Screw the Banks and Investment Firms

cowboyangel · Post by **cowboyangel** » Sat Feb 28, 2009 10:13 pm

OBAMA: FALSE PROPHET?

Obamaâ€™s mortgage plan aims to bolster the banks
By Tom Eley
20 February 2009

On Wednesday, President Barack Obama revealed portions of a plan that aims to stem the collapse of the US housing market. The Homeowner Affordability and Stability Plan (HASP) is designed to provide a modicum of relief to homeowners while protecting the interests of the major financial institutions, mortgage lenders and mortgage securities investors who bear primary responsibility for the collapse of the housing market.

The plan will not lower the crippling debt homeowners owe the banks. It offers nothing to the hundreds of thousands of US households already foreclosed upon, and will not affect the vast majority of the approximately 12 million households already â€œunderwaterâ€

Simon of the Playa · Post by **Simon of the Playa** » Mon Mar 02, 2009 7:09 am

Jekyll Island, Part II.

the House of Morgan does it Again...

http://www.bloomberg.com/apps/news?pid= ... =exclusive

can't sit still · Post by **can't sit still** » Tue Mar 03, 2009 7:57 pm

Well, obama got hundreds of millions in campaign contributions. He didn't get them from me.
He says that he's going to fleece the rich and give money to the banks. He didn't say that he was going to go after the big multi-national corporations who skate on their taxes.
Looks like he's in the pocket of Big corp and Big Bank.
OK, so what do we get? Global research says that WE get an austerity budget and the defense industry gets more bucks.
http://www.globalresearch.ca/index.php? ... &aid=12517
So, as WE are on the road to losing 1 million jobs a month, the safety net is getting threadbare.
The financial powers who are running the show are stealing us blind so that they can survive a situation caused by their excesses. They have no regard for the producing economy. They'd just as soon do the producing in some foreign sweatshop.
They gleefully pulled the plug on Argentina and made a killing. They have no compunction against doing the same here. It never occurred to the shitheads that the fallout would do permanent damage to their own fortunes.
As the PTB try to remake the world as a giant corporatocracy, the whole thing is crashing down. They expect to do consolidation during the crash and come out on top in 10--15 years. I just don't see it happening that way. People are going to be so revolted by the idea of globalization that they just won't let it happen later on.

Things are really starting to change. People are disgusted with the ballot box.
The states are disgusted with the federal gov;
http://www.chuckbaldwinlive.com/c2009/c ... 90303.html

As big business tries to do consolidation and control, many people are pulling in the opposite direction. NWO or somebody wants global control and central power. I think that the end result is going to be global fracturing. Regions and states will try to be autonomous.
The US empire was built with borrowed money. I think that the meltdown will preclude any efforts at resurrecting our super-consumer model of economics. Once the depression really sets in, borrowing money will be the last thing on people's minds.

GOV / banking is trying like hell to get people to start spending money that they don't have. Until they can come up with manufacturing jobs for millions, nobody is going to spend. May they all rot in hell,,,, soon

cowboyangel · Post by **cowboyangel** » Wed Mar 04, 2009 7:37 am

Thanks CSS. Morgan Stanley and Goldman Sachs were big contributors to Obama.

More great articles here: http://dandelionsalad.wordpress.com/

Obama is a myth train wreck waiting to happen.

reinstate the Glass-Steagall/Stiegel Act
make all derivatives illegal as they were from 1936 -1982

Fire Tim Geitner and Larry Summers.

Stop bailing out AIG and the Wall St Banks.

ygmir · Post by **ygmir** » Wed Mar 04, 2009 7:45 am

cowboyangel wrote:Thanks CSS. Morgan Stanley and Goldman Sachs were big contributors to Obama.

More great articles here: http://dandelionsalad.wordpress.com/

Obama is a myth train wreck waiting to happen.

reinstate the Glass-Steagall/Stiegel Act
make all derivatives illegal as they were from 1936 -1982

Fire Tim Geitner and Larry Summers.

Stop bailing out AIG and the Wall St Banks.

standing up, nodding in agreement..........

can't sit still · Post by **can't sit still** » Sat Mar 07, 2009 2:11 pm

We been screwed good. All the taxpayer money is being used to pay off the derivative bets.
http://georgewashington2.blogspot.com/2 ... anged.html
Everyone knows that if enough money gangs up on a company, they can drive the stock down by shorting it ahead of time. The uptick rule was thrown out so that natural greed could be used to destroy any company for fun and profit.
The system was set up to destroy the market for profits. The REAL financial powers set up the investors to be fleeced.
Cowboy Angel posted the farewell letter of the guy who started a fund to short the sub-prime. He made a billion or so.
Some other group saw the sub-prime crash coming just as he did. Actually, they manufactured the crash. Rather than trying to make money by shorting, they took out insurance policies [CDOs] on mortgages that they knew had to fail eventually. Much of the bailout money is being used to pay them off.

SO, the REAL powers set up a rigged game,,,,, sucked in investors,,, torched the market and collected the insurance. They strongarmed congress into making sure that there were plenty of public funds to cover the insurance policy.
They don't want their names to go public so they told the FED to keep mum.
http://georgewashington2.blogspot.com/2 ... ty-of.html

The money that is being poured into bailouts will give them enormous funds to buy back all the physical assets at a fire sale price.
That will make them very happy but, it will make most regular people very unhappy. They have a plan for that too;
http://www.newsmax.com/headlines/milita ... 64765.html
The Haliburton camps are all set up and ready to receive people. Send them, your tired, your sick, your poor, your huddled masses.

This site has a link with a map showing the camps in your state.
http://www.mindfully.org/Reform/2004/FE ... 3sep04.htm

I've been looking for a while to see who the counterparties are to the derivatives. That would tell us where all the money is going. It could be the banks but I have a sneaky suspicion that it is the US GOV. That still makes it a wealth transfer from investors to GOV. GOV would have to hide it somewhere;

"ICE US Trust LLC, newest Federal Reserve shareholder!

Please click on all the hyperlinks within this article: very important information!

http://www.fourwinds10.com./siterun_dat ... 1236377395

Recently the Federal Reserve refused a Bloomberg FOIA request that they release the names of the recipients of $2T taxpayer funds. They cited it was a 'trade secret'. Indeed. So, they are not in the mood to reveal who got what?

Meet the newest shareholder of the Federal Reserve, ICE US Trust LLC, an uninsured trust company organized under New York law, as seen here: http://www.federalreserve.gov/newsevent ... 0304a1.pdf. "ICE Trust" will become a wholly owned subsidiary of ICE US Holding Company LP (â€œICE LPâ€

Post by **Elderberry** » Sat Mar 07, 2009 2:27 pm

cowboyangel wrote: reinstate the Glass-Steagall/Stiegel Act
make all derivatives illegal as they were from 1936 -1982

I definately agree with this; in addition I would make selling everything illegal except for stocks, bonds and commodities. No options or any other form of indirect trading or "gambling"; period.

JK

Simon of the Playa · Post by **Simon of the Playa** » Sat Mar 07, 2009 2:50 pm

it's the same old story...the S & L bailout was a test run, under Poppy.
the very same people who looted the banks came back and bought the shit back for pennies on the dollar from Bill Seidman and the RTC.

9/11 a diversion, to throw off morganthau and the hounds at sec. BLDG 7.

they were onto enron and many others who had used fraudulent acct. practices by fraudulent acct. firms, who just happened to do EVERYBODIES books as well as straight thievery in the form of bonuses and Golden parachutes.

marsh mac, aig, all involved in the biggest swindle in history.

funny how that works, it happened again, times 100, under another Bush, "shrub".

they're laughing it up in Hobe Sound.

can't sit still · Post by **can't sit still** » Sat Mar 07, 2009 4:06 pm

Simon, I suspect and hope that it won't work out a smoothly as "they" hope it will. J P has been downgraded to negative. Not sure how that will play out. Wells Fargo, CITI and B of A are very close to blowing.
I'm trying to keep my eye on the ball. The "ball" being who receives the big payouts. The Senate just told AIG / FED that they have to name names or not 1 cent more.
I suspect that this crash will result in so much scorched earth that the counterparties who receive the payoff,,,,, will get burned.
There isn't enough wealth to repay the tiniest fraction of all the derivatives. "They" got too greedy. The number was reported at $ 1.4 quadrillion. There isn't any way to pay off all the counterparties. Using Lehman as an example, the payoff obligations is 91.7 %.
That means that even if we and all our children get bled white, there will still be a failure of obligations. The people on the losing end of un-satisfied derivatives are going to demand payment.
31 million are on food stamps. We're losing over 600,000 jobs a month. There will be blood in the streets. The FED has to be cucoo if they think that they can continue indefinitely to refuse to name all the beneficiaries of the receiving end of the derivatives.
This has just grown too big. Central bankers are shitting bricks because no amount of currency inflation can satisfy all the counterparties. Every bit of inflation punishes voters.
If the FED refuses to divulge the names of the counterparties, there will be a big push to dump the FED. I believe that it is spelled out to cost $ 400 M. Just imagine if we dumped the FED AND our obligations to them.
if the names are divulged and it turns out to be the Warburgs and Rockefellers,et al,,, then there will still be a big push to dump the FED.
I hope that they get fucked in any case

dragonfly Jafe · Post by **dragonfly Jafe** » Sat Mar 07, 2009 4:49 pm

Don't worry, we will be saved at the last minute by the Anunnaki...

(or maybe that's why the greedy bastards need 1.4 quadrillion in gold...)

cowboyangel · Post by **cowboyangel** » Sat Mar 07, 2009 9:38 pm

can't sit still wrote:Simon, I suspect and hope that it won't work out a smoothly as "they" hope it will. J P has been downgraded to negative. Not sure how that will play out. Wells Fargo, CITI and B of A are very close to blowing.
I'm trying to keep my eye on the ball. The "ball" being who receives the big payouts. The Senate just told AIG / FED that they have to name names or not 1 cent more.
I suspect that this crash will result in so much scorched earth that the counterparties who receive the payoff,,,,, will get burned.
There isn't enough wealth to repay the tiniest fraction of all the derivatives. "They" got too greedy. The number was reported at $ 1.4 quadrillion. There isn't any way to pay off all the counterparties. Using Lehman as an example, the payoff obligations is 91.7 %.
That means that even if we and all our children get bled white, there will still be a failure of obligations. The people on the losing end of un-satisfied derivatives are going to demand payment.
31 million are on food stamps. We're losing over 600,000 jobs a month. There will be blood in the streets. The FED has to be cucoo if they think that they can continue indefinitely to refuse to name all the beneficiaries of the receiving end of the derivatives.
This has just grown too big. Central bankers are shitting bricks because no amount of currency inflation can satisfy all the counterparties. Every bit of inflation punishes voters.
If the FED refuses to divulge the names of the counterparties, there will be a big push to dump the FED. I believe that it is spelled out to cost $ 400 M. Just imagine if we dumped the FED AND our obligations to them.
if the names are divulged and it turns out to be the Warburgs and Rockefellers,et al,,, then there will still be a big push to dump the FED.
I hope that they get fucked in any case :twisted:

Great links CSS. The former head of the London Unit of AIG, Mr. Cassano
boasted that his clientÃ¨le included "sovereigns" ....could this be Britain's Royal Family, or that level of foreign client? That would explain some of the reticence to divulge the names of the counterparties. A naming action probably has strategic implications, that's why they can't do it.

Class war is now a palpable fear among these much tarnished financial ruling elites, I would guess..

cowboyangel · Post by **cowboyangel** » Sat Mar 07, 2009 9:53 pm

can't sit still wrote:I've got a joke for you'all and it's not the slightest bit funny. The banks say that they need $700 billion and that will fix things. The punch line is that the banks are borrowing $188 billion a day from the FED. http://www.gata.org/node/6679
WTF difference is $700 B going to make? The article appears to be authored by Reuters and I don't believe that it is bogus. I've got a pretty good understanding of this financial stuff, but I'm having a hard time getting a perspective on exactly what the numbers imply.
If the banks are trying to get GOV to carry the whole weight of $1.300,000,000,000 "worth" of instruments that are failing, we only have days until GOV collapses. Maybe , I'm mis-interpreting something. I hope that y'all don't think that I'm pessimistic. I just haven't seen any good news.
Dan

ugh, trying to keep up with all these great posts. Michel Chossudovsky calls it the "banks financing their own indebtedness" Cool. We pay them to loan us money and they get to charge interest on it! Viola!

http://www.911blogger.com/node/19175

can't sit still · Post by **can't sit still** » Sat Mar 07, 2009 10:36 pm

Roubini has lots to say;
" The $162 billion bailout of AIG is a nontransparent, opaque and shady bailout of the AIG counter-parties: Goldman Sachs, Merrill Lynch and other domestic and foreign financial institutions."
"And even with the $2 trillion of government support, most of these financial institutions are insolvent, as delinquency and charge-off rates are now rising at a rate--given the macro outlook--that means expected credit losses for U.S. financial firms will peak at $3.6 trillion"

I'm making the assumption that the $ 3.6 trillion loss is leveraged at 50 to 1. Dunno. I'm out of my depth here. If the total world wealth is supposed to be $ 55 trillion, what multiplier would it take to create $ 1.4 quadrillion of debt instruments? I also have to take in mind that not all of the world's wealth was financed / bet on. Reportedly, $ 15 trillion has been lost.
Apparently, the financial PTB hocked the physical wealth of the world for a huge multiple of value, planning to hold GOV hostage for the payoff by threatening to close the banks.

GOV is trying to cough up all the trillions that are demanded in order to avoid a general bank closure. Iceland is the canary that shows us the general plan. So, the banks demanded all the wealth of present and future generations to keep their doors open.

Our treasury is too inept to engineer something like this. That would indicate that the Rothschilds and Rockefellers are the beneficiaries of having the entire world in hock.
GOV prefers to give away the farm rather than being replaced for incompetence.
I see some serious flaws in the reasoning of the financial PTB.

http://www.peterthottam.com/index.html# ... 009Article
Somebody please show me where my logic is flawed or where I'm going down the wrong road.
The Rockefellers aren't interested so much in money as they are interested in the power it brings.
The NWO purports to believe in the creation of a just and equitable world,,, run by them.
They just don't seem to see that the necessary complexity of the micro-managed world would be it's undoing.
Dan

cowboyangel · Post by **cowboyangel** » Sun Mar 08, 2009 9:33 am

You're a smart cookie CSS. As long as they keep things secret, not knowing the true beneficiaries of bailout money, will keep this class of investor at the reigns. You're right, this is what they want. To dictate terms, to control and manipulate money and markets, worldwide. You control the finances and financial direction of the globe and you control everything, even decisions to engage in wars. Chossudovsky said in a talk, "the military roadmap is to support a financial agenda." Let me repeat that. "the military roadmap is to support a financial agenda". How clearer can that be? I hate to say it but WWII was the major outcome of the last depression. For this toxic ruling class, it's better to start a war or series of wars on foreign soils than have to deal with unemployed, hungry, desperate citizens in the streets at home. And yet that will probably happen anyway.

Keep sending the great analysis and links!

Cowboyangel

ygmir · Post by **ygmir** » Sun Mar 08, 2009 9:34 am

cowboyangel · Post by **cowboyangel** » Sun Mar 08, 2009 9:35 am

Oh and Roubini is a great intellect, appears on Forbes. No bullshit with this guy.

ygmir · Post by **ygmir** » Sun Mar 08, 2009 9:42 am

cowboyangel wrote:You're a smart cookie CSS. As long as they keep things secret, not knowing the true beneficiaries of bailout money, will keep this class of investor at the reigns. You're right, this is what they want. To dictate terms, to control and manipulate money and markets, worldwide. You control the finances and financial direction of the globe and you control everything, even decisions to engage in wars. Chossudovsky said in a talk, "the military roadmap is to support a financial agenda." Let me repeat that. "the military roadmap is to support a financial agenda". How clearer can that be? I hate to say it but WWII was the major outcome of the last depression. For this toxic ruling class, it's better to start a war or series of wars on foreign soils than have to deal with unemployed, hungry, desperate citizens in the streets at home. And yet that will probably happen anyway.

Keep sending the great analysis and links!

Cowboyangel

and, the unfortunate thing is, it's been human nature since the beginning...........

cowboyangel · Post by **cowboyangel** » Sun Mar 08, 2009 9:44 am

YMGIR, great ani. I would add to that Hank Paulson's face and Greenspan's, and Phil Gramm's and Bill Clinton's and Paul Volker's and Larry Summer's and well, ya get the idea....

ygmir · Post by **ygmir** » Sun Mar 08, 2009 9:50 am

cowboyangel wrote:YMGIR, great ani. I would add to that Hank Paulson's face and Greenspan's, and Phil Gramm's and Bill Clinton's and Paul Volker's and Larry Summer's and well, ya get the idea....

I'm with ya there............

can't sit still · Post by **can't sit still** » Sun Mar 08, 2009 4:23 pm

This is a comment from a blog. Normally, i wouldn't post something like this. It IS logical for banks to cancel equal amounts of each other's debts. Maybe there is some hope for untangling the mess.
"One of the major problems the banks are facing is that they need to sort out (anywhere between) 350 and 645 trillion dollars of bad derivatives. A lot of the money is owed from one zombie bank to another, and so far they've been 'canceling out' an impressive ~7 trillion dollars a month.

However, as any sixth-grader will tell you, at 49 trillion a year, it will take the banks 7 to 15 years to sort out the good assets from bad. Meanwhile, the banks are still on the hook for the commissions paid on the derivatives (typically between 0.5-1%), which is just a svelte 3.5 trillion--only twice the size of their capital base.

Any money that gets dumped into the banks basically helps them to pay their employees and run their day-to-day operations. They'll only need a few (dozen) more injections to sort out the remaining derivatives."

This is interesting. If true, it implies that the banks want to cut away the web rather than untangling it. That shows some hope for the banks. In the end, I suppose that it is better to have an organized collapse rather than an unorganized one.

The big problem won't go away,,,,,, of course. The world has too much manufacturing capacity. After WW II, the US had most of the surviving capacity. We had it great for a while there. The essence of capitalism is competition. Right now, every country is pumping oil to pay their bills. Along with too much manufacturing capacity, we have too much oil producing capacity for our current consumption level.

No country wants to be the one who cuts back production domestically. Each country crashes it's currency to make it's products cheaper. Japan wasn't able to crash it's currency so, it's economy is crashing the fastest of the developed nations.
Because of over-capacity, it will be the lowest bidder who gets the sale/job.

If US workers can only expect to receive the global mean wage, what does that imply for our former consumption patterns? Debt repayment? The price of a house must reflect the prevailing wage in the same area. When will we work off 20 million empty houses? We still have Alt-a and commercial properties on the verge of crashing.
How will we repay $ <37> trillion in combined debt?

50% in the US depend directly or indirectly on a check from GOV,,,, propped up with borrowed money. Keeping the banks open isn't going to bring a happy ending to our economic problems.

can't sit still · Post by **can't sit still** » Sat Mar 14, 2009 3:31 pm

The FED is,,, as all Burners know, a private group of european bankers. The FED also has a couple thousand member banks here in the states. These member banks are required to pay a fee. Since a big part of this crash is an attempt to consolidate the banking industry in just a few hands, it is necessary to get rid of as many banks as possible.
The big banks want to get rid of the competition.

The smaller banks didn't play with derivatives and don't have the huge losses. The big banks have found a way to destroy the small healthy banks.
""FDIC Chairwoman Sheila Bair announced last week that the quasi-public insurance monopoly would become insolvent in the next few months if it is not allowed to implement a one-time, draconian surcharge on all U.S. banks."
"
"Small, solvent, well-run local and regional banks have objected. They rightly claim that they are not the problem. "
"What is really going is that the Bailout Banks are using the government and its insurance monopoly to help them gain market share by drastically increasing the operating costs of their smaller, better-run and scrappy competitors." We are about to see the worst banks absorb the smaller sound banks--a great injustice, and totally engineered."

http://www.rense.com/general85/own.htm

cowboyangel · Post by **cowboyangel** » Sat Mar 14, 2009 5:36 pm

Fixing the Fed
By William Greider

Congress and the Obama administration face an excruciating dilemma. To restore the crippled financial system, they are told, they must put up still more public money--hundreds of billions more--to rescue the largest banks and investment houses from failure. Even the dimmest politicians realize that this will further inflame the public's anger. People everywhere grasp that there is something morally wrong about bailing out the malefactors who caused this catastrophe. Yet we are told we have no choice. Unless taxpayers assume the losses for the largest financial institutions by buying their rotten assets, the banking industry will not resume normal lending and, therefore, the economy cannot recover.

*

This is a false dilemma. Other choices are available. Throwing more public money at essentially insolvent banks is like giving blood transfusions to a corpse and hoping for Lazarus--or, as banking analyst Christopher Whalen puts it, pouring water into a bucket with a hole in the bottom. So far Washington has poured nearly $300 billion into the bucket, and Treasury Secretary Timothy Geithner has suggested it may take another $1 trillion or more to complete the banks' resurrection. The president has budgeted $750 billion for the task. Morality aside, that sounds nutty.

Here is a very different way to understand the problem: to restore the broken financial system, Washington has to fix the Federal Reserve. Though this is not widely understood, the central bank has lost its ability to govern the credit system--the nation's overall lending and borrowing. The Fed's control mechanisms have been severely undermined by a generation of deregulation and tricky innovations that have substantially shifted credit functions from traditional banks to lightly regulated financial markets. When the Fed tried to apply its old tools, starting in the 1980s, the credit system perversely produced opposite results--an explosion of debt the policy-makers could not restrain. In its present condition, the Fed may even make things worse.

Instead of frankly acknowledging the problem, Fed governors proceeded in the past two decades to engineer exaggerated swings in monetary policy--raising interest rates, then lowering them, in widening extremes. This led to the series of bubbles in financial prices--first stocks, then housing and commodities--that collapsed with devastating consequences, climaxing in the present crisis. In other words, the central bank's weakened condition and its misguided policy decisions have been a central factor in destabilizing the American economy. More to the point, the Fed's operating disorders are directly threatening to recovery; the economy is not likely to get well if the dysfunctional Fed is not also reformed.

In this crisis the central bank has so far flooded credit markets and financial institutions with trillions of dollars in new liquidity and loan guarantees, which may help to stabilize credit markets. But the Fed has been unable to engineer what the economy desperately needs--renewed lending to companies and consumers that can finance renewed growth. The confused purpose of monetary policy stands in the way. The Fed could not restrain credit expansion when it was exploding, and now it cannot stimulate credit expansion when it is frozen.

This analysis is drawn from the work of Jane D'Arista, a reform-minded economist and retired professor with a deep conceptual understanding of money and credit. (Read her recent essay, "Setting an Agenda for Monetary Reform.") D'Arista proposes operating reforms at the central bank that would be powerfully stimulative for the economy and would also restore the Fed's role as the moderating governor of the credit system. The Fed, she argues, must create a system of control that will cover not only the commercial banks it already regulates but also the unregulated nonbank financial firms and funds that dispense credit in the "shadow banking system," like hedge funds and private equity firms. These and other important pools of capital displaced traditional bank lending with market securities and collaborated with major banks in evading prudential rules and regulatory limits. "Shadow banking" is, likewise, frozen by crisis.

Once the central bank has established balance sheet connections to all the important financial institutions, including insurance companies and mutual funds, it can engineer the balance sheet conditions that will virtually compel them to unfreeze lending and restart the flows of credit. This does not require spending vast sums of taxpayers' money. It does require the government to abandon the pretense that it is merely assisting troubled private enterprises in these difficult times. Government has to step up to this financial crisis and take charge of the solution, regardless of how it disposes of the so-called zombie banks. Otherwise, Washington , including the Fed, will be restoring a dysfunctional system that can lead to the same scandalous errors.

D'Arista, who taught at Boston University and years ago was on the staff of the House banking committee, is barely known among exalted policy-makers. But her work has a strong following among progressive economists, who recognize the originality of her thinking. For nearly fifteen years with the Financial Markets Center , a monetary policy think tank, D'Arista identified the systemic disorders emerging in domestic and international finance. She proposed timely reforms while admiring economists congratulated the Fed for creating an era of "great moderation." D'Arista, I should add, is also a published poet. Formal economists will scoff, but poets often see realities the bean counters fail to recognize.

Leaning With the Wind

To understand D'Arista's reform ideas, start with her devastating critique of the central bank. The Federal Reserve, she explains, has failed in its most essential function: to serve as the balance wheel that keeps economic cycles from going too far. It is supposed to be a moderating force in American capitalism on the upside and on the downside, the role popularly described as "leaning against the wind." By applying its leverage on the available supply of credit, the Fed can slow down a boom that is dangerously overwrought or, likewise, stimulate the economy if it is sinking into recession. The Fed's job, a former chairman once joked, is "to take away the punch bowl just when the party gets going." Economists know this function as "counter-cyclical policy."

The Fed not only lost control, D'Arista asserts, but its policy actions have unintentionally become "pro-cyclical"--encouraging financial excesses instead of countering the extremes. "The pattern that has developed over the last two decades," she wrote in 2008, "suggests that relying on changes in interest rates as the primary tool of monetary policy can set off pro-cyclical foreign capital flows that tend to reverse the intended result of the action taken. As a result, monetary policy can no longer reliably perform its counter-cyclical function--its raison d'Ãªtre--and its attempts to do so may exacerbate instability."

Anyone familiar with the back-and-forth swings of monetary policy during recent years will recognize her point. On repeated occasions, the Fed set out to tighten the availability of credit but was, in effect, overruled by the credit markets, which instead expanded their lending and borrowing. The central bank would raise short-term interest rates to slow things down, only to see long-term borrowing rates fall in financial markets and negate the Fed's impact. These recurring contradictions were familiar to financial players but not to the general public. Fed chair Paul Volcker was stymied by expanding credit when he raised rates in 1982-84. His successor, Alan Greenspan, experienced the same frustration in 1994-95 (the beginning of the great debt bubble) and again at the end of the decade. The contradiction became more visible in 2005: Greenspan kept raising short-term interest rates in gradual steps, yet long-term rates kept falling, feeding the bubble of borrowing and inflating prices.

"Rather than restore its ability to exert direct influence over credit expansion and contraction," D'Arista wrote, "the Fed adhered to outdated tools and policies that became increasingly counterproductive. Too often its actions tended to exacerbate cyclical behavior in financial markets rather than exert countercyclical influence." (For her full critique, read "Setting an Agenda for Monetary Reform," a 2008 lecture at the Levy Economics Institute of Bard College, posted online at the Political Economy Research Institute's website. )

Most politicians do not even know the Fed is broken. The central bank's awesome authority is an intimidating mystery to most elected officials, and they typically defer to its oracular pronouncements. But the Federal Reserve, like all human institutions, is subject to folly and error. In fact, it has experienced colossal failure once before in its history. After the stock market crash of 1929, the Fed was utterly disgraced because its response led directly to the Great Depression. Fed governors were motivated by conservative orthodoxy and their desire to protect the profitability of the largest banks, but they misunderstood the mechanics of monetary policy and also stuck to outdated theory that produced the disastrous results. D'Arista's analysis is chilling because she suggests the modern central bank, albeit in very different circumstances, may again be pursuing wrongheaded theory, blinded by similar political biases and obsolete doctrine (for the history, see my book Secrets of the Temple: How the Federal Reserve Runs the Country).

When deregulation began nearly thirty years ago, some leading Fed governors, including Volcker, were aware that it would weaken the Fed's hand, and they grumbled privately. The 1980 repeal of interest-rate limits meant the central bank would have to apply the brakes longer and harder to get any response from credit markets. "The only restraining influence you have left is interest rates," one influential governor complained to me, "restraint that works ultimately by bankrupting the customer." Yet the Fed supported deregulation, partly because its most important constituency, Wall Street banking and finance, pushed for it relentlessly. Working Americans felt greater pain as a result. The central bank braked the real economy's normal growth continually in a roundabout attempt to slow down the credit markets.

The central bank was undermined more gravely by further deregulation, which encouraged the migration of lending functions from traditional bank loans to market securities, like the bundled mortgage securities that are now rotten assets. Greenspan became an aggressive advocate of the so-called modernization that created Citigroup and the other hybridized mega-banks--the ones in deep trouble. Old-line banks lost market share to nonbanks, but they were allowed to collaborate with unregulated market players as a way to evade the limits on borrowing and risk-taking. In 1977 commercial banks held 56 percent of all financial assets. By 2007 the banking share had fallen to 24 percent.

The shrinkage meant the Fed was trying to control credit through a much smaller base of lending institutions. It failed utterly--witness the soaring debt burden and subsequent defaults. Greenspan, celebrated as the wise wizard, never acknowledged Wall Street's inflation of debt. Indeed, he attempted to slow down the economy in order to constrain the financial system's bubbles. That did not succeed either. As Nation readers may recall, I have more than once blistered the Fed's inept performance and blamed Greenspan's "free-market" ideological bias [see "The One-Eyed Chairman," September 19, 2005]. D'Arista's analysis goes deeper and attributes the systemic malfunctioning to the Fed's weakened control mechanisms.

Central bankers attempted to fix the problem, but they may have made it worse. In the late '80s, the Fed and Wall Street leaders, joined by foreign central banks, created an international regulatory regime that requires banks to hold greater levels of capital instead of bank reserves. Reserves are the Fed's traditional cushion for ensuring the "safety and soundness" of the system. Banks were required to post non-interest-bearing accounts on their balance sheets to backstop deposits and as the means for the central bank to brake bank lending. It was assumed that the new capital requirements would do the same. Instead, the so-called Basel Accords (named for the Bank of International Settlements in Basel , Switzerland ) applied very little restraint on lending but created an unintended vulnerability for banking. The new rules have acted like a pro-cyclical force--driving banks into a deeper hole as the crisis has spread because bank capital is destroyed directly by the mounting losses from market securities. The more banks lose on their rotten assets, the more capital they have to borrow from wary investors, who understandably refuse to play. That spreads the panic and failure that governments are trying to cure with public money.

Meanwhile, acting at the behest of bankers, the Fed has practically eliminated the old safety cushion by allowing reserve levels to fall nearly to zero. Bankers complained that reserves were a drag on profits and were no longer needed given the capital rules. In a shocking new arrangement, the Fed, with approval from Congress, has started to pay interest to the banks on their reserves. The commercial banks already enjoyed privileges and protections from the government that were unavailable to any other business sector. Now they insist on getting paid for their public subsidy.

How to Restore Credit--and Credibility

In the past six months, the Fed seems to have reversed course, because bank reserves suddenly jumped tenfold in September, then doubled again by December. Skeptics may conclude that it has created a safe haven for bankers. When everything else is collapsing, banks are given risk-free assets by the Fed; then they collect income from the central bank instead of lending the funds to risky customers. If reserve balances keep growing, the deal will begin to look like hoarding.

These distorted arrangements are what D'Arista thinks must be changed to break out of the downward spiral. The all-encompassing requirement she proposes--liability reserves--would give the central bank the mechanism to inject stimulus into the credit system, into banks and nonbanks alike, funding the Fed can withdraw later if the economy no longer needs a boost. The Fed would first purchase a variety of sound financial instruments from the lending institutions and create an interest-free account that would be posted as a "liability" on the institutions' balance sheets--an obligation owed to the Fed. In order to balance this liability against the loss of income-earning assets on their books, the banks and other firms would have to use the Fed-injected money to make new loans to companies and consumers or to other banks. Either way, the Fed injection would spur lending and help unlock the paralysis in credit markets.

In this arrangement, the Fed would remain in control, because all these transactions would be covered by a repurchase agreement requiring the bank to buy back what it sold to the Fed, on a fixed date and at the same price. The Fed could demand its money back or renew the repurchase contract at its choosing (a standard practice in Fed open-market operations). Thus, if the bank does nothing with its newly injected funds to create loans and generate more income, it will be in trouble when the repurchase contract comes due. The Fed is likewise inhibited from buying worthless junk from banks because that would ruin its balance sheet, the base for the money supply. Instead of earning risk-free income by holding idle reserves, the banking industry would abruptly feel the lash of the central bank's policy decisions--open up your wallets and start lending to more borrowers, or face consequences down the road.

But where does the Fed find the money to make all these transactions? Essentially, it creates the money. That is basically what occurs routinely whenever the central bank decides to inject new reserves into the banking system. It is accomplished with a computer keystroke crediting the money to the private bank's account (and money is extinguished whenever the Fed withdraws reserves). The mystery of money creation defies common reason, but it works because people believe in the results. The money supply relies on the "full faith and credit" of the society at large--pure credit from the people who use the currency. The public's faith can be enlisted in the national recovery, a far better option than spending the hard-earned money that comes from taxpayers.

D'Arista's solution would create the scaffolding to impose many other regulations on the behavior of lending and borrowing. But it does not resolve the problem of what to do with zombie banks. Some of them deserve to die--right now--because they are "too big to save," as the Levy Institute puts it. Other institutions in trouble can be tightly supervised by regulators for years to come, without relieving them of their rotten assets. This will require a kind of silent forbearance that lets the bankers slowly work off their losses, but it does not dump the losses on the public. D'Arista points out that the government has done this many times in the past. The closest comparison is the Third World debt crisis during the 1980s, when some of the same major banks were under water as Latin American nations threatened massive loan defaults. A lengthy, methodical workout was managed by the Fed under Paul Volcker. It wasn't pretty, nor was it just, but the public was not really aware of the deal-making. This time, the deal is too big to hide. People see it happening and are rightly enraged.

The great virtue of D'Arista's approach is that it's forward-looking. Her focus is not on saving the largest and most culpable names at the pinnacle of the financial system but on creating the platform for a financial order composed of thousands of smaller, more deserving institutions that can serve the country more reliably. To achieve this, the Federal Reserve will have to submit to its own reckoning. By its very design, the cloistered central bank is an offense to democratic principles--and now the Fed's secretive, unaccountable political power has failed democracy again. The question of how to democratize the temple or whether to tear it down has to be on the table too, the subject of future discussion.

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About William Greider

National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism (Simon & Schuster) and--due out in February

can't sit still · Post by **can't sit still** » Sat Mar 14, 2009 6:31 pm

Cowboy, that's a great article. Unfortunately, it is a study done in a financial world. It examines finances only. It doesn't address the huge amount of over capacity. It doesn't address the ongoing destruction of job niches by automation. It doesn't address the fact that the world is slowly slipping towards a wage standard that won't allow any discretionary spending,,, survival only.
Up til now, GOV could more or less focus on financial stability and expect to get a good rate of employment for reasonably sound fiscal decisions. The FED was supposed to be responsible for pushing counter-cyclical moves whenever the banks were pushing too hard at cyclical moves.
The FED, seeing the writing on the wall as far as a Keynesian breakdown, decided to hold interest rates WAY too low when they should have been making a counter-cyclical move.
When the FED should have been draining credit from the market, as a response to the banks creating TOO much credit,,, instead, Greenspan kept interest way too low and pumped gas on the fire. I believe that this was done to pull in foreign money because the US couldn't compete in the world market for manufactured goods. The US was no longer competitive.

We were a super-consumer without being a super-producer. The system was doomed.
Any financial remedy that doesn't address the lack of competitiveness in America isn't looking at the whole picture.
China and India have a population of about 2.5 billion. http://www.iiasa.ac.at/Research/LUC/Pap ... igc1_4.htm
If they're accustomed to low wages, how are we going to compete? A service economy won't do it. We pissed in the punchbowl when we rated our toxic financial instruments as AAA. If we can't rely solely on the service, manufacturing and financial economy, how are we going to make a buck,,,, or remnimbi?

True, we want to get our financial house in order. What's our next move as far as jobs?
Stocks are going up,,, so what? The P/E hasn't improved. It won't improve until there are more jobs so people can buy more products.
I see so many people with plans that don't take in the whole picture. I do have a good essay that I'm working on that addresses many of the facets of the problem. It's a compilation of other people's ideas.
Dan

cowboyangel · Post by **cowboyangel** » Sat Mar 14, 2009 6:54 pm

Good point Dan, to make about the employment/manufacturing sector. I think Grieder was trying to keep his focus only the Fed and yes, the elephant in the room is the depleted state of US manufacturing. It may be too late to get that going even with so called green jobs. They just layed off 460 teachers in my county (Marin, CA) while AIG doled out 100 million, of bail-out money, as executive bonuses. This is madness, pure and simple. When are people gonna do the right thing and support general strikes?

The US is being run by a rampant criminal enterprise called the Federal-Investment Banking system and its tentacles to corporations and global robber barons.
Obama's a fucking pimp for these people, goddammit.

can't sit still · Post by **can't sit still** » Sat Mar 14, 2009 9:27 pm

Don't forget the BIS, they've been the enabler for much of GOV's excesses. Just ask Indonesia and Argentina

There is a slippery idea that I can't get a good grasp on. Wealth can only be represented by things and instruments.... leaving out intellectual properties.
The wealth of instruments just got a bit too nebulous for the PTB. So, they created buildings. They couldn't put the wealth of instruments into commodities / things because there just wasn't enough demand. Even with armies all over the world blowing up things so they could be replaced, there still wasn't enough demand for things.

There was no shortage of demand for free buildings. The CRA got it started. The money people have a problem. It didn't take too long before there were too many buildings. So, they have all this wealth in bonds. It can't sit in bonds because of inflation. It HAS to work.
It swooped into commodities for a while but, as an intangible, this capital couldn't sustain demand.
The money people have all kinds of factories. The factories are losing money because there are way too many for the existing demand. They have lots of capital but, without demand for products, there is no need for capital. Reportedly $ 45 trillion in notional value / capital / wealth has been vaporized.

The money people are sitting there with factories and capital but, the only demand is from those who can't pay. They've thoroughly proved that,,, that idea doesn't go anywhere. GOV is exhorting people to go out and buy. That's not working.
Deflation is kicking ass because nobody is borrowing and GOV can't pass it's air-made money into the economy. GOV has lots of money but, no wealth.

How far can deflation go if there continues to be NO demand? If the producing economy can't produce, how long will it be before there is no demand for investment instruments? Bonds?

China made zillions of dollars a year that they had to turn over into US bonds to avoid inflation. Now, they have to spend that money at home to support a hungry population.
China has the GDP of California to support about a billion people. They expect 30 million unemployed next year. How are they going to loan Obama $ 3 trillion?

The US gov is too fucking inept to create jobs. So, they try to take a shortcut and just create demand. Instead of trying to create new wealth, they're trying to suck just a bit more from the producers / savers / investors.
That isn't even socialism,,,,, it's suicide.

We're a fallen imperial power that overspent to maintain empire. We're pretty close to the end of the line when it comes to sucking in foreign money so that we can divert it to our military, fighting lost causes. Our turds in GOV took us to war in countries that had defeated every would-be conquerer for the last thousand years.

Now, we have private capital that is evaporating because of lack of demand. We have GOV that knows nothing else except demand. A marriage made in hell. GOV has demand but, no return. Private capital has nowhere to go,,, like a snowman out in the sun. GOV is like a thirsty hyena in a sandy desert. GOV would willingly slurp up every last drop to nurture the failed empire.

I don't see a rosy future for private capital.

cowboyangel · Post by **cowboyangel** » Sat Mar 14, 2009 10:19 pm

All true, Dan. And Obama is deceiving the masses by trying to put a positive spin on it all. This is irresponsible. Just one fucking thing going hair-wire can tip the entire precarious balance into the nuthouse, translate that into more limited wars or domestic police state actions. This is inevitable as more folks lose their jobs and their sense of hope. The Obama Admin fucking knows this, and rather than lay out an austerity program for those who can afford it, they will continue tell those who can't afford it, that they must get use to the idea of hardship. Imagine that. people in the Obama Admin have been talking about hacking up Medicare. SS is next. What pray tell. kind of "change" is that Mr. Obama? Certainly not the kind of change most folks expected. I say it again, the guy's pimping for the privileged class.

ihlvr · Post by **ihlvr** » Sat Mar 14, 2009 10:57 pm

Well, this is my simple take on what has happened.
I'm 36, a carpenter by trade, and have two kid's. My oldest came along when I was 19, and I dropped out of college, been working ever since.
In the good years, I made a good living, alway's saved, in the bad years there was alway's money to float till thing's picked up. This time it is very different.
I bought a small house I could afford, paid my bill's, had good credit, played by the rules......and everything fell apart.
A friend in CA bought at the top of the market, is underwater, and got half his loan paid off under the obama plan. He has some horrible ARM, it's an old house in poor condition, and the Gov paid for half of it.........so now he is adding a new master bedroom, and a major remodel on the rest of the house.
I'm a single parent, and while we struggle, we are ok for now......he is adding on because of the free gov't money. It's just wrong.
Obama......change.....that's for sure

ihlvr · Post by **ihlvr** » Sat Mar 14, 2009 11:18 pm

I should add, what little I did save in a pretty conservative money fund is gone.
The same bank's that got all the TARP money robo call me 10-25 times a day....on a combined 6k of debt. If ya owe capitol one 300 bucks, they call you until the battery on your phone dies, even though they got 3.5 billion in TARP funds.

cowboyangel · Post by **cowboyangel** » Sat Mar 14, 2009 11:58 pm

The Looming Collapse of the American Empire by Chris Hedges
Posted on February 18, 2009 by dandelionsalad

Digg

by Chris Hedges
Featured Writer
Dandelion Salad
February 17, 2009

Transcript of Chris Hedgesâ€™ presentation at the University of Missouri, Columbia, February 17, 2009. University Lecture sponsored by College of Arts and Science, Peace Studies Program, and Center on Religion and the Professions.

Chris Hedges

Originally uploaded by Lorri37

The daily bleeding of thousands of jobs will soon turn our economic crisis into a political crisis. The street protests, strikes and riots that have rattled France, Turkey, Greece, Ukraine, Russia, Latvia, Lithuania, Bulgaria and Iceland will descend on us. It is only a matter of time. And not much time. When things start to go sour, when Barack Obama is exposed as a mortal waving a sword at a tidal wave, the United States could plunge into a long period of precarious social instability.

At no period in American history has our democracy been in such peril or has the possibility of totalitarianism been as real. Our way of life is over. Our profligate consumption is finished. Our empire is imploding. Our children will never have the standard of living we had. And poverty and despair will sweep across the landscape like a plague. This is the bleak future. There is nothing President Obama can do to stop it. It has been decades in the making. It cannot be undone with a trillion or two trillion dollars in bailout money. Our empire is dying. Our economy has collapsed.

Take a look at the grim statistics. The United Nationsâ€™ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fundâ€™s prediction for global economic growth in 2009 is 0.5 percent-the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent.

And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies, shady mortgage brokers and easy lines of credit, are $14 trillion in debt. Banks, which have negative equities, are charging 23 to 30 percent on credit cards to try and recoup the loss made gambling on subprime bonds. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around the recognition of our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. I am all in favor of a stimulus plan, but not a giveaway to zombie banks, to the creditors, without a dime for actual debt reduction. The hope that half a percentage point, $ 50 billion, might be used to write down troubled mortgage debtors was quashed by this current plan. As Michael Hudson, a professor at The University of Missouri, in Kansas City and a former Wall Street economist has correctly pointed out, what we have done is give $ 12 trillion to the richest one percent - or ten percent of the population - and indebted the economy and the government to this oligarchic class for the next 100 years. We need to refinance mortgages directly so that aid goes to homeowners. The banks and bondholders who made massive profits on these con schemes should take the hit, not the elderly couple down the street. This is what Roosevelt did in the 1930s with the Home Owners Loan Corporation. The stimulus plan is far too small to staunch the bleeding. State and Local governments will face revenue declines of $ 400 to $ 500 billion over the next two years â€” yet the money for the states in the stimulus package is about $ 140 billion. Why have we handed $ 135 billion to AIG, which has been raided in Britain by police because of allegations of financial fraud? We are paying out taxpayer dollars to mafia capitalists rather than the victims. It is insane. It is regressive politics. It is the opposite of New deal economics. And it will not work. The taxpayer dollars spent on high speed rail, on clean energy, on infrastructure repair, on food stamps, unemployment compensation and public health are helpful, but pitifully small given the magnitude of what we face.

How will we cope with our decline? Will we cling to the absurd dreams of a superpower and a glorious tomorrow or will we responsibly face our stark reality? Will we heed those who are sober and rational, those who speak of a new simplicity and humility, or will we follow the demagogues and charlatans who rise up out of the slime in moments of crisis to offer fantastic visions? Will we radically transform our system to one that protects the ordinary citizen and fosters the common good, that defies the corporate state and that dismantles our imperial wars and projects, or will we employ the brutality and technology of our internal security and surveillance apparatus to crush all dissent? We wonâ€™t have to wait long to find out.

We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelgÃ¤nger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out last Thursday when Washingtonâ€™s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the â€œviolent extremismâ€

ygmir · Post by **ygmir** » Sun Mar 15, 2009 7:27 am

ihlvr wrote:Well, this is my simple take on what has happened.
I'm 36, a carpenter by trade, and have two kid's. My oldest came along when I was 19, and I dropped out of college, been working ever since.
In the good years, I made a good living, alway's saved, in the bad years there was alway's money to float till thing's picked up. This time it is very different.
I bought a small house I could afford, paid my bill's, had good credit, played by the rules......and everything fell apart.
A friend in CA bought at the top of the market, is underwater, and got half his loan paid off under the obama plan. He has some horrible ARM, it's an old house in poor condition, and the Gov paid for half of it.........so now he is adding a new master bedroom, and a major remodel on the rest of the house.
I'm a single parent, and while we struggle, we are ok for now......he is adding on because of the free gov't money. It's just wrong.
Obama......change.....that's for sure

that's been one of my biggest issues with the messiah's plan...........bailout, whatever you call it:

if you work and save, drive old cars, buy only what you can afford, you get nothing, zero, nada.
And, probably taxed extra to boot........

But,
if you spend to much, don't read the contract for your mortgage, live off your credit cards,....... you get free money from the gov..........

How the hell is that ok? How do the "social architects" of the present administration justify that?
Re-distributing the wealth allright........right into the hands of those who can't handle finances anyway. Whether it be bankers, wall street, or people who feel entitled to more "stuff" and leisure/luxury than they can afford.......

Pisses me off.......

Screw the Banks and Investment Firms

A personel perspective on the recession

It's The End of the World As We Know It, And I Feel Fine?

Re: A personel perspective on the recession