Report: Half of All Homes Are Being Purchased With Cash

More than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group.

The analysis estimates that around 20% of all homes sold before the housing crash were “all-cash” sales (or around 30% of sales by dollar volume). But over the past seven years, the all-cash share of sales has more than doubled, increasing by more than 30 percentage points, according to economists Hui Shan, Marty Young and Charlie Himmelberg.

The Goldman study analyzed home sales figures from the Census Bureau and the National Association of Realtors and mortgage-origination data from the Mortgage Bankers Association and Lender Processing Services.

The surprisingly large cash-share of purchases helps to explain why home sales have jumped over the past two years despite more muted increases in broad measures of new mortgage activity, such as the MBA’s mortgage application index.

There’s no exact way to know who is responsible for all of these cash purchases, though they are likely to include some combination of investors, foreign buyers, and wealthy homeowners that don’t want to go through the hassle of getting a mortgage before closing on a sale. Mortgage lending standards have sharply tightened up since the housing bubble, with banks scrutinizing borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment. Read more >>

Taxpayers Give Big Banks $83 Billion a Year

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase & Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Read more >>

Secret and Lies of the Bailout

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come

Matt Taibbi


It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we've been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. "It is," says former bailout Inspector General Neil Barofsky, "the ultimate bait-and-switch."

The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it. Read more >>

For sale: U.S. highways and bridges

The nation's roads are up for sale. But who should have control over them?

State and local governments are in desperate need of cash for all manner of road, building and bridge repair, and are increasingly turning to private money for funding.

But the involvement of private investors is raising concerns over how much control the public may lose over its roadways. Companies putting up the money include construction and engineering firms like Bechtel and Samsung, and big banks like Goldman Sachs and Merrill Lynch that aim to attract money from pension funds and insurance companies.

In exchange for the funding, the firms are getting an ownership stake in the projects. That means they'll get a cut of the tolls, and also be responsible for the maintenance. The arrangement has some people nervous. There is a fear that governments are losing some control of the roadways. If the maintenance doesn't get done, what recourse do they have to force the private firms to act? Read more >>

Warren Buffett is one of America’s biggest bailout beneficiaries

Warren Buffett is one of America’s biggest bailout beneficiaries, having profited hugely from buying into firms whose assets were subsequently bailed out. Shortly after the crisis began in 2008, Warren Buffett loaned money to, and bought options from, Goldman Sachs, seemingly with the knowledge the bailout of AIG — a counterparty to which Goldman had massive, massive exposure — would take place.

Dimon as Treasury Secretary would intend more of the same. Dimon and Buffett and others like them believe in having their cake and eating it. They seem to believe that the U.S. taxpayer should provide a liquidity lifeline to their fragile and risky too-big-to-fail businesses, but without at the same time demanding any regulatory oversight to prevent too-big-to-fail banks from acting irresponsibly. Read more >>

Consumer Spending Stalls, Morale at 6-Month Low

Reuters
Consumer spending growth ground to a halt in May as auto purchases flagged, while confidence ebbed to a six-month low in June, the latest signs of trouble for the economy. Although manufacturing activity in the Midwest picked up this month, it offered little cheer for an economic recovery that has been hit by turbulence from the debt crisis in Europe and a lack of clarity on the course of fiscal policy at home.

"We are at a stall speed expansion here," said Tim Quinlan, an economist at Wells Fargo in Charlotte, North Carolina. "We have a consumer who is sort of losing steam."

Accidentally Released Documents Show How Goldman Engaged in 'Naked Short Selling'

It doesn't happen often, but sometimes God smiles on us. Last week he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank's darker secrets into the hands of the public.

The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time -- primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.

Last week, in response to an Overstock.com motion to unseal certain documents, the banks' lawyers, apparently accidentally, filed an unredacted version of Overstock's motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they've been fighting for years to keep sealed. More...

JP Morgan's $2 Billion Loss Just A Preview of Coming Derivatives Collapse

When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned.  But the truth is that this is just the beginning.  This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market.

Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic. According to the Comptroller of the Currency, the "too big to fail" banks have exposure to derivatives that is absolutely mind blowing.

Just check out the following numbers from an official U.S. government report:


JPMorgan Chase - $70.1 Trillion
Citibank - $52.1 Trillion
Bank of America - $50.1 Trillion
Goldman Sachs - $44.2 Trillion

So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars. Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy. More...

Dismal year-to-date performance of some of the major global banking stocks

Here's a little overview of the year-to-date performance of some of the major global banking stocks on December 29, 2011, before the opening bell:

BofA: -60.38%
Citi: -44.76%
Goldman Sachs: -46.41%
JPMorgan: -23.03%
Morgan Stanley: -45.24%
RBS: -50%
Barclays: -34.32%
Lloyds: -63.02%
UBS: -29.33%
Deutsche Bank: -28,55%
Crédit Agricole: -56.04%
BNP Paribas: -37.67%
Société Générale: -59.57%

These are just some of the Too Big To Fail institutions. And while your governments have enough faith in them - or so they want you to believe - to prop them up with trillions of dollars of your money, investors are fleeing them, even if they can expect them to be propped up further.

That doesn't just say something about confidence in the individual banks, it shouts loud and clear from the rooftops on confidence in the banking system as a whole, and indeed on governments' ability to continue bailing them out. In other words: bailouts don’t build confidence, they are taken as a sign that trouble's on the way. More...

"Gold Set To Rally" - Goldman Expects Gold To Promptly Rise To $1,480

As we are experiencing a furious regime change, the sellside positional updates are coming fast and furious. The latest major recommendation change comes again from Goldman which has just reiterated its belief gold will reach its 3 month target of $1,480 shortly. Of course, after a Cramer recommendation to buy the metal, this is the only call for a higher gold price that should be of great concern to everyone. From Goldman: "We expect gold prices to rally toward our 3-month price target of $1480/toz, and continue to recommend a long gold trade. More...

