Geithner embarrasses self again (by opening mouth).
Timothy Geithner’s penchant for speaking about things he does not care enough about to get right has led to him uttering many of the most cringe-worthy phrases about the economic crisis. The latest example is in David Axelrod’s new book about the Obama administration’s response to the financial crisis. This column was prompted by Sam Stein’s piece in the "Huffington Post" about Axelrod’s key points.
“Axelrod was ‘livid’ when he found out that Geithner and [Larry] Summers ‘had quietly lobbied’ against an amendment to the stimulus that would have restricted the payment of bonuses at firms that received bailout funds. Those bonuses had become a huge political sore point for the administration, but the finance guys argued that retroactive steps to claw back the money would have violated existing contracts.This story confirms two pathologies that are well-known about the Obama administration. First, Geithner was a faithful servant of his Wall Street masters when he was Treasury Secretary, just as he was when he was the President of the Federal Reserve Bank of New York. Notice that there is a contradiction in the description of the issue. Preventing banks that received bailouts from paying future bonuses is not “clawing back” bonuses.
‘This would be the end of capitalism as we know it’ Geithner told Axelrod, to which Axelrod says he responded: ‘I hate to break the news, Mr. Secretary, but capitalism isn’t trading very high right now.’”
Clawing back bonuses means recovering bonuses that were improperly paid based on false accounting statements that massively overstated bank income. Neither of the practices I have described would have “violated existing contracts.”
The people that “violated existing contracts” were the bankers who massively inflated reported net income in order to collect massive bonuses while the bank suffered huge losses and the bankers that made massive bonuses by leading frauds that ripped off customers. Both forms of fraud invalidate any contractual claim by the managers to bonuses. Bankers should not get paid in full under normal bankruptcy provisions when they run the bank into insolvency (including a liquidity crisis).
The perverse incentives of the compensation systems were a major contributor to the three financial fraud epidemics that bankers led that caused the greatest financial losses of any property crimes in history. It was grotesquely improper and immoral to pay the bonuses.
It literally made crime pay. It was (and is today) vital that those perverse compensation incentives (which include the deliberate generation of the “Gresham’s” dynamics that suborn supposed “controls” such as the loan officers and brokers, credit rating agencies, auditors, and appraisers) be ended to make the financial world far less criminogenic. The “sure thing” of “accounting control fraud” (aka “looting”) makes “capitalism” as we know it a disgraceful oxymoron. What “we know” bears no resemblance to “capitalism.” Our largest banks became criminal enterprises virulently opposed to markets, competition, democracy, and customer service. At best, we suffered from crony capitalism, a variant of plutocracy.
Read the rest of this fascinating, finger-pointing ha-ha at the people who won the financialization wars (which won't make one bit of difference in the real world) at the link above.
And about that looming Russia (and possibly China (also)) war?
Well, you know how unpopular the possible annexation of Crimea by Russia is, right?
In answer to the most important question: “Do you endorse Russia’s annexation of Crimea?” 82% of the respondents answered “yes, definitely,” and another 11% – “yes, for the most part.” Only 2% gave an unambiguously negative response, and another 2% offered a relatively negative assessment. Three percent did not specify their position.
We feel that this study fully validates the results of the referendum on reunification with Russia that was held on March 16, 2014. At that time 83% of Crimeans went to the polling stations and almost 97% expressed support for reunification.
Ukrainians continue to question whether this was a credible outcome, but it is now backed up by the data obtained by the Germans. The 82% of the respondents who expressed their full confidence in the results of the Russian election make up the core of the electorate who turned up at the ballot boxes on March 16, 2014.
Oh yes. And about that we've-got-the-most-power-so-whatever-we-do-is-okaydokey syndrome going wrong . . . .
RT: There were demonstrations outside the very same buildings a year ago. Back then it was anger at the old authorities. But they've gone now. Will this cycle ever end?
NC: Not for a long time I fear, because this violent peak started in November 2013. That was the violence used to topple the previous government, that violence was shared by the West, let’s not forget that.
There was a democratic government in Ukraine that was violently toppled. What the Western leaders, the European leaders should have said was ask people to wait until the elections this year if they wanted to get rid of the Yanukovich.
But now they encourage the violence. We had a leading US State Department official going out there to Ukraine supporting the protestors. This is what happens: we’ve got the situation now in Ukraine where Poroshenko is a very, very weak president. We’ve got this very weak coalition of interest holding the pro-putsch side together. And there is a real anger now, real division between I would say, the ultra-Nationalist wings, and less nationalistic wings, the more globalist wings. People supported the putsch because they wanted to get Ukraine in the EU and NATO. And they are clashing now with more ultra-Nationalist wings who want something different.
And on the back of all of these there is economic collapse. We’re having some awful austerity measures being introduced in Ukraine, even worse than measures introduced in Greece which cause so much social discontent. And it was a poor country anyway. But the fact is that for the vast majority of Ukrainians things are a lot off worse now than they were under Yanukovich twelve months ago. The economy is going backwards. Poverty is rising. That is the sort of backdrop to what has happened today.
Unless something radical happens in Ukraine: a change of course within the government, there has to be a peace deal with people in the East, and change at economic policies, I think things are only going to get worse. A lot of people in Ukraine are very, very angry about what is going on, and the violence which started in November is carrying on today as we see.
Think there's no conspiracy behind the current Ukrainian Nightmare? (Against their citizens, not ours.)
Then avoid reading the following:
Independent is what CASE swears; independent isn’t what CASE represents. Investigate the names, the associations, the sources of money, the secret service engagements, and what you have is a family, a front, a cover, a closed shop, a mafia. Founders of CASE Ukraine like the American Jonathan Hay and operators of CASE Poland like the Balcerowiz family reveal a well-known anti-Russian alliance. So what are a director of the Gazprom board, Vladimir Mau; a professor of the Higher School of Economics in Moscow, Marek Dabrowski; and Simeon Djankov, Rector of the New Economic School in Moscow, and a protégé of First Deputy Prime Minister Igor Shuvalov, doing on the CASE side?
The latest US survey of the think-tanks in the world counted 6,826 in all as of August 2013. . . . CASE Ukraine starts with the name of Jonathan Hay, whom CASE lists as a member of its founding Supervisory Board. According to a 100-page judgement issued in 2006 by US District Court Judge Douglas Woodlock in Boston, Hay is a convicted fraudster, inside-trader, self-dealer, and corrupt manipulator of US Government funds for the benefit of himself, his lover, and his friends. The judgement ordered Hay to pay a multimillion dollar penalty and restitution. His Harvard University co-conspirators, Andrei Shleifer and his wife, Nancy Zimmerman, were also convicted and fined.
Harvard University, Hay’s and Shleifer’s contractor, was ordered to pay $26.5 million; Hay up to $2 million.
Here is the US Government’s release, after Hay’s conviction. This also claims that Hay was “debarred” from taking pay from the US Agency for International Development (USAID) in future. The full story of Hay’s profiteering from the Russian asset sale schemes of Yegor Gaidar (below right), the short-lived proponent of shock therapy in Boris Yeltsin’s first term, and his privatization director, Anatoly Chubais (left), can be read here and here.
Before his plea bargain in the Boston court, Hay reacted by threatening Moscow reporters investigating his activities. Unbeknownst to those who researched Hay’s misconduct in Russia at the time is that Hay moved on to a similar line of business in Ukrainian privatization. CASE was one of the instruments – and USAID was paying again. At present, CASE doesn’t list Hay on its current Supervisory Board. . . . For seven years following his conviction in the US, Hay helped run CASE Ukraine.
CASE annual reports also reveal that in 2005 Hay was working at CASE Ukraine on sponsorship of the UN Development Programme (UNDP) for teaching the “high-level” and “key” Ukrainian policymakers “problems of Ukraine’s economic and institutional reforms after the Orange Revolution and in the context of Ukraine’s strategic plans for Euro-Atlantic integration.” Helping hands with Hay that year were Gaidar and Anders Aslund, the current chairman of CASE’s Advisory Council.
On April 25, 2013, President Putin publicly identified Hay as a CIA agent.
Referring to Hay’s work on Russian asset privatization for Chubais, and the subsequent US prosecution, Putin said: “We learned today that officers of the United States’ CIA operated as consultants to Anatoly Chubais. But it is even funnier that upon returning to the US, they were prosecuted for violating their country’s laws and illegally enriching themselves in the course of privatisation in the Russian Federation.
They did not have the right to do this as active CIA officers. In accordance with US law, they were not allowed to engage in any kind of commercial activity, but they couldn’t resist – it’s corruption, you see.” Note Putin’s reference to when he was briefed – April 25, 2013.
According to Boyarchuk of CASE Ukraine, Hay was then supervising that organization.
Funding for CASE Ukraine appears to come from governments and government banks. They include Hay’s alma mater, USAID, plus the Canadian and UK aid agencies; the European Commission and the European Bank for Reconstruction and Development; the World Bank; several Ukrainian government organs; and Freedom House, a ferociously anti-Russian think-tank based in Washington, D.C.
Marek Dabrowski is listed as the current head of the CASE Ukraine board, and one of the founders of both CASE Poland and CASE Ukraine. A Polish national, he is currently employed by CASE in Kiev; he is also a professor at the Higher School of Economics in Moscow. He currently lists himself as a member of the scientific council of the Gaidar Institute. The Gaidar think-tank in Moscow rates only one mention in the TTCSP report, trailing far behind CASE in the economic policy line-up. The CASE annual reports identify Dabrowski as one of Hay’s co-workers advising President Victor Yushchenko’s administration.
The Gaidar think-tank website no longer lists Dabrowski on its scientific council. A spokesman for the think-tank claims there is no association between the two think-tanks; CASE annual reports say otherwise. The current CASE website describes Gaidar as a “partner”, but identifies the think-tank by a different name, “Institute for the Economy in Transition”.
Dabrowski was asked if he regards CASE Ukraine as hostile to Russian policy and in favour of regime change in Russia. He was also asked if he views his role at CASE Ukraine as compatible with his presence in Moscow teaching economics and advocating policy change? He replied: “The short answer to your first question is NO, and to your second question – YES (i.e. there is no conflict), with the remark that I am not involved in policy advocacy or policy advising in Russia (since 1994).
Nor I am longer personally involved in policy advising in Ukraine (since 2006). In CASE Ukraine I chair the Supervisory Board on behalf of the founder (CASE) and, according to the by-law of CASE Ukraine, I provide (together with other members of this body) the Executive Director with the overall guidance in respect to research projects, their academic quality, fundraising, finances, etc. The entire CASE network, including CASE Ukraine, deals with economic research agenda and is not involved in politics of any country… Furthermore, CASE and CASE Ukraine do not present institutional opinions on any topic; what they publish represents personal views of individual authors. In this context your words about supposed hostility of CASE Ukraine to Russia sound just inappropriate.”
Polish sources describe CASE Poland as having been initially financed with US and European Commission money with the intention of “guiding the Ministry of Finance in Warsaw.” The Polish finance minister at the time was Leszek Balcerowicz; Dabrowski was one of Balcerowicz’s deputy ministers. Since 2011 Balcerowicz has been an honorary professor at the Higher School of Economics in Moscow, Dabrowski’s current employer.
Balcerowicz’s wife Ewa remains on the board of CASE Poland, while Leszek advises President Petro Poroshenko. There the two of them were, face to face in Kiev last week, according to the presidential press release, “to join the reform process in Ukraine.”
You couldn't say that the western world lets these guys sink or swim on their own, could you?
At least not yet.
February 10, 2015
Paul Craig Roberts and Dave Kranzler
As John Williams (shadowstats.com) has observed, the payroll jobs reports no longer make any logical or statistical sense. Ask yourself, do you believe that retailers responded to the very disappointing Christmas season by rushing out in January to hire 46,000 more retail clerks?
Perhaps those 46,000 retail jobs is the BLS telling us that they have to come up with new jobs to report whether or not there are any.
As we have reported on a number of occasions, whenever the price of gold in the futures market starts to rise, massive uncovered shorts are suddenly dumped on the market. As the shorts dramatically increase the supply of future contracts all at once, the supply overwhelms demand, and the price of gold is driven down despite the fact that the demand for gold in the physical market is strong. (Remember, the price of gold is determined in the futures market in which contracts are largely settled in cash and seldom in gold. The physical market is where gold bullion is purchased, not paper claims on gold for speculation.)
Last Friday the attack on gold was coordinated with the announcement of the suspicious jobs report. The price of gold was hit hard with an avalanche of uncovered gold futures contracts dumped at the same time that the U.S. Government’s Bureau of Labor Statistics (BLS) released what can only be described as an incorrect employment report. The avalanche of paper contracts that were dumped onto the Comex (both the trading floor and electronic trading computer system) took the price of gold down $39 in three hours, with most of the price hit occurring in the first 40 minutes after the jobs report was released.
The volume of contracts that traded after 8:00 a.m. on the Comex was unusually high for a Friday, running about 60% above Thursday’s volume for the same time period. Such departures without cause from normal trading patterns are indicative of market manipulation, and Friday’s price smash capped a week in which the price of gold was taken lower every day at 8:30 a.m. after the release of economic reports, most of which reflected a deteriorating condition of the U.S. economy.
Gold is a refuge in times of uncertainty. With yen, dollars, and euros all being created at a faster rate than goods and services are being produced, with both stock and bond prices at bubble levels, gold is definitely an attractive refuge. Confidence in gold would pull money out of the rigged markets for financial instruments and make it more difficult to maintain the appearance that all is well. To attack gold simultaneously with issuing a happy jobs report doubles the encouragement to remain invested in financial paper and to continue to hold the over-printed currencies.
The expectation is that more money will be printed. The prices of troubled sovereign debt have been bid unrealistically high because of expectations that quantitative easing by the European Central Bank will result in central bank purchases of the troubled sovereign debt. In the US the 100 percent and more than 100 percent auto loans have been securitized and sold as investments. Borrowers whose trade-in value is less than their remaining loan can borrow more than the purchase price of the new car in order to pay off the old car loan.
The lenders made their money on loan fees, but as defaults rise the securitized loans and associated derivatives will likely require a bailout like the securitized mortgages.
Anyone looking at these prospects is tempted by gold, but a rising gold price could bring down the fiat currencies and, thus, must be prevented.
In other words, those who have rigged the system know that it is a house of cards.