Here's what really happening in the U.S, not some illumanti fuck
shit from some online nut:
This article first appeared in The
New York Press.
There was a strange moment last week during President Obama’s
speech at Cooper Union. There he was, groveling before a cast of
Wall Street villains including Goldman Sachs chief Lloyd Blankfein,
begging them to “Look into your heart!” like John Turturro’s
character in Miller’s Crossing…when out of the blue, the POTUS
dropped this bombshell: “The only people who ought to fear the kind
of oversight and transparency that we’re proposing are those whose
conduct will fail this scrutiny.”
The Big Secret, of course, is that every living creature within
a 100-mile radius of Cooper Union would fail “this scrutiny”—or
that scrutiny, or any scrutiny, period. Not just in a 100-mile
radius, but wherever there are still signs of economic life beating
in these 50 United States, the mere whiff of scrutiny would work
like nerve gas on what’s left of the economy. Because in the 21st
century, fraud is as American as baseball, apple pie and Chevrolet
Volts—fraud’s all we got left, Doc. Scare off the fraud with
Obama’s “scrutiny,” and the entire pyramid scheme collapses in a
heap of smoldering savings accounts.
That’s how an acquaintance of mine, a partner in a private
equity firm, put it: “Whoever pops this fraud bubble is going to
have to escape on the next flight out, faster than the Bin Laden
Bunch fled Kentucky in their chartered jets after 9/11.”
And that’s why this SEC suit accusing Goldman Sachs of fraud is
really just a negotiating bluff to give Obama’s people some
leverage—or it’s supposed to be, anyway—according to the PE guy. He
dismissed all the speculation that the fraud investigations would
turn on other obvious villains like Deutsche, Merrill, Paulson
& Co., the Rahm Emmanuel-linked Magnetar and so on.
“You don’t get it, Ames. Even Khuzami, the SEC guy in charge of
the Goldman case, is a fraud; the fucker was Deutsche’s general
counsel when they pulled the same CDO scam as Goldman. You have no
idea how deep this goes.”
And it’s clear that a lot more people here are aware of how
fundamentally rotten things are but they’re not willing to face the
big fraudonomics bummer yet, preferring instead to stick with
specific accusations.
My position on this was, “Good, throw the book at those crooks
too, I don’t see what the problem is here.”
This was exactly what I argued a week ago, during a verbal
slapfight with that acquaintance of mine. We were making a scene in
a Midtown yuppie restaurant, arguing over just how much damage Wall
Street had caused, and what to do about it.%u202F
His position was indefensible, and he knew it, so he switched
tactics:
“OK Ames, which bankers would you throw the book at? Because
you’re arguing that they’re all guilty. So which ones do you go
after? Two of them? Three? Half of them?”
“Every last one of them. Lock ’em up in one of their private
prisons.”
“Not gonna happen, Che.”
“Che? Me? Listen, Scarface, I’m about law and order.
Don’t any of you PE degenerates believe in that anymore?”
“OK, here’s the deal, Che. I’m going to walk you through this
nice and slow so that even an agave-sweetened hippie like you can
understand this. Stick with me, this is gonna be a little
complicated. Ready?” And so he began.
“Let’s say the government decides one day, ‘You know, we oughta
listen to Che here, let’s throw the book at every firm and every
executive that our people can make a case against. Because you
know, gosh, it’s all about rule of law and blind justice, just like
Che says.’ OK, so now this means indicting just about every serious
player in finance, so they take down Goldman Sachs, they take down
Citigroup, JP Morgan, BofA… and they also serve all the big funds
who are at least as guilty, if not more. So they shut down Pimco,
Blackrock, Citadel… maybe they indict Geithner and Summers, haul in
some of Bush’s crooks… right?”
“Too bad they don’t serve popcorn here, this is getting
good.”
“OK, now guess what you’ve just done? You’ve just caused the
markets to completely tank. Remember what happened after the Lehman
collapse? Remember how popular that made every politician in
Washington? Still wondering why they coughed up a trillion bucks?
