Bail-Ins: The Legal Framework is in Place to Continue Looting the American Public.

At the expense of the American public (devastating austerity and elimination of the middle-class), 2008 ushered in government bail-outs in order to preserve Wall Street's corrupt and bankrupt system., but what about government bail-ins (confiscation of bank deposits), the likes of which we saw occur in Cyprus, Greece? In addition to bail-outs, so far, we've been witness to severe austerity measures targeted at the masses, including sequestration, a dog-and-pony-show government shutdown, and massive cuts to food stamp that essentially puts a stranglehold on economic recovery (for the masses), not to mention the threat of default. There is no doubt that the intention is to strip away what is left of the social safety net at a time when its most needed. Meanwhile, J.P. Morgan, Goldman Sachs, Bank of America, Citibank, Deutsche Bank, etc., have not only evaded any and all consequences of their egregious actions, they are generously rewarded as they continue to gamble with taxpayer money. It doesn't take a rocket scientist to see what's going on here.

These austerity measures disproportionately affect children, seniors, and people with disabilities. According to the Center on Budget and Policy Priorities (CBPP), this recent $5 billion cut will average less than $1.40 per person per meal and jeopardize the strength of the current economic recovery. Moreover, according to the Center for American Progress (CAP) "each $1 billion dollar reduction in the Supplemental Nutrition Assistance Program eliminates 13,718 jobs," resulting in more than 68,000 job losses in the coming year.

Keep in mind that programs such as SNAP have what economists call a "multiplier effect"—in other words, "a dollar given to an entitlement recipient has amplified economic benefits. In this case, those consist primarily of the grocers who benefit when food stamp users shop in their stores. The estimated multiplier effect for food stamps is as high as 2 to 1."

The report, "Nourishing Change: Fulfilling the Right to Food in the United States," released by the International Human Rights Clinic (IHRC) at the New York University School of Law is timely as our government cut at least $5 billion-with many more cuts to come-- from the government's already inadequate $80 billion food stamp program, Supplemental Nutrition Assistance Program (SNAP), in the Farm Bill.  This report cites a study by the Center for American Progress, that calculates the "hunger bill" for the country, which includes the costs of treating illnesses and other medical conditions related to food insecurity, the impact of hunger on educational outcomes and lifetime earning potential, and the costs of running charity-based emergency food programs. For 2010, that bill came to $167.5 billion. For about half of that, $83 billion, the Center says we could extend the SNAP program to all food insecure households.

Okay, back to bail-ins.  It's the Dodd-Frank Act that passed in 2010-- it took up 848 pages at the time, as of July 2012 an additional 8,843 pages of rules were added, representing only 30% of the rules to-be-written. The estimate for the final length of the Act is 30,000 pages --that provides the legal framework for bail-ins.

According to the April 24, 2012 IMF report, conversion of bank debt to stock is an essential element of bail-in included in Dodd-Frank. “The contribution of new capital will come from debt conversion and/or issuance of new equity, with an elimination or significant dilution of the pre-bail in shareholders. ...Some measures might be necessary to reduce the risk of a ‘death spiral’ in share prices.” In the language of Dodd-Frank, this will “ensure that unsecured creditors bear losses.”

Under the existing legislation, the FDIC has the power to impose losses on unsecured creditors in the process of resolving failing banks. For example, the FDIC resolved Washington Mutual under the least-cost resolution method in 2008 and imposed serious losses on the unsecured creditors and uninsured depositors (deposit amount above USD 100,000). The Orderly Liquidation Authority (OLA) established under the Dodd-Frank Act further expands the resolution authority of FDIC. Subject to certain conditions, the FDIC now also has the powers to cherry-pick which assets and liabilities to transfer to a third party and treating similarly situated creditors differently, eg: favoring short-term creditors over long-term creditors or favoring operating creditors over lenders or bondholders. -- Economist, Nouriel Roubini

The U.S. is far from the only nation with provisions for bail-ins:

Bail-In Rules for Eurozone Banks Should Start In 2016

Bondholders Bail-in Shows Alternative Method to Rescue Banks

Bank Bail-in Rules Confirmed


But who cares, right? The stock market's soaring to new heights while income disparity continues to widen at unprecedented levels.

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Are the Beltway Elites Intentionally Throwing the U.S. Under the Bus?

Or just us Americans?  Between the on-going disaster of the incredibly complex Affordable Care Act, aka Obamacare, roll-out, which Nancy Pelosi famously said they have to pass to find out what it is;  the partial government shut-down spearheaded by a man married to a VP at Goldman Sachs; the threat of the first default in American history, which it appears will be ongoing (see quote below); the firing of top military leaders for what seem like trivial matters, not to mention, S&P rating downgrade of U.S. debt;  the fiscal cliff episode; sequestration, Wall Street provoked financial collapse in 2008, etc., the U.S. is a buffoon on the befuddled world stage right now, a continuous unfolding spectacle, and no one in power seems to give a damn. If anything, they're promoting that image for all it's worth. 

“Like the House GOP bill, the emerging Senate measure -- though not finalized -- would reopen the government through Jan. 15 and permit the Treasury to borrow normally until early to mid-February, easing dual crises that have sapped confidence in the economy and taken a sledgehammer to the GOP's poll numbers.

At the same time, beltway politicians have no problem allocating billions, if not trillions of dollars to fight unwanted, undeclared wars that extend  to nearly every corner of the globe; to supposedly "aid" other countries;  to prop up/bail out Wall Street; to fund the Department of Homeland Security, the NSA, the TSA, fusion centers, unconstitutional spying programs, etc,  yet we can't pay our own workers, feed our own people, or pay our troops?

From Asia Times:

“Instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

This is a nation that claims the moral high ground? American Exceptionalism? Hardly. Murder has become routine as civilians are slayed all over the world via remote-control drone attacks. Torturing prisoners of war is seen as par for the course. Covertly, or not so covertly, spying on American citizens is becoming normalized and a giant casino is what stands in as thee economy of choice. 

It seems the motive here is to pave the way for endless future extortion, plunder, fear-mongering, and the continuous subversion of the middle-class.

In Ted Cruz's own words:

“Everyone agrees that the debt ceiling is going to be raised,” Cruz told CNBC’s Larry Kudlow in an interview tonight.

“The question,” he continued, “is whether Harry Reid and the president will maintain the same negotiating position they have on the continuing resolution, which is we will bargain for nothing, give us 100 percent of what we want or we will threaten a default.” 

So, in my humble opinion, there is no question that the powers that be are throwing we, the Americans under the bus, but what about America, the nation?  What could possibly motivate the ruling class to do such a thing?  Well, in a nutshell, globalization.  Our privileged leaders are no longer loyal to our nation, only to the wealthy and powerful corporate elite, which has, "in effect, seceded". These magnates, capitalists, moguls, and banksters are global in every sense of the word, their only loyalty is to their ever-growing immense wealth, as they seek out the most beneficial havens with no regard for national boundaries. The Transatlantic Trade and Investment Partnership (TTIP), a transnational agreement brokered by corporations and negotiated largely in secret, that President Obama is pushing, is very good evidence that this is indeed, true.

