FedUpUSA

Archive for April 26th, 2010

NewsWithViews

By Joan Veon

There are those who have been talking about a single global regulator for years and as a result of the 2008 Credit Crisis, there have been calls to protect you and me from future banking crises through new financial reform. However, we had better consider its real impact. It is not about protecting you and me it is about changing the national regulatory laws of America to conform to a world governmental system and globalizing the last barrier separating individual nation-states. It is about a major power grab of America’s financial assets. As a result of the high stakes, we should ask if Republicans are being told they had better vote for financial reform so we don’t have another September/October, 2008? All of a sudden Senators McConnell and Shelby have had a sea change and are willing to work together on changing our banking system. It is a ruse, a con game when they say they are making the system safer. Let us review some necessary points.

As we consider the events of the past 18 months, we are confronted with a great deal of action, uncertainty, negativity, and pillaging of wealth. In order to understand where we are today and where we are going, we need to review the chicanery of the past eleven years.

One of the keynote events was the repeal of the 1933 Glass-Steagall Act in 1999 which we were told was necessary for banking modernization. In June 1999 then Treasury Secretary Robert Rubin said, “Reforming international financial institutions, strengthening the international financial architecture and maintaining open markets are not simply questions of economics but politics.” That same year, after a great deal of media and stock market hype and hysteria, Congress passed the Gramm-Leach-Bliley Act-GLB which tore down all the protections that the Glass-Steagall Act had put in place, including the separation of commercial banking from investment banking to protect the investor. It also allowed for U.S. banks to become “financial conglomerates” meaning they could expand their services to sell insurance, stocks and bonds and perform the once outlawed investment banking services, which opened the doors for derivatives, now at the heart of the problem. It also allowed for American banks, insurance companies and brokerage firms to buy foreign banks, insurance companies and brokerage firms while allowing them to come in and buy ours. Were there any regulatory changes? No. In fact it was known that the SEC was not beefing up their forces to police and monitor the newly expanded financial architecture.

On the international level, that same year, at the Bank for International Settlements-BIS in Basle, Switzerland, set up a new global entity called the Financial Stability Forum-FSF. It was comprised of regulators from the Group of Seven countries with a mandate to police the global level for problems. In an interview with Svein Andressen, its managing director, he told me in response to a question I raised in 2000 that “there was no guarantee” that they would be successful. Today, as a result of the G20 meetings in 2009, it has been reinvented into a larger body comprised of regulators from the G20 countries. It truly is more of a global regulator than it once was with only seven countries.

At the BIS and other think tanks there was a myriad of white papers calling for a consolidation of regulators and to change the national regulatory laws, now that the U.S. had passed GLB. Federal Reserve Board Vice Chairman Donald L. Kohn gave a speech in Sea Island, Georgia in May, 2007 in which he discussed the rise of credit derivatives and their marriage with securitization technologies called collateralized debt obligations-CDOs. While stating that “these developments have made the financial system more resilient to shocks,” he also said,

We need to accept that accidents will happen—that asset prices will fluctuate, often over wide ranges and those fluctuations will be driven in part by trading strategies, by the cycles of greed and fear that have always been with us and by the ebb and flow of competition for market share. The fluctuations will result in redistributions of wealth, and on occasion, will confront us with financial crises.

He then went on to explain some of the changes that needed to be made and commented,

In all of this work, coordination and cooperation among regulators, domestically and internationally are critical because the same firms are the core firms in each of the principal global financial centers.

Lastly, he stated, “In sum, there are good reasons to think that financial innovation over the past few decades, including the emergence and growth of the credit derivatives markets, has made the financial system and the economy more resilient.”

That year saw a number of headlines and articles calling for a “global regulator.” One written by Kenneth Rogoff read, “No grand plans, but the financial system needs fixing.” Another headline read, “Wanted: a guardian of the world’s financial system.”

In 2007, there was what was considered at first a minor problem in the subprime mortgage market—nothing to worry about. The market dropped from a high in July, 2007 of 14,022 to 12,518 that August before recovering that same year in October to the 14,198 level, an all time high. The Dow had risen 94% or 6,878 points since the low point of October 9, 2002. By August, 2008 the market had dropped to 11,483.

Hank Paulson, our second treasury secretary from Wall Street, had issued his “Blueprint for a Modernized Financial Regulatory System” in March, 2008. It called for a total revamping of all of America’s assets that were not under control of the Federal Reserve: the entire mortgage industry, banks that were not regulated by the Fed, credit unions, state chartered thrifts, and the insurance industry. The Fed was at the center of all the newly proposed commissions. In other words, a total take over of financial assets not under their control was at stake.

Is anyone putting two plus two together? The Federal Reserve is a private corporation so they do not issue an annual report and no one knows who their shareholders are. This company controls the entire monetary system of the United States which means they create the ups and the downs in the stock market and business cycle. They control credit. If they want to destroy the small businessman, they just stop issuing credit—like they are doing now. The Paulson Blueprint was blatant about them seizing control over all the other major financial assets they don’t control.

September 2008 found Congress in a heap of distress. When you consider the bombardment that we all went through, we have never seen or experienced anything like this since the British bombed the Baltimore Harbor in 1814 which is where the term “shock and awe” first came from. In September, we saw: the U.S. government seize Fannie Mae and Freddie Mac, Lehman Brothers collapsed and Merrill Lynch was purchased by Bank of America, AIG was bailed out with government money, Morgan Stanley and Goldman Sachs converted to bank holding companies, the government seized Washington Mutual which became the largest banking failure in the U.S., and Wachovia was taken over by Wells Fargo.

In the midst of shock and awe, the front page of the September 18, 2008 Washington Post read “Stocks Plummet as Lending Freezes Up.” It said that “Lawmakers left on the sidelines as Fed, Treasury take Swift action.” The text read,

The frenetic pace of the financial crisis has forced the Treasury Department and Federal Reserve to make rapid-fire decisions in recent days, leaving Capitol Hill lawmakers effectively impotent—and frustrated. Lawmakers on both sides have expressed concern yesterday that have had had no control over when and how federal money has been used to curb the panic on Wall Street. Congressional leaders learned of the rescue late Tuesday during a hastily called meeting. Paulson and Bernanke have taken the lead, not only from lawmakers but from President Bush.

In order to get Congress to pass the TARP monies and the additional powers for the Treasury Secretary, the stock market began to drop. On September 29 when the House rejected the bailout plan, it dropped more than 700 points. By October 10, the Dow had dropped to 7773.71. The week of October 11, 2008 saw the Dow drop by 22% or $8.4T from 2007 market highs. This was its worst week ever in its 112 year history. Who was boss? Those who control the monetary system including the stock market of the United States. Could this happen again? I have maintained that it could given the fact that the biggest change would be to pass the Paulson Blueprint which has been reinvented as the Obama “New Foundation.” I am amazed that nineteen/twenty months after September/October, 2008, the stock market is at a high: 11,125 which may mean if Congress does not pass financial regulation, it could drop back to the March 9, 2009 low. So how did we get in this position again?

On early October, Hank Paulson told and gave his word to senators that he would only use his additional powers in an extreme emergency. Eleven days later on October 14, he nationalized America’s banking system by giving $250B to Bank of America, Citigroup, Goldman Sachs, Bank of New York Mellon, JP Morgan, Morgan Stanley, State Street Bank and Wells Fargo. The Dow had dropped a total of 41% from the year earlier. Talk about warfare. No guns, no bullets but trillions of dollars transferred out of investors pockets, causing major destruction to America’s middle class. Throughout all of the various congressional sessions, both the Treasury Secretary and the Federal Reserve Chairman Ben Bernanke called for regulatory reform. This has been the mantra for a long time.

