I’ve not heard this yet in the MSM, and it’s a serious miscalculation.

Note that since the “downgrade” rumors started the ten year treasury yield has dove.  You’d think it would do the opposite.  You’d be wrong.

The issue with the downgrade is not the fundamental risk of holding Treasuries.  The difference between “AAA” and “AA+” is nearly immaterial.

Rather, the problem is the capital calls it will generate within the banks and the impairment against capital from stock price declines.

We’re now back to stock prices last seen in October – in less than two weeks.

The real problem though is in bank stocks like this:

Note that given the utter fraud of allowing a bank to count “equity value” as capital, when it cannot be spent and is subject to 10% or more swings in value in a single day, means that precipitous stock price drops like this can instantly render a bank insolvent.  We could have fixed that in 2008 and 2009 but of course that would have meant that banks would have had to actually go find capital from real people to make loans with, and that was unacceptable – so in addition to allowing them to “mark assets to fantasy” we also allow them to count as “capital” things you can’t spend, thereby allowing them to generate profits from that phantom “capital” – and huge losses when the deception is revealed.

Incidentally that very scheme – counting as “money” things that aren’t (in the original case capitalized interest on OptionARMs) was what set off my alarm bells on WaMu in early 2007.  If you remember they were paying out dividends (that’s real cash!) with “money” that didn’t actually exist (their cash earnings were insufficient; the rest of their “earnings” from which dividends were being paid was that capitalized interest.)  Of course we know how that turned out, right?  Yes, it took a while, but the outcome, given the behavior and enough time, was obvious more than a year before it all went to hell for them.

Oh yeah, check this out: 13/34 EMA on the SPX weekly is about to cross negative – a fairly reliable long-term BEAR MARKET timing signal.

Stock prices in general don’t bother me much – you can trade either way. 

But if the banks threaten to blow again due to capital problems there is no ability to save them this time and you will lose your deposit money as the FDIC has no money and Treasury cannot borrow enough with the debt limits in the way to save even one of these monster banks, say much less all of them.

Discussion (registration required to post)

 

Most people, even smart people, know surprisingly little about the way money really works in Big Government. With the debt ceiling fiasco suddenly raising awareness of the possibility of a total global financial blowout, now seems like a good time to remind people of seven disturbing facts about money that are almost never acknowledge in the old media.

Fact #1 – There is no FDIC insurance fund.

The money at your bank is insured against loss by the FDIC’s insurance fund, right? Nope. That’s total fiction. There is no actual money in the fund. The FDIC insurance money has already been looted by the U.S. Treasury which has simply replaced the money with a bunch of IOUs.

Why does this matter? Because it means that if the U.S. government goes into default, so will the FDIC! And that means all your bank funds have zero insurance. That’s gonna be a big shock for tens of millions of people when they finally figure this out one day…

Fact #2 – There are no social security funds, either.

When you pay social security taxes, all that money goes into a trust fund that’s held for safekeeping until the day it pays you back, right?

Ha! That’s the “sucker’s view” of social security that only ignorant people believe. In reality, there is no money in the social security trust fund because it too has all been looted by the U.S. Treasury and spent. In truth, social security is already broke. Can’t wait for people to wake up and figure this one out, either…

Fact #3 – The U.S. Treasury is stealing money from you every day, even if you pay no taxes!

Here’s a mind-boggling truth that most people just can’t seem to get their heads around: The U.S. Treasury is stealing money from you every single day by the simple fact that they keep creating new money and handing it out to wealthy banksters. Well, technically this is being done by the Federal Reserve, which isn’t even part of the federal government. But it’s all done in cahoots with the Treasury, which is eroding the value of your money through these money creation and distribution actions.

That’s why prices keep going up all around you, folks: Food isn’t suddenly worth more money; the truth is that your money is worth less! That’s how the Treasury and the Federal Reserve steal from you without even breaking into your home.

