LILA RAJIVA: The Mind-Body Politic
Individuals Not Ideologies
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Archive for October, 2008
Mobs Wins GetAbstract Book Award
“Mobs” won the GetAbstract Book Award for 2008.
My coauthor and I attended the award at Frankfurt, hosted by the gracious and brilliant novelist-entrepreneur Rolf Dobelli:
I then flew to Morocco where I notice gold has been beaten down even further.
Since I am traveling in some rather remote areas, I will not be able to blog for a while…
Guantanamo Prosecutor Resigns Over Evidence Being Withheld
“Vandeveld believed that Jawad was a war criminal who had been taught by an Al Qaeda-linked group to kill American troops and, if caught, to make up claims he had been tortured and was underage. Vandeveld insisted that he had been providing all evidence to the defense.
But by July, Vandeveld told The Times, he had grown increasingly troubled. He kept finding sources of information and documents that appeared to bolster Frakt’s claims that evidence was being withheld — including some favorable to the defense, such as information suggesting that Jawad was underage, that he had been drugged before the incident and that he had been abused by U.S. forces afterward…….
On Sept. 9, Vandeveld e-mailed Dear to say he had resigned from the Guantanamo military tribunals: “The reaction was the expected outrage and condemnation. I have and will maintain my equanimity and, while scared for me and for my family, know that Christ will watch over me….”More at the LA Times.
Neo-conomix - It’s Whatever You Want It to Be
Writes Spencer Hahn:
Every week that I get The Economist (it is a free subscription through having tons of frequent flier miles), I know exactly what the editorial, entitled Leaders, will say. This week is no exception.Here’s my favorite passage: “This is a time to put dogma and politics to one side and concentrate on pragmatic answers. That means more government intervention and co-operation in the short term than taxpayers, politicians or indeed free-market newspapers would normally like.”
They have the nerve to call their publication a “free-market”! This reminds me of the lead-up to the American invasion of Iraq, which The Economist enthusiastically supported (”No war should be entered into lightly, or hastily, or on a slender pretext. In this case, however, none of that applies.” Leader, March 13, 2003).
Whatever the circumstances, you can always count on The Economist to toe the establishment line, while broadcasting its free-market “credentials.”
Blow Up And Brush Off…. (Update)
“As a result of the downturn, developed countries are not expected to help 28 countries facing twin shocks of rising food and fuel prices, Zoellick said. “For the poor, the costs of the crisis could be lifelong,” he said.”
Thanks, Mr. Zoellick.
First, developed countries will have to think twice about lecturing any other country on transparency, legality, freedom or democracy. Their moral position is bankrupt, not just their banks.
Second, leaving the poorest people to fend for themselves seems to be in line with one strain of US government policy since WW II - which sees third world populations as a dire threat to world resources.
Third, Mr. Zoellick, do us a favor and leave the world alone. Stop managing world trade in your favor, creating crises, and then “helping”….
Update:
AFP has this update on Zoellick’s remarks, which seems to suggest that aid to third-world countries will be maintained. Aid doesn’t seem to have done India much good. Still, in a crisis caused by foreign governments, it might be necessary, although how is the question.
“Zoellick significantly told the news conference that the International Finance Corp, the private sector lending arm of the IMF, was exploring the possibility of a fund to help recapitalize banks in the developing world.With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.
“The large surge in food and energy prices — and an associated rise in inflation — present major policy challenges for most countries, further compounded by the uncertain global conditions as the financial crisis unfolds,” an update for the Development Committee said.
For his part, Zoellick stressed that “aid flows must be maintained,” adding that “today’s meeting of ministers was unanimous in that regard.”
Comment:
The private sector lending arm of the IMF…..again, those unnatural and dangerous public-private partnerships. What’s to stop a private investor lending on outrageous terms to foreign central banks? Do developing countries have the resources to monitor the kinds of financial instruments used?
Jim Rogers Says Treasury and IMF are Unleashing Global Financial Holocaust
Listen to Rogers calling our “dear leaders” in DC-NY incompetents and crooks.
http://www.youtube.com/watch?v=xIsHD7nwTbU (October 10, 2008)
He’s buying Yen, Franc, and commodities on dips (that’s a broad generalization…as always, do due diligence).
Why should savers who acted prudently bail-out high-rollers, crooks, and spendthrifts who borrowed money, lied and gambled with houses, bonds, debt?
He forecasts that monetary intervention by the IMF and G-7 will result in rampant inflation, currency instability all over the world. Apparently being a professor at Princeton (Bernanke), or chairing the world’s most powerful investment bank (Paulson) does not make you economically savvy.
So says Mr. Rogers. But nice Mr. Rogers is right out of his neighborhood at this point. He knows his finance. He does not know his political history. I don’t buy the Bernanke-Paulson comedy team argument. I think - as I’ve said many times on this blog..in my articles…and in my first book… something a bit more sinister is afoot.
Not wishing to have my links, ideas, and research picked and then not credited in the blogosphere (as well as msm), I will hold my tongue and tend my own garden….
Market’s Worst Week Ever
For the week, the S&P 500 crashed -18.20%, Dow -18.15%, the Nasdaq -15.30%, and the Russell 2000 -15.65%
Rubini Calls for Massive Reflation
“New York University economist Nouriel Roubini writes tonight that the supposedly civilized world is on the brink of financial collapse and long economic depression unless the government finance officals gathering in Washington this weekend quickly implement a sweeping program of reflation,” notes GATA (the Gold Anti Trust Action Committee)
While I think Rubini’s diagnosis of the real estate glut is right, I don’t believe his program is correct from an Austrian point of view. It would be hugely inflationary, which would be good for precious metals, I think. On the other hand, of course, the G-7 meeting could produce some kind of agreement on gold-backed currency. That would lead to a loss of interest in gold.
VIX Breaks 70
The Chicago Board Options Exchange’s volatility index, known as the VIX, and often referred to as the “fear index,” surged above 70 early Friday, a record high.
Mark to Market was a Scam too…
Hmmm. I was naive. Mark-to-market is being manipulated too:
“Emilio knows, because he learned from the master manipulators at Enron. For an example, he said, check out Section 113 of the bailout bill, titled “Minimization of long-term costs and maximization of benefits for taxpayers.” This is the section that Congress haggled into the bill to ensure a payoff, via warrants, for citizens if mortgages purchased from banks are later sold for a profit. Yet Emilio says bank lobbyists snookered the government by sneaking in an exception under subsection 3a, “Conditions on purchase authority for warrants and debt instruments.” The clause, titled “Exceptions — De Minimis,” states that any debt instruments worth less than $100 million won’t trigger the payback provision.Emilio says that banks will simply issue their debt in tranches of $99 million or less, and avoid allowing the government — and thus taxpayers — to get a piece of the banks’ profits. “It’s a joke,” he scoffed.
Other traders who scanned the bill came to the same conclusion, through their own prisms, agreeing that the bill would provide only an illusion of action while failing to address the key problems facing the financial system: Too many houses will remain on the market; they were bought with too much leverage that is vaporizing in spurts; and those losses have left banks with too little capital from which they can lend.
