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Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed. Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments. Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate. Mr. Summers’s role at the White House includes advising Mr. Obama on whether — and how — to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse. Mr. Summers ... appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. While Mr. Obama campaigned on a pledge to restrict lobbyists from working in the White House, a step intended to reduce any influence between the administration and corporations, the ban did not apply to former executives like Mr. Summers, who was not a registered lobbyist. In 2006, he became a managing director of D. E. Shaw, a firm that manages about $30 billion in assets, making it one of the biggest hedge funds in the world.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

BILL MOYERS: For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you're about to meet wrote a book with just that title. Bill Black, ... what's your definition of fraud? WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have. Well, The way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road. BILL MOYERS: So you're ... saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans? WILLIAM K. BLACK: Yes. BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me? WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

Note: William K. Black is the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. He is now an Associate Professor of Economics and Law at the University of Missouri. The video of this fascinating interview is available here. For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity. A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order. "We have agreed to support a general SDR allocation which will inject $250bn (Ł170bn) into the world economy and increase global liquidity," it said. SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.In effect, the G20 leaders have activated the IMF's power to create money and begin global "quantitative easing". In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it. There is now a world currency in waiting. In time, SDRs are likely evolve into a parking place for the foreign holdings of central banks, led by the People's Bank of China. Beijing's moves this week to offer $95bn in yuan currency swaps to developing economies show how fast China aims to break dollar dependence.

Note: For an extensive archive of key reports on the hidden realities of the Wall Street bailout, click here.

A once-obscure accounting rule that infuriated banks ... was changed Thursday to give banks more discretion in reporting the value of mortgage securities. The change seems likely to allow banks to report higher profits by assuming that the securities are worth more than anyone is now willing to pay for them. But critics objected that the change could further damage the credibility of financial institutions by enabling them to avoid recognizing losses from bad loans they have made. Critics also said that since the rules were changed under heavy political pressure, the move compromised the independence of the organization that did it, the Financial Accounting Standards Board. During the financial crisis, the market prices of many securities, particularly those backed by subprime home mortgages, have plunged to fractions of their original prices. That has forced banks to report hundreds of billions of dollars in losses over the last year, because some of those securities must be reported at market value each three months, with the bank showing a profit or loss based on the change. At first FASB ... resisted making changes, but that changed within a few days of a Congressional hearing at which legislators from both parties demanded the board act. “There is a perception that we are yielding to political pressure,” one board member, Lawrence W. Smith, said as he voted for the changes. A group headed by two former chairmen of the Securities and Exchange Commission, one who served under President Bill Clinton and one who was appointed by President George W. Bush, said that it feared that politicization of accounting standards would destroy the credibility of the board.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

The Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose. Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency. In theory, the administration’s plan is based on letting the market determine the prices of the banks’ “toxic assets” — including outstanding house loans and securities based on those loans. The reality, though, is that the market will not be pricing the toxic assets themselves, but options on those assets. The two have little to do with each other. The government plan in effect involves insuring almost all losses. Since the private investors are spared most losses, then they primarily “value” their potential gains. This is exactly the same as being given an option. Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses. Some partnership! What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other.

Note: The author of this analysis, Joseph E. Stiglitz, is a professor of economics at Columbia University. He was chairman of the Council of Economic Advisers from 1995 to 1997, and was awarded the Nobel prize in economics in 2001. For many revealing reports on the realities behind the Wall Street bailouts, click here.

Members of Congress and the New York State attorney general demanded detailed information Thursday on how tens of billions of taxpayer dollars flowed through the American International Group during its crisis last fall and ended up in the coffers of several dozen big banks, shielding them from losses. The new inquiries shine a spotlight on a question that is exponentially bigger, in dollars, than the $165 million in bonuses that A.I.G. paid out this month, but which has been overshadowed until now by the uproar over the bonuses. “We would like to know if the A.I.G. counterparty payments, as made, were in the best interests of the taxpayers who provided the funding,” said Representative Elijah E. Cummings, Democrat of Maryland, in a letter to Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program. The banks and investment firms that ended up with A.I.G.’s bailout money last fall were, in many cases, counterparties to derivatives contracts it had sold, known as credit-default swaps, which guaranteed the value of assets in their investment portfolios. They included Wall Street firms, like Goldman Sachs, JPMorgan Chase and Merrill Lynch, that have successfully resisted efforts to regulate credit derivatives in the past. In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401(k) accounts and other investments.

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

The Internal Revenue Service is not living up to its pledge to crack down on wealthy tax cheats, an IRS watchdog group says, citing a drop in audits of millionaires last year. Those with incomes of $1 million and above had a 5.6 percent chance of getting audited in fiscal year 2008, which ended last September, down from 6.8 percent the previous year, according to IRS figures. The actual number of millionaires audited fell from 23,200 to 21,874; the number of millionaires filing tax returns grew from 339,138 to 392,776. "In the face of growing federal deficits and public calls to lower the tax gap — the amount of taxes due but not reported and paid — the drop in millionaire audits is surprising," said the Syracuse University-based Transactional Records Access Clearinghouse in a report Monday. It said the significant drop in audits of richer Americans contrasted with IRS statements last year that it was making strong progress in enforcement, especially of those with incomes of more than $1 million. The TRAC report said focus on high earner returns is critical because of the huge rewards. Among those millionaire audit cases where additional taxes were recommended, the average was $198,000 after face-to-face audits and $137,000 for audits done through correspondence. In total, the IRS collected $56.4 billion in enforcement revenues last year, down from $59.2 billion in 2007 and the first decline in collections in a decade.

Note: The highly important statistic only mentioned in passing here is "the number of millionaires filing tax returns grew from 339,138 to 392,776." That's an over-15% increase in the number of millionaires in one year, while most everyone else seems to be losing money. Hmmmm. Makes you wonder.

There must be a criminal investigation of the AIG debacle, and it looks as if New York's top lawman is on the case. The collusion to save this toxic company in order to salvage the rogue financiers who conspired to enrich themselves by impoverishing millions is being revealed as the greatest financial scandal in U.S. history. Instead of taking bonuses, the culprits should be taking perp walks. The real culprits are the AIG leaders who, as New York Attorney General Andrew Cuomo revealed Tuesday, signed those bonus contracts a year ago to reward the very people "principally responsible for the firm's meltdown." As Cuomo noted in a letter to Rep. Barney Frank: "The contracts shockingly contain a provision that required most individuals' bonuses to be 100 percent of their 2007 bonuses. Eleven of the individuals who received 'retention' bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million." But the $165 million in taxpayer funds used to reward them is but a sideshow in a far larger drama of moral decay swirling around the banking bailout. It should not distract from the many billions, not paltry millions, of our dollars being diverted to reward the very folks who brought us such misery. Consider the $12.8 billion of the $170 billion that taxpayers gave AIG in bailout funds that AIG then secretly diverted to Goldman Sachs, a company that evidently has a lock on both the Treasury Department and the Federal Reserve no matter which political party is in power.

Note: For an excellent analysis of "the real AIG conspiracy", click here. For lots more on the hidden realities of the Wall Street bailout, click here.

The Federal Reserve announced Wednesday it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. Fed purchases should boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt. The last time the Fed set out to influence long-term interest rates was during the 1960s. The Fed also said it will buy more mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac to help that battered market. The central bank will buy an additional $750 billion, bringing its total purchases of these securities to $1.25 trillion. It also will boost its purchase of Fannie and Freddie debt to $200 billion. Pimco's Bill Gross tells CNBC that the move has expanded the Fed’s balance sheet by perhaps 50 percent, up to $3 trillion. In addition, the Fed said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets. Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to other ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent. Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.

Note: The Fed is now buying long-term Treasury bonds because it cannot directly lower interest rates any further. Isn't this just a hidden form of increasing the money supply, with the risk of further devaluing the dollar and eventually causing high inflation? For lots more on the hidden realities of the Wall Street bailout, click here

Eliot Spitzer must miss his glory days when he was the scourge of Wall Street as New York’s attorney general. With the bonus battle exploding at the American International Group, Mr. Spitzer has jumped into the fray — and dismissed the bonus scandal, arguing that it is obscuring the “real disgrace” at A.I.G. “Why are A.I.G.’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?” he asks in an article on Slate. Mr. Spitzer notes that A.I.G.’s trading parties were all the big banks including Goldman Sachs, many of which received billions of dollars from the government’s Troubled Asset Relief Program. “So now we know for sure what we already surmised: The A.I.G. bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already,” he writes. “It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure,” Mr. Spitzer writes. Recounting how the economic crisis is affecting workers, with tax increases, pay cuts and layoffs, Mr. Spitzer asks: “Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? What is the deeper relationship between Goldman and A.I.G.?”

Note: For the article written in 2008 by former NY Governor Spitzer which likely caused him to be targeted for a takedown just weeks later, click here. For lots more on the hidden realities of the Wall Street bailout, click here.

The Federal Reserve has no option but to start buying Treasurys as the government's needs for financing are huge, but the government bond market is a disaster in the making, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC. "Other central banks have done it already around the world but basically what it amounts to is money printing and in fact I don't think that it will help the bond market at all in the long run," Faber told CNBC. "Yields have already backed up pretty substantially and I tell you, I think the US government bond market is a disaster waiting to happen for the simple reason that the requirements of the government to cover its fiscal deficit will be very, very high," Faber said. "The Federal Reserve will have to buy Treasurys, otherwise yields will go up substantially," he said, adding that as their reserves were dwindling, foreign investors were likely to scale down their purchases. But there will be a time when the Federal Reserve will have to increase interest rates to fight inflation, and it will be reluctant to do so because the cost of servicing government debt will rise substantially. "So we'll go into high inflation rates one day," Faber said. The stock market ... outlook is bleak, he added. "I think we may still have a rally ... until about the end of April and probably then a total collapse in the second half of the year sometimes, when it becomes clear that the economy is a total disaster," Faber said.

Note: For lots more on the hidden realities of the Wall Street bailout, click here

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them. The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G.. The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Note: For many revelations of the amazing realities of the Wall Street bailout, click here.

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens. As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds. The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say. Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks ... as well as giants like Goldman Sachs and Wells Fargo. They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. A senior Treasury official involved in the bailout effort said the administration was carefully trying not to do anything that could harm the banks and was giving financial incentives to modify mortgages. But by keeping weak banks operating, the markets continue to sink and taxpayer costs are mounting, outside experts said. “The current policy is likely to result in weaker banks,” Mr. Seidman said. “And keeping insolvent banks in operation does not benefit the system.”

Note: Could it be that that the main reason top bank executives are now talking about giving money back is that don't want to give up their lavish bonuses and corporate jets? What about all the talk about how the whole world would go to pot if they didn't get this bailout money? Somehow this is not surprising.

Five of America's largest banks, most of which have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show. Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31 ... a jump of 49 percent in just 90 days. The banks' potentially huge losses ... shed new light on the hurdles that President Barack Obama's economic team must overcome to save institutions it deems too big to fail. While the potential loss totals include risks reported by Wachovia Bank, which Wells Fargo agreed to acquire in October, they don't reflect another Pandora's Box: the impact of Bank of America's Jan. 1 acquisition of tottering investment bank Merrill Lynch, a major derivatives dealer. The risks of these off-balance sheet investments, once thought minimal, have risen sharply. Fears are rising that a spate of corporate bankruptcies could deliver a new, crippling blow to major banks. Because of the trading in derivatives, corporate bankruptcies could cause a chain reaction that deprives the banks of hundreds of billions of dollars in insurance they bought on risky debt or forces them to shell out huge sums to cover debt they guaranteed. The biggest concerns are the banks' holdings of contracts known as credit-default swaps.

Note: For many powerful revelations from major media sources of the Wall Street bailout, click here.

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (Ł700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London. Some $597.5bn was lost to the banks in the last quarter of last year alone, after a ... massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter. The revelation will fuel fears that the UK's reputation as a safe place to hold funds is being fatally compromised by the acute crisis in the banking system and a general trend to financial protectionism internationally. The slide in sterling – it has shed a quarter of its value since mid-2007 – has been both cause and effect of the run on London, seemingly becoming a self-fulfilling phenomenon. The danger is that the heavy depreciation of the pound could become a rout if confidence completely evaporates. Paranoia that the UK could follow Iceland into effective national insolvency and jibes about "Reykjavik on Thames" will find an unwelcome substantiation in these statistics.

Note: For many deep revelations of the realities of the world financial crisis from reliable sources, click here.

There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy. Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth. But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world. Try as we might to salvage the residential real estate market, it's at best worth $23 trillion in the U.S. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion. Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges. To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values. Few know what derivatives are worth. I spoke with one derivatives trader who manages billions of dollars and she said she couldn't even value her portfolio because "no one knows anymore who is on the other side of the trade."

Note: Banks and financial firms deemed "too big to fail" were bailed out worldwide at taxpayers' expense. But what will happen if losses in the derivatives market skyrocket? No government in the world has the resources to save financial corporations from a collapse in their derivatives trading. For a treasure trove of reports from reliable sources detailing the amazing control of major banks over government and society, click here.

With economic activity contracting in 2009's first quarter at the same rate as in 2008's fourth quarter, a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation). The scale and speed of synchronized global economic contraction is really unprecedented (at least since the Great Depression), with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capital expenditures around the world. And now many emerging-market economies are on the verge of a fully fledged financial crisis, starting with emerging Europe. In the meantime, the massacre in financial markets and among financial firms is continuing. The debate on "bank nationalization" is borderline surreal, with the U.S. government having already committed--between guarantees, investment, recapitalization and liquidity provision--about $9 trillion of government financial resources to the financial system (and having already spent $2 trillion of this staggering $9 trillion figure). Thus, the U.S. financial system is de facto nationalized, as the Federal Reserve has become the lender of first and only resort rather than the lender of last resort, and the U.S. Treasury is the spender and guarantor of first and only resort. And even with the $2 trillion of government support, most of these financial institutions are insolvent, as delinquency and charge-off rates are now rising at a rate ... that means expected credit losses for U.S. financial firms will peak at $3.6 trillion. So, in simple words, the U.S. financial system is effectively insolvent.

Note: The author of this insightful analysis, Nouriel Roubini, has a very informative blog, available here.

Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency. “Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. “A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions.” The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund. Smaller banks are outraged over the one-time fee ... Camden Fine, president of the Independent Community Bankers of America, said yesterday. The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said. Consumers should watch this issue closely, said Edmund Mierzwinski, consumer program director at U.S. PIRG, a Boston- based consumer-watchdog group. “I wouldn’t take their money out of the bank yet,” Mierzwinski said. “If the FDIC is saying that there is this serious problem, then we should all be concerned. I think there is a chance the FDIC is going to have to ask taxpayers for money in the future.”

Note: For lots more on the financial crisis from reliable sources, click here.

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy. The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year. The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion. With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion. That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years -- more than half of them since 1997 -- public records show. The quick fix for pension funds becomes a future albatross for taxpayers. The public gets nothing from pension bonds -- other than a chance to at least temporarily avoid paying for higher pension fund contributions. Pension bonds portend the possibility of steep tax increases. By law, states must guarantee public pension fund debts. “What appears to be a riskless strategy is actually very risky,” says David Zion, director of accounting research for New York-based Credit Suisse Holdings USA Inc. “If the returns on the pension bond-financed assets don’t exceed the cost of servicing the debt, the taxpayers bear the brunt.”

Note: The risks to pension funds may require yet another huge public bailout. Where will the money come from? For lots more on the realities of the Wall Street bailout, click here.

Gold rose to its highest [price] in almost seven months in London as investors bought the precious metal to preserve their wealth on speculation the global economy will deteriorate. Bullion has climbed 33 percent since October as governments lowered interest rates and spent trillions of dollars to combat the recession. “The very big uncertainties in the stock market and economy are driving investors into gold and precious metals,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Gold for immediate delivery rose as much as $25.40, or 2.7 percent, to $967.15 an ounce, the highest since July 22. April futures gained $22.10, or 2.4 percent, to $964.40. Some investors are buying precious metals on speculation government stimulus packages [and bank bailouts] will spur inflation, Fertig said. Treasury Secretary Timothy Geithner last week pledged as much as $2 trillion in financing for programs aimed at spurring new lending. The Treasury will likely borrow a record $2.5 trillion this fiscal year ending Sept. 30, according to Goldman Sachs Group Inc. “Investors have been aggressively adding physical gold to their portfolios as concerns about counterparty risk” increase, ETF Securities wrote in a report. Investors are hedging “against the risk of currency depreciation and longer term inflation risks as government debt projections balloon.” “Gold has become, for all intents, the world’s second reserve currency,” Dennis Gartman, an economist and the editor of the ... Gartman Letter, said.

Note: For many revealing reports on the realities of government bailouts of banks worldwide, click here.

Important Note: Explore our full index to key excerpts of revealing major media news articles on several dozen engaging topics. And don't miss amazing excerpts from 20 of the most revealing news articles ever published.