(April 07, 2010)
In case you have problems viewing this video, then watch it here:
- The Dylan Ratigan Show (MSNBC)
(April 07, 2010)
In case you have problems viewing this video, then watch it here:
- The Dylan Ratigan Show (MSNBC)
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses – meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a “bailout tax” on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. “In a year that proved to have no shortage of story lines,” he said, “I believe very strongly that performance is the ultimate narrative.”
Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn’t alone. The nation’s six largest banks – all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry – set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. “What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?” asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America’s populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what’s the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there’s still a widespread misunderstanding of how exactly Wall Street “earns” its money, with emphasis on the quotation marks around “earns.” The question everyone should be asking, as one bailout recipient after another posts massive profits – Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation – is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its “performance” was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients. Continue reading »
Tags: AIG, Alan Greenspan, Bailout, Bank of America, Banking, Bankruptcy, Ben Bernanke, Bonds, Brad Sherman, Bubble, Citigroup, Debt, Economy, FDIC, Fed, Federal Reserve, Goldman Sachs, Government, JPMorgan, Matt Taibbi, Morgan Stanley, Mortgage crisis, Mortgages, Politics, Ponzi schemes, Robert Rubin, Societe Generale, Taxpayers, Timothy Geithner, Treasury, Wall Street
Having the Bernanke puppet in place, the elite can now continue to collapse the system.
By Albert Edwards, Societe Generale
Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?
Ben Bernanke?s recent speech at the American Economic Association made me feel sick. Like Alan Greenspan, he is still in denial. The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion in a pathetic attempt to deflect blame from their own gross and unforgivable incompetence.
The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed.
Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate (see chart below). And now the bubbles have burst, along with central banks? credibility, what now?
(Click on images to enlarge.)
After reading Ben Bernanke?s speech, once again denying culpability for the bubble, I really didn?t know whether to laugh or cry (remember that Ben Bernanke, like Tim Geithner, was a key member of the Greenspan Fed). I feel like Peter Finch in the film Network, sticking my head out of the window and shouting “I’m as mad as hell and I’m not going to take it anymore!” Although criticism of the Fed (and the Bank of England) has now become louder and more widespread, I feel my longstanding derision for their actions during the so-called ?good years? puts me in a stronger position than some to offer further comment.
Opening my 2002-2005 file of old weeklies I did not have to go any further than the first paragraph of the top copy (end of December 2005). “As far as Alan Greenspan’s tenure at the Fed is concerned, we have spared few words of derision. We have made plain our views that the supposed US prosperity that has accompanied his tenure has been based on a grotesque mountain of debt. We have likened the economy to a Ponzi scheme which will ultimately collapse. He has allowed the funding of strong economic activity by mortgaging the US’s future against one bubble (equity) and then another (housing), which is now beginning to implode“. These are almost consensus thoughts now, but not then.
The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion. Blaming the banks is simply a pathetic attempt to deflect the public fury from their own gross and unforgivable incompetence. We have stated before that banks are not the primary cause of the bust. Just as in Japan, a decade earlier, bank problems are a symptom of the bust. It is the monetary and regulatory authorities that are responsible for this mess. And it is not just obvious in retrospect. It was perfectly obvious from the beginning.
I was shocked by a recent survey of Wall Street and business economists, published in the Wall Street Journal (see Bernanke View Doubted 14 Jan? link). Asked whether they agreed or disagreed with the proposition ‘excessively easy Fed policy in the first half of the decade helped cause a bubble in house prices’, some 42, or 74% agreed with the proposition. So unbelievably there are still 12 economists surveyed who did not agree! Even more incredible, a majority of academic economists did not agree with the proposition. Maybe they have sympathy for a fellow academic or maybe they actually believe the preposterous proposition that the western central banks were not in control of the bubbles which were primarily due to tidal waves of surplus savings washing across from Asia.
John Taylor shows this to be nonsense. There was no global savings glut (see chart below) Continue reading »
Tags: Alan Greenspan, Bank of England, Ben Bernanke, Bubble, Central Bank, Economy, Fed, Federal Reserve, GDP, Global News, Government, Middle Class, Politics, Ponzi schemes, Timothy Geithner, U.K., U.S., Wall Street
This article is a MUST-READ!
This is not a conspiracy. This is politics and economics.
Wake up America! You will lose everything, if you do not act NOW.
Prepare yourself for a complete controlled meltdown. The greatest financial collapse in world history.
A hyperinflationary depression. THE Greatest Depression.
The Fed and the US government are destroying America!
(More information at the end of the following article.)
By Stewart Dougherty
Stewart Dougherty is a specialist in inferential analysis, the practice of identifying historic and contemporary patterns and then extrapolating their likely effects upon the future. Dougherty was educated at Tufts University (B.A., magna cum laude), and Harvard Business School (M.B.A. and an academic Fellow).
FOREWORD: At certain times, focusing on the big picture is important not just for investment success, but for personal welfare, and even survival. We believe such times are here. It is estimated that 98% of Americans have never held a gold coin in their hands. Yet 100% of Americans regularly handle Federal Reserve Notes. From a contrarian standpoint, the financial message from those two statistics is clear. Even so, gold is much more than money or an investment medium; it stands for liberty and throughout history has facilitated escape and ensured freedom. Never having touched a gold coin is the monetary equivalent to never having breathed fresh air, felt the warmth of sunshine, looked up at the stars or risen from the gutter. Fiat Federal Reserve Notes are becoming nothing more than sewage decomposing in the vast, toxic septic tank of predatory Washington politics, epic Federal Reserve arrogance and error, blatant Wall Street fraud and outright Master Class plunder. Below, we outline America’s troubling and compounding predicament, and urge you to think about how to protect yourself from its consequences, both financially and personally.
