Archive for April 18th, 2012
We need to toss this clown out of office, and impeachment is the legal way, so let’s get to it.
Three months ago, in his State of the Union speech, President Obama announced a new task force to investigate mortgage fraud and bring some measure of relief to the 12 million American families who are either losing their homes or in danger of losing them.
The new Residential Mortgage-Backed Securities Working Group would be co-chaired by New York State Attorney General Eric Schneiderman, U.S. Attorney John Walsh of Colorado and three Washington insiders from the Justice Department and the Securities and Exchange Commission.
Obama said, “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”
So what has happened?
Tuesday, calls to the Justice Department’s switchboard requesting to be connected with the working group produced the answer, “I really don’t know where to send you.” After being transferred to the attorney general’s office and asking for a phone number for the working group, the answer was, “I’m not aware of one.”
Simply put: It doesn’t exist. The so-called “task force” was a bald-faced lie.
Obama will not investigate and prosecute the mortgage fraudsters. Nor will Romney. Nor, for that matter, will Gary Johnson.
They’re all fraudsters themselves. Vote for Satan and you deserve what you get. Work to put Satan on the ballot and not someone who will actually prosecute fraud and you’ll be serially robbed time after time after time until you have nothing.
It’s that simple folks.
Ps: For those who say “but I want my abortion rights!” or “I want my birth control!” or “I want my guns!” or “I want …..” just remember this: If you have no money because the crooks stole it all you won’t be getting any of those things either!
The Democrats, the Republicans and especially Barack Obama promised that something would be done about the too big to fail banks so that they would never again be a threat to destroy our financial system. Well, those promises have not been kept and the too big to fail banks are nowmuch bigger and much more powerful than ever. The assets of the five biggest U.S. banks were equivalent to about 43 percent of U.S. GDP before the financial crisis. Today, the assets of the five biggest U.S. banks are equivalent to about 56 percent of U.S. GDP. So if those banks were “too big to fail” before, then what are they now? They continue to gobble up smaller banks at a brisk pace, and they continue to pile up debt and risky investments as if a day of reckoning will never come. But of course a day of reckoning is coming, and when it arrives they will be expecting more bailouts just like they got the last time.
The size of these monolithic financial institutions is truly difficult to comprehend. They completely dominate our financial system and everywhere you look they are constantly absorbing more wealth and more power. The following comes from a recent Bloomberg article….
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
Despite all of the talk from the politicians, they just keep getting bigger and bigger and bigger.
So why isn’t anything ever done?
Well, one reason is because these gigantic financial entities funnel huge quantities of cash into political campaigns.
For example, Barack Obama gives nice speeches about the dangers of the too big to fail banks, but he is also more than happy to take their campaign contributions. Goldman Sachs, JPMorgan Chase and Citigroup were all ranked among his top 10 donors during the 2008 campaign.
So do you really expect that Barack Obama is going to bite the hands that feed him?
Of course he is not going to do that.
The truth is that the Obama administration and the Federal Reserve have done everything they can to make life very comfortable for the big Wall Street banks.
During the last financial crisis, the too big to fail banks were absolutely showered with bailouts.
Meanwhile, hundreds of small and mid-size banks were allowed to die.
When representatives from those small and mid-size banks contacted the federal government for help, often they were told to try to find a larger bank that would be willing to buy them.
Sadly, the last financial crisis simply accelerated the consolidation of the banking industry in the United States that has been going on for several decades.
Today, there are less than half as many banks in the United States as there were back in 1984.
So where did all of those banks go?
They were either purchased by bigger banks or they were allowed to go out of existence.
This banking consolidation trend has allowed the big Wall Street banks to absolutely explode in size.
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.
So where will this end?
That is a good question.
The funny thing is that Federal Reserve Chairman Ben Bernanke and other Fed officials keep giving speeches where they warn of the dangers of having banks that are “too big to fail”. For example, during a recent presentation to students at George Washington University, Bernanke made the following statement about the U.S. banking system….
“But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.’”
So does that mean that Bernanke is against the too big to fail banks?
Of course not.
The truth is that he showered those banks with trillions of dollars in bailout money during the last financial crisis.
Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Bank of America - $1.344 trillion
Goldman Sachs - $814 billion
JP Morgan Chase - $391 billion
Bernanke has shown that he is willing to move heaven and earth to protect those big banks.
So what did those banks do with all that money?
They certainly didn’t lend it to us. Lending to individuals and small businesses by those big banks actually went down immediately after those bailouts.
Instead, one thing that those banks did was they started putting massive amounts of money into commodities.
One of those commodities was food.
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.
Can you imagine what kind of mindset it takes to do this?
Can you imagine taking food out of the mouths of hungry families on the other side of the world so that you and your fellow employees can pad your bonus checks?
It really is disgusting.
But that is the way the game is played.
It is set up so that the big guy will win and the little guy will lose.
The other day I wrote about how this is particularly true when it comes to our system of taxation.
Well, since that article I have discovered some new numbers that were just released by Citizens for Tax Justice. Some of the things that they have uncovered are absolutely amazing….
Between 2008 and 2011, Verizon made a total profit of $19.8 billion and yet paid an effective tax rate of -3.8%.
Between 2008 and 2011, General Electric made a total profit of $19.6 billion and yet paid an effective tax rate of -18.9%.
Between 2008 and 2011, Boeing made a total profit of $14.8 billion and yet paid an effective tax rate of -5.5%.
Between 2008 and 2011, Pacific Gas & Electric made a total profit of $6 billion and yet paid an effective tax rate of -8.4%.
So why should middle class families continue to be suffocated by outrageous tax rates when hugely profitable corporations such as General Electric are able to get away with paying nothing?
Our current tax system is an utter abomination and should be completely thrown out.
But as is the case with so many other things, our current system is going to persist because the “big guys” really enjoy the status quo and they are the ones that fund political campaigns.
It would be bad enough if the “big guys” were beating us on a level playing field.
But the truth is that the game has been dramatically tilted in their favor and they know that the politicians are going to take care of them whenever they need it.
So what is going to happen the next time the too big to fail banks get into trouble?
They will almost certainly get bailed out again.
Unfortunately, the big Wall Street banks continue to treat the financial system as if it was a gigantic casino. The derivatives bubble just continues to grow larger and larger, and it could burst and absolutely devastate the entire global financial system at any time.
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
So what happens when that house of cards comes crashing down?
Well, those big banks will come crying to the federal government again.
They will want more bailouts.
They will claim that if we don’t give them the money that they need that the entire financial system will collapse.
And yes, if several of the too big to fail banks were to collapse all at once the consequences would be almost unimaginable.
But of course all of this could have been avoided if we would have made much wiser decisions upstream.
Our financial system is more vulnerable than it ever has been before, and the too big to fail banks just continue to grow.
The lessons from the financial crisis of 2008 have gone unheeded, and we are steamrolling toward an even greater crash.
What a mess.
The fissures — if not outright failure — in the Euro Zone become realized. I fully expect one or more nations to leave the Euro and there is a non-zero chance of an outright collapse. Timing is the problem — I’ll go ahead and stick this in 2012 but may be early a year. We’ll see. Incidentally because of how I worded this Greece leaving is a “score” but I’m not thinking Greece here — try Spain or Italy on for size.
Non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data published today. The ratio rose from 7.91 percent in January as 3.8 billion euros of loans soured in February, a 110 percent increase from the same month a year ago. That takes the total credit in the economy that the regulator lists as“doubtful” to 143.8 billion euros.
This is bad. Very bad, when one considers that Western Banking Systems all depend on default rates closer to 1%, not 8%.
Why? Because of leverage. If you’re running 30:1 gearing then a 3.3% loss wipes you out. A 1% loss is tolerable, but just barely.
And all western “banking systems” have been run between 10:1 and more than 30:1 for the last couple of decades, with Europe consistently at or above the top end of that scale.
It’s not just private funding either; worse is the government side:
Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.
Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros ($289 billion) at the end of January, data from Spain’s treasuryshow. Italian banks increased ownership of their nation’s sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.
This is picking up shiny pennies in front of a steamroller. The banks are doing this because they can borrow from the ECB at 1% and then “buy” Spanish 10 year debt at 6%.
What could possibly go wrong with this, especially when you can count the sovereign debt as all “money good” and thus factor it via a repo and do it again, and again, and again.
That is, it’s not a 5% profit being sought, it’s a 50% profit — by engaging in 10 “turns” of this crank.
Let’s illustrate the problem with this “theory.”
You start with €1 billion in capital. You buy €1 billion in Spanish bonds. On these you expect to earn a 5% profit, because you paid 1% interest but will receive 6%. That is, you will get €50 million in net profit on this transaction.
But that’s not enough. So you pledge the bonds you own into a repo transaction (say, with the ECB) and use that to borrow another €1 billion, with which you do it again.
Soon you have €10 billion in bonds. And you have €500 million in annual interest profits!
That’s damn good on €1 billion in capital — it’s a return of 50% annually on your “investment.”
But what happens if you suffer just a 1.5% loss on the capital value of those bonds?
You got a problem don’t you? You lose €150 million which is 15% of your capital. You say “oh but the interest is still ok” and it initially is, except that the impairment will eventually result in a margin call. Now what happens? More selling shows up. And when the decline in the capital value reaches 10%? Oh gee, there’s a billion euro hole which just happens to equal your capital, and now you’re broke.
This is the problem facing Europe. The entire system is levered like this and now, in a desperate attempt to keep the game going the banks are “eating their own tails” by buying up sovereign debt with loans from the ECB. This is a desperate attempt to cover the losses on their property lending and yet all it winds up being is a sop to the governments which are deficit spending like mad to “prop up” their consumption.
This is a mathematical impossibility and everyone knows it, but the market is sticking its fingers in its ears and doing the “la la la la la la” game.
It just never ends folks, at least not if you vote “D” or “R”….
Months after requesting the transcripts detailing what happened inside the Fed during the financial crisis, the Dylan Ratigan Show reveals the information they received, and discuss their findings with the Huffington Post’s Ryan Grim and Delaware Attorney General Beau Biden.
What was found among what wasn’t redacted (which was most of it) was a monstrous “revolving door” of Fed officials who then go on to “privileged” inside jobs at various institutions.
Of course they take their knowledge with them, which is a problem, and perhaps a very big problem, as you and I will never, ever have that sort of access.
Does it matter? Indeed.
How much is such inside knowledge worth?
You can’t calculate it — it’s that big.
These people need to be shut down. Turn The Fed into a payment clearing mechanism (e.g. Fedwire) only and reform monetary policy with a simple mechanical mandate — zero inflation, period.
We instead keep arguing over how badly we’d like to be screwed — horribly, aggressively and repetitively or with demonic intent.
That’s a stupid debate as either way you got financially hosed by those trading with privileged information. We’re well past the point where accountability needs to be imposed on these the clowns at The Board of Governors of The Federal Reserve.
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