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Part 1 | Goldman Sachs went long oil and short MBS knowing that a stealth regulatory change Nov 9, 2007 would collapse lending to the Private Sector to foster State Capitalism 

This article explains how Progressives in government, Republican, Democrat, agnostic, where able to terminate the regulatory basis for Private Sector Capitalism, while hoodwinking the Private Sector into thinking that they and their American Capitalism was the cause for the chronic economic collapse.

You will understand the cause and the solution.

You will understand the vision Progressives and their crony capitalists are trying to get the Private sector to digest and assimilate, and how by understanding the economics of the bank regulatory mechanism the Capitalism as part and parcel of the purpose for the Constitution, the True Vision possible for what Washington called:

The American Experiment.

By the end of this article, you will also be asking these 2 questions regarding political intent:

Why was Drexel Burnham Lambert, the biggest competitor of Goldman Sachs in the late 1980’s with 90% of the junk bond market, fined $600 million, license revoked, driven out of business? Why was Michael Milken, who created a capital market that funded the establishment of CNN, MCI and a thousand others, many of what are the biggest companies today, fined $600 million, his license to trade in securities eliminated for life, jailed for 10 years, then released after 2, because the judge said he was railroaded by the government? Why did the government drop the FIRREA bombshell on Drexel, the banking industry and Private Sector investors, resulting in the collapse in junk bond values by 70%, because government had driven, Drexel, with Robert E. Rubin presiding the biggest market maker for wealth creation in the 80’s, out of business initially as Goldman Sachs Chairman, then Secretary of Treasury under Clinton, resulting in the greatest transference of wealth in history.

Why wasn’t Goldman Sachs license revoked, senior executives and proprietary fund managers jailed together with Progressive enablers in Congress, the Administration and regulators? Goldman Sachs, with a reputation as a financial predator, colluded with proprietary funds and government to manipulate the demise in the value of mortgages and loans, plundering the wealth of the nation, resulting in the loss of $14 Trillion in Private Sector wealth, collapsing Private Sector capital formation and access to credit, the collapse of Fannie Mae and Freddie Mac, and numerous big and small banks, nearly collapsing AIG.

Let’s get started – 

Political collusion intent, crony capitalism at its worse:

The audacity of hope?  Whose hope?  What did they hope for? and Why?

The plunder by Goldman Sachs went all but unnoticed, while government Progressives and their operatives diverted attention by blaming Capitalism, the Private Sector, subprime lending, hiding its nefarious stealth orchestration to affect a Regime change to a New Normal, where within the next 2 to 4 years, if the Private Sector doesn’t counteract correctly, the only lender remaining, as a result of this stealth scheme will be the government and government owned and controlled entities.

After what many will be calling the crime of the century, an act of financial terrorism perpetrated without compunction for the suffering and loss to Main Street banks, businesses and the hard working, Goldman Sachs is allowed to plunder the nation’s wealth, enabling Progressives to usurp its political control, yet gets a $550 million fine from the SEC, while GS’s CEO meets several times with Obama in the Oval Office for a clap on the back for a job well done, then slithered out of the media attention.

Meanwhile, JP Morgan/Chase, Citibank and others running similar malevolent proprietary funds, hedge funds, oil interests got a total pass.

The why, the secret knowledge regarding the economics of the bank regulatory mechanism through which this travesty was imposed against the interests of the American people, the locomotives of wealth generation in the Private Sector, is explained here below.

Going long oil and short MBS, then shorting all financial shares:

The reason senior executives of Goldman Sachs (“GS“), as we know through their emails, repeatedly thwarted and admonished their proprietary fund managers from buying up mortgage backed securities (MBS) available in the second half of 2007 at depressed prices in favor of taking MBS short positions, while proprietary funds manipulated oil prices upwards, was that they had insider information from their former Chairman, then Treasury Secretary Paulson, regarding a stealth regulatory change that the Bush/Paulson SEC would approve November 9, 2007.

Understanding the value mechanism in loan affordability / underwriting models:

Therefore, they knew that any reduction in mortgage and loan affordability they and their crony/predator capitalist associates could inflict to cause a deterioration in the net disposable income of borrowers, relative to their mortgage and loan payments, would result in a collapse in the principal value of those assets. It was a day of infamy, when the American Private Sector was attached from within, i.e., by government Progressives in Leadership positions in Congress and the Administration and predator and crony capitalists, such as former “Too big to fail” investment banks, known predator hedge funds, such as Soros, known predator commodities traders, such as Mark Rick & Co, oil interests, etc., seeking to inflict harm on competition and politically manipulate a downturn in the economy and currency to gain from massive short positions.

