Paulson's Fix for the Financial System: Less regulation, More Power to the Fed

by Mike Whitney

It is being billed as a “massive shakeup of US financial market regulation”, but don't be deceived. Treasury Secretary Henry Paulson's proposals for broad market reform are neither “timely” nor “thoughtful” (Reuters) In fact, its all just more of the same free market “we can police ourselves” mumbo jumbo that got us into this mess in the first place. The real objective of Paulson's so called reforms is to decapitate the SEC and increase the powers of the Federal Reserve. Same wine, different bottle. Paulson's real motive is to preempt the regulatory sledgehammer that is set to descend on the entire financial industry following the 2008 election. There's growing fear that a President Obama may tote his firehose down to Wall Street and flush out some of the debris that has collected in the market's dark corners.

If Paulson's plan is approved in its present form, Congress will have even less control over the financial system than it does now and the same group of self-serving banking mandarins who created the biggest equity bubble in history will be able to administer the markets however they choose without the annoyance of government supervision. That's exactly what Treasury Secretary and his pals at the Fed want; unlimited power with no accountability.

Paulson is expected to lay out guidelines and principles that are intended to help regulators supervise the financial markets. According to AFP:

“The President's Working Group on Financial Markets said the current regulatory structure is working well despite calls by some US lawmakers.”

In other words, the failing banking system, the housing meltdown, and the frozen corporate bond market are all signs of a robust financial system? This may be the most incongruous statement since “Mission accomplished”. The system is imploding and real people are being hurt by the fallout. Thirty years of industry-led lobbying has dismantled the regulatory regime which made US financial markets the envy of the world. The credibility and transparency are gone along with Glass-Steagall and government oversight of the explosive growth of over-the counter derivatives instruments. Now the system is prey to all types of dodgy debt instruments, suspicious "dark pool" trading and off-balance sheets operations which further reinforce the belief that cautious investment is no better than casino gambling.

"The regulatory line of sight today is by the counterparties," the official said, adding that the guidelines should be "beneficial to industry." (AFP)

How is that different than saying, “Caveat emptor"? That's not a motto that inspires confidence. Many people still naively believe that planning their retirement should not have to be a Darwinian tussle with a crafty junk-bond salesman.

Under Paulson's plan, the Federal Reserve will be granted new regulatory powers, but whatever for? The Fed doesn't use the powers it has now. No one stopped the Fed from intervening in the mortgage lending fiasco, or the ratings agency abuses or the off-balance sheets shenanigans. They had the authority and they should have used it. The Fed knew everything that was going on---including the mushrooming sales of derivatives contracts which soared from under $1 trillion in 2000 to over $500 trillion in 2006---but they decided to cheerlead from the sidelines rather than do their jobs. The fact is, they were worried that if they got involved they might upset the gravy-train of obscene profits that was enriching their bankster friends.

Former Fed chief Greenspan used to croon like a smitten teenager every time he was asked about subprime loans or adjustable rate mortgages. And, as New York Times columnist Floyd Norris points out, (Greenspan) “praised the growth in the derivatives market as a boon for market stability, and resisted calls to use the Fed’s power to increase regulation.” Of course, he did. It was all part of Maestro's “New Economy”; trickle-down Elysium, where the endless flow of low interest credit merged with financial innovation to create a Reaganesque El Dorado. There are no regulations in Eden; anything goes and to heck with the public, they can fend for themselves. Its a dog eat dog world and there ain't no love.

Now its Paulson's job to keep the neoliberal flame lit long enough to make sure that government busybodies and bureaucratic do-goodies don't upset the applecart. That means concocting a wacky public relations campaign to convince the public that Wall Street is not just a pirate's cove of land-sharks and bunko artists, but a trusted ally in maintaining a strong economy through vital and efficient markets.

The Times' Norris summed up Paulson's sham reforms like this:

“The plan has its genesis in a yearlong effort to limiting Washington's role in the market. And that DNA is unmistakably evident in the fine print. Although the proposal would impose the first regulation of hedge funds and private equity funds, that oversight would have a light touch, enabling the government to do little beyond collecting information — except in times of crisis. The regulatory umbrella created in the 1930s would grow wider, with power concentrated in fewer agencies. But that authority would be limited, doing virtually nothing to regulate the many new financial products whose unwise use has been a culprit in the current financial crisis. (“In Treasury Plan, a Reluctant Eye over Wall Street”, Floyd Norris, New York Times)

What nonsense. The house is on fire and hyperventilating Hank is still wasting our time with this rubbish. The real problem is that Paulson and his buddies at the Federal Reserve think of the financial system as their personal fiefdom so they refuse to loosen their hoary grip even though the economy is listing starboard and the water is flooding into the lower decks.

Once again, the New York Times:

“All the checks and balances in the plan reflect the mindset of its architect, Treasury Secretary Henry Paulson, who came to Washington after a long career on Wall Street. He has worried that any effort to substantially tighten regulation could hamper the ability of American markets to compete with foreign rivals.”

No one elected Paulson to do anything. He has no mandate. He is an industry rep. who has worked exclusively for a small group of wealthy investors who have put the entire country at risk with their toxic mortgage-backed bonds, their reckless Ponzi-type speculation, and their off-book chicanery. Paulson should be removed immediately and returned to his wolf's lair at G-Sax. If Bush is serious about straightening out Wall Street, then bring in Eliot Spitzer. He's available. And he'll do what it takes to clean house, that is, put a truncheon-wielding robo-cop in every trading-pit at the NYSE, and dispatch government accountants to every office of every CFO making sure they have a Big Red Pen in one hand and a taser in the other. That's the only way to get the attention of the bandit-class.

“I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil,” says Paulson.

Paulson is wrong. The current turmoil is all about the lack of regulation and he'd better prepare himself for some big changes. The pendulum is already in motion and tighter regulations will soon follow. There needs to be an accounting process for all transactions and capital requirements for every financial institution that creates credit. No exceptions. All of these businesses pose a real danger to the overall system and, therefore, must conform to clearly articulated and strictly enforced rules; no off-balance sheets operations, no dark pool trading, no unregulated derivatives contracts, no level 3 assets, no “mark to model” garbage bonds where CFOs unilaterally decide what they are worth by picking a number out of a hat. Its time to restore order to the markets so retirees and working class families can feel safe investing in their futures. They are the ones who are most hurt by Wall Street's endless trickery.

Paulson's plan is a non starter. The era of sandbagging, supply-side banditry is over. Good riddance.

****************************************************
Fed Up: Bernanke joins G-7 to Stem Global Financial Meltdown

In a recent interview with the New York Times, former Secretary of the Treasury Paul O' Neill, was asked how the problems with subprime mortgages could lead to a financial crisis of global proportions. O' Neill said,

“If you have 10 bottles of water, and one bottle has poison in it, and you don't know which one, you probably won’t drink out of any of the 10 bottles; that’s basically what we’ve got here.”

Bulls-eye. O' Neill's answer is the best yet for explaining a complex situation in simple terms. The term “subprime” is a red herring; it is used by the media to minimize what is really going on. The meltdown in financing extends across the entire range of mortgage-security products. No loan-type has been spared. The wholesale market for anything connected to mortgages is frozen and the details are being intentionally withheld from the public. Two years ago, more than 65 percent of all mortgages were converted into securities and sold off to Wall Street. No more. That scam unraveled in July when two Bear Stearns hedge funds blew up and their were no takers for billions of dollars of mortgage-backed junk. Since then, bankers and hedge fund managers have been scrambling to conceal the facts about what mortgage-backed securities (MBS) are really worth; nothing. The fear is that when the public finds out what is really going on, they'll draw the logical conclusion that the banking system is bankrupt, which it probably is. Just look at these eye-popping losses which appeared in Bloomberg News on April 1 (http://www.bloomberg.com/apps/news?pid=20601208&sid=an2o_RDeA.9A&refer=finance) The financial ship is listing, and the mainstream media is doing its best to keep the public in the dark.

So for the last eight months, a simple matter of “price discovery” on publicly traded securities has been a nonstop game of hide-n-seek. That's no way to run a free market. The recent collapses of Bear Stearns and Carlye Capital are just the latest additions to this ongoing farce. Carlyle was a $22 billion hedge fund that couldn't scrape together a measly $400 million to meet a margin call. Why? Every analyst who wrote on the topic noted that the fund was loaded up with high-quality Triple-A and GSE (Fannie Mae) bonds. So what were they offered for their MBS? That question was never answered because Fed chief Ben Bernanke rode to the rescue and created a new $200 billion auction facility and –Whoosh---Carlyle's mortgage-backed junk disappeared down a black hole. How convenient; another Fed bailout to hide the damning evidence that trillions of dollars of MBSs are utterly worthless and devouring the financial system from the inside.

Bernanke's myriad auction facilities (four, so far) are ostensibly designed to remove these mortgage-backed stinkers from the banks' balance sheets so they can start lending again. But there's another reason, too. The Fed thinks they can simply put these MBSs in cold-storage for a while and then re-thaw them when the market bounces back. But the market for MBSs won't bounce back. This is biggest housing bust in US history and prices have a long way to go. Who is going to invest in mortgage-backed bonds when the underlying asset is losing value every day? Besides, as Paul O' Neill points out; one of the bottles contains poison and investors don't like poison. So, Bernanke is stuck trying to treat with the symptoms rather than the disease. As a scholar of the Great Depression, he's been rifling through his bag o' tricks to mitigate the damage, but without success. The rate-cuts and auction facilities have been a complete flop. The situation is worse now than it was in July; much worse. In fact, the develeraging of financial institutions is accelerating at a pace that no one expected threatening some of Wall Streets' biggest players and putting $500 trillion in counterparty agreements at risk. And it all began with eliminating the basic standards for issuing loans to credit-worthy applicants; the straw that broke the camel's back. Now the whole system is crumbling and an ominous sense of doom pervades trading floors across the planet. Everyone is just waiting for the next shoe drop.

Pimco's Bill Gross said, “What we are seeing is the collapse of the modern day banking system”. American-style capitalism is in crisis-mode and the outcome is far from certain. The Fed's interventions show that the long held belief that markets are self-correcting has vanished. Laissez-faire is out; regulation is in.

Bloomberg News summed it up like this:

“It is no coincidence that the crisis of 2007 and 2008 had its origin in unregulated financial products traded in unregulated markets. Ever since the Great Depression, the government has tried to limit the leverage available to the public in the American stock market. But regulators, led by Alan Greenspan, the former chairman of the Federal Reserve, thought it would hamper innovation, and drive financial activity overseas, if there were any attempts to impose limits on leverage in the unregulated markets.
To avoid a super-bubble in the future, (the) banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.” (Bloomberg News)

In Henry Liu's latest article in Asia Times, “A Panic-stricken Federal Reserve”, Liu makes this observation on the Fed's auction facilities which provide hundreds of billions of dollars in 28 day loans in exchange for dubious mortgage-backed collateral:

"Since the Fed cannot retire loans made via TAF and its repo program without adding to those 'elevated pressures', the loans should be considered an equity infusion, because they’ll be repaid at the convenience of the borrower rather than on a schedule agreed with the lender." What Waldman did not say was that the Fed had ventured into a broad nationalization of the prime dealers on Wall Street by being an equity investor. (Quote,Steve Randy Waldman of Interfluidity; Henry Liu, “A Panic-stricken Federal Reserve”)

Does the Fed realize that it is effectively monetizing the debt by issuing loans that may not be repaid or is this just a clever way to trick foreign investors into believing that the Fed won't print its way out of a crisis? The bottom line is, whether the nation is headed into a deflationary spiral or not; all of the Fed's tools are inflationary. Rate cuts, auction facilities or covert monetization all weaken the currency and levee an unfair tax on savers and people on fixed incomes. Unfortunately, these people have no voice in government, so we can't expect their interests to be fairly represented.

Since housing peaked in 2005, 240 independently-owned mortgage lenders have filed for bankruptcy. Wholesale funding sources have dried up and foreclosures are on the rise. Now, more than 75 percent of mortgages are funded by Fannie Mae or Freddie Mac while another 10 percent are underwritten by FHA. The real estate industry has been nationalized; another knock-on effect of Greenspan's low interest monetary policy. Presently, the Fed and the Secretary of the Treasury, Henry Paulson, are pushing to expand Fannie's and Freddie's balance sheets so they can absorb bigger and riskier mortgages. This is lunacy. Fannie Mae is already perilously under-capitalized and, if it defaults, taxpayers will be on the hook for $2.2 trillion. That doesn't seem to bother Paulson who is determined to reflate the equity bubble so the profits keep rolling in to Wall Street's coffers. Still, even if the plan goes forward, it's unlikely that Paulson and Bernanke will be able to re-energize the real estate market or ignite another housing boom. Public attitudes have changed dramatically in the last few months. The myth that “housing prices never going down” has been dispelled and high levels of personal debt have forced many to reassess their spending priorities. The American consumer has never been so over-extended.

According to Bloomberg:

Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years, another sign the U.S. economy is slowing, according to the American Bankers Association's quarterly survey. Payments at least 30 days past due increased across all eight categories of loans tracked during the fourth quarter, the Washington-based group said today in a statement. Late loans in the quarter climbed 21 basis points to 2.65 percent of all accounts in a consumer-loan index created by the group.

The American consumer is tapped-out. What he needs is a raise, not another loan. Bush's $500 per person Stimulus Package will do nothing to reverse the effects of 30 years of anti-labor legislation and class-oriented monetary policy.

Another indication that attitudes towards spending have changed, showed up in a survey conducted two weeks ago by USA Today/Gallup. The poll released showed that 76 percent of Americans believe that the country is now in recession and 59 percent think the US will slide into a depression that will last for several years. Despite the media's attempts to convince us that these are “the best of times”; the public knows otherwise. Their pessimism is expressing itself through curtailed spending. There's nothing the Fed can do to change the prevailing mood of the country. Working people are hurting. The spending spree is over.

The housing market will be dead for a generation. That means the MBS market will falter and the multi-trillion dollar derivatives monolith will continue to unwind. It will take emergency measures to address the credit avalanche which is just now hitting the broader economy.

The Bear Stearns bailout is a prime example of the extent to which the Fed is willing to go to stop a meltdown. By approving the $30 billion dollar deal with JP Morgan, the Fed arbitrarily went beyond its mandate of providing liquidity to the markets and usurped Congress' authority to appropriate funds. It was a power-grab engineered under shaky pretenses. The Fed isn't authorized to prevent privately-owned businesses that are recklessly leveraged at 30 to 1 from defaulting. More importantly, the Federal Reserve is not Congress, although they have now assumed those constitutional duties. Speaker of the House Pelosi has said nothing so far.

Paulson has used the Bear fiasco as a platform for his blueprint for “broad market reforms”; a 200-plus page document that removes Congress from its role of overseeing the financial markets. According to the New York Times:

“President Bush was preparing to issue an executive order soon to expand the membership and reach of an interagency committee called the President’s Working Group on Financial Markets. (aka; The Plunge Protection Team) The group was created after the stock market plummeted in 1987. The group is also expected to consider ways to broaden the authority of the Federal Reserve to lend money to nonbanks as needs arise. (Ed. note: To authorize more Bear Stearns type bailouts with consulting Congress).....Elements of the plan are clearly deregulatory. The plan proposes, for instance, to reduce the enforcement authority of the S.E.C. in a variety of ways and hand that authority instead to industry groups. The plan recommends that investment advisers no longer be directly regulated by the commission, but instead be supervised by an industry regulatory organization.

The Treasury Department’s blueprint is designed to boost Wall Street’s competitiveness, not Main Street investor protection,” said Karen Tyler, president of the North American Securities Administrators Association and the securities commissioner of North Dakota.” (New York Times)

Congress is being muscled out of financial market supervision by a troop of venal banksters and corporate picaroons who are threatening to finish-off the already-defanged SEC. That will put the Fed in the driver's seat for good. Paulson wants to police the world's most complex markets on the “honor system”. It's crazy. His blueprint is an obvious attempt to consolidate market-related functions under a central authority that is accountable to private industry alone. That way, the Fed can bailout whomever it chooses without congressional approval. Paulson's press conference was just a polite way of informing the American people that the seat of power has shifted from Washington to Wall Street. It's a banker's coup.

