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Wall Street's Naked Swindle
2009-10-14, Rolling Stone magazine
http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history. The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money...) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. Six months after Bear was eaten by predators, virtually the same scenario repeated itself in the case of Lehman Brothers — another top-five investment bank that in September 2008 was vaporized in an obvious case of market manipulation. From there, the financial crisis was on. When Bear and Lehman made their final leap off the cliff of history, both undeniably got a push ... in the form of a flat-out counterfeiting scheme called naked short-selling.

Note: Why isn't this being reported in the major media and aggressively investigated? For many reports from reliable sources on the corruption at the core of the Wall Street collapse and bailout, click here.

Wall Street On Track To Award Record Pay
2009-10-14, Wall Street Journal
http://online.wsj.com/article/SB125547830510183749.html

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year -- a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture. [Executives] at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal. Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year's $117 billion -- and to top 2007's $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels. The growth in compensation reflects Wall Street firms' rapid return to precrisis revenue levels. Even as the economy is sluggish and unemployment approaches 10%, these firms have been boosted by a stronger stock market, thawing credit market, a resurgence in deal making and the continuing effects of various government aid programs. So far, regulators and lawmakers have focused on making sure pay practices discourage excessive risk-taking, leaving to companies the question of how much is too much.

Note: For lots more on the realities of the Wall Street bailout, click here.

Why Is the UBS Whistle-Blower Headed to Prison?
2009-10-06, Time Magazine
http://www.time.com/time/business/article/0,8599,1928897,00.html

No one, including himself, would argue that Bradley Birkenfeld, 44, is a saint. But at the same time, almost no one in the U.S. government would deny that Birkenfeld was absolutely essential to its landmark tax-evasion case against Swiss banking giant UBS. The former UBS employee turned whistle-blower exposed the previously hidden world of offshore tax shelters, which cheats the Treasury out of about $100 billion a year. Thanks to his insider information, UBS was fined $780 million, and it promised to "exit entirely" from the U.S. tax-shelter business and to provide the names of thousands of American tax dodgers, from which hundreds of millions of dollars still might be collected. It also led to new tax treaties with the Swiss that should provide unprecedented tax information in civil cases and better access to such data in criminal cases. Considering Birkenfeld's help, many observers wonder why the Justice Department decided to arrest and prosecute him. Many critics believe the decision to prosecute Birkenfeld, whom some consider the most important whistle-blower in years, sends the worst possible message to other financial-industry insiders who might be considering coming forward. The Government Accountability Project (GAP), a Washington watchdog organization that has extensive whistle-blower experience, says a chilling effect is already apparent: a senior executive at a European bank that offers similar U.S. tax shelters is having second thoughts about going public because of the Birkenfeld case.

Note: For lots more, including Obama's tight ties with UBS, see the New York Daily News article here.

Government Watchdog Says Treasury and Fed Knew Bailed-Out Banks Were Not Healthy
2009-10-05, ABC News
http://abcnews.go.com/Business/lied-watchdog-treasury-fed-knew-bailed-banks-h...

The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, a government watchdog states in a new report released today. Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise. "Contemporaneous reports and officials' statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time and, as detailed in this report, that their overall selection was far more a result of the officials' belief in their importance to a system that was viewed as being vulnerable to collapse than concerns about their individual health and viability," Barofsky says. In announcing the initial $125 billion provided to these banks, former Treasury Secretary Hank Paulson on Oct. 14 said, "These are healthy institutions. As these healthy institutions increase their capital base, they will be able to increase their funding to U.S. consumers and businesses." That same day, the Treasury Department, the Federal Reserve and the FDIC also released a joint statement reiterating that "these healthy institutions are taking these steps to ... enhance the overall performance of the US economy." Barofsky finds, however, senior officials at the Treasury and the Fed had serious concerns about the health of some of these banks.

Note: For a comprehensive overview of the realities underlying the government's bailout of the biggest financial institutions, click here.

