Robert Oak's blog

Systemic Risk - The New WMD

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Securitization was based on the premise that a “fool was born every minute.” - Joseph Stiglitz in congressional testimony, Financial Regulation, October 21, 2008.

Even Adam Smith recognized that unregulated markets will try to restrict competition, and
without strong competition markets will not be efficient. More recent research has shown that
markets often fail to produce efficient outcomes (let alone fair or socially just outcomes) when
information is imperfect or asymmetric—but information imperfections and asymmetries are at
the center of financial markets. That is what they are about. Our financial markets have even
worked hard to exacerbate these problems; as we have noted, they created non-transparent
products that were so complex that not even those who created them fully understood the risks to
which they gave rise.

The Big Pitch - Geithner's Sales Job

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The headlines are ablaze of Geithner's plan.   The Treasury Secretary is on CNBC, the cable news, even conference calls with select bloggers (I wonder if Krugman was invited?), are they twittering too?   The markets react, the Dow up almost 500 pts!   Astounding, magical, we have the cure....or do we?

I already wrote my own overview of the toxic asset plan and believe it fatally flawed with the same assumptions that got us into this mess, home values must drop to be in alignment with income and Americans are tapped out, the great debt fueled Ponzi scheme has collapsed.

 

The Real Screw Job - AIG Used as Funnel of U.S. Taxpayer Money

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large screw small screw
See these two screws on the left? Think of the little screw as AIG bonuses. That big nasty long screw is AIG funneling $183 billion dollars of your money to foreign banks and to banks that already have wads of cash on hand. Those two screw jobs are not even to scale because the large screw would go past the page. Look those two screws over. Now which one do you believe Populist outrage should be focused on?

So we are all outraged over AIG bonuses. Now lets amplify that outrage to the scale of the ripoff. The bonuses are only 0.001 of the real ripoff that just happened. Your tax dollars were funneled through AIG to foreign banks and to U.S. banks for worthless assets. Your own blind rage is a smoke screen, being used by media elites so you do not see the real screw job going on.

In an Instapopulist earlier we showed the AIG payout disclosure. Now I want to amplify those payouts. In the attached file AIG lists payouts to counter parties.

What happened? Basically a bunch of companies placed bets, called credit default swaps, that home mortgages weren't so great and would probably go bust. AIG (Financial Products), as the great global gambling hall, allowed these bets to be placed. Then AIG got a huge mega wad of cash from the government so they could pay out on these casino hall winnings instead of going bankrupt. Banks who won big are foreign banks and of course Goldman Sachs, former Treasury Secretary Paulson's former company.

Think it's about unfreezing credit markets for you and me? Think it's about contracts? Don't you remember something about other nations taking care of their own banking system? Do you believe the United States should prop up the entire globe or payout U.S. taxpayer money to other nations?

Contracts are broken all of the time and considering this is U.S. taxpayer money footing the bill to pay for the below banks gambling bets, yeah, a nation can break such outrageous contracts. This is especially true considering these very institutions are getting billions of your money from the TARP and Federal Reserve. Did you know Goldman Sachs bought an energy speculation firm while receiving TARP funds?

The Wall Street Journal put together an image to show you how this Ponzi scheme works:

 

 

More Big Bucks for Private Investors - Geithner "Plan" Leaked - TARP II

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Here we go, once again trying to get something for worthless assets at the U.S. taxpayers expense. This time since Obama and Geithner know there is no way Congress is going to give them more money....so, they are going to raid the FDIC.

The plan, which will not be released until next week is now leaked all over the press.

In order to get $1 trillion of the estimated $2 trillion of "toxic assets" off of the banks books, now the plan is to offer private investors huge subsidies and loans and then auction off these various assets to these same investors. These "toxic assets" are assuredly really toxic for the banks get to choose which ones they will sell.

The New York Times:

The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.

Friday Movie Night - Argentina's Economic Collapse

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It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

This is a nice illustrated video to explain, in layman's terms, how the credit crisis happened. If you are having problems getting your head wrapped around what is going on, you might watch this.

AIG Congressional Hearing 03/18/09

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The blogs are simply ablaze over bonuses, who allowed it, finger pointing and outrage. To that effect, I thought putting the focus on a fairly detailed and informative Congressional hearing is in order.

American International Group’s Impact on the Global Economy: Before, During, and After Federal Intervention.

Firstly one might read the Government Accountability Office testimony. It's quite a mixed bag and one must really be concerned in AIG taking years to rid itself of the London Financial unit, referred to as AIGFP. Later in the testimony, Liddy himself says this is the problem and it needs to be wound down quickly. Quickly is assuredly not years.

What is Mark to Market and Why Should You Care?

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Relax the rules! Override the FASB! No, it's all a Ponzi scheme enabler, it's Enron Style accounting!

What are these people even talking about with mark-to-market accounting methods?

Mark to market accounting simply means assets are valued at the current market prices. Where the controversy comes into play is in those assets which are not easily assessable since there is no actual market upon which to evaluate them.

So, what happened was we had fictional financial models created to evaluate the value for some types of derivatives. This is what the Enron scandal was in part about. There was no separate established market for energy derivatives, thus Enron with their conspirators, made up some over-inflated fiction on these contracts since there was no real world check to determine their true value.

Friday Movie Night - Stewart vs. Cramer plus the Wobblies Edition

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It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

Unless you have been hiding in a black box, you could not have missed hearing about Jon Stewart's attack on CNBC. Jim Cramer went on the Daily Show and here is the resulting interview:

 

Cramer vs. Stewart, I

 

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