Alan Greenspan Takes Credit For The Financial Crisis (Stays Cheerful Always About Stealing You Blind!) & Paulson's Scheme Exposed Finally

I should have known that someone would write this article. Wish it had been me. (Click on the title link and don't miss the comments. They're priceless! (Actually this whole essay is.))

Alan Greenspan Takes Credit For The Financial Crisis “The morning after we learned of the news,” Greenspan said of the Dow Jones plunging 6.98 percent that day in September 2008, “I was able to look myself in the mirror and say, ‘Hey, not bad.’” Sure, if he’d tried just a little harder he could’ve done better – 10 percent would’ve been a dream – but really, all things considering, not bad! Solid B+ work.

Hey, pretty good, huh? You knew it too, of course. After all, look at them now. Here's the original. Remember how this Paulson made his last billions?* (Please read the comments!) Think what you will. But read all the essays first.

Tisch Hall's Paulson Auditorium was packed last night as NYU Stern Alumni Alan Greenspan and John Paulson spoke about their experiences and gave their insights on politics and the economy.

Greenspan began the conversation with a reminder that graduating from an academic institution is "only the beginning." To support this, Paulson then highlighted Greenspan's illustrious career in the public sector.

Greenspan commended all the presidents with whom he had worked, particularly Gerald Ford.

However, the conversation soon turned from politics to the current economic climate.

Greenspan brought up the fateful day in September 2008 when the Dow Jones industrial average plunged 6.98 percent. However, life picked up for him after the initial shock.

"The morning after we learned of the news," he said, "I was able to look myself in the mirror and say, 'Hey, not bad.'"

According to Paulson, the recovery process has been rather "tepid." Greenspan attributed the slow recovery to excessive government activism.

"What I'd suggest is that we calm down; let the economy heal by itself," he said. "But we are doing better now with the halting of more stimului and programs like 'Cash for Clunkers."

Greenspan also emphasized that the future health of the housing sector would depend on the phasing out of "contradictory" government-instilled institutions like Freddie Mac and Fannie Mae, whose objective of providing affordable housing conflicted with the necessity to "maximize profit for shareholders."

The interview wrapped up with a question the majority of the audience was anxious to have answered.

"There is general worry about the decline in U.S. economic global leadership," Paulson said. "Do you still have confidence in the future of the United States?"

Greenspan responded: "Whenever I get gloomy, I think of Winston Churchill: 'America always does the right things ... after it has tried every other viable alternative."

If you haven't seen All the King's Men, you should. You missed it the other night on TCM, but you can rent it today. I think the Broderick Crawford portrayal of the Willie Stark character (think any Blue Dog/Rethug) can't be beat. Think Governor of Wisconsin. (Emphasis marks added - Ed.)

Ten Ways Alan Greenspan Cheers Himself Up When He’s Feeling Blue Bess Levin At a talk at NYU earlier this week, Alan Greenspan told John Paulson, “Whenever I get gloomy, I think of Winston Churchill. America always does the right things … after it has tried every other viable alternative.” Being pressed for time they had to go on to the next question, but if they’d had longer, Big Al would’ve shared all his tricks for turning that frown upside down. They include: 1. Thinking about one of the last conversations he had before retiring, when Ben Bernanke was weighing taking the job and came into his office and asked what kind of shape things were in and he said “We’re lookin’ good!” with a straight face. (Seriously, that one never fails to crack him up, even today.) 2. Reminiscing about Barbara Walters’ tits. 3. (And when memory won’t suffice, digging out the nudie shots she sent him when they were dating). 4. Annoying the shit out of Andrea Mitchell by following up every statement with “The Oracle Hath Spoken!” through a megaphone. (“Pick up some Lunchables while you’re at the store - The Oracle Hath Spoken!” “Don’t bother me when I’m in the Man Cave - The Oracle Hath Spoken!” “I need some new socks – The Oracle Hath Spoken!”)

5. Reruns of Silver Spoons (Alfonso Ribeiro is his spirit animal). 6. Staring at the ‘Maestro’ tattoo he had inked on his dick. 7. Getting off on the fact that in his day, being such a market-moving BSD, Goldman would have chemists analyzing his tissue spunk to determine how elevated his testosterone levels were and if it would influence his policy-making. 8. Remembering all the people he put in touch with Angelo Mozilo to take out option ARMS on houses they really couldn’t afford and how they literally got their asses torn out. (This can pull him out of even the worst of funks.) 9. Practicing feigning a look of shock when Lady Gaga pulls him on stage during her performance at the MTV Music awards, should he be invited. 10. Thinking about all the times Bernanke would call him freaked out in Fall 2008, and how he’d interrupt every story to pick up call waiting and then after clicking back, say “So where were we? Oh, right, you were telling me what you were wearing.” And two minutes before the end of every call go, “I’m sorry, to whom am I speaking?"

