To Obama: Stop "The Bezzle" - More from Denninger

[Emillereid]

I can't help but agree with him - the financial sector needs complete transparency. Obama needs to make all of them open their books so we can see what they've got. We should take them over. restructure them and become our own bankers. Let them call it socialism - if by that is meant, for the social good - then bring it on!

To Obama: Stop "The Bezzle": UPDATED
http://market-ticker.org/


In a 35-minute conversation with The New York Times aboard Air Force One on Friday, Mr. Obama reviewed the challenges to his young administration. The president said he could not assure Americans the economy would begin growing again this year. But he pledged that he would “get all the pillars in place for recovery this year” and urged Americans not to “stuff money in their mattresses.”

“I don’t think that people should be fearful about our future,” he said. “I don’t think that people should suddenly mistrust all of our financial institutions.”

You want Americans not to "stuff money in mattresses" and "not suddenly mistrust all of our financial institutions"?

Fine.

START LOCKING UP THE EMBEZZLERS AND THIEVES, MANY OF WHOM ARE YOUR CRONIES AND DONORS TO BOTH POLITICAL PARTIES.

Until you do that, anyone with half a brain in their head will head to The Mattresstm, because it is the only place where one can be certain their money is safe.

That's right. The FDIC isn't safe - Sheila Bair said so, and she is taxing the innocent (potentially to the point of ruin!) to fund the guilty. Specifically, she's increasing assessments on banks that did nothing wrong - including a special assessment high enough to severely damage or even wipe out their earnings. These are the local community banks that didn't make bad mortgages and liar loans, didn't write commercial mortgages on strip malls with unrealistic assumptions and didn't participate in the fraud of the last 20 years, but they are being intentionally damaged to bail out the guilty!

The Stock Market isn't safe, because not one of the public firms on the exchange has a balance sheet that can be trusted. Without a balance sheet that I can trust I have no way to know what a reasonable valuation might be. Ergo, I cannot figure out whether stocks are a buy, sell, or short. Never mind Stanford Financial, Madoff and the whole host of others who have been caught doing the same thing.

The Bond Market isn't safe, because the CDS market can be manipulated and thus there are now people who buy bonds intended to force the firms into default, rather than wanting to see them succeed. Therefore, I cannot buy bonds.

If you think that the market is collapsing because people are worried about "socialism", you're wrong. Yes, that's a concern, and yes, people are worried that you're going "hard left" - but there are winners in such a marketplace.

No, the market is being beaten to a pulp because you have inherited a financial system that has for the last twenty years, under both Democrats and Republicans, been comprised of one fraud after another, starting with "the Internet is growing 50% a quarter" and now winding up with "home prices never go down."

You have inherited this President Obama, but you have also refused to change it. Let's tick it off, shall we?

You have refused to step on the neck of the CDS monster by declaring the uncovered writing of these swaps contrary to public policy and thus void, suspending all ability to collect until they are on a public exchange with nightly margin supervision.
You have refused to claw back the nearly $50 billion that our government paid to the bankers who caused the mess via bailing out AIG, and attempted to conceal same.
You have refused to compel The Federal Reserve to disclose the full details of who it is lending to and on what collateral.
You have refused to demand that the banks (and all other firms) produce accurate balance sheets showing the impairment on their so-called "assets".
You have refused to direct the FBI to indict the CEOs who came on national television hours or days before their firms collapsed, proclaiming that "everything is fine."
You have not only refused to demand prosecution of the homeowners, mortgage brokers, lenders and others who lied about the quality of the loans made, you have explicitly excused that behavior in crafting "help" for homeowners, ratifying out-and-out fraud!
And finally, you have stuck a second $700 billion placeholder in your budget for yet more bailout money to be paid to the very people who caused this collapse in the first place.
And much more.

We need a banking system Mr. President. We do not need these banks who gamed the rules, demanded unlimited leverage, colluded with one another to create unreasonable and systemic risk and fomented the great economic and financial collapse since the 1930s.

You've done nothing to solve this problem Mr. President, instead choosing to continue trying to paper over it, as President Bush and Henry Paulson did.

What do we have left President Obama if not "The Mattress"?