Silver Breaks Out From Price Manipulation, The Gains Will be Breath Taking

Jim_Willie_CB

Diamond Rated - Best Financial Markets Analysis ArticleA love affair with silver is so natural. The fundamentals are astoundingly positive and bullish in price prospects. My basic argument has been repeated many times. Industry has countless uses for silver, significant demand. But industry has only miniscule isolated uses for gold, in trivial demand. So silver wins on the Demand side of the equation. Central banks own a huge amount of gold. They frequently sell it, even through their slippery surrogate the Intl Monetary Fund. Central banks own zero silver. So silver wins on the Supply side of the equation.

My motto is that gold fights the major political and financial war, but silver will ride in on a shiny white horse and take much larger spoils. That effect has already begun. Since the significant game changing FOMC meeting on September 21st, where the telegraph message delivered to the world financial markets was made by megaphone, the impact has been clear and stark. Compared to closing prices on September 21st versus October 29th, just five weeks, the silver price had risen from $20.64 to $24.56, up 19.0%. During the same timespan, the gold price had risen from $1274.30 to $1357.60, up 6.5%. My claim, a loose forecast often repeated, has been that the silver breakout gains would be at least double and possible triple the gold gains. We have seen exactly that in recent weeks.

An extremely fuzzy factor is the CFTC attention. The Commodity Futures Trading Commission is supposedly investigating the Big Four Banks for gigantic concentrated short positions in the silver market, for naked shorting of silver, and for collusion with other banks. Commissioner Bart Chilton has made a lot of noise, but has done next to nothing. Some find encouragement, an absurd notion in my view. Let me know when court injunctions are slapped at JPMorgan. Several class action lawsuits against JPMorgan have begun, also encouraging, but unclear on substance. They crop up every couple weeks, the latest citing a RICO aspect. Let me know when the full force of the USGovt regulatory bodies order JPMorgan, Goldman Sachs, Citigroup, and Bank of America to liquidate even 10-20% of their short positions. Unless and until such action occurs, the CFTC chirping is just that, noise from the managerie of obedient pets who work on short leashes at the behest of bankers. Mail room clerks do not give orders or make demands to the executive suites, not now, not ever. The regulatory chiefs are mere squires to the bankers, and will follow orders, not give them. By the way, the Big Four positions are naked short positions in all likelihood.

They are immune from posting collateral, as required by the metals exchanges. So they routinely sell a stack of silver whenever the price moves have been made, like in the wee hours this Wednesday and very early at the New York open. Good Morning New York resulted in almost a full $1.00 drop in the silver price, undoubtedly another naked short raid before the QE decision by the US Federal Reserve and its statement. The full impact of the ambush decline was reversed by afternoon. Right before important events deemed negative nasty to the USDollar, the Big Four go wild with naked shorts, called ambushes. The evidence, the trails, the fingerprints are easily seen except by blind men, official gold industry wonks, and USGovt regulators. More...

Watching Wal-Mart at Midnight

Image via Wikipedia

blogs.wsj.com

This comment from Wal-Mart Stores Inc. has been making the rounds on blogs and newswires the past few days. It says it all about the state of the tepid U.S. recovery. The Journal’s Al Lewis wrote about it yesterday.

Bill Simon, CEO of Wal-Mart’s U.S. business, at a Goldman Sachs conference last week, on behavior at a Walmart store around midnight at the end of a month:

“The paycheck cycle we’ve talked about before remains extreme. It is our responsibility to figure out how to sell in that environment, adjusting pack sizes, large pack at sizes the beginning of the month, small pack sizes at the end of the month. And to figure out how to deal with what is an ever-increasing amount of transactions being paid for with government assistance.

“And you need not go further than one of our stores on midnight at the end of the month. And it’s real interesting to watch, about 11 p.m., customers start to come in and shop, fill their grocery basket with basic items, baby formula, milk, bread, eggs,and continue to shop and mill about the store until midnight, when electronic — government electronic benefits cards get activated and then the checkout starts and occurs. And our sales for those first few hours on the first of the month are substantially and significantly higher.

“And if you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it, and they’ve been waiting for it. Otherwise, we are open 24 hours — come at 5 a.m., come at 7 a.m., come at 10 a.m. But if you are there at midnight, you are there for a reason.”

Tony Hayward, Goldman Sachs, Wachovia, Wells Fargo, UBS, all dumped BP stock before well blowout

Image by Getty Images via @daylife

Excerpted from Darren Weeks, newswithviews
We now know from John Byrne at Raw Story that prior to the Gulf oil mess, not only did Goldman Sachs short shares of TransOcean, the owner of the failed Deepwater Horizon rig, they also ditched 4,680,822 shares of BP stock, worth $250 million and representing 44% of their holdings. “Goldman’s sales were the largest of any firm during that time,” writes Byrne. “Goldman would have pocketed slightly more than $266 million if their holdings were sold at the average price of BP’s stock during the quarter.”

Byrne also noted other financial institutions that also dumped BP holdings.

“Other asset management firms also sold huge blocks of BP stock in the first quarter — but their sales were a fraction of Goldman’s. Wachovia, which is owned by Wells Fargo, sold 2,667,419 shares; UBS, the Swiss bank, sold 2,125,566 shares.”

If that weren’t enough of a “coincidence,” we also had The Telegraph out of London reporting that the chief executive of BP, Tony Hayward, also sold 223,288 shares, worth £1.4 million of stock in his own company (over $2 million) on March 17th — only weeks before the BP Gulf mess. The paper noted that by doing so he “avoided losing more than £423,000 ($614,449) when BP’s share price plunged after the oil spill began six weeks ago.”[13] He took the money and paid off the mortgage on his family mansion in Kent.

At this point, a question should be coming to mind: What did these people know that the rest of us didn’t? How is it that stock in BP and Transocean suddenly seemed so unattractive to those closest to the disaster? Ah, the coincidences! But it gets even better.

