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« WATCH: Obama On Climate Change | Main | You Wanted Proof That Wall Street Owns Washington? »
Tuesday
Jan222013

DEJA BAILOUT: Inside Wall Street's Systemic Hustle

Move over, Goosestep, we've got the Systemic Hustle.

---

By John Titus, creator of the new documentary Bailout.

Goosestepping Towards Dictatorship Under A False Systemic Flag

Over the last five years, every time Wall Street has claimed that one “systemic” event or another would follow the refusal of a demand from bankers, the claim has been exposed later as false. Without exception, the bankers’ “systemic” claims have not only proved baseless, they have proved to be outright lies.

And yet, despite Wall Street’s uninterrupted record of confirmed falsehoods on this score, each subsequent demand by bankers—and each empty threat of a “systemic” event that goes with it—has grown more ridiculous than the last. The trend has proved dangerous in the extreme.

Paulson threatens martial law:

The pattern began with TARP, when Hank Paulson told Congress that martial law (among other events in Paulson’s apocalypse) would descend on American soil, locust-like, unless taxpayers forked over $700 billion in exchange for the banks’ toxic assets. And, as everyone now knows (since pretty much everyone was opposed to TARP), Congress handed over the $700 billion, from U.S. taxpayers, to Paulson, supposedly en route to a window where this unprecedented hangar of cash would be swapped for toxic assets.

Well, it all worked out for the best, right? Not so fast.

It is precisely at this point--right after TARP passed--that Mr. Paulson’s story about an imminent toxic apocalypse comes apart at the seams. You see, as soon as Paulson had the taxpayers’ ransom money in hand, he altogether abandoned the supposedly crucial plan of buying up toxic assets from the banks. In other words, Paulson, by not immediately buying up toxic assets, did the exact thing that he’d told Congress would cause Armageddon.

Rather than taking the emergency measure of removing these toxic assets from balance sheets up and down Wall Street, Paulson just kicked back and let the assets sit there, exactly where they were sitting when he scared the bejeezus out of Congress—as if toxic assets never posed any threat at all.

AMBUSH VIDEO: Henry Paulson Confronted On The Streets Of NYC

Why all the martial law threats, Hankster?

What’s important here isn’t what the banks did with the $700 billion (paid themselves bonuses), it’s that Paulson’s entire threat to America—buy Wall Street’s toxic assets or suffer Armageddon—proved utterly false: the $700 billion didn’t purchase any mortgage-backed securities, and yet the Armageddon that Paulson had promised as a result of that fact never happened.

Strike One.

The bankers’ next systemic threat came two years later in Bloomberg’s lawsuit against the Federal Reserve. Before the banks even dreamed of scaring Congress with a $700 billion tall tale, the Fed had begun a series of lending operations with the banks that aroused the suspicion of Mark Pittman, a Bloomberg reporter.

Pittman filed requests for information relating to the Fed’s loans under the Freedom of Information Act. When the Federal Reserve refused to produce any documents on the grounds that it was legally exempt from the FOIA, Bloomberg filed suit to discover which banks had received $1.5 trillion in loans from the Fed as well as what collateral had been pledged to back the loans.

The district court for the Southern District of Manhattan (Chief Judge Preska) agreed with Pittman and Bloomberg that the Fed was not exempt and ordered the central bank to produce the documents sought by Pittman. The banks appealed the order to the Second Circuit.

The banks’ brief to the Court of Appeals was replete with the systemic events that would supposedly follow if the Fed were to disgorge its lending documentation. This time, the banks’ threats—all based on the mere disclosure of information that was growing stale—included:

  • “severe competitive harm
  • “withdrawal of market sources of funding, acceleration of existing loans” (br. p. 20)
  • “bank runs and failures”

The Second Circuit ordered the Fed to produce the documents anyway, and the Fed complied by divulging the sought-after information—an act that was certain to set off, if the banks’ statements to the court were true, a series of bank runs and other cataclysmic events.

Once again, however, none of the banks’ threats materialized. The only bank runs that year involved Wall Street executives sprinting en masse to deposit their annual bonus checks, which totaled $144 billion for 2010, easily setting a new record.

Strike Two.

The third “systemic collapse” threat on the banks’ behalf was made by the Department of Justice in late 2012 in connection with HSBC, a major bank from Hong Kong. HSBC was caught, and admitted to, illegally money-laundering operations on behalf of drug dealers and terrorists.

The DOJ said that it would not criminally prosecute HSBC because doing so would destabilize the global financial system.

This claim is false every way you cut it.

It is individually false because HSBC confirmed that most of the people involved in the illegal activities had already left the bank; prosecuting them therefore could not have any impact on the bank itself.

It is institutionally false because leaving the executives responsible for the crimes in charge of a “systemically important” bank is an illogical act of madness.

It is legally false because there is no precedent whatsoever for waiving criminal prosecution on the basis of the admittedly guilty defendants’ wholly speculative and hypothetical arguments. On the contrary, the applicable legal principle is “fiat justitia, ruat caelum”—let justice be done though the heavens fall.

And it is historically false because Armageddon has never arrived despite a slew of collapses by primary dealer banks exactly like HSBC: Countrywide, Bear Stearns, Lehman Brothers, Merrill Lynch and MF Global all collapsed without causing anything like what Lanny Breuer suggests would occur here.

Strike Three.

Now, notice how the alleged trigger for each apocalypse has progressed. First it was not intervening to ply the banks with $700 billion to remove toxic assets from their balance sheets. Next it was abiding by a civil transparency statute. And finally it was enforcing black letter criminal law.

Through their systemic hustle, the bankers have jettisoned market forces, civil law, and now criminal law. Evidently the very pillars of the republic, binding on the rest of us, are merely optional for the bloated banks. Incidentally, that alleged watchdog of democracy, the media, has been altogether unconscious through all of this.

So where is this headed?

As it turns out, we got a flavor of what's in store yesterday from none other than the “bailouter-in-chief” himself, Treasury Secretary Tim Geithner, who claims that simply allowing the democratic process to play out in the (artificial) debt limit debate will:

  • “damage economic growth” and
  • “undermine the rule of law”

That latter admonition would be a cosmic joke were it not for the fact that the rule of law has already been pronounced dead, officially, by the Justice Department itself.

This much is clear, however: the systemic hustle, having grown from a grabbing cash to immunizing crime, shows no signs of constraint by any boundaries. That fact would trouble a constitutional scholar as much as it would embolden a dictator.

Stay tuned for the outcome of that litmus test. You won't be bored.

***

John Titus has practiced law in federal courts for more than 15 years.

 

Watch a Trailer for BAILOUT

 

 

Last week from John Titus:

BAILOUT SUPERSTARS: Obama, Jacob Lew And Citigroup

 

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Reader Comments (11)

This much is clear, however: the systemic hustle, having grown from a grabbing cash to immunizing crime, shows no signs of constraint by any boundaries.

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Great post Cheyenne.

As you know well, providing cover for the systemic hustle at every turn is the mainstream media including the so called financial press, who have bought and promoted the Wall Street party line every step of the way, either through willful malfeasance or sheer unadulterated ignorance.

Without a press that questions authority, but instead stays true to the false left-right division promoted by Fox, MSNBC et al, we are left with talking points from both sides that bear little resemblance to truth.
Jan 15, 2013 at 2:41 PM | Registered CommenterDailyBail
Kanjorski Reveals Paulson's Closed-Door TARP Threats

http://dailybail.com/home/kanjorski-reveals-paulsons-closed-door-tarp-threats.html

A fine example of the Systemic Hustle you describe.
Jan 15, 2013 at 2:44 PM | Registered CommenterDailyBail
At least some in the alternative media are paying attention:

AMBUSH VIDEO: Henry Paulson Confronted On The Streets Of NYC

http://dailybail.com/home/ambush-video-henry-paulson-confronted-on-the-streets-of-nyc.html

Why all the martial law threats, Hankster?
Jan 15, 2013 at 2:46 PM | Registered CommenterDailyBail
The mainstream press does little more than repeat the lines they're fed from on high. The only difference between them is the glossy sugar coating--red or blue? Beneath that, the pre-packaged "news" is exactly the same pile of nonsense. But people gobble that shit up, poisoning themselves in accordance with the parasites' wishes.

Yesterday, btw, George Washington published a similarly-themed piece about the easy slope to dictatorship. He compares the U.S. right now to Germany's slow embrace of the Nazis. The parallels he draws from "They Thought They Were Free," a book by Milton Mayer about how ordinary Germans allowed the Nazi takeover, are unsettling to say the least.

http://www.washingtonsblog.com/2013/01/u-s-government-claims-that-the-situation-is-so-complicated-and-dangerous-that-it-must-act-on-secret-information-just-like-the-nazis.html
Jan 15, 2013 at 3:01 PM | Registered CommenterCheyenne
Went ahead and added those 2 videos to your story, Cheyenne.
Jan 15, 2013 at 3:02 PM | Registered CommenterDailyBail
Ignorance is not the presses problem DB. They know exactly what is going on. There are too few that have the courage to say anything because they have sold themselves as our elected officials have or fear for their jobs and parrot the talking points.
Jan 15, 2013 at 3:06 PM | Unregistered CommenterSKINFLINT
If you want to know the inevitable outcome of this in-your-face institutional thievery by government and corporation (aka, 'hand and glove'), look no further than any Third World nation. There you will find virtually everyone living below the property level, save for a select few, amidst a crumbling infraestructure of decayed bridges and roads, generally lousy schools, and virtually no government services whatsoever. You can't drink the water. Crime is rampant. Even Chinese imports are comically expensive. There is no manufacturing, other than those industries which are foreign-owned and offer no benefit to domestic populations. On the bright side, everyone knows the government is full of crap, so they are generally ignored. Only the most gullible bother to pay taxes- most business is handled off the books. People focus on family, friends, faith, community, and work, in that order. There's a slower pace to life. Most folks are happier and healthier than their peers in more "advanced" nations.

Fifteen years from now, the US will be a former super power whose leadership looted into permanent bankruptcy. I predict we will become known as a wonderful place for flea markets and thrift shops.
Jan 15, 2013 at 4:51 PM | Unregistered Commenterh5mind
@DB

Re: MSM non-coverage of the theft. I would add hopeful ENVY to your short list of malfeasance and ignorance as to why things don't get play vis-a-vis our financial institutions.

Exhibit A: Joe Kernen (who went to my HS) of CNBSucks' Squawk truly loves the multi-millionaire and billionaire crooks parading across their set. Of Raj R, pre jail, Joe stated to a lawyer familiar with the case and its damning tape evidence: "...he (Raj) will walk. He's a billionaire and can hire the best lawyers in NY who are better than Justice." Lawyer: "no Joe...". Joe: "But he's a billionaire!"

Exhibit B: Again, our boy Joe asking just about all (Lee Cooperman, Wilbur Ross, etc.) who repeatedly join Squawk what their net worth is so he can be jealous...Just yesterday: "Michael Dell was a billionaire before he was 30...I'm so jealous..."

Joe is just an example the sycophantic, suck-up wanna-be's populating our MSM. They admire who they cover because they see and covet the stuff these people have...
Jan 16, 2013 at 12:48 PM | Unregistered CommenterJosie
@Cheyenne

Great post. I will always contend that TARP was a $700 billion Treasury distraction from the real bailout-er: The Fed. Only a portion of TARP was disbursed. The Fed's discount window is the banks' dirty little secret. Nearly all Americans have no idea what The Fed does or what the discount window is...What saved the financial institutions and other ancillary beneficiaries (e.g., TALF's WallSt wives club) was the discount window, 0% interest rates and time. Mark Pittman knew this...RIP...

PS-how many remember GSuchs and MStanley are bank holding companies? Are they still borrowing from The Fed at 0%?
Jan 16, 2013 at 1:57 PM | Unregistered CommenterJosie
Josie

Good points about Kernen. As for discount window borrowing, we won't know until we get a Fed audit. I would assume they are all still using it occasionally. All Hail Bernanke's transparency.
Jan 23, 2013 at 2:27 AM | Registered CommenterDailyBail

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