- The crime of the century. The greatest one ever. Author
Danny Schechter calls it "Plunder." The title of his important
new book on the subprime and overall financial crisis. Economist Michael
Hudson and others refer to a kleptocracy. A Ponzi scheme writ large.
Maybe an out-of-control Andromeda Strain. An economic one. Deadly. Unrecallable.
Science fiction now real life. Potentially catastrophic. World governments
trying to contain it. Trying everything but not sure what can work. Maybe
only able to paper it over for short-term relief. Buy time but in the
end vindicate the maxim that things that can't go on forever, won't.
-
- The world as we know it is changing. Industrial capitalism.
The entire global economic system. Interconnected. What affects one nation
touches others. If the troubled country is America it reaches everywhere,
and if the crisis is great enough, the disease may be fatal and human
wreckage catastrophic. Precisely the current dilemma that world leaders
and financial experts are scrambling to figure out. Desperate to contain,
and not sure what, if anything, can work. How did this happen and why?
-
- The result of unfettered capitalism's fatal flaw - unbridled
greed in a rigged system that rewards the few at the expense of most
others. First an explanation of how it works. Free-wheeling, "free
market" Chicago School fundamentalism the way economist Milton Friedman
championed it in his 1962 book "Capitalism and Freedom" and
taught it to students for decades. He believed that government's sole
function is "to protect our freedom both from (outside) enemies....and
from our fellow-citizens." Preserve law and order. Enforce private
contracts. Protect private property and "foster competitive (unregulated)
markets." Everything else in public hands is "socialism....blasphemy."
Not to be tolerated.
-
- He said "free markets" work best. Unfettered
by rules, regulations, onerous taxes or any at all, trade barriers, entrenched
interests, and human interference. That anything government does, business
does better, so let it. That the best government is one that governs
least. That public wealth should be in private hands. The accumulation
of profits unrestrained. Corporate taxes abolished. Social services also,
and that "economic freedom is an end to itself....and an indispensable
means toward (achieving) political freedom."
-
- He called most all government interference a restriction
of freedom. Opposed foreign aid. Subsidies. Import quotas and tariffs,
and illicit drug laws for being a subsidy to organized crime, but he
found no fault with major banks laundering their profits. He believed
business should be unrestrained in maximizing them, even the illegal kind
apparently.
-
- He opposed the minimum wage and right of unions to bargain
collectively on equal terms with management. He believed high wages and
benefits harm everyone. They raise prices, and in the end, hurt workers
as well as management. He called Social Security "The Biggest Ponzi
Scheme on Earth," even though it's been the most effective poverty
reduction program ever for millions of seniors who'd be desperate without
it. Especially today given a deepening economic crisis. The nation's social
safety net disappearing, and heading everyone toward managing on his or
her own. Dependent on their ingenuity, resources, and good fortune. Milton
Friedman's ideal world. For those who can't make it, it's their own fault.
It's everyone for him or herself in his judgment, and let the devil take
the hindmost.
-
- As for today's largest ever unraveling Ponzi scheme,
it's just the workings of the "free market." Creative destruction.
"Freedom to choose." The best of all possible worlds, and unfettered
capitalism will figure out the right solutions. Provided government gets
out of the way and gives it free reign. Free money also to wreck world
economies and human lives even more than what's already done.
-
- The Chickens Are Home to Roost
-
- Are they ever, and here's what we've got. A global asset
bubble. A predictable crisis allowed to build and mushroom. Begun after
Chicago School economics took hold under Ronald Reagan. Continued under
GHW Bush. Became religion under Bill Clinton, and ultimately fundamentalism
under GW Bush.
-
- The result - a "slow motion train wreck" gaining
speed. Banks and other financial institutions failing globally. On September
25, the largest bank failure in US history with Washington Mutual's collapse.
Earlier it was giant insurer AIG. Before that Fannie Mae and Freddie Mac,
Lehman Brothers, Bear Stearns, and Merrill Lynch a forced liquidation
to Bank of America.
-
- Others are now teetering on the edge. Strapped by toxic
debt. The result of out-of-control greed for easy profits. Massive fraud
to get them. Thinking they're the best and brightest, and only mere mortals
mess up. Knowing Fed moral hazard will cushion them if they do. True for
some. Not for others, and learning that the Federal Reserve (the world's
key central bank) failed in its primary job. To protect the country's
financial system from insolvency. By contributing to a financial crisis
and one of confidence. By creating near-limitless amounts of capital.
Fueling a housing bubble. Outsized consumer debt, and irresponsible investments
free from government oversight. Fraudulent ones involving multi- trillions
of dollars.
-
- Partnering with government to make it easy. Risking a
global economic meltdown as a result. Scrambling to find solutions. Unsure
if there are any. The present crisis is unparalled. Maybe it can be fixed,
and maybe not. The problem is multi-fold. A perfect storm involving:
-
- -- residential housing;
- -- commercial real estate;
- -- consumer over-indebtedness;
- -- unknown amounts of toxic debt (in the multi-trillions);
- -- affecting world finance and economies;
- -- causing bankruptcies;
- -- many more will follow;
- -- selected ones bailed out;
- -- the entire system endangered;
- -- consumer money market, bank accounts and private pension
funds as well; government backing is needed to protect them; there's not
enough money to do it; and
- -- the contagion is spreading; threatening world economies
and people everywhere.
- This time is really different. A $700 billion bailout
(called the Emergency Economic Stabilization Act of 2008 - EESA) is just
a down payment. Trillions will be needed in the end. Other nations contributing
to help. The problems are deeper and more intractable than anyone expected.
Before this ends, unimaginable amounts of capital will be written off.
Too much to even contemplate. Bad investments contaminating good ones.
Threatening world financial structures with paralysis. Severe economic
damage to their economies as a result.
-
- Eroding industrial capitalism as we know it. At best
managing a short-term fix and delaying a final denouement for a later
time. Under new management with the current and past ones claiming no
responsibility. And unmindful of millions of homeowners facing foreclosure
and bankruptcy. One in ten currently behind in their payments. Others
losing their jobs and way of life. They're the most vulnerable. Least
able to cope, and for some their ability to survive.
-
- According to The New York Times, here's how the Paulson
scheme helps them: "it requires the government to use its new role
as owner of distressed mortgage-backed securities to make 'more aggressive'
efforts to prevent home foreclosures." Weasel words. No specifics.
No assurances, and nothing apparently for homeowners already in foreclosure.
-
- On September 22, ahead of the announced agreement, American
Research Group (ASG) published its latest public sentiment poll results,
and they were stunning. At 19%, George Bush scored lowest ever for a US
president, surpassing Harry Truman at the depth of the Korean War and
Richard Nixon during Watergate. It came at a time ASG's results showed
82% of Americans believe the economy is getting worse, and only 17% approve
of how Bush is handling it. Among registered voters, the number is 18%
at a time no one surveyed (zero percent) said the economy is improving
and 68% say it's in recession. True or false, it's how they feel. How
the crisis affects them, and that's what counts most.
-
- Yet on September 24, the president addressed the nation
audaciously. Callously dismissing public pain and anger. Deceitfully
stating outright lies. A typical performance. Demanded that Congress give
the treasury secretary carte blanche authority over $700 billion to address
"a serious financial crisis." Asked taxpayers to pay for corporate
fraud. Reward criminals and ignore their crimes. Said nothing about the
root cause. The effect on ordinary people, or how Paulson's scheme will
help them. Ignored growing public opposition. Large numbers of credible
observers believing the proposed solution is worse than the problem. The
most honest of them saying it will enrich fraudsters and offer no help
for homeowners.
-
- Yet Bush concluded that "democratic capitalism (is
the) best system the world has ever devised" in spite of clear evidence
that it's broken and corrupted. Exploits people for profit. Enriches the
few at the expense of the many. Rewards criminals for their crimes. Protects
the rich from beneficial social change.
-
- Ahead of the president's address on September 24, The
New York Times showed a rare display of candor in a critical Timothy Egan
opinion piece. About "nearly nationalizing the banking system and
giving the treasury secretary more power than a king....whose decisions
may not be reviewed by any court of law or any administrative agency."
He asked readers to remember "where the biggest heist took place,
and how Wall Street dragged down the rest of the country once before,"
referring to the Great Depression but leaving out everything in between.
-
- He stressed, however, "how Wall Street brought down
main street," and things have now come full circle. Deregulation
unleashed casino capitalism, and bankers made a killing. Now they're in
trouble and Bush demands "the biggest bailout in American history....or
the world will crumble. He said the a similar thing in the run-up to
war" so who can believe him now. Egan quotes a dirt farmer asking
why not the same "concerns (for) average Americans." Because
"we the people" Bush speaks for are them, not us.
