FedUpUSA

Archive for the ‘crooks’ Category

The truth is starting to dribble out….

After tracing 840 transactions of $327 billion in the company’s final days, Giddens is still analyzing where some of the $1.2 billion in missing customer money “ended up,” he said in the report. Corzine’s firm failed after credit-rating downgrades, a record quarterly loss and revelations about its $6.3 billion European debt trade unnerved investors. The missing money has sparked Congressional hearings and former customers have said it undermined confidence in the futures industry.

“For three months, our investigative team has worked to understand what happened during the final days of MF Global when cash and related securities movements were not always accurately and promptly recorded due to the chaotic situation and the complexity of the transactions,” Giddens said in a statement.

Yes, it’s so chaotic that you’re moving money around without recording where it went and where it came from?  That sounds like someone who’s not balancing their checkbook eh?

The investigation to date has found that transactions regularly moved between accounts and that funds believed to be in excess of segregation requirements in the commodities segregated accounts were used to fund other daily activities of MF Global. In the past, such transfers were in amounts of less than $50 million, but as liquidity demands increased and could not be met from internal sources, much larger amounts were used, apparently with the assumption that funds would be restored by the end of the day. By Wednesday, October 26th, as the result of increasing demands for funds or collateral throughout MF Global, funds did not return as anticipated.

Ah, I see.  It’s only $50 million that was “moved” (notice that the word “stole” wasn’t used) during the day, replacing the end of the day.

This is sort of like me deciding to “move” your car when you’re sleeping, and as long as I “replace” it by 6:00 AM when you need it to go to work, it’s all ok, right?  If the cops stop me it’s not really stealing because I was going to bring it back, right?

The point here is that it appears from this report that it was common practice for the firm to use customer funds on an intraday basis, essentially like kiting checks, with the presumption that they could make it all good by the close of business.  This leads to the obvious question as to whether this is going on in other firms without detection, as it is strongly implied that this was an absolutely routine thing for the company to do, and it also appears that either CME didn’t catch it or worse they didn’t care.

What’s even worse is that as I’ve pointed out repeatedly since 2007 when I started writing The Ticker off-balance-sheet vehicles are utterly toxic as they hide risk and make it essentially impossible to accurately determine exactly what is going on at any given point in time.  The Trustee’s filed report states:

The sovereign debt investments undertaken on a repo to maturity basis allowed some immediate gains to be booked, but these were purely paper profits generating negligible cash while the underlying transactions resulted in calls for substantial additional margin.

In other words the actual amount of the risk was hidden by not having it out in the open where people could see it, as the repo-to-maturity deals appeared to be “risk free” and off balance sheet but in fact were not risk free and ultimately led to the detonation of the firm.

The heightened risk and apparent loss of confidence drove customers to close their accounts and withdraw funds, resulting in even greater demands on a relatively limited amount of available cash.

Were the firm not “temporarily” stealing customer funds for operating capital then the loss of customer accounts and withdrawal of funds would have shrunk the firm’s operating profit (since the customers would have left) but that should not have caused the company to fail.  More to the point if segregation is being maintained such a “flight” situation can’t lead to the loss of customer money.

There is one interesting chart in the report, on the second-to-last page. Have a look:

This chart appears to imply that new positions were opened in the last days, as initial margin grossly increased, more than doubling between 10/24 and 10/31.  This is not explained in the narrative thus far, but it certainly appears to require some explanation, since initial margin, as the name implies, is posted when one initiates a position.

I may be mis-reading this chart (or some entries are mis-characterized) but if I’m not it looks like it is not the variation margin that blew the firm up (from changes in value) but rather it was initial margin that got them in trouble, and the obvious question that raises is “How?”

Moyers & Company explores the tight connection between Wall Street and the White House with David Stockman, former budget director for President Reagan.

Now a businessman who says he was “taken to the woodshed” for telling the truth about the administration’s tax policies, Stockman speaks candidly with Bill Moyers about how money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

Stockman shares details on how the courtship of politics and high finance have turned our economy into a private club that rewards the super-rich and corporations, leaving average Americans wondering how it could happen and who’s really in charge.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” Stockman tells Moyers.

