DMcW’s – RED ALERT ON NAMA April 28, 2010

DMcW’s new article puts NAMA into a stark new context the Greek context.

David concludes if Greece defaults it will herald for the Irish government and the NAMA plan going forward a sovereign debt car crash.

Lunacy of NAMA bailout will tip us over the edge | David McWilliams

Roubini the economics sage reckons that Greece is next to been insolvent and will require its debt restructured.

Greece he states will see a disorderly collapse and it will mean huge losses for financial investors holding Greek debt which will in turn trigger knock on effect into Ireland.

Greece ‘Nearly Insolvent,’ Bailout Won’t Work: Roubini – CNBC

So, international money lenders looking lame on buying more greek debt means greeks can only but turn to ECB.

Will the ECB bail the greeks out in totality to the multitude of billions tens of or leave Greece with no option but to drop out of the Euro as David points out in Article today in the Independent.

If Greece do leave the eurozone but remain in the EU will this pave the way for other countries to go down same path.

More on Goldman Sachs under questioning April 27, 2010

The full text of Senator Levin’s opening “remarks” – if a few verbal punches in the face can be termed “remarks”, that is – is now online here. But here’s a choice “remark”:

These facts end the pretense that Goldman’s actions were part of its efforts to operate as a mere “market-maker,” bringing buyers and sellers together. These short positions didn’t represent customer service or necessary hedges against risks that Goldman incurred as it made a market for customers. They represented major bets that the mortgage securities market – a market Goldman helped create – was in for a major decline.

Goldman continues to deny that it shorted the mortgage market for profit, despite the evidence. Why the denial? My best estimate is that it’s because the firm, Goldmans, cannot successfully continue to portray itself as working on behalf of its clients if it was selling mortgage related products to those clients while it was betting its own money against those same products or the mortgage market as a whole

Goldman Sachs under fire and question

The Guardian blogger Richard Adams

And the Wall Street Journal has a round-up of Goldmans jargon you might be hearing about in the email correspondence that the committee will examine. Such as: Lemonade: A structured-financial deal Goldman mixed up to make bad loans go down easy on investors. Used in a sentence, from a Goldman email: “They structured like mad and travelled the world, and worked their tails to make some lemonade from some big old lemons.

But there could be lower points to come for Blankfein. According to today’s New York Times, Goldman Sachs devised “a series of complex deals to profit from the collapse of the home mortgage market”, which goes beyond the one deal that the SEC has picked out.

Goldman Sachs Senate hearing: live blog | Business | guardian.co.uk

D McWilliams new article on sovereign debt machinations. April 26, 2010

D McWilliams new article goes at the mechanics regarding sovereign debt. An excellent read in explaining the machinations behind the current news stories on Greece and Ireland and nation debt management.

Comments from posters brilliant background analysis and links alongside.

Forgive debt, sayeth the Lord | David McWilliams

BASH STREET KID JAIL BREAK BLOG  says:

David covers in detail the actual math behind the story relating to the debt the authorities are moving around.

The analogy using ANGLO / Greece and NATIONWIDE / Ireland is getting at the guts of the story underway.

The story concerning the funneling of paper money from the ECB into the private banks of Greece and Ireland.

An intricate story wrapped in many narratives folding in and and under each other.

David calculates the raw data and concludes Irelands national debt is going to explode if the Irish government continues on its current trajectory.

David then opens up the narrative concerning the EU funneling paper cash into Greece to keep it from sinking and the financial straight jacket that is the euro which will stall Greece economy re generating.

This according to David will invoke a ripple effect unto Ireland and prolong the credit crunch.

Davids conclusion on this is the EU are trying to resolve debt problems with more debt creation.

This is tantamount to operating a type of debt slavery and is antithetical to free market wealth generation principles.

Davids final conclusion rests with debt forgiveness.

Posters comments jump in and make a number of salient points on ‘debt forgiveness’. Contd/..

Goldman Sachs employee frankenstein admission April 25, 2010

NEW YORK (AP) — As the U.S. housing turned downward in January 2007, a Goldman Sachs trader wrote in e-mails to a woman he apparently was courting that investments he had sold were “like Frankenstein turning against his own inventor.”

“I’m trading a product which a month ago was worth $100 and today is only worth $93,” wrote Fabrice Tourre, who was charged along with the bank in a civil complaint filed this month by the Securities and Exchange Commission. “That doesn’t seem like a lot but when you take into account … (the investments) are worth billions, well it adds up to a lot of money.”

Tourre was talking about investment products like the one at the heart of a federal complaint against his firm. For Tourre, the investments were like an invention gone awry: He had started arranging them when the market was on the upswing. But he continued selling them after the market turned – now with Goldman betting against them, in one case allegedly misleading investors about a deal’s origin.

