MISSION ACCOMPLISHED?
There are some folks in the MSM and the blogosphere, of late, that talk of our current Treasury Secretary's "stunning" work. A few others in the ever-surreal MSM and the metaverse are lavishing praise upon the recent efforts of the Chairman of our Federal Reserve Board for a job well done. Yet others tell us--as they conflate the TARP bailout program with the 20+ other, lesser-known, taxpayer-funded Wall Street bailout programs, now totalling roughly $2.5 trillion in "welfare for the rich" -- that the banks are "paying the taxpayers back," to the point where somehow, we're going to make a profit on the deal.
Additionally, as 18-month-old calls for
Federal Reserve and Wall Street bailout history tranparency gain traction and some semblance of response from the financial sector (albeit in many instances only
by court order,
whistleblowers and/or anonymous informants), we're quickly realizing that virtually everything stated above is little more than hype obfuscating much darker truths, such as: roughly five banking instutions--give or take one or two--are regularly colluding on a variety of strategies regarding the
regulatory capture of our government and our society, not the least of which being
ownership and management of our nation's legislative branch.
And, now--in what may yet evolve into one of the biggest stunners of all--we're just beginning to get just the slightest wind of at least one top-five bank--actually America's largest consumer bank--allegedly participating in Repo 105-like scams (referred to as "criminal" by many) for many years, such as the [http://www.bloomberg.com/apps/news?pid=20601039&sid=a6dpE_UaA1gg matter we just learned about concerning Lehman Brothers' finances in the lead-up to their implosion in September 2008.
One of the stories, posted below, calls it all a "cabal." I am beginning to think that is no longer an exaggeration.
As you'll see from the links, below, numerous investigations and outcries--from Democrats on the floors of the U.S. Senate and House of Representatives to the Department of Justice to the historically spineless Securities and Exchange Commission (SEC)--are fully underway or being considered for further review regarding the now-questionable actions of both Bernanke and Geithner, and those that reported to them, concerning their job performance over the past few years. And, all of this is now moving forward with the understanding that, at best, the current Wall Street bailout efforts by our government have already cost taxpayers roughly $2.5 trillion.
I could ramble on about this, myself; but, tonight I'll let a well-respected financial professional and blogger on the economy, and economist Dean Baker, among others, explain all of this in words far better than anything I could write.
TRANSPARENCY: INSOLVENT BANKS AND THOSE THAT OBFUSCATE THEIR INSOLVENCY
The truth of the matter is that--as details of the NY Federal Reserve Board's and our government's obfuscated actions regarding the 2008 financial collapse are being forced into the daylight before our very eyes--two things are becoming quite clear:
1.) many of our nation's biggest banks were, and still are, insolvent; and as Treasury Secretary Tim Geithner, in one of his all-too-rare prescient moments, actually told us last Fall that public confirmation of this knowledge would result in economic disaster for this country if the story was allowed to play out in a transparent fashion (as it is now); and,
2.) with every passing day over the last few weeks, we're also learning that the efforts of those in control of our nation's economy in the Fall of 2008 (with many/most of them still running the show, today, which "coincidentally" means Tim Geithner and Ben Bernanke, among others) were highly irregular, almost certainly negligent, ethically questionable, in some cases potentially illegal and possibly criminal, and involved nothing less than the usurpation of power of the legislative branch of our government.
Yet, some are still telling us--throughout the MSM and even by some within the blogosphere--that this is to be spun into a good thing?
The more practical truth is this: It's just business as usual...and, we're finally beginning to hear the words, "crime," and "criminal," coming from the lips of some key folks, too.
BANKRUPT MEMES SUPPORTING WALL ST. = TRANSPARENT MORAL HAZARDS FOR MAIN ST.
Summing it all up: many of the largest players on Wall Street are still in quite bad shape, and the questionable and possibly criminal efforts of some of those in power to obfuscate these truths--and the truths relating to the very actions of those in power--have cost the U.S. taxpayer, dearly. All of this is occurring as Main Street steps into a "new normal" of persistently high(er) unemployment/underemployment and even lower (relative to the cost of living, on a trending basis, without respect for an occasional monthly bump contrary to that) wages, while Wall Street doesn't miss a meal and engages in yet even riskier and more egregious behaviors than it did prior to 2008--assured of the tacit reality that no matter how disgustingly Wall Street behaves, going forward, our "captured" government will always socialize the financial industry's losses and allow these greed-driven behemoths to set new records in privatized profits, even if it means redefining (I'm being real kind here) the very practice of (supposedly) ethical accounting to facilitate those ends.
Above and beyond the quasi-deification of our current Treasury Secretary and Federal Reserve Board Chair by some in the MSM, and even some bloggers' (armchair pundits with no significant credentials to support their prognostications other than their egos and out-of-context, contorted recantations of their "records") attempts to put forth the meme that it "may" not be a jobless recovery -- IMHO demonstrating absurd hubris while doing same -- while the very leaders of our nation's economy have just told us the exact opposite: we're in for a long, painful slog. In fact, current projections from most of the leaders of this country's economy tell us the U3 Index rate will stay about the same or possibly increase, modestly, throughout 2010.
In fact, this diarist has been falsely accused of being "anti-Obama" for...focusing upon this story of lengthy, persistently high levels of joblessness, which originates from...drumroll, please...the Obama administration's leading experts on the economy.
Go figure? (Yep, lately, my posts have been like flypaper for trolls. Then again, if I couldn't stand the heat, I wouldn't be cookin'!)
DEMOCRATS SPIN IT, DEMOCRATS OWN IT: VOTER JOBLESSNESS, PAIN AND SUFFERING
Even in Friday's much-heralded and latest unemployment/employment story, concerning the release of the Bureau of Labor Statistics' March 2010 Employment Situation Report, our economy did not create enough jobs last month to move the U3 Index unemployment rate. Why is that? Well, it's because we have to create somewhere between 150,000 and 200,000 real jobs (temporary Census Bureau jobs are certainly better than nothing, but, they are short-lived) each month just to keep pace with the growth of the working population and as it relates to the birth and death of businesses--just to stay even.
Meanwhile, the U6 Index actually increased a tenth of a point from February to March (from 16.8% to 16.9%) , for our society as a whole, and the U3 Index unemployment rate (for at least two minority groups) escalated quite substantially during the last month of the first quarter of calendar 2010 (from 15.8% to 16.5% for African-Americans; and from 12.4% to 12.6% for Hispanics). Multiply the U3 Index unemployment rates for these groups by approximately 170% and you'll end up with a number that's fairly close to actual BLS' U6 Index rates for those same demographic segments. In the case of African-Americans, I'd posit that it's not a stretch to say that it is a Depression, not a Recession, at least for that segment of our population. Yes, for people of color (at least in March 2010) the unemployment/underemployment numbers appear to be getting significantly worse, and certainly not worthy of celebration by the leaders of the political party with whom they historically identify--something many in the MSM and the blogosphere have done over the past few days.
Here's Calculated Risk, from their weekly summary, on the latest BLS Employment Situation Report:
Weekly Summary and a Look Ahead
by CalculatedRisk on 4/04/2010 12:25:00 PM
...Although the headline number of 162,000 payroll jobs was a positive (this is 114,000 after adjusting for Census 2010 hires), the underlying details were mixed. The positives: the unemployment rate was steady, the employment-population ratio ticked up slightly (after plunging sharply), the diffusion index showed more industries hiring, and average hours increased (might have been impacted by the snow in February).
But a near record number of part time workers (for economic reasons), a record number of unemployed for more than 26 weeks, and a decline in average hourly wages are all negatives...
"FIVE FOR ME. ONE FOR YOU. FIVE FOR ME..."
Others claim that Wall Street has paid back the "TARP" (within the context of conflating that program as being the only Wall Street bailout program of which Main Street's aware) and that we'll make a profit on it. This is a spectacularly inaccurate piece of misinformation. Unless those same folks in lower Manhattan happen to have a spare $2.5 trillion lying around to cover the actual cash outlays we taxpayers have made to cover their socialized losses, as they continue to privatize their make-believe profits, the costs of the Wall Street bailout have, already, been massive; and, they continue to grow.
Take it away, Dean...
Did We Make A Profit On Citigroup?
Dean Baker
Co-Director of the Center for Economic and Policy Research
Posted: April 1, 2010 09:26 PM
The Washington Post (aka Fox on 15th Street) once again proclaimed TARP a success. The cause for the latest revelry is the fact that the government appears to be in a position to make an $8 billion gain on the stock it holds in Citigroup. Before we join the Post in breaking out the champagne, it's worth taking a bit closer look at our investments in Citigroup.
Our ownership of Citigroup stock has it origins in the dark days of late November of 2008. At the time, Citi's stock price was rapidly descending toward zero and private investors would not go near the collapsing behemoth. The Treasury and Fed boys spent the weekend before Thanksgiving working out a rescue package.
They came up with a package that had the Treasury buying $20 billion in preferred Citigroup stock and guaranteeing the value of $300 billion in troubled assets. In exchange for this guarantee, the government got another $7 billion in preferred Citigroup stock. The total value of this deal -- $27 billion - exceeded the full market value of Citi's stock on the last trading day prior to the rescue. In other words, the government could have owned Citigroup outright for the money that it handed the bank that weekend...
Baker continues on in his post to quote and reference a myriad of downright hidden and lesser-known, taxpayer-funded giveaways--equal to scores of billions of dollars in government supports for Citi and other large banks--almost all of them being related to virtually unpublicized and/or unknown federal programs and government efforts to support Wall Street, as I write this. Definitely worth a read, IMHO. And, after reading it, you'll never reference TARP payments--as the be-all and end-all of government support of Wall Street again--at least in the context you're now reading about them in the MSM and in some blog posts, today.
SENATOR TED KAUFMAN'S SAYING THINGS THE WHITE HOUSE CANNOT
Meanwhile, our Treasury Secretary has been linked to what Delaware Senator Ted Kaufman--Joe Biden's handpicked successor to fill out the remainder of his Senate term--has called outright fraud. (SEE: "NY Fed Under Geithner Implicated in Lehman Accounting Fraud Allegation.") Kaufman says much the same about the complicit nature of our Fed Reserve Board, and the NY Federal Reserve Branch, as well. So, do you think the bravest Senator in our government has gone rogue on the administration? Or, does it have something to do with a much more sophisticated strategy involving others above him in our government?
Perhaps it's the soon-to-be-made disclosure that other financial institutions, such as America's largest bank (at the moment, anyway), may have been [http://brontecapital.blogspot.com/...
engaged in these potentially criminal/fraudulent activities], too?
THE POWERS THAT BE
Powerful Wall Street forces are hard at work, all around us, already succeeding in one of the biggest covert public relations efforts in the history of lobbying right now. I know this because it's common knowledge; but, I also know this firsthand because I used to be one of "them"--a $300-per-hour (the agencies billed the clients roughly that for my services, I did not get compensated at that level) p.r. flack.
It's what they do. I remember once applying for a job at a well-known financial services public relations firm, more than 20 years ago. After showing the Executive Vice President of the firm my portfolio of placements in just about every major media outlet in the country, he leaned over the desk and told me this: "We earn more money and spend more time keeping things out of the media than we do making press placements."
While I didn't get the job--even though I more than likely would've turned it down had one been offered--it was one of the most enlightening moments I've ever had in my career. I'd call it a "jading episode."
Here's the over-arching story about all of this--and to re-phrase a line from Senators Durbin and Sanders, as well as Congressman Colin Peterson: "About five or six banks run the place"--from a George Washington guest post at Naked Capitalism, from Friday...
# # #
(NOTE: Diarist is authorized, in writing, by Naked Capitalism Publisher Yves Smith to republish this post, in its entirety.)
"We Are in a Cabal... Five or Six Players ... Own the Regulatory Apparatus. Everybody Is Afraid to Regulate Them"
George Washington
Guest Post at Naked Capitalism
Friday, April 2, 2010
Washington's Blog
Harold Bradley - who oversees almost $2 billion in assets as chief investment officer at the Kauffman Foundation - told the Reuters Global Exchanges and Trading Summit in New York that a cabal is preventing swap derivatives from being forced onto clearing exchanges:
There is no incentive from the moneyed interests in either Washington or New York to change it...
I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus. Everybody is afraid to regulate them.
Indeed, as I wrote last May:
In at least one area - one of the most important causes of the financial crisis - reform has already been defeated.
By way of background, the derivatives industry has volunteered (once again) to regulate itself.
As Newsweek noted April 10th, the big boys were using bailout money to aggressively lobby against the regulation of credit default swaps:
Major Wall Street players are digging in against fundamental changes. And while it clearly wants to install serious supervision, the Obama administration--along with other key authorities like the New York Fed--appears willing to stand back while Wall Street resurrects much of the ultracomplex global trading system that helped lead to the worst financial collapse since the Depression.At issue is whether trading in credit default swaps and other derivatives--and the giant, too-big-to-fail firms that traded them--will be allowed to dominate the financial landscape again once the crisis passes. As things look now, that is likely to happen. And the firms may soon be recapitalized and have a lot more sway in Washington--all of it courtesy of their supporters in the Obama administration...