Thanks to the endless barrage of feel-good propaganda that daily assaults the American mind, best epitomized a few months ago by the “green shoots,” everything’s-coming-up-roses propaganda touted by Federal Reserve Chairman Bernanke, the citizens have no idea how disastrous the country’s fiscal, monetary and economic problems truly are. Nor do they perceive the rapidly increasing risk of a totalitarian nightmare descending upon the American Republic.
One stark and sobering way to frame the crisis is this: if the United States government were to nationalize (in other words, steal) every penny of private wealth accumulated by America’s citizens since the nation’s founding 235 years ago, the government would remain totally bankrupt.
According to the Federal Reserve’s most recent report on wealth, America’s private net worth was $53.4 trillion as of September, 2009. But at the same time, America’s debt and unfunded liabilities totaled at least $120,000,000,000,000.00 ($120 trillion), or 225% of the citizens’ net worth. Even if the government expropriated every dollar of private wealth in the nation, it would still have a deficit of $66,600,000,000,000.00 ($66.6 trillion), equal to $214,286.00 for every man, woman and child in America and roughly 500% of GDP. If the government does not directly seize the nation’s private wealth, then it will require $389,610 from each and every citizen to balance the country’s books. State, county and municipal debts and deficits are additional, already elephantine in many states (e.g., California, Illinois, New Jersey and New York) and growing at an alarming rate nationwide. In addition to the federal government, dozens of states are already bankrupt and sinking deeper into the morass every day.
The government continues to dig a deeper and deeper fiscal grave in which to bury its citizens. This year, the federal deficit will total at least $1,600,000,000,000.00 ($1.6 trillion), which represents overspending of $4,383,561,600.00 ($4.38 billion) per day. (The deficit during October and November, 2009, the first two months of Fiscal Year 2010, totaled $296,700,000,000.00 ($297 billion), or $4,863,934,000.00 ($4.9 billion) per day, a record.) Using the GAAP accounting method (which is what corporations are required to use because it presents a far more accurate and honest picture of a company’s finances than the cash accounting method primarily and misleadingly used by the U.S. government), the nation’s fiscal year 2009 deficit was roughly $9,000,000,000,000.00 ($9 trillion), or $24,700,000,000.00 ($24.7 billion) per day, as calculated by brilliant and well-respected economist John Williams. (www.shadowstats.com) Fiscal Year 2010’s cash- and GAAP-accounting deficits will likely be worse than 2009’s, given government bailout and new program spending that is on steroids and psychotic.
Putting Fiscal Year 2009’s $9,000,000,000,000.00 ($9 trillion) deficit another way, 17% of America’s private wealth, accumulated over a period of 235 years, was wiped out by just one year’s worth of government deficit spending insanity.
Given this, is it any surprise that Treasury Secretary Geithner has announced that the release of the nation’s FY 2009 supplemental GAAP financial statements has been delayed? Remember, this is the same Secretary Geithner who bullied people to cover up the sordid details of the AIG, or more accurately, the taxpayer-funded, multi-billion dollar, Santa Claus bailout and bonus bonanza for Goldman Sachs. Do you really think this government, characterized as it is by fiscal and monetary secrecy, lies, chicanery, cronyism and stonewalling, wants the people to know what is actually happening? Obviously, it does not, so it hides from the public the inexcusable facts.
Tags: Al Gore, Alan Greenspan, Bailout, Bankruptcy, Barack Obama, Ben Bernanke, Bonds, Corruption, Debt, Dictators, Dictatorship, Dollar, Economy, Fed, Federal Reserve, Franklin Delano Roosevelt, Fraud, Freedom, GDP, Global News, Gold, Goldman Sachs, Government, Health, Healthcare, Henry Paulson, Hugo Chavez, Hyperinflation, Inflation, Keynesianism, Larry Summers, New World Order, North Korea, Obama administration, Politics, Ponzi schemes, propaganda, Robert Rubin, Silver, Society, Taxes, Taxpayers, Timothy Geithner, Treason, Treasury, U.S., Venezuela, Wall Street
John Williams, who runs the popular counter government data manipulation site Shadowstats, has thrown down the gauntlet to deflationists, and in an extensive report concludes that the probability of a hyperinflationary episode in America over the next year has reached critical levels. While the debate between deflationists and (hyper)inflationists has been a long and painful one, numerous events set off in motion by the Bernanke Fed (as a direct legacy of the Greenspan multi-decade period of cheap and boundless credit) may have well cast America as the unwilling protagonist in the sequel of the failed monetary policy economic experiment better known as Zimbabwe.
Williams does not mince his words:
The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar. The results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.
And even as Bernanke continues existing in a factless vacuum where he sees no asset bubbles, Williams takes aim at the one party almost exclusively responsible for the economic carnage that will soon transpire:
The crises have been generated out of and are centered on the United States financial system, triggered by the collapse of debt excesses actively encouraged by the Greenspan Federal Reserve. Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies — policies that limited real consumer income growth — Mr. Greenspan played along with the political and banking systems. He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion.
The Greenspan Fed pushed for ever-greater systemic leverage, including the happy acceptance of new financial products, which included instruments of mis-packaged lending risks, designed for consumption by global entities that openly did not understand the nature of the risks being taken. Complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.
As with consumers, the federal government could not make ends meet while appeasing that portion of the electorate that could be kept docile by ever-expanding government programs and increasing government spending. The solution was ever-expanding federal debt and deficits.