So, where do we go from here? Pimco's Bill Gross gives us some indication in this recent quote:
"In my opinion, the private credit markets have forfeited their privileged right to operate relatively autonomously because of incompetence, excessive greed, and in minor instances, fraudulent activities.As a result, the deflating private market’s balance sheet is being re-nationalized in some cases with increased regulation, in others with outright guarantees and agency lending. Ultimately government programs which support private credit market assets may be required in order to prevent an asset deflation of significant proportions. Authorities must act quickly, with a shot of adrenalin straight to the heart of the problem: home prices. Since homes are the most highly levered and monetarily significant asset that American consumers own, if they decline much further they will drag the rest of the economy with them."

“Re-nationalized”; is that what it is? No one authorized the Fed or Paulson to re-nationalize anything. These over-leveraged banking behemoths need to fail. Let the market work. 28 million Americans are on food stamps, tent cities are sprouting up across the country, discretionary spending is down, food and energy prices are skyrocketing, and wages have been frozen for a generation. Where's the bailout for the working man? Instead, the government's largess is showered on a throng of unctuous fat-cat banksters so they can keep the larder on Martha's Vineyard topped off with Godiva truffles and Cuban cigars. Paulson has to go. Bernanke too.

An article in last week's New York Times, “Leveraged Planet”, provides a great description of the Fed's activities during the weekend of the Bear Stearns fiasco. Journalist Andrew Sorkin recreates the frantic phone calls and panicky deal-making that went on behind the scenes while the stock market was preparing for a Monday morning blow-out:

“JUST before JP Morgan-Chase announced its initial $2-a-share deal to buy Bear Stearns, Ben Bernanke, the chairman of the Federal Reserve, held an extraordinary impromptu conference call. The participants on the Sunday night call, who got a preview of the deal, were Wall Street’s biggest power brokers: Lloyd Blankfein of Goldman Sachs dialed in from home. John Mack of Morgan Stanley rushed to the office to listen on speakerphone. Richard Fuld of Lehmann Brothers, who had been directed to return home from a business trip in New Delhi by none other than Henry Paulson, the Treasury secretary, was patched in, too, among others.

The half-hour call was a rallying cry for support of Bear Stearns — and more broadly, the financial markets, which, as it was described on the call, were on the verge of a major meltdown if not for the pre-emptive steps that the Fed and JPMorgan took. “It was much worse than anyone realized; the markets were on the precipice of a real crisis,” said one participant. Given that Bear held trading contracts with an outstanding value of $2.5 trillion with firms around the world, “we were talking about the possibility of a global run on the bank.” ( Andrew Sorkin, “Leveraged Planet” New York Times)

Typical of the Times, the reader is left feeling that the wild and destabilizing activities of one unregulated market participant, like Bear, is as natural as a spring rain. There's not the slightest hint that Bears' transgressions may have emerged from years of kicking down regulatory doors and feeding campaign contributions into a corrupt political system. That's way beyond the Times' range of analysis. Instead, the heroes of this financial kabuki are none other than the ashen-faced palatines at Fed and the Treasury who deftly donned their Haz-mat suits long enough to battle the flames of the banking inferno with a stream of taxpayer money. So much for moral hazard.

If Bear had been properly policed; it would have been better capitalized with considerably less leverage. Its $2.5 trillion of derivatives contracts would have been regulated by government officials to make sure that they posed no threat to the broader system. Sorkin's recap just proves that the present stewards of the system are bunglers who are out of their depth. After years of serial bubble-making, they are finally begin to realize that their neoliberal Golden Calf was built on a foundation of pure quicksand. In fact, the sirens are already wailing as the yields on 3 month Treasuries continue to plummet, which is the bond market's way of perching itself atop the highest building in downtown Manhattan and screaming, “FIRE!” There's no telling when the stock market will get the message, but it shouldn't be too long.

CODE RED; Emergency planning now underway

So, what is to be done? New York Fed chief Timothy Geithner says that capital markets are still “substantially impaired” and policy makers and financial industry leaders must “act forcefully” to stem the crisis.

“What we were observing in U.S. and global financial markets was similar to the classic pattern in financial crises,'' Geithner said in his prepared testimony to the Senate Banking Committee. He cited ``a self-reinforcing downward spiral'' of asset sales, ``higher volatility, and still lower prices.” (Bloomberg News)
If Geithner's predictions of “a self-reinforcing downward spiral'' sound scary; so do the remedies. The Financial Times outlined the radical strategies that are now under consideration by the G-7 powers for dealing with challenges of the rapidly-expanding credit crisis. These include “the temporary suspension of capital requirements, taxpayer-funded recapitalisation of banks and outright public purchase of mortgage-backed securities.” Everything is on the table.

Representatives from the main western central banks are also discussing whether to force a number of the larger banks to disclose their financial positions so they can objectively determine the weaknesses on their balance sheets.

Other recommendations include boosting capital requirements, “conserving financial resources”, and utilizing public funds. The group is also deciding whether to “suspend capital and reporting rules that tie prudential requirements to market values of securities.” That way the banks can avoid letting shareholders know the true downgraded value of their assets. This is clearly an attempt to deceive the public about the real financial condition of the banks.

“Emergency liquidity support”, reductions in capital requirements, concealing the true value of collateral, relaxing regulations, suspending accounting rules for assets; it sounds a lot like panic. These are the signs of a system so dilapidated that the pilings shake and the scaffolding wobbles with the slightest breeze. A system that's held together with the frayed strands of collective fear; bankers angst. Strike a match and the whole thing will go up like a Roman candle.

[ELAINE: The system is now being reset as we talk about its deficiencies. Namely, the Japanese Carry Trade is now beginning to resume. Slowly but surely. This attempt at restarting the red ink status quo will work...briefly. But it only deepens the debt mess, not eliminates it. The normal housecleaning that all recessions do isn't going to be done at all. And the fear of any sector of the present financial system seeing any sort of 'house cleaning' is due to the immense size of the Derivatives Beast. This creature was hatched and fed in order to be protection against any housecleaning by recessions. Any retraction in value or systems triggers this Beast into action. It can and will devour all world monetary wealth since it is far bigger than the planet's finances. The Derivative Beast, far from being slain, is still growing. And will head towards infinity in less than 10 years. None of the deals being made today fixes this. Indeed, the fantasy that one can pursue Miz Risky while having a Miz Safety in tow is going to lead to a very explosive resolution.]

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Comments

[Bear of Little Brain]

Why do I keep thinking that if I knew enough about Mussolini and Hitler, I would be having some sense of deja vu?
I imagine that Timothy "The Fixer" Geithner's idea of forceful action is not what the plebs expect.

BTW, beautiful dog , Elaine.

[Anthony]

Can somebody show that the explosive growth of derivative market only can happen in post Glass-Steagall ?

The derivative market essentially can only happen when they are able to lie about actual financial product rating right? (I mean, they put some clever math nobody can understand to cover it up, as if it actually represent actual safety)

My feeling this type of situation can only happen when rating agency and seller are in it together, lying and hyping the market.

[Bear of Little Brain]

Anthony:

Not sure if this is the kind of thing you mean (using accounting loopholes):

http://www.businessweek.com/magazine/content/08_15/b4079024463824.htm?campaign_id=rss_topStories

I see that MBIA and its parent were downgraded Friday p.m. (gives someone the weekend to prop it up, I suppose). Yet another dropping shoe to catch?

[blues]

I have a very bad feeling about all of this!

About 18 months ago I tried to tell a very old friend to not buy a house. I asked what would happen if its value went down. Everybody thought I was getting Alzheimer's. The value would have to go up forever. And why was I raining on this fine parade, anyhow? That was about 18 months ago.