Goldman Sachs Group Inc. released that e-mail and 25 other internal documents Saturday in response to a Senate panel’s release of messages in which Goldman executives boast about money they were making as the market imploded later in 2007.

When credit rating agencies downgraded many billions of dollars of mortgage-backed investments in October 2007, Goldman executive Donald Mullen was unabashedly pleased.

“Sounds like we will make serious money,” Mullen wrote to Michael Swenson, another executive, in one of the e-mails released by the Senate Permanent Subcommittee on Investigations.

Goldman has argued vehemently that it did not profit from the mortgage meltdown.

News From The Associated Press

Another link

Goldman hits back over fraud claims – Telegraph

The Wall Street Ponzi Scam back drop April 20, 2010

If any single person is most responsible for the financial crisis, it’s Alan Greenspan. He presided over a Fed that lowered interest rates to zero (adjusted for inflation) but failed to prevent banks from using essentially free money to speculate wildly. You do not have to be a brain surgeon to understand that if money is free, banks will take it and lend it out. And if oversight is inadequate, the banks will lend the money to anyone who can stand up straight and to many who cannot. The result will be a giant subprime lending bubble that will burst.

If any three people are most responsible for the failure of financial regulation, they are Greenspan, Larry Summers, and my former colleague, Bob Rubin. In 1999 they advised Congress to repeal the Glass-Steagall Act, which since 1933 had separated commercial from investment banking. By 1999, Wall Street was salivating over such a repeal because it wanted to create financial supermarkets that could use commercial deposits to place bets in the financial casino. That would yield the Street trillions.

At the same time, Greenspan, Summers, and Rubin also quashed the efforts of the Commodity Futures Trading Corporation to regulate derivatives, when its director began to worry that derivative trading already was getting out of control.

Yet Greenspan continues to take no responsibility for what occurred. In the interview he just completed he avoiding saying anything about the failure of the Fed under his watch to adequately oversee the banks, and the absence of sufficient financial regulation to begin with.

I dislike singling out individuals for blame or praise in a political system as complex as that of the United States but I worry the nation is not on the right economic road, and that these individuals — one of whom advises the President directly and the others who continue to exert substantial influence among policy makers — still don’t get it.

The direction financial reform is taking is not encouraging. Both the bill that emerged from the House and the one emerging from the Senate are filled with loopholes that continue to allow reckless trading of derivatives. Neither bill adequately prevents banks from becoming insolvent because of their reckless trades. Neither limits the size of banks or busts up the big ones. Neither resurrects the Glass-Steagall Act. Neither adequately regulates hedge funds.

More fundamentally, neither bill begins to rectify the basic distortion in the national economy whose rewards and incentives are grotesquely tipped toward Wall Street and financial entrepreneurialism, and away from Main Street and real entrepreneurialism. It was just reported, for example, that America’s top 25 hedge fund managers last year earned an average of $3 billion each. They continue to pay a federal income tax of 15 percent on most of that, by the way, because their lobbying efforts have been so successful.

Meanwhile, the so-called jobs bills emerging from Congress and the White House are puny relative to the challenge of restoring jobs in America. Last Friday’s jobs report, read most positively, showed 112,000 jobs added to the economy in March. But that’s below the number needed simply to keep up with an expanding population. In other words, we’re actually worse off now than we were a month ago. At the same time, the median wage of Americans with jobs keep dropping.

The American economy is seriously out of whack. The two people interviewed this morning don’t seem to understand how far.

Cross-posted from RobertReich.org

Max keiser Press TV updates 17/04/10 April 18, 2010

Max keiser show on Press TV covered ‘NATION’ mag article on wealth distribution and its gap. Covered the ‘rent seeking’ principle on which the plutocrats are stealing the wealth of the system and how it is the wealth finds its way to the richest .01 percent.

Prices determines policy MAx commented on and how it is majority of people only own .5 percent of shares and bonds in the system and how it is the top engineered a way to pass on the risk to the masses. How it is the top 1 percent alone owns 50 percent of shares bonds etc. Transferring the risk from their balance sheet onto the taxpayers is the means through which they’ve managed to carry this off.

Markets totally manipulated and market rigging and abolishing price discovery another mention by Max.

Max then moved onto interview with Alex Jones the ‘media maverick’ and his predictions for the near future with Pentagon – banker (jailor system) false flag operations.

This interviewed covered Alex talking on the next move to rob peoples pension funds and wrecking economies so the top can accede more control. A mad max type collapse underway.

Also, release of Invisible Empire feature on shadow corporate government (jailor system) in control through a matrix like grid of disinformation and make believe.

Alot to ponder and mull…..!!

Exchange systems and Economy part II April 16, 2010

Bash street jail break adds

Exchange systems, particularly between humans on a micro level in conducting of business and in particular exchange systems in relation to one on one inter relations in basic human contact is where the jailors who run the market system in a rigged fashion begin their sabotage and piracy.

I do agree too the dynamic systems of planet earth are inherent self re generational systems and operating according to hidden laws according to the models of both closed and open systems.

I do also agree the intelligensia are lopsided on open systems to the banishment of closed systems and it is purely politically motivated.

Academically speaking for an individual to have to take into consideration a cosmic balance between both closed and open systems in a dance of communication working both in conjunction with each other and spontaneously bursting forth and imploding as systems and breaking with the harmony is to much of a headache for most intelligensia and subsequently ignored to the peril of an understanding of ecosystems and econ systems and so it is why others have had to come along and fill in the massive intelligence gap these paid and hired hands choose to edit according to their own pettiness of vanities.

Information Exchange and Economy

So I thought, here we are, we applied a system of trade and exchange of commodities and goods, applied rules, dynamics and processes, created a dynamic system that forms our financial and economical reality.

We teach the systems phenomenons and dynamics in Universities and educate academics, we do some research into this and once in a while, like Jospeh Stiglitz did with his work on Information Asymmetries, we gain important insights that enhance our understanding and eventually the development as well.

Our academics write in Journals, and publish their findings and their work, to be discussed and evaluated. Human condition applies, and some form of politics that also comes into play is less than beneficial for the process, as other forces often define what is accepted in academic circles and what not. Ok, this is not as bad anymore like it was just a few generations ago, we have come some way in that respect, but still these things are slowing down and often are obstacles on the way for bright new minds to establish their findings.

Today they use advanced computing technology and in the age of Tera Flops have plenty of CPU cycles at their disposal to calculate their models, but lets not forget, they are models, nothing more.

Risk control, and why I think it a good example of how we should start to enhance the process of understanding and exchange of information to allow for a better application of democratic base principles.

Secrecy, classified documents, and so on, are often just in place to serve the agenda of the people who were elected, and not the agenda of the people who elected them. This contributes to a political culture in ways that open doors for abuse of the system and I would hope it is a fair statement to say that we in Ireland have become somewhat specialists in that aspect.

This is a challenge for coming policy makers and academics to consider and a chance to for a new Ireland with a fairer basis, more democratic principles not on paper, but applied.

I might be wrong but to he best of my knowledge there is no interdisciplinary panel active that consults policy makers here, or is there?

Such a panel could be a start, and it should have a role and clear function, not a debate club only. I am not a supporter of the idea to abolish the Senat at all, rather I would change it’s position and enhance it’s role.

Policy makers need to get the best information they can. Academics need the freedom, the platform and the tools to be able to come to better conclusions, better models, and better ways to inform policy makers, and crucially, the public needs involvement in all these things as well.

International exchange with all countries, the ‘G192’, is another demand on such a system to work together to fix what is wrong and better what can be improved for the wellbeing of Nations and their people.

I said that the system is broke, and that applies not only to the financial world, it applies to social structures as well. Put it this way, this is much more than a financial and economical crisis, this is a confidence crisis on a large scale

We need a more transparent, more accountable system that allows progress and free exchange. All this is acknowledged since long and by many leading minds and it is not rocket science, rather common sense!

However, reforms are blocked on all levels, and one of the multifold reasons is the imbalance of power and wealth. Catastrophes of any kind are a chance at the same time, while devastating and causing suffering to a great many people, they are the chance to re consider and fix what is broken. The Asian crisis is a good example how it was avoided by the forces at play.

How can we achieve such changes?

It cannot come from the system within, it has been tried, many times, and to no success. It most definitely has to come from the people themselves, they have to demand this change!

The structure of IPCC has enabled us to speed up the learning process, enabled us to influence politics in ways that never was done before.

Banks under scrutiny for engineering POnzi schemes April 15, 2010

Were the big banks all knowingly running Ponzi schemes? That’s the question that arises from the stunning hearings held this week by the Senate Permanent Committee on Investigations, chaired by Senator Carl Levin, on the collapse of Washington Mutual, the largest thrift failure in the U.S. Faced with looking like fools or knaves, the barons of the big banks — from Robert Rubin to Lloyd Blankfein to WaMu’s Kerry Killinger — have chosen, not surprisingly, the fool. But the WaMu hearings — and Zach Carter’s stunning running commentary on them — suggest that while Bernie Madoff may have been the extreme, he wasn’t the exception. (Note: Carter blogs for the Campaign for America’s Future which I co-direct)

The Levin hearings show that WaMu systematically peddled loans to people it knew could not pay them back. This wasn’t an accident. Levin exposed a WaMu internal audit that reviewed 132 loans, and found 115 involved confirmed fraud, with 80 having “unreasonable” income — meaning the income listed on the loan was so preposterous that any reasonable person, much less a trained loan officer, would have called it into question. The audit resulted in no — zero, nada — changes in WaMu’s lending practices. Fraud wasn’t a problem; it was the business plan.

As Carter summarizes:

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine. This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

WaMu particularly pushed predatory option-ARM loans, loans with an initial monthly payment so low that it often didn’t even pay off the interest on the loan. Then after a couple of years, the monthly payment explodes — and the loan becomes unaffordable.

WaMu actively trained its personnel to convince skeptical borrowers to take these loans because option-ARMS received a very high yield when packaged into securities. So WaMu’s compensation schemes rewarded loan officers for the number of loans sold, not the quality of the loans. Stunningly, Levin cited internal memos showing that even loan officers under investigation for fraud were rewarded with trips to Hawaii and the Bahamas for their high production.

WaMu packaged the fraudulent loans into securities and sold them to investors, or peddled the loans to investment banks that did the same. Even after WaMu’s own internal audits reported that a high percentage of the loans were fraudulent, WaMu still sold them to investors. Worse, even after WaMu’s own study showed that the default rates on option-ARMS were going to be staggering, WaMu rushed to peddle even more of these loans to investors on an “urgent” basis. As Carter reports, “They not only packaged existing option-ARM loans into securities, they issued as many new option-ARMs as possible, in order to score securitization profits before the market collapsed.” CEO Kerry Killinger testifies that he doesn’t know if it would have been appropriate to tell investors what the company knew about default rates. “I don’t know what actually happened,” says Killinger.

As Carter summarizes, this was essentially a Ponzi scheme, similar to Madoff’s:

Making truckloads of fraudulent loans can only end in disaster, but WaMu [executives weren’t] really interested in the long-term picture. They were only interested in their ability to book these loans for big, short-term profits. Even when those bad loans finally took the company under, it had been, in a sense, a success. Its executives had already made millions.
WaMu’s [executives were] in many ways operating a simple Ponzi scheme. Their risky loans were going bad, but the company was trying to counter those inevitable losses with the short-term profits from issuing more risky loans. That’s basically how Bernie Madoff’s scam worked, except he wasn’t using make-believe loan profits, he was using make believe stock returns. So long as the bubble keeps growing, the scam could keep moving. But when the bubble burst, there was no way to keep issuing lots of loans in an economy where home prices were plunging.

The one divergence from the Ponzi scheme is securitization — if WaMu could dump the bad loans off its books, then it wouldn’t have to eat the inevitable losses. But that doesn’t reflect well on WaMu– it means [the executives] were deceiving and abusing investors.

Why run this scheme that would lead to the ruin of the bank? Because the executives were making out like, well, like bandits. Killinger, the CEO of WaMu, was taking home 11 to 20 million a year during the housing boom.

As Carter ponts out, what WaMu was doing in mortgages — originating mortgages that they knew would default, cutting them up into securities, and marketing them to investors without notice — isn’t much different than what Goldman Sachs was doing in synthetic subprime CDOs — creating securities that it knew would fail in order to bet against them, while selling them to investors without notice.

These guys weren’t fools. They knew what they were doing. They knew that the music would stop someday, and the reckoning would come, or more likely, the Feds would step in and bail them out. (Amazingly Killinger is still outraged that WaMu wasn’t bailed out rather than put out of business). But they kept dancing because they were cleaning up along the way.

In the last two weeks, the Financial Crisis Inquiry Commission and the Levin Hearings provide a stunning picture of the industry. The good cop, FCIC, treats the bankers as experts, listens to their opinions, and lets them claim the role of fools. “We didn’t know.” “We didn’t realize housing prices wouldn’t always go up”. ” We weren’t responsible.”

Then yesterday, the bad cop — the Levin committee — exposed the inner working of what Bill Black calls “control fraud,” a business model based upon fraud as central to its profitable operations. It is hard to believe that WaMu or Madoff is an exception. Levin should probe every major bank engaged in the securitization of mortgages. Is it likely that their bank officers were fools? Or that they were prepared to turn their heads or hold their noses because the rewards were so great? Ignorance is their defense, not their condition. They knew what they were doing. The rest is for a prosecutor to sort out.

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