Category Archives: Banks

Jefferson’s nightmare – American children wake up homeless.

Thomas Jefferson said in 1802, “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.”

And here we are. Hedge Funds are becoming the new, the faceless: Land Lords.

Banks bet that a carpenter, for example, cannot pay on a $350,000 dollar mortgage when the building boom was halted after they, the banks, cut the credit. That is OK for the bank is made whole by loan failure insurance called a CDS or Credit Default Swap. It is called that confusing name ‘swap’ because this insurance cannot be called ‘insurance’, because insurance is regulated. Perhaps the bank gets paid a premium when the carpenter is 90 days late, or perhaps when the carpenter and his family are evicted. The CDS world is not regulated. Anything goes. So if the the CDS premium only pays the bank a hundred grand, that is OK, the bank takes out as many CDSs as it likes, say 40, and gets a big payoff when the carpenter moves out. The CDS world is still unregulated today. Confusing? It is meant to be.

But so sad, there is no one to buy the house at $350,000, or even $200,000. No Problem, the bank has made its money already and did not have to wait for the pesky loan to mature. It now sells the house to a hedge fund for thirty cents on the dollar and voila. The bank is done. No maintenance problems. Next?

I have told this tale simply, for actually there are likely three banks involved, the note holder, the ‘investor’, and the servicer. The servicer is the bank that collects the money every month. The ‘investor’ may not be a bank at all, perhaps the bank gets a pension fund or municipality to put up the money. And you might be right if you have suspicions here…. sometimes the ‘investors’ do not get paid back when the loan fails, hey, I said this was unregulated. But the servicer has made a fine profit.

But wait. Isn’t that funny language? Is ‘servicer’ farm speak? Who is getting serviced?
Well it seems like just about everybody but the servicer is getting serviced. It is unregulated. Foreclosure laws vary from state to state. Bankruptcy laws are constitutionally mandated to be the same everywhere… but not foreclosure. Interesting huh? Anyhow, investors may lose. The house-holding families lose. The neighbors lose. The communities lose. And if small businesses used their houses for collateral as almost all did, then the job environment loses because the businesses have negative collateral.
Also the local governments lose, as taxable properties fall in value, cutting revenue requiring more lay offs. This is called a vicious cycle. But some bankers may get bonuses, and thus can play their part in the costly politics is money game as it selects who ‘represents’ and protects us.

Thomas Jefferson long ago saw America as the land of the yeoman farmer; the independent spirit informed by this beautiful land and concerned with the welfare of his neighbors. For he had seen the White House in Washington D.C. burned, in his lifetime, and had seen the boot of imperial oppression and its effects. Jefferson’s America was composed mostly of farmers who did not need explanation that when a bull mounts a cow in order to make a calf it is called ‘servicing’. And conceptually at least, a bull mounting a cow is so much easier than mounting a hard drive today. How times have changed. And how that fear of Jefferson’s, that American children wake up homeless has come true.

And Jefferson’s nightmare is just in the first act. Who will buy the houses from the hedge funds?

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Fourth of July Quandary

Yeah,  We are going through a Big Change and I bet you cannot make it.        But I dare you.
You see, I love this country and I think we are losing it.     Here is the Quandary:
Sure, we have a little financial problem, some persistent unemployment, a wad of debt, a war or two or three, (if you don’t count the assassination drones), and a decades old political stalemate that is really mated in stale, I mean really puewy stale, but that leaves out the failure of the people to fund the press and the failure of the press to cover the important stuff when funded only by commercial interests, a supreme court that thinks money is speech, two administrations that think the constitution is meaningless words, but the Big One, that big slow moving change that we all see and don’t want to admit, and is leaving muddy boot prints all over the future of our dreams:  global climate change: climate chaosYup, you are right and I know it too.   All the Republican Presidential candidates deny climate change as a point of pride.  “How the hell can you grow your way out of a depression, if you admit that the consequences of that growth would just make things worst?”   And what does worst mean?   Migrations of people seeking higher ground and, well, food.    No, not timid people,  desperate ones, wars.

Truth is, the Democrats are not much better.  While mouthing green jobs, and I have to laugh when they call robotics green  and  jobs, they too think the only way out of our recession is to manufacture more stuff.  Ah, efficiency. Democrats can only see growth as the answer too.