Purportedly, it was Arthur Burns, Fed Chairman under Richard Nixon, who first offered the advice that helped to guide Alan Greenspan and a number of Administrations. The gist of the wisdom imparted was that if you ran into problems, you could ignore the budget deficit and the dollar. Ignoring them did not matter, because doing so would not cost you any votes.
Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that “It’s too far into the future to worry about.”
Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations. Yet, the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.
Looking at the events over the past year demonstrates that Williams is not just being a drama queen.
Effective financial impairments and at least partial nationalizations or orchestrated bailouts/takeovers resulted for institutions such as Bear Stearns, Citigroup, Washington Mutual, AIG, General Motors, Chrysler, Fannie Mae and Freddie Mac, along with a number of further troubled financial institutions. The Fed moved to provide whatever systemic liquidity would be needed, while the federal government moved to finance corporate bailouts and to introduce significant stimulus spending.
Curiously, though, the Fed and the Treasury let Lehman Brothers fail outright, which triggered a foreseeable run on the system and markedly intensified the systemic solvency crisis in September 2008. Whether someone was trying to play political games, with the public and Congress increasingly raising questions of moral hazard issues, or whether the U.S. financial wizards missed what would happen or simply moved to bring the crisis to a head, remains to be seen.
More on the impending timing of the complete economic collapse of the US financial system: Continue reading »
Tags: Alan Greenspan, Ben Bernanke, Bubble, China, Congress, Debt, Deflation, Depression, Dollar, Economy, Fed, Federal Reserve, GDP, Gold, Great Depression, Hyperinflation, Hyperinflationary Depression, Inflation, John Williams, Obama administration, Politics, Treasury, U.S., Weimar Republic, Zimbabwe
You just can’t make this stuff up!
As I have previously shown, speculative derivatives (especially credit default swaps or “CDS”) are a primary cause of the economic crisis. They were largely responsible for bringing down Bear Stearns, AIG (and see this), WaMu and other mammoth corporations.
According to top experts, risky derivatives were not only largely responsible for bringing down the American (and world) economy, but they still pose a substantial systemic risk:
Round Two: Carbon Derivatives
Now, Bloomberg notes that the carbon trading scheme will be largely centered around derivatives:
The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.
[Blythe] Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity — in this case, CO2 and other greenhouse gases…
Who is Blythe Masters?
She is the JPMorgan employee who invented credit default swaps, and is now heading JPM’s carbon trading efforts. As Bloomberg notes (this and all remaining quotes are from the above-linked Bloomberg article):
Masters, 40, oversees the New York bank’s environmental businesses as the firm’s global head of commodities…
As a young London banker in the early 1990s, Masters was part of JPMorgan’s team developing ideas for transferring risk to third parties. She went on to manage credit risk for JPMorgan’s investment bank.
Among the credit derivatives that grew from the bank’s early efforts was the credit-default swap.
Some in congress are fighting against carbon derivatives:
“People are going to be cutting up carbon futures, and we’ll be in trouble,” says Maria Cantwell, a Democratic senator from Washington state. “You can’t stay ahead of the next tool they’re going to create.”
Cantwell, 51, proposed in November that U.S. state governments be given the right to ban unregulated financial products. “The derivatives market has done so much damage to our economy and is nothing more than a very-high-stakes casino — except that casinos have to abide by regulations,” she wrote in a press release…
However, Congress may cave in to industry pressure to let carbon derivatives trade over-the-counter:
The House cap-and-trade bill bans OTC derivatives, requiring that all carbon trading be done on exchanges…The bankers say such a ban would be a mistake…The banks and companies may get their way on carbon derivatives in separate legislation now being worked out in Congress…
Tags: Alan Greenspan, Barack Obama, Blythe Masters, cds, CO2, Congress, Derivatives, Derivatives market, Economy, George Soros, Global News, JPMorgan, Maxine Waters, Obama administration, SEC, Warren Buffett
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
Tags: Alan Greenspan, Bailout, Barack Obama, Bonds, Bubble, Debt, Depression, Dollar, Economy, Fed, Federal Reserve, Franklin Delano Roosevelt, Government, Great Depression, Herbert Clark Hoover, Keynesianism, Obama administration, Politics, Recession, Ron Paul, Taxpayers, Treasury, U.S.
“When the people find they can vote themselves money, that will herald the end of the republic.”
- Benjamin Franklin
Added: 22. October 2009
Fall Of The Republic documents how an offshore corporate cartel is bankrupting the US economy by design. Leaders are now declaring that world government has arrived and that the dollar will be replaced by a new global currency.
President Obama has brazenly violated Article 1 Section 9 of the US Constitution by seating himself at the head of United Nations’ Security Council, thus becoming the first US president to chair the world body.
A scientific dictatorship is in its final stages of completion, and laws protecting basic human rights are being abolished worldwide; an iron curtain of high-tech tyranny is now descending over the planet.
A worldwide regime controlled by an unelected corporate elite is implementing a planetary carbon tax system that will dominate all human activity and establish a system of neo-feudal slavery.
Tags: 1984, Abu Ghraib, Afghanistan, Africa, AIG, Alan Grayson, Alan Greenspan, Alex Jones, Bailout, Bank of America, Banking, Barack Obama, Barclays, Bear Stearns, Ben Bernanke, Bill Clinton, Bill of Rights, BIS, Brad Sherman, Bubble, Bush administration, carbon tax, cds, Central Bank, China, Citigroup, Congress, Constitution, Corporations, Corruption, cybersecurity, Debt, Democrats, Dennis Kucinich, Depression, Derivatives, Derivatives market, Detention, Deutsche Bank, Dictatorship, Documentary, Dollar, Economy, EU, Euro, False flag, Fascism, FBI, FDIC, Fed, Federal Reserve, Financial Crisis, First Amendment, Fourth Amendment, Fraud, G20, GDP, George Bush, George Orwell, Gerald Celente, Global News, Global Warming, Goldman Sachs, Gordon Brown, Government, Great Depression, Henry Paulson, Human Rights, Hyperinflation, IMF, Impeachment, Inflation, Internet, Iraq, Jesse Ventura, John Perkins, JPMorgan, Larry Summers, Law, Law enforcement, Lehman Brothers, Lobbyists, Martial Law, Max Keiser, Merrill Lynch, Military, Mind-Control, money supply, Morgan Stanley, Mortgage crisis, Mortgages, NAFTA, Nancy Pelosi, New World Order, NSPD 51, Obama administration, Patriot Act, Paul Volcker, Police State, Politics, Poverty, Privacy, Rahm Emanuel, Raytheon, Republic, Republicans, Rockefeller, Ron Paul, Rothschild, SEC, Second Amendment, Senate, Society, Surveillance, Taxes, Taxpayers, Terrorism, Timothy Geithner, Treason, U.N., U.S., Unemployment, Wall Street, War, warrantless wiretapping program, Wells Fargo, White House, World Bank
The Obama administration is pure Wall Street, Federal Reserve, CFR and Trilateral Commission. There is no change. The banksters have free reign in America.
- The US Government: Bought and Paid For
- Treasury Secretary Geithner’s Closest Aides Reaped Millions Working for Banks, Hedge Funds
- Goldman Sachs Banksters Set to Pay Record £14 Billion in Bonuses
- Government Watchdog: Treasury and Federal Reserve Knew Bailed-Out Banks Were Not Healthy, Lying to Americans
- Goldman Sachs to be paid $1bn if CIT fails, while US taxpayers would lose $2.3bn
- US: Utah approved a $27.3 million incentive package to keep Goldman Sachs, bringing the total amount to $47.3 million
- Congresswoman Marcy Kaptur: There Has Been a Financial Coup D’Etat
“I am outraged that the Obama Administration promised change and did not deliver. “Yes We Can” was a lie. The reality is “It’s Business As Usual, Only Worse, With Higher Deficits”.”
“I am outraged there is not enough outrage over this.”
“Where the hell is the outrage?”
The number of articles and opinions on Goldman Sachs earnings, bonuses, and influence peddling over the past several days is quite stunning.
Many have pointed out the problems; few have expressed outrage over what is happening in general, not just at Goldman Sachs. Let’s take a look.
My take is at the end.
Letting The Dice Roll
Rolfe Winkler at Contingent Capital is writing Letting Goldman Roll The Dice.
Is Goldman really such an indispensable financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger.
Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure.
With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for the $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort?
Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves.
Tags: Alan Greenspan, Bailout, Banking, Barack Obama, Ben Bernanke, Citigroup, Debt, Derivatives, Derivatives market, Economy, Fed, Federal Reserve, Financial Crisis, Fraud, Goldman Sachs, Government, Henry Paulson, JPMorgan, Lobbyists, Max Keiser, Obama administration, Politics, SEC, Timothy Geithner, Treasury, Wall Street
Below is letter text, and attached is the letter that was faxed to every member of the Senate Banking Committee:
Chairman Chris Dodd
U.S. Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20551
Dear Chairman Dodd and members of the Banking Committee,
We are writing to ask you to postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf. Without such an understanding, it is impossible to know whether Chairman Bernanke is fit to serve another term and fulfill the Federal Reserve’s dual mandate to ensure price stability and full employment. A list of said documentation is enumerated below.
Since 2007, the Federal Reserve has expanded its balance sheet by $1.2 trillion and taken on substantial credit, interest-rate, and foreign exchange risk. It has lent immense sums to some financial institutions against overvalued collateral, while refusing to lend to others with no clear standards as to who was rescued and who was not. It has set up holding companies using no-bid contracts, and guaranteed substantial liabilities of Citigroup, all the while keeping information about its actions secret from the public and Congress. This is in stark contrast to the analogous period in the 1930s, when the Reconstruction Finance Corporation fully disclosed loans and collateral to Congress.
Today, big banks are being bailed out and have a substantially lower cost of capital through an implicit government backstop even as Americans themselves are seeing their pay cut. This lower cost of capital – at government expense – coupled with increased scarcity of credit is resulting in the banks recapitalizing by charging American consumers higher credit costs, including record overdraft fees and much higher credit card rates.
As you know, the Federal Reserve has a chartered mandate of both price stability and “full” employment. Since 2002, the year Bernanke joined the Federal Reserve board and aligned himself with Alan Greenspan’s activities, the incomes of Americans have actually declined in absolute terms, with incomes projected to decline a further 5% in 2009. One quarter of all mortgage holders owe more than they own, with that number projected to rise to nearly 50% by 2010. Consumer asset prices, most importantly housing, continue to fall, and unemployment continues to rise. This raises real questions about Bernanke’s tenure as Federal Reserve chairman, and about where those trillions of dollars have gone.
Federal Reserve secrecy must be understood in the context of an intellectual dogma which Alan Greenspan inculcated into the fabric of the Federal Reserve and the economics profession, and which has severely harmed ordinary Americans. Bernanke’s ‘Great Moderation’ speech in 2004 didn’t even consider the idea that the economy was becoming more unstable, even as risks were being built into the system by the policies he encouraged. He ignored evidence of a crisis, saying in 2007 that the turmoil was contained to subprime mortgages, ignoring the bankruptcy of over 100 mortgage originators, and the clear evidence the crisis would spread. Now, even as the crisis is said to be subsiding, we still do not have credit markets that are able to function without substantial government support, we have not addressed institutions that are ‘too big to fail’ which the Fed oversees, bank credit availability is again shrinking (posing risk of further increasing already high unemployment), and toxic assets in the system on the books of both private banks and the Federal Reserve have still not seen price discovery.
