Iceland Abandoned

By HANNES H. GISSURARSON

November 17 2008

Brown’s actions helped to worsen the island’s financial crisis.

REYKJAVIK, Iceland

As recently as last year, Iceland was considered an economic success story. After 16 years of free-market reforms, it was one of the world’s 10 richest and freest countries. Efficiently managing its fish stocks — elsewhere operated with huge losses — it also enjoyed a strong pension system. Massive tax cuts had led to strong economic growth and rising tax revenues. At the same time, extensive privatization generated about $2 billion for the state, allowing it to pay off most of its debt. The newly privatized banks were flourishing. Income distribution was relatively even, and the poverty level one of the lowest in Europe. Like other Nordic countries, Iceland was a stable democracy under the rule of law.

Then, in the first week of October 2008, all went wrong. The three main Icelandic banks collapsed and the government took over their domestic branches. It is still unclear what will happen to their foreign operations. The local currency, the krona, went into free fall. Foreign trade came to a standstill, as it became almost impossible to transfer money to and from the country.

Why did the international financial crisis hit Iceland so hard? A plausible answer is that Iceland’s banks were oversized: With assets worth more than 10 times the country’s GDP, the Icelandic Central Bank simply could not act as their only lender of last resort. In hindsight, Iceland’s Financial Supervisory Authority should perhaps have demanded much earlier that financial institutions significantly scale down their foreign operations.

While some Icelandic bankers may have behaved recklessly, there is another side to the story. In 1994, Iceland joined the European Economic Area, a free-trade zone that unites the 27 EU member states with Norway, Liechtenstein and Iceland. The idea was that any company based within the EEA could operate freely throughout the area, provided it followed the rules.

The Icelandic banks took this seriously and began operations in other European countries, working under EEA regulations. Efficient, aggressive and technologically advanced, they often offered better terms than their competitors, undoubtedly causing some resentment.

At the beginning of the financial crisis in 2007, the Icelandic banks were quite solvent. They had almost no subprime loans. But there was a foreseeable liquidity problem. When the Icelandic Central Bank tried to obtain credit lines from other central banks in the EEA, it was refused almost everywhere. Suddenly, it did matter where the banks had their headquarters. Once the financial markets realized that there was no credible lender of last resort in the Icelandic financial system, a run on the banks became almost inevitable.

One or two of the Icelandic banks might have survived, though, if on Oct. 8 British Prime Minister Gordon Brown had not used the country’s antiterrorist law to take over the assets and operations of two Icelandic banks in the U.K., Kaupthing and Landsbanki. The Icelandic Ministry of Finance and Central Bank even found themselves briefly on the list of terrorist organizations published on the Web site of the British Treasury, alongside al Qaeda and the Taliban.

These British measures significantly worsened Iceland’s financial crisis. The island’s banking system and foreign trade collapsed. Unsurprisingly, banks are reluctant to transfer money to and from “terrorists.”

Mr. Brown justified his draconian actions by saying that the Icelandic government was unwilling to honor its legal obligations to British depositors of Icelandic banks. There is no evidence for this charge. To the contrary, the Icelandic government repeatedly asserted that all legal obligations to depositors in the EEA area would be honored. These obligations are covered by the Icelandic Depositors’ and Investors’ Guarantee Fund set up under EEA rules. The fund is an independent body, guaranteeing all deposits up to about €20,000. However, if the fund is unable to fully meet its obligations, then there is no requirement, under EEA rules, for the Icelandic government to step in.

Prime Minister Brown also talked darkly of last-minute bank transfers from England to Iceland. Whether that is true or false remains to be seen. But interestingly, the last-minute transfer of $8 billion from Lehman Brothers in England to America in September did not land the U.S. Treasury or the Federal Reserve on the British list of terrorist organizations.

Having helped to bring down two of the three Icelandic banks, Mr. Brown, using the position of London as a financial center and his country’s influence in the IMF and the European Union, demanded that the Icelandic government go far beyond what the Depositors’ and Investors’ Guarantee Fund is obliged to do under EEA rules. The prime minister, fearing that the fund does not have sufficient means, insisted that the Icelandic government must guarantee foreign deposits in Icelandic banks. Late Sunday, Reykjavik succumbed to this pressure and agreed to reimburse European savers for up to about €20,000. This might put a debt of perhaps $10 billion on the shoulders of 310,000 people, close to 100% of the country’s GDP.

The central banks in the EEA that refused to come to the assistance of the Icelandic Central Bank probably did not anticipate the damage their inaction would cause even beyond Iceland’s shores. And Prime Minister Brown probably did not understand that bringing down the Icelandic banks would inflict much higher costs on British depositors than if he had stayed calm and participated in resolving the situation.

Little wonder that Icelanders these days feel rather abandoned by their European friends.

Mr. Gissurarson is a board member of Iceland’s central bank and a professor of political philosophy at the University of Iceland.

Source

Well Mr. GissurarsonI I have to agree with you. Seems Iceland was in the process of doing everything within their power to resolve the problem.  What Brown did certainly didn’t help matters any. The EU, Iceland and Canada all started falling together.

Icesave may have been a problem but it of course was  a Privately owned bank. Iceland itself at the time was not in control of it. The owner however was.

Brown punishing a country because of a privately owned bank, was over stepping his bounds for sure.

The Government in Iceland was working to remedy the problem. Brown was in my opinion in to much of a hurry.

Iceland certainly is not a terrorist country and should not have been treated as such.

From October -There is more in my November Index as well.

New State-Run Glitnir Bank Established

Iceland’s Kaupthing Prepares Lawsuit against Britain

Iceland Registers Complaint about Britain to NATO

Government set on collision course with Iceland over Landsbanki assets

Iceland ‘working day and night’

Salaries hit by Icelandic bank Collapse

Fear on streets of Reykjavik as country can only go to IMF for financial bailout

UK Government ‘ignored Iceland warning’/ Charities may lose

Prime Minister Gordon Brown has condemned Iceland’

Iceland government seizes control of Landsbanki

Icelands, Icesave freezes deposits and withdrawals

EU, Iceland, Canada Suffering Fall Out, Caused By US Crisis

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The domino effect: Road to recession

It began with the banks. Then house prices began to tumble. In the months that followed, the shock waves spread, engulfing first high streets, then factories – and thousands of jobs. In this gripping account, Paul Vallely travels across Britain to meet the people whose lives – and livelihoods – have fallen victim to the domino effect that left a nation broken

November 12 2008

We could begin with Peter Sastawnyuk. The 53-year-old businessman filled his £370,000 detached home with petrol canisters, sealed the locks, set tripwires and threatened to set the place alight. More than 40 of his neighbours were evacuated from the posh cul-de-sac on the edge of the Pennines from which Sastawnyuk sent his children to be educated at private school. But the cradle of his dreams imploded, in the end, as the scene of a five-hour police siege. The trigger for it all, a court in Rochdale was told last month, was that he had lost his job, got into debt and had had his home repossessed.

Or we could start with Karl Harrison. The father-of-two was found hanging in his garden shed in Anglesey. The 40-year-old surveyor had lost his job when the housing market began to turn down. He fell behind with his payments on his home loan and was being harassed by a firm called Oakwood Homeloans to pay the arrears, the recent inquest was told. Harrison’s widow has now put the house on the market.

But we do not need melodrama or tragedy to tell this story. So, instead, let us begin with what is becoming a more everyday misfortune.

It was an ordinary Thursday morning in early October when Jackie Horn, a 43-year-old IT worker, left her neat little Edwardian town house behind Stockport Grammar School to make the short journey to work. Her destination was the Vauxhall Industrial Estate in which the largest site was occupied by the company for which she had worked for the past 16 years – Chemix, which manufactured the compounds from which uPVC window frames and cladding are made.

She looked back casually at the house, with its handsome stained-glass windows, and got in her car, a small silver Peugeot. She had bought the house 12 years ago and, though she lived alone, her mortgage was nicely manageable. She had had the car for two years and it was all paid for. At Chemix, she had risen from being a receptionist to being a computer programmer. She was better paid now. Hers was a settled life.

She had had an inkling that things were not quite right at work. She noticed from her IT processing that orders for resin, Chemix’s incoming raw material, had been down for a while. So were orders for the compounds the firm produced as the nation’s door-to-door salesmen found ever-larger numbers of people saying no to the idea of having their windows replaced.

Then, about four weeks earlier, the management had told the workforce that it might have to move to only three or four days’ working each week. The workers had rejected the idea in a ballot and a couple of weeks later were told there might have to be selective redundancies. But letters had gone out a few days before saying that jobs in sales and IT were safe.

When she arrived at the little factory, “a lot of blokes in suits” had appeared. A meeting of the whole workforce was called. The firm was in administration, the bankruptcy accountants told them. They had all lost their jobs. They should leave immediately.

“It was a real shock,” she says. “One day I was receiving a letter telling me my job was safe; the next it had gone. The mood was bad. Everyone was saying goodbye. They were hugging and shaking hands.” She was told she would be kept on for an extra two weeks to help with the shutdown. “I couldn’t look the men in the eye.” Now she, too, sits idle at home.

The Domino Effect

The chain of events – which began with salesmen on commission wildly dishing out sub-prime mortgages (to poor people the United States who did not even have to prove they had the earnings to repay them) and ended with Jackie Horn losing her job – is a long one.

I have spent the past few weeks tracing each link in that chain through the stories of a series of people:

The fall-off in demand for Chemix’s products was the result of decisions such as the one made by a Birmingham newsagent, whose domestic economies included not having his windows removed and replaced with uPVC frames because his cigarette sales were down.

Cigarette sales at the newsagent’s had fallen because staff at the nearby Range Rover production plant had had their hours cut.

Range Rover sales are down because a wide variety of businesses are now tightening their belts; not replacing company cars is an obvious money saver.

Among the businesses not replacing company cars as part of general cost cutting are the shop-fitting, sign-writing and advertising firms employed by retail giant Marks & Spencer, which has had two-thirds wiped from the value of its shares this year.

Trade in shops is down because consumer confidence has fallen in line with catastrophic drops in the prices of shares.

Share market volatility was provoked by the sudden refusal of the banks to lend money to anyone, including each other.

The crisis of confidence within the banks was fed by the dramatic multi-billion dollar collapse of the investment bank Lehman Brothers, which was the biggest bankruptcy the world has ever seen.

