FedUpUSA

Archive for May 12th, 2011

As Treasury sells debt today that puts it over the debt limits, Bernanke says:

Federal Reserve chief Ben Bernanke reinforced his call on Thursday for Congress to raise the cap on U.S. borrowing, saying a failure to do so could lead down the same risky path that the failure of Lehman Brothers did.

Whaaaaaaaaaaaa!

According to the most recent public figures, the debt was just $14 billion shy of the cap.

Uh huh.  How much did we sell in 30s today?

And yesterday’s 10 year auction?

(The latest Treasury balance sheet is from the 10th)

Do those two auctions add to more or less than $15 billion?

That’s what I thought.

PS: If the law does not apply to the government and particularly the Administration, can you please explain to me why anyone else in the country, most-especially the common man who has been continually violated by these clowns in Washington DC, bothers with the alleged moral and ethical imperative to follow the law?

PPS: To Ben – Go perform an anatomically-impossible act.

The Market-Ticker

Matt Taibbi hits another homer….

They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

Of course they did.  Then again, remember this?

Was Bernanke held to account for lying to Congress?  Of course not.  So why should Goldman fear doing it?

Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn’t a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it’s an advanced-stage, 1,100-pound medical emergency who hasn’t left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes. If the evidence in the Levin report is ignored, then Goldman will have achieved a kind of corrupt-enterprise nirvana. Caught, but still free: above the law.

This is new…..how?  When?  Has it ever been new?

Let’s look back to Continental Illinois.  Did anyone go to prison?  Well, there were a few people who were investigated and looked at, but……

Then there’s the 2000s.  What’d we get – a handful (literally) of executives prosecuted?  How many thousands of bogus companies were brought to market?  How many people lost everything “investing” in a pig in a poke – a pig sold them by the very same banks that pulled this crap this time around?

To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge lot of deadly mortgages on its clients, lies about where that crap came from and claims it believes in the product even as it’s betting $2 billion against it. When its victims try to run out of the burning house, Goldman stands in the doorway, blasts them all with gasoline before they can escape, and then has the balls to send a bill overcharging its victims for the pleasure of getting fried.

Now Matt, that’s not quite accurate.  It appears that Goldman also billed the clients that got fried for the gas at five times the market price!

Read the rest folks, then go pray.

If we can’t see these guys prosecuted now, before the Statute of Limitations runs (which, incidentally, is exactly what they’re hoping for) then you may as well put a fork in this nation and our ability to actually attract honest capital, from here or elsewhere.

It’s done.

The Market-Ticker

After last week’s unexpected, and massive jump to 478,000 new unemployment claims, this week settled in at a high but expected 434,000 initial claims.

Please consider the Department of Labor Unemployment Insurance Weekly Claims Report for the week ending May 7, 2011.

In the week ending May 7, the advance figure for seasonally adjusted initial claims was 434,000, a decrease of 44,000 from the previous week’s revised figure of 478,000. The 4-week moving average was 436,750, an increase of 4,500 from the previous week’s revised average of 432,250.

Weekly Claims Moving Average Trending Higher for a Month

The report does not say but the 4-week moving average revision was higher by 1,000.

Seasonally Adjusted 4-Week Moving Average of Initial Claims

2011-04-09 …..396,750
2011-04-16 ……399,250
2011-04-23 …..409,000
2011-04-30 …..432,250
2011-05-07 …..436,750

Unless there are downward revisions, next week the moving average will be higher again if the number of weekly claims exceeds 404,000.

4-Week Moving Average of Initial Claims

Note: The St. Louis Fed has not yet updated their data. That above graph does not show the revision last week or this week’s number. However, the trend is clearly up for a month and assuming another number around 436,000 next month, the 4-week moving average would jump to approximately 446,000.

Last Week’s Explanations Reviewed

Please consider U.S. Jobless Claims Unexpectedly Jump on Auto Shutdowns

The  number of claims for U.S. unemployment benefits unexpectedly rose last  week, pushed up by auto-plant shutdowns and other unusual events that  seasonal variations failed to take into account, the Labor Department  said.

A spring break holiday at schools in the state of New York  prompted workers to file claims, which the seasonal adjustment factors  didn’t expect last week, the Labor Department official said. In  addition, Oregon began a new emergency benefits program for the  long-term unemployed that also pulled in some new claimants, he said.  Finally, auto plant shutdowns due to parts shortages caused by the  earthquake and tsunami in Japan also contributed to the increase, the  official said.