Chairman Bernanke’s policy-making errors might be chalked up to errors of judgment, and it’s possible to argue that he has been chastened by the last few years of turmoil. What is more disturbing is how the Federal Reserve has refused to disclose the details of its commitments to the bankers who came close to destroying our economy. The Bernanke Fed’s execution of its dual mandate cannot be judged without consideration of those commitments, which would require the Fed to disclose documents which it still contends the public has no right to see.
Specifically, I ask that you postpone the confirmation of the Chairman until after the Federal Reserve discloses:
(1) Information that Bloomberg reporter Mark Pittman has requested via a Freedom of Information Act Request on the Bear Stearns rescue and that the Federal Reserve is contesting in the courts, [i] and which Manhattan Chief U.S. District Judge Loretta Preska has ordered by turned over by the Federal Resrve.
(2) Information that Rep. Grayson requested in February at a hearing and by follow-up letter on which institutions received the $1.2 trillion added to the Federal Reserve’s balance sheet, how much reach institution received, and what was promised in return.
(3) All Federal Reserve documents that went to Attorney General Andrew Cuomo’s office relating to the Bank of America/Merrill Lynch merger in which potentially illegal and coercive activity might have occurred, as well all Federal Reserve documents relating to the lawsuit pursued by Merrill Lynch shareholders in the US District court for the Southern District of New York.
(4) Transcripts of all Open Market Meeting Minutes up to and including that of June, 2009, transcripts which are normally withheld from the public for five years.
(5) Full disclosure of all terms and conditions of all off-balance sheet Fed transactions in the past three years.
The Federal Reserve must become transparent and open with Congress and the public about its behavior during the financial crisis. Thank you for your consideration of this matter.
Member of Congress Member of Congress
Cc: Richard C. Shelby
Robert F. Bennett
Charles E. Schumer
Daniel K. Akaka
Kay Bailey Hutchison
Wednesday, October 7, 2009
Source: Washington’s Blog
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Tags: Alan Greenspan, Bailout, Barack Obama, Ben Bernanke, Bonds, Bush administration, China, Debt, Depression, Dollar, Economy, GDP, George Bush, Inflation, Japan, Keynesianism, Obama administration, Peter Schiff, Politics, Recession, Stock Market, U.S., Wall Street
Ben Bernanke IS RIGHT, ‘the recession is over.’
It is now the ‘Greatest Depression’.
Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University.
Paul Craig Roberts
Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with one million school children now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.
|At the urging of Larry Summers and Goldman Sachs’ CEO Henry Paulson, the Securities and Exchange Commission and the Bush administration went along with removing restrictions on debt leverage.|
The spin that masquerades as news is becoming more delusional. Consumer spending is 70% of the US economy. It is the driving force, and it has been shut down. Except for the super rich, there has been no growth in consumer incomes in the 21st century. Statistician John Williams of shadowstats.com reports that real household income has never recovered its pre-2001 peak.
The US economy has been kept going by substituting growth in consumer debt for growth in consumer income. Federal Reserve chairman Alan Greenspan encouraged consumer debt with low interest rates. The low interest rates pushed up home prices, enabling Americans to refinance their homes and spend the equity. Credit cards were maxed out in expectations of rising real estate and equity values to pay the accumulated debt. The binge was halted when the real estate and equity bubbles burst.
As consumers no longer can expand their indebtedness and their incomes are not rising, there is no basis for a growing consumer economy. Indeed, statistics indicate that consumers are paying down debt in their efforts to survive financially. In an economy in which the consumer is the driving force, that is bad news.
The banks, now investment banks thanks to greed-driven deregulation that repealed the learned lessons of the past, were even more reckless than consumers and took speculative leverage to new heights. At the urging of Larry Summers and Goldman Sachs’ CEO Henry Paulson, the Securities and Exchange Commission and the Bush administration went along with removing restrictions on debt leverage.
When the bubble burst, the extraordinary leverage threatened the financial system with collapse. The US Treasury and the Federal Reserve stepped forward with no one knows how many trillions of dollars to “save the financial system,” which, of course, meant to save the greed-driven financial institutions that had caused the economic crisis that dispossessed ordinary Americans of half of their life savings.
The consumer has been chastened, but not the banks. Refreshed with the TARP $700 billion and the Federal Reserve’s expanded balance sheet, banks are again behaving like hedge funds. Leveraged speculation is producing another bubble with the current stock market rally, which is not a sign of economic recovery but is the final savaging of Americans’ wealth by a few investment banks and their Washington friends. Goldman Sachs, rolling in profits, announced six figure bonuses to employees.
The rest of America is suffering terribly.
The unemployment rate, as reported, is a fiction and has been since the Clinton administration. The unemployment rate does not include jobless Americans who have been unemployed for more than a year and have given up on finding work. The reported 10% unemployment rate is understated by the millions of Americans who are suffering long-term unemployment and are no longer counted as unemployed. As each month passes, unemployed Americans drop off the unemployment role due to nothing except the passing of time.
The inflation rate, especially “core inflation,” is another fiction. “Core inflation” does not include food and energy, two of Americans’ biggest budget items. The Consumer Price Index (CPI) assumes, ever since the Boskin Commission during the Clinton administration, that if prices of items go up consumers substitute cheaper items. This is certainly the case, but this way of measuring inflation means that the CPI is no longer comparable to past years, because the basket of goods in the index is variable.
The Boskin Commission’s CPI, by lowering the measured rate of inflation, raises the real GDP growth rate. The result of the statistical manipulation is an understated inflation rate, thus eroding the real value of Social Security income, and an overstated growth rate. Statistical manipulation cloaks a declining standard of living.
In bygone days of American prosperity, American incomes rose with productivity. It was the real growth in American incomes that propelled the US economy.
In today’s America, the only incomes that rise are in the financial sector that risks the country’s future on excessive leverage and in the corporate world that substitutes foreign for American labor. Under the compensation rules and emphasis on shareholder earnings that hold sway in the US today, corporate executives maximize earnings and their compensation by minimizing the employment of Americans.
Try to find some acknowledgement of this in the “mainstream media,” or among economists, who suck up to the offshoring corporations for grants.
The worst part of the decline is yet to come. Bank failures and home foreclosures are yet to peak. The commercial real estate bust is yet to hit. The dollar crisis is building.
When it hits, interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.
Since the spring of this year, the value of the US dollar has collapsed against every currency except those pegged to it. The Swiss franc has risen 14% against the dollar. Every hard currency from the Canadian dollar to the Euro and UK pound has risen at least 13 % against the US dollar since April 2009. The Japanese yen is not far behind, and the Brazilian real has risen 25% against the almighty US dollar. Even the Russian ruble has risen 13% against the US dollar.
What sort of recovery is it when the safest investment is to bet against the US dollar?
Tags: Alan Greenspan, Banking, Bubble, Bush administration, Children, Consumers, Debt, Dollar, Economy, Fed, Federal Reserve, GDP, Global News, Goldman Sachs, Great Depression, Henry Paulson, Homelessness, Inflation, John Williams, Larry Summers, Paul Craig Roberts, Recession, Social Security, U.S., Unemployment
Hyperinflation Nation starring Peter Schiff, Ron Paul, Jim Rogers, Marc Faber, Tom Woods, Gerald Celente, and others.
Prepare now before the US dollar is worthless.
Part 1 :
Tags: Agriculture, Alan Greenspan, Banking, Barack Obama, Bonds, Bubble, budget deficit, Bush administration, Cars, Central Bank, China, Chrysler, Congress, Debt, Depression, Documentary, Dollar, Dow Jones, Economy, Fed, Federal Reserve, Food, Food shortages, GDP, George Bush, Gerald Celente, GM, Gold, Great Depression, Healthcare, Henry Paulson, Hyperinflation, Hyperinflationary Depression, Inflation, Jim Rogers, Keynesianism, Marc Faber, Martial Law, Medicaid, Medicare, Monetary System, money supply, Obama administration, Peter Schiff, Politics, Real Estate, Ron Paul, Silver, Social Security, Stock Market, Taxpayers, Timothy Geithner, Treasury, U.S., Wall Street, White House, Zimbabwe
William K. Black, the former litigation director of the Federal Home Loan Bank Board who investigated the Savings and Loan disaster of the 1980s, discusses the latest scandal in which a single bank, IndyMac, lost more money than was lost during the entire Savings and Loan crisis.
He will examine the political failure behind this economic disaster, in which not only massive fraud has taken place, but a vast transfer of wealth from the poor and middle class continues as the federal government bails out the seemingly reckless, if not the criminal.
Black teaches economics and law at the University of Missouri, Kansas City and is the author of The Best Way to Rob a Bank Is to Own One.
(Run Time: 1 hour, 38 min.)
Posted August 11, 2009
Source: Information Clearing House
Tags: Alan Greenspan, Banking, Bubble, Corruption, Debt, Depression, Derivatives, Derivatives market, Economy, FBI, Fed, Federal Reserve, Fraud, Hyperinflation, Inflation, Politics, Ponzi schemes, Ronald Reagan, Standard & Poor's, Taxpayers, Timothy Geithner, U.S., Wall Street
Guest Tyler Durden of ZeroHedge
Related article: Goldman Sachs $100 Million Trading Days Reach Record (Bloomberg):
Trading losses occurred on – only!!! – two days during April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission.
The company made at least $50 million on 58 of the 65 trading days in the period, or 89 percent of the time.
This is impossible to do! Wake up people!
(Watch especially part 3.)
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Tags: Alan Greenspan, Bailout, Banking, Economy, Fed, Federal Reserve, Financial Crisis, Government, Insider Trading, Max Keiser, Obama administration, Politics, Ponzi schemes, Stock Market, Wall Street
More from Catherine Austin Fitts:
- Former Assistant Secretary of Housing: The U.S. is the Global Leader in Illegal Money Laundering
- Rethinking Diversification
This is a MUST-READ.
To: The Wall Street Journal
Re: “The Fed Didn’t Cause the Housing Bubble”
By: Alan Greenspan, former Chairman of the Federal Reserve
Dated: Wednesday, March 11, 2009
Ladies and Gentlemen:
In his article on your opinion page, “The Fed Didn’t Cause the Housing Bubble,” Alan Greenspan attributes the housing bubble to lower interest rates between 2002 and 2005. That’s amazing to me.
My company served as lead financial advisor to the Federal Housing Administration between 1994 and 1997. I watched both the Administration and the Federal Reserve aggressively implement the policies that engineered the housing bubble. These are described at my website and in my on-line book,Dillon Read & the Aristocracy of Stock Profits (http://www.dunwalke.com).
