I would hope that everyone goes to my website Sickworld News Online Journal from time to time.

The Queen has been on hiatus while I took care of holiday matters. It was a matter of getting the house ready for an onslaught of children and their significant others and then making sure everyone stayed fairly happy. It turned out to be a heck of a lot of fun for everybody and totally worth all the time and effort. Being on hiatus let me rest from the strip so I could re-read it. It confirmed a fear I had that this whole Jackson business is taking the strip away from its central theme. I am also trying a graphic novel approach as I did in the Xeric Grant winning Revenge of the Vampire Bed and Breakfast which I don’t exactly feel is appropriate.

Stay tuned for some changes.

If I were to believe Calomiris’ argument that Fannie made me do it, then apparently the trickle down effect caused Goldman to package the debt from these defective loans into shiny new securities all tied in triple and double a ratings bows. Offering its sales force “ginormous” credits to get rid of these pieces of crap, Goldman raked in the cash from unsuspecting hedge funds, all the while quaking from what horrible calamity would befall it should it go a different path. Like the path of not making “ginormous” credits, I guess.

According to the plaintiffs:

These transactions, the fund said, “provided a vehicle for Goldman to unload its toxic inventory and to profit from the decline in value of the very securities it was recommending that its clients purchase.”

In short, Goldman was shorting its own product because if you’re going to be the slave of Fannie and Freddie, you might as well make a lot of money while doing it.

Occupy Wall Street is denouncing banks and Wall Street for “selling toxic mortgages” while “screwing investors and homeowners.”

He goes on to say:

And the federal government recently announced it will be suing mortgage originators whose low-quality underwriting standards produced ballooning losses for Fannie Mae and Freddie Mac.

Have they fingered the right culprits?

No, according to the right. We know Calomiris is a right winger because he mentions that the underwriting standards began declining in the Clinton administration. When he later talks about the summer of 2004 being the pivotal year that senior management “realized that the only way to meet the political mandates was to massively cut underwriting standards”, he fails to point out what administration was in charge at that particular juncture. The reluctance to use the “B” word is always the sign of a right winger.

Well, what exactly happened in 2004?

The turning point was the spring and summer of 2004. Fannie and Freddie had kept their exposures low to loans made with little or no documentation (no-doc and low-doc loans), owing to their internal risk-management guidelines that limited such lending.

Then, of course, apparently the big realization came that there were political mandates from the Clinton era. I guess. For lack of the “B” word. And the rush to churn out even more no-doc and low-doc loans was on. William Black calls these liar loans or ninja loans…No income, no jobs. Boy, if the government pressured me and I was a bank, I’d give these guys loans in a minute. Patriotic duty and all that.

Calomiris drives this point home by writing:

Politics—not shortsightedness or incompetent risk managers—drove Freddie Mac to eliminate its previous limits on no-doc lending. Commenting on what others referred to as the “push to do more affordable [lending] business,” Senior Vice President Robert Tsien wrote to Dick Syron on July 14, 2004: “Tipping the scale in favor of no cap [on no-doc lending] at this time was the pragmatic consideration that, under the current circumstances, a cap would be interpreted by external critics as additional proof we are not really committed to affordable lending.”

Apparently, Calomiris never heard of Bush’s “Ownership Society”. Could this possibly have been that pressure suddenly descending on the banking community that fateful Spring of 2004?

Bankers tripped over themselves to prove that they are committed to affordable lending by giving loans to anything that even vaguely resembled a human being. Surprisingly, they made a lot of money doing it.

The bulk of the op ed piece goes into various ways in which individuals at Freddie Mac and Fannie Mae heroically stood against the tide of evil political pressure.

The bottom line is that yeah, the political gates were wide open for a lot of underhanded underwriting, for fraud, for excess and a lot of other nasty things. We recently had a really heinous home invasion case go to trial here in Connecticut. A fellow named Hayes was sentenced to die for masterminding a hideous triple murder. His accomplice, Kommisarjevsky, argued that Hayes made him do it. Yeah, and so what?

It sounds to me like Calomiris for all his right wing leanings is making a very liberal argument. Have mercy on the perpetrators, the devil made them do it.

The only president ever to balance the Federal budget was Andrew Jackson. He was a real populist hero, having solidified his standing with the magnificent victory over the British in New Orleans, after the peace Treaty of the War of 1812 had been signed.
Mostly, we’ve been given a history of Jackson inextricably bound up with the trail of tears, in which huge populations of Indians were forcibly marched west. However, his greatest legacy might in fact be the destruction of the Second Bank of the United States. Its president, Nicholas Biddle, was a very powerful character. From what I understand, he played the role of a central banker, making the money decisions for the country. Jackson knew in his heart, there could only be one, elected, strongman. He especially resented that the Second Bank of the United States had quite a few foreign investors (read British). Jackson could hardly allow for foreigners to tell the United States what to do with its money.
I of course see a lot of parallels with today and the unlimited power and hubris of the moneyed classes. We bailed out numbers of foreign banks in addition to so-called American banks, which are hardly American at all, having subsidiaries throughout the world, not to mention addresses in the Cayman Islands. We have been told that not to have bailed them out would have been disastrous.
Jackson’s example to us all shows that this is not necessarily so. you can take on the bankers and the future can be pretty darn bright.

The best thing about working on the Queen comics is that I am constantly faced with simple problems that turn out to be not so simple. The problem posed in this part of the story is that I need an economic mechanism by which to topple the entire underworld. I probably should read a book or two on the topic of economics, but by and large the subject doesn’t much interest me. Corruption and underhandedness, however, does.
The selling of slave futures in completely vile for a number of reasons. It relies on the trafficking of people, on the vagaries of procreation, on false assumptions about market price (mark to market) and the nonexistence of a counter party to Andrew Jackson, say, like someone like Abraham Lincoln.
I figure I’m perfectly justified in inventing this sort of financial vehicle because even though I don’t know a thing about finance, I do know a thing or two about greed. Greed is in fact a very hopeful thing. It’s the optimism that no matter how much you sully your name and your reputation, how much you subvert your moral and ethical underpinnings, that getting a pile of money makes it all worth it.
Our little shawaptis, as you will soon see, having been animated in order to serve the queen in the underworld, become rapturously inspired by the mechanism of greed. As the queen confronts the banker-hating Andrew Jackson, the shawaptis are off doing far better things.

That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.

Or is it well-organized Washington Savvy lobbyists pressuring the government to squeeze as much debt out of the population of the United States as humanly possible to feed their need for a market in mortgage securities?

Wallison doesn’t say. It’s pretty much implied by people such as Wallison that government is a euphemism for socialism when in fact it can be pretty well argued that at this point in time, government is a cozy crony capitalist sort of thing that only takes care of poor people if some rich guy gets a cut of the action. A good example of this is JP Morgan running the Food Stamp Program.

Wallison ends his article by stating the following:

The narrative that came out of these events—largely propagated by government officials and accepted by a credulous media—was that the private sector’s greed and risk-taking caused the financial crisis and the government’s policies were not responsible. This narrative stimulated the punitive Dodd-Frank Act—fittingly named after Congress’s two key supporters of the government’s destructive housing policies. It also gave us the occupiers of Wall Street.

If you read Dodd-Frank, you quickly realize it’s nothing but a catalogue of good business practices. That good business practice can be interpreted as being punitive is really where we are at in the story. The private sector has been so coddled by the government, they act like spoiled children when their mommy asks them to take a teaspoon of medicine. They’d rather be ramming the family car into a telephone pole and blaming it on a negligent family that should have known better than to give the kid the keys.

What spurred me on to research ETF’s was the UBS trader arrested for losing 2.3 billion dollars of ETF hedges while working for the bank. You’d think we’d have learned our lesson in the entire derivative collapse which started us on our precarious economic path. Maybe throw out a few regulations like grenades in front of invading tanks. Maybe keep the entire casino mentality holed away from the general population.

Basically, ETF’s are mutual funds which can be traded on an exchange. Usually, mutual funds have to be treated differently, not speculatively. I haven’t really been able to ferret any answers to my questions. For instance, doesn’t open trading affect the value of the underlying assets in strange and not very natural ways? How can you value a stock differently in a basket of various other stocks differently from the stock in the open market? Is there a temptation to invent prices, maybe even shares themselves?

It’s times like this when I really wish I had done better in Math. Things were so much easier thirty years ago. I’d read an issue of Forbes, check out annual reports, discuss specific stocks with my father-in-law, and off I’d go, if not purchasing stocks, then certainly thinking about it.

Maybe what spooked me was the enormity of knowing there are people like me who think they actually know what they’re doing.

There are protests all over the country against Wall Street and bankers, on top of which there’s a controversy about Bank of America slapping its debit card customers with a five dollar a month fee. This morning’s Wall Street Journal ran an editorial that basically said, oh, poor banks, how else are they supposed to make money. This is true. It used to be that banks depended on the usual tools of usury, i.e., interest accrued on money borrowed, in order to make their profits. The federal reserve, however, has reduced the borrowing rate to near zero.
First and foremost, this means your typical saver gets no benefit at all from keeping money in the bank. Might as well keep it under the mattress, or in gold coins squirreled away in the closet. Meanwhile, the banks get to borrow from the Fed Window for almost nothing at all. This means the only ones benefitting from the low interest rates are the banks, who feel this pressing need to slap their customers with additional fees because it seems getting free money just isn’t enough.
Another troubling article appeared in the Wall Street Journal. This reported that banks receiving money for small business loans were instead using this to repay TARP. So much for low interest rates easing up credit.
As Barack Obama said in his press conference today, some things don’t constitute fraud, just immorality. Unfortunately, here we are two years into his presidency, and immorality is running rampant. I can’t wait to see what happens next.