From BloombergNews:

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

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Politicians in Europe have spent decades creating a fiscal crisis by violating Mitchell’s Golden Rule and letting the government grow faster than the private sector.

As a result, government is far too big today, and nations such as Greece are in the process of fiscal collapse.

But that’s the good news – at least relatively speaking. Over the next few decades, the problems will get much worse because of demographic change and unsustainable promises to spend other people’s money.

(By the way, America will suffer the same fate in the absence of reforms.)

Here’s a stark indicator (click to enlarge) of why Greece is in the toilet.

Look at the skyrocketing number of people riding in the wagon of government dependency (and look at these cartoons to understand why this is so debilitating).

By the way, Greece’s population only increased by a bit more than 16 percent during this period. Yet the number of bureaucrats jumped by far more than 100 percent.

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One almost feels sorry for Treasury Secretary Tim Geithner.

He’s a punchline in his own country because he oversees the IRS even though he conveniently forgot to declare $80,000 of income (and managed to get away with punishment that wouldn’t even qualify as a slap on the wrist).

Now he’s becoming a a bit of a joke in Europe. Earlier this month, a wide range of European policy makers basically told the Treasury Secretary to take a long walk off a short pier when he tried to offer advice on Europe’s fiscal crisis.

And the latest development is that the German Finance Minister basically said Geithner was “stupid” for a new bailout scheme. Here’s an excerpt from the UK-based Daily Telegraph.

Germany and America were on a collision course on Tuesday night over the handling of Europe’s debt crisis after Berlin savaged plans to boost the EU rescue fund as a “stupid idea” and told the White House to sort out its own mess before giving gratuitous advice to others.German finance minister Wolfgang Schauble said it would be a folly to boost the EU’s bail-out machinery (EFSF) beyond its €440bn lending limit by deploying leverage to up to €2 trillion, perhaps by raising funds from the European Central Bank.”I don’t understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense,” he said.

All that’s missing in the story is Geithner channeling his inner Forrest Gump and responding that “Stupid is as stupid does.”

...at birth?

Separated...

This little spat reminds me of the old saying that there is no honor among thieves.

Geithner wants to do the wrong thing. The German government wants to do the wrong thing. And every other European government wants to do the wrong thing. They’re merely squabbling over the best way of picking German pockets to subsidize the collapsing welfare states of Southern Europe.

But that’s actually not accurate. German politicians don’t really want to give money to the Greeks and Portuguese.

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The INET Bretton Woods summit, summoned by George Soros and those who alternatively hide behind, or gather around him, has now happened.

But before trying to analyze whatever we may discover of what occurred there, it is critical to discern how it fits an overall picture.  For context, one must also see what the IMF and World Bank “communitarian” elitists are up to.

We find that before the Bretton Woods affair, focusing upon “new solutions,” there was a similar IMF meeting, called “New Ideas for a New World.”  It was centered upon “Post-Crisis Policy Making” and occurred March 7-14.  That gave some of them a lot of time to communicate and plan in quiet (the traditional word for that is conspire) when they were not attending official sessions, or making videos.

Then, we see that Soros’ April 8-11 conference ended just as the IMF and World Bank took up their April 11-17 Spring Meetings, just a limo ride away.  “Blossom of Spring, won’t you bloom and grow?”  Let us see what is budding in this intensive series of conferences, by the first one’s own promotional vid.

Here is a collection of pitches for “New Ideas for a New World.”  Hey, they left out the last word, “Order.”  Could it be that some of them know their version of order requires fomenting massive disorder first, the crises not to be wasted?  They also left out the word “Brave,” before “New World.”  Maybe that is because some of them like Huxley, have qualms.

http://www.youtube.com/watch?v=Nsst1U8jidA

This video puts their dexterous foot forward about that March 2011 conference, while their sinister footfalls go on.  So who are these dudes, getting together and yukking it up (well, three out of four globalist manipulators seem to approve) and just how spooky are they?  What are the messages of the Big Money priests, to the unwashed, PITI-ful masses of principal, interest, taxes, and insurance payers?

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What would you think if George Soros were organizing his fellow anti-American, globalist, neo-Marxist “thought leaders,” in pursuit of globally governed banking and finance, in a second Bretton Woods conference?

