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by JackRiddler » Mon May 17, 2010 10:32 pm
by JackRiddler » Sat May 22, 2010 12:39 am
Wombaticus Rex wrote:82_28 wrote:Explain it or else I'm going back to that Cydonia thread for the rest of my life.
!!!!!
It's about resolution. Us plebs see the market as unbroken lines, but it's not. When people are watching the market second to second, those unbroken lines break into something else: the "Candlestick" chart.
http://en.wikipedia.org/wiki/Candlestick_chart
You're right that support is voodoo to a certain extent. But it's also based on actual math, and it's right often enough to be useful.
The Candlestick Chart is designed that way because pricing is never uniform in these markets - you will have hundreds of trades in the same instrument/stock/commodity, all at different prices. So the chart is structured to reflect that. Moment to moment, there's a distribution of values.
"Support" is the assumed "real value" bottom boundary. Even if things go to shit and the speculation goes horribly wrong, the "Support" is where the nerds assume the index (Dow Jones, S&P, NYSE) will return to.
"Resistance" is the assumed top boundary. In my limited experience, I see a lot more daily, hands-on reality application and vindication of "Resistance" than I do for "Support". I suspect that's because of what Nordic ID'd in the post above: the "Resistance" numbers are a reflection of psychology -- aka, nobody is willing to buy stock at that price because it just looks insane.
On the other hand, "Support" is supposed to be based on fundamentals, the actual value and productivity of the market...and that's more of a holographic projection from WSJ + CNBC than anything else. There IS no bottom, no safe boundary, no support, because the market is pumped up exponentially far above anything resembling actual value.
This is why "Fundamental Analysis" specialists are so frustrated these days.
"Fundamental Analysis is about what the market should do. Technical Analysis is about what the market is actually doing."
Oh, and yes, if someone is talking about multiple handles, they're full of shit and mouthing empty jargon. It's a chart movement, not a unit of measurement.
nathan28 wrote:Don't listen to all those doomers. The S&P has key support levels in the high zeros. Buy now.
"Support" is a price level a stock has repeatedly fallen to then risen from, so that you could draw a line at that price level and it would look like the chart bounces off it. "Resistance"--which you never hear mentioned on BuyNowSPAN--is the opposite, a price-point a stock can't seem to get above. These levels can be a little fuzzy. In theory, the longer or older the support/resistance level is, the more dramatic the movement should be once it is broken. In theory. Like right now Dow 10,000 or so is both major support and also going to be called "psychological" support, too.
"Five handles" means the dude has been drinking with Larry Kudlow again.
What this means in the real world is that a lot of people are buying and selling at those points--IOW, a lot of people are getting their money chewed up by churning prices, and the brokers are rolling in commissions. There's a saying somewhere that a stock only moves past support or resistance when all the short-term dumb money--i.e., retail players, small funds, investing clubs, other people w/out bloomberg machines--has been spent. There's a corollary (?) that follows from that, that a market or stock will only turn around when all the dumb money is fully invested in the wrong positions and that the actual market makers will create historic highs or lows to ensure this happens.
Support is a term from "technical" analysis, which is basically a bunch of horseshit--but oddly enough, so is the only other form of stock analysis, "fundamental" analysis. Technical analysis looks at price charts and volume, IOW, it's staring at numbers and charts with your autism glasses on. There's some specious stuff about fibonacci numbers and "waves" etc. that claim to be tied into the natural mathematical patterns of social behavior or whatever but hey, sometimes I like to take stimulants with my weed, too. Fundamentals look to "fundamentals," shit (that's what it is) like price (of the shares taken in gross)-to-earnings, profit levels, demand, future availability, social trends etc. Technical analysis doesn't pay attention to anything but numbers.
An example of fundamental analysis would be, say, assuming that a BP well was going to blow the fuck up tomorrow and then shorting ("borrowing" the shares to earn money from the price decline when you "return" them) the stock. Or looking at BP's balance sheet, determining that they're still profitable and that the price will eventually return to higher levels, and buying it to sell later. Technical analysis would be waiting for BP's price to hit a short-term low, shorting it, then selling it when it hit a lower intermediate term low, regardless of whether they clean up the spill tomorrow and suddenly get a no-bid contract on all the remaining oil on the globe.
Most of the CNBC "approach" you hear on that channel is a nonsense mix of sentiment, Pollyana-ism, guessing and flag-waving horseshit. Jim Kramer is the poster boy for this idiocy, which has been termed "specuvesting" because it can't figure out if it's a speculative play or a long-term investment.
I tend to think technical analysis "works" because it allows you to determine a viable entry point, a stop-loss level and an exit point before hand. IOW, it's systematic, it's a plan, a strategizing tool. You can use it to pursue large, longer-term moves ("trend following") or you can use it to profit from short-term choppiness ("swing trading") (but probably not both at the same time). I think the chart patterns are largely full of shit, because like WR says, they're not units of measurement, and there's so many "patterns" it's like seeing faces in clouds.
Don't, however, assume I think that fundamental analysis works. Warren Buffet isn't a fundamental analyst. He buys controlling shares in companies and takes over them. Not the same thing, dawg, not by a long shot. You're fucking retarded if you think that you, a spreadsheet and some guesses you have about the future can figure out how much a company's shares will sell for when you don't work at Goldman Sachs.
JackRiddler wrote:Wombaticus Rex wrote:Fibonacci Retracement is not spurious -- or rather, I don't think it is. I find it to be pretty remarkable, in fact.
The markets are irrational and rigged by design, so technical analysis is the closest thing to a roadmap we have.
Edit - wow, I should have just posted this and not typed anything...
That may show only that players are paying attention and self-fulfilling the price support. No one wants to get killed trying to break it when everyone knows it's supposed to be there and expecting the rest to act like a herd. As I said, it's group think reflecting on itself. Fascinating.
("i'm betting you don't know yet that I know that you know that I know that you know")
justdrew speaks the simple truth wrote:we should ban all stock except for dividend paying shares with voting rights. No share of stock may changes hands more than once per day. and have a 1% tax on the money changing hands. Shareholders should be loath to see companies increasing stock volume. Most of the money currently after stocks should instead go to corporate bonds, and federal/state/municipality bonds.
General Patton wrote:smiths wrote:the best you can do in the markets currently is to bet against whatever goldman recommends,
that play has been infallible ever since goldman predicted $200 oil and the oil price folded about 3 days later
So true, it reminds me of what Nathan Rothschild did during the battle of Waterloo. Make a show of moving one way, then move the other and turn a huge profit. And just like Nathan they have plenty of intelligence gathering/rigging methods to put them ahead of the crowd. So much of capitalism is about copying what other people are doing, mainly because it's been proven to turn a profit and you don't have to go through the hassle and risk of innovation. The downside is the major players that everyone follows can lead you off a cliff.
by JackRiddler » Sat May 22, 2010 12:49 am
JackRiddler wrote:MONEY SUPPLY - Since 1960
Long term, going up. Trend was broken for a few years in the 1990s, when the government was running surpluses. Recent years, going up fast.
They dropped M3 - which adds a variety of timed deposits - in 2006, supposedly because it was inaccurate. This sent Paulians into a fit of claims that the Fed doesn't like how high it's getting. Shadow Stats (John Williams) at http://www.shadowstats.com/charts/monet ... ney-supply estimates it as having peaked over 14 trillion last year and for now dropped to about 14 trillion. That would put M3 money supply at around equal to GDP, which is a historic high.
US M3 as a percentage of GDP, historic
MONEY SUPPLY - Recent Quarters
http://www.federalreserve.gov/releases/h6/Current/
See there for their definitions of M1 and M2. You will note that money supply has continued to grow from year to year.
M1 with Currency & Demand Deposit components
See that crazy short spike in late 2001 - in reaction to 9/11. Then it returned to trend, but look at how crazy thick the red line got - this represents a lot of day-to-day volatility.
MONEY BASE
This is, basically, the Federal Reserve's balance sheet - the total it lends out to the banks. It's the base from which the rest of credit money is created by the fractional reserve system. After many many years to reach $800bn, they more than doubled it quasi overnight in September-Nov 2008, to more than $2100bn. The fractional reserve system has yet to unfold this into the full credit it could become (hence all the complaints that banks have money, but aren't lending it).
---------------------------
DEBT
Puts the public sector debts in perspective, don't it now?
To create this chart, someone helpfully plugged in the numbers from the table at Federal Reserve, "Flow of Funds Accounts of the United States," Release Z.1, March 2010: Table D3, "Debt Outstanding by Sector" (1978-2009). The full report is at http://www.federalreserve.gov/releases/ ... ent/z1.pdf.
Using numbers from that chart, I see that starting in 1978, debt for all domestic non-financial sectors (household, business and public) tripled during the first decade, then almost doubled and doubled again in the two that followed, from 3,211 billion in 1978 to 34,702 billion in 2009, or a growth factor of almost 11. Mortgage debt grew by a factor of 14 (708 to 10,484), federal debt by a factor of 12.5 (621 to 7805), so that it's now equal to 90 percent of GDP. Federal debt in 2009 reached about 55% of GDP (after a 1.5 trillion deficit last year thanks to the bailouts and economic decline) but that's also nearly four times current annual Federal income (i.e., what they take in as revenues through taxes).
GDP unadjusted for inflation (nominal dollars, or what was actually in the books at each stage) went up from 2,417 billion in 1978 to 14,453 billion in 2009 (both Q4), or a growth factor of about 6.
Nominal-dollar GDP numbers from http://www.data360.org/dataset.aspx?Data_Set_Id=352
Thus the debt burden of non-financial sectors has nearly doubled relative to GDP.
By the way, after adding up the numbers for net borrowing in the same years (Fed Res Z.1 Table F.1), it seems that cumulatively the debt figures are very close to the total principle in credit extended, i.e. what was actually borrowed without the accumulated interest (which means that debtors, cumulatively, have tended to keep up with interest payments). However, I can't figure out what of the original principle has been paid off, and what out of the current debt outstanding represents interest. This matters because principle (credit extended) is created money, paid off principle is retired as money, and interest is added extra to debt without actual creation. But I guess the outstanding principle must be something like 90% of the money actually still in supply.
Now look at the chart again and note the blue piece - that's the debt of domestic financial sectors, most of which is what banks owe to banks or other financial entities, much of which is the fabled leverage. From 412 bn in 1978 that rose to 17,083 bn in 2008, or growth by a factor of 41. Then came the crash, and deleveraging, meaning a lot of banks paying off what they owed to banks (with more than a little help from you), resulting in a drop to 15,651 bn in 2009, or still a growth since 1978 by a factor of THIRTY-EIGHT, or 3.5 times more than the growth factor for the non-financial sectors. Relative to GDP, the financial sector debt outstanding has gone up from about 20 percent of GDP in 1978 to more than 110 percent.
That figure is a measure of the runaway growth in financial speculation independent of real production since the dawn of the neoliberal era with its removal of capital controls and banking regulations. Total financial sector debt is higher than the GDP and almost double the Federal debt. This is the big useless monster weighing down on the rest, and if it can't find profitable outlet before continued develeraging, it will cause a renewed crash.
As to who holds the grand total of FIFTY TRILLION DOLLARS IN ALL SECTOR DEBT (2009): Fed Res Z.1, Table L.1 establishes that 75 percent of that is owed to the US financial sector, with the rest split 60/40 between households and rest of world.
About 8 trillion or more of that is supposedly in the hands of the top 6 banks.
Anyway, I felt like injecting some "real" numbers here. (Given that the Fed may be playing, relies on other statistical agencies and banks that may be playing, and anyway XX percent of the economy is underground, unaccounted, hidden or offshored.)
What I think they mean in terms of "inflation" and "deflation" can wait for another post, especially since a) these slippery terms need to be defined, and several of the definitions refer to real phenomena that are important whether or not they should be called inflation/deflation; and b) I change my mind regularly and often feel I have no clue.
Suffice to say it seems not everyone here is distinguishing between money, nominal asset values vs. prices, assets as opposed to income, different types of assets (nominal vs. real vs. cash), debt as opposed to liabilities, money circulation as opposed to supply, etc.
by JackRiddler » Sat May 22, 2010 1:01 am
Bankers jailed, sued as Iceland seeks culprits for crisis
By Haukur Holm (AFP) – May 12, 2010
REYKJAVIK — More than a year and a half after Iceland's major banks failed, all but sinking the country's economy, police have begun rounding up a number of top bankers while other former executives and owners face a two-billion-dollar lawsuit.
Since Iceland's three largest banks -- Kaupthing, Landsbanki and Glitnir -- collapsed in late 2008, their former executives and owners have largely been living untroubled lives abroad.
But the publication last month of a parliamentary inquiry into the island nation's profound financial and economic crisis signaled a turning of the tide, laying much of the blame for the downfall on the former bank heads who had taken "inappropriate loans from the banks" they worked for.
On Wednesday, the administrators of Glitnir's liquidation announced they had filed a two-billion-dollar (1.6-billion-euro) lawsuit in a New York court against former large shareholders and executives for alleged fraud.
"I think this lawsuit is without precedence in Iceland," Steinunn Gudbjartsdottir, who chairs Glitnir's so-called winding-up board, told reporters in Reykjavik.
"It is about higher figures than we have ever seen," she said, adding that she expected Glitnir to file more lawsuits going forward, but that "it is unlikely any will be this big."
Glitnir said it was suing "Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir's chief executive, Thorstein Jonsson, its former chairman and other former directors, shareholders and third parties associates with Johannesson for fraudulently and unlawfully draining more than two billion dollars out of the bank."
The bank also said it was "taking action against its former auditors PricewaterhouseCoopers (PwC) for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the bank's collapse in October 2008."
Glitnir's suit, filed in the New York state Supreme Court on Tuesday, blamed most of the bank's woes on "Johannesson and his co-conspirators," who had "conspired to systematically loot Glitnir Bank in order to prop up their own failing companies."
Johannesson, the former owner of the now-defunct Baugur investment group with stakes in a number of British high street stores including Hamleys, Debenhams and House of Fraser, said he was shocked by the lawsuit.
"The distortions and the nonsense in the lawsuit are incredible," he told the Pressan news website.
Glitnir's administrators "can get a 10-year-prison sentence for misusing US courts in this manner," he insisted.
The bank's chief administrator Gudbjartsdottir took his comments in stride.
"I didn't expect him to be happy with the lawsuit," she said.
In addition to its New York suit, Glitnir said it had "secured a freezing order from the High Court in London against Jon Asgeir Johannesson's worldwide assets, including two apartments in Manhattan's exclusive Gramercy Park neighbourhood for which he paid approximately 25 million dollars."
Gudbjartsdottir said Johannesson had just 48 hours to come up with a satisfactory list of his assets.
"If he does not give the right information he faces a jail sentence," she said.
Four former Kaupthing executives, who all live in Luxembourg, have meanwhile been arrested in Iceland in the past week and Interpol has issued an international arrest warrant for that bank's ex-chairman, Sigurdur Einarsson.
Former head of the bank's domestic operations, Ingolfur Helgason, and former chief risk officer Steingrimur Karason were arrested late Monday on arrival from Luxembourg, just days after former Kaupthing boss Hreidar Mar Sigurdsson, along with Magnus Gudmunsson, who headed the bank's unit in Luxembourg, were taken into custody.
The 49-year-old Einarsson, who lives in London, said late Tuesday he had no plans to travel to Iceland to be arrested.
"I'm absolutely flabbergasted about the latest news," he told the Frettabladid daily.
"There is in my opinion no need for the arrests or custody rulings, and I will not of my own free will take part in the play that it appears is being staged to soothe the Icelandic people," he said.
"I'll put the human rights I enjoy here in Britain to the test and will not therefore come home (to Iceland) to these conditions without being forced," he added.
Copyright © 2010 AFP. All rights reserved. More »
Prosecutors Ask if 8 Banks Duped Rating Agencies
By LOUISE STORY
Published: May 12, 2010
The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation.
4 Big Banks Score Perfect 61-Day Run
By ERIC DASH
Published: May 11, 2010
It is the Wall Street equivalent of a perfect game of baseball - 27 up, 27 down, the final score measured in millions of dollars a day. (Interesting choice of metaphor. How come it's not, Godzilla plays perfect destruction, levelling every single structure in the city? Or Dracula plays perfect harvest, sucking the blood of every single virgin in Transylvania? Because those seem to me more apt metaphors.)
Despite the running unease in world markets, four giants of American finance managed to make money from trading every single day during the first three months of the year.
Their remarkable 61-day streak is one for the record books. Perfect trading quarters on Wall Street are about as rare as perfect games in Major League Baseball. On Sunday, Dallas Braden of the Oakland Athletics pitched what was only the 19th perfect game in baseball history.
But Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase & Company produced the equivalent of four perfect games during the first quarter. Each one finished the period without losing money for even one day.
Their showing, disclosed in quarterly financial filings, underscored the outsize - and controversial - role that trading has assumed at major financial institutions. It also drives home the widening lead that a handful of big banks are enjoying over lesser rivals on post-bailout Wall Street.
SNIP
by JackRiddler » Sat May 22, 2010 1:08 am
seemslikeadream wrote:Senate Approves Fed Audit: Sanders Amendment to End Fed Secrecy Passes
The following is a press release from Senator Bernie Sanders (I-VT).
In a major victory for transparency at the Federal Reserve, the Senate today passed an amendment by Sen. Bernie Sanders to audit the Fed and make the central bank reveal which banks received more than $2 trillion in emergency aid during the financial crisis.
“The Fed can no longer operate in virtual secrecy,” said Sanders (I-Vt.).
Under his amendment, the Government Accountability Office would conduct a top-to-bottom audit of all emergency actions by the Fed since the start of the financial crisis in 2007. The non-partisan research arm of Congress specifically would be directed to investigate apparent conflicts of interest involving the Fed and CEOs of the largest financial institutions in the country.
In addition to the audit, the Fed for the first time would have to reveal by Dec. 1, 2010, the identities of banks and other financial institutions that took more than $2 trillion in nearly zero-interest loans.
Fed Chairman Ben Bernanke repeatedly refused to tell Sanders and others the names of the banks which took the loans.
“Let's be clear,” Sanders said. “When trillions of dollars of taxpayer money are being lent out to the largest financial institutions in this country, the American people have a right to know who received that money and what they did with it. We also need to know what possible conflicts of interest exist involving the heads of large financial institutions who sat in the room helping to make those decisions.”
The amendment, approved by a vote of 96 to 0, was a combined effort by conservative and progressive senators and a wide spectrum of grassroots organizations.
The Fed is fighting federal court judgments ordering the central bank to divulge the information that was sought in Freedom of Information Act lawsuits by Bloomberg News and other news organizations.
The information that the Fed has withheld is separate from the $700 billion in Wall Street bailouts approved by Congress under the Troubled Asset Relief Program. Recipients of those funds were posted on the Treasury Department Web site.
by JackRiddler » Sat May 22, 2010 1:11 am
chiggerbit wrote:I'm curious what Wombat and the rest think will happen now that the housing rebate has expired for the second time. I don't expect that it will be renewed, so will this precipitate any kind of housing crash?
I know that when the the original rebate, which can amount to as much as $8,000, was renewed, it didn't perform as well as hoped during the extension period. Apparently it's believed that the original rebate "stole" housing sales from future sales, which would have included the extension period from November to April 30th, which I read to mean that it didn't really create that many new sales--those which wouldn't have been made without the rebate. I could be reading that wrong, though.
So, what's going to happen now? Did it work? Did it slow down foreclosures? Is it going to affect unemployment at all?
Wombaticus Rex wrote:What's going to happen now: nobody knows.
Did it work? Yes, and that's very, very bad. The stated goal from the beginning has been to maintain high home values, since for most voting Americans, their entire net worth is basically their home. The problem is, that's not a very smart solution in the aftermath of a pricing bubble, and it's equivalent to that old Onion headline about shoveling money into a giant pit for burial. The money spent is 1) delaying the inevitable correction and 2) creating no actual value in the process. I am in no way, shape or form a "market fundamentalist" but I'm pretty satisfied that the Real Estate agents I interact with every day @ work are more intelligent and driven than anyone the Obama administration has working on this.
Did it slow down foreclosures? No, but the other programs did: HAMP, HAFA, etc. It's important to remember that "mortgage servicing" is a huge and diverse industry that's mostly owned by the same banks who are "taking a hit" -- but these delays and "modification programs" are essentially funneling more money to the banks than they would have otherwise received. It's another bailout using homeowners themselves as proxies, and it infuriates me. It's CIA-type cynical, and it's mostly taken as a good thing by the media -- to the point where bank executives can publicly "complain" about this and nobody busts up laughing. Nobody in the big banks wants this resolved, because at the end of the day, their balance books are filled with trillions in worthless paper. Ending the "mortgage modification programs" would...well, no, they'd be protected from taking a hit, then, too. Let's not forget who runs our government, eh?
Is it going to affect unemployment at all? Not at all, no. The next round of problems is ARM jumps -- all those adjustable rate mortgages are about to get a lot more expensive and it will be a definite tipping point for millions of people who are just barely making it now. The next next round of problems is commercial foreclosures, a crisis that's just getting started, basically a 1:1 analog of the residential crisis only with properties worth 10x more. So a lot of people are worried as fuck about that, and/or positioning themselves to bank out on it.
But overall, the $8000 credit didn't amount to much. It's presence or absence is way less important than the media makes it out to be.
I could go on about this all day, but that would be stupid.
by JackRiddler » Sat May 22, 2010 1:17 am
The Bailout of Big American Banks Has Cost Trillions More Than We've Been Told
Granted, the $700 billion dollar TARP bailout was a massive bait-and-switch. The government said it was doing it to soak up toxic assets, and then switched to saying it was needed to free up lending. It didn't do that either. Indeed, the Fed doesn't want the banks to lend.
True, as I wrote in March 2009:
The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:
Bailout money is being used to subsidize companies run by horrible business men, allowing the bankers to receive fat bonuses, to redecorate their offices, and to buy gold toilets and prostitutes
A lot of the bailout money is going to the failing companies' shareholders
Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is "a massive redistribution of wealth to the bank shareholders and their top executives"
The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)
And as the New York Times notes, "Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners".
***
In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG's credit default swaps and is not even really stabilizing AIG.
But the TARP bailout is peanuts compared to the numerous other bailouts the government has given to the giant banks.
And I'm not referring to the $23 trillion in bailouts, loans, guarantees and other known shenanigans that the special inspector general for the TARP program mentions. I'm talking about more covert types of bailouts.
Like what?
Guaranteeing a Fat Spread on Interest Rates
Well, as Bloomberg notes:
“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.”
The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.
The gap between short-term interest rates, such as what banks may pay to borrow in interbank markets or on savings accounts, and longer-term rates, known as the yield curve, has been at record levels. The difference between yields on 2- and 10-year Treasuries yesterday touched 2.71 percentage points, near the all-time high of 2.94 percentage points set Feb. 18.
Harry Blodget explains:
The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.
For the 63 straight trading days in Q1, in other words, Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) made money trading for their own accounts.
Trading, of course, is supposed to be a risky business: You win some, you lose some. That's how traders justify their gargantuan bonuses--their jobs are so risky that they deserve to be paid millions for protecting their firms' precious capital. (Of course, the only thing that happens if traders fail to protect that capital is that taxpayers bail out the bank and the traders are paid huge "retention" bonuses to prevent them from leaving to trade somewhere else, but that's a different story).
But these days, trading isn't risky at all. In fact, it's safer than walking down the street.
Why?
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.
***
The government's zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.
Paul Abrams chimes in:
To get a clear picture of what is going on here, ignore the intermediate steps (borrowing money from the fed, investing in Treasuries), as they are riskless, and it immediately becomes clear that this is merely a direct payment from the Fed to the banking executives...for nothing. No nifty new tech product has been created. No illness has been treated. No teacher has figured out how to get a third-grader to understand fractions. No singer's voice has entertained a packed stadium. No batter has hit a walk-off double. No "risk"has even been "managed", the current mantra for what big banks do that is so goddamned important that it is doing "god's work".
Nor has any credit been extended to allow the real value-producers to meet payroll, to reserve a stadium, to purchase capital equipment, to hire employees. Nothing.
Congress should put an immediate halt to this practice. Banks should have to show that the money they are borrowing from the Fed is to provide credit to businesses, or consumers, or homeowners. Not a penny should be allowed to be used to purchase Treasuries. Otherwise, the Fed window should be slammed shut on their manicured fingers.
And, stiff criminal penalties should be enacted for those banks that mislead the Fed about the destination of the money they are borrowing. Bernie Madoff needs company.
There is another type of guaranteed spread that allows the giant banks to make money hand over fist. Specifically, the Fed pays the big banks interest to borrow money at no interest and then keep money parked at the Fed itself. (The Fed is intentionally doing this for the express purpose of preventing too much money from being lent out to Main Street. That's just dandy.)
The giant banks are receiving many other covert bailouts and subsidies as well.
Too Big As Subsidy
Initially, the fact that the giant banks are "too big to fail" encourages them to take huge, risky gambles that they would not otherwise take. If they win, they make big bucks. If they lose, they know the government will just bail them out. This is a gambling subsidy.
The very size of the too big to fails also decreases the ability of the smaller banks to compete. And - since the government itself helped make the giants even bigger - that is also a subsidy to the big boys (see this).
The monopoly power given to the big banks (technically an "oligopoly") is a subsidy in other ways as well. For example, Nobel prize winning economist Joseph Stiglitz said in September that giants like Goldman are using their size to manipulate the market:
"The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information."
Further, he says, "That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that's why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."
The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets - making up more than 70% of stock trades - but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See this, this, this, this and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).
Goldman also admitted that its proprietary trading program can "manipulate the markets in unfair ways". The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government's blessings.
In addition, the giants receive many billions in subsidies by receiving government guarantees that they are "too big to fail", ensuring that they have to pay lower interest rates to attract depositors.
Derivatives
And the government's failure to rein in derivatives or break up the giant banks also constitute enormous subsidies, as it allows the giants to make huge sums by keeping the true price points of their derivatives secret. See this and this.
Toxic Assets
And the PPIP program - which was supposed to reduce the toxic assets held by banks - actually increased them, and just let the banks make a quick buck.
Mortgages and Housing
PhD economists John Hussman and Dean Baker (and fund manager and financial writer Barry Ritholtz) say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.
Many also accuse Obama's foreclosure relief programs as being backdoor bailouts for the banks. (See this, this and this).
Foreign Bailouts
The big banks - such as JP Morgan - also benefit from foreign bailouts, such as the European bailout, as they are some of the largest creditors of the bailed out countries, and the bailouts allow them to get paid in full, instead of having to write down their foreign losses.
These are just a few of the secret bailouts programs the government is giving to the giant banks. There are many other bailout programs as well. If these bailouts and subsidies are added up, they amount to many tens - or perhaps even hundreds - of trillions of dollars.
And then there is the cost of debasing the currency in order to print money to fund these bailouts. The cost to the American citizen in less valuable dollars will be truly staggering.
by JackRiddler » Sat May 22, 2010 1:19 am
seemslikeadream wrote:
by JackRiddler » Sat May 22, 2010 1:25 am
Thanks to Username wrote:~
2) America's Ten Most Corrupt Capitalists
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)
Wall Street's captains of industry and top policymakers in Washington are often the same people. A lot of them get rich by playing for both teams.
AlterNet / By Zach Carter
May 13, 2010
The financial crisis has unveiled a new set of public villains—corrupt corporate capitalists who leveraged their connections in government for their own personal profit. During the Clinton and Bush administrations, many of these schemers were worshiped as geniuses, heroes or icons of American progress. But today we know these opportunists for what they are: Deregulatory hacks hellbent on making a profit at any cost. Without further ado, here are the 10 most corrupt capitalists in the U.S. economy.
1. Robert Rubin
Where to start with a man like Robert Rubin? A Goldman Sachs chairman who wormed his way into the Treasury Secretary post under President Bill Clinton, Rubin presided over one of the most radical deregulatory eras in the history of finance. Rubin's influence within the Democratic Party marked the final stage in the Democrats' transformation from the concerned citizens who fought Wall Street and won during the 1930s to a coalition of Republican-lite financial elites.
Rubin's most stunning deregulatory accomplishment in office was also his greatest act of corruption. Rubin helped repeal Glass-Steagall, the Depression-era law that banned economically essential banks from gambling with taxpayer money in the securities markets. In 1998, Citibank inked a merger with the Travelers Insurance group. The deal was illegal under Glass-Steagall, but with Rubin's help, the law was repealed in 1999, and the Citi-Travelers merger approved, creating too-big-to-fail behemoth Citigroup.
That same year, Rubin left the government to work for Citi, where he made $120 million as the company piled up risk after crazy risk. In 2008, the company collapsed spectacularly, necessitating a $45 billion direct government bailout, and hundreds of billions more in other government guarantees. Rubin is now attempting to rebuild his disgraced public image by warning about the dangers of government spending and Social Security. Bob, if you're worried about the deficit, the problem isn't old people trying to get by, it's corrupt bankers running amok.
2. Alan Greenspan
The officially apolitical, independent Federal Reserve chairman backed all of Rubin's favorite deregulatory plans, and helped crush an effort by Brooksley Born to regulate derivatives in 1998, after the hedge fund Long-Term Capital Management went bust. By the time Greenspan left office in 2006, the derivatives market had ballooned into a multi-trillion dollar casino, and Greenspan wanted his cut. He took a job with bond kings PIMCO and then with the hedge fund Paulson & Co.—yeah, that Paulson and Co., the one that colluded with Goldman Sachs to sabotage the company's own clients with unregulated derivatives.
