4 Years Ago Could You've Imagined We'd Let Banks Off Laundering Money For Terrorists & Drug Cartels?

Black 9/11: Money, Motive, Technology, and Plausible Deniability

Why Is The S.E.C. Concealing Massive Citigroup Fraud?

Citigroup, the most insolvent bank ever to foul the earth, is being protected by the S.E.C.  We want to know why.

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Guest post submitted by Cheyenne, writer and producer of the soon to be released documentary, Bailout. Watch a trailer for Bailout here.

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What is the SEC hiding?

Part One

William Cohan of Bloomberg wrote a curious story last week, "Why does the SEC protect banks’ dirty secrets?"

It's a really good question.

Standing alone, however, Cohan's article is just another electric tile in a giant mosaic that flashes intermittently in a news cycle, briefly illuminating another piston or grommet in the Wall Street-Washington corruption machine before fading without impact.

But when coupled with other evidence, Cohan's piece, concerning the S.E.C.'s wholesale expungement of information from Citigroup documents in response to a Freedom of Inforation Act (FOIA) request, leads to what looks very much like a criminal conspiracy by Citigroup executives, up to and including Robert Rubin, to defraud the company's investor-clients on a scale that is nothing short of colossal.

In this light, the S.E.C.'s concealment effort on behalf of Citigroup--not its first, as we shall see--poses issues about the exact nature of the S.E.C.'s role with respect to financial crime, because neither "regulator" nor "crime fighter" applies under any reasonable interpretation of the evidence.

The questions raised here are both fair and viable. They’re fair because the S.E.C. elected to make a mockery of both the law it's supposed to follow and the public it's supposed to serve by redacting in their totality documents sought under the FOIA, leaving the inference of criminality to waft plume-like through its own stench. They’re viable because while the statute of limitations for criminal fraud may have run, the statute of limitations for conspiracy to commit fraud—a crime whose very essence, secrecy, precludes the statute from running in the first place—presents no such legal obstacle.

Part One examines the available evidence, which includes Cohan's article, the congressional testimony of former Citigroup risk officer Richard Bowen, and a lawsuit against Citigroup that the S.E.C. filed and immediately tried to settle--unsuccessfully--a year ago. Along the way, we'll see just how pernicious bailouts are to a functioning democracy.

Part Two will explore the potential ramifications of the S.E.C.'s failure to sweep its suit against Citigroup under the rug. The S.E.C.'s failure was due, almost laughably, to the random assignment of its case to Judge Jed Rakoff, a jurist whose revulsion at the S.E.C.'s corruption, already legendary, may well carry everyone involved into unchartered territory.

Cohan's Article About The S.E.C.'s Response to FOIA Requests Involving Citigroup Mortgages

Cohan’s particular focus was on documents that the S.E.C. produced relating to congressional testimony given by Richard Bowen. Bowen is the former Citi risk officer who told the Financial Crisis Inquiry Commission, among other things, that Citi sold MBS products despite knowing—based on information that Bowen provided to the top ranks of the company, including ex-CEO Robert Rubin himself—that huge swaths of mortgages owned by Citi were defective to the tune of between 60 and 80%.

To pursue Bowen’s revelations further, another Bloomberg reporter, Bob Ivry, filed FOIA requests with the S.E.C. seeking documents related to Bowen’s potent disclosures.

What Ivry likely hoped to discover was additional documentary evidence (beyond Bowen’s email to Rubin included with his testimony) that Citigroup officers, including Rubin, had defrauded purchasers of Citi’s MBS products by intentionally selling investments that Citi executives knew to be dogshit. (The term “dogshit” is used in accordance with Citigroup technical parameters for its investment products, which we’ll come to in a minute.)

What Ivry received in response, after a bit of wrangling, was a pile of documents notable only for their extensive redactions, i.e., blacked out content. The S.E.C. contends that the information that it’s concealing on Citi’s behalf qualifies as trade secrets.

The rub here isn’t whether or not the information satisfies the legal criteria for trade secret status. A bit of it probably does while the heft undoubtedly does not. What carries the trade secret assertion into the theater of absurd moral hazard isn't the nature of the information itself, but rather the fact that Citi is able to make the claim at all.

How Bailouts Cover Up Ineptitude and Potential Crime

Citigroup is the most pathetic TBTF bank in business, no mean feat among a herd of behemoths that is deathly ill. Citi exceeds its peers in just about every category you can think of associating with “broke bank” since the crisis began in 2008:

• Citigroup received the most TARP money, $45 billion, tying it with Bank of America as Wall Street's top welfare recipient known at the time
• Citigroup was alone among its peers in having its toxic assets, $306 billion of them, ring-fenced at taxpayers’ expense
• Citigroup received more secret loans from the Federal Reserve--$2.5 trillion—than any other bank, $500 billion more than Morgan Stanley, which Neil Barofsky informs us (via Ben Bernanke) in Bailout (the book, not the film) would have been the next domino to topple in the Fall of 2008
• Citigroup is the only bank that resorted to a reverse stock split, at 1-to-10, to put its share price back over $5, the low watermark for purchase eligibility among many institutional funds

When the crisis hit in 2008, Citigroup should have followed Lehman Brothers—or perhaps led it—into the morgue of corporate obesity. Citigroup posted losses that year of $27.7 billion, more than four times Lehman’s losses before it collapsed into dust during the third quarter, and yet Citi paid out $32.4 billion in compensation—the bulk of it in bonusesafter receiving the $45 billion welfare check.

And Citigroup’s figures that year, as pustulent as they appear, in all likelihood mask even deeper rot within the company. Compare Citigroup's valuations of its MBS holdings with those of another sick TBTF firm at the time, Merrill Lynch.

Merrill matched Citi’s loss with a $27.7 billion loss of its own, and its deteriorating corpus had to be kept alive by Hank “The Hammer” Paulson, who shoved it snugly within a warm Bank of America cavity.

Merrill's troubles reltated in no small part to MBS. In July 2008, Merrill sold $31 billion in mortgage-backed securities at 22 cents on the dollar. A 78% discount, while huge, was not at all unusual as the darkling reality of MBS assets materialized before a market that was sobering up after a very long binge. A few months earlier, Citadel had bought MBS at 27 cents on the dollar. And yet in this very market decline, Citi was marking equivalent investments at the imperial rate of 61 cents.

Of course, when Citi was appraising its MBS assets at nearly 3 times as valuable as those of the soon-to-be-ambulance-bound Merrill, and regulators were looking the other way (often at pornography rather than the raging crisis), no one knew that Richard Bowen would come before Congress and testify that Citigroup mortgages were 60% defective in 2006 and 80% defective in 2007, casting further doubt—this time from within the company itself—on Citi’s 61-cent MBS valuation.

