Tasmanian Times

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

Economy

Trust me, I’m a banker

Barnaby Drake

WE have just witnessed the world’s biggest fraud, perpetrated by a combination of American Banks and stock brokers, not just on America and the American Dollar, but on every financial institution throughout the world. We have been subjected to the whims of the get-rich-quick brigade, who, without conscience, have stopped at nothing to make a fast buck. For the last seventeen years, these people have been chasing the world’s money and treating it as though they have a right to own it.

In their enthusiasm, they first raided the property market, targeting home owners, where they knowingly over-valued property and sold commensurate bonds and mortgages to owners and encouraged them to borrow against their existing properties so that they could gain both title to the assets and the interest on these inflated loans. Not satisfied with this, they then bundled all these shonky over-valued deals together and sold them across the world as asset-backed investments.

This then allowed them to exchange these valueless bits of paper for foreign currency, and raid the real money invested in Trust and Superannuation funds throughout the world. Again, it is the small man who suffered most in the subsequent meltdown. At the same time, they were pillaging the planet of mineral wealth, setting up futures trading, manipulating currencies, and trying to gain control of the farming, food supply, oil, pharmaceuticals and munitions as well as any tradable commodities they could lay there hands on throughout the globe. They have encouraged credit way beyond what many could afford and in doing so, have mortgaged our children’s future. Now finally it has come home to roost.

One of the chief architects in this fraud was Henry Paulson when CEO of Goldman Sachs Bank. He then went on to become Secretary to the Treasury, the second highest position in the US protocol.

His personal net worth has been estimated at over US$700 million.

The financial future of America, and to a large extent, the planet, has been put in the hands of this man. He has been aptly named ‘King Henry’.

Now it is the Treasury and the people of America via their taxes that are the target for the next round of pillage. Greed knows no bounds. And the plunder from this latest assault goes straight into the coffers of those who have caused and profited by the problem they created. The pirates are rewarded and protected at the expense of their victims!

Here are a few apposite quotes:-

‘In 2004, at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by Paulson, the Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements — in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms’ reserve holdings if the SEC agreed to do so instead.
During this repeal of the net capital rule, SEC Chairman Donaldson agreed to the establishment of a risk management office that would monitor signs of future problems. This office was eventually dismantled by Chairman Cox, after discussions with Paulson. In late September 2008, Chairman Cox and the other Commissioners agreed to end the 2004 program of voluntary regulation.’ – http://en.wikipedia.org/wiki/Henry_Paulson

‘The Paulson plan is shameless cronyism at its worst. It would give tens of millions of dollars in increased profitability and share appreciation to the same people who are at the root of this mess – the partners of Goldman Sachs. It would be the mother of all moral hazards. It would be an unambiguous demonstration of the new reality in American finance that being politically connected out-trumps prudent financial stewardship.

Henry Paulson made tens of millions of dollars from the mortgage securitization business when he was at Goldman Sachs. As Treasury Secretary he stood by or actively assisted as Goldman competitors Bear Stearns, Merrill Lynch and Lehman Bros. were permitted to fail or were sold under duress to other institutions. As in the AIG bailout and those of Freddie Mac and Fannie Mae, all of these failures were managed in a way that ravaged shareholders and corporate management, but preserved the interests of counterparties.

Unlike all of the previous managed collapses and bailouts, this one would remove the distressed assets from Goldman’s balance sheet, which would immediately make it much more profitable and cause its stock price to rocket upwards.

Paulson’s proposal provided that only he gets to decide who gets the free money and under what conditions, and that no court could review his decisions. He alone would decide which firms would survive and which would not, and under what terms. He adamantly states that “protecting the taxpayer” is his paramount concern. However, at today’s Senate hearing he and Ben Bernanke blanched at the thought of requiring Paulson’s ex-partners at Goldman to give up any equity to the taxpayer in exchange for this free money.’ —

http://searchingforthetruth.typepad.com/searching_for_the_truth/2008/09/shameless-cronyism.html

‘Goldman Sachs will be able to sell some troubled assets. That fact reignited discussion about the many administration officials who are Goldman alumni. Along with the Treasury secretary, who created the plan, another former executive of the firm is Joshua Bolten, the White House chief of staff. The plans lifted Goldman’s shares 20 percent on Friday, to $129.80. ‘ – NY Times

‘Does anyone think it’s just a little weird to be stampeded into a $700 billion solution to the worst financial crisis since the Great Depression by the very people who brought us the worst financial crisis since the Great Depression?’ – NY Times”

‘Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.’ – Wikipedia

‘Mr. Paulson himself was telling us during the summer that the economy was sound, that its long-term fundamentals were “strong,” that growth would rebound by the end of the year, when most of the slump in housing prices would be over.

He has been wrong every step of the way, right up until early last week, about the severity of the economic crisis.

