Archive for May 11th, 2011
Not surprised at this filing, given the recent decision that MERS has improperly foreclosed by advertisement in Michigan. The expected result was that some of the allegedly screwed have gotten together and now are after MERS for the big bucks in a class-action:
12. MERS has acted in a mortgagee nominee capacity on behalf of its members and within the State of Michigan for more than five (5) years.
13. MERS, for itself and at the direction of, and on behalf of, its members, has filed thousands of foreclosures by advertisement in the State of Michigan.
14. During this period, MERS has illegally prosecuted numerous non-judicial foreclosures by advertisement as permitted under MCL 600.3201, et seq., purchased the property at the subsequent sheriff’s sales and then quit-claim deeded the properties to its associated note holding member.
18. Even in the face of these challenges, MERS did, and continued for a period of years, to knowingly, fraudulently and illegally foreclose using a State law upon which they had no authority or right to utilize.
Now the fun begins; they’re after $400 million…… that ought to leave a mark.
Lee Farkas, former chairman of Taylor, Bean & Whitaker Mortgage Corp., is seen in this handout photo. Farkas was convicted this year of helping run a more than $1.9 billion fraud scheme aimed in part at the government’s Troubled Asset Relief Program. Photographer: Marion County Sheriff’s Office via Bloomberg
The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.
We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
In the Texas “Rent-a-Bank” scandal of the 1970s, for example, two ringleaders created a fraud network of 50 lenders that caused billions of dollars in losses. The watchdogs removed and sanctioned one of the main culprits, but because the crimes weren’t prosecuted, the same crooks reappeared in the 1980s to do it all over again, only on a bigger scale. Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.
It seems as if we have forgotten this lesson.
Take the seven senior officials convicted in the failure of one of the lenders that drove the 2008 credit crunch. All of the cases arose from an investigation of Taylor Bean & Whitaker Mortgage Corp. The first trial occurred last month — 6 1/2 years after the Federal Bureau of Investigation warned publicly that there was an “epidemic” of mortgage fraud and predicted that it would cause a financial crisis if it weren’t contained. The trial and conviction of Taylor Bean’s former chairman, Lee Farkas, occurred nine years after his crimes were suspected.
Taylor Bean was a small Florida mortgage broker before the fraud began as the housing boom took off. Fannie Mae had cited Farkas for multiple violations, but never filed a criminal referral, which would have triggered an investigation. Had it done so, Farkas might have been prosecuted and Taylor Bean shut long before it caused so much damage. Instead, it expanded, then failed, pulling down a bank with it at a cost of $2.8 billion to the Federal Deposit Insurance Corp. Farkas plans to appeal the verdict.
Fraud With Impunity
The Office of Thrift Supervision, the successor to the S&L regulator where I worked, made no criminal referrals in the latest crisis. The Office of the Comptroller of the Currency and the Federal Reserve made less than a handful. Mortgage and investment banks also made very few referrals — and never against their senior officers.
Now it is true that banks made thousands of criminal referrals, but almost all involved low-level figures. The volume overwhelmed the Federal Bureau of Investigation, which failed to devote adequate resources. As late as 2007, the agency assigned only 120 investigators spread among 56 field offices to probe thousands of cases. More than eight times that number probed the S&L frauds, a far smaller epidemic.
Unlike the S&L debacle, there was no national task force and no comprehensive prioritization. This made it difficult to investigate the huge, fraudulent subprime lenders. And since there were no criminal referrals of these firms, the FBI wasn’t even attempting to pursue them.
The two great lessons to draw from this epidemic of fraud is that if you don’t look for it, you don’t find it and that wherever you do look, you do find fraud. The FBI was concentrating on retail banking, or individual borrowers and smaller lenders. But the big problems were being created in the wholesale end of the business, where loans were pooled, packaged, sold and securitized. Because the FBI only looked at relatively small cases, it found only relatively small frauds.
