Denninger Reports: No Change in Sight Despite Whistleblowers and Massive Fraud

07 Apr

As unbelievable as it may see, the world has not changed at all since this crisis began: at least not the world of the banks, of the off book accounting of the trillions in toxic debt and worthless ‘assets’ still sitting on the banks’ books…

And now Greenspan wants to tell us that we are in a dangerous situation? Little late for that now, particularly from the man who allowed and, in fact, promulgated the changes and the stripping of regulatory controls that allowed the catastrophic situation to occur in the first place. The world is indeed a strange place…

The WSJ Reports:

WASHINGTON—Former Federal Reserve Chairman Alan Greenspan urged U.S. policy makers Wednesday to place significantly higher capital and collateral requirements on the financial-services industry, warning of the likelihood of future financial crises if steps aren’t taken to address “too big to fail” firms and the inability of the private market and regulators to predict major risks.

This is the same Alan Greenspan that consistently put forward positions that did exactly the opposite. Let’s go back and revisit history:

  • Sweep accounts made a mockery of reserves in the banking system – an “innovation” that Alan Greenspan put in place.

  • The merger of Citi and Travelers, an act that was black-letter unlawful at the time it was entered into, was passed over by The Fed (even though they had authority to block it) and Greenspan then supported Gramm-Leach-Bliley that retroactively made the merger lawful.

There’s more, but that’s enough – in short, Greenspan is a blatant, black-letter liar.  He personally put forward much of the so-called “innovations” that not only allowed new products into the market but he personally destroyed the capital and collateral requirements that formerly protected banks from ruinous losses as a consequence of bad lending decisions.

Now, having witnessed the acts of his own hand blowing banks to little bits, he wants to go back and revise history, ignoring his own role in setting forward the conditions that made the mess occur!

Puppies often go hide in shame after taking a dump on your carpet, but it takes a senile old coot like Greenspan to stand there and intentionally ignore the smelly edifice that he emitted and which sits directly under his nose.

Commission member Brooksley Born, who chaired the U.S. Commodity Futures Trading Commission during the Clinton administration, was more blunt.

“The Fed utterly failed to prevent the financial crisis,” she said. “Failed to prevent the housing bubble, failed to prevent the predatory lending scandal.”

No kidding.  Ms. Born was one of the few who sounded the alarm – and was run out of town on a rail.

But she wasn’t the only one.

Does anyone remember this Ticker?

Specifically, Stephen Pizzo and Mary Fricker, two individuals involved in the forensic analysis of S&Ls who immolated themselves playing the precise games that the banks are now falling victim to, wrote:

“If Congress again opens up banking to Wall Street speculation, as it opened up S&Ls and banks to real estate speculation, regulators will quickly lose control over the complex series of events that a pervasive marketplace will immediately set in motion. Insider abuse, self-dealing, and back scratching relationships between institutions will run rampant.


Almost immediately the predictable happened. The historical arms-length relationship that had existed between lender and borrower vanished, and with it went due diligence, common sense and, in too many cases, ethics. Thanks to facilitating that bit of synergy the taxpayer is stuck with $300 billion dollars worth of repossessed real estate from failed thrifts. If we sold $1 million worth of this stuff a day, it would take 300 years to sell it all.

Deregulated banks can look forward to a similar script, with some of the same bad actors. U.S. Attorney Joe Cage in Shreveport, Louisiana, told us, “Some of the same people who took down savings and loans, are out in the securities business and banking now, already in place. And they’re just waiting for Congress to abolish the Glass-Steagall Act. If that happens I’m afraid they’ll take the banks just like they did the savings and loans.”"

Dateline September 13th, 1991.

Nearly 20 years before it all blew up, Congress was warned.

The Fed was warned.

Neither cared.

Neither still cares.

Today – right now, right here, there are hundreds of billions in HELOC exposure sitting on bank balance sheets that are behind underwater non-performing first mortgages – and which have no recovery value. They are being held at or near “par”, or 100 cents on the dollar.

Today – right here, right now, Wells Fargo has over $1.7 trillion in off-balance sheet “assets”, Citigroup has over $750 billion, and JP Morgan has over $500 billion.  And that’s just from a quick look at the quarterly financials – a quick look at Bank of America’s 10Q proved non-expositive (I’m sure I can figure it out, but it wasn’t instantly obvious.  Two points to BAC for obfuscating sufficiently for me to actually have to dig to figure out the numbers.)

None of the above have one nickel of capital reserved against them, there is ZERO transparency as to what is in those black boxes or how it is performing, and all of the above has been allowed to exist not only after ENRON did the same damn thing and it blew up the company but also after the crisis of 2008!

Capital ratios and reserves are a joke when banks stick god-knows-what into off-balance sheet VIEs and SPVs and effectively evade any capital requirement that regulators allegedly demand!

Congress is the guilty party here.

The changes in law that came with Gramm-Leach-Bliley and then later the CFTC “modernization”, which between them set up the structures necessary to have off-balance sheet garbage along with an OTC derivative market where there is no effective means to police capital or margin is a direct and proximate consequence of the acts of Congress.

There has been no remediation of these faults.  There has been no corrective action taken on these points.  The “toxic assets” that caused the blowup are still there and are still being carried at or near 100 cents on the dollar, even though they are worth far less.

There is still trillions of this trash being held by these institutions.

Trillions folks.

It’s still there.

NOBODY is holding these banksters to account, NOBODY cares about the fraud, and NOBODY is willing to put their foot down and put a stop to it.


We WILL have another meltdown, the next one worse than the last.  It is inevitable.  It will happen precisely because despite 20 years of explicit warnings from myriad people to Congress and others, despite those warnings being proved correct over time, despite the collapse of 2008, Congress has refused to bite the hand that feeds them with campaign bribes and lobbying “interests” – the banksters – who demand the right to loot America at will and commit acts that were anyone else behind them would result in felony hard time being served.


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