From an article in The Daily Reckoning
Wednesday, July 29, 2009

Brief summary/excerpt:

Elliot Spitzer is back in the news. Speaking to MSNBC, the disgraced crime-fighter described the Fed as a “Ponzi scheme”:

“You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money. This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy.

“The Fed needs to be examined carefully.”

BTW, Spitzer resigned as governor of New York in March 2008. At the time, he had been warning about sub-prime mortgage loans. Some think the feds found a way to silence him – by revealing that he had a bad habit…$1,000-an-hour hookers.

Investigative reporters maintain that federal enforcement officials had the option of leaving Spitzer out of the news. Instead, the Bush Administration Justice Department decided to out Spitzer.

Thomas Quinlin’s Commentary:

Spitzer is no saint.  He’s also stupid…good looking hookers can be bought for a third of that price.

Anything the government does should not surprise you.  Here’s the latest on fiscal stimulus: FMNA and FMAC are placing toxic debt in $50 million tranches.  Then they are turning around and “selling” them back to banks and investors such as mortgage companies and brokerage firms.  The buyer has to come up with 10% of the value to secure the tranche.

But wait!!  The FDIC now comes in and guarantees 90% of the 10% that the buyer has to come up with so in reality the buyer comes up with $500,000 and ends up with a $50 million dollar asset on the books.  All commissions, of course are split with the government.

If the tranches end up losing value, the investors who buy them from the now new owners get screwed, but at least the brokerage firms and other intermediaries are safe; they could sell these “AAA” rated papers to another buyer (hopefully one who has a better sense of value) for $25 million and end up showing a $24.5 million dollar gain on their P&L.

Now, that’s financial planning.  I’ve already had two “financial” firms call me to pitch this shit to me.  I told them to go to hell and that I would not touch their “investment” at any price.

I’ve said this before…we are way beyond ever fixing this system.  The cancerous corruption that pervades our system — finance, justice and government in general — has only one future, and it won’t be pleasant.

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