No More <s>Wire Hangers</s> WaMu's... Ever!

Marla Singer's picture

On September 30, 2008, the Treasury issued an edict innocuously titled "Notice 2008-83," published in the equally innocuously titled "Internal Revenue Bulletin 2008-42."  Perhaps it is just our paranoid side, but we suspect you could return the country to the gold standard in "Internal Revenue Bulletin 2009-63" and no one would catch on for 6 months.  Add to this the fact that Congress, and the rest of the planet, was already quite literally possessed by the upcoming vote on Emergency Economic Stabilization Act of 2008 (the underpinnings of what would later become the Troubled Assets Relief Program or "TARP") and it isn't hard to see why the "notice" went, ironically, somewhat unnoticed.  It shouldn't have.

As government prose goes, it is almost haiku like in its size:

The Internal Revenue Service and Treasury Department are studying the proper treatment under section 382(h) of the Internal Revenue Code (Code) of certain items of deduction or loss allowed after an ownership change to a corporation that is a bank (as defined in section 581) both immediately before and after the change date (as defined in section 382(j)). As described below under the heading Reliance on Notice, such banks may rely upon this guidance unless and until there is additional guidance.


For purposes of section 382(h), any deduction properly allowed after an ownership change (as defined in section 382(g)) to a bank with respect to losses on loans or bad debts (including any deduction for a reasonable addition to a reserve for bad debts) shall not be treated as a built-in loss or a deduction that is attributable to periods before the change date.1

Its effect, however, wasn't quite so demure.

Let us turn, for a moment, the way-back-machine to last September:

On Thursday, September 25, 2008, Washington Mutual was seized by regulators, departing from the normal Friday action.  On a conference call that evening FDIC Chairwoman Sheila Bair blamed the circumstances and the unusual speed of the bank's decline for the unusually prompt corrective action.  "This is the big one that everybody was worried about," she warned.2  Apparently, she was taken very seriously.

As an aside, it is not hard to see why scrutiny began to fall to short-sellers and the like in this period.  Sean Egan is quoted in Bloomberg that Saturday thus:

"WaMu's takeover has proven that there's an easy way, if the FDIC is involved,'' said Sean Egan, president of Egan-Jones in Haverford, Pennsylvania. "You kick the hell out of the equity holders and bondholders. That may be the new model for bank takeovers."3

The seizure of Washington Mutual ends all doubt that even large retail banks are in serious trouble.  In its last days, Washington Mutual lost $16.7 billion in cash to panicky depositors.  The Office of Thrift Supervision press release tells the tale:

Pressure on WaMu intensified in the last three months as market conditions worsened.  An outflow of deposits began on September 15, 2008, totaling $16.7 billion.  With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business.  The OTS closed the institution and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.  The FDIC held the bidding process that resulted in the acquisition by JPMorgan Chase.4

On Friday September 26, Goldman Sachs' credit analyst Louise Pitt quite sagely warns that Wachovia, already facing shareholder revolt, could face a run on deposits similar to the giant sucking sound at WaMu.  Wachovia, then headed by newly appointed former Treasury Undersecretary and former Goldman Sachs Vice Chairman Bob Steel, loses $5 billion in deposits in a single day as customers scramble to draw their accounts down below what was then the $100,000 FDIC depository insurance limit.  The Office of the Comptroller of the Currency, it being their job to notice such things, raises the alarm and the FDIC, with what today would be considered blinding and dangerous speed, presses Wachovia to offer themselves up for sale.  Now.  In particular, to Citi.  The much underrated Charlotte Observer commented thus:

New York-based Citigroup is buying Wachovia's banking operations as well as most of its assets, with help from the Federal Deposit Insurance Corp. Left behind is a standalone public company, still called Wachovia and based in Charlotte, that will house the brokerage, Evergreen asset management and insurance units.5

Of course, Citigroup didn't buy Wachovia.

In the pre-bailout world, when a bank fails, it fails like Washington Mutual.  The regulators (FDIC most likely) take over, they wipe out equity and bondholders and then sell the remains.  It's quick.  It's brutal.  It's decisive.  This is what Bair apparently proposed.  Enter New York Fed President Tim Geithner (as characterized by David Wessel):

Geithner blew up. Wachovia has to open on Monday, he argued. It must be sold this weekend, the buyer needs government assistance, and the debt holders need to be protected. “It has to be this way,” he said. “We just went to Congress for $700 billion. The policy of the U.S. government is that there will be no more WaMu’s.”6

Wachovia, instead, was declared "systemically important" a first since that term was written into law, and auctioned off whole.

