* Discredit of USTreasury Bond Market
* Serious Challenges to the USFed
* Evidence on 911 & Iraq Liberation
* The Grand T.A.R.P. Fund Fraud
* California Dream Turned Nightmare

Issue #63
Jim Willie CB, 
“the Golden Jackass”
14 June 2009

" The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity. Both bring a permanent ruin. But both are the refuge of political and economic opportunists." - Ernest Hemingway


◄$$$ GIGANTIC SEIZURE OF SMUGGLED USTREASURY BONDS WORTH OVER $100 BILLION IN ITALY, WHICH COULD MARK A NEW CHAPTER OF ATTACKS AGAINST THE US FINANCIAL SYNDICATES $$$. A gigantic hoard of US$ bonds worth $134.5 billion was captured at the Italian border entering Switzerland. It was the largest financial smuggling case in history. The arrested were Japanese citizens of no official standing. At this point, it is unknown whether the securities were valid or counterfeit, but due to volume, counterfeit is more than extremely likely. Concern over counterfeit securities is spreading in Asia, where fake underweight gold coins are a rising problem in China. The international press is silent, probably due to the clear enormous risk, and likely also because it is widely understood that Wall Street firms and the US Central Intelligence Agency are the biggest counterfeiters and fraud kings in the world. And Americans thought that large scale counterfeit and fraud was the sole privilege of the United States!!! The bulk of the seized securities were US Federal Reserve bonds worth $500 million each. Typically only official state agencies deal with such large denominations and such large amounts of money. If the bonds are legitimate and stolen, then Italian authorities stand to gain $38 billion in awards and fees. Italian and US secret services were called in to assist the Italian financial police.

Several important international financial newspapers had already reported on the existence of counterfeit securities circulating within unofficial financial markets. The fear of counterfeit bonds and securities has reportedly spread across Asia, the consequence for which has been that real securities are also viewed with suspicion and closely scrutinized. During the World War II, a common practice by several countries at war was to print and circulate high quality counterfeit enemy money, launched exactly as an attack. It has also been historically established that some central banks, like the Bank of Italy in the 1940 decade, issued the same securities twice. The identical registration numbers enabled the nation at war to have more money to spend, the cover being the legitimacy of the serial numbers. See the Asia News article (CLICK HERE).

An interesting perspective is provided by Zero Hedge. This really does read like a spy novel. He wrote, " According to the Treasury, less than 1% of ' Marketable Treasury securities' exist in bearer form. The $134 billion is an interesting number suddenly, unless there is some nuance to ' Marketable' here… If a theft, it would certainly be the largest on record ever. And in such amounts, it seems clear that only government connivance would make such an ' operation' possible. Quietly unloading Treasuries in Switzerland? Or establishing a cash pile abroad for a bit of extraterritorial Quantitative Easing? Buying Treasuries with credit established with a bunch of long off-the-books Treasuries? That is pretty recursive. I like it." See the very brief commentary by Zero Hedge (CLICK HERE). The implication is clear. If the USDept Treasury is correct, that 1% is the limit on bearer bonds, then counterfeits are involved. Only $4000 to $5000 billion in USTreasurys currently float in the credit market, meaning no more than $50 billion exist in bearer bond form.

One might claim that during WWII, the world was involved in a bloody war, a situation not quite the case today. Or is the world at war indeed? My answer is yes, with a phony War on Terrorism to cover staggering fraud, to enable monopolized military service provision contracts, and to offer cover for a narcotics monopoly operation. Furthermore, a financial war is in progress, with the enemy perceived in many major global regions to the be USDollar and USTreasurys, backed by a powerful USMilitary and overbearing USGovt. Wall Street has engaged in $trillion fraud. Since not prosecuted, and worse, since the USDept Treasury continues to be run by Wall Street icon Goldman Sachs, foreigners must feel a strong sense of warlike atmosphere. Foreign governments, here Japan, might have begun a surreptitious attack against the USTreasurys, to discredit, to weaken, to reduce value. The outrage of both huge truckloads of new USTBond supply following clear mortgage bond fraud might be too much for foreign entities to tolerate. Eventual grand secretive dumping of USTreasury Bonds by the Japanese Govt appears to have a designed for sale in Switzerland. The hidden nature of the path to sale must be to avoid the USGovt, its vengeance, and military retaliation, all of which has many precedents. What a huge smuggling operation! The US press, the intrepid lapdogs tied in my opinion to the financial crime syndicate, still sits on the story. The integrity of USTBonds might soon be called into question. The US financial instruments are slowly becoming a laughingstock, a carnival, a field of mockery. This is a new wrinkle in a global battle to remove the United States from its coveted role as custodian of the global reserve currency, a position abused with hegemony and syndicate operations.

Smuggling of government bonds is occurring with other nations. Last week, 800 thousand worth of Luxembourg securities were also seized, the story still incomplete. See the Italian Journal article (CLICK HERE) but it is not in English.

◄$$$ THE SMUGGLING CASE MIGHT EXPOSE THE GREAT GAP IN HIDDEN ILLICIT FLOATING USTREASURYS, WHICH IS UTTERLY HUGE $$$. My claim has been made to family, friends, acquaintances, and clients for several years, that the largest crime syndicates on earth operate under the various wings of the USGovt, and have been for a long time. Proof has come in the last several years, with an unending sequence of grand fraud episodes that have dominated the news wires. Counterfeit and fraudulent bonds are their game, enabled by a fiat currency system, permitted in US origin by its custodial role behind the USDollar. The opportunity for criminal fraud on vast scale is made possible by money without basis (fiat currency) and a criminal mindset that builds protective walls with regulatory and law enforcement agencies, supported by bribery and paid influence (like with USCongress). The United States has it all!

Great discrepancies in USGovt official accounts hide a veritable black hole. From 1990 to the present day, Americans have sold a total of nearly $5500 billion worth of US$-based bonds to foreigners. However, the officially recorded net investment position of the United States can account for an amount totaling only $2800 billion. The US capital market seems to have a black hole at its center. Fingers point to JPMorgan, many of whose USTreasury Bond and Enron records conveniently vanished on 911 in the third building at the World Trade Center. That building fell to the ground, utterly destroyed, yet it had not been struck by any aircraft. Counterfeit USTreasury Bond records are strongly suspected as destroyed in the demolition. The end result is that $2700 billion in US$ bonds vanished from known records and official statistics. The missing $2.3 trillion Pentagon spending on USMilitary appropriations over twenty years is another unrelated matter. See the Financial Times brief article (CLICK HERE) from June 2006.

The following message was provided by a person who once had numerous interactions with people at Dillon Read. Great access was afforded to truly scummy enclaves. The topic was gross missing money from numerous sources, for instance JPMorgan, other Wall Street firms, Fannie Mae, Pentagon, and US security agencies. The message was " I believe the $4 trillion missing money was likely financed with USTreasuries issued by the USTreasuries off balance sheet. Someone once showed me documents on a private placement of off balance sheet Treasuries that had been issued to Myer Lansky. He was trying to check to see if they were authentic. I laughed because the Assistant Secretary of Domestic Finance for the Treasury at the time they were issued was someone I knew on Wall Street. He was a partner at Dillon Read and then Morgan Stanley. A pretty slick guy, he clearly had something on ' the Boys' but I could never figure out what it was. So the idea of the US issuing off-balance-sheet Treasuries is very possible. More ' collateral' fraud. Question is, were they officially issued but not recorded? Are they real?" The implications here are that a tremendous cavern of slush money has been enabled by unofficial USTreasury Bond issuance, conducted in darkness, distributed at the will of the financial syndicate, AND IT IS USED AS COLLATERAL FOR VAST CREATION OF OTHER FUNDS. It is simply not possible for hundreds of billion$, if not trillion$, of counterfeit or intentionally unregistered sovereign and agency bonds to be issued and floating around the world without detection or their surfacing. This story is proof. Watch the story be killed in the US press.

◄$$$ DARK POOLS FLOURISH, AS INSIDER TRADING TAKES DEEPER ROOT, AND MARKET TRANSPARENCY BECOMES DIMMER $$$. Big banks are conducting a high volume of stock trades internally. They are actually capitalizing on the credit crisis. Their brands have gained much more popularity in the last few years. While doing so, they encourage the most active traders to leave the traditional exchanges. The so-called ' Dark Pools' enable the big investment banks to anonymously match orders so that traders do not alert the wider market to their intentions from the publicity, for stocks and bonds. Thus, concerns are acute that stock pricing is no longer transparent. Dark pools usually publish trades with very little detail days after execution. Two of the biggest villains are the broker dealers Goldman Sachs in the United States and Credit Suisse in Europe. They are essentially squeezing out other electronic trading venues, as well as exchanges, resulting in lower fees for competitors. Dark pools owned by brokers and large market makers accounted for 70% of all dark US equity trade volume in April, up from 64% in December and from 58% a year earlier, according to Rosenblatt Securities, which tracks 18 such hidden arenas. The dark pools run by banks have only recently gained accepted usage in Europe. Their success or failure is being observed closely. Some anticipate the US equity markets to fan out into possibly 40 different venues. The NYSE Euronext recently urged the Securities & Exchange Commission to examine the impact of the early activity at some new US trading venues, essentially urging them to do their job. Absent new regulation, such dark pools sponsored by the big banks will continue to grow quickly.

