The Great Dee-Fleck-Tors. All kidding aside, the big news was the passing of the G-20 economic hat that filled up with a modest $1 trillion that will go to crumbling, struggling and barely developing countries. No doubt, that money will go to make sure that those countries don’t default on their debt payment loans that the IMF is hungrily waiting for. That was not what we heard from President Obama. He framed it so we are to believe that the money is for more economic purposes, but I doubt it very much.
Back here at home, Professor Michael Hudson (How the Scam Works, Counterpunch.org) made it perfectly clear how the new Financial Stability Plan to subsidize the sale of “legacy assets”, ie, toxic mortgage debt, will be ripping us off. He explained that if a bank says that their package of collateralized debt obligations (CDO) is worth to them $10 million, it is likely they have overstated that fact. In late 2007, a recent Fitch rating agency study discovered that most of these junk mortgage debts are riddled with financial fraud, and the bank’s $10M package is likely only worth $2M. Isn’t this reassuring since the taxpayers are hoofing up 85% of the costs. Now, if another bank, hedge fund or equity fund decides to pony up $3M, then the scam becomes enhanced. The more money offered for the debt, the more TimmyG puts in, so why not make it a cool $5M. What we got now is the Treasury, with its 85% contribution, laying down $4,250,000. All the “investor” has to fork up is an easy $750,000—its 15% share. The legacy asset seller, B of A, or Goldman Sachs, or JPM, for example, which might even be hiding behind their own sacrificial equity fund they set up to buy the toxic debt which they might later fold up into bankruptcy disposing of the debt altogether, now gets $4,250,000 for its junk mortgage bond that was really only worth $2M! What a way to recapitalize an insolvent and bankrupt banking system! The $2T used for this Ponzi scheme is debt created into bond securities, none of which the private sector wants to touch, from credit cards, commercial loans, student loans, auto loans, and such through the Public-Private Partnership Investment Program (PIPP).
Back here at home, Professor Michael Hudson (How the Scam Works, Counterpunch.org) made it perfectly clear how the new Financial Stability Plan to subsidize the sale of “legacy assets”, ie, toxic mortgage debt, will be ripping us off. He explained that if a bank says that their package of collateralized debt obligations (CDO) is worth to them $10 million, it is likely they have overstated that fact. In late 2007, a recent Fitch rating agency study discovered that most of these junk mortgage debts are riddled with financial fraud, and the bank’s $10M package is likely only worth $2M. Isn’t this reassuring since the taxpayers are hoofing up 85% of the costs. Now, if another bank, hedge fund or equity fund decides to pony up $3M, then the scam becomes enhanced. The more money offered for the debt, the more TimmyG puts in, so why not make it a cool $5M. What we got now is the Treasury, with its 85% contribution, laying down $4,250,000. All the “investor” has to fork up is an easy $750,000—its 15% share. The legacy asset seller, B of A, or Goldman Sachs, or JPM, for example, which might even be hiding behind their own sacrificial equity fund they set up to buy the toxic debt which they might later fold up into bankruptcy disposing of the debt altogether, now gets $4,250,000 for its junk mortgage bond that was really only worth $2M! What a way to recapitalize an insolvent and bankrupt banking system! The $2T used for this Ponzi scheme is debt created into bond securities, none of which the private sector wants to touch, from credit cards, commercial loans, student loans, auto loans, and such through the Public-Private Partnership Investment Program (PIPP).
This is like taking the dead body (toxic mortgage debt), stuffing it into a sack (transferring this debt onto the bankster's shell company's balance sheet), allowing the bankster to steal the contents inside the wallet and then deposit the amount into their re-capitalized bank account (taking Geithner's 85% taxpayer contribution for over inflated toxic mortgage debt). Now they dump the body (the transferred toxic mortgage debt) encased in cement booties into the Hudson River allowing the shell company with the toxic mortgage debt as its only holding, to go bankrupt erasing the debt, while the bankster ends up making out like the bandit he has been allowed to be. All done with the White House's golden seal of approval given by Geithner, Summers, Bernanke and Obama. If this isn't the Royal Scam of century, I don't know what is! The banking emperors get their toxic debt incinerated through bankruptcy, and they end up with a big reward, ie, Geithner paying them two to three times what that toxic mortgage debt was worth at taxpayer's expense. Walla! Now the zombie banks have nothing to write down on their balance sheets. They have been magically re-capitalized by the Treasury and Fed. And no one is the wiser, but you and me. PIPP, PIPP Hurray!
