• FBI’ Shifts – Counter-terrorism To Anti-Fraud

As the economy’s meltdown confuses politicians and economists, and stresses businesses and wage earners, the FBI has suddenly discovered a new path to career advancement. It has announced open season on the financial community with 530 corporate fraud investigations.

The FBI also claimed that 38 of these new investigations involve some of the biggest names on Wall Street, and that it has a record 1,800 investigations digging into mortgage fraud. Mortgage industry professionals, including the CEOs of companies, brokers, and lawyers are apparently being scrutinized for their roles in the evaporation of hundred of millions of dollars.

Some of the disappearance is related to the $700 billion Troubled Asset Relief Program’s cash distribution already dispensed. No-one was watching. What can really be expected for the stimulus money Obama and Congress will shortly be disposing of? Neil Barofsky, the special inspector general of the TARP program put it rather aptly, “History teaches us that an outlay of such money in such a short period of time will inevitably draw those seeking to profit criminally.” This is evidently a behavior newly discovered amongst these so-called pages of history. We can assume that anyone of the millions of taxpayers who are being asked to go into massive debt, could easily have lent a more watchful eye over the apportionment of cash than the amateurish efforts which the Administration and Congress have provided.

All of this, of course, is intended to allay, even anesthetize the public fears that its precious cash is, and will be, judiciously dispensed throughout the attempt to stimulate the economy. Taxpayers must be convinced that the trillions that will be borrowed on their behalf to bailout failing or troubled businesses, are in good hands. Every tactic, including fear and panic, is being applied to convince America that this unprecedented borrowing is justified, and execution of the cash distribution will be diligently overseen by government agencies. Taxpayers must also be persuaded that government intrusion in corporate America will, in time, have positive affect. How else can the emergence of future Madoffs be prevented? Shifting public consciousness is a slow multi-level, multi-dimensional process.

We can rest assured that the FBI investigation, along with an allegedly revived SEC, will not delve too deeply into any affairs of financially healthy friends of the Administration or Congress. Future results will be consistent with past inaction on abuses perpetrated by former executives of organizations such Fannie Mae and Freddie Mac. Where was the SEC’s oversight during the past few months or the past year? Where is it now?

America can look forward to being entertained by in-depth coverage of occasional culprits assembled into the coral constructed specifically for scapegoats. Sure, they will be guilty, and mountains of evidence will be collected then disgorged on their heads with flamboyance in the public square, but they will be bit players in the game. The new FBI initiative is another tool in the arsenal prescribed for taking the taxpayer’s eye off the ball. Fraudsters should be punished. All fraudsters, including the ones at the top of any fraudulent food-chain, even those whose cosy relationships provide insulation from prosecution. Delivering otherwise is repeating tired myths, and is a prolonging of past disrespect of taxpayers.

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• CAPITALISM – A POLITICAL PUNCHING BAG

Capitalism is the heart of the American economic engine, and really the core the whole of American society, but capitalism regularly gets pummeled as a provenance of the nation’s moral disintegration. There are, of course, ample specimens selfishly pursuing purposes to the exclusion of other more lofty ideals, however, such are not the majority of individuals and businesses, which provide the sweat that builds a country. The elements in a society that blame the profit motive are those who leach from its successes directly or indirectly, either out of incapacity, laziness or from jealousy. Going after abusers of responsibility, including CEOs whose incomes vastly overreach their real value, or elected politicians who take bribes such as those who took cash from Fannie Mae, is necessary, just like jail terms are necessary for any criminal behavior in a society that seeks some level of security.

Capitalism and the business culture of all societies, it seems, are easy targets for the venting of frustrations that surface during financial crises, such as the current unstable state of affairs. It is abundantly obvious the general media has done its best to fuel these fires, while leaving the legislators to continue along their paths, unscathed, unrepentant, and unpunished. Defaming the business environment and disparaging corporate America may serve the campaign trail to the White House with moral bait for votes. It won’t serve the future well-being of American society, and its systems if such sentiments find their way through the legislative process stifling trade and asphyxiating the entrepreneurial spirit.

At stake is the freedom that was promised upon the founding of America. With all of its strength, America remains a fragile social experiment that requires, and will always require, care, attention and nurturing. While the current administration curtailed some of the assumed freedoms, the nation should not allow the political pendulum to swing so far in the other direction that a greater degradation of freedoms is instituted in plain sight while attention is being diverted to the “straw man” of corruption, the businessman or businesswoman, being pilloried.

Laws provide a country with ample guidelines that pertain to accepted behavior. Today we find ourselves with countries around the world rushing to seek new convoluted systems of “oversight and regulation” in efforts to reign-in capitalism. Some are even proposing the creation of international regulations and ruling bodies. Such efforts should instead focus on setting legal parameters establishing acceptable rules of conduct within America. Doing so, and setting severe punitive retribution for breaking the laws, as well as providing the courts with real teeth will minimize future abuse and corruption. Specific laws emanating from this economic debacle will retain the freedom required for a flourishing capitalistic system while protecting individual rights to pursue personal and corporate financial objectives. Global problem solving is impossible if your own house is not in order.

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• FANNIE MAE & FREDDIE MAC CONGRESSIONAL DONATIONS - NOTHING ILLEGAL?

American taxpayers should be upset at the amount of Congress directed cash from any corporation, private interest or organization. Whether such financial injection is in support of new drugs, insurance, medical services, or guns, corporate donations to Congress or even to election campaigns should be illegal. Entities with agenda currying favor for their products or causes should be run out Washington. Fannie Mae and Freddie Mac did much worse.

Fannie Mae and Freddie Mac senior executives have been supplying cash to Congressmen including Obama. Why? Why would organizations that were established by the Federal Government in the first place, and which serve the government and the U.S. taxpayers, be “lobbying” congress? Why would these two entities extend the largess of bundles of cash, sundry benefits and late afternoon caviar and champagne to legislators? Why should they care what a few handfuls of Senators think or do? The answer lies in the shadows that underlie the reasons for the financial “surprise” of this past century.

No-one knew. This disaster caught all experts and manipulators on Wall Street, off-guard. NOT A CHANCE. Don’t believe it.

The executives and all senior management at Fannie Mae and Freddie Mac, as well as management at numerous other financial institutions knew exactly what they were doing. Pay-offs to Congress maintained “friends” in the Legislative branch so that there would be no questions, and no oversight of their activities. The abuse continued unabated while personal bank accounts filled up quickly before the ships sank.

Discussions of implementing strict regulations or guidelines is simply a vacuous derailing of attention from the challenge. The strange attempt to instill panic into the minds of all Americans may be a slight-of-hand endeavoring to hide something underlying the mess. THIRTY to ONE leverage was no way to run a railroad, but that isn't what needed hiding since everyone was doing it. Misrepresentations in the books was rampant. Risks were hidden to ensure the packaging, flipping and re-flipping of bundled loans, thereby maximizing fees and bonuses.

Why is no-one digging into the credit rating agencies whose AAA ratings applied to securities riddled with risky loans or worse, injected confidence in undeserving investment vehicles, and minimalized capital requirements for too many lenders.

While Congress agrees to a $700 billion backstop which will provide ample confidence to the markets, it should pick and chose which bailouts to fund as they occur. Otherwise, who will be the final arbiter of good taste as to which tattered financial packages will receive the beneficence from the bailout bucket? Paulson? The long list of reasons against that suggestion starts with conflict of interest and lack of objectivity. Who will make sure the banks running to the trough aren’t coming with only their worst garbage bags after cashing in the good stuff they’ve picked over? How will Price for the decayed assets be decided on behalf of the taxpayers? Will the folks who either led or cheered the parade as it headed to the cliff be reliable decision makers in the process? No blank check should be provided to anyone, least of all any so called experts who had more than passing interest in the creation of the mess. Lets remember the, “burn me once, shame on you, burn me twice, shame on me” caution sign.

The current Congress has shown little propensity for decisive leadership. Today it should not panic, and should not succumb to outrageous demands being made by those who had insufficient foresight to see the looming catastrophe that millions of others pointed to as inevitable. While implementing a solution, Congress should also demand answers to serious questions. Long prison sentences should await executives such as those running investment banks who broke laws, as well as those in Congress who received kickbacks to ignore the duplicitous activities. All cash, and assets accumulated with obscene bonuses extracted through cooked balance sheets should be handed to U.S. taxpayers on a silver platter.

Taxpayers should expect and demand diligence as well as responsibility from Congress, and a monumental blank check is neither diligent nor responsible.

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• WHERE IS THE ECONOMIC LEADERSHIP?

Ben Bernanke delivered a bleak message to Congress today with the usual waffling and back door escapes on any firm statements related to the Nation’s economic future, even its near term prospects. Although, in fairness, we should note that with as much aplomb as he could magnetize from Greenspan’s past performances in front of Congress, he emphatically stated, “accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policy makers.” No kidding? How long did his staff stay up to come up with such vapid pronouncements?

How does someone with so little spine get to such position of power and influence? Even as a front man for back room boys he comes off badly. At least when Greenspan double-talked his way through the halls of Congress we could admire the extent of his obfuscating turn of phrase. He said nothing, but he said it with a nonchalance, even a sang-froid that made you smile in wonderment questioning if this guy was human.

America looks for leadership out of the mess it finds itself in, and the best the Fed Chief can do is warn Congress against doing anything about the futures markets, but he does tell lawmakers to tackle the uncertainty in the housing market. So now, Congress, as confused as ever, will head to the commissary for a free meal on the taxpayers, and mumble to itself over the perplexing state of affairs with no answers in sight, and no one to turn to for guidance.

Inflation continues to advance, although to what degree is unclear since it very much depends on what one measures, but the price index is expected to exceed 4%. The food staples are seeing much higher increases however, but since non-food finished goods and services are in the calculation mix, the numbers that have the most impact on the average family are distorted.

The millions of small businesses at the core of the economy are being affected by the credit crunch, but their plight is ignored while they watch major Wall Street firms getting bailed out. Have no fear though, the SEC is actively investigating the subprime meltdown, stock manipulations and short sales, as well as false rumors tainting brokerages and hedge funds. …And heads will roll. OK, well, maybe not. Effective scapegoating is an extremely difficult art to practice. Where is Eliot Spitzer when the Nation needs him?

The recent blame for the housing market deterioration placed on the hapless borrowers who indebted themselves beyond their capacities has not been very subtle. Policy makers’ only planned action is to set restrictions preventing borrowing by the great unwashed. Credit quality standards will be raised. Oh, joy. Is Congress asking the guys who ran those disasters called Fannie Mae and Freddie Mac into bailout territory to return their million dollar bonuses? Congress is mute. Is anyone on The Hill or the White House raising an eyebrow over the usurious interest rates being charged by banks and credit card companies to a majority of clients? Bernanke’s tarot cards predict a late fall interest rate increase to 2.25%, which is a number as foreign to most borrowing taxpayers as the number of stars in the sky.

We cannot expect superhuman talent to accurately read crystal balls, and obviously economics is not a science, but leadership imbued with some common sense is not too much to expect from Washington and its expensive hired help. Leadership, plus some effectively placed oversight.

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