Tag: banks

TARP rape

In case you were wondering where those record financial industry profits are coming from:

Increased housing commitments swelled U.S. taxpayers’ total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday. The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government’s pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.

It’s a brilliant business plan.

1) Gamble billions of dollars.  If you win, gamble more.  If you lose, go to step 2.
2) Ask the government to pay you trillions of dollars to prevent you from going bankrupt.  Otherwise cats and dogs will start living together!  Tanks on the streets!
3) Profit!

PS – Don’t forget to pay yourself millions of dollars in bonuses for your incredible and irreplaceable business acumen.

This is nothing less than financial rape by politics. It amounts to locking up one-quarter of the economy to guarantee the continued operation of the financial sector, which somehow can’t survive on only one-third of all American profits.

If you want to understand how America threw away its post-WWII economic advantage over the rest of the world, just look at that chart.  And notice how the fall in financial profits corresponded with the nation’s climb out of the 1970s economic malaise.  Profits are the economy’s lifesblood, but diverting those profits to the financial sector has the same effect as a vampire draining the blood out of a human body.  When the historians of the future write the history of America’s decline and fall, you can be sure that the Congress-assisted TARP rape will be marked as a significant event in that process.

Digging a deeper hole

This astonishing display of madness should settle the question about who runs the country, Washington or Wall Street:

Just a few months ago, amid populist anger at the Fed for failing to prevent the financial crisis of 2008 and bailing out Wall Street, Congress was talking of stripping the central bank of its supervisory oversight of banks or forcing it to submit to congressional audit of its interest-rate decisions.

Instead, the new law gives the Fed more power and a better tool box to help prevent financial crises. It will become the primary regulator for large, complex financial firms of all kinds, such as American International Group, the insurer which built a massive derivatives portfolio that regulators didn’t see until it was too late.

So, the Fed created the debt boom, which led to the subsequent credit crunch and the initial stages of Great Depression 2.0. And rather than auditing the central bank, Washington has elected to give it more powers. This should end well.

Mr. Denninger is not optimistic

So much for Mr. Bernanke’s magic printing press:

Now we’re really in trouble:

The ECB failed to auction the €55bn in fixed term deposits it had planned to, and what it did auction (€31.86bn) was at a much-higher rate (0.54 per cent) than what it offered at the start of its Securities Markets Programme (SMP). The market seems to be holding tight to liquidity.

The wall has been hit.

This is a clear warning to the money-printing screamers (of which there are many adherents) and the “we can do this without impacting aggregates” crowd (commonly known as Central Banks with God complexes.) Sadly, as I have repeatedly pointed out, all Ponzi Schemes fail, and they fail at the most inopportune time, after you have spent the proceeds of your previous scamming and thus lack the ability to deal with the failure to sell your latest batch of whatever it is you’re attempting to do.

Oh, and by the way, it gets better. Much better.

See, the ECB has a rollover problem coming, in that they need to roll a significant amount of term liquidity deposits Thursday. If those rolls fail, the markets will crash. Both credit and equity.

As I have repeatedly paraphrased Bob Prechter, the problem with the Whiskey Zulu scenario is that neither Europe nor the USA have a paper money system. The debt money system requires that each new note find a borrower. But when the limits of demand for debt are reached, it’s not possible to continue to issuing more money. Furthermore, most money is created through the fractional reserve banking system, not the central bank, and creating that money also requires a constantly growing demand for credit.

Now, it’s true, the national governments could convert to a paper money system and this is one of the legitimate possibilities, but they cannot possibly do so fast enough to avoid a period of deflationary crash, especially when the politicians who would be responsible for the switch would have to brave the wrath of the financial powers who would be ruined by such a move.

Which is why it’s not going to happen. My best guess is that Plan A was another attempt to solve the problem through more centralization; devaluing the current currencies as they are converted to a regional or global currency. However, given that the global public is already furious with the banking establishment, this probably isn’t viable now. The stimulus plans were supposed to work well enough to give them time to smoothly transition to the next stage of monetary harmonization, but due to their reliance on a bad economic model, that obviously hasn’t happened.

Interesting times indeed.

Above the law

Apparently the big banks aren’t just too big to fail, they’re too big to be prosecuted for breaking all of those invasive laws that require you to turn over fingerprint, blood, and DNA samples in order to open a checking account or buy a cell phone, just in case you might be a Mexican money launderer:

Oh, so the banks don’t just bilk investors and rip off municipalities, they also help Mexican Gangs run drugs?

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers — including the cash used to buy four planes that shipped a total of 22 tons of cocaine. The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

That’s nice. Guns and ammunition cost money – lots of it. Getting that money requires some means of transporting it and “laundering” it. For that, we turn to the largest financial institutions in the world, who, it turns out, have never been prosecuted for these felonious acts.

This is the salient quote: “No big U.S. bank — Wells Fargo included — has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.”

It is completely obvious that there is no longer any rule of law in the USA. There increasingly isn’t even any pretense at it. It is no longer a republic, but a financial aristocracy divided into a thousand corporate fiefdoms. Given human nature, how long can it be before the executives begin granting themselves titles like the Archduke of Wells Fargo and the Grand Count of Google?

More extend and pretend

These so-called financial reforms will do absolutely nothing to bring the nation out of the financial crisis and economic contraction. It doesn’t address outstanding debt, it doesn’t address mark-to-fantasy, it doesn’t address bank insolvency, and it doesn’t even slow down the increasing amount of bank fraud. It’s merely yet another attempt to protect the banks while deceiving the public into thinking that the government reining them in:

President Barack Obama declared victory Friday after congressional negotiators reached a dawn agreement on a sweeping overhaul of rules overseeing Wall Street….

One financial analyst, Richard Bove of Rochdale Research, said he believed the measure would have little impact because banks would find ways to hit consumers with more fees. “The good things coming out of this bill is virtually zero,” he said. “Did it help the U.S. economy? Did it solve any problems? The answer is no and no.”

Financial stocks rose in early trading Friday, as traders were relieved that banks would be allowed to continue most kinds of transactions. JPMorgan Chase & Co. rose 2 percent, while Citigroup Inc. climbed 2.1 percent.

Translation: the casino remains open.

Calling the bankers’ bluff

More and more Americans are discovering that bankers are more bark than bite:

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by. This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

I wouldn’t say they are all crooks, but certainly all the big bankers are. I don’t see why anyone who has a mortgage with any bank that received TARP money should pay them so much as a single dime. It is very clear that the rule of law no matter applies in the USA, so there’s no reason why the enmortgaged masses shouldn’t follow the lead of their would-be financial masters and ignore anything that isn’t in their immediate pecuniary interests.

If your credit is already ruined, why on Earth would you continue to send what little money you have left to a collection of bankrupt thieves and scam artists.

The end of capitalism

Fresh from its successful bailouts of GM (bankrupt), Fannie Mae (-$16.3 billion in Q1), and Freddie Mac (-$6.7 billion in Q1), the Federal Reserve is joining the ECB, the BoC, the BoE, and the SNB in an attempt to preserve the European Union:

European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases as they spearheaded a global drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro….

The Federal Reserve is going to reopen a program set up during the financial crisis, to make sure foreign banks have the dollars they need, the European Central Bank announced late Sunday. The Fed will ship dollars overseas through the Bank of Canada, the Bank of England, the ECB and the Swiss National Bank. The Bank of Japan will be considering similar measures soon, the ECB said. The facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and other financial centers, the ECB said in a statement on its web site.

This isn’t about economics or the euro. This is about preventing the banks that hold sovereign debt from going under and maintaining the geopolitical order that presently sustains the global financial system. And, of course, it’s not going to work. It cannot since it is literally designed to do nothing more than soothe those problematic animal spirits when the core problem is the magnitude of the debt. The problem has always been rooted in debt. And now that genuine capitalists have no interest in purchasing Greek debt at any price and are increasingly unwilling to purchase Portuguese debt, that leaves the money planners to step in and attempt to fill in the gap with their ability to create money by “expanding the balance sheet”.

Once this belated band-aid fails in a few months, the next pitch will be to replace the various currencies with the global currency that the Economist once described as “the Phoenix”. This is an appropriate title because there should be no shortage of ashes from which the phoenix can rise.

By the way, don’t get too excited about the big, but short-term Wall Street rally that is certain to commence. No market goes straight down or straight up. And big up days are indicative of bear markets, not bull markets. This is just the reactive wave and is an artifact of the massive government intervention.

