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Archive for January 26th, 2010

How the Asian crisis was manufactured!

Posted by Admin on January 26, 2010

How the Asian crisis was manufactured by the Illuminati and the BIS

Many people, including some who should know better like Nobel prize winning economist Paul Krugman, believe the Asian crisis was an accident. It was no such thing. It was a deliberately planned attack aimed at stealing much of Asia’s wealth and weakening the Asian tigers.

The attack on Asia was two-pronged with one prong hitting South East Asia and the other aimed at Japan.

To attack Japan, the privately owned BIS (not accountable to any government on earth) changed its international banking rules in a way that deliberately weakened Japanese banks. They then forced (through threats of violence against Japan) the Japanese authorities to bankrupt one of their big so-called city banks. The Japanese chose the smallest of them: Hokkaido Takushoku Bank. When HTK went bankrupt over 1000 viable companies in Northern Japan were forced into insolvency. This meant that loans other Japanese banks had made to them had to be declared “bad.” The result was that all Japanese banks suddenly saw their BIS capital to asset ratio fall below the 8% needed to be allowed to engage in international banking. That meant they were all forced to “immediately” withdraw all their international loans, mostly made to Asia.

The Asian countries, meanwhile, were made extra vulnerable by a deliberate influx of “hot” money that created bubbles. As soon as the Japanese withdrew their loans, the “hot” money was also taken away, destroying the Asian economies. President Mahatir of Malaysia saved his country by seeing through the ruse and preventing the sudden withdrawal of “hot” money.

After the Asian economies collapsed, the carpet-baggers came in. “Hedge funds” and investment funds linked to the oligarchs came marching in and, using Japanese money, they bought up much of Asia’s economic infrastructure at a deep discount.

If the BIS and the IMF etc. were really concerned about economic development they would first of all never have forced HKT bank to go under in a disorderly manner. They would have also figured out a way for the Japanese banks to do something like issue subordinated bonds so they could bolster their BIS capital and not be forced to suddenly vacate Asia.

The criminals who carried this out think they got away with it but the Asians have long memories and they have identified the perpetrators of this attack.

The American economy has been subjected to a similar financial attack by the same group of criminals. They would do well to identify these gangsters and put them out of business for ever.

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Obama Administration’s Use of Drones Responsible for Increase in Civilian Deaths

Posted by Admin on January 26, 2010

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(Image: Jared Rodriguez / t r u t h o u t; Adapted: jeditrilobite, david.evenson)

Monday 25 January 2010 logo

by: William Fisher, t r u t h o u t | Report


The Obama administration is ramping up its use of drone unmanned aircraft to execute targeted killings in Afghanistan and Pakistan, and perhaps in other locations – and, in the process, killing civilians along with insurgents, and risking the compromise of US moral imperatives and foreign policy goals.

That’s the view of a leading civil rights organization, the American Civil Liberties Union (ACLU), which has filed a request under the Freedom of Information Act (FOIA), calling on the president to lift the curtain of secrecy and level with the American people.

The ACLU is asking the government to release basic information about its use of drones to execute targeted killings. The group believes that “the use and proliferation of this tactic must be the subject of public scrutiny and debate.” The strikes are reportedly being carried out both by US military forces and the CIA.

The request is seeking information, including who may be targeted and the geographical limits on where drone strikes may occur. It wants information about the scope and consequences of drone strikes, including a breakdown of the total number of people killed, the civilian casualty toll, the number of people killed who were fighters with the Afghan Taliban or al-Qaeda in Afghanistan or who had some other terror-related affiliation or status.

“The public has been kept in the dark and is therefore unable to assess the wisdom or legality of the strikes,” the group claimed.

“The use of drones to conduct targeted killings raises complicated questions – not just legal questions but policy and moral questions as well. These are not questions that should be decided behind closed doors. They are questions that should be debated openly, and the public should have access to information that would allow it to participate meaningfully in the debate,” according to Jameel Jaffer, director of the ACLU’s National Security Project.

One of the unmanned vehicles, known as the Predator, is capable of flying for hours, armed or unarmed, remotely controlled by pilots who are stationed thousands of miles away. The Predator is part of a growing number of similar craft that includes the Reaper and Raven as well as a new, high-tech video sensor system called the Gorgon Stare, which is being installed on Reapers.

The ACLU charged that the Obama administration has stepped up the use of drones to target individuals not only in Afghanistan, but also in Pakistan and perhaps other countries that are not active theaters of war.

“The use of unmanned drones to target and kill individuals is a profoundly new way of waging war. For the first time, military and intelligence officers can observe, track, and launch missiles at targeted individuals from control centers located thousands of miles away, without any significant US presence on the ground. The technology also permits the United States to target individuals nearly anywhere in the world,” the organization claimed.

The number of civilian casualties caused by drone attacks varies from the dozens to the hundreds. Human rights organizations are particularly concerned that drones could be used to target criminal suspects rather than legitimate military targets. Criminal suspects should be arrested and tried in civilian courts, the ACLU contended, adding that failure to do so could amount to “unlawful extrajudicial killings.”

The ACLU also raised concerns about the wisdom of using drones on policy and moral grounds.

“We hope that the Obama administration will live up to its professed commitments to transparency and openness in government and release this essential information in a timely manner,” the group said.

The increasing use of drones by the US has drawn sharp criticism from President Hamid Karzai of Afghanistan and Prime Minister Yousuf Raza Gilani and other high Pakistani officials.

Jonathan Manes, an ACLU attorney, told Truthout, “The Obama administration has stepped up the use of drones to target individuals not only in Afghanistan, but also in Pakistan, and that drones strikes might be authorized in other countries that are not active theaters of war.”

Pakistan said the strikes against suspected al-Qaeda and Taliban militants along its northwest violate its sovereignty. The attacks have resulted in serious anti-American feelings in Pakistan, which Washington sees as a critical ally in its war on extremism.

Gilani has told the press that drone attacks carried out on Pakistani soil were “counter-productive.” He said, “If the drone attacks had been useful, then we would have ourselves supported them.”

Gilani said the militants in the northwestern tribal areas bordering Afghanistan are strengthened by US missile strikes. “Our policy is to isolate militants from the local tribes, but drone attacks unite them,” he said.

His view was echoed by Pakistan’s Foreign Minister Shah Mehmood Qureshi, who told Reuters that intensified US drone aircraft attacks against Islamist militants in Pakistan could endanger relations between the two allies.

But when Secretary of State Hillary Clinton arrived in the Pakistani capital, Islamabad, she told a news conference the US was standing “shoulder to shoulder” with Pakistan in its military offensive. And the increased use of unmanned Predator drones is one of the highest profile ways the US is doing that.

The White House authorized an expansion of the CIA’s drone program in Pakistan’s tribal areas to parallel the president’s decision to send 30,000 more troops to Afghanistan. The New York Times reported that American officials are talking with Pakistan about the possibility of striking in Baluchistan for the first time – “a controversial move since it is outside the tribal areas – because that is where Afghan Taliban leaders are believed to hide.”

US strategy for eliminating safe havens for militants in the region turns on increasing covert pressure on al-Qaeda and its allies in Pakistan, while ground forces attempt to reverse the Taliban’s advances in Afghanistan.

Investigative reporter Jane Mayer of The New Yorker magazine has revealed that the number of US drone strikes in Pakistan has risen dramatically under President Obama. During his first 9.5 months in office, Obama authorized at least 41 CIA missile strikes in Pakistan, a rate of approximately one bombing a week. President Bush sanctioned approximately the same number of attacks in his final three years in office.

The attacks have killed between 326 and 538 people, according to Mayer. She wrote, “there is no longer any doubt that targeted killing has become official US policy.”

One of the most high-profile critics of the US drone program has been the United Nations human rights envoy, Philip Alston, the UN’s special rapporteur on extrajudicial, summary and arbitrary executions.

Alston told Amy Goodman of the Democracy Now! radio program that the US government’s use of Predator drones may violate international law. He also raised the issue in a report to the UN General Assembly’s Human Rights Committee and said the US should explain the legal basis for using unmanned drones for targeted killings.

In June, Alston presented a critical report on the drone program to the UN Human Rights Council, but he said US representatives ignored his concerns.

He said, “If you’re a Defense Department person, it’s a very attractive proposition. One can use the Predators without putting US servicemen in any harm. They are very effective. They can kill very significant numbers of people.”

But, he added, “The problem is that we have no real information on this program. What Jane Mayer exposed in her New Yorker piece is probably the most detailed information we have. She herself said that the CIA provides no information. It’s extraordinary that it’s the Central Intelligence Agency which is actually operating a missile program, which is actually deciding who to kill, when and where.”

Alston added, “There’s no accountability for it. There’s no indication of the rules that they use. So, I said before, there are rules, that it’s possible to justify a particular killing, but the CIA has never tried to do that. They have simply issued a general assurance: ‘No, no, everything’s fine. We really follow the rules, and we’re very careful.’ Well, if Israel or some other country that we’re scrutinizing says that, we say, ‘Sorry, guys, it’s not enough. We need to get the details’.”

Alston has called on the American government to make clear the details of the program; the legal basis, under US law, on which they are relying; the rules that they have put in place which govern the CIA actions, assuming there are rules; and what sort of accountability mechanisms they have. Do they review what they’ve done? They identify an individual. Often these identifications are very vague. But they say, “‘O.K., we’ve got X in our sights.’ Did they actually kill X? Did they kill someone else? How many other civilians did they kill? There’s never any accounting of that. And we need that sort of retrospective analysis, as well.”

He added that, in countries like Afghanistan and Iraq, “The United States has not done nearly enough, even today, to make sure that private military contractors do not carry out virtually all tasks, including, it seems, running a part of the drone program.”

But the drone program also has its fans. One of them is John Yoo, the former Office of Legal Counsel deputy who wrote the so-called “torture memos. ” Yoo appeared at the conservative American Enterprise Institute recently.

He said that in some areas, President Obama has gone beyond George W. Bush when it comes to the use of executive power. Yoo pointed toward the Obama administration’s increased use of predator drones overseas as an example.

“If we were still in peacetime, and this were the criminal justice system, police are not allowed to shoot missiles at people who might be criminals, might be about to commit a criminal act or might have committed a criminal act, even if we have a hard time finding and arresting them,” said Yoo. He added that in this area Obama has gone beyond Bush.

He said figuring out how to target terrorists is much more difficult because they do not wear uniforms or have territories. “It’s a complicated process that we had not had to think about before, but that doesn’t mean it’s not a war.”

Two leading US senators are also strong supporters of the drone program. They are Republican Sen. John McCain of Arizona and Joe Lieberman, Independent of Connecticut. Their recent visit to Islamabad underscored tensions between the anti-terrorist allies caused by strikes unmanned aircraft strikes against suspected Taliban and al-Qaeda targets.

“Friends don’t always agree on every issue,” Senator . McCain said at a news conference in Islamabad, adding that the United States will “try to find common ground” with Pakistani leaders on the drone issue, but that “we have to do everything we feel is necessary to protect Americans from the attacks of terrorists who may be based here.”

Pakistani President Asif Ali Zardari asked the senators to seek a halt to the drone attacks. He said they are undermining domestic support for the war against Islamist militants and asked that the United States give Pakistan the technology to carry out such strikes on its own.