OK, maybe the case can be be made that since 82% of Americans don’t have passports, they would not know nor care that Australia had a flood the size of France and Germany put together.   Or that the Russian wheat crop failed. Well, Australia’s conservatives used to deny climate change too.  No more.   Will cyclone ally, or the Mississippi flood, or hundred square mile fires wake up ours?
Back in history at a point similar to now, FDR primed the pump.  He got young men working in the CCC camps instead of inventing a life of crime.  Sending money home.  Imagine that.  Our current stimulus envisioned a giant pump priming, thinking there was just one big pump: the banks.  Truth to tell they can just deal with money when it is moving, they don’t make it move, people do, real ones with real locations… on earth.  So how do we get real people in real jobs?, and that could be doing anything since only 8% of us work growing our food.  Planting trees, cutting brush and making trails worked in the 30’s and made kids into strong men with good values.   Kids today want to manipulate stuff with their fingers, because that is all that they have seen: manipulation, money for nothin’ and ever better remotes.  But I digress.
So these parties, the Democrats and Republicans cannot seem to find a lick of common sense among ’em.  Now Will Rogers had some.  He said, “The United States had two great friends…………..  the Atlantic and Pacific Oceans.”   I dare say he is still right even though we have spent TEN years traveling half way around the planet, fighting in the place called the Graveyard of Empires: Afghanistan.We are told by both parties it is for national security. Well my goodness, look at the map. Their neighbors are China, Iran, India and Pakistan.     Talk about a rough neighborhood far away.  Are we snookered or what.  For a decade!  What is this national security?  Domination of all places anywhere on the globe?   It seems to be of the same quality as anything that is  securitized. Even if we had a booming real economy rather than one based upon insurance, financial products and speculation on house values we could not afford that.   Darn.   I was going to dare you, not wheedle bout the thicket of our tarbaby mess.  Seems like I got off my trail.

The dare comes in to design a wiki, you know, one of those computer internet gizmos that allows a lot of folks to work together and figure stuff out.  I think the ancient Chinese saying says it best: “If we don’t change direction, we are bound to end up where we are headed.”  And here I think we need to put our heads together and not expect some celebrity to fix it.  We need change that is not a slogan.

Yesterday ( June 30th)was funny day, not ha ha, when the Greek and British peoples rioted in the streets because the bankers had the legislators renege on pensions, a lifetime promise in those countries.  It is called bait and switch.  In response the US stock market gained 150 points.  What does that say? It seems crazy to one like me.  Bet, we’ll see those same kind of riots in the US within two years time.   You have heard the bankers, haven’t you, complaining about all the greedy people.  Folks get funny when you revoke a life long promise. Not ha ha.
I’ll tell you this, people don’t like to get a screwin’, and there are at least 6 million Americans that have got a good one as the banks have foreclosed them out of their home to collect upon credit default swaps and bonuses.  And the screwin’s not done.  And the politics ain’t mappin it, and the press ain’t covering it, and well, that’s why I ask you to help design this wiki.Because without some meta thinking, some big creative thinking, we are going to have a big train wreck.  Our housing has already lost more than after 1929, and the Parties, if you can call them that are, Clubs are more like it, are still having a pissing contest.  Dumping the economy into the gutter…. simply by having the firm and stupid Republicans come to loggerheads with the firm (well, not really) and stupid Democrats about the debt and create here, just what we observed happening in Greece and Britain yesterday.

So I double dog dare you to figure a way out of this fix.   Or to figure a path to a way……. out.   And don’t tell me you are waiting for Elvis to lead the way.

yours,The Old Sodbuster.

Elections Niagara, here we come, I can hear the Roar.

Our political stance , before and after this election  is a slow cartoon.

We are a canoe crosswise to the current , upstream from Niagara Falls and half of the paddlers are paddling right, half are paddling left, and our captain is saying right, left, right…..      What is next?

This mid-term election cost Three Billion dollars,one billion more than the last presidential election… which  shouts what we call elections have become auctions.  They are not elections but bribe-a-thons… and why?  Because they Pay.

The elections tell us that people are very unhappy.  They recognize they are getting screwed. Fine.  and yet seemingly are economically ignorant.   We have the largest Republican majority since 1928.  Dear reader of history… what does that portend?  Look up what happened between 1928 and 1938 and you will find The Great Depression.    No offense, but releasing the entrepreneurial spirit when nobody has any money and  what you get is Mexico, not Nirvana.   Except Americans(Yankees), in general are neither as happy nor generous nor as entrepreneurial as our neighbors to the south. (Drug war exploits, which have a US mainspring, to the contrary).         History will not repeat itself, as Mark Twain said… but it will rhyme.       And piking will not change this trend.

Yet there is a definitive reason that catalyzes our current dilemma, which we could call the failure in the experiment in democracy.   The free press has failed the electorate.  It is an amnesia engine.  Why?  We have confused free-gratis with free-liberty.   We expect our news to be free of charge (gratis ) and forget the dictum, he who pays the piper calls the tune.     Billionaires determine the “mainstream” news channels, fund the pundits and we allow them to do so, with newspapers that are shoppers (advertising vehicles) with a prepurchased editorial slant, and No effective investagitive reporting.   Why?       He who Pays the Piper Calls the Tune.     The tune is divided government, and thus corporate freedom, paid for by the Koch brothers and the crew that has driven our economic bus over the cliff.  Hello New York.  Hello Hedge Funds.  Hello Insurance, big Pharma and the usual suspects.   On this point FDR and Benito Mussolini agreed: “Corporatism is Fascism”.     Here we are with corporations calling the shots, foreign wars a-breeding with their very predictable profit centers, and domestic population in disarray.

The private equity people are doing just fine though, thank you – they say, for all this 1/4% money.   The economic lingo for our current situation is called the “consolidation phase” of the business cycle.   That is where the agents that have good access to credit (i.e. friends of the money center banks) buy up all the ‘troubled assets’, meaning anybody that is having a tough time in this tough economy.  Are you one of these private equity folks?   I doubt it.  Less than 1% of us are.

The cure in my view is threefold.  a)First we must cure our collective amnesia.  We need a functioning free (liberty) press that is funded by free (liberty) people. We must  rekindle having two ‘newspapers’ in each city, meaning a news gathering organization that is strong enough to fund, support and defend investigative reporters, and those ‘newspapers’ need to be funded by You, Dear Citizen…. not special interests, business interests, or any other none geographic, non-human interest.  And funded by your neighbors as well, with whom you are willing to discuss the events of the day.   This could easily be done with some thoughtful legislation (sic) requiring that one half of your ISP bill be paid to content.  The People must fund the Press from their own pockets.

b) Second we must recall the first three words of the US constitution and make them real:  “We the People”.  It does not begin with we the corporations, we the lawyers, nor even we the supreme court justices.   This government gets its authority from the consent of the governed  and its creations, such as the military, the CIA, the corporations, and the banks are subordinate to that.  Currently we have this upside down.  If you, fellow citizen are willing to lie down and accept that money is speech, and corporations are people, then the Constitution, which all of our military personnel and all federal officials swear to protect and defend, is dead.   It is moribund at this state, you must agree.   I assert, as a veteran and a man in his 65th year that At No Time during my life has the Congress Declared War though the US has initiated some big ones, Viet Nam, Iraq I, Iraq II, Afghanistan  and many smaller ones and it seems on the eve of this election an new one with Yemen.    Yet in order to assert our rights under the constitution, we must effectively communicate as a political community, civilly, and with respect of each other and for the differences that are a natural outcome of human perspective.    We shall either be free(liberty) or oppressed, and the trend is not good.   We will likely be oppressed if one half of the electorate believe the other half are idiots.

and C) We must reclaim our money.   We must recognize, realize, and reclaim the power that comes with the creation of money and make it a community property.  Yes we must haveh checks and balances to be certain it is not abused.  Few understand the archana of the Federal Reserve System with its twelve districts, and many presidents, and boards of directors as well as boards of governers and its firehose of informations and it’s one perminent member of the Open Market Committee.    Yet while its original plan may have been well intended (or not) as a balance of public and private interests in creating our money, the result is five money center banks call the shots.  They make ungodly sums the would make a hedgefund director blush, and with that engage in social control.  They fund the auction/election process lamented at the top of this article as well as funding the empire which instigates the wars also mentioned above.  Electoral funding reform is a downstream solution.  A key to reclaiming our money is exemplified by the bank of North Dakota, a state bank in which the citizens of that state receive the benefits from that money circulated and created in that state.  Your interest write off my make your mind figure that bank money is free to you… but your wallet remembers.  The banks have swallowed up the tax space.  Ellen Hodgson Brown has done a wonderful job of explaining this very subtle, yet powerful way of harnessing for the good, the immense power within the creation of money.   The power of money must, with checks and balances, support the domestic public.  Not empire and the purchase of elections and wars abroad.

An Epochal Land Grab

The Federal Reserve just purchased  $1.24 Trillion on mortgage bonds.    That means.   The Fed has just swept $1.25 Trillion OF LAND ownership into their pocket.
That central banks create money from nothing is confusing to the public, but there is not enough gold for a world with over 6 billion folks, and money gets its value from work, not rocks.  But banks claiming land out of the confusion they themselves created  is over the top.
PT Barnum said there was one born every moment.   I have been paying attention for a long time and it was only after my 60th year that I understood that the Fed was as Federal as Federal Express.  I am not being cute here, I wrote a thesis on the monetary system in 1978.  Economics does not teach about the creation of money.  Even some bank managers do not understand this.  Who holds the Bag at the Fed… are the member banks, called the ‘money center banks’, not the US government.*
Here is my alarm point:  The private creators of money have just swept 1.25 trillion of our land into that bag by “purchasing” mortgage bonds.   I understand how it is (necessarily) mystifying that money is created from nothing.  This is only understood in rarified central bank circles. The money supply must vary with the volume of commercial activity. But claiming land out of nothing is another issue entirely.  That is claiming income streams that produce in perpetuity into private hands at the stoke of a pen.  I am OK with the Treasury owning land that has gone into limbo because of banking missteps in the old walnut shell trick.   This represents some semblance of the commons.   And it would lighten our tax load.  The banks are not a commons, they are private, and by the way, caused the crash of 2008.   It came to pass because of bad gambles with derivatives by money center banks and AIG.  (when the subprime market was $1.3Trillion which got all the press, because people could understand it , whereas the bank and hedge fund derivative trades were $60Trillion, got little ink outside the business press because they were hard to describe.)
The result of the transfer of $1.25 Trillion of mortgage paper to the Fed is a World Class land grab.
This is a violation of the commons, of house holders, of the American people in my opinion.

*Understanding Central Banking is a head scratch.   It was a bone of contention between Jefferson and Hamilton and Jackson to boot.   It’s previous incarnation was with the Federal Reserve Act of 1913 and created a central banking function ( a lender of last resort) but left the ownership of that power in private hands.   What is now going on in August of 2010 is seat of the pants and brand new territory.    My recommendation on understanding this is by reading the book: Web of  Debt by Ellen Hodgson Brown.  It is clearly written, and an amazingly well told story.     If only the younger generation can get ahold of the old walnut shell trick before I did.

Frank-Dud Finance Dance

When is a law not a law?  When it is a bag over your head.

The Financial Regulation Bill.. aka The Frank – Dodd Bill is 2,315 pages requiring 399 rule-makings and 47 studies by yet unconstituted commissions. One familiar with the ways of Washington DC would see this as a tremendous opportunity to lean on lobbyists and the “legal community” to fund the next election cycle.   But fix the financial system: no.

The good part (politically) is the consumer protection agency, although it is housed at the Federal Reserve, is a gesture toward lessening the retail end of getting screwed.   Un-addressed is getting a wholesale screwing, leaving the too big to fail crowd in control… and it is not a big group: Goldman-Sachs, Morgan-Stanley, Bank of America, and Wells-Fargo.
They call the shots, get the money at Zero to 1/4 of one percent interest and loan it out at….5% if you are annointed and the sky is the limit if you are not.  They buy up small banks one after another.

Meanwhile the “high frequency trading” world is un-scathed, with hedge funds trading in the milliseconds. Sorry about your pension being on the down-side of the next ‘flash crash’.

Some wag has mentioned that CEO’s have difficulty relating to stockholders that own their stocks for less than 60 seconds.

A question that arises from this is: What is property?   What is ownership…. when everything is transitory and momentary. It is a grave question that casts light on the shadow banking concept: Hedge Funds, derivatives and all.  When eveything is owned momentarily, as a trading chip, and the ultimate bag man is the taxpayer….. why are we still projecting ownership on the banks?  They Blew It!  We picked up the pieces.  So why do we think the banks own everything?  Perhaps it is habit.   They are the authors of the chain-letter, but neither  are they authors, nor creators of  productive activity.  They have been seen as the permission keepers,  and have been granted the power to create money, via loan creation, which is authorized Not by the Treasury, but by the Federal Reserve Act of 1913.  Arrgh.  I am entering the swamp of history.   I cannot here deeply illumine you on this simple but elusive point, namely, that beyond the gold, and silver standard as we have been since FDR and Nixon; money has been created only by the creation of loans and that had been done, not through the US Treasury which only mints coins, but the cartel of the ‘money center’ banks mentioned at the top of this article.      Oh, and the interest to pay on the loans, that is not created, thus our constant need to ‘grow’.  And when loans end (due to default or the loan gets paid off), that money  that was created: ends,  it is un-created..

I confess, I cannot explain the whole financial charade to you in one post, but can recommend a book that can, namely:  Web of Debt, by Ellen Hodgson Brown.   Interestingly written, historic, and a story well told.

Anyhow  we seem to be entranced in the projection of authority, of (phantom) ownership.

How?

It is the banks that own the houses, becaused they borrowed the money from the Federal Reserve system at less than one percent and loaned it out at 5 to 19%, while the builder built it ( at a fraction of the sale cost) and the banks then sell that monthly cash flow to some sucker in the the ‘securitized’ world, perhaps your pension.    OK,  if I say any more  all our brains will hurt.

Let is be said that the Frank-Dodd bill, is not close to law, for nothing is settled within the devils in the details 2000  plus pages, except 399 rule makings yet to make. I would suggest making contact with your senator or representative and say you want a 100 page bill that separates banking from trading, that breaks up banks that are “too big too fail” and thus too big to govern,  and to prohibit derivatives beyond the first degree. (yes, I will explain this later)

Business will not prosper, until the game is unrigged.

Tune in to a subsequent post for insight into the world of derivatives.