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The Fraud Started At the Very Top: With Government Leaders

George Washington's picture





 

Washington’s Blog

The government's entire strategy
now - as during the S&L crisis - is to cover up how bad things are.

But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:

  • Business Week wrote on May 23, 2006:

"President
George W. Bush has bestowed on his intelligence czar, John Negroponte,
broad authority, in the name of national security, to excuse publicly
traded companies from their usual accounting and securities-disclosure
obligations."

  • Tim Geithner was complicit in Lehman's accounting fraud, (and see this), and pushed to pay AIG's CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes,
    Geithner was "very much in the center of the action" regarding the
    secret bail out of Bear Stearns without Congressional approval. William
    Black points out:
    "Mr. Geithner, as President of the Federal Reserve Bank of New York
    since October 2003, was one of those senior regulators who failed to
    take any effective regulatory action to prevent the crisis, but instead
    covered up its depth"
  • The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted
  • The government knew about mortgage fraud a long time ago. For
    example, the FBI warned of an "epidemic" of mortgage fraud in 2004.
    However, the FBI, DOJ and other government agencies then stood down
    and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen
  • Bernanke might have broken the law by letting unemployment rise in order to keep inflation low
  • Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not
  • Of course, deregulation by Larry Summers, Robert Rubin, Phil
    Gramm and many other high-level politicians and regulators also helped
    to grease the skids for fraud

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith's, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929
to the great crisis of 2008 is surely here. In both cases, the
government knew what it should do. Both times, it declined to do it.
In the summer of 1929 a few stern words from on high, a rise in the
discount rate, a tough investigation into the pyramid schemes of the
day, and the house of cards on Wall Street would have tumbled before its
fall destroyed the whole economy. In 2004, the FBI warned publicly
of "an epidemic of mortgage fraud." But the government did nothing,
and less than nothing, delivering instead low interest rates,
deregulation and clear signals that laws would not be enforced. The
signals were not subtle: on one occasion the director of the Office of
Thrift Supervision came to a conference with copies of the Federal
Register and a chainsaw. There followed every manner of scheme to
fleece the unsuspecting ....

 

 

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.

 

***

 

The government that permits this to happen is complicit in a vast crime.

In
other words, the fraud started at the very top with Greenspan, Bush,
Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the
rest of the boys.

As William Black told me today:

In
criminology jargon: they created an intensely criminogenic
environment. I have no knowledge whether the national security aspects
played any role, but the anti-regulatory dogma was devastating.

 

 

 


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Tue, 11/02/2010 - 23:45 | Link to Comment mark mchugh
mark mchugh's picture

You make many great points in this post, but there is one point that I don't ever want to see forgotten:

The TARP  fraud.

TARP (the Troubled Asset Relief Program) never happened.  The Fed bought the Troubled Assets and we got stock in insolvent banks.

When you take $700B and never spend $1 on what you said you were going to, Fraud really doesn't even begin to describe it.

Wed, 11/03/2010 - 01:19 | Link to Comment The Navigator
The Navigator's picture

Absolutely right - then multiply that by 10 or 20 - every damn government program is that way - stated to 'help those in need' and funds go to 'friends of those in power' - meantime, the middle class gets the royal screw job and ends up with the tax bill.

Problem is, too few Americans know who is screwing them.

Answer is to get them educated - send friends and contacts links of ZH stories like this one - docile sheep don't remain docile long when they realize the fucking they are getting.

The movie 'Inside Job' is a 2 hour version of this article, breaking down what broke down and when by whom. If not in a theatre near you, it will be available at Netflix in 3-4 months - get friends and neighbors to watch and then invest in pitchfork companies.

Tue, 11/02/2010 - 23:41 | Link to Comment tahoe69
tahoe69's picture

I was recently asked what party I vote for/represent? I said "it's all Obama's fault" they gave me the thumbs up. That's all it took.

Tue, 11/02/2010 - 21:35 | Link to Comment Coldfire
Coldfire's picture

Query as to whether government office-holders are at the metaphysical "top" or at the fundamental (as in fundament) bottom.

Tue, 11/02/2010 - 20:59 | Link to Comment Everybodys All ...
Everybodys All American's picture

I see you skipped Obama in your round up ... yet the most egregious things are happening right now and we hired this guy to clean it up. In other words he KNOWS this is going on.

Tue, 11/02/2010 - 20:14 | Link to Comment Revolution_star...
Revolution_starts_now's picture

If the laws were intended for them, breaking it might actually mean something. Laws are for the little guys, you are talking about fraud as a business model. If it makes money, it makes sense. The starting gun for a coke binge that has lasted for 30 years was kicked off in a deal between wallstreet and Ronnie.

They get a free pass, cause after all they understand that we are ignorant and need to be controlled. They understand, just look around at how they have everyone looking at each other while the real theft takes place.

Bitch about the welfare? well that's just revolution insurance. That's cheap, that keeps the flies from gathering. Then we will tell you "these" people are why you are taxed to death, it's a 2 fer, these lame ass people make it easy.

Form follows function, and cures cognitive dissonance, which explains alot. Coin flipping day still runs deep, these people still don't get that voting is just flipping a coin, at the end of it they own both sides, it ain't your coin.

 

 

Tue, 11/02/2010 - 19:52 | Link to Comment Rainman
Rainman's picture

In hindsight, this whole mess makes Nixon's resignation over inept burglaries and dirty tricks look trivial.

And poor ol' Bubba got impeached for sideline poontang, when he was really setting the groundwork for the biggest financial meltdown in history ( the Rhodes Scholar laments the gutting of G-S....never saw this mess coming, etc., etc. ). Then tops it all off by signing that sickening Commodity Futures Modernization Act 2000 ( Enron loophole ) a month before he left office.

Clinton and his fellow rubes helped build this crooked casino brick by brick......like Bugsy opening the first big joint in Vegas. At least today, a Vegas casino plays a straight game or they will be shut down. They don't need to cheat anyway and it's bad for business. 

To be all inclusive, GW, we must go back more than 10 years to include the pioneers who cleared the rugged trail leading to where we are today.   

Tue, 11/02/2010 - 20:03 | Link to Comment lynnybee
lynnybee's picture

You said it right !!  WHY AREN'T BILL CLINTON&ROBERT RUBIN being vilified in the media !?    Why aren't these two considered criminals !    Why aren't people beating down their doors with pitchforks & stringing them up by the ankles ? !   .......... damn criminals.   If CLINTON & RUBIN had allowed gold to trade freely there would have been boom times in South African gold mines !   

Tue, 11/02/2010 - 22:07 | Link to Comment RockyRacoon
RockyRacoon's picture

For the same reason that the poor bastard who is in the Oval Office in 2016 will be blamed for what happened the day before.   U. S. citizens have the attention span of a gnat.  Show ya how smart politicians are:  The California race for Governor had plenty of candidates.  Who in their right mind would want to be at the helm of that behemoth when it bites the dust?  Who?  It takes a delusional fool to think that he/she could fix that mess.

Tue, 11/02/2010 - 19:17 | Link to Comment blindman
blindman's picture
The Financial Con Of The Decade Explained So Simply Even A Congressman Will Get It


Sometimes, when chasing the bouncing ball of fraud and corruption on a daily basis, it is easy to lose sight of the forest for the millions of trees (all of which have a 150% LTV fourth-lien on them, underwritten by Goldman Sachs, which is short the shrubbery tranche). Luckily, Charles Hugh Smith, of oftwominds.com has taken the time to put it all into such simple and compelling terms, even corrupt North Carolina congressmen will not have the chance to plead stupidity after reading this.

Of course, to those familiar with the work of Austrian economists, none of this will come as a surprise. 

1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.

2. Sell these MBS as "safe" to credulous investors, institutions, town councils in Norway, etc., i.e. "the bezzle" on a global scale.

3. Make huge "side bets" against these doomed mortgages so when they default then the short-side bets generate billions in profits.

4. Leverage each $1 of actual capital into $100 of high-risk bets.

5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).

6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.

7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed.

8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations.

9. Slowly acquire trillions of dollars in Treasuries--not difficult to do as the Federal government is borrowing $1.5 trillion a year.

10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries.

11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending.

12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands.

Charles' conclusion does not need further commentary as it is absolutely spot on:

..

.

Tue, 11/02/2010 - 19:49 | Link to Comment blindman
blindman's picture

the current manifestation of fraud goes back to 1913 and nothing can

be done to fix it until it is recognized and unwound.  end the fed.

.

http://www.zerohedge.com/article/financial-con-decade-explained-so-simply-even-congressman-will-get-it?page=2

.

@ above...

 by JethroBodien on Sun, 07/11/2010 - 05:54 #462868 It’s much simpler than that. We are effectively paying a cartel of private banking interests (federal reserve)... interest on the money we borrow into existence. That is the greatest con the world has ever known. Of course every dollar brought into existence under such a system is debt which eventually needs to be repaid. This means for every dollar borrowed into existence there is an equal and corresponding amount of debt created. Now when one factors in the interest paid on the debt you begin to realize no amount of money can ever extinguish that debt. Therefore world monetary system = largest ponzi scheme ever conceived. Everything else is just noise. .reply flag as junk (0)

.......

by Mako on Sun, 07/11/2010 - 21:17 #463693

.

You have it right on the mark. It's really simple, what you are seeing now is "noise" and will be used to pass the blame. The excuse: It wasn't the foundation of the system you see, it's was a few bad apples making loans or creating derivatives, or (insert excuse here). Nice post. .reply flag as junk (0)

.

....................

.

. comment: you have hit the nail squarely. but... it is not a ponzi scheme, it is an enslavement scheme, as ponzi schemes are optional but this has the added element of enforced participation. ie. liberty has been eradicated. it is a perversion of the constitution and the result is intellectual and financial poverty for the masses. also, the citizen or taxpayer pays principle and interest on personal or business loans and taxes to pay the the interest and principle that the banking/financial sector "borrows" into existence. the bankers are paid interest to borrow money. the taxpayer must earn that and then cough it up to the government who then gives it to the bankers. and then the same taxpayer must borrow, in inflated bubble economies, principle at interest, paid to that same banker, and somehow earn or create value to pay back that debt. debt?

...

so all the good people must become criminals to satisfy these obligations of law and monetary dictates. this works out well for the bankers as the population has lost it's moral and ethical compass. that is, the survivors have been compromised and eagerly, but wrongly, accept the notion that the flaw is in the nature of humanity and society. . imo

Tue, 11/02/2010 - 22:02 | Link to Comment RockyRacoon
RockyRacoon's picture

Their is a fly in their ointment -- about as big as a 747.

Of course every dollar brought into existence under such a system is debt which eventually needs to be repaid.

Did they plan on folks not paying back the debts, on purpose?

I think not.  There are enough disgruntled people to burn this thing down.

Wed, 11/03/2010 - 02:00 | Link to Comment The Navigator
The Navigator's picture

A friend told me this:

Ramp up credit card purchases of Ag and Au over the next 6 months - in months 1-9, make monthly minimums and in 10-12 months bail.

Take 'em out for your max limit - plan your hit.

Fraud? Well, maybe not according to THEIR (the banks) standards - certainly we know better.

Just sayin...... If we're gonna get a good screwing by the banks, fair play???

Free Gold and banks take a nice, concerted hit; maybe the Fed gets hit too.

Imagine THAT revolution - and imagine the dollar-cost-averaging of 20-50 ounces of free gold - and imagine your friends and neighbors learning (from er, ah, from somebody) about this payback scheme.

Maybe THAT will get their fucking attention. Fuck with me, expect some payback.

What's bigger than a 747???? The Russian cargo Antonov AN225, the new Airbus A380?

Waiting......waiting.........BURN IT DOWN!!!!

I like the 5th of November but that's a year away - but, that coincides well with line 1. OK, just wait, and buy, monthly minimums.

So a friend told me.

Tue, 11/02/2010 - 22:18 | Link to Comment blindman
blindman's picture

from your lips ....

and the sooner the better. 

burn!  and that is why i say the qe / qe2 is just stealing in

broad daylight because the thing already started burning

a couple of years ago,  maybe many years ago. 

burn!  but why do we let them have all the water when the

fire isn't even in their neighborhood?  politics

Tue, 11/02/2010 - 19:00 | Link to Comment GoingLoonie
GoingLoonie's picture

Good article, but it was more endemic than that.  The example set by W was anything goes.  The ends justified the means in his eyes and the slippery slope was a great ride, he did not care where it ended. So the Decider set the standard, cabinet secretaries followed, then lower level government employees all the way down.  Even the janitors think it is cool to duct work and commit fraud.  The leaders of industry saw this as a blessing for their desired operations and it moved to the private sector as well.  Now it is still there.  Have you tried to hire someone for a job lately.  They want the money up front because they think they earned it by just returning your call.  There is only one solution.  People need to go to jail.  Start at the top of Government, OK, Paulson and Geithner would be a good start.  Then work your way down.  Then go to industry and do the same.  

Tue, 11/02/2010 - 18:52 | Link to Comment Lucky Guesst
Lucky Guesst's picture

In most cases there was always a choice to be stolen from or not.

Tue, 11/02/2010 - 18:08 | Link to Comment Careless Whisper
Careless Whisper's picture

they're all criminals. all elite globalists. all members of the bilderberg group. nothing new. just sayin'

Tue, 11/02/2010 - 18:05 | Link to Comment myshadow
myshadow's picture

I think this is similar to the nixon doctrine, 'if the fed does it then it's legal'. It seems all of the participants are operating under soverign cover. With darryl issa incharge of the oversight committee there won't be any effective investigation of the banksters or the fed. You can forget about the DoJ or SEC doing anything for the next two years.

We are going to have to experience another meltdown before anything will come to pass and this time hopefully the people will take to the streets.

Tue, 11/02/2010 - 17:47 | Link to Comment TheMonetaryRed
TheMonetaryRed's picture

GW -

It's very convenient for the Banksters to blame the "top" - and then tell us that means the government.

Per Bill K. Black, look at the one agency that actually regulated the biggest private failures - and the most-aggressive purveyors of junk. Look at the OTS. Then look at the regulated institutions. Nothing the government did made WaMu make loans so bad that a third of them are non-performing. 

Tue, 11/02/2010 - 17:55 | Link to Comment George Washington
George Washington's picture

Its both!  And I frequently write about the fraud by the big banks.

Tue, 11/02/2010 - 18:51 | Link to Comment TheMonetaryRed
TheMonetaryRed's picture

GW,

Follow the money. The banks made the money disappear. Nobody told them to. Nobody forced them to. They did it out of greed.

Was that greed supported by government policy? Well, sure, but didn't we all agree that "Greed is Good" back then? Don't we still?

The RepubliKeynesians are going to go right back to giving everybody deficit tax cuts and failing to enforce the regulations - or just junking them altogether. So long as the TPers are wedded to deficit tax cuts - and they are, totally - what's going to change?

Bondholders get their guaranteed, deficit-funded bond payments and everything goes on as always.

Tue, 11/02/2010 - 17:37 | Link to Comment Blaise Pascal
Blaise Pascal's picture

Three points.

1. Fed will not announce specific numbers.  They may announce intentions, direction, but no specifics, in magnitude, time or mechanics.

2. Beware the lame-duck Congressional session.  Woe be to taxpayers when ousted lawmakers are permitted to take their frustrations out on revised tax legislation.  And with impunity, I might add.

3. Genius of Republicans to throw McCain to wolves in 2008, without a credible running mate, and to (implicitly) support Obama.  Now Obama is the fall-guy, the economy really tanked on his watch, as he exploded government spending, and a frustrated and angry electorate votes Republicans in (net: 112 loss for Dems in House; 14 in Senate; 16 in Gubernatorial statehouses).  Just in time for reapportionment; weight of demographic trends and Republican control may exile Democrats for another decade.

Blaise

Tue, 11/02/2010 - 18:45 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Funny how that worked out isn't it?  Always be looking ahead 3 to 4 moves on the chess board.

Tue, 11/02/2010 - 17:35 | Link to Comment MGA_1
MGA_1's picture

Well.. hmm... we were diving into a pretty hefty recession, war was on the horizon... gotta fund it somehow...

Tue, 11/02/2010 - 17:33 | Link to Comment tony bonn
tony bonn's picture

and let's not forget the accounting profession's fasb fraud which makes that "profession" criminal and no different than the oldest profession.....they are total liars.

control fraud is the banksters' favorite parlor game.

Tue, 11/02/2010 - 17:15 | Link to Comment web bot
web bot's picture

welll... we don't have long to wait.

Tue, 11/02/2010 - 17:11 | Link to Comment Assetman
Assetman's picture

Watcha gonna do?

Bad boys... bad boys...

 

Tue, 11/02/2010 - 21:47 | Link to Comment RockyRacoon
RockyRacoon's picture

Get more popcorn and watch the spectacle.  Oh, and watch my own backside.

Tue, 11/02/2010 - 17:08 | Link to Comment Rogue Economist
Rogue Economist's picture

The fraud starts above them from the people they take their orders from.

RE

Tue, 11/02/2010 - 17:12 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

Correct.  Which is why the Republican Party first rejected, then co-opted the Tea Party movement.  Gotta keep those fuckers in line.  I think they've been tremendously successful in thwarting any actual rebellion by the plebs.

Tue, 11/02/2010 - 17:31 | Link to Comment illyia
illyia's picture

So far...

Tue, 11/02/2010 - 18:43 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Indeed Sir, so far.

Tue, 11/02/2010 - 17:01 | Link to Comment High Plains Drifter
High Plains Drifter's picture

People crushed by law, have no hopes but from power. If laws are their enemies, they will be enemies to laws; and those who have much to hope and nothing to lose, will always be dangerous.

 

Edmund Burke.

Yes it is true. We live in very dangerous times.

Wed, 11/03/2010 - 00:04 | Link to Comment Adam Neira
Adam Neira's picture

A wise sage once told me that people need three things to be happy.

(1) Something to do.

(2) Someone to love.

(3) Something to look forward to.

 

Tue, 11/02/2010 - 19:32 | Link to Comment destiny
destiny's picture

started long ago, was announced long ago... buy physical gold

http://www.usagold.com/goldtrail/archives/goldtrailtwo.html 

Tue, 11/02/2010 - 19:10 | Link to Comment unwashedmass
unwashedmass's picture

and will anyone ever be prosecuted?
hell no.
the peasants have no power to force the rule of law to be followed.
its over for the US.
the elites are now just draining the last of the well dry.
tomorrow is the real beginning of the end days for the US.

Tue, 11/02/2010 - 18:13 | Link to Comment CH1
CH1's picture

Perhaps, but there wasn't a flashing attention-grabber in every room during Burke's day. It is quite possible that the vast majority have lost the ability to exercise their will.

Tue, 11/02/2010 - 19:11 | Link to Comment Max Hunter
Max Hunter's picture

Indeed... And yes, it makes a difference.  The progression of distractions bombarding us would totally amaze anyone who has not been on this earth in the past 20 years..

We are simply useless consumers being auctioned to the highest bidder.

Tue, 11/02/2010 - 17:51 | Link to Comment tip e. canoe
tip e. canoe's picture

"I got a letter from the government the other day.  
Opened it, read it, it said they were suckers."

http://www.youtube.com/watch?v=TDHl5djnYM4&feature=related

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