Wednesday, April 21, 2010

Jail the Banking Confidence Tricksters

Clever bank executives lend money at mortgage to poor people unlikely to be able to repay it. The bankers do not mind because the housing market is rising. They know that when they inevitably foreclose on the mortgage, the property will have risen in value, and they will be able to sell it on, get back their mortgage money and have some left as profit.

This scheme is fraudulent because it is effectively a “Ponzi scheme”, in other words, it is is pyramidal selling. It works as long as the housing market is rising according to expectations. Housing looks like a reliable investment, so people are keen to enter the property market in the hope of making a profit. But eventually, the market will saturate, as it always does once everyone able to enter the base of the pyramid—expecting to move up it—has done. Once this happens, there is no one left to buy up the foreclosed houses, and expectations change. The housing market stutters. Banks cannot sell foreclosed properties, stop lending on mortgage, and the house market collapses.

The banking gangsters—banksters, as Rooseveldt called them—know this, but cunningly decided to package the mortgages they had lent out into bonds giving anyone willing to buy them a proportion of the annual profit from houses foreclosed and sold on. While the housing market was rising, they looked like a risk free investment and were snapped up by stock market traders and even other banksters. Of course, the banksters knew they had to fail ultimately, so devised a cunning plan to get rich while the gravy train was still running. They paid themselves massive bonuses because they were turning over so much money trading in these junk bonds. Bonuses were in cash, so they did not have to risk holding the bonds. Their customers, including the customers and shareholders of the banks took that risk, and even the general public, because the banksters knew that no government could allow major banks to collapse. So the buck ultimately ended with the taxpayer—you and me!

That is what happened, and that is why banks have been given $trillions to bale them out—$trillions of our money.

And have the governments sought to catch the banksters who devised this scam, and others like it, doling out $billions of our money in bonuses to themselves? Not a bit of it. Politicians hope to get their rewards when they leave office by cashing in on the gratitude of the banking gangsters by becoming one.

We all knew it was a scam, except—it seems—governments. But the banks have been so blatant and unconcerned that they will be caught and convicted that they have been utterly blasé about it all. Now we have evidence, perhaps proof, that Goldman Sachs knew all along they were acting fraudulently. One of its executive directors emailed:

The whole building is about to collapse… only potential survivor, the fabulous Fab [himself, Fabrice Tourre]&hellip standing in the middle of all these complex highly leveraged, exotic trades he created without necessarily understanding all of the implications of these monstrosities!!!

He understood enough to know the bonds were junk and were about to collapse, but Goldman Sachs approved because he was indemnifying the business by selling the bonds while being in collaboration with Paulson and Co who were short selling the bonds knowing they were junk, so they could buy them at less than they sold them, profiting from the knowledge that they were bound to end up worth less.

Meanwhile Goldman Sachs the famous banksters are paying out $5 billion in bonuses. Or rather we are paying out the banksters $billion bonuses.

It has to be time these people were charged. Do not vote for anyone who does not:

  1. undertake to stop banking fraud
  2. puts the fraudsters on trial and jails the guilty ones at the top
  3. breaks up banks that are considered too big to fail
  4. splits lending banks from trading banks
  5. properly and firmly regulates the banks that remain.

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