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.

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The European Union Has Entered Final Meltdown Phase

As we have outlined in previous articles, The EU will collapse, it was a matter of time.  Well, that time has arrived.  The falsely placed hope was that Greece would go silently into the night and then the politicos in Germany and France then could consolidate any impacts from the rest of the PIIGS and somehow manage the overwhelming debt over time. It was a fool’s dream from the onset.

It was so because first there is no way the German and French People would settle with being saddled with the cost of that bailout. The big secret is that both Germany and France are not in that good a shape themselves.  France’s external debt to GDP is 208% and Germany’s external debt to GDP is 163%.  Here is what the house of cards really looks like:

 

It is deceptive, at least, to use the Public Debt to GDP to honestly evaluate the situation, given the enormous exposure of the German and French banks are facing in the derivatives market float that currently exists. Keep it in your mind always that is the banks behind all of this and the ECB would have to bail them out when the final wheel falls off the joy wagon.

There is no way that German and French banks can cover their exposure and the ECB cannot possibly print that much money without setting off massive hyperinflation that would follow any effort to try and print that many Euros. The hope was that Greece would accept the draconian austerity demanded by the bankers to cover the 220% external debt (ED) to GDP.

Where it gets really crazy is that IF Greece went silently into what can only be described as a deep depression, somehow the EU could then manage the Italian ED (135%), the Irish ED 1098%, the Portuguese ED 239%, and the Spanish ED of 173%, basically on the backs of the French and Germans.  See how crazy it gets.

Well it just got a whole lot crazier in the last 72 hours.  The country that invented drama and democracy is not disappointing the world on either front. Greek Prime Minister George Papandreou on Monday called for two high- stakes votes.  The first asks parliament to say by the end of this week whether it has confidence in his leadership. The second is a referendum in which Greek voters would approve or reject, possibly by year’s end, Europe’s latest debt-crisis workout. The move blindsided European leaders on the eve of a global summit and rocked lawmakers in Papandreou’s party, some of whom are now calling for him to step down. The next day, stocks tumbled worldwide, the euro declined and Italian bonds plunged.

French banks and other lenders exposed to Greece and other weak euro zone countries slumped on Tuesday after Greece’s leader said he would put a bailout plan to a referendum, raising the risk of a disorderly default.  Papandreou knew all along he could not force the Greek people to accept the austerity plan proposed by the ECB and IMF.  Europe’s latest bailout proposal falls far short of what’s needed. Under the deal, private banks holding Greek debt would voluntarily accept a 50 percent write-off on their returns; the European Financial Stability Facility, the EU’s bailout fund, would be leveraged to 1 trillion euros ($1.37 trillion) from 400 billion euros; and European banks would raise 106 billion euros ($145 billion) in new capital by June 2012. As for Greece, it is due to receive 130 billion euros ($180 billion) in public funds on top of 110 billion euros pledged in 2010.

Writedowns of Greece’s sovereign debt should be much steeper. Greek bonds held by the European Central Bank would not be covered, so the writedown is really less than 50 percent. It needs to be closer to 70 percent to make Greece’s debt burden bearable. In addition, the EFSF needs a war chest of at least 3 trillion euros to make sure Europe’s banks are recapitalized and to guarantee the financing needs of Italy and other struggling governments.

Greeks know that this latest bailout proposal will also come with many unpopular strings attached, including further austerity measures. In an Oct. 27 poll for the Greek weekly To Vima, the majority said the deal should be put to a national vote, with 58 percent calling it “negative” or “probably negative.” Deep budget cuts, broken pension promises and heavy government job losses have already led to strikes, street protests and violence.

Then Monday’s surprise was, as Greek politics grew ever more chaotic, strong political protests erupted as the government moved to replace military chiefs with officers seen as more supportive of George Papandreou, the prime minister.  In a surprise development, Panos Beglitis, Defence Minister, a close confidante of Mr. Papandreou, summoned the chiefs of the army, navy and air-force and announced that they were being replaced by other senior officers.

