From Volume 38, Issue 5 of EIR Online, Published Feb. 4, 2011

U.S. Economic/Financial News

The Lesson of the Angelides Report: Listen to LaRouche

Jan. 27 (EIRNS)—The Financial Crisis Inquiry Commission (FCIC)'s long-awaited study, released today, clearly recognizes that the bursting of the debt bubble was avoidable and should have been avoided. The main report, directed by chairman Phil Angelides (former California state treasurer), identifies the main cause of the crisis as the erosion and ultimate repeal of the Glass-Steagall Act, and other moves toward deregulation, over the last 40 years. However, it stops short of calling for reenactment of Glass-Steagall today, the solution which Lyndon LaRouche has insisted upon.

The Angelides report correctly names Alan Greenspan as the prime promoter of deregulation and out-of-control speculation, and criticizes his successor at the Federal Reserve Ben Bernanke, Treasury Secretary Hank Paulson, and then-New York Federal Reserve Bank chairman Timothy Geithner (now Treasury Secretary), the latter, for letting Citibank and Lehman Brothers get away with financial murder.

While the two dissenting opinions by Republican members of the Commission deny the role of the deregulatory measures in causing the crisis, the main report pinpoints two major causes: the repeal of Glass-Steagall in November 1999, and the passage in December 2000 of the Commodity Futures Modernization Act, which legalized over-the-counter derivatives in the trillions of dollars. This set off the chain of events which, in 2007, triggered the collapse of the world financial system.

While the FCIC study provides a useful service by putting a spotlight on these measures, Lyndon LaRouche and his political movement fought those moves every step of the way, denouncing the catastrophic economic and social consequences they would have. While often criticized as a "Cassandra," LaRouche's warnings have proven to be right on the mark.

In a webcast on July 25, 2007, LaRouche correctly forecast the financial crisis which was to break out some weeks later. In August, he called for a Homeowners and Bank Protection Act (HBPA) to prevent foreclosures and reorganize the mortgage and MBS markets, which created a groundswell of support. That initiative, however, was blocked on behalf of Wall Street and the Inter-Alpha Group by, among others, then-House Majority Leader Nancy Pelosi, Rep. Barney Frank (D-Mass.), and Sen. Chris Dodd (D-Conn.). Quickly, the first bailout plan enacted led to endless bank rescue operations, and the current hyperinflationary explosion.

The FCIC, which was set up in May 2009 by law, was no "Pecora Commission," but the majority report, by the six Democrats, included reports on potential illegalities which have been referred to the Justice Department.

The study's conclusion were enough to force sputterings and attempts to belittle the partisanship of commission members in certain financial quarters. The Wall Street Journal ranted in a lead editorial that the report amounts to saying that "evil bankers did it," and complained that the attacks on deregulation, over-the-counter derivatives and CDS are unfair.

Wall Street is also alarmed by the fact that the Commission is putting a trove of investigative documents on line, many of which are internal documents and communications of the corporations investigated, fearing that they will provide ammunition for class-action lawsuits. Angelides promised that the Commission will be posting more, including research and investigative documents, audio, and transcripts.

Fed Money Printing Feeding Hyperinflation

Jan. 23 (EIRNS)—The Journal of Commerce Commodity Index rose 50% in 2010, and is above its previous all-time high of the Spring 2008 commodities bubble which set off food price riots around the world. The commodity index has inflated 200% since 2001 under the "helicopter money" policy of Fed Chairmen Alan Greenspan and his henchman Ben Bernanke. The index has risen 100% in just two years 2009-10, the "bank bailout effect." Food prices as a whole, for example, were up 37% internationally from Jan. 1, 2010 to Jan. 1, 2011.

Since the Federal Reserve launched its latest hyperinflationary money-printing scheme under the initials "QEII" in October, there are few commodities on the metals, foodstuffs, and energy futures/derivative exchanges, the contracts for which have not become 50-95% monopolized, or "cornered," at one or several times by a bank or other large financial institution. This is pure speculation, using these derivatives markets to drive the inflation on which the banks are speculating. Morgan Stanley, Citibank, JPMorgan Chase, and Goldman Sucks, for example, have been speculating massively, notoriously on the energy derivatives markets, driving "commercial hedge users" off these markets.

The liquidity to run these massive speculations is being "fed" to the banks by the Fed's purchases of their Treasury bills, MBS, etc.

Hedge Funds Targetting Food Processors

Jan. 24 (EIRNS)—Why speculate on the price, when you can just buy the company? Today it was revealed that three hedge funds—Apollo Global Management LLC, Bain Capital LLC, and TPG Capital (formerly the Texas Pacific Group)—have made a takeover bid for food processor Sara Lee Corp., known for its breakfast pastries, but now also having significant meat-processing, and coffee and tea divisions. On the other side in this bidding war is Brazilian meat processor JDS, which Business Week says has the backing of hedge fund Blackstone Group. The new bid for Sara Lee is almost 10 times annual earnings, and would be the biggest buyout deal in a decade, were it to go through.

In November, former "merger and acquisition" king KKR led a group which bought canned fruit and vegetable processor Del Monte Foods, at the same time Apollo Global was buying CKE Restaurants, owner of fast-food chains Carl's and Hardee's. There's probably much more of this going on.

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