Monday, July 7, 2014
Giant Enron Scam on Wall Street Creates Magic Pixie Dust Money
Giant Enron Scam on Wall Street Creates Magic Pixie Dust Money Regulators at Fault or Lack of Regulations the Cause of the Financial Banking Crisis of 2008? Lex Loeb Contributor Network . The claim that banks are under capitalized because of lack of regulatory reserves seems to be false . The reason why is that the US Federal Reserve and Treasury have been observed flooding the financial system with easy money since the beginning of the crisis which was labeled as "the sub prime mess." As soon as a few major banks start to fail the question of whether they were over regulated or under regulated comes up. Bank Liquidity does not seem to be any relationship to having ready depositor cash on hand because the system is full of free money. The short sellers immediately get the blame. They have certainly been accentuating the negative. Short sellers did not create the conditions for the Amazing opportunities they have recently discovered in and among major financial institutions stock and bond markets Except maybe, or the so called naked shorts, the short interest games with certain limitations. Short sellers are more aptly described as scavengers than predators though they are perceived as ready and willing to attack the wounded. Short sellers can spend most of their speculative lives loosing money. Right now the conditions are right for them to be able to assist sellers in panic mode to unload shares. Providing liquidity to the market on the way up from short sellers rarely raises any popular complaints but when they assist giving sellers liquidity then they get their bad rap. Logic says that short sellers were shorting the same banks all along during the time that share prices rose , and often lost money then, Blaming them for the miserable conditions of banks now defies logic. Insufficient collateral requirements before loans were initiated seems to be something missing from a lot of the media discussion fixing blame. Loan to value ratios were allowed to give many people the opportunity to borrow money from banks with little or no down payment. The history shows that the regulators encouraged low loan to ratios. Fannie Mae and Freddie Mac were originally designed by government to reduce savings requirement of home buyers to get them into a home. Government found that housing created more economic growth nationwide than the automobile industry . The government encouraged the object rive of affordable home ownership for all. The Real Estate Bubble needed an air supply to pump it up. The US government made easy money available for a long time. As home prices skyrocket it seemed that people buying them could actually afford the high relative payment. Evidence of inflation other than in home prices was muted though out the rest of the economy. Home price inflation seemed to be able to take pressure off of wage and commodity inflation. The data suggests that the real estate was becoming a financial asset. Real estate has alway been a primary financial asset. Just as gold can be held as a reserve currency so can real estate but a bank needs to have the means to start with possession of asset, such has having gold bars and coins in the vault, before they can take those to market to put them up for sale. When the liquidity crisis began banks started looking at what was in their vaults. Instead of finding hard assets they were finding digitized certificate numbers on computer ram chips and other memory devices. The federal government regulators cannot be blamed for this occurrence. Digitized certificates also turned out to be as abstract as one might call them magical pixie dust. Imagine your bank going to the vault to find the money they owe you on demand and only finding a vault full of magic pixie dust.. What is pixie dust worth on the open market? No one seems to know for sure. Derivatives get a lot of blame for manufacturing the pixie dust. Stocks and bonds have always been financial derivatives. The pixie dust seems to be composed of derivatives on derivatives on derivatives which makes the pixie dust very hard to understand after it gets spread though out the financial system. Pixie dust looks spectacular--it has glitz and shimmers but that only masks it's complexity. Did you know there are con-artists who occasionally get away with selling cars and homes they don't actually own? It probably happens all the time. A con artist could break into a house that is vacant where he sees a real estate lock box and set up an open house out in front to find a mark. Usually people do not pay cash for a house on the spot. Sales of cars by people who don't own them are probably more frequent occurrences. Some con operators are famous for being able to sell the same house or car over and over and over again. Some actually get away with it. That is one of the principles of computer based identity theft. I have heard stories about someone's uncle who has found a means of defrauding banks that has enabled him to have a financial lifestyle far in excess of his working income level. The banks make it possible for him to rob them blind. The banks are not even aware he is doing it necessarily. Everyone that has received countless credit card applications in the mail knows how easy it is to get high interest unsecured loans. It was those letters coming to Uncle bad guy that allow him to set up assumed identifies get the unsecured credit card offers, apply for them and then max them out with no intention of ever paying back the banks. Another trick uncle bad guy uses is that he finds banks competition to loan out unsecure credit card funds at accelerated rates by allowing balance transfers and interest free transfers between accounts. This allows uncle bad guy to actually continue using the same assumed name over and over again and to max out the same credit card over and over again. Now if uncle bad guy seems like a scary character wait till you find out that the banks themselves have been doing the exact same thing! When banks do it they might call it capital expansion. Sometimes it really is the same thing as you kiting checks. Unsecured credit, is credit with no collateral required. It is a promise to pay later or