Commentary - 03/12/2008

Scientifically-Created Depressions [And Why!]

"From now on, depressions will be scientifically created," is a quote from Congressman Charles A. Lindbergh Sr. He said this in response to the creation of the Federal Reserve, back in 1913. How did he know? Perhaps it was because it had been only six years since the Panic of 1907, and he did have a ring-side seat to all that was going on at that time.

He was also well-known for taking a stand against the creation of the Federal Reserve and was quoted as saying:

"This [Federal Reserve Act] establishes the most gigantic trust on earth.
When the President [Wilson} signs this bill,
the invisible government of the monetary power will be legalized...
the worst legislative crime of the ages is perpetrated by this banking and currency bill."
If you go back and study stories printed in the New York Times during the Panic of 1907, (especially about the Knickerbocker Trust) there certainly are clues as to why Lindbergh would make those statements. These statements also match up with recent statements about our financial panic that's taking place now. It sure seems that Lindbergh certainly knew what he was talking about.

On October 22, 1907, the New York Times ran a story under the heading "Knickerbocker Will Be Aided." Within that story were these paragraphs:


"The action of the Bank of Commerce, according to Mr. Higgins, came as a complete surprise, and he admitted frankly that the task he had to meet was a heavy one."
. . .
"It was rather generally commented upon among the Clearing House banks which received the notification from the Bank of Commerce of its breaking off of relations with the Knickerbocker that this notice had been given in a way quite out of the ordinary."
The next day, completely reversing the previous day's news, the New York Times ran this story:

PAYS OUT $8,000,000 AND THEN SUSPENDS
$1,500,000 Hanover National Check Closes the Knickerbocker Trust Company

Directly under this appeared the following, signed by George I. Skinner, Acting Superintendent of Banks and M. W. Hutchins, Chief Examiner: "In my judgment, based on the examiner's report and recent conferences at the office of the company, the Knickerbocker Trust Company is not only solvent, but has a large surplus and a well-established earning capacity. Unusual and inconsiderate withdrawals will only tend to embarrass the institution."

While a line of depositors was waiting for their money in the Knickerbocker Trust Company's principal branch at 34th and 5th Avenue at 1pm yesterday afternoon, Vice President William Turnbull, who was in active charge of the affairs of the company there, turned to the reporters in his office and said:

"A certain person in a high place in this country, who doesn't know what credit is, and who has done his best to destroy it, began months ago to make assaults upon it. The snowball seems a little thing when it is started. Last night we were all right, and had assets far ahead of our liabilities. We could not foresee this. Today we paid out more the $1,000,000 in two and a half hours. That was lively business."
That is my basis for confirming what Lindbergh stated, "that depressions will now be scientifically created." Some folks call it a "tipping point." If you were in the position at the center of nation-wide promises, you could easily start "a snowball" by simply not keeping a promise, or changing the terms of a promise. Like an enormous chain of interlinked dominoes, the promise not kept would cascaded through the financial system.

But why would this be done? What profit is there in collapsing a financial market? Here's what later ran in the New York Times about two years later:


Now let's move forward almost 100 years. This was one of the warnings published:
Hedge funds overleveraged, Sprott warns. 'Anyone can go down.' Story here [November 24, 2006].
A few folks got very rich playing with other peoples' money [OPM]:
On file [April 9, 2007]: Richest hedge fund managers get richer
Five of the wealthiest took home $1 billion or more each as the 100 best-paid managers earned an average $241 million, according to a published report.

The wealthiest U.S. hedge fund managers and traders became a lot richer last year when five of them took home $1 billion or more each.

And then the first of the dominos fell:
June 14, 2007 (Bloomberg) -- Bear Stearns Cos., the second-biggest U.S. underwriter of mortgage bonds, is liquidating holdings from one of its hedge funds after making money-losing bets on subprime mortgage bonds, said three people with knowledge of the decision. Story here.

June 21, 2007 (CNNMoney.com) -- Merrill Lynch has seized about $800 million of assets from troubled hedge funds managed by Bear Stearns, throwing in doubt the chances that the funds will survive. Story here.

June 22, 2007 (Bloomberg) Bear Stearns is seeking to replace loans extended by banks including Citigroup Inc. and Lehman Brothers Holdings Inc. Story here.

August 11, 2007 (Telegraph-UK) -- Hedge fund panic was behind global stock markets collapse

City sources said problems spiralled when top investment banks including Goldman Sachs, Lehman Brothers and Merrill Lynch - whose prime brokerage arms act as lending banks to the hedge funds - insisted that the funds settle a greater proportion of their debts at the end of the day than they had done previously. Story here.
That last statement is extremely important. In hindsight, we can now see that someone made an unexpected decision insisting:
... that the funds settle a greater proportion of their debts at the end of the day than they had done previously.
[Updated 3/15/08 Wall Street Journal - Page A1] Fed Races to Rescue Bear Stearns
The role of J.P. Morgan as Bear's savior is somewhat paradoxical, considering the recent tense relationship between the two firms. J.P. Morgan was one of several lenders that played a role in Bear's troubles last summer when J.P. Morgan demanded more collateral from one of Bear's struggling hedge funds. There was a heated conversation between Mr. Black, co-head of J.P. Morgan's investment bank, and Mr. Spector, then Bear's co-president, over Bear's reluctance to bail out the hedge fund. J.P. Morgan ultimately served Bear with a default notice on a loan to Bear.
Written above in this commentary, you read that the same thing was said about 100 years ago:
"A certain person in a high place in this country, who doesn't know what credit is, and who has done his best to destroy it, began months ago to make assaults upon it. The snowball seems a little thing when it is started."
In our time, the reports changed from "certain person" to investment houses. Note below the breaking down of those "investment houses" to their Major Holders and you'll see the pattern yourself. Unfortunately, due to all of these "fronts", we cannot get to that "certain person" part. I don't think it would matter if we could. I'm sure there are plenty of sociopaths lined up to take their place.

However, now you know why that:
Sometimes The Dragon Wins


Symbol Name Of Corporation
GS

Major
Holders
Goldman Sachs Group Inc. (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
Barclays Global Investors UK Holdings Ltd17,075,9284.31%$3,672,178,316-.--%
Marsico Capital Management, LLC14,496,2103.66%$3,117,409,960-.--%
State Street Corporation14,274,7763.61%$3,069,790,578-.--%
Vanguard Group, Inc. (The)11,231,0272.84%$2,415,232,356-.--%
Wellington Management Company, LLP9,760,9432.47%$2,099,090,792-.--%
AXA (Paris, France)9,240,2732.33%$1,987,120,708-.--%
FMR LLC7,831,4921.98%$1,684,162,354-.--%
Janus Capital Management, LLC6,791,8871.72%$1,460,595,299-.--%
Bank of New York Mellon Corporation6,418,0881.62%$1,380,209,824-.--%
Northern Trust Corporation6,357,4111.61%$1,367,161,235-.--%
% of Shares Held by All Insider and 5% Owners:9%-.--%
Top 10 [0.9%] of 1010 Institutional Holders Control26.15%-.--%
Percentage of Barclays and "Associates" Control12.87%-.--%
NOTE: Vanguard manages three funds that control 2.10%.
SPDR Trust controls 0.60%.
Janus Capital manages a fund that controls 0.55%.
Fidelty manages a fund that controls 0.45%.
Therefore, the TOP 10 Major Holders control 29.85%, and
Barclays/Associates control 14.02% of Goldman-Sachs.

Symbol Name Of Corporation
LEH

Major
Holders
Lehman Brothers Holdings Inc. (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
AXA (Paris, France)40,094,9867.56%$2,623,815,883-.--%
Clearbridge Advisors, LLC34,646,8846.53%$2,267,292,088-.--%
FMR LLC (Fidelity)31,312,4145.90%$2,049,084,372-.--%
Barclays Global Investors UK Holdings Ltd23,060,4614.35%$1,509,076,567-.--%
Marsico Capital Management, LLC17,258,7503.25%$1,129,412,600-.--%
State Street Corporation16,645,6483.14%$1,089,291,205-.--%
Vanguard Group, Inc. (The)14,600,7932.75%$955,475,893-.--%
Pzena Investment Management, LLC7,527,9041.42%$492,626,037-.--%
Deutsche Bank Aktiengesellschaft (Frankfurt, Germany)7,100,6661.34%$464,667,583-.--%
Allianz Global Investors of America L.P. (Munich, Germany)7,048,2861.33%$461,239,835-.--%
% of Shares Held by All Insider and 5% Owners:4%-.--%
Top 10 [1.6%] of 608 Institutional Holders Control40.82%-.--%
Percentage of Barclays and "Associates" Control7.49%-.--%
NOTE: Legg-Mason manages a fund that controls 2.27%.
Vanguard manages three funds that control 2.02%.
Therefore, the TOP 10 Major Holders control 45.11%, and
Barclays/Associates control 9.76% of Lehman Bros.

Symbol Name Of Corporation
MER

Major
Holders
Merrill Lynch & Co. (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
State Street Corporation76,870,0719.01%$4,126,385,411-.--%
AXA (Paris, France)53,962,2336.32%$2,896,692,667-.--%
Barclays Global Investors UK Holdings Ltd37,962,5634.45%$2,037,830,381-.--%
Vanguard Group, Inc. (The)24,878,2822.92%$1,335,466,177-.--%
Clearbridge Advisors, LLC24,429,6702.86%$1,311,384,685-.--%
Price (T.Rowe) Associates Inc20,093,7512.35%$1,078,632,553-.--%
Marsico Capital Management, LLC16,921,8741.98%$908,366,196-.--%
Morgan Stanley16,520,8771.94%$886,840,677-.--%
Northern Trust Corporation10,620,6991.24%$570,119,122-.--%
Legg Mason Capital Management, Inc.10,586,5461.24%$568,285,789-.--%
% of Shares Held by All Insider and 5% Owners:7%-.--%
Top 10 [1.2%] of 801 Institutional Holders Control34.31%-.--%
Percentage of Barclays and "Associates" Control20.23%-.--%
NOTE: Vanguard manages four funds that control 2.57%.
Therefore, the TOP 10 Major Holders control 36.88% of Merrill-Lynch.

Symbol Name Of Corporation
C

Major
Holders
Citigroup Inc. (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
Capital Research And Management Company230,537,5774.63%$10,759,188,718-.--%
Barclays Global Investors UK Holdings Ltd193,733,2243.89%$5,703,506,114-.--%
State Street Corporation168,713,7333.39%$4,966,932,299-.--%
Capital Research Global Investors152,224,2973.06%$4,481,483,303-.--%
Vanguard Group, Inc. (The)147,162,3652.95%$4,332,460,025-.--%
Capital World Investors135,231,7772.71%$3,981,223,514-.--%
FMR LLC (Fidelity)104,388,7532.10%$3,073,204,888-.--%
AXA (Paris, France)85,210,0351.71%$2,508,583,430-.--%
Bank of New York Mellon Corporation76,662,5871.54%$2,256,946,561-.--%
UBS Global Asset Management (Americas) Inc71,044,1101.43%$2,091,538,598-.--%
% of Shares Held by All Insider and 5% Owners:0%-.--%
Top 10 [0.7%] of 1416 Institutional Holders Control27.41%-.--%
Percentage of Barclays and "Associates" Control8.82%-.--%
NOTE: Capital Group manages four funds that control 5.58%.
Vanguard manages three funds that control 2.13%.
Therefore, the TOP 10 Major Holders control 35.12%, and
Capital Group controls 15.98% of Citigroup.

Symbol Name Of Corporation
BSC

Major
Holders
Bear Stearns Companies Inc. (As of 30-Jun-2007) (As of 30-Jun-2006)
Top 10 Institutional HoldersShares2007Value2006
Putnam Investment Management, LLC7,031,1876.05%$984,366,1804.42%
Private Capital Management, Inc.6,962,6426.00%$974,769,8806.54%
State Street Corporation3,832,4003.30%$536,536,0003.44%
Barclays Global Investors UK Holdings Ltd3,652,1973.15%$511,307,5802.67%
Barrow, Hanley Mewhinney & Strauss, Inc.3,597,4503.10%$503,643,000-.--%
Vanguard Group, Inc. (The)3,313,6982.85%$463,917,7202.41%
Janus Capital Management, LLC3,113,6562.68%$435,911,840-.--%
JP Morgan Chase & Company2,606,6242.24%$364,927,360-.--%
Oppenheimer Funds, Inc.2,445,9202.11%$342,428,800-.--%
Nomura Holdings Inc.2,414,2012.08%$337,988,140-.--%
% of Shares Held by All Insider and 5% Owners:5%7%
Top 10 [2.1%] of 470 Institutional Holders Control33.56%27.91%
Percentage of Barclays and "Associates" Control23.42%23.68%

2008 by Edward Ulysses Cate
Help Support This Site
Commentary Index
Home