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mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Apr 14, 2009 5:52 pm Post subject:

I can't decide where to post this, so it goes here. MT, again:

Quote:

The peasant mentality lives on in America
Conservatives and the Right
by Matt Taibbi | April 14, 2009 - 5:16pm

It took a good long while for news of the Teabag movement to penetrate the periphery of my consciousness � I kept hearing things about it and dismissing them, sure that the whole business was some kind of joke. Like a Daily Show invention, say. It pains me to say this as an American, but we are the only people on earth dumb enough to use a nationwide campaign of �teabag parties� as a form of mass protest, in the middle of a real economic crisis.

What�s next? The Great Dirty Sanchez-In of 2010? A Million Man Felch? (Insert Rusty Trombone joke here).

This must be a terrible time to be a right-winger. A vicious paradox has been thrust upon the once-ascendant conservatives. On the one hand they are out of power, and so must necessarily rail against the Obama administration. On the other hand they have to vilify, as dangerous anticapitalist activity, the grass-roots protests against the Geithner bailouts and the excess of companies like AIG. That leaves them with no recourse but to dream up wholesale lunacies along the lines of Glenn Beck�s recent �Fascism With a Happy Face� rants, which link the protesting �populists� and the Obama adminstration somehow and imagine them as one single nefarious, connected, ongoing effort to install a totalitarian regime.

This is not a simple rhetorical accomplishment. It requires serious mental gymnastics to describe the Obama administration � particularly the Obama administration of recent weeks, which has given away billions to Wall Street and bent over backwards to avoid nationalization and pursue a policy that preserves the private for-profit status of the bailed-out banks � as a militaristic dictatorship of anti-wealth, anti-private property forces. You have to somehow explain the Geithner/Paulson decisions to hand over trillions of taxpayer dollars to the rich bankers as the formal policy expression of progressive rage against the rich. Not easy. In order to pull off this argument, in fact, you have to grease the wheels with a lot of apocalyptic language and imagery, invoking as Beck did massive pictures of Stalin and Orwell and Mussolini (side by side with shots of Geithner, Obama and Bernanke), scenes of workers storming the Winter Palace interspersed with anti-AIG protests, etc. � and then maybe you have to add a crazy new twist, like switching from complaints of �socialism� to warnings of �fascism.� Rhetorically, this is the equivalent of trying to paint a picture by hurling huge handfuls of paint at the canvas. It�s desperate, last-ditch-ish behavior.

It�s been strange and kind of depressing to watch the conservative drift in this direction. In a way, actually, the Glenn Beck show has been drearily fascinating of late. It�s not often that we get to watch someone go insane on national television; trapped in an echo chamber of his own spiraling egomania, with apparently no one at his network willing to pull the plug and put him out of his misery, Beck has lately gone from being a mildly annoying media dingbat to a self-imagined messiah who looks like he�s shouldering more and more of the burdens of Christ with each passing day. And because he�s stepping into a vacuum of conservative leadership � there�s no one else out there who is offering real red meat to the winger crowd � he�s begun to attract not professional help but apostles, in the form of Chuck Norris (who believes we have to prepare for armed revolution and may prepare a run for �president of Texas�) and pinhead Midwestern congresswoman Michelle Bachmann, a woman who is looking more and more like George Foreman to Sarah Palin�s Joe Frazier in the Heavyweight Championship of Stupid. Down goes Frazier! Down goes Frazier!

This new Holy Trinity of right-wing basket cases has been pushing all sorts of crazy hallucinations of late, from Bachmann warning that the Americorps program would eventually be turned into a regime of forced re-education for American youth, to Beck�s meanderings about Obama creating FEMA-run concentration camps to warehouse conservative dissidents, to Norris and Beck stirring up talk of secessionist movements. And a lot of people are having fun with this, because, well, it�s funny. It�s like a Farrelly Brothers version of right-wing political agitation. But it�s also kind of sad.

After all, the reason the winger crowd can�t find a way to be coherently angry right now is because this country has no healthy avenues for genuine populist outrage. It never has. The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That�s why even people like Beck�s audience, who I�d wager are mostly lower-income people, can�t imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over. Beck pointedly compared the AIG protesters to Bolsheviks: �[The Communists] basically said �Eat the rich, they did this to you, get �em, kill �em!�� He then said the AIG and G20 protesters were identical: �It�s a different style, but the sentiments are exactly the same: Find �em, get �em, kill �em!�� Beck has an audience that�s been trained that the rich are not appropriate targets for anger, unless of course they�re Hollywood liberals, or George Soros, or in some other way linked to some acceptable class of villain, to liberals, immigrants, atheists, etc. � Ted Turner, say, married to Jane Fonda.

But actual rich people can�t ever be the target. It�s a classic peasant mentality: going into fits of groveling and bowing whenever the master�s carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you�re a peasant when you worship the very people who are right now, this minute, conning you and taking your shit.Whatever the master does, you�re on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger. And that�s what we�ve got now, a lot of misdirected anger searching around for a non-target to mis-punish� can�t be mad at AIG, can�t be mad at Citi or Goldman Sachs. The real villains have to be the anti-AIG protesters! After all, those people earned those bonuses! If ever there was a textbook case of peasant thinking, it�s struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to millionaires. It�s really weird stuff. And bound to get weirder, I imagine, as this crisis gets worse and more complicated.

http://www.smirkingchimp.com/thread/21289

I half agree with MT on this. It is appropriate to blame the banker bastards who bought the government, but it is more appropriate to hate the government for being bought. MT only lays focus on one side of Republican ire, which is unfair. Some mention of Ron Paul and his minions would be nice balance.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Fri Apr 17, 2009 10:20 am Post subject:

Quote:

Wall Street�s stunning six-week rally has been fed more by traders looking to take advantage of quick swings in the market than investors with a long-term view, NYSE Euronext CEO Duncan Niederauer told CNBC.

