"Had Enough FRAUD America?
Let's expand a bit on a couple of Tickers from the last couple days; "AIG: More Samurai Swords Please" and "What SCHEME Is AIG", specifically.
This is what I said in May of 2008:
The solution to this entire mess is the same that it was (but not taken) back when the Bank of England was essentially looted, and when our banking system was looted in the early 1900s - find the market participants who have engaged in fraud via various forms, whether they be mortgage bankers handing out liar loans and misrepresenting them as "AAA Prime" paper or whether they be people in the marketplace who initiated the plethora of (false) rumors over the last many years about various companies, irrespective of whether the intent was to drive prices up or down, and prosecute them.
We have existing laws that make that conduct illegal. Investigate the activity, charge the wrongdoers, prosecute them, get your convictions and toss the lot of 'em in prison with a bunch of 7' tall rapists in the exercise yard, no guards, and a $100 video camera in the guard shack.
Then post the "results" on YouTube as a warning to the world - try that again in this country and this is the consequence you will receive.
That will be the last time it happens.
But until we take that sort of step and hold people to account, this sort of "looting operation" will continue, and we the people will continue to get screwed.
And specifically with regards to CDS, in the same article:
The entire claim and chain of events rests on the fact that market participants, up to and including Ben Bernanke at The Federal Reserve, were and are aware that these CDS contracts are in fact fraudulent in that there is no way performance can take place, yet everyone up and down the line is allowing these "assets" to be counted as "money good" on the books of banks and other financial institutions!
THIS is the key item in the debate folks.
The rest of this noise making is mental masturbation and intentional misdirection intended to keep you from asking the tough questions and demanding that existing law be enforced.
Congress and prosecutors across the board, both State and Federal, need to start bringing indictments, starting with the fraudulent accounting.
You can't value something at "par" when you are well-aware that the underlying credit quality has gone straight in the toilet and that there is not a snowball's chance in hell that the "insurance" you bought to protect yourself has no chance of being "money good." As soon as you become aware of the impairment under the law you are required to reserve against it!
While any one company could claim that its insurance is "money good" that's not the point.
Everyone in the marketplace today now has proof that these swaps in aggregate are worthless, with proof of this found in the fact that The Fed claimed under oath exactly that as justification for the Bear Stearns bailout!
So you have a situation here where the entire banking regulatory system has declared these contracts worthless in the aggregate and yet company after company continues to claim in their financial statements and results that these contracts are "money good"!
This is out and out fraud and must be stopped.
We the people are being systematically looted by these people and our prosecutorial apparatus sits on its butt and sips Starbucks Lattes instead of doing their job!
It is time for we the people to say ENOUGH.
Call Congress and demand that they stop this charade here and now. Every firm that has claimed their paper is "protected" by these wraps must be forced to identify the counterparty that currently holds the risk and those parties must be forced to prove that they can pay any and all claims against those policies.
If they can't (and the default case must be "they can't", since that was in fact Bernanke's and Geithner's position under oath!) then those wraps must be considered "doubtful" and reserves must be taken against the underlying credit quality.
Do this and we immediately identify who is broke and who is not, the market finds its proper price for these assets, and as a consequence the market will clear.
Everyone wants to make this whole mess complicated.
Its not.
It is in fact very simple.
The only "complication" is that there are thousands of people who are ripping the American People off wholesale, waving their arms around in the hope that you'll let them get away with it.
Don't fall for it.
Nearly a year ago folks.
There it was, laid out for everyone both in government and here.
In plain, black (digital) ink.
Now I want answers. You should want answers. And if you think that the answer is to flood AIG's derivatives desk with threatening calls, it is not.
It is to flood CONGRESS with calls demanding that this crap STOP.
Right now.
Specifically, we must insist that:
Every person involved with an identifiable criminal offense embedded in here (and I bet we can find plenty) be investigated, indicted, prosecuted AND if found guilty IMPRISONED.
Every firm that was unjustly enriched be told that they either return the funds or face a suit for that unjust enrichment and, in the case of a bank (or bank holding company) immediate confiscation by the FDIC and decertification of their federal banking charter.
The Federal Reserve be told that either IT cooperates in this matter and both disgorges its garbage on the balance sheet back to its originators, ceases all non-lending actions and opens its kimono here and forward or its charter will be revoked by Congress and The Fed's function will be subsumed by Treasury.
What I laid forth as my postulate has now been proved correct in the fullness of time.
Gee, Eliot Spitzer is back and says the same thing:
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation. (No really? - me)
So here are several questions that should be answered, in public, under oath, to clear the air:
What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
Was it already known who the counterparties were and what the exposure was for each of the counterparties?
What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
Why weren't the counterparties immediately and fully disclosed?
No kidding.
These bonuses aren't "news" to Geithner (who was at the NY Fed, remember, when this entire AIG mess started) or to anyone else:
WASHINGTON (AP) — Cue the outrage. For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn't until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back.
Cut the crap Mr. President, Mr. Geithner and Congress. You are lying and this entire "bonus" game is a smokescreen to try to divert attention from the real theft - nearly $100 billion dollars of taxpayer money that has gone to Goldman and other banks, including foreign banks, to pay off Credit Default Swaps written by AIG that were worthless as the company had no capital behind them. This in turn means that the accounting of these firms has in fact fraudulently overstated earnings - perhaps for years - and still is!
The Fed, OTS and OCC have and had jurisdiction over American banks that bought these products, and were clearly derelict in their duty to prevent these regulated entities from purchasing these CDS from a firm that was unable to prove capital adequacy to cover its bets.
The European regulators have similar jurisdiction over those institutions and similarly have been derelict in their duty.
What the hell are we doing bailing out FOREIGN REGULATORS AND GOVERNMENTS who were derelict in their duty with regards to the institutions under their control?
Finally, TurboTimmy, it is not acceptable for you to simply "deduct" the amount of the bonuses from AIG's "aid package". Uh uh. This entire bonus question is a smokescreen for the massive conflicts of interest where an investment bank buys billions of dollars of "credit protection" from a company, then the CEO goes to work for Treasury and makes sure those contracts are good by siphoning off money from the taxpayer to cover them when the seller turns out to be insolvent.
It is time to hold people to account, here and now, for what certainly looks to me like an intentional and outrageous looting operation conducted against the American Taxpayer for the benefit of covering up the outrageous malfeasance and misfeasance by both American and foreign governments and regulatory bodies.
I refuse to believe this has all been some big accident.
I firmly believe it has been an intentional series of actions and it is time for America and stand up and say NOT THIS TIME YOU WON'T.
How long will you sit for this America before you either obtain proper redress for these actions or go purchase these two items
and prepare to use them?
No more excuses Mr. President, Mr. Bernanke, Mr. Geithner and Mr. Summers.
It is time to cut the crap, because if we don't do the right thing here and now foreigners will do it for us:
Foreigners sold a net $60.9 billion in long-dated U.S. securities in January, after buying $24.3 billion in December. Including changes in banks' dollar holdings, short-term securities and nonmarket transactions, net foreign capital outflows totaled a record $148.9 billion in January, compared with $86.2 billion in inflows in the previous month.
Michael Woolfolk, senior currency strategist at the Bank of New York Mellon Corp., said the big outflows are a concern and could represent a trend away from the flight to quality that has boosted purchases in U.S. assets in recent months.
"This was a truly awful report, throwing into question the funding of the U.S. current-account deficit," he said in a statement.
Mr. Woolfolk misses the essence of this signal from foreigners. That signal is, quite simply, one of disgust with what is happening over here in the realm of outright theft and fraud, and is best summarized thus:
Stop the looting and start the prosecuting right now or we will take our ball and bat and depart, leaving you with an un-fundable government budget that will be forced to contract by more than 75% within days, along with a smoking hole where your capital markets and economy once were.
Need I remind Ticker readers that I predicted exactly this potential course of action by our government and the potential outcome back when these "bailouts" and "handouts" first began over a year ago?
Time's up folks."
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