Even worse, the traders pointed out, the government can make money on the loans only if it pays so little for them that they can be sold at a much higher price. And yet if the government doesn’t pay enough, then the banks won’t receive enough to make a difference in their balance sheets. So here’s how the taxpayers will be cheated, they said: Banks will take advantage of the suspension of mark-to-market accounting by stating that loans originally held at “par,” or the equivalent of the purchase price, and now valued by the market at 20 cents on the dollar, will really be worth 85 cents if held until the loan matures. The banks will then sell the loans to the government at a fake discount of 75 cents on the dollar.”The lobbyists made sure this bill was rammed through so that these rip-offs couldn’t be fixed in committee,” said another trader. “Everyone on the Street knows it solves nothing.”
More by Jon Markman why the fear is real and warranted.
More Market Slaughter - Dow Under 8000 - First Japanese Company Hit (Updated)
Round up of the news so far:
Yamato Life Insurance Co., a Japanese insurer, filed for court protection from creditors in the nation’s first bankruptcy in the industry in seven years, with debt exceeding assets by 11.5 billion yen ($116 million). It had exposure to US debt through its stock holdings. Japan says its exposure is limited, but I don’t see this as a good sign.
Notice, the first shoe to drop in Europe was also an insurance company, the Belgian Fortis. AIG was, of course, an insurance company and it sold insurance to banks all around the world.
The Tokyo index was down nearly 10%, along with big sell-offs in Asia, including a 9% drop in the Sensex in India and an Australian sell-off so bad it’s being called “Black Friday.” Trading was suspended in Vienna, following a 10% fall at the opening bell; Russian and Indonesian markets have been shut.
European stocks are down, with the UK’s FTSE-100 down 7.3%, German’s DAX down 7.7 %, and France’s CAC-40 down 7.5 %. The collapse of Yamato Life Insurance pushed the Nikkei 225 to 9.6 %.
Market futures are pointing to more sell-off, with the Dow looking at a fall of over 300 points. Brace yourself for some more pain.
Update: As I write, markets opened 5% down (over 600 points) - anticipating Lehman CDS settlement and further damage to Goldman and Morgan Stanley, following downgrades by Moody’s. GE earnings came in in line with expectations, 10% down year-over-year.
Here are the stats at 10.14 AM
8,600.93 Trade Time: 10:12AM ET Change: 
21.74 (0.23%)Prev Close: 9,258.10 Open: 9,261.69 Day’s Range: 7888.48 - 8668.39 52wk Range: 8,523.27 - 14,280.00 Japan has held off joining the near universal rate-cut, which is a good sign, and the yen is up against the dollar as investors are betting on it being healthier than European currencies. Yen is trading around 99 to the buck this morning after falling to around 97 earlier.
Pundits & Pols: Don’t Buy Gold; Stay in Cash Says, IBD; IMF to the Rescue (or Miscue?)
“The same is true for gold, another refuge for cowardly capital. Buying gold amid a financial crisis means paying a premium amid a panic. What happens when that panic recedes? Your gold is worth less….” writes Investor’s Business Daily.
Comment:
Maybe so. Maybe not. But who is saying this? Investor’s Business Daily, which is in the business of selling stocks. Naturally, it wants you liquid and ready to jump in and buy. I’d like to go back and check what it was saying in June or July this year…
Meanwhile, President Bush will be addressing the market panic from the Rose Garden this morning. And the G-7 meet today to consider government guarantees of interbank lending.
The IMF has activated an emergency financial mechanism to help, says Dominique Strauss-Kahn, IMF chief, who has the ear of Hank Paulson.
And Robert Zoellick, World Bank chief (also an ex-Goldman Sachs man and formerly US trade rep) says poor countries will be hit hard. Maybe G-Sax should sell them some more junk bonds to help them out.
Treasury Now Partly Owns Fed
Member banks within each of the 12 districts of the Fed elect 6 of the 9 regional board members and the president for that district. Since the Treasury now intends to take minority equity stakes in some banks that it claims are struggling, (ostensibly for the purpose of preventing investors from pulling out), it will have partial control over the Fed. That means the Fed is now even less independent.
Propaganda Nation: Market Manipulation & Bank Banditry (Updated)
Do Statistics Back Claims of Complete Credit Freeze?
“Many commentators claim, however, that virtually no transactions are occurring in this market. These claims are completely false. For the week that ended October 1, which is the most recent week currently reported, total commercial paper outstanding amounted to $1,607 billion. Yes, this amount was down from the $1,702 billion reported for the previous week, but is a 5.6 percent drop a good reason to panic? If we go back to March 2008, when nobody was talking excitedly about the commercial market’s “freezing up,” we find that the total amount outstanding, on average, was $1,822 billion, or only 13 percent more than last week. In March, the market was working fine; now it’s “locked up.” This sort of hyperbole, with which we are being bombarded hourly around the clock, is totally without a basis in the facts…..”
Robert Higgs, suggesting that some people are fomenting panic. He asks why.
Comment:
The answer lies in asking yourself:
Who has benefited so far? How? What do they want to happen?
Paulson Plan Premeditated?
Here’s Bill Engdahl tying up the loose ends of my piece on Paulson on how Paulson’s plan benefits the three new super banks, Goldman, JPMorgan Chase, and Citi and how they would be used to dominate global, especially European, banking.
Interbank Wars - Latest
The latest in Citi’s fight with Wells Fargo is that Citi has terminated negotiations and is planning to pursue breach of contract against Wells, so Wells is going ahead with its deal. Citi has Goldman Sachs connections: Rubin, Clinton’s Treasury Secretary and a former Goldman chief is a director. Meanwhile, with regard to Bear’s demise, here is a piece arguing that JPMorgan was involved in gold price manipulation under cover of their bail out of Bear this spring. JPMorgan chief Jamie Dimon sits on the Board of the NY Federal Reserve and as such was privy to the NY Fed’s actions re Bear Stearns.
Media Trix
Bill O’Reilly, not usually my favorite person, has been pretty good on standing up to the bail-out. This evening, he had a clip from an NBC skit on the sale of subprime mortgages to Wachovia by a couple, the Sandlers. It mocks Barney Frank’s role in eliminating oversight of Fannie and Freddie. Apparently the video was edited to remove the reference to Frank. The Sandlers had a long list of progressive groups they donated to (including Move On.org).
O’Reilly’s tack seems to be that the positions of those groups is undermined by the funding. That part is far-fetched, but it is time someone pointed out that not everyone affected by the decline in housing prices is an innocent. Many people made fortunes during the boom and are making more money from the bust.
Update - Market Moves Or CyberWars?
Another amazing day. I walked out of the house for 2 hours to buy a laptop for traveling, since my old one had mysteriously lost its internet connectivity. When I came back, the market was closing with a sell off, down 7% (679 points).
It began in the morning when
Paulson announced that insurance companies were in for trouble. That set off the selling in the bank and insurance stocks, including regional bank funds.The whole thing was compounded by the fact that today was the day the ban on short-selling around 1000 financial and finance related stocks was lifted, so short-sellers were pouncing.
[Companies on the SEC's list slid 18 percent on average during the ban, compared with 24 percent drop for all financial companies in the Standard & Poor's 500 Index].
Then, General Motors had a bad day: Standard &Poor threatened to downgrade it (as well as Ford) to junk. GM shares got beaten down under $5; Ford was down over 20% too.
You had to wonder at the timing.
1) It’s the Jewish holiday, Yom Kippur, today. Recall that the selling began the evening of Rosh Hashanah. Remember that old saw - sell Rosh Hashanah, buy Yom Kippur? Markets are weaker at the time…
2) The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It’s the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent.
