The Financial Crisis: The Hidden Beginning

[Sapiens]

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The Financial Crisis: The Hidden Beginning

Last Updated (Monday, 22 June 2009 00:30) Written by Bruce Wiseman Monday, 22 June 2009 00:26

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On April 2, 2009, control of the planet’s banks was turned over to the secret decisions of eleven men—board members of a Swiss organization with a troubling Nazi past.

Banking wasn’t always that way. . . .

My secretary would come into my office every morning at 9:00 a.m. with a room-service smile and an armload of computer printouts.

She would place the reports on my desk as if she were serving a fine meal and arrange them just so, with the overdraft report on top, and then slip out of the office as if she were trying not to wake anyone.

The customer’s name was on the left side of the page followed by the date the account was opened, the six-month average balance, and a listing of the offending checks that had sentenced the account to the OD report. The amount of the checks and the total overdraft were featured prominently on the right-hand side of the page like perps in a police lineup.

The decisions were twofold: do I pay the checks and, whether paid or not, do I assess overdraft charges? Overdraft charges have gotten rapacious in recent years, but they were $4.00 an item back then, and believe it or not, it takes time, money and effort for bank personnel to track down the impostor and send it home branded with banking’s scarlet letter—insufficient funds.

I would usually let the charges stand, but I was not a tough close if someone called in with a plausible story on why the check beat the deposit to their account. This was usually good for one round of reversed OD charges, but rarely repeated despite screenplay-quality presentations.

A friend of mine had a leather shop down the street where he handcrafted sandals, belts and wallets adorned with peace symbols, which, in those days, were found on everything from condoms to dog collars. He was of the genus Hippy, drove a ratty VW van covered in flowery orange and yellows, and wore iconic bell-bottomed Levi’s. There was great profit in leather goods, but Jimmy paid no attention to his bank balance and overdrew the account with such regularity I sometimes wondered if he was trying to ensure the branch remained profitable.

Banking was more personal then:

“Jimmy, you’re OD again.”

“That’s bullshit, man.”

“No, Jimmy. It’s not bullshit. You’re overdrawn $312.”

“I can’t be overdrawn. I just gave you guys a bunch of bread. You probably held it so some checks would come in first and you could hit me with a bunch of overdraft charges.”

“Lay off the weed, Jimmy. When did you make the deposit?”

“Yesterday. Seven hundred bones. Gave it to that foxy black chick with the Afro.”

“Yes. I see it. But you’re still OD.”

“You’re bummin’ me out, man, really bummin’ me out.”

“When was the last time you reconciled your account, Jimmy?”

“Don’t put that on me, man. That form is a bad trip. Gives me a migraine.”

“Bring your last three statements down to the branch and I’ll have bookkeeping reconcile the account for you.”

“Groovy. You gonna reverse the OD charges?”

“Not a prayer. Bring $312 with you.”

“Fascist.”

Your local bank was also where you went to get a loan to buy your new home. And there it stayed until it was paid off.

A customer would come into the branch, fill out an application and, if approved, we would finance 75%–80% of the purchase. The borrower would come up with the balance. When the loan was approved, we would issue the funds to escrow at the appropriate time and put the loan on our books, where it would stay, earning the bank the going rate of interest for home loans.

I’m sure there are still some community banks that offer personal service instead of having you talk to someone in the Philippines about your credit card, but I wrote this to make the point that banking—and mortgage banking in particular—had changed.

Banks started selling loans to investors while keeping the servicing. In other words, the borrower would keep making his mortgage payments to the bank that made the loan but the payment would be sent on to the investor who had purchased the loan from the bank. The investors were usually pension plans or large investment funds.

But this change in mortgage lending was just beginning.

A group of leading bankers would soon turn mortgage banking into a cancer that would eat the industry alive. What follows is the earlier beginning to our story “The Financial Crisis: A Look Behind the Wizard’s Curtain”—a chronicle of the men and institutions who designed the current crisis: a crisis by design.

The purpose of this financial crisis is to take down the United States and the U.S. dollar as the stable datum of planetary finance and, in the midst of the resulting confusion, put in its place a Global Monetary Authority—a planetary financial control organization to “ensure this never happens again.”

But I am getting ahead of myself.

THE JAPANESE

It is 1985 and the Land of the Rising Sun has become the planet’s largest creditor nation. Words like Toyota, Panasonic and Yamaha have become part of the lexicon in places such as Omaha, Cleveland and Des Moines. In 1970, the ten largest banks in the world were American. By the end of the eighties, six of the ten largest banks in the world are Japanese.

What happened?

The Japanese banks were pampered and protected by their government like corporate rock stars. They were permitted to operate with small amounts of reserve capital, which gave them an advantage over other banks and enabled them to expand their market share at the expense of their competition—the major money-center banks in New York and London represented by the dual-headed Darth Vaders of international finance, the U.S. Federal Reserve Bank and the Bank of England.

The Gunfight at the O.K. Corral had nothing on what was about to occur to the banking samurai of Tokyo.

In the eighties, governments had varying regulations about how much capital their banks had to maintain. These standards were supposed to ensure that banks had enough in reserves to protect themselves and their depositors against bad loans.

These “capital adequacy standards” were set as a percentage of the bank’s assets. In other words, if the capital requirements were 8% and a bank had $8,000,000 in capital, they could expand their balance sheet to $100,000,000 in assets (loans and other investments).

But let’s say the capital requirements were 4%. Taking the same bank with the same $8,000,000 in capital, they could carry $200,000,000 in loans and other assets, generating a great deal more income and profit for the bank.

If the capital requirements were 10%, that same bank could have assets of $80,000,000—fewer loans, less income.

You get the picture: the capital requirements dictated what amount of assets the bank could carry. And the amount of assets determined how much income the bank could generate.

The Japanese banks had low capital requirements—one central banker reported them to be as low as 3%. Others claimed 6%. But in either case, they were low. The low capital requirements enabled them to hold more assets, which in turn spun off more income. The elevated income enabled them to offer lower interest rates on loans than the competition could. Their market share grew.

In time, Japanese banking became the Godzilla of international finance—a condition that did not sit well with Alan Greenspan, the recently appointed Chairman of the Federal Reserve Bank, who dealt with the matter like a Mafia chieftain whose turf had been violated by the yakuza.

As soon as he assumed the throne at the Fed, Greenspan, complaining about advantage enjoyed by the Japanese banks, went to his comrades in coin at the Bank of England and executed a two-party agreement establishing capital adequacy standards for U.S. and UK banks. The two of them then turned on their pinstriped Nipponese brothers and told them that they were going to be excluded from Western markets unless they agreed to an international standard of capital adequacy.

The Japanese, dragged to the agreement like a dog to a bath, signed the agreement on July 15, 1988, along with the central bankers of nine other industrialized nations, setting forth “international . . . regulations governing the capital adequacy of international banks.”

The agreement was signed at the secretive Bank for International Settlements in Basel, Switzerland, and is referred to as the Basel Accord. However, since a second accord was signed in 2004 (which we deal with in “Behind the Wizard’s Curtain”), this agreement is now referred to as Basel I and the 2004 agreement as Basel II.

THE BANK FOR INTERNATIONAL SETTLEMENTS

I have dealt with the Bank for International Settlements in the two previous articles on the financial crisis and am going to take the liberty of quoting from them here. First, “A Look Behind the Wizard’s Curtain”:

Central banks . . . govern a country’s monetary policy and create the country’s money.

The Bank for International Settlements (BIS), located in Basel, Switzerland, is the central bankers’ bank. There are 55 central banks around the planet that are members, but the BIS is controlled by a board of directors, which is comprised of the elite central bankers of 11 different countries (U.S., UK, Belgium, Canada, France, Germany, Italy, Japan, Switzerland, the Netherlands and Sweden).

Created in 1930, the BIS is owned by its member central banks, which, again, are private entities. The buildings and surroundings that are used for the purpose of the bank are inviolable. No agent of the Swiss public authorities may enter the premises without the express consent of the bank. The bank exercises supervision and police power over its premises. The bank enjoys immunity from criminal and administrative jurisdiction.

In short, they are above the law.

And from the second article, “Hitler’s Bank Goes Global”:

But then the Bank for International Settlements (BIS) . . . has never seen transparency as one of its core values. In fact, given its fascist pedigree, transparency hasn’t been a value at all. Known as Hitler’s bank, the Bank for International Settlements worked arm in arm with the Nazis, facilitating the transfer of gold from Nazi-occupied countries to the Reichsbank, and kept their lines open to the international financial community during the Second World War. . . .

It is like a sovereign state. Its personnel have diplomatic immunity for their persons and papers. No taxes are levied on the bank or the personnel’s salaries. The grounds are sovereign, as are the buildings and offices. The Swiss government has no legal jurisdiction over the bank and no government agency or authority has oversight over its operations.