To make sense of this complex saga, I set out to travel around the United Kingdom to speak to individuals who had played a key part in each stage of the tumbling of the economic dominoes. There were repeated surprises along the way. Encounters with the real world are like that. Not everything turns out as you might expect.

Northern Rock – Panic Begins

The giant tower of the new Northern Rock building stands empty, like a monument to the folly of the years of reckless capitalism. It has never been occupied. Out at Gosforth, on the northern edge of Newcastle, it is the place where the first rumblings of the seismic shakeout that is now gripping the globe were first detected in the UK.

Today, the yellow-brick buildings that surround it are still staffed, but by managers and employees humbled by the events of the past 12 months which have turned them from freebooting buccaneers of a banking world – in which the possibilities of growth seemed unlimited – to servants of a nationalised service industry. Even the bricks seem symbolic, for the yellow brick road in The Wizard of Oz led to a gleaming city with a giant fraud at its heart.

The man who is driving me round the once-mighty complex is Dennis Grainger. He was once a senior employee of the firm and is now the leading light in the Northern Rock Shareholders Action Group. The combination makes him uniquely placed to tell the story of the building society that turned bank after Margaret Thatcher’s deregulation of the financial sector and which last year provoked the first run on a British bank since the Victorian era.

“Northern Rock was not involved in dodgy sub-prime lending,” says Grainger, 61, of Cramlington, Northumberland. “Our loans were good, safe lending to people who could afford to repay. The Rock was very strict in asking whether people could afford to borrow that amount.” He knows this because one of his jobs was to manage the people checking the paperwork.

“After the crisis broke, the media said the problem was that Northern Rock lent people more than they needed to buy their homes. And it is true that we did offer 125 per cent loans, to cover the house purchase and additional expenses. But the rates of default on those were just half the national average.”

What did for Northern Rock was that so much of the money it lent did not come from depositors but was borrowed by the bank on the international money markets. That is what had turned a provincial building society into the UK’s fifth largest mortgage lender – and a FTSE 100 company. “Some 80 per cent of the mortgages we gave out had been borrowed in this way,” Grainger says. ” I know I used to sign the documents for millions of transfers each month.”

The problem came when, on 9 August 2007, one of France’s three biggest banks, BNP Paribas, told investors that they could not take money out of two of its funds because it was unable to value the assets in them. This was because the financial world had created complex financial packages out of the sub-prime debt and sold them on to other investors. It was like pass the parcel; investors had, in effect, bought blind because the deals had so many layers that no one knew what lay at their heart.

The crunch came when some investors wanted their money back and Paribas realised it did not know whether it had the money to pay out. It was, in the words of Northern Rock’s former chief executive Adam Applegarth, “the day the world changed”. Money markets across the globe shut down because they did not know which banks would remove the final wrapper from the “credit default swaps” – and find they were holding a booby prize.

When the money stopped flowing, banks like Northern Rock – which had, in the jargon, “borrowed short-term to lend long-term” – could not get hold of the cash to finance their next day’s business. On 13 September 2007 the BBC’s business editor, Robert Peston, revealed that Northern Rock had asked for emergency support from the Bank of England. But there was no danger of the bank going bust, he added, so customers need not panic.

“It had the same effect that Corporal Jones does in Dad’s Army,” observes Grainger wryly. “When you shout, ‘Don’t panic! Don’t panic!!” people do exactly the opposite. Peston should have known that.” Outside Northern Rock’s branches, massive queues formed of savers demanding to withdraw their money.

But, if there was compassion for savers, there was scant sympathy for those running Northern Rock, whose chairman was a non-banker – the local oddball free-market environmentalist aristocrat Matt Ridley – and whose risk committee was chaired by Sir Derek Wanless, who had previously been ousted from NatWest with a reported £3m payoff. It was they who had endorsed the aggressive growth strategy of bullish chief executive Applegarth and, in the words of the financial journalist Alex Brummer, author of The Crunch: the scandal of Northern Rock and the Escalating Credit Crisis, “allowed him to run riot, without checks and balances”.

The people most often forgotten in all this are the shareholders. “People assume all the shares were held by big institutions and greedy hedge funds,” says Grainger, “but a quarter of the shares are held by little folk.” Again, he knows because he has met 2,000 of them in the streets where he sets up his Shareholders Action Group stall. Another 4,000 have emailed him.

“These people are not speculators or gamblers. They are people in their seventies, eighties and nineties living on very small incomes who received a few hundred shares in the original demutualisation. Many are old ladies keeping their shares to pay for their funeral arrangements and who I’ve seen crying in the streets, saying they will now be a burden to their family. They are Mr and Mrs Shipyardworker who put their savings, with pride, into the local bank.”

Again, this is not academic to Dennis Grainger. Every month for 10 years he put £250 of his salary into the Northern Rock employees’ Share and Save scheme. It was to be his retirement pot. At one point it was worth £114,000. Today it is utterly worthless. “The real losers in all this are the small investors who worked for Northern Rock or savers who bought shares and remained loyal to the bank,” he concludes. “The treatment they have suffered is very unfair.”

It is not the only consequence. To accelerate the payback to the taxpayer, the new management at the now-nationalised company is pursuing an aggressive policy of repossessing the homes of borrowers who get into arrears. Northern Rock’s rate of repossessions is currently running at around double the industry average. And leaked documents from inside the bank reveal that it is set to double numbers in its debt collection arm.

There is a quiet indignation in Grainger’s conclusion. “We have been treated very badly by the Government,” he says. “Northern Rock was illiquid, not insolvent. When there was a run on the bank they wouldn’t lend us £2.7bn, but they’ve had to stump up £400bn to prop up other banks since. We should have been given the same terms as other banks were subsequently given.”

But there was one other bank not included in the rescue deal. When Lehman Brothers investment bank folded it provoked the biggest corporate bankruptcy ever seen.

Lehman – The Untouchables?

Until recently, Andrew Gowers had an office on the 30th floor of a tower in Canary Wharf which offered a stunning panorama of the City of London. It seemed an appropriate location for the UK arm of an investment bank that was one of the big five beasts of Wall Street. If there was any institution whose members might fall prey to the hubris of believing that they truly were Masters of the Universe – as top City traders described themselves with an irony which depreciated with the passing years – then the men at the top of Lehman Brothers might be among their number. The air indeed seemed rarefied at that height. The shame was that nobody bothered to pack the oxygen.

For the past month, Gowers, a former editor of the Financial Times – and now a former director of communications at the 150-year-old US investment bank which had begun life in the 1850s as a cotton-trading partnership – has sequestered himself away in a far less public place, having quit the bank just before it collapsed. He has had a month “watching the autumn go by” in the south of France.

Northern Rock was the prequel to the concatenation of events which has seen £3,000bn wiped off the value of the world’s shares. It has also seen taxpayers across the globe spend double that amount to prop up the world’s banks. But it was the collapse of Lehman Brothers – and the sight of well-paid bankers carrying their belongings from their Canary Wharf offices in black sacks and cardboard boxes – which first suggested that something was going on that might have ripples that moved beyond the United States, or indeed, the Northumbrian fastness of Northern Rock.

But for Andrew Gowers, the writing had been on the Wharf for a good deal longer.

“There was a general awareness of difficulties,” he says, “from August 2007 onwards.” Lehman was a very large borrower, with, according to some estimates, around $130bn in debt, much of it in sub-prime. “But the feeling was that we weren’t as badly exposed as some and there appeared to be some good and clever hedging strategies in place, Gowers says. So 2007 ended as a record year with bumper revenues and the balance sheet grew in the first quarter of 2008 – “which a lot of people, after the fact, found pretty incomprehensible.”

There was no excuse for this complacency. In March, a smaller investment bank, Bear Stearns, had collapsed. In response, Lehman’s share price fell 48 per cent in less than a morning. “But the Lehman management told itself that we were different from Bear Stearns,” Gowers recalls, “because we weren’t so reliant on short-term borrowing and we had large amounts of liquidity.” Anyway, the US Federal Reserve – America’s equivalent of the Bank of England – had stepped in to save Bear Stearns. Perhaps the top people at Lehman – a far bigger bank – believed they would have a state safety net, too.

Even so, says Andrew Gowers, “it all scared the living daylights out of the top management and some major effort was made to shrink the balance sheet, to cut the borrowing and get rid of some of the problem assets.”

The trouble was that other banks were doing the same thing at exactly the same time. As a result, the prices of the assets they wanted to sell fell at a shockingly fast pace. Lehman began to run out of time. It could not offload enough of the dodgy sub-prime debts. To make matters worse, the “good and clever hedging strategies” began to come unstuck. Indeed, instead of offsetting losses, some of the hedges magnified them.

“From April, I became aware of quite a sizeable loss accumulating. Nobody was quite sure how big it was going to be.” In June, executives at Lehman’s money management subsidiary, Neuberger Berman, sent emails to the top managers at Lehman Brothers suggesting that they forgo bonuses – to “send a strong message to both employees and investors that management is not shirking accountability for recent performance.” Lehman’s executive committee dismissed the idea out of hand.

When the news of the first loss ever in Lehman’s independent history came out the market was shocked. Senior managers, including the chief executive, Dick Fuld, didn’t seem to get the measure of the problem. Gowers recalls: “They just thought: we’re not in a catastrophic place, we’ve suffered some buffeting from abnormal developments in the market, but we have a plan to get out of it.”

The market did not agree and the Lehman share price continued to plummet. “That caused jaws to drop, says Gowers and the bank’s chief financial officer Erin Callan and its president Joe Gregory, who had been Dick Fuld’s right-hand man for 34 years, resigned.

But it was not enough. “Eventually, at one minute before midnight, they came out with an explanation of what had gone wrong and what they planned to do,” Gowers recalls. “But it was too late.”

In the end, what did for Lehman was that its executives failed to understand that the politics had changed. On 7 September, America’s biggest mortgage providers, Fannie Mae and Freddie Mac, had to be rescued by the US government. It was one of the largest bailouts in US history. “A feeling grew in Congress that there had to be a limit,” Gowers says.

Lehman Brothers became that limit. “At quite a few points in the downward spiral Lehman’s could have been bought, but Dick Fuld was too proud to accept that,” Gowers adjudges. The result was the largest corporate bankruptcy in history.

Andrew Gowers got out just before the collapse, having concluded that his job had become untenable. The evening that I interviewed him, he had just returned from a relaxed day at the market in Cahors. There would be sea bream for dinner that night. But things looked a little more bleak for some of his former colleagues.

Investment bankers rank fairly low on the public sympathy index. Gowers acknowledges that, yet warns against broadbrush judgements. “There were a lot of people in Lehman’s who took 80 per cent of their pay in shares which were deferred for five years and a relatively low salary,” he says. Many borrowed against those shares and are now hiding away and licking their wounds.

“It had been rolling along in a fantastic way for so long that everybody really did began to think there was no way it was going to end. They applied that to their own personal finances, as well as the way they ran the firms, borrowing against tomorrow.”

But now, grimly, tomorrow has become today.

Blame it on the young guns

The seats are of the kind of red plush velvet that speaks not of your local Indian restaurant but of discreet wealth. The menu offers seared Isle of Skye scallops with pork belly squares and cauliflower purée. With the chateaubriand of Aberdeen Angus, served with a béarnaise sauce, I suspect that Duncan Glassey’s eye might alight at a £58 bottle of 1975 Château Cantenac Brown. But I am wrong. He is happy, he says, with an Australian shiraz, the cheapest on the list of bin ends in the smart Circus Wine Bar & Grill in the austere Georgian elegance of Edinburgh’s New Town.

“How did the world’s cleverest financiers get into this almighty mess?,” I ask him.

There is a lot about Duncan Glassey which is not what you might expect. The child chess prodigy who turned professional runs a wealth planning consultancy for the mediumly-rich. It grew out of his experience of working with lottery winners at the accountant Ernst & Young in the mid-Nineties. His firm Wealthflow LLP now specialises in clients with between £1m and £5m to invest.

For all that, he is modest in his own lifestyle. So much so that in the past he has been told that he lost business from new clients after turning up for the initial interview in a car which they decided was insufficiently grand. There is something about him of the solidity of old money. His client list includes aristocrats as well as advocates. Like those whose money he manages, his bias is towards the conservative and away from the febrile psychology of “active management” where, he insists, over-activity can sometimes substitute for solid long-term investment.

Glassey has some interesting thoughts on the generational conflicts that have tipped the world into financial crisis and to the brink of recession: “The people who made the strategy in the banks are of the baby-boomer generation born from 1945 onwards. They are a generation of grand visions, optimism and high ideals about combining individual empowerment with social values. They are the big talkers and the people with the vision and mission statements.”

By contrast, the generation who have managed us into the present situation have a very different set of attitudes and values. Generation X are the children of the Thatcher era. “They are at home with globalisation and the information revolution,” he says. “Change is normal, as is the idea of lifelong learning. They are not scared of failure.

“What’s important to them is individualism, choice, self-reliance and immediate gratification. They are thrill seekers.” They can be pessimists, cynics and selfish.

But the younger generation who created sophisticated financial products which have so dramatically imploded – the “masters of the universe” – are different again, Glassey says. “They are Generation Y, born from 1985 onwards. They are the generation who have not known a world without the internet. They are highly techno-savvy and street smart but information overload has made them hugely naive in many other ways. They are the Facebook and Bebo generation – networkers who live in a world where divorce and geographical dispersion has broken down the family. They are self-obsessed and close-focused.

“The belief systems of the three groups – the strategists, the managers and the traders – are entirely different,” concludes Glassey. “They don’t really understand one another at all. And they didn’t know what each other really wanted or expected out of the complex financial architecture they created.

“Everybody was locked into the Nick Leeson scenario; no one asked questions so long as everyone was making money.”

The shaven-headed Glassey, aged 39, characterises himself as on the cusp between generations X and Y but his values hark back to what he calls “the old days when banks were trustworthy and on your side, before they became out-and-out sales organisations”. His approach is to keep his clients away from financial fads and fashions and “commission-based products which are deliberately made so complex that clients can’t understand them”. Glassey was always suspicious of the world of credit-swap derivates which he saw as a parade of emperor’s new clothes. “I view all that as speculation. I’m not paid to make huge money for my clients; I’m paid to diversify risk.”

But his clients, Glassey acknowledges, will not be the ones to suffer. “Their portfolios may be down 15 per cent where others are down 35 per cent or more. But their homes and jobs are not as risk.” So whose jobs and homes are in peril? And why? The trail pointed away from the world of pure finance and into that of the stock market.

The trillion-dollar wipeout

They are still selling oysters and champagne in the great courtyard of the Royal Exchange which was founded in 1565 as the centre of commerce for the City of London. In the 17th century, stockbrokers were not allowed within its elegant portals because of their rude manners, but today it is no longer a stock market. Instead, it is a luxury shopping centre whose pillared and marbled atrium is lined with discreet boutiques bearing names like De Beers, Hermès, Tiffany, Bulgari and Cartier. A couple of lattes in its magnificent courtyard will set you back the price on an entire lunch for two in Bury market, of which more later.

I was there to meet Richard Hunter, head of British equities at the fund manager Hargreaves Lansdown – which manages £11bn in shares for its small investor clients. I wanted to find out why the alarm over bank shares that gripped the stock market then infected other areas. After the collapse of Lehman Brothers, it was not just banking shares that fell; equities plummeted in a wide range of companies that had no connections with the financial services industry.

“Credit is the oil in the machinery of the business world,” he says. Every business needs to borrow to finance the gap between buying its raw materials and the income arriving for what it sells. “The money that used to be available to do that just isn’t there any more because the banks have stopped lending to one another. All that has been impacted by the credit squeeze. That’s why share prices fell first in certain sectors – the banks and financial services companies – but soon spread to other areas.”

But there were a collection of other forces in the real economy that accelerated the speed with which prices fell.

“It was a cocktail of factors,” he says. “After the sub-prime crisis broke in the US and after the collapse of Northern Rock here, some people became more cautious and started to spend less.” Then came the global rise in food prices which raised the cost of bread, rice and other staples in the supermarkets; in April, rice prices were double what they had been seven months earlier. Next followed the international hike in the price of oil – it rose as high as $147 a barrel in July, almost treble what it had been a couple of years earlier. And that massively increased both domestic fuel bills and petrol prices.

“If it costs you an extra £10 a week to fill your car and you’re on a budget,” he says, “you have to find that £10 by cutting back somewhere. If you’re paying more for your gas and electricity you have to cut back on something else.”

Then, on top of all that, house prices had started to fall. The fall-off began slowly, last November. By April this year, house prices were lower than they had been a year before. It was the first time an annual drop had been recorded for 12 years. The number of new houses being built fell to the lowest level for 60 years. The building industry, after 13 years of unprecedented growth, faced a major slump; in July the housebuilder Taylor Wimpey asked shareholders for an extra £500m and failed to raise it. Mortgage lending crawled to a near standstill in August as approvals for new homes hit a record low. By September, house prices across the country had fallen by about 10 per cent. Repossessions rose to triple their previous level. In the worst hit areas, such as the centre of Manchester where thousands of buy-to-let apartments had been made in converted inner city warehouses, prices fell by more than 20 per cent.

Half the flats in one prestigious block, Albion Mill – a converted Victorian biscuit factory with double-height living rooms and stunning views across to the Pennines – were repossessed. One woman, Jeanette Leach, 31, got off the plane at Manchester Airport after a holiday in Tenerife and received a text message saying her home had been repossessed; she went straight into the toilets at Terminal Two and hanged herself with the cord from her tracksuit bottoms.

The majority of those falling into difficulties as result of the credit crunch were not driven to such extremes. But, says Richard Hunter, “the stock market tries to discount the falls in value that will come over the next nine to 12 months.” As soon as the banking system was pulled back from what the head of the International Monetary Fund called “brink of systemic meltdown”, investors began to consider what might be the short-to-medium term implications for the real economy. House prices were a key indicator.

And further contraction was obviously on the cards. Some 1.2 million homeowners in the UK are now faced with the prospect of negative equity because the prices of their properties have fallen below what they paid for them. Another 1.4 million households are due to come off short-term fixed-rate mortgage deals by the end of 2008. The credit crunch on the wholesale markets was making mortgages harder to come by. It contributed to a growing “feel-bad” factor on the markets. “With shares and house prices you don’t crystallise your loss till you sell, but you feel poorer because of all the bad news,” says Hunter, “and so your behaviour begins to change. Everyone cuts back.”

Some people do more than that. They panic.

“People who have been in the city 40 years are telling me that they’ve never seen this degree of volatility before,” Hunter says. “Panic overtakes logic. Just a few people running round like headless chickens can infect others because people look at the headless chickens and say: What do they know that I don’t? In the past they used to say that the market was driven by one prevailing emotion – greed or fear; this time it’s a cocktail of both.”

The result was an orgy of frenzied selling in which £2.7 trillion was wiped off the value of shares globally in a single week of extraordinary financial mayhem in October. This was when a crisis that had for months seemed confined to the world of banking began to ripple out into the real world.

Source

Real Change Depends on Stopping the Bailout Profiteers

To understand the meaning of the U.S. election results, it is worth looking back to the moment when everything changed for the Obama campaign. It was, without question, the moment when the economic crisis hit Wall Street.

Up to that point, things weren’t looking all that good for Barack Obama. The Democratic National Convention barely delivered a bump, while the appointment of Sarah Palin seemed to have shifted the momentum decisively over to John McCain.

Then, Fannie Mae and Freddie Mac failed, followed by insurance giant AIG, then Lehman Brothers. It was in this moment of economic vertigo that Obama found a new language. With tremendous clarity, he turned his campaign into a referendum into the deregulation and trickle down policies that have dominated mainstream economic discourse since Ronald Reagan. He said his opponent represented more of the same while he stood for a new direction, one that would rebuild the economy from the ground up, rather than the top down. Obama stayed on this message for the rest of the campaign and, as we just saw, it worked.

The question now is whether Obama will have the courage to take the ideas that won him this election and turn them into policy. Or, alternately, whether he will use the financial crisis to rationalize a move to what pundits call “the middle” (if there is one thing this election has proved, it is that the real middle is far to the left of its previously advertised address). Predictably, Obama is already coming under enormous pressure to break his election promises, particularly those relating to raising taxes on the wealthy and imposing real environmental regulations on polluters. All day on the business networks, we hear that, in light of the economic crisis, corporations need lower taxes, and fewer regulations — in other words, more of the same.

