SOCHI, September 20 (Itar-Tass) — Prime Minister Vladimir Putin called for changing the architecture of the international financial system. He said at the final press conference after a meeting of the Russian-French bilateral commission on cooperation in Sochi on Saturday:
We all need to think about changing the architecture of international finances and diversifying risks. The whole world economy cannot depend on one money-printing machine.
(Here’s a Bloomberg story from last December (2007) that claims the ‘notional amount underlying the contracts’ is $681 trillion: link – RB)
AIG’s Dangerous Collapse & A Credit Derivatives Risk Primer
Daniel R. Amerman, CFA, Sep 17 2008
While it may look superficially similar to the recent implosions of such investment giants as Fannie Mae, Freddie Mac and Lehman, the takeover and bailout of AIG is quite different, and means that the market is entering the next and even more dangerous phase. What is driving the fall of AIG — and potential government losses that may far, far exceed the $85 billion bailout announced late on September 16th — is not mortgages or real estate (directly), but fears that AIG’s huge, global credit-default swap positions will unravel. The $62 trillion dollar credit derivatives market is 50 times the size of the subprime mortgage derivatives market (no, it isn’t : the mortgage derivatives market is estimated by Michael Hudson at $11 trillion – RB), and is indeed larger than the entire global economy. Unfortunately, few people understand credit derivatives, or the full risks to the United States and global markets and economies. In this article, I will take a Credit Derivatives Primer that I published in the spring of 2008 — which anticipated this exact type of event — and update it for the current situation. Through reading this article, you should be able to greatly increase your knowledge of what credit derivatives are, and why they are a far greater danger than subprime mortgages. We will end with introducing some concepts about how individuals can protect themselves and even profit from these unprecedented market conditions – something you won’t find in recent financial history or conventional investments […]
A ‘Friends of Pakistan Conference’ will be held in New York on September 26 in a bid to evolve a comprehensive strategy to provide an economic package to Pakistan, the Pakistan High Commissioner in the UK, Wajid Shamas-ul-Hassan, said Friday. He said the conference would be hosted by Zardari, Rice and Miliband. The G8 countries, China, Saudi Arabia and UAE will participate in the conference. Short and long term strategies would be evolved to help Pakistan with its economic hardships, he said. Commenting on the statement of UK’s Brown urging the US to respect Pakistan’s sovereignty, he said credit of this change of heart must be given to Zardari, as the President had persuaded Brown that such incursions are fuelling anger in Pakistani nation, the incursions would neither benefit the USA nor Pakistan in any way, and the attacks are destabilising democracy in the country. He said Brown was informed that Pakistan should be given space. The allies have appreciated the Bajaur operation, and if given enough time effective strategy could be evolved to fight terror, he added. Responding to a question, he said effective measures are being taken to put the country back on the right track. From next year positive outcome of policies would start to come out, and the country would be put back on the path to development.
Hi, Folks – Here’s a capsule rundown of the recent drama surrounding Eustace Mullins. About a week ago, ever-faithful Reader WayneB forwarded this item to some folks on his personal distribution list. It was picked up by fourwinds10.com and posted on Sept 15th, here. Here’s the forwarded email:
From: Mark Blackburn
Sent: Sep 9, 2008 10:24 PM
To: Edward Spencer
Subject: Latest News on Eustace Mullins.Friends, Through a conspiracy between his great grand nephew Matt and a drifter Named Jessie Lee, Eustace has been taken from his rehabilitation hospital and has disappeared. The hospital told the police that he dismissed himself against medical orders and left around 3:30 pm Tuesday. I spotted him in the car of Jessie Lee and Jessie ran to the car and sped away with Eustace. After filing a 911 missing person report, the Dallas Police said the hospital had allowed him to leave the hospital at 3:30. Be on the lookout for a brown Mercury Marquee about 10 years old with TX license plates 098 VVX. Police say they are helpless to do anything. Last reported address: Jessie Lee, P.O. Box 7011, CutandShoot, Texas 77306. This is the address that was given to me, probably not real. I do not believe that Eustace left on his own and was probably told he was going back to his apartment. Eustace and I had a meeting with the Dallas Probate Court to take him in to Adult Protective Services on Monday to protect him so that his money could be used for his medical needs and to keep greedy relatives from doing him in. Perhaps they will still step in and find Eustace. I can do nothing more than file a report for the police to tell him to contact me if they find him. Pray for Eustace’s safety and that the court will be able to locate him and make sure his medical needs are met. Mark Blackburn
Then, Wednesday (Sep 17), we received this cc: from Wayne:
From: Wayne B.
To: Steven S.
Date: 17 Sep 2008, 09:59:47 PM
Subject: Eustace MullinsHi Steve: I received your message and noted your request that I call Mark Blackburn. I did not call him because I do not know who he is. I finally reached Matt Mader, talked with him for 45 minutes and learned a lot. I just got of the ‘phone with Matt a few minutes ago. Eustace arrived back here in Virginia a few days ago and is staying with Matt until proper living arrangements can be made for Eustace. Jesse Lee drove Eustace back here, he’s the man Mark Blackburn was telling everyone that Jesse was up to no good. As it turns out, Mark Blackburn was the man who was up to no good and had coerced Eustace into signing a Power-of-Attorney as well as a Medical Power-of-Attorney. All documents signed by Eustace have since been revoked. There is a whole lot more to the story. Suffice it to say that Eustace is in a safe place. Matt is not the evil person many people have been led to believe. Under the many extremely extenuating circumstances, I have high regard for Matt, he’s doing the right thing. Kind Regards, Wayne
Pelosi, Kerry May Share Investor Pain as AIG Stakes Evaporate
Jonathan D. Salant, Bloomberg, Sep 19 2008
The market storm that brought down Lehman Brothers, AIG and other pillars of US finance may have also blown holes in the portfolios of Nancy Pelosi, John Kerry and more than 50 other members of Congress. Pelosi, in her most recent financial disclosure form, reported that her husband owned between $250k and $500k of stock in AIG, which ceded majority control to the US government this week in exchange for $85b of loans. Kerry, the 2004 Democratic presidential nominee, disclosed that his wife, Teresa Heinz Kerry, had more than $2m of AIG stock at the end of 2007, when shares were worth $58.30. AIG has fallen 85% this week to close yesterday at $2.69. The lawmakers’ aides didn’t respond to calls seeking comment. Altogether, 56 senators and representatives had stakes in AIG, Lehman, Fannie Mae, Freddie Mac, or Bear Stearns — some of the biggest casualties of the market bloodbath — according to the Washington-based Center for Responsive Politics. The most recent annual disclosure filings list investments as of Dec 31 2007, and reveal the size of holdings only within a range of values. Lawmakers may have sold shares since then. Representative Robin Hayes, a South Carolina Republican, had Congress’s biggest AIG stake, worth between $2.8m and $11.5m. John McCain, the Republican presidential nominee, avoided potential losses. Because of the Arizona senator’s run for the White House, his wife, Cindy, last year liquidated a blind trust that had contained stock in AIG, Fannie Mae, Freddie Mac and Lehman. The amounts of stock she had owned weren’t disclosed. Representative Jane Harman, a California Democrat, owned between $50k and $100k of Lehman shares, according to her disclosure form. Calls to offices of Hayes and Harman weren’t returned.
Russia envoy warns NATO on air space to Afghanistan
KABUL, Sept 18 (Reuters)
Russia threatened to block NATO from using its air space for operations in Afghanistan if member states did not stop “hostile” policies toward Moscow, the Kremlin’s top diplomat in Kabul said. Zamir Kabulov told BBC radio in an interview aired on Thursday:
(Russian air space) is still open, but if the NATO countries continue to their hostile policies with regard to Russia, definitely this issue will happen.
NATO imports most of its logistics via Pakistan to Afghanistan, but also uses Russia’s air space for some cargo. Kabulov said the US had made far too many mistakes since toppling the Taliban government in 1991:
The main one … is that it did not work with the Afghan government and the Afghan nation. During the past 6½ years, instead of strengthening the Afghan government, the Afghan armed forces and the Afghan economy, they strengthened their military presence and this is a main and fundamental mistake.
More than 71,000 foreign troops under the command of NATO and the US military are stationed in Afghanistan.
Old World Economy to the Rescue of Capitalism
Middle East Times, Sep 19 2008
It is too soon to say whether the coordinated action by the world’s top central banks to pump $180b into the financial markets will end the crisis that has gripped Wall Street, devastated the investment banking system and spread gloom and panic across the global economy. But one aspect of the operation is as curious as it is clear. This was an old economy rescue, a G7 rescue, in a financial world where the G7 group of industrialized nations is as outdated as the 19th century Congress of Vienna. The European Central Bank, the Bank of England, the Bank of Japan, and the Swiss and Canadian central banks joined together with the US Federal Reserve in an emergency move, launched at 3 a.m. Washington time, to pump the $180b in dollar liquidity into the markets. (The curious figure points to the role of the Bank of England in proposing the plan — it translates into £100b sterling.) But where were the new pillars of the global economy? The Bank of China, the Reserve Bank of India, the central banks of Brazil, Russia, South Korea and Saudi Arabia were not part of the rescue plan. Given their increasingly important role in world trade and finance, the move might have had more credibility if they had been involved. They are all heavy investors in the US dollar and in American securities. Led by China, Japan and the Gulf states, these other central banks and investment groups are sitting on over $5000b in US assets of various kinds.
Saudi and other Gulf investors have been prominent in raising new capital to help the battered American banks. China’s sovereign wealth fund, the China Investment Corporation, is in talks with Morgan Stanley about buying as much as 49% of the once-fabled investment bank. The Sovereign Wealth funds of Kuwait and the United Arab Emirates have pumped over $12b into US banks this year, and have the losses to show for it. Citigroup was trading at $30.70 last November when the Abu Dhabi Investment Authority pumped in $7.5b. They now trade at around $15. Negotiations between central banks, particularly when they want to surprise the markets, are well-kept secrets. It is possible that the Gulf central banks and investment funds were approached to join the big bailout and declined. After their losses, they could hardly be blamed if they declined, but well-placed financial sources say no such approach was made. Yet their absence from the central bank rescue is a disappointment because this week finance ministers of the Gulf Cooperation Council approved proposals to set up a monetary union council and a draft charter for a single currency and a Gulf central bank. And as the global financial system crumbles, Arab and Chinese and other new players in the world economy need to be part of the solution, even if they have not been part of the problem.
Bankrupt AIG Underwrote McCain’s ‘Reform Institute’
Mark Ames, The Nation, Sep 19 2008
John McCain is making a big show of criticizing the government “bailout” of insurance giant AIG. But it turns out that AIG, which received $85b in US tax dollars earlier this week, is one of the largest donors to McCain’s pet think tank, the comically named “Reform Institute,” which he co-founded in 2001 “in direct response to the millions of Americans who, during the 2000 presidential campaign, expressed profound disillusionment with corrupt fundraising activities.” Apparently, AIG was so troubled over the issue of corrupt fundraising activities that they loaded in as one of the top VIP donors in McCain’s nonprofit think-tank, whose website lists AIG in the “over $50k” donor category — although exactly how much over that $50k is still unclear. Nor is it clear why AIG had any business donating so much money to a think tank whose work in no way overlapped with the insurance company’s — unless, of course, that money was just meant to gain access to McCain. The “Reform Institute” has taken a lot of heat as a front organization designed to funnel money to McCain’s political career. As Ari Berman wrote, McCain’s campaign co-chair, Rick Davis, served as the president of the nonprofit Reform Institute for three years, earning $395k in salary. Davis also headquartered his lobbying firm, Davis Manafort, in the Reform Institute’s offices at that time. He is just one of several McCain people who passed through the Reform Institute’s revolving door while McCain prepared for the 2008 campaign. McCain formally stepped down from his own institute in 2005, but he remains deeply linked to the Reform Institute to this day.
