As of Monday, the triple option is officially back in Statesboro after a 4 year hiatus. It was announced last week that Jeff Monken will take over as head coach of the Eagles (<–click to read history). Jeff Monken is currently the slotbacks  position coach and special teams coordinator with Paul Johnson at Georgia Tech. Monken has been with Paul Johnson’s coaching staff for 13 years. This includes 4 years at Georgia Southern helping to lead the Eagles to 2 more National Championships running the option.

Up until 4 years ago, we have run the triple option almost since the beginning in 1981, winning all 6 of our National Championships running it. The option was part of our tradition at Georgia Southern. When run with discipline, it’s ridiculously hard to stop, is fun to watch and does not require top recruits we tend to lose to much larger schools running pass heavy offenses.  With it, Paulson had the best home record in the country. Other teams feared us and few teams walked away from Paulson with a win. Then, for some strange reason at the end of the 2005 season, the AD, Sam Baker, decided to fire head coach Mike Sewak (who was the offensive coordinator at GSU under Paul Johnson and is currently the offensive coordinator at Georgia Tech under Paul Johnson again) who was 34-14 in 4 years at GSU and took us to the playoffs 3 of those years; and scrap the option because “no one uses it anymore”.  Maybe it was Sewak’s poor academic performance, maybe it was his break with Erk Russell or because some of the players were getting into trouble….whatever the reason, they ended up firing a good, up and coming head coach that could have really taken the program places with a couple of more years of learning under his belt.

Then began the downhill slide of Georgia Southern football that includes only the 2nd and 3rd losing seasons we have ever had. The offense became boring, predictable and unable to put points on the board. During this time, Paul Johnson is running the same offense at Georgia Tech (and Navy before that) and having incredible success with it, proving the option works at any level of competition. So, outgoing president Grube (still angry about remarks Hatcher made about academic standards affecting recruiting) and Baker decide to fire Chris Hatcher an hour after his last game (who was running a passing offense like they wanted 4 years prior) after only 3 years and only 2 recruiting classes and return to the option. I think Hatcher had too much competition from the larger BCS and other FCS schools for the recruits he needed to truly make his offense work, however, I also think Hatcher got a raw deal and should have had one more year to fully prove himself. Incoming president, Dr. Keel, maybe the master behind all of this and Baker maybe sent packing soon after Keel takes over in January…but only time will tell if that is true and that’s all beside the point. Now Monken is bringing the option back and with it a piece of Georgia Southern’s tradition. To me, it’s the most exciting thing that has happen in GSU football since we broke App State’s home winning streak in 2007. Hopefully the school administration will be patient and give Monken a chance to bring back another piece of our tradition….another National Championship.

Goldman Sachs Mafia Arming Themselves Against Public

Goldman Sachs gang; the modern day mafia

Alice Schroeder
Bloomberg
November 30, 2009

And if the proles really do appear brandishing pitchforks at the doors of Park Avenue and the gates of Round Hill Road, you can be sure that the Goldman guys and their families will be holed up in their safe rooms with their firearms. If nothing else, that pistol permit might go part way toward explaining why they won’t be standing outside with the rest of the crowd, broke and humiliated, saying, “Damn, I was on the wrong side of a trade with Goldman again.”

Peter Schiff on The Fed & Your Money

I know I’m somewhat late to this party, but I wanted to point out to all who are still unaware that the ‘too big to fail’ banks which caused are late crisis are even bigger.

JP Morgan, AIG, Citigroup, Goldman, and Bank of America were the winners of Geithner-Paulson’s free money giveaway (with Lehman a bad loser), and together they have swallowed the hundreds of small and medium banks that have failed since. They now present an even bigger and more systemic risk, should they choose to gamble away their money once again.

Despite repeated calls from almost every respected economist (notably Joseph Stiglitz) that these banks are a menace, Lords Geithner and Bernanke have done nothing to restrict their size – indeed, they have made them impossibly more dangerous and lucrative.

Furthermore, none of the incentives which led to such reckless gambling (ludicrous bonus packages, easy credit, low intrest, short-term rewards) have been addressed, and instead have been reinforced.

The next bailout will have to be 700 trillion instead of a mere 700 billion.

J’ai toujours aimé Michael Moore, surtout avant de voir ses films. Il faut parfois savoir apprécier le « buzz » (quel affreux terme, au passage !) qui court autour du film avant même de se rendre dans les salles obscure pour jauger la valeur dudit « buzz » et juger la qualité dudit film. Car Moore, ce n’est une surprise pour personne, se traîne derrière lui une réputation bien gratinée, aussi bruyante qu’une armada de casseroles en téflon usagées, qui lui ouvre une quantité de cœurs et lui ferme une aussi importante quantité de portes. C’est qu’il a tendance à titiller un peu trop les puissants, les technocrates, les nantis, les démagos, les arrivistes, les carriéristes, enfin tous ceux qui font le système (cette « bête sauvage » dont parlait Nixon) et ceux qui en profitent en jurant leurs grands dieux qu’ils ne font rien de mal ; c’est qu’il aime particulièrement, le Moore, aller caresser la barbichette des décideurs, des législateurs, des hauts responsables, des élites, bref des politiques, afin de les confronter à ces aberrations qu’ils ont concouru à créer – ne serait-ce que du fait de leur inaction chronique. Même ceux qui n’ont pas vu Fahrenheit 9/11, à savoir les aveugles, les lapons et les manchots du pôle sud, se « souviennent » d’un gros bonhomme chaussé de lunettes et de casquette allant ennuyer ces messieurs-dames les représentants du Congrès, à Washington, histoire de leur proposer d’envoyer leurs propres rejetons en Irak pour faire la guerre aux vilains. Enfin, nuance : allant ennuyer ces représentants qui votèrent en faveur de l’invasion. Si Moore possède bien une qualité, c’est de savoir comment désigner du doigt les coupables, et il ne se gêne nullement pour cela. Une fois désignés, la curée commence.

Ces « victimes » montrées du doigt par le pamphlétaire le plus célèbre et le plus admiré de l’industrie du cinéma sont aisées à reconnaître puisqu’elles font partie du titre. Car le capitalisme est l’affaire des capitalistes, et potentiellement un cas de conscience pour une majorité des êtres humains qui foulent le sol de cette terre. Nous sommes donc tous concernés. Même le chaland qui subit les foudres de l’inexorable profit ; oui, même cet agriculteur, trapu et bonhomme, aussi beauf que savent l’être les Américains de la campagne, qui prépare tristement son déménagement après avoir reçu sa notification d’expulsion. Sa ferme, l’achat d’une vie, vient d’être rachetée par d’autres Américains qui en ont les moyens, et qui n’auront sans doute pas à débourser toujours plus afin de rembourser un prêt à taux expansif. Déménager pour où ? La question se pose d’autant moins qu’elle ne souffre aucune réponse. Le voilà, l’ami « capitalisme » : c’est l’ange monétaire qui descend du dernier étage des Goldman Sachs, Bank of America et autres pour vous offrir le seul ciel étoilé comme toit de maison. Et de cela, l’agriculteur un peu bourru est tout autant responsable que les puissants : parce que, d’une certaine manière, il a laissé faire le système. Comme nous tous. C’est sur cette position que campe un Moore légèrement désabusé, indubitablement fatigué par ses années de pérégrinations idéologiques depuis Roger et moi. Avec l’impression que rien n’a changé.

A sa façon, Moore ressemble à notre hexagonal postier Olivier Besancenot, le talent pour le montage en plus. Lui aussi pourfend sans égards le système tel qu’il s’est installé et pérennisé ; lui aussi monte à l’assaut de ces puissants qui sont autant de châteaux forts à prendre par les armes ; lui aussi souligne avec raison – et un chouia d’idéalisme – les aberrations de notre économie mondialisée. Et lui non plus ne propose in fine aucune solution valable de rechange. En même temps, la différence c’est que Besancenot est un politicien dont le rôle est d’agir, tandis que Moore n’est qu’un pamphlétaire hyperdoué dont les prérogatives se résument à étaler et faire connaître les scories systémiques. Chacun à sa place. Il me semble néanmoins qu’un Moore, pour ces mêmes raisons, aura toujours plus d’impact que tous les Besancenot du monde : parce qu’il cherche moins à convaincre (votez pour moi) qu’à persuader (accompagnez-moi dans le projet d’un changement profond des mentalités). Le champ d’action du cinéaste s’arrête à la porte des institutions et des bastions de la finance ; en attendant, il aura tracé le chemin pour des politiques plus avisés et, surtout, plus réalistes que celles des anti-tout.

Car Moore, et ce n’est pas la moindre de ses qualités ici, nous donne à voir une chose étonnante, en fin de film, une chose bien plus juste que tous ces exemples de dérives capitalistes livrés les uns à la suite des autres comme on enfile des perles (qui a-t-il besoin de convaincre, d’ailleurs, de l’iniquité des traitements infligés à une population qui souffre quotidiennement dans le « pays de la liberté » ?) ; cette chose, c’est la capacité du politique à dépasser l’institutionnel – les clivages idéologiques, les disparités sociales, les pressions lobbyistes – pour puiser sa force dans une inspiration humaine. Il est incroyable de voir ces images de représentant(e)s du Congrès qui harangue leurs collègues et, par-delà les murs, leurs électeurs, afin de les pousser à la révolte ; il y a de l’émotion dans cette façon qu’a le procureur de Chicago d’intimer l’ordre à ses concitoyens de ne pas quitter leur maison lorsque le représentant de la banque vient les expulser. Le rôle du politique n’est-il pas de protéger ses ouailles, tel un messie civil ? Et qui pourrait contredire l’idée que l’on est mieux protégé entre quatre murs et sous un toit ? Logiquement, presque naturellement, Moore change alors d’époque et nous emmène au temps de Franklin Roosevelt, quand le plus grand des immenses présidents américains (exit Lincoln et Kennedy) envoyait l’armée non pour déloger les manifestants dans les usines, mais pour les protéger. Situation rocambolesque ? Certes, mais qui dans un monde idéal ne devrait être qu’une norme. Difficile de dire si le propos de Moore peut être ici compris comme une légitimation de Barack Obama (dont l’espoir diffus se propage dans les allées filmiques de ce Capitalism), que le cinéaste a eu largement le temps de reconsidérer politiquement depuis la réalisation de son film. Toutefois, il est clair que le nouveau président américain suscite l’enthousiasme de l’originalité chez les hommes et les femmes qui ont subi, un moment ou un autre, les foudres du système.

Gare, pourtant, à la tentation de placer Moore sur un piédestal ! Toutes les qualités de son dernier opus (qui n’a que médiocrement marché aux USA malgré un lancement savamment orchestré par Paramount), depuis l’audace physique du cinéaste, qui n’hésite pas à aller en personne taquiner les agents de surveillance des banques afin de réclamer l’argent versé par les contribuables via le plan Paulson, jusqu’à l’excellente pédagogie visuelle qui fait de toute œuvre de Moore un objet à la fois passionnant et ludique, ne peuvent pas éternellement dissimuler ses défauts. Ces défauts sont connus, ils sont récurrents depuis les débuts de sa carrière ; d’une part, le fait que Moore utilise à sa convenance les mêmes armes que ses ennemis (la propagande), d’autre part ce risque constant de la simplification abusive que personne, même doté de la meilleure foi possible, ne peut complètement éviter. En réalité, l’importance de ces défauts varie selon les yeux qui les regardent et les oreilles qui les entendent. Je veux croire que le public possède cette vivacité d’esprit suffisante pour prendre une certaine distance vis-à-vis des images. Mais pour des spectateurs dénués de tout sens critique, le danger est grand de prendre pour argent ( ! ) comptant les propos du cinéaste, parmi ceux qui frôlent au plus près le révisionnisme. Il arrive parfois que les arguments du cinéaste flirtent avec l’exagération stupide d’un Thierry Meyssan, tout occupé à créer de toutes pièces sa future théorie du complot. Différence essentielle tout de même : dans tous les cas Moore a parfaitement conscience de cette tentation à franchir la limite, ce que les conspirationnistes n’imaginent même pas.

Plus qu’un film sur la conspiration, plus qu’un film révolutionnaire (l’appel final résonne comme un cor de chasse destiné à tous les guévaristes convaincus), Capitalism est pour Moore un exutoire autobiographique. On aurait pu penser que le bonhomme de Roger et moi cesserait rapidement d’importuner le spectateur en se présentant devant la caméra et en allant enquiquiner les passants. Pourtant, le cinéaste a continué à se mettre en scène, et plus encore, à mettre en scène sa ville natale, Flint, dans le Michigan, réceptacle de toutes les dérives du système américain (on la retrouve dans une majorité de ses documentaires, y compris Bowling For Columbine). Il y retourne encore une fois pour quelques scènes parmi les plus émouvantes de sa carrière, particulièrement ce passage où, observant le terrain vague que fut autrefois l’usine automobile où il travailla toute sa vie, le propre père de Michael Moore ressasse la nostalgie d’une époque meilleure. Moore ne s’est jamais autant impliqué personnellement dans son projet de mise en scène, allant jusqu’à montrer des images de son enfance heureuse. Un brin d’égocentrisme ? Dans ce cas précis, le terme exact est plutôt : humanisme.

Eric Nuevo

> Film sorti en salles le 25 novembre 2009

> Lire aussi : notre dossier sur la politique catastrophique de G. W. Bush vue par Moore dans VERSUS n° 14, notre dossier sur la crise financière et le milieu (mafieux !) bancaire dans VERSUS n° 15, et notre dossier sur les world companies dans VERSUS n° 17, actuellement disponible

Please watch.  A video from Knowledge@Wharton, John Mack discusses that fateful weekend in September ‘08.

Throughout the financial crisis, New York based artist Geoffrey Raymond has been hard at work creating portraits of controversial Wall Street figures.

When a painting is completed, Raymond exhibits them in front of Manhattan’s key financial venues, inviting people – with pen in hand – to write their thoughts directly onto the canvas.  Over the past year, Raymond’s paintings have offered a venue for the public to vent their anger.

I asked Raymond for a selection of his paintings for which he has also provided his insight on the works themselves. Click ahead to see select portraits of Wall Street Whipping Boys!

Make a Smilebox slideshow

Editor’s Note:
This chapter discusses the extent to which the Obama Administration is spying on Americans. Prior administrations did this for security reasons. There is evidence that the current administration is doing it for political reasons as well. If that is true, then the words of Orwell in the classic book 1984 are prophetic: “There was of course no way of knowing whether you were being watched at any given moment. How often, or on what system, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time. You had to live—and did live, from habit that became instinct—in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized.”—.

CHAPTER 10: SPYING ON AMERICANS

Soros knows that information is power. Therefore he invested in a data mining company early in the game. In 2004, four operatives in the Dean Presidential Campaign founded a company called Blue States Digital to conduct online fundraising, communicating and organizing of support for political candidates and causes. In 2006 Soros became a client. Blue States worked closely with the Obama campaign. They sent out campaign emails to supporters with instructions to forward that email to five (5) like-minded people, and secretly monitored and recorded the email addresses to which the email was sent. In other words, the Obama campaign spied on its own supporters. See: “How sneakily are Blue State Digital Tracking NGO political e-mails? The LINK is a little wonky and may not work for you more than once or not at all.. So…

“The firm behind President Barack Obama’s online election campaign have been signed up to help anti-racists take on the British National party in the European parliament elections in June.
Blue State Digital (BSD), which used the latest internet technology to mobilise millions of people behind Obama, has been employed to help create a grassroots network across the UK as part of the campaign to stop the BNP leader, Nick Griffin, becoming the far-right party’s first MEP.”

“The firm began work last week and has already signed up thousands of supporters and donors. As part of the first stage of its campaign BSD and an anti-fascist magazine, Searchlight, has sent thousands of emails asking each recipients to forward it to five friends and make a small donation.The software means campaigners can then track who opens the emails, where they are sent and what happens when they arrive at the other end – tailoring future emails to groups and individuals”
[...]

In the aftermath of 9/11 the Bush Administration began monitoring all email, fax and telephone, conversations throughout the world in real time with the NASA Supercomputer. The initial purpose of the monitoring was to detect key words which would indicate a present intention to commit a terrorist act. Later it was modified to monitor the emotional state. This amounted to a warrantless search. So the Patriot Act was changed to permit the monitoring but the evidence was inadmissible as fruits of the poisonous tree. The Administration was reluctant to acknowledge the existence of such activities and unwilling to proceed to court on cases where they would be exposed in pre-trial discovery. There is reason to believe that Blue States wrote a program to mine that information as well.

During the primary Obama deplored the illegal spying on Americans, but when he got to the general election he switched gears. Mainstream media excused this as simply moving to the center. But the logical inference is that he wanted to continue spying on Americans for security reasons and political ones as well. This is evident in reversal on FISA, his refusal to prosecute 40% of the cases, and his ability to tailor messages in real time. For example, when the national chatter decried his Stimulus Plan as a slush fund he quickly renamed it a “Safety Net”. Likewise, when he was called weak and indecisive on Afghanistan, the New York Times headline was immediately changed to read “Obama Convening War Council and Entering Decision Making Phase. For a general discussion of the subject the following article can be found at Wapo: “Government Turning to Data Mining”

The relationship between Soros and Blue Digital is a continuing one. As noted above, Soros is bullish on Brazil and is heavily invested in its economy. He is also trying to insinuate himself into its political system. Thus, it is hardly surprising that Blue States Digital would be down there now working for the labor candidate in that election. Do not be surprised if Soros is paying for this. Do not be surprised if they show up as players in the next Soros Revolution.

forthcoming:

CHAPTER 11: A NEW ROME

CHAPTER 12: THE GHOST OF PAUL REVERE

Author: Bill Boe 11/03/2009

THE GHOST OF PAUL REVERE

First they called us racists, and I did not speak out—because I was not a racist;

Then they called us a mob, and I did not speak out—because I was not a mobster;

Then they threatened a news network, and I did not speak out—because I was not a journalist;

Then they destroyed our country, and I did not speak out—because I wanted to believe their lies;

Then they came for me—and there was no one left to speak out for me. . . . .

By Saijel Kishan and Cristina Alesci

Aug. 13 (Bloomberg) — John Paulson, the hedge-fund manager whose wagers against the U.S. housing market helped him earn an estimated $2.5 billion last year, bought Bank of America Corp. and Goldman Sachs Group Inc. stock in the second quarter, while adding to stakes in gold companies.

His firm, Paulson & Co., bought 168 million shares of Charlotte, North Carolina-based Bank of America valued at $2.2 billion as of June 30, according to a filing yesterday with the U.S. Securities and Exchange Commission. It was the biggest new purchase in the second quarter for Paulson, 53, and made him the bank’s fourth-largest owner.

“It’s ironic because he was the one that made the right call shorting subprime,” said Jerome Dodson, who oversees $2.5 billion at Parnassus Investments in San Francisco. “His timing is good but he probably won’t be as successful with this purchase as he was with betting the housing market would collapse.”

Paulson, who manages about $29 billion, last year started a hedge fund, called Paulson Recovery fund, to invest in financial firms hurt by mortgage writedowns. He boosted investments in gold companies this year to help mitigate potential inflation as governments worldwide increase spending to help their economies recover from recession. Gold has gained 7.7 percent this year.

Stefan Prelog, a spokesman for New York-based Paulson, declined to comment on the filing.

Bank Stocks

Bank of America gained 94 percent in the second quarter as concern the government would take an ownership stake eased amid signs of an improving economy. Paulson also bought 2 million shares of Goldman Sachs, the New York-based investment bank, in the period.

He ended the quarter with 7 percent of the UltraShort Financials ProShares exchange-traded fund, which is used by investors who expect bank shares to decline. The fund declined 57 percent in the quarter as the Dow Jones U.S. Financials Index rose 29 percent. Paulson’s 2 million shares were valued at $84 million on June 30.

Bank of America is the second-largest home lender, trailing Wells Fargo & Co., after acquiring Countrywide Financial Corp. last year. Countrywide lost $703.5 million in 2007 and almost collapsed under the weight of defaulting subprime mortgages.

Paulson’s filing came a day after Timothy Barakett, founder of the $5.5 billion Atticus Capital LP, said he was closing his $3.5 billion Atticus Global Fund to spend more time with his family and concentrate on philanthropic interests. Atticus bought Bank of America shares valued at $355 million in the second quarter, according to a regulatory filing on Aug. 10.

Betting on Gold

Paulson’s stake in the bank is the fund’s second-biggest holding after SPDR Gold Trust. He left unchanged his 9 percent stake in the investment fund that buys gold bullion, according to the filing.

His firm became the largest holder of Johannesburg-based gold producer AngloGold Ashanti Ltd. after buying 40 million shares to end the quarter with a 12 percent stake. Paulson also increased his stake in Johannesburg-based Gold Fields Ltd., becoming the third-largest owner of its U.S.-listed shares.

The fund reduced its stake in Market Vectors Gold Miners ETF, a fund that mirrors moves in the Amex Gold Miners Index, after selling 11 million shares. He owned a 5.3 percent stake in the fund in the second quarter valued at $227 million, down from 15 percent in the first three months of the year.

The hedge fund manager left unchanged a 4.4 percent stake in mining firm Kinross Gold Corp., according to the filing.

Paulson’s Pay

Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet.

Last year, his largest fund, the Advantage Plus Fund, returned 37 percent, compared with a loss of 19 percent for hedge funds on average. The fund has gained 16 percent this year. The industry has returned 12 percent, according to Hedge Fund Research Inc.

Money managers who oversee more than $100 million in equities must file a Form 13F within 45 days of each quarter’s end to list their U.S.-traded stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

Paulson reported holdings valued at $17.1 billion at the end of June compared with $9.3 billion at the end of the first quarter. He placed bets during the quarter on companies including Sun Microsystems Inc. and Wyeth that are takeover targets.

Tech, Drug Stocks

Paulson bought 74 million shares of Santa Clara, California-based Sun Microsystems, which is being taken over by Oracle Corp. for $7.4 billion. The new purchase was his second- largest in the second quarter, according to the filing.

The hedge fund increased its stake in Madison, New Jersey- based Wyeth, which is set to be acquired by Pfizer Inc., by buying 18 million shares of the drugmaker, according to the filing.

Paulson also increased his stake in Schering-Plough Corp. after buying 44 million shares in the Kenilworth, New Jersey- based firm. Schering-Plough agreed in March to be taken over by Merck & Co.

Celente: Americans getting raped by Goldman Sachs mafia

As you see below, Paulson’s fund has added BAC, Citi, Indymac, GS and even State Street using the enhanced corpus from shorting the world’s top banks against the MBS boom in 2007 when we had tipped over in volumes and quality of MBS/Sub-Prime

Interestingly, Dimon’s JP Morgan does not figure in this list.  In an earlier article we had also brought out media reports of his play on the Kraft Cadbury deal!  It wouldn’t be surprising if he gets a couple of ME And Asian investors in his hedge funds in a couple of months. He is sitting on a pretty pile and it will be much bigger in a couple of months when the banks start making some real gains after the accounting bounce back in the last 2 quarters in their fixed income portfolio

Paulson, one of the world&apos;s largest hedge-fund firms, held 300 million shares of Citigroup Inc. (C 4.15, +0.10, +2.47%) at the end of September, according to a regulatory filing late Friday. Three months earlier, the firm had no stake in the financial-services giant.

The stake in Citi was valued at $1.45 billion on Sept. 30, according to the filing. It’s not clear whether Paulson still owns the stake, but the firm doesn&apos;t specialize in rapid trading.

Citi stock climbed 2.5% to $4.15 during after-hours action Friday.

The Citigroup investment follows a big move by Paulson into Bank of America Corp. (BAC 16.00, +0.02, +0.13%) shares earlier this year. See story on Paulson&apos;s Bank of America stake.

Paulson, run by John Paulson, is best known for generating huge returns betting against mortgage-related securities in 2007 and financial institutions in 2008. However, the firm late last year launched the Paulson Recovery Fund, which invests in financial-services firms that are looking to shore up weakened capital positions.

As 2009 began, Paulson was among a group of private-equity investors who acquired failed bank IndyMac from the Federal Deposit Insurance Corp., injecting $1.3 billion into the lender.

In the second quarter, Paulson’s hedge funds bought bank stocks including Bank of America, Goldman Sachs Group (GS 176.68, -0.08, -0.05%) and State Street Corp. (STT 40.40, -0.05, -0.12%) , according to securities filings.

via Paulson held big stake in Citi on Sept. 30 – MarketWatch.

Goldman Sachs’ (GS) board considered buying AIG in late June, 2008, so GS could use AIG’s premium float for capital (rather than becoming a bank holding company and using deposits to fund trades or as collatoral for leveraged trading).  Strangely, GS’s board didn’t realize that another part of GS was questioning the “mark to market” valuations that AIG was making on its swaps.  Also, AIG had revised its Nov and Dec 07 losses from $1b to $5b.  GS and AIG had the same public accountant (Price), which GS was using to get AIG to down-value the value of its assets. 

On that week in Sept, 2008, when Lehman went under, JP Morgan and GS were working to put together a loan of $50 billion to cover AIG’s deepening hole  At the same time, the two banks were demanding new collateral payments from AIG, pushing the insurance giant deeper into its hole.  The Fed and AIG wondered if the fees and interest rate being set by the two banks for themselves and other contributing banks wasn’t essentially stealing the company. 

As it turned out, AIG received funding from the Federal Reserve in exchange for the government taking warrants on a 79.9% ownership of the company.  Goldman had bought $20 billion of insurance from AIG and received as much as $13 billion from AIG when the Fed funded AIG with $90 billion.  The counterparties were paid in full, rather than the sixty cents on the dollar that AIG negotiators had been pressing. Even though GS was hedged because it had purchased credit default swaps in case AIG were to default, one has to ask whether Blankfein at GS used Paulson to have the government pay GS through AIG.  Blankfein claims that his bank would not have gone under had AIG imploded, but surely GS relies on there being a financial market. 

Also, when the Fed essentially took over AIG, Paulson wanted to appoint a new CEO.  Paulson was of course an ex-CEO of GS.  Paulson had one of his advisors, also a GS alum, look at candidates.  The aid favored Ed Liddy, who was on GS’s board.   GS would be running AIG.  Hence, the insurance giant would not run interferance on the $13 billion going to GS.

Besides these conflicts of interest, Goldman trades securities for big firms and pension funds. It also acts as adviser to many of the companies whose securities it trades.   In other words, the problem is in its core business.

So a person could be excused for wincing at Lloyd Blankfein’s statement that his bank is performing not only a social function in providing capital to firms so they can expand, but is “doing God’s work” as well.   John D. Rockefeller used the same expression in regard to his Standard Oil monopoly that offered its remaining competitors the choice to be bought up or drowned.  According to Rockefeller, Standard Oil was Noah’s Ark, saving the oil refining industry from destructive competition.   So what if the uncooperative were put under?  They deserved it. Besides, the industry would be saved.  In this regard, the monopolist viewed himself as a Christ figure.   Are the golden boys the incarnation of this figure?   It goes without saying, but I will anyway, that Blankfein has no misgivings in paying (and being paid) record bonuses in 2009.    The presumptuousness of those bankers aside, Jefferson’s dictum that a national bank would be more dangerous than a standing army to democracy seems apt.  We, the American citizens, have an amazing ability not to see things, and then to tacitly enable that which is in actuality hardly a savior.

For more, pls see: http://twitter.com/euandus

Source: http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6907681.ece?token=null&offset=0&page=1

A loyal reader sent this in.  Thought it would would be interesting and useful to readers of this blog.

“LEHMAN’S FATE WAS SEALED NOT IN THE boardroom of that gaudy Manhattan headquarters. It was sealed downtown, in the gloomy gray building of the New York Federal Reserve, the Wall Street branch of the U.S. central bank.” –Stephen Foley, UK Independent

Stephen Foley is on to something. Lehman Bros. didn’t die of natural causes; it was drawn-and-quartered by high-ranking officials at the US Treasury and the Federal Reserve. Most of the rubbish presently appearing in the media, ignores this glaring fact. Lehman was a planned demolition (most likely) concocted by ex-Goldman Sachs CEO Henry Paulson, who wanted to create a financial 9-11 to scare Congress into complying with his demands for $700 billion in emergency funding (TARP) for underwater US banking behemoths. The whole incident reeks of conflict of interest, corruption, and blackmail.

The media have played a critical role in peddling the official “Who could have known what would happen” version of events. Bernanke and Paulson were fully aware that they playing with fire, but they chose to proceed anyway, using the mushrooming crisis to achieve their own objectives. Then things began to spin out of control; credit markets froze, interbank lending slowed to a crawl, and stock markets plunged. Even so, the Fed and Treasury persisted with their plan, demanding their $700 billion pound of flesh before they’d do what was needed to stop the bleeding. It was all avoidable.

Lehman had potential buyers – including Barclays – who probably would have made the sale if Bernanke and Paulson had merely provided guarantees for some of their trading positions. Instead, Treasury and the Fed balked, thrusting the knife deeper into Lehman’s ribs. They claimed they didn’t have legal authority for such guarantees. It’s a lie. The Fed has provided $12.8 trillion in loans and other commitments to keep the financial system operating without congressional approval or any explicit authorization under the terms of its charter. The Fed never considered the limits of its “legal authority” when it bailed-out AIG or organized the acquisition of Bear Stearns by JP Morgan pushing $30 billion in future liabilities onto the public’s balance sheet. The Fed’s excuses don’t square with the facts.

Here’s how economist Dean Baker recounts what transpired last September 15:

“Last September, when he (Bernanke) was telling Congress that the economy would collapse if it did not approve the $700 billion TARP bailout, he warned that the commercial paper market was shutting down.

This was hugely important because most major companies rely on selling commercial paper to meet their payrolls and pay other routine bills. If they could not sell commercial paper, then millions of people would soon be laid off and the economy would literally collapse.

What Mr. Bernanke apparently forgot to tell Congress back then is that the Fed has the authority to directly buy commercial paper from financial and non-financial companies. In other words, the Fed has the power to prevent the sort of economic collapse that Bernanke warned would happen if Congress did not quickly approve the TARP. In fact, Bernanke announced that the Fed would create a special lending facility to buy commercial paper the weekend after Congress voted to approve the TARP.” (“Bernanke’s bad Money,” Dean Baker, CounterPunch)

The reason Bernanke did not underwrite the commercial paper market was, if he had, he wouldn’t have been able to blackmail congress. He needed the rising anxiety from the crisis to achieve his goals.

Here’s a clip from an editorial in the New York Times (admitting most of what has already been stated) that tries to put a positive spin on the Fed’s behavior:

“Mr. Nocera says that almost everyone he’s ever spoken to in Hank Paulson’s old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about. In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe. In retrospect, if you had to choose one firm to throw under the bus to save everyone else, you would choose Lehman…. it is quite likely that the financial crisis would have been even worse had Lehman been rescued. Although nobody realized it at the time, Lehman Brothers had to die for the rest of Wall Street to live. (“Lehman Had to Die So Global Finance Could Live,” Sept. 14, 2009, New York Times)

So, according to the muddled logic of the NY Times, everything worked out for the best so there’s no need to hold anyone accountable. (Tell that to the 7 million people who have lost their jobs since the beginning of the meltdown.) This latest bit of spin is pure cover-your-ass journalism, an attempt to rewrite history and absolve the guilty parties. The fact is, Paulson and Bernanke deliberately created the crisis in order to jam their widely-reviled TARP policy down the public’s throat. The Times thinks the public should be grateful for that because, otherwise, the crooked insurance giant, AIG, would not have been bailed out and Goldman Sachs and other Wall Street heavies would not have been paid off.

The reason panic spread through the markets after Lehman filed for bankruptcy, was because the Reserve Primary Fund, which had lent Lehman $785 million (and received short-term notes called commercial paper) couldn’t keep up with the rapid pace of withdrawals from worried clients. The sudden erosion of trust triggered a run on the money markets. Here’s an excerpt from a Bloomberg article, “Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion“:

“On Tuesday, Sept. 16, the run on Reserve Primary continued. Between the time of Lehman’s Chapter 11 announcement and 3 p.m. on Tuesday, investors asked for $39.9 billion, more than half of the fund’s assets, according to Crane Data.

“Reserve’s trustees instructed employees to sell the Lehman debt, according to the SEC.

“They couldn’t find a buyer.

“At 4 p.m., the trustees determined that the $785 million investment was worth nothing. With all the withdrawals from the fund, the value of a single share dipped to 97 cents.

“Legg Mason, Janus Capital Group Inc., Northern Trust Corp., Evergreen and Bank of America Corp.’s Columbia Management investment unit were all able to inject cash into their funds to shore up losses or buy assets from them. Putnam closed its Prime Money Market Fund on Sept. 18 and later sold its assets to Pittsburgh-based Federated Investors.

“At least 20 money fund managers were forced to seek financial support or sell holdings to maintain their $1 net asset value, according to documents on the SEC Web Site.

“When news that Reserve Primary broke the buck hit the wires at 5:04 p.m. that Tuesday, the race was on.” (Bloomberg)

This is what a run on the shadow banking system looks like. Bernanke and Paulson pinpointed the trouble in the commercial paper market and used it to put more pressure on Congress to approve their bailout bill.

Bloomberg again:

“It was commercial paper and the $3.6 trillion money market industry that traded the notes that came close to sinking the global economy – not a breakdown in credit-default swaps or bank-to-bank lending….

“Like ice-nine, the fictitious substance in Kurt Vonnegut Jr.’s 1963 novel Cat’s Cradle, a single seed of which could harden all the world’s water, commercial paper was the crystallizing force that froze credit markets, choking off the ability of companies and banks to borrow money and pay bills.” (Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion, Bob Ivry, Mark Pittman and Christine Harper, Bloomberg News)

Bernanke could have fixed the problem in an instant. All he needed to do was provide explicit government guarantees on money markets and commercial paper. That would have ended the bank-run pronto. But he chose not to. He chose to wait until Congress capitulated so he could net $700 billion for his banking buddies.

According to the UK Telegraph:

“On Thursday night, the Treasury went literally down on his knees before Nancy Pelosi, speaker of the House of Representatives, begging her to agree taxpayer money to bail out the financial system. Bernanke, a scholar of the financial panic that caused the Great Depression, told fearful lawmakers there wouldn’t be a banking system in place by Monday morning if they didn’t act. Paulson talked openly about planning for martial law, about how to feed the American people if banking and commerce collapsed.”