Were Citi's incredibly rich valuations the product of accounting fraud? After all, the congressional repeal of mark-to-market accounting rules wouldn't occur until the following year. Or did Citi have some foresight about that event?

What happens when you can’t trust the state

Le Monde Diplomatic
Serge Halimi

There would seem to be no chance that a man who made a fortune out of financial speculation might reach the White House just four years after private banks caused a crisis and had to be bailed out by taxpayers. The uncertainty to the very last minute about the outcome of the US election was probably due to worsening distrust of the state, and everything it does.

The problem of public debt is now at the very heart of US political life, thanks to the dramatic increase in budget deficits caused by the cost of two simultaneous wars (Afghanistan and Iraq), the bank bailouts and new enormous tax cuts (1). Some people claim that “we would love to help but we can no longer afford it.” Others also look to the incestuous links between government and private enterprise, the dubious process that transforms former heads of government into lobbyists or highly paid public speakers (see Blair Inc). The old fear of bureaucratic waste, parasitic middlemen and huge projects that come to nothing, is increasingly exacerbated by suspicions of venality.

The justification that “it costs too much and it won’t work” was already a powerful deterrent against any social action by the state. But perhaps there is now also a conviction that elected representatives have become too remote, too corrupt and too closely associated with the interests of an oligarchy to serve the common good. The right, claiming to be liberal, takes advantage of this lack of confidence and suggests (as with Mitt Romney) that if you want to run a country you might as well first prove yourself by managing a company or a hedge fund.

Yet fraud and waste are rife in the private sector, too. Unknown numbers of engineers, accountants and sociologists, trained at public expense, squander their talents on perfecting the lines of a car bonnet, a new packaging material or a cigarette filter, or on designing outlandish insurance contracts and tax-free investment schemes. Financial success is almost always more important to a company than the social value of its products.
A scandal may occasionally damage or destroy the head of a corporation; it generally does so without questioning the structures on which their activities and power are based. But prevarication by a mayor or a minister, supposed government capitulation to a lobby, or doubts about the funding of an election campaign have immediate repercussions for the state. They undermine its right to raise taxes, organise the country and mobilise the nation.

Almost everywhere people are eager for change. But without the proper instruments to achieve their aims, new or old, all they can do is feel their way, mark time, and sometimes — against all their hopes — go into reverse.

"Legalized Plunder of the American People" - G. Edward Griffin

TARP Bailout Fraud: Where Did the Money Go?

Designed to Fail

Global Research
Stephen Lendman

On December 8, 2008, the Senate confirmed Neil Barofsky’s nomination as Troubled Asset Relief Program (TARP) watchdog. He assumed the post of SIGTARP (Special Inspector General for TARP).On July 20, 2009, he estimated the $700 billion bailout fund could balloon to $23.7 trillion. Obama administration secrecy conceals what’s essential to reveal. Over $9 trillion is known. Some analysts think true figures may be three times that amount. Only crooked bankers and corrupt bureaucrats know for sure.

 In February 2009, Barofsky submitted an initial report to Congress. In the past two months, he said, Washington handed out hundreds of billions of dollars (like confetti) to troubled financial institutions.

Where did the money go, he asked? What assurances exist that it’s not stolen or wasted?

TARP didn’t require recipients to report or internally track funds used. Accountability wasn’t mandated. Banks took full advantage. Instead of loans to stimulate recovery, they hoarded cash, acquired other financial institutions, paid off debt, speculated, and knew then and now there’s plenty more help for the asking.

Fraud prevention standards weren’t imposed. Barofsky doubts the program’s longterm success.

On March 29, 2011, he headlined a New York Times op-ed “Where the Bailout Went Wrong,” saying:

Two and a half years after legislation passed, Obama officials declared mission accomplished. “On my last day as the special inspector general….I regret to say that I strongly disagree.”

TARP and what followed struck out. It “failed to meet some of its  most important goals.” Main Street was sacrificed for  Wall Street.

Congress was told TARP funds would buy up to $700 billion of mortgages. Authorizing legislation (the Emergency Economic Stabilization Act – EESA) emphasized preserving homeownership.

Treasury officials promised help. EESA mandated it. Struggling homeowners got none. Legislative provisions were violated. Treasury changed the rules. Money went to banks with no accountability or mandate to extend credit.

“There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.”

Instead of increased lending, it declined. As inspector general, Barofsky had no enforcement power. He could only recommend. Suggested policies fell on deaf ears. Treasury and Wall Street conspired to commit grand theft. Ordinary people were hung out to dry and scammed.

Helping homeowners was shelved. The Home Affordable Modification Program (HAMP) was introduced. Obama promised four million families help. The program was “a colossal failure.”

It was designed to fail. Its provisions included no accountability. Guidelines only were provided. Banks and other mortgage services ignored them. Foreclosures mounted. Millions of homeowners were defrauded. Nothing changed to this day.

One of HAMP’s most pernicious abuses was letting servicers “direct borrowers who were current on their mortgages to start skipping payments, telling them that that would allow them to qualify for a HAMP modification,” said Barofsky.

“Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which servicers would deny them a permanent modification and send them an enormous ‘deficiency’ bill.”

“Borrowers who might otherwise never have missed a payment found themselves hit with whopping bills that they couldn’t pay and now faced foreclosure. It was a disaster.”

Geithner bears full responsibility. Understating problems, he admitted solutions “won’t come close” to expectations. He refused to address glaring shortfalls. He abandoned Main Street for Wall Street. He’s complicit in grand theft. He and banker cronies belong in prison.

Banks know they can steal with impunity. They’re larger and more powerful now than when crisis conditions erupted. They can speculate recklessly. They’ll be bailed whenever they get in trouble.

Treasury “ignore(d) rather than support(ed) real” reforms. Its “broken promises” turned TARP and other programs into a giant Wall Street “giveaway.”

Its “mismanagement” and criminal complicity “damaged the credibility of the government….” Conditions are so out of control that future policy makers may be unable “to save the system the next time a crisis arises.”

Perhaps that’s TARP’s “most lasting, and unfortunate, legacy.”

Barofsky’s new book “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street” explains.

Writer/Roosevelt Institute fellow Matthew Stoller calls it “a very important” account of the financial crisis aftermath. In April 2010, Barofsky met a key adversary.

Herbert Allison formerly headed Merrill Lynch, TIAA-CREF and Fannie Mae. He came out of retirement to oversee TARP. He became Assistant Treasury Secretary for Financial Stability.

“Have you thought at all about what you’ll be doing next,” he asked. “Out there in the market, there are consequences for some of the things you’re saying and the way you’re saying them.”

Tim Geithner Admits Banks Bailed Out With Rigged Libor, Costing Taxpayers Huge Amount

Huffington Post
Mark Gongloff

 Timothy Geithner claimed on Wednesday that the government had no choice during the financial crisis but to lend to banks and AIG using an interest rate, Libor, that everybody knew was flawed.

