Monday, April 27, 2009

Two Criminals Much Worse than Nixon

You have read on these pages a consistent adherence to civil discourse and reasoned positions. So it should get your attention when I assert that Henry Paulson and Ben Bernanke are criminals much worse than Richard Nixon.

Now I am not making wild assertions like some knee-jerk, attention-getting radical. I am, among many other things, a career corporate and securities lawyer who knows a patent criminal securities law violation when he sees one. Caroline Baum, who is one of most forthright commentators on, a respected financial reporter, reports as follows:

The latest example of what happens when the business of government is business was last week’s release of testimony from Bank of America Chief Executive Officer Kenneth Lewis to New York Attorney General Andrew Cuomo. In it, Lewis says he was strong-armed by former Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke to seal the deal to buy Merrill Lynch without telling his shareholders about the brokerage’s mounting fourth-quarter losses, which came to $15.4 billion.

According to the letter Cuomo sent to Congress and regulators, Lewis wanted to invoke the “material adverse event” clause to back out of the merger, but the bazooka-toting Paulson told him to stay mum and threatened to give him and his board the boot.

Paulson said via a statement that while the words were his, the sentiment was “what he knew to be the Fed’s strong opposition to Bank of America” backing out of the deal.

“No one at the Federal Reserve advised Ken Lewis or Bank of America on any questions of disclosure,” said Fed spokeswoman Michelle Smith.

Of course not, not in those terms. Lewis surely never asked Bernanke directly if Bernanke wanted him to conceal the truth from his shareholders and the Fed never directly advised him. But the deal was clear. Hey, folks, put it to a jury in a shareholders' suit and let's see what the people say to the nefarious activities of the Princeton and Goldman pukes. (I'm sorry, but do I sound extremely disgusted?)

It has never been part of our system of justice that any man is above the law, and that includes Treasury Secretaries, Federal Reserve Chairmen and Presidents. According to Bank of America Chairman Lewis in sworn testimony, Paulson and Bernanke solicited him to violate the securities laws by concealing material information from the bank's shareholders and the securities-buying public. He complied. In legal terms that is aiding and abetting and conspiracy to violate the securities laws of the United States. Forget their official positions or national emergencies or crises; they are not legally relevant. Ask any Bank of America shareholder who held or bought shares during the period and they will confirm that they expected to be informed.

Here is what Mike Shedlock has to say

If Beranke and Paulson -- and for that matter all of the others who ran roughshod over the law to save their bretheren from self-induced financial ruin with government power -- succeed in ducking culpability for their crimes, the politicization of justice in the United States will mark the end of the 200-year American experiment in popular government based on individual rights.

While they may not view themselves as such, these two guys (and others) are criminals who should be accorded the same status in society as child molesters, robbers and rapists who prey upon the innocent and unsuspecting.

If they disagree, they should sue me for libel. Let's go to the mat and see who an American jury will accord the most credibility.

Update June 15, 2009: The Washington Post reports that the House Oversight and Government Reform Committee will be looking at this issue and has subpoenaed the Fed's records. The Associated Press also has a story on the matter. Better late than never guys.

Saturday, April 4, 2009

Hyperinflation and Depression

Jim Sinclair, who has over 50 years international experience in precious metals trading, and whose commentaries are linked at the left, offers the following thoughts:

1. All hyperinflations are currency events, not economic events.

2. All hyperinflations have occurred in what can be called deep deflationary depressions.

3. Quantitative Easing, the wanton printing of money, has been the key to all hyperinflations in history, no exceptions.

4. The recent example of Zimbabwe certainly occurred in the deepest economic doo-doo ever.

5. Don’t mix up hyperinflation with a deflationary business environment as mutually opposed when they are locked in step.

There are now hundreds of billions of dollars in money and credit newly created that are out there sloshing around and ready to move. Hardly anything can bring them back without creating a business downturn or making the present one much worse. So, despite the Fed's lip service to fighting inflation, it won't happen. The Fed has lost its independence from political objectives. We now have a politically driven, short sighted currency. And the politicians are ignoring the inevitable consequences of printing money to reward risky financial behavior, just as the long-term financial consequences of Social Security and Medicare have been ignored.

It would be baffling that they even ignore the timing of their own elections considering that things will be worse two, four and six years from now. But they are counting on demagoguery to pull them through the next election -- lies, scapegoats and demons will be found on which to shift the blame.

The clowns in Washington have no idea what they are doing. Run for cover.