"We have a good deal of comfort about the capital cushions at these firms at the moment." — Christopher Cox, chairman of the Securities and Exchange Commission, March 11, 2008.
As rumors swirled that Bear Stearns faced imminent collapse in early March, Christopher Cox was told by his staff that Bear Stearns had $17 billion in cash and other assets — more than enough to weather the storm.
Drained of most of its cash three days later, Bear Stearns was forced into a hastily arranged marriage with JPMorgan Chase — backed by a $29 billion taxpayer dowry.
Within six months, other lions of Wall Street would also either disappear or transform themselves to survive the financial maelstrom — Merrill Lynch sold itself to Bank of America, Lehman Brothers filed for bankruptcy protection, and Goldman Sachs and Morgan Stanley converted to commercial banks.
How could Mr. Cox have been so wrong?
Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.
Our current Treasury Secretary, Henry M. Paulson, Jr., is now in charge (and with wide discretion) of spending $700 billion of taxpayer money to deal with this crisis; this same man "led the charge" in 2004 to create the environment which allowed the catastrophe which WE THE PEOPLE are now paying for.
The mouse is in charge of the cheese!
And President George W. Bush, our 43rd President of the United States, a candidate for whom I proudly voted in the 2000 and 2004 general elections, is the man who put him there.
As a Republican, I was so disgusted with the blatant "I'm-so-smart-and-they're-so-stupid" corruption of the Clinton Administration, that until I started researching what was going on in Washington these days, I missed the blatant "I-call-the-shots-and-I-can-do-whatever-I-want-to" corruption of the Bush-43 Administration.
We need criminal investigations and criminal accountability in this economic "crisis" -- a "crisis" which looks to me like it was allowed to happen to destabilize the financial sector and provide cover for consolidating financial power in the hands of those who are pulling the strings.
But, let's not get ahead of ourselves.
We now continue by considering some excerpts from Unscrupulous Manipulation of the US Financial Architecture: The Failed Presidency of George W. Bush by Prof. Rodrigue Tremblay, October 25, 2008:
It is thus no accident that the Bush-Cheney administration has presided over one of the worst financial collapses and credit crises in U.S. history, by packing regulatory agencies with cronies whose mission it was to let rapacious speculators and market manipulators go wild. The result has been the creation of a casino-like speculative economy that is now crashing down before our very eyes.
"It is thus no accident" -- a little understated.
This is criminal conspiracy, and it is especially obvious when we consider that the Federal Reserve's Board of Governors is populated exclusively by appointees of Bush-43.
There's another layer of oversight that was put into place to look the other way.
Under Bush-Cheney, financial markets became manipulated by unscrupulous bankers and by rapacious hedge funds, as public regulation was reduced to a minimum. Millions of Americans lost their homes through foreclosure and many more saw their working and pension incomes eroded and destroyed by inflation and plant closings. And as what could be a protracted recession proceeds, many more will lose their jobs in the coming months, while some older employees may have to postpone their retirement because of the disappearance of their pension money.
"Millions of Americans lost their homes through foreclosure" -- the blame for this belongs in the laps of our big-liberal Washington elite. They wanted affirmative action in housing, so they changed the rules to push mortgages for people who really didn't qualify -- including to illegal aliens.
Like all other affirmative action programs, this pushed people who were not qualified into situations they weren't ready to handle.
The resulting failure then just reaffirms the need for the big-liberal elite to interfere more, so we get more affirmative action.
Funny how the only thing liberal programs do, other than cost money, is generate the need for more liberal programs.
Do you suppose that is an accident?
By the way -- how has the meaning of the word "liberal" changed over the past two centuries or so?
Ah, are we off the subject? Back to corrupt cronyism...
In a parody of President Abraham Lincoln, we can say this has been an administration that deserved to be dubbed "a government of the wealthy, by the wealthy and for the wealthy." Some would not hesitate to say, also in parody, that it has been "a government of Goldman Sachs, by Goldman Sachs and for Goldman Sachs," considering the ubiquitous political and economic role which that firm has played within the Bush-Cheney administration. President Bush's own Chief of Staff, Mr. Joshua Bolten, comes from Goldman Sachs. And these days, everybody pretends not see the real and potential conflicts of interests of other public servants who are now on the giving public side of things, at the U.S. Treasury, and who are going to be on the receiving private side of public money, in a scant few months. It is the same thing with a lot of what the U.S. Treasury does. —Even the Governor of the Bank of Canada, Mr. Mark Carney, is a former employee of Goldman Sachs!
This revolving door -- they come from the business they are supposed to regulate, and go into the government regulating that business, then back to that business, for which they have just written the rules.
