The US Intelligentsia and Middle Class Are In the Firm Grip of Fear, Fraud and Denial

[girl gone mad]

The US Intelligentsia and Middle Class Are In the Firm Grip of Fear, Fraud and Denial
http://jessescrossroadscafe.blogspot.com/2010/05/us-is-in-grip-of-fraud-and-denial.html

The lie is comfortable, an illusion easy to live with, familiar, and safe.

Writing from the 'disgraced profession' of economics, James K. Galbraith speaks of the unspoken, the many frauds and deceptions underlying the recent financial crisis centered in the US. Many will read this and shake their heads in agreement, but will be unable to take the next logical step and internalize the implications of the depth and breadth of the dishonesty that enabled it then, and continues to sustain it, even today. Galbraith is asking 'why' and framing a further inquiry into the consequences of this unwillingness to reform.

"Some appear to believe that "confidence in the banks" can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion."

It is easier to go with the flow, relax, rationalize, and be diverted and entertained by 'the show.' The truth may set you free, but before that it can make you feel very insecure and uncomfortable, especially when it requires challenging the 'official story' and policy decisions. Better to say nothing offensive to the oligarchs, and even occasionally to utter intelligent sounding condemnations of those who dare to question the very things you wonder about, and fear, in order to prove your loyalty and to reassure yourself that you are a right-thinking, practical individual. For the disparity that is unavoidably noticed between what is seen and what is said makes one uneasy, fearful that they are losing their bearings, if not reason. And the vested interests play on those fears. See Techniques of Propaganda

The consequences of 'extend and pretend' will be to worsen the final outcome, the day of reckoning.

"The initial deviation from the truth will be multiplied a thousandfold." Aristotle

The banks must be restrained, the financial and political system reformed, and balance restored to the economy, before there can be any sustained recovery.

http://jessescrossroadscafe.blogspot.com/2010/05/us-is-in-grip-of-fraud-and-denial.html">more...

I would encourage everyone to read the Galbraith's written statement to members of the Senate Judiciary Committee, which Jesse posted in full.

[Go2Peace]

1. Exactly. Nothing fundamental has changed. We are just pumping money until we get another bubble.

Nothing to see, move along.... Everything will be OK. We have ..cough cough.. mended our ways and changed... the system was fundamentally sound all along... it was only a few bad..er.. not bad as in jail bad... just bad as in stupid,... bankers that made mistakes... full steam AHEAD with the new world order!

God help those who haven't been able to prepare during this "upturn". If they don't make fundamental change the next one will be a DOOZY!

(notice how *NOBODY* is talking about the massive dollar printing that is going on)

[bbgrunt]

2. the shock doctrine at work. Maybe the stockholm syndrome is taking over.

[JDPriestly]

3. The best parts of Galbraith's statement in my view

An older strand of institutional economics understood that a security is a contract in law. It can only be as good as the legal system that stands behind it. Some fraud is inevitable, but in a functioning system it must be rare. It must be considered – and rightly – a minor problem. If fraud – or even the perception of fraud – comes to dominate the system, then there is no foundation for a market in the securities. They become trash. And more deeply, so do the institutions responsible for creating, rating and selling them. Including, so long as it fails to respond with appropriate force, the legal system itself.

Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: "liars' loans," "ninja loans," "neutron loans," and "toxic waste," tells you that people knew. I have also heard the expression, "IBG,YBG;" the meaning of that bit of code was: "I'll be gone, you'll be gone."

....

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you.

http://jessescrossroadscafe.blogspot.com/2010/05/us-is-in-grip-of-fraud-and-denial.html

[Vinnie From Indy]

5. Agreed!

There is absolutely no doubt that without the rule of law and enforcement of those laws, the system will never be restored.

[glitch]

6. "Either the legal system must do its work. Or the market system cannot be restored."

Without confidence it's all PPT.

[truedelphi]

4. K & R. n/t

[blue97keet]

7. The entire securitization process is a tangled mess of perverse incentives,

conflicts of interest and blinding complexity. It cannot be patched up.