November 28, 2009

“Fool’s Gold” by Gillian Tett

So I recently read Gillian Tett’s Fool’s Gold, her account of the “Morgan Mafia” at JP Morgan who “innovated” the credit default swap and the mass marketization thereof.
The book is well-written and does a good job of explaining all the financial gizmos and machinations which destroyed our economy once and for all.
But in the end Tett does not successfully defend her explicit or implicit theses which are as follows.
Her overt claim is that derivatives and securitization are inherently good and useful, constructive and value-creating, and that it was only their abuse by bad apples which caused everything to go wrong.
This is on display in her very section titles: Innovation, Perversion, Disaster.
More specifically, she claims that the folks at JPMorgan (to whom she had access and who willingly cooperated with her in giving interviews, from Dimon on down to the most obscure cadres; so to a large extent this is JPM’s version of events) did their best to be responsible, accountable, prudent actors, while the bad apples were at most of the other banks.
Her implicit claim is that financialization of the economy and the extreme growth and concentration of the finance sector are also good things. (I take it for granted, after all that has happened, that anything written on the subject which isn’t attacking the sector as such has an obligation to defend its existence.)
But the evidence of the very history she and JPM lay out contradicts all of this.
Tett opens her story with a bunch of drunken frat droogs partying in Boca, reveling in vandalism and mugging one another. This kind of behavior continues throughout the story, unfortunately on more socially destructive levels.
It was at this Boca conference in 1994 that the Morgan Mafia, as the swaps team called themselves, zeroed in on the idea of credit default swaps. This was an extension of existing interest rate swaps, and wasn’t a completely new idea, but the JPM crew really made it work. As will be the pattern throughout the tale, they weren’t doing this in response to any social or even “market” need, but proactively thought it up toward the goals of greater rents and attacking regulation.
They spent the next few years mucking around (by their standards) with the idea, doing a few big deals. But the real goal was to standardize this method of selling risk. They eventually bundled $10 billion worth of JPM risk on existing corporate loans, securitized it, induced Moody’s to give these securities a AAA rating, and in December 1997 marketed it through an SPV shell company (in order to evade taxes). The model was now complete.
When the dotcom bubble crashed, followed by the Enron and Worldcom troubles, nobody took these as evidence that financialization needed to be reined in. On the contrary, CDS were touted as having successfully spread out the risk. Meanwhile, the Fed had embarked upon its easy money policy. So for CDS the lesson and the incentive were clear: They were now to be used to help blow up the mortgage bubble.
Ironically, after having “innovated” the CDS instrument, JPM itself never fully committed to mortgage securities. They could never figure out how correlated mortgage defaults might be, and therefore what the real level of risk was. So they only did two big CDS-MBS deals and then backed off. Similarly, in 2005 Dimon wanted to prioritize mortgage securitization. They spent much of the year setting up an “assembly line” structure to compile, bundle, slice, and sell these securities. But no sooner was the mechanism in place than in early 2006 the mortgage market showed signs of stalling. As defaults started racking up in San Francisco, Las Vegas, Miami and elsewhere, JPM held back once again.
In the end this conservatism served JPM well. When the crash finally came, it was one of the few banks whose balance sheet wasn’t loaded down with toxic paper, and the only one the government could readily turn to as the “private” face of the corporatist bailouts. Tett attributes this to a longstanding corporate culture which allegedly valued teamwork, loyalty, long-term relationships over the Darwinist “eat what you kill” ethos at other banks. Back in 1933 under Congressional grilling JP Morgan Jr. had assured the world that the bank’s mission was to engage in “first class business…in a first class way”. This became a mantra at the bank.
By 2008 this branding, after the neglect of some years, came back to the fore. When Chase Manhattan bought JPM in 2000, although they placed Morgan’s name first in the new combined name “JPMorgan Chase” for this branding purpose, they studiedly dropped the pretentious periods from “J.P. Morgan”, something the JPMers had always taken pride in, just to show who was boss.
Now the periods were back with a vengeance. With the whole system on the verge of collapse, the J.P. Morgan brand name was of great value. But any social value connotation of this was a scam. JPM was in disaster capitalist mode, with Dimon scanning the horizon for M&A opportunities among the wounded. First Bear and later WaMu were the two big feasts JPM enjoyed using public backstops to again mitigate their risk.
As the whole story shows, JPM’s conservatism was never out of any social responsibility or even a real desire to be “first class”, but only out of self-interest. Nothing in the book can elide the fact that even at relatively conservative JPM most of this “innovation” was not in response to any market request but was gratuitously dreamt up and aggressively marketed to buyers who had originally wanted no such thing. Tett quotes Peter Hancock, the early head of the derivatives team: “The idea that we gave the most emphasis to was using derivatives to manage the risk attached to the loan book of banks”.
She goes on:

Players…had different motives for wanting to place bets on future asset prices. Some investors liked derivatives because they wanted to control risk, like the wheat farmers who preferred to lock in a profitable price. Others wanted to use them to make high-risk bets in the hope of making windfall profits. The crucial point about derivatives was that they could do two things: help investors reduce risk or create a good deal more risk. Everything depended on how they were used and on the motives and skills of those who traded in them……

It was only many years later that the team realized the full implications of their ideas, known as credit derivatives. As with all derivatives, these tools were to offer a way of controlling risk, but they could also amplify it. It all depended on how they were used. The first of these results was what attracted Hancock and his team to the pursuit. It would be the second feature which would come to dominate business a decade later, eventually leading to a worldwide financial catastrophe.

But this is belied by every action of this team. On the contrary, from day one team members were focused on politically leveraging risk insurance toward deregulatory lobbying, in order to further amplify risk and rents. The real motives were never anything more than unproductive rent-seeking and regulation-bashing. As for better managing risk, on the evidence of this book no one ever valued any opportunity to build resiliency into the system, to create slack. On the contrary, every space that risk management opened immediately had further risk crammed into it. Nobody seems to have noticed the fallacy here, that is assuming, as Tett seems to, that anyone ever actually cared about “better” risk management, as opposed to generating the fraudulent simulacrum of it to extract further rents and attack regulation.  
Hancock’s real mindset came through more clearly when he decried the “curse of the innovation cycle”, meaning that he lamented that all real financial innovation had long since been completed. He hated what human beings call the proper functioning of an economic sector as it matures, provides its necessary services more efficiently, because then profits go down to their natural mature level. Hancock and his fellow mafioso were out to “innovate” new scams in order to prevent sector maturation and efficiency from prevailing. Similarly Mark Brickell, another Morgan cadre, aptly compared what they were doing to the Manhattan Project. Then there’s the charming Tim Frost, a hard core corporatist ideologue who liked decorating his work space with portraits of “shabby unemployed British miners”. These were a comic centerpiece for his jokes about what happens when returns are bad.
In Brickell’s case the intent to wage total war on society was overt, as his incessant Hayekian market fundamentalist proselytization demonstrates. His real passion was deregulation.

