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Tuesday, November 27, 2012

Imagine what they'd find in New York

It sounds as if the Kabul Bank was an exemplary example of Western-style banking:
Afghan and American officials had for years promoted Kabul Bank as a prime example of how Western-style banking was transforming a war-ravaged economy. But the audit, prepared this year for Afghanistan’s central bank by the Kroll investigative firm, gives new details of how the bank instead was institutionalizing fraud that reached into the hundreds of millions of dollars and obliterated Afghans’ trust after regulators finally seized the bank in August 2010 and the theft was revealed.

Going further than previous reports, the audit asserts that Kabul Bank had little reason to exist other than to allow a narrow clique tied to President Hamid Karzai’s government to siphon riches from depositors, who were the bank’s only substantial source of revenue.

At one point, Kroll’s investigators found 114 rubber stamps for fake companies used to give forged documents a more legitimate look. And the auditing firms used by the bank never took issue with loan books that were “almost entirely fraudulent,” Kroll found, recommending that the Afghan government explore suing the last such auditor, A.F. Ferguson & Co., a private Pakistani firm with a franchise under PricewaterhouseCoopers.

What, one wonders, is the Federal Reserve's reason to exist other than to allow a narrow clique to siphon riches from the American people?  Given the observable facts in evidence, it certainly can't be the stated purpose of guaranteeing stable prices, much less the ex post facto rationale of assuring full employment.

At least the Kabul Bank had external audits, however fraudulent they were.  The Federal Reserve can't even claim as much.

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44 Comments:

Anonymous Noah B. November 27, 2012 9:29 AM  

The Times' hypocrisy does run deep.

Anonymous Loki of Asgard November 27, 2012 9:39 AM  

Thieves caught stealing? I am shocked. I eagerly await their discovery that water is, in fact, wet.

Anonymous Orion November 27, 2012 9:46 AM  

Almost makes you pine for the election of Romney as president. This never would have happened under him. Their being caught so soon, that is.

Anonymous Godfrey November 27, 2012 9:47 AM  

"What, one wonders, is the Federal Reserve's reason to exist other than to allow a narrow clique to siphon riches from the American people?"

Spot on Vox. I'm sick of the blatant hypocrisy.

Anonymous CMC November 27, 2012 9:49 AM  

I think that's the thesis of Anthony Wile at The Daily Bell. Would be great to hear you interview him.

Anonymous MendoScot November 27, 2012 9:53 AM  

The term fraud is so judgemental. I prefer,"virtual bookkeeping".

It's only fraud if you are caught.

Anonymous willneverpostagain November 27, 2012 9:53 AM  

Time for all U.S. troops to leave and seal the border.

These banksters might have a little trouble "keeping their heads".

Anonymous FUBAR Nation (Ben) November 27, 2012 10:03 AM  

It's interesting how you PricewaterhouseCoopers is linked to this fraud.

I am entering the accounting profession and I read all the time how the big 4 accounting firms are shady. This confirms my suspicions.

Anonymous Noah B. November 27, 2012 10:06 AM  

OT, but I suppose many of you have heard that the CFTC has accused Intrade of illegal options trading as a result of Intrade offering bets about future gold prices.

Here's the interesting thing, although it's not really news -- if what Intrade is doing is the equivalent of selling options, this is an admission by the CFTC that COMEX and NYMEX are really just casinos operating with government sanctioned monopoly status in the US.

Anonymous Stilicho November 27, 2012 10:17 AM  

Here's the interesting thing, although it's not really news -- if what Intrade is doing is the equivalent of selling options, this is an admission by the CFTC that COMEX and NYMEX are really just casinos operating with government sanctioned monopoly status in the US.

Indeed. The tacit admission is quite amusing. Especially in light of all of the gold and silver contracts that have reportedly been forced into cash settlement in the last year or so. And, unlike the pollsters, Intrade was not susceptible to push polling without someone putting up substantial money to skew the odds.

As for the Kabul bank, how on earth could anyone with half a brain expect any other result? The outcome was as predictable as the outcome of putting a twinkie in front of Honey Boo Boo (or putting a few billion of other people's money in front of Jamie Dimon, but I'm being redundant).

Anonymous JartStar November 27, 2012 10:26 AM  

When the first EU country defaults in a large way on its debt do the holders of the debt collect with military force? This solution has been common throughout history, for instance when Britain occupied Egypt in 1882. Is the cost of war so high now that it isn’t worth it?

Anonymous zen0 November 27, 2012 10:32 AM  

I'm sick of the blatant hypocrisy.

Unfortunately, blatant hypocrisy seems to be the easiest to pull off, while everyday hypocrisy is pounced upon and torn limb from limb.

Kind of like a cousin of the Big Lie technique.