You know the rest.

Enter "Notice 2008-83."  Once obscure, the small memo has begun to attract a lot of attention, not least of which from Senator Chuck Grassley of Iowa who wrote this weekend:

Treasury’s issuance of the Notice apparently enabled Wells Fargo to take over Wachovia despite a pending bid from Citibank.  Without the issuance of the Notice, Wells Fargo would have only been able to shelter a limited amount of income.  Under the Notice, however, Wells Fargo could reportedly shelter up to $74 billion in profits.  It also potentially enabled Wachovia’s senior executives to qualify for parachute payments that may not have been available under the Citibank deal.7

Authorization has become a huge and lingering question with respect to ongoing conduct by executive agencies and departments since Bailout Nation was founded last fall.  Notice 2008-83 effectively rewrites tax law.  While the Treasury, a part of the Executive branch, is entitled to issue regulations with respect to the various tax laws in the United States, wholesale change of this kind would normally require bicameralsim and presentment, as per the clauses of the Constitution of the same name.  (The requirement that law be passed by both houses and presented, i.e. signed by the President or subject to veto override).  There is, of course, good reason to prevent the Executive branch from running hog wild in cases like these.  We aren't the only ones to have noticed this either.

California, which generally seeks loose conformity with federal income tax in its own state revenue regime, and in what must be a rare bit of indictment, explicitly disavowed the IRS Notice:

Internal Revenue Service Notice 2008-83, 2008-42 I.R.B. 905, issued on October 20, 2008, relating to the treatment of deductions under Section 382(h) of the Internal Revenue Code following an ownership change, shall not be applicable for purposes of taxes imposed under Part 11 (commencing with Section 23001) of Division 2, of this code with respect to any ownership change occurring at any time. 8

Nothing motivates California legislators to faster or clearer action than a threat to their dwindling tax revenues.  Accordingly, the legislative history of this bill has a stark and effective description of the issue that we quote here in part.

Section 382, originally added to the IRC in 1954 and completely rewritten in 1986, is intended to guard against “trafficking in loss carryovers.”  The current version of Section 382 prescribes mechanical rules known as the “Section 382 limitation” that effectively preclude a buyer from using the net operating and built-in losses of the acquired entity at a faster rate than the acquired corporation could have used them if it had sold its assets and invested the proceeds in tax-exempt governmental obligations.  The purpose of this rule is to make losses a neutral factor in a corporate acquisition.  Prior to the enactment of this limitation, corporations with large losses were being purchased by corporations with large taxable incomes simply because the acquired corporation’s losses could be used to reduce the buyer’s taxable income and therefore reduce the net cost to the buyer of the acquisition.


“The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.”

“Did the Treasury Department have the authority to do this? I think almost every tax expert  would agree that the answer is no," said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. "They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."9

California's outrage is necessarily somewhat polite.  The reality is that on September 30, 2008, the Executive Branch of the United States flirted with a full-on constitutional crisis, apparently so that Tim Geithner's sweeping vision of "no more WaMu’s" could be realized.  It is ironic that Mr. Geithner, now elevated to "Secretary of the Treasury Geithner" would phrase the issue in this fashion:

"The policy of the U.S. government is that there will be no more WaMu’s."

Since when do we accord even a president of the New York Federal Reserve Bank such latitude that he may articulate the whole of U.S. Government policy?


On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), which in part asserts that Notice 2008-83 is inconsistent with the congressional intent in enacting Section 382 of the IRC.  While questioning the legal authority of Notice 2008-83, Congress grandfathered transactions that occurred after the Notice was issued and on or before January 16, 2009, in order to protect the reliability of guidance generally, and avoid punishing taxpayers that rely on this guidance.10

In effect it appears that to prevent the FDIC from seizing another major bank and breaking it into pieces (WaMu was the 3rd largest mortgage lender in the country), to preserve the image that (some) large banks simply do not fail, and to "inspire confidence" the Treasury rewrote tax law, facilitated a number of illegal acquisitions (that, without being too sinister, clearly benefited senior management at the acquired firms), doubtlessly tampered with auction results at least indirectly and somehow managed to get the whole matter swept (mostly) under the rug with a grandfather clause by using the argument that it would be too disruptive and inconvenient to do something so drastic as to actually follow the law in these cases.  No wonder Chairwoman Bair looks like she's on anti-psychotics these days.  The FDIC bears almost no resemblance at all to its mid-2008th self.  If you wanted to see an agency that had been irrevocably perverted from its original purpose, well, actually we'd point to the FHA, but surely second in line must be the FDIC.