Brickell took the free-market faith to the extreme. His intellectual heroes, in addition to Hayek, were economists Eugene F. Fama and Merton H. Miller, who developed the Efficient Markets Hypothesis at Chicago University in the 1960s and 1970s, which asserted that market prices were always “right”. They were the only true guide to what anything should be worth. “I am a great believer in the self-healing power of markets”, Brickell often said, with an intense, evangelical glint in his blue eyes. “Markets can correct excess far better than any government. Market discipline is the best discipline there is.”

Peter Hancock shared that view, though he rarely expressed it so forcefully in public. So did most other swaps traders.

The International Swaps and derivatives Association (ISDA), the “industry” lobbying group, under Brickell’s personal leadership spread the gospel of voluntary “market discipline”, “the self-healing power of markets”, “rules designed by the industry itself and upheld by voluntary, mutual accord”. “Bankers and their lawyers were better-informed, and they had strong incentives to comply.” The libertarian bullshit was piled high. The quants added the mystique of math, “Value at Risk” (VaR) to the mix.
Between the Chicago ideology, the mathematical assurance that risk had been tamed, and of course the bribes, Brickell and his horde accomplished their goals. They first staved off new regulation in the aftermath of the Orange County bankruptcy in 1994, then launched their real lobbying offensive. The dream was to not only get risk off the books so that it didn’t eat up the reserve requirements, but to convince regulators to lower the requirements themselves. They convinced the Fed and the CFTC in 1996. (They actually had a harder time convincing JPM’s own management to loosen internal restrictions.)
Led by the Morgan cadres, the deregulatory offensive reached its crescendo at the turn of the millennium with the repeal of Glass-Steagal and, with the CFMA in 2000, the explicit declaration that swaps were not securities and beyond CFTC purview. This happened in an atmosphere of absolute fanaticism over technology, “innovation”, and most of all “growth”. The very fact that none of it had any real-world basis played up the religious aspect of it all.
What was the role in all this of derivatives in general and the Morgan mafia in particular? Tett’s own evidence demonstrates that:
1. The JPM cadres themselves took the lead in using these innovations as the pretext for deregulation.
2. Any “innovation” was quickly put to “abusive” uses.
3. That everyone “abused” securities, and that the clear goal of deregulation was to open up space for these abuses, seems to indicate that these uses weren’t really abuses, but rather that the banks entered the deregulated vacuum using CDS and everything else exactly as intended. It seems that, rather than being the only “responsible” player, JPM was unusually conservative.
More to the point, they got lucky. In particular, the mortgage problems arose in early 2006 just when JPM was about to take the plunge. If this had been delayed for another year, or if JPM’s strategy had been implemented one year earlier, they’d have been caught out just like the others.
So the evidence proves that their intentions were always malevolent, and also doesn’t strongly support the proposition that they “knew” what they were doing much better than everyone else.
This is reinforced by JPM’s behavior since the crash. By then the original JPM team was dispersed throughout the sector, but the diaspora rejoined for a collective bout of whining, finger-pointing, CYA and ideological reaffirmation, even cultivating martyr fantasies. The basic line is the same: We’re innocent, derivatives are good, it was just bad apples who abused them. Most still sing the ideological gospel (though Greenspan’s partial recantation has given a few pause).
As for JPM itself, it has used the strength it gained from the bailout to go hunting. It’s now the world’s biggest bank in terms of market capitalization. It has used its prime position to follow Goldman Sachs into a more overt corporatist partnership with government. (If Dimon really is gearing up to become Treasury Secretary as some reports say, this would be the public consummation of that process.)
The real voice of JPM, most truly in synch with JPM’s actions and the actions of the sector as a whole, remains the fascist Mark Brickell. As the crisis descended he never flinched from triumphalism, self-congratulation, and continued ideological assault.
In April 2008, basking in the glow of JPM’s public-enabled fire sale purchase of Bear Stearns, Brickell raved at the ISDA’s annual conference:

As Brickell stood at the podium in the ballroom of the Vienna Hilton, history weighed on him. ISDA had gathered in the same city two decades earlier, and Brickell considered that symbolically appropriate. Vienna was the home of the great free-market economist Freidrich von Hayek, Brickell’s hero. “[Twenty years ago] we set out to design a business guided by market discipline because we believed it should be an even better guide to good behavior than regulatory proscription”, he observed. “The credit crunch gives good evidence that market discipline has guided the derivatives business better than regulation has steered housing finance.”

Brickell remained as opposed as ever to the idea that governments should intervene. “Hayek believed that markets would create a rhythm of their own, that they are self-healing. That is something we should all remember and honor today”, he told the audience. “When governments arrive to help, there is always a price to be paid that often takes the form of greater regulation”.

Every word of this is an Orwellian window into the black larcenous nihilism of gutter evil. The destruction of the real economy, of millions of jobs, is indeed the “discipline” and the “healing”, most of all the “good behavior”, they want to impose upon us all. JPM and the stronger elements of the sector were entering full disaster capitalist mode.
Tett’s book makes clear, in matching words to actions, that not only was there never any good, constructive intention on the part of these operatives, but almost none of them even learned a lesson from or feel remorse over the crisis and all the destruction it has wrought.
On the contrary, most of them are geared up for further battle. They fully intend to keep committing the same crimes. I think this book could provide some useful evidence for a future Nuremburg-style tribunal. It’s an important history of how this gangster network conspired against the wealth and social stability and security of the people.
One of the few cadres who retained some skepticism during the process was Andrew Feldstein.

Back in the days when the JPMorgan team had concocted its derivatives dream, Feldstein had believed deeply in the intellectual arguments behind financial innovation. He was utterly convinced that if tools such as derivatives were implemented in a rational, efficient manner, they would vastly improve the financial system and economy. It was the dream that drove them all.