Probably 99.9% of the population has no understanding of this phenomenon — the erosion of currency valuation through the centralized government printing of more currency.  And yet it is a government scam that has been carried out against citizens of the world time and time again, spanning millennia! As history has clearly shown, every nation that goes down the path of printing more currency to pay its bills eventually ends up in a runaway hyperinflation scenario followed by
economic collapse. The USA will be no different.

Fact #4 – The “balanced solution” isn’t balanced.

Don’t you love the quirky White House Press Secretary who keeps spewing out the phrase “balanced solution” even while the debt deal leaves the U.S. budget entirely unbalanced?

When you’re spending more money than you’re earning, that’s not financial balance. When the White House says “balanced” what it really means is “compromised” — as in, half way between the Republican position (spend us into purgatory) and the Democratic position (spend us into oblivion). Neither party has any real solution to the cancerous growth of Big Government. That’s because they are creatures of Big Government!

Politicians can no more solve the problems of Big Government than arsonists can solve the problem
of office fires. Because they are, themselves, creatures of runaway debt spending (how else do you get elected these days?), they simply do not possess the cognitive framework from which real financial solutions must stem.

Fact #5 – The government is going to steal everything from you before it collapses

Oh my, this is a tough one for people to get their heads around… especially those who naively trust governments to act in the interests of the People. The simple truth of the matter — and I’ve publicly made this prediction before — is that the government is going to STEAL almost everything you own as it heads toward a total financial implosion.

This will include:

• The government theft of private retirement accounts. The feds will claim they’re taking them over “for your protection.”  Yeah, right. And then one day they will simply all vanish. Kiss your IRA
goodbye…

• The government theft of precious metals. Within the next 3 years, watch for a national emergency to be declared, followed by government confiscation of gold and silver. The feds will take your gold and hand you paper money in exchange. The paper money, of course, will be all but worthless shortly thereafter. Only the suckers, of course, will actually turn in their metals…

• Government takeover of your bank accounts. As banks begin to fail in the big collapse, the government will step in and take ownership of the failed institutions, just as it did with Fannie Mae and Freddie Mac (which used to be publicly-owned companies but are now largely just government finance operations). This will put your bank accounts under the direct control of the White House, which can use executive orders to do things like banning all wire transfers out of the country or limiting daily withdrawals and transfers.  Sure, you’ll still “own” your money in the bank, you just won’t be able to freely access it!

Fact #6 – Most people have no idea about fractional reserve banking, derivatives, the
money supply or the Federal Reserve

It’s not just that most people don’t understand banking and finance; it’s that even members of
Congress have no idea how all this works. With few exceptions (like Ron Paul), they’re just clueless!

Get this: Even most bankers don’t even know how fractional reserve banking really works. They don’t understand derivatives, either, which is why they screwed them up so badly in the housing boom that crashed in 2007. And because bankers, investors and bureaucrats have no idea how it all works, they unwittingly turn it all into a runaway catastrophe.

Allowing ignorant adults to play with debt and derivatives is like letting infants play with nuclear weapons. It can only lead to something messy.

Fact #7 – Most people are betting their lives on the dollar

People buy insurance for their cars, their homes and even their health. But when it comes to money, 99 out of 100 people in America are betting their entire financial existence on the U.S. dollar! They get their paychecks in dollars, their savings accounts are in dollars, and all their assets are denominated in dollars. As a result, they have no diversity to protect them against dollar devaluation.

That’s kinda crazy, considering just how quickly the dollar could collapse in the near future and become totally worthless. That’s why smart people are diversifying their assets and converting
dollars into land, gold, silver or even storable food. Here in central Texas, even ammunition has a long-term barter value that far exceeds dollars.

Looking around at the financial behaviors of others, I’m just stunned at how many people are betting everything on the dollar because they never realized they had any other option (that’s the way the government likes to keep it, of course!).

Mark my words, folks: The great financial collapse of America is now closer than ever.  While I can’t put an exact prediction date on it, there’s absolutely no doubt that it’s coming. The morons in Washington aren’t doing anything to avoid it, either — they’re all just cashing in as much as they can before the big collapse rolls in.

