How Goldman secretly bet on the housing crash
2009-11-01, Kansas City Star/McClatchy Newspapers
Posted: 2009-11-19 02:23:30
http://www.kansascity.com/437/story/1542453.html

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled one of the nation's premier investment banks to pass most of its potential losses to others before a flood of mortgage loan defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman promoted as triple-A investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy Newspapers investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws. "The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's big banks. "This is fraud and should be prosecuted."

Note: For an eye-opening, powerful PBS video which reveals how the economic crisis was conscously allowed to happen, click here. It reveals that Fed chairman Alan Greenspan was against investigating any fraud. For many reports from reliable sources on corruption at the core of the Wall Street collapse and bailout, click here.

Cluster bomb trade funded by world's biggest banks
2009-10-29, The Guardian (One of the UK's leading newspapers)
Posted: 2009-11-19 02:11:25
http://www.guardian.co.uk/business/2009/oct/29/banks-fund-cluster-bomb-trade

The deadly trade in cluster bombs is funded by the world's biggest banks who have loaned or arranged finance worth $20bn (£12.5bn) to firms producing the controversial weapons, despite growing international efforts to ban them. HSBC, led by ordained Anglican priest Stephen Green, has profited more than any other institution from companies that manufacture cluster bombs. The British bank ... has earned a total of £657.3m in fees arranging bonds and share offerings for Textron, which makes cluster munitions described by the US company as "leaving a clean battlefield". HSBC will face protests outside its London headquarters today. Goldman Sachs, Bank of America, JP Morgan and UK-based Barclays Bank are also named among the worst banks in a detailed 126-page report by Dutch and Belgian campaign groups IKV Pax Christi and Netwerk Vlaanderen. Goldman Sachs, the US bank which made £3.19bn proft in just three months, earned $588.82m for bank services and lent $250m to Alliant Techsystems and Textron. Last December 90 countries, including the UK, committed themselves to banning cluster bombs by next year. But the US was not one of them. So far 23 countries have ratified the convention. The UK has yet to do so.

Note: For many verifiable revelations of war profiteering by large corporations, click here.

Foreclosures: 'Worst three months of all time'
2009-10-15, CNN Money
Posted: 2009-11-19 02:07:49
http://money.cnn.com/2009/10/15/real_estate/foreclosure_crisis_deepens/

Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter. 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. There are no firm statistics for it, but many industry watchers claim the percentage of REOs [properties possessed by the mortgage company after an unsuccessful foreclosure auction] caused by borrowers voluntarily walking away from their homes is skyrocketing. The foreclosure crisis may not diminish anytime soon.

Note: For lots more from major media sources on the impacts of the financial crash, click here.

Wall Street's Naked Swindle
2009-10-14, Rolling Stone magazine
Posted: 2009-11-19 02:00:12
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.

Fed Rejects Geithner Request for Study of Governance, Structure
2009-09-21, Bloomberg News
Posted: 2009-11-19 01:57:17
http://www.bloomberg.com/apps/news?pid=20601068&sid=adjvXg1zP.zY

The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said. U.S. lawmakers have also called for a review of the Fed’s power and structure, saying Fed Chairman Ben S. Bernanke overstepped his authority as he bailed out creditors of Bear Stearns Cos. and American International Group Inc. while battling a crisis that led to $1.62 trillion in writedowns and losses at financial firms. While the report requested by the Treasury hasn’t been formally scrapped, no work has been done on the project, which was due Oct. 1. Treasury spokesman Andrew Williams declined to comment, as did Fed spokeswoman Michelle Smith. Congressional leaders have balked at the notion of giving the Fed more power and are leaning toward vesting authority over capital, liquidity and risk-management practices of big banks in a council of regulators.

Note: To understand how business corrupts politicians watch the heated MSNBC News clip at this link.

Fed Urges Secrecy on Banks in Bailout Programs
2009-08-27, ABC News/Reuters
Posted: 2009-11-19 01:53:30
http://abcnews.go.com/Business/wireStory?id=8426669

The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy. The central bank filed its request ... two days after Chief Judge Loretta Preska of the U.S. District Court in Manhattan ruled in favor of Bloomberg News, which had sought information under the federal Freedom of Information Act. Preska said the Fed failed to show that revealing the names would stigmatize the banks and result in "imminent competitive harm." Underlying this case and a similar one involving News Corp's Fox News Network is a question of how much the public has a right to know about how the government is bailing out a financial system in a crisis. The case arose when two Bloomberg reporters submitted FOIA requests about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan.

Note: Don't tax payers have a right to know to which bankds the trillions of tax dollars are going in the bank bailout? For lots more on government secrecy, click here.

Chrysler drops three electric vehicles despite having touted them to get billions in government bailout cash
2009-11-09, USA Today
Posted: 2009-11-16 22:58:51
http://content.usatoday.com/communities/driveon/post/2009/11/620001133/1

If you believed all the talk from Chrysler about how our tax dollars would help finance its fast-track electric-vehicle future, you're in for a big disappointment. Chrysler has disbanded the engineering team that was trying to bring three electric models to market as a rush job. Chrysler [had] cited its devotion to electric vehicles as one of the key reasons why the Obama administration and Congress needed to give it $12.5 billion in bailout money. The change of heart on electric vehicles has come under Fiat. At a marathon presentation of Chrysler's five-year strategy, CEO Sergio Marchionne talked about just about everything on Chrysler's plate ... except its earlier electric-car plans. With the group's disbanding, Chrysler's electric plans will be melded into Fiat's. Marchionne is apparently no fan of electric power. He says electrics will only make up 1% or 2% of Fiat sales by 2014 and that he doesn't put a lot of faith in the technology until battery developments are pushed forward. As a result, Chrysler won't have an electric car on sale as soon as next year, such as the Dodge Circuit sports car concept it had unveiled. The change has come so fast that Chrysler's website has been still featuring pictures of the electric vehicles. As late as August, Chrysler took $70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans, vehicles now scrapped in the sweeping turnaround plan for Chrysler.

Note: For reports from reliable sources on promising new developments in electric automobile technologies, click here.

Goodbye to Reforms of 2002
2009-11-06, New York Times
Posted: 2009-11-16 22:50:44
http://www.nytimes.com/2009/11/06/business/06norris.html

It took just five weeks after the WorldCom accounting scandal erupted in 2002 for Congress to pass ... the Sarbanes-Oxley Act. That law required public companies to make sure their internal controls against fraud were not full of holes. Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration. The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well. Some veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under President Bill Clinton. There are other threats to Sarbanes-Oxley as well. The law set up a long-overdue system of regulating the accounting industry, which had proved time and again that it was incapable of effective self-regulation. The Public Company Accounting Oversight Board has done a credible job, but a month from now the Supreme Court will hear a case that could drive it out of existence.

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

TARP on steroids
2009-10-30, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-10-31 19:03:39
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/30/EDTG1ACEDE.DTL

It was 9/29/08 - a moment when a rare blast of populist democracy briefly singed the economic terrorists who hold the Capitol hostage. It had been a dark and stormy month of financial collapse, culminating in an attempted power grab. Pushed by his fellow Wall Street Ponzi schemers, Treasury Secretary Henry Paulson - a former Goldman Sachs CEO - was threatening Armageddon unless Congress ratified his ... decree for a no-strings-attached bank bailout. Today, the episode seems merely to have set minimum standards for chicanery. As evidenced by two little-noticed sections of the Obama administration's Wall Street "reform" bill, presidents and their bank benefactors are back to thinking they can pilfer whatever they want by burying their demands in the esoterica of lengthier bills. Finding this latest giveaway means digging all the way down to sections 1109 and 1604 of the White House's mammoth proposal. At a recent hearing, Rep. Brad Sherman, D-Sherman Oaks (Los Angeles County), called the language "TARP on steroids," noting the provisions would deliberately let the executive branch enact even bigger, more unregulated bailouts than ever - and by unilateral fiat. TARP on Steroids includes no specific oversight or executive pay constraints. TARP on Steroids allows taxpayer cash to go only to the behemoths (which, not coincidentally, tend to make the biggest campaign contributions). TARP on Steroids would let [the Treasury Secretary] spend as much as he wants.

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

N.Y. Fed pushed AIG on contracts
2009-10-28, Washington Post
Posted: 2009-10-31 18:51:06
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR20091027039...

The Federal Reserve Bank of New York said ... that it had no choice but to instruct American International Group last November to reimburse the full amount of what it owed to big banks on derivatives contracts, a move that ended months of effort by the insurance giant to negotiate lower payments. The New York Fed, led at the time by then-President Timothy F. Geithner, directed AIG to make the payments after it received a massive government bailout. The officials said AIG lost its leverage in demanding a better deal once the company had been saved from bankruptcy. Lawmakers and financial analysts critical of the payouts say it amounted to a back-door bailout for big banks. AIG, the recipient of a $180 billion federal rescue package, ended up paying $14 billion to Goldman Sachs over months and $8.5 billion to Deutsche Bank, among others. Before the New York Fed intervened, AIG had been trying to persuade the firms to take discounts. [A Bloomberg] report concluded that the government needlessly overpaid $13 billion. The Federal Reserve has declined to detail the terms of the deals and specifics about negotiations with creditors. The Bloomberg report quoted an unnamed AIG executive who said he was pressured by New York Fed officials to refrain from filing any documents with the Securities and Exchange Commission that would divulge the deals' details.

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

Wall Street Follies: The Next Act
2009-10-25, New York Times
Posted: 2009-10-31 18:48:25
http://www.nytimes.com/2009/10/25/weekinreview/25morgenson.html

Hoping, perhaps, to persuade a dubious public that curbing reckless business practices is indeed a Washington priority, the Obama administration and Congress produced a hat trick of financial reforms last week. For all the apparent action in Washington, some acute observers say that it was much ado about little. Last week’s moves, they say, were tinkering around the edges and did nothing to prevent another disaster like the one that unfolded a year ago. The white-hot focus on pay, for example, looks like a way for the government to reassure an angry public that they are making genuine changes. But compensation is a trifling matter compared to, say, true reform of derivatives trading. “The American public understands the immorality of paying people huge bonuses for failures that damaged the economy,” said Michael Greenberger, a law professor at the University of Maryland and a former commodities regulator. “What they don’t understand is that those payments are only a small fraction of the irregularities that took place and that, in essence, the compensation problems, as bad as they are, are a sideshow to the casino-like nature of the economy as it existed, pre-Lehman Brothers, and as it exists today.” Regulating derivatives is far more important to those interested in eliminating the possibility of future billion-dollar bailouts. But the derivatives bill generated by the House Agriculture Committee contains a sizable loophole. Many derivatives would not trade in the light of day.

Note: For many revealing reports from reliable sources on the realities of the continuing bank bailout, click here.

Bailout Helps Fuel New Era of Wall Street Wealth
2009-10-17, New York Times
Posted: 2009-10-29 20:16:09
http://www.nytimes.com/2009/10/17/business/economy/17wall.html

Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses. Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes? It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth. Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year. So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza. “All of this is facilitated by the Federal Reserve and the government,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”

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

Derivatives: Don’t Let Exceptions Kill the Rule
2009-10-18, New York Times
Posted: 2009-10-29 20:13:47
http://www.nytimes.com/2009/10/18/business/economy/18gret.html

Congress began the work of reforming our troubled financial system last week, and a bill aimed at regulating derivatives passed the House Financial Services Committee on Thursday. Derivatives — contracts that theoretically protect buyers from unforeseen financial calamities but more often are used to fuel raw speculation — were ... at the heart of the banking crisis. Credit default swaps ... propelled the American International Group off the cliff. Those swaps also linked millions of trading partners, creating a web in which one default threatened to produce a chain of corporate and economic failures worldwide. And derivatives aren’t going away. So reforming the $42 trillion market for credit swaps is crucial if taxpayers are to be protected from future rescues of institutions deemed not only too big but also too interconnected to fail. The best aspect of the House bill is that it requires many swaps to be traded on exchanges just like stocks, subjecting them for the first time to the light of day. But elsewhere in the bill, ... exceptions to this exchange-trading rule undermine its regulatory power. Big banks dealing in swaps don’t want exchange trading, where pricing and the identities of participants would be more publicly transparent. Michael Greenberger, a University of Maryland law professor and an expert in derivatives, criticized the House bill. “The plain language of the legislation can only be read as a Christmas tree of decorative gifts to the banking industry,” he said. “And this is being done when people acknowledge the unregulated O.T.C. derivatives market was a principal reason for the meltdown.”

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

Wall Street On Track To Award Record Pay
2009-10-14, Wall Street Journal
Posted: 2009-10-17 20:15:45
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.

Voices of Power: Elizabeth Warren
2009-10-08, Washington Post
Posted: 2009-10-12 14:45:22
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/08/AR20091008007...

LOIS ROMANO: Welcome, Elizabeth Warren, Chairman of the Congressional Oversight Committee that is tasked with scrutinizing how the Treasury Department has spent $700 billion to shore up our failing financial institutions. There's a wonderful moment [in the movie "Capitalism: a Love Story"] when [Michael Moore] asks you where the $700 billion is, and you look at him and you say, "I don't know." So the question is: why don't you know? WARREN: Well, we don't know where the $700 billion is because the system was initially designed to make sure that we didn't know. When Secretary Paulson first put this money out into the banks, he didn't ask "what are you going to do with it?" He didn't put any restrictions on it. He didn't put any tabs on where it was going to go; in other words, he didn't ask. And if you don't ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it. ROMANO: And that money is gone. You have not been able to track where that money is? WARREN: Well, we don't know where the money went from the financial institutions. The big conversation at the time was that the credit markets are frozen; if we put money into the financial institutions, they will start lending it because that's what they do when they receive money. It was called the "Healthy Banks Program." Secretary Paulson kept saying, over and over, these are investments in healthy financial institutions, no one needs any subsidy, that [the] money was going to be used in lending to small businesses and consumers and kind of get our whole credit market going again. That didn't happen.

Note: To watch a powerfully revealing, five-minute video showing the Inspector General of the Federal Reserve testifying that she doesn't know where trillions of dollars are, click here. For a comprehensive overview of the realities underlying the government's bailout of the biggest financial institutions, click here.

Government Watchdog Says Treasury and Fed Knew Bailed-Out Banks Were Not Healthy
2009-10-05, ABC News
Posted: 2009-10-12 14:42:43
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.

U.S. FDIC chief: 'too big to fail' must end for all
2009-10-04, International Business Times/Reuters News
Posted: 2009-10-12 14:38:55
http://www.ibtimes.com/articles/20091004/too-big-to-fail-must-end-for-all-fdi...

The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators. FDIC Chairman Sheila Bair ... said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds. "We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said. Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process. "I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine. Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers. And by applying the resolution authority more broadly outside of normal regulated bank holding companies, it would help shrink the shadow banking system by discouraging regulatory arbitrage under which financial firms shop for the most lenient supervisors. "If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.

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

In Harsh Reports on S.E.C.’s Fraud Failures, a Watchdog Urges Sweeping Changes
2009-09-30, New York Times
Posted: 2009-10-03 22:18:57
http://www.nytimes.com/2009/09/30/business/30sec.html

The Securities and Exchange Commission’s independent watchdog called for a sweeping overhaul of the agency’s investigation and enforcement practices on Tuesday, after a blistering report on the S.E.C.’s failure to detect Bernard L. Madoff’s extensive Ponzi scheme. Two reports, released by the S.E.C.’s inspector general, H. David Kotz, recommended dozens of changes in the way the agency evaluates tips, trains investigators and documents examinations of securities firms. The first report, which covers the S.E.C.’s inspections and examinations office, outlines 37 improvements that would revamp nearly every aspect of the division’s operations, including how investigators follow up on tips and creating step-by-step procedures in identifying potential violations of securities laws. Mr. Kotz also issued 21 recommendations to the S.E.C.’s division of enforcement, including the start of a formal process for handling complaints and improving working relationships within the division. One measure would mandate that tips and complaints be reviewed by at least two individuals experienced in the subject before taking further action. The proposed changes come after Mr. Kotz’s office completed an exhaustive investigation this month of the S.E.C.’s failure to detect the Madoff fraud despite many warnings and a flood of complaints from credible sources. At nearly every turn, the investigation found, the agency had failed to properly examine Mr. Madoff’s firm and had not adequately followed up on tips from as far back as 1992 that could have unearthed the estimated $65 billion scheme.

Note: For a treasure trove of key revelations on the realities behind the Wall Street crash and bailout, click here. Contact your political representatives urging them to support these recommendations.

But Who Is Watching Regulators?
2009-09-13, New York Times
Posted: 2009-09-28 19:45:59
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.

Wall Street Pursues Profit in Bundles of Life Insurance
2009-09-06, New York Times
Posted: 2009-09-28 14:58:21
http://www.nytimes.com/2009/09/06/business/06insurance.html

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one. The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die. The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money. Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated. In the aftermath of the financial meltdown, exotic investments dreamed up by Wall Street got much of the blame. It was not just subprime mortgage securities but an array of products ... that proved far riskier than anticipated. The debacle gave financial wizardry a bad name generally, but not on Wall Street. Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products. In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones.

Note: As this article reveals, Wall Street will make a killing on these new securitized investments if American life expectancy should drop. Can you think of any ways in which powerful corporations could bring this about? Say an increase in sugar content or genetically modified components in foods? Perhaps lower standards for chemical toxicity? More time watching TV, or other changes leading to increased obesity? Swine flu vaccinations? For lots more from reliable sources on the realities of the Wall Street crash and bailout, click here.

Michael Moore blames capitalism for meltdown
2009-09-18, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-09-22 22:05:59
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.

A Year After a Cataclysm, Little Change on Wall St.
2009-09-12, New York Times
Posted: 2009-09-14 12:59:15
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.

Banks 'Too Big to Fail' Have Grown Even Bigger
2009-08-28, Washington Post
Posted: 2009-09-05 14:32:57
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.

A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style
2009-08-31, New York Times
Posted: 2009-09-05 14:07:31
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.”

