How Derivatives, Collateralized Debt Obligations, Credit Default Swaps crushed the economy Part 2

Part II 

Not long ago, perhaps just to add the little figurines of the bride and groom atop the pinnacle of the many tiered cake celebrating the wedding of our government and their banking betters, the last administration arrogantly turned its back upon the American consumer, and sided with the banks. They did so by using as its tool, a previously little publicized federal entity called the Office of the Comptroller of the Currency, in order to claim jurisdiction and prohibit all State Attorneys General from defending consumers within their states who have been defrauded by banking institutions.

Don’t get me wrong. It’s not as though the last administration has never done anything right with regard to bank regulation. In 2008, out of the desperation of watching banks seize more private property than they could ever hope to maintain much less pay taxes on, the administration raised the ceiling for Fannie Mae and Freddie Mac loans up to $729,000. The resultant refinancing of mortgages within that category, from predatory terms to more traditional terms, helped somewhat to slow foreclosures.

But mortgages above that limit have seen no relief. In other words, this bad movie about America’s mortgage crisis, and the northern hemiphere's spreading economic collapse, is likely only at the intermission. This is happening at the same time that the stock exchanges are delisting solid companies, that have good products such as ground breaking medical devices, simply because the stock market as a whole has fallen, and investors are afraid to invest. Further, our government appears to be assisting big corporations that prey upon society, to crush such smaller innovative companies that enrich and contribute to it. And the next recourse of banks that are seizing more private property than they can maintain, appears to be a plan to start bulldozing whole tracts of empty homes.

Meanwhile, in the midst of this economic turmoil, Congressman Collin Peterson is in the public eye, fighting to gain support for his bill to bring Derivative trading out from the shadows and the unaccountable reaches of the private clearing houses of the banking elite, and onto public exchanges. Peterson’s bill was supposed to bar Derivatives trading in a clearinghouse regulated by the New York Federal Reserve, which he mentioned to the New York Times, is only “a tool of the big banks” that wouldn’t do much to regulate contracts. But Peterson has now come to the correct realization that his bill will never pass, unless it is materially changed to the satisfaction of his colleagues in Congress - the ones who are accepting large contributions and perks from their bankster superiors.

Treasury Secretary, and former president of the New York branch of the Federal Reserve Bank, Timothy Geithner recently stated his own preference that Derivative trading should be monitored by the New York branch of the Federal Reserve Bank.  Banksters prefer this option, as does Secretary Geithner, and their like-mindedness is understandable, given the fact that for many years, as I may have mentioned before, the banks have hand-picked the short list of candidates from which the President of the United States approves the Secretary of the Treasury, and the Chairman of the Federal Reserve Bank.

Still, Congressman Peterson had much of his act right when he told the New York Times two weeks ago, “The banks run the place… I will tell you what the problem is… they (the banks) give three times more money than the next biggest group. It’s huge the amount of money they put into politics.”

But what Representative Peterson and many others in Congress have got wrong, whether unintentionally or not, is their well publicized perception that Derivative, CDO and CDS trading was the Achilles heel that nearly collapsed the US financial system. They are telling us that it was the secret trading of these instruments, wherein buyers had no clue what actually comprised the portfolios, that brought the entire US financial system and hence the world economy to the "brink" of collapse. Well, I remember back when the senators and congressmen, and the Chariman of the Federal Reserve were telling us that our problems were all on account of that pesky Sub-prime Crisis.

Yes, as I said in Part I of this series, the Derivatives, Collateralized Debt Obligations and Credit Default Swaps were merely utilized in such a way as to crush the world economy, not merely bring it to the brink. But there is a more fundamental ingredient involved. What brought the US financial system and the economy down, which by the way is still down, and secretly submerging further like a Top Secret science fiction submarine, was not Derivatives and CDO’s and Credit Default Swaps, but simply people - the shadowy people who control international and national banking policy, and the Federal Reserve. Until those people change their behavior, or are brought under control by government, and until our government in Washington D.C. gets out from under their control, there is going to be a lot of suffering in the world, and maybe even World War III.

Unfortunately, we can’t expect President Obama and his administration to make sufficient changes in how they are allowed to behave. His campaign received $69,823,872 from the banks, if you include real estate, according to the Center for Responsive Politics, more than any other group. Senator John McCain only received $60,605,254.

Look at this. Obama got a bit more than McCain, and Obama won. It reminds me of most all campaigns of recent memory, in that the winner most always received more money than the banks contributed to the runner up. It is reminiscent of how France lost the war of 1815 when Napoleon Bonaparte and his French Army were loaned less from the international bankers than they loaned to the alliance of England, Russia, Prussia and Austria. For one thing, Napoleon’s army couldn’t afford the newly invented rubber boots that kept the feet of the men in Wellington’s allied army dry at Waterloo.

It brings to memory America’s devastating Civil War, which was for the most part instigated by international bankers in England, France and Germany in order to destabilize the newly United States, for the gain of their central banks, and how that war was won by the North after it received more money from international bankers and mobilized an army nearly twice as large as the one from the South.

I really do not like to get up on the soapbox about this aspect...  because someone will always be offended that I did not say slavery was the cause of the Civil War.  But slavery was instead the number one incendiary issue, and it was used to mobilize the hatred of racism, fire people up, and demonize Southerners who believed they were fighting for state's rights, and against financial enslavement by a dominant central bank controlled federal government.  Many good people will not immediately see how this could be possible, given the way recorded history is often incomplete or revised, but the same type of international financial instigation and profiteering happened in World War I, and then again in World War II.           

So here we are now, in the 21st century, in our time, as we bear witness to the domination of the world's governments by corporate, institutional and financial powers.  Just this month, the banks used their lobby in Washington D.C. to prevent the Senate from passing a provision that would have allowed bankruptcy judges to unilaterally reduce the principal amount on mortgages. Last month, the Senate voted, 51-45, against the so-called mortgage cram-down bill, that would have allowed judges to rewrite mortgage terms for struggling borrowers before they faced foreclosure.

This is alarming, because with the banking industry’s destruction of the secondary market for pools of real estate loans, there is no ability for banks to get those loans off their books and make room to initiate new loans. Hence, borrowers with predatory or escalating loan terms, with loans above the Fannie Mae and Freddie Mac limit of $729,000 as mentioned in paragraph two, have nowhere to refinance out of those loans, and so mortgage modifications and reductions are their only option. In other words, with no relief from the banks or congress, homeowners caught within the trap will continue to default, and no amount of phantom stimulus money to the banking elite or the federal bureaucracy will curtail the loss of private property, and the downward pressure on the economy.

Now it may appear to some that I’m wrong, and if so that’s because the banksters, the politicians in their pockets, their accomplices in the establishment news media, and millions of plain folks who are confused about what is really going on, God bless ‘em, are unable to face a painful and inconceivable truth. Many are going to be perennially optimistic that the current administration is courageously engineering an economic recovery. That might even make the stock market go up for a while.

After all, we've all seen the market go up due to the shadowed machinations of large corporations, Wall Street and the government. The Dow can go up 3,000 or more points that way, and when it does the experts will say the market was right, and the general consensus of the media and the public mind will believe that things are truly improving, even when fundamental ethical and economic problems have not been addressed, and the rich are becoming fewer but richer, and the ranks of the desolate are growing...

Today, June 18, 2009, as I write this, former President of the New York Federal Reserve Bank, current Secretary of the Treasury Timothy F. Geithner is speaking before Congress. He is advocating greater control of the Federal Reserve over non banking institutions, in other words more of those large corporations that are too big to fail. The justification for greater Federal Reserve Bank control, Geithner said, is that our economy was brought to the brink of collapse and we can never allow that to happen again. He urged swift action on the part of Congress.

I just don’t see it that way. It appears to me that the economy wasn’t brought to the brink of collapse at all. It was pushed over the edge of collapse, and is still in free fall, although the powers that be are doing a fair job of hiding it. It is ridiculous, and it is saddening for me to think that our elected officials are even entertaining the idea of giving the shadowy tool of the largest banks and corporations, an entity misnomered the Federal Reserve, that is not any more federal than the Federal Express, more power to say which banks and corporations can live or die.

Why is congress entertaining this? What kind of pressure upon them has captured their minds? Can’t they see that these banks and their minions at the Federal Reserve need to be saved from themselves? For how long can a few elected officials and certain unethical folks in corporate boardrooms who are wagging this dog, get away with it? Forever?

Well not necessarily. Not if we have the discipline to stop voting for who we think will be the winner of rhetorical arguments between Republicans and Democrats, or Capitalists and Socialists. Not if we exercise our lawful power to initiate petitions and force a public vote to enable the public funding of campaigns. Not if we thereby take the election of our legislators out of the monied hands of those who care only about financial profit, and not about what happens to people. And not if we then identify and replace the legislators who have continued to align themselves with their cronies in the banks, insurance companies and big corporations to the detriment of the people they swore to serve.