How “Bail-outs” and Bail-ins” Are Just a Huge Transfer of Wealth

In our continuing effort to educate even those who call themselves “experts” on the economy, we have to continue with the facts that the banksters, MSM, and dupes that call themselves legislators don’t want you to see or understand.  We have, in recent past articles, shown you just the facts about the bailouts and now the bail-ins going on in the EU for what they are, just a huge transfer of public wealth to the hands a few elites in banking and the central banking system.

As we watch the economy continue to falter, and jobs vanish, don’t you wonder where all the so-called QE monies really went that were meant to stimulate the economy? Here we are, 5 years into this so-called recovery and unemployment in the US is still 7.6% and only 47% of Americans hold full time jobs.  The number one employer is WalMart and the number two employer is Kelly Temp Services! In the EU, there is a 40% unemployment rate and people’s bank accounts are being raided without consent to supposedly prop up the banks (Bail-Ins). Government services are being slashed everywhere and still nothing seems to be improving.

Well, even though you are not supposed to understand this, let’s look at the Central Bank Practices and especially at the issue of banks’ reserves at the FED and other central banks in the world. This is a complex subject with much technical jargon that confuses a lot of people. Besides, don’t be surprised that your bank branch manager on Main Street as well as lecturers in finance and economics are also ignorant on this issue. In the case of the latter, this subject is hardly taught in universities. And this is the reason why the scam has not been exposed or understood. But, for those who have a basic idea of bank reserves and how this huge amount of “excess reserves” have been created by the FED, have you asked yourself, “Why have I not spotted this scam earlier?”

Many have been taken in by the propaganda that “excess reserves” is the means to encourage banks to extend credit (give out loans) to desperate borrowers who needed urgent funds to survive and to jump-start their businesses. This propaganda is grounded on the assumption that there is insufficient liquidity in the market. This assumption is misleading.

What are Excess Reserves? The latest figures obtained from the H.3 release from the Board of Governors of the Federal Reserve System (the FED) shows excess reserves of about $1.794 trillion (data as of April 17, 2013)! This level of excess reserves is unprecedented and is the highest since reserves were legislated as a requirement.

Excess reserves are the surplus of reserves against deposits and certain other liabilities that depository institutions (collectively referred to as “banks”) hold above the statutory amounts that the FED requires in accordance with the law. The general requirement is that banks maintain reserves at least equal to ten percent of liabilities payable on demand. There is now data to show that as much as 50% of these “excess reserves” are held for United States banking offices of foreign banks.

 

Let me elaborate. Banks receives deposits from their customers which are inter-alia placed in current accounts (checking accounts) or time deposits (fixed deposit accounts) and which the customer can at any time withdraw from the bank. But, banking practice shows that at any one time, only a small fraction of customers would withdraw their deposits in full. So, there was no need for banks to keep all the deposits in their vaults to meet such a demand for payment. Laws were enacted to allow banks to keep in reserve a small amount of monies to meet such demands. That being the case – if only 10% reserves is all that is required according to banking regulations to meet repayment demands, why should there be such a huge amount of reserves, beyond the legal requirement of 10%?

Understand the fact that when a customer deposits monies in a bank, he is in law a “creditor” (he has loaned the monies to the bank) and the bank is a “debtor” (and he can use the money in any way at his absolute discretion, even to speculate). This is because the ownership of the money has been transferred to the bank. The money is no longer the money of the customer. It now belongs to the bank. And as long as the bank is solvent, and there is a demand for repayment of the deposit, the law of contract stipulates that the bank must repay together with the agreed interest that has accrued.

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Now here is where, legally it gets interesting.. if at the time when demand for repayment is made, the bank is bankrupt (i.e. in a liquidation) then the depositor/customer in law is deemed an “unsecured creditor” and must join the queue of all unsecured creditors to share the proceeds of any remaining assets after all secured creditors have been paid. If there are no remaining assets, the depositors get zilch! That is why and as illustrated in the bank confiscation of deposits in Cyprus banks acting in concert with central banks can expropriate all customers’ deposits to pay their secured creditors. You catching on here?

How did the Excess Reserves balloon to a massive US$1.794 Trillion? The Fed’s overall balance sheet has expanded from about $909 billion before the crisis (i.e. before 2008) to about $3.3 trillion in 2013. Of the $2.4 trillion increase, approximately $1.8 trillion is excess reserves. Banks were up to their eyeballs in toxic assets (financial sewage) and they are drowning in this cesspool but for the rescue efforts of the FED and other central banks they would have sunk to the bottom of the cesspool.

The FED created trillions of money out of thin air by a digital entry in its books to purchase the toxic assets (financial sewage) in batches from the banks. The objective of QEs is to save the banks and to save the US Treasury from bankruptcy and not Joe Six-Pack. However, in this article we are focusing on the banks. So, let’s say that the banks HAVE OVER US$10 trillion of financial sewage AND WANT TO DISPOSE THEM WITHOUT AROUSING ANY ALARM.  The monies flowed from the FED to the banks to purchase the financial sewage. The financial sewage is sucked into the FED’s financial vacuum. However the monies are not channeled to the banks’ branches in Main Street to be loaned out to Joe Six-Pack. It is re-routed back to the FED as “reserves”. When the reserves exceed the minimum 10% requirement, the excess is classified as “excess reserves.” This is merely a book entry! And adding insult and injury to Joe Six-Pack, interest of 0.25% is paid on the reserves (i.e. giving profits to the banks).

The banks are allowed to survive in spite of their massive frauds and other financial hanky-pankey. The banks are allowed to use digital technology (e.g. high-frequency trading) to corner the market and destroy Joe-Six-Pack. But, Joe-Six-Pack has to suffer the indignity of unemployment, foreclosures, reduced unemployment benefits, surviving on food-stamps, and other austerity measures. Starting to see the picture here and how this crap is how we are being fleeced like passive little lambs?

“The money flows from the FED to the Too Big To Fail (TBTF) Banksters to Buy Toxic Assets, which is sucked in by the FED’s Financial Vacuum, thereby cleansing the TBTF banks’ balance sheets. The money is then re-routed back to the FED as “excess reserves”.

The FED create monies out of thin air to bail-out the Too Big To Fail banks (TBTF banks) by purchasing their financial sewage (valued at book value as opposed to mark-to-market i.e. instead of paying only 10 cents on the dollar or less, the FED pays dollar for dollar) thereby removing the financial sewage from the balance sheet of the TBTF banks to reflect a “healthier” balance sheet as there are now less financial sewage in the banking system. And, because the TBTF banks are suffering losses, the FED pays 0.25% interest on the “excess reserves” created so as to generate easy profits for the TBTF banks for doing nothing at all. They are earning profits merely from a book-entry in the FED’s books!

The propaganda which I referred to earlier that such monies were meant to enable the TBTF banks to extend credit is therefore bullshit and a load of financial nonsense. So why are the so-called reputable economists at leading universities such as Harvard, Princeton, Cambridge, Oxford etc. touting this propaganda?  In spite of all this past mismanagement, the practices by the TBTF banks is continuing unabated, including the so-called record profits declared by the TBTF banks and the huge bonuses given out to the bankers and their hire-lings. These practices are all just window dressing as long as the toxic assets are not marked-to-market and not declared as junk. If such assets are properly declared, the fiat money banking system would be staring at a bottomless black-hole of toxic assets and indebtedness! What’s worse is these same TBTF banks are still up to their eyeballs in toxic debt, such as derivatives, credit swaps, etc.  In fact JP Morgan Chase alone has exposure more than twice the US GDP! JPMC is exposed just in interest rate derivatives at $45 TRILLION. Take a look at the Fed’s H.8 report to understand how bad it really is.

This has compounded the problem. After the Global Financial Tsunami, all the TBTF banks don’t have enough reserves to meet the withdrawal of deposits placed by customers before the crash. The TBTF banks don’t even have the requisite 10% reserves to meet these demand deposits (Old Deposits).  However, banks are continuing to receive deposits from customers of which 10% of these deposits must be transferred to the FED as reserves. Data shows that customers’ deposits are at an all time high (since 2007), but bank lending is not keeping pace.

Banks are not lending out what they are entitled to do so for two reasons:

1) The banks are using a portion of the “New Deposits” to meet the liability of having to repay the “Old Deposits” in the system. This is because even the excess reserves (created under the QE) are insufficient to meet the demand for repayment of the Old Deposits. So, part of the current New Deposits would be utilized for that purpose. This is the Deposit Ponzi Scheme.

2) Banks are earning no risk profits from interests on “Excess Reserves” at the FED and are only willing to lend to credible borrowers. In the present economic climate, there are just too few credible customers. This is another reason why banks are not lending.

When QE stops, the FED would not be out on a limb because the monies used to purchase the financial sewage from the TBTF banks are still in the FED’s books. The Fed need only to have a reverse entry in it’s books after re-packaging the financial sewage INTO SOME NEW FORM OF FINANCIAL PRODUCT OR WHATEVER (which the TBTF banks are adept at doing before the crash and are still continuing to do so) and dumping them back to the banks and another generation of stupid investors at such time when and if the banks would have recovered. But with the TBTF banks continuing their same toxic practices unabated there is no recovery, ever. Further, with the bank’s unbridled right (sanctioned by law) to confiscate the customers’ deposits (now commonly referred as “Bail-In”) using the Cyprus template, banks have additional financial resources to continue with the plunder and financial rape of the public.

I hope this helps us understand that this unabated transfer of wealth ends with our economic enslavement. The public must be able to understand these fundamentals and demand the end to this fractional banking system and the end of the FED. Your congressmen and women are dupes in this game, as they really don’t understand and therefore do what they are told to do. Inform them WE GET IT and WE DON”T LIKE IT, AND IT MUST STOP NOW! Fire the Fed, break up the TBTF banks and return to pre-1913 banking system controlled by the US Treasury. WAKE UP!  A special thanks to Matthias Chang of Global Research, who unknowingly contributed so much to this article.

QE3- The QE Infinite Path Off the Cliff

Last week, The Fed announced the third round of quantitative easing, the so-called QE3.  Quantitative Easing, in theory, is supposed to stimulate the economy because the Fed both prints more money and puts it into “circulation”, but also keeps interest rates low.  This is basic Keynesian Economics. So let’s take a look at how this has really been working out.

QE1 came in late 2008 under President G.W. Bush.  The Fed initiated purchases of $500 Billion of mortgage backed securities.  Remember, the bundles of bad mortgages that the banks were stuck with after the housing crash? You must remember also, this was in addition to the so-called $700 Billion bailout.

Also, in late 2008, the Fed cut the key interest rate to near zero.  By the summer of 2010, it was obvious that other than enriching the banks, QE1 had not spurred any growth in the economy.

So QE2 came in November of 2010 and lasted until June 2011.  The Fed went to buying $600 Billion in US Treasury Bills to “spur” the economy.  QE2 did NOT create any economic growth.  What QE2 DID DO was to bailout a bunch of foreign banks.  During the period of QE2, cash reserves of foreign banks went from $308 Billion to $940 Billion.  Hmmm,  ahhhh, about $600 Billion. Imagine that!

QE3 is essentially no different in the apparent approach is again to purchase mortgage backed securities, which we already know just enriches the banksters, and just tries to hide the elephant called debt.  WHAT is different about QE3 is that for the first time there is NO LIMIT to how long QE3 will go on!

Fed Chair, Ben Bernanke announced the Fed would purchase $40 Billion A MONTH in mortgage backed securities INDEFINITELY!  In addition, the Fed will keep interest rates at near zero until 2015! Truly QE Infinite!

Given that QE1 and QE2 did nothing except enrich banksters and hide debt, QE3 or QE Infinite only means that the Fed has put us on a course that only increases the size of the cliff and only slightly delays the inevitable crash of the dollar with the super-imposed hyperinflation that will flare.

Given the dollar of today only has 4 cents of the purchasing power of the dollar in 1913 when the Fed “took control” of the US monetary policy. The collapse of the dollar is real potential reality.  Already China and Russia have agreed to trade in Rubles and Yuan, instead of dollars.  India will soon follow.

There are several oil producing countries that now require dollars be converted to British Pounds or Euros, however, even this option is weakening meaning the demise of the dollar as the “petro-dollar” could be a reality in the near future.  This event alone would trigger the collapse of the dollar. This would trigger hyperinflation.

In countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.  Once it starts it can happen very quickly.  The Weimar Republic of Germany in 1923 is a very good example, as are a few others.

  • By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government’s Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 million million).  At the height of the inflation, one US dollar was worth 4 trillion German marks. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28 × 1019, or 33 quintillion) Marks.

  •  The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 million million million) image. (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however did not depict the numbers, “hundred million b.-pengő” (“hundred million trillion pengő”) and “one milliard b.-pengő” were spelled out instead.
  • This makes the 100,000,000,000,000 Zimbabwean dollar banknotes the note with the greatest number of zeros shown.
  • The Post-World War II hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016% or 41.9 quadrillion percent) for July 1946, amounting to prices doubling every 15.3 hours. By comparison, recent figures (as of 14 November 2008) estimate Zimbabwe’s annual inflation rate at 89.7 sextillion (1021) percent., which corresponds to a monthly rate of 5473%, and a doubling time of about five days. In figures, that is 89,700,000,000,000,000,000,000%.

There are those that say that that kind of event could not happen in the US.  The demand of our economy is just too large.  However, the real logic is that regardless the size of the economy, zero value is zero value, so therefore if the largest, most solid currency crashes, the global impacts are catastrophic.

So let’s rethink QE3 and let’s say the Fed will fund Education, Infrastructure in the US, and properly adjust minimum wages and social security benefits to reflect a livable wage and retirement at the rate of $40 billion a month.  I can absolutely guarantee the Fed that this would absolutely stimulate growth because it is a fact that people, both surviving on a minimum wage and those living on social security, SPEND 100% of their disposable income.  This is the direct IV line to the economy.  Just a thought.

OK Folks, When are you really going to get angry?

As we have been documenting for months, every years now is that the Federal Reserve is raping the wealth of the US and everyone is silent, no one seems to mind!  The middle class of this country lost 40% of its wealth between 2007 and 2010, and no one seems to mind.  49,000,000 people go to bed hungry every night in this nation and nobody seems to mind.  10 million people lost their homes from 2007 to 2010 and nobody cares. We have lost 90% of our manufacturing jobs and no one speaks out.

Well maybe this will light a fire under our collective asses. The GAO has just completed their not in depth first audit of the Fed and what was revealed in the audit was startling:

$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”- Bernie Sanders (I-VT)

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.

The list of institutions that received the most money from the Federal Reserve can be found on page 131of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve

As we enter into the campaign season in earnest, just remember this isn’t about “saving America from liberals” or “moving forward”.  This is about putting these casino bankers in jail before they destroy life as we know it.  In fact, it may already be too late.  Just one thing to remember, the key question, who got all this money?  We want it back before this is what we call home:

The Fed’s contract expires with the US Government in 2013 and the most important campaign issue should be that there is no way in hell that contract should be renewed.  Why you haven’t even heard this come up is obvious.  There is no politician that isn’t on the Fed’s payroll one way or the other.  So the second most important issue in this election is campaign financial reform.  Again, this is not even mentioned in either party’s platform.  Don’t be duped by the meaningless issues being presented by either party.

I diligently continue to inform, but without those who read this blog passing the information forward, it is all for naught.  I have never asked for any article of mine to be made viral, but this one certainly qualifies and I humbly and respectfully ask you to make this known to everyone you know and ask them to do the same.  We need to reach 200 million people and based on the readership of this blog, that is only 4 degrees of separation. Get it. Pass it on.

Finally, The Banksters Are Being Exposed By a Brave Member of the Senate

It is all too often easy to look at the political process and feel the deck is so stacked against the regular guy that we must resign ourselves to the fact our democratic process has been bought and sold to the highest bidder.  The Citizens United ruling by the Supreme Court seemed to “seal the deal” for the banksters. Now we get a breath of fresh air from at least one senator who has had the balls to call them out in the light.

Bernie Sanders from Vermont released this  roadmap of  how the banksters stole our money yesterday and it is a must read!  Here is the highlights.

“1. Jamie Dimon, the Chairman and CEO of JP Morgan Chase, has served on the Board of Directors at the Federal Reserve Bank of New York since 2007. During the financial crisis, the Fed provided JP Morgan Chase with $391 billion in total financial assistance. JP Morgan Chase was also used by the Fed as a clearinghouse for the Fed’s emergency lending programs. In March of 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. During the financial crisis, the Fed provided JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. The Fed also agreed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.

2. Jeffrey Immelt, the CEO of General Electric, served on the New York Fed’s Board of Directors from 2006-2011. General Electric received $16 billion in low-interest financing from the Federal Reserve’s Commercial Paper Funding Facility during this time period.

3. Stephen Friedman. In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans. During the same period, Friedman, who was chairman of the New York Fed at the time, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed’s rules prohibited. He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO. During the financial crisis, Goldman Sachs received $814 billion in total financial assistance from the Fed.

4. Sanford Weill, the former CEO of Citigroup, served on the Fed’s Board of Directors in New York in 2006. During the financial crisis, Citigroup received over $2.5 trillion in total financial assistance from the Fed.

5. Richard Fuld, Jr, the former CEO of Lehman Brothers, served on the Fed’s Board of Directors in New York from 2006 to 2008. During the financial crisis, the Fed provided $183 billion in total financial assistance to Lehman before it collapsed.

6. James M. Wells, the Chairman and CEO of SunTrust Banks, has served on the Board of Directors at the Federal Reserve Bank in Atlanta since 2008. During the financial crisis, SunTrust received $7.5 billion in total financial assistance from the Fed.

7. Richard Carrion, the head of Popular Inc. in Puerto Rico, has served on the Board of Directors of the Federal Reserve Bank of New York since 2008. Popular received $1.2 billion in total financing from the Fed’s Term Auction Facility during the financial crisis.

8. James Smith, the Chairman and CEO of Webster Bank, served on the Federal Reserve’s Board of Directors in Boston from 2008-2010. Webster Bank received $550 million in total financing from the Federal Reserve’s Term Auction Facility during the financial crisis.

9. Ted Cecala, the former Chairman and CEO of Wilmington Trust, served on the Fed’s Board of Directors in Philadelphia from 2008-2010. Wilmington Trust received $3.2 billion in total financial assistance from the Federal Reserve during the financial crisis.

