The Fish...it rots from its head...

I am not naive. I understand that corruption in governments, financial markets are as old as governments and financial markets themselves. But I get a growing sense of awareness that it is different this time. It could very well just be me but, I doubt it. Too many people I've spoken with, polls I've read show me there is an utter disdain with Wall St., bankers, the bailed out TBTF's, both political parties and the government itself.

This feelings aren't limited to subversive types, the poor or the uneducated. They are widespread. For example, "They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America....
“We follow the rules, and look where that’s gotten us?” she says, furious and depressed. Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had complied—and when the government got off their backs, they turned around and raised the mortgage back up again!” 
“And charged us a penalty,” Brian chimes in. The non-payment penalty was only $84—but it might as well been $84 million, for all the outrage they feel. “A penalty for non-payment!” 
This is just one of the hundred's of thousand's of stories that exist on this topic. A book could be written on this topic alone and probably will. But until a book is written, here's a few more anecdotes.

You're a lender that has lost the documents needed to foreclose on someones home? No problem, LPS can help! They have handled over half the foreclosures in the entire US. For a fee, LPS will locate and assemble the documents needed for a lender to foreclose. With reports of shoddy and possibly fraudulent paperwork surfacing, LPS and other mortgage servicers are coming under increased scrutiny. Read more here: http://www.washingtonpost.com/wp-dyn/content/article/2010/10/25/AR2010102505731.html

and here: http://www.nakedcapitalism.com/2010/10/4closurefraud-posts-docx-mortgage-document-fabrication-price-sheet.html

This alleged fraudulent behavior has caught the attention of at least one State Attorney General. Richard Cordray, Ohio's Attorney General, has the audacity to make statements such as this: "It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a 'do-over,'" he wrote in the letter to Wells. The other letter was sent to Ohio judges, who were asked to notify Mr. Cordray when banks file substitute affidavits." This statement from Mr. Cordray was in response to banks and loan services companies attempting to paper over their previous submissions of fraudulent documents. Mr. Cordray continues "The banks are committing fraud on the court, essentially perjury, and then saying 'Whoops! You caught me! Here's some different evidence and use that instead,' " Mr. Cordray said in an interview Friday. "I know a lot of judges are not going to take kindly to that." Imagine me or you being accused of submitting false documents to the court, being caught by the court and we respond with "oops, here's the real ones". We're smart enough, not arrogant enough to know better. The biggest US banks aren't.

The story finishes with a sworn deposition from a Wells Fargo employee that signed 300 to 500 foreclosure documents a day without reviewing the documents for accuracy. That breaks down to between 40 and 60 foreclosure documents signings a hour. When asked further on this issue, the Wells Fargo employee responds "Asked if she verified the appropriate information, she said, "That's not part of my job description."

Damon Silvers, member of the independent Congressional Oversight Panel sees the resolution of the US foreclosure crisis as a simple choice. "We are faced with a choice here.We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can't do both."

Well regarded risk analyst Chris Whalen sees it pretty much the same way as Mr. Silvers: "..the fraud and obfuscation now underway in Washington to protect the TBTF banks and GSEs totals into the trillions of dollars and rises to the level of treason. And the sad part is that all of the temporizing and excuses by the Fed and the White House will be for naught. The zombie banks and GSEs alike will muddle along until the operational cost of servicing bad loans engulfs them. Then they will be bailed out -- again -- or restructured."

Whalen adds: "The U.S. banking industry entering a new period of crisis where operating costs are rising dramatically due to foreclosures and loan repurchase expenses. We are less than ¼ of the way through foreclosures. The issue is recognizing existing losses ‐‐not if a loss occurred.
Failure by the Bush/Obama to restructure the largest banks during 2008‐2009 period only means that this process is going to occur over next three to five years – whether we like it or not. Lower growth, employment are the cost of this lack of courage and vision.The largest U.S. banks remain insolvent and must continue to shrink until they are either restructured or the subsidies flowing from the Fed, Fannie Mae/Freddie Mac cover hidden losses. The latter course condemns Americans to years of economic malaise and further job losses.

Professor William Black, former deputy director of the FSLIC, whose actions directly led to over 1,000 convictions in the Savings and Loan scandal in the 1980's claims the US housing bubble was based mainly on fraud: "There was fraud at every step in the home finance food chain: the appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers' incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct." and: "These frauds came from the banks, and they propagated through the system through a series of echo epidemics...This fraud spread through the system and that's why we have a crisis in foreclosures. This stems from the underlying fraud by the lenders in mortgage loans to the tune of well over a million cases a year by 2005."

Robert Shiller, Professor of economics at Yale University compares the current US mortgage fraud crisis to the Great Depression of the 1930's: "Shiller said the danger of foreclosuregate -- the scandal in which it has come to light that the biggest banks have routinely mishandled home ownership documents, putting the legality of foreclosures and related sales in doubt -- is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly."

He's not alone. Lynn Turner a former chief accountant at the SEC adds: "The amount of gimmickry and outright fraud dwarfs any period since the early 1970's, when major accounting scams like Equity Funding surfaced, and the 1920's, when rampant fraud helped cause the crash of 1929 and led to the creation of the S.E.C."