From CNBC (I need to shower after going to the site)

Quote:

In March, Michigan again reported the highest jobless rate, 12.6 percent. The states with the next highest rates were Oregon, 12.1 percent; South Carolina, 11.4 percent; California, 11.2 percent; North Carolina, 10.8 percent; Rhode Island, 10.5 percent; Nevada, 10.4 percent; and Indiana, 10.0 percent. Nine additional states and the District of Columbia recorded unemployment rates of at least 9.0 percent. The California and North Carolina rates were the highest on record for those states.

http://www.bls.gov/news.release/laus.nr0.htm

Mish violently destroys the so-called "savings glut" idea put forward by clown economists:

http://globaleconomicanalysis.blogspot.com/2009/04/neither-krugman-nor-bernanke-can.html

Joseph Stiglitz:

Quote:

The Obama administration�s bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

�All the ingredients they have so far are weak, and there are several missing ingredients,� Stiglitz said in an interview yesterday. The people who designed the plans are �either in the pocket of the banks or they�re incompetent.�

The Troubled Asset Relief Program, or TARP, isn�t large enough to recapitalize the banking system, and the administration hasn�t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama�s advisers have close ties to Wall Street.

�We don�t have enough money, they don�t want to go back to Congress, and they don�t want to do it in an open way and they don�t want to get control� of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. �The bank restructuring has been an absolute mess.�

Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.�

Hope'n'change.

Quote:

Banks Declare War on America

Where is the fury now? The populists with pitchforks who screamed bloody murder at the A.I.G. bonuses are not saying nearly enough, or screaming loudly enough, about an even more outrageous action by the recently bankrupt banks that have now had the impudence to hike credit card interest rates sharply, even on customers who have always been current in their payments.

The banks have joined together to form an offensive alliance that has, in effect, declared war on the United States, its people, and its economy. An accurate name for this coalition of bankers would be "F U, U & U & F the USA."

Or, more simply, this Bankers Axis of Evil, which includes Citibank, Amex, J.P. Morgan Chase, and Capitol One, could be called by a variant of the name of another of its members, not The Bank of America, but The Banks Against America.

We, through the government aid they received, gave them a helping hand; now they give us The Finger.

I called Citibank when I saw the increase in my rate. The customer representative said to me, "Oh, that was nothing aimed at you personally; we did it to everyone, because of the bad economy." I burst out laughing.

These rate increases--some to as high as 29 percent--are exactly the opposite of what the bad economy needs for recovery. They mean that much larger shares of the income of many people will have to go into interest payments, rather than the new purchases that would help bring the economy back.

Weapons of Mass Depression

These obscene interest rates are the latest in a series of the banks' launches of their Weapons of Mass Depression at the American people and our economy.

By these actions, the perpetrators reveal themselves once again to be not bankers, but bankrupters. Through their greed in the past, they brought their banks to the edge of bankruptcy; through their greed in the present, they are pushing many middle-class Americans to the edge of bankruptcy.

This is class warfare with a twist. It's not a war between the rich and the poor so much as it is a war by the rich against the middle class.

The ridiculous rate increases are probably not even in the selfish interests (the only interests that concern them) of the banks. They are likely to force many more people into bankruptcy and default on their balances.

Their attitude seems to be that if the economy is going to go under, they will go first-class on the Titanic.

The Fed effectively lowers the interest rate that banks pay to zero and the banks respond by raising the interest rates they charge to levels that used to be charged only by organized criminals. We can draw the appropriate conclusion about what the organized bankers have become. The criminal loan sharks of the past have been displaced by "legitimate" loan T-rexes of the present.

The banks' policy is MAD: Mutually Assured Depression. They must be stopped. NOW.

As the American people bail out these bankrupters in their sinking yachts, they throw the water back on us, submerging our lifeboats and drowning us: Soak the middle class. Beat the fingers of those clinging to the sides of the lifeboat.

While Republicans and the Faux News faithful were holding their silly "tea parties" (those who think that spending during a near-depression is a bad idea may also be so deluded that they will think that raising interest rates on consumers in a near-depression is a good idea), the banks have been holding their pee-parties.

This is trickle-down with extraordinary vengeance. What's trickling down on us establishes us as peons--or, rather, pee-ons.

We, the people, through our taxes, have poured sustenance into the top end of the bandit banks, and they have thanked us releasing excrement on us from the other end.

Succor the rich and tell the rest of us to suck on it.

These irresponsible banks tell their responsible customers that an "increase is necessary because times are tough" and that what they euphemistically call "re-pricing" is needed to "reflect current economic conditions."

Do they think we are that stupid? Are we?

Rise up Americans! Open your windows and shout (or, much better, telephone, email, or write the President, your senators and member of Congress, television and radio stations, your newspapers, blogs--and your friends and neighbors) and shout:
"We're mad as hell, and we're not going to take it anymore!"

Americans vs. Predators: Demand a Strong Federal Usury Law

President Obama and Democrats (one would hope a number of Republicans, too) should join together to say to the bankrupters what the first President Bush did to Saddam Hussein after the invasion of Kuwait: "This will not stand!"

Let us insist that laws be enacted that establish a federal usury standard at a reasonable rate and that such rates be made retroactive for all credit card accounts. (There will, of course, be howls about the sanctity of contracts, but the fine print that allows one contractor to change the rules whenever he feels like it and to do to the other essentially whatever the hell he wants to should not be considered a valid contract.)

We can call the battle Americans vs. Predators.

A federal usury law with real teeth will be tough on South Dakota and Delaware, but they chose to legalize larceny and they have benefitted long enough at the expense of millions of others.

As we protect our commerce from seafaring pirates off the African coast, let us also reclaim our country and our economy from these land-based American pirates.

http://www.huffingtonpost.com/robert-s-mcelvaine/banks-declare-war-on-amer_b_187413.html?view=print

I don't know about the substance of the above but the anger in it made me smile. We're 2 years into a 10-15 year downturn due to banks and they'd better duck when year 5 or so rolls around.

Life insurers are next:

http://skepticaltexascpa.blogspot.com/2009/04/are-insurers-next-9.html

Quote:

�Edward Liddy, CEO of government-run AIG, still owns more than $3 million of stock in Goldman Sachs, which has pocketed $13 billion or more of the $170 billion federal officials have spent bailing out the ailing Wall Street insurance giant.�

http://www.ritholtz.com/blog/2009/04/aig-head%e2%80%99s-3m-in-goldman-stock-raises-apparent-conflict-of-interest/

Now, had he sold some weed, then we'd be sure to stop him. Gotta focus on the big stuff.

http://implode-explode.com/viewnews/2009-04-15_GoldmanHid13BofLossesinOrphanMonth.html

bacasper

Joined: 26 Mar 2007

Posted: Fri Apr 17, 2009 9:55 pm Post subject:

mises wrote:

Hope'n'change.

