American Logo October 25, 2013 Volume III, #328 ______ Give a man a spade and hell plant a seed. Give him a horse and plow and hell plant a crop. Give him a tractor and hell drive to the nearest liquor store - Peace Corps Handbook _______ Learning From History There is an oft quoted old bromide that those who fail to learn from history are destined to repeat it. We Americans not only perform that exercise regularly, but we tend to outdo and enlarge upon each successive repetition of stupidity. One fertile field for unbridled malfeasance is financial deregulation and the free enterprise larceny that follows like the night the day. In the 1980s the S & L (Savings and Loan) scandal, anointed by the Reagan Administration, resulted in the bankruptcy of 747 freewheeling financial institutions, which were bailed out by the Federal government because in their collective fraud they were considered too big NOT to fail. The loss to the gullible taxpayers amounted to $180 billion (admittedly peanuts by Goldman Sachs standards). Some 140 excessively free enterprisers went to the slammer, and the dramatis personae included the son of a then vice-president. (Hint: Think a bird in the hand.) Heres how it worked: Since the prevailing temper of the times suggested that only in America, where capitalism was in flower, could there exist true freedom of enterprise if entrepreneurs were allowed an absolute pass in seeking life, liberty and the pursuit of their neighbors money. Financial regulation was considered tantamount to communism. (Sound familiar?) In the unfettered field of Savings and Loan, any group of Toms, Dicks and Harrys could launch a near-bank with literally no capital requirement, they could take on any amount of funding by enlisting the support of corrupt deposit brokers, and then they could lend out money to literally anybody, usually enterprises involving the friends, neighbors and especially the relatives of the S & Ls officers and boards of directors. Fun, fun, fun. While it lasted. No big government to get in the way, hampering the American way of life with those nasty unAmerican regulations. (Sound familiar?) The “big government” of course was more than welcome when it was bail-out time, since of course the Federal Deposit Insurance Corporation was required to cover all the debts and losses of all 747 near- (and yet so far) banks. From his sinecure at Harvard, John Kenneth Galbraith observed that this was “the largest and costliest venture in public misfeasance, malfeasance and larceny of all time. J.K., baby, thou shouldst be living at THIS hour. What happened during THIS failure to learn from history makes the S & L caper look like a penny ante round of seven-card stud. The Dodd-Frank Bill, an Act to regulate the American financial industry and provide investor and public protection, (still, incredibly, being widely criticized by the slow-learners on the right side of the aisle), was passed by Congress and the Senate three years ago. Recently, at least one senator has observed that following the greatest scam in world history, all the known perpetrators are still prominent, richer than ever and even regarded as folk heroes in the financial prints and CNBC. Not one of them - on and around the street of dreams that shoulders the sulking, ineffectual Trinity Church - has yet been fingered, prosecuted or required to spend a single night in durance vile. If this scenario was a Hollywood script, no credible producer would touch it. Here it is: A group of billionaire scoundrels conspire to gerrymander an already hopelessly stacked system, committing not only unethical but criminal acts on an enormous scale. Then they plead poverty and the threat of world catastrophe, such that two successive administrations – one run by a cretin named Bush, the other by an ineffectual redeemer named Obama – resurrect the criminals with close to a trillion dollars in tax-payers money, with which the plaintiffs immediately leverage themselves into even greater riches. The crimes of Wall Street have been revealed and dwelt upon ad nauseum, the subject of endless commentary. The criminal conspiracy – which has been the worst kept secret in history for more than five years - involved investment banks, brokers and traders, of which Goldman Sachs and Deutsche Bank were prominent among the more agile players. These mobsters (1) cobbled together a universe of individual home mortgages, some good, some bad, some outright trash, (2) bundled them as collateral behind “mortgage-backed securities,” a hybrid, hitherto unknown but scarcely credible investment instrument, (3) hired huge credit rating agencies with household names, such as Moodys and Standard & Poors, to attest to the quality of this mountain of manure, and then (4) sold billions of dollars worth of this odoriferous inventory to the gape-mouthed public and even supposedly knowledgeable institutions. But that was only the opening salvo in this criminal caper. Rather, it was the first of a three-act atrocity. Next, they simultaneously placed enormous bets AGAINST the success of the garbage they had just sold as investment-grade securities, by running up immense short positions, nailing still other individual and institutional suckers. The crime STILL didnt end there. They made further billions by designing and concocting sophisticated new “products,” a favorite banking hyperbole, in the form of derivatives twice removed, such as Credit Default Swaps, in effect selling what amounted to massive insurance policies both for and against the likelihood of the mortgage-backed securities (a) surviving, or (b) defaulting. For perhaps the first time in history, institutional sharpies were allowed, on a massive scale, not only to play both sides against the middle - which is routine enough on Wall Street - but to play the middle as well. If you care to try this – or anything remotely approaching this – on a more modest scale in Las Vegas, where the regulators are not as patient and understanding as the SEC, you will likely have your kneecaps broken at a minimum, or more likely you will be deposited in a shallow grave in the desert just off Interstate 15. But the government and financial apologists for what followed are in a way even more culpable than the criminals. The rationale for giving more billions to the thieves who extracted billions from the system, went something like this: “if we dont bail these poor guys out, our whole system might collapse.” In other words, declaring that it isnt really a crime to be a crook on Wall Street, its more aptly described as sin, that wonderful Christian invention, because it is subject to infinite forgiveness. Its as if the Attorney General were to say: “I know these Mafia guys are hoods, but if we prosecute them, think of the social repercussions on Manhattans Lower East Side above Fulton Street, and in great tracts of New Jersey. It would likely mark the end of the olive oil importiug industry as we know it. And, most importantly, our diplomatic relations with Sicily might be jeopardized.” Writing in the New York Times, Gretchen Morgenson pointed out that, while the Savings and Loan tsunami over twenty years ago involved billions in fraudulent activity, it created a tiny fraction of the financial chaos that ensued as a result of the recent Wall Street heist. The SNL gig was primitive stuff by todays standards, old hat, this simple enterprise of using the publics deposits to make fraudulent loans to non-existent companies owned by friends, relatives and themselves. It was amateur pilfering, compared with the artistry of Wall Street. And that whole sub rosa S & L industry was signed off and anointed by a smiling Ronnie Reagan. Do we learn from history? Of course. The verbiage has changed, with the bad guys re-cast as job creators, so naturally the slovenly 99% should give them more tax breaks. The principal job thats being created is - yet again - on us.
Posted on: Tue, 15 Oct 2013 00:02:15 +0000
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