On April 10th, The Houston Chronicle reported that Halliburton — the company of which former Vice-President Dick Cheney was CEO — was in the process of acquiring Boots & Coots. Reuters reported that the deal was announced on Friday, April 9th — just eleven days prior to the explosion.[14] The Chronicle noted that “Boots & Coots has become well known for putting out some of the world’s largest oil and gas fires.”[15] The company’s website lists services they provide, including “deepwater application and well inspections, as well as blowout prevention and control counsel or assistance…”[16] According to the Orlando Sentinel, their expertise is already being put to use in the Gulf, as they are “one of two primary companies designing relief-well strategies for the BP blowout.”

So when the acquisition deal is formerly approved by the government, Halliburton — the company famous for profiting from no-bid government contracts in war zones — will have collected for themselves yet another “slick” profit.

This is especially intriguing in light of the fact that, according to NPR, Halliburton’s cementing work — completed only hours prior to the explosion — has become a “central focus” of the Congressional investigation.[18] The Wall Street Journal quotes unnamed “experts” as saying the timing of the cementing in relation to the blast “points to it as a possible culprit.”

But Halliburton isn’t the only company that stands to make a killing off the crisis. The Times Online out of the UK reported that TransOcean itself took out a $560 million insurance policy on the Deepwater Horizon rig. The dollar amount was well above the rig’s value. According to the paper, insurance payouts amounted to a $270 million profit from the disaster.

“The windfall, revealed in a conference call with analysts, will more than cover the $200m that Transocean expects to pay to survivors and their families and for higher insurance costs.”

A number of people have questioned why Corexit — a chemical banned in the UK[21] and is much more toxic than the oil itself — was used as a dispersant in the Gulf. Assuming for the moment that chemical dispersants had to be used, the New York Times reported on May 13th:

“Of 18 dispersants whose use EPA has approved, 12 were found to be more effective on southern Louisiana crude than Corexit, EPA data show. Two of the 12 were found to be 100 percent effective on Gulf of Mexico crude, while the two Corexit products rated 56 percent and 63 percent effective, respectively. The toxicity of the 12 was shown to be either comparable to the Corexit line or, in some cases, 10 or 20 times less, according to EPA.”

Yet, despite the EPA data ranking it “far above dispersants made by competitors” for toxicity, BP chose to dump more than 400,000 gallons of Corexit into the Gulf, order 805,000 more gallons with plans of hundreds of thousands of additional gallons should the spewing continue. Why? More...

"Banging" the U.S. Stock Market

Janet Tavakoli
Chicago residents grew up to the sound of local early morning radio rundowns of pork belly futures and other exchange traded commodities. Every trick in the book from manipulation of soybeans to silver has played out in Chicago's trading pits. Every market professional I've talked to in Chicago since Thursday is of the same opinion. It makes no difference whether human beings or computers are front running and manipulating trades. The gyrations in the market last week have the look and feel of classic market manipulation.

If you want to manipulate a market, deregulate it as much as possible. Then make it as "dark," and fast as possible. Make it hard for outsiders to view your trades as they get done, and make it even harder for anyone to figure out why you are trading. Get as much monopoly power as possible over the market. Get funding at the cheapest possible rate. The best possible rate is the near zero cost funding available from the Federal Reserve.

Next, get your "men" stationed in the most influential positions at the exchanges. Make sure your cronies have shock and awe market dominance through, say, High Frequency Trading algorithms that now make up the majority of stock trades.

Then, make sure you have advance information of major market-moving events. A bailout announcement by the European Union would do nicely. A few days before the announcement, "bang" the market. Pound down the value so you can monetize put options and other bearish instruments. Trigger customers' stop-loss orders, and pick up bargains at their expense. Then cash-in again when the market pops up on bailout news.

To paraphrase Paul Erdman's 1975 tongue-in-cheek observation: "The lack of discretion in financial and political circles these days is appalling."

Meanwhile, take the heat off of yourself by leaking "fat finger" rumors to CNBC, since they can be relied up on to repeat as gospel any self-serving news you throw at them. Did someone type billions? It should have been millions. If we want to rescue the market from the Jaws of future disasters, we have to recognize that "this was no boating (or typing) accident." The system itself is flawed.

(See also: "How to Corner the Gold Market," TSF, March 30, 2010)

The NYSE was supposed to provide market liquidity. Trading safeguards are no good unless they are system-wide. The current and former heads of the NYSE, billed as the "best and the brightest," i.e., the most connected, should be asked a few questions about High Frequency Trading and "liquidity" providers. Our mega-bank trading desks that control most of the volume on the exchanges should be called in for an accounting and justification of their trading activities. Trading patterns during last week's debacle and over the last year should be examined.

Unfortunately, as others have observed before, the SEC is both largely incompetent and captured. They are learning to crawl in the space age. Moreover, the next stop for SEC officials seems to always be a highly paid influential job at a law firm, fund, or other entity that heavily relies on Wall Street for revenues. Financial reform requires radical overhaul of our "regulators."

As for Wall Street mega-bank reform, Congress seems disinclined to break up our Too-Big-To-Fail banks, define proprietary trading, or sever Goldman Sachs, Morgan Stanley, and proprietary trading at large banks from the Federal Reserve's, i.e., taxpayers' heavy subsidies. (See also: "Goldman Sachs: Spinning Gold," Huffington Post, April 7, 2010.)

If everyone wants to stick to the story of "woe is us, we had no idea things could go this wrong," then fine. No one is in control; no one is in charge; and no one can competently regulate our current system. This is a compelling argument for immediate radical financial reform.

The Business of America Is Kleptocracy

Tomgram: William Astore, The Business of America Is Kleptocracy

It’s hard to miss these days. The headlines tell the story -- repetitively. Everyone, it seems, is on the take. The Securities and Exchange Commission has charged Goldman Sachs with securities fraud for creating and selling “a mortgage investment that was secretly intended to fail” -- and then betting against its own customers. JPMorgan Chase which, in a pinch in 2008, happily took taxpayer dough, just reported $3.3 billion in profits for the first quarter of 2010, a jump of 55% over the previous quarter. The bank set aside $9.3 billion in what’s called “compensation and benefits” for its employees in 2009.