The new president’s only hope of resisting this campaign being waged by the elites is if the remarkable grassroots movement that carried him to victory can somehow stay energized, networked, mobilized — and most of all, critical. Now that the election has been won, this movement’s new missions should be clear: loudly holding Obama to his campaign promises, and letting the Democrats know that there will be consequences for betrayal.

The first order of business — and one that cannot wait until inauguration — must be halting the robbery-in-progress known as the “economic bailout.” I have spent the past month examining the loopholes and conflicts of interest embedded in the U.S. Treasury Department’s plans. The results of that research can be found in a just published feature article in Rolling Stone, The Bailout Profiteers, as well as my most recent Nation column, Bush’s Final Pillage.

Both these pieces argue that the $700-billion “rescue plan” should be regarded as the Bush Administration’s final heist. Not only does it transfer billions of dollars of public wealth into the hands of politically connected corporations (a Bush specialty), but it passes on such an enormous debt burden to the next administration that it will make real investments in green infrastructure and universal health care close to impossible. If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal.

Readers of The Shock Doctrine know that terrible thefts have a habit of taking place during periods of dramatic political transition. When societies are changing quickly, the media and the people are naturally focused on big “P” politics — who gets the top appointments, what was said in the most recent speech. Meanwhile, safe from public scrutiny, far reaching pro-corporate policies are locked into place, dramatically restricting future possibilities for real change.

It’s not too late to halt the robbery in progress, but it cannot wait until inauguration. Several great initiatives to shift the nature of the bailout are already underway, including http://bailoutmainstreet.com. I added my name to the “Call to Action: Time for a 21st Century Green America” and invite you to do the same.

Stopping the bailout profiteers is about more than money. It is about democracy. Specifically, it is about whether Americans will be able to afford the change they have just voted for so conclusively.

Source

Published in: on November 8, 2008 at 4:42 am  Comments Off on Real Change Depends on Stopping the Bailout Profiteers  
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Rescued bank to pay millions in bonuses

By Simon Bowers

November 1 2008

Royal Bank of Scotland, which is being bailed out with £20bn of taxpayers’ money, has signalled it is preparing to pay bonuses to thousands of staff despite government pledges to crack down on City pay.

The bank has set aside £1.79bn to cover “staff costs” – including discretionary bonuses – at its investment banking division for the first six months of the year alone. The same division caused a £5.9bn writedown that wiped out the bank’s profits for the same period.

The government had demanded that boardroom directors at RBS should not receive bonuses this year and the chief executive, Sir Fred Goodwin, is walking away without a pay-off. But below boardroom level, RBS and other groups are preparing to pay bonuses to investment bankers who continue to generate profits.

The disclosure drew fierce criticism from Vince Cable, the Liberal Democrat Treasury spokesman.

“The government said they would attach strict conditions on bonuses and it is very clear they are doing nothing of the kind.

“The banks are just making complete monkeys of them.”

He suggested the government would not have agreed to bail out any standalone investment bank. RBS and others had become “entangled with casino-style investment banking operations”, he said.

Despite the continuing financial turmoil and widespread criticism of the bonus culture in the City, the bank is understood to believe the payments are defensible.

A source said: “I think everybody would expect [that those responsible for writedowns] would not get a bonus. But there are people who still made fairly substantial money in other product areas – you cannot just not pay them bonuses, they will just go elsewhere.” Asked about the likely bonus culture after taxpayer-funded bail-out, the source said: “If the government does end up becoming a shareholder, RBS is still a listed entity. It remains the board’s responsibility to ensure it is run commercially.”

Several US politicians have seized on an investigation by the Guardian last month which showed six Wall Street banks – Goldman Sachs, Citigroup, Morgan Stanley, JP Morgan, Merrill Lynch and Lehman Brothers – had set aside $70bn (£42.5bn) in pay and bonuses for the first nine months of the year.

Five are in line to benefit from a $700bn US taxpayer bail-out. The sixth, Lehman Brothers, has collapsed – though not without securing considerable bonus payouts for staff in the US.

Henry Waxman, chairman of the House oversight committee, wrote to chief executives of America’s nine largest banks this week asking them to hand over information about their pay and bonus plans.

In his letter Waxman cites the Guardian report and says: “Some experts have suggested that a significant percentage of [bankers’ pay] could come in year-end bonuses and that the size of the bonuses will be significantly enhanced as a result of the infusion of taxpayer funds.”

Staff costs at RBS’s investment banking division include salaries already paid in the first six months of the year, national insurance and profit-sharing contributions as well as funds earmarked for end-of-year bonuses. The sum set aside is 20% lower than the equivalent figure for the first six months of 2007.

Banking sources privately acknowledge that the sight of these bonus accruals may provoke anger. They concede the industry’s pay and bonus regime is under unprecedented strain as it fails to reflect profitability, asset writedowns or share price declines.

Source

Not really surprised to see some of  the bailout money is going to those who were in part, responsible for the down fall of the banks in the first place.

Governments should be protecting the taxpayer, not the bonues to those who messed up in the first place.

Why should we be surprised by this? Typical Government blunders are to be expected.  Either they don’t think or they don’t care about their citizens, as much as they pretend too.  This crisis was created in the US, flaunted around the world and now this  total insult to the taxpayers. As usual the rich get richer and the poor get ripped off. I am still waiting to see if and what has been investigated and what the findings are. This could be a very fraudulent set of events put into motion by a scrupulous few.

Create a Crisis, Fear and Solution. This method is as American as War or Apple Pie. This method has been used on the American people more times then one could ever imagine. Seems now they are using it around the world. Will we ever know the truth? Probably not.

This is a very informative Video, one of my Visitors gave me a while back. Very interesting indeed and an excellent Video. Be sure to take the time to watch it. You will be very enlightened by the end of it.  Could a Crisis be created? For sure.

The Money Masters – How International Bankers Gained Control of America

Traders’ worst fears realised at Lehmans auction


Hundreds of billions set to change hands as credit default swaps are reconciled

By Stephen Foley
October 11 2008


Derivatives traders were yesterday nervously picking their way through the wreckage of the Lehman Brothers bankruptcy in what was the biggest test to date of the unregulated $60 trillion (£35.4 trillion) credit default swaps market.

Investors who had placed bets on Lehman’s creditworthiness held an auction aimed at clarifying who owes what to whom after the investment bank went bust four weeks ago, and analysts believe that several hundreds of billions of dollars will change hands.

Credit default swaps are a kind of insurance, which investors used to protect themselves in the event that Lehman defaulted on its bonds. Unlike traditional insurance, however, any financial firm could write a credit default swap contract so banks, insurance companies, hedge funds and traditional fund managers are among those now being required to make investors whole.

The auction set a price for Lehman bonds of 8.625 cents on the dollar. Financial firms that sold credit default swaps, therefore, owe 91.375 cents on the dollar – more than Wall Street had been factoring in. That figure increased nerves about whether everyone in the chain will actually be able to pay the amount that they owe, something that will become clear over the coming days. Participants said the auction went smoothly and efficiently.

The insurance giant AIG was one of the biggest sellers of Lehman Brothers credit default swaps, and it faces big losses as a result. It had to be bailed out by the US government three days after the Lehman bankruptcy filing, and has so far been extended $123bn in loans from the US taxpayer. What investors and regulators fear most is a failure to pay by one link in the chain could cause a cascade of losses through the system.

Analysts say the amount of money that has to change hands could be more than $200bn. Some estimates put the value of outstanding credit default swaps on Lehman Brothers debt at $400bn, although some of these trades have already been netted out because some investors both sold and bought CDS contracts. Exact figures are not available because a CDS is a private contract and is not traded on an exchange, but the payout will certainly be the biggest in the 10-year history of the market.

CDS issuance has exploded in recent years as investors have used the instruments not just to insure bonds that they hold, but also to bet on the creditworthiness of companies. The growth of the market has been so fast that Wall Street has not had time to invent a central trading mechanism.

The New York branch of the Federal Reserve, the US central bank, summoned market participants to a meeting yesterday to discuss creating just such a mechanism. IntercontinentalExchange, the electronic trading platform that is now one of the most popular places to buy and sell oil, said yesterday it had set up a joint venture to create a CDS settlement system. Its announcement came three days after CME Group, which runs the Chicago Mercantile Exchange for derivatives trading, said it was joining forces with hedge fund Citadel to set up a similar system.

Deutsche Borse and NYSE Euronext have also expressed interest, suggesting there could be ferocious competition between exchanges if CDS trading is forced into the regulated arena.

Source

Published in: on October 11, 2008 at 6:05 am  Comments Off on Traders’ worst fears realised at Lehmans auction  
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Wall Streeters are just Welfare Recipiants in Disguise

Wall Streeters are just Welfare Recipients, in Disguise they just cost more to feed is all.

They are the Rich Welfare bums who need it the least.

Exactly 9 Years Ago Today: Fannie Mae Eases Credit To Aid Mortgage Lending

Lest we forget. History can say a lot.

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans. ”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.” Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market. In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s. ”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped. Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings. Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites. Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent. Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings. In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups. The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Compliments of One Mans Blog

Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

This means they made a small fortune on the poor for some time. Why is it the poor have to pay more interest? That one percent certainly adds up to a whole lot of profit.

There certainly are those who know how to make money off a stock market crash.

During the Great Depression there were those who made a fortune. Seems the as usual the rich got richer and the poor got very much poorer.

There are those who know very well how to create a crisis and profit from it. I see a pattern emerging.

One does have to wonder (in spite of all the legislation that has been passed over the years) how it is still possible this can happen.

Seems our law makers never really get it right. It could be they really don’t actually do anything to prevent it. Could be they just pretend to fix it.

People become confident things will be OK. They start investing again, until the next crash comes along. Then we all just repeat the same scenario over again. Maybe it’s just me. But I see the wool being pulled over everyone’s eyes yet again.

They mess up and the Government Bails them out. So where is the accountability. Seems anyone in American messes up and Government is there to bail them out. They can be as irresponsible as they want. NO FEAR the Government will give them YOUR MONEY. Meanwhile back at the ranch there are millions living in poverty and many are ending up on the streets every day.

Isn’t that comforting? Yes your Government is taking care of you?

Wall Street bailout: Report from the front

This is almost amusing Poor Suffering Wall Streeters BOY does my heart go out them and all the suffering they have caused. The poor, pathtic, lost souls, that they are.

October 11, 2008

Lehman Brothers Holdings Inc. Chief Executive Richard S. Fuld Jr., wearing tie, is heckled by protesters as he leaves Capitol Hill in Washington after testify before the House Oversight and Government Reform Committee.

AP / Susan Walsh

I don’t fully understand how the $700-billion we are all donating to rescue Wall Street’s executives will be deployed, but I assume it will become clear in a few weeks when we are likely to see a report from the front along these lines: Hundreds of security personnel, some in riot gear, kept order at Congress’ much-anticipated bailout distribution site today on Wall Street. Earlier, dozens of relief trucks loaded with sacks of cash intended for needy financial executives had lumbered through the streets of lower Manhattan before dawn. An estimated 70,000 CEOs, CFOs, COOs, VPs and hedge fund managers hit hardest by the collapse of the credit markets will receive $10 million each in taxpayer money. By 7 a.m., they clogged Wall Street wearing tags issued by their former companies and the crowd was a sea of names like Freddie, Fannie, Lehman, AIG, Washington Mutual, Bear Sterns and Merrill Lynch. Congress had hired emergency-distribution veteran Oxfam International to oversee the operation. Oxfam’s spokesman Jack Rowley said that in the past weeks, needy recipients awaiting the relief drop have been housed in appropriate Manhattan hotels commandeered by the government as holding “camps.” The hotel/camps were chosen in the hopes the executives would be used to the routine, but authorities said conditions had become difficult, with Wall Streeters in some cases forced to share rooms ( try living like poor Americans on the Streets then Whine Boys) at the The Palace, the Four Seasons, The Ritz and the St. Regis. “The hygiene situation is appalling,” said Oxfam’s Rowley, “with the men’s locker-rooms attached to the day spas running out of Clubman aftershave, Armani cologne and Cartier eau de toilette.” ( try living like poor Americans on the Streets then Whine Boys) Rowley said food was also becoming a problem, and his people were putting out an emergency call to restaurants to donate more beef tartare, Dover sole, seared Hudson Valley fois gras, pistachio crusted filet au poivre and wild boar tagliatelle carbonado. ( try living like poor Americans on the Streets then Whine Boys) The denizens of Wall Street, though still among the world’s richest citizens, have been in crisis ever since they bet everything on shaky subprime mortgages , which then predictably collapsed. One executive, who insisted on anonymity, said it is unfair to point the finger of blame at Wall Street. “The middle class let us down,” he told reporters. “We tried to help these $40,000-a-year people by talking them into $3,000-a-month mortgages, which we could bundle into huge hedge investments, and what happens? Two years later they default into foreclosure, cratering our lucrative mortgage-backed securities. I guess that’s gratitude for you.” (OH they were so generous the kindness, the kindness and who are they tring to kid they did it for “profit”.). Congress cut costs at the distribution site by canceling the need for thousands of National Guard members. Instead, in a show of “solidarity with the American needy,” security was provided by a “coalition of the willing,” from such sympathetic states as Switzerland, Macau, Liechtenstein, Barbados, Monaco and the Cayman Islands. Although clad in riot gear, the security personnel also carried folders bulging with deposit slips from their local banks, offering the bailout recipients tax-free havens for their money. Authorities said preparatory operations had gone well, with C-130 cargo planes usually used by USAid to deliver rice to Third World disaster spots having landed at JFK at 2 a.m. They carried the first $70 billion of the $700-billion bailout fund. Waiting trucks were soon in position in lower Manhattan. At exactly 10 a.m., the Oxfam staff opened the truck cargo doors to reveal thousands of sacks bearing the stamp, “Gift to Wall Street from Main Street.” Instantly, the crowd surged forward. Men in Armani Collezioni charcoal 3-button suits with Salvatore Ferragamo belts jockeyed for position next to women in Mariella Burani black crepe blazers with drapped detailing matched with Gucci classic heels. Among them were the CEO’s of Fannie Mae (Daniel H Mudd From Fannie Mae makes 8.79 million a year and owns 18.3 million in shares) and Freddie Mac (Richard F Syron From Freddie Mac makes 3.40 million a year and owns 20.0 million in shares) — who will likely walk away from their companies with over $25 million each, as well as ex Lehman Brothers CEO Dick Fuld, (Better known as Richard S Fuld Jr From Lehman Bros Holdings made 71.90 million a year  and owns $436.8 million in shares).who got $480 million over the years in pay packages.

They all said they appreciated taxpayers helping them out now that they’re out of jobs. (MY  Interpretation of this statement, “Thanking the all day suckers, you the tax payer that is”).

Peacekeepers with bullhorns shouted for calm. Several reporters saw officers with tear gas guns tense up as the crowd began to chant, “Show us the money. . . .” International observers were concerned. “If we don’t get this finished in the next week, the situation will become acute,” said Oxfam veteran Gustav Yves-Pierre. “The risk of money riots is imminent.” He pointed out that many recipients were in arrears on yacht payments and club dues.

One man, Pierre said, told him he feared that if he could not follow through on a $100,000 pledge to the Yale capital campaign, his son would not be accepted early admission, and perhaps not at all, which would interrupt his family’s four-generation membership in Skull and Bones. “That’s why I’m here,” said Yves-Pierre. “Whether it’s the starving in Ethiopia or this, a human being can’t look away when tragedy is unfolding.” Those on the trucks worked feverishly, handing out 110-pound (50-kg) bags of cash, each containing $10 million. As money managers, recipients are expected to invest it and live off the interest, but officials were concerned that with yield rates on treasuries and bonds so low, the $10 million won’t generate enough, and Wall Streeters will have to dip into their new principal to pay for such essentials as Sothebys auctions, Tuscan vacations and caretaking for their Aspen ski houses. Many of those in line found it difficult to wait for hours in the sun and some, on the point of collapse, retreated to their BMWs, and idled with the air conditioning on. As predicted, there was only enough for 10 percent of those in line. It was a poignant sight as tens of thousands headed empty-handed back to their hotel-camps while the luckier recipients struggled to their cars balancing the heavy sacks on their heads. Some relief workers wept openly at the heartbreak. Source

Year of the Bailout

September 09, 2008 

Want a federal bailout? Get in line. Now that the Treasury Department has finally announced its rescue of mortgage giants Fannie Mae and Freddie Mac—at a cost of up to $100 billion each—isn’t it time to start tallying up all this largesse? A hundred billion here, a hundred billion there, maybe it doesn’t seem like much at first. But before you know it, you’ve drained the treasury of the world’s richest country. And besides, more rescues seem to be coming. Here’s a tally of the bailouts so far:

The stimulus package. Maximum taxpayer cost: $150 billion What taxpayers got: Free money, up to $1,200 from the government per household, to spend as they wish. Early research shows most recipients have used the money to pay down debts or boost their savings. Good for them, but bad for the economy, which benefits most in the short-term from spending, not saving.

Bear Stearns. Maximum taxpayer cost: $29 billion. What taxpayers got: Prevented an even worse meltdown in the financial markets—at least for a while.

Fannie Mae and Freddie Mac. Maximum taxpayer cost: $200 billion. What taxpayers get: The mortgage market won’t completely collapse. Interest rates may even drop a little and credit gets a bit easier.

IndyMac and 10 other banks. These insolvent banks had billions in deposits that were taken over by the Federal Deposit Insurance Corp. Taxpayers won’t foot the bill directly, because FDIC takeovers are funded by insurance that banks pay for. But those premiums are likely to rise across the industry, and banks may pass some of that cost onto consumers. What taxpayers get: They don’t have to worry about losing their deposits just because their bank acts reckless. So far, all these bailouts add up to about $400 billion the government could end up doling out to keep key parts of the economy solvent. As the zeroes and the billions mount, we tend to get a bit numb to the magnitude of the number. But it’s big. The savings and loan fiasco of the late 1980s—perhaps the biggest government bailout since the Great Depression—cost taxpayers a mere $130 billion. And $400 billion dwarfs government spending on most other things. It’s equivalent to more than half of the nation’s total annual budget for defense or for Social Security payments. And it’s more than one tenth of all federal spending in a given year. Worse—there’s more to come. Here are some of the bailouts still in the works:

The Detroit automakers. A bill working its way through Congress would commit up to $6 billion in low-interest loans to General Motors, Ford, and Chrysler. Some are pushing for loans of up to $50 billion. Yeah, they’re loans, not grants, and theoretically, the companies would repay them. Unless…something…happens.

More banks. The FDIC says it’s closely watching 117 problem banks at risk of insolvency. Those banks control about $78 billion in assets. Then there’s the daily drama of troubled Lehman Brothers, where investors wait to see whether a white knight will surface, cash in hand, or a Bear Stearns redux takes place. Source

Well we now the Banking bailout cost 810 Billion


The $700 Billion Bailout: One More Weapon of Mass Deception

September 22,2008
By Richard W. Behan
The American economy needs help, but there are other, far more equitable ways to accomplish it.

It is necessary only to assure the financial survival of Wall Street banks and brokerages, the administration’s most loyal supporters and its greatest political contributors — and in large measure the cause of the financial meltdown the country is facing……


Now I am going to retreat to my hoval and eat my bread and water like a good Slave.

Published in: on October 10, 2008 at 11:50 pm  Comments Off on Wall Streeters are just Welfare Recipiants in Disguise  
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Guess What AIG did after the Bailout? Party Time?

AIG Spa Trip Fuels Fury on Hill

Pressing Executives to Concede Mistakes, Lawmakers Blast Them About Bonuses


By Peter Whoriskey

October 8, 2008

For some people at AIG, the insurance giant rescued last month with an $85 billion federal bailout, the good times keep rolling

Joseph Cassano, the financial products manager whose complex investments led to American International Group‘s near collapse, is receiving $1 million a month in consulting fees.

Former chief executive Martin J. Sullivan, whose three-year tenure coincided with much of the company’s ill-fated risk-taking, is receiving a $5 million performance bonus.

And just last week, about 70 of the company’s top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000.

At a House committee hearing yesterday, Rep. Henry A. Waxman (D-Calif.) showed a photograph of the resort, which overlooks the Pacific Ocean, and reported expenses for AIG personnel including $200,000 for rooms, $150,000 for meals and $23,000 for the spa.

“Less than a week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation,” Waxman said in kicking off an angry hearing of the House Committee on Oversight and Government Reform. “We will ask whether any of this makes sense.”

“They were getting their manicures, their pedicures, massages, their facials while the American people were paying their bills,” thundered Rep. Elijah E. Cummings (D-Md.).

The gathering was planned before the bailout as a reward for life insurance agents, a company spokesman said, and fewer than 10 AIG executives were present.

The hearing promised and delivered strident condemnations of the two AIG executives the committee had invited to testify. Sullivan served as chief executive from 2005 to 2008; Robert B. Willumstad served as chief executive from June until September, and before that was chairman of the board.

“Shame on you, Mr. Sullivan,” said Rep. Jackie Speier (D-Calif.), noting that Sullivan was not giving up any of his $5 million performance bonus.

Over and over, the committee members vented outrage at having the federal government bail out the company, referring frequently to their angry constituents.

But neither Sullivan nor Willumstad acknowledged making any mistakes.

“Looking back on my time as CEO, I don’t believe AIG could have done anything differently,” Willumstad said.

Sullivan blamed “a global financial tsunami” and the “mark-to-market” accounting rules, which require businesses to value assets at market value, even if no sale is imminent.

“I have spent my entire adult life in service to AIG, and I am heartbroken at what has happened,” he told the committee.

The committee members, barely concealing their frustration, seemed stunned by the duo’s refusal to find fault with their own performances.

“Don’t you think the management has some responsibility for what went on there?” Rep. John F. Tierney (D-Mass.) said at one point, his voice incredulous.

Sullivan responded that when they learned there was trouble with their investments, they put controls in place.

Tierney then questioned whether, at their compensation levels, the manager should have been “ahead of the curve” on such troubles.

“This is a fundamental failure of management,” Tierney said, exasperated.

The executives sat stone faced.

The House committee, which took on executive compensation at bankrupt Wall Street firm Lehman Brothers on Monday, has received “tens of thousands” of pages of documents from AIG, Waxman said.

Those documents show that AIG executives may have played a more significant role in the company’s collapse than either of the two executives let on, Waxman said.

On Dec. 5, 2007, Sullivan told investors “we are confident in our marks and the reasonableness of our valuation methods.”

But just a week before, PricewaterhouseCoopers, AIG’s auditor, had warned Sullivan that the company “could have a material weakness relating to these areas,” according to minutes from the company’s audit committee.

Moreover, as early as March federal regulators blamed lax management.

“We are concerned that the corporate oversight of AIG Financial Products . . . lacks critical elements of independence, transparency and granularity,” the Office of Thrift Supervision wrote to the company on March 10.

Just as frustrating to the committee members, Sullivan and Cassano seemed to have been rewarded for their performance, even though the company plunged under their stewardship.

AIG lost more than $5 billion in the last quarter of 2007 because of its risky financial products division, Waxman said.

Yet in March 2008 when the company’s compensation committee met to award bonuses, Sullivan urged the committee to ignore those losses, which should have slashed bonuses.

But the board agreed to ignore the losses from the financial products division and gave Sullivan a cash bonus of more than $5 million.

The board also approved a new contract for Sullivan that gave him a golden parachute of $15 million, Waxman said.

As for Cassano, the executive in charge of the company’s troubled financial products division, he received more than $280 million over the past eight years. Even after he was terminated in February as his investments turned sour, the company allowed him to keep as much as $34 million in unvested bonuses and put him on a $1 million-a-month retainer.

He continues to receive $1 million a month, Waxman said.

Asked why they didn’t fire Cassano, Sullivan said they needed to “retain the 20-year knowledge of the transactions.”

“What would he have had to have done for you to fire him?” Waxman said.

Source

After Bailout, AIG Executives Head to Resort

Peter Whoriskey

Less than a week after the federal government offered an $85 billion bailout to insurance giant AIG, the company held a week-long retreat for its executives at the luxury St. Regis Resort in Monarch Beach, Calif., running up a tab of $440,000, Rep. Henry Waxman (D-Calif.) said today at the the opening of a House committee hearing about the near-failure of the insurance giant.

Showing a photograph of the resort, Waxman said the executives spent $200,000 for rooms, $150,000 for meals and $23,000 for the spa.

“Less than a week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation,” Waxman said. “We will ask whether any of this makes sense. ”

The committee will ask the company’s executives about their multimillion-dollar pay packages — some of which they continue to receive — as well as who bears responsibility for the company’s high-risk investment portfolio, which led to its near collapse just weeks ago.

“They were getting their manicures, their pedicures, massages, their facials while the American people were paying their bills,” thundered Rep. Elijah E. Cummings (D-Md.), of the executive retreat at the Monarch Resort.

The House committee, which took on executive compensation at bankrupt Wall Street firm Lehman Brothers yesterday, has received “tens of thousands” of pages of documents from AIG, Waxman said.

Those documents show that as the company’s risky investments began to implode, the company altered its generous executive pay plan to pay out regardless of such losses.
AIG lost over $5 billion in the last quarter of 2007 due its risky financial products division, Waxman said. Yet in March 2008, when the company’s compensation committee met to award bonuses, Chief Executive Martin Sullivan urged the committee to ignore those losses, which should have slashed bonuses.

But the board agreed to ignore the losses from the financial products division and gave Sullivan a cash bonus of over $5 million. The board also approved a new compensation contract for Sullivan that gave him a golden parachute of $15 million, Waxman said.

Joseph Cassano, the executive in charge of the company’s troubled financial products division, received more than $280 million over the last eight years, Waxman said. Even after he was terminated in February as his investments turned sour, the company allowed him to keep up to $34 million in unvested bonuses and put him on a $1 million-a-month retainer. He continues to receive $1 million a month, Waxman said.

Waxman also looked skeptically at the executives’ defense that the troubles in the business had to do with larger economic forces and not their own bad decisions.
When a former AIG auditor, Joseph St. Denis, expressed concerns, Cassano told him “I have deliberately excluded you from the valuation … because I was concerned that you would pollute the process,” according to Waxman.

St. Denis resigned in protest.

PricewaterhouseCoopers, AIG’s auditor, told the company in March 2008 that the “root cause” of AIG’s problems was that people assessing risk did not have enough access to the financial products division, where the risky investments originated.
Waxman further suggested that Sullivan had deliberately misled investors.

On Dec. 5, 2007, Sullivan expressed confidence to investors. But a week before, PricewaterhouseCoopers warned Sullivan that the company “could have a material weakness relating to these area,” committee members said.

Source

Published in: on October 8, 2008 at 4:31 am  Comments (2)  
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FEDERAL RESERVE OWNERS AND HISTORY

March 2012 — Just added the First Audit of the Federal Reserve in 99 years. It is at the bottom of the page.

Seems the Federal Reserve is deep in a Fraud and Money Laundering Scam. This began in the George W Bush Era.

This may just be the tip of the iceberg.

Bush, Fed, Europe Banks in $15 Trillion Fraud, All Documented

FEDERAL RESERVE OWNERS


Here’s a look into who was involved in setting up the Federal Reserve in 1913.

* Rothschild Banks of London and Berlin
* Lazard Brothers Bank of Paris
* Israel Moses Sieff Banks of Italy
* Warburg Bank of Hamburg, Germany and Amsterdam
* Kuhn Loeb Bank of New York
* Lehman Brothers Bank of New York
* Goldman Sachs Bank of New York
* Chase Manhattan Bank of New York (Controlled By the Rockefeller Family Tree)

Charles A. Lindbergh, Sr. 1913 “When the President signs this bill, the invisible government of the monetary power will be legalized….the worst legislative crime of the ages is perpetrated by this banking and currency bill.”

A Bit of History

In August of 1929, the Fed began to tighten the money supply continually by buying more government bonds. At the same time, all the Wall Street giants of the era, including John D. Rockefeller and J.P. Morgan divested from the stockmarket and put all their assets into cash and gold.

Soon thereafter, on October 24, 1929, the large brokerages all simultaneously called in their 24 hour “call-loans.” Brokers and investors were now forced to sell their stocks at any price they could get to cover these loans. The resulting market crash on “Black Thursday” was the beginning of the Great Depression.

The Chairman of the House Banking and Currency Committee, Representative Louis T. Mc Fadden, accused the Fed and international bankers of premeditating the crash. “It was not accidental,” he declared, “it was a carefully contrived occurrence (created by international bankers) to bring about a condition of despair…so that they might emerge as rulers of us all.”

He went on to accuse European “statesmen and financiers” of creating the situation to facilitate the reacquisition of the massive amounts of gold which Europe had lost to the U.S. during WWI. In a 1999 interview, Nobel Prize winning economist and Stanford University Professor Milton Friedman stated: “The Federal Reserve definitely caused the Great Depression.”

US DECLAIRED bankruptcy

Because the government of the U.S. (a corporation) had paid its loans to the Fed with real money exchangeable for gold, it was now insolvent and could no longer retire its debt. It now had no choice but to file chapter 11. Under the Emergency Banking Act (March 9, 1933, 48 Stat.1, Public law 89-719) President Franklin Roosevelt effectively dissolved the United States Federal Government by declaring the entity bankrupt and insolvent.

June 5, 1933 Congress enacted HJR 192 which made all debts, public or private, no longer collectible in gold. Instead, all debts public or private were to be payable in un-backed Fed-created fiat currency. This new currency would now be legal tender in the U.S. for all debts public and private.

Henceforth, our United States Constitution would be continuously eroded due to the fact that our nation is now owned “lock stock and barrel,” by a private consortium of international bankers, contemptuous of any freedoms or sovereignties intended by our forefathers. This was all accomplished by design.

How the Gold was Stolen from America

Under orders of the creditor (the Federal Reserve System and its private owners) on April 5, 1933 President Franklin D. Roosevelt issued Presidential order 6102, which required all Americans to deliver all gold coins, gold bullion, and gold certificates to their local Federal Reserve Bank on or before April 28, 1933.

Any violators would be fined up to $10,000, imprisoned up to ten years, or both for knowingly violating this order. This gold was then offered by the Fed owners to any foreign, non-U.S. citizen, at $35.00 per ounce. Over the entire previous 100 years, gold had remained at a stable value, increasing only from $18.93 per ounce to $20.69 per ounce.

Since then, every U.S. citizen (by virtue of their birth certificate) has become an asset of the government, pledged at a specific dollar amount to pay this debt through future taxation. Thus, every American citizen is in debt from birth (via future taxation), and is, for all practical purposes, property of the creditors, the privately owned Federal Reserve System.

Presently, the United States Government (which again, is completely owned and controlled by the international bankers) continues to forfeit its sovereignty by entering into international monetary and trade agreements which abolish almost all forms of trade tariffs that previously protected not only the value of American commercial productivity and workforce labor, but which were also a substantial source of revenue for the government.

The loss of this revenue, as well as the expanding deficits created by recent massive reduction in taxation for large corporations and the very wealthiest citizens, insures continued borrowing by the government. This self-perpetuating cycle of borrowing is made possible only by the ability of the government to guarantee repayment (of only the interest, never the principal) through future taxation on the earnings of every American citizen.

Due to our banking history of deception, fraud and counterfeiting, which only benefits the purported elite bankers and their underlings, the borrowed principal itself is being used to make the payments on our debt at interest, thus, it is mathematically impossible to pay off.

We are, therefore, obligated to continue this cycle of borrowing indefinitely, causing complete money slavery for life. The amount owed will expand endlessly, until our monthly payments exceed our income, we are bankrupt, and all we have acquired in this lifetime is pillaged from us. Or, until the privately owned Federal Reserve System is ended and all debts are terminated.

This IS WAY Custsy

BANKING SECRETS THAT BANKS DON’T WANT PUBLISHED

With debt termination/debt reconciliation, you’re out of credit card debt and unsecured loans quickly and easily, once and for all! Here, you will learn the the violations that occur in the issuance of credit cards and loans, plus a touch of the legalities employed in terminating your debts. After qualifying and receiving a telephone presentation, you’ll concur that this is the safest, fastest, most legal, lawful, honest and ethical way of getting out of debt there ever was.

Through extensive research and development by economists, bankers, bank auditors, CPA’s, attorneys, underwriters, authors, and database programmers, we have developed a state-of-the-art legal administrative remedy, designed to anticipate and overcome nearly every variation of creditor response.

The successful termination of your debt also includes all-inclusive Credit Clean-Up of the accounts enrolled. Utilizing these abundant resources, we can work toward the termination of your debt within 18 months, with a much lower monthly payment, ending with nothing negative on your credit report.

With the immeasurable assistance and response from consumers nationwide, combined with our passion to do whatever it takes to neutralize this iniquity, our highly effective, proprietary system, and network of highly capable attorneys, will never cease to improve. The laws described below are the foundation of this process.

Your debt termination relies on applying Federal Laws, U.S. Supreme Court decisions, the Fair Debt Collection Practices Act, the Fair Credit Billing Act, the Uniform Commercial Code, the Truth in Lending Act, and numerous other banking and lending laws – to overcome the following banking practices…

Banks bombard consumers with over 6 billion mail solicitations each year. Notwithstanding newspaper, radio, television, magazine, sporting event advertising and numerous other forms of marketing, the average working class, credit-worthy, American is exposed to over 75 loan solicitations per year.

These banking ads represent, in one way or another, that the bank will lend you money in exchange for repayment, plus interest. This absurd idea is completely contrary to what, in reality, transpires and what is actually intended. In actual fact, banks do not lend you any of their own, or their depositors money.

False advertising is an act of deliberately misleading a potential client about a product, service or a company by misrepresenting information or data in advertising or other promotional materials. False advertising is a type of fraud and is often, a crime.

To substantiate this premise, we will begin by examining the funding process of credit cards and loans. When you sign and remit a loan or credit card application, (say you are approved for $10,000.00) the commercial bank stamps the back of the application, as if it were a check, with the words: “Pay $10,000.00 to the order of…” which alters your application, transforming it into a promissory note.

Altering a signed document, after the fact with the intention of changing the document’s value, constitutes forgery and fraud. Forgery is the process of making or adapting objects or documents with the intent to deceive. Fraud is any crime or civil wrong perpetuated for personal gain that utilizes the practice of deception as its principal method.

In criminal law, fraud is the crime or offense of deliberately deceiving another, to damage them – usually, to obtain property or services without compensation. This practice may also be referred to as “theft by deception,” “larceny by trick,” “larceny by fraud and deception” or something similar.

Having altered the original document, the (now) promissory note is deposited at the local Federal Reserve Bank as new money. Generally Accepted Accounting Principels (the publication governing corporate accounting practices) states: “Anything accepted by the bank as a deposit is considered as cash.” This new money represents a three to ten percent fraction of what the commercial bank may now create and do with as they please.

So, $100,000.00 to $330,000.00.00, minus the original $10,000.00 is now added to the commercial bank’s coffers. With this scheme they are taking your asset, depositing it, multiplying it and exchanging it for an alleged loan back to you. This may constitute deliberate theft by deception. In reality, of course, no loan exists.

At this point in the process, they have now transferred and deposited your note (asset) to the Federal Reserve Bank. This note will permanently reside and be concealed there. Since they’ve pilfered your promissory note, they owe it back to you. It is you, therefore, who is actually the creditor. This deceptive acquisition and concealment of such a potentially valuable asset amounts to fraudulent conveyance.

In legal jargon, the term “fraudulent conveyance” refers to the illegal transfer of property to another party in order to defer, hinder or defraud creditors. In order to be found guilty of fraudulent conveyance, it must be proven that the intention of transferring the property was to put it out of reach of a known creditor – in this case, you.

Once they have perpetrated this fraudulent conveyance, the creditor then establishes a demand deposit transaction account (checking account) in your name. $10,000.00 of these newly created/acquired funds are then deposited into this account. A debit card, or in this case, a credit card or paper check is then issued against these funds. Remember – it’s all just bookkeeping entries, because this money is backed by nothing.

Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and/or destination of money. Previously, the term “money laundering” was applied only to financial transactions related to otherwise criminal activity.

Today, its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transactions which generate an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.

As a result, the illegal activity of money laundering is now recognized as routinely practiced by individuals, small or large businesses, corrupt officials, and members of organized crime (such as drug dealers, criminal organizations and possibly, the banking cartel).

Since receipt of your first “statement” from each of your creditors, they have perpetuated the notion of your indebtedness to them. These assertions did not disclose a remaining balance owed to you, as would your checking account. Mail fraud refers to any scheme which attempts to unlawfully obtain money or valuables in which the postal system is used at any point in the commission of a criminal offence.

When they claim you owe a delinquent payment, you are typically contacted via telephone, by their representative, requesting a payment. In some cases this constitutes wire fraud, which is the Federal crime of utilizing interstate wire communications to facilitate a fraudulent scheme.

Throughout the process of receiving monthly payment demands, you may have been threatened with late fees, increased interest rates, derogatory information being applied to your credit reports, telephone harassment and the threat of being “wrongfully” sued.

Extortion is a criminal offense which occurs when a person obtains money, behavior, or other goods and/or services from another by wrongfully threatening or inflicting harm to this person, their reputation, or property. Refraining from doing harm to someone in exchange for cooperation or compensation is extortion, sometimes euphemistically referred to as “protection”. This is a common practice of organized crime groups.

Blackmail is one kind of extortion – specifically, extortion by threatening to impugn another’s reputation (in this case) by publishing derogatory information about them, true or false, on credit reports. Even if it is not criminal to disseminate the information, demanding money or other consideration under threat of injury constitutes blackmail.

New money was brought into existence by the deposit of your agreement/promissory note. If you were to pay off the alleged loan, you would never receive your original deposit/asset back (the value of the promissory note). In essence, you have now paid the loan twice. Simultaneously, the banks are able to indefinitely hold and multiply the value of your note (by a factor of 10 to 33) and exponentially generate additional profits.

For an agreement or a contract to be valid, there must be valuable consideration given by all parties. Valuable consideration infers a negotiated exchange and legally reciprocal obligation. If no consideration is present, the contract is generally void and unenforceable.

The bank never explained to you what you have now learned. They did not divulge that they were not loaning anything. You were not informed that you were exchanging a promissory note (which has a real cash value) that was appropriated to fund the implicit loan.

You were led to assume that they were loaning you their own, or other people’s money, which we have established as false. They blatantly concealed this fact. If you were misinformed, according to contract law, the agreement is null and void due to “non-disclosure.”

Contract law states that when an agreement is made between two parties, each must be given full disclosure of what is transpiring. An agreement is not valid if either party conceals pertinent information.

Related Article

A Wee Family Tree up 1976 Really Interesting

A must to check out for sure. It is very enlightening as to who owns and controls what. They own and control even more today.

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The owners of the Federal Reserve. Our ruling transatlantic elite? and how JFK challenged the Fed.

List of failed banks and banking writedowns

Any President that Would Dare Oppose The Federal Reserve Gets Assassinated: History Lesson & JP Morgan Buyout of Bear Stearns

Article Source

Somewhere in the trillionaires room of Heaven three old codgers are sitting around a table smoking cigars and chuckling over the J. P Morgan Chase & Company buyout of Bear Stearns for a paltry $2.00 a share. Not so much because the price had been over $130 a share a few weeks earlier but because the Federal Reserve Board put up $30 billion of the government’s money to guarantee the sale.

Yes, Mayer Amschel Rothschild, J. P. Morgan and John D. Rockefeller, patriarchs of three of the most powerful family fortunes in history have waited nearly two centuries to see their dreams fulfilled. Perhaps such patience is why their families have remained successful by steadfastly maintaining the rules of the game as set down by their founders.

It was 248 years ago, in 1760 that Mayer Amschel Rothschild created the House of Rothschild that was to pave the way for international banking and control of the world’s resources on a scale unparalleled and somewhat mysterious to this date. He disbursed his five sons to set up banking operations throughout Europe and the various European empires.

“Give me control of a nation’s money
and I care not who makes the laws.”
Mayer Amschel Rothschild

In time the House of Rothschild was able to take control of the Bank of France and Bank of England and relentlessly pursued an effort over two centuries to control a national bank in the USA. By 1850 it was said the Rothschild family was worth over $6 billion and owned one half of the world’s wealth.

From oil (Shell) to diamonds (DeBeers) to gold (from 1919 until 2004 a Rothschild was permanent Chairman of the London Gold Fixing committee which met twice a day in the Rothschild offices in London) the Rothschild’s quietly accumulated a foothold in critical industries and commodities throughout the world.

A master at building impenetrable walls around his family assets the current value of the Rothschild holdings are estimated to be between $100 and $300 trillion, yes that is trillion dollars! Now for a point of reference the current United States National Debt is $9.4 trillion.

J. P. Morgan began as the New York agent for his father’s business in London in 1860 and by 1877 was floating $260 million in US Bonds to save the government from an economic collapse. In 1890 he inherited the business and in 1895 bought $200 million in US Bonds with gold to again save the US economy.

“If you have to ask how much it costs,
you can’t afford it.”
J. P. Morgan

By 1912 he controlled $22 billion and had started companies such as US Steel and General Electric while he owned several railroads. Morgan was also an American agent for the House of Rothschild in London and used the Rothschild resources to help people like John D. Rockefeller.

Rockefeller, who started Standard Oil in 1863 with the help of Morgan, grew his company into the largest oil company in the world and by 1916 Rockefeller was the first billionaire in American history. In 1909 he had set up the Rockefeller Foundation with $225 million and donated nearly a billion more dollars to various causes. The Rockefeller family fortune is estimated to be around $11 trillion today.

“The way to make money is to buy
when blood is running in the streets.”
John D. Rockefeller

So what did they have in common these extraordinary capitalists? They all were dedicated to owning a national bank in America so they could determine the fiscal policies of the nation and earn interest on the debt of the nation.

Rothschild agents in 1791 formed the First Bank of the United States but intense opposition to foreign ownership by President Jefferson and others helped kill it by 1811. A Second Bank of the United States was formed in 1816 once again by Rothschild agents and this time they secured a 20-year charter. However, President Andrew Jackson was also opposed to foreign ownership and withdrew the federal deposits in 1832 as part of his plan to kill the bank charter in 1836.

An attempt to assassinate Jackson in 1834 left him wounded but more determined than ever to stop the central bank. Thirty years later President Lincoln refused to pay international bankers extremely high interest rates during the Civil War and ordered the printing of government bonds. With the help of Russian Czar Alexander II who also blocked a similar national bank from being set up in Russia by the international bankers they were able to survive the economic squeeze.

Lincoln said, “The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe. Corporations have been enthroned, and an era of corruption in high places will follow. The money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed.”

Both Lincoln and Alexander II were assassinated. In 1881 James Garfield became president and he was dedicated to restoring the right of the federal government to issue money like Lincoln did in the Civil War and he was also assassinated.

Finally along came 1913 and the US was again suffering from a weak economy and there was a threat of another costly war, a world war this time, and business tycoons J.P. Morgan, John D. Rockefeller and E.H. Harriman were part of a group that got Woodrow Wilson to sign into law the Federal Reserve Act creating a network of 12 privately owned banks as part of a new Federal Reserve network.

One of the largest stockholders in the new Federal Reserve was the House of Rothschild through their direct and indirect holdings. A few years later it was disclosed that the Rothschilds also owned about 20% of J. P. Morgan. In time Morgan would merge with the Chase Manhattan Bank of the Rockefellers.

Years later John F. Kennedy opposed a private national bank and was assassinated in 1963 and Ronald Reagan opposed a private national bank and in 1981 an attempt was made to assassinate him. Coincidence or not the opposition to a privately owned national bank was a common characteristic.

Which brings us full circle to the present bailout of Bear Stearns by J.P. Morgan Chase & Company and we find the Rothschild, Morgan and Rockefeller families are all conveniently part of the same group benefiting from the bailout and the $30 billion guarantee by the Federal Reserve. This is the third time the J. P. Morgan Company has come to the rescue of the American banking system and economy.

John Perkins “Confessions of an Economic Hitman”Extended Interview 2008

Talks about Banks, Corporations, Free Trade,Wars, Toppling Governments, assassinations and numerous other things the US does to manipulate other countries.

How banks create money out of thin air

In Libya loans were interest free. Libya had no Debt. They instead had a surplus.Its no wonder the US/NATO countries wanted this example of good banking gone.

The Libya American’s never saw on Television

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Who Benefited the most by J.F. Kennedy’s Death?

President John F.Kennedy, The Federal Reserve And Executive Order 11110

From September 2009

Federal Reserve rejects request for public Audit

First independent audit of the Federal Reserve in the Fed’s 99 year history.

By Alan Grayson

I think it’s fair to say that Congressman Ron Paul and I are the parents of the GAO’s audit of the Federal Reserve.

Anyway, one of our love children is a massive 251-page GAO report technocratically entitled “Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance.” It is almost as weighty as that 13-lb. baby born in Germany last week, named Jihad. It also is the first independent audit of the Federal Reserve in the Fed’s 99-year history.

It documents Wall Street bailouts by the Fed that dwarf the $700 billion TARP, and everything else you’ve heard about.

I wouldn’t want anyone to think that I’m dramatizing or amplifying what this GAO report says, so I’m just going to list some of my favorite parts, by page number.

Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, received more than a trillion dollars each. The 5th largest recipient was Barclays PLC. The 8th was the Royal Bank of Scotland Group, PLC. The 9th was Deutsche Bank AG. The 10th was UBS AG. These four institutions each got between a quarter of a trillion and a trillion dollars. None of them is an American bank.

Pages 133 & 137 – Some of these “broad-based emergency program” loans were long-term, and some were short-term. But the “term-adjusted borrowing” was equivalent to a total of $1,139,000,000,000 more than one year. That’s more than $1 trillion out the door. Lending for these programs in fact peaked at more than $1 trillion.

Pages 135 & 196 – Sixty percent of the $738 billion “Commercial Paper Funding Facility” went to the subsidiaries of foreign banks. 36% of the $71 billion Term Asset-Backed Securities Loan Facility also went to subsidiaries of foreign banks.

Page 205 – Separate and apart from these “broad-based emergency program” loans were another $10,057,000,000,000 in “currency swaps.” In the “currency swaps,” the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed’s only “collateral” was a corresponding amount of foreign currency, which never left the Fed’s books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the “broad-based emergency program” loans, together, totaled more than $26 trillion. That’s almost $100,000 for every man, woman, and child in America. That’s an amount equal to more than seven years of federal spending — on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American’s total GNP.

Page 201 – Here again, these “swaps” were of varying length, but on Dec. 4, 2008, there were $588,000,000,000 outstanding. That’s almost $2,000 for every American. All sent to foreign countries. That’s more than twenty times as much as our foreign aid budget.

Page 129 – In October 2008, the Fed gave $60,000,000,000 to the Swiss National Bank with the specific understanding that the money would be used to bail out UBS, a Swiss bank. Not an American bank. A Swiss bank.

Pages 3 & 4 – In addition to the “broad-based programs,” and in addition to the “currency swaps,” there have been hundreds of billions of dollars in Fed loans called “assistance to individual institutions.” This has included Bear Stearns, AIG, Citigroup, Bank of America, and “some primary dealers.” The Fed decided unilaterally who received this “assistance,” and who didn’t.

Pages 101 & 173 – You may have heard somewhere that these were riskless transactions, where the Fed always had enough collateral to avoid losses. Not true. The “Maiden Lane I” bailout fund was in the hole for almost two years.

Page 4 – You also may have heard somewhere that all this money was paid back. Not true. The GAO lists five Fed bailout programs that still have amounts outstanding, including $909,000,000,000 (just under a trillion dollars) for the Fed’s Agency Mortgage-Backed Securities Purchase Program alone. That’s almost $3,000 for every American.

Page 126 – In contemporaneous documents, the Fed apparently did not even take a stab at explaining why it helped some banks (like Goldman Sachs and Morgan Stanley) and not others. After the fact, the Fed referred vaguely to “strains in the financial markets,” “transitional credit,” and the Fed’s all-time favorite rationale for everything it does, “increasing liquidity.”

81 different places in the GAO report – The Fed applied nothing even resembling a consistent policy toward valuing the assets that it acquired. Sometimes it asked its counterparty to take a “haircut” (discount), sometimes it didn’t. Having read the whole report, I see no rhyme or reason to those decisions, with billions upon billions of dollars at stake.

Page 2 – As massive as these enumerated Fed bailouts were, there were yet more. The GAO did not even endeavor to analyze the Fed’s discount window lending, or its single-tranche term repurchase agreements.

Pages 13 & 14 – And the Fed wasn’t the only one bailing out Wall Street, of course. On top of what the Fed did, there was the $700,000,000,000 TARP program authorized by Congress (which I voted against). The Federal Deposit Insurance Corp. (FDIC) also provided a federal guarantee for $600,000,000,000 in bonds issued by Wall Street.

There is one thing that I’d like to add to this, which isn’t in the GAO’s report. All this is something new, very new. For the first 96 years of the Fed’s existence, the Fed’s primary market activities were to buy or sell U.S. Treasury bonds (to change the money supply), and to lend at the “discount window.” Neither of these activities permitted the Fed to play favorites. But the programs that the GAO audited are fundamentally different. They allowed the Fed to choose winners and losers.

So what does all this mean? Here are some short observations:

(1) In the case of TARP, at least The People’s representatives got a vote. In the case of the Fed’s bailouts, which were roughly 20 times as substantial, there was never any vote. Unelected functionaries, with all sorts of ties to Wall Street, handed out trillions of dollars to Wall Street. That’s now how a democracy should function, or even can function.

(2) The notion that this was all without risk, just because the Fed can keep printing money, is both laughable and cryable (if that were a word). Leaving aside the example of Germany’s hyperinflation in 1923, we have the more recent examples of Iceland (75% of GNP gone when the central bank took over three failed banks) and Ireland (100% of GNP gone when the central bank tried to rescue property firms).

(3) In the same way that American troops cannot act as police officers for the world, our central bank cannot act as piggy bank for the world. If the European Central Bank wants to bail out UBS, fine. But there is no reason why our money should be involved in that.

(4) For the Fed to pick and choose among aid recipients, and then pick and choose who takes a “haircut” and who doesn’t, is both corporate welfare and socialism. The Fed is a central bank, not a barber shop.

(5) The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. (If you don’t believe me, ask Jamie Dimon at JP Morgan.) The Fed helped the losers to squander and destroy even more capital.

(6) During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?

And here’s what bothers me most about all this: it can happen again. I’ve called the GAO report a bailout autopsy. But it’s an autopsy of the undead.

Feel free to take a look at it yourself, it’s right here.

Source

Ron Paul and what he went through to get this Audit done.