The Man Who Exposed Madoff Cites Government Complicity in Fraud

This is only the tip of the iceberg, but even it may never be seen.

We ask now why the economists and regulators and media said little or nothing while the frauds and bubbles were developing, then.

But what are they saying now, about the new frauds, and injustices, and the blatant manipulation of the markets wherein some traders turn in financial results that are improbable to produce without inside information and breaking the rules?

A few heroes speak out, but most of the intellectual leadership cower in the shadows, asking 'Where is the outrage?' And the media baits the crowd with this or that distraction, and inflames them to think whichever way it pleases.

Here is an audio interview with Harry Markopolos in which he gives his views on the Federal Reserve as a regulator, financial reform, and the 'recovery.' Harry Markopolos Interview with King World News

Let us start here, and now, to demand the change required. Let us begin by auditing the Fed, and refusing to tolerate the granting of more regulatory power to an institution spawned in a deception in 1913, and at the heart of so many of our financial crises ever since. The Creature from Jekyll Island: A Second Look - G. Edward Griffin (2007)

As of yet, nothing has changed. The silence is deafening.


AFP Interviews Harry Markopolos

...In May of 2000, he submitted an 8-page report to the Boston Regional Office of the Securities Exchange Commission (SEC) listing red flags and mathematical proof of a major fraud but got no reply. He re-submitted his evidence to the Boston and other SEC offices in 2001, 2005, 2007 and 2008, to no avail. By this time, Markopolos was realizing that Madoff had been operating with protection from the inside.

In late 2008, when the stock market crumbled and investors rushed in to redeem their investments, Madoff ran out of cash, turned himself in to authorities, and pleaded guilty in federal court last March 12th.

Markopolos said that all the members of his team feared for their lives during the long investigation and he for more reason than any of the others because of his visibility. He was the one who was submitting all the complaints each year, and he knew that any leak from the SEC could make him a marked man.

He explained that the “offshore feeder funds” were only one step removed from organized crime. “If organized crime knew that Madoff was stealing their money, he would have been killed. Therefore, if Madoff had ever found out that we had a team tracking him through Europe and North America and that he risked getting exposed, it was a good bet that he would have had several billion reasons to want us silenced first. To compartmentalize the damage, I was the only one who went to the SEC.”

No one there knew Markopolos had an assisting team in the field. But Markopolos has proof that the SEC was culpable, too, and says publicly that he has tremendous anger at the agency and sadness for the victims. He says that there were SEC lawyers who were “in bed with Madoff ” and helped destroy lives.

“Madoff paid people to look the other way,” says Markopolos and reminds us that there is a federal report scheduled to come out by the end of the year. He emphasizes that unless there is a cover-up, “the SEC will cease to exist...”

Next Head of the European Central Bank a Goldman Sachs Alumnus or Buba's Head Boy?

The German patience with the EU is admirable.

And in the States, the patience with the rule of Wall Street and the hagiographic praise of Chairman Ben is ... remarkable.

One might even be tempted to call him 'maestro,' at least until the next bubble collapses.

Central Banking Publications
Weber Aims High
25 August 2009

So far, the front runner to succeed Jean-Claude Trichet as head of the European Central Bank, when his term ends in 2011, has been Mario Draghi, the shrewd current governor of the Banca d'Italia and Goldman Sachs alumnus (don't all boo at once).

But insiders are keeping a close eye on Axel Weber, president of the Bundesbank. If Draghi were to fall under a bus on the Via Nazionale (easily done, by the way), or if he were to give in to the blandishments of those who are urging him to dive into the treacherous waters of Italian politics, then Weber is positioning himself as the clear fall-back choice.

This would not go down well at the Elysée, where the thought of a German running the ECB makes President Sarkozy see red. Yet why not? Isn't it their turn, at last?

The efforts of French diplomats, allied to their enviable higher education and elite training, have ensured that Frenchmen have sat at the top of many of the great official international institutions for far longer than Germans (or indeed Brits). A Frenchman has occupied the post of IMF managing director for a total of 34 years since the founding of the Fund 65 years ago, while a German has been in the job for only four years. A Frenchman has been president of the European Commission for 14 years, while no German has held the post since Walter Hallstein, who retired in 1967. No German has headed up the EBRD in London, while Frenchmen have run it for 15 years. No German has led the OECD, and so on.

It would be understandable if Germans felt it was time to have their own man at the ECB. After all, it is German public opinion that in the end is critical for the long-term success of the euro. If German taxpayers are called on to bailout backsliding countries unable to discipline their economies (like Italy), they would be much more likely to do so with good grace if their own man or woman was seen to be minding the shop. So anybody committed to the success of the euro should be rooting for a German candidate, n'est-ce pas?

Enter politics. To reach the top job at the ECB, Weber needs to be nominated by the chancellor. Angela Merkel is fully expected to win the general election next month, possibly with a greatly increased personal mandate.

Now, observe a curious fact. For an institution known in the past for lambasting governments' deficit spending, the Bundesbank has been remarkably quiescent recently. Its big guns have fallen silent. Indeed, Weber has praised German economic policy. In a recent interview with Die Zeit online, Weber noted that the GDP recovery in the second quarter owed much to the support measures deployed by the government, the support of the state banking sector and the ECB's monetary easing. Meanwhile, Merkel has roundly criticised other central banks, such as the Federal Reserve and the Bank of England, while supporting the Bundesbank. They are both singing from the same hymn sheet.

Meanwhile, Weber has been quietly appointing his own people to several key positions while some Bundesbank board directors of an independent cast of mind appear to be heading for the exit.

The odds are still on Draghi. He is what the Italians call "furbo" – variously translated as smart, cunning or foxy. The French will be cheering him on. But the Italian fox will be on the outlook for a German greyhound coming up on the inside lane.

Saving the Federal Deposit Insurance Corporation

If they declare those payments to be on profit after bonuses they may find a groundswell of support on Wall Street. There is nothing like sticking it to the regional banks to consolidate the power of the few.

Look for another program from the Fed/Treasury to 'save FDIC' as part of the overall effort to maintain confidence and prevent a certain armageddon.

American Banking News
FDIC’s Deposit Fund May Need 25% of U.S. Banking Profit in 2010
August 23rd, 2009

With the 80th bank failure occurring in just the first eight months of 2009, the U.S. banking industry’s fee burden from the FDIC is continuing to be pressured as the Deposit Insurance Fund shrinks. Richard Bove, an analyst with Rochdale Securities, told Reuters in a report that the FDIC’s Insurance Fund may need to collect an amount that would equate to about 25 percent of U.S. bank industry pretax income in 2010 to stay afloat.

In the report Bove predicted another 150 to 200 additional U.S. banks failures before the current banking crisis ends. The FDIC will likely use special assessments against banks in order to raise the extra funds needed to secure the Deposit Insurance Fund’s integrity. Bove believes special assessments in 2010 could reach $11 billion in addition to the regular fees banks already pay.

The FDIC last levied a special assessment in the second quarter of five basis points on each FDIC-insured bank’s assets. The assessment is scheduled for collection on September 30.

When the FDIC released its final statement detailed the second quarter assessment it projected that the Deposit Insurance Fund would remain low, but positive through 2009 and begin to rise in 2010. However, FDIC Chairman Blair Sheila Blair said in that same statement an additional assessment may be required as early as the fourth quarter of 2009.

The Deposit Insurance Fund ended the first quarter of the year with a balance of roughly $13 billion. Since that time the FDIC has had to digest several large bank failures, such as Colonial BancGroup, which cost the fund about $4 billion.

The Deposit Insurance Fund holds a fraction of the $52 billion it had just a year ago, raising the odds of an upcoming special assessment to near certainty.

As seen recently on americanbankingnews.com, the FDIC is exploring its options for brining in investors to buy-up failed banks, thus easing the burden on the insurance fund. Investment from private equity firms has been the showcased proposal so far. The FDIC is set to vote August 26 on a relaxed set of guidelines that would entice private equity firms to invest in failed banks.