And So I Go: Yesterday, Today and Tomorrow

Posts Tagged ‘Bail out 2008

Nearly half of US households escape fed income tax – Yahoo! Finance.

I get so angry when I hear people saying, “Tax the rich!”  I get even more angry when the Democrats  use this as a tool to try to  divide the country  in Haves and Have-nots.   The so-called “rich” are already being taxed to support the other half of the people in the United States who pay no taxes at all!  The very rich billionaires   pay 35% of the taxes in the United States although they represent less than 1% of the population. The Democrats have pushed this lie that the rich are oppressing the poor so long that the truth has been lost. It is a case of say it often enough and it becomes the truth regardless.  Now the Democrats have spent so much that even they have become aware of the dire straits this country is in. Suddenly after spending like money grew on trees  and the need for money  to keep spending since the world has put the brakes on their borrowing  the Democrats  want to cut the tax cuts given under President Bush.  Cutting taxes and putting more money in the hands of the people has proven again and again to be the most effective way for the government to GET MORE MONEY THRU TAXING INCOME.  When the people have more money to spend and invest in business there are more people working and therefore more income to tax.  It is so easy to understand but apparently the Democrats and Progressives have a mental block here.

Another fact: it wasn’t until the Democrats came into power in 2006 that our nation began the long dip into the depression we are in now.  It was the  wheeling and dealing that Democrat Barney Frank Chairman of the House Finance Committee and Democrat Sen. Chris Dodd Chairman of the Senate Banking  Committee  stuck their grasping fingers into the  mortgage market demanding banks lend money to people who could not afford to buy a house and then covered these dirty deals up by insisting all was well when President Bush was calling for investigations into Freddie Mac and Fanny Mae that the crisis finally came to a head and the finance industry  came crashing down.

President Bush was in the White House and got suckered into this mess of Bail Outs but it was the Democrats in Congress who voted for them.  Many Republicants and a good many citizens were against the Bail Outs!

So when the crisis that had been allowed to occur  when the Democrats controlled Congress what did the Democrats do?  They did what the Democrats always do: they threw a lot of money at the banks and  even more into the federal government.  Yes all this money was first given to federal agencies to  then give to the banks.  Of course the agencies had to be funded for this service so they took their cut off the top.  They then hired more people so that the agencies in the government could keep growing and growing and spending and spending.   Bigger and Bigger government.  The government agencies got the lions share of the TARP money and the Stimulus money!  Money the nation did not have and had to borrow!

Now the Democrats can only think of taxing the “rich”.  They consider the ‘rich” any couple who makes over $250,000 a year.  People please understand these are  the small business people who employ most of the working people in this country.  By letting the Bush Tax cuts expire the taxes on these people will go back up to the 40%.   This at a time when   money is needed by the people who do the hiring and creating jobs for the rest of us!  Of course they are now referring to just allowing the Bush Tax Cuts to continue as the Obama Tax Cuts.

Anyhow, this article tells exactly who pays taxes in this country and believe me it is not me because I am part of the 47% of people who pay no  INCOME taxes.  In fact, being retired on Social Security I was one who  received   a check from the government on two occasions to boost my income from tax payers who had paid taxes.  It is one thing to get some of your own taxes back but it is an  entirely different thing to get money from the government that comes from other tax payers because you personally do not pay taxes.  I and a good many of you ( 47% of us in fact)  PAY NO INCOME TAXES.  What we do pay is the Social Security and Medicare/Medicaid taxes.  BB

Stephen Ohlemacher, Associated Press Writer, On Wednesday April 7, 2010, 5:38 pm EDT

WASHINGTON (AP) — Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it’s simply somebody else’s problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That’s according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it’s still almost always better to file: That’s the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

“We have 50 percent of people who are getting something for nothing,” said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

That helps explain the country’s aversion to taxes, said Clint Stretch, a tax policy expert Deloitte Tax. He said many people simply look at the difference between their gross pay and their take-home pay and blame the government for the disparity.

“It’s not uncommon for people to think that their Social Security taxes, their 401(k) contributions, their share of employer health premiums, all of that stuff in their mind gets lumped into income taxes,” Stretch said.

The federal income tax is the government’s largest source of revenue, raising more than $900 billion — or a little less than half of all government receipts — in the budget year that ended last Sept. 30. But with deductions and credits, especially for families with children, there have long been people who don’t pay it, mainly lower-income families.

The number of households that don’t pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery.

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

In 2008, President George W. Bush signed a law providing most families with rebate checks of $300 to $1,200. Last year, Obama signed the economic recovery law that expanded some tax credits and created others. Most targeted low- and middle-income families.

Obama’s Making Work Pay credit provides as much as $800 to couples and $400 to individuals. The expanded child tax credit provides $1,000 for each child under 17. The Earned Income Tax Credit provides up to $5,657 to low-income families with at least three children.

There are also tax credits for college expenses, buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances. Many of the credits are refundable, meaning if the credits exceed the amount of income taxes owed, the taxpayer gets a payment from the government for the difference.

“All these things are ways the government says, if you do this, we’ll reduce your tax bill by some amount,” said Roberton Williams, a senior fellow at the Tax Policy Center.

The government could provide the same benefits through spending programs, with the same effect on the federal budget, Williams said. But it sounds better for politicians to say they cut taxes rather than they started a new spending program, he added.

Obama has pushed tax cuts for low- and middle-income families and tax increases for the wealthy, arguing that wealthier taxpayers fared well in the past decade, so it’s time to pay up. The nation’s wealthiest taxpayers did get big tax breaks under Bush, with the top marginal tax rate reduced from 39.6 percent to 35 percent, and the second-highest rate reduced from 36 percent to 33 percent.

But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here’s how they did it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

Internal Revenue Service:

Tax Policy Center:


Morning Bell: The Fatal Flaws of the Wall Street Bailout Bill | The Foundry: Conservative Policy News.

So the guys all got together behind closed doors and over beers and decided on the best way to put Wall Street bankers on Easy Street forever and ever more.  This Financial Reform Bill is like the Health Care Reform Bill  in that the more you learn the sicker you get!

And people this is not going to stop here by any means.  Recall at the G21 Conference right after Obama took office and his willingness with Britain’s PM Brown to form a Global Financial Regulatory Agency?  Well once Obama gets his hands on the countries Financial industry he intends to turn it all over to the  international organization.  Now I would guess that the biggest boys  on Wall Street have already bought their seats at that particular table.  BB

04/23/2010The Fatal Flaws of the Wall Street Bailout Bill

Speaking to an audience of big business and big labor executives (including Goldman Sachs’ Lloyd Blankfein, Bank of America’s Bruce Thompson and SEIU’s Andy Stern) at New York’s Cooper Union, President Barack Obama noted “the furious efforts of industry lobbyists to shape” the financial regulation bill “to their special interests.” Obama then admitted, “I am sure that many of those lobbyists work for some of you. But I am here today because I want to urge you to join us, instead of fighting us in this effort.” Obama should have saved his breath. Wall Street and big labor lobbyists have already joined forces to make sure the current Senate legislation has become a Wall Street Bailout Bill.

Big labor’s ties to this White House are already well documented. Less known is just how close Obama administration interests align with the big firms that benefit most from the TARP bailout. The Washington Examiner reports that at Goldman Sachs, the nation’s largest investment bank, four of the five in-house lobbyists were Democratic Capitol Hill staffers — the remaining one gave $1,000 to Hillary Clinton last election. And USA Today notes that Goldman Sachs alone has given nearly $900,000 since January 2009 to congressional candidates, with 69% of that cash lining Democrat pockets. Finally, then-candidate Obama collected almost $1 million from Goldman executives and employees in 2008, more than the combined Goldman haul of every Republican running for president, Senate and the House.

So what have Wall Street lobbyists bought with their campaign cash and high priced lobbyists? A bill that gives permanent TARP-like authority to Washington regulators, thus enshrining Washington as a permanent bailout machine. Specifically, the bill:

Creates a protected class of too big to fail firms. Section 113 of the bill establishes a “Financial Stability Oversight Council,” charged with identifying firms that would “pose a threat to the financial security of the United States” if they encounter “material financial distress.” While these firms would be subject to enhanced regulation, such a designation would also signal to the marketplace that these firms are too important to be allowed to fail and, perversely, allow them to take on undue risk.

Creates permanent bailout authority. Section 204 of the bill authorizes the Federal Deposit Insurance Corporation (FDIC) to “make available … funds for the orderly liquidation of [a] covered financial institution.” Although no funds could be provided to compensate a firm’s shareholders, the firm’s other creditors would be eligible for a cash bailout. The situation is much like the bailout AIG in 2008, in which the largest beneficiaries were not stockholders but rather other creditors, such as Deutsche Bank and Goldman Sachs.

Provides for seizure of private property without meaningful judicial review. The bill, in Section 203(b), authorizes the Secretary of the Treasury to order the seizure of any financial firm that he finds is “in danger of default” and whose failure would have “serious adverse effects on financial stability.” This determination would be virtually irreversible in court.

Establishes a $50 billion fund to pay for bailouts. Funding for bailouts is to come from a $50 billion “Orderly Resolution Fund” created within the U.S. Treasury in Section 210(n)(1), funded by taxes on financial firms. However, according to the Congressional Budget Office, the ultimate cost of bank taxes will fall on the customers, employees and investors of each firm.

Opens a “line of credit” to the Treasury for additional government funding. Under Section 210(n)(9), the FDIC is effectively granted a line of credit to the Treasury Department that is secured by the value of failing firms in its control, providing another taxpayer financial support.

Authorizes regulators to guarantee the debt of solvent banks. Bailout authority is not limited to debt of failing institutions. Under Section 1155, the FDIC is authorized to guarantee the debt of “solvent depository institutions” if regulators declare that a liquidity crisis (“event”) exists.

Imposes one-size-fits-all reform in derivative markets. Derivatives are already increasingly being traded on clearinghouses thanks to private efforts coordinated by the New York Fed. But the Senate bill would require virtually all derivative contracts to be settled through a clearinghouse rather than directly between the parties. Applying such ill-designed blanket regulation would make financial derivatives more costly, more difficult to customize, and, consequently, less widely used—which would increase overall risk in the economy.

According to Rasmussen Reports, 64% of Americans are not confident that policymakers in Washington know what they’re doing with regards to Wall Street. They have every reason to be concerned. Rep. Peter DeFazio (D-OR) tells National Review: “From the beginning, I’ve thought that the deal Goldman Sachs got via Treasury Secretary Tim Geithner on their bad bets through AIG kind of stunk. They got $13 billion from AIG last year.” DeFazio doesn’t seem to realize that the bill Obama is pushing would empower Secretary Geithner to repeat the AIG bailout ad infinitum. No need to ever go back to Congress for a new TARP. The Senate bill is a permanent TARP. Which is exactly what Goldman Sachs and the rest of their Wall Street lobbyists wanted all along.

Updated with part two added below.

Well, well, well Dear Readers do we got news today.  The AIG big wigs, about 200 of them, are due to get $100 million in  bonuses this year.  Yes, the very same group that carried their company to the brink of bankruptcy so the tax payers had to give them $181 billion (BILLION) in a bail out that we will never get back.  The banks who got bail outs have paid the government back with interest and sometimes a severance type fee on top of it for paying back the bail out too soon.  AIG  on the other hand was one of those “too big to fail” conglomerates.  Of course the “too big to fail” stuff is nonsense since the parts would just be sold off and those that were worthless and not worth saving would be terminated.  (NOTHING is too big to fail,  and sadly that includes the United States Government which is right on the verge of failing with no one out there to bail us out or break up the parts and keep functioning. But that is another story which I have been pounding away at for over a year now.)

Anyhow the AIG bonuses are legal because due to the bail out AIG made a profit and it is in these peoples contracts which were signed well before the financial crisis and the contracts say they will get a bonus based on the profits, plus a bonus just for breathing.  The contracts can not be broken.

Some people are saying the contracts should be broken.  Think carefully on this one people.  If these contracts are broken than that leaves all contracts open to be broken and that is a slope we really don’t want to go down.  Some will argue that contracts are broken everyday and that too is true, but there are heavy penalties to be paid and can only be broken with an agreement (another contract) between the parties to the contract.

So to break the contracts with the 200 AIG wigs would cost a bundle and it is  just better to let them have the bonuses.

NOW read the following from Big Government Blog and see how this bit of info makes the bonus  bit look like fluff blowing in the wind:

Geithner and Bernanke: Laundering Money Through an Illegal Trust?

by Frank Gaffney This afternoon on Secure Freedom Radio we announced a breaking news story concerning the Administration’s ongoing cover-up of AIG financial wrong-doing.  In an interview with David Yerushalmi, senior litigator on the Murray v. Geithner et al lawsuit, we expose possible fraud, money-laundering and criminal activity.


As Yerushalmi says in the interview, “So here’s what we find out in the midst of discovery when we depose the Treasury Department’s deponent and the Fed and get documents, here’s what we’ve learned: The Federal Reserve Bank of New York at the time that it structured the debt that it was going to give AIG insisted that not only did it get the debt, not only would it get principal and interest payments and collateral for that, it wanted 80% of AIG, precisely 77.9% of the shares and the voting rights.  But the Federal Reserve Bank and Geithner knew that it was illegal for the Fed system whether there’s a Fed or the Federal Reserve Bank of New York to own that, so what did they do….”

Read the rest – the  transcript and audio of the interview – at Secure Freedom Radio.    Come back for an update tomorrow involving Neil Barofsky, Special Inspector General for TARP….and an animated movie showing exactly how the AIG, Treasury and Federal Reserve scheme worked…

I copied the transcript here before Obama has it taken off.  this is being done all the time.  BB

aking News: Evidence of criminal wrongdoing in Treasury’s handling of AIG?

by admin on February 2, 2010

Today Secure Freedom Radio has breaking news from senior litigator David Yerushalmi, a major story uncovering evidence of criminal wrongdoing in the AIG matter.


FRANK GAFFNEY: Congressman Darrell Issa, ranking member on House committee on Oversight and Goernment Reform, confronting Treasury Secretary Tim Geithner:

ISSA: In recent weeks, this committee, receiving these documents, have caused us to better underst the NY Fed pressured AIG to avoid negotiations designed to obtain the haircut, as its called, from its counterparties and to keep the details of the counterparties payments from appearing on the firms’ forms at the SEC.

David Yerushalmi, Securities specialist and senior litigator in Murray v. Geithner et al.

DAVID YERUSHALMI: In September of 2008 the US govt took over AIG, effectively over a period of months they invested $180 billion in AIG, collateralized all of its assets, and took 80% of its ownership through shares and voting rights.  They controlled AIG from top to bottom.  Part of that money that they gave to AIG.

When Mr. Geithner was serving prior to his current position as Secretary of Treasury, he was President of Federal Reserve Bank of New York.  They were the ones that originally gave AIG $85 billion of debt by opening up a discount window.  He went to AIG and said, we want you to pay off all of the financial institutions (our buddies on Wall St and even in Europe) because they’re demanding money from you for all these credit default swaps and toxic assets that everyone hears about.

So when AIG started talking to these financial institutions, what would you normally expect, that they would go to their creditors and say, we’re on the verge of bankruptcy they’d ask them to take less than 100% on the dollar – to “take a haircut.”  But the Federal Reserve Bank of New York and Mr. Geithner said no – you need to pay them 100 cents on the dollar because it would be wrong for the Federal Reserve Bank to use it’s clout to gain a better bargaining position.  Companies like Goldman Sachs, UBS, Societe Generale in Paris, etc. were involved as creditors.

GAFFNEY: Here’s the breaking news – what did you discover in the process of your lawsuit on behalf of this Iraq war veteran that sheds further light on this story and raises real concerns about not just peculiar and fiduciarily-challenged behavior but maybe even criminal activity?

YERUSHALMI: Keep in mind that the forcing of AIG to pay the counterparties to pay 100 cents on the dollar may have been stupid, or bad policy or bad business, but it wasn’t illegal.  But in our lawsuit, which we had brought against the Federal Reserve and Treasury when they acquired AIG, they acquired the world’s largest provider of Shariah-compliant insurance products.

GAFFNEY: Shariah, of course, a term we use all the time (people here are familiar with it at Secure Freedom Radio), namely the  theo-political-legal program– that oppressive, barbaric ideology– that the authorities of Islam claim is the true faith. And this is practiced by AIG through its insurance products.

YERUSHALMI: Not just practices, but promoted. Not just to Muslims but to the non-Muslim world…

GAFFNEY: … And we own them as taxpayers. and the lawsuit questions the constitutionality, given the Establishment clause regarding of separation of Church and State.  We’re running out of time, jump to the news that we have here.

YERUSHALMI: So here’s what we find out in the midst of discovery when we depose the Treasury Department’s deponent and the Fed and get documents, here’s what we’ve learned:

The Federal Reserve Bank of New York at the time that it structured the debt that it was going to give AIG insisted that not only did it get the debt, not only would it get principal and interest payments and collateral for that, it wanted 80% of AIG, precisely 77.9% of the shares and the voting rights.  But the Federal Reserve Bank and Geithner knew that it was illegal for the Fed system whether there’s a Fed or the Federal Reserve Bank of New York to own that, so what did they do?  They created this independent trust.

GAFFNEY: The same was true of Treasury right?

YERUSHALMI: Well that’s exactly right.  You would think that if they couldn’t own it maybe they could’ve got the Treasury Department.  But the Treasury Department had no legislative authority to take equity from AIG either.  So what did they do?  They came and opened up a discount window but created a so-called “independent trust” and they hired three trustees, and they insisted that these people were independent non-governmental actors, no conflicts of interests.  But in crafting the trust agreement they slipped in a barely noticed provision of the trust agreement which said “Oh by the way, the Fed controls the trust completely, its terms and effectively the trustees.”  Under anybody’s rendition of trust law this is not a valid trust, this is simply a ruse or an artifice for the Federal Reserve Bank.  The second–

GAFFNEY: Which makes the proposition- David we’re just about out of time.  Which makes what they did as I understand it from a technical, legal sense, money laundering.

YERUSHALMI: Exactly right, if you try to do something which is illegal, gaining control of ownership by the Federal Reserve Bank of AIG which was not authorized through a fraudulent artifice then you have violated- that’s a classic violation of money laundering.

GAFFNEY: You heard it here first at Secure Freedom Radio folks.  We have evidence of criminal activity on the part of the man who is now Secretary of the Treasury and the man who was just reconfirmed as Chairman of the Federal Reserve Board.  We will be pursuing this, David Yerushalmi, as I know you will be very closely.  Thank you for joining us here at Secure Freedom Radio.  We will be hopefully seeing some of these congressional auditors like Congressman Issa taking up this issue as well. Obviously this plot is continuing to thicken.


Shariah Finance, Criminal Wrongdoing in the AIG Takeover: Will the Special Inspector General for the TARP Funds Investigate the Illegal Trust?

by Frank Gaffney Yesterday we broke the story of possible criminal wrongdoing in regards to the bailout of AIG by Treasury Secretary Tim Geithner, then Director of the New York Federal Reserve, and Federal Reserve Chairman Ben Bernanke.


It appears that, through it’s 77.9% control of AIG’s equity and voting rights, the NYFed “sought to accomplish an illegal financial transaction through false means” by creating an “independent”: trust that was in fact not independent, placing it “in violation of federal anti-money laundering statutes (18 USC § 1956).” Here we elaborate a bit further, laying out the issue in the text of a letter submitted to Neil Barofsky, Special Inspector General for TARP (SIGTARP)– as the government takeover of AIG was accomplished using funds provided to the Troubled Asset Relief Program.

First, however, some context: Crucially, these facts were discovered while securities litigator David Yerushalmi and the Thomas More Law Center was representing Iraq War vet Kevin Murray in Murray vs. Geithner, et al. Mr. Murray is rightfully horrified that the very doctrines of the enemy he faced in combat would be promoted by the US government. Specifically, prior to the U.S. government’s takeover of the insurance giant AIG, the company was the world’s leading promoter of Shariah-compliant finance products and businesses. Bailing out and forcefully (and illegally) taking ownership of AIG put the American taxpayer in the position of advocating Shariah-compliant finance, which is troubling on many levels:

First, the Shariah authorities themselves tell us that Shariah is a holistic and indivisible whole and that you cannot carve out “business law Shariah” from any other of its constituent parts, like the law of jihad. And, you can see this in that part of Shariah called civil law or fiqh al-muamalat. According to Shariah, AIG cannot invest its takaful funds in a business that might rent space to a church, because that would violate the principle of not supporting any religion other than Allah’s. Further, AIG may invest its funds in a military armament factory for Muslim armies but not US or infidel armies. In other words, these laws which seemingly have nothing to do with business concerns or ethics but rather everything to do with theo-political concerns apply as forcefully to Shariah-compliant finance as the laws on interest. And, of course the reason for this we know because the Shariah authorities tell us: Shariah makes no distinction between religion, law, politics and war. It is all subsumed under Allah’s law called Shariah.

Second, the very Shariah authorities who have the legitimacy to be Shariah board members for such an international concern are themselves advocates of violent jihad or they are the students and disciples of such Shariah authorities. For example, AIG employs Mufti Imran Usmani, who is the son, student and disciple of Mufti Taqi Usmani, the very authority who sat on the Dow Jones Islamic Index Shariah advisory board for almost 10 years beginning in 1999 and who wrote a book and had it translated into English also in 1999 which called on western Muslims to rise up and engage in violent jihad against the West. Now, either Dow Jones was recklessly blind to this fact or willfully blind to it. Now, we see that AIG and the US Treasury have succumbed to the same reckless disregard of what are now quite obvious facts.

Shariah-compliant finance is the use of Shariah (Islamic law) to sell financial products that are approved by Shariah Islamic authorities. Principally this means that since interest is illegal under Shariah, interest payments are disguised as profits or payments for services rendered. While there is nothing wrong with the use of legal fictions, there is when the details of the guiding force—Shariah—is not disclosed to the investing public. Most problematic, is Shariah’s call for the murder of apostates and global jihad against the very infidels in the West buying these Shariah products. Among some financial institutions’ ‘Shariah advisors’  is Sheikh Yusuf al-Qaradawi (who moonlights as spiritual leader of the Muslim Brotherhood). He famously promoted Shariah-compliant finance as “jihad with money.”

For an in-depth look at Shariah-compliant finance, see David Yerushalmi’s Utah Law Review article, “Shariah’s ‘Black Box’: Civil Liability and Criminal Exposure Surrounding Shariah-Compliant Finance”. Look for a video tomorrow called, “Understanding the Takeover of AIG.”

The following is a letter sent by Mr. Yerushalmi to Neil Barofsky, Special Inspector General for TARP:

Dear Mr. Barofsky:

I am an attorney who has worked in the securities litigation arena for more than 25 years and I also serve as General Counsel to the Center for Security Policy, a highly-respected think tank in Washington, D.C., headed up by former Reagan administration official Frank Gaffney, which focuses on matters of national security. I have cc’d Mr. Gaffney on this email.

In this capacity, I am representing Kevin Murray in a First Amendment/Establishment Clause case against the Fed and the Sec. of the Treasury in his official capacity as head of the Treas. Dept. We have alleged that the takeover of AIG by the US Government encourages, promotes and indeed sustains AIG’s advocacy of Shariah-Islamic insurance products worldwide in violation of the First Amendment. The government filed a motion to dismiss which was denied. I have attached that opinion. Currently, we are in the throes of discovery and awaiting the court’s ruling on our motion to compel Secretary Geithner’s deposition, which was necessitated by the fact that the Fed and Treasury Rule 30(b)(6) deponents either testified inaccurately or feigned ignorance (no surprise to you I am sure). I have attached our Motion to Compel and our companion Response to the government’s Motion for Protective Order.

I write to you today because in the course of our discovery investigation, we effectively uncovered a fraudulent artifice which allowed the Fed/FRBNY and the Treasury (using TARP funds) to accomplish that which it could not accomplish legally at the time (pre-EESA)—the acquisition of 77.9% of AIG’s equity and voting rights. We discovered this because we were looking at “standing” issues relative to the Fed/FRBNY funds provided to AIG under the Credit Facility approved in the latter half of Sept. 2008. But, what we learned was quite simply astounding.

The FRBNY wanted more than just a standard debt deal; it wanted absolute control and ownership of AIG. But, it was illegal for the FRBNY to hold equity and the Treasury Dept. did not yet have the legislative authority, later granted under EESA, to do so. But this didn’t stop then-President Geithner or his general counsel Thomas Baxter. They crafted the AIG Trust to accomplish the same goal. But the Trust was transparently invalid and illegal for two fundamental reasons: One, the FED maintained absolute control over the Trust’s existence, its terms, and the Trustees through Section 1.03 of the Trust Agreement. This, as we explain in our Response papers attached, invalidates the trust; yet the government continues to speak about this as an “independent” Trust.

Two, the Fed/FRBNY could not take legal title to the equity but neither could the Treasury Department during this pre-EESA period. So, the FRBNY named the U.S. Treasury (in the Trust Agreement) as the beneficial owner. But again, as our Response papers point out, it is elemental trust law that a beneficiary must be a person or entity that can actually hold title. While the Treasury Department can hold title, the U.S. Treasury can no more hold title than a bank account – because that is what it is. You can deposit funds or assets into a depository account but the account cannot have “ownership” because it has no more authority to do so than a tree log. But, the FRBNY had to conceal the fact that this transaction was really for the benefit of the Treasury Department (something the Treasury Dept’s Rule 30(b)(6) deponent conceded under oath (also provided in our Response papers), because the Treasury department had no legal authority. And, even if it did, as under EESA a few months later, to grant the federal government voting rights would be to create a Gordian Knot of conflicts-of-interest, which is why presumably the legislation seeks to avoid the government from taking both the equity and exercising voting rights. But, at the time of the AIG Trust, there was absolutely no legislative authority for the Treas. Dept to take control of AIG. Yet, this is what the purportedly Trust accomplished.

In the world of finance, and you certainly know this as well as I, if you seek to accomplish an illegal financial transaction (“specified unlawful activity”) through false means (the Trust structure), you are in violation of federal anti-money laundering statutes (18 USC § 1956). I have attached a ppt presentation my office has prepared for oral argument in our case (although the criminal violation is not at issue insofar as we don’t have standing to raise it). Since this artifice included TARP funds, you, in your capacity as the SIGTARP, do. Please feel free to use this material as you deem best.

I will be in Washington, D.C. on Tuesday meeting with some Congressional leaders on this point, and would be more than willing to discuss this in greater detail.

Thank you.

David Yerushalmi. Esq.

House scales back proposed Wall Street rules – Yahoo! News

It seems the progressives in the House are not going to be allowed to strangle the financial industry with regulations. There are plenty of regulations already in place to keep the financial industry in check, but what we don’t seem to have is the regulations in place to keep congress men like Rep. Barney Frank and Senator Chris Dodd  from messing with the enforcement of the regulations.

Wall Street is all about making money.  Making money in any way they can and with any kind of deal whether “real” or not.  Derivatives aren’t “real” but money can be made by buying and selling these pipe dreams not worth the paper their printed on, so Wall Street bankers had a field day which lead  up to the Financial Crisis  2008.  Which, by the way, We the People have since learned was not a “crisis” after all, but another little scheme to bilk the tax payer out of $800 billion  (remember TARP?).  The banks lined up with their hands out to collect these billions from the Treasury Secretary who has sole control over these funds.  Then Congress had a brainy idea and attached some strings to the money and Wall Street bankers couldn’t pay back the funds soon enough.  This then made it clear the TARP bail out wasn’t necessary.

Anyhow we now know the Bail Out was another scam and the financial problems with derivatives and poor banking practices that got some banks in trouble was due to not enforcing the regulations already on the books.  (the regulations were not enforced because the bankers were paying-off   key congressmen, chief among them Frank and Dodd!)

But congress could not admit they were the culprits behind all the failures and mortgage crisis (was and is real) so they had to do something to “fix the problem” so the nasty greedy bankers couldn’t get away with such shenanigans in the future.   It seems now a few saner heads have prevailed and taken the teeth and the added bloated bureaucracy  needed to enforce the new legislation out of the new legislation.

(Sigh) in some very rare occasions government does manage to get it  somewhat right or workable.  But don’t hold your breath waiting for the next time because the “rightness” only happens once in a blue Indian moon.

Prodded by moderates, however, nearly half the Democrats teamed up with Republicans late Thursday to loosen restrictions on derivatives and reject tougher regulations.Before a final vote Friday, House members will have to decide whether to support an amendment to kill a proposed Consumer Financial Protection Agency, one of the central features of the legislation. The agency would consolidate consumer lending regulations and enforcement that is now split among several banking regulators.

Eliminating the consumer agency could cost the overall bill support from liberals.

Democratic leaders were also seeking to revive legislation that would let bankruptcy judges rewrite mortgages to lower homeowners’ monthly payments. A coalition of banking organizations on Thursday sent lawmakers a letter urging them to vote against the amendment. The House previously passed bankruptcy-mortgage legislation, but it failed in the Senate.

It is ironic that We the People   may have a communist dictatorship to thank for saving us from our own President and Congress.

Our President, Barack Obama went hat in hand and on bended knee to our nation’s banker this past week to beg that our mortgage be extended and even that we be allowed to take out an additional mortgage.  The man who holds the post that has been considered the most powerful in the world  due to his policies seemed to see no shame in begging another country  to  bail out and continue to finance the profligate spending of  the nation he is supposed to be governing and he is, because of his policies and agenda, demanding.

And what did China leaders say?    China which now holds over $500 billion in US Treasury Notes and that much again in actual US properties  told President Obama that they are seriously  concerned about the irresponsible spending  of his administration and think that his proposed health care reform bill  is more than our nation can afford considering  the money to fund this monster would have to come from China and the Chinese people’s  thrift and savings and doing without what they can not afford.

I am appalled that I would live to see the greatest nation ever known come to this in only a few short decades !  I watched C-span Washington Journal – C-SPAN last night  and listened to two very astute ladies discuss our economy and what has happened and what they feel is going to happen.  The videos are below and are rather long but well worth listening to.

First is Judy Shelton whom most of you may be more familiar with as a Wall Street Journal contributing OPED columnist.  Ms. Shelton is careful not to criticize any current or even past  official, she merely states what she feels should have been done instead and gives guidance for the future.   When asked point-blank what current official she  thinks is acting correctly ” Bernanke , Geithener”  she avoided the question altogether and named one of her most admired Economist instead,  and in that way not only answered the question beyond a doubt  but also changed the topic. You might take that to mean a resounding Nay! vote on any of  the people currently making decisions which affect our lives.

The second interview was Nomi Prins discussing her book It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street (Wiley; September 22, 2009) with Vermont Senator Bernie Sanders (I).  Ms. Prins is quite frank and open in discussing her views and placing blame.  She agrees that Wall Street is greedy and grasping and interested in nothing but profits.  She agrees that  Wall Street did build the situation that led to the Bail Out 2008-9  by taking a handful of what came to be called toxic mortgages and created  what she called an upside down pyramid of speculation and profiteering  with derivatives.

If you will recall I once explained derivatives as bets on nothing substantial..  I think  Iused a  fight between two opponents as my basis (mortgage).  This was substance and real and had some value as such.  Subject A and subject B bet on  who would win the battle or the outcome of the fight by choosing sides.  Still some substance and value at this point and little risk of their bet (money).  Subject C and Subject D came along  with a created derivative and bet on  who would be right Subject A or Subject B.  The derivative was based on nothing substantial, nothing but air, nothing but the opinion of another subject in this case.  The risk was greater as  they could lose their money if one of any number of things occurred:  they could lose if any one or all of the two combatants or the Subjects A and/or B  simply walked away  and removed themselves from the action for one example.  Now usually with these transactions this didn’t happen but instead of just dropping out the subject would try to sell his stake to another subject (at a profit of course).  Imaging this then becoming a pyramid of bets on the bets or opinions of others being bought and sold and bought and sold and piled higher and higher.

It was this speculation and play with derivatives that Ms. Prins  explains and blames for the Financial Crisis 2008-9. And  she agrees that  Wall Street’s greed caused all  of this.  However, she explained that it was the Federal government’s (Congress)  insuring any losses that encouraged and enabled this reckless behavior. Wall Street was the animal doing what Wall Street does: churning the paper and making profits.  If the federal government had not encouraged and enabled this risk taking so that the risk was minimized then it would not have happened.

Now let us go back to these toxic mortgages, or mortgages given to people who could not by any prudent lending measures afford the mortgages they were given.  The Federal Government enabled this by almost forcing banks to give these loans and it started with President Carter, picked up again with President Clinton and continued to run amok with the  under the direction of Representative Barney Frank and Senator Chris Dodd  as they  failed to enforce any of the regulation on the Federal Reserve, Fannie Mae and Freddy Mac.

President George Bush again and again called for enforcement of the regulation.  Senator McCain and others called for enforcement.  But because the then privately owned Freddie Mac and Fannie Mae and the Wall Street bankers were making such good campaign donations the Congress overlooked what was going on and allowed the disaster to happen.  The Bail Out   paid off all the “bet” made in the example above and then bought Freddie Mac and Fannie Mae.  Yes, you the tax payer now own the two largest mortgage holders in the world  along with all the foreclosed homes and lost mortgage payments!  And, no one was blamed for the mess.  No one was found guilty or even had to say I’m sorry.

On the topic of “too big to fail”  Ms. Prins  answers that these institutions are too big NOT to fail. They must in her opinion be broken up immediately.  But instead of doing this the Congress with new laws are encouraging them to merge and merge again into larger and larger entities that will eventually become impossible to contain or control and regulate.

And Ms. Prins goes on to explain that regardless of all the noise coming out of Congress (Frank and Dodd) the games are being encouraged , enabled and smiled upon again which is leading to an even greater disaster sometime soon.

This was not news to me since if some of you may recall I have been blogging about this and throwing the belief out at every opportunity to help prepare my readers and myself to the coming deep depression, but it was nice to have two such intelligent renowned economist as these two ladies back my beliefs up.  That is, this beat up old lady with obsolete degrees in education, psychology and avocations in philosophy and history could see it coming so it must be apparent to our congressmen and women so why are they not doing something about it?  Why are they instead continuing on this path of spending, spending, spending?  Why?

And what are We the People going to do about it?

I don’t know the answer to that question.  Congress seems deaf to all the shouting of the Tea Parties, Town-halls, Marches on Washington and probably more town-halls during this Thanksgiving Holiday.  And the elections of 2010 is really going to be too late to do a whole lot  IMO. Besides, I do not trust the American people not to elected again the same thieves and criminals they have been electing.  Rep. Barney Frank will die in his office being elected by a tiny,. tiny group of people and yet holding life and death power over the rest of us.  Congress has the ability to police itself and rid itself of these Rep. Murthas but has rarely done so and is not about to do anything now as far as I can see.  So what is the answer?

Perhaps as I stated in the beginning:  Communist China as our banker has the power and just may use it to save our nation.  You see we are at this time China’s golden goose; we are the consumers of China’s goods so it behooves them to temporarily keep us afloat.  In other words the United States is too big to fail—RIGHT NOW!  The future may be another story and if we don’t get our act together as a nation then we will die as a nation at some later date you can be sure of this.  China is expanding its market area and also growing a more afluent society that will  support its own industry so the time will come very shortly when we are no longer important to China.  It is this time we need to be prepared for and have our house in order so that we can reasonably repay our debt.    Or am I dreaming?  BB

By the way you might want to put C-span Washington Journal – C-SPAN on your to watch list when there is nothing else on TV  or to check on line their video library for topics that interest you.  It will become the most comprehensive “click” on your  blog list I am sure.  C-span is a daily must for me.  I may begin using features programing to post on in conjunction with the usual media.  BB

Jobs reports ‘riddled with inaccuracies’ –

The results of the Stimulus Bill funds is a mess!   The reports of jobs created are so riddled with false statements and twisting the truth that even the Democrats should be appalled.  It is long past time for Congress to rescind this bill and make sure no more money is thrown away.

Remember:  the treasury doesn’t have this money to lend, it borrows all these funds so it is money that must be paid back with interest.  And the Stimulus Bill of $787 billion is on top of the TARP (Bail Out bill) of $700+ billion.

The reports on jobs created or saved by the $787 billion stimulus package are “riddled with inaccuracies and contradictions,” the federal watchdog overseeing the spending acknowledged Thursday.Earl Devaney, chairman of the Recovery Accountability and Transparency Board, told a House oversight committee that the board is taking steps to correct the errors and prevent mistakes in future reports, which are filed by the recipients of stimulus money and posted on the board’s website.

Reports of jobs “created” were for jobs where raises were given not the creation of new jobs.  Reports of jobs created in over 3000 counties and congressional districs that don’t even exist!   Reports of jobs created where no Stimulus money was involved at all. It just goes on and on. And then there is this:

State and federal officials say they are fielding thousands of reports of scam artists, many operating from overseas, using the promise of money from the Obama administration’s $787 billion economic stimulus plan to entice people to hand over bank account numbers. The scams are so numerous, and the criminals hard to identify, that authorities say it’s all but impossible to catch them.
TARP still has $350 billion that has not been used and many banks have returned the money they received with interest and fees.  Only the buy out of AIG and GM is still draining  funds from the tax payers.  TARP  is scheduled to stop December 31 but Treasury Secretary Geithner wants to keep his little slush fund that only he controls.  Make sure Congress hears from you that you want the TARP Bill not to be  extended.
Since it has been proven the Stimulus Bill had no real effect on our economy at all  ask your congressmen to rescind the Stimulus Bill and save what money is left.
Oh, and least we forget:  the first Stimulus Bill is riddled with fraud and lies and as far as anyone can tell hasn’t accomplished anything so the Obama Administration is now pushing for a second Stimulus Bill!~  BB

JPMorgan Chase Reports $3.6 Billion Profit in Quarter –

This people is the so-called financial crisis one year later.

I was one who blogged long and hard against TARP and also spent hours emailing Congressmen and the President not to do this  and put this horrible tax burden on the American people.  Well they did and we tax payers are stuck with a burden our grandchildren will be paying for with the $884 billion TARP.

Now ther is one mand and one man only in total charge of this money, Treasury Secretary  Tim Geithner has only spent about 24% of TARP and is now using the money for other little deals for Obamanation.  For instance the auto unions bail out.  I won’t call  the auto industry bail which is our and the government’s  ownership of GM because it was done for the benefit of the  Auto Workers Union who had backed Obama so much during his campaign.  Now in this case it was the Mafia union bosses who gave the union workers money to the Obama campaign whether or not the union workers themselves wanted to contribute.  The buying of GM and in effect guaranteeing the GM workers of a job  I truly hope the union workers are asking themselves at what price to their family, friends, nation  and great grandchildren this rip off of the American tax payer was made.

This tax cheat Sec. of the Treasury Time Geithner  has sole control of this money—YOUR money.  BB

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