_ _ _ _ _ _ _ _ _ _ *John Paulson and the Greatest Pump and Short Fraud Ever By now, everybody knows that the market for collateralized debt obligations was riddled with fraud in the lead-up to the financial crisis. What is less known is the fact that hedge fund managers helped create and inflate the market for these toxic securities specifically so that they could bet against them and profit from the inevitable collapse. An example of a particularly sordid scheme, orchestrated by hedge fund billionaire John Paulson, was discovered some time ago by David Fiderer, a blogger for the Huffington Post. The information in Fiderer’s blog is rather incriminating, and, of course, the mainstream media is not on the case, so I think it bears repeating. In a close reading of Wall Street Journal Gregory Zuckerman’s book, The Greatest Trade Ever, an otherwise starry-eyed account of Paulson’s bets against the mortgage market, Fiderer discovered this nugget:

“Paulson and [partner Paolo Pellegrini] were eager to find ways to expand their wager against risky mortgages. Accumulating it in the market sometimes proved to be a slow process. So they made appointments with bankers at Bear Stearns, Deutsche Bank (NYSE:DB), Goldman Sachs (NYSE:GS), and other banks to ask if they would create CDOs that Paulson & Co. could essentially bet against.”

As Fiderer explains, Paulson asked the banks to create those CDOs “so that they could be sold to some suckers at close to par. That way, Paulson’s hedge fund could approach some other sucker who would sell an insurance policy, or credit default swap, on the newly minted CDOs. Bear, Deutsche and Goldman knew perfectly well what Paulson’s motivation was. He made no secret of his belief that the CDOs subordinate claims on the mortgage collateral were close to worthless. By the time others have figured out the fatal flaws in these securities which had been ignored by the rating agencies, Paulson could collect up to $5 billion. “Paulson not only initiated these transactions, he also specified the terms he wanted, identifying which mortgages would be stuffed into the CDOs, and how the CDOs should be structured. Within the overall framework set by Paulson’s team, banks and investors were allowed to do some minor tweaking.” It is not clear which banks ultimately participated in Paulson’s scam, but Fiderer quotes Bear Stearns trader Scott Eichel as saying that his bank refused. “It didn’t pass the ethics standards;” Eichel said, “it was a reputation issue and it didn’t pass our moral compass. We didn’t think we could sell deals that someone was shorting on the other side.” Bear Stearns’ moral compass was usually pointed towards the darker regions, but perhaps this is why Paulson subsequently became one of the more eager short sellers of Bear Stearns’ stock. Fiderer continues: “Prior to 2006, there were not many opportunities for naked short selling on subprime securitizations. But in January of that year, investment banks launched a new product, which enabled Paulson to place those bets on a large scale. The ABX index, a sort of Dow Jones Average of subprime mortgage securities, facilitated benchmarking the price of credit default swaps.” In fact, it was a black box company called the Markit Group that created the ABX index. The banks were minor shareholders in Markit Group and provided data. I have noted in a previous blog that the Markit Group is a dubious outfit to say the least, and there is good reason to suspect that the direction of the ABX index was influenced by hedge fund managers and their allies at the big banks. I do not have evidence that Paulson was one of those hedge funds, but authorities ought to be asking questions. Fiderer goes on to suggest that bad loans to homeowners were a significant cause of the financial crisis. On this front, I disagree with him. Certainly, some mortgage lenders were unscrupulous, and there was a certain amount of predatory lending, but the conventional wisdom that this is what crashed the economy is simply false. At the time that the mortgage securities markets began to go south in 2007, defaults on subprime loans had increased only slightly month-to-month, and were in fact considerably lower than in earlier years. In the second quarter of 2007, for example, only 7.7 percent of subprime loans were 30 days past due, slightly up from 6.76 percent in the second quarter of 2006, but considerably lower than the 9.9 percent in the second quarter of 2001. The problem l(ay) not in the loans themselves, but in the fact that the loans had been packaged (apparently, to a large extent, at the behest of John Paulson and perhaps other bearish billionaires) into fraudulent securities that were traded and probably manipulated by a select number of hedge funds and large banks. In a somewhat similar scheme, hedge funds often pump up the stock of public companies before initiating short selling attacks aimed at demolishing those same companies. The economy was brought to its knees by a few powerful and eminently dirty players on Wall Street, not by poor people who had the temerity to buy themselves houses.

_ _ _ _ _ _ _ _ _ _ Gretchen Morgenson also documented these deals put together by Goldman Sachs, Deutche Bank and Morgan Stanley in 2009 (in the pages of the New York Times) - but no one was paying much attention then as the Gold Men took over the U.S. Government to "fix" it.

Banks Bundled Bad Debt, Bet Against It and Won

In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director at the firm. Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits. Goldman’s own clients who bought them, however, were less fortunate. Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.

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