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"When
Larry Summers,
Obama's chief economic advisor, piously tells us
that the administration's hands are tied because we all must abide "by the rule
of law," perhaps it's time to ask: What rule
and for whom?" - Tim Rutten March 18, 2009 LA Times
The
science of
household affairs, or of domestic management.
The social science that
deals with the production, distribution and consumption of goods and
services as well as the theory and
management of economic systems.
"Poverty is
the root of all evil."
"All must prosper for one
to prosper."
"There's only one kind of leadership malpractice:
wasting the lives of those we lead." - Susan CramIt is the duty of
those who have been enlisted in the organization of society to give every
individual the opportunity of acquiring the necessary
talent or skill and the means of utilizing such
a talent so that that individual may exercise
their inherent talent in the pursuit of a
livelihood.
"Wherever politics intrudes upon
economic life,
political success is readily attained by saying what people like to hear rather
than what is demonstrably true. Instead of safeguarding truth and honesty, the
State then tends to become a major source of insincerity and mendacity." –
Hans F. Sennholz
"Karl Marx, whose
economic analyses
are strikingly prescient and relevant today, demonstrated how the credit
economy is one way that central
banking systems attempt to stretch out and soften the boundary where the
private accumulation of profit from
production runs up against the waning
purchasing
power of the consuming public. In a nation whose governing parties and
increasingly wealthy corporate elite can't restrain themselves from devastating
and costly imperialist wars overseas
while at the same time impoverishing ever-growing numbers of the struggling and
poor at home, there isn't going to be
any good economic
news for most people." - Eric Brill 01/08
"While my experience as Assistant Secretary cleaning up
significant mortgage fraud that lost the government billions during the 1980s
confirmed that HUD's financial reputation was deserved, leading the FHA
provided invaluable insight into how government management of the economy one
neighborhood at a time really harms communities." -
Catherine Austin Fitts
The savings and
loan debacle began the regression of the
American republic into a "plutonomy" - a society in which the largest
economic gains flow
to an ever smaller portion of the population creating a decadent
social order that poorly rewards human
labor.
After the
stockmarket crash of 1929, Congress passed a series of laws designed to
restrict the ability of Wall Street to
manipulate markets through the banking industry.
1933 Congress
passed the Glass-Steagall Act and Franklin Delano Roosevelt signs it into
law.
The Glass-Steagall Act of
1933 separated commercial banks,
which accepted deposits and
issued loans, from investment
banks, which underwrote stocks and
bonds.
This was the
governing principle for more than half a
century.
Then along came
Alan Greenspan*.
A known role of the
Federal Reserve
Board is to set monetary policy.
A less publicized part of the job
is to regulate America's banks.
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By the late
1970's, with interest
rates raised to stratospheric heights by Paul Adolph Volker in an attempt
to reign in inflation, most savings and
loans fixed rate assets rate of return were considerably below the
prevailing rate of Federal Reserve funds. The
loans were upside down. The
savings and loans were paying,
let's say 12 percent, for loan
capital but their return on previous released capital was only 6 percent.
1980
Deregulation legislation is proposed
to address the problem created by a portfolio full of long-term, low fixed-rate
assets. Federal government seeks to offer
savings and loans additional
investment opportunities and
adjustable rate mortgages are allowed. No longer is the
savings and loans looked upon as a
neighborhood financial asset - now Wall Street sees the
savings and loan "cash cow" as a valuable asset to be
"levered" accordingly.
The Wall Street financial
institutions that controlled the Federal Reserve began their assault on
the wealth of the American middle
class.
December 12, 1980 Federal Reserve
chairman Paul Adolph Volker BB /CFR/TC raises the prime loan rate to
21.5% which sets the stage for the Savings and Loan
Debacle and, later, the Global Financial Meltdown.
"I was working in
the Carter White House in
1979-80. Unbeknownst to the president, Federal Reserve Chairman Paul Volcker,
another Rockefeller
protégé, suddenly raised interest rates to fight the inflation
the bankers had caused by the OPEC oil price deals, and plunged the nation into
recession. It was through the "Reagan
Revolution" that the regulatory controls over the banking industry were
lifted, mainly in allowing the banks to use their fractional reserve privileges
in making mortgage loans. Volcker's recession shattered American manufacturing
and hastened the flight of jobs abroad. Under the "Reagan Doctrine,"
the US military
embarked on an unprecedented mission of world conquest by attacking one small
nation at a time, starting with Nicaragua. Global capitalism was also on
the march, with the US armed forces its own private police force." - Richard C.
Cook
1982 Gain-St
Germain Depository Institutions Act deregulation legislation expands
acceptable savings and loans
investments by permitting
savings and loans to make
short-term consumer loans, issue
credit cards, and make commercial real
estate loans. This was the
suggested method of stoking commerce after dumping water on the entire economy
by increasing the prime loan rate to 21.5% on December 12,
1980.
Financial engineers and experts claimed that broader
investment opportunities would allow
savings and loans to better
diversify their portfolios enabling them to increase their
short-term earnings and financial
stabilty. A fundamental reality faced the management of newly insolvent financial
institutions. Beginning from a situation
where liabilities exceed assets, managers
cannot overcome financial problems by pursuing a conservative
investment course. In the absence of
a capital infusion to boost assets past liabilities (and return the institution
to solvency), managers must substantially
increase portfolio risk if they are serious about regaining financial health.
The deregulation legislation
provided the means for increased risk taking while ignoring the need for
capital investments. The legislation
lowered capital requirements and revised the accounting rules so that the
savings and loans reported
fractional reserve equity was artificially boosted.
Savings and loans executives began
to look for new lending and investment opportunities that promised
high rates of returns. If all went well, the institution would regain its
financial health, and savings and
loans owners had nothing left to lose if the new
investments soured.