Despite their dire warnings, on Monday morning, the banking system was still intact, just as it was a full month later when the first TARP funds were handed out to the big banks. It was all a hoax. The problem wasn’t the banks toxic assets at all, but the commercial paper and money markets. The Fed and Treasury knew that they could count on Congress’s abysmal ignorance of anything financial; and they weren’t disappointed. On October 3, 2008, Congress passed the Financial Rescue Plan (TARP). Paulson’s fear-mongering had triumphed.

Here’s a quick look at the Lehman chronology:
On Sept. 15, 2008, Lehman Bros. filed for bankruptcy sending the Dow plummeting 504 points.
On Sept. 17, the Dow falls 449 points in reaction to AIG bailout.
On Sept. 29, the Dow tumbles 777 points after House votes “No” on TARP.
On Oct. 3, the House passes Financial Rescue Plan (TARP). The Dow falls 818 points.
On Oct. 7, the Fed creates the Commercial Paper Funding Facility to backstop the commercial paper market. Two weeks later, Bernanke announces the Money Market Investor Funding Facility to make loans of longer maturities.

These are the two facilities which relieved the tension in the markets, not the TARP funds. It’s clear that Bernanke knew exactly how to fix the problem, because he did so as soon as the TARP was passed. Here’s economist Dean Baker in The American Prospect:

“Bernanke was working with Paulson and the Bush administration to promote a climate of panic. This climate was necessary in order to push Congress to hastily pass the TARP without serious restrictions on executive compensation, dividends, or measures that would ensure a fair return for the public’s investment.

“Bernanke did not start buying commercial paper until after the TARP was approved by Congress because he did not want to take the pressure off, thereby leading Congress to believe that it had time to develop a better rescue package. (“Did Ben Bernanke Pull the TARP Over Eyes?”, Dean Baker, The American Prospect)

The American people have been ripped off by industry reps working the policy-levers from inside the government. That’s the real lesson of the Lehman bankruptcy. Happy anniversary.

We pick up the narrative on Monday, March 10, 2008, click here for earlier post.

On Friday prior, JPM Chase came to an agreement on a 28-day loan for Bear Stearns and you will see in the prior post how involved Treasury Secretary Henry Paulson was in the deal.

So back to Monday the 10th, Paulson spends most of the morning on the phone with Keith Hennessey who was Assistant to the President for Economic Policy and Director of the U.S. National Economic Council.

Later that morning the phone log shows four calls to Jerry Corrigan, former President of the NY Fed, but at this time was Managing Director in the office of the Chairman for Goldman Sachs and later in 2008 became chairman of Goldman Sachs holding company GS Bank.

He then has lunch at the White House with presidential staff members.

At 5pm Paulson convenes the first meeting of the Presidents Working Group on Financial Markets, AKA Plunge Protection Team.

On Tuesday the 11th Paulson redacted the first two hours of his day, which were out of the office. He then spoke with Fed chief Ben Bernanke and White House’s Hennessey and SEC chief Chris Cox.

After the call to Cox, Paulson conducts a typical schedule, but is in constant contact with Tim Geithner and White House aides. At the end of the day he meets with an assistant Chinese finance minister.

On March 12^th, which is the alleged date of the closed session of the House. This act was a rarity for the people’s house. According to the House of Representatives’ own historic record this was only the fourth time since 1830 that the House closed the floor allowing only its members and select aides to hear the debate.

The secretive discussion was said to be focused on clandestine monitoring efforts to combat terrorism. There’s other chatter that the debate was centered on a financial destruction based on the fall of Bear Stearns, which I believe was considered a fait accompli by Paulson already.

Before the markets opened on the 12^th the Plunge Protection Team had already met for 45 minutes. Paulson alerts the White House through Hennessey, who is the equivalent to Larry Summers in the Obama administration, and Joel Kaplan, Deputy Chief of Staff and Josh Bolton his boss.

He then has a White House Lunch with what’s described as attended by  “Economic Principals.” Paulson then has a call into Geithner, who could be the conduit to Wall Street on the anticipated House session.

Paulson is the in the Oval Office with the President for an hour, which is an extraordinary amount of time with the President judging from all the other meetings the Treasury Secretary’s schedule has listed as POTUS meetings.

Paulson ends his day with a call to White House Deputy press officer Tony Fratto and calls Sen. Harry Reid from his home.

Thursday, March 13 Paulson starts his day with a 6am call to the EU’s Trichet, which again is odd from the standpoint that Trichet is Bernanke’s peer not Paulson.

The next two hours are redacted so it’s difficult to decipher his moves. After his blackout Paulson continues his dialog with the White House through Kaplan, Bolton.

Paulson then has a 30-minute call with the President.

During the day Paulson had press interviews with CNBC, Washington Post and New York Times. None of these interviews uncovered any of the information cited here. However there is a call late in the day to Bill Keller, editor of the Times. Not sure if this was Paulson doing damage control to squelch any leaks.

Friday, March 14^th was the fateful day for Bear Stearns. Paulson begins the day with a 5:30am conference call with Geithner from his home. Although it is labeled as a conference call no other participants are listed.

Paulson then takes a call from the President at his home at 6:30am. Between this call and the market open Paulson speaks with White House aides three times, Geithner four times including a second conference call of the morning with no other participants listed again and SEC chief Cox.

Once the market opens Paulson raises the curtain on his M&A window and begins to call all of Wall St. In order: Ken Lewis, BofA; Bob Rubin, former Treasury Secretary, Citi director; Lehman’s Dick Fuld; Tim Geithner; Merrill’s John Thain; Goldman’s Lloyd Blankfein; Morgan’s John Mack and then after another Geithner call Paulson calls JPM’s Jamie Dimon.

Most likely he told Dimon no one on the Street or at the White House had the appetite to help Bear Stearns and that JPM had to go it alone with no backstop.

But the hits keep on coming that day.

After Dimon, Paulson speaks with Trichet of the EU and someone else who is redacted. He then spends an hour with Geithner before calling Dimon again. When he hangs up with Dimon, he takes a call from President Bush.

After Paulson hangs up with President Bush he then calls Geithner to work on a game plan before the both of them call Bear’s Alan Schwartz to break the news that Dimon and JPM were pulling the rug out from under him and that the administration was not going to bail out the firm.

Then we had the fire sale over the weekend to JPM and the rest is history.

For more on Wall and Washington and the economy see: http://mgray12.wordpress.com

by Gary North
Originally posted January 28, 2009

I BEGIN WITH A VIDEO. It is the most persuasive low-cost, home-brew video that I can remember. If you do nothing else today, watch this video. I wish I had produced it. Conceptually, it is a stroke of genius. It sets forth the current banking crisis admirably. The remainder of my report rests on this video.

To say that we are in uncharted waters does not begin to get across the idea of the magnitude of our current situation. America is in a canoe, floating down a river that has never been explored. Most of the passengers are trying to listen to the tour guide. But there is a noise that interferes. It is the sound of a waterfall ahead. The noise is getting louder.

The tour guide is new. It is a new career for him. His first day on the job: January 20. He is a good talker, although it’s clear that he is improvising.

The guys with the paddles are also new on the job. This is their first trip down this particular river. You and I are along for the ride. We were assured that this would be a scenic trip, back when the excursion company, Ben Bernanke’s Slow Boat to China, sold us tickets.

So far, we have gone through two sets of rapids: the first in August 2007, which seemed to end by September, and the other beginning a year later, in August 2008. Since then, the rapids have gotten wilder, and the canoe more obviously not under control by the first crew with the paddles, who left on January 20 and handed the paddles over to the new crew.

The canoe seems out of control. Each set of rapids is worse than the last. We get through one set. The other crew kept telling us that everything was under control after the first set. Then we hit the second set. They abandoned ship, assuming you would call this canoe a ship.

The crew has handed out life jackets, but has told us that we don’t have to put them on yet. But they have put on theirs.

The excursion company’s owner, Dr. Bernanke, has said almost nothing since August 2007. His assistant, Hank “Bailout” Paulson, has bailed out. His replacement, Tim “Turbo” Geithner, has just been handed a paddle. Because he was paid $398,000 last year as captain of a cruise ship, the S.S. FOIA-Proof, no one is sure why he signed up for this low-paying assignment.

TWO MAPS
Turbo Bill will have to decide which branch of the river to follow. He has a map. It lists three branches. Two of them mention the possibility of falls. There is some hope that the third route will avoid the falls.

The first set of falls is marked Inflationary Falls. The second set is marked Deflationary Falls.

There is a hoped-for third branch of this river: Conventional Creek. Dr. Bernanke has bet his future – and ours – on this one. Sadly for us, the map is torn at this point. It is a matter of guesswork as to where this creek connects with the main branch of the river.

The video presents the graphic reality of Dr. Bernanke’s strategy to negotiate the rapids. The increase in the Federal Reserve System’s lending to American (and some foreign) banks in 2008, as of November, was a staggering $700 billion.

This increase in lending to banks was accomplished by an increase in the Federal Reserve’s adjusted monetary base from $850 billion (2007) to $1.8 trillion. See the graph here.