Michael Moore blames capitalism for meltdown
2009-09-18, San Francisco Chronicle (San Francisco's leading newspaper)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/18/MN0V19OTKP.DTL

Two weeks before his movie "Capitalism: A Love Story" opens nationwide, filmmaker Michael Moore swept through San Francisco ... with a rally, a Commonwealth Club appearance and an unlikely new antagonist: Democrats. When Moore criticized Sen. Chris Dodd, D-Conn., this week on NBC's "The Jay Leno Show" for getting "sweetheart loans" from a mortgage company he was charged with overseeing, Moore said he got a call from a top Democratic Party official telling him to "back off." But Moore, a longtime supporter of a single-payer health plan, didn't back off. In an interview with The Chronicle, he chided House Speaker Nancy Pelosi for not being aggressive enough in pushing health care reform and ripped President Obama's financial team as "the foxes guarding the henhouse." There is plenty of conservative-bashing in the film, which focuses on capitalism as the "evil" at the root of the financial crisis, but the film also refers to Democratic leaders as the "deliverymen" of the government bailouts for financially troubled Wall Street firms. In his new film, Moore focuses on the investment house Goldman Sachs as a main beneficiary of capitalism's largesse. He notes that Treasury Secretary Timothy Geithner and senior White House economic adviser Lawrence Summers are proteges of Robert Rubin, longtime Goldman executive and President Bill Clinton's Treasury secretary. "The fact that Geithner and Summers are part of this administration makes everything that happens open to question and needs our vigilance," Moore said, "because, literally now, the foxes are guarding the henhouse."

Note: For a review of Michael Moore's new film, "Capitalism: a Love Story," click here.

But Who Is Watching Regulators?
2009-09-13, New York Times
http://www.nytimes.com/2009/09/13/business/13gret.html

Nothing succeeds like failure, as the saying goes. And nowhere is this dismal truth more evident than in our financial regulatory system, one year after the bankruptcy filing of Lehman Brothers. Even though calamitous lending practices laid waste to the nation’s economy, surprisingly little has changed about how the financial arena operates and is supervised. Sure, a couple of venerable brokerage firms have vanished, but many of the same players remain on the scene, in the same positions of power. Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max. Awarding increased power to those who failed in their oversight duties flies in the face of all notions of accountability. Yet those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins. That’s asking a lot, isn’t it? Here’s a novel thought. Instead of creating more regulations to try to prevent this kind of mess from recurring, why not figure out how to hold regulators accountable when they perform as poorly as they did in recent years? Taxpayers must protect themselves against two things: the corrupting influence of bureaucratic self-interest among regulators and the political clout wielded by the large institutions they are supposed to police. [And] taxpayers must demand that the government publicize the costs of efforts taken to save the financial system from itself.

Note: For lots more from reliable sources on the realities of the Wall Street crash and bailout, click here.

A Year After a Cataclysm, Little Change on Wall St.
2009-09-12, New York Times
http://www.nytimes.com/2009/09/12/business/12change.html

Wall Street lives on. One year after the collapse of Lehman Brothers, the surprise is not how much has changed in the financial industry, but how little. Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows. Banks still sell and trade unregulated derivatives, despite their role in last fall’s chaos. Radical changes like pay caps or restrictions on bank size face overwhelming resistance. Even minor changes, like requiring banks to disclose more about the derivatives they own, are far from certain. Regulators and lawmakers have spent most of the last year trying to save the financial industry, rather than transform it. In the short run, their efforts have succeeded. Citigroup and other wounded banks have avoided bankruptcy, and the economy has sidestepped a depression. But the same investors and economists who predicted, and in some cases profited from, the collapse last fall say the rescue has come at an extraordinary cost. They warn that if the industry’s systemic risks are not addressed, they could cause an even bigger crisis — in years, not decades. Next time, they say, the credit of the United States government may be at risk.

Note: For a treasure trove of reports from reliable sources on the realities of the Wall Street bailout, click here.

A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style
2009-08-31, New York Times
http://www.nytimes.com/2009/08/31/nyregion/31judge.html

Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors. He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner. “I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.” The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model. Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose. “If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”

Banks 'Too Big to Fail' Have Grown Even Bigger
2009-08-28, Washington Post
http://www.washingtonpost.com/wp-dyn/content/story/2009/08/28/ST2009082800437...

When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Today, the biggest of those banks are even bigger. The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit. J.P. Morgan Chase ... now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. Concerns are twofold: that consumers will wind up with fewer choices for services and that big banks will assume they always have the government's backing if things go wrong. That presumed guarantee means large companies could return to the risky behavior that led to the crisis if they figure federal officials will clean up their mess. The worry for consumers is that the bailouts skewed the financial industry in favor of the big and powerful. Fresh data from the FDIC show that big banks have the ability to borrow more cheaply than their peers because creditors assume these large companies are not at risk of failing.

Note: For lots more from reliable sources on the realities of the Wall Street bailout, click here.

Bankers Reaped Lavish Bonuses During Bailouts
2009-07-31, New York Times
http://www.nytimes.com/2009/07/31/business/31pay.html?partner=rss&emc=rss&pag...

Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year, even as their employers were battered by the financial crisis. Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008, according to a report released Thursday by Andrew M. Cuomo, the New York attorney general. At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America, million-dollar awards were distributed to hundreds of workers. Mr. Cuomo, who for months has criticized the companies over pay, said the bonuses were particularly galling because the banks survived the crisis with the government’s support. “If the bank lost money, where do you get the money to pay the bonus?” he said. All the banks named in the report declined to comment. Incentives that led to large bonuses on Wall Street are often cited as a cause of the financial crisis. Though it has been known for months that billions of dollars were spent on bonuses last year, it was unclear whether that money was spread widely or concentrated among a few workers. The report suggests that those roughly 5,000 people — a small subset of the industry — accounted for more than $5 billion in bonuses. At Goldman, just 200 people collectively were paid nearly $1 billion in total, and at Morgan Stanley, $577 million was shared by 101 people. All told, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those banks lost $81 billion.

Note: How can this happen? Corruption abounds, yet the fact that you are reading this shows we can change it all. For lots more on the realities of the Wall Street bailout, click here.

Stock Traders Find Speed Pays, in Milliseconds
2009-07-24, New York Times
http://www.nytimes.com/2009/07/24/business/24trading.html

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets. Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense. These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk. Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer. And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage. Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors.

Note: For a wealth of deep reporting on the hidden realities of Wall Street's shadowy operations, click here.

With Big Profit, Goldman Sees Big Payday Ahead
2009-07-15, New York Times
http://www.nytimes.com/2009/07/15/business/15goldman.html?partner=rss&emc=rss...

After all that federal aid, a resurgent Goldman Sachs is on course to dole out bonuses that could rival the record paydays of the heady bull-market years. Goldman posted the richest quarterly profit in its 140-year history and, to the envy of its rivals, announced that it had earmarked $11.4 billion so far this year to compensate its workers. At that rate, Goldman employees could, on average, earn roughly $770,000 each this year — or nearly what they did at the height of the boom. Senior Goldman executives and bankers would be paid considerably more. Only three years ago, Goldman paid more than 50 employees above $20 million each. In 2007, its chief executive, Lloyd C. Blankfein, collected one of the biggest bonuses in corporate history. The latest headline results — $3.44 billion in profits — were powered by earnings from the bank’s secretive trading operations and exceeded even the most optimistic predictions. But Goldman’s sudden good fortune, coming only a month after the bank repaid billions of bailout dollars, raises questions for Washington policy makers. In Washington, some lawmakers warned on Tuesday that a quick return to such high pay would stoke public anger as the Obama administration tried to overhaul financial regulation. They warned that Wall Street lobbyists were already trying to block financial reforms. “People all over this country feel an incredible frustration that they are seeing their neighbors lose their jobs and the government is helping companies like A.I.G. and Goldman Sachs and then the next thing they are reporting huge profits and huge compensation,” said Senator Sherrod Brown, Democrat of Ohio and a member of the banking committee. “I think people are incredulous that this system is working this way.”

Note: For a treasure trove of revelations from reliable sources on the hidden realities behind the Wall Street bailout, click here.

Lawmaker accuses Fed of "cover-up" in BofA deal
2009-06-25, Boston Globe/Reuters News
http://www.boston.com/business/articles/2009/06/25/lawmaker_accuses_fed_of_co...

The Federal Reserve sought to hide its involvement in Bank of America Corp's acquisition of Merrill Lynch as Merrill's financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday. The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters. Bernanke has in the past denied any inappropriate pressure on Bank of America. Fed spokeswoman Michelle Smith on Wednesday referred to a letter Bernanke sent Representative Dennis Kucinich on April 30 and later testimony in which he offered an "unconditional assertion" that he did not ask Bank of America CEO Ken Lewis to withhold information regarding Merrill. The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. Former U.S. Treasury Secretary Henry Paulson has also been called to testify before Congress next month about the Bank of America-Merrill Lynch transaction. After rescuing Bank of America in January, U.S. regulators tightened their grip on the bank with a secret agreement that contributed to the ongoing shakeup of its directors and executives, the Wall Street Journal said, citing people familiar with the matter. The paper, citing internal documents, added that Federal Deposit Insurance Corp. Chairman Sheila Bair wrote to Bernanke before the aid to the bank was unveiled to express the FDIC's "discomfort" with the deal..

Note: For a treasure trove on the hidden realities of the governmental bailout of Wall Street, click here.

Top Chinese banker Guo Shuqing calls for wider use of yuan
2009-06-08, The Telegraph (One of the U.K.'s leading newspapers)
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5473491/Top-...

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency. Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars. Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency. It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely. "I think the US government and the World Bank can consider the issuing of [yuan] bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. Mr Guo is a former head of China's foreign-exchange administration, which manages the country's $1.9 trillion foreign exchange reserves. He said he was confident the yuan would become a major currency in the medium-to-long term. Two months ago, before the G20 meeting in London, Zhou Xiaochuan, the head of the People's Bank of China, the central bank, published a personal paper proposing to replace the dollar as the international reserve currency. His call came after Wen Jiabao, the Chinese premier, asked the US to guarantee the safety of China's huge pile of US debt.

Note: For many more important reports shedding light on the hidden realities of the US and world economic crisis, click here.

We're really sorry about that $650 billion. Here's a lollipop.
2009-05-01, San Francisco Chronicle (San Francisco's leading newspaper)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/01/DDLO17BB2Q.DTL

Like most of us, I guess, I was caught absolutely flat-footed by the economic crisis. I got the part about subprime loans, and why they were both stupid and greedy, but I did not get how that bit of banker's nonsense instantly spread to the national economy and the world economy. Finally I read an article that actually put the thing together in a coherent way. It's in the May 14 issue of the New York Review of Books, and it's by Robert M. Solow, who won the Nobel Prize for economics, so presumably he's not just pulling ideas out of his nose. He starts by talking about leverage, and how very tempting it is as long as prices continue to rise. In the 1990s, it was typical for brokerages (or banks - the difference between the two became blurred) to use a 10-1 model; they used $100,000 to borrow $1 million, and everything was rosy. But it was rosier still at 20-1, and even rosier at 30-1. I am summarizing here - the whole article can be found [here]. [In Solow's words,] "According to data compiled by the Federal Reserve, household wealth in the U.S. peaked at $64.4 trillion in mid-2007, and had plummeted to $51.5 trillion at the end of 2008. Something like $13 trillion of perceived wealth vanished in not much more than a year. Nothing concrete had changed. Buildings still stood; factories were still just as capable of functioning; people had not lost their ability to work or their skills or their knowledge of technology. But a population that thought in 2007 that they had $64.4 trillion with which to plan their lives discovered in 2008 that they had lost 20 percent of that."

Note: Think about it. Simply because of financial manipulations, hundreds of thousands of homes and factory workplaces are now empty, while the numbers living on the street and in camps along rivers has increased dramatically. Yet many of the richest have only grown richer as a result of mergers and more. For lots more on the Wall Street bailout, click here.

Revelations of the wholesale greed and blatant transgressions of Wall Street
2009-04-03, PBS Bill Moyers Journal
http://www.pbs.org/moyers/journal/04032009/transcript1.html

BILL MOYERS: For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you're about to meet wrote a book with just that title. Bill Black, ... what's your definition of fraud? WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have. Well, The way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road. BILL MOYERS: So you're ... saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans? WILLIAM K. BLACK: Yes. BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me? WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

Note: William K. Black is the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. He is now an Associate Professor of Economics and Law at the University of Missouri. The video of this fascinating interview is available here. For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

Hidden Pension Fiasco May Foment Another $1 Trillion Bailout
2009-03-03, Bloomberg News
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alwTE0Z5.1EA

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy. The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year. The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion. With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion. That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years -- more than half of them since 1997 -- public records show. The quick fix for pension funds becomes a future albatross for taxpayers. The public gets nothing from pension bonds -- other than a chance to at least temporarily avoid paying for higher pension fund contributions. Pension bonds portend the possibility of steep tax increases. By law, states must guarantee public pension fund debts. “What appears to be a riskless strategy is actually very risky,” says David Zion, director of accounting research for New York-based Credit Suisse Holdings USA Inc. “If the returns on the pension bond-financed assets don’t exceed the cost of servicing the debt, the taxpayers bear the brunt.”

