11 Reasons Why Bernard Madoff aka "The Swindler" Is America's Unconscious Superhero

“In today’s regulatory environment, it’s virtually impossible to violate rules.” -Bernard Madoff (2007).

The Inadvertent Hand of Justice:

While it is understandable that the super-rich and wealthy, who have lost a large portion of their retirement and investment funds are unanimous in their condemnation and cries of betrayal of trust, and the editorials of all the prestigious newspapers and weeklies have joined the chorus of moral critics, there is much to praise in Madoff’s deeds, even if such praise was not at the heart of his fraudulent endeavor.

1. The swindle of $50 plus billion dollars may make a big dent on US Zionist funding of illegal Israeli colonial settlements in the Occupied Territories, lessen funding for AIPAC’s purchase of Congressional influence and financing of propaganda campaigns in favor of a pre-emptive US military attack against Iran. Most investors will have to lower or eliminate their purchase of Israel bonds, which subsidize the Jewish State’s military budget.

2. The swindle has further discredited the highly speculative hedge funds already reeling from massive withdrawals because of deep losses. Madoff’s funds were one of the last ‘respected’ operations still drawing new investors, but with the latest revelations it may accelerate their demise. The dismissed promoters may finally have to perform an honest, productive day’s work.

3. Madoff’s long-term, large-scale fraud was not detected by the Securities and Exchange Commission (SEC) despite its claims of at least two investigations. As a result, there is a total loss of credibility. More generally, the SEC’s failure demonstrates the incapacity of capitalist government regulatory agencies to detect mega frauds. This failure raises the question of whether alternatives to investing in Wall Street are better suited to protect savings and pension funds.

4. Madoff’s long-term association with NASDAQ, including his chairmanship, while he was defrauding his clients of billions, strongly suggests that the members and leaders of this stock exchange are incapable of recognizing a crook, and are prone to overlook felonious behavior of ‘one of their own’. In other words, the investing public can no longer look to holders of high posts in NASDAQ as a sign of probity. After Madoff, it may signal time to look for a king-size mattress for safe keeping of what remains of a family’s wealth.

5. The investment advisors from top banks in Europe, Asia and the US managing billions of funds did not carry out the most elementary due diligence of Madoff’s operation. Apart from severe bank losses, tens of thousands of influential, affluent and super-rich lost their entire accumulated wealth. The result is total loss of confidence in the leading banks and financial instruments as well as the general discrediting of ‘expert knowledge’. The result is a weakening of the financial stranglehold over investor behavior and the demise of an important sector of the parasitic ‘rentier’ class, which gains without producing any useful commodities or providing needed services.

6. Since most of the money stolen by Madoff came from the upper classes around the world, his behavior has reduced inequalities – he is the ‘greatest leveler’ since the introduction of the progressive income tax. By ruining billionaires and bankrupting millionaires, Madoff has lessened their capacity to use their wealth to influence politicians in their favor – thus increasing the potential political influence of the less affluent sectors of class society…and inadvertently strengthening democracy against the financial oligarchs.

7. By swindling life-long friends, self-same ethno-religious investors, narrow ethnically defined country club members and close family members, Madoff demonstrates that finance capital shows no respect for any of the pieties of everyday life: Great and small, holy and profane, all are subordinated to the rule of capital.


8. Among the many ruined investors in New York and New England, there are a number of mega slumlords (real estate moguls), sweatshop owners (fancy name-brand clothes and toy manufacturers) and others who barely paid the minimum wage to their women and immigrant laborers, evicted poor tenants and swindled employees out of their pensions before moving their operations to China. In other words, Madoff’s swindle was a kind of secular ‘divine’ retribution for past and present crimes against labor and the poor. Needless to say, this ‘unconscious Robin Hood’ did not redistribute the money fleeced from the employers to their workers, he reinvested part of it in charities which enhanced his philanthropic image and to payout to some of his early investors so sustain the overall Ponzi scam.

9. Madoff struck a severe blow against anti-Semites who claim that there is a ‘close-knit Jewish conspiracy to defraud the Gentiles’, laying that canard to rest once and for all. Among Bernard Madoff’s principle victims were his closest Jewish friends and colleagues, people who shared Seder meals and frequented the same upscale temples in Long Island and Palm Beach.

