Volatility

July 17, 2010

Finance Reform Sham, CFPA Sham, SEC/Goldman Sham

 

I’ve written more than enough on the sham finance bill and didn’t see the need for another piece on it . (My most recent.) But I thought this post mortem was true and typical.
 

The ink is not even dry on the new rules for Wall Street, and already, the bankers are a step ahead of everyone else.

In ways large and small, the broad overhaul of the nation’s financial regulatory system that was approved by Congress on Thursday will eat into the profits of the nation’s banks.

So after spending many millions of dollars to lobby against the legislation, bankers are now turning to Plan B: Adapting to the rules and turning them to their advantage.

Even when it comes to what is perhaps the biggest new rule — barring banks from making bets with their own money — banks have found what they think is a solution: allowing some traders to continue making those wagers, as long as they also work with clients.

Banking chiefs concede they intend to pass many of the costs associated with the bill to their customers. The legislation, which is expected to be signed into law by President Obama next week, is intended to address the causes of the 2008 economic crisis and curb the most risky behavior on Wall Street.

“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,” said Jamie Dimon, the chairman and chief executive of JPMorgan Chase, after his bank reported a $4.8 billion profit for the second quarter on Thursday. “Over time, it will all be repriced into the business.”

 
Here are the banksters openly saying they’ll never take less than the extortionate amount they already extract. They regard their robberies as their divine right. As if we needed it, there’s a further declaration of war upon us, and further confirmation that humanity and the banksters cannot coexist in the same world.
 
So I think that’s adequate commentary on this vile sham of a “reform” bill.
 
Meanwhile, in order to confirm for anyone who still had doubts about whether or not Obama ever wanted a real CFPA, Geithner has gone out to oppose the appointment of Elizabeth Warren as its chief. (For a good post on Geithner as wingnut welfare poster boy, a complete failure throughout his worthless life at being anything other than a serviceable villain, see here.)
 
We knew this already, after the original white paper was so weak, eschewing vanilla requirements, and when the administration then without a fight let the thing be subverted and “pre-empted” in the House. So it’s no surprise today when they’re still hacking away at any possible effectiveness on its part, though that’s already a moot point. As I’ve always said, if you have to rely upon heroic personnel for effective regulation, then you can’t have sustained effective regulation over time. In a corporatist system, “regulation” can’t work.
 
Now, after howls of protest, the administration is publicly backpedaling, disclaiming any such opposition. So no doubt more nonsense will ensue.
 
I’ll just mention that the canonization of Warren seems overblown to me. She’s an administration cadre, a Harvard cadre, supports the system, supports the Bailout. The best one can say is that maybe she’s as good as it gets within the system, which is saying little.
 
Indeed, from the public interest point of view, wouldn’t it be better if someone more obnoxious were appointed? That would render the scam more brazen, obvious, and offensive. If you agree the bill’s a sham and want the people to understand that, why would you want an anodyne piece of window dressing like Warren to be part of it? It contradicts our educational mission.
 
It’s in light of this that we should consider the Goldman settlement. It’s a $550 million fine, and Goldman admits a marketing “mistake” and pledges to “reform” its policies. The SEC will distribute some of the proceeds to ACA and IKB, and Goldman agrees this amount is not mitigatory of any future civil awards. There’s all the standard crap about how Goldman agrees to closer oversight and how the SEC pledges to provide that oversight. It looks like a de facto global settlement as far as the SEC’s concerned.
 
I suppose from the reformist point of view there’ll be endless argument over whether or not this is a win for Goldman. From the point of view of taking back our country from these gangsters, the only question is whether or not this was a significant step toward the complete destruction of Goldman and all casino banking.
 
It seems not to be. On the contrary, the “best” case scenario seems to be that gamblers outside the bank hope the settlement will circumscribe the way Goldman can rig the game to the clients going forward.
 
But the game itself, which is purely destructive from any broader point of view, is to continue in its full ferocity.
 
Indeed, if the perception here is that the game will be less rigged vs. the client gamblers, then the settlement is a retrograde step, since one of the few good trends we’ve been seeing is the growing realization that Goldman’s a criminal against everyone including its own clients.
 
So anything that seems to improve the position of the clients is bad for the American people. From our point of view, it would’ve been better if the settlement had more obviously been a whitewash. Or even if Goldman had fought all the way and won. Insidiousness is always worse.
 
The corporate media will do all they can to spin this as a win for everyone, and as sufficient regulatory vigilance. Thus the NYT is calling it a “high-water mark” for regulators, trying to simultaneously exalt it as a big win but also lower expectations going forward. The spin will be: The SEC/Obama got tough, “investors” will be better protected; but Goldman is also vindicated of the worst charges, and implicitly the casino is now in better shape, and the American people should have more confidence in it going forward.
 
It’s all a Big Lie.

May 20, 2010

Trading, Drilling, Technology, and Kleptocracy

 

The other day Barry Ritholz had a brief post expressing his skepticism about some Tradebot self-hype:
 
The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.
 
True, exaggerated, or bullshit, any way it’s another example of the unproductive, parasitic nature of these outfits, and of how they operate in a totally rigged market which is the opposite of a “free” market.
 
Using the word “risk” as part of the English language, how is it possible to profit every day and yet still be running “risks”? It’s statistically impossible. If you win every time, by definition you’re not running risks. By definition you’re playing a game rigged in your favor.
 
How is HFT not insider trading and market manipulation? It is obviously those things. If the system is rigged so that it’s possible for computers to do this, and this method then becomes the monopoly of those who can afford the hardware and the quant “talent” to perform these manipulations, by any objective measure it’s a rigged insider-trading market. The fact that the “law” has failed to adequately criminalize it doesn’t change its criminality. (And meanwhile the neoclassical ideologues will still prate on about the “information” of the “free market”.)
 
What value does this activity create for the economy and society? Obviously none. I doubt that much of the alleged well-planned, constructive capital investment which is supposed to justify the existence of the stock market occurs at 11 second intervals. I’m pretty sure the vaunted “market making” and “liquidity provision” will always be likely to disappear exactly when it’s called upon, as we saw on May 6.
 
That’s the state of affairs when we look at just the “shadow banking” side of it. When we look at this kind of market manipulation from the TBTFs Goldman, JPM, Citi, and BofA (all also perfect last quarter; by contrast Morgan Stanley was downright pathetic with four losing days), and we see how they’re not only playing the same rigged market games but doing it with free money from the Fed, the only question to ask is, How can they lose? On the contrary, if anything they should be far more “profitable” than they actually are, if they’re really as “talented” and smart as they’re cracked up to be, and not just a bunch of thugs leveraging an entrenched monopoly position. For example, according to this Zero Hedge analysis, Goldman’s performance is actually mediocre given its advantages. (And MS must be really incompetent, to have lost at all under these circumstances.)
 
As for whether it’s really possible to be perfect, to rig the market to the point of total domination, I wish they could and would. That would simply be the end of this rotten currency, since if one man sits on an infinite pile of paper dollars while everyone else has none, then the dollars are worthless. That’s simply the core contradiction of capitalism at work once again. The core logic of all these crimes. The only real issue is to what extent they use the ephemeral fake wealth to buy and try to hold real assets like farmland, watersheds, the means of production for post-oil craftwork, toolmaking, etc. From that point of view I suppose it’s good news when we see the banksters still using the looted “bonuses” to buy mansions and yachts and Ferraris and such, the way all the media reports say. While the bank rackets as a whole are positioning themselves for the return to feudalism, apparently most of the individual cadres still consciously think it’s business as usual.
 
Meanwhile, the HFT issue is a distillation of the absurd power we’re giving these criminals and their machines. We see how technocracy in action will always be the tool of corporatism. What could these computers and the “talent” which programs them do if put to socially productive purposes? I suppose the propaganda tracts are full of highfalutin visions, but in real life we’ll never know. All those high-flying promises were nothing but lies.
 
An even more tremendous example of prostituted technology run amok is currently injecting poison into our ocean at an unfathomable rate. It looks like my post which I whimsically named after a volcano erupting forever was more prescient more quickly than I thought. I just mistook which volcano it would be (though ominous Katla’s been rumbling).
 
I just used the word “unfathomable” to describe the rate of the oil’s eruption from the wound, because that’s literally true. Not because the technology to gauge the flow with considerable precision doesn’t exist, but because the government is allowing BP to veto such measurements. (Is anybody still going to say something about this technology existing for the public good, and not purely as a racketeering tool?)
 
Finally, under extreme duress, BP enabled an improved view of the hemorrhage, and what does it show? Although the lying MSM continues to parrot the 5000 barrels/210,000 gallons fraud, which the NOAA itself at first contradicted weeks ago before falling into line, the new view proves that it’s bleeding out at least 20K barrels a day, as independent commentators have been saying, and probably far more. Some estimate the current flood at 70K per day. And it can get a lot worse. BP itself estimates the maximum likely flow at 163 thousand barrels per day.
 
So having triggered an absolute economic and environmental catastrophe, what do BP and Obama do? Do they want to fix it at all costs? Do they feel remorse? No, they have one overriding priority – lies and secrecy. Just as the purpose of the MMS was never to regulate Big Oil but to facilitate its looting, so Obama sees the government’s purpose as to run propaganda interference for BP. He apes its lies, supports its spin, accedes to its information blackout, and even lets BP deputize the Coast Guard as a private thug to smack down any would-be accurate media coverage.
 
The fact is that just as corporatized technology could financialize and loot the economy, but can never repair any of the damage it’s caused, indeed can only complete the destruction on a one-way track (the Bailout), so BP’s technology could tear this hole in the bottom of the sea causing energy concentrated to the point of poison to hemorrhage out into the lifeblood of the earth itself, its allegedly infinitely renewable seas. But the same technology cannot fix it, and can’t even accurately look at it. (Physical and political impossibilities are the same thing if we refuse to change the latter.) Once Humpty Dumpty falls off the wall, all the kings horses and men wouldn’t be able to put him together again even if they wanted to.
 
But of course they don’t want to. They want to lie and say he’s fine, that they’ve restored him to his perch, that he never even fell off the wall in the first place. In Lewis Carroll’s great parable, Alice isn’t actually talking to Humpty Dumpty at all when he tells her “When I say a word, it means whatever I want it to mean, nothing more and nothing less. The question is who is to be Master.” She’s talking to a hologram, with the words being thrown to the image by the spinmasters. The real Humpty is on the ground, dead and in pieces, on the other side of the wall where she can’t see.
 
So it is today with our politics and our economy. And now with the sea itself.
 
Obama’s and the system’s lies for BP and Drill Baby Drill are typical. They’re the only response the system has available as each new disaster hits. It’s just like the Bailout secrecy: How much public money has the Fed allowed the big banks to steal via its “facilities” and MBS buys and QE? Who were the robbers and to what extent? They know their actions constitute history’s greatest robbery, and they have no defense other than secrecy and stonewalling. They even wanted to declare the details of the AIG money laundering scam a matter of “national security”, that’s how hysterical Geithner was about trying to cover his criminal tracks. It’s the same instinct of gangsters everywhere. As Jimmy says in Goodfellas, “Never rat on your friends, and always keep your mouth shut.”
 
Let’s get it straight once and for all. Nothing works anymore. Corporations, government, system technology – it all exists for no purpose other than to steal, and in the process it can do nothing but destroy. It can never again create, never distribute, never fix or heal. It can steal and destroy and then lie and cover up. That’s kleptocracy. It can never be “reformed”. Anyone who doesn’t want to live forever as its slave has to do all he can to break free of it. We have to go “off-grid” as completely as possible – economically, socially, and politically. We have to work to strengthen relocalized ties, and to defend what we build from the system’s inevitable attempts to crush us in the cataclysm of its own collapse.

April 30, 2010

Signal Lanterns

Filed under: American Revolution, Freedom — Tags: , , , , , , — Russ @ 12:55 am

 

A few weeks ago, April 18-19, was the anniversary of Lexington and Concord and Paul Revere’s legendary midnight ride. I didn’t think of it at the time, preoccupied as I was with stuff like the SEC and Goldman. But I intend to pay closer attention to these august dates from our lost revolution in the future.
 
It’s literally true that Paul Revere’s ride is a legendary matter. Throughout American history there have been many Reveres. There was the original story of the “wounded innocence” of 1775, the province of all who were forced by fate into the crucible of war and revolution. (Though when the participants were getting their story straight they rejected Revere’s own deposition because he wouldn’t swear to the alleged fact that the British fired first at Lexington, and he alluded too much to the patriots’ prior preparations for exactly such a British march, which planning tended to contradict the wounded innocence contention.)
 
The story of the heroism of the midnight ride and the signal lanterns was the folklore of Boston right from those first heady days. The legend grew though the first half of the 19th century. Then came the Civil War, and with it Longfellow’s immortal tale of the lone hero with his ringing call to a nation to fight for its freedom. It was carefully tailored to resonate with a public being fired up for war, and at the same time to flatter the already prominent American legend of the hardy, self-reliant man of action. The story had spectacular success from its publication in January 1861, and this has been the base of the legend ever since, while further hagiography as well as debunking built upon (or chipped away at) this base. Thus we’ve seen the martial “Colonel Revere” of proud imperial days, and Esther Forbes’ “simple artizan” [sic] of 1942, the common man who rose to the occasion, and even the capitalist-soldier of the Cold War, as well as the relatively playful satirical treatment of Revere and other patriotic-affiliated figures following the pointless horror of the Great War, or the far more angry debunkers of the Vietnam and Watergate era (some of them going so far as to claim the midnight ride never took place, or that Revere was drunk as he rode, or that he was a  snitch). And so on into modern times where between structural depictions of the social forces of history and “political correctness” Revere and his midnight ride have often disappeared completely.
 
While we can dismiss shallow liberal “correctness” with the level of respect it deserves, we are forced to recognize the power of history itself and its economic and social currents. Today especially we’re buffeted amid a vast turbulence of forces. So far as I can see the readers of this blog agree that the global financialized debt system is doomed and must collapse of its own weight, and also that there’s little even a large mass of the peasantry, let alone a few lonely denizens of the blogosphere, can do to affect the way these forces play out and the tempo of their doing so.
 
Where does this leave the people and events of our legends? Whether we take the legend of a lone midnight rider (or a handful of riders if you include Dawes and Prescott, who are the only other well-known names) and wounded innocence which spontaneously rose and fought back at Lexington and Concord, or whether we go with the more accurate story of a several dozen messengers acting out a well-laid plan which culminated in the vigorous resolution of the fight, either way it’s still just a relative handful of people.
 
Did history have greater space for contingency and small-scale agency back then? Was that too a casualty of the industrial age, the oil age, the age of masses, and by today nothing can any longer be contingent, and no one, not even among the powerful, can be an agent?
 
And then there’s the question of whether today’s events ever still concentrate such pivotal significance into such a small space, in terms of time, geography, and the number of actors engaged. If instead we expand the idea to just look for the metaphorical Lexington event, which could serve to fire the will to fight of millions, or if we go further and seek to envision the discrete moment which could signal the final breaking of the exponential finance and Bailout wave, it’s still hard to imagine. 
 
What can today be the equivalent of a General Gage marching upon Lexington? The latest and most exciting event has been the SEC’s filing against Goldman, which has indeed excited everyone to the point that we see speculation everywhere on whether this is the breaking point for Goldman, or even the turning of the tide against Wall Street itself. Almost as pregnant with portent is the looming European debt default unwind, which may roll up the EU itself, with incalculable consequences. We still have zombie Dubai, still extending and pretending. And providing eschatological backdrop as well as threatening economic devastation itself, we have the eruption of Iceland. Can any of these really provide the non-linear break? We’ll rightly keep doubting until the moment it happens, and probably for some time afterward, just as the newspapermen who witnessed the first Kitty Hawk flight said “that’s nice” and went home thinking, “that was a neat trick, whatever they were really doing”, and it was days before what had happened really sunk in. 
 
When I think of the early days of the crisis the date 9/29 still leaps out at me. I remember writing it on the cover of the notebook I started in August. On 9/29/08 I wrote, “Sarajevo”. It was the day the first TARP vote rejected it. Of course we know what happened next, and by now I don’t say that date was particularly important. But at the time it struck me as a critical moment in the crisis. I thought they might actually have to start letting the whole thing unravel right then and there. But of course that didn’t happen, then.
 
Can there really be such a day? Can there be Marches of the Regulars and midnight rides? And even if there still could be, could there again be a response? Can the Minuteman spirit ever reawaken?
 
Well, that’s just some musings when I thought about the old days. Paul Revere struck me because his legend has been so resilient and evocative for so long for so many. Like I said, I don’t know if they even teach him in school anymore. But should we ever be able to seize upon events, it would be of great use to have the legends to help render them familiar. Not just Revere (who’s really just an example here, but a good one) but the entire heritage is waiting and wanting to do real work once again. It wonders, How was our Revolution lost?
 
So I just wrote this as some notes and suggestions for further thought. Maybe it doesn’t make a lot of sense, or maybe it’ll give people something to think about. We seem to have unfathomable time (meaning simply that we have zero idea if the zombie starts toppling tomorrow or five years from now or anytime in between) and not a huge number of options for what to do with it at the moment.
 
