Busted: Bankers and The Global Economy

September 11, 2008

The Con Game of Securitization and Wealth

crisis through securitization

crisis through securitization

According to Federal Reserve’s Vice Chairman Donald Kohn, “One reason for the loosening of standards was the expectation that house prices would continue to rise and even more certainly that they could not fall in all regions at the same time, supporting diversification through securitization.”

This small sentence combined with a summary of all the accumulated evidence maintained by the Federal Reserve shows the propensity for a lack of regard for economic concerns over the immediate concerns of profit.

“Rising prices would enable lenders to recoup their funds even if the borrower was unable to service the loan, mostly because the borrower would be able to obtain extra cash through refinancing. Expectations of house price appreciation facilitated and interacted with the increasing complexity of mortgage securities, including multiple securitizations of the same loan, which made it virtually impossible for ultimate lenders to monitor the creditworthiness of borrowers. This was a task they had outsourced to credit rating agencies. The absence of investor caution and due diligence was especially noticeable for the highest-rated tranches of securitized debt.”

securitized vomit

securitized vomit

Who started the securitization of loans to begin with? Give the government geniuses at Fannie Mae and Freddie Mac credit for the wunderkind of shaky banking ‘o so many years ago. That is why authorities in banking and in government are quite mum about the evil and deception of securitized bonds. What is worse, they have no intent to change a thing.

The Federal Reserve is still brainstorming new ways to “ameliorate systemic risk. That said, a host of difficult judgments are inherent in how we establish such a system.” That is the trillion dollar question. In the words of Donald Kohn; “How we can structure these requirements and other aspects of regulation to damp, rather than reinforce, the natural procyclical tendencies of the financial system?”

economic usury

economic usury

If the U.S. economy were equated to an automobile engine, we would be running on half the cylinders. The Federal Reserve and other surrogate economists don’t have a clue and are now discussing “solutions” among themselves. Global bankers long for a solution to the trillion dollar question and they want to continue doing the same old things as long as it makes them money for the short-term. The idea is not what is good for any economy, but what is good for quick profits for themselves. That is what banking around the world has come to represent: corporate profit behind the scenes and personal profit while that is possible. Never forget that the Federal Reserve and global central bankers are corporations bent on making a profit, part of a “franchise” of banks that loosely report to Swiss and Roman bankers. They live off of the world; therefore economies are simply tools for wealth. That is the danger nations, governments and peoples face.

Don’t fool yourself. Global bankers are running the world to your peril. However, the sophisticated United States government and others are all for making a profit while they can, oblivious to the danger or convinced that they will live forever while central banking pumps them dry. ~ E. Manning

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September 9, 2008

Investor Confidence: History of Short Rallies

Since the current mortgage crisis has been officially publicly documented around July of 2007, investor profitaking has barraged the stock market under the pretense of confidence after each bailout. Each time the bailout grows larger. The market scores big gains followed by a drop “as reality takes hold.” The media circus and investors appeared to rejoice upon the bailout of Fannie Mae and Freddie Mac, but the joy has proved to be short-lived.

bailout fever

bailout fever

The federal government seems to enjoy playing the same game, now using Sundays as a day of economic rescue and salvation. Traders are in agony as they mourn the loss of another fall downward in the markets. Why can’t we just get the problems over with so we can get back to making money like we used to? That is the essence of Wall Street’s attitude about the economy, an attitude of frustration. These self-centered expressions are expected in a market that has no moral compass beyond profit.

investor dunce award

investor dunce award

Self-absorbed traders and profiteers shouldn’t need to ask. The bailout of Fannie and Freddie, like the bailout of Bear Stearns has prevented a complete meltdown of the economy, certainly saving the plight of every investor from the jaws of bankruptcy today. Considering the short-term mentality of investors, the bailout is good when you consider that investors can come to play another day.

~ E. Manning

July 3, 2008

June 13, 2008

National Dependence on Consumer Credit

Credit plays a central role in the working of the U.S. economy. The U.S. economy has come to rely almost entirely on consumer spending as an engine of growth, accounting for about 70 percent of national gross domestic product.

Some would say that credit is the lifeblood of the American economy. The truth is that banks have made credit financing the lifeblood because bankers and financiers have made expansion for the U.S. economy possible beyond what would normally be possible. The idea isn’t a bad thing in and of itself when used in moderation. However, like a crack addict, the national addiction for credit has spiraled out of control. The end result is that financing has been used to bolster pricing and industrial strength for the last thirty years or more resulting in an ultimate impasse.

The impasse is that because of wages and economic weakness caused by financing virtually everything combined with undermining the economy solely for corporate and personal profit, the economy is no longer able to sustain the same level of financing and high prices. As a result, a market crash or at least a spiraling drop in prices must occur to balance the inequity. Part of what the nation is seeing now is a balancing of this inequity.

Well-entrenched business must realize that old business ways must change in order to survive the recession. Expectations must be lowered. For example, the auto industry must develop new approaches to power vehicles and lower prices. Consumers, in general, can no longer afford to buy high priced products on credit, depending instead on wages to sustain them and making due with less. This is one side of the economic picture. In general, a large portion of the American populace has become a generation of struggling underachievers as a result of economic land mines in their life.

The Federal Reserve and federal government is trying to come up with creative ways to “inspire” the economy. Unfortunately, the very regulations designed to encourage actually discourage and destroy. The government has overstepped its’ bounds and because of this, is reaping the reward now and in the future for itself and the people.

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