Topic: Government Boondoggles
Freddie, Fannie, and those Madcap Lehman Brothers Chicken Little writes the headlines. And he has a point.by Random Outlier
(libertarian)
Monday, September 15, 2008
Writing "hot" is strolling in a free-fire zone. The reporter's observations and interpretations are speckled with the ominous red dots of a thousand laser sights as event piles on event, unguided by anything resembling human reason.
But how can a guy resist reacting to an AP headline at sunrise on an investing Monday morning? To wit:
"Wall Street Meltdown; Lehman Files for Bankruptcy, Merrill Lynch is Sold, AIG Seeks Capital."
I haven't seen a header that sensational since the Cubs won a pennant back in the Reagan years.
Boiling down the Chicken Little headlines, we find:
1. Lehman Brothers, our fourth largest investment bank, is broke.
2. So is Merrill Lynch, an American investing kingpin for more than a century.
3. So is AIG of New York, the world's largest insurance company.
4. The state-sponsored FNM and FMA -- Fanny Mae and Freddie Mac -- are already socialized and back doing business as usual -- loaning your money to any critter with a good story.
5. Prodded by Ben Bernanke and Henry Paulson, ten of the world's largest banks have promised $7 billion each to a rescue fund for the next banking giant to discover it's net worth depends on the auction value of the staples in the supply cabinet and its CEO's Louis IVX desk. That $70 billion is a lot in the same sense that the 138 bucks I've saved up toward a new Hummer is a lot.
---
Number 5 may be the most interesting point. In frantic weekend of meetings Ben and Henry refused to order up enough freshly printed U.S. currency to keep keep the financial naifs at Lehman in business.
There are private suspicions they intended to until the government accountant who can do arithmetic (there's seems to be one, a part-timer) reminded them the federal government is also about out of wealth -- maybe to the point where no one is willing to lend the Fed enough ink to wet the presses.
So the Fed and Treasury compromised. (a) No Lehman bailout. (b) No new cash for anyone, this morning, at least. (c) But because we really love you -- "you" meaning the Rolexed folks who brought you the housing meltdown of '07-'08 -- we'll make a few billion more available by taking a new kind of collateral -- your shares of common stock -- for government loans.
Now, in addition to scrap-paper mortgages, Ben's Fed promises to loan your tax dollars on the security of common stock.
Aren't you glad you saved your Enron share certificates?
(Some readers may recall a previous commentary on the subject at
http://www.nolanchart.com/article3190.html
where your reporter noted that Ben was willing to lend cash to Wall Street against your miserable brother-in-law's in-foreclosure mortgage papers.)
---
If you want to assess blame you're in a target-rich environment, although you risk the triteness in which I here engage because anti-statists have been saying it for decades.
At base, this latest financial panic occurs because our governments have decided that prosperity can happen without the real wealth represented by an honest currency.
Actual wealth is a dependable store of value -- which does not describe our American greenback or virtually any of the other world currencies.
A store of value is that cup of pre-1982 pennies you're hoarding. It can always be melted down for beer mugs or copper wire. What can you do with a c-note when it takes fifty of them to buy a book of matches?
Actual wealth is pile of firewood in the back yard. Fifty pounds of jerked meat. A
Buck knife or the machinery to make one. An acre of arable land.
Actual wealth is a well-trained mule to cultivate your field when the oil wells go dry. Of course, an ill-trained mule isn't worth much, which leads us to the subject of politicians.
With almost no exceptions -- and Ron Paul is one of them -- politicians love the idea of currency whose value is based on their whims, period.
Working through the berries* they hire, they can give everyone exactly what everyone wants, and what most everyone wants is a chance to pick his neighbor's pocket.
Well, not his neighbor's, exactly. He'd like his victim to be a faraway "rich" stranger. This tends to dampen whatever damage might be done to his vestigal moral and practical reluctance to rob the next-door folks. You never know when you may need to borrow a cup of sugar.
The politicians can't create a dependable mule, despite their appearance of descending from one.
What they can do is create the appearance of one, and with an economically naive voter set to please, they can get away with it for a long time simply because of the truth that, having tax-access to the entire wealth of a nation, they can turn tricks that you and I can't.
Let's say Joe has $100,000 to satisfy his million-dollar lifestyle ambitions. With a good tale to tell the money lenders he can have it -- the McMansion, a couple of Infiniti's and a Harley in the garage, dates with Eliot's Kersten every once in a while.
He pays Visa with Mastercard, floats a few signature loans at the banks, delays the mortgage payment. In not too long he works his fiscal floating ways down to patronizing hock shops and collecting aluminum cans. In a year or two he's done -- Chapter Eleven and living on the tenuous charity of relatives and friends.
The Feds do the same thing, but with well-oiled presses and the power to tax, they have no trouble warding off the collection agents for a very long time -- decades and decades as the history of the past generation or three has shown.
But like Joe's, a time of reckoning eventually occurs. Call it "Today." Or maybe "Tomorrow." Pretty soon, anyway.
Meanwhile, the politicians deliver free medicine, free food, free money. It return they keep their seats.
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The accompanying political danger may be more fearsome than the economic consequences of believing that transfer payments and wealth are simply two terms for the same thing.
As today's headlines scream tocsins of financial meltdown and the end of life as American consuming units know it, the politicians bray indignantly for more federal regulation of the financial markets.
They know damned well that their seats depend on the happiness of your sister's worthless husband who truly believes that being the best floor-sweeper in any East LA body shop entitles him to that McMansion at Mailbu. If they validate the idiocy, he votes for them.
So what we're hearing this morning is that we need to turbocharge the presses over at the Bureau of Printing and Engraving but let the likes of Ted Kennedy and Chuck Schumer -- aided and abetted by everyone from Palin to McCain to the MTV Obama-ites -- create new laws about who gets it, how it can be spent, what it's worth, and who gets to make up all the new rules.
A humble suggestion, if you please, and it would be gratifying if a Ron Paul staffer would remind his boss of the concept for purposes of intense explaining and exhorting.
The number of new market-regulating laws we need is zero-- or fewer.
As libertarians and objectivists we are attracted to the Ayn Rand notion that one the the few moral functions of rational government is to outlaw and punish violence and its crucial corollary that FRAUD IS SIMPLY THE INTELLECTUAL EQUIVALENT OF VIOLENCE.
Pardon the all-caps, but the invisibility of that idea in these latter-days justifies a brief shout.
Fraud is already illegal and has been all the way back to the Code of Hammurabi, at least, and...
It is fraud for a bank or broker to lie about its balance sheet, and many did. Almost all have avoided prison; many are getting comfortable again with lips firmly on the taxpayer tit.
It is fraud for a mortgage peddler to tell a $50,000 a year welder he can afford a $500,000 home with travertine and a lap pool.
And don't even get me started on the level of fraud inherent in a public education system which hands out diplomas implying that the graduates can do the kind of elementary calculating necessary to defend themselves against the pin-striped criminal at Wall and Broad.
There is a law on the federal books which provides a starting point. The Lanham Act deals mostly with commercial trademark law, but has a section on commercial fraud.
Stripped of legalese it says that if you tell a lie with intent to profit, you're a criminal and may go to prison.
Dust off the Lanham Act. Bring on the prosecutors. Don't get nervous about the cost of the new prisons rquired. There's a solution.
Ponder the relative evil of certain crimes. The solution will quickly become obvious.
Release a kid in for smoking pot or snorting a line of cocaine. Give his steel cot to a mortgage broker or CDO peddler.
Sounds to me like one of the better bargains available to America, 2008.
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* "Berry, offical new libertarian term for "bureaucrat." cf:
"Ron Paul, the Berries, and the Value of a Human Life"
http://www.nolanchart.com/article4217.html
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Posted By: nader PAUL mckinney
Date: 2008-09-15 09:23:00
Sunday Bloody Sunday The Wall Street Shuffle
ralph DR RON cynthia
What have they done to the earth? What have they done to our fair sister? Ravaged & plundered & ripped her & bit her Stuck her with knives in the side of the dawn & tied her with fences & Dragged her down!
LEHMAN BROTHERS' mortgage troubles provides a yet further occasion to call attention to FORECLOSURE FRAUDS being carried out by via deceptive collections and Wells Fargo through use of the judicial system to further real estate racketeering and IRS fraud. In conjunction with the big Lehman Brother picture, the following is a small (local) component affecting Lehman's decline. *See the court pleadings and more posted at: http://www.lawgrace.org/2008/09/14/lehman-brothers%E2%80%99-mortgage-troubles-nationally-evidence-of-foreclosure-fraud-deception-and-conspiracy-with-wells-fargo-deceptive-judicial-filings/ Despite probes into factors of the mortgage crisis, there has been almost no investigation of the most lethal mortgage mess component: FORECLOSURE ATTORNEYS DEBT COLLECTION ABUSES and JUDICIAL COLLUSION. Congress needs to seek the whereabouts of perhaps billions of dollars and massive amounts of real estate that winds up in the collector attorneys' possession -as well as examine the scores of attorney bankruptcy court frauds.-------------
Referring to a foreclosure case entitled: "Lehman Brothers Bank v. Clement Bailey," case #2007-5610 in Orleans Parish Civil District Court, and New Orleans federal case #08-3881, entitled: "Wells Fargo v. Clement Bailey, JP Morgan Chase, Bank of America, and Allstate Flood Insurance Program." The debt collector attorney filed a Lehman Brothers foreclosure in State Court claiming Lehman holds the note, but Wells Fargo filed the lfederal lawsuit claiming Wells Fargo owns that same note. If Wells Fargo succeeds in concealing Lehman Brothers' (true or untrue) claim against Clement Bailey's property, Wells Fargo and Mr. Adcock will wound up gleaning $$$$ --most likely from JP Morgan Chase, Bank of America, and Allstate Flood Insurance.
**Exhibits on the www.lawgrace.org website:**
*Orleans Parish Civil Sheriff Docket record for the Lehman Bros. v. Clement Bailey foreclosure filed by debt collector attorney Herschel C. Adcock, Jr., showing docket entry "ADA" code for of $2,203.00 to Adcock. *Letter rom Adcock to J.P.Morgan Chase, informing Adcock’s representation of Wells Fargo, and seeking $$$ on Wells Fargo's behalf while at the same time maintaining a foreclosure case on Lehman's behalf. *Page one of the lawsuit that Wells Fargo filed in state court against Bailey, J.P. Morgan Chase, Bank of America, and Allstate Insurance. Also, proof of deliberate foreclosure fraud, and Securities fraud becomes clear when false IRS form 1099's become filed by lenders like Wells Fargo. See>>> http://www.lawgrace.org/2008/08/08/my-august-8-2008-statement-to-the-louisiana-secretary-of-state-office-of-financial-institutions-concerning-wells-fargo-irs-and-mortgage-frauds-sham-foreclosures-and-judicial-collusion-and-national-app/
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