Oh well, another strange gizmo for the toolbox.

April 28, 2010

Goldman Testifies: “We’re Not That Smart.” Jerks, too.

 

As I wrote a few days ago, I’m not concerned about whether or not Goldman actually did violate Wall Street’s own self-rigged law. So the technical strength of the SEC’s case is a side issue, at most a gauge of how far the law’s abdication has really progressed.
 
We should never fall into the trap of letting the enemy frame the issue according to their own corrupt measure of “law”. The dispute of whether or not something is technically illegal is always likely to help the banksters and not the people. We must always insist that these are crimes by any moral measure, crimes against humanity, and would be legalistic crimes in any human community which lived according to the rule of law. That there’s even a debate about the vast, systematic fraud of Wall Street, executive control fraud as the very basis of their business model, or about specific examples of patent fraud like the Abacus con, proves that we no longer have the rule of law in this country. At best law is something struggling to crawl back out from under the massive weight of poisoned mud under which Wall Street and Washington buried it alive.
 
As for their rigged laws today, the only reason we should look to where their crimes run afoul of even that corrupt measure is to taunt, “Even by their own rigged laws they’re guilty!” But that’s never our measure of the indictment. We know that just as nothing short of Nuremburg could deal with the magnitude of (mostly legalized) Nazi crime, so only a Second Nuremburg can deal with this, the same magnitude and quality of economic crime.
 
So with that in mind let’s look at yesterday’s spectacle. Its significance is political. Although it may affect the legalistic proceedings, the real value of it was to highlight before the eyes of the people the everyday criminal actions and unregenerate, clinically psychopathic mindset of these criminals. The more people see the gangsters squirm and stutter under the glare of such simple, morally common sense questions as “Do you think when you sell a security to an investor he has a right to believe you don’t think it’s going to fail?”, the more obvious it becomes that these are nothing at all but gutter con men, with their victim being no one less that America itself. (Although we also need to do more work from the other side of the issue: That they create nothing, perform no useful function. It’s true that “he only destroys” and “he produces nothing” are saying the same thing, but unfortunately many among the masses treat those as two distinct ideas.)
 
Let’s look at a few choice moments with Blankfein and Viniar. (The questioning of the peons was more of the same. It reinforces the ugly picture given by Blankfein and Viniar. We did learn that Tourre’s lawyers are really Goldman’s lawyers. So he’s either being set up to take the fall, or they already have a private deal worked out for him to willingly take the fall.)
 
It’s clear that they’re all incapable of anything but lame excuses and phony, truculent acquiescence when pressed about human issues like ethics or remorse. None of these thugs has a shred of those, or of any other human quality. They are in fact something alien to us, a species of vermin.
 
The only times they sound authentic are in their bursts of criminal defiance.
 
Perhaps my favorite moment was Viniar repeatedly saying he regrets that anyone wrote about Goldman’s crimes in an e-mail, and the vulgar tone of some of them, but not the crimes themselves.
 

Senator Levin is back to leading the questions, and his back and forth with Mr. Viniar has captivated the room.

He starts with a basic question, one he and other senators have asked so many others today: Do you think that a customer has a right to believe that you want securities that you sell to succeed?

Mr. Viniar, a numbers guy, stumbles: “I’m not sure what succeed actually means.”

Mr. Levin continues, asking if a customer has a right to believe that Goldman is selling something the firm believes is a solid security.

Mr. Viniar says that “when we sell securities to customers, we don’t necessarily have a view that they’re going to go up or down.”

Mr. Levin says that’s not what he meant. He means that customers do not think Goldman would sell something it thinks is junk, or the more vulgar word that the senator used. (Forgive him, though, he was citing Goldman employees in e-mails.). Mr. Levin says he sees a very clear conflict of interest that needs to be dealt with. He asks Mr. Viniar what he felt when he heard about the things Goldman employees had written about these deals, again using vulgar words.

Mr. Vinar replies, “I think that’s very unfortunate to have on e-mail.”

The room erupted in a gasp.

Mr. Viniar continues: “I think it’s very unfortunate for anyone to have said that in any form.”

The senator presses the chief financial officer, who adds, that he thnks it’s unfortunate in and of itself that his employees thought their deals were junk — or worse, as the words indicated.

Mr. Levin retorts, “That’s where you should have started.”

He then called a brief recess for the procedural vote on the financial bill.

[Then, after the recess:]

Mr. Viniar said Senator Levin was 100 percent correct in the statements he made before the procedural vote. Mr. Viniar said he felt he should have straight off expressed dismay at the vulgar expressions that some at Goldman believed described their own deals.

 
He was groping to say something like, “I regret that we had people with such an unprofessional, unethical attitude about our duties to our clients; this does not reflect the Goldman creed”, but try as he might he couldn’t find the words. It was like a scene in a movie where the character can’t help revealing what he really thinks even though he’s trying to conceal it. (After a break he tried again, and again could only say, “I regret the vulgarity”. How clueless, how unaware of one’s surroundings, can one get?)
 
We look here directly into the black abyss of these soul-dead criminals. They’re so committed to their crimes, so engrossed in them, that they’re incapable of any attitude other that open defiance or fumbling, incompetent spin. They’re such clinical psychopaths they’re no longer even capable of tactical lying where it comes to the politics of the situation. They have a disease. We should be grateful for it, since things would be worse if they were also good political liars.
 
And now we come to Blankfein, who reveals the same character. He started out lying again about the Bailout, that it was only $10 billion from the TARP and that Goldman paid it back (Goldman’s real cut of the loot so far is over $50 billion and counting).
 
In Blankfein’s exchange with Levin, you can look in vain for B himself to provide any evidence of any productive function Goldman performs, how it contributes to humanity in any way.
 
B himself says they do nothing but run a casino and place bets:
 

Senator Levin and Lloyd Blankfein just can’t agree.

Like the exchange played out between the senator and Goldman’s chief financial officer, Mr. Blankfein and Mr. Levin volleyed back and forth, with their views miles away from each other.

Mr. Levin asks the question he’s asked over and over again. Should Goldman be telling its clients about its own positions? Is Goldman mistreating its clients by betting against them? Do you think clients should know if Goldman thinks something is a piece of junk (or a word more vulgar)?

Mr. Blankfein insists that Goldman is a principal. “The act of selling something is what gives us the opposite position of what the client has. If the client asks us for a bid the next minute we own it, they don’t,” he says.

It is the nature of market-making, he says, that puts Goldman on the other side of its clients’ bets. “What clients are buying or customers are buying is they’re buying an exposure. They are not coming to us to represent what our views are,” Mr. Blankfein says.

But the senator presses on. He thinks clients should know when Goldman is betting against them.

“You say betting against,” Mr. Blankfein says almost incredulously.

 
Kaufmann catches up B on the question, when did you know the mortgage market was going to collapse? B says he never knew, and that he had nothing to do with Goldman’s shutting down the “CDO warehouses”. B ends up having to say, “I think we’re not that smart.” (Picture Salazzo in “The Godfather”: “You think too much of me, kid. I’m not that clever.”) It’s the same old heads-I-win-tails-you-lose. We’re always told the “bonuses” are justified because of how “talented” all these cadres are. And certainly nobody on Wall Street is more talented than Blankfein, who now suddenly says the talent hype was all a lie, that he’s “not that smart”. So which is it? If they’re now admitting they have no “talent”, aren’t that smart, didn’t know what they were doing, surely they’ll be giving back all the bonuses?
 
At any rate, we certainly shouldn’t listen to any objections the day we’re able to claw back all of it, correct? Blankfein himself says so: “We’re not that smart”.
 
Kaufmann missed a bet here:
 

As the exchange continues, Mr. Blankfein points out that many financial companies lost tens of billions of dollars because of the sharp decline of the housing market. (Think Citigroup, Merrill Lynch, UBS — the list goes on.)

 
He should have retorted, “You mean ‘would have lost’ if the taxpayer hadn’t bailed you out.”
 
There’s more back and forth with McCaskill and Tester about synthetic CDOs. It comes through loud and clear that these are worthless, unproductive criminal scams.
 
It’s odd how many commenters on the econoblogs, even among those unsympathetic to Goldman, who scoff at the “financial illiteracy” of the senators. Illiterate they may be by quant standards, but at least in this forum they seem to be as literate as anyone needs to be. The only ideas and words you really need to describe any of this are fraud, con, scam, crime.
 
Yesterday’s exercise provided a demonstration of the mindset of pure, incorrigible, irredeemable criminals. They cannot be rehabilitated. The rackets and their cadres cannot be “citizens”. Wall Street and America are antithetical. Both cannot exist. One must die.
 