So when McCain declared this week that “The government was forced to commit $85b” to his mega-donor AIG, the question becomes, “What forced you to do it?” The American taxpayers never got a red cent in donations from AIG — but now, they’re being forced by people like McCain, whose career profited from AIG donations, to buy his backer’s massively indebted trash heap in what can only be described as the worst business deal in this nation’s history, or the worst example of crony nationalization.
AIG isn’t just funding McCain’s policy think tank, it’s also quite literally thinking for the presidential hopeful. Martin Feldstein, who serves on the board of AIG, is one of McCain’s top economic advisers. Earlier this month, Feldstein gushed in the Wall Street Journal over McCain’s plans to cut taxes even further, and to shift healthcare costs from employers to employees in a “tax credit” scheme that many believe will solely benefit insurance companies, at the expense of workers. Since AIG is — or was — the world’s largest insurance company, it stood to gain from McCain’s policies. The one thing Feldstein does understand is insurance. Feldstein and his cronies at AIG essentially bought themselves an insurance policy — you might call this type of insurance “in case our insanely corrupt, hyper-leveraged operation should ever go bankrupt” insurance — with donations like the “over $50k” given to McCain’s Reform Institute. That insurance paid off handsomely and like clockwork with the government’s $85b nationalization. It’s exactly the kind of insurance policy deal that every American has dreamed about, but never known. And never will know. Now that Feldstein and McCain have successfully worked the American public in the AIG scheme, they have a plan for the entire American economy. They’re calling it “reform.” And the first thing they want to get their hands on is your health insurance, or what’s left of it. So if you’ve been asking yourself lately, “Can it get any worse?” the answer was put best in a horrible ’70s classic rock song by Bachman-Turner Overdrive: “B-b-b-baby you just ain’t seen nuthin’ yet!”
St. Paul dropping all misdemeanor charges
for journalists arrested during RNC
Joe Kimball, Minneapolis Post, Sep 19 2008
Charges will be dropped against journalists who were arrested and charged with misdemeanors for unlawful assembly during the Republican National Convention, St. Paul Mayor Chris Coleman said today. Many reporters, photographers and bloggers were among the 818 people arrested during the Sept. 1-4 convention. Many were trapped on a bridge with protesters on the Thursday night, just before Sen. John McCain made his acceptance speech. Police had warned the large group to dissipate, then closed in from both sides of the bridge and made mass arrests. The mayor’s ruling applies only to journalists getting misdemeanors, but he said that, with the proliferation of alternatative media covering the convention, the definition of journalist will be broadly applied as they try to ascertain identities and credentials. City officials said they’re not sure how many people this will affect. Here’s the mayor’s announcement:
Mayor Coleman Announces Policy Not to Pursue Certain Misdemeanor Charges Against Journalists
SAINT PAUL – Mayor Chris Coleman announced today that the city will decline to prosecute misdemeanor charges for presence at an unlawful assembly for journalists arrested during the Republican National Convention. He made the announcement after consultation with the city attorney’s office, which recommended the city not pursue misdemeanor prosecution of these individuals.
“This decision reflects the values we have in Saint Paul to protect and promote our First Amendment rights to freedom of the press,” Mayor Coleman said. “A journalist plays a special role in our democracy and that role is just too important to ignore. At the scene, the police did their duty in protecting public safety. In this decision, we are serving the public’s interest to maintain the integrity of our democracy, system of justice and freedom of the press.”
The decision will only affect people identified as journalists who face the misdemeanor charge. Recognizing the growing media profession in print, broadcast and the Internet, the city attorney’s office will use a broad definition and verification to identify journalists who were caught up in mass arrests during the convention. It is not known how many cases this decision will affect.
Niqnaq 