no empire can survive being rendered a permanent
laughingstock
Highlighted by
tazz19
The global economic crisis isn't about money - it's about power.
Highlighted by
kenlefeb
The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution
Highlighted by
chrishp
The latest bailout came as AIG admitted to having just posted
the largest quarterly loss in American corporate history —
some $61.7 billion. In the final three months of last year, the
company lost more than $27 million
every hour. That's
$465,000 a minute, a yearly income for a median American household
every six seconds, roughly $7,750 a second. And all this happened
at the end of eight straight years that America devoted to
frantically chasing the shadow of a terrorist threat to no avail,
eight years spent stopping every citizen at every airport to search
every purse, bag, crotch and briefcase for juice boxes and
explosive tubes of toothpaste. Yet in the end, our government had
no mechanism for searching the balance sheets of companies that
held life-or-death power over our society and was unable to spot
holes in the national economy the size of Libya (whose entire GDP
last year was smaller than AIG's 2008 losses).
Highlighted by
kenlefeb
And all this happened
at the end of eight straight years that America devoted to
frantically chasing the shadow of a terrorist threat to no avail,
eight years spent stopping every citizen at every airport to search
every purse, bag, crotch and briefcase for juice boxes and
explosive tubes of toothpaste. Yet in the end, our government had
no mechanism for searching the balance sheets of companies that
held life-or-death power over our society and was unable to spot
holes in the national economy the size of Libya (whose entire GDP
last year was smaller than AIG's 2008 losses).
Highlighted by
greenup
in the end, our government had
no mechanism for searching the balance sheets of companies that
held life-or-death power over our society and was unable to spot
holes in the national economy the size of Libya (whose entire GDP
last year was smaller than AIG's 2008 losses).
Highlighted by
jrstoltz
Yet in the end, our government had
no mechanism for searching the balance sheets of companies that
held life-or-death power over our society and was unable to spot
holes in the national economy
Highlighted by
chrishp
So it's time to admit it: We're fools, protagonists in a kind of
gruesome comedy about the marriage of greed and stupidity.
Highlighted by
kenlefeb
we still
think this is some kind of unfortunate accident
Highlighted by
kenlefeb
something that
was created by the group of psychopaths on Wall Street whom we
allowed to gang-rape the American Dream
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
It wasn't just Wall Street. It was born in Washington; Wall Street was just a tool.
on 2009-03-23 by
tazz19
Excellent point!
It seems that there is no effective difference between them.
Liddy made AIG sound like an orphan begging in a soup line,
hungry and sick from being left out in someone else's financial
weather. He conveniently forgot to mention that AIG had spent more
than a decade systematically scheming to evade U.S. and
international regulators, or that one of the causes of its
"pneumonia" was making colossal, world-sinking $500 billion bets
with money it didn't have, in a toxic and completely unregulated
derivatives market.
Highlighted by
jrstoltz
a huge chunk of
your taxpayer dollars in this particular bailout scam will be going
to pay off the other high rollers at its table
Highlighted by
kenlefeb
People are pissed off about this financial crisis, and about
this bailout, but they're not pissed off enough. The reality is
that the worldwide economic meltdown and the bailout that followed
were together a kind of revolution, a coup d'état. They
cemented and formalized a political trend that has been snowballing
for decades: the gradual takeover of the government by a small
class of connected insiders, who used money to control elections,
buy influence and systematically weaken financial regulations.
Highlighted by
shklepesch
The crisis was the coup de grâce: Given virtually free
rein over the economy, these same insiders first wrecked the
financial world, then cunningly granted themselves nearly unlimited
emergency powers to clean up their own mess. And so the
gambling-addict leaders of companies like AIG end up not penniless
and in jail, but with an
Alien-style death grip on the
Treasury and the Federal Reserve — "our partners in the
government," as Liddy put it with a shockingly casual
matter-of-factness after the most recent bailout.
Highlighted by
cburell
The reality is
that the worldwide economic meltdown and the bailout that followed
were together a kind of revolution, a coup d'état. They
cemented and formalized a political trend that has been snowballing
for decades: the gradual takeover of the government by a small
class of connected insiders, who used money to control elections,
buy influence and systematically weaken financial regulations.
Highlighted by
kenlefeb
The reality is
that the worldwide economic meltdown and the bailout that followed
were together a kind of revolution, a coup d'état. They
cemented and formalized a political trend that has been snowballing
for decades: the gradual takeover of the government by a small
class of connected insiders, who used money to control elections,
buy influence and systematically weaken financial regulations.
Highlighted by
chrishp
Given virtually free
rein over the economy, these same insiders first wrecked the
financial world, then cunningly granted themselves nearly unlimited
emergency powers to clean up their own mess.
Highlighted by
kenlefeb
The mistake most people make in looking at the financial crisis
is thinking of it in terms of money
Highlighted by
jrstoltz
But if you look at it in purely
Machiavellian terms, what you see is a colossal power grab that
threatens to turn the federal government into a kind of giant Enron
— a huge, impenetrable black box filled with self-dealing
insiders whose scheme is the securing of individual profits at the
expense of an ocean of unwitting involuntary shareholders,
previously known as taxpayers.
Highlighted by
kenlefeb
The mistake most people make in looking at the financial crisis
is thinking of it in terms of
money, a habit that might
lead you to look at the unfolding mess as a huge bonus-killing
downer for the Wall Street class. But if you look at it in purely
Machiavellian terms, what you see is a colossal power grab that
threatens to turn the federal government into a kind of giant Enron
— a huge, impenetrable black box filled with self-dealing
insiders whose scheme is the securing of individual profits at the
expense of an ocean of unwitting involuntary shareholders,
previously known as taxpayers.
Highlighted by
katieday
thanks to
Washington's deregulation
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
It's not about "deregulation." It's about Washington's collaboration with the crooks.
These guys look for holes in the
system, for ways they can do trades without government
interference.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
They're not "looking for holes in the system." They lobby their favorite paid-off government official to *craft* the loopholes together, and then they send a kick-back to their government collaborator in the form of campaign contributions or lobbyist support for pet projects.
A CDO is like a box full
of diced-up assets. They can be anything: mortgages, corporate
loans, aircraft loans, credit-card loans, even other CDOs. So as X
mortgage holder pays his bill, and Y corporate debtor pays his
bill, and Z credit-card debtor pays his bill, money flows
into the box.
The key idea behind a CDO is that there will always be at least
some money in the box, regardless of how dicey the individual
assets inside it are. No matter how you look at a single unemployed
ex-con trying to pay the note on a six-bedroom house, he looks like
a bad investment. But dump his loan in a box with a smorgasbord of
auto loans, credit-card debt, corporate bonds and other crap, and
you can be reasonably sure that somebody is going to pay
up. Say $100 is supposed to come into the box every month. Even in
an apocalypse, when $90 in payments might default, you'll still get
$10. What the inventors of the CDO did is divide up the box into
groups of investors and put that $10 into its own level, or
"tranche." They then convinced ratings agencies like Moody's and
S&P to give that top tranche the highest AAA rating —
meaning it has close to zero credit risk.
Highlighted by
chrishp
Suddenly, thanks to this financial seal of approval, banks had a
way to turn their shittiest mortgages and other financial waste
into investment-grade paper and sell them to institutional
investors like pensions and insurance companies, which were forced
by regulators to keep their portfolios as safe as possible. Because
CDOs offered higher rates of return than truly safe products like
Treasury bills, it was a win-win: Banks made a fortune selling
CDOs, and big investors made much more holding them.
The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were. "They had some back room somewhere
where a bunch of Indian guys who'd been doing nothing but math for
God knows how many years would come up with some kind of model
saying that this or that combination of debtors would only default
once every 10,000 years," says one young trader who sold CDOs for a
major investment bank. "It was nuts."
Highlighted by
cburell
As banks and investors of all kinds took on more and
more in CDOs and similar instruments, they needed some way to hedge
their massive bets
Highlighted by
jmittell
The mess Cassano created had its roots in an investment boom
fueled in part by a relatively new type of financial instrument
called a collateralized-debt obligation. A CDO is like a box full
of diced-up assets.
Highlighted by
katieday
Suddenly, thanks to this financial seal of approval, banks had a
way to turn their shittiest mortgages and other financial waste
into investment-grade paper and sell them to institutional
investors like pensions and insurance companies, which were forced
by regulators to keep their portfolios as safe as possible. Because
CDOs offered higher rates of return than truly safe products like
Treasury bills, it was a win-win: Banks made a fortune selling
CDOs, and big investors made much more holding them.
Highlighted by
chrishp
The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were. "They had some back room somewhere
where a bunch of Indian guys who'd been doing nothing but math for
God knows how many years would come up with some kind of model
saying that this or that combination of debtors would only default
once every 10,000 years," says one young trader who sold CDOs for a
major investment bank. "It was nuts."
Highlighted by
kenlefeb
The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were.
Highlighted by
jrstoltz
The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were. "They had some back room somewhere
where a bunch of Indian guys who'd been doing nothing but math for
God knows how many years would come up with some kind of model
saying that this or that combination of debtors would only default
once every 10,000 years," says one young trader who sold CDOs for a
major investment bank. "It was nuts."
Highlighted by
chrishp
The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were. "They had some back room somewhere
where a bunch of Indian guys who'd been doing nothing but math for
God knows how many years would come up with some kind of model
saying that this or that combination of debtors would only default
once every 10,000 years," says one young trader who sold CDOs for a
major investment bank. "It was nuts."
Highlighted by
katieday
As banks and investors of all kinds took on more and
more in CDOs and similar instruments, they needed some way to hedge
their massive bets — some kind of insurance policy, in case
the housing bubble burst and all that debt went south at the same
time. This was particularly true for investment banks, many of
which got stuck holding or "warehousing" CDOs when they wrote more
than they could sell. And that's were Joe Cassano came in.