The financial industry isn't leaving anything to chance, however. One sign of a newly assertive Wall Street emerged recently when a bevy of bailed-out firms, including Citigroup, JPMorgan and Goldman Sachs, formed a new lobby calling itself the Coalition for Business Finance Reform. Its goal: to stand against heavy regulation of "over-the-counter" derivatives, in other words customized contracts that are traded off an exchange...
Geithner's new rules would allow the over-the-counter market to boom again, orchestrated by global giants that will continue to be "too big to fail" (they may have to be rescued again someday, in other words). And most of it will still occur largely out of sight of regulated exchanges...
The old culture is reasserting itself with a vengeance. All of which runs up against the advice now being dispensed by many of the experts who were most prescient about the crash and its causes--the outsiders, in other words, as opposed to the insiders who are still running the show.
And today, Treasury gave the financial giants exactly what they wanted. As Bloomberg writes in an article entitled "Wall Street Derivatives Proposals Adopted in Treasury Overhaul":
Wall Street's largest banks are getting what they want in the U.S. Treasury's plan to regulate over-the-counter derivatives by making all market participants adhere to the same capital requirements...
"The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. "The Street's lobbyists appear to be asking for a `club' structure in OTC trading."...
The bank-written plan, titled "Outline of Potential OTC Derivatives Legislative Proposal" and dated Feb. 13, said the systemic regulator "shall promulgate rules" requiring "capital adequacy," "regulatory and market transparency" and "counterparty collateral requirements."
Hintz said Wall Street revenue from trading fixed-income, commodities and currency swaps in the over-the-counter market may be reduced by 15 percent under the Treasury's changes. "Limiting potential competition" in the market "may not be an unreasonable position to take" by the banks due to the potential loss of income, he said...
Investment banks fought regulation of OTC derivatives for more than a decade because the contracts provide a significant portion of bank earnings.
Do you get it?
Instead of "blowing up or burning" over-the-counter CDS - as nobel economist Myron Scholes urged - or making any other real changes which would help the economy and the consumer, the rule changes are mainly a p.r. effort by the derivatives industry itself (like the stress tests were a p.r stunt by the banking industry.) The "changes" will do virtually everything the derivatives industry asked for, including guaranteeing the big banks' profits in selling CDS by keeping out smaller competitors.
Regulation of over the counter CDS has already failed.
And see this.
Given that JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together held 80% of the country's derivatives risk and 96% of the exposure to credit derivatives as of July 2009, those are probably the players to which Bradley is referring.
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As an addenda to the above post, I'm linking to this post from SEC Chairman Mary Schapiro, from the WaPo, this past Friday, "Stronger regulation would help bring financial swaps out of the shadows." With further detail at the Economic Populist, "SEC Chair Schapiro Slaps Swaps."
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In closing, I'd like to offer you the wisdom of William K. Black's latest commentary...and some final prescience from Nate Silver to go along with that...
William Black: "If The Obama Administration Continues This Way, It's Going To Have A Record Disaster At The Mid-term Elections"
Zero Hedge
Submitted by Tyler Durden on 04/04/2010 15:51 -0500
In this must watch Real News Network interview with William Black, the outspoken critic of all that is wrong and broken with the current system spares no words to once again denounce the (purposeful) ineffectiveness of the administration, and rightfully predicts that with Obama's current track record of inactivity in dealing with the corruption and criminality at the nexus of finance and politics, there will be a massive loss for Democrats at the upcoming mid-term elections. In Black's words: "We knew as soon as we saw Summers and Geithner that the finance side of the administration would be a disaster, but we hoped that political side would be preeminent and say a) this is substantively wrong to continue get in bed with finance and b) it's terrible politics. The Democratic Party will be crushed if it does this. The political side has failed to get involved. This is one of those rare things where doing the right thing is really good politics (Diarist's Note: Tonight, Kossack Badabing has provided us with a particularly good post which provides a very good example of what Black's talking about, and it's linked right HERE), so support candidates that will actually do the right thing. And if the Obama administration continues this way, it's going to have a record disaster at the mid-term elections. There's going to be a massive loss of democratic seats."
Everyone should ask themselves the same rhetorical question that forms the basis of Black's conclusion: "What would it take if the greatest economic catastrophe in 80 years, if an epidemic of fraud by your top elites, if the corruption of your most senior professionals, in accounting, law, appraisal, rating agencies, isn't enough to make you fundamentally reconsider and say we are headed along a disastrous path. What will it take, because the next big one will be even worse."
And, if you're one of those that take Bill Black's mid-term prognostications with a large chunk of salt, perhaps Nate Silver's prescience will make you think twice: "The Issue That Could Fracture Both Right and Left."
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Food for thought this morning...flame away...