Bean Counters
The conviction of Lee Farkas, one time head of the Taylor, Bean and Whitaker mortgage company exposes many of the elements of the housing debacle of the last decade. It also prompts the question: what’s changed? Farkas who probably did not act alone, defrauded stakeholders of $3 billion dollars and caused many more billions in damage by placing fake mortgages. His actions led directly to the collapse of a major bank. How did he do it? He lied.
He lied in a manner calculated to escape being caught. To do this, Farkas hired former executives in Freddie Mac and Fannie Mae so that he knew exactly what buttons to push. Long after these agencies began to suspect that Taylor, Bean and Whitaker was founded on fictitious mortgages they declined to act decisively for fear of causing mistrust in a system that deserved to be mistrusted. Only after the whole gimcrack scheme had demolished whole swathes of the economy did the story of what everyone suspected all along come out.
The basic story is that after Fannie Mae found out that Taylor, Bean and Whitaker were playing dirty, they simply severed their relationship with the firm and covered up the dirt, allowing the scam to continue to create further damage. “Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition. ”
“If there had been a criminal referral, Farkas would have gone to jail in 2002,” William Black, who served as deputy director of the Federal Savings and Loan Insurance Corp. during the S&L crisis of the 1980s, said in an interview.
Seven more years passed before federal regulators shut down Ocala, Florida-based Taylor Bean and prosecutors charged Farkas with orchestrating the $3 billion scam. He had duped some of the country’s largest financial institutions, sought federal bank bailout funds and contributed to the failures of Montgomery, Alabama-based Colonial Bank and its parent, Colonial BancGroup, once among the nation’s 25 biggest depository banks.
…The decision to keep Farkas in business was made by top Fannie Mae officials such as Smith and Zach Oppenheimer, then senior vice president for single family mortgage business, according to Smith’s deposition and a Fannie Mae memorandum.
A confidential agreement between Fannie Mae and Taylor Bean’s Farkas unwinding their relationship was negotiated by lawyers from the general counsel’s office, overseen at the time by Thomas Donilon, now Obama’s national security adviser, according to the documents.
…Fannie Mae officials were also concerned that an immediate termination of the relationship would have “a devastating effect on TBW’s ability to continue as a viable company,” according to an undated Fannie Mae memo filed as part of a related lawsuit.
Francine McKenna, blogging for Forbes argues it boggles the mind to deduce who else knew. “Can anyone deny that there are four firms – KPMG, Deloitte, PricewaterhouseCoopers (PwC), and Ernst & Young (auditor to Lehman) – who knew all along what was going on and never told a soul, including the SEC?”
Fannie Mae is now audited by Deloitte, who took over for KPMG in 2005 after the firm was fired and sued over an accounting scandal.
GMAC has always been audited, like its former parent GM, by Deloitte.
KPMG was also the auditor for two other fraud-ridden mortgage originators – Countrywide, bought by Bank of America who just announced a multi-billion dollar settlement with investors over bad loans and New Century who went bankrupt over bad loans.
Deloitte, Fannie Mae’s auditor ,was also auditor of three other housing related companies that had issues: Beazer, Novastar, and American Home. Deloitte settled to get out of those messes. And Deloitte audited three no-longer-independent large firms sunk by bad mortgages: Merrill Lynch, Bear Stearns, and Royal Bank of Scotland. …
Countrywide, as already mentioned, was audited by KPMG before being absorbed by Bank of America during the crisis period.
Citigroup is also audited by KPMG.
Freddie Mac, who picked up on the TBW business where Fannie Mae left off, is audited by PwC, who also audits Bank of America and JP Morgan Chase.
PwC also audits the Federal Home Loan Banks (FHLB). They ended up with many of the flawed Fannie Mae and Freddie Mac mortgage backed securities packaged from these fraudulent originator loans. FHLB members are now suing the big banks to force repurchases under representation and warranties clauses and other claims.
But of course Francine is wrong. A lot of people have no memory of nothing. Like Franklin Raines, who headed Fannie Mae at the time when things should come out in the open. He could give Sergeant Schultz lessons. “Franklin Raines, who was chairman and CEO at Fannie Mae from 1999 through 2004, said in an interview that he has ‘no memory’ of the Taylor Bean matter.” Raines said Fannie Mae’s regional offices manage terminations to get the largest recovery, and such an event wouldn’t be publicly disclosed.
Markets work by valuing objects based on available information. The financial meltdown is from one point of view a crisis of information. The databases which should describe the risk, value and beneficial claims that people have over assets has been corrupted. For most of us, the sum total of our life’s work is a number on a financial institution’s datafile. Imagine running an audit on a database only to find that nothing adds up; entries that are impossible have been made. Transactions that were specifically forbidden have happened all the time. And worse, the DBAs and Sysadmins are all involved. This is what the Taylor, Bean and Whitaker affair suggests.
If value is nothing but a database entry then corrupting the database is equivalent to destroying value. So here’s the question. Which of the entries in the world economic database should be regarded as true now that whole swathes of it have been discovered to be false? Writing down an asset entry is simply telling the truth about it once you’ve discovered it.
But who can survive the truth? Can you rollback transactions to their last known point if that point is 2002? How many lives are going to be totally destroyed by the adusting entries? Is the database worth saving or should we just scrap the whole thing and tell everyone that all the bets are off and you can keep whatever you can loot in the next twelve hours?
Worse, who can you trust? How do you “reform the system” if the regulators are themselves suspected of being in cahoots with the bandidos? If you want to fire the current DBAs and Sysadmins, where do you recruit the new ones from? These are the problems of systems which are Too To Fail. They are also too big to understand, too big to rollback.
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Not to mention Standard & Poors, et al—they should all be doing serious jail time, selling A+ ratings to the highest bidder.
As John Dunne said: “Hell is truth seen too late.”
It’s like draining a swamp and watching all the creepy things appear as the water recedes. As our economy deteriorates, the various Ponzi schemes and sophisticated swindles are becoming visible. First, Bernie Madoff’s Ponzi scheme comes into view and then Lee Farkas becomes visible. Given time, the Bank of America, Wells Fargo and Goldman Sachs will be standing there bald-ass-naked and their CEOs will be hauled off to jail. Of course, a fair amount of regulatory capture has already occurred. As the CEOs land in jail, their counter-parts in the federal government will land in jail with them.