About these derivative thingies, does anyone happen to have a picture of one? What would they look like? Like an overwrought insurance policy maybe? It seems odd that they could crash and burn the whole economy, and yet hardly anyone has seen one.

[Elaine Meinel Supkis]

Blues, the Derivative Beast is invisible and dwells in a very dark part of the Outer Darkness. There is no photo of it. But what it does is eat numbers on computers. The world's entire banking system is really a relay of lots of computers. With some hard paperwork for insurance. They worry about this global computer system being wrecked in some ways. So they pass the numbers through deep cave dwelling computers that can survive a direct strike from nuclear bombs. Or so is their benighted hope.

[Blunt Force Trauma]

I love the doggie pics. What breed is that?

[blues]

Oh good grief. Not the computers again. I have blogged for months against computerized voting. I know enough about the software that I could (in theory) begin to write programs if I could type enough. And I sometimes fix computer cards to the component level. I know exactly how secure they are. They are very insecure indeed. In fact, the malware producers are leaving the anti-malware (antivirus) businesses in the dust.

Some people want to move to awful "solutions" like TCP:

((----- Copy & Paste - W/O The Line Breaks -----))

http://www.schneier.com/blog/archives/2005/08

/trusted_computi.html

However, this could lead to worse disaster, since once any malware learns how to be "trusted" by the hardware, it automatically becomes encrypted and thus invisible. Computers become very dangerous when people develop a strong motive to hack them. Then again, all those people live in the West Coast earthquake regions. People seem to have a negative learning curve.

Oh, and the dog looks very sweet!

[DeVaul]

This is the first post by Mike that I really enjoyed reading. I laughed out loud at some of his satirical comments. He also seems to be realizing the true criminality of all the main players in this epic drama. Good for him.

To Mike: the more satire, the better. Spare none.

[Elaine Meinel Supkis]

Mike and I had a tiny bit of a chat. Heh.

Yes, we have to use rapier wit around here. And if that fails, a heavy club to the head.

[hardrock]

What are 'they' trying to accomplish? 'They' have been eying the 'baby boomer' nest eggs for years and years. 'They' want it all and with the new Paulson proposals, when implemented, there will be no way to stop them from robbing the entire hen house....eggs, chickens and all. The boomers and their kids will be left paupers with few exceptions....with the sad irony of "no one to blame....it's the market". Greed is the key to all great crimes.

[hardrock]

The 'Great Robbery' will take place in about 3 years from now. 'They' with the help of the media and compromised politicians will lure the public and their trusted fiduciaries back into the market [coop] just in time for the slaughter. As Elaine has pointed out time and again....the money will have escaped the grasp of all Americans, stashed in private 'pirate coves' in different parts of the world. Americans will be left holding worthless paper....stocks, bonds and fiat, printed currency. Is it any wonder why the safest bet is to hold some gold, silver and a piece of ground with water rights....oh yes, a home that is paid for and maybe a fully stocked fallout shelter. I am convinced there is a plan to destroy this nation and the people who founded it. I don't want to get into all the past evils lain at the feet of the evil white men who took the country from the 'noble savages'. That cannot be rectified at this point, it can be reconciled to a point at some future date....provided we survive as a nation.

All we can do is try to inform our fellow citizens to prepare and become aware, otherwise they will become a burden on those of us who do prepare.

If there is anyone out there who has a better idea on how to prepare and survive the coming difficulties I'd like to hear it. We all can't be an Elaine.

[blues]

The points of your above comment are are basically right, hardrock. Although it would surprise me if the financial shell games can continue for another three years.

For typical middle wealth Connecticut dwellers. Putting money in the stock market is just like putting it in a bank that gets robbed every day. Inside information i supposed illegal. Yet it is used every second. Get rid of the stock market. Let every community be protected by democracy and let each one build and own its own industry. Capitalism has totally failed.

[Elaine Meinel Supkis]

No one is more 'inside' than our multimillionaire Presidents and Congress.

[PLovering]

The Neurastheniac Suicide Club wants to wrap up their New Federal Banking Empire before Obama takes office.

Who needs a proactive President asking awkward questions?