When
investments soured,
savings and loans executives
responded by raising rates paid on certificates of deposits - CDs - to garner
more deposits and to make new investments which promised still higher
returns. The industry's interest rate problem,
stemming from Paul Adolph Volker's attempt to reign in inflation, thus became a
credit quality problem.
In the past depositors had no reason to send
funds to savings and loans halfway
across America. Deregulation of
deposit
interest rates coupled
with rapidly advancing computer
technology changed
that by making possible a nationwide market in deposits - the overnight
transfer. Expansive federal deposit
insurance (FDIC) put insolvent
savings and loans in a position to
abuse the new market. Weak institutions needed continued infusions of funds to
pay operating expenses and to support increased
investments.
Federally
insured depositors were largely
unconcerned about the health of the institutions in which they placed their
money. Undercapitalized savings and
loans assured themselves a continuous inflow of funds by simply offering to
pay slightly higher interest rates than their
competitors.
During the 1980s Funds flow from stronger
banks and
savings and loans to the weakest
depositories. Federal deposit
insurance short-circuits the
market's risk-braking mechanisms and for many
savings and loans during the 1980s,
the absence of regulatory supervision is particularly acute. For depositors
placing $100,000 or less in any single institution, all federally insured
banks and
savings and loans represent the
same risk, and rational investors always seek to maximize their
returns.
Healthy
savings and loans are asked to pay
increasing deposit
insurance premiums to protect
depositors in failed institutions and consequently gained little or no cost
advantage from the fact that they were well capitalized. To retain their
customers, more conservative
savings and loans executives often
had to match the interest
rates set by weak institutions. When federal regulators did get around to
dealing with insolvent institutions they would remove bad assets and inject
capital before selling the savings and
loans to new investors.
Ronald Reagan,
rhetorically dedicated to
free markets, condoned policies
that short-circuited market discipline where
savings and loans were
concerned.
"Imagine learning to play basketball, except in consecutive
decades they changed the surface from hardwood to AstroTurf, replaced the
basket with a painted target and then had dedicated five-man defensive and
offensive specialist squads. Why learn skills when the rules keep changing?
Yes, there are basics, but financial literacy doesn't make sense when you have
no sense of control over the future of your finances.
I think the wrong people are being
blamed for the problem. " - Brian Balek 01/08
"Some people think the Federal Reserve central bank
is US government institution. It is not a government institution. They are
private credit
monopolies, if not - will the controllers please step forward - those who
prey upon the people of the US for the benefit of themselves and their foreign
customers; foreign and domestic speculators and swindlers; and
rich and predatory money
lenders. 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 legislation; and there are those who maintain an
international propaganda for the purpose of
deceiving us and of wheedling us into the granting of new concessions which
will permit them to cover up their past misdeeds and set again in motion
their gigantic train of
crime. Those 12 private credit
monopolies were deceitfully and disloyally foisted upon this country
by bankers who came here from
Europe and who repaid us for our hospitality by undermining our American
institutions." - Louis T.
McFadden House Banking Committee Congressional Record, pages 1295 and 1296,
June 10, 1932
"Glass-Steagall is no longer appropriate to the
economy in which we live."
William Jefferson Clinton
"Scores of banks failed in the Great Depression as
a result of unsound banking practices, and their failure only deepened the
crisis. Glass-Steagall was intended to protect our financial system by
insulating commercial banking from other forms of risk. It was one of several
stabilizers designed to keep a similar tragedy from recurring. Now Congress is
about to repeal that economic stabilizer without putting any comparable
safeguard in its place." -
Paul Wellstone
In 1999, the Gramm-Leach-Bliley Act, officially
repealing the Glass-Steagall Act of 1933, was signed into law by
William Jefferson
Clinton. The merger of commercial and
investment
banking once again allowed the
bankers to use FDIC insured personal deposits to purchase "financial
instruments" from hedge funds.
"Even if we got a return to positive growth - an
economy that was growing at 1 percent would be an economy with rising
unemployment. I don't think we can hold out the prospect we'll stabilize at the
current level." - Larry
Summers 4/9/09July 1999 Larry Summers is the man
directly responsible for the financial institution meltdown. As William
Jefferson Clinton's Treasury Secretary from July 1999 - January 2001 Larry
Summers shaped and pushed the financial deregulation that unleashed the present
crisis. Larry Summers
appointed Treasury Secretary when Robert Rubin leaves to become Vice Chairman
of Citigroup.
2000
Larry Summers backed the
Commodity Futures Modernization Act that incredibly mandated that
financial derivatives, including in energy, could be traded between financial
institutions completely without government oversight.
Larry Summers did
consulting work for hedge fund managers Kenneth D. Brody and Frank P. Brosens
of Taconic Capital Advisors from 2004 to 2006.
Larry Summers advised an elite
corps of math wizards and scientists devising investment strategies for the
hedge fund D. E. Shaw & Company from late 2006 to late 2008 and "earned"
$5.2 million. Larry Summers
circle of friends include the hedge fund managers Nancy Zimmerman, Laurence D.
Fink, H. Rodgin Cohen, Orin S. Kramer, Ralph L. Schlosstein and Eric M.
Mindich. Larry Summers directly
profited from the deregulation he
vigorously supported. Larry
Summers had Harvard purchase interest rate default swaps when he was
president of Harvard that ended up costing Harvard over $1 billion.
"The
SEC's best estimate is that there are now approximately 8,800
hedge funds, with approximately $1.2
trillion of assets. If this estimate is accurate, it implies a remarkable
growth in hedge fund assets of
almost 3,000% in the last 16 years. We are also seeing
hedge funds becoming more active in
such varied activities as the market for corporate control, private lending,
and the trading of crude petroleum. Hedge fund account for about 30% of all
US equity trading volume. Investment
strategies or operations of hedge
fund include their use of derivatives trading, leverage, and short selling.
The number of enforcement cases against
hedge fund advisers has grown
from just four in 2001 to more than 90 since then. These cases involve
hedge fund managers who have
misappropriated funds assets; engaged in insider trading; misrepresented
portfolio performance; falsified their experience and credentials; and lied
about past returns." - Securities and Exchange Commission Chairman Christopher
Cox, July 25, 2006
Short-sellers attempt to
profit from an expected decline in the price of
a fungible financial
instrument. Typically, the short-seller will "borrow" fungible financial
instruments - bonds, securities, stock, futures contracts, OTC's, CDS', ad
infinitum - at a certain price and resell them. The short-seller then hopes to
be able to purchase identical fungible security instruments to repay the loan
at a lower price than originally purchased shortly before the loan comes due.
Profit comes when the fungible
financial instrument declines in value.
"The mistake most people make in looking at
the financial crisis is thinking of it in terms of money, a habit that might
lead you to look at the unfolding mess as a huge bonus-killing downer for the
Wall Street class. But if you
look at it in purely Machiavellian terms, what you see is a colossal power grab
that threatens to turn the federal government into a kind of giant Enron - a
huge, impenetrable black box filled with self-dealing insiders whose scheme is
the securing of individual profits at the expense of an ocean of unwitting
involuntary shareholders, previously known as taxpayers." - Matt
Taibbi
securitizing loans
"What we have found over the years in the
marketplace is that derivatives have been an extraordinarily useful vehicle to
transfer risk from those who shouldn't be taking it to those who are willing to
and are capable of doing so." - Alan
Greenspan 2003
"Clearly, derivatives are a centerpiece of the
crisis, and Alan Greenspan was the
leading proponent of the deregulation of derivatives." - Frank
Partnoy 10/08/08
"The derivatives market is $531 trillion, up from
$106 trillion in 2002 and a relative pittance just two decades ago.
Alan Greenspan banked
on the good will of Wall Street to
self-regulate." - Peter S. Goodman
10/08/09Investment banks were able to
"balance" and prove adequate reserves by "securitizing" loans which allow those
investment banks to
move those loans
off their balance sheets.
There are two ways to securitize a loan:
sell the securitized loan as a bond (originally made popular by
Michael Robert Milken* as
junk bonds); or "synthetic" securitization: use derivatives to get rid of the
default risk (with credit default swaps) and lock in the interest rate due on
the loan (with interest-rate swaps).
Once a
investment bank securitizes a
loan that loan is
moved off the balance sheet. Once a loan has been moved off the balance
sheet the capitalization ratio improves and the
investment banks can make even
more loans.
Investment
banks created trillions of dollars of credit without maintaining adequate
capital reserves (leveraged up to 33 to 1 - 3.3 times higher than the
traditional fractional reserve of 10 to 1) by providing
mortgages, student loans and
credit card loans to millions of loan applicants who had no documentation,
no income, no collateral and a bad credit history for enormous short term
profits! Investment banks did
this without tying up any of their capital reserves while con-vincing the
purchasers of the securitized commercial paper (toxic debt) that there was no
risk of default! (thank you Maurice Greenberg!)
"More than 100 securities cases involving losses of
$400 billion were filed against financial firms last year, according to
Cornerstone Research." - Vikas Bajaj 01/19/08
"Let's hope we
are all wealthy and retired by the time
this house of cards falls." - Standard & Poor analyst 'texting' about
collateralized
debt obligations December
2008 A quarterly report
issued by the Bank of
International Settlements states the total outstanding notional amount of
over-the- counter (OTC) derivatives in the world is $683 trillion while the
gross market value for those same instruments was $22
trillion.
"Bank-like investment strategies - such as
the use of leverage (or borrowed
money) and financing long-term
investments with short-term debt -
became common outside the safety net provided by deposit insurance and strong
regulation. As a result, nonbank institutions became vulnerable to runs - if
markets lost confidence in them, their sources of funds could dry up.
Complexity reduces transparency. Neither regulators nor market participants can
easily assess the true financial condition of firms that hold or trade these
newer instruments. Since large parts of derivatives markets are unregulated,
there is a global web of financial claims and counterclaims that is essentially
invisible to financial supervisors and market participants alike. Key
characteristics that produced this systemic vulnerability include: the use of
complex financial instruments, whose value is often linked by complex formulae
to the value of other instruments or financial variables, and for which no
active trading markets exist; extensive
use of leverage, or borrowed funds, which permits institutions to take
larger market positions with a given capital base, increasing potential profits
(but also losses); and
the practice of
moving risky financial speculation off the books, into nominally
independent accounting entities, so that the results do not appear in the
financial accounts of the parent financial institution." - Mark
Jickling
predatory lending
"Several years
ago, state attorneys general and others involved in consumer protection began
to notice a marked increase in a range of predatory lending practices by
mortgage lenders. Even though predatory lending was becoming a national
problem, George Walker
Bush looked the other way and did nothing to protect American homeowners.
In fact, the government chose instead to align itself with
the banks that were
victimizing consumers. The
administration accomplished this feat through an obscure federal [Treasury]
agency called the Office of the Comptroller of the Currency (OCC). The
OCC has been in existence since the
Civil War. Its
mission is to ensure the fiscal soundness
of national banks. For 140 years, the OCC examined the books of national banks
to make sure they were balanced, an important but uncontroversial function. In
2003 the OCC invoked a clause from the 1863 National Bank Act to issue formal
opinions preempting all state predatory lending laws, thereby rendering
them inoperative. The OCC also promulgated new rules that prevented states
from enforcing any of their own consumer protection laws against national
banks. The federal government's actions were so egregious and so
unprecedented that all 50 state attorneys general, and all 50 state banking
superintendents, actively fought the new rules. But the unanimous opposition of
the 50 states did not deter, or even slow,
George Walker Bush in
his goal of protecting the
banks. In fact, when my office opened an investigation of possible
discrimination in mortgage lending by a number of
banks, the OCC filed a federal
lawsuit to stop the investigation." - Elliot
Spitzer, Washington Post, February 13,
2008
"Tight residential real estate markets and low
mortgage rates fueled a five-year property boom as the number of US households
paying more than half their incomes for housing jumped from 13.8 million in
2001 to 17.9 million in 2007." - Brian Louis
"Predatory lenders deserve a lot of
blame for foreclosures and bankruptcies.
How odd to think that the hopes of everyone owning a piece of property is now
as utopian as the collectivist dreams of
communism." - Doug DoepkeCenter
for Housing Policy study:
1996 to 2006
All major types of homeowner-related expenses rose faster than incomes.
The National Housing Conference,
a research affiliate, reported
mortgage payments rose 46%, utilities 43%, property taxes 66% and homeowner
insurance 83%, while homeowner incomes increased only 36.3%.
During the
same period rents rose 51% while renters' incomes rose only 31.4%.
2004 to 2007 As subprime lending grew from a small corner of
the mortgage market lending standards fell disgracefully, and dubious
transactions became common.
October 2007
National Association of Realtors predicts that housing prices
will fall 1.5%.
January 2009 Prices had fallen
29 % in 20 major cities from their peak in the summer of
2006.
"Madison
Avenue helped drive the expansion of Americans use of credit cards. There was a
lot of money to be made by collecting fees for debt creation and
debt service, and the
largest banks wanted in on the action. The 1980s was the age of
a paradigm shift in
American politics. The US transformed itself into a country where the profit
motive supplanted the public good. The rich were taking it all for themselves
and letting the good times roll and everyone who wasn't rich wanted to be or
act as if they were rich. Advertisers suggested people could purchase the
10-day Caribbean cruise or expensive diamond ring that was once restricted to
those with higher income levels creating the illusion that debt was equal to
wealth." - Paul C. Wright
"A few years ago, I discovered that my
domicile was more than a household - it was, and still is, a piggy bank in
disguise. This happened when the mortgage industry began bombarding me with
pitches encouraging me to crack open the bank. I'll admit I was naive
enough to be taken in by this new financial scheme and used the ready cash to
improve the property. A house is really a domicile; a place to relax and
embrace the family in a sheltered
environment. It ought not be
a ready source of cash, and it never ought to be a speculative tool subject to
high-risk ploys. The time has come to cover the bets; it's really tragic to see
so many of us unable to do so." - Earl H. Hygh 01/08
"Between 1999 and 2004, more than half the states, both red
(North Carolina, 1999; South Carolina, 2004) and blue (California, 2001; New
York, 2003), passed anti-predatory-lending laws. Georgia touched off a
firestorm in 2002 when it sought to hold Wall Street bundlers and holders of
mortgage-backed
securities responsible for mortgages that were fraudulently conceived.
Beginning in 2004 Michigan and forty-nine other states battled the US
Comptroller of the Currency and the banking industry (and The Wall
Street Journal's editorial page) for the right to examine the books of
Wachovia's mortgage unit, a fight the Supreme Court decided in Wachovia's favor
in 2007 - about a year before it cratered." - Dean Starkman
| According to
the New York Times, "on February 13 [the day
Spitzer's Op Ed went up on the Washington Post
website] federal agents of the Office of the Comptroller of the Currency
staked out his hotel in Washington. Elliot Spitizer's dalliance with a
prostitute became headline news on March 10. Mainstream news never questioned
the actions of the Office of the Comptroller of the Currency.
|
"One is struck by the
similarities with the Savings and Loan scandal which was
allowed to continue through the Reagan
1980s, long after it became apparent that
deliberate
bankruptcy was being used by unscrupulous profiteers to amass illegal
fortunes at what was ultimately public expense. The long drawn-out housing
bubble of the current
George Walker Bush
decade, and particularly the derivative bubble that was floated upon it, allowed
the Bush administration to help offset the trillion-dollar-plus cost of its
Iraq misadventure." - Peter Dale
Scott
Office of Thrift Supervision
"Our goal is to allow thrifts to operate with a
wide breadth of freedom from regulatory intrusion." - James Gilleran
"The Office of Thrift Supervision championed
the thrift industry's growth during the housing boom and called programs that
extended mortgages to previously unqualified borrowers as "innovations." -
Binyamin Appelbaum and Ellen NakashimaJames Gilleran of
the Office of Thrift Supervision (with the chainsaw) and John Reich (then Vice
Chairman of the FDIC and later at the OTS) and representatives of three banker
trade associations: James McLaughlin of the
American Bankers Association, Harry
Doherty of America's Community Bankers, and Ken Guenther of the Independent
Community Bankers of America.
James Gilleran, an impassioned advocate of
deregulation, cut a quarter of the
agency's 1,200 employees between 2001 and 2004, even though the value of loans
and other assets of the firms regulated by the Office of Thrift
Supervision doubled over the same period.
Scott M. Polakoff claimed
the Office of Thrift Supervision closely monitored allowances for loan
losses and considered them sufficient. The Office of Thrift
Supervision's "reasonable expectations" and "modeling" was based on
faulty assumptions. The
reasonable expectations that Scott M. Polakoff spoke of were
assumptions that even though
incomes were stagnant and individuals could barely afford marked down loan
payments those same individuals were going to earn double or triple their
original income within the next 3 to 5 years when loans reset and mortgage
payments were doubled or tripled.
The Office of Thrift
Supervision was responsible for regulating Superior (a warning of things to
come), Countrywide Financial, IndyMac Bancorp, Washington Mutual, and Downey
Savings and Loan Association among others.
Darryl W. Dochow, the
Office of Thrift Supervision's official in charge of regulating
Washington Mutual, IndyMac, Countrywide Financial and Downey Savings and Loan
Association, played a key role in the collapse of Charles Keating's Lincoln
Savings and Loan by delaying and impeding proper oversight of that thrift's
operations.