BASEL I

Basel I established the terms for the minimum capital requirements for the ten central banks that signed the accord: Belgium, Canada, France, Italy, Japan, the Netherlands, the UK, the U.S., Germany and Sweden (Switzerland signed later).

A standard had been set: banks had to maintain capital of 8% of their assets. But according to the agreement, all assets were not the same. Basel I introduced a special system of weighing the risk of different kinds of assets and loans—they referred to it as risk-weighted assets. For example, corporate loans to businesses called for a higher percentage capital than mortgage loans. As a consequence, banks started cutting back on corporate loans and seeking ways to expand their mortgage portfolios.

As for the Japanese banks, they had to adjust. But the Nikkei Index (the Japanese stock market) was booming at the time, so they didn’t consider it a big problem. Between 1984 and 1989 the Nikkei had risen from 11,500 to 38,900. As stocks increased in value, the capital base of the Japanese banks (made up largely of stock) increased as well.

Things were cool. Sake flowed, geishas danced and banker-san was happy. But the good times were short lived. Less than a year later, in May of 1989, the Nikkei began a decline that eventually brought the index down to below 8,000.

As went the Nikkei, so went the capital structure of the banks. Down they went, slashing their ability to lend and sending the entire Japanese economy into a recession that has been called the “Lost Decade.”

You don’t cross the Fed and the Bank of England and get away with it. Not on this planet.

It was a different story for the U.S. banks. The new capital adequacy standards laid down as Basel I had loopholes through which the American bankers were able to drive their Porsches to bonuses larger than the budgets of several third-world countries.

THE INTENTIONS OF BASEL I

Writers have referred to the consequences of Basel I as unintended.

Were they really?

Greenspan not only sat on the board of directors of the Bank for International Settlements, he was also of course the Chairman of the Federal Reserve Bank. From this position he kept interest rates suppressed at abnormally low levels, ushering in a lethal binge of credit excess in America; advanced the Community Reinvestment Act, which mandated mortgage lending to anyone who drew breath (and some who didn’t); and, along with Robert Rubin and Larry Summers, actively fought efforts to regulate the exploding market in toxic financial instruments called derivatives.

This included using his influence to help eliminate laws that had been on the books for decades protecting people from speculative excess and abuse in financial markets (see “The Financial Crisis: A Look Behind the Wizard’s Curtain”).

DERIVATIVES

Derivatives are what Warren Buffet has called “financial weapons of mass destruction”—financial products that seem to have been imported from a galaxy far, far away.

Derivatives are financial instruments that derive their value from some underlying asset. An example of a derivative is one you have heard a lot of lately: mortgage-backed securities.

Here’s how this works. Mortgage loans are packaged up and legally pooled into a financial document called a security. This simply means that there is a formal certificate that represents a group of loans. The investor buys the security. The security pays interest to the investor, which is based on the interest rates of the underlying mortgages.

You can see where the name comes from: the financial instrument, the mortgaged-backed security, is backed by the mortgages.

It is a derivative because the financial instrument, the security, derives its value from the underlying assets (the mortgage loans).

So what were the intentions of the central bankers when they crafted Basel I? One was to take out the Japanese banks. Mission accomplished.

The other was obvious: to curtail lending to corporations while focusing the attention and appetites of those same lenders on the increased income and bonuses available by investing in mortgage-backed securities.

Under Basel I, banks only had to have half as much capital to invest in mortgages as was required for corporate loans. Or put another way, they could invest twice as much in mortgages as they could in corporate loans with the same amount of capital. The more loans, the more income.

What else did the bankers of Basel think was going to happen other than an explosion in mortgage lending? Nothing of course. And later, when the lenders bought credit insurance for the securities, the capital requirements were reduced even further, pouring gas on what had by then become a raging inferno of credit speculation.

CREDIT DEFAULT SWAPS

It wasn’t actually called credit insurance, though. It had another one of those off-planet names: credit default swaps, but in essence that’s what it was. Here’s how this piece of the puzzle fit.

The bank would buy a contract from an insurer that covered the credit risk of the derivative. In other words, the bank would pay a fee to the insurance company—just like an insurance premium—and if the security turned bad, if the loans failed to pay, the insurance company was obligated to cover the bank’s loss.

When banks bought credit default swaps for their derivatives from an AAA-rated insurance company, the derivative itself took on an AAA rating.

When the derivative received an AAA rating, the bank’s capital requirements—already reduced because the derivatives were made up of mortgages—were reduced even more, freeing up more capital, which enabled them to buy more derivatives, which . . .

There were just a couple of small problems. The credit default swaps—not technically being insurance—were entirely unregulated. This meant that the insurance companies that issued these—think American Insurance Group (AIG), which was the world’s largest insurance company and rated AAA, but which is now owned by thee and me—did not have to carry reserves to cover the loss if the trillions of dollars of derivatives they insured went bad.

The other was the fact that with the passage of the Community Reinvestment Act, the mortgage market was awash in subprime loans (borrowers with poor credit, low income, and no or low down payments). And it was these loans that were packaged into mortgage-backed securities by the trillions and sold to virtually every major bank on the planet, making the international financial structure pregnant with disaster.

It was at this point, having originally set the stage, that the world’s central bankers returned to the Bank for International Settlements in Basel, Switzerland, and issued a second set of rules referred to as Basel II. Included in the Basel II Accord was an accounting rule called mark to market, which brought the planet’s entire financial system to its knees. Mark to market was like pulling the pin on an enormous hand grenade made up of trillions of dollars of toxic derivatives.

On April 2, 2009, at a meeting of world leaders in London, the final card was played: terrified about the potential consequences of a planetary meltdown, they agreed to a plan that established a global financial dictatorship at the Bank for International Settlements called the Financial Stability Board. And this, dear friends, was the goal from the beginning.

If we are going to be realists, we must acknowledge that Greenspan—along with a few fellow monetary jihadists like Paulson, Rubin, Summers and Geithner—planted the bomb in Basel I, lit the fuse by ensuring any meaningful protection against it was removed, and then detonated it with Basel II. What followed the explosion was a global financial coup, which was executed in April.

It took a while for the fuse to burn and the bomb to detonate, but when viewed as a well-constructed plan, the intentions seem inescapable: this financial crisis was and is a Crisis by Design.

The story of how Basel II created the worldwide financial crisis and how the Financial Stability Board was created is covered in detail in my earlier articles on this subject: “The Financial Crisis: A Look Behind the Wizard’s Curtain” and “Hitler’s Bank Goes Global.”

It is the second article that spells out what action to take, and what can and should be done.

[Sapiens]

Re: The Financial Crisis: The Hidden Beginning

http://www.brucewiseman.net/index.ph...ance&Itemid=27

Hitler's Bank Goes Global May 2009 - The Purpose of the Financial Crisis

Last Updated (Wednesday, 20 May 2009 01:12) Written by Bruce Wiseman Sunday, 10 May 2009 16:00

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A towering citadel housing what is essentially a sovereign state known as the Bank for International Settlements is located in Basel, Switzerland. The bank now controls the financial affairs of planet Earth.

If you think this is an exaggeration or the conspiratorial ramblings of the author . . . or not, I invite you to read on.

I wrote the first installment of this article—“The Financial Crisis: A Look Behind the Wizard’s Curtain”—in mid-March of this year.

The article included the following statement:
"The purpose of this financial crisis is to take down the United States and the U.S. dollar as the stable datum of planetary finance and, in the midst of the resulting confusion, put in its place a Global Monetary Authority—a planetary financial control organization 'to ensure this never happens again.'"

This purpose has now been accomplished.

The dollar, the former king of currencies, now goes begging in the pant-suited persona of Hillary Clinton to our creditors at the Chinese Communist Party.

Almost unthinkable a few short years ago, the U.S. dollar is fast losing its status as the world reserve currency, and any thought of saving it is being nuked by the Larry, Moe and Curly of U.S. economic policy - Bernanke, Geithner and Summers - and their Alice in Wonderland trillion-dollar budget deficits.

I would not be surprised to see central banks start using the renminbi (the currency of the newly awakened People’s Republic of China—also called the yuan) for international trade and reserves in the not too distant future. This prediction will likely be scoffed at by global economists, but then they have about as much credibility as pharmaceutical salesmen these days.


A more generally discussed alternative is the International Monetary Fund’s SDR (which stands for Special Drawing Rights). There is no production or property behind the SDR. It is one of those clown currencies that are made up out of thin air—a magic trick central bankers like to do. Intoxicated by the power of the purse, they think of themselves as fiscal alchemists.


But the dollar has seen its glory. It can return one day, if Washington ever finds its financial backbone. But let’s be real, with the exception of a very few, like Ron Paul in the House and Tom Coburn in the Senate, these folks are addicted to spending like junkies on horse.
More importantly, the other shoe has dropped. Like some ghoulish predator from another Alien sequel, a Global Monetary Authority has been born.

It lives.
THE FINANCIAL STABILITY BOARD

On April 2, 2009, the members of the G-20 (a loose-knit organization of the central bankers and finance ministers of the 20 major industrialized nations) issued a communiqué that gave birth to what is no less than Big Brother in a three-piece suit.


Which means? . . .


The communiqué announced the creation of the all too Soviet sounding Financial Stability Board (FSB)—and no, I’m not going to make a crack about the fact that this acronym is the same as that of the Russian intelligence service that replaced the KGB.


The Financial Stability Board. Remember that name well, because they now have control of the planet’s finances . . . and, when one peels the onion of the communiqué, control of much, much more.


The FSB morphed into existence from an earlier incarnation called the Financial Stability Forum. The Financial Stability Forum (FSF) was established in 1999 to promote international financial stability through co-operation in financial supervision and surveillance. Since it had done such a wonderful job, the central bankers decided to expand its powers and give it a new name.


A board sounds like it has more authority than a forum. But the name change isn’t the problem. The FSB’s broadened mandate includes under point 5, “As obligations of membership, member countries and territories commit to pursue the maintenance of financial stability, maintain the openness and transparency of the financial sector, implement international financial standards (including the 12 key International Standards and Codes), and agree to undergo periodic peer reviews, using among other evidence IMF/World Bank public Financial Sector Assessment Program reports.”
Rather a mouthful of elitist banker-speak. But, as a friend of mine is fond of saying, “The Devil is in the details.”


THE 12 INTERNATIONAL STANDARDS AND CODES

While several press releases from the G-20’s London conclave reference these codes as though they were handed down from a fiscal Mount Sinai, finding the specifics takes some digging.


But then the Bank for International Settlements (BIS), out of which the FSB operates, has never seen transparency as one of its core values. In fact, given its fascist pedigree, transparency hasn’t been a value at all. Known as Hitler’s bank, the Bank for International Settlements worked arm in arm with the Nazis, facilitating the transfer of gold from Nazi-occupied countries to the Reichsbank, and kept their lines open to the international financial community during the Second World War.


As noted in the first article, the BIS is completely above the law.


It is like a sovereign state. Its personnel have diplomatic immunity for their persons and papers. No taxes are levied on the bank or the personnel’s salaries. The grounds are sovereign, as are the buildings and offices. The Swiss government has no legal jurisdiction over the bank and no government agency or authority has oversight over its operations.


In a 2003 article titled “Controlling the World’s Monetary System the Bank for International Settlements,” Joan Veon wrote:
“The BIS is where all of the world’s central banks meet to analyze the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them. . . .


“When you understand that the BIS pulls the strings of the world’s monetary system, you then understand that they have the ability to create a financial boom or bust in a country. If that country is not doing what the money lenders want, then all they have to do is sell its currency.”


And if you don’t find that troubling, a close reading of the new powers of the FSB are chilling.


The 12 key International Standards and Codes, which are minimum requirements, contain such things as
• clear specification of the structure and functions of government;
• statistical and data gathering from ministries of education, health, finance and other agencies;
• corporate governance principles;
• shareholder rights;
• personal savings;
• secure retirement incomes;
• international accounting standards to be observed in the preparation of financial statements;
• international standards of auditing;
• securities settlement;
• foreign exchange settlement;
• minimal capital adequacy for banks;
• risk management;
• ratification and implementation of UN instruments; and
• criminalizing the financing of terrorism



“Sounds oppressive,” you say; “but I don’t really care what a bunch of bankers do in Basel, Switzerland. It’s got nothing to do with me.” But I am writing this to tell you that it has everything to do with you, your family, your business, your country, and—if you’re up to it—your planet.


Because as currently structured, the dictates of the Financial Stability Board will impact your life without any say-so on your part whatsoever. Here’s one example from an article written by former Clinton advisor and political strategist Dick Morris in an article for The Bulletin on April 6, 2009.


“The FSB is also charged with ‘implementing . . . tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms.’


“That means that the FSB will regulate how much executives are to be paid and will enforce its idea of corporate social responsibility at ‘all firms.’”
You begin to see what’s involved here.


You see, these standards and codes are commitments, obligations and requirements, not merely advice. The strategy, policies and regulations of the FSB are worked out at the senior levels of the bank. They are approved by the plenary and implemented through the national representatives.


THE STRUCTURE

The plenary, in this sense, is the complete membership body of the FSB. And the membership, my friends—the national representatives who implement these policies—just happen to be the heads of the planet’s more powerful central banks. And in case it slipped your mind, most central banks are private institutions and answerable to no one.


Take our central bank, the Federal Reserve Bank. Yes, the chairman is appointed by the President and often testifies before Congress, but there is virtually no public control over the institution. It can’t be audited nor can Congress tell it what to do. It is not really accountable to anyone. The idea that the Fed is a government agency subject to the control of Congress is a PR line. It is simply not true.


Among other things, central banks govern a country’s monetary policy and create (print) the country’s money.


They make income by charging interest on the money they loan to the government.

Watch this, because if you blink, you’ll miss it.

Governments are perpetually in debt. They are always borrowing money. They have a mental disorder that prevents them from spending less than they collect in taxes—BDD, Budget Deficit Disorder. And if it looks like they might balance the books some year, why, someone can always start a war.

Here’s an example.

Let’s say the annual budget calls for the U.S. government to spend $2.5 trillion. But the income will only be $2 trillion. They’re going to be a little short. But no worries, they have the ultimate credit card—a debt limit that they themselves control. If they borrow up to the established limit, they can just vote it higher—which they have done to the tune of a cool $11.2 trillion dollars.

The Fed loves this.

Listen as the Secretary of the Treasury calls the Chairman of the Fed.

“Ben. It’s Tim.”

“Dude. What’s happening?”

“I need a little bread. Friggin’ Taliban again.”

“No problem, Timbo. How much you looking for?”

“Five hundred big ones.”

Ben licks his lips. “Anything for you, big guy. Send me the notes and I’m down with the five hundred. Five percent work for you?”

“Whatever.”

So the Treasury prints up $500 billion dollars’ worth of IOUs—they are called Treasury bills (short term), notes (medium term) or bonds (long term)—and sends them over to the Fed with a fifth of Chivas.

In the old days, the Fed would print the cash. These days, they click a mouse.

Now here’s the part where you aren’t allowed to blink.

When the Fed prints the money or clicks the mouse, they have no money themselves. They are just creating it out of thin air. They just print it, or send it digitally. And then they charge interest on the money they lent to the Treasury. A hundred-dollar bill costs $0.04 to print. But the interest is charged on the $100. Go ahead: read it again; the words won’t change.

The interest on the national debt last year was $451,154,049,950.63. That’s $1.23 billion a day. These are the same people that are now running our banks, insurance companies and automobile manufacturers.

Reason weeps.

Sure, I oversimplified it. The Fed doesn’t own all the debt and they do some other things. But these are the basics. That is how a central bank works.

It is the heads of the planet’s central banks and some finance ministers that make up the membership of the FSB.

In brief, here’s how it works: the Board’s leadership provides strategies, policies and regulations to the membership. The members vote on the matters and then see to their implementation in their respective countries.

FSB leadership is in the hands of the chairman, Mario Draghi. Mr. Draghi is also the governor of Italy’s central bank. He is a former executive director of the World Bank and like his comrade in international finance Henry Paulson—the former U.S. Secretary of the Treasury who bludgeoned Congress out of the first $700 billion bailout package—Draghi was a managing director of Goldman Sachs until 2006. Like Paulson, he left Goldman in 2006, a year before the financial crisis exploded: Paulson went to Washington to run the U.S. Treasury; Draghi went to Rome to run Italy’s financial system as well as the Financial Stability Forum (forerunner to the Financial Stability Board).

Let’s call it government by Goldman, shall we?
THE REAL SITUATION

More to the point, you may have noticed that you weren’t consulted on this setup. Neither was Congress. In other words, the command channel for implementing global financial strategies goes from the FSB leadership to its central banker members and from them to the world’s financial institutions. You don’t get a peek, neither does Congress, nor, for that matter, does the White House.

And while there may be some accountability in some of the member countries, by and large these central bankers have the authority to implement these regulations and strategies. And they are held responsible by the FSB to do so.



In short, on April 2, 2009, the President signed a communiqué that essentially turns over financial control of the country, and the planet, to a handful of central bankers, who, besides dictating policy covering everything from your retirement income to shareholder rights, will additionally have access to your health and education records.


There is also this troubling little line about “clear specification of the structure and functions of government.” What the hell is that suppose to mean?


There is no oversight here. Not by you, not by Congress, not by anybody. No oversight over a handful of central bankers who operate out of a clandestine organization that is above the law and is responsible for having implemented and enforced the “standards” that froze world credit markets and precipitated the worst financial crisis in the planet’s history (see “The Financial Crisis: A Look Behind the Wizard’s Curtain”).



I haven’t heard word one out of Congress about this, but I’m afraid they are a few clowns short of a circus up there.


Which begs the question, what do we do about this?


THE SOLUTION

There are two critical things that need to be done.


The first lies in the fact that the communiqué signed by the President is an agreement that is binding on the United States and, as such, requires approval by Congress. If classed as a Treaty, it requires approval by two-thirds of the Senate. At the very least, approval should be by Congressional Executive Agreement, which requires a majority of both houses of Congress.


The agreement signed in London on April 2 has been called a New Bretton Woods (Bretton Woods being the location of a meeting of world leaders toward the end of the Second World War, which gave birth to the international financial organizations the World Bank and the International Monetary Fund). The original Bretton Woods agreement was put in place as a Congressional Executive Agreement. So this “new Bretton Woods” should at least do the same.


But this step is just to get Congress to recognize their responsibility here. The Federal Reserve Act, the bill that established the Federal Reserve System, was passed in 1913 two nights before Christmas by a sparsely attended Congress.


People have been complaining about this ever since.


What do you say we don’t let this happen again? Not on our watch. Congress needs to understand that it has a responsibility to approve any agreement signed by the President that is binding on this nation.


But the point is not to get Congress to approve what has been done. It is to first get them to recognize that agreements have been made that affect our entire financial system and that it is their responsibility to shape these agreements in a way that is beneficial to our Republic AND to provide a mechanism for real oversight of this international body.


Central bankers should not be making decisions about international finance without oversight and a system of checks and balances that are reflective of those provided by a republican form of government.


I am, of course, not talking about a political party here. No, no. I’m talking about the American form of government where citizens elect others to represent them.


A republican form of government is one that is operated by representatives chosen by the people.


Congress must step up to the plate. They must insist that the Financial Stability Board be ratified either by Treaty or Congressional Executive Agreement. And that ratification must include the creation of a body with oversight and corrective powers that is comprised of representatives of all the nations involved who are chosen from each country’s elected officials.


There is nothing inherently evil about an international financial organization. As much as we might protest it, it is a global world today, and a body that oversees the smooth flow and interchange of currencies and other financial instruments is needed in today’s world.


But the organization cannot be controlled by international bankers who are not answerable to the citizens of the countries in which they operate. It should be overseen by a senior level group which itself is organized as a liberal republic, following the original model of the United States.


Why? Because the system of government originally created by the United States has been the most successful form of government in man’s history. Any problems with the system have come about as a result of deviations from the original structure—a representative form of government with adequate checks and balances.
Such a body could help create an international economic system in which those that want to be successful can be so. It would also allow them to take an active role in controlling their futures by effectively participating in the legislative process.


ACT!


Let your Representatives and Senators know: the Financial Stability Board must be approved by Congress and must be subject to oversight by elected officials of the countries involved.


Personal visits, followed by calls and faxes to both Washington and local offices, are the most effective. Don’t be surprised if they don’t know what you’re talking about. Politely insist they find out and take action. And understand this when dealing with legislators or their staffs: they are focused almost exclusively on legislation that has already been introduced—a bill with a number on it.


That is not the case here. You want them to take action on this matter by introducing legislation that brings the approval and structure of the Financial Stability Board under congressional control.


This can be accomplished.


“All tyranny needs to gain a foothold is for people of good conscience to remain silent.” —Thomas Jefferson

[Sapiens]

A Look Behind the Wizard's Curtain

http://www.brucewiseman.net/index.ph...ance&Itemid=27

A Look Behind the Wizard's Curtain
A Look Behind the Wizard's Curtain

Wednesday, 01 April 2009 03:21

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I’m tired of hearing about subprime mortgages.

It’s as if these things were living entities that had spawned an epidemic of economic pornography.

Subprime mortgages are as much a cause of the current financial chaos as bullets were for the death of JFK.

Someone planned the assassination and someone pulled the trigger.

The media, J. Edgar Hoover and the Warren Commission tried to push Lee Harvey Oswald off on the American public. They didn’t buy it.

They shouldn’t buy subprime mortgages either.

Someone planned the assassination and someone pulled the trigger.

Only this time the target is the international financial structure and the bullets are still being fired.

Oh yes, people took out adjustable-rate mortgages they could ill afford, that were then sold to Wall Street bankers. The bankers bundled them up like gift wrappers at Nordstrom’s during the Holidays and sold them to other banks after raking off billions in fees. The fees? They were for…well…they were for wrapping the mortgages in the haute couture of Wall Street.

But it didn’t start there. No, no, not by a long shot.

And as the late, great Paul Harvey would say, “And now you’re going to hear the Rest of the Story.”

Are subprime mortgages part of some larger agenda?

And if so, what is it?

Stay with me here, because Alice is about to slide down the rabbit hole into the looking-glass world of international finance.

EASY MONEY ALAN

There are various places we could start this story, but we will begin with the 1987 ascendancy of Rockefeller/Rothschild homeboy Alan Greenspan from the Board of Directors of J.P. Morgan to the throne of Chairman of the Federal Reserve Bank (a position he was to hold for twenty years).

From the beginning of his term, Greenspan was a strong advocate for deregulating the financial services industry: letting the cowboys of Wall Street sow their wild financial oats, so to speak.

He also kept interest rates artificially low as if he had sprayed the boardroom of the Federal Reserve Bank with some kind of fiscal aspartame.

While aspartame (an artificial sweetener branded as “Equal” and “NutraSweet”) keeps the calories down, it has this itty-bitty side effect of converting to formaldehyde in the human body and creating brain lesions.

As we are dealing here with a gruesomely tortured metaphor, let me explain: I am not suggesting that Chairman Greenspan put Equal in his morning coffee, but rather that by his direct influence, interest rates were forced artificially low resulting in an orgy of borrowing and toxic side effects for the entire economy.

THE COMMUNITY REINVESTMENT ACT

Greenspan had been the Fed Chairman for seven years when, in 1994, a bill called the Community Reinvestment Act (CRA) was rewritten by Congress. The new version had the purpose of providing loans to help deserving minorities afford homes. Nice thought, but the new legislation opened the door to loans that set aside certain lending criteria: little things like a down payment, enough income to service the mortgage and a good credit record.

With CRA’s facelift, we have in place two of the five elements of the perfect financial storm: Alan (Easy Money) Greenspan at the helm of the Fed and a piece of legislation that turned mortgage lenders into a division of the Salvation Army.

Perhaps you can see the pot beginning to boil here. But the real fuel to the fire was yet to come.

GLASS-STEAGALL

To understand the third element of the storm, we travel back in time to the Great Depression and the 1933 passage of a federal law called the Glass-Steagall Act. As excess speculation by banks was one of the key factors of the banking collapse of 1929, this law forbade commercial banks from underwriting (promoting and selling) stocks and bonds.

That activity was left to the purview of “Investment Banks” (names of major investment banks you might recognize include Goldman Sachs, Morgan Stanley and the recently deceased Lehman Brothers).

Commercial banks could take deposits and make loans to people.

Investment banks underwrote (facilitated the issuing of) stocks and bonds.

To repeat, this law was put in place to prevent the banking speculation that caused the Great Depression. Among other regulations, Glass-Steagall kept commercial banks out of the securities.

Greenspan’s role in our not-so-little drama is made clear in one of his first speeches before Congress in 1987 in which he calls for the repeal of the Glass-Steagall Act. In other words, he’s trying to get rid of the legislation that kept a lid on banks speculating in financial markets with securities.

He continued to push for the repeal until 1999 when New York banks successfully lobbied Congress to repeal the Glass-Steagall Act. Easy-Money Alan hailed the repeal as a revolution in finance.

Yeah, Baby!

A revolution was coming.

With Glass-Steagall gone, and the permissible mergers of commercial banks with investment banks, there was nothing to prevent these combined financial institutions from packaging up the subprime CRA mortgages with normal prime loans and selling them off as mortgage-backed securities through a different arm of the same financial institution. No external due diligence required.

You now have three of the five Horsemen of the Fiscal Apocalypse: Greenspan, CRA mortgages and repeal of Glass-Steagall.

WAIVER OF CAPITAL REQUIREMENTS

Enter Hammering Hank Paulson.

In April of 2004, a group of five investment banks met with the regulators at the Securities and Exchange Commission (SEC) and convinced them to waive a rule that required the banks to maintain a certain level of reserves.

This freed up an enormous reservoir of capital, which the investment banks were able to use to purchase oceans of Mortgage-Backed Securities (cleverly spiked with the subprime CRA loans like a martini in a Bond movie). The banks kept some of these packages for their own portfolios but also sold them by the bucketload to willing buyers from every corner of the globe.

The investment bank that took the lead in getting the SEC to waive the regulation was Goldman Sachs. The person responsible for securing the waiver was Goldman’s Chairman, a man named Henry Paulson.

With the reserve rule now removed, Paulson became Wall Street’s most aggressive player, leveraging the relaxed regulatory environment into a sales and marketing jihad of mortgage-backed securities and similar instruments.

Goldman made billions. And Hammering Hank? According to Forbes magazine, his partnership interest in Goldman in 2006 was worth $632 million. This on top of his $15 million per year in annual compensation. Despite his glistening dome, let’s say Hank was having a good hair day.

In case this isn’t clear, it was Paulson who, more than anyone else on Wall Street, was responsible for the boom in selling the toxic mortgage-backed securities to anyone who could write a check.

Many of you may recognize the name Hank Paulson. It was Paulson who left the Goldman Sachs’ chairmanship and came to Washington in mid-2006 as George Bush’s Secretary of the Treasury.

And it was Paulson who bludgeoned Congress out of $700 billion of so-called stimulus money with threats of public riots and financial Armageddon if they did not cough up the dough. He then used $300 billion to “bail out” his Wall Street homeboys to whom he had sold the toxic paper in the first place. All at taxpayer expense.

Makes you feel warm all over, doesn’t it?

Congress has its own responsibility for this fiscal madness, but that’s another story.

This one still has one more piece—the pièce de résistance.

BASEL II

Greenspan, the Community Reinvestment Act, the repeal of Glass- Steagall, and Paulson getting the SEC to waive the capital rule for investment banks have all set the stage: the economy is screaming along, real estate is in a decade-long boom and the stock market is reaching new highs. Paychecks are fat.

But by the first quarter of 2007, the first nigglings that all was not well in the land of the mortgage-backed securities began to filter into the press. And like a chilled whisper rustling through the forest, mentions of rising delinquencies and foreclosures began to be heard.

Still, the stock market continued to rise, with the Dow Jones reaching a high of 14,164 on October 9, 2007. It stayed in the 13,000 range through the month, but in November, a major stock market crash commenced from which we have yet to recover.

It’s not just the U.S. stock market that has crashed, however. Stock exchanges around the world have fallen like a rock off a tall building. Most have lost half their value, wiping out countless trillions.

If it were just stock markets, that would be bad enough; but, let’s be frank, the entire financial structure of the planet has gone into a tailspin and it has yet to hit ground zero.

While there surely would have been losses, truth be told, the U.S. banking system would likely have gotten through this, as would have the rest of the world, had it not been for an accounting rule called Basel II promulgated by the Bank for International Settlements.

Who? What?

That’s right, I said an accounting rule.

The final nail in the coffin—and this was really the wooden spike through the heart of the financial markets—was delivered in Basel, Switzerland, at the Bank for International Settlements (BIS).

Never heard of it? Neither have most people; so, let me pull back the wizard’s curtain.

Central banks are privately owned financial institutions that govern a country’s monetary policy and create the country’s money.

The Bank for International Settlements (BIS), located in Basel, Switzerland, is the central banker’s bank. There are 55 central banks around the planet that are members, but the bank is controlled by a board of directors, which is comprised of the elite central bankers of 11 different countries (U.S., UK, Belgium, Canada, France, Germany, Italy, Japan, Switzerland, the Netherlands and Sweden).

Created in 1930, the BIS is owned by its member central banks, which, again, are private entities. The buildings and surroundings that are used for the purpose of the bank are inviolable. No agent of the Swiss public authorities may enter the premises without the express consent of the bank. The bank exercises supervision and police power over its premises. The bank enjoys immunity from criminal and administrative jurisdiction.

In short, they are above the law.

This is the ultra-secret world of the planet’s central bankers and the top of the food chain in international finance. The board members fly into Switzerland for once-a-month meetings, which they hold in secret.

In 1988 the BIS issued a set of recommendations on how much capital commercial banks should have. This standard, referred to as Basel I, was adopted worldwide.

In January of 2004 our boys got together again and issued new rules about the capitalization of banks (for those that are not fluent in bank-speak, this is essentially what the bank has in reserves to protect itself and its depositors).

This was called Basel II.

Within Basel II was an accounting rule that required banks to adjust the value of their marketable securities (such as mortgage-backed securities) to the “market price” of the security. This is called mark to the market. There can be some rationality to this in certain circumstances, but here’s what happened

[Sapiens]

Re: The Financial Crisis: The Hidden Beginning

http://www.brucewiseman.net/index.ph...7&limitstart=2

THE MEDIA AND MARK TO THE MARKET

As news and rumors began to circulate about some of the subprime CRA loans in the packages of mortgage-backed securities, the press, always at the ready to forward the most salacious and destructive information available, started promoting these problems.

As a result, the value of these securities fell. And when one particular bank did seek to sell some of these securities, they got bargain basement prices.

Instantly, per Basel II, that meant that the hundreds of billions of dollars of these securities being held by banks around the world had to be marked down—marked to the market.

It didn’t matter that the vast majority of the loans (90% +) in these portfolios were paying on time. If, say, Lehman Brothers had gotten fire-sale prices for their mortgage-backed securities, the other banks, which held these assets on their books, now had to mark to the market, driving their financial statements into the toilet.

Again, it didn’t matter that the banks were receiving payments (cash flow) from their loan portfolios; the value of the package of loans had to be written down.

A rough example would be if the houses on your street were all worth about $400,000. You owe $300,000 on your place and so have $100,000 in equity. Your neighbor, Bill, in selling his house, uncovered a massive invasion of termites. He had to sell the house in a hurry and wound up with $200,000, half the real value.

Shortly thereafter, you get a demand letter from your bank for $100,000 because your house is only worth $200,000 according to “the market.” Your house doesn’t have termites, or perhaps just a few. Doesn’t matter.

Of course, if the value of your home goes below the loan value, banks can’t make you cough up the difference.

But if you are a bank, Basel II says you must adjust the value of your mortgage-backed securities if another bank sold for less—termites or no.

When the value of their assets were marked down, it dramatically reduced their capital (reserves), and this—their capital—determined the amount of loans they could make.

The result? Banks couldn’t lend. The credit markets froze.

Someone recently said that credit was the life blood of the economy.

This happens to be a lie. Hard work, production, and the creation of products that are needed and wanted by others—these are the true life blood of an economy.

But, let’s be honest, credit does drive much of the current U.S. economy: home mortgages, auto loans and Visas in more flavors than a Baskin-Robbins store.

That is, until the banks had to mark to the market and turn the IV off.

THE CRISIS

Mortgage lending slammed to a halt as if it had run headlong into a cement wall, credit lines were cancelled and credit card limits were reduced and in some cases eliminated altogether. In short, with their balance sheets butchered by Basel II, banks were themselves going under and those that weren’t simply stopped lending. The results were like something from a financial horror film—if there were such a thing.

Prof. Peter Spencer, one of Britain’s leading economists, makes it very clear that the Basel II regulations “…are at the root cause of the crunch…” and that “…if the authorities retain the strict Basel regulations, the full scale of the eventual credit crunch and economic slump could be disastrous.”

“The consequences for the macro-economy,” he says “of not relaxing [the Basel regulations] are unthinkable.”

Spencer isn’t the only one who sees this. There have been calls in both the U.S. and abroad to, at least, relax Basel II until the crisis is over. But the Boys from Basel haven’t budged an inch. The U.S did modify these rules somewhat a year after the devastation had taken place here, but the rules are still fully in place in the rest of the world and the results are appalling.

The credit crisis that started in the U.S. has spread around the globe with the speed that only the digital universe could make possible. You’d think Mr. Freeze from the 2004 Batman movie was at work.

We have already noted that stock markets around the world have lost half of their value, erasing trillions. Some selected planet-wide stats make it clear that it is not just stock values that have crashed.

China’s industrial production fell 12% last year, while Japan’s exports to China fell 45% and Taiwan’s were off 55%. South Korea’s overseas shipments decreased 17%, while their economy shrank 5.6%.

Singapore’s exports were off the most in 33 years and Hong Kong’s exports plunged the most in 50 years.

Germany had a 7.3% decline in exports in the fourth quarter of last year, while Great Britain’s real estate market declined 18% in the last quarter compared to a year earlier.

Australia’s manufacturing contracted at a record pace last month bringing the index to the lowest level on record.

There’s much more, but I think it is obvious that credit pipe can no longer be smoked.

Welcome to planetary cold turkey.

ODDITIES

It is fascinating to look at the date coincidence of the crash in the U.S. Earlier I noted that the stock market continued to rise throughout 2007, peaking in October of 2007. The dip in October turned to a rout in November.

The Basel II standards were implemented here by the U.S. Financial Accounting Standards on November 15, 2007.

There are more oddities.

Despite the fact that Hammering Hank dished out hundreds of billions to his banker buddies to “stimulate” the economy and defrost the credit markets, the recipients of these taxpayer bailout billions have made it clear that they will be reducing the amount of money they will be lending over the next 18 months by as much as $2 trillion to conform to Basel II.

What do you think—Hank, with his Harvard MBA, didn’t know? The former chairman of the most successful investment bank in the world didn’t know that the Basel II regulations would inhibit his homies from turning the lending back on?

Maybe it slipped his mind.

Like the provision he put into his magnum opus, the $700 billion bailout called TARP. It carried a provision for the Federal Reserve to start paying interest on money banks deposited with it.

Think this through for a minute. The apparent problem is that the credit markets are frozen. Banks aren’t lending. They can’t use the money from TARP to lend because Basel II says they can’t. On top of this, Paulson’s bailout lets the Fed pay interest on funds they deposit there.

If I am the president of a bank, and let’s say that I’m not Basel II impaired, why in the world am I going to lend to customers in the midst of the worst financial crisis in human history when I can click a mouse and deposit my funds with the Fed and sit back and earn interest from them until the chaos subsides?

But, hey, maybe Hank’s been putting aspartame in his coffee.

No, this stuff is as obvious as the neon signs on Broadway to the folks who play this game. This is banking 101.

So, given the provisions of Basel II and the refusal of the BIS to lift or suspend the regulations when they are clearly the driving force behind the planet-wide credit crisis, and considering the lack of provisions in Paulson’s bailout bill to mandate that taxpayer funds given to banks must actually be lent, and given the added incentive in the bill for banks to deposit their bread with the Fed, one gets the idea that maybe, just maybe, these programs weren’t designed to cure this crisis; maybe they were designed to create it.

Indeed, my friends, this is crisis by design.

Someone planned the assassination and someone pulled the trigger.

THE RUBBER MEETS THE ROAD

All of which begs the question, How come?

Why drive the planet into the throws of fiscal withdraw—of job losses, vaporized home equity, and pillaged 401ks and IRAs?

Because when the pain is bad enough, when the stock markets are in shambles, when the cities are teaming with the unemployed, when the streets are awash with riots, when governments are drenched in the sweat of eviction and overthrow, then the doctor will come with the needle of International Financial Control.

This string of ineffective solutions put forth by people who know better are convincing bankers, investors, corporations and governments of one thing: the system failed and even the U.S. government—the anchor of international finance (which is blamed for causing the disaster)—has lost its credibility.

The purpose of this financial crisis is to take down the United States and the U.S. dollar as the stable datum of planetary finance and, in the midst of the resulting confusion, put in its place a Global Monetary Authority—a planetary financial control organization to “ensure this never happens again.”

Sound Orwellian? Sound conspiratorial? Sound too evil or too vast to be real?

This entity is being moved forward by world leaders “as we speak.” It is coming and the pace is quickening.

A year ago, I saw an article in which the president of the New York Federal Reserve bank was calling for a “Global Monetary Authority” or GMA to deal with the world’s financial crisis. While I have been following international banking institutions for some time, this was the clue that they were making their move. I wrote an article on it at the time.

By the way, as some may recall, the president of the New York Fed last year was a man named Timothy Geithner. Geithner was very involved in structuring the booby-trapped TARP bailout with Paulson and Bernanke.

Of course, now, he is the Secretary of the Treasury of the United States.

Change we can believe in.

Once Geithner started to push a global financial authority as the solution to the world’s financial troubles, other world leaders and opinion-leading voices in international finance began to forward this message. It has been a PR campaign of growing intensity. Meanwhile, behind the scenes, the international bankers are keeping their hands on the throat of the credit markets choking off lending while the planet’s financial markets asphyxiate and become more and more desperate for a solution.

British Prime Minister Gordon Brown, who has taken the point on this, has said that the world needs a “new Bretton Woods.” This is the positioning. (Bretton Woods, New Hampshire, was the location where world leaders met after the Second World War and established the international financial organizations called the International Monetary Fund (IMF) and the World Bank to help provide lending to countries in need after the war.)

Sir Evelyn de Rothschild called for improved (international) regulations, while the Managing Director of the IMF suggested a “high level of ministers capable of reaching agreements and implementing them.”

The former director of the IMF, Michael Camdessus, called on “the global village” to “urgently and radically” implement international regulations.

As the crisis has intensified, so too have calls for a global financial policeman, and of late, the PR has been directed in favor of—surprise—the Bank of International Settlements.

The person at the BIS who was primarily responsible for the creation of Basle II is Jaime Caruana. The BIS Board has now appointed him as the General Manager, the bank’s chief executive position, where he will be in charge of dealing with the current financial crisis which he had no small part in creating.

A few well-chosen sound bites tell the story.

Following a recent IMF function, discussion centered on the fact that the BIS could provide effective market regulation, while the Global Investor magazine opined that “…perhaps the Bank of International Settlements in Basel...” could undertake the task of best dealing with the crisis in the financial markets.

The UK Telegraph is right out front with it.

“A new global solution is needed because the machinery of global economic governance barely exists…it’s time for a Bretton Woods for this century.

“The big question is whether it is time to establish a global economic ‘policeman’ to ensure the crash of 2008 can never be repeated.”

….

“The answer might be staring us in the face in the form of the Bank of International Settlements (BIS). The BIS has been spot on throughout this.”

And so you see, this was a drill. This was a strategy: bring in Easy Money Alan to loosen the credit screws; open the floodgates to mortgage loans to the seriously unqualified with the CRA, bundle these as securities, repeal Glass-Steagall and waive capital requirements for investment banks so the mortgage-backed securities could be sold far and wide, wait until the loans matured a bit and some became delinquent and ensure the media spread this news as if Heidi Fleiss had had a sex-change operation, then slam in an international accounting rule that was guaranteed to choke off all credit and crash the leading economies of the world.

Ensure the right people were in the key places at the right time—Greenspan, Paulson, Geithner and Caruana.

When the economic pain was bad enough, promote the theory that the existing financial structures did not work and that a Global Monetary Authority—a Bretton Woods for the 21st century—was needed to solve the crisis and ensure this does not happen again.

Which is exactly where we are right now.

WHAT DO YOU DO?

First of all, while not likely, but just in case Timothy Geithner is shocked into some New Age epiphany and Ben Bernanke grows some real wisdom in his polished dome, this is what the government should do:

1) Cancel any aspects of Basel II that are causing banks to misevaluate their assets.

2) Remove the provision of TARP that permits the Fed to pay interest on deposits.

3) Mandate that any funds given under the TARP bailout or that are to be given to banks in the future must be used to lend to deserving borrowers.

4) Repeal the Community Reinvestment Act.

5) Reinstate Glass-Steagall.

6) Restore mandated capital requirements to investment banks.

7) And in case Congress decides to cease being a flock of frightened sheep and take responsibility for the country’s monetary policy, they should get rid of the privately owned Federal Reserve Bank and establish a monetary system based on production and property.

8) But if a global monetary authority is put in place, it should not be controlled by central bankers. It should be fully controlled directly by governments with real oversight over it and with a system of checks and balances. This you can communicate when this matter hits Congress or the White House or both (which it almost certainly will).

And what do you do with your reserves in this Brave New World of international finance?

Modesty aside, please do what I have been recommending for a few years now: get liquid (out of the stock and bond markets) and put some of your assets into precious metals, gold and silver, but more heavily into silver.

Keep the rest in cash (CDs and T-bills) and perhaps a small bit in some stronger foreign currencies like the Chinese yuan (also referred to as the RMB, which is short for renminbi)

And remember that my recommendations are based on my 30 years of experience in banking, finance and investments but I have no crystal ball and make no guarantees regarding my recommendations.

We are living in the most challenging economic times this planet has ever seen. I hope this article has helped shed some light on what is currently happening on the international financial scene. I didn’t cover everything or everyone involved, but these are the broad strokes.

If you want to follow these shenanigans, log on to The Road to London Summit (http://www.londonsummit.gov.uk/en/). It will all look and sound very reasonable—all about saving jobs and homes—but you have seen behind the wizard’s curtain and the above is what is really going on.

Keep your powder dry.

[Sapiens]

Protecting Your Assets in a Serious Financial Crisis

http://www.brucewiseman.net/index.ph...tent&Itemid=27

Protecting Your Assets in a Serious Financial Crisis

Wednesday, 01 April 2009 03:21

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I wrote my Senator about the bailout.

The little one: Paulson and Bernanke's $700 billion donation to their favorite charity, Wall Street.

I urged her to rethink a commitment of nearly three-quarters of a trillion dollars of taxpayer money - my money, and yours - when we had no way to pay it back other than going cap in hand to our friends in the Chinese Communist Party and Dubai to try to borrow it.

I say try, because Congress has been spending hundreds of billions of dollars a year more than it takes in for years and our Marxist and Muslim bankers are getting more than a little skeptical about whether we will ever be able to repay them.

No wonder. We are currently in debt more than eleven trillion dollars, and this is just the government IOUs like Treasury Bills, and Treasury Bonds. Forget the money Congress has ripped off from the Social Security program and the tens of trillions more of unfunded liabilities (future financial commitments for which we do not have the money. Estimates run to about sixty trillion dollars).

These numbers are so big they break the mind. It's hard to even fathom what they mean.

"If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills! It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it 14 years before it reeled out one trillion dollar bills."
- www.100777.com

You get the picture.

The interest on the national debt last year was $451,000,000,000. That's $1,252,777,777 a day, $52,199,074 an hour, $869,984 a minute, $14,499 a second.

Makes you feel warm all over, doesn't it?

So I told my Senator to knock it off.

She responded. She said that 88,000 people had written in opposing the bail out and that 5,000 had written in in favor of it. But that this was a national crisis and she and the other members of Congress felt they were doing the right thing for the American people.

Arrogance doesn't even begin to say it.

These legislators, who have the financial IQ of road-kill, who have bankrupted our nation to the point of a half a trillion dollars a year in interest for wars and welfare, know what's best for the American people?

The first bailout, which was a catastrophe, is of course, now being followed with a second that has more pork than a Jimmy Dean sausage factory. This one is now branded as a "stimulus package", and is being muscled through Congress as I write this for a cool trillion and a quarter (including interest).

You'd think someone pumped LSD into the drinking water up there. With the new bailout program, cum stimulus plan, the projected budget deficit for this year alone is about $1.8 trillion.

Where do they think they are going to get this money? Foreign central banks are dumping dollars like a bad habit, and U.S. debt is now about as welcome as an envelope of anthrax.

Which brings us to the point of this article, which is that when the government finishes its spending binge, and wakes up to their eye-watering fiscal hangover, they will turn inward with a vengeance, seeking to filch money from every nook and cranny of the U.S. population.
TAX INCREASES ON THE WEALTHY

That there will be tax increases is a given. And they will start with the affluent. If you have worked hard and accumulated some wealth in the process, you are a high-profile target for higher taxes.

There is strong sentiment from the White House on down that if you make decent money, if have accumulated some assets, the government should take some of it and spread it around.

Everyone is familiar with the President's statement to Joe the Plumber during a campaign stop last October when he said, "I think when you spread the wealth around, it's good for everybody."

"Everybody" being those people who didn't earn the money but who get some of yours.

But let's not quibble about who created the wealth, what's important is to spread it around, even things out.

And in case you're not mainlining MSNBC for your political news these days, you might have missed the fact that this point of view is not the sole province of the White House. Some key members of Congress are very clear about their Das Kapitalian intentions.

Barney Frank, the Chairman of the House Financial Services Committee, noted recently,

"I think at this point there needs to be a focus on an immediate increase in spending and I think this is a time when deficit fear has to take a second seat... I believe later on there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road."

In fact, the good Congressman may seek a shortcut to your income. Instead of waiting for your tax return, your salary itself could be at risk.

An article in Financial Week, quotes the Chairman of the powerful Financial Services Committee as saying, "Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance.... The compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies." (Emphasis added).

Channeling Karl Marx, Franks' colleague in the House, Democratic Representative James Moran, had this to say during a campaign stop:

"In the last several years, we have had the highest corporate profit ever in American history... But it hasn't been shared. And that's the problem. Because we have been guided by a Republican Administration who believes in the simplistic notion that people who have wealth are entitled to keep it. And they have an antipathy towards the means of redistribution wealth."

Say what?

See, here's the scary part, he's serious. He is a United States Congressman on the Appropriations Committee - one of the most important and powerful committees in the House. He is also part of the Democratic Leadership in the House and this man thinks there is something wrong with people who consider that when they have accumulated some assets, they are entitled to keep them.

When you add gargantuan budget deficits to a government whose economic philosophy is grounded in a craving to redistribute the wealth of its citizens, you know they will be coming for those that have managed to flourish and prosper.

Let's be blunt: if you earn well or you have assets, your financial statement is at risk.

But the assault on your assets is not just coming from potential changes in tax policy.
CONFISCATION OF PERSONAL RETIREMENT ACCOUNTS

Testimony before the House Committee on Education a few months ago, suggested that personal retirement accounts (IRAs and 401Ks) should be converted into government controlled accounts called Guaranteed Retirement Accounts (GRAs). They would be managed by that bastion of fiscal propriety, the Social Security Administration.

California Democrat, George Miller's House Committee on Education and Labor heard a proposal from Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, to eliminate tax breaks for 401(k) and similar retirement accounts such as IRAs and convert them into Guaranteed Retirement Accounts managed by the Social Security Administration.
THE PLAN

Under Ghilarducci's plan, employees would have 5% of their pay mandatorily deducted from their pay and deposited into their GRA. This deduction would be in addition to Social Security and Medicare taxes, which would also have to continue being paid by employers.

The 5% would not be deductible by employers (as is now the case) and only half of the GRA assets could be passed along to your heirs at death. Presumably, Uncle would keep the other half.

"I'm just rearranging the breaks that are available now for 401(k)s and spreading the wealth," she said.

There's that phrase again.
ARGENTINA TO CONFISCATE RETIREMENT ACCOUNTS

And just in case you think the idea of a government confiscating personal retirement accounts is out of the range of possibility, we urge you to read the story in the October 22, 2008 issue of the Wall Street Journal, which reported that the Argentinean government had seized all private pension and retirement accounts to fund government operations and a ballooning budget deficit. Some articles note that this program was mandated by the President, but still had to be approved by the Argentinean Congress, which is controlled by the President's Peronist political party.
CONFISCATION OF GOLD AND SILVER

But trillion dollar budget deficits will require more.

Many turn to precious metals during times of economic duress. This is no surprise as gold and silver have been a store of value for thousands of years and they have actual productive uses as opposed to paper currency which has none other than its government mandated use as money.

When a government has debased its currency at the printing press, it often takes measures to try to prevent its citizens from fleeing from the currency into precious metals or stronger currencies. One of the measures that has been used in the past is making the ownership of precious metals illegal. This seeks to stop the capital flight from its currency to hard assets.

Sound unreal?

We give you President Franklin D Roosevelt on March 9, 1933.

"I as President do declare that... the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measure must be taken immediately to protect the interests of our people.

"Therefore ... I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possession of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price....

"All safe deposit boxes in banks or financial institutions have been sealed....

"Therefore be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service."

It may surprise you to know that laws still exist that give the President the authority to prohibit the ownership of gold, silver and other assets during emergencies. The Trading with the Enemy Act and the International Emergency Economic Powers Act can be used to freeze privately held assets and prohibit their possession anytime the President issues a proclamation of emergency.
CURRENCY CONTROLS

Currency controls are yet another way governments try to contain the adverse effects of printing too much money.

Wikipedia defines it this way: "Currency control is a system whereby a country tries to regulate the value of money (currency) within its borders."

This can take many forms, but for our purposes, one of the ways governments implement currency controls is to limit or prevent assets from leaving the country. You might not be able to move money or other assets abroad (as that would take them out of the grasp of Uncle). Converting dollars into a stronger currency could become illegal as could transferring funds out of the country to buy gold, if it were outlawed here.

Increased taxes, currency controls and outlawing the ownership of precious metals are just some of the potential consequences that could emanate from a government that will soon wake from a spending binge the likes of which has never been seen before. And when the enormity of the damage they will have created starts to dawn on them and starts to dawn on the rest of the country threatening their House or Senate seat, they will turn on the wealthy like machines from the Matrix seeking income for the government in ways that all such governments have done in ages past - ways we have detailed above.
SOLUTION

"Your government considers you a national resource to be exploited. If you don't get your money out of the country before the government gets your money out of you, you're an idiot, and you're going to get what you deserve."
The Casey Report January, 2009

Growing numbers of people are moving assets offshore into gold, silver and stronger currencies such as the Swiss Franc, the Japanese Yen and the Chinese Yuan. Seeing the coming tsunami of government debt and inflation and potential confiscation of personal wealth, many are turning to offshore jurisdictions that provide privacy and outstanding asset protection.

Government taxing authorities would love to have people believe that moving assets offshore is somehow immoral or even illegal. Nothing could be further from the truth. According to the U.S. Government Accountability Office, 83 of the nation's 100 largest corporations including world class brands such as General Motors, Pepsi, News Corp and Wells Fargo had subsidiaries in offshore tax havens in 2007. In fact, hundreds of thousands of offshore entities - corporations and foundations - operate legally in tax haven jurisdictions from Panama to Liechtenstein, from the British Virgin Islands (BVI) to Hong Kong.

Offshore corporations, foundations, and trusts can usually be set up for very nominal amounts and enable those creating them to move some of their assets out of dollars, out of the reach of fiscally irresponsible, avaricious governments and off the radar screen of Big Brother.

[thunderdownunder]

Re: The Financial Crisis: The Hidden Beginning

Sapiens -What have you done Lad - The details are correct, the cogs meshed and the machine is complete and functioning. Then you expose it like HC Andersons tale of "The Emperor has no Clothes".

What can you do about this dirty and foul deed perpetrated in the guise if honest and open acountability when the truth is the complete opposite. Not a damn thing Lad.

I'm not admonishing you, I'm praising you for what is a post that should be not only a "sticky" on this and all financial conservative sites, It should be taught in schools. Answer me, I dare you, why nothing like this is taught when it represents the basics of the life all people live. The true answer is they do not dare.
I attach this from my own son's email to me, to show you they (the young) are smart, aware and very angry. They will fix this even if it means being ostracise's by the powers who will cling like rats to flotsam. They have at least chosen a side, unlike us. Don't worry about the links as they are time consuming (But very interesting in a holistic way) - Read the writings after the links and smell the anger that is brewing from one high distinction Medical student

Hey Dad,



I know you find the stupidity of people frustrating - including oneself from time to time - and I thought you might find some of these videos interesting.



Just a note: the first video can be misleading, as Alan Watts was not an atheist (more like a pantheist: http://en.wikipedia.org/wiki/Pantheism). The poster of the video has taken clips out of context and twisted it in a way that supports his atheistic views - which only shows he is kind of insecure about them, I think. And it is obvious he is trying to covert people to something (the cop-out “no belief” belief?). That aside, it is an excellent clip, and the other ones below it will clarify things more clearly.



The videos are quite long, so you may want to watch them during the “off-peak” period of your internet plan (most plans have one) so you don’t waste too much of your quota.



http://www.youtube.com/watch?v=BE5M8743a1s (just note that in the “I” section he is saying that it’s silly we see things that way – again, misleading clip)





These next video is broken up into parts:



http://www.youtube.com/watch?v=8aufu...eature=related (part 1)



http://www.youtube.com/watch?v=dZ8We...eature=related (part 2)



http://www.youtube.com/watch?v=3RcjA...eature=related (part 3)



http://www.youtube.com/watch?v=tOYIE...eature=related (part 4)





This stuff should be compulsory learning in schools, but all the government wants is your work and money; which is why we are taught the current and completely wrong values of “progress” and “success”.



I find it amusing that people moan and bitch about small insects like termites, saying things like “stupid bloody pests that consume all the wood in our home and build ugly ******* nests everywhere…” and yet we are doing the exact same thing. Our current notions of progress and success means there is no distinction between us and insects like termites. Our sense of awareness is what really separates us from the petty insects, and we have to use this to further evolve – after all, this is how animals evolve. Power without the awareness of how to use it properly means nothing (or worse, a distaster). People need to shed their great sense of entitlement and remove their heads from their asses and become more aware of what’s really happening around them.



It is also said we live in a materialistic world, which is untrue, because we have no respect for the material world. Perhaps “blind consumers” would fit our bill better. Anyway, there are many other videos of Alan Watts on youtube, and I find what he says to be very true.



See you soon,



Sam.

Sapiens - the truth was in the past I thought of you as a bit "fruity"
I was SO WRONG, I now realize you are a deep thinker and truly care

[D-Mack]

Re: The Financial Crisis: The Hidden Beginning

Didn't they wait until it crumbled on it's own ?

What if Basel II had been implemented in 2004 ?

The Last Domino to Fall

While banks in developing nations were being penalized for falling short of the BIS capital requirements, large international banks managed to skirt the rules, although they actually carried enormous risk because of their derivative exposure. The mega-banks took advantage of a loophole that allowed for lower charges against capital for “off-balance sheet activities.” The banks got loans off their balance sheets by bundling them into securities and selling them off to investors, after separating the risk of default out from the loans and selling it off to yet other investors, using a form of derivative known as “credit default swaps.”

It was evidently not in the game plan, however, that U.S. banks should escape the regulatory net indefinitely. Complaints about the loopholes in Basel I prompted a new set of rules called Basel II, which based capital requirements for market risk on a “Value-at-Risk” accounting standard. The new rules were established in 2004, but they were not levied on U.S. banks until November 2007, the month after the Dow passed 14,000 to reach its all-time high. On November 1, 2007, the Office of the Controller of the Currency “approved a final rule implementing advanced approaches of the Basel II Capital Accord.”8 And on November 15, 2007, the Financial Accounting Standards Board or FASB, a private organization that sets U.S. accounting rules for the private sector, adopted FAS 157, the rule called “mark-to-market accounting.”9 The effect on U.S. banks was similar to that of Basel I on Japanese banks: they have been struggling to survive ever since.10

The mark-to-market rule requires banks to adjust the value of their marketable securities to the “market price” of the security.11 The rule has theoretical merit, but the problem is timing: it was imposed ex post facto, after the banks already had the hard-to-market assets on their books. Lenders that had been considered sufficiently well capitalized to make new loans suddenly found they were insolvent; at least, they would have been if they had tried to sell their assets, an assumption required by the new rule. Financial analyst John Berlau complained in October 2008:

“Despite the credit crunch being described as the spread of the ‘American flu,’ the mark-to-market rules that are spreading it were hatched [as] part of the Basel II international rules for financial institutions. It’s just that the U.S. jumped into the really icy water last November when our Securities and Exchange Commission and bank regulators implemented FASB’s Financial Accounting Standard 157, which makes healthy banks and financial firms take a ‘loss’ in the capital they can lend even if a loan on their books is still performing, even when the ‘market price’ [of] an illiquid asset is that of the last fire sale by a highly leveraged bank. Late last month, similar rules went into effect in the Eurpoean Union, playing a similar role in accelerating financial failures. . . .

“The crisis is often called a ‘market failure,’ and the term ‘mark-to-market’ seems to reinforce that. But the mark-to-market rules are profoundly anti-market and hinder the free-market function of price discovery. . . . In this case, the accounting rules fail to allow the market players to hold on to an asset if they don’t like what the market is currently fetching, an important market action that affects price discovery in areas from agriculture to antiques.”12

Imposing the mark-to-market rule on U.S. banks caused an instant credit freeze, which proceeded to take down the economies not only of the U.S. but of countries worldwide. In early April 2009, the mark-to-market rule was finally softened by the FASB; but critics said the modification did not go far enough, and it was done in response to pressure from politicians and bankers, not out of any fundamental change of heart or policies by the BIS or the FASB. Indeed, the BIS was warned as early as 2001 that its Basel II proposal was “procyclical,” meaning that in a downturn it would only serve to make matters worse. In a formal response to a Request for Comments by the Basel Committee for Banking Supervision, a group of economists stated:

“Value-at-Risk can destabilise an economy and induce crashes when they would not otherwise occur. . . . Perhaps our most serious concern is that these proposals, taken altogether, will enhance both the procyclicality of regulation and the susceptibility of the financial system to systemic crises, thus negating the central purpose of the whole exercise. Reconsider before it is too late.”13

The BIS did not reconsider, however, even after seeing the devastation its regulations had caused; and that is where the conspiracy theorists come in. Why did the BIS sit idly by as the global economy came crashing down? Was the goal to create so much economic havoc that the world would rush with relief into the waiting arms of a global economic policeman with its privately-created global currency? The plot thickens . . . .

Originally posted on Global Research on April 18, 2009.

http://www.webofdebt.com/articles/basel.php

[Sapiens]

Re: The Financial Crisis: The Hidden Beginning

Wiseman has published a book:

http://www.behindthewizardscurtain.com/

[ThePythonicCow]

Re: The Financial Crisis: The Hidden Beginning

Wiseman has published a book:

http://www.behindthewizardscurtain.com/

That book, "Crisis by Design: The Untold Story of the Global Financial Coup and What You Can Do About It", seems to be by John Truman Wolfe, not by Wiseman ?

P.S. -- Aha. From http://www.brucewiseman.net/, "He [Bruce Wiseman] is also a published fiction author under the pen name, John Truman Wolfe (www.johntrumanwolfe.com)"

P.P.S. -- I agree with the scenario he claims to present in this book:

the financial crisis was created for the purpose of replacing the United States and the U.S. dollar as the stable point in international finance with a global financial dictator and a new world currency,