Finance and Economics

Anti-Trust and the Public Interest

Posted in Finance and Economics, Law & Politics on June 26th, 2009 by AGY – Be the first to comment

from Barricade contributor Ground Control:

On June 19th, WSJ ran “Too Big to Fail, or Succeed: Everyone will want to become big enough to enjoy ’systemic risk’ protection.”

Here’s the excerpt that got me going:

“The same pattern with regard to competitive markets can be seen in the Justice Department’s new antitrust policy. Christine Varney, the new assistant attorney general in charge of antitrust policy, has said that U.S. policy should be more like Europe’s. Until now, U.S. antitrust policy has tried to protect competition. Europe attempts to protect competitors. Protecting competitors means blunting the skills of superior players, allowing inferior managers and business models to remain in business and thus preventing better managements and business models from emerging. Again, stability wins out over change and progress.”

There’s certainly a lot wrong with Obama’s proposals, which makes it all the more disappointing when his critics get it wrong. Once again, someone writing in the Journal doesn’t get it, that vigorous antitrust enforcement is absolutely essential to promoting and ensuring competitive, innovative, healthy markets.

The simplest observation is that monopoly profits are clearly in the interests of shareholders, and company executives are obligated to maximize profits. At the same time, monopolies are clearly against the interests of consumers, as they underproduce, overcharge, and have a (sometimes greatly) decreased incentive to innovate. Without vigorous antitrust enforcement, especially merger review (which is ex ante), virtually every market would wind up monopolized. The extra profits enjoyed by the shareholders of each monopolist would be dramatically outweighed by the losses they suffer from all the other markets in which they consume. Ex post enforcement is also critical, because not all anticompetitive effects arise from mergers, nor can all such effects be predicted in advance.

While I prefer the Republican policy prescriptions, the prior administration really fell down on the job in the area of antitrust enforcment. The Bush DOJ (much more political than the FTC, which has less political turnover) failed to challenge a single merger in eight years. Then, lo and behold, you have companies that are too big to fail and, moreover, were not forced to behave competitively in the meantime. It was a serious lapse. Anyway, I still fail to get it, why so many conservatives are opposed to antitrust enforcement, as it is a decidedly conservative principle, that markets should be kept free.

Lastly, while it is certainly true that antitrust exists to protect competition for the benefit of consumers, and not competitors per se, competitors are nevertheless a proxy for healthy competition. What this statement is supposed to mean, generally, is that a competitor should be afforded the opportunity to compete on price and quality without facing artificial barriers to entry and/or expansion. Thus an equally efficient rival should be able to compete, but that there should be no sympathy for a competitor with a bad product or costs that are too high. But what most of these ideologues continue to ignore are the tremendous advances in pricing theory and strategy that have been shown, and been mathematically proven, to empower a dominant firm to erect just such artificial barriers. Good for individual shareholder, but bad for everyone else, and a net loss in total consumer surplus/welfare.

Black Swan and the Huff: Take the Bull By the Horns

Posted in Finance and Economics, Law & Politics, Zeitgiest on June 11th, 2009 by AGY – Be the first to comment

Government liquidity injections may not prevent deflation and could even result in hyperinflation.  Got to love the Black Swan. How many times does he have to say it? I love it when the schills at CNBC press him for specific investment positions, and he will have none of it.  These CNBC guys look like such idiots and charlatans–but it works, after all, because it’s TV and ratings are all that matters.  They are the heralds for  the pseudo-experts, and pseudo-theorists. Taleb says the problem is debt, and they say, “well how do you fix that,” and it looks like Taleb is doing everything he can to supress a plaintive sigh.  Huffington is the only one there that’s encouraging. Eventually, as is his go-to move, his advice is fire everyone that was in charge of the old financial system that failed to foresee collapse, because they are using the same flawed forecasts to predict recovery.  “These people failed us and they are going to fail us again.”  Then he walks in front of the money-honey’s shot and off set before they even get to commercial (this was edited out of the official CNBC video, unfortunately because it was awesome when I saw it live.)


Why We Are Not In For A “Recovery”

Posted in Finance and Economics, Zeitgiest on May 29th, 2009 by AGY – 8 Comments

D-E-B-T. Debt? Oh yeah, debt.  Its still out there, isn’t it?

Green shoots? Laughable.  I’m afraid our “long emergency” is still on.

Commercial real estate is headed for a depression just as prime loans and jumbo loans blow up.  Meanwhile, oil is being bid up by speculators (mostly TARP-receiving financial institutions) and the electronic economy is ignoring fundamentals.  This all bodes for a summer crash.  Expect higher unemployment as small and large businesses go bankrupt–further weakening spending and consumption.  Consumer confidence may be reported as high, but their actual spending will not be.

Pressure will increase on the Dollar, as the Fed buys debt so the Treasury can sell debt.  Alas, foreclosure deserts will continue to spread across much of the Sun Belt suburbs, as business gradually grinds to an even slower pace than what we already see.  The Rust-Belt slouches towards Thunderdome.

The upshot: standard of living will decline.  And as it does, we should call it a positive thing when 20% to 30% of indebted individuals and small business owners throw themselves on the mercy of the Bankruptcy Court.  How the Bankruptcy dockets will  swell after our debtor-country realizes that having a pristine credit score is not what its cracked up to be, which is part of the related epiphany that the solution to too much credit and debt is not more of it.  All this credit-score, credit report business was a bunch of nonsense cooked up by the big, crooked banks to keep the little man in debt-fear slavery, wasn’t it?

As this debt gets written off and some of it paid off, the country, ere the world, will have a chance to rebuild wealth on a sustainable basis and perhaps escape the boom-bubble-bust cycle that has afflicted us for so long.

Doubt this? Look here:

total-debt-by-type

losses-by-type

writedowns-total

Yes, those are trillions folks–which, apparently, has become the new billion.

(This remind you that perhaps you need bankruptcy counsel? If so, and you are in the Gulf South, I recommend you go with Kervin & Young–they may be able to save you some money.)

Let’s also check in on the Four Bad Bears as we remind ourselves of this debt reality:

four-bears

If anybody thinks that the blue line is going to trend up over the next 24 months, and that we are not in for a summer or early fall crash, please comment here and tell me why–in light of the preceding debt charts.

On Obama’s Pragmatism and America’s Apathy

Posted in Finance and Economics, Law & Politics, Zeitgiest on May 2nd, 2009 by AGY – 7 Comments

From Tim Eagan at NYT a few days ago, the “Off Brand Presidency”

“[President Obama] campaigned for activist government, a less confrontational foreign policy, a business-friendly way to a green revolution. A liberal. Or, to use the term favored by those who are afraid of the lingering toxicity of that word – a progressive…President Barack Obama is making it safe to be a liberal again – and showing how meaningless such labels can be.

“His first lap reveals not so much about him as it does the country he governs: a nation willing to follow a man whose policies they may not fully believe in…In a recent Pew Center poll, Americans were asked to describe Obama in a single word; the top of the list was “intelligent.” Not black, which is what historians dwelled on. Not socialist, which is what the pickled cranks of the far right have called him. In his 100th-day news conference, Obama had a bit of my-burden-is-great tone, while going out of his way to reject cartoon liberalism. ‘I don’t want to run auto companies,” he said. ‘I don’t want to run banks. I’ve got two wars to run already.’”

Eagan is correct in all of his observations about President Obama.  But I question him when he posits that the nation willingly follows “a man whose policies they may not fully believe in,” because that assumes that most people have considered his policies, confirmed themselves to skepticism regarding his policies, and then affirmed their willingness to “follow” the President’s agenda.  Rather, I think the nation doesn’t give a care what the president’s policies are, nor what they portend in the general arrangement between individual rights and the state.   Instead, the nation’s only desire is to see that its standard of living does not materially decline. This is not a true collective desire expressed by the exercise of popular sovereignty, but rather an individual and intensely narcissistic desire that happens to dominate among a broad majority of potential voters, and is expressed by omission of any demonstrated feeling whatsoever.