But after living through the mess of the Chase-JPMorgan merger, Feldstein became cynical. He still believed derivatives had the theoretical potential to make markets function better, but in practice, dysfunctional management and warped incentives for traders and the ratings agencies were badly distorting the CDO market. He understood the ways in which the banks were playing around to garner good ratings and make end runs around the regulatory system, and the situation troubled him. But it also presented a trading opportunity.

So – he was an ideological believer, and he still “believed”, yet in doublethink, as he saw how it didn’t work in the real world. But so what; it was also a “trading opportunity”.
That can sum up every ideologue of all times.

November 18, 2009

Bank Roundup 11/18

1. So how have things been on the regulation front? Any signs of life?
Ed Yingling of the American Bankers Association says he hates it, so that’s one good thing we can say about Christopher Dodd’s bank reform proposal.
In most ways it looks in theory to be a moderate improvement over Barney Frank’s corrupt mess in the House. It would have a passable CFPA, derivatives clearinghouses, would try to drag some of the shadow banking into the regulatory light (like hedge funds with $100 million or more in assets).
Its most disruptive departure would be to strip the Fed and FDIC of resolution authority and repose all such authority in a new agency which would also subsume the OCC and OTS. This would have separate divisions for big and small banks.
But it still wouldn’t break up the Too Big To Fail entities. Since that’s an absolute necessity, and a baseline measure for whether we have real reform or not, the proposal fails right there. It would still leave us under the thumb of gangsters.
There’s no reason to believe any “resolution authority” would ever be responsibly exercised anyway. In the crisis, under political and disaster capitalist pressure, if it’s possible for resolvers to throw the plan out the window and just repeat the bailout, that’s what they’ll do.
The very fact that the systemic risk entities are being allowed to continue to exist at all proves that this government will always do everything it can for their benefit. It proves that all regulation proposals are lies.
The same goes for all the lesser measures Dodd proposes. Just as in the House, these will be chipped away in committee, and predatory amendments will be added. In the end an anti-reform pro-racketeer bill will be passed.
If you doubt that, then why do you think even as we speak they’re rolling back existing regulation? (See below for more on accounting standards.)
There is the Kanjorski proposal to reinstate a version of Glass-Steagall floating around. This at least purports to wind down TBTF.
But in itself it too misses the real problem of systemic protection rackets, which is not just size but the interconnections of their socially worthless but very destructive bets. (There’s lately been some controversy over the term Too Big to Fail. I always recognized that “Big” encompasses not just size but interconnection, and that interconnection can be a clear and present systemic danger even where the firms are not-so-big, like Bear. So that’s how I’ve always used the term and will continue to use it. As for any alleged political risk that somehow the people won’t “get it” in the case of an entity not quite as big as, say, BofA, I’m not worried about it. These are all pretty damned big by any common sense measure.)
As Yves Smith put it:

So that is why the Kanjorski approach, despite the tough talk and possible disruption, is actually a win for the industry, even if a somewhat extreme version (remarkably) were to pass. It means no one is on the trail of the draconian measures needed to contain the risks the industry poses to the public at large.

The only viable solution to the misbranded TBTF problem is to require systemically important firms (one in the OTC debt businesses, which thanks to the development of “market based credit” is now essential to modern capitalism) to exit all activities that are not socially essential and therefore deserving of government support (pure fee businesses that pose no risk to the taxpayer would be allowed). The permitted activities are regulated intrusively, with tough rules on capital requirements, and product scope (new products would be subject to approval to make sure they were socially productive, that the regulators understood them, and they did not result in increased risk to taxpayers). In other words, an effective solution requires more extensive dismemberment than anyone plans right now, and still requires heavy regulation of the crucial bits that will inevitably be taxpayer backstopped.