The FBI has been processing no more than 2,000 mortgage- fraud cases a year. There are two things to consider though: Not only were they the wrong cases to focus on, but they amounted to nothing in light of the estimated 1 million fraudulent mortgage loans made annually during the housing bubble years.
Deserted by Regulators
The FBI — deserted by the banking regulators and undercut by the Justice Department — was so desperate that it formed a partnership with the Mortgage Bankers Association in 2007. The trade association had created an absurd definition of mortgage fraud under which accounting frauds by a lender were impossible and bankers were the victims. By 2009 the financial crisis had become so acute that Treasury Secretary Timothy Geithner discouraged criminal investigations of the large nonprime lenders.
Nobel laureate George Akerlof and Paul Romer wrote a classic article in 1993. The title captured their findings: “Looting: the Economic Underworld of Bankruptcy for Profit.” Akerlof and Romer explained how bank CEOs can use accounting fraud to create a “sure thing” in the form of record short- term income, generated by making low-quality loans at a premium yield while making only minimal reserve allowances for losses. While it lasts, this fictional income allows the chief executive officer to loot the bank, which then fails, and walk away wealthy.
In criminology, we call these accounting-control frauds and we know that they destroy wealth at a prodigious rate. There’s no “if” about the losses — the only questions are when they will hit, how big they will be, and who will bear them. The record income produced explains why those involved get away with it for years. Private markets don’t discipline firms reporting record profits. They compete to fund them. Fraudulent CEOs can control the hiring and firing and can create the perverse incentives that produce a dynamic in which bad ethics drive good ethics out of the marketplace.
Sophisticated accounting-control frauds not only sucked in employees who should have known better, but also loan brokers. The result is that the large fraudulent lenders — those making a lot from liar’s loans — produced an echo epidemic of deception.
Fraud, it turns out, begets fraud.
(William K. Black is an associate professor of economics and law at the University of Missouri-Kansas City and the author of “The Best Way to Rob a Bank Is to Own One.” The opinions expressed are his own.)
To contact the writer of this column: William K. Black at firstname.lastname@example.org
To contact the editor responsible for this column: James Greiff at email@example.com
Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM), along with three other U.S. mortgage servicers, proposed paying $5 billion to settle a probe of their foreclosure practices by state and federal officials, two people familiar with the matter said.
Note that what the banks want is immunity from prosecution.
They must also reach an agreement on the claims state officials and federal regulators will surrender as part of any settlement. Banks are less likely to sign off on any deal that doesn’t provide a broad release of claims from state attorneys general in the most populous states.
Why would they need that? Well, it might have something to do with this sort of thing:
Perhaps it’s due to the sort of irregularity being discussed here?
Back to the assignment from First Meridian. First Meridian could not have provided instructions to MERS to convey a title they did not hold in 2010! Not only did First Meridian not exist in 2010, but they never filed bankruptcy either!! Instead they joined TRUMP FINANCIAL in 2007 and TRUMP FINANCIAL later ceased to operate!
Uh, you mean that MERS, as “nominee”, is transferring rights in paper from an entity that doesn’t exist, and therefore they can’t have nominee status for that entity any longer?
There isn’t anything wrong with that is there? There isn’t anything wrong with a firm that is being assigned to proffering and causing to be prepared an assignment to itself, right?
Wait a second…. how does the “to” (grantee or transferee, if you will) acquire the right to assign something from the transferOR?
Mr. AG….. Mr. AG your “have a few drinks and don’t bother actually doing your job protecting the taxpayer and citizen” phone is ringing again.
A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges.
Lloyd Blankfein, chairman and CEO of The Goldman Sachs
Group, is sworn in while testifying before the Senate Homeland Security and
Governmental Affairs Investigations Subcommittee on Capitol Hill on April 27,
2010 in Washington, DC.
They weren’t murderers or anything; they had merely stolen more money than
most people can rationally conceive of, from their own customers, in a few
blinks of an eye. But then they went one step further. They came to Washington,
took an oath before Congress, and lied about it.
Thanks to an extraordinary investigative effort by a Senate subcommittee that
unilaterally decided to take up the burden the criminal justice system has
repeatedly refused to shoulder, we now know exactly what Goldman Sachs
executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly
how they and other top Goldman executives, including David Viniar and Thomas
Montag, defrauded their clients. America has been waiting for a case to bring
against Wall Street. Here it is, and the evidence has been gift-wrapped and left
at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt:
Goldman Sachs should stand trial.
The great and powerful Oz of Wall Street was not the only target of Wall
Street and the Financial Crisis: Anatomy of a Financial Collapse, the
650-page report just released by the Senate Subcommittee on Investigations,
chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of
Oklahoma. Their unusually scathing bipartisan report also includes case studies
of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a
bubble era that produced the most destructive crime spree in our history — “a
million fraud cases a year” is how one former regulator puts it. But the
mountain of evidence collected against Goldman by Levin’s small, 15-desk office
of investigators — details of gross, baldfaced fraud delivered up in such
quantities as to almost serve as a kind of sarcastic challenge to the curiously
impassive Justice Department — stands as the most important symbol of Wall
Street’s aristocratic impunity and prosecutorial immunity produced since the
crash of 2008.
To date, there has been only one successful prosecution of a financial big
fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was
just convicted on a smorgasbord of fraud charges and now faces life in prison.
But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff,
his comically excessive crime spree (which involved such lunacies as kiting
checks to his own bank and selling loans that didn’t exist) was almost
completely unconnected to the systematic corruption that led to the crisis.
What’s more, many of the earlier criminals in the chain of corruption — from
subprime lenders like Countrywide, who herded old ladies and ghetto families
into bad loans, to rapacious banks like Washington Mutual, who pawned off
fraudulent mortgages on investors — wound up going belly up, sunk by their own
But Goldman, as the Levin report makes clear, remains an ascendant company
precisely because it used its canny perception of an upcoming disaster (one
which it helped create, incidentally) as an opportunity to enrich itself, not
only at the expense of clients but ultimately, through the bailouts and the
collateral damage of the wrecked economy, at the expense of society. The bank
seemed to count on the unwillingness or inability of federal regulators to stop
them — and when called to Washington last year to explain their behavior,
Goldman executives brazenly misled Congress, apparently confident that their
perjury would carry no serious consequences. Thus, while much of the Levin
report describes past history, the Goldman section describes an
ongoing? crime — a powerful, well-connected firm, with the ear of the
president and the Treasury, that appears to have conquered the entire regulatory
structure and stands now on the precipice of officially getting away with one of
the biggest financial crimes in history.
Defenders of Goldman have been quick to insist that while the bank may have
had a few ethical slips here and there, its only real offense was being too good
at making money. We now know, unequivocally, that this is bullshit. Goldman
isn’t a pudgy housewife who broke her diet with a few Nilla Wafers between meals
— it’s an advanced-stage, 1,100-pound medical emergency who hasn’t left his
apartment in six years, and is found by paramedics buried up to his eyes in
cupcake wrappers and pizza boxes. If the evidence in the Levin report is
ignored, then Goldman will have achieved a kind of corrupt-enterprise nirvana.
Caught, but still free: above the law.
To fully grasp the case against Goldman, one first needs to understand that the financial crime wave described in the Levin report came on the heels of a decades-long lobbying campaign by Goldman and other titans of Wall Street, who pleaded over and over for the right to regulate themselves.
Before that campaign, banks were closely monitored by a host of federal
regulators, including the Office of the Comptroller of the Currency, the FDIC
and the Office of Thrift Supervision. These agencies had examiners poring over
loans and other transactions, probing for behavior that might put depositors or
the system at risk. When the examiners found illegal or suspicious behavior,
they built cases and referred them to criminal authorities like the Justice
This system of referrals was the backbone of financial law enforcement
through the early Nineties. William Black was senior deputy chief counsel at the
Office of Thrift Supervision in 1991 and 1992, the last years of the S&L
crisis, a disaster whose pansystemic nature was comparable to the mortgage
fiasco, albeit vastly smaller. Black describes the regulatory MO back then.