On a related subject, SIGTARP Barofsky says he has over 130 active criminal investigations involving TARP funds. Video: http://worlduntaintednews.com/archives/1307

Yesterday I linked the latest quarterly report from SIGTARP Barofsky. In his report, Barofsky accused Treasury of changing their accounting practices to show the taxpayer loses from AIG will be substantially less. In a bizarre response, Treasury answers with: "... SIGTARP instead sought to generate a false controversy over AIG to try and grab a few, cheap headlines."
Stating that SIGTARP is trying to grab a "few, cheap headlines" makes Treasury look defensive.

More on TARP's accounting practices: "The Obama Administration is also engaging in phony accounting on its expected TARP losses, the latest sleight of hand being magically reducing its expected losses from AIG by $40 billion through a reclassification process. But the biggest source of his false accounting is extend and pretend. The biggest banks are carrying second/junior mortgage portfolios at huge premiums to their real values, which is close to zero. Merely marking the seconds down to something a tad more realistic would easily create $150 billion of losses to Citigroup, JP Morgan, Bank of America, and Wells, in a worst case scenario, much more"

More claims of blatant fraud and manipulation in the US financial markets are leveled by Bart Chilton, the head of the CFTC. Mr. Chilton speaks to the manipulations of the silver markets that several have spoken about for years. Of course, those that spoke out were called "tin foil hatters", sore losers, etc. Mr. Chilton's comments: "the public deserves some answers to their concerns that silver markets are being, and have been, manipulated.” I believe there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price.” Full text of Chilton's comments here: http://jessescrossroadscafe.blogspot.com/2010/10/full-text-of-cftc-commissioner-bart.html

Back in July, 2009, Goldman Sachs accused an employee of stealing software that could be used to manipulate the equity markets. Of course, one has to wonder what GS was doing with software that could be used to manipulate the markets. Original story here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFeyqdzYcizc

Now, Goldman Sachs with the help of the Federal prosecutors have asked the presiding judge for the trial scheduled to begin in November to seal the courtroom in order to keep the trial, evidence of the market manipulating software away from the public: http://online.wsj.com/article/SB10001424052702303891804575576693537306332.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Not only are stock prices being manipulated along with silver prices as claimed by CFTC commissioner Chilton, there are reason to believe other commodities, oil and future market prices are also being manipulated as touched upon here: http://www.washingtonsblog.com/2010/10/high-frequency-traders-might-be.html

Jim Cramer brags to manipulating stock prices: March 2007
In the video from TheStreet.com's "Wall Street Confidential" Webcast, Cramer boasts about manipulating the price of a high-flying stock down, and even acknowledges that doing so might have been illegal
He added that the strategy - while illegal - was safe enough because, "the Securities and Exchange Commission never understands this." Fatboy: Video has since been pulled, here's the original story:

In a post titled "The Height of Hypocrisy", Wall St veteran Larry Doyle lambastes former Treasury Secretary and Goldman Sachs CEO Robert Rubin and others for their hypocrisy as they participate in a simulated White House war room exercise. Not Iraq or Afghanistan but, an exercise regarding the simulation of a state that is days away from defaulting on their debt obligations. Larry adds: "I hope I never lose the feeling of complete and total indignation in shedding light on those involved in the charades and others who would provide cover for it. To wit, count me as extremely pissed off this Wednesday morning. CFO Magazine highlights the hypocrisy embedded in our political and financial system with its report, West Wing Accounting: and: "What a novel concept? Screw Laura Tyson. Where were she and others when the lack of transparency was being promulgated? The American taxpayer is supposed to take this bulls&^% sitting down? Accounting tricks and lack of transparency is merely standard operating procedure until the need for a bailout comes along?" Fatboy here. I've been reading Larry for a few years.The words "screwed" and pissed" are very strong language for him. Here's the link: http://www.senseoncents.com/2010/10/the-height-of-hypocrisy-or-why-america-should-be-so-outraged/#more-22830

Charles Hugh Smith writes to the "Purchase of Political Power" and surmises that "democracy is dead".  Candidate A gains the backing of a Power Elite group (a political action committee or other front) and collects $5 million. As a result of a media blitz, he/she wins.Between elections, he/she amasses a "war chest" of $5 million from the same donors, guaranteeing that the final cost of the next election will be $10 million.funded fiefdoms like teachers unions, and so each candidate sells their soul to the few "special interests" with deep enough pockets to harvest and contribute millions of dollars.
Now repeat that election cycle a few times and see how quickly the cost rises. The truly pernicious aspect of this positive feedback is this: if wealth wasn't becoming ever more concentrated in the razor-thin slice at the top of the U.S. economy, then politicos couldn't gather huge sums of money from such small groups. They would have to seek a broader base to raise money, and that would dampen the influence of the top donors. Instead, the cycle grows stronger with each election cycle: to raise the gargantuan sums needed to keep political power, politicos become ever more reliant on a tiny pool of super-wealthy Elites and State-funded fiefdoms. Democracy is already dead in America, but the wizened death-mask offers a useful facade for propaganda purposes.

AS the US sends it's young men and women to Afghanistan to fight for "democracy", the government has no idea how much money was spent or to whom in Afghanistan prior to 2007. The reason given is because it's "hard": "Navigating the confusing labyrinth of government contracting is difficult, at best," the inspector general says in a report that was released Wednesday: http://www.mcclatchydc.com/2010/10/27/102724/us-cant-untangle-billions-sent.html#ixzz13mMgMaWw

The Nobel Peace Prize recipient, President Obama has awarded Chad, the Democratic Republic of Congo, Sudan and Yemen exemptions from a US law that prohibits funding for foreign governments' militaries if they use children as soldiers:

Salons Glenn Greenwald points out the fact that media outlets through out the world have called for investigations regarding the last "Wikileaks" report that the US knew prisoners were being tortured by Iraqi's but did nothing as US media outlets, most noticably the NY Times and the ABC news with Diane Sawyer have chosen to attack the messenger and not call for an investigation.

Haliburton knew the cement was defective but ordered their employees to keep working. This lead to the death of eleven workers : http://www.nytimes.com/2010/10/29/us/29spill.html?hp

Oil still in the gulf coast from BP. Many people sick.

A Coast Guard official said Saturday the orange substance floating in miles-wide areas of West Bay on the Mississippi River delta appears to be algae, not oil as reported Saturday morning by The Times-Picayune.
However, boat captains working in the BP oil spill response team who first reported the sightings as oil said Saturday they were not convinced by the Coast Guard's initial assessment.

"I've never seen algae that looked orange, that was sticky, smelled like oil and that stuck to the boat and had to be cleaned off with solvent," said one captain, who like the others wished to remain anonymous for fear of losing their BP contracts. "I'll wait for the lab reports. In fact, we're also sending some samples off."(

Dean Blanchard, of Dean Blanchard Seafood Inc. in Grand Isle, Louisiana:
“Hell, we got oil coming in here every day, it’s all around us, we know what oil is… The Coast Guard should change the colour of their uniform, since they are working for BP. We’ve known they are working for BP from the beginning of this thing. None of us believe anything they say about this oil disaster anymore.”


Commercial fisherman Donny Matsler also lives in Alabama.
"I was with my friend Albert, and we were both slammed with exposure," Matsler explained of his experience on August 5, referring to toxic chemicals he inhaled that he believes are associated with BP's dispersants. "We both saw the clumps of white bubbles on the surface that we know come from the dispersed oil."

Gruesome symptoms
"I started to vomit brown, and my pee was brown also," Matsler, a Vietnam veteran who lives in Dauphin Island, said. "I kept that up all day. Then I had a night of sweating and non-stop diarrhea unlike anything I’ve ever experienced."
He was also suffering from skin rashes, nausea, and a sore throat.
At roughly the same time Matsler was exposed, local television station WKRG News 5 took a water sample from his area to test for dispersants. The sample literally exploded when it was mixed with an organic solvent separating the oil from the water.
Naman, the chemist who analyzed the sample, said: "We think that it most likely happened due to the presence of either methanol or methane gas or the presence of the dispersant Corexit."

Wilma Subra, a chemist in New Iberia, Louisiana, recently tested the blood of eight BP cleanup workers and residents in Alabama and Florida. "Ethylbenzene, m,p-Xylene and Hexane are volatile organic chemicals that are present in the BP Crude Oil," Subra said,
"The blood of all three females and five males had chemicals that are found in the BP Crude Oil. The acute impacts of these chemicals include nose and throat irritation, coughing, wheezing, lung irritation, dizziness, light-headedness, nausea and vomiting."

Dr Ott said: "People are already dying from this… I’m dealing with three autopsies' right now. I don’t think we’ll have to wait years to see the effects like we did in Alaska, people are dropping dead now. I know two people who are down to 4.75 per cent of their lung capacity, their heart has enlarged to make up for that, and their esophagus is disintegrating, and one of them is a 16-year-old boy who went swimming in the Gulf."

Alleged, stated and suspected manipulation of US equities, commodities, futures and silver markets. Rampant fraud in the US housing market. Insolvent TBTF US banking institutions being propped up by the US citizens. Accusations of fraudulent accounting practices by the US Treasury being leveled by the government appointed special investigator. Defense department auditors admitting they can't locate where tens, if not of hundreds of billions of US taxpayer dollars have been spent fighting wars in Iraq and Afghanistan to spread "democracy." Federal officials deceiving the residents of the Gulf coast as to the damage and health risks caused by BP's oil spill. And the cowardly actions of the US media outlets as they accuse the messenger behind the latest revelations of torture from Wikileaks.

I have had conversations with attorneys, bricklayers and the unemployed. The wealthy and the poor. Staunch conservatives and bleeding heart liberals. All say basically the same thing. They are losing or have lost faith in government institutions, Wall St., US housing markets and both political parties. The US is clearly at a defining moment, a cyclical change. Financially the change is the end of a 30 plus year debt fueled credit cycle that created most of the growth over the last 30 plus years. This has now ended. It appears the social contract between the US government and the citizens is near it's end. What replaces this contract is hard to see. The country is at a tipping point in it's history. The fish...it rots from it's head.