Consider this quote from the Sibel Edmonds case; from The Highjacking of a Nation, Part 2: The Auctioning of Former Statesmen & Dime a Dozen Generals by Sibel Edmonds, November 29, 2006:
The foreign influence, the lobbyists, the current highly positioned civil servants who are determined future 'wanna be' lobbyists, and the fat cats of the Military Industrial Complex, operate successfully under the radar, with unlimited reach and power, with no scrutiny, while selling your interests, benefiting from your tax money, and serving the highest bidders regardless of what or who they may be. This deep state seems to operate at all levels of our government; from the President's office to Congress, from the military quarters to the civil servants' offices.
Edmonds makes this comment in the context of her own case, and refers to the "Military Industrial Complex" -- but, do you for a moment think this doesn't apply to the financial sector, as well?
Continuing with Unscrupulous Manipulation of the US Financial Architecture: The Failed Presidency of George W. Bush:
In a related matter, for historical purposes, it will be remembered that, in the fall of 2008, the Bush-Cheney administration sponsored a huge rescue-plus-bailout of the largest speculative Wall Street investment banks (which the Bush SEC had deregulated on March 28, 2004) and of a host of other banking and insurance institutions which had engaged in alchemy or synthetic finance and made risky investments. To that effect, it is ready to place at risk close to $2.0 trillion of public money and let the public debt explode, with few conditions attached to protect the public interest. In fact, the Bush administration stood ready to advance hundreds of billions of dollars and only requested non-voting preferred shares in the troubled banks and insurance companies that it rescued from bankruptcy. As a consequence, contrary to what the Roosevelt administration did in the 1930s, the U.S. government has no direct say about the way the troubled financial institutions are managed and run, and thus, if the bail-out were to be successful, most of the benefits would go to bank owners and their executives; but, if things continue to deteriorate, taxpayers will be the ones left holding the bag.
Key quotes: "with few conditions attached to protect the public interest" and "thus, if the bail-out were to be successful, most of the benefits would go to bank owners and their executives; but, if things continue to deteriorate, taxpayers will be the ones left holding the bag."
Some have said this is an example of corporate socialism for the rich. In fact, this has nothing to do with socialism per se, but everything to do with legal and unapologetical extortionism on a high level. For all these reasons, if the ongoing recession and financial crisis were to turn into a full-fledged economic depression, as it could possibly do, and as it did in 1873-1880 and 1929-1939, it would have to be dubbed by historians "the Bush-Cheney Grand Economic Depression" of 2008-20(?).
It's called "corruption" -- this is illegal.
In this context, let me skip ahead to some more quotes from Unscrupulous Manipulation of the US Financial Architecture: The Failed Presidency of George W. Bush. After a short rant regarding the Bush Administration's interactions with the media, Prof. Tremblay states:
Never has American journalism and U.S. corporate media been so corrupt and complicit, and this is because the United States has never had such a corrupt administration, i.e. the 2001-2009 Bush-Cheney administration.
Considering how the media does nothing with regard to the Sibel Edmonds case, can I really argue with Prof. Tremblay on this issue?
Prof. Tremblay then concludes:
In its countless failures, the Bush-Cheney administration has been an unhealthy mixture, rarely seen in a democracy, of immorality, lawlessness and incompetence. —It won't be missed by most people, both in the U.S. and around the world.
No argument from me regarding that statement, either.
So, here's the best part; from S.E.C. Concedes Oversight Flaws Fueled Collapse by STEPHEN LABATON, September 26, 2008:
WASHINGTON — The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street's largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.
The S.E.C.'s oversight responsibilities will largely shift to the Federal Reserve, though the commission will continue to oversee the brokerage units of investment banks.
So now, Bush's five foxes on the Federal Reserve's Board of Governors will take over guarding the henhouse.
Here now is another quote from the Sibel Edmonds case; though made in the context of her own case, it seems so applicable to this crisis as well, and this is another reason why I see this financial crisis we are in as just another... ah, but first the excerpt from An Interview with Sibel Edmonds, Page Three by Chris Deliso, July 1, 2004:
CD: What are they so afraid of?
SE: They're afraid of information, of the truth coming out, and accountability -- the whole accountability issue that will arise. But it's not as complicated as it might seem. If they were to allow the whole picture to emerge, it would just boil down to a whole lot of money and illegal activities.
CD: Hmm, well I know you can't name names, but can you tell me if any specific officials will suffer if your testimony comes out?
SE: Yes. Certain elected officials will stand trial and go to prison.
There was a terrorist attack on 9/11, which snowballed into a War on Terror -- and there was a subprime mortgage crisis, which has ballooned into an economic crisis and even a financial meltdown.
Different events, right?
But, what is going on behind the scenes -- in both cases?
Meanwhile, please read the two articles from the New York Times in their entirety, as they are very informative.