Bunch of cowards and crooks running this country. They don’t understanding banking and finance, and they’re determined to make sure you don’t either. Because the less you know about what’s really going on, the longer they can continue to loot the U.S. economy while people stand around and do nothing.

How bad is the situation, really? Just yesterday, Vice President Joe Biden called Congressional Tea Party members “terrorists” for their insistence that the U.S. budget be balanced. So now, the mere idea of calling for a balanced budget turns you into a “terrorist” to be prosecuted under the Patriot Act.

And why not? Demanding financial sanity MUST be labeled an act of terrorism for our criminal government to continue its own criminal looting operation. Next we’ll probably see the President ordering the arrest and prosecution of any members of Congress — i.e. “terrorists” — who do not go along with unlimited increased in the debt ceiling.

Now you see what the terrorism laws are really all about: They are legislative weapons to be used against political enemies, not actual terrorists. Meanwhile, Big Government is technically engaged in the use of financial weapons of mass destruction against the People, yet no one notices.

A bizarre world we live in, folks. It is dominated by the mindless masses and run by criminal sociopaths. Those who demand real solutions are labeled terrorists, and those who try to explain all this to everybody else are labeled “alarmists.”

Just wait until this house of cards collapses, though. There will be a day of reckoning in which a whole bunch of apologies will be owed to all those people who tried to warn the nation what was
really happening (and where it would lead us).

Mike Adams for Natural News

In its role as the primary federal regulator of a large number of state non-member banks, which collectively service less than four percent of residential mortgages, the FDIC has been reviewing and conducting targeted exams to determine whether any of these institutions have engaged in the types of practices identified at the major servicers. To date, the review has not identified “robo-signing” orany other deficiencies that would warrant formal enforcement actions.The FDIC will continue to monitor these servicers, as well as the performance of institutions servicing loans through FDIC securitizations or resolution programs.

Let’s start with the last first….

That public trust is sacred, and it is the very foundation of the long-term success of your industry.

If bankers and regulators are to uphold that trust, we must demonstrate the ability to work together and engage in long-term thinking that will protect consumers, preserve financial stability, and lay the foundation for a stronger U.S. economy in the years ahead.

Sheila seems to think that there’s any sort of trust to regain?  Shirley you jest – or is that Sheila you jest?

Back up the page a bit we find…..

Instead, the biggest long-term risk to the success of the banking industry would be its failure to support the reforms needed to ensure long-term stability in our financial markets and our economy.

The American people have suffered enormous economic losses as a result of the financial crisis.

The American people suffered enormous economic losses as a result of fraud which in turn resulted in the financial crisis.  Yet the people who engaged in that fraud, from top to bottom, have not paid for it.  They have not been indicted, prosecuted or jailed.  Not only have they not suffered criminally, they weren’t forced to give back the money they stole either.

In April 2010, a Pew Research poll found that just 22 percent of respondents rated banks and other financial institutions as having “a positive effect on the way things are going in this country.”

I suspect if the Pew Research group included a response “hang them all from lamp-posts” that would have gotten the other 78% of the responses.  Of course Pew wouldn’t include something that would allow an honest expression of the depth of hatred that many have for the people in this industry. 

Then again, can you blame the public for that hatred?  It’s one thing to lose your home and everything you worked for as a result of raw speculation that you knew was dangerous, got involved in anyway, and lost the bet on.  That happens all the time, and most people deal with it.  It’s part of the risk:reward paradigm.

But it’s an entirely different matter when you’re told repeatedly that you can afford this house, you can afford to take on this credit, we’re the nice guys in the expensive $5,000 pinstripe suits and we’ve run our computer models and our simulations and this product is both safe and suitable for you.

Of course all of these representations turned out to be a pack of lies.

