It took the journalists at Bloomberg News two years - and presumably lots of legal fees - to pry information out of the Federal Reserve that should have been made public long ago. We now know that the Fed's secret $7.7 trillion lending program wasn't just the most massive bank bailout ever seen, and it wasn't just free money for mega-bankers - though it was certainly both of those things. It was also the greatest hoax in stock market history.

No, scratch that. It was the greatest hoax in the history of money. And it was built on lies. How many? Let us count the ways.

Here's the first one: The banks paid back all the money back that they were given. No, they didn't. They paid back the principal on these loans. But by obtaining loans at rates far below market value, we now know they received the equivalent of $13 billion in cash giveaways.

Here's another lie: Fed economists support a free-market economy.

Ben Bernanke is a conservative economist who claims to support a free-market system. But we now know that the Federal Reserve lent astonishing sums to US banks in secret, and Bernanke fought with all the resources at his disposal to ensure that this information didn't become public. He didn't just want it to be held back to avoid a panic during the crisis. He wanted it kept secret forever.

I don't know what you call somebody like that, but I know what you don't call him: A capitalist. Free markets need transparency, so that investors and customers can make informed decisions and 'the wisdom of the market' can prevail. Nobody wanted the market to do its job. When it came to banks, they wanted it to be blind, deaf, and dumb, unable to make sound judgments about their financial soundness.

They still want it that way. They don't want investors to know how badly Wall Street executives failed at their jobs. They don't want the free market to do what it does best - thin the herd so it's free of incompetent managers like the executives who still run our largest banks.

You can believe in the free market, ur you can believe in today's Wall Street. But you can't do both.

Here's another lie, one that's spread by Dimon and others: Giant banks are more efficient. Size brings efficiency in other kinds of business, but these banks needed massive help. America's six largest banks accounted on any given day for an average of 63 percent of the debt on these loans. The only thing they're more efficient at is wringing free money out of government-created institutions.

And, wow. Jamie Dimon sure is a hypocrite. As Bloomberg noted:

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed's Term Auction Facility "at the request of the Federal Reserve to help motivate others to use the system." He didn't say that the New York-based bank's total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program's creation.

He also didn't mention that these favorable loans gave his bank nearly half a billion dollars in cash it otherwise wouldn't have had. Know what's convenient about that? It helps make up for the three-quarters of a billion Dimon's bank gave up to settle charges of bribery and corruption in Jefferson County, Alabama.

Chase borrowed massive sums of money, either because it was in bigger trouble than it has admitted or because it was bleeding an emergency public program out of greed. Either way, they weren't doing anybody a favor except themselves. How big a favor? Chase netted $457.9 million.

Citigroup's an even more extreme example. Once our largest bank (until continued mismanagement led to ongoing shrinkage). It only exists because Robert Rubin and other officials in the Clinton Administration,cleared the way for the largest merger in history with the enthusiastic support of the Republicans. That merger combined a bank with an insurance company, a harbinger of bad things to come in the risk area.

Citigroup's got the equivalent of a $1.8 billion gift, courtesy of Uncle Sam.

Bank of America CEO Brian Moynihan sneers at his critics, especially those who think you shouldn't foreclose on families without obtaining proof that you own their mortgage. "Oh, sure," he said in response to government demands, "we'll do our homework."

Bank of America's gift came to $1.5 billion.

Goldman Sachs shouldn't have been eligible for any Fed giveaways because it wasn't a commercial bank. But a special "waiver" allowed Goldman allowed to become commercial bank so it could be rescued from actions it took before it was a commercial bank. Before that it was an investment bank. Yet, strangely, it seems to have kept operating as an investment bank even after the transition, too, even though commercial banks aren't allowed to do that.

Understand that? Don't take it personally if you don't. You're not supposed to.

Goldman Sachs's take? Just under $1 billion.

Washington's always telling us that bankers may have done naughty things, but they weren't illegal things. That gets us to our next lie: There's no evidence that bank executives have committed crimes. Thanks to Massachusetts Attorney General Martha Coakley, we may be about to discover whether that's true regarding foreclosures and mortgage filings. But when it comes to stock fraud, the evidence is already piling up.

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It comes as no surprise that Congressional Republicans are balking at President Obama’s $447 billion program forecast to produce as many as 1.9 million jobs. But while the GOP has opposed Obama’s calls for new tax revenue from the wealthiest Americans to pay for it, most of the Republican presidential field wants to give them yet another trillion dollar tax cut payday by eliminating the capital gains tax.

With U.S. income inequality at its highest level in 80 years and the total federal tax burden at its lowest in 60, the last thing America needs to do is further reduce the capital gains tax. As a decade of data shows, the Treasury-draining Bush capital gains and dividend tax windfall for the wealthy not only failed to produce employment gains from America's so-called "job creators." As the Washington Post detailed, "capital gains tax rates benefiting wealthy feed [the] growing gap between rich and poor." Nevertheless, most Republicans are calling for a new capital gains tax rate: zero.

As the Post explained, for the very richest Americans the successive capital gains tax cuts from Presidents Clinton (to 20 percent) and Bush (to 15 percent) have been "better than any Christmas gift":

While it's true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.

The convenient chart above tells the tale. And as the Washington Post suggests elsewhere in its jaw-dropping series "Breaking Away," plummeting tax rates overall and on capital gains in particular have been widening the chasm between the rich and everyone else in America:

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Is he a liar? Is he just clueless? Or does he live in a parallel universe?

From Center for Economic Policy and Research:

"Greenspan also said he believes that the sharp rise in gold prices is due to market concerns about inflation taking off in the long run. He noted how there has never been such a major expansion of credit in U.S. economic history."

Let's look this one up. There is an organization called the "Federal Reserve Board" that puts out really good data on credit. If we look at its most recent Flow of Funds accounts, we see that credit for the economy as a whole expanded at a 3.0 percent annual rate in 2009, a 4.2 percent annual rate in 2010, and a 2.3 percent annual rate in the first quarter of 2011, the most recent quarter for which data is available.

Has there ever been "such a major expansion of credit in U.S. economic history?"

Well, actually credit expanded more rapidly than the 4.2 percent rate in 2010 in every single year that Greenspan chaired the Fed. In fact, it expanded more rapidly in every year in this series (going back to 1976) and probably every year since the Great Depression. In other words, for Alan Greenspan night is day, up is down, he is looking at an extraordinarily slow pace of credit expansion and telling reporters that is the fastest on record...read on

The media built him up for some reason. Maybe it was the glasses or his love of Ayn Rand, but usually they then tear you down after you get everything wrong. However, Alan escapes that path and still hangs around to sprout off nonsense that is usually listened to by the confidence fairies.

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Alan Greenspan has returned and is trying to be the Grand Poobah of economics again. Hasn't the world endured enough of his Randian ideology and resulting actions that led to the meltdown of the entire global financial markets?

Here's Paul Krugmans's response:

Some people have asked me for reactions to this piece by Alan Greenspan (pdf) on how Obama’s activism is preventing economic recovery. I could go through the weak reasoning, the shoddy econometrics that ignores a large literature on business investment and ignores simultaneity problems, etc., etc..

But never mind; just consider the tone.

Greenspan writes in characteristic form: other people may have their models, but he’s the wise oracle who knows the deep mysteries of human behavior, who can discern patterns based on his ineffable knowledge of economic psychology and history.

Sorry, but he doesn’t get to do that any more. 2011 is not 2006. Greenspan is an ex-Maestro; his reputation is pushing up the daisies, it’s gone to meet its maker, it’s joined the choir invisible.

He’s no longer the Man Who Knows; he’s the man who presided over an economy careening to the worst economic crisis since the Great Depression — and who saw no evil, heard no evil, refused to do anything about subprime, insisted that derivatives made the financial system more stable, denied not only that there was a national housing bubble but that such a bubble was even possible.

If he wants to redeem himself through hard and serious reflection about how he got it so wrong, fine — and I’d be interested in listening. If he thinks he can still lecture us from his pedestal of wisdom, he’s wasting our time.