The US financial markets evolve in their corruption, while at the same time control the regulatory bodies in a virtual straightjacket. The intelligent observer can infer such hidden market activity, by noting a simultaneous drop in bid size and ask size, with zero information provided to public eyes. Any claim of transparent and equilibrium based US financial markets is loaded with total stupidity and ignorance. See " Wall Street' s Secretive & Dangerous Dark Pools" by Tyler Durden (CLICK HERE) for more background and detailed information on this scummy facet to US markets.

Eric deCarbonnel of Market Skeptics claims " Dark Pools unstated primary purpose is insider trading, and insider trading does not coexist well with regulation. In other words, if dark pools are effectively regulated, they will disappear. The passage of Reg NMS extended the trade-through rule to all US exchanges that trade equities, including the New York Stock Exchange, Nasdaq, and American Stock Exchange. It was the most sweeping and controversial change to US markets in 30 years, and made manipulating all US exchanges far easier. Growth in dark pools equals growth in insider trading. It stands as testament to the corruption of US capital markets. As long as there is no penalty or risk for insider trading, more and more firms will engage in it." If an illegal trade can be made, assured of profit, using privileged information, the dark pool is perfect, since it contains no records or oversight.


◄$$$ CHALLENGE TO US FEDERAL RESERVE WITH A FORMAL AUDIT COMES TO THE FOREFRONT SOON $$$. A legal challenge began in February 2009, when Congressman Ron Paul (R-Texas) introduced HR 1207, the Federal Reserve Transparency Act of 2009, which would force a formal accounting audit of the USFed by the USGovt Accountability Office. Shortly after its introduction, it boasted 11 co-sponsors, and three were Democrats. The House of Representatives now shows 221 co-sponsors for HR 1207. With 435 House members in all, a bill needs 218 for a simple majority. Paul has intentionally written the bill to be quite short, thus needing very little amendment or scrutiny for comprehension. In fact, HR 1207 is only 446 words. Last Tuesday, Rep John Boehner of Ohio, the Republican Leader, signed on, to make 156 Republicans to join 51 Democrats so far to support HR 1207.

The US Supreme Court has no interest in disclosure.
The central bank won a supporting vote from the US Supreme Court, when it gave a roadblock decision against the American people (more like flipping the bird or saying F.U.) on the challenge by Bloomberg, using the Freedom of Information Act to request disclosure of how the USFed used $2 trillion dollars in open market operations. Usage of $700 billion in TARP funds is yet another example of disbursements in darkness. The USCongress hires the USFed as consultant agency, yet it has no clue or control over the USFed asset management of operations. National security is constantly invoked for currency management. Furthermore, the USFed and Dept Treasury constantly claim the other body has responsibility when pinned down by Congressional committees. Without an audit, the USCongress remains ignorant of how much gold the nation owns. The Clinton-Rubin gang borrowed almost all of it at near 0% and sold it for private speculative gains one decade ago. Some of today' s financial structure problems extend from those reckless criminal sales.

The next challenge for action on the HR 1207 bill is to avoid having it tabled and set aside to collect dust, especially since it was crafted by the minority party (not in power). The Financial Services Committee has 71 members, and it is responsible for decisions of bring a bill to the House floor for debate and a vote. Right now, the bill has 34 co-sponsors, including a handful of Democrats, meaning that just two more co-sponsors would give the bill a majority in the important committee. A committee majority would almost assure approval to send the bill to the House floor. My pragmatism only wants open debate, some press coverage, and the light of day to shine on this challenge. The US Supreme Court is tainted in my view, as it revealed its seamy underbelly in November 2000, after a decade of decisions to increase police authority on search & seizure. They have been deadly silent on the Patriot Act for seven years, which undercuts the entire Bill of Rights. Its integrity has faded. See a progress report by Jake Towne, a Champion of the Constitution (CLICK HERE), which had an update with news very recently.

In my view, the US Federal Reserve started as an institution to control the US banking system by the Elite of London and Old Europe almost a century ago in 1913. After the Vietnam War, it gradually functioned on the side as an oversight group for money laundering on CIA narcotics sales. In the last decade, it slid further into disrepute when it sanctioned Wall Street mortgage bond fraud, condoned Fannie Mae bond fraud, and was the actual site for JPMorgan counterfeit of USTreasury Bonds. Simply stated, it is a chemical factory and sewage treatment plant and criminal shell game and money laundering operation that coordinates actions with the USGovt regulatory bodies, the USDept Treasury, several Wall Street firms, and various US security and military independent wings. My claim is that the USFed is the center for the financial crime syndicate.

The momentum behind initiatives to force accountability and transparency on the USFed could contribute to bringing down the USTreasury Bond structure built atop the USDollar, and hasten the demise of the US$ itself. A truly independent audit of the USFed' s assets (both bond collection and gold hoard) could reveal its bankrupt insolvent condition. As confidence and reputation are lost, what could follow might be a panic that turns global in a rout of the USDollar. Watch the US Supreme Court for clues on defense or lost control. One particular source suggests that in the midst of US banking system turmoil, failed US banking function, uncontrolled USGovt deficits, and bloated USFed balance sheets, the USFed might resign its contract with the USCongress. That would result in a technical immediate USTreasury Bond default, since no further sales or refunds could follow.

◄$$$ INDICATIONS GROW LOUDER THAT USFED CHAIRMAN BERNANKE IS SOON TO BE REPLACED $$$. The most likely candidate is the current head of White House Council of Economics Advisors, Lawrence Summers. By the way, he is the only economics advisor with an office in the White House wing. Bernanke won the job by his preachings that the USEconomy could be saved with rampant free money dropped upon households, by using the monetary printing press at essentially zero cost, by flooding the banking system in such a way as never to permit deflation to occur. Those reasons all qualify as heretic to the entire central bank treatise. After three years on the job, Bernanke can now serve as a fall guy in the rear view mirror, as the cost of monetization appears to be lost credibility for the USFed, a deluge of uncontrollable liquidity facilities for banks, a tacit attempt to replace elements of the US banking system with adjunct roles by the USFed itself, a runup on long-term USTreasury bond yields, and diverse foreign revolt. His legacy would be complete and total monetary inflation, the well-known historical cause for capital destruction. With Bernanke painted as the fall guy, history can continue to revere Alan Greenspan, a very erroneous unjustified tribute.

When Summers came into focus and entered the spotlight last week, the message seems to grow louder. He gave what seemed like an introductory speech on his philosophy, which might have been deemed out of place without expectation of his new appointment as USFed Chairman. Summers is much more a political animal than Bernanke, much more arrogant too. He has a long list of people who hate working with him, even talking to him. His selection would be fit a scenario where the USFed came crashing down in the next couple years. However, he is NOT so much a Goldman Sachs creature. He is more a Harvard School of thought disciple, a former president of the university (home of the Enron design and experiment, its criminal fraud execution, and insider trading). The rivalry between Quantitative Monetarists in Chicago and Keynesians in Harvard is strong. My theory all along is that the posts go to the losers and crime syndicate leaders. This fits since Keynesian principles have been totally discredited, without much realization. Bernanke has misread every chapter of this disaster. He is the passive professor, the avowed inflation engineer, with no previous political or banking connections to the crime syndicate seats of power. His only apparent advantage is willingness to crank every conceivable liquidity mechanism, but in REACTION.



This story is too important to leave alone. In April of 2009 a scientific paper was published in a respectable peer-reviewed journal, the Open Chemical Physics Journal. The paper is entitled " Active Thermitic Material Discovered in Dust from the 9/11 World Trade Center Catastrophe" released by the prestigious journal. This paper provides indisputable evidence that a highly engineered explosive called nano-thermite was found in the dust of all three buildings at the World Trade Center site. This advanced explosive incorporating nano-technology is only available to sophisticated military labs. So a finger is pointed possibly at the USMilitary, which was ordered to stand down (lower guard). Distinctive reddish gray chips discovered in all four sets of samples collected from separate sites show marked similarities. The properties of these chips were analyzed using optical microscopy, scanning electron microscopy, X-ray energy dispersive spectroscopy, and differential scanning calorimetry. One would expect all explosive material to be incinerated, fully burned, but not so, thus evidence of the genocide crime. The red portion of these chips is found to be an unreacted thermitic material and highly energetic. That explains why the ruins smoldered for a full month after 911, with few questions asked by the lapdog press. See the Prudent Press article (CLICK HERE).

A few hundred eyewitness accounts of numerous large explosions in the basements of the WTC buildings continue to circulate among police, firemen, and emergency medical staff. They were there at the scene on 11 September 2001. None of their accounts ever were entered into the official 911 Commission report, nor appeared in news network reports, much to the frustration of widows who pushed for more investigation. One subscriber from New York has a personal friend on the police staff, who personally witnessed explosions. My conclusion remains: this was the largest and most heinous crime on US soil in a century, covering a grand bank heist of gold bullion, bearer bonds, and diamonds. My information comes from over ten sources. The fact that the USGovt and press networks continue to run with the official story tells me of complicity at the highest level of government. The War on Terrorism is phony, and an insult to our intelligence.


Mine is a different criterion for patriotism, that excludes stolen funds on a grand scale, bloated slush-filled service contracts, mass civilian deaths, usage of experimental weapons on civilians, and especially narcotics trafficking, as troops are now in my opinion being abused and exploited. An elite special death squad operates inside Iraq. Its mission is both political and military. The Iraq Special Operations Forces (ISOF) is staffed by nine battalions and 4564 men, making it approximately the size of the US Army Special Forces in Iraq. They are well equipped, well trained, and act efficiently and covertly in killing their targets from opposing political parties and suspected militia groups.

They call themselves ' The Dirty Brigade' and boast to the family members of their victims during their abductions. Those who oppose the brigade publicly are typically murdered the next day. The brigade was designed and constructed by the USMilitary, but is free of many of the controls that most governments employ to rein in such lethal forces. It is unaccountable to Iraqi ministries and the normal political process. Regard the force as a special private army or security agency (Gestapo) that answers directed to prime minister Nuri al-Maliki, commanded independently of the police and army. By design and Maliki directive, the Iraqi Parliament has no influence over the ISOF Gestapo and knows little about its mission. The Nation wrote " The ISOF will become Maliki' s personal death squad. The prime minister is looking for re-election, and there are not that many restraints on his ability to target political opponents… They kill and no one will hold them accountable, because they belong to the Americans." US Special Forces claim this independent chain of command ' might be the perfect structure' for counter-terrorism worldwide. President Obama has said he will institutionalize irregular warfare capabilities, an indirect blessing. One might scratch the head and ask who the terrorists are? Clearly, this is a sordid side to the ' Liberation' movement to install freedom. See the article in The Nation (CLICK HERE).

◄$$$ THE USA RECEIVED A LOW RANKING ON PEACE FACTOR $$$. The folks at the Global Peace Index gave the United States a ranking of #83, behind every single industrial nation, and behind many nations known for little integrity. Their criteria include gun registration, military activity, prison population, prevalence of crime, and level of violence. The US prison population exceeds far too many entire countries. In many respects, the US remains stuck in the Old West mentality of aggression, violence, and lawlessness, except now it originates at the top, with leadership.


◄$$$ TARP FUND REPAYMENT IS A STORY IN EXTORTION & FRAUD, A MIXED CONFUSING CONTROVERSIAL STORY, WHERE THE TRUTH IS NOT A DESIRABLE ENDPOINT $$$. Begin with the official story, totally sanitized for public consumption, with editorial comments interspersed. Ten of the nation's largest banks were given approval last week to repay $68 billion in USGovt bailout money from the TARP funds. They will soon be free from restrictions on executive compensation that makes it hard to keep their top-performing executives, as they complain. More like the banks are sick to death of USGovt meddling with pay packages for corrupt bank executives, who failed miserably and brought about the death of their banks, or turning them into zombies. The USDept Treasury has officially approved the repayment of funds from the Troubled Asset Relief Program created by the USCongress in October. Analysts claim that for the 10 banks to return $68 billion in bailout money shows some stability has returned to the system. The Stress Tests were used as cover for the approval, even though they were absurdly unrealistic and rigged. All eight banks that received TARP money and passed the USGovt Stress Tests confirmed they received permission to repay the bailout funds. They are: JPMorgan Chase, American Express, Goldman Sachs, US Bancorp, Capital One, Bank of New York Mellon, State Street, and BB&T. Morgan Stanley failed the low-fence test, but it raised enough capital to repay its TARP money, now approved. Northern Trust was not among the 19 banks involved in the Stress Tests, but was given permission to repay the TARP bailout funds.

The amounts the banks would repay to the USGovt are: JPMorgan $25 billion, Morgan Stanley $10 billion, Goldman Sachs $10 billion, US Bancorp $6.6 billion, Capital One $3.6 billion, American Express $3.4 billion, BB&T $3.1 billion, Bank of New York Mellon $3.0 billion, Northern Trust $1.6 billion, and State Street $2.0 billion.

Even President Obama admitted, " This is not a sign that our troubles are over, far from it." Some alert bank analysts questioned whether the repayment of TARP money obscures dangers in the broader banking industry. Smaller banks suffer with billion$ in failing commercial real estate loans. Large banks continue to hold voluminous toxic mortgage bonds and other credit assets, as the toxic waste remains and is valued with gross exaggeration. To date more than 600 banks have received nearly $200 billion in TARP funds, while 22 smaller banks already have repaid borrowed funds. The 10 banks are set to return funds initially used to buy preferred shares in the banks. They trade like stocks but act like bonds, paying regular dividends.

Some of the TARP funds were disbursed more widely, unlikely to be recovered. The $70 billion used to cover raging fires at failed insurance giant American International Group ended up in the pockets of insider syndicate players. Goldman Sachs steered a criminal reimbursement to itself, above market values for its Credit Default Swaps, with continued controversy. In no way will the USGovt recoup more than half of the entire $700 billion, even with tiny exaggerated profits from the banks. The US banking sector remains in dire straits, best characterized by INSOLVENCY, a problem yet unaddressed. Upon granting TARP funds, the USGovt received warrants from the banks. As a result of higher bank stock prices, the warrants provide substantial profits for taxpayers. This is a motive for the USGovt to cooperate with a return phony FASB accounting rules. Dividend payments received by the USGovt from the TARP participants total $4.5 billion to date. Three of the biggest US banks (Citigroup, Wells Fargo, Bank of America) are still deeply rooted to the bailout. Both Citigroup and Bank of America are dead, and Wells Fargo is near death, all deception and malarkey aside.

After repayment of TARP funds, these banks remain dependent on USGovt support, such as debt guarantees from the Federal Deposit Insurance Corp (FDIC) and direct USFed credit lines. American Express and US Bancorp claim that repayments will reduce earnings for the quarter. Mark Williams, a finance professor at Boston University and former USFed examiner, argued that the banks should keep as much capital as possible until the USEconomy turns around. He believes they are motivated too much to eliminate TARP politics from their internal management. He said, " We are not at the bottom of the banking crisis, so why is it that the regulators are letting these banks reduce their capital cushion? Should they stumble again, taxpayers will have to come to rescue." Banks have been chafing under limits on executive compensation, as well as restrictions to hire foreign employees. They claim key employees have been leaving to join small private firms and foreign banks.

The Stress Tests justified integrity of these dead financial ruined structures, and enabled 16 of the 19 banks to raise $75.2 billion in stock sales. What an orchestrated fraud perpetrated on the investment community for the direct purpose of recapitalization! Geithner cautioned senators in early June that the USDept Treasury needs continued flexibility to inject money into the financial sector, but warned that, despite Congressional wishes, fund repayments would not necessarily be used to reduce federal debt. Geithner has reassured that the fund paybacks made less likely any additional money to be requested from the USCongress. Regulators like the FDIC want to avoid the embarrassment and mismanagement of directing repayment of TARP funds only to have banks return months later in worse shape, seeking another handout. See the Finance Yahoo article (CLICK HERE).

◄$$$ THE UNWIND OF TARP IS A MAJOR BLACK EYE $$$. My view on the TARP funds has many sides, almost none being conventional, which are to be summarized. The big banks are involved in many illegal activities, ranging from bond fraud to naked shorting of USTreasurys to money laundering of narcotics funds to payoffs under violent threat possibly. They want to remove prying eyes to crime syndicate activity by underlings at the Dept Treasury and the USCongress, which contains numerous committees and staff members. Some suspicion swirls that banks receiving TARP funds have been forced to purchase USTreasurys as part of the deal, which they wish to stop. The bank stock rally was phony and contrived, designed to lift prices for planned secondary stock sales. The banks attempted to relieve their insolvency, as they raised $75.2 billion in stock sales. Controversy remains from executive perks, lavish parties, and usage for $4.5 billion in dividends. A valid concern is for bank executives at a few levels not wishing to work closely with USGovt officials, much like unwilling subsidiaries of the Dept Treasury. Dividends should have been eliminated entirely, like the European banks did. In fact, the stocks should have been taken down to zero, but raising funds for bank equity would have been made impossible.

Many far more credible factors are involved, each receiving extremely little publicity. The plan is to keep the dead banks functioning, or appearing to function, to raise capital at grossly inflated prices, to continue the fraud enough to steal more money, to dominate in Congressional fund provisions, to enable more corporate mergers (using inflated worthless paper stock), and worse. The USGovt has to minimize the risk of a repeat episode, a return by the banks for more TARP funds soon after, a certain embarrassment, and certain to include mammoth political fights. The financial crime syndicate wants no more publicity or public duels than the Mafia does. One might assume that the banks must pass certain requirements, must make certain promises, if permitted to exit gracefully, much like a crime syndicate for its members. An effort is underway to deflect anti-bank political sentiment, preferential elite welfare programs, and subsidized heavy executive perks, all of which have angered the public to a great degree. Recall that the US Congressional Inspector has recommended 40 criminal investigations for fraud related to TARP fund usage. No legal action has taken place. So perhaps a deal has been cut with the USCongress, not to prosecute any fraud if a grand initiative to repay TARP funds occurs.

◄$$$ MOZILO OF COUNTRYWIDE IS CHARGED WITH FRAUD BY THE SEC $$$. In the US District Court of California, the Securities & Exchange Commission has charged Angelo Mozilo (Chief Executive Officer), David Sambol (Chief Operating Officer), and David Sieracki (Chief Financial Officer) with securities fraud. Opening lines of the formal document stating criminal charges includes:

" To support this false characterization, Mozilo, Sieracki, and Sambol hid from investors that Countrywide, in an effort to increase market share, engaged in an unprecedented expansion of its underwriting guidelines from 2005 and into 2007. Specifically, Countrywide developed what was referred to as a ' supermarket' strategy, where it attempted to offer any product that was offered by any competitor. By the end of 2006, Countrywide' s underwriting guidelines were as wide as they had ever been, and Countrywide was writing riskier and riskier loans. Even these expansive underwriting guidelines were not sufficient to support Countrywide' s desired growth, so Countrywide wrote an increasing number of loans as ' exceptions' that failed to meet its already wide underwriting guidelines, even though exception loans had a higher rate of default… Thus, each of the defendants was aware, but failed to disclose, that Countrywide' s current business model was unsustainable."

The parade of prosecutions has thus begun, although the Powerz might be offering mere sacrificial lambs outside the New York jurisdiction for slaughter and quick shift of attention once completed. The Mozilo thug is offered for imprisonment, but he is from California, and has few connections to the Wall Street crime syndicates. See the formal complaint (CLICK HERE). If justice were really served, at least 80 indictments would be served from leading executives at several dozen banks and top financial firms operating in New York City, like American Intl Group and Fannie Mae, even major private equity firms. Unfortunately, the guilty parties are working under the aegis of USGovt protection after nationalization, or run the Dept Treasury from the Goldman Sachs revolving doors. It will be a long wait before any criminal prosecution occurs for any of several easy marks who worked or work at executives on Wall Street firms. Numerous fraud kings continue to ply their trade, with total impunity and protection by the law enforcement officials and regulators they own.


◄$$$ CALIFORNIA IS THE LARGEST SCALE ZONE OF ECONOMIC WRECKAGE IN THE NATION, A PLIGHT, A TRAGEDY $$$. Unemployment takes a severe toll on households, families, communities, and at times entire states. California is unique always. To begin with, it probably is the most gorgeous state in the entire union, with breathtaking panoramas, seacoasts, national parks, and by far the prettiest city in San Francisco. It is a trendsetter state. It tests social norms and runs risks with new concepts, occasionally with unfortunate results, like with insanely risky home loans. It is the center for Option ARM mortgages, those nasty adjustable rate mortgages that permitted people to buy too big a house, make too little a monthly payment, and eventually suffer the trigger event when rising loan balances. All the while home equity has shriveled from declining home prices, burning the homes from both ends.

The nation has over 25 million jobless. The USEconomic recession has so far put over six million people out of work, and destroyed over $11 trillion in household wealth. This is in no way a common recession. California now stands out in home foreclosures as a leader, in home price declines as a leader, and in state budget crises as a leader, all tragic story items. My interest in the state is for its exemplary role, and spearhead in nation patterns, as a national economic, political, and social upheaval is in progress. Also, 12.5% of Hat Trick Letter subscribers hail from the Golden State. Its unemployment has the distinction of producing 12 of the top 20 MSA (metropolitan statistical areas) in the jobless rate. Michigan only produces two of the other 8 MSA regions, since its devastation is concentrated in Detroit, actually Flint where the carmaker plants are located.

The MyBudget publication made the following comments in clarification. They wrote, " First, there is a misconception with California. What is portrayed on the media is this all powerful and extremely wealthy state (well, maybe before our budget flew off a cliff at least). Yet the reality is more akin to a Banana Republic run by a small ruling elite. The next two groups are those struggling to remain in the Middle Class while the other half of the state barely makes ends meet. That is why we find that 12 of the 20 top unemployment rates come from California. California now has the highest unemployment rate since World War II, coming in at 11 percent."

The nation must retool for a totally new fast changing world. The temporarily cheap oil prices and gasoline prices are no more, as crude oil sits above $70 per barrel. Home prices must come down another 20% to match wage cuts or job losses, since aggregate demand has been severely weakened. The Elkhart Indiana MSA serves a perfect illustration of a community that was based on an industry that cannot remain intact in the United States. It is the center of the recreational vehicle (RV) industry. Many people already feel like they are living in depression level situations. See the MyBudget360 article (CLICK HERE).

◄$$$ THE CALIFORNIA BUDGET IS A TRAIN WRECK, ONE WORTH WATCHING, SINCE THE FEDERAL GOVT WILL SOON BE FORCED TO ENTER THE PICTURE WITH SUBSTANTIAL STATE AID PACKAGES $$$. Until now, the USGovt has pandered its colossal aid to Wall Street and the financial crime syndicate that controls both the USDept Treasury and key power centers in the USCongress. Fannie Mae is a Congressional playground of fraud, theft, and influence. The 50 states are in trouble, at least 75% of them, big trouble, but to date have been largely ignored, with all attention given to Wall Street and its appendages. California is the most likely state to win USGovt aid on a huge scale, which would open the gateways for numerous states to win aid. Their state bonds and municipal bonds have been the source of steady distress and growing crisis. The USGovt federal deficit is soon to escalate from massive state aid. California is at the forefront.

California faces a possible shutdown in the next six to eight weeks, or even sooner. They have exhausted all channels for revenue and credit, and will soon run out of cash. Approval of past budgets helps little, since it faces a $24.3 billion deficit again already. Governor Schwarzenegger has already proposed massive cuts to education, health care, and prisons. Early prisoner release sounds like a dangerous option. He is pursuing structural reform to install more efficiency, but now with knives. He proposes to eliminate and consolidate more than a dozen state departments, boards, and commissions, a gesture made in the past. A few months ago, the state began consolidating information technology groups. The governator has proposed a consolidation of agencies that oversee financial institutions and tax collection operations. He pins some hope on tax code modernization concepts to arrive in July, which are hoped to make revenues more reliable and less volatile, thus avoiding some budget crises.

California state Controller John Chiang has reported that state revenues in May fell by $1.14 billon, a 17.7% drop from a year ago. Worse, the revenues in the current fiscal year fell short of official estimates in the budget plan by $827 million, indicating either mismanagement or deteriorating conditions. Chiang said, " Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government. A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression." A state revenue collapse is in progress, which match the USGovt federal tax revenue decline. State revenues from personal income taxes tumbled by 39.3% in May from a year ago, while revenues from corporate taxes fell by 52.1%, and revenues from sales taxes sagged by 7.6%, according to the controller office. The state cannot seem to get out of its own way, since a two thirds majority is required to pass any budget legislation. Sacramento seems stuck constantly in deadlocks, while its house burns.

Governor Schwarzenegger has many spending cuts on the table, but other measures have sparked controversy. He has proposed state borrowing from local governments and the scrapping of some state programs like the welfare program. Rivals have countered with their own budget plan that includes spending cuts but saves key programs. The showdown battle approaches with the new fiscal year on July 1st. A final budget approval enables California to raise short-term funds by selling revenue anticipation notes (RAN) on the municipal debt market. If pressed, California could sell revenue anticipation warrants (RAW), an idea widely opposed since it costs more. State Treasurer Bill Lockyer cites $7 billion to $9 billion is needed in short-term debt notes to sell. See the Pacific Business News article (CLICK HERE) and the Reuters article (CLICK HERE).

Very big risks loom for some social reaction to deep economic distress, beginning in California. Usually the source is over food or fuel. Their population is extremely active and vocal, with many racial groups well represented. The state is slowly becoming a tinderbox, needing only a spark to erupt. Distress, despair, and loss will soon give way to frustration, anger, and violence. Much precedent exists from past riots in recent decades. It is coming in an unstoppable manner. As William Buckler of The Privateer says, " California faces a deadline at the end of June. It cannot balance its budget which now is in deficit to the tune of $US 24.3 billion. Instead of raising taxes, it has to cut spending by $US 24.3 billion. This is the economic territory of spontaneous social upheaval. A tiny spark, an everyday next to nothing incident, can set off a chain reaction. As has happened before, the National Guard is called out to quell the riots. Emergencies are declared with night curfews and mass arrests follow."