H.R. 5741 Slave Bill Now in Committee:

Slavery has a new name: “Mandatory Service” - Introduced July 15th 2010 by Rep. Charles Rangle (D).

(If Americans sit still for this, then they deserve to be slaves...)

Rob Dew - July 26, 2010

http://www.prisonplanet.com/h-r-5741-slave-bill-now-in-committee.html

H.R. 5741 will give the president the authority “To require all persons in the United States between the ages of 18 and 42 to perform national service, either as a member of the uniformed services or in civilian service in furtherance of the national defense and homeland security, to authorize the induction of persons in the uniformed services during wartime to meet end-strength requirements of the uniformed services, and for other purposes.”

Barely a year after introducing H.R. 1444, which was supposed to form a “Congressional Commission on Civic Service to study methods of improving and promoting volunteerism and national service, and for other purposes”, Congress has upped the ante.

Anyone between 18 and 42 will be eligible for a two year commitment of civilian or military service.

With more college graduates working for the fast food industry, a depression era unemployment rate and less people retiring; the government will have plenty of eligible able bodies to move into the slave ranks.

This echos the sentiment of President Obama who asked Congress in Febuary 2009 to send him a bipartisan bill in the spirit of national service. His Chief of Staff Rahm Emanuel outlined a similar plan in his book The Plan.

But even Emanuel aims low looking at only 18 to 25 year olds for three months of compulsory service. Under this new legislation nearly all, able bodied Americans will be sentenced to two years of forced labor.

The infrastructure is already in place for those unwilling to participate in mandatory service and now the army is looking to fill it’s ranks with Interment/Resettlement Specialists.

There are very few loopholes to opt of out national service, even CONSCIENTIOUS OBJECTORS (SEC. 109) will be forced to choose the mandatory option of A. noncombatant service (as defined by the President) or B. national civilian service. It seems the congressional commission on civic service will no longer be needed thanks to the hard work of a suspected Congressional tax cheat from New York.

The slavery bill is currently in debate in the House Committee on Armed Services chaired by Rep Ike Skelton a democrat from Missouri. Those who oppose mandatory slavery should contact Rep. Skelton. Many bills die in committee and this bill should meet the same fate.

Fix America? = Fix the Politicians!...

By Dylan Ratigan - July 4th, 2010, 2:00PM

http://www.ritholtz.com/blog/2010/07/fix-america-fix-the-politicians/

Today we end Fix It week on my show, although we hope to keep this recurring theme. But the largest hindrance to solutions for all of the problems we’ve discussed – be it the Deficit, Energy, Education or the Wars – goes back to one place: the current Political Process in our country.

We practically all share the same list of problems, regardless of ideology: The undue influence of moneyed interest, the focus on inane Culture Wars instead of proper governance, the low quality of our politicians coupled with their high incumbency rates, the lack of ethics, disclosure etc. The only question left is how to fix them and then, how do we muster the will?

These are the questions we will address for my entire show today – and just to get the ball rolling, here are four of my favorite solutions:

1. ONE FOR ME, ONE FOR YOU:

I don’t have to explain to anyone why we need to fix the campaign finance system. The question is how do we do it fairly. Publicly financed campaigns are one solution, but they seem to go against our very nature as Americans. After all, who wants to be forced into having their tax money going to politicians they don’t like? Meanwhile, infringing on the amounts people can donate gives an advantage to wealthy candidates. But I think there is pretty easy solution to this:

I propose that we make a law that charges 100% fee on all political spending, with the that fee going into a public campaign financing fund that given solely to candidates with low campaign coffers on a per petition signature basis. This means that if a well-moneyed candidate like Barack Obama wants to spend $740 million of campaign donations, $370 million of that can go to his campaign and the other half to public campaign fund.

Even better, if a wealthy person like Michael Bloomberg wants to spend $108 million of his fortune trying to get elected, half goes to other, less-moneyed candidates. As far as those “poorer” candidates go, the more valid petition signatures they have, the more money they should get from the fund.

In addition to curtailing the power of the dollar in elections, this would especially help new candidates take advantage of modern marvels like social networking etc. to jumpstart a serious challenge to more-moneyed opponents.

And if you don’t want your money going to candidates you don’t like, then don’t get in to the game in the first place.

2. DISCLOSE EVERYTHING TO ALL:

It is a sad state of affairs when corporations, who clearly don’t work for us, are forced to disclose more to than Politicians who do (or at least are paid by us). We need to put the legal onus on Politicians to disclose every single potential conflict of interest, be it an invite to a BBQ or getting their nephew a job with a contractor. This means that if it could in any conceivable way be considered a conflict, it’s on them to disclose it even if there is no specific rule against it. Then, if they are found being negligent of material disclosure, they need to be fired, fined and possibly jailed.

Finally, this information MUST be updated weekly into open-source searchable databases. There is no shortage of smart, patriotic Americans who can take it from there.

3. COOL YOUR HEELS FOR SEVEN YEARS:

The revolving door from Politics to corresponding positions of undue influence in the private sector has to be stopped. There needs to be a seven year cooling off period for all Politicians, staffers and regulators from working in any related industry or lobbying their former colleagues.

While this might sound draconian, ask yourself, do you really think we are getting high quality public servants with the current incentive structure? I am betting we will get much more capable public servants once we hinder their ability to get rich off of their service.

4. END THE LEFTY-RIGHTY FACADE:

As far as I can tell, at this point the major differences in the traditional Political Parties has basically become their stance on gay marriage – and even that looks pretty similar once they are in power. Both like to give away money they don’t have and are unwilling to stand up to the special interests that fund them.

Furthermore, the false choice of “Republican” or “Democrat” is keeping some of the best candidates from making it to the general election. If politicians want to align themselves into two Political Parties, that is their right. But the government shouldn’t allow them to hold separate primaries. Hopefully this recent move to open primaries in California will take off across the country.

The question now is how do we get these same complicit politicians to make the fundamental changes that we need to the system. My hope is that in the coming years, we will see more and more people deciding that they have had enough and will enter into the political spectrum or push their neighbors and friends to do so.

Also, I am waiting patiently for serious candidates in the United States to sign a legally binding contract guaranteeing that they will support initiatives like the ones outlined above. Don’t laugh, it’s already on its way across the pond.

Politicians held personally liable for breaking their promises to the voter? That’s change we all could believe in.

Follow Dylan Ratigan on Twitter: www.twitter.com/DylanRatigan

Put Patients and Doctors Back in Control of Healthcare:

http://www.thedailybell.com/1095/Ron-Paul-Put-Patients-and-Doctors-Back-in-Control-of-Healthcare.html

by Dr. Ron Paul - The Daily Bell - Wednesday, June 02, 2010



Most everyone agrees that health care in the United States has major problems, the biggest problems relating to skyrocketing costs.

No one doubts the system is in need of reform. However, too many in Washington see tighter government controls as the solution. In fact, the problems are rooted in past government controls that created more problems than they solved.

Ironically, laws and policies in the 1970's promoting Health Maintenance Organizations (HMOs) resulted from desperate attempts to control spiraling costs. However, instead of promoting an efficient health care system, HMOs took far too much control away from patients and physicians and gave it to the insurers. This excessive reliance on third-party payers instead removed incentives for insured patients to economize on health care costs, and allowed the problem to snowball. Furthermore, the third-party payer system created a two-tier health care system where people whose employers could afford to offer "Cadillac" plans have access to top quality health care, while others face financial obstacles in obtaining quality health care.

For these and other reasons, I introduced the Private Option Health Care Act last week. This bill places individuals back in control of health care by replacing the recently passed tax-spend-and-regulate health care law with reforms designed to restore a free market health care system.

First, the bill would provide all Americans with a tax credit for 100 percent of health care expenses. This tax credit is fully refundable against both income and payroll taxes. It would also allow individuals to roll over unused amounts in cafeteria plans and Flexible Savings Accounts (FSAs). Next, it would provide a tax credit for premiums for high-deductible insurance policies connected with a Health Savings Account (HSAs) and allow seniors to use funds in HSAs to pay for medigap policies. In addition, it would repeal the 7.5 percent threshold for the deduction of medical expenses, and thus would make all medical expenses tax deductible.

This bill would also create a competitive market in health insurance by exercising Congress's Constitutional authority under the Commerce Clause to allow individuals to purchase health insurance across state lines. Ending these state-imposed bans would create a competitive national marketplace in health insurance.

The Private Option Health Care Act would also ensure that people harmed during medical treatment receive fair compensation while simultaneously reducing the burden of costly malpractice litigation on the health care system. The bill achieves this by providing a tax credit for negative outcomes insurance purchased before medical treatment. This type of insurance would provide compensation for any negative outcomes without having to go through lengthy litigation or giving huge sums to trial lawyers.

Finally, the Private Option Health Care Act would lower the prices of prescription drugs by reducing barriers to the importation of Food and Drug Administration (FDA)-approved pharmaceuticals. Under my bill, anyone wishing to import a drug simply submits an application to the FDA, which then must approve it unless it is either not approved for use in the United States or is adulterated or misbranded.

The Private Option Health Care Act allows Congress to correct the mistake it made last month by replacing the new health care law with health care measures that give control to individuals, instead of the federal government and corporations. Our health is too vital to allow for the typical results of government interference and "fixes".

Slouching Toward Despotism:

http://jessescrossroadscafe.blogspot.com/2010/05/guest-post-slouching-towards-despotism.html

by Keith Hazelton May 27, 2010

Benjamin Franklin, when asked at the conclusion of the Constitutional Convention in 1787 what that assembly had created, purportedly responded, “A republic, if you can keep it,” which seems likely given his remarks to Convention members on that September day immediately prior to their vote on the proposed Constitution in its original form.

Often, but on far more occasions in the last three years, we are reminded of a portion of those remarks. Dr. Franklin, given his age (81) and health, asked to have his commentary read to delegates preceding what he hoped would be a unanimous vote in favor of a nonetheless flawed agreement.

“In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, (but) can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other.”

And the question we keep pondering is, “Are we there yet?” Are we merely slouching toward despotism, or have we arrived? Are we already so corrupt so as to need despotic government, what with Vampire Squids and corporate/union-bought elections and Congressional bystanders and regulatory capture and Systemically Important Too Big To Fail and Gulf of Mexico oil well disasters?

(Despotism, by the way, describes a form of government by which a single entity rules with absolute and unlimited power, and may be expressed by an individual as an autocracy or through a group as an oligarchy according to Wikipedia, the world's leading source of made-up information, which is good enough for us.)

In previous posts we have observed the growing and discernible disconnect between several types of government-reported economic data such as Retail Sales and actual state sales tax collections, and the Employment Situation and withholding tax collections. Others also have made solid cases for these disconnects between statistical theory and economic reality and it occurs to me that, far from being isolated or random events, they are evidence of much more disconcerting forces at work.

Fudging on unemployment numbers or "rounding up" retail sales reports may seem like minor infractions, and many of these government data reports have been manipulated for years, maybe half a century, but they represent a pattern of conscious, calculated design of "don't worry, be happy, the government's in charge, nothing to see here, so move along."

The Bureau of Labor Statistics (BLS), for example, estimates who is working and who is not, but conveniently excludes millions of people from its composition of the unemployment rate who are not working but neither deeming them “unemployed” because they are “marginally attached” to the workforce or are “discouraged” by a lack of job prospects and no longer are looking for employment (2.3 million as of March 2010 plus another 3.4 million “persons who currently want a job,” who also aren’t counted as unemployed).

Side note: You are well aware, of course, the Social Security Administration probably could tell us monthly almost exactly how many people really are working, not working, working part time, self-employed, and so on based on its receipts of tax withholdings from employers. It is beyond the pale to imagine SSA could not furnish a version of the monthly Employment Situation that would be far more reliable by orders of magnitude than the guesses of the BLS.

As to why government statistical agencies may be reporting "happy" numbers, well, you know the answer to that...government statistics are lying's fifth circle of hell, just a shade better than Campaign Promises.

How about the major changes to the Producer Price Index and the Consumer Price Index which were made in the 1980s and 1990s to greatly reduce reported inflation numbers as a means of containing the cost of living adjustments (COLAs) for Social Security recipients, as John Williams at ShadowStats extensively has reported for years?

Or the March 2010 Monthly Treasury Statement, which understated the true government deficit last month by including a $117 billion collection described as “proprietary receipts from the public” by the Treasury, likely TARP repayments but not defined as such. Or the December 2009 Monthly Treasury Statement in which $45 billion extracted from the nation’s banks as a 13-quarter advance FDIC premium also was shown as a “negative outlay” which creates a significant understatement of the true FY2010 deficit picture (so far, $162 billion this fiscal year, which will understate our true deficit by about 10 percent).

Or the “New” General Motors wasting millions of (tax) dollars for print and television ads to promote a fictitious narrative that it has “repaid” government loans of $8.1 billion (to the U.S and Canada) “plus interest” five years early when in fact SIGTARP, the Special Inspector General of the Troubled Asset Relief Plan Neil Barofsky, told Congress and Fox News that GM did no such thing, that the loan “repayment” did not come the old fashioned way from sales and earnings but from a "cash advance" on another TARP facility which both governments will count as additions to their already significant equity positions. Nothing in those ads mentions the many tens of billions of taxpayer dollars borrowed from China which flowed into General Motors and Chrysler pre-bankruptcy which never will be repaid.

And now the New GM wants to create another automobile financing company, or buy back its former GMAC/Ally unit which itself has received nearly $20 billion of government Too Big To Fail largesse, so it may become even more profitable by returning to sub-prime auto and everything-else lending and have a happy IPO later this year, because as everyone knows, including the New GM's management, there's precious little profit in building cars no one wants and few can afford. "As a dog returns to its vomit, so a fool repeats his folly," (Proverbs 26:11) as Jesse's Cafe Americain recently observed.

How about the seeming inability to legislate any significant financial reform in the wake of the worst economic crisis in 80 years, a crisis which, mind you, needed fewer than eight years to erupt once the last shred of restraint – Glass-Steagall – was forcibly removed at the end of 1999 by those who, coincidentally (paging Messrs. Rubin and Summers), have profited so handsomely from its demise.

The Banking Act of 1933 – Glass-Steagall – was a wonder of simplicity in a simpler era. It set forth in a mere 37 pages of text the safeguards necessary to separate commercial banking from everything else and to ably prevent for 66 years – two full generations – any meaningful implosion of the nation’s financial system. Any search for cause and effect of The Great Recession must begin here. The useless financial reform act – the Dodd act – weighs in at a lobbyist-induced 1,500+ pages, and will do nothing to prevent another financial crisis, nothing to dismantle Too Big Too Fail, nothing to contain derivatives, nothing to audit the Federal Reserve and nothing to curtail abuses in consumer financial practices.

Yet where are the criminal investigations? Where is the FBI? Where are the Congressional inquiries and panels and special prosecutors? Where are the indictments? Where are the perp walks and the jail sentences? Where is the justice, Mr. Holder and your 50 friends among the states? Aside from two former Bears Stearns hedge fund managers in 2007, and a pretend hedge fund manager - Mr. Madoff - in 2009, a weak SEC civil show-case against Goldman Sachs in 2010 and the mostly voluntary, golden-parachute-enabled "retirements" of a handful of TBTF C-level executives, a number of which, John-Thain-like, merely have revolved around the door a couple of times and landed at another lucrative looting opportunity, nothing has happened. Nothing, nada, zero, zip, dick. Nothing. It's breathtaking in its design and execution.

We now are reliably told the TARP program will cost less than $100 billion when all is said and done. Huh? What about the $2 trillion-plus of added government debt which itself adds tens of billions to the annual interest servicing burden, or the $1.5 trillion-plus willed into existence by the Federal Reserve? Who are they kidding?

Or a Health Care Act which, in 2,500 pages manages to spend about another trillion dollars or so and leaves no health insurance company behind, effectively criminalizing, albeit with monetary penalties far less than the cost of individually paid health insurance plans, anyone not otherwise exempted who fails to purchase health care coverage.

It seems to us, after thinking about this topic for some time now, that we have arrived. We have arrived at that point in our civilization in which our government deems it acceptable to obfuscate about things both small and large on the basis that, Jack-Nicholson/Colonel-Jessup-like, we (the rest of us who aren’t lodged in the political/oligarchical castes) “can’t handle the truth.”

And most of the time it would appear they are right, that we – the rest of us – can’t be bothered with such discrepancies and inconsistencies, falsehoods and half-truths. We're too busy trying to keep the house, make the mortgage and auto loan and credit card and student loan payments. We're too focused on our own financial survival to be concerned with what goes on at a national leadership and direction level. And doesn't it just seem a little too convenient for those who wish to plunder the wealth of the nation to keep the other 90 percent of us so strapped with indebtedness and an outdated personal moral conviction that debts should be repaid regardless of their potential to physically and mentally harm one's well being or, heaven forbid, harm one's all-important credit score, when walking away from debt has been an accepted business practice for centuries?

It only seems to matter on those rare occasions when things blow up, and the average, non-voting, non-taxpaying citizen awakens from his or her media-induced stupor to ponder that when the curtain is drawn away, it reveals only humans and not wizards, or that the outgoing tide reveals who has been swimming naked or when the emperor is shown to be undressed. But interest in such matters wanes quickly, and the thirst for change recedes silently into renewed acceptance of the status quo, as we now discover.

Soon, no doubt, when markets resume their upward trajectory and the Dow returns to and surpasses 14,250 (probably by this summer) and oh-don't-worry-about-those-6.5-million-log-term-unemployed-because-they're-just-lazy, much of this unpleasantness of the last three years will be forgotten by those more interested in only good news and Dancing With the Stars and American Idol, and the continued warnings of the Cassandras will be deemed evidence that these are, once again, merely the musings of disaffected social misfits or bad-news-opportunists who deep down must hate America (right up until the point at which the next crisis erupts, and erupt it will).

In fact, our short attention spans are relied upon by the political class of both parties and by the oligarchical class which controls it, as magnificent wealth transfer schemes blossom anew (talk about green shoots...) and the all-so-brief period which has elapsed between the “days away from financial Armageddon” of September 2008 and the "all clear, business as usual" of May 2010 insures, like the watered-down, useless "financial reform" legislation written by financial industry lobbyists which certainly will pass soon, that the laudable goal of making safe our financial system and returning it to the status of handmaiden to legitimate capital-producing and jobs-creating enterprise, will be discarded in exchange for the pretense of life as we knew it, circa 2006.

Only this time, effectively having destroyed the middle class of Boomers, Gen X-ers, Gen Y-ers, Millennials and Echo Boomers, and having bought the complicit silence of the of a near-majority (47% of Americans paid no income tax whatsoever in 2008) in exchange for bread and circuses, and having largely destroyed the previous primary mechanism by which wealth has been stolen and transferred (credit creation and personal indebtedness), the masters of the universe will have to find a new scam, which, at this writing, appears to be sovereign government debt, currencies and commodities, because turning back the calendar to 2006 alone will never recreate the consumer spending/debt orgy of 1982-2006.

In fact we think the oligarchs realize this, and they are redoubling their efforts to pillage as much as possible before the real collapse occurs, even as its seeds already have been sown in this crisis which now appears, by design and deception, to be ending. That collapse draws nigh, and Roubini and Taleb and Ritholtz and Panzer and Jesse and Tyler and Mish and Yves and Charles Hugh Smith and Joe Bageant and many, many others already see it, yet all are being dismissed - again - as those nattering nabobs of negativism who, broken-clock-being-right-twice-a-day-like, were merely “lucky” in guessing about the immediate past crisis as former Fed Chairman Alan Greenspan suggested in a recent television interview.

Tell us Greece is not the "sub-prime" of early 2007; that the US$150 billion "cure" to be soon applied by the EU and IMF is only can-kicking but will allow one and all to congratulate themselves on "containing" an isolated problem and to quickly return to the never-ending cocktail party, that is until the next Greece Fire which spreads to one after another country, including, ultimately, the possibility of the conflagration reaching bond markets in the U.S.

Or that a mere US$1 trillion of bailout/rescue/currency support recently proposed by the Eurozone and the IMF to "shock and awe" financial markets dominated by the recently rescued TBTFs who busily apace bet against the very governments which saved them (except now in Germany), is not merely another stealth rescue of these giant financial institutions which, having been caught with a bit too much Club Med sovereign debt on their books while their own prop traders work hard to destroy its value, now cry out - again - that the risk of their insolvency - again - threatens the global financial and economic systems.

Or that the battling machines of high-frequency trading, which briefly wiped out and then restored a trillion dollars worth of fictitious (paper) wealth in fewer than 15 minutes mid-afternoon May 6th in a dry-run rehearsal of things to come, won't now become even more emboldened and empowered to manipulate financial markets in any manner necessary to insure continued quarters of perfectly profitable trading days.

(May 6th should have been a non-event. We were expressly warned by the Manhattan Assistant US Attorney in a July 2009 court filing, in which it was alleged that a former Goldman Sachs quant trading programmer stole Goldman's "secret proprietary trading code," that "there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." Well, duh. Doesn't it just seem like someone took this code, or a similar one, out for a test drive earlier this month?)

Soon, perhaps if not already, the wealth transfer will be complete, and a newly impoverished, former middle class will wake up from their recliners to find not only is Dancing With the Stars over, but also is their former debt-fueled way of life as the economy staggers, unemployment escalates, more good jobs are exported and living standards rapidly erode. (Irony alert: Their former U.S. employers, who effectively have downsized and off-shored their way to record profits, will find they have destroyed their own customer base - the former middle class - who no longer can afford their products.)

When 40 million people are receiving food stamps at one end of the economic spectrum (and probably another 20 million eligible according to the Department of Agriculture), and the bulk of financial and real assets have been concentrated into the top 10 percent of the other end of the economic spectrum, nothing good can come of it. So the well-off cohort will remain well-off and will conspire to direct through their agents in government only enough resources to buy the complicity and silence of the bottom 40 percent, like tax breaks, food stamps, health care subsidies and so on, and the soon-to-be-former middle class will be ground into yet lower levels of the economic ladder, such, that when the looting has concluded, we will see a top 10 percent and a bottom 90 percent, much as feudalistic Europe in the centuries of the Dark Ages.

(We strongly recommend two books on the subject, both of which in far more detail and eloquence lay out the symptoms, causes and effects of our slouch toward despotism: Survival +, by Charles Hugh Smith at Of Two Minds, and Deer Hunting With Jesus: Dispatches From America's Class War, by Joe Bageant at Joe Bageant (and whose recent post about the American Hologram Lost on the Fearless Plain also is required reading).

“All lies and jest… Still a man hears what he wants to hear and disregards the rest,” so said Paul Simon, which rings so true more than four decades later. We hear what we want to hear, and, apparently, what we want to hear is that all is back to normal, that all is good, that the wizards have everything under control, and that nothing bad can ever happen again.

So, are we there yet? Have we not already abdicated our responsibilities as citizens and tacitly embraced the despotism of which Franklin predicted 222 years ago, having become so corrupted (contaminated) as to require the despotic government of an oligarchy dedicated to insuring the truth never gets in the way of a good narrative, an enormous disparate accumulation of wealth and a firm grip on the levers of power to ensure the preservation of that wealth?

A few Tea Party primary victories and incumbent "mandatory retirements" aside, nothing will change in Washington as long as the strings of campaign cash and lobbyist perks are being pulled elsewhere. The "outs" who soon will replace some of the "ins" promptly will forget about their mandates from the voters the day they move into their new D.C. offices and townhomes and realize from moment one their only responsibility is to their own rational self-interest of being re-elected in 2012 and 2014 and 2016. Et tu, Barack?

And if Benjamin Franklin is not prescient enough for you, how about the Teacher, in Ecclesiastes, Chapter 1, v.13-18, from about 2,300 years ago:

What a heavy burden God has laid on men! I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. What is twisted cannot be straightened; what is lacking cannot be counted. I thought to myself, "Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge." Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief.

Indeed, with wisdom comes sorrow, and from more knowledge, more grief. Would, sometimes, that we could empty so much of it from the mush of our remaining gray matter and then we wouldn't have to pretend it's all good, when, in fact, it’s anything but good, as soon, perhaps in a matter of a few short years, we shall see.

We first wrote the following paragraphs in June 2006, long before sub-prime lending, a bursted housing bubble, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, CitiGroup, Bank of America, JPMorgan Chase, Goldman Sachs, GM, Chrysler, the Federal Reserve, the Treasury Department and The Great Recession began to dominate our lives, when Franklin’s predictions and our inexorable slouch toward despotism first appeared on our radar screen:
The transition from unitary executive to dictator – conservative, benevolent or otherwise – will not happen in the waning months of the current administration, so uniquely manifested by America's First Triumvirate of George Bush, Dick Cheney and, until recently, Karl Rove, but succeeding chief executives may choose overtly to expand further the envelope-pushing and Constitution-trampling of the 43rd President and his neo-conservative command-and-control cabal as the American oligarchy, and the nation, slouches slowly toward despotism.

As such, we will one day awake from our debt-financed, pleasure-induced stupors to find one person or group firmly in charge, answering to no one, especially not Congress, and in complete grasp of the military, the intelligence agencies, the treasury, the Federal Reserve and the financial and judicial systems. It will happen – it is happening – an inch at a time, until the day comes when not only will we, the fun-loving, celebrity-worshipping, civic-duty-abhoring citizens of America, so embrace the notion of despotism, we will think it entirely our own idea.

Are we there yet?...

(Keith Hazelton is an Adjunct Professor of Finance at Oklahoma City University's Meinders School of Business and an Economic Adviser to the Oklahoma Bankers Association. His opinions are his own.)

America's Ten Most Corrupt Capitalists:

Wall Street's captains of industry and top policymakers in Washington are often the same people. A lot of them get rich by playing for both teams.

http://www.alternet.org/news/146819?page=entire

High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States:

By David DeGraw & Max Keiser, AmpedStatus Report
Posted on Monday, May 10th, 2010 at 1:11 am

http://ampedstatus.com/high-frequency-terrorism-how-the-big-banks-and-federal-reserve-maintained-their-death-grip-over-the-united-states

The following article is the third-part of a six-part report titled: “The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States.” The full report is available here:

http://ampedstatus.com/the-financial-oligarchy-reigns-democracys-death-spiral-from-greece-to-the-united-states

III: Financial Terrorism Operations: 9/29/08 & 5/6/10

In the aftermath of Goldman Sachs’ public flogging before the world in Congress, and while under investigation, on the very day that Congress was voting on the “break up the too big to fail banks” amendment and cutting behind the scenes deals to gut the audit of the Federal Reserve, the stock market had its greatest sudden drop in history, plummeting 700 points in ten minutes - shades of September 29, 2008 all over again.

If you recall, back in September ‘08, as Congress was voting down the first bailout, the big banks made the market plunge a record 778 points in one day, fear and panic then led Congress to pass the bailout. Trillions of our tax dollars, the money that we desperately need to keep our society functioning over the long run, then went out the window and into the pockets of the very people who caused the crash.

What happened on September 29, 2008 will go down in history as one of the greatest acts of terrorism ever.

9/29/08 proved that when you have so much power concentrated in the hands of a few, you can manipulate a computer algorithm and make the market and economy go which ever way you want it to go. So on 5/6/10, just as the power of the big banks was threatened again on the floor of the Senate and a deal on auditing the Federal Reserve was being negotiated, in came a sudden and unprecedented ten-minute 700 point market drop. A precision-guided High Frequency Trading (HFT) attack to show Congress who’s boss.

If you think the massive sudden drop happened because one lowly trader hit one wrong button, if you actually believe that the entire stock market can plunge because of one mistaken key stroke by a low level trader, you are stunningly naïve. I hate to burst your bubble, but this was a direct attack.

In a market where 70% of all trades are executed by computer algorithms via High Frequency Trading (HFT), Goldman Sachs has the power to make the market crash or rise at will. In fact, Goldman has a major Weapon of Mass Destruction in its Program Trading monopoly of the New York Stock Exchange, as Tyler Durden described on Zero Hedge:

“Goldman’s dominance of the NYSE’s Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity, and generating who knows what other possible front market-looking, flow-prop integration benefits. Yesterday [5/6/10], Goldman’s SLP function was non-existent. One wonders - was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse….

… here is the most recently disclosed NYSE program trading data….

What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm’s own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.

We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.”

For further investigation, I turned to Max Keiser, who has written and authored similar Program Trading and HFT computer algorithms. I asked him if he thought this was an attack, here is what he had to say:

“May 6th was an unequivocal act of domestic financial terrorism in America. A day that will live in infamy.

To scare the lawmakers, themselves large owners of the very banks and stocks that they are supposed to be regulating, a financial Weapon of Mass Destruction was put to their head and they acquiesced.

As the inventor of the continuous double-auction, market-making technology (VST tech. US pat. no. 5950176) that is referenced 132 times by program trading and HFT patents since 1996, I can tell you that Goldman, JP Morgan and the gang simply pulled the ‘buys’ from their computer trading programs and manufactured a crash. And when the coast was clear, and it was clear the politicians were not going to vote for anything that would break up the ‘too big to fail’ banks; all the ’sells’ were pulled from the computers and the market roared back.

This is a Manchurian Candidate market where program trading bots start the ball rolling in whatever direction Wall St. wants the market to go - and then hundreds of thousands of day-traders watching Cramer on CNBC jump on the momentum bandwagon and commit the crime for the Wall St. financial terrorists, who then say, ‘It wasn’t us, it was ‘the market!’”

On Friday, the next day, after the “break up the too big to fail banks” amendment was soundly defeated by a 61 to 33 margin in Senate and a deal was struck to eliminate key provisions from the audit of the Federal Reserve bill, Goldman was meeting with the SEC to work out a settlement in their case against them. Once again, Goldman proves that crime pays. Welcome to the New Mafia World Order.

Other than the two major operations carried out on 9/29/08 and 5/6/10, we must also recall a smaller attack on January 21st and 22nd of 2010, when Obama had a press conference and came out in favor of the Volcker Rule, which would have limited these HFT and “proprietary trading” schemes. At that time, the market dropped 430 points. Soon after this attack, all follow up talk on the Volcker Rule faded away and this reform has not been seriously addressed by Obama since then.

The bottom line, the United States has been taken over by a financial terrorism network. Let’s face it, we are all hostages of these financial terrorists and our puppet politicians rather be in on the scam than defend our interests. If these terrorists don’t get their way at all times, they have the power to throw their tremendous weight around and turn millions of lives upside down in a matter of minutes, and as they have shown they have no hesitation in executing that power, no matter how many millions of lives they destroy.

They set off this crisis with a wave of bombings in their initial Economic Shock and Awe campaign two years ago, resulting in massive devastation. Just to name a few of their greatest hits within the U.S.:

* 50 million Americans are now living in poverty, which is the highest poverty rate in the industrialized world;

* 30 million Americans are in need of work;

* Five million American families foreclosed upon, 15 million expected by 2014;

* 50% of US children will now use a food stamp during childhood;

* Soaring budget deficits in states across the country and a record high national debt, with austerity measures on the way;

* Record-breaking profits and bonuses for themselves.

Like other terrorists, they don’t use IEDs, they use CDOs. They don’t use precision laser-guided missiles, they use High Frequency Trading. They don’t have WMDs, they have derivatives. Let’s also not forget that they have toxic assets and dirty debt bombs just waiting to be deployed upon the American public once there is any true growth in the economy. Their nuclear arsenal includes hundreds of Trillions in secretive derivatives and hidden debt bombs, just ticking away, waiting to be set off… at their whim...

Fed Keeps Rates At Record Lows; Upbeat On Economy:

http://finance.yahoo.com/news/Fed-keep-rates-at-record-lows-apf-1923832918.html?x=0&sec=topStories&pos=main&asset=&ccode=

Jeannine Aversa, AP Economics Writer, On Wednesday April 28, 2010, 2:17 pm

WASHINGTON (AP) -- The Federal Reserve is sounding a more confident note that the economy is strengthening and pledges to hold rates at record lows to make sure it gains even more traction.

Wrapping up a two-day meeting Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery.

The Fed offers a more upbeat view of the economy, even as it notes that risks remain.

The Fed says the job market is "beginning to improve" and notes that consumer spending has "picked up." Both observations were brighter than when the Fed last met in mid-March.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) -- Federal Reserve policymakers are likely to deliver a fresh vote of confidence in the staying power of the recovery as signs multiply the economy is strengthening.

Fed Chairman Ben Bernanke and his colleagues resumed their two-day meeting Wednesday morning and are all but certain to keep holding rates at record lows to help the economy grow. However, they'll also expected to discuss when and how they'll reverse course and start boosting rates once the recovery is firmly rooted.

The Fed meets as the economy flashes growing signs of improvement.

Employers are creating jobs. Americans' confidence is rising and they are spending more. Manufacturers are boosting production. And an increasing number of companies -- such as Ford, Caterpillar and UPS -- are seeing their profits grow. By those measures, the economy is in better shape now than when the Fed last met in mid-March.

Still, there are continuing strains: high unemployment at 9.7 percent, loans are hard for people and businesses to obtain, and the housing and commercial real-estate markets are fragile. Greece's debt crisis also is roiling Wall Street. U.S. stocks lost 2 percent on Tuesday.

"The Fed's confidence in the recovery has clearly improved, and they'll communicate that," said Bill Cheney, chief economist at John Hancock. "But they are still going to be cautious because certainly nothing about the economy is cast in stone. I don't think the Fed wants to create any image that it's ready to boost rates," he added.

For now, the Fed is poised yet again to leave its key bank lending rate between zero and 0.25 percent, where it's remained since December 2008.

Assuming the Fed leaves rates alone, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, will stay about 3.25 percent. That's its lowest point in decades.

Rock-bottom rates serve borrowers who qualify for loans and are willing to take on more debt. But they hurt savers. Low rates are especially hard on people living on fixed incomes who are earning scant returns on their savings.

Still, if super-low rates spur Americans to spend more, they will help invigorate the economy. That's why the Fed also is expected to repeat its pledge -- in place for more than a year -- to keep rates at record lows for an "extended period."

Some concern has emerged inside the Fed that that pledge could limit its ability to quickly raise rates when necessary. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, for two straight meetings has opposed the Fed's decision to retain the "extended period" pledge.

Hoenig said he fears keeping rates too low for too long could lead to excessive risk-taking by investors, feeding new speculative bubbles. He's also expressed concern that low rates could eventually unleash inflation.

Yet Bernanke and other Fed officials in recent weeks have made clear that the Fed's pledge to keep rates at record lows for an "extended period" is linked to the economy's performance -- not to a specific period. The Fed will raise rates whenever it decides it's necessary, Bernanke has said.

Higher rates for millions of American borrowers are still months away at best, many economists predict.

The timing and execution of a Fed policy shift is a high-stakes game.

The Fed needs to hold rates at record lows long enough to make sure the recovery is lasting, especially once the bracing effects of the government's massive fiscal stimulus fades later this year.

On the other hand, the Fed must be nimble to start tightening credit to prevent inflation from becoming a problem or sowing the seeds of new speculative excesses such as in the prices of stocks, bonds or commodities.

One tricky question is when the Fed should start selling some of its vast portfolio of mortgage securities. The Fed bought $1.25 trillion of these securities to drive down mortgage rates and aid the housing market. Its challenge is to sell those assets in a way that doesn't weaken home prices and push up mortgage rates.

"My expectation is that sales would be slow, gradual, announced in advance, and would not create undue market impacts," Fed Chairman Ben Bernanke told Congress recently.

The Fed's balance sheet has exploded, reflecting the central bank's action to fight the financial crisis. It stood at $2.3 trillion for the recent week, more than double the level before the crisis struck.

"I think we would like to bring the balance sheet back to something consistent with where it was before the crisis," Bernanke told lawmakers. "And that would suggest something under a trillion dollars, I think, would be appropriate."

Besides selling securities outright, the Fed has a number of other tools to shrink its balance sheet when it moves to tighten credit. Those include selling securities from its portfolio with an agreement to buy them back later. Those operations are called reverse repurchase agreements. The Fed also is moving forward on a plan to let banks set up the equivalent of certificates of deposit at the central bank. That would give banks an incentive to park money at the Fed, rather than lending it out.

Unemployment Falls In A Majority Of Large Metro Areas As Recovery Spreads:

Christopher S. Rugaber, AP Economics Writer - Wednesday April 28, 2010, 1:28 pm

http://finance.yahoo.com/news/Unemployment-falls-in-a-apf-3686872780.html?x=0&sec=topStories&pos=4&asset=&ccode=

WASHINGTON (AP) -- Unemployment rates fell or remained level in three-quarters of the 372 largest metropolitan areas, a sign that the economic recovery is widespread.

The Labor Department said Wednesday the jobless rate dropped in 69 percent of metro areas last month from February. It rose in 24 percent of large cities and remained the same in the rest.

That's an improvement from February, when the unemployment rate decreased in 51 percent of metro areas and increased in one-third.

The report follows other recent encouraging news about jobs. Employers added 162,000 jobs in March, the government said earlier this month, the most significant gain in three years.

Still, the growth wasn't enough to bring down the unemployment rate, which remained at 9.7 percent for the third straight month.

The metro unemployment data isn't seasonally adjusted and can be volatile from month to month. Some of the cities with sharp drops last month in unemployment recorded big increases in February. That could reflect the impact of February's massive snowstorms, economists said.

Steven Cochrane, managing director at Moody's Analytics, said Wednesday's report shows employment nationwide is stabilizing.

"The recovery really is spreading broadly across the country," Cochrane said. "I'm not seeing any regional clusters ... that look like they're shifting relative to others."

Year-over-year figures, which cancel out seasonal variations, also show improvement. But they also illustrate how far much of the country has to go to recover from the recession.

The jobless rate dropped in only 41 metro areas in March compared to the previous year, while rising in 321. As recently as December, the unemployment rate fell in only one area compared to a year earlier.

The report shows unemployment is still widespread. Twenty-eight cities reported jobless rates above 15 percent, compared to 29 in February. Fifteen of those cities were in California and five were in Michigan.

Unemployment topped 10 percent in 164 cities last month, down from 187 in both January and February.

Among the 49 cities with a population of 1 million or more, the Detroit metro area had the highest unemployment rate, the department said, at 15.5 percent. The Riverside, Calif. metro area had the second highest, at 15 percent.

The New Orleans metro area had the lowest rate among cities with 1 million or more, at 6 percent, followed by Oklahoma City at 6.1 percent. Both regions have benefited from higher oil prices in recent months. New Orleans' port has seen a jump in international trade.

A Debt Level Great Enough To Threaten The Dollar Rating:

http://www.theinternationalforecaster.com/International_Forecaster_Weekly/A_Debt_Level_Great_Enough_To_Threaten_The_Dollar_Rating

by Bob Chapman
Posted: April 7 2010

Your purchasing power is less and less with every passing day, changes coming to currencies, no end to corruption in government, Wall Street, and banking, US states on the verge of bankruptcy, economic and financial zombies on the old continent, globalization has brought us to the brink of collapse, Interest rate volatility to come soon, US debt far over GDP, property abandoned.

Almost every day in almost any currency your purchasing power in terms of gold is less and less. Thus, these currencies in which you save the fruits of your labor are cheating you out of your savings.

The US dollar is particularly vulnerable because of its staggering debt even though it is the world reserve currency. In fact the debt is so onerous that we believe the quality rating of the dollar could be lowered by the end of the year. Many other currencies face the same dilemma and in the final analysis only gold will be worth what it is today or in the future.

Unless the US government expropriates Americans’ retirement plans they won’t be able to fund their sovereign debt. This situation is exacerbated by continued fiscal deficits of some $1.8 trillion. The administration and the Democratic Party are bound and determined to destroy America financially. Between government, Wall Street and banking America is being destroyed. This did not just happen that way; it was planned that way. When people discover what has been done to them there will probably be a revolution.

Government spends excessively, as free trade and globalization keeps America under a staggering load of unemployment in what has become a corporatist fascist nation controlled by Wall Street and banking and run by Marxists, who for years have operated in the shadows as bureaucrats.

Many American states are on the edge of bankruptcy. Their only hope is massive layoffs and reduced services adding to the already massive unemployment that plagues our nation. The situation is close presently to resembling the 1930s and that is after trillions of dollars created out of thin air permeated the economy. Worse yet, nothing has been done deliberately to solve the problems. One might think the antics of government; banking and Wall Street were deliberate-unfortunately they are. It won’t be long before everything will be nationalized and corporatist fascism will be in full flower.

Corruption in government, Wall Street and banking knows no end. This in addition to the looting of funds for Social Security and Medicare, that the Treasury now must fund, when they cannot even fund current debt without having the Fed buy it with money created out of thin air. Talk about inflation – it is surely on the way. If we use GAAP accounting, not the US government’s cash figures, the deficit is really in the vicinity of $4.5 to $5 trillion, not $1.8 trillion. This, of course, is nothing new and the same lying and secrecy is in force worldwide. All that people have saved worldwide has been stolen from them - they just do not know it yet.

The situation in Europe is so bad that all of Europe is attacking Germany because they save and do not spend enough and their balance of payments surplus is obscene to other spenders not only in the euro zone, but in the entire EU as well. Their thought is Germany should be losers like we are. Then there are the PIIGS who care about little or nothing. We know we lived for years in all of these countries and fully understand where they are coming from. They all wanted socialism and it has doomed them, as has the euro zone and the European Union. They are about to discover socialism and debt are about to destroy them. You have made yourselves into economic and financial zombies. There is no one left to bail you out. Subsidizing everything doesn’t work as they are soon to find out. When Europe and America fail unfortunately they are going to in part take the entire world down with them – no one is going to be spared.

We have an economy in a state of collapse and part of the reason for that is free trade, globalization, offshoring and outsourcing, which since 2000 has cost America some 8 million good quality jobs. Where are you Smoot-Hawley now that we need you? There are many reasons why the American economy is collapsing and free trade, British mercantilism, is one of them.

As we have said for months there is a multilateral change coming in currencies. A massive devaluation of all currencies and a debt settlement between countries. When that happens consumers worldwide will lose 2/3’s of their purchasing power on the final leg down into deflationary depression, which is probably 1-1/2 to 2 years away. Your only protection against such events is holding gold and silver related assets.

Those who have opted for general stock investments since 1998 have come out even if they were lucky and that includes massive market manipulation by our government. Not just failed policies. The creation in August 1988 of the President’s Working Group on Financial Markets” has been a disaster for free markets and a gift to dictators and would be tyrants. The markets are a giant scam and their underpinnings are about to collapse. There has been little or no growth over those years. Real estate bubbles in residential and commercial markets have collapsed and the stock market will soon follow. Hitting you right in the forehead is almost a 4% yield on 10-year T-notes that could well become 5% by yearend, which we predicted late last year. That will put the 30-year fixed rate mortgage at 6-1/4% to 6-1/2%. What do you think that will do to real estate, markets and profits? This is mainly because of sovereign debt that grows exponentially every minute of every day. These pyromaniacs in the White House and Congress add to the conflagration all day every day. The result has been a 25% loss in the S&P since March of 2000, and a loss versus gold of 75%. Gold has risen from $252 to $1,224 and silver from $3.50 to $20.00 with massive government and Fed suppression. Where do you think your money should have been and where your money should be? In gold and silver bullion, coins and shares. Yes, as usual we were crazy and we were right and we are going to continue to be right, because we understand what the Illuminists are up too.

You live in a bankrupt country, along with 18 other major bankrupts, and you will soon learn how you are going to lose everything you have worked a lifetime for. A rise in interest rates of 5% adds $620 billion annually to the US debt in interest alone and that is rising exponentially. The US, nor any government, can survive such debt service.

We are calling inflation, real inflation, not the official variety of 3%, but at 8%. John Williams says on the things you buy every day it is 10%. We should easily see 14-5/8% inflation by the end of the year just as we did 2-1/2 years ago.

The Fed has ended its $1.25 trillion program of buying toxic debt from lenders. We do not know if that is the correct figure, we do not know from whom they were purchased and we do not know what was paid for the MBS, because it is a secret. This purchase has put downward pressure on interest rates for the past 15 months. This is an abnormal procedure and it can be expected that interest rates would move higher. It also means that the fed will now be a seller in the market as the FDIC is attempting to be. If sold these securities will put downward pressure on these bonds and force higher rates in a market that is already subject to crowding out by the treasury. In addition, quantitative easing is being phased out, putting further upward pressure on rates. The Fed if it continues these policies may stem hyperinflation but they run the distinct risk of having deflation run out of control, which could easily drive the economy into deflationary depression. This is a super human feat we do not see being accomplished without major damage, at the least.

Rate volatility is going to increase dramatically, as the Fed works to hold the 10-year T-bill rate below 4%. This is what they did previously at great cost to savers and taxpayers.

As rates climb the dollar carry trade becomes much less attractive and as it is unwound borrowed money is pulled from other investments, such as bonds putting more upward pressure on rates and at the same time downward pressure on stocks, which have been purchased with borrowed money. If the Fed tightens, as they might on Wednesday, yields will move even higher. If that happens those in the carry trade and bonds and shares will see gains evaporate and sales of both bonds and stock will ensue, as the carry trade is unwound. This is what markets are now facing.

This takes us to municipal bonds and particularly California, which has $85 billion in debt, that has to be paid by its citizens, of which about 40% do not pay any taxes. In addition it officially has 12.4% unemployment, which is really about 25% and getting worse daily. This is a state with $1 trillion to $3.5 trillion in unfunded pensions and the world’s 8th largest economy. This is a state that, via federal subsidy, sold “Build America Bonds”, bonds yielding 6.3%, or 2.4%, higher rates than Treasuries. California is on the edge of bankruptcy and their municipal bonds should be sold, as many from other states should be sold as well. States won’t work out of their problems for years.

Last week the Dow rose 0.7%; S&P 1%, the Russell 2000 0.7% and the Nasdaq was unchanged. Banks rose 0.3%; broker/dealers 0.8%; cyclicals 0.8%; transports 1.2%; consumers 1.2%, as utilities fell 1.8%. High tech fell 0.3% as semis gained 1.1% and Internets fell 0.2%. Biotechs fell 0.2%; gold gained $12.00; the HUI rose 6.2% and the USDX fell 0.6% to 81.17.

Two-year Treasury bills rose 6 bps to 1.02%; the 10-year T-notes rose 10 bps to 3.95% and the 10-year German bund fell 7 bps to 3.08%.

The Freddie Mac 30-year fixed rate mortgage rose 9 bps to 5.08%; the 15’s rose 5 bps to 4.39%; one-year ARMs fell 15 bps to 4.05% and jumbos rose 1 bps to 5.83%.

Fed credit declined $7.4 billion. Fed foreign holdings of Treasury, Agency debt rose $7.2 billion to a record of $3.020 trillion. Custody holdings for foreign central banks increased $64.5 billion just year-to-date, and year-on-year 15.7%.

M2 narrow money supply fell $10 billion.

Total money market fund assets fell $30 billion to $2.983 trillion, the first time below $3 trillion since 10/07. Year-to-date it is off $311 billion and year-on-year it is off 22.2%.

Commercial paper fell $5.2 billion, or 20.8% ytd and 24.9% yoy.

America’s debt is now $31 trillion, or 2-1/2 times US GDP. Americans on average only own 11% of their home the remainder is debt. Home prices are headed lower until 2013, so 20% lower prices are a certainty. In some areas homes have already fallen 60% to 75%. This situation will feed on itself for years and bankruptcies and inventory for sale will flourish for years. About 45% of homes have mortgages. We wrote five years ago that the government wants to own and nationalize those homes, so they can control the public.

As we wrote earlier we expect another large stimulus plan soon and the Fed to reverse gears and flood the world with money sometime soon. This should be the last rescue and the result will be hyperinflation followed by collapse and a deflationary depression. This is the last chance to buy gold and silver inexpensively.

If you do not think there was inflation in 2007 and 2008 homeowners insurance rose 24%, in 2008 it rose 31% and again in 2009-10 it rose 31%.

Treasury debt is on the ropes and is about to cause the Illuminists real trouble, along with higher interest rates. Later this year or early next year debt as a percentage will reach 95%. From there on its collapse. How can anyone conceive deficits of more than $10 trillion over the next ten years?

The ISM Non-Manufacturing Index release by the Institute for Supply Management rose in March to 55.4 from 53.0. The index reached the highest level since November of 2007.

The increase to 55.4 was above market expectations of an increase to 53.3. The data shows that the economic activity in the US continues to improve.

More Americans unexpectedly signed contracts in February to buy previously owned homes, signaling government efforts to support the market will start pay off.

The index of purchase agreements, or pending home sales, rose 8.2 percent, the second-biggest gain on record and the largest since October 2001, after a revised 7.8 percent drop in January, the National Association of Realtors announced today in Washington.

Hedge funds that aim to profit from macroeconomic upheavals have had a lacklustre start to 2010, in spite of some of the biggest international monetary crises in more than a decade.

http://www.ft.com/cms/s/0/b8e7ab2e-400f-11df-8d23-00144feabdc0.html?ftcamp=rss - The Greek debt crisis and steep falls in value for both the euro and sterling have failed to translate into noticeable gains for most macro managers, many of whom predicted a stellar year on the back of huge global economic rebalancing.

So-called global macro hedge funds, which specialise in bets on interest rates, sovereign bonds and currencies, have on average lost 1.25 per cent on investments so far this year, according to industry data compiled by Hedge Fund Research, a Chicago-based index compiler.

Many of the hedge fund industry’s biggest names have so far failed to turn market crises to their advantage often in spite of fervent political criticism linking them to damaging market “speculation”.

The 5-foot alligator lurking in the algae-green waters of the community swimming pool was not the worst thing code-enforcement officers have found in recent years at AAA Apartments in Cocoa.

Bathrooms infested with mold. Walls with gaping holes where air conditioners had been ripped out. Garbage and trash strewn about the 52-unit complex. The city began issuing code-violation fines in 2007, back at the beginning of the housing slump, and the apartments' co-owners soon owed the city $1.8 million more than three times the current list price of the property, and enough money to motivate the now-former co-owners to try bribing a code-enforcement officer.

AAA Apartments, now bank-owned, may be an example of things to come. As home foreclosures continue to mount throughout Central Florida, code-enforcement officers say apartments, condominiums and other commercial buildings are being abandoned by their owners and repossessed by banks in growing numbers.

A surprise Fed announcement eclipsed the disappointing March Employment Report on Friday. Yes, it is a disappointment despite the media and permabull spin, because the Street expected March NFP to exceed 200k. One forecast had the job gain at 400k. But only 48k temporary Census workers were recorded. So only 162k NFP were reported.

Birth Death Model jobs are 81k, even though ADP, who actually does a count, showed small business lost 112k jobs. Professional services gained 11,000 jobs, but 40,000 were part-time jobs.

Review and determination by the Board of Governors of the advance and discount rates to be charged by Federal Reserve Banks.

Traders quickly surmised that if the Fed is going to allow public access to an emergency meeting to discuss a possible discount rate hike, the probability is very high that a discount rate will occur soon.

The probable reason for the public airing is to disabuse the notion that the Fed’s secrecy keeps the public in the dark about its operations while it tips coming policy to insiders who profit on the inside info.

Most of the financial media ignored the Fed notice and reported the dollar surged because the jobs report indicated the economy had turned the corner. How is this possible when the number of jobs were below the consensus forecast?

Other financial media types spun the disappointing NFP as good news because it means the Fed cannot hike rates. But the dollar rally contradicts this notion…If anything, SPMs jumped on asset allocation, which will be a temporary boost for stocks. Perhaps the past months’ upward revisions were a factor.

The change in total nonfarm payroll employment for January was revised from -26,000 to +14,000, and the change for February was revised from -36,000 to -14,000.

Once again we see chicanery in the March Employment because the Household Survey shows a gain of 264k jobs but ‘Men 20 years & over’ accounted for a 290k job gain. ‘Women 20 years & over’ LOST 42k jobs. This is absurd.

You might recall that we noted that the January Employment Report recorded a 541k jobs increase in the Household Survey due to an increase of 529k of jobs for ‘Women 20 years & over’, while ‘Men 20 years & over’ LOST 1k jobs. This is impossible!

Now we see the opposite scheme ‘Men 20 years & over’ gained 290k jobs; women lost 42k jobs.

The Household Survey shows an increase of 308,000 jobs, but the BLS did not report this in the preamble to the report. Most of the gain is due to 233,000 gain in ‘Men 20 years and older’. ‘Men 16 year and older’ account for 297,000 of the 308,000 jobs gain in the Household Survey! For February, ‘Women 20 years of age and older’ increased only 11,000.

Wages fell 0.1% (+0.2% expected), a record for the data series; but it only goes back to 2006. Wages should increase before employment increases due to the high cost of benefits.

U6, comprehensive unemployment, increase 0.1 to 16.9% in March. ‘Unemployed for 27 weeks or more’ hit a record 44.1%. Per Alan Abelson, the odds of finding a job sank to 18.7% from Feb’s 20.1%. The Exhaust Rate (people that have exhausted unemployment benefits) hit 54.01% for February.

Gallup Daily tracking finds that 20.3% of the U.S. workforce was underemployed in March. [The 149,268 consumer bankruptcies filed in March represented the highest monthly consumer filing total since Congress overhauled the Bankruptcy Code in 2005.]

For the week ended Wednesday, the Fed’s balance contracted $5.992B due to the sale of $5.103B of MBS. The Fed monetized $1.5B of agencies.

US banks earned $2.5bn last year from an accounting rule that enables them to book gains – known as “Christmas capital” by buying assets at a discount, a new study shows. More than half of all acquisitions of failed banks last year resulted in such gains, according to SNL Financial, which compiled the data.

Regulators Shut Down South Carolina Bank; Makes 42 US Bank Failures This Year

http://finance.yahoo.com/news/Regulators-shut-South-apf-1589099445.html?x=0&sec=topStories&pos=2&asset=&ccode=

Marcy Gordon, AP Business Writer, On Friday April 9, 2010, 5:41 pm EDT

WASHINGTON (AP) -- Regulators on Friday shut down a bank in South Carolina, marking 42 bank failures in the U.S. so far this year amid mounting loan defaults, especially in commercial real estate.

The Federal Deposit Insurance Corp. took over Beach First National Bank, based in Myrtle Beach, S.C., with $585.1 million in assets and $516 million in deposits. Bank of North Carolina, based in Thomasville, N.C., agreed to assume the assets and deposits of the failed bank.

In addition, the FDIC and Bank of North Carolina agreed to share losses on $497.9 million of Beach First National Bank's loans and other assets.

The failure of Beach First is expected to cost the deposit insurance fund $130.3 million.

There were 140 bank failures in the U.S. last year, the highest annual tally since 1992 at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008 and only three succumbed in 2007.

The number of bank failures likely will peak this year and will be slightly higher than in 2009, FDIC Chairman Sheila Bair said recently.

As losses have mounted on loans made for commercial property and development, the growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.

The number of banks on the FDIC's confidential "problem" list jumped to 702 in the fourth quarter from 552 three months earlier, even as the industry squeezed out a small profit. Still, nearly one in every three banks reported a net loss for the latest quarter.

The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.

The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.

Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.

Catherine Austin Fitts: "This is the Soviet Union."

Whistle blower and former U.S. Asst. Secretary of Housing,
Catherine Austin Fitts took off the gloves yesterday
in this national radio appearance, openly talking about
what is unfolding in America today, including subjects
she was once afraid to speak about publicly.

-- Catherine agrees with, and expands upon Ron Paul's
public pronouncement that the international bankers and
the Pentagon/CIA have literally engaged in a coup d'etat
of the U.S. government...

-- She speaks openly about something she was once afraid
to talk about publicly...

-- She explains what the "New World Order" is really about...

-- She lays out what the future of America will look like...

-- She talks about what Huxley, Eisenhower and Brzezinski
told us was coming - a high tech/scientific dictatorship...

-- She says using the words "police state and slavery" are
no longer "unreasonable" in describing America's future...

4-part radio interview, approx 40 minutes:

You must listen to this, it's the best
interview I've ever heard Catherine Austin Fitts do.

Part I
http://www.youtube.com/watch?v=8hzpAYNX5Uc

Part II
http://www.youtube.com/watch?v=7kVoMnmXh2Y

Part III
http://www.youtube.com/watch?v=c_l1FLHAPHI

Part IV
http://www.youtube.com/watch?v=n_ZlibXwRh8

Please take (make) the time, and listen to the entire interview,
and do so without any distractions. This is an exceptional
interview and you need to hear it and pass it on...

About Catherine Austin Fitts:
http://solari.com/about-us/resume/

Looting Main Street:

How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece...

By Matt Taibbi
Posted Mar 31, 2010 8:15 AM



If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. "Yeah, it went up about 400 percent just over the past few years," she says.

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human waste into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

And once the giant machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes — schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed — yes, that's right, bribed, criminally bribed — the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back off, so they could have the rubes of Jefferson County to fleece all for themselves.

Birmingham became the poster child for a new kind of giant-scale financial fraud, one that would threaten the financial stability not only of cities and counties all across America, but even those of entire countries like Greece. While for many Americans the financial crisis remains an abstraction, a confusing mess of complex transactions that took place on a cloud high above Manhattan sometime in the mid-2000s, in Jefferson County you can actually see the rank criminality of the crisis economy with your own eyes; the monster sticks his head all the way out of the water. Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America's biggest banks, across a vast fruited plain of bribes and felonies — "the price of doing business," as one JP Morgan banker says on tape — all the way down to Lisa Pack's sewer bill and the mass layoffs in Birmingham.

Once you follow that trail and understand what took place in Jefferson County, there's really no room left for illusions. We live in a gangster state, and our days of laughing at other countries are over. It's our turn to get laughed at. In Birmingham, lots of people have gone to jail for the crime: More than 20 local officials and businessmen have been convicted of corruption in federal court. Last October, right around the time that Lisa Pack went back to work at reduced hours, Birmingham's mayor was convicted of fraud and money-laundering for taking bribes funneled to him by Wall Street bankers — everything from Rolex watches to Ferragamo suits to cash. But those who greenlighted the bribes and profited most from the scam remain largely untouched. "It never gets back to JP Morgan," says Pack.

If you want to get all Glenn Beck about it, you could lay the blame for this entire mess at the feet of weepy, tree-hugging environmentalists. It all started with the Cahaba River, the longest free-flowing river in the state of Alabama. The tributary, which winds its way through Birmingham before turning diagonally to empty out near Selma, is home to more types of fish per mile than any other river in America and shelters 64 rare and imperiled species of plants and animals. It's also the source of one of the worst municipal financial disasters in American history.

Back in the early 1990s, the county's sewer system was so antiquated that it was leaking raw sewage directly into the Cahaba, which also supplies the area with its drinking water. Joined by well — intentioned citizens from the Cahaba River Society, the EPA sued the county to force it to comply with the Clean Water Act. In 1996, county commissioners signed a now-infamous consent decree agreeing not just to fix the leaky pipes but to eliminate all sewer overflows — a near-impossible standard that required the county to build the most elaborate, ecofriendly, expensive sewer system in the history of the universe. It was like ordering a small town in Florida that gets a snowstorm once every five years to build a billion-dollar fleet of snowplows.

The original cost estimates for the new sewer system were as low as $250 million. But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs. Jefferson County, in effect, became one giant, TV-stealing, unemployed drug addict who borrowed a million dollars to buy the mother of all McMansions — and just as it did during the housing bubble, Wall Street made a business of keeping the crook in his house. As one county commissioner put it, "We're like a guy making $50,000 a year with a million-dollar mortgage."

To reassure lenders that the county would pay its mortgage, commissioners gave the finance director — an unelected official appointed by the president of the commission — the power to automatically raise sewer rates to meet payments on the debt. The move brought in billions in financing, but it also painted commissioners into a corner. If costs continued to rise — and with practically every contractor in Alabama sticking his fingers on the scale, they were rising fast — officials would be faced with automatic rate increases that would piss off their voters. (By 2003, annual interest on the sewer deal had reached $90 million.) So the commission reached out to Wall Street, looking for creative financing tools that would allow it to reduce the county's staggering debt payments.

Wall Street was happy to help. First, it employed the same trick it used to fuel the housing crisis: It switched the county from a fixed rate on the bonds it had issued to finance the sewer deal to an adjustable rate. The refinancing meant lower interest payments for a couple of years — followed by the risk of even larger payments down the road. The move enabled county commissioners to postpone the problem for an election season or two, kicking it to a group of future commissioners who would inevitably have to pay the real freight.

But then Wall Street got really creative. Having switched the county to a variable interest rate, it offered commissioners a crazy deal: For an extra fee, the banks said, we'll allow you to keep paying a fixed rate on your debt to us. In return, we'll give you a variable amount each month that you can use to pay off all that variable-rate interest you owe to bondholders.

In financial terms, this is known as a synthetic rate swap — the spidery creature you might have read about playing a role in bringing down places like Greece and Milan. On paper, it made sense: The county got the stability of a fixed rate, while paying Wall Street to assume the risk of the variable rates on its bonds. That's the synthetic part. The trouble lies in the rate swap. The deal only works if the two variable rates — the one you get from the bank, and the one you owe to bondholders — actually match. It's like gambling on the weather. If your bondholders are expecting you to pay an interest rate based on the average temperature in Alabama, you don't do a rate swap with a bank that gives you back a rate pegged to the temperature in Nome, Alaska.

Not unless you're a moron. Or your banker is JP Morgan.

In a small office in a federal building in downtown Birmingham, just blocks from where civil rights demonstrators shut down the city in 1963, Assistant U.S. Attorney George Martin points out the window. He's pointing in the direction of the Tutwiler Hotel, once home to one of the grandest ballrooms in the South but now part of the Hampton Inn chain.

"It was right around the corner here, at the hotel," Martin says. "That's where they met — that's where this all started."

They means Charles LeCroy and Bill Blount, the two principals in what would become the most important of all the corruption cases in Jefferson County. LeCroy was a banker for JP Morgan, serving as managing director of the bank's southeast regional office. Blount was an Alabama wheeler-dealer with close friends on the county commission. For years, when Wall Street banks wanted to do business with municipalities, whether for bond issues or rate swaps, it was standard practice to reach out to a local sleazeball like Blount and pay him a ton of money to help seal the deal. "Banks would pay some local consultant, and the consultant would then funnel money to the politician making the decision," says Christopher Taylor, the former head of the board that regulates municipal borrowing. Back in the 1990s, Taylor pushed through a ban on such backdoor bribery. He also passed a ban on bankers contributing directly to politicians they do business with — a move that sparked a lawsuit by one aggrieved sleazeball, who argued that halting such legalized graft violated his First Amendment rights. The name of that pissed-off banker? "It was the one and only Bill Blount," Taylor says with a laugh.

Blount is a stocky, stubby-fingered Southerner with glasses and a pale, pinched face — if Norman Rockwell had ever done a painting titled "Small-Town Accountant Taking Enormous Dump," it would look just like Blount. LeCroy, his sugar daddy at JP Morgan, is a tall, bloodless, crisply dressed corporate operator with a shiny bald head and silver side patches — a cross between Skeletor and Michael Stipe.

The scheme they operated went something like this: LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, the now-convicted Birmingham mayor who at the time had just been elected president of the county commission. (At one point Blount took Langford on a shopping spree in New York, putting $3,290 worth of clothes from Zegna on his credit card.) Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees. Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep "churning" you for more and more fees. "The transactions were complex, but the scheme was simple," said Robert Khuzami, director of enforcement for the SEC. "Senior JP Morgan bankers made unlawful payments to win business and earn fees."

Given the huge amount of money to be made on the refinancing deals, JP Morgan was prepared to pay whatever it took to buy off officials in Jefferson County. In 2002, during a conversation recorded in Nixonian fashion by JP Morgan itself, LeCroy bragged that he had agreed to funnel payoff money to a pair of local companies to secure the votes of two county commissioners. "Look," the commissioners told him, "if we support the synthetic refunding, you guys have to take care of our two firms." LeCroy didn't blink. "Whatever you want," he told them. "If that's what you need, that's what you get. Just tell us how much."

Just tell us how much. That sums up the approach that JP Morgan took a few months later, when Langford announced that his good buddy Bill Blount would henceforth be involved with every financing transaction for Jefferson County. From JP Morgan's point of view, the decision to pay off Blount was a no-brainer. But the bank had one small problem: Goldman Sachs had already crawled up Blount's trouser leg, and the broker was advising Langford to pick them as Jefferson County's investment bank.

The solution they came up with was an extraordinary one: JP Morgan cut a separate deal with Goldman, paying the bank $3 million to back off, with Blount taking a $300,000 cut of the side deal. Suddenly Goldman was out and JP Morgan was sitting in Langford's lap. In another conversation caught on tape, LeCroy joked that the deal was his "philanthropic work," since the payoff amounted to a "charitable donation to Goldman Sachs" in return for "taking no risk."

That such a blatant violation of anti-trust laws took place and neither JP Morgan nor Goldman have been prosecuted for it is yet another mystery of the current financial crisis. "This is an open-and-shut case of anti-competitive behavior," says Taylor, the former regulator.

With Goldman out of the way, JP Morgan won the right to do a $1.1 billion bond offering — switching Jefferson County out of fixed-rate debt into variable-rate debt — and also did a corresponding $1.1 billion deal for a synthetic rate swap. The very same day the transaction was concluded, in May 2003, LeCroy had dinner with Langford and struck a deal to do yet another bond-and-swap transaction of roughly the same size. This time, the terms of the payoff were spelled out more explicitly. In a hilarious phone call between LeCroy and Douglas MacFaddin, another JP Morgan official, the two bankers groaned aloud about how much it was going to cost to satisfy Blount:

LeCroy: I said, "Commissioner Langford, I'll do that because that's your suggestion, but you gotta help us keep him under control. Because when you give that guy a hand, he takes your arm." You know?

MacFaddin: [Laughing] Yeah, you end up in the wood-chipper.

All told, JP Morgan ended up paying Blount nearly $3 million for "performing no known services," in the words of the SEC. In at least one of the deals, Blount made upward of 15 percent of JP Morgan's entire fee. When I ask Taylor what a legitimate consultant might earn in such a circumstance, he laughs. "What's a 'legitimate consultant' in a case like this? He made this money for doing nothing."

As the tapes of LeCroy's calls show, even officials at JP Morgan were incredulous at the money being funneled to Blount. "How does he get 15 percent?" one associate at the bank asks LeCroy. "For doing what? For not messing with us?"

"Not messing with us," LeCroy agrees. "It's a lot of money, but in the end, it's worth it on a billion-dollar deal."

That's putting it mildly: The deals wound up being the largest swap agreements in JP Morgan's history. Making matters worse, the payoffs didn't even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan "passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions." In other words, not only did the bank bribe local politicians to take the sucky deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.

JP Morgan was far from alone in the scam: Virtually everyone doing business in Jefferson County was on the take. Four of the nation's top investment banks, the very cream of American finance, were involved in one way or another with payoffs to Blount in their scramble to do business with the county. In addition to JP Morgan and Goldman Sachs, Bear Stearns paid Langford's bagman $2.4 million, while Lehman Brothers got off cheap with a $35,000 "arranger's fee." At least a dozen of the county's contractors were also cashing in, along with many of the county commissioners. "If you go into the county courthouse," says Michael Morrison, a planner who works for the county, "there's a gallery of past commissioners on the wall. On the top row, every single one of 'em but two has been investigated, indicted or convicted. It's a joke."

The crazy thing is that such arrangements — where some local scoundrel gets a massive fee for doing nothing but greasing the wheels with elected officials — have been taking place all over the country. In Illinois, during the Upper Volta-esque era of Rod Blagojevich, a Republican political consultant named Robert Kjellander got 10 percent of the entire fee Bear Stearns earned doing a bond sale for the state pension fund. At the start of Obama's term, Bill Richardson's Cabinet appointment was derailed for a similar scheme when he was governor of New Mexico. Indeed, one reason that officials in Jefferson County didn't know that the swaps they were signing off on were lousy was because their adviser on the deals was a firm called CDR Financial Products, which is now accused of conspiring to overcharge dozens of cities in swap transactions. According to a federal antitrust lawsuit, CDR is basically a big-league version of Bill Blount — banks tossed money at the firm, which in turn advised local politicians that they were getting a good deal. "It was basically, you pay CDR, and CDR helps push the deal through," says Taylor.

In the end, though, all this bribery and graft was just the table-setter for the real disaster. In taking all those bribes and signing on to all those swaps, the commissioners in Jefferson County had basically started the clock on a financial time bomb that, sooner or later, had to explode. By continually refinancing to keep the county in its giant McMansion, the commission had managed to push into the future that inevitable day when the real bill would arrive in the mail. But that's where the mortgage analogy ends — because in one key area, a swap deal differs from a home mortgage. Imagine a mortgage that you have to keep on paying even after you sell your house. That's basically how a swap deal works. And Jefferson County had done 23 of them. At one point, they had more outstanding swaps than New York City.

Judgment Day was coming — just like it was for the Delaware River Port Authority, the Pennsylvania school system, the cities of Detroit, Chicago, Oakland and Los Angeles, the states of Connecticut and Mississippi, the city of Milan and nearly 500 other municipalities in Italy, the country of Greece, and God knows who else. All of these places are now reeling under the weight of similarly elaborate and ill-advised swaps — and if what happened in Jefferson County is any guide, hoo boy. Because when the shit hit the fan in Birmingham, it really hit the fan.

For Jefferson County, the deal blew up in early 2008, when a dizzying array of penalties and other fine-print poison worked into the swap contracts started to kick in. The trouble began with the housing crash, which took down the insurance companies that had underwritten the county's bonds. That rendered the county's insurance worthless, triggering clauses in its swap contracts that required it to pay off more than $800 million of its debt in only four years, rather than 40. That, in turn, scared off private lenders, who were no longer interested in bidding on the county's bonds. The banks were forced to make up the difference — a service for which they charged enormous penalties. It was as if the county had missed a payment on its credit card and woke up the next morning to find its annual percentage rate jacked up to a million percent. Between 2008 and 2009, the annual payment on Jefferson County's debt jumped from $53 million to a whopping $636 million.

It gets worse. Remember the swap deal that Jefferson County did with JP Morgan, how the variable rates it got from the bank were supposed to match those it owed its bondholders? Well, they didn't. Most of the payments the county was receiving from JP Morgan were based on one set of interest rates (the London Interbank Exchange Rate), while the payments it owed to its bondholders followed a different set of rates (a municipal-bond index). Jefferson County was suddenly getting far less from JP Morgan, and owing tons more to bondholders. In other words, the bank and Bill Blount made tens of millions of dollars selling deals to local politicians that were not only completely defective, but blew the entire county to smithereens.

And here's the kicker. Last year, when Jefferson County, staggered by the weight of its penalties, was unable to make its swap payments to JP Morgan, the bank canceled the deal. That triggered one-time "termination fees" of — yes, you read this right — $647 million. That was money the county would owe no matter what happened with the rest of its debt, even if bondholders decided to forgive and forget every dime the county had borrowed. It was like the herpes simplex of loans — debt that does not go away, ever, for as long as you live. On a sewer project that was originally supposed to cost $250 million, the county now owed a total of $1.28 billion just in interest and fees on the debt. Imagine paying $250,000 a year on a car you purchased for $50,000, and that's roughly where Jefferson County stood at the end of last year.

Last November, the SEC charged JP Morgan with fraud and canceled the $647 million in termination fees. The bank agreed to pay a $25 million fine and fork over $50 million to assist displaced workers in Jefferson County. So far, the county has managed to avoid bankruptcy, but the sewer fiasco had downgraded its credit rating, triggering payments on other outstanding loans and pushing Birmingham toward the status of an African debtor state. For the next generation, the county will be in a constant fight to collect enough taxes just to pay off its debt, which now totals $4,800 per resident.

The city of Birmingham was founded in 1871, at the dawn of the Southern industrial boom, for the express purpose of attracting Northern capital — it was even named after a famous British steel town to burnish its entrepreneurial cred. There's a gruesome irony in it now lying sacked and looted by financial vandals from the North. The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive.

In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery.

[From Issue 1102 — April 15, 2010]

http://www.rollingstone.com/politics/story/32906678/looting_main_street