Mortgage Fraud: A Glimmer of Hope

Here is an interview of Matt Taibbi:

How the US Plans to Nuke the Rest of the World

The SOPA/PIPA legislation is in effect a "weapon of mass destruction" that will easily destroy the world as we know it. Here is a very nice description of just how dangerous and "creepy" the proposed SOPA and PIPA laws are:



The above is just one of many, many wonderful instructional videos available from the Khan Academy.

From Wikipedia:

The Khan Academy is a not-for-profit educational organization, created in 2006 by Bangladeshi American educator Salman Khan, a graduate of MIT. With the stated mission of "providing a high quality education to anyone, anywhere", the website supplies a free online collection of more than 2,600 micro lectures via video tutorials stored on YouTube teaching Mathematics, History, Healthcare & Medicine, Finance, Physics, Chemistry, Biology, Astronomy, Economics, Cosmology and Computer Science.

Obama's Persecution of Whistleblowers

Here is a talk given by whistleblower Jesselyn Radack:



As Racack points out in the video, the chilling fact is that "supposed left-leaning" Obama has brought more charges against whistleblowers than all previous administrations combined. With "friends" like Obama, the political left has no need for enemies.

Psychopaths Are Among Us

Here is a bit from an excellent article by William D. Cohan in Bloomberg News:

Did Psychopaths Take Over Wall Street Asylum?: William D. Cohan

It took a relatively obscure former British academic to propagate a theory of the financial crisis that would confirm what many people suspected all along: The “corporate psychopaths” at the helm of our financial institutions are to blame.

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”

How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”

Go read the whole article because the reporter includes a great deal more detail about Brody's thesis.

I found the book Snakes in Suits: When Psychopaths Go to Work to be useful in exposing this problem with modern corporations. This book has Robert D. Hare as co-author. It is Hare who developed the Psychopath Check List - Revised (PCL-R) which is the standard instrument for identifying psychopaths.

Bottom line is that these monsters create havoc and ruin many, many lives:

Then, according to Boddy’s “Corporate Psychopaths Theory of the Global Financial Crisis,” these men were “able to influence the moral climate of the whole organization” to wield “considerable power.”

They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”

Boddy doesn’t name names, but the type of personality he describes is recognizable to all from the financial crisis.

He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”

And if you need more scare put into you. Here is a bit from an article in The Los Angeles Times by Andrew Malcolm:

Using his law enforcement experience and data drawn from the FBI's behavioral analysis unit, Jim Kouri has collected a series of personality traits common to a couple of professions.

Kouri, who's a vice president of the National Assn. of Chiefs of Police, has assembled traits such as superficial charm, an exaggerated sense of self-worth, glibness, lying, lack of remorse and manipulation of others.

These traits, Kouri points out in his analysis, are common to psychopathic serial killers.

But -- and here's the part that may spark some controversy and defensive discussion -- these traits are also common to American politicians. (Maybe you already suspected.)

Yup. Violent homicide aside, our elected officials often show many of the exact same character traits as criminal nut-jobs, who run from police but not for office.

Kouri notes that these criminals are psychologically capable of committing their dirty deeds free of any concern for social, moral or legal consequences and with absolutely no remorse.

"This allCapitol Hill Domeows them to do what they want, whenever they want," he wrote. "Ironically, these same traits exist in men and women who are drawn to high-profile and powerful positions in society including political officeholders."

Good grief! And we not only voted for these people, we're paying their salaries and entrusting them to spend our national treasure in wise ways.

Excusing Rogue Cops

Here is a nice post on The Agitator blog citing a new low in police "professionalism" in the US:

Maybe there’s a legitimate law enforcement reason to strip a man naked, strap him to a chair, tie a “spit hood” around his mouth, put a hood over his head (see video at the link), and douse him with pepper spray until he dies. That’s what sheriff’s deputies in Lee County, Florida did to 62-year-old Nick Christie two-and-a-half years ago.


I certainly can’t think of any such legitimate reason. But Lee County State’s Attorney Stephen Russell apparently can. Because he cleared the deputies involved of any wrongdoing.

Christie’s family just filed a lawsuit.

The cop's crime is obvious. But the more insidious crime is the State Attorney who looked but could find no "crime" in this brutal case.

New Rules for the New Economy

Rule #1: He who writes the rules owns the gold.

Here is a bit from an article by Simon Johnson that rips into the insanity of the US government letting the big banks make big bucks on their housing bubble fraud but then demanding that the little guy, the taxpayer, first fork over billions to "make whole" the fraudulent banks, then stand by and look down at our feet while the big bank's top people get billions in bonuses, then go through a charade of "law enforcement" where the bankers get off the hook with pitifully small fines for bad behaviour and no jail time:

Santa Claus came early this year for four former executives of Washington Mutual (WaMu), a large US bank that failed in fall 2008. The Federal Deposit Insurance Corporation (FDIC) had brought a lawsuit against the four, actions that included taking huge financial risks while “knowing that the real estate market was in a ‘bubble.’” The FDIC sought to recover $900 million, but the executives have just settled for $64 million, almost all of which will be paid by their insurers; their out-of-pockets costs are estimated at just $400,000.

To be sure, the executives lost their jobs and now must drop claims for additional compensation. But, according to the FDIC, the four still earned more than $95 million from January 2005 through September 2008. So they are walking away with a great deal of cash. This is what happens when financial executives are compensated for “return on equity” unadjusted for risk. The executives get the upside when things go well; when the downside risks materialize, they lose nothing (or close to it).

Here is the problem with the current "system" that is shafting the 99%:

But capitalism without the prospect of failure is not any kind of market economy. We are running a large-scale, nontransparent, and dangerous government subsidy scheme for the benefit primarily of a very few, extremely wealthy people.

Jon Huntsman, a candidate for the Republican presidential nomination, is addressing this directly – insisting that we should force the largest banks to break up and to become safer. No other candidate for the presidency is seriously confronting this issue head-on: just saying “we’ll let them fail” is no kind of answer when the failure of megabanks would cause so much damage.

We should learn from both the WaMu and the Occupy movement. In both cases, the lesson is the same: concentrated financial power is a gift that keeps on giving – but not to you.

The Sleaze that Passes for Politics in America

Here are some bits from a NY Times op-ed by Paul Krugman exposing the cynical manipulation of truth by Republicans, Romney in particular:

Suppose that President Obama were to say the following: “Mitt Romney believes that corporations are people, and he believes that only corporations and the wealthy should have any rights. He wants to reduce middle-class Americans to serfs, forced to accept whatever wages corporations choose to pay, no matter how low.”