Highlighted by
chrishp
When Morgan presented their plans for credit swaps to regulators
in the late Nineties, they argued that if they bought CDS
protection for enough of the investments in their portfolio, they
had effectively moved the risk off their books.
Highlighted by
tarmotoikkanen
Given a free hand within the
company, Cassano set out from his offices in London to sell a
lucrative form of "insurance" to all those investors holding lots
of CDOs. His tool of choice was another new financial instrument
known as a credit-default swap, or CDS.
Highlighted by
katieday
In its simplest form, a CDS is just a bet on an outcome. Say
Bank A writes a million-dollar mortgage to the Pope for a town
house in the West Village. Bank A wants to hedge its mortgage risk
in case the Pope can't make his monthly payments, so it buys CDS
protection from Bank B, wherein it agrees to pay Bank B a premium
of $1,000 a month for five years. In return, Bank B agrees to pay
Bank A the full million-dollar value of the Pope's mortgage if he
defaults. In theory, Bank A is covered if the Pope goes on a meth
binge and loses his job.
Highlighted by
chrishp
What Cassano did was to transform the credit swaps that Morgan
popularized into the world's largest bet on the housing boom. In
theory, at least, there's nothing wrong with buying a CDS to insure
your investments. Investors paid a premium to AIGFP, and in return
the company promised to pick up the tab if the mortgage-backed CDOs
went bust. But as Cassano went on a selling spree, the deals he
made differed from traditional insurance in several significant
ways. First, the party selling CDS protection didn't have to post
any money upfront. When a $100 corporate bond is sold, for example,
someone has to show 100 actual dollars. But when you sell a $100
CDS guarantee, you don't have to show a dime. So Cassano could sell
investment banks billions in guarantees without having any single
asset to back it up.
Highlighted by
tarmotoikkanen
Therefore, they
argued, they should be allowed to lend more, without keeping more
cash in reserve.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
This is also directly related to the Fed's manipulation of the money supply, to lower interest rates and create more "money" for these banks to lend.
Unlike traditional insurance, Cassano was offering investors an
opportunity to bet that
someone else's house would burn
down
Highlighted by
tarmotoikkanen
First, the party selling CDS protection didn't have to post
any money upfront. When a $100 corporate bond is sold, for example,
someone has to show 100 actual dollars. But when you sell a $100
CDS guarantee, you don't have to show a dime. So Cassano could sell
investment banks billions in guarantees without having any single
asset to back it up.
Highlighted by
jrstoltz
When a $100 corporate bond is sold, for example,
someone has to show 100 actual dollars. But when you sell a $100
CDS guarantee, you don't have to show a dime. So Cassano could sell
investment banks billions in guarantees without having any single
asset to back it up.
Highlighted by
chrishp
Secondly, Cassano was selling so-called "naked" CDS deals. In a
"naked" CDS, neither party actually holds the underlying loan. In
other words, Bank B not only sells CDS protection to Bank A for its
mortgage on the Pope — it turns around and sells protection
to Bank C for the very same mortgage. This could go on ad nauseam:
You could have Banks D through Z also betting on Bank A's mortgage.
Highlighted by
chrishp
What Cassano did was to transform the credit swaps that Morgan
popularized into the world's largest bet on the housing boom.
Highlighted by
katieday
Unlike traditional insurance, Cassano was offering investors an
opportunity to bet that
someone else's house would burn
down, or take out a term life policy on the guy with AIDS down the
street. It was no different from gambling, the Wall Street version
of a bunch of frat brothers betting on Jay Feely to make a field
goal. Cassano was taking book for every bank that bet short on the
housing market, but he didn't have the cash to pay off if the kick
went wide.
Highlighted by
kenlefeb
In a span of only seven years, Cassano sold some $500 billion
worth of CDS protection, with at least $64 billion of that tied to
the subprime mortgage market. AIG didn't have even a fraction of
that amount of cash on hand to cover its bets, but neither did it
expect it would ever need any reserves. So long as defaults on the
underlying securities remained a highly unlikely proposition, AIG
was essentially collecting huge and steadily climbing premiums by
selling insurance for the disaster it thought would never come.
Highlighted by
chrishp
In a span of only seven years, Cassano sold some $500 billion
worth of CDS protection, with at least $64 billion of that tied to
the subprime mortgage market.
Highlighted by
katieday
In the biggest joke of all, Cassano's wheeling and dealing was
regulated by the Office of Thrift Supervision, an agency that would
prove to be defiantly uninterested in keeping watch over his
operations. How a behemoth like AIG came to be regulated by the
little-known and relatively small OTS is yet another triumph of the
deregulatory instinct. Under another law passed in 1999, certain
kinds of holding companies could choose the OTS as their regulator,
provided they owned one or more thrifts (better known as
savings-and-loans). Because the OTS was viewed as more compliant
than the Fed or the Securities and Exchange Commission, companies
rushed to reclassify themselves as thrifts. In 1999, AIG purchased
a thrift in Delaware and managed to get approval for OTS regulation
of its entire operation.
