Feckless Nation, or, Fortress of Lies.

James Howard Kunstler, Kunstler.com

Originally published 11 March 2013

History has a special purgatory where it sometimes stashes feckless nations punch drunk on their own tragic choices: the realm where anything goes, nothing matters, and nobody cares. We've surely crossed the frontier into that bad place in these days of dwindling winter, 2013.

Case in point: Mr. Obama's choice of Mary Jo White to run the Securities and Exchange Commission. A federal prosecutor back in the Clinton years, Ms. White eventually spun through the revolving door onto the payroll of Wall Street law firm Debevoise & Plimpton, whose clients included Too Big To Fail banks JP Morgan, Bank of America, Morgan Stanley, and UBS AG, defending them in matters stemming from the financial crisis that began in 2008, as well as other companies that needed defending from allegations of financial misconduct, such as the giant HCA hospital chain (insider trading), General Electric (now a virtual hedge fund with cases before the SEC), and the German-based Siemens Corporation (federal bribery charges).

A republic with a sense of common decency -- and common sense -- would have stopped the nomination right there and checked the "no" box on Mary Jo White just for violating the most basic premise of credibility: that trip through the revolving door that shuttles banking regulators from the government agencies to the companies they used to oversee and sometimes back again.

Has there not been enough national conversation about the scuzziness of that routine to establish that it's not okay? Does it not clearly represent the essence of dysfunction and corruption in our regulatory affairs? Didn't President Obama promise to seal up the revolving door? So how could Mary Jo White possibly be taken seriously as a candidate for the job? And how is it possible that everyone and their uncle, from The New York Times editorial page to the Sunday cable news political shows to the halls of congress, is not jumping up and down hollering about this? Well, because anything goes, nothing matters, and nobody cares.

The funny part is that, when challenged over her past connections to the banks and companies she would now have to regulate, Mary Jo White offered to recuse herself from future cases involving them. So, from the get-go as SEC head, Ms. White would not concern herself with the doings of JP Morgan, Bank of America, and Morgan Stanley? How is it that gales of laughter did not blow Mary Jo White clean out of the hearing room? Is there not another qualified person from sea to shining sea who could come in and do the job without one hand tied behind his or her back?

Now it also turns out that upon leaving Debevoise & Plimpton, Ms. White is scheduled to collect monthly retirement checks from the company amounting to a half million dollars a year -- that's for life, by the way -- while she supposedly runs the SEC. How is that not a conflict of interest? The remedy proposed by Ms. White and her attorneys was for her to take the retirement loot as a lump sum during her tenure as SEC chair, after which she could revert to collecting her pension in the $42,500 monthly payouts. Pardon me, but, well ...what the fuck? What planet are we on?

As if that's not enough, Ms. White's husband, John W. White, is a partner at another giant Wall Street law firm, Cravath, Swaine & Moore, which frequently tangles with the SEC on behalf of its clients. Mr. White proposed to change his pay structure while his wife runs the SEC. More gales of laughter. He is also on the advisory committee of the Financial Standards Accounting Board, the group that oversees national accounting practices and which, in 2009, infamously changed its Rule157 so that TBTF banks could "mark to fantasy" the fraudulent CDOs and other bond-like "innovative" securities that they created -- many of which they had to eat after the housing bubble bust when the collateral for these swindles lost its value and the "innovators" could no longer pawn the stuff off on credulous pension funds and other client "muppets."

The silence over this disgraceful matter -- and many others like it, including the dead hand in the empty suit posing as US Attorney General -- indicates that not only is the rule of law extinct in this country, but so are public figures of principle and credible news organs. Nobody has made a noise about it. Anything goes, nothing matters, and nobody cares. So, the objection to it has to come from outside the authorized channels. And the consequences will mount outside the fortress of lies that the establishment has become.

Over One-and-a-half QUADRILLION

That's right. Quadrillion. Over one-and-a-half times that. That is the notional amount of derivatives, as denominated in US dollars. As reported by the Bank of International Settlements this March. It's on page 108 of this pdf.

Oh. My. God.

