The best way to rob a bank is to be a banker

An excellent interview at Democracy Now with William Black :

As Foreclosures Hit All-Time High, Wall Street on Pace to Hand Out Record $140B in Employee Bonuses

The Dow Jones Industrial Average has topped 10,000 for the first time in a year, as JPMorgan Chase reported massive profits in the third quarter.
Meanwhile, the Wall Street Journal is reporting that major US banks and securities firms are on pace to pay their employees about $140 billion this year—a record high.

But on Main Street, foreclosures are also at record levels, and the official unemployment rate is expected to top ten percent.

The record bonuses come less than a year after taxpayers bailed out many of those same financial institutions.

Black :

But in fact, foreclosures, relative to delinquencies, are quite low compared to historical ratios. In other words, banks have tons of folks who are not paying their mortgages on time, and they’re not foreclosing. And the reason they’re not foreclosing is, once you foreclose, you have to recognize losses under the accounting rules. And the banks gimmicked the accounting rules. They put pressure on Congress, and Congress put pressure on the accounting profession to gimmick the accounting rules now about a year ago.

Now, these bonuses, of course, are paid compared to alleged profits. What happens if you understate your losses dramatically? You report much higher profits and much higher bonuses. So this is a web of fraud, in which they are getting as much as they can before the place goes to hell in a handbasket again.

Danger! Bankers at work!

h/t Brasscheck TV

$7.7 trillion bail-out? Holy crap!

Earlier today I saw this handy click-to-enlarge pie chart at Boing Boing from Voltage Blog
The pie on the right includes the Marshall Plan, the Louisiana Purchase, the moonshot, the S&L crisis, the New deal, NASA, and the Korean, Vietnam, and Iraq wars, for a total of $4.6 trillion.
On the left we have the somewhat larger 2008 bailout pie.

But then tonight I read at Bloomberg : Nope, it's not $4.6 trillion, it's $7,700,000,000,000.
At $24,000 for every man, woman and child in the US, it could pay off more than half their mortgages.
Bob Eisenbeis, economist for the Atlanta Fed for 10 years, on the lack of government oversight : "They got snookered."

But these are just loans, right? The companies will pay the taxpayers back when ... when ....
Holy crap! Isn't this the part in the movie where the seasoned old cop/FBI/CIA guy tells the anxious victim not to submit to blackmail/ransom/terrorist's demands because they will never stop their demands no matter how much you pay them and besides if you give in they're just gonna kill you/your wife/your country afterwards anyway?

Commenter Frank W at Boing Boing : "Money is a meme. It consists of the belief in it. That does not mean it does not exist, just that it consists of the belief in it. So, here's a pretty picture of a unicorn."

Cross-posted at Creekside

Corporate welfare fraud

Naomi Klein :
"Washington's handling of the bailout is not merely incompetent. It may well be illegal.
According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending -- for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. -- is a violation of the act." Yet this is exactly how the funds are being used."

American International Group Inc. got an expanded $150 billion government bailout this week, and is setting aside $503 million in compensation for executives.

Bloomberg : "The Treasury has committed $290 billion of the $350 billion already allocated through capital injections to banks and AIG. The four attending members of the House Oversight and Government Reform Committee's subcommittee on domestic policy accused Treasury of picking "winners and losers'' by giving loans to healthy banks to use in buying smaller ones."

"This administration wants to privatize Wall Street’s gains and socialize Wall Street’s losses," said Rep. Elijah Cummings, D-Md.

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. ~ Thomas Jefferson, 1802

The Bank of Canada's strange behaviour

Jim Stanford, Chief Economist with the Canadian Auto Workers' Union, national columnist with the Globe and Mail and past chair of the Progressive Economics Forum has written an excellent post on the strange behaviour of the Bank of Canada in dealing with the current financial crisis brought on by the US sub-prime-mortgage-meltdown credit crunch.

Oh. You thought that was just a US problem? Not hardly. Stock exchanges and financial markets from Shanghai to Frankfurt and, Toronto in between, are being torn to shreds as speculators with collateralized securities watch the value of the paper they hold shrink like a wet angora sweater in a hot dryer.

Honestly, it's their fault and I have no sympathy for them. It's just that the damage they will wreak as a result of their attempt to sell the poor something they could not afford in the first place, and then sell the paper those mortgages were written on at inflated values will come back to bite all of us while leaving the working class in even worse condition.

The surprize was the sudden decision by the Bank of Canada to suddenly defend its interest rate by adding liquidity to the financial markets. What makes this even more surprizing is that the Bank of Canada has made the same statement over the years: Regardless of conditions, the central bank (meaning David Dodge) has made it very clear to all of us that the sole purpose, of that supposedly apolitical institution, is to defend the inflation rate.

The Bank of Canada has stood by while the exchange rate of the Canadian dollar has edged to near par with the US dollar and caused the Canadian manufacturing sector to dump 400,000 jobs. We are told by the central bank that we have to live with that. It's an adjustment and the Bank of Canada is not in the business of defending the exchange rate - it simply defends the inflation rate.

Except that isn't what the central bank is doing. Stanford does an excellent job of lighting up the scene on the Bank of Canada's behaviour and, while you might think he objects to bailing out a bunch of greedy chartered banks and speculators, he actually approves of the Bank of Canada's actions. He can explain it, but before you head over there, this is a sample of his latest column in the Globe an Mail:

What’s got me irked is the obvious contradiction between the Bank’s willingness to ride to the rescue of banks, hedge funds, and private equity dealers, versus its tough-love response to the dislocation of 400,000 factory workers.

[...]

If real businesses use cheap credit to invest in too much real production, create too many jobs, and strengthen incomes too rapidly for the Bank’s liking, then it cracks down hard. But if speculators use cheap credit to fuel a frenzied inflation in paper valuations, that’s no problem. An average worker can’t get ahead. But a speculator gets a free pass – even though the “wealth” they create is no more real than the turrets of Hogwarts Castle.

Go read. It's good and it's understandable.