Last Week’s Excuse Evaluated

The data is now in to evaluate last week’s excuse. From this week’s report …

The largest increases in initial claims for the week ending April 30 were in    New York (+24,431), Michigan (+3,948), Wisconsin (+3,746), North Carolina    (+2,749), and Ohio (+2,319), while the largest decreases were in New Jersey    (-4,004), California (-3,145), Massachusetts (-2,966), Puerto Rico (-2,713),    and Florida (-2,156).

Oregon is not on the map so throw that bogus excuse out the window. While Michigan, Ohio, and Wisconsin are up a bit the total of all three states is 10,013. Together with New York, we have a grand total of  34,444, assuming the unlikely event that all of those claims were related to the excuses given.

If so, that would have put last week’s number at 443,556 or 50,000 higher than the recent bottoming at the 390,000 level.

440,000 is an elevated number, consistent with a slowing economy and the April jump in unemployment that mainstream media essentially disregarded.

For more on jobs and how the unemployment rate is calculated please see

• Digging Still Deeper In Friday’s Jobs Report; What’s the Real Unemployment Rate?
• BLS Jobs Report: Nonfarm Payroll Headline Number Looks Good, Beneath the Surface, Awful




• Reader Question Regarding “Dropping Out of the Workforce”; Implications of the Falling Participation Rate

Mike  “Mish”  Shedlock
Global Economic Analysis

Let’s ask an ugly question: What if Treasury simply ignores the debt limit?

Now to be clear, as of the 10th this hasn’t happened.

But that’s damn close – some $16 billion.  And the auctions continue, including those yesterday which have not yet settled.

But the question remains – what if the Administration simply ignores the law?

Is there any recourse available in that circumstance?  Not that I can see; there is no “or else” in the law!

So what we have are not laws, they’re suggestions.  And I “suggest” that you keep a close eye on the Treasury Daily Statement, which you can find here – that is, if its truthful (and again, what recourse exists if it is not?)

The Market-Ticker

Banking in darkness – FDIC system insures over $7 trillion in deposits with a dwindling insurance fund.  Americans are offered close to zero percent interest rates to stuff their money into this banking vortex.

The American banking system is based on pure faith.  Usually when the topic comes up in conversation I will ask someone if they know what backs the green cash in their wallet.  One of the common responses is “there is gold in Fort Knox” or another typical response is that it is backed by U.S. assets.  Unfortunately both of these answers are incorrect.  In fact all of our money deposited in the banking system is backed by the pure faith in our U.S. government.  Now for decades this implicit belief was fine because we actually were a creditor and exporter nation.  We also had a higher savings rate.  Today we have a system where we continually spend more than we produce and expect this dynamic to somehow function long term as if we found an endless well of Kool-Aid.  The Federal Deposit Insurance Corporation (FDIC) insures each individual account up to $250,000.  Given that one in three Americans has zero dollars to their name and most others have a sum nowhere close to this amount, many go forward with an unstated faith in the system.  However the FDIC Deposit Insurance Fund is largely running on fumes.  This shouldn’t be such a big issue aside from the fact that the American banking system has over $7 trillion in deposits.

FDIC Fund taking hits

Source:   The Tree of Liberty

The interesting thing to note is that bank failures have slowed down yet the FDIC is actually benefitting from the Federal Reserve’s massive quantitative easing adventure.  Banks have been allowed to step up to the plate and borrow from the Fed at ridiculously low rates to remedy their own appalling balance sheets.  Yet little of this has helped working and middle class Americans.  It is also worth mentioning that the banks with the ugliest balance sheets are the too big to fail and we have already been told that they will not fail even if we have to increase the Fed balance sheet to $2.7 trillion in a colorful trail mix of junk loans.  These banks have grown over the problematic decade:

Bank of American and JP Morgan Chase each have $2 trillion worth of assets each.  Most of the troubled balance sheets are situated in a handful of banks even though collectively the U.S. has over 7,500 banks.  The top 10 virtually dominate the $13 trillion in total assets:

Now you have to draw your own conclusions here.  The biggest banks with the worst balance sheets have a mandate that they will not fail.  What this means is the cost of the bailouts is being supported by the public via low savings rates and also hidden inflation:

Keep in mind the above rate is for larger accounts.  Most working and middle class Americans simply have enough in their banking account to pay the monthly bills and maybe fill up their car with low octane $4 a gallon fuel.  As food and energy costs rise a larger portion of monthly income is being devoted to these items thanks to the Federal Reserve bailing out these too big to fail banks.  This is ultimately the cost of not letting bad banks fail and allowing good banks to grow.  The cost indirectly shows up and is spread across the mainland of America.

