Busted: Bankers and The Global Economy

September 23, 2008

Global Liquidity Crisis: On the Brink

crisis solution

crisis solution

Turn on the TV, read the paper or peruse the latest internet news. You’ll be told that we’re on the brink of imminent crisis, a lock down of liquidity that must be remedied immediately. The Fifth Avenue Rush is on. The only solution is bipartisan unity in Congress to turn over vast power to the Bush administration and the U.S. Treasury without accountability. The Republican feel-good legislation is in place to save the home of the brave. We can do it if we can do it together. We will save the world for democracy.

The American taxpayer must trust that Henry Paulsen will use $700 billion wisely to snatch up worthless securitized bonds. Sound familiar? In the same way that the Federal Reserve Bank is totally unaccountable and is never subject to audit, the current proposal contains this proviso:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Henry Paulson, because of the massive liquidity freeze, is about to receive kingly authority to solve the current liquidity crisis. Even after the nation spends an initial sum of $700 billion, there is no guarantee of success beyond maintaining the current business, investor climate and monetary markets, shaky though they may be. The entire proposal is designed to bailout the collapsing U.S. financial system and save the world so that the current power structure can continue unchanged, further supporting control over the failing system. In the words of the administration, the fate of every American’s retirement and savings hangs in the balance. That makes many Americans nervous, at least for those that have managed to prosper, save and invest.

bailout money grab

bailout money grab

In one more segment of authority, the executive branch of the Bush administration wants to perform another magnanimous service while exempting itself from any chance of responsibility or review for the pending results.

While the media and Congress are fussing about the lack of oversight on the project or who Henry Paulson uses to assist him in the huge money grab, the Federal Reserve Bank and the International Society of Bankers sit quietly by watching the drama like ripe fruit ready for picking. A few have pointed out that the lack of oversight is a grand opportunity for abuse or profitaking.

This current idea proposed is bold and transparent in simplicity. Have the Federal Reserve wave its monetary wand, giving buddies in the former investment banking industry piles of cash for rooting out the bad bonds and making a huge chunk of debt go away as the Federal Reserve apportions more American gold to send quietly to Swiss vaults while clueless Americans aren’t watching. No rush about the physical location of gold. International Bankers will count it anyway as their personal profit and add it to the national debt. Never mind that the Fed is already holding all the nation’s gold. Fort Knox is an illusion.

fort knox gold

fort knox gold

The funding credits will never actually need to leave the Fed. The entire process can be done electronically without a trace. The craft is in the paperwork that the U.S. Treasury will alter, permanently erasing a mountain of fraudulent debt that only the banking community and authorities can see. The scheme is perfect because the scheme is all about semantics anyway.

Never has such a bailout been proposed with such secrecy. Even the federal bailouts during the Great Depression and during the Savings and Loan collapse of the 80s never suspended judicial review. Enter an emboldened U.S. Congress led by a Democrat majority that seeks oversight and taxpayer protections. Congress claims to be keenly interested in recouping any possibility of future income derived from currently worthless securitized bonds as the Bush Administration claims. Yet, the American taxpayer will never see a penny from these worthless pieces of paper.

homeowner bailout

homeowner bailout

Democrats want to be certain that going forward, any institutions that benefit from financial insurance also bear the cost of that insurance. Congress is also interested in bailing out beleaguered homeowners that face losing their homes. On “The View,” Whoopi Goldberg and Bill Clinton agreed that enraged Americans need the same bailout consideration that Wall Street and the financial system is getting. Unlike Congress, Whoopi and Bill weren’t talking about new bankruptcy laws that Barney Frank thinks will do the trick. Americans want cold hard cash that they can retire on, like the bankers that robbed the nation.

While all of these opportunities can be justified and even supported, the possibility of pork barrel spending is likely to escalate as Senators and Representatives see the opportunity to bolster their interests. That is the part and parcel of shameless American politics in this age.

credit addiction

credit addiction

Meanwhile, a desperate executive administration and U.S. Treasury Secretary are prepared to do most anything to get legislation through Congress. Reputations are now on the line.

Paulson and President Bush have argued that the alternative is that credit markets will remain frozen. Businesses will fail because they can’t get the loans they need to operate. The economy will grind to a halt because consumers that account for two-thirds of U.S. economic activity, won’t be able to get the credit they need to keep spending. Just think, it all started with broadening the profits of bankers by using compound interest instead of simple interest. We’ve come a long way baby.

national security

national security

Unbridled credit is the insanity that this nation has been built on in the last four decades. Unbridled credit is what has enabled this nation to rise prices without raising wages. Unbridled credit is what has allowed the American consumer to sell himself into slavery to financial interests. Unbridled credit is what has built the power that politicians and business have come to depend on. Unbridled credit is why even Big Business seeks cheap Federal Reserve funding. The Federal Reserve and the International Bankers hold the key to that credit through the auspices of the federal government. The spectacle is all about power and the fear of change. This is the nation’s new national security issue. ~ E. Manning

September 7, 2008

Freddie & Fannie: The American Dream

For years, Freddie Mac and Fannie Mae have bragged that they are in the “American Dream Business.” If that is the case, the American Dream has just gone bust. In many respects, it is the beginning of the end although the U.S. Treasury wants to paint the idea of a new beginning.

