Spain's Credit Rating Cut

Considering the vastness of the debt problems facing numerous European countries, this is hardly a surprise. The problem now is that European leaders are playing whack a mole with economic problems. One pops up, they smack it down, another pops up they smack it down.

May 29 (Bloomberg) -- Spain lost its AAA credit grade at Fitch Ratings as Europe battles a debt crisis that’s prompted policy makers to forge an almost $1 trillion bailout package for the region’s weakest economies.

The ratings company cut the grade one step yesterday to AA+ and assigned it a “stable” outlook, according to a statement from London. Spain has held the top rating at Fitch since 2003. Standard & Poor’s lowered Spain’s ratings to AA on April 28.“The process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium-term,” Brian Coulton, Fitch’s head of Europe, Middle East and Africa sovereign ratings in London, said in the statement.

Spain is struggling to cut the euro region’s third-largest budget deficit as the economy, still reeling from the collapse of a debt-fueled construction boom, is forecast to contract for a second full year. Prime Minister Jose Luis Rodriguez Zapatero, who has angered traditional allies by cutting public wages and freezing pensions, has failed to convince investors he can put the finances back in order as borrowing costs continue to surge.U.S. stocks fell after Fitch’s announcement and the euro weakened to $1.2280. The currency used by 16 European nations has slumped 19 percent against the dollar in the past six months on concern that indebted countries won’t be able to rein in their spending.

‘Still a High Rating’

“I would like to emphasize that it’s still a high rating,” Soledad Nunez, the director of Spain’s Treasury, said in a telephone interview. “The agency recognizes that public finances are strong and the government’s commitment to fiscal reform.”

There comes a point where printing billions if not trillions of dollars simply doesn't work anymore because of lack of confidence, we are mot there yet but Europe appears to be running out of options. As I said yesterday, the Tea Parties have been vindicated.

The DOJ Has a Massive Case in Regards to the Muni-Bond Scandal

The muni-bond scandal has appeared big for some time now as rumors here ans there floated about that a massive investigation was taking place, but I doubt people expected it to be this vast:

700,000 Tapes

U.S. prosecutors amassed almost 700,000 tape recordings and 125 million pages of documents during an investigation that lasted more than three years, lawyers have said.The government has identified more than 200 transactions that were rigged by 16 banks, according to a Justice Department list filed in the criminal case on March 24. The list was later sealed by U.S. District Judge Victor Marrero, who is presiding over both cases in Manhattan.

More than 20 individuals were identified as co- conspirators, including six former bankers with Charlotte, North Carolina-based Bank of America and five former bankers with New York-based JPMorgan.The Justice Department today sought to limit the pre-trial exchange of information among parties in the civil lawsuit. Jannaco argued against releasing the tapes to any lawyers outside of the class-action.

“The tapes contain actual conversations of collusive conduct,” including “material at this point we don’t want to have to disclose to protect our grand jury investigation,” she said.In October, a grand jury indicted David Rubin, founder of Beverly Hills, California-based CDR Financial Products Inc., along with the firm’s former chief financial officer and a vice president for taking kickbacks for running sham auctions for the investments. All three deny wrongdoing. Three former CDR employees and one former UBS AG employee have pleaded guilty in the criminal probe.

Providing Evidence

Bank of America has been providing prosecutors with evidence since at least 2007. The bank voluntarily reported its own illegal activity and agreed to cooperate with the Justice Department, according to a statement from the company. Bank of America has also provided information to plaintiffs in the civil antitrust class action.

It should be noted that the thrust of the story is not about the vastness of the documentary evidence, but the possibility that more financial houses and individuals mat be targeted for their role in the muni-bond scandal.

The Tea Party Was Right

All across the world and across the United States (with the exception of the Fed) austerity is the magic word of the year. This is not a surprise as the Tea Parties were formed in no small part to slow the vast growth of a fiscally unsustainable path for this country. As we can see, the chickens came home to roost over too much government debt a lot quicker then many people though. The collapse of Greece and the internal contradictions of the Socialist states of Europe are now forcing these governments to adopt policies that could be right out of a Tea Party platform.
Case in point, Spain:

MADRID (AP) -- Spain's finance minister has pleaded with lawmakers to vote in favor of emergency economic measures saying they are harsh but necessary to reduce the country's bloated deficit.The package, which includes a cut in civil servants' wages, will be voted on Thursday and approval is expected to be by possibly just one vote.Finance Minister Elena Salgado told Parliament ''the measures are painful but inevitable.''

It should be noted that the Zaptero government is as left wing as they get, after being catapulted into power following the successful terror attacks known as the Madrid bombings, they promptly maintained and expanded socialist policies until this year when the money ran out, now its austerity time!. Closer to home we have New Jersey on Chris Christie becoming something of a national sensation for cutting government, and even in California, Schwarzenegger has finally come around to proposing an austerity budget to force the hands of his opponents in the Democrat controlled legislature:

ALAMEDA, Calif. — California Gov. Arnold Schwarzenegger delivered his May budget proposal Friday afternoon, addressing a $17.9 billion deficit by proposing wholesale elimination of key social welfare programs, with no tax increases.Schwarzenegger projects the state will have $91.5 billion in general fund revenue in fiscal 2011, but faces a $17.9 billion shortfall, including a $7.7 billion deficit carried over from the current fiscal year. The administration uses a $19.1 billion deficit figure, after adding a $1.2 billion reserve.

State officials say California has adequate resources to retire the state’s $8.8 billion of outstanding revenue anticipation notes when they mature this month and next.Controller John Chiang warned lawmakers that their prompt action is needed to avoid a repeat of the state’s cash-flow problems last year, when the controller’s office issued some $2 billion in IOUs to lower priority creditors to preserve cash for creditors with higher legal standing, such as bondholders.

Closer to my home in New York, guess who said this:

He also spoke directly to New York’s powerful public employee unions, saying he would freeze salaries of state workers. And he said he opposed raising taxes.