Darryl W. Dochow, Ellen Seidman, James Gilleran and Scott
M. Polakoff knew what was happening and let it happen. Washington Mutual paid
13 percent of the Office of Thrift Supervision's 's budget in the 2007-2008
fiscal year while Countrywide provided 5 percent.
On September 25, 2008
the Office of Thrift Supervision (OTS) seized Washington Mutual and placed it
into the receivership of the Federal Deposit Insurance Corporation (FDIC). The
FDIC sold most of Washington Mutual's assets and liabilities, including covered
bonds and other secured debt in a 2007 SEC filing valued at $327.9 billion, to
JP Morgan Chase for
$1.9 billion.
Countrywide Financial and Stanford L.
KurlandCountrywide Financial said in an
investor presentation it would have refused 89 percent of its 2006 borrowers
and 83 percent of its 2005 borrowers if it had been required to assure the fact
that borrowers could continue to make payments at loan terms.
Stanford
L. Kurland, Countrywide's former president and 27 year veteran, acknowledges
pushing Countrywide into the type of higher-risk loans - loans that came with
low "teaser" interest rates. Stanford L. Kurland was at the center of that
culture shift at Countrywide which started in 2003.
On July 9, 2008, IndyMac bank's shares
closed at $0.31 in trading on the New York Stock Exchange, a loss of
over 99% from its high of $50 in 2006. IndyMac Bank was seized on July 11, 2008
and was the fourth largest bank failure in US history. IndyMac Bank held $32
billion in assets.
Through a sweetheart deal Stanford L. Kurland was
able to purchase the deliquent IndyMac mortgages. PennyMac purchased $558
million of mortgages that the Federal Deposit Insurance Corp. acquired last
year for PennyMac for pennies on the dollar.
Stanford L. Kurland then
renegotiates the mortgage with the mortgagee writing down the value of the
mortgage and reducing the interest rate. According to Eric Lipton PennyMac
stands to make a profit of at least 50 percent on mortgage defaults. Others
suggest PennyMac's investments may return 15 percent to 25 percent a
year.
"Kurland is seeking to capitalize on a situation that was a
product of his own creation. It is tragic and ironic. But then again,
greed is a growth industry." - Blair A. Nicholas
Stanford L. Kurland pushed loans to people who could not afford the
reset mortgage payment and then, once the institutions that held those loans
could not meet the newly imposed capital requirements of the Bank of
International Settlements and were forced into bankruptcy, purchases the loans
for pennies on the dollar from the federal government reciever. Then Stanford
L. Kurland renegotiates the loans reaping a second profit from those original
high-risk loans - the losses on the original high-risk loan are then paid by
the lender with no resort - the taxpayer.
Bankers, including the peon
Stanford L. Kurland, saw in advance a way to profit on the predatory lending
debacle twice!
Washington Mutual
Washington
Mutual stated in a December 2006 securities filing that it was continuing to
qualify borrowers based on their ability to afford a teaser interest rate.
"Americans aren't financially illiterate. Americans are willing to
work, budget, scrimp and save to achieve the American
dream. The trouble is that this American dream
eludes most but the upper class. Three
decades ago, a single income could purchase a house and pay taxes, utilities,
gas, insurance, etc. That was a time when you could buy a new
home for about $20,000. Today, no
single-income earner can afford to buy a house even at the "bargain" price of
$400,000. How does someone purchase a house or even keep up with rent and
modern living expenses earning $30,000 a year? Today,
debt - not hard work and saving
- makes the American dream possible. - Regina Powers
01/08
On September 25, 2008 the Office of Thrift Supervision
(OTS) seized Washington Mutual and placed it into the receivership of the
Federal Deposit Insurance Corporation (FDIC). The FDIC sold most of
Washington Mutual's assets and liabilities, including covered bonds and other
secured debt in a 2007 SEC
filing valued at $327.9 billion, to
JP Morgan Chase for
$1.9 billion.
MERS"The
development of "electronic" mortgages managed by MERS went hand in hand with
the "securitization" of mortgage loans chopping them into pieces and selling
them off to investors. In the heyday of
mortgage
securitizations, before investors got wise to their risks, lenders would
slice up loans, bundle them into "financial products" called "collateralized
debt obligations" (CDOs),
ostensibly insure them against default by wrapping them in derivatives called
"credit default swaps," and sell them to pension funds, municipal funds,
foreign investment funds, and so forth. There were many secured parties, and
the pieces kept changing hands; but MERS supposedly kept track of all these
changes electronically. MERS would register and record mortgage loans in its
name, and it would bring foreclosure actions in its name. MERS not only
facilitated the rapid turnover of mortgages and
mortgage-backed securities, but
it has served as a sort of "corporate shield" that protects investors from
claims by borrowers concerning predatory lending practices." - Ellen Brown
"MERS has reduced transparency in the mortgage market in two ways.
First, consumers and their counsel can no longer turn to the public recording
systems to learn the identity of the holder of their note. Today, county
recording systems are increasingly full of one meaningless name, MERS, repeated
over and over again. But more importantly, all across the country, MERS now
brings foreclosure proceedings in its own name even though it is not the
financial party in interest. This is problematic because MERS is not prepared
for or equipped to provide responses to consumers' discovery requests with
respect to predatory lending claims and defenses. In effect, the securitization
conduit attempts to use a faceless and seemingly innocent proxy with no
knowledge of predatory origination or servicing behavior to do the dirty work
of seizing the consumer's home. . . .
