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.

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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 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.

What Goes Up….! Where is the Down?

A lot of people lament the lack of upward mobility in the U.S. right now and I share those sentiments. However, equally important is downward mobility. What makes the concept of America unique is not merely the concept that the poor can become rich but that the rich can become poor. It is this second part that is the most dangerous to social cohesion when it disappears. Unfortunately, the system that we have today of an unholy alliance between Wall Street, Washington D.C. and the multi-national corporations (including the military industrial complex of course) stands there holding onto all the levers of power to serve as gatekeepers of their own empires.

Consider this when we think about how the game is “rigged” right now.  From Matthew Cardinale of the
Inter Press Service on  28 Aug 2011.

Atlanta, Georga: The first-ever audit of the U.S. Federal Reserve has revealed 16 trillion dollars in secret bank bailouts and has raised more questions about the quasi-private agency’s opaque operations.   “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else,” U.S. Senator Bernie Sanders, an Independent from Vermont, said in a statement.   The majority of loans were issues by the Federal Reserve Bank of New York (FRBNY).

“From late 2007 through mid-2010, Reserve Banks provided more than a trillion dollars… in emergency loans to the financial sector to address strains in credit markets and to avert failures of individual institutions believed to be a threat to the stability of the financial system,” the audit report states.  “The scale and nature of this assistance amounted to an unprecedented expansion of the Federal Reserve System’s traditional role as lender-of-last-resort to depository institutions,” according to the report.   The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.

The emergency loans included eight broad-based programs, and also provided assistance for certain individual financial institutions. The Fed provided loans to JP Morgan Chase bank to acquire Bear Stearns, a failed investment firm; provided loans to keep American International Group (AIG), a multinational insurance corporation, afloat; extended lending commitments to Bank of America and Citigroup; and purchased risky mortgage-backed securities to get them off private banks’ books.

Overall, the greatest borrowing was done by a small number of institutions. Over the three years, Citigroup borrowed a total of 2.5 trillion dollars, Morgan Stanley borrowed two trillion; Merryll Lynch, which was acquired by Bank of America, borrowed 1.9 trillion; and Bank of America borrowed 1.3 trillion.  Banks based in counties other than the U.S. also received money from the Fed, including Barclays of the United Kingdom, the Royal Bank of Scotland Group (UK), Deutsche Bank (Germany), UBS (Switzerland), Credit Suisse Group (Switzerland), Bank of Scotland (UK), BNP Paribas (France), Dexia (Belgium), Dresdner Bank (Germany), and Societe General (France).

“No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the President,” Sanders wrote.   In recent days, Bloomberg News obtained 29,346 pages of documentation from the Federal Reserve about some of these secret loans, after months of fighting in court for access to the records under the Freedom of Information Act.  Some of the financial institutions secretly receiving loans were meanwhile claiming in their public reports to have ample cash reserves, Bloomberg noted.   The Federal Reserve has neither explained how they legally justified several of the emergency loans, nor how they decided to provide assistance to certain firms but not others.

“The main problem is the lack of Congressional oversight, and the way the Fed seemed to pick winners who would be protected at any cost,” Randall Wray, professor of economics at University of Missouri- Kansas City, told IPS.   “If such lending is not illegal, it should be. Our nation really did go through a liquidity crisis – a run on the short-term liabilities of financial institutions. There is only one way to stop a run: lend reserves without limit to all qualifying institutions. The Fed bumbled around before it finally sort of did that,” Wray said.

“But then it turned to phase two, which was to try to resolve problems of insolvency by increasing Uncle Sam’s stake in the banksters’ fiasco. That never should have been done. You close down fraudsters, period. The Fed and FDIC (Federal Deposit Insurance Commission) should have gone into the biggest banks immediately, replaced all top management, and should have started to resolve them,” Wray said.

For many years conventional wisdom has said that the whole world is controlled by the monied elite, or more recently by the huge multi-national corporations that seem to sometime control the very air we breathe. Now, new research by a team based in ETH-Zurich, Switzerland, has shown that what we’ve suspected all along, is apparently true. The team has uploaded their results onto the preprint server arXiv.

