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278 comments on Paulson and Bernanke ratchet up the blackmail talk
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278 comments on Paulson and Bernanke ratchet up the blackmail talk
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Hard to tell how this will all wash out at this point in time, but I think this recent bit of breaking news could eventually reveal much:
http://news.yahoo.com/s/ap/financial_meltdown_investigation;_ylt=AkxwqHv...
----------------------------
FBI investigating companies at heart of meltdown
-----------------------------
Bob,
We can hope that this investigation will reveal much.....but I just don't believe the FBI has enough political power to do a real investigation...they'll just be investigating the designated fall guys. Besides, trying to pin the blame on a few corrupt firms misses the point, IMHO - what we're experiencing is a systemic failure.
Anyway, take this as constructive criticism. I'm a fan of your postings. I wish you would take Leanan's advice and start a blog (you know Leanan is never wrong, stop fighting it! :^)
Regards,
Brother Kornhoer
Political power? Hah! Since when has the FBI been independent? Not in the last seven years... No, I posit this is nothing more than scapegoating. Those eventually "caught" will be blamed for it all and the focus kept as far away from the truth as possible. Then they will be given sentences better suited to jaywalking and/or pardoned. And America will snore through it.
I offer Abu Grahib and Scooter Libby as proofs of concept.
Cheers
They will probably conclude that Martha Stewart is Ms. Big behind the whole scam.
The article says there have been 26 investigations over the past year. How many successful prosecutions? I doubt that the FBI will have the ability to get very far with this since these companies under investigation will have used much legal advice to ensure what they did was not going to send them to jail. It might not have been right but was almost certainly legal.
The "independent" rating agencies will have provided valuations and so it will be difficult to prove they have misrepresented their assets.
One thing to do in congress might be to ask Eric Thorson, the Inspector General at Treasury, if there are similar internal investigations to look at connections within the department. But, Thorson was previously IG at the Small Business Administration where he seems to have muffed an investigation of an improper contract let by Steve Preston, the new HUD Secretary, to a GOP hack named Vernon B. Parker who served as assistant secretary for civil rights in the Agriculture Department from April 2003 to January 2006.
So, while IGs have had some useful roles during the present administration, it is not clear that the IG at Treasury is of that sort. Still, it would be worth asking just to cover the bases.
Chris
It's a nice distraction for the masses.
It gives people the impression there really is some Ken Lay etc types to blame, and then we even get to watch the trials on television.
Boring... Another boring collapse where everyone is asleep. At the end of the age of enlightenment even. Who'd a thunk it.
Actually, there are some criminals at the heart of the matter--those that naked shorted the system and started the collapse, floks like Einhorn and Rocker, and their "journalist" accomplices. I'm sure Overstock.com's CEO could give you a good list for starters, as could the folks at NCANS. Most of the top people at the SEC need prison terms, but then so does Bush, Cheney, Rice, Powell, and the rest of that crew.
These guys think they should be jailed, see "How to create an Angry American"
http://www.youtube.com/watch?v=OgfzqulvhlQ
It looks like some people get away with lying.
Few have taken what I've said about how this crisis started seriously. It was started by Goldman Sachs. At the time, I was a shoreholder in NFI, the very best of the sub-prime brokers, which is bourne out by their still being in business and have yet to default on any bond payment. So, I was a witness to what happened, although it took some time to understand the how.
I offer this as further testimony as the author's financial credentials far outweigh mine. A sample:
There's much more evidence as to Goldman's criminal responsibility. And just who was heading Goldman at the time? Paulson.
Here we have bob o'brein recap how the media failed even when it was shown just what was happening and how. Some may remember this full page ad placed in the 8 FEB 2005 WaPost that detailed the caause of the coming crisis and demanded accountibility.
Now we have the Robber-in-Chief trying to rob every US current and unborn to the second generation citizen. IMO, all the members of BushCo need to experience the Bonny and Clyde treatment.
Yikes. Have seen references to this before and just started reading more about it. An article in Money magazine a few years ago described Paulson as being very interested in wildlife....especially birds and predators, and how the latter maintained their position in the top of the food chain. He also is fascinated by snakes. While I like wildlife and animals too, I'm struck by the analogies here...predators and snakes. So what are they planning...should we look forward to a world oligopoly? Also, I guess that means that any investment in the stock market is sort of like throwing your money into the wind. Great.
For those who haven't, I highly encourage reading this item by Michael Hudson:
As for investing in stocks, make sure you choose a properly regulated and transparent market, which means none in the USA. I favor Oslo because the companies I like are listed there.
One of NCANS founding members has this "better plan to save the US economy," which I hope will generate some responses:
This is correct. The Fed and the Treasury have misidentified and mischaracterized the nature of this crieis from the beginning, equating it to a garden variety 'money panic/liquidity squeeze'. Under such circumstances, the injections of Fed liquidity would be 'mopped up' after the panic had subsided ... and the Fed's balance sheet cleansed. In a money panic situation, the paper taken as collateral by the Fed in an open market operation would be good, but temporarily undervalued by the panic.
This crisis is a secular revaluation of assets. The paper taken by the Fed as collateral isn't good paper mis-valued ... it really is bad paper! After a year of crisis and bear markets in all forms of paper collateral ... the Fed's balance sheet is a mess.
A giant problem with the Paulson proposal is it will bring more bad paper out of the woodwork. $700b now, $1.2t next week, $5t the end of next year ... it will never end. All the banks - both in the US and abroad - are swimming in the stuff.
I disagree with the 'Base Money' scenario since it is an inflation plan. The Fed has plenty of subsidiaries - Fannie Mae, Freddie Mac and AIG come to mind - that can be converted into 'parking spaces' - holding companies for Fed waste. The Fed can replace the waste with more Treasuries and nobody would know. Bernanke could be doing this now, the only concern would be uncertainty over him keeping his job after January.
You have illustrated the core of the current crisis in one sentence! This is the lack of yield in all investments, particularly debt. 'Simple' return is insufficient, requiring excess leverage and complex intermediation. Instead of returns to savings/investments compounded over time with manageable risk, the markets have turned to 'growth' and speculation ... and complexity and intermediation to 'hedge' the unpredictable risk. Unfortunately, the decline of yield has taken decades to manifest itself and will not be solved overnight with a bailout.
The spark for Paulson's Plea was the bankruptcy of Lehman Brothers and the resulting shockwaves felt in the money markets. The common connection between all the failures is the derivatives markets: the CDS market which is leveraging debt downward (think 'Portfolio insurance') and the interest rate/cash flow swaps market. Trading, originating and settlements in these markets should be suspended until someone who has some insights into them can straigten them out. Doing this would calm the money markets and not cost the taxpayers a dime!
Don't visit my blog!
http://stevefromvirginia.blogspot.com/
Great analysis by Jerome. I'd add one thing, while this is a blatant theft by the banksters we still have no choice but to inflate the currency in some manner. There is such a massive overhang of current and future debt (social security, pensions, etc) that the only "solutions" are either default or monetization/hyperinflation. Paulson's plan does accomplish eventual hyperinflation but we get no benefit from it other than whatever crumbs dribble back to the general economy from the banks. The best plan IMO (now that we have completely gone over to socialism anyway) would be to spend the trillion or two on transition to a nuclear/renewable power grid. But too bad, we will kill our chances to do that now. By the time they finish printing up the first trillion or so for the banks, there won't be enough confidence left in the dollar to afford any useful infrastructure projects. If people understood the scale of this issue they would be in shock. We are looking at the last chance for America's future being given away to a handful of banking parasites - and it is happening right under everyone's noses. At the very least people reading this thread should be emailing their representatives. It takes less time than reading the thread. Don't let it be said that we went down without even an objection.
Both the FBI investigation and the rumblings in Congress and the Senate are but sideshows. There were representatives this morning who had sincere doubts, but their hands are tied, They get to do token democracy, sure, but they won't be able to change the essence of the plan. Oversight? Paulson himself insisted today that he wants it, while Section 8 of the plan explicitly states there won't be any.
What I found remarkable is that Bernanke talked about maintaining economic growth, while it should be very clear that the US economy is shrinking like pants on fire. It's hard to estimate, but it would be safe to say that $10 trillion has vanished from the credit, buying power, give it a name, of the American people in the past year. So GDP growth is now a preposterous notion, but no Congressman says a word on that. More here: Growth? Where?
Jerome, there is not enough emphasis on the fact that Paulson gets to choose which banks fail, and which ones prosper. We know that most of the plan's $700 billion+ would go to Goldman and Morgan, but that's just a start. They will target banks by the dozen, to get to customer deposits, which they can do by forcing the banks to sell assets at a pre-set price. All banks will after all be made de facto government agencies. Yes, that means Paulson will be back as the boss at Goldman.
The word you will see used for all of it is "consolidation". It's a financial take-over the scale of which the world has never seen. It's not about money, it's something much bigger: power over money.
ilargi...I agree about the FBI and the bailout itself being a big show. For whom? I would have to guess those that are keeping this country running right now...the Creditors and owners of our debt. The Fed is trying to show China, KSA and the likes that we are doing "something" to try to fix this. If we lose their confidence, the FED knows how ugly it could get.
Paulson testifying before congress;
Paulson; “I’ll just read from my notes here…ahem…. We have very credible evidence that Sadam Hussain has weap… What the….? Damn it! these are Colin Powell’s notes. I said write me something LIKE Colin’s testimony you idiots.”
McCain is suspending his campaign and returning to Washington to focus on the crisis.
He is also asking to postpone the Presidential debate on Friday.
HE is trying to look concerned and helpful, but where was he for the last year that this has been brewing? It is too late now...............
How can you tell whether he is "suspending" his campaign? He's had no campaign since the Palin news cycle blew out. And his campaign before that was "Obama is a bad ..." fill in the blank. Pathetic.
He has had enough of a campaign over the last number of months to miss some key energy votes. If he is ready to come back to Washington now, I have to say that I must form the opinion that he was ducking those votes which would have boosted renewable energy which he says he supports. Taking this dim view, it is very easy to see him as ducking the debate but saying something else to cover.
This does not seem like the candidate I phone banked for eight years ago. People used to swear at me saying that McCain was a traitor to POWs and had illegitimate colored children and all sorts of hateful made up stuff. He took it in stride and shot back at the folks who would break the ninth commandment, highlighting their hypocricy.
But, now, to me, hypocrisy seems to be part of where he is at himself. None of us can be free of it entirely. But, here is one who should be more aware of the harm it can do and be more careful. I haven't yet decided if he would be ruinous for the country the way I was pretty sure his opponent would be back in 2000. I'd had dealings with his father and there was a problem with him keeping his word. I figured the son would have problems as well. Turned out I was right. It is possible to have an OK president who is a scoundel. But, when character is basically all you are running on, being unable to deliver really really harms the country.
Chris
This one, at least, is not made up. He has a VERY interesting history with this issue:
Vietnam Veterans Against McCain
Cheers
Opposing legislation is part of the job of a legislator. If you don't like the position, you work to get the person out of office. But doing his job does not make him a traitor, no matter how emotionally invested you might be in the opposite position. I am going to say that the idea that we did not do everything possible to get back any who might have been left in captivity leaves a horrible feeling. But, there is that word possible to consider. It may be very sound judgement to decide that holding up a move towards peace is not possible.
The time to leave no man behind is during a orderly retreat. Our retreat was not orderly because Nixon delayed. If you want to assign blame, start there.
Chris
It was interesting but sad tonight that he closed the debate defending just these points. Obama did talk about funding the VA better, but that was not what McCain was answering. Kerry also ended up defending all the time. What horrible things that war has done to us.
Chris
IMHO from Yurop this is just another part of his campaigning. Remember politicians are mostly only interested in two things, getting elected and getting re-elected.
To the best of my knowledge McCain is no financial expert.
Catching the guilty may be useful for putting the fear of prosecution into the next batch of scammers, but don't expect to recover a significant amount of cash. The biggest chunk of cash went to homeowners who are defaulting, they either bought too much house, or refinaced their house as real estate prices rose. In any case, this is largely spent money. Its spending was a significant part of our 5 to 6.5% current account deficit. Having spent more than we produce for more than two decades, is the REAL problem we have. The overall level of debt owed to foreigners is just too large for any easy resolution. The amount owed by families, and businesses is even larger than what the government owes. The only cure is to go from current account deficit to surplus, but this means we have to produce more, and or consume less, by roughly 10% of GDP. That will make nearly everyone feel poor.
The FBI is completely compromised, as evidenced by their actions after 9/11. They will conduct their investigations, but nothing will come of it, except perhaps a few promotions of crooks.