Anonymous Stilicho November 27, 2012 10:40 AM  

Greece has effectively defaulted, but the rest of the EU is more concerned with pretending that it was not a default than actually collecting anything. I suppose that's the advantage of defaulting first. Who knows what the reaction will be to Spain defaulting.

Anonymous JartStar November 27, 2012 10:45 AM  

Intrade is doing is the equivalent of selling options, this is an admission by the CFTC that COMEX and NYMEX are really just casinos operating with government sanctioned monopoly status in the US.

They are now shut down in the US.

Nobody but the deluded thinks options is anything but gambling. The powers that be went after them on the technicality of an approved exchange as they wanted a piece of the pie, and they hated that the people would gamble on policy decisions and elections.

Anonymous JartStar November 27, 2012 10:56 AM  

Greece has effectively defaulted, but the rest of the EU is more concerned with pretending that it was not a default than actually collecting anything.

Yes, but the EU isn't done doubling down on everything yet. As Ismail Pasha couldn't pay his current debts, he simply took on more and more debt in a desperate attempt to keep things going. Eventually the music stopped, France and England squabbled over what was left, and the bondholders won out in England pushing the government to occupy Egypt in an attempt to recoup losses with the Suez canal.

Will France or Germany occupy Piraeus when the debt fairy runs out of dust?

Blogger James Dixon November 27, 2012 11:01 AM  

> When the first EU country defaults in a large way on its debt do the holders of the debt collect with military force?

As Stilicho says. If you check the terms of Greece's recent refinancing, you'll see that they effectively defaulted on the original debts, changing the terms of the bonds after the fact to make it look like they hadn't.

Anonymous Kickass November 27, 2012 11:03 AM  

This is interesting Vox. Been doing alot of thinking about things since Sandy hit, in particular. Growing up I saw my parents do without a lot of things and just work, work, work. Their biggest thrill was no debt (good) and money in the bank. No vacations, no holidays, no time off...just work all the time. Dad died, a health nut in awesome shape, in his very early forties. Probably exhausted. I wished to God he had not worked so very much.

I am beginning to wonder why I need to work, work, work to put money in the bank to be "secure". Why? What if I am satisfied with all I have? What if I just get the things I need, want or do the things I would like to do with what I earn instead of slaving away all the time to save for a future that might not come. I am not talking about being stupid, but just rethinking things.

Especially when you see this stuff.

And black friday. I mean really, we need to get into fistfights over a new camera when we most likely have three at home that work fine?

Someone said, I can't remember where I read it, that they would make us slaves and we would love it.

Anonymous Stilicho November 27, 2012 11:04 AM  

Will France or Germany occupy Piraeus when the debt fairy runs out of dust?

I would expect France to take some type of "foreclosure" action before Germany for the simple reason that the French may view it as an opportunity to shore up their own shaky balance sheet.

Anonymous Kickass November 27, 2012 11:06 AM  

Also, what happened to producing? You used to love to visit people because the Wife made the best apple pie and the Husband made amazing furniture and you wanted to see his latest creation. Or, the Wife was an artist and you wanted to see her latest painting and the rancher Husband always let you taste fresh milk and help him.

No one cooked the same, no one's home looked the same. And that was part of the fun. You enjoyed other people's talents and could trade with them.

But I guess you can't tax that....

Anonymous DonReynolds November 27, 2012 11:07 AM  

It seems to be easy for ordinary Americans to wildly exaggerate the cunning and intelligence of his representative in Congress. I have never understood this. The House seems to be in the process of going down on their knees to give Obamba yet another blowjob over the dreaded fiscal cliff. Surrender makes no sense.

What does make sense is for the House of Representatives to refuse to go along with what they KNOW is economically foolish....i.e., raising taxes and cutting spending in a weak economy. Politically, it is a fork....either refuse to compromise and be totally blamed for the impact of the fiscal cliff.....or participate in a slightly smaller (and more expensive) fiscal cliff. Either way, the economy will tank and the Republicans will get the blame.

It would be better to do what they know to be the right thing to do for the economy and let the damned process work. Put all the blame where it rightly belongs by putting the matter in the laps of the Democrats in the Senate and Obamba. Specifically, the House should extend the Bush-era tax cuts for another year. If Prince Harry and the Democrats in the Senate refuse to pass it, then they get the blame. If they do pass it, in self-defense, and Obamba vetoes the bill.....he gets the blame. Either way, the House has done their duty and anyone who blocks the bill....gets the credit.....whether it is the Senate or the Oval Office.

The same goes for the automatic spending cuts. Restore the spending cuts as the House sees fit in separate bills. Let the Senate do their own deliberating, conference, and send the bill to the White House. IF they have the balls to veto any or all of them, then the blame rests totally on Obamba. End of story and the House has done their part. Let the process work and stop trying to make backroom Chicago deals. We have enough of those already.


Anonymous The other skeptic November 27, 2012 11:11 AM  

Perhaps an all-female SC would help fix things or maybe it would destroy America faster.

Anonymous Loki of Asgard November 27, 2012 11:13 AM  

Unfortunately, blatant hypocrisy seems to be the easiest to pull off, while everyday hypocrisy is pounced upon and torn limb from limb.

Kind of like a cousin of the Big Lie technique.


It is called "refuge in audacity." No matter how dishonest you are or how reprehensible your actions, if you can do it with a sort of unrepentant flair and black humour, you will always have admirers and apologists.

Anonymous MendoScot November 27, 2012 11:20 AM  

Related:

It is now the Fed’s primary function to worry about shadow banking, over which it has no direct control, other than to make sure sufficient collateral of good quality continues to be available.

There is a worrying complacency in financial circles about this problem, which suggests that financial assets are not discounting the serious risk of systemic failure.

Anonymous Noah B. November 27, 2012 11:36 AM  

"...cutting spending in a weak economy."

The left has no intention of cutting spending and will not agree to spending cuts. All their talk of "cutting spending" really just means that they're not increasing spending as fast as they would have otherwise preferred. In other words, it's just another lie.

Anonymous zen0 November 27, 2012 11:42 AM  

In other bankster news, fine upstanding Canadian boy, Mark Carney, Governor of the BoC, is going to take over the Governorship of the BoE. Big step up. He'll whip that miserable nag into racing form.

He is probably the only Central Bank head who can drive a dog sled. Bernanke probably doesn't even go outside. (not that there is anything wrong with that)

Anonymous Stilicho November 27, 2012 11:46 AM  

what they KNOW is economically foolish....i.e., raising taxes and cutting spending in a weak economy

Sure, more debt always solves a debt crisis.

Those who would trade long term economic viability for a little short term economic continuity deserve neither.

Anonymous zen0 November 27, 2012 11:52 AM  

Those who would trade long term economic viability for a little short term economic continuity deserve neither.

So that is exactly what they will do then. Bankster superstar Mark Carney has based all his economic projections on that scenario.

And, as the classic Eastwood character William Munny says in Unforgiven, "Derserves got nuthin' to do with it."

Blogger James Higham November 27, 2012 12:04 PM  

What, one wonders, is the Federal Reserve's reason to exist?

Think Mullins had a certain amount to say on that.

Anonymous Stilicho November 27, 2012 12:23 PM  

So that is exactly what they will do then.

Absolutely! Extend and pretend/delay and pray is the only game in town. You always have to keep in mind the fact that Congress invariably proposes political solutions to economic problems with predictable results.

So, I expect a "grand compromise" that raises some tax rates (but probably produces little or no new tax revenue) in return for phantom spending cuts that will be scheduled to occur in the future but never quite seem to materialize (in addition to not even being cuts, but rather mere reductions in the rate of increase per past practice). This will be widely hailed as avoiding the fiscal cliff and will accomplish nothing beyond a brief surge in the markets (if that: the markets seem to be increasingly skeptical of these political solutions that solve nothing). A bigger rally could occur if the Fed joins the chorus and perhaps bumps up its Treasury purchases to coincide with Congressional action, but it is still just more can kicking that solves nothing.

Blogger James Dixon November 27, 2012 12:27 PM  

> Specifically, the House should extend the Bush-era tax cuts for another year.

Or even make them permanent.

But yeah, there's a lot they can do. Append a repeal of Obamacare to every spending package. Refuse to fund either of the DoE's, the EPA, the BATF, and Homeland Security. Etc., etc., etc.

But they won't do any of them.

Anonymous Ferd November 27, 2012 12:44 PM  

That is why i invested my savings in my vest. It is a bit bulky. But, it will stop a bullet.

Also, that garden i have in the backyard is loaded with pvc cans that are full of gold and silver coins.
I feel much more secure that the Feds can't touch those now.

Then, of course, is my redoubt up in the hills. It would take a huge effort to find me there. Not even a drone can find an underground bunker. Gosh, look at how little they know about Iran. Anyway, get the basics for life sustainability and hunker in the bunker. Would make a great bumper sticker for your jeep in this Age of Giant Government.

George Washington would have splintered his wooden teeth watching this play out!

Lord have mercy on the USA.

Blogger Serge_Tomiko November 27, 2012 12:44 PM  

Fine. You want to get rid of a central bank. What is your alternative? Who is supposed to issue the currency and why would anyone bother accepting it? Are you just planning on opening a gold mine and hoping everyone loves shiny yellow metal as much as you?

You repeatedly misconstrue systems with ethics and virtue. Because a particular institution is filled with thieves and liars does not mean the concept of an institution is without merit.

My point is that we must consider viable alternatives. What does this post really do besides arouse libertarians? It's like pornography and masturbation.

Anonymous Stilicho November 27, 2012 12:48 PM  

I wonder if an audit would find Germany's gold and, if so, how it could be determined that it belonged to Germany and not some other party to whom it was sold, loaned, hypothecated, re-hypothecated, pledged, collateralized, allotted, allocated, etc.? Is it, in the well established tradition of bank runs everywhere, first come, first served? Millions of increasingly nervous Krauts want to know.

Anonymous crusty November 27, 2012 12:51 PM  

"Fine. You want to get rid of a central bank. What is your alternative? Who is supposed to issue the currency and why would anyone bother accepting it?"

Article 1 - The Legislative Branch
Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;


Well there's a start, anyway. This did work before there ever was a Federal Reserve.

Anonymous Stilicho November 27, 2012 12:56 PM  

Fine. You want to get rid of a central bank. What is your alternative? Who is supposed to issue the currency and why would anyone bother accepting it?

Good lord but you are dense and historically illiterate. The market has always been capable of determining what money is and what acceptable substitutes are. Entire economies and empires functioned without central banks for thousands of years. This country functioned without one and every foray into central banking has ended in disaster.

You keep showing up here, asking the same questions and failing to comprehend the answers. Now you repeat the tired old saw about the lack of success of your statist solution being due to not having the right people in charge. Good luck with that. Human nature being what it is, you will never have the right people in charge for long enough, even if you had the right solution to begin with.

Anonymous Josh November 27, 2012 1:07 PM  

Fine. You want to get rid of a central bank. What is your alternative? Who is supposed to issue the currency and why would anyone bother accepting it? Are you just planning on opening a gold mine and hoping everyone loves shiny yellow metal as much as you?

Gold has been money for thousands of years of human history.

Most preferable would be to abolish legal tender laws and legalize competing currencies.

Less preferable, but infinitely better than our current system, would be a gold standard.

Anonymous Noah B. November 27, 2012 1:43 PM  

Serge, are you really this stupid? Try reading about the history of money before you make such absurd statements.

Blogger ajw308 November 27, 2012 3:37 PM  

Stilcho, don't feed the troll. He mocks Vox because he believes Vox values gold. As far as I can tell, mankind has valued gold for all of recorded history.

Then he mocks Vox for preferring a system that's been shown to work while he adores a system that's failed.

I find it hard to believe he's that ignorant. He's gotta be a troll.

Anonymous tiredofitall November 27, 2012 6:28 PM  

"Thieves caught stealing? I am shocked. I eagerly await their discovery that water is, in fact, wet. - Loki of Asgard

Only if they discover it by someone holding their heads in a toilet until the bubbles stop.

Anonymous Loki of Asgard November 27, 2012 6:56 PM  

Only if they discover it by someone holding their heads in a toilet until the bubbles stop.

Well, now I know what I'll be doing with my evening.

No. Better still, I shall reverse the polarity on their toilets and pump the entire contents of the New York sewer system into their offices.

And best of all, nobody will know the difference.

Thank you for the inspiration. I must go about this right away.

Blogger Serge_Tomiko November 27, 2012 7:24 PM  

Crusty, I'm so impressed you can read the constitution! Wow! Maybe you can explain to me that part about regulating the value of money? On this site, General Vox wishes to have a gold standard where the market fixes all our problems. What happens when someone decides to follow the constitution and regulate the value of money? Say maybe by repudiating debt? Or just printing it from thin air and demanding its payment in taxes? In fact, this is exactly what the country did during the Revolution. It's what Pennsylvania tried to do in 1750 that was a major cause of the Revolution. It was done during the Civil War.

General Vox doesn't like this little bit of history.

The issue with an independent central bank is democracy itself. Money is the very manifestation of government power. It is too dangerous to give elected fools such power when all they care about is the next election.

Do you really think you can trust Congress, filled with idiots who can't read or who believe islands will tip over if you have too many people on them, to adequately manage the value of money to promote long term stability?

Again, quit the snark. Keep your mouth shut if you don't have any solutions. Better yet, offer REAL solutions.

Let's say tomorrow I become dictator and I have very hard right views. What would you have me do?

PS: http://monetaryrealism.com/for-the-record/

Anonymous Anonymous November 27, 2012 8:12 PM  

Crusty, please describe the "central bank" that existed in the US between the years, oh, 1841 and 1913. Then explain its operations. Thanks.

Borderline Anonymous

Anonymous 11B November 28, 2012 12:05 AM  

...that the Afghan government explore suing the last such auditor, A.F. Ferguson & Co., a private Pakistani firm with a franchise under PricewaterhouseCoopers.

Funny, Ferguson doesn't sound like a Pakistani.

Anonymous JW November 28, 2012 9:19 AM  

"It's only fraud if you are caught."

And if you realy believe that you are 'entitled' to it, it's not theft!

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