Wall Street, escandalos relacionados a la crisis y protestas de OWS

The Screwed Election:
Wall Street Can’t Lose, and America Can’t Win
by Joel Kotkin Aug 10, 2012 4:45 AM EDT
Everyone hates the big banks—except the two candidates running for president. Joel Kotkin on the bipartisan triumph of crony capitalism.

About two in three Americans do not think what’s good for Wall Street is good for America, according to the 2012 Harris poll, but do think people who work there are less “honest and moral than other people,” and don’t “deserve to make the kind of money they earn.” Confidence in banks is at a record low, according to Gallup, as they’ve suffered the steepest fall in esteem of any American institution over the past decade. And people have put their money where their mouth is, with $171 billion leaving the stock market last year alone, and 80 percent of Wall Street communications executives conceded that public perception of their firms was not good.

Americans are angry at the big-time bankers and brokers, and yet, far from a populist attack on crony capitalism, Wall Street is sitting pretty, looking ahead to a presidential election that it can’t possibly lose. They have bankrolled a nifty choice between President Obama, the largest beneficiary of financial-industry backing in history and Mitt Romney, one of their very own.

One is to the manner born, the other a crafty servant; neither will take on the power.

Think of this: despite taking office in the midst of a massive financial meltdown, Obama’s administration has not prosecuted a single heavy-hitter among those responsible for the financial crisis. To the contrary, he’s staffed his team with big bankers and their allies. Under the Bush-Obama bailouts the big financial institutions have feasted like pigs at the trough, with the six largest banks borrowing almost a half trillion dollars from uncle Ben Bernanke’s printing press. In 2013 the top four banks controlled more than 40 percent of the credit markets in the top 10 states—up by 10 percentage points from 2009 and roughly twice their share in 2000. Meantime, small banks, usually the ones serving Main Street businesses, have taken the hit along with the rest of us with more than 300 folding since the passage of Dodd-Frank, the industry-approved bill to “reform” the industry.

Yet past the occasional election-year bout of symbolic class warfare, the oligarchs have little to fear from an Obama victory.

“Too big to fail,” enshrined in the Dodd-Frank bill, enjoys the full and enthusiastic support of the administration. Obama’s financial tsar on the GM bailout, Steven Rattner, took to The New York Times to stress that Obamians see nothing systemically wrong with the banking system we have now, blaming the 2008 market meltdown on “old-fashioned poor management.”

“In a world of behemoth banks,” he explained to we mere mortals, “it is wrong to think we can shrink ours to a size that eliminates the ‘too big to fail’ problem without emasculating one of our most successful industries.”

But consider the messenger. Rattner, while denying wrongdoing, paid $6.2 million and accepted a two-year ban on associating with any investment adviser or broker-dealer to settle with the SEC over the agency’s claims that he had played a role in a pay-to-play scheme involving a $50,000 contribution to the now-jailed politician who controlled New York State’s $125 billion pension fund. He’s also expressed unlimited admiration for the Chinese economic system, the largest expression of crony capitalism in history. Expect Rattner to be on hand in September, when Democrats gather in Charlotte, the nation’s second-largest banking city, inside the Bank of America Stadium to formally nominate Obama for a second term.

In a sane world, one would expect Republicans to run against this consolidation of power, that has taxpayers propping up banks that invest vast amounts in backing the campaigns of the lawmakers who levy those taxes. The party would appeal to grassroots capitalists, investors, small banks and their customers who feel excluded from the Washington-sanctioned insiders' game. The popular appeal is there. The Tea Party, of course, began as a response against TARP.

Instead, the party nominated a Wall Street patrician, Mitt Romney, whose idea of populism seems to be donning a well-pressed pair of jeans and a work shirt.

Romney himself is so clueless as to be touting his strong fund-raising with big finance. His top contributors list reads something like a rogue’s gallery from the 2008 crash: Goldman Sachs, JPMorgan Chase, Morgan Stanley, Credit Suisse, Citicorp, and Barclays. If Obama’s Hollywood friends wanted to find a perfect candidate to play the role of out-of-touch-Wall Street grandee, they could do worse than casting Mitt.

With Romney to work with, David Axelrod’s dog could design the ads right now.

True, some of the finance titans who thought Obama nifty back in 2008 have had their delicate psyches ruffled by the president’s election-year attacks on the “one percent.” But the “progressives,” now tethered to Obama’s chain, are deluding themselves if they think the president’s neo-populist rancor means much of anything. They get to serve as what the Old Bosheviks would have called “useful idiots,” pawns in the fight between one group of oligopolists and another.

This division can be seen in the financial community as well. For the most part Obama has maintained the loyalty of those financiers, like Rattner, who seek out pension funds to finance their business. Those who underwrite and speculate on public debt have reason to embrace Washington’s free spenders. They are also cozy to financiers like John Corzine, the former Goldman Sachs CEO and governor of New Jersey, whose now-disgraced investment company MF Global is represented by Attorney General Eric Holder’s old firm.

The big-government wing of the financial elite remains firmly in Obama’s corner, as his bundlers (including Corzine) have already collected close to $20 million from financial interests for the president. Record support has also poured in from Silicon Valley, which has become ever more like a hip Wall Street west. Like its east-coast brethren, Silicon Valley has also increased its dependence on government policy, as well-connected venture capitalists and many in the tech community have sought to enrich themselves on the administration’s “green” energy schemes.

Romney, on the other hand, has done very well with capital tied to the energy industry, and others who invest in the broad private sector, where government interventions are more often a complication than a means to a fast buck. His broad base of financial support reflects how relatively few businesses have benefited from the current regime.
Who loses in this battle of the oligarchs? Everyone who depends on the markets to accurately give information, and to provide fundamental services, like fairly priced credit.

And who wins? The politically well-situated, who can profit from credit and regulatory policies whether those are implemented by Republicans or Democrats.

American democracy and the prosperity needed to sustain it are both diminished when Wall Street, the great engineer of the 2008 crash, is all but assured of victory in November.



Attorney General to U.S. -- Nothing to See On Wall Street, Folks, Just Move Along
By Richard (RJ) Eskow

Yesterday the Justice Department announced that once again it's not going to pursue evidence of Wall Street crimes which have been sent its way. It has already failed to act on information sent to it by sources whose investigators are apparently more dogged than its own, including several other government agencies and the Financial Crisis Inquiry Commission. Now the bipartisan committee which was led by Senators Carl Levin and Tom Coburn can be added to the list of sources whose leads weren't pursued by Attorney General Eric Holder and his staff.

Holder was on the defensive yesterday, a sign that the mounting criticism of his inaction is getting his attention. He was also scornful of that criticism, saying that it's belied by "a troublesome little thing called facts."

There's something troublesome here, all right, but it isn't the facts.

A Justice Department press release announced that there will be no prosecutions based on the Levin/Coburn report:

"After a careful review of the information provided in the report and more than a year of thorough investigation, the Department of Justice... the FBI and the Special Inspector General for the Troubled Asset Relief Program (and other agencies) have determined that, based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report."
The press release goes on to say:

"The department and its investigative partners conducted an exhaustive review of the report and its exhibits, independently gathered and scrutinized a large volume of other documents, and tenaciously pursued potential evidentiary leads, including conducting numerous witness interviews."

The DOJ also boasts that, "Since FY 2011, the Department of Justice's financial fraud enforcement efforts have resulted in at least $185 billion in civil and criminal forfeitures, restitution, civil settlements and other penalties." (Bankers have continued to collected huge salaries and bonuses, however, so the lack of criminal prosecution gives them no reason to stop committing crimes.)

