Busted: Bankers and The Global Economy

July 19, 2009

Economic Depression: American Resentment Flickers Against Corporate Wealth

money green with envyThe recession and the rising gulf between the haves and have nots; investment bankers versus newly impoverished and unemployed Americans is changing viewpoints. At one time, any company reporting record profits was certain to earn applause for this was seen as the American way. Americans were firmly invested in what they believed was the trickle-down theory of economics. The scam that investment bankers have pulled on the world with their highly staked leveraging games has changed much of this sentiment. Now that institutions that formerly made up the investment banking capital of the world are recovering with the intent of paying back taxpayer-backed Federal Reserve bailout money, Americans are leering at the possibilities that nothing has been learned from the crisis of financial literacy that prevails itself upon the world.

Writer David Segal has introduced the idea that class resentment is to blame as investment bankers continue to rake in the speculation-based financial dough based on the same numbers games that brought the nation to the edge of financial oblivion. The reality runs much deeper. In the eyes of Americans, the reality isn’t about making money, but how money is earned. Americans feel that they are being scammed because the nation operates by multiple sets of rules depending on how much money and influence you can peddle. Even members of Congress like Charles Schumer have demonstrated that they believe Americans are simply brutes to be used by the system to bolster corporate along with government wealth and influence.

Now that the likes JP Morgan Chase and Goldman Sachs are reporting fantastic encouraging numbers after having enjoyed bailout at the expense of Americans and the system at large, Americans see that the victory is very hollow. Recent financial victories in American are without benefit to anyone that doesn’t directly play the insider financial games on Wall Street. Multinational corporations continue to rule the roost behind the scenes, taking more out of America than they put in. Profit without personal responsibility is king. Most of America continues to be in great pain and America already knows that recent financial victory on Wall Street is a result of the same deluded thinking and policy that still threatens to destroy the financial system. It is not a system based on honesty and real numbers, but simply a gambling game of manipulation and opportunity.

The fact is that the Federal Government likes the control and authority that it wields in the banking community as a result of the bailout. The same can be said for the money that government has invested in the corporate structure. Uncle Sam holds the cards as the government maintains a front row seat at AIG. This is the only means that government now has to rein in the continued greed and avarice of Wall Street and corporate investors. The system hasn’t been reinvented as promised nor have sufficient reforms taken place to insure the safety of financial system on any level. We are still living in the last century. Nothing has changed. That is why government is so quiet about what is a hollow victory on Wall Street. ~ E. Manning

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April 14, 2009

Bernanke: It’s All About the System

monopoly moneyPresident Obama declares that the sun is coming out as the economic storm wanes. “The financial and economic risks posed by a collapse of AIG would have been at least as great as those created by the demise of Lehman. In the case of AIG, financial market participants were keenly aware that many major financial institutions around the world were insured by or had lent funds to the company. The company’s failure would thus likely have led to a further sharp decline in confidence in the global banking system and possibly to the collapse of other major financial institutions. At best, the consequences of AIG’s failure would have been a significant intensification of an already severe financial crisis and a further worsening of economic conditions. Conceivably, its failure could have triggered a 1930s-style global financial and economic meltdown, with catastrophic implications for production, incomes, and jobs. The Federal Reserve and the Treasury agreed that in the environment then prevailing, AIG’s failure would have posed unacceptable risks for the global financial system and for our economy.” – Ben Bernanke in speech to Morehouse College

Magic Money T-ShirtThe American taxpayers have been put on the hook to bail out Wall Street.  Success is still not guaranteed despite a recently sunny disposition. Meanwhile the European Union supports a new monetary system and retirement of the dollar as the prop of the global community that central bankers have long proffered. The general undercurrent in much of the EU underwrites “the collapse of the Bretton Woods system based on the US Dollar as sole pillar of the global monetary system.” This was predicted by some parties in the EU last year, but so far has not come to pass because of the creativity and financial manipulation of the International Society of Central Bankers.

March 18, 2009

The Corollary of Banking Greed

greed-is-good-2“Greed is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.” Michael Douglas was privileged to echo those memorable words in a timeless Hollywood movie that resounds the philosophy of much of the financial world without apology. Those words now cut into the souls of mainstream Americans.

The corollary of banking greed dictates that financial greed is opportunity and entitlement magnified by lack of authority. Wall Street has reveled in this truth for decades and the results of this unpleasant law have come to roost. AIG, once held to be the bastion of risk management, has proved the effect of this corollary as they continue to mandate runaway bonuses for what amounts to the summary destruction of everything that America holds dear where money is concerned. Americans are taking their authority back.

Government is apparently into the payoff. We now have a mystery amendment in the recent stimulus package. Senate Banking Committee Chairman Chris Dodd added a compensation restriction to the bill. The Dodd Amendment provides an exception for contractually obligated bonuses agreed on before Feb. 11, 2009.

The Senate Chairman has egg on his face. He claims that the original amendment did not include that exemption and he denied inserting the provision. “I can’t point a finger at someone who was responsible for putting those dates in. I can tell you this much, when my language left the senate, it did not include it. When it came back, it did.” One of AIG’s key offices resides in Connecticut. Connecticut Senator Dodd was AIG’s largest single recipient of campaign donations during the 2008 election year totaling more than $100K.  Heck, it’s just more convoluted behind-the-scenes favoritism and payola in the highest ranks of federal government.

The good news is that this writer does not need to rail about the entitlement attitude of AIG, Wall Street or Senator Dodd. The good people of America have this issue firmly in hand. The uproar of the public has brought threat of injury and permanent demise to what used to be seen as harmless financial types. America isn’t waiting on Senators and Representatives to utter their glib proclamations about how they are preparing to tax the bonuses to get your money back. How is that for ‘in the box’ thinking? We are now taxing our own money back?

Heck, America isn’t waiting on government reaction or platitudes. Americans are ready to take this matter into their own hands. A few choice folks are willing to go into AIG gun’s-a-blazing to stop the abuse of trust in a company that is now 80 per cent owned by the American taxpayer, while millions sit idled at home with recent job losses. AIG employees now fear to go to work. Extra guards are posted at the door. Chaos is in the ranks as the corrupt corporation structure reels at the public reaction. Americans are prepared to take matters into their own hands. The federal government isn’t prepared for a lynching. Congress is exploring the possibilities in hearings. ~ E. Manning

March 4, 2009

U.S. Mortgage Panic Ensues

tsunami-financeA mortgage panic is setting in. More than 8.3 million U.S. residential mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year. An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent. Do you have one of these mortgages? Probably not if you have been in your home more than 5 years and made sensible choices with financing. 10 million homes is small potatoes compared to number of residential mortgages out there in the United States. However, the crooked system of weights and balances that bankers designed are now a house of cards ready to crash as more Americans appear to be losing their homes.

The banking and finance system has plowed virtually every mortgage into a profit making system of toxic securities. The system of high finance is beginning to panic as it realizes that it must comply with trimming and modifying home loans to keep their customers viable as they lose their bottom line. Why are the system of bankers and high finance trembling in their boots? Confidence continues to dwindle and stock prices fall. Trading value is the bread and butter of publicly-traded companies. Banking and high finance are trembling due to the toxic securities that they built to underscore and enhance their profits. With toxic mortgage-based securities failing, this puts banks, investors and insurers like AIG in the position of holding the bag of spoiled goods that were originally designed to spur runaway profits and build a system of financial prosperity.

mortgage-tsunamiWe are witness to what has happened. Bankers and high finance have designed their own self-destruction that has been left squarely in the hands of government and citizens to miraculously rectify. The fallout from all the speculation and rampant leveraging has been an enhanced recession which is likely to lead to a depression. No man lives on an island. The world of finance is no exception. Sooner or later, greed and fraud bite back. The only problem for the nation is that the taxpayer is covering the systemic failure with their own blood, sweat and tears. ~ E. Manning

September 24, 2008

Power: The Truths behind the Meltdown

massive bailout

massive bailout

Americans should feel some value in the fact that the FBI is now investigating toxic firms that have been central to the U.S. financial meltdown. For some time 26 firms have been under intense scrutiny by the FBI. The media has been highlighting investigation of the 4 firms that have collapsed: Fannie Mae, Freddie Mac, AIG and Lehman Brothers.

The mortgage twins, Fannie and Freddie, have already been under investigation for years based on varying problems with financial irregularities and leadership issues. The investigations will focus on the financial firms and the individuals that ran them. Hopefully, middle management will also be scrutinized and judged. The truth is that the FBI needs to find the perpetrators of the fraud rather than single out top dog scapegoats.

financial storm

financial storm

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint unilateral decision last week that the only way to stop the U.S. financial carnage was to deal with the root cause of all the troubles by rooting out billions of dollars of bad mortgage debt sitting on the books of major financial firms. This debt has triggered the worst credit crisis in decades, “causing” credit markets to freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system. The billions of dollars pumped into the global economy are creating a crisis of stagflation themselves, a nasty round of inflation coupled with the current economic recession and malaise. The results of those actions cannot be undone and are being ignored by panicked authorities.

The reality behind the liquidity lock down that the Bush administration and U.S. Treasury Secretary are panicking about revolves around interbank lending, a problem that has been noticed publicly for at least a year. Why is there a problem? The crisis boils down to an issue of trust. Bankers know that they cannot trust one another and are unwilling to take the fall for the fraud of other bankers. In other words, the bankers know they have been harpooned by the securities that were supposed to make them wealthy. Bankers have put the thumbscrews on lending to protect their solvency.

selling Wall Street

selling Wall Street

The Bush adminstration has its game face on. President Bush says he expects Congress to pass “a robust plan” that deals with the nation’s economic problems. The word robust has become another favorite public watchword that should garner your prompt attention. Robust implies a broad emcompassing scope along with complex provisions that could very well be the downfall of any attempts to band-aid the current situation. Currently, an estimate is that 1 of 254 mortgages is actually in some measure of foreclosure. This is a very small percentage to cause a crisis. What the American press and government is acknowleging is merely the tip of the iceberg. The main problem with securitized loans is that when they were developed and created, a system was not developed to track reality. An internal processing scandal within the process of issuing of these securities is implied. However, government has not been eager to breach this area of the mortgage crisis beyond specifying that the regulations and concepts in the entire financial system are dated and ineffective. Somehow, this idea is supposed to get government, regulators and bankers off the hook.

taxpayer crisis

taxpayer crisis

What should be done to resolve the current foreclosure crisis? Not a soul has bothered to shift gears in addressing the real problem regarding predatory financing and usury in place. Each known problem loan triggered by payment issues needs to be evaluated regarding the current real value of the home. If evaluation of home value is an issue because of a weak market, then half the real value of home should be the mortgage value. This action would assist in correcting inflated home prices and counter price inflation. Any failure of the past verification process through bankers or qualification of the homeowner should be ignored as long as the homeowner is gainfully employed and can make the payments on the new loan. The government then needs to reissue a safe government-backed assumable loan that will allow the buyer to stay in the home at a low interest rate. Ultimately, the goal would be for every loan to be converted to a non-predatory government loan with low interest. Loans would not be securitized or bundled for resale as government securities. Banks would not bundle loans into any internal or banking instruments. Bankers would simply make money from compound interest and providing basic banking services. The bailout needs to be on the side of the taxpayer, the basis and stock of capital and wealth, rather than on the side of corporate interests that often pay few taxes in the real world beyond payroll.

losing the Dream

losing the Dream

If push came to shove, the nation would be better off giving mortgages away than bailing out the endless debt and failure created by Wall Street and the system in place. Americans would then own their homes fair and square with a new national beginning. Trillions in debt would be eliminated overnight. This idea seems radical and expensive, but is assuredly no more expensive than a long-term bailout of government and corporate fraud. The American population would benefit directly from the bailout, as should always be the case. The main problem is that such an action would destabilize the power structure in place. However, the ideas presented here are no less sane than what is being proposed by the Federal Reserve and the U.S. Treasury in the name of the Bush administration. We are a nation of double standards that bolsters government and corporate power at the expense of the populace, a fascist notion. That needs to change.

The FBI has been in various stages of investigation regarding the mortgage debacle since March of 2007, even before most Americans were aware of a scandal. This proves that the Bush administration has been aware of mortgage fraud and scandal before the nation began to see the sign in the summer of 2007. As far back as the summer of 2004, President Bush beamed with pride about the creativity of the banking and mortgage industry, the single force that had maintained the illusion of national prosperity during the last three political administrations, originating from the Clinton administration.

Where are the people that are being investigated and implicated in fraudulent activities? Is the FBI keeping tabs on the movements of those may be involved in the scandal? What Americans should be concerned about is whether the U.S. government is allowing people that are tied directly into these firms to leave the country if they haven’t left already. ~ E. Manning

September 17, 2008

Bailout Fever Strikes U.S. Again

The world of insurance will never be the same. AIG, a major insurance corporation and the world’s largest insurer has averted the worst financial collapse in history by accepting an $85 billion Federal Reserve loan and giving the government a majority stake in the company. The U.S. Treasury was fearful of a “disorderly failure” that would lead to larger national failures.

American International Group was a wild card with failure creating an enormous and unknown measure of system risk to the entire economy. The federal government gets 79.9 percent take of the firm and senior managers give up their jobs.

panic on the street

panic on the street

Meanwhile, the Federal Reserve loan with a 2-year term will allow AIG (in theory) to divest itself of assets in a timely manner without creating an immediate crisis. Stockholders have been effectively squeezed out and are subject to losing any dividends.

AIG was huge in the credit default market, insuring contract guarantees that companies would not fail in large financial deals. A default contract buys protection against the threat of default by a company, municipality or a package of debt backed by mortgages. A buyer pays the seller a premium over a set term. The seller pays out if the default occurs. Defaults on mortgages and securitized bonds brought AIG to the verge of oblivion.

The complexity and global reach is huge, likely affecting every fund on the market in one fell swoop. Even with the loan in place to protect AIG for the short-term, Wall Street is reeling from the effects. A future bankruptcy would also play havoc on business contracts. There are reports that people are hording cash. Derivatives have been a highly profitable on Wall Street until now. The financial world is changing quickly as repercussions from the subprime mortgage crisis ripple across the globe.

~ E. Manning

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