"End of Wall Street Boom" - Must-read history

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Wed Nov 10, 2010 7:07 pm

.

Sigh. I want to do another big round of updating sooner or later -- this thread is like a blog (with friends), or a diary of the financial coup d'etat. Also to respond to some of the additions and assimilate some stuff posted in other threads. (Why don't people like keeping it all in one thread? Stuff that can add to the overall picture instead gets lost after a few posts.)

For now, I'm dropping in to note that various predictions upthread about imminent developments seem to be on schedule. I shouldn't say predictions, since really it's about actions that were already intimated or subtly announced earlier this year.

The election is done and here we go:

1) EU is considered to have stabilized. UK has had its austerity round. Now the Fed makes the big QE move on the day after the US election, played as a "stimulus" but entirely as the latest incarnation of The Bailout, but Bank of America is still teetering. G-20 is going to make an issue of dollar printing. Stimulus cash has run out, new Republican statehouses will further scale back state budgets (as will the Democrats in New York and California, no mistake, but not quite as stupid as the Republican governors of NJ and OH, who actually canceled federal rail plans). No political impetus left for spending on big-ticket energy or infrastructure projects. As for the all-holy private sector, the corps and banks are still hoarding all the cash, because there is no return in investing in the US consumer economy right now or for years to come. AND all the chumps have once again been lured back into the stock market (ride it up, idiots). All conditions are set up for the next leg down.

2) Catfood Commission is in the news, preparing to lay down its shocking, shocking findings that Social Security and Medicare and everything else except "defense" must be cut radically even as taxes for the rich are lowered (in exchange for "removing loopholes" like, um, the mortgage deduction which as we know totally impacts the rich). Obama prepared to go along with the Bush tax cut extensions. This will provide the bipartisan cover for an austerity package the likes of which we've never seen, and I'm not expecting to see a French-style uprising over it, merely widespread misery. The Depression is on schedule, and Obama is in the role of Hoover.

(Did everyone catch the most important element in the US propaganda about France the last couple of months? Something close to 100 percent of the stories declared that France was raising retirement age to 62, when in fact this is the early retirement age with lower benefits, such as also exists in the US. I can't think of any element in the propaganda that was more important in making the French seem "crazy.")

All that being said, my bet for the foreseeable is still currently on deflation. Inflation requires demand.

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Re: "End of Wall Street Boom" - Must-read history

Postby bks » Wed Nov 10, 2010 9:15 pm

All that being said, my bet for the foreseeable is still currently on deflation. Inflation requires demand.


So sayeth the oracle (Michael Hudson), and I'm inclined to agree with him. But there will always be demand for staples, and the anecdotal evidence is that they're going up in cost significantly.
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Re: "End of Wall Street Boom" - Must-read history

Postby freemason9 » Wed Nov 10, 2010 11:17 pm

smiths wrote:i bought mine at about 16, and its looking good baby,

the fundamentals for silver and gold have not changed,

at the point that honest government returns delivering real monetary reform and banks are charged with fraud and scattered to the winds,
at the point that tax havens, derivatives and shadow banking are abolished,
at the point that destruction, collapse and looting are no longer profitable

at that point sell your silver and gold

until then its only direction is up


Here's my question, though:

If silver and gold are so valuable, and if they are such good investments, why in the world is anyone willing to sell it?
The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new.
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Re: "End of Wall Street Boom" - Must-read history

Postby Nordic » Wed Nov 10, 2010 11:33 pm

I sold mine because I basically lost my job and needed cash to live.

:grumpy

Businesses sell it because they mark it up.
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Re: "End of Wall Street Boom" - Must-read history

Postby smiths » Thu Nov 11, 2010 12:05 am

its a fair question about selling precious metals,

if you bought gold at $300 and its $1400 youd be tempted to sell, but then what, hold dollars that by your own logic are devaluing

my ideal would be to hold assets like land, but i cant afford it, so i go for something i think will hold value that i can afford

on inflation/deflation i think the next 12 months will see the change from deflation to inflation,

my problem with making sense of it is that a lot of what has been deflated in a monetary sense was not even considered money thirty years ago,
is wiping a billion dollars off a balance sheet by writing off derivatives bets really deflationary?
is insurance on insurance money?

true money, food and oil have all gone up in value, isnt that real price inflation

in australia i read that we dont have inflation because the dropping price of flat screen TV's offset the rise in food prices

but is that really a balance?
the question is why, who, why, what, why, when, why and why again?
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Re: "End of Wall Street Boom" - Must-read history

Postby Nordic » Thu Nov 11, 2010 12:29 am

Yeah, where the F is this deflation they keep harping about?

Gas is up, oil is up, food is up. So house prices have dropped, WHO THE FUCK CARES, they were in a goddamn bubble! Supposedly the biggest bubble in history.

And they're not gonna raise house prices by flooding the world with their shitty paper money.

None of this is making any sense whatsoever, unless their actual idea is to destroy the world economy, which is certainly what it SEEMS is their goal.

The ground buffalo I used to buy at the corner store was $5.99 a pound, it just went up to $7.99.

As one tiny tiny example of all the food I see going nothing but up in price.
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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Thu Nov 11, 2010 1:39 pm

It's the old question of what constitutes inflation. Food and fuel have been excluded from the "core" CPI for something like 20 years now as volatile, which obviously is ridiculous. I think the most important measure is the cost of labor: wages, salaries, benefits. That's down for the 90 percent, while income and wealth are up for the 1 percent.

Hyperinflation can occur at any time, but as has been discussed above, that's a measure of confidence in a currency, and a different animal from inflation or deflation.

Two articles that talk about the only issue that matters long as the banksters rule:

http://www.businessinsider.com/nobel-ec ... er-2010-11

STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover
George Washington, Washington's Blog | Nov. 4, 2010, 7:57 AM | 16,689 | 71
A A A





Its Not the "Great Recssion", Its the "Great Bank Robbery"
The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months"



As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail.


And Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. See this, this and this.

Nobel prize winning economist Joseph Stiglitz just agreed. As Stiglitz told Yahoo’s Daily Finance on October 20th:


This is a really important point to understand from the point of view of our society. The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.

***

A lot of the predatory practices in automobile loans are going to be able to be continued. Why is it OK to engage in bad lending in automobiles and not in the mortgage market? Is there any principle? We all know the answer to that. No, there’s no principle. It’s money. It’s campaign contributions, lobbying, revolving door, all of those kinds of things

***

The system is designed to actually encourage that kind of thing, even with the fines [referring to former Countrywide CEO Angelo Mozillo, who recently paid tens of millions of dollars in fines, a small fraction of what he actually earned, because he earned hundreds of millions.].

***

I know so many people who say it’s an outrage that we had more accountability in the ’80’s with the S&L crisis than we are having today. Yeah, we fine them, and what is the big lesson? Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you’re still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards but look small compared to the amount that you’ve been able to cash in.

So the system is set so that even if you’re caught, the penalty is just a small number relative to what you walk home with.

The fine is just a cost of doing business. It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.

***

I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.

***

So do we have any confidence that these guys who got us into the mess have really changed their minds? Actually we have pretty [good] confidence that they have not. I’ve seen some speeches where they said, “Nothing was really wrong. We didn’t get things quite right. But our understanding of the issues is pretty sound.” If they think that, then we really are in a sorry mess.

***

There are many aspects of [deterring people from committing crime]. Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.

And that’s why, for instance, in our antitrust law, we often don’t catch people when they behave badly, but when we do we say there are treble damages. You pay three times the amount of the damage that you do. That’s a strong deterrent. Unfortunately, what we’ve been doing now, and more recently in these financial crimes, is settling for fractions – fractions! – of the direct damage, and even a smaller fraction of the total societal damage. That is to say, the financial sector really brought down the global economy and if you include all of that collateral damage, it’s really already in the trillions of dollars.

But there’s a broader sense of collateral damage that I think that has not really been taken on board. And that is confidence in our legal system, in our rule of law, in our system of justice. When you say the Pledge of Allegiance you say, with “justice for all.” People aren’t sure that we have justice for all. Somebody is caught for a minor drug offense, they are sent to prison for a very long time. And yet, these so-called white-collar crimes, which are not victimless, almost none of these guys, almost none of them, go to prison.

***

Let me give you another example of where the legal system has gotten very much out of whack, and which contributed to the financial crisis.

In 2005, we passed a bankruptcy reform. It was a reform pushed by the banks. It was designed to allow them to make bad loans to people to who didn’t understand what was going on, and then basically choke them. Squeeze them dry. And we should have called it, “the new indentured servitude law.” Because that’s what it did.

Let me just tell you how bad it is. I don’t think Americans understand how bad it is. It becomes really very difficult for individuals to discharge their debt. The basic principle in the past in America was people should have the right for a fresh start. People make mistakes. Especially when they’re preyed upon. And so you should be able to start afresh again. Get a clean slate. Pay what you can and start again. Now if you do it over and over again that’s a different thing. But at least when there are these lenders preying on you should be able to get a fresh start.

But they [the banks] said, “No, no, you can’t discharge your debt,” or you can’t discharge it very easily.

***

This is indentured servitude. And we criticize other countries for having indentured servitude of this kind, bonded labor. But in America we instituted this in 2005 with almost no discussion of the consequences. But what it did was encourage the banks to engage in even worse lending practices.

***

The banks want to pretend that they did not make bad loans. They don’t want to come into reality. The fact that they were very instrumental in changing the accounting standards, so that loans that are impaired where people are not paying back what they owe, are treated as if they are just as good as a well-performing mortgage.

So the whole strategy of the banks has been to hide the losses, muddle through and get the government to keep interest rates really low.

***

The result of this is, as long as we keep up this strategy, it’s going to be a long time before the economy recovers ….




In the following, you may replace "mistake" with "crime" if so inclined...



http://www.alternet.org/module/printversion/148770

Obama's Biggest Mistake: Selling Out to the Bankers
By James K. Galbraith, New Deal 2.0
Posted on November 7, 2010, Printed on November 11, 2010
http://www.alternet.org/story/148770/


Bruce Bartlett says it was a failure to focus. Paul Krugman says it was a failure of nerve. Nancy Pelosi says it was the economy’s failure. Barack Obama says it was his own failure -- to explain that he was, in fact, focused on the economy.

As Krugman rightly stipulates, Monday-morning quarterbacks should say exactly what different play they would have called. Paul’s answer is that the stimulus package should have been bigger. No disagreement: I was one voice calling for a much larger program back when. Yet this answer is not sufficient.

The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. Larry Summers. Timothy Geithner. Ben Bernanke. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.

Up to a point, one can defend the decisions taken in September-October 2008 under the stress of a rapidly collapsing financial system. The Bush administration was, by that time, nearly defunct. Panic was in the air, as was political blackmail -- with the threat that the October through January months might be irreparably brutal. Stopgaps were needed, they were concocted, and they held the line.

But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”

The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. They could boom the stock market. They could make a mint on proprietary trading. Their losses on mortgages were concealed -- until the fact came out that they’d so neglected basic mortgage paperwork, as to be unable to foreclose in many cases, without the help of forged documents and perjured affidavits.

But new loans? The big banks had given up on that. They no longer did real underwriting. And anyway, who could qualify? Businesses mostly had no investment plans. And homeowners were, to an increasing degree, upside-down on their mortgages and therefore unqualified to refinance.

These facts were obvious to everybody, fueling rage at “bailouts.” They also underlie the economy’s failure to create jobs. What usually happens (and did, for example, in 1994 - 2000) is that credit growth takes over from Keynesian fiscal expansion. Armed with credit, businesses expand, and with higher incomes, public deficits decline. This cannot happen if the financial sector isn’t working.

Geithner, Summers and Bernanke should have known this. One can be fairly sure that they did know it. But Geithner and Bernanke had cast their lots, with continuity and coverup. And Summers, with his own record of deregulation, could hardly have complained.

To counter calls for more action, Team Obama produced sunny forecasts. Their program was right-sized, because anyway unemployment would peak at 8 percent in 2009. So Larry Summers said. In making that forecast, the Obama White House took responsibility for the entire excess of joblessness above eight percent. They made it impossible to blame the ongoing disaster on George W. Bush. If this wasn’t rank incompetence, it was sabotage.

This is why, in a crisis, you need new people. You must be able to attack past administrations, and override old decisions, without directly crossing those who made them.

President Obama didn’t see this. Or perhaps, he didn’t want to see it. His presidential campaign was, after all, from the beginning financed from Wall Street. He chose his team, knowing exactly who they were. And this tells us what we need to know, about who he really is.


