The Aztecs Are US - Called Out by China - Trading in Death: Rapacious Bankers Are Making Enormous Fortunes (Still) & "No!" To Oligarchy

Not really a surprise to hear is it? My guess (as a history student of long standing) used to be that the end of civilizations must have crept up on those poor, overwhelmed people, who had become used to the abuses of their leadership so thoroughly that they never saw it coming until they heard the conquistadores at the door. And then they opened it hopefully. Still doing as they had been carefully instructed. I wonder sometimes, when I get down pretty low, if the last 30 years (since that horrendous "Morning In America" moment for the lower classes came to pass (when they/we began to lose everything)) hasn't compressed the U.S.'s time sufficiently. What took hundreds of years for the Romans and a century for the British, among others, is here present day. Surprise! After all, you gotta admit that China will have no problem collecting as it exposes the truth about what it's owed by those who sold US out. Get ready to read this kind of headline every few days from now on. China Calls Our Bluff: The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation

America's biggest creditor - China - has called our bluff. As the Financial Times notes, the head of China's biggest credit rating agency has said America is insolvent and that U.S. credit ratings are a joke:

The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated.

“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview.

It's just the start, friends. And it will get much worse. Feeling some sympathy with those poor Aztecs yet?

Mark Crispin Miller documents what we have in store for the nasty upcoming ending, and how the Dems just weren't organized enough to even give the 'thugs a run for their money (emphasis marks added - Ed.):

On Wednesday morning, Politico reported that American Crossroads GPS, the organization formed by operatives Karl Rove and Ed Gillespie, hauled in an impressive $5.1 million in June. A separate legal entity from its parent shop, American Crossroads (a distinction that allows it to hide the names of its donors), GPS was poised to use that money for the ostensible purpose of wreaking havoc on behalf of Republican candidates.

It’s the type of secretive electioneering that has Democrats publicly crying foul — the Democratic National Committee sent out the story on Wednesday morning. In private, however, party operatives expressed anxiety with the development. During the 2008 campaign, a group of Democratic operatives essentially tried to create its own version of American Crossroads GPS. Progressive Media was formed in 2007 as an independent opposition research arm for the presidential campaign. The organization, structured then as a 527 group, produced notable hits, including footage of John McCain saying he would be comfortable if U.S. forces were in Iraq for 100 years as well as the first mention of the Arizona Republican’s numerous homes.

And then there's this, which should make us all sit up and take notice before the next Fox-inspired lying brigade takes wing. Talk about foxes and henhouses.

Changing the rules again - How the Bush/Cheney Deregulation F*ucked Up Everything? (Emphasis marks added - Ed.)

Trading in Death: Rapacious Bankers are Making Fortunes by Forcing Up the Price of Food and Leaving Millions to Starve

By Zoe Brennan 20th July 2010 The women crouch in the dust, hacking into the hard African dirt. They are looking for food. This is Chad, West Africa. Sedoisa, a 71-year-old grandmother, sifts through the soil, searching an anthill for grains. On the brink: There are fears that the current situation in West Africa will develop into a famine.

Bringing a wrinkled hand to her mouth, she gestures that she is looking for something to eat. It is 7 AM. Along with a team of 'termitieres', she searches all day long.

The villagers, among them heavily pregnant women and small children, are looking for the nest containing the queen ant. This is the prize, where the worker ants have stored their hoard. If they find it, the villagers will raid the ants' small stock of grain, collected from the barren, windswept plain. On good days, the termitires might find 2.5 kg of precious food. It is hard work, and each day the number of women searching increases. The country stands on the brink of famine. The rains have failed, and - crucially, imported food is too expensive for Chad's people to buy. In neighbouring Niger, the situation is even worse. Trading in life and death? Workers on the floor of the New York Stock Exchange have become used to buying and selling food derivatives. One woman describes the crisis. She says: 'Soon the day will come when there will no longer be enough anthills for everyone.'

The people of West Africa are starving. Almost 10 million people in the region are facing a food crisis.

Why?

In order to answer that question, we need to visit Manhattan's financial district - although no one is starving there.

At 200 West Street, another type of anthill exists. It is the gleaming New York headquarters of Goldman Sachs investment bank. The £1.5 billion 43-storey building, which opened this year, houses 11,000 staff - who reaped a staggering $20.2 billion in bonuses in 2007. Market leaders: Goldman Sachs have led the way in food derivatives. Just as in the African anthill, there is a strict hierarchy in this house of Mammon. Vice-Presidents sit at shared workbenches. Managing directors get windowless offices. The 300 elite partners get a room with a view. High above are the executive suites, with panoramic vistas of New York Harbour. Here, Goldman's Masters of the Universe - each worth many millions of pounds - set the bank's strategy.

As it became clear there were problems in the U.S. mortgage market, this band of select bankers decided to switch a large number of Goldman Sachs's investments to other commodities - namely rice, wheat, corn, cattle, coffee and cocoa. Such investments had been going on for some time, but this marked a major shift towards them. Goldman Sachs was not alone. Other investment houses such as Merrill Lynch, Deutsche Bank and Lehman Brothers followed a similar strategy. Indeed, it was recently reported that British financier Anthony Ward, dubbed ChocFinger, has amassed 214,000 tons of cocoa beans, worth £658 million.

Some suspect he wants to exert a stranglehold over the market and force prices higher. Admittedly, cocoa beans are not a basic foodstuff, but it does illustrate how one individual or corporation can affect the market. Either way, the investment houses' momentous decision to move into food investments has had tragic consequences. The strategy has caused world food prices to soar, leading to riots, famine and many deaths.

At the end of 2006, food prices across the world started to rise sharply. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent.

Around the world, 200 million people - mostly children - who relied on cheaply imported foodstuffs sank into malnutrition or starvation. There were riots in more than 30 countries. The crisis continues today.

'A herd of market traders, speculators and financial bandits have turned wild and constructed a world of inequality and horror.' And indirectly, through a pension, shares or other investment, it could be your money which is being used to make others go hungry.

Jean Ziegler, former UN chief food expert, says this speculation has led to 'silent mass murder'.

. . . And yesterday, the World Development Movement spoke out against this trend. Its director, Deborah Doane, said: 'Investment banks like Goldman Sachs are making huge profits by gambling on the price of everyday foods.' Nobody benefits from this kind of reckless gambling except a few City wheeler-dealers.

. . . When this process was tightly regulated, and only those companies with a direct interest in the field could get involved, it worked.

Then the big investment banks turned their interest to agriculture, and decided they wanted to trade in futures.

'This isn't just any commodity. It is food, and people need to eat.'

Goldman Sachs and others lobbied for the rules to be changed. Eventually, the regulations were abolished. Suddenly, the simple risk-management deals with farmers were turned into 'derivatives' - or contracts - that could be bought and sold among traders who had nothing to do with farming. A market in speculation on the price of food was born.

. . . Investment banks needed fertile new ground for growth, of course because they had left scorched earth behind in their previous areas of interest. The mortgage market had collapsed, and money managers had to find new places to invest. Commodities became the latest hot thing in investment banking circles. In 2003, commodity index holdings amounted to $13 billion. By 2008, $317 billion had poured into the funds investing in this area. The bank's money was not at risk, of course. Putting food on the table: Goldman Sachs chief Lloyd Blankfein awarded himself a record bonus at the height of the food derivatives boom. It was investing in a price index - little more than gambling - using other people's money: the savings accounts, pension funds and life insurance policies of the general public.

Soon, the prices of foods being traded on this index went up. The banks' investors were, of course, delighted.

Take the case of wheat. American grain prices had long been set by the Minneapolis Grain Exchange. For more than a century, prices had steadily declined. Then, in 2005 - as banks became involved in trading it, the price of wheat began to rise. So did the cost of rice, corn, soy, oats and cooking oil.

. . . There were a few voices of sanity. One old-fashioned grain seller said: 'This isn't just any commodity. It is food, and people need to eat.'

There were huge profits to be made, however. It is no coincidence that Goldman Sachs chief Lloyd Blankfein rewarded himself with the highest payouts in Wall Street history in these years.

He gave himself $53 million in 2006, and $68 million in 2007. Quite simply, making money is the foremost principle at Goldman Sachs.

The global speculative frenzy over food prices sparked riots and helped drive the number of people going hungry in the world to more than a billion. The price of basic foodstuffs rose by 80 per cent between 2005 and 2008.

. . . Back in West Africa, the poor reap the fall-out from this crisis. Oxfam warns that the region stands on the very brink of a devastating famine. Oxfam' s food policy adviser, Chris Leather, told the Mail: 'West Africa is suffering a very real crisis.

. . . 'This has pushed world food prices up, and it is the poorest and most vulnerable in the world who suffer most. We are very concerned by the situation.' Jean Ziegler of the UN says: 'In a world overflowing with riches, it is an outrageous scandal that more than one billion people suffer from hunger and malnutrition and that every year over six million children die of starvation and related causes.'

It seems that the big shots of Goldman Sachs feel very little outrage, however. They have weathered a series of storms in recent months, including being charged with a £650 million fraud in the U.S. Emails from executives boasted they were making 'serious money' while millions of homeowners were plunged into misery by the housing crash. Famously known as 'the haves and the have-yachts' for their amazing bonus-fuelled lifestyles, executives have seen a series of record profits since inventing the Goldman Sachs Commodity Index.

Indeed, 2009 was the most profitable year in the bank's history.

Do they care if Africa starves? It appears not.

One Democratic member of Congress (one of the leading intellectual Senators - and there are only a few of these left now) cares a lot - enough to try to make a difference. Let's see how many others jump on board. This is a movement for which we should be marching on D.C. (Can you understand now why Bill Gates and Warren Buffett made so much noise about funding charities? Not that they were guilty enough to turn the extra moolah down though.) (Emphasis marks added - Ed.)

In 2009, Exxon Mobil, the most profitable corporation in history made $19 billion in profits and not only paid no federal income tax — they actually received a $156 million refund from the government.

No To Oligarchy

Bernie Sanders July 24, 2010 The American people are hurting. As a result of the greed, recklessness and illegal behavior on Wall Street, millions of Americans have lost their jobs, homes, life savings and their ability to get a higher education.

Today, some 22 percent of our children live in poverty, and millions more have become dependent on food stamps for their food.

And while the Great Wall Street Recession has devastated the middle class, the truth is that working families have been experiencing a decline for decades. During the Bush years alone, from 2000-2008, median family income dropped by nearly $2,200 and millions lost their health insurance. Today, because of stagnating wages and higher costs for basic necessities, the average two-wage-earner family has less disposable income than a one-wage-earner family did a generation ago. The average American today is underpaid, overworked and stressed out as to what the future will bring for his or her children. For many, the American dream has become a nightmare. But, not everybody is hurting.

While the middle class disappears and poverty increases the wealthiest people in our country are not only doing extremely well, they are using their wealth and political power to protect and expand their very privileged status at the expense of everyone else.

This upper-crust of extremely wealthy families are hell-bent on destroying the democratic vision of a strong middle-class which has made the United States the envy of the world.

In its place they are determined to create an oligarchy in which a small number of families control the economic and political life of our country.

The 400 richest families in America, who saw their wealth increase by some $400 billion during the Bush years, have now accumulated $1.27 trillion in wealth. Four hundred families! During the last fifteen years, while these enormously rich people became much richer their effective tax rates were slashed almost in half.

While the highest-paid 400 Americans had an average income of $345 million in 2007, as a result of Bush tax policy they now pay an effective tax rate of 16.6 percent, the lowest on record.

Last year, the top twenty-five hedge fund managers made a combined $25 billion but because of tax policy their lobbyists helped write, they pay a lower effective tax rate than many teachers, nurses and police officers. As a result of tax havens in the Cayman Islands, Bermuda and elsewhere, the wealthy and large corporations are evading some $100 billion a year in U.S. taxes.

Warren Buffett, one of the richest people on earth, has often commented that he pays a lower effective tax rate than his secretary. But it's not just wealthy individuals who grotesquely manipulate the system for their benefit. It's the multinational corporations they own and control.

In 2009, Exxon Mobil, the most profitable corporation in history made $19 billion in profits and not only paid no federal income tax — they actually received a $156 million refund from the government.

In 2005, one out of every four large corporations in the United States paid no federal income taxes while earning $1.1 trillion in revenue.

But, perhaps the most outrageous tax break given to multi-millionaires and billionaires happened this January when the estate tax, established in 1916, was repealed for one year as a result of President Bush's 2001 tax legislation.

This tax applies only to the wealthiest three-tenths of 1 percent of our population. This is what Teddy Roosevelt, a leading proponent of the estate tax, said in 1910.

"The absence of effective state, and, especially, national restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need is to change the conditions which enable these men to accumulate power which is not for the general welfare that they should hold or exercise . . . . Therefore, I believe in a . . . graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate."

And that's what we've had for the last ninety-five years—until 2010. Today, not content with huge tax breaks on their income; not content with massive corporate tax loopholes; not content with trade laws enabling them to outsource the jobs of millions of American workers to low-wage countries and not content with tax havens around the world, the ruling elite and their lobbyists are working feverishly to either eliminate the estate tax or substantially lower it.

If they are successful at wiping out the estate tax, as they came close to doing in 2006 with every Republican but two voting to do, it would increase the national debt by over $1 trillion during a ten-year period. At a time when we already have a $13 trillion debt, enormous unmet needs and the highest level of wealth inequality in the industrialized world, it is simply obscene to provide more tax breaks to multi-millionaires and billionaires.

Read on for rest.