That’s the “good scenario”.
The “bad scenario” is where John Q. Sixpack after long unemployment and impoverishment, has had enough. Then we have the bread riots and the crooked CEOs become human piñatas hanging from lamp posts. I’m hoping we can avoid doing a repeat of the French Revolution.
I am convinced that Obama, raised on the bitter poison of his America-loathing mother and grandparents, is convinced to his vpcore that the American system is and has always been rotten to it’s core. I believe Obama believes that the system of checks and balances, designed so carefully to weed out and preclude corruption as mipuch as possible, were mere window dressing on a fundamentally corrupt system…
It was natural then that Obama, a fanatical corrupt anti-American who never once believed in America, once ascending to power, would implement a totally corrupt regime whose sole purpose for existence was to reward his cronies and destroy his political enemies. He talks the hope and change and “soaring rhetoric” game, but at his heart he’s a blackguard.
I think he is also the apotheosis of the Leftist lies that have spread like a cancer in America, and which now threaten to destroy this mighty nation and reduce her to a slag heap. The Left must be destroyed. It has shown it cannot and will not coexist – so it must go.
The good news and the bad news, when all trust and respect is lost:
http://www.schlockmercenary.com/2011-06-30
I am convinced that Obama, raised on the bitter poison of his America-loathing mother and grandparents, is convinced to his vpcore that the American system is and has always been rotten to it’s core. I believe Obama believes that the system of checks and balances, designed so carefully to weed out and preclude corruption as mipuch as possible, were mere window dressing on a fundamentally corrupt system…
Well is Obama right? I would argue that he can’t be entirely right for the following reason. Something of real value exists. The lights still go on. The car still works. That sandwich still hits the spot. The existence of the stuff the works reveals itself empirically.
Of course there’s a lot of stuff that is corrupt. It reveals itself ultimately in the treasure chests filled only with ash. In empty suits. In degrees that are mere credentials. This stuff has tried to pass itself along with the real stuff for a very long time.
That’s the way it’s always been, and the way it will always be. The garbage has to be taken out every day until the end of time. But just as some cancers hide in the central nervous system where the immune system can’t easily see them, the best place for corruption to hide is in those who are above suspicion.
That’s why institutions have to remain reasonably flat. They can never get so tall, like the Tower of Babel, that all we can descry of the priesthood is some distant figures gesturing in the clouds, beyond our ken and past our criticism.
That’s why centralization is so deadly and why distributed accountability is so necessary. The feedback loop cannot get so long and convoluted that the lag is unacceptable. Too Big Fail is too dangerous to happen.
There’s something wrong with the system, but I have no confidence in those who prescribe even more centralization to keep things on the rails; who seek to appoint yet another group of the Great and the Good to save us from others like them.
What has to happen now is to simplify things. Get things back down to where the system is at information break-even; to the point where the energy required to know something is available for what needs to be known. Right now its too expensive, politically and otherwise to find out the truth.
Morton #3:
Yes, you have hit upon it. The Left tells lies about the Right and then believes them in order to justify their own actions. Katherine Harris, the Secstate of FL in 2000, denied Gore the Presidency by certifying the vote. So now they admit they are taking over as many of the Secstate positions in order to be able to do the same thing. The poor and minorities were wrongly denied loans for decades – never mind the stats that showed they were bad risks – so they should have been given loans and the costs spread around to society as a whole.
And once that sort of thing becomes offically sanctioned, then why not get in on the action yourself? I recall a HEW employee in the DC area 20 years ago who was taking the money she was supposed to administer to upgrade poor people’s homes and using it for her own home. Once you are driving down the street tossing handfulls of hundred dollar bills out the window, why not stuff a few in your own pockets?
Once the moral hazard has been removed by official sanction it’s not a slippery slope; it’s a vertical cliff. Has there ever been a criminal who did not feel what he was doing was morally justified?
You wonder, though… Ever watch one of those helicopter covered car chases in LA or somewhere? And wonder how the hell that the guy in the car thinks he can get away? I mean even if the cops lose you, TV Channels 9, 6, and 27 have you covered. So why do they keep driving until the rims melt? You could ask the same question of Farkas and Madoff and the rest. The U-boats stopped leaving for Argentina some time ago.
By the way, last year Orlando, FL was the No.1 place in the U.S. for plumetting real estate values while Ocala, FL was No.2
And also, Franklin Raines made $90M as head of Fannie.
W:What is corrupt is the so-called “Liberal” order. It has been taken over by Marxist mobsters, opportunists and nihilists. What used to be just the corrupt urban political machines have morphed into an inter-meshed national one. We are witnessing in DC how every Democrat urban machine (and blue state State-wide machine) is run.
The vast majority of the players in these scams are opportunists connected to the Democrat Party, and many f them are on the government payroll. All the scams rely on oceans of the taxpayers money. Blame not the nation for corruption but them. As others have said, the solution is to get all of them out of power and into jail. Take their money, liberty and power away from them. It is an open question if this is possible as much of the nation has been either numbed or cowed.
The window is closing, however. They have to be thrust out in 2012, and then when a new order comes in, they must be prosecuted and punished. This includes the management of GS, Governmental and quasi-governmental agencies, the NGOSs the Unions, Soros, and most of all, Obama and his henchmen. Their criminal and traitorous careers must be punished. Only then can we have reform.
We must face that we have had an attempted coup, and face it as a nation.
One hopes that people like Palin can act as a lighting rod in this and focus the nation.
We must remember that the true Nomenklatura is relatively small=-2, 2.5 million at best. There is no fundamental reason why the nation cannot be set right.
I think that you give Obama too much credit for moral probity. He is an immoral monster. He would have been no matter what his childhood. There s no justification for this man.
‘
But the real point is that he s just a figurehead. He is not the main actor behind this. Should he disappear tomorrow all the problems would remain.
i
It s a Party that has been thoroughly corrupted and degraded by Marxism and nihilism. We have allowed them to take the cultural high ground for generations. Now they reach the political summit. We have the most obvious of choices before us.
