The New Robber Barons Read online

  The New Robber Barons

  How Bankers Created an

  International Oligarchy

  Janet M. Tavakoli

  Copyright © 2012 by Janet M. Tavakoli. All rights reserved.

  Published by Janet M. Tavakoli, Chicago, Illinois

  No part of this publication may be reproduced, stored in a retrieved system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the Web at www.coppyright.com.

  Limits of liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special incidental, consequential, or other damages.

  Under no circumstances will the Publisher or author have any liability to any person or entity for (a) loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of the Publisher or author in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if the Publisher or author is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The financial reporting analysis observations and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any opinion or information is given or made by the Publisher or author in any form or manner whatsoever. Each opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding, or selling.

  Library of Congress Cataloging-in-Publication Data:

  Tavakoli, Janet M.

  The New Robber Barons: How Bankers Created An International Oligarchy / Janet M. Tavakoli

  ISBN-10: 0985159006

  ISBN-13: 978-0-9851590-0-9 (Electronic)

  BOOKS BY JANET TAVAKOLI

  Credit Derivatives & Synthetic Structures, John Wiley & Sons (1998, 2001). Also available in Japanese and Orthodox Chinese.

  Structured Finance & Collateralized Debt Obligations, John Wiley & Sons (2003, 2008).

  Dear Mr. Buffett: What An Investor Learns 1,269 Miles from Wall Street, John Wiley & Sons (2009). Available in English, Orthodox Chinese, simplified Chinese, Japanese, Portuguese, and Turkish.

  The New Robber Barons, Janet M Tavakoli (E-Book compilation of articles from the 2008 financial crisis to January 2012).

  Coming Soon

  The Money Book (non-fiction 2012) – Tavakoli pierces the fog and predicts what you should buy and sell to take advantage of global financial turmoil and when to shift your investment strategy.

  Archangels (E-book 2012, fictional financial thriller).

  ACKNOWLEDGEMENTS

  I would like to thank the many people who offered comments, encouragement, and suggestions. In particular, I would like to thank Libby Fisher Hellmann. Without her generous encouragement and advice, this compilation would never have been completed.

  Some of these articles, particularly the later articles have appeared on the web and a few have been prominently featured on the front page of the Huffington Post. Arianna Huffington and the professional staff at the Huffington Post have handled every question and request at the speed of light. “Tyler Durden” at ZeroHedge.com, Barry Rithotlz at The Big Picture (Ritholtz.com), Henry Blodget and the team at Businessinsider.com, Karl Denninger at Market-ticker.org, the team at FT Alphaville, the blog at the Wall Street Journal, the team at New York Times’s Dealbook (dealbook.nytimes.com), Michael Shedlock (globaleconomicanalysis.blogspot.com), Andrew Tobias at Money and Other Subjects (andrewtobias.com), Robert Wenzel (economicpolicyjournal.com), Ron at Wall Street Pit Group (wallstreetpit.com), “Arthur Cutten” at Jesse’s Café Americain (jessescrossroadscafe.blogspot.com), Steve Megremis (dailybail.com) and many others have honored my work by sharing some of their web real estate to feature, excerpt, quote, or comment on it.

  I would also like to thank Nancie Poulos, Arturo Cifuentes, Hilary Till, Pamela van Giessen, William J. Mikus, David Pelleg, Edward Stone, Nancie Poulos, Jim Rogers, J. Allan Meyer, and Rita Ilse Guhrauer. I would also like to thank the many people who did not wish to be named but who acted as mutual sounding boards.

  No opinions or theories presented in this book necessarily represent those of the people I have thanked. I am responsible for any errors, statements, interpretations, or conclusions.

  About The New Robber Barons:

  With Trillions On the Table Nobody Plays Fair, and Everyone Plays for Keeps.

  Tavakoli’s on-going chronicle of the global financial crisis exposes the criminogenic environment that enabled international oligarchs to solidify power.

  In January 2009, Warren Buffett, CEO of Berkshire Hathaway, told Tom Brokaw: “the idea that people that move money around are some favored class…strikes me as getting pretty far away from where we should be.” Two years later he publicly excused apparent insider trading by one of his successor candidates, David Sokol.

  Berkshire Hathaway officer Charlie Munger admonished law students that Americans shouldn’t be "bitching about a little bailout."

