Not a surprise.
Hopefully, there will be only one or 2 more times when I’ll have to spell his damn name again.
Category: Corruption
Is All of AIG a Scam?
Or maybe it’s the whole damn system.
The folks at Institutional Risk Analytics have concluded that AIG’s reinsurance business was little more than a Ponzi scheme well before it set up its Financial Products division that took down the firm with its credit default swaps (CDS) business:
One of the first things we learned about the insurance world is that the concept of “shifting risk” for a variety of business and regulatory reasons has been ongoing in the insurance world for decades. Finite insurance and other scams have been at least visible to the investment community for years and have been documented in the media, but what is less understood is that firms like AIG took the risk shifting shell game to a whole new level long before the firm’s entry into the CDS market.
In fact, our investigation suggests that by the time AIG had entered the CDS fray in a serious way more than five years ago, the firm was already doomed. No longer able to prop up its earnings using reinsurance because of growing scrutiny from state insurance regulators and federal law enforcement agencies, AIG’s foray into CDS was really the grand finale. AIG was a Ponzi scheme plain and simple, yet the Obama Administration still thinks of AIG as a real company that simply took excessive risks. No, to us what the fraud Bernard Madoff is to individual investors, AIG is to the global financial community.
The crux of this accusation is that they reinsurance contracts that they did not have the resources to back up.
So their reinsurance, essentially insurance bought by insurance companies to insure themselves against a catastrophe, was essentially meaningless, and all the parties involved knew this:
One of the most widespread means of risk shifting is reinsurance, the act of paying an insurer to offset the risk on the books of a second insurer. This may sound pretty routine and plain vanilla, but what most people don’t know is that often times when insurers would write reinsurance contracts with one another, they would enter into “side letters” whereby the parties would agree that the reinsurance contract was essentially a canard, a form of window dressing to make a company, bank or another insurer look better on paper, but where the seller of protection had no intention of ever paying out on the contract.
My guess is that both the CDS and reinsurance business functioned the same way, which means that neither had legally binding contracts.
Essentially, it means that much of the insurance industry, whether reinsurance or CDS, is simply an attempt to deceive regulators, and defraud investors.
This raises an obvious question: if what was largely thought to be the largest insurer in the world was little more than a Ponzi scheme, how many other huge fraudulent enterprises are out there.
H/T The Big Picture.
Alaska Republicans: Go Cheney Yourselves
In the wake of the DoJ’s decision to drop charges against Ted Stevens, Alaskan Republicans are calling for Mark Begich to resign so that they can get a new election for Senate.
Because, you know, some people probably voted for Begich because Stevens was a convicted felon, because, you know, no one ever votes on information that might not be 100% accurate.
Let’s be clear, Ted Stevens is still a completely corrupt son of a bitch, even if the Beltway Bozos and their Evil Minions™ are now wringing their hands over the injustice, as Zachary Roth ably makes clear:
But even leaving criminal wrongdoing aside, no one disputes that Stevens accepted hundreds of thousands of dollars worth of home renovations and gifts (remember that massage chair?) from a supporter who had a slew of business interests that Stevens was in a position to affect as a powerful federal lawmaker and appropriator. That’s what we call “corrupt”.
I would add that he also did this supporter a lot of favors.
If the DoJ had done its job, Ted Stevens would die in a jail cell, and he still deserves that.
FASB Re-Enables Crooked Incompetent Bankers
Under pressure from bankers, and their lackeys in Congress, the Federal Accounting Standards Board has relaxed mark-to-market rules.
This means that bankers can go back to creating more of the big sh$#pile, and calling it a pony:
Changes to fair-value, or mark-to-market accounting, approved by FASB today allow companies to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost net income. Firms could apply the changes to first-quarter results.
The FASB just got pressured to allow liars accounting again. This is a bad thing.
“Significant judgement”, my ass. Wall Street has no judgment at all.
Reviewing Dick Cheney’s Security Clearance
So I was reading this account of a Seymour Hersh interview on Fresh Air in which he says that Cheney loyalists have been “burrowed” into sensitive government positions, and continue to feed him information:
“I’ll make it worse. I think he’s put people left. He’s put people back. They call it a stay-behind. It’s sort of an intelligence term of art. When you leave a country and, you know, you’ve been driven out the, you know, you’ve lost the war. You leave people behind. It’s a stay-behind that you can continue to have contacts with, to do sabotage, whatever you want to do. Cheney’s left a stay-behind. He’s got people in a lot of agencies that still tell him what’s going on. Particularly in defense, obviously. Also in the NSA, there’s still people that talk to him. He still knows what’s going on. Can he still control policy up to a point? Probably up to a point, a minor point. But he’s still there. He’s still a presence.”
(Audio at bottom)
And the first thing that went through my head was, “People from the NSA are talking to a guy who orchestrated the outing of a covert CIA agent?”
Then I realized that the real question was, “Why does Richard Bruce Cheney still have a security clearance?”
Based on my reading of the entire Lewis “Scooter” Libby case, it’s clear that Patrick Fitzgerald had concerns that Cheney was aware of the leaks on some level, though he lacked any hard evidence (missing emails anyone?) to go any further.
That being said, a security clearance is not a legal procedure, it’s an administrative procedure, and to a significant degree, it is necessary for the holder of this clearance to show that they not a security risk, either intentionally or through negligence.
There is also an additional duty to report any credible potential security violations to the appropriate authorities.
This is a lower standard of proof than, for example, the Intelligence Identities Protection Act, or obstruction of justice statutes.
There is therefore a significant concern that Dick Cheney violated the terms of his clearance, and pending an investigation, his clearance should be suspended pending an investigation.
Unlike a government employee whose livelihood is dependent on having a clearance, this should not provide an undue burden, and a hearing, with witnesses, including Lewis “Scooter” Libby and Mr. Cheney, testifying under oath, would be an appropriate venue to decide whether or not he was either deliberately or negligently cavalier with sensitive intelligence data.
Of course, if Mssrs Cheney or Libby were to make untrue statements in the process of giving their testimony, that would be a matter for the federal prosecutors.
File Under: I Used to Be Disgusted, Now I Try to Be Amused
It appears that the Treasury Department is stonewalling the body charged with monitoring the various bank bailouts.
But “without a clearer explanation” about parts of the program, “it is not possible to exercise meaningful oversight over Treasury’s actions,” said Elizabeth Warren, a Harvard Law School professor who leads a special congressional oversight panel monitoring the TARP program. Her comments came in a Senate Finance Committee hearing on the bailout program.
Noting that TARP passed Congress six months ago, Warren said that her group has repeatedly called on the Treasury Department to provide a clear strategy for the program — and that “the absence of such a vision hampers effective oversight.”
Dr. Warren, this is not a but, it’s a feature.
Geithner is a former Federal Reserve Bank of New York president. Opacity and secrecy are how they think that it’s supposed to work.
That’s the whole idea behind the Federal Reserve system.
Stevens to go Free
The DoJ is dropping charges because of rampant proprietorial misconduct.
That does not mean that Ted Stevens is not guilty as hell, though.
Now, how about looking at Don Siegelman?
Where the Bailout Money is Going
CNN has a handy interactive chart, though Bloomberg, using slightly different math, gives us a figure of $12.8 Trillion, or over 90% of last year’s GDP.
Meanwhile, as has been noted earlier, AIG has been cutting sweetheart deals with the banking giants, and now the GAO, the investigative branch of Congress, is saying that the Treasury Department is being too lax in its policies on repaying AIG counterparties, confirming once again that Tim Geithner is the large banks’, and large Wall Street firms’ bitch.
There is no need for AIG to pay off at 100¢ on the dollar here, and the insistence that they do so is an excuse to pump more money into insolvent banking giants.
Wanna Put Social Security in the Stock Market?
Because that’s what the Pension Benefit Guaranty Corporation (PBGC), the government insurance fund for defined benefit retirement programs, did last year, just before the stock market crashed.
The reason given by the Bush Evil Minion™ Charles E.F. Millard was that the PBGC needed better returns to shore up its trust fund, because of all the companies going bankrupt and welshing on their pension obligations.
It may be true that they actually bought into the idea that they could get better returns, even in a stock market that was clearly overvalued and with an economy already shocked by the housing cost, but my money is that the real reason was that it was an election year, and they saw the signs of a stock market drop, and they wanted to push some money into the market quickly in order to keep everything afloat until after the election.
In either case, it should be noted that the PBGC’s trust fund is like a drop in the ocean compared to that of Social Security, and if they thought that it could effect the markets, just imagine what the multi-trillion Social Security fund would do.
In fact, it’s so large, that it would drive the stock market up upon being invested in the market, and when a large population cohort started to retire, it would drive it down, giving the Baby Boomers that wonderful “buy high, sell low” feeling.
Now We Know Why Banks Were Profitable Last Month
Because, using our tax dollars, AIG settled its accounts with the big banks at 100% on the dollar, even while they are refusing to pay on deals with smaller players.
So, not only are we funneling money to the big 5 banks through the TARP, and the TALF, and various Fed facilities, we are also shoveling money in through the back door by way of AIG’s Financial Products Division.
I now have a tough choice….Should I go long in pitchforks, or torches?
Norm Coleman May Go To Jail
There has now been testimony that Nasser Kazeminy, a close friend of Norm Coleman instructed his CFO to pay $100,000.00 to Coleman’s wife’s insurance agency for nothing in the way of services.
Now the Star-Tribune has obtained a March 19 deposition from the lawsuit that first surfaced the scandal. The deposition is from B.J. Thomas, the chief financial officer of the company that paid out $75,000 to a firm where Laurie Coleman worked as a consultant — even though he found no evidence of actual work.
Thomas was asked: “In that conversation that you had with Mr. Kazeminy, did he tell you, quote, United States senators don’t make sh#$, close quote? Or words to that effect?”
Thomas answered: “Yes, sir.”
Kazeminy is boned, unless he roles on Coleman, and Coleman is a rat, so you gotta figure so is Kazeminy.
Pass the popcorn
Madoff’s Wife In the Crosshairs?
Certainly, if I were a prosecutor, I would be looking at here, because Ruth Madoff’s got a $2 million payment from Madoff Securities International Limited just before her husband was arrested, the London office of the Ponzi scheme, and itself under investigation for aiding and abetting Bernard Madoff’s fraud.
Cuomo Now Going After AIG Counterparty Deals
I’ll bet that he is wondering the same thing that I am, how much of this was legitimate deal making, and how much was self-dealing.
Hopefully, we will see serious criminal investigations here.
Convictions Reversed in Pennsylvania – NYTimes.com
The Pennsylvania Supreme Court has reversed hundreds of convictions of children made by judges who took kickbacks from privately owned detention centers.
Obviously, it’s nice to see their records expunged, but some of the damage will be permanent.
As I said 6 weeks ago, old post This is a Natural Result of Private Prisons.
IMF Economist Compares US to Argentina and Russia
Desmond Lachman, former deputy director of the International Monetary Fund’s Policy and Review Department writes an OP/ED in the Washington Post todaysays what I have been saying for some time, that we are not tossing out the incumbents who created the mess, and that we are treating an solvency crisis as a liquidity crisis.
Mr. Lachman, a fellow at the right wing American Enterprise Institute (!) basically says that both Paulson and Geithner are handling the situation in a manner consistent with the most corrupt 3rd world nations.
Your mouth to Barack Obama’s ear, dude.
Tell Me How This is Not Fraud and Theft of Services
It appears that the senior managers at AIG’s Paris division of AIG’s Financial Products, Banque AIG, wrote $234 billion in derivatives contracts so that they would likely be technically be in default if they left the firm:
The executives at Paris-based Banque AIG, Mauro Gabriele and James Shephard, have resigned in recent days but have agreed to stay on for a transition, according to people familiar with the matter. In the wake of their resignations, AIG must replace them to the satisfaction of French banking regulators.
If they don’t, French regulators may appoint their own designee to manage the bank — an outcome that could trigger defaults under the bank’s derivative contracts. The private contracts say that a regulator’s appointment of a manager constitutes a change in control, according to a person familiar with the matter; the provision is often included in derivative contracts where parties want to preserve a way out if something about their counterparties changes.
