UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

September 17, 2008

AIG STORY ISN'T OVER

William Greider, Nation - The reason the Fed was compelled to save an American insurance company in order to save the global financial system goes to the source of the rot--the "new financial architecture" developed during the last generation. These innovations allowed banking and finance to expand their leverage explosively, borrowing and lending far beyond the traditional limits defined as prudent risk-taking. One gimmick that supposedly made this okay was the creation of esoteric insurance derivatives--the so-called "credit default swaps" that supposedly protected investors and firms against losses in mortgage securities and other debt paper.

Critics repeatedly warned that these derivatives were a time bomb--trillions of dollars in risk insurance that would be exposed as meaningless if financial markets ever experienced a sharp fall in asset values. Politicians and regulators from both parties brushed aside the critics and led cheers for Wall Street's fancy new ways of guaranteeing risk.

AIG sold those guarantees in huge volume. It assumed potential liabilities far beyond the firm's capacity to make good on the deals if something went terribly wrong. The problem is global because AIG--an imperious promoter of globalized finance--sold this rotten paper all around the world to big investors and leading banks. If AIG is suddenly insolvent, the pain and loss are spread instantly to thousands of balance sheets in Asia and Europe--banks and corporations that must suddenly write down their own assets. That's why the Fed could not wait to find out what would happen if AIG was allowed to fail. . .

Some of the largest, most respectable banks--led by JPMorgan Chase--did the same thing. It was a highly profitable line of business. The gimmick insurance was widely admired by financial economists and approved by the supposedly objective rating agencies. It is not clear to me how government intervention can unwind this feature of our corrupted financial system--short of making good on the trillions in these essentially fraudulent contracts. Not even the Federal Reserve has the assets to swallow all of Wall Street's folly and deception.

If my fears are right, a more fundamental reckoning may lie ahead and Washington will have to take far more decisive action. At some point, the new president might have to do what FDR did in the wreckage of early 1933--declare a "bank holiday" and announce emergency rules to govern banking and finance until the crisis is broken.

5 Comments:

Anonymous Deep State said...

Not quite. The reason the Fed was compelled to save an American insurance company is because AIG is one of the CIA's biggest launderers of CIA drug money.

September 17, 2008 9:24 PM  
Anonymous wellbasically said...

Where should the banks have invested their money if not in mortgage securities?

In truth they should be the safest investments in the world.

September 18, 2008 2:35 AM  
Anonymous Mike Ruppert (reposted excerpts) said...

NOW IS THE TIME – THERE IS HOPE

Today I saw some thing I never thought possible. I saw a Rothschild endorse a fundamentally Rockefeller candidate – John McCain. DNC Platform Committee Member Lynn Forester de Rothschild quit her post to endorse McCain as she also ended her longstanding role as a fundraiser for Hillary Clinton. The Clintons also have strong Rockefeller "lineage" so I'm guessing that Hillary understands the move perfectly with a wink and a nod.

I'll give you the punch line now, without making you read further.

If Rothschilds and Rockefellers are taking the same side it is because the entire economic paradigm is threatened. There is good reason to believe it. The Dow has lost almost 10% in just two days. The bailouts are lining up at the door before the Fed goes bankrupt; before our government goes bankrupt. Lehman was ten times bigger than Enron. AIG was much bigger than Lehman. Still to come are Washington Mutual, Goldman, J.P. Morgan, the automakers and the airlines, to name a few. Not all are going to be saved.

There is only one run on the bank taking place. This time it's the Federal Reserve and we know who will get screwed. The Fed and our Treasury are being looted at the one moment in time when we most need them to be full.

All of this has everything to do with Peak Oil.

...

Now is the time when we can break the back of infinite growth and stumble our way to a steady-state economy that we can use to help prepare for Peak Oil. We can do this before the moment in time comes when (as I wrote in "Global Corp") the last CFO of the last corporation, after the last merger, says to himself, 'Hooray we did it!" – as he turns out the last light on all of us.

Today a Rothschild sided with a Rockefeller… They are scared. And John McCain will loot the Fed faster than Barack Obama will. The old paradigm is trying to cash out with our money. Neither candidate will do a damn thing for us. We must do it for ourselves.

September 18, 2008 3:24 AM  
Anonymous Anonymous said...

RF and Rchilds work together to loot the us citizen - they own the Fed

March 16, 2009 11:53 PM  
Anonymous Anonymous said...

Bringing US to its knees is part of God's plan, maybe then we will seek out and realize the greatness of a creator that has made a trillion galaxies with a billion trillion stars each floating precisely in an orbit, down to each atom in them. By worshipping powerless idols like Jesus, or neglecting God, we remove ourselves from HIS protection and are ravaged by satans agents

March 16, 2009 11:56 PM  

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