The Bailout & Some of the Players
Tuesday March 31, 2009
The crisis was the coup de grâce: They have been given virtually free rein over the economy, these are the same insiders first wrecked the financial world, and subsequently granted themselves unlimited emergency powers to clean and hide their own mess.
Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. (AIG assets 1 trillion dollars
Cassano ran his scam out in the open thanks to Washington's deregulation of the Wall Street casino.
Cassano created a new type of financial instrument called a collateralized-debt- obligation (CDO).
A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs.
Thanks to a financial seal of approval, banks had a way to turn their shittiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible.
Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.
Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending.
Banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets ,but they some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell.
Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending. As banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets — some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell.
In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the borrower can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the borrowers mortgage if he defaults. In theory, Bank A is covered if the borrower loses his job.
Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A it turns around and sells protection to Bank C for the very same mortgage.
Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry
Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, prevented banks of any kind from getting into the insurance business.
In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup.
The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. This legislation contained a provision lobbied by and for Enron a major contributor to Gramm—that exempted energy trading from regulatory oversight. Gramm’s wife Wendy had been part of the Enron Board her salary and stock brought in between $1 million and $1.8 million to the Gramm family.
Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields
When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."
The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures.
Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans.
The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company.
1. Alan Greenspan. Chairman of the Federal Reserve 1987-2006, called CDOs extraordinary useful and regulating them would be a mistake
2. Sandy Weill CEO of Citygroup 1998-2003 celebrated 45 billion taxpayer bailout by taking a Mexican vacation in a Citytroup jet with $13,000 carpets,Hermes scarves and Baccarat crystal
3. Phil Gramm Senate Banking Committee 1995-2000 pushed to Repeal the Glass-Steagall act exempted CDOs deals from regulation.
4. Joe Cassano Chief of AIG 2001-2008 blew $500 billion in the economy is enjoying $280 million in deals.
5. Robert Rubin, fought to overturn the Glass-Steagal act. opposed regulation of credit swaps helped create Citygroup out of which he made $115 million still on City group mentor of Timothy Geithner.
6.Jimmy Caine CEO of Bear Sterns cashed out 51 million before resigning before the sale to JP Morgans.Alledgedly smoke weed while Bear Sterns went Bankrrupt.
7. Christopher Cox chairman of the SEC 2005-2009 Gave the market a free ride waiting until too late to reverse the voluntary regulation program of 2004
8. Angelo Mozillo Head of Countrywide Finance 1969-2008 biggest provider of subprime loans specialized in predatory loans that broke people in Mansions, gave favorable mortgage to Sen. Chris Dodd
9. John Thain, Merryl Lynch chief 2007-2009, proposed himself a 10 million bonus as the company imploded. Office refurbishing of 1.2 million dollars in the crisis.
10. Henry Paulson CEO of Goldman 1999-2006, Treasury secretary 2007. Arranged bailout for Goldman made his decisions non-reviewable.
11. Dick Fuld CEO of Lehman Bros 1993-2008,largest bankruptcy in US history earned 22 million the year Lehman went bust. Attempted to sell his 13 million home to his wife.
12. Ken Lewis CEO Bank of America 2001 through present, too big to fall company, buying MBNA, Countrywide and Merryl Lynch. Failed to catch a 11 billion loss prior to purchase at Merryl Lynch.
13. Barney Frank, Representative; his homosexual lover, Herb Moses, was a senior executive at Fannie Mae; Frank’s efforts helped to deregulate Fannie Mae in the 1990s. Fannie Mae and Freddy Mac combined assets are over 5 trillion dollars.
14. Christopher Dodd. Chairman of the Banking committee. States that he did not see the160 million bonus approval, but signed it anyway.
The Credit Card Meltdown Scam and The New Laws That Do Nothing to Prevent It
In the financial world, a credit rating is actually a number through which lenders can decide whether or not to give a loan or line of credit to an individual.
In calculation of the credit score, these agencies use a formula that is known as FICO. This acronym is named after the Fair Isaac Credit Organization which is one of the first companies to use credit ratings in the 1950s. A FICO score is usually a number between 300 to 900 and roughly gives the risk an individual poses to a lender. While a rating of 300 is considered to be an extremely high risk rating, 900 virtually indicate no risk. In this score, about 30% is dependent on the percentage of your present utilized total credit, 15% depends on how long you have had open lines of credit, 10% depends on how large your past lines of credit have been and 35% depends on the number of delinquent payments you have.
The advertising executives, who first launched the Madison Avenue Guerilla Marketing Tactics for the credit cards companies, can only be described as advertising geniuses. Do you really realize what they accomplished? They overwhelmingly persuaded Americans to take on the "Charge it now and pay for it later" mentality by appealing and facilitating to the instant gratification response already embedded in our “new world culture” both young and old.
What was initially a convenience in the new world financial crisis has become a necessity that ranges from using the credit for business purposes when the necessary cash is unavailable to family use such as providing for the basic needs of food, shelter, transportation and health.
However, be assured that the more debt that consumers amass, the greater the profit of the credit companies. Consequently, lending by the credit companies have begun to add all kinds of extra charges.
Every credit card user signs a disclosure prior to their plastic money being issued. The problem is, very few people read the in's and out's of these irrevocable one-sided binding contracts. Truthfully, that's what the credit card companies are counting on; however regardless of the terms in this present economy the people need the credit cards to survive.
Here's a list of what you really signed up for:
· 0% to 23% bait and switch interest rates
· Exorbitant late fees
· Hidden charges
· Unexplained interest rate hikes
· Deceptive minimum payments
· Hidden rules in the fine print
· Universal default
According to current statistics on myfico.com, today's consumer has a total of 13 credit obligations on record at a credit bureau. Nine of those are likely to be credit cards and the other four are some type of installment loan, (auto loans, mortgage loans, student loans, etc).
In the United States, the legal term for a credit bureau under the federal Fair Credit Reporting Act (FCRA) is consumer reporting agency — often abbreviated in the industry as CRA.
In the United States, key credit bureau consumer protections and general rules or governing guidelines for both the credit bureaus and data furnishers are the federal Fair Credit Reporting Act (FCRA), Fair and Accurate Credit Transactions Act (FACTA), Fair Credit Billing Act (FCBA), and Regulation B.
Two government bodies share responsibility for the oversight of credit bureaus and those that furnish data to them. The Federal Trade Commission (FTC) has oversight for the consumer credit bureaus. The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks with regard to the data they furnish credit bureaus.
However, in reality, all of these agencies from the practical standpoint of view fail to protect the customer. These agencies fail to exert the appropriate pressure and remedies within the powers that have been supposedly appointed to them.
Most U.S. consumer credit information is collected and kept by the four national credit reporting agencies: Experian (which purchased the files and other assets of TRW), Equifax, TransUnion, and Innovis (which was purchased from First Data Corporation in 1999 by CBC Companies).
Additionally, there is a national alternative credit bureau, PRBC. Incorporated in March 2002, PRBC enables consumers to self-enroll and build a positive credit file by reporting their on-time payments (such as rent, utilities, cable, and phone) that are not automatically reported to the three traditional credit bureaus.
This burdensome, time-consuming, futile effort will however not change any of the reports that are actually being used.
In the U.S., there are three business or commercial bureau repositories: Dun & Bradstreet, Experian Business, and Equifax Small Business Financial Exchange (SBFE)
At first glance, the sweeping credit card legislation that passed the Senate on Tuesday looks like a huge victory for consumers. The bill, after all, contains relief from penalty fees and certain interest rate spikes.
But for people who pay off their bills each month, and milk the card rewards programs for everything they’re worth, there is some cause for concern.
President Barack Obama on Friday signed legislation into law that requires credit card companies to inform applicants about agreements, rates and fees before rates are increased or changed (AND WHAT ???). Interest rates and late fees, which credit card companies charge and are often the reason people slip into deeper credit debt, will now face new limitations and restrictions. Which obviously the only thing that it does is reinforce and emphasize what already is absurd. But it appears that once one reads this, one has immediately become in agreement with the abusive changes in rates and fees.
The new also law puts emphasis on the elimination of "confusing terms and conditions" and requires the use of simple language (STILL DOES NOT PUT AN END TO USURY AND ABUSE).
The above makes the assumption that an informed client is a financially secure client. The question is: for whom?
Also in this new law are included new restrictions on when card companies can increase the interest rate on balances you’ve already run up. The bill says that banks generally must wait until you’re 60 days late in making the minimum payment before applying a penalty interest rate to your existing debt.
Card companies will have to give 45 days’ notice before raising their interest rates. There’s also a notice requirement for any significant change to a card’s terms, which may keep companies from surprising customers who have been saving their loyalty points for years with huge alterations in rewards programs.
The credit card companies make billions each year in legitimate interest charges and fees, but are under constant pressure from the shareholders to increase their earnings. To make this extra money the credit card companies sometime adopt some dirty tricks to make this money.
The first one out of the 10 dirty tricks credit card companies play is also the worst of them: not posting your payment the day it was received. This delay will bring to the company a late payment fee.
The Second trick is to make you pay late by changing the due date for your credit card payment. For being late the company will charge again a late payment fee and if the situation repeats for few months in a row they can legally increase your interest rate.
Third trick played by the credit card companies is a ridiculous one: you can be charged a penalty fee for not using your credit card a certain period of time.
One of the new scams that have appeared in the last years is the card cancellation fee. This fee was adopted because a large number of the clients of a certain bank discovered the extra charges and they rushed all to cancel their accounts.
When the new law takes full effect next February, the following will apply:
· Except in cases of default, rate changes will generally apply only to new purchases, not existing balances.
· Banks must send a bill at least 21 days before it's due.
· Payments received by 5 p.m. on the due date must be counted as on time.
· Lenders must give 45 days' notice before raising rates. (Consumers may opt out and pay under the old terms.)
· Payments above the minimum must be applied first to highest-interest portion of the balance.
· People under 21 must offer proof of income or have a co-signer to obtain a credit card.
· "Over-limit" fees cannot be triggered by purchase unless cardholder agrees that lender should permit such a purchase.
· Gift cards cannot expire in less than 5 years. Inactivity fees must be prominently disclosed.
Unlike in prior recessions, cardholders who recently lost their jobs are unlikely to be able to extract equity from their homes or draw down retirement accounts to help pay off their debts. That means borrowers who fall behind on their bills are more likely to default, leading to higher losses.
The average American household is saddled with nearly $8,400 of credit card and other revolving debt, according to Moody’s Economy.com.
At Citigroup, executives noted that the company’s 10.2 percent credit card charge-off rate for the first quarter had broken its “historic correlation with unemployment” and showed no sign of letting up.
Consumers with poor credit repayment histories or court adjudicated debt obligations like tax liens or bankruptcies will pay a higher annual interest rate than consumers who don't have these factors. To me this represents the fox guarding the hen house since the credit bureau, the credit cards and the banks are all the same.
So don’t expect to qualify for incentives, discounts or any other kind of assistance and watch carefully for the disclaimer “with approved credit.”
Credit Card and Judgment Garnishment
Question: WHAT WILL HAPPEN WHEN JUDGEMENT HAS BEEN FILED AGAINST YOU AT THE COURTHOUSE?
Answer: The answer to your question depends primarily on your state of residence, as each state regulates what actions judgment holders can to enforce judgments they have obtained.
The most common method used by judgment creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact your employer and require your employer to deduct a certain portion of your wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments.
In most states, creditors are allowed to garnish wages between 10% and 25% of your income, with the percentage allowed being determined by each state. For example, if you live in California, which allows for 25% wage garnishment, and you take home $2,000 per month, a judgment creditor could garnish you at the rate of $500 per month until the debt is paid off. Keep in mind that, generally, only one garnishment is allowed at a time, so if you have several judgments against you, the one who contacted your employer first would be paid first from the garnishment, then the second, and so on. Another important point to remember is that Social Security benefits, pension payments, and many other types of income for Bottom of Formthe elderly and disabled, are exempt from garnishment, which means that most elderly Americans do not need to fear wage garnishment if they are unable to pay their bills.
Another option for a creditor trying to enforce a judgment is to request that your bank to place a levy on your bank account. Basically, this means that the creditor has the right to take whatever money in your account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, you can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so you should carefully review your state’s laws to find out if your bank account can be levied.
The third common way that creditors enforce judgments against consumers is by placing liens on properties owned by judgment debtors. For example, if you own a home, a creditor with a judgment against you will likely place a lien on your home, meaning that if you sell or refinance your home, you will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity you have in your home, then the lien may prevent you from selling or refinancing until you can pay off the judgment.
Basically all of these laws have been enacted so that long worked hours resulting in the creation of some kind of stability are placed in the hands of judges interpretation that will obviously need appeal processes and motions in order to regain control over what is rightfully yours at a severely discounted return.
Demise of the Middle Class
- The naïveté of the Left has long been reflected in its attempts to construct a system that will change human nature in order to achieve social justice instead of nurturing an economic and financial context that evokes social justice while accommodating human nature.
- These issues are pressing today, when the demise of the middle class is no longer a forecast, but a fact.
- In addition to what the Wall Street Journal calls the "four horsemen of the workplace" (downsizing, increased automation, moving operations to low-wage countries, and the use of temporary workers), the middle class was also hammered by the growth in demand for high-skilled labor, the spread of networked computers, the shift from a manufacturing to a service economy, flatter tax rates, immigration, an increase in single-parent families, a decline in unionization, an erosion in the value of the minimum wage and a steady rise in securities markets (and speculation) in which the already-wealthy are disproportionately represented.
Beyond Marie Antoinette Capitalism
- One solution that will not work: "Marie Antoinette Capitalism," only instead of urging "Let them eat cake," the modern refrain is "Let them buy shares."
After all, it’s a free market
- Between 1967 and 1992 the United States spent more than $3.2 trillion on solutions that ignored ownership patterns. As George Mason University Professor Walter Williams points out: "The money spent on poverty programs since the 1960s could have bought the entire assets of the Fortune 500 companies and virtually all U.S. farmlands, and what did it do? The problems still remain and they are even worse."
- For example, Social Security entitlements are the only old-age pension for a majority of those in the private sector. Today's hugely regressive Social Security tax (levied on a flat percentage of payroll) is now the largest single tax paid by most taxpayers (Social Security and Medicare taxes accounted for 34 percent of this year's $1.7 trillion in federal revenues) and the present value of those anticipated payments represents the most significant "wealth" for a majority of U.S. households. Thus, in the world's avowedly most capitalist economy, the most important asset for a majority of its citizens is an assurance that someone else will be taxed on their behalf. Adding insult to injury, that tax is levied on jobs, the nation's sole economic opportunity policy.
by Father Charles Coughlin
As William Jennings Bryan put it (see Chapter 49), as long as the Federal Government does not take back its power to issue the money for our nation, there is no other reform that can be accomplished. In other words, if one does not want to correct the financial system, one goes round in circles; one wastes his time, no matter what organization one belongs to. This is why the “Michael” Journal lays so much stress upon that issue, which is of the utmost importance: every Canadian citizen must absolutely understand the urgency for the Federal Government to take back its power to issue, create the money for our nation, instead of borrowing it at interest from private banks, which brings about unrepayable debts. In the following excerpts from his book, Father Coughlin speaks about the U.S.A., but his arguments apply just as well to Canada or any other country.
A. P.
by Father Charles E. Coughlin
While the National Union for Social Justice appreciates the splendid efforts which noble statesmen have made in the past to restore to Congress the power to coin money and regulate its value, there is also the realization that these efforts have been in vain because an uninformed and misinformed people have labored under the delusion that switching party politics instead of changing the money policies was the key to contentment and prosperity...
The Constitution and money
How is personal, physical life sustained under diversified activities?
By the exchanging of goods and services.
How is this exchange of goods and services accomplished?
Through the medium of money, which was originated by social necessity to make possible exchanges of varieties of articles and articles of unequal value.
Is the substance of which money is made important?
No. It is the legal status given it by government stamp that makes it acceptable by all as money, whether it be made of metal, or of paper.
Who should create money?
The Government, representing all of the people.
In our country (the U.S.A.), what governing body should represent all of the people?
The Congress of the United States.
Does the Constitution of the United States provide that Congress should originate our money?
Yes. It is very specific and well defined: “Congress shall have the power to coin money and regulate the value thereof, and of foreign coin”. Article 1, Section 8, Part 5.
Under existing laws, does our National Government originate our money?
No, only to a very limited extent.
Who does originate (create) our money?
Private corporations, commonly called banks, now originate practically all of our money.
Why have private individuals usurped and exercised the sovereign power of issuing our money?
Because when that power is held and exercised by private individuals, they can and do control the entire economic, social and governmental system and derive enormous, illicit, profits therefrom.
Under our present private money-creating system, what do the bankers get for nothing?
They get interest on the money they create and lend, and title to people's properties by confiscation of properties pledged, if the loans are not repaid at a specific time.
Can Congress delegate a power, reserved to it by the Constitution as a public function, to be operated for private profit without specifications?
No, not without violating the Constitution of the United States.
Has Congress delegated for private profit and without specification the power to originate our money?
Yes, by the National Bank Act of 1863, and the Federal Reserve Act of 1913, as well as intermediary and subsequent enactments.
Why does this violation continue?
Because every time a Franklin, a Jefferson, a Jackson, or a Lincoln, or any other honest public servant attempted to arouse the people to the fraud from which they suffer, the private money creators — international bankers — arose in their might and used their controlled press, their bootlick politicians, their office boy bankers, their docile clergymen, and their power over the prosperity of America, to smash the drive for economic freedom. Thus far, they have succeeded.
How can Congress regain its privilege of issuing our money?
There is no need to regain what it has not the right to surrender. It still has that right, and can, and should immediately resume the exercise of this most important constitutional command.
Are the Federal Reserve Banks really Federal?
They are not. The Federal Reserve Banks are private stock corporations owned entirely by other private corporations known as member banks. They are no more Federal than the Federal Bakery or Federal Laundry.
What is a Federal Reserve Bank?
It is a Central Bank, the bankers' bank.
Usury
If banks, then, are debt shops where money is manufactured for the purpose of creating debts, is money issued primarily for usurious purposes?
Yes. Money comes into existence from the banks only as “interest-bearing-loans” which interest must be paid by every person who uses money.
What is usury?
Usury is a breach against the commandment “Thou shalt not steal”, and is related to three specific immoral actions listed under the following: (a) Charging an unreasonable and abnormal rate of interest. (b) Charging interest on any recognized non-productive or destructive loan. (c) Charging interest on a loan of fictitious money which the lender created, thereby demanding from the borrower an unjust return, in the latter case, the lender reaps where he did not sow.
Is usury opposed to morality?
Yes, and it is also opposed to Christian teaching.
Effects of a dishonest money system
What will happen if the present money system is continued and if the present policies endure?
1. Private individuals will coin money for their own personal gain.
2 Corporations organized for production, such as automobiles, steel and textiles, will be under the domination of the private money creators.
3. The government itself will be dominated by the money plutocrats.
4. The press, dependent upon advertising received from banker-dominated corporations and commercial houses, will continue to deceive the people.
5. The educational system will continue to ostracize the truths of economics from our schools.
6. The citizens, weighed down by the unbearable costs of war and depression, will be inclined to blame a democratic form of government and unwittingly relinquish the liberties already won for the bare necessities of life, which the plutocrats will allow them only at the sacrifice of liberty. Dictatorship will necessarily ensue.
Advantages of an honest money system
What will happen after an honest money system is established? An honest money system will help us:
1. To restore sovereignty over money to its rightful possessors, namely, the People, through Congress.
2. To rid Congress of servile politicians.
3. To eliminate from domination over the government the manipulators of money who oftentimes were the cause of war.
4. To insure lasting peace among nations whose governments will be able to legislate laws independent of the international money changers.
5. To make possible the real freedom of the press and the teaching of the truth in all schools, freed once and for all from the domination of money creators.
6. To permit Christian virtue to be practised when want is destroyed in the midst of plenty.
Father Coughlin concludes his book with the following words:
Without economic freedom, both physical and political liberty are meaningless. Their existence depends almost totally upon financial freedom. It is essential that we Americans recapture our sovereign right of coining and regulating our money and of foreign coin. It is essential that we cease paying tribute to the Federal Reserve Banks who create our money out of nothing and lend it into use with an invisible tax appended to it. It is either your money or your life.
You must act like apostles who have learned the truth. You must spread the gospel of financial freedom even at the cost of life itself... Form your battalions, independent of the leadership of the press, the politician and the poltroon! Cast aside your lethargy!
In the name of Christianity, I implore you to participate in duplicating the miracle of the Master Who fed the hungry multitudes. This can be accomplished by insisting, by demanding the institution of an honest money system... The money changers must be driven from the temple of America. If we of this generation, numbed with the opiate of indifference and cowered by the appeals to selfishness, fail to dislodge the radical rule of the money changers, may we go to our graves unwept, unhonored and unsung!
The first issuance of legal tender occurred during 1862 during the civil war, Treasury notes non-interest were issued deemed necessary to float the debt of the United States in short green papers were printed “green backs”
IN 1864 an ACT was provided all private Bank notes could be redeemable one per one the coins.
In 1908 a great deficit t had accumulated discussion began regarding revenue and d accumulated
In 1913 the Federal Reserve was created (The Federal Reserve Act), this did the following floated the banking reserve to 40%, authorized hypothecation of obligations (offered stock and bonds), established branches in different countries. Bills of credit and legal tender were issued based on the full faith and credit of the US.
During the Great Depression by hypothecation and rehypothecation caused an economic collapse, at that time the dollar was still made of gold and silver.
The Bretton Woods agreement in 1960 made however a de facto transition “from gold standard to dollar standards”. This was necessary because redeeming international gold for gold was impossible there was more gold abroad than gold in the USA.
The Bretton Woods agreement did what the Constitution did not authorize but exactly what it forbid; the complete debasement of the Constitutional Coin was effected and accomplished under the International Money Fund.
In 1968 another Act was passed the special drawings ACT. This Act placed under the Secretary of the Treasury a cabinet position that had been abolished by creating and Independent treasury that comingled the people’s money. These actions cannot be reviewed under any officer of the US. the Secretary of the Treasury is a Governor of the IMF.(which is under the UN)
Section 4 of the special Drawings ACT issued an international letter of credit called a Special Drawings Certificate which was deposited in the Federal Reserve Banks which became collateral for security for the Federal Reserve Notes the term dollar was then valued directly to Special Drawings ACT. Not to gold or silver.
Being this as is the international organizations have gained control of the domestic monetary system and can make political decisions for the members.
WILL AFFECT YOU
FEBRUARY 15, 2009
It's the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus -- and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress's own budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. "A failure to act, and act now, will turn crisis into a catastrophe."
"we have chosen hope over fear." Until, that is, you need fear to pass a bill.
Inhofe Statement on Stimulus Compromise
Bill is 93% spending and only 7% stimulation
Depressed? No! We're angry
According to American legend, when the stock market crashed on Oct. 29, 1929, flocks of stockbrokers jumped to their death on Wall Street, in violent parody of down-trending graphs and ticker-tape parades and calendar pages flung from windows on New Year's Eve. It never happened.
The fallacy of American capitalism is the equation of our economic status and our mental well-being. In a country where we routinely define ourselves by our job, an economic downturn must lead to a psychological downturn. Right?
Politicians, Democrats and Republicans alike, have learned in these last weeks that Americans are not a people listless with dejection. Quite the reverse. Americans are angry at corporate incompetence that is rewarded. Americans are angry at having to bail out the institutions that so efficiently foreclosed on their mortgages. Americans are angry that rich people -- rich, smart, educated people who know all there is to know -- seem not to know how to pay their taxes.
In October a Southern Californian murdered his wife, his mother-in-law, and his three sons, before killing himself. The Los Angeles Times diagnosed the killer as "despondent over financial losses."
From Europe have come two recent stories of suicides among the very rich. Adolf Merckle, a German billionaire, threw himself in front a train, after losing a vast portion -- but nowhere near all -- of his wealth in bad investments. In France, Thierry Magon de la Villehuchet, a money manager, committed suicide after learning that his clients' investments -- Bernard Madoff, again -- had disappeared. Both suicides were Japan-esque in their sense of shame, and quite unlike the recent scenarios from Wall Street.
Dick Fuld, who oversaw the collapse of Lehman Brothers, continues to live in his Greenwich, Conn., mansion. (Kudos, Dick!) John Thain, who managed to sell off Merrill Lynch as it was accumulating billions in debt, was recently fired from Bank of America. He promised to repay the million dollars of bank money he used to redecorate his office. But he exited the building with million-dollar bills stuffed in his briefcase. Robert Rubin (once proclaimed "the best secretary of the treasury since Alexander Hamilton" by Bill Clinton) resigned from Citibank after receiving millions of dollars for services that have never been adequately described to shareholders. Rubin plans some sort of return to "public service" in the future.
Vladimir Ilyich Lenin described fascism as "capitalism in decay." Though Lenin died five years before Wall Street crashed, his epithet anticipated the rise of fascism and Nazism across Europe. Anarchists and Marxists and socialists also seized the bullhorn and swayed crowds.
With the 1930s as our guide, we should not be surprised today by the riots and demonstrations in Chinese factory towns and along the boulevards of Paris, and at the Republic Windows and Doors factory in Chicago. Economic depression gives rise to political unrest that makes "depression" a misnomer when applied to human emotion or behavior.
In Miami more than a thousand people showed up for 35 fire department openings. The crowd formed before dawn. Everyone in line looked solemn. Not expectant. But resolute.
Taxes:
The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the ones they own more energy efficient.
Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year.
The $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded Earned Income Tax Credit.
Middle-income and wealthy taxpayers will be spared from paying the Alternative Minimum Tax, which was designed 40 years ago to make sure wealthy taxpayers pay at least some tax, but was never indexed for inflation. Congress fixes it each year, usually in the fall.
First-time homebuyers who purchase their homes before Dec. 1 would be eligible for an $8,000 tax credit, and people who buy new cars before the end of the year can write off the sales taxes.
Homeowners who add energy-efficient windows, furnaces and air conditioners can get a tax credit to cover 30 percent of the costs, up to a total of $1,500.
A 50 B clean energy future will include benefits for those who weatherize( a way to create jobs) their homes and buy hybrid cars,it 11
B to upgrade the the nationwide transmission grid to get renewable energy from rural areas to cities(most surely not enough the actual cost is 100 B.
College students — or their parents — are eligible for tax credits of up to $2,500 to help pay tuition and related expenses in 2009 and 2010.
Those receiving unemployment benefits this year wouldn't pay any federal income taxes on the first $2,400 they receive.
Health insurance:
Many workers who lose their health insurance when they lose their jobs will find it cheaper to keep that coverage while they look for work.
Right now, most people working for medium and large employers can continue their coverage for 18 months under the COBRA program when they lose their job. It's expensive, often over $1,000 a month, because they pay the share of premiums once covered by their employer as well as their own share from the old group plan.
Under the stimulus package, the government will pick up 65 percent of the total cost of that premium for the first nine months.
Lawmakers initially proposed to help workers from small companies, too, who don't generally qualify for COBRA coverage. But that fell through. The idea was to have Washington pay to extend Medicaid to them.
COBRA applies to group plans at companies employing at least 20 people. The subsidies will be offered to those who lost their jobs from Sept. 1 to the end of this year.
Those who were put out of work after September but didn't elect to have
COBRA coverage at the time will have 60 days to sign up.
The plan offers $87 billion to help states administer Medicaid. That could slow or reverse some of the steps states have taken to cut the program.
19 Billion to modernize health information technology(Electronic medical records)
These provisions reflect the handiwork of Tom Daschle, until recently the nominee to head the Health and Human Services Department.
Senators should read these provisions and vote against them because they are dangerous to your health. (Page numbers refer to H.R. 1 EH, pdf version).
The bill’s health rules will affect “every individual in the United States” (445, 454, 479). Your medical treatments will be tracked electronically by a federal system. Having electronic medical records at your fingertips, easily transferred to a hospital, is beneficial. It will help avoid duplicate tests and errors.
But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”
Keeping doctors informed of the newest medical findings is important, but enforcing uniformity goes too far.
Elderly Hardest Hit
The Federal Council is modeled after a U.K. board discussed in Daschle’s book. This board approves or rejects treatments using a formula that divides the cost of the treatment by the number of years the patient is likely to benefit. Treatments for younger patients are more often approved than treatments for diseases that affect the elderly, such as osteoporosis.
In 2006, a U.K. health board decreed that elderly patients with macular degeneration had to wait until they went blind in one eye before they could get a costly new drug to save the other eye. It took almost three years of public protests before the board reversed its decision. What about other systems in other countries? A report from the CATO institute tells us “the grass is not always greener.” Unified health systems of 12 developed countries were studied concluding that 1. They are all different 2. Not that universal and 3. Not that wonderful.
For example, Canada, the system that is most often touted by planners, has a health plan that has faded precipitously in the last decade. Tests such as PSA (a blood test to determine prostate cancer) are done half as often as in the USA. The same for PAP smears (cytology of female genitalia) and mammograms are done 1/3 as often as in the USA. Not surprisingly, deaths from prostate CA are 18% and breast CA 25% higher than in the USA. The average time to see an orthopedic surgeon and get on the operating schedule is around 40 weeks. People with angina are only 1/3 likely to get angioplasty, catheterized or bypassed. Canadian health costs will consume ½ of the gross domestic product by 2050.
The UK: If you need a hernia operation, you will join the 1 million Britons out of the 60 million in the population waiting for a hospital bed. 1/3 of them wait over 30 weeks. Once you get to be 64 years of age and over, you become a victim of HISM –the national health service has decried that no preventive screening tests for cancer should be done over 65 despite the fact that this when cancers become more frequent. Death rates from pneumonia in that age group a triple compared to the USA.
France: You pay 18.8% from your payroll taxes in addition to alcohol and tobacco taxes. It is interesting to know that 92% of the citizens pay for private insurance in addition to 30% co-pays. In Paris, 80% of the doctors bill additionally. In there you pay up front and later collect from the government or the insurance company.
Even though in the USA Medicaid patients receive terribly fragmented care and the Medicare patients, as well as the doctors, are bound by very elaborate rules that make it very difficult to practice medicine, we continue to say the free enterprise has not worked and thus we have to go to a single payer system. The reality is that patients assigned benefits to the insurance company or Medicare and the insurers pays the provider whether it is doctor or hospital, prices are now being set by the insurance company and government. We have accidentally done a controlled experiment in which ½ of our healthcare is government sponsored and in the private sector 2/3 of the people are covered by a third party i.e. insurance company. Therefore in reality we have never tested the free enterprise system.
Hidden Provisions
The stimulus bill will affect every part of health care, from medical and nursing education, to how patients are treated and how much hospitals get paid. The bill allocates more funding for this bureaucracy than for the Army, Navy, Marines, and Air Force combined (90-92, 174-177, 181).
The health-care industry is the largest employer in the U.S. It produces almost 17 percent of the nation’s gross domestic product. Yet the bill treats health care the way European governments do: as a cost problem instead of a growth industry. Imagine limiting growth and innovation in the electronics or auto industry during this downturn. This stimulus is dangerous to your health and the economy.
Tom Daschle, had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.
The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn't what's illegal, but what's legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.
He'd been getting $1 million per year from a law firm. But he's not a lawyer, nor a registered lobbyist. You don't get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.
Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal's private equity firm, represented everything Obama said he'd come to Washington to upend.
budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.
After Obama's miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell -- and that this president told better than anyone.
I thought the awakening would take six months. It took two and a half weeks.
Now that the game plan of the once invisible hand (corporate) has hit the wall and there was no way to further conceal their grand objective ... total control ... the money brigade ... trillions ... is being produced to cover up the predatory practices of those that created our disaster.
The panic talk about creating new jobs is in fact pure mumbo jumbo ... trash talk. The nonstop shipment of manufacturing, service, and technical jobs to other countries has denuded this country of its base and the base of the middle class.
Even as the printing presses continue to bundle trillions more to prop up the corrupt financial institutions, hardly anything is being proposed that might get Americans back to work. A buy American program, stopping the flow of illegal competition, and the e-zine successful program are under attack.
The purpose of the last stimulus package that gave money to all levels of society was that it would be spent on goods and that would keep companies that provided them ... solvent. Sounds like that thinking was on the right track, but now that has changed and so has the rhetoric.
Knowing there is no way under our present situation to get that premise going the new premise is that the American workers are no longer the engine of success ... finance is.
This begs the question, is capitalism dead and needs to be replaced, maybe socialism, or an exotic new invention?
Bush said under the circumstances he has to stray from the free market practice. Obama has indicated government growth will create most of his imagined jobs. Are they both not signaling a New World Order?
There are many diverse differences of opinion our society is engaged in: gay marriage, pro life, gun control, energy, on and on, but these must be put aside for the moment.
Unless we save our republic there will be no platform left for us to democratically argue for causes. Our voices will be muffled
Florida's average monthly eligibles is currently approximately 2.3 million Medicaid recipients
INFRASTRUCTURE
Highways repaved for the first time in decades. Century-old waterlines dug up and replaced with new pipes. Aging bridges, stressed under the weight of today's SUVs, reinforced with fresh steel and concrete.
But the $90 billion is a mere down payment on what's needed to repair and improve the country's physical backbone. And not all economists agree it's an effective way to add jobs in the long term, or stimulate the economy.
1.3 B for the AMTRAK
4.6 B for the ARMY CORPS OF ENGINEERS
4 B for housing improvements
6.4 B for for clean drinking water
7 B to bring broadband to to underserved areas treated under BUSH as a luxury OBAMA feels it is an essential service as our highways.(FUNDS AND GRANTS TO COMPANIES WILLING TOTO DEPLOY BROADBAND WIRED OR WIRELESS)
What does open access and underserved communities mean need to be DEFINED.Satellite based INTERNET SERVICES are already available in the rural markets.
The main problem is the cost of Satellite based Broadband that costs $ 90 a month.
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ENERGY
Homeowners looking to save energy, makers of solar panels and wind turbines and companies hoping to bring the electric grid into the computer age all stand to reap major benefits.
The package contains more than $42 billion in energy-related investments from tax credits to homeowners to loan guarantees for renewable energy projects and direct government grants for makers of wind turbines and next-generation batteries.
There's a 30 percent tax credit of up to $1,500 for the purchase of a highly efficient residential air conditioners, heat pumps or furnaces. The credit also can be used by homeowners to replace leaky windows or put more insulation into the attic. About $300 million would go for rebates to get people to buy efficient appliances.
The package includes $20 billion aimed at "green" jobs to make wind turbines, solar panels and improve energy efficiency in schools and federal buildings. It includes $6 billion in loan guarantees for renewable energy projects as well as tax breaks or direct grants covering 30 percent of wind and solar energy investments. Another $5 billion is marked to help low-income homeowners make energy improvements.
About $11 billion goes to modernize and expand the nation's electric power grid and $2 billion to spur research into batteries for future electric cars.
SCHOOLS
A main goal of education spending in the stimulus bill is to help keep teachers on the job.
Nearly 600,000 jobs in elementary and secondary schools could be eliminated by state budget cuts over the next three years, according to a study released this past week by the University of Washington. Fewer teachers means higher class sizes, something that districts are scrambling to prevent.
The stimulus sets up a $54 billion fund to help prevent or restore state budget cuts, of which $39 billion must go toward kindergarten through 12th grade and higher education. In addition, about $8 billion of the fund could be used for other priorities, including modernization and renovation of schools and colleges, though how much is unclear, because Congress decided not to specify a dollar figure.
The Education Department will distribute the money as quickly as it can over the next couple of years.
And it adds $25 billion extra to No Child Left Behind and special education programs, which help pay teacher salaries, among other things.
This money may go out much more slowly; states have five years to spend the dollars, and they have a history of spending them slowly. In fact, states don't spend all the money; they return nearly $100 million to the federal treasury every year.
The stimulus bill also includes more than $4 billion for the Head Start and Early Head Start early education programs and for child care programs.
13 B of expanded credit for college tuition($2500) and related expenses.Phased out for couples earning more than $160,000 yearly.
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NATIONAL DEBT
One thing about the president's $790 billion stimulus package is certain: It will jack up the federal debt.
Whether or not it succeeds in producing jobs and taming the recession, tomorrow's taxpayers will end up footing the bill.
Forecasters expect the 2009 deficit — for the budget year that began last Oct 1 — to hit $1.6 trillion including new stimulus and bank-bailout spending. That's about three times last year's shortfall.
The torrents of red ink are being fed by rising federal spending and falling tax revenues from hard-hit businesses and individuals.
The national debt — the sum of all annual budget deficits — stands at $10.7 trillion. Or about $36,000 for every man, woman and child in the U.S.
Interest payments alone on the national debt will near $500 billion this year. It's already the fourth-largest federal expenditure, after Medicare-Medicaid, Social Security and defense.
This will affect us all directly for years, as well as our children and possibly grandchildren, in higher taxes and probably reduced government services. It will also force continued government borrowing, increasingly from China, Japan, Britain, Saudi Arabia and other foreign creditors.
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ENVIROMENT
The package includes $9.2 billion for environmental projects at the Interior Department and the Environmental Protection Agency. The money would be used to shutter abandoned mines on public lands, to help local governments protect drinking water supplies, and to erect energy-efficient visitor centers at wildlife refuges and national parks.
The Interior Department estimates that its portion of the work would generate about 100,000 jobs over the next two years.
Yet the plan will only make a dent in the backlog of cleanups facing the EPA and the long list of chores at the country's national parks, refuges and other public lands. It would be more like a down payment.
When it comes to national parks, the plan sets aside $735 million for road repairs and maintenance. But that's a fraction of the $9 billion worth of work waiting for funding.
At EPA, the payout is $7.2 billion. The bulk of the money will help local communities and states repair and improve drinking water systems and fund projects that protect bays, rivers and other waterways used as sources of drinking water.
The rest of EPA's cut — $800 million — will be used to clean up leaky gasoline storage tanks and the nation's hazardous waste sites.
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POLICE
The stimulus bill includes plenty of green for those wearing blue.
The compromise bill doles out more than $3.7 billion for police programs, much of which is set aside for hiring new officers.
The law allocates $2 billion for the Byrne Justice Assistance Grant, a program that has funded drug task forces and things such as prisoner rehabilitation and after-school programs.
An additional $1 billion is set aside to hire local police under the Community Oriented Policing Services program. The program, known as COPS grants, paid the salaries of many local police officers and was a "modest contributor" to the decline in crime in the 1990s, according to a 2005 government oversight report.
Both programs had all been eliminated during the Bush administration.
The bill also includes $225 million for general criminal justice grants for things such as youth mentoring programs, $225 million for Indian tribe law enforcement, $125 million for police in rural areas, $100 million for victims of crimes, $50 million to fight Internet crimes against children and $40 million in grants for law enforcement along the Mexican border.
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HIGHER EDUCATION
The maximum Pell Grant, which helps the lowest-income students attend college, would increase from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. That would cover three-quarters of the average cost of a four-year college. An extra 800,000 students, or about 7 million, would now get Pell funding.
The stimulus also increases the tuition tax credit to $2,500 and makes it 40 percent refundable, so families who don't earn enough to pay income tax could still get up to $1,000 in extra tuition help.
Computer expenses will now be an allowable expense for 529 college savings plans.
The final package cut $6 billion the House wanted to spend to kick-start building projects on college campuses. But parts of the $54 billion state stabilization fund — with $39 billion set aside for education — can be used for modernizing facilities.
There's also an estimated $15 billion for scientific research, much of which will go to universities. Funding for the National Institutes of Health includes $1.5 billion set aside for university research facilities.
Altogether, the package spends an estimated $32 billion on higher education.
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THE POOR
More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package. Millions more could be kept from slipping into poverty by the economic lifeline.
People who get food stamps — 30 million and growing — will get more. People drawing unemployment checks — nearly 5 million and growing — would get an extra $25, and keep those checks coming longer. People who get Supplemental Security Income — 7 million poor Americans who are elderly, blind or disabled — would get one-time extra payments of $250.
Many low-income Americans also are likely to benefit from a trifecta of tax credits: expansions to the existing Child Tax Credit and Earned Income Tax Credit, and a new refundable tax credit for workers. Taken together, the three credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
The package also includes a $3 billion emergency fund to provide temporary assistance to needy families. In addition, cash-strapped states will get an infusion of $87 billion for Medicaid, the government health program for poor people, and that should help them avoid cutting off benefits to the needy.
HOMELAND SECURITY
2.8 B for homeland security ,1B for airport security.
HOME BUYER CREDIT
3.7 billion to that would include first home buyers an $ 8K that does not need to be payed back(This will cover only a small part of the downpayment),from Jan 1st to AUGUST unless the home is sold in 3 years.
HOWEVER
Home buyers now facing add-on fees
It's not what home buyers, sellers and refinancers want to hear, but they need to know: Both Fannie Mae and Freddie Mac are ratcheting up their mandatory fees and toughening credit score and down-payment rules as of April 1.
Most major lenders already are pricing in the higher fees, effectively raising costs to consumers immediately and reducing the impact of housing stimulus efforts from Congress and the Obama administration.
Under Fannie's and Freddie's new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come up with down payments of 30 percent or higher. For example, a buyer with a 699 FICO score who can bring a sizable down payment of about 25 percent to the table will now get hit with a 1.5 percent ''delivery'' fee at closing under the new guidelines.
A buyer with a FICO score between 700 and 720 will pay an extra three-quarters of a point. Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.
Applicants who seek to buy a condominium and cannot come up with a 25 percent down payment will be hit with a three-quarter point add-on penalty, no matter how high their credit score -- simply because they are not purchasing a traditional detached, stand-alone home.
Buyers of duplexes, where one unit is owner-occupied and the other is rented, will be charged a flat 1 percent add-on from Fannie, even if they've got FICOs above 800 and make 50 percent down payments. Refinancers who take cash out at settlement also will be forced to pay extra -- as much as three points if they've got low credit scores and modest equity stakes.
HIGHER RISKS
Both Fannie Mae and Freddie Mac say they are tacking on these extra fees to counter higher risks and losses associated with certain loan products, buyer equity stakes and credit scores. Declining home values in many parts of the country are intensifying losses for both companies when loans go to foreclosure.
Though quasi-private enterprises until last September, Fannie and Freddie now are operating under the control of federal regulators and are bleeding billions of dollars of red ink. Freddie spokesman Brad German said that some of the loan categories and credit risk combinations targeted in the latest round of fees ''default at four to eight times'' the rate of other mortgages in the company's portfolio. ''We have to manage these risks appropriately,'' he added, and that means pricing them based on the probability of higher losses.
However, realty agents, mortgage bankers and brokers are incensed at the new round of fee increases, calling them counterproductive in an environment where housing needs help, not new impediments. They have begun lobbying Congress and the two companies' federal overseers to scrap the latest add-ons.
Charles McMillan, president of the National Association of Realtors, complained in a letter to the Federal Housing Finance Agency, the regulator of Fannie and Freddie, that not only were individual fee increases unjustified, but that in combination they could seriously deter home purchases. McMillan said ''a borrower with a credit score of 670 making a 20 percent down payment for a condominium would have the fee raised from 150 basis points (1.5 percent) to 350 basis points (3.5 percent) -- more than double'' under Fannie Mae's new schedule.
''They're shooting themselves in the foot,'' said Steve Stamets, a mortgage loan officer in Rockville, Md. With substantial down payments of 20 percent and more, said Stamets, ''they don't need to be that tough'' on applicants even if home prices decline slightly more before the cycle ends.
''When consumers with 720 credit scores are being adjusted, there is something seriously wrong with the system,'' said Harry H. Dinham, a Dallas mortgage company owner and former president of the National Association of Mortgage Brokers.
As recently as two years ago, FICO scores in the upper 600s were enough to qualify any applicant for prime financing. Now scores of 720 to 740 are the bare minimum if you're going to escape add-on fees -- and still not good enough if you choose to buy a condo or a duplex.
HERE TO STAY
Where's all this headed? Absent congressional intervention or new marching orders from the companies' regulator, the add-on fees are here to stay. But there's an alternative readily available for just about anyone who wants to avoid the fees: FHA mortgages, where down payments go as low as 3.5 percent and credit scores are not an issue for most applicants.
FORECLOSURE PLAN
That plan is expected to use at least $50 billion in Wall Street rescue money authorized last year to provide subsidies when banks reduce interest rates for troubled homeowners to lower the monthly payments many Americans are now struggling to pay.
Treasury Secretary Timothy Geithner mentioned the housing program last week as he rolled out a wide-ranging financial-sector rescue plan that could send $2 trillion coursing through the financial system. Obama is expected to detail how the administration plans to prod the mortgage industry to do more in modifying the terms of home loans so borrowers have lower monthly payments.
More than 2.3 million homeowners coast-to-coast faced foreclosure proceedings last year, an 81 percent increase from 2007. Analysts say that number could soar as high as 10 million in the coming years, depending on the severity of the recession.
Several national banks have already said that foreclosures would be halted temporarily. In Florida, also hard hit by foreclosures, two South Florida banks -- BankUnited of Coral Gables and BankAtlantic of Fort Lauderdale -- said late last week they would also temporarily halt foreclosures in anticipation of Obama's announcement.
Banks may soon have to choose between the lesser of two evils. They could either modify loans -- with a subsidy -- to provide lower lending rates, and lose what they might've made from the higher lending rate over the life of the loan. Or they can do nothing and run the risk that a homeowner could file for bankruptcy and then have a judge order new loan terms that allow the borrower to stay in the home -- and pay the lender less money.
''Ten thousand people face foreclosure every day in this country. And it's a problem that not only affects the individual homeowner and their family, but oftentimes has a direct impact to home values in the neighborhood that that house or homes are on,'' White House spokesman Robert Gibbs told said on Tuesday. ``This is a tremendously important part of what the president believes has to be done next in order to move our economy forward.''
In Denver, Obama said the stimulus package had received broad support in Washington and elsewhere, though Democrats pushed it to passage with only three Republican votes in the Senate and none in the House.
Bailout Likely to Focus on Most Afflicted Homeowners
The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households — and rising — fall into this category. Without help, they will lose their homes.
The second group is far larger. It is made up of the more than 10 million households that can afford their monthly payments but whose houses are worth less than what is owed on their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continue to make payments on an investment that may never pay off.
Scratch beneath the details of any housing bailout proposal, and the fundamental issue is whether it tries to help the second group or just the first.
Mr. Obama has evidently decided to focus on the first group, based on the previews of his speech that aides have offered. In coming weeks, his administration will begin spending $50 billion to entice banks to reduce the monthly payments of people who otherwise couldn’t afford to stay in their houses. In effect, the government will split the losses on these mortgages with banks.
The $50 billion will come from the money Congress has already allocated for the bailout of the financial system. It is likely to be aimed at people who need a significant, but not an enormous, amount of help to meet their mortgage payments.
There are some big advantages to this approach. Bailing out all underwater homeowners would be tremendously expensive. All told, about $500 billion in mortgage debt is already underwater, and it’s impossible to know in advance who is likely to walk away. So the government would have to spend hundreds of billions of dollars to help millions of people who don’t need help staying in their homes.
But the Obama approach also brings risks. The administration is betting that few of those 10 million underwater homeowners will walk away. (A year from now, the number will about 15 million, Moody’s Economy.com projects.) If they begin to abandon their homes in large numbers, however, they will aggravate the housing bust and the financial crisis — and probably force the administration to come up with a new, much larger housing bailout down the road.
Underwater homeowners clearly face a difficult choice. By walking away from a house and then renting a similar one in the same town, many could save themselves a lot of money. And those who need to move — to take a new job, for example, or to marry — may have little choice but to default. They may not get enough from a sale to pay off the mortgage.
On the other hand, defaulting will wreck a homeowner’s credit rating. For families that don’t need to move, doing so will also bring other headaches and costs. They will be leaving behind their homes. Many other people may continue to make their payments simply because they think it’s the right thing to do.
The current housing bust doesn’t have a good recent historical analogy. It’s too big. But there have been some serious regional housing slumps that may offer a window into how underwater homeowners will behave this time.
If the economists from the Boston Fed are right — or even close to right — then the aggressive approach may cost something like $500 billion to prevent 500,000 foreclosures. That’s $1 million per prevented foreclosure. Is that really worth it? Or could the money be better spent in other ways? (There is also the small matter of whether Congress would be willing to spend another $500 billion anytime soon.)
Housing plan aimed at keeping people in homes
Washington insiders expect the plan to focus on lowering monthly payments for some borrowers through a combination of lower interest rates, extended terms and even principal write-downs.
The foreclosure crisis has bedeviled policymakers for nearly two years, and several programs launched with great fanfare have had little success.
Obama has pledged to spend $50 billion to $100 billion of the remaining financial bailout funds approved by Congress last fall to help worthy but struggling homeowners stay in their homes.
Economists and policymakers agree that the rising tide of foreclosures is causing collateral damage to neighborhoods and communities as they lose residents, properties fall into neglect and the tax base erodes.
But previous efforts to reduce foreclosures have been thwarted by a central problem: How should the losses be shared among borrowers, lenders and the government?
The prevalence of bubble markets in areas including California, Florida and Nevada has raised other equity issues: Is it fair to use funds from taxpayers elsewhere in the country to help borrowers in those markets? And is it fair to use taxes collected from renters or those who made sensible financial decisions to bail out borrowers who were greedy or careless?
So far, lenders have been unwilling to write down the principal on troubled mortgages, in part because most had been bundled into complicated securities and it has been legally uncertain whether servicers had the right to alter the terms.
Congress tackled that problem last summer by passing a law known as Hope for Homeowners. Under that plan, the government would guarantee new mortgages for worthy borrowers if lenders would agree to write down the principal. But the program has had few takers so far.
One way of forcing lenders to reduce principal is by changing bankruptcy law. Currently, bankruptcy law permits judges to lower the principal for any consumer loan except a mortgage.
Obama has expressed support for the idea, which would require Congress to pass new legislation to amend the bankruptcy code.
AUTO
2.5 B to make sales tax paid on new car purchases deducting it from the sales tax income.
But automakers will not have plug in hybrids and battery power electric batteries are on the make probably not for at least one available.
This is a misleading stateemnet.
TAXES
115 B $ 400 perworkert,$800 per couple credits on 2009 and 201o it phases out fro AGI 80 t0 90 K single and $160,000 per couple.
Crist readies four tax ideas
The Republican governor's goals for the spring lawmaking session include four separate tax proposals that would go before voters on the 2010 ballot, when Crist himself would be seeking voters' favor as a candidate for re-election as governor or election to the U.S. Senate.
The total taxpayer savings — or cost to all local governments and schools statewide — could weigh in at roughly $600 million, according to preliminary staff estimates and prior analyses of similar proposals to help homeowners and cap and limit local-government taxation.
• Cap government spending by limiting cities' and counties' tax collections. Any taxes collected above the rate of inflation and population growth would be kept in a "stabilization fund" in case of emergencies. Legislative Republicans want the cap to apply to the state government as well.
• Limit growth in the assessed value of businesses, vacation homes and other nonhomesteaded properties to 5 percent annually. Those assessment increases are now capped at 10 percent a year due to the passage of Amendment 1 in Jan. 2008.
• Aid first-time home buyers by increasing the homestead exemption to 50 percent of the market value of the home. The exemption's value would decrease back to zero over five years. Maximum exemption: $500,000.
• Prohibit tax-assessment increases on homesteaded properties whose market values decline — a quirk in the current Save Our Homes system known as "the recapture rule."
That proposal is the only tax plan that requires a straight up-or-down vote.
The constitutional amendments will need to pass by a three-fifths vote in each house: 24 in the Senate and 72 in the House. In each chamber, the proposals can pass without any Democratic votes.
Voters must approve the final amendments with a 60 percent vote.
Sen. Dan Gelber, D-Miami Beach, who has not been briefed on the proposals, voiced skepticism, saying Crist's plans might perpetuate the imbalance in Florida's property tax system in which longtime property owners receive greater benefits than newcomers.
For example, he said, a 5 percent tax cap for businesses would result in two gas stations on the same intersection paying wildly different tax bills over time, with the older gas outlet enjoying a locked-in benefit, and the newer station paying much higher taxes.
"While he's to be applauded for using the word 'revenue,' he should be talking about how to increase it … not decrease it at a time when schools are suffering like never before."
Meyer said the union might also oppose another Crist priority that would require up to 70 percent of school money to be spent "in the classroom" because it's unclear how "classroom" is defined.
"People are hurting, and it's just unfair to increase their property taxes when their property values fall
CAN YOU BELIEVE THIS?
Click on your state to see some of the projects included in this bill.I found it to be very interesting and informative. Also you can see that a lot of city's & towns are not listed.I wonder if the leaders of the missing city's and towns are just "not on the ball" so to speak and did not submit a wish list?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Find projects by state or territory
Alaska (46 projects)
Alabama (318 projects)
Arkansas (199 projects)
Arizona (743 projects)
California (1971 projects)
Colorado (201 projects)
Connecticut (449 projects)
Washington, D.C. (8 projects)
Delaware (7 projects)
Florida (1752 projects)
Georgia (266 projects)
Hawaii (316 projects)
Iowa (51 projects)
Idaho (348 projects)
Illinois (1031 projects)
Indiana (713 projects)
Kansas (139 projects)
Kentucky (524 projects)
Louisiana (433 projects)
Massachusetts (266 projects)
Maryland (54 projects)
Maine (72 projects)
Michigan (782 projects)
Minnesota (335 projects)
Missouri (403 projects)
Mississippi (552 projects)
Montana (57 projects)
North Carolina (319 projects)
North Dakota (61 projects)
Nebraska (154 projects)
New Jersey (261 projects)
New Mexico (215 projects)
Nevada (163 projects)
New York (289 projects)
Ohio (847 projects)
Oklahoma (223 projects)
Oregon (159 projects)
Pennsylvania (352 projects)
Puerto Rico (340 projects)
Rhode Island (116 projects)
South Carolina (271 projects)
South Dakota (30 projects)
Tennessee (103 projects)
Texas (1240 projects)
Utah (298 projects)
Virginia (400 projects)
Vermont (61 projects)
Washington (368 projects)
Wisconsin (358 projects)
West Virginia (1 projects)
Wyoming (85 projects)
http://www.stimuluswatch.org/project/by_state
The total of cost of all the projects submitted by Florida is $15,644,718,723
The Financial Crisis, The Bailout & Some of the Players
Tuesday March 31, 2009
A slowly progressive takeover of the government was done by a small class of insiders, using money to control elections(VOTESCAM), buying influence and weakening established financial regulations.
The crisis was the coup de grâce: They have been given virtually free rein over the economy, these are the same insiders first wrecked the financial world, and subsequently granted themselves unlimited emergency powers to clean and hide their own mess.
Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. (AIG assets 1 trillion dollars
Cassano ran his scam out in the open thanks to Washington's deregulation of the Wall Street casino.
Cassano created a new type of financial instrument called a collateralized-debt- obligation (CDO).
A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs.
Thanks to a financial seal of approval, banks had a way to turn their shittiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible.
Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.
Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending.
Banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets ,but they some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell.
Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending. As banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets — some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell.
In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the borrower can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the borrowers mortgage if he defaults. In theory, Bank A is covered if the borrower loses his job.
Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A it turns around and sells protection to Bank C for the very same mortgage.
Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry
Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, prevented banks of any kind from getting into the insurance business.
In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup.
The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. This legislation contained a provision lobbied by and for Enron a major contributor to Gramm—that exempted energy trading from regulatory oversight. Gramm’s wife Wendy had been part of the Enron Board her salary and stock brought in between $1 million and $1.8 million to the Gramm family.
Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields
When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."
The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures.
Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans.
The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company.
1. Alan Greenspan. Chairman of the Federal Reserve 1987-2006, called CDOs extraordinary useful and regulating them would be a mistake
2. Sandy Weill CEO of Citygroup 1998-2003 celebrated 45 billion taxpayer bailout by taking a Mexican vacation in a Citytroup jet with $13,000 carpets,Hermes scarves and Baccarat crystal
3. Phil Gramm Senate Banking Committee 1995-2000 pushed to Repeal the Glass-Steagall act exempted CDOs deals from regulation.
4. Joe Cassano Chief of AIG 2001-2008 blew $500 billion in the economy is enjoying $280 million in deals.
5. Robert Rubin, fought to overturn the Glass-Steagal act. opposed regulation of credit swaps helped create Citygroup out of which he made $115 million still on City group mentor of Timothy Geithner.
6.Jimmy Caine CEO of Bear Sterns cashed out 51 million before resigning before the sale to JP Morgans.Alledgedly smoke weed while Bear Sterns went Bankrrupt.
7. Christopher Cox chairman of the SEC 2005-2009 Gave the market a free ride waiting until too late to reverse the voluntary regulation program of 2004
8. Angelo Mozillo Head of Countrywide Finance 1969-2008 biggest provider of subprime loans specialized in predatory loans that broke people in Mansions, gave favorable mortgage to Sen. Chris Dodd
9. John Thain, Merryl Lynch chief 2007-2009, proposed himself a 10 million bonus as the company imploded. Office refurbishing of 1.2 million dollars in the crisis.
10. Henry Paulson CEO of Goldman 1999-2006, Treasury secretary 2007. Arranged bailout for Goldman made his decisions non-reviewable.
11. Dick Fuld CEO of Lehman Bros 1993-2008,largest bankruptcy in US history earned 22 million the year Lehman went bust. Attempted to sell his 13 million home to his wife.
12. Ken Lewis CEO Bank of America 2001 through present, too big to fall company, buying MBNA, Countrywide and Merryl Lynch. Failed to catch a 11 billion loss prior to purchase at Merryl Lynch.
13. Barney Frank, Representative; his homosexual lover, Herb Moses, was a senior executive at Fannie Mae; Frank’s efforts helped to deregulate Fannie Mae in the 1990s. Fannie Mae and Freddy Mac combined assets are over 5 trillion dollars
14. Christopher Dodd. Chairman of the Banking committee. States that he did not see the160 million bonus approval, but signed it anyway.
Analysis of a Financial Coup a la Americaine and possible solutions
April 7, 2009
Bottom of Form
The finance industry has effectively captured our government as a silently disguised financial Coup D’etat a la Americaine
This is image that comes to mind when we think about a “coup de’etat.” It is NOT like this anymore.
Recovery will fail unless we break the financial oligarchy that is blocking essential reform; we’re running out of time.
The story is not new but it has never been as humongous as it is now.
In the recent summit a new definition of “global” control was presented as global regulated net.
1. Governments in Eastern Europe struggled after 1989, as did the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s.
Eastern Europe
2. Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
Asia
South Korea
Latin America
3. All of these crises looked depressingly similar. All countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders.
As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
Over borrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.
The downward spiral that follows is remarkably steep. With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out.
Oligarchs
The government will typically need to wipe out some of the national champions. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments
At the outset of the crisis, the oligarchs are usually among the first to get extra help from the government. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.
Eventually, as the oligarchs realize, some within the elite have to lose out before recovery can begin. It’s a game of musical chairs: there just aren’t enough currency reserves to take care of everyone, and the government cannot afford to take over private-sector debt completely.
The government has to be ready, willing, and able to be tough on some of his friends -particularly with regard to wresting control of the banking system from the hands of the most incompetent and avaricious “entrepreneurs.”
If the government can’t stay tough the consequences are massive inflation or other disasters
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending.
The elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed and fast, to pull the economy out of its nosedive.
The government seems helpless, or unwilling, to act against them.
Congress ends up taking more money out of taxpayer pockets
Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent.
Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative.
Greedy bankers dream
The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.
The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of JP Morgan (the man).
JP Morgan: concerned, upset or ruthless?
In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.
We have the world’s most advanced economy, military, and technology; we also have its most advanced oligarchy.
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts.
The American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Also what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.
The channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W. Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives.
Dan Quayle
Corzine and Clinton
Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman as an institution that was itself almost a form of public service.
Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone.
Ben Bernanke: The man
This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”
As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.
The Great Depression: men in line waiting for hand outs
From the confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:
· Insistence on free movement of capital across borders;
· The repeal of Depression-era regulations separating commercial and investment banking;
· A congressional ban on the regulation of credit-default swaps;
· Major increases in the amount of leverage allowed to investment banks;
· A light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
· An international agreement to allow banks to measure their own riskiness; and
· An intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.
Greed: A disease affecting oligarchs through the USA
the Oligarchs in america
The oligarchy and the government policies that aided it did not alone cause the financial crisis that exploded last year. But each time a loan was sold, packaged, securitized, and resold, banks took their transaction fees, and the hedge funds buying those securities reaped ever-larger fees as their holdings grew.
Because everyone was getting richer, and the health of the national economy depended so heavily on growth in real estate and finance, no one in Washington had any incentive to question what was going on. Instead, Fed Chairman Greenspan and President Bush insisted metronomically that the economy was fundamentally sound and that the tremendous growth in complex securities and credit-default swaps was evidence of a healthy economy where risk was distributed safely.
In the summer of 2007, signs of strain started appearing. The boom had produced so much debt that even a small economic stumble could cause major problems, and rising delinquencies in subprime mortgages proved the stumbling block.
In October 2007, John Thain, Merrill Lynch’s final CEO, reportedly lobbied his board of directors for a bonus of $30 million or more, eventually reducing his demand to $10million in December; he withdrew the request, under a firestorm of protest, only after it was leaked to The Wall Street Journal.
In a financial panic, the government must respond with both speed and overwhelming force. The root problem is uncertainty—in our case, uncertainty about whether the major banks have sufficient assets to cover their liabilities. Half measures combined with wishful thinking and a wait-and-see attitude cannot overcome this uncertainty. And the longer the response takes, the longer the uncertainty will stymie the flow of credit, sap consumer confidence, and cripple the economy—ultimately making the problem much harder to when a major financial institutions gets into trouble, the Treasury Department and the
Federal Reserve Bank
Federal Reserve Bank Run Amuck
Federal Reserve engineer a bailout over the weekend and announce that everything was fine.
In March 2008, Bear Stearns was sold to JP Morgan Chase in what looked to many like a gift to JP Morgan (Jamie Dimon, JP Morgan’s CEO, sits on the board of directors of the Federal Reserve Bank of New York, which, along with the Treasury Department, brokered the deal).
In September 2008, we saw the sale of Merrill Lynch to Bank of America, the first bailout of AIG, and the takeover and immediate sale of Washington Mutual to JP Morgan—all of which were brokered by the government. In October, nine large banks were recapitalized on the same day behind closed doors in Washington. This, in turn, was followed by additional bailouts for Citigroup, AIG, Bank of America, Citigroup (again), and AIG (again).
In September 2008, Henry Paulson asked Congress for $700 billion to buy toxic assets from banks, with no strings attached and no judicial review of his purchase decisions. Many observers suspected that the purpose was to overpay for those assets and thereby take the problem off the banks’ hands—indeed, that is the only way that buying toxic assets would have helped anything. Perhaps because there was no way to make such a blatant subsidy politically acceptable, that plan was shelved.
Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves. As the crisis has deepened and financial institutions have needed more help, the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand. This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that.
“By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” No mention was done about what makes sense for the third group involved: the taxpayers.
What are the solutions?
We face at least two major, interrelated problems. The first is a desperately ill banking sector that threatens to choke off any incipient recovery that the fiscal stimulus might generate.
The second is a political balance of power that gives the financial sector a veto over public policy, even as that sector loses popular support.
Bank of America Building
Big banks, it seems, have only gained political strength since the crisis began.
The banks have been exploiting this fear as they wring favorable deals out of Washington. Bank of America obtained its second bailout package (in January) after warning the government that it might not be able to go through with the acquisition of Merrill Lynch, a prospect that Treasury did not want to consider.
The Federal Reserve has taken on a major role in providing credit to the economy—the function that the private banking sector is supposed to be performing, but isn’t. Yet what they do.
Banks hoarding money to shore up reserves
The Bank behavior is corrosive: unhealthy banks either don’t lend or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and as it does, bank assets themselves continue to deteriorate—creating a highly destructive vicious cycle.
The government must force the banks to acknowledge the scale of their problems; the most direct way to do this is nationalization.
The Treasury however is trying to negotiate bailouts bank by bank and behaving as if the banks hold all the cards. Under these conditions cleaning up bank balance sheets is impossible.
Nationalization would not imply permanent state ownership. It would allow the government to wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector.
The main advantage is immediate recognition of the problem so that it can be solved before it grows worse.
The government needs to inspect the balance sheets and identify the banks that cannot survive a severe recession. These banks should face a choice: write down your assets to their true value and raise private capital within 30 days, or be taken over by the government.
Cleaning up the megabanks will be complex. And it will be expensive for the taxpayer; according to the latest numbers, the cleanup of the banking system would probably cost close to $1.5 trillion
We will soon see this new type of currency as needed in this type of economy that we run
The second problem the US faces—the power of the oligarchy. The solution is simple: break the oligarchy.
The replacement of the bank executives who got us into this crisis is just and sensible; ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.
We need to see banks that will remain insolvent put up for sale
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.
This may seem like a crude and arbitrary step. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.
We need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat industrial monopolies were not designed to address the problem we now face.
The problem in the financial sector today is that one firm or a small set of interconnected firms, by failing, can bring down the economy.
The banking crisis cannot be solved by trying to put out the fire with money
The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.
The U.S., of course, still remains the world’s most powerful nation, rich beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print.
Press printing money
The U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.
The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our sluggish inactivity.
All the countries admidst the global economies failure jump out in unison without parachutes following the USs actions in a blind attempt to solve the problem
It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because Eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.
Sinking dollar
The mighty dollar burns out in the financial crisis
New World Order
Goldman Sachs bet on housing meltdown -- and won
A McClatchy investigation found that investment bank giant Goldman Sachs made secret bets on an imminent housing crash -- while selling off billions in soon-to-be worthless securities.
Related Content
Little scrutiny for loans bought by Goldman Amid the housing crisis, Goldman Sachs gives, takes away Goldman Sachs' secret bets
Standing up to Goldman Sachs
BY GREG GORDON
McClatchy News Service
WASHINGTON -- In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
``The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,'' said Laurence Kotlikoff, a Boston University economics professor who has proposed a massive overhaul of the nation's banks. ``This is fraud and should be prosecuted.''
John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time.
``It would look much more damaging,'' Coffee said, ``if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless.''
Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article.
REDUCING RISKS
A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to ``hedge'' against a housing downturn.
DuVally told McClatchy that Goldman ``had no obligation to disclose how it was managing its risk, nor would investors have expected us to do so . . . other market participants had access to the same information we did.''
For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bust.
Goldman remains, along with Morgan Stanley, one of two venerable Wall Street investment banks still standing. Their grievously wounded peers Bear Stearns and Merrill Lynch fell into the arms of retail banks, while another, Lehman Brothers, folded.
To piece together Goldman's role in the subprime meltdown, McClatchy reviewed hundreds of documents, SEC filings, copies of secret investment circulars, lawsuits and interviewed numerous people familiar with the firm's activities.
McClatchy's inquiry found that Goldman Sachs:
• Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they had misled borrowers or exaggerated applicants' incomes to justify making hefty loans.
• Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean which companies use to bypass U.S. disclosure requirements.
• Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.
• As previously reported, was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.
With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money -- a 23 percent taxpayer return that exceeded federal officials' demand -- the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.
Goldman announced record earnings in July, and the firm is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.
Goldman's financial panache made its sales pitches irresistible to policymakers and investors alike, and may help explain why so few of them questioned the risky securities that Goldman sold off in a 14-month period that ended in February 2007.
Since the collapse of the economy, however, some of those investors have changed their opinions of Goldman.
Several pension funds, including Mississippi's Public Employees' Retirement System, have filed suits, seeking class-action status, alleging that Goldman and other Wall Street firms negligently made ``false and misleading'' representations of the bonds' true risks.
Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman's subprime mortgage-backed bonds in 2006, said the state's funds are likely to lose ``hundreds of millions of dollars'' on those and similar bonds.
Hood assailed the investment banks ``who packaged this junk and sold it to unwary investors.''
California's huge public employees' retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund's holdings, in July CALPERS listed the bonds' value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.
In May, without admitting wrongdoing, Goldman became the first firm to settle with the Massachusetts attorney general's office as it investigated Wall Street's subprime dealings. The firm agreed to pay $60 million to the state, most of it to reduce mortgage balances for 714 aggrieved homeowners.
Attorney General Martha Coakley, now a candidate to succeed Edward Kennedy in the U.S. Senate, cited the blight from foreclosed homes in Boston and other Massachusetts cities. She said her office focused on investment banks because they provided a market for loans that mortgage lenders ``knew or should have known were destined for failure.''
New Orleans' public employees' retirement system, an electrical workers union and the New Jersey carpenters union also are suing Goldman and other Wall Street firms over their losses.
While Goldman was far from the biggest player in the risky mortgage securitization business, neither was it small.
From 2001 to 2007, Goldman hawked at least $135 billion in bonds keyed to risky home loans, according to analyses by McClatchy and the industry newsletter Inside Mortgage Finance.
In addition to selling about $39 billion of its own risky mortgage securities in 2006 and 2007, Goldman marketed at least $17 billion more for others.
It also was the lead firm in marketing about $83 billion in complex securities, many of them backed by subprime mortgages, via the Caymans and other offshore sites, according to an analysis of unpublished industry data by Gary Kopff, a securitization expert.
EXAGGERATED
In at least one of these offshore deals, Goldman exaggerated the quality of more than $75 million of risky securities, describing the underlying mortgages as ``prime'' or ``midprime,'' although in the United States they were marketed with lower grades.
Goldman spokesman DuVally said that Moody's, the bond rating firm, gave them higher grades because the borrowers had high credit scores.
For investment banks such as Goldman, the trick was knowing when to exit the high-stakes subprime game before getting burned.
New York hedge fund manager John Paulson (not related to Henry Paulson) was one of the first to anticipate disaster. He told Congress that his researchers discovered by early 2006 that many subprime loans covered the homes' entire value, with no down payments, and so he figured that the bonds ``would become worthless.''
He soon began placing exotic bets -- credit-default swaps -- against the housing market. His firm, Paulson & Co., booked a $3.7 billion profit when home prices tanked and subprime defaults soared in 2007 and 2008.
At least as early as 2005, Goldman similarly began using swaps to limit its exposure to risky mortgages, the first of multiple strategies it would employ to reduce its subprime risk.
The company has closely guarded the details of most of its swaps trades, except for $20 billion in widely publicized contracts it purchased from AIG in 2005 and 2006 to cover mortgage defaults or ratings downgrades on subprime-related securities it offered offshore.
In December 2006, after ``10 straight days of losses'' in Goldman's mortgage business, Chief Financial Officer David Viniar called a meeting of mortgage traders and other key personnel, Goldman spokesman DuVally said.
Shortly after the meeting, he said, it was decided to reduce the firm's mortgage risk by selling off its inventory of bonds and betting against those classes of securities in secretive swaps markets.
DuVally said that at the time, Goldman executives ``had no way of knowing how difficult housing or financial market conditions would become.''
DuVally said Goldman has made other bets with hundreds of unidentified counterparties to insure its own subprime risks and to take positions against the housing market for its clients. Until the end of 2006, he said, Goldman was still betting on a strong housing market.
However, Goldman sold off nearly $28 billion of risky mortgage securities it had issued in the United States in 2006, including $10 billion on Oct. 6, 2006. The firm unloaded a further $11 billion in February 2007, after it had intensified its contrary bets. Goldman also stopped buying risky home mortgages after the December meeting, though DuVally declined to say when.
Despite updating its numerous disclosures to investors in 2007, Goldman never revealed its secret wagers.
BARRIERS IN PLACE
Asked whether Goldman's bond sellers knew about the contrary bets, spokesman DuVally said the company's mortgage business ``has extensive barriers designed to keep information within its proper confines.''
However, Viniar, the Goldman finance chief, approved the securities sales and the simultaneous bets on a housing downturn. Dan Sparks, a Texan who oversaw the firm's mortgage-related swaps trading, also served as the head of Goldman Sachs Mortgage from late 2006 to April 2008, when he abruptly resigned for personal reasons.
The Securities Act of 1933 imposes a special disclosure burden on principal underwriters of securities, which was Goldman's role when it sold about $39 billion of its own risky mortgage-backed securities from March 2006 to February 2007.
The firm maintains that the requirement doesn't apply in this case.
DuVally said the firm sold virtually all its subprime-related securities to Qualified Institutional Buyers, a class of sophisticated investors that are afforded fewer protections than small investors are under federal securities laws. He said Goldman made all the required disclosures about risks.
Whether companies are obliged to inform investors about such contrary trades, or ``hedges,'' is ``a very hot issue'' in cases winding through the courts, said Frank Partnoy, a University of San Diego law professor who specializes in securities. One issue is how specific companies must be in disclosing potential risks to investors, he said.
Coffee, the Columbia University law professor, said that any potential violations of securities laws would depend on what Goldman executives knew about the risks ahead.
``The critical moment when Goldman would have the highest liability and disclosure obligations is when they are serving as an underwriter on a registered public offering,'' he said. ``If they are at the same time desperately seeking to get out of the field, that kind of bailout does look far more dubious than just trading activities.''
Read more: http://www.miamiherald.com/2009/10/31/v-fullstory/1310367/goldman-sachs-bet-on-housing-meltdown.html#ixzz0pXYWFdox
HOW CONGRESS FAKED FINANCE REFORM
By Matt Taibbi
It's early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.
The real shocker is a thing known among Senate insiders as "716." This section of an amendment would force America's banking giants to either forgo their access to the public teat they receive through the Federal Reserve's discount window, or give up the insanely risky, casino-style bets they've been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street's most lucrative profit centers: Five of America's biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan's trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.
Get more Matt Taibbi on the Taibblog.
"When I first heard about 716, I thought, 'This is never gonna fly,'" says Adam White, a derivatives expert who has been among the most vocal advocates for reform. When I speak to him early in May, he sounds slightly befuddled, like he can't believe his good fortune. "It's funny," he says. "We keep waiting for the watering-down to take place – but we keep getting to the next hurdle, and it's still staying strong."
In the weeks leading up to the vote on the reform bill, I hear one variation or another on this same theme from Senate insiders: that the usual process of chipping away at key legislation is not taking place with its customary dispatch, despite a full-court press by Wall Street. The financial-services industry has reportedly flooded the Capitol with more than 2,000 paid lobbyists; even veteran members are stunned by the intensity of the blitz. "They're trying everything," says Sen. Sherrod Brown, a Democrat from Ohio. Wall Street's army is especially imposing given that the main (really, the only) progressive coalition working the other side of the aisle, Americans for Financial Reform, has been in existence less than a year – and has just 60 unpaid "volunteer" lobbyists working the Senate halls.
Read Taibbi's original scathing Wall Street investigation, "The Great Bubble Machine."
The companies with the most at stake are particularly well-connected. The lobbying campaign for Goldman Sachs, for instance, is being headed up by a former top staffer for Rep. Barney Frank, Michael Paese, who is coordinating some 14 different lobbying firms to fight on Goldman's behalf.
The bank is also represented by Capitol Hill heavyweights like former House majority leader Dick Gephardt and former Reagan chief of staff Ken Duberstein. All told, there are at least 40 ex-staffers of the Senate Banking Committee – and even one former senator, Trent Lott – lobbying on behalf of Wall Street. Until the final weeks of the reform debate, however, it seemed that all these insiders were facing the prospect of a rare defeat – and they weren't pleased. One lobbyist even complained to The Washington Post that the bill was being debated out in the open, on the Senate floor, instead of in a smoky backroom. "They've got to get this thing off the floor and into a reasonable, behind-the-scenes" discussion, he groused. "Let's have a few wise fathers sit around the table in some quiet room" to work it out.
As it neared the finish line, the Restoring American Financial Stability Act was almost unprecedentedly broad in scope, in some ways surpassing even the health care bill in size and societal impact. It would rein in $600 trillion in derivatives, create a giant new federal agency to protect financial consumers, open up the books of the Federal Reserve for the first time in history and perhaps even break up the so-called "Too Big to Fail" giants on Wall Street. The recent history of the U.S. Congress suggests that it was almost a given that they would fuck up this one real shot at slaying the dragon of corruption that has been slowly devouring not just our economy but our whole way of life over the past 20 years. Yet with just weeks left in the nearly year-long process at hammering out this huge new law, the bad guys were still on the run. Even the senators themselves seemed surprised at what assholes they weren't being. This new baby of theirs, finance reform, was going to be that one rare kid who made it out of the filth and the crime of the hood for everybody to be proud of.
Then reality set in.
Picture the Restoring American Financial Stability Act as a vast conflict being fought on multiple fronts, with the tiny but enormously influential Wall Street lobby on one side and pretty much everyone else on the planet on the other. To be precise, think World War II – with some battles won by long marches and brutal campaigns of attrition, others by blitzkrieg attacks, still more decided by espionage and clandestine movements. Time after time, at the last moment, the Wall Street axis has turned seemingly lost positions into surprise victories or, at worst, bitterly fought stalemates. The only way to accurately convey the scale of Wall Street's ingenious comeback is to sketch out all the crazy, last-minute shifts on each of the war's four major fronts.
FRONT #1
AUDITING THE FED
The most successful of the reform gambits was probably the audit-the-Fed movement led by Sen. Bernie Sanders, the independent from Vermont. For nearly a century, the Federal Reserve has been, within our borders, a nation unto itself – with vast powers to shape the economy and no real limits to its authority beyond the president's ability to appoint its chairman. In the bubble era it has been transformed into a kind of automatic bailout mechanism, helping Wall Street drink itself sober by flooding big banks with cheap money after the collapse of each speculative boom. But suddenly, with both the Huffington Post crowd and the Tea Party raising their pitchforks in outrage, Sanders managed to pass – by a vote of 96-0 – an amendment to force the Fed to open its books to congressional scrutiny.
