FedUpUSA

Archive for the ‘Looting’ Category

It’s Gonna Be Like Christmas! (Health Care)

Posted by Karl Denninger

Oh boy are some folks in for a surprise…..

“It’s just going to be like Christmas,” said DeCarlo Flythe, who lost health coverage for his family when he was laid off almost three years ago. “It’s going to be great. You know, no worries (about) the bills. We are going to go ahead and pay our co-pay and be alright.”

You got the $10,000 for the policy and another $10k for the out-of-pocket deductibles, right?

Yes, I know if you are lower-income you’ll get subsidies.  But that being laid off thing might become more-permanently laid off, you see, since if you go back to work your employer will have to either pay a fine (annually) or pick up the majority of that $10k in cost.

If your value in the marketplace is $20/hour, with a 2,000 hour man-year of work (50 weeks x 40 hours/week) your economic value in the economy is $40,000 (gross.)  From this your employer is going to have to take $10,000 out to avoid being fined, which means you now make $15/hour.  Then you pay taxes (FICA and Medicare) on that.  You’ll likely get back the rest of your federal income tax (especially if you have a family) but your out-of-pocket medical expenses will still be that $10,000 either way.

So now you’ve got $30,000/year less about $2,300 in Medicare and FICA tax, and from that you subtract the co-pays and deductibles of $10,000.  You’re left with about $18,000 to live on, or about $1,500 a month for your family of four.

This sounds like “Christmas”?

The clue-stick coming to whack these folks upside the head just as did the people who said “I don’t have to worry about putting gas in my car or paying my mortgage!” will lead to some rather extreme emotions, I suspect, when the truth becomes apparent.

UPDATE:

Geithner’s New York Fed Told AIG to Limit Swaps Disclosure

Jan. 7 (Bloomberg) — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.

Bank Payments

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

Securities Lawyers

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e- mailed statement. Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Mark Herr, a spokesman for New York-based AIG, declined to comment. Andrew Williams of the Treasury referred questions to the New York Fed.

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

‘Reasonable Basis’

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.

‘No Mention of the Synthetics’

The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures. The correspondence includes e-mails between AIG’s Shannon and attorneys at the New York Fed and its law firm, Davis Polk & Wardwell LLP. Tom Orewyler, a spokesman for Davis Polk in New York, declined to comment as did Shannon.

According to Shannon’s e-mails obtained by Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

AIG had about $9.8 billion of swaps protecting the synthetic holdings as of September 2008, the company said on Dec. 10, 2008. Goldman Sachs said in a press release last month that it was among banks that had losses on synthetic CDOs.

As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

‘Guided by Your Counsel’

“Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

“Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

In at least one instance, AIG pushed for documents to be disclosed and then released the information.

‘Better Disclosure’

“We believe that the agreements listed in the index (i.e., the Master Investment and Credit Agreement and the Shortfall Agreement) do not need to be filed,” Peter Bazos, a Davis Polk lawyer wrote on Nov. 25, 2008. “Please let us know your thoughts in this regard.”

AIG’s Shannon replied that “the better practice and better disclosure in this complex area is to file the agreements currently rather than to delay.” The agreements were included in the Dec. 2 filing.

More details of the negotiations over swaps payments emerged in November 2009 when Neil Barofsky, the special inspector in charge of policing the Troubled Asset Relief Program, assessed the Fed’s role in the bailout.

“Federal Reserve officials provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” Barofsky wrote in a Nov. 17 report. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

AIG’s first rescue was an $85 billion credit line from the New York Fed in September 2008. The bailout was expanded three times and is valued at $182.3 billion. That includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion for Maiden Lane facilities to buy mortgage-linked assets owned or backed by the company.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

SEE THE ACTUAL E-MAILS HERE  (page 5 is particularly interesting)

Where Are The Damn Handcuffs?

Posted by Karl Denninger

If you’re not mad enough to contemplate the use of your pitchfork and torch after reading this, you are unfit to be an American and should immediately book yourself on a one-way flight – to Yemen.

This is about PPIP – and a game I predicted would be played in March of last year.  Specifically:

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

You got that?

Let me ‘splain it in English.

The banks bought bonds that were worthless in the open market, because The Government intended to intentionally overpay for these bonds.

This is exactly what I said would happen in March of 2009:

There’s nothing complicated about this at all.

Buy for 30 cents, sell to the PPIP for 50 cents, pocket a quick (and huge) profit immediately and nobody’s the wiser.

Now here’s the problem.

We were later told that the FDIC would not allow the banks to game the system like this.

That was a lie too.

It’s “absolutely ridiculous” that banks, which were expected to reduce their holding of such volatile mortgage securities, bought them before the government program was running and may now profit, said Michael Schlachter, managing director of Wilshire Associates, the Santa Monica, California-based investment-consulting firm. “Some of them created this mess, and they are making a killing undoing it.”

The people involved need to be indicted for looting the Treasury and Geithner along with Sheila Bair must be removed from office for permitting it, after BOTH said it would not happen.

They lied – period.

Here’s what The Fed’s Dudley said at the time:

His comments add to signs that Treasury Secretary Timothy Geithner’s Public-Private Investment Program to boost debt prices and rid banks of devalued assets to expand lending is stalling, after helping to spark a rally in stocks and bonds. The Federal Deposit Insurance Corp. yesterday delayed a test sale of bad loans held by U.S. banks that had been billed as a tryout for its role.

Well it sure rallied the prices of those assets, but the banks didn’t rid themselves of them.  They instead bought up yet more worthless paper, adding to the trash they were holding, and now are in fact using the speculative gains to record “profits” on securities that still have not and cannot perform as the underlying loans are still not paying as agreed!

I thought The Fed was supposed to REGULATE banks?  You know, when they decide this is how something should happen (or something that should not happen) they then PREVENT IT FROM HAPPENING AND/OR FORCE IT TO STOP?

Lying is an art form but in this case you literally had your pocket picked by Congress so these banksters could intentionally game the system, exactly as I said they would, and instead of REDUCING their holdings of toxic assets THEY ADDED TO THEM!

What happens when, not if, the true “value” (that is, ZILCH!) of these so-called “assets” pokes its head through NOW? 

Back in April of 2009 I posted the following:

And since the banks will apparently get paid (by you the taxpayer) any difference between internal marks and the sale price, not only get to prevent more than a 5% loss off the market price, they do even better as they get to guarantee no more than a 5% loss off their internal mark!

We just keep adding scams on top of scams; if $170 billion stolen from taxpayers to “bail out” banks via AIG isn’t bad enough, this program will be some $500 billion (or more), and that’s not even the total value since some banks have been buying up “distressed” ALT-A liar loans with TARP money in front of this program’s announcement!

I hate it when I’m right.

The question is when Americans will be pissed off enough to do something about being literally robbed blind by the banksters that infest this nation.

A Cautionary Tale

Posted by Karl Denninger

When in the course of human events……

So began a document written over 200 years ago.

But for a very long time, before there were firearms in the hands of the people, there were pitchforks and…..

Yes, that would be torches.

But that is not 200 years ago, or 400, or 1,000.

It is today.

In Iceland.

A land where a handful of banksters robbed the nation and looted its Treasury, then demanded that the public accept paying for the consequences.

The people have risen and declared that these are the acts of a criminal gang.  That the actions that led to this distress were not mistakes, they were instead unindicted and unpunished felonies.  That the people were unwilling and unknowing dupes, not willing participants with equal culpability.

And finally, that they will not pay so the criminal cabal – the international bankster fraternity – will be protected and made whole.

Iceland’s President has said “no”:

“The cornerstone of Iceland’s constitution is that the nation is the highest judge for the validity of law,” Grimsson told reporters at his residence outside the capital Reykjavik today.

Grimsson vetoed the so-called Icesave accord after more than 60,000 of Iceland’s 320,000 inhabitants signed a petition urging him to reject the legislation. His decision means lawmakers must either drop the bill or put the matter to a referendum.

Does anyone know what the laws are governing immigration – to Iceland?

I’m only half-joking.

This is the first President who has acted as a President.  Who has recognized, understood and acted in accordance with the will of the people.

70% of the population appear to oppose bailing out the criminal cabal.

Contrast this with the EESA/TARP legislation. 

By a margin of more than 100:1 and in some districts a margin reported as high as 300:1 The American People called, faxed and emailed their Representatives and Senators, along with the White House, to tell them NOT TO BAIL OUT THE CRIMINAL BANKING CABAL.

Our Congress and President did so anyway.

In Iceland we have seen proof that a strong display of the good old-fashioned torch – with the implied threat of the pitchfork being next – was sufficient for the government to recognize that:

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

I am convinced that our nation will not stop being looted by this very same criminal cabal until The People display the torch and reiterate the foundational principal of this Republic – that we, the people, are stating our intention of revoking The Government’s right to exist should it continue to act at the behest of a criminal cabal hellbent and determined on looting every member of society along with the public Treasury.

The choice is yours America. 

You have seen today that forceful yet peaceful demonstration – a clear and unmistakable statement that the principles that underlay The Declaration of Independence remain in full force and effect, and that we, the people are both willing and prepared to enforce them if it becomes necessary – still works.

That you, not the den of vipers, control the ultimate path of legislation in all civilized nations.

When will you, America, be willing to display your torch?