Using data obtained (circa 2007) from the Orbis database (a global database containing financial information on public and private companies) the team, in what is being heralded as the first of its kind, analyzed data from over 43,000 corporations, looking at both upstream and downstream connections between them all and found that when graphed, the data represented a bowtie of sorts, with the knot, or core representing just 147 entities who control nearly 40 percent of all of monetary value of transnational corporations (TNCs).

When we look to the East and watch our Arab brothers struggle against tyranny, I don’t think we connect their struggle to us.  However, I assure you that the roots of that struggle was economic slavery, not unlike we, both in the US and the EU, are rapidly marching (or is it being herded?) toward at this very minute.

As we awaken to these facts, it is apparent that the PTB, who wish to continue their “project”, are having more and more of a difficult time unfolding “their solutions” to our problems.  You know “solutions’ like raiding retirement and pension funds, eliminating worker’s unions, ending any “social programs” of any kind.

Probably the most important news story of September 7th won’t be reported by International MSM.  No, it won’t be Obama’s speech on Jobs, nor will it be the outcome of the first games in the NFL.  It will be this.

Seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions.  German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe’s revamped rescue machinery, threatening a constitutional crisis in Germany and a fresh eruption of the euro debt saga.

Mrs. Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country’s constitutional court rules on the legality of the EU’s bail-out machinery.   If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union.

The seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions of the state. “Hysteria is sweeping Germany ” said Klaus Regling, the EFSF’s director.  German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel’s own coalition plan to vote against the package, including twelve of the 44 members of Bavaria’s Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.

Christian Wulff, Germany’s president, stunned the country last week by accusing the European Central Bank of going “far beyond its mandate” with mass purchases of Spanish and Italian debt, and warning that the Europe’s headlong rush towards fiscal union strikes at the “very core” of democracy. “Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies,” he said.

A day earlier the Bundesbank had fired its own volley, condemning the ECB’s bond purchases and warning the EU is drifting towards debt union without “democratic legitimacy” or treaty backing.  Joahannes Singhammer, leader of the CSU’s Bundestag group, accused the ECB of acting “dangerously” by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified.

Mrs. Merkel faces mutiny even within her own Christian Democrat (CDU) family. Wolfgang Bossbach, the spokesman for internal affairs, said he would oppose the package. “I can’t vote against my own conviction,” he said.   The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF’s firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy.   Mrs. Merkel’s aides say she is facing “war on every front”. The next month will decide her future, Germany’s destiny, and the fate of monetary union.

I make all these points because we must think clearly and precisely now.  No politics, nor economic religion, just fix this now, and we can.  We start by taking some people DOWN.  Start to put some balance back into the equation.  I think the audit of the FED would be an excellent place to start that quest.

Secondly, we must be informed voters and place candidates that understand clearly the goals of restoring balance into our global economy through prudent but thorough regulatory changes.  That must, by its nature, start with the political process elements of our societies.   I cannot think of anything more important to you on a personal basis than this.

 

Finally A Step in the Right Direction

As a followup to my previous post calling out the fact that not one single bankster or Wall Street financial thug has been prosecuted for the giant fraud and ponzi schemes foisted on the world’s economy, it now appears that at least some in CONgress are beginning to fear the wrath of the people.  This is a start, but I suspect it will still be a long time before any of these crooks actually see jail time.  We all can help the process a bit by letting our Representatives and Senators that we demand justice.  They either do the right thing or we will do the right thing come next election.

This just released:

“They clearly misled their clients and they misled the Congress,”  Senator Levin added, announcing that he will recommend that his panel refer all of the Goldman executives who testified before the committee for criminal prosecution by the Justice Department and for sanctions by the SEC for violations of securities laws.

This is a fairly detailed and lengthy piece by Shahien Nasiripour.  It is worth reading in full at its source.  The only thing missing from Levin’s report is a perjury recommendation for Henry Paulson who lied before Congress repeatedly during various testimony given in 2007 and 2008 – see the right column of this website to watch his lies for yourself. Here’s the link: http://www.huffingtonpost.com/2011/04/14/goldman-financial-crisis-prosecution_n_848994.html

Huff Po

WASHINGTON — Goldman Sachs executives deceived clients in order to profit off the brewing financial crisis and then misled Congress when asked to explain their actions, concluded a top lawmaker who led a two-year investigation into Wall Street’s role in the meltdown.