Where did that bank bailout go? Watchdogs aren't sure
2009-08-09, Sacramento Bee/McClatchy News
Posted: 2009-08-20 22:35:26
http://www.sacbee.com/838/story/2094756.html

Although hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation's financial sector, it's still difficult to answer some of the most basic questions about where the money went. Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don't have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it's essentially worthless. "TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested," a special inspector general over the program reported last month. The "very credibility" of the program is at stake, it said. The program was controversial from the start. Critics say it's unfairly rewarded the big banks and Wall Street firms that pushed the economy to the brink.

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

Bank Bonuses Far Exceeded Profits
2009-07-30, CBS News
Posted: 2009-08-09 16:28:55
http://www.cbsnews.com/stories/2009/07/30/business/main5197668.shtml

Several financial giants that received federal bailout money in the last year paid out bonuses to employees in 2008 that greatly exceeded the amount of profit generated by the banks, according to a study on executive compensation released by New York State Attorney General Andrew Cuomo Thursday. Despite claims by bank executives that bonuses are tied to the company's performance, the report states that "there is no clear rhyme or reason to how the banks compensate or reward their employees." Cuomo's investigation "suggests a disconnect between compensation and bank performance that resulted in a 'heads I win, tails you lose' bonus system." According to the report: • Goldman Sachs, which earned $2.3 billion last year and received $10 billion in TARP funding, paid out $4.8 billion in bonuses in 2008 - more than double their net income. • Morgan Stanley, which earned $1.7 billion last year and received $10 billion in bailout funds, handed out $4.475 billion in bonuses, nearly three times their net income. • JPMorgan Chase, which earned $5.6 billion in 2008 and received $25 billion from the government, paid out $8.69 billion in bonus money. • Citigroup and Merrill Lynch lost a combined $54 billion last year. They received a total of $55 billion in bailouts and paid out $9 billion in combined bonuses. ($5.33 billion for Citigroup; $3.6 billion for Merrill Lynch, which was subsequently acquired by Bank of America.) Bonuses have been a hot-button issue surrounding these federally bailed out banks for months, with company executives facing heat from ... local officials like Cuomo angered by the exorbitant compensation plans for the same people widely seen as responsible for the country's financial crisis.

Note: Click here to read the full report. For lots more on the realities behind the taxpayer bailout of Wall Street, click here.

Bankers Reaped Lavish Bonuses During Bailouts
2009-07-31, New York Times
Posted: 2009-08-02 23:54:45
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.

Sticker Shock: $23.7 Trillion Bailout?
2009-07-21, ABC News
Posted: 2009-07-26 23:02:22
http://abcnews.go.com/Business/Politics/story?id=8140184

"The total potential federal government support could reach up to $23.7 trillion," says Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, in a report released today on the government's efforts to fix the financial system. "The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn't even imaginable," said Rep. Darrell Issa, R-Calif., ranking member on the House Oversight and Government Reform Committee. "If you spent a million dollars a day going back to the birth of Christ, that wouldn't even come close to just $1 trillion -- $23.7 trillion is a staggering figure." The government has about 50 different programs to fight the current recession, including programs to bail out ailing banks and automakers, boost lending and beat back the housing crisis. So far they've cost taxpayers around $4 trillion. But Barofsky says if each federal agency spent the maximum potential amount involved in these initiatives, taxpayers could be on the hook for trillions more. The watchdog also warned today that hundreds of billions of taxpayer dollars could be lost if the government does not increase the transparency of the TARP program, which he says has grown to an unprecedented scope and scale. Requiring TARP recipients to report on how government funds are used is among the recommendations urged by Barofsky. He also wants the department to report on the values of its TARP portfolio so taxpayers know about the value of their investments.

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

With Big Profit, Goldman Sees Big Payday Ahead
2009-07-15, New York Times
Posted: 2009-07-26 22:59:14
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.

Citi raises card rates on millions
2009-06-30, Financial Times
Posted: 2009-07-04 20:37:35
http://www.ft.com/cms/s/0/e1d0c610-65c7-11de-8e34-00144feabdc0.html

Citigroup has sharply increased interest rates on up to 15 [million] US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks. People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13 [million] and 15 [million] credit cards it co-brands with retailers such as Sears. Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees’ salaries. Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent – or nearly 3 percentage points – between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research. Citi’s move came as the economic downturn caused record defaults among US card users and prompted many issuers to raise rates, both to cushion their losses and pre-empt the new restrictions set to come into effect in February. However, Citi’s increases have been larger than those of its main rivals, according to Lightspeed, which tracks about 12,000 US credit card accounts. Carolyn Maloney, Democratic representative for New York, the author of the new rules that will sharply constrain lenders’ ability to raise rates for risky borrowers, criticised Citi’s move. “It’s hard to tell if rate hikes on existing balances being put in place now are the result of prior bad business decisions or getting in under the wire of the new law,” Ms Maloney told the Financial Times.

Note: Evidently one of the key effects of the forced multi-billion-dollar bailout of Citibank by US taxpayers has been to enable the bank to continue to gouge the public with exorbitant interest rates. This is called "saving the financial sytem." For lots more on the realities of the Wall Street bailout, click here.

Lawmaker accuses Fed of "cover-up" in BofA deal
2009-06-25, Boston Globe/Reuters News
Posted: 2009-06-29 18:54:21
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.

Only a Hint of Roosevelt in Financial Overhaul
2009-06-18, New York Times
Posted: 2009-06-23 13:48:57
http://www.nytimes.com/2009/06/18/business/18nocera.html

Three quarters of a century ago, President Franklin Roosevelt earned the undying enmity of Wall Street when he used his enormous popularity to push through a series of radical regulatory reforms that completely changed the norms of the financial industry. Wall Street hated the reforms, of course, but Roosevelt didn’t care. Wall Street and the financial industry had engaged in practices they shouldn’t have, and had helped lead the country into the Great Depression. Those practices had to be stopped. To the president, that’s all that mattered. On Wednesday, President Obama unveiled what he described as “a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.” In terms of the sheer number of proposals, outlined in an 88-page document the administration released on Tuesday, that is undoubtedly true. But in terms of the scope and breadth of the Obama plan — and more important, in terms of its overall effect on Wall Street’s modus operandi — it’s not even close to what Roosevelt accomplished during the Great Depression. Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself. Everywhere you look in the plan, you see the same thing: additional regulation on the margin, but nothing that amounts to a true overhaul. The plan places enormous trust in the judgment of the Federal Reserve — trust that critics say has not really been borne out by its actions during the Internet and housing bubbles. Firms will have to put up a little more capital, and deal with a little more oversight, but once the financial crisis is over, it will, in all likelihood, be back to business as usual.

Note: To watch the Inspector General of the Federal Reserve testify to Congress that she knows pracitcally nothing of trillions of dollars that are unaccounted for, click here. For many revealing reports from reliable sources on the hidden realities of the continuing taxpayer bailout of the biggest financial corporations, 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)
Posted: 2009-06-14 14:45:33
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.

Fed Would Be Shut Down If It Were Audited, Expert Says
2009-06-10, CNBC News
Posted: 2009-06-14 14:33:18
http://www.cnbc.com/id/31204170

The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC. With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said. "If the Fed examiners were set upon the Fed's own documents ... to pass judgment on the Fed's capacity to survive the difficulties it faces in credit, it would shut this institution down," he said. "The Fed is undercapitalized in a way that Citicorp is undercapitalized." Grant said he would support legislation currently making its way through Congress calling for an audit of the Fed. Moreover, he criticized the way the Fed has managed the financial crisis, saying the central bank's target rate should not be around zero. "I think zero is the wrong rate for almost any economy," Grant said, adding the Fed has "embarked on a vast experiment in moral hazard. Interest rates are the traffic signals in a market economy, and everything's green. ... You have to wonder whether these interest rates are the right clearing rate or rather they are the imposition of a central bank." Amid a disparity between analysts predicting there will be no rate hikes soon and the fed funds futures indicating tightening by the end of the year, Grant said he thinks the Fed indeed will begin raising rates as inflation creeps into the picture. Fed funds futures have fully priced in as much as a half-point rise in the target rate from its current range of zero to 0.25 percent. "If the hairs on the back of your neck stand up when there's too much unanimity of opinion, then one begins to worry about this," he said. "The Fed proverbially has been late."

Note: For an astonishing five-minute video clip of a Congressional hearing where the Inspector General of the Fed acknowledges she knows almost nothing about trillions of dollars missing from the Fed, click here. For many more important reports shedding light on the hidden realities of the economic crisis, click here.

Judge upholds three-word foreclosure strategy
2009-05-29, KGO-TV (San Francisco ABC-TV affiliate)
Posted: 2009-06-08 09:57:14
http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=6839404

A Bay Area couple has successfully blocked their lender from taking their home. A federal judge in San Jose brought the foreclosure process to a stop after the couple invoked a three-word strategy first outlined last month by 7 On Your Side's Michael Finney. A home could be saved with three words: "produce the note." Facing foreclosure, owners Isabel and Richard Caporale are using a novel legal strategy to hang on to their home. The couple went to federal court and basically said just three words. "They claim they have it, but I have no proof that they have this note, and you would think by now it's been almost three months," says attorney Marc Voisenat. The "they" Voisenat is referring to is the loan servicing company and "the note" is the legal document proving money is owed. Without it, the strategy goes, money can't be collected and there can be no foreclosure. On Thursday, a federal judge agreed, stopping the foreclosure in its tracks and for now, the Caporales can stay in their home. "It's wonderful because I'm almost positive the next time we come back to court the house will be ours," says Isabel Caporale. Thousands could use this strategy and it all comes down to sloppy paperwork. Mortgages are chopped up, bundled and resold around the world as complicated financial vehicles. Often the paperwork doesn't follow the loan and if there's no paperwork and no proof, the foreclosure is a no-go. "We've never seen a company produce the original note yet," says Attorney Chris Hoyer. Hoyer set up a website offering consumers advice and paperwork to pursue a "produce the note" strategy. In Florida "produce the note" is gaining momentum as a safety net for homeowners.

Note: For more information on how to use this strategy, see the Consumer Warning Network's excellent information available here. More information is also available in this article.

Thriving Norway Provides an Economics Lesson
2009-05-14, New York Times
Posted: 2009-05-31 17:48:53
http://www.nytimes.com/2009/05/14/business/global/14frugal.html

When capitalism seemed on the verge of collapse last fall, Kristin Halvorsen, Norway’s Socialist finance minister and a longtime free market skeptic, did more than crow. As investors the world over sold in a panic, she bucked the tide, authorizing Norway’s $300 billion sovereign wealth fund to ramp up its stock buying program by $60 billion — or about 23 percent of Norway's economic output. "The timing was not that bad," Ms. Halvorsen said, smiling with satisfaction over the broad worldwide market rally that began in early March. The global financial crisis has brought low the economies of just about every country on earth. But not Norway. With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state. And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent. Norway is a relatively small country with a ... population of 4.6 million and the advantages of being a major oil exporter. Even though prices have sharply declined, the government is not particularly worried. That is because Norway avoided the usual trap that plagues many energy-rich countries. Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world.

Note: For lots more on the global economic and financial crisis from reliable sources, click here.

666: Goldman's latest bonus bears the mark of the beast
2009-05-03, The Independent (One of the U.K.'s leading newspapers)
Posted: 2009-05-10 19:46:33
http://www.independent.co.uk/news/business/analysis-and-features/666-goldmans...

Something strange is afoot when Popbitch – provider of a weekly email beloved of students, stuffed full of celebrity tittle-tattle and links to the silliest miscellany of the web – breaks off from such glorious trivia to encourage readers to support GoldmanSachs666.com, a deadly serious website measuring the political tentacles of the mighty investment bank. The credit-market catastrophe that has plunged the world into recession is everywhere stirring new ways of thinking about how banking relates to the wider world, but nowhere more so than among a generation coming into political consciousness in these searing times. Something is brewing, some argue, that could make the "regulatory-financial complex" something to rail against in the same way that the military-industrial complex was in the Cold War. This should worry Goldman Sachs. More so than any other firm, it exists at the intersection of politics and high finance. "It was listening to the news coming out of AIG that got me fired up," says Mike Morgan, founder of GoldmanSachs666.com. "While politicians were screaming about $165m paid out to AIG executives in bonuses, $180bn was walking out the door." The Federal Reserve and the then-treasury secretary, Hank Paulson, decided to funnel public funds to AIG, and its counterparties were paid in full. You don't have to scratch far into the internet to find conspiracy theories: Mr Paulson was chief executive of Goldman before going into government; he appointed Edward Liddy, formerly of Goldman, to run AIG; Goldman was AIG's biggest counterparty, receiving $12.9bn from AIG after the bailout.

Note: For lots more on the Wall Street bailout, 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)
Posted: 2009-05-10 19:43:11
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.

Piggish capitalism endangers us all
2009-05-08, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-05-10 19:33:39
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/07/ED1117GOT8.DTL

Even if you don't dig on swine, it has become impossible to avoid them. If you're not pummeled by television reports about Wall Street oinkers, you're bombarded by talk-radio rants about congressional pork and newspaper dispatches about swine flu. They are each part of what might be called piggish capitalism - an economic theory that mixes subsidization, consolidation and deregulation - and it endangers us all. In 1999 ... President Bill Clinton signed a landmark deregulation measure that "ushered in an era of aggressive bank mergers," as Reuters reports. The result was what critics like Rep. John Dingell, D-Mich., predicted at the time: Wall Street created "a group of institutions which are too big to fail" and that "taxpayers are going to be called upon to cure." Mass producing mortgage-backed securities that were quickly infected with subprime mutations, these financial factory farms became so enormous and unregulated that they spread toxic assets throughout the entire economy. And when losses mounted, the government made banks whole with trillion-dollar bailouts. Incredibly, our government hasn't learned from these crises. Regulation-wise ...new financial rules have yet to move in Congress. Additionally, the much-vaunted bank "stress tests" have been shrouded in secrecy, which experts say created the potential for rampant insider trading. Meanwhile, the White House seems loath to break up financial firms, preferring instead another bank bailout - even as analysts warn that such bailouts fuel merger mania. Pigs may, in fact, be the smartest domestic animal. But when charged with managing capitalism, they clearly have trouble comprehending the simplest lessons.

Note: For a clear example of the lack of concern about trillions of dollars unaccounted for by the Federal Reserve, listen to a five-minute video testimony of the inspector general of the Fed being question by a Congressman at this link. Then learn more about the major manipulations of the Fed on our highly banking and financial revealing summary available here.

Reported Suicide Is Latest Shock at Freddie Mac
2009-04-23, New York Times
Posted: 2009-05-02 07:41:16
http://www.nytimes.com/2009/04/23/business/23freddie.html?partner=rss&emc=rss...

The pressures were already immense when David B. Kellermann was promoted to the top financial position at the mortgage giant Freddie Mac last September. Mr. Kellermann's boss and other top executives were ousted when the Treasury secretary seized Freddie Mac and its sibling company, Fannie Mae; others left on their own and were not replaced. Early on Wednesday, Mr. Kellermann went to the basement of his brick home and hanged himself, according to people familiar with the situation who were not authorized to speak. His body was removed five hours later, through a throng of neighbors, television crews and others. "David was such an honest and humble person," said Tim Bitsberger, Freddie Mac"s treasurer until he left in December. "It just doesn't make sense," Mr. Bitsberger said. The roots and causes of suicide are often unclear. It is not known if Mr. Kellermann succumbed to the pressures of his job. But in the aftermath of his death, it is plain that at Freddie Mac, as at many of the companies in the center of this economic storm, there are forces so strong they can overwhelm almost anyone. Mr. Kellermann ... was at the intersection of some of the most difficult issues facing the company. Mr. Kellermann was also working in a poisonous political atmosphere. He was recently involved in tense conversations with the company's federal regulator over its routine financial disclosures. Freddie Mac executives wanted to emphasize to investors that they believed the company was being run to benefit the government, rather than shareholders.

Note: For a revealing archive of reports on the hidden realities underlying the Wall Street bailout, click here.

Restrain the credit card industry
2009-04-23, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-05-02 07:30:47
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/22/EDK817761J.DTL

While American consumers have been struggling, credit card companies have been enjoying a field day. Not only are most of them receiving federal bailout money, but they've been jacking up interest rates (there were rate hikes on nearly 25 percent of accounts between 2007 and 2008) and switching the terms of agreements with consumers. Why the rush to gouge consumers in the depths of a recession? In July 2010, the Federal Reserve will impose new, consumer-friendly disclosure and administrative restrictions on the credit card industry. Scrambling to get ahead of the deadline, the card companies have been raising interest rates, slicing credit lines and, in too many cases, simply dumping customers with little rhyme or reason. Defaults and delinquencies have skyrocketed - and consumers are livid. "It's off the charts in terms of their ire about paying higher interest rates, particularly when their money, as they see it, is being given to the banks to prop them up," said Rep. Jackie Speier, D-Hillsborough. Speier's staff says her office has been "flooded" with calls from furious constituents. Speier is ... a co-sponsor of HR627, better known as "The Credit Cardholders' Bill of Rights." The bill - which has the support of the Obama administration - would prevent card issuers from raising interest rates without advance notice and end the practice of "double-cycle billing" so that consumers do not have to pay interest on debts they've already paid.

Note: For a highly revealing archive of reports on the hidden realities underlying the Wall Street bailout, click here.

Chrysler rejects new loan over exec pay limits
2009-04-21, CNN
Posted: 2009-05-02 07:20:25
http://www.cnn.com/2009/BUSINESS/04/21/chrysler.loan/

Chrysler turned down additional government funding this month because executives at the troubled auto manufacturer could not agree to new government-mandated limits on executive pay, according to a source familiar with the matter. An official with Chrysler Financial told CNN that the loan was turned down because the company "has determined that it has adequate private capital funding to cover the short-term needs of our dealers and customers and as such, no additional TARP funding is necessary at this time." The official also said that company executives "have not been presented with any new demands with regard to executive compensation." Chrysler already borrowed $1.5 billion from the Treasury under the Troubled Asset Relief Program, or TARP, but those loans were made under less strict regulations pertaining to executive compensation. The Washington Post, which first reported the story online Monday, said the amount of the loan Chrysler rejected was $750 million. A Treasury department spokesman declined to confirm the loan rejection, but told CNN that the administration's Auto Task Force continues to monitor the financing situations for Chrysler and General Motors. "This is an issue that Chrysler and its stakeholders will need to address as part of this process," the spokesman said.

