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The Smartest Guys in the Room.....are crooks

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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Mon Oct 25, 2010 8:51 am

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William K. Black and L. Randall Wray
Posted: October 24, 2010 11:53 PM

Foreclose on the Foreclosure Fraudsters, Part 2: Spurious Arguments Against Holding the Fraudsters Accountable

Our call for closing down control frauds and stopping the foreclosure frauds typically meets with three objections. First, it is claimed that while there were some bad apple lenders, much of the fraud was committed by borrowers. Our proposal would let fraudulent borrowers remain in homes to which they are not entitled, punishing the banks that were duped. Second, the biggest banks are too important to foreclose. And third, it is not possible to resolve a "too big to fail" institution.

Who is Guilty?

Let us deal with the "borrower fraud" argument first because it is the area containing the most erroneous assumptions. There was fraud at every step in the home finance food chain: the appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers' incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.

That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry -- indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized.

The homeowners were typically fraudulently induced by the lenders and the lenders' agents (the loan brokers) to enter into nonprime mortgages. The lenders knew the "loan to value" (LTV) ratios and income to debt ratios that they wanted the borrower to (appear to) meet in order to make it possible for the lender to sell the nonprime loan at a premium. LTV can be gimmicked by inflating the appraisal. The debt to income ratios can be gimmicked by inflating income. "Liar's" loan lenders used that loan format because it allowed the lender to simultaneously loan to a vast number of borrowers that could not repay their home loans, at a premium yield, while making it look to the purchaser of the loan that it was relatively low risk. Liar's loans maximized the lender's reported income, which maximized the CEO's compensation.

The problem is that only the most sophisticated nonprime borrowers (the speculators who bought six homes) (1) knew the key ratios they had to appear to meet, (2) had the ability to induce an appraiser to inflate substantially the reported market value of the home, and (3) knew how to create false financial information that was internally consistent and credible. The solution was for the lender and the lender's agents to (1) instruct the borrower to report a certain income or even to fill out the application with false information, (2) suborn an appraiser to provide the necessary inflated market value, and (3) create fraudulent financial information that had at least minimal coherence.

When the overburdened homeowner began missing payments, late fees and higher interest rates kicked-in, boosting the stated income of mortgage servicers and the value of the securities. Not coincidentally, the biggest banks own the servicers and could maximize claims against the mortgages by running up the late fees. It was quite convenient to "misplace" mortgage payments, so even homeowners who were never delinquent could get hit with fees and higher rates. And when payments were received, the servicers would (illegally) apply them first to the late fees, meaning the homeowners were unknowingly still missing mortgage payments. The foreclosure process itself generates big fees for the SDI banks.

And, miracle of miracles, the banks would end up with the homes and get to restart the whole process again -- from resale of the home through the financing, securitizing, and fee-for-servicing juggernaut.

Unfortunately, it did not go quite as smoothly as planned. The SDIs were supposed to act like neutron bombs -- killing the homeowners but leaving the homes standing, to be resold. The problem is that wiping out borrowers lowered the value of real estate, crushing not only the real estate market but also construction and through to all associated sectors from furniture and home restoration supplies to big ticket purchases that rely on home equity loans. It also led to questions about the value of the securitized toxic waste manufactured and held directly or indirectly by financial institutions.

Next, a few judges began to question the foreclosures, as they saw case after case in which the banks claimed to have lost the paperwork or submitted amateurishly forged documents. Or, several banks would go after the same homeowner, each claiming to hold the same mortgage (Bear sold the same mortgage over and over). Insiders began to offer depositions exposing fraud and perjury. It became apparent that in many and perhaps most cases, the trusts responsible for the securities (often these are "special purpose" subsidiaries of the banks) never received the "notes" signed by the borrowers -- as required by both IRS tax code and by 45 of the US states. Without the notes, billions of dollars of back taxes could be due, and the foreclosures violate state law. Finally, the Attorneys General of all fifty states called for a foreclosure moratorium.

What to do? We suggest an immediate moratorium on foreclosures and a requirement that all notes be produced by purported holders of mortgages within a reasonable length of time. If they cannot be found, the mortgages -- as well as the securities that pool them -- are no longer valid. That means that the homeowners are not indebted, and that the homes are owned free and clear. And that, dear bankers, is a big, big problem. It is also the law -- without evidence of debt, there is no debtor and no creditor.

Commentators are horrified that a foreclosure moratorium would let "deadbeat" borrowers remain in their homes while delinquent in their payments. The speculators that purchased "MacMansions" and stated on six separate loan applications that each house was their principal dwelling are frauds. The moratorium would (briefly) reward fraudulent borrowers while (briefly) punishing the fraudulent banks. This is true.

It is not possible to separate "worthy" borrowers who were duped by banks from all "unworthy" borrowers who knew the loan applications were false. Indeed, given the millions of borrowers that received liar's loans, even if the borrowers were all frauds we could not possibly prosecute all of them due to lack of resources. We currently prosecute roughly 1,000 mortgage fraud cases annually at the federal level. If we used all of our resources to investigate and prosecute fraudulent mortgage borrowers exclusively we would be able to prosecute less than one-tenth of one percent of those frauds.

The losses that the fraudulent nonprime lenders caused are vastly greater than the losses caused by fraudulent borrowers, so no rational prosecutor would use his scarce resources to prosecute individual nonprime borrowers. Moreover, prosecutions of individual borrowers for alleged fraud in the applications would be difficult to win against competent defense counsel because it will not be possible to infer the borrower's intent and knowledge and whether the loan agent instructed him to enter specified information on the application. We are not arguing that the speculator who committed fraud while buying six homes should be allowed to walk free. We are simply arguing that it makes no sense to use limited judicial resources to go after owner-occupier households where it will be almost impossible to prove intent to defraud.

On the other hand, we can infer a lender's fraudulent intent because it is financially sophisticated and has expertise in lending. An honest mortgage lender would not make "liar's loans" because absence of proper underwriting inherently produces loans that are expected to default. Yet, in 2006 just about half of all mortgages originated were liar's loans. Banks happily advertised specialization in "no doc" and NINJA loans. There can be no question about intent -- the intent was fraud, plain and simple. Fraud on the part of credit raters is equally easy to infer -- we have the internal emails that document intent to defraud securities purchasers by "pay to play" schemes. And the fraud committed by the investment banks that pooled the mortgages is also well documented. These entities committed tens of thousands and even millions of frauds each. For obvious efficiency reasons, that is where our judicial resources ought to be directed.

Macro Effects and Culpability

There is one other consideration that biases the case in favor of borrowers. Many homeowners were sold on the idea that "real estate values only go up" -- and quite a few planned to refinance on better terms, or even to flip the house at a price that would allow them to pay-off a mortgage they could not otherwise afford. We realize that it is not easy to shed tears for speculators foiled by the market, and that is not our point.

What is important to understand, however, is that the financial sector is largely culpable for the generation of speculative frenzy, the creation of the "financial weapons of mass destruction", and the transformation toward financial fragility that finally collapsed in 2007. In the aftermath we lost 10 million jobs and millions of homeowners lost their homes. The "collateral damage" inflicted by the SDIs is now endangering tens of millions of American families -- most of whom played no role in the speculative euphoria. Almost half of American homeowners are already underwater or on the verge of going under. In short, it was Wall Street that turned our homes over to a financial casino -- and so far virtually all the losses have been suffered on Main Street.

This culpability is at the aggregate scale and of course no individual bank can be held liable in court for the collapse of the financial system. Rather, each bank's guilt must be assessed according to its own fraud. However, a national moratorium on foreclosures must be evaluated at the macro level, and justified on the basis of the aggregate costs, benefits, and moral implications. And certainly at the aggregate level that must be considered by President Obama, the benefits to the majority of Americans clearly outweigh the costs imposed on the relatively few. And the morality is also on the side of homeowners and clearly against the banks.

Closing the control frauds would actually benefit honest bankers by eliminating the "Gresham dynamics" created by fraudulent institutions -- a race to the bottom in underwriting. Since fraudulent banks use accounting fraud to manufacture high profits, they do not actually have to use a viable business model. By eliminating control fraud from the financial sector, it will be much easier for honest banks to succeed.

Further, the financial system has massive excess capacity -- as evidenced by the need to create bubble after bubble to find outlets for capacity. Almost all of the innovations in practice and instruments of the past two decades were spurred not by demand but rather by excess capacity. Downsizing the financial sector is critical to restoring it to a size that is commensurate with the needs of the economy.

The cost of not closing control frauds, by contrast, can be staggering. The business practices that maximize the fictional reported income (e.g., making "liar's loans to people who cannot repay their loans) maximize real losses and hyper-inflate financial bubbles. Control frauds destroy wealth at a prodigious rate. The one thing we certainly cannot afford is leaving the control frauds under the control of fraudulent CEOs.

Can the Frauds be Foreclosed?

The assertion that the SDIs cannot be resolved because of their size is unsupported. Very large institutions have already been resolved both in this country and abroad. The "too big to fail" (TBTF) doctrine has always been unproven, dangerous, and counter to the law. An institution that is not permitted to fail faces obvious adverse incentive problems. It also destroys healthy competition with institutions that are not considered TBTF. It encourages risk-taking and fraud. And it subverts the law, which requires that insolvent institutions must be resolved.

As we write this piece, the markets are taking it upon themselves to begin to close down the control frauds -- with homeowners fighting the foreclosures and investors demanding that the banks take back the toxic waste. Unfortunately, following the market solution will be a long-drawn-out and costly process -- both in terms of tying up the judicial system but also in terms of the uncertainty and despair that will persist. At the end of that process, the banks will have to be resolved. No matter how much the politicians dislike it, they will end up with the banks in their hands -- either now or later. Taking them now is the right thing to do.

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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Fri Oct 22, 2010 12:23 pm

William K. Black and L. Randall Wray
Posted: October 22, 2010 02:08 PM
http://www.huffingtonpost.com/william-k ... tml?page=1
Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership
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After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:

A government review of botched foreclosure paperwork so far has found that the problems do not pose a "systemic" threat to the financial system, a top Obama administration official said Wednesday.
Yes, that's right. HUD reviewed the "paperwork" problem to see whether it threatened the banks -- not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.

The Justice Department is leading an investigation of possible crimes involving mortgage fraud.
That language was carefully chosen to sound reassuring. But the fact is that despite our pleas the FBI has continued its "partnership" with the Mortgage Bankers Association (MBA). The MBA is the trade association of the "perps." It created a facially ridiculous definition of "mortgage fraud." Under that definition the lenders -- who led the mortgage frauds -- are the victims. The FBI still parrots this long discredited "definition." That is one of the primary reasons why -- in complete contrast to prior financial crises -- the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.

Note that the Justice Department is not investigating foreclosure fraud. HUD Secretary Donovan's statement shows why:

"We will not tolerate business as usual in the mortgage market," he said. "Where there have been mistakes made or errors, we will hold those entities, those institutions, accountable to stop those processes, review them and fix them as quickly as possible."
Note the language: "mistakes", "errors", "processes" (following the initial use of "paperwork"). No mention of "fraud", "felony", "criminal investigations", or "prosecutions" for the tens of thousands of felonies that representatives of the entities foreclosing on homes have admitted that they committed. Note that Donovan does not even demand that the felons remedy the harm caused by their past fraudulent foreclosures. Donovan wants them to "fix" "processes" -- not repair the harm their frauds caused to their victims.

The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers' trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce. The FASB's new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional "income" and "capital" at the banks. The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.

The inflated asset values allow the Fed and the administration to ignore the Fed's massive loss exposure and allow Treasury to spread propaganda claiming that TARP resolved all the problems -- at virtually no cost. Donovan claims that we have held the elite frauds accountable -- but we have done the opposite. We have made the CEOs of the largest financial firms -- typically already among the 500 wealthiest Americans -- even wealthier. We have rewarded fraud, incompetence, and venality by our most powerful elites.