Highlighted by
wizzylolly
ut in the late Nineties, a few years before Cassano took over
AIGFP, all that changed. The Democrats, tired of getting
slaughtered in the fundraising arena by Republicans, decided to
throw off their old reliance on unions and interest groups and
become more "business-friendly." Wall Street responded by flooding
Washington with money, buying allies in both parties. In the
10-year period beginning in 1998, financial companies spent $1.7
billion on federal campaign contributions and another $3.4 billion
on lobbyists. They quickly got what they paid for. In 1999, Gramm
co-sponsored a bill that repealed key aspects of the Glass-Steagall
Act
Highlighted by
shklepesch
Initially, at least, the revenues were enormous: AIGFP's returns
went from $737 million in 1999 to $3.2 billion in 2005. Over the
past seven years, the subsidiary's 400 employees were paid a total
of $3.5 billion; Cassano himself pocketed at least $280 million in
compensation. Everyone made their money — and then it all
went to shit.
Highlighted by
katieday
Wall Street responded by flooding
Washington with money, buying allies in both parties.
Highlighted by
kenlefeb
In the
10-year period beginning in 1998, financial companies spent $1.7
billion on federal campaign contributions and another $3.4 billion
on lobbyists. They quickly got what they paid for.
Highlighted by
jrstoltz
smoothing the way for the creation of financial megafirms like
Citigroup.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
True deregulation doesn't make it easier to create megacorporations. It's hard work to build a big business.
The kind of deregulation they're talking about here, is SELECTIVE DEREGULATION. They relax certain regulations to make it easier for big companies to get bigger, while still keeping the foundational regulations in place, that keep the competitors small.
If we erased ALL of the regulations, there would be more competition, everyone would be smaller, and the big corporations would find themselves too big to compete with the smaller companies.
The move did away with the built-in protections afforded
by smaller banks. In the old days, a local banker knew the people
whose loans were on his balance sheet
Highlighted by
kenlefeb
In the old days, a local banker knew the people
whose loans were on his balance sheet: He wasn't going to give a
million-dollar mortgage to a homeless meth addict, since he would
have to keep that loan on his books. But a giant merged bank might
write that loan and then sell it off to some fool in China, and who
cared?
Highlighted by
chrishp
When investment banks write CDS deals, they hedge them.
But insurance companies don't have to hedge. And that's what AIG
did. "They just bet massively long on the housing market," says the
source. "Billions and billions."
Highlighted by
chrishp
The very next year, Gramm compounded the problem by writing a
sweeping new law called the Commodity Futures Modernization Act
that made it impossible to regulate credit swaps as either gambling
or securities. Commercial banks — which, thanks to Gramm,
were now competing directly with investment banks for customers
— were driven to buy credit swaps to loosen capital in search
of higher yields. "By ruling that credit-default swaps were not
gaming and not a security, the way was cleared for the growth of
the market," said Eric Dinallo, head of the New York State
Insurance Department.
Highlighted by
katieday
The blanket exemption meant that Joe Cassano could now sell as
many CDS contracts as he wanted, building up as huge a position as
he wanted, without anyone in government saying a word.
Highlighted by
katieday
In the biggest joke of all, Cassano's wheeling and dealing was
regulated by the Office of Thrift Supervision, an agency that would
prove to be defiantly uninterested in keeping watch over his
operations.
Highlighted by
katieday
By the fall of 2007, it was evident that AIGFP's portfolio had
turned poisonous, but like every good Wall Street huckster, Cassano
schemed to keep his insane, Earth-swallowing gamble hidden from
public view. That August, balls bulging, he announced to investors
on a conference call that "it is hard for us, without being
flippant, to even see a scenario within any kind of realm of reason
that would see us losing $1 in any of those transactions." As he
spoke, his CDS portfolio was racking up $352 million in losses.
When the growing credit crunch prompted senior AIG executives to
re-examine its liabilities, a company accountant named Joseph St.
Denis became "gravely concerned" about the CDS deals and their
potential for mass destruction. Cassano responded by personally
forcing the poor sap out of the firm, telling him he was
"deliberately excluded" from the financial review for fear that he
might "pollute the process."
Highlighted by
wizzylolly
That same year, as the subprime crisis was exploding, the
Government Accountability Office criticized the OTS, noting a
"disparity between the size of the agency and the diverse firms it
oversees." Among other things, the GAO report noted that the entire
OTS had only one insurance specialist on staff — and this
despite the fact that it was the primary regulator for the world's
largest insurer!
Highlighted by
jrstoltz
Among other things, the GAO report noted that the entire
OTS had only one insurance specialist on staff — and this
despite the fact that it was the primary regulator for the world's
largest insurer!
Highlighted by
kenlefeb
That same year, as the subprime crisis was exploding, the
Government Accountability Office criticized the OTS, noting a
"disparity between the size of the agency and the diverse firms it
oversees." Among other things, the GAO report noted that the entire
OTS had only one insurance specialist on staff — and this
despite the fact that it was the primary regulator for the world's
largest insurer!
Highlighted by
katieday
When AIG finally blew up, the OTS regulator ostensibly in charge
of overseeing the insurance giant — a guy named C.K. Lee
— basically admitted that he had blown it. His mistake, Lee
said, was that he believed all those credit swaps in Cassano's
portfolio were "fairly benign products." Why? Because the company
told him so. "The judgment the company was making was that there
was no big credit risk," he explained. (Lee now works as Midwest
region director of the OTS; the agency declined to make him
available for an interview.)
Highlighted by
katieday
The
situation was so bad that when outside consultants were called in a
few weeks before the bailout, senior executives were unable to
answer even the most basic questions about their company —
like, for instance, how much exposure the firm had to the
residential-mortgage market.
Highlighted by
jrstoltz
AIG might have been OK had
it not been for a complete lack of internal controls. For six
months before its meltdown, according to insiders, the company had
been searching for a full-time chief financial officer and a chief
risk-assessment officer, but never got around to hiring either.
Highlighted by
katieday
The following February, when AIG posted $11.5 billion in annual
losses, it announced the resignation of Cassano as head of AIGFP,
saying an auditor had found a "material weakness" in the CDS
portfolio. But amazingly, the company not only allowed Cassano to
keep $34 million in bonuses, it kept him on as a consultant for $1
million a month.
Highlighted by
chrishp
What sank AIG in the end was another credit downgrade. Cassano
had written so many CDS deals that when the company was facing
another downgrade to its credit rating last September, from AA to
A, it needed to post billions in collateral — not only more
cash than it had on its balance sheet but more cash than it could
raise even if it sold off every single one of its liquid assets.
Even so, management dithered for days, not believing the company
was in serious trouble. AIG was a dried-up prune, sapped of any
real value, and its top executives didn't even know it.
Highlighted by
chrishp
The only
relevant government office that wasn't represented was the
regulator that should have been there all along: the OTS.
Highlighted by
kenlefeb
Then, in January 2009, the company did it again. After all those
years letting Cassano run wild, and after already getting caught
paying out insane bonuses while on the public till, AIG decided to
pay out another $450 million in bonuses. And to whom? To the 400 or
so employees in Cassano's old unit, AIGFP, which is due to go out
of business shortly! Yes, that's right, an average of $1.1 million
in taxpayer-backed money apiece, to the very people who spent the
past decade or so punching a hole in the fabric of the
universe!
Highlighted by
jrstoltz
making up things like credit-default swaps and
collateralized-debt obligations, financial products so complex and
inscrutable that ordinary American dumb people — to say
nothing of federal regulators and even the CEOs of major
corporations like AIG — are too intimidated to even try to
understand them.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
This kind of fiction can only be hidden amidst a maze of government regulations.
In a truly unregulated market, everything would be simple enough for these "ordinary American dumb people" to understand, because these ordinary people are the market that must be satisfied for any business to succeed.
the top five investment
banks
Highlighted by
kenlefeb
The banks generously volunteered to submit to new rules
restricting them from engaging in excessively risky activity. In
exchange, they asked to be released from any lending restrictions.
The discussion about the new rules lasted just 55 minutes, and
there was not a single representative of a major media outlet there
to record the fateful decision.
Highlighted by
jrstoltz
There are plenty of people who have
noticed, in recent years, that when they lost their homes to
foreclosure or were forced into bankruptcy because of crippling
credit-card debt, no one in the government was there to rescue
them. But when Goldman Sachs — a company whose average
employee still made more than $350,000 last year, even in the midst
of a depression — was suddenly faced with the possibility of
losing money on the unregulated insurance deals it bought for its
insane housing bets, the government was there in an instant to
patch the hole. That's the essence of the bailout: rich bankers
bailing out rich bankers, using the taxpayers' credit card.
Highlighted by
cburell
a commission
of seven people
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
A Free Market would not allow a mere 7 men to supervise only 5 companies.
In a Free Market, decisions would be made by thousands of companies, supervised by millions of customers and stockholders.
"If AIG went down,"
he says, "there was a good chance Goldman would not be able to
collect." The AIG bailout, in effect, was Goldman bailing out
Goldman.
Highlighted by
tarmotoikkanen
In
essence, Paulson used the bailout to transform the government into
a giant bureaucracy of entitled assholedom, one that would
socialize "toxic" risks but keep both the profits and the
management of the bailed-out firms in private hands.
Highlighted by
cburell
That's the essence of the bailout: rich bankers
bailing out rich bankers, using the taxpayers' credit card.
Highlighted by
tarmotoikkanen
Market analyst Eric Salzman is more blunt. "If AIG went down,"
he says, "there was a good chance Goldman would not be able to
collect." The AIG bailout, in effect, was Goldman bailing out
Goldman.
Highlighted by
jrstoltz
That's the essence of the bailout: rich bankers
bailing out rich bankers, using the taxpayers' credit card.
Highlighted by
kenlefeb
The people who have spent their lives cloistered in this Wall
Street community aren't much for sharing information with the great
unwashed. Because all of this shit is complicated, because most of
us mortals don't know what the hell LIBOR is or how a REIT works or
how to use the word "zero coupon bond" in a sentence without
sounding stupid — well, then, the people who do speak this
idiotic language cannot under any circumstances be bothered to
explain it to us and instead spend a lot of time rolling their eyes
and asking us to trust them.
Highlighted by
kenlefeb
That roll of the eyes is a key part of the psychology of
Paulsonism.
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kenlefeb
on 2009-03-21 by
kenlefeb
And this same psychology is exactly how the government manipulates all of us into "trusting" them to do what is best for us (uh, really, for them).
No one knows who's getting that money or exactly how much of it
is disappearing through these new holes in the hull of America's
credit rating. Moreover, no one can really be sure if these new
institutions are even temporary at all — or whether they are
being set up as permanent, state-aided crutches to Wall Street,
designed to systematically suck bad investments off the ledgers of
irresponsible lenders.
Highlighted by
tarmotoikkanen
And what's the global impact of the US "wasting" all these trillions? Will it help other countries to compete economically, or will US collapse and bring down everything else?
The reason the number has dropped to nothing is that the Fed had
simply stopped using relatively transparent devices like repurchase
agreements to pump its money into the hands of private companies.
By early 2009, a whole series of new government operations had been
invented to inject cash into the economy, most all of them
completely secretive and with names you've never heard of
Highlighted by
jrstoltz
the Fed had
simply stopped using relatively transparent devices like repurchase
agreements to pump its money into the hands of private companies.
Highlighted by
kenlefeb
By early 2009, a whole series of new government operations had been
invented to inject cash into the economy, most all of them
completely secretive and with names you've never heard of.
Highlighted by
kenlefeb
According to the law, in other words, the Fed simply cannot be
audited by Congress. Or by anyone else, for that matter.
Highlighted by
tarmotoikkanen
While the rest of America, and most of Congress, have been
bugging out about the $700 billion bailout program called TARP, all
of these newly created organisms in the Federal Reserve zoo have
quietly been pumping not billions but trillions of dollars into the
hands of private companies (at least $3 trillion so far in loans,
with as much as $5.7 trillion more in guarantees of private
investments).
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
This is why we NEED Rep. Paul's bill to audit the Federal Reserve!!!
I wonder how much more is still left uncovered. Seems every month something new turns up that's been brewing under the wraps.
The reason the number has dropped to nothing is that the Fed had
simply stopped using relatively transparent devices like repurchase
agreements to pump its money into the hands of private companies.
By early 2009, a whole series of new government operations had been
invented to inject cash into the economy, most all of them
completely secretive and with names you've never heard of. There is
the Term Auction Facility, the Term Securities Lending Facility,
the Primary Dealer Credit Facility, the Commercial Paper Funding
Facility and a monster called the Asset-Backed Commercial Paper
Money Market Mutual Fund Liquidity Facility (boasting the chat-room
horror-show acronym ABCPMMMFLF). For good measure, there's also
something called a Money Market Investor Funding Facility, plus
three facilities called Maiden Lane I, II and III to aid bailout
recipients like Bear Stearns and AIG.
Highlighted by
katieday
None other than disgraced senator Ted Stevens was the poor sap
who made the unpleasant discovery that if Congress didn't like the
Fed handing trillions of dollars to banks without any oversight,
Congress could apparently go fuck itself — or so said the
law. When Stevens asked the GAO about what authority Congress has
to monitor the Fed, he got back a letter citing an obscure statute
that nobody had ever heard of before: the
Highlighted by
greenup
The relevant section, 31 USC 714(b), dictated that
congressional audits of the Federal Reserve may not include
"deliberations, decisions and actions on monetary policy matters."
The exemption, as Foss notes, "basically includes everything."
According to the law, in other words, the Fed simply cannot be
audited by Congress. Or by anyone else, for that m
Highlighted by
greenup
Accounting and Auditing
Act of 1950. The relevant section, 31 USC 714(b), dictated that
congressional audits of the Federal Reserve may not include
"deliberations, decisions and actions on monetary policy matters."
The exemption, as Foss notes, "basically includes everything."
According to the law, in other words, the Fed simply cannot be
audited by Congress. Or by anyone else, for
Highlighted by
greenup
In essence, the Fed was telling Congress to lay off and let the
experts handle things.