Wretchard #5 and Mongoose #7:
In other words, John McCain was wrong when he said there is too much money in politics.
In reality, there is just too much politics.
The rottenness will never be thoroughly expunged, nor the economy healed, until an honest DOJ or mega-special prosecutor investigation names names and files charges against those still alive and whose statute of limitations are still running. Because the biggest issue is trust. Nobody, NOBODY, trusts financial institutions these days. We hold our nose and deal with them if we must, but if we are honest we never invite them in our homes for dinner or approve their dating our daughters. And those who do deal with them today are just as suspect as they. Only after blood is let and incarceration served will a wholesome relationship be restored. Sorry, but that’s the way it is. Won’t happen, you say? If not, this period of stagflation and ennui will last a l-o-o-o-o-o-o-n-g time.
Mongoose@7,
Yes, there is.
That relatively small group of people have most of the power in this country: academe, police agencies, courts, political office, and the Federal bureaucracy.
There is no way we’ll be able to get them out peacefully, and they will never swing from lampposts. They have the money and power to make sure they are never held accountable. They will rule over us from gated communities, protected by their corrupt cohorts, and by arms and technology the rest of us are not allowed to possess.
We. Are. Screwed.
By the way do y’all recognize the fact that KPMG and many of these other firms don’t do just accounting?
They also conduct studies on everything from the price of tea in China to the design of space launch vehicles. Why should we believe them about that stuff if they can’t balance the checkbooks? Crooks are never crooked in just one way.
One Beltway Bandit firm beat out our company for a contract with the FAA. And then they produced a report for another private company that said exactly what the customer wanted it to say. Unfortunately at about that same time I produced a detailed study that put a full spread of 6 torpedoes into their basic premise. And their response was “We were just giving the customer what he wanted.” The customer wanted a lie and they provided one; now that is real customer service!
So a small-time mortgage crook has been convicted. BFD.
When will we see Franklin Raines, Jamie Gorelick, Barney Frank and Maxine Waters in the dock? And how about their enablers in firms like Goldman Sachs?
I predict: Never.
On this topic, I just finished reading “The Big Short” by Michael Lewis. This is the story of the handful of offbeat men who saw the collapse of the mortgage market coming years in advance, and through them it tells the complete inside story of the 2008 collapse. It was on the bestseller list last year and I missed it, but it’s out on paperback or kindle or whatever you use now. Flows nicely, quick read, took me about 6 hours and all I can say is – Wow. It’s very rare that I will say this about any book, but – The Big Short is an Important book.
Why say that about it? Because I thought I understood how the 2008 crash had played out fairly well; I even know what CDO’s and CMO’s were. After reading this book, I realized that I hadn’t even imagined 1% of the crap that was going on behind the scenes, and now I can only say that it’s impossible for anyone who hasn’t read this account to be capable of carrying on an intelligent conversation about the crash of 2008 – and I really do mean that. I now realize that before now, that group included me; I am still in shock at the depiction of how deep the rot has gone. (and also in shock that this information is public, and still all the “good” people are acting like nothing much happened. They may as well call it “the recent unpleasantness”)
Again, I finished this book and said – Wow. As corrupt you may think Wall Street is, as cynical as you are about the people who have been running things – you cannot even concieve of how deep the corruption went, and you do not have it in you to be as cynical as you need to be. No normal human being does. Lee Farkas is just a penny ante back alley hustler, and the sums he took down are chump change compared to what Goldman, and Morgan Stanley, and Deutsch Bank, and Lehman, and Bear Stearns, and all the rest of them took down as an ordinary course of doing business every day.
THAT’s why no one much cares about Lee Farkas. On the scale of what Wall Street was doing, he just rifled the cash drawer at the local 7/11. Annoying but too small to matter.
Between the big Wall Street firms and the big banks, they probably clipped the system for close to $1 Trillion, but no one knows for sure. But that’s where all your Tarp money went, courtesy of Hank Paulsen and Timothy Geithner. You want a preview of what the end game for the european debt situation is going to look like? Read this book – that’s why it’s important. When a system is built on nothing but lies and fraud, it always comes apart at the end no matter how badly all the kings horses and all the kings men want to keep it together.
It’s actually an uplifting tale – one of my favorite threads was of the two young men who started out with a $100,000 Charles Schwab account and who turned that into $200 million dollars by betting on Wall Street’s mendacity. But the most maddening part is that these people who saw it coming didn’t hide what they saw – they tried for years to tell anyone who would listen what was coming, and why!
But they were told they were crazy, or stupid, or just ignored completely. Well, this is the tale of the men who ignored what they were told, stuck to their guns, and become multimillionaires because of it.
Read it, I swear you will not be disapointed.
The most m
righto, see my comment back a couple of threads up, if I didn’t mention my old buddies at the accounting firms, well, they’ve long been the piano players.
Is it corruption? Well. There are some people who set out to be corrupt, even if it is more work than doing the same thing honestly. There are others who, when they come to a fork in the road, they take it. There are others who simply cannot tell the ACs from the DCs, it’s all mumbo-jumbo to them, and they are (very) well-paid to recite it. I think there are a lot of these.
The number who fully understand the system and see what they are doing is illegal, immoral, and fattening, and do it anyway – is probably tiny, but they are nearly all in the executive offices. Only a Nuremberg Trials system could convict them of anything – an absolute presumption of guilt going in (I am not much of a fan of the Nuremberg Trials, in case you haven’t noticed).
Now, the thing is, none of this is even noteworthy, it is just human nature. What makes it different this time is the *scale* on which all this human malfeasance has managed to operate. You cannot pull hundreds of millions, much less multiple trillions, from the system under false pretenses without damaging something equally hugely.
With the invention of nuclear weapons the human race has had to learn to restrain itself as never before. And we have managed, so far (a couple of modest Japanese cities as necessary demonstrations). Now, who will introduce equal restraints on economic meltdowns, now that they can be engineered?
Thomas Donilon should not have a good enough security clearance to use the Post Office.
Wretchard said, “If you want to fire the current DBAs and Sysadmins, where do you recruit the new ones from?”
Well said. I am in favor of defunding and disbanding failed organizations such as ATF, CIA, etc, denying their employees their pensions, using shaped charges to destroy their headquarters and let the rubble lay where it falls as a lesson.
But, most governmental organizations do have -some- functions that need to be done, so who ya gonna hire after you’ve thrown the baby out with the bath water?
And the answer is -> The Usual Suspects
Geithner Says Failure to Raise Debt Ceiling Unthinkably Damaging.
Strauss-Kahn Case Seen as in Jeopardy
Democrat: Controversial ATF program shows need for tougher gun laws
Geithner, Strauss-Kahn, and a Democrat walk into a bar, and are confronted by a maid with a gun. “This could be unthinkably damaging!” declared Geithner. “Don’t worry, the IMF will take care of it!” cried Strauss-Kahn, dropping his pants. A shot rang out.
The maid dropped to the floor, dead, as fifty ATF agents jumped out of the shadows. “That will teach her to play with guns,” sniffed the Democrat.
The important learning from this debacle is that regulatory agencies are COMPLETELY WORTHLESS. Every major financial shenanigin of the past 40 years has been “discovered” right after it blew up. Why pay agencies for protection when all they provide is a false illusion of safety?
wws@13: it’s impossible for anyone who hasn’t read this account to be capable of carrying on an intelligent conversation about the crash of 2008
I wouldn’t jump to any rash conclusions about the knowledge pool of this site’s readership (two/three in particular whose individual and collective insights tend to drown out the heroic accomplishments of the self-taught herd post-crash including this reader who ‘got it’ enough to know that picking up one of the Crash books would not be a heart healthy exercise), but I’m curious of another opinion, if I may inquire, after reading the Lewis account, should the country have pursued the fast and deep correction, or prolonged and shallow, as per present course? (That’s an academic question of course since the former was never in the cards so to speak.) Just curious.
apologies if I appeared to be slighting anyone here; that was not my intent. It’s just that I thought I had studied the issue well, and even I was shocked. Here’s just one example out of many: I knew Goldman was corrupt, but I had no clue as to how cynically criminal that firm was. They intentionally manipulated the ratings firms like Moody’s in order to get AAA ratings on the fantastically complicated derivatives; but Goldman always *knew* that these products were worthless. The entire *reason* for the complexity was so that no one, not the regulators, not the ratings agencies, could ever figure out what was going on inside them. THEN Goldman (and the other firms as well) promised their own investors that these financial products were safe as they sold them to them. (Some traders were quoted as laughing about how gullible their German clients were – the Germans actually believed that everyone would live up to their contracts, which the traders found quite funny!)
At the *same* *time* as they were selling these things to their own clients, Goldman was shorting them in it’s own accounts – a safe bet, since they had created them and knew they were worthless. And even *that* wasn’t enough – they then sold billions of dollars worth of counterparty risk to AIG, which appears to have been the most brain dead player of all. (they sold them the backside of all the bad loans they had sold to the Germans) And THEN, when it all fell apart, they pressured the US treasury into assuming all of AIG’s debt, the bulk of which was owed to Goldman.
They nakedly stole from all of their customers, both foreign and domestic. They stole from every firm that dealt with them. They stole every bit of capital AIG had. And then they stole the entire country blind, by getting the US Treasury to assume all of AIG’s debt, when that should simply have been defaulted.
No criminal conspiracy in history has ever stolen on the scale they have stolen, and yet look where they are – STILL the most “respected” firm on Wall Street. And everyone knows it and no one dares to do anything about it.
Oh, I gotta quit or I start to believe that we really don’t deserve to survive. Not in anything like our current form, that’s for damn sure.
as far as your question – Lewis just reports what happened, we gotta draw our own influences as to what comes next. But I observe that the biggest problem with what we’ve done is that none of the poison has actually been drained from the system; even now it has just been hidden, and is still waiting to come out. A lot of it has been buried on the Fed’s balance sheet – what do you think they’ve been buying, after all? Guess what stands behind our currency now – $1 Trillion or more in bad, worthless, loans that can never be paid. Makes you feel real good about the Dollar, doesn’t it?
All of this rot has got to be dealt with before we ever get to enjoy anything like a true “recovery”, but we have not dealt with any of it – we’ve just hidden it and printed more fake money to paper things over for a few more months. In late 2008, we avoided the car crash by choosing to infect ourselves with a terminal cancer. Personally, given the choice, I’d take my chances with the car crash.
This is the real face of information warfare. The rise of virtual representations of value, which allowed useful services to be performed, was taken one step further to the point of abuse. Not simply to the point of abuse but to where Hitler sought to put it. The Big Lie. A lie so great that nobody would believe anyone would have the effrontery to utter it.
What does it mean to live in a world where the safest lies are the biggest one? Are there any falsehoods that one can confidently declare to be unutterable? Yet for the conniving precious little of it appears to have relied on a chain of information. At no point could anybody “drill down” into the underlying asset.
No. Instead bedrock was met in social proof. Moody’s ratings. Certified books of accounts. Goldman Sachs assurances. Ultimately the proof was in the bright smiles, the marble lobbies and expensive suits and wrist watches of the assurers. Now it turns out they were nothing more, in essence, than grifters. So who do we turn to?
The facts, I guess. We have to drill down to the facts; determine that nothing is known until the thing is weighed and assayed and surveyed by people who don’t know each other and preferably sampled by ourselves. How funny it is that an age that prided itself in atheism and supposed rationality was taken in by a bunch of shamans and mountebanks. Look they’re doing it still. Wanna buy some carbon credits?
Social proof as a foundation of trust is poison. You can rely on it in the absence of all else, but nothing will substitute for the facts. That means that huge vertical institutions reaching up to the stratosphere are infeasible. The information distance to the facts is too great. They are inherently full of noise; worse, they are full of lies.
Now that we’ve uncovered this rot, the last thing anyone should do is turn to yet another rater, another regulator, another set of badged media interpreters, another supergovernment or transnational authority to create the perfect supersystem. No to supersystems. No to Too Big to Fail.
W: so you are saying that we should avoid the situation where someone is “Too big to nail?”
Well, as I said before, the vipers have to be punished. To those who say that they cannot be, I would urge them yet hope for justice still.
If the American people are truly aroused, it can yet happen. It must happen.
Someone above noted that the trust in financial institutions cannot be repaired with it. I would add that almost all institution have been corrupted and should there not be reform across the bard that all will in time whirl apart.
The Left willfully corrupts institutions in the hope that just such a demoralization materializes, but time and again they misjudge the heart, mind and soul of Man.
Let us not despair just yet.
wretchard @22:
“How funny it is that an age that prided itself in atheism and supposed rationality was taken in by a bunch of shamans and mountebanks. Look they’re doing it still. Wanna buy some carbon credits?”
That is because atheism is self-referential. Leaving aside exactly what people mean by “God”, the function of an eternal value system located in a mental space outside our individual value sets, is to provide a standard against which we judge and are judged. Once a relative notion like multiculturalism or relative truth is introduced under the guise of “equality”, the way is open for hypocritical crooks, desperate to validate their lives, to prey upon well-meaning but dismayingly ignorant people.
I think when all this broke that everyone concluded that the SEC people who had been found watching porn and playing games on their work computers had given up on doing their jobs when they found out the fix was in. It is believable that it was a case of getting in more trouble from doing your job honestly than looking the other way. I was in the USAF for 25 years and I can tell you that shoot-the-messenger is a very common attitude in the Fed Govt.
But has anyone found any actual evidence of this? Or rather, did the crooks and their enablers make sure that the people in the oversight positions were the ones who could not get a job saying “Do you want fries with that?”
It may be the same as trying to drain Lake Erie with an eyedropper, but as a stockholder, I vote every time against re-appointing the current auditing firm.
They know where ALL the skeletons are, and how to avoid them. Fresh auditor eyes might dig them up… maybe.
Madoff and Enron were pikers.
tom
A small financial story out this morning, directly on topic to everything we’ve been talking about here, and especially why some firms are “Too Big to Fail”
“Goldman Sachs’s Central Bank Connections Reach Ever Deeper”
“The targeting of central banks reflects the value banks such as New York-based Goldman Sachs place on the skills economists gather working in policy-making at a time when growth in advanced economies is struggling to gain momentum. Meantime, governments seeking top officials are again turning to Goldman Sachs for top decision-makers…”
http://finance.yahoo.com/news/Goldman-Sachss-Central-Bank-bloomberg-1168816847.html?x=0&sec=topStories&pos=9&asset=&ccode=
This is one of those few little windows into what’s going on behind the scenes that we get occasionally. Who makes decisions at the US Treasury, the Federal Reserve, the Bank of England, and the European Central Bank? Why the quants and other associated geniuses from Goldman Sachs, of course! It is all the same little club.
I think the simplest, and most revealing way to put it is this: Goldman Sachs is the agency through which the leading Central Banks attempt to privately implement their policy. But at the same time, the Central Banks are the agencies trhough which Goldman Sachs publicly tries to implement *Its* policy and preferences! They are all now so interlocked and intertwined that it is no longer possible for any one of them to go down without all of them going down. Everyone sinks or swims together.
And what the foolish idealists who supported this kind of interlocking system never realized is that this is sweet, sweet ambrosia to every bad actor and manipulator with real criminal talent. What good is it to take over one company, or clean out one bank? For men with true ambition, it was clear that all one had to do was to get inside this interlocking directorate, and the world would be theirs. How can anyone stand against Goldman now? They have intentionally rigged the world’s financial systems with an updated version of a deadman’s switch; if they go down, we ALL go down. They know it, and actually they don’t give a damn anymore whether we do or not.
Want to know what it feels like to be one of these Masters of the Universe? Check out this odd little ATM receipt that’s in the news, found in a parking lot in the Hamptons. (btw, it looks like they know who this was, and he’s not a Goldman guy, but he is a hedge fund manager, representative of the class)
http://dealbreaker.com/2011/06/blind-item-which-east-hampton-resident-likes-to-keep-100-million-or-so-in-his-checking-account/
The account balance is what is making everyone gasp – to all appearances, this is just some guy hanging out in the Hamptons. Checking account balance: $99,864,731.94
You read that right – this guy keeps $100 million in his checking account, just for chump change. Someone like that doesn’t see the world the way we do – and you know what? He doesn’t give a damn about how we see it. If you had that balance in your checking account, would you?
I have a very strong suspicion – more than that, actually – that for a certain small class of people, those who are *really* calling all of the shots today behind the scenes – he’s average. His class doesn’t exist to serve the public anymore – we exist to serve, and to service, them. Think that’s too harsh? Compare his checking account balance to any of ours.
Masters of the Universe, indeed.
YBR. The last time we had a big market/economic correction that was managed correctly was 1919-22. The Sec. of Tres. was Andrew Mellon and it was a fast, deep, short correction. Harding/Mellon were not interventionists and said the market will clear the board. The next opportunity was 1929 and the BOY WONDER Hoover intervened and we wallowed in it for 12 yrs. between he and the Socialist Roosevelt. A common thread here is govt. intervention. Keep the gov. out of it and we are all much better off.
Anglo-Saxon – you are on to something there. Our nation cannot long survive without integrity in leadership and institutions. Too late will the left realize that their modus operandi, the ends justify the means, will wreck destruction on the people individually, and the nation, entirely.
Like the point in Euclid’s geometry, integrity is difficult to define. Yet, we all know it when we see it. It must necessarily entail loyalty to principles, but what principles?
Without the existence of a universal truth, with only relative human righteousness, there can be no integrity. All we have to offer from the point of view of mankind is that knowledge of good and evil that we were not intended to have from our inception.
The liberal view is that if one wants to help the little guy, flawed rationale and unjust methods are essential. Only the end result, or really, the intention is important. No one is really a crook, if they want to “help people” and punish the wealthy.
The nation is in a crisis of integrity because we have rejected absolute righteousness of God in favor of the foolish thinking of mankind. Arrogance is believing that what we think and what we want is important in the universe created by God.
It should be obvious. Integrity is not respected by those in power. It is reviled and distrusted. People with power and authority actually fear individuals who display integrity. Auditing agencies are no different.
There will come a time when an individual with a strong sense of integrity will remain obdurate under pressure to compromise. Knowing themselves to be wrong, management will be incensed by this inflexibility of character. It happens many times every day, all over the world. It is instructive to watch the creative and innovative actions of authority figures as they attempt to circumvent this obstacle. It usually turns out poorly for the person of integrity, at least over the short term.
Docbill@28: Keep the gov. out of it and we are all much better off.
I hear that – loud and clear (just resuscitating the subject makes me angry all over again at the raw naked hubris … like the M.C. Hammer hit “You Can’t Touch This”) and I don’t disagree, with the perspective of hindsight. Congress was scared witless – the magnitude and the speed. Realistically I don’t think there was any chance they would not ‘do something.’ So here we are.
I remember being shocked at Kanjorski’s claim of a $500 billion one day money market withdrawal. Not nearly as shocked as when the media reported it never happened. From seekingalpha (Feb 2009):
So where does the $500 billion outflow number come from? Would you believe: the Sunday New York Post, which on September 21 published a story headlined “Almost Armageddon” featuring this paragraph:
According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening [on Thursday]. The total money-market capitalization was roughly $4 trillion that morning.
Lies, d@mn lies, statistics … and trader chat. Of such things history is made.
“It should be obvious. Integrity is not respected by those in power.”
“In a time of universal deceit, telling the truth is a revolutionary act.”
– George Orwell
YBR.
The real obvious part is that govt. intervention to buy votes with the Democraps victim voting base is the start of the housing debacle in the first place. Read Reckless Endangerment for a blow by blow story of the corruption of all the various govt. segments that didn’t regulate, investigate, or question any of the obvious signs. The logic for the public/private intervention into housing was/is corrupt on its face. The idea that the private sector lending rules of down payment and payment history are unjustly discriminatory is stupid unless you view everything through the prism of social justice. If that is the case then any and everything is wrong. All children should be above average in all homes! YEA right.
w @ 32:
“In a time of universal deceit, telling the truth is a revolutionary act.”
– George Orwell
Orwell was an optimist.
There is some Hindu or Buddhist truism, I’ve lost the exact quote (ironic as you will see), along the lines of, “The true dharma is not hidden but lost in all the false dharma”. Shout the truth from the rooftops, but who will notice? The prophets tried, Cassandra was accursed by the gods.
Epinigosis #30:
“Integrity is not respected by those in power.”
True. I was not liked by many people in the USAF because I not only had integrity but the experience, analytical skills, and communications abilities that enabled me to tell them, in effect, to go to hell and also provide GPS coordinates and a precise heading to get there.
Docbill@33: The idea that the private sector lending rules of down payment and payment history are unjustly discriminatory is stupid unless you view everything through the prism of social justice.
I hear that too. That the (post-) modern version of this country is decidedly less ‘downtrodden’ than earlier versions arriving in NYC is a (short term) end state of complicated heritage descending in no small part from the legacy of slavery. What was the Churchill phrase: “The Americans will always do the right thing… after they’ve exhausted all the alternatives.”
As to the issue of causation, I’m not going to mix it up with the crew here. I know your position. My view is that the post-911 context was more complicated and that the banksters would have found way – one way or another – to employ their new financial “innovations.” If not housing, something else. And never forget the irresistible pull of leveraged returns in a rising market.
RE: the corruption of all the various govt. segments that didn’t regulate, investigate, or question any of the obvious signs…
I blame the Bush administration for that. Congress was warned repeatedly throughout his two terms. The rating agencies and Congressional oversight – the twp last lines of defense that could have easily – easily – contained the problem to manageable proportions – both crumbled like desert sand.
YBR #37:
“Congress was warned repeatedly throughout his two terms.”
Yes, by Bush – as well as a few others, but Bush was the loudest. The Congressional Black Caucus closed ranks around Franklin Raines and declared any action to restrain Fannie and Freddy to be Racist. And when one Federal agency recommended that the mortgage situation be investigated a Republican Congressman, (Richard Lugar I think), demanded that instead the investigators themselves be investigated for even suggesting such a horrible thing.
This was an American version of the Oil for Food program. The payoffs clearly were so large and so sweeping that, like Iraq, nothing less than tanks and armed troops invading DC could have stopped it.
What I would like to know is Where Are They Today? Farkas probably will soon be playing officially supervised golf at Eglin AFB, but where are the people now who were at Bear Stearns and the Boston Fed and asserted that the old standards no longer applied?
During the S&L meltdown of the 80′s I said that we had no choice but to honor the Federally provided insurance but that we need a No Further Financial Involvement List, to ID the people associated with that debacle and make sure they never had the ability to be involved in business above the “Do You Want Fries With That?” level. We still need that List, more than ever.
RWE@38:
Very true about the CBC – not Maxine Waters’ finest moment.
But less so about Bush, I think, whose management style was hands-off delegation of authority. I will never forget the look of anger on Bush’s face when a pistol-whipped Paulson emerged from the White House meeting to brief the President on the details of the crash. I am convinced Bush had no idea. But Paulson knew very well.
His name should be near the top of that list.
Please. You should know that nothing will happen to the big sharks. There will be no trials, no prison. There will be no ropes, no lampposts. Instead there will simply be a slow decline and decay — a “Detroit Writ Large” over the next 20 years.
Yes the dollar will continue to depreciate.
Yes the Treasury will continue to float securities and yes the Fed will continue to buy them.
Yes big corps will continue to hand out stock options to their execs, then do stock buybacks to drive up the price of their own shares.
Yes more people will continue to go onto food stamps (see SNAP and JP Morgan).
Yes more big corps will continue to dump their employees into ObeyMeCare.
Yes US jobs will continue to flow offshore.
Yes the unemployment rate will continue to slowly rise.
Yes the Federal government will bail out the States (like California) to prevent State government defaults.
Yes the Federal government will “capture” 401K and IRA accounts and everyone who holds those accounts into a government program with “defined benefits”.
Yes the MSM will continue to ignore any corruption or criminal behavior related to Democrats, yes eventually the big MSM outfits will receive government subsidies (they are too big to fail, freedom of speech must be protected, etc.)
I could go on. Slowly, slowly, the frogs are cooked. End result: see Detroit.
SS@40: So what’s your point?
YBR.
This rodeo didn’t start post9/11. It started with the Carter admin. The Community Reinvestment Act of 1977 laid the foundation for this bubble. When Slick Willy arrived in 1992 he and his cronies, ACORN etc. went about repaying their voting blocks with heavy leverage and threats to the private sector lenders to relax standards etc. or face law suits and boycotts. The bankers knew this was going to happen and referred to the unspoken guarantee of the Federal treasury as the Greenspan put. It ran for 8 yrs. before GWII ever got near the Whitehouse.
The whole Democratic Federal govt. was involved in this govt. sponsered and faciltated raid on the economy.
22. wretchard
This is the real face of information warfare. The rise of virtual representations of value, which allowed useful services to be performed, was taken one step further to the point of abuse. Not simply to the point of abuse but to where Hitler sought to put it. The Big Lie. A lie so great that nobody would believe anyone would have the effrontery to utter it.
W…
The scam was counterfeiting credit… issuing fake securities. The MERS crew was doing so by the billions.
It’s straight, black-letter-law, securities fraud.
Government Sacks has out done Al Capone, who famously captured both Chicago and Illinois. They’ve never been purged since.
The reason the Money Trust ™ keeps financing the Wan is mutual respect: the Liar’s Guild.
—–
Filmdom is larded up these days with exogenic global threats — real end of the world as we know it.
However, being in the midst of the First Financial World War, the conflict is being fought WITHIN machines.
Viruses and algos are the metastasizing ‘bots of war — jamming and front-running the opfor.
The unhedged fund managers are straddling and stripping the economy.
We are devolving towards Muscovy — and Boyars. ( The Wan calls them Czars )
In the ‘modern’ day we’re seeing a reflux of Money Trust ™ apparats shuttling to and fro. Apparently, two years is more than enough to punch one’s ticket.
Economic indicators were flat-lined until 2001 to 2003 introduced the Subprime Crisis:
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers… In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s. [emphasis added]
Who was pressuring whom?
The economic indicators begin to wiggle post Glass-Steagall: Boom and collapse of the shadow banking system.
As I said, complicated.
Amateurs vs professionals.
“No criminal conspiracy in history has ever stolen on the scale they have stolen, and yet look where they are – STILL the most “respected” firm on Wall Street. And everyone knows it and no one dares to do anything about it.” Well, Senor Equis had been watching Max Keiser for a long time, and thus knew about the banksters = greatest financial terrorists of all time thing. Until he turned it off. Same depressing thing every day. At least Coast to Coast AM has more variety.
During several decades from the 1940′s to the late 1960′s, there were individuals (Augustus Owsley Stanley comes to mind) who strove to manufacture and distribute pure and un-adulterated product that guaranteed no evil side-effects from “bad acid.” In other words, for a period of just over a decade, it was easy to score inexpensive, dependably pure, professionally manufactured LSD. The German pharmaceutical firm Sandoz had discovered the remarkable properties of the drug in 1943, and through the 1950′s and early 1960′s they marketed unimpeachably pure supplies that made their way to the general population.
However you may feel about hallucinogens, for decades it was being investigated by serious researchers who saw people changed for the better by their experiences. On reflection, it’s lamentably consistent with the academic fraud of Psychology that LSD as a party drug was popularized by Timothy Leary and his pal Baba Ram Dass Alpert.
After LSD was made illegal in the late 1960′s, purity of street drugs became increasingly problematic. Suppliers proliferated who had no scruples about cutting their product with cheaper, nastier, even poisonous substitutes.
Okay. Here’s my point: The Left have destroyed the credibility of so many of our culture’s institutions, we can’t any longer take for granted the purity or wholesomeness of ANYTHING. The currency is not just debased; it is F*cking WORTHLESS, artificially propped up by the increasingly frantic and bizarre actions of Treasury and the Fed. All it will take is one moment of panic by some institutional currency trader somewhere in this wide world, and the fraud that is the United States currency will suddenly be refused or deeply discounted by creditors everywhere. It is presently balanced like a pencil on its point, and the faintest eddy in the air will be enough.
• Education in the USA sucks horribly. We have at least three generations of high school diplomates who can’t work up the charges for a hamburger-fries-and-a-drink without PICTURES of the food on the cash register buttons. God help them if they have to make change manually. Even a degree from any of the once-vaunted universities is deeply suspect. (Maybe this is actually a good thing…)
• Unions include a number of people who have essentially been “shanghaied” and forced into union membership. This is a two-edged sword. As those who detest the corruption of their own unions see more and more that their leadership is only interested in stealing their own members’ hard-earned dues, along with taxpayer monies, we can expect to see growing bloody internal conflict and purges.
• Obamacare has set up a crowd of autonomous dictators who will have the authority to deny treatment to those deemed too old, insufficiently productive, politically unreliable, unlikely to contribute further revenues through taxes, etc. The law (if you care to actually read through the 2,000 pages) in many places states that decisions by these stinking bureaucrats will be final, that there will be NO APPEAL to any other authority. The legislation deemed passed by the criminals of the Democrat-dominated Congress of Obama’s first two years, allows these appointed bastards full authority to develop as many new regulations as they like, and gives them undiluted authority to SELECTIVELY APPLY and INTERPRET their own regs. No review by Congress, the people, the courts.
• Over the decades that the Democrat party controlled state legislatures and governors, they managed to appoint their own loyalists to positions ranging from sheriffs and schoolboards to city managers, county supervisors, regional watershed commissioners, and God-only-knows-what-else. This is why we see so many clearly insane and corrupt perversions of US traditions, and Constitutional principles turned on their heads by federal judges appointed by Dems.
• The election process can no longer be trusted. Even before the election of 2000 —which even the vicious New York Times has acknowledged was won by G.W. Bush — Democrat political machines have repeatedly stuffed ballot boxes, “discovered” uncounted boxes of suspiciously democrat ballots, refused to allow the votes of military personnel serving outside the country, and vandalized Republican Party vehicles intended to help transport voters to the Polls. In the most recent congressional mid-term elections in Nevada, many voters reported finding that their ballots in voting machines were ALREADY MARKED AS CAST FOR HARRY REID.