Would you consider that their goals include dragging American influence and incomes down, while confiscating much of our personal finances and giving them to other nations (and yes, the age-old financier network behind them) in the name of “communitarianism?”

Would you find their goal is to replace the bad influences of the IMF and the World Bank, with a much worse, more powerfully controlling, post-American global apparatus?

What would you think, if that meeting were being held this April 8th through 11th?

I got an email, last week; it was Tuesday the 22nd.  It was from George Soros.  To hear as straight from the dragon’s mouth as feasible, I had subscribed.  In this emailed article, he lamented the inequities of wealth among the nation-states of Europe, under the strains of their continuing insolvency crisis.  He warned of the dangers of national interest.  Rather, he proposed, not surprisingly, a further blowing of the global insolvency bubble, so the more indebted European nations may get along owing, while their lending nations get along being owed — all the while, blending and worsening the  financial and monetary crises and spreading this yeasty recipe further throughout the world, especially to America.

That was quite provocative.

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From Business Insider:

Stephen Lerner

[Former SEIU Official Stephen] Lerner said that unions and community organizations are, for all intents and purposes, dead. The only way to achieve their goals, therefore–the redistribution of wealth and the return of “$17 trillion” stolen from the middle class by Wall Street–is to “destabilize the country.”

Lerner’s plan is to organize a mass, coordinated “strike” on mortgage, student loan, and local government debt payments–thus bringing the banks to the edge of insolvency and forcing them to renegotiate the terms of the loans. This destabilization and turmoil, Lerner hopes, will also crash the stock market, isolating the banking class and allowing for a transfer of power.

Lerner’s plan starts by attacking JP Morgan Chase in early May, with demonstrations on Wall Street, protests at the annual shareholder meeting, and then calls for a coordinated mortgage strike.

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From Bob Dylan’s lyrics to a real California workplace policy, progress is being made. Despite an economy on life support with only weeks, if not hours, remaining to survive fiscally before the State Treasurer of California begins issuing IOU’s for payments, legislators have come up with a plan. Their plan is now to force employers to accept employees who come to work stoned. This should really help light-up the ailing economy. It may sound like a joke, but it’s serious.

A state lawmaker in California, during the nation’s worst recession, wants to outlaw employers from firing workers who come to work stoned. Isn’t that special? Or course the worker must have a medical marijuana card, which in California you can get at the checkout line in most supermarkets, or about as easily. Sneeze and you’ve got it.

So now truck drivers, heavy machine operators, accountants and secretaries all can continue their weekend binges into Monday. How else can a single bill: endanger lives, lose productivity, get the few remaining businesses to pack up and leave the state, while simultaneously encouraging increased drug use? That’s a four-fer! You get four objectives satisfied with a single law. Way to go, California! Who said California couldn’t get any higher?

No way that this type of insanity would ever pass the sober state legislature. Uh, wrong again. Pass the joint man, you just ain’t paying attention, dude. The legislature overwhelming passed this same bill in 2007, but was vetoed by the then Governor Arnold, who was probably stoned at the time. Now, with Governor Brown as the new sheriff in town, who knows? Brown doesn’t want to alienate his union base.

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At the very start of the “Reagan revolution,” David Stockman exposed the myth that Ronald Reagan and the modern Republican Party are dedicated to small government.

In 1981, the 35-year-old Stockman gave up his Michigan seat in Congress to become Reagan’s budget director. A vocal critic of what he continues to call the “welfare-warfare state,” Stockman had signed on because he believed in the limited government rhetoric that Reagan espoused. Once inside the White House, Stockman quickly became disenchanted, and gave an interview to journalist William Greider that became the basis for an explosive Atlantic Monthly article in which Stockman admitted that Reagan’s spending cuts had been a “Trojan horse” used to justify tax cuts. In his 1985 memoir, The Triumph of Politics, Stockman chronicled Reagan’s reluctance to fulfill his campaign promise of shrinking the size and scope of government and balancing the budget. The result? The gross federal debt tripled while Reagan was in office.

