Forget about the $700 billion dollars in federal aid known as TARP that went to the banksters back in 2008 -- that was just the tip of the iceberg. According to new secret documents recently released by the Federal Reserve, between 2007 and this year the Fed pumped more than $3 trillion into the hands of banks and businesses. Most of that money came in the form of short term lending, at near zero percent rates of interest.

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Forget about the $700 billion dollars in federal aid known as TARP that went to the banksters back in 2008, says Thom Hartmann.   That was just the tip of the iceberg.   According to new secret documents recently released by the Federal Reserve, between 2007 and this year, the Fed pumped more than $3 trillion into the hands of banks and businesses, to stave off financial collapse.   Most of that money came in the form of short term lending -- banks were given billions of dollars at near zero-percent interest rates, which is essentially free money, insofar as the banks can then turn right around and buy Treasury bonds (from the same government that just loaned them the money at virtually zero-percent interest rates) so that they can then began to collect something like 4% return on investment -- or more if they decide to gamble in the credit markets or the stock market.    This then is a cleverly disguised multi-billion dollar give-away, or theft, from us to them.

So who, specifically, benefited from this secret low-interest lending program by the Fed?   The usual suspects:   Citigroup, Lehman Brothers, and Merrill Lynch.   "Well connected" foreign banks took advantage too -" banks like UBS of Switzerland and BNP Paribas of France.   Also, American businesses like McDonalds, Verizon, GE, and Caterpillar received some of the cake as well.   Suntrust Bank received about $7.5 billion, and received it directly from their own CEO, who just happened to also be serving on the Board of Directors at the Atlanta Federal Reserve at the time!   At the height of this secret low-interest lending program -- in 2008 -- the Fed had made over $1.5 trillion in outstanding loans of this kind.   This then is a cleverly disguised multi-billion dollar give-away, or theft, from us to them.

The release of these documents, showing more than 21,000 transactions unknown until now, highlights the need for a more transparent Federal Reserve, which is of course an issue that's been advanced by members of Congress like Ron Paul in the House and Bernie Sanders in the Senate.   It also shows just how strong Wall Street's grip on our government is.  

Banksters profited off this program and now sit on mountains of cash, to no small extent as a result of this until-now secret wealth transference program.  

Meanwhile small businesses suffer around the country and can't get the loans they desperately need, which in ordinary times they would certainly get.   And the very same financial institutions that received loans at an interest rate of less than a half percent, are now charging their credit card users 30% interest to borrow some of that money back!   And their lobbyists are doing everything they can to crush Elizabeth Warren's new baby  in its cradle.   I refer of course the new Consumer Financial Protection Agency that President Obama as tasked her with setting up.   The banksters know that the success of this agency, especially if it stays in her hands, will cost them hundreds of billions of dollars in lost profits -" profits which they would be able to continue squeezing out of unprotected and unwary consumers should her new agency somehow be scuttled, sidetracked, or otherwise be made to fail.

Banksters spend many millions of dollars each year lobbying Congress in opposition to financial reform, with much of that lobbying money borrowed at near-zero percent interest from the Fed.  

All this is, from the point of view of the society as a whole, nothing less than insanity.  

Bubble economy thievery and Tea Party blindness to it

According to Matt Taibbi, the United States has become mired in a complex web of economic and thievery-based instruments that are directly tied to the bubble economy he describes.   Some economists regarded these instruments as potential means to assist Americans in buying homes, but in fact these instruments enabled the fraudulent behavior that wrecked the U.S. economy.   Making matters worse is the dearth of understanding by the public, and the exploitation of that misunderstanding by particular politicians, according to Taibbi.   His latest book, Griftopia:   Bubble Machines, Vampire Squids and the Long Con That is Breaking America, identifies some of the personalities and looming problems within our very troubled financial and political system, and is highly recommended by preeminent scholar of this whole phenomenon, Danny Schecter, in an article that was recently summarized on the front page of OpEdNews.

In his book, Matt talks about the whole silent majority notion or meme that is playing on a kind of Southern white resentment.   It's the notion/meme that "we obey the law, we pay taxes, we work and somehow it's all these other people that are reaping the benefits -- these people who don't want to work, these people who are immigrants, and who come and steal our social services"   (Very useful rhetoric in getting people to not focus on the various Wall Street scams that are surreptitiously robbing them blind.)

In essence, Matt's book is about heretofore secret corporate-government operations and Wall Street criminality over the last ten or fifteen years.   The politics are just one element of the crime.   Another element is the propaganda campaign through which the PR agencies of the banksters could get ordinary people to not pay attention to what was going on.   Tea Party ignorance and gullibility provided an example of exactly how that works.   Wall Street found a way to convince these people to back the Wall St. political agenda and the deregulatory aims of banksters, and it all took place under the Reagan-blessed rubric of, "we're going to get the government off our backs."

Like anyone else, Tea Partiers want their food to be clean, don't want to drink poisoned water, and want to have cops to protect them from burglars, and yet they've been brainwashed into believing that the government causes all of their problems.   What they fail to see is that in terms of its magnitude, this new, space-age global financial thing dwarfs all of their tea issues.   And there is no politician that's speaking to them about it, which is the really depressing part.   In addition, the mass media have not really done a very good job, either, of explaining this to them, or to anyone else for that matter.

The contradiction that is fundamental to American politics  

On the one hand we have this propaganda about how government has no place in the economy whatsoever:   "There should be no regulation;   the government's only rule should be in the armed forces and the police."   Then too, you hear all this foolish talk in the Tea Party now, about strict constitutionalists -- that the government should abolish every department except for the army.   Alan Greenspan believed all this, on the surface, but at the same time that he was preaching this objectivist proto-capitalist religion, he was building a massive welfare state for Wall Street!   It was and is a complete contradiction:   "Get the government off our backs," but also, "Let's make the government into a permanent insurance policy for rich people." 

The most important thing with Greenspan, as it pertains to the current problem, is his attitude towards the derivatives scheming that nearly bankrupted our country.   He became the Fed chairman at the very beginning of the age of derivatives.   This was right before the "87 stock crash, which was caused by derivatives, which were these computerized financial instruments that were pegged to transactions that derived from, and were therefore derivative to, other more fundamental market transactions.   Example:   a bet on whether an insurance policy (like a collateralized debt obligation or CDO) was going to be paid off -" the CDO insurance policy being a fundamental market transaction, the bet deriving from it and therefore being derivative to it.   Greenspan completely missed the powerful way that this grand new casino of derivatives-betting was going to affect the economy as a whole.  

In the early "90s, there was a series of disasters, including the Orange County disaster, that were caused by a variety of these (derivative) instruments, such as the interest rate swaps and foreign exchange swaps.   Greenspan and the bankers of the Fed never understood this stuff.   They thought that these instruments were just devices for creating more liquidity, and Greenspan persistently went before Congress and said that we do not need more regulation of these (derivative) instruments.   Later on in the year 2000, he became a pivotal figure in affirmatively deregulating these forever, in a law called the Commodity Futures Modernization Act.   He was very much the driving force behind that, which then led to the mortgage crisis.   That's where derivatives really blew up and where we saw these collateralized debt obligations and other fancy devices that were created to disguise crappy sub-prime mortgages as AAA-rated debt.   But he actually thought that they were just harmless instruments that banks could use to make a little bit more money.   He failed to see the catastrophic potential.

Every country has scam artists;   but only in a dying country are people like that part of the power elite.   And now it's happening here:   the scam artists have taken over our government and our economy.   They now dominate our country's power structure and their propaganda has duped a large majority of our population.   Millions are losing their jobs, their incomes and their homes, and they really have no clear idea, yet, who to blame.   This then is a cleverly disguised multi-billion dollar theft that continues as we speak.

In the former Soviet Union, too, there was an incredible pessimism because of the rising poverty and the rising theft that played a big role in creating it.   There was no belief in the future because there was so much instability, thievery and poverty.   Just as now in America, life expectancy rates were falling.   People who had the ability to take anything, steal anything, were doing it.   People who were advantageously positioned within the society and economy wanted to get whatever wealth they could steal and get it out of the country as quickly as possible.   They might steal the money from the government and buy a villa in France.   That was the modus operandi in those years.   And that's how the financial services industry in America is now, with regard to the entire mortgage-based securities scam.  

It's the same mindset, whether it was the guys at companies like Countrywide who were pushing people into bad loans when they qualified for good ones, . . or the banks who were immediately taking these loans and selling them off to pension funds and insurance companies, knowing that they were going to disintegrate, . . or the hedge fund guys who were intentionally creating masses of crappy loans to dump off on other people, or the ratings agencies who were favorably rating stuff that they knew was crap.  

At the very top of the overall con game you had companies like Goldman Sachs and Deutsche Bank that were basically getting the taxpayer to essentially buy this stuff, by way of the bailouts, knowing all too well that it was severely over-valued.   It was the same "let's get what all we can right now before it all blows up" mindset that you saw in the former Soviet Union and that one has always seen in many third world countries.  

But there's still another part of the gigantic rip-off that is taking down America's middle class:  

Outsourcing our nation's wealth through foreign sovereign wealth funds  

A sovereign wealth fund is basically like a giant hedge fund that is government owned, and they're particularly popular in the oil producing countries of the Middle East.   You have a country like Saudi Arabia or the United Arab Emirates, for instance, that gets a lot of revenue from oil, and they put the excess cash in this giant fund that looks for investment opportunities around the world, to grow itself bigger.   A bunch of guys (the profit-seeking bankster middle men) from an American investment bank will show up with a slide projector and try to sell some Arab sheiks the Pennsylvania Turnpike.   They will sit down, show all these pictures and say, "look, the toll booths are in good shape, the roads are paved, and you should buy this thing.'" In this way, the State of Pennsylvania did try to sell the Pennsylvania Turnpike!   They ended up not doing that particular deal, but there are cities and states all around the country that are doing these deals.     In Chicago, it's the parking meters.   City representatives sold 75-years worth of parking meter revenue that otherwise would have gone to the City of Chicago.   As a result, the Abu Dhabi Investment Authority is now a 26% owner in Chicago's parking meters!   Result:   there are no more parking holidays in the city of Chicago.   You have to pay meters on Lincoln's birthday, on Christmas, Thanksgiving.   If you're an alderman and you want to have a street fair or something like that, you basically have to pay an exorbitant fee to Arab investors in order to have the right to hold a fair in your own neighborhood.   This is happening all over the United States.   There are dozens of these deals going through.   Our country is gradually being sold off to foreigners because we can no longer afford to maintain our own country!   Tax revenues are too small because wages have fallen and so many jobs (and paychecks) no long exist.

Finally, the biggest robbery of all:

Homeowners being robbed by big mortgage companies operating in collusion with the courts

Courtroom foreclosure proceedings now favor big mortgage companies over the homeowners who are systematically being robbed by them!    Special courts have been created that have been nicknamed "rocket dockets."   Their mandate is to "clear" 25 cases an hour, so judges are spending just a few minutes on each case.   The problem here is that these cases are very complicated:   In the beginning, when these mortgages were issued, no one knew that their future would turn out to be far different from that of the normal mortgages one would have had 20 or 30 years ago, when one bank gave one person a loan, and then they held the loan note until maturity.   In the last 10 to 15 years, banks have been making loans to people and then essentially throwing the loan notes in big piles and essentially chopping them up into little bits, making securities out of them and then selling those securities to foreigners or pensions or others.   Problem is, many of these transactions were essentially fraudulent.   Why fraudulent?   Because the seller was fraudulently presenting sub-prime mortgages as AAA-rated.   And once they dumped these loans off on other people, in the form of mortgage-backed securities, the banks stopped doing the paperwork, saying to themselves, "Why bother doing this the right way, or why bother being principled or even legal about it now?   It's out of our hands and no longer our worry.   We sold it, we have the money they paid us, and now it's someone else's problem.   Good riddance and good bye."   In other words, they sold a product that they knew was crap, and that is of course the very definition of fraud.  

Why again was the product crap?  

Because it was a virtual certainty that many of the mortgages in the bundled group of securitized mortgages were going to go bad.   Why would they go bad?   Because as soon as home prices stopped rising, and people started losing their jobs (to continuing automation/computerization and to low-wage workers in China), they would be unable to make their mortgage payments, and their homes/mortgages would be forced into foreclosure.  

However, the vast majority of these foreclosure cases had what is called "bad paperwork," which means, among other things, that the foreclosing entity is no longer in possession of the mortgage note.   Therefore the bank or other foreclosing entity is unable to prove that they actually own this loan.   And if there is actually a lawyer present in the courtroom that points this out, usually the homeowner can beat the rap.   By this means some people are able to stay in their houses three and four years after making their last mortgage payment.   Yet, up until now, 98% of the cases are still unopposed, and the courts usually just rubberstamp these foreclosures, even when the foreclosure is not legal and could easily be beaten by any decent lawyer.

Many class-action lawsuits in the pipeline

When the banksters were selling these mortgage-backed securities, they were typically selling them to groups of investors who were not well organized.   One person owned one 1/1000th or one ten-thousandth of a pool of mortgages.   It's only now that those investors are getting together, organizing and realizing that the big banks took them for a ride.   So the banks are now getting sued from two sides:   They're getting sued by the investors, and they're getting sued by groups of homeowners who are being foreclosed upon.  

There's one suit in New Jersey against the Bank of America.   It's a class-action suit that basically charges BofA with using predatory loan practices or getting people into houses that they couldn't afford or into risky loans when they could have had safe ones and then defrauding investors.   There's another suit in Kentucky that is a racketeering or RICO suit.   They're using racketeering laws to try to get at this.   So it is coming;   there's going to be a wave of lawsuits where people are going to try to recover their money from the banksters who continue to steal it from them by the billions.

Banksters invented these derivative instruments, creating them by taking big piles of loans and chopping them up in a process that's called securitization.   Securitization has actually been around since the "70s, but in the "70s they didn't have this way of taking those diced-up loans and dividing them up into what they call tranches.   Today they apply a very obscure math to these pools where they basically say, "99% of the time, 28% of these loans will never fail, so therefore we can sell that 28% part as AAA."   They invented that tool in the late "90s.   That's when it all took off because now they could take a bunch of junk, mix that in with the good stuff, and sell the whole caboodle as AAA, which (fraudulently) signifies to the buyer that the credit risk is almost zero.   They were never able to do all this stuff before laws were changed in 1998 (thanks to heavy lobbying), so that's when this catastrophe began to take shape.

In his book, Tiabbi describes several bubbles, including the Internet bubble, the housing bubble and the commodities bubble, which were all clever forms of thievery that transferred huge amounts of wealth from the middle class to the very rich.  

Commodities bubble raised consumer prices to artificially high levels

In 2008 gas prices went through the roof.   Presidential candidate McCain was giving his "drill baby drill" speech, and the reporters afterward were joking, "McCain, what a moron, as though this was what caused gas prices to go up -- because we weren't drilling in the Gulf of Mexico!"   In fact most people had no idea why gas prices were going up.     Eventually some began to understand that it had to do with deregulation.   Originally there was a tightly regulated system in which most of the people who were buying and selling commodities had to be physical hedgers, according to the law, which means you are either physically producing or physically consuming oil or gas or soybeans or corn before you can speculate.   Therefore, only a small percentage of people could be speculators.   Why this restriction?   Because the regulators were smart enough to know that you didn't want speculators buying up the whole corn market and then dominating the prices.

However, starting in the early "90s, a lot of companies went to the government and, with plenty of lobbying money, got exemptions to these rules.   So over the course of about 10 or 15 years, the amount of speculative money in the market started to balloon.   In 2003, there was $13 billion dollars worth of speculative money in commodities.   By 2007 it was over $300 billion.   That money was betting on the price of oil and corn to go up.   And so, sure enough, those prices went up.   Every single commodity saw a price increase in that four-year period, the average being 200%.   It was a speculative bubble and the speculators made billions in "profits' -" at everyone else's expense.

Right in the middle of the commodities bubble market and its associated thievery

If you buy and sell commodities, you're probably doing it on the Goldman Sachs commodities index.   They are a major commodities trader.   They were the first company to get one of those exemptions.   Their subsidiary got the first one, and then Goldman, who was telling the entire world that oil was going to go up to $200 a barrel in 2008, got the second one.   The price of oil never got that high, but it did get to $149, which was at least three or four times what oil would have sold for had it not been for the speculative frenzy and resulting bubble.   And by way of commissions, Goldman made money off of each one of those speculators, each of those speculative "investments."   Most people thought the rising price of oil was a supply-and-demand issue, but supply was up that year and demand was down, and none of this was reported in the media.   The rising price of oil was totally due to the Goldman-fueled speculative frenzy.   The result:   Everyone who paid more for gas and oil inadvertently helped pay for the billions in profits the speculators made off of the speculative frenzy that drove the bubble price of oil skyward.   In other words, a very clever form of theft was going on.

So we have systemic problems and the public is not getting the information to understand them.   Politicians are not really educating the public about these things, and they are bailing out the companies that have acted badly.   The media, too, are not really informing people, so it seems that many in the public are left with a simplistic understanding, rather than seeing the systemic issues and solutions.  

Is another bubble coming?

There's a long way to go, down, for these mortgage-backed securities.   A lot of the banks, the Federal Reserve and the government still own billions and billions of dollars worth of them.   And they're recognizing that at par or face value, the reality is they're probably worth five or ten cents on the dollar.   So eventually, there's going to be some kind of reckoning.   Meanwhile, the banks and the government are together artificially propping up the market.  

You night have heard about quantitative easing.   Right after the election, the Federal Reserve printed $600 billion new dollars basically to buy stuff;   they're buying mortgages;   they're buying treasury bills, and that is propping up the market value of these securities.   It's making people on Wall Street feel richer, and so the idea is that they will start spending more, and this will help the economy.   The more yachts and high-end jewelry we can sell to these super-privileged folks, the more jobs we can create.   Problem is, the overall situation is bubble-like:   there's a huge mass of overvalued stuff (various financial instruments) out there that moneyed people are getting themselves into, and when that bubble collapses, it's going to be ugly for all of us.

How to stop the thievery

 

There are a lot of solutions out there that make sense.   And a lot of them were proposed during the argument over Dodd-Frank, the Wall Street Reform Bill.   The most important one was the Brown-Kaufman Amendment, put together by Sherrod Brown and Ted Kaufman.   They proposed the mandatory breakup of companies whenever they exceed a certain size, specifically when the revenues of any given company exceed 10% of all nationwide bank deposits.

Why do we have to break these companies up?   Because our biggest problem is this too-big-to-fail issue -- it places government in a position of being subservient to these companies.   Also, when they get that big, they have no incentive to behave responsibly because they know they're going to get bailed out, by the taxpayers and "their" government.

The other problem is that when you have a too-big-to-fail company, it allows them to borrow money more cheaply.   Why?   Because if you're the Fed and you're lending to two banks, one that is too big to fail and one that isn't, the one that's too big to fail knows, and you know, that it's going to get its money back.   Why?   Because the government's never going to let it go under.   Therefore, you'll charge Goldman Sachs less than you'll charge your local bank.   That gives them an inherent competitive advantage.   Cost of capital is everything in banking, so these companies are going to get bigger and bigger, while small banks are going to get smaller and smaller, so the problem will get ever worse.   Therefore, breaking up the biggest banks is the most important thing we have to do.

Authors Bio:

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.