konane's Blog

"Let’s put the pieces together here. Just this past weekend China announced that State Owned Enterprises (SOEs) will be allowed to default on commodity derivative contracts. Think of that. China has given the green light and authorized the defaulting on commodity derivative contracts.

This story broke over the weekend but has not gotten much mainstream media attention on this side of the pond. (North America). The only inference to it was the talk or “buzz” on the Wall Street floor that another bank was rumored to be close to defaulting. As Art Cashin of UBS Securities indicated in the video clip I posted earlier, normally when a market sells off on a rumor and the rumor turns out to be false, the market will tend to correct itself. IT DIDN’T.

The Reuters report cited 6 foreign banks that received letters indicating that the Chinese State Owned Enterprises would be given the green light to default on their derivatives.

A look at what a derivative actually is may be useful here. A Derivative is a financial instrument that is derived from some other underlying asset, index, event, value or condition. Rather than trade or exchange the underlying itself, derivative traders enter into an agreement to exchange cash or assets over time based on the underlying. A simple example is a futures contract: an agreement to exchange the underlying asset at a future date. Commercial and investment banks make up the foundation of the over the counter (OTC) derivatives market. Investors use derivatives to protect against risks, such as sudden changes in price or value of the underlying asset. Others tap derivatives to take on extra risk, in the hope of extra gains.

Well China owns billions of these products and it has finally come to light they have had enough of having the value of their derivatives manipulated by the manipulation of the price of the underlying asset. They have finally woken up to the fact that these derivatives have been bundled together like junk in a manner that resembles the mortgage backed derivatives that brought down the world markets last year.

Back to Reuters.  Some of the State Owned Enterprises that stated their potential intentions to default were Air China. China Eastern and Cosco. Mainly in part because they took major derivatives losses over the past year but also, concerns are arising that the derivatives that they were sold by these foreign institutions are garbage, underwater and may never see the light of day. So why continue to pay for them? So the concern in the financial world is that holders of these losing products may just walk away, not unlike a home owner with a $600,000 mortgage on a home valued at $475,000 deciding to just hand in their keys. However, read on...this has nothing to do with morgtgage backed products.  This time, the concern may be over Oil.

They (Reuters) cited 6 foreign banks.Where the story gets really intriguing is that among the major derivatives providers according to Reuters but also widely known in the industry, are Goldman Sachs, UBS and JP Morgan.

Here is the looming problem. These products are worth billions. One report that a good friend of mine did showed that if Goldman Sachs for example were to take this one up the rear, they could stand to lose 15 billion dollars. (This number is by no means confirmed)

An important history lesson is needed here. “Potential default” was the concern that sparked and prompted the most recent economic crisis. These intricately weaved products along with highly speculative CDOs and CDSs began to fall apart when the bubble that was in large part significantly contributed to and created by the financial institutions that were packaging this junk started to fall apart.

Imagine the impact for a brief moment if you will, on the impact to the financial landscape if China were to say “we are walking away” from those products. I would imagine that China, being the biggest purchaser of US debt, could surely collapse the US institutions that were at one point deemed too big to fail if they decide to go ahead with this plan.

This is why I don’t take tonight’s news that China purchased 50 billion dollars of IMF bonds lightly. In fact, I take it very seriously. This is why I take the buzz on the floor over the past two days very seriously as well as I do the incredible spike in Gold today. Most importantly, I do not take lightly the recent 25% correction we have seen in the Chinese Stock Market. Can all these events be interconnected some how? Is the Chinese stock collapse giving us a hint?

The Reuters story came out on Mon Aug 31, 2009 at 7:42am EDT. I find it quite interesting that the mainstream media did not take this more seriously. Reuters reported that the above noted Chinese companies have already issued letters to the banks. The Reuters article cites 4 clear points.

• State-owned firms may default on commodity hedges - report

• Bankers dismayed, confused by report; seek more details

• Lawyers question legality of the move

• Traders suspect lurking losses may have prompted warning (Adds analysts comments)

Analysts are fearing that if these three big companies came out and spelled out their losses and dismay at these products then this might prompt other large Chinese corporations to do the same.

Let’s take a closer look at the companies that have been mentioned in these news articles out of China. They are Air China, China Eastern and Cosco. If you ask me, this conundrum might have to do with oil. I deduce from this that if there is a problem brewing it has everything to do with their Oil Derivatives business.

Here’s a brief overview of what might happen should these companies, and others, default. The banks, namely Goldman Sachs, J.P. Morgan and from other accounts possibly Deutsche Bank will find themselves LONG on oil futures with no customers on the short side of the derivatives. This will most likely lead the banks to sell the excess oil futures without a care for the price. This is no different than what happened when Bear Stearns was forced to sell off their gold futures in March of 2008 which then resulted in a sharp downturn in the price of Gold.

Reuters stated:

Spokespersons at Goldman Sachs (GS.N) and UBS (UBSN.VX) declined comment, and media officials at Morgan Stanley (MS.N) and JPMorgan (JPM.N) were not immediately available for comment. All are major global providers of commodity risk management.

We have yet to hear their commentary. A Chinese statesperson was quoted as saying “"If we were among the banks receiving that letter, we would be very angry.” You bet your bottom dollar. You don’t think the firms listed above are angry, or, are they frightened that if the Chinese State Owned entities start taking affirmative action it could theoretically bring down some of the biggest remaining names on Wall Street?

Remember Reuters initial story was titled Beijing's derivative default stance rattles market. Read it thoroughly for more information.

Then, read the story that broke last Saturday to get a clearer perspective before the political and corporate spin started to enter the story. China warns banks on OTC hedge defaults –report.

“BEIJING, Aug 29 (Reuters) - Chinese state-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, a leading financial magazine said.

China's SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), had told the financial institutions that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying.”

On September 1, 2009 Reuters said that the Banks, not the commodities would be at risk if China followed through.

Yes, legal battles would ensue should this happen and we can also expect to have Chinese political figures downplay the story in an effort to avert panic. However, if they can prove that these derivatives or the underlying asset was manipulated in a manner to profit the bank that issued the product then that may even do more damage than the default themselves.

Perhaps the “buzz” on the floor is indeed true. Perhaps we are going to see action that could annihilate one of the biggest Wall Street firms ever.

If there is one thing I have learned of late is that when the Chinese speak, we must listen. Their list of allies is ever growing and they are simply fed up of having to swallow the US garbage that has turned out to be toxic and dangerous to their highly controlled and coveted state owned enterprises.

I leave you with these thoughts that I alluded to above. The Chinese market has corrected 25%. This news broke this past weekend. New York saw a sharp sell-off on Monday. Buzz of a bank default hit the floor. The rumor did not abate and the selling intensified. The selling carried over into Tuesday. Gold, a classic hedge against troubled times has broken out to the upside, China has purchased 50 billion in IMF bonds and has been questioning the US dollar now for upwards of a year. China was up 5% overnight and Gold has continued to climb this morning.

Where there is smoke there is often fire."

http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html

 

"Philip Giraldi: What FBI whistle-blower Sibel Edmonds found in translation

Why is her story being covered up?

12:14 PM CST on Sunday, February 17, 2008
Dallasnews.com

"Most Americans have never heard of Sibel Edmonds, and if the U.S. government has its way, they never will.

The former FBI translator turned whistle-blower tells a chilling story of corruption at Washington's highest levels – sale of nuclear secrets, shielding of terrorist suspects, illegal arms transfers, narcotics trafficking, money laundering, espionage. She may be a first-rate fabulist, but Ms. Edmonds' account is full of dates, places and names. ..........."

http://www.dallasnews.com/sharedcontent/dws/dn/opinion/points/stories/DN-sibeledmonds_17edi.ART.State.Edition1.45b446a.html

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Breaking Down the Under-Oath Disclosures of the Formerly-Gagged Sibel Edmonds...

"It has now been over a week since the video tape and transcript from the remarkable 8/8/09 deposition of former FBI translator-turned-whistleblower Sibel Edmonds was publicly released. Previously, the Bush Administration invoked the so-called "state secrets privilege" in order to gag Edmonds, in attempting to keep such information from becoming public.