How would this statement be received? I believe, and hope, that it would be almost universally condemned, by liberals as well as conservatives. Mr. Romney did once say that corporations are people, but he didn’t mean it literally; he supports policies that would be good for corporations and the wealthy and bad for the middle class, but that’s a long way from saying that he wants to introduce feudalism.

But now consider what Mr. Romney actually said on Tuesday: “President Obama believes that government should create equal outcomes. In an entitlement society, everyone receives the same or similar rewards, regardless of education, effort, and willingness to take risk. That which is earned by some is redistributed to the others.”

And in an interview the same day, Mr. Romney declared that the president “is going to put free enterprise on trial.”

This is every bit as bad as my imaginary Obama statement. Mr. Obama has never said anything suggesting that he holds such views, and, in fact, he goes out of his way to praise free enterprise and say that there’s nothing wrong with getting rich. His actual policy proposals do involve a rise in taxes on high-income Americans, but only back to their levels of the 1990s. And no matter how much the former Massachusetts governor may deny it, the Affordable Care Act established a national health system essentially identical to the one he himself established at a state level in 2006.

Over all, Mr. Obama’s positions on economic policy resemble those that moderate Republicans used to espouse. Yet Mr. Romney portrays the president as the second coming of Fidel Castro and seems confident that he will pay no price for making stuff up.

Welcome to post-truth politics.

...

So here’s my forecast for next year: If Mr. Romney is in fact the Republican presidential nominee, he will make wildly false claims about Mr. Obama and, occasionally, get some flack for doing so. But news organizations will compensate by treating it as a comparable offense when, say, the president misstates the income share of the top 1 percent by a percentage point or two.

The end result will be no real penalty for running an utterly fraudulent campaign. As I said, welcome to post-truth politics.

If there were any justice in the world, this farce that passes for politics would quickly lead to the complete collapse of America. Instead, the Republicans have been pulling this fraud for 30+ years and the only penalty has been a slow decay within America and a slow collapse of their economy. And the electorate continues like sheep to the slaughter. They don't complain. They keep electing these liars to positions of power, to positions that let them enrich the top 1% at the expense of the bottom 99%.

America, Land of the Freely Arrested

From an article in the NY Times:

By age 23, almost a third of Americans have been arrested for a crime, according to a new study that researchers say is a measure of growing exposure to the criminal justice system in everyday life.

The study, the first since the 1960s to look at the arrest histories of a national sample of adolescents and young adults over time, found that 30.2 percent of the 23-year-olds who participated reported having been arrested for an offense other than a minor traffic violation.

...

The study did not look at racial or regional differences, but other research has found higher arrest rates for black men and for youths living in poor urban areas.

I have to laugh. Americans love to beat their chest and proclaim their "love of liberty" but they arrest and incarcerate at a rate far beyond almost every other country in the world except for the handful of despot dictatorships. You would think this report would force Americans to look in the mirror. Their myth of "freedom loving" doesn't match up with their eagerness to jail. It is much like the Founding Fathers prating on about "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. while being one of the worse slavery-based societies on the face of the earth.

Understanding the Bank Bailouts

Here is one of the best explanations of how to understand the real effects of the bank bailouts, a post by Steve Randy Waldman on the blog The Big Picture:

Yes, Virginia, the banks really were bailed out.