Incidentally, this isn't the first time Greenspan has been a close associate of alleged fraudsters. Back in the 1980s, Greenspan went to bat for politically connected Savings & Loan titan Charles Keating, urging regulators to exempt his bank from a key rule. Keating later went to jail for fraud, after, among other things, putting out a hit on regulator William Black. ("Get Black – kill him dead.") Nice friends you've got, Alan.
3. Larry Summers
During the 1990s, Larry Summers was a top Treasury official tasked with overseeing the economic rehabilitation of Russia after the fall of the Soviet Union. This project, was, of course, a complete disaster that resulted in decades of horrific poverty. But that didn't stop top advisers to the program, notably Harvard economist Andrei Shleifer, from getting massively rich by investing his own money in Russian projects while advising both the Treasury and the Russian government. This is called "fraud," and a federal judge slapped both Shleifer and Harvard itself with hefty fines for their looting of the Russian economy. But somehow, after defrauding two governments while working for Summers, Shleifer managed to keep his job at Harvard, even after courts ruled against him.
That's because after the Clinton administration, Summers became president of Harvard, where he protected Shleifer. This wasn't the only crazy thing Summers did at Harvard—he also ran the school like a giant hedge fund, which went very well until markets crashed in 2008. By then, of course, Summers had left Harvard for a real hedge fund, D.E. Shaw, where he raked in $5.2 million working part-time. The next year, he joined the the Obama administration as the president's top economic adviser. Interestingly, the Wall Street reform bill currently circulating through Congress essentially leaves hedge funds untouched.
4. Phil and Wendy Gramm
Summers, Rubin and Greenspan weren't the only people who thought it was a good idea to let banks gamble in the derivatives casinos. In 2000, Republican Senator from Texas Phil Gramm pushed through the Commodity Futures Modernization Act, which not only banned federal regulation of these toxic poker chips, it also banned states from enforcing anti-gambling laws against derivatives trading. The bill was lobbied for heavily by energy/finance hybrid Enron, which would later implode under fraudulent derivatives trades. In 2000, when Phil Gramm pushed the bill through, his wife Wendy Gramm was serving on Enron's board of directors, where she made millions before the company went belly-up.
When Phil Gramm left the Senate, he took a job peddling political influence at Swiss banking giant UBS as vice chairman. Since Gramm's arrival, UBS has been embroiled in just about every scandal you can think of, from securities fraud to tax fraud to diamond smuggling. Interestingly, both UBS shareholders and their executives have gotten off rather lightly for these acts. The only person jailed thus far has been the tax fraud whistleblower. Looks like Phil's earning his keep.
5. Jamie Dimon
J.P. Morgan Chase CEO Jamie Dimon has done a lot of scummy things as head of one of the world's most powerful banks, but his most grotesque act of corruption actually took place at the Federal Reserve. At each of the Fed's 12 regional offices, the board of directors is staffed by officials from the region's top banks. So while it's certainly galling that the CEO of J.P. Morgan would be on the board of the New York Fed, one of J.P. Morgan's regulators, it's not all that uncommon.
But it is quite uncommon for a banker to be negotiating a bailout package for his bank with the New York Fed, while simultaneously serving on the New York Fed board. That's what happened in March 2008, when J.P. Morgan agreed to buy up Bear Stearns, on the condition that the Fed kick in $29 billion to cushion the company from any losses. Dimon-- CEO of J.P. Morgan and board member of the New York Fed-- was negotiating with Timothy Geithner, who was president of the New York Fed-- about how much money the New York Fed was going to give J.P. Morgan. On Wall Street, that's called being a savvy businessman. Everywhere else, it's called a conflict of interest.
6. Stephen Friedman
The New York Fed is just full of corruption. Consider the case of Stephen Friedman (expertly presented by Greg Kaufmann for the Nation). As the financial crisis exploded in the fall of 2008, Friedman was serving both as chairman of the New York Fed and on the board of directors at Goldman Sachs. The Fed stepped in to prevent AIG from collapsing in September 2008, and by November, the New York Fed had decided to pay all of AIG's counterparties 100 cents on the dollar for AIG's bets—even though these companies would have taken dramatic losses in bankruptcy. The public wouldn't learn which banks received this money until March 2009, but Friedman bought 52,600 shares of Goldman stock in December 2008 and January 2009, more than doubling his holdings.
As it turns out, Goldman was the top beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman made millions on the Goldman stock purchase, and is yet to disclose what he knew about where the AIG money was going, or when he knew it. Either way, it's pretty bad—if he knew Goldman benefited from the bailout, then he belongs in jail. If he didn't know, then what exactly was he doing as chairman of the New York Fed, or on Goldman's board?
7. Robert Steel
Like better-known corruptocrats Robert Rubin and Henry Paulson, Steel joined the Treasury after spending several years as a top executive with Goldman Sachs. Steel joined the Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded to do, well, nothing much until financial markets went into free-fall in 2008. When Wachovia ousted CEO Ken Thompson, the company named Steel as its new CEO. Steel promptly bought one million Wachovia shares to demonstrate his commitment to the firm, but by September, Wachovia was in dire straits. The FDIC wanted to put the company through receivership—shutting it down and wiping out its shareholders.
But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share—saving Steel himself $7 million. He now serves on Wells Fargo's board of directors.
8. Henry Paulson
His time at Goldman Sachs made Henry Paulson one of the richest men in the world. Under Paulson's leadership, Goldman transformed from a private company ruled by client relationships into a public company operating as a giant global casino. As Treasury Secretary during the height of the financial crisis, Paulson personally approved a direct $10 billion capital injection into his former firm.
But even before that bailout, Paulson had been playing fast and loose with ethics rules. In June 2008, Paulson held a secret meeting in Moscow with Goldman's board of directors, where they discussed economic prognostications, market conditions and Treasury rescue plans. Not okay, Hank.
9. Warren Buffett
Warren Buffett used to be a reasonable guy, blasting the rich for waging "class warfare" against the rest of us and deriding derivatives as "financial weapons of mass destruction." These days, he's just another financier crony, lobbying Congress against Wall Street reform, and demanding a light touch on—get this—derivatives! Buffet even went so far as to buy the support of Sen. Ben Nelson, D-Nebraska, for a filibuster on reform. Buffett has also been an outspoken defender of Goldman Sachs against the recent SEC fraud allegations, allegations that stem from fancy products called "synthetic collateralized debt obligations"—the financial weapons of mass destruction Buffett once criticized.
See, it just so happens that both Buffet's reputation and his bottom line are tied to an investment he made in Goldman Sachs in 2008, when he put $10 billion of his money into the bank. Buffett has acknowledged that he only made the deal because he believed Goldman would be bailed out by the U.S. government. Which, in fact, turned out to be the case, multiple times. When the government rescued AIG, the $12.9 billion it funneled to Goldman was to cover derivatives bets Goldman had placed with the mega-insurer. Buffett was right about derivatives—they are WMD so far as the real economy is concerned. But they've enabled Warren Buffett to get even richer with taxpayer help, and now he's fighting to make sure we don't shut down his own casino.
10. Goldman Sachs
No company exemplifies the revolving door between Wall Street and Washington more than Goldman Sachs. The four people on this list are some of the worst offenders, but Goldman's D.C. army has includes many other top officials in this administration and the last.
White House:
Joshua Bolton, chief of staff for George W. Bush, was a Goldman man
Regulators:
Current New York Fed President William Dudley is a Goldman man
Current Commodity Futures Trading Commission Chairman Gary Gensler has been a responsible regulator under Obama, but he was a deregulatory hawk during the Clinton years, and worked at Goldman for nearly two decades before that.
A top aide to Timothy Geithner, Gene Sperling, is a Goldman man
Current Treasury Undersecretary Robert Hormats is a Goldman man
Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist
Former SEC Chairman Arthur Levitt is now a Goldman adviser
Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man
COO of the SEC Enforcement Division Adam Storch is a Goldman man
Congress:
Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson
Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for Congress
Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman
And the list goes on.
Zach Carter is an economics editor at AlterNet and a fellow at Campaign for America's Future. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.
~
by JackRiddler » Sat May 22, 2010 1:28 am
US probing Morgan Stanley deals: media
(AFP) – May 12, 2010
WASHINGTON — US federal prosecutors are investigating whether Morgan Stanley misled investors about financial derivative deals against which it sometimes bet, The Wall Street Journal reported Wednesday.
The suspicions were similar to civil fraud charges faced by Goldman Sachs, which is also under investigation for how it designed and sold mortgage-related products before the financial crisis.
But Morgan Stanley chief executive James Gorman said he was not aware of any federal investigation into the investment bank's practices involving the complex financial products.
"We've not been contacted by the Justice Department about any transactions that were raised in the Wall Street Journal article and we have no knowledge whatsoever of a Justice Department investigation," he told reporters in Tokyo.
"We have looked into the situation internally in some detail."
The Journal said investigators were namely examining whether Morgan Stanley fairly represented to investors its roles after it arranged and marketed pools of bond-related investments known as collateralized debt obligations (CDOs) and its trading desk sometimes placed bets that the deals' value would fall.
Among the deals under scrutiny are so-called "Dead Presidents" packages named after US presidents James Buchanan and Andrew Jackson, the newspaper said, citing a person familiar with the matter.
But although Morgan Stanley helped design and bet against the deals, the firm did not market them to clients.
The Department of Justice could not immediately reached for comment about the probe, which is in its preliminary stages.
Copyright © 2010 AFP. All rights reserved.
by JackRiddler » Sat May 22, 2010 1:54 am
Brad Birkenfeld
From Wikipedia, the free encyclopedia
Brad Birkenfeld is an American banker who formerly worked for UBS, Switzerland's largest bank.[1]
He is the first person ever to expose what has become a multi-billion dollar international tax fraud scandal over Swiss private banking.[2] Despite his unprecedented, extensive and voluntary cooperation, and registering as an IRS whistleblower, Birkenfeld is the only U.S. citizen to be sentenced to jail as a result of the scandal.[3]Contents [hide]
1 Background
2 Results
3 "Whistleblower" status
4 Chilling Whistleblowers and Prosecutorial Misconduct
5 Tax Analysts' "Person of the Year"
6 Birkenfeld's plea, sentencing and incarceration
7 References
8 External links
[edit]
Background
In October 2001, Birkenfeld began working at UBS in Geneva, Switzerland, handling private banking, primarily for clients located in the United States. In 2005, he learned that UBS's secret dealings with American customers violated an agreement the bank had reached with the IRS.[4]
He resigned from UBS in October 2005 and provided written whistleblower complaints to Peter Kurer, Head Counsel for UBS, and other UBS senior executives regarding the illegal practices of U.S. cross-border business. When UBS's internal investigation found no irregularities, Birkenfeld went to the United States and registered as an IRS whistleblower in June 2007 to expose this international scandal to the authorities. The Justice Department later found that UBS's internal probe into Birkenfeld's allegations that bank managers were encouraging breaches of UBS's own written policies did not examine or follow up on available evidence.[5]
Over the next three years, Birkenfeld voluntarily undertook affirmative actions to initiate contact with and to provide sensitive, detailed information about the misconduct to the U.S. Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), and to the U.S. Senate.
[edit]
Results
In February 2009—following the issuance of a "John Doe" summons that was based in significant part upon the information that Birkenfeld provided to the IRS in June 2007—UBS entered into an historic Deferred Prosecution Agreement with the Government to avoid indictment on criminal charges of aiding tax evasion. The Agreement entailed UBS paying $780 million in fines and turning over the names of about 250 clients.[6]
All the major players, including the UBS senior executive in charge of offshore business in the United States, have paid fines, been put on probation, or been set free. One of the executives, Martin Liechti, was detained for 4 months by U.S. authorities, invoked the Fifth Amendment in front of the U.S. Senate in July 2008, and was released back to Switzerland in August 2008.
[edit]
"Whistleblower" status
Birkenfeld initially came forward in 2005 under UBS's policy on "Whistleblowing Protection for Employees." When he went to the U.S. government in 2007, he registered with the IRS's Whistleblower Reward Program, but Justice Department tax prosecutor Kevin Downing told him that it "does not, in any way, participate in the Program. The Program is exclusively within the jurisdiction and control of the Internal Revenue Service."
At a March 4, 2009 Hearing before the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Governmental Affairs, Senator Claire McCaskill asked, "Was there a whistleblower in this case?" IRS Commissioner Doug Shulman deferred the question to John DiCicco, a senior trial attorney in the Justice Department's Tax Division, who answered, "Mr. Birkenfeld...."
Six months later, DiCicco told TIME magazine, "With regard to whistleblowers: those who seek to be treated as true whistleblowers need to know they must come in early and give complete and truthful disclosures.... Mr. Birkenfeld did not come in and give complete and truthful disclosures. Therefore, he is not entitled to whistleblower status."[7]
The Justice Department's Motion for Sentence Reduction stated: "Defendant Birkenfeld has provided substantial assistance.... This substantial assistance has been timely, significant, useful, truthful, complete, and reliable."[8]
[edit]
Chilling Whistleblowers and Prosecutorial Misconduct
On October 22, 2009, whistleblower advocacy groups sent a letter to U.S. Attorney General Eric Holder, urging him to conduct an independent review of Birkenfeld's case because of the chilling effect it is having on potential financial whistleblowers.[9]
On December 7, 2009, Birkenfeld's attorneys sent a letter to Holder detailing alleged misleading statements by the prosecutor, which were the most prejudicial to Birkenfeld's harsh sentence, and filed a motion with the judge regarding the same. The judge denied the motion on January 4, 2010 without hearing.
[edit]
Tax Analysts' "Person of the Year"
Attorney Dean Zerbe, who helped write the 2006 IRS whistleblower law when he served as tax counsel to the Senate Finance Committee, called Birkenfeld "the most important tax whistleblower ever."
On January 1, 2010, Tax Analysts, a non-profit which encourages transparency in tax laws, named Birkenfeld "Person of the Year."[10] On January 3, 2010, Birkenfeld's case was a story on the first 2010 episode of 60 Minutes.
[edit]
Birkenfeld's plea, sentencing and incarceration
Although on at least one occasion Justice Department officials told Birkenfeld they were not looking to prosecute him,[11] they arrested him in 2008 and he promptly pleaded guilty to a single fraud conspiracy count.
Birkenfeld's sentencing was originally set for August 15, 2008, but was delayed four times as the Justice Department, citing his cooperation in the UBS investigation, repeatedly asked for more time. This is belied by the fact that June 10, 2008 was the last time the Justice Department asked Birkenfeld for any information regarding UBS, Swiss private banking, or his former U.S. clients.[12]
On August 21, 2009, he was sentenced to 40 months in jail (ratcheted up from the 30-month prison term prosecutors sought).[13]
Although he had already been under house arrest for a year and a half (none of which counted towards his sentence), the Justice Department said that it intended to continue using Birkenfeld in conducting investigations, deferring his sentence until January 8, 2010. Accordingly, Birkenfeld reached out to the Justice Department multiple times, which indicated it had no interest in speaking with him and failed to ask him a single question during this time.
Birkenfeld began serving his sentence at the Federal Correctional Institute in Schuylkill, Pennsylvania on January 8, 2010. Currently, he is the only UBS banker or client to go to jail. On Tax Day, April 15, 2010, his attorneys filed a petition for pardon/commutation to the President Obama and the Pardon Attorney.
[edit]
References
1^ Swiss Banker Turned Whistleblower Ended Up With a Prison Sentence, The Washington Post, 16 May 2010
2^ UBS on Trial: The End of Secret Banking?, Business Week, 10 July 2009
3^ UBS Whistleblower Gets Rewarded with Prison Time, Bloomberg, 26 August 2009
4^ One Man Puts a Dent in Tax Evasions, L.A. Times, 26 October 2009
5^ Justice Dept. Chastises UBS Chairman Over IRS Fraud Probe, Investment News, 3 March 2009
6^ UBS Strikes Deal with US Over Tax, UK Telegraph, 3 August 2009
7^ "Why is the UBS Whistleblower Headed to Prison?", Time Magazine, 6 October 2009
8^ Motion for Sentence Reduction Pursuant to U.S.S.G. s5K1 and 18 U.S.C., s 3553(e), U.S. District Court for the Southern District of Florida, 17 August 2009
9^ Key UBS Informant Headed to Jail, Wall Street Journal, 15 October 2009
10^ "Birkenfeld is Tax Analysts Person of the Year", Federal Tax Crimes, 1 January 2010
11^ Why is the UBS Whistleblower Headed to Prison?, TIME Magazine, 6 October 2009
12^ Prosecution of UBS Informant Seen Backfiring on U.S., Reuters, 9 October 2009
13^ The White House and the Justice Department: Different Approaches to UBS, Harpers, 24 August 2009
[edit]
External links
60 Minutes profile, January 3, 2010
Why Is the Whistleblower the Only One Heading to Prison? - video report by Democracy Now!
This page was last modified on 20 May 2010 at 16:32.
by JackRiddler » Sat May 22, 2010 2:02 am
by JackRiddler » Sat May 22, 2010 2:36 am
JackRiddler wrote:Thanks, MacC!
SNIP
Here's reformed Reaganomics Commando P.C. Roberts telling it like it is on "entitlements reform":
http://counterpunch.org/roberts02192010.htmlFebruary 19 - 21, 2010
Wall Street Targets the Elderly
Looting Social Security
By PAUL CRAIG ROBERTS
Hank Paulson, the Gold Sacks bankster/US Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new US debt, is still not in jail. He is writing in the New York Times urging that the mess he caused be fixed by taking away from working Americans the Social Security and Medicare for which they have paid in earmarked taxes all their working lives.
Wall Street’s approach to the poor has always been to drive them deeper into the ground.
As there is no money to be made from the poor, Wall Street fleeces them by yanking away their entitlements. It has always been thus. During the Reagan administration, Wall Street decided to boost the values of its bond and stock portfolios by using Social Security revenues to lower budget deficits. Wall Street figured that lower deficits would mean lower interest rates and higher bond and stock prices.
Two Wall Street henchmen, Alan Greenspan and David Stockman, set up the Social Security raid in this way: The Carter administration had put Social Security in the black for the foreseeable future by establishing a schedule for future Social Security payroll tax increases. Greenspan and Stockman conspired to phase in the payroll tax increases earlier than was needed in order to gain surplus Social Security revenues that could be used to finance other government spending, thus reducing the budget deficit. They sold it to President Reagan as “putting Social Security on a sound basis.”
Along the way Americans were told that the surplus revenues were going into a special Social Security trust fund at the U.S. Treasury. But what is in the fund is Treasury IOUs for the spent revenues. When the “trust funds” are needed to pay Social Security benefits, the Treasury will have to sell more debt in order to redeem the IOUs.
Social Security was mugged again during the Clinton administration when the Boskin Commission jimmied the Consumer Price Index in order to reduce the inflation adjustments that Social Security recipients receive, thus diverting money from Social Security retirees to other uses.
We constantly hear from Wall Street gangsters and from Republicans and an occasional Democrat that Social Security and Medicare are a form of welfare that we can’t afford, an “unfunded liability.” This is a lie. Social Security is funded with an earmarked tax. People pay for Social Security and Medicare all their working lives. It is a pay-as-you-go system in which the taxes paid by those working fund those who are retired.
Currently these systems are not in deficit. The problem is that government is using earmarked revenues for other purposes. Indeed, since the 1980s Social Security revenues have been used to fund general government. Today Social Security revenues are being used to fund trillion dollar bailouts for Wall Street and to fund the Bush/Obama wars of aggression against Muslims.
Having diverted Social Security revenues to war and Wall Street, Paulson says there is no alternative but to take the promised benefits away from those who have paid for them.
Republicans have extraordinary animosity toward the poor. In an effort to talk retirees out of their support systems, Republicans frequently describe Social Security as a Ponzi scheme and “unsustainable.” They ought to know. The phony trust fund, which they set up to hide the fact that Wall Street and the Pentagon are running off with Social Security revenues, is a Ponzi scheme. Social Security itself has been with us since the 1930s and has yet to wreck our lives and budget. But it only took Hank Paulson’s derivative Ponzi scheme and its bailout a few years to inflict irreparable damage on our lives and budget.
Years ago with stagflation defeated and a rising stock market, I favored privatizing Social Security as a way of creating a funded retirement system and producing greater savings and larger incomes for retirees. At that time Wall Street was interested, not for my reasons, but in order to collect the fees from managing the funds.
Had Social Security been privatized, I doubt that Wall Street would have been permitted to deregulate the financial system. Too much would have been at stake.
After the latest crisis brought on by Wall Street’s dishonesty and greed, trusting Wall Street to manage anyone’s old age pension requires a leap of faith that no intelligent person can make.
Wall Street has got away with its raid on the public treasury. Now, pockets full, it wants to pay for the heist by curtailing Social Security and Medicare. Having deprived the working population of homes, jobs, and health care, Wall Street is now after the elderly’s old age security.
Social Security, formerly an untouchable “third rail of politics,” is now “unsustainable,” while the real unsustainables--a pre-1929 unregulated financial system and open-ended multi-trillion dollar Global War Against Terror--are the new untouchables. This transformation signals the complete capture of American democracy by an oligarchy of special interests.
Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com
Here's my DU thread you reference, no edit here:
http://www.democraticunderground.com/di ... 89x7777568
(The discussion is surprisingly un-obnoxious by current DU standards.)JackRiddler wrote:
Real change will never happen except by socialism. Start by expropriating the banks.
Edited on Tue Feb-23-10 02:03 PM by JackRiddler
The following was inspired by this thread by Talking Dog:
Some news we can all feel good about!!!! The top 400 families are making more than ever!!!!
And the taxes they are paying are at record lows!!!!!!
http://www.democraticunderground.com/di ... id=7775796
Which I recommend. It contains the following three charts, which I will borrow:
It occurred to me while highly informative, these charts on their own may actually cause one to underestimate the wealth and the power of the superrich class!
So the following came out:
As one poster points out (in that thread), the relevant category is not really the top 400 earning households, it's more like a pool of the top 4,000 earning households, out of whom 400 appear to occupy the top spots in a given year. Increasingly, it's more like a pool of the top 20,000 to 40,000 households around the world who are involved in the more or less loose networks or global community of the superrich.