They were scared for their lives; that’s why they voted for that
bailout. You’d have done the same goddamn thing. But if we go after
everyone guilty of fraud and theft, the market crash this country
would see would make 2008 look like Sesame Street. Open that can of
worms labeled ‘Fraud’ and the whole fucking economy collapses. You
may as well prosecute people for masturbating. No one will know
where the fraud investigation stops and who will be charged
next—everyone will try to cash out, and the markets will tank to
zero. And guess what happens when the markets tank to zero? Every
fucking American with a retirement plan, or an investment
portfolio, or a 401k—every state pension plan in the country, every
teacher’s pension fund, every fireman’s pension—every last one of
them will be wiped out. That’s what the Lehman collapse taught
us.”
“Us? It didn’t teach anything but that this country is run by
maniacs.”
“Jesus H. Christ, Ames– you’re even more clueless than the
idiots who managed the Lehman collapse. I mean, didn’t everyone get
it how badly those idiots screwed up with Lehman? It was the
biggest screw-up this hemisphere has ever seen. You had Secretary
Paulson and Fed Chief Bernanke scratching their asses not knowing
what to do, so then they go, ‘OK, we’re supposed to be a free
market economy, and we’re supposed to be the Republicans—let’s try
something different for a change since nothing else is working.
Let’s go out on a limb and actually give this “free market” thing a
whirl. Who knows? Maybe the “free market” really works the way we
always say it does. Nothing else seems to work, let’s let the free
market decide Lehman’s fate. Maybe corporate-socialism isn’t the
answer.’ So they hung Lehman out in the free-market, and BAM! The.
Shit. Hit. The. Fan. No shit, dudes—the free market is for suckers,
didn’t your daddy teach you idiots that? Not only did Lehman
collapse—everything collapsed; confidence in the entire system
collapsed. And here’s what I’m trying to explain to simpletons like
you: Our economy is just a confidence game. Don’t ask me how it got
this way, don’t care.”
I tried saying something insulting to him, but he just talked
right over me, lurching forward baring his laser-whitened
teeth.
“I’m sure you have the answer, you and Ron Paul and all the
other pot-smoking libertarian do-gooders have it all figured out.
But what I’m saying is, no confidence means end of the confidence
game. That’s what Lehman showed. Every single player in finance
suddenly had to face the fundamental problem—this whole fucking
economy is built on fraud and lies and garbage. So when Lehman
collapsed, every single player panicked, going, ‘If Lehman was
nothing but a Ponzi scheme—and I know what I’m running is a Ponzi
scheme—holy shit, that means everyone else is running a Ponzi
scheme too! Run for the exits!’ No one trusted anyone else,
everyone pulled out, and the entire global economy collapsed just
like that. And that meant your parents, my parents, every teacher,
every fireman, every person in the country going into retirement,
every price on every asset—wiped out.
“And here’s what I’m trying to get you to understand: In the
grown-up world, when an entire country’s savings accounts are wiped
out because of some do-gooder and his law books and his Thomas
Jefferson ‘What about free and fair markets?’ crap, that is a big
problem—people don’t give a fuck about Jefferson and ‘free and fair
markets,’ they just want their savings to be worth something. And
people are right: Jefferson was an imbecile. He should have been a
folk singer, not a Founding fucking Father. But that’s another
issue that’s over your head—the point is, the guy who destroys this
economy because it’s ‘the right thing to do’ will have to flee for
his life, and whatever president or political party was in power
when that decision was made will be out of power for the next 200
years. That’s why Washington panicked and passed ‘the bailout,’
they didn’t want to be the fools whom all the Ponzi victims blame
for tanking the Ponzi scheme, so they broke the glass and pumped up
a newer, bigger Ponzi scheme. It was an expensive 14 trillion
dollar lesson in, ‘Stay the fuck away from free-market experiments,
assholes!’ How naive are you people to actually believe that ‘free
market’ crap? The problem is when people in power are stupid enough
to listen to guys like you: all the do-gooder libertarians and the
do-gooder free-market Republicans who forgot that they’re supposed
to lie. Hello!”
“Libertarian, me? Since when was I ever a libertarian?”
“That’s my point: Fools like you don’t even know who you are
anymore. They forgot that they’re supposed to lie about all that
libertarian free-market shit, keep it far the fuck out of policy.
But instead of just lying about free-markets while secretly
propping up Lehman, the idiots actually tried pulling off a
‘free-market’ miracle, and we had to pay $14 trillion just to find
out what I could have told them for no fee at all, which is: ‘Hey,
assholes, you’re supposed to be hypocrites, OK? You’re supposed to
be two-faced free-market liars, not libertarian Quakers! You’re not
supposed to believe in anything—your job is to get up in front of
the public and lie about free markets and the rest. Period.’
“That’s it, how fucking hard is it? Look, watch my face: Say one
thing out of one side… and do the other out of the other side. Got
that? Let everyone else whine and cry about, ‘Ooh, that’s not fair,
ooh, that’s a bailout, that’s socialism, that’s corruption.’ That’s
what losers do—they whine. You, for example, Che—you whine all the
time, and look at you… Can you pay the bill for this meal? Is there
a libertarian on earth who can afford to buy a decent meal in
Manhattan? And now, look at me: I’m a hypocrite. Hell yes I am! I
lie every day of my life, I lie to myself in my sleep. Hell, I’m
lying to you right now, in fact I don’t even know what the fuck I’m
saying anymore because I’m so used to lying. And yet—who’s the guy
with the black card? Who’s the one who’s going to pick up the check
tonight? Guys with power, guys like me, we lie. You got that? ‘Lie’
as in ‘My Lai’ the massacre—as in, ‘My Lai you long time, me so
free-markety.’ You distract the dumbshits with free-market B.S.
because hey, for whatever reason, that’s what the public likes to
hear, it doesn’t really matter what lie you feed them so long as
it’s the lie that puts them in a trance. And then behind the
scenes, you do the very opposite: You fix the game, you cover up
this problem here with those funds there, you move shit around, you
skim budgets and you subsidize the system, you cover up the bad
shit and once in a while throw a has-been to the wolves to keep the
public entertained—that’s the way the system works, and anyone
who’s an adult understands that. And everyone who doesn’t
understand that can go form an online libertarian chat group and
complain with all their little libertarian friends about free
markets and Jekyll Island and ‘Wahhh! It’s not not fair,
waahhhh!’”
“What’s with the libertarian accusation?”
“It’s just that you all sound the same to me. Libertarians,
hippies—is there really a difference? You all whine alike: ‘It’s
not fair, man! Ooh! You can’t do that, it’s fraud, it’s corruption,
ooh no!’ Or: ‘It’s the income inequality, man; Goldman Sachs
controls us all man; it’s socialism for the rich; it’s all too
scary for my retarded 5-year-old libertarian brain!’ Seriously,
anytime I meet libertarians like you—”
“Listen—I’m not a fucking libertarian, OK? I want free handouts.
How clear do I have to make this? Me—handouts. Me—Big Government. I
want to collectivize your productive cash, because I am a resentful
parasite. Are you capable of processing a single word of what I’m
saying to you, Spaz?”
“Uh-huh, sure, whatever. Here’s the thing: I think it’s great
that you and your friends memorized Road to Serfdom in between Star
Trek episodes—no really, I’m happy for you. Yeah, we’re all so
proud. But here’s the thing: We grown-ups are really, really busy
now trying to sort out the free-market mess you made with that
Lehman move of yours. Yeah, so why don’t you run along to your
libertarian chat rooms and have your little debates about Jekyll
Island and the gold standard, because it really means a lot to us.
And report back to me as soon as you have it all figured out,
m’kay? Just get the fuck out of my face and leave the adults
alone.”
It got a lot more vicious and personal than this, but when our
verbal slap-fight ended—and he paid the bill—I thought about what
he said, and it made a lot more sense. Fraud has become so endemic
in this country that it’s woven its way into America’s DNA, forming
a symbiotic relationship that can’t be undone without killing off
the host. If they push it just a little too hard, the entire
American economy could crash, asset values could tank, and that
means tens of millions of extremely pissed off retirees and Baby
Boomers. As the Wall Streeter put it: “Whoever is responsible for
bursting this latest bubble by exposing all the fraud—and tanking
all the markets—will not only be out of power for at least a
generation, but they’ll all have to get radical reconstructive
surgery on their faces and seek political asylum somewhere remote.
No one wants to be that guy, and that’s why it’s not going to
happen.”