Here is our problem – as well as Dr. Bernanke’s. This increase in the monetary base was produced by fiat money: the money spent by the FED to purchase assets. The money was spent into circulation, as all increases in the FED’s balance sheet are.

This money has entered the banking system. There are two things the banks can do with this money: (1) keep some or all of it on deposit with the FED, where the public cannot get its hands on it; (2) purchase investment assets from the public, which means that the fractional reserve banking process will take over and turn the monetary base into spendable money. If the banks do the second, the money supply will more than double. Prices will then more than double. We will go over Inflation Falls.

If the banks keep the money on deposit at the FED, because the FED started paying interest on deposits last October – three years earlier than previous legislation had authorized – then the increase in excess reserves will have the same effect as would the doubling of the legal reserve requirement by the FED. It will offset the increase in the monetary base. Dr. Bernanke is betting his future and ours that this will get us onto Conventional Creek.

The intricate route through the rapids to Conventional Creek – assuming Conventional Creek actually exists – involves trusting commercial bankers not to do what bankers have always done: lend every dime the banks can get their hands on. Banks make money by making loans. There is no other way for banks to make a profit. Always before – except possibly in 1929–33 – banks have lent every dime that was deposited. To sit on unused reserves is to avoid getting paid. Bankers enjoy getting paid. They fear not getting paid.

So, Dr. Bernanke seems to be betting the canoe on bankers’ doing what bankers never do: sit on reserves. He is luring bankers to lend to the Federal Reserve, which does not face the wrath of shareholders or the FDIC. It does not have to make a profit. It gets to decide each year how much money to return to the Treasury as its donation. It keeps enough to pay its bills.

To lure bank deposits into the FED’s digital vault, the FED started paying interest last October. But interest was low: 1.5% until the second week of October, and 1% thereafter. This is the federal funds rate, the rate at which banks lend overnight to each other to meet reserve requirements.

This fall in the FedFunds rate has now created a problem for Dr. Bernanke’s journey to Conventional Creek. The FED has announced a target rate for FedFunds of 0%. In recent weeks, the rate has fallen to about one-tenth of 1%. I post this on my site in the department, “Federal Reserve Charts.”

The link is “Free Market Federal Funds Rate.” Here was the FedFunds rate as of the week of January 19 – inauguration week.

You can see that it was close to one-tenth of 1%. Basically, this was no interest payment at all.

Here is the situation facing banks. They can keep their money on deposit at the FED for free. Or they can buy 90-day Treasury bills, also for one-tenth of 1%. This is how they avoid all risk of default. But they cannot make a profit. They cannot avoid losses.

Meanwhile, anyone who receives digital money who decides to keep digital money has his money in a bank. Banks must pay interest on most accounts. For as long as depositors demand a rate of interest above 90-day T-bills, banks have a major cash flow problem. More money is going out the door in interest than is coming in from T-bills and reserves at the FED. “What’s a banker to do?”

He can pay less to depositors. That means depositors’ hopes of ever retiring and living off of capital are doomed, unless they find a way to beat the stock market or the commodities market. They must become entrepreneurs. They do not want to do this.

It was not that they had any legitimate hope before. They were paid (maybe) 3%. Price inflation was at 3%. They were taxed at ordinary rates on the interest payments. They were going into the hole. But the illusion of hope was still there. If they are paid nothing on their deposits, they know they are doomed to working until age 85, unless prices fall by 3% a year – which would be a great thing. It has not happened since 1932.

Banks are paying depositors well above 0% these days. To find out how much, visit this site for the best rates nationally.

So, for every dollar that a bank keeps at the FED or in T-bills, it is losing money. What is the incentive for banks to lose money? Only this: the terror of losing even more money.

TERRIFIED BANKERS
Ever since September 2008, M-1 has taken off like a skyrocket: Inflationary Falls. In contrast, the M-1 money multiplier has fallen like a stone: Deflationary Falls. I post links to these charts in my department, “Federal Reserve Charts.” You can see both charts on one page here.

My explanation for the M-1 money multiplier’s reversion to an M-1 money divisor is that the FED began paying interest on bank reserves. This has kept most of the increase in the adjusted monetary base from creating an inflationary disaster.

The bankers have now run out of profitable options. They must accept one of these painful alternatives. First, they accept the slow draining away of profits that will come as a result of the freeze on the interest rate income on their excess reserves – money they could legally lend. Second, they accept the risk (technically, uncertainty) of lending to corporations in the middle of the longest recession since the end of World War II. These corporations may go bankrupt. Third, they can lend to the U.S. Treasury to buy long T-bonds, which pay above 3%. Their principal is then at risk. Rising long rates, due to monetary inflation and then price inflation, could raise yields, thereby lowering the market value of the T-bonds.

If bankers keep their banks’ money at the FED, this means that their terror is extreme. They would rather suffer the slow losses of money paid to depositors. A sure loss is better than the potential losses of lending to corporations or the U.S. Treasury. This means that they think the canoe is going to go over Deflationary Falls.

If bankers are this pessimistic about the economy, then we really are in uncharted waters. The people who Americans paid to manage their money misinvested hundreds of billions and – it may turn out – close to $4 trillion during Greenspan’s bubble and the carry-over under Bernanke’s attempted slowing of the monetary base, 2006–2007. These people were lured into a trap by Greenspan’s monetary and interest rate policies. Those Austrian School economists and forecasters who warned that this would happen were ignored then and are ignored now. “Crackpots. Lucky guessers.”

Now these same people, in shell shock because of what the market has done to their investments, are paralyzed in fear.

We are now being told by the so-called experts who told us not to sell our stocks, let alone sell short (I recommended both in November 2007), that the stock market is close to the bottom. Yet they cannot tell us when this economy will recover. Then how do they know the stock market is at the bottom?

We are told, “The market has discounted all the bad news to come.” Did the market forecast this in October 2007? No. So, why are the ex-genius stock fund managers any better informed now than then?

If the banks will not shift those excess reserves to T-bonds or corporate bonds or corporate loans, then there is not going to be a recovery for years. Banks are still failing. Corporations are still failing. The FED is still pumping in fiat money to re-capitalize banks. Before long, it will be doing the same with T-bonds, for the Federal government’s expected deficit is $1.2 trillion. If bankers think, “This economy is too risky to lend any money,” then this economy will continue to decline.

Will we get mass deflation? No. Mass deflation is a theory suggested by Keynesians. They call this a zero-bound economy. This is what Bernanke has worried about all along. In his now infamous “helicopter” speech in 2002, he said this.

However, a deflationary recession may differ in one respect from “normal” recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero. Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash. At this point, the nominal interest rate is said to have hit the “zero bound.”

We are now at this point. The consumer price index actually fell in December. The Median CPI was flat.

Deflation great enough to bring the nominal interest rate close to zero poses special problems for the economy and for policy. First, when the nominal interest rate has been reduced to zero, the real interest rate paid by borrowers equals the expected rate of deflation, however large that may be. . . .

Although deflation and the zero bound on nominal interest rates create a significant problem for those seeking to borrow, they impose an even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation. This burden arises because, even if debtors are able to refinance their existing obligations at low nominal interest rates, with prices falling they must still repay the principal in dollars of increasing (perhaps rapidly increasing) real value.

This is bad for consumers, he said. What can be done about this? In short, “What’s a central banker to do?” This:

Beyond its adverse effects in financial markets and on borrowers, the zero bound on the nominal interest rate raises another concern – the limitation that it places on conventional monetary policy. Under normal conditions, the Fed and most other central banks implement policy by setting a target for a short-term interest rate – the overnight federal funds rate in the United States – and enforcing that target by buying and selling securities in open capital markets. When the short-term interest rate hits zero, the central bank can no longer ease policy by lowering its usual interest-rate target.

We are now at that place that Bernanke feared was theoretically possible. It has happened on his watch. Some people still believe that the central bank, in his words then, has “run out of ammunition.” He assured us that a central bank never runs out of ammunition.

However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero.

What the video on FED lending showed is Bernanke’s desperate attempt not to run out of ammunition. Unless this ammunition is nothing but blanks, he will hit his target: the economy.

It is best to avoid a zero-bound condition, he said. As with all Keynesians, all Chicago School monetarists, and all supply-side economists, Bernanke hates the thought of price deflation.

As I have already emphasized, deflation is generally the result of low and falling aggregate demand. The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place.

Tough luck, Ben. We are there.

Within the hard-money camp, most of us think mass inflation will be the result if present policies are followed by the FED. The banks will eventually have to buy T-bonds and other interest-paying assets. If they don’t, the red ink of payments to depositors will bankrupt them. They are like wounded men on a battlefield. They will bleed to death. The FDIC will intervene, or the FED will, before this happens.

American banking is now nationalized. Congress is in a position to force banks to lend. “No loans, no more bailout money.” Before we go over Deflation Falls, Congress will do just that.

There are deflationists in the hard-money camp. They are in fact the true hard-money people. They think the dollar is true hard money. They think prices will fall. They trust the dollar, not gold. The ones who trust gold and the dollar are not deflationists. They are confused.

They think we will go over Deflation Falls. I don’t mean that they predict a Japan-like economy. Japan had a few years in the 1990’s in which price deflation of 1% occurred. A rate of deflation that low is subject to statistical error. No one really knows what “prices in general” – there are no known prices in general, only statistical indexes – did or did not do, when we are talking about a change of 1%.

I am talking about someone who thinks the 1930’s are coming back. Bernanke described this scenario: “massive financial problems, including defaults, bankruptcies, and bank failures, were endemic in America’s worst encounter with deflation, in the years 1930-33 – a period in which (as I mentioned) the U.S. price level fell about 10 percent per year.”

I make the following prediction: this is not going to happen.

CONVENTIONAL CREEK
What about muddling through? What about a reversal of the zero-bound economy, but without mass price deflation? What about a reversal of FED policy, once the economy reverses?

First, why should it reverse? Second, how soon?

Third, what can the FED do to reverse its policy? Can it unload the toxic waste assets it swapped for Treasury debt? On whom? At what discounted price? Forget about it. The FED is stuck forever with this junk.

Can the FED stop buying T-bonds and T-bills? With a $1.2 trillion deficit forecast this year? President Obama has said this will not be the last such year. If the FED stops buying, rates will climb. If rates climb, the recession reappears. No exit there. More monetary base increases.

Fourth, the FED can hike the reserve requirement for banks. Convert today’s excess reserves into legal reserves. This is exactly what it should do: move toward 100% reserve banking. But then the banks will bleed again: more payments to depositors than income from lending. They cannot lend because the reserve rate is at 20%, or whatever the FED decides. The FDIC then gets stuck with more busted banks. It is below $25 billion in reserves now, and that is in Treasury debt. It must sell Treasury debt in order to raise cash to cover deposits.

No exit.

CONCLUSION
I am all for muddling through. But, at this point, I don’t see Conventional Creek on my copy of the map. The monetary base has been doubled. The only thing keeping banks from lending to the limit of their legal reserves is fear. If bankers are so afraid to lend, despite returns of one-tenth of 1%, we are not heading toward Conventional Creek. We are headed for the falls. Inflation Falls.

Dollar falls. Gold rises.

Dois economistas fizeram um belo trabalho: estimaram o custo-benefício do socorro de Paulson durante o início (ou o auge?) da crise atual. Veja o resultado aqui.

É o tipo de trabalho que todo economista deveria tentar fazer. É difícil, mas se queremos falar algo relevante sobre o mundo que nos cerca…

In the beginning of March of last year Treasury Secretary Hank Paulson and Ben Bernanke saw the wheels were coming off the economy.

The two scrambled to right the cratering Wall Street banks before Bear Stearns ever entered the headlines. Protestations from former Bear head Alan Schwartz that his firm was on solid ground until the rug was pulled out from under him seem to be backed up by Paulson’s meeting and phone schedule from that time.

On Tuesday, March 4th 2008 Paulson has breakfast with the President. Prior to that morning Paulson was not sitting at the President’s breakfast table much. As an aside, the are more redactions or blacked out blocks of times on Paulson schedule during this time period than any other time.

Later in the day following a call to NY Fed chief Tim Geithner and Bernanke there is an hour blacked out which is followed by a call to Geithner.

On the 5th, Paulson spoke with Sens. Chris Dodd and Richard Shelby the two ranking members of the Senate Finance panel and Rep. Barney Frank of the House Finance panel and Nancy Pelosi. Then lunch at the White House.

On March 6th a day before JPMorgan Chase offered a 28-day loan to Bear to stem the loss of confidence, Paulson is traveling to California takes a call from the Italian central banker Mario Draghi. Why is Paulson speaking to central bankers? That’s Bernanke’s job.

A key adviser to Paulson during this time was Bob Steel, former Goldman Sachs vice chairman under Paulson when he ran the shop.

Steel was appointed Under Secretary for Domestic Finance at  Treasury on October 10, 2006 and served until July 9, 2008.

Steel was the principal adviser to the secretary on matters of domestic finance and led the department’s activities regarding the U.S. financial system, fiscal policy and operations, governmental assets and liabilities, and related economic matters.

On the 7th Paulson called Steel at 4:30am (i assume that is local time in SF) and then Tim Geithner before calling Jamie Dimon JPM chief to sure up the Bear backstop?

Not sure a Treasury Secretary should be working on an MA desk at the same time.After Dimon he calls Lehman’s Dick Fuld but I don’t know why he would unless he was giving Lehman a heads up on its biggest competition in the bond market.

Big chunks of the day are redacted so its difficult to determine what else Hank was up to.

Over the weekend Paulson was at the Gridiron Dinner with someone who was redacted on Friday night and at the White House dinner Saturday night with someone who was also redacted.

Next post on Wednesday about the week Bear went down and the House held a rare closed session.
For more on Wall and Washington and the economy see: http://mgray12.wordpress.com

Thanks for the Fande New York Times Op-Ed Board!

http://www.nytimes.com/2009/10/29/opinion/29thu1.html?_r=1

EXCERPT:

Meanwhile, sectors of the economy are being starved of credit. Consumer credit by commercial banks stood at $834 billion in August — about $45 billion less than at the end of last year. Business financing is doing no better. Banks’ outstanding commercial and industrial loans fell to $1.411 trillion in September, $170 billion less than a year earlier. Commercial paper issued by nonfinancial businesses has plummeted 40 percent over the last year.

This will not do. It is nigh impossible for economic recovery to take hold when credit is sputtering as it is. For the Obama administration’s financial strategy to be a success, the banks must do more than survive. They must lend again.

Fande = Fact & Evidence; Cande = Conjecture & Exaggeration

* Bring your Fande, leave your Cande!

clips of Ben Bernanke & Tim Geithner & Alan Greenspan & Hank Paulson taken from the movie Fall of the Republic
http://www.falloftherepubli…
released on October 21st 2009

Tags:
Ben Bernanke chairman federal reserve U.S. economy TARP bailout foreign banks Central Bank Liquidity Swaps Alan Grayson Tim Geithner Greenspan Hank Paulson Ron Paul Fall of the Republic President Barack Obama webster tarpley Nancy Pelosi max keiser peter schiff jim rogers marc faber mish Jim Cramer silver gold bullion recession depression

By Roy Bleckert

The PBS Frontline show ,The Warning , does a good job on the greed & corruption  of the CEO’s ( Rubin , Summers , Geithner) that have played a key role in our financial meltdown (but leaves out the BOD ) , I submit they totally miss  Greenspan’s role in the process

Greenspan started out with the free market principals,  but along the way he got corrupted enough to be believe fraud was ok , that you could build a derivative market fueled by the distortions the Feds made in the housing market starting with Carter’s 1977 CRA act , the 89 mortgage act, 92 Freddie & Fannie phony loans to people who could not afford a house , 95 tracking loans by neighborhood ( iirc the one Obama sued in court for Acorn? ) well the only way I know of to fuel a distorted market is with fraud

Greenspan, Rynd, Reagan were right that the free market should be allowed to function , but  Brooksley Born is right that the government role in the financial markets should be to establish a honest and level playing field , so the Bernie Madoff’s of the world do not corrupt the system.

Free Market’s can only survive in a honest and level playing field,  if the The Few, The Money Changers are running a rigged and corrupt system it does not matter if you have a Free Market , Communist System or anything else , In a rigged game the few are going to take advantage of the many and keep them oppressed as long as they can hold power in a corrupt system

If the role of government is to make sure one person is not allowed to harm another , a Free people and Free Markets will bring about the best chance for economic prosperity , a nation that can dictate it’s own destiny and individual freedom for all citizens in it’s border

Is the the kind of nation you want to live in and pass on to your children ?

http://video.pbs.org/video/1302794657/

First of all- My counterpoint, a segue taken from Allan Erickson’s recent post at American Thinker entitled,
“Obama’s war on Fox & half the country” lays the foundation for a deeper, comprehensive view of the Obama presidency steered by an elite cabal led by George Soros.

Obama’s war on Fox & half the country

by Allan Erickson

On the one hand, we should celebrate the war between Fox News and the White House.

It is a good thing President Obama & Co. are angry with Fox. It means Fox is doing its job, you know, holding the Executive Branch accountable, like a real news organization. This is good news. Traditionally in America, the Fourth Estate’s role has been to challenge those in power, challenge the assumptions, examine the assertions, and check for accuracy, all the while carrying both sides of the story.

A real news organization serves the people, acting as a check on power by informing people so they can make good decisions at the polls.

The fact that Fox is holding Obama’s feet to the fire should cause rejoicing. (proof if the Truth hurts the WH; we need more of it from those brave enough to speak it.)
On the other hand, there are three bad news dimensions to all this: the rest of the media is content to lick Obama’s boots, true to pattern Obama is glad to selfishly attack a private news organization (by the way, the most highly rated television news group in the nation), and the more Nero fiddles, the higher the flames.

Barack Obama is happy to fight a war on Fox.

Oh, that the Commander in Chief would fight the war on terror with as much energy and focus.

The truth is Barack Obama is becoming a most divisive President.

He preaches unity with his mouth, but with his hands, he sows seeds of division. Do not forget how he applied thug tactics during the campaign while denigrating Fox, insulting average Americans as gun-toting Bible thumpers, encouraging racial tensions as he always had through ‘community organizing,’ i.e., ACORN. Never forget how his machine took money from overseas. Remember how he raised an enormous war chest via the internet with no way to track donors. Don’t overlook the thug tactics used during the Texas caucuses, how law enforcement was instructed to suppress media criticism in Missouri, how free speech and a free press were quelled in Chicago when a reporter sought to cover Obama’s Chicago activities via Annenberg and Ayers and ‘education reform.’

Notice today his army of Czars: radical leftists, race baiters, anti-American globalists, distinctly and angrily opposed to most traditional American values.

And now we have his media czar Anita Dunn singing the praises of Chairman Mao, and bragging that the Obama campaign controlled the media. All this coming at a time she calls Fox nothing more than a Republican mouthpiece. (Never mind that half of Fox’s viewers are Democrats and Independents, according to a recent survey by the Global Marketing Research Center.)

Thanks to the internet (which Obama seeks to control as well), those who are wise consumers of media and news have been paying attention. They know full well this President and his operatives are capable of most anything now. The lies and misrepresentations increase almost daily.

Journalists with an ounce of integrity see through the octopus ink now being spewed in the water, for this is what the war on Fox is all about, clouding the issues, providing cover, defense and retreat. How odd to see a radical Leftist President in Nixonian garb.

Fox has been the only news TV organization willing to challenge this President on both foreign and domestic policy. Fox is the only TV outfit with guts enough to run stories about ACORN corruption. Fox is the only television organization covering what the roughly half the American people think about healthcare reform and cap ‘n trade, doing so with real coverage of Town Hall Meetings and Tea Parties. Fox is the only substantive television news group asking the tough questions about Afghanistan.

The rest of the major media are either silent, complicit, or cheerleaders for this Government, a government populated in the main by radical leftists devoted to the destruction of our Republic, traitors by any definition.

In case you have not noticed, the Constitution is taking a back seat to the EU and the U.N., and economic freedom is being absorbed into the socialist kool-aid served daily throughout D.C., the media, and the public schools.

Fox has challenged all this, and so Fox must pay. Fox must pay, as Limbaugh did last week, by being tied to the scourging post and beat with lies, slander, and condemnation, excoriated in public by the most vicious and cruel campaign ever witnessed, unless you consider how Obama’s operatives treated Sarah Palin and her family to a similar whipping post.

And the beatings will continue.

So the battle lines are clearly drawn. The President has made a clear declaration of war on at least half of his own people. Obama & Co. have made it clear: if you disagree with this President, you will be hounded, threatened, condemned and destroyed. How Maoist. (Dunn was not kidding.)

This is the change you voted for, this is the hope you expected, and this is the dawning of a new American age of unity, purpose and prosperity?

The only remaining questions are: how long will the People put up with Al Capone in the White House, how far will Al Capone push things, what will be the end game (2010 or 2012?), and how many bodies will he leave in his wake, both at home, and abroad?

American Thinker

Now for the man behind Obama pulling the strings… because he can…

and sad to say, our Congress has knuckled under like a bunch of greedy, cowardly sycophants gladly working for Soros because they have been bought and paid for by Soros funneling untold amounts of money to them through campaign donations .

Here is a direct quote from the Soros playbook stating unequivocally how he feels about America:

“Soros quote from Soros Public Enemy # 1

http://canadafreepress.com/index.php/article/14700 (source)

“The main obstacle to a stable and just world order is the United States.”—George Soros

(why? Because we are a Democracy ruled by the WILL of the People.)

“In 1979 Soros established the Open Society Institute (OSI), which serves as the flagship of a network of Soros foundations that donate tens of millions of dollars each year to a wide array of individuals and organizations that share the founder’s agendas. Those agendas can be summarized as follows:

http:// www.discoverthenetworks.org/individualProfile.asp?indid=977

* promoting the view that America is institutionally an oppressive nation

* promoting the election of leftist political candidates throughout the United States

* opposing virtually all post-9/11 national security measures enacted by U.S. government, particularly the Patriot Act

* depicting American military actions as unjust, unwarranted, and immoral

* promoting open borders, mass immigration, and a watering down of current immigration laws

* promoting a dramatic expansion of social welfare programs funded by ever-escalating taxes

* promoting social welfare benefits and amnesty for illegal aliens

* defending the civil rights and liberties of suspected anti-American terrorists and their abetters

(the release of Mazrazi to Libya)

* financing the recruitment and training of future activist leaders of the political Left

* advocating America’s unilateral disarmament and/or a steep reduction in its military spending

* opposing the death penalty in all circumstances

* promoting socialized medicine in the United States

* promoting the tenets of radical environmentalism, whose ultimate goal, as writer Michael Berliner has explained, is “not clean air and clean water, [but] rather … the demolition of technological/industrial civilization” with Cap and Trade a vehicle for Soros enrichment.

****** Bringing American foreign policy under the control of the United Nations******

* promoting racial and ethnic preferences in academia and the business world alike

* promoting taxpayer-funded abortion-on-demand

* advocating stricter gun-control measures

“The problem, then, resides not in the hand but in the mind. To be sure, it must be almost impossible for any mere mortal to begin with nothing and make billions upon billions of dollars without coming to believe himself not only clever, which he surely must be, but also very wise. And George Soros seems to find further warrant for the depth of his wisdom in the fact that in England he became a student at the London School of Economics and a disciple of Professor Karl Popper . Popper, of course, was acknowledged to be one of the century’s important philosophers of science, but it was for his influence as a passionate enemy of totalitarianism, particularly for his book, “The Open Society and Its Enemies”, that he is now perhaps best remembered. Mr. Soros continues to proclaim himself a disciple, invoking his professor’s authority over and over again, and by implication, wrapping himself in Popper’s mantle as a social thinker.”

In The Open Society, Popper had provided not only a devastating philosophical critique of the underpinnings of totalitarianism, particularly as they had been realized in the then-contemporary evils of both Marxism and fascism, but a passionate defense of democratic liberalism. In the present context, it seems both sad and necessary to point out that the term “open society” as Popper used it means almost exactly the opposite of what those words are nowadays meant to imply in the mouths of the political actors on whom George Soros is currently lavishing millions of dollars. For Popper, the enemy was totalitarianism, especially in its two most devastating 20th-century manifestations, Nazism and Communism. For many if not most of Soros’s current beneficiaries the enemy seems to be the United States of America itself. They, of course, would say that they only mean to make the country a better place. Yet when spelled out in greater political and legislative detail, “better” somehow ends up meaning more antinomian at home and more at the mercy of those who wish the country ill abroad.

And listen to George Soros’s own application of what he imagines he learned at the feet of the master. In his (warped) view, the outcome of the Cold War which ended in the defeat of Communism did not, as people seemed to believe, prove that capitalism was the superior system. While there is no doubt, he says, that the Communist model turned out to be inferior to free enterprise, that is “only because the free enterprise model has been pursued in a less dogmatic, extremist way than the Communist one.”

Reading the above passage, one finds it difficult to believe one’s eyes. Somewhere, either between Hungary and London, or between London and New York, Mr. Soros seems to have misplaced the terms democracy and freedom—the latter, of course, having been the main “model” juxtaposed to Communism, particularly from within the Soviet world—and from without, of course, there was in addition the mighty and, as it would turn out, liberating power of the United States.

Finally, Soros tells us that he used to be more balanced in his relation to the two main parties, leaning only slightly more toward the Democrats. In any case, previously he did not consider it a matter of life or death which party won the elections, but he does now. The defeat of George Bush was essential, as the book’s subtitle puts it, to “correcting the misuse of American power.”

Thus the mountain of social philosophy has labored and brought forth…Barack Obama. Soros’s intellectual vanity and social ingratitude have been well requited.”

Source reference

There will be more articles forthcoming now that the public has awakened to the dire threat Obama and the Soros agenda pose to America. Soros is a very complex man. So complex is he and the wealth he has created. He has magnified his lack of empathy for more than picking the wallets, gold and jewelry off of the Jews headed for the death camps; he has given himself permission applying the same techniques to picking clean the economies of countries leaving them bankrupt.