You may remember when Rand Greenspan made a pretty shocking admission to Rep. Waxman

Waxman: Then where do you think you made a mistake?

Greenspan: I made a mistake in the presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders...

Waxman? Do you have any financial responsibility for the financial crisis? (On his ideology)

Greenspan: ...to exist you need an ideology. The question is whether it is accurate or not, and what I'm saying to you is, yes, I found a flaw.

Zombies who need to eat our brains like Greenspan never go away. Here's an excerpt from Matt Taibbi's new book, Griftopia, on Greenspan.

Greenspan met Rand in the early fifties after leaving Columbia, attending meetings at Rand's apartment with a circle of like-minded jerkoffs who called themselves by the ridiculous name of the Collective and who provided Greenspan the desired forum for social ascent.

These meetings of The Collective would have an enormous impact on American culture by birthing a crackpot anti-theology dedicated to legitimizing self interest -- a grotesquerie called Objectivism that hit the Upper East Side cocktail party circuit hard in the fifties and sixties.

It is important to to spend some time of the seriously demented history of Objectivism, because this lunatic religion that should have choked to death in its sleep decades ago would go on, thanks in large part to Greenspan to provide the entire intellectual context for the financial disasters of of the early twenty first century.

He was always committed to his Randian beliefs and based US monetary policy on those ideas throughout his career -- which of course in the end produced a huge failure. I agree with Paul and that the only time I want to hear from him again is : If he wants to redeem himself through hard and serious reflection about how he got it so wrong, fine — and I’d be interested in listening. Wouldn't it be nice to see the media and their 24/7 capabilities examine Greenspan's policies and actions and do it for him since he'll never come clean?

(h/t ThinkTanked Blog)

Just in case you didn't see it coming, here's the opening salvo in the Great Bush Tax Hike Cut Battle, courtesy of the Heritage Foundation, that non-partisan think tank that just happens to wrap itself around every conservative value out there.

It's a fantasy, just like every other fiscal policy the Republicans think is gospel. They cue the tax cut fairies and ignore David Stockman, Alan Greenspan, Paul Krugman, and just about every economist on the planet while catering to the few and starving the many.

Reassure the children. The Tax Cut Monster is a big red greedy thing, but it's easy to kill. Do nothing, and the tax cuts vanish! Just like that. The tax cut fairies will cry and stomp, but it'll be all right. We'll all be better off for it, even if the richest 400 people in the country have to pay something more like their fair share.

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Former Fed Chairman Alan Greenspan said that the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy.

In an interview on NBC's "Meet the Press," Greenspan expressed his disagreement with the conservative argument that tax cuts essentially pay for themselves by generating revenue and productivity among recipients.

"They do not," said Greenspan.

"I'm very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money," he said. "And at the end of the day that proves disastrous. My view is I don't think we can play subtle policy here."

The comments from the former Fed chief were an elaboration of a position he outlined in an interview earlier in the week. Speaking with PBS' Judy Woodruff, Greenspan expressed his opposition to passing legislation that would hold tax rates steady (under law the tax cuts Bush passed ten years ago are going to expire, thereby bringing rates back to Clinton-era levels). President Obama has pledged to continue the tax breaks for those individuals making under $200,000 and those families earning less than $250,000.

But Republicans want the entire package kept in place. Even so, they have declined to say how they would pay for it, saying, in part, that keeping the Bush tax cuts in place will pay for itself.

In addition to throwing cold water on that theory, Greenspan also weighed in on broader economic issues and trends. The former Fed Chairman relayed some sobering economic predictions, saying he expected the nation's unemployment rate to remain at its current level, mainly because there were few tools left to change it.