even much later for goods and services purchased today. Wimpy said, "I will pay you tomorrow for a hamburger today." and he said it every day when he needed a hamburger. The masters of business administrator, MBAs, found a magical way to make magical pixie dust in the wondrous world of unsecured loans. Regulators regulate what is legal and try to prevent what is illegal. When it comes to policing completely unknown bank practices and loopholes, in and between the laws, regulators are at at a complete loss. To get an unsecured loan all it takes is a signature on a piece of paper with personal account information.. Banks learned that with a stroke of a few computer keys they could wire money electronically from bank to bank and back home.at the speed of light. Yes the speed of light. Payments to other banks no longer necessarily consist of having any physical dollar bills on hand nor do any need to be hand delivered. The system invited the same abuses that a master of identity thief like Uncle Bad Guy conjured up. only now it was the banks themselves, and especially the fitter investment banks from wall street. The investment banks found out that electronically they could do what the con artist does selling the same house to two or three separate people. Instead of fraudulently selling house the banks could accelerate the use of their bank deposits by actually using the same money on deposit to make multiple loans! The great Goldman Sachs might have done the most to exploit this means of capital expansion by accelerating the processing of loans. They were creating money out of nothing. Goldman has had several of it's top insiders controlling the US treasury. The banking houses took their magic wands wrote unsecured loan paper and poof the US treasury provided any bridge physical money notes just in cases some one might need to walk them across a street to another bank. Most money gets wired , Checks are an antiquity. One trick appears to be use unsecured credit loans from other banks to facilitate re lending and re lending again! That leads to more magic pixie dust. Pixie dust raining down on the streets of upper and lower Manhattan and coming home to you on your most recent credit card statements. the cries for need of capital in the present crisis I start wondering how so much pixie dust got into the system. A couple of banks or a bank and a few of it's own subsidiaries can be used for massive capital expansion scheme all in house. A big investment firm like Goldman or Lehman could use powerful computers to keep their books cooking every day 24 hours around the planet while generating higher profits with accelerated time based kiting all in house. To hide the fact that funny money was created, loans could be packaged then re package and subdivided into shares and sold off to marks. Did you know that you can buy a house with a completely assumed identity? Uncle Bad Guy did it using unsecured lines of credit from credit card accounts that were coming in the mail to his various assumed names and with handy dandy free credit card balance transfers. Wall street banks were doing exactly the same thing on a much higher level. A lot of investment bankers 5 million dollar Manhattan condos were financed by their banks doing the exact same thing as Uncle bad guy! If you had a lot of pixie dust money to spend it really could buy nice luxuries first you had to trade pixie dust for real money to make the purchase. Sounds a lot like Enron? Wall street floated bonds of happiness and made happiness derivatives out of them to give higher yields other banks. Not all banks in trouble were creating pixie dust money out of thin air. Some were becoming major marks of the con artists . Beware when banks say they have run out of capital it means that they are no longer operating as a bank. The media is deaf dumb and blind when it comes to spotting financial fraud until a complete collapse happens and everyone is pointing fingers ? Banks suddenly find that their portfolios are full of pixie dust and they are not sure where it came from . Those banks can be completely innocent as they did not generate the stuff they just got bum deals from banks that unloaded pixie dust in magic pixie package deals. The responsible banks may even be the most solvent having exchange most of the pixie dust they created to banks that had been honest and that had real capital. Government financial regulation offices are controlled by the same people running the financial scams. So far it has not been revealed to the public by anybody because every one wants to put a lip stick happy face on the pig. We need market confidence. The crooks want to start doing the same thing again as soon as possible. No one should think that the markets have been undermined by massive fraud! Now that I am finding my bank account is full of pixie dust I am getting a little mad at the reaction of the government where the crooks look like they are going to get a pass again. I think it is a great idea that foreign firms can come in and buy up the bad banks here in the US they can take the crooks home with them and have a solid monetary economy turned into a pixie dust economy there and not us. Putting the blame like Alan Greenspan does on "irrational exuberance" is not taking account of the unsecured credit racket or the false data entry financial that have gutted wall street. Don't be fooled by the Paulson quick fix with the idea of having the federal government start a pixie dust bank to settle claims like the RTC did for the savings and loan crisis. This looks like a means of letting the crooks get away with the crimes they committed. The write downs may not make losses go away. I would not want to see the federal government take pixie dust without seeking the ill gotten gains of those who produced them. That is what will happen. Maybe one small bank will get hit by a federal investigation but the big ones who did most of the artificial digital capital expansion like Goldman Sachs are sure to get away with it and they will be the soul standing investment bank worldwide afterwords free to create the next generation of pixie dust. That is political power and not economic power. The real economic powers will emerge later to take their place. .