If Alan Greenspan and Ben Bernanke don't take that 96-0 vote as a kick-to-the-groin testament to the staggering unpopularity of the Fed, they should. When 96 senators agree on something, they're usually affirming their devotion to the flag or commemorating the death of Mother Teresa. But as it turns out, the more than $2 trillion in loans that the Fed handed out in secret after the 2008 meltdown is something that both the left and the right have no problem banding together to piss on. One of the most bizarre alliances of the bailout era took place when Sanders, a democratic socialist, and Sen. Jim DeMint, a hardcore conservative from South Carolina, went on the CNBC show hosted by crazy supply-sider Larry Kudlow – and all three found themselves in complete agreement on the need to force Fed loans into the open. "People who come from very different places agree that it ought not to be done in secret, that the Fed isn't Skull and Bones," says Michael Briggs, an aide to Sanders.
Matt Taibbi uncovers how the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece.
The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to name the banks that had been bailed out by the Fed. "Will you tell the American people to whom you lent 2.2 trillion of their dollars?" Sanders demanded.
After a little hemming and hawing, a bored-looking Bernanke – Time magazine's 2009 Person of the Year, by the way – bluntly said, "No." It would be "counterproductive," he explained, if clients and investors learned that these poor banks were broke enough to need a public handout.
Bernanke's performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed's goblin-in-chief to heel. The new law will force Bernanke to post the identity of loan recipients on the Fed's website for all to see. It also mandates that the Government Accountability Office investigate potential conflicts of interest that took place during the bailout, such as the presence of Goldman CEO Lloyd Blankfein in the room during the negotiations of the AIG bailout, which led to Goldman's receiving $13 billion of public money via the rescue.
Taibbi reveals how the government's case against Goldman Sachs barely begins to target the depths of Wall Street's criminal sleeze.
The Sanders amendment was perhaps the headline victory to date in the ongoing War for Finance Reform, but even this battle entailed some heavy casualties. Sanders had originally filed an amendment that was much closer to a House version pressed by libertarian hero Ron Paul, one that would have permanently opened the Fed's books to Congress. But as the Senate crawled closer to a vote, the Sanders camp began to hear that the Obama administration opposed the bill, fearing it would give Congress too much day-to-day involvement in Fed policy. "The White House was saying how wonderful transparency is, but they still had 'concerns,' "Briggs says. "Within a couple hours, those concerns were being worked out."
The end result was a deal that restricted the audit to a one-time shot: Congress could only examine Fed loans made after December 2007. Once the audit was complete, the Fed's books would once again be sealed forever from public scrutiny. Sen. David Vitter, a Democrat from Louisiana, countered with an amendment to permanently open up the Fed's books, but it was shot down by a vote of 62-37. In one of the most absurd and indefensible retreats of the war, a decisive majority of senators voted to deny themselves the power to audit the Federal Reserve on behalf of the American people. When it comes to protecting the world's wealthiest banks from public scrutiny, it turns out, Democrats and Republicans have no trouble achieving bipartisanship.
FRONT #2
PROTECTING CONSUMERS
The biggest no-brainer of finance reform was supposed to be the Consumer Financial Protection Bureau. The idea was simple: create a federal agency whose sole mission would be to make sure that financial lenders don't rape their customers with defective products, unjust fees and other fine-print nightmares familiar to any American with a credit card. In theory, the CFPB would rein in predatory lending by barring lenders from making loans they know that borrowers won't be able to pay back, either because of hidden fees or ballooning payments.
Wall Street knew it would be impossible to lobby Congress on this issue by taking the angle of "We're a rapacious megabank that would like to keep skull-fucking to death our customers using incomprehensible and predatory loans." So it came up with another strategy – one that deployed some of the most inspired nonsense ever seen on the Hill. The all-powerful lobbying arm of the U.S. Chamber of Commerce, which has been fierce in its representation of Wall Street's interests throughout the War for Finance Reform, cued up a $3 million ad campaign implying that the CFPB, instead of targeting asshole bankers in flashy suits and hair gel, would – and this isn't a joke – target your local butcher, making it hard for him to lend you the money to buy meat. That's right: The ads featured shots of a squat butcher with his arms folded, standing in front of a big pile of meat. "The economy has made it tough on this local butcher's customers," the ad reads. "So he lets some of them run a tab and pay the bill over time to make ends meet. But now Washington wants to make it tougher on everyone." After insisting – falsely – that this kindly butcher would be subject to the new consumer protection bureau, the ad warns that the CFPB "would also have the ability to collect information about his customers' financial accounts and take away many of their financial choices."
Sitting in the Senate chamber one afternoon not long before the vote, I even heard Sen. Mike Enzi, an impressively shameless Republican from Wyoming, insist that the CFPB would mean that "anyone who has ever paid for dental care in installments could be facing the prospect of paying for dental care upfront." Other anti-reform ads claimed that everyone from cabinetmakers to electricians would be hounded by the new agency – even though the CFPB's mandate explicitly excludes merchants who are "not engaged significantly in offering or providing consumer financial products or services."
The CFPB was always a pretty good bet to pass in some form. Just as pushing through anything that could plausibly be called "health care reform" was a political priority for the Obama administration, creating a new agency with the words "consumer protection" in the title was destined from the start to be the signature effort of the finance bill, which is otherwise mostly a mishmash of highly technical new regulations. But that didn't stop leading Democrats from doing what they could to chisel away at the thing. Throughout the process, Chris Dodd, the influential chairman of the Senate Banking Committee, has set new standards for reptilian disingenuousness – playing the role of stern banker-buster while taking millions in Wall Street contributions. Dodd worked overtime trying to craft a "bipartisan" bill with the Republican minority – in particular with Sen. Richard Shelby, the ranking Republican on the committee. With his dyed hair, porcine trunk and fleshy, powdery-white face, Shelby recalls an elderly sumo wrestler in drag. I happened to be in the Senate on the day that Shelby proposed a substitute amendment that would have stuffed the CFPB into the FDIC, effectively scaling back its power and independence. Throughout the debate, I was struck by the way that Dodd and his huge black caterpillar eyebrows kept crossing the aisle to whisper in Shelby's ear. During these huddles, Dodd would gently pat Shelby's back or hold his arm; it was like watching a love scene in a Japanese monster movie.
Shelby's amendment was ultimately defeated by a vote of 61-37 – but he and Dodd still reached a number of important compromises that significantly watered down the CFPB. The idea was to rack up as many exemptions as possible for favored industries, all of which had contributed generously to their favorite senators. By mid-May, Republicans and Democrats had quietly agreed to full or partial "carve-outs" for banks with less than $10 billion in deposits, as well as for check-cashers and other sleazy payday lenders. As the bill headed toward a vote, there was also a furious fight to exempt auto dealers from anti-predatory regulations – a loophole already approved by the House – even though car loans are the second-largest source of borrowing for Americans, after home mortgages. The purview of the CFPB, in essence, was being limited to megabanks and mortgage lenders. That's a major victory in the war against Wall Street, but it will be hard to be too impressed if Congress can't even find a way to vote for consumer protection against used-car salesmen.
FRONT #3
ENDING "TOO BIG TO FAIL"
Perhaps the fiercest fight of all over finance reform involved a part of the bill called "resolution authority" – also known as, "The next time an AIG or a Lehman Brothers goes belly up, do we bail the fuckers out? And if so, with whose money?" In its original form, the bill answered these crucial questions by requiring that banks contribute to a $50 billion fund that could be used to aid failing financial institutions. The fund was hardly a cure-all – $50 billion "wouldn't even be enough to bail out Citigroup's prop-trading desk," as one industry analyst observed – but it at least established a precedent that banks should pay for their own bailouts, instead of simply snatching money from taxpayers.
The fund had been established after a fierce battle last fall, when Democrats in the House beat back a seemingly insane proposal backed by the Obama administration that would have paid for bailouts by borrowing from taxpayers and recouping the money from Wall Street later on, by means of a mysterious, convoluted process. That heroic stand in the House, which was marked by long nights of ferocious negotiations, was wiped out in one fell swoop on May 5th, after Dodd and Shelby huddled up in another of their monster-love sessions and hammered out a deal to strip the bailout fund from the bill. The surprise rollback was introduced by the Senate leadership late on a Wednesday and voted on three hours later. Just like that, taxpayers were back to fronting the nation's biggest banks the money when they find themselves in financial trouble.
One day after the Shelby-Dodd wipeout, another key reform got massacred. This was the "Too Big to Fail" amendment put forward by two reform-minded freshmen, Sens. Ted Kaufman of Delaware and Sherrod Brown of Ohio. The measure would have mandated the automatic breakup of any bank that held more than 10 percent of all insured deposits, or had at risk more than two percent of America's GDP. The amendment was just the kind of common-sense, loophole-proof, no-bullshit legislation that, sadly, almost never passes in the modern Senate.
Brown is an interesting character. Whenever I talk to him, I often forget he's a U.S. senator; he feels more like a dude you met on an Amtrak train and struck up a conversation with. He remains the only member of Congress I've ever met who took off his shoes and socks in the middle of an interview. But when I catch up with him in an anteroom outside the Senate chamber on the day his and Kaufman's amendment ends up being voted on, he seems harried and tense, like a man waiting for bad news in a hospital lobby. In recent weeks, he confides, he has found himself facing both barrels of the banking lobby.
"There are 1,500 bank lobbyists in this town, and they're coming by all the time," he says. "And it's not just the lobbyists. When the bank lobbyist from Columbus comes by, he brings 28 bankers with him."
At the moment, though, Brown has a more pressing problem. He and Kaufman are both making themselves conspicuous in the Senate chamber, and the reason why is illustrative of the looniness of Senate procedure. Unlike in the House, where a rules committee decides in advance which amendments will be brought to a vote, senators have no orderly, dependable way of knowing if or when their proposals will get voted on. Instead, they're at the mercy of a strange and nebulous process that requires them to badger the leadership, who have the sole discretion of deciding which amendments go to a vote. So Brown is reduced to hanging around the Senate floor and trying to get a committee chair like Chris Dodd to put Too Big to Fail to a vote before other amendments use up all the time allotted for debate. It's not unlike fighting a crowd of pissed-off airport passengers for a single seat on an overbooked flight – you're completely at the mercy of the snippy airline rep behind the desk.
Near the end of the day, to Brown's surprise, Dodd actually allows his amendment to go to a vote. In the end, however, the proposal to break up the nation's riskiest banks gets walloped 61-33, with an astonishing 27 Democrats – including key banking committee heavyweights like Dodd and Chuck Schumer of New York – joining forces to defeat it. After the debate, Kaufman, a gregarious and aggressive advocate of finance reform, seems oddly unfazed that his fellow Democrats blew the best chance in a generation to corral the great banking monsters of Wall Street. "For some of them, it was just a bridge too far," he says. "There's an old saying: Never invest in anything you don't understand." Given the bizarre standards of the Senate bureaucracy, Kaufman considers it a victory just to have gotten his amendment into the woodshed for an ass-whipping.
I encounter that same "just glad to be here" vibe from Sen. Jeff Merkley, a Democrat from Oregon who co-authored one of the handful of genuinely balls-out reforms in the entire bill. The Merkley-Levin amendment couldn't have been more important; it called for restoring part of the Glass-Steagall Act, the Depression-era law that prevented commercial banks, investment houses and insurance companies from merging. The repeal of Glass-Steagall in 1999 paved the way for the creation of the Too-Big-to-Fail monsters like Citigroup, who drove the global economy into a ditch over the past 10 years.
Merkley-Levin was the Senate version of the "Volcker Rule," a proposal put forward by former Fed chief and Obama adviser Paul Volcker, that would prevent commercial banks from engaging in the kind of speculative, proprietary trading that helped trigger the financial crisis. When I meet with Merkley, he is in the same position as Brown and Kaufman, waiting anxiously for a chance to get his amendment voted on, with no idea of when or if that might happen. A vote – even if it means defeat – is all he's hoping for. When I ask if he's excited about the prospect of restoring a historic piece of legislation like Glass-Steagall, he smiles faintly. "I'm not saying I'm real optimistic," he says.
In the end, Merkley is forced to resort to the senatorial equivalent of gate-crashing: He attaches his amendment to the sordid proposal to exempt auto dealers from the CFPB, which has already been approved for a vote. That Merkley has to invoke an arcane procedural stunt just to get such a vital reform a vote is a testament to how convoluted American democracy looks by the time it reaches the Senate floor.
As with the whittled-down victories over the Fed audit and the Consumer Finance Protection Bureau – and the brutal defeat of Too Big to Fail – the stalling over the Volcker Rule underscores the basic dynamic of the Senate. With deals cut via backroom consensus, and leaders like Reid and Dodd tightly controlling which amendments go to a vote, the system allows a few powerful members whose doors are permanently open to lobbyists to pilot the entire process from beginning to end. One Democratic aide grumbles to me that he had no access to the negotiations for months, while a Wall Street lobbyist he knows could arrange an audience with the leadership. The whole show is carefully orchestrated from start to finish; no genuinely tough amendment with a shot at being approved receives an honest up-or-down vote. "It's all kind of a fake debate," the aide says.
