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Europe, US Under Siege

Republics May Fall to Financial Assaults
By Wayne Jett © June 19, 2010
    There is no joy in Mudville, but it’s not about baseball. Financial predators are cold-bloodedly sucking life-juices from bone and marrow of Western Civilization. Where is the U. S. government in this historic episode of wanton criminality? The U. S. is acting, not as the world’s policeman, but as captive enabler of the predators.
U. S. Aids Fraud, Subverts Europe
    Recall that, by May 20, German Chancellor Angela Merkel banned naked short selling of shares in Germany’s major banks. She also prohibited cash-settlement credit default swaps on those banks and on German sovereign debt. Days later, Merkel broadened the ban of naked short selling to apply to all corporate shares traded primarily on German exchanges.
    U. S. Treasury secretary Timothy Geithner jetted to Europe to persuade other governments not to follow Germany’s lead. In two days, he conferred with finance officials of Britain, the European Central Bank and Germany. Then May 27 Geithner triumphantly, but falsely, announced from Berlin that the U. S. and Europe were in “broad agreement” on a global framework for financial regulation.
    Contradicting Geithner in diplomatic terms, German finance minister Wolfgang Schaeuble stated “I know the Americans approach is somewhat different” to naked short selling. But, Schaeuble said, Germany was right to go it alone against naked short selling, given the seriousness of the threat to financial stability.
    On June 9, French president Nicolas Sarkozy joined chancellor Merkel in formally asking the European Commission to propose a ban “of naked short sales on all or certain shares and bonds, and on certain naked CDSs on sovereign securities,” to become fully effective this summer. The EC welcomed the move by Germany and France, indicating support for prompt action.
Goldman Sachs Lends a Hand
    The next day, June 10, Reuters reported from Toronto remarks by Goldman Sachs president Gary Cohn as follows: “I don’t think anyone in the industry has any problems with banning naked short (sales). The concept of naked short sale is not a great concept. In fact, from a regulatory standpoint the more regulatory certainty we get on naked short sales the easier it is for us to force these down on our clients.”
    Do not mis-read the statements by Cohn as real support for banning naked short selling. Goldman Sachs and its client hedge funds have exerted all necessary influence to assure no enforcement of federal laws against manipulation of financial markets and no reform by Congress. Cohn merely attempted to construct a public record that (a) U. S. financial markets lack “regulatory certainty … on naked short sales,” and (b) Goldman’s clients (and almost certainly Goldman itself) are presently engaging in naked short selling in U. S. financial markets and around the world.
    Based on Cohn’s statements, presumably the Securities & Exchange Commission is not preventing naked short selling in U. S. markets despite years of official statements that selling short with no intention of borrowing or delivering shares is an illegal, manipulative practice in violation of federal securities laws.
U. S. Financial Reform Fails Miserably
    The “too-big-to-fail” concept often applied to certain Wall Street banks has little or nothing to do with harm done to others by their failure. Rather, a bank is TBTF if it has sufficient influence at the Federal Reserve, the White House, Treasury and in Congress to gain bailouts as needed. The only solution to TBTF, therefore, is to reduce the bank’s influence by reducing its size and by curtailing its activities towards that end.
    The Senate and House conference on financial regulation reform is busy doing the opposite: assuring TBTF banks will become even bigger and more influential with government. A reform proposed to restructure big banks after they get in trouble morphed into added discretionary power for the mechanism already in place which enables FDIC to seize and dissolve smaller competitors. Even Paul Volcker agrees the TBTFs would remain untouched by it.
    Regional and community banks across the country see the growing threats to their survival, so the presidents of several regional Federal Reserve banks are speaking against giving Wall Street banks even greater size and influence. Richard Fisher of the Dallas Fed was joined by Kansas City Fed’s Thomas Hoenig and St. Louis Fed’s James Bullards in calling for restrictions on derivatives trading by the TBTFs. Fisher points the way by stating what should be obvious: “dangers posed by institutions deemed TBTF far exceed any purported benefits,” and “ending the existence of TBTF institutions is certainly a necessary part of any regulatory reform effort that could succeed in creating a stable financial system.”     
     Three of twelve Fed presidents are dwarfed by the financial heft of the mega-banks of the New York Fed when it comes to political influence. Republican ranking member of the Senate Banking Committee Richard Shelby of Alabama has worked hand-in-glove with majority leader Harry Reid (D-NV), Banking Committee chairman Christopher Dodd (D-CT) and Charles Schumer (D-NY) to deliver Republican votes for Wall Street’s demands. This permitted rank-and-file Democrats running for re-election, Blanche Lincoln (D-AR), for example, to propose legislative amendments objectionable to Wall Street, knowing they would be killed by Republican filibuster.

Global Instability Emanates from U. S.
    This domination of U. S. political process and government power by the financial barons of Wall Street endangers national and international stability.  The same Wall Street influence, disguised as populist politics, created federal and state debt which threatens imminent default and consequential collapse of public institutions, not the least of which is the U. S. national security apparatus.
    Important republics of Europe are at risk of falling to dictatorships of one kind or another, and the causes are not simply of their own doing.  Those who truly control the New York Fed and the dollar’s value have created greater barriers to international trade than the Smoot-Hawley Tariff Act of 1930, and other nations know this is so.
    Russia calls for a “new world economic order” in the wake of Western collapse now occurring. Russia notes that the euro’s existence as alternative to the dollar eased the global pain of financial collapse which emanated from the U. S. in 2008, and calls for a new international reserve currency.  Brazil, Russia, India and China, the BRIC nations, have been net sellers of U. S. Treasury securities. This is not without justification considering the Fed’s entirely irresponsible management of the dollar.
    But a reserve currency managed by BRIC and other nations is more likely a move towards greater oligarchic control of currencies, not less, and increased subjugation of the middle class as is occurring in the U. S. If the American middle class cannot retain political power on the foundation of its Constitution, prospects for middle class gains in other nations are diminished.
British Petroleum Gulf Blowout
    When governments allow securities to be created which make productive businesses worth more dead than alive, scenarios abound by which death can be arranged. A crucial rubber seal in the blowout preventer was damaged during an earlier procedure involving the string of drill-pipe.  The damaged seal meant the BOP would not work under great stress, and also that pressure readings were inaccurate due to leakage of oil and gas through the damaged seal.   On top of that, the day the blowout occurred BP insisted upon replacing heavy drilling mud with sea-water much less capable of holding pressure in the well.
    After the blowout cost 11 lives and the drilling platform, measures taken by the U. S. government to forestall actions preventing or minimizing damage from the leaking oil have been even more questionable than the lead-up to the “accident.” Protocols to burn the oil before it spread were ignored. Ships offered by the Netherlands to suck up the oil and separate it from the water were refused. Proposals to clean the oil by spreading absorbent grasses were turned down. State requests to build sand dikes to prevent the oil from reaching shore were delayed and denied. On June 18, the U. S. Coast Guard prevented 16 giant barges obtained by the State of Louisiana from sucking up oil before it hit the coastline.
    Combine these factors with the oddity that the CEO of BP is a British gentleman, Tony Hayward, whose talents and expertise seem better suited to business other than oil production. His glibness and glad-handing manner are akin to those of investment bankers or hedge fund managers, for example, whose ownership interests must have influenced his appointment.
  Hayward sold about one-third of his BP holdings one month before the blowout occurred.  He is said to have done so innocently. Goldman Sachs sold 4.68 million shares (about 44% of its BP holdings) sometime within the quarter ended March 31 (acting, as always, because it is so much more intelligent than others in the markets).  Whether they acted innocently and intelligently or otherwise is likely to remain uncertain, because the U. S. government simply cannot be trusted to conduct an honest investigation and tell the truth about it.
   President Barack Obama's oval office speech to the nation on the Gulf oil spill focused on one aim: enactment of law similar to the "cap-and-trade" bill already passed by the House. The House bill is nothing short of a complete federal takeover of all sources and uses of energy in the U. S. Energy costs would be pushed sharply higher - at the expense of the middle class - and Wall Street would collect those cost increases through its evil scheme to "trade" rights to use energy.
   Reaping enormous illicit profits by using specially designed derivatives and manipulative trading practices to destroy companies while inexorably suppressing the middle class. This has been the template of the dominant elite since 2007, and it remains so in 2010.  ~