Even when they lose, they win. According to James Kwak of the Baseline Scenario website, on a deal in which JPMorgan swallowed $880 million in losses, its bankers still managed to walk away with up to $10 million in compensation. As he wrote, “JPMorgan’s bankers did just fine, despite having placed a ticking time bomb on their own bank’s balance sheet.” Meanwhile, Robert Rubin, who helped create the world that led to the 2008 financial meltdown as Treasury Secretary under Bill Clinton, then took a top position at Citibank and made more than $100 million before it tanked on his watch. As economist Dean Baker puts it, “In the fall of 2008, when Citigroup was saved from bankruptcy with a taxpayer bailout, Rubin quietly slipped out the back door (with his money), resigning from his position at Citigroup.” Only recently Rubin made the headlines for offering the least apologetic (non-)apology imaginable for taking the American people to the cleaners.

And when it comes to taking, according to Eric Lichtblau of the New York Times, “more than 125 former Congressional aides and lawmakers are now working for financial firms as part of a multibillion-dollar effort to shape, and often scale back, federal regulatory power.” In other words, the regulators and their aides legislate the rules and then simply step through that infamous revolving door and pick up a handsome check on the other side. There are, in fact, at least 11,000 well-employed registered lobbyists in Washington today. A $3.4 billion “industry” in 2009, lobbying is definitely a field to get into, even in bad times, and according to the Christian Science Monitor, “when the cost of grass-roots efforts and of strategic advisers are all counted, total spending on influencing policy in Washington approaches $9.6 billion a year.”

As for the money flowing into politics from corporate deep pockets, 2008 not only saw the first billion-dollar presidential campaign, but at $1.7 billion, more than doubled the 2004 campaign’s costs, and no one expects 2012 to be anything but more expensive. All this is, of course, known to anyone who glances at the front page of a daily newspaper, but what exactly do we make of it all? What does it add up to? William Astore, historian and TomDispatch regular, has a suggestion, but before you start his piece, you might want to close your purse or button that back pocket with your wallet in it. Otherwise, they could be picked bare by the time you’re done. Tom

American Kleptocracy
How Fears of Socialism and Fascism Hide Naked Theft
By William J. Astore

Kleptocracy -- now, there’s a word I was taught to associate with corrupt and exploitative governments that steal ruthlessly and relentlessly from the people. It’s a word, in fact, that’s usually applied to flawed or failed governments in Africa, Latin America, or the nether regions of Asia. Such governments are typically led by autocratic strong men who shower themselves and their cronies with all the fruits of extracted wealth, whether stolen from the people or squeezed from their country’s natural resources. It’s not a word you’re likely to see associated with a mature republic like the United States led by disinterested public servants and regulated by more-or-less transparent principles and processes.

In fact, when Americans today wish to critique or condemn their government, the typical epithets used are “socialism” or “fascism.” When my conservative friends are upset, they send me emails with links to material about “ObamaCare” and the like. These generally warn of a future socialist takeover of the private realm by an intrusive, power-hungry government. When my progressive friends are upset, they send me emails with links pointing to an incipient fascist takeover of our public and private realms, led by that same intrusive, power-hungry government (and, I admit it, I’m hardly innocent when it comes to such “what if” scenarios).

What if, however, instead of looking at where our government might be headed, we took a closer look at where we are -- at the power-brokers who run or influence our government, at those who are profiting and prospering from it? These are, after all, the “winners” in our American world in terms of the power they wield and the wealth they acquire. And shouldn’t we be looking as well at those Americans who are losing -- their jobs, their money, their homes, their healthcare, their access to a better way of life -- and asking why?

If we were to take an honest look at America’s blasted landscape of “losers” and the far shinier, spiffier world of “winners,” we’d have to admit that it wasn’t signs of onrushing socialism or fascism that stood out, but of staggeringly self-aggrandizing greed and theft right in the here and now. We’d notice our public coffers being emptied to benefit major corporations and financial institutions working in close alliance with, and passing on remarkable sums of money to, the representatives of “the people.” We’d see, in a word, kleptocracy on a scale to dazzle. We would suddenly see an almost magical disappearing act being performed, largely without comment, right before our eyes.

Of Red Herrings and Missing Pallets of Money

Think of socialism and fascism as the red herrings of this moment or, if you’re an old time movie fan, as Hitchcockian MacGuffins -- in other words, riveting distractions. Conservatives and tea partiers fear invasive government regulation and excessive taxation, while railing against government takeovers -- even as corporate lobbyists write our public healthcare bills to favor private interests. Similarly, progressives rail against an emergent proto-fascist corps of private guns-for-hire, warrantless wiretapping, and the potential government-approved assassination of U.S. citizens, all sanctioned by a perpetual, and apparently open-ended, state of war.

Yet, if this is socialism, why are private health insurers the government’s go-to guys for healthcare coverage? If this is fascism, why haven’t the secret police rounded up tea partiers and progressive critics as well and sent them to the lager or the gulag?

Consider this: America is not now, nor has it often been, a hotbed of political radicalism. We have no substantial socialist or workers’ party. (Unless you’re deluded, please don’t count the corporate-friendly “Democrat” party here.) We have no substantial fascist party. (Unless you’re deluded, please don’t count the cartoonish “tea partiers” here; these predominantly white, graying, and fairly affluent Americans seem most worried that the jackbooted thugs will be coming for them.)

What drives America today is, in fact, business -- just as was true in the days of Calvin Coolidge. But it’s not the fair-minded “free enterprise” system touted in those freshly revised Texas guidelines for American history textbooks; rather, it’s a rigged system of crony capitalism that increasingly ends in what, if we were looking at some other country, we would recognize as an unabashed kleptocracy.

Recall, if you care to, those pallets stacked with hundreds of millions of dollars that the Bush administration sent to Iraq and which, Houdini-like, simply disappeared. Think of the ever-rising cost of our wars in Iraq and Afghanistan, now in excess of a trillion dollars, and just whose pockets are full, thanks to them.

If you want to know the true state of our government and where it’s heading, follow the money (if you can) and remain vigilant: our kleptocratic Houdinis are hard at work, seeking to make yet more money vanish from your pockets -- and reappear in theirs.

