Meanwhile, back at the ranch…

Well thank god Dubai has stepped in an bought a sizable chunk of Citigroup, otherwise we would have a new Enron on our hands. In the fine tradition of making sure to steal a million purses because then its just a statistic, Citigroup used some rather shady account maneuvers. In fact, what they have done is outright illegal.

The whole shame would have been exposed, once Citigroup was exposed on the finical sheets. Of course, Dubai helped out, buying 5% of the Citigroup for the discount price of a mere $7.5 billion. This was more of a shout out to their boy in Saudi Arabia, a certain sheik who already owns a lot of the supposedly American corporation.

So, what the fuck happened?

Credit crisis reveals widespread accounting manipulation by top US banks

By Joe Kay, World Socialist Web Site

http://www.inteldaily.com/?c=1…

Chief among the “economic realities” behind Citigroup’s announcement is the credit crisis brought on by record defaults on home mortgages in the United States. Citigroup has already announced a $5 billion write-down related to home mortgages, which provoked the resignation of its CEO Charles Prince. It is expected to announce further losses of up to $11 billion in the fourth quarter.

The bank’s exposure could be much greater, however, as it may be forced to acknowledge losses that it had previously kept off its books. An article by Wall Street Journal reporter David Reilly on Monday (“Citi’s $41 Billion Issue: Should it put CDOs On the Balance Sheet?”) noted that the bank faces an “immediate threat” from troubles involving off-balance-sheet entities called collateralized debt obligations (CDOs)

The Journal notes that Citigroup “was one of the biggest arrangers of CDOs-products that pools debt, often mortgage securities, and then sell slices with varying degrees of risk.” The bank may be forced to bring these CDOs onto its balance sheet. “If Citigroup had to include an additional $41 billion in CDO assets on its books,” the Journal noted, “that could potentially spur a further $8 billion in write-downs, above and beyond those already signaled, according to a report earlier this month by Howard Mason, an analyst at Sanford C. Bernstein.”

Throughout the housing boom of the past several years, the CDOs, and related entities known as structured investment vehicles (SIVs), made substantial returns. SIVs are also off-balance-sheet entities, but are more open-ended, investing in other risky securities, including CDOs. Even those entities closely associated with banks have been nominally independent. The “independence” of these entities has been entirely fraudulent, however. They have been critical for the banks’ bottom line as sources of lucrative fees, buying up mortgages and other assets from their parent banks.

Ah yes, massive looting based on spreadsheets. It’s like death by spreadsheet, except it transfers wealth from the average citizen to right elite. And since the rich elite write the laws, everyone involved should get away with this in flying colors. One thing I have learned in my dealings with Wall Street is this: When you steal, steal billions. It will be so overwhelming people will just look the other way.

I wish I could run my finances like this, with my collateralized debt obligations not affecting my Quicken. Imagine if you could just pretend your mortgage just didn’t exist! And you could just keep on trucking like you never had to pay it back. Yeah, must be sweet being part of the elite.

So why the fuck is this illegal?

Commenting on the way that major banks were able to shift their risks off their balance sheets, New York Times economic writer Floyd Norris noted in an article published November 16 (“As Bank Profits Grew, Warning Signs Went Unheeded,”), “Instead of being suspicious, many analysts believed that banks had found a new way to prosper. Making a loan and keeping it on the balance sheet until it was repaid was so old-fashioned. It was far better to collect fees for arranging transactions and passing on the risks to others.”

In fact, many of these risks were not really transferred. Norris notes that the banks often made arrangements (called “liquidity puts”) with the purchasers of their CDO securities that would allow the purchasers to sell the CDO securities back to the bank if there was no other market. “That risk may have seemed slight when the securitization market was booming. But now the banks are being forced to buy back securities for more than they are worth.”

In essence, the puts allowed the banks to sell CDOs and other assets without really selling them. Use of the puts actually increased as the housing market began to unravel, as it was necessary to provide the guarantees in order for the banks to get investors to buy mortgage-backed securities whose value was increasingly in question.

The legality of these operations is highly dubious, since part of the intention appears to have been to mislead investors regarding the financial health of the company. Even if the operations by banks were legal, the fact that they were not reported to investors was likely a violation of accounting rules.

According to Norris, Citigroup and Bank of America were among those banks that used “liquidity puts” heavily.

Oh, so wow. Some ultra-rich dudes lied to average investors so they could loot them selling snake oil in the form of fake balance sheet! I am not sure, but that sounds like racketeering. Of course, it’s white color, so the worst that will happen to dudes like Prince from Citigroup is a mandatory 6 month stay at Club Fed where he will have to row against those dudes from Yale in the prison games.

And they will get to keep the money.

Even Kenneth Lay died with the money.

Speaking of which, where is all of Lay’s money now?

Exactly.

So, Dubai bails Citigroup out, and that helps the stock market recover, so this story will be buried. And buried deep.

Could be worse, there could be a rogue bailout in the works!

Schumer urges scrutiny of Federal Home Loan bank’s advances to troubled lender Countrywide



http://www.msnbc.msn.com/id/21…

WASHINGTON – Sen. Charles Schumer on Monday urged a federal regulator to examine whether loans to troubled Countrywide Financial Corp. put at risk a network of regional government-sponsored lenders.

Countrywide, plagued by a surge of defaults among loans made to borrowers with weak credit, is the largest borrower from the Federal Home Loan Bank of Atlanta, with $51 billion, or 37 percent of the bank’s total advances as of Sept. 30, according to a Securities and Exchange Commission filing.

Like mortgage finance giants Fannie Mae and Freddie Mac, the federal home loan banks are government-chartered enterprises, benefiting from the widespread assumption on Wall Street that the federal government would bail them out in the event of a crisis.

That implicit backing enables the home loan banks as a group _ made up of 12 individual cooperatives _ to borrow cheaply on global markets by issuing hundreds of billions of dollars in top-rated securities backed by mortgages.

So basically, instead of bailing the banks out directly, they are using a middle man, the Federal Home Loan Bank system. See, if the Bank of Atlanta went down, they would go down for basically asinine business practices. Free trade would see their doors closed. So instead, there is a rogue bailout by the Federal Home Loan Bank system. And why funds the Federal Home Loan Bank system?

That’s right! YOU!

So, even when there is not a bail out, there is a bail out. And this is the only one that has come to light.

So while you spend your wheels about civility, the system is systematically looting you.

And you are none the wiser.