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David Stockman: We’ve Been Lied To, Robbed, & Misled – And we’re still at risk of it happening all over again

Saturday, March 30, 2013 15:09

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Then, when the Fed’s fire hoses started spraying an elephant soup of liquidity injections in every direction and its balance sheet grew by $1.3 trillion in just thirteen weeks compared to $850 billion during its first ninety-four years, I became convinced that the Fed was flying by the seat of its pants, making it up as it went along. It was evident that its aim was to stop the hissy fit on Wall Street and that the thread of a Great Depression 2.0 was just a cover story for a panicked spree of money printing that exceeded any other episode in recorded human history.

David Stockman, The Great Deformation

Click the play button below to listen to Chris' interview with David Stockman (56m:33s):

by Adam Taggart / Peak Prosperity

David Stockman, former director of the OMB under President Reagan, former US Representative, and veteran financier is an insider's insider. Few people understand the ways in which both Washington DC and Wall Street work and intersect better than he does.

In his upcoming book, The Great Deformation: The Corruption of Capitalism in America, Stockman lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good.

By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct. And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued -- in full -- at all costs.

Of course, history shows that our markets and economy would have been better off had the system been allowed to correct. Most of the "too big to fail" institutions would have survived or been broken into smaller, more resilient, entities. For those that would have failed, smaller, more responsible banks would have stepped up to replace them - as happens as part of the natural course of a free market system:

Essentially there was a cleansing run on the wholesale funding market in the canyons of Wall Street going on. It would have worked its will, just like JP Morgan allowed it to happen in 1907 when we did not have the Fed getting in the way. Because they stopped it in its tracks after the AIG bailout and then all the alphabet soup of different lines that the Fed threw out, and then the enactment of TARP, the last two investment banks standing were rescued, Goldman and Morgan [Stanley], and they should not have been. As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games, such that Goldman Sachs got $10 billion dollars for the fiscal year that started three months later after that check went out, which was October 2008. For the fiscal 2009 year, Goldman Sachs generated what I call a $29 billion surplus – $13 billion of net income after tax, and on top of that $16 billion of salaries and bonuses, 95% of it which was bonuses.

Therefore, the idea that they were on death’s door does not stack up. Even if they had been, it would not make any difference to the health of the financial system. These firms are supposed to come and go, and if people make really bad bets, if they have a trillion dollar balance sheet with six, seven, eight hundred billion dollars worth of hot-money short-term funding, then they ought to take their just reward, because it would create lessons, it would create discipline. So all the new firms that would have been formed out of the remnants of Goldman Sachs where everybody lost their stock values – which for most of these partners is tens of millions, hundreds of millions – when they formed a new firm, I doubt whether they would have gone back to the old game. What happened was the Fed stopped everything in its tracks, kept Goldman Sachs intact, the reckless Goldman Sachs and the reckless Morgan Stanley, everyone quickly recovered their stock value and the game continues. This is one of the evils that comes from this kind of deep intervention in the capital and money markets.

Stockman's anger at the unnecessary and unfair capital transfer from taxpayer to TBTF bank is matched only by his concern that, even with those bailouts, the banking system is still unacceptably vulnerable to a repeat of the same crime:

The banks quickly worked out their solvency issues because the Fed basically took it out of the hides of Main Street savers and depositors throughout America. When the Fed panicked, it basically destroyed the free-market interest rate – you cannot have capitalism, you cannot have healthy financial markets without an interest rate, which is the price of money, the price of capital that can freely measure and reflect risk and true economic prospects.

Well, once you basically unplug the pricing mechanism of a capital market and make it entirely an administered rate by the Fed, you are going to cause all kinds of deformationsas I call them, or mal-investments as some of the Austrians used to call them, that basically pollutes and corrupts the system. Look at the deposit rate right now, it is 50 basis points, maybe 40, for six months. As a result of that, probably $400-500 billion a year is being transferred as a fiscal maneuver by the Fed from savers to the banks. They are collecting the spread, they've then booked the profits, they've rebuilt their book net worth, and they paid back the TARP basically out of what was thieved from the savers of America.