That may be true, but all bubbles to eventually burst, all Ponzi
schemes do collapse. The only question is when. For those of us not
on the verge of retiring, the sooner we have this day of reckoning
and get it over with, the better.
* *
*
Ever since I got kicked out of Russia and forced back home, I’ve
been collecting all kinds of news articles about fraud, in a
document file titled “America Is Russia.” Here’s a little taste of
the wonderful world of American Fraud:
1). Accounting Fraud:
Last year, America’s leading banks were insolvent. They had tens or
hundreds of billions in losses on their books, and the only way to
wipe those losses out would be to either a) own up to the mess,
raise enormous amounts of money on top of all the bailout money; or
b) get out a big fat eraser, and wipe those losses off the books as
if they never existed. The first option was nice and all, but a
real hassle. So Geithner and Larry Summers chose Door Number Two:
Accounting Fraud. They forced the FASB to accept a rule-change in
the accounting methodology called “mark-to-model” which let banks
decide how much their assets were worth, rather than letting the
markets decide. So if for example a BofA owned a complex security
called “Orion Butt Fungus” that was worth 5 pesos on the open
market, but BofA was too broke to go out and raise 5 pesos to cover
that loss, under the new accounting rules, the government told BofA
that rather than pricing “Orion Butt Fungus” at what the market
will actually pay for it, why not first ask, “How much would BofA
like ‘Orion Butt Fungus’ to be worth, in a perfect world?’” If BofA
answers, “Doyee, gee I dunno, how about $500 million?” then under
the “mark-to-model” accounting rules, BofA could now value “Orion
Butt Fungus” at $500 million, and voila! Their problems are over.
That wasn’t so hard, was it? Suddenly, BofA looks like it knows how
to pick winners! And no one’s going to second-guess them, because
everyone else is mark-to-modeling their “Orion Butt Fungi” too! The
end result: under the old rules, BofA would have had to raise money
just to cover its debts, sort of like you and me have to do, and
that’s just a lot of money going to waste. But now that its
portfolio is so profitable, BofA has a much easier time raising
money, which it uses to pay ginormous bonuses to its
executives.
2). Big Pharma Fraud.
Remember that scene early in Fight Club, when Edward
Norton explained his job, when it was more profitable to let a car
defect go and pay whatever lawsuit settlements come from the
deaths, and when it’s better to recall the cars because the number
of deaths will result in too many lawsuits? This is humanitarian
do-gooder stuff compared to the savage real-world fraud-for-profit
model that drives America’s drug companies. It’s really simple and
it goes like this: the more fraud a drug company commits, so long
as it’s off-the-scale fraud with the most horrible consequences for
the victims, the drug company’s profits always outdo the criminal
fines and lawsuits by factors of 20, 30, 100… It’s as simple as
that. Because the billion in penalties here or the two billion in
class action lawsuit settlements there are always far less than the
tens of billions you earn from pushing harmful drugs on
unsuspecting idiots. To wit: Between May 2004 and March 2010, a
handful of top drug companies like Pfizer, Eli Lilly and
Bristol-Myers paid over $7 billion in criminal penalties for
bribing doctors to prescribe drugs for unapproved uses, with
sometimes deadly consequences. However, as a Bloomberg report
noted, the fines are always a fraction of the profits—Pfizer alone
paid almost $3 billion in criminal fines since 2004, yet that was
just one percent of their total revenues; Eli Lilly got busted
bribing doctors to prescribe a schizophrenia drug, Zyprexa, to
elderly patients suffering from dementia, even though company-run
clinical trials showed an alarming death rate of 31 people out of
1,184 participants (double the placebo rate). Whatever—the market
for elderly dementia patients meant billions in extra revenues. So
Eli Lilly continued pushing Zyprexa on the elderly for another four
years until it the Feds busted them. Eli Lilly got hit with $1.42
billion fine, but that was peanuts compared to the $36 billion it
earned on Zyprexa sales from 2000-2008. To make it happen, the drug
companies buy off all the checks and balances: lawsuits revealed
the enormous bribes they pay to doctors, and even America’s medical
journals are so corrupted by drug company influence that they’re no
longer reliable as much more than hidden
advertisements, according
to a recent UCSF study. Medical journals are 5 times more
likely to publish “positive” drug reviews than negative reviews,
and one-quarter of all clinical trials are never published at all,
leading doctors to prescribe drugs assuming they have all the
information. The result: prescription
drugs kill one American every five minutes …while
Americans pay more for drugs than anyone in the world, spending a
total of $12 billion on drugs in 1980 to spending $291 billion in
2008—a 1,700% increase. America is ranked only
17th in the world in life expectancy.
3). Alan Greenspan: Fraudonomics
Maestro. America’s central banker from 1987-2006 once told
a do-gooder regulator not to fuck with the bankers’ fraud schemes,
because in Greenspan’s mind, fraud was not a crime and didn’t need
to be regulated. Then Greenspan forced the regulator, Brooksley
Born, to resign. Just in time for his next and final act as Central
Bank chief: from 2001-2004, Greenspan pumped up the biggest housing
bubble in human history by holding rates down to nothing, while
touring the country promoting
the glories of subprime and Alt-A mortgages. Then in late 2005,
when the bubble was ready to burst, Greenspan tendered his
resignation and switched over to the other side, signing lucrative
contracts with three investment firms all of which bet big against
gullible American homeowners, and reaped billions. First, Greenspan
signed up to work for Deutsche Bank, which is being sued for
securities fraud for selling an Abacus-like CDO to a Warren
Buffett-owned bank, M&T; Greenspan also worked for Pimco, which
earned $2 billion in a single day in September 2008, when Fannie
Mae and Freddie Mac were nationalized with Greenspan’s lobbying
help; and lastly, Greenspan went to work for Paulson & Co., the
hedge fund that raked in $1 billion off the same Abacus CDO deal
that brought the SEC fraud suit against Goldman Sachs. It’s an
unusually perfect record for Greenspan, given his atrocious
forecasting record at the Fed. It recalls the old Greenspan circa
1984-5, when he worked as a lobbyist for Charles Keating trying to
push regulators off his back and vouching on the record for
Keating’s character…Keating was eventually jailed for fraud in the
worst savings and loan collapse of all.
4). Municipal Debt
Fraud. America’s $2.8 trillion municipal bond market
is rife with fraud of the sort you’d expect in an emerging tinpot
economy: opacity rather than transparency, plenty of corruption and
kickbacks, resulting in decimated budgets and services cutbacks in
communities across the country. The problem all stems from way the
bonds are issued these days: instead of holding open tenders,
nearly all are the result of backroom deals. Back in 1970, only 15
percent of municipal bond contracts were awarded through no-bid
contracts; last year, 85% of muni bond deals were assigned in
no-bid, non-transparent agreements. Studies show that no-bid bonds
invariably cost municipalities more than bonds resulting from open
tenders. So far, fraud and corruption charges have been leveled
against state employees and city councilors in Florida, New York,
New Mexico, Alabama and California, to name a few. Muni bond
defaults soared from just $348 million in 2007 to $7.4 billion in
2008—that’s an increase of 20 times– with growing numbers of
cities, counties and states on the verge of bankruptcy.
5). Journalism
fraud. The Washington Post got caught whoring out
their venerable editorial staff to corporate lobbyists for anywhere
from $25,000 to $250,000 a date, depending on the access. The
Atlantic Monthly admitted to TalkingPointsMemo that it routinely
sold access to its editorial staff for cash. As for business
journalism, all sorts of articles and studies have asked the
obvious question: “How did every mainstream business outlet miss
the financial collapse of 2008?” Among all the self-flagellating
mea-kinda-culpas, you won’t find the word “fraud” in their answer.
Speaking of business journalism and fraud, The Business
Insider, one of the top business news blogs, published a pair of
articles defending Goldman Sachs against the SEC fraud charges. The
author of the articles defending Goldman Sachs is Business
Insider’s co-founder and editor, Henry Blodget. In 2003, Blodget
himself was charged with securities fraud by the SEC for repeatedly
misleading clients into buying stocks of companies that
in private emails
Blodget referred to as “piece of shit.” Under the terms of
Blodget’s settlement with the SEC, he agreed to a lifetime ban from
the securities industry, and he paid $4 million in fines and
disgorgements. Since he is not barred from the world of business
journalism, Blodget was able to post an article last Friday
headlined: “HOLD EVERYTHING: The SEC’s Fraud Case Against Goldman
Seems VERY Weak.”
