Showing posts with label Tim Geithner. Show all posts

Wednesday, September 19, 2012

A Rare Look at Why The Government Won't Fight Wall Street

POSTED: SEPTEMBER 18, 10:28 AM ET

Wall Street sign in New York
Michael Evans/Getty Images

The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who've come at the issue from the inside.

We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a new book by Jeff Connaughton, the former aide to Senators Ted Kaufman and Joe Biden. Jeff is well known to reporters like me; during a period when most government officials double-talked or downplayed the Wall Street corruption problem, Jeff was one of the few voices on the Hill who always talked about the subject with appropriate alarm. He shared this quality with his boss Kaufman, the Delaware Senator who took over Biden's seat and instantly became an irritating (to Wall Street) political force by announcing he wasn’t going to run for re-election. "I later learned from reporters that Wall Street was frustrated that they couldn’t find a way to harness Ted or pull in his reins," Jeff writes. "There was no obvious way to pressure Ted because he wasn’t running for re-election."

Kaufman for some time was a go-to guy in the Senate for reform activists and reporters who wanted to find out what was really going on with corruption issues. He was a leader in a number of areas, attempting to push through (often simple) fixes to issues like high-frequency trading (his advocacy here looked prescient after the "flash crash" of 2010), naked short-selling, and, perhaps most importantly, the Too-Big-To-Fail issue. What’s fascinating about Connaughton’s book is that we now get to hear a behind-the-scenes account of who exactly was knocking down simple reform ideas, how they were knocked down, and in some cases we even find out why good ideas were rejected, although some element of mystery certainly remains here.

There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

Most damningly, Connaughton writes about something he calls "The Blob," a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from.

In one amazing example described in the book, Kaufman decided he wanted to try to re-instate the so-called "uptick rule," which had existed for seventy years before being rescinded by the SEC in 2007. The rule prevents investors from shorting a stock until the stock had ticked up in price. "Forcing short sellers to wait for the price to tick up before they sell more shares gives a breather to a stock in decline and helps prevent bear raids," Connaughton writes.

The uptick rule is controversial on Wall Street – I’ve had some people literally scream at me that it doesn’t do anything, while others have told me that it does help prevent bear attacks of the sort that appeared to help finally topple already-mortally-wounded companies like Bear Stearns and Lehman Brothers – but what’s inarguable is that Wall Street hates the rule. Hedge fund types or employees of really any company that engages in short-selling will tend to be most venomous in their opinions of the uptick rule.

Anyway, Connaughton and Kaufman were under the impression that new SEC chief Mary Schapiro would re-instate the uptick rule after taking office. When she didn’t, Kaufman wrote her a letter, asking her to take action. When that didn't do the trick, he co-sponsored (with Republican Johnny Isakson) a bill that would have required the SEC to take action.

Nothing happened, and months later, Kaufman gave a grumbling interview to Politico about the issue. One June 30, the paper’s headline read: "Ted Kaufman to SEC; Do Your Job."

The next day, the Blob bit back. Connaughton was in the basement of the Russell building when a Senate staffer whose wife worked for Shapiro shouted at him. From the book:

"Hey, Jeff, you’re in the doghouse." He meant: with his wife.
"Why?" I asked.
"That Politico piece by your boss."
I was taken aback but tried to downplay the matter. "We just want the SEC to get its work done."
"Remember," he said. "We all wear blue jerseys and play for the Blue Team. I just don’t think that helps."

When Connaughton told Kaufman over the phone what the staffer said, Kaufman exploded. "You call him back right now and tell him I said to go fuck himself in his ear," Kaufman said.

Similarly, when Kaufman tried to advocate for rules that would have prevented naked short-selling, Connaughton was warned by a lobbyist that it would be "bad for my career" if he went after the issue and that "Ted and I looked like deranged conspiracy theorists" for asking if naked short-selling had played a role in the final collapse of Lehman Brothers. Naked short-selling is another controversial practice. Essentially, when you short a stock, you're supposed to locate shares of that stock before you go out and sell it short. But what hedge funds and banks have discovered is that the rules provide "leeway" – you can go out and sell shares in a stock without actually having it, provided you have a "reasonable belief" that you can locate the shares.

This leads to the obvious possibility of companies creating false supply in a stock by selling shares they don't have. Without getting too much into the weeds here, there is an obvious solution to the problem, which essentially would be forcing companies to actually locate shares before selling them. In their attempt to change the system, Kaufman and Connaughton discovered that the Depository Trust Clearing Corporation, the massive quasi-private organization that clears most all stock trades in America, had come up with just such a fix on their own. Kaufman recruited some other senators to endorse the idea, and as late as 2009, Connaughton and Kaufman were convinced they were going to get the form. "I said to Ted, 'We’re going to change the way stocks are traded in this country.'"

But before the change could be made, Goldman, Sachs issued "data" showing that there was "no correlation" between naked short selling and price movements. When Connaughton asked an Isakson staffer what the data said, the staffer, intimidated by Goldman, replied, "The data proves we're full of shit." Connaughton looked at the data and realized instantly that it was a bunch of irrelevant gobbledygook, even firing off an angry letter to Goldman telling them the tactic was beneath even them.

But Goldman’s tactic worked. A roundtable to discuss the idea was scheduled by the SEC on September 24, 2009. Of the nine invited participants, "all but one" were for the status quo. Connaughton expected the DTCC representatives to unveil their reform idea, but they didn’t:

Afterwards, I went over to [the DTCC representatives] and asked, "What happened?" Sheepishly, and to their credit, they admitted: "We got pulled back." They meant: by their board, by the Wall Street powers-that-be.

Essentially the same thing happened in Kaufman’s biggest reform attempt, the amendment to the Dodd-Frank bill he co-sponsored with Ohio’s Sherrod Brown, which would have broken up the Too-Big-To-Fail banks. But the Brown-Kaufman amendment, which was really the meatiest thing in the original Dodd-Frank bill, the one reform that really would have made a difference if it had passed, just died in the suffocating mass of the Blob. The key Democrats one after another failed to line up behind it, and in the end it was defeated soundly, with Dick Durbin, the number two man in the Democratic leadership, giving it this epitaph: "a bridge too far."

Again, those interested in understanding the mindset of the people who should be leading the anti-corruption charge ought to read this book. It's the weird lack of concern that shines through, like Khuzami’s comment that he’s "not losing sleep" over judges reprimanding his soft-touch settlements with banks, or then Southern District of New York U.S. Attorney Ray Lohier’s comment that the thing that most concerned him – this is the period of 2008-2009, the middle of a historic crimewave on Wall Street – was "cyber crime."

On the outside we can only deduce the mindset from actions and non-actions, but Connaughton’s actually seen it, and with the book you get to see it too. It’s scary and definitely worth a read.

