Nations Over Banks (Who Serve Only Themselves)


Nations Over Banks (Who Serve Only Themselves)

Posted by Karl Denninger

Are you listening Mr. Obama?

First, let’s look at the idiocy among so-called “reporters”

Swaps Soar on Germany’s ‘Act of Desperation’: Credit Markets

Desperation?  Or is it more like this?

Merkel Seeks EU Rules After German Short-Selling Ban (Update1)

You know, like the rule of law, for instance?

“The lack of rules and limits can make behavior in financial markets driven purely by the profit motive destructive and lead to an existential threat to financial stability in Europe and even the world,” Merkel told lawmakers in Berlin today. “The market alone won’t correct these mistakes.”

Yes indeed.  But the profit motive isn’t evil or bad.  It’s only bad and troublesome when it comes with lawlessness and conflicts of interest.

For example, Goldman Sachs:

As the housing crisis mounted in early 2007, Goldman Sachs was busy selling risky, mortgage-related securities issued by its longtime client, Washington Mutual, a major bank based in Seattle.

Although Goldman had decided months earlier that the mortgage market was headed for a fall, it continued to sell the WaMu securities to investors. While Goldman put its imprimatur on that offering, traders in the same Goldman unit were not so sanguine about WaMu’s prospects: they were betting that the value of WaMu’s stock and other securities would decline.

Got that?  Oh, and it wasn’t just WaMu; the article documents trades against Bear Stearns, the State of New Jersey,  AIG and Thornburg, with the worst being AIG that they profited from twice – first by their demise, then again when they managed to get paid at “par” for bets with AIG that were in fact worth zero as the company was bankrupt!   Yet Lloyd has said:

“Questions have been raised that go to the heart of this institution’s most fundamental value: how we treat our clients.” — Lloyd C. Blankfein, Goldman Sachs’s C.E.O., at the firm’s annual meeting in May

Oh there’s no question at all Lloyd.  Goldman and the rest of the large banks have made clear that their interest is singular: Whatever makes money the banks will do, irrespective of how “clients” are treated or, in many cases, whether what is being done is legal.

Unlawful?  Yep.  We have at least two known examples among the banksters (the GIC conspiracy and Jefferson County), including this fabulous quote I cited yesterday:

The whole investment process was rigged across the board,”

This isn’t capitalism.  It’s thuggery and when institutionalized and formalized as a policy of “we have a legal shield behind which we will do this as we won’t be prosecuted for breaking the law in the process of ripping everyone off” it can also be thought of as fascism.

Remember that John Dillinger “made money” too.  But he was, at least, honest about the fact that he stole it.

The banks, on the other hand, are dishonest about how they steal it: they rig bids, they intentionally obscure bids and offers so as to be able to screw people on the spread, they trade against their clients using the information they gain from them, thus giving them an unfair advantage, they browbeat governments into unsound reductions in capital requirements (e.g. Hank Paulson’s petition to remove the 14:1 leverage limit less than two years before he became Treasury Secretary) and then when their bets blow up they extort taxpayer bailouts and changes in the law so they don’t have to recognize their own bankruptcy.

Then there’s the old-fashioned “advice” that Goldman hands out to “clients” and which Bloomberg compiled a list of since the first of the year:

Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.

Seven of nine eh?  78% losers?  If you listen to these clowns you’re going to be broke fast.  Now the $64,000 question: Has Goldman been taking the other side of those recommendations?

You can best look at Germany’s action yesterday as The Banks .vs. The Sovereigns.

In Germany, the government is reasserting it’s primacy over those entities it licenses to do business, as it should.

But in Italy, the response was to suspend mark-to-market on government securities held in “available for sale” portfolios, demonstrating that in that country, primacy goes to the banksters, and that they in fact run the government, not the other way around.

Then we have Spain, which had an actual bond auction failure yesterday.  Yes, it was a real honest-to-God failure, with the nation trying to sell €8 billion but only managing to place €6.44 billion.  That’s a fail.  And let’s remember that Spain is one of the nations that has been tapped to “bail out” Greece, and that they have to issue to do it.  How’s it working out to choose the side of the banksters, Spain?

In this nation last night saw a plethora of “let the banksters steal from all of you” candidates get blown to bits.  Arlen Specter lost his Senate Primary while Rand Paul won his.  There wasn’t an establishment candidate who thought that letting banks rob the people was a good idea who won yesterday. 

The people of this nation have had it with this crap, yet Washington, thus far, doesn’t appear to be listening.  November is going to be a bloody month for incumbents if they don’t cut it out here and now, stopping the looting and starting with the prosecuting!

Oh, and the “reaction” in the capital markets to Germany’s announcement?  How much more clear can it be?

The Stock Market has been advancing not on improving economic prospects but because the banks were given a license to rob the people in 2009, and they have done so.

But now the people, along with a few wise governments (cough-Germany-cough) are saying “enough!” to robbery not of, but by the banks.

No nation can survive when it the rule of law becomes subordinate to a handful of rich and powerful people who simply steal anything they want with impunity.  The economy of such a nation ultimately is bled dry by that corruption and theft, with the people over time refusing to innovate and provide their effort when it will simply be robbed away from them.

There’s a lesson in here for Washington and President Obama, but the time available for both to act is limited; should the “let ’em rob ’em all” mentality persist the market will solve this problem in a most-unpleasant fashion.

It is time to choose Washington.

Choose wisely.