• The U.S. Supreme Court has two new members appointed by Obama who have been found to have brazenly LIED in their confirmation hearing testimony before Congress. Now on the bench and beyond any check, information is coming to light showing that they have voted in cases where they should have recused themselves.
• Attorney General Eric Holder has abused his office repeatedly, pursuing outrageously racist policies, and violating the laws he swore to uphold. (New Black Panthers voter intimidation)
• Obama has circumvented the legislative process by appointing scores of “czars” and giving them authority to promulgate endless regulations that have the full force of law. Until Congress or a subsequent president specifically challenges or over-rides them, those have the force of law, without having ever been considered, debated, or approved by anyone but Obama himself.
• Obama has circumvented the legislative process by using his presidential authority to issue hundreds of Presidential Directives. Until Congress or a subsequent president specifically challenges or over-rides them, those have the force of law, without having ever been considered, debated, or approved by anyone but Obama himself.
• On April 27th, the White House issued a flagrantly fraudulent document which Obama assured us is his actual birth certificate. The simplest examination of the file shows he is a liar and it is a forgery. This, unless everything I understand about the situation is wrong, constitutes multiple felony acts of fraud, far superseding in significance any mere question of his birth. This is not a case of a private individual attempting – as Dan Rather did – to present fraudulent documents as real (i.e., the alleged TANG memos that on examination were clearly produced by modern word-processing methods that did not come into being until decades after Bush served in the Texas Air National Guard.) It is a blatantly forged document, assembled from bits and pieces of other documents in a layered digital construction which shows that wildly unrelated images were culled to create the composite document. It is literally impossible for the elements in that document to exist in a legitimate scan of a paper original birth certificate.
People familiar with the Hawaii system have pointed out that the serial number is also anachronistic, showing a number earlier than for another known example of a real birth certificate issued for a birth on a date before Obama’s.
I downloaded the PDF file myself from the W.H. website, and saw as soon as I opened it up in Illustrator that it is a composite constructed of bits and pieces in multiple layers — an impossibility for a true original scan of an actual document. It is so amateurish that it almost functions as a DARE by the criminals who produced it: “Screw You. We did this fraud, and you can’t touch us. We own the press – they won’t report the story, they won’t report your pathetic lawsuits. We own the courts – they won’t acknowledge your filings. They won’t hear the lawsuits. They’ll throw them out. SCREW YOU. WE WON.”
• In many ways, the Birth Certificate, school records, and so on, are a smoke screen meant to distract from far more serious grotesqueries going on. Obama is clearly not the towering intellect that has been claimed. He is more and more demonstrably a half-wit who cannot function without a script, and every day presents some new crisis small or vast, which finds him out of his reckoning.
• This suggests compellingly that there’s a shadow group that maneuvered him into office and is pulling his strings from offstage, and none too subtly. These people are hungry to control the U.S. government, intimidate the populace, give administrative control to the United Nations — Hillary has confirmed she is negotiating with the UN to give them authority over U.S. citizens’ gun rights — and bleed the country white. The rest of us can go suck salt and die.
• It all means these degenerates are embedded like ticks, and not about to yield up power without a fight. It is not going to be easy. I encourage everyone to learn first aid and keep buying ammunition in all calibers.
Discovered in 2000, dropped in 2004, prosecuted in 2006, convicted in 2011. Right to a speedy trial, indeed.
Ah, yes, the graduates of our finest universities working tirelessly for the people in the highest levels of trust and government perform their best again. Explain to me why these people aren’t treated as Mussolini and Ceaușescu?
Three billion dollars. It’s beyond human ability to repay. It’s beyond human ability on punish in proportion the the crime. (I hear robbing a gas station of $100 gets you 5-10, which actually means 3 months.) If its possible to punish someone for $3 billion in fraud in a human lifetime, we must let petty criminals who steal $1,000 off. A second in jail isn’t worth the trouble.
Epignosis @ 29 & 30:
“Like the point in Euclid’s geometry, integrity is difficult to define. Yet, we all know it when we see it. It must necessarily entail loyalty to principles, but what principles?”
Surely it is the personal equivalent of the scientific method? The experiences of your life or your culture leads you to draw certain conclusions/principles. Those conclusions drive your behaviour which, as you point out in your follow-up comment, is seen as obdurate by authority figures who are not usually interested in principles, even in areas where principle is supposed to be the stock-in-trade. Punishment follows. At this point, the obdurate one can recant (the punishment is critical here), change course because of new “evidence” or stay committed. People with integrity change their minds but only when they believe one of their principles was too narrowly cast.
Seen from this perspective, “helping the little guy” with flawed rationale and unjust methods is inherently corrupting. Once a culture becomes therapeutic, that is, it abandons the principle that the same rules apply to everyone, it starts to decay. I think this is why, for all of their barbaric cruelty and dubious logic, the Islamists can appeal to those who yearn for a coherent set of rules to guide their lives.
“but where are the people now who were at Bear Stearns and the Boston Fed and asserted that the old standards no longer applied?”
One example that Micheal Lewis followed in his book, both representative of the class and quite notable in his own right: Howie Hubler, from Morgan Stanley. Responsible for $9 BILLION in losses for Morgan Stanley from his own trading desk alone – the biggest lost incurred by a single trading desk *Ever*!!! He had gone long on several billion dollars worth of derivatives with Morgan Stanley’s money, earning himself massive commissions for each trade. He thought one or two might go bad, and never imagined the simple logic that they were all essentially the same thing, and that on the day that one went bad they would all go bad simultaneously.
Anyway, what happened to Hubler, who threw away $9 Billion of other people’s money so he could make some commissions? First he went on “vacation” – then he never came back. He’s currently living in New Jersey with an unlisted number and unlisted address – but guess the kicker: He left with his $25 million dollar severance package intact! That’s because *none* of them had any language in their severance packages making them liable for any losses.
Every one of the men who were behind this walked away with millions – often tens of millions! – in their pockets, regardless of whether they actually made or lost money for their firms. In this game, you got paid just for playing, not for winning or losing – it was a Heads, we Win, or Tails, the Public Loses! game from the start.
God designed a system where everything is its own reward or punishment. Please remove take-your-pick corrupt whoever from a position of power. A part of them wants to be taken out. They are in a hell of their own making already.