Quote:

That writer oughtta not hold back and tell us what he REALLY thinks. Laughing

Anyway, he seems to have forgotten that Obushama voted AGAINST a bill that would have limited credit card interest rates to - get this - 30%!

mises

Joined: 05 Nov 2007
Location: retired

Posted: Sat Apr 18, 2009 5:43 am Post subject:

Quote:

Social Security and Medicare Will Cost More Than The Value Of Everything In The United States

Here's the good news: future costs of Social Security and Medicare won't require higher taxes. Now here's the bad news: the reason these programs won't require higher taxes is that they'll be so expensive that there's no possible way to pay for them through taxes. Everything in the US (not counting people) is worth about $50 trillion and those two programs will cost $80 trillion, unless they are reformed.

Wharton insurance and risk management professor Kent Smetters, a former deputy assistant Treasury secretary and economist for the Congressional Budget Office, explains that the only way for these problems to survive is by cutting them back drastically.

http://www.businessinsider.com/social-security-and-medicare-will-cost-more-than-the-value-of-everything-in-the-united-states-2009-4

I reckon the whole post should be read. I don't know how this will be dealt with.

This is a fun read. I've been short two (Crocs, EBHI).

http://247wallst.com/2009/04/15/twelve-major-brands-that-will-disappear/

And none of the above deserve a bailout. Firms die. That's how the system goes.

http://skepticaltexascpa.blogspot.com/2009/04/moldbugs-zombie-america.html
The above is a long post and poorly formatted, and I'm lazy today so..

Seems we're in a bit of an economic lull now.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Mon Apr 20, 2009 11:29 am Post subject:

http://www.ritholtz.com/blog/2009/04/worst-year-in-fortune-500-history-847-profit-decline/

Quote:

Worst Year in Fortune 500 History, 84.7% Profit Decline

Fortune 500 Annual List is out for 2008. It is FUGLY:

▪ 2008 was the worst year in the history of the Fortune 500 for America�s largest companies;

▪ Profits fell from $645 billion in profits in 2007, to just $98.9 billion - an 84.7% decline;

▪ Eleven of the top 25 largest corporate losses in list history took place last year;

▪ Insurance giant AIG posted a $99.3 billion loss � the biggest corporate loss of all time;

▪ Thirty-eight companies disappeared from the list altogether;

▪ Newcomers to the Fortune 500 list: Polo Ralph Lauren, Visa and Mastercar;

▪ 15 women ran Fortune 500 companies in 2008 � an all-time high;

▪ One out of every six working Americans � 25.6 million people � work for the nation�s largest companies;

http://www.bloomberg.com/apps/news?pid=20602007&sid=ahP7Xp58mE1U&refer=govt_bonds

Quote:

Banks Face $400 Billion More in Losses, JPMorgan Says (Update1)

April 20 (Bloomberg) -- Banks are likely to realize about $400 billion more in losses on soured assets, requiring further injections of government capital, JPMorgan Chase & Co. said.

How about those stress tests? Here's an apparently leaked first draft:

http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html

Quote:

The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.
....

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

More bailouts are soon. These will be huge too.

http://nymag.com/news/businessfinance/56151/
The Wail of the 1%

Quote:

As the privileged class loses its privileges, a collective moan rises from the canyons of Wall Street.

http://globaleconomicanalysis.blogspot.com/2009/04/made-in-india-pipe-sparks-union-outrage.html

Quote:

Made In India Pipe Sparks Union Outrage

Inquiring minds are reading that unions are in a huge uproar over Steel Pipe Made in India.

Jeff Rains, a retired steelworker at the sprawling mill here, made the discovery. Out walking a month ago, he waited impatiently at a rail crossing while a freight train slowly passed, its flatbed cars stacked with steel pipes, each wide enough for a child to crawl through. Then he noticed �Made in India� stenciled on the pipes.

The United Steelworkers union has been trying ever since to galvanize the Granite City story into national outrage over steel imports, raising suggestions of protectionism in the process. The union and its workers want steel pipe for future projects to be made in the United States, creating domestic jobs.

The imported pipe has inflamed that sentiment. The union filed an antidumping lawsuit in Washington last Wednesday against tubular and pipe steel imported from China. A day earlier, Local 1899 staged a rally here, drawing more than 500 people to the same field where the lengths of �Indian pipe,� as the people here call them, have been stacked.

�The steel pipe behind us is a symbol of what has gone wrong in this country,� one of the speakers declared, arguing in effect that a lax Congress and greedy businesspeople, as in Wall Street, had brought three months of layoff, so far, to more than 10 percent of Granite City�s work force. The crowd cheered, and some chanted back, �No more greed.�

Here's the deal. Like it or not, and union workers clearly don't, this is a global economy.

Companies cannot afford to pay high prices steel or they will not have any profits to share. Union wages and benefits are simply higher than the market can bear and there is no good solution other than what unions do not want to hear.

The choice is not between high priced US steel and imported steel, the choice is between building anything at all and not building it.

Moreover it is highly doubtful imported steel costs any jobs. For every steelworker job lost, there are doc unloading jobs gained, trucking jobs gained, and more restaurants that benefit from increased trucking and shipping along the way.

Of course there is a balance of trade issue that needs to be addressed but that is separate and distinct from a jobs related issue.

Not a Steel Issue

This is not just a steel issue. I am talking about flat panel TVs, steel, copper pipe, appliances, cars, electronics, underwear and damn near anything one can make. The days are gone where someone can be paid $40 an hour, $30 and hour, or even $20 an hour with enormous pension benefits at retirement.

Nothing, and I repeat nothing is going to change this situation. One can protest, bitch and moan, or send me nasty emails (as many do every time I write such a post), but the fact remains, union expectations for wages and benefits are simply too high.

I can hear the screams already. "We need living wages". My answer remains what it always has been. I grew up in Danville, Illinois. There were 6 of us (4 kids) in what was probably a 600 square foot home. We had one bathroom for all of us. There were no flat panel TVs, or SUVs in my childhood. We only went on two vacations, one to the Osarks the other to the Smoky Mountains. But we were happy and growing up I thought we were relatively well-to-do middle class.

The key is we were happy and there were meals on the table every day. Now it seems the lack of a $35000 SUV every few years is out an out deprivation.

Wages Not Even The Issue

The issue is not even wages. The issue is how far those wages go in conjunction with unrealistic expectations about standards of living.

Policy decisions by the Fed, by the Treasury, by Congress, and even by unions are to blame. Unions have priced themselves out of the global economy. But the real problem is the massive amount of wasteful spending in Congress and the loose policies at the Fed that have created this crisis.

At every crisis, the Fed stepped on the gas inflating the economy. Unions benefited as wages rose along with the price of everything. However, eventually there comes a time when no one is willing to pay those wages. That has obviously happened. Yet because of the Fed's expansionary policy, prices of houses and goods and services continued to rise, outstripping wages.

The only people who really benefited from the Fed's expansionary policies were the bank executives, the fat cats on Wall Street, and government bodies who taxed rising property values and took a chunk out of everything people made via sales taxes, income taxes, and property taxes.

The entire mess has now crashed with consumers deep in debt on their houses, SUVs, and credit cards. And union expectations are left out of whack with what those jobs are worth.

No Sugar Coating

No one wants to hear this but here it is without sugar coating: A long painful recovery process is in order. It may take a decade to play out. Lower home prices, lower prices on goods and services, and lower wages and benefits will all be a part of the recovery process.

In aggregate, the current generation now in high school is likely going to be the first generation in America's history with a lower standard of living than their parents for quite some time to come.

Who does Goldman's own?
http://www.opensecrets.org/orgs/summary.php?id=d000000085?

ontheway

Joined: 24 Aug 2005
Location: Somewhere under the rainbow...

Posted: Mon Apr 20, 2009 12:03 pm Post subject:

The coming double dip depression: Or, as I said long ago somewhere on Dave's, the "w" recovery. The middle leg down is coming. Interesting debate: http://www.youtube.com/watch?v=xzEWTIc2ADU http://www.youtube.com/watch?v=YLBKIsRxX_8&feature=related http://www.youtube.com/watch?v=hghfWwKxezo

mole

Joined: 06 Feb 2003
Location: Act III

Posted: Mon Apr 20, 2009 3:15 pm Post subject:

Quote:

How about those stress tests? Here's an apparently leaked first draft:

Here's a panic attempt at damage control:
http://www.cnbc.com/id/30307192

Then some more speculation:
http://market-ticker.denninger.net/archives/972-Treasury-Caught-Lying-Again.html

mises

Joined: 05 Nov 2007
Location: retired

Posted: Wed Apr 22, 2009 10:14 am Post subject:

http://www.ritholtz.com/blog/2009/04/portfolio-cover-stpry-on-timothy-geithner/

Quote:

Portfolio Cover Story on Timothy Geithner
Print this post
By Chris Whalen - April 22nd, 2009, 9:25AM

Gary Weiss of Portfolio has just published a profile of Treasury Secretary Tim Geithner:

http://www.portfolio.com/executives/2009/04/22/Treasury-Chief-Tim-Geithner-Profile

He recalls my first experience with Geithner at an NYU conference on risk management hosted by the Stern School several years ago. Even though Geithner admitted yesterday in his congressional testimony that he has no actual financial markets experience whatsoever, you would think that an economist and bureacrat focused on financial policy would have some passing acquiantance with Basel II, especially as the President of the FRBNY.

The more I see and hear Secretary Geithner speak on financial services policy, the more I am convinced that this man has not a clue what he is doing and must therefore be acting at the instruction of others � Bob Rubin, Larry Summers and the folks at GS � IMHO.

The Big Picture is a mainstream, legitimate and widely read site. The GS owns the government conspiracy theory has gone mainstream.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Wed Apr 22, 2009 10:35 am Post subject:

Bring on the deflation:

Quote:

An IMF analysis shows that when a nation's debt to GDP ratio reaches 60%, the probability of that nation slipping into a deflationary black hole approaches 100%. The US budget's predicted shortfalls will be enough to put the US over the tipping point.

http://www.telegraph.co.uk/finance/financetopics/recession/5166956/IMF-warns-over-parallels-to-Great-Depression.html

There is too much to quickly summarize in this:

Quote:

Big bank profits are bogus! Massive public deception!

http://www.moneyandmarkets.com/big-bank-profits-are-bogus-massive-public-deception-33228

Here is a good overview of derivatives:
http://dollardaze.org/blog/?post_id=00617

In case you believed the nonsense about housing "stabilizing":

Quote:

Golden State Mortgage Defaults Jump to Record High

http://www.dqnews.com/Articles/2009/News/California/CA-Foreclosures/RRFor090422.aspx

In the UK, we have someone who realized that huge deficits give bankers even more power over governments. Seems everything gives them more power:

Quote:

Budget: The bankers are back in charge

Keeping up investor confidence in Britain plc has become the number one priority for the government

For much of the last year, the City has felt angry politicians breathing down its neck. Today the tables were turned: the bankers are back in charge.

It might not look so from the headlines. Soaking the super-rich means a top fund manager rubbing along on, say, �500,000 will have to hand over an extra �50,000 in personal tax. But when it comes to the nation's finances, these masters of the universe will call the shots in future.

The reason is we need them to fill the colossal black hole in the public accounts. This year alone, investors must lend us at least �220bn to keep the show on the road. With foreign investors diverted by troubles back home, much of this will need to come from City pension funds, insurers and savers.

Even on the chancellor's heroic assumptions about imminent economic recovery, the following years will be little better � probably �200bn a year worth of new gilts will need to be issued for the forseeable future.

The consequences of refusal � a "gilt strike" to ressurect the 1970s parlance � do not bear thinking about. We had a taste today when City alarm at the chancellor's largesse caused a mini run on gilts and sterling. Dealers were said to be terrified at the prospect of a possible downgrade in government debt by ratings agencies.

...

This is why there was not more in the budget to help put the economy back on its feet; we simply cannot afford it. As Mervyn King warned a few weeks back, Gordon Brown's hopes for fiscal stimulus on a meaningful scale were unrealistic. The best that Darling could hope for today was that the global economy gradually improves and that the "natural stabilisers" of existing public spending promises do their best to stop it getting any worse here.

