- And I sincerely believe, with you, that banking establishments
are more dangerous than standing armies; and that the principle of spending
money to be paid by posterity, under the name of funding, is but swindling
futurity on a large scale.
- Thomas Jefferson to John Taylor, May 28, 1816 (via
Library of Congress)
- Well, this takes the cake. Prior to the revelations of
this week, your humble editor was 95% convinced. Now he is 100% convinced...
Washington and Wall Street are run (and overrun) by evil clowns, and the
country is too bored or bamboozled to care.
- When asked what kind of government the new nation had,
Ben Franklin reportedly replied: "A republic, if you can keep it."
Given the evidence mounting all around, it now seems reasonable to openly
doubt whether we can keep it. America has sold its birthright as a nation
for a mess of pottage. We have sold it to a bunch of greedy jackal banksters,
no less, in exchange for the idiotic assurance that trees can grow to the
sky and nothing ever has to change.
- Ah well. As Bertrand De Jouvenal observed, "A society
of sheep must in time beget a government of wolves." Mayhap time has
simply caught up with us.
- What brings upon this sudden outburst, you ask? A confluence
of things. Let's see, where to start...
- Fire Volcker?
- In mid-July, Taipan Daily spoke out on "The Unconscionable
Muzzling of Paul Volcker." Why was the great man nowhere to be found?
A quick excerpt:
- We here at Taipan Daily have no special dispensation
as to why the meatheads in Washington do what they do.
- But we do have the ability to make an educated guess
or two... and the guess here is that Volcker wound up getting railroaded.
It's a good bet that Volcker made the mistake (if one could call it a mistake)
of being too forthright in his views not willing enough to "play
ball" as it were.
- You see, the White House finance team is dominated by
a Wall Street mentality. So dominated, in fact, that insider culture permeates
the place like the smell of trout guts in a fish market.
- One can see this (or rather smell this) in observing
team Obama's top financial pitchmen, Tim Geithner and Larry Summers. As
president of the New York Fed, Geithner was a creature of Wall Street,
bought, sold and paid for, from day one. Even the staid New York Times
has called out Turbo Timmy, noting his exceptional "reliance on bankers,
hedge fund managers and others."
- In recent days, Volcker got himself in trouble for speaking
out yet again. The marginalized giant is still getting no respect
and he is getting fed up. The solution? Start making noise off the record
a lot of noise if need be.
- Last week, The New York Times reports, Volcker said that
"the Obama administration's proposed overhaul of financial rules would
preserve the policy of 'too big to fail' and could lead to future banking
bailouts." Ouch! Who dares throw cold water on the men who walk the
corridors of power? Volcker, that's who!
- Further speaketh Volcker at a financial conference in
Los Angeles: "I do not think it reasonable that public money
taxpayer money be indirectly available to support risk-prone capital
market activities simply because they are housed within a commercial banking
- And then, in a wide-ranging Charlie Rose interview this
week, Volcker strayed from the party line even further: "We can't
just pump up consumption and pump up housing again. Might pad us for a
year or two, but it's imbalance that got us in trouble in the first place..."
- And on commercial mortgages: "The single [biggest]
threat in the credit area right now is commercial mortgagescommercial real
estate's in trouble taking the loss and recognizing loss has only just
- And Wall Street's response? Fire the guy! After the Charlie
Rose interview, someone atBrown Brothers Harriman (which, incidentally,
bills itself as "the oldest and largest partnership bank in America")
responded with a snide commentary titled "Why Volcker Should Be Fired."
- The "Why Volcker Should be Fired" commentary
has since been mysteriously removed from the bbh.com Web site. (The saved
link now returns a blank page; Google search evidence remains.) Prior to
its disappearance, the scornful author chided Volcker for not being "fired
with enthusiasm" [sic] over the administration's Neville-Chamberlain-like
strategy of securing financial peace in our time. Volcker is not towing
the party line, the BBH scribe all but whined. "He is doing a disservice
to the administration and the country."
- So this is what it comes to. The only sane person with
thecojones to challenge the blatant appeasement of Wall Street gets the
sound of crickets... and dark mutterings from banking shills over how he
should be fired for not playing ball.
- Give us our bread and circuses, our stimulus-driven rallies,
our morphine shots of massaged government data! And banishment to those
- Ken, Hank and Lloyd
- In another sordid bit of news, Ken "Pig in a Poke"
Lewis the hapless Bank of America CEO has announced he will
step down at the end of this year. (It isn't clear why Lewis has finally
chosen to throw in the towel, but some suspect a forthcoming SEC lawsuit.)
- So is this an example of just desserts? A megabanker
laid low, finally getting what he deserves? Nah.
- To make a Godfather analogy, Ken Lewis strikes your editor
as a bit like Fredo Corleone. He was one of the bankster "family,"
but a bit of an annoying screw-up who had to be taken out. The whole Merrill
Lynch debacle was flat-out embarrassing, not to mention Lewis' off-the-cuff
mutterings a violation of banksteromerta about pressure from
"inside" (i.e. Fed and Treasury) to make the deal happen.
- Putting a "hit" on a high-ranking family member
is never easy. There are always complications involved. But as with the
weak and disloyal Fredo, Lewis had to be dealt with.
- To get a sense of how the megabanker "family"
dynamic really works, check out the relationship between Hank and Lloyd.
(That would be Hank Paulson, former Treasury Secretary and Goldman Sachs
CEO, and Lloyd Blankfein, the current Goldman Sachs CEO.)
- In a bit of laudatory detective work, John Crudele of
the New York Post got ahold of phone records showing the extraordinary
number of calls made between Hank Paulson and Lloyd Blankfein in the dark
days of September 2008.
- On Wednesday, Sept. 17, the day the stock market was
in trouble, Paulson spoke with Blankfein five times, including a pair of
calls at 7:20 p.m. and 8:45 p.m. One of the earlier calls at 12:15
p.m. is listed on Paulson's log in the same five minute interval
as a call to Geithner, which could indicate that this was a conference
- If Paulson did set up a conference call, it would have
been an extreme instance of putting someone who wielded a lot of power
Geithner together with someone Blankfein who could
profit from that connection.
- And all of this doesn't include possible cell phone calls.
The Treasury turned over to me Paulson's official schedule and phone records
after I made a request under the Freedom of Information Act...
- Goldman has well and truly earned the "Government
Sachs" nickname. Now we find out that, not only does Goldman benefit
from extensive "soft" influence by way of having staff interspersed
up and down the Washington food chain... it also benefits from "hard"
influence of the hardest kind, namely, direct phone calls from a top Treasury
official, even as the market gyrates wildly in anticipation of the Fed
and Treasury's next move.
- Maybe it's time we took up a tongue-in-cheek suggestion
from Marc Faber. Why not just outsource the running of the U.S. Fed and
Treasury to Goldman Sachs entirely? At least then we could do away with
pretense and just recognize the situation for what it is.
- Socialist Mortgage Holders Unite
- Want yet more evidence that our beloved republic is swirling
down the financial drain? Take a look at this chart (courtesy of chrismartenson.com)
depicting mortgage-backed securities purchased by the Fed:
- View larger image here
- As Martenson observes (underscore emphasis mine),
- ...the Federal Reserve alone bought $722 billion of mortgages
and agency debt when only $686 billion in new mortgages were issued. So,
through August, the Fed bought more than 100% of the entire supply of new
(purchase) mortgages in 2009.
- That's not a free housing market; that's a market bought,
owned, and sustained by the Federal Reserve's willingness to print up three
quarters of a trillion dollars out of thin air.
- Folks, the government is no longer just propping up the
housing market; the government IS the housing market. What are we going
to do, pray tell, when this taxpayer-funded support is withdrawn? How are
we going to handle the downpour of "shadow housing inventory"
currently held back from the market, as bankers and builders unload foreclosed
and distressed properties in waves over the next five years? Perhaps we
could inflate the new homebuyer tax credit from $8,000 to $150,000, tack
the cost onto the national debt, and just monetize the whole kit and caboodle?
Heck, what's another 10 trillion among friends?
- As Einstein once said, "No problem can be solved
from the same level of consciousness that created it." As Einstein
also said, "There are only two things that are infinite, the universe
and human stupidity and I'm not sure about the former."
- The United States government is so utterly dunderheaded,
these high-minded bureaucrats actually believe our problems can be solved
by doing even more of what was done before. Wunderkind Obama advisor Larry
Summers, recognized to be one of the most condescendingly arrogant people
on the planet, actually spelled this out a few months ago in a speech to
his fellow eggheads.
- And speaking of which (doing more of what we did before)....
- Thanks to 15 words in SEC Code 77f, you could pocket
$18,187 from thousands of corporate â¤slush fundsâ¤ù
- Most people donâ¤t even know it existsâ¤õ
But on page 24, paragraph 1, of SEC Code 77f, there is a 15-word phrase
that gives you the 100% legal right to dip into more than 3,000 corporate
- Start today, and you could be on your way to $18,187
as you read this.
- Toxic Waste Redux
- Perhaps the craziest, the most insane, the most stupefyingly
stupid thing that crossed your editor's desk this week was a piece titled
"Wall Street Wizardry Reworks Mortgages." AsThe Wall Street Journal
- A new wave of financial alchemy is emerging on Wall Street
as banks and insurers seek to make soured securities look better. Regulators
are pushing back, saying the transactions don't have enough substance and
stand to benefit bankers and ratings firms.
- The deals come as Wall Street firms, buoyed by surging
markets, are seeking to profit from the unwinding of the complicated securities
that helped fuel the credit crisis. Regulators, meanwhile, are struggling
to prevent a recurrence of the crisis.
- The popular deals are known as "re-remic,"
which stands for resecuritization of real-estate mortgage investment conduits.
The way it works is that insurers and banks that hold battered securities
on their books have Wall Street firms separate the good from the bad. The
good mortgages are bundled together and create a security designed to get
a higher rating. The weaker securities get low ratings.
- The net result is financial firms' books look better
and they need to hold less capital against those assets, even though they
are the same assets they held before the transaction...
- And here is the WSJ's nifty graphic:
- View larger image here
- Upon reading that excerpt and perusing the graphic, one
has to ask: "Gee, why does this sound familiar?"
- Maybe because this "new wave of financial alchemy"
is just like the "old" wave of financial alchemy that nearly
BLEW UP THE GLOBAL ECONOMY.
- Among other things, the financial crisis was caused by
far too much leverage, backed by far too little capital, in pursuit of
casino-style profits on "triple-A" rated securities that were
actually toxic junk.
- And now, barely a year on from the blow-up... not even
twelve months from the fall-out... the banksters are bound and determined
to light the same stick of dynamite all over again!
- Have we learned nothing? Absolutely nothing?
- No, maybe it's even worse than that. Maybe what the banksters
have learned is that Washington will come to their rescue no matter what...
and that in terms of concentrating power in the hands of the "family,"
i.e. the connected megabanks at the top of the power structure, the whole
crisis deal actually worked out pretty good... so why not just keep pressing,
showing contrition on the surface even while robbing taxpayers blind, given
that further crisis might simply concentrate power even more... as the
American republic in its noble entirety is recast as a bloated cash cow
to be milked dry, a plaything "of the bankers, by the bankers and
for the bankers," that oligarchy might not perish from the Earth.
- Warm Regards,