The many whom Eagan describes as being open-minded, are more likely simply apathetic.  They have apathy, and many perhaps disdain, for the discussion that surrounds dualism of liberal/conservative or Republican/Democrat, and by extension are more or less apathetic to the whole social structure.  I would bet that more people than Eagan would be estimate, would if pressed very readily admit that both political parties are generally corrupt, and beholden to the same interest: campaign contributions.  However, these same people remain generally apathetic because there is no legitimate third party, and there is no loud cry for one.  There was an extremely high level of interest in the 2008 Presidential election, but it was popular in the same way that a sporting event was, it captured the hearts of the voters–but not their minds.

Most people only participate and change course when they get uncomfortable or frightened.  For instance, the Democrats took the legislature in 2006 because Iraq was going very badly, and that scared people and disturbed them.  And Obama was slightly trailing McCain in 2008 in electoral votes, but when Lehman failed in September that scared people, made them uncomfortable, then Obama surged ahead and never looked back.  So when we do get change, its really just apoplectically switching from one bought party to another–its never been a studied, carefully considered shift in the national values, rather its been a reaction to the fear of a decline in material standards.  Is this tyranny of the apathetic majority?

Another example of apathy: You can’t find 100 people outside of the CPA lobby that are advocates of the current income tax system, but do you ever think its going to change?  We have a super majority of citizens who agree that the tax code is damn inefficient , and wasteful, and too complex, but we can’t tackle the problem.  Even the Sec. of the Treasury couldn’t get his shit straight.  We are the only country that has to figure this stuff out for ourselves, rather than getting billed by the government.   We have a super-majority of people who want it changed, but they don’t really want it changed, because it might be uncomfortable to do away with the loopholes and write offs that the current byzantine structure provides. The many, the masses, the voters are simply concerned with being able to keep up a certain level of consumption and access to the material fruits of the debt economy, and whatever  policies most quickly deliver the maintenance of their standard of consumption will be favored by the consumers.  Whether such policies are socialist or classical, liberal or laissez faire is of no concern to the American.

The danger in all this is that the structural implications of those policies go largely unquestioned and unanalyzed by the many who brought Obama to power.  These are the poll respondents who account for his “approval rating.”  Like his predecessors, we have not seen any real political philosophy from the President,  outside the decision to enact those policies aimed at keep people driving their autos, eating Ruby Tubesteak, shopping at the mall, and paying their cable bill.  Its often couched in terms of “jobs” and “getting people back to work,” but jobs for the sake of jobs, work for only the sake of maintaining a level of consumption, is nihilistic and destructive.  Its the ideology of the cancer cell: growth for the sake of growth.

Eagan suggest something of this apathy in his last paragraph on that post, though he is much more kind: “They are parked, for now, in a lane of open-mindedness, along with the 75 percent of Americans who see Obama as a “strong leader.” If their president also happens to be a liberal, they don’t care – so long as he succeeds.” Calling the American mass “open-minded” gives them for too much credit.  Succeeds at what?  For most voters, I think the answer is: “Succeeds at increasing or maintaining my standard of living.”  This is precisely where the influence of a mass of uneducated, largely apathetic voters comes in: “you can do whatever, you want, Mr. President, as long as it means that I can get paid and support a certain level of consumption for myself and my family, by god!”

At first glance this might seem like a from of American pragmatism.  But this sentiment is not pragmatic, because it’s not reasoned or thoughtful enough to rise to the level of philosophy.  However, discussing pragmatism is certainly appropriate after 100 days, and it is fair to say that Obama’s operational policy so far is high-pragmatist.  As Eagan wrote, “Obama’s broad support points to an old American character trait – pragmatism.”

One way that American apathy is revealed is that we have no real radical figures in our culture or politics.  Has America really been moved by any radicals since Martin Luther King?  And don’t say Obama, because he’s not a radical just because he’s co-opted the language of change.  The American proles don’t really want change, they want to talk about change, they want to dress up the status-quo and call it change.  But they are a afraid of real change, because change means uncertainty, and change is uncomfortable.  How can you get through your net-flix queue, after all, if someone goes out and upsets the social order?

So, where are our leaders and poets, where are our Lord Byrons and Bob Dylans, where are our Jacobins and Castros?  From this vantage point all I can see is Caesar.  God, we could really use George Carlin today–he never hung out with the elites, never needed to please and social climb, so he was free to rail against the entirety of the establishment, all organized religion, all organized parties.  He told the truth and we laughed because it was true.  Unlike Alan Greenspan, whose hamartia was the desire to please people, and we worshiped him like a hero. (Read Maestro, by Bob Woodward.)

