REASON # 1.) You might not know it yet, but the U.S. has just entered into another recession, according to the world’s (arguably) leading expert on economic business cycles. And, when it comes to this type of thing, the guy’s never been wrong.

REASON #2.) Our government has committed close to $450 billion more U.S. taxpayer dollars to Wall Street bailouts in 2011, alone. As I’ve detailed it in many posts over the past few years, the folks riding the one-way gravy train from Washington D.C. to lower Manhattan have been receiving a minimum of $200 billion in stealthy and not-so-stealthy bailouts, annually, since 2008. (And, this doesn’t even include the more than $200-billion outstanding tab that the banking community still owes us from their TARP bailout.) But, this year, we’re already on track to (easily) more than double that number.

REASON #3.) Morgan Stanley -- with massive amounts of their capital, and then some, highly-leveraged in derivatives, high-risk loans, securities and related supports for teetering European banks -- may very shortly end up joining the ranks of our country’s insolvent/undercapitalized, too-big-to-fail financial services firms. (Move over BofA and Citi, there’s a new zombie in town.) And, let’s not overlook BofA and JP Morgan, as additional events these past few days have just informed us, Morgan Stanley is not alone among US too-big-to-fail firms needing “taxpayer protection” from the sovereign and related big-bank meltdowns across the pond.

REASON #4.) The Special Inspector General for the TARP (SIGTARP) noted in a report, published on Friday, that our government, essentially, permitted Bank of America and Citigroup—our country’s two largest, still-insolvent banks--to ignore recapitalization requirements mandated as a result of their poor performance in the 2009 Treasury Department/Federal Reserve-sponsored “stress tests”. As a byproduct of this kabuki, BofA and Citi were enabled to misrepresent their financial condition to the public.

REASON #5.) Speaking of “misrepresenting their financial condition to the public,” the Chairman of the International Accounting Standards Board (IASB) was in Boston on Friday, and he announced that most/many of Europe’s sovereign funds and banks (these are funds and banks with substantial U.S. investments in them, both directly and indirectly) are cooking their books. (See number “3,” above, for more on this.)

REASON #6.) Almost every week, it seems, our country’s securities traders are now moving light years beyond any sane effort to reinstill confidence in our now-blatantly-“rigged” stock markets. Frankly, it’s to the point where “front running”--a practice considered to be unquestionably illegal, whereby traders actually “beat” clients’ securities bids to the proverbial “counter”—is now becoming virtually institutionalized, IMHO. A couple of recent examples have come to light with regard to Wall Street trading which explain why the house always wins when the game is fixed. (Yet, some still wonder why small, independent investors are walking away from the stock market these days? Could it be that the rest of us are finally getting a clue?)

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RECESSION 2.0: IT’S HERE.

For all intents and purposes and for many, if not virtually all, of the same reasons that our economy tanked in 2008 (i.e.: deliberate lack of sufficient regulatory oversight of the financial services sector, nominal transparency [read: “great obfuscation and secrecy”] in the derivatives marketplace, the still-unbridled greed of Wall Street, too-big-to-fail banks enabled to grow larger not smaller over the past three years, a government virtually owned by, and in thrall to, its masters of finance, etc., etc.) it’s now quite self-evident, especially given the inconvenient business/economic news of the past 72 hours, noted down below, that we have already entered into another recession.

In fact, the world’s (arguably) leading expert on business cycles, Economic Cycle Research Institute Co-Founder Lakshmann Achuthan, has just called it. We are in a recession…again! And, he’s been about 100% accurate on his calls since…forever.

Done freakin’ deal.

(Many would argue that we never came out of the [first] Great Recession; and, I do believe that is a definitive political truth, even if it may not be a technical economic reality. And, apparently, that “technical reality” may be no longer.)

Fellow Kossack HoundDog published an excellent post about this important story, earlier Friday evening, which didn’t receive the appropriate notice it was due, IMHO, entitled: “US Faces Another Recession Through Next Year, Says ECRI.” It’s a continuation of a theme upon which I’ve published a few pieces in the past 60+ days, as well. See: “ECRI Co-Founder Lakshmann Achuthan: Double-Dip Scare Immediately Ahead,” and Amidst Economic Fatal Distractions, President Obama Throws A “Hail, Mary!”