He proposed capping state spending and limiting local property tax increases to no more than 2 percent annually.

If you clicked the link you will have realized that was Andrew Cuomo, scion of one of the most liberal dynasties in the United States. It testifies to the courage and wisdom of the original tea party movement that their ideas are now being incorporated into all sides of the political spectrum as a means to win elections. Not to bad for a group of people who were mocked and ridiculed and smeared in a most horrendous manner.

San Jose's Legal Complaint and the Muni-Bond Scandal

A nice addendum to previous reports about how widespread the muni-bond scandal is:

The City of San Jose, one of many alleged victims of the bankers’ deception currently suing the banks, said in a federal complaint that its investigation revealed “a far-reaching, industry-wide conspiracy through which municipal derivative providers, working with municipal derivative brokers, foreswore competition with one another in the municipal derivative transactions of San Jose and others.” The conspiracy also compelled the city to pay “exorbitant fees,” it said.


San Jose summed up its claims against the alleged perpetrators, including Goldman Sachs, Citibank, Morgan Stanley, and others, saying: “They manipulated and allocated the municipal derivatives market amongst themselves in ways that included but was not limited to: signaling to each other their intended bids and whether they were interested in winning a particular transaction; submitting courtesy bids on transactions they had no intention or desire to win in order to give transactions an artificial veneer of fairness; refraining from bidding on transactions to allow another to prevail without competition; lowering their intended bids in response to signals that the transaction could be won by them at terms that would yield higher profits; giving false price verification reports; kicking back money through undisclosed and/or unearned fees; and other actions that depressed the returns that San Jose and other municipal bond issuers earned on municipal derivative transactions and otherwise caused them economic injury, while inflating the profits of defendants.”


"Because of the pervasiveness of this conduct and the inter-transactional relationship of defendants' illegal conduct, the conspiracy has had a market-wide effect on the terms of municipal derivative transactions and prices of services associated therewith, depriving San Jose and other municipal bond issuers of the benefits of free competition. As a result, San Jose suffered harm in several ways, including, but not limited to: (a) receiving rates on municipal derivatives that were artificially depressed and uncompetitive; (b) being forced to engage counter-parties to municipal derivative transactions that carried increased credit risks that were not reflected in the terms of the transactions; and (c) being forced to pay uncompetitive, inflated fees and costs in municipal derivative transactions."

Lets not forget the role of the Democrats here.

Chavez and the Boligarchs

An interesting look at the bandits Chavez relies upon to maintain his power. This isn't complicated, steal peoples wealth give it to supporters who are now vested in you, and repeat the process as needed. Of course his supporters may one day find themselves in the hot seat as the well runs dry, but such is the life in a dictatorship where the whims and fancy of one man can become government policy by fiat:



Something seemed oddly familiar about certain businessman being harassed while government supporters received favorable treatment.

Euro Falls as Spain Worsens

Considering Zapetro has been leading the way on ruinous economic policies, the fact that spain set up for failure is no surprise:

May 25 (Bloomberg) -- The euro dropped to the lowest level against the yen since November 2001 and fell against the dollar on concern that weakness in the Spanish banking system will act as a drag on the economy.

The single currency declined after the International Monetary Fund urged Spain to do more to overhaul its ailing banks, adding to speculation Europe’s financial institutions may face more losses. The Japanese currency gained as a decline in stocks boosted demand for the yen as a refuge. The won slumped as tensions escalated between the two Koreas over the sinking of a warship from the South’s navy in March.

“What’s happening in Spain has added to concerns about the euro,” said Henrik Gullberg, a foreign-exchange strategist at Deutsche Bank AG in London. “The market is concerned that this financial-market uncertainty will feed through into the real economy.”

The euro weakened 1.8 percent to 109.66 yen as of 10:09 a.m. in London after dropping to as low as 109.34 yen. The common currency depreciated 1.3 percent to $1.2212. The dollar declined to 89.71 yen, from 90.29 yen.

The 16-nation euro slid to a four-year low of $1.2144 on May 19.Spain’s banking industry “remains under pressure” as consolidation has been “too slow,” the Washington-based IMF said in a report yesterday after a regular review of Spain."We fully support” the new austerity measures, it said, referring to Spain’s plans to rein in its budget deficit with the deepest spending cuts in three decades.

Austerity can be avoided by sensible fiscal positions when times are good, or is that too complicated?

Economist Looks at California

Its not that Schwarzenegger didn't finally come around to doing the right thing, he just had to wait too long:

COMPARISONS between California and the land of Socrates have become frequent recently. They are different, of course. California is nowhere near defaulting on its debts (though rating agencies consider that risk greater in California than in the other 49 states). But California has become America’s symbol of fiscal mismanagement as Greece is now Europe’s.

Arnold Schwarzenegger, California’s lame-duck governor, conceded as much on May 14th, when he updated his budget proposal to the legislature. After several rounds of painful spending cuts, California is now contemplating a budget that is, when adjusted for inflation and population growth, smaller than it was a decade ago. And yet the state still confronts a budget hole estimated at $17.9 billion in the current and coming fiscal years. Mr Schwarzenegger, a Republican in a high-tax state, wants to plug that hole without raising taxes, with more cuts and some federal aid.

The chief culprit, pension obligations promised by previous admins have all but put the state on a fiscally unsustainable budget path.

South Korea Takes Harder Line on North

Not a total cutoff mind you, a shared industrial zone where North Korean workers provide the manpower in exchange for precious hard currency remains open, but a serious escalation nonetheless:

SEOUL, South Korea — Tensions escalated sharply Monday on the Korean peninsula, as South Korean President Lee Myung-bak said that his nation would sever nearly all trade with North Korea, deny North Korean merchant ships use of South Korean sea lanes and ask the United Nations Security Council to punish the North for what he called the deliberate sinking of a South Korean warship two months ago.

