Don't Mention it

The classic con game 3 card monte employs one of the most effective social engineering tactics ever devised; the shill. When you think about what a shill does it's really simple and highly effective; s/he instills confidence (and thus the "con" in "con game") in the sucker. This is an advanced level of mis-direction as opposed to lying through pr.

Now with the SEC trotting out its dog and pony "let's get Goldman" script, the stage is set for yet another round of pr. My prediction? In the endgame, Goldman will settle but get back to business, "business" defined in Goldman terms as "raping and pillaging."

The crux of the case is the counter bets that Goldman took out against the financial packages poisoned by the sub-primes - basically, shorting them, but not in the traditional stock market kindergarten way, but in "sophisticated" schemes called CDSs, or credit default swaps. Goldman's argument is that they were simply protecting their clients' interests, while the SEC is crying "foul!" in the form of fraud by not having disclosed the counter bets to buyers. Whatever you think of this, once again, uncle scam is employing dirty tricks, this time in the form of our old friend mis-direction. Here's the set up...

While everyone from the NY Times to the WSJ to the market (as of this, Goldman's down, of course, but that'll change) is reporting on the basis of this case, what of John Paulson?He's the hedge fund manager who got Goldman - and others - to sell him shorts based upon on the sub-prime loan packages that he cherry-picked! And in case you don't know, his fund made a killing; six billion or so.

The SEC has said Paulson is not being indicted because he didn't defraud investors, and therefore they are going after Goldman. But here's my question; Say you steal a truck loaded up with large flat panel LED TVs on delivery. You sell me two at 500 bucks a piece.

Now let's say the cops bust you, and you were dumb enough to keep a log of all your customers. They find it and trace me down. They come to my crib, have a search warrant and compare the serial numbers on a master list from the delivery company to my TV; there's a match. Do I get to keep my TV, even though I did nothing wrong?

Now, six billion is small in the EM08 landscape. But whose money was invested? One of the big problems facing us is the dis-entangling (in real estate speak, this is called "chain of title") of the sub-prime loan packages, tracing their steps backwards to find out just where they originated. Many have been so over-leveraged that the originating party/ies have simply disappeared under a convoluted paper blizzard. It makes the tax code look cute.

In a similar way, and if this investigation were to be conducted with thoroughness let alone justice, we'd put the faces of real people on that six billion that Goldman and Paulson sold down the river. They'll never be made whole much less more than whole to the extent the banks took our bailout money and lent it back to us by buying T bills.

But the SEC (and DoJ) has already given Paulson a pass. It's a dangerous message; cheat and win. But here's the rub; if the SEC is going after Goldman, then Paulson -- the architect of the deal -- shouldn't be able to keep his TV.

The Fix

When it rains it pours. By now everyone knows about Madoff's ponzi scheme gone bust, but calling it the biggest theft in history ignores the $700B just handed over on a platter to the banks with no strings attached. In fact, what's tragic is that I heard Chris Dodd himself say that provisions were stipulated for the banks to use the money (in part) for credit. As we all know, that hasn't happened, and the banks instead used and are using the money to go shopping for themselves.

Yup - my bugaboo; further conglomeration.

You think it's bad now that oil, auto, media, and cell phone oligarchs have consolidated, just watch what happens with just a few super banks dominating everything. It's a gambling law: NEVER put all your chips on one bet unless you have "the nuts," the best hand.

Does anyone out there honestly think and can you rationally argue as to how a few super banks is "the nuts," the best possible bet for America...? On the other side of the ledger, that club ("And YOU and me ain't in it," -George Carlin) where the elites sit, they absolutely know what to do: conglomerate!

What's going on is stupefying on a level that would make Marx's and Ayn Rand's heads explode. Well, maybe not Rand's, but you get what I mean.

Long ago, in a financial disaster far, far away, there was a company named Enron who played a game, the game of "now monetize this." And there was a referee, Andersen, to make sure that Enron dotted it's "i's" and crossed its "t's." And there was trickery afoot in Ken Lay's house, and it burned down.

And when the smoke cleared all was revealed - the refs had been in on the fix.

August 31, 2002
Arthur Andersen surrenders its license to practice accounting in the United States. 85,000 people lose their jobs. Nine billion dollars in annual earnings disappears.(1)

Just like the NBA ref who got caught fixing games, the biggest sports story in the past decade in my opinion. Know how much money transacts on Vegas sports books? Some estimate it dwarfs all other forms of gambling.

Yep, Andersen was the REAL story of the fall of Enron. So what does this have to do with Bernie-Boy Madoff? Well, where in the hell were the refs, that is, the SEC???

Michael Ocrant wrote a story in 2001 for MARHedge, which covers the hedge fund industry, about how some traders, money managers and financial consultants questioned Madoff's record of 72 winning months in a row. "When I spoke to them about something not being right … they were adamant — there's no way this could be real," says Ocrant, now at Institutional Investor. "There's no one in history with that kind of results." [sic] He says Madoff smoothly dismissed the questions when he interviewed him at the time. "You could see why people would trust him, particularly since he'd been running a successful business for years."(2)

That's seven years ago that people in the industry knew. Now, if you're a watchdog, shouldn't you at the very least be reading and keeping up with industry trades? And if nothing else, a winning streak of 72 months long is statistically highly improbable. Realistically speaking, it's impossible.

But here's where American capitalism has taken a cue from show biz, of all things. The glitz, the glamour (think Trump, "Lifestyles of the Rich and Famous") and the talking heads, both high and low. Shit, it even has its own channels such as CNBC and Bloomberg thanks to cable's wild west channel fest. In movies it was Hedda Hopper on through to Rona Barrett to Pauline Kael and Noel Burch. The corollary body in finance are the analysts (and journalists, too). Now consider this:

In 1975, deregulation of brokerage commissions opened up a Pandora’s box of competition for securities analysts. Suddenly discount brokerages abounded and took business from investment banks. As trade commissions declined, brokerage firms had diminished resources to fund analyst services. As a result, stock analysts relied less on brokerage fees for income and more on investment banking fees. They began to be judged more for their investment banking skills than their insights or analysis, and this is how what many regard as a systemic conflict of interest was born.(3)

In regards to the mortgage debacle, one thing stands out: the credit rating agencies, such as Standard & Poor's and Moody's. In other words, the analysts, or referees, this time in the form of credit raters. Because while there are barely six AAA rated companies in America such as Microsoft, ADP and GE, the way over-leveraged financial products containing toxic mortgages (some of these "products" leveraged over TWENTY times!) that eventually blew up and caused the house of cards to collapse were being rated AAA, the top blue chip rating.(4)

Bottom line? The present-day game of American capitalism's rigged and, surprise, it's not in your favor. How do we know? Easy; the refs are in on the fix.

NOTES
1. From the PBS series Independent Lens and their page on Enron: The Smartest Guys in the Room. This is from the sub-section, "Enron Timeline: 2002." Despite Andersen's shredding a ton of Enron related documents when under the gun, the fix appears in yet another incarnation, this time as judges. On May 31, 2005, the U.S. Supreme Court overturns the conviction of the Arthur Andersen accounting firm for obstructing justice by shredding thousands of Enron documents. Andersen’s top Enron accountant withdraws his guilty plea when prosecutors drop their case.

2. Financial world still amazed over Madoff's downfall
By David Lieberman, Pallavi Gogoi, Theresa Howard, Kevin McCoy and Matt Krantz, USA TODAY 12/15/08

3. From the PBS series Independent Lens and their page on Enron: The Smartest Guys in the Room. This is from the sub-section, "How the Stock Market Works."

4. 60 Minutes this past Sunday ran a frightening story on the next wave of mortgages set to default, the ones just above the absolute shit sub-primes that we are now experiencing.

The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.

Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.

A Second Mortgage Disaster On The Horizon?
60 Minutes: New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default
December 14, 2008 broadcast

The Teflon Dons

Tell me, Mr. Harrigan, how does it feel, getting paid for it? Getting paid to sit back and hire your killings... with the law's arms around you? How does it feel to be so goddamn right?

-Robert Ryan as Deke Thornton in Sam Peckinpah's, The Wild Bunch


It's just crazy how because of the way these devils have completely trashed everything, the fact that we are engaged in TWO wars has completely receded into the background.

I was remarking to a friend how (and I think I just wrote about this, but I reiterate) it's also crazy the way the wipeout of billions in investor capital by the thievery and collusion of Enron, Andersen, Tyco, Worldcom, Global Crossing, Adelphia... is ancient history.

Which is to say that it's just of a piece that the following is going down - in the background - while everyone is distracted by the shithole we're in economically.

Mis-direction. A trickery tool par excellence.

One last note; I was watching Lou Dobbs yesterday, and he had on three talk show hosts - sorry I don't recall their names. The topic was the auto company welfare that's just the latest in the trash heap. The first two expressed outrage and shock, and then the third, a black woman, smiled and said something to the effect that her audience isn't surprised at all.


