Middle class retirement now largely a postcard fantasy – How Wall Street fabricated a buy and hold fairytale and jumped ship with taxpayer golden parachutes.  Did baby boomers think about who they would be selling those 401k and pension stocks to?

The days of dreaming about long days playing golf on a green course and taking luxurious cruises around the world are appearing more and more like a foggy memory for those in the middle class planning for retirement.  As Wall Street bankers and hedge fund managers rob the public blind, the mission statement sold to baby boomers is starting to become a large bait and switch catchy enough to make it on a Hallmark card.  For decades Wall Street begged and lured the public in either directly or through pension funds into their web of easy money.  Save $100 a month and you’ll retire a millionaire!  As it turns out, the golden parachute was only available to a tiny fraction of the population while the oligarchy in the financial sector offloads their toxic bets onto the taxpayers struggling balance sheet.  The end game?  No retirement.  At least no retirement like those plastered on glossy mutual fund brochures.  What the Wall Street banking charlatans failed to tell you is that you eventually need to sell those stocks to use the money for real world spending.  What they also failed to mention is that the baby boomer generation is now going to sell into unrelenting headwinds of demographics bringing on a younger and poorer generation to purchase their stocks.  Of course Social Security is in the crosshairs of the financial elite since they already secured their financial piece of the pie.  You know things are bad when the Federal Reserve is stating that stocks are not exactly a winners bet in the years going forward.

Retirement becoming more of a postcard fantasy

The middle class has been pillaged and ransacked by financial thievery for decades.  The debt bubble and mass delusion is now imploding.  The graft and con games taking place in the financial sector would be comical if they weren’t so real and economically tragic.  The Federal Reserve has given covert loans to big banks while big banks publicly stating all was well.  The Federal Reserve has grown their balance sheet to a stunning $2.8+ trillion of questionable assets and other junk with little redeemable market value.  It would have a hard time selling these items on eBay let alone the natural marketplace.  There is no easier way to make a profit than stealing from the taxpayer.  Of course the problems in the system are coming at the expense of the working and middle class.  For those who bought into the Wall Street mantra of buy and hold, making a profit has gotten much harder:

This is fascinating data to look at.  This decade has been horrible for stocks.  The S&P 500 stands today where it did in 1998.  The massive stock volatility is simply a reflection of the problems deep in our financial system.  The above chart examines P/E ratios over time.  Really fascinating information but the Fed study finds that P/E ratios are likely to go lower because of demographic shifts and also the reality that we have a lower wage employment force dominating our economy.  The latest decade is a reflection of the bubble era machinery that has hoisted up the financial sector into an untouchable corner yet middle class Americans have taken it squarely in their stock portfolios.  Why?  Because Wall Street has been preaching buy and hold as if it were some patriotic mission but many of these hedge funds and banking managers have placed bets that openly aim against American middle class success.  In fact, some have made bets on flat out American failure and have made billions of dollars with lower tax rates that are given to hedge funds.

The stock market casino

The stock market has been on a wild ride for well over a decade:

Source:  Mish Global Economic Analysis Blog

Read the rest at My Budget 360

Amid all the market volatility and weakness in the financial sector of late, you may have missed this WSJ front page story: “States Go After Big Bank on Forex”.

The story is about growing scandal in the banking industry centered around banks allegedly overcharging pension funds for currency transactions.

“Attorneys general in Virginia and Florida filed civil suits against BNY Mellon alleging that the bank cheated pension funds in those states by choosing improper prices for currency trades the bank processed for the funds,” The WSJ reports. “The Virginia lawsuit, filed in a Fairfax, Va., state court, cites internal bank emails allegedly showing that senior bank officials knew about, and endorsed, a currency-trading method that hurt state pensioners.”

In addition to Virginia and Florida, California and Tennessee are also suing BNY Mellon and State Street Corp. over the alleged fraud.

The man who uncovered the alleged scam, Harry Markopolos, expects all 50 states to eventually join the suit. If the name sounds familiar that’s because Markopolos was a whistleblower on the Madoff Ponzi scheme, only to have his claims ignored by the SEC for the better par of a decade. (See: Harry Markopolos Says Big Banks Worse Than Madoff)

In this case, Markopolos says BNY Mellon and State Street we’re taking about “three tenths of a percent from every forex transaction for pension funds” by back-timing the trade to benefit banks at the detriment of their pension fund clients. “It’s almost the exact same scheme as the market timing scandals of 2003,” he claims.