In Washington, the Obama administration said the South Korean measures were “entirely appropriate.” President Obama instructed American military commanders to coordinate closely with their South Korean counterparts to “insure readiness and deter aggression.”

“The Republic of Korea can continue to count on the full support of the United States,” Secretary of State Hillary Rodham Clinton said in Beijing, where she was attending high-level talks between China and the United States that have been overshadowed by the crisis. “Our support for South Korea’s defense is unequivocal.”

The steps outlined by Mr. Lee in a nationally televised speech — coupled with new moves by South Korea’s military to resume “psychological warfare” propaganda broadcasts at the border after a six-year suspension — amounted to the most serious action the South could take short of an armed retaliation for the sinking of the ship, the South’s worst military loss since the Korean War ended in a truce in 1953.

A fullout war us unlikely for now, thankfully. The biggest problem South Korea has is the their capital in Seoul is right off the border and any war could result in massive civilian casualties in the initial stages.

Marines Provide Comfort in Afghanistan

A man and his child wait outside Naw-Abad to receive medical care May 15 during a Marine-sponsored village medical outreach

A nice story on a beautiful Saturday as Summer beckons:

NAW ABAD, Afghanistan (May 19, 2010) — Marines and medical officers from Brigade Headquarters Group and 3rd Low Altitude Air Defense Battalion, I Marine Expeditionary Force (FWD) and an Afghan national army medic from Camp Shorabak, Afghanistan, set up a village medical outreach, May 15, outside the village of Naw Abad, to provide medical care to the people of that area.


The Marines and Sailors set up a medical tent and aided over 35 men and children who traveled from their homes down to the medical site.
Lt. Cmdr. Aaron R. Huber, 3rd LAAD Bn. medical officer said his team provided excellent health care and worked to their limits.


Huber, from Southaven, Miss., also said most illnesses were acute and were treated by the medical staff.Locals were also given a short class on preventative medicine to encourage district well-being.Before the villagers left to return home, they were given hygiene items such as toothbrushes, toothpaste and lotion to take back to their families. Solar powered radios were also handed out so the villagers would be able to listen to their local radio station for information on upcoming village medial
outreaches.


The Naw Abad village men have little access to health care, but as the women very rarely leave their compounds, most of them have never seen a physician.
Navy Lt. Michelle M. Lynch, medical officer with Marine Medium Tiltrotor Squadron 261, 3rd Marine Aircraft Wing, took a female engagement team and traveled inside each compound to give the village women needed health care."They are kept away from mainstream culture," said Lynch. "Their needs are easily overlooked."

No doubt they are overlooked. Anyway, Good Work.

The 4th guilty Plea in the Muni-Bond Scandal

Consider this an add on to yesterdays news:

NEW YORK -(Dow Jones)- A former financial services company employee pleaded guilty Wednesday to conspiracy and fraud charges in a bid-rigging and price- fixing scheme in the municipal finance market, prosecutors said.

In a statement, the U.S. Department of Justice's Antitrust Division said Mark Zaino pleaded guilty to two counts of conspiracy and one count of wire fraud.Zaino is the fourth person to plead guilty in the matter and has agreed to cooperate with prosecutors in the investigation.

In a charging document known as a criminal information filed Wednesday, prosecutors alleged Zaino engaged in a bid-rigging conspiracy from October 2001 to March 2006, in which Zaino and other co-conspirators agreed in advance on who would be the winning bidder for investment agreements sought by public entities issuing municipal bonds.

By the way, the company in question is most likely UBS:

The government contends that CDR Financial Products Inc. coordinated the bid-rigging scheme. In October, a grand jury indicted the firm, its founder David Rubin, former chief financial officer Zevi Wolmark, and vice president Evan Andrew Zarefsky. The firm and the three men deny they did anything illegal.

As part of the conspiracy, Zaino acted as a broker of investment agreements, and co-conspirator providers designated in advance which provider would be the winning bidder for certain GICs brokered by UBS.

The firm’s name was not identified in court filings or in October’s indictment, in which UBS is identified only as “Financial Institution A.”Market participants noted that Zaino worked as a vice president for CDR, then known as Chambers, Dunhill, Rubin & Co., prior to his job at UBS, which he began in spring 2001.

Three other former CDR employees have pleaded guilty to criminal charges and have agreed to cooperate with investigators. They are Matthew Adam Rothman and Douglas Alan Goldberg, former CDR vice presidents, and Daniel Naeh, who has not worked for the firm in years but was living in Israel and acting as a bidding agent on muni deals.A spokesman for UBS was not immediately available to comment.

UBS was one of the institutions that was involved in the Gripgate scandal that torpedoed Bill Richardson's cabinet hopes:

The New Mexico Finance Authority has asked the office of Attorney General Gary King to look into trying to recover millions of dollars lost in a deal at the center of a federal pay-to-play investigation.The authority’s chairman, Stephen Flance, said Wednesday that he hoped to recover money from a series of companies that recommended that the agency use complicated financial vehicles called interest-rate swaps.

Ultimately the market for the swaps collapsed, causing the agency to refinance roughly $450 million of $1.7 billion in bonds used to the state’s high-profile transportation program — GRIP, short for Governor Richardson’s Investment Partnership.That refinancing cost $6 million to $10 million, NMFA officials said Wednesday.It is that money that Flance hopes the agency can recover, he said.

“We thought we were getting independent advice, and I think that it was not as independent as we were led to believe,” Flance said of the team of advisers. “I think that they had a product to sell.”

The companies that might find themselves on the business end of the Attorney General’s legal complaint, if it comes to that, are JP Morgan Chase Co. and UBS, among others. The two firms were among those on a team of advisers that recommended the swaps, Flance said.Both JP Morgan and UBS sold a portion of $1.1 billion in bonds for the New Mexico Finance Authority in April 2004, which helped finance the GRIP program. A California company at the center of a federal investigation involving the financial authority, meanwhile, got a state contract to advise the authority on the swaps.

