THE OIL BOMB AND MORE!

[sometimeman]

IRAN IS FIXING TO DROP ITS "OIL BOMB"

This requires some explaining.
Iran did this to break free from the tyranny of the dollar. Russia and Europe welcomed the Iranian oil bourse because 70 percent of Europe’s oil is imported from Iran. The two most oil-hungry nations growing hungrier by the day, China and India, also said that they were very interested. Now you see why Iran’s president is “the most dangerous man in the world?” It has nothing to do with the damned nuclear bomb. It has to do with the detonation of the oil bomb that has detonated the dollar bomb. For America this is war, literally, because having left the Gold Standard in 1971 it had, de facto, made oil the commodity on which the dollar is based by ensuring that oil is sold mostly in dollars. (When Saddam said in April 2002 that he was considering selling some Iraqi oil in Euros he signed his death warrant). Came the decline in the dollar came the decline in the value (purchasing power) of oil revenues as well as OPEC’s dollar-based assets. Oil-exporting countries started thinking in terms of selling some oil in Euros. This would put the dollar even more on the skids. President Bush’s first Middle East trip this year, ostensibly a “peace mission”, was actually to deliver what Mike Whitney calls “the horse’s head” (as in the film, The Godfather). “Bush went to the trouble of travelling half-way around the world to tell the Saudis and their friends in the Gulf States that they were going to continue linking their oil to the dollar or they were going to “sleep with the fishes.”

MORE>>>>
www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Opinions/Columns/13-Jul-2008/The-oil-bomb

[sometimeman]

In an article in The San Francisco Chronicle in December 2007, attorney Sean Olender suggested that the real reason for the subprime bailout schemes being proposed by the U.S. Treasury Department was not to keep strapped borrowers in their homes so much as to stave off a spate of lawsuits against the banks. The plan then on the table was an interest rate freeze on a limited number of subprime loans. Olender wrote:

“The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value – right now almost 10 times their market worth. The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

“. . . The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC . . . .

“What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back.”1

[soaks]

Here is some interesting reading on the Glass-Steagall Act:

EDIT: I've beefed-up these links with some excerpts from the articles, I would highly recommend persuing the links for their full context.

In addition to the Wikipedia link to the Gramm-Leach-Bliley Act (which repealed the Glass-Steagall Act) I would also recommend this Wikipedia article on Subprime mortgage crisis:

en.wikipedia.org/wiki/Subprime_mortgage_crisis

==========

A good explanation and background:
www.cftech.com/BrainBank/SPECIALREPORTS/GlassSteagall.html

Introduction to the Glass-Steagall Act
-snip- And what is commonly known today as the Glass-Steagall law is actually the Bank Act of 1933, containing the provision erecting a wall between the banking and securities businesses. It also laid the groundwork for legislation that would allow the Federal Reserve to let banks into the securities business in a limited way.

-snip-

Provisions of the Glass-Steagall Act were directed at these abuses:
(1) Banks were investing their own assets in securities with consequent risk to commercial and savings deposits. The concern of Congress to block this evil is clearly stated in the report of the Senate Banking and Currency Committee on an immediate forerunner of the Glass-Steagall Act.

(2) Unsound loans were made in order to shore up the price of securities or the financial position of companies in which a bank had invested its own assets.

(3) A commercial bank's financial interest in the ownership, price, or distribution of securities inevitably tempted bank officials to press their banking customers into investing in securities which the bank itself was under pressure to sell because of its own pecuniary stake in the transaction.

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One Opinion on it's strengths and weakness:
www.investopedia.com/articles/03/071603.asp?viewall=1

-snip-

Were the Walls Necessary? - The New Rules of the Gramm-Leach-Bliley Act
The limitations of the GSA on the banking sector sparked a debate over how much restriction is healthy for the industry. Many argued that allowing banks to diversify in moderation offers the banking industry the potential to reduce risk, so the restrictions of the GSA could have actually had an adverse effect, making the banking industry riskier rather than safer. Furthermore, big banks of the post-Enron market are likely to be more transparent, lessening the possibility of assuming too much risk or masking unsound investment decisions. As such, reputation has come to mean everything in today's market, and that could be enough to motivate banks to regulate themselves.

