The Federal Reserve system is a ponzi scheme

A buddy of mine just launched a new informational site about our debt-based fake-money “Federal” “Reserve” system.  It’s a quick 1-page overview of the fundamental flaws in our economy.

Unless we fix these problems our economy will continue its downward spiral into neo-feudalism under banker rule.

Have a look

University-brainwashed-trained economists especially need to read this.

Who wants to be a millionaire?

From BSC

Central banks start to abandon the U.S. dollar – From the Wallstreet Blogs, Fortune, CNN

“Just last week, America’s debt lept $166 billion in a single day. That one-day run-up is greater than the entire U.S. annual deficit in 2007. And Americans, the world’s consumers, continue much of the behavior that helped the U.S savings rate drop so low.

The dollar has been in free-fall since 2007.

Last year, both China and Russia have questioned why the dollar should be the world’s reserve currency.  (Naturally, they were advocating for the ruble and yuan).

A new report from Morgan Stanley analyst Emma Lawson confirms what many had suspected: the dollar is firmly on its way to losing its status as the reserve currency of the world.

And just last week, the United Nations released a report concluding that the dollar should no longer be the world’s reserve currency because it is not stable enough. The dollar is down 5% over the past month, and even currency traders don’t see it as a safe haven any more.

There is certainly an element of economic competitiveness in those statements from foreign bodies and governments, but at the same time, Americans houldn’t be surprised that, in these touchy times, central banks want more of a measure of security than the dollar can afford right now – particularly when we’re running up an enormous deficit through the costs of stimulus programs and two simultaneous wars.”

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The US Dollar is losing reserve currency status because it is being over inflated to near worthless proportions, by being printed with wreckless abandon by PRIVATE CORPORATE BANKS.

If we do not take back the power to issue our own currency, as provided by the US Constitution, we will never escape the DEBT SLAVERY that occurs by allowing private central banks to loan us our own money at interest!  This currency black hole creates inflation and loss of value because every dollar “borrowed” comes with debt attached, and in order to pay the interest on the first dollar we have to borrow more dollars, again with more interest!  These bankers have run this same scam in other, less sophisticated countries.  Now they’re running it here.

These are real images of devalued, inflated currencies from the last 60 years.  Some so worthless that the people use them as wallpaper or simply throw them away.  Imagine a loaf of bread costing 200 billion dollars!  Thats what they pay in Zimbabwe.

DON’T BE A SUCKER!

Securities and Exchange Commission files civil suit against Goldman Sachs for mortgage fraud

Why is the SEC filing a civil suit as opposed to having the DOJ indict these Wall Street fat cats criminally for insider trading?  At best a civil suit will result in a fine.  At least it’s something, but this is nowhere near the level of action we need to take.

—————–

New York Times
By LOUISE STORY and GRETCHEN MORGENSON

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

Mr. Paulson is not being named in the lawsuit. In the half-hour after the suit was announced, Goldman Sachs’s stock fell by more than 10 percent.

In recent months, Goldman has repeatedly defended its actions in the mortgage market, including its own bets against it. In a letter published last week in Goldman’s annual report, the bank rebutted criticism that it had created, and sold to its clients, mortgage-linked securities that it had little confidence in.

“We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can predict the future of markets today,” Goldman wrote. “We also did not know whether the value of the instruments we sold would increase or decrease.”

The letter continued: “Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a ‘bet against our clients.’ ” Instead, the trades were used to hedge other trading positions, the bank said.

In a statement provided in December to The Times as it prepared the article on the Abacus deals, Goldman said that it had sold the instruments to sophisticated investors and that these securities “were popular with many investors prior to the financial crisis because they gave investors the ability to work with banks to design tailored securities which met their particular criteria, whether it be ratings, leverage or other aspects of the transaction.”

Goldman was one of many Wall Street firms that created complex mortgage securities — known as synthetic collateralized debt obligations — as the housing wave was cresting. At the time, traders like Mr. Paulson, as well as those within Goldman, were looking for ways to short the overheated market.

Such investments consisted of insurance-like policies written on mortgage bonds. If the mortgage market held up and those bonds did well, investors who bought Abacus notes would have made money from the insurance premiums paid by investors like Mr. Paulson, who were negative on housing and had bought insurance on mortgage bonds. Instead, defaults spread and the bonds plunged, generating billion of dollars in losses for Abacus investors and billions in profits for Mr. Paulson.

For months, S.E.C. officials have been examining mortgage bundles like Abacus that were created across Wall Street. The commission has been interviewing people who structured Goldman mortgage deals about Abacus and other, similar instruments. The S.E.C. advised Goldman that it was likely to face a civil suit in the matter, sending the bank what is known as a Wells notice.

Mr. Tourre was one of Goldman’s top workers running the Abacus deal, peddling the investment to investors across Europe. Raised in France, Mr. Tourre moved to the United States in 2000 to earn his master’s in operations at Stanford. The next year, he began working at Goldman, according to his profile in LinkedIn.

He rose to prominence working on the Abacus deals under a trader named Jonathan M. Egol. Now a managing director at Goldman, Mr. Egol is not being named in the S.E.C. suit.

Goldman structured the Abacus deals with a sharp eye on the credit ratings assigned to the mortgage bonds associated with the instrument, the S.E.C. said. In the Abacus deal in the S.E.C. complaint, Mr. Paulson pinpointed those mortgage bonds that he believed carried higher ratings than the underlying loans deserved. Goldman placed insurance on those bonds — called credit-default swaps — inside Abacus, allowing Mr. Paulson to short them while clients on the other side of the trade wagered that they would not fail.

But when Goldman sold shares in Abacus to investors, the bank and Mr. Tourre only disclosed the ratings of those bonds and did not disclose that Mr. Paulson was on other side, betting those ratings were wrong.

Mr. Tourre at one point complained to an investor who was buying shares in Abacus that he was having trouble persuading Moody’s to give the deal the rating he desired, according to the investor’s notes, which were provided to The Times by a colleague who asked for anonymity because he was not authorized to release them.

In seven of Goldman’s Abacus deals, the bank went to the American International Group for insurance on the bonds. Those deals have led to billions of dollars in losses at A.I.G., which was the subject of an $180 billion taxpayer rescue. The Abacus deal in the S.E.C. complaint was not one of them.

That deal was managed by ACA Management, a part of ACA Capital Holdings, which changed its name in 2008 to Manifold Capital Holdings.

Goldman at first intended for the deal to contain $2 billion of mortgage exposure, according to the deal’s marketing documents, which were given to The Times by an Abacus investor.

On the cover of that flip-book, it says that the mortgage bond portfolio would be “selected by ACA Management.”

In that flip-book, it says that Goldman may have long or short positions in the bonds. It does not mention Mr. Paulson or say that Goldman was in fact short.

The Abacus deals deteriorated rapidly when the housing market hit trouble. For instance, in the Abacus deal in the S.E.C. complaint, 84 percent of the mortgage bonds underlying it were downgraded by rating agencies just five months later, according to a UBS report.

It takes time for such mortgage investments to pay out for investors who short them, like Mr. Paulson. Each deal is structured differently, but generally, the bonds underlying the investment must deteriorate to a certain point before short-sellers get paid. By the end of 2007, Mr. Paulson’s credit hedge fund was up 590 percent.

Mr. Paulson’s firm, Paulson & Company, is paid a management fee and 20 percent of the annual profits that its funds generate, according to a Paulson investor document from late 2008 titled “Navigating Through the Crisis.”

Legislation would bar taxpayer bailouts of derivatives ponzi schemes

April 15 (Bloomberg) — Goldman Sachs Group Inc., JPMorgan Chase & Co. and their biggest rivals would be forced to wall off derivatives trading operations from their commercial banks under a measure to be introduced by Senate Agriculture Committee Chairman Blanche Lincoln, a congressional aide said.

Lincoln, an Arkansas Democrat, will propose a “no-bailout provision” as part of an overhaul of derivatives regulation she plans to unveil today, according to the aide, who declined to be identified because the plan isn’t public. The measure aims to ensure banks don’t endanger depositors’ money with risky trading of over-the-counter derivatives, the aide said.

The proposal is already drawing opposition from banks that dominate the $605 trillion over-the-counter market. Derivatives regulation being weighed by Congress could cost JPMorgan from “$700 million to a couple billion dollars,” Jamie Dimon, the bank’s chief executive officer, said yesterday during a conference call with analysts.

“I imagine their lobbyists have already contacted their best contacts in the government,” said Darrell Duffie, a finance professor at Stanford University in Palo Alto, California.

The five biggest dealers in the largely unregulated market — all commercial banks — earned $28 billion from derivatives trading last year, according to reports collected by the Federal Reserve and people familiar with the matter.

Tougher Than Obama

Lincoln’s provision would bar swaps dealers from taking advantage of the Federal Reserve’s discount lending window, emergency liquidity functions and the Federal Deposit Insurance Corp.’s deposit guarantee.     “It eliminates all of the advantages with the affiliation with an insured depository institution, which are profound,” said Karen Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc.

President Barack Obama met with House and Senate leaders at the White House yesterday, pushing them to finish work on the regulatory legislation he proposed last June. He said the bill must include strong oversight of the derivatives market, which he described as an “enormously risky” part of the shadow economy.

Lincoln’s bill is tougher than what Obama has proposed for derivatives oversight and could complicate efforts to pass a broader regulatory overhaul bill, lawmakers said yesterday. It would have to be approved by the Agriculture Committee and then incorporated into the broader regulatory-reform bill drafted by Senate Banking Committee Chairman Christopher Dodd. Dodd’s was approved by the banking panel last month on a 13-10 vote without Republican support.

Moderate Democrat

Lincoln, a moderate Democrat who has campaigned in Arkansas on her independence from party leadership, is facing a tough primary election fight, with members of the progressive wing of the Democratic Party like MoveOn.org attacking her for being too close to Wall Street.

