By Ziad K Abdelnour
I personally believe that the US government’s entire strategy now - as during the S&L crisis - is to cover up how bad things are.
But it is not only a matter of covering up fraud that has already happened. I am afraid our government also created an environment which greatly encouraged fraud….and the mortgage fraud is a lot like the fraud which occurred during the Great Depression.
It is clear to everybody by now that our government knew about mortgage fraud a long time ago. The FBI warned indeed of an "epidemic" of mortgage fraud back in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. The Federal Reserve turned its cheek and allowed massive fraud and the SEC has repeatedly ignored accounting fraud…..while Alan Greenspan took the position that fraud could never happen.
Later in 2006, President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations.
Moving forward to today’s Administration, we all know by now that Tim Geithner was complicit in Lehman’s accounting fraud and pushed to pay AIG's CDS counterparties at full value, and then to keep the deal secret.
As Robert Reich recently noted, Geithner was "very much in the center of the action" regarding the secret bail out of Bear Stearns without Congressional approval.
Tim Geithner, as President of the Federal Reserve Bank of New York since October 2003, was also one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth.
It is equally clear to everybody by now that:
• Bernanke might have broken the law by letting unemployment rise in order to keep inflation low.
• Paulson and Bernanke falsely stated that the big banks receiving TARP money were healthy, when they were not.
• Arguably, both the Bush and Obama administrations broke the law by refusing to close insolvent banks.
• Congress may have covered up illegal tax breaks for the big banks.
• Of course, deregulation by Larry Summers, Robert Rubin, Phil Gramm and many other high-level politicians and regulators also helped to grease the skids for fraud.
Comparing our current crisis to the Great Depression, the main relevance is surely here since in both cases, the government knew what it should do. Both times, it declined to do it.
In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy.
Again, and not to be repetitive, the FBI clearly warned publicly in 2004 of "an epidemic of mortgage fraud." But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ....
This is fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.
Following the rule of law, the government that permits this to happen is clearly complicit in a vast crime.
So what are we to do with the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys?
Reminiscing the principles of our Great Founding Fathers, everyone knows that the American colonists revolted largely because of taxation without representation and related forms of oppression by the British.
But - according to Benjamin Franklin and others in the thick of the action - a little-known factor was actually the main reason for the revolution.
To give some background on the issue, when Benjamin Franklin went to London in 1764, this is what he observed:
When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes… Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:
“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”
In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.
Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was "the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War." This, he said, was the real reason for the Revolution: "the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction."
Is this just ancient history?
The ability for America and the 50 states to create their own respective credit has largely been lost to private bankers. The lion's share of new credit creation is done today by private banks, so - instead of being able to itself create money without owing interest - the government owes unfathomable trillions in interest to private banks.
America may have won the Revolutionary War, but it has since lost one of the main things it fought for: the freedom to create its own credit instead of having to beg for credit from private banks at a usurious cost.
As economic writer and attorney Ellen Brown has tried to teach to President Obama, Governor Schwarzenegger, and anyone else who will listen, the way out of the economic crisis is to stop paying interest to private banks for the creation of credit, and to return to the system of government-issued credit used by the Founding Fathers to create prosperity for the people and to gain independence from their oppressors.
The big question is: Are they or anyone out there listening? Go figure....
Your feedback as always is greatly appreciated
Thanks much for your consideration