Monday, December 21, 2009

Cronies of the Fed most "bailoutable"

Raising "crony capitalism" to its most putrid level yet.

Study Finds That Of All Factors Determining The "Bailoutability" Of Crappy Banks, Ties To The Federal Reserve Are Most Critical

Submitted by Tyler Durden on 12/21/2009

Adam Smith, Charles Darwin and George Washington are not only rolling in their graves, they are dancing the macarena. A new study by the UMich School of Business has found what everyone has known since the crisis began, if not centuries prior: that the biggest, crappiest banks were guaranteed to get more bailout funding the more political ties they had (and more kickbacks they had offered). Is this sufficient to claim that capitalism in its purest sense has been corrupted beyond repair, courtesy of political intervention and constant pandering? Probably not, but it sure makes a damn good argument. In any case, the data is sufficient for all bears to start keeping a track of which banks are increasing their lobbying efforts and funding: those are the ones where the greatest weakness is likely still to be uncovered (if it hasn't already). And while the political relationship probably is not a big surprise to any realistic readers, another finding of the study makes a solid case for abolition of the "apolitical" Federal Reserve:

A new study by Ross professors Ran Duchin and Denis Sosyura found that banks with connections to members of congressional finance committees and banks whose executives served on Federal Reserve boards were more likely to receive funds from the Troubled Asset Relief Program, the federal government's program to purchase assets and equity from financial institutions to strengthen its financial sector.

The unsupervised Federal Reserve gets to make or break banks, presumably under the gun of its one and only master, Goldman Sachs, which has already destroyed its major historical competitors: Bear Stearns and Lehman Brothers. This is a sufficient condition to not only audit the central bank but to immediately seek its abolition, and also to commence anti-trust proceedings against Goldman Sachs which is not only a monopoly, but by extension has veto power over the very regulatory mechanism that is supposed to keep it "fair and honest." The system is truly broken.


  1. Stiglitz also points to the Fed’s $182.3 billion AIG bailout as an example of how policy has been tilted to support Goldman Sachs.

    “The biggest single gift was the AIG rescue,” he says. “No one has ever provided a good argument for why we did it other than we were bailing out Goldman Sachs.”

  2. Well, if you WILL all go on believing in this fiction, then it's no surprise the level to which these perverts will carry it and all of you.

    Abolish it!

  3. Almost half the warrants will be worth converting only if Citigroup gains 422 percent by October 2018 and attains a market value of more than half a trillion dollars, a level no U.S. bank has ever achieved.

    “It’s a big stretch,” said Bernard Chriqui, vice president of equity derivatives trading at Nomura in New York. “It’s sort of like a lottery ticket.”

  4. Goldman Sachs? You mean that huge contributor to the Obama campaign? Their good buddy BO is serving them well. So nice to know there is loyalty amongst thieves.


  5. Systematic effort to weed out the banks who would stand in the way of the consolidating the money to the few in the circle.

    These banks that failed, got absorbed or merged ended any opportunity to clip the wings of the monopoly, (sorry PC: to big to fail)

    Lehman Bros. that was for show. The Wellstone of sorts. Get ready for the new derivatives next years. Time for another tanking.

    Next years new bomb will be in my NWO forcast for next year. BOMBS AWAY.

  6. “The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”