Call it a back-door bailout: By using an artificially low Libor, the government saved the banks and AIG millions, maybe billions -- and cost the taxpayers the same amount.

The use of Libor in the bailouts also rubber-stamped that hopelessly manipulated interest rate as a market measure, raising still more questions about just how worried Geithner and other regulators really were about it.

In a House Financial Services Committee hearing on Wednesday, Treasury Secretary Geithner was asked why Treasury and the Fed used the London Interbank Offered Rate as a basis for loans to insurance giant American International Group and to U.S. banks under the Term Asset-Backed Securities Loan Facility -- even though Geithner and other regulators had long suspected that Libor was artificially low, as Geithner testified.

"We were in the position of investors around the world," Geithner shrugged. "You have to choose a rate, and we did what everybody did -- use the best rate available at the time."

Geithner repeated his claim that he warned other U.S. and British regulators in the spring of 2008 about possible manipulation of the key interest rate and recommended changes to the way the rate was set.

But he also said that, months later, when it came time to set bailout terms for the Too Big To Fail Set, the government just had no other choice but to use Libor.

Sure, that's one way to look at it. Another, less charitable way to look at it is that the Fed was fully aware that Libor was being manipulated lower, and was fine charging an artificially low rate to lend money to banks and to AIG, in what amounted to yet another kind of bailout. Why make life harder for them, right? They had enough problems dealing with the crisis they had created. Raising red flags about Libor might have only made the crisis worse, making it harder for banks to borrow money.

But in the process, the government left untold mountains of cash on the table for U.S. taxpayers. Even if Libor was only manipulated a tiny bit lower, these small breaks add up.

Why the Senate Won’t Touch Jamie Dimon: JPM Derivatives Prop Up U.S. Debt

Web of Debt
Ellen Brown

When Jamie Dimon, CEO of JPMorgan Chase Bank, appeared before the Senate Banking Committee on June 13, he was wearing cufflinks bearing the presidential seal.  “Was Dimon trying to send any particular message by wearing the presidential cufflinks?” asked CNBC editor John Carney.  “Was he . . . subtly hinting that he’s really the guy in charge?”

The groveling of the Senators was so obvious that Jon Stewart did a spoof news clip on it, featured in a Huffington Post piece titled “Jon Stewart Blasts Senate’s Coddling Of JP Morgan Chase CEO Jamie Dimon,” and Matt Taibbi wrote an op-ed called “Senators Grovel, Embarrass Themselves at Dimon Hearing.”  He said the whole thing was painful to watch.


“What is going on with this panel of senators?” asked Stewart.  “They’re sucking up to Jamie Dimon like they’re on JPMorgan’s payroll.”  The explanation in a news clip that followed was that JPMorgan Chase is the biggest campaign donor to many of the members of the Banking Committee.

That is one obvious answer, but financial analysts Jim Willie and Rob Kirby think it may be something far larger, deeper, and more ominous.  They contend that the $3 billion-plus losses in London hedging transactions that were the subject of the hearing can be traced, not to European sovereign debt (as alleged), but to the record-low interest rates maintained on U.S. government bonds.

The national debt is growing at $1.5 trillion per year.  Ultra-low interest rates MUST be maintained to prevent the debt from overwhelming the government budget.  Near-zero rates also need to be maintained because even a moderate rise would cause multi-trillion dollar derivative losses for the banks, and would remove the banks’ chief income stream, the arbitrage afforded by borrowing at 0% and investing at higher rates.

The low rates are maintained by interest rate swaps, called by Willie a “derivative tool which controls the bond market in a devious artificial manner.”  How they control it is complicated, and is explored in detail in the Willie piece here and Kirby piece here.

Kirby contends that the only organization large enough to act as counterparty to some of these trades is the U.S. Treasury itself.  He suspects the Treasury’s Exchange Stabilization Fund, a covert entity without oversight and accountable to no one. Kirby also notes that if publicly-traded companies (including JPMorgan, Goldman Sachs, and Morgan Stanley) are deemed to be integral to U.S. national security (meaning protecting the integrity of the dollar), they can legally be excused from reporting their true financial condition.  They are allowed to keep two sets of books.

Interest rate swaps are now over 80 percent of the massive derivatives market, and JPMorgan holds about $57.5 trillion of them.  Without the protective JPMorgan swaps, interest rates on U.S. debt could follow those of Greece and climb to 30%.  CEO Dimon could, then, indeed be “the guy in charge”: he could be controlling the lever propping up the whole U.S. financial system.

Hero or Felon?

So should Dimon be regarded as a national hero?  Not if past conduct is any gauge.  Besides the recent $3 billion in JPMorgan losses, which look more like illegal speculation than legal hedging, there is JPM’s use of its conflicting positions as clearing house and creditor of MF Global to siphon off funds that should have gone into customer accounts, and its responsibility in dooming Lehman Brothers by withholding $7 billion in cash and collateral.  There is also the fact that Dimon sat on the board of the New York Federal Reserve when it lent $55 billion to JPMorgan in 2008 to buy Bear Stearns for pennies on the dollar.  Dimon then owned nearly three million shares of JPM stock and options, in clear violation of 18 U.S.C. Section 208, which makes that sort of conflict of interest a felony.

Financial analyst John Olagues, a former stock options market maker, points out that the loan was guaranteed by $55 billion of Bear Stearns assets.  If Bear had that much in assets, the Fed could have given it the loan directly, saving it from being swallowed up by JPMorgan.  But Bear did not have a director on the board of the NY Fed.

The European Stabilization Mechanism, Or How Goldman Sachs Captured Europe

Global Research
Ellen Brown

The Goldman Sachs coup that failed in America has nearly succeeded in Europe—a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers. 

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress.  But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair.  Paulson’s plea for a permanent bailout fund—the Troubled Asset Relief Program or TARP—was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank president Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion Euro bailout for European banks without asking anyone’s permission.  And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press.  The ESM imposes an open-ended debt on EU member governments, putting taxpayers  on the hook for whatever the ESM’s Eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight.  The ESM is cheered by Eurozone governments, their creditors, and “the market” alike, because it means investors will keep buying sovereign debt.  All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the Eurozone governments?

There is another alternative to debt slavery to the banks.  But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB . . . .

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as Member States representing 90% of the capital commitments have ratified it, something that is expected to happen in July 2012.  A December 2011 youtube video titled “The shocking truth of the pending EU collapse!”, originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length.  It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM:  a treaty of debt. . . . The authorized capital stock shall be 700 billion euros.  Question: why 700 billion?  [Probable answer: it simply mimicked the $700 billion the U.S. Congress bought into in 2008.] . . . .

Goldman Secret Greek Loan Used American TARP Money

Money News

Greece’s secret loan from Goldman Sachs Group Inc. was a costly mistake from the start.

On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.

Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs.

“The Goldman Sachs deal is a very sexy story between two sinners,” Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.

Goldman Sachs’s instant gain on the transaction illustrates the dangers to clients who engage in complex, tailored trades that lack comparable market prices and whose fees aren’t disclosed. Harvard University, Alabama’s Jefferson County and the German city of Pforzheim all have found themselves on the losing end of the one-of-a-kind private deals typically pitched to them by securities firms as means to improve their finances.

Goldman Sachs DNA

“Like the municipalities, Greece is just another example of a poorly governed client that got taken apart,” Satyajit Das, a risk consultant and author of “Extreme Money: Masters of the Universe and the Cult of Risk,” said in a phone interview. “These trades are structured not to be unwound, and Goldman is ruthless about ensuring that its interests aren’t compromised -- it’s part of the DNA of that organization.”

A gain of 600 million euros represents about 12 percent of the $6.35 billion in revenue Goldman Sachs reported for trading and principal investments in 2001, a business segment that includes the bank’s fixed-income, currencies and commodities division, which arranged the trade and posted record sales that year. The unit, then run by Lloyd C. Blankfein, 57, now the New York-based bank’s chairman and chief executive officer, also went on to post record quarterly revenue the following year.

‘Extremely Profitable’

The Goldman Sachs transaction swapped debt issued by Greece in dollars and yen for euros using an historical exchange rate, a mechanism that implied a reduction in debt, Sardelis said. It also used an off-market interest-rate swap to repay the loan. Those swaps allow counterparties to exchange two forms of interest payment, such as fixed or floating rates, referenced to a notional amount of debt.

6 Shocking Revelations About Wall Street's "Secret Government"

Alternet
Les Leopald


We now have concrete evidence that Wall Street and Washington are running a secret government far removed from the democratic process. Through a freedom of information request by Bloomberg News, the public now has access to over 29,000 pages of Fed documents and 21,000 additional Fed transactions that were deliberately hidden, and for good reason. (See here and here.)

These documents show how top government officials willfully concealed from Congress and the public the true extent of the 2008-'09 bailouts that enriched the few and enhanced the interests of giant Wall Streets firms. Here’s what we now know:

• The secret Wall Street bailouts totaled $7.77 trillion, 10 times more than the $700 billion Troubled Asset Relief Program (TARP) passed by Congress in 2008.

• Knowledge of the secret bailout funds was not shared with Congress even while it was drafting and debating legislation to break up the big banks.

• The secret funding, provided at below-market rates, gave Wall Street banks an additional $13 billion in profits. (That’s enough money to hire more than 325,000 entry level teachers.)

• The secret loans financed bank mergers so that the largest banks could grow even larger. The money also allowed banks to step up their lobbying efforts.

• While Henry Paulson (Bush’s Secretary of the Treasury) was informing Congress and the public that only minor reforms were needed to protect Fannie and Freddie from collapse, he met secretly with leading Wall Street hedge fund managers -- among them his former colleagues at Goldman Sachs -- to alert them that he was about to nationalize the giant mortgage companies – a move that would eradicate nearly all the stock value of the companies. This information was enormously valuable because it allowed these hedge funds to short Fannie and Freddie and thereby make a fortune.

• While Timothy Geithner was head of the NY Federal Reserve, he argued against legislative efforts by Senator Ted Kaufman, D-Delaware, to limit the size of banks because the issue was “too complex for Congress and that people who know the markets should handle these decisions,” Kaufman recalls. Meanwhile, Geithner was fully aware of the enormous secret loans while Senator Kaufman was kept in the dark. Barney Frank, who was authoring key bank reform legislation was also not informed of the secret loans. No one in Congress was told.
So what does this all mean?

1. The big banks and hedge funds were in much more trouble than we were led to believe.

As many of us suspected, all the big banks were on their knees begging for help – secretly – while telling their investors, the public and Congress that all was well. They had gambled and lost. Under the rules of ideal capitalism, they should have suffered some “creative destruction,” and seen their shareholder value eliminated through bankruptcy, and their managers replaced. The entire banking system should have been reorganized from top to bottom as well. Instead, these colossal failures were secretly rewarded.  

2. Wall Street’s secret government made sure the largest banks would grow even larger, aided by the secret funding.

While Congress was debating legislation to break up the large banks and reinstitute Glass Steagall (to separate risky investment banking from insured commercial banking,) the secret government was using public funds to grow even larger through mergers and acquisitions. Because Congress and the public were unaware of the secret funding and ill-health of all the banks, the legislation was easily defeated. As the chart below makes painfully clear, too-big-to-fail banks grew even bigger.  

3. The bigger Wall Street becomes, the more government it can buy.

This part isn’t secret. As the top six banks grew larger, they spent more funds lobbying to make sure that they wouldn’t suffer any unprofitable impacts from banking reform legislation. So after the biggest banks received hundreds of billions in secret loans, they upped their lobbying funds to maintain their size and power. Read ‘em and weep:

4. Wall Street’s secret government protects its own.

At first, it’s not easy to understand how Treasury Secretary Paulson, the former head of Goldman Sachs, could risk attending a secret meeting with giant hedge fund managers, many of whom used to work at Goldman Sachs. How could the nation’s highest ranking financial official dare to tip off these hedge fund elites about the imminent government takeover of Fannie and Freddie before Congress and the public were informed? Well, one answer is that Paulson felt obliged to warn his old comrades of the impeding nationalization. Maybe, he wanted to get them out of harm’s way just in case they were heavily involved in those markets. Or maybe he also wanted to give them a very valuable tip to profit by. But the deeper explanation, I believe, is that Wall Street’s key government officials – Paulson, Summers, Geithner, Orszag (the former Obama OMB chief who now makes millions working for CitiGroup), etc. truly believe the following:

• Wall Street banks are the best in the world and are the cutting-edge of the American economy. They are our future.

• Wall Street bankers and hedge fund managers are enormously smarter and sharper than the rest of us. They deserve our admiration.

• Helping Wall Street to grow and prosper is precisely the same thing as helping all Americans and the entire economy. They deserve our support.

• Secret meetings to provide insider information are normal on Wall Street. There’s nothing wrong with warning your friends about upcoming policy decisions that might impact their profits.

• There’s also absolutely nothing wrong with providing trillions of dollars of secret loans to the best and the brightest and not telling Congress about it.

It’s all a closed loop of self-justification and self-deception: Wall Street is brilliant. What Wall Street does is for the good of the country. Helping Wall Street profit is good for the country. Hiding the truth from democratically elected leaders is also for the good of the country because Wall Street is brilliant and knows better.

Max Keiser On Obama's Hallucination That Banks Didn't Commit Fraud

Financial Polarization and Corruption: Obama’s Politics of Deception Don’t Let Him Get Away With It...