Carl Levin, chair of the Senate Permanent Subcommittee on Investigations, will recommend that Goldman executives who testified before his panel, including chairman and chief executive Lloyd Blankfein, be referred to the Justice Department for possible criminal prosecution, the Michigan Democrat announced Wednesday. Members of the subcommittee will now deliberate Levin’s proposal.

A Goldman spokesman said its executives were truthful in their testimony, adding that the firm disagreed with many of the panel’s conclusions.

Two and a half years after a historic crisis that has yielded not a single criminal conviction of anyone who played a leading role in causing it, the prosecution of such a high-profile Wall Street executive may satisfy the public’s desire to see culprits brought to justice. Last year, the Securities and Exchange Commission settled a lawsuit it had brought against Goldman.

But the firm was just one target of a sweeping, 639-page report by the Senate panel into the causes of the crisis. Hardly a fluke occurrence, the meltdown was the product of a deeply corrupt financial system, one fueled by profit-hungry banks that deceived their clients, and overseen by lax regulators who were complicit in the firms’ chronic abuse of the most fundamental rules of the game, the report concludes.

The investigation found a “financial snake pit rife with greed, conflicts of interest, and wrongdoing,” Levin said.

More than any other government report produced in the wake of the crisis, this account names names, blaming specific people and institutions: Goldman Sachs, Washington Mutual, Moody’s Investors Service, Standard & Poor’s, the Office of Thrift Supervision and others. It targets four types of institutions, all of which it says played key roles in causing the crisis: mortgage lenders that offered prospective homeowners booby-trapped loans; regulators that were paid by the institutions they were regulating and cooperated in widespread deception; rating agencies that gave seals of approval to products they knew to be especially risky, all in the pursuit of market share; and Wall Street banks that duped investors into buying securities that only the insiders knew were destined to go bad.

“They clearly misled their clients and they misled the Congress,” he added, announcing that he will recommend that his panel refer all of the Goldman executives who testified before the committee for possible criminal prosecution by the Justice Department and for sanctions by the SEC for violations of securities laws.

This is a very rare time when YOU can really make a difference in the world.  Everybody call, write, email your Representatives and Senators and demand that they not only support the committee on this effort, but that they also continue hound the Justice Department to fully, completely, and swiftly investigate and prosecute these crooks.  These crooks have all but destroyed our future with their greed.  WE WANT OUR MONEY BACK!!!!

The Iceberg Begins to Reveal Its Size

For months, I have been illustrating that both our officials, our banksters, and central banks globally have not told us how big this economic crisis really is in scope and size.  For nearly three years now they have resisted giving the critical information of who got how much of the bailouts, etc, citing it would weaken certain banks and investors and that would be disastrous to the economic recovery.  $800 billion is the number bandied about.  But as the months move forward and each little bit begins to surface you have to ask, so how big is “the nut”?  Well try on about $10 Trillion and growing! Consider these facts.

Source – Bloomberg

Goldman Sachs Group Inc., which rebounded from the financial crisis to post record profit last year, was a regular borrower from two emergency Federal Reserve programs in 2008 and early 2009, new data show.

The firm borrowed from the Fed’s Term Securities Lending Facility most weeks from March 2008 through April 2009, data released by the Fed today show.  Two units of the New York-based firm borrowed as much as $24.2 billion from the Fed’s Primary Dealer Credit Facility in the weeks after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008.

Chief Executive Officer Lloyd Blankfein, 56, was quoted by Vanity Fair last year as saying the company might have survived the credit crisis without government help.  The firm’s president, Gary Cohn, was more definitive, according to the magazine: “I think we would not have failed,” he was quoted as saying. “We had cash.”

Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York during 2008 and 2009, has disputed such an assessment.

“None of them would have survived,” without government help, Geithner said in an interview last December.

Goldman Sachs took a $100 million overnight loan from the Primary Dealer Credit Facility on March 18, 2008, the day after the facility was created in the wake of JPMorgan Chase & Co.’s rescue of Bear Stearns Cos.  At the time, spokesman Michael DuVally said his firm was “testing” the facility and would use it “if doing so makes sense from an economic and funding diversification point of view.”

The firm didn’t borrow any more from the PDCF until Sept. 15, the day that Lehman Brothers filed the largest bankruptcy in U.S. history. On that day Goldman Sachs borrowed $2.5 billion at a 2.25 percent interest rate and furnished the Fed with $2.68 billion of collateral. The firm doubled the amount it borrowed to $5 billion on Sept. 19 and doubled it again to $10 billion on Sept. 22, when Goldman Sachs’s London subsidiary also took its first PDCF loan of $250 million.

At the peak, Goldman Sachs borrowed $24.2 billion on Oct. 15, which included $18 billion for the firm’s U.S. broker-dealer and $6.2 billion for the firm’s London division, the data show. The peak borrowing came two days after the U.S. Treasury Department assembled executives from nine of the country’s biggest financial firms and told them they’d be provided with capital injections from the government, with Goldman Sachs receiving $10 billion from the Troubled Asset Relief Program.

In its quarterly filings with the U.S. Securities and Exchange Commission, Goldman Sachs didn’t disclose that it borrowed from the PDCF.

The firm also borrowed from the Term Securities Lending Facility, which offered longer-term funding than the PDCF’s overnight loans. On March 28, 2008, Goldman Sachs borrowed $7 billion from the Fed’s TSLF in exchange for $8.42 billion of collateral that included $3.5 billion in agency-backed mortgage debt and $4.9 billion of non-agency backed mortgage debt. Before the loan was scheduled to mature on April 25, Goldman Sachs borrowed an additional $4 billion on April 11 and $223 million on April 18.

The two largest TSLF loans to Goldman Sachs were $7.5 billion on Dec. 4, 2008, and the same amount on Dec. 31, 2008, the data show. The firm also didn’t disclose its TSLF borrowing in its quarterly SEC filings, although it provided data on its borrowing to the U.S. Treasury.

When the loans from the PDCF and the TLSF are combined, the firm’s total borrowing from the Fed peaked at $35.39 billion on Oct. 21 and Oct. 22, 2008, the data show.

“In late 2008, many of the U.S. funding markets were clearly broken,” he said. “The Federal Reserve took essential steps to fix these markets and its actions were very successful.”

Goldman Sachs didn’t borrow as much as some of its rivals, while it borrowed more than others. Morgan Stanley, which was the second-biggest U.S. securities firm after Goldman Sachs before the two firms converted into banks in September 2008, borrowed as much as $100.5 billion at its peak on Sept. 29, 2008, the data show. That includes $61.3 billion of loans from the PDCF and $39.2 billion from the TSLF, the data show.

JPMorgan Chase & Co., the second-biggest U.S. bank by assets, borrowed $3 billion from the Primary Dealer Credit Facility on Sept. 15 and as much as $5 billion from the TSLF on Oct. 17, the data show.

“We did not need the liquidity or funding” on the day of Lehman’s bankruptcy, said Jennifer Zuccarelli, a JPMorgan spokeswoman. As Lehman’s collapse triggered broader financial turmoil, “we had been encouraged by our regulators to use their facilities when it was helpful to the marketplace and to remove any stigma,” she said.

Even as JPMorgan borrowed less from those two programs than Goldman Sachs or Morgan Stanley, it was borrowing from a different Fed program that neither Goldman Sachs nor Morgan Stanley tapped. JPMorgan Chase and its Chase Bank USA subsidiary borrowed from the Term Asset Facility, which was established in December 2007 to provide term loans to depositary institutions.

The Federal Reserve has lifted its veil of secrecy regarding special lending programs during the financial crisis, responding to a mandate from Congress by revealing the specifics of transactions with firms like Goldman Sachs and Citigroup.

Critics of the Federal Reserve are poring over the data, seeking red flags regarding potential improprieties. And Congress has asked its Government Accountability Office to sift through the numbers and offer its own analysis.

At the same time, it’s possible that the release of details will end up largely vindicating the Fed for the massive financial support that it gave the economy at a time of severe stress. The emergency loans, in the view of many finance experts, helped to avert a much deeper economic slump. And those loans have now been largely paid back without losses to the central bank.

The numbers are staggering, encompassing more than a dozen emergency programs set up starting in 2007 or 2008. In one program alone the Fed doled out nearly $9 trillion in funds to borrowers such as Morgan Stanley and Merrill Lynch, largely at interest rates below 1 percent. (This program involved overnight loans, so the amount of Fed credit outstanding at any single point in time was much smaller.)

Other programs, with longer-term loans also measured in the trillions of dollars.

The Fed actions were just part of a larger array of government bailouts for the financial industry, which were deeply unpopular with most Americans. Rescue programs run outside the Fed included insurance-style backstops for bank debts and the investments from the Treasury’s $700 billion TARP (Troubled Asset Relief Program).

The Federal Reserved released documents Wednesday identifying the recipients of $3.3 trillion in emergency aid provided at the height of the financial crisis.

“Two European megabanks — Deutsche Bank and Credit Suisse — were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities,” The Huffington Post‘s Shahien Nasiripour reported.

More than $290 billion worth of mortgage securities were sold to Deutsche Bank, a German lender. Credit Suisse, a Swiss bank, got more than $287 billion in mortgage bonds.

“The mortgage purchase program has come under withering criticism by economists and financial experts who believe the Fed’s initiative has unnecessarily inflated the housing market, and prevented the cleansing that pretty much all experts believe is necessary for a full economic rebound,” Nasiripour wrote.

“In addition, the Fed disclosed details of ‘swap’ arrangements with foreign central banks,” the Associated Press reported. “These occurred when the Fed traded much-in-demand dollars for foreign currencies to try to ease credit. The foreign central banks, in turn, lent the dollars to banks in their countries that needed dollar funding. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan were involved in the exchanges.”

Banks weren’t the only recipients of Fed money. Corporations like Caterpillar, General Electric, Harley Davidson, McDonald’s, Verizon and Toyota also relied the programs.

In 2008, as commercial loans dried up, the Fed became the only source of loans for otherwise creditworthy corporate borrowers.

The data, which took months to compile and had previously been secret, was released Wednesday to comply with July’s Dodd-Frank law overhauling financial regulation.

“The information spans six loan programs as well as currency swaps with other central banks, purchases of mortgage-backed securities and the rescues of Bear Stearns Cos. and American International Group Inc,” Bloomberg noted.

“We see this not as the end of a process but really a significant step forward in opening the veil of secrecy that exists in one of the most powerful agencies in government,” Sen. Bernie Sanders (I-VT) told reporters on Nov. 17.

“The act requires the Fed, after a two-year delay, to identify firms that, following the law’s passage, borrow through its discount window and participate in its purchases or sales of assets such as mortgage-backed securities and Treasuries,” Bloomberg observed.

There is much more to come because even with the resistance from the FED to be transparent, the situation involving IMF and the ECB is not even as transparent as the Fed.  Given the size of this bubble, if it bursts it will make the mortgage bubble look like a dot.  I know…Iknow… Stop.. Please I can’t take anymore.  The reality is where you are going to take, not IF you are going to take it.

The Storm, THE Emphasized, Is Approaching

The recent stock market upswing has no relationship to reality.  I repeat, no relation to reality.  Dismal numbers came out all week and the market racked up over 400 points of gain. HUH?  That golden horizon is really the dusk of a very dark economic period in the world, fast approaching.  There is no more time left, no FED maneuver can set it right, and the only hope, our congress and world bankers are absolutely devoid of the will to act.

According to Asia News Federal Reserve Chairman Bernanke issues the warning.  Asian nations, China and India first, are no longer willing to purchase securities issued by the US Treasury, which this year the Treasury has about US$ two trillion short-term debt to refinance and the FED has no buyers for their paper.  Beijing is buying gold instead.

Milan (AsiaNews) – For at least four years, AsiaNews has sounded the alarm bells against the risks due to the huge size reached by speculative finance.  In 2008, we said that the attempt to save US banks could push the US debt beyond the point of solvency (see Maurizio d’Orlando, “US debt approaches insolvency . . .,” in AsiaNews 19 December 2008) Back then it could appear a bit overblown, but now even US Federal Reserve Chairman Ben S Bernanke is warning the US Congress about the danger. In a statement before the House Financial Services Committee, he said that the US public debt might no longer be sustainable very soon. Financial jargon aside, the subtitle of an article by The Washington Times—Stage is set in U.S. for a Greek tragedy—says it all. Interviewed for the article, Bernanke says the United States is likely to face a debt crisis like the one in Greece sooner than later, “not something that is 10 years away”.

In 2008, the size of the debt was such that it was quite clear that it was not sustainable. Now we have a timeframe to measure the likelihood of insolvency for the US public debt, and it is this year. The reason for that is described in an article whose title needs no explanation: “The bankruptcy of the United States is now certain”.

By the end of 2010, the US Treasury will have to refinance US$ 2 trillion in short-term debt, plus additional deficit spending for this year, estimated to be around US$ 1.6 trillion. Together, the US Treasury will need to borrow US$ 3.5 trillion (US$ 3.6 according to this writer) in just one year.

In 1999, two well-known economists—Alan Greenspan and Pablo Guidotti—published a formula in an academic paper. Kept secret for a long time, it is designed to predict with precision when a country’s public debt will lead it to be insolvent. Called the Greenspan-Guidotti rule, it says that to avoid a default, countries should maintain hard currency reserves equal to at least 100 per cent of their short-term foreign debt maturities.

According to the author, the United States holds 8,133.5 metric tonnes of gold (the world’s largest holder).  At November 2009 dollar values, that is about U$ 300 billion. The US strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that is roughly US$ 58 billion worth of oil.  According to the IMF, the US has US$ 136 billion in foreign currency reserves. Altogether, that is some US$ 500 billion in reserves (US$ 455.5 billion according to AsiaNews).

Foreigners hold 44 per cent of US$ two trillion short-term US debt; that is US$ 880 billion. Total domestic savings in the United States are only around US$ 600 billion annually. If the United States needs to sell US$ 3.5 trillion (or US$ 3.6 trillion) in Treasury bills, and all domestic savings combined are put into US Treasury debt, the United States will still fall short by nearly US$ 3 trillion. Where is the rest of the money going to come from?

Not China, nor India or any other Asian countries. Last year, China has in fact proportionately reduced its holdings in US Treasury bills in relation to rest of its reserves.  Recently, the International Monetary Fund (IMF) put up 191.3 tonnes of gold for sale. Some analysts had earlier suggested that China might be interested in buying it. Assets in dollars are estimated to represent over 70 per cent of China’s US$ 2.4 trillion foreign exchange reserves. As of April 2009, China held 1,054 tonnes of gold or 1.2 per cent of its GDP. That falls well below the world average. Indeed, gold represents less than 10 per cent of China’s total reserves.

According to the China Daily, a semi-official mouthpiece for the Communist Party of China, China is not likely to buy IMF gold because it might upset the market. However, some Chinese commentators believe that Beijing should increase its gold reserves to 1,800 tonnes. Sources told AsiaNews that China’s real goal is 4,000 tonnes.  The same is true for other Asian countries. For instance, India, Mauritius and Sri Lanka have bought 212 tonnes sold by the IMF.

As for Japan, it is likely to continue avoiding open confrontation with the United States; but the real intentions of its top financial circles might be inferred from a mysterious and unsolved incident that occurred last summer when two officials from Japan’s central bank were caught at the Italian-Swiss border town of Chiasso carrying US Treasury bills with a nominal value of US$ 134.5 billion.

Since 1945, the US dollar has been the main international reserve currency. In theory, this gave the US Federal Reserve the power to issue debt securities at will, with the value of international trading assets. However, the Greenspan-Guidotti rule restricts this power.  Whenever US insolvency becomes self-evident, no one dare say they did not know. The Greenspan who came up with the aforementioned formula is the same Alan Greenspan who chaired the Federal Reserve for 18 years and allowed speculative. i.e. “structured” finance to expand (based on poorly tested mathematical algorithms).

One has to wonder just what is really going on.  Big banks and investment firms are the beneficiaries of nearly $1 Trillion taxpayer dollars, 40% of which found its way to foreign banks and the remainder is just that. It remains in the vaults of the banks and the FED.  I had reported earlier here that the excess reserves in the FED have exceeded $1 Trillion! In addition, major corporations are sitting on the largest collective cash reserve in history.  The top 25 hedge fund managers in 2009 received a collective $25 Billion in bonuses.  I didn’t stutter, that was Billion.

At the same time we are seeing foreclosures continuing at record paces, small businesses have loans recalled and no new credit is available.  Not even in severely distressed areas like Detroit and New Orleans.

We must see things as they are and not how they are being spun.  We are really entering the event horizon and once we past that point, which is optimistically only months away, there is no capacity to recover.  If we don’t collectively demand action I worry we are doomed for 10-15 years of severe depression, much worse than D1.