Following the December 30 suicide bombing at a US base in eastern Afghanistan that killed seven CIA officers and contractors, Washington has also increased its use of the controversial strikes near the Afghan border. Suspected US missiles killed four people and injured three in the latest raid on the North Waziristan tribal area. That was the sixth attack in the region in a week, the Associated Press reported. The AP quoted two Pakistani intelligence officials, who said a pair of missiles struck a house and a vehicle in a village near the town of Miran Shah. They did not identify the victims.

It is the civilian deaths that are giving US policymakers serious headaches. The strategy outlined by Gen. Stanley McChrystal – and supported by Obama with the deployment of 30,000 additional troops – centers on protecting the Afghan people. It is unclear how killing civilians with drone attacks furthers that goal.

In a related development, military observers have revealed – and their revelations have been confirmed by the US military – that a new, “stealthy” US drone, nicknamed “The Beast,” is operating out of Kandahar, Afghanistan.

But they question what it’s doing there. One military web site wrote, “Since the Taliban do not have radar, why deploy an expensive, stealthy drone when conventional models like the Predator and Reaper work so well? And what’s the point of having a high-level, strategic craft in that theater?”

It says the speculation is that The Beast may be carrying out missions outside of Afghanistan, with Iran and Pakistan both being possible candidates.

The Air Force has confirmed The Beast’s existence to Aviation Week magazine. “Officially, it’s an RQ-170 Sentinel, developed by Lockheed and flown by the flown by the 30th Reconnaissance Squadron at Tonopah Test Range in Nevada,” the magazine reported.

And, in something of an embarrassment for the US military, The New York Times reported that insurgents in Iraq and Afghanistan have hacked into live video feeds from Predator drones, a key weapon in a Pentagon spy system that serves as the military’s eyes in the sky for surveillance and intelligence collection.

Though militants could see the video, The Times said there is no evidence they were able to jam the electronic signals from the unmanned aerial craft or take control of the vehicles, according to a senior defense official speaking on condition of anonymity.

Obtaining the video feeds can provide insurgents with critical information about what the military may be targeting, including buildings, roads and other facilities. The military has reportedly known about the vulnerability for more than a decade, but assumed adversaries would not be able to exploit it.

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What Cooked the World’s Economy?

Posted by Admin on January 26, 2010

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What Cooked the World’s Economy?

Tuesday 27 January 2009

http://www.truthout.org/013009T»

by: James Lieber, The Village Voice

It wasn’t your overdue mortgage.

It’s 2009. You’re laid off, furloughed, foreclosed on, or you know someone who is. You wonder where you’ll fit into the grim new semi-socialistic post-post-industrial economy colloquially known as “this mess.”

You’re astonished and possibly ashamed that mutant financial instruments dreamed up in your great country have spawned worldwide misery. You can’t comprehend, much less trim, the amount of bailout money parachuting into the laps of incompetents, hoarders, and miscreants. It’s been a tough century so far: 9/11, Iraq, and now this. At least we have a bright new president. He’ll give you a job painting a bridge. You may need it to keep body and soul together.

The basic story line so far is that we are all to blame, including homeowners who bit off more than they could chew, lenders who wrote absurd adjustable-rate mortgages, and greedy investment bankers.

Credit derivatives also figure heavily in the plot. Apologists say that these became so complicated that even Wall Street couldn’t understand them and that they created “an unacceptable level of risk.” Then these blowhards tell us that the bailout will pump hundreds of billions of dollars into the credit arteries and save the patient, which is the world’s financial system. It will take time – maybe a year or so – but if everyone hangs in there, we’ll be all right. No structural damage has been done, and all’s well that ends well.

Sorry, but that’s drivel. In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi’s scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He’s peanuts.

Credit derivatives – those securities that few have ever seen – are one reason why this crisis is so different from 1929.

Derivatives weren’t initially evil. They began as insurance policies on large loans. A bank that wished to lend money to a big, but shaky, venture, like what Ford or GM have become, could hedge its bet by buying a credit derivative to cover losses if the debtor defaulted. Derivatives weren’t cheap, but in the era of globalization and declining American competitiveness, they were prudent. Interestingly, the company that put the basic hardware and software together for pricing and clearing derivatives was Bloomberg. It was quite expensive for a financial institution – say, a bank – to get a Bloomberg machine and receive the specialized training required to certify analysts who would figure out the terms of the insurance. These Bloomberg terminals, originally called Market Masters, were first installed at Merrill Lynch in the late 1980s.

Subsequently, thousands of units have been placed in trading and financial institutions; they became the cornerstone of Michael Bloomberg’s wealth, marrying his skills as a securities trader and an electrical engineer.

It’s an open question when or if he or his company knew how they would be misused over time to devastate the world’s economy.

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Fast-forward to the early years of the Clinton administration. After an initial surge of regulatory behavior in favor of fair markets, especially in antitrust, that sort of behavior was abandoned, and free markets triumphed. The result was a morass of white-collar sociopathy at Archer Daniels Midland, Enron, and WorldCom, and in a host of markets ranging from oil to vitamins.

This was the beginning of the heyday of hedge funds. Unregulated investment houses were originally based on the questionable but legal practice of short-selling – selling a financial instrument you don’t own in hopes of buying it back later at a lower price. That way, you hedge your bets: You cover your investment in a company in case a company’s stock price falls.

But hedge funds later diversified their practices beyond that easy definition. These funds acquired a good deal of popular mystique. They made scads of money. Their notoriously high entry fees – up to 5 percent of the investment, plus as much as 36 percent of profits – served as barriers to all but the richest investors, who gave fortunes to the funds to play with. The funds boasted of having genius analysts and fabulous proprietary algorithms. Few could discern what they really did, but the returns, for those who could buy in, often seemed magical.

