A Timely Song (For All You Financial Types)

An Interesting Poem, By An Interesting Poet

Chaos has long been an admirer of the films of Joel and Ethan Coen, but until recently was unaware that they possessed other talents. Here's an appropriate and clever example of said talent, by one of the brothers:

'The Drunken Driver Has the Right Of Way'

by Ethan Coen

The loudest have the final say,
The wanton win, the rash hold sway,
The realist's rules of order say
The drunken driver has the right of way.

The Kubla Khan can butt in line;
The biggest brute can take what's mine;
When heavyweights break wind, that's fine;
No matter what a judge might say,
The drunken driver has the right of way.

The guiltiest feel free of guilt;
Who care not, bloom; who worry, wilt;
Plans better laid are rarely built
For forethought seldom wins the day;
The drunken driver has the right of way.

The most attentive and unfailing
Carefulness is unavailing
Wheresoever fools are flailing;
Wisdom there is held at bay;,
The drunken driver has the right of way.

De jure is de facto's slave;
The most foolhardy beat the brave;
Brass routs restraint; low lies high's grave;
When conscience leads you, it's astray;
The drunken driver has the right of way.

It's only the naivest who'll
Deny this, that the reckless rule;
When facing an oncoming fool
The practiced and sagacious say
Watch out — one side — look sharp — gang way.

However much you plan and pray,
Alas, alack, tant pis, oy vey,
Now — heretofore — til Judgment Day,
The drunken driver has the right of way.

Sanitized For Your Protection

If you needed further evidence of how much of a bubble the residents of the Empire live, work, shop and play in, look no further than this piece appearing in the nation's paper of record. Purporting to discuss the issue of high governmental officials' involvement in the despicable practice of torturing suspects to obtain information (or, perhaps, just for the hell of it), the reporter cannot or has been forbidden to actually use the word "torture." So, what we have instead are the creative use of euphemisms: "brutal techniques," "harsh interrogation methods," "harsh treatment," "aggressive techniques," and finally, "abuse," this last coming from an actual person, Sen. Carl Levin, who should know better. Of course, this is not new, or novel, in any way; residents of the Empire do not wish to gaze upon the truth about themselves and their complicity in rape, murder, genocide, and torture in their Imperial adventures. Chaos could say a good deal more about how the words one uses defines their reality, limits their options for action, etc., but really, what would be the purpose? The most uncomfortable fact is that there exists in this benighted nation a large percentage of the population who approves of these barbaric practices, and why would anyone expect this to change?

Funny Stuff, And True (And Sad)

Terrific piece here, encapsulating the somnolent, illiterate, celebrity-worshipping, tv-addicted, SUV-driving, godfearing, flagwaving, violent, obese, ignorant, and ultimately comatose US public and its complicity in the overall economic collapse of the US and world economies. Quoted in full, this makes for fun reading (in a doomerish sort of way, of course). Enjoy.

The Top Ten Signs You Are Living in a Banana Republic

As the Republic’s eyes continue their glossy stare at the trillions (with a T) being poured into the financial bailout by this thing they mention on TV called “the FED,” we at The Barricade, with a fair-use tip-of-the-hat to Letterman submit a TOP TEN LIST: Top Ten Signs You Are Living in a Banana Republic.

Why only ten? While there are certainly other signs that our country is a banana republic worthy of comparison to other ignominious, run-down, despotic regimes where the plutocracy plunders the treasury for its own interest, the American audience has an attention span of less than 30 seconds, is addicted to Ritalin and Adderall, and therefore has a penchant for lazy summaries and cliff notes. Have we lost you yet? Without further adieu:

10. Zimbabwe–the archetypal banana republic and the home of the $100 Billion omelet–praises recent US FED action. So the FED–an institution of which most Americans have no true comprehension–prints over $1.2 trillion (with a T), and Zimbabwe declares, “Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their national interests. That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide.” Not the kind of endorsement we desire to restore confidence in our financial system.

