 crore a day. It appears that the investors as also our members were testing our systems and our management capabilities. When they saw that all the settlements were being completed absolutely on time without any hitches they started developing confidence in us. As our rules and regulations were absolutely transparent and once investors started seeing prices and quantities in different stocks on a real time basis at all places where our terminals were located, they came to recognise a major difference between NSE and all other exchanges. As NSE volumes started growing, the Prices reflected on its screen became a benchmark for all other exchanges including BSE. It did not require much time for NSE to establish its leadership in the market. Another interesting thing that is worth noting is the composition of its investor class when it emerged as the largest stock exchange of the country. At that time more than 90 per cent of the value of trading was accounted for by non-institutional or retail investors. Strangely, even most of the promoters of NSE, were not trading on NSE. That is why I consider that institutional investors are less market savvy and laggards as compared to retail investors. Although the institutional investors' holdings have grown quite rapidly during the last decade the retail investors continue to be the backbone of our equity markets. Given the fact that NSE enjoys the maximum trust of the retail investor community, it will continue to grow both in terms of trading volumes as also in terms of market share.Depository with DematerialisationAs NSE spread across the country, it faced serious problems. related to the paper-based settlement system. The first set of problems related to transport of share certificates to the central clearing location in Mumbai. Since NSE decided to shorten the settlement period it introduced weekly settlement system as against BSE's fortnightly settlement. Shortening of the settlement period along with the responsibility of clearing settlement of the net obligations during the next week put an excessive burden on NSE. The pay-ins of securities from all over the country at Mumbai and the re-dispatch of pay-outs thereafter at all the relevant locations in a week's time created lot of difficulties for its members. NSE therefore decided to offer a helping hand to its members. It made arrangements to receive all the pay-ins at four major metros, viz, Mumbai, Delhi, Kolkata, and Chennai and also make pay-outs from these four metros. At its own expense NSE used to ship by air all the securities pay-ins from the other metros to the central location in Mumbai and reship by air the pay-outs to the other metros. On many occasions NSE had to airship share certificates weighing more than four tonnes a week each way at its own expense. The paper based system posed other more serious problems. Several anti-social elements tried to take advantage of the system by introducing fake and fraudulent securities and transfer forms that accompanied them. To deal with problem fake certificates, NSE, with the assistance of registrars and transfer agents of the companies, launched a system of scrutiny of the documents before they are accepted as pay-ins. Despite all this, NSCCI., as also several members, suffered loss due to the massive nature of the problem.NSE therefore took up in earnest, the task of setting up a depository where ownership records would be maintained in a dematerialised form. The speed with which this task was also implemented could be noted from the fact that the depository went live in November 1996, just two years after NSE went live in November 1994. It was a great encouragement and relief for us when C.B Bhave agreed to take up the responsibility as the first MD and CEO of the depository in the early part of 1996 He has done a wonderful job at the depository and taken great heights. NSDL therefore continues to be the preferred depository of the investor community. In this context, it is worth the remembering that despite the obvious advantages of a depository there were some people who were not in favour. These were the people who could benefit from badla trading environment. The true motives of some of these people got exposed during the 1998 stock market debacle when it was found that the physical share certificates were being misused in badla trading. If depository movement has become a resounding success in India in such a short period of time it is a tribute to both the -government and the SEBI for consciously pushing the capital market players in that direction. The Indian depository is unique in the world in one respect. It is perhaps, the only depository to have full data on investor holdings, which gets updated continually. The investors are therefore better protected from problems that may arise due to intentional or unintentional activities of the depository participants which are in the investors' interest. The success of a dematerialised depository has also helped to usher in an era of rolling settlement. In a period of less than four years the Indian capital markets could make a transition from a weekly account period settlement first to a T+5 settlement, then to T+3 settlement and finally to a T+2 settlement. It would have been simply impossible to think of rolling settlement if depository movement had not caught on in such a short period of time. India is one of the few countries where depository movement has become such a market-wide success.Futures and OptionsDespite the advice to the contrary even from many of our well-wishers we decided not to introduce badla trading system on the NSE. Some had favoured NSE introducing badla trading as they felt that we would be able to manage it more efficiently and in a transparent fashion. The main reason why we did not favour badla trading is that it is a hybrid product which muddies up the price discovery process as badla is a mix of the cash and the futures market. Badla grew rapidly in the Indian market after forward trading was banned in the 1960s because of the excessive speculation that it was leading to. Badla provided an escape route to the active market players; it gained in popularity with speculators as also many financiers who wanted to deploy their funds in a profitable way. The badla trading system also became a conduit for deployment of unaccounted money for traders in many areas. Right from day one of NSE, we were keen that India should graduate into the globally accepted most efficient form of futures trading, viz, futures and options. Hence our efforts were, at that time, concentrated on getting SEBI approval for futures and options. Being a totally new product it did take us quite some time to get the futures trading duly approved. A major part of the difficulty that we faced was on account of the powerful badla lobby which strongly opposed introduction of futures in the Indian markets. The main worry of the badla lobby was that, once futures were introduced in India badla would lose its attraction.After a great deal of efforts, futures were allowed to be introduced. However, BSE managed to score over NSE by launching futures one day prior to that of NSE. But that has not helped BSE in any way as could be noted from the fact that futures have not taken off at BSE. As of today more than 99 per cent of the futures trading in the country happens to be on the NSE. One need not put in great efforts to find out as to why BSE has lost to NSE in the futures game. The reason for this is simple. When NSE was concentrating its efforts on building its in-house expertise, developing the trading and settlement software, and the spread of the message of futures countrywide through large number of investor seminars, BSE was emotionally pleading the case of badla even in foreign countries. As a result, it lost a great deal in terms of getting seriously prepared for the introduction of a relatively more complex options and futures trading. Once having lost the lead in this area it has become more difficult for BSE to attract investors to its futures segment. During 2000-01 the market witnessed exceedingly high speculative activity on the exchanges, aided by badla with diluted standards and http://int.er-exchange position shifting. This led to a market crash forcing the government to ban badla and announce introduction of rolling settlements. My worst fears about the highly risky nature of badla trading were proved to be correct and our decision not to introduce it at any cost also proved to be the right one.Risks of Individual Stock FuturesThe original plan of bringing futures to the country in place of badla was to introduce index futures, index options and stock options. The SEBI committee that went into the whole issue of equity based futures was not in favour of futures in individual stocks which are, however, currently being traded on the NSE. In fact, all over the world the widely accepted futures products are the index futures, index options and stock options. In most of the countries, wherever equity futures are traded the individual stock futures either do not find any place or even if they are grudgingly allowed, not much trade takes place in them. Most of the market players either do not find individual stock futures to be useful products or they consider them... and very rightly so... as highly risky products.The basic purpose which the equity futures are supposed to serve is to provide a mechanism for investors to hedge their risks arising from unanticipated broad market movements. It is universally accepted that index futures serve this objective of protecting investors eminently from risks arising from broad market trends by incurring a small cost in the form of margins paid to the exchanges. Let me briefly explain what this means. The price of a stock at any point of time reflects the influence of two factors. The first set of factors relates essentially to the performance of the company itself. For example, if you have invested your money in a cement company, the price of its shares would depend on the profitability of cement, relative locational advantages/disadvantages of the production facility of the particular company, type of production technology, quality of its management, etc. The other set of factors that influence the share prices of the that cement company would depend on the state of the capital market itself. Even if there is no change in the factors that influence working of the particular cement company, prices of its share will go up or down depending on the bearish or bullish conditions in the market. When an investor invests in a company after making a detailed study he can be reasonably sure about the price he should pay as of today But it is not possible for the investor to predict as to what will happen to its price say alter three months if the overall market conditions change. To protect investors against such risks which are associated with the future market trends, index futures have been devised. If an investor is interested in only specific stocks he might as well buy options contracts in such stocks which the option writers provide. In fact, the stock options are safest for an individual since his upside risk of buying an option is limited to the extent of the margin money paid for buying stock options. In the case of stock futures, the risk can be very high if the market moves in the opposite direction by a large measure.The world over, Stock futures are not favoured in view of the risks they pose to the investors as also to the markets. Futures in individual stocks are considered to be highly risky primarily because they can be manipulated by unscrupulous speculators. A group of large speculators can come together and manipulate the futures prices of an individual stock by acting in a concerted fashion. Since a trader in futures has to shell out only margin amounts and not the full price of the value of the contract, leveraging becomes easy. In other words, the amounts required to manipulate futures prices of an individual stock would not be very large if a group of speculators can act in concert to manipulate its market price. The same cannot be said about index futures. For example, the NSE's main stock index, viz, Nifty has a huge market capitalisation of around `12 lakh crone. It is, therefore, not as easy to manipulate Nifty as individual stocks are included in Nifty. There has been some discussion in the newspapers about the manipulations of Nifty index by some unscrupulous speculators. The mechanism adopted by such manipulators is relatively simple. They pick up a share of a company like HLL which has a large weight in the index but a relatively smaller floating stock. After the introduction of individual stock futures it has become much easier to manipulate shares like HLL as one needs much less margin money to be deposited with the exchange for buying futures in HLL. If there were to be no futures in individual stocks, speculators would need much larger amounts to take delivery of stocks and hold them for manipulating share prices. Thus we have introduced a futures trading systems which makes it much easier for market players not only to manipulate prices of individual stocks but also of the indices on which futures contracts are written.Most of the countries that have introduced equity futures have preferred to introduce index futures, and options in index and individual stocks. Very few countries have taken the risk of introducing individual stock futures. Even in those countries where the individual stock futures have been introduced the relative trading colonies are quite