A new struggle for Independence begins

I'm afraid America's fallen off track, perhaps irrevocably so. Humpty Dumpty fell off the wall kind of stuff. We're getting beat by the Chinese, who are working for less. Our leaders have abandoned domestic employment for offshoring and outsourcing. Worst of all, there appears to be no end in sight to the draining of the American economy.

Now for quite some time wages have been falling in real terms. "Real" is defined in economic terms as the true purchasing power of the dollars that we earn. If prices go up, and our wages go up a corresponding amount, then income gains are cancelled out.

Most Americans are woefully ignorant about the present value of money--the concept that our money loses value over time. Instead, prices are said to be going up while in fact it's the dollar that's going down. Nowhere has this been clearer than with the price of gold. Speculation drives prices up, yes, but it's ultimately the weakening purchasing power of the dollar that makes commodity prices rise.

If Americans really knew how the current banking system was set up to devalue their currency, they'd grab their pitchforks and storm the castle. Ignorance therefore plays a vital role in perpetuating the myth that the dollar is a store of value when it's really designed to lose value, 96% of it as a matter of fact since the inception of the Federal Reserve.

So if you had bought dollars in 1913, put them in your mattress and pulled them out, they'd be worth four cents in today's money (excepting of course the value of the physical currency to collectors.) Perhaps a better example would be the penny. So devalued has the penny become that Congress actually had to pass a law to prevent pennies from being melted down for scrap--the copper in them is worth more than one cent. Eventually our currency will be so devalued that a penny might only be worth a quarter of a cent, an eighth, and so on until its copper value becomes too expensive to justify its use in the coin. Perhaps you've seen the cheap foreign currencies made from aluminum.

So the penny is a proxy for our weakening currency. Yet most Americans ignore the constant devaluation of their currency. I say "their" because it is the people's money. Their representatives in Congress--at least they should be "theirs" according to the Constitution--have the exclusive right to control the issuance of money. Every year, Congress grants the Federal Reserve the right to distribute money. Not surprisingly, every year the Federal Reserve brings into existence more money, meaning the money out there is worth less.

Say the Federal Reserve expands the money supply by 100%. Instead of, let's say, $5 trillion in circulation, there's $10 trillion. Imagine if a corporation did that with their stock, doubling the amount issued every year. What would happen to the poor saps who bought last year's stock? Where would the price go? Well unless the company had a banner year, the stock price would likely fall, perhaps by half. Why? The ownership shares which the company issues in the form of its stock get diluted. More shares: existing shares worth less.

Now the same is true with your money. The government upon which people depend to preserve the value of their savings is actually working against them. It's diluting the value of existing dollars by printing or distributing more of them.

Now of course the Treasury and the banks that constitute the Federal Reserve have their little tricks...well, ok, maybe not so little...to conceal the massive increases in money supply. First, they abandoned tracking the amount of money in circulation a few years back. A valuable statistic called M3 was no longer made public. As a result of the change, following the real quantity of dollars out there became more challenging, subject to more subjective analysis, and therefore harder to pinpoint.

Why did the government abandon tracking? Well, you could say they have something to hide. Something called shadow banking. Shadow banking is a system of loans and securitization of debts that allows banks to create money in the present from debts payable in the future. By lending amongst themselves, banks can convert a stream of future payments--a mortgage payout, let's say--into what's called a "present value". The present value is of course dependent on how certain the debt is to be repaid. As we saw in the mortgage crisis, the level of debt repayment uncertainty rises, so too does the risk premium, or amount that lenders charge borrowers, goes up. Perhaps way up, to the point the funds from investors simply aren't available, except at usurious rates.

Now the problem with securitization of all those mortgages--securitization means the process of converting future payments into a present day value--is that assumptions have been built into the value of the debt, assumptions that may not be true, or subject to changing conditions.

As the uncertainty of mortgage borrowers ability to repay climbs, the appetite for risk among the banks declines. You end up with a situation a lot like you see today, where lenders are hesitant to lend, or at least stop lending cheaply.

Now the purpose of my explanation here is not to review the reasons for the mortgage crisis. Instead, I wanted to offer as full an explanation of why the US economy is about to experience a second meltdown.

History often repeats itself. If the causes for the meltdown in 2008 (and the decline in stocks through 2009) still exist today, then the probability of a reoccurrence remains. And the magnitude of the correction could be even larger if the causes of the past meltdown haven't been reduced or eliminated.

I could go over the conduct of companies which had a key role in the mortgage meltdown--either profiting from it, or exploiting it and/or the subsequent bailout, but that's not relevant really for a couple of reasons. All that really matters is the system that allowed the mortgage crisis to occur still remains.

If you've read anything that I've been saying over the past four years, you'll surely know that I'm predicting a major crisis at this point. And it won't be an economic cause. Whatever our nations struggle with international competition, the reality is that our financial system is completely demolished. The regulatory bodies failed the American people in 2008 haven't been repaired. The so-called financial reform, as far as I can tell, doesn't go far enough in preventing the kind of abuses that made the 2008 crisis possible.

Former bank regulator Bill Black has blamed the collapse on mortgage fraud. Fraud is an important word. It essentially means to employ deceit or trickery. The truth represents a threat to the fraudsters; they operate using a opaque screen to cover their misdeeds. And our government, which should be regulating the financial entities, has been compromised utterly by their political influence.

We've reached a point of no going back. The relationship between cronies within/into/out of government, and corporation and government have become too strong. The democratic will of people--as established in the vital preamble to the Constitution--has been violated. As a result, I can go on no longer in placing my faith in the operation of government, or its role in regulating the currency.

In my opinion, the lack of regulatory enforcement is a window into the murky cross-relationship between those with money and those in power. The only way to end such a relationship is to let the economy go where it must--where the pain of going as as we do exceeds the pain of change.

Of course the ramifications of no change will continue to grow, and manifest themselves in the state of our economy, and in other troubling ways. Catherine Austin Fitts has labelled the system built around making profit from misery a tapeworm economy. The Military Industrial Complex and the Banking Establishment have grown so powerful that they now control our nation's policies at the highest level, no matter their popularity or acceptance. And the two-party system avoids accountability, by exchanging twiddleedee with twiddleedum every so often, in periods long enough to capitalize on the American public seeming mystifying inability to remember.

Why do I write this? Not to depress you, the reader, but rather to warn you of the need to take action. Protect yourself from the constant devaluation of the currency. And unfortunately I must recommend you divest yourself of the American stock market until such time as the Republic--and its controls over the corporate sphere--have been reestablished.

I'm not expecting miracles overnight. It will take a great deal of courage and strength to contest the status quo. Absent resistance to the order, it's likely the economy will slide into ever worsening stagnancy, with constant devaluation of our savings and lethargy in the stock market or worse. The need for real lasting political change overshadows now whatever confidence remains in the system, a system so corrupt and rotten it can only be removed in entirety. Pull the root, and don't hack at its branches.

Obama spins BP spill, and we get to pay

Below is a crosspost from my health and environmental blog, where I post infrequently.

I did see Obama's speech last night, and found it wholly inadequate. He failed to mention that BP was denying responders the use of respirators. Apparently people along the coast are experience dizziness, headaches, and other issues from the leak and, quite possibly, the toxic dispersants as well.

Last night, Obama said nothing of BP's chronic understatement of the size of the leak. The number I've been able to translate from gallons (yes, the size of the leak is being obfuscated by the use of barrels instead of gallons) is about 50,000 barrels a day (calculated from 42 gallons/barrel and an estimated 2 million gallons/day.) A far cry from the 5,000 we were told were leaking by BP for months. The discrepancy speaks legions about BP's credibility, and Obama's as well.

As I say in the article below, I guess it was the size of BP's surface tankers collecting the oil that gave away the true size of the spill. Nothing was volunteered. And now we can only guess at the size of undersea plumes, whose existence BP has denied.

Now today, after negotiating with BP for four hours, Obama said a $20 billion fund will be set up. He neglected to mention when. It was only by digging through the details later that I saw this in an AP article:

"Svanberg announced the company would not pay dividends to shareholders for the rest of the year, including one scheduled for June 21 totaling about $2.6 billion. The company will make initial payments into the escrow fund of $3 billion this summer and $2 billion in the fall, followed by $1.25 billion per quarter until the $20 billion figure is reached."

Excuse me? Where's the beef? The first installment hasn't yet arrived. And what are the poor people on the Gulf going to do should BP go bankrupt? With government serving the corporate interest (above even its own?) we really are on our own.

Begin post:

I'm writing this before President Obama goes before a nationwide audience this evening. I'm not sure if he'll characterize the response to the Deepwater spill as "his own." No one, it would seem, wants to take ownership of the response. The spill is an economic, environmental, and political liability. It may now be such a huge political problem, now that it hasn't been dealt with in a forthright manner.