If the government does not hold the fraudulent CEOs responsible, who is supposed to stop the epidemic of elite financial fraud? The Obama administration's answer is the fraudulent CEOs themselves, at a time of their choosing. You can't make this stuff up.

But ultimately resolving the problems is not the government's responsibility, said Michael Barr, assistant Treasury secretary for financial institutions.

"Fundamentally, this is up to the banks and the servicers to fix," he said. "They can fix it as fast as they feel like."

So who is Michael Barr and why is saying things on behalf of the Obama administration that make it appear to be a wholly-owned subsidiary of the fraudulent lenders and servicers? He's a Robert Rubin protégé and he's the senior Treasury official for banking policy.

We have a different policy view. We believe that only the government can stop fraud from growing to catastrophic levels and that among the government's highest responsibilities is to provide the regulatory "cops on the beat" with the competence, resources, courage, and integrity to take on our most elite frauds. We believe that anything less is a travesty that causes tens of millions of Americans to be defrauded and poses a grave threat to our economy and democracy.


Prompt Corrective Action

First, it is time to stop the foreclosures until the banks and servicers adopt corrective steps, certified as adequate by FDIC, that will prevent all future foreclosure fraud. They must also adopt plans to remedy the injuries their foreclosure frauds have already caused, and assist the FBI, Department of Justice, and legal ethics officials investigations of their officers' and attorneys' frauds and ethical violations.

Second, it is time to place the financial institutions that committed widespread fraud in receivership. We should remove the senior leadership of the banks and replace them with experienced bankers with a reputation for integrity and competence, i.e., the honest officers that quit or were fired because they refused to engage in fraud. We should prioritize the receiverships to deal with the worst known "control frauds" among the "systemically dangerous institutions" (SDIs). The SDIs' frauds and fraudulent leaders endanger the global economy.

We propose Bank of America for the first receivership. In the last few weeks, the SEC has obtained a large (albeit grossly inadequate) settlement of its civil fraud charges against the former senior leaders of Countrywide. (Bank of America acquired Countrywide and is responsible for its frauds.) Fannie and Freddie's investigations -- with their findings reviewed by their regulator, the Federal Housing Finance Agency (FHFA) -- have identified many billions of dollars of fraudulent loans originated by Countrywide that were sold fraudulently to Fannie and Freddie through false representations and warranties. The Fed, BlackRock, and Pimco's investigations have identified many billions of dollars of fraudulent loans provided by Countrywide under false reps and warranties. Ambac's investigation found that 97% of the Countrywide loans reviewed by Ambac were had false reps and warranties. Countrywide also engaged in widespread foreclosure fraud. This is not surprising, for every aspect of Countrywide's nonprime mortgage operations that has been examined by a truly independent body has found widespread fraud -- in loan origination, loan sales, appraisals, and foreclosures. Fraud begets fraud. Lenders that are control frauds create criminogenic environments that produce "echo" epidemics of control fraud in other professions and industries.

We have been amazed that, as one financially sophisticated entity after another found widespread fraud by Countrywide in the entire gamut of its operations, the administration, the industry, and the financial media act as if this is acceptable. Countrywide made hundreds of thousands of fraudulent loans. It fraudulently sold hundreds of thousands of loans through false reps and warranties. It fraudulently foreclosed on large numbers of loans. It victimized hundreds of thousands of people and hundreds of financial institutions, causing hundreds of billions of dollars of losses. It has defrauded more people, at a greater cost, than any entity in history.

Bank of America chose to purchase Countrywide at a point when it -- and its senior leaders -- were infamous. Bank of America made some of these Countrywide leaders its senior leaders. Yet, Bank of America is not treated as a criminal entity. President Obama, Attorney General Eric Holder, Donovan, and Barr cannot even bring themselves to use the "f" word -- fraud. They substitute euphemisms designed to trivialize elite criminality. The administration officials do not call for Bank of America to be the subject of a criminal investigation. They do not demand that Fannie, Freddie, Ambac, the FHFA, and Pimco file criminal referrals about Countrywide's frauds. They do not demand that Fannie, Freddie, and the Fed refuse to purchase or take as collateral any mortgage instrument from Bank of America. No one at the Harvard Club in New York moves to kick Bank of America's officers out of their club! The financial media treats Bank of America as if it were a legitimate bank rather than a "vector" spreading the mortgage fraud epidemic throughout much of the Western world.

For the sake of our (and the global) economy, our democracy, and our souls this willingness to allow elite control frauds to loot with impunity must end immediately. The control frauds must be taken down and their officers removed promptly. Receivership is the way to begin to reclaim our souls, our economy, and our democracy and Bank of America has the track record that makes it a good place to start. It is sufficiently large and powerful that its receivership will send the credible signal that America is restoring the rule of law and that even the most elite frauds will be held accountable.

Next we need to remove the rest of the "too big to fail" institutions -- we call them systemically dangerous institutions, or SDIs -- to reduce the global systemic risks that they pose. We are rolling the dice with disaster every day. The SDIs are inefficient, so shrinking them will reduce risk and increase efficiency. We need to follow three types of policies with respect to SDIs.

They cannot grow larger and compound the systemic risk they pose.
They must create an enforceable plan to shrink to a level and functions such that they no longer pose a systemic risk within five years.
Until they shrink to the point that they no longer pose systemic risks they must be regulated with far greater intensity than other banks. In particular, control fraud poses so severe a risk of triggering another global financial crisis that there must be no regulatory tolerance for control frauds at the SDIs. One of the best ways to reduce their risks is to mandate that high levels of executive compensation be paid only after sustained and superior performance (at least five years), and with "claw back" provisions if compensation was obtained by fraudulent reported income or seriously inadequate loss reserves.
Appointing a receiver for an SDI will be a major undertaking for the FDIC, but it is also well within its capabilities. Contrary to the scare mongering about "nationalizing" banks, receivers are used to returning failed banks to private ownership. Receiverships are managed by experienced bankers with records of competence and integrity rather than the dread "bureaucrats." We appointed roughly a thousand receivers during the S&L and banking crises of the 1980s and early 1990s under Presidents Reagan and Bush.

Here is how it works. A receiver is appointed on Friday. The bank opens for business as normal (from the bank's customers' perspective) on Monday. The checks clear, the ATMs work, and the branches all open. The receiver's managers direct the business operations, find the true facts about the bank's operations, senior managers, and financial condition, recognize the real losses, and make the appropriate referrals to the FBI and the SEC so that the frauds can be investigated and prosecuted.

The receiver is also a well-proven device for splitting up banks that are too large and incoherent by selling units of the business to different bidders who most value the operations.


Dealing with the "Dirty Dozen" Control Frauds

Simultaneously, we should put in place a system to replace the existing cover up of the condition of other banks with vigorous investigations and honest accounting. The priority for these investigations should be the "Dirty Dozen" -- the twelve largest banks. The Fed cannot conduct a credible investigation. It has taken so many fraudulent nonprime loans and securities as collateral that it is the leading proponent of covering up these losses.

The FDIC should lead the investigations (it has "backup" regulatory authority over all banks), but it should hire investigative experts to add expertise to its Dirty Dozen examination teams. The priorities of the teams will be identifying existing losses and requiring their immediate recognition (the regulatory authorities have the authority to "classify" assets that can trump the accounting scams that Congress extorted from FASB). The FDIC should prioritize the order of its examinations of the largest SDIs on the basis of known indicia of fraud. For example, Citi's senior credit manager for mortgages testified under oath that 80% of the loans it sold to Fannie and Freddie were made under false reps and warranties. The Senate investigation has documented endemic fraud at WaMu (acquired by Wells Fargo). The FDIC should sample nonprime loans and securities held by Fannie, Freddie, the Federal Home Loan Banks, and the Fed to determine which nonprime mortgage players originated and sold the most fraudulent loans. This will allow the FDIC to prioritize which SDIs it examines first.

We should also create a strong incentive for financial entities to voluntarily disclose to the regulators, the SEC, and the FBI their frauds, their unrecognized losses, and the officers that led the frauds -- and to fire any officer (VP level and above) who committed (or knew about and did not report) financial fraud. Any SDI that originated or sold more than $2 billion in fraudulent nonprime loans or securities should be placed in receivership unless it has conducted a thorough investigation and made the voluntary disclosures discussed above prior to the commencement of the FDIC examination, and developed a plan that will promptly recompense fully all victims that suffered losses from mortgages that were fraudulently originated, sold, or serviced.

We make three propositions concerning what we believe to be institutions that are run as "control frauds". To date, this situation has been ignored in the policy debates about how to respond to the crisis. The propositions rest on a firm (but ignored) empirical and theoretical foundation developed and confirmed by white-collar criminologists, economists, and effective financial regulators. The key facts are that there was massive fraud by nonprime lenders and packagers of fraudulent nonprime loans at the direction of their controlling officers. By "massive" we mean that lenders made millions of fraudulent loans annually and that packagers turned most of these fraudulent loans into fraudulent securities. These fraudulent loans and securities made the senior officers (and corrupted professionals that blessed their frauds) rich, hyper-inflated the bubble, devastated millions of working class borrowers and middle class home owners, and contributed significantly to the Great Recession -- by far the worst economic collapse since the 1930s.

Our first proposition is this: The entities that made and securitized large numbers of fraudulent loans must be sanctioned before they produce the next, larger crisis. Second: The officers and professionals that directed, participated in, and profited from the frauds should be sanctioned before they cause the next crisis. Third: The lenders, officers, and professional that directed, participated in, and profited from the fraudulent loans and securities should be prevented from causing further damage to the victims of their frauds, e.g., through fraudulent foreclosures. Foreclosure fraud is an inevitable consequence of the underlying "epidemic" of mortgage fraud by nonprime lenders, not a new, unrelated epidemic of fraud by mortgage servicers with flawed processes. We propose a policy response designed to achieve these propositions.

S&L regulators, criminologists, and economists recognize that the same recipe that produced guaranteed, record (fictional) accounting income (and executive compensation) until 2007 produced another guarantee: massive (real) losses, particularly if the frauds hyper-inflated a bubble. CEOs who loot "their" banks do so by perverting the bank into a wealth destroying monster -- a control fraud. What could be worse than deliberately growing massively by making loans likely to default, converting large amounts of bank assets to the personal benefit of the senior officers looting the bank and to those the CEO suborns to assist his looting (appraisers, auditors, attorneys, economists, rating agencies, and politicians), while simultaneously providing minimal capital (extreme leverage) and only grossly inadequate loss reserves, and causing bubbles to hyper-inflate?

This nation's most elite bankers originated and packaged fraudulent nonprime loans that destroyed wealth -- and working class families' savings -- at a prodigious rate never seen before in the history of white-collar crime. They created the worst bubble in financial history, echo epidemics of fraud among elite professionals, loan brokers, and loan servicers, and would (if left to their own devices) have caused the Second Great Depression.

Nothing short of removing all senior officers who directed, committed, or acquiesced in fraud can be effective against control fraud. We repeat: Foreclosure fraud is the necessary outcome of the epidemic of mortgage fraud that began early this decade. The banks that are foreclosing on fraudulently originated mortgages frequently cannot produce legitimate documents and have committed "fraud in the inducement." Now, only fraud will let them take the homes. Many of the required documents do not exist, and those that do exist would provide proof of the fraud that was involved in loan origination, securitization, and marketing. This in turn would allow investors to force the banks to buy-back the fraudulent securities. In other words, to keep the investors at bay the foreclosing banks must manufacture fake documents. If the original documents do not exist the securities might be ruled no good. If the original docs do exist they will demonstrate that proper underwriting was not done -- so the securities might be no good. Foreclosure fraud is the only thing standing between the banks and Armageddon.