Global Research
Prof. Michael Hudson

The seeds for President Obama’s demagogic press conference on Thursday were planted last summer when he assigned his right-wing Committee of 13 the role of resolving the obvious and inevitable Congressional budget standoff by forging an anti-labor policy that cuts Social Security, Medicare and Medicaid, and uses the savings to bail out banks from even more loans that will go bad as a result of the IMF-style austerity program that Democrats and Republicans alike have agreed to back.

The problem facing Mr. Obama is obvious enough: How can he hold the support of moderates and independents (or as Fox News calls them, socialists and anti-capitalists), students and labor, minorities and others who campaigned so heavily for him in 2008? He has double-crossed them – smoothly, with a gentle smile and patronizing patter talk, but with an iron determination to hand federal monetary and tax policy over to his largest campaign contributors: Wall Street and assorted special interests – the Democratic Party’s Rubinomics and Clintonomics core operators, plus smooth Bush Administration holdovers such as Tim Geithner, not to mention quasi-Cheney factotums in the Justice Department.

President Obama’s solution has been to do what any political demagogue does: Come out with loud populist campaign speeches that have no chance of becoming the law of the land, while quietly giving his campaign contributors what they’ve paid him for: giveaways to Wall Street, tax cuts for the wealthy (euphemized as tax “exemptions” and mark-to-model accounting, plus an agreement to count their income as “capital gains” taxed at a much lower rate).

So here’s the deal the Democratic leadership has made with the Republicans. The Republicans will run someone from their present gamut of guaranteed losers, enabling Mr. Obama to run as the “voice of reason,” as if this somehow is Middle America. This will throw the 2012 election his way for a second term if he adopts their program – a set of rules paid for by the leading campaign contributors to both parties.

President Obama’s policies have not been the voice of reason. They are even further to the right than George W. Bush could have achieved. At least a Republican president would have confronted a Democratic Congress blocking the kind of program that Mr. Obama has rammed through. But the Democrats seem stymied when it comes to standing up to a president who ran as a Democrat rather than the Tea Partier he seems to be so close to in his ideology.

So here’s where the Committee of 13 comes into play. Given (1) the agreement that if the Republicans and Democrats do NOT agree on Mr. Obama’s dead-on-arrival “job-creation” ploy, and (2) Republican House Leader Boehner’s statement that his party will reject the populist rhetoric that President Obama is voicing these days, then (3) the Committee will get its chance to wield its ax and cut federal social spending in keeping with its professed ideology.

Michael Moore's Mistake: "Keep The Fed, End Capitalism"

Editor's note: The next two posts provide an example of how specific objectives evolve when people begin to consider the root causes of our socio-economic breakdown.  The Federal Reserve is a key component of society's ills, but the rationale for arriving at this doorstep seems to be support for "unfettered capitalism".  A naive position to justify a worthy cause- to end the Fed.

 The Daily Bail




Don't skip the clip inside - Runs 2 minutes. Peter Schiff provides sanity at the end.

Moore is cluelessly deranged regarding bailouts, the Federal Reserve and capitalism. The problem is not unfettered capitalism; the problem is that favored industries were spared from the market by government assistance.

Capitalism does NOT exist on Wall Street.

Every single over-leveraged, fraudulent financial institution that was saved by TARP and Bernanke and Geithner's trillions in stealth bailouts should have been allowed to fail. We are talking about investment banks, after all, not your grandmother's church choir.

Investment banks take risks by nature. And they should face dissolution and bankruptcy when those bets don't work out.

We've said it from the beginning, against the ignorant and misinformed current of status-quo talking heads and wannabe financial experts, including Inside Job director Charles Ferguson and over-hyped author Ellen Brown, allowing Lehman Brothers to fail was the only thing Bernanke and Paulson ever got right.

The market spoke and the government didn't intervene. That is capitalism. And not coincidentally we learned later that Lehman was an over-leveraged cesspool of fraud and criminal malfeasance with a $600 billion crater in its balance sheet, despite assurances from Dick Fuld that $20 billion from taxpayers would have saved the company. Complete and utter nonsense. And there is little reason to believe that Lehman's fraudulent financials were any different than what we would have found at Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup or Bank of America.

Each and every major investment bank was then, and to this day, remains MASSIVELY insolvent. It's not even a close call - with 30:1 leverage on inadequate capital, assets need only decline 4% in value to wipe out the balance sheet, and assets have declined 30-40% on average. We are talking about insolvency by orders of magnitude.

Only in the Bernanke-Geithner, CNBC-promoted, 'can-kicking' world of purple unicorns and psychedelic money printing, can any other conclusion be reached.



In just 15 seconds this clip perfectly encapsulates the madness of bailing out Wall Street millionaires and billionaires.

Bill Black: The Banks Are Still Insolvent, And Obama Is Not Only Covering It Up, He's Taking Credit!

Daily Bail

Bill Black says you're doin' a heck of a job, Mr. President.

---

A look back at a Bill Black op-ed from last Fall. Nothing has changed.

As part of their TARP propaganda tour, Obama officials from Tim Geithner to the president himself keep repeating the same lie statistic -- that solving the financial crisis will cost far less than the 2.5% of GDP it took to clean up after the S&L crisis. In this piece, Bill Black gives withering criticism of Obama for playing extend and pretend with the TBTF banks -- the very same game the S&L regulators played during the 1980's. It didn't end well back then, and it won't end well this time.

Regardless, says Black in a new op-ed, the results, are clear:

For reasons that only Summers, Geithner, and Obama can know, they chose to adopt Pratt's disastrous and dishonest anti-regulatory strategy and parrot his dishonest claims of brilliance and success. Congress passed the Prompt Corrective Action (PCA) law in 1991 for the express purpose of outlawing any repeat of Pratt's refusal to close insolvent banks. Congress, at the behest of the Chamber of Commerce, the American Bankers Association (ABA), and Chairman Bernanke, successfully (and shamefully) extorted the Financial Accounting Standards Board to change the accounting rules so that banks no longer had to recognize losses on their toxic mortgage paper appropriately until they sold the assets.

Covering up the losses had three real (carefully unstated) purposes: (1) permitting evasions of the PCA [Prompt Corrective Action law], (2) allowing the banks to remove themselves from the strictures of the TARP program even if they are, in reality, insolvent, and (3) allowing insolvent and impaired banks to pay their senior executives huge bonuses on the basis of the (fictional) income that results when a bank does not recognize its losses.

The Bush and Obama administrations have consistently refused to apply any of the successful lessons learned in responding to the S&L debacle - even though the response has been praised by experts in public administration and Treasury Secretaries from both parties for decades. Both administrations refused to even discuss the current crisis with the senior S&L regulators that contained that crisis before it caused a recession. Obama thinks his response to the crisis was brilliant because it did not follow the S&L regulators' much more expensive strategy. Obama cited the comparison to the S&L debacle as the most telling demonstration he could make of why his administration deserves praise.

It's a Miracle!

What Obama does not understand is that his "cover up" strategy and his claims of brilliant success are direct steals from Dick Pratt's playbook. Dick Pratt was the top S&L regulator in 1981-83. When he left (to join Merrill Lynch) he claimed that he had contained the crisis through innovative resolution strategies that slashed the average historic costs (from over 20% to less than 5% of the S&L's assets). Pratt's "resolutions" were accounting scams that did not resolve anything. They did, however, transmute real insolvencies into fake assets and create guaranteed (fictional) accounting income. The scam was so crazy that the more insolvent the S&L acquired, the greater the fictional income that the deal created. Pratt did so many of these scam resolutions that they created so much fictional income and capital that the industry reported it had suddenly returned to profitability.

The reality was quite different. There was no miracle, only the cumulative results of multiple accounting scams. Pratt's resolutions did not resolve failed S&Ls. They were still insolvent.

A summary of Black's op-ed from last week:

* Fictional Accounting Allows Insolvent Banks To Pay Billions In Bonuses

* The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers' trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce.

* The FASB's new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional "income" and "capital" at the banks. The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.

Background:

* William Black Calls On FDIC To Seize Bank Of America

* William Black With Dylan Ratigan: "There Is Bank Fraud Everywhere And BERNANKE Is Leading The Cover-Up," PLUS Part 2 Of 'Seize Bank Of America'

Bonus Video: Ratigan with Black and Inside Job Director Charles Ferguson

Click here for Ratigan's complete interview with Charles Ferguson.

* "There have been ZERO criminal referrals."

* “None of that is happening because the people in charge don’t look.”

* “If you looked you would have seen fraud incidence in these mortgages in the 80% range and they could not have been sold.”

* “The real losses are being hidden bby the Fed to the tune of trillions of dollars RIGHT NOW.”

Dithering European policymakers fail to calm volatile stock markets

The Guardian
Helen Pidd
Jill Treanor


• Germany divided over bolstering bailout fund
• Analysts expect US-style Tarp €150bn relief scheme

Eurozone in turmoil as markets remain unconvinced that
European debt crisis can be stabilised.

Stock markets endured a day of sharp volatility amid uncertainty about how eurozone leaders intend to solve the ongoing – and increasingly pressing – crisis that is gripping the single currency and threatening global growth.

While the US and UK hope that eurozone leaders will come up with a scheme strong enough to build a firewall around the most indebted countries in the eurozone, Germany has emerged as a stumbling block to any plan to increase the bailout funds for the eurozone to €2tn (£1.7tn) or more.

German politicians told the Guardian of their dismay at reports following the last weekend's meeting of the International Monetary Fund about beefing up the existing bailout fund – known as the European Financial Stability Facility.

Frank Schäffler, a Free Democratic Party (FDP) politician from North Rhine-Westphalia, said any scheme to bolster the fund from its existing €440m capacity would be a "catastrophic development" that he feared would lead to inflation.

"It must be stopped," he said in a phone interview. Schäffler is from the pro-business Free Democratic Party (FDP), which rules in coalition with the Christian Democratic Union (CDU) of the chancellor, Angela Merkel.

Germany's finance minister, Wolfgang Schäuble, appeared to downplay any attempt to bolster the EFSF. "We do not intend to increase it," he said in a television interview.
His remarks came after European markets closed and after France's CAC40 closed 1.8% higher and the Dax in Germany rose 2.9%.

Gains in London were more muted with the FTSE index ending 0.4% higher at 5,089.37, while Wall Street was gyrating.

President Barack Obama called on European leaders to move more quickly to address the crisis. He said in a town hall meeting that Europe's financial crisis "is scaring the world" and that the actions the region's leaders have taken so far "haven't been as quick as they need to be".
Louise Cooper, of BGC Partners, said: "These massive moves tell us how deeply uncertain is the future. Trying to trade or invest in such markets is more than difficult, I would suggest it is almost impossible."

Gold prices are falling – down by $40 and off $300 from its $1,920 an ounce high on 6 September – as traders liquidate positions to release cash to cover losses elsewhere.

But earlier Lorenzo Bini Smaghi, an executive board member of the ECB, had insisted that discussions were under way about how to bolster the EFSF. "I know that people are thinking about these things. They may not be willing to admit it in the public, but they are thinking about these things," he said, referring to the Troubled Asset Relief Programme (Tarp) used in the US after the 2008 banking crisis.
Analysts at JP Morgan expect European banks to get a capital injection of up to €150bn through a Tarp-like deal. "Euro-Tarp is, in our view, the best risk-reward medicine for opening the Eurobank funding market," JP Morgan analyst Kian Abouhossein said.

There is also speculation about recapitalisation of eurozone banks, particularly because the losses, or "haircut", on Greek bonds are expected to rise to 50%. The second bailout for Greece in July put the loss at 21% and fears of large writedowns drove shares in Greek banks – big holders of their country's debt – to a 19-year low.

French banks are also of concern to the market and remarks by Banque de France's Christian Noyer at the weekend were seen as suggesting the central bank was ready to step in if necessary.

While a wide-ranging solution is needed, the focus is still on Greece. It needs the sixth tranche of payouts – €8bn – from its original bailout to be released next month or it will run out cash, potentially defaulting on its debt and being unable to pay its public-sector workers.

The EFSF must also be endorsed across the eurozone, even before any plans can be adopted to bolster its firepower. A key vote in Germany is due on Thursday and Schäffler suggested Angela Merkel, the chancellor, and Schäuble were not being honest with parliament about what lay ahead. "The ink has not dried on this second bailout and already there is talk about more money," he said.
On Tuesday afternoon the FDP, part of the government coalition, will meet to decide whether to support Merkel but Schäffler says he will vote "no" regardless.

Doubts remain about whether enough will be done. Philip Booth, from Cass Business School, said: "The IMF and the EU still has not woken up to the realities of the sovereign debt situation."

Face Off at 55 Wall Street

The Strange Politics Of The US 2012 Election

Global Research
Jack A. Smith

Part 1, What Both Parties Are Up To

When was it that the most extremely disturbed inmates seized control of the madhouse known as the American political system? We know they are wielding decisive influence within the two-party structure by their destructive antics in Washington and various state capitals, but when and how did this happen?

Some contend that the takeover was accomplished last January, when the new Republican House majority assumed office. Granted that the intransigent buffoonery of the right/far right party is a substantial factor, but it by no means is the only factor, as the Democrats suggest.

The Tea Party (TP) phenomenon is a symptom of one of the more bizarre political moments in American history between the odd couple that constitutes the two-party system, not the principal causative agent. It is a new formation but composed of the old hard core right wing and religious right reinvigorated with conservative populism, anti-government libertarianism, garnished with an element of racism in response to a non-white chief executive, and performing the political equivalent of wilding in the streets.

The larger Republican Party and its leadership may not be as fanatical but is going along with the far right because it's producing positive practical gains for conservative ideology and programs, and seems to have tied the bewildered and misled Democrats into impotent knots. The big danger for the GOP is going so far to the right that it gets trounced in the 2012 elections, which is what the White House is counting on.

Others maintain seizing the asylum was facilitated when President Barack Obama took office in January 2009 — the argument being that he is a weak pushover who doesn't understand how to fight for his beliefs.

Obama, however, is a tough, exceptionally ambitious politician who knows what he wants and goes after it with cool precision. How else could have migrated to the U.S. Senate and the presidency of the United States in five years after an unremarkable dozen years in academia and the obscurity of the Illinois state senate? With virtually no record of accomplishments he whipped the formidable Hillary Clinton electoral machine, then the McCain/Palin opposition, and then his own party's left wing in the process.

The president does indeed fight for his convictions, much to the dismay of the liberals and progressives — a prominent sector of his own party constituency whom he mocked as the "professional left," then rendered powerless by furling his brows. The problem isn't the president's "weakness" but his now only partially disguised moderate conservative convictions that allow him to pull his party to the right in the name of bipartisanship, even if it takes humiliating his most fervent supporters.

It wasn't Obama's fear and trembling but self-confident chutzpah during the deficit debates when he gratuitously consigned the greatest achievements of the New Deal and Great Society to the future chopping block, and in House Speaker John Boehner's opinion gave the Republican leadership 98% of what it actually sought.

In fact there was no real debt crisis or probability of default. Raising the debt limit is as American as Thanksgiving dinner, and it's an economic necessity in a recession. Obama had a perfect right to avoid default unilaterally by invoking his 14th Amendment obligation to pay the country's bills. He chose to allow the charade to fester. Wall Street was well aware there would be a last minute agreement to cut programs and not raise taxes, although the mass media converted the farce into a potential national calamity until the end.

Liberal critics and the trade union movement were appalled by Obama's primary focus on reducing the deficit during a severe economic crisis as opposed to recognizing that the first priority should be heavy government investment in creating jobs. The headline over economist Paul Krugman's New York Times column told it all: "The President Surrenders."

Continuing high unemployment is one of the main reasons working class/middle class families may experience a painful double-dip recession, extending the crisis many years. Officially, 9.1% or 14 million American workers are jobless. Black unemployment 16.7%. When the total includes "discouraged workers" who have given up constant job seeking for lack of success, along with part-time workers who cannot obtain needed full-time employment, the pool expands to nearly 30 million workers or 16.2% of the labor force.

Obama responded to intense criticism and dismay about his inattention to unemployment from various quarters by putting forward a jobs program in a major speech to a joint session of Congress Sept. 8. The proposal, titled the American Jobs Act, appeared to offer considerably more breaks and financial incentives to businesses to hire more employees than to the jobless workers.

The chief executive stressed the bipartisan the nature of his proposal, maintaining that virtually all of its aspects were supported by conservatives as well as Democrats, and assuring Republicans fixated upon deficit reduction that "everything in this bill will be paid for" through a scheme to increase the amount of money the to be sliced from future spending. Part of such reductions will derive from cuts in Medicare and Medicaid, just as the liberals and unions feared. Much of the $447 billion pricetag will go to tax breaks for business and a reduction in payroll taxes to employees and companies.

The Decline of the United States of America: The Moral, Political and Economic Causes

Global Research
Prof. Rodrigue Tremblay

“The deterioration of every government begins with the decay of the principles on which it was founded.” Montesquieu, (Charles Louis de Secondat)  (1689-1755)

“I am convinced that I am acting as the agent of our Creator. By fighting off the Jews, I am doing the Lord's work.” Adolf Hitler (1889-1945), German politician and future German Chancellor, Mein Kampf, chap. 2, 1925

"I believe that God wants me to be president."George W. Bush, American 43rd president, speech in Washington D.C., June 1, 2004

"This economy of ours is on a solid foundation." George W. Bush, American 43rd president, January 4, 2008 (N.B.: the U.S. economy was about to enter into recession.)

"I believe that the Iraqi people will greet us as liberators." Sen. John McCain, March 20, 2003

"We used to hustle over the border for health care we received in Canada. And I think now, isn't that ironic?" Sarah Palin, American politician and former governor of Alaska, (admitting that her family used to get treatment in Canada's single-payer health care system, despite having demonized such government-run programs as socialized medicine that will lead to death-panel-like rationing, March 6, 2010)

“The Lord says be submissive. Wives, you are to be submissive to your husbands.” Michele Bachmann, Rep. of Minnesota and 2012 Republican presidential candidate, (on the question of submitting to the authority of her husband, 2006). Rep. Bachmann is also a graduate of Oral Roberts University.

“Let the woman learn in silence with all subjection. But I suffer not a woman to teach, nor to usurp authority over the man, but to be in silence.”
The Bible (New Testament), 1 Timothy 2:11-12

"Think of the American economy as a large apartment block. A century ago—even 30 years ago—it was the object of envy. But in the last generation its character has changed. The penthouses at the top keep getting larger and larger. The apartments in the middle are feeling more and more squeezed and the basement has flooded. To round it off, the elevator is no longer working. That broken elevator is what gets people down the most." Lawrence Katz, Harvard University economist, 2010

The American economy is in the Doldrums, the American Political System is Dysfunctional and Paralyzed

Around the world, many are baffled by what's happening to the United States. It seems that all at once the wheels are going off the cart. The American economy is in the doldrums, the American political system is dysfunctional and paralyzed, and a series of elective, far away foreign wars is ruining the country.

The U.S. economy used to be an engine of economic growth and the American political system used to be a well-oiled checks-and-balances machine that was geared toward progress and that could accommodate both leadership and compromise. Moreover, Americans can be proud that their constitution, at least on paper, is one of the best in the world, having been crafted by enlightened founders who believed in individual and democratic freedom.

In this short article, I will identify what I think to be the two major causes of America's current decline. (I welcome comments.)

-The first cause is a moral one: it is related to the widespread corruption that permeates many institutions and sectors of the U.S. society, the most corrupt of them all being the political system and the corporate system. It is no accident that the epicenter where these two corrupt systems meet is at the Pentagon, an agency that reports upon reports picture as a cesspool of corruption.

The result of that widespread corruption is that the United States is now generating a sub-standard class of politicians to administer its affairs who are not the servants of the common good, but who rather serve happily the narrow money interests that finance them. The U.S. corporate elite, for the most part, has abandoned all loyalty to its country while it roams the world in order to make short-term profits at all costs and avoid paying taxes in its country of origin.

The result: wacky politicians and greedy business people are in charge.

