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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Wednesday, September 22, 2010

Goldman Sachs, TARP and Redistribution of Wealth...Lies and Deceptions

...Merrill Lynch, Morgan Stanley, and Goldman Sachs, the three remaining independent investment banks, all faced runs that would quickly sink them absent government intervention. Citigroup and Bank of America, two of the three largest commercial banks, were also almost certainly insolvent. Many other banks also faced insolvency

Dean Baker, Co-Director of the Center for Economic and Policy Research recently published an article in the Huffington Post titled, The Terrible Tale of the TARP Two Years Later. 

In it he makes some very good comments and observations that warrant notice.

Two years ago, the top honchos at the Fed, Treasury and the Wall Street banks were running around like Chicken Little warning that the world was about to end. This fear mongering, together with a big assist from the elite media (i.e. NPR, the Washington Post, the Wall Street Journal, etc.), earned the banks their $700 billion TARP blank check bailout. This money, along with even more valuable loans and loan guarantees from the Fed and FDIC, enabled them to survive the crisis they had created. As a result, the big banks are bigger and more profitable than ever. 

Yes indeed, we, the people, made it possible for corrupt, greedy and heartless corporations to ruin our economy and our nation at the expense of most of the middle and lower classes which constitutes 95% of our population.  How was this accomplished? As the excerpt above says, by "fear mongering".  I remember that well.  The world would come to an end if we didn't bail out all of these corrupt and fraud mongering Wall Street and Commercial banks.  It was truly a conspiracy led by the likes of Henry Paulson, Ben Bernanke and Timothy Geithner.  Remember, this all occurred long before Obama took office and Larry Summers was even a factor (although they eventually participated in this fraud against the people).
I had always been of the belief that if a business is failing, it should be allowed to fail - which is the case for most businesses in this country.  I believed it when we bailed Chrysler out so many years ago even though that did become a positive experience.  The real question remains, how involved should government be when it comes to private enterprise?
In reality, the Fed almost certainly had the ability to keep the economy going by sustaining the system of payments even if the chain of bank collapses was allowed to run its course.
Again, The Fed (Czar Bernanke) lied to Congress saying that by allowing the banks to fail, it would shut down the commercial paper markets which basically is the vehicle used by many companies to meet their payroll.  If the banks failed and the commercial paper markets were shut down, the economy would collapse for sure.  A bold faced lie.
So what did we really accomplish wth TARP?  In my opinion and that of Mr. Baker's, no more then allowing the transfer of more wealth to the already wealthy allowing them to continue to thrive and survive while most of America drowned in a financial cesspool the bankers so selfishly, greedily and illegally created.
It is important to remember that the economy would be no less productive following the demise of these Wall Street giants (emphasis added). The only economic fact that would have been different is that the Wall Street crew would have lost claims to hundreds of billions of dollars of the economy's output each year and trillions of dollars of wealth. That money would instead be available for the rest of society. The fact that they have lost the claim to wealth from their stock and bond holdings makes all the rest of us richer once the economy is again operating near normal levels of output.
 In a nutshell, Dean Baker sums it up very well.  He says,
We are also supposed to feel good that the vast majority of the TARP money was repaid. This is another effort to prey on the public's ignorance. Had it not been for the bailout, most of the major center banks would have been wiped out. This would have destroyed the fortunes of their shareholders, many of their creditors, and their top executives. This would have been a massive redistribution to the rest of society -- their loss is our gain. (emphasis added)
Dean Baker claims that  the possible outcome - had we allowed the banks to fail - would have been to our advantage.  (emphasis below added)
It is important to remember that the economy would be no less productive following the demise of these Wall Street giants. The only economic fact that would have been different is that the Wall Street crew would have lost claims to hundreds of billions of dollars of the economy's output each year and trillions of dollars of wealth. That money would instead be available for the rest of society. The fact that they have lost the claim to wealth from their stock and bond holdings makes all the rest of us richer once the economy is again operating near normal levels of output.
 Basically, had we not bailed them out we all would be better off today.  Instead, the only ones better off are the very same ones we bailed out after they caused the worst financial crisis in the history of the world, enriched themselves by the greatest transfer of wealth known to man and now continue to operate much the same as they did in the past.  In other words, we handed them the keys to the safe, gave them a "get out of jail free" card so that they could continue to enjoy the ultra lavish lifestyles they earned while stealing from the rest of us.
Forty Three million people now live in poverty in the United States.  Fifteen million children go to bed sleep hungry each night, a false but published figure of 9.6% unemployment exists, there is little in the way of job creation and millions have and are still losing their homes creating a larger homeless population then ever before.   "The American Dream" is gone for most Americans contrary to what President Obama said in his Town Hall meeting the other day.
Baker sums it up pretty well.
Instead, we have the same Wall Street crew calling the shots, doing business pretty much as they always did. The rest of us are sitting here dealing with wreckage of their recklessness: 9.6 percent unemployment and the loss of much of the middle class's savings in their homes and their retirement accounts. And the lackeys of the Wall Street crew are telling us that we should be thankful that we didn't have a second Great Depression. Maybe we don't have the power to keep the bankers from picking our pockets, but we don't have to believe their lies.
I must however, disagree with one statement Mr. Baker makes,
"Maybe we don't have the power to keep the bankers from picking our pockets, ..."
I believe we DO have the ability and POWER to keep th ebankers from picking our pockets.  For one, we can move what ever money we have from large national commercial banks such as Bank of America, Chase, Citibank, Wells Fargo and shut them down.  If they have no deposits they cannot survive.  Put your money into small regional banks and/or credit unions.  Secondly, we can demand from our legislators that they remove commercial banking status from Wall Street firms such as Goldman Sachs.  They are not a commercial bank and SHOULD NOT be allowed to borrow at near zero from the Fed window.   They should not be allowed the benefits and protections of commercial banks.
Even more important  is that fact that we can rise up as a nation and tell our "fearless" leaders that we do not believe them at all.  Lies like "the Recession is Over", lies like we are on the road to recovery, lies like the unemployment figures and more.  In other words, we tell them "NO MORE LIES".  Our power still lies in our voting.  If we don't like a candidate, don't vote for them even if it means you don't vote for anyone.  Write in a vote for another candidate - you know we are still allowed to do that.  Don't vote for the lesser of two evils as so many of us do.  When you do that you are certain to elect "an evil".
Stand up American and be heard.  Make your voices heard because "Together We Can Make A Difference".

