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October 17, 2007 Steve
Niva October 16, 2007 Peter
Linebaugh Paul
Findley Robert
Bryce Uri
Avnery Paul
Craig Roberts Ray
McGovern Norman
Solomon Martha
Rosenberg William
S. Lind Joel
S. Hirschborn Website
of the Day
October 15, 2007 Gary
Leupp Andy
Worthington Heather
Gray John
Walsh Joshua
Frank Dave
Lindorff Matt
Vidal Ali
Khan Sen.
Russ Feingold Johnny
Barber Website
of the Day October 13 / 14, 2007 Alexander
Cockburn Wajahat
Ali Jeffrey
St. Clair Ralph
Nader David Heleniak Laura Carlsen Brian Cloughley Richard Rhames Ron Jacobs Fred Gardner John Ross Russell Hoffman Missy Beattie Poets' Basement Website of the Day
Cindy
Sheehan Brendan
Cooney Alan
Farago Jan
Oberg M.
Shahid Alam David
Macaray Julia
Kendlbacher Peter
Rost, MD Website
of the Day
Al
Giordano Saul
Landau Jacob
G. Hornberger William
S. Lind Joshua
Frank Josh
Mahan Pat
Williams
October 10, 2007 Michael
Yates Gary
Leupp David
Macaray Alan
Farago Tom
Clifford Col.
Douglas MacGregor Sunsara
Taylor George
Wuerthner Roxanne
Dunbar-Ortiz Michael
Dickinson Website
of the Day
October 9, 2007 Paul
Craig Roberts Andy
Worthington Alan
Farago Brian
Eno David
Rovics Farzana
Versey Andrew
Buncombe Website
of the Day
October 8, 2007 David
Macaray Jeff
Ballinger Brian
Eno Christopher
Brauchli Louay
Safi Matt
Reichel Dave
Lindorff Thomas
P. Healy Martha
Rosenberg Richard
Rhames Website
of the Day
October 6 / 7, 2007 Alexander
Cockburn Norman
Finkelstein James
Bovard Patrick
Cockburn Jeffrey
St. Clair Ralph
Nader Ray
McGovern Saul
Landau Ben
Tripp Terry
Lodge Seth
Sandronsky Kevin
Funk / Steve Fake Missy
Beattie Website
of the Weekend
October 5, 2007 Andy
Worthington David
Macaray Lee
Sustar Dan
La Botz Aaron
Hess William
A. Cook Website
of the Day
October 4, 2007 Uri
Avnery Dave
Marsh Valerio
Volpi Cecilie
Surasky Dave
Lindorff Norman
Solomon Laura
Carlsen Walter
Brasch Ben
Terrall William
S. Lind Website
of the Day
October 3, 2007 Vijay
Prashad Anita
Sinha Winslow
T. Wheeler Sharon
Smith Jeff
Leys Sen.
Russ Feingold Mohamad
Bazzi Brenda
Norrell Robert
Weissman Website
of the Day
October 2, 2007 Ibrahim
Warde Gary
Leupp David
Macaray Conn
Hallinan John
Ross Alan
Farago Sonja
Karkar Niranjan
Ramakrishnan Website
of the Day
October 1, 2007 Al
Giordano Paul
Craig Roberts Moshe Adler Ingmar Lee John V. Walsh Norman Solomon Roger Burbach Ramzy Baroud Stephen Lendman Susie Day Website of the Day
September 29 / 30, 2007 Alexander
Cockburn Uri
Avnery Andrew
Cockburn Jeffrey
St. Clair Wajahat
Ali Andy
Worthington Don
Santina Ralph
Nader Fred
Gardner Seth
Sandronsky Gideon
Levy William
S. Lind Reza
Fiyouzat Richard
Rhames David
Michael Green Zach
Mason Poets'
Basement Website
of the Weekend
September 28, 2007 Kathleen
and Bill Christison Roberto
J. González / Saul
Landau Tom
Clifford Christopher
Brauchli Martha
Rosenberg Dave
Zirin Laray
Polk Binoy
Kampmark James
McEnteer Website
of the Day
September 27, 2007 Alan
Farago Andy
Worthington Jonathan
Cook William
Hughes Ray
McGovern Ron
Jacobs Dave
Lindorff Joshua
Frank Anne
Dachel Website
of the Day
Bill
Quigley Paul
Craig Roberts Jeff
Kisseloff China
Hand Behzad
Yaghmaian Sonja
Karkar Mike
Ferner Col.
Dan Smith Clifton
Ross Brenda
Norrell Website
of the Day
September 25, 2007 Nicole
Colson Uri
Avnery Brendan
Cooney Harry
Browne Marjorie
Cohn David
Macaray Ralph
Nader Dan
Bacher Anthony
Papa Christopher
Ketcham Website
of the Day
September 24, 2007 George
Ciccariello-Maher Saree Makdisi David
Keen Sherwood
Ross Ron
Jacobs Donna
Saggia Mike
Ferner Malini
Johar Schueller Monique
Dols Website
of the Day
Alexander
Cockburn Jennifer
Loewenstein Linn
Washington, Jr. Jeffrey
St. Clair Alan
Farago Brian
Cloughley Robert
Fantina Roxanne
Dunbar-Ortiz Jason
Hribal David
Rosen Mike
Whitney John
V. Walsh Dave
Lindorff David
Michael Green Fred
Gardner Cassandra
Jones Roger
van Zwanenberg Poets'
Basement Website
of the Weekend
September 21, 2007 Karim
Makdisi M.
Shahid Alam Alan
Farago Joshua
Frank Dave
Zirin Kenneth
Couesbouc Dr.
Steffie Woolhandler and Dr. David Himmelstein Ben
Terrall Steve
Fournier Frederico
Fuentes, et al Website
of the Day
September 20, 2007 Kathleen
Christison Zoltan
Grossman Paul
Craig Roberts Stan
Cox Russell
Mokhiber Charles
Modiano Raymond
J. Lawrence Brendan
Cooney Website
of the Day
September 19, 2007 Paul
Craig Roberts Paul
Krassner Sgt.
Martin Smith Seth
Sandronsky Claud
Cockburn Victoria
Buch Robert
Weissman Mike
Ferner Dan
Bacher Website
of the Day
September 18, 2007 Mike
Whitney Alan
Farago John
Ross Ron
Jacobs Alex
Doherty September 17, 2007 Marjorie
Cohn Paul
Craig Roberts Ricardo
Alarcón Marc
Levy Eva
Liddell Website
of the Day Sept. 15-16, 2007 Alexander
Cockburn Vicente
Navarro Mike
Whitney Herman
Mindshaftgap Ellen
Cantarow Jordan
Flaherty Zachary
Hurwitz September 14, 2007 Debbie
Nathan Franklin
Lamb Patrick
Cockburn Farzana
Versey Alan
Farago Hank
Edson September 13, 2007 Patrick
Cockburn Scott
Vest, former Air Force Captain at Minot Andy
Worthington Michael
Baney Dr.
Susan Block September 12, 2007 Paul
Craig Roberts Stan
Goff William
Blum Manuel
Garcia Debbie
Nathan
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October 17, 2007 The Cracks in Wall Street's Hall of MirrorsTime for the Banks to Face the HangmanBy MIKE WHITNEY
Officials in the Treasury Dept--working with their colleagues at Citigroup, J.P. Morgan and Bank of America---have concocted a scheme to rescue the banks from their massive losses in mortgage-backed securities. The group is planning to set up a $100 billion emergency fund which will purchase non-performing assets for short term debt. In truth, the fund is a bailout which provides the financial giants with an excuse for not reporting their enormous losses from bad bets. The story first appeared in Saturday's Wall Street Journal and was followed on Monday with a second headline piece: "RESCUE READIED BY BANKS IS BET TO SPUR MARKET" WSJ: "The high stakes plan to RESCUE BANKS FROM LOSSES on mortgage securities amounts to a big bet that a consortium of financial giants"AT THE PRODDING OF THE US GOVERNMENT"can PERSUADE INVESTORS TO POUR MORE MONEY INTO THE TROUBLED CREDIT MARKET." That's right; the Treasury Dept is directly involved in a scam that saves the banks while trying to "persuade" investors to "pour more money" into toxic mortgage-backed sludge. Treasury Dept officials clearly have a different idea of "moral hazard" than the rest of us. The banks are presently holding hundreds of billions of dollars in mortgage-backed securities (MBSs) that they cannot sell"because there are no buyers ---and don't want to take back on their balance sheets because they'll be forced to increase their capital reserves. So they've decided to launch a public relations campaign to promote some goofy-sounding fund, called the "Master-Liquidity Enhancement Conduit" or M-LEC, which will allow the banks to place their unwanted bonds in Limbo until some future date when the public appetite for garbage CDOs improves. The WSJ does a good job of disguising the real motive behind the new "Super-Conduit" (aka the Bailout fund) but in the last paragraph, buried in Section C-3, they reveal the truth: "The goal is to reassure investors and make them more willing to buy its short-term debt." So, the fund is really just a way of rearranging the marketplace until the next crop of gullible investors sprouts up and buys more mortgage-backed garbage. Where are the regulators? The SEC and Treasury should be forcing the banks to be straightforward with the public and let them know about the hanky-panky they've been up to with their risky SIVs (structured investment vehicles) Citigroup alone has nearly $80 billion in off-balance sheets operations which are in distress. The bank accounts for "25% of the global SIV market. As of August, assets held by SIVs totaled $400 billion". SIVs are set up as a way to make money without taking the risk onto their balance sheets. "They issue their own short-term debt, usually at relatively low rates ... then use the proceeds to buy higher yielding assets such as securities tied to mortgages." (WSJ) Ever since Bear Stearns blew up in late July, investors have been steering clear of any securities connected to real estate, which means the SIVs are getting the Double Whammy---they can't sell their asset-backed commercial paper (because it's mortgage-backed) and they find buyers for their collateralized debt obligations. (CDOs) To a large extent, the market is still frozen despite