Tuesday, July 17, 2012

THE U.S. DEPARTMENT OF "JUSTICE" BLACKMAILED BARLEYS BANK THUSLY: PAY THE U.S. A FINE OF $160 MILLION OR FACE PROSECUTION FOR THEIR RIGGING OF THE LIBOR (WHICH JUST HAPPENED TO ROB THEIR CLIENTS OF MANY BILLIONS OF DOLLARS). AGREED, SCREW THE CLIENTS.

theREALnews Permalink

Will Obama Admin. Prosecute the Big Banks for LIBOR Manipulation?

Michael Greenberger: With Wall St.'s embace of Romney, Obama has nothing to lose prosecuting the big banks for the LIBOR fraud

A complete transcript is available at the original.

Bio

Michael Greenberger is a professor at theUniversity of Maryland School of Law, where he teaches a course entitled "Futures, Options and Derivatives."Professor Greenberger serves as the Technical Advisor to the United Nations Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. He has recently been named to the International Energy Forum’s Independent Expert Group that provided recommendations for reducing energy price volatility to the IEF’s 12th Ministerial Meeting in March 2010. Professor Greenberger was a partner for more than 20 years in the Washington, D.C. law firm of Shea & Gardner, where he served as lead litigation counsel before courts of law nationwide, including the United States Supreme Court.

Monday, July 16, 2012

NAOMI WOLF: "WE ARE SEEING SYSTEMATIC CORRUPTION IN BANKING -- AND SYSTEMATIC COLLUSION." THE COLLUSION IS BOTH AMONG BANKS AND BETWEEN BANKS AND GOVERNMENT. NO ONE HAS BEEN INDICTED FOR THESE MULTI-TRILLION-DOLLAR CRIMES. HOWEVER, THE U.S. IS PROPOSING NEW WAYS TO PUNISH WHISTLEBLOWERS.

This global financial fraud and its gatekeepers

The media's 'bad apple' thesis no longer works. We're seeing systemic corruption in banking – and systemic collusion

Naomi Wolf
guardian.co.uk, Saturday 14 July 2012 15.47 BST

Protesters outside a Bank of America annual shareholders' meeting in Charlotte, North Carolina.
Photograph: Jason Miczek/Reuters

Last fall, I argued that the violent reaction to Occupy and other protests around the world had to do with the 1%ers' fear of the rank and file exposing massive fraud if they ever managed get their hands on the books. At that time, I had no evidence of this motivation beyond the fact that financial system reform and increased transparency were at the top of many protesters' list of demands.

But this week presents a sick-making trove of new data that abundantly fills in this hypothesis and confirms this picture. The notion that the entire global financial system is riddled with systemic fraud – and that key players in the gatekeeper roles, both in finance and in government, including regulatory bodies, know it and choose to quietly sustain this reality – is one that would have only recently seemed like the frenzied hypothesis of tinhat-wearers, but this week's headlines make such a conclusion, sadly, inevitable.

The New York Times business section on 12 July shows multiple exposes of systemic fraud throughout banks: banks colluding with other banks in manipulation of interest rates, regulators aware of systemic fraud, and key government officials (at least one banker who became the most key government official) aware of it and colluding as well. Fraud in banks has been understood conventionally and, I would say, messaged as a glitch. As in London Mayor Boris Johnson's full-throated defense of Barclay's leadership last week, bank fraud is portrayed as a case, when it surfaces, of a few "bad apples" gone astray.

In the New York Times business section, we read that the HSBC banking group is being fined up to $1bn, for not preventing money-laundering (a highly profitable activity not to prevent) between 2004 and 2010 – a six years' long "oops". In another article that day, Republican Senator Charles Grassley says of the financial group Peregrine capital: "This is a company that is on top of things." The article goes onto explain that at Peregrine Financial, "regulators discovered about $215m in customer money was missing." Its founder now faces criminal charges. Later, the article mentions that this revelation comes a few months after MF Global "lost" more than $1bn in clients' money.

What is weird is how these reports so consistently describe the activity that led to all this vanishing cash as simple bumbling: "regulators missed the red flag for years." They note that a Peregrine client alerted the firm's primary regulator in 2004 and another raised issues with the regulator five years later – yet "signs of trouble seemingly missed for years", muses the Times headline.

A page later, "Wells Fargo will Settle Mortgage Bias Charges" as that bank agrees to pay $175m in fines resulting from its having – again, very lucratively – charged African-American and Hispanic mortgagees costlier rates on their subprime mortgages than their counterparts who were white and had the same credit scores. Remember, this was a time when "Wall Street firms developed a huge demand for subprime loans that they purchased and bundled into securities for investors, creating financial incentives for lenders to make such loans." So, Wells Fargo was profiting from overcharging minority clients and profiting from products based on the higher-than-average bad loan rate expected. The piece discreetly ends mentioning that a Bank of America lawsuit of $335m and a Sun Trust mortgage settlement of $21m for having engaged is similar kinds of discrimination.

Are all these examples of oversight failure and banking fraud just big ol' mistakes? Are the regulators simply distracted?

The top headline of the day's news sums up why it is not that simple: "Geithner Tried to Curb Bank's Rate Rigging in 2008". The story reports that when Timothy Geithner, at the time he ran the Federal Reserve Bank of New York, learned of "problems" with how interest rates were fixed in London, the financial center at the heart of the Libor Barclays scandal. He let "top British authorities" know of the issues and wrote an email to his counterparts suggesting reforms. Were his actions ethical, or prudent?

A possible interpretation of Geithner's action is that he was "covering his ass", without serious expectation of effecting reform of what he knew to be systemic abuse.

And what, in fact, happened? Barclays kept reporting false rates, seeking to boost its profit. Last month, the bank agreed to pay $450m to US and UK authorities for manipulating the Libor and other key benchmarks, upon which great swaths of the economy depended. This manipulation is alleged in numerous lawsuits to have defrauded thousands of bank clients. So Geithner's "warnings came too late, and his efforts did not stop the illegal activity".

And then what happened? Did Geithner, presumably frustrated that his warnings had gone unheeded, call a press conference? No. He stayed silent, as a practice that now looks as if several major banks also perpetrated, continued.

And then what happened? Tim Geithner became Treasury Secretary. At which point, he still did nothing.

It is very hard, looking at the elaborate edifices of fraud that are emerging across the financial system, to ignore the possibility that this kind of silence – "the willingness to not rock the boat" – is simply rewarded by promotion to ever higher positions, ever greater authority. If you learn that rate-rigging and regulatory failures are systemic, but stay quiet, well, perhaps you have shown that you are genuinely reliable and deserve membership of the club.

Whatever motivated Geithner's silence, or that of the "government official" in the emails to Barclays, this much is obvious: the mainstream media need to drop their narratives of "Gosh, another oversight". The financial sector's corruption must be recognized as systemic.