Note: The risks to pension funds may require yet another huge public bailout. Where will the money come from? For lots more on the realities of the Wall Street bailout, click here.

Stimulus Plan Places New Limits on Wall St. Bonuses
2009-02-14, New York Times
http://www.nytimes.com/2009/02/14/business/economy/14pay.html?partner=rss&emc...

Buried deep inside the ... economic stimulus bill ... is some bitter medicine for companies that have received financial bailout funds. Over staunch objections from the Obama administration, Senate Democrats inserted a provision that would impose restrictions on executive bonuses at financial institutions that are much tougher than those proposed 10 days ago by the Treasury Department. The provisions would prohibit cash bonuses and almost all other incentive compensation for the five most-senior officers and the 20 highest-paid executives at large companies that receive money under TARP. The restriction with the most bite would bar top executives from receiving bonuses that exceed one-third of their annual pay. The provision, written by Sen. Chris Dodd, D-Conn., highlighted the growing wrath ... over the lavish compensation that top Wall Street firms and big banks awarded to senior executives at the same time that many of the companies, teetering on the brink of insolvency, received taxpayer-paid bailouts. "The decisions of certain Wall Street executives to enrich themselves at the expense of taxpayers have seriously undermined public confidence," Dodd said Friday. "These tough new rules will help ensure that taxpayer dollars no longer effectively subsidize lavish Wall Street bonuses." Top economic advisers to President Obama adamantly opposed the pay restrictions, according to congressional officials.

Note: For powerfully revealing reports on the realities of the Wall Street bailout, click here.

Bad bank + toxic debts = moral hazard x10
2009-02-02, MarketWatch.com
http://www.marketwatch.com/news/story/Bad-bank-toxic-debt-one/story.aspx?guid...

BusinessWeek says Paulson/Bush & Co. wasted $350 billion in TARP money ... the Congressional Budget Office and GOP say Obama & Co. will waste another $800 billion on "non-stimulus" programs ... Nobel economist [Joseph Stiglitz] calls [the Bad Bank] plan "cash for trash" ... Warning, you are entering a bizarre space-time continuum ... where Wall Street makes random quantum leaps between metaphoric realities. In the "Lost" television series we're transported into a parallel reality, a perfect metaphor for today's global economic meltdown, which is misunderstood and grossly mismanaged. Wall Street crashed ... on the "Lost Island ... of Manhattan," the former center of world banking. The collateral damage has been enormous: Freddie Mac, Fannie Mae, Lehman Brothers, Bear Stearns, global trade, Iceland. [Wall Street's] clueless leaders ... are "Lost" with no bottom, no recovery, no strategy in sight. A new president, a secretive Fed and an old Congress are throwing around taxpayer trillions like free candy ... on top of Bush's "$10 Trillion Hangover" ...after a clueless Wall Street wrote off trillions in toxic debt, then wasted $350 billion in TARP bailout money, buying $50 million private jets, attending golf outings at exclusive resorts, spending millions on CEO's office renovations and paying $18 billion in year-end bonuses. Hope masks denial: Even President Obama's consultant [Warren] Buffett acknowledges that the proposed stimulus plan "might not work." The stimulus might not work? What if this last bullet is a blank? Should you prepare for the worst-case scenario?

Note: For many revealing reports on the realities of the Wall Street bailout, click here.

What Red Ink? Wall Street Paid Hefty Bonuses
2009-01-29, New York Times
http://www.nytimes.com/2009/01/29/business/29bonus.html?partner=rss&emc=rss&p...

By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived. Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year. That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller. Some bankers took home millions last year even as their employers lost billions. The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher. The state comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely. “The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,” Mr. DiNapoli said in an interview.

Note: For many reports from reliable sources on the realities of the Wall Street bailout, click here.

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