We will deal with objections to our proposal in the next piece.
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Thu Oct 21, 2010 5:57 pm

It is coming up to Haloween and it is no coincidence that I am reading "THE CREATURE FROM JEKYL ISLAND". It is a horror story, however a story about your money. Your financial future at the whims and mercy of .......well I will not give it away, but I thought I better at least jot down the parts I highlighted as interesting. I hope to learn more about the creature from Jekyl Island and will do more research as I can. (it is the story of the creation of the US Federal Reserve)

from Page 177:

"The bank "pretended" to make a loan but what it really did was to "manufacture" the money for government use".

Page 179:

The Cabal is a partnership, and each of the two groups is committed to protect each other, not out of loyalty, but out of mutual self interest.

Page 179:

It is commonly observed in modern times that criminals are often treated lightly when they rob their neighbour. But if they steal from the government or a bank, the penalties are harsh.

Page 193

The mandrake Mechanism.......a magic money machine

page 244 and 245

three paragraphs speak to the power of the major financial firms to control the media

I will do some more study and add to the list, but it sounds as if we are designed to be economic serfs

more to come

read the book
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Thu Oct 07, 2010 10:44 am

(crime pays very well for those who cheat in million dollar figures in Canada.........if you are big enough to cheat in $100 million size figures, you will likely NEVER meet a policeman or a prosecutor in Canada. I believe it is a ZERO risk, high reward game at these levels.......advocate comments. See chapter five http://www.breachoftrust.ca)

CRA soft on tax cheaters


Christian Hartmann, Reuters Files
Canada has lagged other countries in going after those sheltering their money in Liechtenstein.
Diane Francis, Financial Post · Thursday, Oct. 7, 2010

In 2008, stories broke in the international media that a whistle-blower in Liechtenstein had sold information in 2006 to various tax departments in the United States, Australia and others about alleged tax evasion. Canadians were cited.

In the House of Commons, Canada's government said it doesn't pay for such information while U.S., Australian, German and other authorities swung into action and have imposed jail sentences and huge fines on tax cheats.

Canadian Senator Percy Downe in 2008 sought answers under Ottawa's Access to Information Act to make sure that even if the Canada Revenue Agency (CRA) didn't pay, it was pursuing tax evaders.

In November 2009, he obtained information from the CRA that there was about $100-million in Liechtenstein bank accounts related to 106 Canadian citizens and that the "CRA anticipates that it will reassess approximately $17-million in taxes, interest and penalties."

Dissatisfied that nothing had been collected since 2006, the Senator sent another request. This week he was told that 26 cases involving 68 individuals had been completed as of June, including 20 residents of Canada who came forward under the Voluntary Disclosure Program: $5.2-million had been assessed in back taxes, interest and penalties (but an undisclosed amount was unpaid due to appeals) and that no one had been charged with tax evasion.

"Unlike the United States, Germany and other countries that moved aggressively and rapidly to recoup any unpaid taxes that were owed, Canada took another tactic: strong words promising action, but little effort to make recovery of unpaid taxes a priority," wrote the Senator. "Other countries lay tax fraud charges against individuals for having undeclared bank accounts in tax havens, but not Canada."

Also annoying to him was the use of the word "assessed."

"It is merely what the government claims it is owed. The account holders are free to appeal, and until their appeals are exhausted, they don't have to pay a dime," he said. "Canadians who use domestic banks pay taxes. Why should these people get a tax holiday?"

Most disturbing of all is the invocation of the Voluntary Disclosure Program (VDP), a partial amnesty for cheaters because this is not what then-Revenue minister Jean-Pierre Blackburn pledged in the House in late 2009. He stated uncategorically that no one among the Canadian holders of Liechtenstein accounts had, or was eligible to come forward under the VDP. He also estimated the CRA would collect $20-million in taxes, penalties and interest.

The whole affair is appalling and fortunately Senator Downe intends to pursue this scandal to find out exact details, why the CRA relaxed rules on VDPs and why it has taken so long. "Who is being protected?" he asks.

Canadians pay high tax rates and are aggressively pursued at home if they renege. The Tories attacked income trusts over tax leakage (that didn't exist). Meanwhile, nothing is done about this offshore cheating and lack of disclosure. People who lie and cheat should be hunted down and punished as severely as they are in other developed nations. Frankly, this smacks of corruption, incompetence or both. "If the 1,785 Canadian-owned Swiss accounts, that have recently been disclosed, are reviewed as quickly as the 106 from Liechtenstein, it will take just over 274 years to go through them all based on 26 completed cases in four years," Senator Downe wrote.

This is no way to run a country.

dfrancis@nationalpost.com
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Thu Sep 30, 2010 8:29 am

(the economy gets stolen........no one gets prosecuted........the money ends up in a Swiss account)


French probe reveals 1,800 Swiss accounts held by Canadians
GREG MCARTHUR
From Thursday's Globe and Mail
Published Wednesday, Sep. 29, 2010 9:00PM EDT
Last updated Thursday, Sep. 30, 2010 6:16AM EDT
207 comments
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The Canada Revenue Agency has received details on nearly 1,800 Swiss bank accounts registered to Canadians that were uncovered by French prosecutors during a probe into the clients of Europe’s largest bank.

For more than a year, investigators in the French Riviera city of Nice have been poring over a trove of banking records from the Geneva offices of HSBC. The documents, which were stolen by a former employee of HSBC and handed over to investigators, have sparked a diplomatic spat between France and Switzerland and waves of anxiety for HSBC clients who may have turned to the Alpine state to conceal their wealth.

French investigators decided to examine the documents in case they revealed any criminal activity by French clients of the bank. To narrow down their search, they organized the accounts by nationality. The analysis revealed that Canadians held more accounts than citizens of some countries with much larger populations and economies, the chief prosecutor told The Globe and Mail and CBC in a joint interview. In comparison, Americans represented about 1,600 accounts.

“The government’s been working with the French government on this issue and we’ve received a list of names of individuals who may be exploiting offshore accounts,” said Erin Filliter, a spokeswoman for Keith Ashfield, the Minister of National Revenue. She declined to provide details of the data that had been received.

The HSBC case is another blow to an embattled Swiss banking industry and its strict culture of secrecy, and supplies another boost to governments that have declared war on tax havens in a bid to stave off rising deficits. Nine months ago on a trip to France, then Minister of Revenue Jean-Pierre Blackburn told reporters he was close to receiving the records, but the CRA had been tight-lipped ever since.

Although it is not illegal to have a Swiss bank account, Canadian residents are required to declare all of their world-wide income to the CRA. Switzerland does not recognize tax evasion as a criminal offence, which historically has made it difficult for governments to obtain information about suspected tax cheats stowing away money there. In 2009, the United States cracked the veil of Swiss banking secrecy when it fined Swiss banking giant UBS $780-million and forced it to hand over the names of 4,450 clients after the UBS officials admitted they had encouraged wealthy Americans to evade tax.

HSBC has not been accused of any wrongdoing, and has repeatedly censured France for relying on stolen documents to investigate potential fiscal crimes and pursue unpaid taxes. While Swiss authorities clamour for help from the French in returning the man behind the theft – a former IT employee named Hervé Falciani – he remains a free man near Nice, where he has helped guide investigators through the voluminous records.

Just six months ago, HSBC issued a letter to the Canadians whose accounts were part of Mr. Falciani’s hoard, reassuring them that it is unlikely government agencies will be able to use the information in the documents. “Our outside lawyers believe that it would be difficult to take advantage of the stolen data for legal ends,” states the March 10 letter, which was signed by the Swiss office’s chief executive and chairman. “In fact, they are bits and pieces of data, which were manipulated by the former worker and are a result of serious punishable crimes.”

The chief prosecutor in Nice who obtained the records, Eric de Montgolfier, defends his use of the stolen material. His investigators stumbled across the records when the Swiss requested that he search Mr. Falciani’s Nice-area home in January, 2009. When Mr. Falciani explained why the Swiss were so interested in him and that prosecutors might be interested in the files he took with him, Mr. de Montgolfier said he had an obligation to examine them.

“Imagine that in the case of an international investigation, I found a dead body in a basement ... do I have to close my eyes? No. I have a duty to investigate,” he said.

He shot back at Swiss criticism that he is encouraging employee theft, saying: “Who else than bank employees would be able to denounce the wrongdoings in these fortresses? Yes, you need to be inside those banks. If they do not talk, who else will? Certainly not the ones who take advantage of the system.”

It’s unclear how much money is in the 1,800 accounts. In an interview, Mr. Falciani said that clients of the Geneva office were required to deposit a minimum of $500,000.

If Canada is successful in its efforts to obtain the data, it won’t be the first time it has used stolen material to audit offshore funds. For the past two years, tax collectors in British Columbia have relied on files that were stolen from a financial institution in the tiny European tax haven of Liechtenstein and later sold to the German government to audit more than a dozen Canadians.

Mr. de Montgolfier declined to provide details on the Canadians in the records.

“I thought it was a high number for Canada,” he said.
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Sun Aug 22, 2010 11:07 am

Week in Review
August 21, 2010

Income Inequality and Financial Crises


Hulton Archive/Getty Images
SCRAPING BY In Depression-era New York City,
scenes like this underscored the sudden hardship.

By LOUISE STORY

David A. Moss, an economic and policy historian at the Harvard Business School, has spent years studying income inequality. While he has long believed that the growing disparity between the rich and poor was harmful to the people on the bottom, he says he hadn’t seen the risks to the world of finance, where many of the richest earn their great fortunes.

Now, as he studies the financial crisis of 2008, Mr. Moss says that even Wall Street may have something serious to fear from inequality — namely, another crisis.

The possible connection between economic inequality and financial crises came to Mr. Moss about a year ago, when he was at his research center in Cambridge, Mass. A colleague suggested that he overlay two different graphs — one plotting financial regulation and bank failures, and the other charting trends in income inequality.

Mr. Moss says he was surprised by what he saw. The timelines danced in sync with each other. Income disparities between rich and poor widened as government regulations eased and bank failures rose.

“I could hardly believe how tight the fit was — it was a stunning correlation,” he said. “And it began to raise the question of whether there are causal links between financial deregulation, economic inequality and instability in the financial sector. Are all of these things connected?”

Professor Moss is among a small group of economists, sociologists and legal scholars who are now trying to discover if income inequality contributes to financial crises. They have a new data point, of course, in the recent banking crisis, but there is only one parallel in the United States — the 1929 market crash.

Income disparities before that crisis and before the recent one were the greatest in approximately the last 100 years.

· In 1928, the top 10 percent of earners received 49.29 percent of total income.

· In 2007, the top 10 percent earned a strikingly similar percentage: 49.74 percent.

· In 1928, the top 1 percent received 23.94 percent of income.

· In 2007, those earners received 23.5 percent.

Mr. Moss and his colleagues want to know if huge gaps in income create perverse incentives that put the financial system at risk. If so, their findings could become an argument for tax and social policies aimed at closing the income gap and for greater regulation of Wall Street.

This inquiry is one that some conservative economists are already dismissing.

R. Glenn Hubbard, for instance, who was the top economic advisor to former President George W. Bush, said income inequality was not the culprit in the most recent crisis.

“Cars go faster every year, and G.D.P. rises every year, but that doesn’t mean speed causes G.D.P.,” said Mr. Hubbard, dean of the Columbia Business School and co-author of the coming book “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity.”

Even scholars who support the inquiry say they aren’t sure that researchers will be able to prove the connection. Richard B. Freeman, an economist at Harvard, is comparing about 125 financial crises around the globe that occurred over the last 30 years. He said inequality soared before many of these crises. But, Mr. Freeman added, the data from different nations is difficult to compare. And Professor Freeman says he has found some places, like the Scandinavian countries, where there were crises without much inequality, suggesting that other factors, like deregulation, may be the best explanations.

For his part, Mr. Moss said that income inequality might have complicated links to financial crises. For instance,

n inequality, by putting too much power in the hands of Wall Street titans, enables them to promote policies that benefit them — like deregulation — that could put the system in jeopardy.

Inequality may also push people at the bottom of the ladder toward choices that put the financial system at risk, he said. And low-income homeowners could have better afforded their mortgages if not for the earnings gap.

(Mr. Hubbard has a different take: He says many lower-income homeowners should not have had mortgages in the first place. The latest crisis, he says, was caused by policymakers who decided to “democratize credit” by expanding home ownership. Their actions were driven by a desire to address inequality, but those policymakers were misguided and should have improved education instead, he adds.)

Scholars who study inequality often focus on people at the bottom. But, Mr. Moss said, the incentives of people at the top also deserve more scrutiny.

He pointed to the recent work of Margaret M. Blair, who teaches at Vanderbilt University Law School and is active with the Tobin Project, the nonprofit organization Mr. Moss founded a few years ago to study issues like economic inequality. She is researching whether financial workers promote bubbles and highly leveraged systems, even unconsciously. Ms. Blair said that because financial bubbles often lead to higher returns, financial workers have the potential to make more, and this pattern can influence their trading strategies and the policies they promote. Those decisions, in turn, drive even greater income inequality, she said.

After the 1929 crash, the income gap narrowed dramatically and remained low for decades, because of the huge wealth lost by people at the top and the sweeping financial reforms introduced in the 1930s that reined in Wall Street.

So far, the results are not as dramatic in the wake of the recent financial crisis. The income gap narrowed slightly in 2008, according to the most recent data available, but it remains unclear if it will continue shrinking.

This time, after all, the system did not collapse as it did in 1929. The status quo on income inequality looks like it was essentially maintained. Mr. Moss said he supported the government intervention in 2008, though he noted, "Financial elites
image001-11.jpg
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made off rather well."
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Tue Aug 17, 2010 3:14 pm

images.jpeg
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Wallace Immen
From Wednesday's Globe and Mail
Published on Tuesday, Aug. 17, 2010 4:17PM EDT
Last updated on Tuesday, Aug. 17, 2010 4:18PM EDT
If you ever hear your boss use the phrase “what an incredible year the company has had,” when reporting the latest results, it might be time to dust off your résumé, a new study suggests.

Using inflated language and third-person phrases such as “the team” and “the company” rather than “I” and “we” can be verbal tip-offs that an executive is lying or covering up a bad situation, according to a new study by David Larcker, director of the corporate governance research program at Stanford University’s Graduate School of Business, and doctoral student Anastasia Zakolyukina.

Fibbing execs are more likely to talk in generalities rather than specifics, according to an analysis of 30,000 transcripts of executive conference calls about earnings from 2003 to 2007. Over all, 14 per cent of executives made statements that raised caution flags and about half of their companies later had to restate their earnings.

“It’s an age-old question to determine whether someone is lying. The breakthrough in this study is that we could use a computer to look at a huge sample of statements and find words that raise red flags that there is deception going on,” Professor Larcker said.

The study found execs who later revised their firm's financial statements displayed distinct styles of speech, including language that “disassociates themselves from their subject matter,” Prof. Larcker said. CEOs and CFOs who were deceptive used significantly fewer self-references and more third-person plural and impersonal pronouns, the study found.

For example, “rather than say ‘I know’ or ‘I’m sure,’ top executives at companies that later ran into trouble were most likely to refer the authority to someone else, saying ‘our auditors say’, or ‘this has been certified,’” Prof. Larcker said.

“A particular feature of statements that later proved inaccurate was the use of hyperbole with value-laden words like ‘fantastic’ and ‘outstanding.’ When you hear words like ‘incredible’ and ‘unbelievable’, they may be tip-offs that what the leader is saying really does strain credibility,” Prof. Larcker said.

A closer examination of several of the deceptive statements found that the speakers tended to use the shortest sentences, and had the least amount of hesitation between statements. The authors suggest that is because they had rehearsed phrases they wanted to use before the conference call.

One such transcript identified in the study was a conference call with Erin Callan, the former chief financial officer of Lehman Brothers a few months before the company collapsed. She used the word “great” 14 times, “strong” 24 times and “incredibly” eight times to describe the bank's performance. She also used the word “challenging” six times.

The results have practical applications for employees as well as clients of companies, Prof. Larcker said. “In a sense you are placing a bet on the long-term viability and reliability of a company as an employer and a supplier. If what a you hear from management gets more third person and vague it raises questions that all may not be as rosy as management is indicating.

He cautioned that the findings are by no means definitive. “I can’t say these are check boxes and when you see four you have hit trouble,” he said. “That said, they are an intriguing indication of potential trouble ahead.”

The researchers plan a follow-up study to determine whether it’s possible to use the wording of statements as an investment strategy to drop potentially risky companies from your portfolio, Prof. Larcker said. “If the statements indicate that the figures are not correct, you are wise to drop ... some of the firms whose statements include early warnings that there is risk you don’t know about. That’s especially important in an economy that is moving sideways.”

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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Thu Jul 15, 2010 7:51 pm

Goldman Sachs to pay
out more than $550M
to settle securities
fraud suit

BY Bill Hutchinson
NEW YORK DAILY NEWS STAFF WRITER

Thursday, July 15th 2010, 5:19 PM

The Wall Street giant was accused of
duping people into investing in subprime mortgages
that were designed to fail.

Wall Street titan Goldman Sachs agreed Thursday to
fork over $550 million to settle a civil suit that
charged it duped people into investing in subprime
mortgages designed to fail.

"This settlement is a stark lesson to Wall Street firms
that no product is too complex, and no investor too
sophisticated, to avoid a heavy price if a firm
violates the fundamental principles of honest
treatment and fair dealing," said Robert Khuzami,
enforcement director for the Securities Exchange
Commission.

Goldman Sachs has agreed to pay the SEC $300
million in fines and $200 million in restitution to
investors taken by the fraud, according to people
familiar with the deal.

The company, however, does not have to admit
wrongdoing.

The fine is the largest against a financial company
in SEC history, but is only 1/20th of the $10 billion
in bonuses the firm handed out last year.

The company earned $13.4 billion in 2009 and
$3.3 billion in the first quarter of this year.

Goldman Sachs was accused of misleading investors
by failing to tell them the mortgage securities had
been chosen by a Goldman hedge fund client,
Paulson & Co., that was betting the investments
would fail

The civil suit, charging Goldman with securities
fraud, was filed by the SEC on April 16.

It remained unclear if a separate criminal
investigation of Goldman by federal prosecutors will
be called off.

Goldman and other Wall Street giants have come
under heavy scrutiny for the financial shenanigans t
hat helped fuel the nation's economic meltdown.

Executives at Goldman were hauled before a Senate
committee for an embarrassing public grilling about
whether they bilked investors and pocketed huge
bonuses with financial instruments that were
designed to fail.

(advocate comments.......about five cents in fines for every dollar paid out in bonuses last year at Goldman. Probably closer to a thousandth of a cent for every dollar earned in a criminal nature. Who said crime does not pay?)
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Mon Jul 05, 2010 9:45 pm

PAUL B. FARRELL

July 6, 2010, 12:01 a.m. EDT
Obama's 'Presidency in Peril' or 'Failed President?'
12 deadly signs Wall Street's 'Conspiracy of Weasels' killed Obama's reforms

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Financial reform is D.O.A. Window dressing. What's next? An implosion? Yes, a depression. Dead ahead.

Scott Adams warned of this trend in "Dilbert & the Way of the Weasel." Forget competition. No, capitalism breeds monopolies, it's a "financial system designed to transfer money from lesser weasels to greater weasels. Someday, if everything goes according to plan, one supreme weasel will have all the money and everyone else will be his or her domestic servant."


Jobs data point to more uncertainty
Phil Izzo & Paul Vigna analyze today's jobs report and what it says about the state of the economic recovery. Plus, Naftali Bendavid on why today's unemployment numbers are a problem for Democrats.

Until then, 99% of America's wealth remains concentrated in Wall Street's "Conspiracy of Weasels." They know only one thing, blindly "follow the money. If you took the same amount of money" traded daily on the NYSE, "sealed it in drums and dropped it in the ocean, 4 billion weasels would drown just trying to be near it."

When Obama signs the so-called reform bill, blow a goodbye kiss to our last great hope for true reform: Obama failed. True reform will never happen. Wall Street gains more power fighting every new reform bill, making massive investments in lobbyists. Witness their rapid return to power since near-bankruptcy in 2008.

No, the Weasel Conspiracy members didn't drown, they rule America. They killed democracy, destroyed capitalism and are consolidating vast new wealth and power in the hands of this conspiracy of Wall Street, Corporate CEOs, the Forbes 400 and Washington's pay-to-play power-players. Result: Less than one million co-conspirators control a nation of 310 million citizens.

Here are 12 more warnings exposing the Weasel Conspiracy's phony financial reforms:

1. Robert Kuttner: Obama, 'Presidency in Peril?' Or a 'Failed President?'

Kuttner's opening paragraph in his new book, "Presidency in Peril" is brutal: "In the spring of his second year, Barack Obama is at risk of being a failed president ... a great stagnation ... prolonged suffering for ordinary people ... the lost promise of an era of reform." Obama's failure would leave 2008-2012 as merely a brief interregnum in a long Republican era, with the far right more dominate and more extreme with each election cycle."

Yes, we "averted a second Great Depression," but to benefit few: "Wall Street has recovered and its executives are once again collecting tens of billions in bonuses, but Main Street is not sharing in the prosperity." Why? Obama continued "Bush's failed policies ... a president elected as a change agent opted for so much continuity" that he merely institutionalized "the enduring and bipartisan influence of the financial industry."

2. Morici: If the economy 'goes down ... it's for good ... cannot soon recover'

Economist Peter Morici warns: "Outlook darkens for Obama" with "a terrible performance" the year after "a deep recession ... The economy must add 13 million private-sector jobs by the end of 2013 to bring unemployment down to 6%, and Obama's policies are not creating conditions for businesses to hire."

Then, in "Double Dip or Off the Cliff" Morici sounds a dark alarm: "Without a radical change in policy, the nation is at risk of a terrible calamity ... If the economy goes down a second time ... deficits can't be much increased ... the Fed can't further cut interest rates." So the economy "likely goes down for good. Unemployment would rise into the teens, and the economy would sink into a depression -- a deep and painful slump from which it cannot soon recover."

3. Paul Krugman: 'The Third Depression?' or the 'Great Depression II?'

"We are now ... in the early stages of a third depression" and "the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense ... primarily a failure of policy ... governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. ... And who will pay the price for this triumph of orthodoxy? The answer is tens of millions of unemployed workers, many of whom will go jobless for years and some of whom will never work again."

4. The Economist: Coming revolution will force a new age of austerity

"Borrowing has been the answer to all economic troubles in the past 25 years. Now debt itself has become the problem," says Philip Coggan in the Economist. "A society built on consumption will have to pay more attention to saving. The idea that using borrowed money to buy assets" is over, "the debt-financed model has reached its limit. Most of the options for dealing with the debt overhang are unpalatable. ... The battle between borrowers and creditors may be the defining struggle of the next generation."

Struggle? An underestimation: It will accelerate rapidly into a revolution after November.

5. Dylan Ratigan: Reform? No, Obamanomics is same failed Reaganomics

"The same Washington spinsters who have driven our country into the ground" are now claiming a "policy victory" the "the most sweeping change of our financial regulatory since the Great Depression." Wrong ... "The real sweeping change of our financial system took place over the past 20 years." The "repeal of Glass-Steagall in 1999. The Commodities and Futures Modernization Act of 2000 ... legalized the most destructive financial instruments of all, derivatives," writes MSNBC's Ratigan in HuffPost. "What does it mean ... that the same people who brought you these horrible changes" have now "institutionalized the policies that will keep the causes of these problems firmly in place."

6. Time: 'The Best Laws Money Can Buy. For Sale: Your Government'

Lobbyists got $3.5 billion last year. "That's the biggest bargain in town," says Steven Brill in Time. Example: "Since 2009, the Private Equity Council has paid Capitol Tax ... $30,000-a-month retainer to keep its members' taxes low." With other groups lobbying on the same issue, the overall spending ... was maybe $15 million. ... What did the money managers get for their $15 million investment?