James K. Galbraith is the author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, and of a new preface to The Great Crash, 1929, by John Kenneth Galbraith. He teaches at The University of Texas at Austin.
© 2010 New Deal 2.0 All rights reserved.
View this story online at: http://www.alternet.org/story/148770/
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Re: "End of Wall Street Boom" - Must-read history

Postby jingofever » Thu Nov 11, 2010 4:49 pm

Ireland's Fate Tied to Doomed Banks:

By CHARLES FORELLE and DAVID ENRICH

DUBLIN—With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the "torture chamber," a nod to its history as a venue for painful meetings.

For two years, Ireland had poured money on a raging banking crisis, to no avail. Each estimate of the rising price of rescuing Ireland's banks turned out too low. Mr. Lenihan needed to halt the drip-drip of bad news that was leading his country to ruin. "I want a final figure ASAP," he told the group.
'Still in Good Shape'

Two weeks later, the estimate came in: Up to €50 billion—nearly $50,000 for every household in the Emerald Isle.

But now, investors are betting the bill could be higher still and could reignite Europe's sovereign-debt crisis. The unpopular government is bracing for collapse, and on Tuesday, Irish government bonds continued a week-long slide to a fresh record low. The debt is judged as risky as Greece's was this spring just before that nation begged for a European Union bailout.

Mr. Lenihan, racing to ease those fears, proposed Thursday shrinking the country's 2011 budget by €6 billion. Proportionally, that's as if the U.S. suddenly eliminated the Defense Department.

Ireland's troubles are Europe's. The 16 euro-zone countries have agreed to guarantee up to €440 billion in loans if any among them is unable to borrow from private markets.

It wasn't supposed to be this way. In October 2008, Mr. Lenihan boasted that his government had devised "the cheapest bailout in the world so far." Ireland's financial regulator pronounced the banks "more than adequately capitalized."

Interviews with dozens of bank and government officials, and an examination of documents released by the Irish parliament, reveal that Ireland misjudged its crisis early on. Desperate to preserve the homegrown banking system, the government—blind to just how sour Irish loans had gone—yoked the fate of the nation to the fate of its banks.

Along the way, the government was hobbled by faulty information from outside advisers, from a trust-and-don't-verify regulatory culture and from the troubled banks themselves.

The result has been calamitous: Bad loans at five once-sleepy banks have snowballed into an existential threat. The crisis has hammered Ireland's economy and left taxpayers with a bill that will take a generation to pay. Irate Dubliners burned one big bank's ex-boss in effigy and blocked the gates of parliament with a cement truck in protest. Bankers face criminal probes and a parliamentary inquiry.

The miscalculations are severe. In December 2008, the state laid plans to pour €1.5 billion into Ireland's sickest institution, Anglo Irish Bank Corp. Over the next two years, the government upped the figure a half-dozen times, pumping in a total of €22.9 billion. In September, the central bank said Anglo might need as much as €11.4 billion more.

In an email, Mr. Lenihan said the cost estimates announced in September had put an "upper end" on the price of the bailout in order to "eliminate any uncertainty in the market." The cost rose over time in part because "the information provided by the banks was not a true reflection" of the health of their loans. His 2008 comment that the bailout was the cheapest in the world didn't imply, he said, that "there would be no cost to the bailout."

For a decade, Ireland was the EU's superstar. A skilled work force, high productivity and low corporate taxes drew foreign investment. The Irish, once the poor of Europe, became richer than everyone but the Luxemburgers. Fatefully, they put their newfound wealth in property.

As the European Central Bank held interest rates low, Ireland saw easy credit for construction loans and mortgages. Developers turned docklands into office towers and sheep pastures into subdivisions. In 2006, builders put up 93,419 homes, three times the rate a decade earlier.

Anglo, founded in 1964, spent its first three decades making small commercial real-estate loans. But when Sean FitzPatrick, an ambitious accountant, took the bank's reins in 1986, he opened big offices in London and the U.S. Anglo bankrolled marquee projects, putting $70 million behind the Chicago Spire, planned as America's tallest building.

Rivals followed suit. Allied Irish Banks PLC deployed "win-back teams" to claw away borrowers from Anglo. Bank of Ireland executives wooed clients with trips on corporate jets.

The party ended in 2008, when the property bubble popped and the global economy tipped into recession. The government remained optimistic; an internal finance-department memo concluded in May that the Irish banking system was "sound and robust based on all key indicators of financial health."

Yet by September, Irish banks were struggling to borrow quick cash for daily expenses. The government thought they faced a classic liquidity squeeze. Ireland—whose hands-off regulator had assigned just three examiners to two major banks—didn't recognize the deeper problem: Banks had made too many bad loans, whose defaults would leave the lenders insolvent.

"Liquidity, not capital, is the main issue in the current crisis," financial regulator Patrick Neary wrote to Kevin Cardiff, a top finance-department official, on Sept. 10. A week later, Anglo executives told government officials that the bank's core business, despite the cash crunch, was healthy: "Loan book remains strong," they said. And Merrill Lynch bankers working for the government advised that another lender, Irish Nationwide Building Society, could absorb any bad loans. (It has since needed €5.4 billion in bailout money.) Merrill and INBS declined to comment. Mr. Neary couldn't be reached for comment.

The warnings grew louder at the end of September 2008. Anglo's depositors were fleeing. At 8:40 p.m. on Sept. 29, a PricewaterhouseCoopers partner working for the government emailed Mr. Cardiff with bad news: Anglo "borrowed €0.9 billion from the Central Bank and do not have any reserves left."

The next morning, Ireland launched the bailout Mr. Lenihan would dub the world's cheapest, guaranteeing every deposit and nearly all debt issued by Irish banks. Dublin hoped that would free others to lend to Irish banks, and Ireland would muddle through without shelling out a dime.

But while that quickly restored cash to the banks, it didn't address the bad loans. Those loans were now very much the government's problem because the guarantee had made it the protector of the entire financial system.

As Ireland copes with the aftermath of a large property bust, it faces a new wave of emigration but also innovation, as a group of architects band together to create a micro economy. WSJ's Andy Jordan reports from Dublin.

PwC was sent to look at the banks' books. It found defaults creeping up. Still, banks insisted they could soldier on unaided. In December meetings with bankers in the fifth-floor boardroom of Ireland's debt agency, the government resolved to act.

"It's not credible that you don't need equity," John Corrigan, the agency's chief, snapped. "You're taking capital. That's it."

Four days before Christmas, the government announced it would buoy Anglo with €1.5 billion in capital. Bank of Ireland and Allied Irish would get €2 billion each.

PwC found that Anglo burnished its financial reports with temporary deposits and had secretly loaned its directors €179 million. Mr. FitzPatrick, the chairman, resigned. Mr. Neary, Ireland's financial regulator, was eased out with €640,000 in severance and a €143,000 annual pension. Mr. FitzPatrick's lawyer declined to comment.

Predictions that the guarantee would stem the crisis soon looked like fantasies. In January, Ireland nationalized Anglo.

The following month, taxpayers put €7 billion into Allied Irish and Bank of Ireland; the government, using PwC's data, had predicted €4 billion weeks before. And PwC missed the mark further. Relying largely on the bank's own data, it estimated Anglo's bad loans might hit €3 billion a year. Today, Anglo has lost about €20 billion and classifies more than three-quarters of its €64 billion in outstanding loans as "at risk" of default. A PwC spokeswoman declined to comment.

On March 6, 2009, Mr. Lenihan met with advisers to bat around remedies. None sounded promising. He turned to Peter Bacon, an economist he'd hired a week earlier, who shocked the crowded room with a figure far bigger than the few billion Ireland had spent. The banks made more than €150 billion of potentially toxic property and land loans, he said. "That's the extent of your problem."

Mr. Bacon suggested the government buy loans from the banks at discounted prices, effectively handing them cash and easing doubts about their viability. By insisting on steep discounts, Ireland would be less likely to lose money on the purchases. On the flip side, bargain prices would trigger losses at the banks—which the government would probably have to patch with more capital. The taxpayer would foot the bill either way, but at least Ireland would understand how big it was.

The approach "has the merit of certainty and clarity," Mr. Bacon argued. But, he added, it would only work if "the projection of the extent of impairment is accurate in the first place."

It wasn't.

A small team at the debt agency, including Mr. Corrigan, the chief, and a top lieutenant, Brendan McDonagh, pulled together a plan for a new entity, the National Asset Management Agency, to buy €77 billion worth of loans for €54 billion, a 30% discount.

Those estimates shaped public expectations about the rescue bill. But they were based on information from the banks, which told NAMA their loans were well collateralized. In early 2010, Mr. McDonagh's team got a rude surprise upon diving into the books.

"We opened it up and said, 'Oh, my God,"' Mr. McDonagh said in an interview. "What they are telling us is not the reality."

The banks had said they had loaned 77% of the value of a property, on average. The other 23%, put up by the borrower, would cushion a default.

The NAMA teams found that banks often piled on "equity releases" that amounted to lending out 100% of the value, and left them fully responsible in a default.

Worse, much of the collateral was shaky. Several times, a developer pledged future profits on other ventures. Many loans were riddled with flawed documentation, leaving banks without solid legal rights to the property they had believed was backing up the loans.

When NAMA disclosed its first round of loan purchases on March 30 this year, the average discount—or "haircut"—was 47%, far above the 30% originally estimated.

"The detailed information that has emerged from the banks in the course of the NAMA process is truly shocking," Mr. Lenihan told lawmakers. But, he added, "we now know the extent of the losses in our banks....This certainty will further boost international confidence in our ability to recover."

He was wrong. NAMA, preparing its next purchases, demanded steeper cuts. Property prices were tumbling, and the agency was under public pressure not to squander money. Once, a banker complained the agency was drastically undervaluing a loan. "You're damn lucky to be able to get the money you're getting," a NAMA official shot back.

In August, when NAMA announced the next round of purchases, the average haircut rose to 56%, again leaving Anglo short of capital. Again, the government wrote a check.

On the afternoon of Sept. 8, Mr. Lenihan, at work despite a diagnosis of pancreatic cancer nine months earlier, convened government officials and Anglo's brass in his latest bid to put a firm figure on the bank rescue's cost. The ground-floor Finance Department conference room where they met was adorned with photos of past ministers. That day, one of them, Anglo Chairman Alan Dukes, was seated across from his own picture.

Mr. Lenihan told the men that Anglo couldn't be kept afloat. He instructed NAMA to calculate the final haircuts quickly. Over the next two weeks, NAMA priced Anglo's loans at a 67% discount, causing the bank to require another €6.4 billion from taxpayers. It said it would take a 60% haircut on the rest of AIB's loans—likely putting the government in control of that bank.

The total capital injected into banks by the government so far: €34 billion, with at least another €12 billion on the way. The bailouts mean Ireland will run a government deficit equal to 32% of its gross domestic product, the highest figure ever in any euro-zone country. Skeptics say a still-sinking property market will next sour residential mortgages, inflating the government tab even more.

Patrick Honohan, Ireland's central-bank governor, says the government is fighting on two fronts. While wrestling with the banks' bad loans, it must repair state finances badly damaged by a deep recession and a swift erosion of the tax base. The bailout bill, he says in an interview, "is not Ireland's only problem."
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Re: "End of Wall Street Boom" - Must-read history

Postby Nordic » Thu Nov 11, 2010 5:11 pm

Washingtonsblog has been all OVER the theme from above, too, that until we break up the too-big-to-fails and throw the shysters in jail, the economy will not recover.

Just like the government itself can't recover, America can't recover, until we throw the Bush cabal criminals in jail and get to the root of what/who they were all working for.

Somehow I think there might be some overlapping names in those two groups.
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Re: "End of Wall Street Boom" - Must-read history

Postby AhabsOtherLeg » Fri Nov 12, 2010 11:31 am

JackRiddler wrote:
STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover


But don't you see? They can't just be thrown in jail like normal people, regardless of their actions! It would prevent them from making the money!

EAGLE, Colorado — A financial manager for wealthy clients will not face felony charges for a hit-and-run because it could jeopardize his job, prosecutors said Thursday.

Martin Joel Erzinger, 52, faces two misdemeanor traffic charges stemming from a July 3 incident when he allegedly hit bicyclist Dr. Steven Milo from behind then sped away, according to court documents.

Milo and his attorney, Harold Haddon, are livid about the prosecution's decision to drop the felony charge. They filed their objection Wednesday afternoon, the day after prosecutors notified Haddon's office by fax of their decision.

Haddon and Milo say this is a victim's rights case, that Erzinger's alleged actions constituted a felony, and that one day is not enough notice.

“The proposed disposition is not appropriate given the shocking nature of of the defendant's conduct and the debilitating injuries which Dr. Milo has suffered,” Haddon wrote.

As for the one-day notice, Haddon wrote, “One business day is not sufficient notice to allow him to meaningfully participate in this criminal action.”

Milo, 34, is a physician living in New York City with his wife and two children, where he is still recovering from his injuries, court records show.

Milo suffered spinal cord injuries, bleeding from his brain and damage to his knee and scapula, according to court documents. Over the past six weeks he has suffered “disabling” spinal headaches and faces multiple surgeries for a herniated disc and plastic surgery to fix the scars he suffered in the accident.

“He will have lifetime pain,” Haddon wrote. “His ability to deal with the physical challenges of his profession — liver transplant surgery — has been seriously jeopardized.”

Erzinger, an Arrowhead homeowner, is a director in private wealth management at Morgan Stanley Smith Barney in Denver. His biography on Worth.com states that Erzinger is “dedicated to ultra high net worth individuals, their families and foundations.”

Erzinger manages more than $1 billion in assets. He would have to publicly disclose any felony charge within 30 days, according to North American Securities Dealers regulations.

Milo wrote in a letter to District Attorney Mark Hurlbert that the case “has always been about responsibility, not money.”

“Mr. Erzinger struck me, fled and left me for dead on the highway,” Milo wrote. “Neither his financial prominence nor my financial situation should be factors in your prosecution of this case.”

Hurlbert said Thursday that, in part, this case is about the money.

“The money has never been a priority for them. It is for us,” Hurlbert said. “Justice in this case includes restitution and the ability to pay it.”


Hurlbert said Erzinger is willing to take responsibility and pay restitution.

“Felony convictions have some pretty serious job implications for someone in Mr. Erzinger's profession, and that entered into it,” Hurlbert said. “When you're talking about restitution, you don't want to take away his ability to pay.”


“We have talked with Mr. Haddon and we had their objections, but ultimately it's our call,” Hurlbert said.

Dropping the felony charge is not a revelation, Hurlbert said.

“We had been talking with them about this misdemeanor disposition for a while now,” Hurlbert said. “The misdemeanor charges really are what he did.”...

Haddon and Hurlbert have squared off before. Haddon was one of Kobe Bryant's defense attorneys, with lead attorney Pamela Mackey, when Bryant faced sexual assault charges in Eagle County. Hurlbert was the lead prosecutor in that case.

Bicyclist hit from behind
Milo was bicycling eastbound on Highway 6 just east of Miller Ranch Road, when Erzinger allegedly hit him with the black 2010 Mercedes Benz sedan he was driving. Erzinger fled the scene and was arrested later, police say.

Erzinger allegedly veered onto the side of the road and hit Milo from behind. Milo was thrown to the pavement, while Erzinger struck a culvert and kept driving, according to court documents.

Erzinger drove all the way through Avon, the town's roundabouts, under I-70 and stopped in the Pizza Hut parking lot where he called the Mercedes auto assistance service to report damage to his vehicle, and asked that his car be towed, records show. He did not ask for law enforcement assistance, according to court records.

Erzinger told police he was unaware he had hit Milo, court documents say.

When Avon police arrived he was putting a broken side mirror and a bumper in his trunk, court record say.

Meanwhile another motorist, Steven Lay of Eagle, stopped to help Milo and called 911.
...

The original complaint included a felony count against Erzinger for causing serious bodily injury. Deputy DA Mark Brostrom is prosecuting the case and Milo says in court documents that Brostrom called Erzinger's July 3 actions “egregious.” Prosecutors pleaded the case down to a misdemeanor later in the summer, then in August told Milo and his attorneys that Erzinger would face a felony charge, Haddon wrote.

But on Sept. 7, Brostrom told County Court Judge Katharine Sullivan that the case would be pleaded as a misdemeanor. That's the first time Milo or his attorneys had heard of it, Haddon wrote, and they protested “in the strongest possible terms,” Haddon wrote.


http://www.vaildaily.com/article/201011 ... ofile=1062


Disgusting, but par for the course. This is the reality of having a class of people who cannot be punished. It is an aristocracy, pure and simple.


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Re: "End of Wall Street Boom" - Must-read history

Postby vanlose kid » Sat Nov 13, 2010 9:37 am

Nordic wrote:Yeah, where the F is this deflation they keep harping about?

Gas is up, oil is up, food is up. So house prices have dropped, WHO THE FUCK CARES, they were in a goddamn bubble! Supposedly the biggest bubble in history.

And they're not gonna raise house prices by flooding the world with their shitty paper money.

None of this is making any sense whatsoever, unless their actual idea is to destroy the world economy, which is certainly what it SEEMS is their goal.

The ground buffalo I used to buy at the corner store was $5.99 a pound, it just went up to $7.99.

As one tiny tiny example of all the food I see going nothing but up in price.


The Boiling Frog: Effects of QE2 On The Bottom 80% of the U.S. Population
Gonzalo Lira
Monday, November 8, 2010

An old metaphor: If you take a frog and drop it into a roiling pot of boiling water, it’ll jump right out, unscathed. But if you put that same frog in a pot of cold water, and then slowly raise the heat, that frog won’t move. It’ll stay in that pot of water, calm as can be, right up until it is boiled to death.

I’ve been arguing that the unpayable Federal government debt, coupled with irresponsible Federal Reserve policies, will inevitably lead to a hyperinflationary event and currency collapse. In order to prepare for a web seminar on hyperinflation in America, I’ve been looking at the issue of how to safeguard assets before a currency collapse, and how to identify opportunities in the midst of a hyperinflationary crisis.

But along the way—inevitably—it’s led me to consider the issue of the effects of hyperinflation on the American people. Not even hyperinflation—just regular old rising consumer prices: How will they affect the average household.

It’s disturbing.

Even if you don’t buy my hyperinflation call in the least—and a lot of very smart people don’t—the recently announced Quantitative Easing 2 policy of the Federal Reserve has had and will have a profound effect on the dollar.

And a profound effect on the American people—especially the bottom 80%.

Bernanke’s stated purpose in QE2 is to spark consumer spending, and thereby reignite the economy. To do this, Bernanke and the Fed will pump $600 billion into the Treasury bond market, in monthly $75 billion increments—at minimum. According to the Fed’s statement, if more “liquidity” is needed, then by golly, more liquidity will be pumped into the economy.

QE2 is really the official start of a race-to-the-bottom debasement of the U.S. dollar.

No one doubts this—and no one would dispute that such a currency debasement will bring about upward pressures on consumer prices across the board. Indeed, this is the explicit purpose of QE2: The Fed is trying to induce inflation, as it believes that inflation will bring about a reignition of the stagnant American economy.

A lot of commentators have been discussing what QE2 will mean for equities and the various bond markets. People are talking about the Treauries’ yield curve—but not much about what QE2 will mean for the rest of the American population: The middle class, the working poor, the poor, and even the upper-middle class.

So let’s give it a go:

Taking Bureau of Labor Statistics data for 2009, which can be found here, we can put together this simple chart of household incomes and expenditures for last year, divided by quintiles:

Image
Data, from Bureau of Labor Statistics, can be found here.
Data in unadjusted U.S. dollars.

(A note on the data: Housing expenditures include mortgage payments or rents, utilities, and heating, including heating oil. Transportation data includes use of public transportation. Food includes “Food Away From Home”—a remarkably high proportion of expenditures, at 41% for the entire population, skewering to almost 50% for the top quintile, and almost 30% for the lowest quintile. The figure “% of Annual Expenditures” represents how much food, housing, clothing and transportation—the basic necessities—represents of the total expenditures of each quintile. The figure “% of Income” shows the basic necessities as percentages of after-tax income for each quintile.)

Now, it’s no trick to see that rising prices of basic necessities—as a result of plain vanilla Fed-induced inflation, and not the hyperinflation I am positing—will affect everyone: But especially the middle class, the working poor and the poor.

It would be nice if we could quantify that effect. But we can’t just input a hypothetical inflation rate, apply it to the data, and come out with a number expressing how much each percentage point of inflation will affect each quintile of the population.

We can’t because, as prices rise, people buy less of a necessity: Higher gas prices means people drive less. Higher food prices means people eat less, or less quality of food. Higher heating oil prices means people heat their homes at a lower temperature—or in some cases not at all.

But although we can’t easily quantify it, we can comfortably make certain claims about the effects of rising consumer prices on the population.

The first claim I would venture to make—and one that I don’t think will be particularly controversial—is this: Any household spending more than two-thirds of their after-tax income on food, housing, clothing and transportation will suffer an immediate, negative impact from the Fed’s efforts at induced inflation.

That covers pretty much the bottom three quintiles of American households. So 60% of the U.S. population will suffer an immediate effect of rising prices—the stated policy goal of Ben Bernanke’s QE2.

QE2 is having the immediate intended effect of pushing up asset prices, bouying up the financial sector—but it’s also pushing up commodity prices, which have been rising ever since QE2 was first toyed with as a policy option back in the spring.

Lag times may vary, but rising commodity prices inevitably translate into rising consumer prices for basic necessities on Main Street. QE2 is directly responsible for the rise in the last few weeks of all commodities. This will inevitably lead to higher consumer prices.

This inevitable effect of rising prices for the basic necessities gives lie to the stated goal that the Fed has of helping the American people by way of QE2. The policy is not helping—on the contrary: A minimum of 60% of the population will feel immediate, unavoidable pain directly as a result of QE2. They will spend more for basic necessities than they spent previously for them.

Or else, if they don’t spend more, they will consume less. This ought to be obvious: People who cannot afford to spend more on a necessity will instead consume less of it, be it food, gas, or heating oil.

So here’s Fed Lie Number 2: QE2 will not get the economy spending again—on the contrary, rising consumer prices brought about because of QE2’s pushing up commodity prices will insure that the population cuts back on consumption, even if in nominal terms they are spending the same, or even more.

The key assumption that I am making, of course, and which has to be made in any analysis of the effects of rising consumer prices across socio-economic groups, is that wages and salaries will either not rise, or will rise with a lag time of no less than six months.

This is an easy assumption for me to make: Even in the best of economic times, wages and salaries do not rise in lockstep with an expanding economy. And we are currently not in an expanding economy.

It is reasonable to assume that, during a period of steadily rising prices coupled with stagnant economic growth, wages and salaries will not rise for at least six months, if not longer. And of course, if unemployment were to rise above the current U-6 rate of 17%, then obviously aggregate wages and salaries would contract further—which would further aggravate the effects of the rising prices of basic necessities on the bottom 60% of the population for sure. If unemployment continues to rise, then that bottom 60% would begin to grow into the bottom 70% or 80%—maybe even hit the top quintile as well.

Wages are key. If inflation hit consumer prices as well as wages in equal measure, the net effect would be zero—which is more or less what you see in ordinary expansion-driven inflation, the kind prevalent in healthy economies: There are price pressures on commodities, which eventually translate into higher prices at the supermarket—but there are also price pressures on wages, as the economy in toto is expanding, and therefore bidding up scarce labor as it grows. In an expanding economy, prices might be rising—but wages are rising too, so no complaints.

However, in a stagnating or contracting environment—such as what we are experiencing now in the American economy—there are obviously no pressures on wages: If anything, there are downward pressures on wages and salaries.

So if commodity prices rise, people—especially the poor, the working poor, and the middle-class, but maybe even the upper-middle class—are really going to take a hit, as more of their after-tax income goes to paying for basic necessities.

Some people might think that the debasing of the dollar via QE2 will mean that the real cost of housing will fall, as rents and fixed mortgages will be undermined by inflation. They might think this is a good thing.

But this only makes sense if your earnings are absolute: If you’re boss is paying you in gold coins, or silver lingots. But if you live on a dollar income, especially a fixed income—as so many seniors do, let alone the average wage earner—even if your housing costs remain nominally static, rising food, transportation and clothing prices will still take bigger and bigger bites out of that dollar-based income. Please look at the last line of the above table—“Food, Clothing, Transportation as % of Income”—which I calculated precisely for this objection.

The only ones who won’t feel the pain of rising prices of basic necessities that bad is the top quintile—maybe. If they’re income comes predominantly from equities, maybe. If not, then they’re going to take the hit as well.

Way to go, Benny! Your QE2 is going to hit all five quintiles! Be proud!

As I have discussed in detail elsewhere, and which ought to be clear from my discussion in this post, Ben Bernanke and the fucking idiots at the Fed committed the post hoc ergo propter hoc fallacy with regards inflation: They seem to genuinely think that inflation begets growth, rather than understanding that growth begets inflation. (I don’t buy conspiracy theories that claim Benny and the Fed Fucktards are deliberately creating inflation to save the elite’s bacon—I think Benny and his Lollipop Gang are simply and genuinely stupid.) So he and his minions have started up QE2, hell bent on creating inflation in the American economy.