So imposing is this opaque corporate wall, that in a "vast" number of
foreclosures, MERS actually succeeds in foreclosing without producing the
original note "the legal sine qua non of foreclosure" much less documentation
that could support predatory lending defenses." - Timothy McCandless
"MERS as straw man lacks standing to foreclose, but so does original
lender, although it was a signatory to the deal. The lender lacks standing
because title had to pass to the secured parties for the arrangement to legally
qualify as a "security." The lender has been paid in full and has no further
legal interest in the claim. Only the securities holders have skin in the game;
but they have no standing to foreclose, because they were not signatories to
the original agreement. They cannot satisfy the basic requirement of contract
law that a plaintiff suing on a written contract must produce a signed contract
proving he is entitled to
relief." - Ellen Brown
bankruptcy "In
times past, bankruptcy would have wiped out the bad
debts. The problem with
debt write-offs is that bad
savings go by the boards too. But today, the very wealthy hold most of the
savings, so the government doesn't want to have them take a loss. It would
rather wipe out pensioners, consumers, workers, industrial
companies and foreign investors. So
debts will be kept on the
books and the economy will slowly be strangled by
debt deflation." - Michael
Hudson 06/08
investment bank meltdown
"The injunction of Jesus to love others as
ourselves is an endorsement of self-interest." - Brian Griffiths,
Goldman Sachs public
relations man
"We see TARP as an insurance policy. No matter how
bad it gets, we're going to be one of the remaining banks."- John C. Hope III,
Whitney National Bank chairman 1977 A.L. Williams establishes its base by mass-marketing the
concept of "Buy Term and Invest the Difference." With "BTID" the company
illustrated how its middle-income client base could purchase sufficient
protection with term life insurance and systematically save and invest in
separate investment vehicles, such as mutual fund Individual Retirement
Accounts. A.L. Williams is initially established as a privately held general
agency, at first selling term life insurance policies underwritten by Financial
Assurance, Inc.
1980 A.L. Williams enters into a
contract with Boston-based Massachusetts Indemnity and Life Insurance Company
(MILICO), a larger underwriter of life insurance, whose parent is PennCorp
Financial Services, Santa Monica.
1980s Salomon
Brothers is acquired by the commodity trading firm Phibro Corporation. Salomon
Inc. is noted for its innovation in the bond market, selling the first
mortgage-backed
security, a hitherto obscure species of financial instrument created by
Ginnie Mae. Shortly thereafter, Salomon Inc. begins purchasing home mortgages
from thrifts throughout the US and packaged them into
mortgage-backed
securities, which it sells to local and international
investors.
1981
First American National Corporation (later renamed The A.L. Williams
Corporation) as established as a holding company for First American Life
Insurance (later renamed A.L. Williams Life Insurance Company) and First
American National Securities (later renamed PFS Investments, Inc).
Shearson is acquired by American
Express and operated as a subsidiary of the financial services company.
1982 The A.L. Williams Corporation (ALWC)
underwrites a public stock offering, listed in the Over the Counter (OTC)
market under the symbol ALWC.
1983 Listed on the
NASDAQ exchange under ALWC. American Can and PennCorp Financial Services
merge.
1984 Shearson merges with
Lehman Brothers
Kuhn Loeb - now Shearson
Lehman.
1986
Federal Reserve
Board reinterprets existing law to allow commercial
banks to derive a minuscule 5% of
their revenues from investment
banking activities. The movement to use the
Federal Reserve
Board to kill Glass-Steagall begins.
Alan Greenspan's greatest
accomplishment was using oblique statements to create an aura of
mysticism around monetary policy
that never actually existed.
John Kenneth Galbraith described Alan
Greenspan's management of the publicity surrounding the movement of
interest rates as "one
of the brilliant theatrical exercises of all time."
1986
Sanford Weill
con-vinces Control Data Corporation to spin off its troubled subsidiary,
Commercial Credit, a consumer finance company by purchasing it with $7 million.
After a period of layoffs and reorganization, the company completes a
successful IPO. Sanford
Weill is a scion David-Weill family. Lazard Freres - France's biggest
investment bank - is owned by
Lazard and David-Weill
families - old Genoese banking scions.
1987
86-year-old American Can announces a name change to Primerica Corporation.
Primerica Corporation completes a hostile
takeover of Smith Barney.
Sanford Weill acquires Gulf
Insurance.
1988 Commercial
Credit owned by Sanford Weill acquires Primerica Corporation for $1.54
billion.
Shearson Lehman acquires E.F. Hutton now Shearson Lehman Hutton
Inc.
1989 Sanford Weill acquires Drexel Burnham
Lambert's retail brokerage outlets.
1991
Primerica Corporation changes the name of A.L. Williams to Primerica Financial
Services.
1993 Primerica acquires Travelers
Insurance Corporation and adopts the name Travelers Inc.
Sanford Weill
purchases Shearson Lehman Hutton from American Express for $1.2 billion.
Shearson Lehman Hutton acquires Colorado-based lender, Aurora Loan Services, an
Alt-A lender.
1997 Travelers, a diverse group of
financial concerns, roots come from Commercial Credit, a subsidiary of Control
Data Systems that Sanford Weill takes
private. Sanford Weill goes on merger
leveraged buyout acquisition spree.
1998
Travelers aquires Salomon Inc. and merges it Smith Barney creating Salomon
Smith Barney. Citicorp and
Travelers merge and form the behemoth
Citigroup.
2000 Lehman purchased West Coast subprime mortgage lender BNC
Mortgage LLC. Lehman quickly became a force in the subprime market.
September 11, 2001 Salomon Smith Barney is by
far the largest tenant in 7 World Trade Center, occupying 1,202,900 sq ft
(111,750 m2) (64 percent of the building) which included floors 28–45.
Lehman occupies three floors of World Trade Center where one of its employees
dies.
2002 Citigroup spins off Travelers Property
and Casualty.
2003 Lehman makes $18.2 billion in
loans and ranked third in lending.
2004 Lehman
makes over $40 billion. Lehman has morphed into a real estate hedge fund
disguised as an investment bank.
2005
Goldman Sachs receives
approximately $1.6 billion in taxpayer subsidies (mostly through Liberty Bonds)
from New York City and state taxpayers to finance the a new headquarters near
the World Financial Center in Lower Manhattan.