When and if these cases go to trial is unknown, but Markopolos sure hopes to avoid a settlement. “I want to see them admit guilt,” he tells Aaron Task in the accompanying interview. “If [banks] settle it feel like justice denied because they also will settle without admitting or denying guilt. That’s just too easy. ”

Yahoo TechTicker

We here at FedUpUSA just love Mr. Black.  If we have any hope of our economy recovering, those responsible for the massive fraud and the looting of Americans must be prosecuted.  It really is that simple.

http://www.youtube.com/watch?v=kUyutryL_SY

Coming soon: A huge national finance education of the masses

Here’s someone who thinks we need to STOP THE LOOTING AND START PROSECUTING!

William Black: Regulations were deliberately weakened to create conditions for systemic fraud.

Click book cover to order William Black’s book:

It really doesn’t get more damning than this…..

“Fraud As a Business Model”, the slides from her presentation delivered today to the Federal Housing Finance Agency’s Supervision Summit.

Unfortunately I don’t have audio… but the Powerpoint slides speak for themselves…

From one of the slides:

• Investment banks – securities fraud
• Mortgage lenders – widespread fraud
• Rating agencies – junk science
• CDO “managers” – crash test dummies & accomplices
• Certain hedge funds – shorted CDOs they “managed”
• Bond insurers – money for nothing
• Regulators – poseurs and enablers

You gotta love it… and you darn well should read it.

The presentation is brutal, it is spot-on, it encompasses it all. 

And now, with it out there under the white-hot light of the public and presented to the government’s forum on housing finance supervision from one of the preeminent experts in the world of Structured Finance, there no longer is any excuse for the lack of action on these scams – from top to bottom.

Again, where are….

FHFA1282010

“It’s the DEBT, Stupid!”
We’re Doing Something About it! Come Join the Swarm!

Posted by Karl Denninger

Oh boy are some folks in for a surprise…..

“It’s just going to be like Christmas,” said DeCarlo Flythe, who lost health coverage for his family when he was laid off almost three years ago. “It’s going to be great. You know, no worries (about) the bills. We are going to go ahead and pay our co-pay and be alright.”

You got the $10,000 for the policy and another $10k for the out-of-pocket deductibles, right?

Yes, I know if you are lower-income you’ll get subsidies.  But that being laid off thing might become more-permanently laid off, you see, since if you go back to work your employer will have to either pay a fine (annually) or pick up the majority of that $10k in cost.

If your value in the marketplace is $20/hour, with a 2,000 hour man-year of work (50 weeks x 40 hours/week) your economic value in the economy is $40,000 (gross.)  From this your employer is going to have to take $10,000 out to avoid being fined, which means you now make $15/hour.  Then you pay taxes (FICA and Medicare) on that.  You’ll likely get back the rest of your federal income tax (especially if you have a family) but your out-of-pocket medical expenses will still be that $10,000 either way.

So now you’ve got $30,000/year less about $2,300 in Medicare and FICA tax, and from that you subtract the co-pays and deductibles of $10,000.  You’re left with about $18,000 to live on, or about $1,500 a month for your family of four.

This sounds like “Christmas”?

The clue-stick coming to whack these folks upside the head just as did the people who said “I don’t have to worry about putting gas in my car or paying my mortgage!” will lead to some rather extreme emotions, I suspect, when the truth becomes apparent.

UPDATE:

Geithner’s New York Fed Told AIG to Limit Swaps Disclosure

Jan. 7 (Bloomberg) — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.

Bank Payments

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

Securities Lawyers

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e- mailed statement. Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Mark Herr, a spokesman for New York-based AIG, declined to comment. Andrew Williams of the Treasury referred questions to the New York Fed.

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

‘Reasonable Basis’

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.

‘No Mention of the Synthetics’

The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures. The correspondence includes e-mails between AIG’s Shannon and attorneys at the New York Fed and its law firm, Davis Polk & Wardwell LLP. Tom Orewyler, a spokesman for Davis Polk in New York, declined to comment as did Shannon.

According to Shannon’s e-mails obtained by Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

AIG had about $9.8 billion of swaps protecting the synthetic holdings as of September 2008, the company said on Dec. 10, 2008. Goldman Sachs said in a press release last month that it was among banks that had losses on synthetic CDOs.

As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

‘Guided by Your Counsel’

“Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

“Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

In at least one instance, AIG pushed for documents to be disclosed and then released the information.

‘Better Disclosure’

“We believe that the agreements listed in the index (i.e., the Master Investment and Credit Agreement and the Shortfall Agreement) do not need to be filed,” Peter Bazos, a Davis Polk lawyer wrote on Nov. 25, 2008. “Please let us know your thoughts in this regard.”

AIG’s Shannon replied that “the better practice and better disclosure in this complex area is to file the agreements currently rather than to delay.” The agreements were included in the Dec. 2 filing.

More details of the negotiations over swaps payments emerged in November 2009 when Neil Barofsky, the special inspector in charge of policing the Troubled Asset Relief Program, assessed the Fed’s role in the bailout.

“Federal Reserve officials provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” Barofsky wrote in a Nov. 17 report. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

AIG’s first rescue was an $85 billion credit line from the New York Fed in September 2008. The bailout was expanded three times and is valued at $182.3 billion. That includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion for Maiden Lane facilities to buy mortgage-linked assets owned or backed by the company.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

SEE THE ACTUAL E-MAILS HERE  (page 5 is particularly interesting)

Where Are The Damn Handcuffs?

Posted by Karl Denninger

If you’re not mad enough to contemplate the use of your pitchfork and torch after reading this, you are unfit to be an American and should immediately book yourself on a one-way flight – to Yemen.

This is about PPIP – and a game I predicted would be played in March of last year.  Specifically:

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

You got that?

Let me ‘splain it in English.

The banks bought bonds that were worthless in the open market, because The Government intended to intentionally overpay for these bonds.

This is exactly what I said would happen in March of 2009:

There’s nothing complicated about this at all.

Buy for 30 cents, sell to the PPIP for 50 cents, pocket a quick (and huge) profit immediately and nobody’s the wiser.

Now here’s the problem.

We were later told that the FDIC would not allow the banks to game the system like this.

That was a lie too.

It’s “absolutely ridiculous” that banks, which were expected to reduce their holding of such volatile mortgage securities, bought them before the government program was running and may now profit, said Michael Schlachter, managing director of Wilshire Associates, the Santa Monica, California-based investment-consulting firm. “Some of them created this mess, and they are making a killing undoing it.”

The people involved need to be indicted for looting the Treasury and Geithner along with Sheila Bair must be removed from office for permitting it, after BOTH said it would not happen.

They lied – period.

Here’s what The Fed’s Dudley said at the time:

His comments add to signs that Treasury Secretary Timothy Geithner’s Public-Private Investment Program to boost debt prices and rid banks of devalued assets to expand lending is stalling, after helping to spark a rally in stocks and bonds. The Federal Deposit Insurance Corp. yesterday delayed a test sale of bad loans held by U.S. banks that had been billed as a tryout for its role.

Well it sure rallied the prices of those assets, but the banks didn’t rid themselves of them.  They instead bought up yet more worthless paper, adding to the trash they were holding, and now are in fact using the speculative gains to record “profits” on securities that still have not and cannot perform as the underlying loans are still not paying as agreed!

I thought The Fed was supposed to REGULATE banks?  You know, when they decide this is how something should happen (or something that should not happen) they then PREVENT IT FROM HAPPENING AND/OR FORCE IT TO STOP?

Lying is an art form but in this case you literally had your pocket picked by Congress so these banksters could intentionally game the system, exactly as I said they would, and instead of REDUCING their holdings of toxic assets THEY ADDED TO THEM!

What happens when, not if, the true “value” (that is, ZILCH!) of these so-called “assets” pokes its head through NOW? 

Back in April of 2009 I posted the following:

And since the banks will apparently get paid (by you the taxpayer) any difference between internal marks and the sale price, not only get to prevent more than a 5% loss off the market price, they do even better as they get to guarantee no more than a 5% loss off their internal mark!

We just keep adding scams on top of scams; if $170 billion stolen from taxpayers to “bail out” banks via AIG isn’t bad enough, this program will be some $500 billion (or more), and that’s not even the total value since some banks have been buying up “distressed” ALT-A liar loans with TARP money in front of this program’s announcement!

I hate it when I’m right.

The question is when Americans will be pissed off enough to do something about being literally robbed blind by the banksters that infest this nation.