It was almost four years ago that Federal Reserve Board Chairman Ben Bernanke, Treasury Secretary Henry Paul Paulson, and then New York Fed Bank President Timothy Geithner ran to Congress warning that the end of the world was near. They told members of Congress that the banks were drowning in bad debt and without a massive bailout they would soon be forced into bankruptcy. Congress quickly coughed up the money in the form of $700 billion in TARP loans. The Fed contributed trillions more.

Undoubtedly most of the bad debt was due to stupidity, which does not seem to be in short supply on Wall Street despite the high paychecks. The folks running the major banks somehow could not see the largest asset bubble in the history of the world. The fact that house prices had risen by more than 70 percent above their trend level, with no plausible explanation in the fundamentals of the housing market, did not trouble these high-flyers.

But there was more than just stupidity involved here. There was an epidemic of mortgage fraud that was identified by the FBI as early as 2004. The general story was that the big subprime issuers were pushing their agents to issue as many mortgages as possible, because they knew that they could sell almost any mortgage the next day in the secondary market. As a result, many mortgage agents put down information that they knew to be false, often changing information provided by applicants to allow borrowers to get mortgages for which they were not actually qualified.

Clearly, much of this sort of fraud took place. There were many accounts of people who received mortgages with payments that would have taken up their entire income. In some cases, the applicants may have been responsible for the false information. According to the FBI, in most of the cases it was the lenders who put down the false information so that they would be able to issue a loan that could be sold in the secondary market.

During the bubble years I had several people send me emails saying that friends or relatives were being told by their supervisors at major lenders to fill in false numbers to allow people to get mortgages for which they were not qualified. While anyone can make up anything in an email, the fact that I got similar accounts from multiple sources suggests that this sort of fraud was actually taking place on a substantial scale. (The alternative explanation, that there was a conspiracy to fool me, hardly seem very plausible.) The question is, how high up in the corporate hierarchy did this fraud originate?

A serious investigation would start at the bottom and work up. It would find offices where many of the especially bad mortgages were issued. The investigators would question the mortgage agents about how so much false information ended up on loan forms.

After scaring some number of mortgage agents into talking, they would then talk to the branch managers. If they got two to three branch managers to acknowledge that they had pushed such agents to falsify information, they would then press them to reveal how they decided to engage in mortgage fraud. This practice could lead to the top levels of the bank.

The same policy could be followed with securitization. There have been enough emails uncovered and public statements from insiders to know that some people within the major investment banks knew that many of the mortgages that they were securitizing were fraudulent. It is, of course, against the law to deliberately pass on fraudulent mortgages. It is also against the law to ignore clear evidence of fraud when rating these issues, as appears to have been the practice of the bond-rating agencies.

In short, it seems that there was a lot of crime here, but not much effort at enforcement. In its first three years the Obama administration did almost nothing to investigate criminal practices that contributed to the bubble and the subsequent meltdown. The attorneys general settlement on robo-signing in January called for a task force to be headed by New York Attorney General Eric Schneiderman.

Almost four months later there is little evidence that this task force is making much progress. For example, if someone wanted to contact the task force to report evidence of fraud, they would certainly have a difficult time surfing the web to find a phone number to call or an email address.

With the statute of limitation for many possible offenses being reached in the near future, if it has not already been reached, there should be a serious sense of urgency about this issue that is altogether lacking. If the Obama administration pursued al Queda with the same vigor as it's investigating financial fraud, Osama Bin Laden would be sunning himself on some beach in the Caribbean.

Socialism is a Naughty Word

By Ted Folkert

May 7, 2012

I always thought being social was a good thing. I don’t remember anyone ever telling me any different. That is what they teach us in “charm” school. That is what Andrew Carnegie told us in his best seller for many decades: “How to Win Friends and Influence People.” That is what every motivational speaker in the country teaches us. That is what every sales trainer in the country teaches us. That is what many psychologists teach us. That is what we teach our kids.

But, if you try to use that word in a political conversation you may be immediately castigated because it relates to that dreaded and broadly feared word “socialism.” That’s the word that makes “Boohoo” Boner and ”Mumps” McConnell go nuts. It makes all of their uneducated and simple-minded constituents go nuts. It makes the rich and powerful and the behemoth corporations go nuts. You know - those who pay Boohoo and Mumps, and all of the other lame-brained tea partiers that they have to baby-sit, to do their dirty work for them.

Socialism has for some reason become synonymous with communism, that dreaded word that caused Senate Republican, Joseph McCarthy, in 1950 when he claimed to possess evidence that significant numbers of communists continued to hold positions of influence in the State Department, to go off his rocker and drag every Jew in Hollywood and all of his political opponents into the hearing room, in front of the cameras, and forced them to prove beyond a reasonable doubt that they were not communists, didn’t know any communists and hated communists – and quite often, after hours and days of testimony, they couldn’t convince him, which really made him go nuts. He destroyed careers and left many bright people with bruised reputations and damaged lives. He garnered the attention of all of the news media in his 15 minutes of fame.

We started wars and sacrificed the lives of tens of thousands of our fine young people because of the misguided threat of communism. We changed regimes in other countries because of the misguided threat of communism. We spent billions and trillions of U.S. dollars fighting what we thought were eminent threats of communism. We don’t need to rewrite those books about our fear of communism. We know that story. But the sad overhang of that everlasting, misguided and unnecessarily devastating portion of our history is that now our right-wingers discuss the word socialism as if it were communism.

Social, society, sociology, socialism – these words all relate to the Latin word sociālis, soci - partner.

Social simply means living in companionship with others or in a community, rather than in isolation. People are social beings. Social pertains to human society.

Society simply means an organized group of persons associated together - individuals living as members of a community.

Sociology is simply the study of the human society.

So how did socialism become known as a bad word - a system that advocates the ownership of the means of production and distribution of capital by the community at large? To me socialism should just mean the act of being social, the act of living in a community, the act of participating in a human society.

Isn’t that what we are doing? Isn’t that what we have been doing for a hundred thousand years, a million years, we don’t know how long? That is what we humans do. We live together in communities. Communities where we share the resources, share the wealth, take care of each other – an equation whereby the result is greater than the sum of the parts – a social situation whereby we all do what we do best, which provides a much greater standard of living, a safer, healthy, longer and more meaningful life than any one of us could provide for ourselves on our own. That is the way the word, socialism, should be described.

That is what I mean when I declare to be a socialist, a person who believes in living in a society with everyone else who agrees to do his part in the community and share the fruits of his labor with everyone else who participates on the same basis.

We don’t need communism or socialism if it means that the means of production are owned by the community. What we need is a mix of socialism and capitalism. A mix where the functions that are basic to society that can be provided more efficiently and more universally and more practically by government than by private industry, such as: law and order, public safety, national defense, public transportation, education, health care, safety nets and social services, are provided by government and all other functions are provided by private enterprise.

Capitalism and private enterprise work well only if they are limited to those functions of society that can function efficiently under a competitive environment. Such is not the case for the essential needs of society that only government can provide fairly and efficiently for the common good.

Is such a society going to have its problems? Is such a system going to require order, laws, rules, regulations, organizations, committees, groups, panels? You know - Government? Of course, it is. This is civilization we are talking about - food, shelter, clothing, safety, protection. This is the system whereby we build strong communities, efficient agricultural systems, modern construction systems, hi-tech manufacturing systems, professional health care systems, public safety and protection systems, efficient transportation systems, hi-tech communication systems, entertainment systems, religious systems – all social functions of a community, a civilization, a city, a state, a country, a nation, a world.

So are we going to let the misguided and maligned use of the word socialism destroy all of these social functions that we humans have created and developed and nurtured and improved and perfected all of the thousands and millions of years? Are we going back to the early days of our occupation of this country we live in? The days when law and order was settled on an individual basis and controlled by whoever was the biggest and the toughest and the quickest draw? Are we going to return to the days when whoever was the slickest con or was able to garner the strongest grip on any segment of society could control it forever and reap all of the benefit and wealth that it produced – at the demise and suffering of all others?

Is that what our society has become? Is that what we would have it become? Is that what the right-wing, under the ownership and control of the rich and powerful would want for society? Is that what they think society should be? Is that the way they think society can survive and prosper?

If this is the way society is destined to function then the American Express card slogan will apply to the handgun – “Don’t leave home without it!”

Should we adopt Bonehead Bachman’s and Mutt Romney’s way of thinking about taxing the rich – “they earned it, so they should get to keep it?” Should that just apply to the rich or to everyone? Should we adopt the platform of the right-wingers, the Tea Partiers and the Libertarians – the Ronald Reagan followers - “government is not the solution, government is the problem?” Should we reduce the size and the functions of government like these meatheads expound as they throw red meat to their pit bull followers?

Should we just get rid of government and let everyone fend for themselves? Or should we just get rid of the parts that interfere with the free rein of the rich and powerful, as they transfer all of the wealth and the largess of the public treasury to themselves - the public treasury that we all contributed to for the benefit of government for the common good?

If this is the answer, then we are going back 400 years and starting all over again with an ungoverned land, the wild-wild West, the survival of the fittest, the winner-take-all land where people will be unable to live together in a society or a community or anything relating to “social” or “common.”

I would much prefer “socialism”, particularly, the kind of socialism that has proven to work best, where government provides the functions of society and community that government can provide more fairly and efficiently than individuals or industries, so that we can continue to educate our young and provide opportunities for everyone to contribute in their most productive way and thereby enable a reasonably good standard of living for everyone – you know – for the “common good”.

Think about it!

Be someone!

Be social!

Be common!

Confessions of a deranged monster of finance, one of the many self-serving egotists and pathological liars, the "masters of the universe", who are destroying capitalism and the free enterprise system with their un-prosecuted greed, dishonesty and fraud. (My words, not Jessica Silver-Greenberg's)

Dimon Says JPMorgan Made an ‘Egregious Mistake’

By Jessica Silver-Greenberg

Published: May 13, 2012

“There’s almost no excuse for it,” Mr. Dimon said about the trading loss that stemmed from a soured bet on credit derivatives made by the bank’s chief investment office in London.

The trading, which was intended to protect the bank from financial risk, turned bad.

The bank was “sloppy” and “stupid,” Mr. Dimon said.

His interview with NBC’s David Gregory was supposed to be an amiable weekend chat about JPMorgan’s Global Cities Initiative, a five-year economic growth project that the company has been working on. And Mr. Dimon had taped an interview on Wednesday about the project with NBC, without disclosing the trading losses even though he knew about them. On Friday, he sat for a second interview to discuss the losses, apologizing to Mr. Gregory.

Questions rose last month about the bank’s activities amid reports that a trading unit in London was taking outsized positions to hedge against risk that they were distorting the market.

In April, Mr. Dimon, who prides himself on having a finger on the pulse of risk at the bank, dismissed concerns about the trading. In a conference call with analysts on April 13, Mr. Dimon called the worries “a complete tempest in a teapot.”

On Sunday, Mr. Dimon backed away from that confident position. “We were dead wrong” to dismiss the concerns, Mr. Dimon told Mr. Gregory.

Usually a fierce critic of federal regulators meddling with banks, Mr. Dimon said Sunday that the bank would be open to inquiries from regulations.

The interview marked a stark contrast in Mr. Dimon’s earlier position. Even after the full extent of the loss was revealed Thursday on a hastily organized conference call, Mr. Dimon would not admit that the losses called for a stronger regulatory framework. Instead, he defended the trading unit, saying that it had “done a great job for a long extended period of time.”

In the interview aired Sunday, Mr. Dimon said the losses would provide ammunition for regulators to tighten restrictions on banks.

“This is a very unfortunate and inopportune time,” for the trading losses, he said.

The $2 billion loss came from a complicated trading strategy that involved derivatives, financial instruments that derive their value from the prices of securities and other assets. The strategy was erected to defray any potential losses on the bank’s large holdings of bonds and loans, but it backfired and instead of hedging against losses, the trades produced losses of its own.

Mr. Dimon said Sunday that he would support the government’s authority to unwind a failing bank, even if it meant wiping out shareholder equity. But, he emphasized that JPMorgan was “very strong.”

We are losing the mediating middle of everything, and the result is a country paralyzed by social and economic as well as political division.

The remorseless logic of global capital (think: big banks and super PACs) and the middleman-crushing power of the Internet (think: Amazon and the Tea Party) are combining to end not only the "small r" republican vision of the Founders but also many essential, intermediating business and social structures.

The Founders feared both the Monarch and the Mob. Now the salving, balancing middle is being ground to dust between the two.

Like an engine without oil or a knee without cartilage, we are in danger of seizing up. We are losing many of our lesser but essential sources of authority, credit, guidance, service and judgment. Face-to-face dealings, accidental acquaintances, the happenstances of geography and commerce are being replaced by a net-based cacophony of political flash mobs, stovepiped thinking and mail-order trade for virtually every product and service.

A partial list of who is under pressure: families with time to be a family, independent-minded elected representatives, small farmers not beholden to Monsanto or Cargill, county chairmen, "big tent" politics, independent business and sales agents, weekly newspapers, local radio and TV stations, teachers with freedom to teach, principals with latitude to run their schools, local religious leaders respected for their character and judgment.

In politics, the national parties have ceased to be mechanisms of consensus or even mechanisms at all. The power resides entirely with ideological, commercial or personal money.

Barack Obama and Mitt Romney, two cool, aloof, effective assemblers of the new machinery, rely entirely on their own purpose-built campaigns, which have allegiance to no one but them.

Congress is now a home for the politically incapacitated. Senators who once had a year or two to attempt statesmanship and independent thought begin running for reelection even before they are sworn in.

As for the media, the days are long gone when a news anchor like Walter Cronkite could end his broadcast by saying, "And that's the way it is," and most people in the country would nod in agreement. There are no such truly unifying figures today, and most of the money in televised news is spent on ideologically discrete presentations of it.

The Internet makes possible the assembly of new intermediating institutions, but those are still in their infancy for the most part. In the meantime, mighty and basically unaccountable companies such as Google, Facebook, Amazon and others conduct, facilitate and dominate monarch-to-mob-and-back commerce.

To fend off both the monarchy and the mob, the Founders resurrected the Roman ideal of republican government, updated with a Newtonian clockwork of countervailing powers. They saw further protection against political tyranny in an economy of widely dispersed private property -- the ideal for them was the English yeomanry -- and in a rich social soil of education, family and homage to faith that would produce solid citizens.

Today, the Monarchy isn't a Hanoverian in a dusty wig, but rather a silent alliance between an all-knowing, all-benefit-dispensing Washington and billionaires (real people or corporate "people") given new freedom to exert their power by spending at will.

Today, the Mob isn't a witch hunt in Salem, but rather an Internet increasingly ruled by the worship of the viral and made profitable largely by companies that specialize in the Schumpeterian work of wiping out social supply lines of local human interaction with generations or even millennia of tradition.

The risk is that in the name of democracy, we are going to destroy it; that in the name of freedom, we are going to lose it; and that in the name of bringing the budget under control and saving the middle class, we are going to lose both to the Monarchy and the Mob.

Other than that, things are going fine.