Sisters Are Doing It For Themselves - Eurythmics featuring Aretha Franklin

I woke up this morning to the sweet, sweet sounds of a shattered glass ceiling. This Week is now being hosted by a woman, Christiane Amanpour. With no disrespect intended to interim host Jake Tapper (who did a fairly decent job, certainly better and more consistently than Stephanopoulos), I am thrilled to get a new voice and new point of view to the Sunday shows. Both as a female and as a person who has lived in other countries, I'm hoping that Amanpour will bring something different to the American macho exceptionalism that spews forth mindlessly on these shows. And who better to inaugurate Amanpour's first show than that other glass ceiling breaker, Speaker of the House Nancy Pelosi? Of course, on the other end of the spectrum, we have Sarah Palin on yet another "exclusive" interview with Fox News Sunday. Elsewhere on the dial, Ayn Rand's boy toy Alan Greenspan will be on Meet the Press and would-be Fourteenth Amendment Warrior Lindsey Graham is on State of the Union and Tweety's trying to figure out if tying the Republicans to the Tea Party is a good electoral strategy. Like I said, we could sure use a fresh perspective on Sundays.

ABC's "This Week" - House Speaker Nancy Pelosi, D-Calif.; Defense Secretary Robert Gates.

CBS' "Face the Nation" - Sen. Jon Kyl, R-Ariz.; Adm. Mike Mullen, chairman of the Joint Chiefs of Staff; Richard Haass, president of the Council on Foreign Relations; Thomas Saenz, president of the Mexican American Legal Defense and Educational Fund.

NBC's "Meet the Press" - Mullen; former Federal Reserve Chairman Alan Greenspan; Gov. Ed Rendell, D-Pa.; New York Mayor Michael Bloomberg.

NBC's "The Chris Matthews Show" - Panel: Kimberly Dozier, Dan Rather, Rick Stengel and Helene Cooper. Topics: The War in Afghanistan: How Long Will the President's Popular Support Last? Can Democrats Limit the Damage By Tying Republicans to the Tea Party?

CNN's "State of the Union" - Sens. Carl Levin, D-Mich., and Lindsey Graham, R-S.C.

CNN's "Fareed Zakaria GPS" - On Sunday, Fareed has an exclusive interview with Senator John Kerry -- the Chairman of the Senate Foreign Relations Committee -- to talk about the Wikileaks and, more broadly, the war in Afghanistan; about Iran and whether we should be engaging that nation; and about U.S. politics. Then Pakistan's Ambassador to the U.S. responds directly to the accusations in the war logs that his intelligence service has been colluding with the Taliban.

"Fox News Sunday" - Former Gov. Sarah Palin, R-Alaska; Senate Minority Leader Mitch McConnell, R-Ky; House Minority Leader John Boehner, R-Ohio.

So what's catching your eye this morning?

Ta-Nehisi Coates: This is who they are--America's far right-wing, speaking with all the emboldened ignorance that is fast becoming their stock-in trade

Mock, Paper, Scissors: Peggy Noonan vists Dick Cheney in the hospital

Matthew Yglesias: Conservatives don't care about the deficit

OurFuture: Alan Greenspan and things forgotten

The American Spectator: America's Ruling Class - And the Perils of Revolution

Julian Sanchez: Poor, tragic, troubled Mel Gibson

Robert Reich is right: No one ever mentions this on the teevee. (Instead, we have people like Mrs. Alan Greenspan and Mika Brzezinski giving us stern lectures about tightening our belts.) In real dollars, adjusted for inflation, people are actually making less than they made thirty years ago. This is a massive systemic problem and it will require a major course correction to fix (and no, I don't mean cutting unemployment benefits):

Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.

And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn’t pay their bills, and banks couldn’t collect.

***
A second parallel links 1929 with 2008: when earnings accumulate at the top, people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets—commodities, stocks, dot-coms or real estate—to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.

The crash of 2008 didn’t turn into another Great Depression because the government learned the importance of flooding the market with cash, thereby temporarily rescuing some stranded consumers and most big bankers. But the financial rescue didn’t change the economy’s underlying structure — median wages dropping while those at the top are raking in the lion’s share of income.

That’s why America’s middle class still doesn’t have the purchasing power it needs to reboot the economy, and why the so-called recovery will be so tepid—maybe even leading to a double dip. It’s also why America will be vulnerable to even larger speculative booms and deeper busts in the years to come.

Economics is like actuarial science: Voodoo predictions based on a set of assumptions and mathematical models. The thing is, none of those models work when behavior is erratic, rules broken and and focus put on the quick buck rather than true growth. If no other lesson from the financial meltdown resonates, let that one ring.

Alan Greenspan knows it too. That's why he came before Congress on October 28, 2008 and told them he was wrong:

He was wrong, yes, but now he's not willing to blame the Wall Street moguls for everything. In March, he gave this gem of an interview to Bloomberg News. Here are some of the mind-boggling parts:

HUNT: Right. Let’s talk about the subprime a little bit. You said in your Brookings speech, I’m going to quote you, “We at the Federal Reserve (this was a footnote I think actually) were aware -

GREENSPAN: I’m impressed.

HUNT: - (inaudible) as early as 2000 of instances of some highly irregular subprime mortgage underwriting practices but regrettably viewed it as a localized problem subject to standard prudential oversight, not the precursor of what was to happen.”

Is that saying you saw instances of highly irregular underwriting, but you didn’t dig deeper?

GREENSPAN: No, we knew that there was a lot of egregious underwriting going on. The critical issue is that it wasn’t subprime per se that created the triggering of the crisis. It was securitized subprime. And securitization didn’t happen until mid-2003, 2004 in the volume, including not only securitization but essentially adjustable rate mortgages - subprime adjustable rate mortgages

I had to read that twice, but I think I understand it now. My interpretation: "We knew there were a lot of toxic assets being created, but it was ok because at that point they weren't carved up and bundled as securities."

This happens after the S&L mess, Orange County, California's bankruptcy after a $1.6 billion dollar loss on derivatives, and the failure of Long Term Capital Management in 1998 due to a huge derivative loss.

If there was a lesson to learn from those three events it is this: Bad loans make bad investments. If that has the ring of truth, how on earth can Greenspan sit and admit with a straight face that he knew bad loans were being made?

Of course, Greenspan loves hedge funds now, especially since he consults for one of the biggest ones, and has since January, 2008. They love him too. Digby points out that the guy who loves him best is John Paulson. THAT John Paulson. The Goldman-Sachs-is-in-very-deep-trouble John Paulson. Let that deep conflict of interest sink in.

His next tidbit made my head explode. In a discussion about the deficit, the current recovery, whether it's sustainable, and whether a value-added tax makes sense he says this:

GREENSPAN: The problem, however, is very much the type of issue that Greece has got. We can find money to bail them out in the short run. But unless the underlying system contracts, the deficit contracts, it’s just delaying the problem.

So I’m not convinced by any means that we can succeed in stabilizing this long term outlook strictly from a value added tax because unless we come to grips with the fundamental issue, which is the fact that we have promised in the ways of benefits for Medicare, for Social Security physically more than we have assets to deliver with.

So the economy can only grow so far and right now the claims on the real economy, forget finance, are getting larger and larger. And it is not an issue just in Social Security I might add, its money. You can always print money and solve it.

Medicare is a defined - is not a defined benefit program. It is one based on the physical needs of the population.

Those darn American people again. Sitting around on Main Street, getting in the way of the economic recovery with their health care and retirement needs. Those entitlements.

This is the same guy who gave away the Treasury to the rich guys by green-lighting Bush tax cuts. The same guy who testified that cutting the deficit and creating a surplus was the way to economic growth in the 90s before he said if the deficit got too low and the US got too solvent, it could cause economic problems in 2000. The same guy who let John Paulson endow a chair in economics in his name at NYU so he could leave a legacy of inconsistent, erratic, self serving conservative monetary policy to students in perpetuity.

If you're in the mood for some common sense abuse, read the whole thing. He'll explain why big banks shouldn't be broken up but why they shouldn't be bailed out, why regulators missed the warning signs of the meltdown (I'd argue they ignored them, didn't miss them), why Fannie and Freddie were good before they were bad, and more.

It would be so nice if something made sense for a change. - Alice in Wonderland