From Each According to His Gullibility -- To Each According to His Greed

Never has the old adage my father used to repeat to me -- “the rich get richer and the poor poorer” -- seemed fresher or truer. If you want confirmation of just where we are today, for instance, consider this passage from a recent piece by Tony Judt:

In 2005, 21.2 percent of U.S. national income accrued to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founder’s family in 2005 was estimated at about the same ($90 billion) as that of the bottom 40 percent of the U.S. population: 120 million people.

Wealth concentration is only one aspect of our increasingly kleptocratic system. War profiteering by corporations (however well disguised as heartfelt support for our heroic warfighters) is another. Meanwhile, retired senior military officers typically line up to cash in on the kleptocratic equivalent of welfare, peddling their “expertise” in return for impressive corporate and Pentagon payouts that supplement their six-figure pensions. Even that putative champion of the Carhartt-wearing common folk, Sarah Palin, pocketed a cool $12 million last year without putting the slightest dent in her populist bona fides.

Based on such stories, now legion, perhaps we should rewrite George Orwell’s famous tagline from Animal Farm as: All animals are equal, but a few are so much more equal than others.

And who are those “more equal” citizens? Certainly, major corporations, which now enjoy a kind of political citizenship and the largesse of a federal government eager to rescue them from their financial mistakes, especially when they’re judged “too big to fail.” In raiding the U.S. Treasury, big banks and investment firms, shamelessly ready to jack up executive pay and bonuses even after accepting billions in taxpayer-funded bailouts, arguably outgun militarized multinationals in the conquest of the public realm and the extraction of our wealth for their benefit.

Such kleptocratic outfits are, of course, abetted by thousands of lobbyists and by politicians who thrive off corporate campaign contributions. Indeed, many of our more prominent public servants have proved expert at spinning through the revolving door into the private sector. Even ex-politicians who prefer to be seen as sympathetic to the little guy like former House Majority Leader Dick Gephardt eagerly cash in.

I’m Shocked, Shocked, to Find Profiteering Going on Here

An old Roman maxim enjoins us to “let justice be done, though the heavens fall.” Within our kleptocracy, the prevailing attitude is an insouciant “We’ll get ours, though the heavens fall.” This mindset marks the decline of our polity. A spirit of shared sacrifice, dismissed as hopelessly naïve, has been replaced by a form of tribalized privatization in which insiders find ways to profit no matter what.

Is it any surprise then that, in seeking to export our form of government to Iraq and Afghanistan, we’ve produced not two model democracies, but two emerging kleptocracies, fueled respectively by oil and opium?

When we confront corruption in Iraq or Afghanistan, are we not like the police chief in the classic movie Casablanca who is shocked, shocked to find gambling going on at Rick’s Café, even as he accepts his winnings?

Why then do we bother to feign shock when Iraqi and Afghan elites, a tiny minority, seek to enrich themselves at the expense of the majority?

Shouldn’t we be flattered? Imitation, after all, is the sincerest form of flattery. Isn’t it?

William J. Astore is a TomDispatch regular; he teaches History at the Pennsylvania College of Technology and served in the Air Force for 20 years, retiring as a lieutenant colonel. He may be reached at wjastore@gmail.com.

"I personally believe that some people at Goldman Sachs may end up joining me in hell"

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Did a Clever SEC Bait Goldman Sachs Into Compounding Its Legal Problems?
Sam E. Antar

The Kiss of Death

In filing its lawsuit against Goldman Sachs on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had gone packing for the weekend.

When a company or individual receives a surprise subpoena on a Friday from the SEC, it is usually designed to ruin their weekend plans. Yes, the SEC can get personal in its own way.

Usually, corporate lawyers are unavailable on short notice to work weekends. When a company or individual receives a subpoena or lawsuit on a Friday, they are left to stew in anxiety over the weekend until Monday, before their lawyers can appropriately advise them on how to respond to the SEC.

Back in the day as the criminal CFO of Crazy Eddie, I received a surprise subpoena from the SEC late Friday afternoon. I had to wait until Monday before my attorneys had time to advise me on a course of action.

The "kiss of death" message is deliberately sent on Fridays to chill the bones of criminals. Some criminals wait in anxiety during the weekend until Monday to consult with their attorneys about what to do next. Other criminals or SEC targets like Goldman Sachs don't want to wait until Monday. So they make rash decisions and major errors in prematurely reacting to the "kiss of death" message to their own peril and find themselves in legal quicksand.

Goldman Sachs chose not to wait until Monday and fully digest the implications of the SEC complaint. After a relatively short consultation with its attorneys, the company hastily issued a detailed press release later Friday afternoon that I believe will land it into deeper potential trouble. Before I discuss that issue, it's worth noting who the SEC selected to be its lead counsel in the lawsuit against Goldman Sachs.

SEC Lead Litigation Counsel: Richard E. Simpson the "Pit bull"

The SEC chose top gun Richard E. Simpson as its lead counsel in its lawsuit against Goldman Sachs and Fabrice Tourre. Coincidently, Richard E. Simpson was the same lead counsel for the SEC in its successful case against Crazy Eddie and the Antar family.

Simpson is a twenty year veteran at the SEC Enforcement Division. He could have easily made much more money in the private sector, but instead stayed at the SEC. As a former adversary who did battle against Simpson and later buckled under his pressure to cooperate with him, I found him to be very focused, knowledgeable about how criminals operate, and he knows how to bring them down.

In the Crazy Eddie days, Richard Simpson developed a reputation for turning pin stripe suits into orange prison jump suits.

Simpson's investigation of the Antar family led to the capture of fugitive Eddie Antar in Israel, later imprisonment of Eddie and his brother Mitchell, and the impoverishment of other family members. Simpson won civil cases against against Sam M. Antar, Eddie's father, and other family members who were not indicted in the criminal case.

Simpson's relentless pursuit of the Antars earned him the nickname "Pit bull" from U.S. Attorney Michael Chertoff's office, which prosecuted the Crazy criminal case. Over a fifteen year period Simpson was able to recover from the Antars more money than they made by selling Crazy Eddie stock to duped investors at inflated prices. The Antar family engaged in massive skimming before Crazy Eddie's became a public company and Simpson recovered a substantial amount of those funds from secret foreign bank accounts, safe deposit boxes, and even money hidden in Sam M. Antar's ceiling.

