AIG a gold standard for fiascoes

By Rhonda Swan

Palm Beach Post Staff Writer

Friday, March 20, 2009

Treasury Secretary Timothy Geithner may have the "complete confidence" of President Obama, but he doesn't have mine. Ditto for Federal Reserve Chairman Ben Bernanke.

In fact, American International Group's $165 million bonus fiasco is one of the many blunders the U.S. government has made in handling the worst economic crisis of my lifetime, which has me giving serious consideration to the so-called conspiracy theorists.

My friend Norman, who studies conspiracies like a college senior cramming for a must-pass final exam, last year introduced me to the documentary America: Freedom to Fascism, late director Aaron Russo's exposé of the illegal and unconstitutional income tax and the Federal Reserve that is not federal and has no reserves.

It's a fascinating film that certainly got me thinking, if only for a while. Then the economy collapsed. The so-called experts can't fix it. And now my income tax dollars, which I'm not convinced I should be paying, are lining the pockets of the suits who got us in this mess.

Are Mr. Russo, G. Edward Griffin, author of The Creature from Jekyll Island: A Second Look at the Federal Reserve, and U.S. Rep. Ron Paul, R-Texas, right? They maintain that the Fed is an illegal, private banking cartel created surreptitiously by the richest and most powerful bankers in the world during a secret meeting on Jekyll Island, Ga. The Fed is not a part of the U.S. government, they say, but in cahoots - I mean partnership - with it. The Fed controls our monetary system - with no oversight from our government - and its profits are shared with financial interests around the world.

It sounds pretty far-fetched until you learn that AIG used some of its $170 billion in taxpayer bailouts to send $11.9 billion to France's Societe Generale, $11.8 billion to Deutsche Bank of Germany, and $8.5 billion to Barclays of Britain. Then you hear that Mr. Bernanke will save the day with a $1.2 trillion effort to lower mortgage rates and other consumer debt to spur spending and revive the economy. But he's doing it by spending $300 billion on government bonds and $750'billion on mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

I'm no math whiz, but how can Fannie and Freddie guarantee anything when the U.S. government - itself broke - just bailed them out? Sounds to me like we're just printing worthless paper on top of worthless paper and spreading around the debt. In other words, fiat money, irredeemable paper currency.

It's just what Franklin Roosevelt promised wasn't happening during the Great Depression in 1933 when he ordered private citizens to turn in their gold to the Federal Reserve in exchange for pieces of paper. "We do not want and will not have another epidemic of bank failures," President Roosevelt said. "This currency is not fiat currency."

Wrong! Seems to me that if we'd stuck with gold and hadn't turned over control of the nation's money to an entity our government doesn't control, we wouldn't be in this mess.

Consider this response from former Fed Chairman Alan Greenspan to a question by NewsHour's Jim Lehrer about the kind of relationship the Fed chair should have with a U.S. president. "The Federal Reserve is an independent agency, and that means basically that there is no other agency of government which can overrule actions that we take," Mr. Greenspan said. "So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't frankly matter."

In other words, don't question the agency that Mr. Bernanke admitted in 2002 caused the Great Depression. That's nerve!

Maybe it's time we stop bailing out the AIGs of the world, shut down the Fed and start over.

Conspiracy theory or not, that's change I can believe in.

http://www.palmbeachpost.com/search/content/opinion/epaper/2009/03/20/a18a_swancol_0320.html#comments

Ron Paul: Culprits Of Financial Collapse Should Be Arrested

Not treated as saviors and given more power to “fix” the problem that they created

Paul Joseph Watson
Prison Planet.com
Thursday, March 12, 2009

Congressman Ron Paul says that the people responsible for the economic crisis should not be hailed as saviors and given more power to fix the problem that they created, but arrested and criminally prosecuted.

Paul told the Alex Jones Show that the only way the private Federal Reserve could be brought under control would come as a result of a mass uprising, noting that there is a lot more awareness in Washington about the Fed’s contribution to the economic crisis.

The Congressman has two bills before Congress, one to abolish the Fed altogether and another to audit the organization.

“Today they’re protected, they’re in total secrecy and they’re protected by the law - if 1207 is passed we have an audit and they have to answer the questions and I figure, if we ever get that far and get the exposure and get the transparency that we need then people will wake up and realize, why do we have them at all,” said Paul.

The Congressman’s bill to audit the Fed is similar to another bill introduced by Bernie Sanders in the Senate which is aimed at getting the Fed to answer specific questions about where $2 trillion in bailout funds has gone, a subject that Bloomberg News sued the Fed simply to try and discover. Staggering scenes unfolded last week at a Senate budget Committee meeting when Bernanke arrogantly refused to state where any of the bailout money had gone despite repeated questioning by Sanders.

