This is a particle repost that bears repeating

Corporations, which control the levers of power in government and finance, promote and empower the psychologically maimed. These companies exist in a pathological world where identity and personal worth are determined solely by the perverted code of the corporation.  It rewards the most compliant, craven and manipulative, and discards the losers who can’t play the game, those who do not accumulate wealth or status fast enough, or who fail to fully subsume their individuality into the corporate collective.The employees who advance are vacant and supine. They are skilled drones, often possessed of a peculiar kind of analytical intelligence and drive, but morally, emotionally and creatively crippled. Their intellect is narrow and inhibited.  They demand that they not be treated as individuals but as members of the great collective of Goldman Sachs or AIG or Citibank. They talk together. They exchange information. They make deals. They compromise. They debate. But they do not think. They do not create. All capacity for intuition, for unstructured thought, for questions of meaning deemed impractical or frivolous by the firm, the qualities that always precede discovery and creation, are banished.” The iron goals of greater and greater profit, order and corporate conformity dominate their squalid belief systems. And by the time these corporate automatons are managing partners or government bureaucrats they cannot distinguish between right and wrong. They are deaf, dumb and blind to the common good.
These deeply stunted and maladjusted individuals, hold the fate of the nation in their hands. They have access to trillions of taxpayer dollars and are looting the U.S. Treasury to sustain reckless speculation. The financial and corporate system alone validates them. It defines them. It must be served.

My Dad

I love you the stars and blue whales. You taught me to dance on top of your feet when I was small enough to hold your hands above my head and look up at you to see that you were at least 10 feet tall. Because of you, I got the unbelievable privilege of giving birth to 4 amazing souls, that asked me to teach them how to dance with girls! Because of you, I have an independent mind, a free thinking spirit, and an incredible amount of enthusiasm for the best of what can be. Because of you I learned to ride dirt bikes on  put-in-bay,I learned to fire a hand gun safely and how to build a fire safely. I learned that even if I cannot understand the way another person express's  the love they feel for me, it is the proper way for them to exhibit is correct to them and accept it to be true to their heart. I learned that the popular way is not the way for my heart to go, and that I will and always will do, the right thing, for my heart, my loves, my beliefs...Because of you I will always fight for the underdog. You Dad, are and always will be the first true love of my life.

 

Every definition of a Ponzi scheme

Barry Rotholtz at The Big Picture has a great find today, a McClatchy article by Greg Gordon, published December 30. From the Gordon article:

McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman Sachs critic Janet Tavakoli said at times met “every definition of a Ponzi scheme.”

Another astounding statement from the article is:

In some of these transactions, investors not only bought shaky securities backed by residential mortgages, but also took on the role of insurers by agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value — as Goldman was effectively betting they would.

If these statements are true, then it seems to me that criminal action is called for in the first case, since Ponzi schemes are illegal (unless perpetrated by governments that can print money).

And if criminal action has not occurred in the second case, laws are deficient. It is inconceivable to me that a situation should exist where an investment is sold that could legally require the investor to pay more money if the investment declined in value. The only situation that I can see where that could be legitimate would be if the investment was sold on margin. Then a decline in value could trigger a margin call. However, if that was the case (margin call), then McClatchy would be guilty of gross misrepresentation of facts and, I would think, liable for slander unless a retraction was issued.

Another piece by Ritholtz carries a video in which former U.S. Senator, New Jersey Governor and Goldman Sachs executive John Corzine says that the unpopularity of Goldman Sachs is a matter of envy. When paired with McClatchy article, the opinion seems ludicrous.

All this brings me to the March Investment Outlook newsletter from Bill Gross of PIMCO. He raises the question of whether added debt can solve a debt crisis. He has some thoughts about when this might be a viable strategy and when not. But what he comes around to is the thought that as sovereign debt becomes more and more used to resolve private debt issues, shouldn't the yields of the two classes of debt converge? Gross says:

It is interesting to observe that over the past few months when investors have begun to question the ability of governments to exit the debt crisis by “creating more debt,” that increases in bond market yields have been confined almost exclusively to Treasury/Gilt-type securities, and long maturities at that. There has even been a developing debate in the press (and here at PIMCO) as to whether a highly-rated corporation could ever consistently trade at lower yields compared to its home country’s debt. I suspect not, but the narrowing in spreads since late November solicits an interesting proposition: Government bailouts and guarantees such as those evidenced and envisioned in Dubai and Greece, as well as those for the last 18 months with banks and large industrial corporations across the globe, suggest a more homogeneous “unicredit” type of bond market. If core sovereigns such as the U.S., Germany, U.K., and Japan “absorb” more and more credit risk, then the credit spreads and yields of these sovereigns should look more and more like the markets that they guarantee. The Kings, in other words, in the process of increasingly shedding their clothes, begin to look more and more like their subjects. Kings and serfs begin to share the same castle.

Note: The underlining represents Gross's emphasis.

Gross goes on to say:

This metaphor doesn’t really answer the critical question of whether a debt crisis can be cured by issuing more debt. The answer remains: It depends – on initial debt levels and whether or not private economies can be reinvigorated. But it does suggest the likely direction of sovereign yields IF global policymakers are successful with their rescue efforts: Sovereign yields will narrow in spreads compared to other high-quality alternatives. In other words, sovereign yields will become more credit like. When sovereign issues become more credit-like, as evidenced in Greece, Spain, Portugal, and a host of others, they move closer in yield to the corporate and Agency debt that supposedly rank lower in the hierarchy. That process of course can be accomplished in two ways: high-quality non-sovereigns move down to lower levels or governments move up. The answer to which one depends significantly on future inflation, the aftermath of quantitative easing programs, and the vigor of the private economy going forward. But the contamination of sovereign credit space with past and future bailouts is a leveler, a homogenizer, a negative for those sovereigns that fail to exert necessary discipline. Only if global economies stumble and revisit the recessionary depths of a year ago should the process reverse direction and place Treasuries, Gilts, et al. back in the driver’s seat.

All this provokes the following questions:

1. If some of the debt securities created by the investment banks are in fact Ponzi schemes and "heads I win tails you lose" deals with the banks' customers, how can a convergence of credit rating between sovereign debt and these securities possibly put Treasuries, Gilts, etc. back in the driver's seat under any circumstance if the dubious private securities are, in effect, government guaranteed?

2. Wouldn't repeating the recessionary depths of 2009 be a disastrous outcome? Wouldn't the driver's seat be in a flaming wreck?

3. Isn't the failure to address the TBTF (too big to fail) problem in a timely way just compounding the exposure to risk of a "super nova" end game?

4. Why is it that the potential here that seems so terrifying to me is apparently not on the radar screens of the various governments around the world, the central banks and the investment banking behemoths that seem to have resumed the operations that preceded and led to the collapse in the fall of 2008?

5. How can John Corzine, a man who presumably has great insight into the inner workings of the investment banking world, both from within and as an elected official for more than a decade, have such a dismissive attitude toward the situation?

6. Am I stupid?

Declare war on Goldman Sachs

Declare war on Goldman Sachs and other global financial firms that created this mess. Send the troops, the planes, the tanks, and the ships. Attack every outpost of the saboteurs on European soil. Blockade the airports and ports. Make Wall Street traders and CEO's fear for their lives, or at least for their freedom to travel. Build some Guantanamo-like facility to hold these enemy financial combatants until they can be tried, convicted, and properly punished.

OK, if a literal armed attack on Goldman is too far-fetched, then go after the firm using the full force of the regulatory and legal systems. Close the offices and go through the files with a fine-tooth comb. Issue subpoenas to all non-clerical staff for court appearances. Make the internal emails public. Post the names of all managers and traders on Interpol. Arrest anyone who tries to board a plane, train, or boat; confiscate their passports; revoke their visas and work permits; and put a hold on their bank accounts until culpability can be assessed. Make life at least as miserable for them as it now is for Europe’s tens of millions of unemployed workers.

We know that the Obama administration will not go after the banksters that created this global financial calamity. It has been thoroughly co-opted by Wall Street’s fifth column—who hold most of the important posts in the administration. Europe has even more at stake and has shown somewhat more willingness to take action. Perhaps our only hope for retribution lies there.  

Some might believe the term “banksters” is too mean. Surely Wall Street was just doing its job—providing the financial services wanted by the world. Yes, it all turned out a tad unfortunate but no one could have foreseen that so many of the financial innovations would turn into black swans. And hasn’t Wall Street learned its lesson and changed its practices? Fat chance. We know from internal emails that everyone on Wall Street saw this coming—indeed, they sold trash assets and placed bets that they would crater. The crisis was not a mistake—it was the foregone conclusion. The FBI warned of an epidemic of fraud back in 2004—with 80 per cent  of the fraud on the part of lenders. As Bill Black has been warning since the days of the Saving and Loan crisis, the most devastating kind of fraud is the “control fraud”, perpetrated by the financial institution’s management. Wall Street is, and was, run by control frauds. Not only were they busy defrauding the borrowers, like Greece, but they were simultaneously defrauding the owners of the firms they ran. Now add to that list the taxpayers that bailed out the firms. And Goldman is front and center when it comes to bad apples.

Lest anyone believe that Goldman’s executives were somehow unaware of bad deals done by rogue traders, William Cohan reports that top management unloaded their Goldman stocks in March 2008 when Bear Stearns  crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers—and the only protection it had came from AIG, which it knew to be a bad counterparty. Hence on March 19, Jack Levy (co-chair of M&As) sold over $5 million of Goldman’s stock and bet against 60,000 more shares; Gerald Corrigan (former head of the NY Fed who was rewarded for that tenure with a position as managing director of Goldman) sold 15,000 shares in March; Jon Winkelried (Goldman’s co-president) sold 20,000 shares. After the Lehman fiasco, Levy sold over $6 million of Goldman shares and Masanori Mochida (head of Goldman in Japan) sold $56 million worth. The bloodletting by top management only stopped when Goldman got Geithner’s NY Fed to produce a bail-out for AIG, which of course turned around and funneled government money to Goldman. With the government rescue, the control frauds decided it was safe to stop betting against their firm. So much for the “savvy businessmen” that President Obama believes to be in charge of Wall Street firms like Goldman.

From 2001 through November 2009 (note the date—a full year after Lehman) Goldman created financial instruments to hide European government debt, for example through currency trades or by pushing debt into the future. But not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece’s debt—making income on bets that Greece would default. No doubt they also took positions as the financial conditions deteriorated—betting on default and driving up CDS spreads.

But it gets even worse:  An article by the German newspaper, Handelsblatt, (“Die Fieberkurve der griechischen Schuldenkrise”, Feb. 20, 2010) strongly indicates that AIG, everybody’s favorite poster boy for financial deviancy, may have been the party which sold the credit default swaps on Greece (English translation here -  http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/ ).

Generally, speaking, these CDSs lead to credit downgrades by ratings agencies, which drive spreads higher. In other words, Wall Street, led here by Goldman and AIG, helped to create the debt, then helped to create the hysteria about possible defaults. As CDS prices rise and Greece’s credit rating collapses, the interest rate it must pay on bonds rises—fueling a death spiral because it cannot cut spending or raise taxes sufficiently to reduce its deficit.

Having been bailed out by the Obama Administration, Wall Street firms are already eyeing other victims (and for allowing these kinds of activities to continue, the US Treasury remains indirectly complicit, another good reason why one shouldn’t expect any action coming out of Washington). Since the economic collapse is causing all Euro-nations to run larger budget deficits and at the same time is raising CDS prices and interest rates, it is easy to pick off nation after nation. This will not stop with Greece, so it is in the interest of Euro- land to stop the vampires now.

With Washington unlikely to do anything to constrain Goldman, it looks like the European Union, which is launching a major audit, just might banish the bank from dealing in government debt. The problem is that CDS markets are essentially unregulated so such a ban will not prevent Wall Street from bringing down more countries—because they do not have to hold debt in order to bet against it using CDSs.  These kinds of derivatives have already brought down an entire continent – Asia – in the late 1990s, and yet authorities are still standing by and basically doing nothing when CDSs are being used again to speculatively attack Euro-land.  The absence of sanctions last year, when we had a chance to deal with this problem once and for all, has simply induced even more outrageous and fundamentally anti-social behavior. It has pitted neighbor against neighbor—with, for example, Germany and Greece lobbing insults at one another (Greece has requested reparations for WWII damages; Germany has complained about subsidizing what it perceives to be excessive social spending in Greece).

Of course, as far as Greece goes, the claim now is that these types of off balance sheet transactions in which Goldman and others engaged were not strictly "illegal" under EU law.  But these are precisely the kinds of "shadow banking transactions" that almost brought down the global financial system 18 months ago. Literally a year after the Lehman bankruptcy - MONTHS after Goldman itself was saved from total ruin, it was again engaging in these kinds of deals.

And it wasn't exactly a low-level functionary or “rogue trader” who was carrying out these transactions on behalf of Goldman.  Gary Cohn is Lloyd "We're doing God's work" Blankfein's number 2 man.  So it's hard to believe that St. Lloyd did not sanction the activities as well in advance of collecting his “modest” $9m bonus for last year’s work. 

If these are examples of Obama’s “savvy businessmen”, then heaven help the global economy.  The transaction highlighted, if reported that way in the private sector, would be accounting fraud. Fraud - "Go to jail, do not pass Go" fraud. That senior bankers had no problem in structuring/recommending/selling such deals to cash-strapped governments should probably not surprise us at this point. However, it would be interesting to know if the prop trading desks of those same investment banks, purely by coincidence of course, then took long CDS (short the credit) positions in the credit of the countries doing the hidden swaps.  A proper legal investigation by the EU could reveal this and certainly help to uncover much of the financial chicanery which has done so much destruction to the global economy over the past several years.

In this country, we have had a “war on terror” and a “war on drugs” and yet we refuse to declare war on these financial weapons of mass destruction. We all remember Jimmy Carter’s “MEOW”—the attempt to attack creeping inflation that was said to sap the strength of the US economy in the late 1970s. But Europe—and indeed the entire globe—faces a much more dangerous and immediate threat from Wall Street’s banksters. They created this mess and are not only profiting from it, but are actively preventing recovery. They are causing unemployment, starvation, destruction of lives, and even violence and terrorism across the world. They are certainly more dangerous than the inflation of the 1970s, and arguably have disrupted more lives than Osama bin Laden—whose actions led the US to undertake military actions in at least three countries. That should provide ample justification for Greece’s declaration of figurative war on Manhattan.

However, in an ironic twist of fate, it was just announced that Petros Christodoulou will take over as the head of Greece’s national debt management agency. He worked as the head of derivatives at JP Morgan, and also previously worked at Goldman—the firm that got Greece into all this trouble!

Dimitri Papadimitriou has recently made what we consider to be an important plea for moderation of the hysteria about Greece’s debt. Writing in the Financial Times, he complained that “The plethora of articles in your pages and others, some arguing in favor and other against a bail-out, contribute to market confusion and drive the country’s financing costs to record levels. It is not yet clear that a bail-out is even needed, but this market confusion is rendering the government’s ability to achieve its deficit goals ever more difficult.” 

Indeed, we suspect that the same financial firms that helped to get Greece into its predicament are profiting from—and stoking the fires of—the hysteria. He goes on, “what Greece really needs now is a holiday from further market confusion being created by contradictory, alarmist public commentary”. Greece, Euroland in general, and the rest of the world all need a holiday from the manipulation and destruction of our economies by Wall Street firms that profit from speculative bubbles, from burying firms, households, and governments under mountains and debt, and even from the crises that they create. Governments all over the globe should use all legal means at their disposal to ferret out the bad faith and even fraudulent deals that global financial behemoths are foisting on us.

Marshall Auerback is a market analyst and commentator. He is a brainstruster for the Franklin and Eleanor Roosevelt Intitute. He can be reached at MAuer1959@aol.com

L. Randall Wray, a professor of economics at the University of Missouri at Kansas City (UMKC).

The End of the Goldman Sachs Glaze

by Zachary Adam Cohen on February 26, 2010

Where I’m from, which, incidentally, is still where I am and always hope to be, working for Goldman Sachs was the pinnacle of achievement and success.  I went to the best private schools, I was given every opportunity; tutors, music lessons, access to high culture in the form of theater and museums. My college education was paid for. I came into adult life without any obligations or debts. I was bred to be either a lawyer or a banker. And coming out of college just after the turn of the millennium, Goldman Sachs was where everyone wanted to be.

How Far The Mighty Have Fallen

I am going to say this loud and clearly. If I worked for Goldman Sachs today, I resign as soon as I possibly could. This is starting to make me sick to my stomach:

As far back as 2000 and 2001, Goldman helped Athens quietly borrow billions to mask its poor finances by creating derivatives that essentially transformed loans into currency trades that Greece did not have to disclose under European rules.

They make money helping a sovereign country hide its debt. And then…

Mr. Bernanke said the Securities and Exchange Commission was also concerned about how derivatives — financial instruments that are largely unregulated and do not trade on public exchanges — have contributed to Greece’s problems. “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive,” he said.

Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of the Senate Banking Committee, also took aim at credit-default swaps, which allow banks and hedge funds to wager on whether a company or country might default.
Critics say the swaps have contributed to Greece’s problems and increased the odds of a financial collapse.
“We have a situation in which major financial institutions are amplifying a public crisis for private gain,” he said.

“Amplifying a public crisis for private gain.” What was done was technically legal. And I don’t care. It is still clearly wrong, and that is precisely what is so decrepit about our society right now. Just because you can do something, does not mean you should.
Although that is not how I was raised. I was raised to “get mine.” Not by my parents, or my teachers, or tutors or professors. Nah, they were all good people. Moral, honest, authentic. It was my culture. It was the culture around me that said it was OK, in fact, that it was advisable, to seek out my own private gain at all costs. No thought should be paid to the effects of my private gain. No thought given to what society gained or, more likely, lost by my singular attention on my own situation.

Next Steps For Goldman Sachs

Prosecution is probably the most appropriate action that could be taken, but since there is no justice in this world, or if there is, its probably being directed by former Goldman employees, I’m not holding my breath. So what are the next steps for Goldman?
Lloyd Blankfein, Goldman’s Chief, should immediately hold a very public press conference and apologize. But what would he be apologizing for?

1. For profiting on both ends of a very fucked up trade whereby Goldman made money helping Greece hide its debt obligations so that it could gain entry into the Eurozone, and then, when Greece was weakened, deploying sophisticated derivatives to bet on Greece’s default. Blankfein should simply say, “We got this wrong, and although nothing illegal occurred, it still wasn’t right and we are immediately going to refund our profits from these activities and donate our time and advice to the Greek government, to help them find a way out of this.”
2. Blankfein should then go on and apologize for the larger problem of which Goldman is a very big part. That problem is the short-term lunacy of Wall Street’s demands, of minimizing long term financial, environmental and cultural sustainability to the demands of quarterly earnings. He should apologize for putting Goldman’s profits above societies well-being.
3. He should announce a commission made up of internal and external independent experts to examine Goldman’s actions, philosophies and culture over the past decade. That commission should be given the power to make sweeping changes to Goldman’s operating ethos. Futhermore, he should announce that 6 months from today, the results of that commission will be made public and that he will be present at another press conference to take questions from the press, for as long as they wish to ask them.
4. Blankfein has an opportunity to show real leadership. As the head of the most prominent investment bank, and a private citizen, he can show, by example, that changing the culture of greed, of “getting mine,” is no longer functioning, and that furthermore, it is clearly and without a doubt hurting the whole of society. Our political class is not capable of this kind of leadership. Republican and Democrat alike. But private citizens can show true leadership, and in times like these, can have even more of an effect than even our elected officials.
5. Blankfein should immediately announce pay caps. I don’t care how hard you work, or the risks involved in what you do; no one should make more than $10 million a year. He should put these caps in place for 10 years, and mandate there will be no workarounds, no hiding of actual payments. He should urge every other bank and financial institution to follow his lead. He should openly dare people to quit. “If you think that $10 million is too little, then we don’t want you here.” Let them leave. The people who do, and there will certainly be a handful, are NOT the people that Goldman wants. I don’t know who would want them, but remind me not to invest my money with them, mmkay?

Look, I had a short, barely noticeable career in finance. I wasn’t that good. I have many friends at Goldman Sachs and sprinkled all over the “Street.” I love and care for many of these people. It is true I am growing apart from them, a natural consequence of a new line of work, a new, less conventional lifestyle; in general I am becoming interested in things that no longer interest many of my friends. I try hard not to treat my friends in finance so badly. But I am finding it tougher and tougher to explain away why so many smart and talented people would sacrifice their lives for the illusions of security and financial well-being. I wish I could reach out their future selves and just tell them it’s not worth it.
The entire financial services industry has lost its moorings. It’s lost its fucking mind, and it needs drastic and immediate shock therapy knock it back into place. And there is a place for financial services in the 21st Century. But it is going to have to do some serious self-examination and self-correction. Because if it doesn’t, a whole lot of people are going to find themselves in jail. And whether its a jail with cells or a prison of the mind, an emptiness of the soul, doesn’t really make a difference. The fact is they’ll be imprisoned.

Markopolos's book excerpt

The SEC proved equally inept when it came to Markopolos's other cases. He claims he gave the agency 20 cases of market timing, which proved that various companies had stolen billions of dollars from investors. The SEC, Markopolos says, turned down all of them. One of his examples included a huge mutual fund that had monthly turnover percentages in its international equity funds of 1,100 to 1,300 percent range per month.
Markopolos is withering in his dismissal of just about every SEC employee whom he approached, including New York Branch Chief Meghan Cheung -- "the strongest impression that I got from her was that I was bothering her" -- and Assistant Director Doria Bachenheimer. The notable exception was Ed Manion in the SEC's Boston office who "was more determined to expose Bernie Madoff's scheme than I was," but was stymied by jurisdictional issues.
When he first brought his concerns -- and a voluminous file -- to the SEC in 2000, Grant Ward, the agency's New England regional director of enforcement, was woefully unprepared to handle the assignment, writes Markopolos. "As I explained this massive fraud to Ward, it very quickly became clear he didn't understand a single word I said after hello... if blank looks were dollar bills, I would have walked out of that room a rich man. He was coldly polite, but he didn't ask a single probing question. I never knew if that represented a lack of interest, a lack of comprehension, or simply a desire to go to lunch."
Even his buddy, Manion, was devastated with Ward's non-response. When Markopolos asked him if he thought Ward got it, Manion replied: "Not one single word of it."
For years, Marokopolos took extra precautions, out of concern for the safety of his family. He says he lived under a death sentence, terrified that his pursuit of Madoff was putting his family in jeopardy since billions of dollars were at stake, "and apparently some of that money belonged to the Russian mafia and the drug cartels - people who would kill to protect their investments... So I wouldn't start my car without first checking under the chassis and in the wheel wells. At night I walked away from shadows and I slept with a loaded gun nearby..."
He started carrying an lightweight Model 642 Smith and Wesson everywhere he went and asked the local police department in his small town of Whitman, Massachusetts for 24/7 protection.
In addition, his wife got her handgun license, he upgraded the alarm system around his house and imagined the ways that Madoff's hit men would kill him: "if Madoff wanted to kill me he was going to use professionals, and that meant a double-tap with two bullets to the back of my head."
Media Failure: Didn't Anyone Want a Pulitzer?
And Makropolos slams the media, expressing his incredulity at their lack of initiative. In early March of 2002, Markopolos claims he sent a copy of his SEC submission on Madoff to a senior reporter at Forbes but it was ignored. "The lack of serious interest was astonishing. I think the editors at Forbes, like so many others we were to encounter, were victims of their own hubris... In fact, I suspect that the only way he would have taken it less seriously was if it had been written in crayon. He was just too smart to recognize the truth."
Two reporters who did stories on Madoff were MARHedge reporter Mike Ocrant, who become an integral part of Makropolos's team and Barron's reporter Erin Arvedlund, who followed up on Ocrant's original story. But Markopolos was frustrated that both stories failed to make a ripple, especially at the SEC. And he attributes the agency's deafening silence to the fact that they never read the stories because they don't have a publication budget, "meaning staff members have to pay out of their own pockets for any industry material," including even the Wall Street Journal.
The Most Tragic of Ironies
The most poignant part of the book involves Markopolos's tragic failure to prevent French money manager Thierry de la Villehuchet from losing billions to Madoff -- and then committing suicide weeks after Madoff's arrest. In the bitterest of ironies, Markopolos first learned about Madoff in 2000 from de la Villehuchet, spurring Markopolos's decade-long obsession.
When the Frenchman bragged about how his funds were handled by Madoff, who guaranteed him an amazing one to two-percent monthly return, that raised eyebrows and Markopolos and his associates began to dig into Madoff.
Within minutes of scanning Madoff's numbers, Markopolos says he knew he was a fraud, telling one of his associates, "There's no way this is real. This is bogus". The more he looked, the more problems began emerging as "clearly as a red wagon in a field of snow... and that's when we began chasing Bernie Madoff," writes Markopolos, who has a fondness for colorful metaphors.
Markopolos and his associates repeatedly warned de la Villehuchet over the next eight years to no avail. At one point, when they warned him and questioned his faith in Madoff, de la Villehuchet said, "If I'm wrong... Then I'm a dead man," explaining that he had invested billions from Europe's wealthiest families in Madoff.
Markopolos says he wept on and off for three days when he learned that de la Villehuchet had slit his wrists with a boxcutter:
"And truthfully, I've never stopped wondering if I could have saved his life."

Brooksley Born, Brooksley Born, Brooksley Born

Greenspan humiliated and bullied Brooksley Born of the Commodity Futures Trading Commission under Clinton when she accurately predicted that credit default swaps were going to crash the market. Had Greenspan had the capacity to listen, the coming market disaster might have been averted. I'm not saying that other economists didn't do their bit to bring us all down, but Greenspan was out in front, arrogantly confidant in his own judgment until it all came crashing down.

Market watch

By David Weidner, MarketWatch

NEW YORK (MarketWatch) -- I had to look it up to be certain, but once I did, everything regarding Goldman Sachs Group Inc.'s public relations strategy became crystal clear.

