Saturday, October 30, 2010

The Audacity of Republican Lies

So here we are on the verge of a mid term election and the media (pundits) spends it's time speculating and joking about the probability of who will win. They love the "excitement" of the tote board election mentality. Is the Fourth Estate not charged with the responsibility to objectively create informed public opinion as a part of the political check and balance system established to protect Democracy?
President Carter told Bill Mahr that he has never seen such a polarization of the United states, and the talking heads discuss how Obama will have to get along with Republicans. How do you get along with supposed fellow Americans who only want to get their power back to "reduce the size of government," and "lower taxes" for the highest income earners, because taxes have been lowered for everyone else? How do you establish a dialogue of understanding with people who lie about "death panels" and misrepresent economic realities by still arguing for the validity of: "trickle down," along with deregulation and the free enterprise, of self-correcting markets based on the postulate that the "market is rational?" How do you do this when our "Great Recession" was clearly caused by all of this and more. How do you objectively create informed public opinion by allowing all the liars to advertise their lies and by allowing all the secrete funding of campaigns as supported by the recent Supreme Court ruling?
And how does it make sense to be so against any improvement in health care? It does for the monopolistic (ologopolistic) health carriers.
I know that the answer to all of these questions is to acknowledge that Financial Darwinism is the problem. Financial Darwinists want all the biggest and wealthiest companies and people to make as much money as possible and do not care if it is at the expense of the American democratic design ethic which is to provide a society that is - "by the people and for the people." Today, only 55 years after our country truely emerged from the "Great Depression," we are back in the 20's - only it is worse. Mass media has become a relentless propoganda machine fueled by the ultra rich. Greed is good. Education is on the decline. And to avoid the devastation of "new" economic theories from the 80s, which are essentially laissez-faire based theories - all the political lies must be recognized as Social Darwinism/Financial Darwinistic Propoganda.
The media is on a tight rope. Only a few individuals have the guts, the insight or are allowed to express the truth, which is self-evident. It's a good thing that Chris Mathews, Ed and Keith are still on TV, and Krugman is still in the Times, but where is everyone else? ?
Today, October 30th, all the talking heads talk about is the threat of cargo jet packages, but what about the danger of allowing the party that voted against Social Security and Medicare, and the people who within the last 10 years pushed for deregulation (the tearing down of barriers errected to protect us from Greed in the aftermath of the depression) gain more control over our mutual and simbiotic destiny? What about giving more power to people against health care and financial reform? What about electing individuals - who are for: Mega Health Carriers, Mega Bank Holding Companies; and against Gov spending to create jobs, against making banks lend to small businesses, against regulations to protect us from Greed as well as against Jefferson's idea that the "role of government is to protect the Public?"
What about pointing out the evils of propoganda based on absolute lies and half truths to get the masses to act like pawns supporting what is best for the ultra rich. And what about Democrats who do not know how to stand up for the truth or the imperfect Health Care bill? What about our Supreme Court that is now firmly in the corner of Financial Darwinists! So today let's talk about how historic it will be if Dems lose 60 seats, and agree that nothing will get done if the T party and the Repubs gain control of the house. Two years of doing nothing in the name of political philosophy while so many of their fellow Americans suffer in the shadows of 17% real unemployment.

Sunday, July 25, 2010

All the Truth And Nothing But The Truth

Former Goldman CEO Henry Paulson, it has been reported, once again has declared that the "root cause of all this are housing policies," referring to the 2008 meltdown, and that the reform legislation has not focused specifically on housing policy. Although reform has not specifically focused on housing it is a misleading conclusion only designed to avoid blame, and not illuminate the real root cause - which is Financial Darwinism.

So Paulson, a former Prince of investment banking, once again indulged in blame shifting. To focus on "housing policies" as the primary cluprit is to avoid a clear view that Wall Street's voracious demand for enough mortgages to package into "too complex to explain" investments fueled the demand for more and more mortgages. Do not overlook how badly Wall Street needed tons of mortgages to turn into "complex financial instruments" to securitize and then sell to satiate its greed-based, rapacious appetite to create fees. Fees were the rule and the ethic - not value for investors.

Last year Mega Bank Holding Companies, which had been investment banks, generated record profits. Hiring has resumed at record salaries, becuase Wall Street has not missed a step as it continues to contrive egregiously leveraged complex investments, sometimes referred to as financial instruments. Certainly banks are not using much of their capital to fund capital formation, ie., loans to small businesses to create jobs by underwriting businesses that desparately need money to exist and possibly expand.

These complex financial instruments, like those of the past that did us in, still offer the illusion of guarantees - and are still referred to as "colaterialized." Collaterialized by what - the mirage of a Credit Default Swap.

Now our regulators have another 2,000 pages of reform. In the year 2000 the Fed had over 1,550 pages of Bank Holding Company Regulations . If the Fed had only enforced one reg that prohibited selling a security that could not be explained well enough to be understood - then none of the "too complex to explain" complex financial instruments could have been sold. The SEC could have stopped the collaterialized debt obligations by using regulations in effect in 2000 which addressed disclosure and the ommission of significant information. Finally the SEC has recoginzed this (a little late) and slapped Goldman on the wrist with a 500MM fine; small change compared with their egregious profits in the past and their continuing use of crazed leverage. I have contended in my book that the "too complex to explain" were material violations of existing regs; the SEC has not gone far enough yet.
But good news - now we have a "systemic risk regulator" to spot the toxicity of too much leverage. This is absurd considering the self-evident toxic nature of too much leverage-debt. When so much money was being generated by leverage no one wanted to turn off the faucette, although so many smart economists working for the Fed had to have some awareness of the evils of debt and the lack of sense behind the too complex to explain. Regretably our leading regulators agrued for deregulation which unleased a renewal of Laissez-faire economics from the days of Social Darwinism.

Our financial media has not properly investigated or analyzed the substance behind what is reported as, or deemed to be, an empirical pronouncement. Or are they are on the side of the Laissez-faire economics which led to the "Great Depression?" It is possible they are too young to make the distinction between the Chicago School of Econ from the late 70s and the rational concerns of economists like Samuelson and Thurow from the aftermath of the depression.
And too many respected members of the Fourth Estate appear to be comfortable passing on arogant excusses and phony reasons, without probing questions, from all the heavily credentialed, expert pundits who should have known enough, but failed to recognize that too much leverage, if everything does not go exactly right, turns into poison. Of course the risk of way too much leverage was/is "insured" and this fictitious insurance is what killed AIG and the others who assumed that everything would always go up. Where has investigative objectivity gone? Is it OK to pass on hopelessly slanted opinions which in turn create uninformed public opinion?

We are still using and buying into concepts like "collateralized debt obligations." And our new so-called financial reform has not truely addressed the lack of real substance behind what is purported to be collateral. For example the Credit Default Swap lives on, and there is no legal definition governing how this "insurance" is backed up by any form of rational reserves to underwrite the toxicity of too much leverage still being "collateralized" and insured. The government is still on the hook, which means we are still providing the collateral for Goldman to churn financial products for fees, some of which have finally been related to fraud!

All the truth and nothing but the truth - is still missing in action. The truth of what our former investment banks, now Bank Holding Companies, are not required to do is obvious to all the small businesses who need capital. These so-called banks are still using 100s of Billions free capital provided by the FDIC to support the leverage behind their proprietory financial products issued and sold to provide revenue for their own greed, how do you think Goldman generated record profits last year? The truth of morally backrupt economic policies from Friedman and Greenspan is still shoved under the rug. And an Everest sized iceberg of unemployment still lurks under the surface of Wall Streets recovery. Because Banks are not required to make loans to small businesses based on some relationship to the Billions and Billions of essentially free capital provided to them by the Fed and the FDIC - our recovery is more for Wall Street than mainstreet.

Don't forget Banks make so much more money using leverage for their own accounts than they can generate by lending to small businesses. So there is far less motivation to lend for capital formation. And Financial Reform which continues to allow Banks to use leverage - (based on funds from the Fed and the FDIC, our money) - for financial investments in lieu of lending for real investment is wrong. The continuing problem is that investment banks, like Goldman, have been allowed to remain bank holding companies, so they qualify as banks to receive vast sums of money from the Fed and the FDIC - therefore shift their still highly leveraged risk to the government.

Reform is to abolish abuse. Womens Sufferage, Glass-Steagall and The Civil Rights Act are examples of government legislative reform. Reform which focuses on how to spot too much financial risk faster, when the Fed blew it in the year 2000 by not spotting the ludicrious fallaceous nature of Credit Default Swaps to cover up the risk of egregious leverage is misleading. Reform which does nothing meaningful to curb CDSs is ludicrous. And reform which does not require all the new Bank Holding Companies, which were formerly investment banks, to lend to small business to stimulate capital formation to create jobs is a stain against humanity and truth.

Tuesday, January 5, 2010

Bernanke Still In Denial

"Lax oversight Caused Crisis, Bernanke Says," NY Times front page headline Monday, January 4th. The article went on to observe that Bernanke's remarks in his Sunday speach in Atlanta were, "perhaps his strongest language yet assessing the roots of the financial crises."

So once again the leader of the Fed is more concerned with enlarging the power of his (the Fed's) fiefdom than recognizing the realties of what actually happened. Bernanke's defense of interest rate policy (Monetary Policy) begs the question of economic policy in lieu of admitting or exposing the fact that the Fed failed to regulate Bank Holding Companies. (And the SEC forgot about 10B5 violations as well.) When is anyone or any newspaper going to point out that the Fed (and the SEC) failed to enforce their own regs - regulations which would have prevented the sales of "complex securities" that were supposed to be explained well enough to be understood. So it was a severe violation of regulations to have sold all the CMOs and CDOs that "guaranteed" the lenders debt obligations which enabled them to have sold the volume of mortgages necessary to have created a housing bloat - "bubble." ( Severe violations of significant regulations have the force of law behind them! ) And the sales of the too complex to explain continue unfettered!