I think the following, by bullingdonmorons sums it up much better than I ever could:

“ALL our politicians know exactly what they are doing.

Our politicians are simply service managers for the banks and corporations who now rule the world. We have been shafted. We were never given any choice, no-one ever put it in any manifesto, we never voted for it, but we got it all the same. The bankrupt ideology of Neo-Liberalism, with its dogma of economic liberalization, free trade, privatization and deregulation, and its mantra that all human activity is a market from which a profit can be made.

The ruling elite now own our land, gas, electricity, railways, water and media. They have corrupted our politicians and our police. They are now coming for our pensions, our NHS, our roads, our schools and our green spaces. They have systematically destroyed the unions, dismantled our protections, created mass unemployment and are dismembering the welfare state, They caused an economic crash which bankrupted our economy and yet they walked away with their wealth intact.

And what do we get in return? Austerity, recessions, huge debts and deficits. A government conducting a systematic assault upon the sick, the poor and the disabled, slashing welfare budgets and forcing people off benefits. 500,000 of us now use food banks. They make it easier to sack us, make us work longer hours for less pay, force our kids to work for nothing, raise the retirement age whilst cutting our pensions and weaken our health and safety laws. And all just so a handful of people can be immensely rich. Frankly, it's sickening.

But by far the worst damage they have inflicted upon us is that they have destroyed our children's futures.

My generation grew up under governments that believed in full employment and a welfare state. We benefited from decades of struggle, hard won rights that enabled us to have a decent standard of living, own our homes and be cared for when we got old or sick.

However, for 30 years, we have let them slowly dismantle everything my parents and grandparents had fought for. For the millions born since 1980, the only assets they will own will be the ones passed on by their parents. They live in rented accommodation, or negative equity or have interest only mortgages. Their pensions are worthless. They spend every penny they earn, have no savings and buy everything with credit.

But it's even worse for our grandchildren. 50% of them are now loaded with debt before they even leave education. If they are lucky enough to have a job, it's on minimum wage, on zero hour contracts, or part time work, or stacking shelves for nothing. They have no protections, no rights. Pensions are just a pipe-dream. None of them have any hope of getting a mortgage. This is the true cost of the last 30 years. In our lifetime, they have managed to strip away everything our forefathers built for our kids, reducing them to the level of medieval serfs, possessing NOTHING. It's heartbreaking.

So, It's time to get angry, and we need someone to express that anger, because none of our politicians are going to do it. Someone to speak for the millions of hard working people who only want a decent life for themselves and for their kids to have a decent future. Someone that speaks up for all of us, not just a privileged few. Someone that tells us that our worth is not measured by our wealth, but our value as human beings. Someone that tells us that compassion and empathy are not bullshit. Someone that tells us that ordinary people can expect to have a decent job, a decent house and decent healthcare. Someone that tells us our elderly can live out their final years in a degree of comfort. Someone that tells us our sick and disabled should be allowed to exist with a shred of dignity. Someone that tells us that the most disadvantaged will not be looked down upon as scum.

Someone that tells us that our kids can still have hopes and dreams.

We should all be born equal, with an equal chance to develop, to achieve, to succeed. But far too many are now condemned to a life of struggle by a system that creates so many losers for the benefit of so few winners. It is not only unfair and unjust, it is unsustainable.

And it's time we all stood up and said, enough is enough.

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Goldman Sachs Earns Millions Off the Backs of the Starving.

As usual, Goldman Sachs did quite well for themselves last year as their revenue increased by 30%, their stock price by 40%. But it is the estimated $400 million they made in 2012 from speculating on food including wheat, maize and soy, that is the most disturbing.  Why? Because betting on food prices jacks of food prices, contributing  further to a growing global food crisis.

Read more about it here.

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When Banksters Scam, Swindle and Steal, It's Legal.

The Justice Department won't be pursuing criminal charges against Goldman Sachs or its employees over its deceptive practices in marketing mortgage-backed securities and collateralized debt obligations (CDO).

In April 2011, the Senate Permanent Subcommittee on Investigations released a voluminous report on the role of major banks, federal regulators and credit rating firms in the collapse of the subprime mortgage market and ensuing financial crash of September 2008. 240 pages of the 640 page report examined the role of Goldman Sachs (GS) in selling securities that they were betting would fail.

Chairman of the committee, Senator Carl Levin of Michigan, said the panel’s two-year probe had found “a financial snake pit rife with greed, conflicts of interest and wrongdoing". He went on to say, "In my judgment, Goldman clearly misled their clients and they misled Congress.”

On Thursday, despite the massive amount of evidence - 56 million pages of memos, documents, prospectuses and emails - against Goldman Sachs, the DOJ concluded that "there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report.”

Moreover, on the same day that the DOJ decided not to pursue criminal charges against GS, the SEC, in a totally separate investigation of a $1.3 billion subprime mortgage deal from 2006, also decided not to take any action against GS. And the largest transfer of wealth from the public to private sector continues on.

What happened to President Barack Obama's Justice Department task force to investigate banking practices in the mortgage industry?

"On the sixth month anniversary of the announcement of the so-called financial crisis task force, the twin announcements yesterday that Goldman Sachs and its executives will not be charged by either the Sec or DOJ for conduct directly related to the toxic assets at the heart of the crisis is a stark reminder that no individual or institution has been held meaningfully accountable for their role in the financial crisis. And without such accountability, the unending parade of megabanks scandals will inevitably continue," - Neil Barofsky

Links:

Goldman Sachs and Control Fraud

Five Senior Goldman Sachs Execs Gave $130K To 'Obama Victory Fund' WHILE Eric Holder Was Deciding Whether To File Criminal Charges

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How Goldman Sachs Helped Cover up Greece's Debt.

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Bankster Back Door Bailouts Explained

Girl Bear: "What about the Goldman Sachs? Did they buy another bank?"
Boy Bear: "Because when you already own the U.S. government, you don't need to buy any more banks."

Boy Bear: "Actually, the Goldman Sachs probably profited from the failure of the AIGs".
Girl Bear: "How could someone profit from the downfall of one of their biggest clients?"
Boy Bear: "Because while the Goldman Sachs was loaning money to the AIGs, it was also making a secret bet that they would go under."
Girl Bear: "My god! Is this some kind of science fiction movie? Like the Star Wars?"

Girl Bear: "Are any of the bailouts going on today?"
Boy Bear: "Yes, the Ben Bernanke keeps the short term rate at zero."
Girl Bear: "How is that a bailout?"
Boy Bear: "Low rates means the banks have to pay the American very little interest in their savings accounts?"
Girl Bear: "That is very nice gift from the American people to the banks."
BoyBear: "Yes."
Girl Bear: "And to show their gratitude, did the banks stop their foreclosures?"
Boy Bear: "No".
Girl Bear: "Did they give them mortgages?"
Boy Bear: "No".
Girl Bear: "Did they do anything at all?"
Boy Bear: "Yes, they increased the monthly fees on all bank accounts."
Girl Bear: "That does not sound like the gratitude, that sounds like the screwing over of the American people."

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Bank of America's Dead Drop to Rick Perry and Goldman Sachs VP Changes Name to Lobby From Inside.