Most of these entities get to show whatever US income they like. They have a leeway unimaginable to most of us in the ability to defer income, reinvest it prior to taxation, show revenue as loss, show revenue in other countries, put it into their own foundations, or shift it around different institutions. (One part of an empire appears to lend money to a separate unit that is also part of the empire. Or, at the extreme, one part of an empire bets on the failure of another which runs a speculative plunder scam for a few years and then predictably goes under - the Goldman-Sachs/AIG model.)
And just plain hide it.
The assessed values of assets like multiple large real estate holdings can vary by hundreds of millions from year to year. The main flows of cash can be kept offshore and in foundations, where many of the true levers of power lie, largely unaccounted. Control of a variety of corporate entities translates into a control of a far larger multiple in assets than those that appear as individual wealth. Ultimately this class (top half percent at most) also owns the largest voting shares in the big banks and corporations (in US and increasingly worldwide as a single global class). Thus they own and can control the majority of the economy.
The absolute largest fortunes are unlikely to appear on this list. They are older money that has diversified into many holdings and is administered by foundations or obscure structures of holding companies owning holding companies. These complexes (or "empires") maintain whole tribes descended from robber barons, but generally there is one monarch or small group actually running the empire at any given time (e.g., for the Rockefellers over the last half-century that would have been David). They rise and fall, but generally maintain stability through the generations. They can reach more easily into politics in the guise of charitable and political institutions (from the Koch complex on the "screw everyone" right financing the Teabaggers, to the Rockefellers on the "noblesse-oblige" right financing ostensible social initiatives, which bizarrely is called "liberal").
Some on the top 400 list of income earners are relatively trivial fortunes of the moment garnered from single-source successes (sports, pop/movie stars, overnight Internet fortunes). These may not yet have diversified and institutionalized themselves via foundations and the like. They may be household names, but they don't have the power yet of the established empires. These occasionally crash and burn. They also provide a spectacular version of the life of the rich that helps to divert attention from the majority of the rich. Instead of Mellons or some demented European aristocrats dating back to the Hohenzollerns, people think the world's owners are Tiger Woods and Tom Cruise.
Recently we saw how the Gates fortune diversified and institutionalized itself for the next century. The Gates were able to present this logical business move as "giving away their money." This is the classic process by which robber barons appear to turn into "philanthropists," perhaps the most important PR term ever invented by the well-paid propagandists of the super-rich. (If it's a give-away, how is it that a century later most of the supposedly given-up fortunes are still around, telling you they're bringing you NPR and PBS for free?)
And all that still doesn't account for the shadow world of the multinational spook and criminal industries (arms, drugs, money laundering, smuggling, bust-outs, etc.) or the religious enterprises ("churches") who get to evade taxation and accounting and accumulate vast fortunes while having an enormous impact in shaping politics and society to their advantage.
Finally, even for the large portion of the total income tax collected that they do pay, you can be certain that the superrich get more back in the way of corporate welfare and other government services:
Laws are generally enforced in the service of their interests. Wars are fought in their presumed economic interests, generally after groups among the super-rich lobby for them years in advance. Members of this class own the contractors who directly profit from these wars and the "defense" complex. After each set of wars they hire and enrich the generals who did the planning and ran the campaigns, and who return to the Pentagon to pitch contracts and show their gold cufflinks to the next generation of generals.
I focus on war and the spook complex since that's half of the discretionary budget, but of course all other parts of it contain taxpayer-financed corporate welfare for major multinational corporate contractors.
All this is nothing that hasn't been described in the past by scholars like C. Wright Mills. (The Power Elite, 1959 - 51 years ago.)
The main part of the federal government that pays back to the people, meanwhile, is the part financed directly by the people, in the form of regressive taxes like SS/FICA and the charges for Medicare and unemployment insurance. Until now, this has always been run at a surplus, and that surplus has been put into T-bills to finance the awesome deficits of the discretionary budget (the main part of which is devoted to war, "defense" and the spook complex). Gradually it's become obvious the US government is unlikely to ever pay back what it owes to Social Security, which is why the holy grail of the corporate policy wonks has always been privatizing it and ending that obligation.
A more progressive tax system and more money for social programs may help make things better for the majority, but it isn't going to change the system at all. The power imbalance will remain. The inhumane distortions it causes will remain, from the servants' quarters at the Rockefeller mansion down to the hellish pits of the maquiladoras and out to the bomb-cratered landscapes of Asia and the plastic garbage patch in the Pacific - a new dead continent, growing by the day.
(Utopia time)
If you want to change this system, you have to acknowledge the need for something that has been cursed as "socialism":
- Nationalize and communalize the banks. There should be state banks devoted to particular functions (California Agricultural Bank, Michigan Technology Bank) and consumer credit unions. Their boards should be voted on by depositors. They should meet from year to year to plan finance for a rational, sustainable economy. (Obviously there would no longer be a Federal Reserve!)
- Negotiate with all world powers to reduce militaries to emergency response and border patrol, and put it into green energy and transport conversion. (They'll go along, they're just as broke. Also, most of them are not as stupid as we've been, despite all our "natural" advantages.)
- Public campaign finance and free TV time for everyone who can make a ballot as a condition of broadcast license (by cable too, or it's pointless).
- Obviously: end corporate personhood.
- Throw open the books of the banks, MIC contractors, foundations, churches, offshore entities, etc., and above all the black budget and spook world. No longer can a company get special privileges because of its intel connections. (Obviously CIA must be shut down and the full extent of its activities since 1947 revealed.) All money flows must be made identifiable. Hire 10 times as many people as currently work at the SEC, FTC, FBI financial section to handle this. It's a jobs program all its own!
- Obviously, end war on drugs to drain the swamp of hidden money. Make into a war on the international arms trade.
- Punish state and corporate crime to finally establish the rule of law. The fact is, this is the one form of crime for which deterrence provably works. (If you had beheaded the nine bank presidents back in 2008, you can be sure their successors would have been less reckless.) (That was a joke.) This needn't be a long march to the guillotine. Exposure and expropriation will be sufficient for more than 90 percent of those discovered. Believe me, for many of these people being put on a decent pension of $50,000 a year would feel worse than any vision of hell they've ever imagined. Those who go to prison will find very spacious accommodations there, after most of the current prisoners are released in the drug amnesty.
- Senate? Presidents? Please. These are means to delegate power to the upper class. The House should be sovereign, preferably with a proportional representation system. A Senate (modified so that big states have up to five senators) should have veto power at most.
- A President's sole job should be to should smile and wave at parades, look solemn at funerals, and have a good-looking spouse. It sort of is that way already - although power lies in the executive, it has shifted into the permanent bureaucracy and the deep state, and above all in private capital. Electing one guy (or even gal, someday) to the top spot every four years means you get to watch him grow old fast as he waits out a quarter of that time just in making the appointments (most of whom come out of the permanent bureaucracy) and either willingly or by force makes every possible accommodation to the corporate will, until he's spat back out four or eight years later into a minor fortune.
Make the House sovereign, and watch voters take up an intense interest in learning about the issues.
YES! I see this involves constitutional changes, and I know how unlikely these are.
NO! I don't think ANY OF THIS is likely to happen.
I'm just laying out the structure of power, and what it would look like if it were to change from within. Progressive taxation alone won't do it.
Much more likely is a sooner-or-later collapse of the death system, which is why our culture is so obsessed with apocalypse as religion and visions of planetary disaster as entertainment (which we're helping to speed along, no doubt on some level voluntarily).
Ooops. I didn't think I'd be spending this hour quite in this way. Think I'll make a new post of this and watch it drop down the board (or get slagged by unclever one-liners for a couple of rounds).
by justdrew » Sat May 22, 2010 2:51 am
by JackRiddler » Sat May 22, 2010 11:11 am
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