Senator Judd Gregg, a New Hampshire Republican, expressed frustration that a deal between Lincoln and Senator Saxby Chambliss of Georgia, the Agriculture panel’s top Republican, had fallen apart under White House pressure. Gregg indicated the derivatives bill wouldn’t get Republican support.

“Obviously all bets are off,” said Gregg, who spent months in Banking Committee negotiations that failed to yield agreement on derivatives language.

Republicans signaled that they will oppose Dodd’s bill, which they said won’t prevent taxpayers from having to prop up failed financial firms in the event of a future economic crisis.

“It’s a bill that actually guarantees future bailouts of Wall Street banks,” Senate Republican Leader Mitch McConnell old reporters after meeting with Obama.

Spin Offs

Along with forcing commercial banks to spin off their swaps dealers to a different corporate entity, Lincoln’s derivatives legislation would bar dealers, exchanges, clearinghouses and other swaps-market participants from being able to take advantage of emergency lending from the Fed, according to the aide.

It would also increase protections for clients by requiring swaps dealers to treat them as a fiduciary — obligating them to put customers’ interests ahead of the company’s, the aide said.

The measure requires most over-the-counter derivatives to be traded on exchanges or through clearinghouses. Companies that use swaps to hedge the cost of materials or other non-investment purposes would be exempted from the requirements, the aide said.     Like the Volcker rule, which would ban commercial banks from proprietary trading, the wall-off provision would separate derivatives trading from traditional banking activities such as taking deposits and making loans.

Cheaper Funding

It is also an effort to crack down on the possibility that banks would use cheaper funding provided by deposits insured by the FDIC. to subsidize their trading activities, the aide said.

The proposal, which would affect 25 to 30 banks that trade derivatives, is likely to generate strong opposition, analysts said. Along with Goldman Sachs and JPMorgan, the other three banks that control almost all swaps trading are Morgan Stanley, Citigroup Inc. and Bank of America Corp.    “With 97 percent of OTC derivatives housed in the five biggest banks, it tells you how critical it is for the business model to be affiliated with a really big bank,” said Petrou of Federal Financial Analytics.

Treasury Secretary Timothy F. Geithner, speaking at the White House yesterday, said Lincoln’s plan was promising.

“Based on what she has laid out in public, it looks like a very strong bill, very close to where we are,” Geithner said.

To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Phil Mattingly in Washington at pmattingly@bloomberg.net.

It’s Official – America Now Enforces Capital Controls

Tyler Durden, Zero Hedge 03/28/2010 14:27 -0500

Lehman failed to report “repo” transactions, cooked books

If this doesn’t convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don’t know what will.

Keep in mind, that Geithner ran Lehman through 3 “stress tests” prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas–the examiner who wrote the 2,200 page investigative-report which was released on Thursday– has provided plenty of information detailing Lehman’s “materially misleading” accounting and “actionable balance sheet manipulation.”

In other words, they cooked the books.

“Quite a few observers… have been stunned and frustrated at the refusal to investigate what was almost certain accounting fraud at Lehman. ….The unraveling isn’t merely implicating Fuld (Lehman CEO) and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations….

We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency. If, as things appear now, Lehman was allowed by the Fed’s inaction to remain in business, when the Fed should have insisted on a wind-down ….. at a minimum, the NY Fed helped perpetuate a fraud on investors and counterparties.

This pattern further suggests the Fed, which by its charter is tasked to promote the safety and soundness of the banking system, instead, via its collusion with Lehman management, operated to protect particular actors to the detriment of the public at large.

And most important, it says that the NY Fed, and likely Geithner himself, undermined, perhaps even violated, laws designed to protect investors and markets. If so, he is not fit to be Treasury secretary or hold any office related to financial supervision and should resign immediately. (Naked Capitalism)

Repeat: “Accounting fraud”, “collusion”, “aiding and abetting.” These are serious charges by a usually restrained blogger.

And this is from Zero Hedge:

“Lehman has become merely the latest example of all that is broken with today’s crony capitalist system…. The evident conclusion is that the core driver of modern capitalist society is fraud at its very core, and nothing short of a massive revolutionary overhaul of the political system, which is the number one defender .. of very lucrative bribes and kickbacks originating from the same rotten Wall Street that (is) nothing but a sham filled with toxic assets” Zero Hedge

This story isn’t going away. Someone has to go to jail. It’s clear that Geithner acted as the “chief facilitator” of industrial scale securities flim-flam which led directly to the Great Crash of ’08. He needs to be held accountable for his actions.
_______

Mike Whitney

Citigroup announces possible bank holiday

Warns customers it “reserves the right” to delay withdrawals from checking accounts for seven days.

This notice was sent to customers nationwide:

“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change,”

Citigroup later claimed that it was a mistake and only applied to residents of Texas.  They later released the following statement:

Citibank has now released the following statement by way of explanation: “When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future.” [futureofcapitalism.com]

Kucinich calls on Congress to take control of the Fed, end fractional reserve banking system

Dennis Kucinich speaks to the participants of the 2009 American Monetary Institute’s 5th Annual Monetary Reform Conference: