Wednesday, April 21, 2010

Nation of Fools - It WAS a SETUP and the Rest of Your Life Is at Risk! (Hope You Enjoyed Playing at the USA Casino of Your Dreams)

The United States-initiated wars and punitive foreign policies intended to bring hostile regimes to heel, are guaranteed to escalate current wars while turning simmering conflicts into new wars.The major premise of this Trends Journal® is that the US has put the world on a path that, if not diverted in time, will lead to the first “Great War” of the 21st century.

The “Great War” will not occur by spontaneous combustion. A deadly mix of incendiary policies, deliberate provocations, incessant warfare and widespread “collateral damage” (millions of dead civilians) has brought the world to the brink.

Remember the (so-called) fear of finding out the depth of the "toxic" assets/debts still in all those bailed-out bankers' portfolios? Yeah. WE should fear finding out, because it's been no secret to them from the first. And who would pay the piper.

The majority of people who took out these loans were told by their mortgage broker that they would be able to refi before, BEFORE the reset took affect. The whole industry was a PONZI scheme, a scheme designed by Wall Street, and since 1999, commercial banks to fleece the consumer.

If you just can't buy the "9/11 was a well-planned fait accompli (done deal) long before it happened " argument, then you probably won't be interested in the surrounding economic facts that explain almost everything (financially connected) that happened before and since - and well into the future for as far as the eye . . . .

I'd even go as far as saying that the reason the Enron manipulations were so blatant was that Ken Lay was in on the beginning of the planning and thought he'd be the big guy to make the first "big killing" (of the public) out of the previous Rethuglican deregulation fever. And he did. (Remember Dumbya smirking as he laughed out loud calling him "Kenny Boy" in admiration and disbelief at what he had accomplished?) And I'm guessing he's now in Dubai or somewhere similar enjoying his public largesse.

How else do you explain the shenanigans of the knighted ex-Sir Allen Stanford (son of a barber/insurance salesman and accomplished liar who got his start buying up depressed property after the Texas oil bubble burst in the 80's, founder of a bank on the island of Montserrat in 1985 and now represented by prominent criminal defense lawyer Brendan Sullivan, who represented Oliver North) and all the other wise guys who started fake investment firms while Raygun/Bush reigned, but were just outed now without understanding that a lot of the "chosen" ones were inside the action long before the crash occurred? The planned crash. Oh. Yes, indeedy. And this is why invading Afghanistan and then changing the venue to Iraq looked like a cakewalk to the announcers. It was just another step in the plan to provide total economic domination by the chosen people of the West. No. Not the Christians. Hardly. And, yeah, we (not I as I was screaming at the TV the first time I saw the announcement from the two of them) then let Bush at the end of his two corruption-laden terms appoint the CEO of Goldman Sachs to come up with the plan to loot the Treasury for the rest of the savings the lower classes had painfully accumulated during the two terms of their chosen Democratic President - the only Democrat to have been elected for the 12 years prior when the world inexplicably went to hell economically for the lower classes after Carter was deposed. Nice work if you can get it. From Danny Schechter's New Dissector we get a free history lesson not available in the high school or college classroom. You're not gonna like to hear this (but you should read it all). A. Swienckowski writes:

First of all, your article today articulated many of the problems that we as average Americans face in hoping that someone wll be roundly prosecuted in the economic collapse. If the reports are true in the NY Times and The Wall Street Journal that Paulson shopped his idea to several banks before Goldman Sachs accepted his $15 M to create a product to bet against a portfolio of expected defaulting sub-prime loans. Exactly who provided Mr. Paulson with a portfolio of loans who hadn’t defaulted? If these loans were provided by loan servicers and/or banks, then the issue of confidentiality becomes an issue.

What’s ludicrous is that no one wants to even speculate that this collapse was pre-arranged. Prior to 2000, the number of mortgage brokerage firms across the nation was almost non-existent. After 1999 and the epic abandonment of rules and regulations that had been in existence since the early 1930’s, we have mortgage brokerage firms springing up all across the nation, hawking short-term, variable loans to home owners. Wall street was introduced to the lucrative sub-prime mortgage market and the real estate mortgage industry was off and running. Banks became close bed fellows with mortgage brokers and loans that would not have been approved by a commercial bank, was suddenly approved because the same loan was presented to the bank by a mortgage broker. Mostly everyone wanted to refi and take advantage of these lower rate variable rate loans and millions of people did.

The last quarter of 2006, late September early October, the market began to shift. The grand-daddy of Wall Street funds in the mortgage business began to hedge their bets, slowly removing capital as investments in this market. By May of 2007, the sub-prime market began to crumble. I contend that the decline of this market was pre-arranged by the people who invented it in the first place.

It was known to investors that these loans carried a trigger date - affectionately known as the re-set. If home owners had refi several times since 2002, and many had, then it would be a safe bet that these same people would need to refinance to avoid the two-year or five-year reset. The guys that designed this knew that they would remove easy financing from this market and when they did, they also knew that the resets would force most of those borrowers into default especially because refinance loans would be impossible to get because the rules changed.

Required FICO scores for a refinance crept up. In 2002, anybody could buy a home with a 620 FICO. In 2007, if you had less than a 750 FICO, no institution would touch the loan. Goldman Sachs, B of A, Citi, Chase, all knew that these loans would not be able to perform when the resets became effective. The majority of people who took out these loans were told by their mortgage broker that they would be able to refi before, BEFORE the reset took affect. The whole industry was a PONZI scheme, a scheme designed by Wall Street, and since 1999, commercial banks to fleece the consumer.

This situation perpetrated by Wall Street is no different than the high stakes scam the Hunt Bros performed in the early 1980’s. The so-called financial reporters that report on these issues prefer to report for the mega-investors and few have the background knowledge to understand how these markets are created and by whom. The investors made money w(hen) the market was hot and you can be sure that they are making mad money with the market in decline.

Since Paulson and Goldman Sachs peddled synthetic CDO’s and insured them, doesn’t it stand to reason that these worthless instruments have been sold as investment instruments multiple times? If my lowly assumption is correct, then perhaps the elephant in the room is not the sub-prime mortgages, but rather how often the same bundles were sold, insured and resold multiple times?

Why don’t reporters from the MSM pin-point exactly when Goldman Sachs became a bank in order to qualify for TARP Funds? Why were they allowed to become a bank and qualify for these funds just based on the economic condition in the country?

To be sure, in order to create and destroy markets, you have to be a major player and the major players created a new mortgage instrument to net them billions. Prosecutions? Doubtful. Regulations? Toothless, because there are still green fields of opportunity to create where people embrace capitalism at any cost. Like PT Barnum said: a fool is born every minute.

Read the whole essay. And take action now. Peace. Suzan

P.S. Please read the following from Devilstower (but only if you have a settled stomach). (Emphasis marks added - Ed.)

InfrichingCredible!

And you gotta admit, this explanation makes it pretty clear how it worked.

- - - - - - -

Shoes, Sues, and Sachs of Sh*t

by Devilstower

Mon Apr 19, 2010

Sen. Carl Levin says there's another big shoe to drop on the Goldman Sachs case, but seeing as how a whole load of tennies, hip waders and muck-lucks are already bouncing around the room, it's hard to imagine what else is still to be revealed.

Business Week has an article up on how Goldman and hedge fund managers may escape an SEC smack down by skating around the idea of what "selected" means.

While Magnetar avoided ordering managers to buy specific securities, it often pushed them to select ones with higher yields, according to a person who participated in some of the transactions and declined to be identified because the deals were private. The firm told banks and asset managers what its strategy was, the people said.

You got that? If the hedge funds were pointing out specific crappy loans and saying "buy that," they could be in trouble. But if they merely set "targets" for the quality of the loans in their CDOs, then they may skip merrily away. However, if the bankers, such as Goldmans, knew what the hedge funds were doing and still pressed these instruments on their clients as worthwhile investments, they won't get away so easily. That Goldman, Merrill, and the rest knew they were peddling the worst crap imaginable is beyond doubt. How they peddled it will require a careful review of every prospectus, email, meeting, and phone call involved.

It may even be that the banks played "fair." They may have put together a prospectus full of numbers, shoved them out there, whistled tunelessly, looked away, and waited for Real Smart People to rush in figuring they had a bargain. After all, with famous hedge fund managers snapping up the risky core of these things, the rest of the investment (the safer part) must have seemed pretty tasty.

Of course, there's also the little matter of whether the banks knew that the hedge funds were not just engaged in classic hedging by protecting their investments, but betting against the entire CDO. And since the banks were also peddling the credit default swaps (and the instruments created by bundling the credit default swaps, God help us), there's no doubt they knew what was happening. Now, is that illegal? We'll find out.

In the meantime, the SEC voted today to sue Goldman. And here's the really fun part.

The U.S. Securities and Exchange Commission split 3-2 along party lines to approve an enforcement case against Goldman Sachs Group Inc., according to two people with knowledge of the vote. . . . Republican commissioners Kathleen Casey and Troy Paredes voted against suing, the person said.

Republicans voted not to sue over a little thing like purposely contriving to create instruments designed to fail, and peddling these intentionally faulty wares to customers. You have to ask, what would it take for a Republican to actually stand against Wall Street?

Now we start to dig for the details. There will be a prospectus on each of these CDOs, and it's very likely that numerically these babies are going to be correct. What it's going to come down to is the language of the prospectus and the discussions (verbal and email) that were held with clients.

Complicating things is that the "synthetic" CDOs at the heart of the Goldman / Paulson end of this deal where not regular CDOs built by bundling together loans. Complicated as those are, these were a couple of steps removed. These synthetic CDOs were composed from bundles made up of swaps, in this case the pay-out side of default swaps on other CDOs.

Here's how something like this might work (and I may well have missed a step, or even a whole waltz. After all, they've built this thing with the intention of tripping people up, so it's not surprising that it's hard to follow along.)

The Magnetar View

1. Magnetar (or some other hedge fund) declares that they are interested in the equity "tranche" of a CDO. They set targets for what they want the in the tranche (really bad stuff).

2. They then wait for the additional layers of the CDO to be formed and for the instrument to be sold to clients.

3. Magnetar now takes a CDS against the larger tranches - which may be 10x to 100x their initial environment.

_A. If the CDO actually makes targets, Magnetar takes a nice payout because they owned the riskiest bit. Probably around what it cost them to support the credit default swap on the larger instrument. So Magnetar breaks even.

_B. If the CDO unravels, Magnetar makes an even bigger payout by collecting on the default swaps. The little equity tranche investment is lost, but that loss is swapped by the CDS payout. Magnetar wins big.

The Paulson View

1. Paulson (or another hedge fund) declares that they are interested in synthetic CDOs containing bundles of CDS obligations. They set targets for what they want in the lower tranche (really bad stuff).

2. They wait while a synthetic CDO is formed around CDS swaps that include coverage for crap like that at the core of the Magnetar CDOs.

3. Paulson then takes a secondary swap (it's not clear if these were always against the original CDO, or whether they also bet against the synthetic CDO).

_A. If the original CDOs hold and the synthetic CDO survives, Paulson pockets the payments for the original swap, which it uses to pay off the secondary swap (though probably at a loss). Paulson losses small.

_B. If the original CDO fails and the synthetic CDO fails because the CDS are forced to pay, Paulson's secondary CDO pays off at a much higher level of investment - Paulson wins big.

The Goldman Sachs view

1. Original CDO is formed.

2. Original CDO sold to clients. Goldman takes a cut. Goldman wins.

3. Synthetic CDS is formed.

4. Synthetic CDS sold to clients. Goldman takes a cut. Goldman wins.

From this, it might appear that Goldman can't help but win no matter what happens. But there's one more piece:

Individual banker working at Goldman view

1. Original CDO is formed, no matter how bad.

2. Original CDO sold to clients, no matter how much BS is required or even if Goldman itself is client. Banker takes immediate cut. Banker wins.

3. Synthetic CDO is formed, no matter how bad.

4. Synthetic CDO sold to clients, no matter how much BS is required or even if Goldman itself is client. Banker takes immediate cut. Banker wins.

_A. Everything works out and clients and Goldman make money. Banker doesn't care. He got his money already.

_B. Everything falls apart and clients and Goldman lose money. Banker doesn't care. He got his money already.

Which makes it appear that the individual bankers went home with big bucks no matter what, except that... no wait. They did. And Republicans just voted not to disturb these guys while they're sunning on their yachts.

What looks to make all this possible is a drastic undervaluing of the cost of default swaps which in turn was made possible by an over-valuing of the intelligence and moral judgment of the people involved in the market. In short, there was an intrinsic expectation that people won't purposely buy crap, because most people didn't think it through to the "how to leave another guy holding the bag" stage. Which is exactly the weakness that Magnetar and other hedge funds spotted after spending months studying the market and talking to the people who sold these instruments.

* * * * * * * And as for John McCain's integrity (lack thereof actually):

There is a new round of “where have you gone, John McCain?” liberal commentary starting up. I used to find this amusing, but it is all based on a profound misunderstanding of McCain the politician. Recently, McCain has been making a fool of himself by repudiating the maverick label he once clung to for dear life in years past, and to head off a strong primary challenge from Hayward he has begun pretending that he has a problem with illegal immigration. This has led to quite a few liberals declaring that McCain is sacrificing his integrity for political purposes, but this gives him far too much credit. This takes for granted that McCain once had integrity as a politician that he could still destroy.

As the presidential campaign showed once again, McCain’s actual acquiantance with the substance of any policy, especially domestic policy, was extremely sketchy and poor. During at least the last ten years he never adopted a domestic policy position because he had studied the issue carefully and determined that a certain kind of legislation made the most practical sense or was the best expression of certain guiding principles. He determined that the fastest way to get attention and to aggrandize himself was by breaking with his party in melodramatic fashion over issues that happened to appeal to mainstream media journalists and pundits.

____________________

4 comments:

Short Short Stories said...

Suze,

the entire financial meltdown was a planned demolition. They all knew that fraud was at the heart of the thing.

Magnetar had one heck of a scam thought out and caught the banksta mobsters totally off guard.

Check out this Youtube of William Black calling out the fraudster's field generals: Bernanke and Geithner over the Lehman Brother's fraud.

http://www.youtube.com/watch?v=3-HTylLzXu8&feature=player_embedded

take care, jerry

libhom said...

We need a lot more perp walks of banksters and brokesters.

Nance said...

Wow! This is what I call the Long Form of decision-making, a very left-brain activity; you're a fount of info. For my part, I don't know enough to use the Long Form, so I sip from the fire hydrant and rely on the Short Form: my intuition is that something ugly has taken place.

The final defense for Goldman Sachs or anyone else who sells securities is always, "If you can't afford to lose, don't get into the game." By the millions, ordinary wage-earners found themselves in the game whether they wanted to be or not--if not directly with Goldman Sachs, then certainly indirectly through their 401K's and conservative retirement portfolios.

Heads need to roll.

Teeluck said...

If Paulson was the guy behind Goldman's scheme, we can't win