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Tuesday, November 29, 2011

Secret Bailouts, Crony Capitalism, and Greedy Bastard$

If you read the steady drip, drip, drip of information coming out about the secret Wall Street bailouts by the Federal Reserve and the rotten corruption of U.S. officials like former Treasury Secretary Hank Paulson it's easy to take the side of the #OccupyWallStreet movement.

Wall Street is infested with a rotten nest of crooks.

Secret Fed Loans Gave U.S. Banks Undisclosed $13B  —  The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret.  Now, the rest of the world can see what it was missing.  —  The Fed didn't tell anyone which banks …

Steve Randy Waldman / interfluidity:
Yes, Virginia. The banks really were bailed out --
After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health. The government provided famous and obvious transfers like paying unwinding AIG swaps at 100¢ on the dollar. It forced short-term yields to zero and created an environment in which medium-term interest rates would be capped for several years, granting banks a near-risk-free arbitrage for a while. It emitted trillions in excess reserves on which it continues to pay interest. It forewent investigations and prosecutions that by law it should actively pursue, and settled what enforcement it could not avoid for token fees. Then there are the things conspiracy theorists and cranks like me suspect but cannot prove...
Hank Paulson tipped off his Wall Street buddies first about the pending takeover of Fannie Mae and Freddie Mac. Isn't this the definition of insider trading? Of crony capitalism? Why isn't this a criminal abuse of power?

Richard Teitelbaum / Bloomberg:
How Paulson Gave Hedge Funds Advance Word  —  Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan.  It was July 21, 2008, and market fears were mounting.  Four months earlier …

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

A Different Message

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives -- at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006...
Michael Shedlock / Mish's Global Economic …:   Treasury Secretary Henry Paulson Tipped Off Prominent Hedge Funds Regarding Fannie Mae While Telling …
Lisa Du / Business Insider:   You Won't Believe What Hank Paulson Revealed To Hedge Funders Right Before The Height Of The Financial Crisis
AngryBear: Hank Paulson and Some Animals Are More Equal than Others
Hank Paulson Tipped Off The Goldman-Led "Plunge Protection Team" About Fannie Bankruptcy 7 Weeks In Advance --
Today, BusinessWeek's Michael Serrill and Jonathan Neumann have released a blockbuster report based on a FOIA response by the Treasury, which proves that in America rules are only for little people, that this country has been a banana republic for years, that Animal Farm was spot on, and gives excruciating detail of how Hank Paulson tipped off a select group of Goldman diaspora hedge fund managers about the eventual failure of Fannie and Freddie 7 weeks ahead of this information becoming public knowledge. The report basically is a summary of a meeting that took place at the offices of Eton Mindich's Eton Park headquarters on July 21, 2008, 7 days after his famous '“If you have a bazooka, and people know you have it, you're not likely to take it out," speech and 7 weeks before both GSEs effectively filed for bankruptcy and were put into conservatorship...
Judge finally says enough and blocks crony deal between SEC and Citigroup.

Current TV:
Matt Taibbi on Judge Rakoff’s decision to reject the SEC’s latest settlement with Citigroup
Keith and “Countdown” contributor Matt Taibbi of Rolling Stone discuss the remarkable decision by U.S. District Judge Jed Rakoff to reject a $285 million settlement between Citigroup and the Securities and Exchange Commission for misleading investors. Taibbi points out that banks take punitive settlements in stride, saying, “They recognize that every now and then they’re going to get dragged into court, they’re going to have to give a little bit of money to somebody, and then they get to walk away and keep doing it.”

John Cassidy / NewYorker.com:
Why Judge Rakoff Was Right to Block the Citigroup Settlement
The current system has incentives to create corrupt Greedy Bastard$.

Greedy Bastards: How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry by Dylan Ratigan

William K. Black / New Economic Perspectives:
"Greedy Bastards": A Review of Dylan Ratigan's Views on the Financial Crisis --
As Ratigan demonstrates, our most elite financial CEOs typically created and maintained grotesquely perverse incentive structures that encouraged their officers and employees as well as “independent” professionals to act criminally in a manner that harmed customers, the public, and shareholders – but made the controlling officers wealthy...

Second, cheating is dominant because finance CEOs create such intensely perverse incentives that fraud becomes endemic...

Rep. Alan Grayson (former Democrat/Florida) asks in a Congressional hearing if anyone is minding the store at the Federal Reserve? The answer is no. The Federal Reserve and their crony banker pals have an open license to create and distribute money for their own enrichment.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia