Posts Tagged ‘Fraud’
Incapable of Reforming Itself

Jesse nails it:

A credibility trap is when the regulatory, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform or even honestly address the situation without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even relatively honest reformers within the power structure are susceptible to various forms of soft blackmail and coercion.

And so a failed policy and its support system are almost self-sustaining, long after it is seen by the people to have failed. In its failure it becomes counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for those who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

I could not put it better myself. This further explains the move by our governing elite to constrain free speech. A tendency recognized by denizens of the opposite ends of the political spectrum, such as Goebbels and Hayek :

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”
Joseph Goebbels


“Everything which might cause doubt about the wisdom of the government or create discontent will be kept from the people. The basis of unfavorable comparisons with elsewhere, the knowledge of possible alternatives to the course actually taken, information which might suggest failure on the part of the government to live up to its promises or to take advantage of opportunities to improve conditions–all will be suppressed. There is consequently no field where the systematic control of information will not be practiced and uniformity of views not enforced.”
Friedrich A. von Hayek, The Road to Serfdom

It’s little wonder the governing class across the English speaking world are so determined to remove not just the right, but the expectation of free speech. If they get their way, we know where we will end up:

“When any government, or any church for that matter, undertakes to say to its subjects, ‘This you may not read, this you must not see, this you are forbidden to know,’ the end result is tyranny and oppression, no matter how holy the motives. Mighty little force is needed to control a man whose mind has been hoodwinked; contrariwise, no amount of force can control a free man, a man whose mind is free. No, not the rack, not fission bombs, not anything—you can’t conquer a free man; the most you can do is kill him.”
Robert A. Heinlein, If This Goes On, 1940

George Orwell wrote 1984 as a warning, not a how to manual. Something we need to recognize if we are to resist big brother and the thought police’s propaganda.

It’s the kids I feel sorriest for. Governments will lose the ability to maintain their big lie. Much of the governing class will try to resort to tyranny to maintain their relatively privileged position. This process and the overthrow of the big lie will tear core societal assumptions and structures asunder.  It’ll be as traumatic for us as was the ending Communism and the defeat of Nazis for Nazis and communists. Most have no idea what they will lose:

“It is worthy of remark that a belief constantly inculcated during the early years of life, whilst the brain is impressible, appears to acquire almost the nature of an instinct; and the very essence of an instinct is that it is followed independently of reason.” Charles Darwin, The Descent of Man, 1871

Reality always wins.

History Rhymes

Is Bastiat predicting the future, explaining the past or commentating on the present:

When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.”

Of course it’s a bit of a trick question as the answers are not mutually exclusive. There is a constant in history and it is us. Our basic DNA will not have changed much since he wrote that sometime before 1850. Looking around our world is very different, but we are fundamentally the same.

The much longer, incomparably more comfortable and relatively pain free life we lead flows not from within us, but without. It is the effect of the social and physical capital created by our ancestors, elders and even ourselves in our youth. The knowledge, institutions, practices and procedures work hand in glove with our physical infrastructure to sustain our way of life. It is this external fabric we have created that drove past improvements and is the only hope for future gain. That’s why attacks on them are so unforgivable. It is why this site takes such a strong stance against attacks on our cultural capital. Cultural capital being shorthand for all those things that make our way of life what it is.

So it is with a heavy heart that I catalog some of the latest signs of just how rotten our system has become. But it is not with a hopeless heart. For we still have within us and around us knowledge of a better way. We know things can and will be better, if we but make it so. Honesty and integrity are not dirty works.They are a clarion call from our past to us and our future. We will revive. We will survive. We will make a better world.

The only question is how low do we go? Germany repeatedly in the last century dived into the depths.  It exterminated its own people, then moved onto those of its neighbors. Plundering. Ever plundering. No restraint. No morality. No reflection of its cultural past curtailed the excesses of its then progressive present. Then occupied, cleaved into two and absorbed into ideologically opposed camps. Yet a generation or two later and it is again united and a European colossus. Albeit one with a heart of paper.

The German work ethic survived. Its culture is amenable to wealth creation. It creates wealth. We can recreate our cultural pillars. We can overthrow the rogues and advocates of political correctness. We owe it to our elderly and our ancestors as much as to our children and children’s children. They deserve better than the base vile acts being undertaken in the world, sometimes in their name or with the approval of their elected representatives:

MF Global repeatedly misappropriates steals clients money:

What could be alarming is that the conditions that led to the loss of customers’ funds at MF Global have not been corrected, and it could be happening again at some other firm even now. We just may not realize it because the losses have not yet been publicly disclosed.

As in the case of MF Global, the insiders and powerful customers learn about the impending loss first, and take steps to secure their accounts before the collapse and downfall occurs.

Around 75 years since customer money was stolen in tis money. But no one is responsible, it was bad systems, fat fingers. Only in America, or perhaps not.

Then there is  the issue of the Greece not paying and not defaulting:

Greek haircuts:


The International Swaps and Derivatives Association said on Thursday that based on current evidence the Greek bailout would not prompt payments on the credit default swaps.”…

The claim that Greece has not defaulted — despite refusing to make good on their obligations in full or on time — is utterly laughable.

In order to get paid on a default, you need a committee to evaluate whether or not failing to make payments is a — WTF?!? — default? Even more ridiculous, the committee is composed of biased, interested parties with positions in the aforementioned securities?

Zerohedge details the composition of the ISDA in this post and notes:

Keep in mind, as criminal as this appears, and as damaging to the CDS market, the real trigger will be what ISDA does determines following the end of the PSI process. If there is no credit event then either, especially when the CACs are triggered as expected – an event which will certifiably be a trigger event under Section 4.7, then ISDA is truly hell bent on blowing up the CDS market as a hedging vehicle in its entirety.

Perhaps most alarming of all is the purchasing of stocks by central banks. Central banks that are backstopped by the Fed. What have they cooked up between them? Read about it at Jesse’s Cafe Americain. I’m sick of the slime.

Bastiat was right. We are at a low ebb and heading down. What we do now will determine how low we go. Will we wait until Greece is our fate? Or will we rise up sooner, seizing control of our culture, our capital? Spread the word. The sooner people see, the sooner they object, the less dire the circumstances when we can start rebuilding. Western civilization will prevail within its own countries. We will prevail. But will it be your children or your children’s children who are born free? It is their birth-right. It is your birthright.

We outnumber the Kleptocrats.  We live in democracies.  Think about it. We can win this battle, as long as we ensure it involves ballots not bullets.  So go ahead, make my day, make everyone’s day. Make a new day, a new civilization. One which increases our cultural capital, one built on trust and integrity.  One worthy of us.

Killing cultural capital

A casual glance around the net reveals how much of our cultural capital has been destroyed. Trust is integral to our way life and is being undermined in so many ways. Take MF Global for instance, which involves outright theft of customers money. Much has been written on it, but Janet Tavakoli has the best lines:

Too Big To Fail and Too Connected To Jail.

MF Global was the eighth largest bankruptcy in the US, with thousands of customers victimized by theft, and yet one hardly ever hears about it…

I have heard that they will attempt to drag this investigation out until after the national elections in November, but if it comes out before that it will be wrapped up in a “don’t ask don’t tell admit no guilt” settlement….

“Our government…teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”  Louis D. Brandeis

Corzine is a powerful figure in the Democratic funding machine, and JPM is the biggest kid on the Street.

On MF Global don’t forget:

Feds Key In on $325 Million Wire Transfer Made in Last Hours of MF Global: Keep in mind that customers who had requested their money DAYS before the 31st were sent checks instead of the customary wire transfers which they had requested, and those checks were not honored. And I have heard of at least one instance where a customer’s wire tranfer was reversed a day later by the banks, which I had thought was not even possible.

Barry notes problems with the foreclosure settlement:

As I noted oh so many times before, once we bailed out failing banks, there is a strong incentive to protect rather than police them. This deal is a perfect example.

Here’s an excerpt from the column:

“Before the settlement, we learned that nearly every aspect of the robosigned documents was false. None of the details were ever reviewed. The signatures attesting to the review of the documents were fabricated — made by someone other than the person whose name was on the document. Neither person — the supposed signatory to the document nor the hired forger — ever validated the facts of each case. All of the safeguards put in place to make sure foreclosures were done correctly and legally were bypassed. Even the notary stamps were bogus — they were not real, and not signed by a notary to validate that the signer and the signature matched.

How did this happen? Instead of a careful review, people were hired to rubber-stamp hundreds of foreclosure documents an hour. Former burger flippers were paid $8 to $10 an hour to violate the law, file false affidavits and commit perjury. Some of the information was correct, but much of it was wrong — and none of it was verified for court purposes.

We commented at the time that eroding accounting standards was an assault on part of the bedrock of our capitalist system. Barry has posted to similar effect on the FASB action:

In the height of the financial crisis, the Financial Accounting Standards Board were pressured to pass FASB 157 (“Fair-value accounting”)….

Derided as “Mark-to-Make-Believe” it leads to this unfortunate situation: The same models that led to the unfortunate money-losing purchase decision in the first place are now being used to actually value these holdings. regardless of the obvious flaw in the model in the first place.

As these bad buys plummet in price, investors in banks have no insight into the loss potential — they are hidden from view, along with the true financial condition of the company. This sort of accounting f..kery would never be tolerated in a nation where investors mattered more than insiders and bankers. Instead, it rewards the incompetent and allows near insolvent banks to pretend they are solvent, thereby allowing the granting of huge bonuses.

Almost three years later, we see the results of the Accounting Board’s move. The large bailed out banks remain weakened. Like all wounded animals, they are very dangerous. They have institutionalized fraud, made forgery a business expense. ZIRP exists for the primary reason of allowing these banks to rehabilitate their faulty balance sheets. Savers get punished.

The same could have been accomplished much more quickly and cheaply through prepackaged bankruptcies. That would have required an uncorrupted Congress, an honest Accounting board and a willingness to allow capitalism in America. Instead, we had foisted upon us a convoluted form of Socialism for Financiers.

Socialism for financiers is proving to be no better for society than was socialism for everyone else.

The problem is becoming abundantly clear to all:

The foreclosure fraud settlement has shown a breakdown in the ability of regulatory agencies to deal with the aftermath of fraudulent conduct. They simply have no ability to offer a regulatory response that’s commensurate with the behavior. If the behavior does lead to a negotiated settlement, then it comes with unsatisfying “neither admit or deny” statements that judges have continued to question.

It is good that our views are spreading. A few years earlier and we might now be on the way to recovery. As it is much of the developed world is going to have to hit bottom before it can start to get better. A bit like some alcoholics. Not surprising really as the West has been drunk on debt.

The extent of the regulatory capture is mind blowing. Again the blogs tend to be fulfilling the role vacated by the fourth estate:

The OCC doesn’t want anyone digging too deeply into the solvency of the major banks or into the mess they’ve made of the mortgage paperwork system. Well, now there’s evidence that this is exactly what’s going on. The interview with this whistleblower is well worth reading. Put this one in the suspension of belief category:

Supervisors told his entire group that “Wells Fargo had submitted over 10,000 files to Promentory. Only 4 were found to be in question, and upon final review by Wells, no harm was found.” So, 10,000 homeowners submitted their complaints and all 10,000 were deemed to be models of perfection.

It will be interesting to see the final figures on the reviews…if the OCC releases them.

It appears the entire regulatory and political infrastructure of the US has been captured by vested interests. The nation is living off its cultural capital. While there is a lot of ruin in a nation, it is not infinite.

It is time to return to integrity. In fact it is well past the time. The current devouring of all that made us what we are can not continue. The sooner we face up to reality and start laying down more cultural capital the better. Not every nation needs to hit bottom. Anarchy is best avoided. The US, Canada, Australia and NZ may yet avoid it. I fear there are dark days ahead for UK, irrespective of what it now does.