Monday, December 26, 2011

Wall Street, Financial Meltdown, TARP, American Free Enterprise and Haman in the Book of Esther

Here's a personal story that should really capture your full attention and brand the whole sordid episode of the financial meltdown in 2008 deep into your brain so you can fully understand just how much you have been bamboozled by the financial 'wizards' and 'warlocks' on Wall Street and Main Street:

A friend of ours was at a party in New York City just over 3 years ago now in late 2008 on the weekend when all of the final negotiations were taking place about which investment banks to save and who to let die on Wall Street.

The New York investment banker, of course, had let it be known that he was 'worth in the vicinity of $100 million' prior to October, 2008. In pure money terms. Not personal integrity or valor, that is for sure.

Heading into that weekend, the deal to save AIG had been floated which was necessary since Goldman and other large investment banks had a lot of their capital tied up in the collateralized debt obligations (CDOs) and other guaranteed payments between all the large international investment banks.

If the deal was not completed that weekend, as it appeared on Friday evening, the debt liabilities of AIG would overcome all of the net assets of the large investment banks. By Monday morning at the opening of the day's markets, every one of them would be not only technically 'bankrupt' but officially bankrupt and unable to conduct any further transactions around the world.
'Joe' (names changed to protect the innocent) he said: 'Come with me out on the terrace and take a good look around!'
Our friend was more than a little nervous to accompany him for fear of watching him jump off the ledge as so many did during the Great Depression. The investment banker had been drinking heavily, and why not?  Our friend was probably more than a little afraid that the investment banker would actually jump and possibly take him with him.
'Take a look around, {Joe}. All of this, all of my life's work is now gone. Kaput, P-tooey! Nothing is left. We are going to watch AIG take down the whole banking system on Monday morning and with it will go all of this, my wealth and my world!'
We think our friend may have shown some compassion for this so-called 'gentlemen'. Maybe. He probably poured himself and his Wall Street buddy another stiff drink to ease both of their collective pain.

Well, to make a long story short, the AIG deal was cut over the weekend and the financial system of America was put on the life-support system known as the first tranche of the Banking Bailout Plan Part I.

And guess what? This 'so-called gentleman' has now had ALL of his wealth restored through the recovery of the Goldman stock! His net worth probably has topped $150 million this year as a result of your generosity and largesse.

Gives you sort of a 'tingly feeling' all up and down your leg like Chris Matthews, right?

We all know that the financial system of America was about to blow sky-high by the fall of 2008.

Years of extraordinary excess in the form of debt, speculation, greed, contempt and deceipt by the investment bankers on Wall Street and the regular bankers and mortgage bankers on Main Street, along with the usual suspects of real estate speculators, financiers and manipulators set the table for such a magnificent meltdown in October of 2008.  (it happens every single time there is a financial panic on America...or anywhere else in the last 800 years. See 'American Financial Panics' and read Kenneth Rogoff's book, 'This Time is Different: Eight Centuries of Financial Folly')

Couple this with extremely lax regulation, supervision and oversight by Capitol Hill and the White House from 2001-on (yes, that includes the W White House and the GOP-controlled Congress in both the House and Senate) and the stage was set for the American financial system being one short weekend away from completely melting down like Chernobyl or Three-Mile Island or the Fukushima Nuclear Reactors in Japan.

Perhaps less than 24 hours according to some accounts.

Read 'On the Brink' by Hank Paulson; 'The Big Short: Inside the Doomsday Machine' by Michael Lewis; and 'Too Big To Fail' by Andrew Ross Sorkin if you haven't done so already.  A small budget B-level movie producer truly could make a great slasher horror movie series based on these 3 accounts of those dark days in late 2008 which would rival any trilogy of Freddy Krueger, Leatherface and Michael Myers. Combined.

Why does any of this matter to us in 2011?

Well, because many, perhaps a majority of the Wall Street financiers and big-bank presidents profiled in these horror stories are still working in their chosen fields of 'mismanagement', er, 'malfeasance', er... 'work'!

And guess what? They have had almost all of their wealth regenerated and restored to them by the good folks of the United States of America. Namely you. The American Taxpayer. In the form of the TARP bailouts among other machinations of the federal government and the Federal Reserve over the past 3 years.

If it wasn't 100% solely the gift of you, the Great American Taxpayer, then the balance of the funds used to restore the wealth of Croesus to King Croesus himself came from the unknowing and/or unwitting government of Red China who provided funds in the form of more lending to our profligate ways of governance in America again.

Ultimately, how these things always have ended in history, the inflation that inevitably occurs following such financial debacles will provide the ultimate 'way out' for the federal government to get out of paying off these massive debts dollar-for-dollar.  Inflation is not going to be friendly to your standard of living, or your children's future, nor to your savings which will be eroded downward in a commensurate manner.

These guys might just be the 'Hamans' of the 21st century. Haman the Agagite was the manipulative Prince under King Xerxes who not only wanted to kill Mordecai in the Book of (Queen) Esther for failing to kneel before him but to destroy the entire Jewish people to boot. Haman plotted and connived and schemed to get poor innocent Mordecai to step up on the gallows and have that noose slipped around his neck but in the end,Haman got his just due comeuppance on the very same gallows he built to hang Mordecai.

Our modern-day financial manipulators just have not been called to account yet for their actions in the worldly sense.

Maybe they will in the spiritual, moral and justice realms one day.

We are assuming there must be some honest, God-fearing people on Wall Street and in the Main Street banking system somewhere in this great land of ours.  Someone who actually has taken their responsibility to manage depositors money seriously and at least tried to do the right thing when making money the easy way seemed to take precedence over doing it the right way.

But These Wall Street Bankers and Financial Services Execs.  They plotted and schemed and connived their way into protecting their wealth and way of life instead of doing 'the right thing' and just declaring bankruptcy in 2008.

Which would would have wiped out their personal wealth but it would have also allowed a planned reorganization of the assets of Goldman Sachs to continue doing business so the rest of the financial system would not have completely collapsed around us all.

It would have been the right thing to do. For them and for our country.

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