Bank of America is cutting 3,500 jobs this quarter according to an internal memo, as the biggest U.S. bank grapples with its $1 trillion problem-loan portfolio and growing economic concerns. Upon wider review, at least 10,000 jobs are likely to be eliminated in total.

Meanwhile, from Zero Hedge:

Right after Texas Governor and Republican presidential candidate Rick Perry spoke at a Politics and Eggs breakfast in Bedford, New Hampshire, an unknown gentlemen approaches a casual Perry like an Ian Flemming character, and proceeds to dead drop the following: "Bank of America... We will help you out"... and silently moves on. At least we know now who is funding what, and whose interests potential future president Perry will be paid to defend.



Full event can be found here. Before someone pulls it, that is.

Then, come to find out that a former Goldman Sachs VP, named Peter Simonyi (who previously worked for the SEC) changed his name to Peter Haller to lobby Congress from the inside. He ended up working as a top staffer for Rep. Darrell Issa (R-CA) on the Oversight Committee, and went on to argue against regulations on Wall Street.

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Obama's Draconian Intellectual Property Law Proposals Already in Effect

The mass incarceration that's taken place over the last three decades, largely under the auspices of the "War on Drugs" that has only served to create a permanently criminalized underclass will not only continue, it will greatly expand under Obama administration's crackdown on intellectual property law offenders as he felonizes infringement.

Take former Goldman Sachs computer programmer, Sergey Aleynikov.  He did not kill anyone. He did not assault anyone. He did not inflict bodily harm on any living creature, nor take or sell drugs...he did something much worse: he stole source code from Goldman Sachs.  For this victimless crime, because Goldman Sachs is no one's victim, the government wanted to seek a sentence five-times higher than what probation recommends.  Well, federal Judge Denise L. Cote, who likened his crime to “economic espionage”, sentenced him to four-times what the probation recommended - eight years - explaining that Mr. Aleynikov's conduct “deserves a significant sentence because the scope of his theft was audacious — motivated solely by greed, and it was characterized by supreme disloyalty to his employer.” Oh, the irony!

Did Mr. Aleynikov break the law?  Do something wrong?  Yes he did; however he certainly showed remorse when he said, “I never meant to cause Goldman any harm. I am sorry for the burden and emotional impact this trial has caused on my family, and my mother and children.” I think it's fairly clear that Mr. Aleynikov does not pose a threat to society; therefore, should receive the minimum sentence, especially considering he is a first time offender.

President Obama is not legitimately trying to address infringement or counterfeiting problems with his sweeping revisions to U.S. copyright law. He is simply cracking down on the people in order to protect the interests of corporations, instead of encouraging companies to adapt to the changing technological environment.

“The legitimate desire to address some serious counterfeiting abuses - such as medications or industrial components used in defense products - has been hijacked to create draconian proposals to alleviate the content industry of the burden of protecting its own interest using its own extensive resources. The government's role in protecting the public's right to safe medicine and component parts should not be allowed to morph into supplanting the responsibility of private companies to use existing legal remedies to remove possibly infringing content online and bring legal action against those involved. -- CCIA President & CEO Ed Black

Links:

Government Seeks Sentence Five Times Higher Than Probation Recommends

Intellectual Property Watch

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America's Criminal System of Injustice

From Time Out to Hard Time: Young Children in the Adult Criminal Justice System
A Special Project Report from the Lyndon B. Johnson School of Public Affairs Juvenile Justice Research Class—Spring 2008 The University of Texas

The U S is one of the only countries in the world that sentences children under 18 to die in prison; in other words, life without parole (LWOP). Judges are required to impose LWOP for certain crimes, regardless of age, in some states. Children as young as seven can receive a mandatory sentence of LWOP in Florida and Pennsylvania.

As of November 2009, 194 countries have ratified the Convention on the Rights of the Child, including every member of the United Nations except Somalia and the United States. Somalia's cabinet ministers have announced plans to ratify the treaty.

The US is one of the only countries in the world that still uses solitary confinement; a method of punishment long ago determined to be cruel and unusual punishment by most of the world as long ago as 1913. Today, we have 80,000 people in solitary confinement, thousands of them children.

The United States is one of the only developed countries in the world that still uses the death penalty, which combines solitary confinement with execution for sometimes as long as 30-years. Death row inmates wait, isolated, in cells of just a few square feet, on an average of 13-years. The sentence is, in fact, two punishments in one, as "life" becomes nothing but a long, torturous, and lonely countdown to execution.

"The delay itself subjects death row inmates to decades of especially severe dehumanizing conditions of confinement," -- Justice John-Paul Stevens regarding his view of lengthy pre-execution waits in December of 2009.

These practices set the United States apart from nearly all nations in both the developed and the developing world.

Meanwhile, Jamie Dimon - who spent over $6.2 million on lobbying last year in order to ensure the banksters can continue to commit legalized crime - in his annual letter to shareholders this month, wrote,

"...that punitive efforts [against banks and bankers] only hurts ordinary shareholders, and that the vilification of industries denigrates much of what made this country successful. [...]When we reduce the debate over responsibility and regulation to simplistic and inaccurate notions, such as Main Street vs. Wall Street, big business vs. small business or big banks vs. small banks, we are indiscriminately blaming the good and the bad ? This is simply another form of ignorance and prejudice."

There's something fundamentally wrong with a justice system that allows those who are already empowered, to not only avoid punishment for egregious "crimes" against humanity, but in addition, to profit and gain even more advantage.

"This person understands how to control risk within a massive organization, manage political relationships across the political spectrum, and generate the right kind of public relations. When all is said and done, this banker runs a big bank and – here’s the danger – makes it even bigger. Jamie Dimon is by far the most dangerous American banker of this or any other recent generation." -- Simon Johnson

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Corporations Conveniently Cloak the Psychopaths Among Us

Yet, the Supreme Court is endowing these giant psychopathic super powers with even more super powers, without the threat of severe punishment that we mere humans are subject.

Why? Well, it all started with the legal doctrine of "corporate personhood", established in the late 1800s, that makes the claim corporations are persons or human beings, therefore they are intended to fully enjoy the legal status and protections created for persons or human beings. Fast forward one-hundred years and the powers that be have decided it's in we, the human beings, best interest if we the human beings serve these giant beasts that house the psychopaths residing within.

But what makes powerful wealthy people believe that corporations are persons? From what I remember from economics 101, a corporation is an artificial legal and social structure where human beings gather for economic reasons. Yes, it (the corporation) is very good at raising capital, creating wealth, providing a return for its shareholders, etc. However, it cannot serve on a jury, cannot serve time, cannot serve our country, nor can it serve breakfast. It can "live" forever...can "live" in multiple nations at once...can "live" with or without oxygen, food, sex, and all the other things we humans require. The bottom line is, that it is an it...that's it.

The good thing. Obama's angry. Maybe that means he's not going to take it anymore.

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Goldman Sachs Pleads Not Guilty

Photographer: Jay Mallin/Bloomberg
Leaders of four of the biggest U.S. banks including, l to r, Lloyd Blankfein, chairman and CEO of The Goldman Sachs Group Inc., James Dimon, chairman, president, and CEO of JP Morgan Chase & Co., John Mack, chairman of Morgan Stanley, and Brian Moynihan, CEO and president of Bank of America Corp., are sworn in during a hearing before the Financial Crisis Inquiry Commission (FCIC) in Washington, D.C.


Wall Street acts as if nothing has changed, and with good reason; it hasn't. The financial services industry hasn't atoned for its role in the current economic crisis as of yet, and Lloyd Blankfein, head of Goldman Sachs, who posted record profits last year, setting aside $16.7 billion to pay employees, less than a year after receiving government assistance, during the worst economic calamity since the Great Depression, made it clear today, that they have nothing to atone for, as Goldman Sachs has done nothing wrong.

"We learn from the pain of our mistakes and Wall Street was spared any pain because of the government bailout and therefore it's important there be a self examination and I think we're well short of that at this moment." -- Former California State Treasurer Phil Angelides

Today, the Financial Crisis Inquiry Commission, a bipartisan, 10-member panel created by Congress to investigate and report on the financial crisis, commenced the first of two days of hearings on the causes of a collapse that led to a $700 billion U.S. government bailout of the nation’s banks. Blankfein and Angelides set the tone by engaging in a feisty exchange at the very beginning. Angelides told Dow Jones Newswires he wasn't satisfied with the executives' acceptance of their role in the financial crisis.

“Mr. Blankfein himself never admitted that there was any responsibility of Goldman Sachs to make sure the products themselves were good products. That’s very troublesome.” -- Philip Angelides

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Goldman Sachs Responds to Outcry

Goldman Sachs Employees
In Government..Past and Present :
Goldman Sachs'- The Great American Bubble Machine - expertise in reaping the benefits of generating inflated speculations paid off with a spectacular year, while the rest of us struggled to either keep the jobs we have or replace the jobs we lost.

Despite, our plight, and despite our sacrifice to bail Goldman Sachs out, the firm planned to distribute the biggest bonus payout in its 140-year history. This, of course, outraged Americans everywhere. After all, Goldman, at the mercy of we, the taxpayers, received $10 billion in TARP funds and an additional $12.9 billion in bailout money (as a counterparty to AIG's worthless credit default swaps) not to mention access to as much free credit as they need, amongst other windfalls, that the average American can only imagine in their wildest dreams. Yes, they paid back the $10 billion, but that's a drop in the bucket, considering the ocean of advantages they received. Not to mention, by paying the money back, they escaped the executive compensation limits, and the constraints that existed until the bailout money was paid back.

Well, it appears Goldman has responded to their largest shareholders who would like to see Goldman's profits lining their pockets, rather than the pockets of Goldman employees, and to the public outcry against the the biggest bonus payout in the firm's history. Goldman's 30 most-senior executives will be paid in the form of stock, rather than in cash.

“– The firm’s entire 30-person management committee, which comprises all global divisional and regional leadership, will receive 100 percent of their discretionary compensation in the form of Shares at Risk, which are subject to restrictions for five years. Discretionary compensation represents the vast majority of senior management’s compensation and is directly tied to the firm’s overall performance.”

“– Shares at Risk cannot be sold for five years, in addition to other restrictions.”

“– The five-year holding period on Shares at Risk includes an enhanced recapture provision that will permit the firm to recapture the shares in cases where the employee engaged in materially improper risk analysis or failed sufficiently to raise concerns about risks. Enhancing our recapture provision is intended to ensure that our employees are accountable for the future impact of their decisions, to reinforce the importance of risk controls to the firm and to make clear that our compensation practices do not reward taking excessive risk.”

“– The enhanced recapture rights build off an existing clawback mechanism which goes well beyond employee acts of fraud or malfeasance and includes any conduct that is detrimental to the firm, including conduct resulting in a material restatement of the financial statements or material financial harm to the firm or one of its business units.”

“– Shareholders will have an advisory vote on the firm’s compensation principles and the compensation of its named executive officers at the firm’s Annual Meeting of Shareholders in 2010.”

Links:

Goldman Sachs Announces Changes to 2009 Compensation Program

Goldman Sachs Alters Its Bonus Policy to Quell Uproar

$994,795 is what Goldman's employees contributed to President Obama's campaign, making them #1 amongst Obama's contributors.

Top 5 AIG executives may quit over pay: - Five top executives at troubled insurer American International Group (AIG) said last week they will quit if their compensation is cut significantly by the US pay czar, says a media report.

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Bailed Out Billionaires Choose Pistols Over Penance

Yes, it's true. Goldman Sachs (GS) executives are arming themselves against we, the people.

Dec. 1 (Bloomberg) -- “I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

The banksters sincerely believe that America is a government of GS, by GS, and for GS...the people, the Constitution, the Bill of Rights, and financial integrity be damned!

Of course, GS has plenty of company. Without the help of the U.S. Congress, Senate and the entire elite corpocracy that has established global dominance, GS probably would not have attained the level of arrogance, entitlement and elitism that has truly blinded them to the reality that they're clearly in the minority, and that we, the people have a breaking point.

However, this did not happen overnight. This process started three decades ago, under Ronald Reagan, after a generation of relentless corporatization. What Reagan forgot to mention, was that the reason he was clearing out the welfare queens, was to prepare ye the way of the welfare kings.

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Goldman Sachs Takes Advantage of Taxpayers Underpinning Financial System

Goldman's big profits and megabonuses, came as the US federal budget deficit hit $1.4 trillion - the highest since 1945. However that doesn't seem to concern Lloyd Blankfein - who, in 2007, when the economy was melting down, as chairman of Goldman Sachs, was paid a bonus of $67.9 million, and whose bonus this year could top that number - spoke at a Fortune magazine breakfast a few weeks ago, and he said, re. accepting TARP funds:

“If I had known it was as pregnant with this kind of potential for backlash, then of course I would have really not have liked it.”

These huge payouts, almost 50% of Goldman's revenue, would not be possible without the billions of dollars from taxpayers that have propped up the financial system. In addition, as George Soros said, "Banks are actually getting hidden subsidies of enormous amounts because of their ability to borrow at effectively zero, and buy 10-year government bonds at 3.5 per cent. So those earnings are not the achievement of risk-takers. These are gifts, hidden gifts, from the Government, so I don't think those monies should be used to pay bonuses."

Oh, and speaking of getting paid for nothing, Goldman Sachs continues to get paid for swaps on redeemed bonds.

New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.

How much longer should we allow these superbanks to feed off the American public?
As long as we allow the existence of financial institutions that are too big to fail, the banks will continue to suck the life out of each and every one of us.

There are people who want to change things, for instance, Paul Volcker, who wants to break up the giant banks, so why isn't President Obama listening to Paul Volcker?

"People say I'm old-fashioned and banks can no longer be separated from nonbank activity. That argument brought us to where we are today." -- Paul Volcker

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We Must Tolerate the Inequality?

Despite the fact that a trained chimp could perform as well as Goldman Sachs, given all the help (TARP; $13 billion from AIG, because it was a counter party; free access to credit from the Federal Reserve; FDIC guaranteed debt...) they've received since the collapse of our economy, not to mention, the welfare recipients have not returned the favor by issuing credit to we, the people and to small business, the engine of job creation...despite all of that, they tell us we should tolerate the inequality...that it is good for all of us.