The only question is whether we’ll have the triumph of America or of Bailout America; whether we’ll live as human beings, or according to the whims of fraud, theft, robbery, bribery, and extortion. That’s the way it is today. But they’re adding serfdom, and soon they’ll enforce enslavement.
 
Today is the crossroads. Whether or not there’s to be any future at all is the decision. Let’s make sure we seize every opportunity like yesterday’s testimony, to drive the right decision.

April 27, 2010

Silly Season

 

Things are reaching quite the bizarre crescendo this week for finance “reform”. We have the regular crooks and the windmill tilters, and sometimes it seems exciting enough that I’m ready to charge a windmill myself.
 
Today Lloyd Blankfein will go before Congress to talk about Goldman’s political plight. (This is definitely a political matter as far as its real significance; even if the SEC is serious about its action, it’s doubtful that with these rigged laws Goldman will end up getting more than a wrist slap.) They’ve already issued some preliminary lies and nonsense, as dissected here and here.
 
Is it really possible that the SEC suit against Goldman will be the tipping point? That even the worst Democrats like Blanche Lincoln are feeling the heat to the point that they might even pass a quasi-reform rather than a pseudo-reform? This past weekend they even made a good adjustment in the derivatives proposal. They beat back arch-criminal Warren Buffett’s brazen attempt to carve out an exception for himself, which was enough to piss off Buffett’s waterboy Ben Nelson, who yesterday voted with the Republicans to cut off debate on the bill….
 
…and that brings us back down to earth. What I just said is probably nonsense, since the very fact that with 59 votes on paper (which not long ago was the filibuster-busting 60), and certainly more than 50 even with the possible defection of absolute villains like Nelson, the Democrats still refuse to go ahead and use their majority, either through reconciliation or by just getting rid of the filibuster altogether, proves that they have no will to real reform. At most, like Lincoln they’re politically trembling for November, as well they should be. But even with those political fears, they’re still only going to pander and engage in pseudo-reformist political theater.
 
Yes, for the moment the derivatives regs are headed in the right direction. But they still fall far short of what’s necessary – the complete banning of speculative derivatives, period. And, the existing House bill contains nothing but loopholes and scams masquerading under the name of “derivatives reform”. What kind of odds would Goldman offer if I wanted to bet on that eventual negotiation improving or gutting whatever the Senate comes up with?
 
And the bill doesn’t break up the big banks. Instead it wants to enshrine an allegedly new “resolution authority” which would really take its place alongside the existing PCA law which was violated and ignored in 2008 and 2009, and would undergo the same fate in the next crash. This is a scam plain and simple. Via the Kanjorski amendment it may even be a Trojan Horse designed to guarantee further bailouts, by enshrining a new “right” of insolvent, collapsing banks to demand judicial review of resolution seizures. Since such resolutions would have to be undertaken with speed, to let the bankrupt banks sue can only be intended to ensure that if an administration ever actually wanted to use the resolution authority, it wouldn’t be able to, but would have to cave in and agree to a bailout.
 
Also, the mechanism by which this bill is supposed to “guarantee” that the resolution won’t cost the taxpayers any money is a fund which will allegedly be collected from all “big” banks, meaning banks with “assets” of $50 billion or more. While that’s pretty big, it’s still extending the net far and wide for the benefit of just a few of the biggest rackets. As we saw with CIT, the government doesn’t consider $100 billion “too big to fail”. So why are they mining as low as 50 to help out the likes of JPM, BofA, and Citi? It’s obviously a pro-oligopoly measure, meant to harm mid-level competitors of the biggest rackets. (Not that I’m getting teary-eyed for the mid-size rackets, but we have to recognize what’s going on here.)
 
So this “resolution authority”:
 
1. Will not be used in lieu of bailouts. In the crisis they’ll simply ignore it, just like they did before.
 
2. Even if they wanted to resolve an insolvent big bank, it’s likely the bank could take legal action to stall, thereby forcing the bailout through disaster capitalist extortion.
 
3. Whatever motions they go through to collect monies from the rackets themselves to fund these bailouts will fall disproportionately upon the smaller rackets. So just as from the Bailout’s inception, so the continuation of the Bailout will have intensifying monopoly as one of its primary goals.
 
Overall the Senate bill is shaping up to be sham. Even if the derivatives regulation does end up being strong on paper, it’s likely to remain ineffectual if the derivatives market remains in the stranglehold of a handful of rackets. The bill doesn’t break them up, so they’ll instead break up anything worthwhile that’s in the bill.
 
It seems that for all their public whining, the banksters are on more solid ground in their laughter. The laughter suffuses their jolly e-mails crowing over the cleverness of their crimes.
 
And then they have their ever-reliable MSM errand boys to package their propaganda for them.
 

“Because of the origins and the impact of the global financial crisis, we have now entered an historical phase in which most industrial country governments will restrain banks through the wide use of regulatory, tax and enforcement tools,” he said. “People can debate for hours whether this should happen or not. The fact is that it will happen.”

 
This is part of the full court press, everyone playing his role in putting over the farce of “reform.”
 
And of course Sorkin himself:
 

While most agree that the system needs to be reformed, the worry, at least in Beverly Hills, is whether the reform will go too far — in contrast to the rest of America, where many feel the reform won’t go far enough.

 
What an odd term – “rest of America.” By that he means, America, period. I think any real American recognizes that Wall Street is an alien cesspool, and the finance globalists, to the extent that they’re nominal American “citizens”, are a cabal of traitors. They’re all enemies of the true American people.
 
But I suppose he’s telling a kind of truth there. To the finance gangster elite and their little flunkeys, Wall Street is the “real America”, and a hack like Sorkin probably thinks he’s being magnanimous in referring to the feral, filthy peasants, slated for serfdom, as “Americans” at all.
 
That’s the same mindset which is producing the Senate bill, which produced the House bill, and the health racket bill and so much else, and encompassing it all, the Bailout itself.
 
In the ideology of Bailout America, only the rich are citizens. The rest are economic cannon fodder. We who truly do comprise the real people, the real economy, any real chance of human community and well-being, must turn this lie upside down. We must recognize these gangsters and their servants as the stateless, as the rootless, as the useless, as the worthless. They’re not Americans, and they have no legitimate place in America. With their treason, their robbery, their vandalism, they’ve forfeit all such consideration.
 
They’re rabid dogs, and must be driven as such.

April 20, 2010

What if the Volcano Erupts Forever?

 

Watching animation of the ash dispersal from the Eyjaffjollajokull volcano is mesmerizing. The chaotic turbulence seems an apt image for the chaos spreading over the world today. The last three times this volcano erupted it triggered a greater eruption by its neighbor Katla. These are synchronized parts of a system. The greater eruption may come within the week.
 
I wonder if anyone’s trying to generate a similar graphic to depict the turbulence of the bailout; the now zombified, insolvent, yet ever more intense global finance casino, the Tower of Debt Babel becoming more top heavy by the day even as it totters more dynamically.
 
More and more criminal energy keeps being pumped into the system, accompanied by more and more fear, despair, and rage on the part of the victimized peoples of the planet. Non-linear jumps are inevitable.
 
This volcano, arising in Iceland of all places, the one place where people are showing any sign at all of being willing to fight back and say No, seems eerily symbolic.
 
If I were a mystic I’d think it’s no coincidence at all…..
 
By now we’re so used to the pulse of globalization and its mechanisms like cheap, on-demand air travel that it seems an odd interlude for so many planes to be grounded. (My fellow Naked Capitalism readers are familiar with how Yves Smith has been trapped in England for days now.) It’s especially unfathomable and infuriating that there’s no easy way to cast political blame for a volcano, though some are trying, and of course everyone’s looking for how to turn it into a scam. The system being what it is, the airlines are already whining for a bailout. The response to yet another shot across the bow from the uncanny orb itself is to try to build the Debt Tower higher, add another layer to the pyramid scheme, double down and compound the crime.
 
The system has literally zero ideas beyond theft by now. The hubris of kleptocracy has become extraordinary. Since the Greek meltdown has transfixed all us  perplexed commentators, we’ve grasped at the imagery and morality tales of Greek mythology. Today the story of Icarus seems apropos. Full of irrational exuberance, Icarus defied his father’s warnings and flew too close to the sun, which melted the wax of his wings and sent him plummeting into the sea.
 
Today the planes want to fly into the ash. Every flier wants to fly ever higher into what he thinks is the sun of infinite greed and power satiety. As Lloyd Blankfein and others have said, they consider themselves gods. But they are not. They’re louts and thugs who managed to strap on the artificial wings of cheap oil and a phony economy based on a fictive fiat dollar and exponential debt. That sun toward which they fly, into which they want to drag us all, is actually their hell on earth. But it shall be the furnace of their own immolation.
 
Just as a flight of fancy (though no more fanciful than the flight plan of infinite globalization itself), we can see the volcano as a parable. The flight gods now rescind our wings, which took us too close to the sun.
 
We face the impending economic and energy descent into the Second Great Depression, this one permanent by our measure of time. If this is to be what most would experience as a new Dark Age, what might be the effect of a physical blast out of Katla? A new, quickly-descending physical, literal Dark Age, including the mass failure of crops and subsequent famine? Yet this would not be a wild card, like the asteroid which mortally wounded the dinosaurs. It would just be an acceleration of everything that’s fated anyway by Peak Oil. The failure of globalization, of industrial agriculture, of consumerism, and the acceleration of every pathology, and of the system’s eventual collapse.
 
What if the planes were grounded forever? We see how the system’s already pushing back against reality. They’re already saying European transportation ministries overreacted and should lift the restrictions. Everyone was too hysterical about the threat of the ash. That you can fly through it just fine. Let the “free market” do its thing. There go those pointy-headed safety freaks again. All the same arguments which have worked out so well with the finance sector, and at every single other point they were deployed against reason, common sense, and reality.
 
But just as a thought experiment, what if the planes were grounded forever right now? The reality is that they will eventually be grounded forever, and any grounding today only lessens the finite number of flights left in our future. Man cannot fly forever on renewable energy and biofuels. You can’t have cheap globalized flight without cheap fossil fuels. As the oil depletes and becomes impossible to extract except at prohibitive costs, we’ll face a choice about flight. We can allow “essential” flight to continue. In practice this will mean elites, the rich, and the military get to fly, while the rest of us are permanently grounded. This particular technological stratification will be a stark milestone on the road to our impending enslavement, as we look up in wonder at the alien things in the sky in the same way a South Seas islander once did.
 
We’re already enshrining our own version of cargo cults, as we keep absurd faith in things like consumerism, what the elites call “capitalism”, the “ownership society”, the monetized version of the “American dream”, even as these have been proven to be Big Lies. So we may even tolerate the dear, slave-extracted oil being used to power luxury jets that hop among fortified elite compounds while we grovel in the mud. So far that’s been our response to things.
 
Or, we can make the choice, find the resolve, to say the oil, like every other resource, belongs to we the people, and we’re going to take it back to use for the public good. In the unlikely event of such morality and wisdom prevailing, we will indeed ground the planes as a stupid luxury which under corporatism produces almost nothing but generates enormous waste and pathology.
 
The reality is that the fossil fuel economy will be grounded. Financialization will be grounded. All the volcanoes are rumbling. The only one we’re not sure about is the political volcano. There too, only in Iceland have we felt some slight shaking of the earth.
 
Meanwhile the whole airline fiasco is being derided as yet another EU failure. Just as they thought they could have their monetary union cake but eat their sovereign fiscal policies too, so it turns out their parochial transportation ministries don’t know how to coordinate responses to things like volcanoes. Following the eruption it took five days for the ministries of the whole gaggle of countries to even get together. After the disparate, nationally based responses to the financial crisis, to the Georgian war, and the feckless pseudo-coping with Greece, this is yet more evidence of the absurdity of “Europe” as an entity and as a concept.
 
Once again I’m reminded of how the “EU” like every other aspect of globalization and financialization, is in itself a bubble phenomenon. It looks good and functions well only on the upswing, only when things are going well. But the moment things go wrong, having to mark it to market becomes a disaster.
 
(And with something like a volcano, there’s no craven FASB to cave in and let you cook the books. You fly the plane or you don’t.)
 
And what about that Greek bailout? After all the tedium and angst of the protracted negotiations toward a bailout, everyone has concluded almost immediately that this bailout won’t work. Greece may still default in 2010, 2011 at the latest. And the wobble in Portugal’s debt tower is becoming more pronouced.
 
(At Zero Hedge they joked that the Greeks should still sell islands like Santorini. There’s another volcano, which leveled the Minoan civilization at Thera and gave rise to the legend of Atlantis. So where to for today’s Atlantis? It’s the same flagitious pseudo-civilization, the same crime and depravity as in the original legend. Once again we see how symbolic this volcano is.)
 
One last rumble which some are claiming (or hoping) to detect is that the SEC’s suit against Goldman will open the floodgates of a general offensive against this particular hedge fund, and against the whole compass of the TBTFs. Since Friday several other actions against Goldman have commenced. We’ll see what happens.
 
My position has long been that on the longer, more ponderous curve, this is the downslope of fossil fuel globalization and the financialized pseudo-economy, and the pseudo-civilization which by now is a diseased vestige. But politically there’s no linear reform curve here. The only linear political curve heads down as well – to neo-feudalism, neo-medievalism, serfdom.
 
Only a non-linear political break, seizing an opportunity opened up by some stumble along the vaster economic curve, can flip the political trend over to a different strange attractor. The two attractors are fascism or revolution (I take solace in the fact that either way corporate liberals are doomed). By “revolution” I mean the people transforming themselves back into a true constitution the way we once were, when we still lived according to the values of freedom, justice, morality, and community. The great volcano of the age already casts its pall over modern “civilization”, which was really just an oil- and debt-fueled blip. All that must choke and die.
 
But it’s our choice whether we die with it, or whether we use the surge and winds of our own spiritual volcano to loft us above the ashes of the burning neoliberal world, where we can again soar the currents and breathe the clear, bracing air of our redeemed humanity.
 
They flew into their false sun of greed, war, destruction, despair. But they and their gaslight sun will now crash to the inexorable earth. Will we fall with them? Or shall we seek the old, and what can again be the new, light? Humanity never had a sunset, only a light blotted by the smog of crime. Our sun can still be rising, if we rise to meet that dawn. It’s a choice of volcanoes.

April 17, 2010

The SEC Sues Goldman

Filed under: Law, Reformism Can't Work — Tags: , , — Russ @ 2:05 am

 

Yesterday the SEC sued Goldman Sachs for civil fraud. The case centers on Goldman’s 2007 ABACUS CDO, which it manufactured at the behest of hedge fund predator John Paulson. The scam was for Paulson to cobble together a toxic mess of MBS he expected would blow up, find suckers to buy this CDO, and then short it. Goldman’s role was to launder the CDO as having been conscientiously constructed. They used the good name of a vetting firm, ACA. Goldman supposedly told ACA that Paulson was consulting on the MBS selection and would be taking the same side of the bet as the buyers would be.
 
Goldman then cited ACA’s imprimatur in touting this CDO to the suckers – pension funds, other institutional investors, dumber banks, the usual suspects. Meanwhile it helped Paulson really bet against what was really garbage. It collected fat fees every step of the way, including from the investors it defrauded.
 
(Barry Ritholz compares it to The Producers, who try to defraud their investors by putting on a crappy play they expect to quickly close while embezzling much of the loot.)
 
Typical of this feckless government, it’s only a civil and not a criminal indictment. Even if the SEC is serious this time (which I won’t assume until I see it), Goldman would still get off easy for capital fraud.
 
Of course the terrorist stock market struck fast, with the Dow plunging 125.91 points, the most in tow months and ending a week-long surge, to punish this nuisance to the banksters. The MSM rushed to defend the market. The NYT showed great compassion for the victims and fear for the future. “A relatively calm day turned turbulent” as those regulatory barbarians struck out of a beautiful spring sunrise.
 

Expectations are unusually high this quarter: investors are looking for an average of 38 percent growth in profit. Banks have driven much of the strength in the market over the last year, helped by a period of historically low interest rates that have made borrowing cheap.

But analysts worry the golden days for the financial sector may be limited if government investigators intensify their examination of risky trading practices. That may raise new questions about whether the broader momentum in the market can endure.

“What you’re going to go into now is a market that is very skeptical about the outlook,” Mr. Battipaglia said. “Whether this recovery continues or flattens out will be made clear in the weeks ahead.”

 
Even in the first moments of the indictment the first speculation was on how GS probably had a heads up and took positions to capitalize. Zero Hedge was asking how, not if, they must have shorted themselves. Sure enough, a few hours later there were more specific rumors. It’s likely that Goldman has committed every financial crime it was able to conceive every time it could, so it would be extremely out of character for them not to have engaged against insider trading against their own market image. After all, it would only be shareholders who took any hit.
 
If the SEC is serious about this, that’s fine as far as it goes, though we have to assume the least. When everyone parses the technicalities of this or the similar Magnetar trade, or any of an endless list of crimes, we get bogged down in counting how many angels were dancing on the head of a pin. What was technically a violation? What was a “crime” in the legalistic sense.
 
