Jim's Blog

We are in trouble, the entire west is in trouble, in substantial part because the financial system has been leaking a lot of money.  So has every other part of the governing apparatus, but the financial system is the biggest hole in the bucket.

Now a lot of people are saying that this is a revolutionary election, it is about fundamental change.  Thomas Sowell, a man I enormously respect, tells us this is a crossroads election.  But is not.  The Democrats are driving the bus towards the precipice in top gear with the pedal flat to the metal, the Republicans propose to proceed with the pedal not quite flat to the metal.  Some of the unelectably extreme elements of the Tea Party are suggesting a lower gear.  In Britain, they applied supposedly radical cuts – which “cuts” some how result in a substantial increase in government spending.  Before the “cuts”, an ordinary Briton had to be crazy if he planned to work, marry, have kids, and support his own kids.  After the “cuts”, he still had to be crazy if he planned to work, marry, have kids, and support his own kids.

But let us focus on the biggest single money leak:  The financial system, for all the other problems resemble that.  If we had the will to fix the financial system, we would have the will to fix all the other problems.

The Market Ticker proposes a general audit of the banks:  Shut down the insolvent banks, and remove their management permanently from the banking industry.  This seemingly addresses the problem of crooked financiers.  If we cannot jail them, we can at least fire them.   Unfortunately, it does not ask why we are overrun with crooked bankers.

In America, the problem was the CRA and affirmative action lending.  The regulators required a banker to make loans to certain voting blocks that there was no way could legitimately be made – so only crooked bankers survived.  If a banker is still in business, he is a criminal.  But world wide, we saw a similar outbreak of crooked lending, often with very different beneficiaries.

The common factor in all this crooked lending was Basel:  Basel means that regulators are the ultimate decision makers as to what is a risky loan and what is a safe loan – which means that politically correct loans are necessarily supposedly safe, and politically incorrect loans are necessarily supposedly unsafe – which means that a banker has to be corrupt.

So to fix the banking system, have to undo Basel.  This sounds easy.  The left claims that Basel is deregulation, therefore extremely bad and the big cause of our financial troubles;  The right claims that Basel is regulation, an explosive expansion of regulation, therefore extremely bad and the big cause of our financial troubles – except however that only one minor candidate, widely viewed as ludicrously extreme, proposes to undo Basel.

Every candidate claims to hate the banksters twice as much as every other other candidate – but again only one candidate proposes to purge the banking system of zombie banks and crooked bankers.

You will notice the the fix for the financial system is the wholesale rollback of thirty years of financial regulation (or, as the left call it, deregulation), the mass firing of the good and the great, the powerful, the important and the influential, a large portion of the most eminent graduates of our most eminent universities, and the imprisonment of a significant fraction of them.  Simply apply a similar fix to every part of our society, and the problem is solved.

We have a society that believes that children should not be spanked, that thieves should not be flogged, that women should not suffer adverse consequences for bearing children by men other than their husbands – and that graduates for the most eminent universities should not lose their jobs for corruption or incompetence.

The most extreme of the “right wing” candidates are proposing measures far too feeble to make a difference. Consider for example, the mortgage scandal. Where is the candidate that suggests that to fix our financial system, the bums (the entire financial sector of wall street and the regulators to which they are connected by a revolving door) need to be fired for incompetence and imprisoned for fraud?

A lot of people are proposing “solutions” for the mortgage crisis – but all these “solutions” propose that the people in charge of the too-big-to-fail banks and their regulators will remain powerful, important, and out of jail, despite demonstrated criminality and gross incompetence.

The ruling elite has lost the capacity to discipline itself.  Power is slipping out of their feeble hands, falling into the street.

Our society has reached that awkward state, too late for reform, too soon to shoot the bums, but that stage is usually irreversible.  It will eventually reach the time to shoot the bums stage.

Illegality by our elite is provoking illegality by ordinary middle class people.

As Market Ticker tells us:

This is where lawlessness leads us – to more lawlessness.  Once you commit a lawless act against someone and are not punished for it you have invited them to retaliate with complete disregard for the law in their response. You are only required to deal ethically and morally with an ethical and moral entity across the table – one who ignores the law loses their right to demand that respect in return.

This mess begins with the securitization and sale of these mortgages in the first instance.  It begins with whether or not the original banks actually transferred the notes at all (there’s plenty of evidence they did not) and whether the representations and warranties were complied with when these securities were sold to investors (we know in many cases – if not all – they were not, from FCIC sworn testimony.)

We have turned a blind eye to these lawless acts for the better part of a decade – not one indictment has issued for securities fraud over these matters.  And it’s not just mortgages – we know banks were involved in ripping off communities such as Jefferson County, we know they are alleged to have been involved in rigging municipal debt offerings (which raised the cost of living for everyone through higher taxes) and yet not one bank officer or bank itself has been placed under indictment for any of it.  Further, the FBI warned in 2004 of an “epidemic” (their words) of mortgage fraud, and instead of it being prosecuted the agents were pulled and reassigned.

We have had two sequential administrations – Bush and now Obama – that have intentionally refused to prosecute any of this lawless behavior.  This refusal continues to this very day with admissions in depositions under oath of the commission of literal tens of thousands of felonies per month (each instance of falsely swearing before a court is a separate count of fraud upon the court and, in the case of “robosigning”, forgery – affixing a notary’s signature by other than the actual notary.)  Yet despite this having been confirmed in multiple depositions going back several months not one indictment has issued thus far and Attorneys General talk about not wanting to “upset” the banks or the “economy.”

One of the bigger criminals in the mortgage scam was Former Countrywide CEO Mozilo.  The SEC has made a symbolic settlement with him and a couple of his accomplices for seventy two million dollars, not a dime of which he has to pay personally, and which would be peanuts even if he had to pay it personally.  As a part of the agreement, all potentially embarrassing details associated with his crimes are sealed from nosy outsiders.

What little money will be paid, will be paid from an escrow fund the company set up to cover shareholder litigation – and since Countrywide was taken over by the FDIC, this means that the government is paying the money to itself.

Felix Salmon has found an interesting document in the financial crisis inquiry hearings.

It seems the banks not only knew that the loans they were selling to investors generally failed to meet underwriting standards, they were so careless as to have documents lying around saying so in plain English.

Seems like they were a bank of morons.  When I was involved in criminal conspiracies, none of us would write in plain English, and we would very rarely speak in plain English.

But if you are a regular visitor to his blog, that we are ruled by dim witted criminals is unlikely to surprise you. What has, however, surprised me, is that the political branch of the conspiracy failed to swiftly throw the bankster branch to the wolves and blame them for everything. If I was in Obama’s shoes, in 2009 I would have been preparing federal prosecutions to generate interesting headlines just before the 2010 mid term elections, but instead both political parties continue in cover up mode.

The ruling elite is too soft on each other to hold on to power for very much longer. As soon as we get a really big crisis, are likely to fall.

If you watch the reality show “survivor”, you will have noticed that in any power struggle, the winners usually have invisible connections – there is a group that conceals from outsiders that it is a group.  Conspiracy tends to be a substantial part of any winning strategy.  Conspiracies are therefore as common as cockroaches and crabgrass.  Conspiracy theory has a deserved bad name because it tends to be invoked to explain away unwanted evidence, as for example Chomsky explaining that the Khmer Rouge were good guys under attack by the CIA, shortly before he explained that they were bad guys installed in power by the CIA.

But while we should not believe in conspiracies with the ability to program millions of refugees to say unkind things about noble mild mannered agrarian reformers, nor conspiracies that can bring out large mobs on the streets to lynch beloved leaders of the proletariat, we should believe in conspiracies that link together a handful of powerful people in a handful of powerful, but supposedly separate and independent, organizations.   The state department really was full of commies.

By definition, a conspiracy is small.  Astroturf, therefore is a signature of conspiracy. If there is a real mob in the streets, a conspiracy is unlikely to have much control over it.

Another good signature of conspiracy is people mysteriously rising to power from nowhere, as the current leader of the British Labor party. Ed Miliband has a mysteriously invisible powerbase. Before 2005, no one had heard of him. Then he is nominated to a safe seat – which usually only happens to people who have been working for years to inherit the seat, promptly becomes minister, and then, leader of the labor party.

Tracing connections, we find a lot of odd links between the London School of Economics, the people who made the 10:10 no pressure video, and Ed Miliband – revealing the presence of a greenie conspiracy that is

1. Powerful
2. Composed of morons
3. Unable to get its agenda through