Consequently, to the delight of many in the banking industry (not everyone, however, was happy), in November of 1999 Congress repealed the GSA with the establishment of the Gramm-Leach-Bliley Act, which eliminated the GSA restrictions against affiliations between commercial and investment banks. Furthermore, the Gramm-Leach-Bliley Act allows banking institutions to provide a broader range of services, including underwriting and other dealing activities.

Conclusion
Although the barrier between commercial and investment banking aimed to prevent a loss of deposits in the event of investment failures, the reasons for the repeal of the GSA and the establishment of the Gramm-Leach-Bliley Act show that even regulatory attempts for safety can have adverse effects.

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Another take on it's strengths and weakness:
www.marketwatch.com/news/story/would-glass-steagall-save-day-credit/story.aspx?guid=%7B3AA33D85-AD38-41B4-B300-033235B5734A%7D

In 1999, the law banning brokerages and banks from marrying one another -- the Glass-Steagall Act of 1933 -- was lifted, and voila, the financial supermarket has grown to be the places we know as Citigroup, UBS, Deutsche Bank, et al.

But now that banks seemingly have stumbled over their bad mortgages, it's worth asking whether the fallout would be wreaking so much havoc on the rest of the financial markets had Glass-Steagall been kept in place.

-snip-

At brokerage firms there are supposed to be Chinese walls that separate investment banking from trading and research activities. These separations are supposed to prevent dealmakers from pressuring their colleague analysts to give better results to clients, all in the name of increasing their mutual bottom line.

Well, we saw how well these walls held up during the heyday of the dot-com era when ridiculously high estimates were placed on corporations that happened to be underwritten by the same firm that was also trading its securities. When these walls were placed within their new bank homes, cracks appeared and -- it looks ever so apparent -- ignored.

No one really questioned the new fad of collateralizing bank mortgage debt into different types of financial instruments and selling them through a different arm of the same institution. They are now.

-snip-

When banks are being scrutinized and subject to due diligence by third-party securities analysts more questions are raised than when the scrutiny is by people who share the same cafeteria. Besides, fees, deals and the like would all be subject to salesmanship, which means people would be hammering prices and questioning things much more to increase their own profit -- not working together to increase their shared bonus pool.

-snip-

...These are Band-Aid measures, however, that won't patch what's broken: the system of conflicts that arise when sellers, salesmen and evaluators are all on the same team.

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And Wikipedia's take on it's repeal via the Gramm-Leach-Bliley Act:
en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

-snip-

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1997 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services. Other major mergers in the financial sector had already taken place such as the Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation combination in the mid-1990s. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Acts by combining insurance and securities companies, if not for a temporary waiver process. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.

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Although Bill Clinton did sign this law in Nov 1999, both of it's major authors (Gramm-Leach) were Republicans and the full impact of this law blossomed under the Bush Administration and a Republican controlled Congress.

[sometimeman]

I'm ignorant of the Act however, I think the Democrats have done about as much damage as the Republicans if you don't include George Bush. When Bush is included the Republicans have definitely ruined things.
However, the Democrats have refused to rein in Bush and Company.
Nancey Pelosi is a sorry as they come.
AIPAC runs Washington. Their power base includes ignorant Conservative Christians, like my (former) "self"

[soaks]

Sometimeman,

The links that I provided are not long reads, and have direct bearing on the gist of your original post.

[sometimeman]

Thank you for your gentleness and over looking my lack of learning.
All business in any field or endeavor, that I know of, seek a legislative advantage that gives them an advantage over their competitors.
I can tell of one ridicules example, that of primary lead producers having legislation enacted declaring the furnace slag of their competitors, the scrap lead processors, "hazardous waste".

It took some money and some doing, testifying before congress to get things straight. All business, of any significant size, has law firms in the state and nation's capitols that read the federal register and try to prevent from being done in by restrictive legislation. So it is with Banks and Banking
Greed is destroying us.

[soaks]

-Bump-

I've beefed-up the links in the post upthread with some excerpts from the respective articles.

On a related note, I wonder if it's worth exploring Phil Gramm's (a senior financial advisor to John McCain's campgain) contributions to deregulation from his days as Chairman of the Senate Banking and Finance Committee?