9. The Department of Energy was run by a dentist and never by anyone who has ever worked in the energy industry. Ever you wonder why we don’t have a national energy policy? Jimmy Carter named James Schlesinger—an apparatchik with no history in the energy sector—as the nation’s first Energy secretary. Ronald Reagan claimed he was going to dismantle the Department of Energy. His pick for Energy secretary was James B. Edwards, a man who understood drilling—he was a dentist. GHWB named former chief of naval operations Admiral James David Watkins as his energy secretary. Bill Clinton’s choices for the top Energy spot were: Hazel O’Leary, a lawyer; Federico Pena, another lawyer; and finally Bill Richardson, a politico and diplomat. George W. Bush’s choices to head the Department of Energy included Spencer Abraham, a lawyer who’d just lost his seat in the U.S. Senate, and Samuel Bodman, an engineer whose professional career was in investments and chemical production. Finally, Obama’s secretary of energy is Steven Chu, a Nobel Prize-winning physicist. Chu has experience in energy-related issues, including his job as director of the Lawrence Berkeley National Laboratory, but he’s never been in the energy business. “It’s the mythology of the Beltway,” one Houston energy analyst told me recently. “You are hopelessly compromised if you are anywhere close to the oil industry.”

8. The Treasury Department is a wholly owned subsidiary of Goldman Sachs and the other Wall Street mega-firms that are too big (or too connected) to fail. No explanation needed here. This is obvious to even the dopiest of Americans which leads us to …

7. The complicit failure of the national media to call out the Treasury Department’s clear conflicts of interest when it comes defrauding the Treasury at the expense of the US Taxpayer. Rachel Madow, Keith Olbermann, Daily Kos, Huffington Post, Fox News, anyone? Is there anybody out there? Just nod if you can hear me. This is easy and it makes the KBR/Haliburton/Iraqi war connection look complicated by comparison. When KBR was a wholly owned subsidiary of Haliburton and Cheney was the former CEO of Haliburton, we were confused with the KBR/Haliburton relationship and Cheney’s ties (people had a hard time making that second jump, not sure how we were confused, but we were). This one is so simple even my almost two year old niece understands it: Sec. of Treasury and former CEO of Goldman Sachs Hank Paulson has funneled billions to his old firm and his friends via DIRECT CHECKS and checks to AIG which is run by a former director of Goldman Sachs Edward Liddy. The money spent “bailing out” AIG will be shuffled over mostly to the CDS counterparites, GS et al. Liddy is only taking $1 of salary because he is such a public service saint. He has an acute financial stake in one of AIG’s counterparties—namely, his $3.2 million personal investment in Goldman Sachs stock. Mainstream Media, please call me and I will help you connect the dots…finance is not that complicated, just ask my adorable niece.

6. Only 53% of Americans feel capitalism is better than socialism. Two main points to note here: (1) We have never had free market capitalism in this country, because our government has always encouraged obfuscation and lack of transparency, by selective disclosure and favoritism; and (2) failure of large institutions is not allowed (even though it is an essential part of capitalism). So, we don’t have failure in America. Failure would be upsetting. We are all living in one big Lake Wobegon - where all of our businesses are above average. I didn’t get a chance to vote in this poll, but if I had to choose I would prefer the Scandinavian Socialist model over the Latin American version that we seem to be veering into. Instead, the U.S. gets the worst of both worlds - no public education or health care, high taxes, privatized gains shared by plutocrats and socialized losses shared by taxpayers. If that is your definition of American capitalism - I am amazed the polling numbers were as close as they were.

5. The bankruptcy process has becomes a political process. If this is the worst economy since the great depression, why aren’t there more bankruptcies? When did bondholders–which own a risky asset class called, ahem, “bonds”–become a guaranteed non risk asset class? It is obvious that my college professors were mistaken in teaching that the only RISK FREE asset class was US GOVERNMENT DEBT SECURITIES. They are going to have to rewrite a ton of economics and corporate finance textbooks to include Bear Stearns bondholders and preferred stock holders, Fannie and Freddie bondholders, any bond or preferred instrument held by Bill Gross/PIMCO (the official fourth branch of the US govt.) and any bonds or preferred stocks of the too-politically-connected-to-fail group of financials including AIG, GS, MS, WFC, C, JPM, et al as part of the risk-free asset classes in 21st century American capitalism. And, maybe they should hold off publishing until June because GM and Chrysler debt and preferred holders may be on that list as well. At least all of the rewriting of the books on financial institutions, markets, and money will stimulate the publishing industry. Which leads us directly to…

4. Both politcal parties are beholden to the financial oligarchs–And yes, that includes the Democratic Party. The Democratic Party, the party of FDR, Kennedy, LBJ, Carter and Obama, the party of the little people, the common man, the disadvantaged, the party of farmers, laborers, labor unions, and religious and ethnic minorities continues the same misguided policies and cronyism of the former Republican regime in BAILING OUT BANKERS and INDENTURING GENERATIONS for what will end up being tens of trillions (with a T). We are either in bizzarro world or a banana republic or both. “The Democrats have replaced the Republicans as the big benefactors to the financial community,” said Kevin Phillips, author of “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.” Philips writes, “The financial community is donating more to Democrats than ever before and you’ve got more Democrats in the financial community, creating a very powerful pattern there. I don’t think you’re going to see the Obama administration and Congress willing to be tough enough in dealing with these things.” So, let’s get this straight: none of the big banks and financial companies’ bondholders are taking any hit, and they refuse to go into bankruptcy or receivership, however GM and Chrysler may go into the not so delicate arms of bankruptcy. Is Obama more loyal to his wall street friends in the Democratic monopolies in the Northeast and California, or to his hard working lower/middle class constituents in the Midwest which is usually a coin flip in terms of party loyalty–see, Michigan, Ohio and Indiana? To quote John Lennon, strange days indeed, most peculiar momma. That or we are living in a banana republic. Which is easy to accept.

3. William Black, the former Chief Fraud Investigator at the Federal Home Lending Bank and Office of Thrift Supervision during the Savings and Loan scandal, calls the current bank stress tests ” A COMLETE SHAM.” The FHLB is a very big institution, with $1.3 trillion (with a T) in loans, and its Chief Fraud Investigator during the S&L scandal, says a pillar of Federal banking reform policy is “a complete sham.” A complete sham. In addition to comparing the stress tests of our nations’ financial system to a counterfeit, fraud, flimflam, ruse (is that emphatic enough for you America, or do I need naked women shooting you with lasers to make you pay attention? I know, I do. Can we get some graphics of naked ladies in here, please?)

Mr. Black also called the stress test “a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough. Black also said, “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: “’If we lie and they believe us, all will be well.’ It’s Orwellian.” “The fact bank stocks have been rising since Geithner unveiled his plan is “bad news for taxpayers,” he says. “It’s the subsidy of all history.”

2.William Black the former Chief Fraud Investigator and Federal Regulator during the S&L scandal uses the following words to describe the STRESS TEST of capital ratios for our NATIONS’ LARGEST BANKS:
(A)“A COMPLETE SHAM”
(b) “POTEMKIN MODEL” - fancy Russian word for SHAM
(c)“Reason for STRESS TESTS is to FOOL US and to make US CHUMPS”
(d) “’If we lie and they believe us, all will be well.’ It’s Orwellian.”
(e) the Geithner debt plan is “bad news for taxpayers”
If confidence is all we need to restore the financial system, then we should just nominate Tony Robbins as Secretary of Treasury.
OBTW, William Black’s book The Best Way to Rob a Bank is to Own One, is a must read about financial fraud and regulatory capture and for the glossy eyed it has a catchy and cool title. Paul Volker wrote this about the book, “Bill Black has detailed an alarming story about financial - and political - corruption. The specifics go back twenty years, but the lessons are as fresh as the morning newspaper. One of those lessons really sticks out: one brave man with a conscience could stand up for us all.” Robert Kuttner of Business Week proclaimed, “Black’s book is partly the definitive history of the savings-and-loan industry scandals of the early 1980s. More important, it is a general theory of how dishonest CEOs, crony directors, and corrupt middlemen can systematically defeat market discipline and conceal deliberate fraud for a long time — enough to create massive damage.”

Now, drum roll…

1. The People Don’t Know and Don’t Care to Know. The American people are quite aware of Malawian Adoption Law, can cite the California statutes on artificial insemination, and know Octomom’s middle name, but can’t or won’t listen to one word about who controls their institutions, nor can they find William Black on any other media outlet other than the Web or Bill Moyers. We have the former Chief Fraud Investigator screaming SHAM, SWINDLE, HEIST and we just sit there glassy-eyed, wondering if the blind guy was given a fair shot on Idol. No hour slot on Larry King, no lead story on 60 minutes, not even 5 minutes on The Daily Show, which is arguably the best financial and investigative journalist show on television.

My friends and dear readers, this is your representative republic. This is the product of your popular sovereignty. This is your AMERICA.

Here's One More...

If you have any curiosity at all about the government's priorities and its methods, here's an excellent piece, quoted in full, on the latest bank bailout plan. One doesn't have to be an expert in finance or economics to recognize that rotten egg smell emanating from this kind of sleight-of-hand Rube Goldberg device called the PPIP. At any rate, here's the change we didn't vote for...



Tragedy is turning into farce as the real intent of the bank rescue plan becomes apparent. Geithner and the banksters have adopted the playbook of a true fraud-and-deceit all-star: Enron.

No matter how cynical you get, it’s impossible to keep up.

- Lily Tomlin

Somewhere along the continuum, there is a point at which tragedy turns into farce. I’m starting to think we may have passed that point with this whole TARP/TALF fiasco.

From a comedy perspective, Turbo Timmy and his madcap schemes are the gift that keeps on giving. We’re scaling the heights of utter absurdity now... it’s like a Kurt Vonnegut novel come to life.

Just take this recent snippet from The Wall Street Journal, for instance:

The Treasury Department, facing criticism over its bank-rescue program, said it may allow a broader group of private investors to purchase toxic securities...

Last month, the Treasury said it would select fund managers based on certain criteria, including an ability to raise private capital and a minimum of $10 billion of eligible assets under management.

On Monday, the Treasury said a proposal won't necessarily be disqualified if firms don't meet all the criteria. The Treasury added that it is particularly interested in program participation by small, minority- or woman-owned businesses.

Hmm. Okay, so let me get this straight. First they start out with an eligibility hurdle so ridiculous, it sounds like a leftover Dr. Evil catchphrase from the Austin Powers movie. “You must have ten BILLION dollars...”

Then it hits them that gosh, ya know, that might have been a dumb idea.

So in a stroke of belated genius, they decide to 1) disregard their own proposal criteria – not change it, but just ignore it, mind you – and 2) turn the bank rescue program into some kind of warm and fuzzy feel-good “help the little guy” exercise, like an SBA loan program writ large.

Read the following in John Lovitz “liar” voice: We want to take all your money and give it to the banksters. No, wait. That sounds bad. We want to help the, ah, the billionaires. The poor, poor billionaires. No, wait – crap. That’s bad too. Here it is: We want to help minorities. Minorities and women. Yeah! Yeah, that’s the ticket...

An American Classic

The REALLY funny news, though, is that the PPIP (as it has been so christened) rescue plan now seems to be taking a page from one of the all-time greats of fraud and deceit.

I have to take this opportunity to share one of my favorite nuggets, a little story that was making its way around trading desks circa 2002:

Once there was a country bumpkin named Kenny – Kenny boy to his friends – and Kenny boy found himself in need of some money. Trouble was, he didn’t have a job and didn’t own a thing except a recently deceased pet goat. But Kenny boy was smart, and it didn’t take long for him to hatch a plan. Kenny boy called up all the farmers in the county and arranged a raffle for a blue-ribbon Holstein milking cow. On the day of the raffle, 100 farmers showed up and paid $50 per ticket, giving Kenny boy $5,000 to put in his pocket. Kenny boy drew the winning ticket and everybody went home. The next day, the raffle winner came by Kenny boy’s place to collect his prize. Kenny trotted out his expired pet. The farmer scratched his head and said “Son, that’s not a prize milking cow. That’s a dead goat.” So Kenny boy gave the farmer his fifty dollars back.

And as you might have guessed, Kenny boy’s last name was Lay and he grew up to found Enron.

Ah, Enron. Remember those guys? The giant tilted “E,” the ridiculous hubris, the bizarre commercials with the computerized “Why” voice... Classic stuff.

Enron worked hard to rip off rubes like the public officials of the state of California, who didn’t realize that deregulating electricity markets without knowing how the game was played was the rough equivalent of dumping a bucket of chum into a shark tank.

Enron also did all kinds of neat innovative things with “side pockets” and “special investment vehicles” and “off-balance-sheet partnerships,” even going so far as to use really cool Star-Wars-themed names like “Death Star” and “Chewco.”

In retrospect, who could have known that even as Enron was going down the tubes, our current crop of banksters were busy taking notes?

Move Over Darth Vader

I bring up Enron in light of new revelations that propel this whole rescue plan debacle to new heights of criminality and avarice.. Feast your eyes on this tidbit from a recent Financial Times piece, “Bail-out banks eye toxic asset buys”:

US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals [emphasis mine] under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls.”