-
- As for Paulson's plan, here's what the Financial Times
writer Martin Wolf said on September 23. He called it "not a true
solution to the crisis." It doesn't address the "fundamental
problem." It's "neither a necessary nor an efficient solution.
It is not necessary because the (Fed can) manage illiquidity through its
many lender-of- last resort operations. It is not efficient because it
can only deal with insolvency by buying bad assets (overpriced junk) at
far above their true value, thereby guaranteeing big losses for taxpayers
and providing an open-ended bail-out to the most irresponsible investors."
-
- Wolf also objects to Paulson getting unchecked powers.
Providing little or no help to the poor and "ill-informed" (read
duped) borrowers, and lists other operational suggestions "essential
for the long-run health of any financial system" without needing
"a penny of public money." Among them, forcing creditors to
take losses and not taxpayers.
-
- Unmentioned in his article is the underlying fraud behind
the crisis and a lack of regulatory oversight that made it easy. Also,
omitted was what's covered in the section below.
-
- The 1937 Housing Act's Empowering Section 8 Authority
-
- One Section 8 sentence provided the basis for the treasury
secretary's empowerment. It reads:
-
- "Decisions by the Secretary pursuant to the authority
of this Act are non-reviewable and committed to agency discretion, and
may not be reviewed by any court of law or any administration agency."
-
- In other words, unchallengeable czarist powers. In contrast
to the 1930s Reconstruction Finance Corporation's (RFC) closely supervised
operations. That era's Home Owners' Loan Corporation (HOLC) that refinanced
homes to prevent foreclosures. And the 1980s Resolution Trust Corporation
(RTC) mandate to liquidate assets from failed S & Ls. Not dispense
free money for bad investments unchecked. The above authorities subject
to judicial review. Not governed by a financial boss to run as he pleased.
-
- The Announced "Bailout" Deal - The Emergency
Stabilization Act of 2008 (ESA)
-
- According to The New York Times, EESA calls for "strict
oversight of the program by a Congressional panel and conflict-of-interest
rules for firms hired by the Treasury to help run the program."
Also "a change in the bankruptcy laws sought by some Democrats to
give judges the authority to modify the terms of first mortgages."
-
- Given the bipartisan blame for today's crisis. The post-9/11
willingness to give the administration near-carte blanche authority across
the board. Eight years of indifference to social needs and public welfare.
Who now believes that policy going forward will change and that the agreed-on
scheme will protect people or curb the secretary's authority. On his own
initiative, George Bush usurped supreme power post-9/11 while few in Congress
blanched. None in leadership positions. Little today has changed.
-
- Disclaimers notwithstanding from both sides of the aisle,
Wall Street is pleased. Paulson got what he wanted. The plan's fine print
will assure it. Public money. Far more, if needed, than $700 billion.
The power to dispense it freely. With weak at best oversight and judicial
review, and the ability to conceal fraud and malfeasance. In short, the
between-the-lines meaning of Paulson saying: "We have made great
progress toward a deal, which will work and be effective in the marketplace."
-
- The same one that fleeced the nation and betrayed the
public trust. Now empowered to take more with the full faith and blessing
of the government from both sides of the aisle. Belying George Bush's
insult that "The rescue effort....is not aimed at Wall Street; it
is aimed at your street." And Nancy Pelosi's hypocrisy that: "All
of this was done in a way to insulate Main Street and everyday Americans
from the crisis on Wall Street....I want to congratulate all of the negotiators
for the great work they have done." Who in banker boardrooms would
disagree.
-
- Some Relevant Facts
-
- Clearly the present crisis is unprecedented. As stated
above, maybe it can be fixed and maybe not. No one is sure because no
one understands it fully. Where all the problems lie. To what degree
can they be contained. How great their fallout may be. Their full effect
on world economies. How bad things may get before they stabilize and improve,
and the way the world will look like when they do.
-
- Whatever's coming, industrial capitalism is eroding.
A kleptocracy replaced it. If the system is saved, it will be temporary,
and an even greater one will emerge. Why this article is called Grand
Theft America. A criminal class runs it, and they're rewarded for their
crimes. Backed by the full faith and credit of the government with taxpayer
money. A near-limitless amount created and borrowed. Who said crime doesn't
pay!