Neither the minister nor any government spokesman offered an explanation for the sudden, sweeping changes, which were scheduled to be considered on November 7 as part of a regular annual review of military leadership retirements and promotions. Usually the annual changes do not affect the entire leadership. “Under no circumstances will these changes be accepted, at a time when the government is collapsing and has not even secured a vote of confidence,” said an official announcement by the opposition conservative New Democracy party.

Add to this Greece’s government looked on the verge of implosion on Tuesday ahead of a Friday confidence vote as a socialist deputy defected and another cadre called for early elections after the prime minister called a referendum on his EU debt rescue. Greek Prime Minister George Papandreou called the referendum late Monday in a bid to secure approval of his disputed economic policies without early elections. But the gambit backfired when a former deputy minister defected, reducing the ruling party’s majority in the 300-seat parliament to 152 deputies. Moments later, the head of parliament’s economic affairs committee Vasso Papandreou called for an early ballot and a temporary unity government to “safeguard” the EU deal agreed last week to slash Greece’s huge debt by nearly a third.

This “popular revolutionary” move is going to spread rapidly to the rest of the PIIGS. The unraveling will be rapid.  The exposure of the American banks is significant and they have already been slammed this week with MF Global filing for bankruptcy on Monday, investors pummeled many financial stocks, fearful that problems were lurking on the books of other Wall Street firms. It was a crisis of confidence, not unlike in 2008 when the markets punished stocks on mere speculation of trouble.  An interesting note is that Jon Corazine, the ex-head of Goldman Sachs, was at the helm at MF Global.  Imagine that! A leopard doesn’t change its spots!

We are going to witness the largest transfer of wealth in the history of the world within the next few weeks and the citizens of Germany, France, US, and Britain are NOT the winners, and neither is the 1%.  The winners are the 1/4%.  Are we catching on yet?

The Fox is in the Henhouse Again, and We are not Watching!

We watched as the banks were bailed out after ripping off nearly $5 trillion dollars of America’s wealth.  We are on the hook for their loses.  They were too big to fail, we were told.  It would be a disaster for the world’s economy.  The same story was then foisted on our European brothers, and again with the same “chicken little” reasoning.

Well, here we are 3 years later and the economy is still in the dumpster and we have not done one thing to correct the major problem of banks being investment firms ponied up to the roulette table wildly playing with OUR money unchecked.  Now the drunken bankers are at it again.  I have written many articles concerning this crazy derivatives market that is the banker’s hedge for the downside of this slow motion crash of the world’s economy.

This WAS one market that the bankers were exposed and WE were not on the hook for bailouts.  Well, that was until last week.  No ONE is MSM National media is even reporting this.  If you aren’t mad as hell when you read this, you are certifiably in a COMA.

Source: Washington’s Blog

Bloomberg reports that Bank of America is dumping derivatives onto a subsidiary which is insured by the government – i.e. taxpayers.

Yves Smith notes:

If you have any doubt that Bank of America is going down, this development should settle it …. Both [professor of economics and law, and former head S&L prosecutor] Bill Black (who I interviewed just now) and I see this as a desperate move by Bank of America’s management, a de facto admission that they know the bank is in serious trouble.

The short form via Bloomberg:

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation…

Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

Now you would expect this move to be driven by adverse selection, that it, that BofA would move its WORST derivatives, that is, the ones that were riskiest or otherwise had high collateral posting requirements, to the sub. Bill Black confirmed that even though the details were sketchy, this is precisely what took place.

And remember, as we have indicated, there are some “derivatives” that should be eliminated, period. We’ve written repeatedly about credit default swaps, which have virtually no legitimate economic uses (no one was complaining about the illiquidity of corporate bonds prior to the introduction of CDS; this was not a perceived need among investors). They are an inherently defective product, since there is no way to margin adequately for “jump to default” risk and have the product be viable economically. CDS are systematically underpriced insurance, with insurers guaranteed to go bust periodically, as AIG and the monolines demonstrated. [Background.]