Note: The reason many banks are giving back government loans is very likely also because of executive pay limits. The limits were reported in a NY Times article on Feb. 14, 2009. Not long after came the first news that banks were considering returning the bailout money. Do you think these top execs are more interested in their own paychecks or the health of the company? For a highly revealing archive of reports on the hidden realities underlying the Wall Street bailout, click here.

Fed Shrouding $2 Trillion in Bank Loans in ‘Secrecy,’ Suit Says
2009-04-16, Bloomberg News
Posted: 2009-04-25 08:38:36
http://www.bloomberg.com/apps/news?pid=20601087&sid=aS89AaGjOplw

U.S. taxpayers need to know the risks behind the Federal Reserve’s $2 trillion in lending to financial institutions because the public is now an “involuntary investor” in the nation’s banks, according to a court filing by Bloomberg LP. The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. The largest U.S. banks have tapped more than $125 billion in government aid under the Troubled Asset Relief Program in the past seven months. Assets, including loans and securities, on the Fed balance sheet totaled $2.09 trillion as of April 9. Banks oppose any release of information because that might signal weakness and spur short-selling or a run by depositors, the Fed argued in its March 4 response. The release of the information “can fuel market speculation and rumors,” including a drop in stock price and a run on the bank, the Fed said. Bloomberg replied yesterday that “these speculative injuries relate only to the reactions of customers, shareholders and other members of the public, not to competitors’ use of the borrowers’ proprietary information to their advantage,” the exception to disclosure under the FOIA law. Government loans, spending or guarantees to rescue the U.S. financial system total more than $12.8 trillion since the international credit crisis began in August 2007, according to data compiled by Bloomberg as of March 31. The total includes about $2 trillion on the Fed’s balance sheet.

Note: For an extensive archive of key reports on the hidden realities of the Wall Street bailout, click here.

'Bailout psychology' destroying the economy
2009-04-05, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-04-25 08:26:24
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/04/INR316Q4F5.DTL

President Obama must stop the bailouts and start the prosecutions. It's time to focus on anti-poverty programs to protect the growing unemployed from hunger and homelessness. Stealth payments to billionaire bondholders must cease immediately. Since the mid-1970s, average Americans' wages have stayed flat when adjusted for inflation. Productivity rose, profits rose, but not wages. To compensate for stagnant wages and the desire to consume more each year, Americans worked more, retired later, spouses went to work, and many burned savings. Then they started borrowing. Debt became America's growth industry. The scheme collapsed because Americans' wages weren't sufficient to pay the interest on existing debts. The administration and the banks keep talking about a credit crisis, but there isn't one. Banks are lending. If you want a mortgage and can afford to pay it back, you can borrow at low rates today. But most Americans don't want more debt because it is a debilitating path to poverty. The average American family already pays 14 percent of annual income in interest to banks. To fix this fake crisis, there are fake discussions about what the government must do. The endlessly recycled plan to buy "troubled" assets isn't to get banks lending again, because they haven't stopped lending. The plan seeks for taxpayers to buy worthless assets at high prices to absorb rich investors' losses. That's it. It keeps coming back as a different plan, but with that same goal. There is no goal beyond that one goal: keep rich people from taking losses.

Note: For an extensive archive of key reports on the hidden realities of the Wall Street bailout, click here.

The G20 moves the world a step closer to a global currency
2009-04-03, The Telegraph (One of the U.K.'s leading newspapers)
Posted: 2009-04-25 08:23:36
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5096524/The...

The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity. A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order. "We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity," it said. SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.In effect, the G20 leaders have activated the IMF's power to create money and begin global "quantitative easing". In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it. There is now a world currency in waiting. In time, SDRs are likely evolve into a parking place for the foreign holdings of central banks, led by the People's Bank of China. Beijing's moves this week to offer $95bn in yuan currency swaps to developing economies show how fast China aims to break dollar dependence.

Note: For an extensive archive of key reports on the hidden realities of the Wall Street bailout, click here.

‘No-Risk’ Insurance at F.D.I.C.
2009-04-07, New York Times
Posted: 2009-04-14 20:14:49
http://www.nytimes.com/2009/04/07/business/07sorkin.html?partner=rss&emc=rss&...

The Federal Deposit Insurance Corporation was set up 76 years ago with the important but simple job of insuring bank deposits. Now, because of what could politely be called mission creep, it’s elbowing its way into the middle of the financial mess as an enabler of enormous leverage. In the fine print of Treasury Secretary Timothy F. Geithner’s plan to lend as much as $1 trillion to private investors to help them buy toxic assets from our nation’s banks, you’ll find some details of how the F.D.I.C is trying to stabilize the system by adding more risk, not less, to the system. It’s going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. These loans, while controversial, were given a warm welcome by the market when they were first announced. And why not? The terms are hard to beat. They are, for example, “nonrecourse,” which means that if an investor loses money, he owes taxpayers nothing. It’s the closest thing to risk-free investing — with leverage! — around. But, as we’ve learned the hard way these last couple of years, risk-free investing is an oxymoron. So where did the risk go this time? To the F.D.I.C., and ultimately, to us taxpayers. A close reading of the F.D.I.C.’s statute suggests the agency is using a unique — some might call it plain wrong — reading of its own rule book to accomplish this high-wire act. Somehow, in the name of solving the financial crisis, the F.D.I.C. has seemingly been given a blank check, with virtually no oversight by Congress.

Note: For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

U.S. May Enlist Small Investors in Bank Bailout
2009-04-09, New York Times
Posted: 2009-04-14 20:12:05
http://www.nytimes.com/2009/04/09/business/09fund.html?partner=rss&emc=rss&pa...

During World War I, Americans were exhorted to buy Liberty Bonds to help their soldiers on the front. Now, it seems, they will be asked to come to the aid of their banks — with the added inducement of possibly making some money for themselves. As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds. The idea is that these investments, akin to mutual funds that buy stocks and bonds, would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. But there is another, deeply political motivation as well: to quiet accusations that all of these giant bailouts will benefit only Wall Street plutocrats. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses. Nonetheless, the administration and executives in the financial industry are pushing to establish the investment funds, in part to counter swelling hostility against the financial industry. The embrace of smaller investors underscores the concern in Washington and on Wall Street that Americans’ anger could imperil further efforts to stimulate the economy with vast amounts of government spending. Many Americans say they believe the bailout programs ... will benefit only a golden few, including some of the institutions that helped push the economy to the brink. Critics like Joseph E. Stiglitz, a Nobel Prize-winning economist, argue that the bailouts merely privatize profits and socialize losses.

Note: For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

Why Creditors Should Suffer, Too
2009-04-05, New York Times
Posted: 2009-04-14 20:09:57
http://www.nytimes.com/2009/04/05/business/economy/05view.html?partner=rss&em...

The Obama administration’s proposals to reform financial regulation sound ambitious enough as they aim to bring companies like A.I.G. under a broader umbrella of government rule-making and scrutiny. But there is a big hole in these proposals, as there has already been in the government’s approach to bailing out failing financial companies. Even as they focus on firms deemed too big to fail, the new proposals immunize the creditors and counterparties of such firms by protecting them from their own lending and trading mistakes. This pattern has been evident for months, with the government aiding creditors and counterparties every step of the way. Yet this has not been explained openly to the American public. In truth, it’s not the shareholders of the American International Group who benefited most from its bailout; they were mostly wiped out. The great beneficiaries have been the creditors and counterparties at the other end of A.I.G.’s derivatives deals — firms like Goldman Sachs, Merrill Lynch, Deutsche Bank, Société Générale, Barclays and UBS. These firms engaged in deals that A.I.G. could not make good on. The bailout, and the regulatory regime outlined by Timothy F. Geithner, the Treasury secretary, would give firms like these every incentive to make similar deals down the road. In both the bailouts and in the new proposals, the government is effectively neutralizing creditors as a force for financial safety. This suggests a scary possibility — that the next regulatory regime could end up even worse than the last.

Note: For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

Revelations of the wholesale greed and blatant transgressions of Wall Street
2009-04-03, PBS Bill Moyers Journal
Posted: 2009-04-14 20:08:37
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.

Big Bonuses at Fannie and Freddie Draw Fire
2009-04-04, New York Times
Posted: 2009-04-11 07:04:13
http://www.nytimes.com/2009/04/04/business/04bonus.html?partner=rss&emc=rss&p...

Fannie Mae and Freddie Mac, the two troubled companies at the heart of the nation’s mortgage market, are set to pay their employees “retention bonuses” totaling $210 million, despite calls from lawmakers to cancel the payments. The bonuses, which were made public on Friday, were defended by the companies’ federal regulator, James B. Lockhart, who said he intended to let them proceed. In a letter sent last week to Senator Charles E. Grassley, an Iowa Republican, Mr. Lockhart disclosed that 7,600 Fannie and Freddie workers were scheduled to receive payouts aimed at retaining those “employees most critical to keep and difficult to replace.” Under the plan, 213 employees will receive retention bonuses worth more than $100,000 this year, and one Freddie Mac executive will receive $1.3 million. Those figures drew sharp rebukes from Mr. Grassley and other lawmakers, who noted that Fannie and Freddie had received pledges of $400 billion from taxpayers to offset huge losses since they were seized by the government in September. Similar bonuses paid by the American International Group, which was also bailed out by taxpayers, incited fiery attacks from the White House and legislators when they were revealed last month. “It’s hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year,” Mr. Grassley said in a statement. “It’s an insult that the bonuses were made with an infusion of cash from taxpayers.”

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

Banks Get New Leeway in Valuing Their Assets
2009-04-03, New York Times
Posted: 2009-04-11 07:01:25
http://www.nytimes.com/2009/04/03/business/03fasb.html?partner=rss&emc=rss&pa...

A once-obscure accounting rule that infuriated banks ... was changed Thursday to give banks more discretion in reporting the value of mortgage securities. The change seems likely to allow banks to report higher profits by assuming that the securities are worth more than anyone is now willing to pay for them. But critics objected that the change could further damage the credibility of financial institutions by enabling them to avoid recognizing losses from bad loans they have made. Critics also said that since the rules were changed under heavy political pressure, the move compromised the independence of the organization that did it, the Financial Accounting Standards Board. During the financial crisis, the market prices of many securities, particularly those backed by subprime home mortgages, have plunged to fractions of their original prices. That has forced banks to report hundreds of billions of dollars in losses over the last year, because some of those securities must be reported at market value each three months, with the bank showing a profit or loss based on the change. At first FASB ... resisted making changes, but that changed within a few days of a Congressional hearing at which legislators from both parties demanded the board act. “There is a perception that we are yielding to political pressure,” one board member, Lawrence W. Smith, said as he voted for the changes. A group headed by two former chairmen of the Securities and Exchange Commission, one who served under President Bill Clinton and one who was appointed by President George W. Bush, said that it feared that politicization of accounting standards would destroy the credibility of the board.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

Financial Industry Paid Millions to Obama Aide
2009-04-04, New York Times
Posted: 2009-04-11 06:58:41
http://www.nytimes.com/2009/04/04/us/politics/04disclose.html?partner=rss&emc...

Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed. Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments. Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate. Mr. Summers’s role at the White House includes advising Mr. Obama on whether — and how — to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse. Mr. Summers ... appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. While Mr. Obama campaigned on a pledge to restrict lobbyists from working in the White House, a step intended to reduce any influence between the administration and corporations, the ban did not apply to former executives like Mr. Summers, who was not a registered lobbyist. In 2006, he became a managing director of D. E. Shaw, a firm that manages about $30 billion in assets, making it one of the biggest hedge funds in the world.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

Obama’s Ersatz Capitalism
2009-04-01, New York Times
Posted: 2009-04-11 06:56:08
http://www.nytimes.com/2009/04/01/opinion/01stiglitz.html?partner=rss&emc=rss...

The Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose. Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency. In theory, the administration’s plan is based on letting the market determine the prices of the banks’ “toxic assets” — including outstanding house loans and securities based on those loans. The reality, though, is that the market will not be pricing the toxic assets themselves, but options on those assets. The two have little to do with each other. The government plan in effect involves insuring almost all losses. Since the private investors are spared most losses, then they primarily “value” their potential gains. This is exactly the same as being given an option. Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses. Some partnership! What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other.

Note: The author of this analysis, Joseph E. Stiglitz, is a professor of economics at Columbia University. He was chairman of the Council of Economic Advisers from 1995 to 1997, and was awarded the Nobel prize in economics in 2001. For many revealing reports on the realities behind the Wall Street bailouts, click here.

Inquiry Asks Why A.I.G. Paid Banks
2009-03-27, New York Times
Posted: 2009-04-11 06:54:00
http://www.nytimes.com/2009/03/27/business/27cuomo.html?partner=rss&emc=rss&p...

Members of Congress and the New York State attorney general demanded detailed information Thursday on how tens of billions of taxpayer dollars flowed through the American International Group during its crisis last fall and ended up in the coffers of several dozen big banks, shielding them from losses. The new inquiries shine a spotlight on a question that is exponentially bigger, in dollars, than the $165 million in bonuses that A.I.G. paid out this month, but which has been overshadowed until now by the uproar over the bonuses. “We would like to know if the A.I.G. counterparty payments, as made, were in the best interests of the taxpayers who provided the funding,” said Representative Elijah E. Cummings, Democrat of Maryland, in a letter to Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program. The banks and investment firms that ended up with A.I.G.’s bailout money last fall were, in many cases, counterparties to derivatives contracts it had sold, known as credit-default swaps, which guaranteed the value of assets in their investment portfolios. They included Wall Street firms, like Goldman Sachs, JPMorgan Chase and Merrill Lynch, that have successfully resisted efforts to regulate credit derivatives in the past. In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401(k) accounts and other investments.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

Congress Passes Wide-Ranging Bill Easing Bank Laws
1999-11-05, New York Times
Posted: 2009-04-11 06:41:20
http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-...

Congress approved landmark legislation today that opens the door for a new era on Wall Street in which commercial banks, securities houses and insurers will find it easier and cheaper to enter one another's businesses. The measure, considered by many the most important banking legislation in 66 years, was approved in the Senate by a vote of 90 to 8 and in the House tonight by 362 to 57. The bill will now be sent to the president, who is expected to sign it, aides said. ''Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy.'' The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation's financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression. Consumer groups and civil rights advocates criticized the legislation for being a sop to the nation's biggest financial institutions. The opponents of the measure ... predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly.

Note: Clearly these critics of the elimination of Glass-Steagall have been proven right by the financial crisis which has unfolded less than 10 years later. Note the key role played by President Obama's top economic advisor, Larry Summers. If the players haven't changed, how likely is it that the game has?

IRS defends drop in audits of millionaires
2009-03-22, MSNBC/Associated Press
Posted: 2009-04-05 19:40:04
http://www.msnbc.msn.com/id/29831158

The Internal Revenue Service is not living up to its pledge to crack down on wealthy tax cheats, an IRS watchdog group says, citing a drop in audits of millionaires last year. Those with incomes of $1 million and above had a 5.6 percent chance of getting audited in fiscal year 2008, which ended last September, down from 6.8 percent the previous year, according to IRS figures. The actual number of millionaires audited fell from 23,200 to 21,874; the number of millionaires filing tax returns grew from 339,138 to 392,776. "In the face of growing federal deficits and public calls to lower the tax gap — the amount of taxes due but not reported and paid — the drop in millionaire audits is surprising," said the Syracuse University-based Transactional Records Access Clearinghouse in a report Monday. It said the significant drop in audits of richer Americans contrasted with IRS statements last year that it was making strong progress in enforcement, especially of those with incomes of more than $1 million. The TRAC report said focus on high earner returns is critical because of the huge rewards. Among those millionaire audit cases where additional taxes were recommended, the average was $198,000 after face-to-face audits and $137,000 for audits done through correspondence. In total, the IRS collected $56.4 billion in enforcement revenues last year, down from $59.2 billion in 2007 and the first decline in collections in a decade.

Note: The highly important statistic only mentioned in passing here is "the number of millionaires filing tax returns grew from 339,138 to 392,776." That's an over-15% increase in the number of millionaires in one year, while most everyone else seems to be losing money. Hmmmm. Makes you wonder.

AIG - the biggest shark of all
2009-03-19, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-03-28 08:51:43
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/03/18/ED0316IQ82.DTL

There must be a criminal investigation of the AIG debacle, and it looks as if New York's top lawman is on the case. The collusion to save this toxic company in order to salvage the rogue financiers who conspired to enrich themselves by impoverishing millions is being revealed as the greatest financial scandal in U.S. history. Instead of taking bonuses, the culprits should be taking perp walks. The real culprits are the AIG leaders who, as New York Attorney General Andrew Cuomo revealed Tuesday, signed those bonus contracts a year ago to reward the very people "principally responsible for the firm's meltdown." As Cuomo noted in a letter to Rep. Barney Frank: "The contracts shockingly contain a provision that required most individuals' bonuses to be 100 percent of their 2007 bonuses. Eleven of the individuals who received 'retention' bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million." But the $165 million in taxpayer funds used to reward them is but a sideshow in a far larger drama of moral decay swirling around the banking bailout. It should not distract from the many billions, not paltry millions, of our dollars being diverted to reward the very folks who brought us such misery. Consider the $12.8 billion of the $170 billion that taxpayers gave AIG in bailout funds that AIG then secretly diverted to Goldman Sachs, a company that evidently has a lock on both the Treasury Department and the Federal Reserve no matter which political party is in power.

Note: For an excellent analysis of "the real AIG conspiracy", click here. For lots more on the hidden realities of the Wall Street bailout, click here.

Spitzer Takes Aim at ‘Real Disgrace’ at A.I.G.
2009-03-17, New York Times blog
Posted: 2009-03-28 08:50:32
http://dealbook.blogs.nytimes.com/2009/03/17/spitzer-takes-aim-at-real-disgra...

Eliot Spitzer must miss his glory days when he was the scourge of Wall Street as New York’s attorney general. With the bonus battle exploding at the American International Group, Mr. Spitzer has jumped into the fray — and dismissed the bonus scandal, arguing that it is obscuring the “real disgrace” at A.I.G. “Why are A.I.G.’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?” he asks in an article on Slate. Mr. Spitzer notes that A.I.G.’s trading parties were all the big banks including Goldman Sachs, many of which received billions of dollars from the government’s Troubled Asset Relief Program. “So now we know for sure what we already surmised: The A.I.G. bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already,” he writes. “It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure,” Mr. Spitzer writes. Recounting how the economic crisis is affecting workers, with tax increases, pay cuts and layoffs, Mr. Spitzer asks: “Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? What is the deeper relationship between Goldman and A.I.G.?”

Note: For the article written in 2008 by former NY Governor Spitzer which likely caused him to be targeted for a takedown just weeks later, click here. For lots more on the hidden realities of the Wall Street bailout, click here.

Fed to Buy Up to $300 Billion Long-Term Bonds
2009-03-18, CNBC/Reuters News
Posted: 2009-03-28 08:44:58
http://www.cnbc.com/id/29755961/

The Federal Reserve announced Wednesday it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. Fed purchases should boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt. The last time the Fed set out to influence long-term interest rates was during the 1960s. The Fed also said it will buy more mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac to help that battered market. The central bank will buy an additional $750 billion, bringing its total purchases of these securities to $1.25 trillion. It also will boost its purchase of Fannie and Freddie debt to $200 billion. Pimco's Bill Gross tells CNBC that the move has expanded the Fed’s balance sheet by perhaps 50 percent, up to $3 trillion. In addition, the Fed said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets. Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to other ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent. Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.

Note: The Fed is now buying long-term Treasury bonds because it cannot directly lower interest rates any further. Isn't this just a hidden form of increasing the money supply, with the risk of further devaluing the dollar and eventually causing high inflation? For lots more on the hidden realities of the Wall Street bailout, click here

Treasurys Are 'Disaster Waiting to Happen'
2009-03-17, CNBC
Posted: 2009-03-28 08:43:36
http://www.cnbc.com/id/29720589/

The Federal Reserve has no option but to start buying Treasurys as the government's needs for financing are huge, but the government bond market is a disaster in the making, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC. "Other central banks have done it already around the world but basically what it amounts to is money printing and in fact I don't think that it will help the bond market at all in the long run," Faber told CNBC. "Yields have already backed up pretty substantially and I tell you, I think the US government bond market is a disaster waiting to happen for the simple reason that the requirements of the government to cover its fiscal deficit will be very, very high," Faber said. "The Federal Reserve will have to buy Treasurys, otherwise yields will go up substantially," he said, adding that as their reserves were dwindling, foreign investors were likely to scale down their purchases. But there will be a time when the Federal Reserve will have to increase interest rates to fight inflation, and it will be reluctant to do so because the cost of servicing government debt will rise substantially. "So we'll go into high inflation rates one day," Faber said. The stock market ... outlook is bleak, he added. "I think we may still have a rally ... until about the end of April and probably then a total collapse in the second half of the year sometimes, when it becomes clear that the economy is a total disaster," Faber said.

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

A.I.G. Planning Huge Bonuses After $170 Billion Bailout
2009-03-15, New York Times
Posted: 2009-03-21 09:51:32
http://www.nytimes.com/2009/03/15/business/15AIG.html?partner=rss&emc=rss&pag...

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them. The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G.. The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Note: For many revelations of the amazing realities of the Wall Street bailout, click here.

Some Banks, Feeling Chained, Want to Return Bailout Money
2009-03-11, New York Times
Posted: 2009-03-21 09:48:43
http://www.nytimes.com/2009/03/11/business/economy/11bailout.html?partner=rss...

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens. As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds. The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say. Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks ... as well as giants like Goldman Sachs and Wells Fargo. They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. A senior Treasury official involved in the bailout effort said the administration was carefully trying not to do anything that could harm the banks and was giving financial incentives to modify mortgages. But by keeping weak banks operating, the markets continue to sink and taxpayer costs are mounting, outside experts said. “The current policy is likely to result in weaker banks,” Mr. Seidman said. “And keeping insolvent banks in operation does not benefit the system.”

Note: Could it be that that the main reason top bank executives are now talking about giving money back is that don't want to give up their lavish bonuses and corporate jets? What about all the talk about how the whole world would go to pot if they didn't get this bailout money? Somehow this is not surprising.

Whitney Sees Credit Cards as the Next Crunch: Report
2009-03-10, CNBC
Posted: 2009-03-21 09:47:18
http://www.cnbc.com/id/29611789/

Prominent banking analyst Meredith Whitney warned that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy. "Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is under-appreciated is the role of credit-card availability in that spending," Whitney wrote in the Wall Street Journal. Although credit was extended "too freely over the past 15 years" and rationalization of lending is unavoidable, what needs to be avoided was "taking credit away from people who have the ability to pay their bills," said Whitney, CEO of Meredith Whitney Advisory Group. Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010. "Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney said. There is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said. "Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines," she said.

Note: Some believe that rising defaults on credit card debt could cause yet another financial shock to the system. For many more revelations of the amazing realites of the Wall Street bailout and the now world-wide financial and credit crises, click here.

The U.S. Financial System Is Effectively Insolvent
2009-03-05, Forbes Magazine
Posted: 2009-03-21 09:46:05
http://www.forbes.com/2009/03/04/global-recession-insolvent-opinions-columnis...

With economic activity contracting in 2009's first quarter at the same rate as in 2008's fourth quarter, a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation). The scale and speed of synchronized global economic contraction is really unprecedented (at least since the Great Depression), with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capital expenditures around the world. And now many emerging-market economies are on the verge of a fully fledged financial crisis, starting with emerging Europe. In the meantime, the massacre in financial markets and among financial firms is continuing. The debate on "bank nationalization" is borderline surreal, with the U.S. government having already committed--between guarantees, investment, recapitalization and liquidity provision--about $9 trillion of government financial resources to the financial system (and having already spent $2 trillion of this staggering $9 trillion figure). Thus, the U.S. financial system is de facto nationalized, as the Federal Reserve has become the lender of first and only resort rather than the lender of last resort, and the U.S. Treasury is the spender and guarantor of first and only resort. And even with the $2 trillion of government support, most of these financial institutions are insolvent, as delinquency and charge-off rates are now rising at a rate ... that means expected credit losses for U.S. financial firms will peak at $3.6 trillion. So, in simple words, the U.S. financial system is effectively insolvent.

Note: The author of this insightful analysis, Nouriel Roubini, has a very informative blog, available here.

Regulatory reports show 5 big banks face huge loss risk
2009-03-09, Miami Herald/McClatchy News
Posted: 2009-03-21 09:43:13
http://www.miamiherald.com/news/politics/AP/story/940829.html

Five of America's largest banks, most of which have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show. Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31 ... a jump of 49 percent in just 90 days. The banks' potentially huge losses ... shed new light on the hurdles that President Barack Obama's economic team must overcome to save institutions it deems too big to fail. While the potential loss totals include risks reported by Wachovia Bank, which Wells Fargo agreed to acquire in October, they don't reflect another Pandora's Box: the impact of Bank of America's Jan. 1 acquisition of tottering investment bank Merrill Lynch, a major derivatives dealer. The risks of these off-balance sheet investments, once thought minimal, have risen sharply. Fears are rising that a spate of corporate bankruptcies could deliver a new, crippling blow to major banks. Because of the trading in derivatives, corporate bankruptcies could cause a chain reaction that deprives the banks of hundreds of billions of dollars in insurance they bought on risky debt or forces them to shell out huge sums to cover debt they guaranteed. The biggest concerns are the banks' holdings of contracts known as credit-default swaps.

Note: For many powerful revelations from major media sources of the Wall Street bailout, click here.

'Run on UK' sees foreign investors pull $1 trillion out of the City
2009-03-07, The Independent (One of the U.K.'s leading newspapers)
Posted: 2009-03-21 09:41:32
http://www.independent.co.uk/news/business/news/run-on-uk-sees=foreign-invest...

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London. Some $597.5bn was lost to the banks in the last quarter of last year alone, after a ... massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter. The revelation will fuel fears that the UK's reputation as a safe place to hold funds is being fatally compromised by the acute crisis in the banking system and a general trend to financial protectionism internationally. The slide in sterling – it has shed a quarter of its value since mid-2007 – has been both cause and effect of the run on London, seemingly becoming a self-fulfilling phenomenon. The danger is that the heavy depreciation of the pound could become a rout if confidence completely evaporates. Paranoia that the UK could follow Iceland into effective national insolvency and jibes about "Reykjavik on Thames" will find an unwelcome substantiation in these statistics.

Note: For many deep revelations of the realities of the world financial crisis from reliable sources, click here.

Bair Says Insurance Fund Could Be Insolvent This Year
2009-03-04, Bloomberg News
Posted: 2009-03-21 09:39:53
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=alsJZqIFuN3k

Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency. “Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. “A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions.” The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund. Smaller banks are outraged over the one-time fee ... Camden Fine, president of the Independent Community Bankers of America, said yesterday. The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said. Consumers should watch this issue closely, said Edmund Mierzwinski, consumer program director at U.S. PIRG, a Boston- based consumer-watchdog group. “I wouldn’t take their money out of the bank yet,” Mierzwinski said. “If the FDIC is saying that there is this serious problem, then we should all be concerned. I think there is a chance the FDIC is going to have to ask taxpayers for money in the future.”

Note: For lots more on the financial crisis from reliable sources, click here.

The $700 trillion elephant
2009-03-06, MarketWatch (Wall Street Journal Digital Network)
Posted: 2009-03-14 08:12:46
http://www.marketwatch.com/news/story/The-700-trillion-elephant-room/story.as...

There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy. Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth. But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world. Try as we might to salvage the residential real estate market, it's at best worth $23 trillion in the U.S. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion. Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges. To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values. Few know what derivatives are worth. I spoke with one derivatives trader who manages billions of dollars and she said she couldn't even value her portfolio because "no one knows anymore who is on the other side of the trade."

Note: Banks and financial firms deemed "too big to fail" are being bailed out worldwide at taxpayers' expense. But what will happen if losses in the derivatives market skyrocket? No government in the world has the resources to save financial corporations from a collapse in their derivatives trading. For lots more on the realities of the Wall Street bailout, click here.

Hidden Pension Fiasco May Foment Another $1 Trillion Bailout
2009-03-03, Bloomberg News
Posted: 2009-03-14 08:06:05
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
Posted: 2009-03-07 07:21:14
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.

The Death of 'Rational Man'
2009-02-08, Washington Post
Posted: 2009-03-07 07:19:48
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/06/AR20090206027...

What allowed some people to see the financial crash coming while so many others missed its gathering force? I put that question recently to Nouriel Roubini, who has come to be known as "Dr. Doom" because of his insistent warnings starting in 2006 that we were heading into a global firestorm. Roubini gave two kinds of answers. The first involves standard number-crunching of the sort that economists routinely do -- and that Roubini just did better and sooner. It's his second answer that's more interesting, because it goes to the heart of what we should take away from this crisis: Roubini decided to discard the assumption of market rationality that underlies most economics and to embrace the psychological insights of what's known as "behavioral economics." Everyone else had those same numbers. Why did Roubini act? The answer is that he decided to trust his gut, which told him there was trouble ahead, rather than Wall Street's "wisdom of the crowd," which -- as reflected in stock prices -- said everything was rosy. He concluded that the markets were not pricing in the degree of risk that was actually present in housing. "The rational man theory of economics has not worked," Roubini said last month at a session of the World Economic Forum at Davos. That's why he and other prominent economists are paying more attention to behavioral economics, which starts from the premise that economic decisions, like other aspects of human behavior, are influenced by irrational psychological factors.

Note: To visit Nouriel Roubini's highly informative blog, click here. For lots more on the financial crisis and bailout, click here.

Global economic crisis called biggest U.S. security threat
2009-02-13, Los Angeles Times
Posted: 2009-02-21 09:50:24
http://www.latimes.com/news/nationworld/nation/la-na-security-threat13-2009fe...

The nation's new intelligence chief [has warned] that the global economic crisis is the most serious security peril facing the United States, threatening to topple governments [and] trigger waves of refugees. The economic collapse "already looms as the most serious one in decades, if not in centuries," said Dennis C. Blair, director of national intelligence, in [testimony before the Senate Intelligence Committee]. Blair's focus on the economic meltdown represents a sharp contrast from the testimony of his predecessors in recent years, who devoted most of their attention in the annual threat assessment hearing to the issues of terrorism and the wars in Afghanistan and Iraq. "Time is probably our greatest threat," Blair said. "The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests." He said that one-quarter of the world's nations had already experienced low-level instability attributed to the economic downturn, including shifts in power. He cited anti-government demonstrations in Europe and Russia, and he warned that much of Latin America and the former Soviet satellite states lacked sufficient cash to cope with the spreading crisis. "Countries will not be able to export their way out of this one because of the global nature" of the crisis, Blair said. U.S. intelligence analysts fear there could be a backlash against American efforts to promote free markets because the crisis was triggered by the United States. "We're generally held to be responsible," Blair said.

Note: For the complete text of Blair's testimony, click here. For an excellent analysis, click here. For more on the realities behind the economic crisis, click here.

Gold Climbs to Seven-Month High as Economy May Worsen
2009-02-17, Bloomberg News
Posted: 2009-02-21 09:46:21
http://www.bloomberg.com/apps/news?pid=20601082&sid=acerPa4tlqXg

Gold rose to its highest [price] in almost seven months in London as investors bought the precious metal to preserve their wealth on speculation the global economy will deteriorate. Bullion has climbed 33 percent since October as governments lowered interest rates and spent trillions of dollars to combat the recession. “The very big uncertainties in the stock market and economy are driving investors into gold and precious metals,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Gold for immediate delivery rose as much as $25.40, or 2.7 percent, to $967.15 an ounce, the highest since July 22. April futures gained $22.10, or 2.4 percent, to $964.40. Some investors are buying precious metals on speculation government stimulus packages [and bank bailouts] will spur inflation, Fertig said. Treasury Secretary Timothy Geithner last week pledged as much as $2 trillion in financing for programs aimed at spurring new lending. The Treasury will likely borrow a record $2.5 trillion this fiscal year ending Sept. 30, according to Goldman Sachs Group Inc. “Investors have been aggressively adding physical gold to their portfolios as concerns about counterparty risk” increase, ETF Securities wrote in a report. Investors are hedging “against the risk of currency depreciation and longer term inflation risks as government debt projections balloon.” “Gold has become, for all intents, the world’s second reserve currency,” Dennis Gartman, an economist and the editor of the ... Gartman Letter, said.

Note: For many revealing reports on the realities of government bailouts of banks worldwide, click here.

US Treasury overpaid $78 bln under TARP-watchdog
2009-02-06, CNN News/Reuters
Posted: 2009-02-15 09:58:02
http://money.cnn.com/news/newsfeeds/articles/reuters/MTFH29185_2009-02-06_01-...

The U.S. Treasury looks to have overpaid financial institutions to the tune of $78 billion in carrying out capital injections last year, the head of a congressional oversight panel for the government's $700 billion bailout program told lawmakers. Elizabeth Warren, a Harvard law professor, said her group estimated the Treasury paid $254 billion in 2008 in return for stocks and warrants worth about $176 billion under the Troubled Asset Relief Program, or TARP. Warren said the Treasury, under then-Secretary Henry Paulson, misled the public about how it would price them. "Treasury simply did not do what it said it was doing ... They described the program one way, and they priced it another," Warren said at a hearing before the Senate Banking Committee. She added that Paulson "was not entirely candid" in describing TARP's bank capital injection program. Neil Barofsky, another watchdog for the TARP program, told the Senate committee his office is turning to criminal investigations. "That's going to be a large focus of my office," he said. Warren told the banking committee that after three months on the job, her panel is still not getting enough answers from Treasury. She described the bailout as "an opaque process at best." Barofsky raised concerns about potential fraud in one of several programs funded by bailout money -- the Federal Reserve's Term Asset-Backed Loan Facility (TALF).

Note: Was the overpayment by Treasury to Wall Street banks for nearly-worthless assets they created a mistake? Or was it the real, hidden purpose of TARP to pay the banks more for the assets than they are worth? For many revealing reports from reliable sources on the realities behind the Wall Street bailout, click here.

Goldman, JPMorgan Won’t Feel Effects of Executive-Salary Caps
2009-02-05, Bloomberg News
Posted: 2009-02-15 09:50:10
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=azVLk.22AkLI

Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid aren’t likely to be affected by pay restrictions announced yesterday by President Barack Obama. The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more. Pay caps may provide the political cover the administration needs to deliver additional infusions of capital into the financial sector. Obama ... “is not proposing to go back and get that $18.4 billion in bonuses back,” Laura Thatcher, head of law firm Alston & Bird’s executive compensation practice in Atlanta, said of the cash bonuses New York banks paid last year, the sixth-biggest haul in history. “Right now, we have not clamped down” on pay at banks. In addition, some executives may be compensated for the potential reduced salaries with restricted stock grants, which may result in huge paydays after the bank repays the government assistance with interest. “They’re just allowing companies to defer compensation,” said Graef Crystal, a former compensation consultant. The restrictions are “a joke,” he said, because “if the government is paid pack, you can be sure that the stock will have risen hugely.”

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

Curtailing executives' pay? Good luck with that
2009-02-05, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-02-15 09:48:55
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/05/BUHF15NF2U.DTL

Will President Obama's new plan to rein in executive compensation at companies receiving taxpayer money be more successful than previous attempts? Not if history is any guide. Since at least 1984, Congress and accounting authorities have enacted measures designed in whole or part to stem runaway pay. Yet compensation for top executives has continued to climb in both dollar terms and as a multiple of average worker pay. In 1992, the average chief executive earned $5 million, or 126 times the average hourly worker. By 2007, the average CEO was earning $12.3 million, or 275 times the average worker. No matter what Congress cooks up, it seems like executives, companies and their consultants find a way over, under or through the rules. "It's like putting up a dam for a river. The water tries very hard to find a way around it," says John Olson, a partner with Gibson Dunn & Crutcher who advises corporate boards on compensation and other matters. Obama's plan will apply only to companies taking bailout money in the future and has escape hatches of its own. "You can try all these different reforms," [says Corey Rosen, executive director of the National Center for Employee Ownership,] but none will be truly effective "unless the board of directors, the media and public stop thinking of executives as superstars and that if we just get the right CEO, everything will be OK."

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

New Bank Bailout Could Cost $2 Trillion
2009-01-29, Wall Street Journal
Posted: 2009-02-06 09:25:30
http://online.wsj.com/article/SB123319689681827391.html

Government officials seeking to revamp the U.S. financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, according to people familiar with the matter. President Barack Obama's new administration is wrestling with how to stem the continuing loss of confidence in the financial system, as it divides up the remaining $350 billion from the $700 billion Troubled Asset Relief Program launched last fall. The potential size of rescue efforts being discussed suggests the administration may need to ask Congress for more funds. The administration is expected to take a series of steps, including relieving banks of bad loans and distressed securities. The so-called "bad bank" that would buy these assets could be seeded with $100 billion to $200 billion from the TARP funds, with the rest of the money -- as much as $1 trillion to $2 trillion -- raised by selling government-backed debt or borrowing from the Federal Reserve. The administration is also seeking more effective ways to pump money into banks, and is considering buying common shares in the banks. Government purchases so far have been of preferred shares, in an effort to both protect taxpayers and avoid diluting existing shareholders' stakes. Given the weakened state of the banking industry, with bank share prices low and their capital needs high, economists say the government probably can't avoid owning at least some banks for a temporary period.

Note: Note that the U.S. government has to borrow from the Federal Reserve, which most people don't realize is privately owned by the richest banks. For more on this, click here. The $2 trillion of taxpayer money for Wall Street's toxic assets revealed here is in addition to over $7 trillion already committed according to CNN and others. Wouldn't government debt of this magnitude threaten a broad range of government services and risk seriously weakening the dollar? For many other revealing reports on the Wall Street bailout, click here.

Facing foreclosure? Don't leave. Squat
2009-02-04, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-02-06 09:22:41
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/04/EDK215MNA0.DTL

Marcy Kaptur of Ohio is the longest-serving Democratic congresswoman in U.S. history. Her district, stretching along the shore of Lake Erie from west of Cleveland to Toledo, faces an epidemic of home foreclosures and 11.5 percent unemployment. Now, she is recommending a radical foreclosure solution from the floor of the U.S. Congress: "So I say to the American people, you be squatters in your own homes. Don't you leave." She criticizes the bailout's failure to protect homeowners facing foreclosure. These mortgages were made, then bundled into securities and sold and resold repeatedly, by the very Wall Street banks that are now benefiting from [a government bailout]. The banks foreclosing on families very often can't locate the actual loan note that binds the homeowner to the bad loan. "Produce the note," Kaptur recommends [to] those facing foreclosure demands of the banks. "[P]ossession is nine-tenths of the law," Rep. Kaptur [said]. "Therefore, stay in your property. Get proper legal representation ... [if] Wall Street cannot produce the deed nor the mortgage audit trail ... you should stay in your home. It is your castle. It's more than a piece of property. ... If you look at the bad paper, if you look at where there's trouble, 95 to 98 percent of the paper really has moved to five institutions: JPMorgan Chase, Bank of America, Wachovia, Citigroup and HSBC. They have this country held by the neck."

Note: Why is it that with the trillions of dollars given by the U.S. government to prop up banks who used shady loan practices, so few homeowners facing foreclosure have received any assistance? For many revealing reports on the realities of the Wall Street bailout, click here.

House Arrest for Madoff in $7 Million Apartment
2008-12-17, abcnews.com
Posted: 2009-02-06 09:21:13
http://abcnews.go.com/Blotter/WallStreet/story?id=6480363

Bernard Madoff, accused of the largest fraud in U.S. history, will be allowed to remain in his $7 million Park Avenue apartment instead of being sent to jail, under terms of an agreement announced today by federal prosecutors. Madoff was unable to meet the bond conditions set last week by a federal magistrate which required him to get four people to sign his personal recognizance bond. According to the U.S. Attorney's office, only Madoff's wife and brothers were willing to sign the document. But instead of ordering him held in jail, prosecutors agreed to home detention with electronic monitoring. Madoff and his luxury apartment on Manhattan's upper east side will be fitted with an electronic monitoring device by the court's pre-trial services and Madoff will be under a curfew of between 7 p.m. through 9 a.m. Madoff's wife agreed to post the mansions in her name in Palm Beach, Florida and in Montauk on New York's Long Island. The Securities and Exchange Commission chairman said today the agency has found "no evidence of wrongdoing by any SEC personnel" in connection with Madoff's alleged $50 billion Ponzi scheme and that the SEC intends to get to the bottom of where it may have gone wrong. "I was very concerned to learn this week that credible allegations about Mr. Madoff had been made over nearly a decade and yet never referred to the commission for action," Commissioner Christopher Cox said at a press conference. Yesterday, Cox acknowledged what amounted to a generational failure on the part of the SEC to discover any hint of Madoff's scheme, despite allegations dating back to 1999.

Note: Why is the criminal responsible for the largest single banking scandal in history given house arrest rather than jail before his trial? Isn't it remarkable that the hands-off treatment Madoff received over the years from the SEC seems to be continuing from the Federal prosecutors? For more on Wall Street corruption, click here.

Bad bank + toxic debts = moral hazard x10
2009-02-02, MarketWatch.com
Posted: 2009-02-06 09:19:51
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
Posted: 2009-01-30 10:00:23
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.

U.N. crime chief says drug money flowed into banks
2009-01-25, International Herald Tribune/Reuters News
Posted: 2009-01-30 09:59:13
http://www.iht.com/articles/reuters/2009/01/25/europe/OUKWD-UK-FINANCIAL-UN-D...

The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday. Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year. "In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor." The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way." Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved.

Note:. For powerful evidence that corporations and even rogue elements of government are involved in the huge amounts of cash generated in the drug trade, click here. For lots more on corporate corruption, click here.

Madoff's fund may not have made a single trade
2009-01-15, Reuters News
Posted: 2009-01-24 10:08:47
http://www.forbes.com/afxnewslimited/feeds/afx/2009/01/15/afx5928915.html

Bernie Madoff's investment fund may never have executed a single trade, industry officials say, suggesting detailed statements mailed to investors each month may have been an elaborate mirage in a $50 billion fraud. An industry-run regulator for brokerage firms said ... there was no record of Madoff's investment fund placing trades through his brokerage operation. That means Madoff either placed trades through other brokerage firms, a move industry officials consider unlikely, or he was not executing trades at all. 'Our exams showed no evidence of trading on behalf of the investment advisor, no evidence of any customer statements being generated by the broker-dealer,' said Herb Perone, spokesman for the Financial Industry Regulatory Authority. Each month, Madoff sent out elaborate statements of trades conducted by his broker-dealer. There also appear to be discrepancies between monthly statements sent to investors and the actual prices at which the stocks traded on Wall Street. To some, the numbers did not add up. About 10 years ago, Harry Markopolos, then chief investment officer at Rampart Investment Management Co in Boston, asked risk management consultant Daniel diBartolomeo to run Madoff's numbers after Markopolos tried to emulate Madoff's strategy. DiBartolomeo ran regression analyses and various calculations, but failed to reconcile them. For a decade, Markopolos raised the issue with the U.S. Securities and Exchange Commission, which has come under fire in Congress in recent weeks for failing to act on Markopolos's warnings.

Note: For lots more on corporate corruption from reliable, verifiable sources, click here.

U.S. moving toward czarism, away from democracy
2009-01-18, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2009-01-24 10:06:10
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/18/INGP158S4G.DTL

Every patriot should be concerned about the intensifying efforts to supplant democracy with something far more authoritarian. Call it American czarism. Czars - i.e., policymakers granted extralegal, cross-agency powers - have become increasingly prevalent in our government over the past century. Until now, this slow lurch toward czarism has primarily reflected the ancient, almost innate human desire for power and paternalistic leadership. In recent years, this culture of "presidentialism," as Vanderbilt Professor Dana Nelson calls it, has justified the Patriot Act, warrantless wiretaps and a radical theory of the "unitary executive" that aims to provide a jurisprudential rationale for total White House supremacy over all government. But only in the past three months has American czarism metastasized from a troubling slow-growth tumor to a potentially deadly cancer. In October, Congress relinquished its most basic oversight powers and gave Treasury Secretary Henry Paulson sole authority to dole out billions of bailout dollars to Wall Street. At the same time, it did nothing when Federal Reserve chairman Ben Bernanke used fiats to commit $5 trillion worth of new money, loan guarantees and loosened lending requirements ... all while he refused to tell the public who is receiving the largesse. Indeed, the Economist magazine's prediction that the "economic crisis may increase the attractiveness of the Chinese model of authoritarian capitalism" is coming true right here at home, as we seem ever more intent on replicating - rather than resisting - that model.

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

Congress Wants Details On Bailout Firms' Bonus Plans
2008-10-30, CNBC
Posted: 2009-01-16 08:49:25
http://www.cnbc.com/id/27423117

The hot-button issues of CEO pay and the Wall Street bailout may soon collide with the real world of Wall Street bonuses, taxpayer and shareholder anger over the financial crisis, and a Treasury secretary with deep roots on Wall Street. And that collision could be loud and ugly. Though what's commonly known as the Wall Street bailout package includes modest restrictions on CEO pay, it hardly prevents participating financial firms from paying bonuses to top executives and others. And in an environment of beaten-down stock prices, rising layoffs, recession and huge government bailouts, experts and legislators say big end-of-year bonuses will cause a firestorm of public outrage and likely provoke a Congressional backlash. "The corporate community doesn't seem to get it," says a seething Nell Minow, founder of the Corporate Library, which focuses on corporate governance issues. "If the corporate leaders don't come to the American people with some accountability, they are going to find themselves in a world of pain. Congress will set CEO pay." "People are going to be demanding that someone go to jail," say Rep. Peter DeFazio (D.-Ore), who says his constituents have applauded him for voting against the legislation. "It will require Democrats to revisit restrictions [on CEO pay]. " DeFazio says he would also recommend Congress "empower a division in the FBI and Justice Department to investigate the fraud and misdeeds that went on."

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

U.S. Debt Expected To Soar This Year
2009-01-03, Washington Post
Posted: 2009-01-09 08:36:16
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/02/AR20090102023...

With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world's appetite for financing U.S. government spending. For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world's mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free. But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history. With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

Note: For many revealing reports on the realities of the Wall Street bailout and its impacts on the national debt, click here.

Investors dump $89B in U.S. securities in historic fire sale
2009-01-04, USA Today
Posted: 2009-01-09 08:34:58
http://www.usatoday.com/money/markets/2009-01-04-foreign-investors-us-securit...

The deep river of private money that helped knit together the global economy has abruptly dried up, new government figures show. As the global financial crisis grew more severe this summer, foreigners sold almost $90 billion of U.S. securities — the greatest quarterly fire sale by overseas investors since the government began keeping track in 1960. U.S. investors also are retrenching; they unloaded about $85 billion worth of foreign holdings in the quarter, says the Commerce Department's Bureau of Economic Analysis. "We've had a global panic. Everyone is pulling their money home," says economist Adam Posen of the Peterson Institute in Washington, D.C. That's bad for economic growth in the U.S. because it threatens to starve capital-hungry companies and entrepreneurs. But it's especially serious for emerging-market countries that rely heavily on outside financing. Capital flows into countries such as South Korea, Turkey and Brazil were evaporating even before the mid-September Lehman Bros. bankruptcy made things worse. The reversal of private capital flows signals an abrupt end to a nearly two-decades-long era of financial globalization, says economist Brad Setser of the Council on Foreign Relations. Private flows into and out of the U.S. for purchases of stocks, corporate bonds and federal agency bonds have dropped from around 18% of economic output to near zero "in a remarkably short period of time," Setser says.

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

Execs of bailed-out banks got $1.6B last year, AP finds
2008-12-21, USA Today/Associated Press
Posted: 2009-01-02 09:20:54
http://www.usatoday.com/money/companies/management/2008-12-21-bank-execs-bail...

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals. The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management. The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines. The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help. Among the findings: • Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million. The New York-based company on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28. • John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.

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

Where'd the Bailout Money Go? Shhhh, It's a Secret
2008-12-22, ABC News/Associated Press
Posted: 2008-12-26 09:35:59
http://abcnews.go.com/Business/wireStory?id=6508158

It's something any bank would demand to know before handing out a loan: Where's the money going? But after receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it. "We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,"' said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. "We have not disclosed that to the public. We're declining to." The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest? None of the banks provided specific answers. "We're not providing dollar-in, dollar-out tracking," said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars. The answers highlight the secrecy surrounding the Troubled Assets Relief Program, which earmarked $700 billion—about the size of the Netherlands' economy—to help rescue the financial industry. There has been no accounting of how banks spend that money. "It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry," said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout. But, at least for now, there's no way for taxpayers to find that out.

Note: For more key information that the bankers don't want you to know, click here. For many revealing reports from reliable sources on the realities of the Wall Street bailout, click here.

The Madoff Economy
2008-12-19, New York Times
Posted: 2008-12-26 09:32:32
http://www.nytimes.com/2008/12/19/opinion/19krugman.html?partner=rss&emc=rss&...

The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend. Yet ... how different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole? The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole. Last year, the average salary of employees in “securities, commodity contracts, and investments” was more than four times the average salary in the rest of the economy. Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common. The incomes of the richest Americans have exploded over the past generation, even as wages of ordinary workers have stagnated. High pay on Wall Street was a major cause of that divergence. Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials ... who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms ... politicians have walked when money talked. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.

Note: This entire, penetrating article is well worth a read at the link above. For many revealing reports from reliable sources on the realities of the Wall Street bailout, click here.

UAW busting, Southern style
2008-12-18, Los Angeles Times
Posted: 2008-12-26 09:27:22
http://www.latimes.com/news/opinion/commentary/la-oe-raynor18-2008dec18,0,406...

The foreign nonunion auto companies located in the South have a plan to reduce wages and benefits at their factories in the United States. And to do it, they need to destroy the United Auto Workers. Last week, Senate Republicans from some Southern states went to work trying to do just that, on the foreign car companies' behalf. [Republican] representatives from states that subsidize companies such as Honda, Volkswagen, Toyota and Nissan first tried to force the UAW to take reductions in wages and benefits as a condition for supporting the auto industry bailout bill. When the UAW refused, those senators torpedoed the bill. They claimed that they couldn't support the bill without specifics about how wages would be "restructured." They didn't, however, require such specificity when it came to bailing out the financial sector. Their grandstanding, and the government's generally lackluster response to the auto crisis, highlight many of the problems that have caused our current economic mess: the lack of concern about manufacturing, the privileged way our government treats the financial sector, and political support given to companies that attempt to slash worker's wages. When one compares how the auto industry and the financial sector are being treated by Congress, the double standard is staggering. At Goldman Sachs ... employee compensation made up 71% of total operating expenses in 2007. In the auto industry, by contrast, autoworker compensation makes up less than 10% of the cost of manufacturing a car. Hundreds of billions were given to the financial-services industry with barely a question about compensation; the auto bailout, however, was sunk on this issue alone.

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

Ariz. police say they are prepared as War College warns military must prep for unrest
2008-12-17, Phoenix Business Journal
Posted: 2008-12-26 09:25:35
http://www.bizjournals.com/phoenix/stories/2008/12/15/daily34.html

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks. �Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,� said the War College report. The study says economic collapse ... and loss of legal order are among possible domestic shocks that might require military action within the U.S.. U.S. Sen. James Inhofe, R-Okla., and U.S. Rep. Brad Sherman, D-Calif., both said U.S. Treasury Secretary Henry Paulson brought up a worst-case scenario as he pushed for the Wall Street bailout in September. Paulson ... said that might even require a declaration of martial law, the two noted. State and local police in Arizona say they have broad plans to deal with social unrest, including trouble resulting from economic distress. The security and police agencies declined to give specifics, but said they would employ existing and generalized emergency responses to civil unrest that arises for any reason. �The Phoenix Police Department is not expecting any civil unrest at this time, but we always train to prepare for any civil unrest issue. We have a Tactical Response Unit that trains continually and has deployed on many occasions for any potential civil unrest issue,� said Phoenix Police spokesman Andy Hill.

Note: Use of military forces to maintain domestic order has been forbidden since 1878 by the Posse Comitatus Act. The Pentagon appears to be planning to abrogate this key support of civil liberties.

Why AIG Gets Billions, GM Gets Scorn
2008-12-12, U.S. News & World Report blog
Posted: 2008-12-26 09:19:55
http://www.usnews.com/blogs/flowchart/2008/12/12/why-aig-gets-billions-gm-get...

AIG, the huge insurance company, has so far gotten $173 billion worth of federal aid, because traders at one small division made bets on exotic securities that were so calamitous they threatened to bring down the whole company. So far, the amount of money the feds have pledged to this one firm equals nearly one-third of the nation’s defense budget. General Motors, America’s biggest automaker, has asked for a $10 billion federal loan, equal to one-seventeenth of what AIG has gotten – and Congress has said no. There were no rogue traders at GM, and the company’s problems have intensified in plain view, over several months, instead of coming from out of nowhere in a single, cataclysmic episode. Make sense? Doesn’t to me. So maybe if we look at each company a bit more closely, it will be clearer why the government favors companies like AIG over ones like GM. Does have AIG have friends in high places? You could say that. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both support the AIG bailout, and they’ve steered money to the company without Congressional approval. GM’s most important friends in Washington have been the Michigan Congressional delegation, which obviously doesn’t have the clout it used to. Paulson has actually argued against using part of the huge $700 billion financial bailout fund to help the automakers, because they can’t pass a “viability” test proving they’ll stay in business long enough to pay back the loans. But AIG hasn’t passed a viability test either, and without federal help there’s little doubt it would be in bankruptcy.

Note: At least someone is asking the right questions! For many highly revealing reports from reliable sources on the realities of the Wall Street bailout, click here.

Executive Pay Limits May Prove Toothless
2008-12-15, Washington Post
Posted: 2008-12-19 07:45:21
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/14/AR20081214026...

Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules. But at the last minute, the Bush administration insisted on a one-sentence change to the provision. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money. Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives. "The flimsy executive-compensation restrictions in the original bill are now all but gone," said Sen. Charles E. Grassley (Iowa), ranking Republican on of the Senate Finance Committee. Senators on the Finance Committee have expressed concern to Paulson and are now considering whether they should amend the law to apply the enforcement mechanism to all firms participating in the bailout.

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

Fed Refuses to Disclose Recipients of $2 Trillion
2008-12-12, Bloomberg News
Posted: 2008-12-19 07:44:03
http://www.bloomberg.com/apps/news?pid=20601109&sid=apx7XNLnZZlc

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral. Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression. The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. “If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC. The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP. Total Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA. “There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

Wall Street legend Bernard Madoff arrested over '$50 billion Ponzi scheme'
2008-12-12, Times of London
Posted: 2008-12-19 07:40:56
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5331997.ece

Shock and panic spread through the country clubs of Palm Beach and Long Island after Bernard L Madoff, a trading powerbroker for over four decades, allegedly confessed to a massive fraud that will cost his wealthy investors at least $50 billion, perhaps the largest swindle in Wall Street history. Mr Madoff, 70, a former Nasdaq stock chairman, was apparently turned in by his two sons and arrested on Thursday morning at his Manhattan apartment by the FBI. The FBI claims that three senior employees of Mr Madoff's investment firm - once a towering presence on Wall Street - turned up at his apartment on Wednesday to ask questions about the company's solvency. Two of them are believed to be his sons, Andrew and Mark, who have worked for their father for two decades. Mr Madoff told them that he was "finished", that he had "absolutely nothing", and that "it's all just one big lie". He said the investment arm of his firm was "basically a giant Ponzi scheme," and that it had been insolvent for years. A Ponzi scheme, named after the swindler Charles Ponzi, is a fraudulent investment operation that pays abnormally high returns to investors paid from money put into the scheme by subsequent investors, rather from real profits generated by share trading. The FBI complaint states that Mr Madoff told his sons he believed the losses from his scheme could exceed $50 billion. If that is the case, his fraud would be far greater than past Ponzi schemes and easily the greatest swindle perpetrated by one man.

Note: If a former Nasdaq chairman was committing this kind of blatant fraud while still the chairman of Nasdaq, what does it say about the level of corruption on Wall Street? For a treasure trove of reports from reliable sources exposing the realities of the Wall Street corruption, click here.

Jim Rogers calls most big U.S. banks "bankrupt"
2008-12-11, Reuters News
Posted: 2008-12-19 07:38:02
http://www.reuters.com/article/InvestmentOutlook09/idUSTRE4BA5CO20081211

Jim Rogers, one of the world's most prominent international investors, ... called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded. Co-founder with George Soros of the Quantum Fund, [Rogers] said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital. "Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers. "What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics." While not saying how long the U.S. economic recession will last, he said conditions could ultimately mirror those of Japan in the 1990s. "The way things are going, we're going to have a lost decade too, just like the 1970s," he said. "Governments are making mistakes," he said. "They're saying to all the banks, you don't have to tell us your situation. You can continue to use your balance sheet that is phony.... All these guys are bankrupt, they're still worrying about their bonuses, they're still trying to pay their dividends, and the whole system is weakened."

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

Idled workers occupy factory in Chicago
2008-12-06, Chicago Tribune/Associated Press
Posted: 2008-12-12 11:55:19
http://www.chicagotribune.com/news/chi-ap-il-workersoccupyfact,0,1928458.story

Outraged and determined Chicago factory workers who were abruptly laid off this week have occupied their former workplace and say they won't leave until they get the severance and vacation pay they say they're owed. The employees say they received three days notice their plant was closing. In the second day of a sit-in on the factory floor Saturday, about 250 union workers occupied the building in shifts while union leaders outside criticized a Wall Street bailout they say is leaving laborers behind. Leah Fried, an organizer with the United Electrical Workers, said the Chicago-based vinyl window manufacturer failed to give its 300 employees the 60 days' notice required by law before shutting. She said the company can't pay employees because its creditor, Charlotte, N.C.-based Bank of America, won't let them. Bank of America received $25 billion from the government's financial bailout package. The company said in a statement to news outlets Saturday that it isn't responsible for Republic's financial obligations to its employees. "Across cultures, religions, union and nonunion, we all say this bailout was a shame," said Richard Berg, president of Teamsters Local 743. "If this bailout should go to anything, it should go to the workers of this country." Outside the plant, protesters wore stickers and carried signs that said, "You got bailed out, we got sold out."

Note: For many revealing reports on the Wall Street bailout from major media sources, click here.

All Fall Down
2008-11-26, New York Times
Posted: 2008-12-12 11:54:14
http://www.nytimes.com/2008/11/26/opinion/26friedman.html?partner=rss&emc=rss...

I spent Sunday afternoon brooding over a [New York Times] front-page article, entitled ["Citigroup Saw No Red Flags Even as It Made Bolder Bets”]. In searing detail it exposed ... how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics. So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so. Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including ...the former Treasury Secretary Robert Rubin, were ... so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it. These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion.

Note: For many revealing reports on the Wall Street bailout from major media sources, click here.

US diluted loan rules before crash
2008-12-01, ABC News/Associated Press
Posted: 2008-12-05 10:54:31
http://abclocal.go.com/wpvi/story?section=news/business&id=6532267

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents. "Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job. Bowing to aggressive lobbying - along with assurances from banks that the troubled mortgages were OK - regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way. The administration's blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s. Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Those proposals all were stripped from the final rules.

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

Bailout Oversight Lacking, GAO Says
2008-12-03, Washington Post
Posted: 2008-12-05 10:51:08
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/02/AR20081202022...

The Bush administration has failed to adequately oversee its $700 billion bailout program and must move rapidly to guarantee that banks are complying with the plan's limits on conflicts of interest and lavish executive compensation, congressional investigators said yesterday. The new report by the Government Accountability Office, the nonpartisan investigative arm of Congress, said the Treasury Department has yet to impose necessary safeguards or decide how to determine whether the program is achieving its goals. The auditors said it was too soon for them to tell whether the bailout was working. "The rapid pace of implementation and evolving nature of the program have hampered efforts to put a comprehensive system of internal control in place," the report said. "Until such a system is fully developed and implemented, there is heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner." So far, the rescue package has provided at least $150 billion in capital infusions to 52 financial institutions, the auditors said. They added that no applications for funding were denied by the Treasury. The congressional auditors urged Treasury officials to determine how each bank receiving bailout money is using the money and whether they are using it in a way consistent with the intent of the law. Several congressional leaders have criticized financial firms for hoarding the money instead of using it to lend to borrowers.

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

Economic rescue could cost $8.5 trillion
2008-11-30, Los Angeles Times
Posted: 2008-12-05 10:49:37
http://www.latimes.com/business/la-fi-pricetag30-2008nov30,0,7549258.story

With its decision last week to pump an additional $1 trillion into the financial crisis, the government eliminated any doubt that [it has] no hesitation in pledging to spend previously almost unimaginable sums of money and running up federal budget deficits on a scale not seen since World War II. Indeed, analysts warn that the nation's next financial crisis could come from the staggering cost of battling the current one. Just last week, new initiatives added $600 billion to lower mortgage rates, $200 billion to stimulate consumer loans and nearly $300 billion to steady Citigroup, the banking conglomerate. That pushed the potential long-term cost of the government's varied economic rescue initiatives, including direct loans and loan guarantees, to an estimated total of $8.5 trillion -- half of the entire economic output of the U.S. this year. The spending already has had a dramatic effect on the federal budget deficit, which soared to a record $455 billion last year and began the 2009 fiscal year with an amazing $237-billion deficit for October alone. Analysts say next year's budget deficit could easily bust the $1-trillion barrier. "I didn't think we'd see that for a long time," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "There's a huge risk of another economic crisis, a debt crisis, once we get on the other side of this one." Once the financial crisis eases, higher interest rates and soaring inflation will be risks.

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

Credit-card industry may cut $2 trillion lines: analyst
2008-12-01, Reuters News
Posted: 2008-12-05 09:43:46
http://www.reuters.com/article/topNews/idUSTRE4B01HI20081201

The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said. The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted. "In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent." Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults. A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said. Mortgages and credit cards are now dominated by five players who are all pulling back liquidity, making reductions in consumer liquidity seem unavoidable, she said. "We are now beginning to see evidence of broad-based declines in overall consumer liquidity. Already, we have witnessed the entire mortgage market hit a wall, and we believe it will, for the first time ever, show actual shrinkage over the next few months," she wrote. "In a country that offers hundreds of cereal and soda pop choices, the banking industry has become one that offers very few choices", Whitney wrote in a note dated November 30. "Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.

Note: This article, in pointing out that the banking industry offers few choices for consumers, fails to mention that the industry is rapidly becoming extremely concentrated, with major bank failures and takeovers accelerating due to the financial crisis on Wall Street. And the bailout from the Fed and Treasury has encouraged this concentration through huge tax breaks and risk protections. For many revealing reports on the Wall Street bailout from reliable sources, click here.

15 corporate chieftains each top $100 million in 5 years
2008-11-20, Denver Post/Wall Street Journal
Posted: 2008-12-05 09:42:11
http://www.denverpost.com/business/ci_11036514

The credit bubble has burst. The economy is tanking. Investors in the U.S. stock market have lost more than $9 trillion since its peak a year ago. But in industries at the center of the crisis, plenty of top officials managed to emerge with substantial fortunes. Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak. The study ... showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period. The issue of compensation and other rewards for corporate executives is front-and-center in the wake of the financial meltdown. In the tech bubble of the late 1990s, more than 50 individuals each made more than $100 million from selling shares just prior to the crash. Many had just founded companies that had never turned a profit. "The system tends to reward people for participating in bubbles," says Roy C. Smith, a finance professor at New York University's business school.

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

With economic crisis making credit scarce, bartering is booming
2008-11-21, Los Angeles Times/Boston Globe
Posted: 2008-12-05 08:51:32
http://www.boston.com/news/nation/articles/2008/11/21/with_economic_crisis_ma...

As the financial crisis makes cash and credit increasingly scarce, the ancient custom of bartering is booming. Cost-conscious consumers are getting creative to make every dollar count. Some are dusting off books, DVDs, video games, and other little-used items to trade for necessities or gifts. Others are exchanging services such as house painting for Web design or guitar lessons for clerical work. These newly minted cheapskates are seeing the world through green eyeshades, cutting costs wherever and whenever they can. "In the last couple of months, it's been like a bucket of cold water in our faces," said Mary Hunt, founder of money management site DebtProofLiving.com. "It has woken us up. We are paying attention to what things cost." Every recession triggers bartering, economists say. But the Internet has given the practice unprecedented reach. Before the Web connected strangers from anywhere, bartering was limited by geography and social circle. As a form of everyday currency, bartering has downsides. It's far more time-consuming and tricky to negotiate the exchange of goods and services than it is to simply plunk down some bills. Sometimes prospective swappers flake out or try to rip off their trading partners. Transactions don't always go smoothly. Still, exchanging something you no longer want or need for something you do is appealing to many. A growing number of websites, including TradeaFavor.com and JoeBarter.com, cater to the cost-conscious. There were 148,097 listings in the barter category of Craigslist in September, up sharply from 83,554 a year earlier.

Financial Bailout Balloons to the Trillions
2008-11-25, ABC News
Posted: 2008-11-28 12:21:43
http://abcnews.go.com/Business/Economy/story?id=6332892

The government's financial bailout will be the most expensive single expenditure in American history, potentially costing around $7.5 trillion -- or half the value of all the goods and services produced in the United States last year. In comparison, the total U.S. cost of World War II adjusted for inflation was $3.6 trillion. The bailout will cost more than the total combined costs in today's dollars of the Marshall Plan, the Louisiana Purchase, the Korean War, the Vietnam War and the entire historical budget of NASA, including the moon landing, according to data compiled by Bianco Research. It remains to be seen whether the government's multipronged approach to bail out banks, stimulate spending and buy up mortgages will revive the economy, but as the tab continues to grow so does concern over where the government will find the money. Monday the government guaranteed an additional $306 billion to bail out Citigroup, and today Treasury Secretary Henry Paulson pledged $800 billion to make credit more available to consumers and small businesses, and to buy up mortgages from Fannie Mae and Freddie Mac. Congress last month allocated $700 billion for an emergency bailout of some of Wall Street's most storied firms by purchasing their troubled assets. The funds allocated through the Troubled Assets Relief Program are but a small part of the government's overall bailout spending. Bailout programs also include a Federal Reserve plan to buy as much as $2.4 trillion in short-term notes called commercial paper that began Oct. 27, and an FDIC plan to spend $1.4 trillion to guarantee bank-to-bank loans that commenced Oct. 14, according to Bloomberg News, which first compiled the total cost of the bailout.

Note: $7.5 trillion amounts to about $25,000 for every person in the U.S. What's going on here? For many revealing reports on the realities of the Wall Street bailout, click here.

Citigroup gets a monetary lifeline from feds
2008-11-25, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2008-11-28 12:15:29
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/24/BUST14B71M.DTL

The bailouts keep coming, and they seem to be getting worse for taxpayers. The deal worked out over the weekend to prevent the collapse of Citigroup "is a terrible deal for taxpayers," says Campbell Harvey, a Duke University global finance professor. "Some intervention was necessary. But the terms of the intervention basically shafted the U.S. taxpayer." Under the deal, the U.S. government will invest $20 billion in Citigroup preferred stock (on top of its previous $25 billion capital injection from the Troubled Asset Relief Program) and guarantee up to $306 billion in mortgage and other assets. Citigroup would absorb the first $29 billion in losses on that asset pool. Losses exceeding $29 billion would be shared 90 percent by the government and 10 percent by Citigroup. What do taxpayers get for taking on this risk? Citigroup will pay an 8 percent dividend on the preferred stock or $560 million a year. By comparison, when Warren Buffett's Berkshire Hathaway recently invested $5 billion in Goldman Sachs and $3 billion in General Electric, it got preferred stock that pays a 10 percent dividend. The government also gets warrants to purchase about $2.7 billion worth of Citigroup common stock at $10.61 per share. Citigroup's shares closed at $5.95 per share Monday, up $2.18 from Friday. For the warrants to become profitable, the common shares would have to nearly double.

Note: The answer to the question of what taxpayers get should be essentially nothing. Only Citigroup shareholders will see the benefits mentioned, and very few taxpayers are shareholders. Money is being thrown around like never before. For many revealing reports on the realities of the Wall Street bailout, click here.

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
2008-11-24, Bloomberg News
Posted: 2008-11-28 12:14:08
http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis. When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in. “Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

Note: How is it possible that trillions of taxpayer dollars are being thrown around, yet Congress is not being told where the money is going? For revealing information on how the Fed manipulates government, click here.

Paulson makes it clear: He's in charge
2008-11-13, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2008-11-22 09:22:39
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/13/BUUK1439IF.DTL

Henry Paulson's speech Wednesday made it pretty clear: The Treasury secretary has seized control of the financial system. "He is absolutely the most powerful person in the country. Maybe the world," says Wall Street accounting expert Robert Willens. The most telling line in his speech came when Paulson was explaining why he did a 180-degree turn with money approved by Congress under the $700 billion bailout bill. Instead of using it to buy troubled mortgage assets from banks, as clearly envisioned, he scrapped that idea and used it to make equity investments in banks. "In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks," he said. If Paulson bothered consulting with President Bush, he didn't mention it. In fact, he didn't even mention the president until the tail end of his speech, when he talked about the global summit Bush is hosting this weekend. I can understand why Paulson wants to distance himself from an unpopular president, especially one who has little facility for complex financial matters. But Bush is [the] president and even President-elect Barack Obama knows there can be only one president at a time. And his last name is not Paulson. In September, when Paulson asked for a $700 billion blank check from Congress to fix the financial markets, he got a lot of blowback. By the time Congress was done with his proposal, it had grown from 2 1/2 pages to more than 450. Yet it now appears that Paulson got the blank check he wanted.

Note: Why doesn't Congress have some say in what is done with this $700 billion? That's over $3,000 for every taxpayer in the U.S. which is being spent with practically no accountability. Is this what democracy looks like? For many key articles revealing the hidden realities of the bailout, click here.

Warning: King Henry's bailout like Rummy's Iraq
2008-11-10, MarketWatch (A Wall Street Journal Digital Network Website)
Posted: 2008-11-22 09:20:48
http://www.marketwatch.com/news/story/reagonomics-hides-sleeper-cells-harbori...

So you thought Barack Obama's victory signaled the death of Reaganomics? Wrong, wrong: Reaganomics is very much alive. In a subtle, bloodless coup, the Reaganomics ideology magically pulled victory out of the jaws of defeat in the meltdown. The magic happened fast and quietly, in the shadows, while you were in a trance, distracted by the election drama. Recently Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, framed the issue perfectly: "Has the Treasury partially nationalized the private banks, as we have been told? Or is it the other way around?" The question was rhetorical, the answer painfully clear. In a few weeks Wall Street did the old bait and switch, emerging from an economic and market disaster with new powers, in total control of America. And thanks to Treasury Secretary Henry Paulson's brilliant bailout coup, Reaganomics is now the new "sleeper cell" quietly hidden inside the Obama White House and America's Treasury, where it will be for a long time to come. Listen closely folks: You and your government are and will continue being conned out of trillions. Klein further exposed this insanity in a recent Rolling Stone article, "The New Trough: The Wall Street bailout looks a lot like Iraq, a 'free-fraud zone' where private contractors cash in on the mess they helped create." Paulson's privatization, outsourcing and management of the $700 billion bailout has the exact same Reaganomics ideological, strategic and deceptive footprints that President George W. Bush and former Defense Secretary Donald Rumsfeld used to privatize, outsource and mismanage the costly Iraq War blunder.

Note: For the powerfully revealing article by Naomi Klein mentioned in the article above, click here. Speaking on Tulsa Oklahoma’s 1170 KFAQ, Senator James Inhofe of Oklahoma (Republican) has revealed that Treasury Secretary Henry Paulson was the source of the threat of martial law in the US if the $700 billion bailout bill was not passed that was exposed on the House floor by Rep. Brad Sherman. For many key articles revealing the hidden realities of the bailout, click here.

Financial Crisis Tab Already In The Trillions
2008-11-18, CNBC
Posted: 2008-11-22 09:18:37
http://www.cnbc.com/id/27719011

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track. CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved. Try $4.28 trillion dollars. That's $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources. Not only is it an astronomical amount of money, it's a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and news releases. Strictly speaking, not every cent is a direct result of what's called the financial crisis, but it is arguably related to it. Some 68-percent of the sum falls under the Federal Reserve's umbrella, while another 16 percent is the under the Troubled Asset Relief Program, TARP, as defined under the Emergency Economic Stabilization Act, signed into law in early October. The TARP alone is bigger than virtually any other US government endeavor dating back to the Louisiana Purchase.

Note: That's over $10,000 per man, woman, and child in the U.S. Click on the link above to view a highly informative slideshow, the "Biggest Budget Items in US History," comparing the Wall Street bailout to famous historic government expenditures, and a chart, the "Financial Crisis Balance Sheet," detailing the many components of the bailout. For many key articles revealing the hidden realities of the bailout, click here.

Ditch the smooth transition. The people voted for change
2008-11-14, The Guardian (One of the U.K.'s leading newspapers)
Posted: 2008-11-22 09:11:34
http://www.guardian.co.uk/commentisfree/2008/nov/14/obama-white-house-wall-st...

The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bail-out is not merely incompetent: it is borderline criminal. In a moment of high panic in September, the US treasury pushed through a radical change in how bank mergers are taxed - a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140bn in tax revenue, legislators found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "[the] treasury had no authority to issue the [tax change] notice". Of equally dubious legality are the equity deals the treasury has negotiated with many of the banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals: "Any use of these funds for any purpose other than lending - for bonuses, for severance pay, for dividends, for acquisitions of other institutions ... is a violation of the act." Yet this is exactly how the funds are being used. Then there is the nearly $2 trillion that America's central bank, the Federal Reserve, has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg news service believes this secrecy violates the law and has filed a federal suit demanding full disclosure. Yet the Democrats are either openly defending the administration or refusing to intervene. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Note: For many key articles revealing the hidden realities of the bailout, click here.

Treasury gives banks multi-billion tax break windfall
2008-11-11, San Francisco Chronicle/Associated Press
Posted: 2008-11-14 08:28:51
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/11/BUTP141OVI.DTL

Some of the nation's biggest banks are in for a windfall – on top of the $700 billion government bailout – thanks to a new tax policy quietly issued by the Treasury Department. The notice gives big tax breaks to companies that acquire struggling banks hit hard by the mortgage crisis. In some cases, the tax breaks could exceed the cost of acquiring the banks, according to analyses by private tax experts. The change could cost the Treasury as much as $140 billion by enabling firms that acquire struggling banks to use more losses incurred by those banks to offset their own taxable profits. San Francisco's Wells Fargo & Co., which made a bid to acquire Wachovia Corp. just days after the notice was issued, stands to reap about $20 billion in additional tax savings because of the change, according to the analyses. Wells Fargo paid $14.8 billion in a stock deal to buy Wachovia. The notice was issued Sept. 30 as Congress debated the $700 billion bailout plan. Some members of Congress are upset that such a sweeping tax change was issued with no public hearings or congressional input. "I am concerned that the notice, which was never debated by Congress, could end up costing taxpayers tens of billions of more dollars on top of the hundreds of billions of dollars already approved by Congress in the financial rescue plan," Sen. Chuck Schumer, D-N.Y., said in a letter last week to Treasury Secretary Henry Paulson. Some tax lawyers questioned the legality of the notice. Before the notice was issued, the merged bank could write off only a limited amount of the losses. The notice removed those restrictions, enabling the acquiring banks to make huge reductions in their tax liabilities.

Note: With no limitations placed on the nine biggest banks receiving many billions of dollars in bailout money, they are free to buy up smaller banks. And they will likely receive huge tax breaks, sometimes even greater than the purchase price, for doing so! For many revealing, reliable reports on the Wall Street bailout, click here.

Lobbyists Swarm the Treasury for Piece of Bailout Pie
2008-11-12, New York Times
Posted: 2008-11-14 08:26:19
http://www.nytimes.com/2008/11/12/business/economy/12lobbying.html?partner=rs...

When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool. Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express. Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed last month, the Treasury Department has committed all but $60 billion. The shrinking pie — and the growing uncertainty over who qualifies — has thrown Washington’s legal and lobbying establishment into a mad scramble. The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for [other more] improbable candidates. The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s. Adding to the frenzy is the possibility that the next Congress and White House could change the rules further. President-elect Barack Obama has added his voice by proposing that the struggling automakers get federal aid, which could mean giving them access to the fund. Meanwhile, the list of candidates for a piece of the bailout keeps growing. American Express won approval Monday to transform itself into a bank holding company, making the giant marketer of credit cards eligible for an infusion.

Note: American Express is a credit-card company; if it failed due to losses on its risky, predatory lending, its failure would present no "systemic risk" to the financial system as a whole. But by turning itself into a "bank holding company," as it just won approval to do, it can scoop up billions of easy money from the government anyway! For many revealing and reliable reports on the Wall Street bailout, click here.

Government Rescue Spending: Clear or Cloudy?
2008-11-11, ABC News
Posted: 2008-11-14 08:24:23
http://abcnews.go.com/Business/Economy/story?id=6225744&page=1

After weeks of sometimes frenzied efforts by the federal government to rescue the financial system ... critics say there are many questions but few answers about the work performed by the Treasury Department and the Federal Reserve. "The bailout, the Treasury, the Federal Reserve -- it's like a three-card monte game, you don't know where the money's coming from, you don't know who it's going to, and I think the public has every right to be outraged by this," said Bill Allison, a senior fellow at the Sunlight Foundation, a government transparency watchdog group. Gerald O'Driscoll, a former vice president at the Federal Reserve Bank of Dallas ... said he worried that the failure of the government to provide more information about its rescue spending could signal corruption. "Nontransparency in government programs is always associated with corruption in other countries, so I don't see why it wouldn't be here," he said. Questions about transparency at the Federal Reserve, in particular, have prompted a lawsuit: Bloomberg L.P., which operates the news agency Bloomberg News, is suing the Fed for the release of information on its lending to private financial institutions. "We really don't know anything," Matthew Winkler, the editor-in-chief of Bloomberg News, told ABCNews.com. "All we know is something close to 2 trillion is being used and that money is the taxpayers'. ... We don't know whom it's being lent to and for what purpose because we can't see it because it isn't disclosed."

Note: For many revealing and reliable reports on the Wall Street bailout, click here.

Fed Defies Transparency Aim in Refusal to Disclose
2008-11-10, Bloomberg News
Posted: 2008-11-14 08:22:23
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return. Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure. The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months. The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress. Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3.

Note: For many revealing and reliable reports on the Wall Street bailout, click here.

A.I.G. Secures $150 Billion Assistance Package
2008-11-11, New York Times
Posted: 2008-11-14 08:21:04
http://www.nytimes.com/2008/11/11/business/11insure.html?partner=rss&emc=rss&...

The American International Group said on Monday that it ... had secured a new $150 billion government assistance package intended to stem the bleeding from its complex financial contracts. A central component of the new package will be to get the most tainted assets out of the company, in an effort to stop the collateral calls that have been rapidly draining A.I.G.’s cash. A.I.G.’s trading partners in these financial contracts will largely be made whole in the process. [An] important feature will be government investments of about $50 billion to create special-purpose entities to relieve the company of its most tainted assets. About $30 billion of the government money will be used to buy complex debt securities that were insured by A.I.G. and about $20 billion more will be used to buy securities backed by home loans. A.I.G.’s counterparties — financial institutions in the United States and Europe — have not borne significant losses on the financial contracts that led A.I.G. to the brink, and the new program suggests they will not. “We’re funding somebody on the other side” of A.I.G.’s derivatives contracts, said Lynn E. Turner, a former chief accountant with the Securities and Exchange Commission. Neither A.I.G. nor the federal government has been willing to provide the names of the company’s biggest counterparties, or their amount of exposure. “We’ve had way too many things here that nobody knows anything about,” said Mr. Turner, who is on the Treasury’s Advisory Committee on the Auditing Profession. “That’s why no one has faith in the capital markets.”

Note: The culture of secrecy around this bailout using nearly $1 trillion of taxpayer money is appalling. For many revealing and reliable reports on the Wall Street bailout, click here.

New Terrain for Panel on Bailout
2008-11-04, New York Times
Posted: 2008-11-14 08:16:40
http://www.nytimes.com/2008/11/04/business/economy/04bailout.html?partner=rss...

Having been handed vast authority and almost no restrictions in the bailout law that Congress passed ... a committee of five little-known government officials, aided by a bare-bones staff of 40, is picking winners and losers among thousands of banks, savings and loans, insurers and other institutions. It is new and unfamiliar terrain for the officials, who are making monumental decisions — a form of industrial policy, some critics say — that contradict the free market philosophy they usually espouse. Predictably, the process is stirring alarm from Capitol Hill to Wall Street. Among the problems, critics say, is that despite earlier promises of transparency, the process is shrouded in secrecy, its precise goals opaque. Treasury officials have refused to disclose their criteria for deciding which banks ... get money. And officials have yet to say they even have a broader strategy, though banking executives are convinced the government wants to encourage acquisitions. Already, critics from Capitol Hill to Wall Street are lashing out at the program, saying the banks are misusing the capital infusions by hoarding the money rather than lending it. The government, the critics say, is wrongly steering funds to banks to take over weaker rivals. All this comes after Mr. Paulson abruptly shifted the focus of the program to injecting capital rather than buying distressed mortgage-related assets from the banks. This meant that Congress had never debated the details of how the government ought to carry out a recapitalization.

Note: With the intense secrecy and all of the lobbyist and big guns for banking fighting for hundreds of billions of dollars given practically free by the government, do you really think these "five little-known government officials" will be impartial in their decisions? For many revealing, reliable reports on the Wall Street bailout, click here.

This Bailout Doesn’t Pay Dividends
2008-10-21, New York Times
Posted: 2008-11-14 08:13:08
http://www.nytimes.com/2008/10/21/opinion/21stein.html?partner=rssuserland&em...

Secretary Paulson [has been] described as playing the role of the Godfather, making the banks [a bailout] offer they could not refuse. But in one important respect, he was more Santa Claus than Vito Corleone: the agreement allowed the banks to continue paying dividends to common shareholders. These dividends, if they are paid at current levels, will redirect more than $25 billion of the $125 billion to shareholders in the next year alone. A significant fraction of [the bailout] money will wind up in shareholders’ pockets — and thus be unavailable to plug the large capital hole on the banks’ balance sheets. The officers and directors of the nine banks will be among the leading beneficiaries of the dividend payout. Their personal take of the dividends will amount to approximately $250 million in the first year. Why would the banks want to maintain large dividend payouts when they’ve had such a hard time borrowing, are starved of cash, and the credit markets believe that they run a significant risk of defaulting? Shouldn’t these distressed banks be marshalling all of the financial resources available to them to ensure their viability? Here’s why: Each dollar paid out as a dividend today is a dollar that cannot be seized by creditors in the event of bankruptcy. For a distressed company, dividends are not in the interest of the enterprise as a whole (shareholders and lenders taken together), but only in the interest of shareholders. They are an attempt by shareholders to beat creditors out the door. The government should close the door by putting an immediate stop to the dividend payouts of any banks receiving direct federal support.

Note: Is the fox guarding the hen house? For many revealing, reliable reports on the banking bailout, click here.

Waxman Seeks Bank Data On Use of Bailout Funds
2008-10-29, Washington Post
Posted: 2008-11-07 09:09:26
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/28/AR20081028034...

Congressional investigators yesterday demanded that the nation's nine largest banks prove they are not using an emergency infusion of $125 billion in taxpayer funds to lavish their executives with wealthy bonuses. "I question the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses, especially after one of the financial industry's worst years on record," [Rep. Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform,] wrote in a letter to the banks. Lawmakers across the political spectrum want to ensure that the government's bailout program results in increased lending, not bigger paydays for executives. But a new study suggests that financiers are still bullish about their bonuses. More than two-thirds of Wall Street professionals are expecting a bonus this year, and 36 percent are anticipating a larger bonus than last year, according to a survey by eFinancialCareers, a career networking company. "Some experts have suggested that a significant percentage of this compensation could come in year-end bonuses and that the size of the bonuses will be significantly enhanced as a result of the infusion of taxpayer funds," Waxman said. In his letter to the banks, Waxman asked them to provide detailed data on compensation packages since 2006, as well as the projected salaries and bonuses for the rest of the year. The request was sent to Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, State Street, and Wells Fargo.

Note: For extensive coverage of continuing revelations about the Wall Street bailout, click here.

White House defends money for banks
2008-10-30, Washington Post
Posted: 2008-11-07 09:08:14
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/30/AR20081030022...

Under fire from Democrats and Republicans alike, the White House ... defended giving billions of bailout dollars to banks that plan to reward shareholders and executives -- or even buy other banks. Allowing banks to engage in such normal business activities actually could help loosen lending and revive the sagging economy, said Ed Lazear, chairman of the Council of Economic Advisers. He said the administration would not impose any conditions on banks beyond those required when Congress created the bailout program, which authorized the government to buy stock in financial institutions. Lazear was put before the cameras in the White House briefing room amid a rising chorus of complaints from lawmakers about the latitude that banks will have when they receive bailout money from Washington. That bailout was originally sold by the administration as a plan for the government to purchase toxic mortgage-based assets from financial institutions, to get them off their books and inspire the resumption of normal lending. After passage, though, the administration decided the better course would be to devote $250 billion into buying ownership stakes in banks. With taxpayers' money flowing into their vaults, banks are going ahead with paying dividends to shareholders, giving bonuses to top executives and acquiring competitors. Lawmakers are asking why banks with the money to do those things need taxpayer-funded help. The rescue legislation included some limits on executive compensation, considered weak by many. And while it does not allow institutions receiving the money to increase dividends, it does not prevent them from paying those dividends.

Note: For extensive coverage of continuing revelations about the Wall Street bailout, click here.

Banks Owe Billions to Executives
2008-10-31, The Wall Street Journal/wealthbulletin.com
Posted: 2008-11-07 09:07:11
http://www.wealth-bulletin.com/home/content/3352363539/

Financial giants getting injections of federal cash owed their executives more than $40 billion for past years' pay and pensions as of the end of 2007, a Wall Street Journal analysis shows. The government is seeking to rein in executive pay at banks getting federal money. But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces. The sums are mostly for special executive pensions and deferred compensation, including bonuses, for prior years. Some examples: $11.8 billion at Goldman Sachs Group Inc., $8.5 billion at J.P. Morgan Chase & Co., and $10 billion to $12 billion at Morgan Stanley. Few firms report the size of these debts to their executives. In most cases, the Journal calculated them by extrapolating from figures that the firms do have to disclose. Most firms haven't set aside cash or stock for these IOUs. They are a drag on current earnings and when the executives depart, employers have to pay them out of corporate coffers. [Such] liabilities grew especially high in the financial industry, with its tradition of lavish pay. The liabilities are an essentially hidden obligation. Even when the debts to their executives total in the billions, most companies lump them into "other liabilities"; only a few then identify amounts attributable to deferred pay.

Note: For extensive coverage of continuing revelations about the Wall Street bailout, click here.

Effectiveness of AIG's $143 Billion Rescue Questioned
2008-11-03, Washington Post
Posted: 2008-11-07 09:06:01
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/02/AR20081102021...

A number of financial experts now fear that the federal government's $143 billion attempt to rescue troubled insurance giant American International Group may not work, and some argue that company shareholders and taxpayers would have been better served by a bankruptcy filing. The Treasury Department leapt to keep AIG from going bankrupt on Sept. 16, and in the past seven weeks, AIG has drawn down $90 billion in federal bailout loans. But some key AIG players argue that bankruptcy would have offered more structure and greater protections during a time of intense market volatility. Echoing some other experts, Ann Rutledge, a credit derivatives expert, ... said she ... fears that the government is papering over the problem with a quick fix that was not well planned. "What we see now are a lot of games by the government to keep these institutions going with a lot of cash," she said. "This is to fill holes in companies' balance sheets, and they're trying to hold at bay the charges that our financial system is insolvent." As AIG has rapidly eaten through the loan money, the Fed has twice expanded its original $85 billion bailout -- which itself was the largest government bailout of a private company in U.S. history. Earlier last month, the Fed ... gave AIG $38 billion more in credit for securities lending to try to keep the firm from drawing down its first Fed loan too quickly. Then on Thursday, the Fed agreed to let AIG borrow $20 billion from a larger commercial paper bailout fund it had set up days earlier for all institutions that lend money to each other. If the company had filed for Chapter 11 bankruptcy protection, AIG could have frozen the crippling collateral calls.

Note: For extensive coverage of continuing revelations about the Wall Street bailout, click here.

Was There a Loan It Didn’t Like?
2008-11-02, New York Times
Posted: 2008-11-07 09:04:44
http://www.nytimes.com/2008/11/02/business/02gret.html?partner=rssuserland&em...

As a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what. “At WaMu it wasn’t about the quality of the loans; it was about the numbers,” Ms. Cooper says. “They didn’t care if we were giving loans to people that didn’t qualify. Instead, it was how many loans did you guys close and fund?” When underwriters refused to approve dubious loans, they were punished, she says. In February 2007 ... the pressure became intense. WaMu executives told employees they were not making enough loans and had to get their numbers up, she says. “They started giving loan officers free trips if they closed so many loans, fly them to Hawaii for a month,” Ms. Cooper recalls. “One of my account reps went to Jamaica for a month because he closed $3.5 million in loans that month. If a loan came from a top loan officer, they didn’t care what the situation was, you had to make that loan work,” she says. One loan file was filled with so many discrepancies that she felt certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor. Ms. Cooper says that her bosses placed her on probation for 30 days for refusing to approve the loan and that her team manager signed off on the loan.

Note: For lots more on corporate corruption from reliable sources, click here.

Treasury could bail out any industry
2008-10-30, San Francisco Chronicle/Associated Press
Posted: 2008-11-07 09:01:21
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/30/BU1D13QM6S.DTL

As the list of ailing companies seeking government help grows, it is anybody's guess where the Treasury Department's largesse will stop. The $700 billion bailout bill is so vague that virtually any U.S. company could be eligible for government help. While the capital infusions announced this month will be directed only to banks, Treasury spokeswoman Brookly McLaughlin confirmed that the law allows the department to create other rescue programs "open to a broader set of financial institutions." As the bill is written, "financial institutions" don't have to be banks or financial entities. In theory, any company could declare itself a financial institution and ask the Treasury Department to grant it temporary aid if its rescue is deemed "necessary to promote financial market stability." "Talk about the barn doors being left open - it's like they left off the walls and roof, too," said Bert Ely, an independent banking consultant. He suggested that under the bill, an airline could transfer future revenue streams into a subsidiary and ask the government to buy shares in that new "financial institution." Representatives of the auto, insurance and other industries are already seeking government help, indicating they think they qualify because of their financing units. Airlines and home builders are lobbying for government help to prop them up through the economic downturn - either under the bailout bill or some other legislation. And if insurance and auto lobbyists succeed in their efforts to tap the bailout money, experts said other industries will probably follow.

Note: For extensive coverage of continuing revelations about the Wall Street bailout, click here.

So When Will Banks Give Loans?
2008-10-25, New York Times
Posted: 2008-10-31 10:19:49
http://www.nytimes.com/2008/10/25/business/25nocera.html?partner=rssuserland&...

“Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?” It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question [during] an employee-only conference call. The JPMorgan executive who was moderating the employee conference call didn’t hesitate to answer. “What we ... think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way.” Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction. In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: “It couldn’t be clearer if they had taken out an ad.”

Note: Was the real purpose of the "bailout" to strengthen the biggest banks by enabling them to gobble up the smaller ones at the public's expense? No wonder the legislation was rushed through without discussion! For lots more highly revealing reports on the Wall Street bailout, click here.

U.S. Is Said to Be Urging New Mergers in Banking
2008-10-21, New York Times
Posted: 2008-10-31 10:18:24
http://www.nytimes.com/2008/10/21/business/21plan.html?partner=rssuserland&em...

In a step that could accelerate a shakeout of the nation’s banks, the Treasury Department hopes to spur a new round of mergers by steering some of the money in its $250 billion rescue package to banks that are willing to buy weaker rivals, according to government officials. As the Treasury embarks on its unprecedented recapitalization, it is becoming clear that the government wants not only to stabilize the industry, but also to reshape it. Two senior officials said the selection criteria would include banks that need more capital to finance acquisitions. “Treasury doesn’t want to prop up weak banks,” said an official who spoke on condition of anonymity, because of the sensitivity of the matter. “One purpose of this plan is to drive consolidation.” With bankers traumatized by the credit crisis and the loss of investor confidence, officials said, there are plenty of banks open to selling themselves. The hurdle is a lack of well-capitalized buyers. Stable national players like Bank of America, JPMorgan Chase, and Wells Fargo are already digesting acquisitions. A second group of so-called super-regional banks are well positioned to take over their competitors, officials said, but have been reluctant to undertake or unable to complete deals. By offering capital at a favorable rate, the government may encourage them to expand.

Note: So the U.S. government is using billions of taxpayer dollars to support megamergers which create less competition and more monopolistic conditions. Hmmmm. Is that what the taxpayers really want? For lots more highly revealing reports on the Wall Street bailout, click here.

Bailout Expands to Insurers
2008-10-25, Washington Post
Posted: 2008-10-31 10:17:02
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/24/AR20081024017...

The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said. Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers. The new initiative underscores the growing range of problems that Treasury is scrambling to address with the $700 billion allocated by Congress this month. The shape of the plan has changed repeatedly since Treasury Secretary Henry M. Paulson Jr. introduced it last month as an effort to rescue banks by buying their troubled mortgage-related assets. That original mandate has now been pushed aside by a plan to take equity stakes in banks and insurance companies, and other businesses are lobbying to be included. The government has been forced to expand the plan partly because the federal guarantees previously given some institutions, such as banks, have put other companies and financial sectors at a disadvantage, making them less attractive to uneasy investors. The cost of saving the country's largest insurer continues to rise. Senior managers at troubled insurance giant American International Group warned the Federal Reserve yesterday that the company would probably need more taxpayer money than the $123 billion in rescue loans the government has provided.

Note: For lots more highly revealing reports on the Wall Street bailout, click here.

No curbs on Wall Street pay despite meltdown
2008-10-24, San Francisco Chronicle/Associated Press
Posted: 2008-10-31 10:14:19
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/10/24/national/a143651D...

Despite the Wall Street meltdown, the nation's biggest banks are preparing to pay their workers as much as last year or more, including bonuses tied to personal and company performance. So far this year, nine of the largest U.S. banks, including some that have cut thousands of jobs, have seen total costs for salaries, benefits and bonuses grow by an average of 3 percent from a year ago, according to an Associated Press review. "Taxpayers have lost their life savings, and now they are being asked to bail out corporations," New York Attorney General Andrew Cuomo said of the AP findings. "It's adding insult to injury to continue to pay outsized bonuses and exorbitant compensation." That there is a rise in pay, or at least not a pronounced dropoff, from 2007 is surprising because many of the same companies were doing some of their best business ever, at least in the first half of last year. In 2008, each quarter has been weaker than the last. "There are, of course, expectations that the payouts should be going down," David Schmidt, a senior compensation consultant at James F. Reda & Associates. "But we haven't seen that show up yet." Some banks are setting aside large amounts. At Citigroup, which has cut 23,000 jobs this year amid the crisis, pay expenses for the first nine months of this year came to $25.9 billion, 4 percent more than the same period last year. Typically, about 60 percent of Wall Street pay goes to salary and benefits, while about 40 percent goes to end-of-the-year cash and stock bonuses that hinge on performance, both for the individual and the company.

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

Panel grills credit raters over inflated ratings
2008-10-23, MSNBC/Associated Press
Posted: 2008-10-31 10:12:46
http://www.msnbc.msn.com/id/27326652

Executives and employees at the major credit ratings agencies were often aware of problems in the AAA grades awarded to thousands of mortgage-related securities whose downgrades helped plunge the nation into a financial meltdown. The companies — Standard & Poor, Moody’s and Fitch, Inc. — made enormous profits as they evaluated a ballooning number of mortgage-backed bonds, many of which were given top marks as long as housing prices went up. “The story of the credit rating agencies is a story of colossal failure,” said Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee. The California Democrat said, “Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing to protect the public. The result is that our entire financial system is now at risk.” The companies are important because their high assessments assured investors that their money should be safe. The inflated ratings awarded to securities backed up by subprime loans led investors to buy them in enormous numbers. But now, most of these securities have been downgraded and the market for them has largely evaporated, contributing to the current crisis. The panel also heard former ratings agency executives say there’s an inherent conflict of interest in the industry because they’re paid by bond issuers instead of investors who trust their ratings to make smart investments.

Note: For many reports on corporate corruption from reliable sources, click here.

Bernanke Is Fighting the Last War
2008-10-18, Wall Street Journal
Posted: 2008-10-31 10:05:54
http://online.wsj.com/article/SB122428279231046053.html

"Nothing," [famed economist] Anna Schwartz says, "seems to have quieted the fears of either the investors in the securities markets or the lenders and would-be borrowers in the credit market." The credit markets remain frozen, the stock market continues to get hammered, and deep recession now seems a certainty -- if not a reality already. [Recently, according to Schwarz, Secretary of the Treasury Hank Paulson has] shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down." Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. Everything works much better when wrong decisions are punished and good decisions make you rich." How did we get into this mess in the first place? As in the 1920s, the current "disturbance" started with a "mania." But manias always have a cause. "In every case, it was expansive monetary policy that generated the boom in an asset. The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest ratest. And then of course if monetary policy tightens, the boom collapses." Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure.

Note: Anna Schwarz and Nobel-winner Milton Friedman authored A Monetary History of the United States. It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression. The excellent article above mentions that Fed Reserve Chairman Bernanke once said "I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. We won't do it again." Top bankers and their cronies have been aware of what causes the boom/bust cycle for over 100 years and taken full advantage of it. Try to find one top banker who lost significant money in any bust cycle.

Banks Are Likely to Hold Tight to Bailout Money
2008-10-17, New York Times
Posted: 2008-10-25 09:00:30
http://www.nytimes.com/2008/10/17/business/17bank.html?partner=rssuserland&em...

All of the combined profits that major banks earned in recent years have vanished. Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. The problems that began with home mortgages, analysts say, are migrating to auto, credit card and commercial real estate loans. The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves? John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. “We will have the opportunity to redeploy that,” Mr. Thain said of the new capital. “But at least for the next quarter, it’s just going to be a cushion." For every dollar the banks earned during the industry’s most prosperous years, they have now wiped out $1.06. [Treasury Secretary Henry M.] Paulson unveiled plans to provide $125 billion to nine banks on terms that were more favorable than they would have received in the marketplace. The government, however, has offered no written requirements about how or when the banks must use the money. “There is no express statutory requirement that says you must make this amount of loans,” said John C. Dugan, the comptroller of the currency. The banks could use the money from the government for any number of things. Some analysts say the banks may use it to acquire weaker competitors. Others say they might use it to avoid painful cost-cutting. And still others say the banks may sit on the capital.

Note: With no requirements placed on how the bailout money is to be used, what is to stop the banks from using taxpayers's money to inflate the bonuses to top executives, or to increase political campaign contributions to Congress members in return for future favorable legislation?

F.B.I. Struggles to Handle Financial Fraud Cases
2008-10-19, New York Times
Posted: 2008-10-25 08:59:07
http://www.nytimes.com/2008/10/19/washington/19fbi.html?partner=rssuserland&e...

The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials. The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. The cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes. So depleted are the ranks of the F.B.I.’s white-collar investigators that executives in the private sector say they have had difficulty attracting the bureau’s attention in cases involving possible frauds of millions of dollars. Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism. According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.

Note: How fortunate for the financial fraudsters that the FBI doesn't have the resources to investigate them! Was it just a coincidence that first the "war on terror" and then the Wall Street bailout both have resulted in trillions of dollars going to a few well-positioned corporations? For more on government corruption from reliable sources, click here.

Wall Street's 'Disaster Capitalism for Dummies'
2008-10-21, MarketWatch.com (owned by Dow Jones)
Posted: 2008-10-25 08:55:27
http://www.marketwatch.com/news/story/14-reasons-main-street-loses/story.aspx...

Sorry to pop your bubble folks, but it no longer matters who's president. Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy." We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism." Three decades of influence peddling in Washington ... accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown. Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Naomi Klein summarizes the game in Shock Doctrine: the Rise of Disaster Capitalism. This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters.

Note: The author of this highly critical commentary, Paul B. Farrell, is a well-known writer on finance and investment and a long-time columnist at The Wall Street Journal's sister-site MarketWatch.

Outrage Leads AIG To Cancel Second Luxury Retreat
2008-10-09, ABC News
Posted: 2008-10-17 08:13:55
http://www.abcnews.go.com/Blotter/story?id=5994567

Battered by outrage over the $440,000 it spent on a luxury retreat less than a week after the federal government loaned it $85 billion dollars, the giant AIG Insurance Company says it has called off plans to hold a second retreat next week at the exclusive Ritz-Carlton Resort in Half Moon Bay, California. The Ritz-Carlton outing, like the earlier one, was to reward top independent insurance agents, which the company called a "standard industry practice." "I am somewhat relieved to hear that AIG has canceled their Ritz-Carlton conference, which was nothing less than a slap in the face of the American people," said Rep. Elijah Cummings (D-MD). "I cannot fathom how in the same day -- the very same day -- that AIG asked the government for another $37.8 billion loan, the company would even consider moving forward with plans to host another large conference at another luxury resort." Critics ... have denounced AIG for holding an expensive retreat at a time of economic crisis. The criticism has been "demoralizing" within AIG said Nicholas Ashooh, a spokesperson for AIG, "but we have to recognize that we're in a different environment and we have to adjust to that." AIG says it has instructed its worldwide managers to re-scrutinize how money is being spent. "We're certainly reviewing all our expenditures in light of financial circumstances and the fact that taxpayer dollars are helping to support AIG as we get through this difficult credit crisis," said Ashooh.

Note: For many reports of corporate corruption from reliable sources, click here.

Keating 5 ring a bell?
2008-09-25, Los Angeles Times
Posted: 2008-10-17 07:55:18
http://www.latimes.com/news/columnists/la-oe-brooks25-2008sep25,0,1039504.column

Once upon a time, a politician took campaign contributions and favors from a friendly constituent who happened to run a savings and loan association. The contributions were generous: They came to about $200,000 in today's dollars, and on top of that there were several free vacations for the politician and his family, along with private jet trips and other perks. The politician voted repeatedly against congressional efforts to tighten regulation of S&Ls, and in 1987, when he learned that his constituent's S&L was the target of a federal investigation, he met with regulators in an effort to get them to back off. That politician was John McCain, and his generous friend was Charles Keating, head of Lincoln Savings & Loan. While he was courting McCain and other senators and urging them to oppose tougher regulation of S&Ls, Keating was also investing his depositors' federally insured savings in risky ventures. In 1989, [Lincoln] went belly up -- and more than 20,000 Lincoln customers saw their savings vanish. Keating went to prison, and McCain's Senate career almost ended. Together with the rest of the so-called Keating Five ... McCain was investigated by the Senate Ethics Committee and ultimately reprimanded for "poor judgment." But the savings and loan crisis mushroomed. Eventually, the government spent about $125 billion in taxpayer dollars to bail out hundreds of failed S&Ls. The $125 billion seems like small change compared to the $700-billion price tag for the Bush administration's proposed Wall Street bailout. But the root causes of both crises are the same: a lethal mix of deregulation and greed.

After Bailout, AIG Execs Head to California Resort
2008-10-07, ABC News
Posted: 2008-10-10 11:30:51
http://abcnews.go.com/Blotter/story?id=5973452&page=1

Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today. "Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said. AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges. "They're getting their pedicures and their manicures and the American people are paying for that," said Cong. Elijah Cummings (D-MD). Appearing before the committee, Martin Sullivan, the AIG CEO until June, said the company was overwhelmed by a "financial global tsunami," and that "no simple or single cause" was to blame. "I am heartbroken at what has happened," Sullivan said. Robert Willumstad, the CEO from June to September, 2008, maintained AIG was a victim of a "crisis in confidence" and an "unprecedented global catastrophe." But Congressional investigators raised questions of "mismanagement" and whether AIG executives sought to "cook the books" and hide negative information from outside auditors. Waxman also said there is evidence the two men changed the bonus schedule once the company began to post losses, so that executives under the "Senior Partners Plan" would continue to make multi-million dollar salaries. Sullivan was given a $15 million "golden parachute" payment after being replaced as CEO in June.

Note: For lots more on corporate corruption from reliable sources, click here.

Bailout tests how much the American public will tolerate theft
2008-09-23, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2008-09-27 08:34:59
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/23/ED0J132MOV.DTL

Treasury Secretary Paulson's edict to create a $700 billion fund to buy worthless mortgage securities from agitated wealthy bond investors is nothing short of a final step on the path to the end of the republic. The secretary claims he can only be effective if his decisions are beyond judicial review. Our government and its owners appear to be testing how much the American public will tolerate. A few years ago, no one could have imagined that the silent majority would quietly accept thefts of this magnitude from a government that stopped tiny payments to single mothers with poor children in the name of welfare reform because the program's $10 billion cost was breaking the federal budget. If the public allows this theft, then it will signal to powerful forces that they can essentially do anything, because the American public has become so mushy-headed that it will stand up for nothing. When power discovers that those from whom it would exact payment are powerless, its viciousness increases infinitely. Our enemy has revealed itself, and it is our own government. Because the American public has not been introduced to methods for controlling its government for generations, I will suggest one called a general strike. This fundamental democratic power is where everyone decides to send a message to the government by not going to work, to school, shopping, nowhere. This is the critical time when charlatans among us will promise they can save us from the inevitable if we only allow them the power they need to save us. They are lying.

Note: This article's author Sean Olender is an attorney in San Mateo, California. Mr. Oleander predicted the bailout of Fannie Mae and Freddie Mac months before it happened based on clearly disempowering moves by the government. To see his prescient article on this from Feb. 2008, click here.

Almost Armageddon: Markets were 500 Trades from a Meltdown
2008-09-21, New York Post
Posted: 2008-09-27 08:33:43
http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm

The market was 500 trades away from Armageddon on Thursday [September 18], traders inside two large custodial banks tell The Post. Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed. According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt. Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals. Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion, Lou Crandall, chief economist at Wrighton ICAP, told The [Wall Street] Journal. And for good reason. By the close of business on Wednesday, $144.5 billion - a record - had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services. By Thursday, that level ... had grown to $100 billion.

Note: For insight into the banking and financial powers that runs today's governments, click here.

Stimulus Plan a Scam to Benefit the Rich
2008-02-03, San Francisco Chronicle (San Francisco's leading newspaper)
Posted: 2008-02-08 12:36:07
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/03/IN8LUO095.DTL

Congress is about to sell us the biggest fraud in American history. It's been highly touted as an economic stimulus bill that will help millions of Americans. As part of the bill, Congress is set to rush through an increase in the mortgage loan limits for Fannie Mae and Freddie Mac (and Federal Housing Administration insurance, too) - from $417,000 to $729,750 - the first step toward a massive financial disaster in which taxpayers will end up paying through the nose. Now, thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie. This shift will certainly doom Fannie Mae and Freddie Mac, so don't be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion. The irony here is that the collapse in housing prices could make Fannie insolvent even without raising the loan limit. Increasing Fannie's limit is like going on a spending spree with your credit cards because you know you are going to file for bankruptcy in a few months. Only here the taxpayer is left holding the bag. Our children will pay interest on this debt in perpetuity. It is our debt. It is inescapable. In the coming months, Fannie and Freddie will buy up mortgages based on old, fraudulent appraisals and on loans with bogus inflated incomes. Unfortunately, many of these loans will still default. Expansion of Fannie and Freddie's reckless lending is exactly what Congress wants because it's plausibly deniable. Teary-eyed lawmakers can take to the airwaves a year from now and declare: "We had no idea Fannie could go under, but we can't cut and run now. Those same lawmakers won't mention the fact that they get paid far more by real estate lobbyists than they do from our Treasury.

Note: The author wrote this article seven months before the collapse of Fannie Mae and eight months before the huge banking bailout. For more news articles suggestion major manipulations to transfer public tax monies to the banking sector, click here.