From Legal Times

Top Bush Officials Unlikely to Face Personal Liability for 9/11 Detentions

Tony Mauro
12-10-2008

The Supreme Court has already shown its skepticism of the Bush administration’s war-on-terror policies through a series of rulings vindicating the rights of Guantánamo detainees and “enemy combatants.”

On Wednesday, another aspect of the administration’s policies drew criticism from at least some justices: the roundup of Arab-Americans and Muslims that the government said had some terrorist connection, in the immediate aftermath of the Sept. 11, 2001, attacks. But the Court seemed unlikely to act on that skepticism and expose top government officials to personal liability for their role in ordering and administering the roundup.

Pakistani citizen Javaid Iqbal, one of 184 “high-interest” suspects taken in, claims the policy was discriminatory and that he was mistreated at the so-called ADMAX housing unit at the federal correction center in Brooklyn, N.Y. In the case now titled Ashcroft v, Iqbal, Iqbal is seeking to hold former Attorney General John Ashcroft and former FBI director Robert Mueller, as well as middle- and lower-ranked prison officials, personally liable for violating his rights. Iqbal filed the suit in May 2004 after being deported to Pakistan.

The issue before the Court was whether Iqbal’s complaint was sufficient to state a claim against Ashcroft and Mueller and to get past summary judgment—thereby exposing the officials to costly and time-consuming discovery.

At the district court and appeals court levels, judges rejected government efforts to dismiss the complaint. The U.S. Court of Appeals for the 2nd Circuit, citing the high court’s sometimes contradictory rulings on what plaintiffs must state at the outset to make a viable complaint, said Iqbal’s allegations, though general, were plausible enough to survive.

As the justices debated the issue, several discussed that issue of plausibility—whether it was even plausible that Ashcroft and Mueller could have been involved in setting policies or actually doing harm to Iqbal.

Solicitor General Gregory Garre, arguing for Ashcroft and Mueller, insisted that Iqbal’s attempt to link top officials to his treatment was not plausible. “Common government experience,” Garre said, would suggest that the attorney general is not involved in “microscopic decisions” such as those at issue in the Iqbal case.

But Justice David Souter disagreed, stating that “the claim . . . that the attorney general or the director of the FBI was establishing a . . . policy that centered on people with the same characteristics as the hijackers does not have that kind of bizarre character to it and, I think, would not run afoul of the plausibility standard.”

Justice Ruth Bader Ginsburg also seemed to doubt Garre, invoking a report by the inspector general of the Justice Department that she suggested “lends some plausibility to Iqbal’s claims.” That 2003 report found that Ashcroft and Mueller were intimately involved in the policies regarding post-9/11 detentions and that most detentions were based on racial and religious characteristics.

Alexander Reinert, representing Iqbal, also cited the report as proof that “from the attorney general’s office there was a direction to make the conditions of confinement as harsh as possible.” Reinert is a lawyer with the New York firm Koob & Magoolaghan.

But Garre insisted the policies were “perfectly lawful” and that the inspector’s report “can’t make up for the deficiencies in the complaint itself.” He argued that under the doctrine of qualified immunity, aimed at protecting officials from being sued for their official acts, Iqbal’s complaint should have been dismissed at the district court level.

Several of the Court’s conservatives seemed sympathetic to Garre’s position. With disdain, Justice Antonin Scalia said at one point, “That’s lovely, that the ability of the attorney general and the director of the FBI to do their jobs without having to litigate personal liability is dependent on the discretionary decision of a single district judge.”

The case has attracted the attention of former and current government officials who fear that if the 2nd Circuit is upheld, they will be exposed to liability in their decision-making that could be harmful, especially in reacting to national security emergencies.

A brief filed by the Washington Legal Foundation on behalf of five former attorneys general said the Iqbal case raises the prospect that top officials will have to face discovery and other proceedings even in frivolous cases. “They are very concerned by the effects that such disruptions are likely to have on the ability of high-level officials to carry out their missions effectively,” the brief states.

Tony Mauro can be contacted at tony.mauro@incisivemedia.com

Amerikkkan Socialism: Comparing "Welfare Moms" and Wall Street Shitheads

Shocking New Evidence for the Existence of God!
Jailing of S&L chief heartens theologians



With all of the stuff being pumped out about the continuing disaster that is the American economy under dumbya and now, the Bear Stearns disaster, I think the key point to the working stiffs is: You know, the Fed is bailing them out.

Here are two other bailout instances:

(1) Back in the 80's when that icon of American business, Lee Iacoca, along with his shithead MBAs destroyed Chrysler, the Fed bailed them out.

(2) When the S&L fiasco - remember that jerkoff Charles Keating? (photo above) - played itself out, ultimately the Fed bailed them out.

It's called "insurance," or "Federally Insured" or, worse, "protecting the economy," but is in reality corporate welfare. I say this because of the corporate shitheads and their pr shills that are always railing about the evils of "socialism" and yet, meanwhile, all of the above examples are billions of dollars in social welfare, taxpayer money, doled out to these jerkoffs.

Btw, one of Bush's brothers was involved in Lincoln Savings and Loan. Big surprise, eh?

Now, if a gambler comes up to you and says, "I'll give you 2 to 1 on a coin flip," you'd take it. That's for every time it comes heads he gives you $2, but every time it comes up tails you give him $1. Now, what if the stakes were for millions and you knew he had nothing to lose, in other words, he had Fed money backing him up. It'd still be a good bet for you, but the bet is risk-free to the proposer.

And as we all know, for every winner, there's a loser(s). That's built in to this money bilking system's dna.

That's exactly what we have. It's risk-free gambling for big money corporate interests. Well, the risk is diverted to us taxpayers. Rich folks don't worry about that because that's what shelters, off-shore accounts and loopholes exploited by their well-paid economic hitmen take care of. You know, those mba jerkoffs whose soul-less work is to serve their masters while justifying it by driving Range Rovers and living "the good life" in suburbia.

There are few more curmudgeonly peeps in the world than Bill Maher, but I happen to agree with him when an interviewer once asked him point blank for the one single thing he'd do to change the political system here. Maher: "You gotta take the money out of the system."

Realistic? No. But right? Yes.

And because "the system" infects everything, it's why mega-corporate money can get their comments inserted into mainstream mass media so that it becomes mantra and stigmatizes the poor. But since "welfare moms" aren't rich, organized and connected (ie: conglomerated like the corporate interests) they are easily demonized.

Unfair fight between the senior bully and the freshman nerd? You bet.

And here's the rub: that demonization serves a valuable interest. It's an old and very fundamental magician's trick, really. It's called misdirection. this is very simple and obvious stuff that all of you know. And yet, it worked well in any number of historical examples and continues able and well.

That basic principle informs the legal system and law enforcement practice to the bone. Policemen, let alone detectives and surely DA's, aren't concerned with catching corrupt corporations and politicians that bleed the laity dry and keep them dis-empowered. They say the real threat to our Amerikkkan way of life are "young, gang-related brown kids."

Or peeps wearing turbans.

The ONE exception is if there is too much sunshine, as with the junk bond, S&L and Enron cases. Then they literally have no choice.

Shift the spotlight on to education. How much research is done on "the attendant ills of the hood" versus "the political assumptions and economic practices of large corporations"?

Before mis-education and believing the party line, there must be a compound question: What are the facts and are there other arguments? Peeps look where they are TOLD to look. Goebbels understood this all too well.

Rather than blather on as I am wont to do, try this on for size. From the upcoming April issue of "The Nation." Read on...

The Gentlemen's Bailout

[from the April 7, 2008 issue]

The Federal Reserve's announcement of an open-ended bail-out for Wall Street's endangered financial firms and banks opens an ominous new chapter in what might be called "market socialism with American characteristics." If Washington tries to do something for "losers" who are ordinary citizens, financial titans complain about violating free-market principles. When the titans themselves are going down, they rush to their patrons at the central bank and demand extraordinary relief. Government must save the big money, we are told, for the overall good of the economy. Thus, the financial system's reckless losses--approaching $1 trillion but probably far more--are being "socialized," dumped on the public, the very people victimized by its snares and falsified valuations.

Put aside the obvious hypocrisy and greed. This nation is on the brink of a historic catastrophe. It requires emergency responses from the federal government on a scale not seen since the Great Depression and the New Deal, the subject of this special issue. Yet the rescue party is composed of the same people who co-wrote this disaster. They are, first, the financiers who indulged their own appetites for extreme wealth and enlarged a financial system of esoteric fakery that inflated prices and profits. Second, the close collaborators were the Federal Reserve and other authorities who blessed this dangerous concoction and declined to enforce prudential standards.

