Part 4: Golden Lily’s Liar Loans and the Subprime Meltdown

In parts one, two, and three a narrative was formed around covert right wing activities stretching from the end of World War 2 up until the start of the War on Terror. In a nutshell, a giant horde of stolen riches known as the ‘Black Eagle Trust’ were used to fund a shadow American empire tucked under the meme of anti-communism.

At the end of the Cold War, a large number of ‘off-balance sheet’ securities were issued by banks such as UBS and Deutsche Bank against this wealth and funneled into the USSR.

In September 1991, George H. W. Bush and Alan Greenspan, both Pilgrims Society members, financed $240 billion in illegal bonds to economically decimate the Soviet Union and bring Soviet oil and gas resources under the control of Western investors, backed by the Black Eagle Trust and supported later by Putin who for the right price purged certain oligarchs.

After the Soviet Union fell, the cabal in possession of these resources made plans to cycle them into the legal economy and cover-up the dirty deeds that they were associated with. The original 10 year Brady bonds, set to mature in September 2001, were destroyed in the attack on the World Trade Center. The firm that held the securities was Cantor Fitzgerald, which suffered catastrophic losses including the death of every employee.

Under a suspension of regular rules by the SEC, the illicit bonds were cleared by the Bank of New York and added to the capital reserves of banks holding ‘Black Eagle’ gold including Chase, Citibank, Credit Suisse, HSBC, Deutsche Bank, and UBS. To obfuscate its trail, the money was quickly shifted into the mortgage market, where the demand for subprime loans would rise by $246 billion.

Loans that require little or no documentation of income soared to $276 billion, or 46 percent, of all subprime mortgages last year from $30 billion in 2001, according to estimates from New York- based analysts at Credit Suisse Group. Homebuyers with those loans defaulted at a 12.6 percent rate in February, compared with 1.5 percent of fully documented prime mortgages, said San Francisco- based First American LoanPerformance, a mortgage consulting group.

The global financial crisis, like the massive pyroclastic clouds flowing through the streets of New York on 9/11, has served as a smokescreen for the criminal syndicate which inherited Golden Lily’s loot to get away...

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Reasons to vote no on Wall Street reform don’t hold up

Wall Street reform looks to be in as much trouble as the energy bill. Though the bill was passed out of conference, it’s actually now losing votes on the Senate floor despite the addition of Maria Cantwell. Robert Byrd’s death is one and Repub Scott Brown is two, and four others are threatening to walk.The original vote was 59-39 with Specter and Byrd not voting. Factor them in, and we can only afford to lose two votes after gaining Cantwell's. If Russ Feingold continues to filibuster, then we need all four of the remaining waverers lest the 2007-8 status quo stands and Wall Street brings down the economy again.

Brown is opposing the bill and Chuck Grassley (R-IA) and the Maine twins are threatening to oppose it because of a $17.9 billion fee on big banks from the House version. Democrat Evan Bayh has also grown wishy-washy.

This is ridiculous. Big financial firms and banks have caused trillions of dollars worth of damage to this country - $700 in TARP funds, $787 billion in the stimulus, two consecutive quarters of 6% decline in US GDP, 10% unemployment – yet Repubs would risk it happening all over again rather than tax these crooks a paltry $18 billion? Puh-leaze! It's even more hypocritical when one considers the anti-bailout bleating of most of these Repubs. Here’s our chance for another Main Street bailout, and yet just as with the stimulus and unemployment extension, they’re saying no. Any good will Brown generated by introducing Elena Kagan to the Judiciary Committee yesterday is gone now.

Dodd and Franks have made some small changes to address these petty concerns, but that won't solve all the bill's political woes - and not just because Brown is still playing coy. Democratic Senator Russell Feingold of Wisconsin is also planning to vote against the legislation, as he did before conference. Sen. Maria Cantwell (D-WA) also voted against it in May, but her concerns about derivatives seem to have been addressed. Feingold, however, is almost taking the position that unless we end too-big-to-fail (and it is too bad that the bill doesn't), then we should leave the current system in place exactly as it its.

I truly admire Feingold and am happy to fundraise for his re-election campaign, but I think he's making a terrible mistake here. If the bill’s strength is already losing it votes, holding out for something better will lose even more. Give Feingold what he wants and not only do the four Republicans firm up their opposition, perhaps we lose not only Bayh but Ben Nelson as well, who voted against an initial procedural motion. That takes us from a possible 61 and passage to a ceiling of 56-57 and failure.

It made sense to filibuster in May when there was still a chance to strengthen the bill, but we’re in the end game now. Either we pass this bill or one very close to it, or we don’t pass a bill at all. This wasn’t the case before conference when the August recess was still far away, but it is the case now. If Feingold and others want to register discontent, they should vote for cloture and against the bill, but a vote against cloture is a vote for Jamie Dimon and a vote for the 2007-8 status quo.

Reasons to vote no on Wall Street reform don’t hold up

Wall Street reform looks to be in as much trouble as the energy bill. Though the bill was passed out of conference, it’s actually now losing votes on the Senate floor despite the addition of Maria Cantwell. Robert Byrd’s death is one and Repub Scott Brown is two, and four others are threatening to walk.The original vote was 59-39 with Specter and Byrd not voting. Factor them in, and we can only afford to lose two votes after gaining Cantwell's. If Russ Feingold continues to filibuster, then we need all four of the remaining waverers lest the 2007-8 status quo stands and Wall Street brings down the economy again.

Brown is opposing the bill and Chuck Grassley (R-IA) and the Maine twins are threatening to oppose it because of a $17.9 billion fee on big banks from the House version. Democrat Evan Bayh has also grown wishy-washy.

This is ridiculous. Big financial firms and banks have caused trillions of dollars worth of damage to this country - $700 in TARP funds, $787 billion in the stimulus, two consecutive quarters of 6% decline in US GDP, 10% unemployment – yet Repubs would risk it happening all over again rather than tax these crooks a paltry $18 billion? Puh-leaze! It's even more hypocritical when one considers the anti-bailout bleating of most of these Repubs. Here’s our chance for another Main Street bailout, and yet just as with the stimulus and unemployment extension, they’re saying no. Any good will Brown generated by introducing Elena Kagan to the Judiciary Committee yesterday is gone now.

Dodd and Franks have made some small changes to address these petty concerns, but that won't solve all the bill's political woes - and not just because Brown is still playing coy. Democratic Senator Russell Feingold of Wisconsin is also planning to vote against the legislation, as he did before conference. Sen. Maria Cantwell (D-WA) also voted against it in May, but her concerns about derivatives seem to have been addressed. Feingold, however, is almost taking the position that unless we end too-big-to-fail (and it is too bad that the bill doesn't), then we should leave the current system in place exactly as it its.

I truly admire Feingold and am happy to fundraise for his re-election campaign, but I think he's making a terrible mistake here. If the bill’s strength is already losing it votes, holding out for something better will lose even more. Give Feingold what he wants and not only do the four Republicans firm up their opposition, perhaps we lose not only Bayh but Ben Nelson as well, who voted against an initial procedural motion. That takes us from a possible 61 and passage to a ceiling of 56-57 and failure.

It made sense to filibuster in May when there was still a chance to strengthen the bill, but we’re in the end game now. Either we pass this bill or one very close to it, or we don’t pass a bill at all. This wasn’t the case before conference when the August recess was still far away, but it is the case now. If Feingold and others want to register discontent, they should vote for cloture and against the bill, but a vote against cloture is a vote for Jamie Dimon and a vote for the 2007-8 status quo.

Weekly Audit: Brown-Nosing Wall Street Reform

by Zach Carter, Media Consortium blogger

More than two years after the collapse of Bear Stearns, the House and Senate finally ironed out their differences on Wall Street reform in the wee, small hours of Friday morning. The bill now goes back to both the House and Senate for final approval, but it’s fate in the Senate is uncertain following the defection of Tea Party Sen. Scott Brown (R-MA).

The resulting bill has several things going for it, but largely misses the critical structural lessons of the Great Financial Crash of 2008. As Wall Street continues to score epic profits and grotesque bonuses over the coming months, progressives must be committed to continuing the fight for a fair economy.

Megabanks intact

As Andy Kroll explains for Mother Jones, the bill essentially lets too-big-to-fail banks off the hook. Megabanks like J.P. Morgan Chase and Citigroup will not be broken up into smaller institutions that could fail safely, nor will they be required to exit many of their most reckless business ventures. One of the most promising reforms still on the table as Congress moved on the bill was a plan to ban banks from gambling with taxpayer money—and Congressional leaders sabotaged it at the last minute.

As Tim Ferhnolz notes for The American Prospect, instead of strengthening the bill by negotiating with committed reformists like Sens. Maria Cantwell (D-WA), and Russ Feingold (D-WI), Senate leadership chose to cut a deal with Tea Party favorite Scott Brown (R-MA). Brown’s price? Allowing banks to gamble by running their own proprietary hedge funds. After Senate negotiators gave Brown what he wanted, he suddenly reversed his support for the bill on Saturday morning.

Derailed by in-fighting

Essentially, petty interpersonal spats overwhelmed the push for real reform. Cantwell and Feingold’s objections to the legislation were correct so far as policy substance were concerned, and Cantwell always made clear that her vote could be won by simply closing a huge loophole in the bill. But after the two Democrats voted against the bill for being unnecessarily weak on the Senate floor, Sen. Chris Dodd (D-CT) simply shut them both out of the negotiation process. This would be funny, if it weren’t true.

Brown had already proved his ability to go back on his word with Senate negotiators just a few weeks prior. He was a committed “yes” vote when the bill went to the Senate floor, but unexpectedly reversed his position at the last minute, causing the legislation to fail the first time it came up for a vote. But instead of trying to cut a deal with progressives, Dodd decided to roll the dice again with Brown, and the legislation now finds itself in limbo, with Senate approval uncertain.

A slight improvement

But despite its unnecessary shortcomings, the Wall Street reform bill is still an improvement over the status quo, as I emphasize for AlterNet. We get a stronger set of consumer protections, along with a thorough audit of the Federal Reserve. The Fed served as the government’s principal bailout engine throughout the crisis, pumping $4 trillion into the nation’s financial system with almost no accountability or oversight. Bringing these massive bailout operations into the light should build momentum for broader reforms, but it’s up to engaged citizens to make that a reality.

There are plenty of major policy battles brewing that directly involve the financial industry. As Dean Baker notes for Truthout, the current economic policy agenda is a Wall Street executive’s dream. Lawmakers are seriously considering slashing Social Security while ignoring an unemployment catastrophe and leaving troubled homeowners out in the lurch. These are all catastrophic economic errors in the making.

Foreclosed again

As Annie Lowrey reports for The Washington Independent, Fannie Mae unveiled a new policy last week to punish borrowers who owe more on their mortgages than their home is worth. As home prices have plunged in value over the past three years, huge swaths of borrowers owe their bank hundreds of thousands more than their home is worth. Now many borrowers, realizing that they are pissing away huge amounts of their monthly income to a ruthless bank, are making the perfectly rational decision to walk away from their mortgage.

In cases where borrowers can, in fact, afford to continue making payments, but simply do not want to waste their money, walking away is called a “strategic default,” and there is nothing wrong with it. Both parties knew the terms of the mortgage agreement when it was signed, and a well-paid, professional banker signed off on it. Borrowers are not violating a contract by failing to pay—in a mortgage, the borrower keeps paying the bank, or the bank gets the house. Walking away just means that the bank gets the house.

But, of course, bankers are upset that they didn’t predict the downturn in home prices, even though this is part of their job description, and the reason they get paid big bucks. When borrowers walk away, bankers lose money. So banks putting pressure on the government, Fannie Mae and Freddie Mac to punish borrowers who walk away, and Fannie Mae has acquiesced by agreeing to shut borrowers out of the mortgage market for seven years, and harassing them in court for unpaid mortgage balances.

Your right to rent

As Greg Kaufmann emphasizes for The Nation, there are much better policy alternatives. Instead of slamming borrowers, the government could encourage bankers to write down their total debt burden to whatever their house is currently worth. Bankers don’t want to do that, because it means taking a loss, and when agencies like Fannie Mae are willing to intimidate borrowers to line bankers’ pockets, why should bankers agree to play ball?

According to  Kaufmann, one of the best ways to get banks to negotiate seriously with borrowers is to establish a right-to-rent policy. Borrowers who receive a foreclosure notice would get the right to rent their current home at a fair market rate, determined by a court, for up to five years. Bankers don’t want to be landlords, so the provision would force them to negotiate with borrowers in trouble by imposing an unpleasant new duty on the bank. If bankers still didn’t want to negotiate, borrowers would have five years to find a new place to stay. It’s great policy, and legislation to implement it has already been introduced in the House.

The final version of the Wall Street reform bill is worth supporting, but it won’t fix the foreclosure crisis or prevent bankers from taking outrageous risks that put the entire economy in jeopardy. Many key reforms are still necessary, and it’s up to progressives to keep the pressure on lawmakers to make sure they are enacted in the coming months.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

Weekly Audit: Want Economic Justice? Then it's Time to Act

by Zach Carter, Media Consortium blogger

On Thursday, the U.S. Senate passed a financial reform package that includes a handful of important reforms, but it won’t fundamentally change the relationship between banks and society. Wall Street still has a vice grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.

The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today’s atmosphere of outspoken economic unrest.

Focus on the Fed

So what’s good about the bill the Senate just passed? As Annie Lowrey explains for The Washington Independent, the Federal Reserve’s emergency lending programs will finally be subjected to public scrutiny.

The Fed served as the U.S. government’s chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don’t know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.

Of particular interest are the “Maiden Lane vehicles”—programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least— big bonuses for AIG’s employees, with little or no effort to limit the impact on taxpayers.

Reconciliation

There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize for AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.

The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.

Regulators will get a handful of important new tools, including the authority to shut down complex banks on the verge of collapse, the ability to monitor derivatives and a have new set of powers to protect consumers. That’s all good, but we’ll still be living with too-big-to-fail behemoth banks that engage in reckless trading and exploit consumers.

Engaging activists

That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation, that business is not going to be accomplished without serious, organized progressive activists putting pressure on political leaders to act in the public interest, rather than the interests of the corporate class.

When the country suffered a trauma that massively discredited the establishment rulers, the Democratic Party became the establishment. And progressive groups in DC, under stern White House orders not to cause trouble (don’t show up at his door! he’s a donor! we might nominate him for something!), descended into what one organizer calls “grotesque transactionalism” . . . . If we’re going to get reform on the scale we need, bank lobbyists and members of Congress alike have to be confronted with the terrifying thought that the system from which they profit might just be run over—that 700 angry protesters might show up on their lawn.

As Hayes details, Bank of America lobbyist Gregory Baer woke up last Sunday with exactly that– 700 protesters in his front yard. That kind of pressure gets results. It took Franklin Delano Roosevelt seven years to enact his New Deal financial reforms. Earlier in the 20th Century, it took more than a decade for public opinion to align itself with the corporate crackdowns pushed by Republican President Theodore Roosevelt. It’s reasonable to expect the fight for fair finance to take more than two years, and important to fight hard for it.

The minimum reforms are already clear. Essentially, we need to bring banking back to the model that persisted from the 1930s into the 1980s—an era with no serious financial crises or bailouts. Our current financial woes stem from the systematic dismantling and deregulation of this system over the past 30 years.

State-run banks?

But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine, the state of North Dakota has been largely insulated from much of the fallout from the financial crisis of 2008. Part of the reason for the state’s relative stability lies in the fact that it operates its own bank.

North Dakota’s direct supervision of one institution among the hundreds of banks that operate in the state has helped insulate it from the credit storm on Wall Street. The state has its own engine of credit, and can keep funds flowing to businesses that need it, even in the middle of a crisis.

The prospect of state-run banking may seem radical, but it isn’t. It’s a practical proposal based on the established, real-life success of the Bank of North Dakota. As Brown notes, five other states have legislation pending that would create their very own banks—Massachusetts, Virginia, Washington, Illinois and Michigan, while Hawaii recently approved a study to determine the usefulness of a bank run by that state.

The financial reform bill the Senate just passed was a good start, but we’ve got a long way to go. We’re not going to get there without a committed community of progressive activists who demand that the economy serve society, not only entrenched corporate interests.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

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