By John Bougearel – Author of Riding the Storm Out
The New York Post reported on March 25 that while Geithner has orchestrated a scheme to help the banksters “purge themselves of toxic mortgage assets a few months hence (Geithner hopes to have his bankster bailout scheme operarational by May) Citi and BAC “have been aggressively scooping up those same securities in the secondary market” in the two months ahead of Geithner’s rotten-to-the-core plan for taxpayers.
According to the NYP:
“Both Citi and BofA each have received $45 billion in federal rescue cash meant to help prop up the economy and jumpstart the housing market. But the banks’ purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.
One Wall Street trader told The Post that what’s been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.”
If this NYP story is factual, taxpayers have a right to ask how can their monies be so badly misspent by the banksters? And they have the right to ask why the banksters, commercial banks ~ mind you, they are speculating with taxpayer dollars on toxic dreck? How does that work to restore the safety and soundness of the financial system that failed us precisely because the banksters had been speculating and buying this dreck that caused the financial system to fail? Common sense would suggest that Citigrooup and Bank of America’s continued speculative purchases of toxic assets would continue to undermine the safety and the soundness of the already badly troubled financial system.
But, for those that are not fully apprised of the game Geithner has set up for the banksters, the recent activity of purchasing Alt-A and option ARMs actually will soon bolster the financial system magnificently, at least on paper.
The mark to market value of these toxic assets are priced roughly at 30 cents on the dollar and still falling each day. However, because of Geithner’s scheme, come May 09, the banksters will be able to sell the dreck they are purchasing to PIM-Rock (Pimco and Blackrock) and other hand-chosen friends of the govt at roughly 85 to 90 cents on the dollar. Thereby, the banksterss at Citi and BAC stand to more than double their recent investments, funded with taxpayer dollars, in less than two months.
Now, how is it going to work that the banksters will find patsies to buy their 30 cent dreck today at 90 cents in May. Why, the answer to that is the taxpayer will once again come to the rescue, silly. Taxpayers will be providing 97% of the funding required for Pim-Rock to purchase these toxic assets at fraudulently inflated prices. You and I will be bridging the gap between the 30 cents the banksters are paying for dreck today and selling same dreck 90 cents in May. “God love ‘em” (meaning us the taxpayers) must be on the lips of all said banksters and other friends of Geithner.
Now, as you will recall, banksters like Citigrough and Bank of America are supposed to be insolvent and so flipping broke, broke, broke that they had to borrow hundreds of billions of dollars from taxpayers just to stay on life support. And those hundreds of billions of dollars were intended to recap the banksters so they could begin lending to consumers and businesses again. At least, that what the aim and what Congress and the administration had hoped they would do with the taxpayer monies provided so far. But guess what, they missed their mark.
Instead of these monies being directed to providing needed credit to consumers and businesses, it is being directed towards buying more of this dreck that got the banksters into the mess they are in today. Sounds like the banksters would still engaging in risky business speculating on depreciating assets that are still dribbling their way towards being worth 15 cents on the dollar or even less in some circumstances. But you would be wrong. The banksters are not speculating at all. That is because the Geithner fix must already be in, or else the banksters would not has stepped up their purchases of this dreck this past month.
Geithner and Obama undestand that to finance this scheme they will have to go around Congress, who are now so incensed at the reckless use of bankster bailouts to date they will not appropriate another stinkin’ dollar. That is why Geithner, in his infinite criminal wisdom has cooked up this scheme to tap the FDIC and the Fed for funding. Ultimately, the funding from the Fed and FDIC comes once again from you and I, the taxpayers. The Fed willy-nilly prints money, and meanwhile, the FDIC has recently been authorized to tap taxpayers for up to $500 billion (I am not sure if the bill has passed yet, but that is most likely a formality at this point).
This is Taxation Without Representation
As Nemo at Self-Evident and Steve Randy Waldman pointed out, the Geithner scheme to go “end-around” Congress is a constitutional violation. Several others have pointed out that Geithners scheme is “beyond-the-powers of the US Treasury, FDIC and Fed. The legal latin term for this is “ultra vires,” which refers to conduct by an entity or its officers that exceeds the powers granted by law.
“There is an old English tradition that nobody can spend your money without your consent, given either directly by you or indirectly by your duly elected representative body. When this tradition is violated, those raised in it have historically yelled things like “Taxation Without Representation!” and grabbed their muskets.
This is why the U.S. Constitution requires that all bills concerning taxation and spending must originate not just in Congress, but specifically in the House of Representatives.
Today, Steve Randy Waldman asks an excellent question: Who passed the Geithner plan?
And isn’t Congress supposed to have the power of the purse? A loan guarantee is a contingent liability, a cost in real terms. Can the US Treasury spend money without Congressional approval, as long as it promises to spend only if a coin flip comes up heads?”
And so I ask: where is the US Attorney General on this issue? Why is he not stepping up to the plate to do his civic duty as a public servant to protect American taxpayers? Could he be intentionally silent on this issue or asleep at the wheel on account of the fact that he was just appointed by Barack Obama?
Eric H. Holder Jr. was sworn in as the 82nd Attorney General of the United States on February 3, 2009 by Vice-President Joe Biden. President Barack Obama announced his intention to nominate Mr. Holder on December 1, 2008.
When all is said and done, if regulatory reform does not legislate that commercial banksters be restricted to taking deposits and making loans, in the future, I will be having another coniption-fit! They have exceeded their role in society and marginalized themselves as criminal elements. Guantanamo is where they properly belong. Commercial banksters in the future should never again speculate with unregulated securities and other shaky collateral!
You can’t make this stuff up to possible be any more offensive than it is!
Artificial Price-Fixing Schemes of the Late 1920’s
Artificially manipulating the price of a asset is nothing new. The Pecora Committee in 1933-1934 found the activities of investment bankers “flotation of foreign securities [to be] one of the most scandalous chapters in American History.” To be blunt, those securities were crap. The banksters of that era would artificial fix the price of these issues at a high mark during the “pegging periods” when they sold these securities to the public. When the pegging period expired, Mr. Pecora found that these banksters that sold these securities would withdraw their support. And when the artificial support disappeared, the value of those securiteis would plunge.
Now imagine if you will two months hence in May 09, when Geithner’s artificial price support for today’s modern day banksters is no longer needed. Once this support is withdrawn, just where do you suppose the values of these securities go? Why right back down to 30 cents. Or lower.
As Mr. Ferdinand Pecora described it in his report: “No matter how the operation is characterized, its effect is the same, it creates the appearance of a stable market…whereas in fact the stability is an illusion created by the manipulative practices of the [banksters].”
The evils of articial price-fixing ws also reviled by England’s Queen’s Bench in Scott v. Brown 1892: “If persons…creat an artificial price in the market …which are not real, but mad for the purposes of inducing the public to take shares, they are guilty of as gross a fraud as has ever been committed and a fraud which can be brought home to them in a criminal court.”
God save the banksters or else!
The only angle that is different in today is in the method of induction to the public. We are being forcibly induced into buying the banksters fraudulently and ridiculously inflated assets the banksters under the pretext of fear-mongering from regulators, the US Treasury and Obama administration. God save the banksters or else!
Commenting on the banksters of the 1920’s, lawyer and author Bernard Reis of False Security: The Betrayal of the American Investor noted that banksters were “a force that can at will cause to disappear into thin air vast sums of other people’s money. We have not eaten it, we haven’t hidden it, we’ve only invested it, and presto! It isn’t.”