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heavily specialised in home loan portfolios, was the first to go in March. Just as it had done in the 20th century, J.P. Morgan swooped in and picked up Bear Stearns for a pittance. One year prior, Bear Stearns shares traded at $159; but J.P. Morgan was able to buy in and take over at $2 a share. In September, Washington Mutual collapsed— the largest bank failure in history. J.P. Morgan again came in, paying $1.9 billion for assets valued at $176 billion. It was a fire sale. order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. It merely shifted wealth from one class to another, as it had done almost a century prior. $2a share. In September, Washington Mutual collapsed— The global dominoes fall the largest bank failure in history. J.P. Morgan again came No sooner were the words out of Paulson's mouth than in, paying $1.9 billion for assets valued at $176 billion. It other financial institutions began imploding, as did the was a fire sale. global financial system—much modelled after the lauded American banking system. Mortgage bail-out fraud In September, the Federal Reserve, its line of credit Relatively quietly over the summer, Freddie Mac and assured, then bought the world's largest insurance Fannie Mae, the publicly traded companies responsible for | company, AIG, for $85 billion for an 80-per-cent stake. 80 per cent of home mortgage loans, lost almost 90 per AIG was the largest seller of CDS, but now that it was in cent of their value for the year. Together they were __ the position of having to pay out, from collateral it did not responsible for half the outstanding loan amounts but were _ have, it was teetering on the edge of bankruptcy. now in debt by $80 to every $1 in capital reserves. In October, an entire country, Iceland, went bankrupt, To guarantee that they would stay alive, the Federal having bought worthless American sub-prime mortgages Reserve stepped in and took over Freddie Mac and Fannie —_as investments. European banks began exploding, all Mae. On 7 September 2008, they wanting to cash in concurrently were put into "conservatorship", on their inflated US stocks to known as "nationalisation" to the pay off low-interest-rate debts rest of the world—but Americans In other words, Paulson was before rates climbed higher. have difficulty with the idea of | _ blackmailing Congress in order The year before, the signs had any government-run industry that . been evident when the largest requires taxpayer-funded to lead a coup by the banking US mortgage lender, increases. 9 Q Countrywide, fell. Soon after, What the government was elite under the false gulse of the largest lender in the UK, really doing was handing out an necessary legislation to stop Northern Rock, went under— the dyke from flooding. unlimited line of credit. The deal, done by the Federal Reserve and not the US Treasury, was Japan and Korea's auto able to bypass congressional manufacturing nosedived by 37 approval. The Treasury Department then auctioned off per cent as global economies were contracting. Treasury bills to raise money for the Federal Reserve's Pakistan was on the edge of collapse, too, with real own use, but nonetheless taxpayers were funding the _ reserves at $3 billion—enough to buy only a month's rescue. The bankers had bled tens of billions of dollars supply of food and oil—and was attempting to stall from the system by hedging and derivatives gambling, and payments to Saudi Arabia for the 100,000 barrels of oil triggered the portfolio interbank lending freeze which then _ per day it provides to the country. Under President seized up and crashed. Musharraf, who left office in the nick of time, Pakistan's The takeover was presented as a government-funded currency lost 25 per cent of its value, its inflation rate bail-out of an arbitrary $700 billion, but does nothing to running at 25 per cent. London long having copied Wall Street's creative financing. solve the problem. No economists were asked to present Meanwhile, energy costs had soared, with oil reaching a their views to Congress. The loan only perpetuates the peak of almost $150 per barrel in the [northern myth that the banking system is not really dead. hemisphere] summer. The costs were immediately passed In reality, the damage will not be $700 billion but closer _ on to the already spent home-owner in rising heating, fuel, to $5 trillion, the value of Freddie Mac and Fannie Mae's transport and manufacturing costs. Yet 30 per cent of the mortgages. It was nothing less than a bail-out of the cost of a barrel of oil was based upon Wall Street quadrillion-dollar derivatives industry which otherwise speculation, and this climbed to 60 per cent due to the faced payouts of over a trillion dollars on CDS mortgage- _ speculative fear factor during the summer months. As backed securities they had sold. It was necessary, said soon as the financial crisis hit, suddenly oil prices slid Treasury Secretary Henry Paulson, to save the country down, slicing oil costs to $61 per barrel from a high of from a "housing correction". But, he added, the $700- $147 in June and proving that the 60-per-cent speculation billion taxpayer-funded takeover would not prevent other factor was far more accurate. banks from collapsing, in turn causing a stock market This sudden decline also revealed OPEC's lack of crash. In other words, Paulson was blackmailing Congress in Continued on page 80 blackmailing Congress in order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. 26 ¢ NEXUS In other words, Paulson was Continued on page 80 www.nexusmagazine.com DECEMBER 2008 — JANUARY 2009