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kenlefeb
When one considers the comparatively extensive system of
congressional checks and balances that goes into the spending of
every dollar in the budget via the normal appropriations process,
what's happening in the Fed amounts to something truly
revolutionary — a kind of shadow government with a budget
many times the size of the normal federal outlay, administered
dictatorially by one man, Fed chairman Ben Bernanke.
Highlighted by
jrstoltz
When one considers the comparatively extensive system of
congressional checks and balances that goes into the spending of
every dollar in the budget via the normal appropriations process,
what's happening in the Fed amounts to something truly
revolutionary — a kind of shadow government with a budget
many times the size of the normal federal outlay, administered
dictatorially by one man, Fed chairman Ben Bernanke.
Highlighted by
kenlefeb
Accounting and Auditing
Act of 1950. The relevant section, 31 USC 714(b), dictated that
congressional audits of the Federal Reserve may not include
"deliberations, decisions and actions on monetary policy matters."
The exemption, as Foss notes, "basically includes everything."
According to the law, in other words, the Fed simply cannot be
audited by Congress. Or by anyone else, for that matter.
Highlighted by
saschamaj
I reckon that the original intent is a good one: a central bank that is independent and free from political influence. In reality though, the central bank has become beholden to Wall Street interests, because it's led by former Wall Street bankers and because of the outrageous influence of a small number of financial institutions over the world's financial system.
To this date, no one knows exactly what
criteria the Treasury Department used to determine which banks
received bailout funds and which didn't — particularly the
first $350 billion given out under Bush appointee Hank Paulson.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
This is exactly why National City was bought by PNC. They gave TARP money to PNC and refused it to NCC... why?
The situation with the first TARP payments grew so absurd that
when the Congressional Oversight Panel, charged with monitoring the
bailout money, sent a query to Paulson asking how he decided whom
to give money to, Treasury responded — and this isn't a joke
— by directing the panel to a copy of the TARP application
form on its website.
Highlighted by
kenlefeb
Which, when you think about it, is insane: What had brought us
to the brink of collapse in the first place was this relentless
instinct for building ever-larger megacompanies, passing
deregulatory measures to gradually feed all the little fish in the
sea to an ever-shrinking pool of Bigger Fish. To fix this problem,
the government should have slowly liquidated these monster,
too-big-to-fail firms and broken them down to smaller, more
manageable companies. Instead, federal regulators closed ranks and
used an almost completely secret bailout process to double down on
the same faulty, merger-happy thinking that got us here in the
first place, creating a constellation of megafirms under government
control that are even bigger, more unwieldy and more crammed to the
gills with systemic risk.
Highlighted by
tarmotoikkanen
Another member of Congress, who asked not to be named, offers
his own theory about the TARP process. "I think basically if you
knew Hank Paulson, you got the money," he says.
Highlighted by
kenlefeb
on 2009-03-21 by
kenlefeb
PNC has a board member that used to be a Federal Reserve Bank chairman. NCC had no personal ties to the "Insiders Club".
"There's definitely a feeling among community bankers that no
one up there cares much if they make it or not," says Tanya
Wheeless, president of the Arizona Bankers Association.
Highlighted by
jrstoltz
Nonetheless, the lion's share of the bailout money has gone to
the larger, so-called "systemically important" banks. "It's like
Treasury is picking winners and losers," says one state banking
official who asked not to be identified.
Highlighted by
jrstoltz
"It's like
Treasury is picking winners and losers," says one state banking
official who asked not to be identified.
Highlighted by
kenlefeb
It might not bode well that Geithner, Obama's Treasury secretary,
is one of the architects of the Paulson bailouts
Highlighted by
tarmotoikkanen
In essence, Paulson and his cronies turned the federal
government into one gigantic, half-opaque holding company, one
whose balance sheet includes the world's most appallingly large and
risky hedge fund, a controlling stake in a dying insurance giant,
huge investments in a group of teetering megabanks, and shares here
and there in various auto-finance companies, student loans, and
other failing businesses. Like AIG, this new federal holding
company is a firm that has no mechanism for auditing itself and is
run by leaders who have very little grasp of the daily operations
of its disparate subsidiary operations.
Highlighted by
katieday
It might not bode well that Geithner, Obama's Treasury secretary,
is one of the architects of the Paulson bailouts; as chief of the
New York Fed, he helped orchestrate the Goldman-friendly AIG
bailout and the secretive Maiden Lane facilities used to funnel
funds to the dying company.
Highlighted by
kenlefeb
Neither did it look good when Geithner
— himself a protégé of notorious Goldman alum
John Thain, the Merrill Lynch chief who paid out billions in
bonuses after the state spent billions bailing out his firm —
picked a former Goldman lobbyist named Mark Patterson to be his top
aide.
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kenlefeb
In fact, most of Geithner's early moves reek strongly of
Paulsonism.
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kenlefeb
In
essence, the bailout accelerated the decline of regional community
lenders by boosting the political power of their giant national
competitors.