-
- For over 30 years, an unimaginable wealth transfer to
the rich has been ongoing. To the top 1% and corporate America from most
others. It proves the failure of a system that rewards the few at the
expense of the many. Licenses greed and creates this kind of global financial
crisis so far uncontained. It begs the questions: what caused it and what's
the fallout:
-
- -- the ruinous effects of militarization; insane amounts
of spending on it; "military Keynesianism;" believing capitalism
thrives on foreign wars; "Global Wars on Terrorism" currently;
their costs are unsustainable and are heading the nation toward bankruptcy;
- -- the drain on an already weakened economy;
-
- -- maxed out consumers now debt slaves;
-
- -- so is government from unrepayable obligations in the
tens of trillions; not the fictitious "official" reported numbers;
-
- -- the possibility of future default; hyperinflation;
national bankruptcy, and the demise of the republic;
-
- -- human default as well: mass bankruptcies; home foreclosures;
rising unemployment; increased poverty; and growing numbers of families
unable to survive;
-
- -- the subprime crisis is just part of it; seven million
mortgages sold to the unwary; the idea was to criminally defraud them;
offer two-year teaser rates; then reset them higher semi-annually based
on an interest rate benchmark; payments soared as much as 30% and became
unaffordable; the scheme was to cash in at the expense of mortgage holders,
and five million risk losing their homes and life savings;
-
- -- an "economic Pearl Harbor" for Warren Buffett;
for Senator Chris Dodd a "50-state Katrina;" a "house of
cards (built on) reckless finance" for author Kevin Phillips; Frankenstein
finance; casino capitalism; for most Americans, a human catastrophe;
- -- the demise of our manufacturing base; letting malls
replace factories as the economy's engine;
-
- -- permitting the financialization of the economy; speculative
finance writ large; replacing productive investment; totally deregulated;
run by fraudsters; free from government oversight; letting investment
banks game the system at up to 40 to 1 leverage; until 2004, 12 to 1 was
the maximum;
-
- -- a government - business conspiracy for global dominance
and the single-minded pursuit of profit; unfettered amounts of it through
cleverly manipulated schemes; transferring multi-trillions of dollars
from workers to the most wealthy; doing it without people even noticing;
-
- -- creative destruction to let giant businesses grow
larger by removing and devouring smaller ones; even large ones;
-
- -- permitting and/or ignoring massive fraud; involving
multi- trillions of dollars; the largest ever Ponzi scheme; a calculated
crime with media complicity through silence; not reporting a growing
problem as it emerged; waiting until it mushroomed and still not explaining
it accurately and honestly; and
-
- -- wondering won if the best and brightest can fix things
or if no amount of money or ingenuity can do it.
-
- The Plan's Architect - Henry Paulson
-
- From a Nixon administration staff assistant to the assistant
secretary of defense. To assistant to key Watergate official John Erlichman.
To Goldman Sachs in 1974. To a partnership in the firm in 1982. Then Chief
Operation Officer (COO) in 1994 and CEO in 1998 by a palace coup against
co-chairman and now New Jersey governor Jon Corzine, according to New
York Times columnist Floyd Norris.
-
- Even before the current crisis, Goldman was the preeminent
Wall Street firm. A survivor. The largest, and along with Morgan Stanley,
the remaining two Street giants left standing. But no longer as investment
banks after the Federal Reserve's September 21 announcement that both
companies will become bank holding companies after a mandatory five-day
waiting period, now over.
-
- In theory, they'll be under stricter Fed oversight but
will get Fed help to complete their transition and thereafter. As a well-
connected financial powerhouse, whatever Goldman wants, Goldman gets.
Always in the past by recycling top executives into Democrat and Republican
administrations, and now more than ever given Henry Paulson's extraordinary
financial czar powers.
-
- Before his $700 billion giveaway plan, the 2008 Housing
and Economic Recovery Act gave him authority to fleece taxpayers by rescuing
Fannie Mae and Freddie Mac as well as raise the national debt by over
$5 trillion dollars. He also orchestrated the demise of Bear Stearns,
Lehman Brothers and Washington Mutual. The forced sale of Merrill Lynch,
and arranged the government takeover of AIG.
-
- He has near-open checkbook authority to reward close
allies with loans and free money and let them acquire troubled assets
on the cheap. This from a man with much responsibility for today's crisis.
