Greeks Call For Referendum On IMF Bailout, Call Austerity "Barbaric Attack" And "Premeditated Crime Against Greek Society"

Just in from ZeroHedge:

Looks like the downloads of "Austerity for Bankrupt Dummies" on all those paradropped Kindles, which Amazon was forced to do after the market did not share its outlook enthusiasm, has had the desired effect: suddenly with everyone understanding what is required, the threats of a revolution (both literal and metaphoric) are hitting a crescendo. As Bloomberg reports: "ADEDY, the Athens-based federation representing the more than 500,000 Greek civil servants who have seen wages cut this year, said the move signaled a new and “barbaric attack,” and called a protest rally for April 27 [yep, another day of strikes and rioting]. Another demonstration has been set by the opposition Syriza party for today in Athens. "This is a premeditated crime against Greek society,” Alexis Tsipras, the head of Syriza said in an e-mailed statement. “The majority of the Greek people are being tossed helplessly in the tempest of insecurity, unemployment and poverty.” He called for a referendum on the decision to seek IMF support." So here we are, and neither Germany nor Greece really wants the bailout So who the hell is benefiting from all this theater? Why, the major banks, of course, and a few politicians who are, and tried and true Chris Dodd fashion, are merely their lackeys for life. We are now convinced that there will be a government overhaul, hopefully peaceful, but most likely violent, in Greece in the next 3 months if the IMF bailout in fact occurs. We wish we could say the same thing about the United States.
From Bloomie:

Papandreou, who announced today he will trigger the rescue is under fire from voters and unions for raising taxes and cutting wages to reduce a budget deficit that is more than four times bigger than European Union rules allow. Greeks fear the EU and IMF package, crafted to stem the country’s soaring borrowing costs, will mean lower pensions and benefits, more wage cuts and produce a deeper recession.

Taxes, Wages

The premier won elections in October promising to raise wages of public workers and step up stimulus spending. Within weeks of coming to power, the new administration discovered they faced a 2009 budget deficit of 12.7 percent of gross domestic product, more than twice the shortfall the defeated New Democracy government had revealed. EU officials revised the deficit further to 13.6 percent of GDP yesterday.

The shortfall derailed Papandreou’s spending plans and forced him to raise taxes and cut wages to try to make good on a pledge to cut the shortfall to 8.7 percent this year. Investors shunned Greek bonds leaving the government struggling to finance its debt. Papandreou’s popularity has declined, particularly among the public workers who suffered the pay cuts and are the traditional base of his socialist party.

And, yes, the same incompetent politicians driving the ship straight into the iceberg, are waxing poetic about the last hours above surface:

Activating the rescue mechanism and turning over economic policy to EU and IMF oversight is “a new Odyssey for Greece,” Papandreou said. “But we know the road to Ithaca and have charted the waters,” he said, referring to the return of mythological hero Ulysses to his island home after a decade.

Confidence in Papandreou’s handling of the economy dropped this month on deepening fears of new austerity measures. The share of people trusting his management of the crisis fell to 47 percent from 55 percent in February, according to a survey of 540 Greeks by Public Issue for Skai radio.

And the political infighting is reaching new highs:

Ninety-one percent of those surveyed said they expect a wave of new fiscal measures from the IMF, around the same proportion as in an April 18 poll for Eleftheros Typos newspaper. The poll showed 51 percent believe the IMF will harm the country, compared with 27 percent who said it would be of benefit.

ADEDY has held four 24-hour national walkouts so far this year. GSEE, the umbrella group representing 2 million private- sector workers will meet next week to decide “how and when” to strike, spokesman Stathis Anestis said.

“Papandreou spoke of a new Odyssey: heaven only knows how long that will be,” Antonis Samaras, the leader of the main opposition party, the center-right New Democracy which was defeated by Papandreou’s socialist Pasok party in October.

Samaras said that while he had taken responsibility for the previous government’s failures in some policies “the borrowing crisis is exclusively the achievement of Pasok.

One thing is certain, at the end of this crisis, getting funding at sub-10% yields will be the absolute least of Greece's worries.
___________________________-

More from Mish:

Greek P.M. Calls Greece a "Sinking Ship", Tip of Iceberg in Bailout Requests; Interactive Map of Debt to GDP; What Countries Hold Most Greek Debt?

Greece just fired the EU's bazooka. Attempts to talk down the crisis in Greece failed spectacularly with Greek Bonds approaching that of Taliban ridden Pakistan.

Please consider Greece Calls for Activation of Financial Rescue

Describing his country’s economy as “a sinking ship,” the Greek prime minister formally requested on Friday an international bailout, testing the solidarity of the European Union as never before.

“We drew up a plan, we took difficult and painful measures,” Prime Minister George A. Papandreou said in a nationally televised address. “But the markets did not respond. The time has come for us to ask our partners in the E.U. to activate the mechanism we formulated together.”

He was referring to an emergency aid package arranged two weeks ago in Brussels. The plan foresees up to €30 billion, or $40 billion, in loans from Greece’s euro-zone partners, and up to €15 billion from the International Monetary Fund.

The activation of the E.U.-I.M.F. rescue plan, Mr. Papandreou said, “will send a strong message to the markets that the E.U. is not playing their game and will not leave its currency at risk.”

“At some stage the euro area will arrive at a fork in the road,” said Gerard Lyons, chief economist at Standard Chartered Bank in London, “as some economies are structurally different to others.”

For Greece, Spain, Italy, Ireland and Portugal [The PIIGS] the financial crisis has highlighted the constraints of euro membership. Unable to devalue their currencies to regain competitiveness, and forced by E.U. fiscal agreements to control spending, they are facing austerity measures just when their economies need extra spending.

Mr. Lyons said the long-term choices for the euro area appeared stark: Either push on toward a political union, handing budgetary power to a central authority, or form a “two-speed” block.

Strong Message To EU

Greek Prime Minister says activation of the E.U.-I.M.F. rescue plan “will send a strong message to the markets that the E.U. is not playing their game and will not leave its currency at risk.”

I say the market is sending a strong message to Greece and the EU that this is the tip of the iceberg when it comes to EU sponsored bailouts.

Debt to GDP Map

13 of 27 EU nations, including France and Germany exceed debt limits set by the European Commission.



See Debt Rising in Europe for a nice set of interactive maps.

What Countries Hold Most Greek Debt?

Inquiring minds are reading Still in a Spin for clues as to what countries hold the most Greek debt.

Our debts, your problem

Yet the alternative to a bail-out—default—is too grisly to contemplate, not least because of the dire consequences for Europe’s banking system. Banks in Greece hold €38.4 billion-worth of the government’s bonds, according to Deutsche Bank. This amounts to almost 8% of their total assets. A big write-down in the value of those bonds would leave the banks crippled. But around 70% of Greek government bonds, €213 billion-worth, are held abroad, mainly elsewhere in Europe.

There are no solid figures on how much of this is held by banks but it is possible to make rough guesses. The Bank for International Settlements (BIS) provides figures for foreign banks’ lending to the Greek government, Greek banks and the private sector combined. Furthermore, according to analysts at the Royal Bank of Scotland, banks bought a bit less than half of the Greek bonds sold between 2005 and 2009. Based on these figures, table 2 contains our estimates of which countries’ banks own Greek public debt.

The “low” figure is calculated using the weight of each country’s total exposure to Greece in the BIS figures. For instance, French banks account for a quarter of all foreign-bank loans to Greece. If we assume that half (ie, €106 billion) of the €213 billion of Greek government bonds owned outside Greece are held by banks, and that French banks have a quarter of that, their share is €27 billion. On the low estimate, euro-zone banks own €62 billion of Greek government bonds.

The true exposure is probably a bit higher, perhaps €70 billion. It is more likely that holdings within the euro area are weighted more towards commercial banks than pension and insurance funds, because banks are able to use Greek government bonds as collateral for cash loans from the European Central Bank (ECB). The “high” estimate assumes public debt accounts for all the foreign banks’ lending to Greek entities in BIS data. This is surely an overstatement, but the exposure of German banks, for instance, is likely to be much closer to our high estimate, €30 billion, than the low one.

Given the pain that a Greek default would inflict on the euro area’s banks, it is perhaps not surprising that the currency club’s governments have rushed to announce firmer details of a bail-out.

One look at the above chart is all you need to see to understand why France has been the most vocal supporter of bailing out Greece. For comparison purposes, US and U.K. banks avoided this mess.

For interest rate and CDS charts of the Greek bond crisis, please see Greece Budget Gap Worse Than Feared; Bonds Approach Pakistan Levels; Greek Bond Crash In Pictures.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

The Nazi Way Out From Weimar and The Great Depression

Maybe Ellen Brown should not offer such brilliant ideas (really, they worked). Just imagine a nazi USofA or its gov't with fiat money power. Better the collapse.

THINKING OUTSIDE THE BOX: 

HOW A BANKRUPT GERMANY SOLVED ITS 

INFRASTRUCTURE PROBLEMS

By Ellen Brown, August 9th, 2007

"We were not foolish enough to try to make a currency [backed by] gold of which we had none, but for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced. . . .we laugh at the time our national financiers held the view that the value of a currency is regulated by the gold and securities lying in the vaults of a state bank."

- Adolf Hitler, quoted in "Hitler's Monetary System," www.rense.com, citing C. C. Veith, Citadels of
   Chaos (Meador, 1949)

Guernsey wasn't the only government to solve its infrastructure problems by issuing its own money. (See E. Brown, "Waking Up on a Minnesota Bridge," www.webofdebt.com/articles/infrastructure-crisis.php, August 4, 2007.) A more notorious model is found in post-World War I Germany. When Hitler came to power, the country was completely, hopelessly broke. The Treaty of Versailles had imposed crushing reparations payments on the German people, who were expected to reimburse the costs of the war for all participants — costs totaling three times the value of all the property in the country. Speculation in the German mark had caused it to plummet, precipitating one of the worst runaway inflations in modern times. At its peak, a wheelbarrow full of 100 billion-mark banknotes could not buy a loaf of bread. The national treasury was empty, and huge numbers of homes and farms had been lost to the banks and speculators. People were living in hovels and starving. Nothing quite like it had ever happened before - the total destruction of the national currency, wiping out people's savings, their businesses, and the economy generally. Making matters worse, at the end of the decade global depression hit. Germany had no choice but to succumb to debt slavery to international lenders.

Or so it seemed. Hitler and the National Socialists, who came to power in 1933, thwarted the international banking cartel by issuing their own money. In this they took their cue from Abraham Lincoln, who funded the American Civil War with government-issued paper money called "Greenbacks." Hitler began his national credit program by devising a plan of public works. Projects earmarked for funding included flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency.
One billion non-inflationary bills of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. This government-issued money wasn't backed by gold, but it was backed by something of real value. It was essentially a receipt for labor and materials delivered to the government. Hitler said, "for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced." The workers then spent the Certificates on other goods and services, creating more jobs for more people.
Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries, circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Germany's economic experiment, like Lincoln's, was short-lived; but it left some lasting monuments to its success, including the famous Autobahn, the world's first extensive superhighway.¹

Hjalmar Schacht, who was then head of the German central bank, is quoted in a bit of wit that sums up the German version of the "Greenback" miracle. An American banker had commented, "Dr. Schacht, you should come to America. We've lots of money and that's real banking." Schacht replied, "You should come to Berlin. We don't have money. That's real banking."²
Although Hitler has rightfully gone down in infamy in the history books, he was quite popular with the German people, at least for a time. Stephen Zarlenga suggests in The Lost Science of Money that this was because he temporarily rescued Germany from English economic theory — the theory that money must be borrowed against the gold reserves of a private banking cartel rather than issued outright by the government.³ According to Canadian researcher Dr. Henry Makow, this may have been a chief reason Hitler had to be stopped: he had sidestepped the international bankers and created his own money. Makow quotes from the 1938 interrogation of C. G. Rakovsky, one of the founders of Soviet Bolsevism and a Trotsky intimate, who was tried in show trials in the USSR under Stalin. According to Rakovsky, Hitler had actually been funded by the international bankers, through their agent Hjalmar Schacht, in order to control Stalin, who had usurped power from their agent Trotsky. But Hitler had become an even bigger threat than Stalin when he had taken the bold step of printing his own money. Rakovsky said:

[Hitler] took over for himself the privilege of manufacturing money and not only physical moneys, but also financial ones; he took over the untouched machinery of falsification and put it to work for the benefit of the state . . . . Are you capable of imagining what would have come . . . if it had infected a number of other states . . . . If you can, then imagine its counterrevolutionary functions.⁴

Economist Henry C K Liu writes of Germany's remarkable transformation:

The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.⁵

In Billions for the Bankers, Debts for the People (1984), Sheldon Emry commented:

Germany issued debt-free and interest-free money from 1935 and on, accounting for its startling rise from the depression to a world power in 5 years. Germany financed its entire government and war operation from 1935 to 1945 without gold and without debt, and it took the whole Capitalist and Communist world to destroy the German power over Europe and bring Europe back under the heel of the Bankers. Such history of money does not even appear in the textbooks of public (government) schools today.

Another Look at the Weimar Hyperinflation

What does appear in modern textbooks is the disastrous runaway inflation suffered in 1923 by the Weimar Republic (the common name for the republic that governed Germany from 1919 to 1933). The radical devaluation of the German mark is cited as the textbook example of what can go wrong when governments are given the unfettered power to print money. That is what it is cited for; but in the complex world of economics, things are not always as they seem. The Weimar financial crisis began with the impossible reparations payments imposed at the Treaty of Versailles. Schacht, who was currency commissioner for the Republic, complained:

The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . . [T]he Reich could not find any way of holding its head above the water other than by the inflationary expedient of printing bank notes.

That is what he said at first. But Zarlenga writes that Schacht proceeded in his 1967 book The Magic of Money "to let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted wisdom' the financial community has promulgated on the German hyperinflation."⁶ Schacht revealed that it was the privately-owned Reichsbank, not the German government, that was pumping new currency into the economy. Like the U.S. Federal Reserve, the Reichsbank was overseen by appointed government officials but was operated for private gain. What drove the wartime inflation into hyperinflation was speculation by foreign investors, who would sell the mark short, betting on its decreasing value. In the manipulative device known as the short sale, speculators borrow something they don't own, sell it, then "cover" by buying it back at the lower price. Speculation in the German mark was made possible because the Reichsbank made massive amounts of currency available for borrowing, marks that were created with accounting entries on the bank's books and lent at a profitable interest. When the Reichsbank could not keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.⁷
According to Schacht, then, not only did the government not cause the Weimar hyperinflation, but it was the government that got it under control. The Reichsbank was put under strict government regulation, and prompt corrective measures were taken to eliminate foreign speculation, by eliminating easy access to loans of bank-created money. Hitler then got the country back on its feet with his Treasury Certificates issued Greenback-style by the government.

Schacht actually disapproved of this government fiat money, and wound up getting fired as head of the Reichsbank when he refused to issue it (something that may have saved him at the Nuremberg trials). But he acknowledged in his later memoirs that allowing the government to issue the money it needed had not produced the price inflation predicted by classical economic theory. He surmised that this was because factories were sitting idle and people were unemployed. In this he agreed with John Maynard Keynes: when the resources were available to increase productivity, adding new money to the economy did not increase prices; it increased goods and services. Supply and demand increased together, leaving prices unaffected.

___________________

1	Matt Koehl, "The Good Society?", www.rense.com (January 13, 2005); Stephen Zarlenga, The Lost Science of Money(Valatie, New York: American Monetary Institute, 2002), pages 590-600.
2	John Weitz, Hitler's Banker (Great Britain: Warner Books, 1999).
3	S. Zarlenga, op. cit.
4	Henry Makow, "Hitler Did Not Want War," www.savethemales.com (March 21, 2004).
5	Henry C. K. Liu, "Nazism and the German Economic Miracle," Asia Times (May 24, 2005).
6	Stephen Zarlenga, "Germany's 1923 Hyperinflation: A 'Private' Affair," Barnes Review (July-August 1999); David Kidd, "How Money Is Created in Australia," http://dkd.net/davekidd/politics/money.html (2001).
7	S. Zarlenga, "Germany's 1923 Hyperinflation," op. cit.

---

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.

Home | Also by Ellen Brown | Links | Contact Us | Order Now 

Can you hear me, screaming in the distance: "We Are Freaking Doomed!"

I snatched this memorable phrase to The Mogambo Guru to present you a patented technology capable to explain why we are so freaking doomed.

Ladies and Gentlemen, meet the Silent Subliminal Presentation System a.k.a. Silent Sound Spread Spectrum, S-Quad or SQUAD. You don't believe in mind control, don't you? Me too. Unfortunately, is patented from several years.

Look here for more about it.

U.S. Military Suffers Major Defeat In Korengal Valley, Forced To Retreat

View of the Korengal Valley, Afghanistan, from Firebase Phoenix

James Circello for uruknet.info:

The U.S. military has retreated from a base in the remote Korengal Valley, Afghanistan, after spending over four years trying to hold the ground. The U.S. forces even negotiated the terms of their defeat, paying the resistance fighters and leaving them the base fully intact with buildings, fuel, generators and military equipment, in order to be allowed a peaceful retreat out of the valley.

The corporate media and, for the most part, the Pentagon brass have framed the forced retreat from the “Valley of Death” as a “shift” in strategy. This so-called shift has been eye-opening for the soldiers and marines who have lost friends and shed blood in the mountains of Afghanistan, while forced to defend an outpost which U.S. military commanders have argued is “a remote backwater of limited strategic value.”

Despite its “limited strategic value,” a startling 42 U.S. troops have been killed there, hundreds have been wounded, and a disproportionate number of Afghan civilians have perished. One of the last soldiers to die there took his own life, unable to cope with the daily horrors of a hopeless mission.

U.S. troops used as bait
The soldiers stationed in the Korengal Valley had one mission: to act as sitting targets and wait to be attacked on a daily basis. The Afghans in the Korengal Valley were fighting because foreign invaders have occupied their country for nearly a decade. The U.S. military occupied the Korengal Valley to provoke them into a fight. This is the logic of empire.
The harsh reality that we have been used as nothing more than bait cannot be overlooked. The strategy of Korengal Valley—to place soldiers and marines in harm’s way in an attempt to use them as bait to lure the Afghan resistance into battle so that military fighter jets, helicopters and other resources could be called in to target the Afghan fighters and kill them using whatever equipment was available—has been a complete failure. The retreat should serve as a clear signal that our pain and suffering is of no concern to the officers and politicians forcing us to fight…

[continues at uruknet.info]

Really the worst possible career choice

18 veterans kill themselves every day: report

The suicide rate among war veterans is extraordinary, new data reveals.
Thirty try to commit suicide each day, on average, reports the Army Times. Seven percent succeed, while 11 percent are likely to make another attempt in the next nine months.
That adds up to 18 retired soldiers who successfully kill themselves daily -- 6,570 annually -- roughly five a day by service members receiving medical care from Veterans Affairs, rated one of the best health programs in the country.

The Times noted that "In general, VA officials said, women attempt suicide more often, but men are more likely to succeed in the attempt."
The report cites access to health care and age -- younger veterans are less likely to try -- as two major factors in the suicide rate, and notes that the VA is seeking to strengthen its suicide prevention programs.

According to the National Coalition for Homeless Veterans, "Roughly 56 percent of all homeless veterans are African American or Hispanic, despite only accounting for 12.8 percent and 15.4 percent of the U.S. population respectively."

The struggle among veterans to return to everyday life has been documented over the years.
The Associated Press reported in November 2007 that one in four homeless people across the nation is likely to be a veteran, even though veterans constitute a mere 11 percent of overall adults in the United States.
"And homelessness is not just a problem among middle-age and elderly veterans," AP added. "Younger veterans from Iraq and Afghanistan are trickling into shelters and soup kitchens seeking services, treatment or help with finding a job."

Homelessness among women who served in Afghanistan and Iraq is on the rise.
The Boston Globe reported last year that "number of female service members who have become homeless after leaving the military has jumped dramatically in recent years."
One in ten homeless veterans under 45 years of age is a woman, statistics showed in July of 2009.
"Some of the first homeless vets that walked into our office were single moms," Paul Rieckhoff, Iraq and Afghanistan Veterans of America's executive director and founder, told the Globe.
"When people think of homeless vets, they don’t think of a Hispanic mother and her kids. The new generation of veterans is made up of far more women.’"

What should excommunicated pervert priests do after their banishments? How about join a "Catholic" sex cult that requires a woman with yogurt-smeared genitals to copulate with her pastor in front of the whole congregation?

Lately it seems that atheists like me are losing a lot of fun... LOL of the day from Gawker.com:

What should excommunicated pervert priests do after their banishments? How about join a "Catholic" sex cult that requires a woman with yogurt-smeared genitals to copulate with her pastor in front of the whole congregation? Meet the Little Pebble church.

Little Pebble Dohsyuku-kai is a Japanese "commune" that self-identifies as Catholic. They believe one congregant is in the midst of a virgin pregnancy with twins. Consequently, the priest must fuck her on an altar everyday, while everyone watches and prays.

William "The Little Pebble" Kamm, whom Vice describes as a "cultish, quasi-Catholic huckster convicted of sexual assault on a teenage girl," founded the church. After his 2005 imprisonment, estranged follower Father Jean-Marie Thornbush Little John (must... resist... penis joke...) rallied a congregation of five (or seven, if you count the theoretically embryonic twins) in rural Japan. His flock has a shocking website depicting their rituals, which includes Jean-Marie copulating daily with pregnant virgin Clara-Josefa-Menendez Yumi Abe. Vice writer Li Kouji <attended one such ritual:

When prayers were finished, the two plopped themselves down on a futon mattress in front of the altar and Jean-Marie began sucking on Clara's tits for several minutes. Then they started 69-ing. When that was done, Jean-Marie pulled Clara between his legs, spooned some yogurt on her shaved pubis, and began massaging it in with his cock. […] Devotees claim there's no penetration involved, but what followed looked like penetration to us.

Kouji also conducted interviews. Jean-Marie—who started his theological career as a celibate Catholic and member of the Franciscan Society of the Atonement—explained the church's mission:

God gave you orders so that Mr. Little Pebble [Kamm] could be saved from life in prison? What did he instruct you to do?
To have correct sex according to God's method in front of the altar, in front of the Eucharist, and therefore in front of God.

Why do you smear yogurt all over the woman's genitalia during this ritual?
Clara-Josefa-Menendez has always been frigid and non-orgasmic, and because of this her vagina never gets wet. However, as I am a regular clergy who has taken a vow of celibacy and am therefore an unmarried virgin, I wasn't aware that you could buy lubricants to use in such circumstances. That's why I turned to yogurt.

Clara says she is content to have pleasureless sex for the benefit of the masses on a daily basis. It has to do with her father:

I hear that you have correct sex every day. Do you get any pleasure out of it?
Not at all. [laughs] After moving here I learned that I was scarred emotionally as a child and that I have a problem with men in general. When I was young I witnessed how my father fooled around with numerous women, […] I've had sex with men in the past, I've cheated, I've been married twice, and had lots of premarital sex. I had one-night stands without thinking anything of it. But really, I was only doing it for the sake of it, and I never gained any pleasure out of sex.

Does it differ in anyway from normal sex?
It's completely different. I've never had sex out of love. In fact, I'm fundamentally incapable of loving, but I know that Jean-Marie has correct sex because he wants to give love. I never experience sexual pleasure from having correct sex with Jean-Marie, and at times I even feel the same hatred toward him that I feel toward my father.

Clara's friends and family don't approve Little Pebble, but she doesn't mind: "I don't really have acquaintances anymore because I've shut them all out."
Jean-Marie also claims to have ordained the first gay marriage God has ever decided to permit. Here's one of the newlywed's now:

You claim to be the first-ever Catholic gay couple to have married.
Longin: I have personally never heard of a wedding ceremony especially created for gay couples, so in that sense it is definitely a first. Sure, some countries allow same-sex marriages, but I think it's the first time in the history of mankind that God created an alternative form of holy matrimony for a gay couple.

Every Little Pebble utterance is nuttier than the last, all of them couched in the tranquil language of spiritual contentment. Photographer Kanamedia documents the NSFW ceremony with accompanying color images. [Vice, HeraldSun, image via Little Pebble Dohsyuku-kai]

Send an email to Maureen O'Connor, the author of this post, at maureen@gawker.com.  

Fox News hit piece against 9/11 truth and Jesse Ventura backfires

Fox News hit piece against 9/11 truth and Jesse Ventura inadvertently reveals a shocking truth; WTC leaseholder was "on the phone with his insurance carrier to see if they would authorize the controlled demolition of the building"

Paul Joseph Watson - Prison Planet.com
Friday, April 23, 2010

A Fox News hit piece against Jesse Ventura and the 9/11 truth movement written by former Washington D.C. prosecutor Jeffrey Scott Shapiro inadvertently reveals a shocking truth, that World Trade Center leaseholder Larry Silverstein, who collected nearly $500 million dollars in insurance as a result of the collapse of Building 7, a 47-story structure that was not hit by a plane but collapsed within seven seconds on September 11, was on the phone to his insurance carrier attempting to convince them that the building should be brought down via controlled demolition.

http://www.prisonplanet.com/bombshell-silverstein-wanted-to-demolish-building-7-on-911.html

Six Banks Control 60% of Gross National Product - Is the U.S. at the Mercy of an Unstoppable Oligarchy?

Bill Moyers Journal

By Bill Moyers

Six Banks Control 60% of Gross National Product -- Is the U.S. at the Mercy
of an Unstoppable Oligarchy?

Moyers and economists James Kwak and Simon Johnson wonder whether the
financial powers are more profitable, and more resistant to regulation than
ever.

April 23, 2010

The following is a transcript taken from Bill Moyers' recent interview with
Simon Johnson and James Kwak on Bill Moyers Journal.

So even if the Tea Party folks saw the light, what can ordinary Americans
do?

That's the question I want to put to my guests, Simon Johnson and James
Kwak. They have written this new book, 13 Bankers: The Wall St. Takeover and
the Next Financial Meltdown. It's a must read - already a best seller -- and
it couldn't have come at a better time. This book could change the debate
over financial reform by tipping it in favor of the public.

Simon Johnson is a former chief economist at the International Monetary
Fund. He now teaches at MIT's Sloan School of Management and is a Senior
Fellow at the Peterson Institute for International Economics.

James Kwak is studying law at Yale Law School - a career he decided to
pursue after working as a management consultant at McKinsey & Company and
co-founding the successful software company, Guidewire. Together James Kwak
and Simon Johnson run the indispensable economic website
BaselineScenario.com

Welcome to you both.

Let me get to the blunt conclusion you reach in your book. You say that two
years after the devastating financial crisis of '08 our country is still at
the mercy of an oligarchy that is bigger, more profitable, and more
resistant to regulation than ever. Correct?

Simon Johnson: Absolutely correct, Bill. The big banks became stronger as a
result of the bailout. That may seem extraordinary, but it's really true.
They're turning that increased economic clout into more political power. And
they're using that political power to go out and take the same sort of risks
that got us into disaster in September 2008.

Bill Moyers: And your definition of oligarchy is?

Simon Johnson: Oligarchy is just- it's a very simple, straightforward idea
from Aristotle. It's political power based on economic power. And it's the
rise of the banks in economic terms, which we document at length, that it'd
turn into political power. And they then feed that back into more
deregulation, more opportunities to go out and take reckless risks and-- and
capture huge amounts of money.

Bill Moyers: And you say that these this oligarchy consists of six
megabanks. What are the six banks?

James Kwak: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase,
Citigroup, Bank of America, and Wells Fargo.

Bill Moyers: And you write that they control 60 percent of our gross
national product?

James Kwak: They have assets equivalent to 60 percent of our gross national
product. And to put this in perspective, in the mid-1990s, these six banks
or their predecessors, since there have been a lot of mergers, had less than
20 percent. Their assets were less than 20 percent of the gross national
product.

Bill Moyers: And what's the threat from an oligarchy of this size and scale?

Simon Johnson: They can distort the system, Bill. They can change the rules
of the game to favor themselves. And unfortunately, the way it works in
modern finance is when the rules favor you, you go out and you take a lot of
risk. And you blow up from time to time, because it's not your problem. When
it blows up, it's the taxpayer and it's the government that has to sort it
out.

Bill Moyers: So, you're not kidding when you say it's an oligarchy?

James Kwak: Exactly. I think that in particular, we can see how the
oligarchy has actually become more powerful in the last since the financial
crisis. If we look at the way they've behaved in Washington. For example,
they've been spending more than $1 million per day lobbying Congress and
fighting financial reform. I think that's for some time, the financial
sector got its way in Washington through the power of ideology, through the
power of persuasion. And in the last year and a half, we've seen the gloves
come off. They are fighting as hard as they can to stop reform.

Simon Johnson: I know people react a little negatively when you use this
term for the United States. But it means political power derived from
economic power. That's what we're looking at here. It's disproportionate,
it's unfair, it is very unproductive, by the way. Undermines business in
this society. And it's an oligarchy like we see in other countries.

Bill Moyers: And you say they continue to hold the global economy hostage?

James Kwak: Exactly. Because what's happened- what we learned in 2008 were
certain institutions are so big and so interconnected that if they were to
fail, they would cause systemic shocks throughout the economy. That's
essentially what happened in September 2008 when Lehman Brothers collapsed.
And what's remarkable, and I think what essentially proves the point of our
book is that almost two years later, nothing has changed.

Or the only thing that has changed is that these banks have gotten larger,
more powerful, both economically and politically. And they've been flexing
their muscles in Washington for the last year and a half. So Neal Wolin, the
Deputy Treasury Secretary gave a blistering speech to the U.S. Chamber of
Commerce in which he said, look, the financial sector has been spending more
than one million dollars per day lobbying against the reforms we need to fix
the financial system. Now, Simon and I think those reforms that the
Administration has proposed do not go far enough. But we think they're
certainly better than nothing. What Wall Street wants is they want nothing.
They want to stop this in its tracks and go back to where we were five years
ago.

Simon Johnson: It's amazing, Bill. But this is this is politics and this is
money. And you know, there's a ground game, which is campaign contributions,
which are surging in. I'm sure on both sides of the aisle. And there's also
the ideological space. It's amazing. The Chamber of Commerce that claims to
represent the broad cross section of American business is siding with six
big banks, who favor policies that are directly contrary to the interests of
most of the membership of the Chamber of Commerce. And that's just not just
me saying that. That's Neal Wolin. That's Treasury. That's the White House
saying that now. Calling fortunately, they've come to the point where
they're willing to call the Chamber of Commerce on that. But I don't know if
that message is getting through to people.

James Kwak: You see what the bankers have done is they have taken a basic
principle which is more or less true. Which is that free financial markets
do enable money to go to the places where people need it. But on top of
that, they've erected a system that is indescribably complex. And gives many
opportunities to make money at the expense of their customers, at the
expense of their counterparties. Even at the expense of their own employers.
So, one of the things that has happened has been that Wall Street finance
has become so complex and the internal systems of Wall Street banks has
become so complex that if you are a smart banker, who is out to maximize
your own income, you can find the loopholes in the system and you can
exploit them, even if it means taking money from your own-- from your own
company

Bill Moyers: You've been writing this week on your website-- about this
hedge fund in Chicago that's made a lot of money. In effect, betting against
the American Dream. What was that?

James Kwak: Magnetar is a hedge fund which means that other people gave them
money to invest. And their job is to make as much money as possible. And
these were the smart guys in the room. They saw that the system was broken.
And they found a specific way to exploit it. And they knew that they could
go for example, they could go to Wall Street banks and the banks would
collaborate in making these extremely toxic securities. Because they knew
what the bankers incentives were. They knew that the banker's incentives
were to do the deal, to do the transaction, to get the fees up front. And
they knew that there was nobody watching out for the investors. There was
nobody watching out to make sure that securities they manufactured were
actually good securities. But essentially what they were doing is they
wanted to short the housing market. And they shorted the market in such a
way that they actually made the problem worse, because what they did is they
encouraged they tried to create these very toxic securities explicitly so
that they could then short those securities. And that's why in a sense, they
were they were shorting the American Dream. But what the real story of
Magnetar, I think, is that they were exploiting a system that was deeply
broken.

So, we like to think that the financial system we have in Wall Street are
set up so that as people try to make lots of money they are they are
indirectly helping the economy by making sure their capital goes where it's
needed most. What the Magnetar story shows us that this is a casino, where
you can make money you can make money exploiting the weaknesses in the
casino. And it has nothing to do with the American Dream. It has nothing to
do with making sure that capital goes to the places where it's needed most.
I have to say that we owe a great to debt to "ProPublica" and "Planet Money"
and "This American Life" for uncovering this story

Bill Moyers: Public radio's excellent program, "This American Life", did a
terrific broadcast on this subject, based upon the ProPublica investigation
that you talked about. And there's a song in it that I have to play for the
two of you and for my audience. Take a listen.

UNIDENTIFIED MAN: Step one. You write a check for 10 million dollars. Hand
the check to a Wall Street bank, and ask them to make us a CDO. Step two:
they create the CDO, using risky stuff, very risky stuff, extremely risky
stuff. Step three: other investors commit hundreds of millions of dollars to
the CDO. Step four: we bet against the CDO, using a credit default swap.
Step five: the housing market crashes. The CDO's value goes to zero, our bet
pays off and we make hundreds of millions of dollars and before you can say
step six, we're rich! We're going to bet against the American Dream, we're
going to be on the winning team, purchase risky debt on a massive scale.
Then place a bet that the debt will fail. Hundreds of millions for Magnetar,
the economy collapsing like a dying star. No one will know till it's on NPR,
and who cares? It's time to hit the town, this sucker could go down. The
housing market's losing steam. And all we got to do to make our dreams come
true is bet against the American Dream!

Bill Moyers: You're smiling, James, but is it really that funny?

James Kwak: Well for decades, we've been told that Wall Street and financial
innovation were promoting the American Dream. And what they've I think what
the show and the song have really hit the hit the nail on is that in fact,
you can make even more money betting against the American Dream. And that's
the kind of system we have today.

Simon Johnson: My bumper sticker from this and I hope it does become a
bumper sticker is, "Trust me, I'm a banker."

I mean, you need to break through there's a level of progress here, Bill.
Which is when people can laugh about it. When people can break it down into
pieces. When you've got the 60-second version. And you can hammer that. And
people understand it. Then you're starting to fight back. This is about
ideology. This is about belief. This is about these guys are smart. These
guys are well paid. So they must know what they're doing. And that's wrong.

Bill Moyers: You wrote on your website this week about how JPMorgan Chase
lost $880 million on one of these kind of whacky obscure deals? But the
executives still paid themselves millions of dollars in up front fees. And
you conclude that bankers placed a ticking bomb on their own bank balance
sheet. It exploded and personally they still made money.

James Kwak: Exactly. Because this is an example so, this is from the
"ProPublica" investigation of Magnetar. essentially the bankers at JPMorgan
Chase involved in the transaction created a new CDO. A new collateralized
debt obligation. Which was very, very toxic. And either they knew at the
time that it was toxic, or they should have known, I have no way of knowing.
JPMorgan decided to hold onto most of this toxic product they-- they had
built. A billion dollars worth of toxic product. And then when the market
collapsed, it turned out they lost $880 million on that position.

So, if we think about it, there are really two possibilities here. The
bankers involved in the transaction either really thought that this was a
good product and a good investment, in which case they're incompetent. Or
they had- they may have doubts, they may have thought it was toxic, but they
knew that the way the internal systems at JPMorgan Chase worked, they could
get the fees front, they could get bonuses based on those fees, and leave
the bomb for later.

Bill Moyers: Somebody wrote on your blog this week, "If I were to buy an old
house. Make some cosmetic improvements that mask an underlying rot. Got my
insurance company to write an exorbitant homeowners policy exceeding any
leans against the property. Then burned it down, wouldn't that be fraud?"
Did you answer this guy?

James Kwak: I haven't. That would

Bill Moyers: Would you?

James Kwak: That would be fraud.

Bill Moyers: That would be fraud. So, explain to me how you manage to lose
$880 million on your own company's money to make a quick buck for yourself
and you get away with it?

James Kwak: Well, I think that there are laws in this area. So, for any
securities, there has to be-- for this type of security, there has to be a
document which explains those securities. And that's a document that you
give to the investors who might buy them. And there are laws governing
those. And if you put in facts in there that that are materially false. That
you know to be true, that is fraud. But I think the problem is that in many
of these cases, I don't think that many of these people are criminals. I get
a lot of criticism for saying that I don't think these people are criminals.
But I think it's relatively easy to write these documents in such a way that
you're not saying anything you know to be false. And so, they pass through,
they pass through any kind of you avoid any possible criminal liabilities
there. But yet, they can be misleading in a way that encourages people to
buy them.

Simon Johnson: I think it's actually worse in some instance, Bill. Certainly
for offshore activities. Goldman Sachs was involved in hiding a lot of Greek
government debt. They then sold new Greek government obligations to people
in the United States as far as far as we understand it. And didn't reveal
that they'd hidden the levels of the true levels of government debt. Now,
that is withholding material information. That's a violation of rule 10B-5.
and where is the legal process, you should ask, that holds them accountable
for that? I've talked to lots of very good lawyers about this. And there are
many complicated stories about why Goldman Sachs won't face any civil action
or criminal action. There are huge loopholes in our legal system with regard
to financial services that need to be closed.

Bill Moyers: There were some interesting hearings, as I know you saw, before
the Financial Crisis Inquiry Commission. And some of the first, some of the
most interesting testimony came from the former honchos at Citigroup. Mr.
Prince and Mr. Rubin. Take a look.

CHARLES PRINCE: Let me start by saying I'm sorry. I'm sorry that our
management team, starting with me, like so many others, could not see the
unprecedented market collapse that lay before us.

ROBERT RUBIN: My role at Citi, defined at the outset, was to engage with
clients across the bank's businesses, here and abroad. Having spent my
career in positions with significant operational responsibility at Treasury
and, prior to that, at Goldman Sachs, I no longer wanted such a role at this
stage of my life, and my agreement with Citi provided that I would have no
management of personnel or operations.

ROBERT RUBIN: But almost all of us, including me, who were involved in the
financial system, missed the powerful combination of factors that led to
this crisis and the serious possibility of a massive crisis. We all bear
responsibility for not recognizing this, and I deeply regret that.

PHIL ANGELIDES: The two of you, in charge of this organization did not seem
to have a grip on what was happening. I don't know that you can have it two
ways. You were either were pulling the levers or asleep at the switch.

Bill Moyers: How can it be that a Robert Rubin, former Secretary of the
Treasury, pulls down $100 million as a senior advisor to Citigroup and
claims he doesn't know the risk that was involved in what he was trying to
sell to clients and foreign officials? How can that be?

James Kwak: I think there are two things. There's a narrow and a broad view
of this. The narrow view is I think Rubin is actually not lying. I think it
is true that Rubin did not know what the risks were. Although he certainly
should have known what the risks were. And that's because he was fully
subscribed to this ideology that free markets are good. That the market will
take care of itself. That, he also suffered from a lot of the blindness that
corporate officers and directors have. Corporate officers and directors
manage these enormous organizations with tens of hundreds of thousands of
people. They have very little idea what's going on. They're getting their
information from subordinates, who are giving them a filtered view of the
world. On the other hand, when he says, no one could have foreseen this.
This is what I call an intellectual cover up. And I say that because it's
very disingenuous. Over the past 20 years, these banks used their economic
power and their political power to engineer an unregulated financial
environment in which precisely this sort of thing could happen. And in that
sense, I think that this was not an accident. It was not a natural disaster.
It was not unforeseeable. It was the product of the efforts by the sector
over the past 20 years to reshape Washington and to engineer an environment
that would allow them to make as much money as possible. Simon talked
earlier about money. And we know that the financial sector, especially Wall
Street, has been, has made enormous contributions to both campaign
contributions and lobbying expenses. But I think there were, there were two
more potent weapons in their arsenal. One is the revolving door. So, we've
seen an enormous number of people passing back and forth between Washington
and Wall Street over the past 20 years. This is not a new phenomenon. It
happens in every industry. But there are certain things that make it
especially pernicious when it comes to finance. One is that, one is a
question of incentives. So, compared to other industries, Wall Street can
simply offer enormous amounts of money. I'm not saying that everyone did
that. I'm not saying that even the majority of people did that. But that is,
that is very clear.

Bill Moyers: The New York Times has a story this week saying that 125 former
members of Congress and staffers are now working for the financial industry
in Washington. One of them is Michael Oxley, whose name is on one of the
most important pieces of business legislation in the last 20 years. The
Sarbanes-Oxley bill, which was designed to impose some very strict
accounting rules after Enron on all of this. And there he is now, he's a
lobbyist for the securities industry.

Simon Johnson: But Bill, it goes even further and deeper than that. Robert
Rubin was Secretary of the Treasury in the 1990s. He oversaw the
deregulation. He fought hard against Brooksley Born, the only regulator in
living memory who tried to prevent derivatives from getting out of control.
He then went to Citigroup. He presided over this nonsense and this mess.
He's now and he was he's clearly éminence grise of this administration. Mr.
Geithner and Mr. Summers are his protégés. But that's, that's not all. Next
week, the Hamilton Project, a project of the Brookings Institution founded
by Mr. Rubin, will have a big public event. Probably Mr. Rubin's most
prominent Washington appearance since the crisis broke. The headline act at
this event will be Vice President Joe Biden. Now, maybe Mr. Biden will be
taking on the view of finance that we all should fear greatly. But I'm not
so optimistic.

Bill Moyers: You know, I don't get it. Recently when "Newsweek" wanted to
give big space to somebody to explain how we get out of this, who wrote the
piece? Robert Rubin. I mean, are they locked into this worldview so that
they cannot see the consequences of their own actions?

James Kwak: Well, I think there are a couple things going on. One of the
things we talk about in the book is how the Democratic Party became taken
over by this Wall Street friendly view in the 1990s, which is, you know,
extremely important, because in the 1980s, we had a deregulatory
administration that was largely opposed by a Democratic Congress. And it
became very convenient for Democrats, because if you believed in the
ideology of finance, you could sincerely think, I am a Democrat, I am a
servant of the poor and the working class. And yet, I can take campaign
contributions from Wall Street, because I sincerely believe that Wall Street
is doing what's best, what's in the interest of the country.

I think it's been exposed in the last year and a half that a lot of what
Wall Street did was not in the best interest of the country, not in the
interest of the people getting these subprime loans, not in the interest of
the taxpayer who was paying for the immense fiscal costs of the financial
crisis and the recession. But it's, there's a curious time lag going on in
the, in the Wall Street, intellectual and political establishment, where
they think they're still in 2005.

Simon Johnson: As I travel around the country, Bill, I'm really struck by
the fact that while people in Washington talk about populist anger in the
country, most of what I encounter is legitimate, sensible anger. People
actually understand what happened. They understand what went wrong. And they
want to stop it. And the banks don't get this. The belief system on Wall
Street is the same. Jamie Dimon, head of JPMorgan Chase, one of the most
powerful men in the country. If you don't know his name, you should look him
up because this is a man to fear.

Bill Moyers: Very close to the President. Has dinner- lunch with the
President.

Simon Johnson: The President called him a savvy businessman, recently. Jamie
Dimon told his shareholders, we just had probably our best year ever. They
didn't have their best year ever. They went through crisis. They were saved
like the rest of the financial system by the government, by the taxpayers,
but that's not how they see it. That's not what they believe. That's really
important. That belief must be shaken if we're to make any progress at all.

Bill Moyers: But we can't compete with those lobbying dollars. We can't
compete with this interlocking oligarchy that you say. That's a fact.

Simon Johnson: Bill, in 1902, when Theodore Roosevelt took on the industrial
trusts, nobody knew what he was doing. Nobody thought he could win. The
Senate was called the Millionaires Club for a reason. And it wasn't even any
theory. The antitrust theory, everything we know and believe about monopoly,
why monopoly is bad for society, didn't really exist, certainly not in the
mainstream consensus, when Roosevelt decided to take on J.P. Morgan, okay?

Ten years later, the mainstream consensus has shifted completely. People
understood from the debate and from the struggle, from the fact- from the
way the trusts fought back and the way they spent their money, they began to
understand this was profoundly dangerous, politically and socially. 1912,
everyone agreed that breaking up Standard Oil was a good idea. Had to be
done. They broke into 35 companies, most of them did well. The shareholders
actually made money. It's a very American resolution, Bill. And it's very
clear that we've had this confrontation before in American history: Andrew
Jackson against the Second Bank of the United States in the 1830s, Jackson
won, barely; Theodore Roosevelt, the beginning of the 20th Century; FDR in
the 1930s.

The American democracy was not given to us on a platter. It is not ours for
all time, irrespective of our efforts. Either people organize and they find
political leadership to take this on, or we are going to be in big trouble,
okay? Now, I agree, we don't have Theodore Roosevelt. I agree. The only
Senator who speaks complete truth and clarity on this issue is Ted Kaufman
from Delaware, who's an appointed Senator, he got- he was appointed to Joe
Biden's seat, and he's not running for reelection. He therefore doesn't care
about the money. I take that point. But there are others. There must be
others. We must find them and we must fund them, individually, sufficiently,
to fight against this nonsense from the corporate sector.

I would like to emphasize, Bill, I'm a professional entrepreneurship, James
is a successful entrepreneur. We're not anti-finance. We have many people
endorsing the book, backing us, and you know, they, we put their blurbs in
the book for a reason, who are from finance. Who really appreciate and
understand this key point. Which is the complexity has gone too far. It's
become dangerous. And we need to return our financial system to a simpler,
more direct, easier to manage way.

Bill Moyers: You both paid attention last week, to the hearings in
Washington, on the Financial Crisis Inquiry Commission. Was there a theme
that you heard emerge there?

James Kwak: I think the biggest theme that I heard emerge was that this was
an innocent mistake. So, what I mean by that is-

Bill Moyers: You mean the collapse of 2008? All of this? What- was-

James Kwak: Exactly.

Bill Moyers: An accident?

James Kwak: Yes, an accident in the sense that-

Bill Moyers: Natural disaster?

James Kwak: As we heard Chuck Prince say and Robert Rubin say, we couldn't
see it coming. These were, there were risks that build up in the system, and
our models didn't account for it. We're sorry that it happened. Not even,
we're sorry that we did it. We're sorry that it happened.

And I think that this is, I mean, it's unfortunate if they really believe
this. Because again, if we just take a very small example, one of the things
that clearly went wrong is these banks were not able to manage their own
risk. They did not know what positions they had. They did not know what
market forces they were exposed to. You would think that should be the first
job of a bank. And I don't think this was an innocent mistake. And I say
that for this reason. It was in the bank's short term financial interest to
underestimate their risk. Because if they had estimated their risk
accurately, they should have had to set more capital aside, they would have
been less profitable.

So, yes, it's possible that the CEOs of these banks honestly did not
understand their risk positions. But that mistake-- there was an incentive
behind that mistake. You know, banks never overestimate their risk. These
mistakes always only go in one direction. Because that's the direction they
have an incentive to make the mistake in.

Bill Moyers: What do you mean they have an incentive to make a mistake?

James Kwak: So, in the short term, a bank's profitability is going to depend
on how much capital it has to set aside. So, in banking, if I have a certain
position, I have to set aside a certain amount of capital to protect myself
from that position going bad. If I think the position is less risky than it
actually is, I'm going to set aside less capital to cover that position, and
that's going to give me a higher profit margin.

If I'm the head of this bank, that means that in the short term, I'm going
to have higher profits, higher stock price, more money for me, but I'm
underestimating the risk of something blowing up several years down the
line. But we know that the, essentially, the incentive systems within these
banks favor short term profits over long term solvency.

Simon Johnson: The most profound thing, observation, on this structure,
inadvertent, I would say, observation, was by Chuck Prince, the former head
of Citigroup. In July 2007, right before the whole structure began to
crumble. He said, "As long as the music is playing, you've got to get up and
dance." And that's a statement about the incentive structure. Saying, well,
everybody's doing it. That's how we all make money. We've got to do it, too.
I'm just a bank doing what all the other banks are doing. That's absolutely
the heart of the problem. I would also say and tell you, and emphasize,
these people will not come out and debate with us. The heads of these
companies or their representatives, they will not come out. They're afraid.
They don't have the substance. They don't have the arguments. We have the
evidence. They have the lobbyists. And that's all they have.

Bill Moyers: They've got the power, the muscle, the money.

Simon Johnson: They have money.

Bill Moyers: You just have the arguments. You just have the facts. On your
side.

Simon Johnson: Absolutely. That's exactly what it comes down to.

Bill Moyers: Let me show you one of my favorite moments of the week. The
commission on the crisis is looking into two former executives of the big
mortgage giants, Fannie Mae and Freddie Mac. And the Fannie Mae guy tries to
say, what happened was Congress made us do it.

BILL THOMAS: Was there an opportunity, perhaps, to reprioritize your charter
and focus on those things that were most relevant in the marketplace that
would have made the institution more sound?

ROBERT J. LEVIN: That wasn't done at my pay grade.

BILL THOMAS: My understanding is, between 2000 and 2008, you made $45
million. So only people above 45 thousand-- 45, excuse me, million dollars,
between two and 2008, could answer that question?

ROBERT J. LEVIN: What I meant by the, what I was addressing was the question
of, could we have affected the charter act--

BILL THOMAS: Right. And it was above--

ROBERT J. LEVIN: Of the company--

BILL THOMAS: Your pay grade.

ROBERT J. LEVIN: Yes. And my language was sloppy, and--

BILL THOMAS: No, it wasn't sloppy.

ROBERT J. LEVIN: And what I meant by that--

BILL THOMAS: It was flippant, if you want that as a choice.

ROBERT J. LEVIN: What I meant by that, sir, was that that was in the purview
of the Congress, not the company.

Bill Moyers: You're laughing.

Simon Johnson: So, look, what I say to my, to all my Republican friends: on
Fannie Mae and Freddie Mac, you were right. They became too big to fail.
They captured Congress. They were known as some of the most formidable
financial lobbyists in the 1990s. They argued for the rights to take on
these kinds of risks, okay?

And the Republicans were right. The Republicans called them on this. But now
it's the big private banks that have the same incentive structure. That have
bulked themselves up so big that you can't let them fail. That's what we saw
in September 2008. Hank Paulson looked at his options. And they are all
pretty awful. And I'm not a big fan of Hank Paulson, but I think the moment
where he looked at it, he was right. That if you let JPMorgan Chase or
Goldman Sachs fail, the consequences would have been devastating, because
they're so big. It's a Fannie May and Freddie Mac structure come to Wall
Street, come to the top guys on Wall Street. And our Republican colleagues
and friends should recognize this, they should acknowledge it. And then we
can all fix this together.

Bill Moyers: Well then why is Mitch McConnell, the Senator from Kentucky,
who is the Republican Leader in the Senate saying what he said this week?
Let me show you from his statement.

SEN. MITCH MCCONNELL: If there's one thing Americans agree on when it comes
to financial reform, it's that it's absolutely certain they agree on this:
never again, never again should taxpayers be expected to bail out Wall
Street from its own mistakes [...] This bill not only allows for
taxpayer-funded bailouts of Wall Street banks, it institutionalizes them.
The way to solve the problem is to let the people who made the mistakes pay
for them. We won't solve this problem until the biggest banks are allowed to
fail.

Bill Moyers: He seems to be saying what you say, right?

Simon Johnson: It's a clever piece of political manipulation. It's not at
all what we say. What he says is dangerous and deliberately misleading.

Bill Moyers: How so?

Simon Johnson: He says let the biggest banks fail, go bankrupt, don't do
anything, leave the situation as it is now and when they get in trouble, let
them fail. If you do that, you'll have catastrophe. The bankruptcy system
clearly and manifestly cannot deal with the failure of a complex, global,
financial institution. And we have the evidence before us in what happened
after Lehman Brothers failed. That was bankruptcy. It caused chaos around
the world, Bill. That's what the Republicans are advocating. Is we just
leave things as they are and next time we'll take that chaos and we'll get a
second Great Depression. We're arguing for reform. We're arguing for change.
We're arguing for ways to make those biggest banks smaller and safer. If
they were small enough to fail, that's a very different story. And that's a
much safer place to be.

Bill Moyers: What do these big six banks think about what Senator McConnell
is saying?

James Kwak: Well, the big six banks don't want any reform at all,
essentially. So, I think that they are, and there's some evidence that
Senator McConnell has been talking to the big banks and to other people on
Wall Street.

Bill Moyers: There have been published reports that he attended a fundraiser
with hedge funds and other Wall Street poobahs just last week, before he
made this statement. And the reporters, knowing that he had been at this big
fundraiser for hedge fund and Wall Street tycoons a week before, begin to
press him in an unusual, and actually promising way. Take a look at this.

REPORTER: How do you push back against this perception that you're doing the
bidding of the large banks? You know, there was a report that you guys met
with hedge fund managers in New York. A lot of people are viewing this
particular line of argument, this bailout argument as spin--

SEN. MITCH MCCONNELL: You could talk to the community bankers in Kentucky.

REPORTER: I'm not asking you about the community bankers--

SEN. MITCH MCCONNELL: But, I'm telling you about the community bankers in
Kentucky. This is not, everybody--

REPORTER: Have you talked with other people other than community bankers?

SEN. MITCH MCCONNELL: Well, sure. We talk to people all the time. I'm not
denying that. What's wrong with that? That's how we learn how people feel
about legislation. But the community bankers in Kentucky, the little guys,
the main street guys, are overwhelmingly opposed to this bill.

REPORTER: Well what would you say to folks who say that this is just spin to
deflect attention from the fact that you're representing the large banks?

Bill Moyers: So, he deflects their questions about being at this meeting
with the large banks, the oligarchs, as you called them. And talks about
community banks back in Kentucky. What do you make of that?

Simon Johnson: Well, two things, Bill. First of all, he's embarrassed, as he
should be, and that's good. I don't think they used to be embarrassed. I
think-- I hope Vice President Biden is somewhat embarrassed by the event
he's going to attend next week with Robert Rubin, unless he criticizes Rubin
and goes after Rubin's view of the world. In which case, I'm okay with that.

James Kwak: This other part of the problem which Simon and I talk about more
in the book, and that we don't think is fully solved by the legislation in
the Senate, is why do you have to have these too big to fail banks in the
first place? So, we think that's the obvious and simplest and almost
unarguable solution that you should simply not have banks that are too big
and too interconnected to fail.

Simon Johnson: There are no benefits to society, Bill, from having banks
that are larger than $100 billion in total assets. This is a
well-established fact. The evidence does-

Bill Moyers: You make the case.

Simon Johnson: There's nearly 100 pages of footnotes for a reason.

Bill Moyers: But don't let the facts get in the way.

Simon Johnson: I understand. But there's no evidence, okay? We've let our
banks get to $2 trillion-- Citigroup when it almost failed or did fail in
fall 2008 was a $2.5 trillion bank. Jamie Dimon runs a $2 trillion bank at
JPMorgan Chase and says, if we're big, it's 'cause we're beautiful and
efficient. And we should be allowed to get bigger. It's not true. They're
big because of the government subsidy, right? That's what gives them the
profits at this level. If they get bigger, they'll become more dangerous.
That's, those are the costs. On the benefit side, there's no economy of
scale or scope or anything else to support the case that banks bigger than
$100 billion. That's on a pure cost/benefit basis.

James Kwak: So, there's no way that Jamie Dimon, who according to many
observers is perhaps the savviest bank CEO, the best one out there, there's
no way that he can know what's going on within his organization. There's no
way he can even have an information system that will let him know,
efficiently, all the things that he needs to know. So, why is JPMorgan Chase
so big? One reason is that it's in the interest of CEOs to have large banks.
Because if you have, the larger your bank, the bigger your salary. But then
at the same time, it creates this incentive among the traders, the people
who really make the money or lose the money in these banks. It creates an
incentive to the traders to essentially exploit the management failings of
the company.

Bill Moyers: The toughest hearing in Washington this week was conducted by
Senator Carl Levin in the Senate, looking into Washington Mutual. That's the
largest bank ever to go under in our history, and there are some friends of
mine in Washington say there's some possible criminal indictments going to
be coming out of this. Let me show you Senator Levin laying out some of the
evidence.

SEN. CARL LEVIN: To keep that conveyor belt running and feed the
securitization machine on Wall Street, Washington Mutual engaged in lending
practices that created a mortgage time bomb...WaMu built its conveyor belt
of toxic mortgages to feed Wall Street's appetite for mortgage-backed
securities. Because volume and speed were king, loan quality fell by the
wayside and WaMu churned out more and more loans that were high risk and
poor quality.

Destructive compensation schemes played a role in the problems just
described. These incentives contributed to shoddy lending practices in which
credit evaluations took a back seat to approving as many loans as possible.

Bill Moyers: He goes on, you know? There's evidence that WaMu knowingly sold
fraudulent loans to investors in the form of securities. That loan offices
were falsifying documentation in order to churn out as many lousy loans as
they could. And that senior management was putting pressure on the loan
officers to do just this. And he claims, what we were talking about, that
destructive compensation schemes were part of the problem.

James Kwak: I think that some people may go to jail. I think that falsifying
loan documents, I think there's a good chance people could go to jail for
that. I think that if there are- you know, when you get the emails of people
at midlevel managers at these banks saying, you know, falsify the loan
documents. They might go to jail as well. I don't think anyone who's high up
in these banks is going to go to jail for this reason.

I think that, for example, these loans were eventually sold on to investment
banks which used them to manufacture new securities. Those investment banks
were getting documents from Washington Mutual. These are like
representations and warranties. So Washington Mutual is saying, you know,
these loans meet these criteria. And the investment bank is going to say, I
got this document from Washington Mutual. They told me the loans were good.
You can't send me to jail.

And he's absolutely right. So, you've got investment bankers who must have
known. Who should have known that a lot of these loans are bad. But they've
got a piece of paper from the person selling them the loan saying they meet
these criteria. He's pretty much Scott free when it comes to criminal
liability. So--

Bill Moyers: Mistakes were made, but not by me, right?

James Kwak: Exactly.

Bill Moyers: I mean, that seems to be the mantra that came through all these
hearings this week: mistakes were made but not by me.

Simon Johnson: Or, no, I think they also say, Bill, well, everyone made
mistakes, Bill. You know, we're just human. This was beyond our control. And
that's not true, these are systems they controlled, they designed. Mr. Rubin
designed this, right? And I want to point out there's something very
interesting in this WaMu conversation.

It's only when a firm collapses that you get full discovery. Now, Senator
Levin is a great voice on this. And I think he's absolutely nailing this.
But he only has the ability to get at this level of detail and documentation
from a company that failed like WaMu. For the people who were able to keep
going. The Goldman Sachses of this world, you'll never know what they were
really up to.

These are incredibly smart people. They're very well paid. They have ever
incentive. The regulators are totally outgunned. It's not an accident that
this complexity allows them to get away with it. It's by design. That's the
system. Not a conspiracy, Bill. Don't say that.

Bill Moyers: I wouldn't.

Simon Johnson: It's a system of--

Bill Moyers: A system.

Simon Johnson: It's a system of beliefs and incentives, much more profoundly
dangerous than a conspiracy.

Bill Moyers: Why?

Simon Johnson: Conspiracies you can unroot. Conspiracies you can have, you
know, a couple of hearings. People can understand it on TV. You get the
sound bite. This is very complex. This is about what many, many PhDs and
specialists in finance have cooked up over 20 years with the active
participation of the people who were supposed to oversee that in Washington.

Bill Moyers: Is this what the blogger meant when he posted on "The Baseline
Scenario" this week, "Unnecessary complexity just creates rich opportunities
for systemic corruption"?

James Kwak: That is certainly one of the things he meant.

Bill Moyers: What should be the purpose of reform? Should it change the
behavior of Wall Street, or should it change the regulation of Wall Street?
And there is a difference, is there not?

Simon Johnson: Absolutely. Look, I don't know if this will work or not. I
don't know if at the end of the day, we will end up supporting the bill. I
hope we will, okay? But whatever happens, this is one legislative cycle.
Theodore Roosevelt did not change the mainstream consensus in this country
with regard to power and monopoly and the dangerous side effects of big
business overnight.