[pramod panda]

I think it is time we recognise that the design of financial regulation needs to be cognizant of a very fundamental fact that the adhesiveness that has been growing in the financial system demands unique structure and processes for regulation. No more the conventional understanding of the potential risk (macro) would be helpful in finding the right governance structure for the financial system.

The difference in banking as an off market phenomenon and the financial market as a place where exchanges take place is no more the relevant factor to be taken into account to assume that different structures are needed for the financial market and banking system and then to set up separate regulatory and supervisory structure for the banking system and non-banking financial system ( financial market regulation)

[hardrock]

Never heard such 'gobbledygook' in my life. Pramod panda, must be a corporate insider, a recent college grad or a seasoned bureaucrat. Does anyone reading here have any idea what he is attempting to say? Would you bet on it?

For a start: A designer of financial regs can be 'cognizant' but I rather doubt the regs can.

[Bear of Little Brain]

hardrock:
I think it comes down to this snippet:

"that different structures are needed for the financial market and banking system"

But we have that. Goldman looks after the markets and Morgan looks after the banks. Done!

[Bear of Little Brain]

Panda:
Don't mean to make light of your comment, but it is a little tricky to figure out. :-)
I think it's the "no mores" that add confusion.

[ClaireVoyant]

Hardrock:
"Safest bet is to hold gold, silver, and a piece of land with water rights" -- in an economic meltdown nothing is safe: They can seize land assets, too. Don't forget the Supreme Court recently legalized "condemnation" of private property for the taking by private interests, at will. My grandparents had considerable farmland acreage confiscated during the Depression, by the simple strategem of fixing it at inflated tax values; when the tenant farmers' revenues failed to cover the inflated tax bill, the land was seized for a public park; this was accomplished quickly, while the hearings to dispute the inflated tax value dragged on until the issue was moot.
The "safe" course is for more people to become educated and become activists: out the bastards, expose their misdeeds, publicize the scam behind calls for "free markets" and de-regulation and DEMAND ACCOUNTABILITY. Brava to Elaine and all you posters for laying bare the machinations of these miscreants. Thanks for your work in cutting the Gordian knot of confusion surrounding their plots to defraud the public.

[Dutch]

Paulson's real motive is to preempt the regulatory sledgehammer that is set to descend on the entire financial industry following the 2008 electionElection-Campaign-Money Mar-08 . There's growing fear that a President Obama may tote his firehose down to Wall StreetWall-Street-Layoffs and flush out some of the debris that has collected in the market's dark corners.

It is impossible for him to do this, I think of Obama as a 'bargaining chip' to do one thing,(save the currency market in Chicago).

Big American money is on him. And we know who the Clinton Toy belongs too.

Interesting note on the Carlyle Group, Bush Family are the main share holders no?

While this was going on wasn't he in New York(Conveniently after Spitzer got the axe) Screaming about how this was the fault of housing speculators and there wasn't going to be any bailout for them!

What a Pinko Commie, this little bush is! He stabbed Bear in the back too! Just like he will liquidate a drugged comotose society, to poor to pay their bills.

[Dutch]

For those of you afraid of Fascism, you will never see it. And remember this, the Communists have MURDERED more people in history than any other animal before or after since this wretched disease of the mind showed up on our doorstep.

[blues]

Seriously, Why would anyone give a damn about the suggested "communist murders"? Like, I mean, we murder people every single day! It's a frickin tradition around here! Communists my ass. Rather be "communist" than Amero idiot jackass!

[Elaine Meinel Supkis]

As proportion to population, the Mongols were worse.

[Gary W]

The Assyrians were quite nasty too. It's a pretty sorry history, but it'll be nothing compared to the catastrophe unfolding if we don't get on top of climate change, resource depletion, food shortages, industrial pollution, and overpopulation. Who are we going to blame for all that? Besides each other.

[Elaine Meinel Supkis]

Humans killed all the Neanderthals, every last one of them.

Our past is very dark, indeed. Ask the gorillas and chimps about us.

[Dutch]

I dont know about you but if I saw a neanderthal in my front yard, I would shoot the sonofabitch.HAHA