We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on the battleground could be your pension fund and 401K.
The late Libertarian economist, Murray Rothbard, wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.
In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s. In 1928, it launched the Goldman Sachs Trading Corp., a closed-end fund similar to a Ponzi scheme. The fund failed in the stock market crash of 1929, marring the firm's reputation for years afterwards. Former Treasury Secretaries Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current Treasury Secretary Timothy Geithner rose through the ranks of government as a Summers/Rubin protégé. One commentator called the U.S. Treasury "Goldman Sachs South."
Goldman's superpower status comes from something more than just access to the money spigots of the banking system. It actually has the ability to manipulate markets. Formerly just an investment bank, in 2008 Goldman magically transformed into a bank holding company. That gave it access to the Federal Reserve's lending window; but at the same time it remained an investment bank, aggressively speculating in the markets. The upshot was that it can now borrow massive amounts of money at virtually 0% interest, and it can use this money not only to speculate for its own account but to bend markets to its will.
But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough. The voters too have evidently had enough, as demonstrated in the recent upset in Massachusetts that threw the late Senator Ted Kennedy's Democratic seat to a Republican. That pivotal loss gave Paul Volcker, chairman of President Obama's newly formed Economic Recovery Advisory Board, an opportunity to step up to the plate with some proposals for serious banking reform. Unlike the string of Treasury Secretaries who came to the government through the revolving door of Goldman Sachs, former Federal Reserve Chairman Volcker came up through Chase Manhattan Bank, where he was vice president before joining the Treasury. On January 27, market commentator Bob Chapman wrote in his weekly investment newsletter The International Forecaster:
A split has occurred between the paper forces of Goldman Sachs and JP Morgan Chase. Mr. Volcker represents Morgan interests. Both sides are Illuminists, but the Morgan side is tired of Goldman's greed and arrogance... Not that JP Morgan Chase was blameless, they did their looting and damage to the system as well, but not in the high handed arrogant way the others did. The recall of Volcker is an attempt to reverse the damage as much as possible. That means the influence of Geithner, Summers, Rubin, et al will be put on the back shelf at least for now, as will be the Goldman influence. It will be slowly and subtly phased out... Washington needs a new face on Wall Street, not that of a criminal syndicate.
Goldman's crimes, says Chapman, were that it "got caught stealing. First in naked shorts, then front-running the market, both of which they are still doing, as the SEC looks the other way, and then selling MBS-CDOs to their best clients and simultaneously shorting them."
Volcker's proposal would rein in these abuses, either by ending the risky "proprietary trading" (trading for their own accounts) engaged in by the too-big-to-fail banks, or by forcing them to downsize by selling off those portions of their businesses engaging in it. Until recently, President Obama has declined to support Volcker's plan, but on January 21 he finally endorsed it.
The immediate reaction of the market was to drop - and drop, day after day. At least, that appeared to be the reaction of "the market." Financial analyst Max Keiser suggests a more sinister possibility. Goldman, which has the power to manipulate markets with its high-speed program trades, may be engaging in a Mexican standoff. The veiled threat is, "Back off on the banking reforms, or stand by and watch us continue to crash your markets." The same manipulations were evident in the bank bailout forced on Congress by Treasury Secretary Hank Paulson in September 2008.
In Keiser's January 23 broadcast with co-host Stacy Herbert, he explains how Goldman's manipulations are done. Keiser is a fast talker, so this transcription is not verbatim, but it is close. He says:
High frequency trading accounts for 70% of trading on the New York Stock Exchange. Ordinarily, a buyer and a seller show up on the floor, and a specialist determines the price of a trade that would satisfy buyer and seller, and that's the market price. If there are too many sellers and not enough buyers, the specialist lowers the price. High frequency trading as conducted by Goldman means that before the specialist buys and sells and makes that market, Goldman will electronically flood the specialist with thousands and thousands of trades to totally disrupt that process and essentially commandeer that process, for the benefit of siphoning off nickels and dimes for themselves. Not only are they siphoning cash from the New York Stock Exchange but they are also manipulating prices. What I see as a possibility is that next week, if the bankers on Wall Street decide they don't want to be reformed in any way, they simply set the high frequency trading algorithm to sell, creating a huge negative bias for the direction of stocks. And they'll basically crash the market, and it will be a standoff. The market was down three days in a row, which it hasn't been since last summer. It's a game of chicken, till Obama says, 'Okay, maybe we need to rethink this.'
But the President hasn't knuckled under yet. In his State of the Union address on January 27, he did not dwell long on the issue of bank reform, but he held to his position. He said:
We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy. The House has already passed financial reform with many of these changes. And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.
What this "real reform" would look like was left to conjecture, but Bob Chapman fills in some blanks and suggests what might be needed for an effective overhaul:
The attempt will be to bring the financial system back to brass tacks... That would include little or no MBS and CDOs, the regulation of derivatives and hedge funds and the end of massive market manipulation, both by Treasury, Fed and Wall Street players. Congress has to end the 'President's Working Group on Financial Markets,' or at least limit its use to real emergencies... The Glass-Steagall Act should be reintroduced into the system and lobbying and campaign contributions should end... No more politics in lending and banks should be limited to a lending ratio of 10 to 1... It is bad enough they have the leverage that they have. State banks such as North Dakota's are a better idea.
On January 28, the predictable reaction of "the market" was to fall for the seventh straight day. The battle of the Titans was on.
Follow Ellen Brown on Twitter: www.twitter.com/ellenhbrown
While enduring the same handicap all engaged in such endeavors do, she get us close enough to events to allow us to form our own opinions and suspicions. She is relaxed enough to acknowledge error and she does it in a charming and friendly manner. What is usually a dry and complex topic for most of us becomes clear and interesting. If she didn't, how many of us would be reading this column? Soldier on, Ellen Brown.
Fanned.
Web of Debt has been a real eye opener for me and I can't thank you enough for your efforts.
Ellen, tell them about Executive Authority during a crisis.
In short POTUS can stop all the fraud, near fraud, powerplays of the private sector by:
1. Declaring martial law to eliminate the threat of economic collapse.
2. Issuing an Executive Order mandating that the Treasury becomes the issuer of all credit to sustain
asset values for all classes of assets.
3. Issuing an Executive Order mandating a five day bank holiday to foreclose the opportunity for market
makers Including the Plunge Protection Team) to short the market, and then using Emergency
Powers to reinstate Glass-Steagall, prohibitions on trading in proprietary accounts, etc.
POTUS has the real power if only he would use it.
What POTUS does is declare that financial big boys are a serious threat to the Republic because while they are too big to fail, they are killing us. Therefore, by their very existence they constitute a clear and present danger. Under that threat, POTUS has Emergency Powers with which he exercises his authority to declare limited martial law.
Everything else is just a matter of making certain that POTUS is in control of the Military,
CIA, and NSA. He then implements all of those actions mentioned in the above comments.
So let's get out the pitchforks and give him some support.
Very thoughtful article but I believe the main reason for the decline can be attributed to a massive amount of short selling - evidenced by increase in the volatility index - and the 'weighting' this has on prices. It is easier to destroy [prices] than to build and once confidence is broken a massive decline is highly likely.
If the SEC & the USA Government were really 'fair dinkum' [Aussie slang] about ‘change on Wall St we can believe in' they would implement the following changes immediately:
1) Reintroduce the short selling up-tick rule removed mid July 2007.
2) Force ALL trading back onto the exchange where the stock is listed.
3) Abolish ALL forms of non transparent trading that is not available to all participants in real time.
4) Put a cap on the amount of short selling in stocks - say 10% of listed shares.
5) Force stock borrowers - for short selling - to pay a 20% deposit fee [based on transacted value] to a central clearing house on top of the normal borrowing fee paid to the lender. Deposit refundable after trade close out.
6) Reintroduce Glass-Stiegel to ensure 'Chinese walls' within brokerage houses.
7) Short selling via 'contracts for difference' OR options to be treated as per stock subjected to short selling rule.
8) All short selling/running totals to be published daily - as per open interest in futures markets.
9) Goal terms to apply for non compliance.
A more level 'playing field' would
Apart from program trading, flash trading is nothing more than a form of 'front running' whereby 'alternate platforms' see the order before others, which allows orders to be placed to 'scalp' the order before others get a chance to see/act. Dark pools are yet another using alternate trading platforms. Such 'venues' split the pool of orders allowing privileged trading to occur. In many instances it is reported outside the main pool - if reported at all.
ALL trading should be forced back onto the exchanges where the stock is listed. The SEC would then have to observe one market for compliance - not a multitude as currently exists.
Let's be honest - it has been short selling NIRVANA for the spivs since the short selling up-tick rule was removed. Now let's see all the pips start to squeak!
That would solve a whole lot of problems.
Your snipe at fractional reserve banking was not on my radar when I posted my reply but I follow your logic. Personally I have championed hard money since the mid 1970's when I was a 'fellow traveler' of the late James Blanchard III - then Chairman of the National Committee of Monetary Reform. We were even then championing the abolition of the USA Federal Reserve System in unison with many from the von Mises School of financial discipline. A return to sound money backed by Gold and Silver controlled by the Government is the way to go. We must remove the cabal of self interested banks and opportunistic politicians who have a MASSIVE ongoing interest in causing and perpetuating inflation. In other words eliminate the Federal Reserve System.
Great to see your latest comment here at HuffingtonPost.
Your book, "Web of Debt" (www.WebOfDebt.com) is in my "Top 10 Most Important Books in America This Decade" list, precisely for explaining the mechanics of how the Fed "money supply" spigot is used by the wealthiest bankers & money men to control US elections, & to rig US & world) markets.
Web of Debt ALSO explain how, over the past century, Goldman-Sachs, JPMorgan+Chase, and Citi-bank have ALL BEEN ALLIED WITH the Rothschilds bank of London & Europe, & how that megabanking Cartel (which Max Keiser references simply as "The City of London," which as you report, is quite independent of Crown & even Parliament's authority) has a long history of creating speculative (inflationary) money bubbles....
Indeed, many financial historians suspect that JP Morgan was allied with "the London bank" when he allegedly triggered a run on rival Knickerbocker bank, which triggered the Panic of 1907... from which Morgan (with the deep pockest of his London friends) was able to scoop up VALUABLE ASSETS... & banking rivals - for pennies on the dollar...
.....which boom-Bubble-BUST recession (1907 "Panic") led DIRECTLY to the creation of The Federal Reserve System in 1913... DOMINATED BY JPM & The Bank of London, which almost certainly played a huge role in the coming Great Depression of 1929.
Until Americans recognize that our financial system is now SUBORDINATE, not only to predatory financiers, but FOREIGN financiers, there will be no real progress in the US
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- Larry Summers never worked at Goldman
- Relying on Max Keiser?? He's an absurd figure. You might want to do a bit of research on him
- Quoting someone who talks about "Illuminists"
- Goldman never got "caught stealing"
- The allegations that GS front-runs its clients is not credible: if clients are being front-run why don't they take their business elsewhere?
- waaaaaaaaay too paranoid
- etc..
"Goldman Sachs admitted to this sort of market manipulation in a notorious incident last summer, in which the bank sued an ex-Goldman computer programmer for stealing its proprietary trading software. Assistant U.S. Attorney Joseph Facciponti was quoted by Bloomberg as saying of the case:
“'The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”
"The obvious implication was that Goldman has a program that allows it to manipulate markets in unfair ways. Bloomberg went on:
“'The proprietary code lets the firm do ‘sophisticated, high-speed and high-volume trades on various stock and commodities markets,’ prosecutors said in court papers. The trades generate ‘many millions of dollars’ each year.'”
Those many millions are not doing anything to help the economy. They are profits skimmed from the rest of us, using sophisticated computer programs we don't have access to. Those programs should either be outlawed or taxed out of existence.
I don't get the logic about "profits skimmed from the rest of us using...programs we don't have access to". Anyone can have access to such programs - it's just a question of paying the appropriate fees. All the major players do it. Should only slow trading be allowed? How slow? Should computers be forbidden. I don't get it.
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I live in Hawaii. Here some descendants of Hawaiian Aboriginals are trying to reclaim their country which was stolen from them in the late 1800s and given to the USA. These poor folks talk on and on about the injustice of it. Their's is a fruitless task. From about a one and a half million they've dwindled to a lost minority in their own county.
Such is the fate of the protesters today. I'm sure folks like Ellen are being watched, and everyone else who reveals truths about their activities. In the end, all such protests and truth telling is pointless. The Greedheads through their minions, lackeys and useful idiots are in charge.
My solution is simple: Watch the TOTAL and COMPLETE collapse of the Empire of the United States of America, and enjoy the show - once in a lifetime opportunity.
For the most part, I've moved on - into the watching and enjoying part. Like looking at a violent movie and judging it not just by content, but also by: How well did the actors perform? Does the script flow smoothly?
Is the movie believable?
So far, it's a very exciting show. I am pleased.
Allen
I've come to the conclusion we live with an amazing opportunity: once-in-a-lifetime. Two powerful forces have come together with the lightening speed of computers:
1. Mainstream Apathy - The majority of people including Americans are fully occupied with their daily lives: Taking care of Granma; the kid's sports programs; getting the car fixed; finding a job; and on and on. They don't have the time to understand the issues which are crouched, by the other force, in increasing complex language to hide the simple and obvious truths about the other powerful force...
2. Greedhead Control - The Greedheads are in charge of all the major routes of information/energy flow: Media; Money; Health; Government; and so on.
The Greedheads are parasites unseen by most in the Mainstream until a catastrophe takes the life of their niece's mother in Afghanistan; or their uncle's retirement in a 401K; or their brother's job, or their own health because of a "pre-existing condition."
And the Greedheads are global. They own governments. Governments fail and they move on or build/buy new one. Millionaires come and go. The Greedheads make and break Billionaires. Small fish. The Greedheads survive. Their minions infiltrate every organization, especially ones established to counter them.
See Part 2...
Naomi Klein in her book The Shock Doctrine detailed numerous financial crises that were instigated against countries to make them kneel, genuflect, and kiss the ring of the Washington Consensus.
Are there any trading data to suggest that Goldman Sachs precipitated the sell-off? Any other stock watchers looking out for such manipulation? I have not seen anything like this on Naked Capitalism.
Keep up the great work.
"Congress has to end the 'President's Working Group on Financial Markets,' or at least limit its use to real emergencies... The Glass-Steagall Act should be reintroduced into the system and lobbying and campaign contributions should end..."
What do I know but here's my thought's;
This legislation should curtail and/or deter and if it force these bankers+gansters back to craft more their wickedness then penalties for infringement/non-compliance should hit them like a ton of bricks.
Furthermore, since corporations are now considered "a person" [under "their" so-called 1st Amendment rights most recently given to them] then they should be treated as such, meaning their incorporation or entity status should also change to make them more like the individual "self employed" who must carry most of their liability as a person. Shareholders should shoulder some to the responsibilities for electing and approving the astronomical compensation and socially irresponsiblities these rouge impulsive greedy gamblers display.
End of rant.
It is amazing the way that Goldman is able to operate as a rogue organization holding the power to create money for virtually free to invest, bribe and manipulate all they want. When will people demand that we take back our sovereign power to issue and control our own money separate from the banking cabal?
Larry
I did some selling since then and kept my 2X inverse positions. We're going below 10K for sure, maybe below 9K. I hope Obama doesn't buckle, but I think Congress will & then we'll get what we got on the health bill - nada. Then, lo and behold, the market will "suddenly discover" that maybe the economy isn't so bad after all, and start inching up again. We may be back at this month's highs by late Spring.
Of course, we will still be manipulated by GS, who, frankly, own the place.
So look at the investors. Reality shift!
Lot's of speculation here, but the chilling fact is - it COULD be true. And given the past performance of these players, if they CAN do it, they do.
When I first heard of the new "Volcker Rule" last week, I dismissed it as mere window dressing. Maybe not. As Ellen points out, we may be in for some real fireworks before we get to whatever it is that comes next. But it would seem that it is not going to be just a phony "recovery" back to what we had before. Maybe because that's impossible - the financial system is passing through some kind of a watershed.
Like the end at last of private fractional reserve banking?
Keep your eye on Ron Paul and Dennis Kucinich. Especially when they are in agreement, as on next steps re the Fed.
Time for the states to step up with public banks modelled on the successful Bank of North Dakota.