Wednesday, December 31, 2008

Raw thoughts unedited

We need trans-egoic leadership now more than ever. We're being led by people mostly (to different degrees) largely "stuck" in their egos - they don't want to/haven't evolved to that "level". They crave status, power, money, safety beliefs in having much much more than they need, and incomplete / sick self-esteems that "need" confirmation in status and material wealth and escape in sensuality.

Unfortunately, I believe that includes Obama, though I think he is closer to breaking through the "ego ceiling" than many, for one reason because, thankfully I imagine that even growing up now a guy of his age with superior intelligence has grown farther on the spiral of devlopment than I would have 10 years ago, but actually that's not true - I was higher because I was in the visionary late '60s early '70's sub-generation.

A close male relative of mine 20 years younger who is very bright was going to be a professor of art, but switched to law school and is a copyright lawyer now for big corporations, I believe, which I sort of understand, at least I understand the much more pay and opportunity angle, but he converted to Mormonism, which is mythic-membership, mythic/rational (borderline - "straddling"), at best.

Of course the choices on the Spiritual line for Westerners are New Age mishmash of religion and Spirituality, mythic Eastern religion, Eastern Spirituality, mythic Western religion, and little else - Integral Spirituality is in short shrift for the general populace, there are politically progressive rational Christian religious denominations but they are a small minority. My relative encountered the edge of secular culture, postmodern relativistic aperspectival pluralism, and, of course wasn't satisfied with the absurd+, in place of wholeness and Love and Light and Life.

Tuesday, December 16, 2008

I was astonished that I didn't know much at all about this

From "WEB OF DEBT" by Ellen Goodman

original site here



President Andrew Jackson called the banking cartel a "hydra-headed monster eating the flesh of the common man." New York Mayor John Hylan, writing in the 1920s, called it a "giant octopus" that "seizes in its long and powerful tentacles our executive officers, our legislative bodies, our schools, our courts, our newspapers, and every agency created for the public protection." The debt spider has devoured farms, homes and whole countries that have become trapped in its web. In a February 2005 article called "The Death of Banking," financial commentator Hans Schicht wrote:

The fact that the Banker is allowed to extend credit several times his own capital base and that the Banking Cartels, the Central Banks, are licensed to issue fresh paper money in exchange for treasury paper, [has] provided them with free lunch for eternity. . . . Through a network of anonymous financial spider webbing only a handful of global King Bankers own and control it all. . . . Everybody, people, enterprise, State and foreign countries, all have become slaves chained to the Banker's credit ropes.1

Schicht writes that he had an opportunity in his career to observe the wizards of finance as an insider at close range. The game has gotten so centralized and concentrated, he says, that the greater part of U.S. banking and enterprise is now under the control of a small inner circle of men. He calls the game "spider webbing." Its rules include:

* Making any concentration of wealth invisible.
* Exercising control through "leverage" – mergers, takeovers, chain share holdings where one company holds shares of other companies, conditions annexed to loans, and so forth.
* Exercising tight personal management and control, with a minimum of insiders and front-men who themselves have only partial knowledge of the game.

The late Dr. Carroll Quigley was a writer and professor of history at Georgetown University, where he was President Bill Clinton's mentor. Dr. Quigley wrote from personal knowledge of an elite clique of global financiers bent on controlling the world. Their aim, he said, was "nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole." This system was "to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements."2 He called this clique simply the "international bankers." Their essence was not race, religion or nationality but was just a passion for control over other humans. The key to their success was that they would control and manipulate the money system of a nation while letting it appear to be controlled by the government.

The international bankers have succeeded in doing more than just controlling the money supply. Today they actually create the money supply, while making it appear to be created by the government. This devious scheme was revealed by Sir Josiah Stamp, director of the Bank of England and the second richest man in Britain in the 1920s. Speaking at the University of Texas in 1927, he dropped this bombshell:

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.3

Professor Henry C. K. Liu is an economist who graduated from Harvard and chaired a graduate department at UCLA before becoming an investment adviser for developing countries. He calls the current monetary scheme a "cruel hoax." When we wake up to that fact, he says, our entire economic world view will need to be reordered, "just as physics was subject to reordering when man's world view changed with the realization that the earth is not stationary nor is it the center of the universe."4 The hoax is that there is virtually no "real" money in the system, only debts. Except for coins, which are issued by the government and make up only about one one-thousandth of the money supply, the entire U.S. money supply now consists of debt to private banks, for money they created with accounting entries on their books. It is all done by sleight of hand; and like a magician's trick, we have to see it many times before we realize what is going on. But when we do, it changes everything. All of history has to be rewritten.

The following chapters track the web of deceit that has engulfed us in debt, and present a simple solution that could make the country solvent once again. It is not a new solution but dates back to the Constitution: the power to create money needs to be returned to the government and the people it represents. The federal debt could be paid, income taxes could be eliminated, and social programs could be expanded; and this could all be done without imposing austerity measures on the people or sparking runaway inflation. Utopian as that may sound, it represents the thinking of some of America's brightest and best, historical and contemporary, including Abraham Lincoln, Thomas Jefferson and Benjamin Franklin. Among other arresting facts explored in this book are that:

* The "Federal" Reserve is not actually federal. It is a private corporation owned by a consortium of very large multinational banks. (Chapter 13)
* Except for coins, the government does not create money. Dollar bills (Federal Reserve Notes) are created by the private Federal Reserve, which lends them to the government. (Chapter 2)

* Tangible currency (coins and dollar bills) together make up less than 3 percent of the U.S. money supply. The other 97 percent exists only as data entries on computer screens, and all of this money was created by banks in the form of loans. (Chapters 2 and 17)

* The money that banks lend is not recycled from pre-existing deposits. It is new money, which did not exist until it was lent. (Chapters 17 and 18)

* Thirty percent of the money created by banks with accounting entries is invested for their own accounts. (Chapter 18)

* The American banking system, which at one time extended productive loans to agriculture and industry, has today become a giant betting machine. An estimated $370 trillion are now riding on complex high-risk bets known as derivatives – 28 times the $13 trillion annual output of the entire U.S. economy. These bets are funded by big U.S. banks and are made largely with borrowed money created on a computer screen. Derivatives can be and have been used to manipulate markets, loot businesses, and destroy competitor economies. (Chapters 20 and 32)

* The U.S. federal debt has not been paid off since the days of Andrew Jackson. Only the interest gets paid, while the principal portion continues to grow. (Chapter 2)

* The federal income tax was instituted specifically to coerce taxpayers to pay the interest due to the banks on the federal debt. If the money supply had been created by the government rather than borrowed from banks that created it, the income tax would have been unnecessary. (Chapters 13 and 43)

* The interest alone on the federal debt will soon be more than the taxpayers can afford to pay. When we can't pay, the Federal Reserve's debt-based dollar system must collapse. (Chapter 29)

* Contrary to popular belief, creeping inflation is not caused by the government irresponsibly printing dollars. It is caused by banks expanding the money supply with loans. (Chapter 10)

* Most of the runaway inflation seen in "banana republics" has been caused, not by national governments over-printing money, but by global institutional speculators attacking local currencies and devaluing them on international markets. (Chapter 25)

* The same sort of speculative devaluation could happen to the U.S. dollar if international investors were to abandon it as a global "reserve" currency, something they are now threatening to do in retaliation for what they perceive to be American economic imperialism. (Chapters 29 and 37)

* There is a way out of this morass. The early American colonists found it, and so did Abraham Lincoln and some other national leaders: the government can take back the money-issuing power from the banks. (Chapters 8 and 24)

The bankers' Federal Reserve Notes and the government's coins represent two separate money systems that have been competing for dominance throughout recorded history. At one time, the right to issue money was the sovereign right of the king; but that right got usurped by private moneylenders. Today the sovereigns are the people, and the coins that make up less than one one-thousandth of the money supply are all that are left of our sovereign money. Many nations have successfully issued their own money, at least for a time; but the bankers' debt-money has generally infiltrated the system and taken over in the end. These concepts are so foreign to what we have been taught that it can be hard to wrap our minds around them, but the facts have been substantiated by many reliable authorities. To cite a few –

Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, wrote in 1934:

We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. 5

Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged:

Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.6

Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report:

[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.