One story, for example, is the following:
“In 1995, a senior Clinton Administration official shared with me the Administration’s targets for Fannie Mae and Freddie Mac mortgage volumes in low- and moderate-income communities. We had recently reviewed the Administration’s plans to increase government mortgage guarantees – most of these mortgages would also be pooled and sold as securities to investors. Even in 1995, I could see that these plans would create unserviceable debt loads in communities struggling with the falling incomes expected from globalization. Homeowners would default on mortgages while losses on mortgage-backed securities would drain retirement savings from 401(k)s and pension plans. Taxpayers would ultimately be hit with a large bill . . . but insiders would make a bundle. I looked at the official and said that the Administration was planning on issuing more mortgages than there were houses or residents. “Shut up, this is none of your business,” the official snapped back.”
Tags: Alan Greenspan, Bubble, Bush administration, Catherine Austin Fitts, CIA, Drugs, Economy, Fannie Mae, Fed, Federal Reserve, Freddie Mac, Government, Housing, Mortgage crisis, Mortgages, Politics, Taxpayers, Treasury, U.S.
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Added: March 15, 2009
Tags: Alan Greenspan, Bailout, Banking, Barack Obama, Bill Clinton, Bubble, Bush administration, Debt, Dollar, Economy, Fed, Federal Reserve, George Bush, Government, Inflation, Obama administration, Peter Schiff, Politics, Real Estate, Recession, Stock Market, Taxpayers, U.S., Wall Street
1:51:21 – 12.03.2009
Source: Google Video
Tags: Adolf Hitler, Afghanistan, Africa, AFRICOM, Alan Greenspan, Alex Jones, Bailout, Bank of England, Banking, Barack Obama, Ben Bernanke, Bilderberg, Bush administration, CFR, China, CIA, Civil liberties, Civil rights, Climate Change, Concentration Camp, Congress, Constitution, Corporations, Corruption, Credit Crisis, Credit Crunch, Debt, Defense Department, Derivatives, Derivatives market, Dictatorship, Documentary, Dollar, Economy, Eric Holder, Farmers, Fascism, Fed, Federal Reserve, FEMA, Financial Crisis, George Bush, Gerald Celente, Global Warming, Government, Great Depression, Guns, Health, Henry Kissinger, Henry Paulson, Human Rights, Hyperinflation, Inflation, Interrogation, Iraq, Jesse Ventura, John F. Kennedy, Joseph Stalin, Liberty, Lobbyists, Martial Law, Military, Mortgage crisis, Mortgages, NAFTA, Nancy Pelosi, National Security Presidential Directive 51, New World Order, Obama administration, Police State, Politics, Ponzi schemes, Privacy, Rahm Emanuel, Rex 84, Riots, Rockefeller, Ron Paul, Second Amendment, Society, Stock Market, Surveillance, Taxes, Timothy Geithner, Torture, Treasury, Trilateral Commission, U.S., Wall Street, War, White House
And Greenspan should know, since he is one of the people mainly responsible for this mess.
NEW YORK (Reuters) – Former U.S. Federal Reserve Chairman Alan Greenspan said on Tuesday the current global recession will “surely be the longest and deepest” since the 1930s and more government rescue funds are needed to stabilize the U.S. financial system.
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Tags: Abu Dhabi, Alan Greenspan, Bailout, Bank of England, Ben Bernanke, Bonds, Bubble, Debt, Dollar, Dubai, ECB, Economy, Fed, Federal Reserve, Financial Crisis, Gold, Government, Iceland, Inflation, Jean-Claude Trichet, Max Keiser, Politics, Treasury, U.S.
And I still say we will see hyperinflation very soon. The current policies of the Fed are doomed.
Just look who profits the most of these interventions….and suddenly the greater picture suggests that the Fed wants to destroy the dollar and the economy (especially the middle class) intentionally.
Do some research – if you not already have – on who created the Fed and find out the ulterior motive of this monster from Jekyll Island. You may watch Zeitgeist, The Movie, Final Edition especially Part III of the movie which starts at 1:14:30 .
The Fed is creating ‘the worst case scenario’ and it is absolutely correct that “we are beyond the extremes of the 1930s.”
We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking.
You cannot drop below zero. So what next if the credit markets refuse to thaw? Yes, Japan visited and survived this policy Hell during its lost decade, but that was a local affair in an otherwise booming global economy. It tells us nothing.
This time we are all going down together. There is no deus ex machina to lift us out. Certainly not China, which is the most vulnerable of all.
As the risk grows, officials at the highest level of the British Government have begun to circulate a six-year-old speech by Ben Bernanke – at the time of its writing, a garrulous kid governor at the US Federal Reserve. Entitled Deflation: Making Sure It Doesn’t Happen Here, it is the manual of guerrilla tactics for defeating slumps by monetary means.
“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.
Critics had great fun with this when Bernanke later became Fed chief. But the speech is best seen as a thought experiment by a Princeton professor thinking aloud during the deflation mini-scare of 2002.
Bush was probably equally shocked when he found out that invading other countries causes US soldiers to die.
The Fed under Greenspan and Bernanke has caused this mess in the first place.
Ron Paul warned years ago of exactly this financial crisis.
Now the dollar looks good again – and many say all points to deflation, which is a ‘understandable’ misunderstanding – but very soon you will see hyperinflation and the total destruction of the dollar and the US economy. The US are broke and the US will ‘fail’ in the not too distant future – but there will be no bailout.
And like magic – like the Fed creates dollars out of thin air – there will come forward a new ‘post dollar’ currency. Everything is already set up for that.
Former Chairman of the Federal Reserve Alan Greenspan testifies before the House Oversight and Government Reform Committee on Capitol Hill in Washington October 23, 2008. REUTERS/Kevin Lamarque
WASHINGTON (Reuters) – Former Federal Reserve Chairman Alan Greenspan told Congress on Thursday he is “shocked” at the breakdown in U.S. credit markets and said he was “partially” wrong to resist regulation of some securities.
