Why the Fed Will Fail

Financial reform is here. Yay! Right?

I'm not so sure.

Although Sen. Chris Dodd's financial reform package would create an alphabet soup of new regulatory bodies, much of the responsibility of identifying and defusing the next big threat to the financial system will fall to the Federal Reserve. I don't doubt that there are plenty of sharp, talented people working at the Fed, but the way things stand right now, the cards are going to be stacked heavily against them.

With last week's release of Tony Valukas' report on the Lehman Brothers' bankruptcy, some problems with the reform bill have become all too clear.

The cost of clarity
First and foremost, we have to wonder whether the folks at the Fed can even keep up with the complex, fast-paced financial firms that they're supposed to oversee.

To pick apart the Lehman situation, it took Valukas and his army of lawyers and other skilled pros a year of diligent effort. Over that time period, the team waded through "a patchwork of over 2,600 software systems and applications" and collected 5 million documents comprising 40 million pages -- 34 million of which were reviewed by the Valukas and his team. As the Chicago Tribune points out, that's like reading Tolstoy's War and Peace more than 27,000 times.

In the end, the effort led to $38 million in billings to Valukas' firm, Jenner & Block, and another $30 million in fees to Valukas' financial advisor, Duff & Phelps.

Granted, a bankruptcy investigation and ongoing regulatory review are hardly the same thing. But it took the relentless digging of the Valukas team to figure out that Lehman was duping creditors, investors, rating agencies, and regulators with its "repo 105" transactions. And in many ways it was actually easier for Valukas, since he was no longer facing a moving target -- or at least it wasn't moving as much as before.

And this was all for just Lehman Brothers, which had around $640 billion in assets at the time of its bankruptcy. What do you think the process might look like for Goldman Sachs (NYSE: GS  ) and its $850 billion in assets? Or how about Citigroup (NYSE: C  ) and its $1.9 trillion in assets?

A broken business model
We can probably point to plenty of regulatory failures in the lead-up to the financial crisis. But I hardly think that they're regulatory failures stemming from lack of regulators. As Valukas noted in his report, regulators were swarming on Lehman well before its collapse: "In mid-March 2008, after the Bear Stearns near collapse, teams of Government monitors from the Securities and Exchange Commission ("SEC") and the Federal Reserve Bank of New York ("FRBNY") were dispatched to and took up residence at Lehman, to monitor Lehman's financial condition with particular focus on liquidity."

It seems to me that the issue never was whether there were people trying to address the problem, but rather that they were trying to regulate on a fuzzy mandate of not letting something bad happen within the bounds of a very permissive system. For the same reason that we have speed limit signs posted in our residential neighborhoods, we need to give regulators a clearer, tougher set of standards that they can impose on financial companies.

First and foremost, those standards need to address the lunatic business model that Lehman Brothers -- and, really, most of the big financial companies -- was operating on at the time of its demise.

Specifically, Lehman was increasingly building up large, illiquid, proprietary investments while primarily financing itself through very short-term agreements. What it became was a massive, teetering Jenga game right smack in the middle of our financial system that could be toppled in the blink of an eye if it lost the confidence of major counterparties such as JPMorgan Chase (NYSE: JPM  ) , Citigroup, HSBC (NYSE: HBC  ) , and Bank of America (NYSE: BAC  ) .

Not such a good start
There's been a lot of hype about the fact that Dodd's bill includes the so-called "Volcker Rule," which would prohibit banking institutions from taking part in activities such as proprietary trading.

However, I'd say that the bill includes the Volcker Rule the way Cocoa Puffs include well-balanced nutrition. Little actually gets implemented in the text of the bill. Rather, specific regulations are supposed to come from a study on the rule's potential impact. Not only is this likely to maximize the squishiness of the eventual rules, but it also gives lobbyists plenty of time to work their magic.

In the end, I don't see the Fed folks as a bunch of incompetent bumblers. But when it comes to smothering the next Lehman, Fannie Mae (NYSE: FNM  ) , or AIG (NYSE: AIG  ) , I do think they'll fail miserably because they're being given a butter knife to regulate with when what they need is a buzzsaw.

Do you think the Fed will be able to keep our financial system safe and secure? Scroll down to the comments section and share your thoughts.

The U.S. is hardly the only place where fiscal fitness is an issue. Check out why the situation in Greece matters to smart investors.

Fool contributor Matt Koppenheffer owns no shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.


Read/Post Comments (62) | Recommend This Article (92)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 24, 2010, at 10:48 AM, ir4getful wrote:

    I believe you have hit the nail on the head. As long as laws and regulations allow financial institutions to engage in certain exotic and/or high risk activities, no regulator or team of examiners, accounts, lawyers, etc. can hope to keep up. Strict, defineable, and measureable lines must be drawn and unequivocably enforced and secured from legislative and political tinkering over time. In return for compliance and limits on risk taking, there also needs to be strict safeguards against non-regulated businesses getting into the business of banking. I firmly believe that, over the last 30 years, much of what has gone wrong has emanated, at least in part, from the ever expanding presence of non regulated entities engaged in activities traditionally reserved for banks. This includes the S&L crises as well as past and present RE bubbles. The proliferation of crooked morgage brokers and scam artists are but current examples. The once finite lines drawn between banks and other financial companies have become so vague that people "deposit" money with the likes of Madoff, not fully understanding the difference. This is becoming ever more important as advancing technology increasingly blurs the lines and changes the way people purchase, pay, and invest.

    I strayed from your question. Yes, the Fed will continue to keep our financial system safe and secure, simply because they have the monetary power to do so. But as we have seen, the price tag gets larger each time they need to intervene - which cannot go on forever.

  • Report this Comment On March 24, 2010, at 2:45 PM, rj8118 wrote:

    Re-elect noone, force single item bills and if that fails, require a minimum of a 50% yes vote from both parties for a bill to pass.

  • Report this Comment On March 24, 2010, at 5:30 PM, 777091 wrote:

    Just abandon too-big-to-fail after announcing the new policy. Then let them fail. Not much regulation is needed then.

  • Report this Comment On March 24, 2010, at 5:42 PM, Shark52 wrote:

    The real issue for me is that the big banks trumpet the value of capitalism yet hide behind the government when necessary and handy. We have FDIC insurance ostensibly to ensure consumer confidence. There should be a price to pay in addition to insurance premiums for letting the government under the tent. If banks were limited to being just banks - as Charlie Munger aptly states, doing nothing that isn't boring, why would we have the issue. We would not need a to big to fail policy because it would only involve those that actually chose to ante-up in the gambling game - specifcally excluding banks. if they did a bad job of betting, they lose and life goes on. That is what capitalism is about. Said another way, don't bang the drum of capitalism and then grovel to not be held accountable for the seeds you sow.

  • Report this Comment On March 24, 2010, at 5:49 PM, TPBFool wrote:

    That's Fed's answer for everything - more layers of burocracy and nothing meaningful ever produced. The sad truth is we, as a nation, will be debt-laden for many years to come because of the "too big to fail" duping. There has got to be a line drawn in the sand or we'll (at the hand of the government) just continue to burrow deeper into a hole that that has no bottom in sight.

  • Report this Comment On March 24, 2010, at 5:50 PM, steveballmer wrote:

    Oh my goodness!

  • Report this Comment On March 24, 2010, at 5:50 PM, eby123 wrote:

    The courts broke up AT&T into baby bells and can and should do the same with banks, insurance companies, automobile companies, etc.