Keeping up investor confidence in Britain plc has become the number one priority for the government. All the more worrying therefore that the first reaction from the CBI was that Darling had failed to "set out a credible and rigorous path for restoring the public finances to health". If fixed income fund managers take the same view and put their money elsewhere, this budget could be as cheerful as it gets.

And some GS links:

http://www.goldmansachs666.com/2009/04/goldman-sachs-daily-links-april-22-2009.html

mises

Joined: 05 Nov 2007
Location: retired

Posted: Wed Apr 22, 2009 1:55 pm Post subject:

How easy is it to game the system?

http://www.morganstanley.com/about/ir/shareholder/1q2009.html

Quote:

The results for the current quarter are compared with the results of the first quarter of the prior year, which have been recasted on a calendar basis due to a change in the Company's fiscal year end from November 30th to December 31st.

....

As a result of the change in the Company's fiscal year end from November 30th to December 31st, the Company had a December 2008 fiscal month transition period. The results for this period, which reflected a net loss applicable to Morgan Stanley of $1.3 billion, are presented on page 19 of the financial supplement accompanying this release.

Pile losses into December, and then skip December on financial reports. The market will swoon. As it is swooning, hedge funds (and those who can read a financial statement) dump the stock while it is on an upswing. Done. Joe Wannaberich gets screwed and the titans come out ahead.

Goldman's did the same:

http://norris.blogs.nytimes.com/2009/04/14/the-case-of-the-missing-month/

And BofA sold a Chinese bank.

So the big guys earned a profit. Financial crises over.

Pluto

Joined: 19 Dec 2006

Posted: Wed Apr 22, 2009 3:13 pm Post subject:

http://www.google.com/finance Well, Apple did well, but leave it to the financials to fuck everything up. Anyone surprised? -- after trading on 22 April 2009

mises

Joined: 05 Nov 2007
Location: retired

Posted: Thu Apr 23, 2009 1:00 pm Post subject:

Quote:

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week ...

http://www.calculatedriskblog.com/2009/04/report-chrysler-bankruptcy-could-happen.html

Quote:

This is getting surreal. Goldman principal program trading is now well over 5x compared to its customer and agency trades and a 150 million share pick up compared to last week. For yet another week, Goldman's principal trading represents more than half of all NYSE member firm principal transactions.

The people demand Cuomo and an end of market manipulation.

http://zerohedge.blogspot.com/2009/04/goldman-sachs-principal-transactions_23.html?www.GoldmanSachs666.com

Primary link to NYSE data inside the zerohedge link. This is actually quite scary. If GS is holding the whole market it by herself, or merely trading with herself, the dow could implode.

Remember the housing bust? It isn't finished:

http://www.ritholtz.com/blog/2009/04/existing-home-prices-fall-124-sales-drop-71/

Quote:

Existing-home sales fell 7.1% from March 2008; Since February 2009, they fell 3% (seasonally adjusted annual rate of 4.57 million units). Even that weak monthly number was due to a �downwardly revised level of 4.71 million in February.�

http://globaleconomicanalysis.blogspot.com/2009/04/fannie-freddie-delinquencies-soar-and.html

Quote:

Fannie Freddie Delinquencies Soar (and they are going to get much worse)

On Tuesday, Fannie Mae and Freddie Mac reported Mortgage Delinquencies Rose 50% in a Month.

Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.

Those are pretty nasty numbers.

Here is an excellent graphic from the NYT:

http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html

http://optionarmageddon.ml-implode.com/2009/04/23/lunchtime-links-4-23/
http://online.wsj.com/article/SB124045610029046349.html#mod=testMod

Quote:

his shouldn�t surprise anyone. In the name of �protecting� banks the financial system, Bernanke, Paulson, Geithner, Summers, et al have deliberately misled the public about the scope and severity of the crisis.

I was saying that a long, long time ago.

http://news.yahoo.com/s/ap/20090423/ap_on_bi_go_ec_fi/us_economy;_ylt=Am8xvWJOOKrOufv_qXw4ig2yBhIF

Quote:

New jobless claims rise more than expected to 640K

Quote:

GM plans to close 15 plants for 9 weeks

http://www.usatoday.com/money/autos/2009-04-22-gm-plant-shutdown_N.htm

http://latimesblogs.latimes.com/laland/2009/04/wells-cfo-california-economy-market-close-to-bottom.html

Quote:

Wells CFO: California economy close to bottom

No, it isn't. California isn't close to bottom.

Here are some fun facts:

Quote:

* Consumer prices fell 0.4% in February, the first time since 1955 (54 years).
* Retail sales decreased 1.1% from February to March (seasonally adjusted); sales are off 10.7% from March 2008 (retail and food services decreased 9.4%).
* The net worth of American households � the difference between assets and liabilities � was $51.5 trillion, down $11.2 trillion or nearly 18% from 2007.That sets Americans� total wealth back to levels lower than 2004. It is the first decline in American household net worth since 2002.
* Mortgage credit fell to $10.5 trillion, the first decline since the Fed started keeping track in the 1950s.
* Americans� homeowners� equity as percentage of the value of their homes fell to 43% in 2008�lowest since before WWII.
* Industrial production fell 1.5% in March from a month earlier; down 13% since the recession began in December 2007, worse than every recession since World War II.
* National Federation of Independent Business Small Business Optimism Index for February was down 1.5 points to 82.6 (1986=100), the second lowest level in the 35-year history of the survey. This has significant implications for employment and loan demand.
* According to RGE (Nouriel Roubini) many US banks are insolvent: overall banking capital before the crisis was $1.4 trillion but there are expected losses of $1.8 trillion. Losses from loans and securities generated by US financial institutions are estimated to have been $3.6 trillion at its peak.
* Defaults on corporate bonds bought by U.S. life insurers may cost �substantially� more than losses on securities linked to subprime, Alt-A and commercial mortgages�further deflation.
* According to the most recent data from the U.S. Department of Education, default rates for federally guaranteed student loans are expected to reach 6.9% for fiscal year 2007, and are climbing dramatically.
* Credit cardholders had $962 billion in unpaid balances on general purpose and proprietary cards at the end of 2007, an 8.6 percent increase from the previous year. That figure is expected to climb to $1.2 trillion by the end of 2012, or $6,373 per cardholder.
* Two-thirds of the $154.5 billion of securitized commercial real estate mortgages coming due between now and 2012 won�t qualify for refinancing; Deutsche Bank, Goldman, and others estimate declines in commercial-property values of 35% to 45% from the peak in 2007. They believe the commercial real-estate slump will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession.
* Deflation continues worldwide: Japan, Germany, and China are all experiencing deflation.
* U.S. unemployment is now at 8.5%.