Highlighted by
saschamaj
"This is exactly what the
financial system needs," said Andrew Feldstein, CEO of Blue
Mountain Capital and one of the Morgan Mafia. Strangely, there
aren't many people who don't run hedge funds who have expressed
anything like that kind of enthusiasm for Geithner's ideas.
Highlighted by
jrstoltz
Strangely, there
aren't many people who don't run hedge funds who have expressed
anything like that kind of enthusiasm for Geithner's ideas.
Highlighted by
kenlefeb
To fix this problem,
the government should have slowly liquidated these monster,
too-big-to-fail firms and broken them down to smaller, more
manageable companies. Instead, federal regulators closed ranks and
used an almost completely secret bailout process to double down on
the same faulty, merger-happy thinking that got us here in the
first place, creating a constellation of megafirms under government
control that are even bigger, more unwieldy and more crammed to the
gills with systemic risk.
Highlighted by
saschamaj
As complex as all the finances are, the politics aren't hard to
follow. By creating an urgent crisis that can only be solved by
those fluent in a language too complex for ordinary people to
understand, the Wall Street crowd has turned the vast majority of
Americans into non-participants in their own political future.
There is a reason it used to be a crime in the Confederate states
to teach a slave to read: Literacy is power. In the age of the CDS
and CDO, most of us are financial illiterates. By making an already
too-complex economy even more complex, Wall Street has used the
crisis to effect a historic, revolutionary change in our political
system — transforming a democracy into a two-tiered state,
one with plugged-in financial bureaucrats above and clueless
customers below.
Highlighted by
greenup
By creating an urgent crisis that can only be solved by
those fluent in a language too complex for ordinary people to
understand, the Wall Street crowd has turned the vast majority of
Americans into non-participants in their own political future.
Highlighted by
kenlefeb
As complex as all the finances are, the politics aren't hard to
follow.
Highlighted by
kenlefeb
By making an already
too-complex economy even more complex, Wall Street has used the
crisis to effect a historic, revolutionary change in our political
system — transforming a democracy into a two-tiered state,
one with plugged-in financial bureaucrats above and clueless
customers below.
Highlighted by
kenlefeb
In essence, Paulson and his cronies turned the federal
government into one gigantic, half-opaque holding company, one
whose balance sheet includes the world's most appallingly large and
risky hedge fund, a controlling stake in a dying insurance giant,
huge investments in a group of teetering megabanks, and shares here
and there in various auto-finance companies, student loans, and
other failing businesses. Like AIG, this new federal holding
company is a firm that has no mechanism for auditing itself and is
run by leaders who have very little grasp of the daily operations
of its disparate subsidiary operations.
Highlighted by
saschamaj
As complex as all the finances are, the politics aren't hard to
follow. By creating an urgent crisis that can only be solved by
those fluent in a language too complex for ordinary people to
understand, the Wall Street crowd has turned the vast majority of
Americans into non-participants in their own political future.
There is a reason it used to be a crime in the Confederate states
to teach a slave to read: Literacy is power. In the age of the CDS
and CDO, most of us are financial illiterates. By making an already
too-complex economy even more complex, Wall Street has used the
crisis to effect a historic, revolutionary change in our political
system — transforming a democracy into a two-tiered state,
one with plugged-in financial bureaucrats above and clueless
customers below.
Highlighted by
katieday
"But wait a minute," you say to them. "No one ever asked you to
stay up all night eight days a week trying to get filthy rich
shorting what's left of the American auto industry or selling $600
billion in toxic, irredeemable mortgages to ex-strippers on work
release and Taco Bell clerks. Actually, come to think of it, why
are we even giving taxpayer money to you people? Why are we not
throwing your ass in jail instead?"
Highlighted by
kenlefeb
they're rolling their
eyes, because You Don't Get It.
Highlighted by
kenlefeb
And on the linear spectrum of capitalism to
socialism, where exactly are we now? Is there a dictionary word
that even describes what we are now?
Highlighted by
saschamaj
In fact, most of Geithner's early moves reek strongly of
Paulsonism. He has continually talked about partnering with private
investors to create a so-called "bad bank" that would systemically
relieve private lenders of bad assets — the kind of massive,
opaque, quasi-private bureaucratic nightmare that Paulson
specialized in. Geithner even refloated a Paulson proposal to use
TALF, one of the Fed's new facilities, to essentially lend cheap
money to hedge funds to invest in troubled banks while practically
guaranteeing them enormous profits.
Highlighted by
saschamaj
By making an already
too-complex economy even more complex, Wall Street has used the
crisis to effect a historic, revolutionary change in our political
system — transforming a democracy into a two-tiered state,
one with plugged-in financial bureaucrats above and clueless
customers below.
Highlighted by
saschamaj
These people were never about
anything except turning money into money, in order to get more
money; valueswise they're on par with crack addicts, or obsessive
sexual deviants who burgle homes to steal panties. Yet these are
the people in whose hands our entire political future now
rests.
Highlighted by
saschamaj
Public Comment