channel59

 Congress was explicitly warned before it repealed Glass-Steagall that doing so would lead to both asset and credit bubbles, not to mention rampant fraud. Specifically, Stephen Pizzo and Mary Fricker, two individuals involved in the forensic analysis of S&Ls who immolated themselves playing the precise games that the banks are now falling victim to, wrote: "If Congress again opens up banking to Wall Street speculation, as it opened up S&Ls and banks to real estate speculation, regulators will quickly lose control over the complex series of events that a pervasive marketplace will immediately set in motion. Insider abuse, self-dealing, and back scratching relationships between institutions will run rampant. .... Almost immediately the predictable happened. The historical arms-length relationship that had existed between lender and borrower vanished, and with it went due diligence, common sense and, in too many cases, ethics. Thanks to facilitating that bit of synergy the taxpayer is stuck with $300 billion dollars worth of repossessed real estate from failed thrifts. If we sold $1 million worth of this stuff a day, it would take 300 years to sell it all. Deregulated banks can look forward to a similar script, with some of the same bad actors. U.S. Attorney Joe Cage in Shreveport, Louisiana, told us, "Some of the same people who took down savings and loans, are out in the securities business and banking now, already in place. And they're just waiting for Congress to abolish the Glass-Steagall Act. If that happens I'm afraid they'll take the banks just like they did the savings and loans."" Congress was warned. Repeatedly. In written testimony that is STILL, to this day, available to every single member of Congress. The Fed supported the repeal of Glass-Steagall. In fact, Greenspan was strongly in favor of it. Today, Congress again sits on its hands and does nothing about rampant, blatant, admitted fraud in the banking system. Yes, admitted. As written in "Firecracker Fourth", it is reported that UBS engaged in a knowingly-fraudulent "cosmetic" transaction for the explicit purpose of intentionally not reserving against illiquid and dangerous securities (again for emphasis): "Paramax claims that, from the beginning, the UBS hedge was cosmetic. In May 2007, when the original agreement was signed, the terms were a fraction of the market rate. Also, Paramax had only $200m under management and its agreements with its own investors limited it to commit no more than $40m to any single deal. Thus, it could never compensate UBS fully for any meaningful loss in value of the $1.3bn UBS was trying to insure, it claims. Paramax also claims that UBS told it that the bank would employ "subjective valuation methodologies" that meant it would not record any loss in value that could trigger calls for additional margin from Paramax. (Because credit derivatives contracts are individually tailored agreements rather than standardised documents, in fact there is some discretion in how firms value such deals.) Paramax also claims that UBS assured it that if it needed a "real" hedge, it would tear up the agreement." Now maybe Paramax is lying in their filings in the dispute. But let's think about this for a second. Someone is lying but from a regulatory perspective it doesn't matter who it is! See, if its Paramax, one still has to ask - why is it that we have so-called "regulators", including The Fed, OTS, OCC and the SEC, who allowed a firm that had only $200 million under management to write protection on over one billion in underlying securities? The simple fact of the matter is that this sort of nonsense is pervasive in our financial markets and it is why we are in the mess we find ourselves in. We have a Congress that is now faced with The Fed and Treasury trying to strong-arm them into "promoting" The Fed into the role of the "market stability regulator" after it opened up its lending facilities to institutions that it either knows or should have known have improperly accounted for risk - either due to outright fraud or by buying "swaps" from firms that could not possibly make the payments necessary to cover those bets. There is absolutely no justification whatsoever in allowing any of these agencies to have one iota of additional regulatory power and in fact Congress must remove all such regulatory power that they currently have, or place it under strict oversight, until the truth of these allegations, and all similar ones, are discovered and the guilty parties to the bad transactions prosecuted to the fullest extent of the law. We have had zero regulatory oversight from Congress over the last 20 years in these matters. None. Zip. Zero. Nada. Congress has repeatedly given the banking system whatever it wanted in terms of ability to enter various lines of business and be free from the "shackles" of regulation, yet it has continued to stand behind these institutions with billions of dollars in taxpayer bailouts every single time the bets have gone bad. Harvard's 2008 "State of the Nation's Housing Report" puts in stark relief the outcome that the intentional malfeasance and misfeasance of our regulators and Congress have brought upon America: One in six children is living in a household where 50% or more of gross income goes toward housing. For those in the bottom quartile, these families have only $548 per month for all non-housing needs. It is obvious that when one subtracts food from that amount, even with only one child in the household there is not much left. Now pay the light and heat bill. In 2006, 17.7 million households were paying more than half of their income toward housing, and more than double that - 39 million - were spending more than 30% of income. The standard for "affordability" in mortgages has, since the Depression, been 28% - that is, the "Front end" ratio - for sound mortgage lending. Congressional malfeasance and misfeasance has led directly to screwing the children of this nation and in fact approximately one in FOUR households is living in a "stressed" housing cost situation, while the banks and their buddies have made billions in bonuses and stock options! The "solution" from Congress? Spend more money we don't have. Create more "programs" for "economic stimulus" and handouts to lenders and builders. Shift even more burden onto the backs of taxpayers, even though the money is not there to fund these programs, leading to nearly five hundred billion dollars in new deficit spending proposed or passed in the first six months of this year alone. Never mind Ben Bernanke, who has injected a record amount of liquidity into the banking system in a brazen attempt to allow these institutions to avoid taking their losses and be honest with investors - and the public. Of course when those very same investment and commercial banks use the nearly three hundred billion dollars in slosh to speculate in the commodities markets in an attempt to "earn their way out of the hole" Congress screeches about "evil commodity speculators" instead of demanding that Bernanke drain the liquidity that he put into the system in the first place, which was the cause of the dollar's decline and thus created the increase in the price of those very same commodities! Bank of America's document, which was "outed" as the "blueprint" for the housing bailout bill, discloses that they believe that second line mortgages have a current value of just a few pennies on the dollar - a few being, literally, two or three! Yet have we seen any of these institutions actually mark down their second line portfolios to that 2-3 cents on the dollar? No. Is it not appropriate to ask "why not?" when the bank's own internal documents are propounding this as the actual value of those notes? 

see more of this article at: http://market-ticker.denninger.net/archives/508-The-Looting-Of-America-Continues.html