modest. The Italian stock exchange which ranks next only to NSE in terms of value of traded contracts in individual stock futures, accounts for only 25 per cent of NSE's volume. But when it comes to the value of contracts in index futures the volume of the Italian exchange is nearly twice that of NSE. This is indicative of the fact that individual stock futures are not considered as safe as index futures even in the countries in which such futures products are traded. All the major futures exchanges of the world in the US or Europe consider that individual stock futures are not only highly unsafe but also that they do not serve any justifiable purpose. Despite the obvious risks that individual stock futures pose to the safety and integrity of the capital market of the country, they have been introduced in a hurry in our country.In my opinion it was not a wise thing for us to have introduced individual stock futures. I am fully conscious that I am in a hopeless minority to hold such a view. All those who had mourned the death of badla are very happy that a similar product is now available for them to play their games. Some prominent brokers also hold the opinion that the void created by the ban of badla has been filled up through an equally risky product like individual stock futures. I sincerely believe individual stock futures pose an avoidable risk to our capital markets because of the unbridled growth in their trading volume. Of the daily total trading volume of all the futures products, the individual stock futures alone account for over 60 per cent. Further, the daily trading volume of the individual stock futures is on an average more than twice the trading volume of the cash market.Shortening of Settlement PeriodMost of us remember that before setting up NSE, the settlement system followed by BSE — the exchange which accounted for nearly two-thirds of the trading volume of all the exchanges of the country until 1994 — was an account period cycle of trading for a fortnight and settling the net obligations after a period of 15 days. Thus, if somebody traded on the first day of the trading cycle he could get his funds or securities almost after a month. Often this period used to get extended to almost six to eight weeks if there was hectic activity in the market forcing the exchange authorities to club several trading cycles. After NSE started operating it reduced the cycle to one week of trading and settling the net obligations a week thereafter. But for more than four years we are all in a rolling settlement era. To begin with a T+5 cycle was introduced, meaning thereby that each day's trades are settled five days thereafter. Introduction of the rolling settlement meant India entering into the global league of more efficient markets. This prompted the authorities to push this reform to shorten the settlement cycle further to a T+3 settlement mode. Later, with a view to score over even the developed countries in shortening the settlement cycle it was reduced further to T+2 mode. In this context it should be noted that the major developed country markets in Europe and America have been toying For the last several years with the idea of shortening their settlement cycle from the current T+3 mode to T+2. But they have refrained from the temptation of reducing the cycle to less than T+3 mode for the simple reason that the disadvantages arising from shortening the settlement cycle far outweigh the gains. All that the shortening of the settlement cycle means funds or securities are obtained a day earlier. But the hassles of managing such a short settlement cycle are far too many, besides there is the risk of several players not being in a position to complete their pay-in of securities and settle funds in time to complete T+2 settlement.In India we face many problems due to differing levels of computerisation and risk management practices of several market players. It is simply not a question of availability or otherwise of RTGS at all places. Most of our banks do not have efficient electronic funds transfer (EFT) facilities which enable banks to move funds from one branch where a customer is located to the other branch which interacts with the exchange clearing corporation. Secondly, even though currently there is a depository mode of delivery, many investors find it too inconvenient to make their delivery in time for the settlement. Hence many investors either give the power of attorney (POA) to their broker or sign delivery slips well in advance and keep them with their brokers. . . Most of you might have read in the newspapers the horror stories that are coming to light where the brokers have cheated their investors. I do not want to dilate on this point too much as all of you are already aware of the risks that the investors are facing as a result or a shortening or the settlement cycle to T+2. One therefore often gets tempted to ask as what the investors have gained from shortening the settlement cycle except providing an opportunity to some people to claim that India is ahead of even the developed countries in terms of shorter settlement cycles.Problems of Participatory NotesWith our stock markets passing through an unprecedented boom, the problems posed by the so-called participatory notes (Ms) are being discussed in several responsible quarters. Some of the FIIs which are registered with SEBI and permitted to invest in our equity markets mobilise funds through PNs which are supposed to be subscribed by other eligible investors. When Flls invest funds mobilised through PNs for investing in the Indian equity markets, they have to give a written undertaking that they have not mobilised funds from non-eligible entities. Frankly, the current regulations governing the PNs are not satisfactory enough to ensure that absolutely the right type of funds are getting into our markets. Many people feel that the colour of money cannot be correctly known when it is flowing through the PNs. The worry about the PNs is that the current boom is largely fuelled by the FII money, bulk of which is flowing through the PNs. The vulnerability of the market to manipulations increases when it is difficult to know the source of money that fuels heavy trading activity in the market. Since a large amount of money has flowed into our equity markets through the PNs it is difficult to take any corrective action that may trigger a sudden outflow of money that has entered the market through the PNs. It is a big dilemma facing the policy-makers.Short Selling and Securities LendingCurrently, SEBI is seriously examining the desirability of allowing short selling by the institutions which cannot execute other than delivery-based trades. The idea is to provide a level playing field to the institutions so that they can also freely trade in the market as other market players. This policy is also expected to be accompanied by two other measures. When institutions are a allowed to sell short they will also be subjected to the same margining system as others who are permitted to do short selling. Secondly, to facilitate short selling, a scheme for lending and borrowing of securities would be introduced. Anybody who sells short can complete the settlement by borrowing the relevant securities from the willing lenders and delivering them at the pay-in time to the clearing corporation. The borrower of securities can then buy them from the market at an appropriate time to return the borrowed securities to the lender. The argument in favour of short selling is that it allows market players to take a view on security prices. lf a market player feels that the current price of a security is too high he can sell the borrowed securities and cover his position at a later day when the prices are expected to fall.In theory, the facility of short selling looks attractive since it may provide opportunities for intelligent players to introduce corrective market forces. But often the reality could be different as experienced by Hong Kong a couple of years ago. Several large players took advantage of the short selling facility together with the lending and borrowing facility to beat down prices. Large speculators can indulge in heavy short selling to push down prices steeply and cover their position at a later date at much lower prices. Such players can reap huge profits at the cost of other investors and market stability. One is really not sure whether it is desirable to introduce all such facilities which have the potential for destabilising the markets without any compensatory benefits.Is the Boom Going to Last?Most of those who have a large exposure to the equity markets are very anxious to know whether the current boom will last and how far the market will rise. Frankly, it is very difficult for anybody to make any reliable forecast on a subject like this. II anyone knew the right answer he could make a huge amount of money. It is for this reason that both astrologers and the chartists are so much popular these days. My simple suggestion to all those emotionally involved in the stock markets is that, do not believe anyone who is certain that the market is bound to move in a particular direction or that the stock index will be at a particular level by say June 2006 or some such date. If some "market experts" give such forecasts they are trying to play with sentiments. If, however, they are a part of one of the powerful manipulator groups they would perhaps be the people to know in which direction the market will move. But one can be certain that such manipulators will never tell the truth because their attempts would be to fool the market so that they can make money. If they want to buy particular stocks they would like to say that this is the best to time sell them so that they can buy them when the market goes down as a result of large sales.Like in most areas of our lives we should try to depend on native intelligence and not be misled by the quacks or scamsters. Investors should make their own careful study before jumping into the fray. The stock market is not meant for people who are governed by emotions and are likely to be carried away by the mad frenzy of bulls and bears. I would, therefore, like to provide some tools with the help of which investors should try to analyse market trends and the likely direction in which the market may move in the near future. The first question that comes to anyone's mind is how to judge as to what is the right or justifiable level of the market and when can it be said to be at an artificially high level or a depressed level? If one has the correct answer to such a question one can judge as to whether the market has the potential to go up or down in the not so distant future.There are two types of approaches to this problems. One set of people vouch by the technical analysis of the market and depend heavily on charts. The charts no doubt help us understand how the market moves. But that does not mean that an investor can make a huge amount of money with the help of charts. This approach is as good as what an astrologer can say. There is another set of people who can be said to be rationalists who believe that fundamentals of a company should be used for assessing whether the market price of a company's share is at a reasonably right level. A company with a high level of earnings and the prospect of future growth always commands the attention of investors who are willing to pay a good price to keep it in their portfolio. Even though a company is not currently earning a high level of profits, its share will also command a premium if there is a fair chance that its future earnings will be at high levels. Certain industries at particular points of time are considered growth industries and the companies belonging to these industries will be considered valuable. Companies belonging to stagnant industries will be valued cheaply even though they are profitable. My personal sympathies are with this group of rationalists who attach the maximum importance to a careful study about the current and future levels of profitability of companies before taking an investment decision. Since investors buy shares from return considerations, they should attach maximum importance to current as well as potential future growth in earnings. Company shares are not pieces art or culture, which are valued on totally different considerations. Hence investors should not be emotionally attached to particular companies and hold on to them even if there is clear evidence that many things are wrong with particular companies that are in the portfolio. All the same I would like to say a word of caution even about this rationalists' approach to investment decisions. It should be noted that fundamentals do not help much in deciding the right price of a share at any point of time. Equity markets are subject to cycles of boom and depression and the same company's shares even with unchanged earning conditions will be priced differently at different points of time. In a booming market even relatively dud shares command high prices. This phenomenon could be better noted from the fact that the levels of P/E ratios of individual shares as also of stock indexes are very high during a boom and are much lower under depressed market conditions. Boom conditions are often the results of irrational exuberance while prolonged depressed market conditions are many a time caused by irrational gloom. Thus fundamental analysis does not help to determine levels of prices of shares at all times and under all market conditions. All that the fundamental analysis tells us is whether relative price levels of different shares are rationally determined. If we accept this line of reasoning, we will have to agree that it is difficult to state if the market has priced itself correctly when the Sensex is around 10,000 or the Nifty around 3,000. Nobody can say correctly whether the market has some more potential left to go up further or whether the Sensex will cross 12,000 by the end of 2006. 1f somebody predicts that market has overpriced itself and the Sensex will fall below 8,000 over the next few months, there is valid justification to disbelieve it.My next proposition is that markets are deeply influenced by sentiments and herd mentality rather than logic. When a large number of players expect that the market is likely to fall, all or most of them will make attempts to exit as hastily as possible. Often, there is an attempt to exit hastily and the situation is similar to that of a stampede which often results in avoidable suffering and loss. Each market player plans to exit as early as possible so that he exits when the prices have not fallen too much. When a large number of market players hasten to exit, prices fall fast and steeply. Another interesting feature of market behaviour is that the responses of market players to certain developments are often disproportionate and excessive. In a relatively depressed market even a minor piece of bad news leads to a large fall in prices. Because of the herd instinct of the market players, price movements often tend to get exaggerated. My suggestion is not to treat market as a rational organism.One more aspect which most of the investors should keep in mind is as follows. Most of the time, markets are influenced, although in varying proportions, by market players who tend to profit from the mistakes of uninitiated and gullible investors. A large number of investors who buy/sell on the basis of half-baked reports/studies tend to be big losers. Every boom sooner or later flattens out and a large number of investors who hold on to their investments with a greed to profit from much higher prices end up as big losers. Most of such investors may not return to the market in the next boom. But like moths in every rainy season, a new generation of moths gets attracted to the markets. Hence the cycles of boom and burst recur. Investors who do not have the stomach to digest losses from market collapses or do not have the expertise to tread carefully to protect themselves from the furies of bulls and bears should not enter the wonderland of equity markets.

Our boy Trump has spent a lot of time and money in and out of court. The following very long and ongoing list of court cases won and lost, is compliments of Wikipedia:Trump and his businesses have been involved in 3,500 legal cases in U.S. federal courts and state court, an unprecedented number for a U.S. presidential candidate.[1]Of the 3,500 suits, Trump or one of his companies were plaintiffs in 1,900; defendants in 1,450; and bankruptcy, third party, or other in 150.[1]Trump was named in at least 169 suits in federal court.[2]Over 150 other cases were in the Seventeenth Judicial Circuit Court of Florida (covering Broward County, Florida) since 1983.[3]In about 500 cases, judges dismissed plaintiffs' claims against Trump. In hundreds more, cases ended with the available public record unclear about the resolution.[1]Where there was a clear resolution, Trump won 451 times, and lost 38.[4]The topics of the legal cases include contract disputes, defamation claims, and allegations of sexual harassment. Trump's companies have been involved in more than 100 tax disputes, and on "at least three dozen" occasions the New York State Department of Taxation and Finance has obtained tax liens against Trump properties for nonpayment of taxes.[1]On a number of occasions, Trump has threatened legal action but did not ultimately follow through.[5]Of Trump's involvement in the lawsuits, his lawyer Alan Garten said in 2015 that this was "a natural part of doing business in [the United States]",[5][6]and in the real estate industry, litigation to enforce contracts and resolve business disputes is indeed common.[5]Trump has, however, been involved in far more litigation than fellow real-estate magnates; the USA Today analysis in 2016 found that Trump had been involved in legal disputes more than Edward J. DeBartolo Jr., Donald Bren, Stephen M. Ross, Sam Zell, and Larry Silverstein combined.[1]The Trump lawsuits[5][6]have attracted criticism from Trump's opponents, who say that this is not a trait that conservatives should support.[5]James Copland, director of legal policy at the conservative-leaning Manhattan Institute, states that "Trump clearly has an affinity for filing lawsuits, partly because he owns a lot of businesses" and has sometimes used litigation as a "bullying tactic".[5]Although Trump has said that he "never" settles legal claims, Trump and his businesses have settled with plaintiffs in at least 100 cases (mostly involving personal injury claims arising from injuries at Trump properties), with settlements ranging as high as hundreds of thousands of U.S. dollars[1]and recently as high as tens of millions of dollars.[7]Among the most well-known Trump legal cases was the Trump University litigation. Three legal actions were brought alleging fraud, one by the New York State Attorney General and the others by class action plaintiffs.[8]In November 2016, Trump agreed to pay $25 million to settle the litigation.[7]In 1985, New York City brought a lawsuit against Trump for allegedly using tactics to force out tenants of 100 Central Park South,[17]which he intended to demolish together with the building next door. After ten years in court, the two sides negotiated a deal allowing the building to stand as condominiums.[18]In 1988, the Justice Department sued Trump for violating procedures related to public notifications when buying voting stock in a company related to his attempted takeovers of Holiday Corporation and Bally Manufacturing Corporation in 1986. On April 5, 1988, Trump agreed to pay $750,000 to settle the civil penalties of the antitrust lawsuit.[19]In late 1990, Trump was sued for $2 million by a business analyst for defamation, and Trump settled out of court.[20]Briefly before Trump's Taj Mahal opened in April 1990, the analyst had said that the project would fail by the end of that year. Trump threatened to sue the analyst's firm unless the analyst recanted or was fired. The analyst refused to retract the statements, and his firm fired him for ostensibly unrelated reasons.[21]Trump Taj Mahal declared bankruptcy in November 1990, the first of several such bankruptcies.[22]After, the NYSE ordered the firm to compensate the analyst $750,000; the analyst did not release the details of his settlement with Trump.[23]In 1991, Trump sued the manufacturers of a helicopter that crashed in 1989, killing three executives of his New Jersey hotel casino business.[24]The helicopter fell 2,800 feet after the main four-blade rotor and tail rotor broke off the craft, killing Jonathan Benanav, an executive of Trump Plaza, and two others: Mark Grossinger Etess, president of Trump Taj Mahal, and Stephen F. Hyde, chief executive of the Atlantic City casinos.[25][26][27]One of the defendants was owned by the Italian government, providing a basis for removing it to federal court, where the case was dismissed. The U.S. Court of Appeals for the Third Circuit upheld the dismissal in 1992, and the Supreme Court denied Trump's petition to hear the case in the same year.[28]In 1991, Trump Plaza was fined $200,000 by the New Jersey Casino Control Commission for moving African American and female employees from craps tables in order to accommodate high roller Robert LiButti, a mob figure and alleged John Gotti associate, who was said to fly into fits of racist rage when he was on losing streaks.[29]There is no indication that Trump was ever questioned in that investigation, he was not held personally liable, and Trump denies even knowing what LiButti looked like.[29]In 1991, one of Trump's casinos in Atlantic City, New Jersey, was found guilty of circumventing state regulations about casino financing when Donald Trump's father bought $3.5 million in chips that he had no plans to gamble. Trump Castle was forced to pay a $30,000 fine under the settlement, according to New Jersey Division of Gaming Enforcement Director Jack Sweeney. Trump was not disciplined for the illegal advance on his inheritance, which was not confiscated.[30]In 1993, Donald Trump sued Jay Pritzker, a Chicago financier and Trump's business partner since 1979 on the Grand Hyatt hotel. Trump alleged that Pritzker overstated earnings in order to collect excessive management fees.[31]In 1994, Pritzker sued Trump for violating their agreement by, among other ways, failing to remain solvent.[32]The two parties ended the feud in 1995 in a sealed settlement, in which Trump retained some control of the hotel and Pritzker would receive reduced management fees and pay Trump's legal expenses.[33]In 1993, Vera Coking sued Trump and his demolition contractor for damage to her home during construction of the Trump Plaza Hotel and Casino.[34]In 1997, she dropped the suit against Trump and settled with his contractor for $90,000.[35]Coking had refused to sell her home to Trump and ultimately won a 1998 Supreme Court decision that prevented Atlantic City from using eminent domain to condemn her property.[36][37]In 1996, Trump was sued by more than 20 African-American residents of Indiana who charged that Trump reneged on promises to hire 70% of his work force from the minority community for his riverboat casino on Lake Michigan. The suit also charged that he hadn't honored his commitments to steer sufficient contracts to minority-owned businesses in Gary, Indiana. The suit was eventually dismissed due to procedural and jurisdiction issues.[38][39]In the late 1990s, Donald Trump and rival Atlantic City casino owner Stephen Wynn engaged in an extended legal conflict during the planning phase of new casinos Wynn had proposed to build. Both owners filed lawsuits against one another and other parties, including the State of New Jersey, beginning with Wynn's antitrust accusation against Trump.[40][41]After two years in court, Wynn's Mirage casino sued Trump in 1999 alleging that his company had engaged in a conspiracy to harm Mirage and steal proprietary information, primarily lists of wealthy Korean gamblers. In response, Trump's attorneys claimed that Trump's private investigator dishonored his contract by working as a "double agent" for the Mirage casino by secretly taping conversations with Trump. All the cases were settled at the same time on the planned day of an evidentiary hearing in court in February 2000, which was never held.[42]Personal and sexualIn 1992, Trump sued ex-wife Ivana Trump for not honoring a gag clause in their divorce agreement by disclosing facts about him in her best-selling book. Trump won the gag order.[43][44][45]The divorce was granted on grounds that Ivana claimed Donald Trump's treatment of her was "cruel and inhuman treatment".[46][47]Years later, Ivana said that she and Donald "are the best of friends".[48]A sexual assault claim from 1994 for child rape was filed against Trump on October 14, 2016,[49]a case that was dropped and refiled, remaining in suspension as of November 4, 2016.[50]In April 1997, Jill Harth Houraney filed a $125,000,000 lawsuit against Trump for sexual harassment in 1993, claiming he "'groped' her under her dress and told her he wanted to make her his 'sex slave'". Harth voluntarily withdrew the suit when her husband settled a parallel case. Trump has called the allegations "meritless".[51][52]Lawsuits 2000–2009[edit]In 2000, Donald Trump paid $250,000 to settle fines related to charges brought by New York State Lobbying Commission director David Grandeau. Trump was charged with circumventing state law to spend $150,000 lobbying against government approval of plans to construct an Indian-run casino in the Catskills, which would have diminished casino traffic to Trump's casinos in Atlantic City.[53][54]From 2000 on, Trump tried to partner with a German venture in building a "Trump Tower Europe" in Germany. The company founded for this, "TD Trump Deutschland AG" was dissolved in 2003, several lawsuits following in the years thereafter.[55]In 2001, the U.S. Securities and Exchange Commission brought a financial-reporting case against Trump Hotels & Casino Resorts Inc., alleging that the company had committed several "misleading statements in the company's third-quarter 1999 earnings release". Trump Hotels & Casino Resorts Inc. consented to the Commission's cease-and-desist order, said the culprit had been dismissed, and that Trump had personally been unaware of the matter.[56][57][58]Trump sued Leona Helmsley,[59]and Helmsley counter-sued Trump[60]due to contentions regarding ownership and operation of the Empire State Building. In 2002, Trump announced that he and his Japanese business partners, were selling the Empire State Building to partners of his rival Leona Helmsley.[61][62]In 2003, the city of Stuttgart denied TD Trump Deutschland AG, a Trump Organization subsidiary, the permission to build a planned tower due to questions over its financing. Trump Deutschland sued the city of Stuttgart, and lost. In 2004 Trump's German corporate partner brought suit against the Trump Organization for failure to pay back a EUR 200 million pre-payment as promised. In 2005, the German state attorney prosecuted Trump Deutschland and its partners for accounting fraud.[63][64][65]In 2004, Donald Trump sued Richard T. Fields in Broward County Circuit Court (in Florida); Fields was once Trump's business partner in the casino business, but had recently become a successful casino developer in Florida apart from Trump. Fields counter-sued Trump in Florida court. Trump alleged that Fields misled other parties into believing he still consulted for Trump, and Fields alleged improprieties in Trump's business.[66]The two businessmen agreed in 2008 to drop the lawsuits when Fields agreed to buy Trump Marina in Atlantic City, New Jersey, for $316 million,[67]but the deal was unsettled again in 2009 because Trump resigned his leadership of Trump Entertainment after Fields lowered his bid.[68]Fields never bought the company, which went into bankruptcy about the same time and was sold for $38 million.[69][70]Trump's lawsuit was dismissed after a hearing in 2010.[71]In 2004, the Trump Organization partnered with Bayrock Group on a $200 million hotel and condo project in Fort Lauderdale Beach, to be called Trump International Hotel & Tower. After proceeding for five years, real estate market devaluation stymied the project in 2009 and Trump dissolved his licensing deal, demanding that his name be removed from the building. Soon after this, the project defaulted on a $139 million loan in 2010.[72]Investors later sued the developers for fraud. Trump petitioned to have his name removed from the suit, saying he had only lent his name to the project. However his request was refused since he had participated in advertising for it.[73]The insolvent building project spawned over 10 lawsuits, some of which were still not settled in early 2016.[74]In 2006, the Town of Palm Beach began fining Trump $250 per day for ordinance violations related to his erection of an 80-foot-tall (24 m) flagpole flying a 15 by 25 feet (4.6 by 7.6 m) American flag on his property. Trump sued the town for $25 million, saying that they abridged his free speech, also disputing an ordinance that local businesses be "town-serving". The two parties settled as part of a court-ordered mediation, in which Trump was required to donate $100,000 to veterans' charities. At the same time, the town ordinance was modified allowing Trump to enroll out-of-town members in his Mar-a-Lago social club.[75]Trump International Hotel and Tower in ChicagoAfter the 2008 housing-market collapse, Deutsche Bank attempted to collect $40 million that Donald Trump personally guaranteed against their $640 million loan for Trump International Hotel and Tower in Chicago. Rather than paying the debt, Trump sued Deutsche Bank for $3 billion for undermining the project and damage to his reputation.[76]Deutsche Bank then filed suit to obtain the $40 million. The two parties settled in 2010 with Deutsche Bank extending the loan term by five years.[77]In 2008, Trump filed a $100 million lawsuit for alleged fraud and civil rights violations[78]against the California city of Rancho Palos Verdes, over thwarted luxury home development and expansion plans upon part of a landslide-prone golf course in the area, which was purchased by Trump in 2002 for $27 million.[78]Trump had previously sued a local school district over land leased from them in the re-branded Trump National Golf Club, and had further angered some local residents by renaming a thoroughfare after himself.[78]The $100 million suit was ultimately withdrawn in 2012 with Trump and the city agreeing to modified geological surveys and permit extensions for some 20 proposed luxury homes (in addition to 36 homes previously approved).[79][80]Trump ultimately opted for a permanent conservation easement instead of expanded housing development on the course's driving range.[81]In 2009, Donald Trump sued a law firm he had used, Morrison Cohen, for $5 million for mentioning his name and providing links to related news articles on its website. This lawsuit followed a lawsuit by Trump alleging overcharging by the law firm, and a countersuit by Morrison Cohen seeking unpaid legal fees.[82]The suit was dismissed in a 15-page ruling by Manhattan Supreme Court Justice Eileen Bransten, who ruled that the links to news articles concerned "matters of public interest."[83]In 2009, Trump was sued by investors who had made deposits for condos in the canceled Trump Ocean Resort Baja Mexico.[84]The investors said that Trump misrepresented his role in the project, stating after its failure that he had been little more than a spokesperson for the entire venture, disavowing any financial responsibility for the debacle.[85]Investors were informed that their investments would not be returned due to the cancellation of construction.[84]In 2013, Trump settled the lawsuit with more than one hundred prospective condo owners for an undisclosed amount.[86]Lawsuits 2010–presentConstruction and property law matters[edit]In 2011, Donald Trump sued Scotland, alleging that it built the Aberdeen Bay Wind Farm after assuring him it would not be built. He had recently built a golf course there and planned to build an adjacent hotel. Trump lost his suit, with the Supreme Court of the United Kingdom unanimously ruling in favor of the Scottish government in 2015.[87][88]In 2013, 87-year-old Jacqueline Goldberg alleged that Trump cheated her in a condominium sale by bait-and-switch when she was purchasing properties at the Trump International Hotel and Tower.[89]In 2015, Trump initiated a $100 million lawsuit against Palm Beach County claiming that officials, in a "deliberate and malicious" act, pressured the FAA to direct air traffic to the Palm Beach International Airport over his Mar-a-Lago estate, because he said the airplanes damaged the building and disrupted its ambiance.[90]Trump had previously sued the county twice over airport noise; the first lawsuit, in 1995, ended with an agreement between Trump and the county; Trump's second lawsuit, in 2010, was dismissed.[90]Trump is suing the town of Ossining, New York, over the property tax valuation on his 147-acre (59 ha) Trump National Golf Club Westchester, located in Briarcliff Manor's portion of the town, which Trump purchased for around $8 million at a foreclosure sale in the 1990s and to which he claimed, at the club's opening, to have added $45 million in facility improvements.[91]Although Trump stated in his 2015 FEC filing that the property was worth at least $50 million, his lawsuit seeks a $1.4 million valuation on the property, which includes a 75,000-square-foot clubhouse, five overnight suites, and permission to build 71 condominium units,[91]in an effort to shave $424,176 from his annual local property tax obligations.(91A) Trump had to pay nearly $300,000 in attorney’s fees in Doral painter’s lawsuit related to unpaid bills brought by a local paint store against the Trump National Doral Miami golf resort, ordered the billionaire politician’s company to pay the Doral-based mom-and-pop shop nearly $300,000 in attorney’s fees. All because, according to the lawsuit, Trump allegedly tried to stiff The Paint Spot on its last payment of $34,863 on a $200,000 contract for paint used in the renovation of the home of golf’s famed Blue Monster two years prior.[92]Trump filed the action after separately being sued by Briarcliff Manor for "intentional and illegal modifications" to a drainage system that caused more than $238,000 in damage to the village's library, public pool, and park facilities during a 2011 storm.[92]In October 2016, the Ontario Court of Appeal ruled that Trump, together with two principals of a connected developer, could be sued for various claims, including oppression, collusion and breach of fiduciary duties, in relation to his role in the marketing of units in the Trump International Hotel and Tower in Toronto, Canada.[93]A subsequent application for leave to appeal was dismissed by the Supreme Court of Canada in March 2017.[94]Also in October 2016, JCF Capital ULC (a private firm that had bought the construction loan on the building) announced that it was seeking court approval under the Bankruptcy and Insolvency Act to have the building sold in order to recoup its debt, which then totaled $301 million.[95]The court allowed for its auction[96]which took place in March 2017, but no bidders, apart from one stalking horse offer, took part.[97]Defamation mattersAlso in 2011, an appellate court upheld a New Jersey Superior Court judge's decision dismissing Trump's $5 billion defamation lawsuit against author Timothy L. O'Brien, who had reported in his book, TrumpNation: The Art of Being the Donald (2005), that Trump's true net worth was really between $150 and $250 million. Trump had reportedly told O'Brien he was worth billions and, in 2005, had publicly stated such.[98]Trump said that the author's alleged underestimation of his net worth was motivated by malice and had cost him business deals and damage to his reputation.[99]The appellate court, however, ruled against Trump, citing the consistency of O'Brien's three confidential sources.[100]In 2014, the former Miss Pennsylvania Sheena Monnin ultimately settled a $5 million arbitration judgment against her, having been sued by Trump after alleging that the Miss USA 2012 pageant results were rigged. Monnin wrote on her Facebook page that another contestant told her during a rehearsal that she had seen a list of the top five finalists, and when those names were called in their precise order, Monnin realized the pageant election process was suspect, compelling Monnin to resign her Miss Pennsylvania title. The Trump Organization's lawyer said that Monnin's allegations had cost the pageant a lucrative British Petroleum sponsorship deal and threatened to discourage women from entering Miss USA contests in the future.[101]According to Monnin, testimony from the Miss Universe Organization and Ernst & Young revealed that the top 15 finalists were selected by pageant directors regardless of preliminary judges' scores.[102]As part of the settlement, Monnin was not required to retract her original statements.[101]On January 17, 2017, Summer Zervos, represented by attorney Gloria Allred, filed a defamation suit against President-Elect Donald Trump for claiming that she had lied in her public sexual assault allegations against him.[103]Financial mattersIn July 2011, New York firm ALM Unlimited filed a lawsuit against Trump, who ended payments to the company in 2008 after nearly three years. ALM was hired in 2003 to seek offers from clothing companies for a Trump fashion line, and had arranged a meeting between Trump and PVH, which licensed the Trump name for dress shirts and neckwear. ALM, which had received over $300,000, alleged in the lawsuit that Trump's discontinuation of payments was against their initial agreement. In pre-trial depositions, Trump and two of his business officials – attorney George H. Ross and executive vice president of global licensing Cathy Glosser – gave contradictory statements regarding whether ALM was entitled to payments. Trump, who felt that ALM had only a limited role in the deal between him and PVH, said "I have thousands of checks that I sign a week, and I don't look at very many of the checks; and eventually I did look, and when I saw them (ALM) I stopped paying them because I knew it was a mistake or somebody made a mistake."[104]In January 2013, a judge ordered that the case go to trial, after Trump and ALM failed to settle the lawsuit.[105]During the trial in April 2013, Trump said that ALM's role in the PVH agreement was insubstantial, stating that Regis Philbin was the one who recommended PVH to him. Trump's attorney, Alan Garten, said ALM was not legally entitled to any money.[105][106][107]The judge ruled in favor of Trump later that month because a valid contract between him and ALM was never created.[107]Trump University litigationMain article: Trump University § Allegations of impropriety and lawsuitsIn 2013, in a lawsuit filed by New York Attorney General Eric Schneiderman, Trump was accused of defrauding more than 5,000 people of $40 million for the opportunity to learn Trump's real estate investment techniques in a for-profit training program, Trump University, which operated from 2005 to 2011.[108][109][110]Trump ultimately stopped using the term "University" following a 2010 order from New York regulators, who called Trump's use of the word "misleading and even illegal"; the state had previously warned Trump in 2005 to drop the term or not offer seminars in New York.[111][112][113]Although Trump has claimed a 98% approval rating on course evaluations, former students recounted high-pressure tactics from instructors seeking the highest possible ratings, including threats of withholding graduation certificates,[114]and more than 2,000 students had sought and received course refunds before the end of their paid seminars.[114]In a separate class action civil suit against Trump University in mid-February 2014, a San Diego federal judge allowed claimants in California, Florida, and New York to proceed;[115]a Trump counterclaim, alleging that the state Attorney General's investigation was accompanied by a campaign donation shakedown, was investigated by a New York ethics board and dismissed in August 2015.[116]Trump filed a $1 million defamation suit against former Trump University student Tarla Makaeff, who had spent about $37,000 on seminars, after she joined the class action lawsuit and publicized her classroom experiences on social media.[85]Trump University was later ordered by a U.S. District Judge in April 2015 to pay Makaeff and her lawyers $798,774.24 in legal fees and costs.[85][117]Breach of contract matters2013]In 2013 Trump sued comedian Bill Maher for $5 million for breach of contract.