Now the hoax is falling apart. Many millions of innocents, here and around the world, will suffer painful consequences. The authorities, meanwhile, are trying to "save the system" by propping up failure. We do not suggest that the government should not intervene. On the contrary, it must intervene far more forcefully--using the unique emergency powers of the Federal Reserve and Congress to cauterize the wound and take over private firms if necessary. To impose stern new rules of conduct on financial firms as the price of rescue. To ensure a reliable flow of capital and credit to the real economy--industry, commerce and consumers--which has been bullied for many years by Wall Street's distorted values.

In a nutshell, here's what the Fed did after tortured negotiations with Wall Street players: it first bailed out Bear Stearns with a loan that failed to reverse the collapse of the firm's stock price and assets. Then it gave JPMorgan Chase a loan guarantee of $30 billion to protect it against losses as it took over Bear Stearns. Most significant, the Fed promised open-ended loans on easy terms to some twenty other major investment houses to protect them against the same threat. Nobody can put a price tag on all of the central bank's rescue promises--many hundreds of billions if the deterioration continues--but the main point is, the Fed has agreed to take the rotten financial paper, such as home mortgage securities, off the hands of these troubled firms.

What did the Fed demand in return? Not much, it seems, but nobody knows. These private deals were made among gentlemen of high finance; no need to bother the public with complicated details. If that sounds harsh, check out the websites of the Federal Reserve Board and the New York Federal Reserve Bank. Their brief, utterly opaque announcements were addressed to bankers, without a word of explanation for citizens. In this crisis, the Federal Reserve is an untrustworthy agent for the public interest. Its institutional bias is to defend the club members and cover up its own errors.

To understand the gravity of our larger situation, think of this crisis in three layers. The first layer is the panic--the visible worldwide flight of investors and other banking interests from the poisoned assets in the US system. The second layer is the deflation of Wall Street's long-running hyperinflation of financial assets, the value of stocks, bonds, short-term loan paper and other instruments. For two decades, the Fed tilted monetary policy to favor capital over the real economy of production, creating dangerously lopsided conditions. Now Wall Street is going through its own contraction, and many more high-flying firms, including hedge funds, will fail or be taken over at bargain prices or both. In the long run this should be good for the US economy, restoring balance that the Fed's one-sided monetary policy destroyed. But in the short run it could be perilous--starving the productive economy of credit.

The third layer of crisis is the massive loss of US capital. That means more debt will be piled on the nation's already massive indebtedness to foreign creditors. One way or another, the country cannot restore itself unless it replenishes lost capital--not simply for banking and finance but for the overall economy. To put it bluntly, this means a bailout from abroad--the Asian and Arab nations with vast surpluses of capital. Those nations (one hopes) will buy larger shares of US companies, including Wall Street, or lend directly to the US government or both.

An activist government would respond aggressively on many fronts, but unfortunately we don't have one. Congress, including most Democrats, has been utterly deferential to the Fed and the financial titans. The President is clueless, though he may still veto any positive legislation. But this crisis won't wait for the next election. Here are some steps that Congress ought to try now:

§ Force the Federal Reserve to come clean about the secret terms of any deals it made with the bankers. What operating rules did the Fed impose on the firms it assisted? What is the real public exposure to loss? These bailouts should strip failing firms and shareholders of their entire assets, including contracts that allow CEOs to ruin their firms and then walk away with $100 million in severance pay.

§ The central bank needs a public agenda for bailing out Wall Street--a set of new requirements on future behavior in investment and banking that begins to reform the financial system. If a troubled bank refuses to accept these terms, let it fail. If necessary, put the firm in receivership and take it over.

§ Create a US recovery fund to invest in restoring the real economy, not the shrinking financial system. It would borrow capital to support an aggressive agenda of public investments. This fund could take over the ruined securities now held by the Fed and manage them for some years until they can be gradually put back into the marketplace without slaughtering homeowners or depressing real estate prices. Any firm bailed out by government must be prohibited from ever buying back these assets on the cheap, profiting on its own failure as Wall Street firms did in the savings-and-loan crisis.

§ Americans need to increase their savings safely. Congress can create a federal savings fund that pays modest interest rates and protects savings against inflation and the shenanigans of private funds. This savings pool, guaranteed by government, can lend capital to the recovery efforts and even become a first step toward repairing the broken pension system.

In other words, it is time again to think big, the way New Dealers did. But even reform-minded legislators are intimidated by the power of Wall Street money and ideas. The crisis might change that, as politicians begin to realize that Wall Street is yesterday.