Now they go down and pound the table and whine and pout like JP Morgan and the rest of them,you have to let us do stock buy backs, you have to let us pay out dividends so we can ramp our stock and collect our stock option winnings. It is outrageous that the authorities, after the so-called “near death experience" of 2008 and this massive fiscal safety net and monetary safety net was put out there, is allowing them to pay dividends and to go into the market and buy back their stock. They should be under house arrest in a sense that every dime they are making from this artificial yield group being delivered by the Fed out of the hides of savers should be put on their balance sheet to build up retained earnings, to build up a cushion. I do not care whether it is fifteen or twenty or twenty-five percent common equity and retained earnings-to-assets or not, that is what we should be doing if we are going to protect the system from another raid by these people the next time we get a meltdown, which can happen at any time.

You can see why I talk about corruption, why crony capitalism is so bad. I mean, the Basel capital standards, they are a joke. We are just allowing the banks to go back into the same old game they were playing before. Everybody said the banks in late 2007 were the greatest thing since sliced bread. The market cap of the ten largest banks in America, including from Bear Stearns all the way to Citibank and JP Morgan and Goldman and so forth, was $1.25 trillion. That was up thirty times from where the predecessors of those institutions had been. Only in 1987, when Greenspan took over and began the era of bubble finance – slowly at first then rapidly, eventually, to have the market cap grow thirty times – and then on the eve of the great meltdown see the $1.25 trillion to market cap disappear, vanish, vaporize in panic in September 2008. Only a few months later, $1 trillion of that market cap disappeared in to the abyss and panic, and Bear Stearns is going down, and all the rest.

This tells you the system is dramatically unstable. In a healthy financial system and a free capital market, if I can put it that way, you are not going to have stuff going from nowhere to @1.2 trillion and then back to a trillion practically at the drop of a hat. That is instability; that is a case of a medicated market that is essentially very dangerous and is one of the many adverse consequences and deformations that result from the central-bank dominated, corrupt monetary system that has slowly built up ever since Nixon closed the gold window, but really as I say in my book, going back to 1933 in April when Roosevelt took all the private gold. So we are in a big dead-end trap, and they are digging deeper every time you get a new maneuver.

 

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“consequently, that the ultimate right of the parties to the Constitution (i.e. the States), to judge whether the compact has been dangerously violated, must extend to violations by one delegated authority as well as by another--by the judiciary as well as by the executive, or the legislature.” Virginia Assembly Report 1800, James Madison. 

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McCain remarks from inside the Egy territory to the W.Post insults the Egy sovereignty.we consider him persona non grata.an unwelcome person— Egyptian Cabinet (@Cabinet_eg) August 6, 2013

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A federal government which does not derive its lawful and limited authority from the Constitution of the United States is by definition an occupation government and criminal regime.  It’s authority is null and void and no one is bound by any rule of law to obey it.  --Donald L. Cline

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Everybody is still talking about the other baby, the royal baby. In fact, I saw that President Obama released a statement congratulating Prince William and Kate Middleton on the birth of their son. Then he said, “And whatever you do — hang on to that birth certificate.” - Jimmy Fallon

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"And if you didn't know, the only difference between socialism and communism is an AK-47 aimed at your head."-  Quang Nguyen

Solution to the problem in Egypt :

They want a new Muslim leader, Give them ours. 

The administration’s attempt to intimidate Fox News and its employees will not succeed and their excuses will stand neither the test of law, the test of decency, nor the test of time. We will not allow a climate of press intimidation, unseen since the McCarthy era, to frighten any of us away from the truth.

-          Roger Ailes, Fox News

When Satan is knocking at your door, simply say, "Jesus, could You please get that for me.

- unknown

"There are 27 amendments in the Constitution but only one says 'shall not be infringed,'" Steve Toth said. "The Second Amendment is the amendment that keeps the people free."

“The States then being the parties to the constitutional compact, and in their sovereign capacity, it follows of necessity, that there can be no tribunal above their authority, to decide in the last resort, whether the compact made by them be violated; and consequently that as the parties to it, they must themselves decide in the last resort, such questions as may be of sufficient magnitude to require their interposition.” – James Madison 

"When you disarm the people, you commence to offend them and show that you distrust them either through cowardice or lack of confidence, and both of these opinions generate hatred." - Niccolo Machiavelli

“We cannot continue to rely on our military in order to achieve the national security objectives we’ve set. We’ve got to have a civilian national security force that’s just as powerful, just as strong, just as well-funded.” - "Obama", 2008

"A gun is like a parachute. If you need one, and don't have one, you'll probably never need one again."