On June 22, 2004 Justin Feldman, former attorney for Eddie Antar, in an interview at the SEC Historical Society commented on SEC attorney Richard Simpson:

Rick Simpson. Tenacity, I'm telling you! When he wanted every dollar back we had to fight with him to get ten cents on the dollar on our fees.

After the SEC filed its complaint against Goldman Sachs and Fabrice Tourre, I was interviewed by Diane Tucker from the Huffington Post and was asked about Simpson. I told her:

Richard Simpson is a relentless litigator who brought the Antar clan to its knees.

Rick is a tough adversary. I swear he works over 90 hours a week. He's focused, aggressive, and understands the way criminals operate. He knows accounting backward and forward, which is rare for an attorney. Richard Simpson is what the SEC should be today, but unfortunately is not.

In addition, former FBI Special Agent Paul Hayes who led the criminal investigation of Crazy Eddie was interviewed by Diane Tucker. See below:

Former banker and retired FBI agent Paul D. Hayes told me on the phone he is impressed with Simpson. more...

The Big Short: Inside the Doomsday Machine

From a Vanity Fair Blip:
Michael Burry always saw the world differently—due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn’t surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry’s oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession. Read an excerpt here.

This interesting little tidbit from Scion Capital's website:

Thank you for visiting. Dr. Michael Burry has liquidated Scion Capital, LLC and is currently focusing on his private investments. Dr. Burry is not accepting outside investors. If you have an interest, Dr. Burry has made Scion Capital's earliest investor reports available.

____________________________________________

Further, Dr. Burry feels the financial crises originating in the United States and elsewhere were eminently predictable and preventable. The following timeline regarding developments at Fannie Mae and Freddie Mac is illustrative of why the crises were not prevented.

July 2003 (Scion Capital Quarterly Report to Investors): "Freddie Mac and Fannie Mae warrant special comment. Interestingly, Fannie Mae, when it was a much less significant force, was declared insolvent on a mark-to-market basis by the U.S. General Accounting Office back in 1981. As well, each of the two predecessors to the just- fired CEO of Freddie Mac left Freddie to run S&L’s that they subsequently ran into the ground during the 1980s. Yet the market reserved a muted reaction for Freddie Mac firing its top three executives last month over an accounting scandal and, with a straight face, blaming the mess on a lack of accounting expertise within the company.

After hearing from Fannie, Freddie and representatives of the President, U.S. Rep. Richard Baker, a longtime and vehement critic of these two companies, has elected to withhold any knockout punch. Fannie Mae’s CEO in particular lacked subtlety. Citing the company’s primary importance to the national housing market and relying on Fannie’s formidable political connections, he publicly dared the U.S. Congress to act. Not so much as one peep of indignation was heard in response. To the extent the national housing market is untouchable, we have evidence not of strength but of fragility."

October 2004 (Scion Capital Quarterly Report to Investors): "I recently watched Mr. Franklin Raines, CEO and Chairman of Fannie Mae, defend himself before a House subcommittee against allegations of fraudulent financial reporting brought by its regulator, OFHEO. I have already read OFHEO’s interim report on the matter, and you know from prior letters that I have had a dim view of Fannie Mae and its CEO for some time. My impression: Fannie Mae is unregulated, and they are very likely committing fraud.

An entity is not being regulated if it takes subpoenas and threats from the Department of Justice in order to obtain management’s cooperation in a regulatory review. Too, an entity is not being regulated if a Congressional investigation cannot be performed due to wholly inadequate knowledge of the business at issue on the part of the investigators. Watching our representatives flail at questioning Mr. Raines was rather shocking. They were in no manner capable of getting past the headline issues, and even those were covered only in superficial fashion. Remarkably, these particular representatives were members of the House subcommittee specifically charged with regulating the GSEs.

Then there are Fannie’s friends, with whom Mr. Raines apparently spends most of his days. Rep. Artur Davis suggested OFHEO was putting Fannie in more danger with the release of the report. Rep. Barney Frank, the House Financial Services subcommittee’s lead Democrat, went so far as to charge that OFHEO was "irresponsible." Yet, how can a regulator be irresponsible simply by letting the public know it suspects foul play on the part of the regulated?"

On the subject of fraud, OFHEO’s report makes clear Fannie’s intent to deceive. The report details not gray areas of accounting, but rather specific acts to manipulate earnings. Per the testimony of Armando Falcon, Jr., head of OFHEO, “The accounting violations cannot be dismissed as mere differences of interpretation in accounting rules. Fannie Mae understood the rules and simply chose not to follow them.” Time and again, the ethics of men and women have proven no match for a lucrative incentive structure.”

November 11, 2004 (The Washington Post): A senior House Democrat said yesterday that he will not support a budget increase for the federal regulator of Fannie Mae until questions raised in a confidential report have been addressed. Rep. Barney Frank (Mass.), senior Democrat on the committee overseeing Fannie and its regulator, said in a letter to colleagues that an inspector general's report on how the Office of Federal Housing Enterprise Oversight examined the mortgage funding company's accounting "raises very serious issues which must be thoroughly discussed and addressed." Frank said in an interview that the issues involve "the role that OFHEO has played." The report "has major public policy implications," but he could not be more specific because the report has not been made public, he said. OFHEO has said recently that budget restrictions threaten to hamper its continuing investigation of Fannie Mae's accounting...

2006 (The Washington Post): “Fannie Mae engaged in "extensive financial fraud" over six years by doctoring earnings so executives could collect hundreds of millions of dollars in bonuses, federal officials said yesterday in a report that portrayed a company determined to play by its own rules. Regulators at the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight, in announcing a settlement with Fannie Mae that includes $400 million in penalties, provided the most detailed picture yet of what went wrong at the congressionally chartered firm.”

