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Saturday, September 13, 2008

LEH disaster - America's status Communism?

First of all, it's Sunday morning at 8.a.m and I am shocked (but not surprised) to read that LEH has $85 bil of toxic stuff in the WSJ – Mr. Fuld and his various CFO's were talking of substantially less -- the last figure was $50 bil. - that by itself is a fraud and a felony and should be prosecuted.

I totally agree with the anchorman of CNBC who said that these are crimes and they need to be jailed. The Bush administration must have as part of the "Bush Doctrine" a clause stating that reckless bankers can participate in national fraud schemes and they walk away with hundreds of millions of dollars in bonuses. Crucial national organizations like Fannie and Freddie were part of huge scandals and went bust yet Mr. Bush hides and leaves it all to Mr. Paulson who has repetitively proved he even has no control above the situation, since he has a conflict of interest per se.

Paulson and Bernanke said in Senate and Congress hearings that the situation was contained a year ago and up to $100 bil would be the maximum damage. We are now already at $1 tril. by real counting, without the hidden and phony accounting of the GSE's. That's a lousy performance to put it diplomatically. Normally, both of them should have been fired instead of praising them – this is an insane world.

Just reading the rescue plan for LEH makes me sick. Some Wall Street banks finance a Bad Bank so that someone else can walk away with the perks. It's outrageous that LEH came in this situation with the FED, Treasury and SEC on them. What is it that these guys do not act in time?? That's what I meant earlier when I mentioned the conflict of interest for Paulson. Basically, as the current soundest competitor, it's always to the benefit of Goldman when the others are in trouble. In such a crisis the president should deal with the situation directly, since these are all events, which are leading the USA into a depression and he should be aware that the current situation is out of control. Four of the big icons went bust within 5 months and there is no end in sight.

The fact that the stockholders were screwed every time will create a structural crisis of trust, since America seems to have entered a post-modern communism status. That will create distrust in the US financial system and get people to pull money out of the US, which will create major damage to the indices. Capitalism should be that the guys who risk the money are protected from reckless thieves from within - so far they have walked away with insane amounts of money and the stockowners get screwed. Paulson and Bernanke's attitude that stockowners should not be bailed out is neither understandable nor acceptable. It's not about bailing them out -- it was their assignment to protect them for abuse of the system. Creating worthless mortgages, which will blow up is and should be a federal felony and was supported by greedy rating agencies. That is, as I stated earlier, the biggest bank robbery ever in the history. We are talking about hundreds of billions of dollars. Wall Street paid themselves the biggest bonuses ever as the crisis was already looming on the horizon.

As the word "earn" implies, we should deserve what we get. So I am not criticizing talent, which works hard to make a living but we have to be humble about the opportunity and to be fair to the one's who have given us the opportunity. CEO's of these companies have to get a grip. They do not own these places. It's not right from the government to ask CEO's, who do not own that company and are in financial distress, to bailout Lehman with stockowners money yet, on the other hand, they just screw the stockowners when those same CEO's make the wrong calls, which wreck the companies. This is a total systematic misconcept – it's like letting the wolves and butcher watch over the goats. Paulson is not qualified due to his insight. To the contrary, he is disqualified, since he made $1 bil. through this system. Taxpayers are not responsible for mistakes Wall Street and their supervisors (the FED, SEC and Treasury) made, but I am afraid they have to pay the bill with the shareholders.

The system does not work apparently, since it cannot withstand a crisis on its own power. America is in the biggest crisis since the Great Depression, but the government and media try to distract the public with secondary issues. The wrong people are in charge (as everybody can see) and it needs some drastic and immediate changes to save what is left. I am not talking of political parties, rather more of a basic attitude and responsibility. This crisis was avoidable but the supervising authorities were to willing to liberalize the rules and close their eyes. The BIS (Bank for International Settlement) warned over a year ago that such a crisis was due and even I saw it coming, hence it was not the job of a rocket scientist to see the inevitable, although I even did not have all the insides.

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