Mr. Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”

“Death Star” my foot... If this true, it makes the Enron chicanery of days past look positively Ewok-scaled in comparison.

And most likely it is true... a few weeks prior to the FT exclusive, the New York Post reported that Citigroup and Bank of America had already begun using TARP funds – billions given to them by the government that they were supposed to use to make loans – to instead “aggressively scoop up” more of the very toxic assets that blew them up in the first place.

The very idea that these banks could be buying up each other’s garbage – that they are even considering it – well, it just hurts my head, it’s so mind boggling. To understand why, let’s walk through a quick analogy.

Lawn Mowers and Government Loans

Imagine, for a moment, that I have a beat-up old mini-fridge in the back of my garage. It has a coolant leak, it’s a little moldy, and it smells like stale beer, but I’m pretty sure it still works.

Meanwhile, you happen to be in possession of a rusty old lawn mower. The blade is caked beyond recognition with fossilized grass clippings, the gunk that passes for oil has never been changed, and the thing takes twenty or thirty pulls to start... but you, too, are fairly certain your lawn mower “works.”

Now imagine that you and I make a deal. I will sell you my disgusting mini-fridge for the princely sum of a hundred thousand dollars. You, in turn, will sell me your ancient lawn mower for a hundred thousand dollars. I write a six-figure check out to you, and you write a six-figure check out to me.

Nothing’s really happened, right? All we’ve done is swap two crap assets, neither one worth fifteen bucks in the real world, and furthermore swapped an identical large chunk of change ($100,000) between our respective bank accounts.

But hold on! Did I mention that we both employ highly creative accountants?

Here’s the good news about our little swap. Thanks to our exchange, I can record a massive profit on my books... to the tune of $99,900, or whatever sum is left over above and beyond the book-entry carrying cost for my fridge. And you can do the same with your lawn mower.

In the real world, the only thing that happened is junk got swapped with junk. In fantasy-land accounting world, however, you and I both just conjured up fantastic profits out of thin air.

And it gets even better... did I mention that the government has generously granted me a non-recourse loan in order to provide the funds with which to buy your $100,000 lawn mower?

I didn’t actually have to move $100K out of my bank account and into yours, because $93,000 of it was covered by government loan. The same privilege was extended to you, of course.

And of course the proceeds of my loan were sent to you as cash... and the proceeds of YOUR loan were sent to ME as cash... which means the wonderful taxpayer ponied up TWICE – to the tune of $186,000 – to fund our little phantom transaction with real dollars.

See how great this is? We swap crap assets worth zilch, pretending they are actually worth $100,000... we record a massive profit on our books... and we collect real profit in the form of a $93,000 handout to both of us (the non-recourse loan).

Of course, someone will eventually scratch their head (just like Kenny boy’s farmer) and say, “Hey. We don’t have anything worth $100,000 here. We’ve got a disgusting mini-fridge and a rusty lawn mower.”

But by the time that happens, you and I will be in clover... and by definition we never had to pay back the loans anyway! Ain’t giant handouts grand?

To understand what the banks plan to do under the guise of the PPIP “rescue plan” by way of swapping toxic assets with each other, simply replace “mini-fridge” and “lawn mower” in the above example with “toxic asset A” and “toxic asset B.”

Then up the scale from $100,000 to hundreds of billions – all the way up to a cool trillion maybe – and there you go.

This is the fabulous Enron-style solution Turbo Timmy at the Treasury and Sheila Bair at the FDIC have laid out for us: “Death Star” and “Chewco” on steroids. They want to Enronize the whole damn financial system in an effort to save their connected masters (and grateful future employers) on Wall Street.

Some Explanations...

Continuing Chaos' efforts to inform readers of just exactly what is going on, as the Empire of Sorrows struggles to avoid reaping what it has sown for the last thirty years or so, PBS personality Bill Moyers conversation with former financial fraud regulator William Black is highly recommended. As with the subject of Peak Oil, what is significant here is the gap between what should be done and what is being done, which is vast. Chaos notes, once again, that pretty much all one needs to do to understand what's happening is to peruse The Automatic Earth on a daily basis. For another most informative take, involving a little history between the current "players" in the government financial area and a whistleblower, check out this most interesting article in The Asia Times.