Zombie Banks, Economic Tsunamis and the Gold at the Bottom of the Ocean

Thanks, but the battle has moved on.

For all the surrounding fanfare, the stimulus package and housing plan brought forward last week and stirringly trumpeted by President Obama last night, have arrived on the battlefield with a truckload of supplies long after the battle has spread to the surrounding hillsides. Thanks, but we needed these things a long while ago — we’re talking years ago. The number of casualties these bandages can help now is far less than the number of wounded to come.

Most importantly, the supplies in the truck do almost nothing at all to stop the real cause of all the bloodshed.

Congress has devised this plan from conventional party agendas — investment and tax-cuts — guided by conventional banking insiders being very careful not to point out who’s really been mowing down the bystanders. The reason it won’t work is because it doesn’t address the rot at the foundation of the financial system.

Many different fingers have been pointing to the lack of regulation, or the micro-managing of interest rates, or the sub-prime loan debacle, or the hedge fund orgy, or the lack of a real free-market. But the real cause is much more basic: fraud — wide-scale, systemic fraud.

Fraud exists far beyond the level of Bernie Madoff, everywhere. The system collapsing in front of us was revolving around lies all up and down the system: fraudulent loans, fraudulent rating systems, fraudulent balance sheets, corrupt regulatory bodies, fraudulent investing instruments, topped off by corrupted government guidelines and oversight.

Fraud exists even in the vision — generated for public consumption — of what money is, what debt is, what banks do, what a deposit is, what credit is, the integrity of where money goes, who gets it and who doesn’t and why.

Insolvency, fraud and off balance sheet mumbo-jumbo

Despite Obama’s insistence in his address to Congress, the issue at heart is not the need to jump-start lending. We are already drowning in unpayable levels of debt. The very concept of “credit” and “debt” and the fraudulent terms by which they now exist need to be completely redrawn.

The debt problem at the heart of the mess is an outgrowth of the far more fundamental issue of fraud.

Here’s just one tiny example: Citigroup sent out letters to customers in California last March warning clients that their adjustable rate mortgages were likely about to go up, so clients should lock down a better deal now and buy a new fixed rate mortgage. But Citigroup lied. These particular clients’ ARM rates were about to go down. The threat didn’t exist. This is fraud, people. Citigroup was taking advantage of people who didn’t have their mortgage numbers and an actuary at their fingertips.

That kind of misrepresentation is just one small instance of widespread financial industry disingenuousness.

The first “bailout” served essentially as a massive giveaway doled out in bonuses to top executives or horded in desperation. These banks never had any intention of lending out the taxpayer money to “save the economy.” I wouldn’t doubt Paulson knew it. Nor would I doubt that banks are refusing to tell anyone where the bailout money went because they’re not eager for the public to discover just how much of the billions went directly into pockets.

Even now, the nation’s largest banks are hiding their trillions in toxic “assets” off their balance sheets as they aim to shakedown the government for more taxpayer money.

Fraud at this level has been the way of financial business. As Mish Shedlock points out, it is never practical to tell the truth.

It’s NEVER “practical” for the Fed, the SEC, Banks, CEOs in general, the FDIC, Congress, the Treasury Department, or the President to tell the truth.

This is what it all boils down to: Somehow it’s never “practical” to stop a drunken credit-financed orgy, yet when the party ends, it’s never “practical” to discuss the consequences.

In this case, the credit orgy lasted so long, and there were so many players, that the most important truth right now that needs open, honest discussion is that the entire US Banking System Is Insolvent.

Congress's terra incognita: investigate financial fraud

Mish and others have been pointing out for months that many (probably most, possibly all but a handful) high-profile banks are dead banks walking — zombie banks being defibrillated into seeming aliveness solely by expected infusions of public money.

To deal with this fraud monster — and Congress soon will be forced to — they’ll need to travel into governing terra incognita, those uncharted waters where pirates and sea monsters lurk.

To have a hope of reaching the far-off land of recovery, Congress — or an appointed, verifiably independent body (or an unanticipated act of God) — will need to root out the fraud at the highest levels of the banking, finance and regulatory industries. That exercise no doubt will lead to uncovering the fraud within their own parties and their own supposed ideologies.

Here be dragons

Here be dragons indeed.

Congress will venture into these waters only when compelled by the reality of the conventional plan’s futility, combined with the utter insistence of the American people — along with, perhaps, the force majeure of international catastrophe.

This stimulus plan, however, was a necessary step — if only to demonstrate that the standard playbook needs to be thrown out the window. Mish and Minyanville continue:

The government’s strategy is to buy time. It always is. Time allows it to slowly drain wealth from the poor/middle class and re-distribute it to the rich who own the financial system.

The Fed, the SEC, and the Treasury department are all jumping through hoops attempting to disguise this fact, but their collective panic to bail out the wealthy at the expense of the poor tells the truth, even as they find it “impractical” to do so.

Real stimulus idea: Replace lies with truth

The people of the planet are done being abused. That we’ve put up with financial abuse for this long speaks volumes about the patience of our souls. But we insist: no more. We are about to throw out the system that looks solely to profit from us and to create one that truly serves us.

Truth needs to replace lies in every nook and cranny. Nothing less will work at this juncture. The consciousness of the planet, of humankind, insists. I suspect Obama gets this, even as he needs to navigate murky, treacherous waters. His energy is calling out the right direction, though the specifics needed aren’t yet in the plan.

Giant ray of hope

As the transition to integrity takes place, there is a great deal of anxiety and fear. The suffering is certainly real. I know as well as anyone that it is very difficult in today’s world to face a loss of money and not have it affect one’s sense of safety, identity and capability.

Experiencing the loss of a home — and all the judgment, powerlessness and self-blame that can come along with that event — can be devastating. The lifestyle we construct around us can come to represent everything we stand for, everything we are. To be forced to give it up threatens our very sense of self.

Unexpected treasure under the receding tide of money.

But there is a great ray of hope here amidst the crumbling pylons. For at the bottom of the ocean — as the tide of money recedes — is where we can find the real gold.

The real gold is a sense of ourselves that is truly independent of money.

For a very long time, most people have been strongly identified with money (or lack thereof) for their sense of safety and self worth (or lack thereof). This external yardstick is being revealed more and more to be not only a very poor measuring device but also an unreliable safety tool. Now we have the opportunity to choose a better one.

We have the opportunity to find the enduring gold within: an inner connection to the intrinsic value of our humanity, our lifeforce, our being.

We are seeing the truth that money, indeed anything external, is temporary. It is a poor and arbitrary measure of real worth.

When natural disaster strikes — the recent fires in Australia come to mind — those affected often say to interviewers that they are just happy to be alive. The disaster has made them realize the greater value of their lives, rather than their possessions. Everyone pitches in, everyone helps each other.

Many are losing their homes and livelihoods now due to an economic tsunami. While the disaster is man-made, its magnitude is sweeping a good many honorable people away in the surging undertow. The broader truth here is certainly the same: there is far greater value in the lives being lived than in the possessions lost.

It is wise to take definitive steps to honor your life in this moment of time. Can you let go of judgments and expectations for this moment and simply get in touch with your sense of being alive and honor it? Can you extend this honoring to others?

We are each struggling from one moment to the next to make this shift to an internal yardstick. Extend compassion — to yourself and to others. As we glimpse the gold within, we’ll see that each of us, in fact, is valuable beyond measure.