David Stockman on Crony Capitalism from BillMoyers.com on Vimeo.

Bill Moyers

Hell has frozen over.

These columns have defended the independence of the Federal Reserve from attacks on the right and left, but after last week the central bank is on its own. It’s impossible to defend the Fed’s rank electioneering as it lobbies for more political and taxpayer intervention in the housing market—just in time for the election campaign.

This extraordinary political intrusion came in the form of a 26-page paper that the Fed sent to Capitol Hill last Wednesday, without invitation, graciously offering what Chairman Ben Bernanke called a “framework” for “thinking about certain issues and tradeoffs.” He was underselling his document. The paper is a clear attempt to provide intellectual cover for politicians to spend more taxpayer money to support housing prices.

I didn’t Ticker that paper originally as it was simply too outrageous to bother with.  There’s a point at which The Fed’s actions reach into the realm of rank politicking and attempts to protect their “chosen many” from their own foibles; we’ve certainly seen plenty of games played in the last three years.

But this paper, sent to Congress unsolicited, apparently went too far for even the Journal’s bankster-crank-stroking reflexes.  Among other things it said:

In this report, we provide a framework for thinking about directions policymakers might take to help the housing market. Our goal is not to provide a detailed blueprint, but rather to outline issues and tradeoffs that policymakers might consider. We caution, however, that although policy action in these areas could facilitate the recovery of the housing market, economic losses will remain, and these losses must ultimately be allocated among homeowners, lenders, guarantors, investors, and taxpayers.

This is where the problem is, of course.  Where does the government get the right to “allocate losses” through interventions?  The dirty little secret about the housing mess is that:

• The Fed was largely complicit in causing the housing bubble.  In fact, Greenspan intentionally stoked this speculative orgy and further, both he and Bernanke intentionally averted their eyes from the monstrous credit expansion that “maintained” economic output and which was utterly unsustainable — a mathematical fact that was obvious to anyone who bothered to look at the very data The Fed maintains!  In other words The Fed is now trying to find ways to evade responsibility for what it did.
• The losses are real but being hidden by further Fed actions!  Just one example is the hundreds of billions of dollars of second lines (Home Equity and “Silent Second” mortgages) that are behind underwater, non-performing first line mortgages.  These have an actual net present value in a foreclosure of zero, as they’re not entitled to one penny of recovery until every dollar of the first is satisfied, and the first is underwater and thus will not be fully recovered.  All of our large banks have monstrous exposures in this regard — almost none of these loans were securitized and thus they are all sitting on bank balance sheets, most at nearly 100 cents on the dollar.  These accounting values are fictions.

The reason that The Fed and our Government are desperate to hide these losses, praying for a miracle to somehow keep them from being recognized, is quite simple — these long-duration investments are typically held by insurance companies and pension funds.  Recognition of these losses will cause the allegedly “healthy” firms and funds that hold this paper to be shown to be severely impaired or worse.

Yet there is no evading these losses.  I’ve been pounding the table on these issues for five years and yet the alleged “extend and pretend” game has not led to value recovery.  Instead, the value of homes has continued to decline!  At some point the games end as these notes mature and an actual accounting must be made.  The idea that The Fed would propose that “taxpayers” eat these embedded losses is both an outrage and a circular argument — do you really care if you have your taxes raised to the point that you go bankrupt or you lose your pension and go bankrupt?  Either way you’re bust!

The only solution is to accept that which we cannot change.  Bad loans create losses when the loans are made and nothing can be done about that later on.  You can change who eats the loss, but when it all devolves back down to the public then which hand you pick someone’s pocket with makes no difference at all.

The more important issue here is holding those at The Fed personally and professionally accountable for this massive cock-up.  There is a long history of intentional evasion of the law, including Alan Greenspan’s “approval” of the blatantly-unlawful Citi/Travelers merger that was later made retroactively legal by Gramm-Leach-Bliley and evasion of reserve requirements with sweeps.  These sorts of machinations are nothing more than allowing a gambler to double down on a lost bet, and when one looks at the history of leverage in the financial markets and The Fed’s active and outrageous actions in this regard, given their charter which mandates that they control credit aggregates, it is clearly time to stick a fork in these mendacious bastards and remove the Board of Governors wholesale.

This is getting old…

It took a relatively obscure former British academic to propagate a theory of the financial crisis that would confirm what many people suspected all along: The “corporate psychopaths” at the helm of our financial institutions are to blame.

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

Bah.

Such people do exist, of course.  But that’s not the point.  This sort of behavior is self-defeating in any operable society because those who operate in that world quickly find themselves with few friends and fewer opportunities.  Word gets around.

Soon nobody will do business with you without donning a titanium butt-plate first, as they get tired of being violated.  That in turn drives up your cost of doing business and suddenly your competitors have an edge.  They exploit it, and now you’ve got trouble — if you don’t reform you’re soon out of business.

This is the usual dynamic.  It led those who were psychopaths to practice “quick hit” economic acts.  In the old West the huckster ripped off someone or robbed a stagecoach, but never showed up in town and plied a trade for any length of time, because they’d never get away with it — soon the lynch mob would appear and give you a permanent necktie.  In the more-modern era you were simply run out of business and then run out of town.

But something happened in the 1990s and into the 2000s.  The Government became infested with the same sort of game, and started to embrace and even sleep with some of these monsters — sometimes literally!  Government found that it could run the same game that was plied in the old days of “snake oil” and use it to buy votes, and so long as they made more and more outrageous claims the voters would suspend their disbelief and continue to buy into their games at the ballot box.

Now the psychopaths in the business world had a partner who would shield them — literally — from the consequences of their actions.  Money laundering, bogus securities that the sellers knew were worthless, even actual bribery became part of the business model and the justice system was blinded by those handlers in the government, who relied on the very same hucksters to finance their political promises!

So yeah, sure, we have psychopaths on Wall Street.  But the real problem doesn’t lie there.

The root of this problem lies in Washington DC, because without their active cooperation there would have been thousands of indictments, trials and prison sentences handed out by now.

But in point of fact there have been none.

A Los Angeles Fire Department firefighter is shown at a fire in West Hollywood, Calif., on Friday Dec.30, 2011. (Mike Meadows/AP Photo)

From the lefty coast….

A rash of arson fires in the dark of night set Los Angeles on edge over New Year’s Eve, and authorities deployed hundreds of extra firefighters, patrol cars, undercover officers and helicopters to stop the attacks.

On Saturday night, firefighters rushed to multiple fires, quickly extinguishing a vehicle fire in a Hollywood carport and responding to another in the massive parking structure at Hollywood Boulevard and Highland Avenue. Those blazes followed at least 38 other suspicious fires between Thursday night and Saturday morning, making it the worst wave of arson since the 1992 riots.

“Whoever is doing this is really messing with people’s lives,” said Los Angeles Fire Capt. Jamie Moore.

This is probably one deranged individual with a penchant for fire.

Probably.

But while you’re sipping your beverage of choice this evening, consider again that while this is probably one deranged individual there are millions of screwed-over individuals that have taken it in the backside from the big banksters who have, incidentally, gone without prosecution.  Indeed, our own President claims that “no laws were broken.”

Oh really?

Hmmm… perjury is a violation of the law.  How many perjured affidavits were filed in foreclosure cases?

Fraud is a violation of the law.  How many investors and others got rooked in various schemes and scams over the last few years?

Money laundering is a violation of the law too.  I seem to remember a “deferred prosecution agreement” instead of handcuffs and prison sentences.

Don’t be fooled by the claim that the injured are all “sophisticated investors” who should know better.  Were all the farmers who got hosed in the MF Global collapse “sophisticated investors” or were they trying to make a living growing corn, wheat or soybeans so you’d have something to eat and were simply trying to lock a decent price for their crop to be delivered in a few months?