[118]Maher had appeared on The Tonight Show with Jay Leno and had offered to pay $5 million to a charity if Trump produced his birth certificate to prove that Trump's mother had not mated with an orangutan. This was said by Maher in response to Trump having previously challenged Obama to produce his birth certificate, and offering $5 million payable to a charity of Obama's choice, if Obama produced his college applications, transcripts, and passport records.[119][120]Trump produced his birth certificate and filed a lawsuit after Maher was not forthcoming, claiming that Maher's $5 million offer was legally binding. "I don't think he was joking," Trump said. "He said it with venom."[119]Trump withdrew his lawsuit against the comedian after eight weeks.[121]2014[edit]In 2014, model Alexia Palmer filed a civil suit against Trump Model Management for promising a $75,000 annual salary but paying only $3,380.75 for three years' work. Palmer, who came to the US at age 17 from Jamaica under the H-1B visa program in 2011,[122]claimed to be owed more than $200,000. Palmer contended that Trump Model Management charged, in addition to a management fee, "obscure expenses" from postage to limousine rides that consumed the remainder of her compensation. Palmer alleged that Trump Model Management promised to withhold only 20% of her net pay as agency expenses, but after charging her for those "obscure expenses", ended up taking 80%.[123]Trump attorney Alan Garten claimed the lawsuit is "bogus and completely frivolous".[124][125]Palmer filed a class-action lawsuit against the modeling agency with similar allegations.[126]The case was dismissed from U.S. federal court in March 2016, in part because Palmer's immigration status, via H1-B visa sponsored by Trump, required labor complaints to be filed through a separate process.[123][127]2015[edit]In 2015, Trump sued Univision, demanding $500 million for breach of contract and defamation when they dropped their planned broadcast of the Miss USA pageant. The network said that the decision was made because of Trump's "insulting remarks about Mexican immigrants".[128]Trump settled the lawsuit with Univision CEO Randy Falco out of court.[129]In July 2015, Trump filed a $10 million lawsuit in D.C. Superior Court for breach of contract against Spanish celebrity chef José Andrés, claiming that he backed out of a deal to open the flagship restaurant at Trump International Hotel in Washington, D.C.[130][131]Andrés replied that Trump's lawsuit was "both unsurprising and without merit"[132]and filed an $8 million counterclaim against a Trump Organization subsidiary.[131][133]Also in July 2015, Chef Geoffrey Zakarian also withdrew from the Washington, D.C., project with Andrés in the wake of Trump's comments on Mexican illegal immigrants, and is expected to lose his own $500,000 restaurant lease deposit as a result.[132]Trump denounced and then sued Zakarian in August 2015 for a sum "in excess of $10 million" for lost rent and other damages.[134]Trump's lawsuit called Zakarian's offense at his remarks "curious in light of the fact that Mr. Trump's publicly shared views on immigration have remained consistent for many years, and Mr. Trump's willingness to frankly share his opinions is widely known".[134][135]Disputes with both chefs were eventually settled in April 2017.[136]In 2015, restaurant workers at Trump SoHo filed a lawsuit that from 2009 to at least the time of the filing, gratuities added to customers' checks were illegally withheld from employees. The Trump Organization has responded that the dispute is between the employees and their employer, a third-party contractor. Donald Trump has been scheduled to testify in court on September 1, 2016.[137][138]2018[edit]In 2018, Noel Cintron, the personal driver for Donald Trump before he became the President of the United States, filed a lawsuit Cintron v Trump Organization LLC with the Supreme Court of the State of New York (Manhattan). The lawsuit claims that during his 25-year employment by Trump, he was not compensated for overtime and the second time his salary was raised he was induced to surrender his health insurance, an action which saved Trump approximately $17,866 per year.[139]The lawsuit seeks $178,200 of overtime back pay, plus $5,000 in penalties that are seen under the New York State Labor Law.[140]Assault claims[edit]In September 2015, five men who had demonstrated outside of a Trump presidential campaign event at Trump Tower in New York City sued Donald Trump, alleging that Trump's security staff punched one of them. They also allege that Trump's security guards had been advised by city police that they were permitted to protest there. Several people videotaped the incident.[141][142]In June 2015, the Culinary Workers Union filed charges with the National Labor Relations Board (NLRB), alleging that the owners of Trump Hotel Las Vegas "violated the federally protected rights of workers to participate in union activities" and engaged in "incidents of alleged physical assault, verbal abuse, intimidation, and threats by management".[143]In October 2015, the Trump Ruffin Commercial and Trump Ruffin Tower I, the owners of Trump Hotel Las Vegas, sued the Culinary Workers Union and another union, alleging that they had knowingly distributed flyers that falsely stated that Donald Trump had stayed at a rival unionized hotel, rather than his own non-unionized hotel, during a trip to Las Vegas.[5][143]Poll watching controversy[edit]On October 31, 2016, a New Jersey federal judge, John Michael Vazquez, ordered the Republican National Committee (RNC) to hand over all communications with the Trump campaign related to poll watching and voter fraud. He asked for testimony and documents relating to Kellyanne Conway, RNC officials Ronna Romney McDaniel of Michigan, and Rob Gleason from Pennsylvania.[144]It is claimed Gleason, McDaniel, and Roger Stone recruited poll watchers to check for voter fraud. The state Democratic parties of Nevada, Pennsylvania, Arizona, and Ohio filed lawsuits against Trump for encouraging illegal voter intimidation. The states' Democratic parties are also suing their respective Republican party counterparts, along with Roger Stone, who is allegedly recruiting poll watchers and organizing ballot security efforts in a number of states. Stone runs the group "Stop the Steal." It claims Trump supporters yelled at voters outside Las Vegas area polling places when they said they weren't voting for the Republican nominee, and that Stone is asking supporters to conduct an illegitimate "exit polling" initiative aimed at intimidating voters of color.Pat McDonald, the director of Cuyahoga County Board of Elections in Ohio, reported that "Trump supporters have already visited the county elections board identifying themselves as poll observers, even though they did not appear to be credentialed as poll observers as required under Ohio law." Election officials have expressed concern about "instability on Election Day," one lawsuit claims, and discussed the possibility of bringing police to polling sites to address conflicts. In Clark County of Nevada, a lawsuit claims: "A Trump supporter harassed and intimidated multiple voters outside of the Albertson's supermarket early voting location on Lake Mead Boulevard, repeatedly asking voters for whom they were voting, and then yelling at them belligerently and attempting to keep them from entering the voting location when they stated they were not voting for Donald Trump." When poll staffers told the Trump supporters to stop harassing voters, "the Trump supporter told poll workers that he had 'a right to say anything he wanted to the voters.'" Poll staffers called police, and the Trump supporter left. The lawsuit also claims similar incidents took place in neighboring Nye County as well. In Pennsylvania, Murrysville City Councilman Josh Lorenz supposedly posted instructions for the way Clinton supporters could vote online, even though there is no online voting in Pennsylvania. Eight registered electors, mostly from the Philadelphia area, challenged the portion of the state Election Code that prevents poll watchers from observing elections outside of the counties where they live.[145][146][147]In Pompano Beach, Florida, police asked two poll watchers to leave a polling site. Two precinct clerks were also fired for not adhering to policy and training. No arrests were made. No other incidents were reported in South Florida.[148][149]Nevada early voting Latino turnout controversy[edit]On November 8, 2016, Trump filed a lawsuit claiming early voting polling places in Clark County, Nevada, were kept open too late. These precincts had high turnout of Latino voters. Nevada state law explicitly states that polls are to stay open to accommodate eligible voters in line at closing time. Hillary Clinton campaign advisor Neera Tanden says the Trump campaign is trying to suppress Latino voter turnout. A political analyst from Nevada, Jon Ralston tweeted that the Trump lawsuit is "insane" in a state that clearly allows the polls to remains open until everyone in line has voted. Former Nevada Secretary of State Ross Miller, posted the statute that states "voting must continue until those voters have voted". Miller said: "If there are people in line waiting to vote at 7 pm, voting must continue until everyone votes.... We still live in America, right?"[150]A Nevada judge denied Trump's request to separate early voting ballots. Judge Gloria Sturman, of the District Court for Clark County Nevada, ruled that County Registrar of Voters Joe P. Gloria was already obligated by state law to maintain the records that the Trump campaign is seeking. Sturman said: "That is offensive to me because it seems to go against the very principle that a vote is secret."[151][152]Diana Orrock, the Republican National Committeewoman for Nevada and a vocal Trump ally, said she was unaware of the lawsuit before Politico contacted her. "I know that the [Clark County] registrar was on TV this morning saying that anybody who's in line was allowed to participate in the voting process until all of them came through," she said. "If that's what they did, I don't have a problem with that ... I don't know that filing a suit's going to accomplish anything." Orrock doubts the lawsuit will have any impact.[153]Lawsuit for inciting violence at March 2016 campaign rally[edit]During a campaign rally on March 1, 2016 in Louisville, Kentucky, Trump repeatedly said "get 'em out of here" while pointing at anti-Trump protesters as they were forcibly escorted out by his supporters. Three protesters say they were repeatedly shoved and punched while Trump pointed at them from the podium, citing widely shared video evidence of the events. They also cited previous statements by Trump about paying the legal bills of supporters who got violent, or suggesting a demonstrator deserved to be "roughed up."[154][155][156][157]The lawsuit accuses Donald Trump of inciting violence against protesters in Louisville, Kentucky. The plaintiffs are Kashiya Nwanguma (21), Molly Shah (36) and Henry Brousseau (17). The suit is against Trump, his campaign, and three Trump supporters (Matthew Heimbach, Alvin Bamberger and an unnamed defendant). One defendant, Bamburger, who was wearing a Veteran's uniform in the video, apologized to the Korean War Veterans Association immediately after the event, writing that he "physically pushed a young woman down the aisle toward the exit" after "Trump kept saying 'get them out, get them out."[154]Trump's attorneys requested to get the case dismissed, arguing he was protected by free speech laws, and wasn't trying to get his supporters to resort to violence.[156][158]They also stated that Trump had no duty to the protesters, and they had assumed the personal risk of injury by deciding to protest at the rally.[154]On Friday, April 1, 2017, Judge David J. Hale in Louisville ruled against the dismissal of a lawsuit, stating there was ample evidence to support that the injuries of the protesters were a "direct and proximate result" of Trump's words and actions. Hale wrote, "It is plausible that Trump's direction to 'get 'em out of here' advocated the use of force," and, "It was an order, an instruction, a command." Hale wrote that the Supreme Court has ruled out some protections for free speech when used to incite violence.[159]Defendant Heimbach requested to dismiss the discussion in the lawsuit about his association with a white nationalist group, and also requested to dismiss discussion of statements he made about how a President Trump would advance the interests of the group. The request was declined, with the judge saying the information could be important for determining punitive damages because they add context.[154]Hale also declined to remove the allegation that Plaintiff Nwanguma, who is African-American, was victim to ethnic, racial and sexist slurs at the rally from the crowd. The judge stated that this context may support claims by the plaintiffs' of incitement and negligence by Trump and the Trump campaign. The judge wrote, "While the words themselves are repulsive, they are relevant to show the atmosphere in which the alleged events occurred."[154]The judge stated that all people have a duty to use care to prevent foreseeable injury. "In sum, the Court finds that Plaintiffs have adequately alleged that their harm was foreseeable and that the Trump Defendants had a duty to prevent it." The case was referred a federal magistrate, Judge H. Brent Brennenstuhl, who will handle preliminary litigation, discovery and settlement efforts.