  • Report this Comment On March 24, 2010, at 6:08 PM, FinnMcCoolIRA wrote:

    To paraphrase Reagan:

    The government is not the solution ,,, it IS the problem!

    Unfortunately, the current administration and its' supporters, INTEND to "fundamentally transform" [destroy] the existing capitalist system - to the extent it still exists - and replace it with a preferred government centrally controlled socialist system.

    The country is dead in the water if this nonesense continues!

  • Report this Comment On March 24, 2010, at 6:24 PM, DJDynamicNC wrote:

    I'm not terribly optimistic. However, I also think that Obama is going to be turning his attention to banking reform next now that health care is done, and as he's shown, he brings some pretty big guns to the party. This is a political winner for him too, as everybody hates the banks right now (except the Republicans in Congress, who are bound to fight him on it and lose many of their teabaggers over it). So we shall see.

  • Report this Comment On March 24, 2010, at 6:32 PM, DJDynamicNC wrote:

    @FinnMcCool - it should be noted that when strong regulatins such as Glass-Steagal were on the books, this precise situation was prevented. The New Deal led to the greatest period of consistent economic prosperity in American history. However, once Reagan led the charge to deregulate... well, here we are today, just struggling out of the Bush recession.

    But don't take my word for it. Here's Kevin Drum of the Washington Monthly:

    "Democratic presidents have consistently higher economic growth and consistently lower unemployment than Republican presidents. If you add in a time lag, you get the same result. If you eliminate the best and worst presidents, you get the same result. If you take a look at other economic indicators, you get the same result. There's just no way around it: Democratic administrations are better for the economy than Republican administrations."

    - http://www.washingtonmonthly.com/archives/individual/2005_05...

    Again, I encourage you to delve into the numbers behind this assertion - the link I provided is a good start with plenty of graphs and statistics, but certainly do your own research if you wish. You'll find the facts bear this assertion out.

    I am certainly open to a reasonable counter argument, however, if you have one.

  • Report this Comment On March 24, 2010, at 6:56 PM, dolphid444 wrote:

    It appears this administration is not the one that should be held responsible for destroying the existing capitalistic system. Remember the Rep had total control for so long that regulation was a forgotten entity. Reagan's famous lie about big government...remember it was a markedly larger government when he left office than when Carter was there. The Bush men finished it off with two bogus wars and runaway support for corporate America from making war on nations to grab oil for the oil barons, to allowing financial institutions to get "too big to fail" (we used to regulate that) and free market was floated wildly as the best idea ever till it sank and had to get bailed out by the taxpayers. And then all the Rep Party gets bent out of shape when the people finally get a piece WITH NO help from the Rep but after 100 yr battle, health care is a right ... so to me the Big O is going in the right direction!

  • Report this Comment On March 24, 2010, at 7:09 PM, indigodenim wrote:

    It is enough to give a conservative a ripping headache. CDS and CDO activity are not safe ways of hedging toxic waste. They are the toxic waste!! One loan goes bad and a billion dollar liability is created... The guy selling the bad loan, and the guy rating package containing the bad loan, and the

    guy(s) insuring the bad loan should all go to jail.

    A bet is not an investment. It is just a bet.

    The things should be outlawed unless they are regulated exactly like insurance.

    When i heard the congressmen talking about "counterparties" and "tranches", it woke me up to go read up on this stuff. They have no freakin idea what they are talking about. Now we need new laws to remind us that these forms of gambling and fraud are really against the law?

    How does anyone put any faith in the ratings agencies at this point?

    Yes the FED will probably fail. Where's the aspirin??

  • Report this Comment On March 24, 2010, at 7:21 PM, FinnMcCoolIRA wrote:

    @DJDynamicNC:

    1. - The countrys 'economic prosperity' was assured IN SPITE OF the New Deal! We all know that the Depression was aggrevated and extended because of FDRs policies ... winning WWII and the post war expansion [new building, Eisenhower's highways and capitalism in gereral assured the economic growth.

    2. - It was Clinton NOT Reagan who killed Glass-Steagal.

    3. - Any excess of capitalism allegedly engendered by 'deregulation' is relatively easy to fix; however, changes made by 'progressive-socialists' are virtually impossible to overcome since they become ENTITLEMENTS!

    4. - The current blowup in America was caused by loose monetary policy coupled with the lefts demand that Fannie/Freddie back mortgages [see Barney Frank] to 'low and middle' income people who had little lilelihood of ever repaying.

    5. - The left precipitated the lated Fannie/Freddie debacle as far back as the '70's with the Community Redevelopment Act etal [see J Carter].

    We have to get government OUT OF PRIVATE ENTERPRISE....NOW!

  • Report this Comment On March 24, 2010, at 7:27 PM, oldetoad wrote:

    I think you are correct in your assessment, and artfully gentle in explaining why. Lets get real- The behavior of the big investment banks, and Washington since Lehmann's collapse is just as bad, and there is no intention to "fix it" really. Our current debts and unfunded liabilities already exceed our ability to pay, and those smart guys know it.

    The transformation they are planning will be awlful for most of us.

  • Report this Comment On March 24, 2010, at 7:45 PM, PositiveMojo wrote:

    The regulation model that the Fed is currently using is "Reactive" rather than "Proactive". For example, if your job is to protect the drinking water in a reservoir you monitor the safety of the "sources" that feed into the reservoir. If you simply monitor the output you are likely to have a disaster on your hands trying to clean up the reservoir after it has been tainted. The current army of regulators are, and will continue to be, aimlessly swimming around.

    Until the Fed regulates the "financial products" before they are sold and understand the impact of each product and the associated risk, they are simply reactive and trying to put the genie back into the bottle. You must establish the rules before the ball is put into play.

  • Report this Comment On March 24, 2010, at 7:46 PM, PositiveMojo wrote:

    The regulation model that the Fed is currently using is "Reactive" rather than "Proactive". For example, if your job is to protect the drinking water in a reservoir you monitor the safety of the "sources" that feed into the reservoir. If you simply monitor the output you are likely to have a disaster on your hands trying to clean up the reservoir after it has been tainted. The current army of regulators are, and will continue to be, aimlessly swimming around.

    Until the Fed regulates the "financial products" before they are sold and understand the impact of each product and the associated risk, they are simply reactive and trying to put the genie back into the bottle. You must establish the rules before the ball is put into play.

  • Report this Comment On March 24, 2010, at 7:48 PM, keny2k wrote:

    Financial reform? Very simple - ditch the too big to fail bs. If a financial institution gets into trouble, let it fail. Investors will learn a valuable (though harsh) lesson and those that brought about the failure will be out on the street. Investors will begin to demand more accountability of corporate leaders before investing with them. The government has been incompetent in regulating large financial institutions thinking they can somehow regulate away bad behavior. Government - as Reagan stated - is the problem!

  • Report this Comment On March 24, 2010, at 7:50 PM, Gorm wrote:

    There is a key difference between implicit and explicit regulation and bankers seem inclined to use to their advantage whatever isn't explicitly prohibited. To that end I see absolutely no reason why:

    1) We don't bust up the TBTF and reduce our risk exposure.

    2) Reinstall Glass Steagall forcing financials to choose ONLY one charter. No grandfathering.

    3) Rigidly regulate derivatives and set up an exchange to ensure transparency.

    4) Limit leverage.

    5) Force rating agencies to get derive their income from someone other than the debt they are rating.

  • Report this Comment On March 24, 2010, at 7:54 PM, frankwindes wrote:

    There was good reason to keep the banks separate from the other financial institutions, they need to be separated again.

    However, another underlying problem is that there doesn't seem to be personal penalty for any executives of financial institutions for creating the strange investment vehicles that fell apart. There really should be jail terms waiting for these folks, along with loss of personal wealth if their customers lost personal wealth or the government had to bail them out to save the country.

    Any attempt at oversight by the Fed will be overwhelming unless the laws require any new financial instrument to be approved in advance of it's use.

  • Report this Comment On March 24, 2010, at 7:54 PM, Gorm wrote:

    There is explicit and implicit regulation. Seeing financials increasing look to advantage themselves in areas NOT explicitly denied I suggest:

    1) Bust up the TBTFs. Just too must risk and not enough benefit to our economy.

    2) Reinstall Glass Steagall and force financials to choose ONLY one charter. No grandfathering.

    3) Rigidly regulate derivatives and set up an exchange to assure transparency.

    5) Limit leverage.

    All the money in our economy is being made in financials. It is all about gamesmanship. Banking serves a VITAL need to our economy. We must be assured they focus on fulfilling that role vs preying on us - which has been the case.

  • Report this Comment On March 24, 2010, at 7:58 PM, mpg57 wrote:

    The only reason there is too big to fail is: The Fed and the Union investments for retirement was in AIG. Lehrman could collapse because there was not "vested interest". When McCain saw his retirement a risk it was a "National Crisis" I lost mine and nobody cared! I think they should loose theirs. Too Big To Fail Is BS and a shelter for those in power to protect their own at the price of the rest of us. Vote them all out and promote term limits by not voting for incumbents.

    Sorry for the soap box,

    Ken

  • Report this Comment On March 24, 2010, at 8:54 PM, TMFKopp wrote:

    Interesting that some of the discussion here mirrors what I believe is the biggest obstacle to getting anything done -- partisan finger pointing.

    Both sides seem dead set on placing the blame for the financial crisis on the other side's shoulders. You know what? Frankly, it really doesn't matter right now. When we've got some good legislation on the books and the big banks are no longer holding the financial system hostage, then maybe we can sit back and figure out how the history books should read.

    For now, though, both sides should get together to figure out what are the most salient pain points and how to best address them. Which, of course, is a pipe dream on my part...

    A similar issue at play is the fact that the Dems seem dead set on claiming some sort of victory with the legislation with the consumer protection bit. How about putting pride aside, making sure that the essential pieces of legislation that everyone seems to agree on get passed, and then taking a crack at the consumer bit separately?

    As I noted previously (http://www.fool.com/investing/general/2010/03/16/how-to-fail... I don't think consumer protections are nearly the big deal that they're being made out to be.

    Matt

  • Report this Comment On March 24, 2010, at 8:55 PM, TMFKopp wrote:

    @mpg57

    This is the place for soap boxes... well put.

    Matt

  • Report this Comment On March 24, 2010, at 9:06 PM, starbucks4ever wrote:

    Financial reform is a non-issue, IMO. It's just about how you arrange hundred bureaucrats on hundred chairs. I'm not following it because it's not interesting.

  • Report this Comment On March 24, 2010, at 9:10 PM, Gerlitz wrote:

    Actually, the Dems. vs. Repubs finger pointing political shenanigans mask the true problem. Neither proposes real reform. True reform means Nationalizing the Fed and taking back control of money creation for the People. So long as private bankers control money creation through printing of Federal Reserve Notes which can only be printed by issuance of Treasury Debt (read: debt for the taxpayers) then the Dems solution (more gov't spending) will only create more Sovereign Debt. The Repubs solution (less gov't spending) will only exacerbate the current problem of too few dollars in the economy.

    You can call it "socialism" if you want and make it a dirty word, but printing Sovereign Dollars without counting them as debt (yes, you can do this: see Colonial Scrip, Greenbacks, etc.) and holding the private banks accountable to limits on credit extension is the only way to end debt slavery to the banks.

    Also, it's what the constitution calls for.

    Good luck with your argument!

  • Report this Comment On March 24, 2010, at 9:10 PM, njdo wrote:

    The Fed and Chris Dodd are the problem, not the cure. Dodd wants to get re-elected and if you vote for him, you're stupid. The Fed will continue to run rings around the regulators while leach-like slowly bleeding the American economy. 1/4% on 12 trillion is a very large sum of money to get paid for doing absolutely nothing the treasury couldn't do for free. Just like cows; however, the domesticated American herd couldn't exist without being continuing milked. As the rate goes up the Fed will get really rich and of course some new useful idiot will replace Dodd. Line up and get your zombie shot.

  • Report this Comment On March 24, 2010, at 9:47 PM, LessGovernment wrote:

    You want squishy?

    Who regulates the Fed?

  • Report this Comment On March 24, 2010, at 11:20 PM, 102971 wrote:

    iramgetful hit the nail on the head. Every comment after that first one is balderdash since it doen't face the real problem, iramgetful did.

  • Report this Comment On March 24, 2010, at 11:27 PM, snapperreef wrote:

    Ever since the U S, In the words of James Grant, "socialized the banking system" we have more and more allowed bankers and money handlers to avoid responsibility for their acts. This encourages them to cook up money schemes like subprime loan bonds and the 'repo 105 transactions'. They can make the big money while these schemes last but when the bubbles burst, the taxpayer covers their losses.

    There should never be a govt bailout of a financial house. How could we be in a bigger mess than what we have gotten into with the trillions of debt we all have incurred?

  • Report this Comment On March 24, 2010, at 11:46 PM, Eliz1000 wrote:

    Seriously, are we getting good talented people in government? They are making lots of money on the side but what can they do for the country? We need specialist in economics and health and international gov. We need also to see both sides of any question and so does the populace. Somehow we need to get especially smart people in control, pay them and release the rest to their own devices. Our world is too complicated for amateurs.

  • Report this Comment On March 25, 2010, at 1:05 AM, BrooklynDodger wrote:

    Too big to fail has to be fixed for a reason not mentioned yet, but tied to consumer protection.

    AIG, an insurance company not regulated by the US government, has (had?) millions of premium-paying customers in dozens of foreign countries, none of whom had anything to do with credit default swaps. If all of those people woke up one morning to discover that the life/auto/house insurance they had contracted wasn't there because their insurance company had failed, some reasonable expectations would be

    (1) demands by multiple governments at the state department level to fix the problem

    (2) country-wide boycotts by local populations of other American businesses and brands that had nothing to do with the problem

    (3) the need for lots of multilingual lawyers, presumably paid for by the US government.

  • Report this Comment On March 25, 2010, at 3:07 AM, MotleyReader wrote:

    All this rhetoric about the Fed is nauseating...

    My hope is that more states will follow in the foot steps of North Dakota and create their own state banks so that each state's money stays in their state and the proceeds from loans and fractional banking go into state treasury coffers instead of one of the twelve branches of the Fed. If every state chartered their own "central bank" that replaced the need to utilize any of the Fed banks, the Fed as we know it today could become marginalized and eventually extinct. North Dakota has some of the lowest unemployment and is running a budget surplus. State-controlled central banking along with nationalization of the money creation role of the Fed (like @Gerlitz wrote) seems to be a recipe for success. Here is the text from the Wikipedia article on the BND:

    "The Bank of North Dakota (BND) is a state-owned and -run financial institution based in Bismarck, North Dakota. Under state law the bank is the State of North Dakota doing business as the Bank of North Dakota.

    All state and local government agencies are required to place their funds in the bank. Other entities may also open accounts at the Bank; however, BND offers fewer retail services than other institutions, and has only one office, limiting its competitiveness in consumer banking.

    Instead, BND has taken a role more akin to a central bank, and has many functions, such as check clearing, that might be expected from a branch office of the Federal Reserve. The Bank does have an account with the Federal Reserve Bank, but deposits are not insured by the Federal Deposit Insurance Corporation, instead being guaranteed by the State of North Dakota itself.

    BND also guarantees student loans (through its Student Loans of North Dakota division), business development loans, and state and municipal bonds."

    What I like about this model is that all the proceeds from sound banking practices originate within the state, for the people and businesses of the state, with the ultimate benefit of the state treasury itself, allowing those profits to be reinvested into community development, new businesses, and so on. If, for any reason, the state bank requires additional capital, it could tap its account with the Fed.

    It's intriguing, and I hear that more states are considering setting up their own state banks after North Dakota's very successful model. I hope they all succeed!

  • Report this Comment On March 25, 2010, at 5:30 AM, rawlem wrote:

    The clearest way to describe how to divide what the banks do is to think of a "utility" and a "casino". A bank is a utility that circulates money as its plumbing. That should be guaranteed and supported by the government.

    All activities in the casino should be stripped out into a separate company or require a 100% capital ratio.

    Banks won't like that but tough

  • Report this Comment On March 25, 2010, at 7:15 AM, ogital wrote:

    This is very sad. So many people expecting the government to save their stupid butts when anything goes wrong (for them). This is a question of greed plain and simple. When the financial problems started, the government should have said sorry folks but the companies will just have to fail. What ever happened to the thought “if it seems too good to be true it surely isn’t.” The management of those companies should have been tried and convicted as in the ENRON case, and that would have put an end to the stupidity. Sorry folks, but my 401K and IRAs got dinged in the fallout and I have since started making my own investment decisions so I don’t get screwed again by unethical management or the government.

  • Report this Comment On March 25, 2010, at 7:44 AM, mesapet wrote:

    Although "too big to fail" really means "too big to be allowed to fail", it also was the mental slogan (which they termed a "model") of the Wall St boys and the Greenspan guys. But their main assumption was that the upward trend was infinite. So their investments were bets on the upward trend, which was teminated by the high price of oil that broke the bottom level of our economy. Unlike the racetrack where you just tear up your losing tickets, TBTF was the govt guarantee that losing tickets were worth something, maybe $ trillions after all, and the losing bettors were too valuable to lose.

    Now the govt is on the hook. And it is also TBTF. But the trade deficit is negative due to the tax system ( the income and Soc Sec taxes), the M.E. problem which pits OPEC against AIPAC, the unfunded obligations of govt at all levels. Hint: note that Congress has a special pension and health system. That says it all. Crocodile tears from Congress about various and sundry difficulties are just political strategyms. Now the big bubble is not the DOW, but the dollar.

  • Report this Comment On March 25, 2010, at 10:31 AM, mountain8 wrote:

    Vote no to incumbants.

  • Report this Comment On March 25, 2010, at 11:21 AM, MORK000 wrote:

    The whole problem starts at the very top of management because if top management did anything to the nex lower position that was doing wrong then it would be stopped. However that is'nt the case. So now you situation changes and you have to show integrity by letting go of your top management so the rest of that company knowe that they won't get away with such craftyness.

  • Report this Comment On March 25, 2010, at 1:00 PM, TopAustrianFool wrote:

    "In the end, I don't see the Fed folks as a bunch of incompetent bumblers. But when it comes to smothering the next Lehman, Fannie Mae (NYSE: FNM), or AIG (NYSE: AIG), I do think they'll fail miserably because they're being given a butter knife to regulate with when what they need is a buzzsaw."

    The FED will fail because the FED inflationary policy is what caused the whole bubbe. They are the cause of the problem. Get that?

    The incredibly low rates, which is done by the FED, coupled to the restriction that this low rate borrowing could only be use for real estate, created an inflation that was greatly reflected in housing and indirectly, over time, in general prices. Because of this house prices grew, construction sky-rocketed and then investments by firms that create capital assets, like CAT and such, went up with it. This was malinvestment as the house prices, low interest rates were not a cause of increase savings, but of money creations. That's right, printing money. So the FED is the main culprit period. So the Bust is nothing but the liquidation of this malinvestments and toxic assets, which the govt has slowed by promising to bail out and buy the toxic assets. If the govt had said that there would be no bail outs under any circumstances, firms like CAT and the banks would have liquidated faster.

    The financial firms were just trying to profit from the conditions. If you lend money in an inflatinary environment, you loose, because by the time the debt is repaid the buying power of the money will have decrease, thereby reducing your profit. The only way you can make moeny is by chopping the debt and securitizing it by selling it to unsuspecting investors. So there is nothing to regulate. The FED is the problem.

  • Report this Comment On March 25, 2010, at 1:39 PM, TopAustrianFool wrote:

    And by the way. The FED gets what ever it wants. The FED is the most powerful institution in this country. So your statement that they are given a "butter knife to regulate with when what they need is a buzzsaw" flies in the face of reallity. If the FED could fix the problem with regulation of any type, they get it. They get what they want, and the FED chairman is the most powerful man in the land when it comes to his own position. No one can unseat him, he retires when he wants. No one tells him what to do. No one can set him up for failure. He only fails because he is the main problem.

  • Report this Comment On March 25, 2010, at 3:10 PM, Glycomix wrote:

    The US debt as a percentage of GDP has been 65% from 1990 until 2008.

    According to the wikipedia article on "United States Public Debt", Mr O'Bama and Congress will increase public Debt to 100% by 2010.

    http://en.wikipedia.org/wiki/United_States_public_debt

    CNN politics will not post anything where I include websites.

    We are not there yet, but we will be unless someone acts.

    Consider this: hyperinflation occurred in at least 6 latin american countries in the 1980s to mid 1990s because they got into debt and wouldn't cut back on their public consumption.

    Bolivia was able to overcome its hyperinflation by

    With all due respect to the Democrats who read this, Mr. O'Bama and his Radicals in Congress are adding debt like it was cheeze whiz.

    On August 2, 2009, according to the Washinton Post, Congress said that they would be borrowing $9 trillion in debt over the next 10 years. They're tripling the debt in a day! The National Debt was $4.8 trillion in 2006, even with the war in Iraq!

    O'Bama added $13.1 trillion in NEW WELFARE programs! That's what the debt is for. We're about to drown in the 50% unfunded medicare entitlement causing huge debt so that we have to pay $38 trillion or its busted. Based only on the numbers presented to congress in Feb. 19, 2005 by Tom Savin of the Center for policy analysis, we owe $29.2 trillion in the next 8 years, we'd have to increase taxes to about 400% of its current level to pay this off.

    http://www.ncpa.org/speech/medicare-now-and-in-the-future

    The estimate of percent raise was based on the following formual: US taxes received =$1 trillion in 2009 divided by 142.3 million taxpayers.