3) The decline is 7 years from 9/11
Anyway, when I got back the damage had been done.
[I ended up buying my computer at a shop that sold refurbished electronics in a rather shady side of town. A cop car was pulling away just as I walked in. But having just been a spectator to one of the biggest bank heists in history, I suddenly found the grungy looking characters hanging around rather harmless].
James Altucher, a trader, has this to say at The Street:
“The single biggest reason the stock market has fallen in the past five days is hedge fund liquidations. Of the top 20 hedge funds in the world, something like 18 are down 20% or more this year. They are getting redemptions, they are liquidating, they are selling stocks with reckless abandon to raise cash. Our job as good investors is to give them liquidity and take their bargain-basement merchandise off of their hands. Let’s get their selling over with so we can make money.”
Well, that’s evident. There was big selling, especially at the end, the kind from sell signals going off in program trading.
Morton Kondracke on FOX News in the evening was telling us sagely that it’s not a liquidity issue, it’s a confidence issue, and (get this) the answer is to create a global central bank. Right. The solution to a confidence problem is to give the markets to the confidence-men.
A note on cyberwarfare might be apposite hear. I dig it up from an old article I wrote that references Laurent Murawiec’s now notorious power-point presentation in 2002 advocating seizing Saudi oil fields. Murawiec is connected to Donald Rumsfeld’s Revolution in Military Affairs (RMA) which makes InfoWars central to the battle ground.
“In all these cases, IW involves creating phantom cyber-images, which can include phantasms of nonexistent trains, airplanes, stock market orders, and bank transfers; false impressions of the enemy’s troop strength and one’s own, of supplies and movements, of fake attacks and all-too-real defenses; and phantom images of the enemy’s leaders doing evil things on screen because one has video-morphed images of them doing them so.
“Information warfare is not about machines or even electrons. It is about people’s minds, society’s functions, and armies’ strategies. Cyberspace endows us — and our enemies — with new and extraordinary means with which to achieve our respective aims. “We have only begun to cyber-fight….”
More at “Tom Tancredo Takes Out Mecca: The Cyber Wars Playing Near You.”
Forex Follies: Rupee Falls As Foreign Investment Flees India
“New Delhi (PTI): Indian currency may lose further ground and dollar is likely to touch Rs 50 in the next two months in the wake of global financial crisis, say exporters and economists.”
More at The Hindu.
Propaganda Nations: Brown or Green, But Not Gold…
“Oct. 9 (Bloomberg) — Confronting the worst financial crisis since the Great Depression, Gordon Brown and Henry Paulson went in different directions.
Brown, who opted to spend 50 billion pounds ($87 billion) to partly nationalize at least eight British banks, took the most direct route to shore up the system. The U.K. prime minister’s approach contrasts with the one taken by U.S. Treasury Secretary Paulson, who crafted a more complicated $700 billion plan to buy financial firms’ bad debts. Yesterday, Paulson signaled he may follow and invest directly in banks.
“The U.S. is just less predisposed toward nationalization than all the European countries,” said Joseph Mason, a professor at Louisiana State University in Baton Rouge who used to work at the Treasury’s Office of the Comptroller of the Currency. He praised the British plan as more straight-forward. “I just think they’re way ahead,” he said.
Brown’s plan returns his Labour Party to its roots, reflecting post-World War II policies of taking ownership of industries ranging from airlines to mining. Margaret Thatcher’s Conservative government reversed those policies in the 1980s, and they were rejected as Labour doctrine under the leadership of Tony Blair and his successor….”
Comment:
The Brown idea is nothing more than what George Soros and Paul Krugman advocate. It’s official international socialism. [Paulson's is unofficial corporate socialism, i.e., thuggery].
No mention that Brown has nuclear energy ties, dumped Britain’s gold at the bottom of a 20 year trough in gold prices, and supported monetary intervention ala Greenspan, thus making him culpable for the boom in credit too.
Mind-Body: Making Fish Into Dragons
” At the three-tiered Dragon Gate, where the waves are high,
fish become dragons,
Yet fools still go on scooping out the evening pond water.“
Commentary from Zen Mountain Monastery:
There is a Chinese legend about a great dragon gate though which the mighty Yellow River flows, where the waves at the gate are high and the three tiers of the gate are treacherous. On the third day of the third month when the peach blossoms bloom and heaven and earth are ready, if there’s a fish that can get through the dragon gate then horns sprout on its head, it raises its bristling tail, catches hold of a cloud, and flies away becoming a dragon.
But you see, the conditions have to be right. How are the conditions made ready for us to pass through the gate? No one can predict. Yet they don’t become correct by creation, by will, or intent. When the wind of our mind ceases to blow, when the god of fire truly comes looking for fire, then “the sky can’t cover it; the earth can’t support it.”
Yet fools still go on scooping out the evening pond water.
Somebody watches as a fish leaps free of the dragon gate, is zapped by a lightning bolt, and is transformed into a dragon. Then they hurriedly run down to scoop out some of the water to drink, thinking that will make them into a dragon. It must come from deep within. We can’t live another’s life, practice another’s barriers, realize another’s true nature.
Where do you find yourself? What do you need to do before you can live and die completely, unreservedly? Who is asking? How much does it matter? What are you willing to let go of? These are the conditions. They are real and they come to life when we bring them to life. What is Buddha? Please, find out for yourself…”
Who’s to Blame: Free Market or Financialization?
“Iceland’s reinvention from the poor cousin in Europe to one of the region’s wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s. Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.
Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system. Among the purchases were the iconic Hamley’s toy store and the West Ham soccer team.
Back home, the average family’s wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.
But the whole system was built on a shaky foundation of foreign debt.
The country’s top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland’s gross domestic product of $14 billion…”
Comment:
The usual muddled and dishonest blanket indictment of the free markets will begin. But look at the facts. It was massive deregulation of one sector - banking and finance, allowing it to become the target of what amounts to predatory lending. Debt. Speculation. Possible criminality.
“The krona is suffering in part from a withdrawal by a falloff in what are called carry trades — where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.”
Icelandic bonds? Remember those? Just a while back, every investment newsletter you read was urging you to get fantastic rates of return on those bonds. What you have is interest rate arbitrage, speculators making money off the difference between interest rates. They aren’t to blame, of course. Give people an incentive, and they will act on it. But that’s the result of unrestricted printing of paper money, artificially low interest rates, and artificially abundant credit. Don’t blame the free markets.
And this gem from Jim Willie:
REALITY CHECK, INVESTMENT ALTERNATIVE: If you had purchased $1000 of Delta Airlines stock one year ago, you would have $49 today. If you had purchased $1000 of AIG stock one year ago, you would have $33 today. If you had purchased $1000 of Lehman Brothers stock one year ago, you will have $0 today. However, if you had purchased $1000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling, you would have received $214 today at redemptions. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-KEG Plan.
IMF: Recession through 2009
“The IMF — and many private economists — believe the U.S. economy will probably contract in the final three months of this year and the first three months of next year, meeting a classic definition of a recession. The economy’s last recession was in 2001.
The government’s bailout package is aimed at thawing lending by buying bad mortgage-related debt from troubled financial institutions. The idea is that the banks’ books would then be cleaner, putting them in a better position to lend and get the economy moving.
The IMF said this effort should help to stabilize markets but even so “the process of balance-sheet repair will be long and arduous.” Credit availability is likely to remain constrained throughout 2009, the IMF said.
Fed Chairman Ben Bernanke warned in a speech Tuesday that the economy’s outlook for this year has darkened and the pain could last for some time. His remarks were seen as foreshadowing Wednesday’s rate cut.
Looking at other countries, Germany’s growth will slow to 1.8 percent this year, down from 2.5 percent last year. France’s growth will weaken to just 0.8 percent, compared with 2.2 percent in 2007. Britain’s economy will see growth taper to 1 percent, down from 3 percent last year. Canada’s growth will tail off to 0.7 percent this year, from 2.7 percent last year.
In Japan, growth will cool to just 0.7 percent, from 2.1 percent last year.
Global powerhouses China and India will see growth clock in this year at a robust 9.7 percent and 7.9 percent, respectively. Even if those projections prove correct, they would still mark downgrades from their blistering performances last year. Russia’s economy should grow by a brisk 7 percent this year, down from 8.1 percent last year.
Inflation around the world remains high, driven up by surging energy and food prices through much of this year….”
ObamcCain: The Politics of Pose
“Will anyone ask the Democratic candidate how he feels about stoking up a replication of the Iraq disaster, with a possible war between nuclear Pakistan and nuclear India as lagniappe? The dawn of an Obama administration is now scheduled, on the candidate’s pledges, to see escalation of a doomed and pointless war in Afghanistan and perhaps also termination of Karzai, now square in Uncle Sam’s sights as a failure and probably scheduled for assassination. There’s the heritage of JFK and Vietnam for you. It’s back to 1963.
Asked if Russia was evil, just like the Soviet Union in Ronald Reagan’s eyes, Obama said yes, McCain “maybe”. Trade? Latin America? Africa? Europe? Nothing from either man, though they both agreed that they would flout the UN at will.
Of the two performances, Obama’s was the more appalling since he is meant to be the candidate of change and new ideas. He has no detectable commitment to change and no new ideas. Neither does McCain. Yet the post-debate panelists mostly claimed the Town Hall Meeting an absorbing affair, rich in content. We have one more debate, in which McCain will have another chance to reduce Obama’s commanding lead, something he failed to do last night, even though it now seems Sarah Palin did slow McCain’s slump with her performance last week. McCain and Palin are trying to get traction by slurring Obama for association with Bill Ayers, a leader of the the bomb-throwing antiwar Weathermen in the 60s. Obama was eight when they threw the bombs. It doesn’t seem a productive line of attack for McCain and Palin, particularly when many Americans wouldn’t mind blowing up Wall St themselves….”
Alexander Cockburn in Counterpunch.
Propaganda Nation: Clean Coal
“Sarah Palin and John McCain have always been for it. Joe Biden was sort of against it before he was for it and Barack Obama embraces it. To what am I referring? The alleged panacea of clean coal.
Doesn’t it make you feel all warm and fuzzy? We can have our most polluting energy source, the one that gouges our land, dirties our air with particulates, poisons our water with mercury, and generates most of our greenhouse gas emissions because it’s the cheapest, currently most abundant fuel source we have. Well hold on there, coal mavericks, you’re mistaken. Coal is a non-renewable resource. Factor in the externalities of pollution and costs to human heath, and the so-called cheap fuel source skyrockets….”
More at The Huffington Post by Simran Sethi on the bipartisan dog and pony show.
Bank Wars: Bush Is Morgan’s Man
“Developments just prior to and immediately after the bailout illuminate interesting political and potentially ominous market realities. The political reality is that George W. Bush, unlike his father, is most likely a Morgan man. Press reports indicate that W himself was involved in these transactions. Comparing the transactions shows that Morgan received the federal 800-pound gorilla’s unbridled support whereas federal coercion in the Citi-Wachovia transaction was, by comparison, restrained. In “facilitating” the JP Morgan–WaMu deal, the FDIC first wrestled WaMu to ground, executing a midnight foreclosure and repossession of all its assets. The FDIC then sold WaMu’s $302 billion in assets to Morgan for $1.9 billion and wiped out the WaMu equity holders, including a group that had invested $7 billion six months ago. Monday JP Morgan further announced that had no intention of hiring or retaining WaMu management. Wachovia was just the latest bone thrown to JP Morgan. In another federally “facilitated” transaction, on March 17, 2008 JP Morgan acquired global securities giant Bear Stearns for $236 million, or $2 a share. After shareholders complained, JP Morgan increased its “offer” fivefold, to $10 per share. In February of 2008, Bear Stearns stock had a market value $93 per share. Citi, by comparison, has not received the same level of government support. In the Citi-Wachovia transaction, the FDIC did not actually seize Wachovia’s assets. It only threatened to seize Wachovia’s assets, allowed Wachovia to survive as a legal entity and gave Wachovia until December 31 to close the deal with Citi. If W is not a Morgan man, then he is not a good negotiator, because the delay has opened the door for Wachovia to negotiate a better deal…..”
More by Bill Butler at Lew Rockwell.
Defaulted Home Loan in US = No Pension in China
“Chanting slogans “Return my blood money” and “Stealing elderly money,” protesters rallied outside the territory’s legislature building in the downtown Central financial district to urge newly elected lawmakers to investigate the sales of Lehman-backed bonds in Hong Kong.
The investors, many of them near or at retirement age, also swarmed several major banks, including Bank of China and Standard Chartered, in small groups in hopes to recoup their money.
Organizers said about 1,000 people attended the rally. Police did not offer an estimate.
Protesters accused banks that sold them Lehman-backed bonds failed to explain to them the products were linked to the bankrupt U.S. company as they thought their investment carried low risk.
“I was only told it was an investment with principal protection,” said electrical repairman Chan Hong-ming who bought $30,000 worth of Lehman-backed bonds two years ago from Bank of China.
The 50-year-old said the bank salesman had deceived him by not telling him the bonds were secured by swap obligations guaranteed by Lehman.
“The bank just cheated me … Now I don’t even know how much my investment is worth.”
Housewife Annie Ng also said she was misled by banks when she bought the $15,000 bond.
“I’d never heard of Lehman Brothers before. I wouldn’t have bought it if I knew Lehman was involved,” said the 60-year-old mother who planned to passed on the money to her children.
Billions of dollars in souring debt forced Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the U.S., to file for bankruptcy last month amid the world’s worst financial crisis in decades….”
Fed Cuts Rate as European, Asian Markets Slide Down
The Fed cut rates this morning by 50 basis points:
“Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.. ..”Worse Than 1929? Emergency Fed Purchase of Commercial Paper
“The Fed said it is creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies.
“The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors” have become increasingly reluctant to buy commercial paper, especially longer-dated maturities. As the market for commercial paper shrank, the Fed said rates on the longer-term debt “increased significantly,” making it more expensive for companies to borrow.
The Treasury Department, which worked with the Fed on the program, said the action is “necessary to prevent substantial disruptions to the financial markets and the economy.”
The Treasury will provide money to the Federal Reserve Bank of New York to support the new program, the Fed said. It did not say how much.
If a company’s commercial paper is not backed by assets or other forms of security acceptable to the Fed, the company could pay an upfront fee, the central bank said.”
(The emphasis is mine).
That’s breaking news right now.