The reason that commentators like Chris Whalen were relatively sanguine about Bank of America likely becoming insolvent as a result of eventual mortgage and other litigation losses is that it would be a holding company bankruptcy. The operating units, most importantly, the banks, would not be affected and could be spun out to a new entity or sold. Shareholders would be wiped out and holding company creditors (most important, bondholders) would take a hit by having their debt haircut and partly converted to equity.

This changes the picture completely. This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. [Background.] So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.

The FDIC is understandably ripshit. Again from Bloomberg:

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Well OF COURSE BofA is gonna try to take the position this is kosher, but the FDIC can and must reject this brazen move. But this is a bit of a fait accompli,and I have NO doubt BofA and the craven, corrupt Fed will argue that moving the derivatives back will upset the markets. Well too bad, maybe it’s time banks learn they can no longer run roughshod over regulators. And if BofA is at that much risk that it can’t survive undoing this brazen move, that would seem to be prima facie evidence that a Dodd Frank resolution is in order.

Bill Black said that the Bloomberg editors toned down his remarks considerably. He said, “Any competent regulator would respond: “No, Hell NO!” It’s time that the public also say no, and loudly, to this new scheme to loot taxpayers and save a criminally destructive bank.

Professor Black provided a “bottom line” summary in a separate email:

1.The bank holding company (BAC) is moving troubled assets held by an entity not insured by the public (Merrill Lynch)  to the Bank of America, which is insured by the public
2. The banking rules are designed to prevent that because they are designed to protect the FDIC insurance fund (which the Treasury guarantees)
3. Any marginally competent regulator would say “No, Hell NO!”
4. The Fed, reportedly, is saying “Sure, no worries” by allowing the sale of an affiliate’s troubled assets to B of A
5. This is a really good “natural experiment” that allows us to test whether the Fed is protects the public or the uninsured and systemically dangerous institutions (the bank holding companies (BHCs))
6. We are all shocked, shocked [sarcasm] that Bernanke responded to the experiment by choosing to protect the BHC at the expense of the public.

Karl Denninger writes:

So let’s see what we have here.

Bank customer initiates a swap position with Bank.  In doing so they intentionally accept the credit risk of the institution they trade with.

Later they get antsy about perhaps not getting paid.  Bank then shifts that risk to a place where people who deposited their money and had no part of this transaction wind up backstopping it.

This effectively makes the depositor the “guarantor” of the swap ex-post-facto.

That the regulators are allowing this is an outrage.

If you’re a Bank of America customer and continue to be one you deserve whatever you get down the line, whether it comes in the form of higher fees and costs assessed upon you or something worse.

Stand Up to the Coup

Bank of America has repeatedly become insolvent due to fraud and risky bets, and repeatedly been bailed out by the government and American people. The government and banks are engineering an age of permanent bailouts for this insolvent, criminal bank (and the other too big to fails).  Remember, this is the same bank that is refusing to let people close their accounts.

This is yet another joint effort by Washington and Wall Street to screw the American people, and to trample on the rule of law.

The American people will be stuck in nightmare of a never-ending depression (yes, we are currently in a depression) and fascism (or socialism, if you prefer that term) unless we stand up to the overly-powerful Fed and the too big to fail banks.

This story from Bloomberg just hit the wires this week. Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.

This means that the investment bank’s European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn’t get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to “give relief” to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.

What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan. Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.

First folks, we are talking over $150 Trillion of exposure.  That is 10 times our GDP!  Would you give me 100% of your income for the next ten years because I need it to make up my gambling loses!  What would you say to me?  You know, the OWS call for a BANK TRANSFER DAY in early November is getting to be a really significant idea.  If the banks refuse to act in a responsible manner and the FED is refusing to discipline its children, then we have to just take their “toys” (our money) away from the bankers.  It is time for “time out” for our out of control children.  Check out your local credit unions, they are real functioning banking organizations owned and controlled by their depositors and members.  Congress will never vote our interest, so we have to vote with our bucks.

The Month of Shocktober

We have posted several Warning/Situation Updates and we will continue to do so as information dictates.  The solar surface has been relatively quiet, although a still large un-numbered solar sunspot is just beginning to rotate into view and the earth facing sun surface has #1305 and #1313 still earth facing and could still be the sources of a large CME.

In addition, the Canary Islands El Heirro volcano still bears watching.  Swarms of earthquakes are continuing sporadically and have increased in intensity and the depth of the quakes is more shallow,  both of those facts RAISES concern.  Below is the latest press release from Spanish officials.

“October 8, 2011 – CANARY ISLANDS – An intensified sustained earthquake swarm is now taking place at the Canary Islands and it appears the magma is now on the move again bubbling closer to the surface and incinerating more rock in the process. Over the last 24 hours, we’ve seen the depths of the tremors rising up to within 11 km from a depth average of about 14.5 to 15 km. The number of seismic volcanic tremors has also doubled at El Hierro since Wednesday. On Wednesday, October 5, there were 79 recorded seismic events. On Thursday, there were 160 and on Friday, October 7th, there were 177.”

Our concern over this situation is the potential for a large land mass sliding into the ocean creating a mega-tsunami directed at the East Coast of the US and South America.  The focus of this concern is that IF a tsunami were to occur, the East Coast of the Americas would have only 8-9 hours to take any preventive measures.  IF the tsunami were to occur at say midnight EDT, then most of the residents in the danger zone would be asleep, not have any communication devices on during the valuable time they would need to get to safety.

If you live in the areas of potential danger, and until this situation stabilizes, you should think about getting the information you would need in a timely fashion.  This concern is amplified by the fact that the USGS service is not even REPORTING anything on this situation.  We are recommending taking these actions:

1).  You can monitor that activity at The European-Mediterranean Seismological Center . Do so at least twice a day.

2).  As with an emergency plan, make sure you have a way to communicate with each other 24 hours a day.  So as some of you sleep, others are awake and monitoring the situation.  We can’t emphasize enough that in this particular situation, every minute will be precious.

3).  Be sure about your evacuation plan.  Again, those with the information first will be the ones who will most likely be successful in escaping and will not be the ones stuck in grid-lock.  I think you could imagine that the roads will become impassable very quickly when every coastal citizen is trying to go west and to high ground.

However, as we monitor natural dangers, we also monitor financial and political situations as well. Given the current situation in the EU concerning Greece, Italy, Ireland, Spain, and Portugal, and the lack of action and political grid-lock in Germany, France, and to a lesser degree the UK, the collapse of the EU could occur within the next two weeks.  Based on information provided us privately, it is no longer a question of IF, only WHEN, and those in the know say it could be this week coming up (October 10-17th).

Some would say, OK, why would this be any different than the 2008 financial event in the US?  Well, consider that the EU CANNOT “bail-out” countries like we bailed out banks.  In addition, the bastard child in the room is the world’s derivatives market.  If the EU goes down, investors would only be holding all those credit swaps, etc. which would all be exercised at once.  This is the monster.  It is a $500 Trillion monster!  To put this insanity into perspective, that is almost 10 tens the world’s GDP as estimated by the World Bank for 2010, which was just a little north of $63 Trillion!

This, simply stated, ends the world economy as we know it, and it would all unravel within a matter of 7-10 days.  Markets and banks close immediately, riots ensue within 48 hours and chaos is real for EVERYONE.  We are now elevating our watch of this situation.  Anything that would even trigger rumors at this point could tip the bus over the cliff.  While we have been writing about this since we began, we now see real events beginning to form that toxic situation that could trigger this financial tsunami and soon.

One of the major concerns are the threats being issued by the so-called “Anonymous”, the group believed responsible for kicking off the Occupy Wall Street (OWS) movement.  They have specifically threatened to “attack” the global electronic banking system during this period.  If the markets were forced to close because of such attack, it could be the “gunshot” that panics the herd into a stampede to “preserve” what is left in value in the market.  

We know that these situations all together seem a bit overwhelming.  It makes us step back and want to just go fishing.  However, the reality is we will survive all of this and more!  We simply want everyone to be awake and alert.  It is the LERTS that will survive and we want everyone to survive.  Too many of us have already paid the ultimate sacrifice as a result of the events unfolding.  Each loss is a loss to each and every one of us. Whether it was a soldier or civilian killed in the various wars, or the death of a protestor in Yemen, or the retired “investor” who took their own life because they lost everything, they ARE US.  Knowledge gives us the ability to remain calm, confident, and most importantly the ability to endure and continue.

Further Updates from the Currency War Front

Well, folks, it’s official – mark November 22, 2010 in your calendars.  With yesterday’s $8.3 billion POMO monetization, the Fed’s official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion.  The Fed is now buying about $30 billion per week, or about $120 billion per month, for the foreseeable future and beyond, it would mean that China would need to buy a comparable amount to be in the standing. It won’t. In other words, the Ponzi operation is now complete, and the Fed’s monetization of US debt has made it not only the largest holder of such debt, but made external funding checks and balances in the guise of indirect auction bidding, irrelevant. China is now not the one having the most to lose on a DV01 basis on that day when the inevitable surge in interest rates finally happens. That honor is now strictly reserved for America’s taxpayers.

In addition, Tuesday China and Russia sent a loud message to the FED.

Source: Asia One – Su Qiang and Li Xiaokun

St. Petersburg, Russia – China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.  Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities. The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

“That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries,” he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.  The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communique. Details of the documents have yet to be released.

Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a “fair and reasonable new order” in international politics and the economy.

Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.

Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.  Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.

In related news on the situation in the EU comes the grim but expected news that the Spanish 3-month bill auction failed.  The debt agency sold only €3.26bn of the €4-5bn that was offered, at average yield of 1.743% vs 0.951% prior. What people must understand is that is nearly double the interest rate.  This debt service is the back breaker to the economy.  Tensions are surely going to start boiling over on the Emerald Isle.  If Greece was a big bomb to the EU and ECB stability, and Ireland was Greece’s big brother, then the Spanish economy is their bigger brother Bubba.  These three countries WILL require further bailouts and quite frankly more than the ECB can handle.  The death of the EU is like watching a shot buffalo go down in a Sam Peckinpah movie.

Finally, back in the US, in addition to the impacts of QE2, the mortgage situation as related to the big banks is far from going away.  To put things in clear perspective, the banks bundled, and sold to investors, junk paper consisting of bundled questionable mortgages.  In most cases, those same banks kept the seconds on those mortgages.  However, now the investors do have recourse.  These bundled packages required the banks to “buy back” any equity that was in default or foreclosure.  The bottom line to this is that the top five banks, between the bad second mortgages and the default clauses on the crap they dumped on investors, are on the hook for nearly $400 Billion, which is more than the equity value of those top five banks.

In view of the fact the currency wars have unquestionably erupted, these elements represent the perfect storm.  As a side, the “fear” index on Wall Street today was the highest recorded since 1987.  These events are moving along the worst case scenario lines.  Watch very carefully.

The Decrees of Fate are Many but the Decrees of Destiny are Few

Destiny can be likened to travelling to a distant city whether or not you wish to make the trip. The way the man gets to the city is his only choice and therefore whatever occurs as a result of his decision is where fate comes in.

When I contemplate all that I am currently observing in the world with wars, natural disasters, and economic hardships, I think about us.  I mean the collective “US”. WE, as mankind have a destiny.  We might not know the ultimate destiny, but we all sense we are moving toward something more.  We sense when we are not moving forward to that destiny, as we collectively sense now.  We have lost what we call  “our spirit” or the “spirit of mankind.”  More realistically we can say it is the collective aspirations of all men.  This universal inspiration sets us apart from all other creatures we are aware of in existence.

I wonder how we allowed ourselves to make the choices we have made or are making.  Would are ancient ancestors look with pride at how far we have progressed or will they be saddened that we are still at war, or that there are still far too many of us hungry, sick, or marred in poverty and victimized on a daily basis?

I also wonder that if our current situation is the decrees of fate that has resulted from the choices we have made, then why do we feel so powerless to change those choices?  Let’s be honest here.  On an individual basis, we all are sickened at how many of our finest young men and women are dying in distant wars we know little about and yet as individuals we do nothing more than lip service on occasion to change it. Why?

We all know that a very few have a vastly disproportionate amount of the collective wealth and they are amassing even more everyday and we know they are not using their wealth in any meaningful way for the betterment of all.  Yet we allow them the continued privilege that such wealth generates.  Why?

I understand the wisdom that a man realizes more readily the depth of his soul when confronted with disaster than while sitting in the lap of luxury, but where are WE right now?  For me it came down to some pretty basic stuff.  Do I really have a soul and do I really have a destiny?  For me, the answer to both questions is yes. While trials and tribulations are the tuition of a soul, we have choices, choices as individuals and collective choices.

I feel I am on fairly solid ground here.  This has nothing to do with religious dogma or belief systems.  I don’t pretend to have even the slightest clue to the “TRUTH”.  I think even most agnostics or atheists you would meet would agree that you cannot rule out the possibilities of some sort of eternal  or dimensional existence.

So why am I rambling about this now?  Is it too much coffee or not enough sleep?  No, it’s the stories of people having their retirement plans so impacted that they must continue to work well past 65, or 4500 children dying every minute of starvation or disease.  It is the agony and pain of women, children, and the elderly caught in the vise grips of war and conflict.  It is the deterioration of our systems of education and infrastructure.  It is 2 million families that will be thrown from their homes in just America this year.

Can WE not do better than this?  What is really stopping us from drinking from the Chalice of Fulfillment?  When will these unnecessary hardships and suffering actually become intolerable to us?  Please do not misunderstand what I am trying to say, I really don’t have any of the answers, only the questions.

I know it is easier for the soul in each of us to devolve rather than evolve, but it seems we are almost severed from that which we call the “spirit of man”.  That same spirit that created England and the Magna Carta.  The same spirit that sparked the French and American Revolution. The same spirit that allowed the world to survive two major global wars.

It seems to me that we should re-empower OURSELVES as individuals. We need to reconnect to our spirit of who we are and then collectively we need to clean this mess up pronto.  What say you?

An Update on the Continuing Bank Failures

On October 4th,2009 I wrote that the FDIC had laid out over $55 Billion in insurance funds to cover bank loses, and that I felt the FDIC would go red in January or February of 2010, just based on the math and the rate of bank failures, coupled with the number of banks that were still in trouble.  My concern was the bigger banks still in trouble like Citi.  In December 2009, one of the major shareholders of Citi, Kuwait Investment Fund sold their stake in Citi.  There is also a lot of money moving in the EU after the announcement that Greece is essentially bankrupt.  In my October article, I personally thought that the FDIC might go red sooner than January or February, “much sooner” is what I said exactly.

While many readers commented that I may be too pessimistic about the situation, it actually turned out to be worse than even I thought.  Bank failures for 2009 set a record and FDIC went red in December 2009.  As losses have mounted on loans made for commercial property and development, the growing bank failures have sapped billions of dollars out of the deposit insurance fund, and its deficit stood at $20.7 billion as of March 31.

282 banks have failed since the beginning of 2008. 400 of the remaining 800 “troubled” banks may be in trouble. George G. Kaufman is the John F. Smith Professor of Finance and Economics at Loyola University Chicago and a consultant at the Federal Reserve Bank of Chicago has this to say about it. “ Bank (depository institutions) failures are widely perceived to have greater adverse effects on the economy and thus are considered more important than the failure of other types of business firms. In part, bank failures are viewed to be more damaging than other failures because of a fear that they may spread in domino fashion throughout the banking system, felling solvent as well as insolvent banks.  Thus, the failure of an individual bank introduces the possibility of system wide failures or systemic risk. This perception is widespread.  It appears to exist in almost every country at almost every point in time regardless of the existing economic or political structure. As a result, bank failures have been and continue to be a major public policy concern in all countries and a major reason that banks are regulated more rigorously than other firms.  Unfortunately, whether bank failures are or are not in fact more important than other failures, and I will argue in this paper that they are not, the prudential regulations imposed to prevent or mitigate the impact of such failures are frequently inefficient and counterproductive.

A little background: Most failed banks are essentially sold to other banks and some go into receivership. The common maneuver here is to transfer the assets and liabilities to another bank with some level of guarantee from the FDIC to help support those liabilities. This is typically done on a Friday evening and causes the bank to be closed perhaps the next day (Saturday) and then the bank opens, business as usual, on Monday. So far, there has been little panic or problems with this modus operandi.

Now however, the FDIC is finding it more and more difficult to find banks that want to help out. That is, the banks that formerly had wanted to purchase other banks have done so and are not interested in buying any more banks. To put it bluntly, the FDIC is running out of buyers.  Often times they are literally coming down to the wire to get all the transactions and contracts, etc. pertaining to the purchase completed in time to seamlessly make the transition, as it is taking longer and longer to secure a buyer.  A recent example is Ideal Federal Savings Bank of Baltimore Maryland with $6.3 M in assets, but will cost the FDIC $2.1M because the FDIC could not find a buyer.

The number of bank failures is expected to peak this year and be slightly higher than the 140 that fell in 2009. That was the highest annual tally since 1992, at the height of the savings and loan crisis. The 2009 failures cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008, the year the financial crisis struck with force, and only three succumbed in 2007.

The number of banks on the FDIC’s confidential “problem” list has jumped to 775 in the first quarter of 2010 from 702 three months earlier, even as the industry as a whole had its best quarter in two years. A majority of institutions posted profit gains in the January-March quarter. But many small and midsized banks are likely to continue to suffer distress in the coming months and years, especially from soured loans for office buildings and development projects.

The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.  The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.  While depositors’ money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government, the concern is competition and more importantly the loss of local community banks that invest locally.

James Wesley Rawles at survivalblog.com suggests we should be forewarned: 1.) The pace of bank failures in the U.S. is likely to increase. 2.) The number of banks that will have to be directly bailed out (rather than conglomerated with little fuss) will increase. 3.) The risk of bank runs will also increase. The point at which bank runs occur is difficult to predict, since it is based upon subtle psychological tipping points.

What is really disconcerting about these facts is that there are several other facts that just don’t jive with the reality of what is going on. Fact One- The FED is sitting on the largest excess cash reserves in its history (over $1 trillion). Fact Two- collectively corporate America is sitting on their largest cash reserves. Fact Three- banks are recalling record numbers of credit lines from small businesses that ARE NOT in default and have no adverse issues.  So while overall the economy is the main cause of the failures, there also seems to be some hidden agendas working as well.  It will be very interesting to read the independent examiner’s report concerning the WAMU closure last year.  Maybe we can find a “smoking gun” from this report that would indicate if there is some hidden agenda in the FDIC’s aggressive actions.  All I know is that there will be little hope of recovery if the “Big Five” are the only ones standing when the “Fat Lady” sings.