There are honest voices out there today, and they are more mainstream than perhaps Tim Eagan would like to admit, but those voices are slightly out of the earshot of most voters.  For instance, when you have someone like Simon Johnson writing in one of the most widely circulated and oldest journals of American opinion, The Atlantic, this month that:

“The finance industry has effectively captured our government…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 not using their influence to prevent 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.”

-And nobody says or does anything, then the only possible conclusion is apathy or cognitive dissonance.  There is no outcry…and I don’t think its because our leaders regard this MIT professor and former director of the IMF as a crack-pot, its because they know that the American voter largely does not care. Therefore it wouldn’t matter that the above was published in The Atlantic rather than Time. (who reads anymore, anyway?)

This sentiment is not only expressed in print, its also in Radio and on TV. Only a few days ago, in a radio interview Dick Durbin said “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”  Its not just Durbin, Barney Frank echoed that same sentiment last night on Real Time with Bill Maher.

But, again, where is the outcry?  Its not apparent, because for now most people still don’t care.

One of the sources of their apathy is the degradation of the meaning of money and finance all together.  When people ask, “where does money come

from,” and the answer is: “the government just makes it up;” and when the follow up question is “then why does money have any value,” and the answer is “because everyone believes it does,” most people really can’t stand to deal with the true fragility and fundamentally arbitrary nature of something they put so much value in as money, so its more comfortable to just turn off those thoughts.  And can you blame them?  After all, bankers, realtors, investment advisers and the lot have been lying to us for so long.   Over the last 8 years we created 17,000 AAA rated securities, but in reality only 4 companies were worthy of that designation. Why? Because, Wall Street alchemists created the illusion of value.  It’s just made up, like the value of the Dollar itself.  When your pension fund is broke because it invested in crap lies, what is the reaction of the voter–nothing yet, but perhaps when these pension funds go bust which could very well happen in the next couple of months we could see some geezer riots.  But don’t expect Joe Six Pack who is not in line for a pension to get involved.

Standard of living increased over the last 12 years because of a massive build up in credit (read: debt), and a concomitant explosion in the money supply thanks to the Chinese buying our debt.  We have had one bubble economy after another, first stocks, then real estate.   Excessive private and public debt was the reason for the crash of 2008.  The solution so far to our problem of too much consumption and too much debt, has

been to encourage more consumption and more debt.  No objection from most Americans–given the choice of having the Federal balance sheet taking on tens of trillions of dollars of more debt, or having one’s employer go out of business, the average voter will have the government go into unthinkable levels of debt any day of the week, and twice on Sunday.  The only value-system at work  is the overriding desire to keep consuming–at any cost.  This doesn’t mean that Joe Six Pack bears any overt hostility to the fate of our Republic, really, its just that when it comes down to  tough choices, he couldn’t give less of a shit.

Now, lets bare it: I voted for O, and I think he’s a real righteous dude.  After all, there is no way I could have ever, ever cast a vote for Sarah Palin.  So, I am not one of those “pickled cranks of the far right” calling Obama a socialist.  Like I said, so far he’s just pragmatic.  And as Judge Posner said, pragmatism has “no inherent political valence.”  But, in being bare, its okay to say that President Obama’s pragmatism is a very Social Democratic version that bespeaks traditional socialist values.  His pragmatism and socialism get wrapped up in each-other.

Contrary to the vitriol that came out of McCain-Palin last year, “socialism” is not a bad word. Even though its been co-opted by the right and made into  synonym for the occult, its just as legitimate a form of government as any other. And it is a legitimate check on the concentration of all the wealth and power in the hands of a small group of capitalists (note, however, that power is more concentrated at the top now than it ever has been, despite the efforts in the West of post-war Social Democrat governments). What’s insidious in Obama’s pragmatic socialism is that it pretends to be in favor of a free market system, and even worse, pretends to be even-handed, when its more and more obvious that certain financial elites and others of the priviligencia are directing the hand of policy.  As President Obama said, he doesn’t want to run banks and auto companies, he just wants to be the one who decides which banks and businesses fail and which ones succeed.

I make no value judgment about socialism, but I am calling out that it is intellectually dishonest to pretend that we haven’t witnessed a fair bit of it since September 2008. We are developing a form of socialism that benefits financial elites at the highest level, and inculcates the middle-classes at the other levels with the anesthetic of consumption.  If we’re going to have a type of pragmatic socialism, we need to know the rules, and it should be transparent. (Also, as an aside here, as we have written on this blog before if we are going to have socialism than we vote for the Swedish rather than the Venezuelan model that we seem to be sliding into…you know, universal health-care, free tuition at all colleges and all that.)

When we have a voting population that really has no care for its relationship to the state, and will tolerate anything as long as their living standard is propped up, it doesn’t matter whether the prevailing system is liberalism or socialism.  Neither do deficits and debt matter, because the highest value is present consumption.  The fate of future generations has largely been ignored, both economically and environmentally, because we have to keep spending and consuming.  This implies that we largely have no values, or at least we can’t agree on any.  Therefore, pragmatism makes some sense.

Posner, in Overcoming Law,  argues that a pragmatic case can be made for liberalism. Societies which adhere most closely to liberal tenets have produced and are likely to produce better consequences than those societies embracing socialism, social democracy, moral conservatism, or fascism.  Furthermore, liberalism and pragmatism mesh together neatly: “Liberalism . . . is the political philosophy best suited for societies in which people don’t agree on the foundations of morality, and pragmatism is the philosophy of living without foundations.” Our society has no moral foundation, and the only value we agree on is that we like money and we like consumption.

So, where will we go with this experiment in pragmatic socialism?  Is apathy just doomed to persist as the prevailing American value? N. N. Taleb points out that thirteen centuries of peaceful ethnic coexistence in Lebanon exploded overnight into brutal, completely unexpected civil war. Everyone assumes America is too complacent for class warfare in the literal sense to erupt. Perhaps, but the world will not be on the Dollar Standard for ever, and when currencies start to slide its very hard to put the brakes on.  And if that happens, people will experience a very sudden and very painful decline in their standard of living.  I’m not saying that such a thing is imminent, but that it’s structurally possible, fundamentally unpredictable, and should not be discounted.

Our best hope is that the effort by present policy-makers to re-inflate the credit bubble that drives the consumption economy won’t work, and that other countries will gradually rather than suddenly turn away from the USD.  Yes, this will adversely impact Americans’ ability to continue consumption at present levels.  However, people can consume less and have a better quality of life.  And in the process, perhaps this country will discover some values–any values.  Hopefully liberal values and freedom will still figure prominently in that future system, but so too should  the values of deferring some consumption in favor of future generations, so that they will have a least a fighting chance.  For now, the inheritance of the future seems to be only debt and pollution–oh, and also all these vacant subdivision and strip malls whose best hope for the future is to become a skate-park, thanks for that, Boomers.

Post Script Links:

“For Obama Justice Must be Pragmatic” 5/3 Sunday NYT

The Tyranny of Experts and why it’s ok to say “They Wuz Wrong!”

Posted in Finance and Economics, Law & Politics, The Fed Delenda Est, Zeitgiest on April 27th, 2009 by AGY – 662 Comments

by Pigpen

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge — even to ourselves — that we’ve been so credulous.” — Carl Sagan

Dr. Sagan, thank you, your voice from the cosmos is heard. The big bamboozle that we need to painfully acknowledge, if only to ourselves, is that somehow we have been duped into believing that our leaders know what they are doing. Perhaps we could kindly call this “hero worship,” but it is more accurately described as the tyranny of the experts. Our culture is infatuated with heroes, and blinded by the fact that our leaders claim to be experts, but that in reality know nothing and are consistently wrong.

Bill King echoes Sagan’s brilliance in his discussion of the soon to be released stress test of the country’s largest 19 financial institutions. “A major problem with the ‘stress test’ is it depends on modeling and it’s the precise practice responsible for much of this economic and financial mess. It’s extraordinary that so many people believe that the Fed and Treasury, after missing the financial disaster, housing debacle, recession and derivative implosion, can now extrapolate economic conditions and resultant financial affects from its models. How did all that rocket-science modeling for subprime defaults and securitization workout? Yet many people already forget or ignore this reality.” They don’t know what their doing with these models, they don’t represent the real world, but they are going to go by them and pretend that they’re not WRONG.