[160]Heimbach filed a separate counterclaim in April 2017, arguing that Trump was "responsible for any injuries" he [Heimbach] "might have inflicted because Mr. Trump directed him and others to take action". Heimbach, "a self-employed landscaper", and a member of the Traditionalist Youth Network, "which advocates separate American 'ethno states', "spends much of his time" online writing "against Jews, gays and immigrants and urging whites to stand up for their race." He wrote his own lawsuit which requested that Trump pay Heimbach's "legal fees, citing a promise Mr. Trump made at an earlier rally to pay legal costs of anyone who removed protesters."[161]Heimbach's "counterclaim" against Trump has "probed the limits of free speech and public protest while confronting the courts with a unique legal argument".[161]On May 5, Trump's lawyers submitted legal filings that argue that Heimbach's "indemnity claim should be dismissed on the same grounds". According to a University of Virginia law professor, Leslie Kendrick, this indemnity or "impleader" case is "highly unusual."[161]New York University's Samuel Issacharoff, a professor of constitutional law, argued that care must be taken to not allow speech, in the "context of a political rally" to be "turned into something that is legally sanctionable."[161]Payments related to alleged affairs[edit]See also: Stormy Daniels–Donald Trump scandal and Karen McDougal § Alleged affair with Donald TrumpAdult film actress Stormy Daniels has alleged that she and Trump had an extramarital affair in 2006, months after the birth of his youngest child.[162]Just before the 2016 presidential election Daniels, whose real name is Stephanie Clifford, was paid $130,000 by Trump's attorney Michael Cohen as part of a non-disclosure agreement (NDA), through an LLC set up by Cohen; he says he used his own money for the payment.[163]In February 2018, Daniels filed suit against the LLC asking to be released from the agreement so that she can tell her story. Cohen filed a private arbitration proceeding and obtained a restraining order to keep her from discussing the case.[164]According to White House Press Secretary Sarah Huckabee Sanders, Trump has denied the allegations.[165]On March 6, 2018, Daniels sued Trump in California Superior Court, claiming among other things that the NDA never came into effect because Trump did not sign it personally.[166]On March 16 Cohen, with Trump's approval, asked for Daniels' suit to be moved from state to federal court, based on the criteria that the parties live in different places and the amount at stake is more than $75,000; Cohen asserted that Daniels could owe $20 million in liquidated damages for breaching the agreement.[167]The filing marked the first time that Trump himself, through his personal attorney, had taken part in the Daniels litigation.[168]In early April 2018, Trump said that he did not know about Cohen paying Daniels, why Cohen had made the payment or where Cohen got the money from.[169]On April 30, Daniels further sued Trump for defamation.[170]In May 2018, Trump's annual financial disclosure revealed that he reimbursed Cohen in 2017 for expenditures related to the Daniels case.[171]In August 2018, Cohen pleaded guilty to breaking campaign finance laws, admitting paying hush money of $130,000 and $150,000 "at the direction of a candidate for federal office", to two women who alleged affairs with that candidate, "with the purpose of influencing the election". The figures match sums of payments made to Stormy Daniels and Playboy model Karen McDougal.[172][173]American Media, Inc. had reportedly in 2016 bought for $150,000 the rights to a story by McDougal alleging an affair with a married Trump from 2006 which lasted between nine months to a year.[174][175][176]David Pecker (AMI CEO/Chairman and friend of Trump), Dylan Howard (AMI chief content officer) and Allen Weisselberg (chief financial officer of The Trump Organization) were reportedly granted witness immunity in exchange for their testimony regarding the illegal payments.[177][178]In response, Trump said that he only knew about the payments "later on"; Trump also said regarding the payments: "They didn't come out of the campaign, they came from me."[179]The Wall Street Journal reported on November 9, 2018 that federal prosecutors have evidence of Trump’s "central role" in payments to Stormy Daniels and Karen McDougal that violated campaign-finance laws.[180][181]Special Counsel investigation[edit]Main article: Special Counsel investigation (2017–present)The Special Counsel investigation is a United States law enforcement investigation of Donald Trump's 2016 presidential campaign and any Russian (or other foreign) interference in the election, including exploring any possible links or coordination between Trump's campaign and the Russian government, "and any matters that arose or may arise directly from the investigation."[182]Since May 2017, the investigation has been led by a United States Special Counsel, Robert Mueller, a former Director of the Federal Bureau of Investigation(FBI). Mueller's investigation took over several FBI investigations including those involving former campaign chairman Paul Manafort and former National Security Advisor Michael Flynn.It has been noted that Trump has experienced a high turnover with respect to the attorneys handling this matter, as well as a large number of prominent lawyers and law firms publicly declining offers to join Trump's legal team.[183][184]Attorneys known to have been approached include Robert S. Bennett of Hogan Lovells,[185]Paul Clement and Mark Filip, both with Kirkland & Ellis,[186][186]Robert Giuffra Jr. of Sullivan & Cromwell,[185]Theodore B. Olson of Gibson, Dunn & Crutcher,[187]and Brendan V. Sullivan Jr. of Williams & Connolly.[186]Other firms with attorneys who have decided not to represent Trump include Quinn Emanuel Urquhart & Sullivan,[188]Steptoe & Johnson,[188]and Winston & Strawn.[citation needed]Former U.S. Attorney Joseph diGenova and his wife Victoria Toensing were briefly slated to join Trump's legal team, but withdrew their services from Trump in March 2018, citing conflicts of interest.[189]In an article describing the "unique circumstance" of Rudy Giuliani's unpaid leave of absence from Greenberg Traurig while representing Trump, possibly because of "potential conflicts", Christine Simmons said some other law firms may have turned down representing Trump in the Russia case due to "public relations headaches or business and recruitment concerns".[190]Trump has called such views a "Fake News narrative".[191][192]In a National Law Journal article, Ryan Lovelace described how white-collar lawyers must weigh the "risks" and "stigma" of joining the Trump team. He quoted a prominent defense attorney's concerns about "the constant shuffle of attorneys in and out of the president's legal team", and the possibility that an attorney could invest resources and reputation in such representation "only to find yourself on the sidelines a short time later because the president saw someone he liked better on Fox News".[192]The quoted attorney also noted "a stigma to being linked to this president" that might impact business with other clients.[192]A list of other reasons for not wanting to represent Trump is provided by Jill Abramson for The Guardian:The problem for the white-collar defense bar's crème de la crème is that Donald Trump is so blatantly the client from hell. He won't listen. He won't obey instructions. He is headstrong. He is a bully. Sometimes, he doesn't pay his bills. Most of all, it's possible that he isn't capable of discerning fact from fiction. This last foible could get any lawyer who represents him into very deep legal hot water. No one wants to get disbarred for the fame and fortune of representing President Trump. Then there's the justifiable concern over all the unforced legal errors that the defense side, led by Trump himself, has already committed.[193]An Above the Law article states that some law firms have refused to represent the President of the United States because "Donald Trump has somehow turned POTUS into a dog of a client self-respecting lawyers do not want to touch", expressing concern that "[i]f all the good attorneys — the ones with reputations to preserve and ethics to uphold — refuse to represent the president, what's left are the 'bad' attorneys. The ones who don't have the slightest idea what a moral and ethical principle is".[194]Allegations of business links to organized crime[edit]Journalists David Cay Johnston and Wayne Barrett, the latter of whom wrote an unauthorized 1992 Trump biography, have claimed that Trump and his companies did business with New York and Philadelphia families linked to the Italian-American Mafia.[195][196]A reporter for The Washington Post writes, "he was never accused of illegality, and observers of the time say that working with the mob-related figures and politicos came with the territory."[197]Trump helped a financier for the Scarfo family get a casino license, and constructed a casino using firms controlled by Nicodemo Scarfo.[198]Trump also bought real estate from Philadelphia crime family member Salvatore Testa, and bought concrete from companies associated with the Genovese crime family and the Gambino crime family.[195][196][197]Trump Plaza paid a $450,000 fine leveled by the Casino Gaming Commission for giving $1.6 million in rare automobiles to Robert LiButti, the acquaintance of John Gotti already mentioned.[29]Starting in 2003, the Trump Organization worked with Felix Sater, who had a 1998 racketeering conviction for a $40 million Mafia-linked stock fraud scheme, and who had then become an informant against the mafia.[199]Trump's attorney has said that Sater worked with Trump scouting real estate opportunities, but was never formally employed.[200]Use of bankruptcy laws[edit]Trump has never filed for personal bankruptcy, but hotel and casino businesses of his have been declared bankrupt four times between 1991 and 2009 to re-negotiate debt with banks and owners of stock and bonds.[201][202]Because the businesses used Chapter 11 bankruptcy, they were allowed to operate while negotiations proceeded. Trump was quoted by Newsweek in 2011 saying, "I do play with the bankruptcy laws – they're very good for me" as a tool for trimming debt.[82][203]According to a report by Forbes in 2011, the four bankruptcies were the result of over-leveraged hotel and casino businesses in Atlantic City: Trump's Taj Mahal (1991), Trump Plaza Hotel (1992), Trump Hotels and Casino Resorts (2004), and Trump Entertainment Resorts (2009).[204][205]Trump said "I've used the laws of this country to pare debt.... We'll have the company. We'll throw it into a chapter. We'll negotiate with the banks. We'll make a fantastic deal. You know, it's like on The Apprentice. It's not personal. It's just business."[206]He indicated that many "great entrepreneurs" do the same.[204]1991[edit]In 1991, Trump Taj Mahal was unable to service its debt and filed Chapter 11 bankruptcy.[206]Forbes indicated that this first bankruptcy was the only one where Trump's personal financial resources were involved. Time, however, maintains that $72 million of his personal money was also involved in a later 2004 bankruptcy.[207]1992[edit]On November 2, 1992, the Trump Plaza Hotel filed Chapter 11 bankruptcy, and Trump lost his 49 percent stake in the luxury hotel to Citibank and five other lenders.[208]In return Trump received more favorable terms on the remaining $550+ million owed to the lenders, and retain his position as chief executive, though he would not be paid and would not have a role in day-to-day operations.[209]1994[edit]Trump Plaza Hotel and Casinoclosed in 2014By 1994, Trump had eliminated a large portion of his $900 million personal debt through sales of his Trump Taj Mahal and Trump Plazaassets,[210]and significantly reduced his nearly $3.5 billion in business debt. Although he lost the Trump Princess yacht and the Trump Shuttle (which he had bought in 1989), he did retain Trump Tower in New York City and control of three casinos in Atlantic City, including Trump's Castle. Trump sold his ownership of West Side Yards (now Riverside South, Manhattan) to Chinese developers including Hong Kong's New World Development, receiving a premium price in exchange for the use and display of the name "Trump" on the buildings.[211]2004[edit]Donald Trump's third corporate bankruptcy was on October 21, 2004, involving Trump Hotels & Casino Resorts, the publicly-traded holding company for his three Atlantic City casinos and some others.[212]Trump lost over half of his 56% ownership and gave bondholders stock in exchange for surrendering part of the debt. No longer CEO, Trump retained a role as chairman of the board. In May 2005[213]the company emerged from bankruptcy as Trump Entertainment Resorts Holdings.[214]In his 2007 book, Think BIG and Kick Ass in Business and Life, Trump wrote: "I figured it was the bank's problem, not mine. What the hell did I care? I actually told one bank, 'I told you you shouldn't have loaned me that money. I told you the goddamn deal was no good.'"[215]2009[edit]Trump's fourth corporate bankruptcy occurred in 2009, when Trump and his daughter Ivanka resigned from the board of Trump Entertainment Resorts; four days later the company, which owed investors $1.74 billion against its $2.06 billion of assets, filed for Chapter 11 bankruptcy. At that time, Trump Entertainment Resorts had three properties in Atlantic City: Trump Taj Mahal, Trump Plaza Hotel and Casino (closed in 2014), and Trump Marina (formerly Trump's Castle, sold in 2011). Trump and some investors bought the company back that same year for $225 million. As part of the agreement, Trump withdrew a $100 million lawsuit he had filed against the casino's owners alleging damage to the Trump brand. Trump re-negotiated the debt, reducing by over $1 billion the repayments required to bondholders.