But it wasn’t magic. It amounted to the return of the age-old scam called “bucket shops.” Also sometimes known as “boiler rooms,” bucket shops emerged after the Civil War. Usually, they were storefronts where people came to bet on stocks without owning them. Unlike their customers, the shops actually owned blocks of stock. If customers were betting that a stock would go up, the shops would sell it and the price would plunge; if bettors were bearish, the shops would buy. In this way, they cleaned out their customers. Frenetic bucket-shop activity caused the Panic of 1907. By 1909, New York had banned bucket shops, and every other state soon followed.

In the mid-’90s, though, the credit-derivatives industry was hitting its stride and argued vehemently for exclusion from all state and federal anti-bucket-shop regulations. On the side of the industry were Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and his deputy, Lawrence Summers. Holding the fort for the regulators was Brooksley Born, who headed the Commodity Futures Trading Commission (CFTC). The three financial titans ridiculed the virtually unknown and cloutless, but brilliant and prophetic Born, who warned that unrestricted derivatives trading would “threaten our regulated markets, or indeed, our economy, without any federal agency knowing about it.” Warren Buffett also weighed in against deregulation.

But Congress loved Greenspan – a/k/a “the Maestro” and “the Oracle” – and Clinton loved Rubin. The sleepy hearings received almost no public attention. The upshot was that Congress removed oversight of derivatives from the CFTC and preempted all state anti-bucket-shop laws. Born resigned shortly afterward.

Soon, something odd started to happen. Legitimate big investors, often with millions of dollars to place, found that they couldn’t get into certain hedge funds, despite the fact that they were willing to pay steep fees. In retrospect, it seems as if these funds did not want fussy outsiders looking into what they were doing with derivatives.

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Imagine that a person is terminally ill. He or she would not be able to buy a life insurance policy with a huge death benefit. Obviously, third parties could not purchase policies on the soon-to-be-dead person’s life. Yet something like that occurred in the financial world.

This was not caused by imprudent mortgage lending, though that was a piece of the puzzle. Yes, Fannie Mae and Freddie Mac were put on steroids during the ’90s, and some people got into mortgages who shouldn’t have. But the vast majority of homeowners paid their mortgages. Only about 5 to 10 percent of these loans failed – not enough to cause systemic financial failure. (The dollar amount of defaulted mortgages in the U.S. is about $1.2 trillion, which seems like a princely sum, but it’s not nearly enough to drag down the entire civilized world.)

Much more dangerous was the notorious bundling of mortgages. Investment banks gathered these loans into batches and turned them into securities called collateralized debt obligations (CDOs). Many included high-risk loans. These securities were then rated by Standard & Poor’s, Fitch Ratings, or Moody’s Investors Services, who were paid at premium rates and gave investment grades. This was like putting lipstick on pigs with the plague. Banks like Wachovia, National City, Washington Mutual, and Lehman Brothers loaded up on this financial trash, which soon proved to be practically worthless. Today, those banks are extinct. But even that was not enough to cause a worldwide financial crisis.

What did cause the crisis was the writing of credit derivatives. In theory, they were insurance policies for investors; in practice, they became a guarantee of global financial collapse.

As insurance, they were poised to pay off fabulously when these weak bundled securities failed. And who was waiting to collect? Well, every gambler is looking for a sure bet. Most never find it. But the hedge funds and their ilk did.

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The mantra of entrepreneurial culture is that high risk goes with high reward. But unregulated and opaque derivatives trading was countercultural in the sense that low or no risk led to quick, astronomically high rewards. By plunking down millions of dollars, a hedge fund could reap billions once these fatally constructed securities plunged. Again, the funds did not need to own the securities; they just needed to pay for the derivatives – the insurance policies for the securities. And they could pay for them again and again. This was known as replicating. It became an addiction.

About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in 1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank for International Settlements, a consortium of the world’s central banks based in Basel (the Fed chair, Ben Bernanke, sits on its board), reported the gross value of these commitments at $596 trillion. Some are due, and some will mature soon. Typically, they involve contracts of five years or less.

Credit derivatives are breaking and will continue to break the world’s financial system and cause an unending crisis of liquidity and gummed-up credit. Warren Buffett branded derivatives the “financial weapons of mass destruction.” Felix Rohatyn, the investment banker who organized the bailout of New York a generation ago, called them “financial hydrogen bombs.”

Both are right. At almost $600 trillion, over-the-counter (OTC) derivatives dwarf the value of publicly traded equities on world exchanges, which totaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a year later.

The nice thing about public markets is that they act as canaries that give warnings as they did in 1929, 1987 (the program trading debacle), and 2001 (the dot-com bubble), so we can scramble out with our economic lives. But completely private and unregulated, the OTC derivatives trade is justly known as the “dark market.”

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The heart of darkness was the AIG Financial Products (AIGFP) office in London, where a large proportion of the derivatives were written. AIG had placed this unit outside American borders, which meant that it would not have to abide by American insurance reserve requirements. In other words, the derivatives clerks in London could sell as many products as they could write – even if it would bankrupt the company.

The president of AIGFP, a tyrannical super-salesman named Joseph Cassano, certainly had the experience. In the 1980s, he was an executive at Drexel Burnham Lambert, the now-defunct brokerage that became the pivot of the junk-bond scandal that led to the jailing of Michael Milken, David Levine, and Ivan Boesky.

During the peak years of derivatives trading, the 400 or so employees of the London unit reportedly averaged earnings in excess of a million dollars a year. They sold “protection” – this Runyonesque term was favored – worth more than three times the value of parent company AIG. How could they have not known that they were putting at risk the largest insurer in the world and all the businesses and individuals that it covered?

This scheme that smacks of securities fraud facilitated the dreams of buyers called “counterparties” willing to ante up. Hedge fund offices sprouted in Kensington and Mayfair like mushrooms after a summer shower. Revenue from premiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26 billion in 2005. Cassano reportedly hectored ever-willing counterparties to “play the power game” – in other words, gobble up all the credit derivatives backing CDOs that they could grab. As the bundled adjustable-rate mortgages ballooned, stretched home buyers defaulted, and the exciting power game became about as risky as blasting sitting ducks with a Glock.

