FedUpUSA

Archive for November, 2009

John Hussman is always a good read. A week after it came out, I am catching up on reading reading “Should Come as No Shock to Anyone”.

Hussman is about as level-headed as they come, so it was interesting to see him accuse the Fed and Geithner of “Unconstitutional Abuse of Power”. Here is the pertinent snip:

There is most probably a second wave of mortgage defaults in the immediate future as a result of Alt-A and Option-ARM resets. Yet our capacity to deal with these losses has already been strained by the first round that largely ended in March. The Federal Reserve has taken a massive amount of mortgage-backed securities onto a balance sheet that used to be restricted to Treasury securities. The purchase of these securities is reflected by a surge in cash reserves held by banks. Not only are the banks not lending these funds, they are contracting their loan portfolios rapidly. Ultimately, in order to unwind the Fed’s position in these securities, it will have to sell them back to the public and absorb those excess reserves, so to some extent, the banking system can count on losing the deposits created by the Fed’s actions, and can’t make long-term loans with these funds anyway.

Increasingly, the Fed has decided to forgo the idea of repurchase agreements (which require the seller to repurchase the security at a later date), and is instead making outright purchases of the debt of government sponsored enterprises (GSEs such as Fannie Mae and Freddie Mac). Again, the Fed used to purchase only Treasuries outright, but it is purchasing agency securities with the excuse that these securities are implicitly backed by the U.S. government.

This strikes me as a huge mistake, because it effectively impairs the Fed’s ability to get rid of the securities at the price it paid for them, should Congress change its approach toward the GSEs. It simultaneously complicates Congress’ ability to address the problem because Bernanke has tied the integrity of our monetary base to these assets. The policy of the Fed and Treasury amounts to little more than obligating the public to defend the bondholders of mismanaged financial companies, and to absorb losses that should have been borne by irresponsible lenders. From my perspective, this is nothing short of an unconstitutional abuse of power, as the actions of the Fed (not to mention some of Geithner’s actions at the Treasury) ultimately have the effect of diverting public funds to reimburse private losses, even though spending is the specifically enumerated power of the Congress alone.

Needless to say, I emphatically support recent Congressional proposals to vastly rein in the power (both statutory and newly usurped) of the Federal Reserve. Starting with the Bear Stearns deal, the Fed under Ben Bernanke has made a sharp and distinct departure from its historical role, in violation of its charter. As I noted when the bondholders of Bear Stearns were rescued, “The troubling aspect of the Fed’s action was not that it lent to a non-bank entity. That ability is clearly authorized by Section 13(3) of the Federal Reserve Act. The problem is that it made its “loans” as “non-recourse” funding – meaning that it would not stand to be repaid if the collateral itself was to fail.” This is still what the Fed seems determined to accomplish.

In my view, deeper loan losses are ahead, and if we deal with the next round the same way that we dealt with the last, we will ultimately succeed in debasing the U.S. dollar. There’s little inflationary pressure at present, and chances are that fresh credit concerns will create enough demand for government liabilities to forestall inflationary pressures for several years more. But we cannot reimburse the losses of irresponsible lenders with trillions freshly issued government liabilities without those liabilities ultimately eroding in value. The probable real, after inflation return on stocks and bonds over the coming decade is likely to be very unsatisfactory.

I certainly agree and that is why we need the Fed audited in Ron Paul fashion, not some watered down proposal that makes allowances for and covers up the Fed’s unconstitutional abuse of power.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

He says he won’t leave his position as Treasury Secretary, despite a recent Rasmussen poll where 42% of Americans indicated his work has boarded the failboat (and 47% of investors showed no love; dude, you can’t make Main Street OR Wall Street happy?), but should Timmay ever find himself out on his arse, where do you think he would end up?

Well, per this image provided by LOLFed reader Michael S. we’re thinking he could amuse himself by harassing truckers at the “Dixie Boy,” Maximum Overdrive-style.

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FOR IMMEDIATE RELEASE – Nov. 20, 2009

For more info contact:

Still Productions

Bill Still

thesecretofOZ@gmail.com

The Secret of Oz Banned on Amazon

After being on Amazon.com for only three days, the new film on the economy, “The Secret of Oz” has been banned by Amazon.com.

“You may no longer sell on our site,” said Amazon.com in an email to Still Productions at noon today.

“This came completely out of the blue without warning, and without any shred of legitimate cause,” said Director Bill Still.

Amazon.com’s email cites “performance” issues. “We took this action because your selling performance has fallen below our standards.” It referred Still to their “Customer Experience Metrics” page to see what the problem was, but a check of that page showed no performance issues whatsoever. See screenshot below.

Still has appealed the ban. Amazon says they usually respond within 24 hours to appeals.

This is no joke. Mr. Still had his movie listed on Amazon for 3 days before they pulled it. Below is the full text of Amazon’s letter:

“Hello from Amazon.com.

“This is an auto-generated message to let you know that we have blocked your Amazon.com seller account and removed your listings. You may no longer sell on our site. We took this action because your selling performance has fallen below our performance standards. If you still have items to ship, you are required to take appropriate steps to resolve your pending sales. Your Seller Account will remain accessible and you are encouraged to refund or ship pending orders.

“If you wish to appeal this decision you may do so by following the instructions in Your Seller Account at [http://www.amazon.com/gp/seller-account/management/your-account.html]. An appeal should include a clear plan of action that addresses all reasons for failure to perform; including but not limited to your inventory management methods, your fulfillment practices, and customer service improvements. Appeal requests are usually responded to within 24 hours.

“Your Customer Experience Metrics and goals are published daily for your review here [https://sellercentral.amazon.com/gp/customer-experience/summary.html]. Reviewing them may help you understand where your selling performance has fallen short of our standards. You can also review the performance related notifications we have sent you in the past here [https://sellercentral.amazon.com/gp/customer-experience/perf-notifications.html].”

Mr. Still then went to Amazon’s site to discover that, indeed, all his “performance metrics” were perfect, having never failed to deliver a movie the same day or any other issues whatsoever – as you can see in the screen shot above.

I would appreciate the widest possible dissemination on this as this movie is too important to the future of Americans, and their understanding of our money system, to lose. Please pass it along to other bloggers and to any media outlets you know.

Although wide dissemination through Amazon was the goal, The Secret of Oz can still be purchased from Bill’s site via PayPal:

“The Secret of Oz.”

Related or not, we also learned that this moving is now being discussed in “higher circles” at the very time that the Fed’s opacity is under attack. Note the Oz analogy now coming into use:

Coincidentally, this action by Amazon follows the movie’s first “rejection” from a film festival after being screened in 9 film festivals and winning multiple awards:

Just this past week, the Peak City Film Festival in Apex, NC, a suburb of Raleigh, NC, rejected the film after first accepting it. The film festival is going on this weekend, here’s how they phrased their rejection:

Dear Producer,

Your entry in the Peak City Film Festival has passed through our jury process, but regretfully, will not be screened. Our judges have determined your entry did not meet the criteria for a completely family-friendly production due to certain elements of language or actions, regardless of how small…

I’ve seen the film twice, there is no language or action in the film that is not family appropriate, the Wizard of Oz movie itself would be less family appropriate.

I sincerely don’t know if these things are connected, but this film deserves the widest possible dissemination. Nothing short of our nation’s and children’s futures may depend on the spark it hopefully ignites.

Thank you,

Nathan Martin

It’s Friday and I’m lazy! So I give you the Daily Show’s list of things not to be thankful for: Detroit sells its Silverdome for less than a one-bedroom apartment, Goldman Sachs reports huge profits, and three congressmen warn New Yorkers of terrorism.

Also, CNBC is welcome to film LOLFed off a computer monitor any time.

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