The collapsing of Private Sector capital formation and access to credit:

Progressives in government, Bernanke at the Federal Reserve, knew that predatory and crony capitalists such as GS, JP Morgan Chase, Citibank manipulation of these markets would collapse Private Sector capital formation and access to credit, because the implementation of this stealth regulatory change would establish a systemic shift in the bank regulatory underpinning that would undermine the economic value of debt capital and equity capital in all USA companies and financial institutions by forcing them to deleverage, implode ownership and control of financial institutions and secondary markets, such as MBS, Fannie Mae and Freddie Mac, into the government, where only government would have the regulatory capacity to own and control capital. 

The “New Normal” political intent:

The political intent was that, after much suffering, projected to take 4 to 6 years, a New Normal would emerge, where the Private Sector would begin to releverage only through such government entities. The conclusion of which would be the complete transfer of the ownership and control of capital, property, production, and fruits of productivity, including savings, resulting from work, creativity, ingenuity and innovation from the Private Sector to the government.

The Progressive vision:

The Progressive vision, enabled by this stealth regulatory change, was that, through taxation and the burden of bureaucracy and regulation, competition from Main Street banks, businesses and innovators would be suppressed into subservience to the interests of big business and government.

This was the same concept as Hoover and FDR in the 30’s based on economic theories of the time that the boom bust of the economy every 20 years was caused by competition from small business innovators, which could be prevented from succeeding by raising their taxes, costs of doing business and bureaucratic burden.  However, the small business lobby forced FDR to cancel the tax increases after one year.

Predator capitalists take advantage of “arcane” economic knowledge:

 GS had firsthand knowledge of the political economic powers at work to implement a stealth regulatory change that would abruptly end the Private Sector free enterprise Capitalist system and force an inexorable shift, as we have since observed, from control and ownership of capital from the Private Sector to the Federal government and Federal Reserve not seen since the 1930′s.

Uncovering collusion between crony capitalists and government Progressives:

Should the media, economists, think tanks and the State and Federal governments pursue this, it will be discovered that many of the proprietary funds (since disbanded)  within the “too big to fail” financial institutions of the nation and many international hedge funds and oil interests not only manipulated oil prices and shorted MBS, but having precedent knowledge regarding the historical effect of this regulatory change, established these special funds, sourcing capital from many pension funds and foundations to cause the devaluation of bank assets on an unprecedented scale, not seen since the same stealth regulatory change was made under Hoover in 1929 that abruptly ended the Roaring 20’s and precipitated the Great Depression.

With this precedent knowledge and the high level proprietary knowledge of the “arcane” economics of the bank regulatory mechanism, and the selection of Bernanke for his special expertise regarding the regulatory underpinning and changes that were implemented during Great Depression, the government, Fed and predatory and crony capitalists knew that their combined efforts would lead to the same systemic collapse in Private Sector capital formation and credit, as happened in the 1930’s and has befallen the US and most of the rest of the world that subsequently adapted the same regulatory change, resulting in a stealth coup of the entire Private Sector.

Investment Banks and Hedge Fund Managers Begin the Liquidate and Establish Short Positions

With this foreknowledge, the investment banks and hedge funds, privy to the implications of the stealth regulatory change, knew that the upward manipulation of oil prices from May to November 2007 by 60% would radically reduce mortgage and loan affordability, collapse bank capital and lending liquidity, forcing banks and lenders to liquidate all Private Sector loans in favor of zero risk weighted assets with unconditional guarantees of the US and foreign governments, States and Municipalities and the Federal Reserve and first world foreign Central Banks, which retained their value that the stealth regulatory change had deprived from the Private Sector.

Therefore, they established short positions in MBS throughout the second half of 2007, while liquidating equities and all the most vulnerable financial and corporate shares, reaping astronomical profits throughout 2008 for these funds and fund managers at the expense of the Private Sector, because this stealth regulatory change removed the predominant market pricing inherent in medium and long term contracts so that there were no bottoms to short positions. Concurrently, the government vilified the banks, investment banks, businesses, homeowners, the entire Private Sector free enterprise Capitalist system, when in reality, the regulatory basis and mechanism through which the Private Sector free enterprise Capitalist system operates had ceased to exist.

The Swindle | Democrat Congress and the Bush Administration Move against the Private Sector

The difficulty the perpetrators of this regulatory change have is that should there be hearings on the GS “fraud” it may turn against them, i.e., revealing that the systemic economic collapse in Private Sector capital formation and credit that ensued, was a swindle by the Democratic Congress and the Bush Administration that imposed the regulatory change GS and the other leading financial institutions were privy to. This allowed the current Democratic Congress and Obama Administration to use this contrived crisis as an excuse to usurp ownership and control of all Private Sector debt capital and equity capital by forcing banks and financial institutions, i.e., do or die, to a systemic stealth shift from providing credit to the Private Sector to the Federal government and Federal Reserve, where the resulting dramatic loss of wealth, freedom and liberty would be received by the general public as a salvation, versus the economic enslavement it veils.

Historic precedence – a lesson learned history is induced to repeat itself:

In effect, this is the same regulatory change imposed by Hoover in 1929 that became the harbinger of contrived failure in the Private Sector free enterprise Capitalist system that enabled FDR to institute similar programs against the wealth accumulation of the Private Sector as the current stealth regulatory change has achieved to allow Obama and the Democratic Congress to use the same contrived crisis to continue more radically the same social economic shift as FDR tried from 1933 until 1938. In 1938, the Private Sector banks and businesses finally prevailed on the Federal government to reinstate the Private Sector’s free enterprise Capitalist system by restoring the one critical regulation that had been deprived the Private Sector by Hoover in 1929, but not before the same perpetrators of the scam, who had divested all their equities before the 1929 collapse, had shifted their cash positions back into equities, where the day of the restoration of the key Private Sector free enterprise Capitalist system regulation recorded the biggest one day percentage gain in the stock market, with April 2, 2009 being a distant second.

Goldman Sachs and others insider knowledge to the systemic collapse and fraud:

When this is well understood, “fraud” claimed by the SEC and a number of institutional and growing population of private investors and individuals that lost money as a result of the market manipulations and improprieties based on insider information, may be seen as something vastly worse than “fraud.” Plunder by predator capitalists, the government and the Federal Reserve. The insiders themselves are strategizing behind the scenes as to how to block the public from discovering how and why they worked with GS and others to perpetrate what will be discovered to be one of the greatest crimes of deception in history. “Hope and change” is really “Hope they don’t find out about our stealth regulatory change.”

Background re American n Private Sector Capitalism:

Regulatory change having a hidden political intent – stealth:

In order to understand the importance of this stealth regulatory change and why knowing that it was working its way politically behind the scenes, we need to have some understanding of the regulatory mechanism that is the underpinning or substratum of the Private Sector free enterprise Capitalist system, and how that mechanism works in the support and sustaining of Private Sector wealth creation. Most people studying markets and economics, banking and business think that the economy is best explained by interpreting data derived from the capital markets, basically anecdotal evidence.  While quantitative models are able to track and predict trends, mostly the data has a political and ideological potential to spin according to who pays one’s salary.

However, the underpinning to the Private Sector free enterprise Capitalist system, called the economics of the bank regulatory mechanism, is an entirely predictive model based on the interrelationship of ratios and formulas related to the underwriting of cash flows, risk weight categories and the mechanism for sustainability of predominant market pricing through regulatory cycles. It is an arcane economic knowledge understood by the most senior bankers, business titans, fund managers, the Federal Reserve, the House and Senate Banking Committees and US Treasury (Presidents and their Patrons), but not taught or understood by the general business community and public.  Nevertheless, it is the operating system of American Private Sector Capitalism, the regulatory basis to which all markets react, in the same way as the Windows and Apple operating systems provide the code upon which all programs and applications are developed and operate.

Therefore to understand what has happened to the economy, how, why and by whom, one needs to look at the regulatory substratum and underpinning for the capital markets, which is the economics of the bank regulatory mechanism.

There are three major aspects involved in the economics of the bank regulatory mechanism:

Theorem:

The expansion and contraction of the Private Sector economy is directly related to the leveraging of the increasing and decreasing values of bank capital, as those values are determined by the changes in

1. The affordability of the monthly mortgage or loan payment, involving underwriting ratios of net disposable (operating) income to the percent of that income allocated to the loan payment, which determines the principal value of the loan that becomes an asset to the bank (i.e., the strength of the yield of bank assets, based on debt service coverage formulas).

2. The risk adjusted ratio of assets to capital, which allow banks to shift from higher risk weighted assets requiring less leverage to lower risk weighted assets in order to sustain bank capital values and liquidity through regulatory cycles, in particular to shift from the 3 Private Sector risk weights to the zero % risk weight of the government (limited by a total overall leverage of asset to capital of 25:1), when there is a decline in markets, and

3. The ability of banks and borrowers to enter into financial contracts having a sustained economic value, where the values booked by the bank are held to maturity, thus establishing predominant market pricing which

(a) prevents the collapse of credit (debt capital) allowing banks to roll over quality credits as banks receive cash from maturing loans,  

(b) prevents the collapse of property and shares (equity capital), as inherent to this operating mechanism is that lending liquidity is the basis of Private Sector capital formation and sustained wealth,

(c) allows declining markets to recover and expand again, without damaging either the capital adequacy ratios of banks or the capital markets, because in the regulatory cycle, as loans mature, banks refinance loans at lower interest rates, which in turn sustains the principal value of loans, thereby expanding bank capital and Private Sector equity into the next round of economic expansion and

(d) allows the banks to uphold the implicit contract between the depositors, banks and other Private Sector credit institutions to sustain the value of their deposited cash, which requires that the value of the financial contracts between borrowers and lenders be maintained for the duration of their term, i.e., held to maturity.

With this theorem and related corollaries outlined in other articles, the economic outcome of all planned and unplanned programs (such as the effect of tax policy changes, regulatory changes, etc.), of the government and economic events, can be accurately predicted and planned to the widespread benefit of the Private Sector from generation to generation.

Stealth undermining of Private Sector Capitalism to achieve the Progressive vision:

However, knowledge of this arcane economics can and has been also be used to achieve the nefarious political intent of Progressives seeking to undermine, cripple, crush and cut wealth expansion just before it can blossom and bloom from generation to generation, thereby hiding the true potential, while blaming the Private Sector as the cause, as Hoover and FDR did, as Progressives in the Bush/Paulson, now Obama/Geithner and the Progressives in Congress have done since 2006.

These three corollaries to the theory of the bank regulatory mechanism work in interrelated synchronized concurrence to establish value to all debt and equity capital, which value, based on affordability formulas and ratios, is then sustained by

• Shifting risk weights to preserve capital: The ability of banks to shift from 3 Private Sector risk weight asset classes, including

1. 100% risk weights, such as consumer loans (car loans, home equity loans, credit card loans, etc.) and commercial loans (commercial real estate, corporate debt, etc.),
2. 50% risk weighted assets, such as home mortgage loans municipal and some industrial revenue bonds,
3. 20% risk weight assets, such as AA and AAA rated securities generated by the Private Sector and conditional guarantees of the Federal government, which had formerly included Fannie Mae and Freddie Mac, these together the Private Sector risk weighted assets, and
4. the 4^th category represented by the combined residual credit permitted by the Private Sector to the government, zero % risk weighted assets, including US Treasuries, any unconditional guarantee of the Federal government or Federal Reserve.

• ·         The zero % risk weighted asset class:

1. This is intended
   1. to provide liquidity, a place for governments, Central Banks, financial institutions and capital markets to park their savings, reserves and uninvested capital,
   2. to provide government with funds to invest in Private Sector infrastructure and R&D during periods of economic depression AND
   3. to offset the effect of productivity gains, where value is increases for less cost, which has the potential to undermine the sustainability comparative principal values of bank assets, causing a contraction in bank capital during an economic boom.
   4. How this asset class is spent is critical to bolstering the wealth of the Private Sector or intentionally draining it, either way, which the Progressives in leadership positions in Congress and the Administration know. Unfortunately, most such government spending and the accumulated debt is counter-productive, working against wealth creation in the Private Sector. 
   5. There are 2 kinds of government debt in the 4^th risk weight category (risk bucket)
      1. Sustainable productive, typically represented by government guaranteed Municipal and Industrial Revenue bonds, where the resulting construction, be it a highway, bridge, airport, port facility, stadium, is repaid from Private Sector leasing and management of the construction, Note, this is the use of stimulus by the Chinese government, engaging Private Sector to design and construct infrastructure on underutilized property, greatly increasing its value, then amortizing the debt, which is repaid by long term Private Sector leasing paid from sale and lease of buildings, or if R&D, then licensing fees, where social causes are left to the Private Sector charities.  The result is that value for money is created that adds to the wealth and prosperity of the community where the money was spent, and the currency as a whole.  This is pure Private Sector oriented Capitalism, where government uses and benefits the Private Sector.
      2. Counter-productive, resulting from printed or borrowed money wastefully spent, having no self-generating income based on sustained productivity as a means to repay the expense, relying instead on the depletion of Private Sector wealth by taxing and borrowing in competition with and against the Private Sector’s own credit/savings.  This is the typical of US debt, where tax dollars and expended stimulus are absorbed by bureaucracies intended to drain the productivity of the Private Sector paid double the wage of the Private Sector, or to undermine charities by paying to keep the unproductive on the dole, and other schemes used as a means to establish voting blocks to keep a government elite and crony capitalists in power working against the interests of the Private Sector, moreover to burden and prevent entrepreneurs, creators and innovators in every field, except as conducive to government, from succeeding.  This is correctly called State Capitalism, because the political intent of creating debt is to subjugate the Private Sector and indoctrinate or expropriate ingenuity.
   6. This 4^th risk weight category includes any loan or loan program, where the Federal government is required to approve a loan or credit obligation granted by a bank or financial institution or credit provider. Examples today are any small business loan approved by the Small Business Administration (SBA loans), Ginnie Mae, and since October 2008 also Fannie Mae and Freddie Mac (to prevent Central Banks and Pension funds around the world from liquidating these assets)
   7. New 4^th risk weight assets include the new agency the Democrat Congress and Obama Administration establishment the Consumer Financial Protection Agency (CFPA) within the Dodd/Frank Financial Reform Act, a policing mechanism through which every loan or credit granted requires the approval of the Federal government, which approval carries with it the Federal government’s implied unconditional guarantee, which allows banks, which can no longer provide loans to the Private Sector, to grant such loans effectively owned and controlled by the Federal government versus the Private Sector.

• “Predominant market” sustainability:

1. The upholding of “predominant market” pricing and contracts between borrowers and banks prevents banks from falling out of capital adequacy compliance. For example, when the principal value of the assets falls below the required risk adjusted ratio of assets to capital, the predominant market provides a near impenetrable floor value for all commodities and property, which in turn sustains equity values of Private Sector property and shares owners, prevents out of control speculation, market manipulation and manipulative short selling.
2. Significantly, predominant market contracts also preserve the value of depositor’s cash, which means that there cannot be a run on the bank’s deposits because of the sustainable strength of its assets, where sudden withdrawals are easily replaced by the banks’ access to Federal Reserve, other depositors and other financial institutions.
3. This market pricing stability is due to the “predominant market” contracts of mortgages and loans held to maturity representing (formerly) 70% of bank assets, and 70%(+/-) of all bank assets and capital markets.
4. o      Note, the entire MBS market that existed prior to November 9, 2007 has vanished and what remnants still exist are either owned or guaranteed by the Federal government or Federal Reserve, both in the process of developing new government agency guarantee programs and guarantee products as part of the shift of Private Sector ownership and control of capital to the Federal government or Federal Reserve.

GS’s insider knowledge:

The special knowledge that GS had was that without the knowledge of the general public regarding in particular the implications of this regulatory change, the Senate and House Banking and Finance Committees, in particular Chris Dodd and Barney Frank, put enormous pressure on the Financial Accounting Standards Board (FASB) to go through with their plan to execute another (1929) Hoover coup of the Private Sector’s wealth, i.e., the shift from the basis for Private Sector ownership and control of wealth creation and preservation under FASB 115 (hold to maturity accounting – corollary 3.c above), to the basis for the Federal government and Federal Reserve to control and own Private Sector’s debt capital and equity capital, FASB 157, where the Private Sector was forced to revalue all assets on a mark to market basis, i.e., taking losses based on changes in the affordability models – ratios of net disposable (operating) income to loan payment, versus actual default, with only the Federal government and Federal Reserve allowed to own and guarantee assets on a hold to maturity accounting basis.

This stealth regulatory change, stealth because its true political intent was obfuscated by the government and political cronies and slanted studies, abruptly ended Private Sector free enterprise Capitalism on November 9, 2007 affected a government coup of all Private Sector wealth.

Paulson: the Progressive’s inside man:

The implementation of this stealth regulatory change required the approval of the Bush Administration’s SEC, which required the former Chairman of GS, then US Treasurer, Hank Paulson, and obstensively Bush 43, the son Bush 41. Bush 41 best remembered for his insisting of “Read My Lips No New Taxes”, whose first act as president was to get together with Progressives in Congress to push through, what was then, the biggest tax increase in history, with the full knowledge that by raising taxes (see corollary (i) above) the collapsed loan affordability ratios of banks, would suffocate the Reagan boom years setting up a Recession that even his Gulf War I could not curtail. Bush 41 was the son of Prescott Bush, a supporter in 1929 of the same Hoover regulatory change, that gave rise to power of FDR and his ability to institute Socialist concepts, as well as the German Socialist Republic and Mussolini’s Italy, which enabled them to collapse their Private Sector bank assets and equity, take over the banking and financial system and industry, then revalue all assets to the government’s hold to maturity accounting valuations. In short this was a family of Progressives intent on the stealth undermining of Private Sector wealth and access to opportunity and prosperity in support of their elite cause through any deception and lie that would mislead the public regarding their nefarious political intent.

Bernanke, the enabler of the Progressives’ vision:

On February 1, 2006, Bernanke, was installed by Bush 43 as Governor of the Federal Reserve, based significantly on his expertise and understanding of the causes for the 1929-1938 “Great Depression” of Hoover/FDR, namely, that the imposition of mark to market accounting on the unwitting Private Sector, while government and the Federal reserve retained hold to maturity accounting, could be used to crush, weaken and subjugate the Private Sector by manipulating the mortgage and loan affordability ratios, enabling government, the Federal Reserve and predator and crony capitalists to buy up assets on the cheap and revalue them under hold to maturity accounting.  In 1929, this was achieved by the Federal Reserve’s raising of interest rates.  In 2007 it was done by the big investment banks and biggest banks establishing of proprietary funds to drive oil process upwards by acquiring tankers of oil, as though sold to China, but actually hoarded, as a basis to create a trending oil price, that justified their analysts to project higher oil prices.  Such higher oil prices reduced the affordability of the monthly mortgage and loan payments to households and businesses, which under mark to market accounting, meant that there would be an across the board loss in value to the principal value of bank assets determined by loan affordability models, and once mark to market accounting was implemented, the predominant market pricing mechanism, which prevented and penalized rampant predatory speculation, eliminated, predator and crony capitalists continued their unmitigated upward oil price manipulation, while shorting competing financial institutions shares, then pulling their deposits, collapsing their capital adequacy ratios, wiping out their capital, then taking over their businesses, e.g., Bear Stearns, Lehman Brothers and others.

This was at a time, when virtually every market was rising, after several years in which the Fed had been lowering interest rates in the wake of the damage to the principal values of bank assets resulting from 9/11, which rate reductions prevented the collapse in bank capital values. Because the affordability formulas are the basis for the value of bank assets, unless and until income began to increase to home owners and businesses, the Fed’s raising of interest rates would have collapsed the principal value of mortgages and loans representing the assets of banks, stalling any recovery. However by 2006, the economy was finally on the mend and people’s salaries and business profits were expanding in what became an economic boom.  This allowed the Fed to again start to raise interest rates over a 2 year period from 1% to 5%, while the economy was booming in every market sector, something that had never happened before in any recovery, where some even in September October of 2007 were predicting the advent of a Golden Age.

However, GS and others knew that their inside man, Hank Paulson, was working with the House and Senate Banking committees, Barney Frank and Chris Dodd, to make the stealth regulatory change, with Bernanke expected to be able to better manage the collapse than his predecessors in 1929-1938 Roy Archibald Young, Eugene Isaac Meyer, Eugene Robert Black, Marriner Stoddard Eccles (an avowed Keynesian). GS also knew the implications of FASB’s depriving of hold to maturity accounting from the Private Sector, while retaining hold to maturity accounting for the Federal government and Federal Reserve, i.e., the repetition of the 1929-1938 historical collapse.

Creating a “tipping point” in lending liquidity:

In support of the combined political purpose, GS and many other proprietary bank, investment bank and hedge funds worked with oil traders from May 2007 to November 2007 to systematically hoard and hide oil purchases together with oil futures to create an artificial trend in oil prices significantly above oil price predominant market values.  This market manipulation would have been unsustainable had GS and the other proprietary hedge funds not known that all predominant market contracts would be at once obviated, thereby forcing the regulatory revaluation of all bank assets held to maturity prior to the November 9, 2007 to be marked to market accounting. Without the sharp reduction in loan affordability due to the effect of the oil price increase from stabilized $60 per barrel in May 2007 to $95/brl by November 2007, the bank asset value change to changeover to marked to market accounting from hold to maturity accounting to the Private Sector, while wobbly, would not have caused the sudden “tipping point.” However, the revaluation of bank assets loosing at least 10% of their value on a risk adjusted basis, due to the sudden booking of the reduction in loan affordability, forced all banks in that one month of November, needing to protect the value of depositor’s cash and restore the marked to market accounting devaluation of the principal value of bank assets booked directly against their capital, to shift depositor’s cash out of 100% risk weighted credits to consumers and businesses and 50% risk weighted mortgages and municipal bonds in every market sector over to US zero % risk weighted Treasuries. The result was dramatic.  In the one month of December 2007, 2 years of solid growth and expansion in every market sector retraced with charts in every market falling abruptly into a precipice, i.e., a sudden systemic collapse and the start of the Bush Recession. 

No wonder Bush ended his Presidency handing it over to Obama with an aura of having accomplished his role, as Hoover did, so undermining the economy that the electorate overwhelmingly voted in a Savior of the crisis, a Socialist as FDR then, Obama now.

How Proprietary funds plundered the wealth of the nation:

This also meant that the proprietary oil funds and MBS shorts, in fact every market short seller and hedge fund privy to the knowledge of the workings of the economics of the bank regulatory mechanism, were able to plunder the markets because they knew

• That bank assets no longer had the Private Sector free enterprise Capitalism’s hold to maturity accounting to protect banks’ predominant market contract values.
• That they could manipulate the affordability formulas even further through MBS short sales, where marked to market accounting enables unchecked manipulation of oil prices, now freed from oil price predominant market contracts. The resulting undermining of bank capital, forcing the Fed to lower interest rates, giving investment banks access to cheaper funds as they converted to bank holding companies and banks, as Private Sector capital markets were collapsing,
• That by driving banks out of regulatory compliance, as losses in bank asset values had to be marked directly against the value of bank capital, predators (GS et al) could collapse bank capital and lending liquidity of competitors and targets.
• That because loans could no longer be rolled over without a government guarantee associated to return the loan to an hold to maturity accounting valuation, would meat that equities of all companies with bank loans or even AAA rated bonds would be unable to access credit to roll over their debt and equities would collapse. For example, General Growth Properties filing bankruptcy in April 2009, because they could not refinance their AAA rated debt, which vultures tried to buy at 20% face value, and the default of Dubai World, where only the transfer of significant equity to the Emirates Emir enabled enough cash to keep the debt current.

GS and the other proprietary hedge funds continued to easily manipulate oil prices upwards through July 2008, while shorting MBS and all markets, until oil prices reached $147/brl and all markets collapsed under the weight of a preponderance of shorts, as the marked to market accounting regulatory destruction of the Private Sector’s wealth had obviated all predominant market contract values.  In September 2008, the oil traders finally unwound their positions, as 5 million barrels of oil that had been hoarded in 200,000 brl increments through the period to drive prices up to create the artificial trend each time apparent oil demand dropped below 1 million from the 87 million brls/day supply, finally came back onto the market and were sold, back in the $60/brl range. This was reported by CNBC, explaining that this proved that proprietary bank funds, hedge funds and oil traders had manipulated the market.

The mark to market kibosh:

Since then, many bankers, former regulators, such as Bill Isaac, former Speaker, such as Newt Gingrich, the American Bankers Association and others have tried to get hearings with the House and Senate Banking Committees, but any mention of the FASB 157 and FASB 157e marked to market accounting regulatory change is absolutely forbidden by Chris Dodd, Barney Frank and Geithner, now the US Treasurer This is because they are privy to the “arcane” knowledge and use of the economics of the bank regulator mechanism and 1929-1938 historic precedence, where by forcing it into replacing its foundational hold to maturity accounting with marked to market accounting the FDR Progressives ended Private Sector free enterprise Capitalism directly causing the imposition of Private Sector bank assets and equity.

They understand that Federal government and Federal Reserve retaining the sole right to value Private Sector assets on a hold to maturity accounting basis, are able, thereby, to acquire and originate assets directly and through owned and controlled financial entities, then revalue all assets and companies purchased, such as their acquisitions of Trillions in USD AA and AAA MBS at depressed marked to market pricing, back to their original hold to maturity accounting values, in effect ripping off the Private Sector’s wealth for themselves.

Progressives’ Regime change to a New Normal:

In this way, the Progressives in government through the reenactment of (the Hoover/FDR) imposition of mark to market accounting on the Private Sector, penalize the principal values of originated bank assets to their own benefit. Thus, without the public being the wiser, government has forced Main Street and Wall Street financial institutions into shifting their lending into structured government programs, built into Obamacare and the Dodd/Frank Financial Reform Bill and others, which together cause the entire Private Sector wealth creation, property ownership and capital control to capitulate into the government. This is a process which Progressives are openly discussing on CNBC, Bloomberg and CNN as “Regime change” and Paradigm shift” to their vision of a “New Normal” where in another 2 to 4 years, unless FASB 157e is reversed to FASB 115, Private Sector capital formation and access to credit will be impossible without going through the government. That’s why Obama is telling his Progressive constituency and liberal dupes that he just needs a couple more years of cooperation. 

Reversing the audacity of hope and change:

However, the entire Progressive plan and blueprint for “hope you don’t find out what they’re up to” and “change to their New Normal” will fall flat and become impossible to achieve once FASB 157 is reversed back to FASB 115, at which point, Private Sector lenders and depositors cash will again be secure, as predominant market pricing reforms under a tsunami of refinancing and revitalized mortgage and loans securitizations, with the B and BB risk takers returning to the markets, as the rated tranches of new securities will have having value sustainable cash flow values.

You be the judge:

What is the political intent of the government and special interests here?

1. where Drexel was fined and purged and Milken fined and jailed for creating a capital market that created billions of Dollars in sustained expanding productive wealth, innovations in products and services, economic expansion, business expansion and jobs.
2. while the government collapsed the junk bond market, triggering the S&L crisis through the passage of FIRREA in order that crony capitalists could take over the Drexel/Milken market and predator capitalists could profit from the acquisitions of deeply discounted loan pools of banks forced to fail by the RTC.

What is the political intent of the government and special interests here?

1. where, known predator capitalists, such as GS, took advantage of a Progressives’ government stealth regulatory change to end the regulatory basis for Private Sector Capitalism, to plunder and destroy the wealth of the nation in order to foster a radical Progressive government Regime change to a New Normal.
2. Should GS have been granted a slap on the wrist by the SEC and pat on the back by Obama? or
3. Should GS and other financial terrorists and plunderers have been de-licensed as a criminal enterprise, with the criminal executives jailed for plundering the Private Sector’s wealth and government Progressives impeached or jailed for Treason?
4. The anecdotal evidence is clear, but no action was taken by government against the other “too big to fail financial institutions” given a total pass. 

Restoring the regulatory basis for American Private Sector free enterprise Capitalism:

When one understands the economics of the bank regulatory mechanism, the regulatory underpinning for both American Private Sector Capitalism and Socialist State Capitalism, the political intent is clear. Moreover, if FASB 157e is not terminated and FASB 115 the regulatory basis for Private Sector Capitalism not reinstated as a very first action by Freedom loving Americans, the economy will continue to deteriorate, implode and to be sucked down like quicksand in favor of State Capitalism, the New Normal, where within the next 2 to 4 years all capital, property, production and fruits of productivity, creativity, ingenuity and innovation will be owned and controlled by the government, with rights allocated based on patronage, the entrepreneurial society subjugated to new rulers.

The crime is more heinous because by hiding the true potential of the American Experiment in Private Sector Capitalism, where government’s role is that of a referee preventing obstruction of rights, monopolistic, predatory and crony capitalists and in particular the emergence of State Capitalism for a Progressive elite. If the Private Sector is not enabled to reduce regulatory burdens, non-productive, counter-productive bureaucracy and spending that acts as a barrier to the entrepreneurial achievement emerging in each new generation, crushing the inherent creative force of the individual, then the wealth and prosperity of the nation will being driven down to a common denominator of diminishing means, ruled through the control of capital by a government elite and crony capitalists and relegated to no more than fodder to be manipulated to the will of the State.

Imagine a world, where the American Experiment was fully implemented:

But imagine instead that by educating the public regarding the economics of the bank regulatory mechanism, the economic basis for which the Constitution was created,

1. where it is clear that reductions in government burdens that reduce loan affordability are eliminated,
2. where an 11% flat tax is imposed for those earning over $50,000 per year, all other taxes eliminated, deductions only for children and marriage, with tax credits for schools, deductions for charitable donations,
3. where the bureaucracy’s salaries are put in parallel with the Private Sector, government spending cut by 50% including the competitive outsourcing of bureaucratic functions,
4. where government borrowing eliminated,
5. where necessary government generation of electronic currency and printed cash spent only in areas where the resulting sustainable productivity and cash flows from leasing and licensing fees repays the debt, not taxes of government borrowing,
6. where SSS and Medicare Trust funds are shifted to management by insurance companies offering annuities guaranteed by the government, their pent up capital is released for management by private sector asset managers for investment in the Private Sector, the same as Private Sector Pension funds, providing a surplus value to the annuity

The resulting expansion of capital in the Private Sector will become so widespread and pervasively enormous with capital seeking investment, while savings expand exponentially, that the barriers to opportunity, innovation, creativity, ingenuity, talents and technology will be removed enabling every American in every new generation, through their own effort and perseverance to breach the barriers Progressives have created to suppress success, crush and control the blossoming of talents in their favor.

American Private Sector Constitutional free enterprise Capitalism:

Invocation: "For whoever has, to him more shall be given; and whoever does not have, even what he has shall be taken away from him." Mark 4:25

Imagine a world where, instead of a Fortune 500 and S&P 500, and Nasdaq 2900, there was a Fortune 5,000, S&P 5,000, Nasdaq 30,000, with the smallest company each having a market cap bigger than the smallest now, little to no inflation, deflation held in balance, because government infrastructure and R&D directed through the Private Sector to support such expansion would be adding a substratum of sustained productivity to the value of currency. There is a need to move forward with this waiting vision, which has been undermined by wasted counter-productive consumptive spending Progressives have purposely inflicted on the Private Sector, because of their knowledge of the economics of the bank regulatory mechanism and how to use it to their advantage against the Private Sector.

The unleashing of the creative force within each man is the True Vision that Founders thought possible, which Progressives have strived to hide from the American people.  Its realization comes with the understanding of the unrestrictive potential of capital and that man is endowed with a force of creative perseverance and talents that once unchecked represent and an unlimited force of prosperity – a Golden Age.