Last fall, Stockman was the GOP-defector du jour once more, arguing against extending George W. Bush’s tax rates in the New York Times, on 60 Minutes, the Colbert Report, Parker-Spitzer, ABC, NPR, and MSNBC. Stockman’s argument – that it’s irresponsible to cut taxes when cumulative U.S. debt is steadily mounting as a percentage of GDP – is based on the simple principle that balanced budgets come only when revenues actually meet expenditures. If we’re not willing to actually shrink government spending, he says, then we should pay full freight now, rather than forcing our children and grandchildren to foot the bill down the line.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Richard Vigilante, author of Panic: The Betrayal of Capitalism by Wall Street and Washington to discuss his book and the future of the publishing industry as we know it.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Panic: The Betrayal of Capitalism by Wall Street and Washington
Richard Vigilante Books
The line between book and Internet will disappear

After the break: The New Ledger’s Top Ten Books for 2010!
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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss what the dead $1.1 Trillion Omnibus spending bill means for small businesses, and what really started the financial crisis.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Democrats drop funding fight, opt for short-term deal
Political Rashomon on Financial Crisis Panel
Financial Crisis Primer: Questions and Answers on the Causes of the Financial Crisis
Why Our Statement Is Not a Dissent or a GOP Report
Financial Crisis Primer

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In today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the latest GDP numbers, Obama’s fiscal train wreck, and his views on the economy shared this week on the Daily Show.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. You can find our iTunes feed at CoffeeandMarkets.com. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Roubini: U.S. Heading for “Fiscal Train Wreck”
Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis
Obama on the Daily Show
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“[Politicians and the Federal Reserve] rigged the market,” says financial author and filmmaker Michael Covel. “They rigged the market through interest rate manipulation and we’re still paying for it today.” In his documentary, Broke: The New American Dream, Covel explores the roots of the financial crisis, which he traces back to Netscape going public in 1995.

Covel sat down with Reason.tv’s Ted Balaker to discuss the role politicians, the Federal Reserve, Wall Street, and media figures like CNBC’s Jim Cramer played in the financial meltdown. Topics include: why Covel is down on “buy and hold” as an investment strategy and the differences between state lotteries and poker.

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Excerpted from Bought and Paid For: The Unholy Alliance Between Barack Obama and Wall Street. Published by Sentinel. Copyright Charles Gasparino, 2010.

But despite his trials, [Lloyd] Blankfein had taken time out of his grueling schedule to help a firm that wasn’t a Goldman client, not even a prospective one. The firm was ShoreBank Corporation, a small community bank located in Chicago that lent money to inner-city businesses and was exploring the possibility of financing nascent and as-yet-unprofitable “green” businesses through so-called conservation loans and environmental banking, according to the bank’s Web site.

The bank’s self-described mission was to “change the world.” And yet despite its seemingly good intentions, the bank’s urban commercial borrowers were suffering greatly from the lower property values and high unemployment that stemmed from post–financial crisis recession. Without Blankfein’s help (and the help of other
major Wall Street firms) ShoreBank would follow the fate of dozens of other banks during the great recession and face almost certain collapse and government liquidation.

To be sure, helping out a struggling bank that wasn’t even a client was a most un-Goldman-like thing to do. Goldman dealt with only the biggest companies in corporate America or with superwealthy individuals (typically, those with $10 million or more to invest with the firm). More thanthat, this was a firm that had a reputation for screwing just about any company, clients included, when business was on the line. Goldman, of course, would deny that assertion. Even so, in the normal course of business, a bank like ShoreBank, with its modest funds and do-gooder reputation, wouldn’t even appear on Goldman’s radar as a potential customer.

Yet for some seemingly inexplicable reason, Lloyd Blankfein—who had a net worth close to $500 million and until recently had never heard of ShoreBank—started imploring his friends at other firms, like Morgan Stanley, GE Capital, and others, to help this little bank. Not that Blankfein suggested there was money to be made here. Quite the contrary; it was simply the right thing to do.

To any casual observer, this puzzling scenario raises the question: Why would Blankfein possibly want to save ShoreBank?

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The Republican Pledge to America released last nearly perfectly addresses the problems being created by the current leadership of our federal government. Its first sentence, making the point that Nobel Laureate economist Friedrich Hayek made fifty years ago in his The Constitution of Liberty, America is an idea, is something of major import that has been forgotten in this era of using government in an attempt to escape individual responsibility.

The reference to the Declaration of Independence contained in the rest of the Pledge should be obvious to us all, but unfortunately our education system is today more about garnering largesse for political unions than about educating our children on what ideas form the basis of our country.

The current jobs recession and the financial crisis that created it are the result of those in charge of an expanded federal government attempting to make the world in their own vision—in this particular case the vision that everyone has the right to own a home.

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On April 22nd we published an article entitled IndyMac Attack: Did Schumer, Paulson, Soros, and the CRL Kill the Bank and Profit From Its Collapse? We summarized the story as follows:

At the end of 2007, hedge fund billionaire John Paulson invested $15 million in the leftist non-profit, Center for Responsible Lending, their largest single donation ever. Around the same time, Paulson and his employees contributed over $100,000 to the Democratic Senatorial Campaign Committee, headed, at the time, by Sen. Chuck Schumer. Roughly six months later, CRL and Sen. Schumer both launched a highly public attack on the California-based mortgage lender, Indymac. The lender failed, wiping out the investment of thousands of people. Roughly six months after that, John Paulson, in partnership with George Soros, bought up the remnants of Indymac for pennies on the dollar.

…a top executive of CRL when this deal went down, Eric Stein, is now working at the Treasury Department, heading up the proposed Consumer Financial Protection Agency. Mr. Stein will be the chief federal official designing regulations to protect consumers. Right.

At the time, we asked if this could all be coincidence.  Today, we are getting closer to answering this question.

As reported by hedge fund blog AbsoluteReturn+Alpha, Congressman Darrell Issa (R-CA), ranking member of the House Committee on Oversight and Government Reform is probing John Paulson on his relationship with the Center for Responsible Lending.

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Since the early twentieth century, periods of real or perceived national emergency have been “critical episodes” in the growth of government’s size, scope, and power in the United States and in many other countries. Hence, the concise conceptualization: Crisis and Leviathan (the main title of my 1987 book on the growth of government in the United States from the late nineteenth century to the late twentieth century).

In the past century, the first five such critical episodes in the United States were: World War I; the Great Depression; World War II; a multi-faceted set of crises associated with the civil-rights revolution and the Vietnam War, roughly coincident with the presidencies of Lyndon B. Johnson and Richard M. Nixon; and the post 9/11 events associated with the so-called War on Terror and the U.S. attacks on and occupations of Afghanistan and Iraq. We are now amid another such critical episode, which springs from the housing bust that began in 2006, the economic recession that began late in 2007, and the financial debacle that reached its climax in September 2008.

The current troubles are complex and raise a multitude of questions. Many books and articles no doubt will be written to analyze these various issues in scholarly depth and detail, and certainly anything we might say today must be regarded as preliminary, at best. I focus here on a few aspects of the present episode that relate closely to my own research on the growth of government, a field of study to which I have returned again and again over the past thirty years.

I

The current recession has elicited many comparisons with earlier business downturns, especially with the Great Depression. Federal Reserve chairman Ben Bernanke is often described as an expert on the Great Depression who takes its lessons, as he understands them, deeply into account as he formulates and implements Fed policies. Likewise, many other economists have revisited the Great Depression recently in search of lessons applicable to current policy-making. In all of these reflections, the mainstream economics profession in general has distinguished itself by an astonishing superficiality of historical knowledge and lack of theoretical prowess.

The swiftness with which a great many mainstream economists have reverted to the simplistic “vulgar Keynesianism” that had its heyday from the late 1940s to the late 1960s has been nothing short of shocking, given that by the end of the 1970s such old-fashioned Keynesianism seemed to have been completely discredited and superseded in the leading echelons of the mainstream economics profession. Now it has come roaring back.

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Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Below are his main points and entertaining quotes:

• Central banks will never tighten monetary policy again, merely print, print, print
• Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
• “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
• “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
• US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
• “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
• Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
• The next 3-5 years will be highly volatile

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If any further proof is needed that Barney Frank has been completely incompetent in his oversight of the financial services industry, one need look no further than this past week. Just one day after Frank sent a memo to the White House urging the President to reject the attempt by Republicans to include GSE reform in any financial reform bill, Freddie Mac requested an additional government bailout of $10.6 billion to cover losses incurred in the first quarter. Only one day (!) after Frank defended the GSE’s, writing that “as Fannie and Freddie operate today, going forward, there is no loss”.

There is no loss.

Rep. Frank, of course, has a distinguished history of ineptitude when it comes to regulation of the housing industry, and his role in the financial market collapse. But when it comes to avoiding culpability, he is second to no one in his ability to spin a web of deceipt and reinvent history.

“It was Tom DeLay’s fault, he was in charge back then. Republicans were the ones pushing home ownership on the poor. I only advocated for rental housing.”

Lies, demonstrable lies.

But let’s not forget that Frank became chair of the House Financial Services Committee in January 2007, after the Democrats re-took congress. While the housing market decline had already begun, it would be well over a year before the financial crisis really began to accelerate. Fannie and Freddie, in fact, were not placed under federal control until September 2008.

Surely Barney Frank, with his vast intellect and experience, saw these problems developing and was preparing to do everything within his power to reign in the mortgage industry, and stem this crisis, as he assumed his new leadership role. Right?

Source: CSPAN

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The more details that emerge about the Obama-Dodd financial “reform” bill, the worse it smells. The bill is most certainly an attempt to give the government vastly more power and control over the economy. And despite the vocal, condescending, even mocking protestations from Democrats and their allies, this bill does in fact contain unlimited bailout authority for the Fed. It’s right there in the bill for the world to see.

But it is increasingly evident that there may be something more sinister going on behind the scenes that is driving this debate.  The President trotted up to New York to give a big televised speech and scolded Wall Street for “resisting reform” saying that if we are to prevent another crisis, we must pass his bill.

The whole charade amounted to little more than political theater.  Big Wall Street banks actually WANT this bill.  Executives for Citigroup and Goldman Sachs (two firms that both received bailout funds) have both made statements in favor of Obama’s financial reform bill.

So, one must ask, if this is so draconian on Wall Street, why do they want it so badly?  The answer to this question is in the details of the bill: Not only does this bill not rein in big Wall Street banks, its actually a very big gift to Big Banks and other special interests—gifts that will cost Main Street, the taxpayers and consumers.

The large financial institutions at the root of the financial crisis wouldn’t even be regulated by the CFPA. Their oversight would remain at the porn-surfing Securities and Exchange Commission. But of course the bill is full of burdensome regulations for smaller institutions with which they will struggle to comply and also remain profitable.  The larger banks that are covered will not only have the resources to adapt but will also likely grow even larger by swallowing up smaller institutions that can’t make it.

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Price fixing is illegal in the private sector, but unfortunately there are no rules against schemes by politicians to create oligopolies in order to prop up bad government policy. The latest example comes from the bureaucrats at the International Monetary Fund, who are conspiring with national governments to impose higher taxes and regulations on the banking sector.

The pampered bureaucrats at the IMF (who get tax-free salaries while advocating higher taxes on the rest of us) say these policies are needed because of bailouts, yet such an approach would institutionalize moral hazard by exacerbating the government-created problem of “too big to fail.” But what is particularly disturbing about the latest IMF scheme is that the international bureaucracy wants to coerce all nations into imposing high taxes and excessive regulation. The bureaucrats realize that if some nations are allowed to have free markets, jobs and investment would flow to those countries and expose the foolishness of the bad policy being advocated elsewhere by the IMF. Here’s a brief excerpt from a report in the Wall Street Journal:

Mr. Strauss-Kahn said there was broad agreement on the need for consensus and coordination in the reform of the global financial sector. “Even if they don’t follow exactly the same rule, they have to follow rules which will not be in conflict,” he said. He said there were still major differences of opinion on how to proceed, saying that countries whose banking systems didn’t need taxpayer bailouts weren’t willing to impose extra taxation on their banks now, to create a cushion against further financial shocks. …Mr. Strauss-Kahn said the overriding goal was to prevent “regulatory arbitrage”—the migration of banks to places where the burden of tax and regulation is lightest. He said countries with tighter regulation of banks might be able to justify not imposing new taxes.

I’ve been annoyingly repetitious on the importance of making governments compete with each other, largely because the evidence showing that jurisdictional rivalry is a very effective force for good policy around the world. I’ve done videos showing the benefits of tax competition, videos making the economic and moral case for tax havens, and videos exposing the myths and demagoguery of those who want to undermine tax competition. I’ve traveled around the world to fight the international bureaucracies, and even been threatened with arrest for helping low-tax nations resist being bullied by high-tax nations. Simply stated, we need jurisdictional competition so that politicians know that taxpayers can escape fiscal oppression. In the absence of external competition, politicians are like fiscal alcoholics who are unable to resist the temptation to over-tax and over-spend.

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