    They added $1.4 trillion for deluxe unemployment benefits which also included support to pay 50% of the health insurance, because COBRA health costs $1400 a year. That was a stimulus? That's pork. They also bought $2,000 junk cars for $7,600 apiece. The problem is that $1.4 trillion would raise our taxes 21% if we pay for it over 10 years at 5% interest. How long will the current low interest last? Ha! When I bought my house in 1990, I was happy to get an 8% interest rate. I only got it because I put 20% down and the house was worth 20% more than they were asking for.

    I don't call these senseless radicals 'Democrats' because they aren't statesmen, they aren't thinking about the future. The Democrats that I grew up with like Sam Nunn and the 'guy with the red bow tie from Indiana" wouldn't act this way.

    They knew how to control themselves. I don't think that they know what they're doing. Hubris is going to destroy us.

    Walter Mahan wrote the following about the effect of inflation:

    The inflation in Brazil between 1961 and 2006 was 14.2 quadrillion percent —14,200,000,000,000 percent…. To put this in human scale, I know a person who built a house in 1979 for 60,000 cruzeiros novos, the currency of the day. A decade later, with the annual inflation rate at 1,782 percent, my friend spent the same amount for a pair of shoes!

    http://insidework.net/resources/articles/hyper-inflation-the...

    I hope that everyone here will do their best to encourage the Democrats to drop this 'Borrow and Spend' binge.

    We may not have a country left if they don't

  • Report this Comment On March 25, 2010, at 3:17 PM, Glycomix wrote:

    Here's something that's been in my craw since November 2008.

    The Housing GSEs like Fannie Mae and Freddie Mac caused the housing crash.

    Wall Street didn’t cause the destruction of the world economy.

    Democrats in House and Senate Banking Committees caused Stock Market crash & deperssion

     Harassed Regulators, Fannie& Freddie CEOs:

    o Make bad loans to meet “Affordable housing goals” set by HUD

     Required by Cranston Gonzalez Affordable Housing act of 1990. (Repeal Cranston-Gonzalez to eliminate bad loans).

    • This law also disseminated these toxic mortgages throughout the economy by securitizing them into mortgage-backed securities. (AKA CDOs, Credit Debt Obligations) http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs...

     Maxine Waters: Regulation must be done in a manner so as not to impede[Fannie and Freddie’s] affordable housing mission, a mission that has seen innovation …100 percent loans (no down payment).

    2005 April 6, Greenspan said, Keep GSEs below 23%, 1.3trillion, Lower it to 5%, $300 Billion.

    If GSEs fail (Fannie, Freddie +12 others) economy will go sour, cause “systemic risk”.

    http://www.federalreserve.gov/boarddocs/testimony/2005/20050...

    a. FANNIE & FREDDIE provided PORK for Democrats: Schumer, Dodd, Franks, Meeks, Davis, Clay, Waters, etc.; & PAYOLA for Dems (Chris Dodd, Jim Johnson, Claude Raines, Jamie Gorelock& Republicans: Bob Bennett (son employed by Fannie)

    http://money.cnn.com/magazines/fortune/fortune_archive/2005/...

    b. Schumer berated Greenspan “You’re wrong!” Frank, Dodd, Schumer & Bennett said that they didn’t want “any significant changes in Fannie Mae’s purpose”

    . Schumer & Dodd: “Fannie, Freddie & Housing GSEs are OK!”

    http://www.floppingaces.net/2008/10/02/wsj-calls-out-dems-wh...

    http://online.wsj.com/article/SB122290574391296381.html

    Result: Dems told Greenspan “retire” and left on Jan 30, 2006.

    2. 2006 October 1, Housing GSEs bankrupt by $1.8 trillion. Make 50% of all mortgages

    St. Louis Federal Reserve Governor William Poole said (in the 2nd paragraph of 1-17-2007 speech ) The GSEs: Where Do We Stand, “the housing GSEs—Fannie Mae, Freddie Mac, and the 12 federal home loan banks, as of September 30, 2006…have total assets of $2.67 trillion…The housing GSE liabilities on their balance sheets and guaranteed obligations off their balance sheets are about $4.47 trillion”

    $1.80 trillion in the red = $4.47 trillion liabilities- $2.67 trillion assets

    http://research.stlouisfed.org/publications/review/07/05/Poo...

    3. 2008, September 9: Fannie & Freddie=bankrupt;

    guaranteed 76% of all mortgages, $5.3trillion in loans

    - 408% of what amount Greenspan said was “Too Much”

    http://www.c-spanvideo.org/program/281353-1 [37:00-38:50 (90 sec clip) in testimony]

    When asked, Lockhart said ‘Affordable Housing goals” caused Fannie and Freddie’s executives to guarantee unsafe loans. “HUD Goals were too aggressive”

    http://www.c-spanvideo.org/program/281353-101 [16:12-17:50]

    HUD required % of dwellings purchased GOALS for Fannie and Freddie

    TO poor or moderate income:from 50% in 2000 to 56% in 2007

    Underserved housing loans: from 31% in 2000 to 43% in 2007

    Special Affordable housing: from 19% in 2000 to 27% in 2007

    SEE Tables 1& 2 (pp. 4-5)

    http://www.huduser.org/portal/datasets/GSE/gse2007.pdf

    4. Fannie Mae/Freddie Mac Bankruptcy- caused stock-market crash

    Investors thought they were safe; so invested in them.

    Greenspan 6 April 2005 testimony: “Investors have too much confidence in the GSEs because they think it’s backed by the US treasury.”

    http://www.federalreserve.gov/boarddocs/testimony/2005/20050...

    o

    Iceland’s pension fund became bankrupt because they invested in Fannie & Freddie.

    The destruction of the US financial system and the securitization of toxic loans by Fannie Mae and Freddie Mac did. Pension plans put their saving into Fannie and Freddie; Individual put their IRAs into them; community banks put their reserves into the GSEs and even governments such as Iceland put its pensions in mortgage-backed securities issued by Fannie Mae and Freddie Mac thinking that they were secure because of disclosure laws and the US government backing.

    They didn’t realize that congress exempted the GSEs from the 1933, 1934 and 1937 securities disclosure requirements!

    Now their stock is worth $1 a share. Any takers of the toxic loan? I want to be sure that no one I invest in EVER buys a mortgage-backed security from Fannie or Freddie.

    (See Chris Shay’s mention of this in the video clip 3:29-3:39) http://www.youtube.com/watch?v=y4A0RuXhnQA] also http://www.c-spanarchives.org/library/index.php?main_page=pr... 2:14:34-2:17:40.]

  • Report this Comment On March 25, 2010, at 5:23 PM, MikeMark wrote:

    The short answer is no. The Fed cannot ever prevent crisis.

    The reason is simple. Regulation covers a certain case, usually seen in the rear-view mirror. Hindsight is 20-20.

    However, in addition we must recognize that the Fed is actually the cause of the crisis. The Fed (combined with fractional reserve banking) creates or enables a higher liquidity of money (or volume). It inflates the supply. No matter what the regulations are, that money will find a home somewhere. A bubble will be created somewhere. The bubble will burst, the crisis will begin.

    There already exists a regulation that was designed to prevent this. It is the regulation in the Constitution of the United States requiring the States to allow nothing other than gold or silver as money. The Federal Reserve itself is unconstitutional.

  • Report this Comment On March 25, 2010, at 7:26 PM, jfg565 wrote:

    This is just another example of how many in our country have developed the philosophy of not wanting to live (suffer) from the consequences of their choices. If someone makes a bad choice they expect the government to be there to bail them out. This has happened time and time again over the years so you can't really expect people not to feel that way.

    So many want government to provide a safety net for all areas of their life. Unfortunately this leads to a dependency mentality along with bigger and bigger government with all its many layers of bureaucracy. This universal safety net comes at a cost. And guess who keeps having to pay for it?

  • Report this Comment On March 25, 2010, at 8:25 PM, TopAustrianFool wrote:

    Glycomix

    the politicians would have not been able to do mischief without the inflationary policies of the FED. So although I do not disagree that politicians had a hand in it. Without the FED Dodd and Frank could have not done anything.

  • Report this Comment On March 25, 2010, at 8:31 PM, TopAustrianFool wrote:

    "However, in addition we must recognize that the Fed is actually the cause of the crisis. The Fed (combined with fractional reserve banking) creates or enables a higher liquidity of money (or volume). It inflates the supply. No matter what the regulations are, that money will find a home somewhere. A bubble will be created somewhere. The bubble will burst, the crisis will begin"

    Absolutely correct. FED is the cause. When there was no FED states started doing their own fractional banking and ruining their own economies. The Bank of New England actually learned from this and instituted tight controls on its money. Because of this New England actually had a period of prosperity and stability until the Civil War, which gave DC centralized power. Oh well...

  • Report this Comment On March 25, 2010, at 9:03 PM, ecoloney wrote:

    The purge began Jan 19, 2010. May the purge continue in November 2010.

  • Report this Comment On March 25, 2010, at 10:54 PM, bigjohnson2 wrote:

    What idiot president allowed the banking hyenas out of the pen?

    No, government only responds in emergencies. Currently. i am terribly concerned with president "curious george", "lovely wicked witch of the west" rep. pelosi and "i'll let you do anything ..."sen. DIRTY harry reid

    we must be watchfull of them or the country wil be lost!

  • Report this Comment On March 25, 2010, at 10:55 PM, bigjohnson2 wrote:

    who's hustling the clothes and why?

  • Report this Comment On March 26, 2010, at 2:29 AM, burrowsx wrote:

    The Fed is the wrong place for a Financial Consumer Protection Agency. With the FCPA housed in the Fed, there is a built-in conflict of interest, in which banks are engineered to win over the interests of consumers.

    The Volcker Rule is only a start. Requiring a regulated exchange for all derivative contracts, and delivering a copy of the investment document to buyers will force greater transparency. But without a truly independent protection agency, all we have is a shell game.

    Is there something about the air in Connecticut that causes such financial moral debility in its Senators?

  • Report this Comment On March 26, 2010, at 3:58 AM, Aceuphisleev wrote:

    Don't worry everyone, this will all blow over once the Chinese Empire owns us ;)

    But in all seriousness, I feel that simplicity is generally a good policy in politics and finance. Institutions should have the option to create fancy and complex derivative instruments, but they should also have to account for the risk they take (i.e. no bailout). At the same time, the government could likely prevent another crisis with a few simple regulations (limits on leverage, for example). Instead, they instinctively create more programs, policies, rules, regulations, etc. and take on massive debt in the process.

    The simple truth is that the crisis cannot be fixed quickly. When debt builds up over years and years on the shoulders of easy credit, the system requires years and years of prudent management before it is fixed. Unfortunately, we have loaded up on even more debt, which only delays the inevitable.

    Our culture is built upon a desire to live beyond our means, and the Fed helped perpetuate this mindset by keeping interest rates abnormally low for so long. Now, oddly enough, they are even LOWER! I realize this is meant to encourage borrowing as a way to stimulate growth, but as I said before, no "stimulation" is going to provide a "quick fix" for this economic situation.

  • Report this Comment On March 26, 2010, at 5:35 AM, MeHow5r wrote:

    I absolutely agree with article's main thesis. History confirms it: the FED has failed every time ever since it was created in 1913. Why? Because preventing crises was not the reason why the FED was created. I won't delve into details here, but I encourage all to read up about the depression of 1910 (I bet you 8:1 you haven't heard of this one - why?), Friedrich Von Hayek and Austrian School of Economics in general.

  • Report this Comment On March 26, 2010, at 1:53 PM, INoFoolin wrote:

    Capitalism does not require 'free' markets, but it must have 'fair' markets. Without some laws (regulation) there is anarchy. If laws aren't enforced innocent people are ruined. The true 'conservative' will agree that this is a nation of laws, and that the criminals should be caught and punished. Why do the Republicans side with anarchy, lying, cheating, stealing? Enron, Tyco, Goldman, Lehman, AIG, etc. were ponzi schemes. We need more enforcement and oversight of criminal behavior, not less.

  • Report this Comment On March 27, 2010, at 1:58 AM, daleinaz wrote:

    @eby123, the courts did not break up AT&T.

    AT&T agreed to be broken up so that they could get into the "lucrative" computer business. As a regulated monopoly, they were prohibited from selling computers or software, to keep them from competing with IBM.

    Still, I agree with others, if an institution is "too big to fail", doesn't that mean it is "too big"?

  • Report this Comment On March 27, 2010, at 11:21 AM, TopAustrianFool wrote:

    "Capitalism does not require 'free' markets, but it must have 'fair' markets. "

    There are fair markets in Cuba. Go check them out. No one is asking for no laws, no regulations, no courts. The job of the govt is arbitration, courts, some policing. But govt is regulating everything.

    The only fair capitalism is the Free Market kind. Where people vote with their wallets, not the govt choosing winners and loosers with tax-breaks and regulations. Only consumer choice is the answer unfortunately consumers also love a free-ride and the govt is always willing to sell promises of free-rides in exchange for votes. Everyone was mad about the health insurance companies. Everyone supported the free ride politicians promised but once the numbers wouldn't add up and everyone saw they would have to pay more, they didn't want it anymore. Yeah well I hope you like your change America, now that you will have to pay for it too.

  • Report this Comment On March 27, 2010, at 11:24 AM, TopAustrianFool wrote:

    "Why do the Republicans side with anarchy, lying, cheating, stealing?"

    Couldn't agree more with that statement. What I would like to know is: Why do the democrats side with Comunism, lying, cheating, stealing?

  • Report this Comment On March 27, 2010, at 6:24 PM, scharfl wrote:

    Where people are ruled 100 percent by the Ten Commandments, both capitalism of the Ayn Rand variety and the socialism of the Cuban variety can flourish and prosper. Where Ten Commandments don’t rule or cannot be enforced, there will always be Castros, Enrons, Derivatives, Greenspans, and we will witness history repeating itself. Nothing is inherently good or bad in itself. It’s the people, their character, leadership…Sorry, all this was to come out of my preaching from the pulpit tomorrow Sunday morning….

    schar

  • Report this Comment On March 28, 2010, at 8:25 PM, rse0506 wrote:

    Only slightly tongue-in-cheek, I offer the following greatly simplified financial regulatory regime:

    1. Eliminate ALL financial regulations, and replace them with this single one:

    2. Anyone in management at any financial institution (commercial bank, investment bank, brokerage, shadow bank, hedge fund, insurance company, etc; and in fact ANY institution with an overall debt ratio higher than some percentage, like maybe 60% or 70%), MUST "eat their own cooking". Which means that ALL of their compensation must be in company stock, with a ten to fifteen year ramping vestment period (if they need some cash to live on when they first start their job, they're allowed to margin a little bit of their stock).

