FedUpUSA

Archive for April, 2010

Readers of FedUpUSA knew what the rest of America is about to find out:  Health Care was NEVER about health.  It was always about tax revenues.

SP Futures Daily Chart

The Federal Reserve and the Administration seem intent on creating another bubble, or rather reflating an old one in US dollar heavy financial assets, in order to prolong the mother of all bubbles, the credit in US dollars bubble.

They are doing it selectively, with the banks carefully apportioning the excess liquidity into financial assets held by a relatively fewer amount of Americans who own stocks, while savers are heavily penalized.

When the credit bubble begins to totter things will become quite chaotic, and the panic this next time around may be terrific, dwarfing that so-easily forgotten repentance and regret of 2007-8. More than panic: hysteria.

I think it is now too late for a real reform. The Democrats have squandered their mandate from the people, and the Republicans are crony capitalists marching in lock step with the Banks, who seem to be in control once again. But I could be mistaken, and would be glad if I am.

When the US dollar and economy roll over it will make quite a wave that will swamp many boats. But these things take time. Once they start to happen, it moves slowly at first, but then gains a momentum and becomes almost unstoppable.

I am not quite sure how much water the USS Leviathan has already taken on, and how big the hole might be. But I firmly believe that the iceberg has been struck, the damage done, and the process has begun. The lifeboats are being quietly provisioned and reservations taken for the officers and crew, and the upper decks.

Again, these things take time, and there is always hope until the end. But there is less and less that can be done as the process continues to unfold, with no serious repairs, and only distractions for the passengers, and encouragingly false announcements, from the bridge.

How much do average Americans make after the Great Recession? Examining the income of U.S. households. 65 percent of U.S. households live on $65,000 or less.

Posted by mybudget360

In order to understand the middle class, we first have to draw a line in the economic sand.  Many in our society would like to believe that we live in a classless system but this isn’t true especially when we look at the financial data.  This classless belief has been shattered with the current structure of the banking bailouts that have favored the top 1 percent in our country.  I wanted to update some of the data that I had posted back in December of 2008.  There is something fascinating about looking at aggregate income data because it tells us a lot about our financial condition.  Yet whenever we hear debates about the middle class, rarely does anyone talk about the specific income cutoff.

Let us first examine the top 35 percent of households:

Source:  Census

If a household brings in $65,000 or more they have made it into the top 35 percent of affluent households.  Now this may not seem like much to a large number of middle class Americans given the rising cost of goods over the last few decades.  To make it into the top 1 percent a household would need to make more than $250,000 per year.  To be in the top 0.1% a household would need to make more than $1.6 million.  This data distribution was from 2007.  I managed to find more recent Census data from 2008 and put together an updated chart to shed a different perspective of the middle class.  The below chart is more realistic because it goes from 0 to $200,000 and since most people fall along this spectrum the information might be more useful and applicable:

38 percent of U.S. households make $49,999 or less.  When we talk about the 40 million Americans receiving food assistance this is where we are looking.  If we look at household incomes of less than $74,999 we cover 58 percent of all U.S. households.  The actual median household income in 2008 is $63,000 according to the American Community Survey done by the Census.  We’ll have more updated information in September of this year with data for 2009.

The above chart helps highlight the cutoff points for middle class Americans.  In recent debates, we have seen that those who make $100,000 or more have somehow made this seem like the de facto income in America.  Even at this level, only 20 percent of U.S. households make $100,000 or more.  This is high relative to what many Americans are working with.  Yet I think many in the media since they fall in this range seem to project their own income situation onto the public discourse.  If they would only look at the above data they would find out that middle class Americans have to get by with much less in today’s market.

A household that makes more than $200,000 is in the top 5 percent of our country.  Yet even that isn’t enough to put them in the top 1 percent that control 42 percent of all financial wealth.  But even within the top 1.5 percent income variation is enormous:

Source:  Wikipedia

“As of 2005 there are approximately 146,000 (0.1%) households with incomes exceeding $1,500,000, while the top 0.01% or 11,000 households had incomes exceeding $5,500,000. The 400 highest tax payers in the nation had gross annual household incomes exceeding $87,000,000. Household incomes for this group have risen more dramatically than for any other. As a result the gap between those who make less than one and half million dollars annually (99.9% of households) and those who make more (0.1%) has been steadily increasing, prompting The New York Times to proclaim that the “Richest Are Leaving Even the Rich Far Behind.” Indeed the income disparities within the top 1.5% are quite drastic. While households in the top 1.5% of households had incomes exceeding $250,000, 443% above the national median, their incomes were still 2200% lower than those of the top .01% of households. One can therefore conclude that almost any household, even those with incomes of $250,000 annually are poor when compared to the top .1%, who in turn are poor compared to the top 0.000267%, the top 400 taxpaying households.”

I guess many things are relative when it comes to income.  True wealth is actually measured by net worth.  In 2009 the number of millionaire households jumped to 7.8 million but this is down from the peak of 9.2 million in 2007.  This recession has destroyed a lot of wealth and the middle class have seen a longer journey ahead if they ever wish to reach financial security.  But this isn’t a new trend and this recession has only brought the issue of economic class to the forefront.

The Financial Crisis: Are We All Responsible?

“Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease, but the very existence of a society.” Samuel Johnson

As the hearings and scandals progress, and the revelations and charges start to cut closer to the heart of the credit swindles, inevitably there will be a movement to say, “We are all responsible. Let’s allow bygones to be bygones, it was all a misunderstanding. Let’s move on to something new. Justice is not important, and cannot be done.”

There will be long accountings of how the problems arose, and how changes in the banking laws, broker deregulation, and the erosion of elite privileges compelled the Wall Street banks to take more and greater risks, to violate unspoken understandings about customer relationships, to take great risks, to bend the laws, to use money and influence to suborn perjury and the breaking of oaths, and to generally undermine the fabric of government.

There will be long analyses that suggest that trust has been lost, the trust that binds the social and financial interactions of people. And there will be an effort to regain that trust, to promise change and reform, and of course, justice.

As for justice they will say, but aren’t we all responsible? Didn’t we all believe the promise that ‘greed is good?’

No.

The overwhelming majority of people are hard working, honest in their dealings, more concerned with raising families than ruling others, if anything distracted by their day to day problems. Long suffering, patient to a fault, too willing to the give the Wall Street bankers the benefit of the doubt for the very reason of their own good natures. They could not imagine themselves doing the things of which these men stand accused, so they cannot believe that others would so willingly lie and deceive, cheat and steal, attack the very heart of the nation, while wrapping themselves in a flag of hypocrisy, for a few more dollars that they can hardly need or even personally spend.

And why? Because it feeds their sickened hearts, their pathological egos, and the need to make others suffer loss for their own gains. It sets them apart from a humanity which they hold in contempt enmingled with a nagging self-hate, makes them feel superior and worthwhile, and at the extreme even as gods among men.

So when the fresh public relations spin and propaganda from Wall Street and the financial sector’s demimonde starts this week, and seeks to confuse the issues and distort the true nature of the fraud, recall who profited and who lost, who was caught with their hands deep in the pockets of the many, and even now stand arrogantly unrepentant with the ongoing misery of others to their account. And who stood idly by while charged by sworn oaths with protecting the innocent, the unsuspecting many, from the predatory, lawless few.

“When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle.” Edmund Burke

Or, in the words of William K. Black and Elliot Spitzer in their essay Questions on the Goldman Scandal at New Deal 2.0:

“We applaud the SEC lawsuit, but it will not solve the problem. Unless our financial system is reformed to put adequate protections and checks and balances in place, we can expect this kind of fraud to continue. Financial executives will continue to take risks they do not understand. Those who control the flow of capital will continue to churn out profits with socially disastrous consequences.”

The banks must be restrained, the financial system reformed, the economy brought bank into balance, and justice done though the mighty fall, before there can be any sustained recovery.

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.