FedUpUSA

Archive for April 25th, 2012

Much of this will not be new to regular readers, but for those of you who are new to trying to understand our economic situation, or for those of you who have friends and family that never seem to ‘get it’ or continually tell you that you’re nuts, here’s something you can show the skeptics.

The next time you find yourself at a family gathering and Uncle Jim insists that we’re ‘recovering’ and ‘everything’s going to be just fine, ‘ whip this out, you’ll be the life of the party.  

A New Economic Game:  ”The Truth”

Derivatives expert Janet Tavakoli takes a hard look at what — and who — caused the financial crisis.

Janet Tavakoli calls it as she sees it — and what she often perceives isn’t a pretty picture. But for any advisor, or other investment professional, to ignore this industry veteran’s razor-sharp insights would be folly.

A gutsy critic of both Wall Street and the federal government, the Chicago-based consultant, specializing in derivatives and structured products, pulls no punches. Through her independent research into the global financial crisis, Tavakoli uncovered what she calls massive, widespread fraud committed by a network of mortgage originators, securitizers, and rating and regulatory agencies, among others.

Earlier, the founder of Tavakoli Structured Finance, 58, predicted the thrift industry blow-up and the demise of Enron. Then she foresaw that excessive leverage and structured products’ misratings would lead to a global financial crisis.

In her just-published e-book, The New Robber Barons, Tavakoli charges that the relationship between failed mortgage lenders and investment banks that securitized and sold risky loans was “the largest Ponzi scheme in the history of our capital markets … a financial Pearl Harbor,” where “investment bankers piloted many of the planes.”

Now Tavakoli sees another huge financial crisis looming.

The University of Chicago MBA has traded, structured and sold derivatives at firms including Merrill Lynch, PaineWebber and Westdeutsche Landesbank; and she had earlier stints at Bear Stearns and Goldman Sachs. Research recently talked with her about red flags and preventive solutions.

You write that, in the past three years nothing has been fixed but that we must hold Wall Street responsible for the fraud that resulted in the financial crisis. What should be done?

We need to have investigations. But with the pushback and all the lobbying, what they’ve been counting on is that the statute of limitations for some of these frauds is expiring. So if you don’t file complaints, you may not be able to.

Members of Congress are enabling the lack of punishment and covering up great misdeeds in our financial system — and they’re doing it with no fear of consequences — i.e., being voted out of office, in which case they could find themselves the subject of investigation.

What do you mean: “covering up”?

Many people are covering up for cronies who have a lot of money sloshing around. We threw money into the financial system with no accountability and thus made the problem worse. Our system has been completely infiltrated and bought off. Things aren’t changing because Big Money doesn’t want it to change.

What other indications are there of a cover-up?

The MF Global dog-and-pony show. The attitude toward bundlers like Jon Corzine [the firm’s ex-CEO], who is a big bundler for the Obama campaign, is that the guy can do no wrong. This was before he even testified. People who are raising big money for campaigns get off with no real investigation.

In the Sarbanes-Oxley age, for MF Global to say they were unaware of what they were doing beggars belief. And yet there has been no indictment.

Is President Obama part of the cover-up?

Yes, in that he’s enabled it. He’s left people in place who crashed the global financial system in the first place: [Treasury Secretary] Tim Geithner and [Federal Reserve chair] Ben Bernanke. Obama had told us: “You can’t keep doing things the same way and expect different results.” So he’s been quite a hypocrite.

Who else is in the cover-up?

Mary Schapiro was appointed [by President Obama] to head the SEC. She was formerly head of FINRA, the antichrist of investor advocacy! Yet she was chosen SEC [chair] because the regulators are captive by and serve the people they’re supposed to be regulating. They do not serve investors.

In a way, Obama has been the anti-regulator because he didn’t put people in the regulatory agencies, the Fed or the Treasury who would investigate and fix things that are wrong in our global financial system.

If he’s re-elected, then presumably, things will continue in this same way?

Yes.

What if a Republican is elected President?

Who else is not in the pocket of Big Money interests!

So, no matter who’s President, these crimes — if you want to call them crimes — will be perpetuated?

Yes. And we do want to call them crimes! They are crimes.

What should Obama do now to help Americans?

He has a lot of resources at his disposal, one main one being moral suasion — he’s got the pulpit. When there was a crisis, Reagan, Carter, Bush went on television and explained what needed to be done. We haven’t seen that kind of leadership from President Obama. If anything, the American people have been told things to make them think [conditions] aren’t really as bad as they are: inflation isn’t as bad as you think because an iPad is cheaper now — nonsense like that.

So the public is being poorly informed?

Yes. Therefore, financial advisors need to be doing fundamental analysis of investments and not [only] be reading the Wall Street Journal or, God forbid, watching CNBC.

In other words, FAs should do their own research and figure things out for themselves.

Yes. Sadly, you’re on your own. That’s part of how we got into this mess: We lost the art of rolling up our sleeves and looking for opportunities.

On Internet TV, you stated that we’re “absolutely vulnerable to a repeat [crisis] because the fraud went unpunished and we printed money like crazy to bail us out of the last one.” That’s scary.

But the fact is we’ve bailed people out and had no consequences for them. So it emboldened them to turn around and behave in the same way. Look at banks like JP Morgan: Shortly after the crisis, they thumbed their nose at the idea of trying to separate speculation from the rest of the bank. So if you don’t have restraints on behavior, you’ll see it repeated. And now we’ve made it worse. It’s like handing a drunk driver who got into a crash the keys to a bigger, faster car together with a bottle of vodka.

In every area of finance where we bailed people out, you see the same wrongdoers volunteering to help fix the situation. That’s pretty funny: They weren’t trustworthy before, and they’re not trustworthy now.

But what about the investigations that already have been held?

They’re all for show, and people end up with a slap on the wrist for minor issues. Investigators should be looking instead at the interconnected fraud that infected the mortgage lending market. And there is still a lot today, especially fraud on borrowers. If you go to the root of the problem and choke off the money supply, you stop the fraud in its tracks.

But the banks say they lost money.

The fact that a bank lost money isn’t an indication that they were a victim as opposed to being a perpetrator. A classic problem with control fraud is that the parasites destroy the host — in this case, the host being the bank and the parasites being the bank employees. If you were the victim of a control fraud by the people who worked in your own bank but meanwhile, you were collecting huge bonuses, you overlooked the control fraud within your own institution.

Read the rest at AdvisorOne

Spain is about to enter a full-scale Crisis.

A few facts about Spain:

•    Total Spanish banking loans are equal to 170% of Spanish GDP.

•    Troubled loans at Spanish Banks just hit an 18-year high.

•    Spanish Banks are drawing a record €316.3 billion from the ECB  (up from €169.2 billion in February).

Things have gotten so bad that Spanish citizens are pulling their money out of Spain en masse: €65 billion left the Spanish banking system in March 2011 alone.

As bad as they are, even these data points don’t do justice to the toxic sewer that is the Spanish banking system.

Case in point, over HALF of all Spanish mortgages are owned by Spanish cajas.

If you’re unfamiliar with the caja banking system, let me give you a little background…

Until recently, the caja banking system was virtually unregulated. Yes, you read that correctly, until about 2010-2011 there were next no regulations for these banks (which account for 50% of all Spanish deposits). They didn’t have to reveal their loan to value ratios, the quality of collateral they took for making loans… or anything for that matter.

So, with Spain today, we have a totally unregulated banking system sitting atop HALF of ALL Spanish mortgages after a housing bubble that makes the one that happened in the US look like a small bump.

Spain’s housing bubble is the dark blue line below. The US is the gray one.

Oh, I forgot to mention, the cajas primary lending market during Spain’s housing boom were subprime and sub-sub prime borrowers.

Put another way, today the entire Spanish banking system is saturated with toxic mortgage debt on a level that makes the US in 2008 LOOK GREAT.

If you don’t want to take my word for it, have a look at the Spanish stock market. It’s been in a free fall for over a month as Spain’s banking system teeters on the brink of collapse (remember they’re drawing over €300 BILLION in emergency loans from the ECB.

If you think that chart looks bad, take a look at Spain’s LONG-TERM chart where the market has just broken a 15-YEAR TRENDLINE signaling that the bully market is OVER and setting the stage for a horrific Crash.

This is hands down the ugliest chart out there today. Spain is telling us point blank that disaster is looming.

With that in mind, I believe we have at most a month before Spain drags down the entire EU. The Spanish economy and banking system are too large to be bailed out. The IMF and ECB know this.

Moreover, worldwide banking exposure to Spain is well over €1 TRILLION. What impact do you think that might have on the EU which has an entire banking system that is leveraged at 26 to 1 (Lehman Brothers was leveraged at 30 to 1 when it collapsed)?

Heck even Ben Bernanke and others have issued warnings that Europe could drag down the US banking system if it crumbles.

So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com

Good Investing!

Graham Summers – for Zero Hedge

Why do chimpanzees throw poop?  The federal government would like to know and is using your tax dollars to investigate the matter.  Every single year, we all send huge amounts of our hard-earned money to the federal government.  We hope that they will spend that money wisely.  Unfortunately, that is simply not the case.  You are about to read some examples of how the government is wasting your money that are absolutely mind blowing.  Anyone that claims that there is not a lot of waste that can be cut out of the federal budget is lying to you.  Our politicians have racked up the biggest pile of debt in the history of the world and they are spending our money on some of the stupidest things imaginable.  It is imperative that the American people be educated about all of this outrageous government waste, because right now the political will to change this corrupt system is simply not there among the current crop of politicians in Washington.  We are stealing trillions of dollars from future generations and many of the things that our politicians are wasting that money on are almost too bizarre to believe.

The following are 30 mind blowing ways that the government is wasting your money….

#1 In 2011, the National Institutes of Health spent $592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.

#2 The National Institutes of Health has spent more than 5 million dollars on a website called Sexpulse that is targeted at “men who use the Internet to seek sex with men”.  According to Fox News, the website “includes pornographic images of homosexual sex as well as naked and scantily clad men” and features “a Space Invaders-style interactive game that uses a penis-shaped blaster to shoot down gay epithets.”

#3 The General Services Administration spent $822,751 on a “training conference” for 300 west coast employees at the M Resort and Casino in Las Vegas.

The following is how the Washington Post described some of the wasteful expenses that happened during this “conference”….

Among the “excessive, wasteful and in some cases impermissable” spending the inspector general documented: $5,600 for three semi-private catered in-room parties and $44 per person daily breakfasts; $75,000 for a “team-building” exercise — the goal was to build a bicycle; $146,000 on catered food and drinks; and $6,325 on commemorative coins in velvet boxes to reward all participants for their work on stimulus projects. The $31,208 “networking” reception featured a $19-per-person artisanal cheese display and $7,000 of sushi. At the conference’s closing-night dinner, employees received “yearbooks” with their pictures, at a cost of $8,130.

You can see some stunning pictures of GSA employees living the high life in Las Vegas right here.

#4 Do you remember a few days ago when credit rating agency Egan Jones downgraded U.S. government debt from AA+ to AA?  Well, someone in the federal government apparently did not like that at all.  According to Zero Hedge, the SEC plans to file charges against Egan Jones for “misstatements” on a regulatory application with the SEC.

Normally, the SEC does not go after anyone.  After all, when is the last time a major banker went to prison?

No, the truth is that the SEC is usually just a huge waste of taxpayer money.  According to ABC News, one investigation found that 17 senior SEC officials had been regularly viewing pornography while at work.  While the American people were paying their salaries, this is what senior SEC officials were busy doing….

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.

An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.

Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.

And another SEC accountant attempted to access porn sites 16,000 times in a single month.

#5 According to InformationWeek, the federal government is spending “millions of dollars” to train Asian call center workers.

#6 If you can believe it, the federal government has actually spent $750,000 on a new soccer field for detainees held at Guantanamo Bay.

#7 The U.S. Agency for International Development spent 10 million dollars to create a version of “Sesame Street” for Pakistani television.

#8 The Obama administration has plans to spend between 16 and 20 million dollars to help students from Indonesia get master’s degrees.

#9 The National Science Foundation spent $198,000 on a University of California-Riverside study that explored “motivations, expectations and goal pursuit in social media.” One of the questions the study sought an answer to was the following: “Do unhappy people spend more time on Twitter or Facebook?”

#10 The federal government actually has spent $175,587 ”to determine if cocaine makes Japanese quail engage in sexually risky behavior”.

#11 In 2011, $147,138 was given to the American Museum of Magic in Marshall, Michigan.  Their best magic trick is making U.S. taxpayer dollars disappear.

#12 The federal government recently spent $74,000 to help Michigan “increase awareness about the role Michigan plays in the production of trees and poinsettias.”

#13 In 2011, the federal government gave $550,000 toward the making of a documentary about how rock and roll contributed to the fall of the Soviet Union.

#14 The National Institutes of Health has contributed $55,382 toward a study of “hookah smoking habits” in the country of Jordan.

#15 The federal government gave $606,000 to researchers at Columbia University to study how heterosexuals use the Internet to find love.

#16 A total of $133,277 was recently given to the International Center for the History of Electronic Games for video game preservation.  The International Center for the History of Electronic Games says that it “collects, studies, and interprets video games, other electronic games, and related materials and the ways in which electronic games are changing how people play, learn, and connect with each other, including across boundaries of culture and geography.”

#17 The federal government has given approximately $3 million to researchers at the University of California at Irvine to fund their research into video games such as World of Warcraft.

#18 In 2011, the National Science Foundation gave one team of researchers$149,990 to create a video game called “RapidGuppy” for cell phones and other mobile devices.

#19 The U.S. Department of Agriculture once handed researchers at the University of New Hampshire $700,000 to study methane gas emissions from dairy cows.

#20 In 2011, $936,818 was spent developing an online soap opera entitled “Diary of a Single Mom”.  The show “chronicles the lives and challenges of three single mothers and their families trying to get ahead despite obstacles that all single mothers face, such as childcare, healthcare, education, and finances.”

#21 The federal government once shelled out $2.6 million to train Chinese prostitutes to drink responsibly.

#22 Last year, the federal government spent $96,000 to buy iPads for kindergarten students in Maine.

#23 The U.S. Postal Service once spent $13,500 for a single dinner at Ruth’s Chris Steakhouse.

#24 In 2011, the Air Force Academy completed work on an outdoor worship area for pagans and Wiccans.  The worship area consists of “a small Stonehenge-like circle of boulders with [a] propane fire pit” and it cost $51,474 to build.  The worship area is “for the handful of current or future cadets whose religions fall under the broad category of ‘Earth-based’, which includes Wiccans, druids and pagans.”  At this point, that only includes 3 current students at the Air Force Academy.

#25 The National Institutes of Health once gave researchers $400,000 to study why gay men in Argentina engage in risky sexual behavior when they are drunk.

#26 The National Institutes of Health once gave researchers $442,340 to study the behavior of male prostitutes in Vietnam.

#27 The National Institutes of Health once spent $800,000 in “stimulus funds” to study the impact of a “genital-washing program” on men in South Africa.

#28 The National Science Foundation recently spent $200,000 on a study that examined how voters react when politicians change their stances on climate change.

#29 The federal government recently spent $484,000 to help build a Mellow Mushroom pizzeria in Arlington, Texas.

#30 At this point, China is holding over a trillion dollars of U.S. government debt.  But that didn’t stop the United States from sending 17.8 million dollars in foreign aid to China in 2011.

Do you feel good about paying your federal taxes after reading all of those examples of wasteful government spending?

All over America, middle class families are scratching and clawing in an effort to survive in this economy, and the oppressive levels of taxation imposed on those families certainly does not make things any easier for them.

It is tremendously immoral for the federal government to take money out of the hands of hard working families and spend it on such ridiculous things.

So what do you all think about the list above?

Do you have any things that you would add to that list?

Are you disgusted by how the federal government is mismanaging our money?

Feel free to leave a comment with your opinion below….

The Economic Collapse