People still seem surprised to read that hedge principals have raked in billions of dollars in a single year. They shouldn’t be. These subprime-time players knew how to score. The scam bled AIG white. In mid-September, when it was on the ropes, AIG received an astonishing $85 billion emergency line of credit from the Fed. Soon, that was supplemented by another $67 billion. Much of that money, to use the government’s euphemism, has already been “drawn down.” Shamefully, neither Washington nor AIG will explain where the billions went. But the answer is increasingly clear: It went to counterparties who bought derivatives from Cassano’s shop in London.

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Imagine if a ring of cashiers at a local bank made thousands of bad loans, aware that they could break the bank. They would be prosecuted for fraud and racketeering under the anti-gangster RICO Act. If their counterparties – the debtors – were in on the scam and understood that they didn’t have to pay off the loans, they could be charged, too. In fact, this scenario played out at subprime-pushing outlets of a host of banks, including Washington Mutual (acquired last year by JP Morgan Chase, which itself received a $25 billion bailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers (which went belly-up). About 150 prosecutions of this type of fraud are going forward.

The top of the swamp’s food chain, where the muck was derivatives rather than mortgages, must also be scrutinized. Apparently, that is the case. AIGFP’s Cassano has hired top white-collar litigator and former prosecutor F. Joseph Warin (profiled in the 2004 Washingtonian piece, “Who to Call When You’re Under Investigation!”). Neither Cassano nor his attorney responded to interview requests.

AIG’s lavishly compensated counterparties were willing participants and likewise could be considered for prosecution, depending on what they knew. Who were they?

At a 2007 conference, Cassano defined them as a “global swath” that included “banks and investment banks, pension funds, endowments, foundations, insurance companies, hedge funds, money managers, high-net-worth individuals, municipalities, sovereigns, and supranationals.” Abetting the scheme, ratings agencies like Standard & Poor’s gave high grades to the shaky mortgage-backed securities bundled by investment banks such as Goldman Sachs and Lehman Brothers.

After the relative worthlessness of these CDOs became clear, the raters rushed to downgrade them to junk status. This occurred suddenly with more than 4,000 CDOs in the first quarter of 2008 – the financial community now regards them as “toxic waste.” Of course, the sudden massive downgrading raises the question: Why had CDOs been artificially elevated in the first place, leading banks to buy them and giving them protective coloring just because the derivatives writers “insured” them?

After the raters got real (i.e., got scared), the gig was up. Hedge funds fled in droves from their luxe digs in London. The industry remains murky, but some observers feel that more than half of all hedges will fold this year. Not necessarily a good sign, it seems to show that the funds were one-trick ponies living mainly off the derivatives play.

We know that AIG was not the only firm that sold derivatives: Lehman and Bear Stearns both dealt them and died. About 20 years ago, JP Morgan, the now-defunct investment bank, had brought the idea to AIGFP in London, which ran with it. Seeing the Cassano group’s success, Morgan jumped in with both feet. Specializing in credit default swaps – a type of derivative triggered to pay off by negative events in the lives of loans, like defaults, foreclosures, and restructurings – Morgan had a distinctive marketing spin. Its “quants” were classy young dealers who could really do the math, which of course gave them credibility with those who couldn’t. They abjured street slang like “protection.” They pitched their sophisticated swaps as “technologies.” The market adored them. They, in turn, oversold the product, made huge commissions, and wounded Morgan, which had to sell itself to Chase, becoming JP Morgan Chase – now the country’s biggest bank.

Today, the real question is whether the Morgan quants knew the swaps didn’t work and actually were grenades with pulled pins. Like Joseph Cassano, such people should consult attorneys.

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Secrecy shrouds the bailout. The 21 banks that each received more than $1 billion from the Fed won’t disclose how, or even if, they’re lending it, which hardly quells fears of hoarding. The Treasury says it can’t force disclosure because it took only preferred (non-voting) stock in exchange for the money.

If anything, the Fed had been less candid. It stonewalls requests to reveal the winners (mainly banks and corporations) of $1.5 trillion in loans, as well as the securities it received as collateral. A Freedom of Information Act (FOIA) suit to obtain this information by Bloomberg News has been rebuffed by the Fed, which insists that a loophole in FOIA exempts it. Bloomberg will probably lose the case, but at least it’s trying to probe the black hole of bailout money. Of course, Barack Obama could tell the Fed to release the information, plus generally open the bailout to public eyes. That would be change that we could believe in.

As for Bloomberg, its business side, Bloomberg L.P., has been less than forthcoming. Requests to interview someone from the company – and Michael Bloomberg, who retains a controlling interest – about the derivatives trade went unanswered.

In his economic address at Cooper Union last spring, Obama argued for new regulations, which he called “the rules of the road,” and for a $30 billion stimulus package, that now seems quaint. In the OTC swaps trade, the Bloomberg L.P.’s computer terminals are the road, bridges, and tunnels for “real-time” transactions. The L.P.’s promotional materials declare: “You’re either in front of a Bloomberg or behind it.” In terms of electronic trading of certain securities, including credit default swaps: “Access to a dealer’s inventory is based upon client relationships with Bloomberg as the only conduit.” In short, the L.P. looks like a dominant player – possibly, a monopoly. If it has a true competitor, I can’t find it. But then, this is a very dark market.

Did Bloomberg L.P. do anything illegal? Absolutely not. We prosecute hit-and-run drivers, not roads. But there are many questions – about the size of the derivatives market, the names of the counterparties, the amount of replication of derivatives, the role of securities ratings in Bloomberg calculations (in other words, could puffing up be detected and potentially stop a swap?), and how the OTC industry should be reported and regulated in order to prevent future catastrophes. Bloomberg is a privately held company – to the chagrin of would-be investors – and quite private about its business, so this information probably won’t surface without subpoenas.

