You Decide

"I am beyond words today.

The Ticker here, which talked about the first half of the hearing related to AIG, was bad:

Specifically, I quote: "The Federal Reserve decided we should pay 100 cents on the dollar", but Mr. Issa nailed the truth on this in a followup - they could have purchased those contracts for far less in the open market at the time.

The bottom line is that the testimony was that The Fed decided to settle the contracts in a non-economic manner that resulted in screwing the taxpayer by transferring more than $100 billion dollars of taxpayer money out to these banks when the cash value at the time was FAR LESS.

Now that's pretty good thuggery - literally grab $100 billion of taxpayer money to intentionally overpay for bets that were already, in the case of Goldman Sachs, covered!

The video can be seen here;   http://www.c-span.org/Watch/Media/2009/05/13/HP/R/18523/Congress+Questions+AIGs+Progress+Accountability.aspx 

the entire thing is well worth the time, but if you don't have nearly 4 hours, the most important portions start around 2:28 into the hearing, where Marcy Kaptur gets Liddy to admit that The Federal Reserve took all responsibility for settling the CDS contracts held by AIG.

I thought I had been bowled over for the day.

I was wrong.

The afternoon session, with the so-called "Trustees", was even worse.  Scroll into that video 3:01:00, and listen to the exchange related to the Trustees that are supposed to have a fiduciary responsibility to the taxpayer through The Fed and Treasury for the 80% of the stock in AIG now owned by the taxpayers.

Bluntly, an invited expert witness and professor absolutely screwed this "Trust Agreement" to the wall.

The provisions of the so-called "Trust" document in fact, it was alleged, effectively put the taxpayer at the end of the line - behind Treasury's political desires - despite the fact that it is taxpayer money and thus the taxpayers that are the actual beneficial owners!

Worse, the Trustees are permitted to invest personally in any opportunities they may learn of through their duties, secretly and without the permission of or even notice to Treasury or The Fed.

If you can believe it, it got even worse:

The Trustees are indemnified in that agreement even against bad faith actions or those not in the interest of the beneficiaries of the trust!

I sat slack-jawed listening to this testimony.  The bottom line here is that there is essentially no protection for the taxpayer to any material degree nor any recourse against the trustees with regards to the taxpayer funds committed to AIG, should the trustees act in a fashion that is not in the best interest of the taxpayer.

Isn't this all very nice?

Do I have hard evidence that any of these people have active conflicts and have benefited personally from the actions they've taken?  No.  But does this smell bad?  Absolutely.  Indeed, one of the trustees worked for the Federal Reserve Bank of NY (for 36 years), another was a board member of the Federal Reserve Bank of NY (!), and the third appears to have come from "private" industry.  Indeed, the Trust Document calls for all reports to go to the NY Fed - and not to Congress or Treasury!

It gets better.

The minutes of the Trustee meetings were claimed to be the property of The Federal Reserve Bank of New York - even though we the taxpayers are the supposed beneficiary?  Mr. Kucinich asked for the records - and was rebuffed. 

There is no transparency!

The Trustees of course objected to the characterization presented to the committee, but were strongly rebutted by the committee's invited expert.

Mr. Issa may have not wanted to question the Trustees, but I will.  The insular nature of this "Trust", the incestuous nature of where these people came from, and the outrageous nature of the so-called "Trust Document" is enough for me.

Then things got really interesting.

Judicial Watch released the following:

Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it forced the Obama administration to release documents about the October 13, 2008, Treasury Department meeting that coerced major banks to allow the government to take $250 billion equity stakes. Among the other news, the documents confirm former Treasury Secretary Hank Paulson told the CEOs of nine major banks that they had no choice but to allow the government to take equity stakes in their institutions. The documents show Obama Treasury Secretary Tim Geithner, FDIC Chairman Shelia Blair, and Fed Chairman Ben Bernanke co-hosted the meeting with Paulson.

President Obama's Treasury Department attempted to prevent the disclosure of these documents, refusing to respond to an FOIA request.  Judicial watch sued.

On February 4th The Obama Administration claimed it had no documents related to the meeting, but was forced to recant and release them.

In other words, THE PRESIDENT LIED AND ATTEMPTED TO COVER UP THE FACTS.

The Obama Administration also redacted Geithner's edits to some of the documents.

These documents show that the banks in question were literally forced to accept the interference of the government in the form of equity investment under the direct threat that their primary regulator (the OTS or OCC, as the case may be) would force them to do so if they refused.  Both OTS and OCC are run by Treasury.

The outrage here is not just that these CEOs were forced (literally) to take the money.  It is also that they were forced to, at the same time, accept whatever FUTURE restrictions on activity, including compensation, Treasury or Congress desired to impose.

In short the banks were forcibly nationalized without a prior finding of insolvency; this is blatantly unconstitutional as a "taking" without compensation.

The raw document dump shows an insane amount of redaction.  But what's also clear is one entry: "Good morning.  FYI, Futures up 380."

Point a gun at people's heads and threaten to shoot, all in the name of goosing the stock market.

This, after refusing to demand that banks not lend out more in unsecured funds than they have in excess capital - for more than ten years.

A recent Ticker commented on the nascent bill to provide a "backstop" to state and local municipal bond issuance. I believe it is quite safe to say that the precise same sort of thuggery used with the banks will be employed with the States, if we do not stop it.  After all, there is zero evidence that this changed with the Obama Administration; they in fact tried to prevent the release of the FOIA'd documents from Treasury, redacted an awful lot of the material, refused to provide Geithner's notes on the matter and further, have failed to act to restructure that odious "trust" document mentioned above.

We are no longer a nation of laws; this is a bigger scandal, by far, than Watergate and it is 100% bipartisan.

If we the people allow any of this to stand we can consider our nation's founding document to be nothing more than toilet paper.

We need a special prosecutor, we need indictments and impeachments, and we need them now."

http://market-ticker.denninger.net/archives/1039-Thuggery-And-Mob-Action,-Government-Style.html