Given this experience, and the lessons learned, for example, in the Chrysler bankruptcy or the structure of PPIP and given that Tim "No More WaMu's" Geithner has now been elevated to the Secretary of the Treasury, how many other "Notice 2008-83"'s are out there that we have not yet seen?

To touch on earlier work here on Zero Hedge, we might also posit this question:

Who exactly regulates the many government attorneys whose sign-off is required to issue notices such as these.  Mark S. Jennings, at the Internal Revenue Service is listed as the Notice's primary author, but who penned the opinion that posited its legality?

In the years to come we suspect many theories will emerge with respect to the day we should sing the bailout anthem to commemorate the creation of Bailout Nation.  We think that day might well be September 30, 2008.

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Renfield's picture

Wholly shit.

Is there ANY WAY AT ALL that this can be translated into small words and sound bytes for popular understanding?

Ironic question but I'm not really kidding. It's so difficult to get people to understand the swindles that our governments and corporates have perpetrated on what used to be capitalist societies...but this one takes the cake and deserves to be understood by the 'common people'.

This is right up there with Denninger's discovery of the Fed's shenanigans with the Temporary Open Market Operations just prior to the market dive in September 2008. The corruption of the Fed reeks so bad it makes Blankfein look like he's, well, doing God's work by comparison. Those disgusting crooks Timothy Geithner and Bermonkey need to be exposed around the world.

Marla, you are my hero.

PS: Maybe in storybook form? Moby Dick's Revenge, or The Day Too Big to Fail Swallowed the USA...

TumblingDice's picture

"The Fed determines US government policy." should be an easy one to understand.

"All control is just an illussion." is always applicable, and especially in this case.

"Snake eats own tail, yet still hungry."

"All the different agencies of the US government, and those pretending to be, will circle jerk your livelyhood away as fast as they possibly can."

Hard to get specific with these. Just tell the lazy bums to read zerohedge.

L_Gobbo's picture

I'm grateful to Marla and ZH for this detailed reportage. This piece reads like Wesley Mouch's playbook: bureaucrats who have become so familiar with the inner workings of the multi-tiered labyrinth of the looterocracy that they know they can rely on the sheeple to shrug, baa, and go back to grazing as the looter-in-chief of some alphabet soup agency issues Notice 2009-69, dispossessing the sheep of every last shred of value to which they may still lay claim. When it comes to most Americans - even well-informed ones - their eyes will glaze over long before any of us can reach the crescendos of our rants.

The most effective method at our disposal right now - and the one that has unexpectedly gathered momentum - is the movement to end the Fed. Strike the root!

Mad Max's picture

Small words:

"The Treasury changed the law, without authority to do so, in order to provide massive tax benefits to favored banks."

Anonymous's picture

"They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."

Far. Canal.

TumblingDice's picture

"[The Constitution] is just a goddamned piece of paper."

GW Bush

Understand this fact and you might have an easier time with the rest of it. They are getting really bad at even pretending to be a government these days. Bicamiralism and presentation is only necessary when the population is level-headed, well armed, and not in a constant confused, consumer credit driven trance.

Renfield's picture

Hey TD

You're right, you're right, I know you're right.

Some days I have an easier time than others. :-) This ain't one of those poor husband had to listen to another rant after I read this. Rant II the Sequel after reading Denninger's piece lo these many months ago. And it isn't even my country...

It's just that I have a lot of respect for the whole constitutional thing (as a political ideal) and it bugs me a lot when the disrespect (not you, not Marla, but idiots like GW Bush) is so blatant, and it's so easy for 'them' to pull off their treasonous crimes. Because so many of us peasantry can be such easily bought morons!!!! I wish other smaller countries would follow the example of the *constitutional* (not corrupt) US, and I wish the US did a better job of leading. It's like not knowing who to blame more in a crowd of children, the stupid playground leader who starts all the trouble, or the gutless little followers who then imitate.

