Economics is for Everyone!





predatory lending

hedge funds

savings and loan debacle

Office of Thrift Supervision

the best thing you can do for America is go shopping!

"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

Our Obsolescent Economy

Without Knowledge of the Past There is No Future

Economics is defined as:

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 Cram

It 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

boy are you stupid

savings and loans debacle

"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 corporate 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.

alan greenspan
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. US 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

Alan Greenspan: The Federal Reserve Is Above The Law

The Federal Reserve Explained In 7 Minutes

The Federal Reserve as an Instrument of War

Priceless: How The Federal Reserve Bought The Economics Profession

How One Woman Tried—and Failed—to Stop the Fed From Driving the US Into Recession

"Dark Alliance" 2.0: The Federal Reserve, Wall Street and the Laundering of Drug Money

How Goldman Controls The New York Fed: 47.5 Hours of Secret Recordings and a Culture Clash

Inside the New York Fed: Secret Recordings and a Culture Clash

We can't grow ourselves out of debt, no matter what the Federal Reserve does

"Some people think the Federal Reserve central bank is US government institution.

It is not a government institution.

It is a private credit monopoly of 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 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.

Twelve 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

abolished Glass-Stegall

Larry Summers and the Secret "End-Game" Memo

"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 4/9/09

July 1999 Larry Summers appointed Treasury Secretary when Robert Rubin leaves to become Vice Chairman of Citigroup. 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.

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 & incorporation 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 US 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

securitized loans

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 10/08/09

Investment 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 corporate 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!)

collateralized debt obligation

collateralized debt obligations

"We can't let them fail because it would bring the entire banking system down." - Barack Obama

"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

black hole of fungible assets

What does one TRILLION dollars look like?

America's Derivative Market :
Unbelievably Huge & Totally Unregulated

World Derivatives Market Estimated As Big As
$1.2 Quadrillion Notional, as Banks Fight Efforts to Rein It In

Making the most of borrowed time
Speech delivered by Mr Jaime Caruana,
General Manager of the BIS

The best thing you can do for America is go shopping!

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 US 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 Doepke

Center 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

elliot spitzer

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

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 Nakashima

James 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 corporate 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

Countrywide Financial and Stanford L. Kurland

Countrywide 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 US 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!

Washinton Mutual

Washington Mutual

US Faults Regulators Over Bank

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 corporate bonds and other secured debt in a 2007 SEC filing valued at $327.9 billion, to JP Morgan Chase for $1.9 billion.



"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

credit card debt


"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

Playing the Pension Funds

It's the Interest, Stupid! Why Bankers Rule the World

Here's Where State Pension Systems Are In The Most Trouble

Preparing To Asset-strip Local Government? The Fed's Bizarre New Rules

send in the antichrist

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 incorporation 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 incorporation (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 incorporation for First American Life Insurance (later renamed A.L. Williams Life Insurance incorporation) 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 incorporation.

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.

1989 Alan Greenspan bumped it up to 10%.

1996Alan Greenspan kills
Glass-Steagall when he ups the limit to 25%.

The greatest accomplishment of Alan Greenspan was using oblique statements to create an aura of mysticism around monetary policy that never actually existed. John Kenneth Galbraith described the 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 incorporation by purchasing it with $7 million. After a period of layoffs and reorganization, the incorporation 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 incorporation. 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 incorporation 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 incorporation 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 Troubled Asset Relief Program (TARP) Treasury Department, July, 2009

Breakdown of 8.5 trillion rescue plan

"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 US 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.

Timeline of the Asian financial crisis

Bankrupt Grand Chevrolet Firms Closed

Eight Charged in $50-Million Car Loan Fraud

Scapegoat Economics 2015

Goldman Sachs Proof that God hates its Customers

How Goldman Sachs Helped Greece to Mask its True Debt

Goldman Sachs Shorted Greek Debt After It Arranged Those Shady Swaps

"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

Credit Exposure to Capital Ratio. Amounts in $Millions




Credit Exposure to Capital Ratio

JP Morgan Chase








Bank of America








Keiser Report: JP Morgan's Financial Herpes

JP Morgan invented credit-default swaps
to give Exxon credit line for Valdez liability

Bank of America Smacked
with Foreclosure Fraud Lawsuits

HSBC: The World's Dirtiest Bank

HSBC Helped Terrorists, Iran,
Mexican Drug Cartels Launder Money, Senate Report Says

"Dirty Money" Foundation of US Growth and Empire

Citibank schemed with firm to hide its woes: Ex-Dewey partner

Pritzker's Superior Bank Subprime Losses Blemish Resume

"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

April 2, 2009 Financial Accounting Standards Board relaxs 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

November 25, 2008 to July 8, 2009 Financial institutions issue $274 billion debt under the Temporary Liquidity Guarantee Program.

The program opens a channel of funding for financial institutions unable to borrow in US markets after the collapse of Lehman Brothers.

General Motors Financial Services auto and home lender which recieved $13.5 billion from US taxpayers in exchange for corporate debt in the form of junk bonds becomes a bank to qualify for the Temporary Liquidity Guarantee Program.

To insure the $10 million of General Motors Acceptance Corporation junk bonds annually with a five-year credit default swap contract it costs $895,000.

To insure the entire $13.5 billion in General Motors Acceptance Corporation junk bonds annually will cost over $1.2 billion annually.

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