The process ends a 70-year experiment that began as an attempt to get a struggling nation back on its feet after World War II, ending in arguably the largest nationalization in global history. Fannie Mae and Freddie Mac have been forever tainted by the mortgage meltdown and securitized loans.

Essentially, the mortgage twins are a colossal fraud full of failed policy decisions and misplaced trust. Banks loan the “creditworthy” money for mortgages. Fannie and Fannie bought the loans as-is and packaged them into bundles to create bonds that external investors could purchase. All the while, the government and taxpayers are on the hook for the entire spectacle as the entire scheme for profits unraveled with the introduction of the mortgage meltdown.

For decades, the perception of these bonds has been the same as the safety of the U.S. government bonds. The mortgage twins were established with the complete backing of the federal government. What could be safer? Whether such a guarantee ever actually existed is the subject of much financial debate now. The “government-sponsored enterprises”, now failed is the result of twelve months of slow painful devaluation in the mortgage market combined with the idea of government guarantees that couldn’t solve the problem of worthless securitized bonds and suffering confidence.

mad lady liberty

mad lady liberty

The disingeniunity of the government and the mortgage twins was so large and the undercapitalization so pronounced, that investors bailed out in large quantities. That reality is also a reflection of the deceptive state of mind of the U.S. federal government. The federal government is no longer based in any kind of true reality where policy or money is concerned. They have lost their way and their collective minds, hopelessly addicted to wishful thinking and the addiction to monetary power without the ability to back it.

The Feds were limited as to how much they could borrow to cover the mortgage twins. Now that Fannie and Freddie are nationalized, the federal government vainly hopes that full confidence will be restored so that investors can be coaxed back into the fold of business. The burden on the U.S. taxpayer is huge and the moral hazard brought about by carelessness is no smaller.

How can anyone trust an agency or body of people so corrupt or hopelessly addicted to wishful thinking. Politicians and bureaucrats are addicted to notions that have permanently altered and depressed the perception of the American Dream of owning a home.

will lawmakers wake up?

will lawmakers wake up?

Barack Obama mentioned that the bailout must somehow protect taxpayers. Republicans have made no such statement to date. Still, the truth is that taxpayer protection as a result of government oversight and abuse of regulation shows the moral and financial bankruptcy of the federal government is the worst way. They are incapable of any measure of trust or faith.

To make matter worse for Republicans, they have touted smaller government and lower taxes while promoting and acting out the opposite. The takeover of the mortgage twins implies that anything the current government order says is implicitely flawed, a mere placation of the public. John McCain and Sarah Palin are tied into that reality directly by the Bush Administration and Republican policy.

The Congress is not free from blame either and Democrats are guilty by implication as well. The struggle for power and the adoption of ideas that clearly don’t work are rarely corrected. Instead, the steamroller of Congressional law makes constant adjustments in failed policies that will somehow become miraculously repaired if lawmakers just care enough and spend more money that the nation doesn’t have from international bankers and foreign sovereign nations.

The bottom line is that American taxpayers have been greatly wounded and no placation offered by the current administration or long-term politicians have the respect of true patriots. We see the lies, the seduction and the abandonment. Government and lady liberty has become hopelessly addicted to vain thinking where money and endless promises are concerned. The nation is a laughingstock of pathetic liars, made worse by bumbling incompetence and mismanagement. The American people are muddied by corruption and slavery through ineffective and misguided leadership. ~ E. Manning

September 5, 2008

FDIC: Dismal Banking and Another Failure

As you’ve probably heard by now, industry results for banking in the second quarter were pretty dismal. The results were not surprising as the industry coped with financial market disruptions, the housing slump, worsening economic conditions, and the overall downturn in the credit cycle.

The main reasons for the drop off are the same that we’ve been seeing since the second half of last year:

declining non-interest income,
rising non-interest expense,
decrease in gains on securities sales,
and mounting loss provisions.

The eleventh bank failure of the year came into play with Silver State Bank of Henderson, Nevada. What is the problem with banking? Mainly liquidity. That is often an elusive problem for banks with abused balance sheets and a nation full of securitized bonds that are pretty much worthless.

September 3, 2008

A New Banking Crisis for Britain and Europe?

British bankers have began to hoarde their reserves and have become reluctant to engage in the usual interbank lending process that commercial banking enjoys daily. The resulting freeze in liquidity and tightening of credit that will shortly result is reminiscent of the reaction of U.S. bankers during the initial stages of the U.S. mortgage and credit crisis before the Federal Reserve Auction was created.

Apparently, the pressure from bad securitized mortgage bonds continues to rack the United Kingdom bankers. As a result fearful bankers simply shut down the process of usual banking trust, freezing the free exchange of capital that the modern world has grown accustomed to.

In April, the Bank of England offered to take on shaky mortgage-backed bonds in an effort to liquify the frozen banking system. This effort has not worked. Bankers are instead working to prop up their own internal banking instead of dealing with the larger marketplace, another reaction similar to U.S. bankers.

The liquidity freeze points to the distinct possibility of more banking failures in the UK similar to Northern Rock, in which the British government nationalized the debt. Lack of confidence is once again becoming the buzz word in British banking as fears mount. Fears in the commercial banking community are showing their reflections once again as a global financial slowdown or recession looms. ~ E. Manning

August 30, 2008

FDIC Prepares for Banking Slaughter

The FDIC is seriously considering its future workload by expanding offices in Dallas, Texas that handle banking closures. However, the FDIC is trying to indicate that the 125,000 foot expansion is due to an increase in workload from the failure of ten banks this year, completed yesterday with the closing of Integrity Bank of Alpharetta, Georgia. 117 banks are now on the FDIC trouble list. The FDIC says that “it’s important to note most banks on the problem list will either cure themselves or end up being acquired by another company.” That is true. What is also true is that many failed banks don’t show up on the list at all. The silver lining in the situation is the number of government jobs that will be needed in the Dallas Metroplex area.

The FDIC reports that non-interest income at banks waned as trading and securitization services slowed. That is an understatement to be certain.

Sheila Bair reported: “We’ll be proposing changes to the current assessment system that will shift a greater share of any assessment increase onto institutions that engage in high-risk behavior to encourage and reward safer behavior.” The lack of honest information from banks has been and continues to be the Achilles heel in FDIC efforts. Fraudulent banking is reported as up by corporate information specialists while government regulators play down the significance of fraud and failure. The fear is palpable, but regulators are full of blather in an effort to convey confidence. ~ E. Manning

Check out an interesting article at RGE Monitor.

August 5, 2008

Economic Confidence and the Art of Maybe

Captain Henry Paulson

Captain Henry Paulson

In a measure of “prudent preparedness”, U.S. Treasury Secretary Henry Paulson has retained Wall Street’s Morgan Stanley to advise the government on shoring up the props for ailing government mortgage twins Fannie Mae and Freddie Mac.

Paulson, emboldened with new authority, has hired Morgan Stanley to assist the Treasury in the event it needs to expand the government’s line of credit or buy stock in the companies or at least that is what the public line is. The reality is that where money and credit are concerned, Paulsen has the Federal Reserve attached to his right hip. It isn’t about the need for more money as such.

Morgan Stanley knows how investment bankers think, how banking instruments work behind the scenes along with associated tricks of the trade from an insider perspective. He’s an old hand himself, a Goldman Sachs man, just a little out of perfect practice. He needs a sounding board. In essence, the government has an old con man hiring the equivalent of group of con men to help beat what con men have designed for their own ends. That’s the story. The action by Paulson is beautiful in its simplicity. It’s a deal that gives Morgan Stanley plenty of reputation collateral since the money the firm is making is largely symbolic. Desperate times require desperate measures.

Where would America be without confidence?

Where would America be without confidence?

Paulson has 18 months to cover his bases in legislation that George Bush recently signed. Even so, supporters and critics of the plan are worried that taxpayers will be stuck holding the ball for the massive debt with the danger of bankrupting the country in a truly profound sense.

Paulson says that his action is all about confidence. He believes that having special powers in place may boost confidence in the mortgage twins enough to keep the U.S. Treasury from bailing them out.

That is what the whole study is about: the Art of Confidence. Maybe Paulson can boost confidence since investors and citizens know that the U.S. Treasury has its firm hand in place with the assistance of a qualified investment banking insider. That is the hope. Securing that hope cost the government a mere $95,000 for expenses on the surface.

Authorities range a bailout of Fannie and Freddie between $25 and $100 million dollars depending on who is doing the talking. An extra note of confidence with Captain Paulson at the helm may just steer us clear of the icebergs. May be.

April 27, 2008

U.S.: Bailout Debt Grows Larger

The Federal Reserve recently issued their miracle chart showing very little of real meaning. The gray areas are times of documented recession. You will notice that even though the United States is in a recession, the recession is not noted except by the huge pileup of bank debt. I would suppose that the Federal Reserve and the U.S. Treasury are still debating when they want official recession to begin. (more…)

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