This misses the big picture that the rule of law has already long since been subverted. The law was hijacked to legalize many of the worst crimes. A corrupt Congress led the way, with such abrogations of the rule of law as the CFMA, which unleashed CDS into a lawless free-fire zone. Where it’s technically impossible for “crimes” to be committed, crime can run wild. That’s just one example of how the rule of law has been completely liquidated. Few financial crimes are clearly identifiable as crimes anymore, since the system is set up to allow them to use the very complexity which enables their cons to also legally whitewash them. Meanwhile “regulators” are generally compliant and often accessories.
 
That’s the whole point of rule by administrative decree. You first liquidate the law and replace it by the rule of unaccountable bureaucrats. Then you select the bureaucrats themselves according to their conformity with whatever gangsterism is the regime you really want to impose. Any rogues who actually want to work in the public interest are bullied, marginalized, or purged.
 
So in any particular case like this struggling to figure out the technical extent of the “crimes” is likely to be a fruitless effort. Even if the process goes through the motions of establishing a technical violation, there won’t be any real punishment. It’s political theater. Meanwhile the overall criminal regime continues unabated. It’s misdirection.
 
The reality is always that the finance sector is organized crime, across the board. The government and the MSM want us to think that Goldman may have committed an isolated de jure violation here, an aberration from its general pattern of legality, with technical legality being synonymous with moral legality and with what any human community would treat as legal.
 
But the truth is the opposite. Goldman Sachs and all of Wall Street is a criminal enterprise. All of its major actions are crimes according to any common sense measure of morality and rationality. These crimes have simply been illegitimately legalized by a hijacked system of law. Goldman’s crimes are not the aberrations, but rather the criminal trend itself, while its truly legal actions are there only for money laundering and political cover, just like with similar criminal syndicates like the Mafia.
 
Since we live in a kleptocracy, this government will never actually restore the rule of law and bring justice to these rackets. Even what shreds of legality still remain will only be rarely, meagerly enforced. That this anodyne indictment (not even criminal) has been greeted with such a bustle is a testament to what a vacuum justice has become. We shouldn’t lose sight of the big picture – the entire finance sector is criminal, and this legal system has been hijacked and will never be sufficient to solve the problem. If we sit around and wait for the likes of the SEC to set things right, let them set the pace and dictate the scope of what can be done, we’ll definitely remain serfs and eventually become slaves.
 
In the meantime, what’s the real purpose of this lawsuit? The immediate consensus is probably correct. It’s meant to put on a big political show, to make the Obama administration look good as part of the rollout for his finance “reform” bill. In the end Goldman will at worst get a slap on the wrist. (But maybe not even that -there’s always Obama’s cowardice, his propensity to cave in under the slightest pressure even the rare times he ever tries to do something supposedly in the public interest. It wouldn’t surprise me if he fails to follow through on even this paltry little traffic ticket. Look at what happened to his bogus “Volcker rule”.) Meanwhile they seem to be setting up the standard “bad apple”, in this case one Fabrice Tourre, the Goldman cadre who ran the ABACUS operation. Presumably Blankfein and the rest of the brass have plausible deniability. Ah, there’s that “rule of law” again….
So the administration is inviting Goldman to make the bad apple defense. They can get together to make a deal. They can scapegoat this bad apple, implicitly exonerating the Goldman brass. Goldman gets a slap on the wrist, Obama claims a big phony victory. That looks like the plan. (But like I said, watch for Obama to instead cave in.)  
 
(Meanwhile we can see another example of the government’s bad faith in that phony finance bill. They’re sure in need of propaganda help for it. Its centerpiece is looking to be the “resolution authority” scam. We can see the scam when we look at how this vaunted, robust “authority” would actually require court approval to be exercised. The Federal Bankruptcy Court would have to sign off on any resolution. That’s absurd on its face.
 
Even assuming the government ever actually wanted to “resolve” a collapsing big bank instead of bailing it out, which we should never assume, how are you supposed to do this when you’re melting down so fast that “by Monday we won’t have an economy”? All a bankrupt bank has to do is stall, fight the action in court, and the government will feel it has no choice but to cave in and bail them out.
 
That’s the intended outcome of the “resolution authority” scam. It’s designed to fail even in the unlikely contingency that the government really tried to use it.)
 
These are history’s worst robbers. We need to stop obsessing on the scam “legalities” and develop a fully political consciousness and attack. Sure, when there’s a particular example like this, we can have fun with parsing it – but only and always within the broader context that this is part of a political war. Don’t let the government, the banksters, or myopic commentators frame it as: “Let’s see if they got caught in a technical violation. That’s the extent of culpability here. The burden of proof is on the accuser to prove his case according to the technicalities. If this fails, that signifies innocence.”
 
That would be the equivalent of a Russian in WWII having to prove in any particular case that German invaders were committing a technical crime.
 
The right way to look at this case, or any case like it, is “So for once you’re claiming you’re going to apply your law to one of these crimes? Refreshing. But we’re not going to let you fool us. We’ll believe you’re serious about justice when you restore real laws which criminalize all finance crimes. Until then this is all a scam. We’re not going to wait for a day that will never come. We’ll seek to redeem the law on our own.”

February 19, 2010

“The Grifters”, Taibbi’s Remake

 

Matt Taibbi’s new Rolling Stone piece, “Wall Street’s Bailout Hustle”, attacks the great crimes of our day with his usual vigor and ferocity.
 
This piece doesn’t really tell us anything new, but is another piece of the ongoing project in cataloguing these crimes and describing their real nature. We basically have two narrative options. The first is to describe it in terms of classical totalitarianism, corporatism masking itself in the simulacrum of democracy and capitalism (needless to say, what’s happening has literally nothing to do with democracy and textbook “free” markets and everything to do with their complete destruction). Hannah Arendt’s monumental work The Origins of Totalitarianism remains frighteningly relevant today. More topically up to date authorities are Naomi Klein’s Shock Doctrine (which I’ve long considered practically a part four of Arendt’s book) and Chris Hedges’ attempts to popularize Sheldon Wolin’s concept of “inverted totalitarianism” (corporatist tyranny which maintains the trappings of democracy for a while), as in these two excellent pieces.
 
The second is to describe it in terms of gutter gangsters and con men, swindlers and thugs. Both approaches are correct, and I use both myself. Tyranny is always infused to some extent with flim-flammery and thuggery. Although perhaps this corporatist tyranny is the most brazen and undiluted kleptocracy of all.
 
Here Taibbi goes all in on the con man lexicography. I don’t know where he picked up these quaint-sounding terms, but they all sound dead on.
 
So we have the rundown on the basics of this infinite capital crime, described in terms of its true wretched, sniveling, gutter crackhead pickpocket essence.
 
There’s “the Swoop and Squat”, originally describing an auto insurance scam, here describing how Goldman first bought CDS on mortgage securities from AIG, then bet against those MBS, then made $5.9 billion in collateral calls on the deterioration of its own bubble in order to cash in on as much of this “insurance” as possible before AIG went bankrupt. For the grand finale, Goldman used its government influence to extort another $13 billion in theft from the taxpayers, laundered through the AIG bailout. Grand total swindled: almost $19 billion. That right there wipes out Goldman’s alleged $13.4 billion in 2009 “profits”. That’s quite an insurance claim. But there’s lots, lots more.
 
We have “the Dollar Store”. For no reality-based reason, Goldman and Morgan Stanley were allowed to become bank holding companies, which gave them access to infinite free money from the Fed. (In spite of the MSM’s lies at the time, this move was heads-I-win, while the tails-you-lose was that the government never for a second intended to exercise the vaunted “greater regulatory oversight” holding company status was supposed to incur.) The FDIC helpfully guaranteed almost $30 billion of borrowing by this “bank”. The Dollar Store is simply a place set up to look like a legitimate outfit but really intended to fleece the mark. Here the banks, the government, the MSM were hustling and bustling about, looking intent, speaking of “getting the banks lending again” while the gullible taxpayer was taken for all he had. (Never explained was why, if it’s all government money, we needed the banks at all. I asked that the very first day Paulson said we need to get the banks lending again, and I’m still waiting for a real answer. I’ve always known there is none.)
 
Everybody thinks he knows a “Pig in a Poke” when he sees one, but if he’s the average American taxpayer, apparently not. Otherwise it’s hard to explain how the Fed got away with changing its rules to accept worthless toxic crap paper as Grade-A collateral for the free money it’s been shelling out.
 
The “Rumanian Box” was originally a scam counterfeiting device, but via its MBS buys and QE ideology, the Fed has become the biggest counterfeiter the world has ever seen. If you’re a casino bankster, this box works flawlessly and bounteously. If you’re any kind of saver or pensioner, or anyone who depends upon a paycheck, you’re the rube who bought a box that has stopped working.
 
“The Big Mitt” refers to a rigged poker game. Here the government and the banksters tip one another off and manipulate the deck so that the banks always draw aces while the taxpayer always gets a worthless hand. A particularly noxious example was how Treasury tipped off the banks on the mechanisms of the PPIP scam so they could load up on toxic paper ahead of time, which would promptly be exchanged with the government for stolen taxpayer money. At what point does corruption pass over into treason?
 
None of us needed Taibbi to remind us of how Goldman’s high-frequency trading algorithms are simply a legalized form of “the Wire”, the old scam whereby the manipulator of inside information acts upon it before releasing it to other stakeholders, to his profit and their detriment. After months of denial Goldman was finally forced to acknowledge that it sometimes acts against its own clients’ interests, if it can see an advantage in some fast insider trade based in the info a client has given them. It’s simply astounding that Goldman Sachs is allowed to exist at all, let alone that anybody still seeks their business.
 
Finally, “the Reload” is where the scammer tries to hit the same mark again. In the case of the docile doormat taxpayer I guess it’s hard to resist. So no sooner had the crash occurred and the Bailout was on then all the Wall St and Washington criminals pulled together to try to reflate some bubble, any bubble. The most obvious new bubble is the stock bubble, fueled 100% by public money stolen by the banks (and perhaps even surreptitious direct government buying). But quietly the Fed and Treasury have bought far above $1 trillion in MBS to prop up toxic paper prices and try to get this bubble as well reflated. They’re so desperate for bubbles they’ve even been pretending to take climate change seriously, because via cap and trade they’re on the scent of another bubble.
 
Of course, they have no choice but to try to reflate the bubble. America’s real economy, any productive basis for an economy, have long since been gutted. Those aren’t coming back under the auspices of this system. The one and only way the power structure can try to preserve its wealth and power is to prop up the zombie system, keep blowing bubbles, use the crashes for disaster capitalism and to consolidate creeping totalitarianism (this to be “inverted” as long as possible). Overt mass state violence will be postponed as long as possible. The final goal is remedievalism. The restoration of the Dark Ages. A handful of warlords, a mass of starving, freezing serfs.
 
This is the one and only path they can tread. The only alternative is to voluntarily relinquish power, return it to the people. I doubt they’ll do this.
 
What comes through most clearly from all this:
 
1. The big banks are permanently insolvent. None has made a legitimate cent in ages, and none ever will again. Especially now, 100% of their “profit” is: (A) simply looted from the taxpayer, (B) accounting fraud, (C) the result of crimes like HFT front-running.
 
2. America’s apathy and docility in the face of its liquidation, this docility being a form of extremism in itself, is exceeded only by the absolute derangement of the sodomites. The orgy, the “bonuses”, the psychopathic behavior, make it clear that by now they can’t help themselves. They’re like sharks in a feeding frenzy. They’ll rip and tear and gorge and bathe in blood until all the food is destroyed and all that’s left is to rip themselves to shreds.
 
To harken back to yet another example from medieval history, this is a modern example of the Dance of Death.
 
3. Taibbi brings in one last term from con lingo – America looks like “the True Believer.” The mark is desperate not to hear what he hears, not to see what he sees, not to know what he knows, and most of all not to do what he must do to redeem what was stolen from him. Too invested in his delusions, in the false comfort of the short-term status quo, in all the lies the con man convinced him to believe to the point that by now they constitute a significant part of his identity, or perhaps all of it, he refuses to hear, to see, to know, to do.
 
Instead he listens as the criminal himself sidles up again with a new scam. One which convinces the mark he can get everything back if he only believes another lie and forks over what little he has left. As long as for another moment the believer, who believes so intimately in such a bundle of lies that he can’t bear the thought of existence without them, can be warmed with a new reason to believe the lie, he can stave off the coldness of reality.
 
And so in a sense Lloyd Blankfein is right when he says he provides something in return for his theft. He tells the True Believer the lie he needs to believe in, lest he be forced to face his fleecing. Lest he be forced to face the cold hard choice of fighting back for what’s his, or submitting once and for all, before the world, before history, before himself, to abject slavery, forever.
 
So the only question is, will the inertia True Believers defeat the real truth and the real call to arms?
 
Meanwhile, there’s no question at all about the cons themselves. There’s not enough rope in America to hang ’em all. 

February 15, 2010

Tower of Debt, or Greeced Pole?

 

It looks like we have shaping up in Europe a reprise of 2008. Everyone’s comparing Greece to Bear Stearns, or Lehman, or AIG, depending on the point of view.
 
The AIG angle looks especially enticing when you look at the inevitable entanglements of Goldman Sachs. Goldman encouraging Greece to spend like a drunken sailor, Goldman helping it hide the debts from the EU and its accounting rules, Goldman meanwhile taking on lots of CDS protection vs. the inevitable default, and Goldman then seeking to trigger that default, to force a bailout of Goldman’s positions.
 
Yes, in that sense it’s like rewriting a play. Greece ~ AIG, Germany/the EU ~ Treasury/the Fed, Goldman = Goldman.
 
On the other hand, if you leave out the actual mechanism of crime and take the eagle’s-eye view, this sure looks like Lehman – it’s collapsing, everyone wants to pretend they can let it collapse without crashing the system – but this time everyone knows you can’t let Greece default and still keep on with business as usual. Nope, Portuguese and Spanish default would probably follow hard on a Grecian jubilee, and from there the dominoes quickly get much bigger. There are dark allusions to the big European banks’ exposure to Greek debt, and the UK itself is being held together by duct tape.
 
What this all adds up to is that they have to figure out something, but they don’t know what. That’s why so far they’ve just issued unsatisfying declarations of moral support and nothing more. I guess they’ll have to try to bail out Lehman this time around (especially if it’s also AIG and Goldman is demanding its terrorist payoff).
 
(They’re also saying the EU charter doesn’t allow bailouts, but I think we can imagine what that’s worth. Watch how they evade it or openly flout it, compare that to America’s PCA law which was also ignored, and then ponder how much credence we should put in American “reform” proposals involving “resolution authority.” It’s always been a scam, it’ll be a scam today in Europe, and it’ll always be a scam in days ahead.)
 
The basic delusion with the EU is the same as in the American finance sector. They assumed assets would forever appreciate, that marking to market would always mean marking upward, and that no level of anyone’s debt servicing would ever outrun asset appreciation. That’s why no one worried about Greece’s Goldman-assisted profligacy.
 
While reading that NYT piece I found myself nodding and saying, “Greece played by the rules.” Including the “cheating” of which many are now accusing them: “If a government wants to cheat, it can cheat”, the NYT quotes an IMF cadre. It can indeed; that’s the way you all set it up with the IMF and with every other aspect of financialized globalism.
 
But don’t listen to the scapegoating – Greece did what it did with tacit German approval, because the Tower of Debt was supposed to climb forever while the banks raked in tremendous tolls. Collecting bingeworthy tolls doesn’t work if everybody fails to binge.
 
And when the crash comes? Disaster capitalism: bailouts, “structural adjustments”, privatizations, liquidation, expansion of tyranny. It’s set up to be win-win for the criminals. That’s the way it’s playing out so far in America, and now they’ll try to take the next step in Europe.
 
(Anybody who ever doubts a word of what I say must answer the two simple questions: (1) Why was the wealth so unevenly distributed in the good times, and more importantly (2) when the crash and depression come, why don’t those who benefited the most during the boom now have to sacrifice the most during the bust?
 
I think the record proves the criminal intent of all system ideology and practice throughout the cycle.)
 
So the Euro elites are having a little problem with one of their junior members? The Greek local bosses are getting uppity? But what did Greece really do? It’s just a microcosm of the whole scam. “Borrowing” while cooking the books. Stealing from the future. The way it’s piled up today, all government debt is exactly that; everyone cooks his books. The whole point of the EU is to run up debt. The whole point of exponential debt in general is to allow the already rich to live even further beyond their means, and to faciliate even further stealing from the non-rich who have to go catastrophically into personal debt just to try to keep up appearances. The financialized debt economy is simply a vast repetition of the original physical and geographic accumulation under feudalism. But this time the accumulation is not “primitive”, and a precursor of capitalism, but rather the terminal accumulation as capitalism dies out completely and feudalism returns. (Capitalism was only a temporary outgrowth of cheap, plentiful fossil fuels.)
 
The only reason the power structures of Germany and France set up this “EU” in the first place is because they thought it would provide them with even more exploitation opportunities at the expense of the smaller countries, and eventually of their own people as well.
 
How much responsibility does Greece have here, as opposed to Germany and the EU themselves, as opposed to Goldman? In looking at the whole gangland network, I rank everyone, from bosses to capos to the made men among soldiers, to the rank and file soldiers, to all the lowly hangers-on, and assign responsibility accordingly.
 
According to that ranking, Goldman and the EU/Germany are bosses, while the Greek establishment is pretty far down – a soldier, I guess.
 
So if Germany is whining because another boss directly advised one of the EU’s lower level guys on how to secretly run up debt, I say that’s mainly the fault of the bosses, while the Greek government is small potatoes.
 
As for the allegedly spendthrift Greeks in general who are being demonized by the establishment, I doubt much of this bingeing went to benefit the people as opposed to Greece’s own rich parasite gang, who will now try to socialize the pain after having pocketed the gain. (Just look at all the public revenues they already promised to Goldman as “collateral.” I’d love to see the Greek people tear up those “contracts.”)
 
And that’s just what Germany will end up trying to do, as it has to take the lead in a new round of Bailouts.
 
(And Spain is up next? Of course, it was mostly German banks who pumped up Spain’s housing bubble. Let’s remember that when German elites are whining about the Spanish Bailout.)
 
Yes, imposing totalitarianism by stealth and gradual economic strangulation is hard work.
 
So now, thanks to Greece, it looks like the Eurocrats will have to move into Bailout/disaster capitalist mode sooner than expected. “Austerity” measures, “structural adjustments”, like in Weimar Germany, are now demanded for Greece (and increasingly for America). Privatize the gain and then socialize the pain.
 
Greece, Germany, America – the taxpayer is the target, in exactly the same way that the poor of the Global South previously have been the target of globalization. The tsunami is now to engulf all of us, and we’re to be liquidated and feudalized.
 
If we let that happen.
 
Maybe we can look at each taxpayer base as a potential insurgency. So far the Americans have proven craven and docile. So now we look to the Greeks, and soon to the Germans. Maybe they’ll show a little more life in the face of their proposed liquidation.
 
I would call to all peoples. Greeks! Germans! Americans! The governments in Athens, Berlin, most of all in Washington and Brussels, are your enemies! The banks are your enemies! And the governments serve the banks!
 
We’ll see. Disgustingly, the Big Lie of trickle-down, a-rising-tide-lifts-all-boats, still seems to have a lot of traction.
 
No! The rising tide is a tsunami to smash all but the biggest boats!
 
Will anyone, anywhere, Stand Up? Complaining, the way the taxpayers have contented themselves so far, will do no good.
 
A country must cleanse itself. Purge, burn, purify.       

January 15, 2010

Where’s the Midget?

Filed under: Bailouts Only Propped Up Zombies, Reformism Can't Work — Tags: , — Russ @ 3:55 am

 

This week we saw the opening act of the Financial Crisis Inquiry Commission. So far it’s been what we expected, lots of empty words headed nowhere in particular. This, like everything that’s been said so far, reminds me of the opening remarks in The Road Warrior; how “their leaders talked and talked and talked”, but nothing could stave off the collapse.
 
On Wednesday the chief banksters slouched in. The photo of these crooks being sworn in provided the only amusement and insight. The sneer, the scorn, the boredom, the malaise, the childishness, the hostility, the incomprehension, the psychopathy, are clear to see in their faces, which radiate the banality of evil.
 
Again we see how incapable they are of even pretending to respect any community of law other than the law of the jungle. Their political ineptitude, their inability by now to even play the political game, reflects the profoundly anti-political essence and agenda of finance corporatism itself. This ideology, as it engulfs and assimilates the entire political system, has sought to completely destroy democracy itself. All real politics must perish if corporate monopoly is to enjoy full dictatorship. This process is largely complete (we’re still waiting on the Supreme Court for its decision on direct corporate election commodification).
 
In the bankster response to this commission, and our expectations for the commission in general, we have, unfortunately, kin responses to it. The only responses the current reality support.
 
True, the banksters couldn’t be quite so brazen in their contempt as they’ve been with Obama. Phil Angelides will probably try to accomplish something here. But the CEO testimony showed up what will likely be the limits throughout.
 
The banksters were able to evade the harshest questioning with the standard boilerplate, pandering, propaganda, lies about paying back the TARP, and statements of pseudo-accountability.
 
Blankfein pretended Goldman only dealt with “professional investors who want this exposure”. He repeated the longstanding Goldman line that the Bailout helped everyone including GS, but that GS didn’t need it. As far as the rest of America, the real economy, real people like the teachers and cops Angelides invoked, Blankfein issued the typical non-apology apology: “We regret the consequence that people have lost money”. Kind of like, I regret if anyone was offended by my innocent remarks. It’s all your fault, you fucking crybabies.
 
Dimon was similarly bland and sleazy. “I blame the management teams 100% and fault no one else.”
But I really blame everyone else but management, and better yet I blame no one in particular: “This kind of thing happens every five to seven years”. A financial crisis happens every five to seven years, and it’s just a kind of “thing” that kind of “happens”.
 
That’s of course a lie. Number one, financial crises did not happen every few years so long as Depression-era regulation like Glass-Steagal was still in effect. They only started constantly occurring and recurring once aggressive deregulation became the government policy. JPM itself, as Dimon well knows, took the lead in lobbying for monopoly finance dereg.
 
Dimon went so far as to claim his daughter called him up to ask, “Dad, what’s a financial crisis”, and that after he lied to her about it the same way he lies to America she said, “then why is everyone so surprised?” Quite a heartwarming story.
 
Blankfein was trying to mine the same vein when he obnoxiously compared this to a “hurricane” (not just a spontaneous thought, apparently; it was in his prepared statement as well). He said these were acts of god, prompting Angelides’ best line: “Acts of god we’ll exempt. These were acts of men and women.”
 
(Hmm, maybe that was unfair. Maybe these were “Acts of God”. After all, they’re doing “God’s work”.)
 
Angelides did flummox Blankfein on one line of inquiry, where he demanded to know how Goldman could legitimately induce the ratings agencies to give AAA ratings to CDOs where GS itself had information which would cause it to bet against them. Blankfein didn’t give anything approaching an “answer”, as of course he could not.
 
On Thursday government cadres came in to spew their own lies. Attorney general Holder bragged about over 2000 mortgage fraud investigations underway. Of course, all of these target only small fry. None are meant to threaten the real criminals, and RICO investigations remain, in the administration’s favorite fuck-you phrase, “off the table”. FDIC chief Sheila Bair gave standard boilerplate about the “resolution” scam. SEC head Mary Schapiro complained about unstable funding for the agency, even though it’s hard to explain how insufficient funds played into the SEC’s illegal and unconstitutional decree shielding AIG laundering from public interest transparency for ten years.
 
The only good testimony came from state regulators who told an all-too-familiar story of Federal-level corruption, obstruction, and interference. Illinois attorney general Lisa Madigan, one of the few who want action, who has filed anti-racketeering lawsuits, focused on federal foot-dragging and resistance to state action.
 
She thus by implication highlighted for us how the financial “reform” bill underway in Congress will seek to expand federal power to pre-empt state action. And in mentioning the anti-law, anti-public obstructionism of the OCC she reminds us how it is still headed by Bush political appointee John Dugan. (What, the Dems couldn’t find their own pro-Wall Street hack to put in that job? Once again we see how this idiot Obama can’t even get the spoils system right.)
 
In the end this is just political theater, and not even good theater. People hope this might live up to its 30s predecessor, the Pecora commission. But Pecora was empowered by FDR, who actually did want to do something about bankster abuses of democracy. But by that measure we’re today still in the Hoover stage.
 
Pecora had the great moment where they plopped a midget in JP Morgan’s lap. Will we be able to do that to Jamie Dimon this time around? Where’s the midget going to come from?
 
More seriously, as Yves Smith points out, this commission is “structurally flawed”, as it doesn’t have or seek broad subpoena power to peruse the big banks’ books. Rather, they’re going to issue subpoenas ad hoc, just in stimulus-response fashion, if they accidentally happen to get a lead.
 
It’s reminiscent of the Private Securities Litigation Reform Act of 1995 (another gift of Rahm Emanuel), the Catch-22 corporatist legal trap whereby plaintiffs are required to know ahead of time exactly what crimes the defendant committed, when in fact pre-trial discovery is necessary to get a good grasp of what those crimes were.
 
Unfortunately, all the indications are that the commission will be unable, and probably won’t even try, to effect a tipping point in the public’s understanding of these crimes and their motivation to take action.
 
It’s part of the system; therefore it’s not trying to upset the system. Just like Obama’s bogus bank tax, this is meant to distract and appease the angry public, not educate and empower it.
 
Such education will have to come from outside, from among the people themselves, and only the people themselves will be able to empower themselves.
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