10. Robert Jones, the President and CEO of Old National Bancorp, has served on the Fed’s Board of Directors in St. Louis since 2008. Old National Bancorp received a total of $550 million in low-interest loans from the Federal Reserve’s Term Auction Facility during the financial crisis.

11. James Rohr, the Chairman and CEO of PNC Financial Services Group, served on the Fed’s Board of Directors in Cleveland from 2008-2010. PNC received $6.5 billion in low-interest loans from the Federal Reserve during the financial crisis.

12. George Fisk, the CEO of LegacyTexas Group, was a director at the Dallas Federal Reserve in 2009. During the financial crisis, his firm received a $5 million low-interest loan from the Federal Reserve’s Term Auction Facility.

13. Dennis Kuester, the former CEO of Marshall & Ilsley, served as a board director on the Chicago Federal Reserve from 2007-2008. During the financial crisis, his bank received over $21 billion in low-interest loans from the Fed.

14. George Jones, Jr., the CEO of Texas Capital Bank, has served as a board director at the Dallas Federal Reserve since 2009. During the financial crisis, his bank received $2.3 billion in total financing from the Fed’s Term Auction Facility.

15. Douglas Morrison, was the Chief Financial Officer at CitiBank in Sioux Falls, South Dakota, while he served as a board director at the Minneapolis Federal Reserve Bank in 2006. During the financial crisis, CitiBank in Sioux Falls, South Dakota received over $21 billion in total financing from the Federal Reserve.

16. L. Phillip Humann, the former CEO of SunTrust Banks, served on the Board of Directors at the Federal Reserve Bank in Atlanta from 2006-2008. During the financial crisis, SunTrust received $7.5 billion in total financial assistance from the Fed.

17. Henry Meyer, III, the former CEO of KeyCorp, served on the Board of Directors at the Federal Reserve Bank in Cleveland from 2006-2007. During the financial crisis, KeyBank (owned by KeyCorp) received over $40 billion in total financing from the Federal Reserve.

18. Ronald Logue, the former CEO of State Street Corporation, served as a board member of the Boston Federal Reserve Bank from 2006-2007. During the financial crisis, State Street Corporation received a total of $42 billion in financing from the Federal Reserve. ”

{end press release quote}

We need to support this courageous effort by being totally outraged and begin demanding that a criminal investigation begin immediately.  We should also demand that Congress does not renew the Federal Reserve Charter to “handle” the job the US Treasury should be doing.  That charter is up for a vote in 2013. Everyone who reads this should inform everyone they know about these facts and ask them not only to read it but to pass it on to everyone they know and then we all should put our representatives on notice that we absolutely want our financial system back.

There is no single issue more important to each and everyone of us, literally.  Get informed, wake up, and act. Forget the clown circus that is the presidential campaigns and get to the REAL Chains that bind us.  Let’s set ourselves free and here are the keys to the cuffs.

Some Fact Checking on the BIG BAILOUT and Its Effect on the Economy

Remember back in 2008, when Uncle Ben Bernanke and Little Timothy Geithner went to the Hill and said they needed $700 B to bailout the banks or else the world economy would collapse?  Yeah we all remember, there have been millions of articles, documentaries, and movies made about it.

Ok so when the Congress called Uncle Ben back to testify about what he did with the money and was asked to explain how the bailout had saved the economy, he REFUSED to disclose who got how much, defending his position by saying that divulging such information could jeopardize the public faith in the individual banks who had received monies.  Congress said, ‘Oh OK that makes sense’.

Then, in 2009, the discussion was that if banks were too big to fail that those banks should also be too big to exist, as that would put us right back in the position that got us into the jam in the first place.  Bernanke agreed, but offered no statements as to what should be done to prevent it.  Some in CONgress did and the Dodd-Frank Bill was passed.  At the time some said it was too weak as written, but hey, at least it was a start.

So, here we are now.  How has Dodd-Frank or Federal Reserve policy worked?  I do hope you are sitting down for this.  You may also want to pour a stiff dink, if you are so inclined, or at least have a pair of vise grips handy to occasionally pinch yourself.

First, too big to fail has resulted in the following: Five banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve. Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy!  WHAT????  Yeah you read it correctly.  Back in 1970, the 5 biggest U.S. banks held 17 percent of all U.S. banking industry assets.  Today, the 5 biggest U.S. banks hold 52 percent of all U.S. banking industry assets.  What say you Uncle Ben? What say you CONgress?

At a recent lecture at George Washington University, Mr. Benanke said ,according to CNNMoney, — “The bailouts of Bear Stearns and AIG were “distasteful” but still necessary. Meanwhile, the Fed was “helpless” when it came to saving Lehman Brothers, he said.

“Lehman Brothers was in itself probably too big to fail, in the sense that its failure had enormous negative impacts on the global financial system,” Bernanke said. “But there we were helpless, because it was essentially an insolvent firm.”

In a lecture about the Fed’s emergency efforts during the financial crisis, Bernanke explained that the central bank was willing to bail out AIG (AIG, Fortune 500) and Bear Stearns because it expected both firms would eventually be able to pay back their loans. Bear Stearns was ultimately acquired by JPMorgan Chase (JPM, Fortune 500).

Lehman Brothers, on the other hand, had no collateral to put up in exchange for the Fed’s assistance.

“It was very difficult and in many ways distasteful intervention that we had to do on the grounds that we needed to do that to prevent the system from collapsing,” Bernanke said. “But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.'”

Oh! Then I guess we really had no choice except to fork over the $700 Billion.  It was exactly $700 Billion though, wasn’t it Uncle Ben?  It took a court case by Bloomberg (because CONgress wouldn’t or couldn’t demand the info) to reveal the true number of the bailout.  Vise grips and shot glasses at the ready, here are the real numbers we are all on the hook to the FED for.

The amount of money in secret loans that some of the big Wall Street banks received from the Federal Reserve is absolutely staggering.  The following figures come directly from a GAO report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Bank of America – $1.344 trillion
Goldman Sachs – $814 billion
JP Morgan Chase – $391 billion

OMG that’s $7.1 TRILLION and then with the bailouts of foreign banks, yes most of the major banks in Europe, and yes we did those too, but you know the information is “so sensitive”.  The total is $16.115 TRILLION and that is more than the annual GDP of the entire country!

But this has been good for the economy right?  I mean if we, as the American people, throw that much money at the problem things are getting better.  I mean the banks did the responsible thing to fix the problem, after all we have trusted them with an entire year’s worth of labor by everyone and every company in the US.  Well…..consider these two facts.

1). Over the past few years, big Wall Street banks have made huge amounts of money speculating on the price of food.  This has caused food prices all over the globe to soar and it has caused tremendous hardship for hundreds of millions of families around the planet.  The following is from a recent article in The Independent….

Speculation by large investment banks is driving up food prices for the world’s poorest people, tipping millions into hunger and poverty. Investment in food commodities by banks and hedge funds has risen from $65bn to $126bn (£41bn to £79bn) in the past five years, helping to push prices to 30-year highs and causing sharp price fluctuations that have little to do with the actual supply of food, says the United Nations’ leading expert on food.

Hedge funds, pension funds and investment banks such as Goldman Sachs, Morgan Stanley and Barclays Capital now dominate the food commodities markets, dwarfing the amount traded by actual food producers and buyers.

Goldman Sachs alone has earned hundreds of millions of dollars in profits from food speculation.

2). According to the New York Times, the too big to fail banks have complete domination over derivatives trading.  Every month a secret meeting that includes representatives from JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup is held in New York to coordinate their control over the derivatives marketplace.  The following is how the New York Times describes those meetings….

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan. The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

When the derivatives market fully implodes, there will not be enough money in the world to bail everyone out.  According to the Comptroller of the Currency, the too big to fail banks have exposure to derivatives that is absolutely outrageous.  Just check out the following numbers….

JPMorgan Chase – $70.1 Trillion

Citibank – $52.1 Trillion

Bank of America – $50.1 Trillion

Goldman Sachs – $44.2 Trillion

That’s over $200 TRILLION dollars, more than 3 ½ TIMES the global GDP! And that is just the Big Five’s exposure to the derivatives market.

This is beyond insane and would be funny except we are being enslaved to keep it floating. When you combine these facts with the current crisis in the EU, and the fact CONgress has gutted Dodd-Frank and even voted down the Volcker rule that would not allow banks to speculate with our deposits, it doesn’t even make sense to a brick wall.

I write this article because the banksters are counting on us not understanding how well they have fleeced our global economy with no hopes of any recovery.  They hope we will all just say this is high finance and we don’t need to understand it.  You would understand if your teenage ran up $5,000 in credit card bills wouldn’t you? And I am certain what you would say and do to your irresponsible teenager who did such a thing.  THEY would be grounded for LIFE, and you certainly wouldn’t give them any more of your money!  For each and every one of us, we need to understand this is the very same thing, only the irresponsible teenagers in this scenario are the FED, the banksters, and our CONgress, and I am being nice. Criminals could also be used to replace irresponsible teenager in this real life scenario, lots of criminals.  So what are we going to do about this, DAD? MOM?  There really isn’t anybody else stepping up, nowhere in the world.  Sorry to be such a bummer, but it is what it is.

While the Sheeple Slept and CONgress diddled – The REAL BAILOUT NUMBERS

According to a Bloomberg article, the Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.  Banksters nor the FED mentioned that banks took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

The truth came out in the 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions.  “When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.  If you remember, at the time of the initial request for disclosure, the Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

$7.77 Trillion is the amount of money the central bank parceled out, not $700 billion that is commonly understood.  Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.  Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.

Information on which banks borrowed, when, how much and at what interest rate was kept from public view.  The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank.

Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”  Lawmakers knew none of this.  They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

The Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.  Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.

And still, no one goes to jail! No one gets sacked! Instead, it is off to rape Europe. I beginning to believe we have been invaded by the Borg in the guise of these banksters! No one is capable of stopping them and they seem hell bent on assimilating every shekel.

The True Greek Crisis

Everything we hear about the crisis in the EU, it seems that the whole situation is a result of the “problems” in Greece, and to a lesser degree Spain, Portugal, and Italy.  French president Sarkozy and Germany’s chancellor Merkel can’t agree on how to “bailout” Greece.  IMF and the ECB threaten to withhold funding for Greece if they don’t continue to enforce more and more austerity programs.  Greek 1 year bond rate is 117%!

If you followed just MSM you would think the Greeks were the most stupid businessmen and politicians, and there is considerable support that these elements of Greece certainly contributed to the current situation.  After joining the EU, there was wheeling and dealing with total disregard for the future and now they are in a real pickle.  Some in the EU are calling for the dissolution of the Greek government and absorbing the region into other EU member nations!

However, in historical perspective, one could also argue that Greece was setup for this fall. Closer examination suggests a reality that is very different than the “picture” being painted for us to consume.  Let’s examine some facts.

The Lazy Greek Meme

Greece is a land of ancient myth. But more recent myths have made Greeks cringe when foreigners start asking questions.

Greeks are lazy. They don’t work. They’re profligates who are taking down Europe. The caricature has become so common that a recent TV commercial in Slovakia used it to sell beer, drawing a contrast between the virtuous Slovak and the paunchy Greek indulging himself on a beach.

Most foreigners know Greece from holidays spent lolling on its beaches and drifting around its magical ruins. You could easily take it for granted that everybody here is just chilling out. They aren’t. The Greek labor force, comprising 5 million souls, works the second highest number of hours per year on average among countries in the Organization for Economic Development (OECD), right after South Korea. Greeks work 42 hours per week, while the industrious Germans toil just 36.

The average Greek worker earns a bit over $1,000 a month. Private sector employees are the most underpaid in the EU. Even before the harsh austerity measures imposed by the EU and the IMF, the Greeks had already cut the real average wages in the private sector to 1984 levels. This week the Greek parliament is expected to vote on measures that would place 30,000 public sector workers in a “labor reserve” at slashed pay – up to 40 percent.

Greeks retire a bit later than the European average. And the average pension, $990, is less than that of Ireland, Spain, Belgium, and the Netherlands. Thirty percent of the labor force works with zero Social Security or protections, while in the rest of the EU only 5-10 percent of workers are in this precarious situation.

The reality is simple, though rarely admitted –The “bailout” of Greece is really a bailout of big European banks. A game of smoke and mirrors leads us to think that Greek indolence led to financial ruin. The Greeks have done some things wrong, to be sure. But it was a dangerous mix of stupid economic theories and high-flying finance, fueled by a corrupt government, and that combination exploded the economy. If all this sounds sickeningly familiar, it should. We’re witnessing Round 2 of the Great Global Shakedown by the banks.

The Greeks got socked in WWII and then creamed again by a brutal civil war (1946–1949), in which American military aid to the Greek governmental army ensured the defeat of the Greek Communist Party.  After WWII, the Truman Doctrine and the Marshall Plan determined relations between the U.S. and Europe. The economic recovery of Germany—designed to benefit American multinationals like IBM, Ford and General Motors – was a high priority. (Watch a fascinating lecture by economist Joseph Halevi here.) Greece mattered to the U.S. as a strategic barrier against the USSR in the Cold War, so it decided to support Greece with economic and military aid, fearing that another communist domino would fall.

Meanwhile, a resurgent Greek Left began to demand fair labor practices and human rights. It was duly answered with brutal repression. Executions and exile were common. In 1967, the army, backed by the CIA, overthrew the government in a Cold War right-wing military coup. The new government, known as the Regime of the Colonels, engaged in stupid military adventures like a disastrous attempt to annex Cyprus, which led to its collapse in 1974. But the Greeks maintained a ridiculously oversized army and navy, underwritten by the U.S., to keep those Russians at bay. When the Cold War ended, the Russians were no longer a threat to the U.S., and, accordingly, financial support for Greece was drawn down.

