24 January 2011
23 January 2011
Tavakoli: No Need to Qualify - This IS a Massive Cover-up of a Control Fraud
Hard to top this for straight talk and right to the heart of the matter from someone who knows the financial markets, and especially derivatives, better than most.
From this afternoon's mailbag (with permission):
"Loved your commentary: 'The American government is acting as if it is involved in a massive cover-up of a control fraud and corruption that could perhaps be the worst in its history.'Tavakoli Structured Finance
There's no need to qualify. The government IS involved in a massive cover-up of control fraud and corruption, and it is the worst in U.S. history.
We let the servants quietly steal from the wine cellar and larder (for more than a century), and after discovering that no one would check their behavior—in fact, we handed the keys to our consumables to all the servants and let them bribe the overseers—they have watered down all the wine, and they backed up the truck to the larder and replaced most of the food with jars of peanut butter.
The bad guys have won, it's almost too late to find our food and wine (5 year statute of limitations for securities fraud). As you rightly point out, those who speak up like William K. Black are marginalized.
Perhaps the most positive thing one can do at this point is try to stay on top of the anomalies created by this mess and try to preserve and increase wealth for the few that will listen."
Janet Tavakoli
22 January 2011
America Trapped in a Massive Coverup of Control Fraud and Corruption
I think most readers with an economics background would be familiar with a liquidity trap, which is a situation where monetary policy is unable to stimulate an economy suffering a non-cyclical credit contraction, either through lowering interest rates or increasing the money supply because expectations of adverse events (e.g., exogenous deflationary factors, insufficient aggregate demand, or civil or international war) make persons with liquid assets unwilling to invest.
America is caught in a confidence or credibility trap, in which the changes, investigations, and reforms necessary to restore trust to an economy or market are rendered unlikely because doing so would expose a pervasive corruption that the principals fear would destroy the careers of politicians and business people who may have permitted and even appeared to facilitate the control fraud that caused the financial crisis in the first place. Personal risk trumps public stewardship.
The fraudulent activity is covered up and therefore continues or at the very least appears to continue, crowding out most productive business investment and activity which cannot possibly hope to compete with the highly profitable fraudulent activity ad asset bubbles under such opaque and uncertain circumstances. Informed market participants are unwilling to invest their liquid assets in a system which they suspect is riddled with accounting fraud, insider trading, and regulatory weaknesses, except of course in a few situations and somewhat ironically in some existing frauds, such as a bubble in equity valuations for example, which they think they understand.
The American government is indeed acting as if it is involved in a massive coverup of a control fraud and corruption that could perhaps be the worst in its history. I think many people who are looking at this know in their hearts that all is not well, that there is something not quite right in the current situation. How else can we explain such massive and widespread financial fraud, with so few meaningful indictments, or even ongoing investigations with credible disclosures? And the worst perpetrators appear to be dictating the remedies and reforms to the system for this government sponsored recovery.
Hank, Tim, and Ben alluded to the consequences of the discovery and uncontrolled disclosure of this fraud, and it frightened the Congress so badly that they immediately gave up and signed over 700 billion dollars, and many billions more, to facilitate the coverup of this under the guise of recovery and stabilization. I would like to imagine that those in charge are attempting to prevent a panic while they put out the fires, but I see little serious remedies designed to save the public, much less than to perpetuate the firetrap. And so the corruption continues to smolder and fester, and thereby debilitate the nation.
More than an American scandal, this fraud reaches deep into the halls of power in Europe, some of whose national governments are already failing. What had been the Keating Five is now the Global Finance 500.
People say they understand this, but they really do not understand the implications of it. They intellectualize and theorize around it, try to deal with it by smashing it down into something they can get their mind around and accept. They may even try to turn it to their short term personal financial advantage. But they are not dealing with it and certainly not facing up to it.
The US banking system controls the issue of the reserve currency of the world, which impacts the price of virtually everything that is bought and sold.
And as you might expect there are many whose vested interest is to distract and to change the subject away from it. There is a great deal of money to be made by serving the desire to turn people's attention away from the problem to find someone else to blame, some other problem to focus upon, and some new victim class to absorb the public anger. It is an old story, often repeated in tragedy.
Thirteen Ways to Hide the Truth
But unfortunately, confronting the truth and fixing the situation is key to any sort of sustainable recovery. And this is the trap of crony capitalism and control fraud, when it has nearly exhausted its victims, and is having difficulty finding new ones to maintain its growth and facade.
Until that time there will be a procession of scapegoats, defaults, bailouts, and property seizures, both implicit and explicit, and a growing toll of innocent victims and systemic destruction, ending finally in the collapse of the US national currency and international trade.
If it had not been that the US is so large, and for the time being controls the bulk of the world's reserve currency, it is likely this would have already come to some conclusion before spreading so widely and pervasively. But the situation remains highly unstable and threatening, despite assurances to the contrary.
William K. Black is telling us something very important, as Harry Markopolos had been trying to tell some simple but important things to the investors in Bernie Madoff's investment scheme. The Madoff investors preferred to vilify and ignore him. It appears that the same thing is happening to William Black. And the final outcomes may be similar.
What can one person do besides to spread the word, and demand the truth in their own place and their own way? Support those who stand and tell the truth, sometimes at great cost. Insulate and remove yourself from the fraud as best you can to preserve your wealth and your integrity.