For a more typical example of how this “regulation” is supposed to work, let’s look at the proposed Perlmutter amendment to the House reform bill. “Strongly supported by banks”, this amendment would give the proposed systemic risk council the power to order the FASB and SEC to suspend or change accounting rules. You know it’s got to be bad when even the US Chamber of Commerce opposes it.
The FASB has already been a political whipping boy this year, as the same Kanjorski bullied it into dropping the imperfect but closer-to-reality-based mark-to-market accounting standard. But now even Paul Volcker, also an enemy of mark-to-market, but a proponent of international accounting standards, is an outspoken opponent of the Perlmutter amendment, which would bring chaos as it tosses standards formally and completely into the bloody arena.
A basic element of ugly harmony throughout the crisis, from both banks and politicians, has been hostility toward reality-based accounting. The reason for this is clear. The banks are all insolvent, and the only way they can pretend to be capitalistically viable rather than corporatist parasites is through massive accounting fraud. This massive fraud is now enshrined government policy, and on every front the corrupt political lackeys of Wall Street are seeking to extend it.
2. One place where the accounting wilderness has crept back is in the realm of commercial real estate.
The banks have perhaps around $1.8 trillion in CRE loans on their books, but since this hasn’t been marked to market no one has any idea what it could really be worth. The potemkin stress tests didn’t even pretend to deal with this.
Over the next several years $500 billion in loans per year are set to mature. These loans are likely to be under extreme pressure from debt deflation. Declining property cash flows, construction depressed on account of the credit crunch, depreciation in the value of the collateral underpinning these loans, all portend defaults, perhaps enough to trigger the next crash.
Through the TALF the Fed is backstopping many of these loans, and meanwhile the order of the day is extend and pretend: give extensions on loans you think or know will default. More phony accounting, hoping to play for time while praying for a miracle.
So what this means is the Fed is propping up the simulacrum of a continuing CRE loan market. But when the Fed withdraws this support, or when it’s just not enough, lending will stop, everyone will then value all this paper at zero, and again the banks will be forced into insolvency check.
We are in end game. The government will certainly keep trying to help its bank king escape check, but it can’t do it forever. One day, inevitably, it will be checkmate.
3. Meanwhile, there seems never to be any lack of just plain bad behavior. These people are not only evil, they are petty and mean.
*Obama’s “good people” have certainly shown their good will in rushing to jack up credit card rates before a new regulatory restriction prevails next year. (Dodd has also proposed legislation to move up this date.) The most notorious is Citi slamming some of its best customers with a 29.99% rate. But according to a Fed survey 50% of banks are raising rates and lowering credit lines for good customers. It’s a combination of squeezing the cash cow and punishment for the Congress daring to pass a mildly reformist bill.
(Citi issued a statement blaming the people and regulators.)
According to the Pew Charitable Trusts the twelve largest banks, who issue 80% of credit cards, are still using “unfair or deceptive”, and often illegal, lending tactics.
All of this is going on while their bank vaults are full of free Fed money.
[For anyone who still has questions about the health care rackets, how they’ll confront legislation, and therefore how legitimate the bill there is going to be, see the same behavior on the part of Big Drug.]
*The Jefferson County scam has given us some insight into the character of JPMorgan. JPM, with the connivance of the standard corrupt local yahoos, swindled the county into bonding a $3.2 billion sewer project with a package of interest rate swaps which are now worthless. (Sewage indeed.)
(This was such an all-day sucker that other sharks were circling, and JPM paid them off to go away: $3 million to Goldman, 1.4 to Rice Financial.)
The county is now suing JPM, which says the claims are “meritless”. But they already settled a federal suit for $700 million. Under that deal they paid the county $50 million and wrote off $650 million in “fees”. But the county still says it can’t service the debt JPM’s scam saddled them with, and they’re demanding more support.
*We may learn more this week about the BofA/Merrill deal as two board members and a former executive are scheduled to testify before the House Oversight Committee.
Former general counsel Timothy Mayopoulos claims he was summarily fired in 12/08 when he informed BofA brass that there existed no material adverse change which would legally justify BofA’s pulling out of the Merrill deal. Meanwhile, one of the board members, Charles Gifford, is caught trashing the deal in an email: “Unfortunately it’s screw the shareholders!!”
It’s not yet clear what all of this means, but the picture which has been emerging is of a rotten deal pushed by the Bush administration, agreed to by the incompetent BofA “leadership” (especially the moronic Ken Lewis), who then got cold feet, especially when they realized what a garbage barge Merrill really was (they couldn’t be bothered to do due diligence earlier; Paulson stampeded them, but they were stupid enough to be stampeded).
They were especially upset to see how Merrill went happily whistling along handing out billions in bonuses. They wanted out of the deal, and what happened…..? That’s what we’re eventually going to find out. Supposedly Paulson used a combination of threats and rewards to rope Lewis back in.
We are already 100% sure of one thing. Whatever went down, it was massive theft from the taxpayers.
*We can’t finish without some news from the incorrigible pricks at AIG. In his latest antic, placeholder dreg CEO Robert Benmosche (last seen beginning his tenure with a vacation), frustrated at how he doesn’t get to go parading around as king of the world like Lloyd Blankfein, and how everyone doesn’t just hate him and his company but considers him a contemptible little worm, and AIG a smelly little rathole, has been threatening to quit if the government doesn’t stop dissing him.
Apparently the last straw was Feinberg’s decree on executive pay for his special children who haven’t paid back the TARP, remedial dunces like AIG and its head dunce Benmosche. (What kind of loser is this guy that he can’t get a better job than that? Clearly he’s not very high on the “talent” list. He quits here and he might as well go hang out with Dick Fuld.)
Well, there’s no point in much analysis here. AIG is the dreg of dregs (maybe along with GMAC). I wouldn’t pay the whole lot of them a plug nickel, let alone the hundreds of billions which two administrations have looted from us on their behalf.

October 19, 2009

Confirmed: The Bailout Failed


After a sojourn among the green shoots, Paul Krugman has returned to his old beat criticizing the bailout. He picked a good time for it.
What have we learned about the bailout, one year on? It was explicitly supposed to get the banks lending again. (And implicitly, our government promised us that if the banks were bailed out they’d never go back to their psychopathic casino ways.)
The basic idea was straightforward enough. Banks were needed to keep lending to small businesses and individuals. This would preserve and create jobs.
It was never explained why this required bailing out the big bank structures rather than shoring up the smaller ones, who have always been the real drivers of that kind of lending, but the government and the MSM claimed that this was the case. Never mind that they had no coherent argument. They just said “trust us”.
Being trusted, what did the government do? It doled out trillions of dollars of taxpayer handouts and exposure to these rackets, demanding nothing in return. The Bush and Obama administrations directly conveyed the money via the TARP, they laundered it through AIG, they let them borrow unlimited funds at practically zero interest through the Fed, they let them borrow on the open market with the FDIC guaranteeing their debt, and in many other ways lent, conveyed, laundered, insured, guaranteed, an unfathomable amount of money.
Meanwhile they asked nothing in return. Nothing. There were no strings attached. No one was investigated, arrested, tried, convicted. No conditions were placed on subsequent activities. Pay, trading, accounting shell games, everything has been not only untouched, but the administration has gone to villainous lengths to facilitate it. 
What was the inevitable result of this?
By dispensing the largesse and the “forbearance” with no strings, rules, or threats attached, the government aggressively helped Goldman Sachs, JPMorgan and others not to “resume lending” but to ratchet up their predatory and parasitic casino actions.
This past week GS and JPM reported billions in “profits”. That these are not real profits, that they are the result of the Too Big To Fail put and accounting games, matters nothing to corporatism. It’s profit for the gangsters, while the people take the loss and the exposure.
And what has been the nature of their “profitable” activities? As the NYT said, “hot areas like trading stocks and bonds rather than in the ho-hum business of lending people money.”
Indeed these are the big winners of the great crime. They were bailed out directly and indirectly. Goldman and Morgan Stanley were allowed to transform themselves into “bank holding companies”, which gave them access to endless cheap Fed borrowing. The MSM lied and said this would mean greater regulation and restricted activities, but in practice Goldman hasn’t been restricted one bit. They’ve gotten the best of both worlds, of law and crime.
GS, MS, and JPM have also issued tens of billions in FDIC-guaranteed bonds. (The FDIC doesn’t have the money to cover its obligations. Indeed it is now borrowing money from the very banks it is supposed to help regulate. So when you picture the FDIC as a grizzled old reliable mainstay which is guaranteeing your modest bank deposits, remember that it is now on the hook for vast amounts of gangland money. When the crash comes it won’t have anywhere near enough to pay off everyone. Who do you think is going to get paid off? This is another massive looting job which simply is in place but hasn’t happened yet.)
GS and the other high-flying casino rackets are simply speculating parasites, using the people’s money to make endless reckless bets against the well-being of the people. Thanks to the TBTF premium, they have a big advantage over any would-be competitors who don’t have such government protection. Because they have no risk, no restrictions, and endless funds with which to gamble, there are literally no limits on their psychopathy in search of odious gain.
(By now they’re so confident in the government as their bagman and hired thug that they no longer even recognize political limits, brazenly looting for themselves tens of billions for what they still call “bonuses”. Goldman alone has put aside $16.7 billion in money that was simply stolen from the taxpayer.)
Does the government at least have to recognize political limits? How does the government defend this? It hardly bothers to try. Obama recently trotted out White House economic cadre Diana Farrell to openly admit that the Too Big To Fail banks are purely an artificial government creation. This was the latest stark declaration of overt corporatism, that the number one priority of the federal government is the continued existence, empowerment, and profitability of a handful of bank rackets.
Farrell also chirped that the administration will “manage and oversee” the New Racketeer Order and made the fatuous claim that big banks are somehow necessary. (How, she didn’t say.) But these were just political lies. The record of the administration is clear. Without exception every major action has been pro-bank, and it has done nothing against the banks or for the people. It is an unbroken record of class war from above.
So much for the “profitable” casino banks. What about the theoretically “real” banks among the Too Big To Failers? Those who are heavily immersed in mortgages and credit cards, like Citi and BofA, who were also supposedly profitable in the first two quarters? Surely more than anything else their continued health would be the best measure of the progress of the bailout and the recovery.
But they just reported multi-billion dollar losses. Even with the TBTF put, even with mark-to-management accounting, even with every other trick and lie the government allows them, they had to report big losses. As Krugman said today, this is the real economy coming back to bite. 
These are the ones who are supposed to take the lead in “getting back to lending”. But they can’t.
Here’s what’s happening, according to Krugman. The economic turndown is on account of the credit crunch driving asset and debt deflation. This causes more credit card and mortgage defaults, more foreclosures. The bailout was premised on renewed lending to individuals and businesses in order to break this cycle. But instead banks like Citi and BofA have hoarded the cash even as these mounting defaults hit their balance sheets harder and harder. This causes them to further retrench, they don’t lend, and the bailout fails to accomplish its purpose even if we pretend that anyone was ever telling the truth about it in the first place.
So let’s sum up. The two premises of the bailout were that banks would then be enabled to play their allegedly necessary role, lending in order to break the debt deflation cycle, and that their casino days were over.
We see how not only is no one lending, but everyone is rushing back to the casino as fast and as flagrantly as possible.
So the bailout was a de jure lie in the case of rackets like Goldman and JPM. Under no conceivable circumstance would they ever have been of service to Main Street. And it was at least a de facto lie in the case of the likes of Citi and BofA. They especially were supposed to be the lending leaders. They can’t and won’t play that role. So they’re useless.
So, as most of us knew at the time in spite of the lies of government, academia, and the MSM, every cent of the bailout money was pointlessly gambled. It was thrown away down history’s worst rathole.
And to think of what could have been done instead, if the biggest lie of all hadn’t been when the people believed they were voting for Change.    
Never in human history was such a robbery committed by a handful of criminals, with an entire society as the victim.

