to make a platform for the metal plate to ride on.
Assuming Bush’s explanation is valid, the first question is why are we not in “normal circumstances”? If “something” has caused abnormal circumstances, shouldn’t we identify and attack that root cause rather than apply a $700 billion band-aid to the effects? If we don’t find and eliminate the fundamental cause for our “abnormal circumstances,” it’s certain that this fundamental cause will continue to generate the same kinds of dire consequences (effects) the Bush administration is currently trying to bandage.
Bush won’t identify, let alone challenge, the real “root cause” of our “abnormal circumstances,” because that cause is the fiat monetary system and unconstitutional government. Read Article 1 Section 10, Clause 1 of the Constitution which declares in part, “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts.” That section of the Constitution has never been amended. Nevertheless, when was the last time you saw gold or silver coin in general circulation as our money? Answer: A.D. 1968—the last year gov-co redeemed “silver certificates” with silver dollars. Since then, we’ve been in a brave new fiat-money world.
September 29, 2008 12:20 PM
Wednesday, May 24, 2006
Fannie Mae engaged in "extensive financial fraud" over six years by doctoring earnings so executives could collect hundreds of millions of dollars in bonuses, federal officials said yesterday in a report that portrayed a company determined to play by its own rules.
Regulators at the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight, in announcing a settlement with Fannie Mae that includes $400 million in penalties, provided the most detailed picture yet of what went wrong at the congressionally chartered firm.
They portray the District-based mortgage funding giant -- a linchpin of the nation's housing market -- as governed by a weak board of directors, which failed to install basic internal controls and instead let itself be dominated and left uninformed by chief executive Franklin Raines and Chief Financial Officer J. Timothy Howard, who both were later ousted.
Shares Plunge
Shares in Fannie and Freddie have plummeted more than 80 percent this year on concern they don't have sufficient capital to withstand record foreclosures on the $5.2 trillion of mortgages they own or guarantee.
In regards to the current financial crisis described by many as the worst in multiple generations, billionaire investor George Soros stated here:
The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to pwoer. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent. These leaders believed that markets are self-correcting, meaning that it prices get out of whack, they will eventually revert to historical norms. Instead, this laissez-faire attitude created the current housing bubble, which in turn led to the seizing up of crdeit markets...
Soros further opines elsewhere:
...regulations have been progressively relaxed until they have practically disappeared.
December, 1982--Garn - St Germain Depository Institutions Act of 1982 enacted. This Reagan Administration initiative is designed to complete the process of giving expanded powers to federally chartered S&Ls and enables them to diversify their activities with the view of increasing profits. Major provisions include: elimination of deposit interest rate ceilings; elimination of the previous statutory limit on loan to value ratio; and expansion of the asset powers of federal S&Ls by permitting up to 40% of assets in commercial mortgages, up to 30% of assets in consumer loans, up to 10% of assets in commercial loans, and up to 10% of assets in commercial leases.
- Deregulation practically eliminated the distinction between commercial and savings banks.
- Deregulation caused a rapid growth of savings banks and S&L's that now made all types of non homeowner related loans. Now that S%L's could tap into the huge profit centers of commercial real estate investments and credit card issuing many entrepreneurs looked to the loosely regulated S&L's as a profit making center.
- As the eighties wore on the economy appeared to grow. Interest rates continued to go up as well as real estate speculation. The real estate market was in what is known as a "boom" mode. Many S&L's took advantage of the lack of supervision and regulations to make highly speculative investments, in many cases loaning more money then they really should.
- When the real estate market crashed, and it did so in dramatic fashion, the S&L's were crushed. They now owned properties that they had paid enormous amounts of money for but weren't worth a fraction of what they paid. Many went bankrupt, losing their depositors money. This was known as the S&L Crisis.
- In 1980 the US had 4,600 thrifts, by 1988 mergers and bankruptcies left 3000. By the mid 1990's less than 2000 survived.
In less then 7 years after the initiation of this major banking deregulation, in February of 1989, President Bush (the first of course) unveiled the S&L bailout plan. As the Help Center puts it;
http://seekingalpha.com/article/71265-the-credit-bubble-deregulation-gone-wildThe S&L crisis cost about 600 Billion dollars in "bailouts." This is 1500 dollars from every man woman and child in the US.
Deja Vu
"When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage.
" The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
"The Federal Reserve's most important mission, of course, is monetary policy.
"Augmenting concerns about the Federal Reserve is the perception that we are a secretive organization, operating behind closed doors, not always in the interests of the nation as a whole. This is regrettable, and we continuously strive to alter this misperception.
There are certain Federal Reserve deliberations that have to remain confidential for a period of time. To open up our debates on monetary policy fully to immediate disclosure would unsettle financial markets and constrain our discussions in a manner that would undercut our ability to function.
"Inflation can destabilize an economy even if faulty price indexes fail to reveal it.
"But where do we draw the line on what prices matter? Certainly prices of goods and services now being produced--our basic measure of inflation--matter. But what about futures prices or more importantly prices of claims on future goods and services, like equities, real estate, or other earning assets? Are stability of these prices essential to the stability of the economy?
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy?
"Our overall management of the Federal Reserve System should, and does, come under considerable scrutiny by the Congress. Since we expend unappropriated taxpayer funds, we have an especial obligation to be prudent and efficient with the use of those funds.
"Finally, the substantial changes under way in bank risk management are pressing us to continuously alter our modes of supervision and regulation to keep them as effective and efficient as possible.
"Along with our other central bank colleagues, we are always looking for ways to reduce the risks that the failure of a single institution will ricochet around the world, shutting down much of the world payments system, and significantly undermining the world's economies. Accordingly, we are endeavoring to get as close to a real time transaction, clearing, and settlement system as possible.
"Central banks need to respond patiently and responsibly to the commentary, and we need to adapt to changing circumstances in markets and the economy.
"A democratic society requires a stable and effectively functioning economy.
"It is, thus, no wonder that we at the Federal Reserve, the nation's central bank, and ultimate guardian of the purchasing power of our money, are subject to unending scrutiny. Indeed, it would be folly were it otherwise."(2)
On April 6, 1998, Weill and Reed announce a $70 billion stock swap merging Travelers (which owned the investment house Salomon Smith Barney) and Citicorp (the parent of Citibank), to create Citigroup Inc., the world's largest financial services company, in what was the biggest corporate merger in history. The transaction would have to work around regulations in the Glass-Steagall and Bank Holding Company acts governing the industry, which were implemented precisely to prevent this type of company: a combination of insurance underwriting, securities underwriting, and commecial banking. The merger effectively gives regulators and lawmakers three options: end these restrictions, scuttle the deal, or force the merged company to cut back on its consumer offerings by divesting any business that fails to comply with the law....Following the merger announcement on April 6, 1998, Weill immediately plunges into a public-relations and lobbying campaign for the repeal of Glass-Steagall and passage of new financial services legislation.
Robert E. Rubin, secretary of the Treasury, recommended that Congress pass legislation to reform or repeal the Glass-Steagall Act of 1933 to modernize the country's financial system....the proposals would permit affiliations between banks and other financial services companies, such as securities firms and insurance companies. (1)
October-November 1999
Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant.
December 4, 2008
Director Rubin and ousted CEO Prince - and their lieutenants over the past five years - are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths. (3)
(1) http://www.allbusiness.com/government/business-regulations/500983-1.html
(2) http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html quotes appears here without permission, but in solidarity and support.
With Glass-Steagall out of the way, Sandy Weill had his merger and the American financial industry now had a green light to enlarge on subprime lending. Some followed Weill’s model of consolidating loan and insurance companies as he had done with American Health & Life and Travelers, taking loansharking to a level those who had engaged in it back when it was done in storefronts with peeling paint could have never imagined.
More money than any organized crime syndicate could have dreamed of flowed into the coffers of the subprime lenders. What had been an activity aimed mainly at people of color now became linked to complex financial instruments such as tranches and derivatives, that to an uninitiated mind resembled nothing so much as the old shell game. Where’s the mortgage? Under this fund? No. guess again. Inner city and suburb which had been separated by redlining became linked by acronyms–MBS, CDOs, CMOs. But as we shall see in the next essay, ripping off people of color would continue.
http://thestrangedeathofliberalamerica.com/did-racism-help-cause-the-mortgage-crisis-the-rise-of-sandy-weill-and-citigroup.html
| F A C I N G S O U T H A progressive Southern news report June 5, 2003 - Issue 51 Published by the Institute for Southern Studies and Southern Exposure magazine SPECIAL REPORT - BANKING ON MISERY: Citigroup, Wall Street, and the Citigroup the biggest financial corporation in the world. And under the leadership of CEO Sandy Weill, a surprising share of its fortunes come In this special issue of Facing South, we present the results of a seven-month investigation by award-winning journalist Michael Hudson of A longer version of "Banking on Misery" will appear in the summer 2003 issue of Southern Exposure, out later this month. It will also feature To pre-order a copy of the summer 2003 issue (just $5) or to sign up for a year's subscription to Southern Exposure (just $21), visit * * * BANKING ON MISERY By Michael Hudson
Flores says the manager told her she needed to come in and get a new loan. She thought she had no choice. And her problems didn’t end. As she fell behind again, she says, CitiFinancial forced her to write post-dated checks to try and catch up. When The July 2002 deal carried a 17.99 annual percentage rate, or about triple the market rate for home loans. Nearly all of the $17,398 mortgage She knew it was a lousy deal. But what choice did she have? “I was desperate,” she says. “I thought they were going to take my house.” She signed the papers.
Over the past year, Citigroup and its CEO, Sanford I. Weill, have been buffeted by investigations into the company’s misadventures with Enron, But is there an overlooked scandal brewing for Citi in places far from Wall Street? In Southern hometowns such as Selma, Ala., Ashland, Ky., These borrowers are part of the growing “subprime” market for financial services. They are mostly low-income, blue-collar and minority A seven-month investigation by Southern Exposure has uncovered a pattern of predatory practices within Citi’s subprime units. Southern “It’s a pretty lowdown company that would take advantage of the working poor like this,” says Tom Methvin, an attorney with Beasley, Allen, an Citi, critics say, is a model for America’s financial apartheid: a company that’s slow to offer affordable credit to minority and These assertions are called into question by the fact that Citi’s subprime lenders charge high rates even to borrowers whose credit records The study estimated this group includes nearly 90,000 predominately African-American customers who took out first mortgages in 2000 from The company counters that it “has long maintained very high standards” within its subprime operations. It says it doesn’t discriminate or The company has reined in some of its worst abuses, but it has done so under pressure from activists and government. The changes fall short of In his public statements, Weill has rejected the idea his company victimizes anyone. In January, he told investors Citi “has become a leader Citigroup’s push into the subprime market is a dramatic example of how the merger of high and low finance is playing out on Wall Street and on TO READ THE REST OF "BANKING ON MISERY," INCLUDING RELATED WEB-ONLY LEND US A HAND – We work hard to make Facing South your Southern TURN IN YOUR FRIENDS - Know someone who might like FACING SOUTH? Write us at facingsouth@southernstudies.org and we'll add them to the mailing list! Copyright C 2003 Institute for Southern Studies. PO Box 531, Durham, NC 27702. |
In fact, as the NYT points out, Weill is still so staunchly in favor of the repeal that he displays a wooden trophy of sorts in his office. (In the banking equivalent of a stuffed lion's head mounted on the wall, the plaque reads "Shatterer Of Glass-Steagall.") And, appearances be damned, Weil apparently was not compelled to take this gloating piece of memorabilia down before being visited by a reporter.
Glass-Steagall -- the legislation that required commercial and investment banking institutions to remain separate -- was the key piece of legislation that helped Citigroup morph into the banking behemoth it has become. By extension, it helped Weill's net worth skyrocket.
Weill said that Citigroup's failure makes him "incredibly sad,"
"Tens of trillions of dollars of transactions were done in the dark," reports University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing... {subsequently} there was more betting on the riskiest subprime mortgages than there were actual mortgages."
Source: MotherJones.com