A missing piece for the banks to get the Accounts-keeping Seal of Approval for jacking up the market value of the toxic debt that is really barely worth anything is to get the Financial Accounting Standards Board (FASB) to rewrite the financial accounting rules allowing the mega-empire-banks, 5 in total, to decide for themselves what the value of the toxic mortgage debt is worth to them. These new rules and guidelines give the bankstas a veil of fabricated legitimacy of which they needed to drape upon the value of their toxic mortgage debt. This would allow Geithner to go forward with his inflated and subsidized offers to the banks with the cover needed from the quasi-governmental agency--FASB. We don't need no stinkin' mark-to-market rules! We are the crime bosses of Wall Street! Step aside. WE make the rules around here, mista! Mista Obama, we are comin' through. Geithner, get your checkbook out and ready! These magical rules were back dated to cover the last few weeks to make sure all bases are covered.
Now, what is worth-less, is now worth-more. A lot more! You have to admit it is a beautifully designed Royal Scam. All bases covered. The banks can now get their worthless debt valued at gleefully inflated amounts thanks to new FASB rule changes. The banks can set up their own shell equity funds to sell, ie. transfer, the toxic mortgage debt onto a new balance sheet, at a 15% cost. The banks, in return, get to receive from Treasury a subsidized purchase price (at 85%) for the toxic mortgage debt, now valued 2 to 3 times its actual mark-to-market value. Now the banks have no toxic paper on their balance sheets thanks to all of us, China, and the Fairy God Mother. This is what is referred to as a "Clusterf**k"! The plot against Caesar Americus by Brutus Geithnerslut and Da' Boys has finally arrived.
Here is another kicker. F. William Engdahl wrote in Geithner’s Dirty Little Secret, that there are only 5 mega-banks that hold “96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default”, as was reported by the Federal Office of Comptroller of the Currency, in its Quarterly Report on Bank Trading and Derivatives Activity. JPMorgan holds $88 trillion in derivatives. Bank of America holds $38 trillion; Citi holds $32 trillion; Goldman-Sachs holds $30 trillion; Wells Fargo-Wachovia Bank holds $5 trillion. And, out of Britain, HSBC USA holds $3.7 trillion.
Mr. Engdahl called this a banker’s coup d’etat. The $180B bailout to AIG went to rescuing the 5 mega-banks, since they were AIG’s biggest counterparty clients.
Tim Geithner says, “We need better, smarter, tougher regulations”, so TimmyG, why hasn’t the Glass-Steagall Act been reactivated? Why hasn’t the Commodity Futures Modernization Act 2000 been trashed? Yet, TimmyG is still blowing his rusty horn and wanting to bring in better, smarter and tougher regulations. Let’s hear ya play another tune for us because this one is down right bad. What is amazing is that Timmy, when he was chairman of the New York Federal Reserve, reporting to Bada Bing Ben Bernanke, was supposed to enact regulatory rules, but he says that was not his role. Yet, according to his job description, he was to act as a banking regulator. Watch William K. Black, a former regulator and economist say so to Bill Moyers.
Dr. Dean Baker, economist, wrote in “Geithner’s Plan Will Tax Main Street to Make Wall Street Richer”, “Oh, by the way, some people will get very rich off the Geithner plan. Some hedge and equity fund managers could make hundreds of millions or even billions off the Geithner plan. And, under current law, they will pay a lower tax rate on this money than a schoolteacher or firefighter. Are you sold yet?”
Michael Whitney quoted the economist Jeffrey Sachs in “Geithner Hog Wild”, “Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and FED)…”
It sure seems to me that the Geithner plan is like allowing gangstas who have terrorized the village store owners by breaking windows and knocking down doors, as well as looting the cash registers while stuffing their pockets with merchandise as they run out the door, to then be given government neighborhood block grants to open up their shops in the places where the former businesses had been established. And then, tell the villagers they will be spending their money in the gangsta’s new shops. This is the kind of nation we seem to be living in from my perspective.
TimmyG now wants Congress to grant him full regulatory power so he can decide which institutions need to be shut down because they maybe dangerously too large of a risk to go own without HIS form of regulation. So now, we have place Brutus (Tim Geithner) as Caesar’s (Obama and US) bodyguard. Or, you might say that now that the three little pigs have hired on the wolf to do their housecleaning.
Dr. Baker went on to say, “The core problem is that many of the largest banks are bankrupt. They are currently concealing this bankruptcy by listing assets on their books at prices that are far above their market value. In principle, they can do this for a long time, unless the government forces them to write-down the value of these assets. As long as the banks are bankrupt, they will not make new loans, limiting the ability of many businesses to get capitalized.”
So, what would be the incentive for these government subsidized mega-banks to risk the “gifts” Geithner has given them through Treasury and Federal Reserve hand-outs in the form of TARP, TALF, and Federal Fund Window exchanges during a time when the economy is shrinking, unemployment figures show we may see 700-800,000 unemployed per month as the year progresses (1 in 4 or nearly 14 million unemployed: a 25 year high now at 8.5%; average full-time work week hours are down to 33.2 per week- a record low, over 5 million jobs lost; 2.4% jobs lost over the last 4 months; 1 in 4 people have been looking for work over the last 6 months).
What appears clearer and clearer is that the Obama presidency’s prime players are not willing to upset or disrupt the function, structure, or process within the financial sector, but they are very willing to increase the lines outside the nation’s unemployment offices and continue to hurt the American working people as they sacrifice in order to stay solvent without one penny of a bonus, or an increase in their expense accounts, or when finding themselves on the street not having the opportunity to land upon a cushy Golden Parachute.
Once the stimulus begins to circulate through the paychecks of working America, we will be able to assess if there will be a noticeable impact in spending. I believe out of the $900B stimulus there will only be around $200B filtering through the hands of workers spreading out throughout the entire country. This is so small in comparison to the $12 trillion (pledged, promised, and portioned) that has been leveraged on behalf of only a handful of mega-banks through this Trickle Down economic policy in hopes that this economy will begin borrowing in the face of a shrinking and unstable consumer market. Does any of this make a speck of sense?
There has been no tough talk to the bankstas. The Obama Team has not said that if you don’t write down your mortgage debt at the mark-to-market price, and raise private capital within a 30-day time, then you will otherwise have to go into receivership. If taken over, then the government would handle the write-downs of the toxic assets (debt) and own the assets.
Had they done what Dr. Dean Baker suggested, which was for the bondholders to be guaranteed full protection if their bankstas unwound in 30-days, but if the process were to take longer, dragging it out, then the bondholders would be less protected. How brilliant!! So, why isn’t Dr. Baker our Treasury Secretary? Oh, I forgot, he is not a Trojan Horse for Wall Street. That appears to be a requirement for joining Team Obama.
The contrast between the breakneck speed that was used to bailout Bear Stearns, in March 2008, that took only a weekend, or the sale of Merrill Lynch to Bank of America, or the initial bailout of AIG, or the impressive speed that was engineered when Washington Mutual was placed into the hands of JPMorgan-Chase, or the 5 insolvent mega-banks that Washington found new capital to bathe them with, or the overnight firing of Mr. Goodwrench Wagoner over at GM, so demonstrates that Team Obama has put finance before labor, as they diminish, lessen, reduce the interests of labor, and the nation’s need for labor and manufacturing in order to rescue the country from further collapse and give favor to what is called the “real” economy over the “monopoly-financial-capitalist” economy.
Here is another kicker. F. William Engdahl wrote in Geithner’s Dirty Little Secret, that there are only 5 mega-banks that hold “96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default”, as was reported by the Federal Office of Comptroller of the Currency, in its Quarterly Report on Bank Trading and Derivatives Activity. JPMorgan holds $88 trillion in derivatives. Bank of America holds $38 trillion; Citi holds $32 trillion; Goldman-Sachs holds $30 trillion; Wells Fargo-Wachovia Bank holds $5 trillion. And, out of Britain, HSBC USA holds $3.7 trillion.
Mr. Engdahl called this a banker’s coup d’etat. The $180B bailout to AIG went to rescuing the 5 mega-banks, since they were AIG’s biggest counterparty clients.
Tim Geithner says, “We need better, smarter, tougher regulations”, so TimmyG, why hasn’t the Glass-Steagall Act been reactivated? Why hasn’t the Commodity Futures Modernization Act 2000 been trashed? Yet, TimmyG is still blowing his rusty horn and wanting to bring in better, smarter and tougher regulations. Let’s hear ya play another tune for us because this one is down right bad. What is amazing is that Timmy, when he was chairman of the New York Federal Reserve, reporting to Bada Bing Ben Bernanke, was supposed to enact regulatory rules, but he says that was not his role. Yet, according to his job description, he was to act as a banking regulator. Watch William K. Black, a former regulator and economist say so to Bill Moyers.
Dr. Dean Baker, economist, wrote in “Geithner’s Plan Will Tax Main Street to Make Wall Street Richer”, “Oh, by the way, some people will get very rich off the Geithner plan. Some hedge and equity fund managers could make hundreds of millions or even billions off the Geithner plan. And, under current law, they will pay a lower tax rate on this money than a schoolteacher or firefighter. Are you sold yet?”
Michael Whitney quoted the economist Jeffrey Sachs in “Geithner Hog Wild”, “Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and FED)…”
It sure seems to me that the Geithner plan is like allowing gangstas who have terrorized the village store owners by breaking windows and knocking down doors, as well as looting the cash registers while stuffing their pockets with merchandise as they run out the door, to then be given government neighborhood block grants to open up their shops in the places where the former businesses had been established. And then, tell the villagers they will be spending their money in the gangsta’s new shops. This is the kind of nation we seem to be living in from my perspective.
TimmyG now wants Congress to grant him full regulatory power so he can decide which institutions need to be shut down because they maybe dangerously too large of a risk to go own without HIS form of regulation. So now, we have place Brutus (Tim Geithner) as Caesar’s (Obama and US) bodyguard. Or, you might say that now that the three little pigs have hired on the wolf to do their housecleaning.
Dr. Baker went on to say, “The core problem is that many of the largest banks are bankrupt. They are currently concealing this bankruptcy by listing assets on their books at prices that are far above their market value. In principle, they can do this for a long time, unless the government forces them to write-down the value of these assets. As long as the banks are bankrupt, they will not make new loans, limiting the ability of many businesses to get capitalized.”
So, what would be the incentive for these government subsidized mega-banks to risk the “gifts” Geithner has given them through Treasury and Federal Reserve hand-outs in the form of TARP, TALF, and Federal Fund Window exchanges during a time when the economy is shrinking, unemployment figures show we may see 700-800,000 unemployed per month as the year progresses (1 in 4 or nearly 14 million unemployed: a 25 year high now at 8.5%; average full-time work week hours are down to 33.2 per week- a record low, over 5 million jobs lost; 2.4% jobs lost over the last 4 months; 1 in 4 people have been looking for work over the last 6 months).
What appears clearer and clearer is that the Obama presidency’s prime players are not willing to upset or disrupt the function, structure, or process within the financial sector, but they are very willing to increase the lines outside the nation’s unemployment offices and continue to hurt the American working people as they sacrifice in order to stay solvent without one penny of a bonus, or an increase in their expense accounts, or when finding themselves on the street not having the opportunity to land upon a cushy Golden Parachute.
Once the stimulus begins to circulate through the paychecks of working America, we will be able to assess if there will be a noticeable impact in spending. I believe out of the $900B stimulus there will only be around $200B filtering through the hands of workers spreading out throughout the entire country. This is so small in comparison to the $12 trillion (pledged, promised, and portioned) that has been leveraged on behalf of only a handful of mega-banks through this Trickle Down economic policy in hopes that this economy will begin borrowing in the face of a shrinking and unstable consumer market. Does any of this make a speck of sense?
There has been no tough talk to the bankstas. The Obama Team has not said that if you don’t write down your mortgage debt at the mark-to-market price, and raise private capital within a 30-day time, then you will otherwise have to go into receivership. If taken over, then the government would handle the write-downs of the toxic assets (debt) and own the assets.
Had they done what Dr. Dean Baker suggested, which was for the bondholders to be guaranteed full protection if their bankstas unwound in 30-days, but if the process were to take longer, dragging it out, then the bondholders would be less protected. How brilliant!! So, why isn’t Dr. Baker our Treasury Secretary? Oh, I forgot, he is not a Trojan Horse for Wall Street. That appears to be a requirement for joining Team Obama.
The contrast between the breakneck speed that was used to bailout Bear Stearns, in March 2008, that took only a weekend, or the sale of Merrill Lynch to Bank of America, or the initial bailout of AIG, or the impressive speed that was engineered when Washington Mutual was placed into the hands of JPMorgan-Chase, or the 5 insolvent mega-banks that Washington found new capital to bathe them with, or the overnight firing of Mr. Goodwrench Wagoner over at GM, so demonstrates that Team Obama has put finance before labor, as they diminish, lessen, reduce the interests of labor, and the nation’s need for labor and manufacturing in order to rescue the country from further collapse and give favor to what is called the “real” economy over the “monopoly-financial-capitalist” economy.
thanks for reading, jerry
3 comments:
Jerry, I'd say we're looking through the same lens.
Your analysis exposes a ruthlessness that most could not imagine. I sincerely hope you are wrong. Such sugar coated arsenic could never be justified.
Solbama and Chris, thanks for your comments. Since I first posted this piece, I have been adding to it. It has been a work-in-progress. I believe what I have written has been an evolution within the halls of Treasury as the bankstas sit alongside Geithner as the scheme together how to dump the toxic mortgage debt upon the US citizenry with a veil of legitimacy. It all makes sense. The mortgage debt has been their albatross around their necks and now they have figured out how to dispose of it once and for all.
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