[216][217]In 2014, Trump sued his former company to remove his name from the buildings since he no longer ran the company, having no more than a 10% stake; he lost the suit.[218]Trump Entertainment Resorts filed again for bankruptcy in 2014[219]and was purchased by billionaire philanthropist Carl Icahn in 2016, who acquired Trump Taj Mahal in the deal.[220]Campaign contributions[edit]According to a New York state report, Trump circumvented corporate and personal campaign donation limits in the 1980s – although he did not break any laws – by donating money to candidates from 18 different business subsidiaries, rather than giving primarily in his own name.[197][221]Trump told investigators he did so on the advice of his lawyers. He also said the contributions were not to curry favor with business-friendly candidates, but simply to satisfy requests from friends.[197][222]Donald J. Trump Foundation[edit]During the 2016 U.S. presidential election, media began reporting in detail on how the Donald J. Trump Foundation was funded and how Donald Trump used its funds. The Washington Post in particular reported several cases of possible mis-use, self-dealing and possible tax evasion.[18] [19] [20]Regarding the various irregularities in the Trump Foundation, former head of the Internal Revenue Service's Office of Exempt Organizations Division Marc Owens told The Washington Post: "This is so bizarre, this laundry list of issues.... It's the first time I've ever seen this, and I've been doing this for 25 years in the IRS, and 40 years total.[21]When interviewed for the Post's article, Trump spokesperson Boris Epshtein said that Trump did not knowingly violate any tax laws.[18]The office of New York State Attorney General Eric Schneiderman investigated the foundation "to make sure it's complying with the laws governing charities in New York."[22]Controversy over tax returns[edit]In October 2016, The New York Times published some tax documents from 1995. These documents indicate that Trump might have evaded paying taxes on as much as 916 million dollars in income at one time. Trump likely gave some of his creditors shares of his failing businesses to avoid taxes on hundreds of millions of dollars he was given in debt relief, which is illegal. Legal scholar Edward Kleinbard of the University of Southern California believes Trump forged tax documents. Trump claimed on his tax returns that he lost money, but did not recognize it in the form of canceled debts. He likely avoided paying 425 million dollars in taxes, says Steven M. Rosenthal, an attorney at the Tax Policy Center. Rosenthal claims he "borrowed other people's money and spent it in spectacular fashion." Trump might have performed a stock-for-debt swap. This would have allowed Trump to avoid paying income taxes for at least 18 years. An audit of Trump's tax returns for 2002 through 2008 was "closed administratively by agreement with the I.R.S. without assessment or payment, on a net basis, of any deficiency." Tax attorneys believe the government may have reduced what Trump was able to claim as a loss without requiring him to pay any additional taxes.[223][224]It is unknown whether the I.R.S. challenged Trump's use of the swaps because he has not released his tax returns. Trump's lawyers advised against Trump using the equity for debt swap, as they believed it to be potentially illegal.[225]Marc Kasowitz, name partner of the Kasowitz, Benson, Torres & Friedman firm, wrote a letter threatening The New York Times over publication of the 1995 documents. Kasowitz's action drew attention to the fact that the biglaw firm had done extensive legal work for Donald Trump and his businesses since at least 2001 including also bankrupt casino restructuring.[226]In early 2017, firm member and former Connecticut Senator Joe Lieberman introduced Pres.-elect Trump's nominee for Secretary of Education Betsy DeVos to the Senate Health, Education, Labor and Pension committee.[227]Destruction of documents[edit]In June 2016, a USA Today article reported that Donald Trump and his companies have been deleting emails and other documents on a large scale,[228]including evidence in lawsuits, sometimes in defiance of court orders and under subpoena since as early as 1973.[229][230][231]In October 2016, Kurt Eichenwald published new research findings in Newsweek. The findings were first published by Paul Singer[232]on June 13, 2016[233]and gained larger attention[234][235]after a new report in Newsweek on October 31, 2016. According to Newsweek, Trump and his companies "hid or destroyed thousands of documents" involving several court cases from as early as 1973."Over the course of decades, Donald Trump's companies have systematically destroyed or hidden thousands of emails, digital records and paper documents demanded in official proceedings, often in defiance of court orders.... In each instance, Trump and entities he controlled also erected numerous hurdles that made lawsuits drag on for years, forcing courtroom opponents to spend huge sums of money in legal fees as they struggled—sometimes in vain—to obtain records."— Kurt Eichenwald, Donald Trump's Companies Destroyed Emails in Defiance of Court Orders Newsweek, October 31, 2016In 1973 Trump, his father and their company were in court for civil charges for refusing to rent apartments to African Americans. After their lawyers had delayed court requests for documents for several months, Trump, then being under subpoena, said his company had destroyed corporate records of the past six months "for saving space". In a court case beginning in 2005 against Power Plant Entertainment, LLC, an affiliate of real estate developer Cordish Cos., it was revealed that Trump's companies had deleted the data requested by court.[236]Cordish Cos. had built two American Indian[237]casinos in Florida under the Hard Rock brand and Donald Trump accused them of cheating him out of that deal. Nonetheless, Trump's lawyers had refused to instruct workers to keep all records related to the case during litigation.[229]Trump had established a procedure to delete all data from their employees' computers every year at least since 2003,[234]despite knowing at least since 2001 that he might want to file a lawsuit. Even after the lawsuit was filed, Trump Hotelsdisposed of a computer of a key witness without having made a backup of the data. A former general counsel of the Trump casino unit confirmed that all data were deleted from nearly all companies' computers annually. Trump and his lawyers claimed they were not keeping records and digital data although it was revealed that Trump had launched his own high-speed internet provider in 1998 and an IBM Domino server had been installed for emails and digital files in 1999.[229][235]

The much more detailed and longer version is here:Alexander Finnegan's answer to How were black people treated in the Soviet Union?The U.S. was hell for black people in the U.S. Racism has a long history in the U.S., going back to the times of slavery. And the most religious and capitalist masters were often the most brutal:Racism was so normalized that the KKK used to have parades in Washington D.C.In fact, there were stories of U.S. marines who were black that were captured as POW’s in the Korean War and sent to China. They preferred to stay in China.Why an American POW chose Mao’s China over homeClarence Adams chose to remain in Red China after the end of the Korean War.The Soviet Union prided itself as being the world’s most egalitarian society, one in which men, women, and people of all colors could be comrades.Paul Robeson was a celebrity author, writer, actor, and musician.Around the world, Marxist Leninist nations have fought for the end of colonial rule, against racism, and for a more just and less exploitative world.Even today the U.S. is a very capitalist, right wing, and authoritarian culture. Most of the society is organized around private tyrannies in which most people work. The bosses control what you wear, what you say, and some even check your Facebook account and you can get in trouble for saying the wrong things. These are unelected, unaccountable, and highly stratified organizations called “corporations.” Capitalists talk about their love for the “free market,” which is really just the business class running the society without much input from the actual workers, who get to vote for one of two corporate filtered candidates, candidates who also pledge their allegiance to capitalism.The purpose of the courts and the police are not to protect people, but to actually protect the private property of those who own the means of production. They are to ensure the unwashed masses don’t get any ideas and decide to seize the means of production for themselves. The courts also act as a form of dispute resolution between different people of the ownership class. Justice is available if you have the money to afford a lawyer and can pay litigation expenses. Many can’t. Tort law used to be a way to prevent corporations from making knowingly defective products which harm people, but in many states there are laws which limit punitive and pain and suffering damages to an offensively low level. Further, lawyers won’t take cases which will cause them to lose money.“I can’t breathe!” “I can’t breathe!” said Eric Gardner, as the police strangled him to death. The cops got off free. 98% of the time cops walk free after killing minorities. Why? Because in a capitalist society blacks are often poor, and poor people are considered worthless because they are not “value producers.” In the U.S. the poor and minorities have the option to go to the military and be gun fodder for the U.S. imperial army—which is designed to protect U.S. corporate assets overseas, go to a for-profit prison so someone can make money off your loss of freedom, or become a statistic of inner city crime or of police violence.Capitalism also causes systemic racism. For example, the process of redlining in major cities caused the ghettoizing of minorities and lowered their ability to build up home equity, a major source of wealth for the middle classes.Redlining, a process by which banks and other institutions refuse to offer mortgages or offer worse rates to customers in certain neighborhoods based on their racial and ethnic composition, is one of the clearest examples of institutionalized racism in the history of the United States. Although the practice was formally outlawed in 1968 with the passage of the Fair Housing Act, it continues in various forms to this day.History of Housing DiscriminationFifty years after the abolition of slavery, local governments continued to legally enforce housing segregation through exclusionary zoning laws, city ordinances which prohibited the sale of property to Black people. In 1917, when the Supreme Court ruled these zoning laws unconstitutional, homeowners swiftly replaced them with racially restrictive covenants, agreements between property owners which banned the sale of homes in a neighborhood to certain racial groups.By the time the Supreme Court found racially restrictive covenants themselves unconstitutional in 1947, the practice was so widespread that these agreements were difficult to invalidate and almost impossible to reverse. According to a magazine article, 80% of neighborhoods in Chicago and Los Angeles carried racially restrictive covenants by 1940.The Federal Government Begins RedliningThe federal government was not involved in housing until 1934 when the Federal Housing Administration (FHA) was created as part of the New Deal. The FHA sought to restore the housing market after the Great Depression by incentivizing homeownership and introducing the mortgage lending system we still use today. Instead of creating policies to make housing more equitable, the FHA did the opposite. It took advantage of racially restrictive covenants and insisted that the properties they insured use them. Along with the Home Owner’s Loan Coalition (HOLC), a federally-funded program created to help homeowners refinance their mortgages, the FHA introduced redlining policies in over 200 American cities.Beginning in 1934, the HOLC included in the FHA Underwriting Handbook “residential security maps” used to help the government decide which neighborhoods would make secure investments and which should be off-limits for issuing mortgages. The maps were color-coded according to these guidelines:Green (“Best”): Green areas represented in-demand, up-and-coming neighborhoods where “professional men” lived. These neighborhoods were explicitly homogenous, lacking “a single foreigner or Negro.”Blue (“Still Desirable”): These neighborhoods had “reached their peak” but were thought to be stable due to their low risk of “infiltration” by non-white groups.Yellow (“Definitely Declining”): Most yellow areas bordered black neighborhoods. They were considered risky due to the “threat of infiltration of foreign-born, negro, or lower grade populations.”Red (“Hazardous”): Red areas were neighborhoods where “infiltration” had already occurred. These neighborhoods, almost all of them populated by Black residents, were described by the HOLC as having an “undesirable population” and were ineligible for FHA backing.These maps would help the