“Every year,” he says, “you had thousands of criminal referrals, maybe 500
enforcement actions, 150 civil suits and hundreds of convictions.”
But beginning in the mid-Nineties, when former Goldman co-chairman Bob Rubin
served as Bill Clinton’s senior economic-policy adviser, the government began
moving toward a regulatory system that relied almost exclusively on voluntary
compliance by the banks. Old-school criminal referrals disappeared down the
chute of history along with floppy disks and scripted television entertainment.
In 1995, according to an independent study, banking regulators filed 1,837
referrals. During the height of the financial crisis, between 2007 and 2010,
they averaged just 72 a year.
But spiking almost all criminal referrals wasn’t enough for Wall Street. In
2004, in an extraordinary sequence of regulatory rollbacks that helped pave the
way for the financial crisis, the top five investment banks — Goldman, Merrill
Lynch, Morgan Stanley, Lehman Brothers and Bear Stearns — persuaded the
government to create a new, voluntary approach to regulation called Consolidated
Supervised Entities. CSE was the soft touch to end all soft touches. Here is how
the SEC’s inspector general described the program’s regulatory army: “The Office
of CSE Inspections has only two staff in Washington and five staff in the New
York regional office.”
Among the bankers who helped convince the SEC to go for this ludicrous
program was Hank Paulson, Goldman’s CEO at the time. And in exchange for
“submitting” to this new, voluntary regime of law enforcement, Goldman and other
banks won the right to lend in virtually unlimited amounts, regardless of their
cash reserves — a move that fueled the catastrophe of 2008, when banks like Bear
and Merrill were lending out 35 dollars for every one in their vaults.
Goldman’s chief financial officer then and now, a fellow named David Viniar,
wrote a letter in February 2004, commending the SEC for its efforts to develop
“a regulatory framework that will contribute to the safety and soundness of
financial institutions and markets by aligning regulatory capital requirements
more closely with well-developed internal risk-management practices.”
Translation: Thanks for letting us ignore all those pesky regulations while we
turn the staid underwriting business into a Charlie Sheen house party.
Goldman and the other banks argued that they didn’t need government
supervision for a very simple reason: Rooting out corruption and fraud was in
their own self-interest. In the event of financial wrongdoing, they insisted,
they would do their civic duty and protect the markets. But in late 2006, well
before many of the other players on Wall Street realized what was going on, the
top dogs at Goldman — including the aforementioned Viniar — started to fear they
were sitting on a time bomb of billions in toxic assets. Yet instead of sounding
the alarm, the very first thing Goldman did was tell no one. And the
second thing it did was figure out a way to make money on the knowledge
by screwing its own clients. So not only did Goldman throw a full-blown “bite
me” on its own self-righteous horseshit about “internal risk management,” it
more or less instantly sped way beyond inaction straight into craven
“This is the dog that didn’t bark,” says Eliot Spitzer, who tangled with
Goldman during his years as New York’s attorney general. “Their whole political
argument for a decade was ‘Leave us alone, trust us to regulate ourselves.’ They
not only abdicated that responsibility, they affirmatively traded against the
By the end of 2006, Goldman was sitting atop a $6 billion bet on American home loans. The bet was a byproduct of Goldman having helped create a new trading index called the ABX, through which it accumulated huge holdings in mortgage-related securities. But in December 2006, a series of top Goldman executives — including Viniar, mortgage chief
Daniel Sparks and senior executive Thomas Montag — came to the conclusion that
Goldman was overexposed to mortgages and should get out from under its huge bet
as quickly as possible. Internal memos indicate that the executives soon became
aware of the host of scams that would crater the global economy: home loans
awarded with no documentation, loans with little or no equity in them. On
December 14th, Viniar met with Sparks and other executives, and stressed the
need to get “closer to home” — i.e., to reduce the bank’s giant bet on
Sparks followed up that meeting with a seven-point memo laying out how to
unload the bank’s mortgages. Entry No. 2 is particularly noteworthy. “Distribute
as much as possible on bonds created from new loan securitizations,” Sparks
wrote, “and clean previous positions.” In other words, the bank needed to find
suckers to buy as much of its risky inventory as possible. Goldman was like a
car dealership that realized it had a whole lot full of cars with faulty brakes.
Instead of announcing a recall, it surged ahead with a two-fold plan to make a
fortune: first, by dumping the dangerous products on other people, and second,
by taking out life insurance against the fools who bought the deadly cars.
The day he received the Sparks memo, Viniar seconded the plan in a gleeful
cheerleading e-mail. “Let’s be aggressive distributing things,” he wrote,
“because there will be very good opportunities as the markets [go] into what is
likely to be even greater distress, and we want to be in a position to take
advantage of them.” Translation: Let’s find as many suckers as we can as fast as
we can, because we’ll only make more money as more and more shit hits the
By February 2007, two months after the Sparks memo, Goldman had gone from
betting $6 billion on mortgages to betting $10 billion against them — a
shift of $16 billion. Even CEO Lloyd “I’m doing God’s work” Blankfein wondered
aloud about the bank’s progress in “cleaning” its crap. “Could/should we have
cleaned up these books before,” Blankfein wrote in one e-mail, “and are we doing
enough right now to sell off cats and dogs in other books throughout the
How did Goldman sell off its “cats and dogs”? Easy: It assembled new batches
of risky mortgage bonds and dumped them on their clients, who took Goldman’s
word that they were buying a product the bank believed in. The names of the
deals Goldman used to “clean” its books — chief among them Hudson and Timberwolf
— are now notorious on Wall Street. Each of the deals appears to represent a
different and innovative brand of shamelessness and deceit.
In the marketing materials for the Hudson deal, Goldman claimed that its
interests were “aligned” with its clients because it bought a tiny, $6 million
slice of the riskiest portion of the offering. But what it left out is that it
had shorted the entire deal, to the tune of a $2 billion bet against its own
clients. The bank, in fact, had specifically designed Hudson to reduce its
exposure to the very types of mortgages it was selling — one of its creators,
trading chief Michael Swenson, later bragged about the “extraordinary profits”
he made shorting the housing market. All told, Goldman dumped $1.2 billion of
its own crappy “cats and dogs” into the deal — and then told clients that the
assets in Hudson had come not from its own inventory, but had been “sourced from
Hilariously, when Senate investigators asked Goldman to explain how it could
claim it had bought the Hudson assets from “the Street” when in fact it had
taken them from its own inventory, the bank’s head of CDO trading, David Lehman,
claimed it was accurate to say the assets came from “the Street” because Goldman
was part of the Street. “They were like, ‘We are the Street,’” laughs
Hudson lost massive amounts of money almost immediately after the sale was
completed. Goldman’s biggest client, Morgan Stanley, begged it to liquidate the
investment and get out while they could still salvage some value. But Goldman
refused, stalling for months as its clients roasted to death in a raging
conflagration of losses. At one point, John Pearce, the Morgan Stanley rep
dealing with Goldman, lost his temper at the bank’s refusal to sell, breaking
his phone in frustration. “One day I hope I get the real reason why you are
doing this to me,” he told a Goldman broker.
Goldman insists it was only required to liquidate the assets “in an orderly
fashion.” But the bank had an incentive to drag its feet: Goldman’s huge bet
against the deal meant that the worse Hudson performed, the more money Goldman
made. After all, the entire point of the transaction was to screw its own
clients so Goldman could “clean its books.” The crime was far from victimless:
Morgan Stanley alone lost nearly $960 million on the Hudson deal, which
admittedly doesn’t do much to tug the heartstrings. Except that quickly after
Goldman dumped this near-billion-dollar loss on Morgan Stanley, Morgan Stanley
turned around and dumped it on taxpayers, who within a year were spending $10
billion bailing out the sucker bank through the TARP program.
It is worth pointing out here that Goldman’s behavior in the Hudson scam
makes a mockery of standards in the underwriting business. Courts have held that
“the relationship between the underwriter and its customer implicitly involves a
favorable recommendation of the issued security.” The SEC, meanwhile, requires
that broker-dealers like Goldman disclose “material adverse facts,” which among
other things includes “adverse interests.” Former prosecutors and regulators I
interviewed point to these areas as potential avenues for prosecution; you can
judge for yourself if a $2 billion bet against clients qualifies as an “adverse
interest” that should have been disclosed.
But these “adverse interests” weren’t even the worst part of Hudson. Goldman
also used a complex pricing method to turn the deal into an impressive
triple screwing. Essentially, Goldman bought some of the mortgage
assets in the Hudson deal at a discount, resold them to clients at a higher
price and pocketed the difference. This is a little like getting an invoice from
an interior decorator who, in addition to his fee for services, charges you $170
a roll for brand-name wallpaper he’s actually buying off the back of a truck for
To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge
lot of deadly mortgages on its clients, lies about where that crap came from and
claims it believes in the product even as it’s betting $2 billion against it.
When its victims try to run out of the burning house, Goldman stands in the
doorway, blasts them all with gasoline before they can escape, and then has the
balls to send a bill overcharging its victims for the pleasure of getting
Matt Taibbi for Rolling Stone – Read The Rest
… the words of Timo Soini after the fact and after they printed it unedited online yesterday.
Here is what was originally published at this link, with the omitted parts that they scrubbed bolded:
Why I Won’t Support More Bailouts
When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the so-called bailouts of euro-zone member states. These bailouts are patently bad for Europe, bad for Finland and bad for the countries that have been forced to accept them. Europe is suffering from the economic gangrene of insolvency—both public and private. And unless we amputate that which cannot be saved, we risk poisoning the whole body.
The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.
To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.
At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy that benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a kind of deadly symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever-more money back to our governments, keeping the scheme afloat.
In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made. Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland’s NAMA and a lineup of special-purpose vehicles that make Enron look simple. Some politicians understood this; others just panicked and did as they were told.
The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.
Further contrary to the official wisdom, the recipient states did not want such “help,” not this way. The natural option for them was to admit insolvency and let failed private lenders, wherever they were based, eat their losses.
That was not to be. As former Finance Minister Brian Lenihan recently revealed, Ireland was forced to take the money. The same happened to Portug-al-uese Prime Minister José Sócrates, although he may be less forthcoming than Mr. Lenihan about admitting it.
Why did the Brussels-Frankfurt extortion racket force these countries to accept the money along with “recovery” plans that would inevitably fail? Because they needed to please the tax-guzzling banks, which might otherwise refuse to turn up at the next Spanish, Belgian, Italian, or even French bond-auction.
Unfortunately for this financial and political cartel, their plan isn’t working. Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.
And so, unpurged, the gangrene spreads. The Spanish property sector is much bigger and more uncharted than that of Ireland. It is not just the cajas that are in trouble. There are major Spanish banks where what lies beneath the surface of the balance sheet may be a zombie, just as happened in Ireland for a while. The clock is ticking, and the problem is not going away.
Setting up the European Stability Mechanism is no solution. It would institutionalize the system of wealth transfers from private citizens to compromised politicians and otherwise failed bankers, creating a huge moral hazard and destroying what remains of Europe’s competitive banking landscape.
Some defend the ESM, saying its use would always require unanimity. But the current mess with Portugal shows that the elite in Brussels will seek to enforce unanimity through pressure when it cannot be obtained by persuasion. Abolishing unanimity is only a matter of time. After that we have a full-fledged fiscal transfer union that is obviously in hock to Brussels’ anti-growth corporatism.
Fortunately, it is not too late to stop the rot. For the banks, we need honest, serious stress tests. Stop the current politically inspired farce. Instead, have parallel assessments done by regulators and independent groups including stakeholders and academics. Trust, but verify.
