ZOMBIE BANKS, BUBBLE BATHS & EPITAPHS

Pretty Boy grabbed a log chain,
And the deputy grabbed his gun;
In the fight that followed
He laid that deputy down.

Then he took to the trees and timber
To live a life of shame;
Every crime in Oklahoma
Was added to his name.

But a many a starving farmer
The same old story told
How the outlaw paid their mortgage
And saved their little homes.

Others tell you ’bout a stranger
That come to beg a meal,
Underneath his napkin
Left a thousand dollar bill.

It was in Oklahoma City,
It was on a Christmas Day,
There was a whole car load of groceries
Come with a note to say:

Well, you say that I’m an outlaw,
You say that I’m a thief.
Here’s a Christmas dinner
For the families on relief. ( Woody Guthrie, Pretty Boy Floyd )

”The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.” ( Matt Taibbi, Rolling Stone )

The rhetoric is compelling, earnest, heartfelt and well meaning. The intentions are noble. However, it is a myth that the incoming banking regulations will achieve much that is useful. This new version is an outgrowth of the desperate economic times of the 1930’s, coupled to the political advantages of layering in, padding, and embedding more and more government in the name of reform and fairness. But, in the awful hardships of the Great Depression, the accepted theory  that is accepted as the Gospel  as the cause of that calamity was large scale fraud in the securities markets. It may have existed, and is clearly, along with prostitution, one of the oldest arts, but it may not have been a significant cause. But it was and is useful , politically, to cover the flank by setting up the SEC at the time, and its new super-charged and more bloated version today. Back then, and the recent crash, over borrowing , followed by deflation  and higher trade tariffs seem more significant as a catalyst to the morass than than securities fraud.

The recent senate hearings, the reform bill,  manipulated public outcry, the Michael Moore good intentions paving company and so on, are all placebos and pacifiers, designed to bullet proof the political leaders  against charges of being soft on  sticky fingered speculators and wash-traders. In securities matters,  as in many other spheres, government, if left unchecked, tends t o proliferate, like dust balls, and in any enforcement context the objective is always to have as much leeway as possible to annoy, harass, litigate, and sometimes seize and intimidate by executive fiat;  there is always a need to bag a few trophies.  The placebos seems to germinate into Frankenstein like creatures that compete for scalps while posturing before the media as proactive public defenders to the benefit of few. In the last debacle, the regulators in the U.K and U.S. had all the authority needed to avoid a crisis and encourage stability, they did not use it, but find themselves being rewarded by more powers to supplement the adequate means at their disposal. Its repressive and divisive, but plays to the peanut gallery of left wing reactionaries, that have no  claim on moral superiority, just a plausible pretext for putting their sticky fingers into the till.

”Michael Moore: I don’t know if they’re so much revolts in favor of capitalism as they are being fueled by a couple of different agendas, one being the fact that a number of Americans still haven’t come to grips with the fact that th

#8217;s an African American who is their leader. And I don’t think they like that.

Naomi Klein: Do you see that as the main driving force for the tea parties?

MM: I think it’s one of the forces — but I think there’s a number of agendas at work here. The other agenda is the corporate agenda. The health care companies and other corporate concerns are helping to pull together what seems like a spontaneous outpouring of citizen anger.

The theory of government involvement  may actually be prolonging the financial crisis and encouraging  and ensuring a banking dependence on government support  due to the low interest rates put in place to deal with the crisis. The  Bank of International Settlements  believes the Federal Reserve and other central banks are distorting financial markets and creating ”zombie banks” whose profitability is artificial according to Jaime Caruana. Caruana claims banks are so dependent on government that they could not survive in a normal interest rate environment.  The distortions being a serious threat to the broader market, leading investors to take on excessive risks, and encouraging companies to postpone the recognition of losses, which in turn will set the stage for another potentially even more serious phase in the financial crisis. Like the patient that won’t leave the hospital. The rhetoric of the Left has not focused on monetary policy and the record levels of household debt, probably as a matter of political expedience, and belief, likely illusory, that low interest rates will translate into reducing the political sensitive unemployed.  ”But the bottom line is that the global financial system is awash in liquidity and one way or another, that’s got to be sopped up, he said” ( John Greenwood, Reuters )

“7:36pm – Mr Blankfein and the senators continue to speak different languages, especially on the idea of betting on securities to fail. “The securities weren’t meant to fail,” Mr Blankfein said. “They succeeded in conveying the risk that they were meant to have.”

But Sen Tester still doesn’t understand how Paulson could be in the room with Goldman, hoping to make “dough” on the securities they were selecting to bet against.

“Right wrong or indifferent, it sounds like there was a failure to disclose in the transaction,” Mr Tester said. “I know you say you were hedging your risk, but it’s more like a scam.”

6:55pm – Mincing words, Mr Blankfein explains that when he was talking about clearing old loans off the books, he was referring to aged inventory and that when he called them “cats and dogs” he meant “odds and ends”

Eternal recurrence.A bubble bath that smells like dead fish washed up on the shore. The  hearings on Capital Hill in senate sub-committee featuring financial institution Goldman–Sachs and its CEO Lloyd Blankfein had an understated entertainment value that has been poorly understood by our media. Although the vagaries of the Roman Catholic Church have been much publicized,and the ongoing ritual of human sacrifice in war duly documented,  the Goldman story appears far more sensational,scandalous and dangerous. it recalls the famous Pecora Commission of the 1930’s which exposed the same spirit of thought that has been solemnly handed down to today’s generation.

In short, Goldman is accused and suspected of many activities whose complexity contravenes our present understanding of mathematics. This is a world of synthetic and illusory products, based on what they consider the false  premise of middle class values; thus they are products based on a dream which in itself is an illusion. Like Charles Dicken’s and his purity of the middle class, this completely phantasmagorical creation has been seized upon by financial institutions using the same magic wand that Hollywood has woven its mystique over the years. hey, its only money. The mortgage securities themselves were toxic, but unfortunately the rot that germinated into cancerous infection cannot be cauterized or cured. If its meant to die, it may be better to let it succumb to mortality of its own accord. Intensive reform, may just prolong the coma. 

”But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet. ( Matt Taibbi )

“At the start of Tuesday’s hearing, subcommittee chairman, Democrat Carl Levin of Michigan, accused Goldman Sachs of packaging and selling financial products tied to risky home mortgages — without disclosing that it was investing in financial instruments that would increase in value, if the mortage-backed securities failed.

“Its [i.e., Goldman Sachs'] misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system.  And when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse.  The firm’s own documents show that while it was marketing risky mortgage-related securities, it was placing large bets against the U.S. mortgage market.  Goldman did well when its clients lost money,” he said.

Although everyone expresses revulsion, and by extension at the even bigger fix of staging the economic meltdown of September 2008, we will never know the full details. As Blankfein explained to Senator McCaskill on Wednesday, ” the devil was in the details”, which bore the same tone as Hitler apologists who claimed “he had some good ideas, he just went too far”. Money, at its inception, was conceived as a medium of exchange, yet the financial system seems determined to flee from this role into a form of quantum-alchemy that is uncontrollable despite what will be half-hearted efforts at financial reform. it may also indicate a changing identity for the role of capital, its importance and range of consequences  from the beneficial to the destructive.

“Senator McCaskill scored points, along with McCain, by noting that with a synthetic CDO, there’s no real there there. It’s just a side bet on actual assets that have already been sold, so you’re not actually buying anything concrete. McCaskill shook her head in befuddlement before saying, “seems like a hamster in a cage trying to get to compensation.” Blankfein defended the product with some mumbo jumbo about managing risk profiles. But what we’re left pondering is McCaskill’s image of hamsters manically tunneling through the wood chips for dollar bills.”

“Blankfein technically outpointed Senator Levin during the opening exchange, I think — Levin doesn’t have a particularly deep understanding of high finance — but Goldman’s chief lost the big point: how Goldman’s actions appear to Main Street. Basically Blankfein condoned the practice of “betting against a product you’re selling.” That’s the damning headline. Here’s what it sounds like to Joe Blow: I sell you my car, and meanwhile, I bet with someone on the side that the car will break down within six months. No graceful way to put lipstick on that pig.”

As Blankfein winces and feigns conviction in his tinny high pitched voice, which leaves one to wonder what is actually going on in the executive suite;  Enter Sandra Schulberg, a movie producer, and Josh Waletzky, a documentary director/writer. They decided together to reconstruct ‘Nuremberg: Its Lesson for Today,’ a film originally made by Schulberg’s father during the Nuremberg trials and released in 1949. It seems to run in cycles, from McCarthy withhunts, to Nazi style witch hunts.

The first Nuremberg trial was convened November 20, 1945, in Nuremberg, Germany, to try the top Nazi leaders for their atrocious crimes. The verdict was rendered October 1, 1946. The lead U.S. prosecutor and the driving force behind the organization of the trial was U.S. Supreme Court Justice Robert H. Jackson. During preparation for the trial, Jackson made the bold and historic decision to use film and photo evidence to convict the Nazis.

Writer/director Stuart Schulberg and editor Joseph Zigman were commissioned to create a documentary about the trial. Schulberg and Zigman found themselves terribly constrained. Crucial coverage simply did not exist. On the other hand, a complete sound recording of the trial had been made, but it was not synchronized to the motion picture record. Obviously, Mr. Schulberg faced immense challenges, but still managed to assemble a poignant representation of the trials and their outcome.

Now his daughter and her partner have taken the original recording and remastered it. The banking scandal has endured far longer than the Third Reich, perhaps even achieving its ambition of a thousand year reign. It has probably also destroyed more lives, but also created great wealth. A Nuremberg trial for the financial system reaching back to its roots, the nerve center of this tentacled monster may be an interesting idea; although to many the truth would be so much weirder than the fictional account that it could conceivably be classified as science fiction. Like D.H. Lawrence and his “rocking horse winner” we could be on a wooden steed absurdly predicating wagers on something we don’t understand.

Michael Ferguson at Polymathica.com : ”In the Industrial Age, those with decision making authority and command over the disposition of resources have had characteristic IQs in the 110 to 140 range. I refer to it as a Mediocracy or ‘rule by the kind of smart.’ There are many mechanisms that have contributed, for better or worse, to this state of affairs. This is apropos to Robert’s comments about the Venturists not being overly bright. However, they actually do a fairly good job in allocating capital to projects consistent with the prevailing rules of the game.

The problem, if there is one, is that the ‘object of the game’ is not congruent with the best interests of society. It is incumbent upon those who construct the playing field, i.e. the politicians, to bring the two into closer alignment. However, they, too, are not very smart. Kind of smart, but not very smart.

The question becomes how smart are the complainers, how well informed are they and how committed, through inaction, are they to the status quo? If our behavior is to complain, engage in supercilious commentary and then return to our cynical complacency, then we are less admirable than those who have contrived this sorry state of affairs.”

However, more effective than any banking reform; the Obama administration could look to  Debrahlee Lorenzana for a form of earnings guidance that seems to have brought her, or the bankers to their knees. She claims to have been fired from her banking job for being a workplace distraction, though the buxom banker said she had no control over the way she looked.  However, it was revealed her ”distractive” qualities were enhanced through a series of cosmetic surgeries she had extolled on reality television. Citibank, already government controlled,  has denied the charges , but the drama of  the sure-fire combination of sex-money-celebrity ensures a morality play to keep America fixated through the dog days. If only she could have found Russian spies like Anna Chapman in Citibank’s ranks…. Perhaps the Citibank annual report will come with pin-up centerfolds to whet investor appetite; though it is hard to interpret Citibank’s reason of poor performance being the sole reason for Lorenzana’s dismissal.  ”…whether she’s a novel form of discrimination victim or a gold digger trying to cash in on male attention she courted, the 33-year-old single mom says she’s unbowed and trying to teach corporate America a lesson.” ( Jennifer Peltz. AP )

Just keep the motor runnin’,
This won’t take very long.
By the time the po-lice get here,
We’ll be already gone.
We’ve got to leave ‘em hangin’,
We can’t leave ‘em no clues.
Just take the money and run.

Lord, I love robbin’ banks.
Lord, I love robbin’ banks.
I always tell the teller, “Thanks.”
Lord, I love robbin’ banks.

I like to holler, “Stick up!”
When I walk through the door.
It lets ‘em know their safe,
Just isn’t safe anymore.
I like to see their faces,
When I show ‘em my gun.
Then take the money and run.

Lord, I love robbin’ banks.
Lord, I love robbin’ banks.
I always tell the teller, “Thanks,”
Lord, I love robbin’ banks. ( David Allan Coe, I Love Robbin’ Banks )