The words we are fed by the mainstream media and politico's is that the astronomical debt we have recently created for generations to come was necessary to "save the world" as we know it. So I guess I'm wondering why it is that the ones who used our money to create the problem by financing their greedy lifestyles are now being given more of our money to continue their greedy lifestyles while the common man/woman is losing jobs, homes, retirements, health care, pride and dignity???
(NOTE: Niel Barofsky is a TARP special investigator)
Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks. It is not clear whether the report will also disclose the banks’ use of the bailout money to pay executives fat bonuses which they used to buy gold toilets and prostitutes, and to lobby Congress to stop any meaningful reform.”
I can only guess the reasons is: They keep doing it, and we keep letting them.
The problem is they are accelerating the pace by which they are doing it, middle class wealth destruction, in ways that most aren't aware. I suspect one reason is because many, unlike myself who can figure out my finances on a matchbook cover, have their money handled by "money managers". How is that working out for ya?
The other problem is all this incessant noise about "green shoots" and recovery when the markets shoot up less than a percent on such low volume it is a non event. Unless of course you are Goldman Sachs
and make millions upon millions on market moves of less than a fraction of a percent. Hey how is that TARP (Read that taxpayer dollars) money working out for them?
Let me take a moment here to illustrate for you how the game is played and Goldman Sachs is Goldman Sachs and you ain't.
See the folk that have "real money," and no you don't know who they are but can bet they are not reading this, use all sorts of exotic financial wizardry to make their bucks. Just ask Goldman. One of the things they use is hedge fund. You all have heard of them, but if you are like me, can't afford to invest in one.
However for a short period of time investment vehicles appeared that evened out the playing field a bit.
But only if you knew which ones to play in as most of them are suckers bets. These are known as ETF's or "Exchange Traded Funds".
Now there are to little ETF's by which the common man could bet on the economy. IF you thought the economy was going to do bad you could buy
FAZ (up 2% today) or if you thought things were going to go good you could buy
FAS (down 2.12%). Now not to long ago these ETF's traded in the 2 to 8 dollar range. This meant the little guy could get in there and play with the big boy's. Because after all there are a lot of lilttle guys as smart as the big guys that just haven't learned to steal as good.
So what happens. The big guys jump in. Volatility skyrockets. And you either make good money or lose good money. But at least, the little guy can still play.
So what happens?
The ETF managers pull a reverse split and now FAZ and FAS play in the 40's effectively shutting a lot of little guys out. Keep in mind it isn't because , like a normal stock, these vehicles appreciated in value. These vehicles were not designed to be held for appreciation. They were designed to be traded for profit. No it is because an arbitrary decision was made to make the vehicle more expensive. Ostensibly to cut down on volatility, but effectively shutting out the little guy.
And that my friends is just a small example of how the game is played. It is played at all levels, government and Corporate to keep the rich richer which is leading very quickly to a class society that will, if it has not already, result in an
oligarchy that will enact a
totalitarian government. This is not a pipe dream or a conspiracy theory. It is being played out daily in full view of those who are going to be hurt the worst, you and I. If only we would look.
Consider:
The Great American Bubble Machine: From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again (Keep in mind this is the company we gave 10 BILLION to because they were "to big to fail").
Other large institutions were deemed to big to fail, AIG, Fannie Mae and Freddie Mac among others.
"Fannie and Freddie were not too big to fail," he says. "How do I know? That's what the law said. On the debentures, when they used to be physical paper, it literally said, 'These instruments are not protected by the full faith and credit of the United States government.' " Alan Greenspan
So did the Government violate the law by giving them, or others, or money to play with?
But now consider that apparently the Government has had some sort of an epiphany and decided that
CIT Group once considered to big to fail, can be left to the dogs???
We have to wonder by what criteria they have these epiphanies when you consider the following:
It’s official: the financial sector is back on the road to where it was headed before the credit crisis began. That is the message to be gleaned from last week’s stellar earnings reports for Citigroup (C), JPMorgan (JPM), and Goldman Sachs (GS).
While Goldman Sachs and JPMorgan reported huge second quarter profits from trading and investment banking activities respectively, Citigroup managed to surmount its money-losing operations with profits from a windfall income in the sale of its Smith Barney unit to Morgan Stanley.
To a euphoric business press corps and to Washington lawmakers, the earnings represent the first genuine signs of green shoots in the financial services sector.
But on closer inspection, these profits reveal little more than the return of risk appetite in the face of rising problems at the operating-level. For instance, in the case of JPMorgan, investment banking revenue helped offset rising defaults on consumer loans, while Citi masked its operating losses with a one-time asset sale.
But then, although I am reasonably sure that this little fact has nothing to do with the decision to allow Citi to fail, I still have to wonder. See 101 year old Citi bank is one of the largest lenders to small and mid-size businesses? Well hell, who needs them, right?
Not that we really have any idea what any of the recipients of OUR (lets stop calling it TARP money and be honest. It is our "tax dollars"that are being illegally spent unless "taxation with out representation" is now considered acceptable) money are doing with it. Again From Niel Barofsky:
In his report to Congress, Barofsky reiterates his recommendation that the Treasury Department require TARP recipients to account for how funds are spent. The Treasury had argued that this tracking would be "impractical, impossible or a waste of time," according to the report.
The report says, "In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how those funds have been used by TARP recipients. Treasury is now conducting regular surveys of the banks' lending activities; however, with the exception of Citigroup and Bank of America, Treasury has refused to seek further details on TARP recipients' use of funds."
That however should come as a surprise to no one when you consider the Government has absolutely no idea how much all of this is costing us, from the
Washington Times:
The inspector general in charge of overseeing the Treasury Department's bank-bailout program says the massive endeavor could end up costing taxpayers almost $24 trillion in a worst-case scenario. That's more than six times President Obama's proposed $3.55 trillion budget for 2010.
Which of course, again is no surprise when government agencies themselves have designated themselves among the elite that can play on OUR MONEY! See ,
"You can't get corporate jets. You can't go take a trip to Las Vegas, or go down to the Super Bowl on the taxpayers' dime." - Barack Obama, February 2009
Apparently Obama's advice does not apply to flying in 700 of the Social Security Administration's 62,000+ employees to a resort in Phoenix, spending $700,000 in taxpayer money in the process as ABC reported here. The SSA claims that due to threats of bodily harm received, the event was necessary in order to reduce stress rather than videoconferencing or a meeting. While I certainly do not condone threats, one might wonder why these threats have been received in the first place.
Perhaps it is because Social Security payments have been slashed in half by the fudging of the inflation numbers by the government.............
And need we remind you of our own post dated 5/14/09:
(link)
Wherein the following was reported :
Federal employees now receive on average 102% more than there counterparts in the private sector performing the same jobs. It wasn't clear whether that took into account the 3.9% pay raise they just got or not
AH! But wait I am neglecting the "GREEN SHOOTS," like the accelerating commercial mortgage crises and the coming credit card defaults.
And who will pay to clean that up????? As Simon Johnson Points out in his essay that we have excerpted below, we really have no idea the mess that the banks are in. Because they are intentionally hiding it!
I could go on but I am hoping that you can see a very distinct pattern here that relates to posts we have made in the past that point to an ever evolving Corporate/Governance alliance that will result in the common man/woman becoming servants to the ruling class. You see the most effective coups are the ones where a shot is never fired. The ones where the people wake up one morning and find they are no longer free and wonder how it happened. Economic bondage is the most insidious of all and it is sad to note that unlike our forefathers the American of today seems more disposed to stand in a soup line as to die on the "real battlfield".
However in one of my former occupations I learned that I could communicate facts to my employees and they would of course think, "Bullshit!!"
I could however, pay somebody labeled as an expert to come in and regurgitate the same facts in an inservice setting and the same employee's would think, "Brilliant". It is the nature of the game.
So I will leave you some thoughts From a Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008. He blogs about the financial crisis at
baselinescenario.com, along with James Kwak, who also contributed to this essay. The full essay can be found at
http://www.theatlantic.com/doc/200905/imf-advice
emphasis will be ours:
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country.
One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.
Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves. As the crisis has deepened and financial institutions have needed more help, the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand. The first AIG bailout, which was on relatively good terms for the taxpayer, was supplemented by three further bailouts whose terms were more AIG-friendly. The second Citigroup bailout and the Bank of America bailout included complex asset guarantees that provided the banks with insurance at below-market rates. The third Citigroup bailout, in late February, converted government-owned preferred stock to common stock at a price significantly higher than the market price—a subsidy that probably even most Wall Street Journal readers would miss on first reading. And the convertible preferred shares that the Treasury will buy under the new Financial Stability Plan give the conversion option (and thus the upside) to the banks, not the government.
This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that. As Neel Kashkari, a senior Treasury official under both Henry Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for the third group involved: the taxpayers.
Even leaving aside fairness to taxpayers, the government’s velvet-glove approach with the banks is deeply troubling, for one simple reason: it is inadequate to change the behavior of a financial sector accustomed to doing business on its own terms, at a time when that behavior must change. As an unnamed senior bank official said to The New York Times last fall, “It doesn’t matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.” But there’s the rub: the economy can’t recover until the banks are healthy and willing to lend.
Big banks, it seems, have only gained political strength since the crisis began. And this is not surprising. With the financial system so fragile, the damage that a major bank failure could cause—Lehman was small relative to Citigroup or Bank of America—is much greater than it would be during ordinary times. The banks have been exploiting this fear as they wring favorable deals out of Washington. Bank of America obtained its second bailout package (in January) after warning the government that it might not be able to go through with the acquisition of Merrill Lynch, a prospect that Treasury did not want to consider.
The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.
Meanwhile, the Federal Reserve has taken on a major role in providing credit to the economy—the function that the private banking sector is supposed to be performing, but isn’t. Yet there are limits to what the Fed can do on its own; consumers and businesses are still dependent on banks that lack the balance sheets and the incentives to make the loans the economy needs, and the government has no real control over who runs the banks, or over what they do.
At the root of the banks’ problems are the large losses they have undoubtedly taken on their securities and loan portfolios. But they don’t want to recognize the full extent of their losses, because that would likely expose them as insolvent. So they talk down the problem, and ask for handouts that aren’t enough to make them healthy (again, they can’t reveal the size of the handouts that would be necessary for that), but are enough to keep them upright a little longer. This behavior is corrosive: unhealthy banks either don’t lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and as it does, bank assets themselves continue to deteriorate—creating a highly destructive vicious cycle.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnectedAdd to Technorati Favorites