Through the ’80s and most of the ’90s, the Greeks economy faltered, and the Greeks had to pay super-high interest rates when they borrowed money. The government, mired in bureaucracy, mismanaged things badly. Taxes were not collected. Bitter class conflicts emerged. Horribly high unemployment persisted.

But in 1992, something called the Maasticht Treaty brought hope, getting the ball rolling for the creation of the euro. Unfortunately, the idea of the euro was kind of a fairy tale promoted by European elites (minus the British). Some tried to sound warnings of an epic screwup. Wouldn’t the lack of a shared language, common culture, and big central government be a problem? Paul Krugman notes that European number crunchers who wanted the euro weren’t above fudging results to make the plan look good. The fairy dusters won, and in 1999, the euro became official. In 2000, Greece joined the game.

One fairy tale held that once countries adopted the euro, they wouldn’t default. They would limit their deficits. Every country would become like Germany, where debt was highly secure. Yay! Greek debt, Irish debt and Spanish debt began to trade as if they were super-safe German or French debt. Countries like Greece that had been considered dicey investment became overconfident. The European Central Bank would take care of inflation, they thought. And surely no one could go bankrupt. The Greeks, once forced to pay high interest rates (as high as 18 percent in 1994), could now borrow at low interest. The conservative Greek government went on a reckless borrowing spree and the banks went on a reckless lending spree. Big European banks were delighted to lend them money; more than a few also helped the Greeks hide evidence that all was not well.

Many of these big banks knew perfectly well as early as 2005 that the Greeks wouldn’t be able to pay the money back. But so what? Banks love a little thing called moral hazard – where you know your risky behavior is not going to be punished because somebody out there is going to pay for it. That’s what they counted on with Greece, and accordingly kept the rivers of money flowing.

The Greek government borrowed boatloads for the 2004 Olympics, which cost twice as much as projected. Magician-bankers at Goldman Sachs obligingly helped it disguise the debt — we’re talking billions — with clever little financial instruments called derivatives. The public hadn’t a clue what was going on. All the southern countries on the euro continued to borrow heavily, spend heavily, and for a while, they boomed until the boom as the financial markets collapsed in 2008.

God of the Winds

TSHTF in 2008. Everybody looked around and said, “Who the hell is going to pay off these debts?” The banks saw big money heading out the door. According to the bible of neoliberal economics, this can’t happen. Human beings and societies are one thing. But banks must be saved at all costs.

When the Greek government changed hands in October 2009, the books were opened and it became obvious that there was a much bigger deficit than anyone thought. Investors ran for the hills. Interest rates shot up. In November, just three months before the Greeks became the epicenter of the European economic crisis, the wizards of Wall Street were back on the scene in Athens, trying to peddle more deals that would allow debt to magically vanish. The New York Times summed up the banks’ role in the crisis:

“As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

“In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come…Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.”

With evil financial winds gaining hurricane force, it became clear that Greece would need a whole lot of money if the bankers were going to get paid back. They jumped on the austerity train to nowhere– chasing their tails by making draconian cuts, which only increased their deficits, and then having to ask the EU for more money. Public workers were fired to pay the banks. Pensions were slashed to pay the banks. But there still wasn’t enough money to pay the banks.

If you’re a country that has your own sovereign currency – like the U.S. – then you have some options in this situation. You can do monetary expansion to head off deflation, for example, and devalue your currency. But once Greece went on the euro, it say good-bye to such options. So it cut, and cut, and cut, and now it’s going bankrupt anyway. The country is mired in falling income, rising deficits, and sinks even further. It’s in the Herbert Hoover death spiral.

Meanwhile, members of the EU are flipping out. Contributions to the bailout agreed to in July are supposed to be proportional to a country’s economic status, and thus the Germans have the biggest chunk to fork over. They are not keen on the notion of doing so in order for the Greek and French banks to get paid. Hey, they’re thinking, wouldn’t it be cheaper to recapitalize our own banks directly? The French are really flipping out, because after the Greek banks, their banks are holding the biggest hordes of Greek debt. They’re worried about their credit ratings. The bailout decision has been postponed until mid-November so everybody can fight it out.

With the major banks holding all of these Greek derivatives, is it any wonder that BoA and JPMC are now trying to foist these toxic assets onto the American Taxpayers by transferring these assets into their banking arms so the loses would be covered under the FDIC!

No matter how this turns out, two facts will remain unchanged.  First, Greek debt will be the start of the whole house of cards collapsing, that was the EU and the Euro.  Secondly, Greeks will pay the price of cozying up to greedy bankers for decades.