BP has been actively trying to cover up the disaster. Obviously, they have the most to lose by admitting that the spill is out of control. For weeks, they refused to consider that the leak was anything more than 5,000 barrels. Fedgov has--and is, depending on what Obama will actually do differently--demurred control over the clean-up to BP, a questionable act considering how BP's failure to follow safety rules and regulations led to the crisis.

We've only recently been able to guess at the size of the leak. BP's damage control efforts have been more about controlling public relations and the release of negative information than stopping the leak. The FAA has obliged by preventing overflights of the spill area by media personnel. Just as perception management overshadows the political leadership, so too does BP try and obfuscate damaging press and deflect criticism to prop up its sagging public image (limiting lawsuits is another goal.)

As hard as Obama might try to sound tonight, it's a safe bet what he does won't be anywhere as aggressive. It's a recurring theme: talk tough and do little to nothing. How much more bad leadership can America take? As a defender of the environment, I guess I might take some consolidation in the carbon taxes he'll likely try to sell. In my opinion, trying to take advantage of the spill is grossly immoral, even if it points the country in a different direction.

Fact is, the buck stops at the President's desk. If for whatever reason he can't get BP to stop the leak(s ?), he needs to do it himself. Yet he's said he lacks the resources to stop it. Can we honestly believe that? With all those trillions spent on our war machine, I can't believe we can't put anything out there on the water. During an oil spill off Saudi Arabia, huge tankers vacuumed up the oily water. Why can't we at least try to do something like that? Deepwater will likely do more damage to the US--economically--than any terror strike could have. Yet we haven't anticipated it, and now must depend on the polluter's capability to respond, which so far now eight weeks later, has been...surprise...inadequate.

We could talk forever about how the spill could have been better dealt with. We could also talk in volumes about how the spill could have been avoided. I'm sure the mainstream media will cover these valuable issues, judging from the scale of the disaster. So in this respect, don't expect me to repeat what's regurgitated but rather spotlight the less published secrets and schemes meant to mislead the public and cover up the extensive relationship between policymakers and Washington and BP.

Now Obama might say anything tonight. And some people will believe him, no matter what he says. It's often easier to believe that something will be done than see it done. Obama's time in office can be characterized as lip service to the ideal, and doing the complete opposite.

I could list many examples of what Obama said on the campaign trail he didn't do in office. The glowing one, of course, is the failure to draw down U.S. forces in Iraq according to the promised timeframe. Escalating the Afghan war is something Obama never said he would not do, however.

As a side note, I found it amusing that a report just came out indicating Afghanistan had $1 trillion in minerals and natural resources. Of course, this bounty is the reason our occupation has lasted so long--a point I made on my blog years ago. If we won, we'd get to go home. A trillion dollars is a pretty good motive to find terrorists behind every bush, and press an unworkable plan into an unwinnable occupation. And meanwhile the Military Security Complex fattens itself on the blood of innocents and young Americans caste into the fray.

* * *

According to the Los Angeles Times, Rahm Emmanuel, Obama's chief of staff, was staying for five years in a Washington, D.C. townhouse owned by a BP adviser. Emmanuel has been known to say that no disaster should go to waste. This fits exactly with Naomi's Klein's concept of disaster capitalism, where corporation profit from inadequate enforcement except, of course, instead of greedy corporations it's crass political opportunism.

Money rules the Washington establishment, and the consensus in Washington is that corporations pay better than serving the public interest, at least as long as illusion that the public is being represented can be preserved. This is why the art form of perception management has latched onto the Washington establishment--feeding the myth that politicians are still serving their constituencies.

Maybe the unholy alliance between the corporate and political worlds has been at work for longer than we've realized. Wherever we now stand in the historical cycle--whether at some new low point or somewhere along a slippery, downward slope--it's obvious deft management of the media is seen as more than valuable than actual leadership. Preserving the impression that something is being done ameliorates the public's rightful skepticism. Meanwhile, deals in the back rooms and corridors of power allow the wealthy and corporations to avoid accountability.

Regulations are much criticized despite the fact they were greatly eviscerated prior to the financial crisis (see the testimony of Texas professor James Galbraith here.) Rather than presenting an obstacle to growth, regulations--if enforced--protect the markets. The trillions of equity (I've heard $10 trillion real estate and another $10 trillion in equity values) that disappeared didn't have to vanish. Yet the companies who kept pushing risky bets in the Wall Street casino gained the most from short-sighted speculation, exactly the thing Glass-Steagal tried to prevent prior to its dismantling by Congress.

So now, with all that oil bursting from the busted, under-maintained well in the Gulf, it's clear that a lack of enforcement is to blame. Self-regulation, a term that came into existence during the get-rich 1980s, simply doesn't work. The forces of greed are simply too strong in the corporate enterprise. Profit-taking is simply too short-term an approach to consider longer term consequences, even if they include self-destruction. British Petroleum stands now on that precipice. And if it'd go under, many investors and stakeholders would pay the price.

Those that profit the most in the short-term aren't likely to hang around once their mistakes impact the companies they once led. The executives who should have monitored the company's compliance will jet away and land in exclusive retirement retreats on golden parachutes.

We could blame greed for this--or the structure of corporate governance. All too often corporate boards rubber stamp the decisions of upper management. Shareholders rarely question the ethics or morality of board decisions, especially in regard to compensation committees. All too easy it is for board members to consent to huge stock options packages for executives, based on quarterly performance, rather than measure performance against longer term objectives.

The environment is a stakeholder in all corporations. Rather than look at the earth as a passive backdrop, a source of raw materials, to be plundered 'til exhaustion, all corporations must look at sustainability. Implementing sustainable practices requires full commitment by shareholders and corporate Board members who perform the invaluable function of holding executive management to account.

Like auditors, independent outsiders need to observe corporate practices and report on them. Most importantly, regulatory lapses must be corrected. If government regulators have recurring issues with a company, or its methods, the shareholders and directors need to take action. The BP case clearly shows the consequences of non-monitoring. And preventable are the effects if the causes are obvious for all to see (except perhaps the executives who are trying to squeeze maximum profit out of their operations by undercutting safety.)

Well, if BP should go under, I think the environment will have its say. Again, BP's misconduct wasn't isolated or random but rather sustained and serious. The company had been put on probation--which I said in my last post is an utterly meaningless proposition that obviously did nothing to push the company in to compliance.

Another huge lesson is for government. When regulators fail their job--as Galbraith's testimony linked above explains--everyone loses. Not only the offending company--the Enron, the Worldcomm, the BP--but so many people who had done nothing wrong. The lesson lies in government doing its job, and walls being put between the regulators and regulated.

Enough said. At this time we don't need lessons, we need to prevent the tragedy from worsening. Now isn't the time for opportunism, or even recriminations. It's time to stop the spill. If Obama can't do that, he'll almost certainly be tossed aside in 2012.

Obama appears to be having a hard time getting BP to pay all its claims. This shouldn't be a surprise. If you read my post on blogspot last month, you'd have been reminded of how long it took Exxon to pay the fisherman in Prince William Sound, and how inadequate their compensatory damages had been as awarded by a corporate-friendly Supreme Court some twenty years later.

Now if Obama can only spend our money--or our children's children's to be more accurate, as it's all borrowed--to clean up the spill, I'd say fedgov has become utterly toothless or so wholly beholden to BP that it socializes the costs of the companies pollution. Either alternative is unacceptable. We do know the taxes on oil drilling will go up, presumably to pay for future spills. Guess who gets to pay for the taxes? You. So because fedgov (especially the notorious M.M.S.) failed to regulate, and BP didn't self-regulate, you pay.

Unless of course you live on the Gulf, the largest impact will be higher energy costs. If Obama chooses to exploit the disaster by urging a carbon tax scheme, it'll provide a dark motive for not handling the response, or letting BP bungle it. Another impact: shipping into and out of the Port of New Orleans will be more expensive, and delayed, resulting in higher prices for some kinds of imports throughout the country, and lower prices for exports like grains from the Midwest which go through New Orleans, typically via barge down the Mississippi.

Under-regulated, BP pollutes. The corporate state capitalizes on the failure. And we get to pay, higher prices for gas and energy, as well as some imports. The scheme encourages wrong-doing and punishes the innocent unless of course BP really does go under, or the Supreme Court reverses its corporate-friendly bias and uncaps damage limits. Neither scenario--really the same issue, liability--is likely to occur. BP will be allowed to go on, and the costs in some way limited in order to protect the corporation.

~End post

Goldman indictment chopping at branches

Woke today to the news that Goldman Sachs had been indicted. Needless to say, with all my writing about Goldman Sachs, all of it critical, I'd felt somewhat vindicated. Yet at the time of this writing, I can't be sure whether the indictment will expose wrong-doing at the top rungs at Goldman, kind of like how the prosecution of a few "bad apples" at Abu Ghraib did little to expose "harsh interrogations" authorized at the top of the military's chain of command--namely by Rumsfeld and Dick Cheney.

Currently a single employee--a Goldman Vice President stands under indictment for fraud, misrepresenting a basket of securities he was hawking. This rogue trader kind of stuff reminds me of the $7 billion fraud allegedly perpetrated by Jerome Kerviel at Societe Generale, who'd been arrested in January 2008.

What's so interesting about both cases is how a corporate with a pattern of fraud offers up a scapegoat for massive losses brought on by mismanagement and greed. Far easier it is to blame a single rogue trader than a slew of traders, or the actions of an individual despite the orders and permissions he'd been granted by his superiors. For an idea on how broadly fraud was being perpetrated, I'd recommend Peter Schiff's 2006 address to southern California mortgage brokers and a recent lecture by white collar criminologist and former bank regulator William Black.

In the minds of investors and clients--who are the most likely to react in an adverse way to Goldman's indictment, it's easy to dismiss what are company- and perhaps industry-wide examples of malfeasance by attributing them to a bad apple. The bad apple--in Societe's example, a young computer programmer--could redirect distrust away from the company who'd created the circumstances through which fraud on an unprecedented scale (at least by a single individual) could be committed.

Another benefit to scapegoating is to mollify the size of losses that occurred because of bad decisions by the financial entity. Societe had lost billions on dubious derivatives, not coincidentally the same type of product hawked by the indicted Goldman executive. Derivatives are essentially debt instruments whose present value reflects a large degree of future uncertainty about the credit-worthiness of borrowers and value of the underlying collateral.

Misrepresenting the sale of an orange is one thing. It's a tangible, physical object. Not so with the derivative, a financial project based on little more than the promise to be repaid. So shaky were CDOs (Collateralized Debt Obligations) that
many were sold with insurance attached--the infamous CDSs (Credit Defaults Swaps.)

What's so interesting about the CDS--which Buffett has labelled "insurance fraud"--is the fact they were created to insure the purchaser against the risk of loss. This would be like saying, "Hey, wanna buy some super-risky asset?"
"No," the client might retort. "Well, then what if add--for an additional cost--a clause that will compensate you in the event of loss?"

The client might bite at the possibility of a higher return. This was--after all--the age when hedge funds were making easy millions by borrowing cheap and earning big returns. This Wall Street attitude was part of the culture of greed, a Gordon Gecko-type construct where making more was naturally assumed to be a healthy, constructive attitude. Bush was in charge and the money-grab was on. Ethics were secondary, or irrelevant.

I digress. Back to our story of the day, which is how Goldman Sachs is facing legal charges for its misconduct. I'd said I'd felt vindicated, but I do possess some doubts about the effectiveness of the charges. Purely civil, they don't incur any criminal penalties.

A case could be made that the prosecution of a single employee could relieve pressure on the company for its participation in other forms of wrong-doing, a virtual laundry list assembled on blogs like mine and by investigative journalists like Matt Taibbi.

I hope that investors and clients will wake up to the reality that they've been betrayed by Wall Street in this most recent fraud. More importantly, investors need to understand that they've been intentionally defrauded, as part of a pattern of abuses by investment banks.

It's worth noting these same banks have crossed the threshold into positions of greater control and authority as a result of emergency reforms passed after the Lehman Brothers collapse. In what could be deemed a sweetheart deal, or example of disaster capitalism, Goldman and other investment banks were converted into bank holding companies, which greatly reduced their cost of capital. So excuse me for being somewhat cynical about the government's ability to reign in its close partners on Wall Street through a single indictment.

Now as long as Glass-Steagall remains de-constructed, I'd argue that the same risky behaviors and outright criminal deceptions related to the sale of derivatives will continue. And rather than interrupt the practices that led to the collapse of the credit bubble in 2008, a lack of criminal prosecutions for securities fraud will not only allow the practices to continue but actually foster greater acceptance for illegal conduct based on misrepresentation.

Wall Street, and not just the banks, should be particularly concerned about a loss of trust by the investing public. Any time a pattern of fraud emerges in any industry, it's credibility rightfully diminishes. And as a bursting of the credit bubble showed, it's not the initial losses that cause the most financial damage. Instead, it's the broader sell-off that occurs due to a loss of trust: the foundation of all relationships.

Sensitive to this PR damage, Wall Street responded by hiring the greatest of frontmen--Barack Obama. It funded our President's campaign to the tune of over $200 million and the pay-off has been large, with the first installment on the Obama investment a $308 billion loan to Citigroup (beyond TARP), made as the administration's first action, before even it'd taken office.

Don't blame the President exclusively. Congress has done its part to make sure Wall Street gains from the reaction to the crisis, or at least isn't hurt as badly as it would were the forces of non-intervention allowed to work their invisible hand on the marketplace. Instead we have a lame excuse for socializing the banks' losses--what Nouriel Roubini calls "lemon socialism."

It wasn't so long ago that everyone was acknowledging the importance of broad participation in stock market investing through mutual funds and IRAs in the 1990s. The investing public won, as did the brokerages, by increasing the pool of investment capital. Middle class Americans were investing, and we were all getting ahead.

Now we could say that the bursting of the 2008 credit bubble was different from past crises, but many of the conditions leading to it were easily preventable, predictable and predicted.

The end of the 90's bull market in equities came with the Dot Com Bust in 2000-1. What's far less widely known is that the SEC was in the process of investigating Wall Street for its role in fraudulently talking up Dot Com stocks. The investigations came to an abrupt halt on September 11th, 2001.

Numerous brokerages were being investigated by the SEC in 2001. The evidence ended up being stored in the SEC offices in--you can probably guess this--vaults of WTC 7, the third building at the complex to be destroyed on September 11th. Remember WTC 7 was the building whose collapse had been predicted twenty minutes beforehand, by BBC.

Add to that stupendous timing the fact that WTC 7 wasn't directly hit by any of the aircraft. WTC 7 also housed the operations command for the initial response--the Mayor's Office of Emergency Management. One witness, Barry Jennings, of the NYC Housing Authority actually stated that he'd heard bombs in the building. See his interview on his traumatic near-death experience at 911review.og. {Mr. Jennings was consistent with his testimony in the years after 9-11. He has since died. See the blog http://barryjenningsmystery.blogspot.com/ for more on his story}


Whatever you understanding of what went on 9-11, or your reaction to government reports on 9-11, it appears as if Wall Street has been unregulated and under-investigated for years. In the past two stock market corrections, we see the consequences of inadequate regulatory enforcement. Paradoxically, the financial damage from a loss of public confidence far exceeds the benefits granted to those who bent the rules to chase record profits like those at Goldman Sachs.

As I've written about, the company has so much influence with the White House, that a real investigation--one which expose criminal actions at the highest level--would be undermined or prevented. Therefore like the Valerie Plame investigation, we will see little more than a sacrificial lamb being offered for what are thoroughly illegal and criminal behaviors perpetrated at the highest levels. The result of the limited investigation will instill the attitude among Wall Street players that they are above the law, and therefore go on to commit additional illegal actions under the assumption they will never be held accountable.

For more, see wtc7.net

"Debunking NIST conclusions about WTC7..."
http://georgewashington2.blogspot.com/2008/08/debunking-nists-conclusions-about-wtc-7.html

"9/11 and the Greenberg Familia" by Jerry Mazza
http://onlinejournal.com/artman/publish/article_1261.shtml

"SoGen reels from record $7 bln rogue trade fraud"
http://www.reuters.com/article/idUSL2422020620080124

///

Goldman Sachs directed TARP funds

I've been consistent in my criticism of the Federal Reserve and Treasury Secretary Geithner. Relying on alternative news resources--not the mainstream--I was able to put together a highly accurate analysis of last fall's bailout months before the conclusions I reached made it to the mainstream. (This story is breaking. For more, see addendum below.)

The mainstream media has been so heavily consolidated, corporatized, its content dumbed down--you probably knew that already. What's less obvious is the role it plays in obfuscating vital issues and denying the American people the information they need to reach conclusions that might contradict the status quo.

Just read this on HuffPo about Treasury Secretary Geithner, in an article titled "Geithner's New York Fed Pushed AIG To Keep Sweetheart Deals Secret" by Shahien Nasiripour:
"An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs." [Huffington Post]

Goldman Sachs is a poster child for cronyism. As I've reported, the company fills key Congressional staffer and White House economic adviser positions election after election. It's also used flash trading to make 2009 a banner year.

The nexus between Goldman and those in power reaches so deep that the company directly formulates federal policy. When AIG was at risk of failing, a huge bailout was made not to save the banks, but rather to assure Goldman that its investments in AIG wouldn't disappear. Former Goldman CEO Paulson, Treasury Secretary at the time, made dozens of calls to then Goldman CEO Blankfein during the negotiations phase that preceded the bailout. The big answer is why: Goldman hadn't been in trouble at the time. Of course later, during the cover-up phase which continues to this day, Paulson's replacement Geithner denied that Goldman was the intended recipient of TARP funds, through the so-called counterparty risk posed by an AIG failure.

So corrupt has our government become that the White House takes its marching orders from those with the most money on Wall Street. But I guess you knew that. What you didn't know, thanks to the media, is how far the cronyism goes, or how total Goldman's control over our government is. You, the concerned taxpayer, have no ability whatsoever to shape economic policy. Instead the decisions are made in back rooms, far beyond any public scrutiny or legal accountability.

According to the HuffPo article, Barofsky, the Inspector General for TARP, has blasted the way that program funneled huge amounts to Wall Street insiders. More accusations are forthcoming, according to HuffPo, which must trouble the powers-to-be being that the website and its talented reporters have become quite a force for investigative journalism (the MSM has abandoned I.J.).

Specifically, the HuffPo article reports "Geithner's people told AIG to delete references on draft regulatory filings to the sweetheart deals." It goes on to cite a statement by Congressman Issa (R-Ca.): "It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the SEC..."

In other words, the facts were hidden. The statement continues:
"The lack of transparency and accountability is disturbing enough, but the outstanding question that remains is why the [New York Fed] didn't fight for a better deal for the American taxpayer. Clearly, the New York Fed wanted to suppress details and limit disclosure of the counterparty deal from the American people -- the only question is why?"

I'll answer why. Because the truth has to be suppressed or it will destroy all the credibility the political and monetary systems have left! If the American people really learned that the AIG bailout wasn't about a threat of systemic failure but instead a quid pro quo that exists between politicians and Wall Street, they'd surely revolt. At the very least they'd consider not paying their taxes. Not exactly the same thing as a revolution, but considering how tightly the Federal Reserve and its banks are ties to the IRS, the damage could be immense.

What's at stake is the faith and trust the people put in money and their leaders. Revealing the truth on the sweetheart deals imperils the myth that we control who governs us. The fact is that the transition to a new administration--one which purported to bring change no less--has meant business as usual.

We saw how the Bush era ushered in a new level of marketing called perception management. As long as the delivery is smooth and consistent enough, people can be fooled into believing anything. Say something often enough, long enough, loud enough, and its veracity is irrelevant. Think of it like branding--present a corporate symbol often enough through advertising, and it becomes familiar to the consumer: the mental equivalent of a brand on the hide of some domesticated livestock.
The corruption is total, and the media plays a direct role in maintaining the illusion that there's choice in who governs us when in fact everyone at the top works for the same moneyed interests. The American political system has become a sham, a facade of public perception and marketing messages with no substance behind it.

The predominantly conservative interests that really run the Capitol want to placate the masses so we go through the pageantry of an election process which is in fact nothing more than a long coronation ceremony for the pre-selected candidate favored by the Establishment.

The evidence of the corruption is far more than economic. We see our national security prerogatives managed for the benefit of a Military Industrial Complex, the ultimate tapeworm which sucks tax revenue out while providing nothing of lasting benefit. Look no farther than the full body scan machines that will be bought in the aftermath of the crotch bomber lapse. These contracts will be with companies tied to Chertoff and Ashcroft, an example of cronyism within the National Security complex.
Meanwhile our trade policy has succumbed to the very same interests which concocted the bailout--wealthy investors who felt threatened by unions and the resistance to corporate rule they presented. So we were told globalization would benefit us, that NAFTA would bring jobs. Instead it's devastated our manufacturing base, coupled with massive overseas investment and off-shoring to Asia, where labor is cheap and union-free.

Qui bono? [Who benefits?] Surely it's not those of us who now toil in the services sector, which was promoted as the savior of the American economy, alongside finance sector jobs. Financial services companies have gone from constituting under 15% of our nations GDP (a misnomer as financial profits don't constitute P--or "Product") to over 40%. Pushing piles of paper with no intrinsic value around (yes, that's what our money really is) looks good on paper, but in the real world, real men and women make real things.

The service economy and financial get-rich-quick bubble that characterized the Bush years weren't all that's burst. So too has exploded the concept that government is worthy of our trust. And so many people have lost pensions and assistance that they'll need to keep themselves comfortable in retirement, which itself has become a laughable notion for those who've got next to nothing, which is a huge mass of people labelled "useless eaters."

Don't believe me? Go to some place where older blue-collar types shop. You can literally see the worry on their face. The older employees live in terror of having a medical accident, being that so many self-employed are uninsured. The closer to retirement, the more worried they become, being that they start to see their inevitable decline in health.

The Wal-mart economy has engineered a new low in desensitivity for the plight of the employee. While young and healthy workers may not be aware of how fragile their status is, the older ones must return to work. One greeter told me she'd had a seizure, fallen, blacked out, been to the emergency room the previous day and come to work. Another, wearing the butcher's white apron, told me she couldn't afford the steak sold there. (They don't actually cut meat at Wal-mart, she'd simply been stocking shelves in the meat section.)

If American style laissez-faire, unregulated capitalism means that elderly have to work until death, and workers' right to health care and time for recovery can't be assured, we need to discard the system entirely. Maybe the system is doing it for us by failing. If things get so bad that no one is secure, and those that are don't feel secure, it'll be replaced. But how much pain will we have to endure before the pain of change is less than that of going on?

In time, we'll come to depend more and more on ourselves, and not expect handouts or help. We'll be less focused on what goes on in some distant capital and look more to local government.

The states offer more direct assistance then the federal government but the recession has hurt them badly. I just saw that California and New York are going to cut billions from their bloated budgets. As long as the federal government can borrow, or print money, the entrenched political system will be in control. The states, which provide health care for poor under 65, don't have the power to issue money like the Federal Reserve does (it's a power relegated to the Fed by Congress.) Therefore, the states have more to lose when Medicaid rolls overflow, or undocumented illegal aliens (millions in CA and NY) need health care and show up in the ER. Therefore the federal government can maintain inadequate security along our borders and avoid the consequences, unlike the states and municipalities.

The conflict of interest between the American people and federal government has reach unprecedented proportions. I think people will increasingly look to opt out, particularly from new taxing schemes and laws passed by the Federal government for the benefit of their cronies. TARP is an excellent example of this fleecing of the American people. Another is our taxation system: the revenue secured by the IRS passes to the Federal Reserve, not to our government.

While borrowing at ultra-low rates of interest, this group of private bankers gets to charge exorbitant rates of interest for consumer lending. Or it can sit back and borrow huge sums from the Federal Reserve and lend it to our government, taking no risk while receiving interest from the American people (via taxes) by lending them back their own money.

Addendum 1-8-10

This story is hot. See HuffPo's compilation on the AIG storyhere.

I mis-titled the post "Goldman directed TARP funds" because I don't build a linkage firmly enough between Geithner and Goldman. Still, I'm confident the control eminated from Goldman on the bailout. Provocative now; established fact soon enough.

I'm fully assuming that Geithner was doing as Goldman wanted. As more and more facts are revealed, this story line will flush out.

The financial motive was large enough for Goldman to cash in on its influence. HuffPo cites blogger Janet Tavakoli:
"The November 2009 TARP Inspector General's report failed to mention that Goldman originated or bought protection from AIG on about $33 billion of the problematic $80 billion of U.S. mortgage assets that AIG 'insured' with credit derivatives, about twice as much as the next two largest banks involved."

Through a cover-up, Goldman Sachs would have attempted to disguise the scope of its influence, to limit political backlash and to protect Geithner, who actions on behalf of the company would show him to be a de facto agent for the company.

I posted at truthout.org concerning another article there. Here's what I said:

"As I say in my blog, this isn't about Geithner. He's only the stooge, the puppet. If he's not in there, Goldman will just put another person in to replace him. Robert Rubin same idea. The insiders are there because Goldman has the most political influence to expend. Read Matt Taibbi for more.

...If the American people were to find out that their money was going to subsidize Goldman's losses, they'd realize that the status quo had been maintained despite the change rhetoric/facade of the duopoly's election charade."

Yeah, a little scrappy I know but sooner or later the people will have to wise up.

See also this article on Geithner at michaelmoore.com.

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