The Mullahs' Revenge

The "Hindenburg Omen", a term owed to the 1929 crash that brought on the Great Depression is said to be in the offing whenever there are a large number of both new 52 week highs and 52 week lows on the NYSE.

The stars were thus aligned in the fall of 2005. Unfortunately the Federal Reserve then decided it could outflank history. Greenspan resigned as Fed chairman the following January after agreeing to add $38 billion in govt. reserves. At the very same time Ben Bernanke, Bush's budget adviser, was appointed to replace him while the Fed quietly reported that the following quarter it would hide M-3, the broadest measure used to estimate the supply of money within an economy. Why the secrecy?

The Iranian Bourse

Despite a complete absence of coverage from the U.S. media conglomerates, a financial nightmare was unfolding. By invading Iraq and toppling Saddam Hussein Bush had empowered the country most able and determined to undermine U.S. influence. If successful an Iranian bourse that allows international buyers to buy oil in euros would mean the demand for U.S. dollars would collapse, staunching credit and liquidity.

So when Arianna Huffington asks who are these mysterious, unconfirmed counterparties to AIG's serial recklessness we must recognize that the CIA also functions through "legitmate companies". AIG had long been exposed for its lawbreaking. Its executives had confessed to criminal charges but Spitzer's investigations may have only scratched the surface. A paper trail stretching back a decade reveals that AIG regularly used offshore shell companies to skirt the law.

One current scam worked like this: Marsh, an insurance broker, was supposed to find the best insurance policies for its clients from a wide range of companies. Instead it steered the policies to companies such as AIG that agreed to pay kickbacks. It solicited phony competitive bids for insurance contracts to deceive customers into thinking there was real competition for their business. Marsh made $800 million on kickbacks in 2003 alone – over half its $1.5 billion profit. With a 40-percent share of the global insurance brokerage market, its fraud drove up prices for everyone. But as Business Insurance bemoaned, AIG received "little more than a tap on the wrist. The message delivered here is that a company of AIG's power have things pretty much its own way."

So where did all those billions of taxpayer dollars go? My guess is to pay off China, and perhaps Russia and Saudi Arabia.

From the London Telegraph: "Fannie and Freddie - the world's two biggest financial institutions - make up almost half the $12 trillion US mortgage industry. But that understates their vital importance at this juncture. They are now serving as lender of last resort to the housing market, providing 80pc of all new home loans.

Roughly $1.5 trillion of Fannie and Freddie AAA-rated debt - as well as other US "government-sponsored enterprises" - is now in foreign hands. The lion's share of US mortgage debt is held by the central banks of China, Russia and petro-powers. These countries could all too easily precipitate a run on the dollar in the current climate and bring the United States to its knees, should they decide that it is in their strategic interest to do so.

George W. Bush should be hailed as hero ... in Teheran.

The Trap for Obama, Updated w/video

Ever Deeper:
Now comes word that the official at the center of the fraud scandal at the Treasury Department has been allowed to quietly quit and retire from his job as a government regulator, despite allegations that he allowed a bank to falsify financial records (The federal government took over IndyMac back in July, after the bank's stock price plummeted to just pennies a share when it was revealed the bank had financial troubles due to defaulted mortgages and subprime loans, costing taxpayers over $9 billion. )

One becomes both dismayed and slightly amused when celebrated novelists bemoan the limitations of fiction. What their lament is meant to suggest is that there are realities specific to a particular time and place that demand authentic, unbiased reporting, that the conceit of universal truth is a 19th century pretense. One wonders where, if one accepts their premise, such an impartial observer might exist.

Just as the global financial meltdown continues to expose the glaring flaws in "free-market" capitalism, so have the recurrent tragedies of history shown that human stupidity, shortsightedness and greed know no cultural or geographical boundaries. For instance reading this : “If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke said. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial-products division, this was a hedge fund basically that was attached to a large and stable insurance company.” --one doesn't know whether to laugh and go stock up on gold or simply become a hermit. Does the Chairman of the Federal Reserve not read the newspaper?

I submit that not only did Mr. Bernanke know that the "regulatory system" was being abused, his predecessor enabled the criminals. It is a crisis that President Obama, having wisely foreseen has now inherited, but he would be advised to observe the upheavals taking place in the land of his father. He will be facing a powerful backlash if he turns into the lightning-rod for the American public's simmering rage.

January 17, 2008 Protests Bring New Violence in Kenya
Jeffrey Gettleman, NYTimes, NAIROBI:

Opposition protests resumed in Kenya on Wednesday, and as many people here feared, violence erupted across the country once again. [ ] Opposition leaders have vowed to carry on protests for two more days, and it seems that Kenya’s security forces, which have deemed all protests illegal, are cracking down harshly. On Wednesday afternoon, police officers in padded suits sealed off downtown Nairobi, the capital, and ordered everyone out...

In the near quarter century of Daniel Arap Moi's rule the Kenyan people saw their once hopeful future crushed by their ruler's apparent greed. According to a report by the "Kroll Risk Consultancy", Mr Moi and his sons used a web of front men to manage their secret deals and hide their money. It estimated that Gideon Moi was worth some £550 million as of 2002, while Philip was worth about £384 million. The report was prepared at the request of the new Kibaki administration which succeeded in replacing President Moi by promising to end state corruption.

In 1999 John Githongo founded the Kenyan chapter of the anti-corruption organization Transparency International. In line with his pledge to wipe out government corruption Kibaki appointed Githongo as his "anti-corruption czar". When Githongo revealed that an Anglo Leasing fraud had siphoned off $100 million from inflated government security contracts via a phantom company listed in Britain he was denounced by his fellow ministers and eventually forced to leave the country. Githongo has finally returned to Kenya but what he is finding does not inspire him with hope.

"In the past, the scandals that we had were of a scale that was mind-boggling to most people. Big sums, hundreds of millions of dollars! Those are many zeros and sometimes difficult to connect to your everyday circumstances," he said. "What is happening now is having a very direct impact on the poor."

Back to "Business as usual"

Despite President Kibaki's promises, Mr Moi and his sons remain highly influential, Gideon Moi is now an MP and former President Moi was recently named special envoy to Sudan's north-south peace process. Kenyans' great expectations that followed Kibaki's election have given way to despair as they watch the vultures both in and out of Kenya pick away their future through stealth and criminal deceit. As one reporter put it, "There was a feeling [in the new government]that pursuing corruption of the past was provoking corruption allegations in the present".

That is the challenge facing President Obama ... as the SEC complicity clearly shows... the rot in Washington reaches clear to the head of the stinking fish. Now we learn that Obama's own White House Counsel Greg Craig represented Rove in his recent book deal, while Craig’s law partner, close associate and mentor, Emmet Flood, is representing Bush in executive privilege matters before the Washington D.C. Court of Appeals, where Bush officials are charged with the political firings of U.S. attorneys for failing to act on orders to prosecute Democrats prior to elections.
One does not need to be a famous novelist to conjure all the dire consequences to a country that accepts this level of corruption.

Charles Dickens' GREAT EXPECTATIONS

In his 'Great Expectations' Dickens takes on the corruption of the judicial system of his time. Dickens' masterful work was intended to propel those in power to institute reforms at a time when children, their parents having been forced into crime, were destined to share the same fate. Great Expectations contained the implicit warning that left unchecked, England would be guaranteed a future of violence, lawlessness and despair-- a fate that still gravely faces Kenya and our own USA.

Luckily, though we may not have a Dickensian novelist, we do have at least one incorruptible reporter who moonlights as a comedian:

The Daily Show With Jon StewartM - Th 11p / 10c

Joe Nocera

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

The End of Free Candy

P.J.O'Rourke, the conservative writer, once remarked: “The Republicans are a party that says government doesn't work - and then get elected and prove it.”

The American experiment, by which I mean its stumbling, often contrary, lunge towards a functioning representative democracy, has been at once a triumph and a failure. It has triumphed in terms of its wide influence and material possessions but failed in providing steadiness and harmony for its polity. In short it has succeeded to large extent by investing in the current whims of fashion. The country's economy, beginning with Henry Ford and his goal of planned obsolescence, has always depended upon an addiction to consumption-- a need for instant gratification that eviscerates stability and opposes reflection and prudent conservation. The current financial crisis is the result of a culture that both literally and metaphorically "eats without thinking".

As Rachel Maddow, our most brilliant political pundit so humorously described it: Our Wall Street titans are like six-year-olds unable to keep themselves from secretly gorging on the Halloween candy. Meanwhile our representatives in Congress instead of keeping a watchful eye grab their own fistfuls, leaving the public to clean up the six-year-old's vomit.

Victims of Greed

As Anatole Kaletsky asks: How did this disaster come to pass? And how can it be that the U.S. Treasury Secretary is such a financial dunce? One might as well ask how George W. Bush emerged from Harvard with a masters degree in business.

The genesis of the giant multi-national was spawned in the post-World-War-II impulse for unified markets and the American public's demand for ever-increasing quarterly profits. One didn't need to have knowledge to reach the corporate table, just a good enough gimmick to con the bankers long enough for sufficient cash to be raised before the next sure bet.

When Paulson announced his $700 billion “plan” the financial world heaved a sigh of relief. Finally, there would be a white knight to cover all our losses. Sadly, it quickly became clear that while Mssrs Paulson and Bernanke could construct a sophisticated model for the market function of a 12 to 1 leveraged reinsurance derivative, they had no clue how their theoretically-sound, computer-generated product would behave once that six-year-old was finished gobbling up all the candy. So what I first mistook as arrogance was actually sheer bluster. The swaggering demand at the end of Paulson's "mighty" three page paper that: "decisions by the Secretary pursuant to this Act are non-reviewable and may not be reviewed by any court of law or any administrative agency” was merely a bluff trying to fake real confidence.

Not So Sweet Irony

Were it not for the potential tragedy we all face because of their hubris we would be delighting in the deregulators' comeuppance. Remember this from the Republican Party Platform?

"We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself."

What Bush and Hank were saying just last week:


Well chaps you may pout and stamp your free-market feet but the world has had enough of your childishness. As the Financial Times now reports:

"The Bank of England has moved to inject longer term cash into money markets as part of a co-ordinated effort with the US Federal Reserve, the European Central Bank and the Swiss National Bank. The intervention follows the breakdown late on Thursday of talks over a $700bn bailout for the US financial system.

Money market traders said that interbank lending for terms longer than a day had come to a near standstill as counterparties feared that they may be lending to a bank that could suddenly become insolvent.

The Bank of England said it would extend $30bn in cash for a week against eligible collateral, drawing on currency swap lines put in place earlier this month with the Fed."

The US will lose its role as a global financial “superpower” in the wake of the financial crisis, Peer Steinbrück, the German finance minister, said on Thursday, blaming Washington for failing to take the regulatory steps that might have averted the crisis.

“The US will lose its status as the superpower of the world financial system. This world will become multi­polar” with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. “The world will never be the same again.”

So there you have it. The world has moved on Mr. Paulson. You may stay in Washington and play more of your games hoping to spare yourself and Senator McCain your due punishment. Neo-liberalism is dead. The only thing left to see now, is whether or not there are enough grown-ups left in the country to give you and your Republican buddies a long-deserved spanking.