government decide which properties were eligible for FHA backing. Green and blue neighborhoods, which usually had majority-white populations, were considered good investments. It was easy to get a loan in these areas. Yellow neighborhoods were considered “risky” and red areas (those with the highest percentage of Black residents) were ineligible for FHA backing.The End of RedliningThe Fair Housing Act of 1968, which explicitly prohibited racial discrimination, put an end to legally-sanctioned redlining policies like those used by the FHA. However, like racially restrictive covenants, redlining policies were difficult to stamp out and have continued even in recent years. A 2008 paper, for example, found denial rates for loans to Black people in Mississippi to be disproportionate compared to any racial discrepancy in credit score history.In 2010, an investigation by the United States Justice Department found that the financial institution Wells Fargo had used similar policies to restrict loans to certain racial groups. The investigation began after a New York Times article exposed the company’s own racially-biased lending practices. The Times reported that loan officers had referred to their Black customers as “mud people” and to the subprime loans they pushed on them “ghetto loans.”Redlining policies are not limited to mortgage lending, however. Other industries also use race as a factor in their decision-making policies, usually in ways that ultimately hurt minorities. Some grocery stores, for example, have been shown to raise prices of certain products in stores located in primarily Black and Latino neighborhoods.ImpactThe impact of redlining goes beyond the individual families who were denied loans based on the racial composition of their neighborhoods. Many neighborhoods that were labeled “Yellow” or “Red” by the HOLC back in the 1930s are still underdeveloped and underserved compared to nearby “Green” and “Blue” neighborhoods with largely white populations. Blocks in these neighborhoods tend to be empty or lined with vacant buildings. They often lack basic services, like banking or healthcare, and have fewer job opportunities and transportation options. The government may have put an end to the redlining policies that it created in the 1930s, but as of 2018, it has yet to offer adequate resources to help neighborhoods recover from the damage that these policies inflicted.[1]Redlining By Credit Card CompaniesCredit card redlining is a spatially discriminatory practice among credit card issuers, of providing different amounts of credit to different areas, based on their ethnic-minority composition, rather than on economic criteria, such as the potential profitability of operating in those areas.[2]Capitalism Causes Systemic Racism“Racism” is so often applied to US prison statistics and policing; to data on differences in employment, housing, wealth and income distributions, college enrollments, film awards, and so much more; and to hardening hostilities toward immigration. At the same time, racism is so often condemned — at least in mainstream media, dominant political circles and most intellectual and academic institutions. Racism’s persistence where the capitalist economic system prevails raises the question of the connection between capitalism and racism.Many societies are structured and operate to subordinate one or more portions of their population — politically, culturally, economically or in combinations of these ways — while privileging others. Among the successive generations born into societies with such subordinations, some will challenge and seek to change their condition. Force can try to maintain subordination, but it is costly, dangerous and often unsuccessful. The preferred method has rather been (a) to develop an idea that justifies the subordination and (b) to install that idea as deeply as possible into the thinking of both the subordinated and the privileged.One such idea is “race,” the notion that sets of inherent (often deemed “natural”) qualities differentiate groups of people from one another in fundamental ways. This idea of race can then be used to explain the subordination of some and the privileges of others as effects of their racial differences. The concept of race thus accomplishes a reversal: Instead of being a produced idea, an ex-post justification of structures of social subordination, race morphs instead into some pre-existing “reality” that caused or enabled the subordination.We know how and why racism worked often to support slavery around the world and especially in the early United States. Masters endorsed and promoted ideas that justified slaves as subordinated because they were an inferior race. Racist ideology also sometimes supported feudalism by dividing lords and serfs into different races. Indeed, some early capitalist systems likewise racially distinguished employers from employees.Racism persists in no small part because its benefits to capitalism outweigh its costs.However, capitalism presents a more complex case, because it often made “individual freedom” central to its supportive ideologies. Opponents of slavery could use that ideology to fight for slavery’s abolition. Yet capitalism’s history nonetheless keeps exhibiting both the idea of race and racism. And the evidence marshaled by, among others, Manning Marable in How Capitalism Underdeveloped Black America (1983) certainly documents capitalism’s subordination of many African Americans. Do racism and capitalism then support one another as per Malcolm X’s famous statement, “You can’t have capitalism without racism”? Should we follow Adolph Reed Jr.’s perspective (in his 2013 New Labor Forum article “Marx, Race and Neoliberalism”) that sees racism as a “historically specific ideology that emerged, took shape, and has evolved as a constituent element within” capitalism?Answers to these questions emerge from patterns exhibited by capitalism’s inequality and instability. Capitalists never could end their system’s tendency to generate gross inequality (in wealth and income distributions) nor its instability (in cycles of depression and recession). Both those features of capitalism have contributed to ongoing social injustice and oppositional social movements. Had the heavy burdens of recurring business cycles (periodic unemployment and its multiple consequences) been distributed roughly equally or randomly across societies where capitalism prevailed — threatening and frightening everyone — those oppositional movements might well have gathered the broad support needed to consign capitalism to an early demise.However, those burdens were never distributed equally or randomly. Some suffered them disproportionally and repeatedly, resulting in social subordination. Others were relatively privileged, exempted from those burdens partially or totally. Yet, in their struggles to displace slavery and feudalism as societies’ prevalent pre-capitalist economic systems, supporters of capitalism had often promised that it would differ from those systems by guaranteeing everyone liberty, equality and brotherhood or solidarity. What capitalism achieved contradicted that promise.The burdens of capitalism’s instability fell much harder on employees than employers, and much harder upon some employees than others. Capitalism thus always faced a basic legitimation problem. How could it justify its unequal distributions of income, wealth and the burdens of its systemic instability among the people whose condition of being “free and equal” capitalism was supposed to guarantee?One of the major means of managing this legitimation problem has been an ideology of race (alongside other ideologies centered around concepts such as “productivity” and “meritocracy”). Capitalism repurposed race and racism. By dividing human beings, conceptually and practically, into intrinsically different subgroups, capitalism’s defenders could explain and justify why its economic benefits (e.g. the status of employer rather than employee) and burdens (unemployment, poverty etc.) were so unequally distributed (both within countries and globally). Employers, politicians, academics and journalists reinforced the notion that the cause, fault or blame for that unequal distribution lay with racially differentiated characteristics, not with the capitalist system.Certain population groups — conceived as races — were deemed underdeveloped, incapable, irrational and/or psychologically disqualified in relation to capitalism’s productive rigors. Such presumed inferiority was then offered as an explanation for why people of some races were rarely employers and, among employees, were those last hired and first fired, poorly paid, ghettoized etc.Such races — often non-whites — were, in effect, assigned to play the role of shock absorbers in and for capitalist business cycles. They still are: A 2016 report from the University of Illinois, using the racialized differentiations, documents how young people of color in the United States continue to face significantly higher rates of unemployment and lower employment per population ratios than young white people do.In the United States, most white employees have been spared constantly fearing and periodically suffering unemployment and its consequences. A minority of white employees shares the fate of a huge portion of the “shock absorber” races. That fate comprises job insecurity, recurring unemployment and its consequences: loss of skills, job connections and promotions; descent into hopelessness and desperation; turning toward illegal revenue-generating activities; policed into disproportionate incarceration; etc. By concentrating both poverty and the business cycle shock absorber role in certain subgroups of their populations and by using racism to explain that concentration, capitalist societies “manage” the risks attending their tendencies to gross inequality and instability.Some conservatives and right-wingers further legitimate capitalism by reframing their racism. For them “the problem” is that capitalism has not been allowed to work its healing magic — market discipline — upon those inferior groups. Misguided social protections, minimum wages, safety nets, welfare etc. have kept them inside a “culture of poverty” defined as recurring unemployment, poverty, social isolation, family instability, incarceration etc. By correcting (i.e. removing) those misguided and counterproductive social protections, capitalism’s disciplines would integrate them into prosperity and growth. That this has not happened for most subordinate groups is blamed on the depth of their racialized inferiority and/or the legacy of liberals’ imposition of a culture of poverty.In contrast, liberals and social democrats who accept the concept of race have mostly sought to ameliorate the sufferings of the unemployed and poor by policies such as education, welfare and training. Such policies likewise rarely succeeded either generally or enduringly. They could not overcome the system’s reproduction of poverty and unemployment and the imposition of them disproportionally on the shock absorber “races.” Both conservatives and liberals have enforced a shared denial of the mechanisms of mutual support between capitalism and racism.Of course, capitalism is not the only cause or source of racism, but ignoring or minimizing its role only perpetuates racism. By designating some members of society to be shock absorbers of recurring business cycles, the capitalist system creates legacies of trauma and inequality that can accumulate into dysfunctional qualities for its victims. There is neither need nor warrant to take those qualities as givens, nor to transform them into racialized attributes. The solution is rather to treat those legacies as among the profoundly unacceptable consequences and costs of capitalism’s profoundly divisive inequality and instability.A capitalism that perpetuates itself via racism incurs huge self-protection costs: to police and imprison or to provide some safety nets for its shock absorber “races” or varying combinations of both. When capitalists shift some or all of those costs onto the tax obligations of workers, more social tensions emerge. Workers are then told their tax payments must compensate for the “deficiencies” attributed to the shock absorber “races” rather than to the structural irrationalities of capitalism. Racial conflicts then preclude or tear apart working-class political unity. Racism persists in no small part because its benefits to capitalism outweigh its costs, or at least those costs capitalists have to bear.When capitalists and their ideological supporters disavow racism, they carefully ignore capitalism as a key part of the problem. They point instead to the intolerance of “some people who lack compassion for the less fortunate.” Thereby they further divide the working class, in effect, into one race that cannot or will not work hard (and is therefore unemployed and poor) and another race that lacks compassion. In comparison, capitalists and their supporters congratulate themselves for their superior morality.Capitalism thus comes full circle. Its supporters use and benefit from a racism whose practice and consequences they blame exclusively on others but never on capitalism itself.[3]When Paul Robeson returned to the U.S., he was forced to appear before a Congressional Committee which attempted to humiliate, shame, and mock him for being a communist, calling him “Un-American.” His response:Footnotes[1] The US Government Used These Maps to Keep Neighborhoods Segregated[2] Redlining - Wikipedia[3] How Capitalism and Racism Support Each Other