the upbeat cheerleading on the business pages. Clearly, the worst is yet to come. How bad is it? An article in yesterday's Financial Times said that, "Only $9.9 billion of home equity loan securitizations have come to market since July 1---A 95% DECLINE FROM THE $200.9 BILLION IN THE FIRST HALF OF THIS YEAR AND A ROUGHLY 92% DECREASE FROM THE SAME PERIOD LAST YEAR." The banks are in trouble. Big trouble. Main sources of revenue have dried up overnight and they're stuck with hundreds of billions of debt. That's why the papers broke the story on Saturday when there was NO chance of triggering a stock market crash. Imagine the horror of investors around the world when they discover that the major investment banks are running these shabby "off-balance sheets" operations while concealing their real financial condition from their investors. Consider the disgust the public feels when they see Treasury officials bailing out the banks instead of ordering them to report their losses and get on with business. Still, Wall Street nonchalantly leaps from one swindle to the next never considering the damage it's doing to the credibility of the market. Susan Pulliam summed it up like this in the Oct 12 edition of The Wall Street Journal:
"Hall of mirrors" is an understatement. The system is thoroughly opaque and crooked as a ram's horn. The market's new architecture, "structured finance", is a dismal rip-off from start to finish. Consider the mentality of the hucksters who dreamed up "securitizing" subprime mortgages and selling them off as precious jewels in the secondary market. This was a blatant con-job. How can the liabilities of "borrowers with bad credit" be traded to foreign investors and pension funds like they were valuable assets? And where were the regulators while this scam was going on? Isn't this sufficient evidence that the system is totally out of whack? Wall Street avoids transparency like the plague. That is to be expected. But what about the government? It's the government's job to protect the investor and maintain the integrity of the system. Is that what Treasury Dept is doing or are they "LURING investors to buy debt issued by the rescue fund as part of the plan"? (quote from the Wall Street Journal) "Luring"? Is that how Paulson sees it; like luring turkeys to the chopping block with a trail of bread crumbs? The idea of protecting the little guy has never occurred to anyone in the Bush administration. Their job is to shift wealth from one class to the other via equity bubbles and government bailouts--anything that advances the corporate agenda. Presently, the banks are sitting on $200 billion in non-performing mortgage-backed securities (MBSs) and collateralized debt obligations. (CDOs) They are also hold another $300 billion in collateralized loan obligations (CLOs) from mergers and acquisitions which stalled after the Bear Stearns meltdown. If the present bailout doesn't materialize, we're likely to see bank closures and a plummeting stock market. Shouldn't the regulators have considered the probability of a crash before they allowed trillions of dollars of radioactive-bonds to flood the market when no one had any idea of their real value? Wouldn't that have been the prudent thing to do? Now we know what they are worth. They're worth nothing. That's why the banks are running scared and refusing to put them up for auction. They'd rather sleaze them into a lofty-sounding superfund that masks their true value. In the last 2 weeks the stock market soared on the news that the banks were reporting billions of dollars in losses. Investors were hoodwinked into believing the banks were being honest and had "come clean" about their financial condition. What a joke. In reality, the banks only reported roughly 5% of their potential losses; the rest were hidden in their off balance sheets operations. Equities skyrocketed to new heights. Wall Street was euphoric. Now we know the truth. It was all baloney. The Wall Street Journal: "The new fund is designed to stave off what Citigroup and others see as a threat to the financial markets world-wide: the danger that dozens of huge bank-affiliated funds will be forced to unload billions of dollars in mortgage-backed securities and other assets, driving down their prices in a fire sale ... .The ultimate fear: If banks need to write down more assets or are forced to take assets onto their books, that could set off a broader credit crunch and hurt the economy. It could make it tough for homeowners and businesses to get loans." It could "hurt the economy" and "make it tough for homeowners and businesses to get loans?" Ahhh, yes. It's all clear now. The banks only cooked up this colossal bailout to make things better for us common people. How is it that we didn't notice that before? Our problem is that we don't see the magnanimity and altruism which drives the corporate agenda. From the New York Times:
We already know about the problems with the ratings agencies and how they are in bed with the investment banks. We also know that the whole purpose of the new fund is to off-load mortgage-backed tripe which is no longer sellable on the market. What we didn't know is that the New York Times eagerly provides the peppy public relations narrative to assist big business in dumping its failing assets. NY Times: "The conduit will pay market prices for the securities it buys. But it remains unclear how officials will determine the price of some bonds that have not been actively traded since August, because the difference between what buyers are willing to pay and what sellers want has widened significantly." Of course, they'll pay full price because they want to be "made whole" again. The truth is, however, that these derivatives will probably only fetch pennies on the dollar unless they get another Wall Street PR face-lift. Christian Stracke, market analyst from the research firm CreditSights, said the effort appears to be "an attempt to soothe tense investors in the debt market, rather than to provide substantive relief to the worst-hit mortgage securities". Stracke added, "For me, this is more of a P.R. blitz." Bingo. The announcement of the forthcoming Master-Liquidity Enhancement Conduit or M-LEC further underlines the gravity of the problems facing the banking system. The fund creates a "buyer of last resort" so that these dubious assets won't be sold on the market at fire-sale prices. Citigroup appears to be the greatest beneficiary of the current plan. They have a number of Enron-type SIVs which could be at risk. Again, the problems that are surfacing in the banking sector today are the direct result of Greenspan's loose monetary policies coupled with the dismantling of the regulatory regime that was created following the 1929 stock market crash. We are now back to Square 1. All of the various scams and swindles which permeated that hyper-inflated market are now back in full-force foreshadowing a steep decline in investor confidence, increased market manipulation, and an unavoidable economic calamity. "Structured finance" has transformed US markets into a carnival sideshow. Productivity and real growth have been replaced with never-ending credit expansion and speculative abuses. Reckless monetary policies and the behemoth current account deficit have destabilized the global economy a set the stage for a fiscal Armageddon. The subprime mortgage crisis and subsequent shrinking of asset-backed commercial paper (ABCP) has thrown a wrench in the funding of daily corporate operations. These are the harbingers of an impending recession. As mortgages continue to default at a record pace; the aftershocks will continue to rumble through the credit markets where subprime loans have been "securitized" into bonds and leveraged at maximum levels. It's just one domino knocking down the next. The financial system is at greater risk now than any time in the last 80 years. Regrettably, the only remedies coming from the Fed are more currency-destroying rate cuts or hundreds of billions of dollars in repos to remove mortgage-backed bonds from the banks' balance sheets. Neither of these solutions addresses the critical issues; they do not stabilize the market, reinvigorate lending, or restore investor confidence. They are merely band aids on a sucking chest-wound. They won't stop the bleeding. The Fed's monetary policies promote financial speculation which inevitably leads to equity bubbles. Under Greenspan's stewardship, the country has lurched from the 1990's bond bubble, to the dot.com bubble, to the subprime meltdown, to the liquidity crisis, to the credit crunch---all engineered at the Federal Reserve with ancillary assistance from the charlatans in the banking industry. An article in China Worker, "Credit Crunch threatens Global Downturn" summarizes our present predicament it like this: "Financial globalization has rebounded on the system. Capitalist leaders boasted that the near total integration of financial markets across the globe would provide lenders and borrowers everywhere with instant access to a completely liquid money market. New types of financial securities and sophisticated derivatives would spread the risk of borrowing so widely that it would eliminate risk entirely. While economies were growing and bubbles inflating, it appeared that---through derivatives trading--- losses would be widely diffused among speculators, reducing risk to very low levels. Not even the most astute financial analysts could predict what would happen in the event of recession. The unanswerable question was: Who would ultimately bear the risks arising from widespread defaults or bankruptcies? The veteran investor, Warren Buffet, warned that derivatives would prove to be 'weapons of mass destruction'. The fantasy of financial alchemy transforming high risk gambling into low risk money-making has now been shattered." The author is right. "Structured finance" is a fraud. Risk has not been eliminated. In fact, it has exploded and become a system-wide problem. The dead wood is everywhere. The banks are being crushed by a debt-load they generated through "securitization". They need to accept responsibility for their poor judgment (or greed?) and report their losses. The Super-Conduit is just a dodge to put off the unavoidable day of reckoning.The whole wretched plan should be scrapped. No amount of financial chicanery will eradicate billions of dollars in bad bets. It's time for the banks to face the hangman. Mike Whitney lives in Washington state. He can
be reached at: fergiewhitney@msn.com 
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