Biblitz delivers advise

ASK Biblitz about Wall Street.

'The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force - only this time with the full financial support of the U.S. government.'


WELCOME!

What can you tell me about the bailout of Wall Street lately?

See also Brooklyn and New York.

Gambling, anyone?

Biblitz replies:



Mostly that it isn't over and that nothing's changed to prevent a second similar collapse. Here's why:

Rolling Stone

Wall Street's Bailout Hustle

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash

By Matt Taibbi
March 4/10

Schadenfreude! Biblitz is listening to the Goldman Sachs Senate hearings beginning April 27/10 LIVE on Sirius/XM Bloomberg 130.

Michael Santoli of Barron's on Goldman Sachs' controversial operations as early as April, 2006.

More on the vast, unregulated market of credit default swaps.

Who would have guessed that the brilliant originator of derivatives was, in fact, a French woman?

Nobel laureate Joseph Stiglitz on the financial crisis - and how to fix it
.

Goldman wasn't alone. The nation's six largest banks - all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry - set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. ...

... The question everyone should be asking, as one bailout recipient after another posts massive profits - Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation - is this: In an economy as horrible as ours ... where in the hell did Wall Street's eye-popping profits come from, exactly? ... A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?



The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.

The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force - only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before. ...

... The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off." ...



CON #1 THE SWOOP AND SQUAT

... the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company - in this case, the government. (Goldman sold toxic securities often insured with psuedo-insurance from AIG which, thanks to deregulation, never had to show it had the capital back up the deals. Banks then squeezed AIG for cash collateral, forcing it into a liquidity crisis. When the gov't took AIG over, Goldman was paid considerably more than it would have been if AIG had proceeded, as many Americans did, to bankruptcy)...

CON #2 THE DOLLAR STORE

The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark....

... Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank (including huge loans at zero interest). ...

CON#3 THE PIG IN THE POKE

... In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. ...

CON #4 THE RUMANIAN BOX

... Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed - meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let involvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. ... We refill the banks' balance sheets, and they, in turn start to lend money again ... ... (But they didn't!) ... In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars. ...

CON #5 THE BIG MITT

... In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.



At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. ... "Some of them created this mess," he (Michael Schlachter of the investment firm Wilshire Associates) said, "and they are making a killing undoing it." ...

CON #6 THE WIRE

... instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business. ...

The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. ... despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. ...

CON #7 THE RELOAD

... The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year. ...

... by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing again into the most dangerous and destructive investments all over again. Wall Street was going for the reload. ... (-- pgs. 48-55)

drones-club Biblitz and a few chaps head for the bar like bison to the watering hole after having relied to their peril on one of Bingo Little's dreams to guide the management of the respective trust funds. Even Oofy Prosser, the club millionaire, winced visibly and cursed like billy-o at the mere mention of Bingo's name. "It's alright for Bingo," he told a sympathetic Bean, "he's got Rosie M. Banks, the famous lady novelist, rely on - and that silly Wee Tots. I hope he goes and boils his bally head! Better not show up here, that's all I can tell you." A few companionable rumbles suggested others shared this view of young Bingo's investment advice..

Mad

By Frank Jacobs
June, 2009

The Bailout Hymn of the Republic

Our eyes have seen the sorrow
of a nation going bust,
Filled with bankers and politicos
that none of us can trust,
Not to mention Wall Street profiteers
who fill us with disgust -
Our hopes and dreams are gone!

Lordy, lordy, how they blunder!
Major banks now going under!
Years of savings torn asunder -
Our hopes and dreams are gone!

(-- p. 53)

The New York Times Magazine

Math is Hard

The Madoff whistle-blower talks about what the S.E.C. doesn't understand about money

Questions for Harry Markopolos
By Deborah Solomon
Feb. 28/10

In the year since you testified before Congress about the S.E.C.'s failures, many of the agency's employees have been replaced. They've redisorganized. They redisorganized the enforcement unit. I actually approve of that. I think Robert Khuzami, the new head of the enforcement division, has got fire in his belly.

Are you saying the S.E.C. under Schapiro is about to catch fraud on Wall Street? She has the wrong staff. They're a bunch of idiots there.



What do you mean? The five commissioners of the S.E.C. are securities lawyers. Securities lawyers never understand finance. They don't have the math background. If you can't do math and if you can't take apart the investment products of the 21st century backward and forard and put them together in your sleep, you'll never find the frauds on Wall Street.

So why doesn't the S.E.C. hire finance people? Why don't they hire you? They're overlawyered. They're poisoned by lawyers. ... (-- p. 14)

Professional obligations even of New York securities lawyers:

See also State Common Law Applying Fiduciary Duties Upon Financial Advisors by Ron A. Rhoades, accessed online April 27/10.

The practice of law has an essential tradition of complete independence and uncompromised loyalty to those it services. Recognizing this tradition, clients of lawyers practicing in New York State are guaranteed "independent professional judgment and undivided loyalty uncompromised by conflicts of interest." Indeed, these guarantees represent the very foundation of the profession and allow and foster its continued role as a protector of the system of law. Therefore, a lawyer must remain completely responsible for his or her own independent professional judgment, maintain the confidences and secrets of clients, preserve funds of clients and third parties in his or her control, and otherwise comply with the legal and ethical principles governing lawyers in New York State. ...

A lawyer as adviser furthers the interest of the client by giving a professional opinion as to what he or she believes would likely be the ultimate decision of the courts on the matter at hand and by informing the client of the practical effect of such decision. The lawyer may continue in the representation of the client even though the client has elected to pursue a course of conduct contrary to the advice of the lawyer so long as the lawyer does not thereby knowingly assist the client to engage in illegal conduct or to take a frivolous legal position. A lawyer should never encourage or aid the client to commit criminal acts or counsel the client on how to violate the law and avoid punishment therefor. ... (emphasis added) (From the 74-page New York Lawyer's Code of Professional Responsibility, accessed online April 27/10)

Historically mondo New York:

In Cheap We Trust

The Story of a Misunderstood American Virtue

Hardcover
By Lauren Weber

After the Civil War, America's factories and natural resources were freed up, and the process of modernization gathered steam again. Immigrants from the hinterland and from abroad poured into cities. New technologies like the steam engine were transforming production, and the transcontinental railroad, completed in 1869, connected one end of the country to the other, unleashing yet another wave of growth in agriculture, manufacturing, mining, real estate, and just about every other American industry.

Industrialists and bankers, speculators and criminals, accumulated fortunes on a scale that rivaled the monarchs of Europe. Men like Cornelius Vanderbilt and Henry Clay Frick spent millions of dollars on costume balls, mansions, and trinkets. They competed to outspend and outimpress each other. At one New York City dinner, the host passed out cigarettes wrapped in $100 notes; each bill was monogrammed in gold with his initials. Mrs. Stuyvesant Fish held a lavish party for her pet monkey, dressing him up in a tuxedo. In pursuit of something new and different to electrify his friends, a midwestern millionaire held a "poverty social": friends were asked to arrive wearing rags and tatters, then were served scraps of food on wooden plates while sitting on buckets and boxes. "They played being poor for one night and not one of them but joined in ecstatic praise of their host and his unusual ability to provide a sensation," wrote one journalist.

The most obvious exception was Hetty Green. Even as the robber barons were building French-style chateaus on upper Fifth Avenue, Hetty was living in rooming houses, moving frequently in order to avoid paying property taxes. She sometimes did business in the Manhattan offices of the Chemical Bank. There, she set up her paper at an old desk behind the counter. Bank employees later remembered her bringing with her a lunch pail filled with oatmeal, which she mixed with water and heated on the radiator. Thus she avoided paying for a restaurant meal. (From A Nation of Savers, p. 67)

Have you a message you'd like to share with Wall Street post-bailout? Here's mine courtesy of Dean and The Weenies. Sing along if you know it!


teaman90
Don't keep these things to yourself, for goodness sake, all bottled up. Get it off your chest. Tell us your story. You may e-mail us at leo@askbiblitz.com if you prefer. We'll post the best of our best entries in subsequent pages. Please check back soon for updates!