Hostage Situation After Action Report

Longtime readers will remember I started blogging two years ago, just in time to catch the collapse of Fannie, Freddie, Washington Mutual, Lehman Brothers and AIG.

September 15, 2008, the day John McCain lost the election with this infamous statement as the Dow lost over 500 points:



...was the same day AIG's fate was sealed.   Two years later, William Greider reveals the story of how the Wall Street banks held the Fed and the American taxpayer hostage in order to extort trillions out of us, with the collapse of AIG bringing down our financial system as the result if the banks didn't get their ransom.  Early Tuesday morning on September 16, 2008, they delivered their ransom note.

Sometime after midnight, the bankers called to say, sorry, they were not interested. There would be no private-sector rescue. According to Thomas Baxter, general counsel at the New York Fed, notification came on Tuesday morning, not from the principal executives of Goldman and JPMorgan but from a bankruptcy lawyer, Marshall Huebner, advising JPMorgan on AIG’s problems. The New York Fed immediately hired him as its own lawyer and proceeded to do what the bankers had refused to do—bail out AIG.

JPMorgan and Goldman offered no public explanation for rejecting Geithner’s proposal. The public wasn’t ever told the banks were asked to do their part. Nor did Federal Reserve officials argue with the decision or try to apply persuasive pressures. It did not put the squeeze on to convince the bankers they must accept some kind of sacrifice in the interest of sharing the pain. Nor did Geithner threaten to pursue an alternative strategy that could have forced the banks to negotiate the terms. This was considered out of the question, though the central bank has employed all these tools on past occasions.

In a subsequent hearing, Damon Silvers, the AFL-CIO policy director who is a member of Warren’s oversight panel, asked Baxter, “When you’re pulling together the private sector to solve a problem that they’ve created of the type that AIG represented, is it typical to accept no for an answer?” Baxter fudged. “Well, I started out by saying there was nothing typical about the crisis,” he replied. He talked in circles and never answered the question.

If the bankers refused to participate, the Fed had to move fast to stanch the bleeding. AIG faced another downgrade from credit rating agencies (the same agencies that had given triple-A blessings to mortgage securities). The Fed adopted the bankers’ “term sheet” as its operating guide and swiftly created a revolving credit fund of $85 billion.

Late on Tuesday, the central bank lent $12 billion to AIG. The next day, it lent another $12 billion. This was only the beginning. The AIG operation became a gigantic spigot for circuitously distributing public money to private banking interests. As the New York Fed pumped more money into AIG, the insurance giant pumped it right out the door to satisfy the demands from counterparties like Goldman Sachs. Having helped scuttle the private rescue, Goldman collected $13 billion from this backdoor public assistance. The Fed did not stop AIG’s hemorrhage. It began financing it, with no questions asked.

And thus began the downward spiral we're now in today where Wall Street's biggest players are richer than ever before, and the rest of us are facing a long, painful slide into deflation.  JPMorgan and Goldman Sachs told all of us to eat shit and die.  We should be out in the streets right now with pitchforks.

Except we can't afford the pitchforks.

Shocked Jock

The long, strange story of radio loudmouth Hal Turner reached the end of one crazy chapter and the beginning of a new one this week with the former shock jock turned FBI informant now facing ten years in prison for threatening three federal judges.

A US Internet radio host was convicted Friday of threatening to assault and kill three judges who upheld a ban on handguns in Chicago, the US Justice Department said.

Hal Turner, 47, was arrested in June 2009 for an Internet posting that said of the three federal judges who had upheld Chicago's handgun ban, "Let me be the first to say this plainly: These judges deserve to be killed."

His post included photos of the three men, Chief Judge Frank Easterbrook and Judges Richard Posner and William Bauer, as well as their phone numbers and work addresses.

All three judges testified during his trial, which was held in New York after Chicago judges recused themselves.

Prior to the trial, it was disclosed that Turner was a well-paid informant for the Federal Bureau of Investigation (FBI), pulling in over $100,000 from the government in just five years time.

And Turner's stint as an informant uncovered some really insane stuff on the domestic terror front:  plots to kill Senators,  President Obama, and other Washington figures.  Of course, Turner himself is a rabid neo-Nazi racist asshole, but he's far from the only one out there.  The feds kept him on the payroll for five years until he crossed that particular line in Chicago.

I'm betting prison's not going to be a pleasant experience for Hal.

Know Nothings

Your alternative to having Obama (a one-time Constitutional Law professor) is having people like Sharron Angle running Washington.  You know, people who actually haven't read the Constitution.

In a recent interview with a local TV station, Nevada Republican Senate candidate Sharron Angle claimed that it is unconstitutional for the United States to remain in the United Nations:

ANGLE: The United Nations resides on our soil and costs us money. We are – I don’t see any place in the Constitution — in those eight priorities — about the United Nations. So when we start talking about cutting programs, 5-percent per year, I think the United Nations fits into that category, yes.

Angle might want to actually read the Constitution before she starts talking about what’s in it. Article II of the Constitution provides that the president “shall have power, by and with the advice and consent of the Senate, to make treaties, provided two thirds of the Senators present concur.” That is why the United States may belong to treaty organizations such as the UN. President Truman entered into the treaty which creates the UN, and the Senate ratified that treaty.

But that doesn't matter to her, only scoring political points through sheer ignorance.  It doesn't matter what truth or fact or law is, only what Sharron Angle believes in her cocoon of delusion and how well she can use that to win votes.

Logic would dictate anyone lacking even basic knowledge of how the Constitution works and the protections it provides should not be a member of the Senate making laws for all Americans.

Nevada is clearly challenging that.  Angle is now gaining ground on Harry Reid if not tied.

This Week's Busted Banks

One more in Illinois brings the 2010 total to 110 in 32 weeks.

Regulators on Friday shut down a bank in Illinois, bringing to 110 the number of U.S. banks failures this year amid mounting loan defaults.

The Federal Deposit Insurance Corp. took over Palos Bank and Trust Co., based in Palos Heights, Ill., with $493.4 million in assets and $467.8 million in deposits. First Midwest Bank, based in Itasca, Ill., agreed to assume the assets and deposits of the failed bank.

In addition, the FDIC and First Midwest Bank agreed to share losses on $343.8 million of Palos Bank's loans and other assets.

The failure of Palos Bank is expected to cost the deposit insurance fund $72 million.

It was the second straight week marked by the failure of an Illinois bank. Last week the FDIC seized Ravenswood Bank, a small bank in Chicago. The closure of Palos Bank brought to 14 the number of bank failures this year in Illinois.

With 110 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, which was already a brisk year for shutdowns. By this time last year, regulators had closed 77 banks.

The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

This will only get worse as the economy continues to weaken.  Community banks like this are the heart and soul of the small business lending industry, and that's being wiped out by Bush siding with the huge megabanks in the TARP debate and Republicans refusing to allow Democrats to fund small business lending by assisting smaller community banks like the ones that are closing by the dozens each month.

Meanwhile, The Next Morning...

Alright.

Obama's statement on Cordoba House last night was the morally right thing to do, but looking objectively at it after a night's sleep, I have to entertain the thought that while it was morally correct, politically Obama and the Democrats are going to pay a heavy price for this.

Example one is CNN quoting Pam "Atlas Shrugged" Gellar's response to Obama, when she happens to be one of the most xenophobic bigoted anti-Islamic beings on Earth currently.  It's one thing when I point out "Hey, look at this verbal fecal matter that Pammycakes threw at Obama.  She's crazy."  It's entirely another when CNN characterizes her as legitimate:

"Obama came out for the Islamic supremacist mosque at the hallowed ground of 911 attack," Pamela Geller, a leading foe of the Islamic center, wrote on her blog Friday night. "He has, in effect, sided with the Islamic jihadists."

Any thinking American realizes how idiotic that is, but then you realize that just back in March that a Harris Poll showed 57% of Republicans believe Obama is a Muslim.  I'm pretty sure that number has gone up after this, so as far as Gellar's insanity goes, her views really are legitimate and mainstream among Republicans.

Expect the Sunday shows this weekend to be all about how Democrats are now going to have to answer if they agree with Obama or not, and how Republicans are going to say "It's not a question of can they build Cordoba House there, but should they."

It's a false argument, as Digby reminds us.  We're at a point where Republicans have embraced the Party of No label so much that it now extends to all Muslims in America.  It's outright bigotry being justified under "Islam isn't a real religion" the way slavery and racism was justified because "Blacks aren't really human" and anti-Latino racism today is "they're not really Americans".  We should be appalled that this is happening at all.

But the ignorance is overpowering.  Our media has failed to even try to bother to educate.  Pam Gellar is given equal time as having a real argument instead of it being treated as spittle-flecked invective hurling forward from her mouth like a garden hose.

We're deep into the scariest time socially that many of us, at least in my relatively young 80's kids generation, have seen.  9/11 at least united us against those who perverted a religion into hatred.  Nine years later we have become the hatred.

Now things are going to get really ugly.  Democrats nationwide are going to have to go on record about this, and the hate merchants are going to get all new ammo to use this fall.  You will see commercials this fall with "And Bob Smith agrees with Obama that Muslims should build a mosque at Ground Zero in New York City.  Bob Smith...out of touch with the people" and exploding towers and people in turbans.  It's going to be hideous.

That's all they have is hate...but American history is full of examples where hate achieved political goals.

[UPDATE]  Via Memeorandum, FOX News actually defends Obama for standing up for the First Amendment here. Watch:



Here there be dragons.

[UPDATE 2] And now Obama is walking back his comments from last night?!?

President Obama expanded on his remarks about the mosque planned near ground zero during his trip to Florida Saturday.

Obama said that his statement on Friday didn't express support for the “wisdom” of building a mosque two blocks from the site of the Sept. 11, 2001, terrorist attacks in Manhattan, but rather the right the group has to build it.

"My intention was simply to let people know what I thought. Which was that in this country we treat everybody equally and in accordance with the law, regardless of race, regardless of religion," Obama said.

“I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there. I was commenting very specifically on the right people have that dates back to our founding,” Obama told reporters Saturday after delivering remarks in Panama City Beach, Fla. “That's what our country is about."

Are you kidding me? Obama, what the hell?

[UPDATE 3]  Josh Marshall puts Obama's statements today in badly needed perspective.

He's not getting into the identity of the builders or whether he agrees the exact placement. They have the right to build on private property. We're Americans. We'd don't discriminate on the basis of religion. Even the AP, more accurately, refers to the president "expanding" on his statement, though perhaps better to say 'countering willful distortion.' The CBS version of the AP story says he "expounded" on the issue. (ABC was a bit in Politico's direction, though nearly as egregious.) Even with the aim of selling copy and appealing to its core readership's biases, this stands out as a troubling example of organized lying on the part of Politico's editors. It will be interesting to see who else follows their line.


Late Update: Notably, whereas Politico writes that the White House had may no effort to suggest that the president's original statement referred to a equal right to build rather than support for this particular effort, the Times says that had indeed done just that. What stands out here is that there is nothing surprising about Obama's stance since I believe this is the stance of most people who take a 1st Amendment stance on this. Who the people behind the project are is beside the point. Getting drawn into the design of the building is irrelevant. We don't discriminate on the basis of religion. Call it the American values position. 

So this really is a case of the Village picking a fight, and once again it's Politico throwing the first punch.

Korean Barbecue Redux

According to Time magazine's analysis of the UN's exhaustive report from international experts on the sinking of the frigate Cheonan in March, it pretty much absolutely had to be the North Koreans who did it.

The document, a draft of which has been seen by TIME, consists of 286 pages of sometimes dense scientific and engineering analysis. It not only presents the case for why a North Korean attack is the "only plausible possibility" but sources with detailed knowledge of its preparation say that its intent is to pick apart, in a manner worthy of a Sherlock Holmes story, the most prominent competing theories that have been publicly raised in the months sine the incident. There is no way the ship ran aground, the report says, because the damage to the Cheonan's hull was in no way consistent with that scenario. To the contrary, "two types of hull deformations, impossible to occur in a grounding event, were observed."

The possibility of a friendly fire episode, widely debated on the web in South Korea and elsewhere, is similarly dismissed. The report asserts that all "submarines from neighboring countries were either in or near their home bases at the time of the incident." A collision with another boat? No trace of "an incoming vessel" was found. A ship-to-ship or ground-to-ship missile? The damage done to the Cheonan, the report states, would have been considerably different had that happened. In all, the report runs through 10 different possible scenarios of why the ship might have sunk, and after outlining the evidence in each of those cases it concludes with the words: "no chance."

By contrast, it labels the notion that a North Korean torpedo struck and sunk the Cheonan as a "high possibility." It asserts that the survivors of the Cheonan heard "one or two explosion sounds [sic]," and says that South Korean Marine sentries posted on the nearby Baekyrong Island testified to seeing "a flash of white light" about 100 meters in height. The report further states that analysis done by the U.S. Navy for the joint commission concludes that the sub fired a torpedo with an explosive weight of 250 kilograms that blew up just under the center of the boat, to its port side, at a depth of six to nine meters. The report goes on to a detailed technical discussion of "shape and trace analysis," which explains why the damage done to the Cheonan's hull is consistent with a torpedo attack.

In other words this is a hell of a Friday night news dump because it basically accuses North Korea of a major act of war.  Not sure where this goes from here, but it probably won't be good and it could be absolutely disastrous.

StupidiNews, Weekend Edition!

• A second wave of flooding in Pakistan is putting as many as 20 million people at risk...
• ...as well as raising the fears of the Pakistani government collapsing due to massive political unrest.
• After 900 years, Venice, Italy may be getting its first female gondolier.
• Ten-year Treasury notes have fallen to their lowest yield in sixteen months on word the Fed is buying debt.
• Wikileaks plans to release another 15,000 Afghan War documents in the near future despite heavy criticism.