Even in light of the pathetically low savings rate, many Americans have increased their savings rate because access to debt has been slowed down:

Of course increasing your savings rate from zero makes anything look significant.  Two main drivers for the above trend; first, Americans are being pushed to save because access to debt via home equity or credit cards is being shut off and second, many simply do not trust the casino that is known as Wall Street.  You know things are bad when big time Vegas gamblers state publicly that they don’t trust Wall Street.  This push is being reflected above and the increase has occurred at a time when many of the big banks are simply offering a place similar to your mattress to store your money and a rate of interest that is slightly above zero (also similar to your mattress).

The employment picture and banking implications

The good news is that we have added jobs in the last few months. The bad news is these jobs are reflecting the new world of low wage capitalism.  In other words we have lost many good paying higher wage jobs and have replaced them with lower paying jobs.  All this is happening while the cost of many items is rising.  So you can do the math here; less pay and rising expenses.  This calculus is not good for the American worker.  If anything it is showing that our economy is adjusting to this new reality where bailed out banks can pay CEOs 800 times the median household income for actually driving our economy into the ground.  I think as Americans we rally around innovative companies that produce a good and reward those that provide a service.  Yet most of the large payouts are going to Wall Street investment banks that are nothing more than swindlers and snake oil salesmen trying to siphon off economic rents from the productive economy.  Reward production and economic growth, not scandalous cronies that exist only because they have mastered the art of graft.

The clearest picture of this new economic divide shows up in the average per capita income:

Source:  Social Security Administration

I find it amazing that few realize that half of all workers make on average $25,000 a year or less.  That is, one out of two working Americans makes the equivalent of one Ford car per year (or half a year of tuition at a private university).  There is something seriously awry with our banking system because it does not support the greater good of our economy.  As things stand we will live in a casino like environment were massive bubbles will appear in random sectors like housing, technology, energy, commodities, and higher education simply because we allow this symbiotic relationship between Wall Street and our government to persist.  The real scandal is happening there and this is what will bring the end to the middle class.

So what do we need to do?  What needs to be called for is the splitting up between Wall Street investment banking and regular deposit institutions.  How is it possible that we have a FDIC with nearly no money in their insurance fund backing up $7 trillion in deposits?  Not only is that hard to believe but these banks have over $13 trillion in assets while massively speculating in global stock markets.  If these institutions want to gamble with their own money so be it but expect them to fail.  Working and middle class Americans need to rally around the nucleus of the problem and demand real substantive change.  The Federal Reserve cannot balloon its balance sheet to $2.7 trillion and impact our money supply without allowing for a deep and thorough audit.  If change does not occur we are going to end up with a Wal-Mart and McJob economy with people moonlighting at questionable for profit institutions that teach you a hard lesson in student loan debt all the while banks count their profits after booting out millions of Americans via foreclosure thanks to taxpayer bailouts.  With this kind of system you might as well bank with the lights out.

My Budget360

These are your Attorneys General folks….

Now, in response to queries from TIME, Miller says he initiated fundraising calls to several national firms that represent big banks after he had announced his intention to investigate the foreclosure mess. “In September and October, I tried to reach out to people that I’d worked with and I thought had respect for me and potential support for me and tried to raise money from them,” Miller says. “And a number of them were from national firms.”

Uh huh.

“People I’d worked with”?

Hint: As Attorney General, you don’t work with people.  You regulate them.  You investigate their conduct.  And, in certain circumstances, you bring charges, you prosecute and you sue.

This is like saying that the Attorney General “works with” a bank robber.  Oh wait, that works too, doesn’t it?

Miller denied any sort of impropriety.

I will simply observe that one can determine whether there was impropriety through the inverse of the number of indictments that Miller and the rest of these clowns have sent up through a Grand Jury.

That would be zero, right?
The Market-Ticker