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Tuesday, March 16, 2010

The Financial Smoking Gun--Indict Geithner and Bernanke!

Since the mortgage meltdown occurred, many bloggers and reporters have known that the financial system was rigged to allow the fabricated fraud to go forward without any serious scrutiny, supervision, accountability, regulation, or transparency over what has been called “financial innovations”, in other words, fraudulent derivatives and securities, as well as credit default swaps, which established the marketplace as a revolving Wall Street casino establishment betting on something, but then, without notifying the “something”, betting that the “something” will fail.

What has come forward by such first rate reporters-bloggers-analysts, such as Michael Whitney, Karl Denninger, and the people at ZeroHedge, and explained in the television media by such personalities as Dylan Ratigan and Eliot Spitzer, Lehman Brothers appears to have engaged in fraud when it was still an investment banking institution.

Simon Johnson wrote in his piece “Senator Kaufman: Fraud Still at the Heart of Wall Street”, “He [Senator Kaufman-D.DE, a member of the Senate Judiciary Committee] goes after Lehman -- with its infamous Repo 105 -- as well as the other entities potentially implicated in those transactions, including Ernst and Young (Lehman's auditors). This is the low hanging fruit -- but have you heard even a squeak from the White House or anyone else in the country's putative leadership on this issue?” Where is President Obama? Where is your outrage, sir? Where is the Change We Can Believe In? Is it in a Goldman Sachs bank account? Is it in your reelection campaign fundraising account over at Bank of America located at 3401 Connecticut Avenue NW?

I believe Michael Whitney coined the term “a planned demolition” when describing what the Too-Big-To-Fail financial banking investment institutions were doing to the economy as they performed their mortgage magic mirages upon the American people as they duped them into buying homes they couldn’t afford, with no money down, and no analysis of the buyer’s financial ability to pay. And, what went along with that was a bet that they couldn’t pay at some point down the line. From there, home prices grew in their asset values and formed a massive bubble that eventually exploded.

Michael Whitney wrote in his piece, 3-15-10, “Lehman Brothers Scandal Rocks the Fed”, “After a year-long investigation, court-appointed bank examiner Anton Valukas has produced a deadly 2,200 page report which details the activities that led to the Lehman Brothers bankruptcy. The report is a keg of dynamite.”

We might say that this just could be the smoking gun, the mushroom cloud that erupted out of the volcanic rubble left by the toxic mortgage’s magma meltdown brought to all us by capitalism gone bad as designed by Alan Greenspan, Hank Paulson, Ben Bernanke, and Timmy Geithner—the Four Financial Fustian Fiends, or the Four-Squared Fleecing Fools.

I have been calling the TBTF syndicate a financial crime syndicate with Bernanke and Geithner as the mobster’s governmentally appointed financial operating field generals doing what is necessary to make sure that the Federal Reserve cranks out cash to them through its Quantative Easing operation keeping the failed mega-investment banks saturated with liquidity.

This appears to be a full-blown conspiracy to dupe the Congress, American people and the world to believe that QE was designed to infuse the investment banks with taxpayer cash in order to loosen up the credit markets and bring the economy back on-line after being shut down. April Fools!!!

Written in Naked Capitalism, by Professor L. Randall Wray, “Timmy-Gate: Did Geithner Help Hide Lehman Fraud”, “Now we find that Geithner’s NYFed supported Lehman’s efforts to conceal the extent of its problems. Not only did the NYFed fail to blow the whistle on flagrant accounting tricks, it also helped to hide Lehman’s illiquid assets on the Fed’s balance sheet to make its position look better…it continued to take trash off the books of Lehman right up to the bitter end, helping perpetuate the fraud that was designed to maintain the pretense that Lehman was not massively insolvent.” “In terms of dollar costs to the government, this is surely the biggest scandal in US history.”

Professor Wray continued: The abuse was so flagrant that no US law firm would sign off on the practice, fearing that creditors and stockholders would have grounds for lawsuits on the basis that this caused a “material misrepresentation” of Lehman’s financial statements.”

As I have said before, why isn’t the RICO statute being dusted off and charges slapped down into the hands of former Lehman Brothers CEO Dick Fuld, Fed Chairman Bernanke, and Tim Geithner, who was president of the New York Federal Reserve at the time when he should have been regulating LB. It appears that these three were engaged in the cover-up of Lehman Brothers worthless capital, which Fuld was using to borrow from other banks through what is called Repo-105. This is like a pawnbroker operation between investment banks. You give up some collateral that has market value, and in return, you get and equal value of cash to use for a very short term period of time, with the guarantee that you will pay it back soon, and reclaim your collateral.

But what was happening was Lehman was using worthless collateral and no one at the central bank, or the NYFed made Fuld and his underlings accountable for this shell game, yet it appears the NYFed knew about it and kept it from the investing public!!

Even though a New York Fed spokesman said the collateral accepted from Lehman was up-to-snuff, Lehman ended up failing two stress tests performed by the NYFed in order to determine if the collateral had real market value.

You might say that the New York Fed Outlet Store was pumping up the Lehman Brothers brand of tires, only to find they wouldn’t hold air, yet sold them to unsuspecting buyers without letting them know that in just about 10 miles, the tires would go flat.

Michael Whitney wrote that “[t]his is the huge scandal: [there were] collusive government officials who operate[d] as de facto agents for an industry saturated with corruption and conflicts of interest. [There was a conniving cover-up] of Lehman’s true position because he [Fuld] doesn’t work for the 10 million people who are now standing in unemployment lines, or the 35 million people who are now on food stamps, or the 6 million people who have lost their homes to foreclosure, or the hundreds of millions of people who have seen the home equity evaporate, their retirement funds plunge and their hopes for the future dashed so that a handful of insatiable landsharks could fatten their bank accounts in the Cayman Islands.”

“Today, there is only one market for junk: the Federal Reserve, which has lent $1.3 trillion in cash for trash, no questions asked. This amount exceeds the forecast[ed] Obama medical [health] care plan for the decade. No money for health insurance, but all for the junk-mortgage lenders.” (Yves Smith, Naked Capitalism, Whitney article)

Rave-on Michael Whitney! Beautifully said!!!

Mr. Whitney continues: “Is there really any doubt that Tim Geithner at the New York Fed, or Bernanke knew that Lehman was trading its junk assets to finance its ongoing operations? Doesn’t that in-itself constitute a cover up or [an “intentional” mislead[ing of] investors? And, if Lehman was exchanging garbage to feign solvency, then it seems likely that the other investment giants were engaged in the same type of charade. (Which implies that the rating agencies were culpable, as well.)”

Mr. Whitney had an email exchange with the brilliant, and former Wall Street economist, Professor Michael Hudson, who put this all into perspective. “If investigators can prove that the Fed exchanged US treasuries for MBS [Mortgage-Backed Securities] and other toxic assets that they knew were worth-less than the amount they provided via short-term loans (repos), then it is reasonable to assume that Bernanke’s quantative easing (QE) program operated under the same guidelines. That means, that the $1.25T QE program-which was supposed to extend credit to consumers and businesses—was actually a scam designed to transfer a gigantic load of capital to the very people who gamed the system and precipitated the biggest financial meltdown since the Great Depression. [Therefore, w]ithout question, that misallocation of capital has deepened the recession and sent unemployment skyrocketing.”

So, the big question now is what is President Obama going to do about this smoking gun, this mushroom cloud of information? Will he pull the curtain from behind the stage revealing the fraudsters that have engaged in a possible conspiracy against the United States in order “to transfer a gigantic load of capital to the very people who gamed the system”?

The Time Magazine’s Man Of The Year, and his side-kick dummy may actually be traitors, at the most, and, at the least, small fish mobster field generals who engaged in a conspiracy to perform criminal negligence. What would Joe McCarthy say about this one?

Thanks for reading, jerry


SPECTRE of Deflation said...

Jerry, here's Karl D. telling the complete truth. This CONgress is about to take this nation over the edge of the falls:

A *Very Serious* Warning To Nancy Pelosi
I know you're not going to listen to me.

I'm going to say it anyway, because as a concerned citizen of The United States of America, I must.

You are making a grave, perhaps nation-ending mistake.

Attempting to "deem" the Health Care bill passed when it has not actually been voted on is not Constitutional. Article 1, Section 7:

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined by Yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on the Journal of each House respectively. If any Bill shall not be returned by the President within ten Days (Sundays excepted) after it shall have been presented to him, the Same shall be a Law, in like Manner as if he had signed it, unless the Congress by their Adjournment prevent its Return, in which Case it shall not be a Law.

This is the black-letter law of the land.

There are millions of Americans who are extraordinarily pissed off right now. Some of them, like me, write scathing columns on The Internet or we rant on Talk Radio and Television (such as Judge Napolitano)

But some just smolder. Some remember the other founding document of our Republic, The Declaration of Indpendence, which says, in part:

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

That doesn't sound so good. What has tempered these people is largely what always has in all nations, that is:

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.


Neither you or I know where the line is for that cross-section of the citizens in this land. I cannot speak for them, for I am not inclined toward the sort of actions that they are, nor do I countenance them. As such I'm not exactly on those folks' "A list".

In fact I fear the day they decide to express their disgust, for while in singular number those expressions are horrifying, as a group such actions harken to a time I hope we would never revisit in this nation.

But I do understand, and see, that they are seething in anger at what has befallen this once-great country.

They have watched as thirty years of corruption in Washington DC has turned our economy and government into a bad joke.

They have watched their jobs go overseas to a Communist Nation for the benefit of a handful of corporate oligarchs, while Washington chortles.(SNIP)

SPECTRE of Deflation said...

Jerry, from Mike Shedlock who has a better grasp than 99.99% of the sheeple regarding what they are really doing. Do they teach math in Barry's native country? America ain't much for education, but it beats the Hell out of whatever math he received back home!

Good News From President Obama: "What you're doing is working"

I have good news. A personalized email from Info@BarackObama says...

Mike --

I wanted to take a moment to thank you directly for the outstanding work you've been doing as part of Organizing for America's Final March for Reform. I can tell you that your voice is heard in Washington every day.

But I also know that with just days remaining, the final vote is shaping up to be extremely close. Everything we've worked for is on the line, and your voice is needed now more than ever before.

Raise your voice today: We must all speak out together to finish the job.

I am pleased to hear that since I have been encouraging everyone to email their representatives and kill health care.

On behalf of President Obama I wish to continue "the outstanding work I've been doing" to kill the bill.

Raise Your Voice Today

So I again remind people that the President needs lesson in Math.

Inquiring minds are listening to President Obama proclaim Health Care Premiums Will Decrease 3000%.

Basic Math

While prices of goods and services can rise an infinite amount, the most prices fall is 100%, to zero. Of course bids on a piece of property could turn negative if a toxic waste dump was found on a site. However, Obama is discussing HealthCare, not liabilities associated with toxic waste cleanup.

Assume, you pay $5,000 a year for health insurance. To see a 3000% drop, your healthcare provider would have to pay you $145,000 to take the insurance.

This is not FantasyLand, the Twilight Zone, or Bizarro World where health care has a negative cost and providers pay you to take coverage. Therefore, president Obama is either disingenuous or in serious need of remedial math lessons.

A friend just pinged me to remind everyone that the president also needs remedial education in regards to upholding the constitution.

Organizing America

In an Email two days ago, I received an ad for "The Final March For Reform" paid for by Organizing America, touting "This is Day 6: Write Congress."

Given that Obama has encouraged me to act again, I in turn encourage you to click on the above link urging defeat of HealthCare.

Finally, if you believe that the House ought not ram through HealthCare legislation the public clearly does not want, please sign Ron Paul's Petition To Stop the Health Care Takeover!

I am pleased that president Obama is appreciative of my "outstanding work" to help kill his legislation. Moreover, and with thanks to the president, I am happy to repeat my message.

Mike "Mish" Shedlock

Obama: Premiums Will Decrease 3000%So You Should Get A Raise When H'care Is Passed

SPECTRE of Deflation said...

Jerry, as I have mentioned many times, we are broke!

The Trouble With Bonds

March 18, 2010

The U.S. deficit and the Treasury bonds which must be sold to fund it are beyond comprehension--but I try anyway.

The trouble with bonds (the U.S. Treasury variety, among others) is simple: there's too stinking many of them being issued. Given that every government on the planet except Lower Slobovia is issuing unprecedented quantities of debt (bonds) to fund their skyrocketing deficits (and Lower Slobovia would too, if its credit rating wasn't -ZZZZZ), then we have to wonder who will be showing up to buy the $1.6 trillion in freshly printed T-bills the U.S. Treasury will issue this year to cover the expected Federal deficit.
This is of course "the new normal" given last year's $1.4 trillion deficit.

So what does that number--$1.6 trillion in newly issued Treasury bonds to fund this year's deficit--mean in the real world? We might start by asking who is going to buy that stupendous issuance of new debt.

Just to put that $1.6 trillion into some sort of context, let's add up all the Treasury debt currently owned by the two largest foreign holders: China and Japan. According to the most recent statistics issued by the Treasury, China holds $889 billion and Japan holds $765 billion.

Together the two nations own $1.65 trillion in U.S. T-bills of varying maturity. Interestingly, both nations have been trimming their holdings of U.S. debt recently.

So to fund the current $1.6 trillion deficit, both China and Japan would have to double their holdings in just one year. (Perhaps they could use the $ .05 Trillion difference--$1.65T minus $1.6T--to visit Disneyland and Disneyworld.)

Since the two largest holders of debt are selling, not buying, hoping they will double their stakes this year is asking a bit much.

And then there is the 2011 deficit to sell, too, and we can't expect China and Japan to pony up another $1.5 trillion for next fiscal year's staggering deficit.

How about domestic demand for bonds? Aren't we hearing pundits declare that Americans can easily support their own government's deficits? Talk is cheap, especially for the punditry. According to BusinessWeek/Bloomberg, U.S. investors dumped $369 billion into bond mutual funds since March of 2009, while they extracted $26 billion from equity/stock funds.

That $369 billion went into a variety of public and private bonds, including local government municipal bonds and corporate bonds, so by no means did all of it go into T-bills.

But even if every cent had been used to purchase new Treasury debt, that $369 billion would have bought a mere 23% of the $1.6 trillion of new T-bills being issued this fiscal year to fund the deficit.(SNIP)

Short Short Stories said...

Check this link out.

Hi Spectre,

The piece about who will buy our bonds is a good one. The American people continue to buy goods from Japan and China, and therefore, these countries have lots of dollars. They then go forward and buy our bonds with those dollars, or they use them to buy oil for themselves, since oil is traded in dollars.

As long as Americans keep charging their plasma tv purchases and their Nikes, and Toyotas, etc these countries will continue to buy those bonds.

I am more concerned about the commercial real estate defaults coming, the coming due of AltA and interest only mortgage getting ready to reset. Also, concerned over all those second mortgages (home equities) that are worthless, as homeowners begin to try and remortgage or just foreclose.

I am more concerned about all the toxic worthless mortgage backed securities still sitting on the books not getting written down, as well as the continuation of credit default swaps being written.

I see bubbles everywhere. The market is continuing to bubble as it approaches 11,000 on the DOW from a small cabal of buyers and sellers, and large institutional investors manipulating the stock prices
when the real fundamentals are not there.

I am very concerned what this economy will look like after a mega bank goes down and how that will be dealt with.

take care, Spring has arrived! jerry