The under-oath, detailed allegations include bribery, blackmail, espionage and infiltration of the U.S. government of, and by current and former members of the U.S. Congress, high-ranking State and Defense Department officials and agents of the government of Turkey. The broad criminal conspiracy is said to have resulted in, among other things, the sale of nuclear weapons technology to black market interests including Pakistan, Iran, North Korea, Libya and others.

Even as many of these allegations had been previously corroborated to varying extents, by a number of official government reports, documents and independent media outlets (largely overseas), not a single major mainstream media outlet in the U.S. has picked up on Edmonds' startling claims since her deposition has been made fully available.

Granted, last week was a busy news week, with the death of Ted Kennedy, the release of the CIA Inspector General's report on torture, and the announcement that Michael Jackson's death was ruled a homicide. And, it's true, a 4-hour deposition and/or 241-page transcript [PDF] is a lot of material to review, particularly given the wide scope of the charges being made here. Still, given the serious national security issues at stake, said to have the been among the most important matters of the past 8 years, one would think someone in the corporate MSM might have taken the time to go through the material, and report on it. Particularly as Edmonds' claims have previously been found "credible" "serious" and "warrant[ing] a thorough and careful review," by the DoJ Inspector General, and confirmed as such, on several occasions, by Senators Chuck Grassley (R-IA), Patrick Leahy (D-VT) and many many others.

So for the benefit of the U.S. media, and other readers, who may find it helpful for this large body of newly-available information to be culled down into more digestible pieces, I will attempt to break down the deposition, a bit, into some of its subject matter-based component parts. I will try to go through the major disclosures from the deposition, one-by-one, in a series of pieces which might help others to further report and/or investigate these breathtaking disclosures from a former FBI official who, following 9/11, listened to and translated wiretap recordings made from 1996 through 2002, in the FBI's counterintelligence and counterterrorism departments, under top-secret clearance.

In this first break-down article, we'll look at the answers given by Edmonds during her deposition in regard to bribery and blackmail of current and former members of the U.S. Congress, including Dennis Hastert (R-IL), Bob Livingston (R-LA), Dan Burton (R-IN), Roy Blunt (R-MO), Stephen Solarz (D-NY), Tom Lantos (D-CA, deceased) and an unnamed, currently-serving, married Democratic Congresswoman said to have been video-taped in a Lesbian affair by Turkish agents for blackmail purposes.

In further breakdown articles, we'll look at her disclosures concerning top State and Defense Department officials including Douglas Feith, Paul Wolfowitz and, perhaps most notably, the former Deputy Undersecretary of State, Marc Grossman, the third-highest ranking official in the State Department. Also, details on the theft of nuclear weapons technology; disclosures on Valerie Plame Wilson's CIA front company Brewster-Jennings; items related to U.S. knowledge of 9/11 and al-Qaeda prior to September 11, 2001; infiltration of the FBI translation department and more.

Though Edmonds was careful to not "discuss the intelligence gathering method by the FBI," she notes in her deposition that her claims are "Based on documented and provable, tracked files and based on...100 percent, documented facts."

Among the specific charges she levels against current and former U.S. Congress Members in the deposition:

Dennis Hastert: "[S]everal categories. The acceptance of large sums of bribery in forms of cash or laundered cash ... to make it look legal for his campaigns, and also for his personal use, in order to do certain favors ... make certain things happen for foreign entities and foreign governments' interests, Turkish government's interest and Turkish business entities' interests. ... other activities, too, including being blackmailed for various reasons. ... he used the townhouse that was not his residence for certain not very morally accepted activities. ... foreign entities knew about this, in fact, they sometimes participated in some of those not maybe morally well activities in that particular townhouse that was supposed to be an office, not a house, residence at certain hours, certain days, evenings of the week."

Stephen Solarz: "[A]s lobbyist ... acted as conduit to deliver or launder contribution and other briberies to certain members of Congress, but also in pressuring outside Congress, and including blackmail, in certain members of Congress."

Bob Livingston: "Until 1999 ... not very legal activities on behalf of foreign interests and entities, and after 1999 acting as a conduit to, again, further foreign interests, both overtly and covertly as a lobbyist, but also as an operative."

Tom Lantos: "[N]ot only ... bribe[ry], but also ... disclosing highest level protected U.S. intelligence and weapons technology information both to Israel and to Turkey. ... other very serious criminal conduct."

Unnamed Congresswoman: (Though not identified as such during the deposition, Edmonds has since confirmed her to be a Democrat) "[T]his Congresswoman's married with children, grown children, but she is bisexual. ... So they have sent Turkish female agents, and that Turkish female agents work for Turkish government, and have sexual relationship with this Congresswoman in her townhouse ... and the entire episodes of their sexual conduct was being filmed because the entire house, this Congressional woman's house was bugged. ... to be used for certain things that they wanted to request ... I don't know if she did anything illegal afterward. ... the Turkish entities, wanted both congressional related favoritism from her, but also her husband was in a high position in the area in the state she was elected from, and these Turkish entities ran certain illegal operations, and they wanted her husband's help. But I don't know if she provided them with those."

Roy Blunt: "[T]he recipient of both legally and illegally raised donations, campaign donations from ...Turkish entities."

Dan Burton: (And others) "[E]xtremely illegal activities against the United States citizens who were involved in [covert] operations that were ... against ... foreign government[s] and foreign entities against the United States' interests."

Hastert, Livingston and Solarz, as Edmonds notes in her deposition, would all go on to become highly-paid lobbyist for Turkey and/or Turkish public interest groups after they left the U.S. Congress.

The startling key exchanges relating specifically to criminal corruption by members of the U.S. Congress, from the 8/8/09 Sibel Edmonds deposition in the Schmidt v. Krikorian case, currently pending before the Ohio Election Commission, are now excerpted here.

The full deposition transcript is here [PDF], and more details, including the complete video-tape of the entire deposition, can be seen in our original coverage of the deposition's release. "

http://www.huffingtonpost.com/brad-friedman/fbi-whistleblower-hastert_b_277704.html

 

"Controversial Obama Administration Official Denies Being Part of 9/11 "Truther" Movement, Apologizes for Past Comments

Power, pop, and probings from ABC News Senior White House Correspondent Jake Tapper

September 03, 2009 9:19 PM

Source ABC News

By: Byron York Chief Political Correspondent September 2, 2009

Source WashingtonExaminer

But if the plan envisioned by President Barack Obama and Congressional Democrats is enacted, the primary federal bureaucracy responsible for implementing and enforcing national health care will be an old and familiar one: the Internal Revenue Service. Under the Democrats' health care proposals, the already powerful — and already feared — IRS would wield even more power and extend its reach even farther into the lives of ordinary Americans, and the presidentially-appointed head of the new health care bureaucracy would have access to confidential IRS information about millions of individual taxpayers.

In short, health care reform, as currently envisioned by Democratic leaders, would be built on the foundation of an expanded and more intrusive IRS.

Under the various proposals now on the table, the IRS would become the main agency for determining who has an "acceptable" health insurance plan; for finding and punishing those who don't have such a plan; for subsidizing individual health insurance costs through the issuance of a tax credits; and for enforcing the rules on those who attempt to opt out, abuse, or game the system. A substantial portion of H.R. 3200, the House health care bill, is devoted to amending the Internal Revenue Code of 1986 in order to give the IRS the authority to perform these new duties.

The Democrats' plan would require all Americans to have "acceptable" insurance coverage (the legislation includes long and complex definitions of "acceptable") and would designate the IRS as the agency charged with enforcing that requirement. On your yearly 1040 tax return, you would be required to attest that you have "acceptable" coverage. Of course, you might be lying, or simply confused about whether or not you are covered, so the IRS would need a way to check your claim for accuracy. Under current plans, insurers would be required to submit to the IRS something like the 1099 form in which taxpayers report outside income. The IRS would then check the information it receives from the insurers against what you have submitted on your tax form.

If it all matches up, you're fine. If it doesn't, you will hear from the IRS. And if you don't have "acceptable" coverage, you will be subject to substantial fines — fines that will be administered by the IRS.

Under some versions of health reform now circulating on Capitol Hill, the IRS would also be intimately involved in how you pay for insurance. Everyone would be required to buy coverage. The millions of Americans who can't afford it would receive a subsidy to pay for it. Under the version of the plan currently under negotiation in the Senate Finance Committee, that subsidy would come through the IRS in the form of a refundable tax credit. Under the House plan, the subsidy would come directly from the Health Choices Administration.

In either scenario, the IRS would be the key to making the system work. Before you could receive any subsidy, whether through the IRS or not, the Health Choices Administration would have to determine whether you are eligible for it. To do so, the bills under consideration would give the Health Choices Commissioner the authority to demand sensitive, confidential information from the IRS about individual taxpayers. The IRS would have to provide it.

Under current law, it is a felony for a government official to release taxpayer information in all but the most limited of circumstances. One such exception is for law enforcement; the IRS is allowed to give taxpayer information to prosecutors in criminal cases. The information can also, in some instances, be released to the Social Security Administration and the Veterans' Administration for the determination of benefits. The health care bills would change the Internal Revenue Code to permit the IRS to give similar information to the vast, new health care bureaucracy.

That means the personal tax information of millions of Americans would enter the system whether they want it to or not. "There's a mandate to buy insurance," says one Republican House aide. "You have to buy it. You have millions of people who can't buy it without a subsidy, so they will have no choice but to accept the subsidy in order to buy insurance, and then the Health Choices Commissioner will have access to their tax records."

"How many hands would this information go through?" asks a GOP source in the Senate. "What are the quality controls? This increases the risk of misusing this information."

Some versions of the bill even permit the release of confidential taxpayer information for decidedly less pressing reasons. In H.R. 3200, the IRS would be required to provide taxpayer information to the Social Security Administration for the purpose of helping Social Security officials find qualifying seniors who can then be encouraged to enroll in the prescription drug program. "There is no precedent for using taxpayer information for the purpose of identifying people to go out and advertise to them," says the House expert.

So far, there has been little substantive public debate about the integral role of the IRS in nearly every aspect of the various national health care proposals. But people who are closely involved with the process are deeply concerned about what they view as a massive, and in some senses unprecedented, expansion of the Internal Revenue Service.

First, they wonder whether the IRS can handle the new demands. "There is a sense at the IRS that their purpose is to collect revenue and not to implement all sorts of other programs," says a second Senate GOP aide. "Also, the IRS isn't necessarily great at doing what it does already. How is it going to determine whether 300 million people have health insurance?"

Second, they are concerned about anticipated abuse of the system. "You're going to have lots of fraud," says the House source. "People claiming lots of affordability credits or refundable tax credits. The IRS is not going to have the resources and expertise to police this stuff."

Finally, there is a third concern, more fundamental than questions of whether the IRS can handle the job: Should the IRS be involved in health care enforcement in the first place? As seen in the town halls across the country in August, many Americans are concerned about the coercive nature of the proposed national health care system. Handing the IRS the power to monitor every American's place in the system worries them even more.

Backers of the Democratic bills are betting that the handouts involved — giving people money to buy health insurance — will outweigh concerns about privacy and coercive government. Perhaps. But before Congress makes any decision on national health care, voters should know just what it will involve."

"In a letter to The Daily Telegraph, a group of experts who care for the terminally ill claim that some patients are being wrongly judged as close to death.

Under NHS guidance introduced across England to help doctors and medical staff deal with dying patients, they can then have fluid and drugs withdrawn and many are put on continuous sedation until they pass away.

But this approach can also mask the signs that their condition is improving, the experts warn.

As a result the scheme is causing a “national crisis” in patient care, the letter states. It has been signed palliative care experts including Professor Peter Millard, Emeritus Professor of Geriatrics, University of London, Dr Peter Hargreaves, a consultant in Palliative Medicine at St Luke’s cancer centre in Guildford, and four others.

“Forecasting death is an inexact science,”they say. Patients are being diagnosed as being close to death “without regard to the fact that the diagnosis could be wrong.

“As a result a national wave of discontent is building up, as family and friends witness the denial of fluids and food to patients."

The warning comes just a week after a report by the Patients Association estimated that up to one million patients had received poor or cruel care on the NHS.

The scheme, called the Liverpool Care Pathway (LCP), was designed to reduce patient suffering in their final hours.

Developed by Marie Curie, the cancer charity, in a Liverpool hospice it was initially developed for cancer patients but now includes other life threatening conditions.

It was recommended as a model by the National Institute for Health and Clinical Excellence (Nice), the Government’s health scrutiny body, in 2004.

It has been gradually adopted nationwide and more than 300 hospitals, 130 hospices and 560 care homes in England currently use the system.

Under the guidelines the decision to diagnose that a patient is close to death is made by the entire medical team treating them, including a senior doctor.

They look for signs that a patient is approaching their final hours, which can include if patients have lost consciousness or whether they are having difficulty swallowing medication.

However, doctors warn that these signs can point to other medical problems.

Patients can become semi-conscious and confused as a side effect of pain-killing drugs such as morphine if they are also dehydrated, for instance.

When a decision has been made to place a patient on the pathway doctors are then recommended to consider removing medication or invasive procedures, such as intravenous drips, which are no longer of benefit.

If a patient is judged to still be able to eat or drink food and water will still be offered to them, as this is considered nursing care rather than medical intervention.

Dr Hargreaves said that this depended, however, on constant assessment of a patient’s condition.

He added that some patients were being “wrongly” put on the pathway, which created a “self-fulfilling prophecy” that they would die.

He said: “I have been practising palliative medicine for more than 20 years and I am getting more concerned about this “death pathway” that is coming in.

“It is supposed to let people die with dignity but it can become a self-fulfilling prophecy.

“Patients who are allowed to become dehydrated and then become confused can be wrongly put on this pathway.”

He added: “What they are trying to do is stop people being overtreated as they are dying.

“It is a very laudable idea. But the concern is that it is tick box medicine that stops people thinking.”

He said that he had personally taken patients off the pathway who went on to live for “significant” amounts of time and warned that many doctors were not checking the progress of patients enough to notice improvement in their condition.

Prof Millard said that it was “worrying” that patients were being “terminally” sedated, using syringe drivers, which continually empty their contents into a patient over the course of 24 hours.

In 2007-08 16.5 per cent of deaths in Britain came about after continuous deep sedation, according to researchers at the Barts and the London School of Medicine and Dentistry, twice as many as in Belgium and the Netherlands.

“If they are sedated it is much harder to see that a patient is getting better,” Prof Millard said.

Katherine Murphy, director of the Patients Association, said: “Even the tiniest things that happen towards the end of a patient’s life can have a huge and lasting affect on patients and their families feelings about their care.

“Guidelines like the LCP can be very helpful but healthcare professionals always need to keep in mind the individual needs of patients.

“There is no one size fits all approach.”

A spokesman for Marie Curie said: “The letter highlights some complex issues related to care of the dying.

“The Liverpool Care Pathway for the Dying Patient was developed in response to a societal need to transfer best practice of care of the dying from the hospice to other care settings.

“The LCP is not the answer to all the complex elements of this area of health care but we believe it is a step in the right direction.”

The pathway also includes advice on the spiritual care of the patient and their family both before and after the death.

It has also been used in 800 instances outside care homes, hospices and hospitals, including for people who have died in their own homes.

The letter has also been signed by Dr Anthony Cole, the chairman of the Medical Ethics Alliance, Dr David Hill, an anaesthetist, Dowager Lady Salisbury, chairman of the Choose Life campaign and Dr Elizabeth Negus a lecturer in English at Barking University.

A spokesman for the Department of Health said: “People coming to the end of their lives should have a right to high quality, compassionate and dignified care.

"The Liverpool Care Pathway (LCP) is an established and recommended tool that provides clinicians with an evidence-based framework to help delivery of high quality care for people at the end of their lives.

"Many people receive excellent care at the end of their lives. We are investing £286 million over the two years to 2011 to support implementation of the End of Life Care Strategy to help improve end of life care for all adults, regardless of where they live.”

http://www.telegraph.co.uk/health/healthnews/6127514/Sentenced-to-death-on-the-NHS.html

http://market-ticker.org/archives/1393-ROFL!-China-Tells-IBs-Stuff-It!.html

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http://jsmineset.com/2009/08/31/china-invokes-a-stop-loss-on-otc-derivatives/