You own this problem now.

It is your responsibility.

Either act - it is within your power to do it today - or watch our economy and markets implode.

Pleading will not get it done; all that does is confirm that you either lack the balls to do the right thing or are personally complicit in the corruption and embezzlement.

[HowHasItComeToThis]

1. WALL STREET HAS DIRTIED EVERYONE

:puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke: :puke:

[fed_up_mother]

2. Have to say I agree with this.

[upi402]

3. Lock them up

http://market-ticker.org/
after a fair trial in a court of law, of course

(meh) lock em up;

A credit default swap (CDS) is a credit derivative contract between two counterparties. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument defaults.<1>

CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the specified events occur. However, there are a number of differences between CDS and insurance, for example:

the seller need not be a regulated entity;
in the United States CDS contracts are generally subject to mark to market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract;
Hedge Accounting may not available under US GAAP unless the requirements of FAS 133 are met; if it were not possible to it could increase income statement and balance sheet volatility if the CDS was purchased to hedge an exposure;
The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event.<2><3><4> Generally, to purchase insurance the insured is expected to have an insurable interest such as owning a debt.

attribution
http://en.wikipedia.org/wiki/Credit_default_swap

[SlowDownFast]

4. Right is right.

Karl's right.

Plain and simple.

[Ghost Dog]

5. Obama has said he needs The People's help

to force him, to force others, to do the right things...

[MattSh]

6. If he Needs the people's help,

then he must start rallying them.

Just sitting back and saying "move on, there's nothing to see here" will not get anyone to do much of anything.

[Ghost Dog]

8. People can't just switch off the TV and rally themselves

anymore, over there?

[tomp]

10. obama can't act honorably based on the facts all on his own?

some change.

[Ghost Dog]

15. I don't think he'd be allowed

to do that, all on his own, do you?

[tomp]

17. allowed to tell it like it is? sure, nobody can stop him.

he can go on tv and say whatever the hell he wants. and now you say, "but they'll assassinate him." and i say, "that's the price of patriotism. he's the one who wanted to be president. not only that, but "they" kill lots of people. i don't want obama pretending the wrong thing is the right thing in order not to be killed. if he either knows what's right and won't stand up for it, or doesn't know what's right, he doesn't deserve to be president."

at least, that's where i think this was going.

[amandabeech]

18. If he's afraid of these people, then he needs to spend more time with his family.

Joe might have too many conflicts.

What's that leave, Pelosi? Bah.

Who's President Pro Tem these days.

[Ghost Dog]

19. Hell, just 'media-assassination' would be enough for 'them', these dumbed-down days,

wouldn't it?

[DeschutesRiver]

21. No he can't do it all on his own

he does need the help of our less than esteemed Congress, who has aided and abetted miscreants for the last 20 years and caused this mess. Both parties. You and I don't write the laws, don't pass the regulations, don't legislate. Like I read in an article posted elsewhere, it was/is up to about 545 people to do the right thing, and I am past the point where I can find excuses for their behavior.

The one thing that Obama can do is what he was elected to do - be a leader. He is always allowed to do that. For all I know, what is going down right now might well be part of the plan they have come up with behind the scenes. We are in a huge mess; nobody wants to pull together; nobody wants their particular favorite legislation, legislation loop hole, entitlement program, tax bracket or you name it be it tax cut or spending issue to be changed or eliminated.

The only thing I can think of that would explain Obama's apparent "lack of action" is that at some point, everyone is going need to come to the table and talk straight when it gets bad enough to be damned scary. Letting people of all social, economic, and religious casses hold on tight to their favorite things until the economy makes them no longer even remotely feasible until modifications occur can have its own stimulative effect. And while he is busy getting other programs established in different areas, and working on various ideas for letting the banking system down easy instead of hard, he can let people slowly come to terms with the kind of change that it will take to dig ourselves out of this hole.

Nobody's pet issues will survive intact, I fear, but that is what we've set ourselves up for and that is the only way out now. So perhaps instead of forcing people into this process, a leader lets some things that have no real solution anyway just continue on until people have convinced themselves that drastic change across the board is inevitable. You can't force a populus to do what is in their own best interests when they scream that they won't give up anything - but you can lead them to that idea.

I hope. I really have no clue as to why Obama is taking the path he is, but we are barely at 50 days, and after seeing how he came from behind, tackled and left the Clinton machine in shreds and decisively took the victory from McCain, I am still trusting his judgement. He has to find a solution for a problem for which there is no happy solution - hell of a job, and I have confidence that he will do so. Might make some mistakes, that is to be expected. I might not like the solution - that is also to be expected.

[CoffeeCat]

7. It's going to collapse anyway...

...even if the criminals get their extra billions.

And guess who will be blamed for the collapse? Obama. And guess who will blame him for the collapse? The
Republicans and the corporatists who have been at the epicenter of this collapse.

So, either Obama challenges the system and the powers that be--or he becomes their victim.

Those are the only two choices.

These people are a cancer on our country. Playing along with them does not mean that they are your
friend, or that in the end--you will prevail.

You will not.

Snuff them out. Take them out of the power. Expose what they have done. Rally the country.

You can't win. They've got the power, the money, the media, the voting machines and a host of politicians
on both side who are corrupt as hell (and probably being strong armed with blackmail).

The only way to win is to expose the entire game. America can take it.

[SlowDownFast]

9. Well said. n/t

[tomp]

11. that seems right to me. nt

[fed_up_mother]

12. Sadly agree. The right will make him the next "Jimmy"

[truedelphi]

22. Hear. Hear. n/t

[mike_c]

13. hear HEAR!

Yes indeed!

[DemReadingDU]

14. Denninger: "The Bezzle" Defined

3/8/09 "The Bezzle" Defined by Karl Denninger

I keep getting emails asking me to define "The Bezzle" in a form that "ordinary people" understand, strongly indicating that I've failed in that regard thus far. Let's try again....

Here's what John Galbraith said about it:

"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. there is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in - or more precisely not in - the country's business and banks. This inventory - it should be called the bezzle. It also varies in size with the business cycle."

That sounds rather arcane, but if you roll it around in your head for a while, it should make sense.

Here are some examples of "The Bezzle":

*
Liar loans: The borrower can't possibly pay off the loan on the original agreed terms and the institution that makes the loan "passes it" to an investor fully aware that the borrower almost certainly lied about credit capacity.
*
Overly-rosy projections about growth in property values: The speaker is either incompetent (doesn't understand exponents - a fundamental mathematical concept) or is intentionally deceiving people.
*
Overly-rosy projections about the stock market: "The market always comes back" and "over long periods of time it outperforms other investments." Both true, but both misleading; if you're 18 you might be able to wait for it to come back, but the market has remained flat to down from a given level for more than 20 years before. How long did you say it was before you intended to retire?
*
"The Internet is doubling every three months!": It was - for about six months. But that got embedded into the business plans of thousands of businesses, long after the growth rate had started to slow down to something more sustainable. Oh by the way, the fundamental lie of that claim is that in 7 years the Internet would have gone from its original two people to covering more than the entire population of the planet, including the rice farmer in China and the starving child in Bangladesh.

In short The Bezzle is "the lie" that is always present in business.

The truth is always some degree of lying in business transactions - always has been, always will be. And so long as The Bezzle doesn't become the underlying theme in business, it simply bankrupts the people who try to run it when they get discovered.

But when The Bezzle becomes the underlying premise and basis for business transactions that entire segment of the market is doomed.

more...
http://market-ticker.org/archives/857-The-Bezzle-Defined.html

[truedelphi]

23. Thank you for that explanation on "the Bezzle" I have seen it operating

Ever since early adulthood - back in Silicon Valley Days, a company would do good for two years, and then some "expert" would say that the initial curve of the company's market curve upward "had to" continue. Not at all true - not everyone will buy a fax machine. Not every one wil buy a game station. And those that do come on board might find a different brand several years down the line.

[Mark Twain Girl]

16. Honesty... how refreshing. Site bookmarked - K&R. nt

[Marie26]

20. Complict, IMO

I really don't have a doubt anymore, after seeing who Obama appointed for his economic team & what they've done so far. It's the same crowd that created this mess, heavily funding presidential campaigns along the way.