CHANGES MADE BY THE FEDERAL RESERVE
The Plunge Protection Team Goes to WorkSeptember 15, 2008
What can I say - we are simply living through times that books will be written about in the future. My jaw was on the floor during 3 hours of Sunday night CNBC as announcement after announcement came through the the wire.
The Plunge Protection Team is working overtime to hold S&P 1200. We will hear how amazing it is the market can absorb all this bad news and not take a big loss. Let me tell you - in a week's span we've had
- Fannie (FNM), Freddie (FRE) bailout
- Lehman (LEH) bankruptcy
- Forced marriage of Merrill (MER) and Bank of America (BAC)
- AIG (AIG) crumbling
- A series of initiates by the Federal Reserve over and above everything they've done in the past
And the stock market is flat from where it was before all this happened.
I'm not rooting for shorts, but this is truly not a free market. How the market can be "flat" in all this is hilarious. I truly would not be surprised if the market is up by tomorrow or in a few days as your tax dollars go hard to work buying S&P futures by the bushel behind the scenes. If you are not familiar with the Plunge Protection Team and their "workings" I recommend reading this [Jul 14: Our Gospel is Spreading - Jim Cramer References "The Hand"]
I cannot even begin to go through all the "changes" made in the system Sunday night [September 14, 2008]. I will tell you the most alarming is the change in collateral that the Federal Reserve is now exchanging for Treasuries. Back in the early spring during the last round of dislocations the Federal Reserve said we'd widen what we accept from "AAA rated safe" type of product to credit card debt, auto debt, student debt, etc - AND they lengthened the time they'd exchange this with the banks - up to 84 days (in the "old days" it used to be an overnight loan). They said it's just a temporary measure, until credit markets improve. I said "yeh right". Now we've gotten to the point they will accept EQUITIES (stocks!!!) in exchange for US Treasuries. So what happens if stocks plummet in those 84 days? [NOTE: THEY HAVE!!!] Are you kidding me? We now are letting banks offload their stock holdings into the balance sheet of America?? This was one of multiple jaw dropping moments.
- The Federal Reserve widened the collateral it accepts for loans to securities firms to include stocks in an effort to help Wall Street weather Lehman Brothers Holdings Inc.'s plans for bankruptcy.
- The Fed will now accept equities in the Primary Dealer Credit Facility, its program for lending cash directly to securities firms, in addition to investment-grade debt. Collateral for the Term Securities Lending Facility, which auctions loans of Treasuries, will now include all investment-grade debt securities.
- The Fed also granted an exemption on a rule that limits banks' transactions with their brokerage subsidiaries, a move that provides securities dealers with another source of funding if they need it for market making this week.
I keep using the word historic. It keeps becoming even more surreal.
BAILOUT BILL
This is how the language read PRIOR TO THE ACCELERATION DATE BEING PASSED, i.e., prior to October 1, 2008. Note: I had personally cut and paste this language from this same website (the FDIC website) on October 1, 2008 (shortly before the bailout bill passed):(2) RESERVE REQUIREMENTS.--(A) Each depository institution shall maintain
reserves against its transaction accounts as the Board may prescribe by
regulation solely for the purpose of implementing monetary policy--(i) a ratio of not greater than 3 percent (and which may be zero) in for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); and
(ii) in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum (which may be zero), for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C).
So, what does this do? Makes it possible for "banks already in trouble for lack of capital to hold as little as “zero” capital for transactions" by speeding up the effective date from 2011 to 2008.(2) RESERVE REQUIREMENTS. -- (A) Each depository institution shall maintain
reserves against its transaction accounts as the Board may prescribe by
regulation solely for the purpose of implementing monetary policy—(i) in the ratio of 3 per centum for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); and
(ii) in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum and not less than 8 per centum, for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C).
Which begs the question, why did Congress pass such a law back in 2006?????
For what were they PLANNING that the ZERO RESERVES would become necessary by 2011 back in 2006???? Which begs the question, why did Congress pass such a law back in 2006?????
For what were they PLANNING that the ZERO RESERVES would become necessary by 2011 back in 2006????
========================================================They planned it for Nov, 2008.
EVERYBODY saw this meltdown coming. Perfect timing.
July 10, 2008 Financial Hearings:
Nothing but a dog and pony show. Barney Frank continually steered away any serious line of questioning addressed to "Bailout Ben". What was left? Fluff questions and ass kissing. Why is that? The American people deserve to have representatives represent them, not the bankers, lawyers, liars, and crooks.
The type of questions that MUST be asked are many, such as what you can read here. (These are slight modifications to those prepared by "Rutben" at Tickerforum.)
Write to your representatives and demand that Bernanke/Paulson address these questions.
The Economy? Words Fail Me.
By Dana Milbank
Friday, July 4, 2008; Page A03
Think you're worried about the economy? Phillip Swagel is a wreck.
The assistant Treasury secretary for economic policy, Swagel came out for his monthly economic briefing yesterday, 90 minutes after the Labor Department reported that the country had shed jobs in June for the sixth straight month.