The free-market madmen who treated the American economy like a giant casino have had their day. It’s time to drag them away from the tables and into the sunlight of reality.’ – NY Times

Solutions that could have resolved the crisis have been avoided, as they did not favour the quicker and easier profits for the banking fraternity. Now a more fundamental approach is needed, for despite massive injections at top level, this has failed to stop the freefall of the world’s stock markets, nor has it done anything to stimulate the economy. Instead of trying to solve this problem from the top down, the other way round would benefit the people and the economy to a far greater extent. Banks, and especially small ones who lack clout, are left with debts that will probably send them to the wall and make them easy pickings for the larger and more protected ones. Soon we will have only large institutions and lack of any competition.

If instead of injecting $700 billion into underwriting bad bank debt, this money had been used to shore up the mortgagees, this would both filter back through the banks, giving them the operating capital they needed to keep the system running and also stimulate the economy from the grass roots up. After all, the banks themselves are not real estate agents, and for them to own repossessed properties in large quantities without the ability to lend money to other prospective buyers is a no-no from any point of view. Banks are in the money business, and to survive they need a cash flow. Empty houses are the antithesis of this. Apart from that, the original owners have no rights in the matter and stand to lose far more respectively than the banks. They are not seen as partners in the forcible sale of their properties and they end up the prime losers.

To solve this problem, firstly there should be a moratorium on foreclosures and repossessions, with possibly a period of grace for there to be at least some possibility that the owners of the properties will be able to raise enough money to continue. With a cut in interest rates, the burden on the householders decreases and a cash flow can recommence. But this only goes a part way to reviving the economy. Natural causes will not do it quick enough. If instead of the Treasury giving the money to the banks, if they used this money to give tax rebates to mortgagees and make the interest on their payments, up to a certain ceiling, tax deductible, this would put the money back into the system exactly where it would have the most effect.

At the same time, it would be a good idea to prevent this overvaluing of these assets and stop banks and other interested parties from artificially influencing the market. If instead a comparative value system could be devised, possibly as a computer model, taking into consideration area appeal and other influencing factors, a basic price range for all properties could be created that could be used as a valuation and lending benchmark. It is a complicated issue, but it could be done. This would stabilise the market and could possibly be used to renegotiate existing housing loans. It may be a bit of harsh medicine for the lenders now, but this is far better than the current situation we are facing of a market wipeout.

Another thing that should be a priority is to establish a central credit control authority, where all credit to any individual has to be registered. (Possibly a function of the tax office?)

Before anyone can grant additional credit to an individual, his rating must be checked as to whether he can afford it and to what limit. Mortgages, credit cards, hire purchase items, cars, court orders, etc should all be entered and the person limited to what his income will support AND allow him to live. This system exists in some European countries.

Now the BIG one. Stopping the domino effect when one major currency goes into crisis and takes all the others with it.

This problem is caused by having the world markets speculating in each other’s currencies and allowing the US Dollar to be the lynch pin of world trade. What we need is an independent trading medium not based on any particular currency but on a set of values. Basically back to a gold standard where there was some finite value about currency. (During the Nineteenth Century, the inflation over a 100 year period was minus one percent!)

If, for example, the World Bank were to create a ‘World Dollar’ and this then became the ONLY unit for foreign trade, what happens to local currencies inside their own country becomes irrelevant. Foreign currency itself would cease to become a tradable commodity, and all imports/exports would be done in terms of World Dollars. The World Bank would have a handle on trade and granting of any debt. A country would then only be able to trade within given parameters of its balance of payments. It’s internal affairs would be outside the jurisdiction of the Bank and also free from predatory international money sharks. Their currency would no longer be a subject of trade or futures markets. The World Dollar would remain fixed at the value of an international basketful of commodities. For example, regardless of local fluctuations in price, one World Dollar would always be worth a sackful of rice, or one tonne of iron ore, or ten litres of crude oil, etc. As near to a ‘gold standard’ as possible.

The only real problem with this system is that the Paulsons, who currently control the world’s finances would not like it, as it limits their ability to make the fast buck and lessens their grip on power. But they’ve had their bite of the cherry and have generally stuffed up the entire world.

Time to move on!

Barnaby Drake

Golden Valley

Author Credits: [show_post_categories parent="no" parentcategory="writers" show = "category" hyperlink="yes"]
2 Comments

2 Comments

  1. Casey

    October 20, 2008 at 8:45 pm

    …or read Hudson’s piece here..

    http://www.counterpunch.org/hudson10202008.html

    Casey.

  2. Paul de Burgh-Day

    October 19, 2008 at 4:24 pm

    Well done Barnaby!

    On this subject, all readers would do well to check out the following audio (about 1 hour).
    An outstanding exposition on this staggering heist!
    “The New Kleptocracy”
    “The Largest Financial Theft in American History”
    Must Listen Interview – – By Guns & Butter

    Economist Dr. Michael Hudson on Treasury Secretary Hank Paulson’s “Plan” passed by Congress on October 3, 2008. We discuss what is being purchased, the congressional vote, what this means for the oligarchs, and what this means for the rest of us.
    http://www.informationclearinghouse.info/article21041.htm

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top