August 1, 2009

Why Do We Need The Banks?

According to a new report by New York attorney general Andrew Cuomo, nearly 5000 Wall Street cadres were awarded “bonuses” of $1 million or more in 2008. This was their reward for engineering the complete meltdown of the global financial system and extorting trillions of dollars of protection money from the people of America.
The worst malefactors could well afford this, as the money was conveyed directly from the taxpayers. Thus Citi, which extracted $45 billion in direct handouts and hundreds of $billions in other forms of welfare spent $5.3 billion of this on bonuses.
Bank of America and its acquisition Merrill Lynch also directly collected $45 billion and used $7 billion of that for bonuses.
Goldman Sachs collected $10 billion from the TARP, had $12 billion laundered to it through AIG, and an untold (literally, by the secret-keeping Treasury) fortune in other forms of looting, and paid out a relatively meager $4.8 billion of the proceeds.
The bonanza was similar for other gangs. JPMorgan got $25+ billion and gave out $8.7 billion of it. For Morgan Stanley the loot was $10 billion, bonus handout $4.5 billion.
This bonus bonanza is just the latest in a long, tedious string of government-enabled crimes. All along we’ve been told over and over that putting up with something so revolting is necessary to prevent the total economic collapse of America, and to put us on a footing for “recovery”. Even establishment dissenters like Paul Krugman are still establishment in the end, and toe this party line.

You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.

Yet Krugman himself is unable to let cognitive dissonance go so far as to completely deny the obvious

The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?

First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America..

If these lobbying efforts succeed, we’ll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers’ money — except that it would involve the financial industry as a whole.

The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else.


If you’re wondering how what’s bad for America can also be good for America, so am I. It’s apparently a mystery decipherable only to those within the system.
Meanwhile a report from Ethisphere finds that as of mid-June the TARP has already lost forever $148 billion out of 700. This number is bound to grow, and does not include the trillions in other kinds of Treasury and Fed handouts.
Special inspector general for the TARP Neil Barofsky recently mortified the establishment with his worst-case projection that the taxpayers may end up losing $23.7 trillion down this rathole. The corporate media, suitably scandalized, was quick to close ranks and scoff at this. But of course every projection so far by every kind of cornucopian has fallen far short of the true horror, so while we may perhaps take Barofsky’s figure as an upper bound, we can by no means dismiss it as impossible. 
Yet we stupid peasants were promised a profit on this “investment”.
Why did we make this investment again?
What are the banks supposed to do, in the good business civics textbooks?
Oh yeah, they’re supposed to facilitate constructive capital flows so that entrepreneurship can flourish, innovation can occur, and we can receive better products at lower prices, better tech for better living, better jobs at better wages and lesser hours…
Weren’t these the promises of modern banking, modern capitalism, modern technology? They were.
Is this what the banks have delivered?
No. As Krugman explains:

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.


*They presided over the liquidation of the economy. With the advent of financialized globalization, they facilitated the basically treasonous nature of modern wealth. They led the charge of outsourcing, offshoring, the destruction of wages and jobs.
*They presided over the binge of monopoly consolidation, furthering wealth concentration and wealth inequality, all against the public interest.
*They created the most complex, opaque, mysterious, irresponsible, unfathomable “products” they could.
These complex financial products are inherently dangerous when used as intended. When was the golden time when CDSs were being used responsibly and constructively? If such a time did briefly exist, it was enforced only by regulation, and filled up and shortened by anti-regulatory activity.
The real measure of reckless behavior and abuse isn’t absolute but relative. If everyone in the biz wanted to be what an outside observer would call abusive, then they really weren’t “abusing” but using according to how the culture decreed the baseline would be. Insider ideologues are simply lying  when they try to pretend to draw any distinction between proper use and abuse. These complex instruments are what Buffett called them, and they are a clear and present danger to public health. They are by definition to be abused, and no one can be trusted with them.
*Their bubbles drove up the prices of all staples: food, fuel, shelter, all to feed the greed of speculators and hedonists. Human beings who just wanted a decent life were forced into rat race slavery, or were forced out of society.
*They did everything they could to irrationalize and destabilize not just the financial sector, not just the economy as a whole, but society itself.
*They gambled, looted, hoarded.
Why did we need for these banks to exist again? Why did we allow their crimes?
And then we reached the crisis. What has been the narrative of this crisis? What is supposed to redeem these bailouts?
We were told this was a liquidity crisis, and that what we needed was to get cash to the banks, they’d resume lending, and all the jobs they failed to create before would suddenly spring into being.
(Apologists for the banks nowadays say they never actually promised to lend. And then there’s the misdirection tactic of blaming the government for lying of for confusion. Thus we recently saw henry Paulson grilled on Capitol Hill over his switching from buying toxic paper to cash injections to buying corporate paper…
What all this is meant to confuse is that we were sold the entire program on the premise that it would jumpstart lending. Whether or not this was a good idea is not what matters now. (It was of course not a good idea; when your whole problem is your addiction to debt, you don’t solve that by going further into debt.)
The banks endorsed this marketing campaign. So when we see what a lie it always was, how the banks did not “lend” and never intended to lend, we see what a Big Lie was the entire premise of the TARP and all its minion welfare programs.
That Paulson and Geithner have never been able to settle on a particular tactic for carrying out the looting is irrelevant.)
So what have the banks done with the ill-begotten loot? They haven’t leant; they’ve hoarded and used the money for acquisitions. Some openly boasted of their disaster capitalist opportunism.
And what did any of this do for us? Not one cent of the money “trickled down”.
Now we know that “Too Big To Fail” was always a lie, since propping up these banks hasn’t helped us, it has only harmed us. They have not only stolen trillions, but in the process have further consolidated their position for further adventures in looting. On every front they continue their obstruction front vs. even the most paltry regulation, while they assault consumers with further outrages. They jack up credit rates, refuse to modify mortgages, they have dug in vs. every pathetic attempt to take even an inch from them in the name of the public good.
This is, of course, the same public without whose stolen wealth these banks wouldn’t exist at all. The people are now in the position of the victim of highway robbery who is now forced to beg for a crumb from those who stole, and in return is kicked in the face.
That’s the utopia of the Too Big To Fail ideology, as espoused by both Washington parties and the corporate mainstream media: a boot kicking us in the face forever, while we’re fleeced of every cent.
Letting this vile system of organized crime go down in the first place couldn’t have been worse than the damage we’ve sustained: to our wealth, to our society, to our freedom and dignity. Why should we suffer them to exist?
Even if the paramount imperative were to resume the degradation of debt “growth”, this is no longer possible. The banks’ own behavior displays how they know the jig is up. It’s long been clear that the banks, fearing insolvency rather than laboring through illiquidity, don’t want to lend at all. The whole premise of their existence, the exponential debt/growth socioeconomic model, is defunct. There is no longer a real economic basis on which it can be sustained. There is no future here.
The system is insolvent. Now they are simply trying to steal as much as they can while the getting is good.
The core premise of the Too Big To Fail ideology and the bailout onslaught which has followed from it is that the economy, in order to be restored to health, needs the banks.
The contention is that if all the banks collapsed “main street” would get clobbered, that business would suffer and even more jobs would be lost, because there wouldn’t be lending? But they’re not lending now.
So it’s clear that anything that would happen from the non-existence of the banks is already happening.
But if the banks have abdicated, then why exactly do we need to loot the country to keep them from failing? (“Failing” – but if they’re failing to lend, haven’t they already failied according to the original premise?)
Why again can’t all federal support be plowed into direct stimulus, and none into financial bailouts?
Why again do we need the banks at all?
Their alleged macroeconomic benefits have proven to be so much vapor. America hasn’t even had any real “growth” in a decade, only debt- and bubble-puffed fictional growth, which has now all vaporized, while wages have continued to decline.
The ONLY benefits have accrued to a handful of criminals and parasites.
The harms are obvious and legion and socialized.
So zero benefit, infinite harm…Why are we even still debating this? Smash the infamous thing. Get rid of the globalized “finance industry” completely.
*We don’t need it at all.
*We’re better off without it.
*It’s definitely not worth keeping at such a price.

March 24, 2009

The Bailout War I: AIG


(See also the rest of the five-part series)


As the administration releases the details of the latest version of the same old bailout pan, the furor over AIG continues to sound. With this first in a series of posts on the bailouts I want to present a basic depiction of AIG as the most typical of the corporate players in this crisis.
As innovator and as model AIG was the prototypical and core practicioner. It led the deregulatory charge. It was the ultimate buccaneer under Bush. It was the first to totter, the first to suffer a “systemic” meltdown, and was the real occasion for the foisting of Too Big To Fail on the public. It set the whole bailout program in motion. Every step of the way it was both one of the key players and the catalyst for the whole vicious system.
In a phrase which has spontaneously occurred to so many of us, AIG has been “ground zero for the practices which led the financial system to ruin” (this is the formulation of NYT columnist Joe Nocera). Nocera goes on to admit AIG was the starting point for the TBTF ideology: “The company is being kept alive precisely because it behaved so badly.” In a joint statement the Treasury and Fed, if not quite so morally honest, made the same point in defending the bailouts: “additional resources will help stabilize the company, and in doing so help stabilize the financial system”. Ben Bernanke was more menacing: “We have no choice but to stabilize [AIG] or else risk enormous impact, not just in the financial system but on the whole US economy”.
What is this uncanny operation? AIG was one of the world’s prestigious companies, proud bearer of a AAA rating, pillar of a respected industry. What went wrong, such that the name AIG is now mud, and this industry is reviled as the “FIRE trust”, as Michael Hudson put it in a typical formulation?
The basic answer is that AIG sold out its original business to become a deranged casino bettor. In furtherance of greed, ideology, and the apparent will to be reckless just for the thrill of it, AIG was at the core of an industry-wide anti-regulatory, anti-rule of law campaign. From 1990-2008 AIG contributed $9.3 million evenly among both sides of the Washington system, and spent another $70 million lobbying them. This modest amount bought a lot of anarchy, and by 2001 AIG had helped carve out a vast quarry of lawlessness to mine the structural and moral integrity of the system. To properly mix my metaphors, it was in this lawless space that AIG was able to set the charges which now threaten to blow the economy sky-high.
Although its practices weren’t uncommon, no one’s actions were so vast and reckless. Now as we stagger about the ruins of the finance world we keep receiving economic death threats: unless AIG, already one of the ultimate welfare recipients in American history (and perhaps the most contemptuously ungrateful), continues to receive ransom payments, it will destroy the American and global economy completely. (Nor is this just rhetoric, apparently. The NYT’s Andrew Sorkin, among others, has written that he believes AIG cadres, if not paid protection money, will intentionally crash the economy.) People are getting angry. Political and MSM apologists for AIG have had the nerve to criticize the public for its anger. But it’s AIG and its political, regulatory, and media enablers who have destroyed it, and who now threaten to bring down the whole system. It is they who are to blame for any level of public rage and direct action.
AIG was, a Tom Friedman put it, running “an unregulated hedge fund inside a AAA-rated insurance company”. It leveraged the moral authority of a AAA rating to get that rating conferred on the derivative paper chase as well. AIG and the banks conspired using “quant” phantasmagoria and this AAA tranche scam to evade regulation, to the point they could claim (plausibly, to those predisposed to coddle them) they didn’t need regulation at all.
AIG was involved in many unsound speculative activities, both recklessly leveraging itself and enabling the reckless leverage of every other player. But the core of its adventure was its credit default swap business. Banks and others holding mortgage-backed securities and collateralized debt obligations and god knows what else were keen to buy “insurance” on the value of these things. Eventually AIG wrote some $500 billion worth of this pseudo-insurance, providing the template for a $30 trillion build-up and eventual unravelling. In theory a CDS sounds like a good idea – a hedge against an adverse change in a changeably valued security. But under AIG the CDS had more lucrative, and dangerous, uses.
The first ulterior application was to enable banks to evade reserve requirements. This was an innovation of JP Morgan, and it seems CDSs were invented in the first place with this goal in mind. Having bought this insurance on their speculations, banks claimed they were no longer exposed to risk, and regulators acquiesced. Meanwhile, even as the banks said AIG was an insurer, AIG itself told those same regulators it was not, and they also agreed to this. Thus both AIG and the banks were let off the regulatory hook upon mutually exclusive rationales. This was the beginning of the lawless environment where the CDS nightmare was elaborated.
One of the key anti-regulatory goals the industry had was achieved in 2000 with the Commodity Futures Modernization Act, which declared CDSs off limits to regulators. Now the frontier really opened up. Joe Cassano, the head of AIG Financial Products, introduced several innovations. It became possible to place CDS bets with little or no collateral. AIG itself took the lead in betting monumental sums it could never possibly pay off. There was also an explosion of pure gambling, as buyers and sellers placed bets on underlying assets neither of them owned. The seller could take book on the same “naked” bet with any number of bettors. By multiplying “insurance” on the same risk, AIG was betting ever more ponderously vs. systemic risk, even as its very action was increasing that risk. This is the opposite of sound insurance practice. “They just bet massively long on the housing market”, an industry insider told Matt Taibbi of Rolling Stone.
Everyone was in on the CDS/MBS scam. Banks could shift risk and get out from under reserve requirements, while the AAA rating bestowed by AIG’s touch rendered the derivatives more lucrative. AIG collected the premiums. It could charge more by writing “collateral triggers” into its contracts, such that if the rating of AIG or the underlying securities were ever downgraded they’d have to post more collateral.
AIG knew it would quickly become insolvent the moment anything went wrong. The two factors which drove them on were greed and the ideological dogma that the housing market, and therefore the value of MBSs and CDOs, could only go up forever, and therefore the CDSs would never have to pay off. They regarded their own AAA rating as a law of nature, theirs by divine right.
This was the core theology of the whole finance bubble, of every finance bubble, of the bubble economy and society we now have. (That’s why we watch the administration continue to flail about trying to figure out a way to magically restore value to these derivatives, and beyond this to reflate the housing bubble. That’s the only idea they have, the only idea they could possibly have, since the American economy no longer has any basis other than bubbles. There’s no longer a stable foundation, only despair punctuated by gold rushes. Boom and bust.)
Nocera quotes former AIG exec Robert Arvanitis on AIG’s self-perception: “They never thought of it as abuse. They thought of themselves as satisfying their customers.” This is quite right. From the point of view of AIG, of TBTF, and of big capitalism in general, your only responsibilities are to yourself and (maybe) to your customers. The public, the public domain and public property, are just resources to be mined.
The CDS phenomenon was exemplary of the financialization of the global economy as a whole going back to the 70s. These practices, and the overarching economic structure, are not conventional value-adding capitalism at all, but simple atavistic rent-seeking. The deregulation-enabled casino capitalism which reached its frenetic pinnacle over the last decade, and which now through the bailout/loot conveyance seeks new avenues of plunder, has been history’s greatest manifestation of corporatism, not capitalism.
AIG began to unravel even before the housing bubble burst. As a result of its slovenly accounting culture, its rating was downgraded in 2005. In defiance of the eternal bubble dogma, this set off many of the collateral triggers. AIG responded by accelerating the writing of CDSs (in effect trying to “make it up on volume”). But soon its position deteriorated. It was bleeding red ink and in 9/08, facing another downgrade and another round of collateral calls, it couldn’t hang on. Big tough guy AIG cried for Mommy.
It was AIG’s interconnection with so many big financial players, in particular Goldman Sachs, which decided for Goldman cadre Henry Paulson that AIG had to be propped up with taxpayer money.The Bear Stearns failure was ad hoc and small enough to be dealt with summarily. Fannie Mae and Freddie Mac were formally public-private and therefore also considered atypical. Lehman was unloved and at any rate still considered an isolated failure.
But unlike in the case of Lehman, Goldman had a $20 billion exposure to AIG’s swaps. They were the most important of many big counterparties to AIG’s bets. Beyond this loomed the prospect of systemic collapse, given AIG’s myriad positions in the global economy. While Goldman and its gigantic colleagues, including several foreign banks, were paramount in Paulson’s calculations, he was able to whitewash his policy by citing AIG’s legitimate insurance business, all the individual policyholders, pensions, money markets, municipalities and so on who would be affected by an AIG collapse. As Taibbi put it, “the AIG bailout, in effect, was Goldman [Paulson] bailing out Goldman”. Or Nocera again: “the bailout of AIG is really a bailout of its trading partners”.
Paulson now invoked the specter of TBTF, and its counterpart Too Interconnected To Fail. he made no mention of AIG’s fat counterparties. The MSM, befuddled and credulous as always, and panicked by the stock market, was ready and eager to listen and obey. TBTF was now enshrined. Paulson and Bernanke were able to sound their call of “Stampede!”, everyone stampeded, and without even thinking about it we were locked into this “bailout” death march which looks more and more to be permanent.
At the time no mention was made that the main purpose of the AIG bailout was to launder taxpayer money to many of the same banks who were receiving direct conveyances through TARP. This double-dipping was treated as a national secret for six months by AIG and by both administrations until AIG finally had to cave in and release the names in March. This came after four AIG bailouts and counting. There’s no end in sight, nor does anyone in power have any concept of what an “end” might be, unless it is to be a permanent corporate welfare state for the finance industry.
So much for AIG’s historical role. It only remains for me to make a few comments on AIG’s character. AIG has long had a reputation for arrogance, loutishness, and a sense of entitlement. Now during the bailout we have seen these traits taken to psychopathic extremes.
When the lead architect of destruction Cassano was finally forced out early in 2008, he was kept on the books as a “consultant” at $1 million a month, where he would still be today if political pressure hadn’t forced them to drop him completely. There has been no explanation for why they kept paying him, any more than there can be an explanation for why anyone at AIG or any of these banks could ever think he or anyone else deserves a bonus. It can only be described in terms of psychopathy.  
Being installed as the new bailout-era CEO, Edward Liddy declared his first priority would be to renegotiate the terms of the bailout to AIG’s advantage and the public’s disadvantage. He has been successful, with each subsequent bailout delivering more money to AIG at ever better terms for AIG and ever worse terms for the public, while rolling back the taxpayer protections of the previous bailouts. According to competitors, AIG has been leveraging its privileged position as a welfare queen to undercut competitors on premium rates. It can afford to do this since its existence, and lavish pay for its executives, is guaranteed by the federal government.
AIG was the first and the worst in the long line of miscreants among bailout recipients caught partying with taxpayer money at gilded age corporate “retreats”. It has been absolutely incorrigible regarding bonuses. It it now using taxpayer money to sue the taxpayers demanding a tax refund related to its offshore activities (themselves a evasion of American taxes) and the very accounting snafu which triggered its downfall in the first place.
It also recently circulated a veritable terrorist manifesto depicting in garish detail the economic horrors which would allegedly ensue if the bailouts don’t keep rolling in (and, implicitly, if anyone dares to question their executive pay). Thus they again take the lead, in waving the bloody flag of Too Big To Fail. (Getting back to Sorkin’s claim that AIG cadres, unless paid off, will go elsewhere and seek revenge upon the American economy while profiting from its destruction, and the contention that we need to pay protection to “retain” these people: if this is true, why are we giving them a choice at all? If this is a ticking time bomb scenario, and only the bomber can defuse the charge, would you coddle and beg him, and let him leave if he feels like it? Wouldn’t you make him defuse it, one way or another?)  
In all of these cases when criticized AIG’s gut response has been defiance and contempt, and only under extreme duress have they ever changed their behavior. They clearly hate and despise the taxpayer whose largesse keeps them alive, and their favorite act is to laugh at the taxpayer. No doubt the very fact that they’re partying with taxpayer money provides a special titillation for them.
A word about AIG’s other holdings, which they’re now trying to sell off. In themselves these are typical. Ski resorts and soccer sponsorships: luxury items. International Lease Finance – large-scale airlines are another unviable, propped-up industry, now definitely doomed by Peak Oil. AIG owns or manages real estate holdings in 50+ countries. Here too they’re a major player in the FIRE trust. So we see how in their diversifications as well AIG is a top-heavy, unconstructive, counterproductive force wrecking civilization.
AIG’s efforts to sell off these things have been getting harder as they and the administration have seemed to connive at trashing the brand name and everything connected to it. AIG says the government will provide “backstop financing” for buyers in this asset selloff. (The government has been backstopping a lot lately ever since it backstopped the Bear purchase.) So here too it’s bailouts and lemon socialism for everyone. The buyer gets to buy cheap, and on the taxpayer dime, while AIG gets another disguised bailout.
This is above all a morality play. AIG is a simple acronym which stands for the turpitude of an ideology, an industry, a mode of organizing the economy, a way to arrange the priorities and practices of government and society. It stands for the complete failure of all of these, on rational, practical, and moral grounds. AIG and its CDS practice were not features of capitalism, but exemplary of the rentier character of the FIRE trust which has taken control of the world economy. America became entranced by the delusion of an ideology and faith in a business practice. When this ideology proved false and the practice failed, America was then terrorized with the specter of a complete economic collapse.
So now the people live under a double despair. They watch the economy unravel and their dreams for the future vaporize, even as they are terrorized with the threat that things will get far worse if they don’t meekly consent to the complete looting of the country in the form of a Bailout War, a class war from above, a war by the elites on the people. Thus the people come closer to serfdom with every passing day.
That’s why I regard the public outrage over the AIG bonuses as a positive sign. Whether or not the proximate cause warranted the rage, the rage itself is warranted and long overdue. AIG, by providing such a clear example of capital crime, easy to understand, and yet clearly indicative of the deepest, most fundamental truths, has ironically provided the occasion for the public to “leverage” its hitherto inchoate anger and confusion.
That the MSM and the administration have largely responded with disdainful lectures and demands for obedience to power just shows the bad faith of the administration and the craven, corrupted fecklessness of the media.
Let’s hope the public has the will to continue its education, to become more active rather than less, to maintain their anger and convert it to activist passion, toward organizing against this theft of our country, this theft of our future. It’s completely in the people’s hands, to let the crimes continue, or to put an end to them, take back the country, and rebuild the future.
http://www.globalresearch.ca/index.php?context=va&aid=12265 michael hudson