Above all resist the disinformation, propaganda, and distractions, and all the insidious rationalization and convenient skepticism to complicit apathy, making it clear that you will be neither a willing victim nor a silent bystander to the intoxicant of blame and hatred, and the victimization of others designed to turn the people on one another, be they Gypsy, Muslim, Jew or Christian, black, white, Asian, Hispanic, disabled, old, poor, ill or weak, or any other variety of outsider and convenient target.
For once the madness starts, it can never be controlled, and will eventually come for all, and consume all.
The Great American Bank Robbery
Video - Lecture
By William K. Black
1. Why do we have repeated, intensifying economic crises?
2. What can white collar criminology add to our understanding of what's going wrong?
Note: The William K. Black video was first served at this Cafe in August of 2009 in a post titled The Great American Bank Robbery. It was not so widely received at that time as it seems to be now. I view this as a promising development. The events of the past few years are opening people's minds to the possibility that things are not as they appear, and that the financial crisis and reform did not happen for reasons which they had not yet seriously considered.
The Imperial Presidents
Wall Street is the Praetorian Guard.
As for Nero, we'll just have to wait and see.
But perhaps it might be good to have some fire insurance.
21 January 2011
Concentration in US Banking Since the Repeal of Glass-Steagall
It should be noted that Glass-Steagall was repealed in stages before 1999, with relaxation of the rules as a result of the lobbying efforts led by the Wall Street banks, and with the backing of Alan Greenspan.
A Brilliant Warning on Robert Rubin's Proposal To Deregulate Banks 1995
The Great American Bank Robbery - William K. Black
Source: Systemic Risk In Banking EcoSystems
SP 500 and NDX March Futures Daily Charts
Weakening momentum and light volumes.
Any event will likely do it, even if Benny throws his best slop at it.
But if volumes remain light and the markets detached from reality, they can drift on monetization.
US Dollar Index Drops to Strong, 'Must Hold' Support
A significant break of support here negates the double bottom formation.
It is not so much that gold and the dollar have moved lower together, but rather, the euro rally took quite a bit of risk buying off gold, at least from the continent. Asia remains a firm buyer and will most likely do so.
When the perception of sovereign risk changes again back from optimisim to gloom, I would expect both the dollar and gold to strengthen. Unless that gloom begins to encompass the buck, and acknowledge the yawning chasm of state and municipal defaults which the Yanks and their ratings agencies are so far blithely avoiding, deflecting the concerns to Europe.
This soft shoe dance that Ben and Timmy have done so far is getting a bit thin.
And it was almost funny to see the Amazing Krugman wagging his printing finger at China over the threat of impending inflation. Physician heal thyself.
GE's Jeff Immelt To Replace Paul Volcker
In case there was any question remaining in your mind as to what is really happening.
It should be noted that GE was the number one corporation in lobbying, spending $40 million on the purchase of political influence last year.
Obama is looking more like Herbert Hoover every day, but without the Great Engineer's accomplishments.
As someone said, it could have been worse, Obama could have chosen Lloyd Blankfein as his advisor. But that would have been a demotion for Lloyd, and a probable lessening of his existing impact on public policy.
NYT
Volcker Out, Immelt In on Economic Board
By SHERYL GAY STOLBERG and ANAHAD O’CONNOR
January 21, 2011
SCHENECTADY, N.Y. — President Obama will name Jeffrey R. Immelt, the chief executive officer and chairman of General Electric, on Friday to run his outside panel of economic advisers, replacing Paul A. Volcker, the former Federal Reserve chairman, who is stepping down, the White House said.
Mr. Immelt will chair a new Council on Jobs and Competitiveness that Mr. Obama intends to create by executive order. In a statement issued shortly after midnight, Mr. Obama said he wants the council to “focus its work on finding new ways to encourage the private sector to hire and invest in American competitiveness.”
The council will be a reconfigured version of the board Mr. Volcker chaired, the President’s Economic Recovery Advisory Board. That body, created by Mr. Obama when he took office in the thick of the worst economic crisis since the Great Depression, is set to expire on Feb. 6...
"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group."
Franklin D. Roosevelt
US Policymakers Considering Various Paths for State Bankruptcies
PIIGs on steroids, and selectively applied defaults.
Thank God the Banks will be saved any pain or discomfort.
Washington and New York will rule them all with an iron rod.
NYT
Path Is Sought for States to Escape Debt Burdens
By Mary Williams Walsh
January 20, 2011
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.
House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.
Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.
Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers...
20 January 2011
SP 500 and NDX March Futures Daily Charts - An Economic and Policy Failure
I think the first leg of this correction in stocks is waning a bit as the highly overbought and complacent condition is being worked off, and new shorts are engaging in the market to be squeezed by steady buying in light volumes led by the SP futures.
Perhaps another move down, while Benny's dose of liquidity directly to Wall Street takes effect.
Excepting some event, it is hard to imagine a protracted stock market decline at this time given the artificial support that Wall Street is receiving.
The pigmen feel that they are firmly in control of both NY and Washington.
"The real collapse of our currency began when it became evident that certain industrial circles were more powerful than the government."An Economic Philosophy That Has Completely Failed, William K. Black
Adam Fergusson, When Money Dies
'Failure' depends on what your objectives are. If looting for short term benefit of the Wall Street monied interests and their well-oiled Washington support system, things are working quite well.
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