    Then, you can bet your Fannie, they will pay attention to risk. Congress comes along with the CRA or some other such political bullying, and the CEOs will just say, "this is crazy, let me outta here" ("here" being "my job"). This will eliminate the need for all the finger pointing. The mgmt types will figure out what it will do to their own wealth, and balk. That will either halt it right then and there, or shine the spotlight on it such that the public will see it.

    Scott

  • Report this Comment On March 29, 2010, at 7:26 PM, rushenator7 wrote:

    @everyone...read Ron Paul's "End the Fed"...

    the existance of the Fed is one of the biggest problems. the question is, no matter how much power or lack thereof they are entrusted with, the people trust blindly that the best intentions are put to use when dealing with our money, why can't the people see where/what/who gets the money?

  • Report this Comment On March 30, 2010, at 2:34 PM, golfer1john wrote:

    We're stuck with government involvement and regulation. It's not going away. But, if banks are going to accept government insurance (FDIC) of their deposits, they should not be engaging in trading for their own accounts, using that insured money, and exposing it to the unlimited risks of the derivative instruments that investment banks trade in. Let the investment banks do what they want with their shareholders money, but if they screw up they should be allowed to die. Before Glass-Steagal was repealed, the failures of Lehman and Bear Sterns would not have threatened the entire financial system.

  • Report this Comment On March 30, 2010, at 11:41 PM, njdo wrote:

    The Fed knows exactly what is happening and failed to prevent the systemic breakdown on Wall Street. the Fed has the US Government on the hook always backed by the full faith and credit of all assets in the country and now that Fed has all taxpayers ion hock for more than they can ever possibly pay all they have to do is sit back and collect interest on the debt while Congress continues their Puch and Judy show. If the Fed or Government wanted to solve this problem it would have been solved long ago.

  • Report this Comment On April 01, 2010, at 4:01 PM, theflashadow wrote:

    Recognition of banking problems and abuses have been written up by banking scholars and economists for well over 200 years, yet nothing substantive or effective has been done to correct the attitude of bankers or flaws in banking procedure or practice.

    National regulators have been set up and ignored, International study groups and coooperative efforts to codify and distribute standards in the forms of guides, suggestions, or hard stipulations have been offered all to no avail.

    Central Bank systems have only had two detailed, dedicated studies published in the past hundred years, as if Central Banks are flawless and fulfill the ideal function in the perfect way. (Those two are Vera Smith, (her Ph.D. thesis) and Murray Rothbard, The Mystery of Banking.) (There has been Secrets of the Temple, but that was not a "study" pre se.) Of course, these studies are disregarded because they originate from the dark bowels of the Austrian School (for which I have neither ties nor sympathies, but respect should be paid where due.) who constitute less than 20% of professional economists. If most economists choose to reject the studies for good reason, let's hear about it with a detailed and extended rebuttal to show what is good about central bank, the lender of last resort, who then passes this function on to the government and eventually the taxpayer.

    Paul Volcker, the former Chair of the Fed, recently called for enlightenment, saying, "Somebody should write about how the Central Banks and how they became so important and powerful" . . or something similar to that. Of course, no one will take him up on the challenge because support for CBs doesn't appear to be something to be proven or disproven through the rational process..

    An obscure study came out of the European group of economists and bankers, VoxEU.org. Data was accumulated for bank crises and recovery over a considerably long period. Some of the results are not flattering to CBs. Countries which had Central Banks took longer to recover than those without. Those without Central Banks had fewer non-performing loans, and the differences between recovery with and without a central bank were on average: without a CB - 3.4 years; with a CB - 4.8 years.

    This study was conducted by Hogarth, Reidhill and Sinclair under the auspices of the Bank of England - mother of all central banks.

    The current situation brought on by the banking industry's profligacy and the policy of abuse in the interest of self-aggrandisement was discussed at length by an old economist on MSN.com in their community message boards. It is lengthy and contains enough to write several books. Covers banking, its history, economics, the US laws our banks operate under and even attempts to invoke criminal law against the unprincipled banking characters who delivered us to this morass - from which we may not extricate ourselves for another decade or more and ruined any chance for the US banking system to be the leader in the global commerce that will soon break loose for all kinds of growth and profit opportunities. In short, their degeneracy pushed their industry out of the picture. . . . And, you and I will suffer and pay for not only the corrections required but the loss of profit that was tossed away by short-sightedness - along with our children.

    The Fed's role in this? . . . They led the parade and smoothed the path for the miscreants that followed. There's enough indictment in the history of the current crisis if you care to think your way through it.

    That old gentleman did.

  • Report this Comment On April 20, 2010, at 6:42 AM, worknfool wrote:

    The Fed's creation in 1913 was a complete con job. The voters were sold a bill of goods and convinced, erroneously, that the Federal Reserve was going to be the solution to the problems of the too large banks and their undue influence in government and on the economy. What the voters never realized was the same that so many are ignorant of today; the fox is guarding the hen house, the feed bins and the egg baskets.

    Ask you "representatives" to tell you who owns the Fed. Hell, ask your bank or the average knucklehead stock broker. They have not a clue. The banks that own the Fed will continue to manage our economy like a vampire, feeding on the victim's blood but just to the point of un-dead. It's insane.

    The Jekyll Island meetings of the last century, as well as the activities of the Trilateral Commission more recently are the reality of how business gets done, especially at the "too big to fail" level.

    As for all of the Kool-Aide drinkers from the Keith Oberman and Rush Limbaugh crowds...grow up! The tactics of divide and conquer have never been so blatantly applied nor so incredibly successful. It's so out of control now that even the politicians who are such an integral part in perpetuating the problem don't even realize what they are a part of any more.

    Forget who started it and stop looking for a party to blame...they have become nearly indistinguishable from one another. What ever one does they excuse by pointing to their predecessor and screaming "well they did it first" or worse. Meanwhile...they both keep doing it. Regardless of how it started consider this:

    -Has our government pitted Democrats against Republicans?

    -Have the young been set against the old?

    -Do we still have issues between Black, White and Tan?

    -Have they fostered problems between males and females, husbands and wives, parents and children?

    -How about the haves and have nots, insured and uninsured, employed and unemployed, city to county, farmer to clerk?

    What we are experiencing is the very type of control mechanism that was suggested by Willie Lynch back in the early 1700's, as a means of allowing a small minority of plantation owners to manage a majority population of slaves. Slaves that at any time could have risen up and slain their masters, but they didn't. The reason was that they had already been beset with the divisions of trust within their own culture, the exact same types of divisions that we are so apt to get caught up in today.

    Whether you believe that Willie Lynch was real or myth doesn't matter, the message does. You don't have to be much of a scholar or economist to see that the incentive has always been control, and when you control a people's money you have control of them. We do not own or control the Fed, so any discussion about them should begin from the premise that they own us, because that is much closer to the truth. We are all the new slaves, and that's not being overly dramatic. Forget your labeled alliance and dogmatic diatribes. We are all in the same sinking ship together. "Those People" are not a different color, or religion or sex or sexual preference. "Those People", the ones that we should all be running out of town covered in tar are the asses that run our government, and they all think we're all idiots...believe it.

    We must ask our government for permission to do anything and everything. Special thanks to the Patriot Act and a litany of other excesses and Executive Orders. Our Constitution is now looked upon by our rulers as simply something to be played with and mocked. I can't even count the number of unguarded admissions by recent Health Care shills who admitted that the Constitution wasn't important to them, (not that their opposition isn't just as bad when they rule).

    We do not have control of our own currency, the Fed - and by extension their share holders do, and they are not U.S. citizens. They are the people who own the biggest banks in the world, and they will continue to move us toward a world wide community that shares a worthless scrip currency that they completely control. Again, control of the currency is control of the people since the currency, or money is the core of all valuation of trade between civilized people.

    Nationalization of industries and empire building are all just parts of the slight of hand that has been used to keep our eye on the white gloved hand of the birthday magician, while the crafty assistant climbs out of the box and disappears with all of our wealth. Ever notice that whatever the bogeyman; Muslim radicals, Asian Commies, "Remember the Maine", they are constantly throwing something out there to scare people into believing that we need to sacrifice our national wealth, personal liberties and the lives of our youngest and brightest. Funny thing...there's always the same core groups getting richer when we find ourselves put upon by all of these dangers, real and over blown.

    Who actually gives a rat's backside about Afghanistan, other than the oil company that owns the Black Sea pipeline? Who profits from our involvement in Iraq? Does the average American really care about the Iraqi people and who they pray to or how. Does anybody really believe that the entire Middle Eastern Muslim world just woke up one day and decided "hey, we need to kill all of the Americans"? Pretty hard to fathom coming from countries whose populace couldn't even find us on a map. Why do they even know of us? Because of all of our "good works" overseas? Hmmm, maybe it's got something to do with promising them all self rule during WW I, nah we were just kiddin'. Or how about our nasty little habit of usurping sitting governments all over the world for good God fearin' causes like cheaper sugar, or cheaper oil, or cheaper friggin' banans? And of course we always quietly back the good guys...you know, like Noriega, and the Shah of Iran, and even Sadam. Get real...the 3rd world is poor and illiterate, but they're not retarded. How do you think Americans would react to Afghani militia settin' up patrols and check points all over our country...and then overseeing our elections to make sure that they turn out the way that they want them. Let's be honest. The only real numbers of people concerned with what's going on overseas are the people related to those that are getting rich from it and those that are related to the people who are dieing and being maimed over there so that the first group can accomplish the getting rich part. The rset of America is too busy becoming a third world where their currency is valueless and their biggest worry is where their next meal is coming from. Once they get us that low they know that they've completely won because everything will come from the gubmint then, and there won't be anything that they don't control.

    Dr. Ron Paul scares the bajeezus out of the mainstream media and politicos because he's been speaking about all of these very elementary Constitutional Liberty issues for quite a while now, and it's been picking up inexorable steam, and it won't slow down.

    When In Doubt Throw It Out!

    A food service mantra of safety to keep patrons from being poisoned by spoiled food. I would suggest that this is a perfect adage for dealing with politicians. They all have a shelf life, after which they begin to rot and poison everything around them. Since when did career politician become a life's work goal. It was supposed to be Joe average sets down his hammer or slide rule and commits to public service for a term for the good of the Republic, whereupon he then promptly went back to being a productive private citizen afterward. Why are we even discussing pensions for these scoundrels? Well because they created them for themselves that's why!

    Voter enforced term limits. We have them already, and it's time to start cutting of the necrotic limbs.

    Congress is to be put out of office. Don't fall for their B.S., they are ALL evil! There isn't that simpler? If we err let's do it on the side of OUR welfare and not theirs for a change. Considering all incumbents, the only thing we need to do is to make sure that we create new laws that impart something on the order of the French Revolution's Terror in response to these scoundrels who screw us through their entire term before retiring on an insane public pension while working for the very industries that they previously "regulated". Democrats and Republicans are totally and completely indistinguishable in this area, so all of you dogma devotees take note...your dog has just as much crap on his nose as the other. They ALL do it!

    Since Harry Truman, try and name a politician that didn't leave Federal office a whole lot wealthier than when they went in. Gee, I wonder how that happened? The problem now is that they are so emboldened by our collective bovine apathy that they don't even try to hide it anymore. They lie, cheat and steal with such utter disdain for us and with such regularity that we've become numb to it.

    Here's a few foolish ideas about how to end the madness...and I'm not joking in the least.

    -Implement public punishment for public officials. There should be no higher crime than abuse of the public trust. Since these turds cloak themselves with altruistic malarkey to get the job the punishment for misappropriating that high moral ground should be just as high, and as public as the lies that they told to get elected. Besides, when they cheat they kill. Starting wars to gather resources and wealth should lead to a public beheading, not generational fortunes at our expense.

    -Lesser missteps can be completely eliminated in a single day. Not one Congressional Page will ever be sexually assaulted again. Not one campaign worker will ever drown. And not a single B.J. will the Oval Office ever witness again (except probably between desperate politicians). All it would take is for the bunch of them to see one of their own trotted out to a post on Prime Time T.V., see the scoundrel tied to said post, watch as his ass is bared, and then a little Malaysian man would walk out onto the scene and begin to welt and bloody the bastard's buttock until he could no longer walk or control his bowels.

    Extreme...certainly. Effective deterrent...Most Definitely! Hey, I'm just interested in what works, we've already seen what doesn't.

    -Elected officials' pensions will be denied starting right now. They screwed us while they were in office...time for some pay back. No more pensions period. They can get a 401 and pay SSI just like the rest of us. same goes for their B.S. health care plan.

    -The next elected official who uses his position to reap one dime of unearned wealth shall be beheaded on a dull bladed gibbet and his head will be placed upon the end of a long pike positioned along one of the railings of a D.C. bridge over the Potomac. His immediate family will be stripped of their citizenship and they will be deported to the most depraved 3rd world dictatorship we can find. Maybe with their families well being on the line they can learn to act right.

    If you think this is a ridiculous and callous way of "fixing" the problem...check your premise. To all of you God worshipers...re-read your Bible. The Old Testament God was a serious and mean SOB. The book has plenty of blood in it. To all of you Collectivists, check out your heroic revolutionaries' body counts. Papa Joe was never one to ask twice or forgive a slight. Democrats and Republicans alike drafted unwilling citizens to go to Asia and be killed, maimed and poisoned...while they all made money off of it.

    If these jerks can use the excuse of having to teach some 3rd world despot a lesson, as an excuse to send thousands of our young people off to be killed and maimed, all to allow them and their owners to make more money...then I don't have the littlest bit of a problem having them disemboweled on Sunday morning's Meet the Press. If they can steal our national wealth and commit us to a path of financial ruin that causes generations to suffer in poverty and despair...I would sleep well knowing that they had been tied naked to a post in a tenement basement, slathered in peanut butter and left for rats to eat alive...while we watched on CNN of course.

    All it would take is a handful of these pustules to be dealt with in this way and I think that the appeal of public office would loose some of it's sheen...especially for any length of time or for less than morally sound individuals.

    It's time to get Medieval on their ass!

    Check out:

    fiatempire.com

    zeit geist.com

    America: Freedom to Fascism

    How Stuff Works (discusses the next suppository that Wall Street will be giving us...Cap and Trade).

    Join the Tupperware party...it's just like the Tea Party, only without the meetings. The only important thing is that you educate yourself and pass the knowledge along to at least three people a day. Don't try to argue or persuade, just educate and encourage them to do the same with three other people themselves. I like to call it viral citizenship. By next year we'll be the Masters of the Universe and they'll be the ones looking to "Will Work For Food".

Add your comment.

DocumentId: 1137737, ~/Articles/ArticleHandler.aspx, 4/19/2014 1:23:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement