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Four Time Bombs

March 14, 2011 By Leave a Comment

No need for a match, it's already lit.

I am including this article by Paul B. Farrell  for Marketwatch in full.  What is particularly significant is that Farrell was once a banker with Morgan Stanley.  Lest I appear on some FBI list for calling for a revolution, I have decided to use the words of a Wall Street insider instead.

Four time bombs that will blow up Wall Street

Too late to jail bank CEOs; only revolution will succeed

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Put Goldman Sachs CEO Lloyd Blankfein in jail for six months, and all this will

stop, all over Wall Street and America, a former congressional aide tells Matt Taibbi in his latest Rolling Stone attack, “Why Isn’t Wall Street in Jail? Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them.”

Taibbi’s right, everyone knows Wall Street’s run by a bunch of dictators who are doing more damage to democracy and capitalism than North Africa’s dictators. But jail the CEOs of Goldman, Citi, B. of A. or my old firm Morgan Stanley? Too late.

Only a revolution will stop Wall Street’s self-destructive capitalism. And watching the people revolt against dictators like Mubarak and Gadhafi reminds us of the spirit that sparked America’s revolution in 1776. But today we need a 1930s-style revolution.

During the S&L crisis two decades ago America had a backbone, indicted 3,800 executives and bankers. Today’s leaders have no backbone. Besides jail time won’t reform the darkness consuming Wall Street’s soul. We’re all asleep, in denial about the moral crisis facing America. Yes, we need a new revolution.

Jail time? We’ve heard that many times before. Journalists have been beating that dead horse for three years. Jailing CEOs made sense in early 2009. But our naïve president missed that opportunity, instead surrounded himself with Wall Street insiders as Bush did with Blankfein’s predecessor. Trojan Horses manipulating a Congress filled with clueless Dems mismanaging tired Keynesian theories.

Taibbi got it right: Washington’s error was in protecting Wall Street’s billion-dollar crooks when they should have been prosecuting CEOs for criminal behavior in getting us into the 2008 mess. So today, the political statute-of-limitations has run. Jail solution is wishful thinking, like praying to the tooth fairy for a miracle. Time for action. Time for a revolution on Wall Street.

Jail Wall Street? Old news. They got away with it. We chickened out

“Jail Bank CEOs” makes a great sound bite in the cable pundits’ echo chamber. Remember Taibbi’s earlier indictment of Goldman Sachs: the “world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

But so what? Just three years after Wall Street’s crooks “brought down the world’s economy” Goldman’s Blankfein and his buddies are paying record bonuses, and laughing at us.

Seriously, think about it folks: Since the 2008 meltdown magazines and newspapers have analyzed the 2008 crash to death. It really is old news, history. Journalists churned out book after book: “Greenspan’s Bubbles,” “House of Cards,” “Trillion Dollar Meltdown,” “13 Bankers,” “Dumb Money,” “Bailout Nation,” “All the Devils Are Here,” “The Big Short,” “Too Big to Fail,” “The Failure of Capitalism,” “This Time is Different,” “And Then the Roof Caved In,” on and on, ad nauseum. All talk, no action, and no effect.

Get it? With every book, every editorial, every expose the past three years, Wall Street bankers actually grew stronger, got richer, more arrogant, bolder on bonuses, impervious to attacks, even taunting us, like the dictators Mubarak, Ben Ali and Gadhafi, confident they could do no wrong, confident no one would rebel. Jail? Our moment to act is long past. We blinked.

Yes folks, Wall Street is the “Comeback Kid” story of the 21st century. Like a terrorist in a horror film, Wall Street thrives on threats. Three short years ago, Wall Street was virtually bankrupt, a ward of the state. We could have jailed “just one” of them back then, when they were down for the count. Instead, we bailed them out! Made them richer. Gave them $13.7 trillion, loans, credits, cash, asset buyouts. Gave them keys to the Treasury. They didn’t just recover, they “ran the tables,” to use a blackjack/pool metaphor. Now Wall Street dictators have absolute power, ruling Washington, America, you and me.