The word was chimera, and it means a couple of things: it can refer to a mutant organism or substance. In this case, it probably referred to its second definition: a fanciful mental illusion or fabrication. Chimera is derived from Greek mythology. A Chimera is a fire-breathing monster usually represented by a winged lion, goat and serpent.You see where I'm going with this, right?
Goldman's public relations chief, Lucas van Praag, used the word to describe recent press coverage of his firm which lately has been criticized for bonuses and its hardball negotiating tactics with American International Group Inc. and bonuses. And though the quote pre-dates the coverage, the bank's role in masking debt in Greece.
Some of this criticism is "chimera produced by a febrile mind," van Praag said.
OK, I had to look that one up too. It means fevered and delusional.
This is classic van Praag: the $20 words, the haughty condescension, the arrogant dismissals. The message is you're emotional and don't have your facts straight. We're reasoned and objective about our own matters. You, dear media critics, don't know what you're talking about.
"There is speculation and then there is stupidity," van Praag told the Wall Street Journal. See post in WSJ's Deal Journal.
In recent days van Praag has gone from company mouthpiece to the story. He was ripped apart in a New York Observer piece by Max Abelson. He was ridiculed in the blogosphere. New York Magazine compiled his most stinging quotes. See New York Observer profile of van Praag.See New York Magazine's compilation of van Praagiciticisms.
One could argue van Praag bungled his job so badly that Goldman has had to retain the outside PR firm Public Strategies to rehabilitate its image, a development reported Sunday by the New York Post. Goldman disputes the timing, saying Public Strategies has been working with the firm for close to eight years. See NY Post story.
The point of these attacks seems to be that van Praag is doing Goldman a disservice. His snobbish retorts and rebuttals, once appropriate for a firm viewed as the cream of Wall Street investment banks, sounds harsh when so many have lost so much due the financial crisis from which Goldman seemed to profit.

A 'no-win position'

It would be easy to say van Praag and Lloyd Blankfein, Goldman's chief executive, are Wall Street's Marie Antoinettes, but the reality is far worse. They've been compared to Emperor Palpatine and Darth Vader and, in deference to the younger set, Lord Voldemort and Severus Snape.

To me, the better analogy for van Praag is his own. He has been cast as Goldman's Chimera, at least in the classic sense. He is at times a serpent, a goat and the firm's lion depending on the audience.
It's a critical mistake to assume that van Praag, or any corporate spokesman, is speaking to us, whether "we" are the media or readers and viewers. His audience, as noted by the blogger, Epicurean Dealmaker, is the public, but not first. That distinction goes to Goldman's employees, the traders and investment bankers whose loyalty has played a large part in the success of the firm. See blog post on van Praag.
"I'm sure there's a lot of pressure internally to fight back," said Steve Frankel, a partner specializing in financial services communication at Joele Frank, Brimmer Wilkinson Katcher. "Investment bankers read every word of every story that's written about the firm.
"The (Goldman) PR strategy is to answer every criticism aggressively and in this situation and others, sometimes that approach makes it a bigger story."
Some PR pros believe van Praag has, on occasion, been too aggressive and should have "dialed it back" but even critics refer to him as among" the best in the business."
That is to say on that front that matters most, van Praag has held the line with panache. He's made the arguments of Goldman's traders and bankers very well.
It's a trade-off and maybe not a bad one. Public criticism is going to be there whether van Praag issues a firm-wide mea culpa or not. What may not survive is the morale of the firm. If van Praag is seen admitting mistakes, how does that play in house? Given what we know about most Wall Street firms, the answer is not well.
"During crisis, many corporate communications executives are in a 'no-win' position. Van Praag may be one of them," said Alan Towers, a corporate reputation consultant and head of TowersGroup Inc. "Reputation is built or broken by corporate culture, not communications. Even the top PR person usually has limited influence over culture, but is 'responsible' for reputation. I've seen these executives commit career suicide by pushing a defiant message management forces on them, then get fired when the company caves and needs a scapegoat."
To take it a step further, van Praag seems to be betting that a firm built on loyalty will stay loyal to him. Probably a good bet at Goldman.
This isn't to say the last few weeks have been a weekend at the Amalfi Coast. A person close to van Praag said the personal attacks have bothered him and he's been surprised at the intensity of the criticism not only against him, but directed at the firm.
There is, however, no surprise at the criticism itself. Goldman is, in many ways, the last bank standing on Wall Street. In part, Goldman is singled out because it doesn't have a commercial bank component such as J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 40.19, -0.66, -1.62%) or a retail brokerage arm such as Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 27.43, -0.28, -1.01%) . It's also much more opaque and successful; at least that's the view internally.
Van Praag's emergence as the face of the serpent doesn't necessarily mean he's in trouble or that he's doing a bad job. Goldman is responsible for the actions of Goldman. Van Praag is responsible for explaining why.
He's doing it with a lot of vituperation, hurling gasconade upon foofaraw -- which is exactly why they hired the beast to begin with.
 

Billionair bailout society

If the link between economic growth and job creation really is broken, then capitalism as we've known it for the past seventy years may be dead and gone (or, at the very least, transformed into something very different.)
Our entire conception of American capitalism has been based on its ability to produce an ever rising standard of living for most of our people, especially the middle class. That was the fundamental project of our government after the Great Depression and during the Cold War, and it was remarkably successful for more than four decades. Working people became middle class citizens, and they were the envy of the world.
But by the late 1970s, policy makers and economists argued that New Deal/Great Society government programs were stifling the economy. They called for market "liberalization" (meaning the privatization of public services and the reduction of financial regulations and oversight). Steep progressive income taxes on the super-rich supposedly were discouraging investment. Strict financial controls were supposedly holding back "financial innovation." So step by step we dismantled progressive taxation and financial controls to set in motion a new kind of economy based on neo-liberalism - the deregulation of as many markets as possible.
The new régime was remarkably successful in some respects. Investment boomed, especially into financial assets. The process also shifted enormous wealth to the top fraction of the population. But, middle class incomes stalled as Wall Street became the dominant sector of our economy.
The statistics are harsh: Since the mid-1970s the average real wage of non-supervisory production worker has actually declined by 18 percent, while the top earners saw enormous gains. The net result is this: the compensation of the top 100 CEOs compared to the average workers was 45 to 1 in 1970. By 2008 it was 1,081 to one. In 1960, the financial sector accounted for 15 percent of all corporate profits. By 2008 it was 35 percent.
Along the way Wall Street found new ways to mint money without fulfilling its primary mission: providing capital and credit for investment in the real economy. They could do far better creating, selling and trading new financial instruments that supposedly removed risk from risky loans. (This activity turned out to be the most profitable enterprise in the history of Wall Street.) In the new America, the smart money built hybrid financial instruments, not hybrid cars.
Unfortunately, the risk wasn't gone--it was growing ever larger inside the sub-prime derivatives bubble. The economy crashed and we were (and are still) stuck with trillions of dollars of toxic assets.
Just at this critical point, capitalism may have suffered its fatal injury. The financial crash should have dramatically reduced the wealth and incomes of those who gambled and lost on Wall Street. As in the 1930s the distribution of income should have become much more compressed. The pain and suffering should have been shared more equally. Instead, the biggest banks were bailed out, while millions of Americans were thrown out of their jobs and homes. Worse still, the very bankers who caused the crisis took advantage of $12 trillion (not billion, and not just TARP) of taxpayer support to generate record profits and bonuses.
Is it still capitalism when bankers can "earn" a record $150 billion in bonuses during the worst financial year since the Great Depression, even though they caused the crash in the first place?
Is it still capitalism when the major sector of your economy goes on taxpayer welfare and suffers no consequences?
Is it still capitalism when bailed-out banks can use taxpayer money to lobby against new financial regulations?Capitalism is wrong word for what we have become. It confers far too much dignity. It lets bankers who profit from taxpayer welfare hide behind words like freedom, entrepreneurship, innovation and opportunity. But that's a sham. Let's nail this new stage with a more accurate and more pejorative descriptor. It's not capitalism. It's a billionaire bailout society that comes with the following features:

• The income and wealth distribution is extreme and increasingly so.
• The financial sector is the dominant sector with institutions that are far too big and interconnected to fail.
• The financial sector "earns" money without loaning money to the real economy.
• High unemployment is chronic.
• The middle class is under increasing stress.
• The public infrastructure is decaying due to the lack of progressive taxation.
• The political process is gridlocked making financial reform nearly impossible
• And an anti-government, anti-tax populism emerges that further cripples the government's ability to contain Wall Street.

It's not a pretty picture. But if we don't see it and name it, we can't change it.
But how?
The new billionaire bailout society has two critical weaknesses. First of all it has no real interest in producing enough jobs for all who need and want them. The latest Economic Report of the President predicts that unemployment will hover near 10 percent for the rest of this year which means that the real jobless rate will be more than 17 percent. And it will stay extremely high for years to come. It is doubtful that we'll see full employment (5 percent and below) before the end of the decade. But at some point, high chronic unemployment could translate into mass grass-roots pressure for significant reforms. This creates the political space for a progressive populists surge, not just the Tea party.
Second, the billionaire bailout society is financially unstable. We've fixed precisely nothing since the crash. Too-big-to-fail financial firms have grown even bigger. (In fact the government has given 19 of them special status as too big to fail.) Breaking them up is not on the Congressional agenda. New regulations are likely to be weak if they are issued at all. That means the financial casino is up and running again, fueled by excessive wealth in the hands of the few.
But we have learned at least one very painful lesson: The free market doesn't work on Wall Street. It can't police itself. Even Alan Greenspan admits to that. Since it's lacks the constraints we need, it's going to crash again and probably before the end of this decade.
What needs to be done?
Jobs must come first, second and third. Prolonged unemployment just isn't acceptable, especially while doling out trillions of dollars to Wall Street. If Keynesian stimulus efforts are unable to induce the private sector to hire millions of new workers, then it's imperative to create millions of public sector jobs to rebuild our decaying infrastructure, weatherize our homes and businesses, and to educate our children. Our people have to work. And these kinds of investments also would make a long-term positive contribution to our society.
Worried about the deficit? Then to pay for these jobs and stimulus programs, we should reinstitute steep progressive taxes on the uber-rich. Also we should place a high windfall tax on Wall Street bonuses for as long as the taxpayers are providing subsidies for the financial sector. More important still is a Tobin tax on speculative financial transactions. That would both generate needed funds while simultaneously tamping down on the kind of economically harmful financial gambling that got us into all this trouble in the first place. Most Americans might find such reforms reasonable and fair.
As for Wall Street, Glass-Steagall needs to make a comeback. The largest banks and investment houses also should be broken up into much smaller pieces. They have to be small enough to fail without taking the rest of us with them.
Frankly, I actually had believed that one or two of these major reforms would have passed by now, given the vast financial carnage caused by Wall Street's crash and the massive bailouts that ensued. The banks were desperate. They had no choice but to accept any and all reforms as we doled out their welfare checks. But we asked for nothing in return. Nada. They got the money. They got their record profits and bonuses. And we got the billionaire bailout society.

Clearly I had greatly overestimated the Administration's resolve, and I had underestimated Wall Street's chutzpah. Unfortunately, the upcoming crash might soon give us another chance. Let's hope I'm wrong about that too.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.

It doesn’t matter what regulations are put in place on Wall Street if the captains of our economy are devoid of ethics.
Especially after the gift we gave the big banks in the bailout, further enabling their bad behavior by promising them they’re Too Big to Fail.
Instead of liquidating broke banks and prosecuting insolvent institutions that took us down with them in a giant Ponzi scheme, we bailed them out and underwrote a fresh start that could well lead us back to another calamitous global economic crash.
Thanks to our validation, no lessons were learned and they clearly still don’t get it, as evidenced by the profit and bonus numbers posted by skimming off their own rescue money.
Investment banks such as Goldman Sachs figured out how to make money coming and going.
They sold worthless, bundled securities to unsuspecting pension funds and insurance companies, then actually hedged their bets that many of those same securities would go bust and short-sold the same investments they promoted to others.
It certainly still looked like a Roman orgy at Goldman Sachs, which set aside $16.2 billion for salaries and bonuses – enough for each employee to take home $498,246 at a time the country is broke and almost 15 million Americans are without work.
In fact, the nation’s six biggest banks, gorging themselves as Americans go hungry, set aside $140 billion for executive compensation – pretty comparable to the $164 billion haul they awarded themselves in 2007, before they had to come to taxpayers with their tin cups out.
Goldman Sachs CEO Lloyd Blankfein pocketed only $9 million and we’re supposed to be grateful for this humble act of contrition?
Goldman reported $13.4 billion in profits.
Doesn’t anyone wonder how they got that far back from bailout city in one year in a tough economy?
There’s lots of evidence that they’re back to playing speculative long shots and financial chicken with the same toxic assets, only this time with the full financial support of the federal government.
Big banks took the money borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent.
They took huge sums from the government, sat on it until the government started printing trillions of dollars in a desperate attempt to restart the economy and bought even more toxic assets to sell back to the government at inflated prices and making a killing undoing the mess they made.
In the process, they’re rapidly recreating conditions for another crash, except this time the U.S. government’s cash is depleted.

Our government is not "broken" it is corrupt

No wonder people have lost faith in politicians, parties and in our leadership. The power of money drives cynicism deep into the heart of every level of government. Everything, and everyone, comes with a price tag attached: from a seat at the table in the White House to a seat in Congress, to the fate of health care reform, our environment, and efforts to restrain Wall Street's greed and prevent another financial catastrophe.

Our government is not broken; it's been bought out from under us, and on the right and the left and smack across the vast middle, more and more Americans doubt representative democracy can survive the corruption of money.

Last month, the Supreme Court carried cynicism to new heights with its decision in the Citizens United case. Spun from a legal dispute over the airing on a pay-per-view channel of a right-wing documentary attacking Hillary Clinton during the 2008 presidential primaries, the decision could have been made very narrowly. Instead, the conservative majority of five judges issued a sweeping opinion that greatly expands corporate power over our politics.
Never mind that in at least two separate polls an overwhelming majority of Americans from both political parties say they want no part of the Court's decision; they want even more limits on the power of money in elections. But candidates and their campaign consultants are gearing up to exploit the court's gift in the fall elections.

Just this week, that indispensable journalistic website Talking Points Memo reported that K&L Gates, an influential Washington lobbying firm, is alerting corporate clients on how to use trade associations like the Chamber of Commerce as pass-throughs to dump unlimited amounts of cash directly into elections. They can advocate or oppose a candidate right up to Election Day, while keeping a low profile to prevent "public scrutiny" and bad press coverage. And media outlets already are licking their chops at the prospect of all that extra money to be spent buying airtime -- as much as an additional $300 million dollars. That's not even counting production and post-production costs of campaign ads, which are considerable. A bad situation just got worse.
If you want to know just how much worse, look to the decision's potential impact on our court system, where integrity, independence and fair play count the most when it comes to preserving faith in our system. It's as susceptible to the lure of corporate wealth as the executive and legislative branches are.
Ninety-eight percent of all the lawsuits in this country take place in the state courts. In 39 states, judges have to run for election -- that's more than 80 percent of the state judges in America.
The Citizens United decision makes those judges who are elected even more susceptible to the corrupting influence of cash, for many of their decisions in civil cases directly affect corporate America, and a significant amount of the money judges raise for their campaigns comes from lobbyists and lawyers.
In the words of Charles W. Hall, a spokesman for the non-partisan, judicial watchdog group Justice at Stake, "Corporate bottom lines are not affected by whether a bank robber gets 10 or 20 years in prison. The bottom lines are affected however by whether a large scale lawsuit is upheld or overturned."
During the 1990s, candidates for high court judgeships in states around the country and the parties that supported them raised $85 million dollars for their campaigns. Since the year 2000, the numbers have more than doubled to over $200 million.
The nine justices currently serving on the Texas Supreme Court have raised nearly $12 million in campaign contributions. The race for a seat on the Pennsylvania Supreme Court last year was the most expensive judicial race in the country, with more than four and a half million dollars spent by the Democrats and Republicans. Now, with the Supreme Court's Citizens United decision, corporate money's muscle just got a big hypodermic full of steroids.
As Supreme Court Justice John Paul Stevens wrote in his 90-page Citizens United dissent, "At a time when concerns about the conduct of judicial elections have reached a fever pitch... the Court today unleashes the floodgates of corporate and union general treasury spending in these races."
States that elect their judges, he said, "after today, may no longer have the ability to place modest limits on corporate electioneering even if they believe such limits to be critical to maintaining the integrity of their judicial systems."
No wonder that legal experts, including former Supreme Court Justice Sandra Day O'Connor (the only living current or former Supreme Court member to have been an elected state court judge), have called for states with judicial elections to switch to a system of merit selection. Judges would be appointed but possibly subject to "retention elections" in which voters can simply vote thumbs up or down as to whether jurists are qualified to remain on the bench.
Until such changes are made, the temptations of corporate cash mean that in those states where judicial elections still prevail there hangs a crooked sign on every courthouse reading, "Justice for Sale."

Lord Blankfein only get 9million $ (PR STUNT)

Image via Wikipedia

GOLDMAN BAILOUTS and FRAUD:

1. CDS portfolio went KABOOM when Lehman, WaMu et al BLEW UP. AIG had no money for it. The TAXPAYING SUCKAS gave Goldman FULL VALUE for their WHOLE PORTFOLIO OF CDOs WITHOUT ANY RESTRAINTS OR CLAWBACKS. Geithner should be in JAIL at best.

2. Goldman WAS SHORTING THE SAME securities it was selling to pension funds KNOWING they were going DOWN. This is FRAUD. We need INDICTMENTS. THOUSANDS OF THEM.

3. Fed has purchased tons of MBS and other derivatives under Maiden Lane. The Fed is overpaying and this amounts to unbacked printing of fiat currency and is a hidden back-door bailout to the tune of $700 billion plus AND COUNTING. Goldman is most likely in there as well but we won't know without an AUDIT of the FED.

4. FNM/FRE bailouts to the tune of HUNDREDS OF BILLIONS OF DOLLARS with the Fed overpaying for all of it - is a backdoor bailout of GOLDMAN since GOLDMAN need not worry about any counterparty risk. They are free to gamble further at TAXPAYER EXPENSE.

5. Commodities speculation nets Goldman uber-profits as they CONTROL THE PRICE OF FOOD AND GAS AND OIL.

6. The Fed is not Fed.

THIS MAN SHOULD BE INDICTED, ARRESTED AND THROWN IN THE FOULEST BRAZILIAN PRISON THERE IS.

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HAHAHAHAHAHAHA!

Toyota vs. Goldman sachs

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Maybe the fix would have been a bit more complex that a postage stamp piece of metal, but just as you had gone over to Japan to express your concern on behalf of the American consumer, had our government leaders went into the offices of Goldman Sachs CEO Lloyd Blankfein and the other banksta CEO mobsters and told them that they were responsible for their own fixing so that the consumer would be safe and protected, otherwise they would have to go into bankruptcy court, and the FDIC would then step in break up the bloated behemoths into smaller pieces as the government protected the consumer’s investments. Then an investigation into possible crimes would then proceed.

This did not happen. Instead, Geithner, Bernanke, and Paulson made fabulous deals with these bankstas protecting their wealth and balance sheets, as well as the opportunities to pay huge bonuses during a time of economic hardship.
Just as millions of consumers were at risk of death and/or injury from the gas pedal defects, more Americans were taken down by the financial banking mobsters, to the tune of tens of trillions of dollars, than by this single car company, and the reverberations worldwide were much more powerful than aftershocks, yet our government reacted with more force and hyper-diligence to protect the consumer from risk of harm caused by a sticky gas pedal than we have seen over what many have coined the Second Depression.

Thanks Ray LaHood for making it clear that Toyota has been more important to consumers than this economic recession. I appreciate it, and feel better already.

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Corporate personhood is bullshit!

Image by SEIU International via Flickr

Corporate personhood exists for the purpose of divorcing men like Lloyd Blankfein from the consequences of their actions. Well, I say enough: the man's metaphorical head must roll and the crime for which he bears executive responsibility must be punished. I don't even care if Goldman-Sachs experiences a corporate makeover in the process, but America cannot afford to reward this kind of behavior with taxpayer dollars.

If politicos want to obstruct reform in the name of fictitious persons set free by an amendment clearly intended solely for recently freed members of homo sapiens, there isn't much we can do. But who will have the guts to talk about corporate personhood this morning in the wake of Obama's statement? And how quickly will mention of the issue become an apologia for the role of corporations in American life today?

Corporate personhood has to end. They aren't people, and if they were people we would lock them up more often than any ethnic or national group. Goldperson-Sachsium is a species only known to legal science. It is definitely not a human, but a kind of animal.

Many animals are useful. Some animals, however, are of no use to the American people and should be treated like any vicious predator: captured, chained, and disposed.

This particular animal is no use to the American people. It's time we chained it.

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Just a thought

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People just prefer to love to hear about self-responsibility, blissfully unaware of walmart making its prices low by getting taxpayer money when not following through with the mantra that hard work gets rewarded (recall my story about my friend who went there, overheard the manager doing the rah rah dance to his employees, openly asked them if the workers would share in the profits, and got kicked out as a result). Amongst other examples of elitism stealing from this country and saying how each of us owes $x0,000 in the national debt. That's bull since when does the government work for the people? No, they work for the elitists. They can pay it back.

Or a better idea: Start anew; everyone's debt freely wiped out and everyone starts new. Every company needing bailing out (despite their taking taxpayer subsidy and the rest), every government, and us.

And before anyone says it, profits via ill-gotten means nullify any purported claim to morality or ethics.

DO SOMETHING!

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Another disappointment

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It was another disappointment in a year full of them. What has been missing most of all since the real dimensions of the meltdown became known is a sustained effort to consider our out-of-control financial system as a whole. Both Washington and Wall Street continue to see the financial crisis as a matter of toxic assets, when the entire financial system has become toxic. It is a system of overlarge and untouchable Wall Street institutions that deal in opaque products with government regulators who remain miles behind. The persistence of Wall Street as the whip hand in the global economy has begun to generate doubts about capitalism itself. The remedies being prepared by the Obama administration and the Congress amount to antidotes to the lingering poison in the system from the real-estate bubble; they do little to address the fact that the system is already generating a flood of new poison infecting the whole economy. As commissioner Brooksley Born pointed out during one of the few productive exchanges at the hearing, the four bankers' firms represent about $230 trillion worth of trade in over-the-counter derivatives, much of which is still going unmonitored (prompting another warning recently from Commodity Futures Trade Commission chairman Gary Gensler, who said in a speech that without new rules, the operation of the derivatives market will continue to be like "buying an apple from the supermarket when the price of the apple is kept private" or "buying 100 shares of a stock for your 401[k] with no knowledge of where the market prices the stock").

Bankers and regulators alike continue to characterize the disaster of the past two years as a "perfect storm," but as Angelides himself said, the creation of this system was not an act of God, but of people. Which people? Where are they? You can count on one hand the number of top executives on Wall Street and senior officials in Washington who have owned up to even a sliver of responsibility for a system that was a generation in the making.

Oh, sure, everybody is acutely aware that they have to get on the right side of public outrage. That's no doubt part of the reason why President Obama announced a new $90 billion tax levy today on big financial institutions in order to recoup losses from the TARP bailout program. "My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people," Obama said. But this is mostly political theater. Yes, the CEOs admitted that they are addressing Wall Street's executive compensation practices, which were so central to the disaster and to the conversion of the entire real economy into a optioned-up race to drive up stock prices, come what may. Regulators—especially FDIC chair Sheila Bair, who remains ahead of the curve—are demanding new pay incentives that reward a focus on long-term corporate value, and promoting "clawbacks" of bonuses and salary for instruments that do poorly. But there's already an internal battle over Bair's proposal, and the Wall Street lobby is hovering in ominous opposition.

Above all, most of the culprits of the crisis remain in power, while those who warned most presciently about the systemic issues remain on the outside looking in. Perhaps the oddest thing about the commission's opening hearing was that Born—one of the very few heroes of the whole sordid financial mess—was the last of the 10 commissioners to ask her questions. That's the position usually reserved at congressional hearings for the most junior member of the panel. I couldn't get a straight answer from commission staff on why the only person in Washington who really predicted and understood the dangers to come, and who is clearly more qualified to chair the commission than Angelides, a political crony of Nancy Pelosi's, had been so seemingly marginalized. It seemed akin to batting A-Rod ninth in the opening game of the World Series.

A commission spokesman assured me that Born would go first the next day. Further inquiries revealed that Born was not entirely happy about starting things out with the CEOs. A distinguished lawyer who, as chairwoman of the Commodity Futures Trading Commission, warned back in 1998 that derivatives were getting out of control, only to find herself crushed by the Wall Street/Washington juggernaut, Born would have preferred to build a case more carefully. She wanted to question junior witnesses first, including key people at the Wall Street firms, and only then confront the CEOs with detailed questions about their practices, according to two sources familiar with the internal discussions (Born herself would not comment, and the commission spokesman denied there was any dispute). Bringing in the CEOs first as a headline-grabber and asking them gentle opening questions, said one observer, was like "making Richard Nixon the first witness in the Watergate hearings." Born was overruled, just as she had been in 1998, but sadly for the country, she was proved right once again. After the hearing, when JPMorgan chairman Jamie Dimon was asked why the CEOs hadn't been more apologetic, he responded that questioners have to be "very specific" about what they want him and the others to apologize for. They weren't.

Instead, Angelides asked Lloyd Blankfein of Goldman Sachs to volunteer "the two most significant" things "for which you could apologize." The Goldman CEO obligingly suggested that taking excessive leverage was a mistake, but added that this was "typical behavior" that everyone was doing. Blankfein also said he regretted some instances of Goldman's two-faced practice of selling and pitching derivatives to customers that the firm would then bet against. But in the next breath, Blankfein seemed to aggressively defend such practices because Goldman was a "market maker" that had to supply products to both sides of a transaction. Angelides never got his apology and didn't bring it up again. Nor did the commission seem to make a lot of progress in pulling together a deep and detailed narrative of what went wrong, which is what it's supposed to be doing; instead the four CEOs, our gurus of greed, were asked for advice about what America should do in the future.

What is needed is both a full understanding of what went wrong and an overhaul that would put Wall Street back in its proper place, and return it to its rightful role as an efficient supplier of capital to the real economy. When an august figure like former Federal Reserve chairman Paul Volcker declares that he hasn't seen any evidence that 20 years' worth of financial innovation has produced economic growth, we all ought to be worried. Only with a thorough overhaul can we restore the nation's flagging faith in our market system.

It's not happening. Even with all the currently proposed fixes, Wall Street is likely to remain the master of Main Street, determining compensation levels and the time horizons for strategy and growth. The financial industry is fighting every effort to dampen speculative practices, even in the derivatives market linked to basic commodities, which continues to inflate the price of oil, rice, wheat, and corn despite plentiful supplies that normally would drive prices lower. In the past decade, a frenzy of buying and holding by Wall Street—and by its customers, funds advised to keep 10 percent of their investments in commodities—has overwhelmed the physical supply and demand. As a result, in the eight years leading up to the financial crisis, "American consumers and businesses spent $1.5 trillion more on energy than they had to" because of derivatives trading, says Peter Beutel, who puts out a widely read newsletter on the energy market.

Will the Financial Crisis Inquiry Commission ever get down to this level of inquiry? Let's hope that it does. But this is not a very promising start.