Tuesday, April 20, 2010

There are lots of fat foxes around the chicken house

The Wall Street banks all reported record first quarter profits despite record losses in their lending divisions. The only divisions that they have that are making money are their investment banks. Inflating the stock market is making money for them and that money is of course coming out of your 401k. They have also driven up oil and gas futures which you pay for every time you stop at the pump.

They are also making money on credit derivatives with between 600 and a 1000 trillion of those bets on the books. Its not clear how they make money on these because a casino requires suckers to pay the bills and they burned all those pretty bad. Speaking of those burned: AIG says they are going after Goldman Sachs for all the derivatives bets that AIG had to pay off, now that it has been revealed the roulette wheel Goldman had been using was rigged.

The SEC is requiring the 24 biggest firms to reveal if they have been using anything similar to the Repo 105 transactions that Lehman Brothers used to keep 50 billion off their books right up until they collapsed. A standard Repo agreement is a paper shuffle between companies that amounts to a short term loan. A Repo 105 is treated as a sale of assets for cash even though it isn’t really. By loading up on them at the end of each quarter it made their books look better, like taking a payday loan. But these instruments lose money every time, they can’t possibly make money. Some people might call this accounting fraud, Lehman’s CEO swears under oath that he’s never heard of any Repo 105’s (that he can remember, he was careful to put it that way).

The Republicans are accusing the SEC of timing the lawsuit against Goldman to help Obama. He want’s to push through a law that will allow these fat parasites to be broken up the next time they are insolvent. The banks would have their assets seized, the executives fired without golden parachutes and the stockholders wiped out. The next time they are insolvent will be when somebody really goes through their books. In the mean time the executives are taking quarterly bonuses rather than waiting.

The Republicans are saying the SEC is being political because after all the SEC should have done this a year and a half ago. A year and a half ago the Republicans were in charge. It’s widely reported that Wall Street was relieved to find out that the Republicans on the Securities & Exchange Commission voted against taking any action against Goldman Sachs. In a clear cut case of fraud that cost Goldman’s own investors two billion dollars the Republicans voted to tie the hands of the SEC. Remember, it’s you pay for this fraud, these banks don‘t really make money, they take it from you. www.prairie2.com

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