While lawmakers did manage to boost the taxes of hedge-fund managers ... they agreed to a compromise ... A tax bite about $10 billion smaller than what the reformers wanted." That $15 million bet on lobbyists returned $10 billion, a 700:1 return. Yes, reform's dead, new meltdown ahead.

7. New York Times: Weak president, Congress surrender reg-making to lobbyists

The president is doing the same thing with the SEC and Wall Street that Cheney did with the Minerals Management Service Agency and the oil giants, letting industry write its own regulations. The Times warns: "Lobbying Shifts to Regulations ... Well before Congress reached agreement on the details of its financial overhaul legislation, industry lobbyists and consumer advocates started preparing for the next battle: influencing the creation of several hundred new rules and regulations."

By letting agencies "decide many details," a weak president and weaker Congress are surrendering to Wall Street lobbyists. No wonder analyst Robert Prechter "foresees a slide worse that the Great Depression."

8. U. S. News: Lobbyists kill 'fiduciary duty,' Congress buries it in 'studies'

Another example: Congress "resolved an impasse over whether broker-dealers who give personalized advice to retail investors should be required to act in the best interests of those clients. The compromise calls for the SEC to conduct a six-month study on the subject. The commission will then have the authority to decide whether to impose a new standard."

So Wall Street wins again forcing a weak president "compromise." Up to a week ago the House bill directed the SEC to impose a universal fiduciary duty. Jack Bogle's been after one for 50 years. But Wall Street hates the idea of having any ethical duties to Main Street. Lacking a moral conscience, they will quietly kill it later.

9. Bloomberg News: Congressional 'weasels' gut the Volcker Rule

Worse: In the New York Review of Books a month ago Volcker saw little hope, warning "the time we have is growing short." Then, at the last minute came the final insult, reported Bloomberg: Congress gave "banks until 2022 to fully implement the so-called Volcker rule as an accommodation for Wall Street ... The Glass-Steagall Act of 1933 forced commercial banks such as what is now J.P. Morgan Chase & Co. to shed their investment-banking units in less than two years."

Accommodation? Seems like all Obama, Dodd and Frank have been doing is "accommodating" Wall Street. Sadly, by 2022 the next wave of Reaganomics power-players will have totally erased Obama's reforms from history.

10. Simon Johnson: 'Financial reform is irrelevant' to Goldman Sachs

More proof? Goldman now believes domestic reforms are irrelevant, while it increases global betting, says Simon Johnson, former IMF chief economist and co-author of "13 Bankers." Johnson quotes Sam Finkelstein, Goldman's head of emerging markets: "Debt-to-GDP ratios in the developed world are about double those in emerging markets and they're growing. This makes emerging markets interesting."

Since Goldman's already screwed up America, they're now are hell-bent on screwing up the rest of the world.

11. Time, Stephen Gandel: Traders now dominate 'The Weasel Conspiracy'

The Fed's "two decades of cheap money" turned "the Street over to the traders. That led to a very different way of doing business" which former UBS trader Philipp Meyer says is very simple: "With a trader, the goal of every minute of every day is to make money. If running the economy off the cliff makes you money, you will do it, and you will do it every day of every week." Morality, ethics and the public interest are irrelevant in the Weasel Conspiracy's business model. All that matters is making money, making it fast.

12. Fortune: 'No Perp Walks? No Jail Time?' Why? Banksters own America!

Back in 2002 former SEC Chairman Arthur Levitt told Fortune: "America's investors have been ripped off as massively as a bank being held up by a guy with a gun and a mask." Sadly, Levitt now consults for Goldman.

Recently Becky Quick, anchor of CNBC's Squawk Box wrote a Fortune column: "No Perp Walks. No Jail Time. Why Prosecutors Are Going Easy on Wall Street." Answer: Because Wall Street's banksters no longer need guns and masks. Their highly effective mercenary lobbyists now own Obama's "Presidency in Peril." So they're all protected by get-out-of-jail-free cards.

Quick's summary predicts the future: "Populist anger on Main Street is boiling over, and no wonder. As long as prosecutors continue to look at such white-collar crime as too difficult or too unrewarding to tackle, you can expect the mercury to just keep rising."

And with it "moral hazard" will skyrocket as traders take ever bigger risks to justify their mega-million bonuses, convinced they're immune from prosecution and convinced that in the future taxpayers will again bailout Wall Street's too-political-to-fail banksters.

Warning: Soon the Weasel Conspiracy's out-of-control greed will trigger a historic backlash ... the coming second American Revolution ... an explosive economic class-driven civil war ... paving the way for the second Great Depression ... dead ahead.
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Mon Jun 28, 2010 9:23 pm

How Wall Street Wrecked Your Retirement


By Nicholas von Hoffman <http://www.alternet.org/authors/9694/> ,

The Nation <http://www.thenation.com/> .

July 25, 2008 <http://www.alternet.org/ts/archives/?date[F]=07&amp;date[Y]=2008&amp;date[d]=25&amp;act=Go/> .

People are discovering they have been forced into a system in which others have gambled with their retirement savings and lost it.

Our dysfunctional financial system hit a new low last week when Citigroup, the hopeless wreck of Wall Street, announced it had lost $2.5 billion <http://online.wsj.com/article/SB121636319957764985.html?mod=%20todays_us_page_one> in the past three months – a cheer went up, and so did the Dow. Only $2.5 billion; <http://www.fool.com/investing/general/2008/07/21/strike-three-for- citigroup.aspx> people were afraid the losses would be much higher. Happy days are here again.


There are no happy days for the millions of Americans who have been trying to put away some money for their retirement in tax-sheltered entities like IRAs, Roth Accounts and 401(k)s. For them, the market's downward slope has been harrowing and frightening. When will the steady erosion of their savings end? And when it does, what will be left of their future financial security?


Many of the millions suffering through these worrisome months didn't buy a house they could not afford, didn't speculate on their homes, didn't let greedy impulses lead them to the edge of foreclosure or bankruptcy. Nevertheless, the excesses of their neighbors and the criminal folly of American finance is destroying their plans for retirement. It is dragging down much of the value of their homes, on which they have never missed a payment, homes on which they were counting on selling at retirement to help finance their last years in comfort.


For years, the privatization propagandists have been telling people that when the time comes, Social Security will not be there for them. Now many are learning that it's their private savings that may not be there. They are discovering they have been forced into a system in which other people have, in effect, been allowed to gamble with their retirement savings and have lost it.


The way the private, you're-on-your-own retirement system was supposed to work had individuals, during their younger, working years, investing in stock through tax-sheltered accounts. Almost nobody who is not breaking the law can choose among individual stocks and make money, so future retirees have been encouraged to buy mutual funds run by professional managers, who are supposed to be able to pick the winners.


Most of them aren't much better at doing that than are their customers, but in a rising market, a chicken pecking at stock tables can pick winners. In boom times, it doesn't matter that the future retiree must choose among thousands of mutual funds, many of which carry ruinously high fees. The damage to people's savings goes unnoticed until the market begins to go down.


Even as the market falls, future retirees are told not to panic, to keep their money where it is, because in the long run the value of their accounts will go up and they will have many a happy sunset year traveling the globe and showering their grandchildren with presents.


As the retirement date comes near, they are advised to begin selling stocks and buying fixed-income securities – as bonds are sometimes called – because these pay the interest they earn on a fixed schedule, providing a regular income.


For this to work, stock prices must be high when the holdings are sold and the bonds purchased must pay high rates of interest. But what happens when the stock market is in a nosedive and interest rates are half of the inflation rate, as is the case right now? Panic and worry, no golden years of travel, no presents for the grandchildren. The energy that was to be expended on leisure activities is now spent instead trying to figure out how to make ends meet.


The bright spot is Social Security. That check does come with the regularity of the calendar, whether the market is up or down, whether interest rates be high or low and if, as is the case now, the Greenspan-Bush inflation is destroying family budgets. Social Security adjusts for the rising prices.


But Social Security is too narrow a ledge to stand on through the years between retirement and death. It was designed as the base on which other retirement savings were to be built.


Those savings – the house and the tax-sheltered retirement accounts – are shriveling up and blowing away. The persons for whom Americans' savings have been a reliable source of income are the brokers, the lawyers, the account administrators, the whole tribe of Wall Street fee farmers. They get other people's retirement money regardless of the direction the market may be moving in.


You can't call it a broken system because it was a bad one from the start. It is failing, just as its critics said it would. And what lies ahead for those whose retirement savings are gone may be a very unpleasant old age.
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Tue Jun 22, 2010 5:52 am

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(advocate comment......Fascinating article by Paul. What I get out of what he is pointing out to us, is that the investment and banking industry may have captured the high moral ground by spending billions of dollars on advertising. The public at large cannot know what to believe since the ads convince them things are properly run, and yet the industry gets to pick the pockets of the country while all this goes on, and most of us are not able to recognize this. Ignorance is indeed bliss...............)

PAUL B. FARRELL
June 22, 2010, 12:01 a.m. EDT · Recommend (7) · Post:
Wall Street's Invisible Gorilla is killing America's soul
Commentary: Why millions of Main Street investors cannot see they're destroying capitalism

Doomsday Capitalism virus is spreading

The investor's brain is a very bad computer

Years ago America's leading behavioral economist, Richard Thaler warned: "Think of the human brain as a personal computer with a very slow processor and a memory system that is small and unreliable ... the PC I carry between my ears has more disk failures than I care to think about." And it ages badly.

Factor the Lake Wobegon Effect and the Invisible Gorilla into your computer. What do they tell you about the impact of billions of irrational decisions made by all gamblers betting at Wall Street's 24/7 global casino?

Here are four irrational clues: Remember, between 2000 and 2010 Wall Street lost 20% of your retirement playing the stock market ... Still Wall Street pocketed hundreds of billions for themselves ... Still those fat cats off-loaded trillions of debt on taxpayers when in de facto bankruptcy in 2008 ... and yet our brains let them get away with it.

The conclusion is obvious: The average investor's brain is so irrational it is totally inadequate as a tool in evaluating market trends, cycles and patterns, in picking stocks, and in judging the value of so-called expert advice we get from self-interested bankers, advisers and cable pundits ... and yet, paradoxically, like alcoholics, coke addicts and gamblers, we cannot stop. Crazy but true. Listen as Dr. Bloom continues:

"Halfway through the video, a woman wearing a full-body gorilla suit walks slowly to the middle of the screen, pounds her chest, and then walks out of the frame. If you are just watching the video, it's the most obvious thing in the world. But when asked to count the passes, about half the people miss it." (Translation: Same happens when you're counting passes in the stock market; you miss not only the obvious but the secret stuff Wall Street's Invisible Gorillas are purposely hiding)

Only half? No, my friends, it's far worse. In Bloom's own studies "63% of Americans consider themselves more intelligent than the average American, a statistical impossibility. In a different survey, 70% of Canadians said they considered themselves smarter than the average Canadian." But when it comes to financial markets, its closer to 100%, for both little "gamblers" and the big "casino owners."

Wall Street's Invisible Gorillas really are stealing America blind

Want more proof? Remember the studies by University of California behavioral finance professors Terrance Odean and Brad Barber: They researched the trading behavior of 65,000 American investors. Also all investors trading on the Taiwan Stock Exchange. Their conclusion: "The more you trade the less you earn." 77% of Americans were losers. 82% of Chinese investors were losers. And still: Their brains are so irrational, so addicted, they can't stop, just keep going back.

Yes, investors are stuck with addictive Loser Brains. Even confronted with the facts investors continue in denial, victims of the Lake Wobegon Effect, refusing to learn the lessons of the Invisible Gorilla. Bloom concludes:

"When you direct your mental spotlight to the basketball passes, it leaves the rest of the world in darkness ... Even when you are looking straight at the gorilla (and other experiments find that people who miss it often have their eyes fully on it) you frequently don't see it, because it's not what you're looking for."

