Hightower Lowdown

The Incestuous Relationship between Wall Street and Washington

Phillip K Notz

Let's face it, Washington is sold out to the money guys; whether it be Wall Street bankers, CEO's, food corruptors, environmental polluters, etc. We're thinking too much about putting patches on these problems instead of killing the root cause. Our so called representatives of the people (or even more hypocritical "servants of the people") are sold out to the entities who will provide them with wealth. Our country has tried many times to rein in the greed meisters, but they keep coming back. There is only one solution that will work. What is needed is a constitutional amendment that will decouple Washington from money and couple Washington to the "normal" citizens. I have a start on the wording. It's pretty simple - less than two pages. Does Hightower have time to help get a few numbers straight?

New Pledge

I pledge allegiance to the flag,
And to the country for which it stands.
One nation, under Greed, infinitely divisible, with liberty and get out of jail free cards for all who can afford it.

Teen suicides are up. Returning war veteran suicides are up. Hypocrisy is still an American life style. What’s to grow up for? What’s to live for? Being a serf and pawn in the service of humanity’s plunderers just not good enough? Ungrateful brats!

Isn’t the definition of ‘crazy’ doing the same thing over and over and expecting a different result each time? If borrowing got us into this mess… how can we possibly think more borrowing will do anything, but further line the pockets of those responsible for the hole they borrowed us into?

Golly, you mean NO MATTER WHO WE VOTE FOR… THE GOVERNMENT GETS IN? I’m shocked! And after all we’ve done to reform campaign financing too! Why are we indignant now? When will we learn? The love of money rules! Why bother bad mouthing greed and sifting obsessively through the endless bloody eviscerated entrails of its victims? Greed is the motivation for all that is American… all that is human. It’s the love of money that makes the world go round!

We cannot legislate morality. But: “Yes we can” regulate it!. “Yes we can” tax it. And: “Yes we can” put that revenue to good use leveling the playing field and protecting us commoners from the deprecating influences of the greedy, power hungry life styles of the rich and feckless. And: YES! OF COURSE! We must restore the financial regulations of the Glass Steagall Act! And perhaps even more stringent restraints on the greed of our predatory Economic Royalty.

“Yes we can” use taxation to narrow the gap between the haves and the have-nots. This will virtually eliminate inflation and even lower prices while increasing profits. More money in more hands means more competition, and more goods and services offered and sold. Period!

What has more in common with the Stalinist era Socialism we fear? The trillion dollar subsidizing of the Almighty American Oligarchy of Banking, Insurance, Energy, Real Estate, Wall Street, Big Pharma and the Industrial Military Complex?
OR
The Socialization of Healthcare, Education, Energy, Social Security, Communications and Transportation?

How bad must it get before we tax the rich and return their plunder to We The People? What are ‘We’ waiting for? Another Bolshevik Revolution?
Peace! Bread! Land!
Mel

Change We Can Believe In

I remember seeing in some "Hightower Lowdown" back in the Summer during the election campaign that Mr. Obama was getting a lot of donations from Wall Street. I'm not surprised - I always figured him to be just another slick politician, a prettied-up version of Bill Clinton, who was another politician in bed with Wall Street. So I'm not in the least bit surprised that Mr. Obama is not kicking Wall Street out of bed, even now. He owes them too much.

What I really dislike about the way this administration goes about "doing business" is its sheer unbridled hypocrisy in literally raking the Auto Industry over the coals, and firing Rick Waggoner, when they have only gotten a FRACTION of the bailout money that his Wall Street sweeties have gotten. As Mr. Hightower points out, where are the firings of Wall Street executives, where is the suggestion of complete overhaul of their "industry", where, in other words, is the "change"? It's OK to completely abrogate UAW contracts, but, absolutely unthinkable to abrogate executive bonus "contracts". Someone should tell these clueless nincompoops working for AIG, Fannie Mae and Freddie Mac, who have a vastly enlarged, and totally unjustified, sense of entitlement, that if Uncle Sam wasn't around to bail their firms out, the amount of bonus money they would get would be precisely $0.

At the risk of repeating myself, I always had Mr. Obama pegged as just another politician, but in the back of my mind I hoped that he would stand up to the Wall Street crowd just a little bit, rather than cravenly caving in to them. For starters, he could unload Larry (Mr. Hedge Fund) Summers, Tim Geithner, and the whole Wall Street crew and replace them with people like Warren Buffett, who have business smarts and ETHICS. That would definitely send a message. But, of course, that will never happen. Let's just fire another auto industry exec, instead.

Another thing that could be done is marking these "zombie" bank's assets down to their true level instead of pretending that everything's OK, and if we just get rid of the "toxic assets", we can go back to doing business as usual. That's just putting a bandaid on top of a cancer, and pretending that the cancer doesn't exist, rather than doing the major surgery that definitely needs to be done.

Also, Mr. Hightower has it exactly right about busting up these banks. The post-depression regulations were absolutely right and correct. Glass-Steagel should have never been repealed. It should be reinstated along with strict regulations covering capital and leverage, among other things. Because, when it comes to Wall Street, human nature never changes, no matter how much time has elapsed between 1930 and now, and these regulations should have never been repealed. And, of course, the move toward repeal was helped along its way by the very same people, or their mentors, who are currently in Mr. Obama's Treasury Department! When Tim Geithner's tax problems came up during his confirmation hearings, but the Republicans said that they still wanted him to have the job, and that they ahd complete confidence in him, I knew that the fix was in, since, if the Republicans liked him, Wall Street had absolutely nothing to worry about! If, on the other hand, the Republicans had loudly protested his nomination, I would have been sure that Mr. Obama had picked the right man for the job.