Asked if the people who caused the economic collapse should be trusted as saviors or criminally charged, Paul responded, “We should have minimal government, but even in a minimalist government your government is supposed to deal with theft and physical harm and fraud, and that’s what’s going on and that’s what they ignore or protect….it’s horrible what they’re doing….and they should be prosecuting these people, these people should be in prison.”

The Texas Congressman also discussed Obama’s monetary policy, noting that every time a new government initiative was announced to supposedly rescue the economy, the stock markets sink.

“In spite of how a lot of people think the markets don’t know what’s going on, the markets are pretty smart, so the fact that they’re not responding, in spite of all this stuff the government is doing, every time the government comes up with a new program, the markets go down even more,” said Paul, noting that free market advocates were right in warning that the problems will only begin to be resolved once liquidation is allowed to occur.

Asked how bad the economic picture would get, Paul responded, “I think it’s going to be very prolonged, I don’t see any rebound, markets may come back up and that sort of thing but to rebound I would expect it to last every bit as long as happened in the 30’s,” adding that the last depression did not really end until after a world war.

“I think it’s going to be a long long time but now we live in greater danger because people are far more demanding, they believe they have a right to their neighbors property and that’s why there’s liable to be violence….ultimately they’re going to destroy the dollar,” said the Congressman, adding that the only quick solution to the crisis was to follow constitutional principles.

Listen to the interview with Ron Paul below.

Research related articles:

1. Ron Paul Scolds Bernanke For Skipping Congressional Financial Hearings
2. Ron Paul: Printing Money Only Prolongs The Pain
3. Ron Paul Grills Bernanke: “You Can’t Reinflate The Bubble”
4. Ron Paul: Fear Based Bailouts Constitute Economic Terrorism
5. Ron Paul on The Alex Jones Show: “A Global Financial Order”
6. Ron Paul: Government Spending Driving Us Into Depression
7. Paul: Wars planned to save US empire
8. Ron Paul: Bailout Will Destroy Dollar, World Economy
9. Ron Paul: Greenspan, Bernanke Should Be Criminally Charged
10. CNBC Anchors Mortified That Ron Paul Was Allowed Air Time
11. Ron Paul Slams “Born-again Budget Conservatives”
12. Ron Paul: Obama Foreign Policy Identical To Bush

Central banks don't want their leased gold back

Have you wondered how the scam to suppress gold prices really works? Then, this is a must read...

Submitted by cpowell on Sat, 2009-02-28 04:25.

Section: Daily Dispatches

11:12p ET Friday, February 27, 2009

Dear Friend of GATA and Gold:

Tonight your secretary/treasurer had an exchange about gold leasing with a participant in the wonderful USAGold.com forum sponsored by Centennial Precious Metals in Denver (http://www.usagold.com/cpmforum/). Since gold leasing is at the center of the gold suppression scheme and is a bit complicated, the exchange might be worth sharing, so it's appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Gold Leasing by Government -- A Question

"How long can the U.S. government protect the dollar's value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price?"

-- Former Assistant U.S. Treasury Secretary Paul Craig Roberts in a recent essay (http://www.counterpunch.org/roberts02242009.html)

I am hoping someone can provide me with an explanation of how this machination works. The government leases gold to a dealer. This means, I presume, that the dealer gets to take physical possession of the gold for a period of time and pays a fee for the privilege. What happens when that time expires? The gold must be returned to the government, and unless the price of gold has fallen, the dealer takes a bath. What am I missing?

-- Tahoma.

*

Tahoma, to reply to your question about gold leasing. ...

It works this way.

While central banks traditionally have said they lease gold to earn a little money on a supposedly dead asset, in 1998 Federal Reserve Chairman Alan Greenspan told Congress that this was not true. Central banks lease gold, Greenspan admitted, to suppress its price:

http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

For years prior to 2000, gold leasing fueled what was called the gold carry trade. Investment houses leased gold from central banks, paying the central banks a tiny annual interest rate, usually well below 1 percent of the value of the gold leased, and then sold the gold into the market and invested the proceeds in government bonds, earning perhaps 5 percent annually. The huge difference in interest rates meant a virtually free stream of income for the investment houses, income paid by central banks as interest on the government bonds purchased by the investment houses, secure as long as the investment houses could be protected against sudden rises in the price of gold.

Gold-leasing governments liked this scheme because it supported government bond prices and government currencies and kept interest rates down — below where a free market would have set them. The results were the worldwide, credit-fueled boom, a vast misallocation of capital into unprofitable, unsustainable enterprises, and the worldwide bust now under way.

When the price of gold reached bottom in 1999 and turned up, threatening the investment houses that had sold leased gold even as Western central bank gold reserves began to decline markedly, the Western European central banks, under the supervision of the U.S. government, announced the Central Bank Gold Agreement:

http://www.reserveasset.gold.org/central_bank_agreements/cbga1/

The U.S. government was not formally a signatory to the agreement, but it was announced in Washington and has been called the Washington Agreement. So it is fairly surmised that the U.S. government helped organize the agreement and had a big interest in it -- the continuing support of the U.S. dollar and U.S. government bonds through gold price suppression. Gold price suppression was the essence of the "strong dollar policy." The Washington Agreement was a plan of dishoarding and sale of the gold reserves of the Western European central banks.

While the agreement's participants said they meant to support the gold price by limiting and co-ordinating their gold dishoarding, in fact they were arranging cash settlement of their gold loans, allowing the investment houses that were short gold to close their positions in cash rather than in gold itself. The investment houses were allowed to settle in cash because if they had been required to settle in gold, they would have had to go into the open market to get it and the gold price would have shot up very high, bankrupting the investment houses and greatly diminishing the value of all government currencies and bonds.

That is, central banks do not want their leased gold back. That is what you are missing.

Ever since the Washington Agreement in 1999 the Western central banks have been managing their controlled retreat with the gold price, letting gold rise a fairly steady 15-20 percent per year on average, stretching out their dishoarding as far as they can while trying to maintain some gold on hand for emergency intervention in the currency markets.

Barrick Gold, the biggest hedger (short) among the gold miners, confirmed all this when it announced some years ago that most of its gold loans had 15-year terms and were what the company called "evergreen" -- always allowed to be rolled over year after year so that the gold never had to be repaid as long as Barrick paid the tiny amount of cash interest due on it every year.

Barrick is short more than 9 million ounces of gold and until a few years ago was short much more than that. Who would lend so much gold indefinitely and for a mere pittance in interest? Only a central bank that meant to suppress gold as part of a scheme to keep government currencies and government bonds up and interest rates down.

Defending against Blanchard & Co.'s gold price-fixing lawsuit in U.S. District Court in New Orleans in 2003, Barrick went so far as to claim to be the agent of the central banks when it leased and sold gold and to share their sovereign immunity against lawsuit:

http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf

That is, gold is only the tail on the dog here. But it's a very strong tail.

You can find more detail about the gold price suppression scheme here:

http://www.gata.org/node/6519

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at http://www.gata.org/.

http://www.gata.org/node/7208

Bought & Paid For: Geithner as an Example of Obama's Brand of "Change"

Some of us actually bought it.

"Hope," "Change," and "Yes we can." The spirited mottos of newly-elected President Obama.

These days it's sounding much more like "Yes, we can change hope," as Barack's zealous inexperience collides with one of the steepest learning curves ever faced by an American President.

But despite a handful of alarming early mistakes - like appointing several tax-dodgers to what will no doubt be the "spendiest" administration in U.S. history - surely Obama can bring some kind of change to the White House. It won't be politics as usual, right? And it especially won't be some deplorable Chicago brand of pay-for-play politics, right?

Despite the "truthiness" of Barack's promises...the cold, hard facts would suggest otherwise.

Ladies & Gentlemen of the Jury, I Give You Tim Geithner

You know, George W. Bush left a vacuum in the White House when he left. There wasn't anyone left who could kill the markets with a single speech. Well...we're happy to report that Tim Geithner stepped up to that challenge and met it head-on, tanking the Dow by about 400 points in his first speech.

Tim Geithner. You may recall that he was one of the few Federal Reserve representatives who could explain the Bear Stearns deal in layman's terms. He's a young and uneasy looking go-getter with a silver spoon lodged down his throat. He's not a big bank alumnus like Paulson. And he was picked by the demagogue of "change,"...so we all agreed to overlook his shady, tax-dodging ways.

But he's got other talents as well.

And no, we don't mean making funny faces and embarrassing poses for the camera (which we're convinced to be his true purpose).

No, he's a master of seeming like he's in two pockets at the same time. Incredible really. All at once, this "rich kid" has for his whole career seemed to be a champion of the people and a friend of the banks. Nevermind the fact that this perception is now falling apart on a daily basis.

But in the words of history's bestselling book, "No man can serve two masters." So we've got to ask ourselves...who's little Timmy really working for?

The Proof...

A quick scan of the Internet will give you the table listed at the right. These are the top contributors to Barack Obama's Presidential campaign. This isn't a "secret" or a "conspiracy," it's a matter of public record.

On a tangent, it's remarkable to see that all these banks could still muster campaign money...despite needing taxpayer relief to the tune of tens - and even hundreds - of billions of dollars. Then again, it's probably good business...campaign contributions will keep the gravy train from getting derailed.

But we circled these three names in particular for a reason.

You see, something strange happened on the way to the Treasury. After months of Obama railing against the wicked ways of corporate lobbyists, Geithner appointed the former chief lobbyist of Goldman Sachs to serve as his head of staff.

Just wait...it gets better.

Geithner's new deputy secretary is a former CEO of Citigroup. Another CFO from Citigroup is now assistant to the President...and one of his assistants also came from Citigroup. To finish out the roster, a member of Obama's Economic Recovery Advisory Board...yeah, he used to work at UBS.

But wait; there's more.

Geithner's "Brain Trust" of unofficial advisors includes John Thain - who formerly worked with both Goldman and Merrill Lynch - Gerald Corrigan (another former Goldman exec) and Hank Paulson (yet another former Goldman Exec). The icing on the cake here is Alan Greenspan, who exploited his own disastrous mismanagement of the Federal Reserve in a brief stint with Pimco last year, who's also got Geithner's ear.

Which leads us to ask...

Is there Any Question as to WHO is Steering Our Ship of State?

To which the prompt answer is; no.

And to be honest; it would be hard to argue that this is anything other than a perfect example of "Blagojevich-style" pay-for-play Chicago politics. This isn't a conspiracy theory...it's perfectly spelled out in plain sight. "You help me get elected, I'll help you fleece my taxpayers," "Deal!"

But let's pull back and take our anger out of the situation.

Yes, banks are good for the economy. That much is obvious. And when the banks get their "just deserts" (as in the 1930s or the Panic of 1873) the people suffer for decades. Sounds pretty simple.

But this isn't the 1930s, my friend.

And we've got to remember that Paulson, Geithner, Thain and Greenspan...it was their leadership that got us here in the first place. Their institutions...their organizations that killed the golden goose and the financial system, bringing the economy down with it.

It's almost like getting into a cab with Evel Knievel behind the wheel. Thanks...but no thanks.

http://www.sovereignsociety.com/2009Archives1stHalf/021909BoughtPaidFor/tabid/5336/Default.aspx

Bailouts for Bunglers and Lemon Socialism

By PAUL KRUGMAN

Published: February 1, 2009

Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government — but the president says some very harsh things about you before forking over the cash.

Am I being unfair? I hope so. But right now that’s what seems to be happening.

Just to be clear, I’m not talking about the Obama administration’s plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do. (If that was what it was really doing.) I’m talking, instead, about the administration’s plans for a banking system rescue — plans that are shaping up as a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.

When I read recent remarks on financial policy by top Obama administration officials, I feel as if I’ve entered a time warp — as if it’s still 2005, Alan Greenspan is still the Maestro, and bankers are still heroes of capitalism.

“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” says Timothy Geithner, the Treasury secretary — as he prepares to put taxpayers on the hook for that system’s immense losses.

Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.

And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administration’s response to the financial crisis.

Now, something must be done to shore up the financial system. The chaos after Lehman Brothers failed showed that letting major financial institutions collapse can be very bad for the economy’s health. And a number of major institutions are dangerously close to the edge.

So banks need more capital. In normal times, banks raise capital by selling stock to private investors, who receive a share in the bank’s ownership in return. You might think, then, that if banks currently can’t or won’t raise enough capital from private investors, the government should do what a private investor would: provide capital in return for partial ownership.

But bank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.

My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.

If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair — but prices would, The Financial Times reports, probably be based on “valuation models” rather than market prices, suggesting that the government would be making a big gift here, too.

And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.

Will there at least be limits on executive compensation, to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address — but according to The Washington Post, “the administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid” because “harsh limits could discourage some firms from asking for aid.” This suggests that Mr. Obama’s tough talk is just for show.

Meanwhile, Wall Street’s culture of excess seems to have been barely dented by the crisis. “Say I’m a banker and I created $30 million. I should get a part of that,” one banker told The New York Times. And if you’re a banker and you destroyed $30 billion? Uncle Sam to the rescue!

There’s more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

http://www.nytimes.com/2009/02/02/opinion/02krugman.html?_r=2