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FTR #641 Were We Controlled? (Part II), The Collapse of Bear Stearns

Controlled demolition?MP3: Side 1 | Side 2
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INTRODUCTION: Beginning with disturbing analysis of the apparent sabotage of investment bank Bear Stearns, this program highlights apparent maneuvering in the world of big business and high finance by corporate elements associated with the global Nazi money machine and the political interests served by it. Sending shock waves through an already-troubled financial landscape, the collapse of Bear Stearns in March of 2008 may well have been deliberately engineered by forces hostile to the firm. Among the possible co-conspirators in this gambit are three hedge funds and Deutsche Bank, a principal element of the Bormann capital network. Presentation of the destruction of Bear Stearns–in what one company insider described as an assault by “the shorts”–is set against the background of the short-selling operations associated with the assassination of President Kennedy and the attacks of September 11, 2001. Among the players in the events of 11/22/1963 was the giant German/Argentine commodities trading firm of Bunge, which recently increased its global profile in the marketing of corn syrup, a key ingredient in the production of many foodstuffs. The rise in the price of essential commodities such as corn–driven by market speculation– threatens much of the world with dire hardship and even starvation. Concluding the program, the discussion notes the combining of the I.G. Farben-derived Fischer-Tropsch Process with the culturing of algae, in order to consume the carbon dioxide generated by that fuel-synthesizing technique.

PROGRAM HIGHLIGHTS INCLUDE: The employment of a key former Bear Stearns employee by Deutsche Bank; suspicions on the part of Bear Stearns Personnel that the former employee may well have had much to do with the sabotage that brought down Bear Stearns; the role of “novation requests” in the destruction of Bear Stearns; a recent ruling by the SEC that may well have resulted from the attack on Bear Stearns; the beneficial capital profile of Deutsche Bank and possible co-conspirator Credit Suisse in the wake of the collapse of Bear Stearns; a recap of the torpedoing of Wall Street on 11/22/1963.

1. Analyzing the collapse of Bear Stearns, the program sets forth information strongly suggesting that the firm’s demise was deliberately engineered by hostile forces that profited from the company’s death. Against the background of the apparent sabotage of Bear Stearns, the second side of the broadcast recaps the torpedoing of Wall Street on the morning of 11/22/1963, an event that was greatly exacerbated by the assassination of President Kennedy that afternoon.

Contemplating the death of Bear Stearns, one might consider: the profits derived from the caper by its engineers; the potential for widespread destruction of the U.S. financial infrastructure by gambits of this type; the potential for intimidation of individuals and institutions that might consider resisting the will of the architects of the operation. As discussed below, factual and historical evidence points in the direction of the Underground Reich and its Bormann economic/capital network as the most likely culprit in this affair.

“ . . . It was then, questioning his trading desks downstairs, that [Bear Stearns Chief Financial Officer Sam] Molinaro first heard the rumor: Bear was having liquidity troubles, Wall Street’s way of saying the firm was running out of money. Molinaro made a face. This was crazy. There was no liquidity problem. Bear had about $18 billion in cash reserves. Yet the whiff of gossip Molinaro heard that morning was the first tiny ripple in what within hours would grow into a tidal wave of rumor and speculation that would crash down upon Bear Stearns and, in the span of one fateful week, destroy a firm that had thrived on Wall Street since its founding, in 1923. The fall of Bear Stearns wasn’t just another financial collapse. There has never been anything on Wall Street to compare to it: a ‘run’ on a major investment bank, caused in large part not by a criminal indictment or some mammoth quarterly loss but by rumor and innuendo that, as best one can tell, had little basis in fact. Bear had endured more than its share of self-inflicted wounds in the previous year, but there was no reason it had to die that week in March. What happened? Was it death by natural causes, or was it, as some suspect, murder? More than a few veteran Wall Streeters believe an investigation by the Securities and Exchange Commission will uncover evidence that Bear was the victim of a gigantic ‘bear raid’—that is, a malicious attack brought by so-called short-sellers, the vultures of Wall Street, who make bets that a firm’s stock will go down. It’s a surprisingly difficult theory to prove, and nothing short of government subpoenas is likely to do it. Faced with a thicket of lawsuits and federal investigations, not a soul in Bear’s boardroom will speak for the record, but on background, a few are finally ready to name names. . . .”

“Bringing Down Bear Stearns” by Bryan Burrough; Vanity Fair; August/2008; p. 108.

2. Despite the fact that Bear had strong capital liquidity, a “run” on the institution was started by hedge funds placing “novation“ requests (explained in the text that follows).

“. . .the first to pull their money from Bear were several major hedge funds. So Molinaro and his men canvassed the repo lenders, which give banks billions of dollars in overnight loans that have to be renewed each day. However, Molinaro found that all planned to ‘roll over’ Bear’s loans the next morning. ‘Nobody was cutting us off,’ says a Bear executive involved in the events. ‘There was a lot of chatter though. The hedge funds were agitated. That was concerning, because they could influence the outcome by pulling out cash balances. The same day, Bear executives noticed a worrisome development whose potential significance they would not appreciate for weeks. It involved an avalanche of what are called ‘novation’ requests. When a firm wants to rid itself of a contract that carries credit risk with another firm, in this case Bear Stearns, it can either sell the contract back to Bear or, in a novation request, to a third firm for a fee. By Tuesday afternoon, three big Wall Street companies—Goldman Sachs, Credit Suisse, and Deutsche Bank—were experiencing a torrent of novation requests for Bear instruments. Alan Schwartz thought it strange that so many requests were being channeled to the same three firms, but did his best to assure them all that Bear remained on sound footing. ‘Deutsche Bank we talked to, and they said, ‘We’re getting killed!’’ says a Bear executive. “We said, ‘We’ll take you out of your positions,’ and we did. But it was too late.’ . . .”

Ibid.; p. 151.

3. A major culprit and [perhaps] beneficiary of the apparently-engineered demise of Bear Stearns appears to have been Deutsche Bank and/or persons and elements within that institution. Note in this context that Deutsche Bank–like the other German core companies and financial insitutions–are part of the Underground Reich/Bormann capital network. Three hedge-funds have been named by former Bear Stearns personnel as possible suspects/beneficiaries as well. (For more information about the Bormann capital network, read Martin Bormann: Nazi in Exile by Paul Manning.) Note that a former Bear Stearns executive occupied a key position in Deutsche Bank at the time the devastating rumor-mongering began. Credit Suisse, another Bormann network-connected institution was also a vehicle for the “novation” requests that were central to the demise of Bear Stearns. At the conclusion of this description, read about the relatively positive capital positions of both Deutsche Bank and Credit Suisse as the dust from the Bear Stearns collapse settles on the troubled international financial landscape.

Note, also, that several hedge funds and Goldman Sachs are also viewed with suspicion by former Bear Stearns personnel.

“ . . . Even among the circle of top executives who lived through that frantic week, no two people see the crisis at Bear the same way. Many, though, agree with some version of the scenario Alan Schwartz has come to believe. Yes, Schwartz tells friends, mistakes were made. Yes, the firm was financially weakened. But the more he learned about what had happened behind the scenes that week, the more Schwartz came to believe that Bear’s collapse was a pre-meditated attack orchestrated by market speculators who stood to profit from its demise. According to those Schwartz has briefed, these unnamed speculators—several now being investigated by the S.E.C.—employed a complex scheme to force a handful of major Wall Street firms to hold up trades with Bear, then leaked the news to the media, creating an artificial panic.’Something happened Monday that triggered this mess,’ says one Bear executive who has spoken to the S.E.C. ‘It was as though a computer virus had been launched. Where the hell was this coming from? Who started it? We tried, believe me, but we could not track it down. We know lots of big hedge funds were spreading rumors, but how can you pursue that? Only the S.E.C. can, and they’re all over this.’

At the heart of this theory are the ‘novation’ requests that began to pick up steam that Tuesday and Wednesday. As Bear executives later analyzed these trades, they discovered the overwhelming majority had been made with just three firms: Goldman Sachs, Credit Suisse, and Deutsche Bank. Schwartz came to believe this was no accident. In his mind, the flood of novation requests was designed to force at least one of the three firms to put a temporary halt to accepting them, which is what happened: Goldman and Credit Suisse did. News of that halt not only swept Wall Street trading floors, it appeared to gain credence the next day when David Faber asked Schwartz about it on CNBC. ‘I like Faber, he’s a good guy, but I wonder if he ever asked himself, ‘Why is someone telling me this?’?’ a top Bear executive asks. ‘There was a reason this was leaked, and the reason is simple: someone wanted us to go down, and go down hard.’ (Faber says his reporting was accurate, and arose from talks with a source he has known for 20 years.)

But who? According to one vague tale, initially picked up at Lehman Brothers, a group of hedge-fund managers actually celebrated Bear’s collapse at a breakfast that following Sunday morning and planned a similar assault on Lehman the next week. True or not, Bear executives repeated the story to the S.E.C., along with the names of the three firms it suspects were behind its demise. Two are hedge funds, Chicago-based Citadel, run by a trader named Ken Griffin, and SAC Capital Partners of Stamford, Connecticut, run by Steven Cohen. (A spokesman for SAC Capital said the firm ‘vehemently denies’ any suggestion that it played a role in Bear’s demise. A Citadel spokeswoman said, ‘These claims have no merit.’) The third suspect, at least in Bear executives’ minds, is one of its main competitors, Goldman Sachs. (‘Goldman Sachs was supportive of Bear Stearns,’ says a Goldman Sachs spokeswoman. ‘There is no foundation to rumors that we behaved otherwise.’)

Several Bear executives also named an individual they believed was spreading rumors about them that week, Jeff Dorman, who briefly served as global co-head of Bear’s prime brokerage business until resigning to take a similar position at Deutsche Bank last summer. ‘We heard Dorman was saying things last summer,’ says a Bear executive. ‘At the time we reached out to Deutsche Bank and told them he better stop it.’ (Asked about the allegation, a Deutsche Bank spokeswoman acknowledged that Bear had sent its executives a letter last August asking Dorman not to solicit its clients, as he had agreed upon leaving Bear. Deutsche Bank replied that he wasn’t. The exchange didn’t explicitly address what Dorman might have been saying about the firm, nor would the spokeswoman.) . . . Maybe the S.E.C. will figure out whether Bear was murdered. But maybe it won’t. Even those who believe the firm was the victim of a predatory raid have their doubts it can ever be proved.

‘Even with subpoena power, I’m not sure the S.E.C. will get to the bottom of this, because the standard of proof is just so difficult,’ says a vice-chairman at another major investment firm. ‘But I hope they do. Because you can look at this as just another run on a bank or as a seminal point in the financial history of this country that could bring about a change, perhaps a drastic change, in the way we govern financial markets. If there is a solution to this kind of thing, it must be found in the roots of what happened at Bear Stearns. Because otherwise, I can guarantee you, it will happen again somewhere else.’

Ibid.; pp.155-156.

4. The significance of Deutsche Bank to the Bormann/Underground Reich capital network can be briefly, concisely understood by examining an excerpt from the FBI’s file on Bormann. Bormann’s FBI file revealed that he had been banking under his own name in New York for some time.

” . . . The file revealed that he had been banking under his own name from his office in Germany in Deutsche Bank of Buenos Aires since 1941; that he held one joint account with the Argentinian dictator Juan Peron, and on August 4, 5 and 14, 1967, had written checks on demand accounts in first National City Bank (Overseas Division) of New York, The Chase Manhattan Bank, and Manufacturers Hanover Trust Co., all cleared through Deutsche Bank of Buenos Aires. . . . “

Martin Bormann: Nazi in Exile by Paul Manning; Copyright 1981[HC]; Lyle Stuart Inc.; ISBN 0-8184-0309-8; p. 205.)

5. Much of the second side of the program recapitulates information from FTR#327. (The book Were We Controlled?–originally published in 1967–has been republished and is available. The material from FTR#327 is culled from that book.) On the morning of 11/22/1963, a complex maneuver involving the Argentine/German commodities trading giant Bunge devastated Wall Street. Centered on the apparently deliberate destruction of Anthony “Tino” De Angelis’s Allied Crude Vegetable Oil Refining Corporation, the gambit was effected through short selling and netted the German/Argentine architects of the operation a half-billion dollars in profits–garnered through short-selling. (That half-billion is in early 1960’s dollars, a lot more money at the time.) Once again, the Bormann capital network appears to have been the executor of that coup, followed within hours by the assassination of President Kennedy, which forced the closing of the New York Stock Exchange for the first time in history. As discussed in–among other programs–AFA#37 and FTR#120, Nazi elements linked to the Bormann network were centrally involved in the assassination of President Kennedy.

Note in the above context that the New York Stock Exchange was also closed following the attacks of 9/11/2001 and the stocks of numerous companies were–once again–the focal points of suspicious short-selling in the run-up to the attacks. This short selling is described in the aforementioned FTR#327. Nazi and Bormann network elements were involved in the 9/11 attacks as well. For more about Nazi/Bormann links to the 9/11 attacks, see–among other programs–FTR#’s 456, 513, 530.

One should not fail to note that Bunge–a central element of the financial gambit of 11/22/1963–has benefited from the rise in food prices, and is expanding its influence and infrastructure.

“Bunge Ltd., the world’s largest oilseed processor, agreed to buy Corn Products International Inc. for $4.2 billion in stock to add corn-based sweeteners as demand increases for soft drinks and processed foods in China and India.

Bunge will pay the equivalent of $56 for each share of Corn Products, White Plains, New York-based Bunge said today in a statement. That’s 31 percent more than Westchester, Illinois- based Corn Products’ closing price of $42.90 on June 20. Bunge also will assume about $414 million of Corn Products’ debt.

Bunge Chief Executive Officer Alberto Weisser, 52, will gain refining operations that sell high-fructose corn syrup and food additives to customers including Coca-Cola Co. and PepsiCo Inc. The addition gives Bunge a portfolio of projects similar to U.S. competitor ADM, which derived 35 percent of its operating profit from corn processing last year.

‘Bunge will become a more formidable competitor in global grain processing by broadening the products it sells to customers, strengthening customer relationships, driving down costs by combining logistics and risk management, and extending Bunge’s reach into new markets,’ Credit Suisse analyst Robert Moskow said today in a note.

Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Moskow said. . . .”

“Bunge Agrees to Buy Corn Products for $4.2 Billion” by Mark Herlihy and Choy Leng Leong; Bloomberg News Service; 6/23/08.

6. The recent run-up in global food prices may well be the result of speculation. Noting the decisive position of the Bormann/Underground Reich economic engine in the global economy and capital markets, it is worth contemplating the role of that network in the escalation of commodity prices and those of foodstuffs in particular. In addition to the enormous generation of profits, one should consider the effect of a significant rise in the prices of essentials–food, heating and cooking energy, medical care and the other goods and services requisite to the sustenance of existence.

If they become too high, the plight of the less fortunate will become dire indeed.

“Unless you live in a bubble, like George Bush, who expressed total surprise in February when a reporter told him gas was nearing $4 a gallon, you’ve been socked hard in the pocketbook by rising prices. It’s most evident at the supermarket—according to the Bureau of Labor Statistics, the cost of a gallon of milk has jumped 17 percent and a dozen eggs have leaped 40 percent in the last year and a loaf of bread is up nearly 30 percent in the last two years. At the gas pump the national average for regular gasoline notched a record $3.63 a gallon in early May, double from 2005, and it looks set to break the $4 barrier this summer.

As dramatic as the consumer price increases are, the frenzy on commodity exchanges, where traders negotiate “futures” prices (and related financial products known as “options”) is even more pronounced. The Commodity Futures Trading Commission (CFTC), in an unprecedented public webcast, held hearings on April 22 examining why agricultural commodity prices are skyrocketing. It noted, “In the last three months, the agricultural staples of wheat, corn, soybeans, rice and oats have hit all-time highs.”

Over the last year, wheat prices are up 95 percent, soybeans are up 88 percent, corn is up 66 percent, and Thai B grade rice, the world’s trading benchmark, ended 2007 at about $360 a metric ton. It hit $760 at the end of March and continued its dizzying climb to $1,080 less than a month later. On top of that, crude oil futures have more than doubled since January 2007, coming within a hair of $120 a barrel this April.

One striking aspect of the rising commodity prices is that when charted, they look similar to the Internet stock mania a decade ago or the charts of soaring (and plunging) home prices of late. This is no mere coincidence. One of the main factors in accelerating commodity and food costs is financial speculation. The same Wall Street banks and hedge funds that gave us the stock bubble and the housing bubble are reportedly throwing billions of dollars at the commodity markets, betting they can make a fast buck. One analyst interviewed by the Wall Street Journal estimates that “investors have poured roughly $175 billion to $200 billion into commodity-linked index funds since 2001.” The Journal explained, “As with energy markets a few years ago, pension funds and hedge funds have flocked to grain investments as the supply of farm acreage and crop output shrinks relative to the growing global population and new demands for crops for biofuels and food. Many such investors make predominantly bullish bets,” that is, expecting the price to rise.

The daily fluctuations on commodity exchanges are at times greater than used to occur in an entire year. On February 25 alone, at the Minneapolis Grain Exchange, one type of wheat jumped 29 percent. On a single day in March, “the price of cotton jumped 15 percent despite reports showing cotton supplies were at near record highs,” according to the Toronto Globe and Mail. During the CFTC hearings, commodity producers laid the blame for soaring prices at the speculators’ door. A representative of the National Grain and Feed Association testified, “Sixty percent of the current [wheat] market is owned by an index fund. Clearly that’s having an impact on the market,” while a cotton producer stated, “The market is broken, it’s out of whack.”

If there is a main culprit, it is the market. There is a lot of talk about growing consumption and falling supplies for both food and energy, but most of the data contradicts these claims. For example, despite a drought in Australia, ice and snow storms throughout China, and a cold, wet winter in the American breadbasket, the UN Food and Agricultural Organization projects global cereal production for 2007-2008 to increase by 92 million tons to 2.102 billion tons. But almost all this increase is from a record U.S. corn harvest, which is feeding the market for biofuels.

In essence, large speculators ranging from Wall Street banks and hedge funds to oil companies and agribusiness giants are making a killing from trading commodities. . . .”

“How Speculators Are Manipulating & Profiting from the Global Food Crisis” by A.K. Gupta; Z Magazine; 6/2/2008.

7. Bio-fuels and the Fischer-Tropsch Process, discussed in several previous programs, may be joined in energy development programs to come. For more information about the Fischer-Tropsch Process, the Standard-I.G. Agreement of 1929 that licensed it and its recent resuscitation and application, see–among other programs: FTR#’s 385. 506. 552.

” . . . There is broad consensus throughout the industry that, longer-term, algae represent the optimum solution to aviation’s fuel needs. A number of basic problems need to be solved, such as ensuring enough light gets to every part of an algae tank to enable all the cells to grow properly; and drying algae cells sufficiently to enable the oil they contain to be extracted and cracked into jet fuel.

But Boeing and Airbus are confident these problems can be solved — and the benefits that algae offers as a “third-generation biofuel” are immense. Algae can produce an oil yield 15 times that of second-generation biofuel plants: The world’s entire airliner fleet could be powered from a cultivated area just the size of West Virginia, or Belgium, says Boeing.

Additionally, because algae can be grown in tanks anywhere, biofuel-producing algae farms could be sited next to facilities producing jet fuel from coal or natural gas using the Fischer-Tropsch process. These “coal-to-liquid” or “gas-to-liquid” processes generate large amounts of CO2 from fossil fuels, making them unsuitable as sustainable fuel sources. However, if the CO2 they generate is piped off and used to grow algae in nearby farms, the two forms of fuel production together could create an efficient, carbon-neutral symbiosis for jet fuel production. . . .”

“Biofuels Become Aviation’s Big Focus” by Chris Kjelgaard; Aviation.com; 6/26/2008.

8. A recent ruling by the SEC may well be a response to the “murder” of Bear Stearns.

“The SEC issued its emergency ruling against “naked” short-selling to build investor confidence in market information, SEC Chairman Christopher Cox told CNBC.

“What we are particularly concerned about is the potential for there to be maliciously manufactured, false information that feeds into a run, which is furthered by not legal short selling, but illegal naked short selling,” Cox said.

In a regular short sale, investors sell stock they’ve borrowed, hoping to return the shares later at a lower price and pocket the difference. In “naked” short selling, the investor simply “sells” the stock without ever borrowing any shares.

Cox said “naked” short-selling isn’t illegal, contrary to what some market experts say, so the SEC imposed an emergency rule that prohibits naked selling in the stocks of 19 major financial institutions. . . .”

“SEC’s Cox: ‘Naked’ Short Ban to Restore Confidence”; CNBC.com; 7/16/2008.

9. Both Deutsche Bank and Credit Suisse may be poised to escape the damage done to other financial institutions by the credit crunch and the subprime crisis. Does this have anything to do with the firms’ dealings with Bear Stearns, as described in the Vanity Fair article?

“Deutsche Bank AG has avoided the worst of the banking carnage by pulling off a series of trades that have lightened its load of soured investments. While it still could need to write down assets or raise capital, Germany’s largest bank by market value is positioning itself to be an acquirer in the second half. [Italics are Mr. Emory’s.] . . . On Thursday, Switzerland’s Credit Suisse Group defied analysts’ expectations by posting a 1/2 billion Swiss franc ($1.16 billion) profit after minimal write-downs, which bodes well for Deutsche’s results. The Swiss bank also was able to sell 6.5 billion francs of corporate loans in the second quarter reducing its portfolio to 14.3 billion francs. . . .”

“Deutsche Bank Took Its Pain, But Is It Now Poised to Gain?” by Neil Shah and Carrick Mollenkamp; The Wall Street Journal; 7/29/2008; pp. C1-C2.

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