By now almost anybody that hasn't been living in a cave for the last decade has a pretty good idea about the biggest heist in history perpetrated by Wall Street crooks with the help of the bought off political class.  

They devised a ponzy scam that consisted in bundling large volumes of real estate loans into investment products known as collateralized mortgage obligations, or CMOs.  On top of that layer, they created a host of complex investment products, which together with the CMOs, came to form the main instruments to defraud the nation's coffers, and plunge the country into economic calamity.

These institutions then sold those investment products to unsuspecting investors not only in the U.S., but around the world.  They were aided by corrupt rating agencies whose income depended on the same criminal Wall Street firms who devised the scam.

The quick money was made mainly by the fees associated with the selling of these fraudulent investment products.  Most of the fees were collected at the top, but the scam included a mechanism to grease the hands of everybody involved in the fraudulent chain, including mortgage lenders, real estate agents, and loan officers.

As with every ponzi scheme, in the long term, it was unsustainable.  When the house of cards collapsed, the perpetrators and their enablers in government, protected themselves, and the citizenry was left holding the bag.

The Next Stage of The Scam

Have you ever heard of moral hazard?  Here's the definition...

In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others.
Since we just witnessed the biggest financial heist in history, and it all happened with total impunity, and with full collaboration and protection by the government, it stands to reason that the theory of "moral hazard" will apply to the next step in the ongoing looting of the country.

The first step of the looting plunged the country into economic turmoil.  The losses caused by the Wall Street scam, coupled with an artificially-created government revenue crisis through austerity measures, and the fact that the rich and big corporations are not paying enough taxes, has resulted in a situation where cities and states across the entire country find themselves in dire economic straits, forcing some of them to file for bankruptcy, or in the case of some cities, be taken over by state appointed managers.

It is essential to understand that these things didn't happened by chance, or because of the typical boom-and-bust economic/business cycles. These conditions have been artificially created through careful planning by a very  sophisticated cabal of large business and moneyed interests.

As communities and cities and states starve for revenue to provide the type of public services expected by the tax-payers, those same business interests that caused the problems to begin with send another wave of financial barbarians across the country to pounce, and take advantage of the situation they helped create.

By now we've all heard about the loss of hundreds of thousands of public sector jobs, including teachers, firefighters, police officers, court employees, and many others.  It has become increasingly difficult for municipalities to raise enough revenue to pay for schools, prisons, roads, bridges, parks' maintenance, etc.

But not to worry; in the scramble for cash, all of the sudden all manner of financial "consultants" are popping up all over the country, offering cash-strapped municipalities a solution: privatization of the commons and of the public sector.

And so you start to see a push for the privatization of education (charter schools, online initiatives), private for-profit prisons, policing, sanitation and trash collection, and many other sectors.

One common thread in all of this is the greasing of the hands of the government officials, city councils, and directors public education institutions.

Billions in Future Debt

A perfect case study to illustrate this ongoing looting of the country is reported in the exposé by California Watch, "Billions in future debt: Controversial school bonds create ‘debt for the next generation'".

Basically what's happening here is that these "financial consultants" go into cash-strapped school districts and offer them deals that they can't resist; that seems too good to be true: "Hey Herb, here's the deal.  I'm going to give you a $110 million loan and you don't have to worry about paying me back for another 33 years!  Ain't that sweet?  And of course, you really don't have to worry because you may not even be alive that far into the future to have any concerns.  'Oh, how much you'll have to pay back?'  It's about $485 million, and I know, I know, that may seem a little high, but again, not reason to worry about because property values are going to grow significantly which will help the district pay back the loan easily."

Isn't that great?  How can you say no to that?  In the meantime, the institutions pushing this next scam benefit handsomely--not in 33 years, but now!

Although private firms are not obligated to report their fees to state regulators, the state treasurer’s office has compiled some fee information found in official bond statements. At least 42 financial firms have charged school districts and other agencies in California a total of $389 million since 2007, Lockyer’s office reported.
And this is happening all over the country:
Since 2007, school districts and government agencies in at least 27 states and Puerto Rico have financed projects with capital appreciation bonds.

In Texas, 590 districts and other government entities have issued these bonds over the past six years – more than any other state, according to a California Watch review of a database maintained by the Municipal Securities Rulemaking Board, a federal regulatory agency that oversees the municipal bond market. California was second, with 404, followed by Ohio, with 202.

Nationally, the total amount of debt generated by these bonds is unclear. States rely on varying methods for reporting, and in some cases the data is incomplete. Many capital appreciation bonds were issued in packages with other types of bonds, and national databases do not tally their independent values. 

In California, some of the most dubious deals occurred in San Diego County, where the Poway Unified School District in 2011 used the bonds to borrow $105 million that will cost $982 million to pay back, a repayment rate of about 9.4 to 1. The same year, the Santee School District borrowed $3.5 million that must be repaid at $58.6 million, or 16.6 times the principal.

And you would think that people who have a fiduciary duty as public servants will take the time to fully understand the implications of these decisions.  But alas, the stage is being set once again for plausible deniability, from local officials, to the Wall Street crooks who devised this latest stage in the ongoing scam, to the government enablers who are totally complicit in these crimes...
Whether Napa’s school board understood the long-term implications when it approved the deal remains unclear. When California Watch first asked school board member Joe Schunk about the deal in November, he said Napa had not issued any capital appreciation bonds.

A week later, he called back and said he had been mistaken.

Fellow board member Hurtado said that KNN had explained the deal but that “it was hard to understand.”

This all reminds me of a quote I read somewhere, that goes like this: "It's easy for a man not to understand something when his salary depends on him not understanding it."  Or something like that...

Folks, this is a scam; it's happening all over the country, and not only in education.

We are being robbed, again, in plain sight.

To me, this is deja vu all over again.  Back in 2004, 05, 06 I used to frequent some financial online forums and I remember writing almost the exact type of warnings regarding the housing market.  Sometimes I even felt a little intimidated arguing with very highly educated and experienced professionals in the financial industry... I was told that I was completely wrong, and that I didn't know what I was talking about, etc.

Shock Troops

These people are looting the country; they are not done yet.  They know that the whole thing will eventually collapse again, but they have taken steps to protect their assets.

This is why these same nefarious forces, these fascistic billionaires are funding the efforts to arm the right wing loonies, to pass stand-your-ground laws, to use propaganda to fan the fires of fear and hate and paranoia.

Eventually these folks will serve as the "useful idiots" of these fascists.

If the economy eventually collapses under the weight of this massive fraud, crime and unrest may ensue.  This will give these shock troops useful idiots an excuse to do what they've been wanting to do for a very long time: to shoot at people who taking their stuff, or who are perceived to want to take their stuff, or who look like folks who may want to take their stuff.  It's a self-fulfilling prophesy.

This could give an opening for the intimidation of social activists... Imagine a civil disobedience-type protest; traffic is being blocked; a conceal-carry guy gets out of his car and confronts a protester, and an argument ensues... The State has a stand-your-ground law (written, disseminated, and paid-for by ALEC and their fascist billionaires funders)...  I think you know where I'm going with this.

The Future

I'm not necessarily saying that these things are going to happen exactly as I describe them, but I have no doubt that there is a reason big-money interests are behind many of these laws, stand-your-ground, conceal-carry to anywhere you want, etc.

This is all very dangerous, in my view.  Maybe some people who have had experiences in Europe in the 1930's and 40's can share their insights...

If there is an agenda like this, we all need to wake up and realize what's happening before is too late.  It's up to us...


Originally posted to Ray Pensador on Thu Jan 31, 2013 at 09:38 PM PST.

Also republished by In Support of Labor and Unions, ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, American Legislative Transparency Project, and Occupy Wall Street.

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