Suzan _______________

Bonuses? "Troubled Assets?" Wachovia Drug Money Exposed ("Drugs In, Prisoners Out") - DFH's Rule! Krugman and Driftglass Name Usual Suspects

(If throwing a contribution Pottersville2's way won't break your budget in these difficult financial times, I really need it, and would wholeheartedly appreciate it. Anything you can afford will make a huge difference in this blog's lifetime.)


First off, let me say . . . . love those bank profits (and where did those bonuses come from again, Pedro?) - and that inter-country cooperation! (See below how they got them.) (And I'm thinking at this point, they gotta arrest everybody or give lots more "sweet deals." (Taxpayers pay up, natch!))

"Wachovia handled all the transfers, and they never reported any as suspicious."

I forget. Was it Professor Paul Krugman, winner of the Nobel Prize for Economics (among other honors) or Driftglass, blogger extraordinaire, who first said that the DFH (dirty f*cking hippies) had always been right and that because they were and had been for over 30 years that it would never, ever be reported in the MSM? In fact, it would be denied on pain of death to those evincing such knowledge if anyone dared. Someone just dared.

the DFHs are proved to have been right. It’s understandable, of course. How can the self-proclaimed sensible centrists continue to regard themselves as sensible, when they were wrong about Bush, WMDs, financial deregulation, and so on? Only by becoming even more disdainful of the unwashed ruffians who got it right.

From Paul Krugman's blog (emphasis marks added - Ed.):

Henry Farrell explains it all. One of his commenters says that the US term for what Henry calls Bimberton-kicking is “hippie-punching”, which is about right; although when it comes to politics the proper term is DFH.

What’s particularly noteworthy is that Bimberton-kicking becomes more, not less prevalent when, as has happened consistently this past decade, the DFHs are proved to have been right. It’s understandable, of course. How can the self-proclaimed sensible centrists continue to regard themselves as sensible, when they were wrong about Bush, WMDs, financial deregulation, and so on? Only by becoming even more disdainful of the unwashed ruffians who got it right.

And speaking of others who have called this continuing criminality in our midst from the get-go . . . . From Anti-Fascist Calling we learn about the Wachovia/bankster long-term connection. Remember when we used to say in class that all they had to do to stop the drug trade was "follow the money?" And that there was bound to be some "good" reason why they didn't. I still remember Nixon and Mitchell's serious demeanors about the "druggies." Don't you? At least when they were thought of as DFH's. (And wouldn't you know it would have to be Michael Bloomberg's vehicle that would "break" teh story?) All in good time, they say. All in good time.

But why now? Who's gaining from this now (Rethuglicans involved in the drug trade? Say it ain't so, Joe!)? Can anyone say "Homeland InSecurity?" (And you thought people with AIDs were the only people, outside of those unlucky few in Central and South America, who died in droves while Reagan and Bush 1 were President? Yeah. They were pretty good American Christian Presidents, weren't they? Wish you had some real money invested now in torture equipment manufacturers, don't you? Stock market is still roaring (so to speak), you know.) (Emphasis marks added - Ed.)

P.S. I had blogrolled Hopsicker's site last year. I don't want to run this whole article but it is a hugely importantly bit of reporting, and try to remember who was President at this time, and the look in his eye during the 9/11 muddle (which the legislation coming out of helped immensely to draw the curtains over this muddle).

P.P.S. Thompson was a Bush Pioneer. Surprised? (EXTRA: I hate to continue posting this message, but the need is great (and I know that everyone is in need in this economy, truly I do), but if anyone could make a contribution to my PayPal account (or otherwise - contact me for further info), it will be really, really, really appreciated as my financial situation is increasingly desperate right now due to continued long-term unemployment. Please know that I sincerely appreciate everything that you, my kind readers, have done for me in the past financially and otherwise. Especially, otherwise, as the support group for this blog is beyond belief. My belief anyway. Again, my heartfelt thanks. . . and now . . . back to your irregular viewing.)

Tuesday, July 20, 2010 All In The "Family" Global Drug Trade Fueled By Capitalist Elites When investigative journalist Daniel Hopsicker broke the story four years ago that a DC-9 (N900SA) "registered to a company which once used as its address the hangar of Huffman Aviation, the flight school at the Venice, Florida Airport which trained both terrorist pilots who crashed planes into the World Trade Center, was caught in Campeche by the Mexican military . . . carrying 5.5 tons of cocaine destined for the U.S.," it elicited a collective yawn from corporate media.

And when authorities searched the plane and found its cargo consisted solely of 128 identical black suitcases marked "private," packed with cocaine valued at more than $100 million, the silence was deafening.

But now a Bloomberg Markets magazine report, "Wachovia's Drug Habit," reveals that drug traffickers bought that plane, and perhaps fifty others, "with laundered funds they transferred through two of the biggest banks in the U.S.," Wachovia and Bank of America.The Justice Department charge sheet against the bank tells us that between 2003 and 2008, Wachovia handled $378.4 billion for Mexican currency exchanges, "the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history."

"A sum" Bloomberg averred, equal to one-third of Mexico's current gross domestic product.

Since 2006, some 22,000 people have been killed in drug-related violence. Thousands more have been wounded, countless others "disappeared," torture and illegal imprisonment is rampant.

In a frightening echo of the Reagan administration's anti-communist jihad in Central America during the 1980s, the Bush and now, Obama administration has poured fuel on the fire with some $1.4 billion in "War on Drugs" funding under Plan Mérida. Much of that "aid" is destined to purchase military equipment for repressive police, specialized paramilitary units and the Mexican Army.

There is also evidence of direct U.S. military involvement. In June, The Narco News Bulletin reported that "a special operations task force under the command of the Pentagon is currently in place south of the border providing advice and training to the Mexican Army in gathering intelligence, infiltrating and, as needed, taking direct action against narco-trafficking organizations."

One former U.S. government official told investigative journalist Bill Conroy, "'Black operations have been going on forever. The recent [mainstream] media reports about those operations under the Obama administration make it sound like it's a big scoop, but it's nothing new for those who understand how things really work'."

But, as numerous investigations by American and Mexican journalists have revealed, there is strong evidence of collusion between the Mexican Army and the Juarez and Sinaloa drug cartels. A former Juarez police commander told NPR in May that "the intention of the army is to try and get rid of the Juarez cartel, so that [Joaquin "El Chapo" Guzman] Chapo's [Sinaloa] cartel is the strongest."

The cosy relations among the world's biggest banks, drug trafficking organizations and the U.S. military-intelligence apparatus is not however, a new phenomenon. What is different today is the scale and sheer scope of the corruption involved. As Michel Chossudovsky points out,

This trade can only prosper if the main actors involved in narcotics have "political friends in high places." As legal and illegal undertakings are increasingly intertwined, the dividing line between "businesspeople" and criminals is blurred. In turn, the relationship among criminals, politicians and members of the intelligence establishment has tainted the structures of the state and the role of its institutions, including the military. (The Global Economic Crisis: The Great Depression of the XXI Century, Montreal: Global Research, 2010, pp. 195-196)

While the Bloomberg story should cast new light on highly-profitable links amongst major financial institutions and narcotrafficking organizations in what may be protected drug rackets green-lighted by corrupt officials, media silence, particularly by outlets such as The Wall Street Journal and the Financial Times, threaten to propel what should be an international scandal into a one-off news item scheduled for a trip down the memory hole.

"Cocaine One"

If, as New York Times columnist Thomas Friedman claims "the hidden hand of the market will never work without a hidden fist," then perhaps too, drug cartels work their "market magic" with their own "hidden fist" or, as the Russians like to say a krysha, a web of protectors - and facilitators - drawn from business, finance, organized crime and the secret world of intelligence.

Dubbed "Cocaine One" by Hopsicker, the DC-9 was curious for a number of reasons, not least of which was the fact that "one of the chief shareholders" of a dodgy outfit called SkyWay Aircraft "is a private investment bank in Dallas which also raised funds for a Mexican industrialist with reported ties to a Cali and Juarez Cartel narcotics trafficker."

More curious still, the airline kitted-out its fleet with distinctive colors and a seal "designed to impersonate planes from the U.S. Dept. of Homeland Security." And when he learned that "SkyWay's genesis can be traced to In-Q-Tel Inc., a secretive, Arlington, Va., investment group owned, operated, and financed out of the black box budget of the Central Intelligence Agency," well you can bet corporate media ran themselves ragged investigating that!

To top it off, when another drug plane crash landed in the Yucatan Peninsula eighteen months later and broke apart, a Gulfstream II business jet (N987SA) that spilled "4 tons of cocaine across a muddy field," Hopsicker reported that it had originated from the same network and used the same source for its financing, the "Casa de Cambio Puebla SA, a country-wide network of currency exchanges."

And to make matters even more intriguing from a parapolitical perspective, after searching through FAA records Hopsicker discovered that the Gulfstream II business jet "was owned by a secretive Midwestern media baron and Republican fund-raiser, who had a business partner who, incredibly, owned the other American drug plane, the DC-9, recently busted in Mexico."

In fact, as Bloomberg investigative journalist Michael Smith learned years later, these were the same planes and same currency exchange which Hopsicker reported back in 2007 traffickers had used to purchase drug jets with funds laundered through Wachovia."

One customer that Wachovia took on in 2004 was Casa de Cambio Puebla SA," Smith wrote. The Puebla, Mexico currency exchange was the brainchild of Pedro Alatorre, a "businessman" who "had created front companies for cartels."

Alatorre, and 70 others connected to his network, were seized in 2007 by Mexican law enforcement officials. Authorities discovered that the accused drug money launderer and airline broker for the cartels controlled 23 accounts at the Wachovia Bank branch in Miami and that it held some $11 million, subsequently frozen by U.S. investigators.

In 2008, a Miami federal grand jury indicted Alatorre, now awaiting trial in Mexico along with three other executives, charging them with drug trafficking and money laundering, accusing the company of using "shell firms to launder $720 million through U.S. banks." The Justice Department is currently seeking Alatorre's extradition from Mexico.

According to Bloomberg, "Puebla executives used the stolen identities of 74 people to launder money through Wachovia accounts." Jose Luis Marmolejo, the former head of the Mexican attorney general's financial crimes unit told Smith, "Wachovia handled all the transfers, and they never reported any as suspicious."

Some $300,000 was transferred by Wachovia to a Bank of America branch in Oklahoma City. With cash in hand Bloomberg reports, traffickers "used the funds to buy the DC-9 through Oklahoma City aircraft broker U.S. Aircraft Titles Inc." When queried by Smith about the sale, "U.S. Aircraft Titles President Sue White declined to comment."

Jeffrey Sloman, the federal prosecutor who handled the Wachovia case said in a press release that "Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations."

Yet, as Hopsicker wrote nearly three years ago, "the politically-explosive implications of the scandal may explain why American officials have been reluctant to move against, or even name, the true owners of the planes and basically 'turned a blind eye' to the American involvement exposed by the drug trafficking seizures."

As of this writing, no Americans have been criminally charged in the cash-for drug planes banking conspiracy.

"Troubled Assets" or Something More Sinister?

When Wells Fargo bought Wachovia, once America's fourth largest bank in 2008 at the fire-sale price of $12.8 billion, the bank and its former CEO, Kennedy "Ken" Thompson, who "retired at the request of the board" before the full-extent of the financial meltdown hit home, were in deep trouble.

Before the Wells takeover, Wachovia had been on a veritable shopping spree. After the firm's 2001 merger with First Union Bank, Wachovia merged with the Prudential Securities division of Prudential Financial, Inc., with Wachovia controlling the lion's share of the firm's $532.1 billion in assets. This was followed by the bank's purchase of Metropolitan West Securities, adding a $50 billion portfolio of securities and loans to the bank's Lending division. In 2004, Wachovia followed-up with the $14.3 billion acquisition of SouthTrust Corporation.

Apparently flush with cash and new market clout, Wachovia set it sights on acquiring California-based Golden West Financial. Golden West operated branches under the name World Savings Bank and was the nation's second largest savings and loan. At the time of the buy-out, Golden West had over $125 billion in assets. For Wachovia however, it was a deal too far.

With an enormous housing bubble fully inflated, and a new speculative merger-mania in full swing, one can only surmise that the need for liquidity at any price, had driven banking giants such as Wachovia to play dumb when shadier, yet highly-profitable transactions, such as the "arrangement" with Casa de Cambio Puebla SA, were involved.

Bleeding cash faster than you can say "mortgage backed securities," Wachovia was on the hook for their 2006 $26 billion buy-out of Golden West Financial at the peak of the housing bubble, a move that BusinessWeek reported generated "resistance from his own management team" but ignored by Thompson.

Why? "Because no one outside of Thompson and Golden West CEO Herb Sandler seemed to like the deal from the moment it was announced," a company insider told BusinessWeek.

While the buy-out may have given Thompson "the beachhead in California he had long desired ... the ink was barely dry on the Golden West deal in late 2006 when the housing bubble in markets including California and Florida began to deflate."

Hammered by the housing bust, Wachovia's share price, which had risen to $70.51 per share when the Golden West deal was announced had slid to $5.71 per share by October 2008. In other words, Wachovia, along with the world's economy, began circling the proverbial drain.

However you slice it, although it was clear that the Golden West deal had gone south quicker than you can say "credit default swaps," this didn't seem to stop Wachovia from paying "smartest guy in the room" Thompson $15.6 million in total compensation in 2007, a year after the fatal Golden West transaction. Nor did these losses stop the bank from showering Thompson with a severance package worth nearly $8 million.

But was something else going on here?

Wells Fargo bank admitted in a signed Deferred Prosecution Agreement with the federal government that they would not contest charges brought by the Justice Department in its indictment of the bank.

The banking giant was forced to admit charges by prosecutors that "On numerous occasions, monies were deposited into a CDC [Casa de Cambio] by a drug trafficking organization. Using false identities, the CDC then wired that money through its Wachovia correspondent bank accounts for the purchase of airplanes for drug trafficking organizations. On various dates between 2004 and 2007, at least four of those airplanes were seized by foreign law enforcement agencies cooperating with the United States and were found to contain large quantities of cocaine."

Bloomberg reported that Wells Fargo, in the wake of the settlement "declined to answer specific questions, including how much it made by handling $378.4 billion - including $4 billion of cash - from Mexican exchange companies."

There was however, more than "troubled assets" and charges of money laundering to the story. In fact, the purchase of these drug planes have been tied to some of the Bush administration's most secretive "War On Terror" programs.

Drug Flights, CIA Renditions. Just Another Day at the Office!

Replicating a pattern used by the Central Intelligence Agency during the Iran-Contra scandal of the 1980s, the secret state used a network of cut-outs and legitimate businesses to transport prisoners to Agency black sites for "special handling."

During Iran-Contra it was "guns in, drugs out." Today one might say it's "drugs in, tortured prisoners out." The results however, were the same; egregious crimes and lawbreaking on a staggering scale.

Subsequent investigations by Narco News revealed that "this particular Gulfstream II (tail number N987SA), was used between 2003 and 2005 by the CIA for at least three trips between the U.S. east coast and Guantanamo Bay, home to the infamous 'terrorist' prison camp," Bill Conroy reported."

In addition," Conroy wrote, "the two SkyWay companies are associated with individuals who have done highly sensitive work for the Department of Defense or U.S. intelligence agencies, public records show and Narco News sources confirm."

According to AFP, the Mexican daily El Universal said "it had obtained documents from the United States and the European Parliament which 'show that that plane flew several times to Guantanamo, Cuba, presumably to transfer terrorism suspects,'" the French newswire reported.

The plane was carrying "Colombian drugs" bound for the U.S. for the "fugitive leader of Mexico's Sinaloa cartel, Joaquin 'Chapo' Guzman," when it crashed in the Yucatan.

According to El Universal, the Federal Aviation Administration's "logbook registered that the plane had traveled between US territory and the US military base in Guantanamo," and that its last registered owner was "Clyde O'Connor in Pompano Beach, Florida."

The Independent confirmed separately in January of this year that "Evidence points to aircraft - familiarly known as 'torture taxis' - used by the CIA to move captives seized in its kidnapping or 'extraordinary rendition' operations through Gatwick and other airports in the EU being simultaneously used for drug distribution in the Western hemisphere."

Hugh O'Shaughnessy, confirming earlier reporting by Bill Conroy and Daniel Hopsicker said that "a Gulfstream II jet aircraft N9875A identified by the British Government and the European Parliament as being involved in this traffic crashed in Mexico in September 2008 while en route from Colombia to the US with a load of more than three tons of cocaine."

While O'Shaughnessy got the tail-number and date wrong, he's correct when he states that U.S. intelligence assets "continue the drug dealing they indulged in during the Iran-Contra affair of the Reagan years."

Narco News, citing DEA sources, learned that the crashed Gulfstream loaded with four tons of cocaine "was part of an operation being carried out by a Department of Homeland Security agency."

However in a later report, Mark Conrad, a former supervisory special agent with ICE's predecessor agency, U.S. Customs, told Narco News that the crashed Gulfstream used to transport drugs and prisoners was controlled by the CIA and "that the CIA, not ICE ... [was] actually the U.S. agency controlling the ... operation. If this were the case, then "any individuals or companies involved in a CIA-backed operation, even ones that are complicit in drug trafficking, would be off limits to U.S. law enforcers due to the cloak of national security the CIA can invoke."

In other words, a jet purchased by drug traffickers with funds laundered through an American bank and used in the CIA's "extraordinary rendition" program may have been part of a protected drug operation by U.S. intelligence agencies. An operation furthermore, whose purpose is still unknown.

This report tracks closely with evidence uncovered by Peter Dale Scott. In a recent piece in Japan Focus Scott wrote that "it is not surprising that the U.S. Government, following the lead of the CIA, has over the years become a protector of drug traffickers against criminal prosecution in this country."

"A recent spectacular example" Scott tells us, drawing on research from his forthcoming book, is the curious case of CIA Venezuelan asset, General Ramon Guillén Davila.

General Ramon Guillén Davila, chief of a CIA-created anti-drug unit in Venezuela, was indicted in Miami for smuggling a ton of cocaine into the United States. According to the New York Times, "The CIA, over the objections of the Drug Enforcement Administration, approved the shipment of at least one ton of pure cocaine to Miami International Airport as a way of gathering information about the Colombian drug cartels." Time magazine reported that a single shipment amounted to 998 pounds, following earlier ones "totaling nearly 2,000 pounds." Mike Wallace confirmed that "the CIA-national guard undercover operation quickly accumulated this cocaine, over a ton and a half that was smuggled from Colombia into Venezuela." According to the Wall Street Journal, the total amount of drugs smuggled by Gen. Guillén may have been more than 22 tons. (Fueling America's War Machine: Deep Politics and the CIA's Global Drug Connection (in press, due Fall 2010 from Rowman & Littlefield).

Scott adds that "the United States never asked for Guillén's extradition from Venezuela to stand trial; and in 2007, when he was arrested in Venezuela for plotting to assassinate President Hugo Chavez, his indictment was still sealed in Miami. Meanwhile, CIA officer Mark McFarlin, whom DEA Chief Bonner had also wished to indict, was never indicted at all; he merely resigned."

But the stench of Iran-Contra, like that of the CIA's torture program, as with earlier secret state machinations with drug cartels never went away; in fact, like a cancer, one managed drug operation seamlessly metastasized into another.

Greasing the Wheels

The United Nations Office on Drugs and Crime (UNODOC) state in their 2010 Annual Report that "money-laundering is the method by which criminals disguise the illegal origins of their wealth and protect their asset bases in order to avoid suspicion of law enforcement and to prevent leaving a trail of incriminating evidence," and that financial institutions, particularly U.S. and European banks are key to efforts to choke-off illicit profits from the grisly trade.

The trouble is these institutions, along with U.S. intelligence agencies, are the problem.

UNODOC estimate that profits derived from narcotics rackets amount to some $600 billion annually and that up to $1.5 trillion dollars in drug money is laundered through seemingly legitimate enterprises.

Part of the fallout from capitalism's economic meltdown has been that "drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis," The Observer disclosed late last year.

Antonio Maria Costa, UNODOC's director, told the British newspaper he saw evidence that proceeds from the illicit trade were "the only liquid investment capital" available to some banks on the brink of collapse last year and that "a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

The UN drugs chief said that in "many instances, the money from drugs was the only liquid investment capital." And with markets tanking and major bank failures nearly a daily occurrence, "liquidity was the banking system's main problem and hence liquid capital became an important factor."

According to Costa, "Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities . . . . There were signs that some banks were rescued that way."

Web of Corruption

Although the UN's top anti-narcotics official declined to identify either the countries or banks that have benefited from the murderous trade, a web of corruption envelops the entire financial sector of the capitalist economy as the quest for "liquid assets" trumps everything.

Martin Woods, once director of Wachovia's anti-money-laundering unit in London told Bloomberg, "It's the banks laundering money for the cartels that finances the tragedy." Woods told the magazine he "quit the bank in disgust" after executives "ignored his documentation that drug dealers were funneling money through Wachovia's branch network."

Despite warnings from the Treasury Department since 1996 that Mexican currency exchanges were laundering drug money through U.S. banks, "Wachovia ignored warnings by regulators and police, according to the deferred-prosecution agreement," Bloomberg reported.

"As early as 2004, Wachovia understood the risk," the bank admitted in court. "Despite these warnings, Wachovia remained in the business."

At the bank's anti-money laundering unit in London, Woods and his counterpart Jim DeFazio in Charlotte, NC told Smith "they suspected that drug dealers were using the bank to move funds."

Former Scotland Yard investigator Woods, said he "spotted illegible signatures and other suspicious markings on traveler's checks from Mexican exchange companies," and that he sent copies of his report to the U.K.'s Financial Services Authority, the DEA and U.S. Treasury Department.

But rather than being rewarded for his diligence, Woods told Smith "his bosses instructed him to keep quiet and tried to have him fired." In one meeting, "a bank official insisted Woods shouldn't have filed suspicious activity reports to the government, as both U.S. and U.K. laws require."

According to a whistleblower suit filed with an employment tribunal in London, Barrons reported last year before the Wachovia scandal broke, that Woods claimed "his bosses bullied and demoted him, then withdrew his reports of other suspicious activities in Eastern Europe."

It gets worse. Woods' complaint alleges "that Wachovia staff may have even tipped off Mexican-exchange clients about his laundering suspicions," and the veteran investigator told Wachovia officials "he feared for his safety."

In response, bank spokesperson Mary Eshet said at the time, "Wachovia believes that it has acted appropriately in its business dealings, and Mr. Woods' claims to the contrary are without merit."

Meanwhile, on the American side of the pond, 21-year FBI veteran DeFazio said "he told bank executives in 2005 that the DEA was probing the transfers through Wachovia to buy the planes." The bank ignored his warnings and continued along on their merry way until their indictment.

The law enforcement veteran told Bloomberg, "I think they looked at the money and said, 'The hell with it. We're going to bring it in, and look at all the money we'll make'."

The former Scotland yard investigator added, "If you don't see the correlation between the money laundering by banks and the 22,000 people killed in Mexico, you're missing the point."

But Wachovia wasn't the only large financial institution "missing the point." Bloomberg also revealed that Bank of America and the London-based "HSBC Holdings Plc, Europe's biggest bank by assets," American Express Bank, Banco Santander SA, Citigroup Inc., as well as "the world's largest money transfer firm," Western Union were also up to their eyeballs in dubious transactions.

In 1994 for example, American Express paid $14 million to settle with the federal government after "two employees were convicted in a criminal case involving drug trafficker Juan Garcia Abrego."

Yet between 1999-2004, Bloomberg reported "the bank failed to stop clients from laundering $55 million of narcotics funds, the bank admitted in a deferred-prosecution agreement in August 2007 . . . and paid $65 million to the U.S. and promised not to break the law again." Charges were dismissed a year later under terms of the agreement.

And back in 2004, The Independent disclosed that "HSBC, the UK's largest bank, have been slammed for lax money-laundering procedures in a report by a US Senate subcommittee."

Journalists Hugh O'Shaughnessy and Paul Lashmar revealed that "the UK-based multinational stands accused of laxity in the fight against money laundering, drug trafficking, corruption and terrorism, notably in the oil-rich African state of Equatorial Guinea."

"In one of the few cases" when the scandal-plagued and now-shuttered Riggs Bank "seems to have properly followed US anti-money-laundering legislation," Riggs formally asked HSBC and a Spanish bank, Banco Santander, "to divulge the identities of the owners of two companies that kept accounts with them and that were receiving suspicious wire transfers totalling in excess of $35m (£20m). The banks refused to say who the owners were."

Bloomberg disclosed that "federal agents caught people who work for Mexican cartels depositing illicit funds in Bank of America accounts in Atlanta, Chicago and Brownsville, Texas, from 2002 to 2009." Authorities contend that "Mexican drug dealers used shell companies to open accounts at London-based HSBC."

Nevertheless, neither bank were accused of wrongdoing by the federal government and both firms denied any involvement in money laundering schemes.

Bank of America spokeswoman Shirley Norton told Smith that they "strictly follow the government rules." Norton said, "Bank of America takes its anti-money-laundering responsibilities very seriously," a fact not readily apparent from Bloomberg Markets investigation.

Both Norton and HSBC spokesman Roy Caple told Smith that "[privacy] laws bar them from discussing specific clients."

And so it goes.

Fallout? What Fallout!

In the wake of Wachovia's admission to federal prosecutors, Wells Fargo will pay "$160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009."

"If Wells Fargo keeps its pledge," Bloomberg reports, then "according to the agreement [the federal government will] drop all charges against the bank in March 2011."

Why might that be? Large banks are immune from vigorous prosecution for violating the Bank Secrecy Act "by a variant of the too-big-to-fail theory."

Veteran Senate investigator Jack Blum, who led probes into the Iran-Contra drug connection and the CIA's favorite shadow bank during the 1980s, the Bank of Credit and Commerce (BCCI) told Bloomberg, "the theory is like a get-out-of-jail-free card for big banks."

"There's no capacity to regulate or punish them because they're too big to be threatened with failure," Blum says. "They seem to be willing to do anything that improves their bottom line, until they're caught."

Meanwhile as the bodies pile up, there's no jail time for executives and the assets of firms that could charitably be described as part of a "continuing criminal enterprise" haven't been seized; only a slap on the wrist and a promise to "do better next time."

Just sayin'

Please read the whole article here.

Suzan ____________

C-Span Kabuki Theatre: HUGE Unreported Bank Losses Hidden - Don't Let Goldman Be Goldman & Not Too-Big-To-Fail, Just Too-Connected & Liz Warren Fail

I was wondering when anyone would comment on the obvious. Someone has. Now, is anyone else noticing? Or reacting with the interests of the citizens considered? From Stellaa:

. . . there seems to be a ritual. The accused, usually a corporate wrongdoer, is brought up for a scolding. A public, televised , filled with populist talk and drama scolding.

The Senators/Representatives, take turns kicking the executives in the butt. Yet, I never see the politicians return or, reject contributions from the particular corporation or, industry.

Lets look at Goldman Sachs and the Senatorial Finance Committee. It's not hard, the Center For Responsive Politics, has a great interactive site, Open Secrets, that will answer all your questions: Goldman Sach's Congressional Inquisitors Also Beneficiaries of Firms Financial Largesse.

The committee's 10 senators have together received more than a half-million dollars in total campaign contributions from a combination of Goldman Sachs' political action committee and its employees and their families, research by the Center for Responsive Politics indicates. Top recipients include John McCain (R-Ariz.), Susan Collins (R-Maine) and Tom Carper (D-Del).

Consider this, the people who will make the decision on how to regulate, or to investigate the finance industry, just in the Senate, were paid $500,000.

The Executives are run through a gauntlet in the hearing. Prepared to look repentant and chastised by firms that specialize in this process. We had the Auto Industry, Toyota got it's own show, Bankers, Mortgage Bankers, you name the industry, we have had the show. Cadres of lawyers and public relations experts, advising them on what they will take blame for and what they will apologize for and how. What they will wear, how they will look. Oh, I want one of those contracts.

The Senators/Representatives, take turns castigating the executives and defending the people. Accusations and references to common tropes, gambling, criminality etc. are raised. We are fed bits and pieces. The executives go on interviews to further seem repentant and apologetic. Even on NPR, go figure. Heads down. Some people, probably a lot of people feel sorry for them and they believe their remorse.

Business as usual when the cameras leave the hearing rooms. Money is exchanged. Deals are made. The entertaining and the parties go on as nothing happened. In the end, we are the chumps.

The only price is that at some point, the executives will have to be taken behind, or I should say, in front of the shed for a spanking.

Since 1990, Goldman Sachs has paid $31.6 million to our politicians, 64% to the Democrats and 36% to the Republicans. Have you seen anyone return the money? Have you seen anyone come out and say: I will not take any money. Even as a gesture. A symbol.

And it certainly is shitty. To quote a noted Senator. From a former Goldman VP (emphasis marks added - Ed.):

DON’T Let Goldman Be Goldman

Wallace C. Turbeville Is it fair to single out Goldman in a sea of financial wrongdoing? Absolutely, says Wallace Turbeville, a former Goldman VP. William D. Cohan’s op-ed piece in the July 7th New York Times had the same title as this article, but for the word “Don’t.” At first glance, I thought the Times piece might be a report on New Age self actualization for investment banks. But the title suggests something more troubling. The whole point of financial reform is that Goldman (and the others) should no longer be permitted to be Goldman. A return to business as usual is the last thing we need. Mr. Cohan is a student of Goldman, but he profoundly misreads the firm’s role in the Wagnerian drama we know as “The Great Recession.” He begins by imploring us all to “fess up” to the fact that financial reform would have been impossible had the Administration and Congress not “demonized” Goldman. “Demonization” is a popular word in today’s political discourse. It suggests unfairness. Mr. Cohan does not dispute the facts asserted by the Administration and Congress. Instead, he points out that underlying ethical flaws were shared throughout Wall Street. They arose from the shift toward a business model that rewards taking imprudent risks with other people’s money. Mr. Cohan says that “Goldman Sachs did nothing differently in the years leading up to the crisis than did other firms of its stature.” Anyone who has raised a child is familiar with a common excuse for bad behavior. The proper response to “Everyone else is doing it” is a stern demeanor and the answer: “Maybe, but so what?” But let’s give the article a generous interpretation. While the casual reader might interpret the shared lapse in ethics as an excuse, perhaps it is not intended to be read this way. We will assume that Mr. Cohan intended not to excuse Goldman but to find fault with political leaders who unfairly singled out the firm. It seems obvious that the example of a single firm is a more effective rhetorical device than calling out generalized bad behavior. Politicians used this device and public opinion was successfully mobilized. The job got done. I believe that the public understood that the bad behavior was widespread, and that Goldman was merely one example. Was it unfair to make Goldman the example? The article argues that Goldman was just like all the other firms. It was not. Goldman was actually better at executing a certain investment banking business model than anyone else. It became a leader in the industry, admired by competitors, the media and politicians. The problem was that the business model, so effectively executed by Goldman, turned out to be bad for America. The model inherently risks the survival of critically important institutions. It is also nearly impossible to use the model and, at the same time, maintain business ethics conforming to the shared values of the society. Goldman historically promoted its commitment to ethics when soliciting clients. I am convinced that Goldman people genuinely believed this commitment to be true. It may even be the case that ethics were taken more seriously at Goldman than at its competitors. But seeking business based on ethics carries with it a responsibility. Pursuit of a business model with inherent ethical challenges has consequences that are unavoidable, especially to a firm which has held itself out to clients as particularly ethical. Goldman’s success was envied up and down Wall Street. The pressure to keep pace with Goldman’s earnings drove other firms to emulate its model. At a minimum, managers at other banks were driven to take greater risks hoping for greater rewards as proof to shareholders that they measured up to the Goldman team. It is ironic that Goldman was first to foresee risks of a deteriorating market and acted to defend itself. Goldman’s aggressive preparations, including the extraordinary demands to AIG for collateral, may have actually contributed to the intensity of the panic. Goldman was so prepared that, when the tsunami finally hit, the only real threat to it was a total systemic collapse.

Congress and the Fed stepped in with cash to avoid catastrophe and Goldman, now even more powerful compared with competitors, immediately prospered. The real irony is that Goldman was greatly responsible for the problematic business model; yet, because management pulled the plug so effectively, the value of the bailout to Goldman shareholders was disproportionately large. Mr. Cohan suggests that it was unfair to use Goldman as an example because of its relative ethics and its effective response to the danger. Those points may be relevant if the real issues were incompetence and larcenous intent. Instead, the core concern was and is the dysfunctional business model that generated massive profits for the firms but devastated the society. Goldman was not just like all of the others. It was the leader. Becoming the leader involves a trade that should be well understood at the highest levels of Wall Street. Investment bankers often engage in businesses with underdeveloped rules of conduct. Pushing the envelope may be risky, but the rewards are more than worth it. If a firm is a leader, its profits and the wealth and power of its managers are virtually limitless. If it turns out that the business has consequences to society that are intolerable, even if the consequences were unforeseen, the leader will be the example held out to the public. Management is held to a high standard, but the pay scale more than reflects the level of difficulty.

Is this an unfair trade? I don’t think so.

Finally, Mr. Cohan concludes that we should “lay off the firm and allow Goldman and the rest of Wall Street to return to some semblance of normalcy.” Besides unfairly demeaning the entire financial reform effort, this statement suggests that our problems have been solved.

In fact, it would be a monumental error if financial reform ends with the passage of the legislation this month. James K. Galbraith points out in testimony to the Commission on Deficit Reduction that focusing on Medicare and Social Security as a means to reducing deficits is misguided.

Economic growth is the only sensible solution. He cites the need to restore the financial sector’s role of capital formation for productive purposes, i.e., commercial lending and equity investment. The current legislation focuses on curbing dangerous behaviors and on procedures to deal with financial panics. It does not reconnect Wall Street capital to the engine of economic growth: productive and innovative businesses which employ American workers.

No one wants to drive Wall Street out of business, certainly not politicians whose campaigns rely on it as a source of funds. But the economy will not prosper unless Wall Street reengages with the broader economy. Current bankers will keep their Hamptons estates under the new regulations. But their successors may not be able to afford mansions if 10-20% unemployment is the new American reality. Wall Street’s attention must turn away from churning derivatives on existing products and instruments and toward growth of the economy and jobs. If more government intervention is needed to force this turn, so be it. Neither the public nor its political representatives should feel regret if this means Goldman and the other banks must fundamentally change.

Wallace C. Turbeville is the former CEO of VMAC LLC and a former Vice President of Goldman, Sachs & Co.

And, of course, they were never "Too Big To Fail," only "Too Connected To Fail." (Emphasis marks added - Ed.)

FinReg Achilles’ Heel: Not Too-Big-To-Fail, But Too-Connected-To-Fail

Henry Liu demonstrates why FinReg, however well designed, cannot be counted upon to prevent future market failures.

A rule of finance: All trading models buy safety by externalizing risk to the trading system.

There is an invisible, but solidly anchored assumption in all structured finance and derivative trading models — namely, that a systemic collapse would trigger a government bailout. Since each and every derivative trading model derives protection by externalizing risk to the trading system, systemic risk expands automatically (making systemic meltdown inevitable).

Institutions, then, have an incentive to be considered of “systemic significance” in order to secure a fail-safe advantage in interconnected transactions, even though by themselves they are not “too-big-to-fail”. These trading models are operative when they are marked-to-model, but inoperative when they are marked-to-market in a downturn.

This is the point when these models’ fail-safe strategy by government bailout is activated. Even a government like Hong Kong, which assumes a radical laissez faire posture, has had to intervene directly in the equity market because of the connections between a fixed exchange rate and unregulated financial markets that allow manipulators to attack its equity markets by rigging the automatic effect of exchange rates on interest rates to create deflationary pressure on stock prices.

As you will see, focusing on “too-big-to-fail” alone leave windows of vulnerability for “too-connected-to-fail” hazards.

Hong Kong Monetary Authority Fought Off Hedge Fund Attacks in 1997

In October 1997, three months after China recovered Hong Kong following a century and a half as a British colony, the HK$, which had been pegged to the US$, came under powerful, repeated, speculative and manipulative attacks due to the contagion effects of the Asian financial crisis. The automatic monetary adjustment forced interbank interest rates in Hong Kong to shoot up to unprecedented levels (up to an astronomical 300% at one point), reflecting substantial risk premiums on the HK dollar. This generated severe deflationary consequences for the financial and property markets, as well as the entire economy.

The interventionist role the Hong Kong Monetary Authority (HKMA) played in handling violent market turbulence was controversial by the standard of its own free market ideology. HKMA later admitted that as Hong Kong’s link mechanism was on “autopilot” during the attacks, the interest rate adjustments were part and parcel of the working of a currency board regime, and therefore generating an inevitable and painful financial crisis. The fact that such financial and economic pain was avoidable by de-pegging was not officially acknowledged as an option.

Hong Kong was the target of speculative and manipulative attacks four separate and sequential times during the Asian financial crisis of 1997. The first three attacks took the form of garden variety currency dumping, whereas the fourth attack targeted the structural vulnerability of the Hong Kong’s currency board regime after speculators were convinced that HKMA would defend the peg at all cost. And speculators were waiting to be the happy recipients of guaranteed profit from HKMA’s fixation on the peg.

Please read on for what's already happened worldwide from this game-playing financial system that is indeed "too connected to fail." The following is brought to you as a public service notice (by this blogger). I know it's boring to keep saying the same things over and over but if Elizabeth Warren is not chosen to lead the Consumer Financial Protection Bureau, you can kiss your financial butts good-bye a lot sooner. (Emphasis marks added - Ed.)

As reported on HuffPost last week, Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner's views.

One can assume that Geithner, being very close to the nation's biggest banks, is concerned that Warren, if chosen, will exercise her new policing and enforcement powers to restrict those abusive practices at our commercial banks that have been harmful to consumers and depositors.

Certainly, Warren is not the commercial banking industry's first pick to serve in this new role. And unlike other legislation in which an industry's lobbying effort would naturally slow or cease once the legislation is passed, the new financial reform bill is continuing to attract enormous lobbying action from the banks. The reason is simple. The bill has been written to put a great deal of power as to how strongly it is implemented in the hands of its regulators, some of which remain to be chosen.

The bank lobby will work incredibly hard to see that Warren, the person most responsible for initiating and fighting for the idea of a consumer financial protection group, is denied the opportunity to head it. But this is not the only reason that Geithner is opposed to Warren's nomination. I believe Geithner sees the appointment of Elizabeth Warren as a threat to the very scheme he has utilized to date to hide bank losses, thus keeping the banks solvent and out of bankruptcy court and their existing management teams employed and well-paid.

And I was positive that someone else would document this one day.

That day has arrived. From Corrente (emphasis marks added - Ed.):

I'm sure that you've all experienced the phenomenon I call "the curse of the competent." It's monumentally frustrating, but quite common.

You are hired to do a job. You do it well. Unfortunately, as an unintended consequence of your competence, you make all the other idiots who aren't doing their jobs, or are doing them badly, look like, um, idiots. So then what happens?

You get the short end of the stick, of course. You get laid off, or you have to watch other people getting promoted before you, or you get demoted, or you never quite make it from temp to full-time. Meanwhile, the incompetent get the promotions, the kudos and the benefits of being a favored member of the group you have so cavalierly exposed. If you are a person who is already on the lower rungs of society - like, a woman, a person of color, an "out" LGBT, an older person, or some combination of these - it's even easier to make sure that you never get the recognition you deserve.

This is where Elizabeth Warren comes in.

For many years, Ms. Warren has labored under the mistaken impression that a consumer advocate should actually advocate for consumers. As Chair of the Congressional Oversight Panel created to oversee the banking bailouts, Warren has been the bankers' worst nightmare, and has become a popular favorite because of it. In December of 2009, she wrote that the middle class was disappearing through no fault of its own:

Families have survived the ups and downs of economic booms and busts for a long time, but the fall-behind during the busts has gotten worse while the surge-ahead during the booms has stalled out. In the boom of the 1960s, for example, median family income jumped by 33% (adjusted for inflation). But the boom of the 2000s resulted in an almost-imperceptible 1.6% increase for the typical family. While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.

The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

Please read on for way too much more of the truth than most are still able to handle about our history and what has brought us to this precipice for the middle class. Suzan _____________