What Cooked the World's Economy? It is not your overdue mortgage

[Mass]

A very good article explaining where the crisis comes from. Posting the beginning only for copyright reasons, but go to the link and read the article.

http://www.villagevoice.com/content/printVersion/850296

It's 2009. You're laid off, furloughed, foreclosed on, or you know someone who is. You wonder where you'll fit into the grim new semi-socialistic post-post-industrial economy colloquially known as "this mess."

You're astonished and possibly ashamed that mutant financial instruments dreamed up in your great country have spawned worldwide misery. You can't comprehend, much less trim, the amount of bailout money parachuting into the laps of incompetents, hoarders, and miscreants. It's been a tough century so far: 9/11, Iraq, and now this. At least we have a bright new president. He'll give you a job painting a bridge. You may need it to keep body and soul together.

The basic story line so far is that we are all to blame, including homeowners who bit off more than they could chew, lenders who wrote absurd adjustable-rate mortgages, and greedy investment bankers.

Credit derivatives also figure heavily in the plot. Apologists say that these became so complicated that even Wall Street couldn't understand them and that they created "an unacceptable level of risk." Then these blowhards tell us that the bailout will pump hundreds of billions of dollars into the credit arteries and save the patient, which is the world's financial system. It will take time—maybe a year or so—but if everyone hangs in there, we'll be all right. No structural damage has been done, and all's well that ends well.

Sorry, but that's drivel. In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.

Credit derivatives—those securities that few have ever seen—are one reason why this crisis is so different from 1929.
...

[C......N......C]

1. Look at the world like a club.

You have some members that get all the benefits and won't pay their fair share. They expect the lowest members who get to use nothing to do all the work. It is pervasive throughout the world. There is self satisfying greed that has siphoned all the money and expects to be treated like royalty because they have all the money. That's what cooked the economy $

[Hannah Bell]

2. yep. it's not that complicated in the big picture. money's not moving,

some people have most of it & aren't spending.

why?

to bankrupt enough people that they can buy up the assets & restart the game with fewer players & cheaper labor.

[C......N......C]

4. This is a fantastic economy for some people.

They just let you think it is "bad".

[Hannah Bell]

7. for some. sure. but not for others. some people did well in the 30s, too.

buying up the property of bankrupts.

This company was doing great until they got caught in a credit crunch in the panic of 1893. They were forced to sell out to JP Morgan, who put the company together with others to form the "Harvester Trust," i.e. International Harvester. The Buckeye patentee was Thomas Edison's grandfather.

[C......N......C]

9. Like what's his name used to say. Paul Harvey.

And for the rest of the story, Who on TV or the Radio or the News talks about the dynasties and fortunes being built now at the expense of the world.

[Hannah Bell]

13. i'd like to hear that report. i'm thinking it's mostly the same folks, though.

lots of the folks reporting are their relatives.

[soothsayer]

5. Yep, and the Fed is even helping along the consolidation of power

...deciding who to bail out and who to let get gobbled up by the others with the bailout money, and brokering hostile takeovers like they did with bear stearns.

[C......N......C]

8. The intricacies of how they steal

are complicated to mask the stealing, but it is stealing.

[C......N......C]

10. Derivatives = scam .

[leftofthedial]

23. the world is the fat cats' frat house

and we're all permanent pledges.

Let the hazing begin!

[Ganja Ninja]

3. Credit Derivatives were one of Rick Santelli's specialties.

People like Santelli need to be the first up against the wall.

[C......N......C]

11. Didn't they have to pass a law to make derivatives legal,

or else they were coved by some gaming law that made them illegal ?

[Mother Of Four]

6. I took my time reading the article-

What does this mean for us? (The lil people)

I understand the domino effect...

Loss of jobs = loss of money = loss of homes

ARMs = ballooning payments = loss of homes

No money moving = hazardous or inability to get a loan for a home = homes vacant.

No money moving = loss of jobs = see #1

I guess what my question is, what the heck do we DO about it? Dig in and try to sit it through?

[C......N......C]

14. It becomes reality.

Unless some savior comes along to break the spell. Remember, life has never been better for the super class.

[global1]

12. So It Looks Like Clinton Did Have Something To Do With This Crisis......

and they even implicated Obama in this article - 'before he was a 'community organizer' and 'his appointment of Eric Holder'.

[blm]

16. Clinton kept BushInc's fascist agenda on track throughout the 90s. Deepsixing BCCI for Poppy was

key to keeping the agenda moving.