Michel Chossudovsky, Professor of Economics at the University of Ottawa, wrote during the Asian currency crisis of 1998:

[P]rivately held money reserves in the hands of "institutional speculators" far exceed the limited capabilities of the World's central banks. The latter acting individually or collectively are no longer able to fight the tide of speculative activity. Monetary policy is in the hands of private creditors who have the ability to freeze State budgets, paralyse the payments process, thwart the regular disbursement of wages to millions of workers (as in the former Soviet Union) and precipitate the collapse of production and social programmes.7

Today, Federal Reserve Notes and U.S. dollar loans dominate the economy of the world; but this international currency is not money issued by the American people or their government. It is money created and lent by a private cartel of international bankers, and this cartel has the United States itself hopelessly entangled in a web of debt. By 2006, combined personal, corporate and federal debt in the United States had reached a staggering 44 trillion dollars – four times the collective national income, or $147,312 for every man, woman and child in the country.8 The United States is legally bankrupt, defined in the dictionary as being unable to pay one's debts, being insolvent, or having liabilities in excess of a reasonable market value of assets held. By October 2006, the debt of the U.S. government had hit a breath-taking $8.5 trillion. Local, state and national governments are all so heavily in debt that they have been forced to sell off public assets to satisfy creditors. Crowded schools, crowded roads, and cutbacks in public transportation are eroding the quality of American life. A 2005 report by the American Society of Civil Engineers gave the nation's infrastructure an overall grade of D, including its roads, bridges, drinking water systems and other public works. "Americans are spending more time stuck in traffic and less time at home with their families," said the group's president. "We need to establish a comprehensive, long-term infrastructure plan."9 We need to but we can't, because government at every level is broke.

Money in the Land of Oz

If governments everywhere are in debt, who are they in debt to? The answer is that they are in debt to private banks. The "cruel hoax" is that governments are in debt for money created on a computer screen, money they could have created themselves. The vast power acquired through this sleight of hand by a small clique of men pulling the strings of government behind the scenes evokes images from The Wizard of Oz, a classic American fairytale that has become a rich source of imagery for financial commentators. Editorialist Christopher Mark wrote in a series called "The Grand Deception":

Welcome to the world of the International Banker, who like the famous film, The Wizard of Oz, stands behind the curtain of orchestrated national and international policymakers and so-called elected leaders. 10

The late Murray Rothbard, an economist of the classical Austrian School, wrote:

Money and banking have been made to appear as mysterious and arcane processes that must be guided and operated by a technocratic elite. They are nothing of the sort. In money, even more than the rest of our affairs, we have been tricked by a malignant Wizard of Oz.11

In a 2002 article titled "Who Controls the Federal Reserve System?", Victor Thorn wrote:

In essence, money has become nothing more than illusion -- an electronic figure or amount on a computer screen. . . . As time goes on, we have an increasing tendency toward being sucked into this Wizard of Oz vortex of unreality [by] magician-priests that use the illusion of money as their control device.12

James Galbraith wrote in The New American Prospect:

We are left . . . with the thought that the Federal Reserve Board does not know what it is doing. This is the "Wizard of Oz" theory, in which we pull away the curtains only to find an old man with a wrinkled face, playing with lights and loudspeakers.13

The analogies to The Wizard of Oz work for a reason. According to later commentators, the tale was actually written as a monetary allegory, at a time when the "money question" was a key issue in American politics. In the 1890s, politicians were still hotly debating who should create the nation's money and what it should consist of. Should it be created by the government, with full accountability to the people? Or should it be created by private banks behind closed doors, for the banks' own private ends?

William Jennings Bryan, the Populist candidate for President in 1896 and again in 1900, mounted the last serious challenge to the right of private bankers to create the national money supply. According to the commentators, Bryan was represented in Frank Baum's 1900 book The Wonderful Wizard of Oz by the Cowardly Lion. The Lion finally proved he was the King of Beasts by decapitating a giant spider that was terrorizing everyone in the forest. The giant spider Bryan challenged at the turn of the twentieth century was the Morgan/Rockefeller banking cartel, which was bent on usurping the power to create the nation's money from the people and their representative government.

Before World War I, two opposing systems of political economy competed for dominance in the United States. One operated out of Wall Street, the New York financial district that came to be the symbol of American finance. Its most important address was 23 Wall Street, known as the "House of Morgan." J. P. Morgan was an agent of powerful British banking interests. The Wizards of Wall Street and the Old World bankers pulling their strings sought to establish a national currency that was based on the "gold standard," one created privately by the financial elite who controlled the gold. The other system dated back to Benjamin Franklin and operated out of Philadelphia, the country's first capital, where the Constitutional Convention was held and Franklin's "Society for Political Inquiries" planned the industrialization and public works that would free the new republic from economic slavery to England.14 The Philadelphia faction favored a bank on the model established in provincial Pennsylvania, where a state loan office issued and lent money, collected the interest, and returned it to the provincial government to be used in place of taxes. President Abraham Lincoln returned to the colonial system of government-issued money during the Civil War; but he was assassinated, and the bankers reclaimed control of the money machine. The silent coup of the Wall Street faction culminated with the passage of the Federal Reserve Act in 1913, something they achieved by misleading Bryan and other wary Congressmen into thinking the Federal Reserve was actually federal.

Today the debate over who should create the national money supply is rarely heard, mainly because few people even realize it is an issue. Politicians and economists, along with everybody else, simply assume that money is created by the government, and that the "inflation" everybody complains about is caused by an out-of-control government running the dollar printing presses. The puppeteers working the money machine were more visible in the 1890s than they are today, largely because they had not yet succeeded in buying up the media and cornering public opinion.

Economics is a dry and forbidding subject that has been made intentionally complex by banking interests intent on concealing what is really going on. It is a subject that sorely needs lightening up, with imagery, metaphors, characters and a plot; so before we get into the ponderous details of the modern system of money-based-on-debt, we'll take an excursion back to a simpler time, when the money issues were more obvious and were still a burning topic of discussion. The plot line for The Wizard of Oz has been traced to the first-ever march on Washington, led by an obscure Ohio businessman who sought to persuade Congress to return to Lincoln's system of government-issued money in 1894. Besides sparking a century of protest marches and the country's most famous fairytale, this little-known visionary and the band of unemployed men he led may actually have had the solution to the whole money problem, then and now . . . .

Thursday, December 11, 2008

"Capitalist Fools" - Joseph E. Stiglitz

Opinion [says "Vanity Fair" - it's good analysis to me]
Capitalist Fools
by: Joseph E. Stiglitz, Vanity Fair

January 2009 Issue

Behind the debate over remaking US financial policy will be a debate over who's to blame. It's crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes - under Reagan, Clinton and Bush II - and one national delusion.

There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history - a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it's crucial to get the history straight.

What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road - we had what engineers call a "system failure," when not a single decision but a cascade of decisions produce a tragic result. Let's look at five key moments.

No. 1: Firing the Chairman

In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.

Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you'll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.

Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown - as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation - or "liar" - loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn't have the tools, he could have gone to Congress and asked for them.

Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen - for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk - but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else - or even of one's own position. Not surprisingly, the credit markets froze.

Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn't put it as memorably as Warren Buffett - who saw derivatives as "financial weapons of mass destruction" - but we took his point. And yet, for all the risk, the deregulators in charge of the financial system - at the Fed, at the Securities and Exchange Commission, and elsewhere - decided to do nothing, worried that any action might interfere with "innovation" in the financial system. But innovation, like "change," has no inherent value. It can be bad (the "liar" loans are a good example) as well as good.

No. 2: Tearing Down the Walls

The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act - the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn't its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest - toward short-term self-interest, at any rate, rather than Tocqueville's "self interest rightly understood."

The most important consequence of the repeal of Glass-Steagall was indirect - it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people's money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people's money - people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.

There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can't, in any case, identify systemic risks - the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.

As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation - a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant - and successful - in their opposition. Nothing was done.

No. 3: Applying the Leeches

Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease - the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil - money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America's household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.

The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly - and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending - not that American consumers needed any more encouragement.

No. 4: Faking the Numbers

Meanwhile, on July 30, 2002, in the wake of a series of major scandals - notably the collapse of WorldCom and Enron - Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can't have faith in a company's numbers, then you can't have faith in anything about a company at all. Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are "incentive pay" in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.

The incentive structure of the rating agencies also proved perverse. Agencies such as Moody's and Standard & Poor's are paid by the very people they are supposed to grade. As a result, they've had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy - that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.