As for Richardson and David Rubin, that is how it all began on this blog.

UBS Employee Pleads Guilty in Muni-Bond Scandal and Investigation Widens in Florida

We have already seen CDR employees and political operatives plead guilty, but this would be one of the first times an actual bank employee has thrown themselves on the mercy of the court over the muni-bond scandal:

May 19 (Bloomberg) -- A former Wall Street banker with UBS AG pleaded guilty to participating in a conspiracy to rig bids and pay state and local governments below-market returns on investment deals, the Justice Department said.

Mark Zaino, who worked on the Zurich-based bank’s U.S. municipal-bond and derivatives trading desk from 2001 until 2006, pleaded guilty to fraud and conspiracy charges filed in U.S. District Court in New York, the Justice Department said today. The government said Zaino ran sham auctions in return for kickbacks and funneled illicit payments to CDR Financial Products Inc., another firm that handled bids for such deals.

Zaino’s plea marks the first time that an employee of a Wall Street bank has admitted to participating in the conspiracy to deliver added profits on investment deals at taxpayers’ expense.

The conspiracy stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non-profits, Bloomberg News has reported, based on government records filed in connection with the CDR case. UBS was among the 16 banks that participated, according to a Justice Department list of co-conspirators that was filed in court on March 24 and sealed.Fifteen other banks took part, including Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co., according to the list.

‘Inflated Fees’

“Kickbacks in the form of inflated or unearned fees were paid to Zaino’s employer and its parent financial institution in exchange for assistance in controlling the bidding process,” the Justice Department said in today’s statement.

Mr. Zaino has agreed to co-operate with authorities and as for the fees being used as kickbacks:

Before one bid in August 2002 to invest the proceeds from bonds issued by Missouri’s Health and Educational Facilities Authority, Zaino, CDR employees and a banker at Financial Security Assurance agreed on how much FSA would pay to win the bid and the amount of CDR’s kickback, according to the guilty pleas and other court records. Four days after FSA won the bid, UBS paid CDR a $475,000 kickback disguised as a fee to CDR for arranging a swap between UBS and FSA.

Not a bad gig if you can get it. In other news Florida has decided to expand investigations into the activities of CDR:

Florida's investigation into bid rigging in municipal bonds widened this week with reports that several of the country's largest banks may have been involved in a nationwide conspiracy.

According to federal indictments, the CDR Financial Products of Beverly Hills, Calif., gave false information to municipalities and fed information to bankers allowing them to win with lower interest rates than they were otherwise willing to pay.

Bloomberg News reported that the banks took their illegal gains from the additional returns on Guaranteed Investment Contracts and paid CDR kickbacks. Among the banks named were: Citigroup, JPMorgan Chase, Lehman Brothers and Wachovia.

The alleged conspiracy included more than 200 deals involving about 160 state agencies, local governments and non-profits involving tens of billions of tax dollars.The Florida Attorney General's Office, through spokeswoman Ryan Wiggins, said, "We have been coordinating with other states on a multi-state investigation into this issue since April 4, 2008."

In 2008, Attorney General Bill McCollum issued an 11-page document called "Antitrust Civil Investigative Demands" to 38 firms and subsidiaries, including Merrill Lynch, Bank of America, JPMorgan Chase, AIG SunAmerica Life Assurance Co. and GE Funding Capital Market Services Inc.

The AG's office said that Florida asked for information about every GIC and municipal bond derivative sold during a 10-year period, including all payments made to any persons in connection with these types of transactions and the profits realized from their sales.

Considering Gulf Breeze Florida has been the seen of many CDR activities double checking its activities seems rather rational.

Democrats and CDR Financial Products

Following the Bloomberg story that detailed how widespread the muni-bond scandal actually is there has been a bevy of stories across the country detailing how vast it actually is. From the NY Times to various posts on the topic such as found here or here, or found in the NY Times Dealbook section, to reports on the drop of CDR's stock. As one can see it appears a show may have finnaly droped nationwide as to the vast extent of the alleged wrondoing. Often left out is the political aspect on how this company worked various politicans (overwhelmingly Democrat) to allegedly get the inside track on these deals, lets detail once again the connections:
From January 16th 2009:

The Municipal Bond Scandal that Bloomberg markets exposed in 2006 with their story Broken Promises is emblematic of a culture of corruption that exists in the Democratic party. Using the poor and needy as an excuse, CDR Financial Products along with several other businesses including J.P.Morgan Chase and AIG, teamed up with significant elements of the Democratic party in a nationwide scheme that routinely left parts of this country devastated.


Pay for Play is a misnomer, in reality that is only half the equation. Yes the bribery of Democrat politicians is an offense all by itself. But even more threatening were the black box deals and financial schemes using the municipal bond market as a means to pilfer millions of dollars. The deals were opaque by nature and complicated by design. In short they involve insurance companies, banks, and CDR floating municipal bonds for local government agencies with the purpose of funding improvements, but with the real goal of merely of enriching the companies .

A summary of black box deals:

Step 1:Issuer sells Millions in Municipal Bonds to finance civic improvements
Step2 :Financial firms make millions in fees from bonds Sales (Some have secret agreements to make more from investment gains and insurance)
Step 3: Cities buy back bonds from investors, citizens get nothing.
Step 4: IRS says the agreement cheats taxpayers, demands a tax penalty to keep the bonds tax exempt.

CDR and the Democrats

The withdrawal of Bill Richardson recently made the headlines. In his case CDR gave money to Si SE Puede, a PAC formed to help pay Richardson's expenses at the 2004 Democratic Convention. In exchange its argued that CDR received favorable treatment in regards to bids to do business for GRIP (Govenor Richardson's Investment program) , bid rigging in short.


Another aspect of pay for play, and one more likely to land a politician in jail is CDR's tactic of finding friends, fundraisers and associates of elected Democrats, and hiring them as "Consultants". In New Mexico it was Richardson friend Mike Stratton who was hired by CDR. On a side note the Director of Si Se Puede Fred Duval was hired by UBS ,a Swiss bank, as a consultant. UBS was also one of several banks that ended up receiving a cut of the GRIP pie. The collusion of CDR, elected Democrat, and consultants that occurred in New Mexico is similar to other CDR linked scandals. In Philadelphia it was Ron White (now deceased) who received money and super bowl tickets from the company and was hired as a consultant. He was also an associate and fundraiser for Philly Mayor Sharpe. In Pennsylvania as a whole it was Alan Kessler who was the chief lobbyist for CDR and a top fundraiser for Ed Rendell. The most egregious example would be Mayor Larry Langford of Birmingham Alabama, who is accused in a 101 count indictment of using his friend William Blount and lobbyist Albert LaPierre to funnel money, jewelry, cloths, and watches into his hands in exchange for government favors while he was President of the Jefferson County Commission. Jefferson County, which includes Birmingham is on the precipice of the greatest municipal bankruptcy in history. There are also questions of CDR's actions in Atlanta and several of municipalities and CDR is currently being sued by over 20 school districts and cities in addition to the criminal investigations.


Donations to Democrats
Over the past 16 years David Rubin, President of CDR, has managed to funnel 279,000 dollars to various candidates across the country. In total 95% of that money went to Democrats. Of those Democrats, Obama, Clinton, Ken Salazar, and Henry Waxman were some of the top beneficiaries. In addition he has spread 91,000 dollars to Democrats on a state and local level, with Ed Rendell, Governor of Pennsylvania being the top recipient. It should be noted that Rubin was on Rendell's transition team when he became governor a couple years ago. And where was our former Chairmen for House Oversight and Government Reform Henry Waxman when all of this corruption was going on? Broken Promises exposed CDR in 2006 and the SEC had fined that company in 2007, why no headline grabbing hearings for the country to sick its teeth into? Oh wait CDR in addition to being pouring hundreds of thousands to the Democrats happens to be located in CA-30, that would be Waxman's own district.


The Impact
The greatest threat would be to the integrity to the 2.6 trillion dollar municipal bond market. If "phantom" bonds and scams infect the bond market, what could happen? We have all seen the past couple years the damage fear, panic, and fraud could do to markets and economies. But there is a human impact as well, not just the corrosive affect of bribes and corruption, but an increase of pain and anger for people across the country. In Florida, housing called Oakwood Terrace was left a cesspool when muni-bonds floated in the name of helping low income neighborhoods was never used for improvements. In Philadelphia the people have had their gas rates increased to make up for the 60 million dollars lost from CDR deals gone sour. And in the greatest disaster of all, Jefferson County Alabama, (Mayor Langsford's jurisdiction) is now on the cusp of complete financial meltdown.


If this is not a culture of corruption, what is?

Lets see, Ken Salazar is now at Interior, Obama is President, Clinton is at State, Rendell is still the Governor of Pennsylvania, and Henry Waxman happens to be sitting in a powerfull chairmenship going after companies who point out the reality of Obamacare.
Convergence Indeed!

Bloomberg Points to Convergence Between Muni-Bond Scandal and Economic Collapse

Convergence indeed. In one of the most damning events involving CDR financial products the Justice Department along with Bloomberg News essentially laid out the case that CDR, along with numerous financial houses rigged the aspects of the muni-bond market to their favor and to the eventual detriment of numerous municipalities across the country:

May 18 (Bloomberg) -- A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.

The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.

West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.

They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.

In all over 200 deals invovling over 160 municipalities were involved and one of the key wittness is the informant from Bank of America who managed to also get BOA amnesty from getting chargein in exchange for co-operating. As for theier role in the mortgage crash:

Court records in the broadest-ever criminal investigation of public finance shed new light on how Wall Street's biggest banks were cheating cities and towns during the same decade in which they were setting the stage for a global economic collapse.

As the banks were steering the world's financial system to the brink of catastrophe by loading more than $1 trillion of subprime mortgage loans into opaque debt investments, they were also duping public officials across the U.S.

Many of the same bankers and advisers who sold public officials interest-rate swap deals that backfired for taxpayers are now subjects of the criminal antitrust investigation involving GICs.

The swaps are derivatives designed to keep monthly payments low as lending rates change. Municipal-derivative units of the largest U.S. banks also sold the contracts, public records across the nation show.

Back during the AIG bonus imbroglio, I wrote this in about the Convergence of all these powerful forces:

Amidst all of the attacks on AIG bonuses, the release of the banks and states they paid money to shows an amazing connection to the muni-bond scandal. This is from the Times today:

Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion).

I wrote this in February in regards to Obama's payoff to the banks:

For the record UBS is involved with the Richardson scandal where the bank was part of a 4 way cut of over 5.1 million in fees in a muni-bond deal scandal known as Gripgate. Its also subject to lawsuits in Federal courts by various cities and municipalities. And what other financial institutions has played a key role in the muni-bond scandal that has taken down politicians across this country and is facing suits in the Federal courts, why J.P Morgan Chase of course. The same company that also stands to rake in extra business from this action. Understand all banks can profit from this and if the muni-bond market sees extra business it could also provide more revenue for CDR Financial Products as well. Who knows, perhaps it was Barney Frank's payoff all along.

This is From Feb 18th regarding the collapse of Jefferson county Alabama:

It appears the county, which is now about to go bankrupt due to the deals CDR put together will Mayor Larry Lanfgord adding insult to injury the county may have over paid by a cool 80-100 million for deals that ended up destroying it. In these deals CDR received 2.3 million in fees to carry them out. Other financial groups involved in the deals include JPMorgan Chase & Co.,Bear Stearns Cos., Bank of America Corp. and Lehman Brothers Holdings Inc.

So right of the top you have some of the key beneficiaries of the AIG bailout were the banks who had a hand in the formation of black box deals that impoverished whole communities. In regards to Soc Gen we have their involvement in various deals, this is from January,

We have all the elements of a black box deal. SocGen was the banker who worked with CDR down in Arkansas as well as in Virginia in sketchy deals that went sour.We have the Arizona Industrial Development Authority in whose name the bonds were floated, and CDR who put the deal together.

Charles Anderson, manager of field operations for the IRS's tax-exempt bond division, told bond lawyers in May that the agency is investigating cases where providers of guaranteed investment contracts paid kickbacks to the brokers who evaluated their bids for the agreements. Anderson didn't name the parties involved.

The IRS has scrutinized a $27 million bond sold by Pima County, Arizona's Industrial Development Authority to help individuals buy homes. According to documents obtained from the authority, the IRS said it was concerned about quarterly payments made by Paris-based Societe Generale, France's third-biggest bank, to CDR, which structured the transaction and evaluated bids for the investment agreement.

So Soc Gen, which received the most from the taxpayer via AIG has also been involved in various schemes of a questionable nature. Doesn't it seem odd that the Federal government, when it isn't funneling money to these institutions is subjecting them to investigation? Of course there is the massive lawsuit in the Federal docket launched by various states and municipalites:

Cecile Kohrs Lindell
The Deal
March 17, 2008 Several municipalities, including the city of Chicago, last week filed suits against most of Wall Street, accusing 22 investment banks and 15 brokerage firms of bid rigging and other antitrust violations in the sale of municipal derivatives.

The civil suits follow a criminal investigation under way at the Securities and Exchange Commission, the Internal Revenue Service and the Department of Justice's antitrust division.

According to the complaint, the defendants "agreed, combined and conspired with each other to fix prices, and to rig bids and allocate customers and markets of municipal derivatives sold in the United States and its territories." As a result of this activity, the complaint says, "Plaintiffs received lower interest rates than they would have in a competitive market."

Companies involved:

AIG Financial Products Corp., AIG Sunamerica Life Assurance Co., Bank of America Corporation, Bank of America NA, Bear Stearns Companies, Inc., Cain Brothers & Company, LLC, CDR Financial Products, Inc., Financial Guaranty Insurance Co., Financial Security Assurance Holdings, Ltd., First Southwest Company, GE Funding Capital Market Services, Inc., Genworth Financial Investment Management, LLC, George K. Baum & Company, Investment Management Advisory Group, Inc., JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., Kinsell Newcomb & De Dios, Inc., Merrill Lynch & Co. Inc., Morgan Keegan & Co., Inc., Morgan Stanley, National Westminster Bank plc, Natixis, S.A., Packerkiss Securities, Inc., Piper Jaffray & Co., Security Capital Assurance, Inc., Shockley Financial Corp., Societe Generale, Sound Capital Management, Inc., Trinity Funding Company, LLC, UBS Ag, UBS Securities LLC, UBS Financial Services Inc., Wachovia Bank, N.A., Wachovia Corporation, Winters & Co. Advisors, LLC, XL Asset Funding Company 1 LLC, XL Capital, Ltd. and XL Life Insurance & Annuity Company

Trinity by the way is the offshoot of General Electric which is currently in discussion with the SEC over possible wrongdoings. Of course "these Black Box Deals" have laid waste to numerous places, most notably Jefferson County Alabama home of the now imprisoned Larry Langford and associates. I suggest you read the whole article, its a byzantine story of corruption and greed that is still playing out to this day.

Goldman Accused of Pressuring California Municipalities to Drop Muni-Bond Suit

An interesting development and one that smacks of desperation of true. The case itself was allowed to go forward last month, with several of the companies involved including General Electrics Trinity group and AIG not being named in the suit.

A group of 11 California issuers are charging that an affiliate of Goldman Sachs & Co., J Aron & Co., is pressuring a member of the group to remove Goldman as a defendant in its civil suit charging that 36 Wall Street and other firms participated in a vast bid-rigging conspiracy for municipal swaps and investment agreements.

In a filing with the U.S. District Court for the Southern District of New York, the group of California entities last week charged that J. Aron has halted its commodity trading business with the Sacramento Municipal Utility District at the direction of “senior legal people” at Goldman, until the litigation “gets sorted out.”

Citing a January conversation between Dennis Holcomb, a principal energy trading specialist at SMUD and a J. Aron official, the California entities said: “It is clear from the statements of the representative of the Goldman affiliate, J. Aron, that the order not to do business with SMUD was intended to place pressure on SMUD to abandon its claim in the instant action against ­Goldman.”

The claim came in a motion filed jointly by the group of issuers that have individually sued Goldman and other firms.Goldman fired back Friday, saying in a separate filing that it would not abide by the issuers’ “grossly unfair and irresponsible mischaracterization.”

Now the criminal trial against CDR Financial products is still ongoing with guilty pleas already being submitted. Additionally there has already been a push by the Department of Justice to delay the trial so as not to interfere with the criminal proceedings. As for GE, they may not have been named yet, but they are hardly in the clear.

Arnold Schwarzenegger Proposes a Conservative Solution

He threatened to do this the other day, and it appears he is going to try and get it through. The Democrats off course are squealing about this and trying to increase taxes, unfortunately for them the GOP appears to be unwilling to go along with any increases. Expect another crisis like the one that gripped the state last year, :

ALAMEDA, Calif. — California Gov. Arnold Schwarzenegger delivered his May budget proposal Friday afternoon, addressing a $17.9 billion deficit by proposing wholesale elimination of key social welfare programs, with no tax increases.

Schwarzenegger projects the state will have $91.5 billion in general fund revenue in fiscal 2011, but faces a $17.9 billion shortfall, including a $7.7 billion deficit carried over from the current fiscal year. The administration uses a $19.1 billion deficit figure, after adding a $1.2 billion reserve.

State officials say California has adequate resources to retire the state’s $8.8 billion of outstanding revenue anticipation notes when they mature this month and next.

Controller John Chiang warned lawmakers that their prompt action is needed to avoid a repeat of the state’s cash-flow problems last year, when the controller’s office issued some $2 billion in IOUs to lower priority creditors to preserve cash for creditors with higher legal standing, such as bondholders.

“The governor and Legislature face $19 billion worth of extremely difficult decisions, and I urge them to quickly enact a balanced budget with real solutions so we can avoid the extreme forms of cash management I had to use last year,” he said in a statement.The formal announcement of the governor’s “May Revise” budget sets the stage for the legislative budget debate to begin.

The new fiscal year begins July 1. Given the initial reactions to the budget, with legislative Democrats complaining about the cuts and Republicans drawing the line against any taxes, chances of an on-time budget appear slim.

The Republican governor, a lame duck, said efforts to trim social welfare programs have been blocked by court challenges against any changes. So he now proposes eliminating them completely.“Because judges have prevented us from using a scalpel to trim those programs, we have to use an axe,” Schwarzenegger said.

It takes two-thirds votes in each house of the Legislature to adopt a budget — meaning that at least some bipartisanship is necessary, because the Democratic majorities don’t reach that two-thirds mark.

If only Arnold had done this in 2005 and 2006 instead of trying to fight Global Warming.

Surprise: Goldman Sachs to Pump Money Into Bank Connected to Obama and Left Wing Causes:ShoreBank

Gee, you think they are looking for a favor from their favorite Dems in the White House?

WASHINGTON/NEW YORK (Reuters) - Goldman Sachs Group Inc Chief Executive Lloyd Blankfein and a consortium of other top banks are part of an effort to save ShoreBank Corp, a Chicago bank with Washington ties, a Democratic activist close to the institution said on Friday.

Goldman, Citigroup, JPMorgan and Bank of America are helping raise the $125 million the community development lender needs to avoid a government takeover, said Bill Brandt, chairman of the Illinois Finance Authority.

"My understanding is that Goldman Sachs has made a significant commitment and will act on this commitment today," Brandt said. "Whether this deal gets finally cooked is a Herculean task."

Brandt said Goldman agreed to contribute more than $20 million to help rescue the bank.JPMorgan is considering a financing package of about $15 million that would include converting existing debt to equity as well as a cash investment, a person familiar with the bank's plan said. The second-largest U.S. bank is already an investor in Shore Bank.

Call this bank a money cog in the influence peddling operation known as the left:

ShoreBank has kept a high profile in the community development world. It focuses on loans that contribute to environmental efforts and targets borrowers looking to convert deteriorated apartment buildings into income-producing properties, expand small businesses, and upgrade homes and property.

It was especially hard hit during the recession, reporting a net operating loss of $53.6 million in 2009. In 2008 it eked out net operating income of $1.3 million.

The bank has powerful ties to Washington, displaying on its website a YouTube video of a news report that links ShoreBank with President Barack Obama when he was a senator.

So typical and for more on ShoreBank read this from BigGovernment. By the way I did check out youtube and typed in ShoreBank, check it out.

Update, Tell me if you notice a pattern in who the donations are going to(By the way , they are all employees of Shorebank):

Obama, Barack			Beng, Brian J Chicago,IL 60610		9/30/08	$1,500
Obama, Barack			BROWN, TODD CHICAGO,IL 60615		8/12/08	$1,300
Obama, Barack			TODD, BROWN CHICAGO,,IL 60615		1/4/08	$1,300
Obama, Barack			BERG, BRIAN J CHICAGO,IL 60610		2/23/07	$1,000
Obama, Barack			BROWN, TODD CHICAGO,IL 60615		5/2/07	$1,000
Obama, Barack			RAILSBACK, LYNN OAK PARK,IL 60304		9/3/08	$1,000
Obama, Barack			RAILSBACK, LYNN OAK PARK,IL 60304		9/22/08	$1,000
Obama, Barack			BERG, BRIAN J CHICAGO,IL 60610		1/24/08	$500
Obama, Barack			HOUGHTON, MARY CHICAGO,IL 60615		10/28/08	$500
Obama, Barack			SEIDMAN, ELLEN WASHINGTON,DC 20007		10/17/08	$500
Obama, Barack			SEIDMAN, ELLEN WASHINGTON,DC 20007		8/22/08	$500
Obama, Barack			SPENGLER, LAURIE NAPLES,FL 34102		11/2/08	$500
Obama, Barack			BERG, BRIAN CHICAGO,IL 60610		9/8/08	$300
Obama, Barack			BERG, BRIAN J CHICAGO,IL 60610		4/30/08	$250
Obama, Barack			BERG, BRIAN J CHICAGO,IL 60610		4/30/08	$250
Obama, Barack			BROUGHTON, DAN CHICAGO,IL 60626		3/26/08	$250
Obama, Barack			FLOWERS, LEANA CHICAGO,IL 60653		11/9/07	$250
Obama, Barack			HORSCH, CHRISTOPHER MR CHICAGO,IL 60614		3/24/08	$250
Obama, Barack			WEIGERT, KAREN CHICAGO,IL 60657		9/16/08	$250
Obama, Barack			BERG, BRIAN J CHICAGO,IL 60610		4/30/08	$-250

A Glimpse at Afghanistan

A nice glimpse of Afghanistan when everything works, of course this snapshot is what is needed all the time, not just when there is enough security:

California Looking at Major Budget Cuts

Good luck with that:

SAN FRANCISCO (Reuters) - California Governor Arnold Schwarzenegger will update his plan for "draconian" budget cuts on Friday after four months of legislative debate failed to close a hole last calculated at $20 billion.

The state's credit ratings, only a few notches above "junk" status, are under pressure, and April personal income tax revenue was below target, exacerbating the financial problem for the most populous U.S. state.

