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Now before some people start jumping up and down and yelling, "Straw man, straw man! Nobody believes it's okay to do that," let me present you with this delightful post written by ex-Goldman employee Matt Levine. Here is the actual title of the piece:

So Maybe Citi Created A Mortgage-Backed Security Filled With Loans They Knew Were Going To Fail So That They Could Sell It To A Client Who Wasn’t Aware That They Sabotaged It By Intentionally Picking The Misleadingly Rated Loans Most Likely To Be Defaulted Upon, So What?

Yeah, so what? It was just fraud! What kind of loser is opposed to fraud?

Levine's post is largely an attempt to counter arguments that it's wrong to screw people over in the name of making money. Most of his points rely on the tried and true "sophisticated investor" defense, which is basically akin to that scene in "Animal House" where the guys from Delta House have just destroyed Flounder's car and Otter tries to console him by saying, "Hey, you f***ed up! You trusted us!" In other words, it's your fault that you got the shaft since you should have known we were going to shaft you. Take a look:

There are five points to which your free-floating rage could maybe attach:

1. You were shorting a thing that you were selling to your customers! This is what drove Congress bonkers. But that’s what selling is. If you have 20 apples and sell me 15, you now have fewer apples, and I have more. If apple prices decline, I am worse off, and you are relatively protected. Banks, which are always long some risks and short some others, don’t see zero as a particularly interesting point on this continuum – if you have 20 apples and sell me 30, and apple prices decline, you make money, but that’s different only in degree, not in kind, from selling me 15 and reducing your risk to 5.

The apple analogy is sorta funky since most normal human beings buy apples to, uh, eat them instead of using them as long-term investment strategies. But let's roll with it! Let's say Matt sells me a crate of apples that he thinks is overvalued and that I think I can sell at a profit. I understand that there are certain risks in such transactions: The apples might have worms in them. There might be a surplus crop of apples that will diminish my selling power. Or people might just decide apples suck and not want to buy them. These are all risks I'm willing to assume when I buy apples from Matt.

But what I'm not willing to assume when I buy apples from Matt is that he might have personally embedded hand grenades in 80% of them that will blow up my truck when I try to drive them off the lot. Because that's pretty much what Citi's bad apples did to the people on the other side of the trade:

After the deal closed on Feb. 28, 2007, more than 80 percent of the portfolio was downgraded by credit ratings agencies in less than nine months. The security declared “an event of default” on Nov. 19, 2007, and investors soon lost hundreds of millions of dollars, the S.E.C. said, while Citigroup gained.

Among the losers was Ambac of New York, which insured financial instruments and was the largest investor in the deal, according to the S.E.C. Ambac’s role in the transaction was to assume the credit risk associated with a $500 million portion of the portfolio. When the value of the portfolio fell, Ambac had to make payments to those who had bet against the bonds, as Citigroup had.

In part because of losses tied to the financial crisis, Ambac filed for bankruptcy last year.

Neener, neener, neener, Ambac! How do you like them $500 million apples, losers?

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HuffPo's Investigative Fund has come up with a sharp story on the ever-expanding tax lien investment market, which you'll be surprised to know is just another way for Wall Street to gouge American taxpayers. Here are the relevant parts:

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found. [...]

Some states allow the investors to tack on as much as 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose - in some states within as little as six months. [...]

Years ago, the big banks left the buying of tax liens largely to local real estate specialists and small-time investors. These days, banks and hedge funds, stung by the failure of many speculative investments, see tax liens as a relatively safe option that can yield returns of around 7 percent.

Some banks also are packaging tax liens as securities - in a similar way to how unpaid home loans are securitized - and selling them to investors.

So broke local governments, instead of taking the time to collect taxes properly, are essentially forking over people behind on their taxes to Wall Street, where they'll have the lovely choice of paying off their taxes at usurious interest rates or losing their house to the banks that bought their tax liens. This is a great investment for banks since, even in this horrible real estate market, they can make a significant profit from selling someone's home for the relatively low price of paying off one year's worth of property taxes to the government. Either way, it's KA-CHING, KA-CHING, KA-CHING!

For those interested in learning more about how to become a financial vulture, I found this swell how-to video posted by the National Association of Tax Lien Investors. Note the sociopathic disregard for human suffering throughout it:

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The other day, Krugman wrote that we're in the beginning of a new Long Depression.

Forgive me, but he's wrong: this isn't the beginning, it's been going on for about two years now.

During a Depression there are periods where GDP grows. There are periods where jobs grow. It's just that the periods of job growth don't last.

There were opportunities to end the Depression before it really dug in its heels. The last one was at the beginning of Obama's term. Kicking out of the Depression required two things.

The first was an adequate stimulus. This didn't just mean a large enough stimulus, though the one offered was not large enough, it meant one properly constructed. Tax cuts for ordinary Americans are not stimulative, because folks like banks who have pricing power (you must have a credit card, loans, etc...) will simply take that money away by raising rates and fees. And it doesn't mean short term shovel-projects, it means making commitments which will last for years so that businesses, when making plans know that hiring is worth it because those employees will be needed for more than a year or so.

Likewise the US has some serious problems with the structure of the American economy. The cornerstone of the stimulus had to be reducing US dependence on oil because as long as the US economy is so dependent on oil, full fledged growth is simply not possible. The days of $20/barrel oil aren't coming back, and every time the price of oil gets too high, it puts great pressure on the US economy (and every other modern nation.)

The second thing which had to be done is to force the banks to actually eat their losses. Wipe out the shareholders and let the bondholders take their losses. All the money plunged into the banks (and it was much more than the TARP money, which was the smallest part of it) was wasted. Banks are not lending, and restoring lending is what the bailouts were sold as doing. Moreover they have raised borrowing rates and fees on those who need credit most, soaking up money which otherwise would be helping the economy rather than simply being sopped up to plug holes in bank balance sheets.

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I guess this means "clean coal" plants are next?

WASHINGTON — President Barack Obama will announce on Tuesday plans for the government to help finance the construction of two nuclear reactors -- the first in nearly 30 years, a top US official said.

Obama, who has advocated reducing foreign energy dependency and cutting back on greenhouse gases, will use a 2005 law that authorizes the Energy Department to guarantee loans to projects that help reduce greenhouse gas emissions.

Obama "has long believed that nuclear power should be part of our energy mix," a senior administration told AFP, speaking on condition of anonymity.

The 18.5 billion dollars in existing loan guarantee authority will be used to help finance the construction and operation of two new nuclear reactors at a Southern Company plant in Burke, Georgia.

Here's the thing: Nuclear power plants take a while to earn back investors' money, and until then, they often operate at a loss. They cost so much money to run, they won't close down the Vermont Yankee plant to discover the source of a radioactive substance that's leaking into the Connecticut River.

But hey, who doesn't love radioactive drinking water?

And because nuclear power plants are privately owned, what's to stop holding companies from moving the ownership into riskier corporate entities they could use to file bankruptcy, allowing them to walk away without expensive liabilities in the event of a nuclear accident? Nothing, really.

If anything in this country should be nationalized, it should be high-risk power plants. It's just common sense that for-profit companies will always put profit over safety.

And remember, we can't assume there'll always be a Democratic administration to inspect nuclear power.

The State of the Union speech is normally just a big kabuki theatre exercise. On both sides of the aisle, political parties make clear what they value and show their support or lack thereof for the President's agenda.

No news there. But I think in these days where the political spectrum has been so skewed that tea-baggers actually think Hitler was a liberal, it's a good idea to know just what the GOP does not support, like:

Assistance and tax credits for small businesses to create new jobs:

Or ending tax breaks for companies that send American jobs overseas:

Student loans and helping Americans get higher education:

Prohibiting foreign money from influencing our elections:

Nice to see where small business, education and oligarchy play into the GOP's values, isn't it?

The Post has an in-depth look at how the Fed was oblivious to the nation's looming major banking crisis, and the political maneuvering that will determine its future operation:

The keynote speaker, Federal Reserve Chairman Ben S. Bernanke, assured the bankers and businessmen gathered at the Westin Hotel on Michigan Avenue that their prosperity was not threatened by the plight of borrowers struggling to repay high-cost subprime loans.

Bernanke, who was in charge of regulating the nation's largest banks, told the audience that these firms were not at risk. He said most were not even involved in subprime lending. And the broader economy, he concluded, would be fine.

"Importantly, we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market," Bernanke said. "The troubled lenders, for the most part, have not been institutions with federally insured deposits."

He was wrong. Five of the 10 largest subprime lenders during the previous year were banks regulated by the Fed. Even as Bernanke spoke, the spillover from subprime lending was driving the banking industry into a historic crisis that some firms would not survive. And the upheaval would shove the economy into recession.

Just as the Fed had failed to protect borrowers from the consequences of subprime lending, so too had it failed to protect banks.

The central bank's performance has sparked a great debate about its future as a regulator, pitting those who want to expand its role against those who want to strip its powers. It also has come under pressure from politicians seeking greater oversight of its primary job, adjusting interest rates to moderate economic growth. The battles have complicated Bernanke's bid for a second term as chairman. The Senate Banking Committee voted to approve Bernanke 16 to 7 on Thursday, setting the stage for a January battle on the Senate floor.

The Fed's failure to foresee the crisis or to require adequate safeguards happened in part because it did not understand the risks that banks were taking, according to documents and interviews with more than three dozen current and former government officials, bank executives and regulatory experts.

Regulatory agencies exist to lean against the wind. But rather than looking for warning signs, the Fed had joined -- and at times defined -- the mainstream consensus among policymakers that financial innovations had made banking safer. Bernanke said the economy had entered an era of smaller and less frequent downturns, which he and others called "the great moderation."

But hey, look over there! Ben Bernanke's the Man of the Year!

WASHINGTON — The value of loans held by the biggest beneficiaries of the government's bank bailout fell for the ninth consecutive month in October, the Treasury Department reported Tuesday, a day after President Barack Obama criticized top bankers for not doing enough to boost lending.

The department's monthly report, which monitors the top 22 recipients of support from the government's $700 billion rescue fund, showed that their average loan balances dropped in October by $36.8 billion, or 0.9 percent. That followed a decline of 1.1 percent, or $45.9 billion, in September.

Obama on Monday urged the nation's big banks to make "extraordinary" efforts to increase lending to help consumers and businesses who have been staggered by the worst recession since the 1930s.

David Seaton's News Links: October Surprise

Anchorage Press: True Lies

his vorpal sword: Into the West

cab drollery: Brain Freeze

The American Prospect: Wingnut explanation for the subprime crisis: Libruls made us give loans to the colored people

HOLY CRAP: Muslim children gassed after "Obsession" DVD hits Ohio...Three more Texas polygamists indicted...Donohue defends Palin because witchcraft is real...They need this miraculous spray...Lying hypocrite to teach religion at Yale...Evangelist arrested in child porn case...Continuing cynical manipulation of religious voters, but ‘Pulpit Freedom Sunday' looks like a dud...Pastor Badass...Creationists left out of Vatican evolution conference...Short takes...Being Religulous...Distinguishing between Religion and Fundamentalism...Evangelicals for Obama car magnets...

Corporate welfare at its finest.

White House:

This is a pivotal moment for America's economy. Problems that originated in the credit markets -- and first showed up in the area of subprime mortgages -- have spread throughout our financial system. This has led to an erosion of confidence that has frozen many financial transactions, including loans to consumers and to businesses seeking to expand and create jobs. As a result, we must act now to protect our nation's economic health from serious risk.

There will be ample opportunity to debate the origins of this problem. Now is the time to solve it. In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment.

America's economy is facing unprecedented challenges, and we are responding with unprecedented action.

Paul Krugman details what happened and says:

The unthinkable - a government buyout of much of the private sector's bad debt - has become the inevitable.

NonnyMouse sent this article from The Motley Fool UK, and while this is focused on the UK banking system, it was still as disturbing to me as the thought of Madonna trying to make an updated version of Casablanca set in Iraq (which is to say, on so many levels). But it also occurred to me that given the hyper-partisan and crony-favored atmosphere fostered by the Bush administration, this wouldn't be a completely out-of-left-field thing to be happening here in the US too, if only tacitly:

You may have noticed that, for the past few years, this website has compared personal loans. Thousands of people have used the comparison tool.

As a writer, my involvement with it has largely been limited to looking through data to see patterns in the loans market. We survey users to find out how their applications went, so that we can identify patterns and provide better guidance in our articles. We've found that, of course, sometimes people don't get the loan they apply for, or that the lender offers them a worse rate than the typical APR that was shown.[..]

However, analysing the data we've collated, it's clear that who you vote for in elections affects whether you'll get a loan with a bank. If the bank supports one political party through donations or other means, and you vote for that party, you're more likely to get a loan. If you aren't a known supporter, you're less likely to get the loan. If you're a known supporter of a different party, you're even less likely.

Also, you're more likely to get the cheapest rates (the 'typical' APRs) if you support the same party as the bank!

This has serious implications about data protection, amongst other things.

I'd be curious to know how private banks in the UK would get voter information...but it should serve as a HUGE red flag on the dangers of the Voter/REAL ID cards here in the US.