Yes, America’s bankrupt, but the rich just do not care

Admit it, we lost the opportunity. Jail a bank CEO and Wall Street will miraculously reform? You’re joking, right? Wall Street got away with a “legal” bank heist. Today the should-be/would-be inmates are running the prison.

Wall Street’s corrupt banks have lost their moral compass … their insatiable greed has become a deadly virus destroying its host nation … their campaign billions buy senate votes, stop regulators’ actions, manipulate presidential decisions. Wall Street money controls voters, runs America, both parties. Yes, Wall Street is bankrupting America.

Wake up America, listen:

“Our country is bankrupt. It’s not bankrupt in 30 years or five years,” warns economist Larry Kotlikoff, “it’s bankrupt today.”

Economist Peter Morici: “Capitalism is broken, America’s government is two bankrupt political parties bankrupting the country.”

David Stockman, Reagan’s budget director: “If there were such a thing as Chapter 11 for politicians” the “tax cuts would amount to a bankruptcy filing.”

BusinessWeek recently asked analyst Mary Meeker to run the numbers. How bad is it? America really is bankrupt, with a “net worth of a negative $44 trillion.” Bankrupt.

And it will get worse. Unfortunately, nothing can stop America’s self-destructive Wall Street bankers. They simply do not care that their “doomsday capitalism” is destroying themselves from within, and is bankrupting America too.
One mega-millionaire sent me an email after reading my Jan. 4 column, “America’s worst 10 years start now.”
“Paul, you may well be right about the coming decade, but the rich exist in a different world from the one you write about. They live privileged lives in gated communities. Meet for holidays at the world’s elite resorts. The richest just aren’t worried about today’s economy like your readers. Their issues revolve around who’s the best masseuse, best Pilates teacher, best concierge medical doctor, which private school to choose, what investments they are making at this time, etc. Folks at the top are not concerned with the underlying deterioration of America, except in the abstract, because they aren’t directly affected. That’s why no amount of information from you will ever change things. To them, it’s irrelevant. Best wishes, always enjoy your stuff.”

4 ticking time bombs that will ignite the Wall Street revolution


Yes, the rich live in a different world. And no, information won’t change them. But a revolution will. Revolutions build slowly over a long time. Then, suddenly, a critical mass, a flash point, something totally unexpected ignites the ticking bomb.

It happened recently in a remote Tunisian village. Mohamed Bouazizi, a 26-year-old college graduate, unable to pay bribes, set himself on fire to protest police confiscation of his unlicensed vegetable cart. That triggered a revolution. And his death rapidly led to the collapse of a 24-year dictatorship.
Today we have four hot time bombs, tick-ticking, soon to make history; any one can easily accelerate the revolution that’s already killing Wall Street from within.

Elevator... going down.

1. Wealth gap: Super-Rich vs class wars, death of democracy


The gap: In one generation, America’s wealthiest 1% has exploded from 9% to 23% of America’s income, while middle-class income has stagnated. Even Buffett admits: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and winning.”
But my rich friend tells the real story, of their social disconnect. The rich just don’t care. They live in a different world, live by a self-centered code lacking a moral compass. The public welfare is honored only if supported by tax benefits.
The wealth gap is widening and soon something unpredictable will ignite a Wall Street revolution.
2. Wall Street’s doomsday capitalism vs rule by anarchy


A key Supreme Court decision accelerated and codified Wall Street’s ability to use billions stolen from taxpayers to lobby Washington and solidify its power, all for its own self-interest, through campaign payola, senators’ votes, presidential access, manipulation of regulators, grabbing tax benefits, etc. And it’s every man and woman for themselves.
Don’t believe it? Know this, democracy is dead and you’re in denial. Wall Street CEOs and Forbes 400 billionaires are either engaged in a secret conspiracy, or a classic anarchy picking apart America, oblivious of the fact they are setting up the next big revolution.
3. Pentagon’s perpetual war machine vs America’s budget time bomb