So, who are these tyrants, and why do we listen to them at all? Why do they have so much power when they are consistently wrong? Its because we citizens, the body politic, fail to call them out when they are categorically, unqualifiedly, and are consistently wrong. The list of tyrannical experts is innumerable so we will direct our attention on Ben Bernanke, Timothy Geithner, and Hank Paulson.

threeamigos

Henry Paulson: the Grand Vizier of the Most Sacred Temple of Goldman

In 2000, Hank Paulson was the architect of changing the SEC rules regarding the leverage ratios and risk profiles of the investment banks. Investment banks, prior to the Paulson SEC change, were only allowed to be levered $12 for every $1 of capital that they owned. In that scenario, if a bank’s assets went down 8.3% then the bank would be technically insolvent. Hank had the brilliant foresight to petition the SEC to allow for more self-regulation on Wall Street and allow his banks and others to lever $40 for every $1 of capital. In this scenario, a 2.5% decrease in assets wipes out the banks equity and the bank becomes insolvent.

So when you hear Paulson tell you that the reason for the problem we are in is housing, please realize he is lying to you. He is not just mistaken. He is lying to you. He knows better. Any investment can drop 20, 30, 40% without causing catastrophe. It is the leveraging up of these declining assets at 40 to 1 ratios that caused the problem. Hank Paulson was the pointman in creating this leverage. HE WUZ WRONG.

So, not only has Hammerin’ Hank been dead wrong, but he also used this financial crisis as a tool to consolidate more power and influence into the house of Goldman Sachs. Notice which bank received the most money through the AIG back door bailouts. Notice which bank was NOT saddled with a government mandated merger/acquisition of another bank riddled with toxic assets. “Hi, I’m Hank Paulson, nice to meet you. Listen, I just want to let you know that I will protect any Goldman Sachs counterparty with an unlimited amount of US taxpayer money.” It has almost become too easy to pick on Goldman Sachs, as it is clear as the day is long that this has been an inside job, yet no credible reporter other than japer Jon Stewart, nor any elected official other than Maxine Waters has mentioned it. Maxine, we love you and we know you are dealing with complex issues and insidious connections, but we wish you were a bit more educated on the matter when you do discuss the Goldman swindle.

But Maxine’s ignorance is at the crux of the issue of our reliance on tyrannical “experts.” The financial world is too complex for most Americans to understand and it is that way by design. Adam Tabibi from Rolling Stone describes it fiercely:

“As complex as all the finances are, the politics aren’t hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.”

The citizenry is the clueless customer. We just keep our heads down, watch a little TV, maybe play some golf or go fishing on the weekend, and dutifully pay our taxes. So, are we delusional or indifferent? The reason deception sells is that so many people line up for it.

Timothy “turbo tax override deductions” Geithner:

As the former head of the NY Federal Reserve and chief regulator for all the big money center NYC banks, Turbo has failed at his job as a regulator. This is too obvious. Rather than going into dark detail here, please refer to a previous Barricade post: The Fed is the Biggest Failed Regulator. But, instead of being fired or resigning due to abject failure and shame, Timothy was promoted to the top financial job in the land - Secretary of Treasury. Please, read that again slowly for effect.

“Helicopter” Ben Bernanke

“Helicopter” Ben Bernanke, as in “I will drop money from helicopters to stop deflation,” has been the architect of every silly program with alphabet letters that we have seen to date. Ben should be working on Madison Avenue designing cool acronyms for toilet paper companies, but instead he runs one the most powerful public institution in the U.S. Economy and also the most secretive: The Federal Reserve Bank of the United States. Also significant is the fact that Chairman of the Fed is a political appointment, rather than an elected post. Funny how that happens - all the power in the world resides with people who are unelected. (I am going to reread my constitution and try to figure out which section allows for all this concentration of power in the hands of a banking oligarchy.)

Here are just a few of the comments Ben Bernanke has made that if anyone else would have made such lousy predictions they would have been fired with no hope of employment in the financial industry.

1.The Fed assumed house prices were increasing due to income gains . WRONG

2.The Fed assumed the housing mess was limited to subprime and that losses to the system would be between $50 - $100 billion max. SO WRONG (- he will likely be off by about $4 trillion with a T - that is a very large number)

3. The Fed assumed that bankers were writing good loans based on sound economic demand not bubble demand. WRONG on so many levels

4. The Fed assumed that derivatives made the system safer. SO WRONG I don’t know where to begin

5. The Fed assumed that additional leverage in the system would beneficially increase economic activity. 40x WRONG

6. The Fed assumed household debt levels we appropriate. WRONG
7. The Fed assumed that stocks were fairly valued with their inane “fed model” WRONG

8. The Fed assumed that bankers would act responsibly WRONG WRONG WRONG (but I do hope for and look forward to show-trials of bankers)

So, how have Bernanke and Geithner done in terms of management of their new hedge fund - the FED balance sheet? The Federal Reserve took on more than $74 billion in subprime mortgages, depreciating commercial leases and other assets after Bear Stearns Cos. and American International Group Inc. collapsed. Translate: the FED paid $74 billion for SHIT.Instead of Bear or AIG taking the loss, we the taxpayer will likely take the loss. In its biggest disclosure of the securities accepted to stabilize capital markets, the Fed said yesterday it had unrealized losses of $9.6 billion on the assets as of Dec. 31, 2008. Do you think those positions have improved since that date? If you do please, please email or comment on this blog and tell me where I can get some of those mushrooms. “The numbers basically confirm that Treasury (U.S. Gov’t) is going to have to take some TARP money and reimburse the Fed,” said Chris Whalen, whose financial-services research company analyzes banks for investors. “It is essentially up to the Treasury to get the Fed out of this.”

The FED has lent $2 trillion to financial institutions and hasn’t disclosed information about most of the collateral backing those loans. When these loans blow up, who do you think is going to reimburse the FED for their losses. You see, that’s very large number, folks, and another sign that we are doomed is that the citizenry is no longer stupefied and befuddled at the mention of the word “trillion”. Regardless, the U.S. Taxpayer is the sucker and loser of only resort. To summarize, instead of banks going out of business and into bankruptcy, the FED is buying all of their garbage assets and when the FED fails it will go to the US. Govt - aka the US taxpayer, and you will have you pay them back. So, losers are us taxpayers and winners are investors in banks who are constantly made whole. Does that seem perverse? These events suggest that the big bankers are untouchable, as they are unelected and are simply shills for the true power structure, the elite financial oligarchs that control our country. They are unaccountable, and are never fired for being so WRONG.

I would like to close on a positive note. It was revealed this week by CEO of Bank America Ken Lewis that he was pressured by Paulson and Bernanke to keep quiet about the losses at Merrill Lynch and to continue with the merger knowing it was full of toxic crap. Ken Lewis’s fiduciary duty is to his shareholders and not to his regulators. According to Lynn Turner, former chief accountant at the SEC, if these allegations are proven true, both Bernanke and Paulson should be prosecuted by the SEC to the fullest extent of the law.Now that my friends would be some must see TV or as the readers of US Weekly can appreciate - our financial oligarch elites do the same things as regular people and they are just like us. So next time you see one of the tryrannical experts, please do me a favor and ridicule them as they WUZ WRONG. Snicker at them and make fun of them and let them know you are on to them and they are simply mouthpieces for the elite banking oligarchs and they are WRONG

No Such Thing as “Toxic Assets”

Posted in Finance and Economics, Law & Politics, Zeitgiest on April 26th, 2009 by AGY – Be the first to comment

From Pigpen: “It gets no clearer and succinct than this one minute piece last night on Charlie Rose.  Top hedge fund manager and Nobel Prize winning economist talking how the banks are scamming taxpayers. Please send around as it disgusts me.”

Banks don’t like the prices so they are using their political influence to make sure that they don’t have to accept them.  Alas, banana republic are we.

Watch the full thing in three parts on youtube:  Part 1, Part 2, Part 3