When we issued proposed guidance on non-traditional mortgages, industry comments found the guidance too proscriptive, saying that it “overstate[d] the risk of these mortgage products,” and that it would stifle innovation and restrict access to credit. Later, when we proposed to extend these guidelines to hybrid adjustable-rate mortgages, which at that time made up about 85 percent of all subprime loans, we received a letter co-signed by nine industry trade associations expressing “strong concerns” and saying that “imposing new underwriting requirements risks denying many borrowers the opportunity for homeownership or needed credit options.”

For our part, I think it is clear in hindsight that while our guidance was a step in the right direction, in the end it was too little, too late.

Fraud is fraud Sheila.  Lending people you know they can’t pay back and then playing “hot potato” with the paper, lying to the buyer of the paper so he’s induced to “invest” in something you have every reason to know is going to explode in his face, isn’t “too little, too late.”  It’s a scam.

At this point we’re not speculating any more.  We have sworn testimony that this happened.  That major financial institutions knew they were selling crap to investors – as much as 80% of their production in 2007.  That’s in the record in the form of sworn testimony at this point in time.

Oh yes, the non-bank issuers were worse.  But if the regulated banks had 80% of their production represented by fraudulent and bogus paper, does that not mean that the non-bank lenders were probably peddling paper that 100% garbage?  This, of course, leads one to ask – does it really matter whether the so-called box of chocolates you’re peddling is in fact 80% or 100% dog turds? 

I think not.

Accidents happen.  Speculation is part of all markets.  But when you have sworn testimony in the record that knowingly bad paper was being peddled and it was the vast majority of all the loans being made at the time, that’s not speculation nor is it an accident.

Nether the FDIC or other regulators in Washington have given a damn about this, you’ve done nothing to stop it, Congress has done nothing to stop it, and nobody has been punished for doing it.  Yet we now know that the only logical explanation in 2007 which I and others put forward – that these loans were in fact both fraudulently issued and sold, was factually true because at least some of the people who were doing it have admitted to the facts under oath.

The balance sheets of households, depository institutions, state and local governments and the federal government all suffered serious damage as a result of the recession. All of these sectors are taking steps to repair that damage, but in some cases it will be a long, painful process.

Now that’s a lie.  Very little contraction in systemic debt has taken place, and what has taken place has all been replaced by the federal government.  Shifting liabilities from one hand to another does not change the amount of the liabilities.  It is simply an attempt to hide them.  That’s a scam too.

But then again, that’s all we have these days in America when it comes to Washington and our so-called “financial markets” and “financial firms”, isn’t it Sheila? 

Whether you like it or not you’re a (major) part of the problem – both past and present.

The Market-Ticker

For financial terrorism?

(Reuters) – America’s big international banks may have to restructure and downsize their operations now, unless they can prove they will be easy to dismantle in another financial crisis, said U.S. regulator Sheila Bair.

Uh huh.  How about this Sheila?

Why don’t you talk about the fact that starting with Continental Illinois the FDIC has bailed out not depositors but bondholders?

You know, that “no disruption” model, despite the FDIC being called The Federal DEPOSIT Insurance Corporation.

Where do you see “bondholder insurance” in there?

I can’t find it.

“If they can’t show they can be resolved in a bankruptcy-like process… then they should be downsized now,” said Bair, chairman of the Federal Deposit Insurance Corp.

“There is no reason in the world why they should get some special treatment backstop that other businesses in this country don’t have,” Bair said.

NOW you say this?

This isn’t a 2008 story folks.  It goes back, again, to Continental Illinois.

That’s where this idiocy began.  It is also, not coincidentally, where the utter stupidity in leverage growth – that is, unsupported (and unsupportable) credit expansion began.

Gee, I wonder why when those who enable the leverage through being bondholders of financial institutions are told by the explicit actions of the US Government that they won’t lose their money if the institution does something stupid – or even worse?

Bair is now in the final months of her five-year term heading the FDIC, which she led during the tumult of the financial crisis. Her term ends in June.

Bair said she hopes to have major aspects of new capital requirements and the liquidation regime in place before she departs.

She’s not going to do jack and neither will her successor.

That you can take to the bank.

The Market-Ticker