Open Thread: Financial Chicanery 101: Video of Two Sunday Shows

Since I've posted this I've come on another major piece on what's happening with the banks. New also a discussion of the implications of the ongoing Oligarchic Coup in the U.S. (with comparisons to Russia after the fall of the Soviet Union.). I am including it at the bottom of this thread. Please also take a look at Kuttner's latest, cited at length in my comment. carol.

Paul Krugman interviewed on This Week with George Stephanopoulis.


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Meanwhile back at the ranch it seems that while the banks are too big to fail, Not true of the auto big three. They appear to be on the chopping block. See Naked Capitalism, Auto Company Plans Rejected by Task Force.

And David Sirota's commentary on Progressive Breakfast, Why Not Bank CEOs?

And here's another one from Naked Capitalism, The Banks Were Profitable in January and February Thanks to ... AIG.  After some technical explanation of what's been going on the author provides an explanation for the layman, comparing the way AIG has been functioning to the operations of a shady used car lot. Here's a bit of the explanation:

For those to whom this is merely a lot of mumbo-jumbo, let me explain in layman's terms:
AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).

What this all means is that the statements by major banks, i.e. JPM, Citi, and BofA, regarding abnormal profitability in January and February were true, however these profits were 1) one-time in nature due to wholesale unwinds of AIG portfolios, 2) entirely at the expense of AIG, and thus taxpayers, 3) executed with Tim Geithner's (and thus the administration's) full knowledge and intent, 4) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.

For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this "one time profit", which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), also funded by taxpayers' money flows into the market. If the administration is truly aware of all these events (and if Zero Hedge knows about it, it is safe to say Tim Geithner also got the memo), then the potential fallout would be staggering once this information makes the light of day.

Here is the introduction to the Quiet Coup by Simon Johnson from the Atlantic.

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Is Barack Obama the new Herbert Hoover asks Edward Harrison.. His answer is Yes.

Edward Harrison here. For months now, we have been hearing the Obama - FDR comparisons, all suggesting that Barack Obama is a modern day Franklin Delano Roosevelt, with the opportunity to lead us out of Depression with a new New Deal. I have some serious problems with this comparison. In my view, a comparison between Barack Obama and Herbert Hoover is more apt.

Let's look back at the Depression for a second. Now, if you recall, Herbert Hoover became president in March 1929 when signs of a slowing economy were evident. By August 1929 recession hit.


No votes yet


As someone who believed strongly that an Obama victory in the recent election was crucial (and conversely the election of the McCain/Palin ticket would have been an unmitigated disaster), I have watched events with increasing outrage. But political commentary and for that matter rational thought is generally not enhanced by quick-on-the trigger emotional responses to events. So I have tried to rigorously pursue a give-the-guy-a-chance mode of thinking and writing. And I have read carefully what Paul Krugman, Robert Reich and Robert Kuttner have had to say. (And recently the excellent interview by Intrepid Liberal, Come Home America: An Interview with Truth Teller Wiliam Greider.

That said I find Robert Kuttner taking the gloves off on Obama in today's Huffington Post, in a the piece Obama's Banking Rescue, O for Opaque. I think he says it all. This is not a blast from a knee-jerk radical but a deadly serious assessment of the state of things. I shall quote at length from his important piece:


I fear that these columns have been too polite. They have directed criticisms at Treasury Secretary Tim Geithner and national economic policy chief Larry Summers. Lord knows, they richly deserve the criticism. But let's not kid ourselves. The man they work for is named Barack Obama.

President Obama has promised to run an administration of unprecedented openness. And in some respects, such as the ground rules for spending stimulus funds, he has. But in the most important area of all, the financial rescue, the administration is making trillion dollar decisions relying on the Federal Reserve and a small Wall Street club of advisors, with no transparency or public accountability.

In normal policy-making, an administration comes before Congress to request a law; one or more Congressional committees hold hearings; a broad range of witnesses are called; and then the legislation is drafted, enacted, and funds are appropriated. Criteria for spending the public's money are explicitly legislated; and Congress gets to conduct oversight hearings after the fact to see whether the money has been well spent.

But compare that process with the bank rescue, a policy with all the transparency of J.P. Morgan. The current approach to the bailout began last October when a panicky Hank Paulson, then George W. Bush's Treasury Secretary, met with Congressional leaders and told them if they didn't cough up a blank check of $700 billion in a matter of days, the economy would collapse. It took Congress three weeks, but Paulson got his blank check. There were no hearings, no expert witnesses, and no serious discussion of alternative approaches. But at least Congress legislated the funds, and added as a condition the creation of both a Congressional Oversight panel and an independent inspector general.

... snip ...

Even more alarmingly, the administration is now using the Federal Reserve as an unlegislated, all-purpose slush fund. Because the Fed's operations are largely beyond the reach of Congressional appropriations or scrutiny, the Fed can do whatever it wishes with its money. The Geithner plan was negotiated behind closed doors, the main players being the Fed, the FDIC, the Treasury, and power-brokers on Wall Street.

What we have is something perilously close to a dictatorship of the Fed and the Treasury, acting in the interests of Wall Street. The contrasts with the first hundred days of the Roosevelt administration are striking. Like Roosevelt, Obama faces an economic emergency. Like Roosevelt, he faces an angry public, which has been bilked by excesses on Wall Street. And like Roosevelt, Obama has a supportive Democratic Congress that is willing to substantially defer to the White House on an emergency recovery plan.

But unlike Roosevelt, who used the public's indignation and Congress's support to constrain the barons of private finance, Obama's economic team is using government funds to put the most abusive players on Wall Street back in the saddle. And Geithner and Summers, working with the Fed, are assembling their plan with no public scrutiny.

In the course of a week, the administration's own rhetoric on the A.I.G. bonuses has shifted from "We were bound by contracts" to "This is an outrage" to "Never mind." Wall Street was out for favor for just days. Meanwhile, Geithner is out with a new proposal to give the Federal Reserve even more sweeping powers to be a "systemic risk regulator."

... snip ...

Under the present arrangement, the Fed provides nearly all of the funds, an approach that carries no transparency and huge risks of its own. Until last September, the Fed bought and sold mainly Treasury bonds, the safest securities there are. And it did so for one purpose only--to conduct monetary policy. Now, the Fed is buying trillions of dollars of junk assets, and it will be under tremendous pressure to keep these on its own books, compromising its capacity to run the nation's monetary policy.

It's possible that the Geithner plan will "work" in the sense of re-starting the Wall Street bubble machine, this time with a limitless line of direct credit from the Federal Reserve. If that happens, it will defer an even more serious day of reckoning, as the cost of the Fed's immense credit creation comes due. But the greater likelihood is that the plan will merely enrich some speculators, but neither bring zombie banks back to life, nor get a normal banking and credit system operating again. And then the administration will need to come back to Congress, this time with less credibility, with the economy in even worse shape, having burned through more than a trillion dollars.

We were promised unprecedented openness. In the most momentous area of policy for getting the economy functioning again for ordinary Americans, we have instead unprecedented secrecy, designed by and for Wall Street. We expected better of Obama.


Rachel Maddow's Anxiety Dream (and More Video Highlights From Her MoJo Gala)


10 Video Clips of Rachel Maddow in Conversation With MoJo Editors Clara Jeffery and Monika Bauerlein


Clip 1) The Venn diagram of Rachel: Entertainer, journalist, self-indulgent dork.


Rest at link!


"The wise man points to the stars and the fool sees only the finger - and discusses it 24/7 on cable."

"In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories)."

The other day I mentioned that the mortgages are being dumped by banks to "friendly" insider buyers in bulk at bigger losses than they would go for on the real free market. The losers are purposely making their losses bigger than they ever should have been with the sole intention of profitting on one side (the bulk mortgage buyers in their resales of the homes) while bilking the tax payer for even greater losses.

Any guesses on which properties are selling in bulk? Mine would be any of the properties that are good for resale. (Hint: not destroyed or delapidated homes from being empty for so long - since the companies stopped foreclosing on those properties altogether. No profit there.)

They are all abusing the American taxpayer at every single turn and every way that they can. And, clearly, they are doing it all on purpose.

And, if you haven't figured it out... It is the majority of both political parties giving it all away with a nudge and a wink while pretending they can't do anything about it. If we can figure this stuff out without any of their insider information, then we are probably only talking about the tip of the iceberg in criminal manipulations and thievery.

Now... Any guesses how many politicians will soon retire, after this large scale theft of America, into the extremistly comforting arms and payrolls of these robber baron banks?