http://www.ritholtz.com/blog/2009/04/credit-bubble-hangover/

http://finance.yahoo.com/tech-ticker/article/235032/Traders-Mounting-%22Speculative-Attack%22-on-U.S.-Banks?tickers=xlf,dia,spy

Quote:

Traders Mounting "Speculative Attack" on U.S. Banks

�The view being taken by people who trade credit in the United States is that we�re definitely not out of the woods. And I would say, in fact, there�s something of a run taking place in the credit market. Not a traditional bank run, but a speculative attack on some of the biggest financial players �.�

Specifically, traders are shorting credit of major banks, betting that the government won�t protect bondholders forever:

�Basically these people are betting the big banks will be forced into some sort of default. Now, if enough people bet that, and if the banks can�t draw on enough external support, which in their case would be from the U.S. government, then these runs can be self-fulfilling. It�s extremely dangerous and a situation that�s really not been addressed by the U.S. authorities.�

Good. They need to go bust.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Thu Apr 23, 2009 1:11 pm Post subject:

I like this Simon Johnson character.
http://www.salon.com/tech/htww/feature/2009/04/23/simon_johnson/index.html

Quote:

Simon Johnson says: "Break up the banks"
It's time to get all Teddy Roosevelt on Wall Street, declares the former chief economist of the IMF. Bring out the big antitrust artillery and fire away.

Andrew Leonard

Apr. 23, 2009 |

Simon Johnson is the former chief economist of the International Monetary Fund and in recent months has emerged as one of the most cogent critics of how the Obama administration is addressing the banking crisis. On Tuesday, Johnson, Joseph Stiglitz and Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, testified before Congress' Joint Economic Committee on the topic of the day: "Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions."

On Wednesday, Salon caught up with professor Johnson for the second time this month, and this time, managed to successfully record the interview.

You have become famous for decrying the consolidation of power by a new financial oligarchy over the politics and economy of the United States. Since our last conversation I was intrigued to learn that this isn't necessarily an obsession of yours. In the soon-to-be-published paper "From Ancien Regime to Capitalism: The Spread of the French Revolution as a Natural Experiment," which you co-authored with Daren Acemoglu, you argue that after the French Revolution, Napoleon's armies contributed to future economic growth by breaking up local church and aristocratic oligarchies.

Oh yes! So you know that I work on longer-term issues as well as shorter-term issues. You see, there are some recurring themes here. It's about power, and you have to see it all in that light.

Does Wall Street require its own Napoleon?

Well, there was a lot of damage done the way he did it. And I don't think we currently are living under the "ancien regime." The structure of Western Germany, for example, when the French came in, was post-medieval, and they completely transformed it. I still think that we have basically a good system here today. It's just that a relatively few people got out of control. And they need to be reined in. I think that's doable.

In the Joint Economic Hearing on Tuesday, I thought the most the interesting stuff came from Thomas Hoenig, who had this amazing quote. I mean I was just shocked to hear him say it, to hear a Federal Reserve regional bank president say that any time you have banks that are too big to fail, you are going to have oligarchs. I thought it was brilliant. That's where I am! And I'm trying to persuade people I'm not a sensationalist, or an extremist.

In your own testimony, your basic message was pretty simple: It's time to break up the banks.

Yeah. I've been saying that for awhile, but the new piece is to use antitrust law to do it. Some good lawyers have thought about this now for us, and they are saying, certainly, changing the legislation to make this easier is the way to go. The lawyers themselves are divided on whether you can do this under the existing legal framework. But the historians are adamant that what we are saying is very much in the spirit of the original antitrust movement. What Teddy Roosevelt and his cohorts were worried about was excessive power -- political power for these oligarchs.

But you've pointed out that one of the key aspects of the triumph of finance over everything else in the last 40 years is not just the consolidation of political power, but conceptual power -- in other words, a majority of the country came to believe that what was good for Wall Street was good for everyone. How do you use antitrust to break up a belief system?

The breaking of the belief system is an outcome of the crash. The belief system is kind of a perpetuating mechanism but when the economic realities change, people stop believing the same things. I think one advantage of a society like the United States, a democracy, is that we can change our minds pretty quickly on some things, even some firmly held beliefs. I am not saying throw capitalism out with the bath water. I'm saying big finance has just become too powerful and it needs to be reined in. There are some relatively straightforward technocratic steps that can be taken that will move us in the right direction. But I'm not a starry-eyed idealist -- I don't think this is going to change massively overnight.

While researching bank deregulation this morning I found a paper by Philip Strahan from 2002 arguing that the removal of limits on interstate banking in the late '70s and early '80s "was followed by better performance of the real economy." We can quote literally thousands of papers written over the last 40 years arguing that deregulation was good for the economy. We now have a pretty dramatic counter-example, but it still raises the question of how quickly you can undo 40 years of a dominant economic orthodoxy?

Slowly. But I would also say that the Strahan-type result doesn't strike me as implausible. It's quite possible that things can be overregulated, so you deregulate them, and things operate better. But what I'm arguing is that then feeds into this political cycle where you make more money, and you plow that back into political action committees or whatever, and use that to tilt the playing field in your favor. So let's say that you have excessive regulation to start with, you bring that down to a sensible level, and then the guys making a ton of a money use that to undermine sensible regulation. That would be the kind of dynamic I would buy into.

...

What do we get out of the meta-financial crap? It's not so clear that we got useful things. Did our ATM fees come down? No.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Thu Apr 23, 2009 2:31 pm Post subject:

http://www.marketwatch.com/news/story/Even-Jack-Bauer-couldnt-stop/story.aspx?guid=%7bBE0D1772-A628-454D-80BF-C4484CEBA7DF%7d&print=true&dist=printMidSection

Quote:

Jack Bauer can't stop 'The Goldman Conspiracy'

10 reasons why Wall Street has absolute power over America's democracy
By Paul B. Farrell, MarketWatch

Last update: 7:13 p.m. EDT April 20, 2009

ARROYO GRANDE, Calif. (MarketWatch) -- Two mind-numbing fast-paced dramas. Two parallel worlds. One real, one fiction, both deadly. Jack Bauer, mythic hero of "24." Dying from a deadly bio-pathogen leaked from weapons developed by Starkwood, a rogue mercenary army attacking the presidency, hell-bent on taking over America.
The other drama in play: "Hank the Hammer" Paulson, iconic Wall Street hero, a Trojan Horse placed inside Washington by Goldman Sachs as Treasury Secretary in control of America's $15 trillion economy. Goldman, a modern dynasty with vast financial powers much like those once used by the de' Medici, Rothschilds and Morgans to control nations.
Video: Is a correction imminent?

One of the confounding aspects of bear market rallies is that the longer they last, the more likely investors are to expect a correction, says Barron's Bob O'Brien.

Both dramas play high-stakes games with financial WMDs that have lethal consequences. Jack compresses thrills, kills and chills into 24 hours. Hank, Goldman and their army of Wall Street mercenaries move with equally blinding speed, heart-pounding action.

Drama? You bet. Six short months ago Hank led an assault on Congress. The scene parallels one in "24:" Sangala War Lord Juma's brazen attack inside the White House. But no AK-47s necessary. The Hammer assaulted Congress with just a two-and-a-half page memo in hand. Like a crack special-ops warrior, he took down the enemy, demanding $750 billion, absolute control, total secrecy, no accountability and emergency powers to act immediately ... warning that inaction was not an option, that collapse of America's banking system was imminent, would bring down the global monetary system, pushing world's economies into a "Great Depression II." Congress surrendered.

Here's the whole plot:

Scene 1. American government is now run by the 'Goldman Conspiracy'
Oh, you really think just I'm plotting a television series? Or just paranoid, exaggerating this power grab? You better read "The Usual Suspects," Matthew Malone's brilliant article in Portfolio magazine: He "exposed" the "Goldman Sachs 'conspiracy' to take over the U.S. financial system." Read it in this context: America's financial sector has exploded from 19% of corporate profits in 1986 to 41% today, becoming a magnet for every wannabe billionaire. They know why Wall Street must control Washington.
Malone focuses on the incestuous "conspiracy" of Goldman alumni in Treasury, Bank of America, Merrill Lynch, AIG, Citigroup, Washington lobbyists and politicians.

Scene 2. Huge conflicts motivating Wall Street's 'Trojan Horse'
And just in case you think any emphasis on The Hammer's conflict of interest was invented purely to increase drama, please remember that he worked at Goldman for three decades after serving under Nixon. He got $38 million his last year as CEO in 2006 before becoming Treasury Secretary.

Then during the market meltdown six months ago the $700 million personal fortune he built at Goldman was threatened by Goldman's huge $20 billion derivatives exposure at AIG: Suddenly his responsibilities at Treasury merged with a strong self-interest in protecting his personal fortune. AIG was "saved."

Scene 3. Wall Street's 'quiet coup' also runs world's banking system
There's another equally disturbing expose in "The Quiet Coup," Simon Johnson's great article in Atlantic magazine. A former chief economist at the International Monetary Fund, Johnson also warns that America's "financial industry has effectively captured our government" and is "blocking essential reform."

Worse, he says that unless we break Wall Street's stranglehold (unlikely in the new Washington) we will be unable "to prevent a true depression," warning that "we're running out of time," echoing many of our predictions of the "Great Depression II" coming soon. See previous Paul B. Farrell.
Scene 4. Wall Street used the meltdown to take over America's government

Matt Taibbi, author of "The Great Derangement," captured this drama in a Rolling Stone piece, "The Big Takeover, how Wall Street insiders are using the bailout to stage a revolution." A must-read: "As complex as all the finances are, the politics aren't hard to follow. By creating a crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. ... in the age of CDS and CBO, most of us are financial illiterates."
Wall Street "used the crisis to effect a historic, revolutionary change in our political system -- transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below."

Scene 5. How Obama is keeping alive Bush's 'disaster capitalism'
Back in 2007 at the start of the meltdown, Hank was misleading us in Fortune: "This is far and away the strongest global economy I've seen in my business lifetime." In the real world, Naomi Klein, author of "The Shock Doctrine: Rise of Disaster Capitalism," was warning us that "during boom times it's profitable to preach laissez faire, because an absentee government allows speculative bubbles."

But "when those bubbles burst, the ideology becomes a hindrance and goes dormant while big government rides to the rescue." Then, free-market "ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis." TARP paybacks: Obama has a new "disaster capitalism."

Scene 6. Wall Street's CEOs rule like dictators in a banana republic
Seriously, here's how bad Taibbi sees it: "Paulson and his cronies turned the federal government into one gigantic half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling interest in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing business."

And let's include $5.5 trillion in Fannie Mae and Freddie Mac. Wall Street's greed and stupidity resembles the self-destructive reigns of banana republic dictators.

Scene 7. Wall Street makes an un-American bet on 'disaster capitalism'
Today as you ponder buying some Goldman stock, remember, you're really betting that "disaster capitalism" is back, strong, tightening its stranglehold on Washington and on the American taxpayers, who will guarantee all Wall Street's future failures. Yes, this is un-American, but so what?

The "Goldman Conspiracy" is still probably a good short-term buy ... if you're interested in betting on America's new "democracy of capitalists, by capitalists, and for capitalists," with "The Conspiracy" leading the joint chiefs of this new mercenary army ... and it only took six short months for their "Quiet Coup!"

Scene 8. Banks recycle TARP money, pump earnings, cheat America
Here's how it worked: The Hammer conned a clueless Congress, then shelled out $350 billion of our taxpayer money (Helicopter Ben Bernanke helped by upping the ante with a couple trillion side-bet), buying toxic debt to save his ol' Wall Street buddies. They stopped lending and used the dough to doctor their balance sheets.
So no surprise that Goldman, Wells Fargo and J.P. Morgan Chase are now reporting "blockbuster" first-quarter earnings, says the New York Times, while just months ago "many of the nation's biggest banks were on life support."

Get it? They screwed taxpayers and borrowers so they can repay TARP with (you guessed it) our recycled TARP money. Now it's back to business-as-usual, with no restrictions on CEO pay and bonuses ... no thank-yous ... no admissions of guilt ... while some even arrogantly deny that they ever needed TARP money.

Scene 9. Wall Street's already set the stage for new disaster
Right after the election in November, at the peak of the banking crisis, when Hank, Goldman and the Wall Street mercenary armies were divvying up the $350 billion TARP money, we detailed 30 reasons for the "Great Depression II" likely coming around 2011. We quoted John Whitehead, former Goldman Sachs chairman, former chairman of the New York Fed, former Reagan deputy secretary of state. He warned America's problems will take years, burn trillions, result in massive deficits:
"This is a road to disaster," he said. "I've always been a positive person and optimistic, but I don't see a solution here." He did see a depression at the end of that road, one you can call the "Great Depression II."

Scene 10. Obama turned 'The Goldman Conspiracy' into a superpower
Do you see the parallels: Jack and Starkwood, Hank and Goldman? Jack's a great mythic hero. We need to believe a hero will defend the little guy, stand between us and total annihilation. But Jack Bauer's "dead." Yes, dead. Jack's not real. Never was "alive." Jack's a fiction, a figment of Main Street America's vivid imagination, the symbol of "hope" for a populist revolution. Hope that Jack, Barack or some other new hero will emerge, take power back from Wall Street and return it to the people.
Unfortunately that won't happen, folks. Yes, on TV Jack will come back from near-death, again. But in real life, Hank, Goldman and Wall Street's mercenaries are winning the war. Read and weep Portfolio's chilling finale: "Obama's victory and Geithner's appointment are the completion of Goldman's meticulously crafted plan to become a superpower. The firm now has the clout to impose its will on the financial markets, and the world."

GOP or Dems? Conservatives or liberals? It doesn't matter. We'll all controlled by "The Conspiracy." So why not surrender, let them have the power? The truth is, through their lobbyists and surrogates in Washington, they already rule America. Surrender is a mere formality.

Accept reality. Hold them accountable later. After the next crisis. After the next meltdown of disaster capitalism -- if there's anything left after the "Great Depression II" sweeps like a pandemic across the planet, consuming all economies, for a long time. But for now, Goldman and other banks may well be short-term buys. Just be ready to dump them in the near future ... a scenario that will be here sooner than you think. End of Story

Not a well argued or written article but the theme is solid. Here's another along similar lines from The Nation. I think the right-wing is off in lala land, so we have to look to "the left" to push Obama into sanity (never thought I'd write that..)

http://www.thenation.com/doc/20090504/scheer

Quote:

Thievery Under TARP

We are being robbed big-time, but you can't say we haven't been warned. Not after the release Tuesday of a scathing report by the Treasury Department's special inspector general, who charged that the aptly named Troubled Asset Relief Fund bailout program is rife with mismanagement and potential for fraud. The IG's office already has opened twenty criminal fraud investigations into the $700 billion program, which is now well on its way to a $3 trillion obligation, and the IG predicts many more are coming.

Special Inspector General Neil M. Barofsky charged that the TARP program from its inception was designed to trust the Wall Street recipients of the bailout funds to act responsibly on their own, without accountability to the government that gave them the money. (Read the complete report here.

He pointed to the example of AIG, which has acted as a conduit of funds to the banks it had insured without being required to tell the government what it is doing: "Failure to impose this requirement with respect to the injection of yet another $30 billion into AIG would not only be a failure of oversight, but could call into question the credibility of the government's efforts."

AIG is just one example in a bailout that has left the financial conglomerates unsupervised as they spend taxpayer money in what the report termed a government program of "unprecedented scope, scale and complexity," putting the public and the Treasury Department in the dark as to how the money is being used by the very tycoons who got us into this mess. "The American people have a right to know how their tax dollars are being used," Barofsky wrote in the report, which sharply criticized the government for failing to hold financial institutions accountable.

For all of its criticism of the original program, designed by the Bush administration, the report was equally severe in denouncing the Obama administration's plan to partner with hedge funds and other private capital groups to buy up the "toxic" holdings of the banks. Charging that the plan carries "significant fraud risks," the inspector general's report pointed out that almost all of the risk in this new trillion-dollar plan is being borne by the taxpayers. The so-called private investors would be able to put up money they borrowed from the Fed through "nonrecourse" loans, meaning if the toxic assets purchased prove too toxic and the scheme failed, the private investors could just walk away without repaying the Fed for those loans.

The reason those loans may prove even more toxic than expected and the price paid by this government-underwritten partnership far too high is that the government is purchasing the most suspect of the banks' mortgage packages. In addition, the plan is to accept at face value the evaluation of those packages by the very same credit-rating firms whose absurdly wrong estimates of the dollar worth of these securities helped create the problem that now haunts the world's economy. "Arguably, the wholesale failure of the credit rating agencies to rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis," the report found.

As with the entire banking bailout, the new plan of Obama's treasury secretary, Timothy Geithner, is likely to enrich the very folks who impoverished the rest of us, as the report notes: "The significant government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit."

At the heart of this potentially massive fraud was the original decision of Henry Paulson, President Bush's treasury secretary and a former Goldman Sachs chairman, to not require the recipients of the bailout, such as his old firm, to account for how the money was spent.

Unfortunately, President Obama's administration continued that practice.

The only difference is that the amount of public money being put at risk is now far greater, and the hedge funds, which are totally unregulated, have been brought in as the central players. One of the largest of those hedge funds, D.E. Shaw, carried Obama's top economic adviser, Lawrence Summers, on its payroll to the tune of $5.2 million last year. He may have reason to trust these secretive enterprises that operate beyond the law, but the public does not.

bacasper

Joined: 26 Mar 2007

Posted: Thu Apr 23, 2009 9:14 pm Post subject:

mises wrote:

http://www.marketwatch.com/news/story/Even-Jack-Bauer-couldnt-stop/story.aspx?guid=%7bBE0D1772-A628-454D-80BF-C4484CEBA7DF%7d&print=true&dist=printMidSection

Quote:

Jack Bauer can't stop 'The Goldman Conspiracy'

10 reasons why Wall Street has absolute power over America's democracy
By Paul B. Farrell, MarketWatch

This is exactly the point Alex Jones makes in The Obama Deception, namely that the country has been taken over by the financial and banking elite.

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