2006 Aurora and BNC are lending
almost $50 billion per month.
Goldman Sachs changes its corporate
structure into a bank holding company. Employees earn an average of $622,000 on
a profit of $9.4 billion. Morgan Stanley
CEO John Mack bonus is $40 million. Much
of the commercial paper wealth (over-the-counter
derivatives) is made on takeovers and
leveraged buyouts.
Some of the
people employed by Goldman Sachs
includes George Herbert
Walker Bush (managing director at Lehman Brothers), Robert Zoellick (World Bank president)BB
CFRTC, Henry Paulson (United
States Treasury Secretary), Robert Rubin* (ex-US Treasury Secretary,
ex-Chairman of Citigroup, mentor of US Treasury Secretary is
Timothy Franz
Geithner), John Thain (Chairman and CEO,
Merrill Lynch, and former
chairman of the NYSE), Henry H. Fowler, (58th US Secretary of the Treasury),
Edward Lampert (hedge fund manager), Michael Cohrs (head of Global Banking at
Deutsche Bank), Mark Carney (current governor of the Bank of Canada), Robert
Steel (CEO of Wachovia), Ed Liddy (CEO of AIG), Neel Kashkari, Stephen Friedman
(chairman of the President's Foreign Intelligence Advisory Board and of the
Intelligence Oversight Board, board member of Memorial Sloan-Kettering Cancer
Center, The Aspen Institute and the
Council on
Foreign Relations, Chairman Emeritus of the Executive Committee of the
Brookings Institution, director
Federal Reserve Bank of New York),
Mark Patterson (Treasury chief of staff), Gary Gensler (Commodity Futures
Trading Commission).
Barack Obama received $981,000 for
his campaign from Goldman employees.
2007 4th
quarter Citigroup posts a $10 billion loss, 21,200 Citigroup employees are laid
off. Citigroup's single largest shareholder becomes Abu Dhabi Investment
Authority, the investment arm of Abu Dhabi government, with a $7.5 billion
injection of capital in late 2007 in exchange for a 4.9 percent stake which
pays a $1.7 billion a year dividend. The second largest Citigroup shareholder,
with a 3.6 percent stake, is now Kingdom Holding Company owned by Prince
Al-Waleed bin Talal of Saudi Arabia. $6.88 billion of prefered stock was sold
to an investment fund controlled by the government of Singapore.
2008 Lehman assets of $680 billion are supported $22.5 billion
of firm capital. From an equity position, its risky commercial real estate
holdings were three times greater than capital. In such a highly leveraged
structure, a 3 to 5 percent decline in real estate values would wipeout all
capital.
Between March and September 2008, a seven month
period, the five largest investment bankers on Wall Street effectively go
bankrupt.
March 2008
Federal Reserve sells
Bear Stearns to
JP Morgan Chase for
ten dollars per share, a price far below the previous 52-week high of $133.20
per share.
June 2008
Merrill Lynch seizes $850
million worth of the underlying collateral from
Bear Stearns but only
recoups $100 million in auction.
Merrill Lynch is sold
to Bank of America for
0.8595 shares of Bank of
America common stock for each Merrill Lynch common share, or about $50
billion or $29 per share. The market valuation of
Merrill Lynch was about
$ 100 billion one year earlier. During the final quarter of 2008 Merrill Lynch
lost $15.3 billion. Part of that loss included annual bonuses to employees
before the deal closed as well as a $1.2 million office redecoration with a
$87,000 rug and a $68,000 credenza for CEO John A. Thain who requested a $30
million to $40 million bonus for his stewardship of
Merrill
Lynch.
August
2008 Morgan
Stanley is contracted by the US Department of the Treasury to advise
the government on potential rescue strategies for
Fannie Mae and
Freddie Mac. On September 21,
2008, the Federal Reserve allows
Morgan Stanley to
change its status from investment bank to bank holding company in order to
survive the global economic
meltdown.
November 23, 2008 Fed and Treasury
announce a rescue package for Citigroup to provide insurance
against large losses on bundled securities and derivatives of approximately
$306 billion backed by residential and commercial real estate.
Citigroup agreed to absorb
the first $29 billion in losses on the bundled securities and derivatives; the
government will then cover 90% of losses that exceed that figure.
Citigroup spends $1.77
million on lobbying fees in the fourth quarter.
"The government injected
an additional $20 billion into Citigroup, on top of the $25
billion it invested a few weeks ago. It also said that it would cover 90
percent of the losses on those $306 billion in securities after
Citigroup suffers the first
$29 billion of losses. Citigroup, like many others,
had sought to insure itself against losses with a variety of transactions,
including the purchase of insurance, only to learn that the losses were
overwhelming those who had promised to pay. Insurance on the assets was issued
both by the bond insurers and by others that wrote what were known as credit
default swaps, which amounted to insurance but were not regulated in the
same way. Those who wrote large amounts of such insurance are now in trouble,
either negotiating to pay claims for less than promised or, in the case of the
American International Group, still in
business only because of a government bailout. The
American International Group officials
responsible for writing the swaps told investors they would never suffer any
losses." - Floyd Norris, November 24, 2008
2009
"US taxpayers may be on the hook for as much as $23.7 trillion
to bolster the economy and bail out financial companies." - Neil Barofsky,
special inspector general for the Treasury's Troubled Asset Relief Program
(TARP) July, 2009
"When we look at the
financial calamity that brought down Bear
Stearns and Lehman Brothers, some are fond of saying that "moral hazard" is
still at play because stockholders lost money and employees lost jobs. But tell
that to the stockholders and employees. They were not the ones deciding to take
the outsized risks on loans
that were nothing more than scams to create
short-term wealth from
long-term
disaster." - Curtis White
"Sovereign wealth funds operated by China,
Singapore, Abu Dhabi, and other countries have taken large equity stakes in
Citigroup, Merrill
Lynch, Morgan
Stanley, and other firms, including leading European financial
institutions." - Mark Jickling
At the end of March of 2009, Bloomberg reported
that the federal government and the Federal Reserve have spent, lent or
committed $12.8 trillion. This is $42,105 for every man, woman and child in
America and 14 times the $900 billion of currency in circulation.
America's gross domestic product was $14.2
trillion in 2008.
"The Wall Street banks - which are the recipients
of the bailout money - are also the brokers and underwriters of the US public
debt. We are dealing with an absurd circular relationship: To finance the
bailout, Washington must borrow from the banks, which are the recipients of the
bailout." - Michel Chossudovsky
"With the Long-Term
Capital bailout as a precedent, creditors came to believe that their loans
to unsound financial institutions would be made good by
the Fed - as long as the collapse of
those institutions would threaten the
global credit system. Bolstered by this sense of security, bad loans
mushroomed. The major creditors of the fund included
Bear Stearns,
Merrill Lynch and Lehman
Brothers, all of which went on to lend and invest recklessly. The ad hoc aspect
of the bailout created a
precedent for what has come to be called "regulation by deal" - now the
government's modus operandi." - Tyler Cowen, December 26, 2008
"Under the Paulson plan, the
government would buy mortgages and mortgage-backed securities for more
than they are worth. Among the companies that most vigorously pushed the idea
were the American International Group
and Freddie Mac. The
Federal Reserve and the Treasury
think that the prices have fallen too far. The goal is to recapitalize the
banking system by placing a floor under the prices of securities that never
should have been issued." -
Floyd Norris
Credit Exposure to Capital Ratio. Amounts in
$Millions
|
Bank |
Assets |
Derivatives |
Credit Exposure to Capital
Ratio |
|
JP Morgan Chase |
$1,768,657 |
$87,688,008 |
400.2 |
|
Citi |
$1,207,007 |
$35,645,429 |
259.5 |
|
Bank of America |
$1,359,071 |
$38,673,967 |
177.6 |
|
HSBC |
$181,587 |
$4,133,712 |
664.2 |
"When the "credit crunch" began
and Washington began the rush to solve the problem with taxpayer cash, no
accounting of this derivative nightmare was ever brought to bear. In all the
deliberations and press
releases there was not a single mention of the fact that the primary cause
of the bank collapse was due to these
'time
bombs'." - Andrew Hughes 1/27/09
On April 2, 2009 the Financial
Accounting Standards Board relaxed the "mark-to-market" rule.
Financial institutions were
given the go ahead to value their derivative assets (toxic debt) in a
"mark-to-model" manner. For the first quarter of 2009 financial institutions
were given the go ahead to use creative accounting methods to value their toxic
debt at whatever value their mathematical models predicted. In other words
financial institutions were
allowed to value their toxic debt at whatever value they felt they should be as
opposed to their actual value in the market.
"The announcement April 2,
2009 by the Financial Accounting Standards Board (FASB) weakening
"mark-to-market" accounting rules allowing banks to value their toxic debt at
inflated prices. This was not only an immediate boost to banks' balance sheets
and reported profits, it also showed that the government will give Wall Street
a green light to continue the same methods of fraud and double bookkeeping that
triggered the breakdown of the financial system in the first place." - Tom
Eley
Between November 25, 2008 to July 8, 2009 financial institutions
issued $274 billion of debt under the Temporary Liquidity Guarantee
Program. The program opened a channel of funding for financial institutions
unable to borrow in US markets after the collapse of Lehman Brothers
Holdings Inc. GMAC Financial Services, formerly known as General
Motors Acceptance Corporation, the auto and
home lender that received $13.5 billion
from US taxpayers in exchange for corporate debt in the form of junk bonds,
became a bank in December to qualify for the Temporary Liquidity Guarantee
Program. To protect $10 million of GMAC junk bonds annually with a
five-year credit-default swap contract it costs $895,000. To protect the entire
$13.5 billion in GMAC junk bonds annually will cost over $1.2 billion
annually.
 |
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This website defines a
new perspective with which to engage reality to which its author adheres. The
author feels that the falsification of reality outside personal experience has
created a populace unable to discern propaganda from reality and that this has
been done purposefully by an international corporate cartel through their
agents who wish to foist a corrupt version of reality on the human race.
Religious intolerance occurs when any group refuses to tolerate religious
practices, religious beliefs or persons due to their religious ideology. This
web site marks the founding of a system of philosophy named The Truth of the
Way of Life - a rational gnostic mystery religion based on reason which
requires no leap of faith, accepts no tithes, has no supreme leader, no church
buildings and in which each and every individual is encouraged to develop a
personal relation with the Creator and Sustainer through the pursuit of the
knowledge of reality in the hope of curing the spiritual corruption that has
enveloped the human spirit. The tenets of The Truth of the Way of Life are
spelled out in detail on this web site by the author. Violent acts against
individuals due to their religious beliefs in America is considered a "hate
crime."
This web site in no way condones violence. To the contrary the
intent here is to reduce the violence that is already occurring due to the
international corporate cartels desire to control the human race. The
international corporate cartel already controls the world economic system,
corporate media worldwide, the global industrial military entertainment complex
and is responsible for the collapse of morals, the elevation of self-centered
behavior and the destruction of global ecosystems. Civilization is based on
cooperation. Cooperation does not occur at the point of a gun.
American
social mores and values have declined precipitously over the last century as
the corrupt international cartel has garnered more and more power. This power
rests in the ability to deceive the populace in general through corporate media
by pressing emotional buttons which have been preprogrammed into the population
through prior corporate media psychological operations. The results have been
the destruction of the family and the destruction of social structures that do
not adhere to the corrupt international elites vision of
a perfect world. Through distraction and
coercion the direction of thought of the bulk of the population has been
directed toward solutions proposed by the corrupt international elite that
further consolidates their power and which further their purposes.
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