The mathematics of our $75 trillion Social Security and Medicare deficits often seem insurmountable, but can be recalibrated. However, the war-loving mindset of America’s neocons — fueled by China’s military actions, the insatiable expansion of our military spending and a Pentagon prediction that global population growth — is putting more and more pressure on the world’s scarce resources, and will, in turn, increase global wars and the demand for more war spending, increasing the risk of sudden revolutions everywhere.
4. Global population explosion vs resources, jobs, better lifestyles


As the world population explodes from 7 billion to 10 billion in the next generation, the demand for more jobs and the pressure on scarce resources will increase, while expectations will fall as the ratio of haves to have-nots increases, making the world all around Wall Street a burning powder keg setting up a revolution.
Bottom line: Forget jailing Wall Street’s dictators. It’s naïve and too late. We missed that opportunity. But a revolution will do the trick, give us a second chance to jail the crooks.
Until then, remember, these four factors are building to a head, merging into a critical mass that will accelerate into a revolution and destroy Wall Street from within: The widening wealth gap, capitalism’s new rule-by-anarchy, the high cost of feeding the Pentagon’s costly war machine, and the huge global population explosion.

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The Road From Serfdom

January 20, 2011 By Leave a Comment

Out with the old America, in with the new!

The very nature of life itself on planet Earth has changed and there is no going back.  We have entered a new romantic age in which Americans will regain their self-confidence because there is no other choice.  The rebuilding of America begins now as we put our doubts behind us and take a leap of faith into the future, throwing off the past the way a butterfly emerges from its cocoon and takes flight.

We have talked every issue to death and the time has come to act. The petty debates about debt and the budget blind us to our purpose. The notion that Congress must, before it enacts a law, cite the provision of the Constitution that supports it is a form of fanaticism that will lead to a dead end, just as the Presbyterians led Britain to a dead end when they took over parliament and declared that it had to cite the text of scripture that justified an act.

The forces of reaction have proved powerful but it is not capitalism that they seek to restore but orthodoxy.  They do this because they, like infants, fear change. They must not be allowed to succeed.  The life-affirming romantic impulse wakens us from our torpor, firm in our conviction that the future will triumph over the past.  In the new reaction, opportunistic women like Sarah Palin and Michele Backmann join forces with the reactionaries for their own cynical ends.  But they, like their allies in reaction, are parasites feeding off the dead body of the past.  Were they to bury that body they would have nothing to feed on, so they use all their conniving hypocrisy to convince everyone that the body is still alive.

The cynical Christian right, which is a gigantic scam, has brainwashed a generation to fear people different from them.  Many of them who condemn gays are in the closet themselves and, once outed, plead for forgiveness.  They are all just shills for the Republican Party, which is a for-profit entity that uses the state to reward its contributors.

Their very opposite, the Democrats offer a different chimera, pretending to be for justice when all they care about is themselves.   The Democratic Party is an invitation to disillusionment, just as the Tea Party will end up disillusioned with the Republican Party. Their pledge to cut spending vanishes in the self-serving nature of that organization.  That anyone in his right mind would follow Mitch McConnell is beyond comprehension, unless it is some kind of death wish.

All of this is the detritus of the past, the obsolete and petty forces that bog down America and leave it at the mercy of China.  The Big Parasite, the Lockheed Martin Corporation, can’t even get its F-35 fighter built while China has rolled off its new stealth plane, ready for combat.  This is how far we have sunk as a country.

There is no reason to accept this.  Capitalism must reinvent itself, but it can’t as long as the hoaxes that benefit the likes of Goldman Sachs perpetuate themselves.  Sucking on the tit of the Fed because of the fiction that it is a bank holding company, Goldman Sachs can borrow at zero percent interest and make investments with that money. This takes no brains or ability.  All it takes is a willingness of the American people to let them get away with it.