In short, Mr. Obama is in Wall Street's pocket, the same way has his predecessor and his predecessor's predecessor was, all the way back to whenever.

Yeah, change you can believe in. Just bring it on!

If You See Change In Washington---Pick It Up

What isn't covered in the excellent narrative above is the real dirty work of the Fed. In 2006 when the Fed knew that too many of its banks were holding huge amounts of non-performing real estate loans. It knew there had to be a way to dump foreclosed or abandoned property at prices that would create a false buyers market and improve bank balance sheets.

Here's how it normally works:

The banks must sell there loans in order to get more capital to lend. They sell 100% of their mortgages that are underwritten with Fannie Mae standards to Fannie Mae, the bulk of the rest, which equates to about 98% of all loans, get sold directly to:

- investment packagers, so they lost no money;

- Fannie Mae sold them to Wall Street to get more money to buy loans from the banks, so they lost no money;

- Wall Street packaged all of them, Fannie Mae and non Fannie Mae, and sold them to REITs, so Wall Street lost no money;

- REITs insured the packages with AIG for 150% of their value, so not only did no one loose any money, but someone made a bundle of money on the insurance overage payment, and the American public paid AIG, a foreign corporation, REPEAT, American tax payer money was used to pay a foreign corporation for their loses.

This could not be legal, and no one has opened a challenge to it. How can my government give American taxpayer money to a foreign corporation . . . AIG, and how can you buy interest in a foreign corporation with American tax payer money without Congressional Hearings or authorizing legislation???

The above sequence gets real ugly after 2006.

Strict underwriting guidelines were put into effect after the Savings and Loan debacle of the 80’s and the nature of the alleged fraud that occurred could only have happened if these standards were deliberately ignored by bank underwriters. If you read the 2004 advise to Congress from the Appraisal Foundation Board, just as the fraud was beginning and the LIBOR index came into play, you will see the Appraisal Foundation Standards Board's representative bragged about the complete reliability of the Standards put in after the
S and L problems in 1987 and 1989. And he was right; but certain banks just ignored them.

This time around that would not be good enough. The Federal Reserve therefore, made the Foundation agree to tie the new Scope of Work Appraisal Standard to the individual bank's risk management, and as the banks lost no money, they are making a bundle even at the lower prices.

The Fed and the Appraisal Foundation devised this new standard for the appraiser's Scope of Work which eliminates local appraisers and puts the liability of determining market values on Realtors, with "Opinion of Value" letters, which are to be based on "market conditions." Mr. Giethner only has to get permission to use the tax payer’s dollar to finance 80% of the foreign national acquisition of American’s lost equity. He can do this because the Fed is an independent private bank, so it does not need the Congress or the White House to agree or disagree with its actions, and neither Branch can over rule the Fed.

Here's the net effect of the underhanded implementation of the new Fed standard: An owner of a 400 thousand dollar house is not rich, particularly when houses, in and around an occupied house, have non-performing mortgages and are being "valued" by realtors, to protect the banks, and are being offered at half the real market price due to only including foreclosures and short sales in the so called "Opinion of Value" letters. The "good" mortgage remains at $400,000, but the market value shrinks to whatever, Realtor values the other non-performing mortgages. This is purely a scam to destroy America's home equity.

Until just last week 4/1/2009, the FBI had arrested no one in two years, and it had only arrested people that represented about 200 sales country wide. Last week they arrested more people who did another 150 loans all over the country. There was one buyer who did 750 in South Florida alone. Most of these buyers are from Asia, where the money really resides.

1. These loans never had the first payment made on them.

2. When, not if, they were sold to Fannie Mae- and subsequently to a REIT, the banks involved had to know they were bad when they sold them.

3. In addition, despite the fact securities laws say that when banks and Fannie Mae and Freddie Mack sell their loans to REITs, they must transfer ownership, they have not, and therefore, they are foreclosing on American homeowners and property investors illegally.

4. Every one whose loan sold to an REIT, which is every one of them . . . has been foreclosed on by an entity that either does not own the loan or does not legally own it.

5. Certain Judges are beginning to throw these types of suits out of court. Certain law enforcement institutions should be throwing the people, who failed to transfer ownership, when they knew they had to . . . in jail.

This is what Fannie Mae, Freddie Mac, Wall Street and the Federal Reserve are hiding from the American public and Congress.

Someone needs to calculate the total lost equity to this society because of the Feds arguably fraudulent/manipulation of the real estate market's system of arms length appraisals.

We may then be forced to add a few more trillions of dollars to the cost of bailing out failures. If Obama wants to do really big things he might want to consider giving every head of household in America a check for at least $250,000. We'd jump start the economy even though we're holding toxic assets, like our mortgages which are worth half as much now as they were in 2006.

So, yes, there will be no major change in Wshington as long as Obama is the acolyte of the bailed out "Masters of the Universe." What will change are expectations, when it's realized that nothing will change.