President Obama came into office in January, 2009. The stock market reached a severe low of 6,547 on March 9. From this point, the market started to rise. To date it is around 11,000, a rise of 4,453 points. Obama rolled out his version of Paulson’s Blueprint on June 17. It did not call for the Federal Reserve to chair all of the proposed committees like Paulson’s, but it did call for the Treasury Secretary to chair key committees and, in Section V, it called for very strong international regulatory standards and improved international cooperation. It stated that the,

United States is playing a very strong leadership role in efforts to coordinate International financial policy through the G20, the Financial Stability Board, and the Basel Committee on Banking Supervision.

The Obama Financial Regulatory Reform called for the Financial Stability Board to be restructured and institutionalized on the international level and for national authorities to implement the G20 commitments made in London in 2009 which included “supervisory colleges” that would be able to assess danger.

For the first part of 2010, financial reform took a back seat to health reform and on March 15, Senator Dodd rolled out his version of regulatory reform, leaving behind any kind of bi-partisanship that junior Senator Bob Corker had given earlier. A day after the passage of the healthcare bill on March 21, Senator Dodd pushed through the Senate Banking Committee a vote for the bill he authored six days earlier. This basically was a coup d’état over the Republican Party.

Sadly, most Americans are not aware of the marketing savvy that has gone into changing their minds and covering up the fraud perpetrated on them. Regulatory reform has gone from a “Bailout of Wall Street” to a “Bailout of Main Street.” There is now a movement by Republicans after the Security and Exchange Commissions first indictment in ten years of the biggest bank on Wall Street, Goldman Sachs, to move Congress into bi-partisanship. It has worked.

Sadly in light of the fact that Goldman Sachs has given untold millions to our currently seated politicians in Congress and $1M to Obama for his election campaign, the Republicans have decided to play “nice” at the wrong time. Or is it the wrong time? Are they being vigilant and protecting us against another 40% drop in the stock market or are they part of the con game?

Recently, in commenting on how Wall Street makes its money, Jim Santelli from CNBC said, “Where does Wall Street make its money? In murky deals. The more murkier, the more money they make.” In the April 23, 2010 Financial Times, their editorial commented on Obama’s legislation,

Prospects are good that the eventual reform will be a big step forward. But one should not expect too much even of a significantly improved system. As the economy recovers and financial markets’ appetite for risk revives, the chief danger may lie in placing too much confidence in the new arrangements. Financial regulation is, and always will be, a work in progress.

The truth is the stakes were very high for regulatory reform or else we would not have had all the activities of September/October 2008. The bottom line is the consolidation of power by the central banks all over the world. Through the enlarged structure of the Bank for International Settlements and the newly restructured and empowered global regulatory agency, the Financial Stability Board, all of the world’s assets are being shifted to a place where they are fair game for central bankers. All you have to do is study the arrangements on the national and global level. This is the con game of all the centuries–it is a colossal robbery of our nation and people.

If you cannot see from the above all of the boldfaced lies and grab of America’s financial assets, then you/we deserve what’s coming. Lastly, we can see that the next goal of these powerbrokers is a national sales tax so that we can reduce our debt. America is being stripped of her assets and her citizens are being put in greater and greater bondage through usury and taxation! It is only heaven that can help us now.

The Revolt of the States

By Alan Caruba

President Obama, his weird circle of advisors (czars), and the ideologues within the Democrat Party led by Speaker Nancy Pelosi and Majority Leader Harry Reid only have a few months left to completely destroy the separation of powers between the States and the federal government.

A major battle is looming over the Tenth Amendment which declares that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Almost everywhere one looks today, the States are in rebellion to the overreaching of the federal government. The process involved is called nullification, a legal theory that a U.S. State has the right to nullify, i.e., invalidate, any federal law deemed unconstitutional. Since the Supreme Court moves at a glacial pace, the States through their legislatures have taken the lead in many cases.

Nullification is not secession as in the case of the Civil War, but there is a history of nullification that includes the Kentucky and Virginia Resolutions against the Alien and Sedition Acts. Thomas Jefferson and James Madison both argued that the States are the ultimate interpreters of the Constitution, arguing that the States could “interpose” themselves to protect their citizens from unconstitutional national laws.

Much of the discord in the nation today has its roots in the vital difference between a conservative attachment to traditional values and a liberal ideology that would impose a One World Government on our sovereign nation.

The great philosopher of American conservatism, Russell Kirk, wrote “True conservatism is the antithesis of ideology. It is the negation of ideology. For conservative is grounded in the past. Its principles are derived from the Constitution, experience, history, tradition, custom, and the wisdom of those who have gone before us—‘the best that has been thought and said.’ It does not purport to know the future. It is about preserving the true, the good, the beautiful. Conservatism views all ideologies with skepticism, and the more zealous and fanatic with hostility.”

A case in point is the way that State after State has lined up to oppose through the courts and by individual legal action the imposition of the president’s healthcare legislation, passed on strict party lines by the Democrat Party and only after the most vile revelations of bribery and backroom deals. It is a bill whose content Speaker Pelosi said Americans should supinely consider only after it was passed.

There has been a rapidly growing awareness and rejection of the assertion that the federal government can “own” General Motors or that the government should be in the business of buying and selling mortgages.

Pending financial reform legislation would permit the federal take over any company to install its own board of directors and thus control the economy. The failure to exercise existing regulation of the financial sector hardly calls for more regulation. It calls for stronger enforcement of existing laws.

The increasing awareness and rejection of the false “theory of global warming” is being rejected on the basis of the widely perceived cooling of the earth during this decade and the wild projections of warming 25, 50, a hundred or more years into the unknown future. More and more Americans now know it is based on feeble and deliberately false “computer models”.

That is why the Cap-and-Trade bill, a huge tax on energy use, awaiting action in the Senate, even if imposed in the same fashion as the healthcare bill, will be rejected by the States. There is no need to regulate carbon dioxide, a natural gas that has nothing to do with “warming”, but a rogue government agency, the Environmental Protection Agency, is set to assert this falsehood through massive regulation that will destroy the nation’s economic base.

With increasing pace, the States are demanding that the Second Amendment protecting the right to own and bear arms be respected and asserting their right to pass laws permitting gun ownership, including the right to carry concealed arms for self defense. States that have enacted such laws have seen a dramatic decrease in crime.

The assertion of unconstitutional federal powers lies at the heart of the State’s rejection of these efforts. Unfunded federal mandates are bankrupting the States and they want an end to them. The rapacious taking of State lands is crippling theirs and the nation’s ability to access our natural resources.

A growing spectrum of federal laws intruding upon the sovereignty of individual States is being challenged and this is a good thing. We should all take heart from these challenges as well as the spontaneous occurrence of the Tea Party movement that is a dramatic demonstration that the spirit of individual liberty and of States rights is alive and well in America.

A new generation of Americans is learning that the Constitution was designed to ensure a small and limited federal government and that the States, like the Union, are individual republics.

The battle has been joined.

Economists: The stimulus didn’t help

By Hibah Yousuf, staff reporter

NEW YORK (CNNMoney.com) — The recovery is picking up steam as employers boost payrolls, but economists think the government’s stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.

In latest quarterly survey by the National Association for Business Economics, the index that measures employment showed job growth for the first time in two years — but a majority of respondents felt the fiscal stimulus had no impact.

NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act, which the White House’s Council of Economic Advisers says is on track to create or save 3.5 million jobs by the end of the year.

That sentiment is shared for the recently passed $17.7 billion jobs bill that calls for tax breaks for businesses that hire and additional infrastructure spending. More than two-thirds of those polled believe the measure won’t affect payrolls, while 30% expect it to boost hiring “moderately.”

But the economists see conditions improving. More than half of respondents — 57% — say industrial demand is rising, while just 6% see it declining. A growing number also said their firms are increasing spending and profit margins are widening.

Nearly a quarter of those surveyed forecast that gross domestic product, the broadest measure of economic activity, will grow more than 3% in 2010, and 70% of NABE’s respondents expect it to grow more than 2%.

Still, the survey suggested that tight lending conditions remain a concern. Almost half of those polled said the credit crunch hurts their business.

Derivatives To Be Spun Off?

Posted by Karl Denninger

Here Come The Hypocrites! (Berkshire)

Posted by Karl Denninger