Political Cortex: Brain Food for the Body Politic

Sadly, now due to almost incomprehensible fraud and cheating, the once strong economic foundation of the U.S.A. is crumbling.

Someone once asked the question, "What is the difference between bank robbers and Wall Street robbers?"

The answer is self-evident, the person replied quickly.

"I have never seen a group of bank robbers stand in front of banks they have robbed and applaud themselves.  But the brazen Wall Street robbers showcase themselves every day and applaud themselves."

Bank panic is part of the fabric of the U.S. economy periodically.  The 1907 panic resulted in a crash.  This prompted the creation of the Federal Reserve.  The Federal Reserve is a private banking cartel, which has the convenient veneer of an independent organization.

In reality, the Federal Reserve was a convenient coup by elite bankers, and was designed to control the banking industry.  It was signed into law in 1913.  It took only 5 years for the Federal Reserve to double the money supply.

But by 1929, when the Federal Reserve called the loans back en masse the crash of 16,000 banks took place.  The stock market crashed 89%.  Now, the private and well protected banks within the Federal Reserve system were able to pick up falling banks for pennies on the dollar.

In April 1933 President Franklin D. Roosevelt's executive order confiscated all gold bullion from the public.  By the end of 1933 the gold standard was abolished.

In 1971 President Nixon removed the dollar from the gold standard completely.  Now, the U.S. could float the dollar for whatever the U.S. decided it was worth.  The dollar had no standard of measure, and became the universal currency.  Treasury bills and bonds replaced gold as value.

Following the Great Depression Roosevelt created Fannie Mae, a state-supported major bank to finance affordable mortgages.  At the same time, regulations to control banking operations were put in place to insure there would not be a Depression re-run.

But the U.S. stock market plunged again in 1987 by 22% in a day because of high risk futures trading called derivatives.  In 1989 the savings and loan crisis took place.

George H.W. Bush had to use $142 billion of taxpayer funds to rescue the excesses of the S&L's.  To do so, Freddie Mac was given the task of giving sub-prime (below prime rate) to low income families.

But in 2000, the "irrational spree" of the dot.com bubble burst.  Suddenly 50% of the so-called high tech firms went bankrupt with $5 trillion vanishing from the inflated market value.

Alan Greenspan kept interest rates so low they were actually less than inflation.  Anybody saving their income actually lost money, as Greenspan had the savings rate falling into negative territory.

Greenspan's rock bottom rates of interest let anyone afford a home now.  Minimum wage earners who wanted to buy a home that cost half a million dollars could secure a 100% loan.  

There were so many people now rushing to get these sub prime loans (in the Greenspan money giveaway scheme) that the biggest investment houses figured out a slick way to bundle these virtually worthless home loans, and subsequently sell them, as solid U.S. investments to unsuspecting countries.  The Wall Street whiz kids had discovered heaven on earth.

The excess of American consumer spending didn't suffer and in effect were being propped up by foreign nations that were none the wiser.

The more the banks lent, the more interest they earned.

Along came 9/11!  George Bush told the nation to spend freely during the time of war.  Bush apparently fantasized that the Iraq War he launched would be a quickie conflict, obtaining long term oil leases in Iraq and ridding the world of Saddam Hussein, who the U.S. had by the way supplied with weapons to fight the Iran-Iraq War for years.  

All this cost billions and is still draining the U.S. economy at $10 billion a month.

The sub-prime loan boondoggle backfired.  House prices collapsed as 2 ½ million people who gambled on making a killing flipping their properties over fast got a big surprise.  They lost their gamble.  House prices shrunk drastically.  The interest only loans (which 30% of Californians had) kicked in, playing on the principal.  

With buying a house reality set in -- they couldn't afford a legitimate loan, paying both principal and interest.  Around the U.S.A. there were 2 ½ million foreclosures.  Foreign banks that were conned into buying worthless U.S. mortgage securities (so-called) were losing 3 to 4 billion dollars as well as all respect for U.S. bankers.  The fraud artists worked their scam this way, as Tanya Carlina Hsu explained:

"To guarantee, therefore, these high risk mortgages, the same financial houses that sold them then created `insurance policies' against the sub-prime investments they were selling, marketed as Credit Default Swaps (CDS).  But the government must regulate insurance policies, so by calling them CDS they remained totally unregulated.  Financial institutions were 'hedging their bets' and selling premiums to protect the junk assets.  In other words, the asset that should go up in value could also have a side-bet, just in case, that it might go down.  By October 2008, CDS were trading at $62 trillion, more than the stock markets of the whole world combined."

Every governmental agency -- the Securities and Exchange Commission, the FBI and federal bank authorities are now investigating if they can prove fraud -- these horrifying con artists who generated this economic destruction should be forced to return the billions they stole and if found guilty in a court of law be forced to exchange their lavish mansion existences for prison cells pronto!