Why Summers and Wall Street should not run the Federal Reserve

Grifters and Swindlers

Wall Street was once a venerable institution, but is now little more than a den of thieves. Maybe there are decent people, but the culture itself is one of grifters and swindles, cons and it's been this way for a while with the help of corrupt lawyers like Eric Holder, and corrupt political-pundits like Rubin and Larry Summers. Okay, it always has had a sleazy side, ever since markets were places where animals were bought, sold, and slaughtered. There have always been hucksters, grifters, fraudsters, and thieves. But never so brazen and so many. And so transparently so! And they always manage to "dirty" their marks so that they think they are at fault.

I had other subjects in mind, but several news topics pushed them aside today. In the context of these news items I'm hearing that Larry Summers wants to be Federal Reserve Chairman and the logical and Obama wants to pass up the integral (person with integrity) choice for the job; Janet Yellen. This would be a disaster. Larry Summers should be in jail not the Fed. Janet Yellen is well qualified and what we need right now. But Summers is a corrupt insider and Obama likes him for some reason.

Champion putting hungry foxes in the hen houses

He's been involved in nearly every corrupt short sighted decision in this country since before he championed repeal of Glass Steagle in the waning days of the Clinton Administration. Wikipedia summarizes well [sorry this would take three blogs otherwise]:

1. "Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass–Steagall Act):

"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said. "This historic legislation will better enable American companies to compete in the new economy."

2. As a member of President Clinton's Working Group on Financial Markets, Summers, along with U.S. Securities and Exchange Commission (SEC) Chairman Arthur Levitt, Fed Chairman Greenspan, and Secretary Rubin, torpedoed an effort to regulate the derivatives that many blame for bringing the financial market down in Fall 2008."
3. And there is his role in bringing down Gray Davis in California and enabling Enron to replace him with the Terminator (Arnold Schwarzenegger) Summers excused Enron's financial manipulation in that incident.

Indeed he still supports financial deregulation, is still blocking regulation of the derivatives market and enabling banks to acquire rent seeking opportunities. Heaven help us if he gets access to the Federal Reserves regulatory apparatus! In the Daily Beast Steven Senne quotes Kurt Eichenwald saying:

In his book about Enron, Conspiracy of Fools, Kurt Eichenwald describes Summers’ role in the early stages of the California energy crisis when the state was suddenly faced with power shortages and energy costs that were soaring up to 20 times normal levels. Then-Governor Gray Davis, convinced that Enron and others were manipulating the market, begged the federal government to intervene.

And of course it turned out that Enron really was engaging in swindles and frauds, and that the program of deregulation that the Summers/Rubin school was pursuing would eventually lead to other companies immitating and multiplying frauds -- which are still continuing to this day. And was there quid pro quo? You decide. Tony Wikrent posted this excerpt from emails from around that same time in "Real Economics":

"As you know, Ken has talked to Larry Summers about serving on Enron's Board of Directors. Larry told Ken that in light of his selection to head Harvard, he wants to hold off going on any corporate boards for now. My understanding is that Larry will most likely accept Ken's offer at the end of the year."

Looks like Quid Pro Quo to me. But that's not all. He's also been a champion of bankers and wealth over just about every other priority. During his stint at the World Bank he helped engineer our current trade imbalances by engineering a bailout of East Asian Countries based on letting them arbitrage the dollar. He:

"engineered a bailout that gave countries the money they needed to get through the crisis, but required that they would pay their debts in full. The flip side was that the United States would maintain an open door to exports from the region.

If he'd learned anything from these things it might be one thing but he still champions corporate power, is against regulation and is out to deregulate just about anything that wants to be deregulated. And Obama seems to feel the same way. The times Rana Foroohar quotes him in 2011:

“I’ve been more cautious than many about constraining financial innovation,” he said, adding that he didn’t believe the financial crisis had its roots in “new-fangled financial instruments” but rather in a simple real estate bubble.

If he can say that despite Enron and everything that has happened since, then he's also a prevaricator.

Read more: http://business.time.com/2011/04/12/larry-summers-no-regrets-on-deregulation/#ixzz2bJvLVbRa

No surprises

But that should be no surprise. Money leads people to moral blindness and eyes open recklessness, and the pursuit of money and power is what is behind most corruption. Wall Street is unrepentant. Goldman Sachs has been accused of manipulating aluminum prices, and other companies Copper and other metals. Without laws forbidding them using "other people's money" recklessly they'll continue using their corrupt control over congress, courts and executives to make more money and take over and loot one industry after another. With Summers at the Fed at least he won't be provoking stupid policy decisions such as getting rid of the mortgage option for ordinary people trying to buy a house:

Rules are meant to be Broken

Summers is an awful choice for a human being (could be worse of course), much less to be a trusted advisor or in any position of trust. Yet a lot of folks think Summers is a genius and continue to believe him despite his track record of being wrong and the corrupt results of his prescriptions. This is because he reflects the Wall Street mindset that Alexis Goldstein wrote about after he left it more than 2 years ago. Nothing has changed about it or the people who shill for it:

"But the key to truly understanding superiority on Wall Street is by looking at how it’s measured: with cold, hard numbers. Numbers can be amplified by honest work, but they can also be amplified by betrayal, manipulation, and cheating. And when everything is a cold cost-benefit analysis, why wouldn’t you break regulations—provided you knew the profits you stood to make would dwarf the fines you would pay should you get caught?"

Wall Street's modus operandi for nearly a century has been to "promise the moon" and then laugh at people when the promise turns out to be a lie. And folks like Larry Summers are there to make sure that they can ignore regulations, engage in "new-fangled" swindles and not even get fined in the first place -- to their hearts content. Deregulation and prosecutors who tell Congress that Wall Street firms are "too big to jail" have contributed to the current attitude that Goldstein refers to in this quote:

"This is why paying fines when you are caught breaking the rules is simply deemed “the cost of doing business” on Wall Street. "

Summers has already been handsomely rewarded, and once he leaves office he'll get more rewards still. I suspect his membership in boards and he'll draw good speech fees once he leaves office. And he's still at it. His current project is an attack on government supported mortgages for the remaining middle class: BINYAMIN APPELBAUM writes in the New York Times;

The president praised a bipartisan Senate effort to replace Fannie and Freddie with a system that would charge lenders for explicit government guarantees of some mortgage loans. And while there is a risk that the cost of borrowing would increase, Mr. Obama also said that he wanted to preserve the wide availability of the 30-year, fixed-rate loans that are preferred by most Americans.

A risk? No the word is certainty. And all of us know that their promises are worthless. The end of Fannie and Freddie means the end of the 30 year fixed rate mortgages and folks locked into Usurious interest rates. Wall Street has a massive power over both parties -- and this has to be fought. The first step is defeating Summers.

But of course the Grifters label these frauds and corrupting laws "reform" and act like it will benefit the people it assaults. The same article notes:

"“Washington has suddenly come alive on housing finance reform,” said David Stevens, president of the Mortgage Bankers Association"

Mike Papantonio notes that we should be deliberative as we fight, and neither get furious, nor let nasty people rattle our nerves. It is hard sometimes. But worth the effort. Because once you open your eyes and learn how to see and analyze you can tell the scoundrels from more integral people. I didn't mention that Yellen is more than qualified, a lot smarter, teaches economics, serves on the Federal Reserve Board now, and is honest. Nor did I mention that Larry Summers has a reputation as a macho misogynist. That is because the current in crowd thinks that being a woman or having integrity is a drawback for the job.

Sources for this post:

http//www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html

http//online.wsj.com/article/SB123665023774979341.htm

http//www.pbs.org/wgbh/pages/frontline/warning/view/#morelink"

http//www.huffingtonpost.com/2013/08/05/larry-summers-enron_n_3708137.html

http//www.thedailybeast.com/articles/2008/11/12/larry-summers-and-enron.html

http//real-economics.blogspot.com/2010/12/larry-summers-role-in-derivatives.html

http//www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/larry-summers-biggest-blunder

http//business.time.com/2011/04/12/larry-summers-no-regrets-on-deregulation/

Aluminum scam:

http//www.nakedcapitalism.com/2013/07/how-goldman-made-5-billion-by-manipulating-aluminum-inventories-and-copper-is-up-next.html

http//nplusonemag.com/leaving-wall-street

http//www.nytimes.com/2013/08/07/business/washington-edges-warily-into-housing.html?smid=fb-share&_r=0

Rolling Stone's narrative on the 2008 bailout includes details on Summer's swindling role in it:

http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104?page=2

Bush's Loogie

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Don't feed the Bears

Don't feed the bears they say!

But I'll feed that bear anyway.

He's nice and sweet, and looks like a giant puppy.

Surely he'll appreciate food from this yuppy.

Don't feed on the humans they say!

But look at that fool walking my way.

Christopher H. holte

Bears Don't need Fishing Poles

Bears don't need no stinking poles,

they stick their paw inside wet holes,

and catch a fish with claws and paw,

and immediately chuck it in their maw.

"You humans, you stand there all silly and slow,

while the fish steal your bait and laugh and dance.

And you wear silly hats and swipe at gnats.

Just to get away from your wives and their spats."

"You think we are dumb,

but we have class and nerve

and can catch a fish no matter how it swerves.

We eat well and love the smell,

until you humans turn our rivers to hell."

Christopher H. Holte

PS: Thanks to Jerry E. Williams for telling me Lyle Stories my imagination can segue off.

Lyle the Lumbering Bear

Lyle the lumbering bear,

gave me quite a scare.

I'd taken my pole to the lake.

And was fishing for my dinner stake,

when Lyle comes out of the woods intent

On getting a meal from me for free.

I didn't mind if he caught some fish,

But I was afraid I might be his dish.

So I abandoned my pole,

and I ran for the house.

While lyle casually inspected my gear

and ate my lunch.

I didn't mind too much,

I had my pepper spray,

ready to shoot him

and I still have my skin.

Christopher H. Holte

Lyle and the Hunter

Along the mountain came the hunter,

gunning for ole Lyle.

He had his gun loaded and was so intent

on acquiring a new winter coat.

That as he walked along the path,

he hummed a song in his throat and smiled.

Ole lyle, he heard the hunter a mile away,

and thought to himself, "That hunter seems pretty gay."

"I Think I'll creep up behind him, and make his day."

The Hunter, he was intent, on getting himself a winter coat.

He walked through the woods, for hours and hours

Through pine needle filled galleys, and leafy Bowers,

The aspens swayed as he heard a sound,

and then he turned around.

Ole lyle, he'd heard the hunter a mile away,

and that poor hunter, never had a chance.

And as the fall progressed he danced around,

in his newly tanned suede coat.

Christopher H. Holte

Real life Galt Gulch on Belle Island?

The Libertarians had an idea to "save" Detroit. They wanted to turn Belle Island into a modern "Galt's Gulch". The New York Times reported [http://www.nytimes.com/2013/02/08/opinion/detroit-sinks-with-belle-isle.html?_r=0]:

Belle Isle was recently at the center of a different moneymaking scheme. A group of wealthy libertarians suggested that private investors buy the island from the city for the nice, round, Dr. Evil-ish sum of $1 billion and transform it into an independent, self-governing territory. With the price for citizenship set at $300,000, the Commonwealth of Belle Isle would exist as a sort of free-market paradise; within 30 years, the group’s Web site predicted, the island would be known as the “ ‘Midwest Tiger,’ rivaling Singapore as an economic miracle.” One can order from that Web site a novella about this future Belle Isle, which describes the commonwealth’s low taxes, minimal government, even its own currency (called — seriously — “the Rand”). [A]

And of course it would be a tax-haven for millionaires and billionaires who could run their empires in the USA from it, while looting the whole country and blaming Government. A real life Galt's Gulch! Subsidized by the taxpayers as a even a billion dollars is nothing for a team of billionaires seeking to avoid taxes. And this is no joke, the New York Times article continues:

The book — a preview of its opening chapter has the hero landing on the rooftop helipad of the commonwealth’s 57-story Four Seasons hotel — makes the entire scheme very easy to mock as Objectivist fan fiction. But it’s not entirely a joke: private foundations and deep-pocketed members of the local business elite exercise an outsize influence in a city as broke as Detroit, providing financing for everything from a much-needed light-rail line to the ambitious Detroit Future City plan, which would entirely remap the city.[B]

That objectivists are self-mocking never occurs to objectivists. They are too busy being selfish to pay attention to the self-parody and ruinous behavior.

People like Dan Gilbert, the owner of Quicken Loans and the Cleveland Cavaliers, and Mike Ilitch, a founder of Little Caesars pizza, have been snatching up shuttered skyscrapers and prewar office buildings — since December Mr. Gilbert has bought at least five buildings and, reputedly, an entire downtown city block — as if they’re Monopoly properties.[C]

So we see how "Atlas Shruggged" really plays out. I always thought it incredible that someone could run a railroad and run it into the ground, and blame government. But all that is really happening is that the owners of a business are transferring once productive money to new vistas -- like Galt's Gulch Belle Island -- so that they can keep it all. Objectivism is about incredible reckless selfishness, and whether the avatar is the founder of Little Ceasars, or the junkyard capitalist who wrecked KMart, put it in and out of bankruptcy, bought Sears and other companies; and then wrecked the whole shebang -- the outcome is the same.

Further reading:

http://www.nytimes.com/2013/02/08/opinion/detroit-sinks-with-belle-isle.html?_r=0"

Lou D’Ambrosio's "Sinking Ship": http://www.forbes.com/sites/lauraheller/2012/02/29/analyst-on-sears-like-a-sinking-ship/"

How Objectivism killed Sears: http://www.freerepublic.com/focus/news/3046444/posts?page=84

Papantonio: Detroit -- The New Billionaire Utopia http://ow.ly/ni4It