Federal Reserve losing control

[antiaristo]

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Daily Mail, September 2008:

The man blamed for bringing the world's biggest insurer AIG to the brink of ruin
By SHARON CHURCHER and IAN GALLAGHER
Last updated at 2:10 AM on 21st September 2008



Lawsuit: Joe Cassano peers into the street from his £6million London home

Peering from the doorway of his £6million London home, this is the financier blamed for taking one of the world’s biggest insurers to the brink of disaster.

Joe Cassano was the president of a subsidiary of AIG that ‘lost’ £5.5billion earlier this year, setting the insurer on a path to bankruptcy.
And today The Mail on Sunday can reveal that the dealings that brought it to the edge of collapse were done in London.

Last week, AIG was effectively nationalised with an £48billion loan from the US Federal Reserve to avert a collapse that would have triggered unimaginable consequences on the world’s financial markets.

In March, when the losses were revealed, Mr Cassano, a 53-year-old New Yorker who had an office in Mayfair, left the company.
Asked by The Mail on Sunday if he felt responsible for the AIG crisis, he smiled and said: ‘I left there six months ago.’
Refusing to answer further questions, he went inside his four-storey townhouse in one of London’s most exclusive streets.

Mr Cassano, who learned his craft on Wall Street, was one of the founding team in 1987 of AIG Financial Products. Effectively the insurer’s banking unit, it sold cover to financial speculators, many involved in the American housing market.

Two decades on, Mr Cassano is one of several AIG executives facing a lawsuit accusing them of deceiving hundreds of thousands of investors who suffered huge losses in the latest crash on Wall Street.

According to papers filed in New York’s federal court, he claimed the policies he marketed were so safe they would never lose as much as ‘one dollar’.

His pitch was so convincing that many small investors sank substantial sums of their life savings into AIG shares.

A financial expert told The Mail on Sunday: ‘I’m not going to call Cassano a crook but he was the head of the division that took AIG down. If the US government had not stepped in, and AIG had gone bankrupt, the knock-on effect at institutions around the world would have been disastrous.

‘As it is, Cassano’s exotic financial dealings are the biggest single component of the crisis on Wall Street and in the City.’

Cassano moved to England in 1987 from the US but still owns a house in Westport, Connecticut.

His division AIG FP sold credit default swaps (CDSs), which are, in effect, a type of insurance against an organisation going bust. AIG FP wrote CDS contracts with a range of investment banks and other financial groups.
A CDS is linked to a specific type of asset, typically a company bond or other loan or package of loans. The buyer of the CDS pays a regular sum to the issuer. In return, if there is a default on the asset the issuer pays out a predetermined amount of money.

London has seen a boom in the credit derivatives market over the past ten years because of a combination of the UK’s relaxed regulatory environment and a concentration of people skilled in this type of complicated trading.

During the credit explosion the CDS demand was huge. By 2007 Cassano’s division was providing guarantees mainly through credit default swaps on about $500billion of assets (£285billion).

In effect Cassano’s business was underwriting a huge proportion of the global credit bubble – including the vast American subprime mortgage market. And as house prices in the US fell, the AIG books began to unravel.
In December 2007, Martin Sullivan, chief executive of the whole of AIG, assured shareholders that the chances of the US housing bust leading to losses at AIG was ‘close to zero’.

But he confirmed AIG Financial Products had written off $1.1billion (£600million) because of its credit contracts covering American mortgages.

The bombshell came on February 11. PricewaterhouseCoopers, auditors to AIG, said there had been ‘material weaknesses’ in the standards of financial reporting at Cassano’s division.
Worse was to come. On February 29, AIG announced it was writing off $11.1billion (£5.5billion) on its CDS business.

http://www.dailymail.co.uk/news/article ... -ruin.html


Washington Post, October 2008:

Joe Cassano: The Man Who Brought Down AIG?

Moments ago, members of the House oversight committee concluded their hammering of the two most recent AIG chief executives. Topic: Joe Cassano, the man who some credit with bringing down the insurance giant.

Cassano was president of AIG's financial products division, which trafficked in the credit-default swaps, or CDS, which we learned earlier proved so dangerous.

Rep. Bruce Braley (D-Iowa) angrily recited the tale of Cassano's tape: He earned $280 million in cash -- more than AIG chief executives -- and for every dollar his financial products unit made, 30 cents came back to Cassano and other top execs.

After the unit lost $11 billion, Cassano was fired Feb. 29 of this year, Braley pointed out, and got to keep $34 million in bonuses and was kept on as an AIG consultant at a salary of $1 million per month.

Braley asked the witnesses, former AIG chief executives Michael Sullivan and Robert
Willumstad, if they had exercised their authority to fire Cassano from his consultant's role, given all the damage he had brought to AIG.

"No," both said.

Then oversight committee Chairman Henry Waxman (D-Calif.) really lit into them.

Asked why they didn't fire Cassano, Sullivan said they needed to "retain the 20-year knowledge of the transactions."

Waxman was impressed.

"When I retire I want to come work for you at $1 million a month," he said, The Post's Peter Whoriskey reports.

"What would he have had to have done for you to fire him?" Waxman asked rhetorically.

http://tinyurl.com/44meeb

Zero Hedge, March 10

Is Joseph Cassano Responsible For The Depression?

Posted by Tyler Durden at 1:40 PM


And people thought Jerome Kerviel's blow up was spectacular. In an interesting piece out on abcnews, more light is being shed on AIG's small financial products London office which even AIG now acknowledges was ground zero for roughly $500 billion in losses, as well as the person who ran it, Joseph Cassano. Joe, who previously had made waves after the Washington Post first profiled him in October 2008, had "earned" $280 million during his tenure with AIG and who left the company with a $1 million a year consulting contract, and owns houses in London and Connecticut, was so confident in his huge risky bets that he is quoted as saying "It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions."It is a little easier to see a scenario where Cassano would end up losing $500 billion.

Cassano's nearsighted actions have had staggering repercussions: everyone knows about the secret 21 page mutual assured destruction memo, the billions in cash downstreamed to AIG's counterparties, the systemic impact AIG's collapse has had on both the U.S. and global economy and all the other indirect consequences of the near $200 billion in taxpayer money that AIG's failure has so far cost.

It is somewhat surprising that while Barney Frank et al have been so focused on the executives of the major banks, Joe has been flying low under the public radar. After all, if allegations against Cassano prove true, his loss will have the tenfold impact of Madoff's ponzi scheme, however unlike with Bernie, who impacted a small group of people to a high degree, Cassano's $500 billion loss has to be shared equally amongst all taxpayers. And while hubris and reckless risk management are not criminal acts, incentives will always exist for traders to take on outsized risk unless there is some regulatory intervention, which really cuts to the heart of the whole problem.

http://zerohedge.blogspot.com/2009/03/i ... e-for.html


AIG, March 12:

Traders at the London office of AIG were responsible for massive losses that brought about the near collapse of the US insurer, the firm has said.

Broadcaster ABC has claimed that the Mayfair-based team, led by American trader Joseph Cassano, risked half a trillion dollars (£359 billion) investing in the toxic US mortgage market.

AIG has said the figure is inaccurate, but did admit in a statement that the unit nearly "brought down" the company.

The struggling insurer has avoided collapse through a massive state bail-out totalling more than 150 billion dollars (£108 billion).

AIG is now 80% owned by the Government as a result of attempts to prop up the struggling firm.

ABC said "ground zero" for the insurer's financial implosion was the London branch.

It suggested that a series of disastrous deals saw billions pumped into risky mortgage debt.

Investigative reporter Peter Koenig told ABC's Good Morning America that the UK capital was the "epicentre" of the financial crisis. He said: "For about a decade it went OK. And then, when the US housing market fell out instead, they suddenly realised they had to come up with a half a trillion dollars and all they had was a couple of million in the bank."

The Serious Fraud Office is currently investigating the losses made at AIG's London office.

In a statement, the insurer added: "It was clear that this small unit engaged in trades that nearly brought down the company and its still sound insurance business."

Copyright (c) Press Association Ltd. 2009, All Rights Reserved.

http://www.guardian.co.uk/uk/feedarticle/8400556


Soooo. Can anybody guess which sovereign has jurisdiction over this matter?

Does this remind anybody of an earlier fraud committed by the institution known as Lloyds of London?

I wonder if it is some coincidence that this man has been in London since 1987? Represents the then biggest insurance company in the world? Has possibly rubbed shoulders with the London insurance market Establishment?

[smiths]

Vacuum in US stymies planning for G20

March 11 2009

Gordon Brown is struggling to organise next month's G20 summit in London because it is hard to find anyone to speak to at the US Treasury, Britain's most senior civil servant has claimed.

Sir Gus O'Donnell, cabinet secretary, blamed the "absolute madness" of the US system where a new administration has to hire new officials from scratch, leaving a decision-making vacuum.

Sir Gus told a conference of civil servants on Monday how Number 10 was struggling to liaise with the US Treasury over the G20 meeting because of the handover to the Barack Obama administration. "There is nobody there. You cannot believe how difficult it is," he said, contrasting the US model with the British system where a permanent civil service smooths the transition from one government to the next.

His comments were em-barrassing to Mr Brown, who needs US support to secure what he hopes will be ambitious results from the summit on April 2, and come just a few days after the prime minister met Mr Obama in Washington. British officials insist last Tuesday's White House meeting helped to focus US minds on the summit, although they previously admitted it was difficult to get any sense of what the White House wanted out of the meeting.

Tim Geithner, US Treasury secretary, is one of the few senior officials to have been confirmed by Congress for work in the Treasury. Lawrence Summers, Mr Obama's economics adviser, is also helping with G20 preparations.

Sir Gus's comments, reported on a civil service website, were promptly taken down, with Downing Street claiming his remarks were "taken out of context".

He was quoted as saying: "You get to a certain point, and you can't go any further. If there's a change of administration, you're out, and a whole new bunch of people come in who probably haven't been in government before."

Number 10 said Sir Gus was simply "explaining the benefits of the British system". "We have a very good relationship with the Obama administration on the G20 and other issues," said Mr Brown's spokesman. The government cited Mr Brown's Washington talks as evidence the new US administration was "fully engaged with the G20 agenda".

http://www.ft.com/cms/s/0/0799de02-0ddc ... ck_check=1

[smiths]

Now is the time for a less selfish capitalism

By Richard Layard Published: March 11 2009

What is progress? The Organisation for Economic Co-operation and Development has been asking this question for some time and the current crisis makes it imperative to find an answer. According to the Anglo-Saxon Enlightenment, progress means the reduction of misery and the increase of happiness. It does not mean wealth creation or innovation, which are sometimes useful instruments but never the final goal. So we should stop the worship of money and create a more humane society where the quality of human experience is the criterion. Provided we pay ourselves in line with our productivity, we can choose whatever lifestyle is best for our quality of life.

And what would that involve? The starting point is that, despite massive wealth creation, happiness has not risen since the 1950s in the US or Britain or (over a shorter period) in western Germany. No researcher questions these facts. So accelerated economic growth is not a goal for which we should make large sacrifices. In particular, we should not sacrifice the most important source of happiness, which is the quality of human relationships – at home, at work and in the community. We have sacrificed too many of these in the name of efficiency and productivity growth.

Most of all we have sacrificed our values. In the 1960s, 60 per cent of adults said they believed “most people can be trusted”. Today the figure is 30 per cent, in both Britain and the US. The fall in trustworthy behaviour is clear in the banking sector but can also be seen in family life (more break-ups), in the playground (fewer friends you can trust) and in the workplace (growing competition between colleagues).

Increasingly, we treat private interest as the only motivation on which we can rely and competition between individuals as the way to get the most out of them. This is often counterproductive and does not generally produce a happy workplace since competition for status is a zero-sum game. Instead, we need a society based on positive-sum activities. Humans are a mix of selfishness and altruism but generally feel better working to help each other rather than to do each other down.

Our society has become too individualistic, with too much rivalry and not enough common purpose. We idolise success and status and thus undermine our mutual respect. But countries vary in this regard, and the Scandinavians have managed to combine effective economies with much greater equality and mutual respect. They have the greatest levels of trust (and happiness) of any countries in the world.

To build a society based on trust we have to start in school, if not earlier. Children should learn that the noblest life is the one that produces the least misery and the most happiness in the world. This rule should apply also in business and professional life. People should do work that is useful to society and does not just make paper profits. And all professions – including journalism, advertising and business – should have a clear, professional, ethical code that its members are required to observe. It is not for nothing that doctors form the group most respected in our society – they have a code that is enforced and everyone knows it.

So we need a trend away from excessive individualism and towards greater social responsibility. Is it possible to reverse a cultural trend in this way? It has happened before, in the early 19th century. For the next 150 years there was a growth of social responsibility, followed by a decline in the next 50. So a trend can change and it is often in bad times (such as the 1930s in Scandinavia) that people decide to seek a more co-operative lifestyle.

I have written a book about how to do this and there is room here for three points only. First we should use our schools to promote a better value system – the recent Good Childhood report sponsored by the UK Children’s Society was full of ideas about how to do this. Second, adults should reappraise their priorities about what is important. Recent events are likely to encourage this and modern happiness research can help find answers. Third, economists should adopt a more realistic model of what makes humans happy and what makes markets function.

Three ideas taught in business schools have much to answer for. One is the theory of “efficient capital markets”, now clearly discredited. The second is “principal agent” theory, which says the agents will perform best under high-powered financial incentives to align their interests with those of the principal. This has led to excessive performance-related pay, which has often undermined the motive to work well for the sake of doing a good job and introduced unnecessary tension among colleagues. Finally, there is the macho philosophy of “continuous change”, promoted by self-interested consulting companies, which disregards the fundamental human need for stability – in the name of efficiency gains that are often not realised.

We do not want communism – as research shows, the communist countries were the least happy in the world and also inefficient. But we do need a more humane brand of capitalism, based not only on better regulation but on better values.

Values matter and they are affected by our theories. We do not need a society based on Darwinian competition between individuals. Beyond subsistence, the best experience any society can provide is the feeling that other people are on your side. That is the kind of capitalism we want.

Lord Layard is at the London School of Economics Centre for Economic Performance. He has written ‘Happiness’ (2005) and co-authored ‘A Good Childhood’ (2009)

http://www.ft.com/cms/s/0/3f6e2d5c-0e76 ... fd2ac.html

[madeupname452]

Glad to get your input again AntiAristo

As well as the Federal Reserve , the British Government seems to have lost control too

http://cynicuseconomicus.blogspot.com/2009/03/uk-and-silent-bank-run.html

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London.

Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter.

from the independent

If we think of the numbers that we are looking at, it becomes self-evident why the endless bailouts by the government are falling into a black hole. The government is having to bail out the banks to repay these overseas investors such that, as fast as the money is pumped in, it is pumped straight back out to meet the demands of overseas depositors. With the banks sitting on mountains of toxic debt, with no market left for the sales of these toxic assets, there is nowhere to turn except to the government.
...
However, the UK government is in the position of guaranteeing this huge outflow and, one way or another, they will somehow need to find ever more money to support the outflow.

Quite simply, the government has made a commitment that it will never be able to keep. The only method will finally be to default through the printing press. As the demands from overseas deposits continues, more money will pour in to the banks from the government, and much of it will just transfer out of the country. The government was never going to have access to such an astonishing amount of resource.

It was a very long time ago that I first realised that the UK was bankrupt. As each day goes by, there are ever more stories that confirm this. It really is very simple. The UK collectively borrowed money that it could never pay back, as it simply does not have the wealth to make the repayments.

[JackRiddler]

Sir Gus O'Donnell, cabinet secretary, blamed the "absolute madness" of the US system where a new administration has to hire new officials from scratch, leaving a decision-making vacuum.

Sir Gus told a conference of civil servants on Monday how Number 10 was struggling to liaise with the US Treasury over the G20 meeting because of the handover to the Barack Obama administration. "There is nobody there. You cannot believe how difficult it is," he said, contrasting the US model with the British system where a permanent civil service smooths the transition from one government to the next.

Of course. New age incompetence theory retrofitted to Obama transition, as another set of trillions is scored.

.

[JackRiddler]

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Antiaristo, from your earlier material regarding the sovereign.

Can you explain what the difference was between the Queen and her mother or the force each represented in a thesis statement at eighth-grade reading level, so I get it? Or point to an able summary elsewhere? Thank you.

And thanks very much for the AIG compendium, I hope you don't mind my borrowing it for my Financial Borg Assimilation Thread!

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[antiaristo]

.

Jack, keep on keepin' on.
Lots here are finding it very useful!

Hi 452.
Yeah. Do you get the impression (you're in the UK, aren't you?) that there is a press embargo on the really interesting stuff going on?

smiths, hello there.

There's definitely something interesting going on between London and Washington. It's really unprecedented for the Cabinet Secretary to speak in public like this.

Gus O'Donnell is Cabinet Secretary and Head of the Civil Service.

In both of those roles he reports to the Queen, and not to Gordon Brown. The Cabinet is a branch of the Privy Council and has nothing to do with Parliament. The Civil Service are "outside of political control" in that they answer to the Queen, not the head of government.

When the Sovereign changes, then so does the Civil Service. Gus knows this.

So when Gus (who was my chess captain at school) needs to see his boss he goes to Buckingham Palace for an audience in council.

And when he expresses displeasure, he speaks for the Queen.
And it does look like Obama is keeping his distance, doesn't it?


Back to AIG.
Here is what I think has been going on.

Goldman Sachs (GS) buys junk mortgages and other dodgy consumer debt, and works with Moodys/S&P/Fitch to create "Investment grade AAA CDOs".

GS sells $100 million "AAA CDOs" to Merrill Lynch (ML).
GS books $50 million profit on the transaction.

ML goes to AIG Financial Products (AIGFP) in London and purchases insurance against the $100 million CDOs.

..........

ML buys junk mortgages and other dodgy consumer debt, and works with Moodys/S&P/Fitch to create "Investment grade AAA CDOs".

ML sells $100 million "AAA CDOs" to GS
ML books $50 million profit on the transaction.

GS goes to AIG Financial Products (AIGFP) in London and purchases insurance against the $100 million CDOs.

........

Both ML and GS are now holding $100 million in "AAA CDOs". Each uses these CDOs as collateral for a loan from a third party (eg Lehman). Both ML and GS obtain a loan for $80 million.

Both ML and GS now have $130 million in cash ($50 profit plus $80 loan).

.........

Goldman Sachs (GS) buys junk mortgages and other dodgy consumer debt, and works with Moodys/S&P/Fitch to create "Investment grade AAA CDOs".

GS sells $130 million "AAA CDOs" to Merrill Lynch (ML).
GS books $65 million profit on the transaction.

ML goes to AIG Financial Products (AIGFP) in London and purchases insurance against the $130 million CDOs.

..........

ML buys junk mortgages and other dodgy consumer debt, and works with Moodys/S&P/Fitch to create "Investment grade AAA CDOs".

ML sells $130 million "AAA CDOs" to GS
ML books $65 million profit on the transaction.

GS goes to AIG Financial Products (AIGFP) in London and purchases insurance against the $130 million CDOs.

..........

Both ML and GS are now holding $130 million in "AAA CDOs". Each uses these CDOs as collateral for a loan from a third party (eg Lehman). Both ML and GS obtain a loan for $104 million.

Both ML and GS now have $169 million in cash ($65 profit plus $104 loan).

...........


Round and round and back and forth it goes.
Until Cassano and his boys have built up a CDS liability amounting to $500 billion.

The current market value for much of these underlying CDOs is now 5 to 10 cents on the Dollar.

That's an unrealised loss of $450 to 475 billion.
That is where your money is going.
PROVIDED that the Court will enforce the underlying contract.

So what matters is....jurisdiction.

.

Antiaristo, from your earlier material regarding the sovereign.

Can you explain what the difference was between the Queen and her mother or the force each represented in a thesis statement at eighth-grade reading level, so I get it? Or point to an able summary elsewhere? Thank you.

.

Heh!
British Constitution for Dummies, eh?

Britain hasn't got a constitution.
Britain and Israel. The two states lacking a constitution.

(But Israel hasn't the pretension of running the world financial market)

Britain has what they like to call an "unwritten constitution". The supreme pillars of the state are governed by "conventions" which are nowhere committed to paper.

But Britain has jurisdiction.

May I quote once more from the Lloyds piece in Time Magazine:

In the U.S. the staff of the sec wanted to proceed with both of its inquiries. However, they were stopped abruptly in 1992 by the Commission itself, led by Chairman Richard Breeden, not long after British Prime Minister John Major spent a weekend with President George Bush at Camp David. Had Major persuaded Bush to call off the investigation, as British press reports speculated at the time? Both Bush and Major, through spokesmen, say they don't recall discussing Lloyd's. Former Chairman Breeden, who had been a key White House aide under Bush, told Time that the sec decision against proceeding "was not because Mr. Major and Mr. Bush said anything to each other" but because the SEC decided that disputes between Names and Lloyd's should be resolved in English courts. "We didn't make a judgment that the way (Lloyd's) allocated risks among syndicates wasn't sleazy," Breeden told Time. "We didn't make a judgment that their practices were honest."

http://www.rigorousintuition.ca/board/v ... 1430#81430


There you are.
The entire strategy is to put the dispute into London's jurisdiction.
Just like AIG today.
Why does this matter?
Because the Queen has a back door into the court system. She can interfere whenever she wishes. And none of us are any the wiser.

Again here is how I warned Janet Reno NINE YEARS AGO:

1) Lloyds of London and the British Crown are one and the same. What happened at Lloyds (Time Magazine 21 February 2000) represents the precedent for the surrender of American sovereignty. This process if unchecked will culminate with the re-absorption of the United States into the British Empire and the full extension of English jurisdiction over all American citizens

2) There is no public scrutiny or supervision of the English Court because the people are not sovereign.

3) Queens Counsel, though professional advocates and litigators, also have the power to sit in judgement and deputise as a High Court judge.

4) This obscene combination inevitably leads to reciprocity and a secret, though active market in purchased decisions.

5) The Royal Courts of Justice in the Strand personify this culture of cheating and corruption with High Court Judge John Baker available to issue forged documents under a false name.

6) Mr Blair trained as a barrister with Derry Irvine and formed his character within this culture of cheating and corruption. Though Scottish and still in his twenties he was given the safest Labour seat in England. Likewise Mr Major, when unknown, was given Huntingdon, the safest Conservative seat in the country.

7) Mrs Blair QC also trained with Irvine and obtained her powers from the Queen on the day Mr Blair became Prime Minister. She can now cheat low-paid council workers with greater efficiency and even more profit.

8 )Despite its poor public image the House of Lords served a clear constitutional purpose as an independent check. Hereditary Peers sit as of personal right and are not dependent on Crown patronage. By stripping these Peers of the right to vote but not their right to sit Mr Blair has completed the creation of a de facto hereditary dictatorship behind a smiling democratic façade.

9) The court is a diligent enforcer of draconian libel and secrecy laws buried deep within obscure legislation. There is no free speech, no plurality of the press. Look at the party line on the Princess of Wales and the Blairs’ reproductive achievement. Look at the suppression of Lloyds stories and the banning of Kitty Kelley’s book on the Windsors. Look at the career of Jeffrey Archer, from Star libel to withdrawal from the race to be mayor. The people are not stupid but they know nothing because they are subjects. And subjects have no rights to truth, information, balance or free expression other than those the Sovereign chooses to bestow.

10) Extra-territorial action and conquest is now an established fact. Look to Ireland’s leadership of liars paid by the British Crown and look to the future (two directly elected Presidents, the Prime Minister and Attorney General. And a press monopoly controlled from England).

11) This dictatorship actively and aggressively interferes in American politics and subverts the democratic process in many ways. Just one: she creates “Honorary Knights” – second identities with bank accounts and a passport which are not American citizens and so not subject to the universal “worldwide income” rule for American taxes. Not everyone pays their fair share and not everyone is chased by the IRS.

12) With American politics ruled by money and secrecy who can compete with those who pay no taxes? With those who maintain absolute personal privacy through a secret second identity in London? With those who take commissions from money grubbing brokers? With those who cheat? I repeat: the sovereign people of America are in great danger from this malign foreign dictatorship.

13) And last, the big secret. There are two persons called “Her Majesty Queen Elizabeth”. Both hate democracy and ordinary people with a passion. Both exercise Royal Prerogative powers. Both command private armies with “the right sense of duty”. But only one has sworn and is bound by the Coronation Oath of fidelity to the Nation.

Do you know the story about the king who relied on two independent judges: one, always fair; the other always unjust. The king appoints the judge and lets him make his own decision. In England, the decision you get depends on which “Her Majesty Queen Elizabeth” the judge is obeying. So I say to you what I told the French Prime Minister two weeks ago. That “any State which recognizes this obscenity as a legitimate and trustworthy jurisdiction is laying its own people open to British totalitarianism by stealth”. The Feudal Menace.

(NB all of my scribblings 1999 to 2004 are in the Data Dump.)


The Feudal Menace.
That's what I said in May 2000.
Many others are saying the same thing in 2009.

I hope that's helpful Jack.

[Joe Hillshoist]

Cheers anti, its always good to read your take on this.

Hope things are good with you.

[smiths]

i am firmly of the opinion that a lot of this is about the fed, and the big old private banks it represents regaining control

The idea hit me as I was thinking more and more about CDS (credit default swaps) and their role in today's mess. I was quite surprised by Mr. Bernanke's repeated comments on how "angry" he was at AIG and their ruinous exposure to the CDS market. Now, a Fed chairman - the person most responsible for controlling our money - doesn't get "angry" in public, unless he has a very, very good reason and/or a serious point to make. To continue in the same vein as above, it's a bit like the Pope publicly denouncing one of his most important cardinals.

Why?

Because AIG and all other major CDS players did something very unorthodox, heretical even. They assumed monetary powers above and beyond those of a mere financial acolyte: they created money without having to submit to the prior omnipotent authority of the Fed.

I have previously discussed CDSs acting as phantom equity equivalents. But can they also be viewed as phantom money - indeed, very high-powered money? Yes, they can - and that's a key element to what has become known as "the shadow banking system".

The issuance of CDSs created obligations to pay pre-determined sums every year for, typically, five years - i.e. debts. They were created out of thin air and required no reserving at the Fed or anywhere else. There was no taxation, wage income, rents, mine output, oil wells or anything else tangible backing those debts. So what backed them? Faith, pure and simple. That's as close as we have ever come to creating the absolute faith-based financial instrument. The Dutch, those early tulip-bubblers, knew a thing or two about such instruments: windhandel they called it, or trading in wind.

http://suddendebt.blogspot.com/

at the end of this, there will be a few old very big banks, and a network that they operate through central banks,

and all the upstart hedge funds and new players that arose will be stripped,
and the assets and powers will have reverted to those who see themselves as the rightful owners

[smiths]

We need people-centred banks

Billions of pounds of taxpayers' money are being used to save the banks, but the public is seeing little return

The government is spending billions of pounds to rescue the UK financial sector. It is the biggest corporate welfare programme in history. But what exactly has the taxpayer received for it?

The government's financial bailout has facilitated a huge wealth transfer from UK taxpayers to giant corporations, however it does not preclude UK banks from lending to their overseas customers, or even curbing their tax haven activities. Without the bailout, most bank shares would be worthless and a large number of these are held by foreign investors. The bailout has also increased the value and security of the bonds held by domestic and overseas investors. Indeed, so far, the bondholders have hardly absorbed any of the losses. Meanwhile, bonuses and gold-plated pensions for executives have continued.

Despite this huge injection of cash into the system, home repossessions have increased, credit markets are frozen, unemployment is increasing and infrastructure is in dire need of improving.

Meanwhile, the taxpayer continues to pour money into the financial system to save banks from their own speculative follies. Lloyds TSB bought out HBOS with little idea of the toxicity of its assets. Neither its auditors nor directors had any clue about the quality of investments, as both banks received clean bills of health from auditors on their 2007 accounts. The government has now insured some £260bn of its toxic loans. This is in addition to the £325bn guarantee given to Royal Bank of Scotland. Of the £600bn toxic debts of just these two banks, the taxpayer may eventually have to absorb about £300bn or more, as many loans would eventually be irrecoverable. That is not the end of it, as other banks are also likely to join the gravy train that privatises profits and socialises losses.

The UK banking liabilities is about 4.5 times its GDP, or approximately £6.5tn. So far the government has been tight-lipped about the amounts which may be irrecoverable. The exposure of many countries already exceeds their GDP. And we have not even considered the impact of the possible toxicity of the $58tn credit default swaps market, which played a major role in the collapse of insurance company American International Group.

Despite the greasing of the printing presses, there is unlikely to be enough money to bail out the entire financial sector, and others also looking to join the queue. The government needs to be selective and also change its bailout strategy. The main focus should be on saving the retail, and the normal borrowing and lending segments of banks, rather than the speculative side. This would help to restore much needed prudence to the financial sector.

However, the government claims that banks are best run in the commercial sector and privately owned. Yet the private sector acted irresponsibly, and neither shareholders nor markets checked that irresponsibility. Instead of returning to old follies, the rescued banks could follow one of three alternative models. They could be nationalised and taken into public ownership, and conduct prudent business. They could be turned into co-operatives, or reconstituted as mutuals. In each case, employees, borrowers and depositors should have rights to appoint directors and direct banks, since they have a long-term interest in their wellbeing. Regulators would also have to specify the kind of activities that banks could undertake and banks should be forbidden from excessive risk-taking.

The government's bailout strategy needs to change from being "corporate-centred" to "people-centred". Even after the economic recovery millions of people will have huge debts. Under the "people-centred" approach, government could give vouchers to distressed citizens and effectively underwrite their debts. These vouchers could be used to repay loans to banks, which would then reduce the toxicity of bank loans. The loan repayments and guarantees would have provided much-needed liquidity for the banking system. The same "people-centred" approach could also be applied in other sectors. For example, instead of giving money to car manufacturers, vouchers could be given to people to enable them to buy greener vehicles, thus encouraging manufacturers to compete to produce fuel-efficient automobiles.

http://www.guardian.co.uk/commentisfree ... is-banking

[smiths]

Indeed, no one else has been charged in the case. While Mr Madoff pleaded guilty to 11 federal felony changes, he was not charged with conspiracy. That is significant because conspiracy is a charge that would have required Mr Madoff to say that he worked with others in carrying out the fraud.

Outsiders say it is hard to believe that only Mr Madoff is culpable for what could be a $65bn scheme, the biggest in Wall Street history.

Thousands of victims are still left wondering where the proceeds from the fraud went and whether they will be able to recover their lost money, which in many cases amount to their life savings.

Investors who were allowed to address the court told the judge that they wanted more information about where the money was and who else may have been involved.

One investor, George Nierenberg, said he did not understand why conspiracy was not a part of the charge: “The reams of documents ... and the amount of data must have required an army of people to produce.”

Marc Litt, assistant US attorney, told the hearing that the government “does not entirely agree with [Mr Madoff’s] descriptions of all his conduct”, adding that prosecutors believe the fraud began from at least the 1980s and his securities firm would not have been able to operate without the cash generated by the Ponzi scheme.

He added that “a lot of resources and effort are being expended both to find assets and to find anyone else who may be responsible for this fraud”.

Lev Dassin, acting US attorney for the southern district of New York, said later that prosecutors would “bring additional charges against anyone, including Mr Madoff, as warranted” in their ongoing investigation.

But since Mr Madoff pleaded guilty without a deal with prosecutors – under which he would have co-operated – there is diminishing hope among some investors of finding a financial paper trail, let alone a pot of gold.



http://www.ft.com/cms/s/0/fea8dea6-0f39 ... ck_check=1

[smiths]

I'm not so sure any lessons have been learnt

How can the FSA change when it is being run by ex-bankers, asks Tony Shearer

On 25 February the chairman of the Financial Services Authority (FSA) admitted that it had failed over the previous decade. Lord Turner also said that the requirement that a person running a bank should be a "fit and proper person" had been interpreted by the FSA as meaning anyone not convicted of fraud.
The consequence of the failure is not about bankers' bonuses. It is about depositors; people whose investments have collapsed. We have yet to see the impact of the taxes that will be needed over the next decade to finance the solution, and the inflation that will rip through the economy as a result. The consequences are huge.

The FSA, the Bank of England, UK Financial Investments and the Treasury are supposed to be learning the lessons and changing the system so nothing similar can ever happen again. Lord Turner is an ex-investment banker (from Merrill Lynch); Hector Sants (CEO of the FSA) is an ex-investment banker from Credit Suisse First Boston; and the FSA's new chief operating officer is also from Credit Suisse First Boston.

UK Financial Investments is the government-owned company set up to hold our shares in the failed banks. The non-executives on its board are ex-investment bankers. Glen Moreno, the acting chairman (who plans to step down due to his involvement with a trust with problems relating to tax avoidance) is ex-Citigroup, and the other non-executives are Peter Gibbs (ex-Merrill Lynch), Lucinda Riches (ex-UBS), Michael Kirkwood (ex-Citigroup), Philip Remnant (senior adviser to Credit Suisse) and Louise Tulett (Treasury).

The chief executive, John Kingman, the only executive director, was previously the Treasury official who chaired the joint FSA, Bank of England and Treasury committee set up in 1997 to regulate the stability of the markets. It has failed in the most spectacular and costly way possible. The executive who deals day-to-day with the banks is ex-Merrill Lynch, and the banking analyst ex-Credit Suisse First Boston.

One might expect that the number of ex-Merrill Lynch people would indicate that Merrill Lynch was a sound, well-run company with an appropriate culture. But like most investment banks, its business included packaging and distributing the toxic debts that are at the centre of the failures. Last year, it had to be rescued from collapse.

Just because so many people at the FSA and UK Financial Investments are from investment banks doesn't mean that they are bad people (though it does assume we are all pretty naïve). The problem is that their backgrounds are too similar. In his evidence to the select committee, Sants explained why he deserved the bonus that he has waived, and pleaded for bonuses for his staff because they had worked so hard. There was no recognition that his staff had had to work long hours because the FSA had failed to do its job properly. This example of an investment banker who has learnt nothing, and thinks bonuses are a right, speaks volumes.

http://www.guardian.co.uk/business/2009 ... -authority

[smiths]

and you'll love this one anti,



so china an japan havelent just under half the money to the us,

but look at the amount from the uk and the carribean
the carribean of course being one of the major powers in 21st century politics

[antiaristo]

and you'll love this one anti,



so china an japan havelent just under half the money to the us,

but look at the amount from the uk and the carribean
the carribean of course being one of the major powers in 21st century politics

Hello smiths. I do!
This is "Sovereign" holders, yes?

Who is "Sovereign" in the "Carribean banking centers"?

Is it the same as the Sovereign of the UK?

Should they not combine the UK, the "Carribean banking centers" (and Canada)?

PS the leaked Barclays papers are here:
http://tinyurl.com/cc7qrm

Cheers anti, its always good to read your take on this.

Hope things are good with you.

Cheers Joe, yes and thanks.
How doin'?

As a completely OT aside, what do you make of this:

The Commonwealth parliament of Australia has not legislated on the subject of high treason, which is in Australia governed by the laws of the constituent states, i.e. by the law of England as it stood when they were colonized, subject to local legislation. In the codes of Queensland (1899) and West Australia (1902) the offence is defined in a form which is little more than a redrafting of the English statutes. The provisions of the Treason Felony Act 1848 have been adapted by legislation to New South Wales (1900), Queensland (1899), Western Australia (1902) and Tasmania (1868)

http://www.1911encyclopedia.org/Treason





AIG


They deliberately left AIG Financial Products overseas in London, completely unregulated, and in the hands of a KNOWN CRIMINAL.

Result: $500 billion loss to the American taxpayer.

How much of it gone to those "Carribean banking centers" smiths showed to us? Where it is loaned back to Uncle Sam at interest.


Cassano has got a criminal conviction!!!!

http://zerohedge.blogspot.com/2009/03/a ... ds-or.html

It's for Enron-style shenanigans.

I can see it all now.


We will be told that this was all an unfortunate mistake, that it slipped through the cracks, that with the best will in the world honest men made an honest mistake.....

....just like they did at BCCI.

I TOLD you this one would come back to haunt.

Lord Bingham said: "In applying this new and unfamiliar statutory regime [the 1979 Banking Act], it was necessary for the Bank, first of all, to understand what was meant by 'principal place of business'. That was a legal question.

"Those who handled this matter in the Bank had many applications to process in a very limited time, and did not recognise this as a question to be asked. So no legal advice was sought ... The question was simply never addressed."

Oh yeah?

As early as February 1979 Frank Hall, a senior lawyer at the Bank, wrote an internal memo to colleagues concerning the imminent Banking Act. In it he said: "I should be grateful if you could let me know whether ... there are any companies which are not registered in the UK but which have their principal place of business or place of central management or control here ... but which we should not want to recognise."

Copies of the memo, which was circulated among senior department officials, show several hand-written annotations. "I can't think of any, can you?" says one, to which another official replies: "No."

"But for this - BCCI?" appears in the sidelines, written in the hand of Peter Cooke, the head of banking supervision.

Mr Pollock will argue this critical exchange fits into a catalogue of alarming internal reports on BCCI, each of which ended in the Bank wringing its hands behind closed doors but ultimately shirking its regulatory responsibilities.

He is likely to stop short of direct criticism of Lord Bingham, but his remarks may, at the very least, call into question the fullness of information supplied by the Bank to the Bingham inquiry.

A string of other internal memos make clear the Bank's state of panic. In 1982 BCCI was described as "on its way to becoming the financial equivalent of the SS Titanic!".

Another paper from the same year insists BCCI's status as a Luxembourg bank "has always been something of a fiction ... I believe it would be wrong for us to continue to allow a large international banking group to carry on business on a largely unsupervised basis".

The following year yet another Bank analyst wrote a report on BCCI entitled "Why action is now urgently required". It suggested the Bank was left with "two basic choices": to close BCCI down or to insist it be redesignated a UK bank, under full Bank of England supervision.

Later memos, Mr Pollock may suggest, show shades of cowardice behind the Bank's intransigence. "It is hard to see how we can to other than turn a blind eye ... since we have accepted [BCCI] up to now," wrote one Bank official as the charade of BCCI's Luxembourg status wore increasingly thin.

Mr Cooke himself even described the late BCCI chairman Agha Abedi as "the living personification of Uriah Heep".

Oops!
Still, when you are the Sovereign, these things have a way of resolving themselves to your satisfaction....

3.15pm
BCCI liquidators drop case against Bank

Mark Tran and agencies
Wednesday November 2, 2005

One of the longest and most expensive lawsuits in British history collapsed today as liquidators for the rogue bank BCCI dropped their case against the Bank of England.

The liquidators - accountants Deloitte Touche Tohmatsu - dropped the case after [b]the chancellor of the high court said it was no longer in the best interests of creditors for the litigation to continue.

All sources on this thread:
http://www.rigorousintuition.ca/board/v ... 8450#18450

no longer in the best interests of creditors

Now there's a man delivering a threat if ever I saw one!

"It's not in your interests to win this one!"

[chiggerbit]

Nevermind, wrong Cassano.