- Danny Schechter is a media activist, critic, independent
filmmaker, and TV producer as well as an author of 10 books and lecturer
on media issues. Some call him "The News Dissector," and that's
the name of his popular blog on media issues. He's also the co-founder
of Media Channel.org that covers the "political, cultural and social
impacts of the media," and provides information unavailable in the
mainstream.
-
- Schechter's books include The More You Watch The Less
You Know, Plunder: Investigating Our Economic Calamity and the Subprime
Scandal, and his newest and subject of this review, The Crime of Our Time:
Was the Economic Collapse "Indeed, Criminal?"
-
- As a form of economic terrorism, indeed so says Schechter
and many others. Ellen Brown, author of Web of Debt, writes: Schechter
"establishes the crime's elements, identifies the players, and exposes
the weapons that have turned free markets into vehicles for mass manipulation
and control."
-
- More still, according to former high-level government
and Wall Street insider Catherine Austin Fitts in describing a "financial
coup d'etat" that includes inflating multiple market bubbles, pump
and dump schemes, naked short selling, precious metals price suppression,
and active market intervention by Washington and the Fed that lets powerful
insiders game the system, commit massive fraud, and be able to transfer
trillions of public wealth to themselves, then get open-ended bailouts
when the inevitable crisis surfaces.
-
- In his last book, Plunder, Schechter deconstructed one
element of the economy's financialization - the outlandish amounts subprime
lending, instrumental in inflating the housing bubble and the economic
crisis that followed.
-
- The Crime of Our Time is his latest attempt to explain
"the financial collapse as a crime story (and) the high status white-collar
crooks" who wreak havoc on "the lives of hundreds of millions
worldwide." He quotes from author and labor activist Jonathan Tasini
in his new book, The Audacity of Greed, saying:
-
- "Over the past quarter century, we have lived through
the greatest looting of wealth in human history." While an elite few
profited hugely, "the vast majority of citizens have lived through
a period of falling wages, disappearing pensions, and dwindling bank accounts,
all of which led to the personal debt crisis that lies at the root of the
current financial meltdown."
-
- The fallout cost millions of Americans their jobs, homes,
savings, and futures, the result of a Washington - Wall Street criminal
cabal and their scandalous conspiracy against the US public. In the Crime
of Our Time, Schechter, once again, does a superb job explaining it astutely,
thoroughly, and clearly.
-
- Introduction - Our Time and Financial Crime
-
- (1) In Wall Street We Trust
-
- Once again, the major media betrayed the public by cheerleading
the inflating market bubbles, ignoring the cause and Wall Street/Washington's
role, then downplaying the severity of the crisis that has a long way to
run. Instead their reasoning goes: "we are all to blame, guilty of
greed, over-spending and under-saving," so "when everyone's at
fault, no one can be held responsible."
-
- Yet capitalism's internal contradictions make it crisis-prone,
unstable, ungovernable, and self-destructive because of its repeated cycles
of booms creating bubbles, creating busts, then depressions, and inevitably
decay and demise.
-
- Initially, The New Times deflected attention by focusing
on human errors like "wild derivatives, sky-high leverage, (and) a
subprime surge," but avoided the core issue of white collar crime
and Washington's complicity in it. When it was too late to matter, columnists
like Bob Herbert wrote about financial "malefactors" who walk
away "with a suspended sentence, and can't wait to get back to their
nefarious activities." Where were they when it mattered most?
-
- Still today, the corporate media ignores the crime scene,
instead calling criminal bankers "egotistical jerk(s) as trapped as
anyone" in their own mess, as much victims as their prey.
-
- (2) Former Bank Regulator William Black Speaks Out
-
- Economics Professor William Black is a former senior
bank regulator and Savings and Loan prosecutor. In April 2009 interviews
in Barrons and with Bill Moyers on public television, he referred to "failed
bankers (advising) failed regulators on how to deal with failed assets"
they all conspired to create, proliferate, and use to defraud unwary buyers.
He explained that many failed banks were deliberately brought down, and:
-
- "The way that you do it is to make really bad loans,
because they pay better. Then you grow extremely rapidly, in other words,
you're a Ponzi-like scheme. And the third thing you do is" leverage
up. It's hugely profitable and "inevitable that there's going to be
a disaster down the road."
-
- Black explained it in his book, The Best Way To Rob A
Bank Is To Own One, especially in a lax regulatory environment under the
privately owned Federal Reserve and powerful financial giants that run
the government, not the other way around. They write the laws, make the
rules, install their people in top Washington posts, and get open-ended
bailouts and absolution when their scam implodes.
-
- In the 1930s, the Pecora Commission's Chief Counsel Ferdinand
Pecora noted how "Legal chicanery and pitch darkness were the banker's
stoutest allies." So weren't complicit government officials as well
as media commentators turning a blind eye to their crimes.
-
- (3) The Crime Wave Is Still With Us
-
- In an environment of lax regulation, a Wall Street owned
and operated Fed, the Treasury as their private piggy bank, a bipartisan
criminal culture in Washington, and corporate lobbyists taking full advantage
to get the best democracy their money can buy, it's little wonder that
the same dirty game persists because who cares enough to stop it.
-
- At the same time, millions of jobs are being lost. Home
foreclosures are at record highs. Next year's 2010 mortgage resets will
unleash a greater number, and ahead is the full impact of nationwide commercial
real estate defaults plus any number of new unpleasant surprises.
-
- Even so, little relief is in sight for beleaguered households
or for 48 of the 50 states under water from their budget crises. But according
to Fed Chairman Ben Bernanke, "the recession is very likely over at
this point (even though) it's still going to feel like a weak economy for
some time."
-
- (4) "The Biggest Crime In The World"
-
- That's what former Wall Street banker Nomi Prins told
Schechter when he interviewed her last December. "You're talking double-digit
trillions of dollars - minimum - already in the beginning of 2009, and
we are nowhere near done with finding out how much loss there really is."
-
- One estimate was $197.4 trillion, including "monies
lost, value depreciated, and money spent to try to stabilize the system....and
that (figure) may be low," yet it's incomprehensible. And getting
to the bottom of it through a modern-day Pecora Commission may duplicate
the 9/11 whitewash. According to economist Dean Baker:
-
- "Instead of striving to uncover the truth, (an investigation)
may seek to conceal it" and tell banksters they're free to steal again.
-
- (5) Insiders Wanted
-
- According to Schechter: "We need investigations
by insiders who know where the bodies are buried, and in many cases, not
yet" interred. We need more State Attorneys like Eliot Spitzer and
enough honest politicians to embrace them. We need proof of who's on the
take followed by "a jailout, not (another) bailout. We need to remember
Balzac's insight (that) 'Behind every great fortune lies a great crime,'
" in a culture where the only one is getting caught.
-
- The Madoff Moment
-
- In business since 1960, Bernard L. Madoff Investment
Securities LLC provided executions for broker-dealers, banks, and financial
institutions, and was one of the world's largest hedge fund managers, handling
billions of dollars for a select clientele that included banks, insurance
companies, other hedge funds, universities, charities, and numerous prominent
wealthy individuals.
-
- Madoff served as vice-chairman of the NASD, was a member
of its board of governors, and chairman of its New York region. He also
chaired the Nasdaq's board of governors, served on its executive committee,
and was chairman of its trading committee.
-
- In addition, he was chief of the Securities Industry
Association's trading committee in the 1990s and earlier this decade in
the same capacity when he represented brokerage firms in discussions with
regulators about new stock market trading rules. He was highly respected
and a pillar among his peers until the scam he created imploded.
-
- On December 11, 2008, he was revealed as a world class
swindler when federal agents arrested him for running a giant Ponzi scheme.
According to the FBI's Theodore Cacioppi:
-
- Madoff "deceived investors by operating a securities
business in which he traded and lost investor money, and then paid certain
investors purported returns on investment with the principal received from
other, different investors, which resulted in losses of billions of dollars."
-
- He was tried in federal court on charges of criminal
securities fraud, convicted, and, on June 29, 2009, sentenced to 150 years
in prison, the maximum under the law. In fact, his real crime was getting
caught, and for ripping off the rich and famous, his own kind, who welcomed
the steady high returns until what seemed too good to be true turned out
to be a scam.
-
- Section 4 of the Securities Exchange Act of 1934 established
the SEC to prevent them. It's mandated to enforce the Securities Act of
1933, the Trust Indenture Act of 1939, the 1940 Investment Company Act
and Investment Advisers Act, Sarbanes-Oxley of 2002, and the Credit Rating
Agency Reform Act of 2006. Overall, it's responsible for enforcing federal
securities laws, the securities industry, the nation's stock and options
exchanges, and other electronic securities markets. It's charged with uncovering
wrongdoing, assuring investors aren't swindled, and keeping the nation's
financial markets free from fraud.
-
- For years, there were suspicions about Madoff because
no one understood how his strategy produced annual double-digit returns.
The SEC was alerted but didn't act. Derivatives expert Harry Markopolos
wrote a report for internal SEC use listing 29 Red Flags and accused Madoff
of running a giant Ponzi scheme, to no avail.
-
- Wall Street takes care of its own, and even internal
SEC documents suggest that the agency is notorious for being lax, preferring
wrist-slaps alone, and nearly always against lesser players, not prominent
ones like Madoff or major Wall Street banks and investment firms.
-
- As a result, the agency doesn't regulate. Investigations
aren't conducted or are whitewashed. Criminal fraud goes undetected or
is swept under the rug. Little is done to prevent it, and only rarely are
figures like Madoff caught. Wall Street's criminal culture is in safe hands
under its new head, Mary Schapiro, a consummate insider with close ties
to the Street's rich and powerful, which is why she was chosen in the first
place.
-
- The White-Collar Prison Gang
-
- Even though felons like Enron's Jeffrey Skilling, Worldcom's
Bernie Ebbers, and Tyco's Dennis Kozlowski are in prison, corporate America's
criminal class is thriving, untouched, and mindful that very few of their
kind get caught.
-
- So far during the current economic crisis, not only are
most banksters unscathed, but they've been rewarded with trillions of taxpayer
dollars, interest-free Federal Reserve money, and an open-ended checkbook
for as much more as they want. Who said crime doesn't pay?
-
- The Crimes of Wall Street
-
- Schechter names many, including:
-
- -- "Fraud and control frauds;
-
- -- Insider trading;
-
- -- Theft and conspiracy;
-
- -- Misrepresentation;
-
- -- Ponzi schemes;
-
- -- False accounting;
-
- -- Embezzling;
-
- -- Diverting funds into obscenely high salaries and obscene
bonuses;
-
- -- Bilking investors, customers and homeowners;
-
- -- Conflicts of interest;
-
- -- Mesmerizing regulators;
-
- -- Manipulating markets;
-
- -- Tax frauds;
-
- -- Making loans and then arranging that they fail;
-
- -- Engineering phony financial products; (and)
-
- -- Misleading the public."
-
- Add to these:
-
- -- buying a controlling stake in Washington;
-
- -- assuring their own officials run the Treasury, Fed,
and all functions related to the economy and finance, including the regulatory
bodies; and
-
- -- writing laws and regulations that govern their industry
and activities.
-
- In Washington, what Wall Street wants, it gets. As a
result, financial fraud and other scams are thriving. According to the
Treasury Department's Financial Crimes Enforcement Network, over 730,000
instances of suspected wrongdoing, or 13% more than in 2007, including
a 23% rise in mortgage fraud to almost 65,000
- incidents.
-
- By the numbers, they amount to:
-
- -- $994 billion in 2008 losses or a median loss of $175,000;
-
- -- financial institutions or government agencies accounting
for 27% of the total; and
-
- -- an estimated 17 - 30 months elapse before a typical
scheme is detected.
-
- Examples include "shady lending practices....deepening
debt, exploiting customers, overcharging borrowers with arbitrary late
fees, and imposing other hidden costs that bilk consumers."
-
- Most getting caught get off with mere wrist slaps or
occasional fines amounting to a tiny fraction of the crimes, so it pays
to keep committing them. According to Law Professor and corporate crime
specialist John Coffee:
-
- "Any criminal prosecution....must show either a
specific intent to defraud or, what federal law calls, willfulness which
means a real intent to deliberately defraud someone and engage in misconduct
that you realize was causing injury."
-
- So if fraud is committed with good intentions, criminal
prosecutions won't follow, only civil ones can to redeem losses, and during
the Bush administration, the Justice Department sought cash settlements
most often to keep plaintiffs out of court. And over 60% of the relatively
few tried and convicted served only about two years on average in country
club prisons, and over one-fourth of them were never incarcerated.
-
- It's why year after year, "The beat goes on (as)
new scandals seem to surface daily....(yet) no sooner does one scandal
erupt (when) another threatens to push it out of the public eye,"
or another unrelated issue is manufactured like the phony Swine Flu crisis
tries to sweep them under the rug altogether. Sadly, it works because the
public is none the wiser and never catches on to what investigative journalist
IF Stone once explained:
-
- "All governments are run by liars, and nothing they
say should be believed." Or he simply said: "All governments
lie," usually about the most important issues affecting everyone.
-
- The Criminal Mind
-
- The new Con Artist Hall of Infamy web site explains the
art of the con, has a con watch, and lists current inductees, including
many prominent past and more recent figures like Bernie Madoff, Jeff Skilling,
Bernie Ebbers, and Conrad Black. But for everyone exposed, dozens more
get away with cooking the books, manipulating markets, profiting from insider
deals, selling toxic junk to unwary investors, and pocketing multi-millions
as their legitimate right. Why not, when regulators and law enforcement
are complicit in letting them.
-
- They use "every angle to persuade people to believe"
that their integrity is impeccable, their financial skills unmatched, and
their strengths include:
-
- -- "power & influence" because of friends
in high places;
-
- -- "charisma" to attract broad appeal; and
-
- -- "strong cover" for being a respected financial
community member.
-
- They flourish best free from regulatory oversight during
periods of economic prosperity and bull markets, or at least the illusion
that these conditions exist. Former convicted felon Sam Antar explained:
-
- "White-collar criminals are economic predators.
We consider you, humanity, as a weakness to be exploited in the execution
of our crimes. In order to commit (them), we have to increase your comfort
level (by) build(ing) walls of false integrity around us....We have no
respect for the laws. We consider your codes of ethics, your laws, weaknesses
to be exploited in the execution of our crimes."
-
- "You can't be prosecuted for being stupid. So all
white-collar criminals always try to play stupid. They don't want to show
intent. It's easier to say that this was a result of a mistake or an error
of judgment, than to say that I intended to, to victimize or defraud somebody.
It's relatively easy (and) the criminal element today is figuring out a
way to exploit it" because of so much easy money around for the taking.
-
- The Crime at the Heart of the Crime
-
- Embracing fraud is simple when so many people in high
places commit it, get away with it, and the few caught keep most of their
gains and pay a small price for them. Further, "The line between legal
and illegal can be a thin one or no line at all. It can also be complicated,
even hard for government to investigate and prosecute."
-
- Also, no widely accepted definition of economic crime
exists because intent is so hard to prove, and in a lax regulatory environment
no incentive to either, especially since unelected officials come from
sectors they administer, then recycle themselves back to high-paying jobs.
-
- Who Should Be Prosecuted?
-
- Considering the extensive amount of fraud and harm caused,
tough RICO prosecutions should be used the same as against organized crime
that call for harsh sentencing penalties for the guilty.
-
- More than ever today, the problem is endemic, the way
William Black explains about the pressures on CEOs to keep up with their
peers and generate impressive profits even if getting them means cooking
the books and committing fraud.
-
- He presented this paradigm in a public lecture:
-
- -- "Corporate governance fails. Power is delegated
to CEOs and collaborating members of management;
-
- -- External controls fail through the manipulation of
outside auditors and accounting firms as happened in the Enron and WorldCom
frauds;
-
- -- Rating agencies are co-opted and suborned through
conflicts of interest; (and)
-
- -- Regulation fails or is defanged with rules softened
or changed (through)
-
- (a) Deregulation
-
- (b) No regulation
-
- (c) Desupervision
-
- (d) Lobbying by Companies to undercut regulators which
is justified on ideological grounds as support for free markets (and)
-
- (e) Capture - What regulators there are (are) drawn from
the industry and share its outlook."
-
- The result has been the greatest ever transfer of wealth
from the many to an elite few that continues without missing a beat, and
why not. No one stops them. In fact, the current environment under Democrats
or Republicans lets them flourish.
-
- Whenever a systemic collapse occurs, old scams continue
and new ones emerge, always aimed at fleecing as much as possible from
the unwary.
-
- Investigating Financial Criminals
-
- Given the unprecedented amount of financial fraud, a
new independent Pecora Commission with teeth more than ever is needed
to root it out and hold the guilty accountable. But getting one is another
matter at a time Washington and Wall Street are co-conspirators with every
incentive to facilitate criminality and whitewash attempts to expose it.
-
- Nonetheless, economist Dean Baker lists questions needing
answers:
-
- -- asking financial executives under oath how they missed
the inflating housing bubble; and
-
- -- how they justify millions in compensation given the
crisis they were complicit in creating.
-
- However, getting straight answers will prove daunting
at best, and what government authority will demand them. Perhaps a "People's
Inquiry" can do better even with no teeth and no coverage by the dominant
media.
-
- Progressive web sites and online radio and television
can feature the results and get them to growing audiences. Not millions
but enough to spread the word and hope others pass it on.
-
- If economic deterioration deepens over an extended period
with millions more out of jobs, homes, savings and hope, then a public
outcry for prosecutions might be unstoppable. Even then, it's a long shot
but something worth watching.
-
- Predatory Subprime Lending
-
- According to Schechter, "subcrime over the years
got millions of families into mortgages they couldn't afford, and that
the lenders knew they couldn't sustain." Low teaser rates and financial
institutions' collusion facilitated it to cash in on the enormous profits,
then hang fleeced homeowners out to dry by unaffordable mortgage resets
and eventual foreclosures.
-
- According to the Center for Public Integrity, the largest
Wall Street banks backed 25 of "the sleaziest subprime lenders,"
including CitiGroup, Wells Fargo, JP Morgan Chase, and Bank of America.
Combined, they originated $1 trillion in toxic mortgages from 2005 - 2007,
nearly three-fourths of the total.
-
- Even worse, warnings a decade ago went unheeded, and
former insider Catherine Austin Fitts saw an earlier scam unfolding, brought
it to the attention of her GHW Bush administration superiors, and was told
to shut up and mind her own business.
-
- The idea was to pump as much money into the housing market
to scam buyers with fraudulent mortgages designed to fail. It was predatory
lending across the board with corporate CEOs of the top Wall Street firms
involved. In 2004, the FBI first warned of a "fraud epidemic,"
then later launched "Operation Malicious Mortgage" that charged
over 400 defendants, convicted 173 of crimes, but only accounted for around
$1 billion in losses, a tiny fraction of the total fraud, none committed
by major players, and that's the problem.
-
- A Financial Crimes Enforcement Network (FinCEN) April
2008 study mortgage fraud study found that "the total for mortgage
fraud SARs (suspicious activity report) filed reached nearly 53,000, an
increase of 42 percent" over 2007. The February 2009 report is even
worse at over 62,000 SARs, and filings increased 44% from the previous
year.
-
- Suspected crimes included:
-
- -- falsifying financial information, including fake accounting
entries, bogus trades to inflate profits or hide losses, and false transactions
to evade regulatory oversight;
-
- -- "self-dealing" through insider trading,
kickbacks, backdating executive stock options, misusing corporate property
for personal gain, and violating tax laws relating to "self-dealing"
that amounts to illegally taking advantage of insider positions; and
-
- -- obstruction of justice to conceal criminal conduct.
-
- According to the Center for Public Integrity (based on
the FBI's Mortgage Fraud Report), the same parties allegedly involved in
fraud also created the housing crisis. On July 30, the Wall Street Journal
reported that the Senate launched an investigation and subpoenaed leading
financial institutions believed to be involved. But given how these investigations
go, it's unlikely to expect much, let alone top executives publicly exposed
and later prosecuted.
-
- The Victims Are Everywhere
-
- Besides millions of defrauded homeowners, the big money,
according to former insider Nomi Prins, came from leveraging. She explained:
-
- "The (big) money was made because several layers
up a pyramid, Wall Street investment firms and commercial bank investment
groups decided to repackage these mortgages, create layers of them, that
they then resold to investors." They leveraged up 30 times or more
"against those (toxic) layers, which is the real crime" and
sold the junk to unwary buyers knowing that most of it would default. Adding
layers of high-risk credit default swaps greatly compounded the problem
that ballooned into many trillions of dollars of bad assets.
-
- Witnesses for the Prosecution
-
- Schechter interviewed many homeowners who explained how
they were conned and the devastating effect on their lives. According to
one:
-
- "I'm a person (who's) trying to save my house. I'm
in foreclosure right now. I feel like someone's hand is in my pocket, and
I just want a fair break, a fair shake at the American dream."
-
- Millions had it stolen by willful fraud and deception,
capitalizing on their "low level of financial literacy" to pull
off the most egregious mortgage abuses, and most often get away with them.
-
- Wall Street Complicity
-
- The big players are the smartest, most devious, and best
able to reap the greatest profits knowing that regulators and prosecutors
won't touch them, so why worry.
-
- According to economist Max Wolff:
-
- The securitization process worked by "packag(ing),
sell(ing), repack(aging) and resell(ing) mortages making what was a small
housing bubble, a gigantic (one) and making what became an American financial
problem very much a global" one by selling mortgage bundles worldwide
"without full disclosure of the lack of underlying assets or risks."
-
- Buyers accepted them on good faith, failed in their due
diligence, and rating agencies were negligent, even criminal, in overvaluing
and endorsing junk assets that they knew were high-risk or toxic. "The
whole process was corrupt at its core."
-
- According to political scientist Ben Barber:
-
- "Capitalism has sort of gone off the rails. It ceased
to be capitalism - it's financialization. The fact that it's now all about
speculation, the fact that it's about Ponzi schemes, the fact that it's
about selling and buying paper," not producing real products with
real worth for a real purpose, the essence of industrial capitalism.
-
- The Insurers
-
- AIG was the most prominent, but the industry was complicit
overall, including through "credit default swaps to protect themselves
against defaults" they knew were most likely would happen because
the assets they insured were junk. In addition, hedge funds were "also
a pit of fraud," and according to William Black:
-
- Toxic junk "was created out of things like liars'
loans, which were known to be extraordinarily bad. And now it was getting
triple-A ratings....mean(ing) there is zero risk. So you take something
that not only has significant risk, it has crushing risk. That's why it's
toxic. And you create this fiction that is has zero risk. That itself,
of course, is a fraudulent exercise. Again, there was nobody looking during
the Bush years."
-
- The result was "a 50-state-Katrina blast(ing) through
America" causing millions of homeowner defaults, while criminal financiers
prospered through massive securities fraud and racketeering.
-
- According to economist Michael Hudson, it let the top
1% of the population raise their wealth level from 30% 10 years ago to
57% five years ago to almost 70% today. "It's unprecedented,"
he said (and) makes America look like a third world banana republic."
-
- The Conspiratorial Role of the Media
-
- They profit mainly through advertising revenue, and much
of it comes from the FIRE industry (finance, insurance, and real estate).
Newspapers especially depend heavily on real estate ads in weekend supplements
and daily classified sections. In some communities, local broadsheets are
the virtual "marketing arm of the real estate industry" so they
have every incentive to ignore practices easily identified as fraudulent.
-
- Overall, the media "politicized the problem....rarely
acknowledging their laziness and superficial coverage." When it was
too late to matter, they admitted irresponsibility but only asked questions
like why didn't we see this coming. They did but failed to report it. As
long as the economy appeared prosperous and big profits continued, why
rock the boat? Why ask tough questions when it's easier saying nothing?
Why risk offending bosses and jeopardizing careers? Why practice real journalism
when the fake kind is demanded and rewards for it much greater?
-
- Warnings Ignored
-
- According to Washington Post columnist Robert Samuelson
and others, most economists as well as journalists got it wrong, or more
accurately didn't try to get it right.
-
- Law Professor Linda Beale was unsympathetic in saying
professional economists helped cause the crisis, didn't see it coming,
and don't know how to fix it. Too few even try because they're paid by
the industry, (or related ones), that engineered the fraud, profited hugely
from it, and need professionals to trumpet successes and hide scams.
-
- As a result, dissenting voices were silenced. Denial
was the order of the day, and as long an emerging crisis wasn't evident,
why sound the alarm when it's much easier and safer playing along.
-
- Yet "One didn't have to be an expert to see the
warning signs (that) led to a massive market meltdown, a collapse of the
subprime mortgage market, bankruptcies by the leading financial lenders,
billions of dollars in losses by top banks and financial lenders, and prediction
of more pain to come for millions of Americans facing foreclosures"
plus more job losses than at any time since the 1930s.
-
- But you'd never know it from the public media discourse
that cheerlead the scam until it imploded. Or as former activist and academic
Alex Carey might have said - corporate propaganda protected Wall Street
predators from the truth.
-
- The Bear Stearns "Bleed Out"
-
- The 85-year old Wall Street firm was the first major
one to fail, and "Its stockholders would eventually be wiped out in
what was described as the first government bailout." Many others,
of course, followed with perhaps more to come once the next leg of the
crisis begins.
-
- Writing in Vanity Fair about Bear Stearns, Bryan Burroughs
said there was never "anything on Wall Street to compare to it: a
'run' on a major investment bank, caused in large part not by a criminal
indictment or some mammoth quarterly loss but by rumor and innuendo (that)
had little basis in fact."
-
- The questions are why, cui bono, and did the firm fall
or was it pushed, even though like others on the Street it took huge risks
that could backfire in hard times. But there was more going on than reported.
"There were forces at work here that suggest illegal activities on
a number of levels."
-
- The firm was also independent enough to rile competitors,
perhaps some arranging for it to fail, and if it did, they'd profit hugely
through greater consolidation for larger market shares. So by some accounts,
it was targeted by naked short selling, rumors of a liquidity problem at
a time it was adequately capitalized, and heavy put option buying to sink
its stock price and drive the company to the wall in a matter of days.
It gave JP Morgan Chase a chance to buy it at a tiny fraction of its peak
valuation, or in other words, profit hugely from a vulture purchase arranged
by the Fed.
-
- In short order, Lehman Bros., Merrill Lynch, and other
noted firms failed, giving Wall Street survivors like Goldman Sachs, JP
Morgan Chase, Citigroup, and Bank of America more power than ever.
-
- The Lehman Liquidation
-
- In asking "Did Lehman Brothers Fall or Was It Pushed,"
Ellen Brown quoted author Lawrence MacDonald saying the company was in
no worse shape than other major Wall Street banks, so he concluded that
Lehman was "put to sleep. They put the pillow over (its) face and
they put her to sleep." But why is key.
-
- Schechter quoted economist Michael Hudson blaming CEO
Dick Fuld saying:
-
- "Lehman Brothers essentially committed suicide.
Its head, Mr. Fuld, had many offers from Korea and from investment banks
in the US to take it over. He tried to bluff them. He tried to say, "Crisis?
What crisis? Our loans are perfectly good. We haven't lost a penny. We
want you to pay at the book value of what we say our loans are worth."
-
- But no one believed it, and why should they. "These
are guys who like to wipe out their partners, like to wipe out people they
are doing business with. He (f'd) the whole firm and wiped out the shareholders
(saying) 'We're too big to fail.' " Was Fuld complicit in a deliberate
scheme to bring down Lehman, and if so why?
-
- Apparently, he profited hugely, and so did the Street
by removing a key competitor. First Bear Stearns, then Lehman. According
to Brown:
-
- "Although Lehman Brothers filed for bankruptcy on
Monday, September 15, 2008, it was actually 'bombed' on September 11"
when it was hit by the "biggest one-day drop in its stock" the
result of manipulative naked short-selling and apparent sabotage to prevent
the company from negotiating a deal to be bought. The UK-based Barclays
Bank was interested and was willing to underwrite Lehman's debt.
-
- But as Brown explained:
-
- It "needed a waiver from British regulators of a
rule requiring shareholder approval. (However,) UK Chancellor of the Exchequer
Alistair Darling" stonewalled long enough to prevent it. He did the
same thing with Britain's Northern Rock and "changed the rules of
the game" by opening the spigot in both countries for open-ended bailouts
for banks too big to fail.
-
- Again, why so and cui bono? It "suggests that Lehman
Brothers (Northern Rock and others) did not just fall over the brink but
(were) pushed." The likely reasons were to engineer the financial
crisis, create an emergency, pressure Congress (and the UK government)
to provide billions in rescue funding, give selected major banks in both
countries more power to consolidate, then use bailout proceeds to buy choice
assets on the cheap plus reward themselves handsomely for their cleverness.
-
- It's not new with numerous past examples of predatory
bankers, including JP Morgan, engineering financial crises for profit.
The difference is that today the stakes far higher and global with US giants
Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, Wells Fargo,
and Morgan Stanley the major survivors - bigger and more powerful than
ever, and so far thriving with open-ended bailouts.
-
- Ellen Brown adds:
-
- "The international bankers who caused the financial
crisis are indeed capitalizing on it, consolidating their power in 'a new
global financial order' that gives them (more) top-down global control"
than ever with the public exploited and stuck with the bill.
-
- Are Our Markets Manipulated?
-
- Forget about "animal spirits," random movements,
and asset prices reflecting true values, and understand that all markets
are manipulated up and down for profit with insiders profiting hugely both
ways.
-
- Catherine Austin Fitts calls it a "pump and dump"
scheme to artificially inflate valuations, then profit more on the downside
by short-selling. "The practice is illegal under securities law, yet
it is particularly common" because the gains are enormous, in good
and bad times. When carried to extremes, Fitts calls it "pump(ing)
and dump(ing) of the entire American economy," duping the public,
fleecing trillions, and it's more than just "a process designed to
wipe out the middle class. This is genocide (by other means) - a much more
subtle and lethal version than ever before perpetrated by the scoundrels
of our history texts."
-
- The so-called Plunge Protection Team is one of the tools,
authorized on March 18, 1989 under Ronald Reagan's Executive Order 12631
creating the Working Group on Financial Markets (WGFM) with top government
officials, including the President, Treasury Secretary and Fed chairman
in charge.
-
- It subverts market forces by theoretically intervening
to avoid crises. In fact, it works both ways to drive valuations up or
down along with active insider participation for huge profits with the
public none the wiser.
-
- Schechter explains that "this secret branch of government
has a sophisticated war room, using every state of the art technology to
monitor markets worldwide. It has emergency powers. It doesn't keep minutes.
There is no freedom of information access to its deliberations." Google
has 147,000 entries about it, but only 10 can be accessed, so the most
secretive shenanigans are hidden along with the role of the Fed, the Treasury,
and the White House.
-
- Established by the 1934 Gold Reserve Act, the Treasury-run
Exchange Stabilization Fund (ESF) originally operated free from congressional
oversight "to keep sharp swings in the dollar's exchange rate from
(disrupting) financial markets" through manipulation. Its operations
now include stabilizing foreign currencies, extending credit lines to foreign
governments, and more recently guaranteeing money market funds against
losses of up to $50 billion. Overall, the ESF is a slush fund for Treasury
officials to use as they wish and manipulate markets freely.
-
- Established in 1999 after the Long Term Capital Management
(LTCM) crisis, the Counterparty Risk Management Policy Group (CRMPG) manipulates
markets to benefit giant Wall Street firms and their high-level insiders.
It lets financial giants collude through large-scale program trading to
move markets up or down. It bails out members in financial trouble, and
manipulates markets short or longer-term with government complicity and
approval to go either way for huge profits on stocks, bonds, commodities,
currencies, futures, options, and an array of speculative vehicles like
structured assets and derivatives. Market manipulation enriches insiders
at the expense of the unwary, often fleeced by their chicanery.
-
- The Testosterone Factor
-
- Schechter wonders how different things might have been
if "the Sheriff of the Street," Eliot Spitzer, hadn't been caught
in a sex scandal and forced to resign as Governor. Two days before being
outed in testimony before Congress and in a Washington Post op-ed, he accused
the Bush administration of being a "partner in crime" with predatory
lenders. He wrote:
-
- "Several years ago, state attorneys general and
others involved in consumer protection began to notice a marked increase
in a range of predatory lending practices by mortgage lenders."
-
- "Not only did the Bush administration do nothing
to protect consumers, it embarked on an aggressive and unprecedented campaign
to prevent states from protecting their residents from the very problems
to which the federal government was turning a blind eye."
-
- However, his comments were quickly buried, then forgotten
after his sex scandal erupted, even though it's widely known that well-healed
Wall Street and other corporate types have "kept a vibrant, upscale
sex industry" thriving. What Schechter calls the "testosterone
factor" is brought on by what experts call a sense of exuberance,
a feeling of infallibility, and a sense of entitlement to engage in risky
behavior, including with high-paid prostitutes. It's the same euphoria
gamblers feel when winning. They get addicted to the action and can't stop.
-
- The Role of Regulators and Politicians
-
- Wall Street predators profited hugely with complicit
help from regulators, politicians, and prosecutors. Further, "The
financialization (of the economy) did not just happen; it was engineered,
projected as socially beneficial 'modernization' and innovation" at
the same time industrial capitalism was eroding because operations were
offshored to cheap labor markets.
-
- Financialization is ripe for plunder and fraud under
a system favoring bigness, lax regulations, prosecutorial weakness, and
FIRE sector companies and high-powered lobbyists' influence buying from
criminally complicit politicians.
-
- They got:
-
- -- Glass-Steagall repealed;
-
- -- the Commodity Futures Modernization Act that licensed
high-risk derivatives speculation;
-
- -- off-balance sheet accounting chicanery to hide financial
liabilities;
-
- -- the SEC letting investment banks be self-regulating;
-
- -- an overall regulatory climate conducive to widespread
fraud and abuse;
-
- -- new rules to let commercial banks determine their
own capital reserve requirements;
-
- -- federal bank regulators empowered to supersede state
consumer protection laws, thus facilitating predatory lending;
-
- -- new federal rules preventing victims of abusive loans
from suing firms that bought them from issuing banks;
-
- -- antitrust laws weakened or abandoned and the door
opened to "too-big-to-fail megabanks," and
-
- -- much more, creating opportunities for the worst kinds
of fraud and abuse with virtually no government oversight to stop it.
-
- Worse still, it persists under Obama in more extreme
forms with plans for greater global reach and dominance creating new opportunities
for plunder. According to Michael Hudson, "It looks as if as little
will be done to (curb) financial fraud as will be done to the Guantanamo
torturers and the high-ups who condoned their actions."
-
- Or as Schechter explains:
-
- "Is economic justice even possible under circumstances
riddled with so many banksters still in charge and tangled up in so many
conflicts of interest? In this environment, can we look forward to any
serious fraud or prevention effort, much less a mass prosecution?"
-
- That said, can reckless speculation be halted or will
it continue unabated, followed by greater boom and bust cycles until the
entire system implodes in an inevitable collapse after which no recovery
is possible and most people are left impoverished and on their own because
government did nothing to stop it.
-
- Judgment Day
-
- On September 15, Bloomberg News quoted Fed chairman Ben
Bernanke saying "....from a technical perspective the recession is
very likely over at this point...." The dominant media agree, with
commentators like CNN's Lou Dobbs stating months ago that the economy was
improving and the recession would soon end. Others disagree, including
former insider Nomi Prins saying:
-
- "This economic cycle is not finished going downward.
We are in the beginning of 2009. We've seen a decimated 2008. It's not
getting better anytime soon."
-
- According to economist Max Wolff:
-
- "Sadly there is evidence that we're going to flush
our tax dollars and our opportunity down the toilet to rebuild an unfair
system that rewarded only the top at the expense of everybody and was fundamentally
unsound."
-
- Longtime market analyst Bob Chapman sees no recovery
ahead "even with an official $23.7 trillion committed by the Treasury
and the Fed....(Yet) we hear fairy tales of recovery in the US, Europe
and Asia." Chapman sees the worst of times ahead and many dark years
before returning to normality.
-
- Leading monetary analyst Professor Tim Congdon explains
that money and credit in America have been contracting at a pace comparable
to the Great Depression. "There has been nothing like this in the
USA since the 1930s. The rapid destruction of money balances is madness."
-
- Economist David Rosenberg is also worried because "For
the first time in the post-WW2 era, we have deflation in credit, wages
and rents and, from our lens, this is a toxic brew."
-
- Worse still, Wall Street is more powerful and rapacious
than ever. Speculation remains unabated. New bubbles are being inflated
with a "whole new wave of criminal" fraud, according to investigative
journalist Gary Weiss. Even so, top financial officials have escaped prosecution.
Instead, beleaguered households have been hung out to dry, while meaningful
reforms aren't coming because "financial sector lobbies appear stronger
than ever." As a result, business as usual continues accompanied by
the kind of Washington and media cheerleading we've grown accustomed to
hearing.
-
- Absent is any concern for the common good when more than
ever the business of America is big business with a strategic long-term
plan for co-opting world governments, waging permanent wars for profit,
dominating everywhere militarily, ending social safety net protections,
crushing civil liberties and freedom, tolerating no concern for human rights,
controlling global markets and resources, turning workers everywhere into
serfs, and extracting, unimpeded, as much public wealth as possible.
-
- That's America's future with no simple solutions in sight.
Yet more than ever the old order must be stopped or a far greater calamity
is coming than The Crime of Our Time.
-
- Stephen Lendman is a Research Associate of the Centre
for Research on Globalization. He lives in Chicago and can be reached at
<mailto:lendmanstephen@sbcglobal.net>lendmanstephen@sbcglobal.net.
-
- Also visit his blog site at sjlendman.blogspot.com and
listen to The Global Research News Hour on RepublicBroadcasting.org Monday
- Friday at 10AM US Central time for cutting-edge discussions with distinguished
guests on world and national issues. All programs are archived for easy
listening.
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