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Monday, June 22, 2009

US Financial system is corrupt

I have ranted quite a bit of how the US needs to get righteous, and come clean on accounting standards for banks and the US government. Unfortunately, since Obama has come into office we have seen an acceleration of the public money grab for private profit by those who are the most irresponsible. Also the government itself is in a record breaking power grab that builds upon the Bush years. If Obama is for change, the only change I see fiscally is pouring the countries financies down different drains.

US citizens are not paying attention and therefore deserve the financial ruin we will face. Lets review some recent news shall we?

US Federal Reserve Treasury Purchase
First, the US Treasury, (The people who print money) will be auctioning off record amount of bonds this week at over 104 billion. As previously mentioned, the US Bond market is starting to fight back by raising interest rates. To counter this, the US Federal Reserve, a "quasi" private institution representing the banking interests of the US government, announced: "On Monday of next week, the Fed will buy an undisclosed amount of debt that matures between December 2013 and April 2016. On Thursday, it will snap up debt maturing between August 2026 and May 2039."

Undisclosed? A central institution that is comprised of unelected officials, who routinely work hand in hand with the US Treasury, and has the "power" to set government interest rates (well short term rates, influence long term) will buy an unspecified amount of US bonds?
The fed takes on debt with US Taxpayer US government backing, therefore the Fed should operate with public disclosure. Not to mention that the Fed buying debt from the US Treasury, that is in turn backed by US taxpayers from both the US Treasury printing and US Fed as an entity is outright incestuous.
Case point #1 on Corruption, for this weeks news.
Update 6/26/09: Bernanke "forgets" his actions 6 months ago

Goldman Sachs giving out record bonuses
Goldman Sachs announced giving out to it's executives record bonuses in it's 140 year history. Let me remind my readers that Goldman Sachs has profited hugely from Taxpayer money either directly or indirectly. The taxpayer money is in effect a reward to Goldman Sachs for needing such public "emergency" action. This is outright ridiculous. Not that Goldman is giving out huge bonuses, they should. After all, they are a private company.
What is ridiculous is the outrageous claims back under Bush that 700 Billion in cash needed to be given to banks, and more money to back the financial system otherwise there would be financial armageddon.

Well if financial armageddon would mean that bankers would see their bonses brought to zero as the companies had to pay down the bad debt, well, I would prefer it than this.

Goldman is no longer an investment bank, it changed to a bank holding company, inorder to get loans from the US at incredibly cheap rates. Goldman received about 13 Billion dollars in direct funding from AIG, as a direct result of the US Taxpayer covering bad AIG bets, I mean investments. Also Goldman sold California Bonds and then turn around urging people to "bet" against those bonds. May I remind you, California is on the brink of bankruptcy, and before it is over, I am sure the US taxpayer will foot some of the bill. And to top it off Goldman announced selling over 600 Billion in Bonds (debt) backed by the FDIC. Of course Goldman has record earnings, when all bets are gauranteed winners, there are no losses to take.
Item #2 on corruption in the system, from this weeks news.

UPDATE 6/24/09: Citigroup to raise salaries by 50%

US Government destroying private investment, becoming the sole lender
I warned of this power grab back in the fall of 2008. All countries that consolidate power, as the US is doing, do so by controlling the money. This is done by being not the lender of 'last" resort, but by being THE lender period. President Barack Obama’s announced a program to help more homeowners refinance may be expanded to include borrowers who owe more than 105 percent of their homes’ values, Federal Housing Finance Agency Director James Lockhart said.

What bank can compete? When the US Government is willing to "lend" at 105% value of a home, how can any bank compete? And no bank should! This is not just being a "socialist" or left winger. This action is outright against free market capitalism, no way around it. This is ontop of Obama's unprecedented power grab over private sector being made.

Item #3 on corruption in the system, from this weeks news.

US Government Bond Caper
I blogged on the US government bonds found on two Japanese men, and later how it was announced they where forgeries.

What I still don't understand is the status of these two Japanese men. If these where forgeries I would think the US government would want a pound of their flesh. Also I would expect Italian authorities to proudly announce their plans for prosecution. But I can't find anything to this effect. There is still time for new information to come out to change my tune. But as of now, the entire handling of this event and the contridictions deserve mention. Karl of the market ticker reviews in detail the contradictions on this recent news headline.
The US media focuses ponzi schemes such as Bernie Madoff (13 billion), Standford (7 Billion). But two Japanese with 134 Billion in bonds is not worth mentioning.

Item #4 on corruption in the system, from this weeks news.

And that is just THIS WEEKS news! I haven't been doing my news round up or blog round up for months. Mainly because of time. But also the daily grind of horrible financial misconduct and related news is so common, that I see no point in highlighting all the headlines. By now either you are or are not in the camp that America is no longer a place to do "honest" business. Me posting 50 news items a week won't change that. The take away is the system is sick, and it doesn't need 1 trillion, or 10 trillion more debt added to "fix" the system. The system itself needs an overhaul, and until it gets it, I remain a pessimist on the outlook.

I printed this comic once before, but seems appropriate to re-highlight how America rewards bad behavior.

Matt Bors

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