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Calling All CounterPunchers!
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Today's Stories November 13, 2008 Pam Martens November 12, 2008 Johanna Berrigan Steve Conn Patrick Bond Bokar Ture / Alan Farago Dave Lindorff Karl Grossman David Macaray George Wuerthner Susie Day Website of the Day November 11, 2008 James G. Abourezk Allan J. Lichtman Eric Toussaint Ron Jacobs Peter Montague Corporate Crime Reporter Laura Carlsen Col. Dan Smith Morton Skorodin David Michael Green Charles R. Larson Website of the Day November 10, 2008 David Roediger Paul Craig Roberts Peter Lee Corey D. B. Walker Jeff Halper Bill Hatch Andy Worthington Bill Quigley Peter Morici Anthony Olszewski Kim Nicolini Cpt. Paul Watson Website of the Day November 7 / 9, 2008 Alexander Cockburn Jeffrey St. Clair Vijay Prashad Tariq Ali Jean Bricmont John V. Whitbeck Saul Landau Peter Morici Lawrence Velvel Karyn Strickler Nativo V. Lopez Christopher Fons Alan Farago David Yearsley Christopher Brauchli Samah Sabawi Dave Lindorff Deepak Tripathi Beth Sherouse Patrick Irelan Stephen Martin Richard Rhames J. Murray Lorenzo Wolff Kim Nicolini Poets' Basement Website of the Day
November 6, 2008 Frank J. Menetrez John Chuckman P. Sainath Joshua Frank Edna Canetti John Ross Norman Solomon Fawzia Afzal-Khan Robert Weissman Harvey Wasserman Website of the Day
November 5, 2008 Cockburn / St. Clair Chuck Spinney Ishmael Reed Chris Floyd Binoy Kampmark Michael Donnelly David Macaray Peter Morici Manuel Garcia, Jr. William Willers Website of the Day November 4, 2008 Kathleen Christison James Ridgeway Winslow T. Wheeler Mike Whitney Conn Hallinan Holly M. Barker Ashley Smith Andy Worthington Martha Rosenberg Stephen Martin Doug Lummis Carlos Fierro Website of the Day November 3, 2008 Patrick Cockburn John Kennedy O'Hara Peter Montague Steve Conn Andrew Gebhardt Ron Jacobs Ralph Nader Niranjan Ramakrishnan Uri Avnery Dave Lindorff Fred Gardner DC Larson David Michael Green Val Strange Tuli Kupferberg / Website of the Day
October 31 , 2008 Alexander Cockburn Jeffrey St. Clair Douglas Valentine Ismael Hossein-Zadeh Dr. Ignacy Nowopolski Alan Maass William P. O’Connor Patrick Irelan Brian Cloughley Mats Svensson Binoy Kampmark Steve Conn Alan Farago Morton Skorodin Robert Bryce Wajahat Ali David Yearsley Dennis Loo Pam Martens Stephen Martin Richard Rhames Ramzy Baroud Missy Beattie Howard Lisnoff Richard Neville Saul Landau / Kim Nicolini Lorenzo Wolff Poets' Basement Website of the Weekend October 30, 2008 Cockburn / St. Clair Vijay Prashad Paul Craig Roberts Glen Ford Stanley Heller William Loren Katz Joshua Frank James McEnteer Felice Pace Jonathan Cook Reza Fiyouzat Website of the Day
October 29, 2008 Arno J. Mayer Eric Toussaint Matt Gonzalez Steven Conn Jonathan Cook Patrick Bond Ramzi Kysia Douglas Valentine Stephen Martin Margaret Dooley-Sammuli Amee Chew Website of the Day
October 28, 2008 James G. Abourezk Andy Worthington Gary Leupp Paul Craig Roberts Mike Whitney Gregory V. Button Ralph Nader P. Sainath Martha Rosenberg Charles R. Larson Website of the Day October 27, 2008 Michael Hudson Barbara Rose Johnston John Dinges Mike Whitney Mary Lynn Cramer Greenspan's Higher Power Alan Farago David Michael Green Andy Worthington George Wuerthner Niranjan Ramakrishnan Website of the Day October 24 / 26, 2008 Alexander Cockburn Ishmael Reed Mike Whitney Don Santina Scott Boehm Saul Landau Ron Jacobs Binoy Kampmark Linn Washington Jr. Nicole Colson Bernard Chazelle Brian Jones Christopher Brauchli Benjamin Dangl Val Strange Steve Early David Macaray Allison Kilkenny Richard Rhames Jim Bell Kris De Welde Barry Clemson Adam Engel Mark Scaramella Tuli Kupferberg Lorenzo Wolff Poets' Basement Website of the Weekend October 23, 2008 Allan J. Lichtman Todd Chretien John Ross Peter Morici Mats Svensson Marlene Martin Robert Jensen / Margaret Kimberley Deepak Tripathi David Morris Website of the Day October 22, 2008 Brian Cloughley Heather Gray Jeff Birkenstein Ralph Nader DC Larson David Swanson Keeanga-Yamatta Taylor Race and the Election: When the "Real" America Enters the Voting Booth Larry Everest Robert Fantina Martha Rosenberg Stephen Martin Website of the Day October 21, 2008 Vijay Prashad Paul Craig Roberts Corey D. B. Walker Steve Breyman Eric Toussaint Wajahat Ali Robert Weitzel Brendan Cooney Dave Lindorff Marqueece Harris-Dawson / Bob Wing Patrick B. Barr Omar Barghouti Website of the Day October 20, 2008 Michael Hudson Anthony DiMaggio Tariq Ali Uri Avnery Bill Quigley Ben Rosenfeld David Michael Green William S. Lind Chris Genovali Stephen Martin Howard Lisnoff David Yearsley Website of the Day October 17 / 19, 2008 Alexander Cockburn Jeffrey St. Clair Pam Martens Paul Craig Roberts Mike Whtney Michael D. Yates Suzanne Smith Carl Boggs Ralph Nader Fidel Castro Dave Marsh Saul Landau Jo Guldi Kevin Zeese Larry Everest Steve Early David Macaray Ben Terrall Missy Beattie Don Monkerud Helen Redmond Dan Bacher Wajahat Ali Farzana Versey Vladimir Frolov Kim Nicolini Poets Basement Website of the Day
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November 13, 2008 A Credit Crisis or a Collapsing Ponzi Scheme?The Two Trillion Dollar Black HoleBy PAM MARTENS Purge your mind for a moment about everything you've heard and read in the last decade about investing on Wall Street and think about the following business model: You take your hard earned retirement savings to a Wall Street firm and they tell you that as long as you "stay invested for the long haul" you can expect double digit annual returns. You never really know what your money is invested in because it’s pooled with other investors and comes with incomprehensible but legal looking prospectuses. The heads of these Wall Street firms have been taking massive payouts for themselves, ranging from $160 million to $1 billion per CEO over a number of years. As long as new money keeps flooding in from newfangled accounts called 401(k)s, Roth IRAs, 529 plans for education savings, and hedge funds (each carrying ever greater restrictions for withdrawing your money and ever greater opacity) everything appears fine on the surface. And then, suddenly, you learn that many of these Wall Street firms don't have any assets that anybody wants to buy. Because these firms are both managing your money as well as having their own shares constitute a large percentage of your pooled investments, your funds begin to plummet as confidence drains from the scheme. Now consider how Wikipedia describes a Ponzi scheme:
Looking at outcomes 1, 2, and 3 above, here’s where we are today. The promoters have clearly not vanished as in outcome 1. In fact, they are behaving as if they know they have nothing to fear. As over $2 trillion of taxpayer money is rapidly infused through Federal Reserve loans and over $125 Billion in U.S. Treasury equity purchases to keep these firms from collapsing, the promoters are standing at the elbow of the President-Elect in press conferences (Citigroup promoter, Robert Rubin); they are served up as business gurus on the business channel CNBC (former AIG CEO and promoter, Maurice “Hank” Greenberg); they are put in charge of nationalized zombie firms like Fannie Mae (Herbert Allison, former President of Merrill Lynch); they are paying $26 million and $42 million, respectively, for new digs at 15 Central Park West in Manhattan, where their chauffeurs have their own waiting room (Lloyd Blankfein, CEO of Goldman Sachs; Sanford “Sandy” Weill, former CEO of Citigroup, who put his penthouse in the name of his wife’s trust, perhaps smelling a few pesky questions ahead over the $1 billion he sucked out of Citigroup before the Fed had to implant a feeding tube). We are definitely seeing all the signs of outcome 2: the scheme is collapsing under its own weight; there are panic runs around the globe wherever Wall Street has left its footprint. But outcome 3 is the most fascinating area of departure from the classic Ponzi scheme. Legal authorities have, indeed, examined the books of these firms, except for one area we’ll discuss later. They found worthless assets along with debts hidden off the balance sheet instead of real depositor funds. Instead of arresting the perpetrators and shutting down the schemes, Federal authorities have developed their own new schemes and pumped over $2 trillion of taxpayer money into propping up the firms while leaving the schemers in place. Equally astonishing, Congress has not held any meaningful investigations. This has left many Wall Street veterans wondering if the problem isn’t that the firms are “too big to fail” but rather “too Ponzi-like to prosecute.” Imagine the worldwide reaction to learning that all the claptrap coming from U.S. think-tanks and ivy-league academics over the last decade about efficient market theory and deregulation and trickle down was merely a ruse for a Ponzi scheme now being propped up by a U.S. Treasury Department bailout and loans from our central bank, the Federal Reserve. Fortunately for American taxpayers, Bloomberg News has some inquiring minds, even if our Congress and prosecutors don’t. On May 20, 2008, Bloomberg News reporter, Mark Pittman, filed a Freedom of Information Act request (FOIA) with the Federal Reserve asking for detailed information relevant to whom the central bank was giving these massive loans and precisely what securities these firms were posting as collateral. Bloomberg also wanted details on “contracts with outside entities that show the employees or entities being used to price the Relevant Securities and to conduct the process of lending.” Heretofore, our opaque central bank had been mum on all points. By law, the Federal Reserve had until June 18, 2008 to answer the FOIA request. Here’s what happened instead, according to the Bloomberg lawsuit: On June 19, 2008, the Fed invoked its right to extend the response time to July 3, 2008. On July 8, 2008, the Fed called Bloomberg News to say it was processing the request. The Fed rang up Bloomberg again on August 15, 2008, wherein Alison Thro, Senior Counsel and another employee, Pam Wilson, informed the business wire service that their request was going to be denied by the end of September 2008. No further response of any kind was received, including the denial. On November 7, 2008, Bloomberg News slapped a federal lawsuit on the Board of Governors of the Federal Reserve, asserting the following: “The government documents that Bloomberg seeks are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression. The effect of that crisis on the American public has been and will continue to be devastating. Hundreds of corporations are announcing layoffs in response to the crisis, and the economy was the top issue for many Americans in the recent elections. In response to the crisis, the Fed has vastly expanded its lending programs to private financial institutions. To obtain access to this public money and to safeguard the taxpayers’ interests, borrowers are required to post collateral. Despite the manifest public interest in such matters, however, none of the programs themselves make reference to any public disclosure of the posted collateral or of the Fed’s methods in valuing it. Thus, while the taxpayers are the ultimate counterparty for the collateral, they have not been given any information regarding the kind of collateral received, how it was valued, or by whom.” As evidence that Bloomberg News is not engaging in hyperbole when it uses the word “cataclysmic” in a Federal court filing, consider the following price movements of some of these giant financial institutions. (All current prices are intraday on November 12, 2008):
What all of the companies in this article have in common is that they were writing secret contracts called Credit Default Swaps (CDS) on each other and/or between each other. These are not the credit default swaps recently disclosed by the Depository Trust and Clearing Corporation (DTCC). These are the contracts that still live in darkness and are at the root of why the Wall Street banks won’t lend to each other and why their share prices are melting faster than a snow cone in July. A Credit Default Swap can be used by a bank to hedge against default on loans it has made by buying a type of insurance from another party. The buyer pays a premium upfront and annually and the seller pays the face amount of the insurance in the event of default. In the last few years, however, the contracts have been increasingly used to speculate on defaults when the buyer of the CDS has no exposure to the firm or underlying debt instruments. The CDS contracts outstanding now total somewhere between $34 Trillion and $54 Trillion, depending on whose data you want to use, and it remains an unregulated market of darkness. It is also quite likely that none of the firms that agreed to pay the hundreds of billions in insurance, such as AIG, have the money to do so. It is also quite likely that were these hedges shown to be uncollectible hedges, massive amounts of new capital would be needed by the big Wall Street firms and some would be deemed insolvent. Until Congress holds serious investigations and hearings, the U.S. taxpayer may be funding little more than Ponzi schemes while companies that provide real products and services, legitimate jobs and contributions to the economy are left to fail. Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article. She writes on public interest issues from New Hampshire. She can be reached at pamk741@aol.com New in the Print Edition of CounterPunch For his 20-year stretch as Fed chairman, they all fawned on him – presidents, Congress, the press. Only a handful of left economists said he was pushing the economy over the cliff. Now Greenspan admits it in a humiliating confession. As the world’s financial structure tumbles in ruins, guess what? “I found a flaw in the model… To the extent that I figure out where it happened and why, I will change my views.” Read Frederic Claremont’s savage assessment of the fool who has plunged millions into misery. Also in our new issue: Bill Hatch on the story of one foreclosure; Kristian Williams on police torture in Chicago. Only in CounterPunch newsletter! Get your copy today by subscribing online or calling 1-800-840-3683 Contributions to CounterPunch are tax-deductible. Click here to make a donation. If you find our site useful please: Subscribe Now! CounterPunch books and gear make great presents. Order CounterPunch By Email For Only $35 a Year !
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New in the CP Print Edition! For his 20-year stretch as Fed chairman, they all fawned on him – presidents, Congress, the press. Only a handful of left economists said he was pushing the economy over the cliff. Now Greenspan admits it in a humiliating confession. As the world’s financial structure tumbles in ruins, guess what? “I found a flaw in the model… To the extent that I figure out where it happened and why, I will change my views.” Read Frederic Claremont’s savage assessment of the fool who has plunged millions into misery. Also in our new issue: Bill Hatch on the story of one foreclosure; and Kristian Williams on police torture in Chicago. Only in CounterPunch newsletter! Get your copy today by subscribing online or calling 1-800-840-3683 Now Available from CounterPunch Books! Waiting for Lightning
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