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So what do we do now? In 2000, the 106th Congress as its final effort passed the Commodity Futures Modernization Act (CFMA), and, disgracefully, President Clinton signed it. It opened up the bucket-shop loophole that capsized the world’s economic system. With the stroke of a presidential pen, a century of valuable protection was lost.

Even with that, the dangerous swaps still almost found themselves subjected to state oversight. In 2000, AIG asked the New York State Insurance Department to decide if it wanted to regulate them, but the department’s superintendent, Neil Levin, said no. The question was not posed by AIGFP, but by the company’s main office through its general counsel, a reminder that not long ago, AIG was a blue chip with a triple-A rating that touted its integrity.

We can’t know why Levin rejected the chance to regulate the tricky trade. He died in the restaurant at the top of the World Trade Center on the morning of 9/11. A Pataki-appointed former Goldman Sachs vice president, Levin may have shared other Wall Streeters’ love of derivatives as the last big-money sure thing as the IPO craze wound down. Or maybe he saw swaps as gambling rather than insurance, hence beyond his jurisdiction. Regardless, current Insurance Superintendent Eric Dinallo told me, “I don’t agree with his answer.” Maybe the economic crisis could have been averted if Levin had answered otherwise. “How close we came …” Dinallo mused.

Deeply occupied with keeping AIG, the parent company, afloat since the bailout, Dinallo saw the carnage that the swaps caused and, with the support of Governor Paterson, pushed anew for regulatory oversight, a position also adopted by the President’s Working Group (PWG), which includes the Treasury, Fed, SEC, and CFTC.

But regulation isn’t enough to stop a phenomenon called “de-supervision” that occurs when officials can’t, or won’t, oversee a market. For instance, the Fed under Greenspan had authority to regulate mortgage bankers and brokers, the industry’s cowboys who kicked off this fiasco. Because Greenspan’s libertarian sensibilities prevented him from invoking the Fed’s control, the mortgage market careened corruptly until the wheels came off. Notoriously lax and understaffed, the SEC did nothing to limit investment banks that bundled, pitched, and puffed non-prime mortgages as the raters cheered. It’s doubtful that any agency can be relied on to control lucrative default swaps, which should be made illegal again. The bucket-shop loophole must be closed. The evil genie should go back in the bottle.

Will Obama re-criminalize these financial weapons by pushing for repeal of the CFMA? This should be a no-brainer for Obama, who, before becoming a community organizer in Chicago, worked on Wall Street, studied derivatives, and by now undoubtedly knows their destructive power.

What about the $600 trillion in credit derivatives that are still out there, sucking vital liquidity and credit out of the system? It’s the tyrannosaurus in the mall, the one that made Henry Paulson, the former Treasury Secretary who looks like Daddy Warbucks, get down on his knees and beg Nancy Pelosi for a bailout.

Even with the bailout, no one can get their arms around this monster. Obviously, the $600 trillion includes not only many unseemly replicated death bets, but also some benign derivatives that creditors bought to hedge risky loans. Instead of sorting them out, the Bush administration tried to protect them all, while keeping the counterparties happy and anonymous.

Paulson has taken flack for spending little to bring mortgages in line with falling home values. Sheila Bair, the FDIC chief who often scrapped with Paulson, said this would cost a measly $25 billion and that without it, 10 million Americans could lose their homes over the next five years. Paulson thought it would take three times as much and balked. Congress is bristling because the Emergency Economic Stabilization Act (EESA) could provide mortgage relief – and some derivatives won’t detonate if homeowners don’t default. Obama’s nominee for Treasury Secretary, Timothy Geithner, could back such relief at his hearings.

The other key appointment is attorney general. A century ago, when powerful trusts distorted the market system, we had AGs who relentlessly tracked and busted them. Today’s crisis is missing, so far, an advocate as dynamic and energetic as the mortgage bankers, brokers, bundlers, raters, and quants who, in a few short years, littered the world with rotten loans, diseased CDOs, and lethal derivatives. During the Bush years, white-collar law enforcement actually dropped as FBI agents were transferred to antiterrorism. Even so, according to William Black, an effective federal litigator and regulator during the 1980s savings-and-loan scandal, by 2004, the FBI perceived an epidemic of fraud. Now a professor of law and finance at the University of Missouri-Kansas City, Black has testified to Congress about the current crisis and paints it as “control fraud” at every level. Such fraud flows from the top tiers of corporations – typically CEOs and CFOs, who control perverse compensation systems that reward cheating and volume rather than quality, and circumvent standard due diligence such as underwriting and accounting. For instance, AIGFP’s Cassano reportedly rebuffed AIG’s internal auditor.

The environment from the top of the chain – derivatives gang leaders – to the bottom of the chain – subprime, no-doc loan officers – became “criminogenic,” Black says. The only real response? Aggressive prosecution of “elites” at all stages in this twisted mess. Black says sentences should not be the light, six-month slaps that white-collar criminals usually get, or the Madoff-style penthouse arrest.

As staggering as the Madoff meltdown was, it had a refreshing side – the funds were frozen. In the bailout, on the other hand, the government often seems to be completing the scam by quietly passing the proceeds to counterparties.

The advantage of treating these players like racketeers under federal law is that their ill-gotten gains could be forfeited. The government could recoup these odious gambling debts instead of simply paying them off. In finance, the bottom line is the bottom line. The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans – Joe Six-Packs and hockey moms – would fail.

Black suggests that derivatives should be “unwound” and that the payouts cease: “Close out the positions – most of them have no social utility.” And where there has been fraud, he adds, “clawback makes perfect sense.” That would include taking back the ludicrously large bonuses and other forms of compensation given to CEOs at bailed-out companies.

No one knows how much could be clawed back from the soiled derivatives reap. Clearly, it’s not $600 trillion. William Bergman, formerly a market analyst at the Chicago Fed in “netting” – what’s left after financial institutions pay each other off for ongoing deals and debts – makes a “guess” that perhaps only 5 percent could be recouped, which he concedes is unfortunately low. Still, that’s $30 trillion, a huge number, more than 10 times what the Fed can deploy and over twice the U.S. gross domestic product. Such a sum, if recovered through the criminal justice process, could ease the liquidity crisis and actually get the credit arteries flowing. Not everyone would like it. What’s left of Wall Street and hedge funds want their derivatives gains; so do foreign banks.

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A tangle of secrecy, conflicts of interest, and favoritism plagues the process of recovery.

Lehman drowned, but Goldman Sachs, where Paulson was formerly CEO, was saved. The day before AIG reaped its initial $85 billion bonanza, Paulson met with his successor, Lloyd Blankfein, who reportedly argued that Goldman would lose $20 billion and fail unless AIG was rescued. AIG got the money.

Had Goldman bought from AIG credit derivatives that it needed to redeem? Like most other huge financial traders, Goldman has a secretive hedge fund, Global Alpha, that refuses to reveal its transactions. Regardless, Paulson’s meeting with Blankfein was a low point. If Dick Cheney had met with his successor at Halliburton and, the very next day, written a check for billions that guaranteed its survival, the press would have screamed for his head.

The second most shifty bailout went to Citigroup, a money sewer that won last year’s layoff super bowl with 73,000. Instead of being parceled to efficient operators, Citi received a $45 billion bailout and $300 billion loan package, at least in part because of Robert Rubin’s juice. While Treasury Secretary under Clinton, Rubin led us into the derivatives maelstrom, deported jobs with NAFTA, and championed bank deregulation so that companies like Citi could mimic Wall Street speculators. After he joined Citi’s leadership in 1999, the bank went long on mortgages and other risks du jour, enmeshed itself in Enron’s web, tanked in value, and suffered haphazard management, while Rubin made more than $100 million.

Rubin remained a director and “senior counselor” at Citi until January 9, 2009, and is an economic adviser to Obama. In truth, he probably shouldn’t be a senior counselor anywhere except possibly at Camp Granada. Like Greenspan, he should retire before he breaks something again, and we have to pay for it. (Incidentally, the British bailout, which is more open than ours and mandates mortgage relief, makes corporate welfare contingent on the removal of bad management.)

The third strangest rescue involved the Fed’s announcement just before Christmas that hedge funds for the first time could borrow from it. Apparently, the new $200 billion credit line relates to recently revealed securitized debts including bundled credit card bills, student loans, and auto loans. Obviously, it’s worrisome that the crisis may be morphing beyond its real estate roots.

:::::::::::::::::::::::::::::::::::::::::::::::::

To say the bailout hasn’t worked so far is putting it mildly. Since the crisis broke, Washington’s reaction has been chaotic, lenient to favorites, secretive, and staggeringly expensive. An estimated $7.36 trillion, more than double the total American outlay for World War II (even correcting for inflation), has been thrown at the problem, according to press reports. Along the way, banking, insurance, and car companies have been nationalized, and no one has been brought to justice.

Combined unemployment and underemployment (those who have stopped looking, and part-timers) runs at nearly 20 percent, the highest since 1945. Housing prices continue to hemorrhage – last fall’s 18 percent drop could double. Holiday shopping fizzled: 160,000 stores closed last year, and 200,000 more are expected to shutter in ’09. Some forecasts place eventual retail darkness at 25 percent. In 2008, the Dow dropped further – 34 percent – than at any time since 1931. There is no sound sector in the economy; the only members of the 30 Dow Jones Industrials posting gains last year were Wal-Mart and McDonald’s.

Does Obama’s choice for attorney general, Eric Holder, have the tenacity and will to tackle the widest fraud in American history? Parts of his background don’t necessarily augur well: He worked on a pardon for Marc Rich, the fugitive billionaire tax evader once on the FBI’s Most Wanted List whom Clinton cleared. After leaving the Clinton era’s Justice Department, Holder went to work for Covington & Burling, a D.C. firm that represents corporate heavies including Big Tobacco. He defended Chiquita Brands in a notorious case, in which it paid a $25 million fine for using terrorists in Columbia as security. Holder fits well within the gaggle of elite D.C. lawyers who move back and forth between government and defending corporate criminals. He doesn’t exactly have the sort of résumé that startles robber barons.

Can Holder design and orchestrate a muscular legal response, including prosecution and stern punishment of top executives, plus aggressive clawbacks of money? There seems little question that he has the skill, so the decision on how aggressive the Justice Department will be is up to Obama.

Holder could ask for and get well-organized FBI white-collar teams. The personnel hole caused by shifts to antiterrorism would have to be more than filled to their pre-9/ll staffing if the incoming administration decides to break this criminogenic cycle rather than merely address it symbolically.

Black contends that aggressive prosecution would be good for the economy because it may help prevent cheating and fraud that inevitably cause bubbles and destroy wealth. The Sarbanes-Oxley law passed in Enron’s wake, for instance, is supposed to make corporations now keep the kinds of documents necessary to assess criminality. Whether the CEOs, CFOs, and others who controlled the current frauds will do so is another matter.

“Don’t count on them keeping records for long,” Black warns. “It’s time to get out the subpoenas.”

——-

James Lieber is a lawyer whose books on business and politics include “Friendly Takeover” (Penguin) and “Rats in the Grain” (Basic Books). This is his fifth article for The Voice.

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What are the Chances of a Nuclear War?

Posted by Admin on January 26, 2010

October 10, 2009

By Steve Beckow

Speaking at a Project Camelot Conference today in Brussels, George Green said that he saw a war with China in our near future.

http://www.ustream.tv/recorded/2325758

How likely is a war with China?  For that matter, how likely is a war between any of the nuclear powers?

Let us ask that question of Mike Quinsey’s group, Sheldan Nidle’s Spiritual Hierarchy and Galactic Federation, and Matthew Ward, who are, in my opinion, our most credible sources.

SaLuSa is very certain about the matter: “There will be no nuclear war or that type of aggression.” (1)    He reports that the galactics “can easily [quiet] the guns of war if there is any need to do so.” (2)

He lets it be known that “we are in contact with your leaders, and they have been warned that certain conduct will not be allowed that seriously endangers you.” (3)

“Regardless of what threats are perceived, you will not be involved in a nuclear exchange or war. Your governments are aware of this edict from us, but still use such threats against each other. …

“There is talk of further wars but we assure you that it is no longer part of your future. We have informed your governments and military that nuclear weapons will not be allowed, and have proved we are as good as our word. We are here to lead you into a peaceful era that will allow for the restoration of your planet, and for a quantum leap forward into the Light.” (4)

Diane of Sirius assures us that the galactics are well “abreast of what is taking place, and have a total picture of the likely outcome of the impetus created by you. … We are ready to seize control on your behalf as soon as it is practical to do so and prevent any madcap actions by the dark as they contemplate defeat. We know exactly how they think and will curtail any attempts to prevent the Light from manifesting on your world.  (5)

Atmos tells us that the galactics have shielded the rest of the universe from our nuclear destructiveness:  “Nuclear weapons are an abomination that is so destructive, even to the point of damaging the souls of those in their path. Fortunately, in the past where you have let off nuclear devices, we have placed a protective shield around your Earth to prevent damage to the outer planets, and life forces in Space.” (6)

He tells us that the Galactic Federation has been protecting Earth for millennia against its own destructiveness:

“On more than one occasion, you were intending to bring about a nuclear war. … Your actions could have destroyed your Earth. We wish you to be aware that we have acted as your guardians for many thousands of years and you would not have been where you are now without our help, indeed you would not have reached this high point in evolution.” (7)

Ker-On of Venus offers us his guarantee that the galactics will protect us from ourselves:

“We shall ensure that there is no interference from the dark forces [in Ascension], as their power will have been removed from them. Already we curtail their ability to cause more wars and use their nuclear weapons and we know that it has been their objective in the Middle East.” (8)

Like Atmos, he assures us that the galactics have saved us from our own destructiveness:

“We follow your development and, since you entered the Nuclear Age, have come a lot closer. Our service to Humanity has been to make sure that you complete this cycle, and that both you and the Earth are not destroyed. You have come close to doing so on a number of occasions and we have prevented it. It is fortunate that the Divine Plan for you requires that you see this cycle out to the end, which is but a few years away. (9)

Unequivocably he tells us there will be no nuclear war:

“No matter what rhetoric passes between different countries that confront each other, we give an absolute assurance that there will not be another nuclear war. It will simply not be allowed, and soon the weapons of war shall be completely silenced forever. (10)

The Spiritual Hierarchy and Galactic Fderation (SHGF), speaking through Sheldan Nidle, say they “are confident that the need for a rapid deployment of our forces in response to some dark-induced craziness is unlikely. Until the mass landing date, we will need to intercede only when necessary to prevent nuclear disaster or stop events from getting out of hand. By this we mean an event that swiftly escalates into something serious.”  (11)

Speaking for the terrestrial and spiritual side, Matthew Ward tells us that stopping nuclear wars is the one area of human life where the 2012 team has Creator’s consent to intervene.

“Creator made this single exception to Its law that all souls’ free will must be honored: There will be no more nuclear wars, and spiritually evolved civilizations are authorized to use their technology to prevent any attempts to initiate one. That is why we have been able to repeatedly and confidently assure you that there will be no nuclear war on Earth.

So there is no possibility of planetary-wide destruction. (12)

In answer to “several issues that keep popping up in Internet articles or channeled messages,” Matthew assured us that “There will be no war with Iran … Russia will not engage in a major war and neither will China.”  (13)

On the basis of this, and insofar as this information is true, as I believe it to be, I think I can say unequivocally that George Green’s predictions of  a near-future war with China have no substance to them and no chance of materializing.

Namaste,

Steve

Footnotes

(1) SaLuSa, Feb. 18, 2009 at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.)

(2) SaLuSa of Sirius, Dec. 8, 2008, ibid.

(3) SaLuSa, March 20, 2009, ibid.

(4) SaLuSa, Nov. 14, 2008, ibid.

(5) Diane of Sirius, Aug. 6, 2008, at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.

(6) Atmos, Dec. 17, 2008, at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.

(7) Atmos,  Oct. 13, 2008, at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.

(8) Ker-On, Nov. 3, 2008, at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.  He adds: “The line has been drawn against certain activities that would endanger life on and beyond your Earth, and [the dark] are therefore curtailed in what they can do.” (Ker-On of Venus, Oct. 22, 2008, at http://www.treeofthegoldenlight.com/First_Contact/Channeled_Messages_by_Mike_Quinsey.htm.)

(9) Ker-On of Venus, Oct. 22, 2008, ibid.

(10) Ker-On, Sept. 8, 2008, ibid.

(11) Spiritual Hierarchy and Galactic Federation, “Update,” through Sheldan Nidle, Aug. 12, 2008 at http://www.paoweb.com/sn081208.htm.

(12) Matthew’s Message, March 10, 2009, at http://www.matthewbooks.com/mattsmessage.htm.

(13) Matthew’s Message,  Sept. 24, 2008, ibid.

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