WASHINGTON (AP) — The government on Friday accused Wall Street’s most powerful firm of fraud, saying Goldman Sachs & Co. sold mortgage investments without telling the buyers that the securities were crafted with input from a client who was betting on them to fail.

And fail they did. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co., a hedge fund, capitalize on the housing bust. The Goldman executive accused of shepherding the deal allegedly boasted about the “exotic trades” he created “without necessarily understanding all of the implications of those monstrosities!!!”

The civil charges filed by the Securities and Exchange Commission are the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

The news sent Goldman Sachs shares and the stock market reeling as the SEC said other financial deals related to the meltdown continue to be investigated. It was a blow to the reputation of a financial giant that had emerged relatively unscathed from the economic crisis.

Goldman Sachs denied the allegations. In a statement, it called the SEC’s charges “completely unfounded in law and fact” and said it will contest them.

The SEC is seeking to recoup the money lost by investors and impose unspecified civil fines against Goldman Sachs and the executive, Fabrice Tourre. The SEC could enter into settlement negotiations over the amount if Goldman changed its stance and decided not to fight the charges in a trial.

The SEC said Paulson paid Goldman roughly $15 million in 2007 to devise an investment tied to mortgage-related securities that the hedge fund viewed as likely to decline in value. Separately, Paulson took out a form of insurance that allowed it to make a huge profit when those securities’ value plunged.

The fraud allegations focus on how Goldman sold the securities. Goldman told investors that a third party, ACA Management LLC, had selected the pools of subprime mortgages it used to create the securities. The securities are known as synthetic collateralized debt obligations.

The SEC alleges that Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools and stood to profit from their decline in value. Two European banks that bought the securities lost nearly $1 billion, the SEC said.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” SEC Enforcement Director Robert Khuzami said in a statement.

But Goldman said in a statement that it never mischaracterized Paulson’s strategy in the transaction. It added that it wasn’t obliged to “disclose the identities of a buyer to a seller and vice versa.”

The charges name only Goldman Sachs and Tourre, who was a vice president in his late 20s when the alleged fraud was orchestrated in 2007. Tourre, the SEC said, boasted to a friend that he was able to put such deals together as the mortgage market was unraveling in early 2007.

In an e-mail to the friend, he described himself as “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

Tourre, 31, has since been promoted to executive director of Goldman Sachs International in London.

Stanford University spokeswoman Elaine Ray said a student by the name of Fabrice Tourre received a master’s degree in management science and engineering from the school in 2001.

A call to a lawyer for Tourre, Pamela Chepiga at Allen & Overy LLP, wasn’t returned.

Asked why the SEC did not also pursue a case against Paulson, Khuzami said: “It was Goldman that made the representations to investors. Paulson did not.”

Paulson & Co. is run by John Paulson, who reaped billions by betting against subprime mortgage securities. He is not related to former Treasury Secretary Henry Paulson, a former Goldman CEO.

John Paulson was among the first on Wall Street to bet heavily against subprime mortgages. His firm earned more than $15 billion in 2007, and he pocketed $3.7 billion. He has since earned billions more, largely by betting against bank stocks and then buying them back after their shares plunged.

In a statement, Paulson & Co. said: “As the SEC said at its press conference, Paulson is not the subject of this complaint, made no misrepresentations and is not the subject of any charges.”

Goldman, founded more than 140 years ago, built a reputation as a trusted adviser to investment banking clients and for sending top executives into presidential Cabinet posts.

In recent years, it shifted toward taking more risks with its clients’ money and its own. Goldman’s trading allowed the firm to weather the financial crisis better than most other big banks. It earned a record $4.79 billion in the last quarter of 2009.

The complaint filed in federal court in Manhattan “undermines their brand,” said Simon Johnson, a professor at the Massachusetts Institute of Technology and a Goldman critic. “It undermines their political clout. I don’t think anybody really values being connected to Goldman at this point.”

He continued: “There are many people who — until this morning — thought Goldman Sachs was well-run.”

The SEC’s enforcement chief said the agency is investigating a wide range of practices related to the crisis. The prospect of possible legal jeopardy for other major financial players roiled the stock market.

Goldman Sachs shares fell more than 12 percent Goldman and lost $14.2 billion in market capitalization. The Dow Jones industrial average finished down more than 125 points.

The SEC appears to be taking a particularly aggressive approach with Goldman. Typically, cases are resolved by firms agreeing to a settlement before the charges are made public, said John Coffee, a securities law professor at Columbia University.

“The SEC has changed its style,” Coffee said. “They wanted to tell the world what they thought Goldman had done wrong.”

The charges come as lawmakers seek to crack down on Wall Street practices that helped cause the financial crisis. Congress is considering tougher rules for complex investments like those involved in the alleged Goldman fraud.

President Barack Obama vowed Friday to veto a financial overhaul bill that doesn’t regulate mortgage-backed securities and other so-called derivatives. Legislation in Congress would for the first time regulate derivatives, whose value depends on an underlying asset, such as mortgages or stocks. Senate Republicans oppose the bill.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, is “pleased that the SEC is departing from the lax enforcement of the Bush administration and is returning to the SEC’s proper role of protecting investors in the marketplace,” spokesman Steven Adamske said.

The biggest loser in the alleged fraud was ABN Amro, a major Dutch bank, and the Royal Bank of Scotland, which acquired major portions of it in 2007. The SEC said the Royal Bank of Scotland paid Goldman $841 million to unwind ABN transactions.

IKB Deutsche Industriebank AG, a German commercial bank, lost nearly all its $150 million investment, the agency said. Most of the money the banks lost went to Paulson in a series of transactions between Goldman and the hedge fund, the SEC said.

IKB was an early casualty of the financial crisis. It issued a profit warning in 2007 saying it had been hurt by U.S. subprime mortgage investments. IKB was sold in 2008 to Dallas-based Lone Star Funds.

Ed Trissel, a spokesman for Lone Star Funds, declined to comment on the case.

The SEC charges come after Goldman Sachs denied last week it that bet against clients by selling them mortgage-backed securities while reducing its own exposure to them.

In an annual letter to shareholders, Goldman said it began reducing its exposure to the U.S. mortgage market in late 2006.

AP Business Writers Alan Zibel in Washington, Stevenson Jacobs in New York and Ashley M. Heher in Chicago contributed to this report.

Americans should get more militant if the government doesn’t cooperate. We’ve had enough of being bounced between a facade of two similar parties like pinballs and we’re not going to waste our lives away decaying under this system. Both parties serve the same elite and both hate communitarian nationalism. We’re not as dumb as the government thinks we are. If there is no light at the end of the tunnel, you can count on anti-government action and feeling escalating.

When the car gets stuck in the mud, the government must be there to get the car out.

The link

WASHINGTON — Senate Banking Committee Chairman Christopher Dodd on Tuesday called for sweeping new government powers to prevent another economic collapse, protect consumers and dismantle failing institutions.

Dodd’s 1,100 page-draft would strip the Federal Reserve and other regulators of their powers to regulate banks and hand that job to a single agency. The bill also would take away the Fed’s ability to monitor credit cards and mortgages and establish a new “Consumer Financial Protection Agency.”

The bill, inspired by last year’s financial meltdown, will minimize “economic turmoil and protect(ing) the interest of taxpayers,” the Connecticut Democrat wrote.

An advance copy of the legislation was obtained by The Associated Press.

President Barack Obama has demanded that Congress rewrite the federal regulations governing Wall Street to close legal loopholes and prevent the kind of fraud and abuse that fed the crisis.

Dodd’s proposal was expected to gain broad support among Democrats, but Republicans haven’t signed on.

Among the top points of contention is Dodd’s desire to create a new agency to protect consumers taking out home loans or using credit cards against predatory lending and surprise interest rate hikes.

Republicans counter that creating another bureaucracy will make business harder for banks and limit the availability of credit.

The Senate Banking Committee was expected to review the legislation next week, paving the way for a floor vote by early next year.

The House was already on track with its own proposal. Rep. Barney Frank, chairman of the House Financial Services Committee, said he expects a floor vote in December.

Dodd’s plan differs slightly from Frank’s bill and the administration’s proposal in that it would do more to scale back the powers of the Federal Reserve, which many lawmakers blame for the economic crisis.

For example, Frank has proposed that the Fed be in charge of enforcing tougher regulations on large and influential financial firms so that they don’t grow “too big to fail.” A council of regulators would monitor these firms and make recommendations.

Under Dodd’s bill, the Fed would have less reach. An “agency for financial stability,” managed by a board that includes Fed representation would enforce new rules and dismantle complex financial firms if they threaten the broader economy.

Both the House and Senate bills would likely put limits on the Fed’s ability to provide emergency loans and eliminate its oversight of consumer protections.

Also unlike the House bill, Dodd’s proposal would establish a single federal regulator for banks called the “Financial Institutions Regulatory Administration.”

The single regulator would get rid of two existing federal bank regulators — the Office of the Comptroller of the Currency and the Office of Thrift Supervision. It also would strip the Federal Deposit Insurance Corporation of its oversight of state banks and the Fed in their supervisory powers of bank holding companies.

Dodd has said consolidated oversight is needed to prevent banks from shopping around for an agency that will impose the least amount of oversight.

The only way to have populism is to make the state so strong that it can play referee against economic impulses that are not collectively beneficial. A strong state enables a national self-interest.

Imagine all the problems “fascism” could have prevented. With a strong state, there would be no global economic meltdown because the government would put the bankers in their place. If the bankers act against the interest of the state, they get the purge.

National socialists and white nationalists argue that the movement should all be for the race, and they don’t even know how to define the race. The race is nothing but a collection of genetic matter without the state. The state is everything and everything else is nothing. A cruel death to neo-liberalism!

Quite frankly, it is time for populists to do a little more than talk about opposing the regime. If there is no light at the end of the tunnel, then populists should start to organize not against a particular party but against the entire power structure.
http://money.cnn.com/2009/11/06/news/economy/jobs_october/

NEW YORK (CNNMoney.com) — The nation’s unemployment rate rose above 10% for the first time since 1983 in October, a much worse jump than expected as employers continued to trim jobs from payrolls.

The reading, reported by the government Friday, is a sign of the continued weakness in the labor market even though the economy grew in the third quarter following the longest and deepest downturn since the Great Depression.

The government reported that the unemployment rate spiked to 10.2%, up from 9.8% in September. It is the highest that this rate has been since April 1983. Economists had forecast an increase to 9.9%.

There was also a net loss of 190,000 jobs in October, according to the Labor Department, an improvement from a revised estimate of 219,000 job losses in September. However, economists surveyed by Briefing.com had forecast a loss of only 175,000 jobs in October. This was the 22nd straight month of job losses.

“The only good news is the number of layoffs are dropping off, but those who are laid off still aren’t finding jobs,” said David Wyss, chief economist with Standard & Poor’s.

The jump in the unemployment rate was driven up by a large drop in the number of people who describe themselves as self-employed, as well as the number of teenagers who have jobs. The unemployment rate for teenagers in the labor force soared to 27.6%, up 1.8 percentage points and hitting a third straight record high.

Both teen workers and the self-employed are not captured very well in the government’s separate survey of employers that is used to calculate the number of people on U.S. payrolls. That explains much of the disconnect between fewer job losses overall and the much worse unemployment rate.

The rise in unemployment was not spread evenly across the population. For those with college degrees, the unemployment rate fell to 4.7% from 4.9% in September, as the unemployment rate for those in management, professional, and related occupations slipped to 4.7% from 5.2%.

But the unemployment rate for production jobs, such as factory workers, jumped to 14.5% from 14.1%. The jobless rate for workers in construction, maintenance or natural resources industries such as mining rose to 15.5% from 14.3%.
0:00 /3:08Real unemployment really bad

“There’s a real mismatch between the unemployed people out there compared to what job openings are available,” said John Silvia, chief economist with Wells Fargo Securities. He said construction workers who lost a job when the housing bubble burst don’t have the skills to compete for jobs in sectors that are hiring, such as health care and technology.

Government efforts to end job losses have had limited effects, although the Obama administration estimated last month that 640,000 jobs were created or saved by the federal stimulus package passed earlier this year. But that’s modest compared to the 7.3 million jobs that have been lost since the start of 2008.

Christina Romer, chair of the President’s Council of Economic Advisors, said the steady decline in monthly job losses since earlier this year is a hopeful sign for the economy.

But she acknowledged there’s still significant pain for those looking for work. “Having the unemployment rate reach double-digits is a stark reminder of how much work remains to be done before American families see the job gains and reduced unemployment that they need and deserve,” she said.

Friday’s report comes one day after Congress voted overwhelmingly to extend unemployment benefits by up to 20 weeks. There are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks.

Prior to this report, most economists had believed that the unemployment rate would keep rising and that job losses would continue into next year. But the jump in unemployment in October took it to levels worse than what many previously had expected to be the peak.

According to a survey of top forecasters by the National Association of Business Economics last month, the consensus estimate among economists was that unemployment would hit a high of 10% in the final three months of this year and the first quarter of 2010.

The five economists with the most bearish forecasts had expected unemployment to rise to 10.2% in the fourth quarter of this year before hitting 10.5% in the first half of next year.

Wyss is one of those economists who had projected an unemployment rate of 10.5% in the middle of next year. He said Friday’s report may force him to raise his worst case estimate.

“Some things aren’t playing out the way I expected them to,” he said. “There’s just no good news in this report.”

But others said they see some early signs of life for the labor market. Sung Won Sohn, economics professor at California State University Channel Islands, noted that the biggest increase in temporary employees in two years took place in October.

Employers typically bring in workers on a temporary basis before deciding to make more permanent hires. As such, he expects gains in payrolls by next spring.

“Despite the gloomy job picture, there are some encouraging signs,” he said.

Interesting Website. I will add it to the blog roll. It has well constructed political opinion and links to very good material about the global financial crisis.

The moral power of the exemplary person is the wind; that of the petty person is grass. When the wind blows over the grass, it will surely bend. – Confucious

Strike the Shepherd and the Sheep will Scatter – The 48 Laws of Power

Those who most successfully play the game of death – success in the free market, should not be blamed more heavily than the unlucky and weak. They may not be conscious allies, but they serve our inegalitarian interests. Analogously, Dennis Rodman cannot be blamed for the invention of basketball and gangster rapers cannot be blamed for the “harsh reality” of society or for profiting from the liberal capitalist system. Directly blaming the bankers and business men? Get real! The blame should be placed on George Washington, Abraham Lincoln, Barack Obama and the architects of society…the politicians, the military, the constitution. NOT the businessmen who happen to be a bit more “crafty” than their opponents. Do not blame Wal-Mart. Blame Washington DC. Let the behavior of Wal-Mart (shipping jobs overseas for low pay) expose Washington DC.

Don’t hate the player who plays the game. Hate the game. Until the military force that controls society is altered, we all play the game. Yes we would like to switch from one set of rules to another set of rules, but do not be jealous and hypocritical. Reject the two party system. All energy and focus should be in redirecting society collectively away from the ruling order, instead of trying to rehabilitate and tweak the regime without the necessary adjustments.

Don’t hate the player. Hate the game. It is not morally or strategically justified to blame the player.

Years ago, as the Cold War was coming to an end, I said to my fellow leaders around the globe: the world is on the cusp of great events, and in the face of new challenges all of us will have to change, you as well as we. For the most part, the reaction was polite but sceptical silence.

In recent years, I have often told listeners that I feel Americans need their own change – a perestroika, not like the one in my country, but an American perestroika – and the reaction has been markedly different. Halls filled with thousands of people have responded with applause.

First Gorbachev articulates the need for change. I agree, there is a need for a change. Much to the consternation of the Marxist-Leninists on this website, I believe USSR needed change too (but went too far). In his contingent historical time, Stalin advanced industrialization, but the conditions that existed while Stalin did no longer exist. Marx, while a good thinker for his time, is even further outdated than Stalin.

Our perestroika signalled the need for change in the Soviet Union, but it was not meant to suggest a capitulation to the US model. Today, the need for a more far-reaching perestroika – one for America and the world – has become clearer than ever.

Gorbachev here makes it clear that while he intended to revise the Marxist line, he did not intend to embrace the Reganite line.

But then came the economic crisis of 2008 and 2009, and it became clear that the new Western model was an illusion that benefited chiefly the very rich. Statistics show that the poor and the middle class saw little or no benefit from the economic growth of the past decades.

The model that emerged during the late 20th century has turned out to be unsustainable. It was based on a drive for super-profits and hyper-consumption for a few, on unrestrained exploitation of resources and on social and environmental irresponsibility.

This is very true. The economic crash definitely strengthened my position that in times of struggle, populism and authoritarianism are necessary. On some level, I have always admired authoritarian regimes, but now I swear by them.

But if all the proposed solutions and action now come down to a mere rebranding of the old system, we are bound to see another, perhaps even greater upheaval down the road. The current model does not need adjusting; it needs replacing. I have no ready-made prescriptions. But I am convinced that a new model will emerge, one that will emphasise public needs and public good, such as a cleaner environment, well-functioning infrastructure and public transport, sound education and health systems and affordable housing.

Gorbachev must be reading Free Media Productions!

The time has come to strike the right balance between the government and the market, for integrating social and environmental factors and demilitarising the economy. Washington will have to play a special role in this new perestroika, not just because the United States wields great economic, political and military power, but because America was the main architect, and America’s elite the main beneficiary, of the current world economic model. That model is now cracking and will, sooner or later, be replaced. That will be a complex and painful process for everyone, including the United States.

I couldn’t agree more!

New York Jewish bankers and liberal ideologues should be supported for exposing the weaknesses of the capitalist system, even if they do not intend to. A strong dose of liberal idiocy is like a strong dose of bacteria; anti-bodies are produced. A more gradual dose of liberalism is like lead poisoning; when you notice it is too late. In a Machiavellian sense, they have proven how inferior the system is and how badly it needs to be replaced. Hail the Jewish subversives who expose the flaws of capitalism, liberalism and democracy! Third Positionists, Marxist-Leninists and all critical of Western Capitalism must mourn the loss of Saddam Hussein, but otherwise the most successful Jewish sociopaths should be applauded. Hail Madoff, Hail Abraham Foxman, Hail Chaim Ben Pesach, Hail the Jews who pretend to be anti-semites on Nazi websites.

EXPOSE THE FUNDAMENTAL WEAKNESS OF CAPITALISM. PUT IT ON THE RADAR! The more Jews manipulate the system, the more the weakness of the system becomes obvious. I applaud Jews for proving that the overthrow of capitalism is a prerequisite to a revival of nationalism and ridicule bourgeious nationalists who think removing Jews is sufficient.  Nationalism cannot exist with the current political system in place. The more obvious this is the fact, the better.

http://www.apfn.net/DOC-100_bankruptcy.htm

The first thing F.D.R. did was quietly declare in March of 1933 (by executive order) that the federal corporation was bankrupt and insolvent, which triggered the long standing debt contracts with the international bankers.  The federal corporation went into receivership (ownership) to it’s creditors (the international bankers).  The engineered “great depression” made receivership to the bankers possible, PLUS it consolidated existing control of the banking and monetary system into the hands of the PRIVATE, so called “federal reserve” (which is a private cartel owned by the international bankers).  F.D.R., acting on behalf of his handlers, came for our gold first.  He made it illegal for CITIZENS to own gold.  Whoever owns the REAL money, owns the monetary system.  Thus, in 1934, citizens abruptly ceased to own the monetary system, which of course meant that they had no more actual monetary power or wealth, OR control over the government (which solidified control over american citizens).  Then as if acting from a perfectly planned script for CONQUEST, him and his evil handlers successfully came for our guns in 1934.  The 2nd amendment was overthrown with the rest of the constitution.  We STILL have the huge 1934 gun ban and registration scheme strapped to our backs.

The “new deal” was a euphemism for the total reorganization of the federal corporation in favor of the creditors. The creditors (the international bankers) wanted an all powerful federal tyranny (which they obtained in the 1930s, so it’s mind boggling how tyrannical the federal “government” is today!)

What confuses a lot of people is that they BELIEVE that the constitution is still in force. The legal TRUTH is that the constitution was overthrown in 1933 and as part of the reorganization, the LOOK (i.e. appearance) of the constitution was allowed to remain. This is how federal “judges” were able to get away with complete and OBVIOUS perversion of the interstate commerce clause (the federal “government” claims the authority to regulate EVERYTHING-and I mean EVERYTHING, if any part of it was EVER a part of “interstate commerce.”)

Federal “judges” are well trained by the establishment legal system not to reverse the “progress” the control system has made since 1933. The training is subtle because the legal system (beginning with law schools) is totally obsessed with legal PRECEDENT (i.e. what other “judges” have ruled) as opposed to what the law ACTUALLY says. Law schools indoctrinate students to follow the establishment, and if they do, they will be rewarded with a lucrative career. Today, federal “judges” are controlled (in varying degrees from judge to judge) by the system that took power in 1933, and are strongly influenced when the establishment needs to pick and choose WHAT parts of the sham constitution they will enforce. The establishment maintains a network of loyal federal “judges” who will rule in ways the establishment needs (usually by throwing out or altering cases that could end up limiting federal power). People need to study this abomination for themselves (so they will be outraged enough to take action) so I encourage all Americans to read about cases involving the interstate commerce clause, and more specifically, what the treasonous federal “judges” did to Irwin Schiff and Hollis Fincher (Google is your friend).

The control system that took power in 1933 is beginning to come more out in the open as americans are growing accustomed to not having any rights or privacy or sovereignty. In many ways we are past the point of no return. In theory, an educated citizenry could rise up and reverse the “progress” that’s been made since 1933, but preventing such a thing is exactly WHY the federal “government” has gained effective control over the “school” system. That is WHY there is a federal department of “education.” That is WHY almost all “school” districts are addicted to and CONTROLLED by the “free” federal funding. Kids are brainwashed from day one into being government loyalists and establishment loyalists. This is the new “patriotism.”

Kids are taught massive contradictions which result in such confusion that the subject (the child) has no choice BUT to become loyal and subservient to it’s new master (government) Examples of INTENTIONAL CONTRADICTIONS:

1. The government indoctrination centers (”schools”) preach “say no to drugs” while at the same time PUSHING dozens of dangerous vaccines and mind altering drugs into the bodies of our children.

2. In English class, the poor kids are “taught” that they are there to “learn english,” and then they are taught garbage such as “inventive spelling” which has resulted in a nation full of idiots who cannot spell or use grammar that is even remotely correct.

3. The children are fed a constant stream of nonsense and lies about guns and are abused with scare tactics and intimidation tactics that they should “never touch a gun,” or that “guns kill…,” and that if they ever touch a gun or so much as TALK about guns at school they will be severely and unjustly punished (which frequently happens). I have personally spoken with several young neighbors to tell me just how many threats and how much intimidation they receive from the entire “school” system. One neighbor was given an assignment to find something unique about a certain country. I suggested talking about the gun laws there (since the gun laws of this particular nation are extremely different from ours). This 9 year old had a knee jerk reaction of fear that they would “get into trouble” for talking about guns. I said that this had nothing to do with guns, but the massive threats and intimidation from the “school” system had made this student totally unreasonable on this subject. The only thing this student knew how to do was to be totally obedient (and worshipful) to their government masters. The contradiction is that government agents constantly walk around with guns (the very tool that the students are taught to fear).

My two favorite quotes from the founding fathers:

“If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money, are more dangerous to liberty than standing armies.” ~ Thomas Jefferson

“If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you. May your chains set lightly upon you, and may posterity forget that ye were our countrymen.” — Samuel Adams