Outrageous Economic Shorts - The Great American Middle Class Wipe Out

Welcome to this week in economic outrage.  Every day there are thousands of economic horror stories where one just shakes their head in disbelief at the incessant injustice.  To combat the information overload, we give you a financial follies reader's digest and how those in power could care less about any of it.

GAO Audit of Federal Reserve Reveals Strong Conflicts of Interest

The Government Accountability Office has completed their audit of the Federal Reserve. Guess what the GAO found? Conflicts of Interest. It seems the Banksters are sitting on the Federal Reserve board, supervising their own institutions. The fox is guarding the hen house in other words. One of the most damning GAO discoveries is the timeline of Goldman Sachs turning into a holding bank and a Goldman Sachs board of directors, Stephen Friedman, also serving as the New York Federal Reserve chair.

Imagine That, Writing a Budget to Reduce Government Waste

The GAO released a report for efficiencies in various government programs, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue. While the headlines buzzed about savings, ya all need to read this. The GAO is going after a lot of low hangin' fruit, that being not large corporations but instead social programs and individual taxpayers.

Take this paragraph for example:

The housing market downturn is resulting in billions of dollars of forgiven mortgage debt. In tax year 2008 (the most current data available), the Internal Revenue Service (IRS) estimates that individual taxpayers excluded $6.4 billion to $11.8 billion in forgiven mortgage debts on principal residences. While most forgiven debt is treated as a financial gain and included in taxable income, forgiven mortgage debt is, according to complex rules, sometimes excluded from taxable income.

Forgiven mortgage debt means you probably were foreclosed on and declared bankruptcy. The GAO is recommending this be treated as taxable income? Talk about adding insult to injury.

Through 2012, taxpayers may exclude forgiven mortgage debts from taxable income if the mortgage proceeds were used to buy, build, or substantially improve a principal residence. Forgiven mortgage amounts used for other purposes, including purchases of vacation or investment properties, would generally still be considered taxable income unless the taxpayer is bankrupt or insolvent.

In BP We Trust

During the recent weeks, when we learned that the National Oceanographic and Atmospheric Administration (NOAA) is refused access to research and measure the spill by British Petroleum (BP), and the US Coast Guard warns reporters, research scientists and engineers away from the area, stating that they are simply following orders --- from BP --- one might surmise the sovereignty of the United States of America has been ceded to an oil multinational.

It would certainly appear that way. Many complaints have been heard from a variety of scientists and engineers, eager to monitor, research and learn from this catastrophe, in order to better prepare, and avoid, future such occurrences.

But what of the past decade and BP's other adventures?

Well, in this study by the GAO from October of 2007 (p.54):

In another case, on June 28, 2006, CFTC brought an enforcement action against BP Products North America, Inc., alleging, among other things, that BP cornered the physical propane market and manipulated the price of propane in February 2004.63 Also on June 28, 2006, DOJ announced that a former BP trader had pled guilty to conspiracy to manipulate and corner the physical propane market.(emphasis added - JW)

Hmmm......interesting stuff here!

A Brief History of Securitization


Shadow Bankers Gone Wild




Recently the New York Times published yet another article expressing surprise at the previous existence of securitized financial instruments prior to the last several decades. Securitized financial instruments, or actually securitization, has been around for at least several centuries, and whenever it becomes widely used a Great Depression, or economic meltdown, ensues.

This is the foundation for that bandied about term, “shadow banking.” Without securitization, there would be no such capability. With securitization, the process for creating debt-financed billionaires and multi-millionaires reaches critical mass.

Unfortunately, so to does the dramatic increase in unemployment and poverty.

Those so-called “experts” or “pundits” who continue misleading the populace with extravagant claims as to the recent origins of the securitization process have done a major disservice to society. This brief blog will attempt to rectify this situation.