2009 (Reuters): "The Obama administration on December 24 pledged to backstop all future losses for the mortgage giants, without limit, through the end of 2012. The Christmas eve announcement also eased earlier requirements for Fannie and Freddie to reduce the size of their portfolios. The 2010 limits on their portfolios, in fact, would allow their investment holdings to grow.”

2010 (Associated Press): “Freddie Mac, which has lost a total of almost $80 billion since the housing crisis started in 2007, is bracing for more pain. The McLean, Va.-based company said a record 4 percent of its borrowers are at least three months behind on their payments and facingforeclosure.Its chief executive, Charles Haldeman, warned Wednesday of a "potential large wave of foreclosures" still to come. This is a major problem for the federal government, which seized control of Freddie and Fannie in September 2008. The two companies have already siphoned $111 billion from the government to stay afloat. That number is expected to hit $188 billion by fall 2011.And while Freddie Mac didn't ask for any more bailout money last quarter, the company said it will likely need more financial aid and might never repay it.”

Wall Street re-creating conditions for another crash

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Matt Taibbi
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.

Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."

Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.

Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?

The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?

The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.

The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.

That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."

To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen: More...

Why Is All This Happening? It’s the War Between Bankers

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by Bill Sardi

The public may have casually become aware of recent news announcements about an agreed upon goal between bankers to reach an 8-percent cash reserve requirement in their institutions. A list was recently published showing few banks currently have reached this reserve requirement. This list was obviously issued to apply public pressure via the public’s ability to direct their deposits to more stable banks, thus nudging other banks to increase their reserves.

Banks deploy depositors’ money into interest-bearing loans in order to generate profits and keep a portion in reserve to meet depositors’ immediate needs. Recall that withdrawal of $16.7 billion in cash from Washington Mutual bank over a 9-day period is what drove that bank into insolvency even though it had $307 billion of (over-valued) assets and deposits of $188 billion at the time. So cash reserves are of greater importance into today’s unstable financial environment.

It all sounds so collegiate – a bunch of the world’s bankers have agreed to stabilize their institutions so as to better withstand current economic challenges and create greater public confidence in banks. News reports make it sound like bankers are cooperative. But in reality, there is a war going on between bankers, in particular central bankers, those bankers who supply money to depository banks where the public banks their money.

First shots fired

The first shots in this war were apparently fired by banks in Japan a number of years ago. This dispute between bankers is what has led to the current worldwide financial crisis.

Bruce Wiseman makes us aware of this war in his report A Look Behind The Wizard’s Curtain: The Financial Crisis: The Hidden Beginning. Wiseman’s upcoming book and movie on this topic are scheduled for release in 2010.

Wiseman reports that the top ten banks in the world in the 1970s were American banks. But in the 1980s six Japanese banks rose into the top-ten ranking. Wiseman explains this sudden rise, which was said to shift the center of world banking from New York to Tokyo, was due to the low reserves (said to be as low as 3%) kept by bankers in Japan.

With lower reserve requirements, Japanese banks had more available funds to loan than competing banks throughout the globe. These Nippon bankers could establish branch banks throughout the world and dominate the world’s financial markets.

The 8-percent reserve requirement agreed upon in the Basel I agreement, named for the location of its signing at the Bank of International Settlements in Basel, Switzerland, is intended to put the world’s banks on a level playing field when it comes to doing business outside their own countries.

Wiseman says this low-reserve requirement practiced by banks in Japan was perceived as drawing a samurai sword against the rest of the world’s bankers and this didn’t rest well with Alan Greenspan, then chairman of the US Federal Reserve Bank and Board Member of the International Bank of Settlements, a bank for the world’s central bankers headquartered in Basel, Switzerland. Something had to be done about unfair competition in the banking arena.

Bankers in Japan were informed via the Bank of International Settlements, the "central bankers’ bank," that they would not be allowed to continue their operations in major foreign markets unless they agreed to a minimum reserve requirement – the 8% rule. Japanese bankers were coerced to agree to what has become known as the Basel I accord which was signed in 1988.

Foot dragging over reforms

But it’s now 21 years later, and bankers are still dragging their feet to comply with a stability measure that, had it been implemented, may have staved off part of the current economic crisis long before it occurred.

Don’t get a false impression that Japanese banks are solely to blame for bank instability. Five investment banks in the U.S. (Goldman Sachs, Lehman Brothers, Bear Stearns, Merrill-Lynch and Morgan Stanley) appealed to the Securities Exchange Commission (SEC) and won the privilege to carry a 20-to-1 or even 30-to-1 ratio of capital to loans (not the same as cash reserves, as mentioned above).

For example, instead of these investment banks employing a more traditional capital-to-loan ratio of 10-to-1 (let’s say $1 billion of capital to issue $10 billion in loans), they were given the green light to loan at the ratio of 20-to-1 or even 30-to-1 ($1 billion of capital to issue $20 billion or even $30 billion in loans). This was a conscious decision by the SEC that probably was coerced by political influence.

Basel II spawns real estate bubble

This bankers’ war continued over the following decade and a half, culminating in Basel II in 2004, another agreement between banks to standardize reporting requirements for credit worthiness and capital that each depository bank holds. This is when the so-called "mark-to-market" rules were established. The Bank of International Settlements is attempting to get banks to value their real estate assets on real market value and to reveal all of the non-performing loans (foreclosures) they have on their books. Such revelations and transparency would doom many banks, including some of the world’s largest banks.

Basel II also made provision for reduced reserve requirements for mortgage-backed home loans. This made home loans more profitable and is set off the explosive false growth in residential real estate and created the financial bubble that finally popped in 2008. Central bankers are to blame for setting off this wild fire in the real estate market.

How many banks intend to comply?

A recent survey conducted by the Financial Stability Institute attempted to determine how many banks in 115 jurisdictions in less developed nations in Africa, Asia, Latin America and the Middle East intend to comply with Basel II. The survey was not sent to banks in Japan, possibly for good reason. The 2004 survey revealed 95 countries currently plan to comply with Basel II reporting requirements, and even more countries said they intended to comply with Basel II in a 2006 survey.

