Alfred Woody's Kewl Blog [ 椼森 ]: Jan 28, 2011

Friday, January 28, 2011

California Residents Hit With Government Ban On Paying By Cash

District officials want to find out who “uncommonly antagonistic” individuals are by tracing requests for public records, while federal government paints cash users as potential terrorists

Steve Watson
Prisonplanet.com
Jan 27, 2011

Residents of Discovery Bay, California will be the first in the country to be officially denied the right to use cash to pay for public services, in a move that echoes the Department of Homeland Security’s drive to depict those who use physical money as potential terrorists.

As reported by the Contra Costa Times recently, from May onwards, residents will no long be allowed to pay water bills or purchase park permits after the Discovery Bay Community Services District board voted to ban cash transactions for all services.

Anyone paying for such public services must do so with a credit/debit card, a check or money order.

The declaration on all US money bills that “This note is legal tender for all debts, public and private” will no longer apply in Discovery Bay when it comes to paying the government.

One former director on the District Board told the Times that he believes the move has come in response to a small amount of anonymous requests for copies of public records, which were then paid for in cash, a perfectly legal right.

Residents of the town have been described as “uncommonly antagonistic toward local government”, and former director David Piepho believes some are attempting to use public records “to be like snipers and take shots.”

He believes that by banning cash payments, the local government will be able to identify who these individuals are or prevent them from requesting further public information.

However, district representatives have denied those claims, instead suggesting that the ban is being put in place because handling cash puts city officials under threat from potential thieves.

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The ruling sets a dangerous precedent, not only in that it effectively limits access to public records, but also particularly in light of the fact that the federal government is pushing an agenda to identify those who exclusively use cash to pay for things and do not own credit cards as suspicious and potential terrorists.

As part of the Commercial Facilities Sector Training and Resources, the following PSA video titled DHS Video No Reservations – Extension of “See Something, Say Something” program was recently released by Department of Homeland Security (DHS).

The video suggests that “Terrorists and criminals do their best to cover their tracks. This may include paying by cash.” The hotel receptionist acts baffled and dumbfounded when a guest asks to pay in cash and says he does not use credit cards. Like a dutiful tattle tale she alerts her manager, concluding “I guess it’s not a problem, it’s just… WEIRD.” The narrator of the video then confirms “This is suspicious behaviour”.

Of course, what really is “WEIRD” is the fact that we’re expected to believe that US citizens will find it perfectly normal being asked to report on each other for a government that wishes your every purchase to be electronically traceable on the off chance that you might be an enemy of the state.

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There is No Internet in Egypt

The Internet is reportedly down in Cairo and across Egypt, with users denied both online access and SMS access. The shut off comes just hours before planned protests against Egyptian President Hosni Mubarak. Egyptian protesters have been particularly effective at utilizing social media to organize and mobilize—this past Tuesday's protest was largely arranged via Twitter. State officials have yet to comment on the lack of service. [HP]

Goldman Sachs & AIG, What A Tangled Hedge They Weave

From Janet Tavakoli.

Editor's Note: We are reposting this story from last Fall in light of today's charges regarding Goldman and AIG.

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Goldman Sachs: Reasonable Doubt (pdf)

TSF Opinion Commentary - November 2, 2010

Submitted by Janet Tavakoli

In August 2007, I publicly challenged the fact that AIG took no write-downs whatsoever for its credit default swaps on underlying mortgage related “super senior” positions. I used the example of its aggregate $19.2 billion in credit default swaps on super senior positions backed by BBB-rated tranches of residential mortgage backed securities. I spoke with Warren Buffett, but only about what I had already told the Wall Street Journal (Dear Mr. Buffett Pp. 164-165, 246).

I met with Jamie Dimon, CEO of JPMorgan Chase, adding that the difference was material. JPMorgan Chase’s credit derivatives positions exceeded those of all other U.S. banks combined at the time. JPMorgan was not a participant in the problematic deals, and it was not a recipient of AIG’s settlement payments, but stability in the credit derivatives markets was an important issue. Dimon was dismissive of my concerns. In August of 2007, a potential implosion of AIG was too horrible to contemplate.

Unbeknownst to me, in July 2007, Goldman Sachs and AIG began a prolonged battle over prices and collateral payments for pre-2006 vintage deals on which Goldman had bought protection.

Fraud Audit

Was the risk that Goldman hedged with AIG as bad as Goldman Sachs Alternative Mortgage Products’ GSAMP Trust 2006-S3? Any risk manager worth their salt would have reasonable doubt about this deal and conduct a fraud audit. A fraud audit doesn’t mean you are accusing anyone of fraud, only that the audit will be thorough, because there are indications of grave problems. If there is fraud, however, the audit should be rigorous enough to uncover it.

If the aggregate $19.2 billion CDS position were derived from BBB rated tranches similar to one from GSAMP Trust 2006-3, the supposedly super safe “super senior” tranche would be worth zero. Every underlying BBB tranche would have permanent value destruction and zero value. AIG would owe a credit default swap payment for the full amount $19.2 billion. Since there is doubt about the collateral of every deal of this ilk, super senior tranches of mezzanine CDOs in the secondary market are currently valued at zero.

No wonder Goldman Sachs bought protection from AIG on mortgage backed deals—and then bought protection on AIG. Goldman may not have contributed to the aggregate $19.2 billion position, but this mezzanine super senior risk was visible to all of AIG’s counterparties.

Sophisticated counterparties like AIG are supposed to protect themselves, and have little chance for recovering damages. But now the American taxpayer has stepped in to make payments for AIG. U.S. taxpayers have a right to recover money paid out for derivatives on deals that include phony collateral.

Maiden Lane III now owns the underlying CDOs for AIG’s cancelled credit default swaps. One can now investigate them—and all of the underlying collateral.

The government’s 100% payout to AIG’s counterparties was a gift, and the negotiations were done in secret. The monoline insurers were in a similar situation with a variety of deals from a variety of counterparties. (Structured Finance Pp. 405-427) For example, in 2008, Citigroup Inc. accepted about 60 cents on the dollar from New York-based bond insurer Ambac Financial Group Inc. to retire protection on a $1.4 billion CDO. Ambac said the underlying “super senior” was worth about zero, and the protection payment would otherwise have been near the full $1.4 billion. Citigroup got a relatively huge payout, since other “high grade” deals have been settled for as low as ten cents on the dollar.

The irony is that Goldman Sachs may not have been involved in the worst of the deals, but its officers had unusually high profile in AIG’s damage control. Goldman’s deals with AIG may have all been completely proper, but deals like GSAMP Trust 2006-3 indicate that Goldman should not be exempt from the general fraud audit of mortgage securitizations that all of the former investment banks [Lehman, Bear Stearns, Morgan Stanley, Goldman Sachs, Merrill Lynch, and some foreign banks going business in the U.S. (DMB Pp. 97-107.)] should undergo.

END OF EXCERPT –

Click here to continue reading (attachment embedded below)

The 25-Year 'Foreclosure From Hell' - Banks Now Fear Patsy Campbell Who Hasn't Made A Mortgage Payment Since 1985

Source - WSJ

The 25-Year 'Foreclosure From Hell'

OKEECHOBEE COUNTY, Fla.—Patsy Campbell could tell you a thing or two about fighting foreclosure. She's been fighting hers for 25 years.

The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

And yet Ms. Campbell has been able to keep her house, protected by a 105-pound pit bull named Dodger and a locked, rusty gate advising visitors to beware of the dog.

"They're not going to take this house," says Ms. Campbell. "I intend to stay in this house and maintain it as my residence until I die."

Ms. Campbell's foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.

The story of how Ms. Campbell has managed to avoid both paying her mortgage and losing her home, which is currently assessed at more than $203,000, is a cautionary tale for lenders that cut corners and followed sloppy practices when originating, processing and servicing mortgages. Lenders are especially vulnerable in the 23 states, including Florida, that require foreclosures to be approved by a judge.

Ms. Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies, that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors, and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.

She has managed to stave off the banks partly because several courts have recognized that some of her legal arguments have some merit—however minor. Two foreclosure actions against her, for example, were thrown out because her lender sat on its hands too long after filing a case and lost its window to foreclose.

Ms. Campbell, who is handling her case these days without a lawyer, has learned how to work the ropes of the legal system so well that she has met every attempt by a lender to repossess her home with multiple appeals and counteractions, burying the plaintiffs facing her under piles of paperwork.

She offers no apologies for not paying her mortgage for 25 years, saying that when a foreclosure is in dispute, borrowers are entitled to stop making payments until the courts resolve the matter.

"This is every lender's nightmare," says Robert Summers, a Stuart, Fla., real-estate lawyer who represents Commercial Services of Perry, an Iowa-based buyer of distressed debt that currently owns Ms. Campbell's mortgage and has been trying to foreclose. "Someone defending a foreclosure action can raise defenses that are baseless, but are obstacles for the foreclosing lender," he says, calling the system "an unfair burden" for lenders.

Continue reading...there's much more to this story...

http://online.wsj.com/article/SB10001424052748703865004575648900250047766.html

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Faces of the Home-Foreclosure Crisis

The Tidal Wave of Defaults and Delinquencies That Began Four Years Ago Has Hit Individuals at All Levels of Society

http://online.wsj.com/article/SB10001424052748704610904576031632838153532.html

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Foreclosure? Not So Fast

LOXAHATCHEE, Fla.—Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.

But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.

First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.

Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.

Mr. Machado and his lawyer, Tom Ice, say they now want to convince the owners of the mortgage to cut Mr. Machado's loan balance to between $150,000 and $200,000—the current selling price for comparable homes in his community near West Palm Beach. "The whole intent was to get them to come to the negotiating table, to get me in a fixed-rate mortgage that worked," Mr. Machado said.

http://online.wsj.com/article/SB10001424052748704029304575526182962738098.html

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Strategic Default & Living For Free: Josh Bartlett Hasn't Made A Mortgage Payment In 32 Months And He Hasn't Been Kicked Out Yet (PBS VIDEO)

It Pays BIG To Stop Paying Your Mortgage - You Aren't Going To Believe This Statistic

Fannie & Freddie Will Not Kick You Out If You Stop Paying Your Mortgage

How many different signatures can one robo-signer have..?...

Watch this quick slideshow and find out...

Anatomy of Foreclosure Fraud in Florida...

You will see several examples of ACTUAL fraudulent documents that were submitted by large, well known banks in court proceedings.

We're talking over the top, ridiculous fraud here - Fake people, fake signers, fake documents, false notaries, and EVEN fake banks...

U.S. Treasury to shrink debt ceiling program with Fed

NEW YORK (MarketWatch) -- The Treasury Department said Thursday that it will shrink its supplementary financing program with the Federal Reserve to preserve its flexibility as the country nears the current debt ceiling. The move will effectively put more excess reserves into the banking system, a Treasury official said. The government had been issuing the short-term bills to deposit proceeds at the Fed to help the central bank manage its monetary policy. As the current bills mature, they will not be rolled over, letting the account dwindle to about $5 billion from about $200 billion. The U.S. has about $14.015 billion in outstanding debt subject to the debt limit of $14.294 billion.

Earlier this month, Treasury Secretary Timothy Geithner said the U.S. could hit that debt ceiling as early as the end of March, or at least by mid-May. Last year, the Treasury Department expanded the SFP program after Congress increased the debt limit.

Source - Marketwatch

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Today's economic data...and a few more links...

Durable goods fall 2.5% in Dec.

Excluding transportation, orders up 0.5%

http://www.marketwatch.com/story/us-durable-goods-orders-fall-25-in-dec-2011-01-27

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New-home sales rise to 329,000 in December

Pace reclaims highest since April, but housing market still weak

http://www.marketwatch.com/story/us-new-home-sales-reach-329000-rate-in-december-2011-01-26

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WASHINGTON (MarketWatch) — New applications for U.S. jobless benefits jumped by 51,000 to 454,000 last week, partly because poor weather caused administrative backlogs in four Southern states, the Labor Department reported Thursday.

http://www.marketwatch.com/story/weekly-jobless-claims-jump-51000-2011-01-27

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Lawmakers, Treasury clash on ‘too-big-to-fail’

Obama loan-modification effort, bank servicers come under fire

WASHINGTON (MarketWatch) — Lawmakers and a key government overseer clashed with a top Treasury Department official Wednesday over the long-lasting implications of the agency’s response to the financial crisis and whether “too-big-to-fail” banks still put the system at peril.

http://www.marketwatch.com/story/lawmakers-treasury-clash-on-too-big-to-fail-2011-01-26

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Government, banks to blame for crisis: FCIC panel

Years of deregulation and bank self-regulation cited for meltdown

WASHINGTON (MarketWatch) — The financial and economic crisis that shook the economy to the brink in September 2008 was caused by failures of “30 years of deregulation” and a banking industry eager to trade in toxic subprime mortgages but blind to the attendant dangers, according to the conclusions of a federal fact-finding panel released on Thursday.

http://www.marketwatch.com/story/government-banks-to-blame-for-crisis-panel-2011-01-27

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Google is in the energy business.

Ground zero for the carbon tax is Boston and Chicago.

http://www.boston.com/business/ticker/2011/01/googles_hiring.html?p1=News_links

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Goldman Sachs Owes YOU $10 - Cenk on MSNBC

No Private Central Banks (Michael Rivero)

The Three-Trillion-Dollar War

Click this link ...... http://www.ritholtz.com/blog/category/digital-media/

Video: Deadly Anti-Government Protest Riots In Algeria, Tunisia & Yemen

http://tinyurl.com/4s2au5y

Editor's Note: We made a mistake in the headline; This is a clip of riots in Albania not Algeria. But the way URLs work, we can't fix the headline without destroying all incoming links to this story.

In the Albanian capital Tirana, at least three people have been shot dead and several others injured during a rally. Thousands of protesters gathered outside the Prime Minister's office demanding the government step down over corruption allegations. Police used tear gas and water cannons to disperse the crowds who called for fresh elections. The country has been in a political deadlock since the opposition rejected the result of the ballot two years ago.

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Tunisian police on Wednesday fired tear gas at hundreds of protesters in the capital who are pressuring the interim government to get rid of allies of ousted President Zine El Abidine Ben Ali. The clashes broke out in front of the prime minister's office as the caretaker government prepared to announce adjustments to its line-up. Acrid clouds of tear gas engulfed hundreds of protesters, and some demonstrators responded by throwing stones at police.

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In Yemen, tens of thousands of people marched in the capital, Sanaa. Opposition groups are calling for the president to stand down, after more than three decades in power.

Make sure you read THIS after listening to the six part interview above.

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Foreclosure Document Fraud Drives Notaries to Take the Fifth

Among the many legal problems now being discovered with the foreclosure documents that banks have been using are false notarizations. The most typical variety of this problem occurs when a notary certifies that the person whose signature appears on a document really did sign it, even though the notary didn't witness the signing.

While such false notarizing is criminal, I've not yet heard of any notaries being charged. However, in Maryland, Steve Lash of The Daily Record reports that 18 current and former notaries have invoked their Fifth Amendment right against self-incrimination in a foreclosure case.

The notaries were brought before the court in proceedings involving a lawyer who didn't actually sign numerous foreclosure documents that were nonetheless notarized saying he did. The judge excused the notaries from the proceedings after they took the Fifth, and apparently, they aren't facing prosecution.

Title Issues Trip Up Innocent Buyers

Nonetheless, the ramifications of those false certifications are significant. Because the lawyer -- Thomas P. Dore -- didn't sign the documents as certified, the judge has dismissed five foreclosures, although the banks can refile. In addition, the judge is considering what to do in 15 other cases where Dore isn't sure whether or not he signed the documents, and the judge is also weighing what to do about 12 Dore foreclosures that were completed in which the properties have since been sold. This is a striking situation when you consider the judge's options. Might he rescind the sales? Void the foreclosures, but let the sales stand?The thorny question of how to handle cases when wrongfully foreclosed-upon properties were sold to unwitting homebuyers is starting to surface due to a host of legal issues, and it will only get worse as the pervasiveness of improperly transferred notes and flawed mortgage documentation becomes clearer. In Pennsylvania, thousands of foreclosures were undertaken using documents not signed by an attorney, which may void them. What happens to the innocent buyers of those foreclosed-upon properties?

In Massachusetts, where a recent top court ruling has jeopardized many completed foreclosures but didn't address what happens to the innocent buyers, the issue will be resolved soon. The Massachusetts high court has agreed to hear the appeal in Bevilacqua v. Rodriguez, a case in which the innocent buyer had tried to clear the title to his property, only to be told by the judge that he didn't own the property. That's because the bank that foreclosed on the former owner didn't own the mortgage when it foreclosed, so it couldn't take title to the property. Since the bank couldn't take title, it couldn't sell the property, either.

The bottom line is, though we're a few years into this foreclosure crisis, we're not even at the end of the beginning: New consequences from the failures of banks and their attorneys to follow the law during the real estate bubble keep surfacing every day.

London failing in the Jewish Century

Budget cuts hitting home

News

Budget cuts hitting home

BY JIM HAND SUN CHRONICLE STAFF

Thursday, January 27, 2011 2:15 AM EST

Massachusetts Gov. Deval Patrick pauses to answer one last reporter's question as he leaves a news conference where he announced the state's fiscal 2012 budget at the Statehouse in Boston, Wednesday afternoon. Following Partick are Massachusetts Lt. Gov. Tim Cahill, center, and Administration and Finance Secretary Jay Gonzalez, left. (AP Photo/Stephan Savoia)

Area lawmakers knew bad news was coming and Wednesday they got it with the governor's $30.5 billion budget proposal that cuts local aid, reduces funding for homeless shelters and pares back money for state police.

Gov. Deval Patrick said the budget proposal is balanced, responsible and does not raise taxes to eliminate a deficit.

State Sen. James Timilty, D-Walpole, said legislators knew difficult choices were being made to balance the budget, so the cuts are no surprise.

"There was almost unanimous agreement that the budget was $1.5 billion out of whack. We were expecting it," he said.

That does not mean he is pleased with all the governor's budget decisions or that the House and Senate will not make changes. Timilty said one immediate red flag is a $6.2 million cut in the state police budget.

The Senate chairman of the Joint Public Safety Committee, Timilty said the state police are already understaffed, with 450 fewer troopers than in 2007.

Rising gasoline prices will put a further crimp in state police funding because the department uses a lot of fuel patrolling highways, he said.

State Rep. Betty Poirier, R-North Attleboro, said no one is happy about a $65 million reduction in state aid to cities and towns.

However, she said the impact is offset a little by Patrick's decision to allow cities and towns to join the state health care system without union approval, a move she said will save communities money.

"That seems to be the kind of thing cities and towns are looking for," she said. Poirier said legislators will have more a detailed response to the governor's budget after they study the document for a couple of days.

State Rep. George Ross, R-Attleboro, also said he needed more time to look over the spending plan.

But, he said, he is still holding out hope the Legislature and governor will agree to allow slot machines at racetracks to generate more revenue for cities and towns and offset local aid cuts.

Deborah Banda, Massachusetts director of AARP, said the budget cuts $9.8 million from the state Prescription Advantage program that helps the elderly pay for medicine, but the federal health care reform bill is making up for the loss.

She said 60,000 Massachusetts elderly residents will get 50 percent discounts on drugs this year, thanks to the federal law, and the percentage will increase in future years.

Patrick said his budget continues a decrease in the corporate tax rate while increasing education funding.

It dips into a state reserve fund to the tune of $200 million and cuts $570 million in spending. It also anticipates growth in revenue to balance the budget.

"This budget makes investments in critical areas that will help strengthen our economy in the near term, position us for a strong recovery in the long term, and continue to improve the way government does business," Patrick said.

Some of the highlights include:

An $80 million increase in the so-called "circuit breaker" to help pay for extraordinary special education expenses.

A $45 million cut in funding for legal counsel for the poor.

A $23 million reduction in spending on homeless shelters.

A reduction of 900 state jobs.

A total of $3.9 billion earmarked for education, a record amount.

Egypt stock trading suspended after drop

CAIRO — Egypt's stock exchange suspended trading temporarily on Thursday after a sharp drop, amid the largest anti-government protests in the country in three decades.

The suspension came after the benchmark EGX 30 index dropped 6.2 percent, a day after it recorded a fall of six percent.

Trading resumed at 11.30 am (0930 GMT), but the index recorded further falls.

The jitters on the bourse come amid the most serious anti-government demonstrations in Egypt in three decades.

Six people have died in the protests against the rule of President Hosni Mubarak, which, inspired by the ground-breaking "Jasmine Revolution" in Tunisia, have sent shockwaves across the region and prompted Washington to prod its long-time ally on democratic reforms.

The Palestine Papers, Israel and Britain

Gilad Atzmon argues that more than anything, the leaked Palestine Papers show that Israel is not in the slightest bit interested in peace, and they demonstrate British deceitfulness and hypocrisy.

I have a rule: I never intervene in Palestinian political matters. I never comment on Palestinian internal debates. I do not think that I have the right to do so. I am an ex-Israeli and an ex-Jew, and I write about Israel, Jewish identity politics and Zionism.

For me, the leaked Palestine Papers provide us with a valuable glimpse into Israeli politics and Western complicity in the crimes carried out against the Palestinian people. I realize that most Palestinian commentators agree that the leaked papers have “damaged whatever little credibility the Ramallah-based authority still enjoyed among Palestinians”. Yet, more than anything else, the Papers prove beyond doubt that Israel is not a partner for peace. In spite of the weaknesses that have been shown by the Palestinian Authority (PA) since the 1990s, Israel has failed to secure a peace deal, and has consistently failed to show any will to bring the conflict to an end. In short, Israel has always wanted more.

“...at the time that the British government was supposedly advocating ‘democracy’ in Palestine, the reality was quite different: British ‘James Bonds’ were investing enormous effort in trying to destroy the rising political power in Palestine. One may wonder: what kind of ‘British interests’ was MI6 serving in doing so?”

The Palestine Papers have also clearly shown that whilst Israel likes to present an image of “political pluralism”, that is little more than a deception: there is not much difference at all between Tzipi Livni and Avigdor Lieberman. Both are Zionist enthusiasts, and both are interested in a “Jews-only state” – Indeed, just like Lieberman Livni too, offered to “transfer Israeli Arabs.”

Yesterday, we learned that as far back as 2004 the British secret intelligence service MI6 was assisting the PA in the war against Hamas. According to the Guardian newspaper “The Palestinian Authority's security strategy to crush Hamas and other armed groups on the West Bank was originally drawn up by Britain's intelligence service, MI6.”

So, at the time that the British government was supposedly advocating “democracy” in Palestine, the reality was quite different: British “James Bonds” were investing enormous effort in trying to destroy the rising political power in Palestine. One may wonder: what kind of ‘British interests’ was the MI6 serving in doing so? It is far from being a secret that in 2004 Tony Blair was primarily funded by Labour Friends of Israel, and his No.1 fundraiser was Lord Levy.

The Palestinian people will liberate themselves eventually. In the meantime, we must all liberate ourselves from the grip of Israeli and Jewish lobbies.

Debtris US

Foreclosure crisis far from over

Click this link ..... http://revolutionarypolitics.tv/video/viewVideo.php?video_id=13681

BOMBSHELL REPORT: Goldman Sachs Got Billions From Taxpayers Thru AIG For Its OWN Account, Crisis Panel Finds; Contradicting SWORN Testimony From Execs

This is big. Viniar busted and the truth is finally out.

Story broke very late Wednesday night.

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Source - Huff Po

By Shahien Nasiripour

Goldman Got Billions From AIG For It's Own Account

Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.

The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account--as opposed to those of its clients or business partners-- has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.

The details underscore the degree to which Goldman--the most profitable securities firm in Wall Street history--benefited directly from the massive emergency bailout of the nation's financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.

"If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman's shareholders," said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public."

When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world's largest insurance company, AIG's inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.

Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.

But the report from the financial crisis commission, obtained by The Huffington Post in advance of its release, appears to challenge that assertion: The report reveals another pot of money conveyed to Goldman--the $2.9 billion to cover trades the Wall Street investment house made for itself. That money went straight to the bank's bottom line, according to the report.

Over the last two years, Goldman has reported nearly $22 billion in profits, according to its official earnings statements. During those years, it has paid out $31.6 billion in compensation to its employees.

According to the report, the financial crisis commission first learned that the $2.9 billion in AIG funds landed in Goldman's account through an e-mail the bank sent to the panel on July 15, 2010 in response to questions.

Previously, Goldman executives had testified that the AIG bailout funds the bank collected went to compensate its clients and institutions that held the other side of its trades.

At a hearing on July 1, 2010--two weeks before Goldman sent the e-mail acknowledging how $2.9 billion in AIG funds wound up in its own account--the crisis panel questioned Goldman's chief financial officer, David A. Viniar and managing director David Lehman. Both said they knew nothing about AIG funds landing in the bank's private coffers, according to a transcript of the hearing.

The report concludes that Goldman collected the $2.9 billion as payment for so-called proprietary trades made for its own account--essentially successful bets on large pools of financial instruments.

"The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."

"At the time, the idea was the sucker could go down because there wasn't enough liquidity in the system, money wasn't moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.

In reality, she contends, those fears were overblown: There was ample money in the financial system. Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.

The details in the commission's report leave Goldman "naked," she added. "It doesn't have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that's doing stupid credit stuff is you let them eat it, but that didn't happen in the bailout."

Continue reading (there's more)...

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Here is more detail...

Who Is Dan Jester And Why Did Tim Geithner Call Him 103 Times During The Financial Meltdown Of 2008?

Dan Jester: Still Looking For The Mystery Man Behind The Goldman Sachs AIG Swindle (NEW VIDEO -- Hank Paulson Grilled By Congress About Contact With Jester)

How Paulson Appointees & Former GS Employees Dan Jester & Ed Liddy Colluded To Destroy AIG And Secure A Secret Bailout For Goldman Sachs

FORECLOSURES FROM SPACE

RealtyTrac is out with the total foreclosure numbers for 2010. On the whole things are getting worse.

72 percent of major metro areas saw an increase in foreclosure volume. Although some of the worst hit areas in Nevada, California and Florida improved from 2009, the foreclosure rate in these areas remains shockingly high. If not for some foreclosure suspensions due to the robosigning scandal, these numbers would have been higher.

For a frightening way to visualize the foreclosure crisis, we're borrowing a Google maps technique described by Barry Ritholtz.