Meanwhile, Britain is sleepwalking in a march toward total email surveillance, even as the US brings forward new proposals to punish whistleblowers by extending the Espionage Act. In an electronic world, evidence of these crimes lasts forever – if people get their hands on the books. In the Libor case, notably, a major crime has not been greeted by much demand at the top for criminal prosecutions. That asymmetry is one of the insurance policies of power. Another is to crack down on citizens' protest.

ECONOMIST AND WHITE-COLLAR CRIMINOLOGIST BILL BLACK: THE NEW YORK FED UNDER TIM GEITHNER "WAS INFORMED BY BARKLEYS TRADERS THAT THE RATE WAS BEING MANIPULATED DOWN ... BUT THEY DON'T APPEAR TO HAVE MADE CRIMINAL REFERALS." "SO IF THE NEW YORK FED SCREWED UP OUR ABILITY TO PROSECUTE BY NOT TAKING ACTION AGAINST BARKLEYS, THAT'S NOT A CRIME BY GEITHNER BUT IT'S CERTAINLY SOMETHING WHERE HE SHOULD RESIGN IMMEDIATELY ... HE WAS AN ABJECT FAILURE AS A REGULATOR."

theREALnews Permalink

Baltimore, Big Banks and a Criminal Conspiracy

Bill Black: The LIBOR fraud stole millions upon millions from American cities and people around the world

Original with full transcript here.

Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri - Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" - frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

Thursday, December 22, 2011

OBAMA AND GEITHNER COVER UP THE GREATEST BANKING FRAUD IN HISTORY, ANALYSIS 2: MATT TAIBBI

Obama and Geithner: Government, Enron-Style

POSTED: DECEMBER 20, 10:06 AM ET

. .

Strongly recommend this piece at the Huffington Post by Jeff Connaughton, a former aide to Senator Ted Kaufman. Jeff is one of the smartest guys on the Hill and is particularly strong on issues surrounding Wall Street and the regulatory system. In this piece, he takes apart the oft-stated mantra that what Wall Street firms did during and after the crisis was maybe unethical, but not illegal.

He takes particular aim at Barack Obama, who recently tossed that line out on 60 Minutes in what I thought was one of the real low moments of his presidency. Here’s Jeff’s take:

Speaking in Kansas on December 6, [Obama] said, "Too often, we've seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there's no price for being a repeat offender." Just five days later on 60 Minutes, he said, "Some of the least ethical behavior on Wall Street wasn't illegal." Which is it? Have there been no prosecutions because Wall Street acted legally (albeit unethically)? Or did Wall Street repeatedly violate major anti-fraud laws (and should thus find itself in the dock)?
The President is confusing "legal" with "difficult to prosecute successfully."

The notion that what Wall Street firms did was merely unethical and not illegal is not just mistaken but preposterous: most everyone who works in the financial services industry understands that fraud right now is not just pervasive but epidemic, with many of the biggest banks committing entire departments to the routine commission of fraud and perjury – every single one of the major banks, for instance, devotes significant manpower to robosigning affidavits for foreclosures and credit card judgments, acts which are openly and inarguably criminal.

Banks and hedge funds routinely withhold derogatory information about the instruments they sell, they routinely trade on insider information or ahead of their own clients’ orders, and corrupt accounting is so rampant now that industry analysts have begun to figure in estimated levels of fraud in their examinations of the public disclosures of major financial companies.

Beyond that, as Jeff points out, Obama is simply not telling the truth about the supposedly insufficient penalties available to regulators. Employing the famous "mistakes were made" use of the passive tense, Obama copped out in his December 6 speech by saying that “penalties are too weak." As Jeff points out, what Obama should have said is that "the penalties my own regulators chose to dish out were too weak":

Moreover, the President is misleading us when he says that Wall Street firms violate anti-fraud law because the penalties are too weak. Repeat financial fraudsters don't pay relatively paltry -- and therefore painless -- penalties because of statutory caps on such penalties. Rather, regulatory officials, appointed by Obama, negotiated these comparatively trifling fines. This week, the F.D.I.C. settled a suit against Washington Mutual officials for just $64 million, an amount that will be covered mostly by insurance policies WaMu took out on behalf of executives, who themselves will pay just $400,000. And recently a federal judge rejected the S.E.C.'s latest settlement with Citigroup, an action even the Wall Street Journal called "a rebuke of the cozy relationship between regulators and the regulated that too often leaves justice as an orphan."

What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave. There is ample evidence out there that the Obama administration has eased up on prosecutions of Wall Street as part of a conscious strategy to prevent a collapse of confidence in our financial system, with the expected 50-state foreclosure settlement being the landmark effort in the cover-up, intended mainly to bury a generation of fraud. Here’s how Jeff puts it:

In Ron Suskind's book, Confidence Men, he quotes Treasury Secretary Timothy Geithner as saying, "The confidence in the system is so fragile still... a disclosure of a fraud... could result in a run, just like Lehman." The Obama Administration is pushing hard for a 50-state settlement with the major banks for their fraudulent foreclosure practices, even though several state attorneys general have rejected this approach because, in their view, it would shield too much wrongdoing. Regrettably, Obama's top officials and lawyers seem more eager to restore the financial sector to health than establish criminal accountability among the executives who were in charge.

In other words, Geithner and Obama are behaving like Lehman executives before the crash of Lehman, not disclosing the full extent of the internal problem in order to keep investors from fleeing and creditors from calling in their chits. It’s worth noting that this kind of behavior – knowingly hiding the derogatory truth from the outside world in order to prevent a run on the bank – is, itself, fraud!

This is exactly the mindset that led Lehman to the abuses of the "Repo 105" accounting trick, in which loans were disguised as revenues in order to prevent the outside world from knowing the dire state of the bank’s balance sheet.

Now Obama and Geithner are engaged in the same sort of activity, only they’re trying to prevent a run not on an individual bank, but the entire American financial services sector. Geithner seems really to believe that if fraud were aggressively policed, and the world made aware of the incredible extent of the illegality in our markets, that international confidence in the American financial sector would plummet and our economy would suffer – and suffer, incidentally, on Barack Obama’s watch.

Better, apparently, the Band-Aid the problem now, and let the real mess happen later on, on someone else’s watch, or at least in a second term, when there’s no need to worry about re-election.

Of course, this is exactly the wrong way to go about things. If Geithner and Obama really wanted to convince the world that America’s markets weren’t broken, they would effectively police fraud, and by extension prove to everybody that at the very least, our regulatory system is not broken.

But by taking a dive on fraud, and orchestrating mass cover-ups like the coming foreclosure settlement fiasco, what they’re doing instead is signaling to the world that not only are our financial markets corrupt, but our government is broken as well.

The problem with companies like Lehman and Enron is that their executives always think they can paper over illegalities by committing more crimes, when in fact all they’re usually doing is snowballing the problem so completely out of control that there’s no longer any chance of fixing things, thereby killing the only chance for survival they ever had.

This is exactly what Obama and Geithner are doing now. By continually lying about the extent of the country’s corruption problems, they’re adding fraud to fraud and raising such a great bonfire of lies that they probably won’t ever be able to fix the underlying mess.

If they looked at the world like public servants, and not like corporate executives, they’d understand that the only way out is to come clean. That they don’t look at things that way should tell people quite a lot.

About Matt Taibbi

Matt Taibbi is a contributing editor for Rolling Stone. He’s the author of five books, most recently The Great Derangement and Griftopia, and a winner of the National Magazine Award for commentary.

OBAMA AND GEITHNER COVER UP THE GREATEST BANKING FRAUD IN HISTORY, ANALYSIS 1: BILL BLACK

Benzinga / By William K. Black

Bill Black's Handy Guide to Bankster Fraud, From 'Small Fraudulent Fry' to 'Septic Tank Scum'

The white collar criminologist calls out Bush and Obama for not prosecuting financial fraud and demands an end to the free pass for campaign contributors.

December 20, 2011 | Sixty Minutes' December 11, 2011 interview of President Obama included a claim by Obama that, unfortunately, did not lead the interviewer to ask the obvious, essential follow-up questions

“I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal.”

Obama did not explain what Wall Street behavior he found least ethical or what unethical Wall Street actions he believed was not illegal. It would have done the world (and Obama) a great service had he been asked these questions. He would not have given a coherent answer because his thinking on these issues has never been coherent. If he had to explain his position he, and the public, would recognize it was indefensible. I offer the following scale of unethical banker behavior related to fraudulent mortgages and mortgage paper (principally collateralized debt obligations (CDOs)) that is illegal and deserved punishment. I write to prompt the rigorous analytical discussion that is essential to expose and end Obama and Bush’s “Presidential Amnesty for Contributors” (PAC) doctrine. The financial industry is the leading campaign contributor to both parties and those contributions come overwhelmingly from the wealthiest officers – the one-tenth of one percent that thrives by being parasites on the 99 percent.

I have explained at length in my blogs and articles why:

Only fraudulent home lenders made liar’s loans
Liar’s loans were endemically fraudulent
Lenders and their agents put the lies in liar’s loans
Appraisal fraud was endemic and led by lenders and their agents
Liar’s loans could only be sold through fraudulent reps and warranties
CDOs “backed” by liar’s loans were inherently fraudulent
CDOs backed by liar’s loans could only be sold through fraudulent reps and warranties
Liar’s loans hyper-inflated the bubble
Liar’s loans became roughly one-third of mortgage originations by 2006

Each of these frauds is a conventional fraud that could be prosecuted under existing laws. Hundreds of lenders and over a hundred thousand loan brokers were “accounting control frauds” specializing largely in making fraudulent liar’s loans. My prior work explains control fraud, why accounting is the “weapon on choice” for fraudulent financial firms, and why liar’s loans were superior “ammunition” for committing massive accounting fraud. These accounting control frauds caused greater direct financial losses than any other crime epidemic in history. They also drove the financial crisis that produced the Great Recession and cost millions of Americans their jobs.

In considering my scale of unethical conduct it is important to keep in mind that it is highly likely that anyone that causes very large numbers of people to lose their homes will cause multiple suicides and indirect deaths that arise from the greater vulnerability of the homeless and the blue collar crime effects of destroying neighborhoods inherent to widespread foreclosures. I ignore for this purpose the fact that the fraudulent loans caused the bubble to hyper-inflate and drove the financial crisis that caused millions of people to lose their jobs. The financial accounting control frauds are the weapons of mass destruction of wealth, employment, and happiness. I also ignore the fact that the frauds described here made the perpetrators wealthy. My scale, therefore, systematically and dramatically understates the perpetrators’ moral turpitude. I have also excluded the massive foreclosure frauds from my scale because they did not cause the underlying crisis. When Obama reveals the bankers actions he claims to be legal but highly unethical readers should keep my conscious understatement of the moral depravity of the illegal acts by bankers that drove this crisis in mind when they compare the relative ethical failings.

As a criminologist, I do not favor sentencing criminals to the fates they richly deserve. I would never torture prisoners or place them at risk of assault, rape, or psychological trauma. I do not believe that extremely longer terms of imprisonment are desirable except in rare circumstances. As a lawyer and a criminologist I emphasize that any sentence should come only after a conviction in a trial providing due process protections or a guilty plea. My scale provides a label for the comparative moral depravity of the perpetrator, the deserved punishment (which when vicious is not the far more humane one I would actually impose), and a brief description of the specific frauds that are characteristic of this level of immorality and the number of perpetrators falling in each category. My inspiration was Dante’s circles of hell as described in his Divine Comedy.

The Scale of Ethical Depravity by the Frauds that Drove the Ongoing Crisis

Level 10: Septic tank scum

Eternal Hell: these banksters deserve a physical hell of infinite torment and duration.

Officers that directed control frauds that involved making predatory loans to more than 10,000 homeowners who lost their homes as the result of the frauds. Predatory loans in this context mean deliberately seeking out the elderly or minorities for such loans because they were easier to con into taking loans they could not repay – at a premium yield (interest rate). Dozens of CEOs fall in this category.

Level 9: Pond scum

Time in Hell: These banksters deserve a term in hell.

Officers that directed control frauds that led to more than 10,000 homeowners losing their homes. Hundreds of CEOs fall in this category.

Level 8: Generic scum

Gitmo: Hell’s starkest suburb.

Officers that directed control frauds that led to more than 1,000 homeowners losing their homes. Thousands of CEOs fall in this category.

Level 7: Dante’s deserved denizens

Supermax: No view, and no way out.

The professionals that aided and abetted the overall control frauds by inflating appraisals, giving “clean” audit opinions to fraudulent financial statements, “AAA” ratings to toxic waste, and accommodating legal opinions to the frauds. Thousands of professionals fall in this category.

Level 6: Aspiring to great wealth through fraud

Alcatraz: Great view, but no way out.

The senior lieutenants of the control frauds who committed the frauds that caused more than 10,000 homeowners to lose their homes. Thousands of senior officers fall in this category.

Level 5: A large cog in a smaller fraud

Generic Hardcore Prison: A life of boredom and the almost total loss of freedom.

The senior lieutenants of the control frauds who committed the frauds that caused more than 1,000 homeowners to lose their homes. Thousands of senior officers fall in this category.

Level 4: The banksters who cost us our money instead of our homes – Goldman Sachs & friends

Generic Prison: A life of boredom and a severe loss of freedom.

The officers that led the control frauds who targeted their customers for the purchase of more than $10 million in fraudulent product. Dozens of officers fall in this category.

Level 3: The banksters’ senior lieutenants who cost us our money instead of our homes

Prisons designed for serious, but less physically dangerous felons.

The senior officers of the control frauds who targeted their customers for the purchase of more than $10 million in fraudulent product. Scores of senior officers fall in this category.

Level 2: Banksters who defrauded other bankers (who were willing to be defrauded)

Privatized prisons: Let them enjoy the consequences of their odes to privatization.

The largest control frauds sold tens of billions of dollars of fraudulent loans to each other through fraudulent “reps and warranties.” The kicker here, as Charles Calomiris has emphasized, is that the control frauds on both sides of the transactions knew that they were engaged in a mutual fraud. Hundreds of senior officers fall in this category.

Level 1: Small fraudulent fry

Catch and release: Convict them and put them on probation if they cooperate with the investigations.

The small fry are the loan officers, loan broker employees, and borrowers who knowingly participated in making fraudulent mortgage loans. Over 100,000 individuals fall in this category.

We Need to End the "PAC Doctrine"

To date, Bush and Obama have prosecuted none of the mortgage frauds in the top nine levels. I urge reporters to ask him to explain three things about his statements to 60 Minutes.

Why are there no prosecutions of the felons that drove the crisis and occupy the nine worst rungs of unethical and destructive acts?
Explain the five unethical acts by elite financial institutions that you consider the most destructive and least ethical – but which you believe to be legal. How do you rank the degree of unethical conduct and destruction in those acts?
What specific statutory provisions did you propose to make those five unethical acts illegal? As enacted, which provisions of the Dodd-Frank Act made those five unethical acts illegal? Who has been prosecuted for those formerly legal but seriously unethical and destructive acts that were made illegal by the Dodd-Frank Act?

Reporters will have to be persistent in coordinating their follow-up questions to get Obama to provide direct answers to these questions.

I request that private citizens write President Obama to ask him to provide specific, written answers to these three questions. I will be proposing a series of questions that I will urge citizens to demand answers to because it is clear that the regular media will rarely ask demanding questions of elite politicians or bankers. It is up to us to hold them accountable and end the doctrine of Presidential Amnesty for Contributors.

Bill Black is the author of 'The Best Way to Rob a Bank is to Own One' and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Saturday, November 19, 2011

The Crash of 1929 Was Just a Prelude: Truthout Interviews Whistleblower-Novelist Nomi Prins

Thursday 17 November 2011

by: Mark Karlin, Truthout | Interview

Nomi Prins, author of "Black Tuesday."
(Photo: Official Nomi Prins Page)

Mark Karlin: Given your expertise in understanding the corruption of Wall Street, what did you find in the practices of the financial world leading up to the 1929 crash that presaged the 2007 crisis?

Nomi Prins: Into the crash of 1929, there were six big banks. Their leaders controlled most of the market activity, sat on each others' boards and owned large chunks of stock in each others' firms. They inflated the values of stocks through "trusts" (financial mechanisms by which many investors could "pool" together their money, and borrowed money, to purchase or sell various stocks in bulk).

These were further puffed up by a co-opted media and enabling political leaders (as depicted in "Black Tuesday.") Even as the crash happened, the biggest bankers thought they could contain it and could buoy stocks until the market settled, so they threw in their own (read: customers') money. That didn't work, of course. The financial markets and lending systems collapsed.

Today, we have six banks (mostly incarnations of the 1929 banks) that control the stock market, most mortgage lending, the bulk of deposits and nearly all derivatives activity. They inflated the housing market, in particular subprime loans, so they could stuff those loans into more complicated assets, borrowing hundreds of trillion of dollars against them, increased their risk through derivatives and spread them throughout the globe. When it became apparent these assets didn't have the value that banks said they did, the market, they got federally bailed out, while the Main Street economy sank.

MK: Why did you choose to write a novel that incorporates Wall Street malfeasance surrounding Black Tuesday instead of a nonfiction book?

NP: I'd always wanted to write both fiction and nonfiction. Ever since my debut story about a fish and a princess at age three, the left and right sides of my brain were engaged in tenuous warfare. Several decades later, after I completed my third nonfiction book, "It Takes a Pillage," the inevitability of the widespread economic collapse that I'd warned about in excessive detail, bore down on me. I'd worked over a decade in investment banking and been writing about if for nearly a decade. My brain was fried from all the documents and composite statistics. I wanted to write a novel - to develop complex characters - to tell a human story, to access the very heart of a very parallel historical period, through the heart of my protagonist, Leila Kahn.

Then I met a woman who'd live through those times, and she told me about her prudent father during the Depression. Leila's little sister, Rachel, is based on her. Leila herself came to me one night, when I was thinking about how we can often make very different choices depending on whether we listen to our hearts or our minds. The two men in her life, the banker and the laborer, represent those sides of her, in a time where nothing is black and white, but shades of gray.

MK: Does Leila symbolize the seeker of the American Dream running head-on into its dark underside?

NP: Yes, absolutely. There was a wondrous sense when immigrants came to the US, throughout the late 1800s and early 1900s, of an amazing America that held unlimited promise for all, a nation that welcomed all equally, where mere hard work and tenacity would lead to prosperity. Yet, what many found upon arrival was nothing like that.

Leila and her little sister Rachel live in a dilapidated fifth-floor walk-up apartment in a Lower East Side tenement building, sharing a two-room apartment with five people. Their lives are not easy. Her dying Aunt Rosa can't afford the medicine to soothe her pain. Her cousins work at the Fulton Street docks under unbearable conditions, while their bosses, as Nelson, Leila's boyfriend, says before his arrest, make money on their backs.

There was, and is, an upstairs/downstairs world in New York City, a major and visible class divide there, and throughout the country: that 99 vs. 1 percent gap. "Black Tuesday" focuses on the stark lifestyle and wealth difference between families, neighborhoods and ethnicities, the gap in what they sought, with what they found.

MK: The Glass-Steagall Act was passed in 1933 to try and prevent future market collapses. It was repealed in 1999 after Bill Clinton signed it into law. How significant was the repeal in leading to the 2007 near-Wall Street implosion?

NP: In order to avoid the disastrous co-mingling of customer deposits and accounts with the creation of risky securities, trusts and related trading, banks were separated via the Glass-Steagall Act of 1933 into commercial (dealing with the public's loans, deposits and the more productive use of capital) and speculative (securities creation and trading) arms.

The commercial banks received deposit backing from the newly created Federal Deposit Insurance Corporation (FDIC). And the banks that chose to focus on securities creation and trading - well, they were not provided government subsidies like today. Plus, the Securities and Exchange Commission (SEC) was created to ostensibly protect the public from securities fraud (though it has been useless at that recently.)

Due to the 1999 repeal of the Glass-Steagall Act, commercial and investment banking, and insurance companies, intertwined. Commercial banks were able to leverage (or borrow against "safer" positions more massively) because they owned that more "stable" fee-driven deposit and loan business They could thus create big new debt deals for their clients, create assets stuffed with anything from junk bonds to subprime loans, and load up on derivatives. Competition between banks became about who could leverage their simpler businesses, the most and the quickest. Investment banks, like Goldman, Lehman and Merrill that didn't have the depositor cushion, but wanted in on the same game, got the SEC to allow them to leverage the trading positions they did have, more. Repeal stoked the casino element of Wall Street, rendering productive financing less attractive.

MK: In your novel, the nefarious bank in question is led by a powerful mogul uncle who controls his nephew - a family-run financial firm, so to speak. How has the ownership of banks and financial firms changed since the crash of 1929?

NP: Back then, the Morgan Bank (fictionalized in my novel from a story perspective, but real) was a private elitist bank. Partners were handpicked by Jack Morgan (J.P. Morgan Jr.) and customer lists weren't public, nor were many deals. In "Black Tuesday," Roderick, the nephew, and Jack, the uncle, come to have very different reactions to the bank's secrecy.

Today, JPM Chase, which includes within its hierarchy the original Morgan bank, is similarly one of the most powerful banks in the world, though part-funded by public shares, rather than private ones.

The big banks, epitomized by Morgan Bank in 1929 and JPM Chase today - as well as others - are still run by entitled, privileged titans with disdain for containment by stricter laws. They travel in moneyed circles, have access to - or become - the most senior political leaders and, in general, are completely disconnected from the rest of the public. The only difference is that Morgan came into his position in the family bank through his father, whereas Jamie Dimon rose through the ranks of several banks before attaining his position; otherwise, they could be the same man, same bank, different time.

MK: In 1929, the US financial industry was much more confined to America. Now it is part of an international system that is much more interconnected. Your novel describes a Wall Street that seems quaint and much smaller in scale than what exists today. How has the international financial market in 2011 changed the way in which Wall Street functions?

NP: Today, individuals have more access to invest or "bet" in the market - e-trade or Charles Schwab accounts, and so forth. They never even have to sit down with a broker like they did back in 1929.

Additionally, many have 401K or various pension plans that invest in various stocks and securities for them.

In the 1920s, there were things called "trusts" through which people thought they could invest alongside the bigger, smarter financiers. Now, we have MSNBC, Fox Business and Jim Cramer talking about how small investors can become rich.

Then, certain Wall Street bankers and the equivalent of today's hedge and equity fund titans manipulated the market by having more access to information and the ability to maneuver bigger price swings since they controlled more of the trading volume. It's the same thing today, but additionally now with globalized programmed trading, the big volume trades cause tremendous market movements which can hurt the "little people" who don't know they are coming. Then, investors believed trusts (which were created by banks and stuffed with the stock of their preferred clients' companies) were surefire ways to make money because bankers said so. More recently, investors (including pension funds, municipalities and whole countries) believed AAA mortgage-related securities were surefire ways to make money because bankers and rating agencies said so.

MK: One financial tool that didn't exist in 1929 is the derivative. How has that "investment instrument" made Wall Street a much riskier enterprise?

NP: The advent of a whole slew of different derivatives, from interest rate to currency to credit and all sorts of tailored-made combinations in between, mostly over the past three decades, has infused the financial system with exponentially greater risk and less transparency, and much more dangerous interconnectivity amongst the largest financial players. As a result, global bank and political leaders can yell about how the entire system will implode absent certain bailouts, whether for Bank of America or the international speculators who bet against Greece thought the credit derivatives market, if certain things like debt-for-austerity programs aren't enacted.

Derivatives upped the ante of control that the largest financial players have over the entire system, as well as the ability for them to hold whole counties and populations hostage. In essence, there are more derivatives in the world than many multiples of global gross domestic product (GDP). That makes the global financial enterprise exceedingly risky. Put it this way: what happened with the collapse of finance that lead to the Great Depression, absent complex derivatives, is nothing compared to what could happen today.

MK: You and I have talked about Tom and Daisy Buchanan, wealthy characters in F. Scott Fitzgerald's "The Great Gatsby," who lived reckless lives of privilege and left ruined lives in their wake. How did that novel, published in 1925, influence "Black Tuesday"?

NP: Before contemplating "Black Tuesday," on a whim, I walked into my local library during Great Gatsby month. I got a copy of the classic, re-read it and decided that I didn't like any of the women in it. Plus, the notion of the "roaring 1920s" was about as fake as the Kardashians. There were some exceedingly wealthy people around, but mostly then, like now, the country was struggling - that's why the allure of the stock market sucked in investors that it shouldn't have, like Leila's uncle's partner.

The characters, Tom and Daisy Buchanan, were the quintessential representations of the 1920s vapid, partying, "good" life. Yet at the time, hosts of young women dreamt of being Daisy. Leila learned about high-society life from reading "The Great Gatsby," penned the year she came to America, but upon witnessing that life in Roderick's world, she is crushed by the dark criminality of it all. She even tells Roderick, who knows Fitzgerald, that he couldn't possibly understand the real world, her world, foreshadowing the parallel recklessness at the center of "Black Tuesday."

MK: Unrelated to your novel, but very much related to the subject at hand, is the question of Timothy Geithner. Is there some positive side to his being Secretary of the Treasury, or is he just Wall Street's man in the White House?

NP: Tim Geithner is a tool, literally. When Geithner took the Treasury helm, the amount of Treasury Security debt outstanding was $5.7 trillion (in tradable securities, and $591 billion in nonmarketable ones). In August 2008, just before the most powerful banks sucked the soul out of the country in every manner possible, it was $4.9 trillion. Today, outstanding Treasury debt stands at $9.7 trillion (total debt $10.2 trillion). Most of that increase occurred under Geithner, though it started under Hank Paulson.

Geithner will keep pretending that this seismic debt increase was a requirement to fix our main economy, which continues to get crushed, ignoring mention that the biggest, most powerful banks were propped up by trillions of dollars of federal of subsidies. His being Treasury head is an inherent conflict of interest with his Wall Street alliances, just as then-Treasury Secretary Andrew Mellon, under President Coolidge prior to the 1929 crash, had an allegiance to the bankers, because he was one.

MK: Finally, do you think the Dodd-Frank Wall Street Reform and Consumer Protection Act will actually reform anything on Wall Street?

NP: No. The Dodd-Frank Act does not separate the banks, thereby, no matter what other minor cosmetic items it contains, or yet-to-be-lobbied-to-death practices it evokes, banks can still increase their risk-taking and influence upon the cushion of customers' money.

The Consumer Financial Protection Agency is a great idea, in theory - though it should be noted, there already was a consumer protection department within the Federal Reserve that was 100 percent ineffective as fraudulent mortgages were being stuffed into fraudulent assets and dispersed throughout the world. But, by virtue of its political proximity to the Federal Reserve, any alarm bells it rings will involve a bitter fight against a stronger opponent. Not appointing Elizabeth Warren to run it was a pretty big red flag. I have more confidence in the Occupy movement to bring attention to the myriad of slimy bank practices, like Bank of America's $5 debit fee, which was pushed back, though in order for even public outcry to be effective, it has to translate into real profit loss for the banks, and it has to be hypervigilant and aggressive - forever.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

MARK KARLIN

Mark Karlin is the editor of BuzzFlash at Truthout. He served as editor and publisher of BuzzFlash for ten years before joining Truthout in 2010. BuzzFlash has won four Project Censored Awards.

Comment from original site:

Swaps, treasury bills/bonds, exchanges, derivatives and prodigeous printing; it is all one big fraud that has resulted in what Marx called "ficticious Capital" (of no REAL value) of $700TRILLION (the known amount) which is ten times the estimated WORLD GDP of $70TRILLION (REAL value as determined by LABOUR content)

Now obviously something has to give; something WILL give!

If the l%, of which the bankers are a significant part, have their way, that something will be the basic needs of the 99%. Ie. the rheams of paper, electronic accounts &c, all fraudulent worthless rat bag of deceitful transactions will be off loaded on to the 99% in the biggest swindle of all times.

It has already begun! In Europe the European Centrale Banque in cahoots with International Monetary Fascists (IMF) and the large banks worldwide are restructuring all these frauds into "BAILOUTS" which then exchange into debts for workers and entrepereneurs to pay with their FUTURE REAL value added earnings in the form of taxes that will not then go to essentials for the common people. Goodbye to pensions, medical care, clean water, nutrititonal food. Iceland and Greece are already being crushed in the jaws of these vultures, Spain and Portugal feel the talons and even Italy, Austria and France feel their hot breath, a breath pungent with the stink of economic and social carrion!

Germany, North America do not be complacent; you too are in the sights of the monster.

So what is to be done?!

99% Occupiers, Hang tough! SAY NO! to "BAILOUTS, NO to regressive taxes, NO to wars (that littlr people die for while the l% reap profits, NO to environmental neglect that reduces the carriing capacity of earth for living things!

Be inclusive of all who suffer (or soon will)

If you hang on to your souls, and never give up, you have a world to WIN!!

Saturday, December 18, 2010

THE FED'S STUPENDOUS CRIMES AGAINST THE AMERICAN TAXPAYERS EXPOSED

Blogger's Note: Conservative visitors to my blog may have correctly sensed my liberal leanings. If this is a concern, please scroll down and watch the video featuring Ron Paul -- a Republican candidate in the 2008 Presidential primaries. And if you do scroll down this far, I suggest that you also watch Dylan Ratigan's interview on MSNBC with guest Chris Whalen (leanings unknown to me) from Institutional Risk Analytics.

The Wall Street Pentagon Papers: Biggest Scam In World History Exposed - Are The Federal Reserve’s Crimes Too Big To Comprehend?

Posted on Monday, December 6th, 2010 at 2:16 pm

By David DeGraw, AmpedStatus

What if the greatest scam ever perpetrated was blatantly exposed, and the US media didn’t cover it? Does that mean the scam could keep going? That’s what we are about to find out.

I understand the importance of the new WikiLeaks documents. However, we must not let them distract us from the new information the Federal Reserve was forced to release. Even if WikiLeaks reveals documents from inside a large American bank, as huge as that could be, it will most likely pale in comparison to what we just found out from the one-time peek we got into the inner-workings of the Federal Reserve. This is the Wall Street equivalent of the Pentagon Papers.

I’ve written many reports detailing the crimes of Wall Street during this crisis. The level of fraud, from top to bottom, has been staggering. The lack of accountability and the complete disregard for the rule of law have made me and many of my colleagues extremely cynical and jaded when it comes to new evidence to pile on top of the mountain that we have already gathered. But we must not let our cynicism cloud our vision on the details within this new information.

Just when I thought the banksters couldn’t possibly shock me anymore… they did.

We were finally granted the honor and privilege of finding out the specifics, a limited one-time Federal Reserve view, of a secret taxpayer funded “backdoor bailout” by a small group of unelected bankers. This data release reveals “emergency lending programs” that doled out $12.3 TRILLION in taxpayer money - $3.3 trillion in liquidity, $9 trillion in “other financial arrangements.”

Wait, what? Did you say $12.3 TRILLION tax dollars were thrown around in secrecy by unelected bankers… and Congress didn’t know any of the details?

Yes. The Founding Fathers are rolling over in their graves. The original copy of the Constitution spontaneously burst into flames. The ghost of Tom Paine went running, stark raving mad screaming through the halls of Congress.

The Federal Reserve was secretly throwing around our money in unprecedented fashion, and it wasn’t just to the usual suspects like Goldman Sachs, JP Morgan, Citigroup, Bank of America, etc.; it was to the entire Global Banking Cartel. To central banks throughout the world: Australia, Denmark, Japan, Mexico, Norway, South Korea, Sweden, Switzerland, England… To the Fed’s foreign primary dealers like Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), BNP Paribas (France)… All their Ponzi players were “gifted.” All the Racketeer Influenced and Corrupt Organizations got their cut.

Talk about the ransacking and burning of Rome! Sayonara American middle class…

If you still had any question as to whether or not the United States is now the world’s preeminent banana republic, the final verdict was just delivered and the decision was unanimous. The ayes have it.

Any fairytale notions that we are living in a nation built on the rule of law and of the global economy being based on free market principles has now been exposed as just that, a fairytale. This moment is equivalent to everyone in Vatican City being told, by the Pope, that God is dead.

I’ve been arguing for years that the market is rigged and that the major Wall Street firms are elaborate Ponzi schemes, as have many other people who built their beliefs on rational thought, reasoned logic and evidence. We already came to this conclusion by doing the research and connecting the dots. But now, even our strongest skeptics and the most ardent Wall Street supporters have it all laid out in front of them, on FEDERAL RESERVE SPREADSHEETS.

Even the Financial Times, which named Lloyd Blankfein its 2009 person of the year, reacted by reporting this: “The initial reactions were shock at the breadth of lending, particularly to foreign firms. But the details paint a bleaker and even more disturbing picture.”

Yes, the emperor doesn’t have any clothes. God is, indeed, dead. But, for the moment at least, the illusion continues to hold power. How is this possible?

To start with, as always, the US television “news” media (propaganda) networks just glossed over the whole thing - nothing to see here, just move along, back after a message from our sponsors… Other than that obvious reason, I’ve come to the realization that the Federal Reserve’s crimes are so big, so huge in scale, it is very hard for people to even wrap their head around it and comprehend what has happened here.

Think about it. In just this one peek we got at its operations, we learned that the Fed doled out $12.3 trillion in near-zero interest loans, without Congressional input.

The audacity and absurdity of it all is mind boggling…

Based on many conversations I’ve had with people, it seems that the average person doesn’t comprehend how much a trillion dollars is, let alone 12.3 trillion. You might as well just say 12.3 gazillion, because people don’t grasp a number that large, nor do they understand what would be possible if that money was used in other ways.

Can you imagine what we could do to restructure society with $12.3 trillion? Think about that…

People also can’t grasp the colossal crime committed because they keep hearing the word “loans.” People think of the loans they get. You borrow money, you pay it back with interest, no big deal.

That’s not what happened here. The Fed doled out $12.3 trillion in near-zero interest loans, using the American people as collateral, demanding nothing in return, other than a bunch of toxic assets in some cases.

They only gave this money to a select group of insiders, at a time when very few had any money because all these same insiders and speculators crashed the system.

Do you get that? The very people most responsible for crashing the system, were then rewarded with trillions of our dollars. This gave that select group of insiders unlimited power to seize control of assets and have unprecedented leverage over almost everything within their economies - crony capitalism on steroids.

This was a hostile world takeover orchestrated through economic attacks by a very small group of unelected global bankers. They paralyzed the system, then were given the power to recreate it according to their own desires. No free market, no democracy of any kind. All done in secrecy. In the process, they gave themselves all-time record-breaking bonuses and impoverished tens of millions of people - they have put into motion a system that will inevitably collapse again and utterly destroy the very existence of what is left of an economic middle class.

That is not hyperbole. That is what happened.

We are talking about trillions of dollars secretly pumped into global banks, handpicked by a small select group of bankers themselves. All for the benefit of those bankers, and at the expense of everyone else. People can’t even comprehend what that means and the severe consequences that it entails, which we have only just begun to experience.

Let me sum it up for you: The American Dream is O-V-E-R.

Welcome to the neo-feudal-fascist state.

People throughout the world who keep using the dollar are either A) Part of the scam; B) Oblivious to reality; C) Believe that US military power will be able to maintain the value of an otherwise worthless currency; D) All of the above.

No matter which way you look at it, we are all in serious trouble!

If you are an elected official, (I know at least 17 of you subscribe to my newsletter) and you believe in the oath you took upon taking office, you must immediately demand a full audit of the Federal Reserve and have Ben Bernanke and the entire Federal Reserve Board detained. If you are not going to do that, you deserve to have the words “Irrelevant Puppet” tattooed across your forehead.

Yes, those are obviously strong words, but they are the truth.

The Global Banking Cartel has now been so blatantly exposed, you cannot possibly get away with pretending that we live in a nation of law based on the Constitution. The jig is up.

It’s been over two years now; does anyone still seriously not understand why we are in this crisis? Our economy has been looted and burnt to the ground due to the strategic, deliberate decisions made by a small group of unelected global bankers at the Federal Reserve. Do people really not get the connection here? I mean, H.E.L.L.O. Our country is run by an unelected Global Banking Cartel.

I am constantly haunted by a quote from Harry Overstreet, who wrote the following in his 1925 groundbreaking study Influencing Human Behavior: “Giving people the facts as a strategy of influence” has been a failure, “an enterprise fraught with a surprising amount of disappointment.”

This crisis overwhelmingly proves Overstreet’s thesis to be true. Nonetheless, we solider on…

Here’s a roundup of reports on this BernankeLeaks:

Prepare to enter the theater of the absurd…

I’ll start with Senator Bernie Sanders (I-Vermont). He was the senator who Bernanke blew off when he was asked for information on this heist during a congressional hearing. Sanders fought to get the amendment written into the financial “reform” bill that gave us this one-time peek into the Fed’s secret operations. (Remember, remember the 6th of May, HFT, flash crash and terrorism. “Hey, David, Homeland Security is on the phone! They want to ask you questions about some NYSE SLP program.”)

In an article entitled, “A Real Jaw-Dropper at the Federal Reserve,” Senator Sanders reveals some of the details:

At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later… we have begun to lift the veil of secrecy at the Fed…

After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multi-trillion-dollar bailout of Wall Street and corporate America….

We have learned that the $700 billion Wall Street bailout… turned out to be pocket change compared to the trillions and trillions of dollars in near-zero interest loans and other financial arrangements the Federal Reserve doled out to every major financial institution in this country.…

Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks — Deutsche Bank and Credit Suisse — which were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities….

Has the Federal Reserve of the United States become the central bank of the world?… [read Global Banking Cartel]

What this disclosure tells us, among many other things, is that despite this huge taxpayer bailout, the Fed did not make the appropriate demands on these institutions necessary to rebuild our economy and protect the needs of ordinary Americans….

What we are seeing is the incredible power of a small number of people who have incredible conflicts of interest getting incredible help from the taxpayers of this country while ignoring the needs of the people. [read more]

In an article entitled, “The Fed Lied About Wall Street,” Zach Carter sums it up this way:

The Federal Reserve audit is full of frightening revelations about U.S. economic policy and those who implement it… By denying the solvency crisis, major bank executives who had run their companies into the ground were allowed to keep their jobs, and shareholders who had placed bad bets on their firms were allowed to collect government largesse, as bloated bonuses began paying out soon after.

But the banks themselves still faced a capital shortage, and were only kept above those critical capital thresholds because federal regulators were willing to look the other way, letting banks account for obvious losses as if they were profitable assets.

So based on the Fed audit data, it’s hard to conclude that Fed Chairman Ben Bernanke was telling the truth when he told Congress on March 3, 2009, that there were no zombie banks in the United States.

“I don’t think that any major U.S. bank is currently a zombie institution,” Bernanke said.

As Bernanke spoke those words banks had been pledging junk bonds as collateral under Fed facilities for several months…

This is the heart of today’s foreclosure fraud crisis. Banks are foreclosing on untold numbers of families who have never missed a payment, because rushing to foreclosure generates lucrative fees for the banks, whatever the costs to families and investors. This is, in fact, far worse than what Paul Krugman predicted. Not only are zombie banks failing to support the economy, they are actively sabotaging it with fraud in order to make up for their capital shortages. Meanwhile, regulators are aggressively looking the other way.

The Fed had to fix liquidity in 2008. That was its job. But as major banks went insolvent, the Fed and Treasury had a responsibility to fix that solvency issue—even though that meant requiring shareholders and executives to live up to losses. Instead, as the Fed audit tells us, policymakers knowingly ignored the real problem, pushing losses onto the American middle class in the process.” [read more]

Even the Financial Times is jumping ship:

Sunlight Shows Cracks in Fed’s Rescue Story

It took two years, a hard-fought lawsuit, and an act of Congress, but finally… the Federal Reserve disclosed the details of its financial crisis lending programs. The initial reactions were shock at the breadth of lending, particularly to foreign firms. But the details paint a bleaker, earlier, and even more disturbing picture…. An even more troubling conclusion from the data is that… it is now apparent that the Fed took on far more risk, on less favorable terms, than most people have realized. [read more]

In true Fed fashion, they didn’t even fully comply with Congress. In a report entitled, “Fed Withholds Collateral Data for $885 Billion in Financial-Crisis Loans,” Bloomberg puts some icing on the cake:

For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.

“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.” [read more]