Or how about Jefferson County Alabama?  Over 650,000 people got screwed by that fiasco born out of bribery, corruption and graft, and that’s not an allegation — there have been convictions and jail sentences handed out but the screwing remains!

Nobody wants to see anarchy that has a hint of intelligence.  It is a nasty, ugly business and is utterly indefensible.  But this Ticker isn’t about what you want.  It’s about facing the potential of what is, and if it happens, why it happened so you’re prepared to demand political heads roll — before people start taking actions that lead to literal heads on pikes.

I’m concerned.  Everyone has a breaking point.  If just one tenth of one percent of the population of Jefferson County was pissed off enough and got hosed badly enough to rage against the machine by lighting fires, there would be 650 arsonists in that one county alone!

I can’t imagine what Birmingham would look like under such a scenario, yet 1/10th of one percent is a tiny, minuscule percentage.  It’s nothing.

We have history to look to in this nation in that regard; the strikes of 1877 are an interesting case study in that a large number of people basically lost everything, and once they did, they simply “lost it.”

The complete and utter refusal of the state and federal authorities, from the top down, to prosecute bogus deals and frauds that were the hallmark of the second half of the 2000s, letting the statute of limitations run and making speeches claiming that “nobody did anything illegal” is the epitome of stupidity.  Those uttering such nonsense on both sides of the aisle are malignant pustules on the ass of our nation’s government and the risks they are taking when it comes to civil order and our way of life are utterly indefensible.

Perhaps this gamble will “win”, in that there will be no significant number of people who lose everything and are also either mentally unstable or just simply pissed off enough to not care about the consequences (up to and including their own death) that come with going on such a rampage.

But beyond the fact that intentional injustice of the sort we’ve witnessed is never defensible on ethical grounds, don’t you think this is a rather dangerous gamble to be taking with the economic and other tensions in our country today?

Look folks, it’s simple — what the IMF wants, what the banksters want, here, there, everywhere, is the same thing:  Your money, as much as they can get, and they don’t care what happens to you.

Evidence?  Right here:

Austerity policies are now widely regarded as having failed, and this failure is increasingly obvious in the country elected to act as Austerity’s Child. The banking collapse, and the legacy bequeathed by the Irish state’s extraordinary September 2008 bank guarantee, has seen society in Ireland reshaped as a petri dish for IMF, European commission and ECB experimentation. Successive waves of cuts have been stipulated by the Troika in return for its loans, but implemented without resistance, and arguably, a degree of enthusiasm, by the two governments of the “post-sovereign” era.

Yep.  I said originally that Ireland should give the finger to the banksters, and if the government refused then the people should give the finger to the government, ejecting and replacing it.

What is “give the finger”?

Simple; you tell them this: You made a bad loan, you’re going to eat it.  Period.

Yes, I know, pension funds and others bought the paper.  Guess what — they did no diligence (or insufficient diligence) and they’re going to lose money as a result.  That’s what’s supposed to happen when you do something stupid!

In point of fact it is the only way by which the market works.  When you do smart things you make money.  When you do dumb things you lose money.  When you do really stupid things you go bankrupt.

Well?

There’s still time Ireland.  Tell the banksters to get stuffed.  Right here, right now.

As for Europe, same deal among their governments — including Greece.  Tell the banksters to go to Hell.

As for here?  Same deal.  Got a loan out and are you tired of the “ethics” of these firms?  Consult a tax and legal advisor, find out what can be done to you (if anything) if you tell them to go to Hell, and if that’s the correct business decision then tell them to blow their alleged debt out their ass.

Note carefully folks: American Airlines — a big corporation — just did exactly that.

They filed a preemptive bankruptcy to avoid paying for things they had agreed to pay for because they determined it was no longer to their advantage to do so.

WAKE UP IRELAND.  WAKE UP GREECE.

And wake up AMERICA and AMERICANS.

There is NO moral obligation to pay.  There is only the ability (or not) to enforce a contract.

That’s all.