Despite concerns he had in 2005 that risks were being underestimated by investors, “this crisis, however, has turned out to be much broader than anything I could have imagined,” Greenspan said in remarks prepared for delivery to the House of Representatives Committee on Oversight and Government Reform.
“Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity — myself especially — are in a state of shocked disbelief,” said Greenspan, who stepped down from the Fed in 2006.
With a general election looming November 4, U.S. lawmakers were sharply divided along political lines in either blaming regulators or bickering for failure to prevent the crisis that has gripped financial markets around the world.
“The reasons why we set up your agencies and gave you budget authority to hire people is so you can see problems developing before they become a crisis,” Committee Chairman Henry Waxman, a California Democrat, told a panel that included Securities and Exchange Commission Chairman Christopher Cox and former U.S. Treasury Secretary John Snow.
“To say you just didn’t see it, that just doesn’t satisfy me,” Waxman said.
Bill Maher Interviews Fmr. Comptroller General David Walker about the huge deficit in America.
(CNN) — The Emergency Economic Stabilization Act contains plenty to make lawmakers on the left and right shudder. On the right, it’s the apparent abandonment of free-market principles. On the left, it’s the absence of punishment for high-flying Wall Street CEO’s.
By PAUL CRAIG ROBERTS
Readers have been pressing for a solution to the financial crisis. But first it is necessary to understand the problem. Here is the problem as I see it. If my diagnosis is correct, the solution below might be appropriate.
Let’s begin with the fact that the financial crisis is more or less worldwide. The mechanism that spread the American-made financial crisis abroad was the massive US trade deficit. Every year the countries with which the US has trade deficits end up in the aggregate with hundreds of billions of dollars.
Countries don’t put these dollars in a mattress. They invest them. They buy up US companies, real estate, and toll roads. They also purchase US financial assets. They finance the US government budget deficit by purchasing Treasury bonds and bills. They help to finance the US mortgage market by purchasing Fannie Mae and Freddie Mac bonds. They buy financial instruments, such as mortgage-backed securities and other derivatives, from US investment banks, and that is how the US financial crisis was spread abroad. If the US current account was close to balance, the contagion would have lacked a mechanism by which to spread.
Tags: Alan Greenspan, Bailout, Credit Crisis, Credit Crunch, Debt, Economy, Fed, Federal Reserve, Financial Crisis, Foreclosures, Government, Henry Paulson, Military, Mortgage crisis, Mortgages, Paul Craig Roberts, Politics, Recession, Stock Market, Treasury, U.S., Unemployment, Wall Street
The financial crisis has put a spotlight on the obscure world of credit default swaps – which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?
(Fortune Magazine) — If Hieronymus Bosch were alive today to paint a triptych called “The Garden of Mortgage Delights,” we’d recognize most of the characters in the bacchanalia and its hellish aftermath. Looming largest, of course, would be the Luciferian figures of Greed and Excessive Debt. Scurrying throughout would be the Wall Street bankers who turned these burgeoning debts into exotic securities with tangled structures and soporific acronyms – CDO, MBS, ABS – that concealed the dangers within. Needless to say, we’d see the smooth-tongued emissaries of the credit-rating agencies assuring people that assets of lead could indeed be transformed into investments of gold. Finally, somewhere past the feckless Fannie Mae executives and the dozing politicians, one final figure would lurk in the shadows: a hulking and barely recognizable monster known as Credit Default Swaps.
CDS are no mere artist’s fancy. In just over a decade these privately traded derivatives contracts ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they’ve played a critical role in the unfolding financial crisis. First, by ostensibly providing “insurance” on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble. Continue reading »
Tags: Alan Greenspan, Bailout, Ben Bernanke, Citigroup, Congress, Credit Crisis, Credit Crunch, Economy, Fed, Federal Reserve, Government, Mortgage crisis, Mortgages, Politics, U.S., Wachovia, Wall Street
Back in 2002, when his reputation as “The Man Who Saved the World” was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting “economic stability”.
During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses. Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: “European insurance companies.”
Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.
Lehman Brothers HQ in New York
Global investment bank Lehman Brothers is teetering on the verge of collapse after Barclays pulled out of an 11th-hour rescue.
The departure of Barclays left US Treasury Secretary Hank Paulson and Tim Geithner, the head of the Federal Reserve Bank of New York, spearheading desperate last-ditch attempts to put in place some form of a workable rescue package.
Traders fear that the collapse of Lehman would send shockwaves around the world and spark a global sell-off of shares.
Lehman which employs 4,000 staff in London and 24,00 around the world, could be placed into liquidation as soon as Monday. The bank would be the single largest casualty of the current credit crisis and its collapse one of the biggest failures in Wall Street history.
In one of the most traumatic days in the history of Wall Street, Bank of America is reported to be on the verge of buying Merrill Lynch for $38bn.
Tags: Alan Greenspan, Bank Failure, Bank of America, Banking, Barclays, Credit Crisis, Credit Crunch, Economy, Fed, Federal Reserve, Financial Crisis, financial market, Henry Paulson, JPMorgan, Merrill Lynch, Mortgage crisis, Mortgages, Politics, Treasury, U.S., Wall Street
“The game is over” as independent companies said Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., in an interview on CNBC today. “They were able to borrow without any of the normal restraints. They had a blank check from the federal government.”
Tags: Alan Greenspan, Bailout, Bank Failure, Banking, Bear Stearns, Bill Gates, China, Economy, Fannie Mae, Fed, Federal Reserve, Franklin Delano Roosevelt, Freddie Mac, Government, Henry Paulson, Inflation, JPMorgan, Mortgage crisis, Mortgages, Treasury, U.S., Warren Buffett