And Karl Denninger has figured out how the notional amount held by any financial institution becomes its realized losses. Let's hear what Mr. Denninger has to say:

As with the phony reinsurance contracts that AIG and other insurers wrote for decades, when AIG wrote hundreds of billions of dollars in CDS contracts, neither AIG nor the counterparties believed that the CDS would ever be paid. Indeed, one source with personal knowledge of the matter suggests that there may be emails and actual side letters between AIG and its counterparties that could prove conclusively that AIG never intended to pay out on any of its CDS contracts.

Now consider this.

There is some gross "notional" (or face) value of $683.7 trillion dollars outstanding as of the end of June 08 (last data available.) [Ed-M: Now 1.567 Quadrillion dollars - read the pdf.]

The lions share of those are not "CDS" on individual names or CDOs like what is going on here with AIG. They are instead interest-rate and/or FX products of one sort or another; $458 trillion worth. [Ed-M: Now 1.406 Quadrillion dollars.]

If even a couple of percent of those swaps are in fact "private lettered" out in the fashion that AIG is alleged to have done with their CDS.....

(Hint: This is how "notional" amounts end up becoming realized losses!)

Our Congress had better dig into this hornets nest right damn now because if in fact there is any material amount of this crap going on in the OTC derivative market the $170+ billion blown on AIG trying to cover it up will be a mosquito on an elephant's ass in comparison to what's about to happen to the world's economy and banking system.

If, in fact, it cannot be proved that this is not the case, given the extraordinary lengths that both government and private parties have gone to in order to cover up that IRA alleges AIG was actually up to, we must ring-fence and cut off any part of the financial system impacted by a potential detonation of that market right now, including the US Federal Government, as such a detonation will, if it occurs, destroy any part of the financial system it infests at the time the unwind occurs.

Actually, it will literally destroy the whole entire global economy, for it is now greater than the combined value of all paper wealth and all things (including living things) on Earth. Unless we can get this Beast to unwind without exploding.

If it does explode....

And Pres. Barack Obama will be at the receiving end of the great fury of the masses (holding torches and pitchforks) as they scream at him, "Now you've done it!"

Citigroup Fading Fast

Source: CNN

Chart is self-explanatory. Rumour has it that the street is not confident that this gnomes' lair will be saved before it collapses completely into insolvency.

Coming: Death to Bank of America and Citigroup

The stocks of bank of America and Citigroup have collapsed to below $5.00 a share - they are both penny stocks!

Charting Stocks Gone In 60 Days: Citi and Bank of America Won't Live to See May

Bank of America and Citigroup won’t live to see May. The two banks will be nationalized in the coming weeks, and we think that the announcement can come as
soon as tomorrow evening (Friday evenings are when major bank announcements and failures occur).


The US government has already committed half a trillion dollars to these two firms which is more than 10 times the amount it would cost to buy and control both companies. The market doesn’t believe that $500 billion is enough to save these companies.

Today both banks made fresh new lows with Citi closing at $2.51 and Bank of America closing at $3.93. The 1 year charts below show the short term price movements. You should understand that when a bank stock’s chart looks like
this, even a HEALTHY bank would be in trouble. Nobody wants their deposits tied
up in a company that trades at $2. The outflows of deposits from Bank of America
and Citi must be catastrophic.

And here are their stock price charts!

Source: Chartingstocks.net

The US Gov't will need a lot more than the $500Bn already spent to bail out these banks. Don't count on any bailout for any banks to get through Congress this time -- both Dems and Repubs are majorly pissed off at the banking gnomes who took their year-end bonuses out of the first TARP. When Obama and Geither go to Captiol Hill and tell them that the new TARP is must-pass, the Repubs plus some Dems will shoot it down, probably by filibuster!

I gots two credit cards from Bank of America, both with zero balance. When it goes under, I am sure those cards will be useless!!!!!

Citi Pirates' Group

I just thought I'd make a commentary about the Citigroup Gnomes boarding the good ship United States (still piloted by Bush, Paulson and Brenenke) and making off with $25 bn additional plunder with promises to come back and plunder $306 bn more in the future to "cover their losses" from their bed derivatives bets so they won't get devoured by the Derivatives Beast.

For now, a cartoon.

My Take on Developing All That Oil by 2030

Given the current financial crisis, including the Derivatives unravelling, US Gov't inability to sell 92% of its T-bill offer on the 10th, and general Wall Street cock-up, here's my opinion that there will be sufficient financing or adequate capital to develop oil resources sufficient to attain the production flows predicted by the IEA 'til 2030: