Tag Archives: financial meltdown

Ponzi pitchman Madoff: prison in his penthouse??

Ponzi: n. (see prior post on this form of financial scam)

Pitchman: n. man who hawks his wares on the street. (Madoff’s venue was exclusive country clubs where his returns could be higher.)

Prison: n. a place of confinement for persons who have committed serious crimes

Penthouse: n. the topmost floor of an apartment building – the most luxurious and expensive suite in the building.

What’s wrong with this picture?

Bernie Madoff, the Wall Street financier who bilked the investors and charities out of 50 billion dollars with which they had entrusted him, is not in jail even though he ruined the lives of hundreds of people (and caused a couple of them to commit suicide – so far).

monopolyEven the top-hatted fellow (another banker type??) in the game of Monopoly went straight to jail without passing Go to collect $200.

But Bernie is special. Bernie still has big bucks and big clout. Somehow Bernie gets to spend his pre-trial time in custody in the comfort of his own penthouse with his dear wife, his silk pajamas, and his foie gras.

The judge’s ruling allows Mr. Madoff to remain in his Manhattan apartment, wearing an electronic monitoring device and being watched around the clock by a security team paid for by his wife.

Prosecutors had asked the court to revoke Mr. Madoff’s $10 million bail, secured by various family homes held in his wife’s name, after he violated a court-ordered asset freeze by mailing about $1 million in expensive watches and jewelry to family and friends on Christmas Eve.

In addition to the jewelry that was sent out, prosecutors said, Mr. Madoff had plans to transfer $200 million to $300 million of investors’ money to family members and friends. When authorities searched Mr. Madoff’s office desk, they found $173 million in signed checks ready to be sent.

This guy is a crook from the top of his hat to the soles of his mink slippers.

Tell me, does this seem right to you?  Regular folks get tossed in the pokey for as little as carrying a little too much marijuana or being a drunken nuisance.

We are way too enthralled by money.

Paulson and the Politics of Fear

Treasury Secretary Henry Paulson has been on the fearpath since Thursday when he warned Congress and the country that the world as we know it would end if Congress didn’t immediately authorize $700 Billion (of taxpayer dollars).

Naomi Klein wrote the book Shock Doctrine last year to describe the way that governments use major disasters to grab power or property from the public while everyone is in the grip of fear, loss or grief. Examples from the New York Times review of the book:

“The Shock Doctrine” is Klein’s ambitious look at the economic history of the last 50 years and the rise of free-market fundamentalism around the world. “Disaster capitalism,” as she calls it, is a violent system that sometimes requires terror to do its job. Like Pol Pot proclaiming that Cambodia under the Khmer Rouge was in Year Zero, extreme capitalism loves a blank slate, often finding its opening after crises or “shocks.” For example, Klein argues, the Asian crisis of 1997 paved the way for the International Monetary Fund to establish programs in the region and for a sell-off of many state-owned enterprises to Western banks and multinationals. The 2004 tsunami enabled the government of Sri Lanka to force the fishermen off beachfront property so it could be sold to hotel developers. The destruction of 9/11 allowed George W. Bush to launch a war aimed at producing a free-market Iraq.

Paulson cautioned lawmakers against letting the plan get bogged down in a debate over unnecessary additions. As one blogger noted “Unnecessary additions” – things like accountability, transparency, making sure that the crisis does not happen again, and making sure that it solves the underlying problem. But many questions arise:

1. Did Paulson pull that $700 billion number from his butt? Exactly where would the money be spent and what would it accomplish there? Is this amount just for starters? Others say the number is more like a TRILLION.  How much is a trillion? Ronald Reagan said:

I’ve been trying … to think of a way to illustrate how big a trillion is. The best that I could come up with is that if you had a stack of $1000 bills in your hand only four inches high you would be a millionaire. A trillion dollars would be a stack of $1000-dollar bills 67 miles high.

Since most of us have never seen a bill larger than $100, that stack would be 670 miles high.

2. Did this three-page Paulson Wall Street bailout plan just materialize out of thin air, or — far far scarier — is it something the Bush administration has been scheming about for months – waiting for the right moment, like they did with attacking Iraq (see Shock Doctrine, above)? From Roll Call:

White House Dispatches Team to Push Economic Bill

The White House today is drumming up extraordinary pressure on Congress to approve its plan to enact a $700 billion mortgage bailout fund, suggesting the markets cannot wait much longer and dispatching Vice President Cheney and other top officials up Pennsylvania Avenue to jawbone lawmakers. ……

[White House Deputy Press Secretary Tony] Fratto said it would be “unthinkable” for Congress not to pass legislation this week, asserting the result would be a “very, very serious situation” for the U.S. economy…….

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

This afternoon Terry Gross interviewed Gretchen Morgenson, business columnist for the New York Times (a must listen to…) who said that she suspected things have sucked for well over a year, and the Bush administration knew it but kept telling us these problems were “contained to the subprime market”. Her question was, “Why should we believe them now??”

3. Who is Henry Paulson, anyway, and does he have a dog in the fight? Silly you for wondering if a Bush appointee could have a conflict of interest… For starters he was the CEO of Goldman Sachs, and is very much from and of the Wall Street culture – and will no doubt return there when Bush leaves office, so he’s not going to want to bite the hand that feeds.  And how about this juicy tidbit?

Paulson Debt Plan May Benefit Mostly Goldman, Morgan By Jody Shenn

Sept. 22 (Bloomberg) — Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

…Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,” Jeffrey Rosenberg, Bank of America’s head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.

4. If this is all so horrible and if we’re going to be on the hook for the bailout, why can’t we hear Paulson’s briefing? As Markos said today:

So Treasury gets congressional leaders into a room, and gives them a briefing so horrifying, that they all immediately age 20 years and come out with white hair and immediately get to work pissing away $700 billion to Wall Street.

They’re terrified, we’re told! It was horrible!

So why not slap that presentation online? Why not share this with the American people?

This isn’t Iraq, where you can pretend that the information is “top secret” and must be protected lest disclosure amount to a security breach.

In this case, we’re probably talking financial projections, maybe an excel sheet or two.

So put it online so the rest of the country can see what supposedly has our fearless leaders in a panic.

More tomorrow.

Pretense: McCain flops at flip-flopping on financial regulation

Pretense: a claim made or implied ; especially : one not supported by fact

Now that the financial markets are collapsing around everyone’s ankles, (and McCain’s pants around his own – now where is Spain?), he’s trying to erase our memories of his longtime record as a firm opponent of regulating the financial industry (or any other).  In truth, he has been a proponent of GOP deregulation ideology going back for decades.

But finally some are calling him on his bullshit. NYTimes yesterday:

The crisis on Wall Street is fundamentally a failure to do the things that temper, detect and punish corruption and greed. It was a failure to police the markets, to enforce rules, to heed and sound warnings and expose questionable products and practices.

The regulatory failure is rooted in a markets-are-good-government-is-bad ideology that has been ascendant as long as Mr. McCain has been in Washington and championed by his own party.

Not only does McCain not have a record of supporting regulation: he has a record of unethically pressuring regulators. The matter of the “Keating Five” is re-surfacing for us to have another look-see.  Back in 1987, he used the power of his office to get regulators to back off the troubled Lincoln Savings and Loan, which just happened to be run by a major McCain campaign contributor, Charles Keating.

As the Boston Globe reported: it was a fiction that McCain was somehow less guilty than the other members of the Keating Five:

Dennis DeConcini, a former Democratic senator from Arizona and another of the Keating Five who hosted the key meeting in his office, said in an interview that McCain has gotten a relatively “free ride” even though DeConcini insists that McCain was the “most culpable” of the senators because he had the closest relationship with Keating

McCain met Keating in 1982, during McCain’s successful run for Congress, and soon began accepting offers from Keating to fly McCain’s family on a corporate plane to Keating’s house in the Bahamas. McCain did not pay for most of the trips until years later, when the matter became public.

The Globe quotes a federal regulator who attended the meeting where McCain sought to protect his contributor from oversight:

“This was an institution that is probably the worst institution in America,” Black said, referring to Lincoln. Instead of trying to help “bring it under control, five US Senators were pushing us in the opposite direction.”

Lincoln’s bankruptcy ended up costing taxpayers 3 billion dollars.

Then there’s the small matter of supporting the The Gramm-Leach-Bliley Act, or GLBA for short. In 1999, this was the very legislation that “got government off the backs” (favorite Republican line) of the financial industry.  GLBA essentially eliminated the barriers between commercial and investment banks to consolidate and merge, so that you could have hedge funds, regular banking, lenders, brokerage services and insurance companies all under one roof.  Plus – GLBA repealed key parts of the Glass-Steagall Act, enacted in 1933 in response to the Great Depression to enact stricter controls, and yes, regulation over the banking industry where speculation had run amok.

GLBA was authored by McCain’s favorite economic advisor to his campaign, former Senator Phil Gramm – the same guy who called us a “nation of whiners”.

Of course, when McCain is trying to win the Presidency and be everything to everyone, it’s easy to see why he’d be against regulation before he was for it. Here is a look at McCain’s back-and-forth on regulation during the last 24 hours:

– Deregulation: McCain issued a statement Monday morning saying that “we cannot tolerate a system that handicaps our markets and our banks.”

– Regulation: McCain’s campaign then put out an ad calling for “tougher rules on Wall Street.”

– Deregulation: This morning, on NBC’s Today Show, McCain said, “Of course, I don’t like excessive and unnecessary government regulation.”

– Regulation: Then, on CBS’s The Early Show, McCain said, “Do I believe in excess government regulation? Yes.”

– Both: On CNBC’s Squawk Box, McCain said, “We don’t want to burden average citizens with over-regulation and government bureaucracy…And I’m proud to be a Teddy Roosevelt Republican, who said, ‘unfettered capitalism leads to corruption,’ and we’ve got to fix this.”

No amount of “straight talk” is going to be able to cover up the total failure of the Republican “free market” ideology.