by Guest Author

Steve Randy Waldman writes the blog interfluidity. His take is usually away from the mainstream, and always interesting.

~~~

I find it really depressing that I have to write this. But it seems I have to write it.

Substantially all of the TARP funds advanced to banks have been paid back, with interest and sometimes even with a profit from sales of warrants. Most of the (much larger) extraordinary liquidity facilities advanced by the Fed have also been wound down without credit losses. So there really was no bailout, right? The banks took loans and paid them back.

Bullshit.

Suppose you buy fire insurance from Inflammable Insurance. You pay $1000 for a year of insurance. There is no fire, so you make no claim. Next year, you find a different provider offering a better price, and you switch.

Soon after your relationship has ended, you discover that Inflammable failed to pay any claims at all during the year you were insured, because all customer premiums were diverted to the Cayman Islands and then spent on kiddy porn and Pez. Were you defrauded? Do you have any cause for complaint? After all, ex post your cash flows turned out to be the same as if you had been dealt with fairly.

Of course you have been defrauded. You did not get what you had paid for. You had paid for Inflammable to bear risk on your behalf. It did not do so. The money you paid was simply stolen.

In financial markets, risk-bearing is the ultimate commodity. It is what financial market participants buy and sell. As a financial speculator, I spend exorbitant amounts of money buying out-of-the-money options to limit my downside risk. The vast majority of those options expire worthless, just like the vast majority of fire insurance policies end with no claims paid. If only someone would give me all those options for free, or sell them to me for half the market price, or reimburse the cost of the options that I never end up using, I would be rich. Seriously, given the years I’ve been in this game, I’d be pretty set if I had my option premiums back. It doesn’t seem fair at all that I am confined to a modest middle-class life because I had to buy all this insurance I never used.

Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) lent to financial institutions at or near risk-free interest rates against sketchy collateral (directly or via guarantee); 3) purchased preferred shares at modest dividend rates under TARP; 4) publicly certified the banks with stress tests and stated “no new Lehmans”. By these actions, the state assumed substantially all of the downside risk of the banking system. The market value of this risk-assumption by the government was more than the entire value of the major banks to their “private shareholders”. On commercial terms, the government paid for and ought to have owned several large banks lock, stock, and barrel. Instead, officials carefully engineered deals to avoid ownership and control.

But still. Everything worked out, right? It turns out that banks didn’t need to use the government’s giant insurance policy. It was just a panic after all!

Bullshit.

Suppose my kid’s meth habit got the best of him. He’s needs to come up with $100K quick or his dealer’s gonna whack him. But he’s a good kid, really! Coulda happened to anyone. So I “lend” him the money, even though he has no visible means of support and the sketchiest loan sharks in town wouldn’t give him the time of day. Now I believe in bootstraps and hard work, individualism and self-reliance. So I tell my son. “Son, you are going to pay me back every penny of that loan. You are going to work it off. I have arranged with one of my golf buddies, a guy who owes me a favor or three, a job that pays $200K a year. You’d better show up every day at 9 a.m. and sit behind that desk, and get me back my money!” And he does! After a year, he’s made me whole. What a good kid.

No bail out, right? He paid me back every penny! Worked it off!

Bullshit. The opportunity I provided him, the $200K job that he would not otherwise received without my intercession was a huge grant. On the open market, if I were to accept bribes from the highest bidder to wangle the job from my friend, that opportunity would be worth more than the $100K advanced. I paid my son’s loan with my own money. I just obscured the cash flows, so my son and I can pretend and sustain our mutual self-regard and our righteous disdain for the moochers and the hippies and the riff-raff.

After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health. The government provided famous and obvious transfers like paying unwinding AIG swaps at 100¢ on the dollar. It forced short-term yields to zero and created an environment in which medium-term interest rates would be capped for several years, granting banks a near-risk-free arbitrage for a while. It emitted trillions in excess reserves on which it continues to pay interest. It forewent investigations and prosecutions that by law it should actively pursue, and settled what enforcement it could not avoid for token fees. Then there are the things conspiracy theorists and cranks like me suspect but cannot prove: that the government and the Fed have been less than aggressive in minimizing their costs when they or entities they controls (AIG, Fannie, Freddie) transact with large banks, that they have left money on the table where doing so could be hidden in arcane accounts or justified as ordinary transaction expenses and trading losses. Large banks have enjoyed some rather extraordinary results for allegedly efficient markets, quarters with large trading profits and no or very few losing days. Government housing policy is pretty overtly subject to a constraint that interventions must not provoke loss realizations for banks carrying bad loans at inflated values, or interfere with servicing revenues. (If you think I am overconspiratorial, I’m still waiting for an innocent explanation of this, from 1991.)

Pulling back from a shell game whose details are, by design, labyrinthine, check out the big picture. Since the beginning of the 3rd quarter of 2008 (Lehman quarter), US debt held by the public increased by 84%, from $5.28T to $9.75T (as of the end of Q2 2011). Depending on where you start, the growth rate of publicly held US debt prior to Q3 2008 had been ~8% per year (starting in 1970 or 1980) or ~4.5% (starting in 1990 or 2000). The growth rate since Q3-2008 has been 22.6% per year. The United States has issued between $3T and $4T more debt than would have been predicted by any reasonable estimate prior to the financial crisis. So far.

Hyman Minsky famously described crisis stabilization as a two-step process: First, the state/central-bank steps in as lender of last resort to halt the panic. Then the state must underwrite a program of massive deficit spending in order to “validate” — Minsky’s word — the fragile capital structures and the “innovative” business practices that proliferate during periods of tranquility.

Translating into current buzzwords, when the trouble begins there is a solvency crisis. It is converted into a liquidity crisis ex post by a firehose of net spending by the state. The current crisis has followed Minsky’s script perfectly. Banks’ ability to “pay back” bailouts has depended upon continued regulatory forbearance, tacit expectations of support if shit hits the fan again, and massive government debt issuance which resuscitated assets that would otherwise be worthless.

But who has lost anything from the bailouts? Wasn’t it a win-win? This all sounds very abstract. Where are the transfers?

If the government borrowed or printed a trillion dollars and gave the money to me, would there be any losers? If you don’t think there has been a wealth transfer, if you don’t think ordinary people have lost, please call your Congressperson and ask her to cut me a trillion dollar check. In some abstract sense, this policy of giving me money would push government debt higher. But that is so very vague a cost! I promise I’d do great things with a trillion dollars. My ideas are so much cooler than Goldman Sachs’, despite all the wholesome commercials they are running.