Get it? Your brain is wired to make bad decisions. Wired to make them over and over. Wired to miss crucial data. And this has a cumulative and collective effect that drives markets to the edge of a precipice with such powerful momentum that we're blinded by euphoria, never see the Invisible Gorilla, the Black Swan, the WMD ... never see the risks until it's too late, a catastrophe happens and the invisible becomes painfully visible, tragically blowing up in our faces

Sound familiar? It did happen in 2008 forcing former Fed Chairman Alan Greenspan to admit to a congressional committee: "I found a flaw ... I made a mistake." Actually Mr. Greenspan you were a miserable maestro. For 18 years the mistakes your irrational brain made blinded you to an invisible Reaganomics Gorilla that's still destroying America.

Treasury Secretary Henry Paulson was even worse, later reluctantly admitted he should "have seen the subprime crisis coming earlier." But it turns out he's a liar and con man. Yes, later Bloomberg News reported Paulson not only saw the Invisible Gorilla, he warned Bush's staff at Camp David in 2006, two years before the meltdown. But then the Lake Wobegon Effect kicked in, our leaders all ignored the warnings until the 2008 crash.

Wall Street has no soul, is drowning America in Lake Wobegon

The irrational brains of our leaders are so self-destructive they let bubbles blow and blow ... they will always fail to act early enough ... they are trapped in their greedy brains in denial ... trapped in their narrow ideologies ... trapped, making endless stupid decisions ... ignoring the obvious ... they will let risks become increasing more deadly till minor pops becomes colossal WMD-category meltdowns, crashes, collapses of epic catastrophic proportions, worse than the estimated $23.7 trillion aftermath of the 2008 meltdown ... and another is dead ahead.

Yes, tragically many more are coming because Wall Street is morally dead, it has no conscience, no soul, no ethics, no moral values other than getting as rich as possible, as fast as possible. Tragically, Wall Street is now the Invisible Hand of Capitalism 4.0. Tragically, Wall Street's believes the best economy is an unregulated free-market system where the collective greed of the biggest players best serves the public good.

Yes, tragically for future generations of Americans the guidance system of capitalism's Invisible Hand has been replaced by the guiding hand of Wall Street: With no public conscience, no soul, no ethics, no moral values, nothing other than the addict's obsession to get as rich as possible, fast as possible.

And tragically, Main Street America is trapped with them in the Lake Wobegon Effect. Tragically, the Invisible Gorilla will strike again, soon, and again, and again exploding into visibility ... until our rude awakening.
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Re: The Smartest Guys in the Room.....are crooks

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PAUL B. FARRELL
http://www.marketwatch.com/story/americ ... iteid=nbkh

June 1, 2010, 3:11 a.m. EDT
American investors: Predictably stupid losers
Commentary: Obama backs status quo, helping Wall Street skim hundreds of billions

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Yes, I am mad as hell again. Wall Street's soulless, immoral, greedy bankers really believe that the vast majority of America's 95 million investors are not only "predictably irrational" but "stupid," as J.P. Morgan Chase's chief investment officer put it in Forbes a while back.

Worse, Main Street investors are losers for continuing to trust Wall Street after they lost 20% of our retirement money the last decade. Now, worst of all, Wall Street's traders have profiled Main Street investors in their algorithms: Yes, investors are "predictably stupid losers," what Vegas croupiers call a mark, a dumb gambler that can be easily conned out of his money.


Detecting fraud's early warning signs
Investors and financial advisers always need to watch out for companies engaging in fraud and deceit. Howard Schilit, founder and CEO at Financial Shenanigans Detection Group, describes some of the early warnings signs of accounting tricks and gimmicks companies use to manipulate their financial statements. Steven Russolillo has the interview from the CFA Institute conference.

Why so blunt? Listen: Recently I explained why the Wall Street banks must kill financial reform, to preserve their multibillion dollar bonus pool. One reader commented: "I worked at the Bear Sterns ... every word written here is true. Fact is, bankers regard themselves as wolves and the public as prey, and speak about it openly, among themselves." Then he added a sucker punch: "What is extraordinary to me is how willingly the sheep submit to this."

Yes, folks, Wall Street is certain that America's 95 million investors are clueless sheep headed for the slaughterhouse.

But wait, that's not news. Twenty years ago former bond trader Michael Lewis' "Liar's Poker" described the insanity of our addiction to gambling in a few memorable lines: "Men on the trading floor may not have been to school but they have Ph.D.s in man's ignorance." They know that "in any market, as in any poker game, there is a fool. The astute investor Warren Buffett is fond of saying that any player unaware of the fool in the market probably is the fool in the market."

And as we now know, in the stock market the vast majority of America's 95 million investors are fools -- predictably stupid losers.

Lewis says traders instinctively know that "the larger the number of people" chasing a trend, "the easier it was for them to delude themselves that what they were doing must be smart. The first thing you learn on the trading floor is that when large numbers of people are after the same commodity, be it a stock, a bond, or a job, the commodity quickly becomes overvalued," making it easy for traders to generate hundred-million-dollar-profit days.

Too blunt? Sorry but that's exactly how Wall Street sees you

Are we too harsh, folks? Sorry for lumping you readers in with the rest of Main Street's 95 million predictably stupid losers. But what else could a rational person conclude?

So you ask: What triggered this rant? Simple: A new book, "The Upside of Irrationality: The Unexpected Benefits of Defining Logic at Work and at Home," by Dan Ariely, the brilliant Duke University behavioral economist who earlier wrote the one book whose title alone tells you all you'll ever need to know about behavioral economics. Answer: You are "Predictably Irrational." Period.

I feel sorry for all books on behavioral economics. Why? Because most are written by brilliant academicians and top journalists, not callous, greedy Wall Street traders who'd never divulge their secrets. But that's no excuse: These books are all filled with misleading pop-psychology nonsense based on a simple premise: That if you just buy these books and apply their advice, you can change the way you think, become less irrational and be a better investor, even beat Wall Street. Wrong.

Never read another behavioral economics book ... ever

Here's a partial list of popular behavioral economics books you should never waste time reading. They're also based on that same misleading assumption that you can make your brain less irrational and win at Wall Street's casino. Never happen in a million years. Never.

Wall Street's already programmed your psychological profile into their trading algorithms. They're light-years ahead of you, misleading you into their slaughterhouses and casinos. Here's the list of the popular books no investor should ever read:

"Animal Spirits: How Human Psychology Drives the Markets and Why It Matters for Global Capitalism"

"Beyond Greed and Fear: Understanding Behavioral Finance & the Psychology of Investing"

"Blind Spots: Why Smart People Do Dumb Things"

"Blunder: Why Smart People Make Bad Decisions"

"Drunkard's Walk: How Randomness Rules Our Lives"

"Logic of Life: Rational Economics in an Irrational World"

"Mind Over Money: Matching Your Personality to a Winning Financial Strategy"

"Myth of the Rational Market: A History of Risk Reward & Delusion on Wall Street"

"Nudge: Improving Decisions About Health, Wealth & Happiness"

"Sway: The Irresistible Pull of Irrational Behavior"

"Train Your Mind, Change Your Brain: How a New Science Reveals Our Extraordinary Potential to Transform Ourselves"

"Your Money & Your Brain: How the New Science of Neuroeconomics can Help Make You Rich"

"Why Smart People Make Big Money Mistakes, And How to Correct Them: Lessons From the New Science of Behavioral Economics"

Why such a strong warning? Remember, all these books were built on the original research of Daniel Kahneman who won the 2002 Nobel Economics Prize for his work in behavioral economics. Moreover, all of them were published before Wall Street's meltdown a couple years ago. And still Main Street investors lost trillions of retirement money.

Get it? Reading books on behavioral economics not only didn't help, it probably gave you a false sense of security that made you even more vulnerable to Wall Street's deceptive con game ... and given their current $400 million lobbying efforts to kill reforms, you can bet another meltdown is destined to happen again, soon.

Admit it, investors are sheep, fools, predictably stupid losers

So what's the only thing you need to know about behavioral economics? Begin with the fact that you are predictably irrational. Your brain is not only irrational, your behavior is easily predicted. You can be manipulated without ever knowing it. Wall Street knows your brain is your worst enemy, that 88% of your behavior is driven by the subconscious, biases you cannot change. The fact is, Wall Street does not want intelligent investors who think.

So read all you want, see all the shrinks you want, trade all you want, nothing will save you. Wall Street already has your profile in their trading algorithms. They'll always be light-years ahead of you.

And finally, in spite of all their claims of professionalism, neuroeconomists, perhaps more than other economists, are political animals. As Bloomberg BusinessWeek put it, "the rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient."

The fact is, neuroeconomists are political mercenaries-for-hire who can "prove" any scenario, neoKeynesian or Reaganomics.

Worse, our political leaders are becoming predictably stupid losers

Political animals? You bet. Reminds me of Alan Greenspan's congressional testimony admitting that the Reaganomics free market trickle-down economics failed America: Greenspan admitted he made a "mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and equity."

There was "a flaw in the model ... that defines how the world works," said Greenspan. "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he told Congress. Unregulated markets "held sway for decades" ... then "the whole intellectual edifice, however, collapsed."

And it'll get worse, thanks to Bernanke, Obama and Goldman's lobbyists. Greenspan's deeply flawed Reaganomics remains anchored deep in America's brain and DNA. So every promise made in every behavioral-economics book ever written about the principles originally defined by Kahneman will continue to mislead America's 95 million Main Street investors ... and fail.

Why? Because the insatiable greed driving the Goldman Conspiracy of Wall Street banks is so addictive, so powerful, so overwhelming, so much in control of the political process that nothing, absolutely nothing, can change the next inevitable mega-crash dead ahead.
http://www.marketwatch.com/story/americ ... iteid=nbkh
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Tue Jun 01, 2010 7:00 am

PAUL B. FARRELL
http://www.marketwatch.com/story/americ ... iteid=nbkh

June 1, 2010, 3:11 a.m. EDT
American investors: Predictably stupid losers
Commentary: Obama backs status quo, helping Wall Street skim hundreds of billions

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Yes, I am mad as hell again. Wall Street's soulless, immoral, greedy bankers really believe that the vast majority of America's 95 million investors are not only "predictably irrational" but "stupid," as J.P. Morgan Chase's chief investment officer put it in Forbes a while back.

Worse, Main Street investors are losers for continuing to trust Wall Street after they lost 20% of our retirement money the last decade. Now, worst of all, Wall Street's traders have profiled Main Street investors in their algorithms: Yes, investors are "predictably stupid losers," what Vegas croupiers call a mark, a dumb gambler that can be easily conned out of his money.


Detecting fraud's early warning signs
Investors and financial advisers always need to watch out for companies engaging in fraud and deceit. Howard Schilit, founder and CEO at Financial Shenanigans Detection Group, describes some of the early warnings signs of accounting tricks and gimmicks companies use to manipulate their financial statements. Steven Russolillo has the interview from the CFA Institute conference.

Why so blunt? Listen: Recently I explained why the Wall Street banks must kill financial reform, to preserve their multibillion dollar bonus pool. One reader commented: "I worked at the Bear Sterns ... every word written here is true. Fact is, bankers regard themselves as wolves and the public as prey, and speak about it openly, among themselves." Then he added a sucker punch: "What is extraordinary to me is how willingly the sheep submit to this."

Yes, folks, Wall Street is certain that America's 95 million investors are clueless sheep headed for the slaughterhouse.

But wait, that's not news. Twenty years ago former bond trader Michael Lewis' "Liar's Poker" described the insanity of our addiction to gambling in a few memorable lines: "Men on the trading floor may not have been to school but they have Ph.D.s in man's ignorance." They know that "in any market, as in any poker game, there is a fool. The astute investor Warren Buffett is fond of saying that any player unaware of the fool in the market probably is the fool in the market."