Comment:
This afternoon, Bernanke explained this highly unusual and drastic move as necessary to take the edge off a recession that he admitted was now in store.
Here are the terms and conditions for the new Commercial Paper Funding Facility (CPFF).
The Fed lends to a Special Purpose Vehicle (SPV). (Those are the off-book entities that caused some of this mess, in the first place) at the Fed Funds Rate. The collateral would be the assets of the SPV (which would be the bad debt they are selling to the CPFF).
The SPV buys 3-month dollar denominated commercial paper from eligible issuers at a rate over the 3-month overnight index swap rate (OIS).
Question: Who determines this rate?
Answer: Why, market participants - the firms doing the borrowing.
Question: Can the Fed make unsecured loans?
Answer: Yes - there is a vague option for loans secured ‘through other means.’
Question: Can foreign issuers sell paper to the CPFF?
Answer: Yes - as long as they have a US parent.
Question: How long does this go on for?
Answer: The SPV stops buying paper on April 30, 2009, unless its term is extended. But the Fed can keep on lending money after that until the SPV’s assets (that would be bad debt) mature (who knows when that would be….and what they would be worth at that point).
Question: Who pays for it?
Answer: The Treasury (tax-payers) provides money to the NY Federal Reserve. The money doesn’t follow under the $700 billion bail-out (actually, $800 billion plus with sweeteners added) that just passed.
Unbelievable.
_____________
Meanwhile, we’ll file this under G-Sax Watch:“Kashkari, who was a vice president in Goldman’s San Francisco office before joining the department, is one of four former executives from the firm now working feverishly to resolve the financial crisis…” (see my earlier post on this for the names and positions)
James Kunstler says we may be in for a bout of emergency measures this week, a tectonic shift in the capital markets next to which the events of the 1930s look orderly.
This was University of Chicago Business School Professor John Cochran’s opinion (low) of the original and revised Paulson plan (before it went though). He called it the “nuclear option” and wrote:
“Since the Treasury will not be able to raise overall market prices, it will end up buying from banks that are in trouble, at prices fantastically above market value. This is transparently the same as simply giving the banks free money. Make sure the taxpayers get a thank-you card.”
Pensioners may not be feeling up to sending out thank-you’s. The loss to pension funds in the last 15 months is over $2 trillion, according to a top Congress budget analyst, says AP.
Bank Wars: Market Machinations - Update on Bush
“The US House of Representatives voted in support of the Wall Street bail-out package. As the vote began at 1:00pm, Europe’s equity market gains of +1.5% across the board had been locked in, but the US equity markets started to plunge, down -4.0% in the final three hours of trading.Was this a message from Humungous Bank & Broker that the Paulson Package was not a Wall St bail-out after all? You betcha. Deceitful stuff, this. And when Europe opens well down on Monday, will that be a message from HB&B that they want the same bail-out from the governments there? You betcha.
Interventionists are now in full control of the global equity market. Paulson has won. The banks have won. The people’s representatives caved in and the people can take a hike for all the banks care at this point….”
That’s the excellent Bill Cara who agrees with my take that this crisis was exploited to pave the way for mega-bank consolidation at the expense of the weaker banks.
Comment:
Giving credence to that view, the fight between Citigroup and Wells Fargo heats up. The NY State Supreme Court blocked the incipient merger of Wells with bank-in-distress, Wachovia. Then Wachovia successfully appealed the decision. Now Citi, which has an exclusivity contract with Wachovia, plans to appeal the appeal.
Meanwhile, Wachovia has gotten a restraining order from a N. Carolina judge to prevent Citi from enforcing the exclusivity contract, charging that following the Wachovia-Wells merger announcement, Citi had taken steps to force Wachovia’s collapse.
The Citi offer (for $2.2 b) has the backstop of the FDIC and would cannibalize Wachovia, taking over only the banking operations, not Wachovia’s asset management or retail brokerage. Wells Fargo’s deal, on the other hand, would leave the bank intact and would give it $15.1 b.
Over at the postmortem for Lehman, unsecured creditors have filed a claim that JP Morgan prevented Lehman from accessing its assets, causing the bank to collapse.
And at the Congressional probe into AIG’s contribution to this mess, documents seem to show that AIG’s auditor, Pricewaterhouse Cooper gave a confidential warning that internal overseers weren’t allowed proper access to the highly-leveraged desks. (Of course, if you go back to 2005 and earlier, you’ll find Pricewaterhouse itself was being questioned for its behavior).
Secrecy has been the complaint for years over at Goldman Sachs. What beats me is why no one called these firms on any of this.
Speculation Nations: Russian equities; Update: Where to put money?
“Oil and gas stocks, as well as metals and mining shares, suffered the steepest losses Monday.
The RTS Oil and Gas index fell 22%, with shares of state-controlled Gazprom (UK:OGZD: news, chart, profile) and oil giant Lukoil (UK:LKOD: news, chart, profile) suffering double-digit declines.
The RTS Metals and Mining index fell 15%, with shares of Russia’s largest mining company Norilsk Nickel (UK:MNOD: news, chart, profile) going into free fall. In London trading, Norilsk tumbled 44%.
The Russian equity market is dominated by resource stocks, particularly oil and gas companies, and as a result the recent tumble in commodity prices has hit Russia particularly hard.”
Comment:
That makes the RTS the biggest loser globally, down 62% year to date and 19.1% today.
As energy and commodity speculators have been flushed out by the banking crisis, markets dominated by them have been hit the worst.
Update:
Steve Saville writes that in the last two weeks the Fed’s (Federal Reserve, not the government or Treasury) balance sheet has increased by 50% and says that this portends a massive increase in true money supply that is going to be hugely inflationary. He advises against stocks, bonds, or real estate and suggests that industrial commodities may be in a slump for a while - leaving only precious metals viable. He also thinks we’ll see the PM’s go up in advance of any really severe inflation because of the big players taking positions ahead of the crowd. But technically, GLD, from what I’ve seen hasn’t shown a clear break-out from its trend lines. And SLV has been quite volatile to the downside and restrained to the up. I’d be cautious yet.
Then again, for a stock market untouched by the ongoing earthquake, check out the Iraqi stock exchange.
United Sachs of America: Goldman’s Kashkari Finance Czar; Update: More Goldman
Latest news:
“Neel Kashkari, the Treasury’s assistant secretary for international affairs, was selected Monday to be the interim head of Treasury’s new Office of Financial Stability.
The designation was made by Treasury Secretary Henry Paulson, who was the head of Goldman Sachs before he joined the Bush administration in 2006. Kashkari, 35, will head the office created by the emergency legislation enacted Friday to fund the largest government bailout in history…”
Comment:
Kashkari worked for Goldman as a Vice-President. How brazen can they get?
Side-note: he has a connection to NASA. That is, he’s a rocket scientist turned investment banker.
Rocket science. Hmmm…wasn’t it top-heavy math which got LTCM into that mess in 1998? And isn’t top heavy math a part of the problem today? Not enough banks have the money to hire the people who understand the most complex finance, and that’s why they let a lot of things through they should have checked. So, you have a Goldman quant who’s been vetted at the highest level of security, who has a background in defense and information technology in the key financial position.
Update: The are now four Goldman execs working on the crisis , Dan Jester and Ken Wilson, both financial institutions bankers, and Steve Shafran, who focused on corporate restructuring while at Goldman. Others on the team who are not from Goldman are: Anthony Ryan, the assistant secretary for financial markets; David Nason, assistant secretary for financial institutions; and Bob Hoyt, Treasury’s general counsel.
CALL CONGRESS AND TELL THEM GOLDMAN SACHS OUT OF THE US GOVERNMENT
Banking Blow Up: Eurozone Joins the Panic
The financial fireworks continue. Over the weekend, the Europeans found that they weren’t insulated from the crisis at all:
“Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.
Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.
During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. The Netherlands has just rushed through a second, more sweeping nationalisation of Fortis. Ireland and Greece have had to rescue all their banks. Iceland is facing an Argentine denouement.”
More by Ambrose Evans-Pritchard (who seems to be relishing his role as Jeremiah) at the Daily Telegraph.
Comment:
While I agree in general, I think the hysteria is misplaced. Things aren’t good, but we are only making it worse by fanning public hysteria. The essential problem is that banks are fearful of counter-party risk, because the rating agencies weren’t doing their jobs - so much for more regulation). Many of these assets are illiquid because they are marked up too highly. That includes houses. Prices are deflating, but they are still not back at realistic values. Mark them down and you will find buyers in the market. Instead, everyone is trying to keep prices at artificial levels by getting the government to buy them (and here, in the US, we can print money to support any price level). Ergo - confidence grows less and less, as prices and values become even more completely unhinged.
That’s why, this morning, the Dow is down, sinking below 10,000 for the first time in 4 years. I want to say, I told you so, to the entire political, academic, financial, and cultural establishment which has been out in force telling us to sign that bill, or else.
And remember Jim Cramer saying he liked this market just this past June? Well, today Cramer’s telling people who need their money in the next five years to pull it out of the market asap. Almost makes you think we hit a bottom (only half kidding).
Unlike Cramer, Nadeem Walayat, a trader, has been right on the money. We are at 1929, he says, and yet, we’re not - because, today, it’s not a stock market crisis but a banking crisis. Walayat predicts a two-year recession.
Personally, and here, Evans-Pritchard’s use of the phrase shock and awe seems like a bit of a give away, I think there is more to this crisis than meets the eye. Remain skeptical - especially, when anything involves trampling the constitution and creating ever more powerful financial czars….
Just remember - as this piece says - a substantial part of the media shills for Wall Street and the government. They either print outright falsehoods, naively repeat what they are told, or co-opt the arguments of people who are right by appropriating a part of what they say but giving it their own misleading spin.
As for punitive measures for what’s happened, Michael Brush at MSN Money Central has a good piece on how CEO’s made out while their companies were tanking. He doesn’t have much hope that legislation will get the bad guys to cough up their ill-gotten gains but he does have a couple of links for you to get through to the government.
Regulatory overhaul is not the answer (although a few rules do need to be reinstated). Look at what’s happening in Europe? No lack of regulation there. And, the Eurocrats are even turning their backs on a Eurozone rescue modeled after the American.
“I reject a European shield because we as Germans do not want to pay into a big pot where we do not have control and do not know where German money might be used,”
says Peer Steinsbruch, Germany’s Minister of Finance…..suddenly, quite the nationalist.
Propaganda Nation: Two-Party Games
“The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to the doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can “throw the rascals out” at any election without leading to any profound or extreme shifts in policy. “{p. 1247-1248}
Carroll Quigley, Tragedy and Hope, 1966
And this note for conspiracy aficionados from an admirer:
“Many people interested in Carroll Quigley take entirely out of context the references he made in his book Tragedy and Hope: A History of the World in Our Time about a high-level Anglophile conspiracy that, he said, flourished before World War II. It seems that many people believe Quigley thought this vast conspiracy somehow continues to operate right up to our own day.
But as Dr. Quigley once told me, the reality is much scarier. Instead of a secret cabal now being in charge, there’s no one in charge….”
Comment:
That, of course, is a clever disclaimer. Perhaps there is a group in control…perhaps not. But surely there is a system of thought in control. Corporatism (industrial capitalism as we know it) and socialism, apparently at odds but actually knitted together, with control in the hands of small groups of elites in finance and their apologists in the media and in academia….
That’s quite a plausible conspiracy. American history does indeed show an alliance between big business and so-called progressive reform ….certainly from the era of the Progressives onward. The ideology that has driven this is Fabian socialism, out of which developed theories of mass control, useful both for the work place and equally in politics.
Doug Boggs adds to this discussion with a very interesting post on how complex groups function, where he looks at some of the break-down today in terms of evolutionary change (if I understand him right).
Banker Bail-Out: JPMorgan Take Down of Lehman?
“Oct. 3 (Bloomberg) — JPMorgan Chase & Co., the main lender and clearing agent for Lehman Brothers Holdings Inc., caused the liquidity crisis that led to Lehman’s collapse, creditors said.
JPMorgan had more than $17 billion of Lehman’s cash and securities three days before the investment bank filed the biggest bankruptcy in history on Sept. 15, the creditors committee said in a filing late yesterday in bankruptcy court in Manhattan. Denying Lehman access to the assets on Sept. 12, the bank “froze” Lehman’s account, the creditors claimed.
JPMorgan, the biggest U.S. bank by deposits, financed Lehman’s brokerage operations with daily advances, while money market funds and other short-term lenders provided overnight loans, according to bankruptcy court documents. When JPMorgan shut Lehman off from funds, Lehman “suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired,” according to the filing….”
Bailing Out the Foolish Virgins
“Rabbi Bush exploded in anger. “How dare you be satisfied with such a status quo! First, those foolish virgins were victims, for there is not enough affordable oil, and it is not right that only some have a full supply while others go empty-handed!”
He continued. “Second, the only just solution is for the wise virgins to bail out the foolish ones, or else people will have to live in darkness.”
“Uh,” Jesus replied, “I think that we already have established that if your plan is put into place, everyone will be in darkness.”
Rabbi Dodd interjected, “Rabbi Frank and I have long believed that oil should be affordable for everyone, and that is why we have worked to increase the access of everyone to oil.” “I know,” replied Jesus, dryly, “Your scheme forced up the price of oil so high that only those who had been wise and prudent with their money could afford enough of it at the end. It is harder now to get oil than ever.”
Rabbi Paulson stepped forward with a big grin on his face. “That is why we have a special plan,” he told Jesus. “Foolish virgins can borrow all of the money they want from King Herod, who plans to borrow that money himself from the people.”
“How will the payback work?” asked Jesus, concerned. “It seems that people will be in debt with no hope of repayment. You say you are borrowing from the people to lend to the people? Does not the Book of Proverbs say that the debtor is slave to the lender?”
“Not in our economy,” replied Rabbi Paulson proudly. “We will owe it to ourselves.”
And Jesus wept.”
Bill Anderson in Lew Rockwell.
Vote Third Party
“The main thing holding together the establishment of the Democratic Party is the phoniness and hypocrisies of the Republican establishment. And the main thing holding together the establishment of the Republican Party is the phoniness and hypocrisies of the Democratic establishment.
Voters meanwhile, who are calling Congress at up to 99-to-1 against a bailout favored by both establishments, are on a course to cancel each other out. They seem set to divide themselves behind each establishment candidate: McCain — marketed as a “maverick” — is in fact a front man for Phil Graham who (as Banking Committee chair) oversaw bank deregulation; and Obama — marketed as a “change agent” — is in effect a front man for Robert Rubin who (as Treasury Secretary) oversaw the same bank deregulation.
The voters — as I propose on VotePact.org — should instead join together. Instead of canceling out each other — one voting for Obama and one for McCain — they should join together in pairs: Brothers and sisters, husbands and wives, coworkers and neighbors and debating partners, union officials and small business owners should pair up and both vote for the third parties of their choice. If they both begin supporting different third parties, that will send a strong message. If they both start backing the same candidate, that could — given the unprecedented series of events — mean the re-alignment of American politics.
The obvious candidate to do this is Ralph Nader…..”
That’s Ramzy Baroud in The Palestine Chronicle.
Hmmm…where’s Paul in that? Why not Paul/Nader (we’ll work out the regulatory part later)? All these are utopian ideas, unfortunately. More viable is to forget politics and try other ways of changing things: pull out of the system as much as possible.
The Difference Between Las Vegas and Wall Street
“The difference between Vegas and Wall Street,” said Wayne Allyn Root, Libertarian candidate Bob Barr’s running mate, on Neil Cavuto, October 4, “In Vegas the drunks gamble with their own money…”
Here’s more from where the quote comes:
“Palin lacks the U.S. Senate pedigree, law degree, or the D.C. Beltway credentials of Biden, but she has Reaganesque-like charm, charisma and middle American values………
McCain sensed in the “Palin style” what I’ve understood for a long time: America is looking for a hero, an ANTI-POLITICIAN. Someone who is not a lawyer; not an elitist; not an intellectual; who understands middle America and small town values; who will govern with common sense; who wants to give the power back to the people- NOT the lobbyists and corporate interests. So I say BRAVO to Governor Palin for a job well done. You “get it” in a way so few politicians do (or ever have).”
Who Will Insure the Insurers?
My latest piece, published at Dissident Voice.
“Who Will Insure the Insurers?
Many members of Congress recognized, correctly, that the main thrust of the Paulson plan was to give more power to..well.. Paulson. But since the Paulson plan was defeated on Monday, some have been talking as though tweaking the Paulson plan on a couple of things would be enough to get it through next time. One tweak, they say, would be to have the government insure the bad loans on the books of financial institutions. This is somehow supposed to be an improvement on the plan that would make it acceptable to Republicans (along with the removal of mark-to-market accounting).
Insurance is actually already a part of the bill that was just defeated (Section 102). Section 102 would guarantee bad loans (sorry, troubled assets) by creating risk-based premiums to cover anticipated claims.
So, rather than buying bad loans, or failed banks (also bad ideas, in my opinion) which at least has the remote chance that the government would get the price increase if the loans (or banks) ever recovered their value, the government is proposing to guarantee the bad loans. That means if these troubled assets got less troubled…even positively robust...the banks that made the loans - not the government - would get the price increase. But if they don’t get better, who picks up the tab? Looks like the government.
An insurance fund offers the prospect of all kinds of interesting shenanigans. Banks could claim to make losses, while actually taking in profits. They could keep doing that for another whole cycle. The possibilities are endless for savvy professionals with degrees in math and sophisticated risk- models.
Why would I suspect these respectable institutions of doing any such thing? Because that’s just what they’ve been doing for a long time – as the ongoing FBI investigations into over two dozen of the firms involved in the bail- outs is showing……”
A Day Of Infamy (Update: Bankster Bill - HR 1424- Included)
Congress passed a modified version of the Paulson plan today 263-171. The only thing worth reading in this awful piece of legislation hustled through by an unholy convergence of short-sighted interests was this:
“Paulson last week urged Congress to immediately give him almost unchecked legislative authority to take action. Lawmakers responded by demanding increased oversight, more aid to prevent foreclosures and limits on executive compensation at companies that benefit from the program.”
Here’s H.R. 1424, in which the first part is the Emergency Economic Stabilization Act.
Better Than Bail-Outs
The market needs deflation, as the natural end of excess, says Barry Brownstein. If we try to avert it by intervention, we will end with something much worse - hyperinflation.
“If, on the other hand, the reactionary forces prevail, more money will be thrown after bad; foreigners will withdraw from our capital markets; and eventually, a hyperinflation will begin. In that terrible scenario, it is likely that the United States will split apart; and many cities will descend into anarchy. You can see why I prefer the deflationary depression.”
And the Republican hold-outs in the House came up with a few ideas of their own:
*Suspend capital gains for two years (boosting global competitiveness and upping stock prices)
*Denationalize and privatize Fannie and Freddie
*Waive mark-to-market”*Strengthen the dollar”
That’s from a post by Deroy Murdock at Human Events.
Comment:
We’ll get one of those - mark-to-market will go. And maybe some tax cuts. But don’t hold your breath for a strong dollar or privatizing F&F. My bet’s on hyperinflation…
Propaganda State: Can a Market Panic be Manipulated?
“In a report published in March by the Bank for International Settlements, economists Jacob Gyntelberg and Philip Wooldridge raised concerns that banks might report incorrect rate information. The report said that banks might have an incentive to provide false rates to profit from derivatives transactions. The report said that although the practice of throwing out the lowest and highest groups of quotes is likely to curb manipulation, Libor rates can still “be manipulated if contributor banks collude or if a sufficient number change their behaviour.”
Thanks to Naked Capitalism.
Comment:
Libor stands for the London Interbank Offering Rate. It is the interest rate at which banks agree to lend to each other over various time periods, including overnight, three months and 12 months.
The post at Naked Capitalism is concerned about Libor being unreliable because of banks understating the rates they are paying (to conceal their desperation). The rate is an estimate set at the HQ of the British Bankers’ Association at 11 a.m. every morning in London on the basis of offers from 16 member bankers. The possibility exists that it could be manipulated.
Sandra Goes Beyond the Palin…
Comedienne Sandra Bernhadt has this to say about Sarah Palin:
“Now you got Uncle Women, like Sarah Palin, who jumps on the sh*t and points her fingers at other women. Turncoat bitch! Don’t you f*ckin’ reference Old Testament, b*tch! You stay with your new Goyish crappy shiksa funky bullsh*t! Don’t you touch my Old Testament, you b*tch! Because we have left it open for interpre-ta-tion! It is no longer taken literally! You whore in your f*ckin’ cheap New Vision cheap-ass plastic glasses and your [sneering voice] hair up. A Tina Fey-Megan Mullally broke down bullshit moment.” (rest of the comment censored)
Protecting minorities does not mean insulting and hurting majorities. I am not in favor of hate speech laws at all. But this is utterly misogynistic, anti-Christian (especially fundamentalist), racist and very unfunny. Imagine a moment a white Christian male fundamentalist had said this about some one of another religion….say Muslim, or Hindu, or Jewish. Imagine the furore. This is what PC eventually does. It doesn’t clean up public discourse. It switches the role of victim and tormentor to different groups.
Bankster Bail-Out: What Does Paulson Own and When Will He Own Up to It?
The New China Lobby
None of this should really be surprising. During his time at Goldman Sachs, Paulson made millions of dollars for his firm in China, with commensurate rewards for himself.
In 2006, Goldman Sachs bought into China’s largest bank, the Industrial and Commercial Bank of China, for $2.58, one of a number of such deals cut with Chinese state entities, as neoconservative hawks were quick to note. According to knowledgeable people, its profit of $3.9 billion was the biggest ever for the firm since its founding in 1869.