The same can be said about the biased corporate media who have also abandoned all pretenses of neutrality and objectivity in informing the people and who have rather donned the mantle of unadulterated propaganda in order to cynically manipulate information and public opinion, to the delight of their money masters.

Things were never perfect in the past, but I would argue that the current level and scope of corruption in the U.S. society is unprecedented and is a root cause of the decline of the United States.

The second cause of American decline is more structural and more economic in nature. It is related to a widespread ignorance of the practical consequences of economic and financial globalization that began under the Nixon Republican administration (1969-1973) and which accelerated under the Republican administrations of Ronald Reagan (1981-1989) and of George H. Bush (1989-1993).

I shall tackle each of these causes separately.

I-  The U. S. has abandoned its Democratic Ideals and the Quality of its Politicians is Sub-Standard

Let's talk first about the moral and political causes of American decline.

British Prime Minister Winston Churchill (1874-1965) once quipped that “democracy is the worst form of government, except for all the others.”! Indeed, democracy is a very fragile political system that can sometimes fail the very people it is designed to serve. American president Abraham Lincoln (1809-1865) defined it as “a government of the people, by the people, and for the people.”

But democracy is at its worst when an oligarchy takes control of a country's institutions and imposes its agenda. Such is the case with today's United States. Money interests, not the sovereign people, control the political system today; they control the corporate media system, they control the U.S. Supreme Court and much of the judicial system and, I would argue, they control a large chunk of the academic system.

Europe's "Troubled Assets" Bank Bailout: Germany's Chancellor Merkel Pushes for a Eurozone "Banktatorship"

Global Research
Mike Whitney

Silvia Berlisconi with Angela Merkel

The Bundestag will have one chance to stop Angela Merkel's plan to provide hundreds of billions of dollars to underwater EU banks that made bad bets on sovereign bonds. If the German parliament fails to block Merkel on September 23, then--under the "expanded powers" of the European Financial Security Facility (EFSF)-- insolvent banks will be bailed out and the costs will be passed on to eurozone taxpayers.

Despite her populist bloviating ("We won't be bullied by the markets"), Merkel is a devout Europhile committed to a fiscal union ruled by bankers and bondholders, a Banktatorship. Presently, she is doing whatever she can to hurry the process along before hostile bond vigilantes roil the markets and bring the EU banking system crashing down. This is from Der Spiegel:

"In a situation of market panic, the EFSF has to act quickly," Holger Schmieding, chief economist of Berenberg Bank, told the Financial Times Deutschland. "It could happen overnight or on a weekend." Guntram Wolff of the Brussels-based think tank Bruegel agreed. Parliamentary approval "must not take too long." ("Parliamentary Influence over Euro Bailouts 'Naive'", Der Spiegel)

Sound familiar? US Treasury Secretary Henry Paulson used the same strategy after Lehman Brothers collapsed in 2008 in order to blackmail congress out of $800 billion via the TARP bailout. Once again, the fear of a financial meltdown is being invoked to stealthily extort money from working people. Here's a clip from another article in Der Spiegel:

"The banks are in fact in a bad way. Most of them still have a lot of Spanish, Italian, Portuguese and Irish sovereign bonds on their balance sheets, and it is not entirely clear whether these will ultimately be repaid in full. That in turn is fueling distrust among the financial institutions themselves and many have stopped lending each other money. They are only being kept alive because the European Central Bank (ECB) is making an unlimited amount of money available to them and are accepting securities as collateral that many investors no longer consider to be safe.

Better capitalization for the banks could alleviate this mistrust, because more equity means that the banks could better absorb losses from their sovereign debt business. Those institutions that are not strong enough to raise the money themselves on the capital market would have to be helped out with public money. There is hardly an institution that is better suited for that job than the EFSF." ("The Euro Rescue Fund Needs More Powers", Der Speigel)

This excerpt is wrong in so many ways, it's hard to know where to begin. The EFSF was set up to prevent nations from defaulting, not banks. The idea that bond speculators can be compared to representative governments is laughable. The banks are in trouble because they made poor decisions and now must face painful haircuts on their investments. Shareholders should be wiped out and debts restructured. That's how the game is played.

What Merkel and Co. want to do is turn the system on its head and transform the EFSF into a permanent off-balance sheet SPV (Special Purpose Vehicle) authorised to distribute public money to failing banks. And it's all being done to keep their sketchy banker friends from losing money. So, behind all the baloney about "fiscal unity" and "consolidation of state finances", lurks the ugly truth that the eurozone is a two-tiered system whose financial architecture is identical to Enron. There's nothing democratic about a system that rewards profligate elites while shunting the losses off onto workers. That's just plain old kleptocracy.

The German Chancellor is joined in her struggle by colleagues at the ECB and the IMF. In fact, newly-appointed IMF chief, Christine Lagarde, is leading the charge for Euro-TARP, which may explain why she was rushed through the nomination process after Dominique Strauss Kahn stepped down pending his investigation on rape charges in New York.

In any event, Madame Lagarde has already shown that she's more than willing to do whatever heavy-lifting is required to achieve her objectives and to accommodate her wealthy constituents. . Here's how The Guardian summed up Lagarde's impressive resume:

   "Christine Lagarde stands for protecting big banks.....she's the most pro-bank bailout of the lot." ("IMF under growing pressure to appoint non-European head", The Guardian)

Indeed. So, Lagarde has thrown her weight behind the bank bailouts, er, "bank recapitalization". Also she is a staunch advocate of "institutionalizing a European economic government", which means that she wants to establish a regime that is controlled by bankers and bondholders; Banktopia. At the same time, she insists that this new governing body have the power to intervene in the budgetary process of the eurozone sovereigns to "maintain our efforts to expand the scope of economic surveillance to include government deficits and public as well as private-sector debt, if necessary by imposing “political penalties”.

Right. So, this new trans-EU government will be able to "crack the whip" on errant states that pass budgets that serve the interests of their people rather than those big capital. Meanwhile, Lagarde's EU Superstate will continue to impose the same policies it has since the onset of the financial crisis; large-scale privatization of state assets and services, and belt-tightening programs that keep the economy in a permanent state of Depression. Is this what's in store for the Eurozone?

Keep in mind, the banks are already getting bailed out through the ECB's bond purchasing program that keeps bond prices artificially high and averts a sovereign default. The fact that Lagarde is aggressively pushing for direct injections of capital, suggests that the condition of the banks is far worse than anyone had figured, which is why--according to the Wall Street Journal--"She suggested that the EU's existing sovereign bailout fund (ESFS) could be used for this purpose." It's a classic case of "bait and switch".

German parliamentarians have a chance to put an end to this nonsense once and for all. By blocking Merkel, the Bundestag can ensure that the eurozone's working people will not be ripped off for hundreds of billions of dollars or subjected to the autocratic rule of parasidic banksters . Let the banks pay their own bills.

No to EUROTARP.