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Just the facts, ma'am, about the ongoing economic collapse
Dr. Hussman (below) is -- in my words -- saying that the Bear Stearns bailout was a fraudulent rip-off of the taxpayers: What Congress and investors should understand about the Bear Stearns deal
Next, Contrary Investor points out that JPM was undoubtedly on the hook for massive amounts of payouts on CDS' (Credit Default Swaps) if Bear Stearns went bankrupt. So not only did JPM receive a freebie from the Fed, in which they received Bear
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When you add these incredibly fraudulent rip-offs to the fact that the highest levels of the Bush Regime ordered torture against all international law -- laws which the US itself used to hang Germans and Japanese after WWII -- the conclusion must be that our government is run by a criminal syndicate, like the Mafia except they control the whole country, including the money and secret police.
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Stearns for free and no-loss guarantees, but they probably saved themselves many billions in payouts: Wagging the dog
What you don't hear from any of the politicians (but Rick Santelli has mentioned) is the need to put these derivatives under the jurisdiction of the trading exchanges, like the CME. Right now the $500 TRILLION+ of these things are "over the counter", un-regulated, not standardized, and not properly accounted for.
The reason so many "securities" are not marketable now is that they were never put under the control of the national marketplaces. At one point the Fed had to order the investment banks to catch up on their paperwork -- they were months behind! People would do phone deals and the paperwork wouldn't get done for many months. Crazy sh*t like that is why we're so fucked now.
Another issue is these "investment banks", like JPM, Goldman, etc. They actually play the markets themselves! A lot of their profits come from placing bets. That's why it is so crazy for the Fed to be loaning them more money, and might explain why, after the Fed just opened up the discount window to investment banks, the stock markets started to climb: they had more money to gamble with! Crazy.
When you add these incredibly fraudulent rip-offs to the fact that the highest levels of the Bush Regime ordered torture against all international law -- laws which the US itself used to hang Germans and Japanese after WWII -- the conclusion must be that our government is run by a criminal syndicate, like the Mafia except they control the whole country, including the money and secret police: The green light
Add that to the government surveillance of its own citizens, and multiply by the totalitarian paranoia which has the government prosecuting its own citizens for taking pictures in public, and it is like the old Communist states, except with computerization. Isn't it clear that the government spying on Americans is about maintaining political power without accountability, so that no treason, crimes, incompetence or misdeeds can remove the crooks from power, and that any politician who ever does gain power is compromised by a database of dirt (which might not even be accurate, but could also contain phony "facts")?
WATCHING: Government centers tap into personal databases ...
ACLU: Military skirting law to spy on Americans ...
Take pictures, get busted for "terrorism" ...
So suddenly this seems just totally credible and logical:
Jesse Ventura warns of Obama assassination attempt| |
Excerpt: Former Minnesota Governor Jesse Ventura caused shockwaves during a national radio interview today when he warned Barack Obama to be wary of a potential assassination attempt, saying that the government would target any independent politician who got close to the White House.
The context of Ventura's warning was a discussion about new evidence concerning the assassination of Robert Kennedy, after it emerged that there were additional shooters to accused assassin Sirhan Sirhan. |
What Congress and investors should understand about the Bear Stearns deal
by John P. Hussman, Ph.D.| |
Excerpt: ... The effect of the Fed's guarantee is not to protect the
public, but to protect Bear Stearns' bondholders. ...
The deal is being defended on the notion that the global financial system would have "failed" had Bear Stearns not been rescued. But the orderly transfer, netting and settlement of financial derivatives and other "qualified financial contracts" (QFCs) is precisely what Title IX of the Bankruptcy Act of 2005 was written to facilitate. In effect, the Federal Reserve and the Treasury decided to ignore existing law and provide a bailout to the benefit of Bear Stearns' bondholders at public expense. ...
For Bear Stearns to ?fail? means that it may not fully repay its own bondholders, but it has never meant that Bear Stearns' customers and counterparties would be hurt -- their accounts and contracts are precisely what J.P. Morgan is eager to purchase and can easily transfer. The misuse of public funds is assisted by blurring the distinction between "failure" of Bear's customer and counterparty obligations (which nobody wants and is neither likely nor necessary), and the "failure" of Bear Stearns's stocks and bonds to be successful investments. Why should investment losses be bailed out at public expense? ... |
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Wagging the dog| |
Excerpt: ... Alright, fine, so how does the credit default swap market relate to equity market sector volatility of the moment? It is absolutely clear that the "acquisition" of Bear avoided triggering Bear Stearns related credit default swaps and swaps against CDO, SIV, etc. positions they may have held (assuming a potential Bear BK would have forced a mark to market event), which would indeed have happened had Bear formally entered bankruptcy and their bonds/debt became potentially very meaningfully impaired. There is simply no question whatsoever in our minds that this was the key reason a theoretical acquisition of Bear HAD to happen. Remember the details. JPM took out Bear for a couple of hundred million at the headline $2 per share initial offer level, but concurrently announced it was going to need to charge off about $6 billion as a result of the so-called acquisition. Even at the ultimate $10 level (which is basically shut up money offered to help prevent litigation, which might also have led to asset price discovery) JPM was "telling" us Bear was worth far less than zero by the charge-off number alone. Of course the truth simply had to be that if Bear had filed bankruptcy and the credit default swaps written against their bonds/debt/asset positions had been triggered, the credit default swap liabilities in the market would have been well north of a $6 billion hit to whomever had written those Bear specific CDS contracts. Well north. And that simply could not have been allowed to happen. By the way, just as an item of curiosity, JP |
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| | Morgan has exposure to over 55% of the total banking system credit default swaps outstanding. Are we connecting the dots clearly enough for you?
Sorry, back to the issue at hand. So Bear avoids formally blowing up and the credit default swaps written against their liabilities/investment positions, etc. now become a moot point as JP Morgan (or for the true problem credits, should we say the Fed) is the new creditor and market based asset price discovery is avoided. Hurrah for those folks who had written these default swap contracts. They dodged a massive bullet that was heading one hundred miles per hour directly to a certain spot between their eyes. But what about those "investors" who had purchased the CDS contracts/insurance against a potential Bear default? Whether they did this against existing credit market investment positions for insurance reasons or were simply holding them as a trading position is immaterial. Those CDS contracts purchased which probably had been very profitable, and zoomed straight up in value as Bear was in the process of disintegrating, became worthless with the stroke of a pen (and a $6 billion write down to come). ... |
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