I highly recommend Matt Taibbi's piece in the latest issue of ROLLING STONE , "The Big Takeover". Focusing on AIG, he unravels the current mess we are in and explains how and why we are all "royally fucked".
His most important points include how the Federal Reserve has been converted into a Piggy Bank for the rich, powerful and well connected. More importantly, if you read his piece you can easily understand why AIG, Bear Stearns, Countrywide, Citicorp and others are NOT where they belong: In Bankruptcy.
It is highly instructive to note that Lehman Brothers IS in Bankruptcy. The largest in U.S. history. Former CEO Dick Fuld is facing billions in lawsuits from former shareholders and customers for inter alia, non-disclosure. It's why he sold his $13 million dollar Florida house to his wife for $100. But what haven't we seen in the Lehman Bankruptcy ? Number 1- No taxpayer money has been poured into a dead company. Number 2 - No outrageous bonuses; "retention" payments; unpaid commissions or juicy severance packages have been paid out of the corpus of the Debtor. No Trustee or Bankruptcy Judge is crazy enough to approve any such thing. Number 3- No closed books. Bankruptcy filings are PUBLIC and the corporate books are opened , laid bare and revealed.
The amount of taxpayer money being poured into AIG, Citicorp et al. ( hundreds of Billions) is dwarfed by what the Fed has been doing. ( This is the REALLY scary part folks.) Back in the "Good Old Days" the Fed would control the money supply "M-2" by buying or selling securities. Usually no more than $25 billion per week. To increase M-2 the Fed buys securities like T-bills, bonds and even Mortgage backed securities from member banks. The banks that sell same to the Fed thus have more money to lend and interest rates go down. To limit or control M-2 the Fed sells same = less money to lend= interest rates go up.
Starting in the Summer of 2007 these Repurchase Agreements "Repos" jumped to $33 billion a week. By November 2007, $45 billion; late December 2007 , $65 billion; March 2008 , $77 billion and by May 1,2008 it was $115 billion. It went as high as $125 billion. But by January , 2009 it had dropped to ZERO ! The Fed did NOT stop pumping money into its member banks. Far from it. It simply switched
to secretive, opaque devices like "Term Auction Facility"; "Term Securiities Lending Facility", "Primary Dealer Credit Facility" and "Maiden Lane I " followed by a "II" and then a "III" among several other programs. All totaling THREE TRILLION Dollars in loans to PRIVATE companies AND another $5.7 TRILLION in guarantees of private investments. None, repeat NONE, of this is being regulated or overseen by anyone other than the Fed itself.
We hope.
Now "Tax Cheat Tim" Geithner is proposing that the U.S. Treasury do the exact same thing with taxpayer money to the tune of AT LEAST another trillion. Time was, as the late Senator Everett Dirksen said : " A billion here and a billion there and soon you're talking about REAL money." Now it's TRILLIONS. Worse yet, the Fed will not reveal who is getting how much nor how, if at all, the assets being purchased by the Fed. are being valued. When Congressman Alan Grayson asked Fed Vice Chairman Donald Kohn in January, 2009 where the money went ( $1.2 trillion THEN; $3 trillion and counting, NOW ) he demurred saying that it would discourage banks from taking the money. Better yet, when Grayson asked if the purchased assets were "marked to market" Kohn answered : "The ones that have market value are marked to market." Obviously, the Fed is buying a lot of crap with no real actual current market value and it won't say from whom or for how much. It's enough to make you wonder how many bonds the Fed has bought (and that Geithner proposes to buy) that might as well be backed by tolls on the Brooklyn Bridge ?
Why is this mess a "Ponzi Scheme" ? Because it is. Obama, Bernanke and Geithner are the Madoffs and we taxpayers are the "investors". We've been promised "returns" on taxpayer funded purchases of "assets" as happened under FDR and then again under Bush I with the Resolution Trust Corp. But what are these assets ? Primarily stock in B A N K R U P T companies like AIG. And bonds backed by mortgages owed by unemployed people. And God only knows what else. There's another word for this nonsense : K I T I N G ! Because that is what is really going on. Bernanke et. al. are so terrified of another bank failure that they just keep pumping money into bankrupt institutions while pretending to be "shocked" when it is made public that the same money just flies out the back door. How long do these financial geniuses seriously expect to be able to keep the financial kite aloft before it's inevitable crash ?
It's looking more and more like those nutty, loopy "survivalists" had it right all along. Last week my N.Y.P.D. Home Pistol Permit FINALLY came through. None too soon. ( I lost my "carry" permit 10 years ago thanks to that scumbag Howard Safir.) Yesterday, I bought a gently used Browning .38 Automatic with four extra clips and 100 rounds of hollow point ammo. And the home security system is being upgraded. And I bought some more gold. Why ? Because when all this shit really hits the fan there will be a thunderous roar of "Aux barricades" and a populist rising that will make the Hoover Era "Bonus Army" look like a single Boy Scout Troop on a day trip.
Kudos to Melonie. She's been writing about this stuff for years.



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