Tag Archive | "Paulson"

BAILOUT: America’s Financial Ruin

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By Patrick Wood, Editor

When push came to shove, Humpty Dumpty dis­cov­ered the shortest dis­tance to the cob­ble­stones below: straight down.

Being quite dead, Humpty’s body is stinking up the whole neigh­bor­hood. The eye­wit­nesses call it murder. The coroner, bypassing the eye­wit­nesses, rules it an acci­dent. The public clamors for tax­payer funds to clean up the mess. Con­gress passes a bill for super­glue to be lib­er­ally applied to the broken pieces of shell. The courts finally rule that the eye­wit­nesses are guilty of hate-speech. Con­trac­tors who admin­is­trate the recon­struc­tion project get rich.

And so goes the circle of life. Makes no sense, does it?

The global economy, including its stock mar­kets and banking system, is a decaying, dead corpse in process of a mas­sive credit defla­tion. Until it hits absolute bottom (wher­ever and when­ever that is), no life-support system will help. No gov­ern­ment bailout at tax­payer expense will help. No nation­al­iza­tion of body parts (e.g., Fannie, Freddie, AIG) will help.

Nev­er­the­less, let’s ana­lyze the bailout mania that will most cer­tainly one day be declared the largest and most brazen swindle in the his­tory of the world.

In light of and in response to the rapidly decaying banking emer­gency, Trea­sury Sec­re­tary Henry Paulson and Fed Chairman Ben Bernanke went hand in hand to Con­gress to ask for $700 bil­lion to repair the system. Paulson demanded that no strings be attached; no judi­cial over­sight; no account­ability. “Trust us,” they said.

Their demand was to take rotted assets off the bal­ance sheets of global banks, and sell them to the U.S. gov­ern­ment. No problem raising our national debt by another 12%. No problem that the U.S. credit rating is at risk of being down­graded, costing tax­payers hun­dreds of bil­lions extra in interest charges to ser­vice the existing national debt. No problem that for­eign banks can line up at the trough along­side Amer­ican banks. No problem that the toxic-waste assets don’t even have to be backed by U.S. mort­gages. No problem that these same global bankers are the ones who trashed the credit mar­kets in the first place.

They loved the pri­va­ti­za­tion of mas­sive profits and exec­u­tive bonuses for two decades of exces­sive risk and cre­ative accounting prac­tices. They now love the social­iza­tion of their inevitable losses as their house of cards comes crashing down.

The Paulson/Bernanke propo­si­tion to Con­gress was simple: Pay up or the country will collapse.

Is anyone really for this bailout?

On Sep­tember 29, just before the Senate and House passed sim­ilar bailout leg­is­la­tion, Rep. Brad Sherman (D-CA) made a pas­sionate plea to the House to reject Paulson’s and Bernanke’s demands. Therein he pre­sented a signed peti­tion of no less than 400 econ­o­mists, including three Nobel Lau­re­ates that stated, in part:

“We ask Con­gress not to rush, to hold appro­priate hear­ings, and to care­fully con­sider the right course of action.”

Mean­while, Sen­a­tors and Rep­re­sen­ta­tives reported that enraged cit­i­zens were flooding email servers and switch­boards with demands to vote “NO” on bailout leg­is­la­tion – up to 99 per­cent of them!

Yet, the Senate and the House passed the leg­is­la­tion anyway, behaving like herds of pan­icked wilde­beests on the savanna in Africa.

If everyone other than our elected offi­cials knows that Trea­sury Sec­re­tary Paulson and Fed Chairman Bernanke are brazenly plun­dering the United States cit­i­zenry, then why did they unan­i­mously pass this bailout legislation?

We’ve been had, folks

German philoso­pher Georg Hegel wrote, “We learn from his­tory that we do not learn from history.”

Rep. Louis McFadden, who had served as Chairman of the Banking and Cur­rency Com­mittee for over 10 years, was hop­ping mad about the Fed­eral Reserve and its shame­less abuse of the U.S. gov­ern­ment and its citizens.

In a speech to the House of Rep­re­sen­ta­tives, McFadden stated:

“Mr. Chairman, we have in this Country one of the most cor­rupt insti­tu­tions the world has ever known. I refer to the Fed­eral Reserve Board and the Fed­eral Reserve Banks, here­inafter called the Fed. The Fed has cheated the Gov­ern­ment of these United States and the people of the United States out of enough money to pay the Nation’s debt. The depre­da­tions and iniq­ui­ties of the Fed have cost enough money to pay the National debt sev­eral times over.

“This evil insti­tu­tion has impov­er­ished and ruined the people of these United States, has bank­rupted itself, and has prac­ti­cally bank­rupted our Gov­ern­ment. It has done this through the defects of the law under which it oper­ates, through the mal­ad­min­is­tra­tion of that law by the Fed and through the cor­rupt prac­tices of the mon­eyed vul­tures who con­trol it.

“Some people who think that the Fed­eral Reserve Banks are United States Gov­ern­ment insti­tu­tions. They are pri­vate monop­o­lies which prey upon the people of these United States for the ben­efit of them­selves and their for­eign cus­tomers; for­eign and domestic spec­u­la­tors and swindlers; and rich and preda­tory money lender. In that dark crew of finan­cial pirates there are those who would cut a man’s throat to get a dollar out of his pocket; there are those who send money into states to buy votes to con­trol our leg­is­la­tures; there are those who main­tain Inter­na­tional pro­pa­ganda for the pur­pose of deceiving us into granting of new con­ces­sions which will permit them to cover up their past mis­deeds and set again in motion their gigantic train of crime. [Emphasis added.]

Ouch.

Would you be sur­prised to learn that McFadden’s blis­tering tirade was not deliv­ered in 2008 but rather in 1934 during the darkest days of the Great Depression?

You see, this isn’t the first time in our nation’s his­tory that we have been attacked by the “moneyed vul­tures” who seek to swindle the tax­payer to cover up their own misdeeds.

Read care­fully as McFadden continues,

“The United States has been ran­sacked and pil­laged. Our struc­tures have been gutted and only the walls are left standing. While being per­pe­trated, every­thing the world would rake up to sell us was brought in here at our expense by the Fed until our mar­kets were swamped with unneeded and unwanted imported goods priced far above their value and make to equal the dollar volume of our honest exports, and to kill or reduce our favorite bal­ance of trade. As Agents of the for­eign cen­tral banks the Fed try by every means in their power to reduce our favor­able bal­ance of trade. They act for their for­eign prin­cipal and they accept fees from for­eigners for acting against the best inter­ests of these United States. Nat­u­rally there has been great com­pe­ti­tion among for­eigners for the favors of the Fed.

“What we need to do is to send the reserves of our National Banks home to the people who earned and pro­duced them and who still own them and to the banks which were com­pelled to sur­render them to preda­tory interests.

“Mr. Chairman, there is nothing like the Fed pool of con­fis­cated bank deposits in the world. It is a public trough of Amer­ican wealth in which the for­eigners claim rights, equal to or greater than Amer­i­cans. The Fed are the agents of the for­eign cen­tral banks. They use our bank depos­i­tors’ money for the ben­efit of their for­eign prin­ci­pals. They barter the public credit of the United States Gov­ern­ment and hire it out to for­eigners at a profit to themselves.

“All this is done at the expense of the United States Gov­ern­ment, and at a sick­ening loss to the Amer­ican people. Only our great wealth enabled us to stand the drain of it as long as we did.

“We need to destroy the Fed wherein our national reserves are impounded for the ben­efit of the for­eigners. We need to save America for Americans.”

In fact, McFadden did actu­ally bring formal charges against the Board of Gov­er­nors of the Fed­eral Reserve Bank system, The Comp­troller of the Cur­rency and the Sec­re­tary of United States Trea­sury for numerous crim­inal acts, including con­spiracy, fraud, unlawful con­ver­sion and treason.  Unfor­tu­nately, the charges were ulti­mately ignored, allowing the per­pe­tra­tors to con­tinue for another season.

[NOTE: To his great dis­credit, McFadden was openly anti-Semitic and an early sup­porter of Adolf Hitler during the 1930’s because of his poli­cies toward Jews. McFadden blamed Jews, wrongly so, for the finan­cial chi­canery he oth­er­wise clearly observed.

For many decades there­after, experts, including Nobel Prize-winning econ­o­mist Milton Friedman, have sug­gested that the Fed­eral Reserve was directly respon­sible for the 1929 stock market crash and the sub­se­quent Great Depression.

In 2002, Ben Bernanke (then merely a Fed gov­ernor) deliv­ered a speech on the occa­sion of Friedman’s 90th birthday at the Uni­ver­sity of Chicago, and addressed Friedman’s work on the cause of the Great Depres­sion. Bernanke con­cluded by stating, “You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

All promises aside, guess what? They’re baaack!

FBI opens investigation

On Sep­tember 24, 2008, right before Henry Paulson demanded bailout funds from Con­gress, the FBI had an announce­ment of its own. Namely, that it is inves­ti­gating Lehman Brothers, AIG, Fannie Mae and Freddie Mac for fraud, improper accounting prac­tices, con­spiracy, etc.

These four com­pa­nies are the remaining and prin­cipal insti­ga­tors of the sub­prime credit fiasco. In the case of Fannie and Freddie, there have been accu­sa­tions of fraud and cor­rup­tion for as long as they have existed.

But, Paulson and the Trea­sury had already nation­al­ized them, and shrewdly so: When wrong­doing is ulti­mately proven, it will be hard to hold anyone account­able or to punish the com­pa­nies since the U.S. Trea­sury owns them.

Conclusion

Don’t be fooled into thinking that it’s just about money: It’s also about power.

The Sec­re­tary of the Trea­sury now has near-dictatorial power over this newly formed socialist finan­cial empire.

Of course, this is con­sis­tent with the incred­ible power con­sol­i­da­tion of the Exec­u­tive Branch of our gov­ern­ment under pres­i­dent George Bush during the last 8 years. During this cen­tral­iza­tion, Con­gress and the Judi­ciary have been method­i­cally weak­ened to the point that some polit­ical ana­lysts believe that the Pres­i­dent could, if he wished, declare mar­tial law and dic­ta­tor­ship at the same time with little recourse from the other branches of the government.

Robert Pastor (father of the North Amer­ican Com­mu­nity) said last year that “having a crisis would force deci­sions that oth­er­wise might not get made.”

He was absolutely right. In normal times, the com­bined Con­gress would have laughed Paulson and Bernanke right out of town. The cur­rent finan­cial crisis has pro­vided cover and every oppor­tu­nity for the finan­cial cartel to take what little we have left.

Indeed, those who do not learn from his­tory are doomed to repeat it.

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Global bankers seek to raid taxpayers over subprime fiasco

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By Patrick Wood

Banking used to be simple. When you bor­rowed money from a bank, the bank owned your mort­gage and you paid the interest and prin­cipal directly. This is easily under­stood by this graphic representation:

 

Things got com­pli­cated when bankers got greedy, fig­uring the could make a whole lot more than just simple interest. The scheme is called secu­ri­ti­za­tion, as depicted by the fol­lowing flow-chart.

In its sim­plest terms, secu­ri­ti­za­tion is a process whereby illiquid finan­cial instru­ments (e.g., mort­gages) are pur­chased and com­bined into pools. The pool is then struc­tured where shares can be sold to 3rd party investors like banks, pen­sion funds and even gov­ern­ments. Any type of asset can be secu­ri­tized as long as it has a steady flow of cash asso­ci­ated with it. The cash flow is the incen­tive for pur­chasers to make their investment.

There are many fees that are paid along the road to suc­cessful secu­ri­ti­za­tion. The orig­inal bor­rower pays “points” to the ini­tial broker and/or banker. The pool oper­ator receives the rights to income at a dis­counted price. The invest­ment banker who syn­di­cates the sale charges hefty fees plus com­mis­sions paid to the selling broker/dealer or invest­ment representative.

The invest­ment bankers are the pri­mary enablers and dri­vers of the secu­ri­ti­za­tion process. Right behind them is the Fed­eral Reserve, who is sup­posed to be a watchdog on shaky banking practices.

Invest­ment bankers have many tricks that help to make secu­ri­tized invest­ments more attrac­tive. Appraisers are employed to give favor­able val­u­a­tions (and often greatly inflated) to the under­lying prop­er­ties. Credit agen­cies are employed to give favor­able rat­ings (again, often greatly over-rated) to the invest­ments, thus pro­moting con­fi­dence. The credit risk is often mit­i­gated by adding insur­ance poli­cies, dif­ferent classes of investors, hedging against failure by pur­chasing or selling deriv­a­tives. It gets more com­pli­cated than we want to dis­cuss here.

Cur­rently, Attor­neys Gen­eral in New York, Ohio, and Col­orado are inves­ti­gating illegal appraiser activity with respect to banks and other lenders pres­suring appraisers to fudge their appraisals. The Secu­ri­ties and Exchange Com­mis­sion is cur­rently inves­ti­gating illegal activity at credit rating com­pa­nies who might have been pres­sured into issuing arti­fi­cially high credit ratings.

For the invest­ment bankers, most of their profit is taken out of the “enhance­ment” value at the expense of the under­lying invest­ment that is being pur­chased by unsus­pecting investors. In other words, the ulti­mate investor is get­ting  hosed from the start but the house of cards doesn’t fall until the cash flow starts to dry up — as in, John Doe can’t make his house pay­ment and goes into default on his mortgage.

Secu­ri­ti­za­tions made against the sub-prime lending mar­kets were simply the weakest links in the finan­cial chain.

This is exactly where greed starts to really show up: when bankers decided to relax bor­rowing stan­dards, they began to allow loans that never, ever should have been made. In other words, bor­rowers had defi­cient or delin­quent credit his­to­ries, little doc­u­men­ta­tion on income and over-appraised prop­er­ties. Adjustable rate mort­gages (ARM’s) were tai­lored to fit the income of the bor­rower, which was already too small for a normal loan. Thus, when the ARM adjusted upward, up went the pay­ment amount and the bor­rower finds him­self delin­quent and facing bankruptcy.

Those holding the secu­ri­tized invest­ments all of a sudden receive less income and are forced to “revalue” their invest­ment down to the reality of income actu­ally received plus the prospect of addi­tional declines in income in the future. Remember that these assets were over-inflated in the first place, so investors are forced into taking huge hits on their bal­ance sheets.

Since secu­ri­tized assets are quite illiquid, it is very hard to find another buyer. If you are lucky enough to find one, the buyer will be inter­ested in offering you a “pennies-on-the-dollar” type of price.

It is insuf­fi­cient to blame the credit col­lapse on the sub­prime market. Because it was the weakest ele­ment of an overall flawed invest­ment market, It was simply the first seg­ment to blow up. The rest the market (non-subprime) is fol­lowing right behind it.

Now that people are looking for someone to blame for this debacle, the banking com­mu­nity, including even the Fed­eral Reserve, is shifting the blame to the con­sumer for having made poor bor­rowing deci­sions in the first place. After all, nobody forced them to submit an appli­ca­tion for a loan that they couldn’t afford. They should have known better.

Yet, it was the banking com­mu­nity that struc­tured the loan offers that lured unsus­pecting bor­rowers into their lair. For years, TV ads for mort­gages and credit cards dom­i­nated the air­waves. Many con­sumers received dozens of credit card offers by mail each week. Is it right for the bankers to say that they were merely responding to market con­di­tions, to give the foolish con­sumers what they demanded? In fact, the average person looks to his banker as an “expert adviser”, expecting knowl­edge­able answers that will be in the bor­rowers best interest.

I think not. Their mar­kets were arti­fi­cially cre­ated by the very adver­tising they flooded us with. Adver­tising cre­ates expec­ta­tions that can only be filled by pur­chasing the advertiser’s products.

According to a recent state­ment by Trea­sury Sec­re­tary Henry Paulson, former chairman and CEO of Goldman, Sachs, the Trea­sury will now step in with a plan that “helps investors and lenders avoid unnec­es­sary and costly fore­clo­sures that are not in their interest.” He has also talked of a rate freeze on Adjustable Rate Mort­gages that are soon to reset to a higher interest rate.

You can imagine how the owners of secu­ri­tized invest­ments feel about that. Having been guar­an­teed a cer­tain rate of interest, they will meet any gov­ern­ment inter­ven­tion or price-fixing with a flood of lawsuits.

Of course, a tsunami of law­suits, mort­gage fore­clo­sures and bank­rupt­cies would be fatal to at least a few U.S. banks. Yet appar­ently, to assume respon­si­bility for their own mis­takes (or even crim­inal actions) is too much to ask of them.

If the banking crowd suc­ceeds in taking another full drink from the public trea­sury, it will cost the Amer­ican tax­payers bil­lions in the end.

Mean­while, don’t expect that  the banking crisis is lim­ited to just the sub­prime lending market: It’s merely the tip of the iceberg!

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faq

What is Globalization?

It is the col­lective effect of pur­poseful and amoral manip­u­la­tion that seeks to cen­tralize eco­nomic, polit­ical, tech­no­log­ical and soci­etal forces in order to accrue max­imum profit and polit­ical power to global banks, global cor­po­ra­tions and the elit­ists who run them. It is rapidly moving toward an full and final imple­men­ta­tion of Technocracy.

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What is the Tri­lat­eral Commission?

Founded in 1973 by David Rock­e­feller and Zbig­niew Brzezinski, the Com­mis­sion set out to create a “New Inter­na­tional Eco­nomic Order”, namely, Tech­noc­racy. The orig­inal mem­ber­ship con­sisted of elit­ists (bankers, politi­cians, aca­d­e­mics, indus­tri­al­ists) from Japan, North America and Europe. Col­lec­tively, they have dom­i­nated and con­trolled trade and eco­nomic policy in their respec­tive coun­tries since at least 1974.

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What is Technocracy?

Tech­noc­racy is a move­ment started in the 1930’s by engi­neers, sci­en­tists and tech­ni­cians that pro­posed the replace­ment of cap­i­talism with an energy-based economy. Orig­i­nally envi­sioned for North America only, it is now being applied on a global basis. Authors Aldous Huxley and George Orwell believed that Tech­noc­racy would result in a Sci­en­tific Dic­ta­tor­ship, as reflected in their books, “Brave New World” and “1984″.

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What is Smart Grid?

Smart Grid is the national and global imple­men­ta­tion of dig­ital and Wi-fi enabled power meters that enable com­mu­ni­ca­tion between the appli­ances in your home or busi­ness, with the power provider. This pro­vides con­trol over your appli­ances and your usage of elec­tricity, gas and water.

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Who is M. King Hubbert?

Hub­bert was a geo-physicist who co-founded Tech­noc­racy, Inc. in 1932 and authored its Tech­noc­racy Study Course. In 1954, he became the cre­ator of the “Peak Oil Theory”, or “Hubbert’s Peak” which the­o­rized that the world was rapidly run­ning out of carbon-based fuels. Hub­bert is widely con­sid­ered as a “founding father” of the global warming and green movements.

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Who is R. Buck­min­ster Fuller?

A pio­neer in global eco­log­ical theory, Fuller (1895 – 1984) was the first to sug­gest the devel­op­ment of a Global Energy Grid that is today known as the Global Smart Grid. Fuller is widely con­sid­ered to be a “founding father” of the global green move­ment, including global warming, Sus­tain­able Devel­op­ment, Agenda 21, etc.

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Is the Venus Project like Technocracy?

The Venus Project, founded by Jacque Fresco, is a utopian, modern-day iter­a­tion of Tech­noc­racy. Like Tech­noc­racy, it scraps cap­i­talism and pro­poses that “a resource-based economy all of the world’s resources are held as the common her­itage of all of Earth’s people, thus even­tu­ally out­growing the need for the arti­fi­cial bound­aries that sep­a­rate people.” The appli­ca­tion of tech­nology is the answer to all of the world’s prob­lems, including war, famine and poverty.

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