Click on HoundDog’s link, above, for the latest from Achuthan. (He tells us we’re already in a Recession; we just don’t know it yet.) Meanwhile, here’s my commentary from a little over three weeks ago (see last link in paragraph immediately above)…

…“The ‘recovery’ that may be no longer.” Being a lifelong Democrat I find it somewhat of an affront to my basic sensibilities to hear my Party’s leadership continuing to bloviate on about our “recovery” while at the same time our government is acknowledging that an easy 100,000,000-plus of us live in poverty or on the precipice of it. Put another way: If it’s a “Little Depression” for more than 100,000,000 of us, it’s a Depression for all of us…

… …Meanwhile, the possibility of a double-dip recession becomes more and more real by the day… (Diarist’s Note–10-2-11: Again, please remember I wrote this just over three weeks ago. According to Achuthan’s/ECRI’s latest analysis and statements, we are now definitively in another recession, or at least entering into one. This downturn is moving quickly, and in the wrong direction.) So, it should come as less of a surprise to those reading my posts that, over the past ten days, we’re now learning about how many economists and economic pundits are wondering aloud that we may have already entered (or, we’re about to enter) into a double-dip recession, either in the second or third quarters of this year. (The National Bureau of Economic Research, or “NBER,” usually doesn’t call the beginning or end of a recession until up to a year or more after that milestone actually occurs.) Economic pundit Mish Shedlock, citing potential inaccuracies in the manner by which the government integrates inflation metrics into its GDP data (to make them appear more positive than they may, in fact, be), has an especially good analysis of this in his post from August 29th, entitled: “US In Recesssion Right Here, Right Now.” It’s important to note that Shedlock’s analysis is supported by quite intensive statistical research via the folks over at Consumer Metrics. And, Mish’s post is further backed-up by graphic analysis from none other than Doug Short, the creator of numerous charts and graphs that are used in conjunction with many economic posts throughout the blogosphere, including right here, at DKos. Doug Short, himself, also calls into question what he references as overly-optimistic GDP statistics in a post of his own, “Will the “Real” GDP Please Stand Up?” But, perhaps even more authoritatively, and as I’ve also been reporting upon his commentary in a couple of posts over the past few weeks, Economic Cycle Research Institute co-founder Lakshman Achuthan has been voicing concern about a double-dip for a couple of months now, with his statements becoming more and more alarmist as we move forward, too. This year, Democrats have been eating a lot of public relations crow as they’ve been reminded of their patently misplaced optimism as it was glaringly reflected in their numerous public mistatements regarding our “recovery summer,” last year. If events keep unfolding along the downward trajectory we’re witnessing now into a full-blown, double-dip recession (one which may already be upon us), the reality is that come next Summer and Fall, during the height of the Presidential election year, with a Democratic incumbent spending much of his time explaining why he was even using the word, “recovery,” in 2011--when we were already in the throes of the second leg of a double-dip recession--it will not be a pretty sight.



And, in addition to the virtually official start of our new recession, here are five more, brand new realities about our economy, with each one being reason enough to awake even comatose Democrats and encourage them to make a beeline for their local #OccupyWallStreet protest…

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CLOSE TO ANOTHER HALF-TRILLION IN TAXPAYER BAILOUTS SET FOR WALL STREET THIS YEAR.

Adding even more insults to our society’s already-life-threatening injuries, it is now also all but a done deal that we’re diving head first, once again, into (actually, it should be past tense, once you read more about this, herein) what already appears to be close to another $500,000,000,000 (that’s a half-trillion bucks, already spent, committed or about to be spent) in stealthy taxpayer bailouts for Wall Street, at the very least (since we’re talking about already-committed funds, or about-to-be committed money in 2011, alone, to prop up a bunch of too-big-to-fail banks that should’ve been put out of their misery three years ago).

And, speaking of propping “up a bunch of too-big-to-fail banks that should’ve been put out of their misery three years ago,” Kossack gjohnsit has an outstanding post, from earlier on Saturday, which discusses this truth among many others, “Temporary problems and capitalism’s demise.” (IMHO, it’s a must-read.)

As I’ve painfully detailed and annotated it in recent posts, the U.S. government has been providing, at a minimum, an easy $200 billion per year in stealthy bailouts to Wall Street since 2008, and that’s above and beyond the more well-known programs such as TARP. Many tell us it’s actually much more than that.

Here’s a short list of some of my posts from this year, alone, which provide the details regarding our $200 billion-plus annual tithe to our Masters of the Universe:

“‘The Austerity Delusion’ Amidst More Hidden Bailouts On ‘The Road To Fiscal Crisis’" (3/25/11)

“Did You Hear The Latest Joke About The Treasury Department's Bailout Profits? ROFLMAO!” (3/31/11)

“Krugman: ‘Irresponsible’ Centrist Memes. Johnson: New Bailouts? BofA's Fire Sale. Muni Mess.” (8/12/11)

“Taibbi: ‘Obama Goes All Out For Dirty Banker Deal’ & Stiglitz: Why This Derails Our Youth” (8/26/11)

“Amidst Economic ‘Fatal Distractions,’ President Obama Throws A ‘Hail Mary’” (9/7/11)

And, contrary to popularly-spun fairy tales about banks paying back their taxpayer bailouts—a false meme that’s been further propagated by some, even here within this community--the banking sector still has more than a $200-billion outstanding tab with us taxpayers on this three-year-old program, too. Here’s a link to one of my posts where I go into greater detail on the matter: “The Wall Street Bailout Memes Are Alive And Well” (2/6/11)

And, if you follow me into the next section, immediately below, you’ll learn about the details as to why, compliments of the International Monetary Fund, that $200 billion annual Wall Street bailout tab will more than double in coming months.

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THREE YEARS AFTER 2008, U.S. BANKS ARE STILL GROSSLY OVERLEVERAGED IN THE DERIVATIVES/CREDIT SWAPS MARKETPLACE

Further underscoring the downplayed/obfuscated reality that at least some U.S. banks are either very overleveraged in the derivatives market in Europe or heavily exposed to ongoing, massive investor litigation there, Morgan Stanley looks like it may be in danger of–or already is–joining the list of insolvent/grossly undercapitalized U.S. zombie firms (move over Citi and BofA). And, that’s the prevailing conventional wisdom on “the street” right now, according to a lead story in Saturday’s NY Times. Here are links to some of the additional coverage on the matter from Bloomberg and Zero Hedge, respectively: “Morgan Stanley Seen Risky as Italian Banks in Swaps Market,” and “Morgan Stanley’s Exposure to French Banks Is 60% Greater Than Its Market Cap…And More Than Half Its Book Value.”

To borrow a term from fellow Kossack gjohnsit, much like what happened in our markets in 2007 and 2008, this looks like it’s already creating another “Bear Stearns moment” (and/or “Lehman moment”), both worldwide and here at home.

Here’s the lead from the Saturday’s NY Times’ business section…

Investor Fear Over Morgan Stanley Sharpens

By ERIC DASH and JULIE CRESWELL

NY Times

October 1, 2011 …fears about Morgan Stanley are becoming especially acute. Investors are worried about the bank’s exposure to the European debt crisis, its ability to weather a turbulent trading environment and its reliance on short-term borrowing to finance its operations. The bank and some analysts say the fears are unfounded. But the market drove Morgan Stanley shares down 10.5 percent on Friday to $13.51, and the stock has lost 41 percent in the last three months. That performance was par for the course in what was a bruising third quarter for the entire financial industry. Bank of America shares fell more than 44 percent. Citigroup shares dropped more than 38 percent, while even Goldman Sachs, considered the mightiest of the Wall Street giants, tumbled more than 28 percent…

… …Now Morgan Stanley, which never regained the prestige and power it had in the years before the 2008 crisis, is quickly becoming a focal point for investors who fear that it may not be able to weather another financial storm…



The article continues on to mention that it now costs investors $449,000 a year to insure $10 million in MS bonds against default.

Among investors, the concerns are many. Some worry that the test could come from the company’s exposure to French banks. Others fear a liquidity crisis similar to what occurred in 2008 when banks like Morgan Stanley struggled to borrow the short-term debt that keeps them afloat. Still other investors expect the turbulent markets to take their toll on trading and investment banking results, which are the lifeblood of Wall Street.



Of course, that’s the thing about the casino mentality on Wall Street which is fully-supported in Washington these days…it’s all about the status quo making sure the banks continue along with their irresponsible, risk-taking mentality while our government insures the never-ending cycle which enables Wall Street fatcats to continue to privatize their make-believe profits while they keep on socializing their losses on the backs of the remaining 99% of us.

For Wall Street it’s win-win. For the remaining 99% of us it’s lose-lose.

And, that’s why when one looks at another late-breaking economic “development” in Europe, it becomes self-evident why a quote within Saturday’s NYT business lead also tells us that “…everything seems to be O.K. with these guys.”

You see, one way or another, overtly or covertly, everything IS “okay” with these guys. That’s because U.S. taxpayers are already positioned to foot Wall Street’s casino tab in Europe, too. Below, you’ll learn how this may very likely play out, compliments of the Wall Street Journal, which all but tells us this is what is scheduled to occur in coming months: “IMF Explores Options to Expand Its Lending Power to $1.3 Trillion.”

IMF Explores Options to Expand Its Lending Power to $1.3 Trillion

Ian Talley

Wall Street Journal Blog

September 30, 2011 WASHINGTON—The International Monetary Fund, looking to assure markets that it has the financial firepower to deal with deepening problems in Europe and also crises elsewhere, is exploring how it can have at least $1.3 trillion in lending power, according to officials involved with the discussions. The IMF currently has about $630 billion in usable resources; about two-thirds of that could be lent under IMF rules. Under the plan be considered, the fund would need to make permanent a $590 billion temporary lending facility that was put in place in response to the 2008 financial crisis. The IMF is also counting on member nations to finally enact a doubling of IMF member country dues, totaling $750 billion, which have already been approved in principle. Approvals by national parliaments are expected in early 2012.



So, how will U.S. taxpayer end up footing a big portion of this Euro bailout? Simply stated, the U.S. government is, by far and away, the largest dues-paying member of the Washington-based IMF.

Here’s the LINK to the IMF page at Wikipedia. On that page we learn…

A member’s quota in the IMF determines the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of Special Drawing Rights (SDRs).



Now, I’m by no means an expert on this matter, but it’s my understanding that member countries fund the IMF via dues which are roughly equal to their “quota.” At 17.72%, the U.S. quota is, by far and away, the most powerful member of the IMF. However, what this also means is that U.S. taxpayers are required to pony up annual dues that are approximately equivalent to that amount as a portion of the IMF’s total tab, too. So, when there’s a “discussion” about the IMF amassing a $1.3 trillion bailout fund, in large part to support economies within a teetering European Union, this amounts to approximately $230,360,000,000, or a little less than a quarter-trillion dollars.

Add that to the ongoing, stealthy $200 billion annual U.S. taxpayer bailouts of Wall Street that have been occurring since 2008 (see farther up, above), and we’re quickly approaching $450,000,000 in covert financial sector bailouts on the backs of Main Street in 2011, alone. (Actually, these payments/numbers may flow into early 2012, based upon the WSJ blog story, linked above.)

And, in case you have any questions as to what’s going on here, I’ll let Nobel prize-winning economist Joseph Stiglitz spell it out for you, via his quote on the IMF’s Wiki page…

“When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid?... It is the IMF that keeps the [financial] speculators in business. They’re not interested in development, or what helps a country to get out of poverty.”



Read Stiglitz’ quote, again, please.

Rest assured, this is not just about a potential backdoor taxpayer bailout (shades of AIG circa 2008) solely for Morgan Stanley, either.

There’s another story in today’s (Monday’s) NY Times which provides further support for the reality that the International Monetary Fund is a critical party of the “troika” behind the Euro-sovereign bailout(s), as well. Here’s the link: “Toil and Trouble Over the Caldron That Is Greece.”

Aside from being faced with hundreds of investor suits here at home along with portfolios of investments now at significant risk in bonds pertaining to European sovereign funds and some of that continent’s largest banks, many too-big-to-fail U.S. firms are currently on the “business end” of the litigation stick with numerous European banks, as well. Just Friday, the Financial Times covered one of the most recent suits, this one (of many) by the German Landesbanks against Bank of America and JPMorgan Chase…

BofA and JPMorgan sued over securities

By Tom Braithwaite and Kara Scannell in New York and Chris Bryant in London

Financial Times

September 30, 2011 Bank of America and JPMorgan Chase were sued for selling $4bn of mortgage-backed securities to German lenders that later turned sour.

Sealink Funding, an entity set up by Landesbank Sachsen, a German bank, claimed in suits filed in New York that the US banks sold residential mortgage-backed securities that they knew were backed by bad mortgages. “Defendants not only concealed from Sealink the truth about the poor quality of the securitised loans, defendants also knowingly provided false information to the credit rating agencies in order to secure a triple A blessing for its RMBS,” the complaint against JPMorgan read. The BofA complaint used similar language. JPMorgan declined to comment…

… …US banks, particularly BofA, are mired in mortgage litigation, with diverse claimants demanding compensation for billions of dollars of losses. Countrywide Financial, the mortgage business acquired by BofA in the crisis, is a focus for attention, given its large role in subprime lending. In the complaint against BofA, Sealink said it had been victim of a “massive fraud perpetrated by ... Countrywide Financial,” which made “representations ... [that] were recklessly or knowingly false when made, and caused Sealink to believe that the defendants’ RMBS it purchased were safe investments…”



Yes, as some have been known to describe it: $4 billion here…another $230 billion there…pretty soon you’re talkin’ about real (U.S. taxpayer) money!

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SIGTARP: CITI AND BANK OF AMERICA EXITED TARP PROGRAM PREMATURELY

Meanwhile, over at Citi and BofA, we’re now learning via the Special Inspector General for the TARP that, in 2009, our government obfuscated the fact that they allowed Bank of America and Citigroup to exit the TARP program prematurely. Put another way, our government all but colluded with these two zombie banks to misrepresent their financial condition to the public. (“I’m shocked! Shocked, I say!”)

Here’s the link to Yves Smith’s take on this from Saturday. And, here’s a link to Shahien Nasiripour’s coverage of this story over at the Financial Times’ blog: “Lenders left TARP too soon, says audit.”

Yves’ on Friday…

Key extracts from the Financial Times report today: US regulators moved too quickly to allow Bank of America and Citigroup to repay their troubled asset relief programme bail-outs, according to a new government audit… Policymakers at the Treasury department also sought to allow the banks a rapid exit, at one point approving a BofA proposal that ultimately was rejected because it allowed the company to leave the assistance programme by issuing $4.8bn less common equity capital than was required. Shortly after so-called “stress tests” in 2009 revealed capital shortfalls in the largest US banks, regulators developed a benchmark designed to guide Tarp exit procedures. For every $2 in Tarp aid reimbursed, banks were to raise $1 in new common equity. The assessment was based in part on banks’ capital needs. Just a few weeks later, that benchmark was tossed aside, resulting in an “ad hoc” and “inconsistent” process, Sigtarp said… After submitting 11 proposals, BofA was finally allowed to repay taxpayers their $45bn by issuing $18.8bn in common equity, $1.7bn in stock to employees and shedding $4bn in assets. At one point, the bank requested it be allowed to repay the part of its rescue package that would have ended restrictions on executive pay, an indication it was principally concerned with the issue, Ms Romero said. Regulators balked. The Federal Deposit Insurance Corp, then led by Sheila Bair, insisted that the bank had to raise more common equity to meet benchmarks, as opposed to meeting capital levels through “gimmicks” such as employee stock issuances and asset sales. Treasury approved BofA’s seventh proposal, which called for reduced common equity and greater asset sales… BofA exited Tarp on December 9 2009, when its share price closed at $15.39. It has since plunged about 60 per cent. It closed at $6.35 on Thursday.

Unfortunately, we are likely to see all too soon how well Treasury’s secret pact with the banks worked. And unfortunately, if they are proven to have gambled and lost, no one in the officialdom or at the banks will suffer all that much while the rest of us suffer considerable costs.



As an added “bonus,” here’s the latest on yet ANOTHER new and massive lawsuit against BofA about a totally related matter which supports the basic concept as to why Yves calls it just another chapter in Bank of America’s “Deathwatch.” (According to my “back-of-the-envelope” math, this puts BofA well over $250 billion behind the eight-ball on the business end of legal claims from individual investors and firms, and just plain old citizens.)

(DIARIST’S NOTE: Naked Capitalism Publisher Yves Smith has provided written authorization to the diarist to republish her blog’s posts in their entirety for the benefit of the DKos community.)

Bank of America Deathwatch: $50 Billion Securities Fraud Suit Over Merrill Acquisition

Yves Smith

Naked Capitalism

September 28, 2011 12:08AM If mortgage litigation and losses on second mortgages aren’t enough to put Bank of America in a terminally impaired state, the $50 billion private lawsuit filed earlier today represents another major blow. In short form: when Bank of American bought Merrill, the suit claims failed to disclose $15.31 billion loss around the time of the acquisition. It further alleges that this loss was deliberately hidden to assure the deal would be approved by shareholders. The suit charges that senior executives, including the former CFO, Joseph Price, didn’t tell the general counsel, Timothy J. Mayopoulos, about the full extent of the losses. Mayopoulos had been told the losses were roughly $5 billion. He had initially wanted them to be presented, but later decided against it (one has to assume due to pressure from CEO Ken Lewis and others) because it was within the range of recent Merrill quarterly losses. He was told two days before the shareholder vote the losses would be $7 billion, but that was still in a range that investors would arguably expect. They were actually $11 billion the day of the vote. Four days later, at a board meeting, Mayopoulos found out about the larger loss figures and tried to meet with Price. Mayopoulos was fired the next day. Note that that the SEC sued the Charlotte bank over the very same issue. Judge Jed Rakoff rejected the initial $33 million settlement as inadequate, and reluctantly approved the sweetened $150 million deal, noting it didn’t impose enough costs on the executives involved. This is a particularly clear-cut case. Steven Davidoff, a former deal lawyer turned law professor who writes regularly for the New York Times’ Dealbook, and tends to be conservative in his assessment of litigation, says that if certain facts alleged in the lawsuit prove to be accurate, “…this is a prima facie case of securities fraud.” And he continues:

Plaintiffs in this private case have the additional benefit that this claim is related to a shareholder vote. It is easier to prove securities fraud related to a shareholder vote than more typical securities fraud claims like accounting fraud. Shareholder vote claims do not require that the plaintiffs prove that the person committing securities fraud did so with awareness that the statement was wrong or otherwise recklessly made. You only need to show that the person should have acted with care. This case is not only easier to establish, but the potential damages could also be enormous. Damages in a claim like this are calculated by looking at the amount lost as a result of the securities fraud. A court will most likely calculate this by referencing the amount that Bank of America stock dropped after the loss was announced; this is as much as $50 billion. It is a plaintiff’s lawyer’s dream. Bank of America is facing a huge liability from this claim. It is also facing even more liability for those who bought and sold stock during this period up until Jan. 15. In a ruling on July 29, the judge in this case allowed these claims to proceed against Bank of America, Mr. Price and Mr. Lewis. The judge had already ruled that the disclosure claim related to the proxy vote could proceed. This case is on a relatively fast track, with an October 2012 trial date.



Bank of America is expected to argue that the losses were consistent with what shareholders expected, given that a good will write off of $2 billion was already disclosed, and they didn’t know the full extent of the damage at the time of the vote. My guess is that if that is the best defense they can mount, they are going to have to write a very large check.



Can you say “securities fraud?” Sure you can! But, as we all know, laws are for us little people…you know, the other 99% of America.

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CHAIRMAN OF INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB): TOP EURO BANKS AND SOVEREIGN FUNDS ARE COOKING THEIR BOOKS

The Chair of the International Accounting Standards Board (IASB), Hans Hoogervorst, has just stated in public that (in addition to Morgan Stanley, as noted farther up, above) many European banks are downright obfuscating (read: misrepresenting to the public and/or cooking their books) how deeply in the hole they are as far as the Greek and other potential sovereign bailouts are concerned (as many are noting, this isn’t some blogger or politician making this statement, we’re now hearing this from the leading expert on the matter on the European continent).

On the subject of the EU and the banks, an interesting speech by Hans Hoogervorst, Chair of the International Accounting Standards Board (IASB). He spoke at an investors conference in Boston (PDF) yesterday. I wasn’t there. He was quoted as saying: European banks carried out "blatant breaches" of IFRS in valuing their holdings of Greek debt.

Mr. Hoogervorst’s comments were consistent with his letter (PDF) to the European Securities and Markets Authority. Some tidbits from that letter: There have been indications in the market that some European companies are applying the accounting requirements for fair value measurement and impairment losses in a way that seems to differ from the objective of IAS 39 Financial Instruments: Recognition and Measurement. This is evident particularly in their accounting for distressed sovereign debt, including Greek government bonds.

The bottom line from the chair of the International Standards Board is that the European banks are fudging their books. This is not the Blogs making this assertion. It’s coming from the highest authority that exists.



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MEANWHILE, BACK ON WALL STREET, TACIT ACKNOWLEDGEMENT THAT OUR SECURITIES MARKETS HAVE BEEN ILLEGALLY MANIPULATED FOR THE PAST FEW YEARS (Or, Why Confidence In The Integrity Of Our Markets Starts With “Con”) WHILE REGULATORS HAVE LOOKED THE OTHER WAY

If you’ve been paying any attention to the comings and goings a couple blocks away from Zuccotti Park, over at the New York Stock Exchange, you’d realize that our securities markets in America, at least over the past few years, have reached a point where they are virtually beyond the point of serious regulatory control.

An obscure story about a stock trade, from a couple of weeks ago, that’s been making the rounds of the financial blogs ever since really highlighted the truth (more about that in a second) that we are now moving light years beyond any sane effort to reinstill confidence in our now-blatantly-“rigged” economy.

Frankly, at this point, if anyone thinks that the current state of our nation’s financial markets are anything other than a confidence game writ large, where the house always wins, they’re in deep denial.

Over a year ago, in August 2010, even then-Senator Ted Kaufman (D-Delaware), blew a gasket about all of this, referring to the Securities and Exchange Commission as being downright “corrupt.”

By now, you’ve probably heard about our “New Normal.” (I have two words for that: ”Anything but!”)

And, if you’ve been following my posts, then you know I frequently refer to a term that M.I.T. economist Simon Johnson coined back in August 2009: “Our Two-Track Economy.”

Then, of course, there’s also our “Two-Track Labor System.”

And, last but not least, there’s our stock markets’ “Two-Tier Trading System,”

which is really--thanks to the introduction of High-frequency trading, or “HFT”--all about the reality that a

handful of our nation’s Wall Street firms have been enabled, on an institutionalized basis, to (essentially and quite illegally) front run (the process of placing [usually] a proprietary order for a security ahead of a client’s order to capitalize on the profits generated due to knowledge of the client’s trade, but before that trade is executed) our country’s commercial securities markets. (I’ve been writing about this for the past couple of years, as well.)

This is all due to the fact these select firms are executing securities trades, for themselves and a handful of their most elite clients, in nanoseconds, while the rest of us--you remember: the other 99%, or the few in the remaining 99% of the population that can even afford to buy a few bucks worth of stock--work off of time-delayed platforms which provide the general public with up to 20- to 30-second delays in actual trades.

Again, the institutionalized reality that there’s are two worlds in our society–one where the ultra-wealthy play and another planet within a planet where the 99.9% of us that don’t matter reside–is now to the point where it’s discussed openly; at least if you know where to look for the discussion.

