The Blameless Rich - FDL

[WillyT]

The Blameless Rich
By: masaccio - FDL
Sunday August 21, 2011 11:00 am

“… Where all, or almost all, are guilty, no one is.”
Hannah Arendt, Eichmann in Jerusalem: A Report on the Banality of Evil.

<snip>

From the moment it became clear that the rich in their sucking greed had destroyed the economy, there was a chorus from their flacks explaining that everyone was responsible for the Great Crash. We all played a part in the destruction. This became the clear single explanation, despite the volumes of work placing blame squarely on a few thousand people. Preet Bharara, the US Attorney for the Southern District of New York, uses the fact that many people were involved in fraudulent sales of real estate mortgage-backed securities as an excuse for not bothering to investigate.

Here’s a recent example. At a Book Salon last Sunday, I asked the author, Matthew Richardson, several questions about the people who caused the problems he described in his book on the Great Crash. He offered excuses for all of them, and finally offered this quote from his book, attributed to some unknown person: “The shapers of the American mortgage finance system hoped to achieve the security of government ownership, the integrity of local banking and the ingenuity of Wall Street. Instead they got the ingenuity of government, the security of local banking and the integrity of Wall Street” (edited slightly). Heh, heh, everyone had such good intentions, too bad it worked out so badly for everybody else.

We don’t have a lot of experience dealing with massive frauds that can only be perpetrated through large bureaucracies. Most frauds are limited to a single player or a very small group. Bernie Madoff stole billions with just a few employees. Even the S&L crisis was the result of individual frauds at hundreds of institutions.

The Great Crash required the coordination of tens of thousands of people. It required massive changes to the regulatory structure, both in weakening regulation and weakening regulators. It required dozens of economists and think tanks to publicly support the inane ideas that justified this weakening. These things weren’t an accident. They happened because they met the desires of a very small number of people who had the power and the ruthlessness to get those changes. With those changes, the rich picked up the American economy, shook every last penny they could from its pockets into their own, and threw it into the depths of the Lesser Depression. But we didn't intend to destroy it, they say, so we get to keep all the money and we can't be punished.

<snip>

More: http://firedoglake.com/2011/08/21/the-blameless-rich/

:kick:

[sabrina 1]

1. Excellent article, thank you for posting.

So now, what do we do to get our money back from these criminals?

And to stop them from making US pay their bills?

Say 'no' to Austerity, which is simply a way of the Rich passing on their gambling debts to innocent people who had nothing to do with the disaster they created.

Why DO we let them get away with it?

[Sherman A1]

2. Agreed

We need to turn them upside down and shake them until all the money comes back to the people that actually produce the work from which they have benefited.


Or we could declare them "enemies of the state" and provide them with some lovely beach front accommodations at a nice Federal Facility in the Caribbean Sea, allowing them to enjoy some of the new "water sports" that have become so popular there.

[LWolf]

3. k&r

[slipslidingaway]

4. knr - Who could have known???

1993 and 2000 Derivatives articles...Who could have known???
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3098855&mesg_id=3099613


A few snips from the articles ...

1993

"...With what are now called derivatives, we move from investment, and purchases and sales of hard commodities, to speculating on the future price or yield performance of what were once investments, and relatively simple, economically necessary transactions. It would be like going to the horse races to bet, not on the race, but on the size of the pot. Who would care about what's involved with getting the runners to the starting gate?"


UPDATE: BANK DERIVATIVES EXPOSURE
MARKET OBSERVATIONS - 2/3/2000


"Update Time...In fact, quite timely, really. Surely with the volatility in the bond market these days, it's high time we checked in on those wacky money center banks and their highly flammable derivatives exposure. All sarcasm aside, the reason we continue to update you each quarter on these numbers is that derivatives are part of "what's different this time". In 1990, the total notional value of derivatives outstanding "off" the balance sheet of the commercial banking system in the U.S. was $6.2 trillion. As of 3Q 1999 (the latest numbers released), the value has skyrocketed to over $35 trillion. Needless to say, the number is quite significant. See what we mean?

....Enough of the optimistic, lighthearted banter. A second, and equally important, reason we continue to focus in on derivatives is that these instruments have become so widespread in use that derivatives themselves can have a significant impact on price volatility in the cash markets that underpin the very values on which the derivatives contracts are based. The last point regarding the derivatives markets that truly gives us pause is how little is spoken about them on Wall Street (despite every major trading firm heavily relying on their use). The striking characteristic of derivatives use is the sheer lack of mandated disclosure. There isn't even an attempt at some type of simplified analysis. Every time the SEC/FASB seems near requiring that firm's account for their derivatives activities in their SEC statements, the proposal mysteriously seems to be scuttled at the last minute. Every time. It's like the great mystery of the margin requirement. Just don't bring it up and it will go away. If you simply ignore it, it's not there. After all, it's a new era. Certain things just aren't discussed...


....There you have it. Another quarter under the belt for the Derivatives Report card. As we have said many a time, the more money and credit we have created in the entire US financial system, the demand for derivatives increases. The more volatility in the financial markets, the more the demand for derivatives increases. It truly is different this time. Maybe financial derivatives will remain peaceful and quiet for decades to come, but so far they have only really been tested in the halls of academia or in computer models. We have not experienced a financial market crisis in this country throughout this decade of explosive derivatives growth. We may have come close with LTCM, but that experience was contained as around the toxic area an isolation perimeter of credit and liquidity was quickly and efficiently constructed. What is untested is coincident failures on the part of multiple institutions. Let's hope that day never arrives. These numbers say it won't result in a graceful resolution."


Early 2008 ...

"...What is obviously apparent, we believe very meaningful, and perhaps little understood in the greater investment community, is the growth in magnitude over the 2004 to present period in the CDS market. From about $1 trillion in notional value outstanding at year-end 2003, we're looking at just shy of $14 trillion in notional exposure as of September 2007 for the US banking system singularly. A near fourteen-fold increase in three and one half years. We ask you, do you see this fact being discussed or at least being mentioned on the "front page", if you will? Do you even see this mentioned in discussions or articles regarding what led up to the current mortgage credit debacle? Do you see Senators and other assorted politicians grandstanding in their demands for investigations about how this could have come to pass? We need to at least think through potential investment consequences if indeed credit default swaps become the next credit market shoe to hit the floor in some manner. Why? Because at the periphery it’s already starting to happen.

Very quickly, who are the major players among the US banking system elite? The usual suspects, who else? Here's how it shakes out at present:..."