Read the full article by Dean here

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Anonymous said...

I see that everybody is misguided regarding ethics save jack welch on cnbc this morning!

Not anti business but they must think everyone is stupid!

The comments below signify more and more people are fed up with the big guys operate.

Janet Tavakoli on the "Myth of the Amoral Debtor"; An email from a Charlie Munger student; "Business as Usual"

Of course, some borrowers committed fraud, overreached, or got in over their heads, and there are certainly cases of irresponsibility. However, the reality of the mortgage lending market is that it was rife with fraud by mortgage lenders--from even before the first huge Ameriquest fraud.

I was on CNBC a few months ago and Kudlow, Santelli, and others shouted me down when I brought up predatory lending. Columbia Journalism Review and others took CNBC to task. Widespread predatory lending is well documented. This isn't a matter of opinion, it's a matter of fact.

You'd think Munger had been living under a rock. Yet, he hasn't been, and I believe he knows better. Buffett knows better, too. Unfortunately, instead of using their positions to tell the truth, they are using their positions to propagate what Elizabeth Warren calls "the myth of the amoral debtor."

You and Charlie “Fear” Munger continue to misrepresent history, and that is why the public’s rage at you and at Wall Street grows with every passing day. And that level of anger will remain elevated and growing and directed at the miscreants known as the “bailout sympathizers” for as long as the unemployment rate does. We could and should have wiped out the “too big to fail” equity holders before we wiped out the tax payer. But that would have meant Berkshire’s precious book value would have taken a major hit, and so you used up all of a billionaire’s political capital and traded the ethics and morals you seemingly worked a lifetime to build, to prevent that from happening. Was that trade a good one?

JR said...

Thanks, Anonymous, for the link above. I always enjoy reading what Jane Tavakoli has to say about the state of present-day fiscal responsibility.

JR said...

I'm also impressed with Larry's passion and purpose in analyzing articles such as Dean Baker's above.

Anonymous said...

The next time Jack Welch goes on cnbc maybe one of the parrots can squawk about this...I wonder if they'd still have jobs if the $ was not available to them?

What the US taxpayers gave GE:

GE has joined major banks collectively saving billions of dollars by raising money for their operations at lower interest rates. Public records show that GE Capital, the company's massive financing arm, has issued nearly a quarter of the $340 billion in debt backed by the program, which is known as the Temporary Liquidity Guarantee Program, or TLGP. The government's actions have been "powerful and helpful" to the company, GE chief executive Jeffrey Immelt acknowledged in December.

By taking advantage of its ownership of two tiny banks in Utah, GE has been able to issue $80 Billion dollars worth of federally backed loans about one out of every four dollars available in the program."

And here's part of what GE is giving back to the taxpayers:

"Ordinary incandescents, the bulbs pioneered by Thomas Edison, are manufactured almost entirely outside the United States, with the country's last major General Electric factory set to close this month. The company will continue to make incandescents in Mexico and China."

Read more:

Maestro said...


Our economy is slowly dying, it is kept alive artificially. No one is proposing a solution because no one has the slightest idea of why it is happening and many have vested interest in the present system. However an objective observation of the phenomenon can help us understand it and provide us with an innovative solution. Of course we can't solve the problem with the tools that brought us there in the first place and we need a new ideology.


- Do you feel that your ideology pushed you to make decisions that you wish you had not made?

- Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not. And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.

- You found a flaw in the reality...(!!!???)

- Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

- In other words, you found that your view of the world, your ideology, was not right, it was not working?

- That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.


In order to alleviate those economic woes wee need to create, as fast as possible, a new credit free currency that will solve the credit crunch and bring incremental jobs, consumption and investments to the present system.

An Innovative Credit Free, Free Market, Post Crash Economy

A Tract on Monetary Reform

It is urgent if we want to limit social, political and military chaos.


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