Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #658 Update on the Meltdown

MP3: Side 1 | Side 2

With the upheaval of the market economy, we begin to recognize the monuments of the bourgeoisie as ruins, even before they have crumbled.

Walter Benjamin (circa 1937),
“Black sheep” of the Frankfurt School

Indeed. Although Mr. Emory does not subscribe to Marxist economic theory, it is difficult to discount Benjamin’s eloquent observations. As Barack Obama prepares to assume the helm of the ship of state, the economic waters are very troubled and altogether perilous.

Exploring aspects of the economic collapse, this program begins by noting that banks are declining to say how they are spending the taxpayer money they have received as part of the bailout. Author/commentator David Sirota provides insight as to a possible reason for the banks’ reticence. Relevant data suggest that the premise for the bailout might not be “as advertised”! In addition, Sirota notes that, taking the erroneous data at face value and then drawing the wrong conclusions from it, many states are instituting draconian budget cuts that will be counterproductive. Adding to the flood tide of bad economic news was the revelation that the hedge fund run by Bernard Madoff was actually a huge Ponzi scheme. (Emphatically speculative in nature, the analysis of the Madoff affair occupies the balance of the program.) Although he claims to have acted alone, there is reason to view Madoff — “Lee Harvey Madoff” as we might call him — as the visible element of a much larger operation. Noteworthy is the fact that the cast of characters implicated in one aspect or another of this operation includes the Attorney General of the U.S., who has recused himself from the investigation, because his son represents one of the principals. The collapse has raised many important questions, including queries as to where the money went. What the brilliant Lucy Komisar calls “offshore” is one possibiltiy, with Swiss banks coming into focus. Another possibility is that Madoff clients received much of the money–clients that included the Thyssen family, mary element of the Underground Reich and longtime allies of the Bush family. Among the victims are many Jewish charities and individuals who contribute to Israeli infrastructure, including the non-profit of Nobel Prize winner and Holocaust Elie Wiesel. Examining the milieu involved with the Madoff affair, the possibility that Madoff (like a number of Jews) fronted for the Bormann capital network must be seriously considered. Closing with an apocalyptic vision, the broadcast notes an Army War College report indicating that an economic collapse might all but destroy the United States.

Program Highlights Include: The suspicious “suicide” of a key hedge fund manager, Madoff investor and member of the French economic elite; the fear of a Madoff critic — articulated in a 2005 report on to the SEC on Madoff’s operation–that he was afraid for his and his family’s safety because of his warnings about the fund; links of the Madoff milieu to John J. McCloy II; links of the Madoff milieu to former SEC head and Carlyle group associate Arthur Levitt; the ridiculously small, single auditor overseeing the Madoff fund; review of the Bormann capital network’s use of Jews as fronts for their operations; review of the Bormann capital network’s control over the French economic elite.

1. The program begins by noting that banks are declining to say how they are spending the taxpayer money they have received as part of the bailout.

“It’s something any bank would demand to know before handing out a loan: Where’s the money going?

But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.

‘We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. ‘We have not disclosed that to the public. We’re declining to.’

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?

None of the banks provided specific answers.

“‘We’re not providing dollar-in, dollar-out tracking,’ said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.

Some banks said they simply didn’t know where the money was going.

‘We manage our capital in its aggregate,’ said Regions Financial Corp. spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout. . . .”

“Banks Keep Bailout Spending Secret”

2. Author/commentator David Sirota provides insight as to a possible reason for the banks’ reticence.

“Please, forgive me for saying it. I know it’s a tad annoying, but it has to be said to America’s ruling class in this humble column space. Because if it’s not said here, then you can bet it won’t be said anywhere else, and it needs to be said somewhere on behalf of the millions of citizens who were right.

We told you so.

In the slow-motion train wreck that became the economic meltdown, our bipartisan political establishment and the sycophantic punditburo have been wrong over and over and over again. They told us that eviscerating consumer protections would unleash the market’s benevolent power and boost the economy. They told us that a trillion-dollar Wall Street bailout would solve a credit crisis. They told us that bailout would be subjected to intense oversight and scrutiny. Wrong, wrong and wrong – and when critics predicted just that, sneering commentators and congressional leaders berated us as know-nothing Luddites, conspiracy theorists or both.

But with the release of three new reports, there’s no debate anymore. The studies prove that the critics were right and the ideologues of Washington were wrong.

When in 2005 Congress overwhelmingly passed a credit-card industry-written bill gutting bankruptcy laws, progressives were right to try to stop it – and not just because it was an immoral move to legalize usury. We were right because as the New York Federal Reserve Bank reports, the bill played an integral role in the foreclosure surge that crushed the economy.

In the past, bankruptcy laws made sure debtors first and foremost continued paying their mortgages so that they could stay in their homes. But the 2005 legislation effectively compels debtors to first pay off their credit cards, meaning many then have no money left to pay their mortgages. The Fed’s report estimates that the bankruptcy bill is causing 32,000 more foreclosures per quarter than the economy would have already generated.

We told you so.

When almost every media voice in America was sounding the alarm of financial panic and demanding a Wall Street bailout plan, when bailout opponents were roundly ridiculed as ‘irresponsible’ by politician and pundit alike – those opponents were nonetheless right to say then what a study from the Minneapolis Federal Reserve Bank says now: that the case hadn’t been made.

While reporters and the Bush administration frantically insisted that bank-to-business lending had ceased, inter-bank lending had stopped, and short-term ‘commercial paper’ loans had dried up, the Minneapolis researchers tell us that ‘all three claims were false’ and continue to be false; that ‘nobody has explained how the money system has frozen when the data says it has not’; and that ‘a trillion-dollar intervention warrant(ed) a bit more serious analysis.’

We told you so.

When lawmakers said the bailout included strict oversight measures, skeptics were right to say that claim was patently untrue. According to a new analysis by federal officials at the Government Accountability Office, nonexistent oversight means ‘taxpayers may not be adequately protected’ and that the bailout’s stated goal of fixing the economy ‘may not be achieved in an efficient and effective manner.’

Yes, we told you so.

And so now, even though these damning reports have garnered scant news coverage, perhaps there will be a change. As we – the pragmatic progressive majority – demand tough new financial regulations; job-creating investments in public infrastructure; labor law reforms; universal health care; revised trade policies; a repeal of the odious bankruptcy bill and an end to Wall Street welfare – maybe our humiliated rulers will start listening.”

“Political Establishment Trashed Consumer Protections – and Look What We Got” by David Sirota; San Francisco Chronicle; 12/15/2008.

3. In addition, Sirota notes that, taking the erroneous data at face value and then drawing the wrong conclusions from it, many states are instituting draconian budget cuts that will be counterproductive.

” . . . That’s what’s going on in revenue-starved states right now: governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy. Nowhere is this class war more pronounced than in New York – the home of the financial thieves who killed the economy. Having halved its top tax rate over the last three decades, New York today faces a $15.4 billion deficit. In response, Gov. David Paterson, a Democrat, might have asked his state’s Gordon Gekkos to pay higher taxes, especially considering the idea’s popularity in polls and the news that Wall Street’s elite are still swimming in money. Indeed, according to CBS News, the allegedly beleaguered financial industry is so flush with cash it plans to dole out $14 billion in executive bonuses this year.

Yet, far from forcing robber barons to pay their fair share, Paterson told the New York Times that taxing millionaires is ‘the last place you want to go.’ Instead, he proposes to punish Joe and Jane Six-pack by hiking the taxes and cutting the programs that disproportionately impact them. Specifically, he wants to increase sales taxes, college tuitions and licensing fees and slash education and low-income health programs.

Paterson defended his proposals by telling PBS’ Bill Moyers ‘that when you tax the wealthy in the downturn of an economy, you have an automatic link of a loss of job opportunities and then a loss of population.’ The rationale sounds intelligently pragmatic – until you peruse the relevant data.

When New Jersey recently raised taxes on the wealthy, Princeton University researchers found that most of those who later left the state moved to places with higher taxes, meaning there is no causative link between levies on the rich and residential flight. Likewise, when New York temporarily raised high-income taxes after 9/11, the state added 127,000 jobs, meaning no link exists between higher taxes on the rich and job loss.

During times of surpluses, governors could get away with the unsubstantiated nonsense Paterson is peddling. But now, 43 states confront shortfalls, and because states cannot run deficits, the dollars and sense of these arguments matter. Lawmakers must choose what policy will create the best chances for economic recovery: spending cuts or tax increases, and if the latter, on whom?

The answer isn’t rocket science. As Nobel Prize-winning economist Joseph Stiglitz says, ‘Reductions in government spending on goods and services (are) likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.’

That’s because government cuts automatically decrease the consumptive spending programs that broadly stimulate the economy whereas tax increases, when aimed at the wealthy, more often impact funds socked away in savings.

‘The more that the tax increases (are) focused on those with lower propensities to consume (i.e., the rich),’ Stiglitz notes, ‘the less damage is done to the weakened economy.’

Incredibly, Paterson acknowledges how destructive his budget is, admitting that his own ‘education cuts are draconian, the health care cuts are prohibitive [and] the taxes that are being levied … are not fair.’

So why would he – or any governor – nonetheless try to legislate such idiocy? Because millionaires are the ones who finance gubernatorial candidacies, and their campaign contributions buy tax protection. The result is what another New York royalist promised.

‘Only the little people pay taxes,’ said Leona Helmsley – a doctrine that will exacerbate this recession if states keep making it true.”

“Economic Death and Millionaire Taxes” by David Sirota; San Francisco Chronicle; 12/26/2008.

4. Next, the program explores the death of a blogger who posted under the name “Tanta.” An expert on economic matters who foretold much of the fiscal unpleasantness that has transpired, her death was certainly timely for the malefactors involved in its creation.

“The blogger Tanta, an influential voice on the mortgage collapse, died Sunday morning in Columbus, Ohio.

Tanta, who wrote for Calculated Risk, a finance and economics blog, was a pseudonym for Doris Dungey, 47, who until recently had lived in Upper Marlboro, Md. The cause of death was ovarian cancer, her sister, Cathy Stickelmaier, said.

Thanks in large part to Tanta’s contributions, Calculated Risk became a crucial source of prescient analysis as the housing market at first faltered, then collapsed and finally spawned a full-blown credit crisis.

Tanta used her extensive knowledge of the loan industry to comment, castigate and above all instruct. Her fans ranged from the Nobel laureate Paul Krugman, an Op-Ed columnist for The New York Times who cited her in his blog, to analysts at the Federal Reserve, who cited her in a paper on ‘Understanding the Securitization of Subprime Mortgage Credit.’ . . .”

“Doris Dungey, Prescient Financial Blogger, Dies at 47” by David Streitfeld; The New York Times; 11/30/2008.

5. Much of the program focuses on the Bernard Madoff scandal, the biggest Ponzi scheme in history. Dubbed “Lee Harvey Madoff” by Mr. Emory, Madoff’s claim to be the only one involved is highly dubious.

“Like the conclusion that Lee Harvey Oswald was a lone gunman, the theory that Bernard Madoff acted alone is hard to swallow.

True, Madoff has allegedly confessed that he perpetrated a massive fraud that left behind $50 billion in losses; and he claimed to have done this all alone.

But this is a man who kept false records, sent bogus documentation, bilked investors for billions, lied for years to friends and knowingly harmed charities. It’s within the realm of acceptable behavior to cast a jaundiced eye upon his confession. . . .”

“Did Madoff Act Alone?” by Katie Benner; money.cnn.com; 11/30/2008.

6. The suspicious “suicide” of a Madoff investor from France raises suspicions. Part of the French power elite, de la Villehuchet invested money with Madoff on behalf of wealthy European clients. In this context, it is important to understand the decisive influence of the Bormann capital network on the French power elite. FTR #305 goes into this at some length.

“But after losing more than $1 billion of his clients’ money to Bernard Madoff, Rene-Thierry Magon de la Villehuchet had enough. He locked the door of his Madison Avenue office and apparently swallowed sleeping pills and slashed his wrists with a box cutter, police said.

A security guard found his body Tuesday morning, next to a garbage can placed to catch the blood. . . The bloody scene marked a grisly turn in the Madoff scandal in which money managers and investors were ensnared in an alleged $50 billion Ponzi scheme. De la Villehuchet is believed to have lost about $1.4 billion to Madoff.

No suicide note was found, said NYPD spokesman Paul Browne.

De la Villehuchet, 65, was an esteemed financier who tapped his upper-crust European connections to attract clients. It was not immediately clear how he knew Madoff or who his clients were.

He grew increasingly subdued after the Madoff scandal broke, drawing suspicion among janitors at his office Monday night when he demanded that they be out of there by 7 p.m. Less than 13 hours later, his body was found. . . .De la Villehuchet (pronounced veel-ou-SHAY) comes from rich French lineage, with the Magon part of his name referring to one of France’s most powerful families. The Magon name is even listed on the Arc de Triomphe in Paris, a monument commissioned by Napoleon in 1806.

‘He’s irreproachable,’ said Bill Rapavy, who was Access International’s chief operating officer before founding his own firm in 2007.

De la Villehuchet’s firm enlisted intermediaries with links to wealthy Europeans to garner investors. Among them was Philippe Junot, a French businessman and friend who is the former husband of Princess Caroline of Monaco, and Prince Michel of Yugoslavia. . . .”

“Suicide Madoff Investor Was ‘Honorable Man'” [AP]; msnbc.msn.com; 12/24/2008.

7. De la Villehuchet’s biceps were lacerated. That’s quite a miss for someone trying to cut his wrists.

” . . . His wrists and his left biceps were slashed, said Paul Browne, a New York police spokesman. A wastebasket had been placed under his bleeding biceps, Browne said. . . .”

“Financier Is Found Dead in Madoff Aftermath” by Zachary Kouwe and Michael Wilson; International Herald Tribune; 12/24/2008.

8. Among the wealthy investors who were involved with Madoff were the Thyssen family, long time supporters of Hitler and principals in the Underground Reich.

“Thyssen Family. Source sends the following:

Thybo Investments grew out of a family office for Thyssen. They have been in fund of funds it seems since 1989.

Thybo International is a “proper” fund of fund but it’s newer share class G invests only in one manager – and i’m 99% sure it’s Madoff as the returns are almost the same. Some more info:

The fund started in Jan 2007.
Ernst & Young. Luxembourg are the auditors.
UBS Luxembourg is the administrator. . . .”

“Bernie Madoff’s Victims: The List”; Investorshub.advfn.com; 12/14/2008.

9. Whistleblower Harry Markopolos stated that he feared for his safety and that of his family because of the fact that he alerted the SEC about Madoff years in advance of the breaking of the scandal–to no avail. Perhaps he knew that his “biceps” might become “lacerated” as well!

“The man who tried unsuccessfully for almost a decade to spur federal securities regulators to investigate Bernard L. Madoff did not initially disclose his own identity to regulators because he feared for his life, according to testimony he has apparently prepared for a Congressional hearing Wednesday morning. . . .”

“Madoff Witness Tells of Fear for Safety” by Diana B. Henriques; The New York Times; 2/3/2009.

10. Then Attorney General Michael Mukasey recused himself from the case because his son Mark represents Frank DiPascali, one of the principals in the case.

” . . . The case took another twist Wednesday when the Justice Department said that Atty. Gen. Michael B. Mukasey had recused himself from the Madoff probe. Mukasey’s son, Mark Mukasey, is a defense lawyer representing one of the officers at Madoff’s firm. . . .”

“SEC Failures Spur Calls for Agency Overhaul” by Jim Puzzanghera and Walter Hamilton; Los Angeles Times; 12/18/2008.

11. Much of the money appears to have gone “offshore” as Lucy Komisar puts it. Swiss banks are also coming into focus.

” . . . Now, as the links between Bernard L. Madoff and elite private banks like Geneva-based Union Bancaire Privée emerge, this well-polished reputation has been tarnished by the $50 billion Ponzi scheme that Mr. Madoff has been arrested for and accused of running.

L’Affaire Madoff, as it has become known here and in Geneva, has cast an unwanted spotlight onto the normally shadowy world of private bankers in Switzerland and other cozy hiding places of offshore wealth, like the Cayman Islands and Luxembourg. . . .”

“Madoff Dealings Tarnish a Private Swiss Bank” by Nelson D. Schwartz; The New York Times; 12/23/2008.

12. One of the interesting personages involved with Madoff was John J. McCloy, son of Warren Commission member, U.S. High Commissioner for Germany and architect of the Black Eagle Fund John J. McCloy.

” . . . ‘As we know, Walter’s success came after several thin years,’ wrote John J. McCloy, a banker from Greenwich who described himself and his wife, Laura, as the Noels’ ‘best friends for more than 30 years,’ in May in a letter recommending the Noels to membership in a private club. . . .”

“In Fraud Case, Middlemen in Spotlight” by Eric Konigsberg; The New York Times; 12/16/2008.

13. Another significant personage allegedly associated with Madoff is former SEC head and Carlyle Group associate Arthur Levitt.

” . . . Ex-Securities and Exchange Commission boss Arthur Levitt yesterday fired back at critics trying to lay at his feet some of the blame for the Bernie Madoff scandal, saying he wasn’t asleep at the switch.

‘At this point, I don’t see any evidence that the SEC dropped the ball,’ Levitt, who’s now an adviser to private-equity shop Carlyle Group, told The Post.

The 78-year-old Levitt also denied allegations that he had a chummy relationship with Madoff, who last week was arrested on charges of having masterminded a $50 billion Ponzi scheme that has touched everything from hedge funds to charities to European banks.

Some have suggested that Levitt and Madoff were close enough during the eight years that Levitt was SEC chairman that it might have skewed his oversight of the company. Additionally, Levitt said he’s never been ,an investor in Madoff’s advisory business. . . .”

“Madoff-SEC’s Very Cozy Tie?” by Frank James; chicagotribune.com; 12/17/2008.

14. Many individuals and institutions that invested in Israeli infrastructure were severely damaged by Madoff as well.

” . . . Many of the investors allegedly swindled by Wall Street Journal money manager Bernard Madoff are, like him, Jewish, and for many of them, contributing to Jewish causes is a crucial part of their culture. The effect of their losses on the Jewish philanthropic world is being seen as nothing less than catastrophic. . . . Experts estimate that about 5 percent of all money donated by American Jews–and 20 percent donated to Jewish causes–goes to Israel, where hospitals, universities, synagogues and other non-profit organizations depend on American philanthropy. While these institutions had been suffering from the economic downturn well before the Madoff  scandal broke, his arrest and the collapse of his investment firm has hastened the end for some.

One foundation that contributes to many causes in Israel, the Chais Family Foundation, has had to shut down due to its losses with Madoff. ‘ We are now informing all those wonderful projects that there will be no more funds available,’ said its president, Avraham Infeld, in Israel.”

“Jewish Charities Lose Big with Madoff Investments” [AP]; San Francisco Chronicle; 2/17/2008; p. C2.

15. One of the biggest losers in the Madoff affair was the non-profit of Holocaust survivor and  Nobel-Prize winner Elie Wiesel.

” . . . Wiesel, whose charitable foundation was wiped out by Madoff, has until now mostly kept quiet about the alleged $50 billion Ponzi scheme. But today, the Holocaust survivor and Nobel Peace Prize recipient spoke passionately about his betrayal by Madoff, whom he referred to variously as ‘a crook, a thief, a scoundrel,’as well as a ‘swindler’ and ‘evil.’

Wiesel acknowledged that in addition to having lost his foundation’s assets, he lost his personal wealth to Madoff. ‘All of a sudden, everything we have done in 40 years—literally, my books, my lectures, my university salary, everything—was gone,’ he said during a panel discussion hosted by Condé Nast Portfolio.

His foundation, the Elie Wiesel Foundation for Humanity, lost substantially all of its $15.2 million in assets to Madoff; including his personal investments, total losses may be as high as $37 million. ‘We gave him everything, we thought he was God, we trusted everything in his hands,’ Wiesel said. . . .”

“Wiesel ‘Lost Everything’ to Madoff”; Yahoo.com; 2/27/2009.

16. The collapse of the Madoff operation has fed anti-Semitism.

” . . . Remember the spike in anti-Semitism after the financial meltdown? This will be similar, but with the potential to be a lot more damaging because Madoff is actually being charged criminally. In the above article, Rob Eshman points to the comments left on the site dealbreaker.com, which identified some of Madoff’s investors. Here’s a few of the remarks that will give many Jews chills:

“LOL Jews!…“
“Looks like a lot of Jews might be converting to Muslim soon….in prison….“
“Now that the JEW has been thrown down the well, is our country free? LETS THROW A BIG PARTY!!!“

I remember that last line. Only it’s funnier as a joke, coming from Borat. . . .”

“Bernie Madoff Gives Ammo to Anti-Semites Everywhere” by Brad A. Greenberg; The Jewish Journal; 12/12/2008.

17. Mr. Emory opines that the Madoff operation may well have been a Bormann front. The Thyssens may well have been among the Madoff clients that got money out of the operation. The French elite may well have invested as well. In this context, one should not lose sight of the fact that the Bormann network uses Jews as front men. There are a number of things to be gained from such a gambit. First, a Nazi money laundering operation would be superbly camouflaged by Jewish front operators. Secondly, the money paid by the Bormann network to the support of Israel helps buy silence on the part of would-be Israeli Nazi hunters. Thirdly, it can lend support to the anti-Semitic theory that Jews “control the financial system.” For more about “Bormann Jews” check out FTR #305.

18. Closing with an apocalyptic vision, the broadcast notes an Army War College report indicating that an economic collapse might all but destroy the United States.

“The United States could be sleep-walking into its next crisis, a military report said.

The report by the U.S. Army War College’s Strategic Institute, said that a defense community paralyzed by conventional thinking could be unprepared to help the United States cope with a series of unexpected crises that would rival the Al Qaida strikes in 2001, termed a “strategic shock.”

The report cited the prospect of the collapse of a nuclear state leading to massive unrest in the United States, Middle East Newsline reported.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” the report, authored by [Ret.] Lt. Col. Nathan Freir, said.”

“Doomsday: Report Warns of ‘Strategic Shock’ Leading to Massive Unrest”; World Tribune; 12/15/2008.


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