| CREDIT DEFAULT SWAPS SHOULD BE DECLARED ILLEGAL
BUT THAT WOULD HURT
by William Schmidt, Ph.D - www.tigersoft.com
Credit Default Swaps - guarantee the owner of the CDS against the nonpayment
of a debt by a second
party. How realistically can any entity guarantee thousands and
thousands of contracts,
mortgages and loans against default when a housing, real estate
or stock market
"boom" turns into a bust? Would it not be fraud for me to take in money
guaranteeing all comers
against some monstrous catastrophe? In the event of a giant
earthquake, tidal wave
or meteor, I would have no way of ever paying those I "insured".
I know this. It
would be fraud for me to take in money in this fashion.
CDS, have for years been an unregulated $62 trillion market. Until 2000, many
states prohibited them,
much like stock market side-bets were banned in the 1930s.
Yet, amazingly, Obama's
Treasury Secretary would have the US government guarantee
He has urged this in meeting after meeting since June 2008.
(Geithner) proposed asking Congress to give the president broad power to guarantee
the debt in the banking system, according to two participants, including Michele Davis,
an assistant Treasury secretary. The proposal quickly died amid protests that it
politically untenable because it could put taxpayers on the hook for trillions of dollars.
thought, Wow, thats kind of out there, said John C. Dugan,
the currency, who heard about the idea afterward. Mr. Geithner says, I dont
serious discussion on that proposal then.
in the 10 months since then, the government has in many ways embraced his
prescription. Step by step, through an array of new programs, the Federal Reserve
Treasury have assumed an unprecedented role in the banking system, using unprecedented
of taxpayer money, to try to save the nations financiers from their own mistakes.
more often than not, Mr. Geithner has been a leading architect of those bailouts, the
the head of the pack. He was the federal regulator most willing to push the
H. Rodgin Cohen, a prominent Wall Street lawyer who spoke frequently with Mr.
- New York Times).
So, the US Government guaranteed the debts of AIG, and its many credit default swaps,
in September 2008 after a
hurried and secret Saturday meeting between Paulson (US Treasury Secretary),
Geithner (NY Fed Chairman)
and Lloyd Blankfein, the Chairman of Goldman Sachs. The
US takeover of AIG and all
its financial responsibilities amounted to the taxpayer providing
Goldman Sachs a $13 billion
handout in return for the credit default swaps that Goldman had
bought from AIG. No
effort was made by AIG, or its CEO Edward Libby, an ex-Goldman guy,
or the Paulson regime at the
Treasury or more recently by the Obama Administration to question
the very legality of these
Credit Default Swaps or seek to reduce the taxpayer payment to Goldman
based on their lack of legal
sanction. Many folks think that this was a massive fraud, that it
shows how corrupt both
Bush-Paulson and the Obama-Geithner Administrations were and are.
More dangerously, it clearly
demonstrates that the US Government is little more than a tool
for Wall Street and Goldman
Sachs, in particular.
AIG sold billions of dollars worth of Credit Default Swaps. In doing so, it
against the owner against a
financial failure by various issuers of debts like banks and GM
and other corporations.
It was in no financial position to do that, especially since as the economy
weakened, it had agreed to
put up more and more collateral against its own default. It made
fraudulently. Executives at AIG urged its salesmen to sell these CDS because
they wanted more short-term
revenue - despite the risks - to bring them outrageously high
salaries. AIG and
others thus collected money to guard against an eventuality which they could
see would end up making them
insolvent. They would never have enough money to pay all that
they would owe in this case.
They knew this. But they were happy collecting money as long
as possible to shore up their
profits and executive bonuses.
I would like to see the government
declare that ALL Credit Default Swaps
are illegal private gambling
and fraud. As such no court could require them to be
Realize that Credit Default
Swaps have never been certified by an appropriate government entity to
be valid insurance
policies. Credit default
swaps were fraudulent wagers that should be
declared null, void and
unenforceable, just as illegal gambling debts are.
Obama contends without investigation that no laws
were violated by bankers
insurance companies in crashing down the entire world financial system..
It can reasonably be contended that when AIG and others sold these, they knew that there
was always a risk of
wisdespread financial disaster, in which case they would not be able to pay
what the CDS agreements
required of them. Therefore, these CDS contracts were entered into
in a fraudulent way.
It is the biggest banks that Bernanke, Paulson Obama, Geithner and Summers are closest
to that have made
nearly all these transactions. Trillions of tax payer money is going to bail out
the very culprits who
engaged in these transactions to prolong the financial bubble. Analysis
Have 23,000 Times More Exposure to Credit Default Swaps Than Community Banks
- As the economic crisis puts a spotlight
on the obscure world of credit default swaps CDS, a
n unregulated $62 trillionmarket that most people never heard of and even fewer
understood, the fear
of a CDS catastrophe is haunting the country's largest banks, and the nation's healthy
and consumers are paying the price.
Obama's biggest source of campaign contributions in 2008 was Wall
Goldman Sachs gave
twice as much to Obama as John McCain. It was
a very profitable
investment. Or was it a bribe, pure and simple?.
MONOPOLY FINANCE CAPITALISM
THE US GOVERMENT.
It is hard not to see the extent to which America is under the heel of
a small number of banking
elites. It is as though Goldman Sachs in its tireless quest for profits at the
expense of ordinary people
is out to prove Marx and Linin were correct when they said that wealth and political power
over time become more and more concentrated in financial elites. See
for example these writings.
Preposterous? Not after the Paulson naked $700 billion bailout of
banks which Congress rubber stamped.
More and more the trend is clear to anyone who follows the news. See thee writeups I
past year. They express my total exasperation and disillusionment with Democrats..
Blog - 4/7/2009 - Goldman Sachs: The UnBridled Greed Connection
Blog - 3/23/2009 - Obama's Monopoly FInance ...
Blog 9/21/2008 - Monopoly Finance Capitalism Revealed for All To See.
Blog - September 20, 2008 - Paulson Takes Corruption To Dizzying New Heights...
Look at what Illinois Sen. Dick Durbin confessed to a Chicago radio
audience station this past week: "And
the banks -- hard to believe in a time when we're facing a
banking crisis that many of the banks created -- are still the most powerful lobby on
And they frankly own the place."
Please read http://www.salon.com/opinion/greenwald/2009/04/30/ownership/
evidence of this obvious proposition.
1) Revolving Door Goldman Sachs Lobbyists:
Sachs' new top lobbyist was recently the top staffer
to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by
Frank. Michael Paese, a registered lobbyist for the Securities Industries and
Financial Markets Association since he left Frank's committee in September, will join
Goldman as director of government affairs.
Former Tom Daschle intimate, Mark Patterson,
was until this year Goldman's top lobbyist. Now
he is the chief of staff at the Treasury Department.
Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin
2) Conservative Democrats clash with
their own consituencies' needs
because they are in the pay of Banks and Wall Street:
Evan Bayh's previously-reported
central role on behalf of the bankers in blocking legislation, hated by the banking
industry, to allow bankruptcy judges to alter the terms of mortgages so that families can
stay in their homes. Bayh is up for re-election in 2010, and here -- according
to the indispensable
Open Secrets site --
is Bayh's top donor:
Goldman is also the top
donor to Bayh over the course of his Congressional career, during which
Bayh has received more than $4
million from the finance, insurance and real estate sectors:
| obody in Congress or the Administratin Now Even Tries To Hide
The Extent to Which Banks Control Public
Glenn Greenwald Thursday April
30, 2009 05:35 EDT
"The only way they could
make it more blatant is if they hung a huge
Goldman Sachs logo on the Capitol dome and then branded it
foreheads of leading members of Congress and executive branch
"Of course, ownership of
the government is not confined to Goldman or even to bankers generally; legislation in
virtually every area is written by the
lobbyists dispatched by the corporations that demand it, and its passage then ensured
by "representatives" whose pockets are stuffed with
money from those same corporations. Just as one example, as Jane
Hamsher reported about Bayh:
Bayh's little "lobbyist problem" is considered by many to be what tanked his
Vice Presidential aspirations. His wife Susan earns about $837,000 a year serving on seven
corporate boards, among them Wellpoint, a health insurance company for which Bayh helped
secure a $24.7 million dollar grant. She's on the board of ETrade, even as Bayh is on the
Senate Finance Committee.
Bayh wants people to believe he's a "moderate" who sits in the
Center of K Street, maybe.
Meanwhile, the only citizen protests relating to this mass robbery are driven by anger
at the government for treating bankers too harshly and unfairly -- one of
the most classic manifestations of what Taibbi, in a separate piece, so aptly calls
the "peasant mentality":
After all, the reason the winger crowd cant find a way to be coherently angry
right now is because this country has no healthy avenues for genuine populist outrage. It
never has. The setup always goes the other way: when the excesses of business interests
and their political proteges in Washington leave the regular guy broke and screwed, the
response is always for the lower and middle classes to split down the middle and find
reasons to get pissed off not at their greedy bosses but at each other. Thats why
even people like [Glenn] Becks audience, who Id wager are mostly lower-income
people, cant imagine themselves protesting against the Wall Street barons who in
actuality are the ones who fucked them over. . . .
Actual rich people cant ever be the target. Its a classic peasant
mentality: going into fits of groveling and bowing whenever the masters carriage
rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after
spending fifteen hard hours in the fields. You know youre a peasant when you
worship the very people who are right now, this minute, conning you and taking your shit.
Whatever the master does, youre on board. When you get frisky, he sticks a big cross
in the middle of your village, and you spend the rest of your life praying to it with big
googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group
and you immediately salute and rush off to join the hate squad. A good peasant is
loyal, simpleminded, and full of misdirected anger. And thats what weve
got now, a lot of misdirected anger searching around for a non-target to mis-punish . . .
cant be mad at AIG, cant be mad at Citi or Goldman Sachs. The real villains
have to be the anti-AIG protesters! After all, those people earned those
bonuses! If ever there was a textbook case of peasant thinking, its
struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to
millionaires. Its really weird stuff.
One might think it would be a big news story for the second most-powerful member of
the U.S. Senate to baldly state that the Congress is "owned" by the bankers
who spawned the financial crisis and continue to dictate the government's actions.
But it won't be. The leading members of the media work for the very
corporations that benefit most from this process. Establishment journalists are
integral and well-rewarded members of the same system and thus cannot and will not
see it as inherently corrupt (instead, as Newsweek's
Evan Thomas said, their role, as "members of the ruling class," is to
"prop up the existing order," "protect traditional
institutions" and "safeguard the status quo").
That Congress is fully owned and controlled by a tiny sliver of narrow, oligarchical,
deeply corrupted interests is simultaneously so obvious yet so demonized (only Unserious
Shrill Fringe radicals, such as the IMF's former chief economist,
use that sort of language) that even Durbin's explicit admission will be largely ignored.
Even that extreme of a confession (Durbin elaborated on it with
Ed Schultz last night) hardly causes a ripple.
* * * * * *
Here's Jane Hamsher, with Rachel Maddow, in February, assessing the motives of
people like Evan Bayh and analyzing who owns and controls them (begins at the 3:00
minute mark): http://www.youtube.com/watch?v=pj5wxAdLlds&eurl=http%3A%2F%2Fwww.salon.com%2Fopinion%2Fgreenwald%2F2009%2F04%2F30%2Fownership%2F&feature=player_embedded
FROM THE OFFICE OF SATAN
"Prince of Lies and proud of it"
You have outdone yourself once again, my loyal servant, with these fraudulent, deliciously
deceptive proposals to reform the utterly corrupt financial system you exploited so
profitably as head of Goldman Sachs.
My plans for the destruction of the United States of America have been going along rather
swimmingly until we rushed things a bit with Bear Stearns--ah, the wondrous power of pure,
unmitigated greed! It remains my favorite tool--and calls for reform were suddenly
The rules which would have undone us were simple indeed, as you know all too well:
complete transparency of risk and leverage in all financial documents and financial
the marking to market of all financial instruments and assets at the close of the trading
day, as is currently done with commodities futures and stock options
the banning of "off balance sheet" accounting
the banning of offshore accounts and holding companies
the uniform enforcement of these regulations across all financial classes, assets, firms,
brokers and banks
As you know, Hank, transparency, mark-to-market and strictly enforced regulations of all
banks, broker-dealers and financial institutions would deal a death blow to my plans to
destroy the U.S. via destruction of its financial system. Having sold your soul to me for
the glory and riches you received at Goldman Sachs, you had to comply with my orders to
destroy any such useful regulations with cunning "fixes" of your own.
Though I counted on your native feral survival instincts, I did not expect a plan of such
evil genius. Imagine how foolish and naive humans must be to accept your "fix"!
My mind boggles at the ease with which you have conned the gullible gallery of idiots in
Congress and the mainstream media:
You diminish the powers of the Federal agencies and favor the "shadow
government" Federal Reserve, which is not even a government agency but a private
Instead of proposing transparency, you are adding another layer of secrecy in what the Fed
can investigate and do to "fix" future problems.
Enable more "self-regulation" (hahahaha, I can't stop laughing at this one! You
really are a comedian!)
I am still amused that the American populace hasn't noticed that you, Master of the Dark
Arts at Goldman Sachs, have been duly appointed as the wolf assigned to guard the sheep.
Now you have suggested opening the rusty wire fencing and lighting the opening so your
brethren can more easily slip in and slaughter as many sheep as they wish--and the
American sheep sit there mesmerized by my other crowning achievement, the TV, blithely
accepted that the most voracious, cleverest wolf is now their "guardian." Never
in my wildest imaginations did I hope for such gross stupidity, ignorance and naiveté.
Keep up the fine work--
Your Lord and Master,
"Why on earth not a single Wall Street CEO behind bars? Only logical explanation is
Obama has been paid off handsomely." toulouse_20...