Here’s the story about the over-the-top example of this Wall-Street-gone-wild mentality that I just referenced, a few paragraphs up. It’s a story of high-frequency securities trading taken to the next, totally insane level…

HFT Breaks Speed-of-Light Barrier, Sets Trading Speed World Record



Adds a new unit of time measurement to the lexicon: fantasecond



Nanex.net

September 20, 2011 On September 15, 2011, beginning at 12:48:54.600, there was a time warp in the trading of Yahoo! (YHOO) stock. HFT has reached speeds faster than the speed-of-light, allowing time travel into the future. Up to 190 milliseconds into the future, or 0.19 fantaseconds is the record so far. It all happened in just over one second of trading, the evidence buried under an avalanche of about 19,000 quotes and 3,000 individual trade executions. The facts of the matter are indisputable. Based on official UQDF/UTDF exchange timestamps, there is unmistakable proof that YHOO trades were executed on quotes that didn't exist until 190 milliseconds later! Millions of traders depend on the accuracy of exchange timestamps -- especially after bad timestamps were found to be a key factor in the disastrous market crash known as the flash crash of May 2010. We are confident the exchange timestamp problem has been completely addressed by now: the SEC would have made sure of it. Adding accurate timestamps is not exactly rocket science; it's not even considered to be a difficult problem. Based on recent marketing materials, the exchanges are practically experts on measuring time. And with hundreds of millions in annual data feed subscriptions paid by the same subscribers expecting quotes with accurate timestamps, there is no shortage of funds to make it happen. So we can be certain the exchange timestamps were accurate, which means that HFT has truly entered the era of the fantasecond.



(Diarist’s Note: If you’re interested in this type of thing, you’ll see by clicking on the link at the top of the blockquote, that the folks at Nanex have gone to great lengths to document this story.)

I’m now to the point where I sincerely believe the U.S. would be better off if we just fired everyone over at the Securities and Exchange Commission and started anew. At least, at that point, those Wall Street minions and sycophants would be forced to make a beeline to those firms where they already expect to be rewarded for their deviousness now, instead of at some point down the road. So, let’s just speed up the process; expedite this “deal,” as it were, today, and be done with it! (Obviously, 99.9% of these thieves are not going to see any jail time, so isn’t it time we just stopped kidding ourselves about this travesty?)

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So, while there are hundreds of specific†, highly-documented† reasons to be protesting against (or, at least financially supporting those who protest against) Wall Street right now, new travesties are appearing every day. And, that brings this post full circle, if for no other reason than to remind us that we’re dealing with the intransigence of a deeply imbedded and all-powerful status quo–one that couldn’t give a rat’s ass about the welfare of the remaining 99% of those in our society, today, over whom the one percent currently rule.

Things are bad, and it appears they’re going to get quite a bit worse--for many of us that count ourselves among the 99%--in coming weeks, months and even years. And, perhaps, for the short-run, that’s a good thing, if for no other reason than it will mean that these sparks being generated now by the few that are out there protesting will, in turn, ignite a significant portion of the balance of the population to join with them in protest.

It is the formation of a perfect storm–the proverbial nuclear reaction of the soul times 310,000,000, and of the type that would be expected to occur when the forces of greed and callousness crash head-on into a wall of suffering and compassion.

As many have said, it may take a catastrophe of major proportions to truly affect social change to the extent it’s needed now. And, regrettably, the way things are shaping up, as noted in the commentary from others, above, that is where we appear to be headed, today.

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†=Checkout my posts since late 2007 for a comprehensive review of at least a couple hundred more reasons as to why you should be either writing a check to #OccupyWallStreet, or out in your own metro area’s version of Zuccotti Park holding a sign; or, both!

Click on THIS LINK for more information on protests throughout the U.S. as well as appropriate messaging guidance, directly from the OWS organization.

Get the message out! In a battle of wits, Wall Street is defenseless because we have the nuclear weapon: THE TRUTH.

Make a donation to the WeAreTheOther99%'s media fund.

Go to OccupyWallSt.org and make a donation to their General Fund.

Participate!