He didn't do it in one year or two years. It was a ten year process. The
consensus has to change, Bill. And regulation, the role of regulation or
understanding of regulation with regard to finance has to change. The
regulation is there to limit the downside to society and to make sure that
all of these activities have as much as possible of the positive effect on
the economy without generating these massive negative shocks. And we're a
long way from that point.

James Kwak: I think the distinction you made is a very good one. Between
changing the regulation of Wall Street and changing Wall Street itself. I
think the bill does a lot of things that will improve the regulatory system.

I think it does not do a lot to change Wall Street. Certainly, better
regulation will change Wall Street a little bit, but some of the basic
fundamental issues, I think, for example, the fact that in many realms, Wall
Street banks knowingly make money by finding, because they want to put on a
trade, they find a sucker to take the other side of that trade.

They're making money directly off of their customers. You can't really have
it any other way when you're engaged in proprietary trading. These, this is
not going to change. The fact that we have these enormous banks that are too
big to manage and that have a competitive advantage, because they're big.
That's not going to change.

And that's one reason I think why it's not going to satisfy the many people
in America right now who are upset and frustrated about what's happen.
Because they're going to see that what we've done is we've made Washington a
little bit better at regulating Wall Street. We haven't changed the
fundamental causes.

Bill Moyers: Well, I've seen one regulatory agency after another taken over
by the very industries they were supposed to regulate.

Simon Johnson: This is absolutely right, Bill. And, you know, the person who
nailed this intellectually a long time ago was from the University of
Chicago. George Stigler. Not a man of the left. He got a Nobel Prize for his
observation. All regulated industries end up with the industry capturing the
regulators.

And what's happened to us is a Stigler, exactly what Stigler warned against
on a massive scale. And you have to think very hard about this. The
Administration still argues that we should delegate responsibility, going
forward, for lots of things around finance. Like how much capital you should
have. Delegate that to the regulators.

Now, that's crazy. That's not acceptable. That is not what they should do.
Particularly because, and any Democrat should say, well, wait a minute, next
time a free market President who doesn't believe in regulation comes in will
gut the system. And any person from the right who's read Stigler should say,
Well, these regulators are just going to get captured. You've got to put it
in legislation. You've got to design the legislation. You've got to go after
the things that can be legislated. Congress must not abdicate this
responsibility.

Bill Moyers: So, you would break up the banks. That's what you would do,
right?

Simon Johnson: We would set a hard size cap on the banks. And the banks, in
order to comply with that, would have to break themselves up. So, take a
bank like Goldman Sachs, for example. It's about ten times bigger than what
we would be comfortable with. And, you put that cap in-- they have to figure
out how to do it. They have a fiduciary responsibility to their shareholders
not to lose value as they comply with this law, not a regulation, law,
right? Our book is called "13 Bankers" because it was 13 bankers who were
pulled into the White House last March, and they were saved completely and
unconditionally in the most amazing deal ever: their jobs, their pensions,
their board of directors, their empires. But the title is also an echo of a
remark made forcefully in 1998 by Larry Summers, who was then Deputy
Treasury Secretary to Brooksley Born, who was trying to regulate over the
counter derivatives.

And she was way ahead of her time, by the way. None of this nonsense
existed. But she had- she saw this coming in a very profound sense. And she
wanted to act in a preemptive and preventive way. Now, Larry Summers called
her up. This is according to the public record and it's not been disputed by
any of the protagonists here.

He called her up and he said, Brooksley, if you do what you want to do,
which is regulate the derivatives. Over- regulate all this over the counter
derivatives, you- I have 13 bankers in my office who say you will cause the
greatest financial crisis since World War II., right? That was what he
believed. That was the prevailing philosophy of the Rubin wing, the Wall
Street wing of the Democratic Party.

That was Alan Greenspan's view. That is what brought us to this point. The
idea that if you regulate, in any fashion, in any form, you will cause
problems, you will prevent growth, you will cause crisis. That view is
profoundly wrong. It has been manifestly and repeatedly demonstrated to be
wrong. And the people who hold that view must change their minds or they
should be voted out of office.

Bill Moyers: If Wall Street's behavior doesn't change, can we have another
financial catastrophe like the one in 2008?

James Kwak: The definition of insanity is repeating the same thing over and
over again and expecting a difficult result. And I think one of the core
messages in our book is that the fundamental conditions of the financial
system today are the same as the ones we had leading up to this crisis. And
it would be folly to expect a different outcome.

Now, the legislation will help in certain ways. It will certainly, you know,
it'll bolt the barn door after the horses have fled. The Consumer Financial
Protection Agency will make it much harder to have a bubble built on
subprime mortgages. But we'll have a bubble built on something else. And it
may even be on a market or a product that doesn't even exist yet.

And that's why, again, legislation is helpful, but if you're going to have
the same kind of incentive structures on Wall Street and the same degree of
concentration, the same degree of political power, it's likely that we'll
have another financial crisis.

The financial world has gotten much more dangerous in the last 30 years. We
had this one. We had the stock market bubble of 2000. We had the long term
capital management crisis. We had the S & L crisis. We had the Latin
American debt crisis. And the question is, are these crises going to-- are
we going to somehow figure out a way to have fewer of them, or a way to make
them less damaging? And I'm not sure I've seen that.

Simon Johnson: The structure of the system is such that people will take
these egregious risks. That's what they're paid to do. They will mismanage
their companies. That is absolutely in their incentive. And they get the
upside, remember? Goldman Sachs just helped Geely Automotive, a Chinese car
company, buy Volvo from Ford.

Now, that's an interesting investment. It's a very risky investment. If that
goes well, Goldman will get tremendous upside. If it goes badly or if
Goldman's other investments go badly, who gets the downside? Well, Goldman
Sachs is a bank holding company now. They were allowed to become that in
September 2008 as a way to rescue them. They have access to the Federal
Reserve discount window. Okay? If Goldman Sachs gets into trouble, that's
the responsibility of the Federal Reserve and the downside is for society.
That is an untenable, unacceptable position in America today.

Bill Moyers: We are moving now toward the decisive moment in this fight for
reform, sometime in the next two or three weeks, we may well have a vote in
the Senate. But what are you going to be looking for over the next two weeks
that will convince you there is some possibility of true reform?

James Kwak: Well, it's going to be a little bit difficult, because right now
a lot of the action is in the fine print. As often happens in the last phase
of bills. But I think there's going to be an attempt to weaken the Consumer
Financial Protection Agency. Even more than it's been weakened already.

And essentially, what will happen is opponents will try to make the C.F.P.A.
subordinate to some other regulators, who can veto it. I think that on
derivatives, there's going to be a lot of action, essentially on this issue
of exemptions.

So, the derivative legislation looks quite good if you read the first page
and look at the headlines. But then there are exemptions inside it. And the
question is how big are the exemptions. The thing that we care about most is
on the too big to fail issue. So, are we going to have real constraints on
the size and scope of these banks? Things that the Obama Administration
unveiled in principle to great fanfare in January.

They had a press conference with Paul Volcker and said we're going to have
these Volcker rules. Those rules have been considerably watered down in the
legislation. And I think that, you know, what we would most like to see are
serious constraints on the scope and the size of these banks. Those are the
main issues that I'll be looking at.

Simon Johnson: So, the second Volcker rule was proposed in January was to
put a size cap on our largest banks at their current size. Now, that-

Bill Moyers: $2 trillion?

Simon Johnson: Yes.

Bill Moyers: 2 trillion- a

Simon Johnson: Now, a size cap is a good idea. Obviously, the current size
makes no sense at all, because that's how we got into this mess. There will
be amendments brought forward to the floor of the Senate, if this process
has any integrity at all. For example, Senator Sherrod Brown has a very good
draft amendment.

Bill Moyers: Ohio, right?

Simon Johnson: Absolutely. And he will, in that amendment, press for a hard
cap on the size. And I think also restrictions on the scope. And they'll
give a lot more restrictions in legislation, which regulators will have a
hard time getting out to, in terms of what can be allowed in our biggest
financial institutions.

For me, at least Bill, that is going to be the critical moment. How many
people support that amendment or that kind of amendment. Does the Democratic
leadership come out in favor of it? Where does the White House stand on
this? If the White House steps back and the White House says well, it's all
up to the Senate, we're staying out of this. I think you know what's going
to happen. You're going to get mush, right? Nothing really meaningful will
come of it.

If the President takes the lead, the President takes this one, if the
President takes this to the country, takes on the Chamber of Commerce, goes
directly to people. And explains why you need to make our biggest banks
smaller. As one way, that's not a sufficient condition for financial
stability, but it's necessary and it gets at the heart of their political
power. Take on the big banks. Take them on directly. That's what Jackson
did. That's what Theodore Roosevelt did. That's what Franklin Roosevelt did,
too.

Bill Moyers: Simon Johnson, James Kwak, thank you for being with me. The
book is 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown.
We will link this conversation with your website, BaselineScenario.com.