Tuesday, January 20, 2009

The "Aggregator Bank"- find someone who can run a bank!

Just when it seems Wall Street can’t get any more arrogant, Federal Deposit Insurance Corp. Chairman Sheila Bair, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson announce their interest in creating a toxic waste dump known as an "aggregator bank" – a place where financial institutions can unload their toxic waste at a "fair value." There-in of course lies the rub. Maybe the most concise assessment was provided by a WSJ reader named killben:

"A fair price will make the banks insolvent and a not-so-fair price will end up screwing the tax-payers as has been happening of late .. any guesses who is going to get screwed … banks or tax-payers?" (Killben)

After having conned the American taxpayers to support a $700 billion dollar bailout package, and received billions in loan guarantees, the big banks are coming back to the well to drain it dry.
What the US is experiencing is a preparation for Round Three of Big Banks versus the taxpayers. The Big Banks clearly won round 1 in receiving $300 billion in bailout funds and not only not being to held accountable for it, but using it grow through acquisition. Under the artful guidance of House Speaker Nancy Pelosi, they seem to be managing Round 2 to a similar end- with the Big Banks getting the outstanding balance of the $700 billion without the ability of Congress to control the use of those funds. In Round Three, the Big Banks have indicated that knowing they have taken their credibility to the limit with the "bailout" fund, they are trying to sell the taxpayer a new approach for solving the problems of about 10 large firms that have absorbed 80% of the bailout funding (1). At the end of the day, how the assets are transferred into the ‘dump’ means little – who gets to determine fair value means everything.

Lessons Learned
So far, we have learned who cannot determine fair value: the insurers, the big banks, the Wall Street brokerages who pushed liars loans, bought discounted loan insurance from hedge firms that didn’t have collateral to back the insurance, insurance companies and brokerages that could not represent fair value of their investments to their investors and hence find themselves in court now for misrepresentation. Nor can the Government Sponsored Agencies (Fannie, Freddie, FDIC) be relied on as arbitrators of value. They that have their own legal problems as a result of audit findings saying they misstated values on their books either through incompetence or corruption. Obama has been seemingly blinded by the contributions of the big bankers who managed to install their agents as the economic experts, and at this point it appears any appointment coming from whispers of Geithner or Summers would mean the big banks get to determine what fair value is.
On the other hand, Americans should have also learned who can determine fair value- although no one is asking. In 2008, there were 7,146 commercial depository institutions reporting to the FDIC, with $12 trillion in assets. Less than three hundred have been provided assistance, although those 300 account for $10 trillion in assets. That leaves about 6,850 companies whose employees probably represent a better chance of assessing value than the 300 banks who claim they have problems. If Obama needs the field narrowed a bit more, of the top 50 bank holding companies, 15 have not received bailout assistance. Of those 15, at least 8 are subsidiaries of foreign firms. That leaves 7 of the top 50 bank holding companies from which to pick expertise.
Having someone in charge that understands market value and is secure enough not to be bought-off is what is required to get the Big Banks to ‘unwind’ these securities. That way, the market can restore "fair pricing" and accountability for past misrepresentations.
1. Data for analysis presented in ,Analysis of US Bailout Fund Recipients, by EP Heidner, http://www.scribd.com/doc/10945321/Analysis-of-Bailout-Funding19012008

Saturday, January 17, 2009

Obama’s Sword of Damocles

Obama has upset a large number of his supporters by bringing into his cabinet a number of ‘old guard’ politicians and advisors who provide very strong representation for the dark side of Wall Street. Those would include:

  • Robert Gates, who has endorsed and participated in every dark intelligence operation of the two Bush presidencies, and their cover-ups (1);
  • Hillary Clinton, who connected with the dark side of Wall Street covert operations with her early career representations in protecting CIA accounts in conjunction with the Resolution Trust Corporation (2), the Arkansas Development Finance Corporation (3) and legal blocking for Jackson Steven’s Systematics, which was a major supplier of software for NSA’s banking back office clearing and wire transfers. (4)
  • Timothy Geithner, a protégé and participant in the Goldman-Sachs cabal that helped facilitate the September 11 attacks (5)
  • Lawrence Summers, another protégé of the Goldman Sachs’ Rubin-Friedman cabal that guided Clinton into supporting the rape of Russia, and set up the United States for a dose of the same. (6)

Elaboration of their dark side credentials is documented elsewhere (see footnotes). Americans have a need to understand why Obama has campaigned on the promise of “change you can believe in”, and then threatened his credibility by employing permanent fixtures from Wall Street’s agents of corporate greed cleverly rebranded as national security.

The lessons of three past presidencies are critical: Franklin Roosevelt, Kennedy and Carter. All three represented populist constituencies, not unlike Obama. Roosevelt was able to deliver the New Deal, only after being fortuitous in aborting the right wing coup of the Wall Street Liberty League. After exposing the plot, he struck a deal which allowed the Liberty Leaguers to remain ‘free’ in exchange for their support of the New Deal. That was a ‘win’ for his populist constituency. Kennedy, as the records now reveal, railed against the Wall Street interests and their use of the CIA/OSS. Using his brother as Attorney General, he went toe-to-toe with the dark side and was assassinated without hesitation. Carter in his own style of Christian Democracy attempted to clean up the corruption in CIA, and with Stanfield Turner, expunged about 800 of the dark side agents. By letting them run free, he sowed the seeds for his own destruction. They sabotaged his peace efforts in the middle east and illegally funded the first “October Surprise,” bringing a premature end to his presidency.

Obama – if he wants to accomplish anything for the American public –needs to keep his friends close and his enemies closer. He needs to keep these agents of the dark side under some semblance of control and make some tradeoffs until he can establish a power base other than popularity based on being a nice guy. That will take a few years. In a world of choices, his picks have all been ‘lesser evils’ and allow him to keep the dark side under his chain of command. For that, he deserves our continued respect and support. If he had taken them on directly, or cast them out of power altogether, his fate would have been similar to Kennedy’s. The public, however, needs to remind him this deal with the devil should only be temporary, and he needs to find the path that will allow him put this cancerous dark side into remission for a long, long time.

1. Collateral Damage: U.S. Covert Operations and the Terrorist Attacks on September 11, 2001, E.P. Heidner, March 2008, pp14-16.
2. What is Whitewater Really All About Sherman H. Skolnick, Conspiracy Nation,Vol. 5 Num. 10
3. See the interview with the former marketing director of the Arkansas Development and Finance Authority, and former associate of Bill Clinton, Larry Nichols. (Transcript of the Larry Nichols Interview, which took place on the May 5, 1994 "America's Town Forum" radio show, hosted by Tom Donahue.)
4. The White House "BIG BROTHER" Database, and How Jackson Stephens Precipitated a Banking Crisis, J. Orlin Grabbe
5. Collateral Damage (Part 2): The Subprime Crisis and the Terrorist Attacks on September 11, 2001, E.P. Heidner, December 2008, pp16-17.
6. Ibid.

Wednesday, January 7, 2009

Leon Panetta – the right man for the CIA!

Recent commentaries in the news suggest that Leon Panetta does not necessarily have the ‘correct credentials" to manage the US intelligence community. CNN has trotted out its own photgenic expert from the neo-conservative clique who suggests "his impressive credentials are insufficient to allay the well-founded concerns of senior Democrats and Republicans that he is the wrong man…" with th CNN editors suggesting the "U.S. needs a spy chief with experience."

Let’s put the nomination in historical perspective. Nearly 100% of the financial mess that faces the U.S. today, not to mention the serious credibility image problem the U.S. has overseas, can be attributed to the self-selected community that has managed US intelligence operations for the last 100 years. Any serious historian of U.S. foreign policy is forced to ackowledge the primary role of bankers and their offspring in setting foreign policy, financing covert operations, laundering bribes, and making loans to foreign politicans that were never expected to be paid back. Efforts by Presidents Kennedy and Carter to change this resulted in unhappy results for both. Roosevelt was only allowed to get the New Deal because he traded these bankers their ability to continue their overseas political shennanigans in exchange for their staying out of domestic politics. The role of these bankers, in partnership with their covert operations counterparts, in distorting the money supply and creating the financial distaster of 2008 is well documented.(Note 1) The two largest recipients of bailout funding (Citicorp and AIG) have been long alleged financial laundromats for U.S.covert operations, and have gobbled up 33% ($85 billion) of the bailout funding allocated to date.

This ‘intelligence community’ has not been able to provide its executive management with credible intelligence or advice since its inception. As best the public can tell, they have failed the republic as an advisory institution in every major foreign policy decision of the last fifty years. The intelligence community leadership likes to claim they have been successful, but then immediately qualify the praise by contending they cannot say when or how they were successful "for reasons of national security." They have been saying that since WWII, but revelations forced by the Freedom of Information Act have pretty much shown the opposite to be true. So much so, the last three presidents had to over-ride the FOIA and extend secrecy to documents long overdue for public consumption. The ONLY claim to success they have been able to make in the last half century is the ‘end of the Cold War’ although the public facts seem to suggest to the contrary that either a) the CIA was caught "off guard" by the collapse as the officially sanctioned CIA historians suggest, or b) the end of the Cold War was actually the result of covert bank operations that enriched the bankers and covert operatives. History suggests the end of the Cold War is temporary, and the Bush and Clinton bankers did no more than seriously brutalize an injured bear that is looking for a little payback.(Note 2)

If Panetta can bring a little financial management to the CIA – which he seems emminently qualified to do – maybe he can bring the perspective necessary to the convince the yahoos at Langley, the Pentagon and Wall Street that their covert operations have been the source of the current US economic crisis, and that the greatest enemies of the U.S. Constitution can be found by having them look in a mirror. One cannot expect the regulators (using the term loosely) at the SEC, NASD, FINRA, OCC and other agencies to be forced to turn a blind eye to the illegalities of AIG and Citibank under the guise of national security, and then expect them to hold others institutions accountable. The intelligence wonks have prevented the US from supporting international money-laundering treaties and have fought tooth and nail to prevent financial transparency because that is how they secure their futures-which has little to do with the interests of the republic! The US needs another Stanley Turner, but this time, whoever outs the criminals in the intelligence crowd needs to relentlessly pursue these operatives and put them in jail for a long, long time and ensure they don’t make a comeback like they did after Carter. The two big lessons from Turner’s experience that Panetta should learn: 1) don’t trust anyone from the old school (Turner trusted Carlucci who played him like a fiddle), and 2) prosecute these guys to the full extent of the law, because if you don’t, they will have no second thoughts about coming after you and Obama.

1. http://www.scribd.com/doc/9421535/Collateral-Damage-Part-2-The-Subprime-Crisis-and-the-Terrorist-Attacks-on-September-11-200126122008
2. http://www.scribd.com/doc/9442970/Collateral-Damage-US-Covert-Operations-and-the-Terrorist-Attacks-on-September-11-200128062008