The Miscreants'

[OutofDate1980]

Did organized crime, Al Qaeda and hostile governments cause the financial crisis ?
The Miscreants’ Global Bust-Out: Preface | Deep Capture

There are folks in the government that believe there is a problem.
"Admiral Dennis Blair, then Director of National Intelligence, articulated in his 2009 report to Congress.

In that report, Admiral Blair stated that there was a “dangerous nexus” between organized crime, terrorist outfits, and some hostile governments. Admiral Blair also stated that organized crime had vastly increased its “penetration of legitimate financial and commercial markets…raising the risk of significant damage to the global financial system.”

The cited source is basically a short book that along with the supporting links will take a good day to read. This is a summary of the points raised.

The method used to wage this war was naked short selling, i.e. selling counterfeit securities, also called phantom stock to create an artificial supply to drive down the price of a targeted security. The SEC has been slow to address the issue and current remedies are still inadequate due to the revolving door between the industry that the SEC regulates and the regulators, which has caused the SEC to be a captured U.S. agency.

The Depository Trust and Clearing Corp (DTCC) manages settlement for the entire U.S. capital market, the DTCC is privately owned. The DTCC is suppose to prohibit selling of shares not owned or borrowed, but has too many loop holes by which organized crime and/or even agents of foreign governments that are hostile to the United States use to create phantom stock. In addition the DTCC appears to be lax in enforcing its own rules and infractions have little or no penalties.

The problem began with Michael Milken and his closest associates “willfully, deliberately, and systematically plundered certain S&Ls.” A principal feature of the Milken operation was a variation on what mobsters refer to as a “bust out.”, i.e. "obtain" a business, load it up with debt, siphon out the cash, and declare bankruptcy.

Milken adopted the “bust out” for "the world of high finance." as follows: "Milken issued junk bonds to finance about a dozen of his closest associates," the bonds were used to finance the takeover of companies. The "new owners" would then extract the companies cash.

Milken associates "traded their bonds amongst each other at stair-stepping prices, in an illegal process known as “daisy-chaining.” to give the appearance of a "liquid market", while Milken's brokerages and fund managers "traded on inside information about these companies" provided by the "new owners". After the "new owners" extracted all the cash, "Milken would cut off access to credit and other traders in his network would attack the companies with waves of short selling." , with no cash and no credit the companies went bankrupt, providing short sellers a fortune.

The “bust out” was later evolved into the “death spiral” PIPEs finance to "finance a company, load it with debt, and then take it down.", but used variation called naked short selling.

Some of Milken's closest associates were themselves members of organized crime or did business with organized crime members. These methods of stock manipulation were soon shared with other nations organized crime groups in conjunction with joint ventures and interests. Many rogue states and terrorist groups use the services of organized crime so the knowledge spread.

Utilizing naked shorts does takes capital, creation or control of brokerage firms, market makers and other financial institutions, so most of the targets were small companies, but with the entry of rogue states, terrorist organizations and other well financed groups, this barrier was no longer a factor so large corporations could be targeted and were during the last financial crisis and continues to be a threat. These criminal/terrorist organizations have learned that naked shorting could be used because large "legitimate" financial institutions that own the DTCC and have captured the SEC use the same methods for their gain and exposure of those using naked shorts would lead to criminal prosecution.

 

[mike114]

No. The Fed, politicians, regulations, FDIC, bankers, brokers and citizens are to blame for this economic crisis.

Let's not forget Fannie and Freddie.

 

[batgeek]

it was George W. Bush's fault. or so i am told.

 

[noah way]

No. The Fed, politicians, regulations, FDIC, bankers, brokers and citizens are to blame for this economic crisis.

Let's not forget Fannie and Freddie.

Wall Street most certainly fits the definition of organized crime.

 

[ElasticNinja]

Did organized crime, Al Qaeda and hostile governments cause the financial crisis ?

No. Greed did.

 

[OutofDate1980]

It appears the same folks that own the Federal Reserve owns the DTCC, but I'm finding it difficult to find information. This company has at least 20 trillion (this is not a typo) in assets. It appears all stocks you think you own is actually in the name of Cede & Co., which is owned by this organization.

It appears wikipedia entry is suspect. Depository Trust & Clearing Corporation - Wikipedia, the free encyclopedia

There were suppose to be hearings on this corporation, In July 2007, Senator Bob Bennett, Republican of Utah, suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are "serious enough" that there should be a hearing on them.[7] The committee's Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing.[7] However, no hearing was ever held, and both Sen. Bennett and Dodd are no longer in the Senate, so any possible investigation seems moot at this point, and no further action on naked short selling is anticipated.

 

[OutofDate1980]

No. The Fed, politicians, regulations, FDIC, bankers, brokers and citizens are to blame for this economic crisis.

Let's not forget Fannie and Freddie.

Not to totally disagree, but there may be additional parties.

Warning: Report is 96 pgs + Appendixes of 5 pgs + Citations of 9 pgs = 110 pgs.

Economic Warfare: Risks and Responses by Kevin D. Freeman

"The report was originally published under contractual arrangement with a sub-contractor of the Department of Defense Irregular Warfare Support Program (IWSP)"

"Serious risks to the global economic system were exposed by the crisis of 2008, raising legitimate questions regarding the cause of the turmoil. An estimated $50 trillion of global wealth evaporated in the crisis with more than a quarter of that loss suffered by the United States and her citizens.

A number of potential causative factors exist, including sub-prime real estate loans, a housing bubble, excessive leverage, and a failed regulatory system.

Beyond these, however, the risks of financial terrorism and/or economic warfare also must be considered. The stakes are simply too high for these potential triggers to be ignored.

The Obama administration‘s recent call for greater financial regulation stipulates to the facts that hedge fund activity has been virtually unregulated and that dark-pool trading, Credit Default Swaps, and naked short selling provide tremendous vulnerabilities in the system. This report concurs with these concerns as recently outlined by the heads of the SEC, US Treasury, and Federal Reserve and provides supporting data.

Beyond that, this report exposes the fact that these vulnerabilities are subject to exploitation not only by greedy capitalists seeking profit but also by financial terrorists, intent on destroying the American financial system."

 

[Drhyde]

The economic crisis may have partially been caused by organized crime, hostile governments, etc., but let's not get too hasty here. The crisis was a slow working pressure cooker of thirty years of failed policies, greed, and unexpected events. Most people think this thing just popped up in the last five years or so.

However, it went back as far as the Carter Administration (with the Community Reinvestment Act), Reagan (starting of financial deregulation, Savings and Loan Scandal), Clinton (repeal of the Glass-Stegall Act, encouraged more loans to poverty range people), Dot Com bubble bursting (caused Greenspan to slash interest rates on Treasury Bonds creating leverage for banks), 9/11 (shut down Wall Street for 6 days and crippled our airline industry into a bailout), Iraq conflict (added to our overall debt needlessly), and THEN the housing bubble bursting (which in the process may have indirectly taken the auto industry thanks to soaring fuel prices).

This crisis is greed, negligence, hubris, and irresponsibility all rolled into one. To try and attribute to things like organized crime (plain old white collar crime is more than likely the truth) or terrorist groups is trying to condense three decades worth of bad decisions into a central villain. Sounds more conspiracy theory or sensationalism than rational. There was more at work than just naked short selling. It may have been the factor that caused the bubble to burst, but that bubble was floating towards a pin for a long time.

 

[RiverOfIce]

There is only one cause for the economic failure. People believing that the American dream is alive. They believe that they are entitled to this behavior.

Freddy mac and fannie may would not be required, but the government wanted to extend the dream for a few years. Lets face facts, with out them, no one that bought a house in the last 20 years could afford that house.

But the people the created this crisis, are the people that took part in the system. Anyone that bought a house they knew they could afford, every investor that knew a bad investment, every rich person that took the risk because of the reward. Everyone caused this, because for about 8 years, we ignored the fact that America is dead. Today, we still ignore the fact that America is dead.

The republicans have announced that they want to cut about 2.7 trillion dollars over the next 10 years. Which is less then 250,000 a year, which means we still add about 1 trillion dollars a year to the debt. Congratulations, you managed to politically hurt the programs that you dislike, while american is still bleeding out.

Lets take obama and add it on top of the republicans idea, that would only cut about 5.7 of the 10 trillion dollars. American is still bleeding out. From that point we have two choices. Either 1.) medicar/ SS 2.)Military.

Cutting medicare and social security would cut about 800 billion. Cutting the military would take out about 1.4 trillion a year, yes about 57% of your taxes goes to the military.

 

[Drhyde]

Not to be too divergent from the original topic, but I have serious misgivings about cutting Social Security or the military. There are smaller efforts that could be done over time to the same effect. Taxing corporations that send jobs overseas or even penalizing them, tariffs on imports, eliminating useless bureaucracy (Board of Education, Paperwork Reduction Act, etc come to mind immediately), eliminating the tax cuts for the wealthy, etc.

Social Security also helps not only the elderly, but the mentally/physically disabled and their children. Our military (regardless of how we misuse them these days) does protect us. Suggesting we cut these is the equivalent of cutting off your arm to lose weight. America isn't really dead, we're more like a beat up classic car. We can be restored, but it's going to take a massive amount of time, money, and unity. Unity being the largest hurtle. If we could just get our dumbass two party system to actually work together for once, we might very well pull ourselves out of this hole we dug.

 

[RiverOfIce]

Taxing corporations that send jobs overseas or even penalizing them, tariffs on imports, eliminating useless bureaucracy (Board of Education, Paperwork Reduction Act, etc come to mind immediately), eliminating the tax cuts for the wealthy, etc.

Lets just do that. In fact lets just get rid of everything but the military, medicare/medicaid, and social security.

Let us cut all of the education system, dissolve all the government jobs, the fbi, all the roads, we don't pay or build for anything, but the united states military, medicare/medicaid, and social security. The government now can not pay 1 light bill, hire 1 employee, or even collect any taxes. Everything that you depend on the government is gone.

We are still over budget by 200 billion dollars. After we dismantle and shut down everything but the top three programs, we will still need to cut into medicare/medicaid, military, and/or social security, by 200 billion dollars a year. More then either party is willing to do, currently.

You see the problem, you can cut 1 trillion dollars out of the budget, the cost of everything, but military, medicaid/medicare, and social security, and still not balance the budget.

At most, with both sides ideas combined, you will save about 200 billion dollars.

 

[OutofDate1980]

The economic crisis may have partially been caused by organized crime, hostile governments, etc., but let's not get too hasty here. The crisis was a slow working pressure cooker of thirty years of failed policies, greed, and unexpected events. Most people think this thing just popped up in the last five years or so.

However, it went back as far as the Carter Administration (with the Community Reinvestment Act), Reagan (starting of financial deregulation, Savings and Loan Scandal), Clinton (repeal of the Glass-Stegall Act, encouraged more loans to poverty range people), Dot Com bubble bursting (caused Greenspan to slash interest rates on Treasury Bonds creating leverage for banks), 9/11 (shut down Wall Street for 6 days and crippled our airline industry into a bailout), Iraq conflict (added to our overall debt needlessly), and THEN the housing bubble bursting (which in the process may have indirectly taken the auto industry thanks to soaring fuel prices).

This crisis is greed, negligence, hubris, and irresponsibility all rolled into one. To try and attribute to things like organized crime (plain old white collar crime is more than likely the truth) or terrorist groups is trying to condense three decades worth of bad decisions into a central villain. Sounds more conspiracy theory or sensationalism than rational. There was more at work than just naked short selling. It may have been the factor that caused the bubble to burst, but that bubble was floating towards a pin for a long time.

The cited report lists some of your points, but also includes the increasing involvement of organized crime, rogue states and terrorist. This is an National Emergency Order.

Executive Order--Blocking Property of Transnational Criminal Organizations | The White House

"I, BARACK OBAMA, President of the United States of America, find that the activities of significant transnational criminal organizations, such as those listed in the Annex to this order, have reached such scope and gravity that they threaten the stability of international political and economic systems. Such organizations are becoming increasingly sophisticated and dangerous to the United States; they are increasingly entrenched in the operations of foreign governments and the international financial system, thereby weakening democratic institutions, degrading the rule of law, and undermining economic markets. These organizations facilitate and aggravate violent civil conflicts and increasingly facilitate the activities of other dangerous persons. I therefore determine that significant transnational criminal organizations constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States, and hereby declare a national emergency to deal with that threat."

 

[OutofDate1980]

... Taxing corporations that send jobs overseas or even penalizing them, tariffs on imports, eliminating useless bureaucracy (Board of Education, Paperwork Reduction Act, etc come to mind immediately), eliminating the tax cuts for the wealthy, etc.

We might want to tax those that are large anonymous tax cheats.

Pg 36, 1st para [Full Screen] Economic Warfare: Risks and Responses by Kevin D. Freeman

"The IRS has had virtually no success in identifying even U.S. citizens who hold hedge fund investments, let alone foreign entities. In fact, tax laws do not even require feeder funds to collect information on their clients. The lack of transparency makes hedge funds extremely attractive to those who desire anonymity."

 

[Drhyde]

Lets just do that. In fact lets just get rid of everything but the military, medicare/medicaid, and social security.

Let us cut all of the education system, dissolve all the government jobs, the fbi, all the roads, we don't pay or build for anything, but the united states military, medicare/medicaid, and social security. The government now can not pay 1 light bill, hire 1 employee, or even collect any taxes. Everything that you depend on the government is gone.

We are still over budget by 200 billion dollars. After we dismantle and shut down everything but the top three programs, we will still need to cut into medicare/medicaid, military, and/or social security, by 200 billion dollars a year. More then either party is willing to do, currently.

You see the problem, you can cut 1 trillion dollars out of the budget, the cost of everything, but military, medicaid/medicare, and social security, and still not balance the budget.

At most, with both sides ideas combined, you will save about 200 billion dollars.

However, hacking at these programs won't solve the problem either. You're options are down to increasing taxes or cutting the budgets of each. Increasing taxes is only going to piss off the American public even if it might make things better and politicians aren't going to risk it considering the next major election.

However, cutting the budgets is just as bad. If you pull every on-duty military man and woman back to America and pull out of all foreign affairs to save money, what are they going to do when they get home? They aren't many jobs available for even non-military.

Social Security is even worse. Cutting into it will take those on limited budgets and make their lives virtually unmanageable. Those on Social Security will be forced back into work and job prospects for the elderly or disabled are slim to none. That's not including those who simply can't work because of their impairments. Any solution to balance our budget isn't going to be pleasant and we've dug ourselves deep. Hopefully, not too deep this time.

@OutofTime1980 - Oh I don't doubt they didn't have some hand in it. Plus I believe we should be looking more thoroughly into terrorist groups, organized crime, and particularly white collar crime. I just think we, as Americans but humans especially, tend to single out one thing and ignore everything else. Most people who hear about it our financial disaster would simply have a very hard time following how it happened because of its complexity.

 

[ElasticNinja]

The US spends more then twice the percentage of GDP on its military then other military powers. There is surely lots to be cut. However the US is often left helping out other states (usually European), because the spending power of the US is greater and these other countries are struggling to keep enough equipment on the table. Getting these countries to pool resources could save the US a lot of hassle and money.The US spends more then twice the percentage of GDP on its military then other military powers. There is surely lots to be cut. However the US is often left helping out other states (usually European), because the spending power of the US is greater and these other countries are struggling to keep enough equipment on the table. Getting these countries to pool resources could save the US a lot of hassle and money

The US also has 11 Nuclear Powered Aircraft Carriers. These are quite useful but perhaps 11 is too much. Certainly there is no other military which can come close to matching this, even in sheer numbers of carriers.
It seems a waste to me that the US spends the equivalent of 4.5+% of its economy on the military, which constitutes over 40% of global military expenditures

 

[OutofDate1980]

... @OutofTime1980 - Oh I don't doubt they didn't have some hand in it. Plus I believe we should be looking more thoroughly into terrorist groups, organized crime, and particularly white collar crime. I just think we, as Americans but humans especially, tend to single out one thing and ignore everything else. Most people who hear about it our financial disaster would simply have a very hard time following how it happened because of its complexity.

It appears discovering fraud is too complex for the SEC, so maybe we should implement one of the recommendation per Harry Markopolos (of Bernard Madoff fame) testimony before Congress: pg 49 http://www.house.gov/apps/list/hearing/financialsvcs_dem/markopolos020409.pdf

"In case you are still not convinced, take the following challenge. Name one major securities fraud case that the SEC busted wide open on its own without the felon first turning himself in? Give up? The last major pre-emptive SEC strike was Ivan Boesky, for insider trading violations over two decades ago. Today’s SEC staff are more like financial crime scene investigators, coming in after the fraud scheme has already collapsed, toe-tagging the victims, trying to figure out who the bad guys were and how the fraud scheme occurred. To date the SEC’s inability or unwillingness to regulate and more importantly to implement regulation with adequate tools and training have potentially cost us trillions in the recent financial crisis.

An Alternative Course of Action: Disbanding the SEC

Fortunately, the US already has two very competent securities’ regulators who do a truly fantastic job and at an unbelievably low cost. Unfortunately, they are the New York Attorney General’s office (NYAG) and the Massachusetts Securities Division (MSD). The NYAG and MSD have busted open the Wall Street analysts’ bogus stock recommendations scandal, the mutual fund market-timing scandals, the auction rate securities scandals and a whole host of other industry violations. Where has the SEC been beforehand while all of these frauds were being committed? Sitting safely on the sidelines watching the fraud go by, daring not to get involved for fear of upsetting their masters on Wall Street. And this is the nicer, kinder explanation.

Many investors may claim the SEC has been intentionally missing in action so as to aid and abet financial industry fraud to ensure that predatory financial institutions remain safe from investors. From an investors’ perspective, the only two regulators that have stood up and made investors whole are the NYAG and MSD. These two regulators need to be publicly commended for the great job they are doing on behalf of investors everywhere.

Therefore, one alternative solution for Congress to consider is to disband the SEC and give its budget to the NYAG and MSD to hire staff and keep doing what they’ve been doing which is a darn good job of protecting investors. One reason these two states have competent regulators is that New York City is the world’s largest financial center while Boston is the world’s fourth largest financial center. London is No. 2 while Tokyo is No. 3. Somehow, I doubt that the NYAG and MSD would be hiring many people from the SEC, choosing instead to find competent employees with industry experience locally to do the job more efficiently. From an efficiency standpoint, the NYAG and MSG employ far fewer people at much lower cost and do a much better job of securities regulation than the SEC. If the state regulators are providing more regulatory bang for the buck, an option would be to fund them and zero out the SEC’s budget. After all, we let poorly performing private companies fail, why not let poorly performing government agencies fail too?"