Damn. Losing coherence again and blowing my hitherto coolheaded and urbane blog image. ( :-) yeah yeah I know shutup) Me and my love-hate relationship with the dying empire.

TumblingDice's picture

How do we stop the disrespect? We can try to join the system and work through the proper channels, show competence and as a reward get appointed to some middle tier technocratic position to try to implement our ideals. Except that ideals are flexible and by spending time in the system we will see that it is so much easier to work within the system to ensure that you and your family can get your own instead of ensuring that it is fair, because the people in the system, they rely on the fact that it is unfair, the existance of their jobs depends on big government and looting, and they have not tried their hand in private life where they actually create instead of take, so without the unfair conditions they help create they will drown. By the time you climb the ladder you will be all too used to explaining why in times of crisis we need to flood the system with money, after a few detours first of course, by the hands of the people who know where to put that money and all too good at issuing directives that just might be unconstitutional, but who is looking anyways. Alan Greenspan comes to mind, imagine yourself giving a speech referencing a failed experiment and you will know that this is not the way to go. We cannot go through the system to make this work. There are so many more unelected officials making decisions today that I have a hard time believing that democracy has a chance.

But it still has to be given one. We can try to live despite, and seeing by the fact that most people here have an internet connection, this does not present too much of a problem to most of the users here, or we can try to change it. Enforcing the law should be the duty of the president and that is a high target but it has to be attained. But I think Congress should do. I suggest a political bumrush into the system. We do not need to control the thousands of unelected government positions we can just seize a voice in the Congress for the rule of law. The right questions simply need to be asked. We can blame all we want but this is the system itself that is at fault. The question to ask is what can be done about it. Bumrush the place with reason and truth; normally people don't stand a chance if it is properly articulated.

Incomprehensible rant over.

Cognitive Dissonance's picture

"Bumrush the place with reason and truth; normally people don't stand a chance if it is properly articulated."

I appreciate your passion and willingness to get involved, to take action, to be responsible for making the changes needed. I still feel this way and that's why I'm active in my community.

But I see the same problems on a local level that exist on the state and national level. And the problem isn't the lack of truth or reason, it's the lack of desire to hear truth and reason IF it means we must suffer some pain and dislocation. We The People can find the truth easily if we so desire. As you said, there is the Internet. The fact we aren't looking speaks volumes about our current state of collective denial. We The People are addicted to the fantasy that we can have it all.

Please don't assume that a large group of citizens feel as you do. While many will say they do, when it comes time to put the rubber on the road, they disappear from sight. In fact, as conditions become worse, people pull back even further and "conserve" what they weren't exhibiting in the first place, the courage to stick their heads out and do something that places their community first and possibly their own best interest second. 

I see We The People as I would see any addict, regardless of the substance. An addict constantly trades and bargains away the future for what he or she wants today. Addiction is so much more than a physical issue and has nothing to do with morals or ethics. It's a spiritual, emotional and psychological dysfunction that can only be effectively dealt with when the addict itself finally gives up doing it his/her way and becomes desperate enough to do ANYTHING in order to stop.

We The People have not reached that point of desperation in this country. We're not willing to do whatever it takes to stop the looting, corruption and lying because we aren't yet ready to confront those very same issues personally. 

This is just my opinion and I'm certainly capable of being wrong. But if we stop for a second, step back and view the overall scene from a distance, it's astounding how far down into the dysfunctional black hole we've gone with no end in sight. We The People are addicted and we need to hit bottom before we can begin to find the courage to do the extremely hard work needed to pull ourselves out of this death dive. 

If you look to history for a vision of our future, other countries and empires facing the same type of dysfunction rarely chose the path of self awareness and healing. It rarely ends well. What We The People really need is an intervention by us directed toward us. I'm speaking for myself to myself. Who will follow? Who's next?

SWRichmond's picture

IMO revolutions occur when the likely pain to be incurred during the revolution is widely perceived as being less than the pain likely to be incurred staying with the current system.  I say "widely" perceived, not perceived so by a majority.  It does not take a majority to make a revolution.  Fear is the primary driving force in most people's lives, and most are immobilized by it.  Government, for this reason, has become the largest purveyor of fear.  It keeps the sheep in line to be sheared.

This understanding has been one of the reasons for my rock solid belief that reflation would be pursued at any cost, as a means of preventing the above perception from becoming to widely held.

Cognitive Dissonance's picture

I fully agree. A dissatisfied public is always doing a cost benefit analysis (of course they don't call it that) but it's on a personal level and heavily favored towards doing nothing, because the ultimate cost of revolution could very well be death. An extremely poor life is usually seen by the majority as preferable to the potential of death.

Also agree regarding the numbers involved in revolution. One of the most popular American myths is the idea that revolt against the British was supported by the majority. Nope. Whenever I hear that from someone, I remind them of the severe problems Washington had getting troops, food and guns. It was not a popular war until it was clear it was won.

In fact, it was a war of the financial elites, who decided they didn't want the Bank of England imposed upon the colonies against their will. The elite felt a central bank would ruin their wealth and freedom. Once they decided to revolt, they then turned to myth making and propaganda to rally the "lower class citizens" as Jefferson wrote.

I find it ironic that once again we are at war with a central bank, only this time it's firmly established within our country and mostly supported by the financial elites. They understand they will lose their power if the Fed goes down.

TumblingDice's picture

Good point on the American Revolution. Revolutions of any kind do not need a majority, just a strong unshakable nucleus and foundation.

gatopeich's picture

Fine rant, Tumbly.

I just don't believe you can make your way up in a mayor political party without first managing to look utterly dumb. No political animal will promote or help you in any way if they ever think you could take their place, or remotely look cooler. They will get advantage of you, for a while, if anything. They prefer to be surrounded by plain greedy fools, precisely the aptitudes which allowed them there in the first place.

That's the way corpocracy goes, the way of the "fools in suits".

Of course many think there is a 'Meritocracy' going on somehow, IMO just a matter of (miss)naming. Then on how one greedy fool prevales over another greedy fool... I don't think I care!

No faith in Democracy. Of lately, I increasingly believe that the chance of getting a decent-enough government goes through the rise of a tyrant with great intention, better luck than JFK, the wit to wipe-out corruption (at least for a while), and the intelligence to sorround him/herself with efficient people (instead of more greedy fools). Of course that's a platonic idea.

It is also true that if we (the people of the world) brought any feasible candidate during the last decades, the US hurried to wipe them from the surface of Earth.


But, it is written:

If the evil spirit arms the tiger with claws,
Brahman provided wings for the dove.

Vanishing Point, 1971.


All right, we'll just wait for the next systemic catarsis...

TumblingDice's picture

We need to start a political party or a strong movement towards voting in independents. This is the only way.

I understand your tyrant idea and unfortunately I don't believe it is possible without violence in our current environment (or any envirnoment now that I think about it). The more I think about it though, the more it sounds like Hobbes might have been close to the truth. But I can't abandon Locke. So before going on I feel the need to reconcile them as best as I can.

But Congress is (should be?) the most powerful body in US government, and a voice there should be the first goal IMHO.

Anonymous's picture

You have misplaced faith in a moldy Constitutional system that never reallly worked, that was *ALWAYS* a cover story for what really happens, and then you harm yourself physically by becoming so angry about it all.

john bougerel's picture



I am with REnfield, this was outstanding investigative research!! Kudos to you, really!

Mad Max's picture

Well, we got one out of three. Where's that get us?

Anonymous's picture

Awesome work Marla, thank you!!!

Fibozachi's picture

Fantastic piece Marla !!  Unfortunately, many of us who foresaw the fall of WaMu, WB, AIG, GM et al did not enjoy either the forum (ZH) or literary ability to pen such a work.  As a poor writer, I remain envious of your silver tongue.

That said, there are several works ranging from the mundane to the fascinating that have touched upon not only the exact course of government action/ inaction that you so thoroughly detail above but also a curious string of commonality between each "unique" instance of bank failure / financial crash.  I'll sift through Kindleberger and Armstrong's most recent piece for examples, while immediately suggesting that those who are similarly technically-minded search around online for some more info about Chris Carolan's Spiral Calendar and his Solunar Model.

 ... as the $DXY continues to mark time above 74.77 yet below a recent fourth wave of one larger degree at 75.77 and two larger degrees at 76.82/.89 where two consecutive 144 minute or daily closes above a downward sloping trendline & a firm price channel would effectively shift the underlying trend from one of bearish intent to a rather bullish profile.  89 minute bar closed at 05:40 registered buy signals across the board on my screen for that interval period of time; 55 minute screen registered a confirmed buy signal at the 05:20 close of the bar opened 04:25.

Gold futures have already come into a first target zone which spans 1131-1137 (@ GC continuous contract, current basis December Z09) ... am seeing several negative divergences on the 144 minute GCZ09 and recently registered several short signals on the 55 minute bar closed 05:20 at 1130.60, which plotted a Gravestone Doji; 10946 share @ GC, opened 05:24 / closed 05:57 plotted a simple Tweezer Top at the same level while the 55 minute $DXY attempts to plot a Bullish Marubozu ... latest 10946 share @ GC bar opened 06:14 at 1130.80 is a Bearish Marubozu that has not plotted any additional signals.  First downside target is the pivot point at 1124 while initial support comes in at 1121-1117.  The next few days and 3-5 weeks hold the outside potential for a blow-off move to the upside in gold.  While I am not holding my breath, I would be sorely remiss to not point this out.

Silver futures continue to flail around under 17.92 - 17.97, which is essentially a must hold level for the bears, where 17.69 serves as an important intra-session inflection point as the 76.4% retracement level of the prior down leg  ... akin to gold, silver just plotted a pair of confirmed short signals on the SIZ09 55 minute bar closed 04:25, which plotted a High Wave Doji and notched an intra-bar high of 17.875, where a simple stop could be placed ( for educational purposes ONLY ); several other interval periods of time, tick and volume are exhibiting similar short signals at this juncture of time.   Over 43 TD's (trading days) silver futures have been jogging sideways, marking time while going absolutely nowhere, developing serious negative internal divergences on the daily and serving as a marked non-confirmation to gold's continued rise.

@ CL ( OIL futures, december basis CLZ09 ) plotted a similar 10946 share and 55 minute sell signal just a bit ago .. but like silver and gold at only 4k contracts deep is far from confirming a sell on larger timeframes.

Pay extra attention today to the real bodies of intra-day candles ... at swing highs / lows the real body of a candle (its open and close) must be observed, especially when wicks can penetrate intra-day trendlines ... gold futures right now will show that same battle on either a 55 minute or a 10946 tick chart ... where the real bodies are trying to maintain the 1127 level while the lower wick tries to grab the pivot point at 1124 ... interesting action that is a great example of the different messages told by the wicks and real bodies of candlesticks.

7 am EST is typically the reaction time from Europe's effective rolling opens between 3-5 am EST ... as US equities begin to wake up and very, very light pre-mkt activity takes place .. this time period typically sees one of two things ... either a sharp move at 06:55 - 07:30 or nothing but a slight drift as the various instruments of financial markets simply "sync up" in anticipation of the open of the US cash session.

Cognitive Dissonance's picture

"In the years to come we suspect many theories will emerge with respect to the day we should sing the bailout anthem to commemorate the creation of Bailout Nation.  We think that day might well be September 30, 2008."

May I propose a second date to commemorate the creation of Bailout Nation.

September 11, 2001

While I know it was many years ago, go back and scan some random headlines from the months and years following 9/11. What you will find is a Congress that quickly accelerates its off budget spending under the guise of an emergency (to name just two examples, both the Iraq and Afghanistan wars were paid for entirely off budget in emergency supplemental spending for 8 years) as well as out of control pork barrel spending, a Presidential executive increasingly dismissive of constitutional restraints and a justice system that begins to protect the rouge elements of the other two branches rather than the constitution.

BTW, each year since 09-14-2001, the President has declared we are still operating under national emergency conditions. Obama just did so this past September. Doing so releases all three arms of the government from certain constitutional restraints. However, I can't tell you which ones because it's a secret. Do some research on this subject. Go slow or you might hurt yourself when your head begins to spin out of control.

September 30, 2008 would not and could not have happened the way it did without the preceding 7 years of outrageous and illegal behavior by all 3 branches of government. We're not in Kansas anymore, Toto.

TumblingDice's picture

We are on Yellow "the abyss was averted but you still need to worry" (elevated) alarm condition, in case anyone was wondering. As a side note, I don't think we have ever been on Blue or Green alert conditions, ever, since the inception of the friendly color coded system that is supposed to tell us how afraid we should be.

Cognitive Dissonance's picture

IMHO the color coded terror alert system was simply a psychological terrorist operation perpetrated by the US government against the American people to immobilize and disarm us while the looting began and our "rights" were substituted for privileges. Either that or there really is a terrorist behind every Bush, pun intended.

The real crime here is that the psyop continues in a different form(s) under the present administration. Which leads me to conclude that the President is not (and never was) in control, at least not in the way the average Joe thinks a President controls or runs the country.

When you see things from this perspective, the financial "crisis" looks very different and the so called "stupid and incompetent" leadership (political and corporate) doesn't look so stupid anymore.

Miyagi_san's picture

CD sounds like 911 was good for the elites

Anonymous's picture

I'm not disagreeing, because I know what you are saying is fact. But why all the conspiratorial bullshit on the part of government? "They" were not constrained by the Constitution or by Federal law to begin with, so why make use of a tragedy to ram through extraordinary measures that only alarm certain elements of the population?

My only guess is that they know the fractional reserve system didn't have much time left before it went exponential. But emergency government is so exhausting for everyone--it's always an emergency all the time, so there's no cushion at all for any real emergencies (Katrina).

Cognitive Dissonance's picture

IMHO there is no real consensus between the different factions jostling for the real power behind the facade of the US government. I believe 9/11 was an American coup, with one faction pushing over the top and taking the hill.

We have seen the secret service wisk a President away in a big hurry when there is any hint of danger. So why did Bush spend an additional 10 minutes reading "My Pet Goat" in that Florida school room after the second plane hit the towers?

It was clear something was up by then and there was no way the secret service could have known for sure the President was safe in that class room. That trip was widely publicized. Then he holds a news conference at the same school. Then he's brought to the airport where Air Force One sits on the tarmac for 20 minutes. When it finally takes off, it has no fighter escort for over an hour.


Then he flies to the two US Air Force bases on American soil where nuclear weapons and bombers are based.

Double Hmmmmmm

tip e. canoe's picture

bailout nation is the sequel to fight club.

the end is the beginning is the end.

Steak's picture


I think every published piece on the interwebs, be it the NYTimes, Drudge or this blog, should cite their sources.

I hunger....for MORE!

Biff Malibu's picture

"I love you Marla Dearest..."



"Now clean up this flooorrrrrr!!!"

Fibozachi's picture

For those who have Charles P. Kindleberger's "Manias, Panics, and Crashes: A History of Financial Crises" somewhere inside of a cobweb-laden cardboard box in their attic, please see pages 249 - 274 (updated Fifth Edition) within Chapter 12: The International Lender of Last Resort.


And for those who had a life during college here a few papers from Scribd, which quote the gist of 'it' ...

The Dutch Monetary Environment During Tulip Mania

This Time is Different: 800 yrs of Financial Folly

Crises in the Global Economy From Tulips to Today: Contagion and Consequences

Economic and Financial Crises and Transformations in Sixteenth-Century Europe.


Don't have the time right now to sift through highlights of Armstrong's latest release, "GOLD: $5000+" ... and every ... (2009 - 1873 (July 9) = 136) x 12 (months) = 1632 .. 1632 - 1597 (Fib) = June 2006 (check XHB and ITB, HD, when housing "officially peaked," so on and so forth. 


A must read by Armstrong Economics: GOLD: $5000+

Anonymous's picture

You are recycling year old ideas that have been discredited by the persons making the original charge.

To wit, Jones Day, the law firm that first estimated this was some sort of extra legal give-away to banks, later sheepishly admitted it was not the case in a memo released in December 2008.


First, we do not believe Notice 2008-83 "changes" or "overrides" existing statutory law. It simply interprets it, which is the job of the Treasury and IRS.

Second, the Notice should be viewed as just one of a series of recent IRS announcements providing clarity critical to the consolidation and recapitalization of the financial industry. Absent this clarity, the Treasury and IRS would not have been doing their job, and financial consolidation and the restoration of the industry's capital and market stability could have been hindered.

Third, the potential "cost" of the Notice has been overstated. We earlier calculated a possible maximum "cost" from generic, industry-wide figures. Unfortunately, this "cost" has been frequently cited as authoritative, rather than extrapolative. Recent SEC filings with specific data show the likely cost of the Notice to be much smaller, and are instructive as to why this is so.

Marla Singer's picture

c.f. Congress itself repealing the notice specifically with the comment that it was likely illegal. Who cares what Jones Day says?

Anonymous's picture

You are becoming no better than the rest of the media now.

Wamu did not fail. The FDIC/OTS openly admit that Wamu was well-capitalized and meeting all obligations at the time of seizure. That is not failing. They were under no order from the FDIC to recapitalize.

Wamu had billions and billions of dollars on deposit at the parent company level that were held back IN CASE they fell below well-capitalized levels (which never happened).

The FDIC openly admits they took WAMU because they wouldn't be able to cover losses if they eventually failed, at a later time.

Wamu was the only bank seizure, since the crisis, that cost the FDIC exactly $0. There is a very big reason for that.

Miles Kendig's picture

While the Treasury, a part of the Executive branch, is entitled to issue regulations with respect to the various tax laws in the United States, wholesale change of this kind would normally require bicameralsim and presentment, as per the clauses of the Constitution of the same name.

Marla, it is my sincere hope that you are being cynical here.  If the Constitution were really important to our political leadership and the Congress really wanted the responsibility of going on record with those pesky things called "votes" then our government might actually function as advertised.  Unfortunately, Congress does not want responsibility (actually, this condition is pervasive throughout most positions of authority) and the executive branch is more than willing to put out pronouncements as to what the law is.  (Recalling your previous discussion regarding the OGC)

In essence, our government has been and continues to operate via Executive Order and the Code of Federal Regulations.  Unfortunately this is nothing new.  What is new is the unrestrained willingness to be so up front about it, abandoning all pretense concerning the myths of the nation that purport to substantiate that our national life is actually founded upon such quaint concepts as responsible self government and the rule of law. 

Welcome to the real world Marla.  Not to worry.  I stood up when I worked in the federal civil service and asked what was going on and what harm ever came to me from it?

I am Miles Kendig and I will never go back for any amount of money.

Cognitive Dissonance's picture

I agree fully.

Miles, I'm not calling you out in the least by what I'm about to write. This is being said to the general audience reading this.

Where are the upper level civil servants who swore an oath to protect and serve the constitution? That oath did not have a qualifier stating it was only binding on the oath taker if he or she would suffer no professional, political or even physical harm while defending the constitution.

No one forced these upper level civil servants to take the oath and the job. To assume fair weather would always prevail and thus the upper level civil servant shouldn't be forced to make a choice now is cowardice at best. The fact that these civil servants remain in their jobs means their inaction enables and even supports the corruption and allows it to continue.

A dictatorship or any other form of oppressive government could not survive without an army of civil servants providing logistical, legal and bureaucratic support. All it takes for evil to flourish is for good men to do nothing.

A general strike of a few weeks time is all it would take to bring this Ponzi down. The facts of life are simple. We are all deep captured by the Ponzi and its corruption and we don't wish to risk anything as long as we're allowed to keep our own little slice of the pie. If we don't resist, we are complicit.

The problem isn't "them", the problem is "us".


geopol's picture

Exactly!!! I f you invite a coy dog into your house the likelihood that it will shit the floor is  100%,,dogs do what dogs do....This government is a creeping coup, an insurrection against constitution and law from BEGINNING TO END...  Governments do what Governments do.. No surprise here... It's us!!

Miles Kendig's picture

The problem isn't "them", the problem is "us".

There it is folks.

When confronting the monster that governance and its captors have become one of the most dynamic ideas ever created is the power of no while standing.

tip e. canoe's picture

 "I would prefer not to." - bartleby the scrivener 

Careless Whisper's picture

"...but who penned the opinion that posited its legality?"

ummmm, wouldn't that be one of the law firms that do work for WFC or JPM?

Bitch Timmay is a "bitch Stewie" to the bankstas.

Marla Singer's picture

Actually, no, it would be a government lawyer.

Fibozachi's picture

With all due respect: it would be Gotshal; with an outside chance that Skadden or Perella had a say.

Mad Max's picture

Outstanding piece.

crzyhun's picture

Totally byzantine, in my estimation, what I get of this.....we have more rampant Peter not knowing what Paul is handling!