Capital controls

The EU has abandoned Europe’s Christian tradition and appears likely to drop its capitalist tradition as well:

This document is sitting in a drawer at the Directorate of Economic and Monetary Affairs in Brussels. It was written by a small cellule of EU officials in 2003 or 2004 (If I remember correctly) under prodding from Paris. It explores the legal basis for measures to stabilise the euro and EMU. After combing through the EU treaties and court judgments, it concluded that Brussels may impose “quantitative restrictions” on capital inflows. Free movement of capital in the EU is not an “absolute freedom” and could be limited in an emergency. “Should extremely disturbing capital movements endanger the operation of economic and monetary union, Article 59 EC (Maastricht) provides for the possibility to adopt restrictive measures for a period not exceeding six months,” it says.

It would be renewable every six months. Any decision would be taken by EU finance ministers under qualified majority voting, so no country could veto it.

So much for the oft-heard Europhile defense of the EU as a free market entity. This is why no government or bureaucracy should ever be permitted to have “emergency” powers. It’s rather like telling a rapist that as long as he cries “emergency” first, it isn’t rape, it’s just emergency sex.

Burning the banks

There are flames in Athens now. How long will they take to reach Wall Street and the City?

Three people died when an Athens bank went up in flames Wednesday as tens of thousands of Greeks took to the streets to protest harsh spending cuts aimed at saving the country from bankruptcy. Tear gas drifted across the city’s center as hundreds of rioters hurled paving stones and Molotov cocktails at police, who responded with heavy use of tear gas. At least two buildings were on fire. The fire brigade said the bodies were found in the wreckage of a Marfin Bank branch, on the route of the march in the city center.

Demonstrators chanting “thieves, thieves” attempted to break through a riot police cordon guarding Parliament and chased the ceremonial guards away from the Tomb of the Unknown Soldier in front of the building.

Now, what is the point of “saving the country” from bankruptcy? Will Greece simply cease to exist if it goes bankrupt? Does a junkie die when he is no longer permitted to keep purchasing narcotics from his pusher? The molotov-throwing rioters chanting “thieves” appear to have a more accurate perspective on the global financial system than the hand-wringing editorial writers at the Wall Street Journal. Not a correct one, mind you, but one that is nevertheless more accurate. Don’t get me wrong, I’m not looking forward to the chaos since it isn’t going to be fun for anyone who isn’t young, male, unprincipled, and heavily armed. But it certainly isn’t going to be averted or ameliorated by stealing more money from the public and handing it over to bankers.

I just want to know one thing. Where is the techno remix? And as for Max Keiser, well, you can’t help but think of Chuck D listening to him lay down that heavy rap.

An interesting note relating to the connection of today’s Greek riots to the historical Cinco de Mayo from Wikipedia: “In late 1861 Napoleon III, Emperor of the French, under the Treaty of London (1861) sent troops to Mexico, alongside Spanish and English forces, to collect debts owed by a previous Mexican government. President Benito Juárez had announced the annulment of these debts, and vowed to pay nothing to European powers. Napoleon’s troops occupied the port city of Veracruz on December 8, 1861…. The Battle of Puebla, May 5, 1862, was a single, important victory for the Mexican people over the occupying French Army.”

Given the general European disarmament, I can only conclude that bin Laden will soon be spotted in Athens, thereby requiring an immediate invasion and occupation.

WND column

Bigging up failure

The president of the European Central Bank, Jean-Claude Trichet, told Forbes that global governance is extremely necessary if we want to prevent another financial crisis. … It is his belief that through global governance, the resiliency of the global financial system can be assured, noting that ultimately it was governments’ use of taxpayer’s money, equivalent to around 25 percent of GDP on both sides of the Atlantic, that prevented another catastrophic great depression from occurring.
– “ECB president favors global governance,” Forbes, April 29, 2010

It should come as no surprise to the informed observer that the central bankers of the world are now beginning to openly push for global governance. The current plight of the euro has amply demonstrated the untenability of monetary union without political union. Without the power to enforce government policy on Greece, the most the Franco-Germanic mandarins of the European Union can do is threaten to withhold bailout money from the International Monetary Fund and the EU member states. This impresses the Greek political and financial elite, but no one else in Greece, and violent protests are already erupting across the country at the mere mention of IMF-imposed financial austerity measures.

For, as one young Greek man correctly asked, why should the youth of Greece be forced to pay for the financial misdeeds of their parents and grandparents?