[HughMoran]

18. Funny how we blame the Dems for not stopping the Republicans

While Clinton should have vetoed that bill, it was a Republican (Graham) who inserted that CFMA provision and who had threatened to hold up the bill if it were not there. Clinton likely couldn't have stopped the Republicans and was in a weak position at the time (if you remember correctly). Mentioning Obama without mentioning the 20 of the past 28 years with a Republican president having set this agenda into motion is ludicrous - I can't believe you did that. The Republicans starting with Reagan started this deregulation ball rolling and they had the power of the Presidency behind them for most of the time. Dems have been fighting an uphill battle just to regain power over most of that time and could not always stop the Republicans, no matter what the revisionists would like to think. It's always the Republicans that initiated these crises, why do we want to blame the Dems for not being able to stop them?

[elleng]

26. I won't disagree that lots of stuff occurred under and since rr,

but the 'deregulation' ball was rolling much before.

'The 1973 energy crisis and stagflation radically changed the economic environment, as did technological advances such as the jumbo jet. Most of the major airlines, whose profits were virtually guaranteed, favored the rigid system. But passengers forced to pay escalating fares did not, nor communities which subsidized air service at ever-dearer rates. Congress became concerned that air transport in the long run might follow the nation's railroads into trouble; in 1970 the Penn Central Railroad had collapsed in what was then the largest bankruptcy in history, resulting in a huge taxpayer bailout in 1976.

Leading economists had argued for several decades that this sort of regulation led to inefficiency and higher costs. In 1970-71 the Council of Economic Advisors in the Richard Nixon Administration, along with the Antitrust Division of the Department of Justice and other agencies, proposed legislation which would diminish price collusion and entry barriers in rail and truck transportation. While this initiative was in process, in the follow-on Gerald Ford Administration, the United States Senate Judiciary Committee, which had jurisdiction over the antitrust laws, a part of competition law, began 1975 hearings on airline deregulation. Senator Ted Kennedy took the lead in these hearings. This committee was deemed a more friendly forum than what likely would have been the more appropriate venue, the Aviation Subcommittee of the Commerce Committee. The Gerald Ford Administration supported the Senate Judiciary Committee initiative.

In 1977, President Jimmy Carter appointed Alfred E. Kahn, a professor of economics at Cornell University, to be chair of the CAB. A concerted push for the legislation had developed, drawing on leading economists, leading 'think tanks' in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), the head of the regulatory agency, Senate leadership, the Carter Administration, and even some in the airline industry. This coalition swiftly gained legislative results in 1978.'

http://en.wikipedia.org/wiki/Airline_Deregulation_Act

[smokey nj]

15. Thanks for posting this!

K&R

[slay]

17. I just read the whole article - very interesting and informative

Hope others read the whole thing as well. It's getting really interesting now that it's all blowing up in the faces of these rich criminals.

[starroute]

19. I found something interesting from 2007 in my files

On edit: See also the two items I added below as replies. It seems like both the Bush administration and the Chamber of Commerce were doing a lot c. 2003-07 to keep the scams going -- and they're more than due to come in for their fair share of scrutiny.


http://www.iht.com/articles/2007/07/03/business/bxfund.php

U.S. private equity firms oppose tax law
July 4, 2007

The managers of hedge funds and private equity firms, whose huge profits and lavish lifestyles have made them a target of the U.S. Congress, are fighting back by portraying themselves as the champions of the little guy.

The Private Equity Council, a trade association in Washington founded by Blackstone Group, the Carlyle Group and Apollo Management, has retained an army of lobbyists to try to derail legislation that would raise their taxes. They have joined with allied Republican lawmakers and groups like the U.S. Chamber of Commerce in a coalition that plans to show how pension funds and state and local governments have benefited from the high returns on their hedge fund and private equity investments.

The tax-raising legislation introduced in the House of Representatives and Senate last month "affects blue-jeans-wearing Americans just as it does those working on Wall Street," said Representative Eric Cantor, a Virginia Republican who is leading House opposition to the proposed tax increases. . . .

Legislation co-sponsored by the chairman of the House Financial Services Committee, Barney Frank, Democrat of Massachusetts, and the chairman of the House Ways and Means Committee, Charles Rangel, Democrat of New York, would tax the share of profits that hedge fund and private equity managers receive for investment services at ordinary income tax rates of as much as 35 percent, rather than the capital gains rate of 15 percent. A Senate measure introduced by the Finance Committee chairman, Max Baucus, a Montana Democrat, and the panel's top Republican, Charles Grassley of Iowa, would require publicly traded investment partnerships like Blackstone to be taxed at the corporate rate rather than the capital gains rate.

[starroute]

20. A goodie from 2006 -- hedge funds, short selling, and the Bush family

http://www.thesanitycheck.com/Default.aspx?tabid=56&EntryID=42

1/25/2006

Today, my mailbox was crammed with information about a close Bush family friend being a hedge fund manager who had been fined for naked short selling. . . . Apparently this Bush family friend, a guy named John Mangan, was revealed by the NY Post today as having not only gotten an endorsement by Marvin Bush, but had misled his investors by omitting the information that he had been fined by the NASD for naked short selling and barred for life from working with any legitimate participant. From the Post, who at times I have expressed a less than stellar opinion of (specifically my like/dislike of Roddy Boyd's material), but who knocked one out of the park on this one:

“The fund also has a close relationship with Marvin Bush, the brother of President George W. Bush and a founder of private-equity and fund-of-funds Winston Partners. Bush told The Post he happily served as a reference for Mangan when he was raising capital for the fund.

"John was a neighbor and a friend from Alexandria going back nearly 15 years. We started out playing tennis — he's an incredible player —and the relationship grew," Bush said. "He needed a reference and he was one of the hardest working and smartest guys I knew, so I was happy to tell anyone about that," he added. Bush declined to comment on whether he had an investment with Mangan and McColl.“ . . .

Given that we in the Market Reform Movement has been saying for over a year that naked short selling is a very real problem that defrauds Main Street America on a regular basis, and given that we have been puzzled as to why the government is unusually reluctant to look into the problem, much less acknowledge it and fix it, it is very, very uncomfortable for us to find out that a close friend of at least one Bush has been fined for the practice and barred from his profession because of his involvement in it - the week after we are treated to pictures of our leader with Abramoff – literally moments after claiming he had never met the man.

Anyone else getting a sinking feeling as more of this comes together?

[starroute]

21. From 2004 -- how the Bush administration stalled corporate reform

http://www.concernedshareholders.com/CCS_Corporate_Cronies.pdf

Public Citizen’s Congress Watch
Corporate Cronies

The corporate crime wave that came to light in 2002 cost investors dearly, with some $7 trillion in market value vanishing almost overnight. The series of scandals that spurred this economic meltdown – Enron, Global Crossing, Adelphia, Tyco, Worldcom and others – exposed the stunning, systemic failure of corporate directors to police crooked CEOs or protect the interests of shareholders. In response, President Bush had strong words for dishonest CEOs and other corporate malefactors. “We’ve got thousands of citizens who own shares of publicly held companies, many in pension plans, mutual funds, a lot of them direct ownership,” Bush said in a March 2002 speech on corporate responsibility. “And this country must hold CEOs – CEOs of publicly held companies, to the highest of high standards.”

The job of setting those high standards fell to the Securities and Exchange Commission (SEC), the quasi-independent federal agency charged with protecting investors and maintaining the integrity of U.S. securities markets. In October 2003, the SEC proposed the so-called shareholder access rule, a modest reform measure that would make it easier for concerned investors to place their own nominees on a company’s board of directors. Currently, there is no practical way for shareholders to hold even failing corporate boards responsible. Though the proposed regulation had the support of institutional investors, state treasurers, unions, corporate governance experts, and even SEC Chairman William Donaldson, the shareholder access rule was vehemently opposed by the CEOs of some of America’s largest corporations. A year after first being introduced, the rule still has not seen the light of day.

That’s largely because the Bush administration has sided with the CEOs against the shareholders. Apparently in deference to some of its biggest financial backers and corporate cronies, the Bush administration has worked to delay and debilitate a rule that would hold CEOs accountable to their shareholders. This is a classic case of money and access winning out over what is in the best interest of average citizens. The Bush Administration, the Business Roundtable, and the U.S. Chamber of Commerce pressured the SEC to back down on the shareholder access rule. . . .

• The Bush administration dispatched Treasury Secretary John Snow – a former chairman of the Business Roundtable – to pressure SEC officials to weaken the shareholder access rule. According to one senior commission official, Snow served as the White House point man in making sure “the views of an administration eager to court the chief executives during an election year have been made clear to the chairman.” Multiple SEC officials told four separate reporters that Snow let it be known that the White House does not want the rule to proceed.

[Junkdrawer]

22. K&R

[Junkdrawer]

24. It's a long read, but an important one. n/t

[smokey nj]

25. Kick!