Seriously, this is fraud. They essentially cooked to books to maximize the possibility that, if they left, there was a real risk of the a technical default.
We need to start throwing these folks in jail by the hundreds, and not a “white-collar resort prison,” they should be going to a, “POUND ME IN THE ASS prison,” to quote Office Space.
Why Cap and Trade Sucks
Because if there is a sign that a regulatory strategy is ill conceived, it is when you end up paying farmers not to grow crops, and this appears to be one of the new cash crops for the American farmers.
This is a fraud foisted on the American consumer and the environment, much like the construction of unneeded hydroelectric plants in China for carbon credits on the European cap and trade system is a fraud on the European consumer and the environment.
The solution, which is cheaper for the consumer, and keeps the Wall Street types from gaming the system, is the straight carbon tax.
Banking Industry Threatens Obama Administration
That’s the subtext of this Wall Street Journal article on how Obama is dealing with the financial industry.
The bankers are saying, “If we don’t get our bonuses, we will destroy our companies and the economy.”
As Ezra Klein notes, patriotism is a joke for the super-rich bankers who run Wall Street:
But whenever it comes up in conversation, I’m shocked at the depth of my own fury. And here’s why: Not to sound naive about this, but the absence of patriotism that galls. The lack of responsibility is sickening. These bankers delivered an almost mortal wound to the American economy. Their actions threw millions out of work and wrecked the retirement savings of tens of millions more. It is no exaggeration to say that they will cost us more than 9/11.
And you cannot negotiate with terrorists.
US Tried to Silence Detainee to Cover Up Torture
US Government lawyers attempted to get Binyam Mohamed, the Ethopian detained at Guantanamo, to sign an aggreement not to discuss his treatment as a condition for his release.
Since Mohamed is alleging illegal torture, and the lawyers in question had reason to believe that there was a possibility of criminal prosecution, I do not see how this could be anything but a slam dunk case of obstruction of justice:
U.S. government lawyers tried to get a British resident held at Guantanamo Bay to sign a deal saying he had never been tortured and that he would not speak to the media as a condition of his release, according to documents presented in Britain’s High Court.
U.S. lawyers also wanted Binyam Mohamed, an Ethiopian citizen held at Guantanamo for more than 4 years, to plead guilty to secure his freedom, even though he was never charged with a crime, according to documents released by two judges who ruled in the High Court case.
The documents, relating to a ruling the judges made last October, reveal the U.S. military wanted Mohamed to agree not to sue the United States or any of its allies, and that any rights to compensation should be assigned to the U.S. government.
Any lawyers among my reader(s) want to weigh in on this?
Scatological Explanation of the Geithner Plan
So, I was on a private BBS formed out of the ashes of Netslaves, and someone asked the following:
CNN keeps talking about it raising the DOW today, but I have no idea what it actually is supposed to do.
So I quickly riffed on this, and the response was very positive, so I thought that I should share my (somewhat profane) explanation with the world:
Short:
- Place your hand in your pocket.
- Remove wallet
- Hand to Wall Street Executive.
Longer version:
- The Treasury/FDIC/FED will make non recourse loans to allow investors to buy into the big sh@#pile of mortgage backed securities (MBS), credit default swaps (CDS) and other alphabet soup so that they buyer will put down about 3% for a 20% stake in this sh@#.
- A non recourse loan means that if the investment fails, the lender (i.e. the taxpayer) takes back the sh@#, and the loan is settled, basically, they are only out their 3% (or less) down payment.
- Basically, it’s a subsidy to the big banks and investment houses, who created the sh@#, because the small investor cannot get the sh@# for cash deal without going through the big banks and investment houses, and paying a sh@# load of commissions.
- This has the effect of creating a taxpayer subsidy for the sh@# that is (at least, there are other programs that feed in) of at least 30%.
- So eat your sh@# sandwich, and know that somewhere a Wall Street banker is spending your money on some prostitute to sh@# on him.
What can I say but sh@#?