CHESSNOID

The markets go up and the markets go down.  That will be consistently happening on a daily basis.  What causes these ups and downs are always strange.  This current bear market rally originally started with the banks announcing profitable months in January and February.  I just figured that was caused by the bailout money they took from the government and the temporary stoppage of write-offs from their mortgage losses (foreclosure moratoriums).  Bottom line, just another way to cook the books.

Today, I read a  Seeking Alpha article Exclusive: Big Banks’ Recent Profitability Due to AIG Scam which an anonymous trader explains how AIG helped the banks (counter parties) by manipulating asset prices to maximize the bailout money received from the government.

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).

What this all means is that the statements by major banks, i.e. JP Morgan Chase (JPM), Citi (C), and BofA (BAC), regarding abnormal profitability in January and February were true, however these profits were a) one-time in nature due to wholesale unwinds of AIG portfolios, b) entirely at the expense of AIG, and thus taxpayers, c) executed with Tim Geithner’s (and thus the administration’s) full knowledge and intent, d) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.

For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this “one time profit”, which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), also funded by taxpayers’ money flows into the market. If the administration is truly aware of all these events (and if Zero Hedge knows about it, it is safe to say Tim Geithner also got the memo), then the potential fallout would be staggering once this information makes the light of day.

If this story is true, then it looks like these Government-Wall Street bailouts are completely 100% fraudulent.  The reason why American taxpayers were against these bailouts from the beginning is because they suspected fraud would take place from all the massive money being thrown around.  I still remember former US Treasury Paulson along with still Federal Reserve Bernanke asking for almost a trillion dollars of taxpayer money requesting no oversight on how the money was to be spent. Apparently, they succeeded in pulling the wool over Congress with their blatant lies.

We have spent numerous trillions of dollars and the economy continues to get worse. Enough of the bogus bailouts and trillion dollar budget deficits!