by ilene - May 14th, 2010 11:25 am
Courtesy of Marla Singer, Zero Hedge
On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union. Perhaps the address will be familiar to some of you owing to its most famous passage:
From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in many cases, increasing measure of control from Moscow. Athens alone — Greece with its immortal glories — is free to decide its future at an election under British, American and French observation.
Ironic, as I will address, that he should mention Greece.
Much less well known perhaps is this later passage:
Our difficulties and dangers will not be removed by closing our eyes to them. They will not be removed by mere waiting to see what happens; nor will they be removed by a policy of appeasement. What is needed is a settlement, and the longer this is delayed, the more difficult it will be and the greater our dangers will become.1
The "Iron Curtain" came, of course, to signify the cavernous ideological, and eventually concretely physical, divide between East and West. It took some 43 years before it was lifted once more, first and haltingly, in the form of the removal of Hungary’s border fence in mid-1989 and then, of course, finally via the fall of the Berlin Wall in November that same year.
Not to be compared with a production of Italian Opera, the Iron Curtain did not describe a sudden, smooth, abrupt descent over the stages of Eastern Europe. Quite the contrary, its drop was in stutters of discrete, fractional lowerings, such that it was a full fifteen years after Churchill used the term before its ultimate expression, the Berlin Wall, was finally…
by ilene - May 13th, 2010 4:29 pm
Courtesy of Karl Denninger at The Market Ticker
May 13 (Bloomberg) — U.S. prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter.
The list is a who’s who of the big banks. JP Morgan, Deutsche Bank, UBS, Citigroup, Goldman, Morgan Stanley.
All in all eight banks are being scrutinized by both the toothless SEC but more-importantly Andrew Cuomo, who wields a fairly nasty set of powers through NY’s Martin Act.
Cuomo is investigating whether Goldman, Morgan Stanley, UBS, Citigroup, Credit Suisse, Credit Agricole SA, Deutsche Bank and Bank of America Corp.’s Merrill Lynch misled rating companies to obtain higher ratings, the New York Times said. Cuomo issued subpoenas on Wednesday, the newspaper reported.
Hmmmm… now that’s a good sign.
We know from the public data flow, including testimony before the Congress, that firms did use their knowledge of rating agency models to "tailor" submissions. Whether this rises to the level of intentional deception for the purpose of gaming the system remains to be determined, but that this sort of thing happened isn’t conjecture – it’s admitted fact.
"Changes to prevent it from happening again" are insufficient. Those who were defrauded, if they indeed were, are entitled not only to recompense but to criminal sanction against wrong-doers as a means of dissuading firms and individuals from doing it again.
I’ll believe this is real when I see handcuffs come out.
by ilene - May 3rd, 2010 3:58 pm
Courtesy of Joshua M. Brown, The Reformed Broker
How backwards does a modern nation have to be for a 20% unemployment number to be even remotely tolerable?
I’m always fascinated with democracies that choose to embrace a form of quasi-communism after watching every single one of these experiments toppled – from Russia to Latin America to Asia.
When will they learn? 22% unemployment? 25%? 30%? Must the people be boiling and eating shoe leather before the marxist regime is finally dismantled?
In Spain’s case, apparently.
The timing of the March 11, 2004 Madrid train bombing couldn’t have been worse…3 days later, a nationwide legislative election was held in which the Socialist Party, under current Prime Minister Zapatero, pulled off a major upset. The socialists carried the vote as cowardly citizens ran from the previous ruling party which had been tough on terror, essentially performing the script that the Islamo-Fascists had written for them.
Immediately following the election, Zapatero let the populace of Spain know that there would be no coalition government, that the Socialist Party would be using its perceived mandate to take the country hard-left.
The trouble with this large-scale adoption of big government was that it began just prior to a meltdown. Within just a few years, the global real estate bubble began its descent into hell. The Spanish had gorged on mortgages and buildings with the best of us, levering up to a median…
by ilene - April 28th, 2010 2:28 am
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This article by the Financial Times should remove any doubt in anyone’s mind that Goldman Sachs was willfully selling fraudulent financial instruments. It appears that they were working in conjunction with Ratings Agencies, Mortgage Origination Firms, and Hedge Funds to cheat investors.
"Cheat" means to circumvent or distort the normal price discovery process through misrepresentation, price manipulation, and omissions and distortion of key data.
Carl Levin summarized the situation in his opening statement this morning in tying together various Congressional hearings and investigations into aspects of the recent financial crisis and the underlying frauds. It sounds remarkably like the frauds that Enron had so recently inflicted on the American public.
In particular, Congressman Levin gave a good description of the key role that derivatives played in this control fraud.
"Of special concern was Goldman’s marketing of what are known as “synthetic” financial instruments. Ordinarily, the financial risk in a market, and hence the risk to the economy at large, is limited because the assets traded are finite. There are only so many houses, mortgages, shares of stock, bushels of corn or barrels of oil in which to invest.
But a synthetic instrument has no real assets. It is simply a bet on the performance of the assets it references. That means the number of synthetic instruments is limitless, and so is the risk they present to the economy. Synthetic structures referencing high-risk mortgages garnered hefty fees for Goldman Sachs and other investment banks. They assumed an ever-larger share of the financial markets, and contributed greatly to the severity of the crisis by magnifying the amount of risk in the system.
Increasingly, synthetics became bets made by people who had no interest in the referenced assets. Synthetics became the chips in a giant casino, one that created no economic growth even when it thrived, and then helped throttle the economy when the casino collapsed."
This is also a good description of the basis of the emerging scandal in the silver market, and other commodity markets such as those that Enron manipulated, in which synthetic bets are being used to manipulate price, and improbable sales are being misrepresented under the cover of secrecy and opaque markets as…
by ilene - April 9th, 2010 12:27 pm
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This analysis from the Wall Street Journal indicates that most of the big US Banks are engaging in the same kind of repo accounting at the end of the quarter that Lehman Brothers was doing to hide their financial instability until deteriorating credit conditions and liquidity problems made them precipitously collapse, as all ponzi schemes and financial frauds do when the truth becomes known.
The basic exercise is to hold big leverage and dodgy debt, but swap it off your books with the Fed at the end of each quarter for a short period of time when you have to report your holdings.
This could easily be corrected by requiring banks to report four week averages of their holdings for example, rather than a snapshot when they can hide their true risk profiles so easily, compliments of that protector of consumers and investors, the Fed.
This is nothing new to us. Many of us have noted this sort of accounting trickery and market manipulation at key events especially at end of quarter.
It is facilitated by the Federal Reserve, and FASB, and the agencies.
"Their Fraud doth rarely falter, and is subsidized, instead,
for none dare call it bank fraud, if it’s sanctioned by the Fed."
(apologies to Ovid)
The US is Lehman Brothers on a scale writ large. And when it is exposed by some series of events, the implosion could be more sudden than any can imagine. But in the meantime the US is still the ‘superpower’ of the world’s financial system, through its currency, its banks, and its ratings agencies.
Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review
Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.
A group of 18 banks—which includes Goldman Sachs