The endless wars, the empire that drains our resources and gives us nothing in return, happen because false capitalists collude with the power-mongers to whom individual achievement means nothing.  The dead hand of the American foreign policy Establishment drags us down as well.  We must throw off the chains they use to bind us to the past.

The belief that capitalism has begun to assert itself based on the revival of the American automobile industry is specious. That revival owed itself to the government bailout that demanded replacement of the corporate hacks who drove GM into the ground.

Ayn Rand was wrong.  Ethics and progress are not incompatible.  To the contrary, it is only through ethics that capitalism can revive the American spirit.  For this to happen, we must produce a new mentality capable of vision, action and creativity.  Hayek specifically opposed laissez faire capitalism and Adam Smith accepted the necessity of regulating the banks and of a moral system opposed to exploitation.  But the fallacy in this is that capitalism is unable break down the class system that perpetuates the destructive privilege hiding behind the façade of a false egalitarian democracy. It is unable because it never wanted to.  We must expose the cynicism of privilege that distorts everything for the benefit of the few, leaving everyone else with shattered dreams.

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Gambling and The Market

January 13, 2011 By 2 Comments


It is often said that Wall Street has become a gambling concern.  Instead of investing in companies that will become profitable, Goldman Sachs concluded that the money was in speculating, selling short, hedging one’s bets.  Hedge funds exist by this principle.  Also, financial engineering, a term that will live in infamy, enabled banks to create new instruments that no one understood, and to sell them for a considerable profit with the understanding that their contents might be worthless but also might bring a high return.

Now, according to an article in The New York Times by Suzanne Craig, from which this blog borrows liberally, one firm has decided that gambling in the most accurate sense is the way to go.  The Wall Street bond powerhouse, Cantor Fitzgerald, which like the Phoenix rose from the ashes of the World Trade Center, has opened a betting parlor on the Las Vegas strip. It will become a bookie in sports betting, illegal in New York, but legit in a city invented by the Mafia.  It will be called M Resort Spa Casino, where it will take book.  It will also handle sports betting operations at the Vegas Hard Rock Hotel and Casino, the Cosmopolitan of Las Vegas and the Tropicana Las Vegas,

Heading the operation for Cantor Fitzgerald will be a former bond trader, Lee Amaitis.  Cantor is also betting on a new method of gambling by obtaining a license that would allow sports betting on mobile devices anywhere in Nevada as long as the bettor has an account at a casino.  Jeffrey B. Logsdam, an entertainment and gaming analyst for BMO Capital Markets, puts it this way:  “Guys who trade Treasuries are doing it for basis point, and sports betting is not much different.  Trading a million dollars in Treasuries is different than trading a billion.  Sports betting is the same.  You want the spread, volume and you see yourself as a match maker.”

Cantor is not fooling around.  Unlike most sports books, which typically cap wagers at anywhere from $1,000 to $10,000, Cantor Gaming’s book has a take-all-comers policy.  By virtue of this policy, it is exposing itself to losses if it cannot hedge its bigger bets.  During the last Super Bowl, it handled a few bets in excess of $500,000.  It is also fascinating that Mr. Amaitis has a record–a conviction for dealing cocaine.  He insists that Cantor Gaming mitigates its risk through volume.  To date, Cantor Gaming has taken in more than $400 million in wagers, 20 percent of all the money bet on sports events in Nevada. In 2011, he expects the number to grow to an excess of $1 billion, or 40 percent of the market.