Does this mean the economy is worse than the Bush administration expected?
"We shouldn't, in a sense, be surprised when the data are, are, soft," Swagel managed to say.
Does the economy need another stimulus package?
"I-it seems, you know, it seems like that's, that's enough, uh, enough."
What might trigger another round of economic stimulus?
"I don't, I guess I don't have an answer, I mean, you know, beyond saying we look at all the data and, um -- so, my usual line.".....[see video here]
Unleash Fiscal Policy?
July 4, 2008 | AngrybearSo says Robert Reich. And what he means is investment in infrastructure.
When Philip Swagel, the administration's spokesman, was asked if the economy needs another stimulus package after having lost 62,000 jobs, all he could say was......
"I-it seems, you know, it seems like that's, that's enough, uh, enough."
What might trigger another round of economic stimulus?
"I don't, I guess I don't have an answer, I mean, you know, beyond saying we look at all the data and, um -- so, my usual line."
BEAR STEARNS?
LEHMAN’S CEO SITS ON THE BOARD OF THE NY FED
Ellen Brown, June 14th, 2008
....."Fuld, like Jamie Dimon, was at the luncheon on March 11, 2008 with Bernanke, Rubin, CEO of Citigroup, Geithner, President of the New York FED, Thain of Merrill Lynch, and Schwarzman. Some claim that the meeting was about Bear Stearns and how to handle the situation."
Needless to say, Bear CEO Schwartz was not invited to the luncheon. "Lehman Bros. is one of the original stock holders of the New York Federal Reserve Bank," Olagues observes. "Bear Stears does not now have any ownership in the FED banks."
The luncheon was held two days before the April 14 collapse of Bear Stearns stock that led to the bank’s demise. If the luncheon attendees were indeed discussing the Bear problem on April 11, testimony before the Senate Banking Committee in which the principals said they first heard of the problem on the evening of the thirteenth, says Olagues, was "less than truthful."
The evidence at least warrants an investigation, but who is going to hold these self-dealing Federal Reserve Board members to account? In a March 27 radio broadcast noted in The New York Post of the same day, Senator Christopher Dodd pointed out the conflict of interest and said it needed to be examined; but no mention was made of it at the April 4 Senate hearings.
Why not? Olagues suggests he had gotten his marching orders by then from a major campaign contributor. New York Governor Eliot Spitzer, the former thorn in the side of the Wall Street bankers, has been summarily disposed of; and under the latest proposal of U.S. Treasury Secretary Hank Paulson, the Federal Reserve itself will soon become the chief overseer and regulator of the banks. The Federal Reserve will regulate the Federal Reserve Boards with their litany of private bank CEOs, a clear case of the fox guarding the henhouse. . . .
Transcript of video
concerning the April 3, 2008
Senate Banking Committee Hearing:
Who Committed Perjury Yesterday
[4/3/08]?
http://www.youtube.com/watch?v=zApJkvwUhDg
"You know Jamie Dimon and Ben Bernanke both kinda made out like our financial system was fixing to collapse into a big smoldering pile of nuclear waste if J P Morgan didn't come in and rescue lowly little Bear Stearns, but at 2:30 in the afternoon, a rather interesting exchange took place. Let me read it to you:
Senator Richard Shelby: "Mr. Dimon, for some time, J P Morgan Chase has acted as the clearing house for Bear Stearns. I believe J P Morgan Chase also has extensive OTC derivative contracts with Bear Stearns. What was the extent, sir, of J P Morgan Chase's interconnectedness to Bear Stearns prior to the Bear's announcement of their intention to file for bankruptcy, and what would have been the impact on your company's balance sheet if Bear Stearns had been liquidated? Were these considerations that went through your mind because you were connected. You were the banker, basically, the commercial banker for an investment bank?"You know what Mr. Shelby, I believe, was trying to probe at here was did Bear Stearns try to hedge off their risk by buying their counter party? And, Jamie Dimon, however, threw back a rather interesting reply, he says:
Jamie Dimon: Yeah "we were one of their bankers and one of their main clearing houses, so we obviously had extensive relationships and exposures but the answer to your question, our direct exposure on that day was approximately"...wait for it...guys....."zero. So if you say and where we did have exposure it was fully and totally collaterized, our real exposure would have been, if Bear Stearns went bankrupt, the impact it would have had on the financial system, we would have probably lost money, but we still would have been in".....wait for it again...."fine shape. So it really did not...it was not one of the reasons we went ahead and did this transaction."Systemic risk? I thought the entire financial system was about to collapse. I thought we had a ticking nuclear bomb sitting on the world's balance sheet that the Feds successfully difused. Maybe that wasn't quite true.....