But, should we really be grateful to Reagan? And for all of those people responsible for the financialization (the increase in the size and significance of financial markets and financial institutions) of our economy? The Reagan revolution that helped to create the greatest state of inequality in the history of our nation? Is Wall Street really, "all that"? And one has to wonder, did people at Goldman Sachs know what was coming down the pike? More than that, did they knowingly push us into this crisis, knowing they could milk it for all its worth, while we, the suckers take it on the chin?

Well, it's hard to believe otherwise as they rake in their great fortunes at our expense. But hey, they claim inequality is good for us. Let's see if they're right.

We already know that Goldman Sachs Group Inc boasted third-quarter profits of $3.19 billion a few days ago. We know that Goldman Sachs Group Inc., set aside $16.7 billion for compensation and benefits in the first nine months of 2009, which is up 46% from a year earlier. We know that Goldman Sachs is cashing in like crazy.

And now we know, at a discussion panel titled, "What is the Price of Morality in the Marketplace?" a Goldman Sachs international adviser defended what can only be called over-the-top compensation in the finance industry, as his company plans a near-record year for pay, explaining that putting all this money in the pockets of the men who brought this economy down will help boost the economy.

“We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”

Mayor Michael Bloomberg, it seems, would agree:

“They may be an enormous amount of money for one person, but they are how our people in the city in all industries get paid, whether you drive a cab, work in a restaurant, work in a store, whether you are a municipal employee.

All of this gets filtered down through our economy. No matter what you think about the propriety of any individual person’s bonus, we want companies in the city, and we are dependent on Wall Street finance, to do well.” - Mayor Bloomberg

So, is Wall Street performance really, as Mayor Bloomberg said, beneficial to us? Or is Wall Street simply a big myth? Does it really serve the function of allocating credit in the economy?

* Not according to the graph (left), which shows the percentage of capital expenditures by U.S. non-financial companies that was raised in U.S. financial markets from 1952 to 2006.

In other words, while it's true the dollar volume of financial trading has increased by an enormous amount - over three trillion dollars traded in U.S. financial markets each day - almost none of it is directed to toward creating real wealth.

The second graph (Private Investment in Capital Equipment as a Percent of GDP), shows that non-financial companies (NFC) do not use the stock market to raise funds for capital improvement programs.usury, speculation

"Figure 5.3 shows net funds raised through equity issuance, this time as a percent of capital expenditures ...It is evident that the stock market has not historically been a major source of NFC funds. On a quarterly basis, its contribution never exceeds 18 percent of capital expenditures. On average its contribution has been below 10 percent, even in the 1952-1980 period before (the increase in stock buybacks. However, there is a dramatic change in the relationship between the stock market and the NFCs starting in the early 1980s. Except for brief periods, in the post-1980 era the net equity issuance of the NFCs has been negative and often large. The NFCs have indeed been buying back their own stocks. The stock market has turned into an institution through which NFCs channel funds to financial markets, not the other way around."

The bottom line is that Wall Street and the financial elites, over the last three decades, have convinced us that we are here to serve money, that money is "god". However the opposite is true, money is here to serve us, to serve humanity. Money is nothing without us. In fact, considering money is created with one keystroke, it is nothing with us. We, the people, including atheists, if they believe in and use our monetary system, worship what amounts to nothing. We've been had.

* The Economic Populist

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Goldman Sachs, Ayn Rand, Going Galt and the American People.

Now that Goldman Sachs posted a profit of $3.19 billion, and plans to divvy up record breaking bonuses between them, despite their enormous part in collapsing our economy last year, which continues to leave the rest of us struggling, with no signs of recovering in sight - the unemployment and foreclosure rates are still escalating - it's only fitting that Goldman-Backed, Ayn Rand-Inspired Fund (Roark Capital Group) will invest a record amount at this time. Of course, the fund’s investors include Goldman Sachs Group Inc.

But why on earth is Ayn Rand, Greenspan's hero, more popular than ever amongst average, everyday people?

After all, Rand, worshipper of sociopathic killers, apparently, shares the same view of the common man as Goldman Sachs...that average people were "ugly, stupid and irrational." This quote, taken from her first book, We the Living, "What are your masses...but mud to be ground underfoot, fuel to be burned for those who deserve it?" pretty much sums up her view of humanity, with the exception of the elite, of course.

“On the same day that you saw stories about these bonuses, you saw a story about how wages are at a 19-year low,” -- David Axelrod a senior adviser to President Barack Obama.

Goldman Sachs embodies the Randian philosophy so closely the entity should be called The Ayn Rand Corporation. But wait. Isn't most of the population ready to string Goldman Sachs up by their...well, their sachs? Yet, Rand's greatest selling book "Atlas Shrugged" had an all-time record year in 2008, and 2009 sales should shatter even last year's numbers.

It's more than ironic that this woman who preached the virtue of selfishness, and self-interest - the very thing that almost brought the world's economy to collapse - as man’s greatest moral responsibility, and altruism as a vice, who strongly believed that markets work best when corporations are free to pursue their own selfish interests, who believed the the wealthy and the powerful are the oppressed, and whose Objectivist philosophy equated unfettered capitalism with absolute morality is the same woman people are looking to as their savior.

Excerpt from Michael Prescott's blog:

"Was Ayn Rand "a narcissistic, manipulative sociopath" - or at least a borderline case?

Well, consider the portrait of Rand drawn by two biographies - Nathaniel Branden's My Years with Ayn Rand and Barbara Branden's The Passion of Ayn Rand - and by Jeff Walker's The Ayn Rand Cult. These are, admittedly, hostile sources, but in the absence of any biography by Rand's admirers, they are the only ones we have.

Anyone judging by these books would have to say that Rand was narcissistic in the extreme. She lacked empathy. She could be intensely charming (charm and charisma are common features of sociopathy) but was also prone to outbursts of rage and frustration.

She exploited young, emotionally vulnerable people and frequently sabotaged their self-image with her vindictive cruelty. She claimed to love her husband but carried on an affair with a younger man right in front of him, a situation that drove her husband to alcoholism.

She was a hypochondriac. She showed signs of paranoia. She had an addictive personality, smoked two packs of cigarettes daily, and gobbled handfuls of diet pills (amphetamines).

She despised "average" people, whom she regarded as ugly and stupid and irrational, while viewing herself in exalted terms as the greatest writer in history and the greatest philosopher since Aristotle.

She was concerned with no one's needs or wants or suffering except her own. She was able to claim in print that no one had ever helped her, when in fact she had benefited for years from the charity and goodwill of relatives and business associates and friends. She alienated nearly all her friends and allies by the end of her life, and died nearly alone.

She literally drove people crazy; ex-Objectivist Edith Efron once remarked that if you spent any time with Rand, you had to ask yourself if you were insane, or if she was (quoted in Walker). She was a megalomaniac. She was probably manic-depressive. She created heroic fictional characters who are deeply repressed, incapable of normal human interaction, and typically angry or disgusted with the world.

This is hardly a person who should be seen as the epitome of rationality and benevolence - yet this is how her followers do see her. In my Objectivist years I once hesitantly suggested to a fellow Objectivist that there might be a few character flaws to be found in Rand, only to be met with a blank stare and the appalled question, "Character flaws - in Ayn Rand?!" In Objectivist dogma it is always other people who were at fault in their dealings with "Miss Rand" (as they like to call her). Somehow it was always those irrational others who abused, deceived, and hurt Ayn Rand, and her rages and bitterness were entirely justified, entirely rational. How could they not be? Rand was the personification of reason, so by definition whatever she thought, felt, or did just had to be rational - Q.E.D.

When I look at the portrait of Ayn Rand drawn by a variety of people who knew her best, I see a person who is certainly larger and more theatrical than the run-of-the-mill sociopaths in Martha Stout's book, different from them in degree - but not very different in kind.

And I wonder how a movement founded by a woman with such serious disorders could ever have been seen as a way to personal happiness or to a better world."

Greed was calculated by comparing average incomes with the total number of inhabitants living beneath the poverty line.

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Is the Transfer of Wealth Complete?

Well, if there is any truth to Goldman Sachs plan to deliver total pay and bonuses in excess of $22 billion, after profits more than tripled last quarter, it appears the transfer, if not complete, is well on its way. Reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts helped set the stage for this new era of Wall Street wealth,
as if they really needed it.

Is there any doubt that we, the taxpayers have been scammed on the most massive scale ever to occur in history? We, the taxpayers, who bailed them out, saving them from facing the consequences of their own criminal behavior can't afford housing, can't afford health care, can't afford to pay our bills, can't find a job, meanwhile, the guilty parties are getting ready to divvy up billions of dollars.

But, are we, the taxpayers totally innocent? Not really. Although most of us did not directly participate in creating this systemic ponzi scheme that makes Madoff's devious contrivance look like child's play, we did cultivate the environment, over the last 30 years, that made it possible for these banksters, corporate criminals and our own government to get away with sucking the wealth of our country into their greedy paws.

Decades ago, when we bought into trickle down, supply side Reaganomics, that scapegoats the so-called "welfare queen", we made the decision that the value of money trumps all other values, and encouraged young minds to follow the money, and only the money, rather than allowing the endogenous process to occur - regarding education and career choice - that would facilitate true laissez-faire equilibrium, we planted the "seeds" of destruction. By promising a world of perpetually increasing returns, "we the people" promoted a "Gordon Gekko" value system where "greed is good", because the only fuel this promised "world" required was greed.

Take the increasing flow of graduates from top colleges into the world of finance. According to Laurence Katz , professor of economics at Harvard University and former chief economist at the U.S. Department of Labor, in 1970, three to five percent of Harvard graduates went into the finance industry. That percentage grew to fifteen percent in 1990, and in 2006, a whopping forty percent of Harvard grads pursued a career in finance. Why was there such a dramatic increase? Because, Harvard graduates who chose careers in finance made three times the pay of their peers.

So, what's the problem? Well, lack of diversification, for one. Rather than innovating products and services that actually contribute to society, all of the educated brainpower collects to create and develop monstrously complex financial products, that are, for the most part, worthless, mostly because the process of finding out their true value is close to impossible. These "financial frankenstiens" are often composed of so many layers of different investments - each one with a whole new set of rules, that operate in opposing and convoluted ways - that it would take an infinite amount of time to unravel their worth.

In good times, these monstrosities consume themselves or decompose, however, in times of crisis, these extraordinarily complicated debt securities are more like bundles of tiny little pieces of Styrofoam, plastic, disposable diaper fill, fiberglass, aluminum, and every other non-biodegradable material you can imagine, all twisted, entangled and knotted together. These exotic "brainchilds" - not understood by regulators, buyers, or even their inventors - have only served one purpose: to clog up the financial arteries of our economic system.

In addition to Wall Street and the financial industry - with so much money on the table - collecting brainiacs, like Dick Cheney collects arterial plaque, the entire credit derivatives market was deregulated. The melding of greed, an abundance of brainpower, and deregulation blurs...no, erases the lines between legitimate business and crime or criminal behavior; in effect, institutionalizing crime within the "mainstream" economy.

So, is it any surprise that the "Frankenstein" economy emerged? Not really. But, that doesn't mean it's too late, but we better act fast because it's only a matter of time before we, the taxpaying people, find ourselves in a third world country, pledging our allegiance to the United States under Goldman Sachs.

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Who Gets Treasury Secretary Tim Geithner's Attention?

Why, the Wall Street clowns, of course. And not just any clowns....only a select few earn his undivided attention. According to Tim Geithner's phone records (the Associated Press did a review of Geithner's calendar under the Freedom of Information Act), JP Morgan Chase, and Citigroup make up the small group of all-too-powerful Wall Street bankers lucky enough to have Geithner's ear on demand.

Geithner had more contacts with Citigroup than he did with Rep. Barney Frank, D-Mass., the lawmaker leading the effort to approve Geithner’s overhaul of the financial system. Geithner's contacts with Blankfein [CEO of Goldman Sachs Group] alone outnumber his contacts with Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee.

Looks like the banksters who got us into this mess, are the ones who are supposedly leading our way out of this mess. Is it any wonder, considering Geithner, who was the chairman of the Federal Reserve Bank of New York - which oversees the institutions that make up the heart of U.S. financial activity - at the time of the crisis, therefore responsible for the regulating that didn't happen on Wall Street, was appointed Treasury Secretary?

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The Calculated Dishonesty That Caused Financial Meltdown

Bill Moyers interviews William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. about the financial crisis.



Transcript:

BILL MOYERS: Welcome to the Journal.

For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you're about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.

WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.

BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, "How do they get away with it?" Well, no one has asked that question more often than Bill Black.

The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L's in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating — after whom the senate's so-called "Keating Five" were named — he sent a memo that read, in part, "get Black — kill him dead." Metaphorically, of course. Of course.

Now Black is focused on an even greater scandal, and he spares no one — not even the President he worked hard to elect, Barack Obama. But his main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname "banksters."

Bill Black, welcome to the Journal.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: I was taken with your candor at the conference here in New York to hear you say that this crisis we're going through, this economic and financial meltdown is driven by fraud. What's your definition of fraud?

WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.

BILL MOYERS: In your book, you make it clear that calculated dishonesty by people in charge is at the heart of most large corporate failures and scandals, including, of course, the S&L, but is that true? Is that what you're saying here, that it was in the boardrooms and the CEO offices where this fraud began?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: How did they do it? What do you mean?

WILLIAM K. BLACK: Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.

BILL MOYERS: So you're suggesting, saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans?

WILLIAM K. BLACK: Yes.

BILL MOYERS: How do they get away with it? I mean, what about their own checks and balances in the company? What about their accounting divisions?

WILLIAM K. BLACK: All of those checks and balances report to the CEO, so if the CEO goes bad, all of the checks and balances are easily overcome. And the art form is not simply to defeat those internal controls, but to suborn them, to turn them into your greatest allies. And the bonus programs are exactly how you do that.

BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me?

WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? The Bush Administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that's exactly what happened. Where would you look? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

BILL MOYERS: Yeah. Liars' loans--

WILLIAM K. BLACK: Liars' loans.

BILL MOYERS: Why did they call them liars' loans?

WILLIAM K. BLACK: Because they were liars' loans.

BILL MOYERS: And they knew it?

WILLIAM K. BLACK: They knew it. They knew that they were frauds.

WILLIAM K. BLACK: Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.

BILL MOYERS: You think they really said that to borrowers?

WILLIAM K. BLACK: We know that they said that to borrowers. In fact, they were also called, in the trade, ninja loans.

BILL MOYERS: Ninja?

WILLIAM K. BLACK: Yeah, because no income verification, no job verification, no asset verification.

BILL MOYERS: You're talking about significant American companies.

WILLIAM K. BLACK: Huge! One company produced as many losses as the entire Savings and Loan debacle.

BILL MOYERS: Which company?

WILLIAM K. BLACK: IndyMac specialized in making liars' loans. In 2006 alone, it sold $80 billion dollars of liars' loans to other companies. $80 billion.

BILL MOYERS: And was this happening exclusively in this sub-prime mortgage business?

WILLIAM K. BLACK: No, and that's a big part of the story as well. Even prime loans began to have non-verification. Even Ronald Reagan, you know, said, "Trust, but verify." They just gutted the verification process. We know that will produce enormous fraud, under economic theory, criminology theory, and two thousand years of life experience.

BILL MOYERS: Is it possible that these complex instruments were deliberately created so swindlers could exploit them?

WILLIAM K. BLACK: Oh, absolutely. This stuff, the exotic stuff that you're talking about was created out of things like liars' loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That's why it's toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it's scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I'm quoting Fitch, the smallest of the rating agencies, "the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined."

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.

WILLIAM K. BLACK: Right, and the investment banker that — we call it pooling — puts together these bad mortgages, these liars' loans, and creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80 percent losses on these things, because of course they, in reality, are toxic waste.

BILL MOYERS: You're describing what Bernie Madoff did to a limited number of people. But you're saying it's systemic, a systemic Ponzi scheme.

WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn't even get into the front ranks of a Ponzi scheme...

BILL MOYERS: But you're saying our system became a Ponzi scheme.

WILLIAM K. BLACK: Our system...

BILL MOYERS: Our financial system...

WILLIAM K. BLACK: Became a Ponzi scheme. Everybody was buying a pig in the poke. But they were buying a pig in the poke with a pretty pink ribbon, and the pink ribbon said, "Triple-A."

BILL MOYERS: Is there a law against liars' loans?

WILLIAM K. BLACK: Not directly, but there, of course, many laws against fraud, and liars' loans are fraudulent.

BILL MOYERS: Because...

WILLIAM K. BLACK: Because they're not going to be repaid and because they had false representations. They involve deceit, which is the essence of fraud.

BILL MOYERS: Why is it so hard to prosecute? Why hasn't anyone been brought to justice over this?

WILLIAM K. BLACK: Because they didn't even begin to investigate the major lenders until the market had actually collapsed, which is completely contrary to what we did successfully in the Savings and Loan crisis, right? Even while the institutions were reporting they were the most profitable savings and loan in America, we knew they were frauds. And we were moving to close them down. Here, the Justice Department, even though it very appropriately warned, in 2004, that there was an epidemic...

BILL MOYERS: Who did?

WILLIAM K. BLACK: The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn't let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

BILL MOYERS: You talk about the Bush administration. Of course, there's that famous photograph of some of the regulators in 2003, who come to a press conference with a chainsaw suggesting that they're going to slash, cut business loose from regulation, right?

WILLIAM K. BLACK: Well, they succeeded. And in that picture, by the way, the other — three of the other guys with pruning shears are the...

BILL MOYERS: That's right.

WILLIAM K. BLACK: They're the trade representatives. They're the lobbyists for the bankers. And everybody's grinning. The government's working together with the industry to destroy regulation. Well, we now know what happens when you destroy regulation. You get the biggest financial calamity of anybody under the age of 80.

BILL MOYERS: But I can point you to statements by Larry Summers, who was then Bill Clinton's Secretary of the Treasury, or the other Clinton Secretary of the Treasury, Rubin. I can point you to suspects in both parties, right?

WILLIAM K. BLACK: There were two really big things, under the Clinton administration. One, they got rid of the law that came out of the real-world disasters of the Great Depression. We learned a lot of things in the Great Depression. And one is we had to separate what's called commercial banking from investment banking. That's the Glass-Steagall law. But we thought we were much smarter, supposedly. So we got rid of that law, and that was bipartisan. And the other thing is we passed a law, because there was a very good regulator, Brooksley Born, that everybody should know about and probably doesn't. She tried to do the right thing to regulate one of these exotic derivatives that you're talking about. We call them C.D.F.S. And Summers, Rubin, and Phil Gramm came together to say not only will we block this particular regulation. We will pass a law that says you can't regulate. And it's this type of derivative that is most involved in the AIG scandal. AIG all by itself, cost the same as the entire Savings and Loan debacle.

BILL MOYERS: What did AIG contribute? What did they do wrong?

WILLIAM K. BLACK: They made bad loans. Their type of loan was to sell a guarantee, right? And they charged a lot of fees up front. So, they booked a lot of income. Paid enormous bonuses. The bonuses we're thinking about now, they're much smaller than these bonuses that were also the product of accounting fraud. And they got very, very rich. But, of course, then they had guaranteed this toxic waste. These liars' loans. Well, we've just gone through why those toxic waste, those liars' loans, are going to have enormous losses. And so, you have to pay the guarantee on those enormous losses. And you go bankrupt. Except that you don't in the modern world, because you've come to the United States, and the taxpayers play the fool. Under Secretary Geithner and under Secretary Paulson before him... we took $5 billion dollars, for example, in U.S. taxpayer money. And sent it to a huge Swiss Bank called UBS. At the same time that that bank was defrauding the taxpayers of America. And we were bringing a criminal case against them. We eventually get them to pay a $780 million fine, but wait, we gave them $5 billion. So, the taxpayers of America paid the fine of a Swiss Bank. And why are we bailing out somebody who that is defrauding us?

BILL MOYERS: And why...

WILLIAM K. BLACK: How mad is this?

BILL MOYERS: What is your explanation for why the bankers who created this mess are still calling the shots?

WILLIAM K. BLACK: Well, that, especially after what's just happened at G.M., that's... it's scandalous.

BILL MOYERS: Why are they firing the president of G.M. and not firing the head of all these banks that are involved?

WILLIAM K. BLACK: There are two reasons. One, they're much closer to the bankers. These are people from the banking industry. And they have a lot more sympathy. In fact, they're outright hostile to autoworkers, as you can see. They want to bash all of their contracts. But when they get to banking, they say, ‘contracts, sacred.' But the other element of your question is we don't want to change the bankers, because if we do, if we put honest people in, who didn't cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.

BILL MOYERS: The cover up?

WILLIAM K. BLACK: Sure. The cover up.

BILL MOYERS: That's a serious charge.

WILLIAM K. BLACK: Of course.

BILL MOYERS: Who's covering up?

WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.

These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he's a failed legacy regulator.

BILL MOYERS: But he denies that he was a regulator. Let me show you some of his testimony before Congress. Take a look at this.

TIMOTHY GEITHNER: I've never been a regulator, for better or worse. And I think you're right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.

Overwhelmed by regulation! It wasn't the absence of regulation that was the problem, it was despite the presence of regulation you've got huge risks that build up.

WILLIAM K. BLACK: Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement.

BILL MOYERS: As?

WILLIAM K. BLACK: As president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he's completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that's just plain wrong.

BILL MOYERS: How is this happening? I mean why is it happening?

WILLIAM K. BLACK: Until you get the facts, it's harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts.

BILL MOYERS: What facts?

WILLIAM K. BLACK: The facts about how bad the condition of the banks is. So, as long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?

BILL MOYERS: You--

WILLIAM K. BLACK: Taking away people's bonuses?

BILL MOYERS: To hear you say this is unusual because you supported Barack Obama, during the campaign. But you're seeming disillusioned now.

WILLIAM K. BLACK: Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they're refusing to obey the law.

BILL MOYERS: In other words, they could have closed these banks without nationalizing them?

WILLIAM K. BLACK: Well, you do a receivership. No one -- Ronald Reagan did receiverships. Nobody called it nationalization.

BILL MOYERS: And that's a law?

WILLIAM K. BLACK: That's the law.

BILL MOYERS: So, Paulson could have done this? Geithner could do this?

WILLIAM K. BLACK: Not could. Was mandated--

BILL MOYERS: By the law.

WILLIAM K. BLACK: By the law.

BILL MOYERS: This law, you're talking about.

WILLIAM K. BLACK: Yes.

BILL MOYERS: What the reason they give for not doing it?

WILLIAM K. BLACK: They ignore it. And nobody calls them on it.

BILL MOYERS: Well, where's Congress? Where's the press? Where--

WILLIAM K. BLACK: Well, where's the Pecora investigation?

BILL MOYERS: The what?

WILLIAM K. BLACK: The Pecora investigation. The Great Depression, we said, "Hey, we have to learn the facts. What caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters?" Where's our investigation?

What would happen if after a plane crashes, we said, "Oh, we don't want to look in the past. We want to be forward looking. Many people might have been, you know, we don't want to pass blame. No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. And here, we've got a double tragedy. It isn't just that we are failing to learn from the mistakes of the past. We're failing to learn from the successes of the past.

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn't matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, "You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you're covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn't work. You will cause your recession to continue and continue." And the Japanese call it the lost decade. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It's working just as well as it did in Japan.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, "We just can't let the big banks fail." That's wrong.

BILL MOYERS: But what might happen, at this point, if in fact they keep from us the true health of the banks?

WILLIAM K. BLACK: Well, then the banks will, as they did in Japan, either stay enormously weak, or Treasury will be forced to increasingly absurd giveaways of taxpayer money. We've seen how horrific AIG -- and remember, they kept secrets from everyone.

BILL MOYERS: A.I.G. did?

WILLIAM K. BLACK: What we're doing with -- no, Treasury and both administrations. The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson's firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn't want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG.

Where Congress said, "We will not give you a single penny more unless we know who received the money." And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.

BILL MOYERS: Even though Goldman Sachs had a big vested stake.

WILLIAM K. BLACK: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he wouldn't be allowed in civilized society.

BILL MOYERS: Yeah, like a conflict of interest, it seems.

WILLIAM K. BLACK: Massive conflict of interests.

BILL MOYERS: So, how did he get away with it?

WILLIAM K. BLACK: I don't know whether we've lost our capability of outrage. Or whether the cover up has been so successful that people just don't have the facts to react to it.

BILL MOYERS: Who's going to get the facts?

WILLIAM K. BLACK: We need some chairmen or chairwomen--

BILL MOYERS: In Congress.

WILLIAM K. BLACK: --in Congress, to hold the necessary hearings. And we can blast this out. But if you leave the failed CEOs in place, it isn't just that they're terrible business people, though they are. It isn't just that they lack integrity, though they do. Because they were engaged in these frauds. But they're not going to disclose the truth about the assets.

BILL MOYERS: And we have to know that, in order to know what?

WILLIAM K. BLACK: To know everything. To know who committed the frauds. Whose bonuses we should recover. How much the assets are worth. How much they should be sold for. Is the bank insolvent, such that we should resolve it in this way? It's the predicate, right? You need to know the facts to make intelligent decisions. And they're deliberately leaving in place the people that caused the problem, because they don't want the facts. And this is not new. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.

BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?

WILLIAM K. BLACK: That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse. If they understand how bad it is, they'll run for the exits."

BILL MOYERS: Yeah, and this week in New York, at this conference, you described this as more than a financial crisis. You called it a moral crisis.

WILLIAM K. BLACK: Yes.

BILL MOYERS: Why?

WILLIAM K. BLACK: Because it is a fundamental lack of integrity. But also because, if you look back at crises, an economist who is also a presidential appointee, as a regulator in the Savings and Loan industry, right here in New York, Larry White, wrote a book about the Savings and Loan crisis. And he said, you know, one of the most interesting questions is why so few people engaged in fraud? Because objectively, you could have gotten away with it. But only about ten percent of the CEOs, engaged in fraud. So, 90 percent of them were restrained by ethics and integrity. So, far more than law or by F.B.I. agents, it's our integrity that often prevents the greatest abuses. And what we had in this crisis, instead of the Savings and Loan, is the most elite institutions in America engaging or facilitating fraud.

BILL MOYERS: This wound that you say has been inflicted on American life. The loss of worker's income. And security and pensions and future happened, because of the misconduct of a relatively few, very well-heeled people, in very well-decorated corporate suites, right?

WILLIAM K. BLACK: Right.

BILL MOYERS: It was relatively a handful of people.

WILLIAM K. BLACK: And their ideologies, which swept away regulation. So, in the example, regulation means that cheaters don't prosper. So, instead of being bad for capitalism, it's what saves capitalism. "Honest purveyors prosper" is what we want. And you need regulation and law enforcement to be able to do this. The tragedy of this crisis is it didn't need to happen at all.

BILL MOYERS: When you wake in the middle of the night, thinking about your work, what do you make of that? What do you tell yourself?

WILLIAM K. BLACK: There's a saying that we took great comfort in. It's actually by the Dutch, who were fighting this impossible war for independence against what was then the most powerful nation in the world, Spain. And their motto was, "It is not necessary to hope in order to persevere."

Now, going forward, get rid of the people that have caused the problems. That's a pretty straightforward thing, as well. Why would we keep CEOs and CFOs and other senior officers, that caused the problems? That's facially nuts. That's our current system.

So stop that current system. We're hiding the losses, instead of trying to find out the real losses. Stop that, because you need good information to make good decisions, right? Follow what works instead of what's failed. Start appointing people who have records of success, instead of records of failure. That would be another nice place to start. There are lots of things we can do. Even today, as late as it is. Even though they've had a terrible start to the administration. They could change, and they could change within weeks. And by the way, the folks who are the better regulators, they paid their taxes. So, you can get them through the vetting process a lot quicker.

BILL MOYERS: William Black, thank you very much for being with me on the Journal.

WILLIAM K. BLACK: Thank you so much.

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