Helicopter Ben Invented Tax Evasion Vehicles for the Real Housewives of Wall Street

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Matt Taibbi is out with his take on the Fed’s bailout lending revealed last month. He focuses on how two rich housewives with no apparent business experience got almost a quarter of a billion dollars in the TALF program.

In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper BeerEast Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.

The Macks make for an interesting couple. John, a Lebanese-American nicknamed “Mack the Knife” for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of “palm healing.” The only other notable fact on her public résumé is that her sister was married to Charlie Rose.

It’s hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that’s exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan’s penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.

[snip]

In the case of Waterfall TALF Opportunity, here’s what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here’s the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.

But the kicker is that these two Real Housewives of Wall Street incorporated their little slush fund … in the Cayman Islands.

Perhaps the most irritating facet of all of these transactions is the fact that hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations — including prominent Wall Street names like Pimco, Blackstone and . . . Christy Mack. Yes, even Waterfall TALF Opportunity is an offshore company. It’s one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing tax evasion? Giving it a federal bailout? What the fuck?

Back when we had a chance of shaming TurboTax Timmeh Geithner into withdrawing his nomination to be Treasury Secretary, we should have suspected he and his associates had a soft spot for tax havens.

But by that point, it was already too late. Timmeh and Helicopter Ben had been shoveling money into the pockets of rich housewives so they could hide it in the Cayman Islands.

Yet we have to cut aid to poor kids, because we’re broke.

The Charismatic Blonde Women and the Consent Decree

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DDay reported on OCC’s attempt to preempt a foreclosure settlement on Monday. Today, Yves Smith has a long post giving the consent decrees the banks are trying to roll out in lieu of a real foreclosure settlement the disdain they deserve.

Wow, the Obama administration has openly negotiated against itself on behalf of the banks. I don’t think I’ve ever seen anything so craven heretofore.

[snip]

The part I am puzzled by is who is behind this rearguard action. It clearly guts the Federal part of the settlement negotiations. If you pull out your supposed big gun (ex having done a real exam to find real problems, and it’s weaker than your negotiating demands, you’ve just demonstrated you have no threat. Now obviously, a much more aggressive cease and desist order could have been presented; it’s blindingly obvious that the only reason for putting this one forward was not to pressure the banks, as American Banker incorrectly argued, but to undermine the AGs and whatever banking/housing regulators stood with them (HUD and the DoJ were parties to the first face to face talks).

So the only part that I’d still love to know was who exactly is behind the C&D order? Is it just the OCC?

But what I’d like to know is why, coincident with the roll-out of this Potemkin resolution to the foreclosure problem, someone told Reuters that the Administration was considering Jennifer Granholm and/or Sarah Raskin to head the Consumer Finance Protection Board.

The White House is considering Federal Reserve Governor Sarah Raskin and former Michigan Gov. Jennifer Granholm to head a new agency charged with protecting consumers of financial products, a source aware of the process said Tuesday.

You see, as Yves reminds us, one part of the whole AG settlement that this consent decree seems intended to replace was that Tom Miller, Iowa’s Attorney General, would get the CFPB position as his reward for shepherding through such a crappy settlement.

So now, with the consent decrees the apparent new plan to appear to address foreclosures without penalizing the banksters, the Administration rolls out the claim that it is considering Granholm and Raskin?

And the report is all the more weird given that Granholm was previously floated for the position in late March, at which point she declined to be considered and–the next day–accepted a position with Pew. This morning, in response to the Reuters story, Granholm tweeted,

This story says I’m under consideration for the CFPB job. I have declined to be considered for this post. I’m happy in my new roles at Pew, Berkeley and Dow. And, by the way, while I don’t know Raskin and she may be great, I think nominating Elizabeth Warren is a fight worth waging.

See, best as I can guess (and this is a guess), by pulling the plug on the AG settlement, the Administration lost its best case for appointing someone not named Elizabeth Warren to assume the CFPB position. Whereas they might have been able to claim (falsely) that Miller had achieved this great progressive settlement for homeowners, now they’ve decided to stick with the status quo rather than even a bad settlement. Which leaves them with the increasingly urgent problem of who heads the CFPB when it goes live in July.

And so they float a report that the one blond woman who is as much of a rock star as Warren is might get the position? Do they think Democrats can’t tell the difference between charismatic blonde women (or that progressives would confuse the down-to-earth but centrist Granholm for Warren)?

It’s like they’ve got a Craigslist posting up somewhere:

Wanted: blonde woman with great people skills and rock star looks to serve as figurehead for a position purported to exercise real power to protect American consumers, but which will instead be asked to serve up Timmeh Geithner coffee and complete deference. Democratic affiliation a plus but not necessary.

SWIFT and the Asymmetric Control of Data

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I’ve been thinking a lot about SWIFT lately. Partly that’s because of the renewed discussion on how some big banks relied on cash from drug cartels to survive as the housing bubble began to pop. Partly that’s because of advance publicity for Nicholas Shaxson’s Treasure Islands and coverage of corporate tax dodging. And partly it’s because of this piece, declaring privacy dead without realizing that privacy is only dead for the little people.

You see, I’m increasingly convinced SWIFT will one day be the ultimate battleground over whether the US government can just suck up and analyze all the data it wants.

As a reminder, SWIFT (or Society for Worldwide Interbank Financial Telecommunicatiom) is the online messaging system the world’s finance industry uses to transfer funds internationally. It records the flows of trillions of dollars each day.

It first got big news coverage when Eric Lichtblau and James Risen reported on how our government uses it to track terrorist financing. But of course, the database tracks all sorts of financial flows, not just terrorist financing. Thus, it could be used to track drug finance, tax cheats (both corporate and individual), and the looting of various nations’ riches by their elites.

Swift, a former government official said, was “the mother lode, the Rosetta stone” for financial data.

Indeed, according to Lichtblau’s Bush’s Law, the database appears to track even more information than tax havens would ever collect.

[T]he routing instructions that the company used to move money around the globe often included much more detailed data than any other system: passport information, phone numbers and local addresses, critical identifying information about the senders and the recipients, the purpose of the transaction, and more. (243)

In a world where–as described in Shaxson’s book–our financial system largely runs on the strategic shifting of money behind the cloak of corporate anonymity or secret back accounts, SWIFT appears to be the one place where there is full transparency.

The US and UK in particular, according to Shaxson, have used the secrecy that corporate laws and associated tax havens can offer to sustain their hegemonic position in the world. As we saw, giving a bunch of drug cartels means to launder their money allowed Wachovia to survive for years after the time when it should have collapsed; the US and UK are just larger versions of the same gimmick.

Which is why, I’ve become convinced, the response to NYT’s reporting on SWIFT was (and remains) so much more intense than even their exposure of the illegal wiretap program. The shell game of international finance only works so long as we sustain the myth that money moves in secret; but of course there has to be one place, like SWIFT, where those secrets are revealed. And so, in revealing that the US was using SWIFT to track terror financing, the NYT was also making it clear that there is such a window of transparency on a purportedly secret system.

And the CIA has, alone among the world’s intelligence services, access to it.

Read more →

How Allowing Money Laundering Keeps Our Bubblicious Finance Afloat

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Last June, Bloomberg did a long story on the Deferred Prosecution Agreement that Wachovia negotiated with DOJ. As “punishment” for helping Mexican drug gangs to launder more than $363 billion  through casas de cambios for three years, Wachovia had to pay $50 million fine and a $110 million forfeiture of the proceeds that were clearly from drug gangs.

In my post on Bloomberg’s article last year, I compared the size of this business (plus some other illegal ones Wachovia engaged in) to how much Wachovia was losing in mortgage shitpile.

So $373 billion in wire services (some of which were surely legal), $4 billion in bulk cash services, and some portion of $47 billion in digital pouch services (again, some of which is surely legal and may pertain to remittances). Compare those numbers to the $40 to $60 billion or so in Wachovia subprime losses Wells Fargo ate when it took over Wachovia. Was Wachovia laundering money for drug cartels because it was so badly exposed in mortgage-backed securities, or was it so heavily involved in products that could be used for money laundering just for fun?

It sure looked to me like Wachovia was covering this up–and berating their own money laundering guy who kept pointing to these transactions–because they were so deep in the shitpile.

The Guardian just did its own long story on this (h/t NC) that, among other things, confirms my suspicion there was a connection between the shitpile and the money laundering.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade,” he said. “There were signs that some banks were rescued that way.”

Of course, it almost certainly wasn’t just drug lords. Our banks were almost certainly overlooking other dubious cash transfers during this time, from oil dictators to the mob to illegal corporate gains.

And we couldn’t prosecute such money laundering, the Guardian article suggests, because doing so would have hastened the collapse of the bubble.

Goldman’s Lies and Jamie Dimon’s Piggy Bank

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After a drawn out battle to liberate the records of the Fed’s discount window lending, they’ve finally been released. Bloomberg (who led the legal fight to liberate them) has made the records available here.

While it’s going to take a while for those who understand this stuff to collate the data–the Fed released individual PDFs–thus far there are two stories. First, when Goldman Sachs President Gary Cohn testified to the FCIC that Goldman had only accessed the window once–and that at the request of the Fed–he appears to have not been telling the truth.

Goldman Sachs Bank USA, a unit of the company, took overnight loans from the Federal Reserve on Sept. 23, Oct. 1, and Oct. 23 in 2008 as well as on Sept. 9, 2009, and Jan. 11, 2010, according to the data released today. The largest loan was $50 million on Sept. 23 and the smallest was $1 million on the most recent two occasions.

Goldman Sachs President and Chief Operating Officer Gary D. Cohn told the Financial Crisis Inquiry Commission June 30 that “we used it one night at the request of the Fed to make sure our systems were linked with their systems, and it was for a de minimis amount of money.” Peter J. Wallison, a member of the Financial Crisis Inquiry Commission, then asked, “you never had to use it after that?”

“No, and as I said, we used it on the Fed’s request,” Cohn replied.

Maybe now that we’ve established the principle that people should go to jail for lying like this, we can finally send a bankster to jail?

Bernie Sanders, meanwhile, observes that Jamie Dimon was serving on the Board of the NY Fed at the same time as sucking at its teat.

Under court order, the Federal Reserve today identified more banks that took loans during the financial crisis using a once-secret system that Sen. Bernie Sanders (I-Vt.) called “welfare for the rich and powerful.”A Sanders provision in the Wall Street reform law already had forced the Fed last Dec. 1 to name banks that took trillions of dollars in emergency loans during the crisis.

“The Federal Reserve bailout was welfare for the rich and powerful and you-are-on-your-own rugged individualism for everyone else,” Sanders said. “The information released by the Fed today should never have been kept secret.  This money does not belong to the Federal Reserve; it belongs to the American people.  I applaud Bloomberg News, Fox News and others for their success in lifting another veil of secrecy at the Fed.”

Sanders said the latest disclosure raises questions about conflicts of interest. While Jamie Dimon, the CEO of JPMorgan Chase, served on the board of directors of the New York Fed, in one month alone, April of 2008, JPMorgan Chase received a combined $313 billion in Fed loans.

“This is an obvious conflict of interest on its face that must be investigated as part of the independent audit that my amendment requires to be completed this summer.  When JPMorgan Chase was telling the world about their great financial success, it seems like they were using the Fed’s discount window as a giant piggy bank.”

I guess this is the kind of information about the banksters about which we little people are supposed to remain ignorant?

BIFFOs and Banksters

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I almost got distracted from working my yearly post around this picture of Mr. EW and I in Moneygall, taken back in 2008 when Brian Cowen was about to become Ireland’s Taoiseach and Barack O’Bama was about to officially get enough delegates to win the Democratic nomination to be President.

But this very worthwhile Adam Serwer post reminded me:

I think we’ve finally discovered the origins of President Barack Obama‘s un-American worldview (via LGM):

President Obama has officially declared March 2011 Irish American Heritage Month. More importantly the White House also announced that the president would be brewing his own beer called White House Honey Ale for St.Patrick’ Day.

Obama, who said he will pay for the beer making equipment himself, has made presidential history by being the first U.S. president to brew beer at the White House.

It seems that Obama is certainly getting in touch with his Co. Offaly, roots although no one is sure if honey ale is brewed in the town of Moneygall (Obama’s great-great-great grandfather is said to have left Offaly for New York in 1850).

I would love to know more. What I know is troubling enough. And one thing that I do know is his having grown up raised by his Irish-American mother, his view of the Brits, for example, is very different than the average American. When he gave the bust back to the Brits–the bust of Winston Churchill–it was a great insult to the British. But then if you think about it, his perspective as growing up in Dublin with an Irish mother and grandfather, their view of the Irish Republican Army is very different than ours because he probably grew up hearing that the British were a bunch of imperialists who persecuted his grandfather.

Now, back in 2008 when we were wide-eyed idealists, I found it notable that both Cowen and Obama were making a big career move at the same time. Both of them, you see, are Offaly men (just like Mr. EW, I have to admit), what the Irish affectionately call “Big Ignorant Fuckers from Offaly.” So at that point, I imagined there was some special Luck of the BIFFO, which would put them both in good stead as they moved forward to lead their country.

But it turns out that’s not what these two rising national BIFFO leaders had in common. Unfortunately, it seems, it was a fondness for banksters.

Rather than make honey ale (!?), I’ve been corning beef for the last 10 days, which my own beloved BIFFO and I will enjoy with some Guinness. May your Guinness and corned beef bring you the luck of the Irish in the year ahead.

WikiLeaks Reveals How the British Lied to OECD about BAE Bribery

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A WikiLeaks cable dated March 5, 2007 has raised new interest in the BAE bribery scandal (AP, WSJ, Telegraph). While no one seems to have noted this, the cable shows that the British lied to their counterparts at the OECD about details of the bribery investigation into BAE.

As the Guardian (which led the reporting on this story) reported three years ago, the UK’s Serious Fraud Office started investigating evidence of an elaborate kickback system by which the Brits would give money to the Saudis for BAE contracts in 2004 (it turns out those kickbacks were allegedly used to fund covert operations). In 2006, Prince Bandar bin Sultan flew to London and threatened Tony Blair the Saudis would stop sharing information on terrorists if the SFO continued its investigation. As a result, in early 2007, the SFO stopped its investigation, citing public interest. The US settled its investigation of the same bribery scheme for $400 million last year.

The cable appears to be preparation for the March 2007 OECD meeting of the Working Group on Bribery; it serves as a review of what had happened in the previous, January 2007, meeting regarding the British decision to stop its investigation of the BAE bribery scheme. Much of the cable reviews the stance of each country regarding the UK decision, with France vocally complaining that the British decision violated the Convention on bribery’s prohibition on invoking relations with foreign countries as reason to spike a bribery investigation, and Australia fully supporting the UK decision. According to the cable, the American delegation was in between those two positions (they were basically arguing for putting off a conclusion about the appropriateness of the decision until the March meeting for which this cable served as preparation):

The U.S. delegation took note of the experience and professionalism of U.K. delegation members. The US del inquired into what appeared to be inconsistent accounts relating to differences in views of the SFO Director and Attorney General regarding the merits of the case, reports alleging British intelligence agencies had not joined the government’s assessment that the case raised national and international security interests, and whether the SFO could provide WGB members with assurances that BAE would not continue to make corrupt payments to senior Saudi officials.