During the run-up to the financial crisis, bank managers, shareholders, and creditors paid themselves hundreds of billions of dollars in dividends, buybacks, bonuses and interest. Had the state intervened less generously, a substantial fraction of those payouts might have been recovered (albeit from different cohorts of stakeholders, as many recipients of past payouts had already taken their money and ran). The market cap of the 19 TARP banks that received more than a billion dollars in assistance is about 550B dollars today (even after several of those banks’ share prices have collapsed over fears of Eurocontagion). The uninsured debt of those banks is and was a large multiple of their market caps. Had the government resolved the weakest of those banks, writing off equity and haircutting creditors, had it insisted on retaining upside commensurate with the fraction of risk it was bearing on behalf of stronger banks, the taxpayer savings would have run from hundreds of billions to a trillion dollars. We can get into all kinds of arguments over what would have been practical and legal. Regardless of whether the government could or could not have abstained from making the transfers that it made, it did make huge transfers. Bank stakeholders retain hundreds of billions of dollars against taxpayer losses of the same, relative to any scenario in which the government received remotely adequate compensation first for the risk it assumed, and then for quietly moving Heaven and Earth to obscure and (partially) neutralize that risk.

The banks were bailed out. Big time.

When Obama initially took power and said that he wasn't going to "look back" and only "look forward", i.e. not pursue criminal charges against the Bush administration (or Wall Street). I was happy to go along because I thought Obama would have the guts and drive to set the economy right and help out the suffering populace. But over the past 3 years I've watched as Obama has done half measures, failed to do the substantive hard work to help the broad population while shielding the wrong doers, I've lost patience. Obama is a huge disappointment. He has failed the American people. It is time to get tough on the criminals in the Bush administration and on Wall Street. A thorough house cleaning is needed. Real change must come to America!

Taibbi on the Two-Tier Legal System in the US

Here is a bit from an excellent post by Matt Taibbi in his Rolling Stone blog:

In one of the more severe judicial ass-whippings you’ll ever see, federal Judge Jed Rakoff rejected a slap-on-the-wrist fraud settlement the SEC had cooked up for Citigroup.

I wrote about this story a few weeks back when Rakoff sent signals that he was unhappy with the SEC’s dirty deal with Citi, but yesterday he took this story several steps further.

Rakoff’s 15-page final ruling read like a political document, serving not just as a rejection of this one deal but as a broad and unequivocal indictment of the regulatory system as a whole. He particularly targeted the SEC’s longstanding practice of greenlighting relatively minor fines and financial settlements alongside de facto waivers of civil liability for the guilty – banks commit fraud and pay small fines, but in the end the SEC allows them to walk away without admitting to criminal wrongdoing.

This practice is a legal absurdity for several reasons. By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.

...

Judge Rakoff blew a big hole in that practice [the SEC’s longstanding practice of greenlighting relatively minor fines and financial settlements alongside de facto waivers of civil liability for the guilty – banks commit fraud and pay small fines, but in the end the SEC allows them to walk away without admitting to criminal wrongdoing] yesterday. His ruling says secret justice is not justice, and that the government cannot hand out punishments without telling the public what the punishments are for. He wrote:

Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances.

Notice the reference to how things are “in much of the world,” a subtle hint that the idea behind this ruling is to prevent a slide into third-world-style justice.

...

Here’s a clip of me talking about the ruling last night on Countdown with Keith Olbermann.

Since Obama and his Attorney General aren't willing to treat crime seriously, hopefully the courts will step up and give the American people some justice.

William Black Addresses Occupy LA

This is well worth listening very carefully to:



The tragedy is that Obama had the chance to take office and clean up the corruption. But he didn't. He allowed the Bush admin to walk away scott free. He has allowed fraudulent corporations to avoid justice. These crimes are behind the growing inequality in the US.

Right Wing Hysteria

The political right is in thrall to the ultra-rich who are always horrified by inflation because it can eat up their piles of money as a "hidden tax". But the reality is that, despite record deficits, the bond market is signaling no fear of inflation. But despite that, the Federal Reserve (and more especially the European Central Bank) are still rigorously fighting "inflation" while their economies erode into depression and inflation soars.

Here is a bit by PBS's Paul Solman:

... checking with NYU's celebrated economic historian Richard Sylla, we find that today's rates are astonishingly close to the lowest in the entire history of the United States: 1.85 percent, the nadir reached in late 1941. That was the record, I should say -- until September 22, when the 10-year U.S. interest rate plunged briefly to 1.695 percent.

So what's going on? Well, rather obviously, investors are a lot more worried about the credit of Greece -- or Spain or Italy -- than ours. Investors are also more worried about stock investments. Investors are also more worried about almost any other asset into which they might put their money.

Investors also seem pretty sure that U.S. inflation is not going to be a problem anytime soon. If inflation scared them, they'd hardly let the United States lock in an interest rate of less than 2 percent for an entire decade.

So then why isn't it plausible to draw the following conclusion: that U.S. interest rates have been going in the "wrong" direction because investors are scared that the U.S. is going to reduce its debt and deficits, and such a reduction might horse-collar the world economy?

In other words, might the true story plausibly be a complete contradiction of what is regularly reported? That's what Nobel laureate Paul Krugman of the New York Times has regularly argued, but his "opinion" hasn't managed to leak into everyday coverage.

Obama needs a massive WPA program. In fact the whole developed world needs to do deficit spending to revive the economy. In the meantime, they should re-regulate the bank with even more severe regulations than were brought in post-Great Depression and the bankers of the 1990-2008 era should all be jailed with long, long sentences. These thieves stole trillions of dollars from the bottom 99%. They make Bernard Madoff look like a piker and the corner store robber a joke. The real crime in America is in the boardroom and the legal system needs to go after these malfactors with a vengeance.

Instead of "inflation" being the enemy of the country, the real enemy is austerity imposed by the political right and their ultra-rich patrons, the 0.01%. The financial reality is that bond prices are showing deflation and into "inflation" as the biggest threat to America:

The United States has to pay less than two percent to borrow money for 10 years? That's anti-Chicken Little. Not the sky falling, but the interest rate plummeting. Exactly the opposite of all the dire warnings.

Okay, but we need a little context. How far has the rate fallen? Let's go to Yahoo! Finance for a chart. There, on the right, is a blue chart of the 10-year rate over the past year. OMG! It's down from 3.5 percent since about April. April. What happened in April?

Oh, right. S&P downgraded U.S. debt. (See note.) But wait a second. The bond vigilantes should then have forced us to raise our interest rate. Instead, they lowered it?

Okay, maybe April was an anomaly. So click on "5y" under the chart for a view of the rate over the past five years. Can it be? It looks like the 10-year rate is at the lowest point over the entire period! Lower even than in the depths of despair, the post-Lehman crash of late 2008.

One more attempt at context. Go to Bob Shiller's online chart, then open the Excel file to which this links. You'll find a chart of stock prices, in blue, and the 10-year bond rate, in red, reaching back into the nineteenth century. You'll note that today's 1.97 percent is about as low as our interest rate has ever sunk since at least 1880.

Reclaiming America

Here is Lawrence Lessig on a new coalition to educate Americans about the corrupting influence of big money in politics and their society:

Lawrence Lessig Welcomes Rootstrikers to United Republic from Rootstrikers on Vimeo.

More details at unitedrepublic.org.

What Passes for "Justice" in America

From a post by Matt Taibbi on his Rolling Stone blog:

Woman Gets Jail For Food-Stamp Fraud; Wall Street Fraudsters Get Bailouts

Had a quick piece of news I wanted to call attention to, in light of the recent developments at Zuccotti Park. For all of those who say the protesters have it wrong, and don’t really have a cause worth causing public unrest over, consider this story, sent to me by a friend on the Hill.

Last week, a federal judge in Mississippi sentenced a mother of two named Anita McLemore to three years in federal prison for lying on a government application in order to obtain food stamps.

Apparently in this country you become ineligible to eat if you have a record of criminal drug offenses. States have the option of opting out of that federal ban, but Mississippi is not one of those states. Since McLemore had four drug convictions in her past, she was ineligible to receive food stamps, so she lied about her past in order to feed her two children.

The total "cost" of her fraud was $4,367. She has paid the money back. But paying the money back was not enough for federal Judge Henry Wingate.

Wingate had the option of sentencing McLemore according to federal guidelines, which would have left her with a term of two months to eight months, followed by probation. Not good enough! Wingate was so outraged by McLemore’s fraud that he decided to serve her up the deluxe vacation, using another federal statute that permitted him to give her up to five years.

He ultimately gave her three years, saying, "The defendant's criminal record is simply abominable …. She has been the beneficiary of government generosity in state court."

Compare this court decision to the fraud settlements on Wall Street. Like McLemore, fraud defendants like Citigroup, Goldman Sachs, and Deutsche Bank have "been the beneficiary of government generosity." Goldman got $12.9 billion just through the AIG bailout. Citigroup got $45 billion, plus hundreds of billions in government guarantees.

All of these companies have been repeatedly dragged into court for fraud, and not one individual defendant has ever been forced to give back anything like a significant portion of his ill-gotten gains. The closest we've come is in a fraud case involving Citi, in which a pair of executives, Gary Crittenden and Arthur Tildesley, were fined the token amounts of $100,000 and $80,000, respectively, for lying to shareholders about the extent of Citi’s debt.

Neither man was forced to admit to intentional fraud. Both got to keep their jobs.

Anita McLemore, meanwhile, lied to feed her children, gave back every penny of her "fraud" when she got caught, and is now going to do three years in prison. Explain that, Eric Holder!

Here’s another thing that boggles my mind: You get busted for drugs in this country, and it turns out you can make yourself ineligible to receive food stamps.

But you can be a serial fraud offender like Citigroup, which has repeatedly been dragged into court for the same offenses and has repeatedly ignored court injunctions to abstain from fraud, and this does not make you ineligible to receive $45 billion in bailouts and other forms of federal assistance.

This is the reason why all of these settlements allowing banks to walk away without "admissions of wrongdoing" are particularly insidious. A normal person, once he gets a felony conviction, immediately begins to lose his rights as a citizen.

But white-collar criminals of the type we’ve seen in recent years on Wall Street – both the individuals and the corporate "citizens" – do not suffer these ramifications. They commit crimes without real consequence, allowing them to retain access to the full smorgasbord of subsidies and financial welfare programs that, let’s face it, are the source of most of their profits.

Why, I wonder, does a bank that has committed fraud multiple times get to retain access to the Federal Reserve discount window? Why should Citigroup and Goldman Sachs get to keep their status as Primary Dealers of U.S. government debt? Are there not enough banks without extensive histories of fraud and malfeasance that can be awarded these de facto subsidies?

Go read the original post to get all the embedded links. These are worth following up. You need to really appreciate the "tilt" of justice in America. The makes all too obvious that there is one "justice" for the 99% and a very different "justice" for the 1%.

What surprises me is that most people don't join the protests. They simply put up with the vast and ugly injustice in American life. They continue to hope for a better day, a fairer deal. But it is a fruitless hope. Only if there is profound change in America will the bottom 99% get a chance to improve their lot. They need to fight so that they can get a fair piece of the economic pie. For 30+ years under Republican rule, the rich have gotten fabulously wealthy while the middle class has treaded water and the poor have actually become poorer. Tragic.

"Honest" Graft in the US Congress

Here is a video from CBS News that reviews the corruption and graft among pretty well everybody in Congress. If you can put up with all the intrusive commercials by CBS, watch this:



This video includes all kind of "assurances" by the politicians that they "never traded on any non-public information" while all the details in this financial affairs makes it very clear that they have an extraordinary ability to make financial transations just after their public role gives them access to non-public information. What an odd coincidence. And they all put their hands over their hearts and assure the public that they are as honest as the day is long. And the fact that they make millions while in office off these "lucky" trades is simply beyond credibility. They are corrupt. Thoroughly corrupt.

The CBS report is based on this book by Peter Schweizer:

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Matt Taibbi Sees a Glimmer of Hope

In his Rolling Stone blog, Matt Taibbi sees the first sign that the judicial system is standing up to the corrupt banks and the collusion of the Obama administration with corruption on a monumental scale:

Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.

The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.

This case was similar, but worse. Here, Citi similarly told investors a package of mortgages had been chosen independently, when in fact Citi itself had chosen the stuff and was betting against the whole pile.

This whole transaction actually combined a number of Goldman-style misdeeds, since the bank both lied to investors and also bet against its own product and its own customers. In the deal, Citi made a $160 million profit, while its customers lost $700 million.

Goldman, in the Abacus case, got fined $550 million. In this worse case, the SEC was trying to settle with Citi for just $285 million. Judge Rakoff balked at the settlement and particularly balked at the SEC’s decision to allow Citi off without any admission of wrongdoing. He also mocked the SEC’s decision to describe the crime as “negligence” instead of intentional fraud, taking the entirely rational position that there’s no way a bank making $160 million ripping off its customers can conceivably be described as an accident.

“Why should the court impose a judgment in a case in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?” And this: “How can a securities fraud of this nature and magnitude be the result simply of negligence?”

Rakoff of course is right – the settlement is nuts. If you take Citi’s $160 million profit on the deal into consideration, what we’re talking about then is a $125 million fine for causing $700 million in damages. That, and no admission of wrongdoing.

...

So to recap: a unit of Citigroup, having repeatedly violated the same laws and having repeatedly violated the SEC’s own cease-and-desist orders and injunctions, is dragged into court one more time for committing a massive fraud.

And what does the SEC do? It doesn’t even bring up Citi’s history of ignoring the SEC’s own order, slaps the bank with a fractional fine, refuses to target any individuals, allows the bank to walk away without an admission of wrongdoing, and puts a cherry on the top by describing the $160 million heist not as a crime, but as unintentional negligence.

There is a lot more in Taibbi's post. Go read the whole thing.

I sure hope Matt Taibbi is right and that this is the dawning of a new day, a better day for America. But I'm pretty pessimistic given the craven political position of the Republicans as the party of the 0.01%, the Obama administration as a handmaiden to crime and corruption, and the spineless behaviour of the Democrats. It is nice to hope that 1 out or 3 branches of government is recovering its senses and will put up a fight to protect the bottom 99%, but it is way to early to believe in real change and 1 out of 3 is still a losing position!

... and here is Matt Taibbi in a different post on his Rolling Stone blog taking on the corrupt politics that is so intent on shoveling big bucks to the fraudsters and criminals while squeezing the life blood out of the bottom 99%:

David Brooks, the [gratuitous insult deleted], wrote this this morning entitled "Mitt Romney, the Serious One." In it, he explained how Romney’s recent decision to unveil a plan for reforming the entitlement system "demonstrates his awareness of the issues that need to define the 2012 presidential election."

Romney grasped the toughest issue – how to reform entitlements to avoid a fiscal catastrophe – and he sketched out a sophisticated way to address it.

So we had a giant financial crash in 2008 that necessitated a bailout costing a minimum of nearly $5 trillion and perhaps ultimately costing $10 trillion more, we have foreclosure crisis with more than million people a year losing their homes, and we have a burgeoning European debt disaster that threatens to devastate the global financial system – and the chief issue facing the country, according to Brooks and the Times, is reforming the entitlement system?

The column goes on to throw bouquets on Romney’s plan to semi-privatize Medicare and Social Security. Romney’s ideas are not as draconian as Paul Ryan's, but they do pave the way for Wall Street’s ultimate goal – full privatization of Social Security and Medicare.

Think about what such reforms might mean. Your typical Medicare/Social Security recipient might already have been ripped off three different ways in this era.

He might have been sold a crappy mortgage or a refi by a Countrywide-type firm (which often targeted the elderly). He might then also have unwittingly become an investor in such mortgages and seen the value of his retirement holdings devastated (many of the banks sold their crappy mortgage-backed securities to state pension funds).

Lastly, if he paid taxes, he saw part of his tax money go to pay off the bets the banks made against these same mortgages.

So now that Wall Street has ripped off this segment of society three times, it makes all the sense in the world that Mitt Romney – a former Wall Street superstar who was a chief architect of the modern executive-compensation-driven corporation – is coming back and telling us that we need to cut their Medicare and Social Security benefits in order to defray the cost of the previous three scams.

...

Advocating the turning over of Social Security management to Wall Street after the 2008 crash is a little like asking Paris Hilton to pilot Air Force One, or tabbing Charlie Sheen to manage the inventory of a hospital pharmacy – completely nuts, but to David Brooks, that makes Mitt Romney the “serious” candidate.

Again, go and read the original post to get the whole article as well as the embedded links to referenced material. It is well worth your while.

It is utterly depressing to read Matt Taibbi's exposés. But it is essential reading. The only way to stop the rot, corruption, and criminality is to understand what is happening and individually decide "enough!" and then band together through democratic agitation to stop the agenda to destroy the bottom 99%. The Occupy Wall Street is but one manifestation of what is needed. Much more is needed. Democracy is messy, it is slow to get riled, and it works in mysterious ways, but it is the only tool guaranteed to effect real change. The idiots calling for "revolution" are asking for blood on the streets and failure. Real change is slow, painful, and democratic.

Barry Ritholtz Goes After the Big Lie

Here is a bit from an excellent article in the Washington Post by Barry Ritholtz. His anger is vented at those who push the big lie that it was the political left in Congress who created the 2008 financial crisis. They are selling the big lie that it was social policies to encourage broader home owning that caused the collapse, not rampant fraud and criminality by the mortgage brokers, the Wall Street banks, the ratings agency, and the completely negligent regulation by authorities responsible for regulating the banks:

One group has been especially vocal about shaping a new narrative of the credit crisis and economic collapse: those whose bad judgment and failed philosophy helped cause the crisis.

Rather than admit the error of their ways — Repent! — these people are engaged in an active campaign to rewrite history. They are not, of course, exonerated in doing so. And beyond that, they damage the process of repairing what was broken. They muddy the waters when it comes to holding guilty parties responsible. They prevent measures from being put into place to prevent another crisis.

Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.

A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.

Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.

Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.

The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

What made his comments so stunning is that he built Bloomberg Data Services on the notion that data are what matter most to investors. The terminals are found on nearly 400,000 trading desks around the world, at a cost of $1,500 a month. (Do the math — that’s over half a billion dollars a month.) Perhaps the fact that Wall Street was the source of his vast wealth biased him. But the key principle of the business that made the mayor a billionaire is that fund managers, economists, researchers and traders should ignore the squishy narrative and, instead, focus on facts. Yet he ignored his own principles to repeat statements he should have known were false.

Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.

Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street.

Go read the Ritholtz article and get yourself innoculated to the big lie technique that is being used to exculpate the malfactors while blaming minor actors with a negligible role in this massive crime. Hitler was the master of the Big Lie, but these shysters of Wall Street and their supporters are veritable masters at the technique as well.

Rule of Law Will Now be Attempted in the US

One of the foundation stones of civilization, going back thousands of years, is that a state is sound and mature only when it is under the rule of law, i.e. the code of conduct is in fact codified and enforced.

It appears that the US is about to try to stop being a rogue state, a criminal haven, and attempt to live under the 'rule of law'. Here is a video clip of a Dylan Rattigan show talking about the current attempt to bring fraudulent banks under control and impose the rule of law on them:



It is going to be awfully hard for the top 0.1% in the US to accept that the glory days of buying and selling politicians may be coming to an end, that the running of a two-tier legal system where billionaries get a 'get out of jail free card' while the bottom 99.9% feel the heavy hand of a country with the highest incarceration rate in the world might go under.

The rampant criminality where banks commit massive fraud, create a bubble, then let the world's economy go down the drain while the bankers continue to collect billion dollar bonuses may finally be coming to an end. No thanks to Obama. His administration, like the Bush and preceding administrations, has been a total tool of the criminal elite in the US. This push for the 'rule of law' is coming from the state attorney generals. Finally!

The US may finally be stepping back from the brink, from its banana republic, rogue state, criminal enterprise collapse, back into the family of nations where law is above greed. Maybe. We will have to watch this closely.

How $700 Billion in Bad Debts Destroyed the World Economy

Want to understand how $700 billion in bad loans could take down a $14 trillion US economy and a $70 trillion world economy?

In an infamous speech on May 17, 2007 Ben Bernanke assured the world that the size of "bad loans" was limited and any problem with defaults would be "contained" and not have a big effect on the world's economy:

All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.

But as Matt Taibbi points out, the banks took that bad debt and effectively xeroxed it again and again makes copy after copy that it sold into the world's "derivatives" market ballooning the real losses up into trillions and trillions that were untraceable because the idiot US government under Greenspan, Bernanke, Summers, Rubin, and Geithner refused to regulate the derivatives markets despite the efforts by Brooksley Born to try and regulate it.

Here is the relevant bit from a post by Matt Taibbi on his Rolling Stone blog. Look at the bolded bit for the key fact:

Apparently people feel that by explaining how the banks profited from the explosion of subprime home loans, I’m somehow letting the ordinary homeowner who over-borrowed off the hook.

But the question was never, Do ordinary homeowners share any blame for the crisis? The question, as implicitly posed by Bloomberg, was, Is it true that the banks had NO blame for the crisis?

We can all argue about how big of a slice of the blame pie should be doled out to other actors – the irresponsible homeowner, the corrupted ratings agency analyst, the sleeping regulator, the do-gooder liberal congressman, etc. – later on. But what the mayor said, and Wall Street flaks have been saying for years, is that the banks shouldn’t eat any of that pie, and that they only made those loans because they were forced to, by Barney Frank and Franklin Raines and other such liberal meddling kids.

So let’s examine that for a minute.

For one thing, we know, because of investigations like Carl Levin’s inquiry into Washington Mutual and its subsidiary Long Beach, that these banks were often well aware that fly-by-night lenders like Countrywide and Long Beach were committing fraud on a massive scale – and bought their loans anyway, knowing they could still sell them off on the secondary market.

In 2005, for instance, Washington Mutual did an internal audit of two of Long Beach’s biggest offices, one in Downey, California, and one in Montebello, California. They found that 53 percent of the Downey loans involved some type of fraud, while the number in Montebello was 83 percent. The internal investigation drummed up the usual litany of unsafe financial sexual practices, using white-out to disguise low income levels, cutting and pasting info from good borrowers onto the loan applications of less worthy applicants, and so on.

So you know what WaMu did about all that fraud they found? Zip.

The company overrode its auditors and sold those phony loans off into the market anyway. And internally, they did nothing to change lending practices. WaMu did a follow-up investigation in 2007, and found the fraud rate at Montebello was still 62 percent.

So forget about the banks being dragged, kicking and screaming, to take on even legitimate loans for unworthy, overextended homeowners. Not only did the banks willingly take on every conceivable real home loan, government-backed or not – they even wanted the fraudulent loans, the loans that were not just likely to fail but virtually guaranteed to fail.

Why? Because they could. Because they were making huge profits hawking these bad loans to third-party customers who didn’t know what they were buying.

But here's the real kicker: when the banks milked the Countrywides and Long Beaches dry, and ran out of real people with pulses to lend homes to, they went out and made derivative copies of those "unworthy” lenders supposedly forced upon them by Barney Frank, and sold those copies off on the secondary market.

In other words, they were so “reluctant” to give that Oakland janitor a house that once they had his loan on their books, they promptly Xerox-copied him in the form of synthetic derivatives (essentially, bets on his home loan) and sold him off in five, ten, fifteen different directions. Janitor takes out home loan, bank tells two friends, and those friends tell two friends, and so on, and so on. The banks sold every one of those endlessly-replicating little squares and made cold hard cash each time.

You remember that notorious Abacus deal that Goldman Sachs was involved with, the one in which a pair of European banks, the Dutch bank ABN-Amro and the German Bank IKB, lost a billion dollars buying a portfolio of designed-to-fail mortgage-backed instruments hand-picked by a short selling billionaire named John Paulson?

Well, that portfolio that Goldman and Paulson dumped on those two banks was not, in fact, a portfolio of real subprime home loans. It was a synthetic CDO – a giant package of bets on subprime home loans.

Mike Bloomberg wants you to believe the banks didn’t want anything to do with those unworthy borrowers. Yet in reality, the banks not only went to every conceivable length to take on the home loans of those subprime borrowers, they actually invented new technology to make clones of those Barney Frank debtors.

And there were thousands upon thousands of those synthetic deals, meaning each and every of those deadbeat subprime borrowers have been Xeroxed by the banks fifty or a hundred times over, and are flying around the globe to this day as toxic assets.

Nomi Prins pointed out in her book It Takes a Pillage that we could have paid off every subprime loan in America at the start of the crisis for about $1.4 trillion dollars. But the bailouts ended up being four, five, perhaps as much as ten or twelve times that size.

Why? Because we weren’t paying off the underlying loans of those subprime, personal-responsibility-deficient homeowners. We were paying off the banks' bets on those loans. We were adopting all those clones they made.

Anyway, there's is a massive gap between making a bad decision with one’s personal finances and committing criminal fraud in billion-dollar amounts. Morally, the two acts are not even in the same universe.

The real crime is that Bush's administration refused to regulate the financial system and the Obama administration has refused to clean up Bush's mess and prosecute the trillion dollar fraud that destroyed the world's economy.

Why Are People Demonstrating in the Street

Here's a very simple, dollars-and-cents reason why the American people are angry and the Occupy Wall Street movement is growing. From a post by Paul Krugman on his NY Times blog:

Here, from the CBO report, are the changes, in percentage points, of the shares of income going to three groups. The top quintile excluding the top 1 percent – which is basically the abode of the well-educated who aren’t among the very lucky few – has only kept pace with the overall growth in incomes. Just about all of the redistribution has taken place from the bottom 80 to the top 1 (and we know that most of that has actually gone to the top 0.1).

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It’s a tiny minority, not a broad class of well-educated Americans, who have been winning here.

For over 30 years the bottom of the social order has been taking it on the chin as those in the top 1% (actually the top 0.1%) has bought politicians and corrupted the system to ensure their own "success". The cherry on top is the 2008 financial crisis. This was manufactured by Wall Street, it was fraud on an inhuman scale, they crashed the world economy, they got bailed out by the US taxpayer, and they even got to keep their multi-million dollar "bonuses for a job well done". Meanwhile, Main Street has been clobbered and is still flat on the mat 3 years later with no recovery in sight. No banker has gone to jail. No ratings agency executives have gone to jail for stamping junk mortagages as AAA "investments". That's why people are angry.

Here's Matt Taibbi characterizing this crappy situation:

Occupy Wall Street has not yet inspired many true villains outside of fringe characters like Anthony Bologna, but Bloomberg, with this one decision to trot out this preposterous schlock about congress forcing banks to lend to poor people, may yet make himself the face of the 1%’s intellectual corruption.

This whole notion that the financial crisis was caused by government attempts to create an "ownership society" and make mortgages more available to low-income (and particularly minority) borrowers has been pushed for some time by dingbats like Rush Limbaugh and Sean Hannity, who often point to laws like the 1977 Community Reinvestment Act as central villains in the crash drama.

But Rush Limbaugh and Sean Hannity are at least dumb enough that it is theoretically possible that they actually believe the crash was caused by the CRA, Barney Frank, and Fannie and Freddie.

