by Joel Skousen, World Affairs Brief

Then there is the issue of the insider loans, just emerging, that makes this banking scandal take on aspects of the Savings and Loan scandals of the 1980 and early 1990s. During those times S&L executives went to jail for giving themselves big loans which contributed to the insolvency of the institutions they ran. Stella M. Hopkins of the Charlotte Observer broke the story. “Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy [another regulatory loophole put into place years ago].

“Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with protecting shareholders and overseeing bank management, the experts say. At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million — the biggest dollar jump in the country. The largest of them likely went to three directors of their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.

“Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies. At No. 2, Charlotte-based Wachovia, which was sold to Wells Fargo of San Francisco at the end of 2008, finished the year with $747 million in insider loans. All of the loans were held by the bank’s directors or their companies, with just five holding the largest.

“Insider loans, ranging from home mortgages to multimillion-dollar lines of credit for big companies, are legal but are largely shrouded from public scrutiny. Bank of America’s insider loans zoomed in 2008, but no one will say why. Bank of America [one of the most corrupt of the insider banks] vaulted into the top 10 banks for insider lending last year with an increase of more than $358 million, much of it coming as credit markets froze and mounting financial calamity threatened the industry’s survival. The bulk of the gain came in the third quarter, when the financial sector entered its meltdown.” This means that the big shots where siphoning off available funds, knowing that the coming bailout would replenish them.

Then there is the incestuous relationship between Fannie Mae and Freddie Mac and several of the Congressional banking and finance leaders in both the House and Senate. Rep. Barney Frank claims to be outraged about the financial shenanigans of both AIG and Fannie and Freddie and yet the openly gay Congressman had a multiple year relationship with Herb Moses, an executive for the now_government controlled Fannie Mae. During the same time that Frank had regulatory oversight over Fannie and Freddie, he received over $40,000 in campaign contributions from Fannie Mae and Freddie Mac.

Sen. Chris Dodd (D-CT) of the Senate Finance committee received the most at $134,000. Sen. John Kerry (D-MA) received $111,000, and Sen. Barack Obama received about $106,000. Then Senator Hillary Clinton received $75,500 in campaign contributions from the two semi-government agencies.

Obama’s Chief of Staff, Rahm Emmanuel was made a wealthy man by being placed on the Board of Directors of Fannie Mae by his boss, Bill Clinton. According to the Chicago Tribune, “He was named to the Freddie Mac board in February 2000 by Clinton, whom Emanuel had served as White House political director and vocal defender during the Whitewater and Monica Lewinsky scandals.

“The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board’s working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.

“On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outside profits the government_chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and help maximize annual bonuses for company brass.

“The accounting scandal wasn’t the only one that brewed during Emanuel’s tenure. During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago [where he continued to receive political contributions from Fannie and Freddie].”

INTERNATIONAL OUTCRY ABOUT US FINANCIAL DOMINANCE AND TACTICS

The European Union’s rotating president from the Czech Republic, Mirek Topolanek, blasted the US for spending hundreds of billions of dollars is a “road to hell.” He was forced to downplay those remarks to avert a diplomatic crisis—especially after seeing his own political career in jeopardy as the Czech parliament delivered a vote of “no confidence” this week to Topolanek, putting his EU presidency in crisis as well.

The no confidence vote against Topolanek has even wider repercussions for the EU since Ireland and the Czech Republic are both holding up passage of the Lisbon Treaty which would give broader new powers to the EU. The pro-EU government of Ireland keeps subjecting its people to yearly referendums until they wear down the opposition. However, the Czech Parliament’s rejection of Topolanek is in large part due to Topolanek’s sometimes vacillating support for the EU and the Lisbon treaty. There is a growing disaffection among the Left in the Czech Republic, and any new government is predicted to reflect that.

Anti-US feelings still run high in Europe, and increasingly in Eastern Europe where Russia continues to woo its former satellites by pointing to US intrigue, threats and arm twisting. The international financial community also has good reason to be upset with US bailout tactics, which more frequently favor saving the US insider banks instead of other insider-connected European banks. This week the British auction of government debt failed to find sufficient buyers, and the UK now finds itself facing the prospect of monetizing its own debt just like the US. While this might seem natural to Americans who are used to these kinds of inflationary tactics, European nations simply don’t have the broad currency base to evade the effects of monetization.

Americans also don’t understand that the reality of the world economic system is that US globalist insiders are very much interlinked with European and Asian financial powers, and those powers now feel betrayed by US methods. Both sides of the centuries old Anglo-American combine have their backs to the wall and are fighting for political survival amid growing public distrust of the establishment.

US dollar dominance gained traction over other currencies like the powerful British Pound after WWII, which effectively ruined British finance, or made it hostage to the USA. The US further consolidated the dollar’s role as a reserve currency during the Bretton Woods years when the US currency was backed by a gold redemption clause—the only kind of gold backing worth anything. In 1971, the US was forced to renege on the gold clause when it refused to stop inflating the dollar and could no longer afford the drain on gold. Since then the US has taken advantage of the dollar’s dominance by increasing its inflation of the money supply and exporting that inflation to the rest of the world, thus avoiding rampant inflation at home. The US is the only nation that has been able to use this inflation distribution tool to avoid the normal disastrous effects of hyperinflation—because its pool of currency was world-wide instead of local. While this still plays a role in keeping home inflation at bay, the quantity of monetary inflation is doubling each year and will eventually come back to haunt us.

Naturally, this specter of hyperinflation also threatens international dollar holdings as well. The rest of the world is increasingly worried that US bailout policies and deficit spending ($1.2T this year alone) will seriously erode the value of the dollar. The US has begun the direct monetization of US debt (because the rest of the world isn’t buying anymore), and the Obama administration is proposing a new $3T budget with a $1.3T deficit. Naturally, every administration claims deficits are OK as long as they plan on “cutting the deficit” at some future time—which no one remembers and which never happens. It’s a common trick both parties have played for years.

GALBRAITH AND KRUGMAN TAKES GEITHNER TO TASK

Treasury Sec. Geithner unveiled another weird scheme this week to supposedly solve the toxic debt problem of the big banks. His plan is to offer private investors leveraged and subsidized buys of $1 trillion in toxic assets that are seen as a roadblock to economic recovery. Newsmakers seemed uniformly approving simply because they view it as their duty to be upbeat about any proffered solution. Besides, the stock market seemed to like it—but what do they know? Most stock pickers are betting on what others perceive the markets will do, not fundamentals.

However, the plan met with disapproval of key economists from opposite sides of the political spectrum–Keynesians James Galbraith and Paul Krugman and Austrian economist Gary North.

Nobel laureate and Princeton economist Paul Krugman said, “This is more than disappointing…In fact it fills me with a sense of despair. The Geithner scheme would offer a one_way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.” Krugman said he thought this sounded very familiar to a similar “cash for trash” plan floated by former Treasury Secretary Henry Paulson, who later abandoned the proposal.

Krugman told the NY Times “‘the real problem with this plan is that it won’t work,’ he says, adding that bad loans may be undervalued because there is too much fear in the current climate. ‘But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus_pocus __ for that is what the Geithner plan amounts to __ will change that fact.’ Krugman wrote.” Absolutely right. These loans are bad and investors will profit from the good ones and let the tax payers subsidize the bad ones. So, why bring in the investors if they aren’t at risk for the bad loans? Simple. Like everything in this bailout scheme they are insider deals to make fellow insiders rich. They have nothing to do with saving the real victims of these schemes.

University of Texas professor James Galbraith, author of The Predator State says the plan is “hogwash” and “extremely dangerous.” He is promoting FDIC receivership of insolvent banks. ” The upside of FDIC receivership is the banks are restructured and reorganized for potential sale (either in whole or parts)…FDIC receivership also means new management teams for insolvent banks.” But Galbraith is naive about the fact that the FDIC is part of this evil scheme and will do everything in its power to hand over good assets to the big problem banks and make sure that smaller conservative banks do not share in the profits. Galbraith also thinks that new bank management “will have no incentive to cover up the fraudulent or predatory lending practices of their predecessors.” Untrue. People who are insiders have a high degree of allegiance to the people in government to grant them these job opportunities, with the implicit agreement that they will play along. Galbraith correctly compares the current system “massively corrupted by the subprime debacle,” to be on par with the aftermath of the S&L crisis _ which required that hundreds of insiders go to prison.

Henry Blodget of The Business Insider thinks that “Geithner is suffering from five fundamental misconceptions about what is wrong with the economy. Here they are:

1) “The trouble with the economy is that the banks aren’t lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren’t lending as much as they used to [which is good]. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.

2) “The banks aren’t lending because their balance sheets are loaded with ‘bad assets’ that the market has temporarily mispriced. The reality: The banks aren’t lending (much) because they have decided to stop making loans to people and companies who can’t pay them back. And because the banks are scared that future write-downs on their old loans will lead to future losses that will wipe out their equity.

3) “Bad assets are ‘bad’ because the market doesn’t understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide [but you don’t see county tax assessors lowering the property values so that we pay lower taxes]. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don’t want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.

4) “Once we get the ‘bad assets’ off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they’ll sit there and say they are lending while waiting for the economy to bottom.

5) “Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they’ll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today’s 5% (a vast improvement from the 0% rate of two years ago) to the 10% long_term average. Consumers don’t have room to take on more debt, even if the banks are willing to give it to them.

Summary: “In Geithner’s plan, this debt won’t disappear. It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back.”

UNEMPLOYMENT RATE AT 16 YEAR HIGH

Bob Willis of Bloomberg News notes that “California’s jobless rate surged in February to the highest level since 1983 while unemployment in Oregon and Nevada climbed above 10 percent for the first time in more than two decades. Unemployment in California rose to 10.5 percent from 10.1 percent in January, its Employment Development Department reported today in Sacramento. ‘The West Coast is more heavily dependent on real estate [and new construction] and the decline there has been more pronounced’ said Sung Won-Sohn, an economics professor at California State University. ‘We are not seeing any signs of stabilization in the job market.’”

But the unemployment statistics don’t tell the real story. Like the CPI, they are skewed and manipulated downward. They do not show the number of people still out of work but no longer collecting unemployment benefits. They don’t count the disabled who are ineligible for unemployment. They don’t count part time workers or independent contractors who are still barely working, but falling behind. Realistic estimates of unemployment and underemployment range between 18-20%.

NEW CURRENCY? NOT SO FAST

China even called for a replacement this week of the dollar by some yet-to-be-defined international currency. This is another key New World Order goal that globalists at the CFR and Trilateral Commission would relish. However, they can’t solve the dollar’s current woes by introducing a new currency now since everyone would require a fair exchange value for their existing currencies. This merely changes the name—not the actual quantity of inflation that threatens everyone’s value.

Only during a war, can you get away with forcing an unfair exchange upon current holders of dollars. I suspect that the PTB will be increasingly floating this idea as a mere prelude to some eventual wartime exchange—at very bad rates. China’s idea for a new currency is really aimed at gaining a seat on a new international monetary control institution that will wrest from the US the decision making power on how much to inflate. That isn’t going to happen without war.

The dollar took another hit in value this week as Treasury Sec. Geithner failed to adequately respond to the Chinese call for a new currency. Instead, he gave out mixed messages, first telling fellow globalists at the CFR he was “open” to the suggestion, and then later vehemently supporting the dollar’s reserve currency role.

Various bloggers on the LewRockwell.com blog detailed the mixed messages of both Geithner and Bernanke as they were confronted by Rep. Michele Bachmann from Minnesota: “… when Bachmann asked Bernanke if he would completely renounce any suggestion of replacing the U.S. dollar with an international currency, his eyes looked down and away from her when he replied in the affirmative__i.e., he couldn’t look her straight in the face because he was lying.”

Then comes the dynamite question from Bachman: “‘What in the Constitution grants you the power to justify action taken by the executive to give authority to the treasury for these actions?” Geithner says that Congress gave the authority. Bachmann stops him and says his answer doesn’t address the constitutional issue of where Congress gets the power. She then asks Ben Bernanke where in the Constitution does the Federal Reserve get the power to create trillions of dollars in bailout money. Bernanke also defers to Congressional legislation in the 1930s and evades the constitutional issues.

MAJOR ADMISSION BY OBAMA’S NATIONAL SECURITY ADVISOR JONES

U.S. National Security Adviser, and former Marine Commandant James Jones gave these startling and incautious remarks at the 45th Munich Conference on Security Policy at the Hotel Bayerischer Hof on February 8, 2009. They indicate how deeply entrenched the globalists are in controlling both Republican and Democratic administrations.

“Thank you for that wonderful tribute to Henry Kissinger yesterday. Congratulations. As the most recent National Security Advisor of the United States, I take my daily orders from Dr. Kissinger, filtered down through General Brent Scowcroft and Sandy Berger [NS advisor to Clinton], who is also here. We have a chain of command in the National Security Council that exists today.

“The President, if nothing else, is a pragmatist [and globalist]. He knows that we must deal with the world as it is. And he knows that the world is a very different place than it was just a few years ago. As he said in his inaugural address, the world has changed and we must change with it. And we certainly agree that the world is a multipolar place in the time frame of the moments we are in.” Typical view of the globalist.