The World According to Michael

At the height of the financial collapse there were many things taking place behind closed doors, outside the view of the general public.  When Bear Sterns collapsed the Federal reserve bank and JP Morgan were ready to swoop in and take over the company at pennies on the dollar.  This was just the beginning of a much larger problem that was looming on the horizon.  Backroom financial deals, rule bending and all out economic tomfoolery was, and still is in high gear.  The result is far sweeping rape & pillaging of the citizens of the world.

Shortly after Lehman Brothers filed for bankruptcy a backroom deal was made illegally with the help of the Federal Reserve & US Treasury to sell their brokerage unit to Barclays for $1.85 Billion.  It was worth around $11 Billion at the time.  Lehman's brokerage unit was the most profitable part of the company and still remains profitable today, except Barclays now owns it.  Just what legal right did the executives at Lehman have to give away the one remaining source of value at pennies on the dollar?  Did the shareholders have a voice in this monstrous deal?  How about Lehman's creditors?  The answer is no.  Much of Lehman was sold at pennies on the dollar to various financial companies AFTER they declared bankruptcy.  This left the shareholders & creditors out in the freezing temperatures of moral hazard & fraud.

 After the bankruptcy court was in full swing and the reorganization team was implemented into Lehman's operations, a lawsuit was filed against Barclays.  This lawsuit was to get the full value of Lehman's brokerage unit as to help facilitate their debt restructuring and payment to creditors & shareholders.  On Feb 22 judge James Peck ruled against Lehman's and allowed the pillaging continue.  Peck said in his 103 page statement that:

"The court was not deceived in a manner that should now be permitted to upset the integrity of the sale order. The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."
 
He went onto say:

"The court still would have entered the very same sale order because there was no better alternative and, perhaps most importantly, because the sale to Barclays was the means both to avoid a potentially disastrous piecemeal liquidation and to save thousands of jobs in the troubled financial services industry,"
 
 I find the idea that "no better alternative" exists than to allow the wholesale dismantling of a 100+ year old institution.  At the same time sweetheart deals were given to Lehman's competitors.  The Federal Reserve changed the rules right after Lehman had to file for bankruptcy.  They changed the rules because Goldman Sachs, JP Morgan and the rest of their ilk were on the verge of bankruptcy also.

Lehman Brothers would not have filed bankruptcy if they were allowed to play by the same rules as their competitors.  When the Federal Reserve changed the rules and allowed Goldman Sachs & other investment houses to become "Commercial Banks", this allowed these institutions to borrow money directly from the Federal Reserve at essentially 0% interest.  This allowed these investment houses to stay afloat until the Obama Administration gave them the holy grail of rule changes, the Mark-To-Market rule suspension.   You can read more about Mark To Market here.

If Lehman Brothers could now operate under the same rules as all of their competitors now enjoy, the bankruptcy would be off the table.  At least for now.  This wouldn't absolve Lehman's for all of their horrible financial derivatives mess.  It would allow them an equal playing field and their creditors, investors and shareholders could gain some value back from their investments.  This is of course until the punch bowl is empty and the music stops, then they will all be back at the bankruptcy table; however, this time Goldman Sachs, JP Morgan etc... will be sitting at the same table wondering where it all went wrong.  

The underlying investments of all of these major investment....uhhh, I mean Commercial Banks are mostly worthless.  The day of reckoning will come and all of it will have to be liquidated at their true value.  In 2008 the total estimated financial "listed" derivatives were valued at $600 TRILLION.  The OTC (over the counter) derivatives are estimated valued nearing $600 Trillion.  Combined it's over $1000 Trillion, or $1 Quadrillion.  This dwarfs the worlds GDP numbers which comes in around $61 Trillion.  It's estimated that the entire worlds wealth in the year 2000 was $125 Trillion.  Who knows where it is today.  

I hope this piques some curiosity in how these financial institutions are destroying the world one IRA & 401k at a time.  This will end very badly and I hope you know where your money is...