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There’s an interesting bit of reporting buried deep in this good Gillian Tett column in the Financial Times last week about Geithner’s proposed regulation of credit derivatives. Tett is one of the smartest financial journalists working, and she’s just out with a book on credit derivatives (Audit review to come shortly), so it’s comforting to read this from her:
"For what this week’s announcement essentially represents is not just an effort to reform the letter of the 2000 act; it is also a move to overturn the spirit - and idea that free market discipline alone can encourage bankers to behave."
The 2000 act she’s talking about was the infamous Phil Gramm legislation that banned regulation of credit derivatives, the instruments that are in no small part responsible for the financial crisis. But take a look at this:
"Tales are circulating on Wall Street that some unscrupulous traders have been manipulating the price of “single name” CDS contracts to hurt rivals, or make quick profits. It is also claimed that banks have been deliberately trying to push companies into bankruptcy, in locations ranging from Ukraine to the heartland of the US, to profit on CDS positions they secretly hold."
Interesting, but sounds like the usual scuttlebutt/conspiracy-mongering common amongst traders. But check out the following paragraph:
Dear Sen.Warner, Sen. Webb, and Rep. Cantor: As my elected representatives, I would appreciate it if you could use your resources to find out the answer to a question for me as a U.S. taxpayer: Did American International Group, Inc. give $70 billion of its bailout money to China?
The New York Times says AIG has only named the recipients for $50 billion of the $120 billion it has paid out to “trading partners” on its failed “credit default swaps” and refuses to disclose all the other trading partners who it paid off with our bailout money.
It is extremely hard to figure out why the U.S. taxpayers gave $170 billion to bail out this business which was made in China — literally.
All these organs of our now-former economy are gravely impaired, and a realistic appraisal of them would have to conclude that they've entered the zone of congestive failure. The choice we face really comes down to this: do we put our dwindling resources and "hopes" into resuscitating those dying systems, or do we move forward to the next chapter of American life, cut our losses, and make new arrangements more consistent with the realities on offer from the universe? To take it a step further, can we remain one nation, a common culture, without such a conscious re-purposing of our collective spirit?
As Zero Hedge has claimed on numerous occasions in the past, the ultra-expedited sale of Lehman's North American Broker Dealer operations to Barclays Capital a mere 4 days after Lehman filed for bankruptcy, was likely rife with not just impropriety and judicial incompetence, stupidity and hubris (here's looking at you James "Stella" Peck), but potentially fraud. Of course, it is one thing for a tin-hat clad, conspiratorial-minded, paranoid (and recursively humorous) wannabe financial blog to make such accusations, but when the bankrupt entity itself (Lehman Brothers Holdings) does so itself (finally), it is a different story. And indeed, the debtor did just that yesterday in bankruptcy court, in a filing demanding additional discovery from Barclays which, just like it American brethren, has been recently frothing at the mouth with glee at the phenomenal profits it has been able to muster, however, presumably as the AIG funnel was closed to Barlcays, it had to use other alternatives of "profit" generation: buying a multi-billion business for a few dollars - literally - in this case the perfectly viable broker dealer division of Lehman brothers. The filing body itself has some scathing language, and as the outcome will inevitably point to some sort of shenanigans, Barlcays better get ready to pony up several billion, either in damages or compensatory cash.
The president should email his speech to Wall Street. And while he's at it, he should also blast it out to the people running the giant pharmaceutical companies ..., to the factory farmers filling our food with steroids and additives ... . And he should definitely send it to the credit card companies, which, faced with customers choking on debt and forced to use their credits cards to pay for essentials like food and medical care, respond by jacking up interest rates and tacking on penalties and fees. As card defaults reached record levels in April.
“Something strange happened during the last 7 or 8 weeks. I watch the futures every day and every tick, and a tremendous amount of volume came in a several points during the last few weeks, when the market was just about ready to break and shot right up again. Usually toward the end of the day. It lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?
Discussion of the 50% Retracement Rule,
potential future price levels, time studies, key dates, Fibonacci, Gann, Astro numbers, Robert Rhea's Great Depression analysis.
Buried in a puff-piece story about the TARP is an admission that the folks in Congress (and in Topeka Kansas) ought to pay attention to:
May 19 (Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to refund a combined $45 billion of government funds, people familiar with the matter said, a step that would mark the biggest reimbursement to taxpayers since the program began in October. The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
Ding ding ding ding. So where is the Congressional scrutiny that should come when a primary supervisor fails to prevent these institutions finding themselves in a position where they need to take a combined $45 billion of taxpayer money to stay afloat, irrespective of when or if they pay it back? Missing, that's where. And yet as I noted in the White Paper yesterday, this entire mess has in fact been due to one and only one thing: The regulators in charge of the banking system allowed banks to write more in unsecured loans then they had in excess capital, resulting in hundreds of billions of dollars of loss that was shifted to the taxpayer, over $20 billion in direct losses taken by the FDIC, and over $2 trillion more in "direct and indirect support" by The Fed - all of which has become a taxpayer liability. Wake up America.
Recession Drains Social Security and Medicare was a headline from the New York Times that seemed to me a distortion of facts in order to scare people. After all, what caused the recession but the criminal behavior of predatory mortgage companies and banks who made unfair subprime loans, collateralized them, shipped them downstream to investment banks that securitized them and sold them knowing what junk they were to investors. That combined with a shark tank of hungry salespeople who went at the assets of poor and not so poor homebuyers with time-bomb mortgages whose interest exploded at some point, scattering them into massive indebtedness. Neither Social Security nor Medicare did this. As to the banks supposedly showing profits recently from the bailouts, take a look at Dr. Martin Weiss’ article, Big bank profits are bogus! Massive public deception! He writes, “Was the bad-debt disease magically cured? Did the economy miraculously turn around? Not quite. In fact, we have overwhelming evidence that the condition of the nation’s banks has deteriorated massively since then.
If you have any info that would help, please contact me at my private email address: bailout@michaelmoore.com