This country does not need to have a conversation about how many bullets should go in a clip. It does need to have a conversation about how many parents should go in a family. It needs to talk about the ghettos of Obamerica and have a serious conversation about broken families and generational dependency. It needs to have a conversation about funneling new immigrants from broken parts of the world into areas already suffering from high levels of unemployment and street violence.- Daniel Greenfield

Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants and debt is the money of slaves.- Traditional

  ΜΟΛΩΝ ΛΑΒΕ!

A federal government which does not derive its lawful and limited authority from the Constitution of the United States is by definition an occupation government and criminal regime.  It’s authority is null and void and no one is bound by any rule of law to obey it. --Donald L. Cline

Timid men prefer the calm of despotism to the tempestuous sea of liberty." -- Thomas Jefferson

“Disarmament of the populace is always the first step to depriving them of their civil rights and human rights…many African-Americans and women are actively assaulting the very document that first secured their own freedom... if you do not believe in the Bill of Rights, then you are not, at heart, an American.” – Mike Adams

Only in America could liberals talk about the greed of the rich at a $35,000 a plate campaign fund raising event.

We need to demythologize guns before the liberal attempt to create a totemic fear of them succeeds. If the gun control mentality promoting fear of guns themselves becomes our national mentality, we would turn the clock back to the days when a warrior class ruled over the people because only they had the confidence and expertise to deploy the means of defense and coercion. The gun control agenda will turn us into a people too timid to defend themselves from our would-be masters. – Alan Keyes

So now that there is a new tragedy the president wants to have a “national conversation on guns”. Here’s the thing. Until this national conversation is willing to entertain allowing teachers to carry concealed weapons, then it isn’t a conversation at all, it is a lecture. – Larry Correia'

During his 1956 presidential campaign, a woman called out to Adlai Stevenson: Senator, you have the vote of every thinking person! Stevenson called back: That's not enough, madam, we need a majority.

The economy is so bad, MSNBC had to lay off 300 Obama spokesmen. - Jay Leno

'Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

“What we’re watching here today is the equivalent of Woodward and Bernstein helping Nixon cover up Watergate,” he said. “The mainstream media is Woodward and Bernstein. Watergate is Benghazi. Except this time, Woodward and Bernstein are helping Nixon cover it up.”-- Russ Limbaugh

Lets see if I have this straight...Former President Bill Clinton ... who lied to his own wife... was convicted of perjury ... disbarred from practicing law in his home state... an admitted philanderer ... who "Never had sexual relations with that woman, Miss Lewinsky" ... Impeached by the US House of Representatives ... is giving testimonials for Barrack Obama's character and intentions!!!???  Is this a great country or what!?

 "Thanking Obama for killing Bin Laden is like going into McDonalds and thanking Ronald McDonald for the hamburger. It's the guy cooking the burger that should get the credit, not the clown."

referring to 10-3-12 debate: "Obama made a lot of good points tonight. Unfortunately, most of them were for Romney." - Bill Maher, million dollar Obama donor

How can we stand up to someone that creates a 100 dollar Federal Reserve (FR) note for 2 cents and uses the face value of the note of 100 dollars to buy a 100 dollar U.S. Security where the government has to pay them 4% in interest at the end of the year? A yearly cost of 4 FR notes where it only cost the FR 2 cents to print.

This is the biggest Conspiracy you may ever encounter and this started sometime around 1913. Yes, your parents and their parents had so much of their time stolen from them at a cost of 2 pennies. And the National Debt is one big fraud. And this is not just in the United States but the whole world.- Steven Pattison

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Today, President Obama is calling for the same with the Buffett Rule.' Obama is under the mistaken impression that America's symbol is the bald ego." --The Wall Street Journal's James Taranto

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Remember just a few years ago when...

...the official unemployed was at 8.4 million instead of 12.4 million?

...the U.S. debt was at 9.5 trillion instead of 15.5 trillion?

...gas was $1.89 a gallon?

...the U.S. was friends with Isreal?

...food Stamp Recipients was at 29 million instead of 46 million?

...U.S. Astronauts didn't have to travel with Russians to go into space?

...our country's credit rating was a Triple AAA rating?

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Rep. Randy Neugebauer put the burden into perspective: “It will take over 24 million man hours to comply with Dodd-Frank rules per year. It took only 20 million to build the Panama Canal.”

"Sixty-one percent of debt issued by the Treasury is bought by the Federal Reserve -- which is to say the left hand of the U.S. Government is lending money to the right hand of the US Government. ... Nonetheless, in a land where every mewling babe in the American nursery is born with a debt burden of just under $200,000, the president brags that only his party is 'compassionate' to have no plan whatsoever even to attempt to do anything about this, no way, no how, not now, not ever." --columnist Mark Steyn

Isn't it amazing how every facet of Sergeant Bales life,  high school, college, employment, why he left his employment, his brother’s employment, his wife’s employment, real estate holdings, a missed house payment , a missed promotion etc., is exposed within a week and the same fact finders can't find comparable info on the most powerful man in the world in three plus years ?

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“The election of President Obama by the presidential electors, confirmed by Congress, makes the documents and testimony sought by plaintiff irrelevant,” Obama’s lawyer Jablonski said.

 

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--Author Tom Clancy

 

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- Thomas Paine.

 

"Look, the Taliban, per se, is not our enemy.”

- VP Joe Biden
December 2011

 

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– Ex Parte Milligan (1866)

 

Permit me to hint whether it would not be wise and seasonable to provide a strong check to the admission of foreigners into the administration of our national government ; and to declare expressly that the command in chief of the American army shall not be given to, nor devolve on any but a natural born citizen.
I remain, dear sir,
Your faithful friend and servant,

John Jay. 

 

Calling Ron Paul "out of the mainstream" is a double-edged sword, because it also means he can’t possibly be responsible for the condition of the country today. 

<!--[if !supportLists]-->-        - <!--[endif]-->Thomas E. Woods, Jr.

 

 A guy named Reggie Love leaving the White House to get a degree at the Wharton School of Business. I guess he realized you can't learn anything about economics in the Obama White House.

- Jay Leno

Laws and regulations which violate the Constitution are not obligatory upon any free man. 

(believed to be from George Washington.)

 

  “We’re at that awkward stage where it’s too late to work within the system, but too early to shoot the bastards.”

- Claire Wolf

 

Mustafa Abdul-Jalil, the chairman of the National Transitional Council and de fact president, had already declared that Libyan laws in future would have Sharia, the Islamic code, as its "basic source".
-       The Telegraph (good job Barack!) 

 

Those who make peaceful change impossible, make violent change inevitable     - Robert F. Kennedy

 

 "The world is a dangerous place to live; not because of the people who are evil, but because of the people who don't do anything about it." -- Albert Einstein

  

The four boxes of LIBERTY:
1. soap
2. ballot
3. jury
4. ammo
.....in that order!

 

"The actual need for a service, its relevance and value is always subordinate to the bureaucracy. This is the difference from the private sector: you go into a shop, and the sales assistant asks, 'Can I be of assistance to you, sir?' You go into a government agency: 'Get to the back of the queue and wait until you are called!”'

-       Alistair Mcleod

 

 

 "Only Malcolm X’s autobiography seemed to offer something different. His repeated acts of self-creation spoke to me. The blunt poetry of his words. His unadorned insistence on respect. He promised a new and uncompromising order, martial in its discipline."  

– Barack Hussein Obama 

 

“It is difficult to get a man to understand something when his salary depends on his not understanding it.”

-Oscar Wilde

 

“Anyone with an Obama 2012 Bumper Sticker is a Threat to the Gene Pool”

Congressman Allen West

 

“The Only People Who Don’t Want to Disclose the Truth are Those with Something to Hide."

- Barack Hussein Obama Soetoro

 

"If it takes a village to raise your kid, you’re in the wrong country."

-  Seen by Tim Clack II

  

"The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation."

-Barack Hussein Obama Soetoro Soebarkah Bounel

  

"The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum. " 

- Noam Chomsky

  

"Judge me by the people with whom I surround myself." -

- Barack Hussein Obama Soetoro (we are, Barry)

 

"…whensoever the General Government assumes undelegated powers, its acts are unauthoritative, void, and of no force…"

Thomas Jefferson, Federal v. Consolidated Government

 

“Better to be paralyzed from the neck down than the neck up”

Charles Krauthammer.

 

"Sublata causa, tollitur effectus" (Remove the  cause and the effect will cease)

 "Civilization and anarchy are only seven meals apart"                          

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