Bernie was discriminating in accepting clients, but it was on the basis of their wealth and not their national origin, race, religion or sexual preference. He was very ecumenical and a strong backer of globalization. There was nothing ethnocentric about Madoff: He defrauded the Anglo-Chinese bank HSBC of $1 billion dollars and several billions from the Dutch arm of the Belgian bank Fortes. $1.4 billion was from the Royal Bank of Scotland, the French bank BNP Paribas, the Spanish bank, Banco Santander, the Japanese Nomura; not to mention hedge funds in London and the US, which have admitted holdings in Bernard Madoff Investment Securities. Indeed Bernie was emblematic of the modern up-to-date, politically correct, multicultural, international…swindler. The ease with which the super rich of Europe forked their fortunes over caused one Madrid-based business consultant to observe that, “picking off Spain’s wealthiest was like clubbing seals…” (Financial Times, December 18, 2008 p.16)

10. Madoff’s swindle will likely promote greater self-criticism and a more distrustful attitude toward other potential confidence people posing as reliable financial know-it-alls. Among self-critical Jews, they are less likely to confide in brokers simply because they are zealous backers of Israel and generous contributors to Zionist fund drives. That is no longer an adequate guarantee of ethical behavior and a certificate of good conduct. In fact it may raise suspicion of brokers who are excessively ardent boosters of Israel and promise consistent high returns to local Zionist affiliates – asking themselves whether this business about ‘what is good for the …’ is really a cover for another scam.

11. The demise of Madoff’s enterprise and his wealthy liberal Jewish victims will adversely affect contributions to the 52 Major Jewish American Organizations, numerous foundations in Boston, Los Angeles, New York and elsewhere, as well as the Clinton/Schumer militarist wing of the Democratic Party (Madoff bankrolled both of them as well as other unconditional Congressional supporters of Israel). This may open Congress to greater debate on Middle East policy without the usual high volume attacks.

Conclusion:

Madoff’s swindle and fraudulent behavior is not the result of a personal moral failure. It is the product of a systemic imperative and the economic culture, which informs the highest circles of our class structure. The paper economy, hedge funds and all the ‘sophisticated financial instruments’ are all ‘Ponzi schemes’ – they are not based on producing and selling goods and services. They are financial bets on future financial paper growth based on securing future buyers to pay off earlier cash ins.

The ‘failure’ of the SEC is totally predictable and systemic: The regulators are selected from the regulatees, are beholden to them and defer to their judgments, claims and audit sheets. They are structured to ‘miss the signs’ and to avoid ‘over-regulating’ their financial superiors. Madoff operated in a milieu of a Wall Street where everything goes, where impunity for mega-bailouts for mega swindlers is the norm. As an individual swindler, he out-defrauded some of his bigger institutional competitors on the Street. The whole system of rewards and prestige goes to those best able to juggle the books, to cover the paper trails and who have willing victims begging to get fleeced. What a mensch, this Madoff!

In a few days, one individual, Bernard Madoff, has struck a bigger blow against global financial capital, Wall Street and the US Zionist Lobby/Israel-First Agenda than the entire US and European left combined over the past half century! He has been more successful in reducing vast wealth disparities in New York than all the white, black, Christian and Jewish, reform and mainline Democratic and Republican governors and Mayors over the past two centuries.

Some right-wing conspiracy theorists are claiming that Bernie is a secret Islamic-Palestinian agent (from Hamas) who set out to deliberately undermine the financial base of the Jewish State of Israel and its most powerful, affluent and generous US backers and foundations. Others claim that he is a closet Marxist whose swindles were carefully designed to discredit Wall Street and to funnel billions into clandestine radical organizations – after all…does anyone know where the lost billions have gone? Unlike the leftist pundits, bloggers and protest marchers, whose earnest and public activities have had no effect on the rich and powerful, Madoff has aimed his blows where it hurts the most: Their mega-bank accounts, their confidence in the
capitalist system, their self-esteem and, yes, even their cardiac well-being.

Does that mean we on the left should form a Bernie Madoff Defense Committee and call for a bailout in line with Paulson’s bailout of his Citibank cronies? Should we proclaim “Equal bailout for equal swindlers!”? Should we advocate his flight (or his right of return) to Israel to avoid a trial? It might not fly with his many Jewish victims to make the case for an Israeli retirement for Bernie.

There is no reason to mount the barricades for Bernard Madoff. It’s enough to recognize that he has inadvertently rendered an historic service to popular justice by undermining some of the financial props of a class-ridden injustice system.
-James Petras (Excerpt: "Bernard Madoff: Wall Street Swindler Strikes Powerful Blows for Social Justice", Information Clearinghouse, 12.20.2008. Image: -VioletPlanet, The Hero Factory, 2.26.09).

The Spectacularly Inept & Shameless Financial Elites...

Let's imagine, for a moment, how different the public debate would be today if it had been unions that had caused the current economic turmoil. In other words, try to imagine a scenario in which union leaders - not financial managers - were the ones whose reckless behaviour had driven a number of Wall Street firms into bankruptcy and in the process triggered a worldwide recession.

Needless to say, it's hard to imagine a labour leader being appointed to oversee a bailout of unions the way former Goldman Sachs CEO Henry Paulson was put in charge of supervising the $700 billion bailout of his former Wall Street colleagues. My point is simply to note how odd it is that the financial community has emerged so unscathed, despite its central role in the collapse that has brought havoc to the world economy.

Of course, not all members of the financial community were involved in Wall Street's wildly irresponsible practices of bundling mortgages into securities and trading credit default swaps. But the financial community as a whole, on both sides of the border, certainly pushed hard to put in place an agenda of small government, in which financial markets largely regulated themselves and citizens (particularly high-income investors) would be spared the burden of paying much tax.

The agenda advanced much further in the U.S., but had an impact in Canada, particularly on the tax front.
One would think that those who pushed this agenda so enthusiastically would, at the very least, be a tad embarrassed today. But so influential are those in the financial elite - and their hangers-on in think-tanks and economics departments - that they continue to appear on our TV screens, confidently providing us with economic advice, as if they'd played no role whatsoever in shaping our economic system for the past quarter century.

Of course, we're told there's been a major change in their thinking, in that many of them are now willing to accept large deficits in today's federal budget, in the name of stimulating the economy. While this does seem like a sharp departure from the deficit hysteria of the 1990s, a closer look reveals the change may not be that significant.

In fact, financial types have always accepted deficits - when they liked the cause. Hence their lack of protest over George W. Bush's enormous deficits, which were caused by his large tax cuts for the rich and his extravagant foreign wars. What they don't like is governments going into deficit to help ordinary citizens - either by creating jobs or providing much unemployment relief.

So the Canadian financial community has been urging that the stimulus package consist mostly of income tax cuts - even though direct government spending would provide much more stimulus and do more to help the neediest. If the Harper government follows the financial community's advice, we will simply move further along with the small government revolution launched by Ronald Reagan in the early 1980s.

Of course, tax cuts are not the same as financial deregulation. But they are twin prongs of a bundled package aimed at reducing the power of government to operate in the public interest.

Surely it's time to rethink this resistance to government acting as an agent of the common good. And maybe it's time for a little humility on the part of a financial elite that long has enjoyed such deference while turning out to be so spectacularly inept.

- Linda McQuaig ("Financial Elite Have No Shame), The Toronto Star, 1.27.2009. Image: Title Card, B-Movie, "Scum Of The Earth," 1963).

Bailed Out: Financial Wise Guys & The Wall Street Casino...

"The Congress told the American people to go to hell."-Lou Dobbs, on the passage of the 700 billion dollar Wall Street bailout plan, 10.1.08.

PART I: REPEALING ROOSEVELT

"The federal reserve is still struggling to contain what is already the most severe credit contraction since the Great Depression. Yet in all of the press coverage, commentators have scarcely acknowledged that this old-fashioned panic is a child of deregulation. During the past decade, the financial economy has repeated the excesses of the 1920s -- too much borrowing to underwrite too many speculative bets with other people's money, too far beyond the reach of regulators, setting up the entire economy for a crash.

The Roosevelt schema of financial regulation was built around two principles -- disclosure and outright prohibition of inherent conflicts of interest. All publicly listed and traded companies were required to disclose to the Securities and Exchange Commission and to the public all financial information deemed "material" to investor decisions. The New Deal also prohibited stock trading based on insider information, and it created structural barriers against the kinds of temptations that ruined the economy in the 1920s. The most notable of these was the 1933 Glass-Steagall Act, which prohibited the same financial company from being both a commercial bank and an investment bank.

The Glass-Steagall wall was devised to prevent a repeat of the 1920s' scams, in which banks made speculative investments, turned the debts into securities, and sold them off to unsuspecting investors with the blessing of the bank. With Glass-Steagall, commercial banks were tightly supervised and given access to federal deposit insurance, to keep savings secure and prevent runs on banks. Investment banks, meanwhile, were not government-guaranteed and were free to do more speculative transactions for consenting adult customers. But Roosevelt's newly created SEC subjected securities markets to much tighter structures against self-dealing and insider conflicts of interest.

The New Deal also acted on the home mortgage front. Millions of people were losing their homes and farms to foreclosures, both creating human tragedies and deepening the Depression. In response, the Roosevelt administration literally invented the modern system of home finance. Pre–New Deal mortgages had typically been short-term notes, where most of the principal was due and payable at the end of a brief term, often just three to five years. The New Deal devised the modern long-term, fixed-rate, self-amortizing mortgage. Congress created the Federal Housing Administration to insure these mortgages and win their acceptance among lenders. It also created the Federal National Mortgage Association to sell bonds and buy mortgages, and thus replenish the funds of local lenders. And the New Deal devised a system of federal home loan banks to supervise and advance capital to savings and loan institutions. Deposit insurance was extended to government-supervised mortgage lenders.

The system worked like a watch, combining sound lending standards with expanded opportunity. The rate of home ownership rose from 44 percent in the late 1930s to 64 percent by the mid-1960s. Savings and loan associations almost always ran in the black, there were no serious scandals, and the government deposit-insurance funds regularly returned a profit.

If you fast forward to 2000, much of this protective apparatus has been repealed. Regulators who didn't believe in regulation and a compliant Congress have allowed financial engineers to evade what remains. In the 1980s, regulators began allowing exceptions to Glass-Steagall. In 1999, Congress finally repealed it outright, permitting financial supermarkets like Citigroup to operate ANY KIND OF FINANCIAL BUSINESS THEY DESIRED, and profit from multiple conflicts of interest. The scandals that pumped up the dot-com bubble of the late 1990s, as well as the most flagrant cases like Enron, and the crash that followed, were the result of the SEC and the bank regulators CEASING TO POLICE CONFLICTS OF INTEREST. In the scandals of the 1990s, corporate CEOs, their accountants, and stock analysts working for their bankers, all conspired to puff up corporate balance sheets and pump up stock prices on which executive bonuses depended. This is a little harder today, thanks to the honest accounting requirements of the 2002 Sarbanes-Oxley Act (which the Bush administration hopes to water down). But the same kinds of conflicts and potentials for abuse exist when a mega-bank underwrites a leveraged buyout by an affiliated hedge fund, and then hypes the sale of securities when the fund is ready to sell the company back to the public.

Meanwhile, the once staid and socially directed system of providing home mortgages was seized by financial wise guys and turned into another casino. In the early 1980s, exploiting the Reaganite theme of government-bashing, the savings and loan industry persuaded Congress to substantially deregulate S&Ls -- which then speculated with government-insured money and lost many hundreds of billions, costing taxpayers upward of $350 billion in less than a decade.

In 1989 when Congress reregulated S&Ls, the financial engineers just did another end run. Mortgage companies that were exempt from federal regulation came to dominate the mortgage lending business. This loop of the story begins in 1968 with the privatization of Roosevelt's Federal National Mortgage Association. In the wake of that move, investment bankers invented a daisy chain known as "securitization" of mortgage credit. Through securitization, a mortgage broker could originate a loan, sell it to a mortgage banker, who would then sell it to an investment bank like Salomon Brothers, who in turn would package the mortgages into securities. These were then evaluated and coded (for a fee) by private bond-rating agencies according to their supposed risk, and sold off to hedge funds or pension funds. Each of these worthies took their little cut, raising the cost of credit to the borrower. Rather than diffusing risks, securitization concentrated them, because everyone was making the same bet on real-estate inflation.

In the sub-prime sector, you could get a loan without a full credit check, or even without income verification. The initial "teaser" rate would be low, but after a few years the monthly payment would rise to unaffordable levels. Both borrower and lender were betting on rising real-estate prices to bail them out, by allowing an early refinancing. But when a soft housing market dashed those hopes, the whole sub-prime sector crashed, and the damage spilled over into other financial sectors.

How aggressively the Fed should move has been the subject of extensive commentary. If the Fed moves too slowly or doesn't cut enough, it ends up playing catch-up behind an advancing panic. If it moves too quickly or too generously, it just invites the next round of speculation with cheap money, and in passing might erode confidence in the none-too-robust dollar. But all of this commentary misses the larger point: If monetary policy is the only tool the government has at its disposal, the Fed can't possibly solve the larger crisis (or prevent the next one) by using interest rates alone.

Indeed, until Congress dismantled financial regulation, the Fed was not called upon to mount these heroic rescues, which have become so common in recent years. Until the 1960s, the central bank could keep interest rates low, confident that they would underwrite the growth of the real economy rather than risky financial speculation, for the simple reason that entire categories of speculation did not exist.