A June 12, 2006 Business Week cover story titled "Mr. Risk Goes to
Washington" called him "one of the key architects of a more
daring Wall Street, where securities firms are taking greater and greater
chances in their pursuit of profits." Such as assuming huge amounts
of debt and "placing big bets (with their own money) on all sorts
of exotic derivatives and other securities." Advising clients to
do the same. Casino capitalism at up to 40 to one leverage. Hugely profitable
in up markets. Disastrous in down ones.
-
- Paulson earned millions and now has an estimated $700
million + net worth. For 2007 overall, according to Bloomberg.com, "Wall
Street's five biggest firms (paid out) a record $39 billion in bonuses
(and did it in) a year when three of the companies suffered the worst
quarterly losses in their history and shareholders lost more than $80
billion."
-
- Speculative finance pays well, even in down years, and
it even raised Bloomberg's ire in a Michael Lewis September 24 commentary
titled "America Must Rescue the Bonuses at Goldman Sachs." It
reflected on a possible global financial collapse but sacrificing Goldman
bonuses is another matter. If firm "employees (take) pay cut (s),
it will be (tantamount to failure and) our country may never recover."
How will the company induce new talent to come aboard. Goldman is well-positioned
to get maximum gain from its former CEO's $700 billion handout.
-
- Why else would Warren Buffett bet $5 billion on the firm!
For preferred shares paying an annual 10% dividend. Warrants as well to
buy $5 billion in common stock at a $115 a share strike price. Well off
its $251 peak and below the latest September 26 $138 a share.
-
- Joseph Stiglitz on the Economy
-
- Stiglitz was formerly part of the system he now criticizes.
Free market fundamentalism in its most extreme form. For many months,
he warned about a worsening global economy and growing financial crisis
that's as bad or worse than the Great Depression.
-
- He sees similar problems now as then:
-
- -- outsized speculation through excessive leverage;
-
- -- pyramid schemes;
-
- -- multiple bubbles through so-called Wall Street innovations;
and
-
- -- a lack of transparency and government oversight.
-
- Combined they created a crisis "so great that no
one knows exactly the magnitude of the risk they face. It is particularly
bad because our financial institutions are based on trust. You put money
in the bank and you trust that you can get (it) out, so trust is absolutely
essential for the functioning of our financial markets and economy."
-
- The problem is exacerbated by those providing the news.
The dominant media and frequent spokespeople. Industry representatives
like Lehman Brothers CEO saying last April that "we turned the corner,
and the economy is on the uptick." Also from the president, treasury
secretary and others in government as things keep worsening.
-
- Stiglitz calls this a "top down crisis." The
"$3 trillion cost" of foreign wars a key. Creating huge deficits
and consuming vital resources needed for growth. "This is the first
war in American history that has been totally financed on the credit card.
For the last five years....we have been a debt economy." Not since
the Revolutionary War have "we have had to turn to foreigners,"
so now "40% of our national debt is financed by (them). Even as we
went (to war) we had a big deficit, and yet the president called for tax
cuts for upper middle class Americans." Insane but we did it.
-
- Another factor is other countries trusting that our economy
is working well, and when the president says it is he's believable. "This
administration burned that trust....no wonder everybody around the world
is losing confidence." Even worse is that the administration isn't
dealing responsibly with these problems, mostly because they're of our
own making.
-
- Stiglitz worries about the "real economy:"
home prices dropping; owners forced into foreclosure; more financial firms
in crisis; and a good many won't survive. He sees a weakening financial
system unable or unwilling "to provide credit (the lifeblood of the
economy for) loans, mortgages," and that means lower home prices,
contracting businesses, rising unemployment, and a "downward vicious
cycle. You have to be in fantasy land to say that everything is fine (or
even) that we have turned the corner." He sees at least another 18
months of pain. Maybe longer. Who can know or how much.
-
- For sure, real economic stimulus is needed. Productive
investment. Not the phony "bailout" kind proposed. Aiding state
and local governments. Better unemployment insurance and more for infrastructure.
Providing a basis for long-term growth. Not feeding markets and starving
the hungry, as one writer put it. Not believing markets on their own will
fix things.
-
- Understanding that government must intervene. Responsibly.
Facilitate job creation. End casino capitalism. Provide incentives for
real economic growth. Let foreclosed and threatened homeowners stay in
their homes. Work out an equitable way to do it. "We learned a painful
lesson in the 1930s and today: The invisible hand often seems invisible
because it's not there." It led to the kind of predicament now confronting
the country. The solutions proposed will just compound it.