Insolvent banks and financial institutions must be shut down, purging insolvency from the system. We must restore the market principle of freedom to fail.
If some banks are recapitalized with taxpayer money, taxpayers should get ownership stakes in return, and the entire board should be kicked out. But before any such taxpayer participation can be contemplated, it is essential to first apply big haircuts to bondholders.
For sovereign debt, the freedom to fail is again key. Significant restructuring is needed for genuine recovery. Yes, markets will punish defaulting states, but they are also quick to forgive. Current plans are destroying the real economies of Europe through elevated taxes and transfers of wealth from ordinary families to the coffers of insolvent states and banks. A restructuring that left a country’s debt burden at a manageable level and encouraged a return to growth-oriented policies could lead to a swift return to international debt markets.
This is not just about economics. People feel betrayed. In Ireland, the incoming parties to the new government promised to hold senior bondholders responsible, but under pressure, they succumbed, leaving their voters with a sense of democratic disenfranchisement. The elites in Brussels have said that Finland must honor its commitments to its European partners, but Brussels is silent on whether national politicians should honor their commitments to their own voters.In a democracy, where we govern under the consent of the people, power is on loan. We do what we promise, even if it costs a dinner in Brussels, a “negative” media profile, or a seat in the cabinet.
When in Europe’s long night of 1939-45, war came to Finland with the winter blizzards, my mother was one of eight siblings being raised on a small farm in central Finland where my grandparents eked out a frugal living.
My two young uncles rushed to the front and were both wounded in action during Finland’s chapter of Europe’s most terrible bloodshed. I was raised to know that genocidal war must never again be visited on our continent and I came to understand the values and principles that originally motivated the establishment of what became the European Union.
This Europe, this vision, was one that offered the people of Finland and all of Europe the gift of peace founded on democracy, freedom, justice and subsidiarity. This is a Europe worth having, so it is with great distress that I see this project being put in jeopardy by a political elite who would sacrifice the interests of Europe’s ordinary people in order to protect certain corporate interests.
Europe may still recover from this potentially terminal disease and decline. Insolvency must be purged from the system and it must be done openly and honestly. That path is not easy, but it is always the right path—for Finland, and for Europe.
Mr. Soini is the chairman of the True Finns Party in Finland.
That reads a bit differently, doesn’t it?
Among other things there is a clear statement that Ireland was intentionally screwed. This also falls into what I reported earlier – that it was Tim Geithner who “forced” the Irish to not haircut bondholders. Never mind that the same problem exists right here in America – pretending that our problems were “liquidity.” They weren’t there and they’re not here. Period.
You don’t think that chain of responsibility being documented by the head of a political party might have resulted in a few phone calls from Treasury back to The Journal “asking nicely” to have all reference to this blatantly improper arm-twisting removed, do you?
By the way, wouldn’t such an act by a foreign government be considered an act of economic war?
I read – and reported on – this editorial as originally penned. When I was directed back to the article by astute readers I discovered the changes. Unfortunately for The Journal and others who would intentionally distort the record, the original was picked up and reprinted in its entirety in enough places on The Internet to be able to find what had been done, and reproduce it so you, the reader, can see exactly what sort of “sanitizing” of the truth our corporate media engages in.
You can find one of many copies of the original here, on a site hosted in Finland. I have reprinted the original article for the express purpose of outlining the sort of outrageous revisionism that our corporate-owned media expects us to put up with and the rampant dishonesty that is found in those so-called “Newsrooms.”
In addition, the original letter – in the Finn’s language – can be found on the author’s web site. As a general practice I never reprint full articles – but in this case it’s necessary to show exactly what was elided from the original. And while I fully understand that newspapers often edit submissions for content or length, in this case the WSJ published the original, unedited, and then redacted it later.
PS: Yeah, I have it as originally presented on the web page as an image file. Nice try jackals. Now how about admitting who yanked your chain and “convinced” you to strip the rest out – especially if that pressure came from Treasury, as I suspect it did.