[snip]

The U.S. delegation commented that it was not appropriate at this juncture to conclude that Article 5 does not contemplate the proper invocation of national security interests.

Ultimately, the cable reveals, the group developed a consensus to revisit the issue in the March meeting after further review of the British investigation.

The cable is perhaps most interesting because it gives us a glimpse of what the British publicly told the international community about its investigation, the targets, and the reasons for dropping the investigation.

The SFO Deputy Director falsely portrayed the decision to end the investigation as voluntary

Most interestingly, the cable shows that SFO Deputy Director Helen Garlick portrayed SFO Director Robert Wardle’s decision to terminate the investigate as entirely voluntary.

Garlick started by underscoring the U.K. delegation’s willingness to answer as much as possible the questions of the WGB, bearing in mind pending litigation in the U.K. Garlick reported that SFO and MOD Police investigators had expended more than 2 million pounds sterling on the BAE investigations. She said on December 14, SFO Director Robert Wardle had decided to discontinue the joint SFO/MOD Police investigation based on his personal, independent judgment.

The French doubted this (I’m guessing they were suspicious partly because Wardle did not brief the group himself). Shortly after the January meeting, the Guardian reported that Wardle disagreed with Lord Goldsmith’s ultimate decision to spike the investigation and in 2008 Wardle testified that he strongly disagreed with the decision.

Wardle told the court in a witness statement: “The idea of discontinuing the investigation went against my every instinct as a prosecutor. I wanted to see where the evidence led.”

All of which suggests the French were right to doubt that Wardle made this decision himself.

The Brits may have kept Bandar bin Sultan’s role in the bribery scheme secret

In addition, tt appears that the Brits may have kept Bandar bin Sultan’s rule in the bribery scheme secret–though it may be, instead, that the cable didn’t record the details of the briefing pertaining to Bandar. The cable describes the Brits exhorting their partners to keep the contents of the briefing on the investigation classified.

U.K. delegation head Jo Kuenssberg said the U.K. recognized the level of interest of WGB members in the case and stressed the need to respect the confidentiality of the information contained in the U.K.’s briefing,

And then, among the details revealed in the investigation, the Brits described an “unnamed senior Saudi official” and “another very senior Saudi official” as recipients of some of the bribes in the scheme.

Third, payments made under the al-Yamamah contract to an unnamed senior Saudi official: Garlick advised that in October 2005, the SFO had demanded BAE produce documents including payments related to the al-Yamamah contract. The company made representations to the AG on public interest grounds (political and economic considerations) as to why the investigation should be halted. The AG undertook a Shawcross Exercise and sought representations from various British officials regarding the case. The SFO Director wanted to continue the investigation. On January 25, 2006, the AG agreed that there was no impediment to continuing the investigation. The SFO sought Swiss banking records regarding agents of BAE. The SFO found reasonable grounds that another very senior Saudi official was the recipient of BAE payments. The SFO was poised to travel to Switzerland in connection with its Mutual Legal Assistance (MLA) request when the decision to discontinue the investigation was made;

The cable explicitly named Turki Bin Nasir, then the head of Saudi Arabia’s Air Force and already by that point publicly tied to the bribery scheme. So these two must be others. I’m guessing that Bandar–whose receipt of $1 billion via the scheme would be broken by the Guardian in June 2007–is the “very senior Saudi official” mentioned, not least because his involvement seems to have been exposed at the Swiss bank account stage of the investigation. So the only question, then, is whether the Brits kept his name–as they did the “unnamed senior Saudi official”–secret from their counterparts at the OECD. It appears, however, they did.

In addition, the British review of the investigation far underplayed the amount involved here.

The Logical Consequence of Looting in Libya

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Things for anti-Qaddafi forces in Libya have gone from difficult to worse. Yet even after Director of National Intelligence James Clapper made the mistake of telling the truth about Qaddafi’s strength, there has been little discussion about this report from James Risen and Eric Lichtblau (one exception is Dan Drezner).

Here’s part of what Clapper said (the White House has backed away from his comments and Lindsey Graham has called for his resignation for telling the truth).

“Over time I think the regime will prevail,” acknowledged Clapper. “With respect to the rebels in Libya, and whether or not they will succeed or not, I think frankly they’re in for a tough row.”

Clapper added he did not believe Kadhafi, who has earned a reputation as a maverick, planned to step down after more than four decades in power.

“I don’t think he has any intention of leaving,” Clapper said. “From all evidence that we have, which I’d be prepared to discuss in closed session, he appears to be hunkering down for the duration.”

[snip]

Libyan air defenses, including radar and surface-to-air missiles, are “quite substantial,” Clapper explained.

“A very important consideration here for the regime is, by design, Kadhafi intentionally designed the military so that those select units willed to him are the most luxuriously equipped and the best trained.”

With that assessment–which was echoed in testimony by the head of DIA–in mind, consider Risen and Lichtblau’s description of the way Qaddafi has prepared himself financially to weather a rebellion. They describe that he has hoarded away “tens of billions” in Libya which will make the financial sanctions we’re using against him pretty useless.

The money — in Libyan dinars, United States dollars and possibly other foreign currencies — allows Colonel Qaddafi to pay his troops, African mercenaries and political supporters in the face of a determined uprising, said the intelligence officials, speaking on the condition of anonymity.

The huge cash reserves have, at least temporarily, diminished the impact of economic sanctions on Colonel Qaddafi and his government. The possibility that he could resist the rebellion in his country for a sustained period could place greater pressure for action on the Obama administration and European leaders, who had hoped that the Libyan leader would be forced from power quickly.

In other words, in addition to the tens of billions in assets Europe and the US have frozen, Qaddafi has still more loot available within his country, inaccessible to international sanctions. And that is one thing (the superior Russian arms he has that Clapper mentioned are another) that will allow Qaddafi to wait out the rebels.

Take a step back and think about the implications of this.

According to the story, Qaddafi probably started hoarding money in the 1990s. After the West lifted sanctions on Qaddafi in 2004, the process accelerated.

He has built up Libya’s cash reserves in the years since the West began lifting economic sanctions on his government in 2004, following his decision to renounce unconventional weapons and cooperate with the United States in the fight against Al Qaeda. That led to a flood of Western investment in the Libyan oil and natural gas industries, and access to international oil and financial markets.Colonel Qaddafi, however, apparently feared that sanctions would someday be reimposed and secretly began setting aside cash in Tripoli that could not be seized by Western banks, according to the officials. He used the Libyan Central Bank, which he controls, and private banks in the city. He also directed that many government transactions, including some sales on the international oil spot market, be conducted in cash. “He learned to keep cash around,” said the person with ties to Libyan government officials, who asked to remain anonymous for fear of putting them in jeopardy.

Then, in the weeks before the uprising broke out in Libya, Qaddafi continued to move money around to keep it accessible.

And with it, he is able to outfit and pay his elite troops, mercenaries from other countries, and loyal supporters. He can let oil just sit in the ground (as it did during the previous sanction period), because he doesn’t need to sell oil immediately to get money.

Because Qaddafi managed to loot shrewdly, he is largely immune from our non-military efforts to prevent him from committing genocide against his own people. His looted riches make him the match of most of his country, even backed by the international community.

And the thing is, we knew Qaddafi was doing this looting. Read more →

The Folks Who Run Our Economy Believe in the Easter Bunny

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The folks at the Fed who run our economy apparently believe in the Easter Bunny. And Casper the Friendly Ghost. And Santa Claus.

I mean, I can only conclude the folks over there are completely unhinged from reality given their claim that no people–not a single homeowner–was wrongly foreclosed.

A months-long investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures, members of the Fed’s Consumer Advisory Council said Thursday.

Jason Grodensky, who paid cash for his house yet lost it to Bank of America in “foreclosure” nevertheless. The Fed says there were no wrongful foreclosures.

Christopher Marconi, who got foreclosed by Wells Fargo on a house he didn’t own and had never seen. The Fed says there were no wrongful foreclosures.

Jonathan Rowles, who never missed a payment, who got foreclosed by Chase while he was away in Iraq, in violation of the Servicemembers Civil Relief Act. The Fed says there were no wrongful foreclosures.

Granted, they came to this conclusion, in part, by defining wrongful foreclosure in a way that totally ignores title problems, failure to serve homeowners, and tack-on charges servicers have used to force people into default so they can foreclose.

During a public meeting attended by Fed chairman Ben Bernanke and other regulators, consumer advocates on the panel criticized federal bank regulators for narrowly defining what constitutes a “wrongful foreclosure.”

[snip]

Kirsten Keefe, a member of the Fed consumer panel and an attorney at the Empire Justice Center in Albany, New York, said the Fed’s report defined “wrongful foreclosures” as repossessions of borrowers’ homes who were not significantly behind on their payments.

And they’re not releasing the report–they’re keeping it totally secret! I can only presume that the logic and data (based on just 500 loan files) behind it is so laughable that releasing it would be more damaging than simply issuing this claim with no proof.

Nevertheless, as my list above makes clear, it is simply impossible to state that there have been no wrongful foreclosures and still claim to have even a shred of grasp on reality.

Which I guess, given the smoke and mirrors that has constituted our economy in recent years, is about what we ought to expect from the Fed.

A Modest Proposal: Indefinitely Detain the Banksters

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Obama has declared that he has the authority under the 2001 AUMF to indefinitely hold anyone “if it is necessary to protect against a significant threat to the security of the United States.”

He doesn’t say that person has to be a terrorist, much less part of al Qaeda. He doesn’t say that person has to have any tie to the enemy as defined by the 2001 AUMF, that is, “those nations, organizations, or persons [the President] determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons.” He doesn’t even say that person has to have been rounded up on a battle field, however you define that.

If detaining someone indefinitely is “necessary to protect against a significant threat to the security of the United States,” Obama says, he can do it.

So I say, fine! Let’s indefinitely detain the banksters that crashed our entire economy. They fairly routinely hold the workers and taxpayers of this country hostage these days, just like terrorists do. And when you account for the number of people they’ve left homeless and hungry, the damage they have done may well surpass that of the attack on 9/11. Clearly, the banksters are a “significant threat to the security of the United States”–they’re the biggest threat to the security of the US. And the genius of Obama’s EO is it doesn’t even require the detainees, themselves, represent a threat. Rather, if their detention is necessitated by the security threat, we can detain them. We don’t have to trouble with sorting the good banksters, like Jamie Dimon, from the bad banksters, like Dick Fuld. We can detain them all, just to make sure we don’t accidentally miss any. (Sorry Bill, we can’t take any risks, so this includes you too!)

Simple as that. Our biggest security threat solved!

Mind you, Obama’s Executive Order laying out this amazing limitless standard specifies that the EO only applies to “those detainees held at Guantanamo on the date of this order.”

But we all know that EOs don’t have to say what they mean. We know OLC ruled back in 2001 that, “There is no constitutional requirement for a President to issue a new executive order whenever he wishes to depart from the terms of a previous executive order. Rather than violate an executive order, the President has instead modified or waived it.” We know Bush did just that–change the terms of an EO without changing the text, so none of us had warning we were being spied on. But when national security is threatened–our government has decided–it’s okay to change EOs with no warning.

So all Obama has to do to authorize the indefinite detention of the banksters that represent the biggest threat to our security right now is simply pixie dust his EO, and voila! He can round up the banksters, put them on some tropical island somewhere (I suspect they’ll feel right at home in the Cayman Islands).

It’s as easy as that, vanquishing a security threat, arbitrarily detaining people in the name of security forever.

Right?