6). Fraudonomics
K-12. If you want your kid to grow up to succeed in a
fraud-based economy, you need to teach him the ABC’s of cheating
starting at a young age. This is one area where America’s schools
aren’t failing their students. Cheating is so rampant in schools
that nowadays if the student doesn’t cheat on his exam, chances are
his teacher or administrator will cheat on his test for him. One in
five elementary schools in Georgia are currently being investigated
for tampering with the students’ standardized test scores—although
suspicious patterns of erasing and remarking answers showed up in
half of the state’s elementary schools. In California, as many as
two-thirds of its public schools admitted to fudging its students’
standardized test scores. A survey of graduate school students
found that 53 percent of business school grad students admitted to
cheating, more than any other grad school discipline. Overall, up
to 98 percent of college students today admit to cheating, compared
to just 20 percent who cheated in 1940.
7). Boardroom
Fraud. Corporate America’s boardrooms are stacked up
these days in tight, intertwined relationships that turn public
companies into crime scenes, plundering money from unsuspecting
shareholders and divvying up the loot among the directors and top
executives. In 2008, Chesapeake Energy’s stock price collapsed from
$74 per share to $9.84, wiping out $33 billion in shareholder
value. The CEO, Aubrey McClendon, gambled and lost 94% of his stock
in the company on a margin call, personally losing about $2
billion. So what did the board of directors do? They voted to award
McClendon $112 million for 2008, the highest of any CEO in America.
Shareholders were outraged, calling it a “bailout,” and several
pension funds tried suing Chesapeake, but the courts in Oklahoma
blocked the lawsuits. That’s because Aubrey McClendon is sort of
the George Bush of Oklahoma—a spoiled fuck-up with a rich and
powerful granddaddy—Robert Kerr, former governor and senator, and
founder of Kerr-McGee—meaning plenty of VIP connections for the
loser grandkid. So on Chesapeake’s board, you had Aubrey’s cousin,
Breene Kerr; Frank Keating, Republican ex-governor of Oklahoma
whose son Chip (and Chip’s wife) works for Chesapeake; Don Nickles,
Republican ex-Senator of Oklahoma who co-funded with Aubrey the
Republican anti-gay marriage campaign in 2004; Richard Davidson,
the former head of Union Pacific, whose corrupt board of directors
lavished Davidson with tens of millions in bonuses and a $2.7
million per year pension when he retired… Now multiply a board of
directors like this by the sum total of “Corporate America” and you
get…a corrupt, tin-pot corporate culture masquerading as a
civilized First World corporate culture. That’s us. (You can read
about this problem in an excellent new book Money For
Nothing: How The Failure of Corporate Boards is Ruining American
Business and Costing Us Trillions.)
8). Corrupt credit rating
agencies. The only way big institutional investors like
pension funds could justify buying a piece of the Orion Butt Fungus
CDO pie was if ratings agencies like S&P or Moody’s gave it a
top-notch seal of approval: AAA rated, with a little star on the
forehead for good behavior. And in the world of fraudonomics, good
behavior looks like this email from a Standard & Poor ratings
analyst in December 2006:
“Rating agencies continue to create an even bigger monster _ the
CDO market. Let’s hope we are all wealthy and retired by the time
this house of cards falters.”
The happy ending to this story is that a huge percentage of
thieving scum like this emailer saw their hopes become reality:
they got wealthy and retired before the CDO market crashed in a
trillion-plus dollar heap of shit. And if they didn’t retire, even
better—because bonuses in 2009 were soaring, thanks to the
always-gullible American taxpayer.
9). Regulatory Fraud: In the OTS, OCC,
Fed, pension benefit guaranty agency and of course the SEC, where
whistleblowers were routinely ignored because the regulators were
too busy painting their monitors while surfing sites like
www.fuck-my-wife.com.
This is just scratching the surface, but you get the point.
We’re way past the point of redemption. No wonder everyone’s
dreaming of a violent apocalypse to wipe the slate clean, and take
us away to another plane where everything would be better. Anything
but this.
http://exiledonline.com/confessions-of-a-wall-st-nihilist-forget-about-goldman-sachs-our-entire-economy-is-built-on-fraud/