Amaitis went from working at the race track to bond trading at Fundamental Brokers where he was arrested at work in the 1980s for being part of a multimillion-dollar drug ring that was supplying cocaine to top Wall Street establishments. (Something that was rampant before the financial meltdown.)  Somehow, he managed to get off easy by pleading guilty to cocaine possession as part of a plea bargain. He was obliged to pay a $5,000 fine and the indictment was dismissed.  He also got a year’s probation.  “It was the roaring ‘80s,” he explains, “and I got swept up in it.”  After rehab, he took a job at Cantor Fitzgerald through the good offices of his friend, Howard Lutnick, the firm’s chief executive and chairman. Lutnick dispatched him to London to oversee Cantor’s European operation where Amaitis says he got the idea for Cantor Gaming.  He started Cantor Index in 2000, allowing both spread betting on financial products and sports wagering.  Spread betting allows people to wager on the price movement of a security or, in the case of sporting events, gamblers can wager on the outcome above or below a set spread.  Because this kind of betting is leveraged, Cantor gave it up in favor of licensing its fixed-odds technology, where bettors pay up front to the well known online company Ladbrakes to gamble.  Next stop was Las Vegas, where Cantor became the first licensee to manufacture and distribute hand-held gambling devices. Using them, you can bet on sports events, roulette and slot machines.

In 2008, two gentlemen of Las Vegas, Anthony Marnell III and Joe Margliarditi, opened M Resort and turned the sports book over to Cantor because, as Marnell put it, “Cantor understands technology and scale and was willing to make the capital investment in the book that we couldn’t.”  Margliarditi then moved to the Las Vegas Hard Rock Hotel and Casino leading to its decision to hire Cantor to run its sports book.  Andrew Garood, a former derivatives trader who now works for Cantor Gaming, summed it all up:  “I don’t see any difference between Las Vegas Boulevard and Wall Street.  Over time, we can’t lose, but there will be games where we take a hit.”

I used to know people in the Mob.  My father knew Joe Adonis, who treated my parents to a night at a casino he ran at a destination unknown to my parents because the limo that picked them up and took them home had blackened-out windows.  They had to wear blindfolds on their way to and from the limo. The place was full of glamorous and wealthy people.  Adonis insisted that gambling was a legitimate activity and that making it illegal was stupid.   I myself often bet on college football games when I was in college, using a point-spread card that the campus police peddled.  Why not just legalize it everywhere, or else close down Wall Street?

The real issue is that Wall Street cries out for some sort of regulation and oversight to ensure that it does what it was originally intended to do: provide capital for private enterprise deserving of financial support. Then the company could grow, sell stock, and little old ladies could buy the stock and make a return. Everyone wins. What is the social benefit if the Eagles fail to beat the spread? I’m going to go out on a limb and say, “None at all.” The same can be said for trading bonds.

It's 'cause I bet my house on the Eagles.

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One out of Six – Thank you, Goldman Sachs!

January 3, 2011 By Leave a Comment


Thank you, Goldman Sachs!  The illustrious banking giant has adopted a new in-house measure that would halt the paying of all bonuses in the event that the United States Government has to bail them out again.  I, for one, am greatly relieved by this action since it manifests a sense of social responsibility previously lacking at Goldman.  The fact that the payment of gigantic bonuses might be a factor in creating conditions necessitating a second bailout should not deter us from celebrating their sense of propriety whilst fifteen million Americans remain unemployed and millions more are underemployed or have stopped looking for work altogether.

Surely it is Lloyd Blankfein we must congratulate for this munificence.  It is farsighted of him as well because when the bubble bursts again, as it certainly will, The Goldman Sachs will be obliged once again to go hat-in-hand to the Fed and to the Treasury for an infusion of cash to prevent them from going under. They will do this even as they stand fast to their position that The Goldman Sachs is a capitalist business and that government regulation only impedes its ability to function effectively as they do “God’s work” in the immortal words of The Blankfein himself.  But The Blankfein undoubtedly believes that eschewing bonuses in such a situation will placate the Tea Party-dominated Congress that has sworn on their very lives that there will be no more bailouts and that no bank will ever again be described as “too big to fail.”

But The Blankfein is taking care of that possibility as well by hiring scores of lobbyists who will grease the wheels in the interests of, that’s right, The Goldman Sachs.

The new members of the House of Representatives tipped their collective hand even before being officially sworn in. They held a lavish “swearing in” bash at W, one of the most luxurious and expensive hotels in Washington and sold itickets in the $50,000 range.  In short, the Tea Party is now a booze party in the great Washington tradition with a wink to the lobbyists signaling that, notwithstanding the rhetoric, it is business as usual.  “As soon as coin in coffer rings, the bank regulations repeal from Congress springs.”

After all, this is a free enterprise system except that it is Socialism for the rich and Capitalism for the poor. Congress will continue to create loopholes for the financial giants and corporate America, including all those waivers that allow corporate favorites like Dole, the pineapple giant, to do business in Iran.  These same Congressmen who created the loopholes insist that sanctions are insufficient and that America must seriously consider bombing Iran and engaging in their favorite pastime, “regime change.”

But don’t expect the American people to wake up.  The retired employees of a town in Alabama sat despondently at a town meeting during which town officials informed them, just before Christmas, that there was no longer any money to pay their pensions.  With the exception of one retired black person sitting towards the rear, all the elderly faces were white.  If you were to ask them they would undoubtedly tell you that they are conservatives and are against raising taxes on the wealthy as well as against more spending in the form of another stimulus.   But what would they say if you explained to them that stimulus money went to local governments to prevent the sort of thing they are experiencing, to wit, the loss of their pensions?  Would they shake their heads and moan that there was nothing that could be done and that they would just have to grin and bear it?  After all, a stimulus in this crowd is considered Communism or, at best, Socialism.  And Socialism, as everyone from John Boehner on down knows, is un-American.

One can just imagine Boehner making a passionate speech on how brave these good people of Alabama are to forsake any help from the federal government so Obama cannot impose his Stalinist policies on America.

“These folks may have to go without food for a couple of days,“ he would bellow, “but they are keeping the faith, the great faith that has made America what it is.   And now that we have abolished Medicare and Social Security, they can go to their graves with the knowledge that their sacrifice will enable America to pay for the invasion of Iran.  But I am privileged to announce some good news for the great Americans of Alabama.  The Goldman Sachs will be shipping baskets of foodstuffs and other necessities to all of these folks.  I don’t want anyone to say that this is not a generous nation.  What the government will no longer do, charity will.”

CODA

Please, BOFA? Please?

Truth CAN be stranger than fiction. A few days after I composed this post, Bank of America began running an ad on television in which a voice intones as the words appear on the screen:  “THE FEAR OF HUNGER IS ALL AROUND–ONE IN SIX AMERICANS LIVES WITH HUNGER.” But not to worry.  Cut to lots of red boxes presumably filled with foodstuffs  rolling off an assembly line.  The voice goes on to say that BOFA is working with various groups to make sure the food gets to the needy, but can you trust them?

This is the same Bank of America that cooked the books when it bought Merrill Lynch.

BOFA settled up with the SEC for a small fine of $150 million. But this was not the end.

Bank of America Corp. also recently settled with the Securities and Exchange Commission, the Internal Revenue Service, the Federal Reserve, 20 state attorneys-general and other regulators over charges of rigging bids for investments in municipal securities, agreeing to pay $137 million to authorities.

“The conduct was egregious — in return for business, the company repeatedly paid undisclosed gratuitous payments and kickbacks and affirmatively misrepresented that the bidding process was proper,” said Robert Khuzami, SEC director of enforcement.

And, oh yes, AllState is suing Bank of America, former Countrywide CEO Angelo Mozilo and others over Countrywide’s sale of mortgage securities. AllState said it suffered “significant losses” after buying more than $700 million of Countrywide mortgage-backed securities in reliance on misrepresentations and omissions. Way to go, BOFA.   They have morfed into Robin Hood, robbing the rich to give to the poor.  God bless you BOFA.  Now we can all chow down.

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