-
- Ones that Can Fix It
-
- Good ones not considered. From figures like Dean Baker
of the Center for Economic and Policy Research. Others as well with solid
advice to:
-
- -- make fraudsters eat the bulk of their losses;
-
- -- use public funds only "to sustain the orderly
operation of the financial system;"
-
- -- minimize speculative finance; the root of the current
problem;
-
- -- "minimize moral hazard" - the Paulson (and
Bernanke) "put" picking up where Greenspan left off;
-
- -- let delinquent homeowners stay in their homes and
pay rent;
-
- -- curtail executive compensation for companies getting
government aid;
-
- -- make a key Fed responsibility the prevention of asset
bubbles; reinstitute regulations to do it; Glass-Steagall for starters
that prohibited commercial and investment banks and insurance companies
from combining;
-
- -- impose a modest financial transactions tax to curb
excesses and raise revenue;
-
- -- trade assets, like credit default swaps, openly on
exchanges to establish fair value for them;
-
- -- impose strict limits on leverage;
-
- -- keep Fannie and Freddie public institutions; their
status before being privatized in 1968; and
-
- -- restructure the Fed democratically; a far better solution
is abolish it and let government control its own money; use it responsibly
for all Americans, not just the privileged few.
-
- Other recommendations recognize no quick or easy solutions
to problems this great. Economist James Galbraith says borrowers need
collateral. A new Home Owners Loan Corporation to rewrite mortgages.
Manage rental conversions, and decide what degraded properties should
be demolished. Which ones to save and refurbish. Set it up in communities
under federal guidelines and do it quickly. Help state and local governments
strapped for cash. Reestablish federal revenue sharing. A National Infrastructure
Bank making capital available for infrastructure. Put people to work
building it. Protect seniors and near-retirees from wealth loss. Extra
Social Security, Medicare and Medicaid revenue will help. Get money in
the hands of people who'll spend it.
-
- Address other crucial issues like energy conservation,
reconstruction and renewable power. Infrastructure overall. Tuition
help for students. Another GI bill. Credit card and mortgage interest
rate caps. Rescind anti-consumist laws like the misnamed 2005 Bankruptcy
Abuse Prevention and Consumer Protection Act. A boon for credit card companies
and other businesses. Unfairly burdensome to the public.
-
- A whole range of other projects and ideas to redirect
the economy away from speculative finance and militarism and toward high-return
public investment. Do it before it's too late. Recognize that the present
course is unsustainable. Imagine a government working for everyone and
not just the privileged few. Imagine it not tolerating fraud and malfeasance.
-
- Instead, Congress agreed to a "bailout" and
passed a record $634 billion omnibus spending bill (to run the government
through March 6, 2009) to include a record Pentagon budget; $25 billion
in low- interest auto industry loans; maybe with no provision for repayment;
lifting a quarter-century ban on Atlantic and Pacific off-shore drilling;
billions more in earmarked pork; and likely more coming later for the
airlines and other endangered companies. Taxpayers for Common Sense criticized
the bill at the same time it noted that government "bailout"
appropriations will reach about $1.2 trillion with the $700 billion Paulson
scheme. Others put the total above $1.5 trillion, and many say it's only
for starters.
-
- Paying "hold-to-maturity" prices compounds
the fraud. For securitized assets worth a fraction of full value. Much
of it pennies on the dollar, if anything. Trillions of dollars of toxic
ones. All sorts of them. Newly invented ones. Structured finance and
insurance. Asset-backed securities. Repackaged into marketable pools.
Sold to investors. It's been done for decades but only recently so out
of hand. Greed and deregulation created an alphabet soup of levered-up,
high-risk securitized assets. Financial alchemy. Largely outright fraud,
including:
-
- -- collateralized debt obligations (CDOs), including
auto loans, credit and corporate debt;
-
- -- collateralized (asset-backed home) mortgage obligations
(CMOs);
-
- -- commercial mortgage-backed securities (CMBS);
-
- -- mortgage-backed securities (MBS) and levered loans;
- -- structured investment vehicles (SIVs);
- -- special purpose vehicles (SPVs);
-
- -- pass-through securities;
-
- -- credit and interest rate default swaps;
-
- -- commercial paper and more;
- -- repackaged arcane stuff most people don't understand;
even investors who bought them; like eating a stew with no idea what's
in it; a recipe with no list of ingredients; learning too late it's toxic
and you're in trouble;
-
- Credit card companies as well from growing amounts of
unrepayable credit card debt. The auto industry already assured of a low-
interest $25 billion loan (or maybe handout) for starters. Airlines coming
next. Select homebuilders and troubled companies called too big to fail.
If they're too big to fail, says one observer, they're too big to exist.
-
- EESA will give the treasury secretary near-carte blanche
powers to conceal fraud and help the fraudsters, including his former
company, Goldman Sachs, now in trouble. Pick and choose among others.
Which will survive, and what less favored ones will go on the block at
fire sale prices or disappear. Today there are 9000 banks in the country.
In a decade, half or more of them may be gone.
-
- Economist Michael Hudson calls EESA "cash for trash"
and a "giveaway," not a bailout. A "transfer of wealth
to insiders." A financial coup d'etat. The "largest and most
inequitable (kind) since the (19th century) land giveaways to the railroad
barons."
-
- In this case, socializing losses to let fraudsters "sell
out all their bad bets." Junk of all sorts: a stew of securitized
assets, bad mortgages, car loans, credit card loans, student loans, anything
for insiders stuck with too much of them.
-
- A doomed scheme that will raise the debt level instead
of lowering it. Enrich fraudsters with taxpayer funds. Stick the public
with toxic junk. Maybe buy time before more people and markets catch on,
but, in the end, cripple the economy and erode industrial capitalism
with it.
-
- Hudson is justifiably angry given the amount of fraud
and deceit. The government-concocted scheme to whitewash it. Reward criminals.
Harm most others, and wreck the country at the same time. He says a "kleptocratic
class has taken over the economy to replace industrial capitalism....'banksers'
" for FDR and earlier condemned by Jefferson with this stinging comment:
-
- "I sincerely believe that banking institutions are
more dangerous to our liberties than standing armies. Already they have
raised up a money aristocracy that has set the government at defiance.
The issuing power should be taken from the banks and restored to the
people to whom it properly belongs."
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- A half century later Lincoln said:
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- "I see in the near future a crisis approaching that
unnerves me and causes me to tremble for the safety of my country....corporations
(including bankers) have been enthroned and an era of corruption in high
places will follow, and the money power of the country will endeavor to
prolong its reign by working upon the prejudices of the people until all
wealth is aggregated in a few hands and the Republic is destroyed."
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- Lincoln refused to pay bankers usurious rates to finance
the Civil War and got Congress to pass the 1862 Legal Tender Act. It
empowered the US Treasury to issue "greenbacks" that were interest-
free because government printed its own money. When Lincoln was assassinated
in 1865, the "Greenback Law" was rescinded. A new national banking
act was passed, and the government once again had to pay interest to bankers.
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- On June 4, 1963, President Kennedy issued executive order
(EO) 11110 giving the president authority to issue currency. He ordered
the treasury to begin printing "United States (Treasury) Notes"
to replace "Federal Reserve Notes." He began a process to let
government control its own money and no longer private bankers
- under the guise of the Federal Reserve. Months later,
Kennedy was assassinated. Once Lyndon Johnson took office, he rescinded
EO 11110 and reestablished the current system. More on that below.
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- The Two Greatest Ever Financial Crimes - Today's Fraud
and the 1913 Federal Reserve Act's Privatization of Money Creation
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- Most people think the Federal Reserve is a government
agency, subject to its control. It's sometimes mistakenly called a quasi-
governmental decentralized central bank to disguise its real identity
and purpose. Its Eccles building headquarters compounds the subterfuge.
Below it's stripped away.
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- The Federal Reserve is a private for-profit banking cartel.
Owned and run by major banks and Wall Street in each of its 12 Districts.
It was created and operates in violation of Article 1, Section 8 of the
Constitution that states that Congress alone shall have the power to create
money and regulate its value. In 1935, the Supreme Court ruled that Congress
cannot constitutionally delegate this power to another authority, but,
in fact it did.
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- On December 22, 1913, between 1:30 - 4:30 AM, the Federal
Reserve Act was shepherded through a special Congressional Conference
Committee. Then voted on and passed the next day. Two days before Christmas
with many members gone and most others with no time to read or consider
this momentous document.
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