More about who we were truly bailing out in the AIG bailout:
http://www.reuters.com/article/ousiv/idUSTRE48R3HQ20080928
Thursday, October 2, 2008
Wednesday, October 1, 2008
Bail Them Out or Jail Them -- Where is RICO when you need it!
Before I post another letter I wrote in response to my congressman's ill-advised vote to subsidize fraud, let me first direct the reader to the following link for a brief discussion of RICO - Racketeer Influenced and Corrupt Organizations Act. The main thing to take away from a discussion of RICO is that it can be applied to Securities Fraud such as the Mortgage Backed Securities. The parties involved may be Appraisers, Bond Raters, Investment Bankers and others who knowingly enabled the defrauding of Sovereign Wealth funds, foreign investors, and in the final stages American Pension funds and others with bundles of mortgages they knew were of low value. (If they didn't know, then they should be prosecuted on the grounds of criminal neglect with respect to their fiduciary responsibility.)
Honorable Congressman,
With all due respect, please consider this [ Wall Street bailout ] bill and the previous bailout of AIG to the tune of 85 Billion and the information that we have subsequently found out. The firm of the Treasury Secretary Henry Paulson was on the hook to the tune of 20 Billion dollars if AIG failed to make good on their end of the financial engineering efforts currently in play at Goldman Sachs. According to a recent New York Times article the AIG deal saves Goldman Sachs $20B . The article was published on September 27, 2008.
It is also well known that some of the current tightness of the credit is a direct consequence of actions by Treasury and the Federal Reserve such as increasing the reserve requirements for banking institutions. More money on reserve, means less money to lend, hence higher rates. Ergo, we have a manufactured crisis, with a tailor made solution that will allow the unwinding of financial engineering products with the taxpayer picking up the loss, while Goldman Sachs, and private individuals have their fortunes protected.
Yes, I do understand how the loss of $20 Billion will hurt Goldman Sachs and the Treasury secretary, but unless this matter of legislation is done in the full light of day and several months of critical review, I won't see why the proposed legislation helps the nation as a whole. I will hear after the fact from you and other legislators about how sorry you are for the error and that you had to "trust" those who had a consistent history of not being trustworthy.
Honorable Congressman,
With all due respect, please consider this [ Wall Street bailout ] bill and the previous bailout of AIG to the tune of 85 Billion and the information that we have subsequently found out. The firm of the Treasury Secretary Henry Paulson was on the hook to the tune of 20 Billion dollars if AIG failed to make good on their end of the financial engineering efforts currently in play at Goldman Sachs. According to a recent New York Times article the AIG deal saves Goldman Sachs $20B . The article was published on September 27, 2008.
It is also well known that some of the current tightness of the credit is a direct consequence of actions by Treasury and the Federal Reserve such as increasing the reserve requirements for banking institutions. More money on reserve, means less money to lend, hence higher rates. Ergo, we have a manufactured crisis, with a tailor made solution that will allow the unwinding of financial engineering products with the taxpayer picking up the loss, while Goldman Sachs, and private individuals have their fortunes protected.
Yes, I do understand how the loss of $20 Billion will hurt Goldman Sachs and the Treasury secretary, but unless this matter of legislation is done in the full light of day and several months of critical review, I won't see why the proposed legislation helps the nation as a whole. I will hear after the fact from you and other legislators about how sorry you are for the error and that you had to "trust" those who had a consistent history of not being trustworthy.
The securitization of mortgages with well known, predictable weaknesses to defraud Asian investors and sovereign wealth funds that wanted to get a better return than U.S. Government bonds that were yielding less than 2% after 9/11 is more deserving of an application of the RICO statutes since it took active collusion between banks, appraisers, the GSEs, and others than a bailout from the public treasury.
Please take a listen to the following episode of the NPR program "This American Life" entitled "The Giant Pool of Money" which tries to explain the securitization process and the fee based motivation for the fraud. A transcript can be found here: http://www.thislife.org/extras/radio/355_transcript.pdf
Please look at the big picture. One example:
20 percent of
Cost per reactor is about $2 Billion ( presuming economics of scale and using 1 design), we get from a back of the envelope estimate that we could build about 500 1 GigaWatt Nuclear Reactors for the expected $1 Trillion cost of this bill (and its children).
That would cover close more than 100% of our power needs and leave maybe 5 to 20 percent of the power capacity available for export to
Please develop that "Vision Thing" that we expect from our great leaders. If we can find a Trillion dollars at the drop of a hat, to bail out the hedge funds and children s "Financial Engineering" toys (MBS, CDO, swaps) then perhaps we should measure twice and cut once to deploy American treasury for planned, well thought out actions that may lead to real prosperity for many, rather than just the comfort of those who do lunch with Paulson.
Sincerely,
<anon>
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