FRONT #4
REINING IN DERIVATIVES
When all the backroom obfuscation doesn't work, of course, there is always one last route in Congress to killing reform: the fine print. And never has an amendment been fine-printed to death as skillfully as the proposal to reform derivatives.
Imagine a world where there's no New York Stock Exchange, no NASDAQ or Nikkei: no open exchanges at all, and all stocks traded in the dark. Nobody has a clue how much a share of IBM costs or how many of them are being traded. In that world, the giant broker-dealer who trades thousands of IBM shares a day, and who knows which of its big clients are selling what and when, will have a hell of a lot more information than the day-trader schmuck sitting at home in his underwear, guessing at the prices of stocks via the Internet.
That world exists. It's called the over-the-counter derivatives market. Five of the country's biggest banks, the Goldmans and JP Morgans and Morgan Stanleys, account for more than 90 percent of the market, where swaps of all shapes and sizes are traded more or less completely in the dark. If you want to know how Greece finds itself bankrupted by swaps, or some town in Alabama overpaid by $93 million for deals to fund a sewer system, this is the explanation: Nobody outside a handful of big swap dealers really has a clue about how much any of this shit costs, which means they can rip off their customers at will.
This insane outgrowth of jungle capitalism has spun completely out of control since 2000, when Congress deregulated the derivatives market. That market is now roughly 100 times bigger than the federal budget and 20 times larger than both the stock market and the GDP. Unregulated derivative deals sank AIG, Lehman Brothers and Greece, and helped blow up the global economy in 2008. Reining in derivatives is the key battle in the War for Finance Reform. Without regulation of this critical market, Wall Street could explode another mushroom cloud of nuclear leverage and risk over the planet at any time.
The basic pillar of derivatives reform is simple: From now on, instead of trading in the dark, most derivatives would have to be traded on open exchanges and "cleared" through a third party. Last fall, Wall Street lobbyists succeeded at watering down the clearing requirement by pushing through a series of exemptions for "end-users" – that is, anyone who uses derivatives to hedge a legitimate business risk, like an airline buying swaps as a hedge against fluctuations in jet-fuel prices. But the House then took it even further, expanding the exemption to include anyone who wants to hedge against balance-sheet risk. Since every company has a balance sheet, including giant insurers like AIG and hedge funds that gamble in derivatives, the giant loophole now covered pretty much everyone except a few megabanks. This was regulation with a finger crossed behind its back.
When it came time for the Senate to do its version, however, the lobbyists were in for a surprise. Sen. Blanche Lincoln of Arkansas – best known as one of the few Democrats to vote for Bush's tax cuts – suddenly got religion and closed the loophole. Facing a tough primary battle against an opponent who was vowing to crack down on Wall Street, Lincoln tweaked the language so derivatives reform would apply to any greedy financial company that makes billions trading risky swaps in the dark.
Republicans went apeshit, pulling the same tactics they tried to gut the Consumer Finance Protection Bureau. Sen. Enzi, back at the lectern after his failed attempt to claim that the CFPB was a government plot to control the orthodontics industry, barked to the Senate gallery that Lincoln's proposal would harm not millionaire swap dealers at JP Morgan and Goldman Sachs, but "a wheat-grower in Wyoming." Unmoved by such goofy rhetoric, the Senate shot down an asinine Republican amendment that would have overturned Lincoln's reform by a vote of 59-39.
Then reform advocates started reading the fine print of the Lincoln deal, and realized that all those Wall Street lobbyists had really been earning their money.
That same day the GOP amendment failed, the derivatives expert Adam White was at his home in Georgia, poring over a "redline" version of the Lincoln amendment, in which changes to the bill are tracked in bold. When he came to a key passage on page 570, he saw that it had a single line through it, meaning it had been removed. The line read, "Except as provided in paragraph (3), it shall be unlawful to enter into a swap that is required to be cleared unless such swap shall be submitted for clearing."
Translation: It was no longer illegal to trade many uncleared swaps. Wall Street would be free to go on trading these monstrosities by the gazillions, largely in the dark. "Regulators can't say any longer if you don't clear it, it's illegal," says White.
Once he noticed that giant loophole, White went back and found a host of other curlicues in the text that collectively cut the balls out of the Lincoln amendment. On page 574, a new section was added denying the Commodity Futures Trading Commission the power to force clearinghouses to accept swaps for clearing. On page 706, two lines were added making it impossible for buyers who get sold an uncleared swap to void the deal. Taken altogether, the changes amount to what White describes as a "Trojan Horse" amendment: hundreds of pages of rigid rules about clearing swaps, with a few cleverly concealed clauses that make blowing off those rules no big deal. Michael Greenberger, a former official with the Commodity Futures Trading Commission who has been fighting for derivatives reform, describes the textual trickery as a "circle of doom. Despite the pages and pages of regulations, violating them is risk-free."
On May 18th, as the clock ran out on the deadline to file amendments, reform-minded Democrats staged a concerted push to close the loopholes. But when Sen. Maria Cantwell of Washington offered a proposal to eliminate the "Trojan Horse" sham, Reid tried to slam the door on her and everyone else working to strengthen reform. The majority leader called for a vote to end debate – a move that would squelch any remaining amendments. This extraordinary decision to cut off discussion of our one, best shot at revamping the rules of modern American finance was made, at least in part, to enable senators to get home for Memorial Day weekend.
But then something truly unexpected took place. Cantwell revolted, joined by Sen. Russ Feingold of Wisconsin. That left Reid in the perverse position of having to convince three Republicans to come over to his side to silence a member of his own party. On May 20th, Reid got the votes he needed to kill the debate. A few hours later, the Senate passed the bill, loopholes and all, by a vote of 59-39.
In a heartwarming demonstration of the Senate's truly bipartisan support for Wall Street, Sen. Sam Brownback – a Republican from Kansas – stepped in to help Democrats kill one of the bill's most vital reforms. At the last minute, Brownback mysteriously withdrew his amendment to exempt auto dealers from regulation by the CFPB – a maneuver that prevented the Merkley-Levin ban on speculative trading, which was attached to Brownback's amendment, from even being voted on. That was good news for car buyers, but bad news for the global economy. Senators may enjoy scolding Goldman Sachs in public hearings, but when it comes time to vote, they'll pick Wall
Street over Detroit every time.
The rushed vote also meant that the Democratic leadership wasn't able to gut 716, the amazingly aggressive section of Lincoln's amendment that would cut off taxpayer money to big banks that gamble on risky derivatives. Not that they didn't try. With just three minutes to go before the deadline, Dodd had filed a hilarious amendment that would have delayed the ban on derivatives for two years – and empowered a new nine-member panel to unilaterally kill it. Sitting on the panel would be Bernanke, Treasury Secretary Tim Geithner and FDIC chief Sheila Bair, all of whom violently opposed 716.
Dodd was forced to withdraw his amendment after Wall Street complained that even this stall-and-kill tactic would create too much "uncertainty" in the market. That left 716 still alive for the moment – but even its staunchest supporters expected the leadership to find some way to gut it in conference, especially since President Obama personally opposes the measure. "Treasury and the White House are in full-court mode, assuring everybody that this will be fixed," says Greenberger. "And when they say fixed, that means killed."
Whatever the final outcome, the War for Finance Reform serves as a sweeping demonstration of how power in the Senate can be easily concentrated in the hands of just a few people. Senators in the majority party – Brown, Kaufman, Merkley, even a committee chairman like Lincoln – took a back seat to Reid and Dodd, who tinkered with amendments on all four fronts of the war just enough to keep many of them from having real teeth. "They're working to come up with a bill that Wall Street can live with, which by definition makes it a bad bill," one Democratic aide explained in the final, frantic days of negotiation.
On the plus side, the bill will rein in some forms of predatory lending, and contains a historic decision to audit the Fed. But the larger, more important stuff – breaking up banks that grow Too Big to Fail, requiring financial giants to pay upfront for their own bailouts, forcing the derivatives market into the light of day – probably won't happen in any meaningful way. The Senate is designed to function as a kind of ongoing negotiation between public sentiment and large financial interests, an endless tug of war in which senators maneuver to strike a delicate mathematical balance between votes and access to campaign cash. The problem is that sometimes, when things get really broken, the very concept of a middle ground between real people and corrupt special interests becomes a grotesque fallacy. In times like this, we need our politicians not to bridge a gap but to choose sides and fight. In this historic battle over finance reform, when we had a once-in-a-generation chance to halt the worst abuses on Wall Street, many senators made the right choice. In the end, however, the ones who mattered most picked wrong – and a war that once looked winnable will continue to drag on for years, creating more havoc and destroying more lives before it is over.
of millions of dollars on risky investments
St. Petersburg Times
hree years ago, the state of Florida made bad investments that lost hundreds of millions in value. State leaders blamed the sharks of Wall Street, who they said duped Florida money managers into buying way-too-risky securities.
Chief Financial Officer Alex Sink pushed the state to sue big banks, which she said dumped tainted investments on Florida.
Gov. Charlie Crist demanded a no-holds-barred investigation and named four Wall Street firms that he suspected took advantage of the state.
Attorney General Bill McCollum wondered if there had been fraud and promised help with an investigation.
But no bank was prosecuted, no lawsuit was filed and there was never a full accounting of a financial debacle that could cost Florida governments and taxpayers hundreds of millions of dollars.
Now the St. Petersburg Times has obtained e-mails and internal memos that document a story at odds with the one told by Crist, Sink and McCollum, the elected officials responsible for oversight of the state's money managers.
The securities Wall Street ``dumped'' on Florida? The records show the state was anything but an innocent dupe; it was an eager partner.
Going back at least seven years, state money managers had been trying to find a way around rules that restricted them from buying certain risky securities. Time and again they asked, time and again lawyers told them no.
But so eager were Florida's money managers for higher yields, they bought them anyway. In two months at the brink of the housing market meltdown in 2007, the state invested at least $9.5 billion in securities it was not authorized to buy, a review of confidential memos shows.
``Florida can't say it got snookered,'' said Peter Henning, a Wayne State University law professor and securities law expert, when told what the documents said.
``They were chomping at the bit to buy risky securities. These weren't lambs being led to the slaughter. They weren't fooled. They seemed to go along quite happily.''
What happened?
The State Board of Administration invests more than $140 billion of public money, most of it for the state retirement system. It also manages a fund that pools money from hundreds of Florida towns, counties and school districts.
As of June 30, 2007, the local pool totaled $31 billion, making Florida's the country's largest such fund.
But with the collapse of financial markets and revelations of troubled investments, hundreds of the local clients withdrew billions from the pool. Today it holds less than $6 billion.
Beyond the lost dollars, beyond eroding trust in government, the state's perilous investing aggravated already-strained budgets and put holds on construction of schools, roads, sewers and firehouses across the state. It forced school districts to take out loans to pay teachers.
``I would never invest in the SBA again,'' said Marcia Dedert, finance director of Port St. Lucie, which had to borrow money to finish some roads. ``In my mind, they robbed the citizens of my city.''
It's hard to calculate the costs of the risky deals that went awry. The SBA refuses to recognize any loss for local governments. The agency says it has made many positive changes and its goal is to make its clients ``whole.'' But if the bad securities were sold today, taxpayers could be out more than $300 million.
Ashbel C. Williams Jr., who replaced the SBA director who presided over the fiasco, said the agency and its employees did not violate federal securities laws.
Read more: http://www.miamiherald.com/2010/09/21/1834816/florida-losing-hundreds-of-millions.html#ixzz12HEEVS3W
Government by The Numbers
Cost of County Government per person $2,900 (proposed budget)
Miami Dade Current Population 2.7 Million
1993 County Budget $2.5 Billion
1993 Cost Per Person $1,250
1993 Population 2 Million
1993 Budget adjusted for inflation and population growth $5 Billion
at this level the current cost per person of county government should be $1,888 not $2,900. A family of 4 currently pays on average $11,600 for county government.
Please keep in mind these figures don't include school board, municipal or other taxing authorities if you add these in, the figure would exceed $5,000 per person ($20,000 + for a family of four) and this figure does not include state and federal taxes (I here Greenland is nice this time of year).
In 1993 essential and other services provided by the county were more than adequate (Criminals did not control our streets (thank you 2nd amendment), houses did not burn down by the dozen, and people were not dying of starvation in the streets (see Calcutta), so why the increase of over 35% in real dollars adjusted for inflation and population growth?
Miami Dade County Government is out of control only we the citizens can reverse this situation by truly becoming involved, otherwise we will have to either move or continue to pay for a bloated, intrusive and inefficient bureaucracy.
This is not about not raising taxes, this is about pushing for a 35% reduction in county expenditures and in turn OUR PROPERTY TAXES.
Call or email the Following Commissioners and tell them you are sick and tired and if you don't see a significant reduction (Not 1,2, or 5 percent) in your taxes you will not vote for them (even if the position of dog catcher becomes electable)
