Shattering the myths.

As Senator Shelby kicked off this morning’s “hearings” with Paulson and Bernanke, one could not help but note his tone of justifiable repudiation towards the Treasury, Fed., SEC and Wall St. Shelby made pointed references to his opposition since 1979 to the bailing out of any private institutions/corporations with taxpayer’s dollars, going back to Chrysler. He also made it graphically clear that Congress has been assured on many occasions over the years, starting with Greenspan and ending Cox, Paulson and Bernanke, as recently as February, that there was no cause for concern and that the economy was sound. So, now Paulson wants undisputed power to move quickly forward, “clean and decisively” to legislate action that would favor even more private control over the US markets. He is holding the ultimate “bazooka” to the head of the people of the US making it clear that urgency is of the utmost importance. This is the man who many are on to, now despised by many (all you had to do was watch the demeanors of the many panned shots of several of the committee members). This is the man who, as President of Goldman, sold out his options for $700 million and became the Secretary of the US Treasury. This is the man who has linkage to all the ex Goldman executives now sprinkled strategically throughout the financial and political power bases in the US, Canada ( Mark Carney, Gov. Of the Bank of Canada, former GS ) and Europe.

As the bankers proceeded to raid the life time savings and personal accounts of Americans last week in order to cover their collective bottoms, overriding the rule of contract law, and bail out the crooks (hidden inside the AIG bail out) Paulson and team were hurridly crafting their grand plan for financial crisis legislation, legislation allowing the use of unlimited public funds well over the $700 billion teaser price (say $Trillions) mentioned. Here are just a few proposals of the Act that should strike fear into all Americans:

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.—The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Today, Diane Francis in her column in the Financial Post titled “In the U.S. the monkeys guard the bananas” makes some interesting observations. The real attacks on the New York towers “have been coming from inside by the Capitalist Cowboys”. Making GS and Morgan holding companies completes the demise of all five Wall St. Banks. Paulson, the former Czar of Wall St. has a major conflict of social interest in taking any tough measures against the culprits that have been responsible for the financial Tsunami looming over the U.S. and global markets. He is one of them, beginning is career with Nixon’s sidekick John Erhlichson (Watergate) and culminating as the CEO and Chairman of Goldman form 1999 to 2005. He, along with the rest of the Bush Admin. are now bailing out the problems they created and they won’t attack their base as they leave Washington for Palm Beach and Palm Springs “with the gangs that got away”. I would like to point out here that there are those from the Clinton Admin. That should also be on the hook, such as gold basher, “strong dollar Rubin” and others. Did someone mention Greenspan?

There are many who should have their feet held to the fire as they profited greedily from allowing the capital derivatives monster to grow into Buffet’s “financial weapons of mass financial destruction”. Ms Francis believes that “lawsuits and handcuffs and… RICO prosecutions are in order”, that there should be mass arrests. She also thinks that “taxpayers should be able to seize all the assets of the managers, of all the managers, directors and executives who oversaw this conspiracy of recklessness for years” and that there should be “induced foreclosures in Palm Beach and Palm Springs of Wall Streeter’s mansions, stock portfolios, Porches and private jets.”

I briefly observed part of the statement of the Senator from Ohio this morning commenting on the more than palpable anger emanating from so many of his constituents, that one man had driven over seven hours to meet with him to express his anguish and concerns. Observing the somber expressions of worry so apparent on the faces of so many of those Senators today truly struck almost a chord of fear. One could see that there was every effort being made to disguise negative emotion towards those being interviewed. It seemed to have very little effect on Paulson. That’s when I turned off the TV.

In an aside to all Canadians, we should not delude ourselves into thinking that all of the above does not and will not have serious fallout here. It is only delayed. As the above hearings are being played out, Canadian regulators, politicians, bankers, brokers and others are, and have been erring through omission, ignorance and illegality. Many investors have been and are complaining about apparent “inconsistencies” in our markets, notably the JPMs and specifically naked shorting. There are no satisfactory or accountable replies to such complaints at this time, at least those forwarded by me. We have no idea of what role Mr. M. Carney or the Bank of Canada (at arm’s length to our Government.) has played, or is playing in the above globally infected derivatives markets, now estimated by the Bank of International Settlements to be well over seven hundred and fifty TRILLION dollars. Canadian banks are exposed by $800 billion through credit default swaps. They rely on their guarantors, such as AIG, to back them during a crisis. “Canadian banks and financial institutions are exposed to AIG in several ways, with one of the greatest sources of risk being their reliance on opaque credit markets that link lenders in complex was through an elaborate system for sharing risk in which AIG plays a central role.” (Financial Post, FP1, Se. 17/08) The Royal Bank alone has $300 billion notional exposure, many times its own value. As Jim Sinclair points out, when there is no counter party, it’s real dollars. TD has $197 billion exposure. I openly wonder at their seeming lengthy shenanigans in the trading of one junior’s shares, ECU on the TSE. They aren’t alone.

Suffice it to say, we investors in Canada are still in the dark and there are many factors that we should be urgently cognizant of. I have personally written many times to many authorities and have basically been ignored. That arrogance and off-handedness alone are red flags, and tells me there are some serious speed bumps ahead that will grow proportionately bigger with time and continued obfuscation. Ignorance, recklessness, and/or illegality on behalf of our bureaucrats , regulators, politicians, banks and brokerages is presently greasing the wheels of greed, arrogance, power and malfeasance as we “unaffected” Canadians plunge headlong into the wake of the U.S. juggernaut without a very small jacket.