And as we now know, in the stock market the vast majority of America's 95 million investors are fools -- predictably stupid losers.

Lewis says traders instinctively know that "the larger the number of people" chasing a trend, "the easier it was for them to delude themselves that what they were doing must be smart. The first thing you learn on the trading floor is that when large numbers of people are after the same commodity, be it a stock, a bond, or a job, the commodity quickly becomes overvalued," making it easy for traders to generate hundred-million-dollar-profit days.

Too blunt? Sorry but that's exactly how Wall Street sees you

Are we too harsh, folks? Sorry for lumping you readers in with the rest of Main Street's 95 million predictably stupid losers. But what else could a rational person conclude?

So you ask: What triggered this rant? Simple: A new book, "The Upside of Irrationality: The Unexpected Benefits of Defining Logic at Work and at Home," by Dan Ariely, the brilliant Duke University behavioral economist who earlier wrote the one book whose title alone tells you all you'll ever need to know about behavioral economics. Answer: You are "Predictably Irrational." Period.

I feel sorry for all books on behavioral economics. Why? Because most are written by brilliant academicians and top journalists, not callous, greedy Wall Street traders who'd never divulge their secrets. But that's no excuse: These books are all filled with misleading pop-psychology nonsense based on a simple premise: That if you just buy these books and apply their advice, you can change the way you think, become less irrational and be a better investor, even beat Wall Street. Wrong.

Never read another behavioral economics book ... ever

Here's a partial list of popular behavioral economics books you should never waste time reading. They're also based on that same misleading assumption that you can make your brain less irrational and win at Wall Street's casino. Never happen in a million years. Never.

Wall Street's already programmed your psychological profile into their trading algorithms. They're light-years ahead of you, misleading you into their slaughterhouses and casinos. Here's the list of the popular books no investor should ever read:

"Animal Spirits: How Human Psychology Drives the Markets and Why It Matters for Global Capitalism"

"Beyond Greed and Fear: Understanding Behavioral Finance & the Psychology of Investing"

"Blind Spots: Why Smart People Do Dumb Things"

"Blunder: Why Smart People Make Bad Decisions"

"Drunkard's Walk: How Randomness Rules Our Lives"

"Logic of Life: Rational Economics in an Irrational World"

"Mind Over Money: Matching Your Personality to a Winning Financial Strategy"

"Myth of the Rational Market: A History of Risk Reward & Delusion on Wall Street"

"Nudge: Improving Decisions About Health, Wealth & Happiness"

"Sway: The Irresistible Pull of Irrational Behavior"

"Train Your Mind, Change Your Brain: How a New Science Reveals Our Extraordinary Potential to Transform Ourselves"

"Your Money & Your Brain: How the New Science of Neuroeconomics can Help Make You Rich"

"Why Smart People Make Big Money Mistakes, And How to Correct Them: Lessons From the New Science of Behavioral Economics"

Why such a strong warning? Remember, all these books were built on the original research of Daniel Kahneman who won the 2002 Nobel Economics Prize for his work in behavioral economics. Moreover, all of them were published before Wall Street's meltdown a couple years ago. And still Main Street investors lost trillions of retirement money.

Get it? Reading books on behavioral economics not only didn't help, it probably gave you a false sense of security that made you even more vulnerable to Wall Street's deceptive con game ... and given their current $400 million lobbying efforts to kill reforms, you can bet another meltdown is destined to happen again, soon.

Admit it, investors are sheep, fools, predictably stupid losers

So what's the only thing you need to know about behavioral economics? Begin with the fact that you are predictably irrational. Your brain is not only irrational, your behavior is easily predicted. You can be manipulated without ever knowing it. Wall Street knows your brain is your worst enemy, that 88% of your behavior is driven by the subconscious, biases you cannot change. The fact is, Wall Street does not want intelligent investors who think.

So read all you want, see all the shrinks you want, trade all you want, nothing will save you. Wall Street already has your profile in their trading algorithms. They'll always be light-years ahead of you.

And finally, in spite of all their claims of professionalism, neuroeconomists, perhaps more than other economists, are political animals. As Bloomberg BusinessWeek put it, "the rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient."

The fact is, neuroeconomists are political mercenaries-for-hire who can "prove" any scenario, neoKeynesian or Reaganomics.

Worse, our political leaders are becoming predictably stupid losers

Political animals? You bet. Reminds me of Alan Greenspan's congressional testimony admitting that the Reaganomics free market trickle-down economics failed America: Greenspan admitted he made a "mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and equity."

There was "a flaw in the model ... that defines how the world works," said Greenspan. "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he told Congress. Unregulated markets "held sway for decades" ... then "the whole intellectual edifice, however, collapsed."

And it'll get worse, thanks to Bernanke, Obama and Goldman's lobbyists. Greenspan's deeply flawed Reaganomics remains anchored deep in America's brain and DNA. So every promise made in every behavioral-economics book ever written about the principles originally defined by Kahneman will continue to mislead America's 95 million Main Street investors ... and fail.

Why? Because the insatiable greed driving the Goldman Conspiracy of Wall Street banks is so addictive, so powerful, so overwhelming, so much in control of the political process that nothing, absolutely nothing, can change the next inevitable mega-crash dead ahead.
http://www.marketwatch.com/story/americ ... iteid=nbkh
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Fri May 14, 2010 5:49 pm

America's Ten Most Corrupt Capitalists
Thursday 13 May 2010
by: Zach Carter | AlterNet

The financial crisis has unveiled a new set of public villains—corrupt corporate capitalists who leveraged their connections in government for their own personal profit. During the Clinton and Bush administrations, many of these schemers were worshiped as geniuses, heroes or icons of American progress. But today we know these opportunists for what they are: Deregulatory hacks hellbent on making a profit at any cost. Without further ado, here are the 10 most corrupt capitalists in the U.S. economy.

1. Robert Rubin

Where to start with a man like Robert Rubin? A Goldman Sachs chairman who wormed his way into the Treasury Secretary post under President Bill Clinton, Rubin presided over one of the most radical deregulatory eras in the history of finance. Rubin's influence within the Democratic Party marked the final stage in the Democrats' transformation from the concerned citizens who fought Wall Street and won during the 1930s to a coalition of Republican-lite financial elites. Rubin's most stunning deregulatory accomplishment in office was also his greatest act of corruption. Rubin helped repeal Glass-Steagall, the Depression-era law that banned economically essential banks from gambling with taxpayer money in the securities markets. In 1998, Citibank inked a merger with the Travelers Insurance group. The deal was illegal under Glass-Steagall, but with Rubin's help, the law was repealed in 1999, and the Citi-Travelers merger approved, creating too-big-to-fail behemoth Citigroup.

That same year, Rubin left the government to work for Citi, where he made $120 million as the company piled up risk after crazy risk. In 2008, the company collapsed spectacularly, necessitating a $45 billion direct government bailout, and hundreds of billions more in other government guarantees. Rubin is now attempting to rebuild his disgraced public image by warning about the dangers of government spending and Social Security. Bob, if you're worried about the deficit, the problem isn't old people trying to get by, it's corrupt bankers running amok.

2. Alan Greenspan

The officially apolitical, independent Federal Reserve chairman backed all of Rubin's favorite deregulatory plans, and helped crush an effort by Brooksley Born to regulate derivatives in 1998, after the hedge fund Long-Term Capital Management went bust. By the time Greenspan left office in 2006, the derivatives market had ballooned into a multi-trillion dollar casino, and Greenspan wanted his cut. He took a job with bond kings PIMCO and then with the hedge fund Paulson & Co.—yeah, that Paulson and Co., the one that colluded with Goldman Sachs to sabotage the company's own clients with unregulated derivatives. Incidentally, this isn't the first time Greenspan has been a close associate of alleged fraudsters. Back in the 1980s, Greenspan went to bat for politically connected Savings & Loan titan Charles Keating, urging regulators to exempt his bank from a key rule. Keating later went to jail for fraud, after, among other things, putting out a hit on regulator William Black. ("Get Black – kill him dead.") Nice friends you've got, Alan.

3. Larry Summers

During the 1990s, Larry Summers was a top Treasury official tasked with overseeing the economic rehabilitation of Russia after the fall of the Soviet Union. This project, was, of course, a complete disaster that resulted in decades of horrific poverty. But that didn't stop top advisers to the program, notably Harvard economist Andrei Shleifer, from getting massively rich by investing his own money in Russian projects while advising both the Treasury and the Russian government. This is called "fraud," and a federal judge slapped both Shleifer and Harvard itself with hefty fines for their looting of the Russian economy. But somehow, after defrauding two governments while working for Summers, Shleifer managed to keep his job at Harvard, even after courts ruled against him.

That's because after the Clinton administration, Summers became president of Harvard, where he protected Shleifer. This wasn't the only crazy thing Summers did at Harvard—he also ran the school like a giant hedge fund, which went very well until markets crashed in 2008. By then, of course, Summers had left Harvard for a real hedge fund, D.E. Shaw, where he raked in $5.2 million working part-time. The next year, he joined the the Obama administration as the president's top economic adviser. Interestingly, the Wall Street reform bill currently circulating through Congress essentially leaves hedge funds untouched.

4. Phil and Wendy Gramm

Summers, Rubin and Greenspan weren't the only people who thought it was a good idea to let banks gamble in the derivatives casinos. In 2000, Republican Senator from Texas Phil Gramm pushed through the Commodity Futures Modernization Act, which not only banned federal regulation of these toxic poker chips, it also banned states from enforcing anti-gambling laws against derivatives trading. The bill was lobbied for heavily by energy/finance hybrid Enron, which would later implode under fraudulent derivatives trades. In 2000, when Phil Gramm pushed the bill through, his wife Wendy Gramm was serving on Enron's board of directors, where she made millions before the company went belly-up.

When Phil Gramm left the Senate, he took a job peddling political influence at Swiss banking giant UBS as vice chairman. Since Gramm's arrival, UBS has been embroiled in just about every scandal you can think of, from securities fraud to tax fraud to diamond smuggling. Interestingly, both UBS shareholders and their executives have gotten off rather lightly for these acts. The only person jailed thus far has been the tax fraud whistleblower. Looks like Phil's earning his keep.

5. Jamie Dimon

J.P. Morgan Chase CEO Jamie Dimon has done a lot of scummy things as head of one of the world's most powerful banks, but his most grotesque act of corruption actually took place at the Federal Reserve. At each of the Fed's 12 regional offices, the board of directors is staffed by officials from the region's top banks. So while it's certainly galling that the CEO of J.P. Morgan would be on the board of the New York Fed, one of J.P. Morgan's regulators, it's not all that uncommon.

But it is quite uncommon for a banker to be negotiating a bailout package for his bank with the New York Fed, while simultaneously serving on the New York Fed board. That's what happened in March 2008, when J.P. Morgan agreed to buy up Bear Stearns, on the condition that the Fed kick in $29 billion to cushion the company from any losses. Dimon-- CEO of J.P. Morgan and board member of the New York Fed-- was negotiating with Timothy Geithner, who was president of the New York Fed-- about how much money the New York Fed was going to give J.P. Morgan. On Wall Street, that's called being a savvy businessman. Everywhere else, it's called a conflict of interest.

6. Stephen Friedman

The New York Fed is just full of corruption. Consider the case of Stephen Friedman (expertly presented by Greg Kaufmann for the Nation). As the financial crisis exploded in the fall of 2008, Friedman was serving both as chairman of the New York Fed and on the board of directors at Goldman Sachs. The Fed stepped in to prevent AIG from collapsing in September 2008, and by November, the New York Fed had decided to pay all of AIG's counterparties 100 cents on the dollar for AIG's bets—even though these companies would have taken dramatic losses in bankruptcy. The public wouldn't learn which banks received this money until March 2009, but Friedman bought 52,600 shares of Goldman stock in December 2008 and January 2009, more than doubling his holdings.

As it turns out, Goldman was the top beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman made millions on the Goldman stock purchase, and is yet to disclose what he knew about where the AIG money was going, or when he knew it. Either way, it's pretty bad—if he knew Goldman benefited from the bailout, then he belongs in jail. If he didn't know, then what exactly was he doing as chairman of the New York Fed, or on Goldman's board?

7. Robert Steel

Like better-known corruptocrats Robert Rubin and Henry Paulson, Steel joined the Treasury after spending several years as a top executive with Goldman Sachs. Steel joined the Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded to do, well, nothing much until financial markets went into free-fall in 2008. When Wachovia ousted CEO Ken Thompson, the company named Steel as its new CEO. Steel promptly bought one million Wachovia shares to demonstrate his commitment to the firm, but by September, Wachovia was in dire straits. The FDIC wanted to put the company through receivership—shutting it down and wiping out its shareholders. But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share—saving Steel himself $7 million. He now serves on Wells Fargo's board of directors.

8. Henry Paulson

His time at Goldman Sachs made Henry Paulson one of the richest men in the world. Under Paulson's leadership, Goldman transformed from a private company ruled by client relationships into a public company operating as a giant global casino. As Treasury Secretary during the height of the financial crisis, Paulson personally approved a direct $10 billion capital injection into his former firm. But even before that bailout, Paulson had been playing fast and loose with ethics rules. In June 2008, Paulson held a secret meeting in Moscow with Goldman's board of directors, where they discussed economic prognostications, market conditions and Treasury rescue plans. Not okay, Hank.

9. Warren Buffett

Warren Buffett used to be a reasonable guy, blasting the rich for waging "class warfare" against the rest of us and deriding derivatives as "financial weapons of mass destruction." These days, he's just another financier crony, lobbying Congress against Wall Street reform, and demanding a light touch on—get this—derivatives! Buffet even went so far as to buy the support of Sen. Ben Nelson, D-Nebraska, for a filibuster on reform. Buffett has also been an outspoken defender of Goldman Sachs against the recent SEC fraud allegations, allegations that stem from fancy products called "synthetic collateralized debt obligations"—the financial weapons of mass destruction Buffett once criticized.

See, it just so happens that both Buffet's reputation and his bottom line are tied to an investment he made in Goldman Sachs in 2008, when he put $10 billion of his money into the bank. Buffett has acknowledged that he only made the deal because he believed Goldman would be bailed out by the U.S. government. Which, in fact, turned out to be the case, multiple times. When the government rescued AIG, the $12.9 billion it funneled to Goldman was to cover derivatives bets Goldman had placed with the mega-insurer. Buffett was right about derivatives—they are WMD so far as the real economy is concerned. But they've enabled Warren Buffett to get even richer with taxpayer help, and now he's fighting to make sure we don't shut down his own casino.

10. Goldman Sachs

No company exemplifies the revolving door between Wall Street and Washington more than Goldman Sachs. The four people on this list are some of the worst offenders, but Goldman's D.C. army has includes many other top officials in this administration and the last.

White House:

Joshua Bolton, chief of staff for George W. Bush, was a Goldman man

Regulators:

Current New York Fed President William Dudley is a Goldman man

Current Commodity Futures Trading Commission Chairman Gary Gensler has been a responsible regulator under Obama, but he was a deregulatory hawk during the Clinton years, and worked at Goldman for nearly two decades before that.

A top aide to Timothy Geithner, Gene Sperling, is a Goldman man

Current Treasury Undersecretary Robert Hormats is a Goldman man

Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist

Former SEC Chairman Arthur Levitt is now a Goldman adviser

Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man

COO of the SEC Enforcement Division Adam Storch is a Goldman man

Congress:

Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson

Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for Congress

Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman

And the list goes on.

Zach Carter is an economics editor at AlterNet and a fellow at Campaign for America's Future. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.
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Re: The Smartest Guys in the Room.....are crooks

Postby admin » Tue May 04, 2010 9:12 am

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PAUL B. FARRELL


May 4, 2010, 12:01 a.m. EDT
6 reasons 'Goldman Conspiracy' must kill reforms
Derivatives-bonus culture needs neo-Reaganomics resurgence to survive

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Remember Nietzsche? "God is dead." Let's translate that 19th century Germanic philosophy into modern economics. In Adam Smith's 1776 capitalism, God was the Invisible Hand, a mysterious force running the economy from the shadows.

Flash forward to 2010: Capitalism is dead. The economy has a new Invisible Hand, the Goldman Conspiracy of Wall Street bankers.


Advisers face fallout over Goldman issues
Regulatory concerns surrounding the recent Goldman Sachs hearings leave financial advisers with some explaining to do. Steve Stahler, an independent adviser and President of The Stahler Group, explains how advisers can go about having these difficult conversations with clients.

This transfer of power happened suddenly. As recently as late 2008 the Invisible Hand was on life support, near death. Suddenly, miraculously the Treasury secretary, Goldman's former CEO, transferred the power into a new Invisible Hand of God, the free-market ideology of Reaganomics ... a power absolutely essential to the survival of Wall Street's mega-bonus culture.

Yes, that's why the Goldman Conspiracy must kill financial reforms ... why they will kill effective reform with the backroom support of Obama and Dodd. This was predicted back in late 2008, even before the bailouts, back when we thought Reaganomics dead. "Shock Doctrine" author Naomi Klein warned:

"Free market ideology has always been a servant to the interests of capital ... During boom times it's profitable to preach laissez faire, because an absentee government allows speculative bubbles ... When those bubbles burst, the ideology becomes a hindrance and goes dormant while big government rides to the rescue," then a neo-Reaganomics "ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis," setting up a new bubble, bigger meltdown, and the Great Depression 2 the world narrowly avoided in 2008.

America's now at a historic turning point. If the Goldman Conspiracy succeeds in killing reform, another collapse is guaranteed, soon. Listen to Time magazine's Stephen Gandel:

"Of all the causes of the financial crisis, one of the biggest was a power shift on Wall Street that left the traders in charge and the bankers who had traditionally run everything from Broad Street to Maiden Lane sidelined. Years ago, the investment world and its professionals believed in long-term relationships. That meant nurturing the economy and the companies and people in it." Yes, that was the culture when I was with Morgan Stanley back in the '70s.

But "two decades of cheap money, though, helped turn the Street over to the traders. That led to a very different way of doing business." Gandel captures Wall Street's new culture in one powerful quote: "With a trader, the goal of every minute of every day is to make money ... So if running the economy off the cliff makes you money, you will do it, and you will do it every day of every week."

Wall Street's culture is without a conscience, reveling in $100 million profit days. Traders act like cocaine addicts. Their brains have warped Wall Street's ethics so badly they can't think of anything but bonuses. They've lost their moral compass.

The 6 reasons Obama/Dodd helping Wall Street kill financial reforms

In this context, the Goldman Conspiracy's goals are very simple as they manipulate Congress and the president to protect their warped culture:

No Fed audits, no transparency, no matter how much money the Fed prints for the banks

A toothless Consumer Protection Agency

Wall Street must continue controlling rating agencies

Unregulated proprietary trading of derivatives with loopholes for corporate derivatives

No new Glass-Steagall laws to prevent Wall Street from trading with customers' deposits

And taxpayers must remain liable for future bailouts over $50 billion up to unlimited sums even greater that the recent $23.7 trillion the Fed and Treasury handed out.

Bottom line: The Goldman Conspiracy must kill any real financial reform. Why? The Goldman Conspiracy cannot generate huge bonuses without their new Invisible Hand; the resurrection of unregulated neo-Reaganomics allowing traders to keep gambling in the lucrative $670 trillion global derivatives shadow banking casino.

There's a super-power ideology driving this new Invisible Hand, the neo-Reaganomics that the Conspiracy's lobby is pushing as a substitute for real reform. The principles of their neo-Reaganomics are simple, three ideologies evolved since Reagan's election.

Former Fed Chairman Alan Greenspan's guru Ayn Rand: "When I say capitalism, I mean a pure, uncontrolled, unregulated laissez-faire capitalism, with a separation of economics, in the same way and for the same reasons as a separation of state and church." This ideology guided the world's monetary policy 18 years.

Nobel economist Milton Friedman taught President Reagan "government is the problem." Democracy changed too slowly for him. Klein tells us Friedman believed that "only a great rupture, a flood, a war, a terrorist attack, can create the vast, clean canvasses they crave ... to begin remaking the nation" using the tools of "privatization, government deregulation and deep cuts in social spending."

The current resurgence of Reaganomics is all part of the Goldman Conspiracy's takeover of America. But what's most alarming in their efforts to kill reforms is the new form of government. What they want goes beyond a plutocracy of the rich. Goldman Conspiracy is creating an Orwellian world that resembles the 14 traits of totalitarianism outlined by Laurence Britt in Free Inquiry, an article that's become the single most downloaded article in that magazine.

We first reviewed the 14 traits prior to the 2008 election in "Wall Street's 'Disaster Capitalism for Dummies." Since then this trend has rapidly spread across America.

With this trend, the Conspiracy has crossed a dangerous line. Their lobbying efforts make clear they no longer have to pretend America is a democracy.

I do not like what Wall Street's doing to our freedoms. Years ago I was an investment banker with Morgan Stanley. I'm a patriot, a Marine veteran, volunteered for Korea. I see the Goldman Conspiracy not only killing Adam Smith's capitalism but also democracy and substituting itself as the new Invisible Hand of God running the economy ... and the government.

14 traits of the Conspiracy's emerging new American government

Britt's historical analysis of totalitarian governments revealed 14 shared traits that are now emerging in this resurgent neo-Reaganomics ideology. As you read these 14 traits that Britt wrote just five years ago in Free Inquiry magazine imagine their impact on your retirement and your children's future under the Goldman Conspiracy's rule, without real reforms. Imagine later, after the next meltdown that Wall Street will trigger:

The rich get first priority: laws, tax breaks, favorable regulations

Labor and low wages: stagnant for decades, while CEOs skyrocket

National security obsession: same paranoia shorts domestic programs

Superpower with huge military: war gets 54% of America's budget

Extreme nationalism: ego-driven need to feel superior when threaten

Demonize "enemies:" manipulates public, tightens central control

Corruption and cronyism: the rich get richer with unlimited authority

Obsession with crime: psychological projection of guilt onto "them"

Contempt for human rights: democratic protections hinder leaders

Fraudulent elections: Supreme Court approves political rule by rich

Mass media manipulation: new Orwellian world, ends justify means

Obsession with sexism: ideologies dictate constitutional freedoms

Disdain for intellectuals: Palin, Joe the Plumber replace Bill Buckley

Religion in government: anti-science ideologues guide public policy

Yes, officially America is still a democracy. We still have enough rituals to support the illusion. But the truth is, America has become a plutocracy run by and for the wealthy. Now the rich are running a new trickle-down political economy dispensing leftovers as they rule America through lobbyist mega-bucks siphoned from taxpayers and congressional puppets ... all the signs of the new totalitarianism government that most Americans are in denial of even as the Conspiracy flagrantly pushes this agenda.

It's crucial you see the logical outcome of Goldman Conspiracy's agenda as they keep spending upwards of $400 million on lobbyists to kill financial reforms. They want to destroy Adam Smith's original Invisible Hand of Capitalism. They are blindly obsessed with the new Invisible Hand of Reaganomics that grants economic immortality to Wall Street's too-greedy-to-fail banks, a position that even Ronald Reagan would reject.

Why? Because the Goldman Conspiracy is destroying not just America's economic position as the world's super-power but our moral leadership in the world.

The Goldman Conspiracy's destiny is to blow a new bigger bubble, trigger a new bigger meltdown, and finally drive America into the second Great Depression we dodged twice before.

These guys have no conscience, so be warned. If the financial reforms are as dead as already being widely reported, then the Goldman Conspiracy has won and you should prepare for a repeat of 1929 and the 1930s Depression in the near future.


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