Congress, in its ultimate wisdom, continues to miss this fact, and laps up whatever the head of the current head of the Fed contends, just like it did when Greenspan confused and impressed Congress with his so-called brilliance and degrees. Congress has continually failed to look past all the huge credentials of their appointees to the lack of insight and wisdom behind verbal behavior primarily offered to get Congress off their backs so they can continue to promote a lack of common sense and hide underneath a shroud of economic Financial Darwinism. Remember Greenspan admitted that he did not understand the "too complex to explain financial instruments;" and if Bernanke did why didn't he stop it. Why didn't Bernanke, when he was on the Fed Board of Governors, once question the lack of any substance behind the empty promise of Credit Default Swaps. And why does brilliant Bernanke not cry out about the fact that to continue to the existence of Credit Default Swaps is to allow one of the major culprits in our financial sea of quicksand to continue live on to kill us again. Credit Default Swaps may be analogous to a serial rapist - a serial financial rapist.

When Swindled is in print you will know just how self-serving and self-absorbed Bernanke and his financial leadership cohorts are, and have been. This is not to say that he is the major culprit, but he was watching silently while the Fed allowed severe violations of its regs to flourish. You will clearly understand that Obama's appointee's recommendations to Congress to reregulate are based on expanding their own power rather than on curing the disease. You will become aware of the fact that since 1980 economic theory has been fueled by the greed of Financial Darwinists, as economists have diverted reality by focusing on Monetary Policy and Money Supply at the expense of the fabric of our society. Geihtner, Summers, Bair, whoever was in charge of SEC, Schapiro, Bernanke and a number of other very important heavily credentialed genius' apparently were blinded by the glare of all money that was made and overlooked how it was made.

David Satterfield, with 2 Pulitzers, former business editor of the Mami Herald and managing editor of the San Jose Mercury News, said this about my book: "With keen intellect and searing wit, Henry Schoenberger's How We Got Swindled exposes the myriad financial hijinks and colossal leadership failures that have turned the first decade of the new century into an economic disaster. Schoenberger not only identifies the causes, rationales and human failings the led to this mess; he provides some ready answers for how we must go about fixing it. This should be must-reading for every policy maker in Washington and every student of economics and finance."
With this unequivocal endorsement, from a 2 time Pulitzer prize winning business editor recongnized for relentlessly pursuing truth - there ought to be a publisher with enough guts, insight and concern for brutally candid truth who would be proud to publish How We Got Swindled. However this probably will be difficult as the publisher must have the courage and conviction to stand up for truth knowing the entrenced power structure on Wall Street will not embrace the truth, or be happy about the book. An additional hurdle to finding this kind of publisher is that our Congress is far more concerned with getting money to remain in office than in protecting the public good from avoracious greed, so getting along today with the power structure seems to be the rule. I know from my editor at Doubleday 20 years ago that publishers prefer to "communicate rather than litigate." As a whistleblowing insider author of an extremely diligent, and fascinating book which has been reviewed as, "absolutely on spot" I know Swindled will make many publishers nervous; and it will make my fellow Americans understand fully why they have been swindled! Several publishers have contended they are reading the complete manuscript. So I hope Swindled will appear in the public domain soon, because there is a dire need for my fellow Americans to be aware of the fact that much of the propsed regulation changes are no better than band aids on an open wound.

Although this final thought is out of context (I have not had the time lately to add to my blog) - it is important to point out that James Norris, business editor of the NYTimes listed Fox's book, The Myth of the Rational Market Theory, as one of the six most important books of 2009. In this book Fox concluded that until Yale's Robert Shiller, a behavioral economist, pointed to clear evidence that many of us do not act rationally - the Efficient Market Hypothesis was accepted as gospel. How ludricious that gospel had nothing to do with generations of psychologists noting man's inablility to think straight; or that Ellis and Harper's New Guide to Rational Emotive Therapy was published 50 years before Fox stumbled upon Shiller and Shiller stumbled upon the history of man's irrationality and man's inhumanity toward his fellow man. Coo-coo! Over 300 pages devoted to how man is not rational economically! Man, of course, has a long and lofty rational history regarding religion and wars and seeking revenge for 9/11 in the wrong country. Divorce and its aftermath of joint custody is steeped in rationality, and burkas and slavery make irrationally seem tame. Our legal system is also a paragon of rationalty, always seeking truth. So thank god for Yale's Robert Shiller who discovered that man may just not be rational about money.

Happy New Year - i hope.