  Shortly before Congress confronted him with Goldman Sachs’s profiteering during the financial crisis, Goldman CEO Lloyd Blankfein quipped he was doing “God’s work.”

  CEO Jamie Dimon told shareholders that he didn’t think JPMorgan made a mistake when it came to potential foreclosure fraud: “maybe we’ll have to pay penalties eventually to some of the attorneys general but we really think we should just continue.” Meanwhile the bank scoured 115,000 mortgage affidavits and reserved $1.3 billion for legal costs.

  After MF Global’s October 31, 2011, bankruptcy a U.S. Congressman told former CEO Jon Corzine: "You've got thousands of hard working people around this country that feel cheated."

  Tavakoli serves up example after stunning international example of no-strings-attached socialization of losses and privatization of gains. In the words of Congresswoman Marcy Kaptur: "I believe most of us would call that theft."

  Contents

  PREFACE

  CHAPTER 1

  Bailouts for the Oligarchs

  Proposed Alternative to (the Various Versions) of the Paulson Plan

  (The Emergency Economic Stabilization Act of 2008) - September 25, 2008

 
Selling Democracy On the Cheap - September 30, 2008

  Ponzi Schemes and Stress Tests - May 8, 2009

  Wall Street and Washington Hope You Are Gullible: Disappoint Them - February 14, 2010

  2012: Voters Nix Incumbents, Demand Financial Reform and Fed Fraud Audit - July 1, 2010

  Wall Street’s Advice to Joran van der Sloot (satire)

  June 8, 2010

  CHAPTER 2

  Goldman Sachs’ Definition of “God’s Work”

  Jamie Dimon and Warren Buffett Were Warned AIG Had Serious Trouble One Year Before the September 2008 Crisis (and Goldman Sachs Knew Too) – January 26, 2010

  AIG Paying Out Millions in Bonuses - March 14, 2009

  Did AIG Insure Dodgy Mortgage Products for Goldman Sachs? - March 25, 2009

  AIG Bubble: Irrational Exuberance - August 28, 2009

  Goldman’s Lies of Omission - October 28, 2009

  Goldman Sachs: Reasonable Doubt - November 2, 2009

  I Apologize to David Viniar and Goldman’s Lawyers and Call for More Regulation of Goldman Sachs November 5, 2009

  Goldman’s Undisclosed Role in AIG’s Distress

  November 10, 2009

  I Retract My Apology and Call for More Regulation of Goldman Sachs - November 22, 2009

  Responding to Goldman Sachs - December 25, 2009

  AIG Continued to Write Risky CDO Protection After 2005 [Lewis and TIME are Incorrect.] – March 20, 2010

  Goldman CEO Lloyd Blankfein to Treasury Secretary Hank Paulson: “OK, Now What?” (Humor) – August 23, 2010

  Goldman Sachs: Bullies on the Block - September 13, 2010

  Goldman Sachs Sued by German Bank Over Davis Square VI, an AIG CDO Bailed Out by Taxpayers - October 5, 2010

  CHAPTER 3

  Caveat Emptor

  BofA Says Merrill's Huge Hit was in December (Not November)?

  The China Syndrome and Dead Man's Curve Suggest November - January 26, 2009

  Merrill's Murder/Suicide - February 7, 2009

  Ken Lewis Must Go - April 24, 2009

  Bank of America’s Shareholders Should Reject Bonus Plans - January 12, 2010

  JPMorgan’s Losses From Indecent Exposure - August 9, 2010

  Jamie Dimon and Robert Rubin: Evasive on "Fraud as a Business Model" – November 12, 2010

  The Biggest Headache for Investors in Groupon and Facebook - March 3, 2011

  Mark Zuckerberg’s Value Problem: “My” Facebook Profile Was a Fraud, So Was “Warren Buffett’s” - July 14, 2011

  CHAPTER 4

  Gold and Silver: Glaring Irregularities

  Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold - March 8, 2010

  Washington Must Ban U.S. Credit Derivatives: Games and Gold (Part 2) - March 12, 2010

  How to Corner the Gold Market - March 30, 2010

  Gold Game Changer: J.P. Morgan Accepts Bullion as Money - February 7, 2012

  Today’s Silver Scandal - May 5, 2011

  Price Manipulation: Look for Motive - January 19, 2012

  CHAPTER 5

  Criminal Behavior: Beyond Justice

  Madoff Deserves Lots of Company - December 13, 2008

  Premise of Fortune Cover Story is Incorrect (There was criminal behavior.) - January 11, 2009

  Investment Fund Managers: Nine Warning Signs - February 9, 2009

  Wall Street’s Fraud and Solutions for Systemic Peril - September 29, 2009

  Banging the U.S. Stock Market - May 10, 2010

  IKB’s CEO Found Guilty of Market Manipulation—Some U.S. Bank CEO’s Should Also Face Charges - July 16, 2010

  CHAPTER 6

  Pundits and Junk Science

  Reporting v. PR: Meredith Whitney and AIG - March 23, 2009

  Taleb Kills $20 Billion Mythical Swan – June 1, 2009

  Taleb’s Stranded Swan? – June 3, 2009

  Gasparino’s Glass Jaw Was CNBC’s Draw - July 22, 2009

  Where Were Drama Pundits [Whitney, Taleb and Gasparino] When It Mattered? - July 29, 2009

  Michael Lewis: Junior Salesgirlieman – March 15, 2010

  Wealthy Patriots Wage Class War - December 12, 2011

  CHAPTER 7

  Politicians Inaction

  President Obama's Right to Free Speech - May 10, 2009

  Washington’s Bipartisan Betrayal: The 2015 Global Financial Crisis – December 31, 2009

  CHAPTER 8

  Rating Agencies

  Revoke Rating Agencies’ NRSRO Designation for Structured Products - September 17, 2009

  Ackman Versus Wall Street’s Ponzi Scheme - May 4, 2010

  Tavakoli Structured Finance Revokes Credit Rating Agencies’ NRSRO Designation - July 26, 2011

  CHAPTER 9

  Fannie Mae and Freddie Mac

  “Fraud As a Business Model” - September 6, 2011

  CHAPTER 10

  Warren Buffett’s Twist: “Please, sir, I want some more.”

  Warren Buffett’s Wall Street War - October 20, 2009

  Warren Buffett, Stop Using My Credit Card! - November 23, 2009

  Warren Buffett and Charlie Munger: Winning the Class War - September 21, 2010

  Buffettgate: An Unenforced Policy Isn’t a Policy - April 6, 2011

  Warren Buffett and the Boys of Wall Street - May 9, 2011

  CHAPTER 11

  The “Regulators”

  Inside the Wall Street Journal’s Future of Finance Initiative - December 14, 2009

  Treasury Cover-Up of Goldman’s Role in AGI Crisis – December 22, 2009

  Timothy Geithner, I Call Your Bluff - January 7, 2010

  Show Bernanke and Geithner the Door - January 22, 2010

  Congress Exposes Profiteering in AIG’s Deals: Delay Enabled Cover-Up - January 28, 2010

  Congress’s FCIC Nearly Nailed Former Citigroup Executives to the Wall—Then Blew It - April 8, 2010

  President Obama: Bring Back William Black - April 25, 2010

  CHAPTER 12

  Media Circus

  ProPublica’s (and NY Times’) “Untold” Magnetar Story Creates Excuses for Wall Street and Washington - April 19, 2010

  Tavakoli’s Top Ten Business Books (satire) - December 13, 2010

  Blame the Victims and Enrich the Perpetrators - January 13, 2011

  2011: The Year 60 Minutes Misled Americans About Municipal Bonds – December 20, 2011

  CHAPTER 13

  The Eurozone

  Wall Street’s Advice to the IMF: Control Your Alleged Rapists! (satire) - May 22, 2011

  Euro Endgame - June 1, 2011

  “Standard” Credit Default Swaps on Greece Are a Sham and It’s Not a Surprise - October 27, 2011

  CHAPTER 14

  MF Global Implodes: Ongoing Global Crisis

  Credit Derivatives and Leverage Sank MF Global – November 4, 2011

  MF Global Revelations Keep Getting Worse - November 21, 2011

  Is Crony Capitalism Wrong? - December 3, 2011

  Corzine Dodges the Fraud Question - December 9, 2011

  Rehypothecation Is An Old Story: MF Global’s Story Is a Different Story of Filched Funds - December 16, 2011