But during the past quarter-century, as deregulation has turned the economy into a casino, the Federal Reserve has had to mount major rescues at least six times. In the early 1980s, it bailed out the big New York banks, some of which lost more than the total amount of their capital in failed speculative third world loans; the money-center banks would have been adjudged insolvent if the Fed hadn't bent its usual capital-adequacy rules. Next, the Fed poured huge quantities of liquidity into financial markets after the stock market crash of 1987, in which the market lost more than 20 percent of its value in a single day. The Fed intervened again on several occasions after speculators destabilized several third world currencies and economies from Mexico to Malaysia. The Fed cleaned up after the aforementioned Long Term Capital Management collapse. It flooded markets with money after the dot-com crash and the attacks of September 11, and most recently in the credit crunch of summer 2007.

Indeed, markets have become so reliant on the Fed's bailouts that they even have a term for it -- "the Greenspan put." A put is a financial term meaning a right to sell a financial security at a predetermined price. The knowledge that the Fed would cheapen money in a crisis reassured speculators that they could always unload their paper. That awareness also influenced financial insiders to behave more recklessly."

PART II: WHOSE TO BLAME?

"There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

• The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
• Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
• Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
• Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
• The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
• Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
• Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
• Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
• The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
• An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
• Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation."

-Robert Kuttner, PART I: "The Bubble Economy," The American Prospect, 9.24.07 , Part II: –Joe Miller & Brooks Jackson "Who Caused the Economic Crisis?" Factcheck.org, 10.1.08. Image: -John Wardell, "Roulette Wheel," Flickr 1.1.06).

Right Under Our Noses: Financial Weapons of Mass Destruction & A Modernized Regulatory Structure...

THE PROBLEMS: Part I

“At the heart of this credit crunch mess is something called "derivatives." The Initiative for Policy Dialogue at Columbia University offers a good primer: "A derivative is a financial contract whose value is linked to the price of an underlying commodity, asset, rate, index or the occurrence or magnitude of an event. The term derivative refers to how the price of these contracts is derived from the price the underlying item."

It's kinda like playing craps at the casino, where instead of gamblers betting on the dice-roller to crap-out, with derivatives, investors are betting on whether a creditor is going to go under. But instead of buying chips, the lender buys risk-insurance and makes a "swap" with a third party. If the borrower doesn't pay the loan back, the lender loses the loan but collects the insurance. To make things even more confusing, there are different kinds of derivatives. Futures. Forwards. Swaps. Options.

Ever since Mesopotamians were writing on clay-tablets, derivatives have played a useful role. But, IPD cautions, "they also pose several dangers to the stability of financial markets and the overall economy" because they can be used "for unproductive purposes such as avoiding taxation, outflanking regulations designed to make financial markets safe and sound, and manipulating accounting rules, credit ratings and financial reports. Derivatives are also used to commit fraud and to manipulate markets."

I guess that's why Warren Buffet (in 2002, mind you), said derivatives were a "financial weapon of mass destruction." He was ridiculed at the time but now even John McCain is suggesting that people like Buffet and others tell us how to regulate the market.

According to Marketwatch, the derivatives market is somewhere around $500 trillion. No, that's not a typo. That's trillion. To put it in perspective, Marketwatch reminds us that the U.S. gross domestic product (GDP) is about $15 trillion. The GDP of all nations combined is approximately $50 trillion. The total value of all the real estate in the world is estimated at $75 trillion and the total value of all the world's stocks and bonds is about $100 trillion. But there's a $500 trillion market in derivatives! If you find this all confusing, we're in good company. Because "what we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid August," Bond fund giant Bill Gross told Marketwatch.

Marketwatch goes on to observe: "In short, not only Warren Buffett, but Gross, Bernanke, the Treasury Secretary Henry Paulson and the rest of America's leaders can't 'figure out' the world's $516 trillion derivatives." That's because we're talking about a "shadow banking system," in which derivatives are not just risk management tools but "a new way of creating money outside the normal central bank liquidity rules. How? Because they're private contracts between two companies or institutions." Deregulation? Cutting taxes on the super rich? Arguing that government "hand-outs" are a "moral hazard" leading to "dependency" and welfare queendom? All of this unregulated free-market ideology that has dominated American politics and the GOP since the Reagan revolution has brought the country to its financial knees.”

THE PROBLEMS: Part II

“On September 9, 2008, CNBC’s popular financial show “Squawk Box Europe” interviewed Jim Rogers (CEO of Rogers Holding) on his view of the government takeover of Fannie and Freddie: “You can see that this is welfare for the rich. This is socialism for the rich. It’s bailing out the financiers, the banks, the Wall Streeters... This is outrageous. Who are these people who are taking our money and doing this and ruining America?"

Who, indeed!

On March 21, 2008, The August Review wrote, “As the global financial crisis unfolds, one thing is certain: The major investment and commercial banks who have wrecked our economy and financial system are now successfully sucking unlimited amounts of money from the people's Treasury to bail themselves out.” The August Review has demonstrated repeatedly that the net effect of the New International Economic Order (term coined by the Trilateral Commission in 1973) was to devise new and more effective ways to divert money from the public sector into certain private hands.

With their right hand, elite bankers, investors and brokers can well afford to take on all the risk they desire, knowing that their left hand can get into the U.S. treasury to bail themselves out when they hit the financial brick wall. And with the government takeover of Fanny Mae and Freddie Mac, they have simply outdone themselves: The magnitude of this bailout is on an order higher than anything ever recorded in our planetary history. Of course, everyone in the financial elite are feigning shock and dismay at the tragic turn of events. Saving these companies, they say, will supposedly save our financial system from utter destruction. It’s an ultimatum: Pay up or collapse.

Is it all a smokescreen for yet another planned plundering of our Treasury?

In November 2005, Dr. Laurence J. Kotlikoff wrote a 23 page report titled, “Is the U.S. Bankrupt?” It was issued by the Federal Reserve Bank of St. Louis and quietly posted on their website – and it was totally ignored by the U.S. press. With irrefutable logic and statistical data, he concluded that “Countries can and do go bankrupt. The United States, with its $65 trillion fiscal gap, seems clearly headed down that path.” Being that the U.S. government is the only and exclusive banking client of the Federal Reserve, it is inconceivable that the Fed did not fully understand what Kotlikoff was saying. It is also inconceivable that the Fed would not take action to protect itself, its money, its private stockholders, and hence, to appoint a conservator.

A man for all seasons?

In May of 2006, former Treasury Secretary John Snow was sacked by the Bush administration and was simultaneously replaced by the chairman of Goldman Sachs, Henry “Hammerin’ Hank” Paulson. Goldman Sachs is one of a dozen or so global institutions that are allowed to purchase Bills, Bonds and Notes directly from the Treasury, and is among the top five investment banks in the world. Conflict of interest, you say? Apparently, it is not to the Bush administration or to the Senate who unanimously confirmed his appointment.

If you follow financial news, you will have noticed that Paulson and Fed Chairman Ben Bernanke are appearing together in public on a continual basis these days– joint testimony before the Congress, joint press conferences, meetings at the White House, etc. Headlines like these have been hot and heavy: “Paulson, Bernanke call on Congress to act”, “Bernanke, Paulson Push for New Regulatory Powers”, “Paulson, Bernanke Say Housing Woes May Last”, and “Paulson Meets with Bernanke, Fannie, Freddie Chiefs”.

Interesting. It never used to be this way.

On March 31, 2008, Paulson quietly released a 200 page document titled, “Blueprint for a Modernized Regulatory Structure,” that he and Bernanke are now actively pushing Congress to adopt. It basically calls for the complete restructuring of U.S. markets and their regulatory structures to meet new “global standards”. After all, our regulatory bodies have been created over the last 75 years and are not compatible with today’s financial challenges. In addition, the Blueprint calls for much more self-regulation by the banking/securities industry itself. The very people who brought us this financial chaos in the first place, want us to let them do whatever is in their self-perceived best interest to protect and increase their profits.

Meanwhile, Paulson recently demanded and received from Congress a blank check for the bailout of Fannie and Freddie. The alternative, he boldly claimed, was the further meltdown of the U.S. housing market and likely destruction of the economy.

Does this appear like a bankruptcy proceeding?

• The banker and the CFO (Paulson) make autocratic decisions
• The bankrupt company gets reorganized
• New capital or financing is secured to pay off creditors

If this is even remotely close to the mark, then we can expect to see more bold ultimatums and actions by both Bernanke and Paulson. We can also expect that those who are getting protection for their investments are the global banks and investment houses, not the American people.

THE IMPLICATIONS:

U.S. citizens are getting hosed while banks, brokerages, hedge funds, sovereign wealth funds, wealthy investors, etc., are saved from trillions of dollars in well-deserved losses. By assuming the debts of Fannie and Freddie, the national debt virtually doubles overnight. Even worse, the government risks a downgrade to our existing debt, potentially pushing borrowing costs up by hundreds of billions of dollars per year.

Americans can and should demand that Congress let Fannie Mae and Freddie Mac fail like any other grossly mismanaged company. And in the process, they ought to investigate their senior management for malfeasance and cooking the books to cover it up. Let the free market provide new lenders who perhaps won’t be so greedy and ill-principled.

If a few more commercial or investment banks succumb in the process because of such action, let it serve as a warning to those survivors that they had better shape up or risk losing everything. Allowing Bernanke and Paulson to administrate our financial crisis is like giving an ax and frying pan to the foxes who were left in charge of the hen house.”

A SOLUTION:

“Ralph Nader warned eight years ago that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) were about to tank like the savings and loan industry of the 1980s and '90s. Because his warnings were ignored, taxpayers today face losing billions of dollars to cover these bad debts.

Nader, in a letter to Securities and Exchange Commission Chairman Christopher Cox in 2006, criticized the exorbitant salaries of government-sponsored enterprise executives Jamie Gorelick, Daniel Mudd, Robert J. Levin and Timothy Howard. He noted in his letter that their financial incentives were in direct conflict with consumer financial security. A grave moral hazard was created by the accounting manipulations they sanctioned, Nader said. These manipulations benefited their personal wealth, yet there was no penalty for being caught.

Nader has called for an immediate halt to the increase in the national debt. He demands an end to corporate subsidies and unconditional taxpayer bailouts of corporations. And he has called for aggressive prosecution of corporate criminals.

"Given the contrast between the ‘free market' ideology of the Republicans and the corporate or state socialism that is their increasing practice, the time is ripe for full Congressional hearings next year on the organized power, greed and lack of regulation that is shaking the foundations of Wall Street," Nader said.

Nader has come up with 10 market reforms that he says need to be implemented immediately along with any bailout. These reforms are:

• 1. No bailouts without conditions and reciprocity in the form of stock warrants.
• 2. No more lobbying for any company that is bailed out.
• 3. No golden parachutes or get-out-of-jail-free cards for guilty executives.
• 4. No bailouts without public hearings.
• 5. Reduce the moral hazard in U.S. mortgage markets by introducing covered bonds for the majority of mortgage products, as is done in Western Europe. That gives institutions that finance mortgages an incentive to be prudent, because they cannot just unload them and wipe their hands clean of the liability, but are instead on the hook if the homeowner defaults.
• 6. Maintain neighborhood stability and housing security by passing a law with a sunset clause allowing below-median-value homeowners facing foreclosure the right to "rent to own" their homes at fair market value rates.
• 7. Avoid future housing bubbles by removing implicit government guarantees for new mortgages that exceed thresholds of greater than 15 to 20 times the annual fair market rent value of the home.
• 8. Make the Federal Reserve a Cabinet position, so it is accountable to Congress, as well as make sure all Federal Reserve Bank presidents are appointed by the president and answerable to Congress.
• 9. Reduce conflicts of interest by taking away power for auditor and rating agency selection from companies and placing it in the hands of the SEC to be administered on random assignment.
• 10. Implement a securities speculation tax, starting with derivatives, to deter casino-style capitalism.

If we bail out our corporate masters with hundreds of billions of tax dollars without instituting draconian market reform and launching criminal prosecution, we will be left to bear the cross of corporate malfeasance. We will pay for corporate crime. We will leave those who robbed us free to plunder.”

PROBLEMS I & II: -Sean Gonsalves, “The Death of A Myth”, CommonDreams.org, 9.22.08, -Patrick Wood, (“Globalist Ultimatum: Pay up or Collapse,” The August Review, 9.10.08. SOLUTIONS: -Chris Hedges, Excerpt: “Fleecing What’s Left of the Treasury,” Truthdig,9.22.08. Image: "Hennessy Leroyle's Famous Success: Other People's Money" from Hoyt's Theater, New York : by E.O. Towne. U.S. Printing Co., 1889).

VIOLETPLANET SAYS: And let's not forget Phil Gramm & The Commodity Futures Modernization Act (see 9.19.08 post below). Unweaving this intricate capital web will take time. After all, this financial house of cards took 30 years to implement as did the Neo-Conservative philosophy in general. They're one in the same. Chief motivation: individual profits for the crony cabal...right under our noses yet... again.

Consuming Passions: The Age Of Heroic Consumption...The Tyranny of Money...

The age of heroic consumption is surely drawing to a close. The inspiration of those whose principal virtue is the money that permits them to lay claim to a disproportionate share of the earth’s resources is being by-passed in a world where a population of 9 billion must be accommodated by 2050.

The price tag on the possessions of the wealthy — their 20 million dollar mansions, 5 million dollar yachts, extravagant couture and priceless jewels, their private jets and lives apart from the great majority of humankind — are rapidly losing their power to enchant the rest of us. In an age when scientists, humanitarians and moral leaders are exhorting human beings to look to our impact upon the earth — and not solely in relation to the carbon footprint — it has become obsolete to gaze with breathless admiration upon individuals dedicated to the proposition that a whole world should be dying of consumption, and not just the 1.6m who perish from tuberculosis each year.

The GREATEST THREAT to GLOBAL STABILITY comes NOT from the POOR but FROM the RICH. This startling proposition runs directly into another received idea, which is that the risk of disorder is a result of excessive materialism. What we suffer from is not a surfeit of materialism, but a deficiency of it; for if we truly valued the material basis upon which all human systems depend, we would exhibit a far greater reverence for the physical world we inhabit. If materialism means respect for the elements that sustain life, then we are gravely wanting in it. What is sometimes referred to as “materialism” is actually something else: perhaps a distorted kind of mysticism which believes we can use up the earth and still avoid the consequences of our omnivorous appetites.

This is why the gross consumers of the age will be scorned as the pitiable destroyers of the sustenance, not only of the poor of today, but of everyone’s tomorrow. It is natural for people to want to do the best for their children, but this is generally interpreted as leaving them a private monetary inheritance; but if the other side of this legacy is a befouled world, the enjoyment of today’s privilege may become the curse of the future. In any case, there is a great deal of humbug in pious concern expressed for our children’s children, since this rarely prevents those who give voice to such tender sentiments from living as though there were no tomorrow. “Live the dream” has become the cliche of the hour; although it requires no great wisdom to understand that dreams realized soon turn to ashes.

Everything that can be done to bring the age of heroic consumption to its close should be done. This means the promotion of a different understanding of wealth. The myriad aspects of a truly rich and fulfilled life should be rescued from the tyranny of money. Perhaps we have not entirely forgotten that the most joyful and exhilarating of human occupations derive from self-reliance, self-provisioning, not only in the basic goods that sustain life, but also in satisfactions that arise from the cost-free resourcefulness of ourselves and others.

This is why the A-listers, the celebs, the fat cats, the big spenders, the conspicuous consumers do not represent a “lifestyle” to be emulated at all costs, but serve as warning of the spector of depletion and exhaustion awaiting us within a short space of time. When Thorstein Veblen wrote his Theory of the Leisure Class at the end of the 19th century, he saw “conspicuous waste and show” as a replacement for “earlier and more primitive displays of physical prowess”. Even his caustic insights could not anticipate the degree to which the ornamental in-utility of the very rich would lead them to become pioneers of planetary demolition.

Of course, downgrading the exploits of the major culprits in ransacking the earth is easier said than done. Cultures are not, as journalists and politicians sometimes suggest, to be discarded or “changed” at will. But sooner or later, a reduction in the abuse of the elements of life will be forced upon the world. If it proves impossible to take preventive action in this regard, we shall soon enough be overtaken by events — oil wars, water wars, even more brutal conflicts over land than we have already seen, food wars, social disruption, rioting and breakdown, such as the World Bank has already detected in some 37 countries in the last two years, will be the form in which the relentless plunder of the planet will resolve itself.

Just as the age of heroic labor — the Stakhanovite idea of selfless dedication to the building of Communism — perished, so heroic consumption — that equally selfless dedication to sustaining capitalism — has also had its day. Stakhanovites were so called after a coalminer in the Soviet Union in 1935 who exceeded his work quota by 14 times the fixed level, producing 102 tons of coal in six hours. This became a kind of “spontaneous” official policy in the construction of Socialism.

How laughably old-fashioned this now sounds. And how swiftly things that appear immutable can change. It should be our ambition to ensure that the work of predatory individuals upon the fruits of the earth comes to appear as archaic and futile as the sacrifice of human energies in the Soviet Union to release the resources which, according to Marx, “slumbered in the lap of social labour”.

Heroic consumption, unlike heroic labor, requires no official sponsorship. The incentive to get rich is so deeply embedded in Capitalism, that it has been seen as an expression of human nature itself. The first task in achieving a decent security for all people on earth is to affirm the distinction between human nature and the nature of Capitalism.

Human beings want, above all, TO SURVIVE. The moral and social elevation of the wealthy and their profligacy suggests that they are prepared to sacrifice even this hitherto imperishable goal for the sake of transforming the beauty and value of the world into a wasteland.

-Jeremy Seabrook (Excerpt:"Consuming Passions",The Guardian/UK,6.10.2008. Image: -Antonio Petruccelli: One of the most famous and sought-after Fortune Magazine covers depicting the chaos and financial ruin left in the wake of the Stock Market Crash of 1929, Issue: June, 1937).