We didn't hear Mr. Shelby follow up with the question that, had I been in that room I would have asked, and that would have been something like this:
Everyone has been told, Mr. Dimon, that this transaction was undertaken because the entire financial system was at imminent risk of a full on collapse. But you just testified that you would have been in "fine shape" had "Bear Stearns filed bankruptcy." That doesn't sound like financial armageddeon to me. I hate to be impolite, Mr. Dimon, but your answer compels me to ask: as a member of the Board of the New York Federal Reserve and Chairman of J P Morgan, who's claimed intimate knowledge of Bear's exposure as their clearing firm, did Mr. Bernanke commit perjury when he claimed the justification for this merger was systemic risk, or did you just perjure yourself? Because, see, from where I sit and what I just heard, one of you must have been less than honest with this committee.You know, you didn't hear that from our fine senators yesterday, did you? Maybe you ought to pick up the phone today and ask them why not. Twenty nine billion dollars of taxpayer funds are now committed to backstop a private firm's acquisition of another....a firm in acquisition that Mr. Dimon also testified J P Morgan would not have taken without that $30 billion backstop.So, again, I ask, exactly why was $30 billion of taxpayer funds committed to this transaction if, in Mr. Dimon's esteemed opinion, and let's face it, if anybody should have known, it was him....they weren't in trouble if Bear Stearns went down, and yet, as their clearing firm, and as a counterparty to many of their OTC derivatives, they were, if not one of the largest institutions at risk, possibly the largest institution at risk. One wonders....
But, you know what, yesterday, We the People did not get the answer to that question in those hearings because our senators didn't ask.
It's time to pick up the phone folks. You have been played with, lied to, bamboozled and, generally, ripped off, systematically, for years.
I don't know whether or not J P Morgan told the truth. I don't know whether or not Ben Bernanke told the truth. All I can note is that one of them had to have been less than forthcoming in their testimony because if J P Morgan faced no systemic risk, why exactly, again, was it that Bear Stearns was bailed out? Why were they acquired? And why was $29 billion of taxpayer money committed to the transaction? I still don't have an answer to that question but what we do know is that the proffered reason from Mr. Bernanke has been debunked by the CEO of the firm that claims the most intimate knowledge of the acquired company's balance sheet.
Come on, Ben. Come on, Congress. We deserve better. It's our money, not yours."
Another "interesting" exchange took place, as well, at FreeRepublic.com (FR).
The
above video and transcript were removed
from a thread (post #222; see as originally posted here).
Why would that be? Additionally, countless
numbers of posts were removed from several threads which exposed false
claims made by pro .gov propagandists. Numerous posts evidenced
that these propagandists fabricated and invented comments, and falsely
attributed their comments to me and others. These posters have
been observed to repeatedly
engage in these types of
tactics throughout FR, with impunity. What is,
perhaps, of even greater interest is that these particular posters continually express
their
support for .gov, the Federal Reserve, and NAFTA, while denying .gov
plans for the NAU,
and are, all the while, shielded by FR management. Because these
posters consistently refuse to state, when
repeatedly asked, in what capacity or field
they are employed, and appear to be given free reign by FR management
to mock, deride, and attack those who question .gov, the Federal
Reserve, NAFTA, and the NAU, it certainly does leave one to
wonder what are the true ambitions and goals of a website which claims
it is for conservatives and against government.
Unfortunately, many posts which would
show these "interesting
exchanges" in a more truthful and accurate light are stripped
clean by FR and brought into Alice in Wonderland's rabbit hole.
Again I ask, "Why would that be?" The website claims, after all,
to promote pro-American, conservative values and be against government
largesse. Why does it appear, however, to protect and place pro .gov
propagandists in a better light than those posters who are
loyal, patriotic,
conservative Americans? As FR's duplicitous actions have been
observed by countless posters over the years, it leaves many to wonder
what, exactly, is the owner's true agenda....
A Talk by G. Edward Griffin
Author of The Creature from Jekyll Island
We'll start way back in history to give some kind of historical perspective to this; we'll go back to the first century BC and the tiny kingdom of Phrygia. There was a philosopher by the name of Epictetus and it was Epictetus who said "Appearances are of four kinds: things either are as they appear to be; or they neither are nor appear to be; or they are but do not appear to be; or they are not and yet appear to be." When I read that statement for the first time, I had a big chuckle over it and I thought for sure that if Epictetus were alive today he would probably be a Harvard professor of money and banking; it sounds like so many explanations that I have read about various aspects of the Federal Reserve System. What he did was he took a fairly simple concept but by the time that he was through explaining it, we didn't have any idea what he was talking about. All Epictetus said was that appearances can sometimes be deceiving. That's all he said but by the time he was through explaining the four different ways in which they can be deceiving, we were left back at the switch somewhere.
Nevertheless, I thought, accidentally perhaps, Epictetus had given me a track to run on so-to-speak. Actually it could be the theme since if there's anything in the world that is deceiving it is the Federal Reserve System. In fact, it is one of those appearances of the fourth kind which are those appearances which are not and yet appear to be. I'm going to use that as sort of a hook on the topic. We'll come back to it from time-to-time and punctuate it if I can remember to do that because it tells us something at the most fundamental level about the Federal Reserve System and that is that appearances can be deceiving.
When I did my research on this topic I came to the startling conclusion that the Federal Reserve System does not need to be audited, it needs to be abolished....
"Who Are They Trying To Fool?"
America's Two
Trillion Dollar Taxpayer ScamVideo on Crisis in Sup-Prime Area.
http://video.google.com/videoplay?docid=-3977861761825160732&hl=en
See "Historical Documents" below, testimony entitled
"WRITTEN TESTIMONY
OF: STEPHEN P. PIZZO AND MARY FRICKER"
http://market-ticker.denninger.net/ | April 7, 2008
....Let me remind people that the '29 stock market crash didn't cause The Depression.
The Depression, contrary to popular belief, was caused by a collapse in the bond market, which resulted when The Government attempted to step in and prevent the correction in asset prices that was taking place as the speculative air came out of the bubbles blown in the '20s. The bond market collapse caused an instantaneous ramp in borrowing costs which shut off the flow of capital at the precise time that market participants NEEDED access.
THE FED DOES NOT SET INTEREST RATES AND THOSE WHO CLAIM THE FED "ERRED" IN '29 ARE EITHER LYING OR SIMPLY WRONG.
The Federal Reserve existed in the 1930s and it sat back on its hands, after "pointing the way" and silently allowed Congress to engineer The Depression - an economic dislocation they wanted to happen as it allowed the bankers to steal the wealth and property of Americans for themselves!
America was set up in the 1930s and now it is happening again because all of the people who were involved in it the last time are DEAD.
Dead men tell no tales!
CONTRARY TO BERNANKE'S PUBLIC STATEMENTS THE FED IS ACTUALLY DRAINING DOLLARS OUT OF THE SYSTEM BY OUTRIGHT SALES OF TREASURIES IN ITS PORTFOLIO. THIS IS ALL AVAILABLE FROM PUBLIC DATA POSTED ON THE NY FED'S WEB PAGE. BERNANKE SAID THE FED WILL "PRINT" TO AVOID A DEFLATION BUT IN FACT THE FED IS DOING NO SUCH THING - THE BANKERS WANT BOTH YOUR PROPERTY AND A HIGH VALUE FOR THE CURRENCY - THEIR ONLY STOCK IN TRADE!
Notice that while Ben published his "research papers" you have not heard him say in a Congressional hearing that he will "print" his way out of a deflation, because were he to lie under oath in such a fashion he would be hung out to dry when the truth becomes apparent.
Instead he will say "I didn't know it would happen" after the fact just like he did about the housing mess in the first place (along with Greenspan) even though it is a documented FACT that all were WARNED in 1991 - ten years before the bubble happened....
* * *
Once the dislocation occurs in the bond market there is no longer an opportunity to stop what will be served up upon us. That dislocation could come at any time, it will come without warning, and it WILL occur when the bond market discerns that Congress is going to monetize the losses.
* * *
Before you say "oh they won't do that", here's the first $300 billion to tack on the debt:
"AUTHORITY- The Corporation may issue bonds in an aggregate amount not to exceed $300,000,000,000, which may be sold by the Corporation to obtain funds for carrying out the purposes of this Act, or exchanged as hereinafter provided."
The American Economy is in Severe
Trouble
Don't Forget
Newton's First Law! | Chris PuplavaJuly 2, 2008
...the respite seen off the March lows brought with it plenty of bottom calls and “the worst is behind us” nonsense. What was amazing was that the financial media completely ignored the trends in the economy and were delusional in their Pollyanna thinking. When Wall St. became more cheerful, the U.S. consumer became even more depressed with consumer confidence levels falling to quarter century lows, leaving Wall St. pundits baffled as highlighted in the article below.
Dispelling the Myths of Summer
Pundits have been scratching their heads about why the public mood is so grim. Last week, Barron’s called the drop in consumer confidence “difficult to figure.” A front-page headline in The Washington Post claimed, “We’re Gloomier Than the Economy.”
But are we really?
For the first time on record, an economic expansion seems to have just ended without most families having received a raise. For the first time on record, the typical home price nationwide is falling. The inflation-adjusted value of the Standard & Poor’s 500-stock index has dropped 20 percent in the last year — and 30 percent since its peak in 2000.
I think the public has called this issue exactly right: the American economy has some real problems. Even if this summer’s downturn turns out to be mild, those problems aren’t mild — or simple — and they aren’t going away anytime soon. It’s going to take some real work.
David Leonhardt | The New York Times, July 2, 2008
* * *
Unfortunately, many of the economic and financial tools and options of the past are no longer there. In the 1990 recession, consumers could bring down their savings rate to lean upon and spur consumption, and the Fed could lower interest rates from a starting high of roughly 9%. To get us out of the 2001 recession, consumers tapped into their home equity and the Fed lowered interest rates to levels not seen since the 1950s. This time around, the U.S. consumer’s savings rate is near 0%, the Fed funds rate is already at 2%, the housing ATM is closed. How much lower can the savings rate go? Is the Fed going to lower interest rates to 0%?
Clearly there is more economic and financial pain ahead as the imbalances created over the last several decades are unwound, which is the primary benefit of recessions. We used to have recessions every few years, but that changed over the last three decades with recessions happening every 8-10 years as more debt was pilled on to keep the party going, which allowed imbalances to build up with less unwinding. The economic and financial pain of previous imbalances has been deferred, not erased.
Throw out the ridiculous notion that “the worst is behind us.” Wall St. Pollyanna pundits"
The Bush Financial and Economic Bust of 2008 - The Destruction of Capital
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.” (http://www.fdic.gov/news/news/financial/2008/fil08002.html#body )
The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)....
Miscellaneous items of interest:
1. From Nouriel Roubini, RGE monitor.com
http://www.cnbc.com/id/15840232?video=789413982&play=1
2. More Bad News for Malls: Steve & Barry's BK
Fast-growing retailer Steve & Barry's is expected to file for Chapter 11 bankruptcy protection as early as Wednesday ... A filing would be devastating to mall owners across the country, who ponied up hundreds of millions of dollars to attract Steve and Barry's into huge, empty spaces often as large as 100,000 square feet. Potentially all of those 275 stores could close ...
3. IndyMac
IndyMac Wreck Could Lead to S&L Pile-Up
IndyMac Bankcorp. is/was a bank based in Pasadena. Yesterday
(7/8/08), their stocks were down to 40 cents a share. 40 CENTS! It was
trading much higher earlier this year ($30.77). The above article
discusses
why it's dropped so badly, why so many other savings and loans are
in trouble and either have gone under or may likely go under soon.
On 7/8/08, it was announced that Prospect Mortgage
will buy IndyMac's
branches.
Indymac Sells Branches to Prospect Makes Funding Loans Difficult
"Prospect Mortgage, a unit of private equity group Sterling Partners, announced today that it has entered into an agreement to acquire most of Indymac’s retail mortgage branches a day after the Pasadena-based lender halted most loan origination."
A simple, but interesting, graphical presentation of IndyMac's stock
history, complete with its CEO comments that "we're fine'.
IndyMac: One More Lie For the Road…Consumers & Mortgage Brokers Beware
July 8, 2008
"In order to protect your rate locks, we will require a 1% cash deposit to convert these loans to mandatory delivery. All fees must be received by the end of business on Thursday, July 10th, or your rate locks are subject to cancellation. These fees are fully refundable in the event IMB declines the loan. This fee requirement is all inclusive. You must protect the entire pipeline as part of this process. If you do not submit the required fee for any individual loan as part of this process, all of your rate locks will be subject to cancellation." [excerpted email from IndyMac]In my opinion, this looks awfully shady. As far as I have always known, 'mandatory delivery' comes at a BETTER rate that 'best efforts', therefore why ask for 1% to change to 'mandatory' from 'best efforts'? And why tell the brokers their ENTIRE pipeline must be paid for and not on a loan-specific basis? Remember, they clearly state they ‘will only refund the amount if the loan is declined.
...If [IndyMac doesn't] have the funding capacity all of a sudden that begs to question whether or not IndyMac is really voluntarily shutting down its mortgage operation or is this how the FDIC and other regulatory bodies will operate from now on when banks fail.If they would have come out with news today that IndyMac had been seized, that could have started a run on other regional banks with heavy Pay Option ARM, Alt-A or HELOC exposure, which are the very loan types that led to their demise.
As a matter of fact, this morning Schumer said 'IndyMac’s troubles to not extend to other regional banks'. That also goes in-line with my theory this is simply an FDIC seizure cover-up....
4. It's All About Survival Now
http://www.cnbc.com/id/15840232?video=788549383&play=1 <> Nicole Elliott from Mizuho Corporate Bank (she is from New Zealand), speaks to future projections of the market and warns people not to just stand there...do something to protect themselves. Ms. Elliott projects the DOW will come down to about 9,200 in about 6 months, and down to 8,000 within 12 months.
5. Links to banks, financial institutions, mortgage lenders, and home builders which have gone bankrupt or imploded:
http://builder-implode.com/ (home builders)
FDIC Failed Bank List
Bauer Financial provides health ratings
(up to five stars) for banks throughout
the country. That information is free; for those who want a report upon
which their information is based, that may be obtained for a fee.
6. The following April 2008 article addresses economic information on China. Though its from a socialist website, please ignore that. Most of what is stated in the article, as far as numbers, appears accurate; as far as the cancer rate that is occurring, I cannot speak to this as fact, but I will assume it may well be (it makes sense). It appears from numerous other reliable sources that China is, indeed, having financial troubles because companies are, in fact, moving their factories elsewhere, like Thailand, India, Pakistan, etc., because it has become cheaper. (This happened to Mexico, years ago, not long after NAFTA was illegally enacted. U.S. companies first moved to Mexico. As soon as China became a cheaper production site, off they went to China. Of course, Mexico went further into the toilet afterwards. Now it's repeating, apparently, with China.)
Losses Mount in Chinese Export Industry
Light export industries in China are continuing to face massive losses, shedding jobs and moving operations either abroad or to lower-wage regions of China. The immediate triggers of the downturn—the political and commercial consequences of the US financial crisis—are exacerbating working class discontent over low wages, pollution and poor working conditions....
Who Will Bail Out the FED?
Alex Wallenwein | April 9, 2008Whoever believes that the most recent Fed/JP Morgan heist to acquire Bear Stearns, along with other simultaneous and preceding Fed actions, were "successful" had better check again.
The current crisis is so severe, and it has already forced the Fed to reach into its own balance sheet grab-bag so deeply, that a very legitimate question arises, and the question is this: when the Fed ploughs all the way through its own balance sheet and gets to the bottom of the barrel, who will bail it out?
Before boring you to tears with the gory details, I can give you the answer right now:
You will.
* * * So, how will you bail out the Fed, then?
(I wish I had published this article earlier, because I have been playing around with a draft for over a week now. Had I done so, could have bragged about my "prescience." However, when it comes to the Fed and other corrupt power centers in today's world (or that of ant day and age), all you have to do is assume the worst case scenario, and you'll be pretty much on target.)
The point: You will bail out the Fed because, once the Fed burns through its balance sheet of US treasuries with its current Term Securities Lending Facility (TSLF), it can only get more treasuries onto its balance sheet by having Congress allow the Treasury to borrow more money from the Fed than the Treasury really needs.
We are talking monetization of the debt on steroids, here! Mega-steroids, that is.
So what about my "prescience"? An article just came out in the Wall Street Journal an hour ago at the time of this writing (actually, make that a "notice" since it has all but two very short paragraphs) that states the following, verbatim:
WASHINGTON -- The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.
Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011.
No moves are imminent because the Fed still has plenty of balance sheet.
Actually, I wasn't prescient enough. I take that back. I did not come up with the idea that the Fed would ask Congress for authority to issue debt UNDER ITS OWN NAME rather than under the name of the Treasury!!
Just take that in for a second.
The Fed bankers, whose progenitors have already bribed our Congress to un-constitutionally turn over Congress' exclusive power to "coin money" back in 1913, are now trying to persuade Congress to turn over its borrowing power to them as well, thus allowing the Fed to virtually borrow money from itself and issue itself IOUs for that debt.
It is difficult for me to do the gravity of this new idea justice, so as to correctly and adequately imprint upon your conscious mind the sheer and absolute fiscal insanity of such a proposal. Congress might as well turn its entire legislative function over to the Fed, because that's pretty much what it amounts to.
Once The Fed has the power to borrow from itself and leave Americans on the hook for the loan, it can literally dictate to Congress what laws to pass....
Dollar Declines Against Euro as Wachovia Posts Unexpected Loss
Lukanyo Mnyanda | April 14, 2008 (Bloomberg)The dollar fell against the euro after Wachovia Corp. reported an unexpected loss, fueling concern the worst of the credit crisis hasn't passed.The U.S. currency also declined a second day against the yen after Wachovia posted its first quarterly loss since 2001. The Group of Seven said after a weekend meeting it's concerned ``sharp fluctuations'' in currency markets may hurt the global economy, which ``continues to face a difficult period.'' The yen advanced as a drop in stock markets caused investors to cut holdings of higher-yielding assets funded by loans in Japan.
"Any dollar strength will be short-lived,'' said Robert Minikin, a currency strategist in London at Standard Chartered Plc. The G-7 statement "didn't outline any steps to deal with the credit crunch,'' he said....
Deep Capture
Deep Capture, by Patrick Byrne
A massive financial crime is harming the United States. The crime makes a hoax out of corporate governance, destroys firms, deprives society of innovations, and robs Americans of their savings. It may be bad enough to cause the collapse of the financial system. The institutions that should stop it have been corrupted (”captured”) by the criminals perpetrating it, including the financial press, which is so willfully blind it borders on a cover-up. Dots are being connected in the world of social media, but the same criminals who are behind the scam are manipulating social media to forestall the day of popular epiphany.
And yes, I know this all sounds like a bad Sandra Bullock movie.
I have created Deep Capture to bypass the captured institutions mediating our nation’s discourse. The Table of Contents to your right lists the chapters of Deep Capture. Each chapter contains essays arranged in proper logical order, with the easiest material up front and less-accessible material further back. Please read no further into any chapter than your own desire for detail demands (I plant signposts to guide readers whose preferences for detail differ). If you read far enough into each chapter you will see the Big Picture that is otherwise beyond my power to convey.
To start, please click on “Introduction: An Overview of Deep Capture” and work your way forward.
http://www.deepcapturethemovie.com/
Violations of the Constitution, Regulations,
Laws
"On or about March 16th, 2008, George W. Bush, both personally and through his Treasury Secretary Henry Paulson, caused to be provided to JP Morgan/Chase a bribe(1) ultimately flowing from the United States Treasury in an amount not to exceed $30 billion dollars US, via The Federal Reserve, in order to induce JP Morgan/Chase to assume the liabilities and assets of Bear Stearns and Company at a price not determined in the free market or via public bidding, in violation of the limitations expressly set forth in The Federal Reserve Act of 1913, 12 USC Ch 6."
Why is Bear Stearns Trading at $6 Instead of $2?
In effect, the Federal Reserve decided last week to overstep its legal boundaries – going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns' mortgage debt. But the bank – J.P. Morgan – was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense. Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”
Constitutional
Crisis
by Richard K. Brawn, CCREA (retired), MPA | March 27, 2008
Is preservation of personal financial benefits justification to destroy even one principle of our Constitution? This question is raising a new and much insidious fear. A realization is dawning that interests in key positions within the Executive Branch have created a constitutional crisis that will further hollow out U.S. Constitutional protections for private ownership and contract sanctity. In the post Bear Stearns period, the provisions of Article 1 Section 8 and 9 of the US Constitution mean even less now than they did before. A rational fear gathering force in the market is belief that America will not abide by its own Constitutional guarantees. If the United States of America will set aside clear principle because of fear of economic loss, what principles will stand to protect personal wealth and private property.....Article 1 Section 8 (an excerpt):
Article 1 Section 9 (an excerpt):Ok, now you have refreshed your memory, here is the situation. .
Article 1 Section 8 gives Congress authority to create the Federal Reserve Bank and Federal Reserve Board which may use only the powers granted to Congress. Section 9 denies to the Congress and therefore the FED the authority to take any money from the Treasury except as allowed by a specific lawful appropriation by the whole Congress.....
Market Observations
This article was posted at tickerforum as an excellent read and as one which well describes the causation of market rallies. It also addresses the fact that the Fed & Co., have not ameliorated the underlying problems, and speaks to real estate values and prices.Wagging The Dog | April 2008
http://www.contraryinvestor.com/mo.htm
Market Observations | April 2008
...As we told you then using GM as an example, the credit default vehicles written against real world outstanding company bonds is probably near three times the volume of actual bonds outstanding. Like many derivatives vehicles, these derivatives products have become an end in and of themselves as opposed to the purity of use of these vehicles to simply insure or hedge against adverse outcomes protecting larger financial asset positions actually held. Simple translation? The credit default swaps world has taken on a life of its own.
Alright, fine, so how does the credit default swap market relate to equity market sector volatility of the moment? It is absolutely clear that the "acquisition" of Bear avoided triggering Bear Stearns related credit default swaps and swaps against CDO, SIV, etc. positions they may have held (assuming a potential Bear BK would have forced a mark to market event), which would indeed have happened had Bear formally entered bankruptcy and their bonds/debt became potentially very meaningfully impaired. There is simply no question whatsoever in our minds that this was the key reason a theoretical acquisition of Bear HAD to happen. Remember the details. JPM took out Bear for a couple of hundred million at the headline $2 per share initial offer level, but concurrently announced it was going to need to charge off about $6 billion as a result of the so-called acquisition. Even at the ultimate $10 level (which is basically shut up money offered to help prevent litigation, which might also have led to asset price discovery) JPM was "telling" us Bear was worth far less than zero by the charge-off number alone. Of course the truth simply had to be that if Bear had filed bankruptcy and the credit default swaps written against their bonds/debt/asset positions had been triggered, the credit default swap liabilities in the market would have been well north of a $6 billion hit to whomever had written those Bear specific CDS contracts. Well north. And that simply could not have been allowed to happen. By the way, just as an item of curiosity, JP Morgan has exposure to over 55% of the total banking system credit default swaps outstanding. Are we connecting the dots clearly enough for you?
...What occurred in the week after the Bear Stearns debacle was simply the dream levered hedge portfolio of the last six plus months being turned completely on its head. And what it clearly suggests as one potentially very meaningful driver of performance during that week was levered speculating community leverage unwinding. A leverage unwind that is not finished. As we're sure you already know, if indeed you were a levered fund either choosing or being forced to unwind a portfolio perhaps due to the heavily increased margin/collateral capital calls from the prime broker community in the wake of Bear's sudden submergence, the influence of collective levered portfolio unwinding (raising liquidity) might have looked exactly as is detailed in the table above. To delever you would have sold what you were long and bought what you were short. So although the CNBC fan club may indeed have tried to celebrate the big bear market bottom for the financial markets, what we may have indeed experienced is simply more significant major macro credit cycle reconciliation - levered investment position unwinding (the hedge and levered speculating community). Seems relatively logical, no?
And this is the very reason why we suggest meaningful reluctance in proclaiming an all healed and ready to head higher credit cycle that has all of a sudden been reborn due to the fact that a few financial stocks jumped off of their collective death beds. Although the Fed members have apparently been reannoited as miracle workers, have they really addressed and/or ameliorated THE real problem of the moment which is financial sector balance sheets still loaded with problem credits? Balance sheets now problem long and capital short. Quite unfortunately, and we simply wish along with the Street that it weren't true, a one week change in stock prices does not change balance sheet asset values, especially those values tied to real world residential real estate prices and increasingly commercial real estate values. So for now, despite the emotional and financial price roller coaster ride of recent weeks, we reserve judgment on the true character of fundamental credit market, financial market and real economic change that has taken place. We watch and learn.
NEXT
Crossing the Rubicon | April 7, 2008
These past two weeks have been extraordinary in that the Federal Reserve has had to take actions that have not been used since the Great Depression and a few that heretofore have never been used. There have been several crises in the capital markets that lead us to comment on what they appear to mean. During the last year, we have conveyed a growing concern, through several prior commentaries, as to the dangers and implications of an absence of fear toward various types of increasing risks in our financial system. We believe the culmination of these risks forced the Federal Reserve to take the recent extraordinary actions of creating two new lending facilities for primary dealers and facilitating a merger of Bear Stearns with JPMorganChase to prevent a liquidity and solvency crisis from potentially toppling the U.S. capital markets. The partners of First Pacific Advisors, LLC (FPA) discussed these events on March 21 and came to several conclusions about what the long-term implications of these actions might be and we will share them with you in this commentary. Fortunately, over the last two years, our preparations for potential financial market disruptions have meant that FPA and most of our product areas have essentially avoided the calamitous effects of this credit crisis.....
Mortgage Crises
Watch a summary on Lehman's unreported financial schemes on Mr.
Mortgage’s video, at http://ml-implode.com/. Rather than their
stocks reflecting the fact that it has engaged in unsound business
practices, and, therefore, places into question their own financial
soundness...their stocks go up or remain high. Why is that?
Historical Documents
WRITTEN TESTIMONY OF: STEPHEN P. PIZZO AND MARY FRICKER
September 13, 1991
Hearing: Subcommittee on Telecommunications and Finance
Committee on Energy and Commerce
102nd Congress
A bill to Amend the Federal Securities Laws to Equalize the Regulatory Treatment of Participants in the Securities Industry
STATEMENT OF STEPHEN P. PIZZO
Mr. PIZZO. Thank you, Mr. Chairman, for an opportunity to address this committee. To get right to the point, this so-called bank reform legislation is nonsense. It is dangerous nonsense.The premises on which it is being peddled to Congress are contrived, cynical, and transparent. They are the same arguments, the very same arguments, recycled from a decade ago, only then it was the U.S. League of Savings Institutions that was peddling them, rather than the ABA and the Association of Banking Holding Companies.
...
Instead, the administration and many in Congress have chosen to listen to the failed portion of the banking industry, America's big and super-big banks. It is these colossal failures that many in Congress and the administration now want to accommodate with even broader banking powers. If only you would let them stay out later and associate with new friends, they promise they will straighten up and fly right.
Well, to veterans of the S&L crisis, all of this has a Mad Hatter's tea party quality to it, and I am here to layout in the starkest terms I can what I believe will happen if Congress accommodates the desires of these tumor-like money center banks.
As for allowing corporate ownership, corporations want to be affiliated with banks for the very same reason that Bonnie and Clyde and Willie Sutton wanted to be affiliated with banks, because that is where the money is. And if you facilitate this union between banks and commercial interests, you will effect the most fundamental change ever in how and where capital flows to American business.
Big banks owned by Fortune-500-size corporations will favor the corporate culture. Credit will inevitably begin flowing away from small, family-owned and closely held businesses and into subsidiaries owned by large corporations. Since small business, not corporations, create the majority of jobs in America, the demise of the small business community will translate into higher unemployment and the accompanying cost to government. In the end, Washington will have to rescue job-creating small businesses through a massive and expensive government-backed loan program.
Corporate ownership of banks will also give big business a critical tool with which it can engineer society and the competitive business environment in ways heretofore out of their reach. Suppliers who accommodate a corporate bank's department store chain, for example, will find credit plentiful and easy, while those who do not play ball will find the same credit tight, expensive, and at critical times, unavailable.
The Mafia built its empire on just such subtle, difficult-to-prove, extortive, and anticompetitive relationships....
. . .
As we autopsied dead savings and loans, we were absolutely amazed by the number of ways thrift rogues were able to circumvent, neuter, and defeat firewalls designed to safeguard the system against self-dealing and abuse. One of the favorite methods was to link up like-minded thrifts in the daisy chains through which they could circulate inflated assets and hide their rotten loans to each other and to each other's customers from regulators.
Banks that need to get money to a trouble securities affiliate will do exactly the same thing. By linking up three or more banks, each with its own securities subsidiary, a daisy chain will facilitate a round robin of reciprocal loans in times of need. Then, the next time we have a Black Monday on Wall Street, this daisy chain will swing into action as a handful of mega-banks try to prop one another's securities subsidiaries and their customers as the market plummets.
In such a scenario, billions of federally insured dollars will disappear in the twinkle of a few program trades.
That will happen, not might happen but will happen, and when it does these too-big-to-fail banks will have to be propped up with Federal money. In the smoking aftermath, Congress can stand around and wring its hands and give speeches about how awful it is that these bankers violated the spirit of the law, but once again, the money will be gone, the bill will have come due, and taxpayers will again be required to cough it up....