Goldman also bought a stake in Tokyo’s Sumitomo Mitsui Financial Group, the third largest financial group in Japan in 2003 ($1.26 billion), in return for which Sumitomo Mitsui loaned billions to Goldman Sachs for its investment-grade clients. Both that and the ICBC deal were financed with Goldman’s own money and with investments by its partners, institutions and wealthy clients.
What’s more, Goldman earned more fees than any other of its global competitors in China, being the only foreign securities firm allowed to both trade stocks for brokerage clients and arrange share sales for companies.
[Wonder why Paulson acts so high-handedly? Goldman is notorious for such conflicts].
Knowing that Goldman is the source of a bunch of the credit default swaps now clogging up global finances, we can safely surmise that its Asian clients are now suffering the same toxic shock afflicting its American and European clients. Some European banks just got a wake-up call this week how bad their own situation was, according to the Daily Telegraph.
A Wall Street legend for paranoia and secrecy, “The Firm” didn’t let on for a while how badly it too had been hit. That front fell apart this fall when its stock price swooned, along with those of other financial firms. Recently, the New York Times reported exactly how much Goldman stood to lose from contracts with insurance giant, AIG. If AIG had gone under, Goldman would have lost $20 billion.
The Times also reported, apparently as revelation, that Lloyd Blankfein, current CEO of Goldman, attended weekend meetings with AIG, Paulson, and others, before the AIG rescue was put through.
[Amazing. Powerful corrupt financiers cut backroom deals with each other and twist arms in powerful corrupt DC. Who would have thought? Of course, in the alternative press we were aware of Goldman’s less than Boy Scout past much before the Times lost its innocence, but better late than never….]Now we can guess why it was necessary to convert Goldman so quickly into a commercial bank. With access to customer deposits, the bank would be able to replenish its capital in short order.
Does Paulson profit personally? Reportedly, he sold his own shares in Goldman before being sworn in as Treasury Secretary in June 2006. Still, the meetings between Blankfein, AIG, Treasury, and the Federal Reserve sound like the worst kind of cronyism, given AIG’s subsequent rescue.
And they’re not the only problem.
1) The amendment of reserve requirements (in Section 128, in both the original and amended versions of the Paulson plan) is another: “Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 USC 461 note) is amended by striking ‘October 1, 2011′ and inserting ‘October 1, 2008.’”
As Pam Martens points out, this amendment would allow banks to hold zero reserves for transactions, a very enticing prospect for an investment bank in such dire need of capital it had to reinvent itself as a deposit-taking retail bank. And this would go through before the election, before the political scene was altered drastically.
2) The bailout of the financial sector, especially Goldman Sachs, is now a matter of keen interest to a large number of wealthy and influential foreigners – both individuals and private and state-run banks. Paulson’s long-standing ties with these foreign entities, as well as with leading financial entities all over the world, in and of itself constitutes a powerful conflict-of-interest and opens up the question of foreign influence on one of the most powerful offices in our government.
[For instance, since June 2006, more than 100 ICBC executives have attended courses at Goldman's New York training center, where tutors include Gerald Corrigan, former president of the Federal Reserve Bank of New York, who teaches a course on risk management (of all things). ICBC’s board includes Christopher Cole, Goldman's chairman of investment banking. One of its directors is former Goldman President John Thornton].
When the American state has interests it declares at odds with those of the Chinese state in a number of areas, for example in Africa (where Goldman has a 20% stake in Africa’s largest bank, Standard Bank); when servicemen and women are fighting and dying, ostensibly to protect those interests; when we are threatening other countries with bombing in defense of those interests; shouldn’t the appearance of foreign entities influencing the Treasury Secretary and Federal Reserve policy be treated seriously and transparently?
3) If Goldman went down, ICBC would be severely hit. And so would ICBC’s clients and other investors in ICBC. But it looks like Mr. Paulson would take a big loss too. According to press reports, Mr. Paulson netted a stake reported to be $25 million in the ICBC deal, a stake he and Goldman, as well as investors in Goldman’s private equity funds, are prohibited from selling for three years. A hit to Goldman would hit ICBC (and who knows what else). And a hit to ICBC would hit Paulson’s pocket.
Did Mr. Paulson sell this ICBC stake before he took office or didn’t he? It would be in the national interest to require him to make a public disclosure before this bill is passed.
And then he should resign.
Three- Card Capitalists - The Financial Disappearing Act of 2008
Read my latest piece at Lew Rockwell.com.
Update:
This piece, at first linked on several sites, has suffered censorship, both in the search engines and on reddit (see this link:
http://www.reddit.com/r/politics/comments/74pgc/threecard_capitalists_the_financial_disappearing/?sort=old)
If you think it’s information worth spreading, please take the time and link and post widely, making sure nothing is altered. People need to know what is happening.
“Treasury Secretary Paulson’s Financial Disappearing Act of 2008 is a charade. Lawmakers who dug in and blocked this act of economic treason deserve applause.
The Orwellian name of the legislation itself should have frozen every American citizen in his tracks.
The economy is not about to implode and if it were, it’s doubtful if government would do it anything but harm.The financial markets are in a crisis of confidence because the US government is debasing its currency and stiffing its creditors. Uncle Sam is a deadbeat and the world knows it. The world is worrying what to do about the useless paper it’s holding. That’s what the panic is about.
It’s a strange day when Barry Goldwater and the Chinese Communists are in agreement ….
And they are both right….”
Trying to get this out before the vote tonight, I missed spotting this juicy bit: The Hankster was going to use tax money to bail out foreign investors, as well. No, you heard that right. Not banks HQ’d in the US. But foreign investors who can move their assets from the foreign branch to the US branch. Read more at Mish Shedlock.
Off-the Record: Treasury Caught In Private Conference Call with Analysts…
Here’s something to boggle the mind - Treasury giving financial analysts a private preview of the Paulson deal before the rest of us rubes. What did they do, give them a sell recommendation on the US? That’s what’s wrong in these circles. Everything is done off the record or off-book. Re off-book, check out this post on how Lehman stashed its bad assets off-book in entities it spun off, so they could look good for analysts….
Conference Call (Sept. 28) :
8:54: Okay, someone please please dial in because the hold music sounds so damn familiar but I can’t figure out what it is and it is killing me.
9:00: I’m still on hold
9:02: Yes, Stairway to Heaven! And still holding
9:04 Michael Peace (?) takes the mic “this is very positive…we’ve worked hard with congress…it’ll be good…Neil from the treasury will go over how the warrants works and exec comp”
9:05 Broad discretion for the treasury
9:06 Neil takes the mic
You might’ve heard the headline number: seeking 700 bn. for residential and commercial assets. (yes, we’re aware). “we sought broad authority and flexibility”- They might use the authority for “other instruments”
- Let us be clear: “targeted at financial system NOT failing institutions, though there are some institutions in that system that are, you know, failing.”
9:08: Any institution that has a “meaningful presence in the US” should be allowed to participate. Congress said they wanted: oversight, tax payer protection. OUR highest priority: “making sure it works”…it needs to attract companies to participate…warrants, exec comp were highly negotiated…we think we have enough flexibility to have a system that works.Read the rest (and weep) at Naked Capitalism.
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