No. 5: Letting It Bleed

The final turning point came with the passage of a bailout package on October 3, 2008 - that is, with the administration's response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America's banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.

The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn't address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. The bailout package was like a massive transfusion to a patient suffering from internal bleeding - and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America's taxpayers but failed to ensure that the banks would use the money to restart lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.

The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues - they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely - which they hadn't - the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.

The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems - the flawed incentive structures and the inadequate regulatory system.

Was there any single decision which, had it been reversed, would have changed the course of history? Every decision - including decisions not to do something, as many of our bad economic decisions have been - is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You'll hear some on the right point to certain actions by the government itself - such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.'s had the same perverse incentive to indulge in gambling.

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America - and much of the rest of the world - of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.


Joseph E. Stiglitz, a Nobel Prize winning economist, is a professor at Columbia University.

Tuesday, December 09, 2008

"Flamingoes with Flowers" by Rick Baker

Flamingos with Flowers

A beautiful classical (style) photo. Reminds me some of Audobon prints or 19th century (or earlier) Classical naturescapes - balanced and reasoned in composition. A beauty!

said donharis

Tuesday, November 25, 2008

One mo' time....

I've decided that (the term) "transpersonal or 'trans-personal' as I'm wont to write]) deserves a big come back after Wilber more-or-less banished it from the leading edge for "integral". "Integral" is fine, but we need the specificity of "trans-personal" in a world of egos gone mad these days with all the doom and gloom and fear.

Obama's Treasury Pick Has All the Wrong Ideas - William Greider

Obama's Treasury Pick Has All the Wrong Ideas
By William Greider,
Posted on November 25, 2008, Printed on November 25, 2008

A year ago, when Barack Obama said it was time to turn the page, his campaign declaration seemed to promise a fresh start for Washington. I, for one, failed to foresee Obama would turn the page backward. The president-elect's lineup for key governing positions has opted for continuity, not change. Virtually all of his leading appointments are restoring the Clinton presidency, only without Mr. Bill. In some important ways, Obama's selections seem designed to sustain the failing policies of George W. Bush.

This is not the last word and things are changing rapidly. But Obama's choices have begun to define him. His victory, it appears, was a triumph for the cautious center-right politics that has described the Democratic party for several decades. Those of us who expected more were duped, not so much by Obama but by our own wishful thinking.

Let us stipulate that these are all honorable people, smart and experienced veterans of Washington combat. But they represent the Democratic party that mainly sees itself as managerial -- making government work better. The long era of conservative dominance has taught them to keep their distance from big reform ideas that promise fundamental change of the system. Their operating style is incremental and cautiously practical. They conscientiously avoid (or actively block) propositions that sound too liberal or radical. Alas, Obama is coming to power at a critical moment when incrementalism is irrelevant. The system is in collapse. Financial chaos won't wait for patient deliberations.

Events have confronted Obama with a fearful symmetry between past and present, illustrated by his choice of economic advisers. On Friday, we learned that Timothy Geithner, president of the New York Federal Reserve, would become his new treasury secretary and Larry Summers, who held the same position in the Clinton administration, would be the White House overseer of economic policy. On Monday, Geithner was busy executing the government's massive rescue of Citicorp -- the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protege (Geithner) with the taxpayers' money.

The connections go way beyond irony. They raise very serious questions about where the new president intends to lead and whether he has the nerve to break from the weak and haphazard strategy of the Bush administration. It has dumped piles of public money on the largest financial institutions and demanded little or nothing in return, hoping for the best. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.

On Wall Street, Geithner is known as a highly competent technocrat, well versed in the financial complexities. But he has also been seen as a weak and compliant regulator of Wall Street firms, someone who did not see the storm coming. Occasionally, Geithner would anguish publicly about the accumulating time bombs like credit derivatives and urge bankers to do something, but he did not use his supervisory powers to compel action. In bailout negotiations with Wall Street titans, Geithner and the Federal Reserve were spun around like a top more than once.

No wonder the stock markets rallied explosively when they heard Geithner would be their new boss in Washington. They think he is their guy. Summers may be a brilliant economist -- everyone says so -- but he, too, is a club member in good standing and now manages a huge hedge fund while he advises Obama. The president-elect needs to get a "second opinion" -- someone from outside the financial club who can explain the flaws in the rescue strategy preached by Bush's treasury secretary Henry Paulson and Tim Geithner at the New York Fed.

Their approach has clearly been designed to preserve what's left of the Wall Street establishment and maintain the supremacy of the largest financial firms while the taxpayers pick up their losses. That model has failed and too many smart people know why. The bailouts have been too little too late and aimed at an impossible objective -- persuading private capital investors to believe in the phony assurances proffered by the bankers. AIG, the insurance giant taken over by the feds, has turned into a bloody hemorrhage. Citigroup will be another and may soon be joined by other major banks demanding the same favorable terms. Wasting more public money on insolvent mastodons is the least of it. The real scandal is it doesn't work. It can't work because the black hole is too large even for Washington to fill. Government should take over the failing institutions or force them into bankruptcy, break them up and sell them off or mercifully relieve everyone, including the taxpayers.

Stock markets rallied again with the salvage of Citigroup. But not everyone in Wall Street was cheering. Christopher Whalen of Institutional Risk Analytics, the bank monitoring firm that has repeatedly been right about the banks when the government officials were wrong, had harsh words for the deal. "Pretending that Citi is going to be a going concern I think is silly," Whalen said. "We should be thinking about breaking this company up and redistributing the assets into stronger hands."

Will Timothy Geithner or Larry Summers advise the next president to face reality and throw in the towel? One hopes so, because Whalen warns: "By embracing Geithner, President-elect Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner…. This scheme to stay AIG's resolution cannot possibly work and, when it does collapse, Barack Obama and his administration will wear the blame."

Barack Obama is too smart and perceptive to let this happen to his yet-unborn presidency. Maybe he should find out what Whalen knows.

William Greider is the author of, most recently, "The Soul of Capitalism" (Simon & Schuster).
© 2008 All rights reserved.
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Sunday, November 23, 2008

The Dirty Secret of the Financial Crisis: Our Banking System's Broken By William Greider, The Nation

The Dirty Secret of the Financial Crisis: Our Banking System's Broken

By William Greider, The Nation. Posted November 22, 2008.

No more free money from Washington. No more masters of the universe. No more business as usual. Time for a banking holiday.

Henry Paulson's $700 billion plan to save the world is dead or dying, but the bailout was not killed by his arrogance or his grossly misleading claims about what the public's money would buy. The plan collapsed because it didn't work. The Treasury secretary has launched a PR offensive to revive his falling influence. Too late. The Democrats should be equally embarrassed. In September their leaders in Congress rushed to embrace the Paulson solution, no hard questions asked. They now claim they were duped.

Paulson's squad at Treasury pumped $250 billion into the largest banks, buying their stock at inflated prices on the assumption it would persuade investors to step forward with their capital too. Instead, savvy financial players realized Paulson was spitting into a high wind, trying to save a system with stout talk.

Here is the ugly, unofficial truth that neither Wall Street nor the government will acknowledge: the pinnacle of the US financial system is broke -- with perhaps $2 trillion in rotten financial assets on the books. Nobody knows, exactly. The bankers won't say, and regulators won't ask, or at least don't dare tell the public. Official silence naturally feeds the conviction that banking's problems are far worse than we've been told. The Levy Economics Institute of Bard College puts it plainly: "It is probable that many and perhaps most financial institutions are insolvent today -- with a black hole of negative net worth that would swallow Paulson's entire $700 billion in one gulp."

The scale of this disaster explains why the Treasury secretary had to abandon his original plan to buy up failed mortgages and other bad assets from the banks. If government paid the true value for these nearly worthless assets, the banks would have to write down huge losses or, as Levy economists put it, "announce to the world that they are insolvent." On the other hand, if Paulson pumps the purchase price high enough to protect the banks from losses, $700 billion "will buy only a tiny fraction of the 'troubled' assets."

Paulson was trapped by these circumstances (and his own mendacity). Each time he tried to change the script, market insiders became even more alarmed. Congress is trapped too. So is President-elect Obama. From the outset of the crisis, the essential fallacy shared by governing influentials has been a wishful assumption that quick interventions with tons of public money would somehow restore the system to "normal" without disturbing free-market principles. Replenished banks would start lending again and lead us to recovery. "Normal" is not going to happen. If the new president does not break free of the denial and act decisively, his administration will be dangerously compromised from the start.

Obama can begin by declaring a "bank holiday" like FDR's in 1933 -- an opportunity to put the hard facts on the table and assume temporary control of the entire financial system. Nationalizing the banks sounds more radical than it is, since banking law already empowers regulators to impose extraordinary controls and close supervision over troubled institutions. Facing facts will be painful, but it's better than continuing a costly charade. Paulson's approach, endorsed by many Democrats, was designed to preserve oversized Wall Street titans. In fact, Paulson and the Federal Reserve are making things worse by creating new members of the privileged club of "too big to fail." Public money is being used to finance bank takeovers that will become new behemoths.

A genuine solution means closing down the hopeless institutions and creating a more democratic system based on small to medium-sized banks, financial intermediaries that are less imperious and closer to the real economy of producers and consumers. The Levy institute suggests that some banks are "too big to save." If the president-elect seeks an opinion quite different from his circle of orthodox advisers, he could start with the institute's tartly incisive analysis "Time to Bail Out: Alternatives to the Bush-Paulson Plan," by Dimitri Papadimitriou and Randall Wray. Their perspective is Keynesian, not market worship. They argue (as The Nation and others have) that the bailout is proceeding backward. Instead of saving Wall Street first, government should devote its heavy firepower to reviving jobs, incomes and business enterprises. The banks will not get well or begin normal lending until there is overall economic recovery.

The financial system, meanwhile, can be managed much as it was during the Depression, with regulators weeding out doomed banks and closing them, putting troubled banks under conservatorship and supervising healthy ones closely to prevent excesses. "If we are going to leave insolvent institutions open, it is critically important to replace or at least control management," the Levy paper explains. "Business as usual would be a disaster."

Under these conditions, the government can grant forbearance and prescribe business plans for a slower recovery of bank balance sheets. Instead of buying ruined assets from banks, the government can allow them to sit, possibly for several years, until the economy revives and mortgages or other debt paper regains value. This would amount to an "imposed purgatory" for major banks, keeping them from growing too fast with unsound ventures. Taxpayers will not get off the hook either; government will need to spend hundreds of billions to bail out bankrupt pension funds and pay off insured deposits at failed banks.

Economic stimulus requires preservative measures to stop the bleeding, like a moratorium on home foreclosures and federal lending to the auto industry, as well as force-feeding innovation. Like the financial sector, the reform imperatives must accompany any aid for troubled industries. Do not subsidize more bad behavior by corporate titans or assist companies shipping US jobs and production overseas. In Detroit's case, Washington better get it in writing -- an enforceable contract to recover our money if the auto industry doesn't deliver.

President-elect Obama, of course, cannot act directly on any of these matters before January 20. But the Democratic Congress can, since the Treasury cannot spend any of the next $350 billion in the bailout fund without Congressional approval. Congress's first task is to cut off Paulson's water. Representative Dennis Kucinich, as usual, is out front demanding that Congress reject Paulson's request in advance. You can see why Wall Street hates these propositions. No more free money from Washington. No more "masters of the universe." You can also see why the people might be delighted.


See more stories tagged with: stimulus, housing crisis, financial crisis

William Greider is the author of, most recently, "The Soul of Capitalism" (Simon & Schuster).

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Indeed We Need FDR's Bank Holiday to Get To the Fcats ...
[Report this comment]
Posted by: mmckinl on Nov 22, 2008 12:12 AM
Current rating: 5 [1 = poor; 5 = excellent]
Thank you, William Greider. What has been apparent from the start of the debacle is the coddling, by former Goldman Sachs Chairman Paulson and Federal Reserve Chairman Ben Bernanke of the Federal Reserve, of Wall Street banks and investment banks to the the tune of now over $4 trillion in bailout largesse. The tactics used to threaten Congress and the American people to underwrite these massive bank losses can only be described as the "Shock Doctrine."

Indeed we need FDR's bank holiday plan to get to the facts of the most important sector in the American economy, the financial sector. Taxpayers and indeed the financial industry itself need transparency to quantify the losses and identify the insolvent institutions. Until trust is restored to the system the rot will spread.

We also need to nationalize the Federal Reserve. What has become clear is that this hybrid central bank has been and is being wrought by favoritism to the banks and special interests, and not being operated in the public interest. The current crisis and previous crises can be laid right at the feet of the Federal Reserve, through its operations, management and advisory malfeasance. What is needed is the reclamation of the sovereignty for the creation of currency and credit. We need a truly public central bank, as Canada has.

Why the left has not seized upon this tested and true remedy is beyond me. Congress, I know, is in the grasp of Wall Street, but I have read nothing by the leading lights of the left on FDR's bank holiday.

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» RE: We need to nationalize the Federal Reserve. Posted by: Lauren
» Would the Congress back the need to nationalize the Federal Reserve? Posted by: Artra
» RE: Bank Holiday? Posted by: oregoncharles
» RE: Indeed We Need FDR's Bank Holiday to Get To the Fcats ... Posted by: FeralCat
The whole system is cracked
[Report this comment]
Posted by: Tom Degan on Nov 22, 2008 1:25 AM
Current rating: 5 [1 = poor; 5 = excellent]
Isn't it telling that, for almost sixty years after FDR put in place the regulations which forced Wall Street to temper it's excesses, the market avoided any major (or even minor) financial meltdown. Then a funny thing happened....

In 1980 - for reasons I'm still trying to figure out - the American people thought that sending a feeble-minded, failed "B" movie actor to the White House would be a really neat idea.

Ronald Reagan and his minions immediately began to dismantle the regulations put into place by Franklin Delano Roosevelt's New Deal. In 1987, we had the first stock market crash since before my parents were born. We've had several since then. What occurred on Wall Street on September 15 was the big daddy that anyone paying attention knew was just 'round the corner.

(Go to my blog, click on the archives to June, Scroll down to a piece called "Gentlemen, Start Your Rhetoric". I predicted it. Go to the last piece I wrote in 2007. I predicted it. You want to hear the tragic thing? I never completed the eleventh grade.)

One thing is certain: I sure as hell don't envy president Obama.

It's The Most Wonderful Time of the Year

Tom Degan
Goshen, NY

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» SUGGESTED READING: Posted by: Tom Degan
» RE: More..SUGGESTED READING: Posted by: Inlander
» RE: The whole system is cracked Posted by: Ray Duray
» RE: The whole system is cracked Posted by: Tom Degan
» RE: The whole system is cracked Posted by: Inlander
» RE: The whole system is cracked -- Say, Tom... Posted by: photon's feather
» Tom, By design, many predicted "it". Ergo Conspiracy Posted by: common intelligence
Why to worry? Geithner has all the Greider ideas
[Report this comment]
Posted by: Artra on Nov 22, 2008 2:31 AM
Current rating: 3 [1 = poor; 5 = excellent]
President-elect Obama has taken all that into account, that's why he will be taking
Timothy F. Geithner, a man like Dennis John Kucinich, but on the Treasure Secretary, so two powers lifting the big economical redressing. President-elect Obama is a man who fiercelly will keep his compromise with society before surrendering to the big financiers and a very thoughtful person too. To implement the foreign consecuences to his economical brakes there is no more no less than Hillary. The world will be so glad that even people like Irakis will forget to ask for any repair for the little damages.

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» RE: Why to worry? Geithner has all the Greider ideas - this is satire, no? Posted by: DCostello2
» RE: Why to worry? Geithner has all the Greider ideas - this is satire, no? Posted by: Artra
The System is ROTTEN to the Core!
[Report this comment]
Posted by: Ottomatic on Nov 22, 2008 4:04 AM
Current rating: 5 [1 = poor; 5 = excellent]
Start over.
Kick out the Federal Reserve along with their phony DOLLAR!
All the interest is going to
Emperor Ratschild.
The biggest con game going.
Buy a house and buy two for him.
Such a Deal!

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» RE: The System is ROTTEN to the Core! Posted by: dogster
[Report this comment]
Posted by: Sparks56 on Nov 22, 2008 4:21 AM
Current rating: 3 [1 = poor; 5 = excellent]
CitiCorp is next. I doubt the remaining $350 billion left in the bailout fund would save it. The house of cards is crumbling. I believe Mr Greider is correct; the entire system is insolvent. There's no "there' there. The "invisible hand" is working; stocks, bonds, real estate, etc. are all settling at their real value.
The author is also correct in asserting that this bubble began with the Reagan dismantling of financial regulations. The sub-prime loans "detonated" this much bigger bubble. Read George Soros in a recent NY Review of Books for the best description I've seen of the melt down.

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The Secret Rulers of the World
[Report this comment]
Posted by: caru on Nov 22, 2008 4:41 AM
Current rating: 5 [1 = poor; 5 = excellent]
Series: The Secret Rulers of the World
Added: November 03, 2007. RT: 290 minutes

The source of most if not all our woes, revealed (from the present to the past): Connecting the dots through ~3000 years of revisionist human history, spanning from the time of the pharaohs, all the way up to the present dynasties creating the New World Order, in a quest to perfect the enslavement of mankind. From pirates to banksters, to the ruling elite, who run the world's finances, the media and cover both side of nearly every conflict or war: the world may make more sense after watching this.

About the Producer:
As a child, she had many arguments between her parents over her father's ring, inscribed with "G", a compass and square. At a later age, years of intensive research led her to the identity , history and plans of a power "so organized, so subtle, so watchful, so interlocking, so complete, so pervasive" that even the known 'leaders' of the world are careful not to speak in "condemnation" of it.
Series: The Secret Rulers of the World

01. That Morning of September

02. Only the Start

03. Profiting from 9/11

04. Hidden Empire

05. Vatican Hoarding

06. Amen & the Pharaohs

07. Abraham, a Pharaoh? [7/29]

08. Oceans of Blood

09. The Queen

10. King of Kings

continued in next post ...

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This comment has been removed from the site due to non-compliance with AlterNet's community policies.
» RE: The Secret Rulers of the World 2 Posted by: EncinoM
The Secret Rulers of the World - Present/Past [part 1 of 29]
[Report this comment]
Posted by: caru on Nov 22, 2008 4:47 AM
Current rating: 5 [1 = poor; 5 = excellent]
The Secret Rulers of the World - Present/Past [part 1 of 29]

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» RE: The Secret Rulers of the World - Present/Past [part 1 of 29] Posted by: Ray Duray
» RE: The Secret Rulers of the World - Present/Past [part 1 of 29] Posted by: caru
» Take your f*ckin meds. Posted by: yellow
» RE: Take your f*ckin meds. Posted by: weathered
Pick a side
[Report this comment]
Posted by: US Citizen 07 on Nov 22, 2008 5:13 AM
Current rating: 4 [1 = poor; 5 = excellent]
Let's see.

80% of the people in the world need to learn to live within their means to survive.

20% of the people in the world need us to spend beyond our means to survive. A tactic that put the world into the situation to begin with.

From what I see, loosening lending regulations and extending credit to people who can not afford the financial burden hasn't worked. It just prolongs the inevitible and makes the coming fall, harder.

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» RE: Pick a side Posted by: Passacaglia
» RE: Pick a side Posted by: hilaryuk
Meet the System
[Report this comment]
Posted by: Rhondamarie on Nov 22, 2008 5:37 AM
Current rating: 5 [1 = poor; 5 = excellent]
Readers are referred to this easy to read explanation of the world banking system. Kennedy tried to get us out of the mess. Please read this and pass it on to others.

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» RE: Meet the System Posted by: countingdaisies
Obama-In Bed with Federal Reserve Bank
[Report this comment]
Posted by: 911FalseFlag on Nov 22, 2008 6:04 AM
Current rating: 4 [1 = poor; 5 = excellent]
Based upon the individuals who he is considering to appoint to head the Treasury Department, Obama will continue a policy of allowing the Federal Reserve Bank to dictate economic policy and continue to scam people in this country out of trillions of dollars.

The following is a short excerpt from an article posted on my website:
All of the leading candidates for the position of Treasury Secretary under president elect Barack Obama directly represent the old guard of the corporate elite system that has used the American economy as it’s engine to drive their march toward a global empire for decades.

Under the banner of “change” whichever of [2] these candidates is appointed to the Treasury will continue to rapidly expand the empowerment of the Federal Reserve monetary system and institute the very policies that have led us to the brink of financial ruin to move the economies of the world toward a centralized global banking system.

The Leading candidate for Obama’s Treasury Secretary is current Chairman of the Federal Reserve Bank of New York [3] Tim Geithner.

go to

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» RE: Obama-In Bed with Federal Reserve Bank Posted by: remoran
[Report this comment]
Posted by: CLusterAble on Nov 22, 2008 6:36 AM
Current rating: 5 [1 = poor; 5 = excellent]
I think it all goes back to GREED. Greed of the bankers, the loan brokers and real estate agents during the sub prime lending boom that only cared about precious commission checks and caring less about the borrowers ability to pay back the loans. Greed is what got us to where we are today.

Privacy Center

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» RE: Greed Posted by: countingdaisies
[Report this comment]
Posted by: on Nov 22, 2008 6:46 AM
Current rating: 5 [1 = poor; 5 = excellent]
It goes back to the Republicans' in charge of all 3 branches of Government prior to 2 years ago & they took away all the regulations on the banking industry, also on the energy industry (that is why your utility bills are so much higher and there are some strange extra charges on them). Greed then took over for all these companies, just because it could.

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» RE: Barbara Posted by: left_libertarian
Terrytom Duped my ass
[Report this comment]
Posted by: terryton on Nov 22, 2008 7:12 AM
Current rating: 5 [1 = poor; 5 = excellent]
I love it the “Dimocraps say they were duped.” HORSE SHIT!!! They are in on it. This is the greatest theft in the history of the planet.
When the first bail-out plan was brought forth in such a panic I screamed “you must be nuts.”
After 8 years of the Bush cabal fucking up the country on every level only a fool or a person in on it would accept any plan from that criminal organization. I should have been dead on arrival. Then to let the fox running not guarding the chicken coup had to be nuts. How could we ever expect a fair shake? The plan they finally approved was loaded w/ pork just to get the assholes w/o real values to vote for it. No kind of controls were part of it no real oversight just let the secretary of the treasury hand it out to his entitled rich pals. Duped? Hell no they are in on it. Words cannot describe my out rage. The thieving bastards need to dragged into the street from their ivory towers and shot. If the majority of Americans who have been getting screwed royally for thirty years wake up it may come to that. People arm yourselves. A new revolution is in order. Thomas Jefferson said one might be needed on occasion and he was very wise. The plan described in the article might work w/o a revolution but I promise you “it ain’t gonna happen.”
I shuddered way back when that dolt Ronnie Reagan was elected and they once again started the road to acceptance of bigotry and kept saying greed was good. When so many greedy church leaders jumped on the train it all got exponentially worse. We seem to be a nation of delusional fools. For a time we need a confiscatory 90% tax of the rich because they don’t understand the giveback or gratitude theory of justice. In my view a revolution would not be an overthrow of the government is would be a restoration. And just to strengthen my point about how many fools have been duped never forget that over 50 million voted for McSame and that mindless Sarah.

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» RE: Dragged into the street and shot Posted by: Sushi
I wouldn't count on Obama to do the innovative thing
[Report this comment]
Posted by: susanhathaway on Nov 22, 2008 8:49 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Greider hopes that the worst possible effects of the financial crisis might yet be averted "If the president-elect seeks an opinion quite different from his circle of orthodox advisers." Sadly, I have to say, fat chance. With every Clintonite cabinet appointment, Obama looks more and more like a Blue Dog in sheep's clothing.

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» RE: I wouldn't count on Obama to do the innovative thing Posted by: left_libertarian
NOT BROKE as long as there is a middle class
[Report this comment]
Posted by: billwald on Nov 22, 2008 9:36 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
The purpose of the mess is to destroy the middle class. The country will be broke when we all admit to being "working poor" and the rich people own 90% of the real assets, not just the paper profits.

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[Report this comment]
Posted by: rigross on Nov 22, 2008 9:56 AM
Current rating: 2 [1 = poor; 5 = excellent]
This comment and the appended "...dragged into the street and shot," along with the fascinating but mildly disturbing exchange about the "secret rulers" is illustrative of the dilemma we face.
On the one hand, whether you call it military-industrial complex, global dominance group (as Project Censored does) or Bilderberger/Masons/Space Aliens/whoever, the Conspiracy is real but also includes people like the National Association of Manufacturers and nearly the entire U.S. Congress (albeit many unawares). On the other hand, hotheads and naysayers of all sorts who talk about armed insurrection, "...watering the tree of liberty with the blood of tyrants," etc, and how some particular generic "they" are the problem only encourage the deviciveness and fear that keep us stuck. Let's all try to take a deep breath, respect the humanity of even psychotic criminals like Bush/Chaney, and above all, try to return to the rule of law. It may not be perfect, but it is better than any theory/ideology/"noble idea" that boils down to the arbitrary rule of men (or women).

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» RE: rigross Posted by: terryton
» EVEN WORSE THAN THAT Posted by: rigross
the grand theft continues
[Report this comment]
Posted by: sharonsylvie on Nov 22, 2008 11:21 AM
Current rating: 5 [1 = poor; 5 = excellent]
How could Paulson not understand why everything is tanking? Makes you wonder about conspiracy theories.... Throwing money at the banks could never solve the underlying problems of lack of trust and excessive leverage. The lack of trust is because the ratings companies, banks, and investment houses colluded and lied to create, rate, and sell instruments that were very shaky. As for leverage, these companies already were allowed to sell 20 times their actual assets, and the the SEC, which is supposed to be a watchdog but apparently colluded with them too, allowed the companies to leverage up to 40 times. It's turning out that they all lied about their stocks and bonds, so when the housing bubble burst, they didn't have the money to pay up. It's not because some 10% of home buyers defaulted, it because the banks got greedy. So the entire system does need overhauling, but the bottom line is that most of us want to see them do the perp walk.

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We need "deciders" who will listen.
[Report this comment]
Posted by: Sojourner on Nov 22, 2008 11:22 AM
Current rating: 5 [1 = poor; 5 = excellent]
The unfolding analyses about how we have made the USA insolvent illustrate the large, large number of critics who were crying "Foul."

Trouble is no one was listening.

The comments that look for some evil influence bear the marks of too much entertainment. The drama of good versus evil happens only on stage.

In the real world, the choices are government that functions or government that is ruined from the inside out. So long as the American electorate give us politicians who do not believe in government as a positive force, we will continue ruined.

We have no alternative when officialdom refuses to listen except rebellion or collapse. We have chosen collapse.

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This is exactly what one man has been saying for atleast 3 years and certainly since last year.
[Report this comment]
Posted by: avatar_singh on Nov 22, 2008 12:29 PM
Current rating: 1 [1 = poor; 5 = excellent]
But his voice is shunned because he identified the real villain of hedge funds-the british who harbour most of thse spurious hedge funds in thier c=occupied cayman islands. and itis the british who have always insited on forcing the british way of ecnomoics ont eh europe and rest of the world.
therefore this person has been villified in angloamerican propaganda machinary while in fact all his analysis and predictions have become true. By the way I came to read his artilces only since last year but he seemd so much to the right target-bullyes to he real villain-the english race.
here is one of his latest articles.

LaRouche: From Fear To Panic As Derivatives Crash Hits
Increase Decrease

November 21, 2008 (LPAC)--Lyndon LaRouche today declared that leading bankers and government officials have gone "from fear to panic,'' as the next phase of the total disintegration of the global financial system hits. "We are now seeing the blowout of the multi-trillion dollar derivatives bubble,'' and this is what is driving the panic, LaRouche explained.

As of the end of June 2008, official figures, compiled by the U.S. Comptroller of the Currency, showed a total derivatives exposure of the three largest U.S. bank holding companies--JP Morgan Chase, Citicorp and Bank of America--stood at more than $179 trillion. And the Bank for International Settlements put the amount of documented outstanding derivatives contracts worldwide at the end of 2007 at $675 trillion--still a fraction of the actual exposure.

During November, investors in hedge funds had the opportunity to withdraw their cash, without penalty, and this factor, on top of the already onrushing unraveling of the derivatives bubble, is playing out. LaRouche noted that every major financial institution of the United States, Europe and Asia is tied up in the derivatives collapse, but no one has a clear picture of the exposure of the other financial institutions.

"This is the big explosion, detonating right now,'' LaRouche warned. "And so far, I am offering the only coherent solution--bankruptcy reorganization of the entire global financial system--starting with the cancellation of all derivatives obligations. My solution poses an existential threat to the entire Anglo-Dutch financial system of globalization. I know it, many leading bankers and government officials around the world know it, and, of course, the British know it. This is why the fear has turned to outright panic. We are nearing the showdown moment."

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» RE: This is exactly what one man has been saying for atleast 3 years and certainly since last year. Posted by: EncinoM
still furious
[Report this comment]
Posted by: cbishopp on Nov 22, 2008 2:13 PM
Current rating: 5 [1 = poor; 5 = excellent]
I have written my representative Dianne Feinstein about the bailout and the impeachment of Bush (so that he may not pardon his criminal cronies) and both times she responded with an email that pretty much told me (and everyone else) to shut up.
Actually the first email about the bailout she congratulated herself and the Senate for coming together on an issue that MOST OF HER CONSTITUENTS DID NOT SUPPORT. But she voted for it, anyway.
As for the Bush impeachment, she stated that we have had enough divisive politics and it's time to work together! Work together for what? On the project of impoverishing the nation?
I have had it.
I hope you have, too.
It's time to clean house. There are villians and hero's in both paties and we need to efectively discern between the two and dump the old guard altogether, not hire a new face of change that appoints the same old hags that put us here.
I am actually a supporter of O'bama as I desperately crave the change he so eloquently promised. He was also the best choice offered to us. Because that is what it is, a person who is pre-chosen by the wealthy elite to carry on existing polocies at the expense of the general population. That is why the popular vote is really just for show, to make sure that we do not have a hand in the decision making process.
Feinstein has proven to me that she will do whatever she wants no matter what we say. To claim that they were ignorant of all the bill's problems makes me even more angry.
What IS their job? To approve legislation for christ sake!!
Even I knew that the bailout was a con and I am sitting in my jammies in my living room watching it on TV.
Please be vocal. Scream and yell, march, go to jail in protest, tell your friends, educate one another because they will do this until we stop them.

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» Too big to fail, too divisive to be impeached Posted by: badkitty
This is NO Suprise to a Famil History Researcher!
[Report this comment]
Posted by: joeocho88 on Nov 22, 2008 3:18 PM
Current rating: 5 [1 = poor; 5 = excellent]
I am a family history researcher.
My ethics forbid me to say exactly who has consulted me and what families I have researched.
Suffice it to say that most of what I am tracing goes back the the British Empire which is where I fear The New World Order (IF the "conspiracy theorists" are right!) has a very strong power base in the banking and finance systems -- and NO, IT IS NOT ALL JEWISH!
It tends to be the same families intermarrying with the same families! Certain surnames keep repeating over and over and over again.

These people tend to believe in the DIVINE RIGHT of KINGS to rule over the rest of us --and by extension, keeping all the wealth in their class.

These people do NOT see the consequences of what they are doing. Nor do they care! THEY ARE SO OUT OF TOUCH WITH WHAT YOU AND I CALL REALITY THAT THEY HAVE NO BUSINESS DICTATING IT FOR THE REST OF US! But they do, to the elected officials who are bought and sold with their enormous wealth!

To them, this bailout that will cost billions upon billions of dollars and put ordinary people like us out of work is CHUMP CHANGE to these folks...It is just a gentlemanly agreement like a handshake over a golf game or a debt of honor at a game of cards.RICH PEOPLE LOVE TO GAMBLE --THEY CAN AFFORD TO. THE REST OF US CANNOT!

WHY SHOULD WE THE ORDINARY PEOPLE HAVE TO SUBSIDIZE THE UPPER CLASS --make that UPPER CASTE because that is what our society is trying to become?


We are nothing more than pawns in a chess game, and a course of amusement and an occasional source of money for them to squander ( they don't have much liquidity as their wealth has been carefully stored in trust sometimes for centuries -- ironically so they can't GAMBLE it away!). So they have to engage in various enterprises that generate income above and beyond the trusts like SELLING WAR MATERIALS,THE ILLICIT DRUG TRADE and other enterprises that will yield the most profit. Only the ordinary people are harmed by this and we are just flies on their walls anyway.

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» RE: This is NO Suprise to a Famil History Researcher! Posted by: countingdaisies
Greider is Right
[Report this comment]
Posted by: skinny cat on Nov 22, 2008 4:24 PM
Current rating: 5 [1 = poor; 5 = excellent]
A banking holiday is overdue. If we had a prime minister system (or a constitutional amendment) the new President and Congress would already be on the job. Can Congress and the state legislatures do a constitutional amendment as quickly as Congress bailed out the banks? It’s only a matter of changing two dates. These are the times when politicians wish they had stayed in Podunk.

Does John Acton’s dictum “power tends to corrupt; absolute power corrupts absolutely” apply more to finance capitalists than to politicians? Apparently so. Pork barrel politics never put us in do-do this deep. Mere regulation of unchecked or absolute economic power is not enough. Presidents or Committee Chairmen can stop regulation in its tracks, as we have reason to know.

The root of the problem is a lack of democratic government. If the Voters ratified treaties and trade agreements (as do some EU voters, and the people who are Panama) NAFTA, the WTO, PNTR for China would not have happened. Without those trade agreements and deficits, the bankers could not have done what they did.
This Aristotelian class system cannot stay off the shoals of disaster if the most numerous class is locked out of the system.

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Audit and terminate the FED, and please nationalize failing banks
[Report this comment]
Posted by: JPHickey on Nov 23, 2008 6:53 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
The mainstream media has really pulled the wool over the eyes of the vast majority of our citizens. I know professional lawyers who don't believe the Fed is a private business. Others seem to think it is somehow necessary. Of course I have no credibility with them anyway, and since I'm not being paid to make this case, I just let the matter drop.

However, I have been wondering why we the people have not at least insisted that the Fed be audited. When the results were in, these astonishing statistics could be featured news items on CNN, CNBC, etc, for at least a few days. Maybe the truth could be also reported on "Meet the Press" and/or "60 Minutes".

Without transparency, the ruling elite retain their upper hand. I believe this understanding was part of the Constitution of the U.S. in regards to "checks and balances" as well as freedom of the press. "May the truth set man free!" At least ignorance is hardly bliss.

So then close the Fed and start the banking holidays, ASAP! And of course the U.S. will be forced to give up the military empire sooner rather than later. This matter is too far outside the box for the established status-quo president-elect and congress to focus on. It will just fall off a cliff like everything else that will no longer work.

The U.S. needs to hang up the empire and walk away. Some sort of a "bottom-up" rebuilding of the U.S. economy will take all the resources we can conjure up and then some!

Okay, I'll give the new president and congress something of a honeymoon. However, I believe that drastic challenges may call for drastic actions! I'm ready!

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This is why we need a 'Zero Out' Day....
[Report this comment]
Posted by: jeffrey7 on Nov 23, 2008 8:24 AM
Current rating: 4 [1 = poor; 5 = excellent]
The most basic of human weaknesses has created this bank failure and that is...GREED.
That's the reason you have so many fees attached to your accounts. Don't have enough in get a fee. No enough in checking ...a fee. Write a check another fee.
Take a piss while you're waiting for service
another fee. Call them on the phone to bitch..yep another fee.

All this money for doing nothing and their hurting for cash??!!?! For 10 cents I'd piss in their vacuumtubes and fill the carrier with change!!

The variable interest rates they charge a down right criminal!! Cheap interest rates should go to the poor working class,just to pay off the debt faster, not rich assholes that didn't need a loan in the first place.

This is why we,as a Nation, need to push hard for a 'National Debt Forgivness Day'.
All debt,with the flick of a switch,becomes assets. Yes we'd have to include the richies but what the hell at least the rest of us would breathe a lot easier.

Then an even bigger part of human nature would take over. The part that tells us,'I want to buy that!'. The economic hurricane that would result from everyone's budget being set to the positive would create a 'recovery' that would drive us well into the next century.
Where we would no doubt have to do it again.

By then maybe we'll have figured out that humans are naturally prone to greed and excess.
Living in that condition creates a seperation of the people along strictly monetary lines.
Thusly seperated society devolves into the Controllers and the Controlled. Wars,Riots and Civil Uprisings result and hatred exists where there should be compassionate understanding.

As a result of this awakening,Societies decide to make 'Debt Forgivness Day' a
Bi- century event that's honored all over the world. This won't by itself generate a whole society of shiftless layablouts,they happen naturally, but it may quite well inspire better money managenment and spending practices
so when DFD Day comes around,you could be someone who has no debt to forgive,making
that the new 'gold standard'.

Wouldn't that be better than sweating over a citizen paid for bailout of the people that just suck us dry anyway?

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» Only immature "humans are...prone to greed and excess" Posted by: Sojourner
Trickle Down Never Works
[Report this comment]
Posted by: NoPCZone on Nov 23, 2008 8:45 AM
Current rating: 4 [1 = poor; 5 = excellent]
All The Bush Handout to the Financial Services Industry is essentially is more of the same- trickle down.
Didn't work before- won't this time.

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Yeah Yeah. We all know that. And here comes another "bailout" !!
[Report this comment]
Posted by: maxpayne on Nov 23, 2008 9:51 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
And then Washington will say "SUCK ON THAT MAIN STREET !" and give us all the MIDDLE FINGER !!

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A House of Cards Built on a House of Cards
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Posted by: Carol Burns on Nov 23, 2008 10:24 AM
Current rating: 5 [1 = poor; 5 = excellent]
Our economy, even in good times, is built on leverage. The Fed charges banks a given rate on a given day to borrow Fed funds and requires them to maintain a certain ratio of loans to deposits. When deregulation allowed banks to speculate in the stock market and for some stock market trades, derivatives and hedge funds, to fall outside the regulatory guidelines, the already shaky bottom level of cards fell under the weight of the upper level. Thank Bush and Cheney for diverting funds from our economy to finance wars and line their pockets with the spoils of war. Thank Phil Gramm for his last-minute deregulation of the markets. This "bailout" will do nothing, because the secondary level of the house of cards has already weighed down the bottom level, even though it consists mainly of air. The only real stimulus to the economy must come from the bottom up. The multiplier effect of the dollar at the local level is the only way to get the economy growing again. Bush/Cheney and their Wall Street gang of thugs are just trying to grab up everything they can before they leave office. We don't need "superbanks" or "supermergers", which is where they are headed with this "bailout". We need money in the pockets of every citizen. And we need to call, once again, for the impeachment of Bush and Cheney for their criminal activities.

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» RE: A House of Cards Built on a House of Cards ZYes But Posted by: left_libertarian
We Need to Impeach
[Report this comment]
Posted by: Carol Burns on Nov 23, 2008 10:31 AM
Current rating: 5 [1 = poor; 5 = excellent]

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The DumboCrats DUH Sniff Sniff We were Duped!! Sniff
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Posted by: left_libertarian on Nov 23, 2008 11:30 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
hear them whine like a little baby.
Bush did that he fooled us about WMD, etc

the scary part? these morons will take over from the criminals bush and cheney.

be afraid.

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Thursday, November 20, 2008


Typical idiot-establishment MSM muffle-play: Pat Buchanan (I'm of course NO fan, except for a few fair-trade policies he advocates) was talking about how his fellow debater on the economy works for the Heritage Foundation, and was interestingly pointing out how the foundation is largely and generously funded by a few huge multi-national corporations. Tweet cut Buchanan off, like an adolescent or a preppy club grown up, with a shallow "Ahh, we're not gonna bash anyone's employment, now, Pat - we'll be back after this commercial.

Here we have the self-censorship of the mainstream corporatist media.
Tweet, tweet, tweetly, twetley dum(b)!

Monday, November 10, 2008

We Hope the neo-Dark ages

(the last 8 years) are over now. We won the election (the biggest, most inclusive "we" with Obama. I hope the years progressing in/to The Light follow in this my lifetime. Of course I must acknoweldge the paradox that we're all already in the Infiinte Eternal Light Love indeed are none other than that and the emptiness it arises in.

But the serious cosmic joke game of evolution is to progress up a spiral which includes novelty and innovation and creativity and struggle on this planet to real-ization.

Saturday, October 18, 2008

If ONLY The Federal Gov't. would do this!!!!!!!!

October 18, 2008 Latest News on Global Financial Crisis

Financial Meltdown: The Greatest Transfer of Wealth in History
How to Reverse the Tide and Democratize the US Monetary System

by Ellen Brown

Global Research, October 17, 2008

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"Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride."– Bill Saporito, "How We Became the United States of France," Time (September 21, 2008)

On October 15, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.1

Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history.

On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.

The reversal was dramatic but short-lived. On October 15, the day of the Presidential debate, the Dow dropped 733 points, crash landing at 8,578. The reversal is looking more like a massive pump and dump scheme – artificially inflating the market so insiders can get out – than a true economic rescue. The real problem is not in the much-discussed subprime market but is in the credit market, which has dried up. The banking scheme itself has failed. As was learned by painful experience during the Great Depression, the economy cannot be rescued by simply propping up failed banks. The banking system itself needs to be overhauled.

A Litany of Failed Rescue Plans

Credit has dried up because many banks cannot meet the 8% capital requirement that limits their ability to lend. A bank’s capital – the money it gets from the sale of stock or from profits – can be fanned into more than 10 times its value in loans; but this leverage also works the other way. While $80 in capital can produce $1,000 in loans, an $80 loss from default wipes out $80 in capital, reducing the sum that can be lent by $1,000. Since the banks have been experiencing widespread loan defaults, their capital base has shrunk proportionately.

The bank bailout plan announced on October 3 involved using taxpayer money to buy up mortgage-related securities from troubled banks. This was supposed to reduce the need for new capital by reducing the amount of risky assets on the banks’ books. But the banks’ risky assets include derivatives – speculative bets on market changes – and derivative exposure for U.S. banks is now estimated at a breathtaking $180 trillion.2 The sum represents an impossible-to-fill black hole that is three times the gross domestic product of all the countries in the world combined. As one critic said of Paulson’s roundabout bailout plan, "this seems designed to help Hank’s friends offload trash, more than to clear a market blockage."3

By Thursday, October 9, Paulson himself evidently had doubts about his ability to sell the plan. He wasn’t abandoning his old cronies, but he soft-pedaled that plan in favor of another option buried in the voluminous rescue package – using a portion of the $700 billion to buy stock in the banks directly. Plan B represented a controversial move toward nationalization, but it was an improvement over Plan A, which would have reduced capital requirements only by the value of the bad debts shifted onto the government’s books. In Plan B, the money would be spent on bank stock, increasing the banks’ capital base, which could then be leveraged into ten times that sum in loans. The plan was an improvement but the market was evidently not convinced, since the Dow proceeded to drop another thousand points from Thursday’s opening to Friday’s close.

One problem with Plan B was that it did not really mean nationalization (public ownership and control of the participating banks). Rather, it came closer to what has been called "crony capitalism" or "corporate welfare." The bank stock being bought would be non-voting preferred stock, meaning the government would have no say in how the bank was run. The Treasury would just be feeding the bank money to do with as it would. Management could continue to collect enormous salaries while investing in wildly speculative ventures with the taxpayers’ money. The banks could not be forced to use the money to make much-needed loans but could just use it to clean up their derivative-infested balance sheets. In the end, the banks were still liable to go bankrupt, wiping out the taxpayers’ investment altogether. Even if $700 billion were fanned into $7 trillion, the sum would not come close to removing the $180 trillion in derivative liabilities from the banks’ books. Shifting those liabilities onto the public purse would just empty the purse without filling the derivative black hole.

Plan C, the plan du jour, does impose some limits on management compensation. But the more significant feature of this week’s plan is the Fed’s new "Commercial Paper Funding Facility," which is slated to be operational on October 27, 2008. The facility would open the Fed’s lending window for short-term commercial paper, the money corporations need to fund their day-to-day business operations. On October 14, the Federal Reserve Bank of New York justified this extraordinary expansion of its lending powers by stating:

"The CPFF is authorized under Section 13(3) of the Federal Reserve Act, which permits the Board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations that are unable to obtain adequate credit accommodations. . . .

"The U.S. Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the New York Fed in support of this facility."4

That means the government and the Fed are now committing even more public money and taking on even more public risk. The taxpayers are already tapped out, so the Treasury’s "special deposit" will no doubt come from U.S. bonds, meaning more debt on which the taxpayers have to pay interest. The federal debt could wind up running so high that the government loses its own triple-A rating. The U.S. could be reduced to Third World status, with "austerity measures" being imposed as a condition for further loans, and hyperinflation running the dollar into oblivion. Rather than solving the problem, these "rescue" plans seem destined to make it worse.

The Collapse of a 300 Year Ponzi Scheme

All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on "fractional reserve" lending, which allows banks to create "credit" (or "debt") with accounting entries. Banks are now allowed to lend from 10 to 30 times their "reserves," essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.5 The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough "money" (or "credit") to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years -- ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly. As British financial analyst Chris Cook observes:

"Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources."6

The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own.

The New Deal Revisited

Today’s credit crisis is very similar to that facing Franklin Roosevelt in the 1930s. In 1932, President Hoover set up the Reconstruction Finance Corporation (RFC) as a federally-owned bank that would bail out commercial banks by extending loans to them, much as the privately-owned Federal Reserve is doing today. But like today, Hoover’s plan failed. The banks did not need more loans; they were already drowning in debt. They needed customers with money to spend and to invest. President Roosevelt used Hoover’s new government-owned lending facility to extend loans where they were needed most – for housing, agriculture and industry. Many new federal agencies were set up and funded by the RFC, including the HOLC (Home Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage Association, which was then a government-owned agency). In the 1940s, the RFC went into overdrive funding the infrastructure necessary for the U.S. to participate in World War II, setting the country up with the infrastructure it needed to become the world’s industrial leader after the war.

The RFC was a government-owned bank that sidestepped the privately-owned Federal Reserve; but unlike the private banks with which it was competing, the RFC had to have the money in hand before lending it. The RFC was funded by issuing government bonds (I.O.U.s or debt) and relending the proceeds. The result was to put the taxpayers further into debt. This problem could be avoided, however, by updating the RFC model. A system of public banks might be set up that had the power to create credit themselves, just as private banks do now. A public bank operating on the private bank model could fan $700 billion in capital reserves into $7 trillion in public credit that was derivative-free, liability-free, and readily available to fund all those things we think we don’t have the money for now, including the loans necessary to meet payrolls, fund mortgages, and underwrite public infrastructure.

Credit as a Public Utility

"Credit" can and should be a national utility, a public service provided by the government to the people it serves. Many people are opposed to getting the government involved in the banking system, but the fact is that the government is already involved. A modern-day RFC would actually mean less government involvement and a more efficient use of the already-earmarked $700 billion than policymakers are talking about now. The government would not need to interfere with the private banking system, which could carry on as before. The Treasury would not need to bail out the banks, which could be left to those same free market forces that have served them so well up to now. If banks went bankrupt, they could be put into FDIC receivership and nationalized. The government would then own a string of banks, which could be used to service the depository and credit needs of the community. There would be no need to change the personnel or procedures of these newly-nationalized banks. They could engage in "fractional reserve" lending just as they do now. The only difference would be that the interest on loans would return to the government, helping to defray the tax burden on the populace; and the banks would start out with a clean set of books, so their $700 billion in startup capital could be fanned into $7 trillion in new loans. This was the sort of banking scheme used in Benjamin Franklin’s colony of Pennsylvania, where it worked brilliantly well. The spiraling-interest problem was avoided by printing some extra money and spending it into the economy for public purposes. During the decades the provincial bank operated, the Pennsylvania colonists paid no taxes, there was no government debt, and inflation did not result.7

Like the Pennsylvania bank, a modern-day federal banking system would not actually need "reserves" at all. It is the sovereign right of a government to issue the currency of the realm. What backs our money today is simply "the full faith and credit of the United States," something the United States should be able to issue directly without having to draw on "reserves" of its own credit. But if Congress is not prepared to go that far, a more efficient use of the earmarked $700 billion than bailing out failing banks would be to designate the funds as the "reserves" for a newly-reconstituted RFC.

Rather than creating a separate public banking corporation called the RFC, the nation’s financial apparatus could be streamlined by simply nationalizing the privately-owned Federal Reserve; but again, Congress may not be prepared to go that far. Since there is already successful precedent for establishing an RFC in times like these, that model could serve as a non-controversial starting point for a new public credit facility. The G-7 nations’ financial planners, who met in Washington D.C. this past weekend, appear intent on supporting the banking system with enough government-debt-backed "liquidity" to produce what Jim Rogers calls "an inflationary holocaust." As the U.S. private banking system self-destructs, we need to ensure that a public credit system is in place and ready to serve the people’s needs in its stead.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are and

Ellen Brown is a frequent contributor to Global Research. Global Research Articles by Ellen Brown
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