However, according to a report in Risk Magazine, the banking industry is fighting finalized reforms in the Basel II mandates, claiming the amount of capital required cannot be raised within the allotted time framework. Finance ministers and central bank governors of the 20 leading economies (called the Group of 20) wants full implementation by 2012.

Prudent banking

Prudent banking is not beyond the capability of bankers. For example, according to a Wall Street Journal article, while Basel II requires a capital to loan ratio of 9%, banks in India are required to have a 12% standard.

Bankers in China have been even more prudent. Chinese banks adhere to a cap on loan-to-deposit ratios of about 75% (the actual ratio is more like 67%), and leverage ratios (capital-to-loan ratios) in the single digits – considerably below what the big U.S. banks have been allowed to accumulate. Furthermore, in China, home buyers can only borrow up to 70% of the value of their property (60% if it's a second purchase).

Fang Xinghai, director-general of Shanghai's financial-services office, recently described the difference between the Chinese and U.S. approaches to bank regulation in the Wall Street Journal: "In the U.S., the regulators don't believe in regulation to begin with," he said, and pointed a finger at former Federal Reserve Chairman Alan Greenspan's belief that the Fed's job wasn't to prevent or deflate assets bubbles, but to "deal with the consequences."

The Wall Street Journal report goes on to say that bankers in Spain certainly incurred exposure to an overbuilt real estate market (an estimated 1.2 million unsold new homes), but they avoided further trouble by consolidating all their assets, even non-performing home loans, onto their balance sheets. For comparison, "Special investment vehicles," employed by American banks, "cooked the books" and keep risky debt off of bank ledgers.

Resorting to the unthinkable

Unable to create a level competitive field for banking, the bank reform effort has now shifted away from cooperation to a master plan to take down the world’s economies and exercise complete control in the aftermath by introduction of a master plan to control banking and currency.

According to Wiseman, the plan underway now is to intentionally "take down the United States and the U.S. dollar as the stable datum of planetary finance and replace it with something called a Global Monetary Authority" that will issue a single global currency via the world’s central bankers, who in turn distribute money to depository and investment banks.

What Wiseman is talking about here is that a small group of less than a dozen central bankers are likely to rule the world via control of currency.

As confirmation of Wiseman’s claim, the call for a "global monetary authority" was echoed by a Yale professor in the Financial Times in 2008.

What looms is a single global currency, probably issued by the International Monetary Fund (IMF), which will then exert control over the world’s banks. A more complete picture of what is likely being planned is provided here and here.

The intentional take-down of the world’s economies and establishment of a world currency will be spawned out of planned chaos which would provoke the planet’s masses to beg for relief. The new currency and its new central bank will be offered up as the quickest solution to the world’s economic turmoil.

But will world control be lost?

However, the bankers and elites risk losing control of the world that they now hold. As investigative journalist Daniel Estulin reports, "One of Bilderberg’s primary concerns accordingly is the danger that their zeal to reshape the world by engineering chaos in order to implement their long term agenda could cause the situation to spiral out of control and eventually lead to a scenario where Bilderberg and the global elite in general are overwhelmed by events and end up losing their control over the planet." (The Bilderberg Group, comprised of over 100 influential people, meets annually to discuss issues of world concern.)

Yet central bankers and elitists plod ahead, all the while attempting to tighten their grip on the masses. Following the G20 (20 leading countries of the world) meeting at the beginning of April, 2009, it was reported that, "The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity." A communiqué released by the G20 leaders stated that, "We have agreed to support a general standard drawing rights (SDR) allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity," and that, "SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century." Essentially, "they are putting a de facto world currency into play. It is outside the control of any sovereign body."

IMF plants an agent in our midst

The IMF has the right man in place to do the job in the U.S. Timothy Geithner, U.S. Treasury Secretary, was director of the Policy Development and Review Department (2001–2003) at the IMF. Geithner is also well connected in other circles. He was also part of a consulting firm in the 1980s owned by former Secretary of State Henry Kissinger. Furthermore, Geithner was also president of the Federal Reserve Bank of New York and a staffer at the Council on Foreign Relations.

Geithner, as U.S. Secretary of the Treasury, apparently sees no conflict between his duty to uphold the U.S. Constitution and a one-world currency. He goes along with the agenda to abolish the US dollar in favor of a global medium of exchange. Geithner was quoted to say: "Our hope is that we can work with Europe on a global framework, a global infrastructure which has appropriate global oversight."

What lies ahead

Foot dragging by the world’s bankers to comply with banking standards and the intentional collapse of world economies to force bank reform has dragged the world into a quagmire that could lead to mass starvation, suicide and even war. A former top British bank regulator recently called for the formation of an international bank police agency to bring the bankers into line. But such an idea appears to be too late. Efforts to usher in an IMF-issued currency appear to be steaming forward.

Such plans, to usher in a one-world government and a single currency, were made decades ago by elitists and central bankers, but they were waiting for world events to be engineered in a manner to create the perfect storm that would cause Americans to give up their sovereignty, and their greenbacks, in exchange for a new type of play money and subservience to another rule of law outside the U.S. Constitution. Professor Carroll Quigley described this covert plan in the 1960s in his book entitled Tragedy and Hope: A History Of The World In Our Time. Another broad description of this plan is found here.

World control

Few Americans catch on to the fact that central bankers, not elected representatives, have controlled America for some time now. It was the British banker Mayer Amschel Bauer Rothschild who said in 1791: "Allow me to issue and control a nation's currency, and I care not who makes its laws."

The world exists for the central bankers to plunder, and no one else. What is good for the central bankers is good enough for the rest of the world. It’s like the world is a tiger that is being slung around by its tail. If central bankers aren’t paid their dues, the world must suffer. Yet the bankers must not be deprived of their seven, eight and even nine-figure commission checks amidst the turmoil. The world is being slung into economic chaos over a long-standing war between central bankers. If the masses only knew.

December 14, 2009

Bill Sardi [send him mail] is a frequent writer on health and political topics. His health writings can be found at www.naturalhealthlibrarian.com. He is the author of You Don’t Have To Be Afraid Of Cancer Anymore.