Health and welfare programs are expected to bear the brunt of cuts, teachers are expected to lose jobs and cities are seen being forced to hand over revenue. Schwarzenegger has ruled out tax increases urged by Democrats who control the legislature.

Legislators have changed financial rules to ease a cash-flow crunch, and investors have snapped up recent bond offerings, but California's fiscal future is cloudy.

Better late then never I suppose.

SEC Looking Into Possible Muni-Debt Malfeasance

The idea that someone might be betting against muni-bonds as a way to make a quick has been floating around for some time now. It now appears the SEC has decided to look into the issue:

May 14 (Bloomberg) -- U.S. regulators are exploring possible conflicts of interest for banks that sold municipal bonds and bet the securities would fail, the Wall Street Journal reported, citing unidentified people familiar with the matter.

The U.S. Securities and Exchange Commission and state authorities opened a preliminary probe into municipal credit- default swap trades by banks, the newspaper said. The inquiry seeks to determine whether banks used their own capital to bet against bonds they sold and if the practice was disclosed properly to buyers, the newspaper said.

The move comes as the SEC widens its investigation, started at least a year ago, into whether banks including Goldman Sachs Group Inc. and Morgan Stanley misled investors when selling mortgage-linked securities in the lead-up to the collapse of the subprime mortgage market and global credit crisis.

The agency has been looking for abuse “across the spectrum,” enforcement chief Robert Khuzami said April 16, when the SEC accused Goldman of fraud in the sale of collateralized debt obligations. Goldman says it did nothing wrong.

It is distinctly possible that these banks, being so large and broken into more then one division had one group marketing the bonds and debt, and another group trying to profit off their collapse without any criminal collusion. Think about it, if you are working for Goldman you are pushing a product, indifferent to the actions of someone else just looking for quick strike profits. Of course its also possible that municipalities were given deals that were supposed to be good, but then went sour. This in turn would lead to bank employees telling their friends where profit might be found. Finally, its possible groups were given sour deals with the intent of grifting them out of their money on both ends, in the establishment and later collapse of these deals. I would imagine that is what the SEC needs to prove.

General Electric in Talks With SEC Over Possible Anti-Competitive Practices

GE's connections which caused a modest splash last year in regards to the muni-bond scandal have not gone away, if anything it appears the company that brings good things to light is trying to cut a deal:

GE Funding Capital Market Services Inc., a subsidiary of General Electric Capital Corp., does not agree with the Securities and Exchange Commission’s plans to file charges against it in connection with an industry-wide investigation of guaranteed investment contracts and derivatives, but is discussing the matter, including a “potential resolution,” with SEC staff.....................

The SEC and Justice Department are conducting parallel civil and criminal investigations of anticompetitive practices in the municipal market.

Parallel investigations indeed! With CDR employees already pleading guilty and the SEC looking into numerous aspects of these "black box deals". As for GE's alleged role:

Repost from November 19th:
Who would of think the "green" energy company that gives us the wonderful news channel known as MSNBC wold have been linked the muni-bond scandal? A scandal defined by corruption, bribes, and economic devastation, I tell you what is the world coming to. The companies involved were a unit of GE and a FSA subsidiary of Belgian bank Dexia SA and have been accused of rigging municipal deals:

From Bloomberg News:

Trinity Funding Co., owned by General Electric Capital Corp., and Financial Security Assurance Holdings Ltd. were two of four unidentified companies in the Oct. 29 indictment of CDR Financial Products Inc., its founder, David Rubin, and two executives, according to the people, who spoke on the condition of anonymity because they weren't authorized to do so publicly. Trinity and FSA weren't charged.

Two of the unidentified companies paid CDR to win agreements from local governments that hired Rubin's adviser firm from 2002 to 2004, disguising kickbacks by paying his company to broker swaps with two unnamed financial institutions, according to the indictment............

The Securities and Exchange Commission, which also is conducting an investigation into bid-rigging of municipal investment contracts, has notified at least seven firms, including GE Capital and FSA, that they face civil lawsuits in a parallel investigation.GE and FSA have disclosed receiving so-called Wells notices from the SEC, giving them an opportunity to say why regulators shouldn't bring a civil action. GE said in a filing last year that the investigation related to bidding by former employees and that the firm disagreed with the SEC's recommendation to file suit.

(Basically UBS AG and Bank of America Corp. have also been contacted about the issue. In a nutshell CDR is being accused of many of the allegations that have followed it around the county From the, my words)

The government's charges against CDR center on its involvement with two unidentified firms. One, called Provider B, is a group of financial-services companies that is part of a corporation with headquarters in Connecticut, according to the federal indictment. The state is home to General Electric Co. The second, Provider A, is a "group of financial-services companies located -- or controlled by those -- in Manhattan," the indictment said.

Tip of the iceberg.


By the way this doesn't include a massive civil suit that has been launched against Trinity and numerous other financial houses over their alleged misdeeds.

NY Times Manages to Blame Tea Parties for Budget Problems

The annoying aspect of the article is to blame the "people" for wanting all of these great programs that Democrats tend to shove down our throats. Other goodies include writing about how Democrats plan to use Obamacare to reduce Medicare spending, (chuckle).

It’s easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.

Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.

We, the people, are.

Sure, its the countries fault. By the way, the author Mr. Leonhardt also manages to blame the Tea Party using a very twisted logic:

Many people, including some who claim to be outraged by the deficit, still haven’t acknowledged the disconnect. Just last weekend, Tea Party members helped deny Senator Robert Bennett, the Utah Republican, his party’s nomination for his re-election campaign, in part because he had co-sponsored a health reform plan with a Democratic senator. Economists generally think the plan would have done more to reduce Medicare spending than the bill that passed. So, whatever its intentions, the Tea Party effectively punished Mr. Bennett for not being a big enough fan of big government.

Yeah, that's what we wanted all along Bigger Government. It wouldn't be a grassroots movement tired of incumbent senators making decisions disconnected form the people they are supposed to represent.