He seems to be succeeding, too.

According to Producer Price Index numbers, grains have risen 33% year over year, oil 20% year over year (both figures September-to-September, link is here). Ever since the idea of QE2 was floated back in May/June, commodities of all kinds have been steadily rising. And as of last week, when Quantitative Easing 2 was officially unleashed, commodity prices have surged even more—and will continue to rise for the foreseeable future. Not just precious metals but grains, sugar, coffee, not to mention oil—they are all rising.

Anecdotally, there is increasing evidence that food prices at the supermarkets have been rising for some time. I do not live in the United States, but I’m in close contact with literally dozens of people, both friends and business associates. From casual conversations and long discussions, I’ve been hearing that supermarket prices are rising across the board, and have been rising since at least mid-spring—yet the price rises do not seem to be reflected in the CPI.

That’s because of how the CPI—the Consumer Price Index, the traditional (and official) metric of U.S. inflation—is calculated. It uses data from past years—currently the 2007 and 2008 consumer survey—to create a basket of products, goods and services, which it uses to calculate monthly price changes.

However, the CPI doesn’t slice the baloney fine: If a product-x that was sold in a 20 ounce package for $3.99 back in 2007 is now being sold in an 18 oz. package at the same price, CPI does not compute that there was an 11.1% inflation in the price of product-x. Rather, according to the CPI, there was zero price inflation in product-x—because it sold for the same price, regardless of whether the package was 10% smaller.

But this is exactly what seems to be happening in food, as well as in other categories of what one would consider basic necessities: Foodstuffs are being sold in smaller units, cotton clothing is now being sold for the same price, only made of synthetic materials, and so on. A recent blog post on Zero Hedge highlighted the specific case of coffee at WalMart, previously sold in a package of 39 oz. for $9.88, now being sold for $10.48—in a 33.9 oz package. This represents a 22% jump in price. Cases such as this are common, and cropping up like mushrooms on the web—enough to confirm that stealth inflation is happening, without needing to stop by John Williams’ Shadow Government Statistics.

This brings the obvious question: If food, transportation, clothing and housing prices rise, but the CPI doesn’t measure it—was there inflation?

This isn’t a Zen koan or Berkeley’s tree falling in the woods—this is real. So my answer is obvious: Yes.

But according to the Fed and to most of the economic commentariat (except for a few notable and distinguished exceptions), since the CPI is not rising, there is no inflation. At least not in theory. In practice? That’s something else.

So! What does this all mean?

It means that Americans are the frog in the metaphor. Between 60% and 80% of them—to be precise—are slowly being boiled alive. The bottom 60% to 80%, to be even more precise.

Because of QE2 in all its iterations—its rumor back in the spring, its announcement last week, its forthcoming implementation—prices for food, housing, clothing and transportation are rising, and will continue to rise as Bernanke’s policy works its magic on commodity prices, and eventually reaches the supermarkets.

The financial sectors might be pleased that their assets are being bouyed by this flood of money coming from the Eccles Building—but the rest of the population will be drowning.

It won’t be just the bottom two-thirds of the population that will feel the pain of QE2: The upper-middle class and even the top quintile will inevitably see more and more of their income going to pay for basic necessities, while their wages and salaries remain stagnant—assuming, of course, that they’re lucky enough to still have a job.

All the while, since the Consumer Price Index will be lagging or flat, the mainstream economists and the Fed drones will keep up a steady chant of, “There is no inflation! There is no inflation!”—even as a majority of the population feels the squeeze of rising prices for the basic necessities. It’ll be a lot like a bunch of cooks, standing around the boiling pot, saying to the poor frog, “It’s only cold water! Don’t worry! It’s still cold! Trust us!”

So like the frog in the metaphor, the bottom 60% of American households will be slowly boiled alive by rising prices—

—brought by QE2.

As I said, you don’t have to buy my hyperinflation call and currency collapse scenario to realize this effect of QE2. This effect of Bernanke’s policy is immediate, undeniable, and inevitable: QE2 will hurt a vast majority of the American population, while helping only a very, very few.

To this, I say: Yeay, Benny—way to help the American people. Way to fucking go.

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Re: "End of Wall Street Boom" - Must-read history

Postby semper occultus » Sat Nov 13, 2010 4:22 pm

a very symbolically significant story here about the shift of global economic power - a house-clearing in W London brings to light a Chinese vase - insured for all of £800.......its just been sold to a Chinese buyer for £53 million quid....

http://www.dailymail.co.uk/news/article-1329308/53m-Chinese-vase-kept-wobbly-bookcase-insured-just-800.html
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Re: "End of Wall Street Boom" - Must-read history

Postby seemslikeadream » Sun Nov 14, 2010 1:17 pm






Mazars and Deutsche Bank could have ended this nightmare before it started.
They could still get him out of office.
But instead, they want mass death.
Don’t forget that.
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Re: "End of Wall Street Boom" - Must-read history

Postby Nordic » Sun Nov 14, 2010 3:24 pm

Another amazing post from Washingtonsblog:

http://www.washingtonsblog.com/2010/11/ ... -bank.html

It's Not the "Great Recession". It's the Great BANK ROBBERY

Too extensive to quote here, and too chock-full of hyperlinks. You just have to go there.
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Re: "End of Wall Street Boom" - Must-read history

Postby seemslikeadream » Sun Nov 14, 2010 3:56 pm

Bank of America Is in Deep Trouble, and There May Be Financial Disaster on the Horizon
Its stock value has dropped 40 percent since April, and the bank is mum on what losses it's hiding on its $2.3 trillion balance sheet.
November 11, 2010 |

Will Bank of America be the first Wall Street giant to once again point a gun to its own head, telling us it'll crash and burn and take down the financial system if we don’t pony up for another massive bailout?

When former Treasury Secretary Hank Paulson was handing out trillions to Wall Street, BofA collected $45 billion from the Troubled Asset Relief Program (TARP) to stabilize its balance sheet. It was spun as a success story -- a rebuke of those who urged the banks be put into receivership -- when the behemoth “paid back” the cash last December. But the bank’s stock price has fallen by more than 40 percent since mid-April, and the value of its outstanding stock is currently at around half of what it should be based on its “book value” -- what the company says its holdings are worth.

“The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet,” wrote Bloomberg columnist Jonathan Weil, “is that it’s largely impenetrable.” Nobody really knows the true values of the assets these companies are holding, which has been the case ever since the collapse. But according to Weil, some of BofA’s financial statements “are so delusional that they invite laughter.”

Weil points to the firm’s accounting of its purchase of Countrywide Financial -- the criminal enterprise at the center of the sub-prime securitization market. Bank of America, Weil notes, hasn’t written off Countrywide’s entire value. “In its latest quarterly report with the SEC,” he wrote, “Bank of America said it had determined the asset wasn’t impaired. It might as well be telling the public not to believe any of the numbers on its financial statements.”

With investors valuing BofA at half the worth that the bank claims, it’s one titan of Wall Street that may be on the brink of collapse. But it’s not alone. “Everybody was doing this, this is not just something that Countrywide and Bank of America were doing," legendary investor Jim Rogers told CNBC. As a result, the banks’ balance sheets are "full of rotten stuff" that “is going to be a huge mess for a long time to come.”

And that “rotten stuff” will continue to be a drag on the brick-and-mortar economy until the mess gets cleaned up. Which, in turn, is a powerful argument for a second dip into the public trough.

When the financial crisis hit, those of us who view the free market as more than a hollow slogan urged the government to take over the ailing giants of Wall Street, wipe out their investors, send their parasitic management teams to the unemployment line and gradually unwind the huge pile of “toxic” assets that they’d amassed before selling them back, leaner and meaner, to the private sector.

It worked in the past -- it was Ronald Reagan’s response to the Savings and Loan crisis of the 1980s. But that was then, and today Reaganite policies are deemed to be “creeping socialism” -- thoroughly unacceptable. We were told the banks were too big to fail, and Bush saw eye-to-eye with Republicans and Blue Dogs in Congress and bailed the banks out without exacting a penalty in exchange for the taxpayers' largesse. They socialized the risk, but the financial industry went right back to its old tricks, paying its execs fat bonuses and playing fast and loose with its accounting.

Much of that toxic paper remains on their books -- somewhere. The assets are still impossible to price and now several Wall Street titans appear to be approaching a tipping point, poised to once again to extort a mountain of cash from our Treasury by claiming to be too big -- and interconnected -- to crash and burn as the principles of the free market would otherwise dictate.

But there’s a difference between then and now. At the time, most of us saw the crash as a result of hubris and greed run amok in an under-regulated financial sector. Now, we know the financial crisis was the result of unchecked criminality -- that fraud was perpetrated, in the words of University of Missouri scholar (and veteran regulator) William Black, “at every step in the home finance food chain.” As Black and economist L. Randall Wray wrote recently:

The appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers' incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false [representations] and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.
That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry -- indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized.

And since the crash, they’ve committed widespread foreclosure fraud, dutifully whitewashed by the corporate media as nothing more than some “paperwork” problems resulting from a handful of “errors.”

It is anything but. As Yves Smith, author of Econned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism, wrote in the New York Times, “The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits.”

Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.
Judges are beginning to demand that the banks show their work -- prove they have the right to foreclose -- and in many instances they can’t, having sliced and diced those mortgages up into a thousand securities without bothering to verify the paperwork as most states require by law. This leaves what Smith calls a “cloud of uncertainty” hanging over trillions in mortgage-backed securities -- the largest class of assets in the world -- and preventing a real recovery of the housing market. In turn, that is holding back the economy at large; according to the International Monetary Fund, it’s the drag of the housing mess that’s causing the high and sustained levels of unemployment we see today.

Big financial firms have also been cooking their books in order to obscure how shaky their balance sheets really are because honest accounting would likely bring an end to those big bonuses that drive “the Street.” Yet a day of reckoning may be fast approaching.

If the worst-case scenario should come to pass, with the banks hit by thousands of lawsuits, unable to foreclose on properties in default and with investors running for the hills, expect to hear calls for TARP II. It’d be a very heavy political lift, but given Congress’s fealty to Wall Street it could plausibly be passed.

There are alternatives. As in 2008, the federal government could put failing financial institutions into receivership. But some experts are saying that if we want to get off the roller coaster of an economy moving from one financial bubble to the next, a bolder approach is necessary: permanent nationalization of banks that can’t survive without public dollars.

“Inevitably, American taxpayers are going to pick up much of the tab for the banks' failures,” wrote Nobel prize-winning economist Joseph Stiglitz last year. “The question facing us is, to what extent do we participate in the upside return?” Stiglitz argued that the government should take “over those banks that cannot assemble enough capital through private sources to survive without government assistance.”

To be sure, shareholders and bondholders will lose out, but their gains under the current regime come at the expense of taxpayers. In the good years, they were rewarded for their risk-taking. Ownership cannot be a one-sided bet.
Of course, most of the employees will remain, and even much of the management. What then is the difference? The difference is that now, the incentives of the banks can be aligned better with those of the country. And it is in the national interest that prudent lending be restarted.

Leo Panitch, a professor of comparative political economy at Canada’s York University, wrote that "the prospect of turning banking into a public utility might be seen as laying the groundwork for the democratization of the economy.”

Ellen Brown, author of Web of Debt, points to the success of the nation’s only government-owned bank, the Bank of North Dakota. “Last year,” she wrote, “North Dakota had the largest budget surplus it had ever had…and it was the only state that was actually adding jobs when others were losing them.”

North Dakota has an abundance of natural resources, including oil, but as Brown notes, other states that enjoy similar riches were deep in the red. “The sole truly distinguishing feature of North Dakota seems to be that it has managed to avoid the Wall Street credit freeze by owning and operating its own bank.” She adds that the bank serves the community, making “low-interest loans to students, farmers and businesses; underwrit[ing] municipal bonds; and serv[ing] as the state’s 'Mini Fed,' providing liquidity and clearing checks for more than 100 banks around the state.”

Several states have considered proposals to emulate North Dakota, but such a bold move would obviously be all but impossible in Washington. But it shouldn’t be off the table. Banks provide an “intermediary good” to the economy, creating no real value. But Big Finance’s speculation economy has caused great and real pain for the rest of us. As Joe Stiglitz put it, there’s no reason in the world the incentives of the banks shouldn’t be better aligned with the interests of the country and its citizens.
Mazars and Deutsche Bank could have ended this nightmare before it started.
They could still get him out of office.
But instead, they want mass death.
Don’t forget that.
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seemslikeadream
 
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