On the other hand, nobody who actually understands anything about banking, or has spent more than ten minutes inside a Wall Street office, believes any of that crap. In the financial world, the fairy tales about the CRA causing the crash inspire a sort of chuckling bemusement, as though they were a tribal bugaboo explaining bad rainfall or an outbreak of hoof-and-mouth, a legend good for scaring the masses.

But nobody actually believes them. Did government efforts to ease lending standards put a lot of iffy borrowers into homes? Absolutely. Were there a lot of people who wouldn’t have gotten homes twenty or thirty years ago who are now in foreclosure thanks to government efforts to make mortgages more available? Sure – no question.

But did any of that have anything at all to do with the explosion of subprime home lending that caused the gigantic speculative bubble of the mid-2000s, or the crash that followed?

Not even slightly. The whole premise is preposterous. And Mike Bloomberg knows it.

In order for this vision of history to be true, one would have to imagine that all of these banks were dragged, kicking and screaming, to the altar of home lending, forced against their will to create huge volumes of home loans for unqualified borrowers.

In fact, just the opposite was true. This was an orgiastic stampede of lending, undertaken with something very like bloodlust. Far from being dragged into poor neighborhoods and forced to give out home loans to jobless black folk, companies like Countrywide and New Century charged into suburbs and exurbs from coast to coast with the enthusiasm of Rwandan machete mobs, looking to create as many loans as they could.

They lent to anyone with a pulse and they didn’t need Barney Frank to give them a push. This was not social policy. This was greed. They created those loans not because they had to, but because it was profitable. Enormously, gigantically profitable -- profitable enough to create huge fortunes out of thin air, with a speed never seen before in Wall Street's history.

The typical profit-generating cycle of subprime lending took place without any real government involvement. Bank A (let’s say it’s Goldman, Sachs) lends criminal enterprise B (let’s say it’s Countrywide) a billion dollars. Countrywide then goes out and creates a billion dollars of shoddy home loans, committing any and all kinds of fraud along the way in an effort to produce as many loans as quickly as possible, very often putting people who shouldn’t have gotten homes into homes, faking their income levels, their credit scores, etc.

Goldman then buys back those loans from Countrywide, places them in an offshore trust, and chops them up into securities. Here they use fancy math to turn a billion dollars of subprime junk into different types of securities, some of them AAA-rated, some of them junk-rated, etc. They then go out on the open market and sell those securities to various big customers – pension funds, foreign trade unions, hedge funds, and so on.

The whole game was based on one new innovation: the derivative instruments like CDOs that allowed them to take junk-rated home loans and turn them into AAA-rated instruments. It was not Barney Frank who made it possible for Goldman, Sachs to sell the home loan of an occasionally-employed janitor in Oakland or Detroit as something just as safe as, and more profitable than, a United States Treasury Bill. This was something they cooked up entirely by themselves and developed solely with the aim of making more money.

The government’s efforts to make home loans more available to people showed up in a few places in this whole tableau. For one thing, it made it easier for the Countrywides of the world to create their giant masses of loans. And secondly, the Fannies and Freddies of the world were big customers of the banks, buying up mortgage-backed securities in bulk along with the rest of the suckers. Without a doubt, the bubble would not have been as big, or inflated as fast, without Fannie and Freddie.

But the bubble was overwhelmingly built around a single economic reality that had nothing to do with any of that: new financial instruments made it possible to sell crap loans as AAA-rated paper.

Fannie and Freddie had nothing to do with Merrill Lynch selling $16.5 billion worth of crap mortgage-backed securities to the Connecticut Carpenters Annuity Fund, the Mississippi Public Employees' Retirement System, the Connecticut Carpenters Pension Fund, and the Los Angeles County Employees Retirement Association. Citigroup and Deutsche Bank did not need to be pushed by Barney Frank and Nancy Pelosi to sell hundreds of millions of dollars in crappy MBS to Allstate.

And Goldman did not need Franklin Raines to urge them to sell $1.2 billion in designed-to-fail mortgage-backed instruments to two of the country’s largest corporate credit unions, which subsequently went bust and had to be swallowed up by the National Credit Union Administration.

These banks did not need to be dragged kicking and screaming to make the billions of dollars in profits from these and other similar selling-baby-powder-as-coke transactions. They did it for the money, and they did it because they did not give a fuck who got hurt.

Who cares if some schmuck carpenter in Connecticut loses the pension he’s worked his whole life to save? Who cares if he’s now going to have to work until he’s seventy, instead of retiring at fifty-five? It’s his own fault for not knowing what his pension fund manager was buying.

And, of course, in a larger sense, the entire crisis was the fault of that janitor in Oakland, who took out too big of a loan, with the help of do-gooder liberals in congress and their fans in bleeding-heart liberal la-la land – you know, the same people Bloomberg wowed with his hep jokes about Snooki and Charlie Sheen.

This is the evil lie Bloomberg is now trying to dump on the Occupy movement. And the mayor put a cherry on the top of his Marie-Antoinette act with the rest of his speech:

"But [congress] were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it's one target, it's easy to blame them and congress certainly isn't going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for."

Bloomberg went on to say it's "cathartic" and "entertaining" to blame people, but the important thing now is to fix the problem.

Jesus … I mean, for one thing, Fannie and Freddie don’t even make loans. That’s how absurd this whole thing is.

And the condescension levels here are unbelievable, his air of aristocratic superiority almost breathtaking to behold. Listen to Bloomberg paternally conceding in one breath that it is certainly nice that some struggling people now have homes ("I'm not saying I'm sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn't have gotten them without that"), just before chiding us with the next that there are sometimes negative consequences to doing something that sounds like goodness, like giving people a place of their own to live.

And then there’s this whole line in which he professes to indulgently understand the need for the "catharsis" and "entertainment" of protest, again almost like a Dad who tells his idiot teenage son that he understands the need to sow a wild oat or two, but please don’t wreck the family Mercedes next time.

Well, you know what, Mike Bloomberg? FUCK YOU. People are not protesting for their own entertainment, you asshole. They’re protesting because millions of people were robbed, by your best friends incidentally, and they want their money back. And you’re not everybody’s Dad, so stop acting like you are.

And the real kicker to this depressing story: the American people voted for "change you can believe in" with Barack Obama, but he has delivered more Wall Street fraud and criminality. It is under Obama's watch that the banks have used "robo-signing" fraud to cheaply toss people out of homes, even people who don't have a mortgage and who legally fully own their own homes. The banks don't care. They are in a hurry and a little fraud here and a little crime there, big deal! Obama seems to agree. No bank has been indicted or charged for the pre-2009 fraud and certainly none has been charged for the 2009 through 2011 robo-signing frauds.

So... what are people to do? The two major political parties are bought-and-sold to the top 0.1%. The only recourse is to go to the street and fight to get the country out of the hands of criminals, to fight and stop America on its slippery slope to becoming a banana republic. It is a desperate battle, but it must be won. There is no other choice.