The statement goes on to describe DOJ's "aggressive" pursuit of bank fraud, adding that "The Department of Justice has not hesitated to investigate and take enforcement action when the evidence and facts support doing so."

Holder himself was considerably more testy:

"There have been, I guess, 2,100 or so mortgage-related matters that we have brought here at United States Department of Justice. Our state counterparts have done a variety of things. The notion that there has been inactivity over the course of the last three years is belied by a troublesome little thing called facts."
Unfortunately, the Holder Justice Department has had a troublesome relationship with facts. That dates back to its ginned-up and ultimately discredited claims about something called "Operation Broken Trust," in which it claimed credit for dozens of mortgage-related convictions that it said had resulted from a coordinated operation of that name. As the New York Times noted, many of those investigations had actually concluded before the 2008 election, Holder's appointment, and the creation of "Broken Trust." The Columbia Journalism Review gave its review of the fiasco the headline "Obama Administration's Financial-Fraud Stunt Backfires."

Then there's the graphic evidence of inactivity since the election of President Obama and the confirmation of Attorney General Holder, courtesy of Syracuse University's TRAC project:

(On the other hand, prosecution of immigration cases has soared under this administration.)

Most tellingly of all, there are the insider comments which suggest that the Justice Department has been dragging its feet in providing the mortgage fraud task force with the extremely modest resources it was promised (roughly 100 staff members to investigate a trillion-dollar fraud that involved all of the major U.S. banks, as opposed to 1,000 for the much smaller savings and loan scandal of the 1980s).
And despite Holder's claims, the convictions obtained over the least three-and-a-half years have been strictly for small fry. The Justice Department hasn't even tried any cases against major financial executives, despite seemingly overwhelming evidence which includes:
opednews.com

The AIG allegations: We used the Levin/Coburn Report to review the list of potential criminal activity in that case here.
GE Capital deceptions: That's the company whose politically-connected CEO was given a presidential appointment. Referring investigators were stunned to find that no criminal charges would be filed over its fraudulent deception of investors, even though they had identified specific individuals in the accounting department who had cooked GE's books. GE Capital has also been implicated in fraudulent mortgage practices.

Wells Fargo drug-money laundering: That's the case in which bankers laundered money for the Mexican cartels that have killed tens of thousands of people. You know the gangsters we mean -- they're the guys who decapitate people.

JPMorgan Chase's "London Whale": With particular concern about the cover-up of billion-dollar losses, with special concerns about CEO Jamie Dimon's statement to investors that its London losses were "a tempest in a teapot." Dimon later admitted he had made mistakes. (If he had made false statements to investors, that would be stock fraud, a crime.)

And there are others, too numerous to mention all of them here: Countrywide. Citigroup. HSBC. The list goes on and on.

The Justice Department's argument for inaction seems to come down to this: Bank cases are complicated. They're hard to win. We don't want to try. And it has repeatedly used an argument that's also been made by the president and Treasury Secretary as well, as they've tried to explain away the inactivity: that bad banking behavior isn't necessarily criminal behavior. That claim's been repeated many times, especially in the context of "ABACUS" and other Goldman Sachs misdeeds contained in the Coburn/Levin report.

But it's not true. It's already illegal to lie to clients, to knowingly conceal important information from in order to get their money under false pretenses, or to withhold materially important information from shareholders. And yet that flimsy argument seems to lie at the core of the DOJ's explanation for once again declining to pursue the evidence wherever it may lead.

Here's what really happened in this case: Goldman was selling its clients "crap" investments (a Goldman employee's word), and which it knew to be "crap," while at the same time betting against those investments. And it concealed the fact that these investments were selected, not by the people it told investors were doing the choosing, but by somebody who was well-known for betting against the "crap" -- and who would make a fortune if they failed.

Under the massive civil settlement for ABACUS, the parties acknowledged that it was a "mistake" for Goldman marketing materials to claim that "the reference portfolio was 'selected by' ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors."

"Mistake"? That's more of the linguistic evasion that's used when crooked bankers pay hundreds of millions to settle criminal and civil charges while "neither admitting nor denying wrongdoing." Goldman paid a record amount -- more than half a billion dollars -- to settle this case. The total settlement came to $550 million. That's 550 million admissions of wrongdoing.

As they say: Money talks.

We're not into speculating about the motives for the Justice Department's inaction. But it's not surprising when others who do come to unflattering conclusions, and not just about Holder. This is an issue which the president himself will ultimately have to address -- for his campaign, and ultimately for his legacy.

Meanwhile, the cases the Justice Department hasn't prosecuted have led to billions of dollars in settlements. Eric Holder says that his department and this administration are doing everything they can to prosecute Wall Street fraud and make sure it doesn't happen again. There's only one thing that makes that statement hard to believe: It's a troublesome little thing called "facts."

Del NY Times... Por lo visto los grandes bancos y sus subsidiarias y alicates no han aprendido nada... Habra que demandarlos por este frente tambien?

Problems Riddle Moves to Collect Credit Card Debt
By JESSICA SILVER-GREENBERG
The same problems that plagued the foreclosure process - and prompted a multibillion-dollar settlement with big banks - are now emerging in the debt collection practices of credit card companies.

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

Lenders, the judges said, are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers. The concerns echo a recent abuse in the foreclosure system, a practice known as robo-signing in which banks produced similar documents for different homeowners and did not review them.

"I would say that roughly 90 percent of the credit card lawsuits are flawed and can't prove the person owes the debt," said Noach Dear, a civil court judge in Brooklyn, who said he presided over as many as 100 such cases a day.

Last year, American Express sued Felicia Tancreto, claiming that she had stopped making payments and owed more than $16,000 on her credit card.

While Ms. Tancreto was behind on her payments, she contested owing the full amount, according to court records. In April, Judge Dear dismissed the lawsuit, citing a lack of evidence. The American Express employee who testified, the judge noted, provided generic testimony about the way the company maintained its records. The same witness gave similar evidence in other cases, which the judge said amounted to "robo-testimony."

American Express and other credit card companies defended their practices. Sonya Conway, a spokeswoman for American Express, said, "we strongly disagree with Judge Dear's comments and believe that we have a strong process in place to ensure accuracy of testimony and affidavits provided to courts."

Interviews with dozens of state judges, regulators and lawyers, however, indicated that such flaws are increasingly common in credit card suits. In certain instances, lenders are trying to collect money from consumers who have already paid their bills or increasing the size of the debts by adding erroneous fees and interest costs.

The scope of the lawsuits is vast. Some consumers dispute that they owe money at all. More commonly, borrowers are behind on their payments but contest the size of their debts.

The problem, according to judges, is that credit card companies are not always following the proper legal procedures, even when they have the right to collect money. Certain cases hinge on mass-produced documents because the lenders do not provide proof of the outstanding debts, like the original contract or payment history.

At times, lawsuits include falsified credit card statements, produced years after borrowers supposedly fell behind on their bills, according to the judges and others in the industry.

"This is robo-signing redux," Peter Holland, a lawyer who runs the Consumer Protection Clinic at the University of Maryland Francis King Carey School of Law.

Lawsuits against credit card borrowers are flooding the courts, according to the judges. While the amount of bad debt has fallen since the financial crisis, lenders are trying to work through the soured loans and clean up their books. In all, borrowers are behind on $18.7 billion of credit card debt, or roughly 3 percent of the total, according to Equifax and Moody's Analytics.

Amid the surge in lawsuits, credit card companies are facing scrutiny. The Office of the Comptroller of the Currency is investigating JPMorgan Chase after a former employee said that nearly 23,000 delinquent accounts had incorrect balances, according to people with knowledge of the investigation.

Linda Almonte, a former assistant vice president at JPMorgan, claimed in a whistle-blower complaint that she had been fired after alerting her managers to flaws in the bank's records.

The currency office, which oversees the nation's largest banks, is also broadly looking into the industry's debt collection efforts, focusing in part on the documents included with lawsuits. A spokeswoman for JPMorgan declined to comment.

The Federal Trade Commission is working with courts across the country to improve the process for pursuing borrowers who are behind on their credit card payments, mortgages and other bills. In a recent review of the consumer litigation system, the commission found that credit card issuers and other companies were basing some lawsuits on incomplete or false paperwork.

"Our concerns center on the fact that debt collection lawsuits are a pure volume business," said Tom Pahl, assistant director for the F.T.C.'s division of financial practices. "The documentation is very bare bones."

The lenders disputed the suggestion that they file lawsuits that include flawed or inaccurate documentation.

"We look at account records in our system to individually verify the accuracy of information before affidavits are filed and testimony is given," said Ms. Conway, the American Express spokeswoman, who declined to comment on specific borrowers.

The industry has faced similar criticism over practices stemming from the housing crisis. Amid a surge in foreclosures, state attorneys general accused the banks of using faulty documents without reviewing them and improperly seizing homes. In February, five big banks agreed to pay $26 billion to settle the matter.

The errors in credit card suits often go undetected, according to the judges. Unlike in foreclosures, the borrowers typically do not show up in court to defend themselves. As a result, an estimated 95 percent of lawsuits result in default judgments in favor of lenders. With a default judgment, credit card companies can garnish a consumer's wages or freeze bank accounts to get their money back.

In 2010, Discover sued Taryn Gregory for more than $7,000 in credit card debt. Ms. Gregory, of Commerce, Ga., had fallen behind on her bills, but said she had accumulated only $4,000 in debt.

After the suit was filed, Ms. Gregory, a 41-year-old child care assistant, asked Discover for proof of the balance. The resulting documents, which were reviewed by The New York Times, have inconsistencies. One statement, for example, says it was produced in 2004, but advertisements on the bottom of the document bear a 2010 date.

The lawsuit against Ms. Gregory is still pending. Discover declined to comment. Judges have also raised concerns about witnesses and affidavits.

In May, Michael A. Ciaffa, a district court judge in Nassau County, N.Y., challenged the paperwork signed by a Citigroup employee in Kansas City, Mo. He found that one document "has the look and feel of a robo-signed affidavit, prepared in advance," according to court records. The case is still pending.

Emily Collins, a spokeswoman for Citigroup, said: "We continually review the effectiveness of our controls and policies for credit card collections, and ensure that affidavits are validated for accuracy and signed by Citi employees with knowledge of the client's account. Citi Cards has a range of programs to support our clients who may be facing financial difficulty, and we make every effort to work with our clients to prevent delinquency."

A review of dozens of court records showed that the same employee signed documents in cases filed against borrowers in three other states. In one lawsuit in Seattle, the employee attested in an affidavit in May that a customer, Vickie Sawadee, owed $14,000 on her Citigroup credit card. Although Ms. Sawadee was behind on her payments, she said she does not owe the full amount. She hired a lawyer to defend her case.

Many judges said that their hands are tied. Unless a consumer shows up to contest a lawsuit, the judges cannot question the banks or comb through the lawsuits to root out suspicious documents. Instead, they are generally required to issue a summary judgment, in essence an automatic win for the bank.

"I do suspect flaws," said Harry Walsh, a superior court judge in Ventura, Calif. "But there is little I can do."
Siempre disputen cualquier intento de cobranza

Es interesante haber visto como el ejecutivo le dio dinero a borbotones a la banca que nos embarco en el desastre del 2008 y aun no se ve mejoria en la economia. Ahora, Alex Jones, de Infowars, nos alerta a una posible debacle economica y bursatil en los proximos meses:
http://www.infowars.com/is-there-going-to-be-a-stock-market-crash-in-the-fall/



Is There Going To Be A Stock Market Crash In The Fall?


Aug 29, 2012
Is the stock market going to crash by the end of this year? Are we on the verge of major financial chaos on a global scale? Well, this is the time of the year when investors start getting nervous.

We all remember what happened during the fall of 1929, the fall of 1987 and the fall of 2008. However, it is important to keep in mind that we do not see a stock market crash in the fall of every year. Some years the stock market cruises through the months of September, October, November and December without any problems whatsoever. But this year conditions certainly seem to be right for a “perfect storm” to develop. Technical indicators are screaming that a stock market decline is imminent and sources in the financial industry all over the world are warning that a massive crisis is on the way. In fact, the Telegraph ran a story with the following shocking headline the other day: “Market crash ‘could hit within weeks’, warn bankers“. What you are about to read should alarm you. But it is not a guarantee that anything will or will not happen. When Ben Bernanke gives his speech at the Jackson Hole summit on Friday he could announce to the rest of the world that the Federal Reserve has decided to launch QE3 and that the Fed will be printing up trillions of new dollars. If that happened global financial markets would leap for joy. So it is always a dangerous thing when anyone out there tries to tell you that they can “guarantee” what is about to happen in the financial world. There are just so many moving parts. But if we do not see major intervention by the governments of the world or by global central banks a major financial crisis could rapidly develop this fall. The conditions are certainly right for a stock market collapse, and we could easily see a repeat of what happened back in 2008.
The truth is that the second half of 2012 looks a little bit more like the second half of 2008 with each passing day.
For example, credit default swaps are soaring just like we saw back during the last financial crisis. The following is from a recent article in the Telegraph by Harry Wilson and Philip Aldrick….
Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group’s implosion nearly three years ago.
Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.
The Telegraph also published some ominous warnings from anonymous banking executives in their recent article….
“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.
One anonymous banker was even bold enough to predict a “market shock” for “September or October”….
“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank.
Of course there are analysts on this side of the pond that are incredibly bearish right now as well. The warnings from Europe line up very well with what Bob Janjuah of Nomura Securities has been saying….
Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides.
Others are issuing similar warnings. Just check out what a couple of Bank of America analysts said in a report the other day….
Our strategists see an unusually high number of macro catalysts over the next 3-6 months that could take markets lower. We expect economic growth to disappoint in the second half of the year in anticipation of the fiscal cliff. This would exacerbate any slowdown from the deepening recession in Europe and decelerating growth in emerging markets. There is also the ongoing tension in the Middle East, the potential for a US credit downgrade and accelerating downward analyst estimate revisions. To top it off, September is seasonally the weakest month of the year for stock price returns.
There has been an unusual amount of chatter in the financial world about the September to December time frame.
That could mean something or it could mean nothing.
But is is very interesting to watch what some top financial insiders are doing with their stocks right now.
Dennis Gartman, the publisher of the Gartman Leter, has dumped all of his stocks at this point.
As I have written about previously, George Soros has dumped all of his stock in banking giants JP Morgan, Citigroup and Goldman Sachs.
Are they just being paranoid?
Or do they know something that we do not?
If you are looking for the next “Lehman Brothers moment” in the United States, you might want to watch Morgan Stanley. Morgan Stanley was heavily involved in the Facebook IPO disaster, earlier this year their credit rating was downgraded, and now there are persistent rumors that Morgan Stanley is in big trouble and that it will be allowed to fail. You can check out some of these rumors for yourself here, here and here.
But of course as I have said all along the center of the coming crisis is going to be in Europe, and many analysts agree with me. For example, the following is what the chairman of Casey Research, Doug Casey, had to say during a recent interview….
Europe is a full cycle ahead of the U.S. Its governments and its banks are both bankrupt. It’s a couple of drunks standing on the street corner holding each other up at this point. Europe is in much worse shape than the U.S. It’s highly regulated, highly taxed and much more socially unstable.
Europe is going to be the epicenter of the coming storm. Japan is waiting in the wings, as is China. This is going to be a worldwide phenomenon. Of course, the U.S. will be in it, too. We’re going to see this all over the world.
Much of southern Europe is already experiencing depression-like conditions. Unemployment in both Greece and Spain is well above 20 percent and both economies are steadily shrinking.
Money is flowing out of Spanish banks at an unprecedented rate right now. Just take a look at these charts. The only thing that is going to keep the Spanish banking system from totally collapsing is outside intervention.
But the truth is that all of Europe is in big trouble. Even German companies are slashing job right now. For example, check out what Siemens is up to….
German engineering conglomerate Siemens (SIEGn.DE) is in early internal talks to cut thousands of jobs in response to a weakening economy, particularly in Europe, a German newspaper reported.
Decisions could be made in October or November, according to daily Boersen-Zeitung, which did not specify its sources.
A Siemens spokesman declined to comment.
We are living in the greatest debt bubble in the history of the world, and at some point that bubble is going to burst in a very messy way.
It is vital that people understand that our system is not even close to sustainable.
Knowing exactly when it will collapse is not nearly as important as understanding that a collapse is absolutely inevitable.
I think what former World Bank economist Richard Duncan had to say recently is very helpful….
“The explosion in credit drove economic growth in the U.S. and around the world, and now that’s the only thing that’s keeping us from collapsing in a debt/deflation spiral,” he said. “[What] I think everybody needs to understand is that the kind of economy that we have now, it’s not capitalism. It has very little in common with capitalism. Capitalism was an economic system in which the government played very little role …. Under capitalism, gold was money and the government had nothing to do with it. Now the central bank creates the money and manipulates its value.”
And he is very right.
We aren’t seeing a failure of capitalism.
What we are witnessing is the failure of debt-based central banking.
And if you think that the global elite are not aware of what is happening then you have not been paying attention.
This summer the global elite have been preparing very hard. Either they are getting very paranoid or they know things that we do not.
If you want to catch up on what the global elite have been up to recently, check out these three articles that I have published previously….
-”Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?”
-”Startling Evidence That Central Banks And Wall Street Insiders Are Rapidly Preparing For Something BIG”
-”Jacob Rothschild, John Paulson And George Soros Are All Betting That Financial Disaster Is Coming”
If you are waiting for the nightly news to tell you what to do, then you have not learned anything.
Did anyone in the mainstream media warn you about what was about to happen back in 2008?
Of course not.
The “authorities” insisted that everything was going to be just fine and many average Americans were absolutely wiped out.So don’t expect someone to come along and nicely inform you that your retirement savings are about to be absolutely devastated.
In this day and age it is absolutely critical for people to learn to think for themselves.
Barack Obama is not going to save you.
Mitt Romney is not going to save you.
The U.S. Congress is not going to save you. They are too busy living the high life at taxpayer expense.
The system is not looking out for you. Nobody is really going to care if your financial planning gets turned upside down. This is a cold, cruel world and you need to understand how the game is played. The financial insiders are looking out for themselves and most of them usually are able to avoid financial disaster.
Average folks like you and I are normally not so fortunate.
There are lots of warning signs that indicate that this fall could be a very turbulent time for global financial markets.
Ignore them at your own peril.

Este articulo: http://www.theatlantic.com/business/archive/2012/08/our-low-wage-recovery-how-mcjobs-have-replaced-middle-class-jobs/261839/ menciona como es que los empleos que estamos viendo hoy dia en crecimiento no reemplazan en calidad a los perdidos...

Our Low-Wage Recovery: How McJobs Have Replaced Middle Class Jobs
By Jordan Weissmann
inShare.16Aug 31 2012, 1:07 PM ET 61

When we think about what the economy has lost since the Great Recession, we tend to consider it in terms of simple addition and subtraction. We said goodbye to more than eight million jobs in the downturn; we've added around four million back. It's easy and dismal math.

But there's another painful dimension to this recovery that's gotten far less attention than the lingering jobs deficit. It's the fact that most of the jobs we lost offered decent pay, while the ones we're adding are mostly low-level, service sector positions. Middle class jobs have been replaced by McJobs.

The National Employment Law Project highlights that switch in a new report from which I've borrowed the graph below. Mid-wage jobs, such as construction trades and secretaries, accounted for 60 percent of our employment drop during the recession but made up just 22 percent of the recovery through the first quarter of 2012, according to the most recent Current Population Survey data. Low-wage occupations, such as retail and food service workers, made up 21 percent of the losses and 58 percent of growth.*



This isn't just the familiar story of how blue-collar, male-dominated fields such construction and manufacturing were decimated. As NELP notes, many of the worst hit mid-wage occupations have been office workers; there are now around 345,000 fewer secretaries and administrative assistants and 108,000 fewer insurance claims clerks, for instance. These are jobs that have likely been made redundant by better technology, and the recession became an opportunity for companies to shed weight. Just like factories have reaped productivity gains by laying off workers and investing in machines, some white collar industries have trimmed their payrolls by relying more on IT and temps.

In that sense, what's happened during the recession and its aftermath is really the extension of a longer-term pattern, where technological change and globalization have shaped an economy that creates new work at the top and bottom, but very little in the middle. As this graph, also from NELP, shows, the housing boom helped arrest that trend a bit. It resumed right after the bust.



The middle layer of our economy was hollowed out in the recession. We've barely begun to fill it back in.

_________________________________

*NELP defines a mid-wage job as one where the median worker earns between $13.84 and $21.13 an hour. Low-wage jobs pay $7.69 to $13.83.



Considerando la calidad de los ingresos de estos nuevos empleos bajo la tutela del liberalismo, se puede considerar que la economia se ha recuperado en absoluto, o que hemos cambiado chinas por botellas?

Parece que vamso de cabeza hacia otro trastorno economico... Vayan cuidando sus 401-K's y sus fondos de retiro. http://online.barrons.com/article/SB50001424053111903463204578044510029675872.html?mod=googlenews_barrons#text.print
Going Nuclear: Too Big to Fail, Redux?
By ROBIN GOLDWYN BLUMENTHAL | MORE ARTICLES BY AUTHOR

Derivative levels are higher than they were at the height of the financial crisis, and they are concentrated among four big banks: JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs.

In case anyone cares whether Dodd-Frank or the Volcker Rule defused those financial weapons of mass destruction known as derivatives, they can start worrying. Not only have the rules failed to curtail the risky FWMD, but they are larger than at the height of the financial crisis. And they are concentrated in four banks: JPMorgan Chase (ticker: JPM), Citigroup's Citibank (C), Bank of America (BAC), and Goldman Sachs (GS).

That's according to the second-quarter derivatives report of the Office of the Comptroller of the Currency. It tallied $222.5 trillion of notional derivatives held by insured U.S. commercial banks and savings associations, compared with $203.5 trillion in the second quarter of 2009.

"It's outrageous," says Lawrence Parks, executive director of the Foundation for the Advancement of Monetary Education, who included the statistics in a recent presentation. "If these guys were making bets with their own money, go to it. But don't come to me after you've lost and say, 'I'm too big to fail, give me money without limit.' "
To be sure, new Dodd-Frank rules on swaps dealers just took effect on Friday. But Sheila Bair, the former head of the FDIC who now chairs the Systemic Risk Council, says in an e-mail that, while some derivatives are ordinary hedges, their sheer magnitude, complexity, and opacity "creates an almost impenetrable web of interconnections that makes our global financial system vulnerable to systemic shocks." Her advice? Rules to get risky derivatives out of federally insured banks.

Tipicamete yo no tengo problema cuando demandan a algun banco POR ALGO QUE ELLOS HAYAN HECHO... En este caso van a clavarse a B of A por algo que un contribuyente Democrata y panita de Obama hizo y que la administracion de Obama obligo a B of A a tragarse a CountryWide para obtener dinero federal...
http://www.reuters.com/article/2012/10/24/us-bankofamerica-fraud-lawsuit-idUSBRE89N17120121024

U.S. sues Bank of America over "Hustle" mortgage fraud


By Jonathan Stempel
Wed Oct 24, 2012 2:02pm EDT

(Reuters) - The United States filed a civil mortgage fraud lawsuit against Bank of America Corp, accusing it of selling thousands of toxic home loans to Fannie Mae and Freddie Mac that went into default and caused more than $1 billion of losses.

Wednesday's case, originally brought by a whistleblower, is the U.S. Department of Justice's first civil fraud lawsuit over mortgage loans sold to Fannie Mae or Freddie Mac.

It also compounds the problems that the Bank of America, second-largest U.S. bank, has faced since its disastrous 2008 purchase of Countrywide Financial Corp, once the nation's largest mortgage lender.

According to a complaint filed in Manhattan federal court, Countrywide in 2007 invented a scheme known as the "Hustle" designed to speed up processing of residential home loans.

Operating under the motto "Loans Move Forward, Never Backward," mortgage executives tried to eliminate "toll gates" designed to ensure that loans were sound and not tainted by fraud, the government said.

This resulted in "defect rates" that were roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to "rebut" the problems being discovered, it added. The scheme ran through 2009 and caused "countless" foreclosures, it added.

"The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," U.S. Attorney Preet Bharara in Manhattan said in a statement. "This lawsuit should send another clear message that reckless lending practices will not be tolerated."

Bank of America did not immediately respond to requests for comment.

Since paying $2.5 billion for Countrywide on July 1, 2008, the Charlotte, North Carolina-based bank has lost nearly $40 billion on mortgage litigation and requests by investors to buy back soured loans, Credit Suisse estimated on October 5.

Some of these costs related to Merrill Lynch & Co, which Bank of America bought at the beginning of 2009.

WHISTLEBLOWER

According to court records, the case had been filed under seal in February by Edward O'Donnell, a Pennsylvania resident and former executive vice president at Countrywide Home Loans who had worked there between 2003 and 2009.

The United States later joined the case. It seeks triple damages under the federal False Claims Act, as well as civil penalties.

It is unclear whether O'Donnell has hired a lawyer. O'Donnell could not immediately be reached for comment.

Federal regulators seized Fannie Mae and Freddie Mac on September 7, 2008 and put them into a conservatorship.

Bharara's office has in the last 1-1/2 years brought five civil fraud lawsuits against other lenders under the False Claims Act over alleged reckless residential mortgage lending, involving loans insured by the Federal Housing Administration.

In February, Citigroup Inc settled its case for $158.3 million and Flagstar Bancorp Inc settled for $132.8 million, while Deutsche Bank AG settled in May for $202.3 million. Cases are pending against Wells Fargo & Co and Allied Home Mortgage Corp, Bharara said.

On Monday, Congressman Barney Frank, who chaired the House Financial Services Committee in 2008, said Bank of America should probably be shielded from government lawsuits over Merrill, which it bought in part at federal officials' urging, but he said he knew of no such urging to buy Countrywide.

Bank of America shares were up 2 cents at $9.38 in afternoon trading on the New York Stock Exchange.

The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S, District Court, Southern District of New York, No. 12-01422.

(Reporting by Jonathan Stempel in New York; Additional reporting by Rick Rothacker in Charlotte, North Carolina and Aruna Viswanatha in Washington, D.C.; Editing by Lisa Von Ahn, Tim Dobbyn and Steve Orlofsky)


Lo comico de este asunto es que Angelo Mozilo, ex fundador y cocoroco de Country Wide logro vender la firma a B of A bajo presion por parte de la administracion. Ahora, B of A esta clavao con los pasivos de la empresa criminal de cuello blanco mientras que el panita de Obama, Mozilo, se lavo las manos con una mugre de multa que con gusto pago para librarse de mayor responsabilidad...

Esta interesante columna aparecio en el Kansa City Star (Forro de jaula de pajaros de inclinacion izquierdista) por uno sw aua analistas politicos mas astutos... termino poniendole la cola al burro que en este caso es el lider del caucus negro Emanuel Cleaver que tiene un negocio en quibra financiado por el SBA... Tremendo personaje!!!:

How an anti-redlining law fed the housing bubble
By E. THOMAS McCLANAHAN The Kansas City Star
Updated: 2012-12-30T00:26:50Z
One of the major points of contentions in the aftermath of the housing debacle was whether the Community Reinvestment Act — an anti-redlining law — contributed to the disaster.
Defenders of the law insisted it did not, but it’s harder for backers to support that conclusion now, after the release of a working paper by the National Bureau of Economic Research. Its authors get straight to the point.
“Did the Community Reinvestment Act (CRA) Lead to Risky Lending?” they ask. “Yes, it did. … We find that adherence to the act led to riskier lending by banks.”
The act required banks to serve depositors from all neighborhoods in their operating areas, including those of low and moderate income. The report’s economists found that lending to borrowers in census tracts of modest means increased around the time of a bank’s regulatory exam — and more of those loans went bad.
Quoting from the study: “There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts.”
Boiled down, the process was as follows. Banks were required to make affordable-housing loans under the act. Congress then forced Fannie Mae and Freddie Mac to buy up an increasing proportion of those loans, effectively imposing quotas on the two government-sponsored mortgage giants.
Many of the loans were subprime or otherwise dubious. Fan and Fred were required to “affirmatively” support bank CRA lending and to do this, they had to lower their credit standards.
Given the market heft of Fan and Fred, they greatly contributed to the debasement of credit quality in the mortgage market generally.
Wall Street got into the game in a big way, but Fannie and Freddie provided much of the fuel for lousy loans, encouraging subprime factories like Countrywide to crank out even more dubious paper.
Countrywide made the loans and sold them to the government-sponsored mortgage giants — transactions that provided capital for more loans. And of course when Fannie and Freddie bought those mortgages, they attached a taxpayer guarantee against default.
By the end of 2007, as the looming crash was taking shape, the bubble had become enormous. Wall Street had leveraged itself to the hilt, financing much of its effort with short-term money.
When the lousy mortgages started defaulting and the complex bond packages backed by the now-souring loans failed to perform as expected, the shakier firms couldn’t renew their short-term credit. In 2008 the unraveling accelerated, first with Bear Stearns and then spectacularly with Lehman, whose failure triggered a global credit panic.
Two years ago, I had an exchange in an editorial board meeting with act supporter Rep. Emanuel Cleaver, who at one point burst out, “There’s no evidence that anyone told Fannie and Freddie to make bad loans.”
Never mind that Fannie and Freddie don’t make direct loans, they buy them — and of course it was Congress itself that ordered the mortgage giants to buy “bad loans.” Later, Cleaver sent me a five-page memo defending the act and its role in the debacle.
Cleaver’s comment showed that many in Washington were appallingly ignorant of the origins of the crisis and how the well-intentioned drive toward more “affordable housing” helped push mortgage lending into excess. Despite all this, Cleaver said one of his goals was to make the act even more “impactful,” which sounded as if he wanted more of what contributed to the problem in the first place.
The study ought to end the debate over whether the act was one of the factors culpable in the housing bubble. It was. It helped debase credit standards and encouraged lending to people with bad or dubious credit, and when those loans were scooped up by Fan or Fred, taxpayers ended up on the hook.
When I wrote about this two years ago, I noted that one result of the crash was that many of the people Cleaver says he wanted to help ended up financially ruined.
One hopes that he can find the time to take a glance at that study.

Read more here: http://www.kansascity.com/2012/12/29/3985446/how-an-anti-redlining-law-fed.html#storylink=cpy

En una interesante maniobra legal, AIG estudia si se agrega a una demanda entablada por sus accionistas contra el gobierno de los EEUU... La demanda indica que AIG fue tratada de manera diferente a otros actores en la crisis e incluso que fue usada para resarcir las perdidas de algunos de estos otros actores... como Goldma y Citicorp... Este es el tipo de caso en el cual pueden salir a relucir un gran numero de trapitos sucios que deslucirian la reputacin de muchos de los funcionarios gubernamentales y politicos involucrados en el saqueo de nuestra economia por ciertos sectores de la banca y los politicos asalariados por ellos. Este caso podria ser un problema politico tanto para Obama (por via de Tim Geithner) como para la dinastia Bush por via de Hank Paulson y su patron Goldman Sachs...


A Heaping Helping of Chutzpah: AIG Considers Suing the U.S. Government For Bailing It Out
By Christopher Matthews
Jan. 09, 20130
Hank Greenberg didn’t get to where he is today by being timid. The former chairman of AIG built the company up from humble beginnings in the 1960s to become the world’s largest insurance company, before a 2005 accounting scandal forced Greenberg to step down. But he remained a major shareholder through the U.S. government’s 2008 bailout of the company, when the feds took an 80% stake in the firm in exchange for an $85 billion loan, which saved the company from certain bankruptcy. (The bailout eventually ballooned to $182 billion loan in exchange for a 92% stake.)
But Greenberg isn’t thankful for the rescue. In fact, he thinks we the taxpayers ripped him off in the deal, and he will meet with AIG’s board today in an attempt to convince the company to join his company, Starr International, in a law suit against the federal government, according to a report yesterday in The New York Times.
The suit does not argue that the bailout was unnecessary, but rather that the government exploited AIG’s near-bankrupt position to extract unfair concessions — concessions it did not require of other bailed-out financial institutions. Furthermore, the suit argues, the government used the company to issue “back-door” bailouts to financial institutions across the world. Greenberg is demanding $25 billion in damages to make him and his fellow AIG shareholders whole.

The news that AIG is considering joining the suit has sparked outrage across the financial media. The New York Times pointed out the irony of the decision to sue being made behind the scenes while AIG has been running a high-profile ad campaign thanking America for its investment, and touting the fact that it has recently paid back the bailout funds in full. Forbes called Greenberg and his allies “ungrateful souls” and argued that if AIG joined the suit, it would ultimately “kill” the firm. The Washington Post called Greenberg’s view of the bailout “patently ridiculous.”
On the other hand, in July the U.S. Court of Federal Claims denied the government’s attempt to have the case thrown out, although a similar suit was dismissed from U.S. District Court in November. So do Greenberg and his allies have a point?
Well sort of, but it’s probably not the point they would like to make. Greenberg argued in his initial 2011 complaint that the Federal Reserve gave out loans to many different financial services companies at lower interest rates, and without demanding that the government take a huge ownership stake in return. This is true. But those institutions were either banks that were already closely regulated by the Fed or became bank holding companies and submitted themselves to Federal Reserve regulation in return for access to the Fed’s lending facilities.
AIG, on the other hand, was not a bank then and is not a bank now. It’s an insurance company whose financial products division – which sold billions of dollars in unregulated insurance protection against toxic real estate securities – helped sow the seeds of the 2008 financial panic.


The government would have liked nothing better than to allow AIG to fail, but the fact that the company sold protection against the very subprime mortgage securities that were bringing Wall Street down all around them made its survival paramount to the survival of the global financial system in general. If financial institutions across the globe couldn’t count on AIG to make good on the insurance it sold, there could have been a domino effect that brought down dozens of other banks across the globe. As Ben Bernanke described it in a 2009 interview with 60 minutes:
“Of all the events and all of the things we’ve done in the last 18 months the single one that makes me the angriest . . . is the intervention with AIG. Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system.”
The other argument Greenberg makes in his suit is that AIG was seized in order to use the firm as a conduit for “back-door bailouts.” It is on these grounds that his lawyers claim that the action violates the 5th amendment, which bars the government from taking private property “for public use, without just compensation.” The complaint argues that the government purposefully played a game of brinksmanship with AIG, repeatedly telling the firm that it wouldn’t bail it out so that the government could snap up the firm at a fire sale price and use it as an instrument to filter bailout money to banks across the world.

This is a more interesting argument to consider, because the government has long been criticized for using AIG as a tool for bailing out other institutions. In November of 2008, then-President of the New York Fed Tim Geithner made the decision to terminate the more than $60 billion in insurance contracts between AIG and several large banks, which covered losses in complex financial instruments that were then swiftly declining in value. Instead of negotiating with the banks, however, and forcing those banks to take losses on contracts, Geithner decided to reimburse the banks 100 cents on the dollar. As Neil Barofsky, former Special Investigator General for TARP described it in his recent book Bailout:
“The deal was a gross distortion of the normal functions of the market. In a bailout free world, instead of being saved by the government, AIG would have been unable to make its cash collateral payments to the banks and gone into bankruptcy. As a result, the banks would have been left with the CDOs and stuck with their continued declines in value . . . In that respect, Geithner’s opening of the spigot of taxpayer cash for AIG was more of a bailout of the banks than it was for AIG itself.”
When looking at it from this angle, there is some truth to Greenberg’s argument. AIG received a far worse deal than many other bailout institutions. In addition, the bailout of AIG was a means to bailout the rest of the financial system. But then again, the bailout of any single too-big-to-fail institution is a means to bail out the rest of the system. That’s the point of “too big to fail” in the first place: The failure of one institution will cause the failure of the rest.
But you have all your work ahead of you if you then intend to argue that because some Wall Street institutions were treated too nicely during the financial crisis, that taxpayers owe AIG shareholders $25 billion dollars. That conclusion is laughable simply on the basis that if the AIG board wanted to reject the bailout terms and take the firm into bankruptcy, it could have made that decision in 2008. And nowhere in Greenberg’s 50-page complaint can you find a rebuttal to that simple logic.

Fijense que la demada, o cargos son solo contra la faceta bursatil de la operacion... Cuando demandaran a los que originaban losprestamos por practicas fraudulentas?

U.S. Accuses S.&P. of Fraud in Suit on Loan Bundles
By ANDREW ROSS SORKIN and MARY WILLIAMS WALSH

Justin Lane/European Pressphoto Agency


The Justice Department filed civil fraud charges late on Monday against the nation’s largest credit-ratings agency, Standard & Poor’s, accusing the firm of inflating the ratings of mortgage investments and setting them up for a crash when the financial crisis struck.

The suit, filed in federal court in Los Angeles, is the first significant federal action against the ratings industry, which during the boom years reaped record profits as it bestowed gilt-edged ratings on complex bundles of home loans that quickly went sour. The high ratings made many investments appear safer than they actually were, and are now seen as having contributed to a crisis that brought the financial system and the broader economy to its knees.

More than a dozen state prosecutors are expected to join the federal suit, and the New York attorney general is preparing a separate action. The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P.

From September 2004 through October 2007, S.&P. “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors” in certain mortgage-related securities, according to the suit filed against the agency and its parent company, McGraw-Hill Companies. S.&P. also falsely represented that its ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said.

S.& P., first contacted by federal enforcement officials three years ago, said in a statement Monday in anticipation of the suit that it had acted in good faith in issuing the ratings.

“A D.O.J. lawsuit would be entirely without factual or legal merit,” it said, adding that its competitors had given exactly the same ratings to all the securities it believed to be in question.

Settlement talks between S.& P. and the Justice Department broke down in the last two weeks after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing, several people with knowledge of the talks said. That amount would wipe out the profits of McGraw-Hill for an entire year. S.& P. had proposed a settlement of around $100 million, the people said.

S.& P. also sought a deal that would allow it to neither admit nor deny guilt; the government pressed for an admission of guilt to at least one count of fraud, said the people. S.& P. told prosecutors it could not admit guilt without exposing itself to liability in a multitude of civil cases.

It was unclear whether state and federal authorities were looking at the other two major ratings agencies, Moody’s Investors Service and Fitch.

A spokesman for Moody’s declined to comment. A spokesman for Fitch, Daniel J. Noonan, said the agency could not comment on an action that appeared to focus on Standard & Poor’s, but added, “we have no reason to believe Fitch is a target of any such action.”

The case against S.& P. focuses on about 40 collateralized debt obligations, or C.D.O.’s, an exotic type of security made up of bundles of mortgage bonds, which in turn were composed of individual home loans. The securities were created at the height of the housing boom. S.& P. was paid fees of about $13 million for rating them.

Prosecutors have uncovered troves of e-mails written by S.& P. employees, some of them expressing strong concern about the way such securities were being rated. The firm gave the government more than 20 million pages of e-mails as part of its investigation, the people with knowledge of the process said.

Since the financial crisis in 2008, the ratings agencies’ business practices have been widely criticized and questions have been raised as to whether independent analysis was corrupted by Wall Street’s push for profits.

A Senate investigation made public in 2010 found that S.& P. and Moody’s used inaccurate rating models from 2004 to 2007 that failed to predict how high-risk mortgages would perform; allowed competitive pressures to affect their ratings; and failed to reassess past ratings after improving their models in 2006.

The companies failed to assign adequate staff to examine exotic investments, and failed to take mortgage fraud, lax underwriting and “unsustainable home price appreciation” into account in their models, the inquiry found.

“Rating agencies continue to create an even bigger monster — the C.D.O. market,” one S.& P. employee wrote in an internal e-mail in December 2006. “Let’s hope we are all wealthy and retired by the time this house of card falters.”

Another S.& P. employee wrote in an instant message the next April, reproduced in the complaint: “We rate every deal. It could be structured by cows and we would rate it.”

The three major ratings agencies are typically paid by the issuers of the securities they rate — in this case, the banks that had packaged the mortgage-backed securities and wanted to market them. The investors were not involved in the process but depended on the rating agencies’ assessments.

Although the three agencies tend to track one another, each has its own statistical methods for assessing the likelihood that C.D.O.s and residential mortgage-backed securities, or R.M.B.S., will default. That has led to speculation that S.& P. analysts knew their method yielded unrealistic ratings, but issued the ratings anyway.

“As S.&P. knew, contrary to its representations to the public, S.&P.’s desire for increased revenue and market share in the RMBS and CDO ratings markets, and its resulting desire to maintain and enhance its relationships with issuers that drove its ratings business, improperly influenced S.&P. to downplay and disregard the true extent of the credit risks,” the suit says.

In its statement on Monday, S.& P. said it had begun stress-testing the mortgage-backed securities it rated as early as 2005, trying to see how they would perform in a severe market downturn. S.& P. said it had also sent out early warning signals, downgrading hundreds of mortgage-backed securities, starting in 2006. Nor was it the only one to have underestimated the coming crisis, it said — even the Federal Reserve’s open market committee believed that any problems within the housing sector could be contained.

The Justice Department, the company said, “would be wrong in contending that S.& P. ratings were motivated by commercial considerations and not issued in good faith.”

For many years, the ratings agencies have defended themselves successfully in civil litigation by saying their ratings were independent opinions, protected by the First Amendment, which guarantees the right to free speech. Developments in the wake of the financial crisis have raised questions about the agencies’ independence however. For example, one federal judge, Shira A. Scheindlin, ruled in 2009 that the First Amendment did not apply in a lawsuit over ratings issued by S.& P. and Moody’s, because the mortgage-backed securities at issue had not been offered to the public at large. Judge Scheindlin also agreed with the plaintiffs, who argued the ratings were not opinions, but misrepresentations, possibly the result of fraud or negligence.

The federal action will be the first time a credit-rating agency has been charged under a 1989 law intended to protect taxpayers from frauds involving federally insured financial institutions, which since the financial crisis has been used against a number of federally insured banks, including Wells Fargo, Bank of America and Citigroup.

The government is taking a novel approach by accusing S.& P. of defrauding a federally insured institution and therefore injuring the taxpayer.

Among others, the compliant includes the demise of Wescorp, a federally insured credit union in Los Angeles that went bankrupt after investing in mortgage securities rated by S.& P. Wescorp is included as one example of the contended fraud, and as a way to bring the case in California. The suit was filed in Federal District Court for the Central District of California.

David Stockman, el arquitecto de la economia bajo Reagan, tiene una columna que aparecio en el NYT... Pinta un futuro tetrico para todos...

Opinion


State-Wrecked: The Corruption of Capitalism in America




<H6 class=byline>By DAVID A. STOCKMAN


Published: March 30, 2013







GREENWICH, Conn.

The Dow Jones and Standard & Poor’s 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market’s last peak, in 2007. But instead of cheering, we should be very afraid.



Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.

As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days. The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.

Under the exigencies of World War II (which did far more to end the Depression than the New Deal did), the state got hugely bloated, but remarkably, the bloat was put into brief remission during a midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House and William McChesney Martin Jr. at the Fed.

Then came Lyndon B. Johnson’s “guns and butter” excesses, which were intensified over one perfidious weekend at Camp David, Md., in 1971, when Richard M. Nixon essentially defaulted on the nation’s debt obligations by finally ending the convertibility of gold to the dollar. That one act — arguably a sin graver than Watergate — meant the end of national financial discipline and the start of a four-decade spree during which we have lived high on the hog, running a cumulative $8 trillion current-account deficit. In effect, America underwent an internal leveraged buyout, raising our ratio of total debt (public and private) to economic output to about 3.6 from its historic level of about 1.6. Hence the $30 trillion in excess debt (more than half the total debt, $56 trillion) that hangs over the American economy today.

This explosion of borrowing was the stepchild of the floating-money contraption deposited in the Nixon White House by Milton Friedman, the supposed hero of free-market economics who in fact sowed the seed for a never-ending expansion of the money supply. The Fed, which celebrates its centenary this year, fueled a roaring inflation in goods and commodities during the 1970s that was brought under control only by the iron resolve of Paul A. Volcker, its chairman from 1979 to 1987.

Under his successor, the lapsed hero Alan Greenspan, the Fed dropped Friedman’s penurious rules for monetary expansion, keeping interest rates too low for too long and flooding Wall Street with freshly minted cash. What became known as the “Greenspan put” — the implicit assumption that the Fed would step in if asset prices dropped, as they did after the 1987 stock-market crash — was reinforced by the Fed’s unforgivable 1998 bailout of the hedge fund Long-Term Capital Management.

That Mr. Greenspan’s loose monetary policies didn’t set off inflation was only because domestic prices for goods and labor were crushed by the huge flow of imports from the factories of Asia. By offshoring America’s tradable-goods sector, the Fed kept the Consumer Price Index contained, but also permitted the excess liquidity to foster a roaring inflation in financial assets. Mr. Greenspan’s pandering incited the greatest equity boom in history, with the stock market rising fivefold between the 1987 crash and the 2000 dot-com bust.

Soon Americans stopped saving and consumed everything they earned and all they could borrow. The Asians, burned by their own 1997 financial crisis, were happy to oblige us. They — China and Japan above all — accumulated huge dollar reserves, transforming their central banks into a string of monetary roach motels where sovereign debt goes in but never comes out. We’ve been living on borrowed time — and spending Asians’ borrowed dimes.

This dynamic reinforced the Reaganite shibboleth that “deficits don’t matter” and the fact that nearly $5 trillion of the nation’s $12 trillion in “publicly held” debt is actually sequestered in the vaults of central banks. The destruction of fiscal rectitude under Ronald Reagan — one reason I resigned as his budget chief in 1985 — was the greatest of his many dramatic acts. It created a template for the Republicans’ utter abandonment of the balanced-budget policies of Calvin Coolidge and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy. In effect, the G.O.P. embraced Keynesianism — for the wealthy.

The explosion of the housing market, abetted by phony credit ratings, securitization shenanigans and willful malpractice by mortgage lenders, originators and brokers, has been well documented. Less known is the balance-sheet explosion among the top 10 Wall Street banks during the eight years ending in 2008. Though their tiny sliver of equity capital hardly grew, their dependence on unstable “hot money” soared as the regulatory harness the Glass-Steagall Act had wisely imposed during the Depression was totally dismantled.

Within weeks of the Lehman Brothers bankruptcy in September 2008, Washington, with Wall Street’s gun to its head, propped up the remnants of this financial mess in a panic-stricken melee of bailouts and money-printing that is the single most shameful chapter in American financial history.

There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke, the Fed chairman since 2006. The Great Fear — manifested by the stock market plunge when the House voted down the TARP bailout before caving and passing it — was purely another Wall Street concoction. Had President Bush and his Goldman Sachs adviser (a k a Treasury Secretary) Henry M. Paulson Jr. stood firm, the crisis would have burned out on its own and meted out to speculators the losses they so richly deserved. The Main Street banking system was never in serious jeopardy, ATMs were not going dark and the money market industry was not imploding.

Instead, the White House, Congress and the Fed, under Mr. Bush and then President Obama, made a series of desperate, reckless maneuvers that were not only unnecessary but ruinous. The auto bailouts, for example, simply shifted jobs around — particularly to the aging, electorally vital Rust Belt — rather than saving them. The “green energy” component of Mr. Obama’s stimulus was mainly a nearly $1 billion giveaway to crony capitalists, like the venture capitalist John Doerr and the self-proclaimed outer-space visionary Elon Musk, to make new toys for the affluent.

Less than 5 percent of the $800 billion Obama stimulus went to the truly needy for food stamps, earned-income tax credits and other forms of poverty relief. The preponderant share ended up in money dumps to state and local governments, pork-barrel infrastructure projects, business tax loopholes and indiscriminate middle-class tax cuts. The Democratic Keynesians, as intellectually bankrupt as their Republican counterparts (though less hypocritical), had no solution beyond handing out borrowed money to consumers, hoping they would buy a lawn mower, a flat-screen TV or, at least, dinner at Red Lobster.

But even Mr. Obama’s hopelessly glib policies could not match the audacity of the Fed, which dropped interest rates to zero and then digitally printed new money at the astounding rate of $600 million per hour. Fast-money speculators have been “purchasing” giant piles of Treasury debt and mortgage-backed securities, almost entirely by using short-term overnight money borrowed at essentially zero cost, thanks to the Fed. Uncle Ben has lined their pockets.

If and when the Fed — which now promises to get unemployment below 6.5 percent as long as inflation doesn’t exceed 2.5 percent — even hints at shrinking its balance sheet, it will elicit a tidal wave of sell orders, because even a modest drop in bond prices would destroy the arbitrageurs’ profits. Notwithstanding Mr. Bernanke’s assurances about eventually, gradually making a smooth exit, the Fed is domiciled in a monetary prison of its own making.

While the Fed fiddles, Congress burns. Self-titled fiscal hawks like Paul D. Ryan, the chairman of the House Budget Committee, are terrified of telling the truth: that the 10-year deficit is actually $15 trillion to $20 trillion, far larger than the Congressional Budget Office’s estimate of $7 trillion. Its latest forecast, which imagines 16.4 million new jobs in the next decade, compared with only 2.5 million in the last 10 years, is only one of the more extreme examples of Washington’s delusions.

Even a supposedly “bold” measure — linking the cost-of-living adjustment for Social Security payments to a different kind of inflation index — would save just $200 billion over a decade, amounting to hardly 1 percent of the problem. Mr. Ryan’s latest budget shamelessly gives Social Security and Medicare a 10-year pass, notwithstanding that a fair portion of their nearly $19 trillion cost over that decade would go to the affluent elderly. At the same time, his proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net — Medicaid, food stamps and the earned-income tax credit — is another front in the G.O.P.’s war against the 99 percent.

Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today. Since our constitutional stasis rules out any prospect of a “grand bargain,” the nation’s fiscal collapse will play out incrementally, like a Greek/Cypriot tragedy, in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budgetary patches.

The future is bleak. The greatest construction boom in recorded history — China’s money dump on infrastructure over the last 15 years — is slowing. Brazil, India, Russia, Turkey, South Africa and all the other growing middle-income nations cannot make up for the shortfall in demand. The American machinery of monetary and fiscal stimulus has reached its limits. Japan is sinking into old-age bankruptcy and Europe into welfare-state senescence. The new rulers enthroned in Beijing last year know that after two decades of wild lending, speculation and building, even they will face a day of reckoning, too.

THE state-wreck ahead is a far cry from the “Great Moderation” proclaimed in 2004 by Mr. Bernanke, who predicted that prosperity would be everlasting because the Fed had tamed the business cycle and, as late as March 2007, testified that the impact of the subprime meltdown “seems likely to be contained.” Instead of moderation, what’s at hand is a Great Deformation, arising from a rogue central bank that has abetted the Wall Street casino, crucified savers on a cross of zero interest rates and fueled a global commodity bubble that erodes Main Street living standards through rising food and energy prices — a form of inflation that the Fed fecklessly disregards in calculating inflation.

These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.

All this would require drastic deflation of the realm of politics and the abolition of incumbency itself, because the machinery of the state and the machinery of re-election have become conterminous. Prying them apart would entail sweeping constitutional surgery: amendments to give the president and members of Congress a single six-year term, with no re-election; providing 100 percent public financing for candidates; strictly limiting the duration of campaigns (say, to eight weeks); and prohibiting, for life, lobbying by anyone who has been on a legislative or executive payroll. It would also require overturning Citizens United and mandating that Congress pass a balanced budget, or face an automatic sequester of spending.

It would also require purging the corrosive financialization that has turned the economy into a giant casino since the 1970s. This would mean putting the great Wall Street banks out in the cold to compete as at-risk free enterprises, without access to cheap Fed loans or deposit insurance. Banks would be able to take deposits and make commercial loans, but be banned from trading, underwriting and money management in all its forms.

It would require, finally, benching the Fed’s central planners, and restoring the central bank’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy. Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.

That, of course, will never happen because there are trillions of dollars of assets, from Shanghai skyscrapers to Fortune 1000 stocks to the latest housing market “recovery,” artificially propped up by the Fed’s interest-rate repression. The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.

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David A. Stockman is a former Republican congressman from Michigan, President Ronald Reagan’s budget director from 1981 to 1985 and the author, most recently, of “The Great Deformation: The Corruption of Capitalism in America.”
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